Month: April 2015

Apple CEO Cook: Orders are ‘great’ for Apple Watch

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

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Consumer enthusiasm for the Apple Watch has impressed Tim Cook. 

While visiting an Apple store in California on Friday, the tech behemoth’s CEO told CNBC that reaction to the smartwatch has been “extraordinary.”

“Customers have been giving us great feedback and orders have been great, as well,” Cook said.

Surrounded by a crowd outside the Palo Alto store, Cook also showed off his watch of choice, a stainless steel model with a white band.

By midmorning Friday, “Apple Watch” listings surfaced on eBay.

Despite customer enthusiasm and mostly positive reviews for the watch, Apple stock has reacted sluggishly. Shares in the company were 0.4 percent higher Friday afternoon.

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

How does the Fed raise interest rates?

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

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When interest rates start rising in the US., it will hardly be a surprise.

Officials at the Federal Reserve have been warning for a year that the move is coming. But how, exactly, does a central bank like the Fed raise and lower the price of money?

When a supermarket wants to raise the price of a can of tuna fish, it just sends someone around to print new stickers and slap them on the cans. Gas prices go up and down so often that many outlets have installed electronic signs to change the numbers with a few keyboard licks.

Changing the amount borrowers pay and lenders collect is a little trickier.

Before you get to the “how”—how about explaining “why” the Fed wants to raise rates. Isn’t cheap money good for everyone?

It’s good for borrowers. That’s why the Fed has been having a giant money sale since late 2008 when the bottom fell out of the global financial system. Since then, cheap dollars have flooded through the mortgage market (reviving a dead housing market), the stock market (rebuilding the damage to pensions and 401(k)s) and the bond market (helping companies and governments save money by refinancing their debts at much lower rates.)

Cheap money is not good for savers, though. (That may be one reason so many people have put aside enough for retirement.) And now that the U.S. economy seems to be back on its feet, and employers are hiring, the Fed figures it’s time to end the Money Sale and let interest rates float back up gradually

How does it do that?

The first thing it did was to end its roughly USD 3.5 trillion shopping spree for Treasury bonds, mortgage-backed securities and other paper left behind by the lending binge that inflated the US housing bubble.

A 10-year Treasury bond is just a 10-year loan to Uncle Sam from an investor. So interest rates on that 10-year loan are set by the market; rates rise when there are fewer buyers and fall when demand is stronger.

When it buys bonds, the Fed also pays cash to the sellers, which pumps money into the financial system and the economy. That cash is created with each new bond the Fed buys. (It doesn’t actually “print money”; the number of paper dollars in circulation has no impact on interest rates.)

Once the Fed started buying every bond that wasn’t nailed down, rates dropped to low single digits and stayed there. Now that the Fed has ended its bond shopping, rates are expected to begin rising again. So far that hasn’t happened. But in the past, when the Fed wanted to raise long-term rates, it started selling some of its bond holdings.

Raising long-term rates, though, only raises the cost of long-term borrowing, like mortgages or bonds sold by corporations or local governments to raise money or pay off higher-rate bonds.

So what about short-term rates?

For that, the Fed has a more immediate mechanism handy in its role as the overseer of the nation’s banking system. It’s called the federal funds rate.

That’s the rate banks charge each other for very short-term loans, usually overnight. The Fed can change that rate with a simple announcement at a moment’s notice, though these days it’s giving everyone plenty of advance warning. And, when it finally moves, it’s expected to raise that rate in baby steps.

But why are banks lending money to each other overnight?

Because they are required to end the day with a minimum amount of capital to cover the loans they’ve made to consumers: car loans, credit cards, etc. That capital base moves up and down as you deposit your latest paycheck or use your credit card when you go out to dinner. If one bank comes up a little short on cash, it can borrow from another one (electronically, of course) until it opens the doors the next morning and its capital base starts bouncing around again.

By changing the rate on what banks charge each other for those overnight loans, the Fed has an immediate impact on the interest rates banks charge you. That change moves through the economy quickly.

The Fed sets another bank rate called the discount rate, which is what it charges banks to borrow directly from the Federal Reserve system. But banks have lots of other sources of ready cash (starting with other banks), so change in the discount rate usually has a much smaller impact.

The exception is in times of crisis, when the financial system is in trouble and banks have trouble borrowing elsewhere. That’s one of the main reasons the Fed was created 100 years ago, to be the lender of last resort.

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

Is market liquidity your number one concern?

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

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European investors have thrown their weight behind comments by Jamie Dimon, the CEO of JPMorgan, this week who warned of the risks that reduced liquidity was having on global asset markets.

William de Vijlder, the group chief economist at BNP Paribas, called this the main issue that markets were currently facing and was relieved that the problem was now coming to the fore.

“The concern I have is the following, that markets go up based on monetary liquidity – central bank injections – and they go down based on a reduction in market liquidity ,” he said.

He added that a lack of market liquidity could be highlighted during the “final phase” of a bubble in a particular asset class. He explained that a number of traders could be stung making short term moves as the clock runs down before a steep correction.

“All of a sudden, the music changes,” he said.

Read More: Barney Frank: Dimon’s concerns are overblown

Both Dimon and Larry Summers, the former US treasury secretary, have warned about the volatility in currency and Treasury markets this week and how a lack of market liquidity can spark wild intraday swings. Dimon implied that another economic crisis was inevitable and focused on the “multiple new rules” from regulators since the 2008 financial crisis that was affecting the market-making capabilities of banks.

“The banking system is far safer than it has been in the past, but we need to be mindful of the consequences of the myriad new regulations and current monetary policy on the money markets and liquidity in the marketplace — particularly if we enter a highly stressed environment,” Dimon said in the newsletter on Wednesday.

Bill Blain, a fixed income strategist at Mint Partners, waded in on the debate in his daily research note on Friday. Incredulous at the seemingly never-ending rally in European sovereign bond markets he said “what goes up must come down.”

“If you thought the bond-spike liquidity-vanishing moments we saw last year were extraordinary…you ain’t seen nothing yet,” he said.

Global management consulting firm Oliver Wyman and Morgan Stanley released detailed report on the subject in March, highlighting that global banks have shrunk their balance sheets by some 20 percent since 2010 which has “significantly” reduced the liquidity in secondary asset markets.

Read More: Treasury market still very liquid: Pimco’s Kiesel

“Liquidity has decreased sharply, creating new risks for investors and issuers, but there are no easy answers. Policymakers face a difficult set of trade-offs and how they and the industry responds will have profound implications on traded markets and investors.” Christian Edelmann, the partner and head of corporate and institutional banking practice at Oliver Wyman, said in the report released on March 19.

The research involved interviews with asset managers, with portfolios totaling around USD 10 trillion, who indicated that liquidity in fixed income markets was one of their top concerns.

The Governor of the Bank of England, Mark Carney, has previously highlighted that liquidity could evaporate as the US Federal Reserve tightens its main benchmark interest rate. The Bank of International Settlements also warned in March that market liquidity in the bond markets may increasingly be dependent on the portfolio decisions of only a few large institutions.

Meanwhile in November, a report by the International Capital Market Association (ICMA) looked at the European corporate bond market and concluded that its liquidity was “rapidly evaporating” mainly due to financial regulation and extraordinary monetary stimulus. Regulation, rather than reducing systemic risk, has simply transferred that risk from the banks to investors, it said.

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

PayPal, Ebay to split into two separate public companies

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

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After spending much of this year explaining why its two businesses are best left together, eBay’s board of directors and CEO did a complete about-face Tuesday morning, announcing a plan under which its PayPal and eBay marketplace businesses will be split into separately traded public companies by the middle of next year. And CEO John Donahoe will step down as CEO of eBay once the split takes effect in 2015.

EBay shares jumped on the news, rising by more than 7 percent by midday. They were on pace for their best day since July 19, 2012, when they rose 8.6 percent. (Get the latest quote here.)

Donahoe began 2014 under pressure from activist investor Carl Icahn to split the company into its faster growing payments business, PayPal, and its legacy e-commerce marketplace, eBay. Donahoe and eBay’s board successfully resisted those pleas in winning a proxy fight, but only months later during the company’s annual strategic review, decided that a split in 2015 is now the right move to position each of those company’s for the future.

