After a lukewarm start by the Chinese "market", which had
dropped for the past 6 out of 7 days despite ever escalating
measures by Beijing to manipulate stocks higher, finally the
Shanghai Composite reacted favorably to Chinese micromanagement of
stock prices and closed 3.7% higher as Chinese regulators stepped
up their latest measures by adjusting rules on short-selling in
order to reduce trading frequency and price volatility,
resulting in several large brokerages suspending short sell
operations. At this pace only buy orders will soon be
legal which just may send the farce of what was once a "market"
limitup.
Elsewhere in Asia, equities traded mixed following a lackluster
Wall Street close amid further declines in commodity prices, after
Brent
crudedropped below $50/bbl for the first time since January,
only to rebound in overnight trade. ASX 200 (+0.3%) traded in the
green with gains in financials offsetting losses seen in commodity
names. Elsewhere, the Nikkei 225 closed lower by 0.1% while JGBs
rose following the latest 10-yr auction which drew highest b/c
since Jan with 10-yr yields at a 9-week low.
Speaking of "buy only" trading, Greece may want to consider that
soon because on the second day after reopening its market for
trading, Greek banks traded
limitdown for
the second day in a row. End result: banks such as Piraeus is now
down over 50% in two days.
This is Piraeus Bank -51% in two days... We
need a name for this chart.
pic.twitter.com/x05r9omPEN
— Jonathan Ferro (@FerroTV)
August 4, 2015
The reason: the same one we explained in "
Greek Banks Just Became A "Strong Sell" At Any
Price" - a recapitalization and an equity wipe out are now
virtually assured, In fact, judging by the amount of jawboning
against it, as seen by these headlines that hit the BBG tape
moments ago...
GREEK BANKS SAID TO SEE DEPOSIT INFLOWS SINCE JULY 20
REOPEN
GREEK BANKS’ STRESS TEST TO BE COMPLETED BY END-OCT:
OFFICIAL
GREEK DEPOSITORS WILL NOT BE BAILED-IN: CENTRAL BANK
OFFICIAL
... a bail in of depositors is also practically assured. Only
this time anyone who puts their money in the bank really has nobody
but themselves to blame.
Elsewhere, the energy sector continues to underperform despite
the complex seeing a mild turnaround with
Brentand VVTI Sep'15 futures both in the green, with the former
retaking $50.00 handle. The European morning has seen
Brent
Crudepare some of its recent losses to rise above $50 heading
into the NYMEX pit open, with WTI following suit and also residing
in firm positive territory on the session . The metals complex have
also seen a modest bout of strength during European hours, with
gold trading higher by around $5.00 at USD 1090, while platinum and
palladium are both off their multi year lows, with platinum earlier
reaching its lowest level since 2009 and Palladium reaching its
lowest level since 2012.
Brentoil, which has slumped more than 20 percent over the last
month, was up almost 1 percent. Copper seen as a bellwether of
global growth, nudged off a six-year low.
The dollar also helped relieve the pressure, with it pegged back
by another bout of weak U.S. data on Monday. Raw material reliant
Canadian and Australian dollars both got lifts, alongside Russia's
rouble and other emerging FX.
The Aussie dollar was by far the biggest mover. It rose 1.25
percent to an almost two-week high of $0.7375 after a major change
in tone from its central bank that suggested it was now more
satisfied with the currency level. "You have had a key shift from
the RBA that they don't need to intervene as strongly, so that has
triggered a considerable Aussie bounce," said John Hardy, head of
FX strategy at Saxo Bank.
"And the (U.S.) dollar view is just flat and we are just waiting
for payrolls on Friday. We have had a relatively hawkish set-up
from Yellen and co (that interest rates may go up next month) but
the rates market just doesn't believe it."
European Equities reside in mixed territory (Euro Stoxx: -0.3%)
heading into the North American crossover, with financials the
worst performing sector after Credit Agricole (-9.5%) reported
earnings pre-market and announced that they are delaying structural
reforms.
Bunds reside in positive territory albeit off their best levels,
gaining amid the weakness in equities, while the German curve has
flattened in line with the
postFOMC
trend, following the trend set in USTs. While also of note, the ECB
announced further QE details yesterday, which showed extending
maturities in German debt. Bunds also took out yesterday's highs to
reach their highest level since May 29th before paring some of
these gains amid profit taking with macro news flow fairly light,
while the UK 30Y also reached 2.5%, its highest level since April
before the weak UK Auction (b/c 1.37, Prey. 1.54, tail 0.4bps,
Prey. 0.2bps) saw a weakness in UK fixed income products.
In FX, AUD was the notable outperformer after the RBA
dropped commentsthat a further fall in AUD is
'likely and necessary', with the central bank leaving rates
unchanged, while Australian retail sales (0.7% vs. Exp. 0.4%) and
trade balance data both beat expectations. Meanwhile the USD
(USD-Index: -0.1%) remains relatively flat today amid a tight range
in major pairs.
The notable tier one data from the European morning saw UK
Construction PMI (57.1 vs. Exp. 58.5) print its lowest figure since
May, but fail to have a sustained affect in GBP. Also of note, the
Greek finance and economy ministers are set to meet the Quadriga
(Troika + ESM) regarding bank recapitalisation and
privatisation.
Looking ahead, today's highlights include US ISM New York,
factory orders and IBD/TIPP economic optimism, Canadian
Manufacturing PMI and New Zealand unemployment.
In Summary: European shares decline, though pare the worst of
earlier declines as U.S. equity index futures also slip. Asian
shares gain. Oil rises for first day in 4. Gold, silver rise with
metals, food commodities, cotton, while platinum, palladium fall.
Italian, Spanish stocks among largest underperformers in Europe.
Yields on eurozone 10-yr notes fall; dollar also declines. U.S. ISM
New York, factory orders, IBD/TIPP economic optimism, due
later.
Market Wrap
S&P 500 futures down 0.1% to 2089
Stoxx 600 down 0.2% to 398.5
US 10Yr yield up 1bps to 2.16%
German 10Yr yield down 2bps to 0.61%
MSCI Asia Pacific up 0.3% to 141.5
Gold spot up 0.4% to $1091.1/oz
Eurostoxx 50 -0.2%, FTSE 100 +0.3%, CAC 40 -0.2%, DAX +0%, IBEX
-0.4%, FTSEMIB -0.8%, SMI +0.1%
Asian stocks rise with the Shenzhen Composite outperforming and
the Sensex 30 underperforming; MSCI Asia Pacific up 0.3% to
141.5
Nikkei 225 down 0.1%, Hang Seng down 0%, Kospi up 1%, Shanghai
Composite up 3.7%, ASX up 0.3%, Sensex down 0.4%
Apollo Buys Spain’s Lico Leasing From Fortress: El
Confidencial
Euro up 0.18% to $1.097
Dollar Index down 0.14% to 97.36
Italian 10Yr yield down 4bps to 1.74%
Spanish 10Yr yield down 4bps to 1.91%
French 10Yr yield down 3bps to 0.91%
S&P GSCI Index up 1% to 372.3
BrentFutures up 1.4% to $50.2/bbl, WTI Futures up 1.5% to
$45.9/bbl
LME 3m Copper up 0.3% to $5236/MT
LME 3m Nickel up 1.3% to $10885/MT
Wheatfutures up 1.1% to 504.5 USd/bu
Bulletin Headline Summary from Bloomberg and
RanSquawk
Treasuries drift lower as commodities recover from yesterday’s
rout; markets wait for ADP tomorrow, nonfarm payrolls Friday
for clues on Fed’s next move; data calendar light, with
Factory Orders at 10am.
European Equities reside in mixed territory heading into the
North American crossover, with financials the worst performing
sector, weighed on by Greek banks and Credit Agricole, who reported
earnings pre-market
AUD is the notable outperformer after the RBA dropped comments
that a further fall in AUD is 'likely and necessary', with the
central bank leaving rates unchanged
Oil and industrial metals led a rebound in commodities,
boosting Russia’s ruble as emerging-market currencies rallied
and supporting shares of raw-material producers
Stocks in Athens fell almost 5%, extending biggest slump since
at least 1987 as the nation seeks a return to normal after a
five-week shutdown of its exchange; Piraeus Bank SA slumping 30%,
while National Bank of Greece SA tumbled 29%
Daniel Yu, best known for betting against companies via his
short-selling firm Gotham City Research LLC, says he’s waiting in
the wings for Greece to leave the euro - so he can start
buying
Puerto Rico’s debt crisis escalated as it suspended deposits
into a fund that pays its general-obligation bonds and one of its
agencies defaulted for the first time, jeopardizing the
cash-strapped government’s ability to raise money
Indian central bank Governor Raghuram Rajan kept interest rates
unchanged, rebuffing pressure from the Finance Ministry to
reduce borrowing costs that are among the highest in Asia
Aetna Inc. raised its full-year earnings forecast after
reporting profit that topped analysts’ estimates as it added more
members in government insurance programs
Sovereign 10Y bond yields mixed. Asian stocks mixed, European
stocks, U.S. equity-index futures fall.
