Month: January 2015

Why it’s so hard to pick oil’s bottom

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Trying to pick the bottom of oil’s surprise price plunge may be tougher this time around, with analysts turning to non-traditional indicators to make predictions.

“Normally, when you have a collapse in a commodity price, it’s in response to some supply demand shock,” Mark Keenan, a cross-commodity strategist at Societe Generale, told CNBC. “[But] you’ve actually had a change in the supply and demand curve so you can’t really apply traditional shock dynamics.”

Like many analysts, he expects oil will fall further, citing a host of bearish supply news, such as expectations the US will export more of its oil and record production levels from Iraq and Russia.

Read More Pro: Here’s where pros say oil will bottom (Ouch!)

Just this week, global oil prices have dropped almost 10 percent amid mounting worries about a supply glut. US crude closed at USD 47.93 per barrel Tuesday, the lowest settlement since April 2009, down USD 2.11 on the day. Benchmark Brent crude fell to a session low of USD 50.55 a barrel, its lowest since May 2009, in late afternoon trade Tuesday in the US, down more than 55 percent from its mid-June level.

Alternative tools

One tool Keenan is watching is trade in put options — or contracts giving the buyer the option to sell assets at a particular price by a set date.

“In the wake of this recent price fall, they’ve been quite accurate lead indicators of where prices are going to go,” he said, noting many puts are being bought on Brent at $40.

“Option positions established in Brent tend to be more purposeful and done by quite sophisticated investors because its slightly less liquid and so quite revealing sometimes of where we’re going to go,” he said. Beyond that, he’s looking to less obvious indicators, such as U.S. employment data, broken down into sectors such as pipeline production, oil extraction and oil services.

“If we start to see changes in these profiles, that would be suggestive certainly that these companies are looking to rein in production and production growth is going to slow,” he said.

Keenan’s also looking to US railcar traffic, as shale oil tends to be produced in land-locked regions, away from main pipelines and is often transported by rail. He also is looking to oil-drilling rig counts and production per rig.

Misleading?

But some note looking at rigs and production spending might not yield expected results.

Read More As oil breaks USD 50, Wall Street getting more bearish

Despite expectations North American oil exploration and production (E&P) companies could cut capital spending by as much as 40 percent if oil remains below USD 60 a barrel, “most E&P companies have high growth profiles, and can cut capital significantly without trimming their current production,” Moody’s said in a note Tuesday. It cited data from the US Energy Information Administration estimating U.S. oil production will increase by 700,000 barrels a day this year compared with 2014. Moody’s only expects a pronounced impact from lower capital spending will emerge in 2016.

Moody’s also cited another factor that may limit the readability of rig counts for oil prices: what it called “a tidal wave” of new rig deliveries.

“Many of the existing rigs, particularly jackups, will have to renew contracts in 2015 at significantly lower rates,” Moody’s said. It expects even larger oil-service companies will need to grant price concessions to customers in upcoming contract renewals to maintain customer relationships and take market share.

Those declining rig costs could persuade oil producers to maintain rig counts and continue producing despite lower oil prices.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian shares extend selloff on poor US lead, oil slump

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The selloff in Asian equity markets extended, albeit modestly, early Wednesday, tracking a lower finish on Wall Street overnight as the hunt for a bottom in oil prices continued, while worries that Greece may exit the euro zone dented sentiment.

Overnight, US stocks settled lower as data pointing to a slowing growth in the US service sector weighed on trading sentiment. The Dow Jones Industrial Average dropped 0.7 percent while the tech-heavy Nasdaq declined 1.3 percent. The S&P 500 shed 0.9 percent, but managed to bounce back above 2,000 near the close of Tuesday’s trade. The index had been trading below the 2,000 level since December 17.

Global oil markets slumped on Tuesday for a fourth consecutive day, falling almost 10 percent this week on mounting worries about a global supply glut. US crude closed at USD 47.93 per barrel, the lowest settlement since April 2009, down USD 2.11 on the day. Benchmark Brent crude fell to a session low of USD 50.55 a barrel, its lowest since May 2009, in late afternoon trade.

“The oil sell-off will continue and, until oil finds bottoms, the markets will remain in a downward trajectory, wrote IG market strategist Evan Lucas. “With no major economic news due for a week in this region, Asia will blindly follow the US’s lead.”

Nikkei drops 0.3 percent

Japan’s benchmark Nikkei 225 edged down modestly early Wednesday, after closing at a near three-week low in the previous session on the back of declining oil prices and a strengthening yen.

McDonald’s Japan is in focus ahead of its press conference later today over food safety. A 3 to 4 centimeter-long piece of vinyl was found in a chicken McNugget sold at an outlet in northern Japan over the weekend. Shares of the fast food chain fell nearly 1 percent at the open.

Daikin Industries inched down 0.4 percent after the air conditioning and refrigeration maker announced expenditure of nearly USD 420 million for the expansion of its Goodman operations in the US.

ASX falls 0.7 percent

Australia’s key S&P ASX 200 index dropped to a two-and-a-half-week low in early trade as the rout in oil markets continues to exert pressure on the resource-heavy bourse.

Energy-related counters extended Tuesday’s losses; Oil Search and Santos fell nearly 2 percent each, while Woodside Petroleum plunged 2.2 percent. Santos is in focus for the day amid concerns over the firm’s credit rating.

Miners were mixed on Wednesday, supported by data indicating that iron ore prices may be at the cusp of appreciating. Chinese inventories hit an 11-month low in December, figures from Shanghai Steelhome Information Technology showed. As a result, BHP Billiton and Fortescue Metals slipped 0.3 and 0.7 percent each, but Atlas Iron scaled up 12 percent.

Meanwhile, a private survey released before Wednesday’s open showed some improvement in the Australia’s services sector in December. The Australian Industry Group’s performance of services index (PSI) rose 3.7 points in the last month of 2014 to stand at 47.5, but remained below the 50 mark that marks growth from contraction.

Kospi slips 0.2 percent

South Korean shares opened at a three-week low, but losses were limited as some heavy-weighted stocks advanced.

Hyundai Motor, the second heaviest weighting stock on the Kospi index, notched up 0.6 percent after announcing that it would be investing 81 trillion won over the next 4 years into expanding factories globally, as well as R&D purposes. Steelmaker Posco also opened up nearly 1 percent.

Also in focus was Samsung Electronics which unveiled 4 new mid-to-low end Galaxy models in India, but shares of the electronics giant slipped 0.2 percent at the open.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Oil dips below $49 as sector faces ‘Hunger Games’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Oil’s dramatic fall in price will have serious effects on revenues and spending in the sector, according to some industry analysts, with one investment firm predicting a sector-wide “recession” that will last for several years.

Both US crude and Brent futures fell to fresh 5½-year lows on Tuesday, with the former slipping below USD 49 before paring some losses. Weak global demand and booming US oil production are seen as the key reasons behind the price plunge, as well as OPEC’s (Organization of the Petroleum Exporting Countries) reluctance to cut its output.

This sector slump will lead to a fight to the death for oil firms, according to analysts at Bernstein Research. The research firm likened the current environment to the Hollywood movie “The Hunger Games”, which portrays a dystopian post-apocalyptic future where the main protagonists battle each other to survive.

“Our research convinces us an oil services recession is largely unavoidable at even $80 a barrel…The Hunger Games have begun,” Nicholas Green, a senior analyst at the company, said in a note on Tuesday morning.

Bernstein’s Green believes that offshore activity will also face a “structural recession.” He predicts that there will be only half of the new work available in 2015, compared to last year, and forecasts no material recovery before 2017.

Other possible casualties of the sector’s struggle for survival are the high-risk and reward exploration and oil production companies (E&P), ratings agency Moody’s said Tuesday. If oil prices average $75 a barrel in 2015, then North American E&P companies would likely reduce their capital spending by around 20 percent from last year, according to Moody’s. It could even be cut by 40 percent it oil starts at below $60 a barrel, it added.

Oilfield services companies, or OFS, are companies that provide services to the E&P industry, and could face an earnings crunch of 12 percent to 17 percent if oil averages $75 a barrel in 2014, according to Moody’s. An average price below $60 a barrel in 2015 could drive earnings down by 25 to 30 percent, it added. Meanwhile, midstream operators – which are involved in the transportation of oil – would come under significant earnings pressure if this spending is cut, according to the ratings agency.

