Random Market News, 27 June
"The European Union's competition watchdog on Tuesday imposed a record 2.42-billion-euro ($2.72 billion) fine on technology giant Google, arguing that the company abused its dominance as a search engine by giving illegal advantage to its own shopping service.
"What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate," EU competition commissioner Margrethe Vestager said in a press release. "And, most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.""
"ANZ Suffered 'Substantial Losses' in Alleged Nickel Receipt Scam.
Australia & New Zealand Banking Group Ltd. told a U.S. court that its commodities trading arm suffered “substantial losses” after it discovered that receipts for metal held in Glencore Plc’s Access World warehouses are probably fake.
The fallout from Access World’s discovery has spawned a number of lawsuits around the world. Earlier in June, Natixis SA sued broker Marex Financial Ltd. in London after losing about $32 million on a sale-and-repurchase agreement that the French bank said involved forged receipts for the storage of nickel used as collateral, according to documents from the case. Marex brokered the deal on behalf of its client, Come Harvest Holdings Ltd.
ANZ didn’t put a monetary figure on the cost to its business in the filing, beyond saying its commodity trading operation suffered “substantial losses.” It was originally due to pay ED&F $305 million for the nickel, according to a payment schedule included as part of the court filing."
"Fake news of a fatal car crash wiped out $4 billion in ethereum’s market value yesterday."
"'Petya' cyber attack spreads to US pharma giant Merck after ransomware infects Ukrainian national bank.
The cyber attack has hit major companies in countries across the world.
Analysts say this virus appears to function similarly to the WannaCry bug that infected more than 230,000 computers in 150 countries last month."
"Today’s huge ransomware attack has only made about $7,500 so far."
"ILPA urges LPs to ask about credit lines.
Quarterly reports to investors must be explicit on the use of subscription credit lines, while LPs must ask for data that discounts the impact of borrowed cash, the lobby group recommends."
"How the Federal Reserve serves U.S. foreign intelligence.
The Federal Reserve's little-known role housing the assets of other central banks comes with a unique benefit to the United States: It serves as a source of foreign intelligence for Washington.
Senior officials from the U.S. Treasury and other government departments have turned to these otherwise confidential accounts several times a year to analyze the asset holdings of the central banks of Russia, China, Iraq, Turkey, Yemen, Libya and others, according to more than a dozen current and former senior Fed and Treasury officials."
"Since the start of 2Q17, U.S. economic data have been mixed. On one hand, the unemployment rate has fallen to 4.3% and consumer confidence remains at elevated levels. On the other hand, the demand side of the economy (i.e. data on light vehicle sales, housing starts, net exports and inventory growth, etc.) has disappointed in recent months, coming in below expectations and prior readings.
[R]eal GDP growth is driven largely by the supply side (i.e. private payroll growth), and while 2Q GDP may look similar to the subpar reading we saw in 1Q, this weakness is being driven by a slowdown in demand.
As a result, investors should not panic, as the steadiness of employment growth suggests this potential slowdown will not be as severe as some expect. Furthermore, with private payroll growth remaining stable but exports, inventories and government spending all weaker in the first half, the economy is primed for a bounce back in 2H17."
"Morgan Stanley expected global economic GDP growth of 3.6% this year and 3.8% next year, driven by a "private sector recovery and upswing in the global capex cycle".
However, Morgan Stanley economists did not anticipate a slump amid the "carefully managed tightening", while stronger private capital expenditure and exports will offset slower credit-intensive investment growth.
Global capacity utilization rates will average 86% this year, up 11 percentage points from 2016, before increasing to 89% next year, the bank forecast.
Morgan Stanley expects global steel demand to increase 3% this year to 1.6 billion mt, then rise 1% to 1.62 billion mt in 2018, the bank said in its third quarter price deck.
At the same time, global crude steel production will increase 3% this year to 1.65 billion mt, and rise another 1% in 2018 to 1.67 billion."
"China Debt Squeeze Has Moody's Awaiting First Local Default.
China may finally be ready to cut the cord when it comes to the country’s troubled local government financing vehicles.
Beijing’s deleveraging drive has seen rules impacting LGFV debt refinancing tightened, spurring a slump in issuance by the vehicles, which owe about 5.6 trillion yuan ($818 billion) to bondholders and are seen by some as the poster children for China’s post-financial crisis debt woes."
"China’s Indebtedness in the Face of Slowing Growth.
Moody’s is certainly not the only institution that has expressed concerns about China’s so-called debt bubble. The International Monetary Fund and Bank for International Settlements, among others, have also issued warnings. An explosion of debt has been the main engine for growth in recent years. The credit-to-GDP ratio is currently at almost 260% of GDP, of which around 160% comes from the corporate sector, and the credit-to-GDP gap is 24.5%."
"China’s industrial profits rose 16.7 percent in May from a year earlier as global demand improved, helping to fill companies’ order books.
Earnings increased to 626 billion yuan ($91.5 billion), the National Bureau of Statistics said Tuesday. That compares with a 14 percent gain in April and 8.5 percent growth last year.
Economists forecast slower factory inflation in China in the second half this year, which would dent industrial profits and further erode the global reflation process that had been underway since last year. Still, China’s exports remain robust as demand in U.S. and European markets improves, helping to boost economic sentiment."
"UK-based asset manager M&G is planning to transfer four of its funds to Luxembourg to remove uncertainty for non-UK investors ahead of the country exiting the EU.
The funds are worth a combined €7bn and are offered exclusively to non-UK investors, despite being domiciled in London."
"Asset Managers, Allocators Too Optimistic About Growth Prospects.
A new State Street report suggests that both asset owners and fund managers may be too complacent about their prospects for growth, despite plans to diversify into new asset classes and regions."
Implied rate hike probability on July 26th ~2.5%, September 20th ~12.8%; 0% probability of rate cut through June 13th, 2018.
VIX ~11.06. 10-yr treasury vol (TYVIX) ~4.29.
"Euro Hits 44-week High
EURUSD increased to a 44-week high of 1.1342.
Dollar Index Hits 33-week Low
US Dollar decreased to a 33-week low of 96.32.
US 10Y Bond Yield Hits 32-week Low
United States 10 Year Government Bond Yield decreased to a 32-week low of 2.1282%.
Brazil Equities Dip As Cyberattacks Roil Markets
Brazil’s iBovespa dropped 513 points or 0.8 percent to 61675 on June 27th of 2017, as several global business reported cyberattacks in the form of ransomware against their computer systems. Declines were broad, with Estacio (-3.9%), Embraer (-3.5%), and Suzano (-3.4%) heading losses. Among other stock markets in America, Canada’s TSX closed down 35 points or 0.2 percent to 15281, despite higher prices of gold, oil and gas. Mexico’s IPC edged down 106 points or 0.2 percent to 49060. Chile’s IPSA lost 8 points or 0.2 percent to 4759. Contrastingly, Colombia’s COLCAP eked out a gain of 3 points or 0.2 percent to 1438. Peru’s BVL closed flattish.
Argentina Keeps Interest Rate Steady At 26.25%
The Central Bank of Argentina kept its benchmark interest rate steady at 26.25 percent for the fifth straight meeting on June 27th of 2017. While underscoring some progress in its battle against inflation, the central bank said it will continue to maintain a clear anti-inflationary bias to ensure that the disinflation process continues towards its inflation target between 12 percent and 17 percent during 2017. Consumer prices, as measured by the IPC GBA index, rose 24.0 percent year-on-year in May (below 27.5 percent in April), with core inflation currently standing at 24.6 percent.
Oil Prices Rally On Tuesday
Oil prices increased for the fourth session in a row on Tuesday, amid a weaker US dollar and on expectations of a weekly decline in the US crude inventories. Meanwhile, worries over supply glut still persist. Crude oil prices jumped 2.2% to $44.2 per barrel and Brent crude oil increased 2.3% to $46.7 per barrel around 11:30 AM New York time.
Russia Corporate Profits Fall 1st Time In 11 Months
Corporate profits in Russia decreased by 9.4 percent year-on-year to RUB 3224.5 billion in the first four months of 2017 from RUB 3558.5 billion a year ago. It was the first fall since May last year, as the profits declined in manufacturing (-17.5 percent to RUB 879.7 billion); wholesale and retail trade (-36.3 percent to RUB 526.7 billion); transportation (-13.3 percent to RUB 300.6 billion); information and communication (-22.2 percent to RUB 99.7 billion) and agriculture (-18.5 percent to RUB 99.2 billion). In contrast, net income rose in mining and quarrying (71.3 percent to RUB 786.6 billion); electricity gas steam and air conditioning supply (22.9 percent to RUB 298.3 billion) and real estate (6.7 percent to RUB 90.5 billion).
US House Prices Rise Less Than Expected: Case-Shiller
The S&P CoreLogic Case-Shiller composite home price index of 20 metropolitan areas in the US rose 5.7 percent year-on-year in April of 2017, below 5.9 percent in March and lower than market expectations of a 5.9 percent gain. Prices rose the most in Seattle (12.9 percent), Portland (9.3 percent) and Dallas (8.4 percent). Meanwhile, the national index, covering all nine US census divisions rose 5.5 percent, down from 5.6 percent in March.
Italy Consumer Confidence Recovers From 2-1/2-Year Low In June
Italy's consumer sentiment rose to 106.4 in June 2017 from a nearly 2-1/2-year low of 105.4 in May, beating market expectations of 106.2. All components improved: Economic climate (123.6 from 122 in May); personal situation (100.9 from 100.2); current conditions (105.7 from 105.2); and future expectations (107.7 from 106.6). Meanwhile, unemployment expectations over the next 12 months rose for the third consecutive month (a balance of 35.4 from 32.9 in May). Regarding consumer views on prices, there was an increase in the share of respondents who believe that prices have increased over the past 12 months (a balance of -3.3 from -11.1 in May), and the share of those expecting increases over the next 12 months also grew (a balance of -3.7 from -14.1).
Sweden Producer Inflation Steady At 7.2% In May
Swedish producer prices increased 7.2 percent
year-on-year in May 2017, the same pace as in the previous month. Cost slowed
for energy (12.7 percent vs 19 percent in April) while rose further for
consumer (4.8 percent vs 4.1 percent), capital (3.5 percent vs 2.4 percent) and
intermediate goods (9 percent vs 8.4 percent). On a monthly basis, producer
prices were flat, compared to a 0.3 percent drop in April."
"Logistics industry analysts report that the global freight forwarding market has grown by 2.7% in real terms this past year, an annual jump of 2.1% led by the back of higher air and sea volume growth.
Thanks to a continuation of excess capacity issues and lower average oil prices in 2016, rates continued to fall in both air and sea freight, meaning most forwarders reported lower year-on-year revenues.
Looking ahead, the market is anticipated to grow at a real 2016 to 2020 compound annual growth rate (CAGR) of 4.1%, as global trade volume growth accelerates."
"China’s Best Logistics Files for U.S. IPO
The company was valued at $3 billion after raising $760 million from new investors last year."
"Amazon Japan aims to build a team of 10,000 independent couriers in the Tokyo region by 2020 to continue offering same-day delivery service without relying on major parcel delivery companies.
Private deliverers tend to subcontract with transport companies, and their work is often concentrated during heavy business periods such as the end of the year. Amazon's move could help sustain their work all year, as well as possibly help alleviate Japan's delivery driver shortage."
"Tesco has launched a one hour grocery delivery service in central London."
"Secondary Industrial Markets Show Strong Future Growth Prospects Thanks to e-Commerce, Says CBRE.
While pent-up demand is intact in most markets, warehouse development response has been slow in secondary markets, leading to a growing supply/demand imbalance."
"Since the start of 2017, newbuild contracts for the dry bulk and tanker shipping industries have collectively increased 20 percent from the corresponding 2016 period, according to the Baltic and International Maritime Council (BIMCO)."
"Old School Vs. New School: How Artificial Intelligence Is Transforming Cybersecurity.
We detail how cybersecurity startups are using AI to take a new approach to counter some of the most significant cyber threats."
"Why AI-powered translation needs a lot of work.
Instead of human translators, we’ll see humans in the loop. Machine translation will do the heavy lifting and people will edit the content. This form of augmented intelligence is likely to be prevalent long before we see standalone artificial intelligence."
"The spirit of Claude Shannon looms large over IEEE Spectrum, and indeed the entire modern world. His 1937 demonstration that Boolean logic and algebra could be implemented using electric switches was a tremendous contribution to the computer age just by itself. Then Shannon topped this in 1948 by founding information theory, which provides the mathematical framework for all digital communication."
"Large-scale Production of Living Brain Cells Enables Entirely New Research.
A few years ago, Malin Parmar's research team was one of the first in the world to convert human skin cells directly into brain cells without passing the stem cell state. The discovery shocked the researchers and was perceived as almost impossible. The team is now approaching a point where the discovery is about to bear fruit on a wide scale. By following a new method that involves slightly changing the genetic code that triggers cell conversion, the researchers were able to multiply the production of disease-specific brain cells."
"Gärten der Welt (Gardens of the World).
Gardens representing parts of Asia, Europe, and the Mid East are tucked away among the Soviet-style buildings in East Berlin."
CH: UBS Consumption Index, 2:00 AM ET
EZ: M3 Money Supply, 4:00 AM ET
IT: CPI, 5:00 AM ET
IT: PPI, 6:00 AM ET
US: MBA Mortgage Applications, 7:00 AM ET
US: International Trade in Goods, 8:30 AM ET
US: Pending Home Sales Index, 10:00 AM ET
US: EIA Petroleum Status Report, 10:30 AM ET
JP: Retail Sales, 7:50 PM ET