Thursday, June 06, 2013

  • Draghi Sees Economy Recovering as ECB Rates Left on Hold. European Central Bank President Mario Draghi said the euro-area economy will return to growth by the end of the year, handing policy makers a reason to hold back fresh stimulus. “Euro-area economic activity should stabilize and recover in the course of the year, albeit at a subdued pace,” Draghi told reporters in Frankfurt today. “We will monitor very closely all incoming developments and we stand ready to act.”
  • German Factory Orders Fall; Economy Struggles to Recover. German factory orders (GRIORTMM) fell more than economists predicted in April as Europe’s largest economy struggled to gain strength. Orders, adjusted for seasonal swings and inflation, decreased 2.3 percent from March, when they increased a revised 2.3 percent, the Economy Ministry in Berlin said today. Economists forecast a 1 percent drop, according to the median of 39 estimates in a Bloomberg News survey. In the year, workday-adjusted orders fell 0.4 percent. 
  • Turkish Bonds, Stocks Slump as Erdogan Fails to Calm Investors. Turkish bond yields surged and stocks slumped after Prime Minister Recep Tayyip Erdogan failed to calm investor concern as anti-government protesters demonstrated for the seventh day. The lira depreciated. Yields on two-year benchmark bonds advanced 46 basis points to 6.78 percent at 5:48 p.m. in Istanbul, extending the weekly jump to 71 basis points. The Borsa Istanbul National 100 (XU100) index retreated 4.7 percent to 75,895.26 at the close, its lowest level since Dec. 6. The lira weakened 0.3 percent to 1.8986 a dollar, after earlier strengthening as much as 0.6 percent.
  • European Stocks Decline After Draghi Comments on Stimulus. European stocks declined, reversing earlier gains, as the European Central Bank refrained from announcing additional stimulus measures immediately even as it held its benchmark interest rate. Barclays Plc (BARC) fell to a one-month low as Sumitomo Mitsui Banking Corp. sold a stake in the lender. Fiat SpA lost 6.5 percent as Chrysler Group LLC went in for a vehicle recall. France Telecom SA (FTE) rose after its Orange Business Services unit won a five-year deal to deploy a private network for Heineken NV. Johnson Matthey Plc (JMAT) jumped to its highest price in at least 23 years after posting full-year profit that beat estimates. The Stoxx 600 dropped 1.2 percent to 291.69 at the close of trading in London, after earlier gaining as much as 0.4 percent.
  • Japanese Stock-Index Futures Drop, Signaling Third Day of Losses. Japanese equity futures fell, signaling a third day of losses for the Nikkei 225 Stock Average, on concern the yen’s rally to a seven-week high versus the dollar will hurt corporate profits. Futures on the Nikkei 225 expiring in June slumped 3.1 percent to 12,420 as of 1:52 a.m. in Osaka. The Japanese equity benchmark has fallen 4.7 percent in the past two days, extending a retreat since May 23 to 17 percent. The yen strengthened 2.6 percent to 96.49 per dollar today
  • Yen Rises Most in One Year as Traders Reverse BOJ-Linked Bets. The yen rallied the most in more than a year against the dollar, reaching a seven-week high, as traders unwound bets on a weaker Japanese currency based on the Bank of Japan’s monetary stimulus plan.
  • Credit Swaps in U.S. Rise as Investors Search for Stimulus Clues. A gauge of U.S. corporate credit risk rose to a two-month high as investors sought clues in labor-market data about the pace of central bank debt purchases. The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, rose 1.9 basis points to a mid-price of 87.9 basis points at 11:07 a.m. in New York, according to prices compiled by Bloomberg. The gauge had fallen as much as 1.2 basis points before weekly jobless claims data came in higher than economists’ forecasts and the previous week’s level was revised upward. The risk premium on the Markit CDX North American High Yield Index added 12.8 basis points to 440.7 basis points, Bloomberg prices show. The average relative yield on speculative-grade, or junk-rated, debt widened 5.1 basis points to 546.9 basis points, Bloomberg data show.
  • Higher Taxes Mute Wealth Effect for Wealthy: EcoPulse. High-income Americans are demonstrating some frugality as the positive wealth effect from a rallying stock market is being offset by tax increases.
  • JPMorgan ‘Afraid’ of Emerging Market Selloff Impact on Banks. The emerging market selloff sparked by speculation the Federal Reserve will reduce stimulus may cut revenue for investment banks including Standard Chartered Plc and HSBC Holdings Plc, JPMorgan Chase & Co.’s Cazenove said. Emerging markets are going through the most disruptive period since the collapse of Lehman Brothers Holdings Inc. in 2008 based on the rise in equity, currency and rates volatility, according to the JPMorgan unit’s report titled “Fed Tapering: Who is Afraid of EM Selloff? We Are!” The swings may cause a “material slowdown” in emerging market fixed-income revenues with volumes “drying up,” Cazenove analysts including Kian Abouhossein in London wrote.
  • Dimon Sees ‘Scary’ World as Interest Rates Return to Normal. Global markets will face increased volatility as central banks bring interest rates back to normal levels, JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said. “We should all hope for a normalization of interest rates -- that’s a good thing,” Dimon said today during a panel discussion at the Fortune Global Forum in Chengdu, China. “As we go back to normal, it's going to be scary, and it's going to be kind of volatile.”
  • Goldman Sees Bull Run Over as Returns Trail Stocks: Commodities. Commodities are trailing equities for the longest stretch in almost 15 years as Goldman Sachs Group Inc. and Citigroup Inc. predict the end of the decade-long bull market even as the global economy expands. The Standard & Poor’s GSCI Spot Index of 24 commodities lagged behind the MSCI All-Country World Index for six months, the longest stretch since 1998. Hedge funds cut combined bullish bets across 18 U.S. raw-material futures by 51 percent from a 16-month high in September and are bearish on six of them. Commodities will return 1.6 percent in a year as losses in agriculture and precious metals diminish gains from energy and industrial metals, Goldman said last month. Investors pulled a record $23.3 billion from commodity funds this year as global equities attracted $182 billion, according to EPFR Global, which tracks money flows.  
  • Copper Heads for Biggest Loss in Two Weeks on Demand Concerns. Copper headed for the biggest loss in two weeks in New York as signs of slowing in China and Germany add to concerns that global economic growth will ebb, dimming the outlook for metals demand. German factory orders slid more than forecast in April, figures showed today. Export growth in China, the biggest copper consumer, probably grew in May at half the pace of a month earlier, economists said in a Bloomberg survey before data due June 8. RBC Capital Markets cut its 2013 forecast for copper prices by 9.3 percent. “Poor global economic growth prospects are weighing” on metals, H. Fraser Phillips, a Toronto-based analyst at RBC, said in a note today. “Significant excess inventories have accumulated, and capacity utilization rates are well below full effect levels, pointing to a poor commodity pricing environment.” 
  • U.S. Household Worth Tops Pre-Recession Peak for First Time. Household wealth in the U.S. jumped to a record in the first quarter, exceeding its pre-recession peak for the first time, bolstered by gains in the stock and housing markets that are helping Americans mend finances.
Zero Hedge: 
Business Insider: 
  • Fed's Plosser Says Time to Ramp Down on Stimulus. "I think it's time that we begin to gradually unwind ourselves from this activity," said Mr. Plosser, who is a vocal internal critic of the Fed's stimulus efforts. He spoke with reporters following an address during a Boston College financial conference.
LA Times:
  • Moody's cuts Illinois credit rating on inability to fix pensions. Moody's Investors Service on Thursday downgraded Illinois' general obligation credit rating to the lowest rating in the state's history, the second downgrade by a major rating agency since state lawmakers last week failed to pass a plan to deal with a $100 billion unfunded public pension liability. Moody's downgraded Illinois' $27 billion of general obligation debt to A3 from A2, with a negative outlook. Even prior to the downgrade, Illinois had the lowest rating of any U.S. state.
Financial Times:
  • ‘Frankenstein’ CDOs twitch back to life. Has Frankenstein returned? That is a question some investors might ask when they look at the world of collateralised debt obligations. After all, a mere three years ago it seemed as if the really monstrous forms of CDOs that proliferated during the credit bubble had been killed off. Most notably, issuance of so-called synthetic CDOs – or bundles of derivatives based on corporate, mortgage and sovereign debt – collapsed from a peak of $648bn in 2007 to $98bn in 2009. But now those CDOs are apparently twitching again.
  • China-EU trade war a risk for UK growth. The beginnings of a trade war between China and the European Union could escalate into a damaging battle that might hurt the UK, economists have warned.
Hong Kong Govt: 

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