The warning adds to similar claims last year by the International Energy Agency which predicted that falling oil prices may cut investment in U.S. shale oil by 10 percent in 2015. Oil majors have also been sounding the alarm with BP announcing a restructuring and cost-cutting program in December.

Drilling further into individual stocks, Moody’s said Tuesday that majors such as Shell, BP, ExxonMobil and Total should be fairly well insulated but feared that smaller OFS companies such as Basic Energy Services and Key Energy Services would come under stress.

In Europe, Bernstein Research on Tuesday firmly reiterated its “sell” rating on Saipem and Subsea 7. The two companies saw their stock prices plunge 44 percent and 34 percent respectively last year. Norway’s Aker Solutions was downgraded to an “underperform” by Bernstein on Tuesday, but France’s Technip remains its key defensive play despite dropping 30 percent last year.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian stocks sharply lower amid oil fears

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian indices fell sharply early Tuesday, after stocks on Wall Street declined overnight following the relentless fall in oil prices.

Energy stocks led a broad decline on Wall Street overnight, as crude prices dropped to fresh five-and-a-half-year lows amid concerns about growth beyond the US The Dow Jones Industrial Average shed 1.9 percent, while the S&P 500 declined 1.8 percent – chalking up its fourth consecutive decline. The tech-heavy Nasdaq dropped 1.6 percent.

The selloff in global oil markets showed little signs of slowing in the new year, as fears of a supply glut that vexed the market for the past six months deepened. US crude closed down USD 2.65 at USD 50.04 a barrel — its lowest settlement since April 2009. Front-month Brent crude hovered around USD 53 a barrel, down about USD 3, its lowest since May 2009.

“The fundamentals in oil are unlikely to change in the first half of this year, which will see oil bedding down into its bear market for months to come. The US is unlikely to reduce its production levels as the shale gas revolution continues to pick up pace and US output remains at its highest level in three decades,” IG market strategist Evan Lucas wrote in a note.

Nikkei plunges 2.4 percent

Japan’s key Nikkei 225 index fell to a near three-week low early Tuesday. Trading sentiment was hit by a double whammy of declining oil prices and a stronger yen.

Steep losses among blue-chips weighed on the bourse; Canon and Toyota Motor fell 2.3 and 2 percent, respectively. Sony – which announced that sales of its Playstation 4 surpassed 18.5 million units worldwide – fell 1.2 percent.

Outperforming the bourse was Japan Airlines, which benefits from cheaper oil. Shares of the carrier inched up 0.4 percent.

Mainland indices

China’s Shanghai Composite index was flat in early trade, but held on to its highest level since December 2009. Founder Securities extended Monday’s losses to slump 4.8 percent after a court froze some of its assets.

In Hong Kong, the Hang Seng index opened down 0.9 percent to a one-week low.

ASX tanks 1.8 percent

Australia’s benchmark S&P ASX 200 index slid to a near two-week low in early trade, with its resources sector under pressure.

Oil-related counters took the biggest chunk of losses; Oil Search and Santos fell over 7 percent, while BHP Billiton plunged 5 percent, as oil prices plumbed new lows.

Banking stocks were also sluggish; Macquarie Group and Australia and New Zealand Banking Group dropped 2.1 and 1.6 percent while National Australia Bank shed 1.4 percent.

Meanwhile, the Australian dollar jumped 0.4 percent to fetch USD 0.8110 against the greenback, moving further away from its lowest level since May 2010, on the back of a smaller-than-expected trade deficit in the trade figures for the month of November.

Kospi falls 1.4 percent

South Korean shares opened down at a two-and-a-half-week low of 1,889 as energy stocks were battered by the ongoing slide in energy prices. SK Innovation and S-Oil lost 1.2 and 3.3 percent in early trade

Samsung Electronics notched down 1.8 percent as markets awaited fourth quarter earnings guidance due this week. Rival LG Electronics was in the news for unveiling its second curved phone – the G-Flex 2. Shares of the company reversed opening losses to rise 2.7 percent.

Keeping an eye on Greece

Political uncertainty in Greece has raised fears of a Greek exit from the euro zone. The country announced snap general elections for January, with Syriza, the far-left opposition party which has vowed to overthrow the onerous terms of Greece’s international bailout, likely in the lead.

Along with bets on quantitative easing by the European Central Bank, the euro tumbled to its weakest level since June 2010 on Monday. In early Asian trade on Tuesday, the currency was quoted at USD 1,1937 to the dollar.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India: Fairest emerging market of them all?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Indian economy is set to kick off the year as the favorite among emerging markets thanks to a series of positive economic developments coupled with the accelerating pace of Prime Minister Modi’s reforms.

“We expect India’s stock market to generally outperform emerging and developing peers in 2015,” said Howie Lee, investment analyst at Phillip Futures, in a report last week. The Sensex stock index was Asia’s second-best performing market in 2014, rising around 30 percent.

New Delhi is expected to post economic growth of 5.5 percent during the fiscal year ending March 2015, according to the finance ministry – a welcome sign for an economy that`s seen sub-5 percent growth for two consecutive years.

Read More India: Watch out for these external shocks

“The rise of India looks unstoppable,” the Center for Economics and Business Research (CEBR) said last week. In its annual World Economic League Table, the group expects India to become the Commonwealth`s largest economy by 2018. In 2024, the group expects India will become the world`s third largest economy from its present status as fourth-largest.

2013 marked a year of vulnerability for India as a ballooning current account deficit triggered sharp capital outflows when the Federal Reserve first broached the idea it would reduce its stimulus program.

“Call it a huge slice of luck or astute economic forecasting, but going into 2015, the problems that have plagued India for the past two years have mostly been subdued. Due to falling commodity prices, the twin terrors of current account deficit and high inflation have come under substantial control,” said Howie Lee of Phillip Futures.

November’s wholesale price inflation rate came in at zero for the first time in over five years, and a far cry from May`s 6 percent annual increase. Lee said a global fall in food prices proved more effective in containing inflation than the Reserve Bank of India`s (RBI) 2013 interest rate hike.

While the current account deficit remained high at 2.1 percent of gross domestic product (GDP) during the July-September quarter, expectations for oil prices to remain low in the near term will ease the strain, Lee said. Not only does cheaper oil ease India`s import bill, it also allowed Modi to end diesel subsidies, which cost the government over USD 20 billion in the last fiscal year.

As these “twin terrors” fade into the darkness, the economy is left more resilient to a looming US rate hike, Keki Mistry, chief financial officer of HDFC, India`s third biggest lender by assets, told CNBC. “The period of taper tantrums is over. India has built up a huge amount of reserves and the domestic economy is very resilient, so increasing US rates won`t have as much as of an impact on India as other emerging markets.”

Read More Asian currencies set for a wild ride in 2015

For the government to achieve GDP growth above 6 percent, Morgan Stanley recommends greater focus on medium-term reforms, including the easing land acquisition rules, flexibility in labor markets, and the introduction of a goods and services tax (GST) to create a national taxation system.

Moreover, the overall ease of doing business remains a major priority for the government, the bank added. It`s watching for various policy steps on streamlining clearances for forest and environmental projects, expediting industrial licensing processes and providing stable taxation policies. It also wants to see initiatives under the “Make in India” campaign aimed at convincing multi-national companies to manufacture within the country.

HDFC‘s Keki Mistry believes there`s one another component missing: “We are all waiting for a little enhancement or increase in the investment cycle. That is now a critical thing which we need to look at. Once the investment cycle starts taking off, then I’m sure the economy will get into much higher growth rates.”

Foreign direct investment for 2014 is expected around USD 25 billion, versus USD 28 billion in 2013

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian markets mixed on weak US lead, oil fears

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian stocks were mixed on the first trading day of the week, following a weak lead from Wall Street, and continued jitters in the oil market.

US stocks ended near unchanged on Friday in the first trading session of 2015, with the S&P 500 down for a third session, after economic reports showed manufacturing slowing but still in expansion mode at the end of 2014.

Scaling back from a 128-point surge, the Dow Jones Industrial Average fell as much as 91 points, before closing up 0.1 percent. The S&P 500 fell 0.7 percent while the tech-heavy Nasdaq shed 0.2 percent.

Benchmark Brent crude Brent crude was down 91 cents at USD 56.42 a barrel last Friday while front-month US crude for February delivery settled down 58 cents a barrel at USD 52.69.

Nikkei loses 0.6 percent

Japan’s key Nikkei 225 index moved away from a two-and-a-half-week low as the yen weakened 0.1 percent to trade at 120.3 to the dollar. Markets in Japan were shut since last Wednesday for the holiday season.

Hence, exporters pared losses. Electronics brands like Nikon and Canon lost 2.6 and 1.6 percent while carmkers Nissan and Suzuki Motor shed nearly 2 percent each.

Index heavyweights such as Fast Retailing, owner of clothes brand Uniqlo, and mobile carrier Softbank plunged 1.3 and 0.8 percent, respectively, dragging the bourse lower.

Mainland indices mixed

China’s Shanghai Composite index rose 1 percent to a near five-year high on its first trading session of 2015.

Among top gainers, train makers CSR and China CNR rose the maximum allowable of 10 percent, benefiting from last week’s confirmation of a USD 26 billion merger. Property developer Poly Real Estate climbed up 9 percent.

In Hong Kong, the Hang Seng index shed 0.5 percent. Casino operator Melco Crown was in focus after it applied for a withdrawal of its listing in Hong Kong, citing limited fundraising opportunities and compliance obligations. The gaming stock tanked nearly 7 percent at the open.

ASX gains 0.3 percent

Australia’s benchmark S&P ASX 200 index edged up on the back of a resurgence in the resources sector on Monday.

Commodity-related counters overlooked nagging fears about growth in the world’s top two economies to rise. Energy producers Oil Search and Santos added 2.4 and 1.3 percent each.

Atlas Iron trimmed gains to 6.5 percent, while Fortescue Metals and BC Iron jumped nearly 2 percent each. Mining giant Rio Tinto hovered near the flatline after The Australian Financial Review reported that it could announce a USD 4 billion share buyback next month.

Bank of Queensland was in focus following news that acting chief executive Jon Sutton has been appointed to take the helm at the bank. Shares of the lender fell 0.4 percent early Monday.

Meanwhile, the Australian dollar hovered near its lowest level since May 2010 to fetch USD 0.8083 against the greenback at 0950 SIN/HK.

Kospi falls 0.9 percent

South Korean shares dropped to a one-month low early Monday as losses in blue-chips weighed on the bourse.

Steelmaker Posco led declines with a 2.3 percent loss while Samsung Electronics, which has the heaviest weighing on the Kospi index, slumped nearly 1 percent. Hyundai Motor and sister firm Kia Motors also widened losses to 1.2 and 1 percent, respectively.

Meanwhile, the junior Kosdaq index notched up 0.7 percent while the South Korean won firmed against the dollar to trade at 1,109.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

China stocks roar back in 2014, trashing India

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Breaking out of a multi-year slump, Chinese equities stormed ahead to become the top performing Asian market of 2014, trumping Indian stocks after being locked in a tight race this year.

The notoriously volatile Shanghai Composite advanced 51 percent this year, making it second best performer globally behind Argentina, as domestic retail investors’ increasing enthusiasm for stocks and expectations for further policy easing fueled a stellar rally.

In stark contrast, Hong Kong`s Hang Seng Index, ended the year up just 1 percent as political unrest tied to pro-democracy protests turned off investors.

Trailing behind China in second place, India’s Sensex finished up 29 percent in what has been a milestone year for the market that hit an-all time high in November.

Gains have been powered by optimism around the ability of Prime Minister Narendra Modi, who took office in May, to push through reforms needed to unleash “animal spirits” to spur Asia’s third largest economy.

Strategists expect momentum for both markets to continue into the new year.

Read More: China’s top five macro themes next year: HSBC

“Reforms are panning out in India so there’s still a lot of potential to be unlocked,” Ryan Huang, market strategist at IG, told CNBC. “For China, we should see more efforts to stimulate the economy, in addition to reforms.”

The two Asian giants far outperformed their BRIC peers, with Russia and Brazil stocks ending the year down 45 percent and 3 percent, respectively.

It has been a challenging year for global equities, which have contended with an uncertain global economic environment, geopolitical risks and crashing oil prices. Global stocks rose a meager 3 percent this year, according to the MSCI All Country World Index, which is made up of stocks from both emerging and developed markets.

An unexpected plunge in oil prices gets much of the blame. In a move likely to wreak economic havoc on vulnerable oil exporters such as Russia and Venezuela, oil prices hit more than five year lows Tuesday, tanking around 50 percent since mid-June as feeble global demand compounded by strong supply growth.

Smaller markets shine

South and Southeast Asian markets also featured in the top-five performing markets after registering double-digit gains.

Pakistan and Sri Lanka stocks rose 26 percent and 23 percent, respectively, benefiting from a wave of foreign buying.

Philippines and Indonesia equities followed close behind, both rising over 22 percent.

Philippines stock market has been supported by robust fundamentals, as one of the region`s fastest growing economies with a favorable younger demographic, a growing middle class and surging remittances from overseas.

Meanwhile, Indonesia equities have gotten a fillip from euphoria over the country`s new President, Joko Widodo, who took the helm in October.

Not all markets in Asia enjoyed the same good fortune this year, however. Oil-exporter Malaysia was the region`s worst performer, falling more than 5 percent this year, dragged down by the slump in crude prices. And the pain is expected to continue.

“Although we maintain a bullish outlook for Malaysia in the longer term, we foresee a very rocky road ahead. This bearish near-term outlook is supported by falling oil prices … and would unlikely reverse, suggesting that the KLSE would suffer a similar fate as oil prices,” said Daniel Ang, investment analyst at Phillip Futures.

Leader turned laggard

Japan, the star of 2013, lost some of its momentum this year.

The country`s benchmark Nikkei 225 rose just 7 percent, following a near-60 percent rally last year, as the economy struggled to shake off the blow of April`s sales tax hike and doubts lingered over whether Abenomics would be successful in ending two decades of economic stagnation.

However, next year could be better, say strategists, as the yen continues to weaken and global growth picks up, benefiting the country`s exporters.

Earlier this month, Morgan Stanley raised its 12-month target on the Topix to 1,680 from 1,500, marking 20 percent upside from current levels.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian markets rake in modest gains in thin volume

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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On the first session of 2015, Asian equities traded flat following a lack of foreign cues. Thin volume is also likely as China, Japan, South Korea, Thailand and the Philippines remain shuttered for the holiday season.

A slight rebound in oil prices did little to boost sentiment in Asia. US crude futures gained 80 cents to rise over USD 54 a barrel on Friday, supported by last week’s larger-than-expected fall in US crude stocks but inventories at the oil hub at Cushing, Oklahoma, grew, keeping prices depressed. The rise in oil prices was also pressured by China’s weak factory activity in December.

Benchmark Brent crude previously settled down 57 cents at USD 57.33 a barrel.

ASX adds 0.1 percent

Australia’s benchmark S&P ASX 200 index pared losses to eke out a modest gain on Friday morning, while the Australian dollar traded little changed in light post-holiday trading to fetch USD 0.8135 against the greenback.

Financials underperformed, with National Australia Bank losing nearly 1 percent each while Macquarie Group and Westpac Banking dropped 0.1 and 0.3 percent each.

However, mixed trading in the resources sector capped losses. Energy producer Oil Search and Santos fell 0.6 and 0.2 percent each while Woodside Petroleum notched up 0.3 percent. Atlas Iron was the biggest gainer for the morning, scaling up 37 percent.

STI unchanged

Singapore’s Straits Times index erased early gains to hover near the flatline as traders digested a set of below-view gross domestic product (GDP) released before trade opening on Friday.

The Southeast Asian economy expanded 1.6percent on a quarter-on-quarter annualized basis in the fourth quarter, below expectations for a 3 percent growth in a Reuters poll. On a yearly basis, Singapore grew 1.5 percent, also below estimate for a 2 percent expansion.

For 2014, the benchmark bourse had managed a 6.2 percent gain.

HSI gains 0.1 percent

In Hong Kong, the Hang Seng index edged up.

Wall Street in 2014

On the last day of 2014, Wall Street closed lower in light volume, with major indices erasing gains for December.

The Dow Jones Industrial Average closed down 0.9 percent at 17,823.07, for a gain of 7.52 percent for the year – the sixth straight year of gains for the blue chip index. The S&P 500 had its worst final trading day of the year since 2001, closing down 1 percent at 2,058.90, posting a gain of 11.39 percent for the year. Pressured by a nearly 2 percent decline in Apple, the Nasdaq Composite closed down 0.9 percent at 4,736.05. The tech-heavy index posted gains of 13.40 percent for 2014.

Tracking data releases, AirAsia

China’s official purchasing managers’ index (PMI) slipped to 50.1 in December from 50.3 in the previous month, a government study showed on Thursday. Analysts polled by Reuters had forecast a reading of 50.1. However, the official reading is a tick higher than a similar private which showed factory activity shrank for the first time in seven months in December. The HSBC survey focuses on smaller companies while the official survey looks more at larger, state-owned firms.

Meanwhile, divers looking for the wreck of an AirAsia Indonesia jet off Borneo were unable to resume full-scale operations on Thursday due to poor weather and heavy seas. An air safety official said it could take a week to find the black box flight recorders. So far, at least seven bodies have been recovered from waters near the suspected crash site, along with debris such a suitcase, an emergency slide and a life jacket. On board flight QZ8501 were 162 people, including 155 passengers, 2 pilots, 4 cabin crew and one engineer.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Oil at $14 a barrel? Here’s how it could happen

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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No one really saw 2014’s dramatic plunge in oil price coming, so it’s probably fair to say that any predictions about where it’s going from here fall somewhere between educated guesses and picking a number out of a hat.

In that light, it’s less than shocking to see one analyst making a case — albeit in a pure outlier sense — for a drop all the way below $14 a barrel.

Abigail Doolittle, who does business under the name Peak Theories Research, posits that current chart trends point to the possibility that crude has three downside target areas where it could find support — $44, $35 and the nightmare scenario of, yes, $13.65.

Read More: Oil bottom near? Pro says worst may be over

Make no mistake, she thinks that’s an extreme case. Her target for the more likely move is the $35 range, which in itself is quite a call considering light crude had been just above $100 a barrel this summer and the move would represent a 33 percent or so plunge just from current levels.

But Doolittle makes room for an even more extreme scenario, in which technical support gives way as part of what she describes as a triangular pattern forming in an “ascending trend channel” that brings about the extreme case.

Read More: 2014 crash will be worse than 1987’s: Marc Faber

“There is a wild case scenario for a massive fall in oil and it is made by both the triangle and the possibility that oil’s true trading path will turn out to be sideways on a potential false initial reaction of epic proportions,” Doolittle explained in a report she distributed Wednesday morning. “This possibility cannot be ignored or discounted because it is simply too strong from a technical standpoint.”

She acknowledges that the scenario “may sound outrageous” but cautions “odds appear fairly strongly” that the move could be triggered by “a false initial reaction or basically a massive head fake caused by a variety of factors.”

Before consumers get too giddy about the cost of even lower fuel prices at the pump, Doolittle offers a word of caution.

Read More: Gasoline: Bottoming or the next black swan?

“Clearly this would seem to be a tail wind for consumers, but the various shocks and possible financial market crashes that could be triggered by such a collapse in oil would not be, and thus this seems a very dangerous scenario indeed,” she said.

Doolittle is known for making some of the more extreme calls to be found on Wall Street. She predicted, for instance, that the mid-October market tumult would continue as part of a 60 percent drop in the S&P 500, a move that has not materialized.

Read More: Gartman fund one of year’s big flops

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Dread these headlines in 2015

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

These aren’t predictions; they’re more like contingencies. Playbooks, if you will, for possible outcomes; keys to the coming year. May it be a prosperous one. The yield curve.

Think we’re finally heading into a “rising rate environment?” Better think about exactly what that is. Sure, short-term interest rates are moving up. But the rate on longer-dated bonds isn’t budging—and that’s the rate that matters most to pension funds, insurance firms, mortgage lenders and other financial players.