Read More: Why Apple Pay will hurt PayPal

“What the proxy fight forced was me to come out and articulate our plan of record, our position at that moment, and that’s what I did,” Donahoe told CNBC, “As we’ve continued our annual assessment, looking forward three to five years about how we can best position eBay and PayPal, we think the competitive position and the competitive environment of commerce and payments are going through accelerating change. That creates new sets of opportunities and challenges for both eBay and PayPal and (we believe) that operating independently will give eBay and PayPal focused strategic flexibility and an ability to move quickly and decisively in this changing environment.”

In a tweet, Icahn said he liked the announcement.

While Donahoe has spent much of 2014 extolling the benefits that eBay and PayPal derive from being part of one company, he now says those benefits are in decline.”When you look forward, eBay will be less than 15 percent of Paypal’s business three years from now and we can achieve many of the benefits of the synergies through arms-length commercial relationships.” Donahoe told CNBC.

Devin Wenig, currently president of eBay Marketplaces, will become CEO of the new eBay when the split becomes final. EBay also announced that it has hired Dan Schulman, currently the president of the Enterprise Growth Group at American Express, to take over as PayPal’s president immediately. Schulman will become PayPal’s CEO once the split from eBay is complete.

Read More: Bitcoin gets greenlight from eBay’s PayPal unit

While Donahoe expects to become a board member of both companies, his decision to no longer run either of them is a surprise. Donahoe says that by the middle of 2015 when the split is expected to become official, it will be time for him to step aside.

“I had a good role model named Meg Whitman. When Meg was CEO of eBay, she said she was going to do it for a decade. And she stepped down eight years ago in her early 50s and created opportunity for me, for which I’m enormously grateful. Next year will be my 10th year at eBay and I’ll be creating opportunity for two great leaders to become CEO,” Donahoe told CNBC in an interview.

While eBay’s 180 degree turn is sure to be seen by some as placating a restless shareholder base and avoiding what could have been another bruising proxy fight, Donahoe says that is simply not true.

“Very consciously we didn’t make a reactive decision in Q1 based on a short term event like a proxy fight because we have a long history of being thoughtful and deliberate of how do we set this business up to succeed over the long term. From the beginning, Pierre Omidyar, our founder, has a deep commitment to the long term. … And this process has gone through what is the best way to help eBay and PayPal succeed over the long term. I feel confident this is the right direction and that’s the reason we’re pursuing it.”

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

Nikkei slips below 20000; Asia eyes China inflation data

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

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Asian stocks outside of Japan advanced on the last trading day of the week, drawing support from a stronger finish on Wall Street overnight and as China’s consumer inflation held steady in March.

The consumer price index (CPI) rose 1.4 percent on year, above expectations of a 1.3 percent rise predicted in a Reuters poll and following a 1.4 percent rise in February. Wholesale prices, or the producer price index (PPI), fell 4.6 percent in March, better than the average forecast of a 4.6 percent, and after dropping 4.8 percent in February.

Overnight, US stocks closed higher after trading in a narrow range, with energy shares up on the back of a rebound in the price of crude oil. The Dow Jones Industrial Average added 0.3 percent, while the S&P 500 and Nasdaq Composite gained 0.4 and 0.5 percent, respectively.

Nikkei slips 0.1 percent

Japan’s Nikkei 225 index crossed the 20,000 milestone for the first time since April 2000 at the open, but quickly pulled back seemingly on the back of profit-taking and as the dollar-yen ticked down slightly to 120.46.

The bourse settled at 19,937 on Thursday – a 15-year peak for the second straight session – as foreign investors jumped in amid expectations that Japan Inc will start coughing up more cash to shareholders.

Index heavyweight Fast Retailing is in the spotlight after upgrading its forecast for annual profit and sales projection as sales for its casual wear brand Uniqlo grew quicker-than-expected. The stock was up 3.3 percent, hitting fresh record highs.

Lawson dived 4.1 percent, chalking up its biggest one-day drop in two years, after the convenience store operator’s earnings guidance came in below market expectations.

Mainland indices mixed

China’s Shanghai Composite index inched up 0.2 percent, reversing a lower open, as latest inflation data signalled a favorable environment for further government stimulus.

In Hong Kong, the Hang Seng index appear set to chalk up a three-day long blistering rally, up 1 percent at the open and hitting its highest level since January 2008. Meanwhile, the Hang Seng China Enterprises Index of Hong Kong-listed mainland companies jumped 1.4 percent.

The surge in buying was sparked by Beijing’s decision to let mainland money managers buy H-shares last week, as well as a recent move by the China Insurance Regulatory Commission to allow mainland insurance firms to invest in Hong Kong’s Growth Enterprise Market for the first time.

“What they are trying to do is to take the steam out of China’s local market and redirect some of the liquidity into Hong Kong [so that] eventually Hong Kong will be at a very high level,” Viktor Shvets, Asia head of Strategy Research at Macquarie, told CNBC Asia’s “Squawk Box.”

GF Securities – the mainland’s fourth-largest securities firm by assets – opened up 37.4 percent to HK$25.90 in its market debut on Friday. The Shenzhen-listed company had priced its shares at HK$18.85 – the top of the indicative range – raising $3.6 billion, according to an April 2 statement.

ASX adds 0.2 percent

Australian shares inched up early Friday, recouping some of the resources-led losses in the previous session.

Laggards on the S&P ASX 200 index include global miner BHP Billiton, which extended losses to decline 0.7 percent, following another slide in its U.S. ADRs overnight. Fortescue Metals and Rio Tinto also dropped 1.7 and 0.2 percent, respectively.

The four major lenders hovered in neutral territory, while gold producers were mixed as a stronger dollar weighed on spot gold for a third straight session overnight. Evolution Mining and Newcrest Mining lost more than 1 percent each, while Endeavor Mining rose 3.1 percent.

Kospi rises 1 percent

South Korea’s Kospi index scaled a 7-month high, with automakers, retailers and brokerage houses leading advances a day after the Bank of Korea (BOK) kept interest rates steady at 1.75 percent as expected.

Among gainers, Hyundai Securities and SK Hynix made gains of over 5.5 and 4.3 percent each, while Hyundai Motor and Kia Motors rose 3.4 and 2 percent, respectively.

Shares of Samsung Electronics elevated 0.3 percent, with the global launch of its Galaxy S6 and Galaxy S6 Edge smartphones.

Noble Group eyed

Shares of Noble Group tanked 1.7 percent, extending losses after investment research firm Muddy Waters said on Thursday it had a short position on the commodity trader. The stock has been hammered over the past month following a slew of critical reports about the firm’s accounting practices by Iceberg Research.

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

Bank of England holds firm ahead of tight UK election

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

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The Bank of England kept monetary policy unchanged on Thursday, as investors focused their attention on next month’s too-close-to-call general election.

The UK’s benchmark interest rate stayed at the record low of 0.5 percent, where it has stayed since March 2009. The central bank also held the size of its bond purchases under the quantitative easing program at £375 billion ($554 billion).

 This month’s decision came ahead of a general election in May that is expected to be the closest-fought in generation. Forecasts suggest the Conservatives will emerge as the party with the largest number of seats after the election, but without an overall majority. This would potentially result in another coalition government, like the current Conservative-Liberal Democrat one.

Although the central bank has acted independently of the government since 1997, Societe Generale’s Kit Juckes said a policy change this close the election was “unthinkable.”

Instead, the bank is seen holding rates until inflation starts to recover, led by wage growth. The country is still in the grip of disinflation (falling inflation), with the consumer price index coming in unchanged in the year to February 2015, down from 0.3 percent in January—and well below the central bank’s target of 2 percent.

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

Alcoa beats on earnings, falls short on revenue

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

Listen to the Article (6 Minutes)

Alcoa reported quarterly earnings that beat analysts’ expectations on Wednesday, but its revenue fell slightly short.

Alcoa marks the unofficial start to the quarterly earnings season, and may correlates to the performance of the S&P 500 for the quarter. Since 2005, when Alcoa beat expectations, the S&P 500 was up 75 percent of the time for the quarter and averaged a 4.4 percent return. When the company missed, however, the index was up 65 percent of the time, but the average return was -0.24 percent.

In January, the company projected a 7 percent rise in global aluminum demand for 2015. Still, shares are down more than 13 percent year-to-date. For their part, Wall street bulls outnumbered bears going into the earnings announcement.

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 mixed as BOJ maintains monetary policy

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

Listen to the Article (6 Minutes)

Asian stocks traded mixed on Wednesday, with Japanese markets little moved as the Bank of Japan (BoJ) kept its massive monetary stimulus intact as expected.

Overnight, US stocks gave up gains in the minutes before the close as investors eyed continued gains in oil and the US dollar ahead of the unofficial start of earnings season on Wednesday. The Dow Jones Industrial Average finished in neutral territory, while the S&P 500 and Nasdaq Composite ticked down 0.2 and 0.1 percent each.

Mainland indices mixed

China’s Shanghai Composite index saw extremely volatile trade, rebounding 0.1 percent at 1140 SIN/HK after touching fresh seven-year highs at the open.

Train makers CSR and China CNR appear set to rise by the daily maximum allowable 10 percent for the second straight session in Shanghai after their proposed merger was approved by mainland authorities. In Hong Kong, shares of both companies soared over 30 percent each, helping the broader Hang Seng index to surge 2.4 percent to its highest level since May 2008. The bourse was also playing catch-up with its regional peers after being closed since Good Friday.

Alibaba Pictures Group, the movie division of Chinese e-commerce giant Alibaba Group Holding, jumped 12.6 percent, boosted by an announcement regarding injection of entertainment assets from its parent company.

Read More: IS Sharp running out of options?

Nikkei gains 0.4%

Japan’s Nikkei 225 stayed near a two-week high, while the yen rose as high as 119.99 against the US dollar, after the BoJ held its monetary policy unchanged.

Tokyo-based pharmaceutical company Eisai rallied nearly 2 percent after it was granted an additional patent for its Belviq drug. Following the news, Eisai’s US partner Arena Pharmaceuticals bolstered 3.9 percent overnight on the Nasdaq.

Fast Retailing, which is due to put out first-half results on Thursday, notched down 0.5 percent.

Australia’s S&P ASX 200 index edged up in the morning session, overcoming the disappointment from the Reserve Bank of Australia’s (RBA) decision to hold borrowing costs steady at a record low of 2.25 percent yesterday.

The oil and gas sector reaped in steep gains on the back of firmer oil prices overnight. Oil Search climbed 4.8 percent, while Santos and Woodside Petroleum rose 3.8 and 2.5 percent each.

Junior miners remain in focus after Atlas Iron sought a trading halt on Tuesday. “The news from Atlas Iron was something I have long suggested was coming and I don’t believe it will be the last bad news on the wires. I have concerns for BC Iron, Mount Gibson and the junior play Gindalbie Metals,” Evan Lucas, IG’s market strategist, wrote in a note.

Shares of BC Iron and Gindalbie Metals tanked 5 and 12 percent each, but Mount Gibson advanced 2.6 percent.

Read More: Will the Bank of Korea surprise markets again?

Kospi adds 0.4%

South Korea’s Kospi index widened gains by mid-morning trade, thanks to gains in its index heavyweights. Samsung Electronics, which released its guidance on first-quarter results Tuesday, gained 1.2 percent, while Hyundai Motor and Posco bounced up 0.3 and 3 percent each.

Oil refiners climbed steadily upwards, with S-Oil and SK Innovation up 9 and 6.9 percent, respectively. However, Korean Airlines and Asiana Airlines retreated as higher fuel prices mean higher operating costs.

Hyundai Steel and Hyundai Hysco rallied 4.3 and 2.6 percent each on news of a merger.

Rest of Asia down

In Singapore, shares of Singapore Telecommunications elevated 0.5 percent following news that the telecom service provider will be acquiring Trustwave Holdings, a privately-held information security company based in Chicago. The broader Straits Times index dipped 0.2 percent.

Taiwanese manufacturer of smartphones and tablets HTC dropped 2.1 percent after announcing better-than-expected first-quarter profit, outpacing a 0.6 percent drop in the broader Taiex index.

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

BOJ keeps massive monetary stimulus intact

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

Listen to the Article (6 Minutes)

The Bank of Japan (BOJ) on Wednesday kept its massive monetary stimulus intact, as widely expected, reiterating that the world’s number three economy is recovering moderately.

The central bank pledged to boost its monetary base by 80 trillion yen a year, a quantitative easing program that’s been in place since April 2013, in a bid to rid of deflation for good.

Dollar-yen fell on the news, trading at 119.99 from 120.14, while the Nikkei 225 index held steady at a 0.4 percent gain.

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