Crudeoil, copper and gold rise
US Event Calendar
9:45am: ISM New York, July (prior 63.1)
10:00am: Factory Orders, June, est. 1.8% (prior -1%); Factory
Orders Ex Trans, June (prior 0.1%)
DB's Jim Reid completes the overnight event recap
Commodities continue to be the main game in town at the moment
with the highlight being
Brent(-5.15%) hitting 6 month lows yesterday at $49.52/bbl.
This helped send 10 year Treasuries to two-month lows at 2.149%
(-3.2bps) while Fed Funds contracts fell for a second consecutive
session with the Dec15 (-0.5bps), Dec16 (-2.5bps) and Dec17
(-4.0bps) contracts down to 0.300%, 0.960% and 1.555% respectively.
Despite some resilience, US equity markets succumbed to the
sell-off in energy stocks with the S&P 500 eventually finishing
-0.28% with the energy component tumbling 2% as some of the larger
cap names including
Chevron(-3.25%) and
Exxon
Mobil(-1.45%)
led the move lower.
China’s soft PMI numbers from the weekend and yesterday, as well
as the latest ISM numbers out of the US didn’t help but it was
supply noise out of Iran where the bulk of the blame was centered.
Iran’s Oil Minister, speaking on Sunday, said that production out
of the country can increase by as much as 500k barrels a day within
a week after sanctions end and by 1m barrels a day within a month
following that. The Minister added that he expects sanctions
against the country to be lifted by late November.
Talking of Iran, I was reading over the weekend that the country
has been enduring a 'heat dome' with a heat index of 72C (162F)
which measures heat and humidity and is kinda the opposite of the
wind chill factor reading (ie how warm/cold it actually feels).
Such a number is extraordinary and reflects a heatwave in the
region. I've cooked pizzas at lower temperatures than this!! I
showed this article to my wife who at the moment is struggling when
it gets above 18 degrees and she nearly had a funny turn just
reading it.
Once again it wasn’t just Oil markets where we saw weakness
yesterday with most of the commodity complex enduring another tough
session. In the metals space Gold (-0.82%), Silver (-1.79%) and
Platinum (-2.22%) tumbled while Aluminum (-0.37%) and Copper
(-0.19%) followed suit. Commodity sensitive currencies also felt
some of the pain yesterday too with the Aussie Dollar (-0.30%),
Russian Ruble (-2.84%), Norwegian Krone (-0.90%) and Canadian
Dollar (-0.52%) some of the notable movers.
Staying on credit, DB’s Oleg Melentyev touched upon the latest
moves in US credit markets on the back of the recent fall in oil in
a note at the back end of last week. Oleg noted that last week we
saw US HY energy spreads touch their peak levels from mid-December
of last year (860bps) and that that weakness has now extended to
metals where spreads are now at their widest level since the
2011-2012 peaks. Interestingly, Oleg notes that cross-asset
volatility has experienced its biggest drop since October in recent
weeks despite the weakness in commodities. The fall has come since
the resolution in Greece in mid-July and right around the time of
the commodity-driven widening in HY resulting in the
regression-estimated HY spread being materially inside of its
actual values (50-75bps depending on the time horizon) for the
first time since December 2014. Oleg notes that, absent any
meaningful bouts in volatility higher in the coming days and weeks,
this should help encourage a rebound in US credit. However this
hasn’t yet convinced Oleg that it’s a good enough reason to tighten
spread target levels. In particular he notes of material headwinds
from commodities, EM, rising credit risks and deteriorating issuer
fundamentals which muddles the picture leaving him predisposed to
keep existing longer term spread targets in place.
Looking at how markets in Asia are trading this morning, it’s
been another choppy session in China but bourses are in positive
territory as we hit the midday break with the Shanghai Comp
(+1.34%), Shezhen (+1.76%) and CSI 300 (+1.16%) all up, supported
in part by news on Reuters that the Shanghai and Shezhen bourses
are cracking down on short-selling. The new rules are restricting
the ability for day-traders to short-sell, forcing investors now
into a T+1 settlement and so mitigating intraday volatility.
Elsewhere this morning the Kospi (+0.50%) and ASX (+0.32%) are also
up, however it’s a weaker start for the Nikkei (-0.20%) and Hang
Seng (-0.13%). It’s been a much quieter session for commodities
meanwhile.
Brent(+0.34%) and WTI (+0.71%) have recovered slightly while
Gold (-0.19%) is modestly lower. Asia and Australia credit markets
are +2bps and +1bp respectively. The RBA have left rates unchanged
as we go to print.
Back to yesterday, data in the US, which along with the moves in
Oil, helped support the move lower in yields. Despite no change in
the final July manufacturing PMI reading of 53.8, the ISM
manufacturing reading for the same month attracted some
disappointment with the print falling 0.8pts to 52.7 (vs. 53.5
expected) with employment, export orders and order backlogs
components all falling. The ISM prices paid print was also
disappointing, falling 5.5pts to 44.0 (vs. 49 expected).
Construction spending data for June was the other notable
disappointment yesterday, with just a +0.1% mom rise during the
month versus expectations of +0.6%, the smallest monthly increase
since January although we did see a reasonable upward revision to
the May print (+1.8% from +0.8% previously). Elsewhere the June
personal spending print of +0.2% mom was as expected while the
personal income reading print came in a touch ahead of consensus
(+0.4% mom vs. +0.3% expected). In terms of the PCE readings the
deflator was as expected at +0.2% mom for June, although the
annualized rate ticked up a notch to +0.3% yoy (from 0.2%). The
core was also as expected for the month at +0.1% mom, keeping the
annualized rate unchanged at +1.3% yoy. Finally July vehicle sales
rose to a slightly firmer than expected 17.46m saar pace (vs.
17.20m expected), up a touch from June.
It was a quieter session on the earnings front yesterday with
just a post-market beat from AIG the notable report yesterday. At
the latest count of 370 S&P 500 companies having now reported,
both earnings and sales beats are unchanged versus yesterday’s
tally at 74% and 50% respectively. Over in Europe meanwhile, the
trend has also remained unchanged at 63% and 65% respectively.
Elsewhere in the US yesterday we also saw the latest Fed Senior
Loan Officer Opinion Survey on Bank Lending which showed that on
the whole banks reported little change in their standards on
commercial and industrial and commercial real estate loans, while
on the household side the survey suggested that banks have reported
a slight easing of lending standards for a number of residential
mortgage loans over the past three months.
Moving on, Puerto Rico attracted its fair share of attention
yesterday after halting payments into a fund used to cover its
general obligation debt and as a result defaulting on a $58m bond
payment. The default looks likely to be the trigger to start a
restructuring of Puerto Rico’s roughly $72bn debt load with the WSJ
noting that a group of policy makers are working on a restructuring
plan and are due to present their findings at the of the month.
In the European session yesterday there was much focus on the
reopening of the Greek stock market after a five-week closure. The
ASE closed the session down 16.23% having initially plunged as much
as 25% with banks (-26%) unsurprisingly leading the move lower.
Elsewhere it was actually a fairly constructive day for European
markets, offsetting a weak start on the back of the China data to
close in positive territory with earnings reports from Heineken,
Commerzbank and TomTom in particular helping sentiment. The Stoxx
600 (+0.77%), DAX (+1.19%) and CAC (+0.75%) all enjoyed their fifth
consecutive daily gain. A 0.2pt upward revision to the final Euro
area manufacturing PMI print to 52.4 in July only helped support a
better tone in the European session yesterday. Regionally Germany
(+0.3pts to 51.8) and Italy (+1.2pts to 55.3) were both revised up,
with France unchanged at 49.6 and Spain (-0.9pts to 53.6) falling.
In the UK the print was revised up 0.5pts and above expectations to
51.9. It was a much more mixed session in the European sovereign
bond market. 10y Bunds eventually closed 1.6bps lower in yield at
0.627% as the US session kicked in while Gilts closed 1.5bps lower.
The periphery was generally a basis point wider. Elsewhere the Euro
closed down 0.3% versus the Dollar, not helped by the news that
S&P has revised the outlook on the European Union to Negative
from Stable (at AA+) on the expectation that the EU will provide
first-loss guarantee support for financing connected to the Juncker
Plan as well as the repeated use of its balance sheet to provide
higher-risk financing to EU member states.
Taking a look at today’s calendar now, data-wise June factory
orders is the highlight in the US while the ISM New York and
IBD/TIPP economic optimism survey are also due. Earnings season
continues meanwhile with Walt Disney and CVS Health Corp two of the
notable reporters.
