Random Market News,
05 June 2017
"Markets Face Three Big Geopolitical Risks This Week.
Persian Gulf troubles coincide with U.K. vote and Comey event."
"Analysis: Qatar diplomatic crisis not seen impacting oil, LNG shipping."
"Qatar Airways Middle East landing & airspace restrictions; wider ramifications for global aviation.
Three of the four countries banning Qatari flights from landing are party to the Transit Agreement: Bahrain (12-Oct-1971), Egypt (13-Mar-1947) and the UAE (25-Apr-1972).
There is no police force to enforce commercial international compacts and, while ICAO [International Civil Aviation Organization, https://www.icao.int/Pages/default.aspx] nominally has dispute resolution powers, they have scarcely been resorted to in 70 years and are largely ineffective. "
"JPMorgan Has a Surprisingly Simple Theory for Low Volatility.
The strategists look at the size of revisions to global growth forecasts made by the bank’s analysts as a proxy for macroeconomic surprises generally, and overlay this with implied market volatility levels across rate, credit, equity, currency and commodity markets. The result: economic surprises and volatility move in a "remarkable" lockstep, according to the JPMorgan team."
"Under Pressure: Is Inflation Back?
We consulted specialists across the GSAM investment platform on the range of factors driving inflation, from the temporary glitches that may be clouding the near-term outlook, to the secular drivers that should prevail in the longer term. On balance, we believe a gradual normalization of global price pressures is under way, but the process will remain uneven for the foreseeable future."
"Invesco Global Sovereign Asset
Management Study 2017.
Shift from investment strategy to business model.
Increasing appeal of perceived ‘safe haven’ markets.
Attraction to real estate for matching and flexible participation.
Environmental, social and governance (ESG) growth dependent on performance data.
Central bank risk appetite driven by financial market exposure."
"Supreme Court limits SEC's power to recover ill-gotten gains.
In a 9-0 ruling, the Supreme Court found that the SEC's recovery remedy known as "disgorgement" is subject to a five-year statute of limitations. The justices sided with New Mexico-based investment adviser Charles Kokesh, who previously was ordered by a judge to pay $2.4 million in penalties plus $34.9 million in disgorgement of illegal profits after the SEC sued him."
Implied June 14th rate hike probability ~94.6%.
VIX ~10.07. 10-yr treasury vol (TYVIX) ~4.37.
"Japan Average Cash Earnings Beats Consensus in April
Average cash earnings in Japan rose by 0.5 percent year-on-year in April 2017, following an upwardly revised 0 percent gain in the previous month and above market expectations of a 0.3 percent rise. It was the highest growth in cash earnings since December 2016. By industry, earnings increased the most for: mining & quarrying of stone & gravel (+6.2 percent); followed by finance & insurance (+4.1 percent); wholesale & retail trade (+3.6 percent); and living-related & personal services & amusement services (+3.4 percent). Conversely, earnings for "electricity, gas, heat supply & water" decreased the most (-6.1 percent).
US Unit Labour Costs Rise Less Than Expected
Unit labor costs in the US nonfarm business sector increased a seasonally adjusted annualized 2.2 percent on quarter in the first three months of 2017, final figures showed. It compares with a 3 percent gain in the preliminary estimate and a downwardly revised 4.6 percent drop in the previous period. It is the highest gain in three quarters, reflecting a 2.2 percent increase in hourly compensation while productivity was unchanged. Unit labor costs increased 1.1 percent over the last four quarters.
US Services Sector Growth Slows Slightly In May: ISM
The ISM Non-Manufacturing PMI index for the United States fell to 56.9 in May of 2017 from 57.5 in April, slightly below market expectations of 57. Production and new orders rose at a slower pace while employment picked up. The majority of respondents’ comments continue to indicate optimism about business conditions and the overall economy.
US Factory Orders Post First Drop In Five Months
New orders for manufactured goods in the United States fell 0.2 percent month-over-month in April 2017, following an upwardly revised 1 percent gain in March and in line with market expectations. It was the first drop in new orders for US-made goods since November last year, as orders fell for electrical equipment, appliances and components (-2 percent), transportation equipment (-1.4 percent) and machinery (-0.7 percent). Compared with the same month a year ago, factory orders were up 4.4 percent.
Mexican Peso Gains 1.9% Amid Electoral Outcome
The Mexican Peso appreciated 1.9 percent around 4 p.m. NYT to a 29-week low of 18.33 after President Peña's party won a key election ahead of the 2018 presidential race. The centrist PRI retained the governorship over leftist Morena in the State of Mexico (13.2% of the electoral roll) by a thin margin of 3 pps on Sunday.
Brazil Service Sector Returns To
Contraction In May
The seasonally adjusted Markit Brazil Services PMI Business Activity Index fell to 49.2 in May 2017 from a near two-year high of 50.3 in April and way below market expectations of 50.8. Output dropped after rising in April for the first time in 26 months and incoming new business expanded at the slowest rate in four months. Also, employment continued to contract, as service providers' sentiment towards the 12-month outlook remained weak amid political uncertainty and security concerns. On the price front, input cost inflation reached a four-month high while output charges rose at a slower pace."
"SoftBank’s India solar ambitions may gain from Modi’s EV push.
SoftBank, which has said it will invest up to $20 billion along with Foxconn Technology and Bharti Enterprises in solar projects in India, estimates the electrification drive could create a requirement for over 150 gigawatt (GW) of additional power.
India has an ambitious target to generate 100 GW of solar power by 2022 and while President Donald Trump is pulling the United States out of the Paris accord on climate change, India is sticking to its renewable energy commitments."
"Heavy Dose: Deals To Pharmaceutical Startups Reach New High.
The majority of deals to pharma companies are seed, angel, and Series A rounds."
"Are indoor farms the next step in the evolution of agriculture?
This year, it will open another plant factory at Kansai Science City, on the borders of Kyoto, Nara and Osaka prefectures. Between the two factories the company will be able to produce 50,000 heads of lettuce each day.
What makes the new facility different is the level of automation: tasks such as raising seedlings, replanting and harvesting will be done by machines and guided by artificial intelligence, a move that will cut labor costs by 50 percent and boost profitability. In 2016, Spread was awarded a gold medal at the Edison Awards in recognition of its role in agricultural innovation."
"Grave of Carl Friedrich Gauss. The man who gave his name to magnetic measurement is buried in the city where he did his best work.
It’s hard to fully comprehend how important Gauss has been to mathematics and the sciences. His contributions include groundbreaking proofs and discoveries in algebra and geometry, numbers theory and statistics, physics and astronomy."
"Welcome to the Comedy Wildlife Photography Awards."
Australia AU: RBA Announcement, 12:30 AM ET
European Union EZ: Retail Sales, 5:00 AM ET
USA US: Gallup US ECI, 8:30 AM ET
USA US: Redbook, 8:55 AM ET
USA US: JOLTS, 10:00 AM ET (down, 5.725m consensus)
Australia AU: GDP, 9:30 PM ET