What if the interest rate on benchmark 10- and 30-year Treasurys doesn’t increase next year, even as the rate on one-year Treasury notes rises? What if that so-called “yield curve” keeps flattening? That’s the bet Jeremy Hill, managing partner at Old Blackheath Cos. is making. He sees the one-year Treasury yield above 1 percent next year but the 10-year yield hovering below 2.5 percent.

Read More: Santelli Exchange: Flattening yield curve

We’ve seen this before, during just the last expansion, when then-Federal Reserve chief Alan Greenspan dubbed it a “conundrum,” because traditionally, a flat or inverted yield curve was seen as a harbinger of a downturn. Economists today are still debating whether the inversion in 2006 was a useful sign of the looming sharp recession—and whether such an event now would be similarly worrisome.

Again, the point here is that a “rising rate environment” is not a uniform thing. And investors betting on higher rates better be clear about which rates—and which connected investments—they’re counting on.
Oil patch layoffs

Whether the oil price collapse triggers a broader US slowdown next year will be evidenced in part by one incredibly useful weekly data point: jobless claims.

The Labor Department tracks new claims for unemployment benefits, and this data series has long been a favorite of investors. Michael Darda, chief economist of MKM Partners, notes that there’s almost always been a 20 percent year-on-year spike in claim filings as the economy has fallen into recession. Watching this series has helped him avoid many of the market-crash calls his colleagues have made in recent years; claims have been steadily improving, lately hovering at 14-year lows.

Read More: Saudi Arabia doesn’t care about volatile oil

Helpfully, claims are tracked at both a national and state level. Some increase seems inevitable now in states like North Dakota and Texas whose economies have boomed along with oil. The question for investors is by how much. So long as workers let go from oil and gas industries can find new work elsewhere in a relatively quick period, both the local and national economies ought to perform reasonably well. If instead there is a surge in layoffs that pushes claims at the state and even national level well above year-ago levels, then investors may well have to flip to their slowdown plays.
Millennials

What’s the common link between the rental boom, weak bank loan growth, and the underperformance of General Mills and Campbell Soup? The characteristics of the millennial generation certainly play a part. This group in terms of sheer numbers is now the largest age cohort in America, and finally of an age and an economic situation to exercise their vast influence across the US economy.

The new year could be a key inflection for millennials, said Bill Smead, founder of Smead Capital Management. He sees this group finally having babies, choosing to buy homes rather than rent, purchasing cars, and perhaps even cooking more at home after years of delivery and eating on the go. The investment implications here are obvious. Should millennials instead take another couple of years to make this transition—or never quite make it at all, for various reasons—it points to a very different outcome for everything from the car-service upstart Uber to home builders to traditional banks.

Read More: Millennials will make ‘rent bubble’ disappear: Pro

Trying to pick some consumer names for next year’s investment list? First, talk to a 24-year-old. The stock market’s multiple

There’s one quite useful way to determine if the stock market rally is running out of steam. Namely: Are stocks rising because corporate profits (and future cash flows) are, or are they rising for other reasons? If there’s one concern that’s starting to be expressed across Wall Street, it’s the generally shared enthusiasm for US equities worldwide. Even last year, Bill Miller, chairman of LMM, and others were warning about a “melt-up.” That could still happen if everyone piles out of other investments for various reasons (commodities, emerging markets and bonds come to mind) and into the US stock market.

And that makes earnings season critically important. Yes, the precise tallies by different firms can be all over the map. It’s useful to consult more than one for that reason. But generally speaking, so long as earnings are still growing at a healthy year-on-year clip (even as, say, energy-sector earnings collapse), the stock market’s rally should still be considered a “healthy” one. There are always caveats: Lately, corporate buybacks and other types of so-called “financial engineering” are top ones.

That makes not just earnings-per-share measures, but also total corporate profit numbers economy-wide important to watch. The Labor Department, fortunately, does provide this data. It’s a bit slow, released about a month after most companies report earnings results, but worth following closely next year.

And investors won’t be the only ones paying heed: The Federal Reserve is placing ever-more emphasis itself on these gauges of the financial system. An overvalued stock market relative to earnings is more likely to lead to rate hikes than an undervalued one. The multiple matters.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow