Random Market News, 11 July
"Leveraged Loans: “Weakest Links” Portend Uptick in Default Rate.
Despite the strength of the credit markets, institutional investors are always on the lookout for indicators of market health. To that end, LCD is pleased to introduce for the loan market “Weakest Links” analysis, a barometer we’ve adopted from associates S&P Global Fixed Income Research.
Weakest links are loan issuers rated B– or lower (excluding defaults) by S&P Global with a negative outlook or implication.
At the end of 2Q17, that measurement is 6.4% for the S&P/LSTA Leveraged Loan Index, up sharply from 4.4% at the end of 2015 but down from 7.7% at the end of 2016.
As would be expected, the default rate for the weakest links is significantly higher than for the broader market.
For those issuers rated B– or lower with a positive or stable outlook, the default rate rises nearly 18x, to 7%, as six of those 86 issuers defaulted. And among the weakest links, the default rate increases again nearly 6x, to 40%, as 17 out of 42 issuers defaulted."
"Despite Resilence, Investors Warn About Liquidity.
Fund managers say risk remains in bond funds, despite steps to ease panic selling initiated after the global financial crisis."
"Money management industry sees drop in revenues, profits in 2016 despite 7% AUM gain — [Boston Consulting Group].
Assets under management totaled $69.1 trillion as of Dec. 31, up 7% from the previous year's total of $64.6 trillion, primarily due to market gains. Net new inflows remained primarily flat at 1.5% of beginning-of-the-year AUM, the same as the previous year.
On a regional basis, AUM increased in all regions except for the Middle East and Africa. North American AUM increased to $33 trillion in 2016, up 6% from the year before. European AUM increased 7% to $18.4 trillion; Asia, excluding Japan and Australia, increased 16% to $6.6 trillion; Japan and Australia increased 4% to $6 trillion; Latin America increased 14% to $1.5 trillion; and the Middle East and Africa remained flat at $1.3 trillion.
..."people are going passive." Net revenues fell to $112 billion from $114 billion, a 1.8% decrease from the year before. The last time revenue dropped was from 2007 to 2008, from $100 billion down to $80 billion."
"Hedge fund returns lower in quarter, stronger for 6 months, HFRI says.
The HFRI Fund Weighted Composite index was up 3.68% for the six months ended June 30, while the HFRI Asset Weighted Composite index returned 2.44%."
S&P 500 YTD ~8.34%.
"Sandler O’Neill: Money manager M&A activity in first half marks busiest since 2008.
Sandler O'Neill's review reported 98 transactions announced globally in the first six months, up 27% from the first half of 2016.
The total disclosed deal value in the first half totaled $11.3 billion, compared to $6.9 billion in the first half of 2016."
"SEC Lets More Companies Ignore Shareholder Proposals in 2017.
Companies submitted 288 ‘no-action’ requests this year, 78% of which were granted by agency’s staff."
"White House taps Randal Quarles for Fed board.
Randal Quarles was nominated to the Federal Reserve Board of Governors where he would oversee regulation of banks, the White House said Monday. Mr. Quarles, managing partner of private investment firm Cynosure Group, is a former Carlyle Group partner who has held several economic posts under previous Republican administrations...
Mr. Quarles would be the first person to serve as vice chairman for supervision of the Federal Reserve System, a position created by the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010."
Liquidity is a crucial metric for all marketplaces. But how can we truly evaluate this liquidity? The three keys to answering this question are density, appropriately balanced demand and supply and category concentration."
From a Tech market perspective.
"Not Just for Quants Anymore.
Big data and analytics might be the future of the industry, but most traditional asset managers are struggling to prepare."
"Accounting roundup: FRC, GAAP, IFRS, IASB, S&P."
Implied rate hike probability on July 26th ~3.1%, September 20th ~13.3%; 0% probability of rate cut through June 13th, 2018.
VIX ~10.89. 10-yr treasury vol (TYVIX) ~4.43.
"Malaysia Industrial Production Outperforms In May
Industrial production in Malaysia rose 4.6 percent year-on-year in May of 2017, compared to a 4.2 percent rise in the prior month and beating market expectations of a 4.2 percent increase. It was the highest growth since March 2017 as output of manufacturing went up (7.3 percent from 6.7 percent in the prior month) while output for the electricity sector rebounded (2.5 percent from -1.5 percent). This was offset by worsening mining sector performance, which extended its decline from April (-2.3 percent from -2 percent).
Indonesia Consumer Confidence At 3-Month Low In June
The consumer confidence in Indonesia decreased to 122.4 in June of 2017 from an all-time high of 125.9 in May. It was the lowest level in three months, as households were less optimistic over jobs availability, income and economic conditions in the next six months. The present situation index went down to 113.7 from 115 and the expectations index fell to 131 from 136.9.
Stocks in Mauritius Hit 32-month High
SEMDEX increased to a 32-month high of 2141.
An India offshore proxy.
Japan Producer Price Growth Steady In June
Producer prices in Japan rose 2.1 percent year-on-year in June 2017, the same as in the preceding month, and consistent with market consensus.The producer inflation index remained at its highest level since November 2014, as prices increased for: lumber & wood products (1.8 percent vs 1.8 percent in May), chemicals (3.7 percent vs 3.1 percent), petroleum & coal (11.1 percent vs 17.7 percent), iron & steel (10.8 percent vs 10.9 percent), nonferrous metals (11.4 percent vs 9.7 percent), metal products (1.5 percent vs 1.6 percent), business machinery (0.5 percent vs 0.6 percent) and electronic components (1.7 percent vs 1.5 percent). Meanwhile, costs rebounded for textiles (0.2 percent vs -0.1 percent). In contrast, costs fell for: pulp (-0.7 percent vs -0.6 percent), plastics (-0.9 percent vs -1.3 percent), general purpose machinery (-0.4 percent vs -0.5 percent) and production machinery (-0.8 percent vs -0.8 percent). On a monthly basis, producer prices were unchanged, likewise in May.
KOSPI Inches To New Highs
South Korea's KOSPI gained 13.9 points, or 0.6 percent, to 2396 on Tuesday 11th of June for a new record as most other Asian bourses also closed in the green despite Wall Street moving slightly lower overnight. Latest data from the financial markets showed that domestic institutional demand for Korean stocks have surged to a net KRW 77.2 billion, which have exceeded foreign demand of KRW 58.1 billion as well that of domestic individuals (KRW 53.4 billion). Among the top performers this session, electronics giant Samsung Electronics moved up 0.7 percent, touching record highs, while its peer SK Hynix added 2.5 percent.
South Korea Jobless Rate Rises To 3.8% In June
South Korea’s seasonly adjusted unemployment rate rose to 3.8 percent in June 2017 from a four-month low of 3.6 percent in the previous month. The number of unemployed persons increased by 55 thousand from the previous month to 1.05 million and the number of employed rose by 14 thousand to 26.48 million people. The participation rate edged up to 62.9 percent from 62.8 percent in May.
US Wholesale Stocks Post Largest Gain In 5 Months
Wholesale inventories in the United States increased 0.4 percent month-over-month in May 2017, above an advance estimate of 0.3 percent and following a 0.4 percent fall in April. It was the largest gain in inventories in five months, as automobile stocks rose 0.7 percent amid declining sales. Also, machinery inventories went up 0.7 percent, petroleum stocks advanced 2.6 percent, and professional equipment inventories grew 0.7 percent. Wholesale stocks excluding autos, which goes into the calculation of GDP, increased 0.3 percent in May.
Euro Hits 14-month High
EURUSD increased to a 14-month high of 1.1448."
"Transfix keeps on truckin’, with $42 million in fresh funding led by NEA.
New York-based transportation startup was determined to use its tech to increasingly match customers needing interstate freight shipping with truck drivers needing to make deliveries.
Transfix, which now employs 110 people, just closed on $42 million in Series C funding led by previous backer New Enterprise Associates, with participation from unnamed strategic investors with “strong ties to the retail and logistics world,” says the company."
"The inside story of how Uber tried and failed to build a FedEx rival — and its $69 billion valuation could be jeopardized."
"Idle containership fleets have declined by 70% from 1.7 million TEU in November 2016 to under 500,000 TEU as of June 2017, according to Drewry."
"Asia to North Europe container traffic is exceeding expectations and, with careful capacity management, carriers should reap the benefit with higher spot rates, according to container shipping analyst Drewry.
Westbound shipments after five months increased by 3.8% to 4.1 million teu, whereas the revised first-quarter growth rate was 4.9%.
According to Drewry’s World Container Index, spot rates for a 40ft box on the benchmark Shanghai-Rotterdam route “shot up” last week by 17% or $284 to $1,936 – “as a result of peak season demand and the 1 July GRIs” (general rate increases) – although that is 4% below the same period last year."
"2017 State of Logistics: Third-Party Logistics (3PL).
The global forecast for the third-party logistics provider (3PL) market this year, as composed by the consultancy Armstrong & Associates, is “lukewarm,” says the organization’s chairman Richard Armstrong.
Furthermore, 2016 was a “mediocre year” for third-party logistics in the U.S., says Armstrong, with net revenues growing a modest 2.1% over 2015 to $73.5 billion, while overall gross revenues increased 3.5%, expanding the total U.S. 3PL market to $166.8 billion.
In the meantime, big merger and acquisition deals changed third-party logistics from mid-2014 through 2015, according to Armstrong, but in 2016 the pace slackened significantly."
"Building Blocks: 100+ Startups Transforming The Construction Industry.
Construction is an asset-heavy industry that startups and investors are increasingly recognizing as a sector primed for digitization. 2017 has already seen approximately $169M in disclosed funding across at least 25 deals to construction tech companies."
"The Audi A8: the World's First Production Car to Achieve Level 3 Autonomy.
Level 3 means the driver needn’t supervise things at all, so long as the car stays within guidelines. Here that involves driving no faster than 60 kilometers per hour (37 mph), which is why Audi calls the feature AI Traffic Jam Pilot."
"Autonomous driving levels 0 to 5: Understanding the differences.
The National Highway Traffic Safety Administration adopted the Society of Automotive Engineers' levels for automated driving systems, ranging from complete driver control to full autonomy."
"Toyota launches venture capital fund targeting artificial intelligence startups.
Toyota is the latest Fortune 500 company to launch an AI focused venture capital fund. The initial early-stage fund will deploy $100 million and operate as a subsidiary of the Toyota Research Institute. The automaker has strategically positioned itself as an ROI rather than strategic-focused fund — meaning that it aims to profit like any other VC firm."
"It’s been pretty obvious for a few months now, but Google has finally admitted that it’s running its own investment fund targeting machine intelligence startups. The fund will go by the name Gradient Ventures and provide capital, resources and education to AI-first startups.
Google isn’t disclosing the size of the fund, but the company told us that it’s being run directly off of Google’s balance sheet and will have the flexibility to follow on when it makes sense. This is in contrast to GV (formally Google Ventures) and Capital G, which operate as independent funds."
"IFC leads $50m Series B in CompareAsiaGroup.
Financial aggregator CompareAsiaGroup has raised $50 million in its series B round led by the International Finance Corp (IFC) that was joined in by new investors Alibaba Entrepreneurs Fund, SBI Group, and H&Q Utrust."
"Dutch project tests floating cities to seek more space.
Made up of 87 floating triangles of different sizes, the huge, flexible island made of concrete or steel would eventually stretch 1.5 to two kilometres (one to 1.2 miles), or a total of three square kilometres.
The "Space at Sea" project in collaboration with other countries has won about 1.6 million euros ($1.8 million) in European subsidies to carry out three years of studies into different uses for such islands—from seaweed and fish farms to floating cities and ports."
"Royal Pavilion at Stazione Centrale.
An exclusive waiting room built for the royal family in the 1920s is hidden in Milan’s central station." http://www.atlasobscura.com/places/royal-pavilion-at-stazione-centrale
JP: Tertiary Index, 12:30 AM ET
GB: Labour Market Report, 4:30 AM ET
EZ: Industrial Production, 5:00 AM ET
US: MBA Mortgage Applications, 7:00 AM ET
IN: CPI, 8:00 AM ET
IN: Industrial Production, 8:00 AM ET
CA: Bank of Canada Announcement, 10:00 AM ET
US: Atlanta Fed Business Inflation Expectations, 10:00 AM ET
CA: Bank of Canada Monetary Policy Report, 10:00 AM ET
US: EIA Petroleum Status Report, 10:30 AM ET
US: Beige Book, 2:00 PM ET
CN: Merchandise Trade Balance, 10:00 PM ET
https://tradingeconomics.com/calendar (More complete listing)