Wednesday, June 15, 2016

Today's Headlines

  • Brexit Woe Splits Europe’s Bond Market in Recall of Debt Crisis. Britain’s European Union referendum is redrawing old lines in the European bond market. As demand for safety in the run-up to the vote pushed Germany’s 10-year yields below zero for the first time on record on Tuesday, those on Spanish two-year notes were turning positive. Meanwhile the yield difference between Italian and German 10-year bonds reached the highest since February. For much of Wednesday the reverse was true. Spanish and Italian bonds initially climbed, while German bunds fell, before the securities pared their moves.
  • Japan Traders Risk Brexit Pain in Record Pound Bullish Bets. Japan’s retail investors look to have bought the dip in the pound just in time for the currency to fall off a cliff as polls showed Britons may vote to leave the European Union. Wagers from individuals for sterling to gain against Japan’s currency outnumbered bets it would drop by 314,616 contracts as of June 7, the biggest net longs since Tokyo Financial Exchange Inc.’s Click 365 began collecting the data in 2006. That contrasts with global options markets, where the amount wagered on the pound falling to the lowest since the 1980s more than doubled over the past three months.
  • China’s Bank Lending Rebounds; Good for Growth, Bad for Risk. China’s banks turned on the lending spigot again last month -- a boost for the near-term economic outlook, but a longer-term drag as the nation’s debt pile keeps on swelling. New yuan loans rebounded to 985.5 billion yuan ($150 billion) in May, the People’s Bank of China said, ahead of all 35 economists estimates and beating the median for 750 billion yuan in a Bloomberg survey. Aggregate financing was 659.9 billion yuan last month, missing all but one of 28 forecasts and below the median for 1 trillion yuan, as short-term bill financing slumped and net issuance of corporate bonds turned negative.
  • There Has Almost Never Been This Many Global Stocks in Decline. (graph) Breadth is brutal. Fear of a possible Brexit is being manifested in equities around the world. The Bloomberg composite referendum poll tracker shows that in recent days, the share of the electorate who would vote to leave the E.U. has pulled ahead of the percentage who would vote to remain. Amid the evidence that the "Leave" camp is gaining support, global equities have come under acute pressure, with the MSCI All World Index giving back more than 4 percent over the four sessions through Tuesday. What's startling about this particular pullback is how the number of stocks that are rising was, at the time of yesterday's close, absolutely dwarfed by the amount in decline, observe analysts at Bespoke Investment Group. That means Bespoke's International Benchmark Breadth Indicator, which tracks the number of stocks that are advancing or declining in 25 major markets around the world, tumbled on Tuesday to levels rarely seen in the past decade:
  • Sub-Zero German Yields Risk Creating Vicious Cycle for Investors. The rally in Germany’s bonds is creating a headache for investors. The yield on the nation’s 10-year bund dropped below zero for the first time on record on Tuesday, leaving some investors balking at the lack of return on offer for holding Europe’s benchmark securities. Meanwhile, the surge in bunds has pushed yields on more than half of the $1.13 trillion Bloomberg German Sovereign Bond Index below the European Central Bank’s minus 0.4 percent deposit rate, making almost $626 billion of the bonds ineligible for its quantitative easing plan.
  • European Stocks Rebound as Miners Rise, Inditex Buoys Retailers. A rally in miners and retailers lifted European stocks after a five-day rout, while traders speculated that the Federal Reserve’s latest policy review will offer encouragement to beleaguered markets. Glencore Plc climbed 6.5 percent, helping commodity producers post the biggest increase of the 19 industry groups on the Stoxx Europe 600 Index, as metals advanced. Inditex SA pushed retailers ahead with a 5.5 percent rise after the maker of Zara clothing reported better-than-expected first-quarter profit. Banks in peripheral nations led gains on a gauge of lenders. The Stoxx 600 added 1 percent to 323.63 at the close, rebounding from its lowest level in almost four months.
  • Oil, Gas Drillers Said Facing $2 Trillion Funding Gap. (video) Drillers forced to slash spending during the oil slump may soon be facing another hurdle: a funding shortfall to the tune of $2 trillion over the next five years. That capital crunch creates the risk for underinvestment, perhaps affecting the availability of reserves in the longer term, according to a study published Wednesday by the Deloitte Center for Energy Solutions. The global oil and natural gas industry has curbed capital spending "to a point below the minimum required levels to replace reserves," the Deloitte report said. "That is quite unusual," Andrew Slaughter, executive director at the Center, said of the funding gap in an interview. "You’ve got to spend a lot of capital just to stand still, even without growth."
  • Treasuries Have Best Start Since ’03 as Growth, Brexit Curb Fed. (video) Treasuries are in the midst of their best start to a year in more than a decade as flagging global economic growth and the prospect of Britain exiting the European Union boost demand for haven investments. Benchmark 10-year note yields fell Wednesday before the Federal Reserve concludes a policy meeting. Treasuries have returned 4.8 percent in 2016, the most at this stage of the year since 2003, based on Bank of America Corp.’s U.S. Treasury Index. Futures prices showed zero chance of a Fed interest-rate increase this week, and the probability of a move this year has declined to about 49 percent, from 74 percent at the end of May.
  • Chanos: Easier to Find Short Ideas as Bull Market Goes On. (video)
  • Michael Milken Family Office Becoming a Hedge Fund, Journal Says. Executives who have been managing the personal wealth of Michael Milken at his family office Silver Rock Financial LLC have transformed the firm into a hedge fund and are seeking outside money, the Wall Street Journal reported, citing regulatory filings and people familiar with the matter.
Zero Hedge:

No comments: