Thursday, January 15, 2015

Today's Headlines

  • Mayhem Erupts on Trading Floors After Swiss Central Bank Removes Cap on Franc. At 9:30 a.m. today, trading floors across the City of London erupted. Outbursts of obscenities and confusion followed the Swiss central bank’s surprise decision to abolish its three-year-old policy of capping the Swiss franc against the euro, according to traders in London’s financial district. The U-turn sent the franc as much as 41 percent up against the euro, the biggest gain on record, a move that one trader estimated may cause billions of dollars of losses for banks and their customers. Dealers at banks including Deutsche Bank AG (DBK), UBS Group AG (UBSG) and Goldman Sachs (GS) Group Inc. battled to process orders amid a flood of customer calls and trade requests, according to people with direct knowledge of the events. At least one electronic currency-trading system temporarily halted transactions, adding to the mayhem. “This is the biggest currency shocker in years and it’s likely to create more volatility in the short term,” said James Stanton, head of foreign exchange at deVere Group, a financial adviser that oversees about $10 billion. “Trading positions are extremely vulnerable and volume has gone through the roof.” 
  • Ukraine Lurches Back Toward War as Donetsk Airport Battle Rages. Ukraine lurched back toward full-scale conflict as government troops sought to repel an assault by pro-Russian insurgents for control of an eastern airport. Ukraine still holds the Donetsk airport, which has been mostly destroyed since reconstruction that ended in 2012, a presidential adviser said this evening on Facebook. Earlier, Ukraine said cease-fire violations had surged to a record, the security council warned the unrest may spark a “continental war” and Germany’s leader called for emergency peace talks.
  • Swiss Currency Shock Hits Exporters;  ‘Words Fail Me,’ Says Swatch CEO. (video) Swiss exporters including Swatch Group AG (UHR) and Richemont slumped in Zurich trading after the central bank’s decision to scrap its cap on the currency saw the franc jump more than 14 percent against the dollar and euro. “Words fail me,” Swatch Chief Executive Officer Nick Hayek said by e-mail. “Today’s SNB action is a tsunami; for the export industry and for tourism, and finally for the entire country.” 
  • Eastern European Currencies Dive as Swiss Loan Costs Hurt Banks. Eastern European currencies tumbled and banking stocks slumped after Switzerland’s move to allow its currency to appreciate stoked concern individuals will struggle to repay loans denominated in Swiss francs. Poland’s zloty weakened 15 percent to 4.1533 against the the Swiss currency by 5:56 p.m. in Warsaw, paring an earlier loss of as much as 28 percent. Hungary’s forint and the Romanian leu tumbled to records. Warsaw-listed Getin Noble Bank SA sank 16 percent, while Bank Millennium SA and PKO Bank Polski SA, the country’s biggest lender, slid at least 6.5 percent.
  • UBS, Credit Suisse Earnings Seen Hurt by Rising Swiss Franc. (video) Swiss banks stand to see their earnings eroded by a stronger Swiss franc after the country’s central bank allowed the currency to trade freely against the euro again. UBS Group AG (UBSG), the country’s biggest bank, may see profit shrink 14 percent, while its closest competitor, Credit Suisse Group AG (CSGN), could suffer a 15 percent drop, Barclays Plc analysts led by Jeremy Sigee said in a note to clients. They predict a decline of 30 percent for Julius Baer Group Ltd. (BAER) Analysts from Citigroup Inc. and Morgan Stanley shared the view that the abrupt end to the Swiss National Bank’s (SNBN) cap would squeeze earnings, especially for the country’s many private banks.
  • Target(TGT) to Abandon Canada After Racking Up Billions in Losses. (video) Target Corp. (TGT) will walk away from Canada less than two years after opening stores there, putting an end to a mismanaged expansion that racked up billions in losses. The shares jumped the most in about eight weeks. The Canadian division, which employs 17,600 people, is seeking court approval to begin liquidation, the Minneapolis-based retailer said today in a statement. Dismantling operations north of the border will lead to a $5.4 billion writedown this quarter, though it will boost profit by next year, Target said. 
  • Swiss Stocks Tumble on Central Bank's Surprise; European Equities Rise. Stocks in Switzerland tumbled the most in 25 years, led by the nation’s exporters, while the Euro Stoxx 50 (SX5E) Index rose, after the Swiss National Bank (SNBN) unexpectedly ended its minimum exchange rate. The Swiss Market Index slid 8.7 percent at the close of trading in Zurich, after earlier losing as much as 14 percent. The Euro Stoxx 50 advanced 2.2 percent to 3,157.36.
  • OPEC Sees Less Demand for Its Crude, Slower U.S. Supply. The Organization of Petroleum Exporting Countries said it expects weaker demand for its crude this year and predicted that slumping prices will curb growth in U.S. supply. Demand for OPEC oil will average 28.8 million barrels a day, about 100,000 barrels less than forecast last month, the Vienna-based organization said in a monthly report. While the group boosted its 2015 estimate for U.S. oil production, it said annual growth will be slower than previously estimated as lower prices lead to investment cuts and less drilling. Iraq’s output extended gains from its highest level since 1978
  • Gold Extends Winning Streak to Five Days on Swiss Move. Gold futures headed for the longest rally in more than six months as Switzerland’s decision to decouple its currency from the euro roiled currency markets, boosting demand for the metal as a haven. Gold futures for February delivery surged 2.1 percent to $1,260.30 an ounce at 10:24 a.m. on the Comex in New York, after touching $1,264.60, the highest since Sept. 8. Prices headed for a fifth straight gain, the longest rally since June 25. The metal climbed above its 200-day price average for the first time since September.
  • Copper Demand Fading in Europe as Surcharges Drop to 5-Year Low. European demand for copper is weakening after consumers stockpiled the metal at the end of last year amid deepening concerns about the health of the region's economy. The surcharge added to excahnge prices, an indicator of demand, has fallen to the lowest since 2009, according to Bloomberg. The premium is about $35 a metric ton, down from $60 a ton in November. 
  • Banks Stung by ‘Volatile Volatility’ as Fixed-Income Drops. Big banks have been begging for volatility. Just not the kind they got last quarter. JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Citigroup Inc. (C) posted their worst combined quarterly trading revenue since 2011, led by a 23 percent drop in fixed-income, currencies and commodities, or FICC. That contributed to the first annual decline in aggregate net income for the three biggest U.S. banks since the financial crisis. Their stocks fell.
  • She's No Greenspan: Yellen Signals She Won't Babysit Markets in Turmoil. Janet Yellen is leaving the Greenspan “put” behind as she charts the first interest-rate increase since 2006 amid growing financial-market volatility. The Federal Reserve chair has signaled she wants to place the economic outlook at the center of policy making, while looking past short-term market fluctuations. To succeed, she must wean investors from the notion, which gained currency under predecessor Alan Greenspan, that the Fed will bail them out if their bets go bad -- just as a put option protects against a drop in stock prices. 
  • Lennar(LEN) Shares Tumble as Homebuilder Profitability Weakens. Lennar Corp. (LEN) shares slid after the homebuilder reported increased incentives and narrowing margins, adding to concern that the industry is facing reduced profitability. The Miami-based company, after reporting an almost 50 percent increase in fiscal fourth-quarter profit, said on a conference call Thursday that profit margins are being hurt by a reduced ability to raise prices. The shares sank 5.9 percent to $43.07 at 1:35 p.m. in New York after dropping as much as 9percent, the biggest intraday decline since June 2012. The Standard & Poor’s Supercomposite Homebuilding Index tumbled 5.4 percent. “Across the board, we’re seeing intensified competition as builders go out and chase volume,” Lennar Chief Executive Officer Stuart Miller said on the call.
Business Insider: 
AfD's Henkel:
  • Germany Should Leave Euro After EU Court Opinion. Germany should leave euro area after European Court of Justice opinion backed ECB's OMT bond-buying program, Hans-Olaf Henkel, deputy head of the anti-euro Alternative for Germany party and European Parliament member, says in e-mailed statement. Decision means German govt, parliament and Bundesbank have lost control over spending in addition to currency. ECB's Draghi now has "free hand to finance southern euro states at the expense of German taxpayers and their children." "Germany must now leave the euro area, either alone or together with other euro countries."
Corriere della Sera:
  • Italy May Postpone Balanced Budget Goal With EU Rules. With new EU rules, Italy may be able to postpone its balanced budget goal beyond 2017 and have additional EU4b-EU5b to spend for public investments this year.

No comments: