Random Market News, 7 July
"Dalio: Party’s Almost Over — Keep an Eye on Central Banks
Bridgewater founder Ray Dalio wrote on LinkedIn that he thinks that after nine years of pumping money into the system and keeping interest rates low, central banks are starting to step away from the punch bowl."
"Amid India-China border standoff, Modi and Xi meet in Hamburg, have 'conversation on a range of issues'."
"India's first week under GST: steel market weakens, less impact on polymer, biofuels.
India's steel market weakened during the first week of the Goods and Services Tax regime in the country, while the polymer and biofuel commodity markets largely dodged the bullet, industry sources said."
"UK frictionless trade with EU ‘not possible’ after Brexit.
The UK’s insistence on leaving the European Union’s single market and customs union will make frictionless trade with the EU impossible after Brexit, EU chief Brexit negotiator Michel Barnier warned yesterday."
"China Rewrites Rulebook on Capital Flows After Crisis Lessons.
‘Asymmetric’ capital opening encourages inflows, not outflows.
Approach will probably continue in coming years, Nomura says."
"How diversified are diversified growth funds?
Research by the multi-asset and smart beta group found that, despite DGFs performing in line with their stated aims, much of the investment return from the funds could be explained by beta.
DGFs were highly correlated to a passive benchmark of 50% stocks and 50% bonds, AQR said."
"Cross-Asset Quants Are Facing Their Worst Losses in a Decade.
Losses stand out in two of the best-known quant strategies, trend-following traders known as commodity trading advisers, and risk parity funds. CTAs dropped 5.1 percent over the past two weeks, their worst stretch since 2007, according to a Societe General SA database of the 20 largest managers. The Salient Risk Parity Index dropped 1.8 percent, the most in four months."
"Renaissance Technologies Stumbles in June.
Three funds run by $50 billion Renaissance Technologies fell between 2.5 percent and 4.5 percent during the month, according to individuals familiar with the performance."
"Nevada’s Public Employee Retirement System (NVPERS) saw an 11.8% increase in its preliminary fiscal year 2017, which ended on June 30, bringing the fund’s total asset value to $38.5 billion.
Gains for the year outpace the agency’s 8% target rate.
The overall funded ratio increased to 74.1% in 2016 from 73.2% the prior year, according to the Review-Journal."
"U.K.’s Pension Protection Fund notches 16% fiscal-year return.
The Pension Protection Fund, London, achieved a 16% investment return in the year ended March 31, helping to bolster assets by 22.6% to £28.7 billion ($35.7 billion).
In its 2016/2017 annual report and accounts, the PPF said its funded ratio had increased to 121.6% as of March 31, up from 116.3% a year previous.
The biggest contribution to the fund's returns were alternative credit, with a 11.75% return, and minimum variance equities, at 12.33%."
"Japan's Government Pension Investment Fund on Friday reported a 5.9% gain for its latest fiscal year ended March 31, lifting the value of the Tokyo-based plan's portfolio to a record high of ¥144.9 trillion ($1.3 trillion).
The GPIF's holdings of domestic and overseas equities contributed ¥4.6 trillion and ¥4.3 trillion, respectively, to the fund's ¥7.9 trillion of investment gains for the year, offset partly by foreign bond losses of ¥596 billion and domestic bond losses of ¥396 billion."
The fund's latest annual report, also released Friday, showed the commissions GPIF paid to external managers for the fiscal year amounting to ¥40 billion, equivalent to roughly 3 basis points of the entire ¥144.9 trillion portfolio, and little changed from the prior year."
"Greenwich: Asian institutional asset growth stalling, even as outsourced assets grow.
The survey of 124 large institutional investors in Asia, conducted during the first quarter of 2017, showed total institutional assets of $12.5 trillion, up only marginally from $12.4 trillion a year before.
The survey showed China with a region-leading pool of $5.4 trillion in institutional assets, of which $795 billion has been outsourced to external managers.
The next biggest market was South Korea, with $2.2 trillion in institutional assets and outsourced assets of $666 billion."
"Private Equity’s Other Transparency Problem.
The problem is transparency — or rather, the very large spotlight CalPERS has found itself under as a result of improved transparency within its private equity program.
ILPA, for its part, has continued the charge, most recently turning its attention to the subscription lines of credit employed by private equity firms to bolster internal rates of return.
Publicly reporting private equity fees and expenses has come with an unfortunate side effect, however: making the public aware of exactly how much CalPERS is paying in private equity fees and expenses."
"Simply Economics: Who needs a raise anyway?
Raising rates and cutting down on bond buying means that the Fed won't be giving much of a boost to inflation in the months ahead. But their preset course to withdraw stimulus could leave policy makers with a sense of doubt if wages and if inflation don't in fact pick up. Americans do have jobs but lack of wage growth also points to trouble for consumer spending, where continued softness could leave further room for doubt."
"International Perspective: As the world turns.
Investors had a full plate of global events both economic and geopolitical that kept them cautious all week. Among the many events there was the publication of the minutes of the most recent Federal Reserve and European Central Bank meetings where prospects of further easing were remote to say the least. The week was chock full of new economic data, much of it for June to close out the second quarter. The data week ended as it usually does for the first week of the month with the U.S. employment situation report. Employment gained more than anticipated with upward revisions to the prior two months. Investors also had geopolitical news to deal with after North Korea tested a missile once again. And in Germany, the G20 meeting was getting underway at week's end.
Equities were mixed for the week with those in Asia mostly lower while in Europe, the indexes recorded mild gains and in the U.S., equities advanced in the holiday shortened week.
The U.S. bond market sold off sending the 10 year Treasury note yield up 8 basis points this week and as many as 24 basis points for the last two weeks. The selloff can be attributed to several things including the looming downsizing of the Federal Reserve's balance sheet. Traders were adjusting to the more hawkish rhetoric from central bankers as well."
Implied rate hike probability on July 26th ~3.1%, September 20th ~13.3%; 0% probability of rate cut through June 13th, 2018.
VIX ~11.19. 10-yr treasury vol (TYVIX) ~4.45.
"US Stocks End Higher To Book Weekly Gains
Wall Street closed moderately in the green on Friday after the jobs report showed the US economy added 222 thousand payrolls in June, beating expectations of 179 thousand. The Dow Jones gained 94 points or 0.4 percent to 21414. The S&P 500 advanced 15 points or 0.6 percent to 2425. The Nasdaq jumped 64 points or 1.0 percent to 6153. During the week ending June 7th of 2017, all three major indices notched modest weekly gains, with the Dow Jones edging up 0.3 percent; the S&P 500 0.1 percent; and the Nasdaq 0.2 percent.
Stocks in Canada Hit 32-week Low
Toronto TSX decreased to a 32-week low of 14931.
Mexico Inflation Rate Highest In Over 8 Years
Consumer prices in Mexico jumped 6.31 percent year-on-year in June of 2017, following a 6.16 percent rise in May but below market expectations of 6.34 percent. The inflation rate accelerated for the twelfth straight month, reaching the highest since December of 2008, led by cost of housing and utilities, food and energy. Consumer prices spiked in January after the liberalization of gasoline cost. The central bank expects inflation to stay above the 3-4 percent target in 2017 and to converge to 3 percent by the end of 2018.
Swedish Krona Hits 43-week High
USDSEK decreased to a 43-week low of 8.4118.
Silver Hits 14-month Low
Silver decreased to a 14-month low of 15.483 USD/t. oz."
"Panama Canal Authority (ACP) has announced it is evaluating a modified toll structure incentivizing the container segment to make return voyages."
"Emerging Markets: Mixed forecast for economic, infrastructure growth.
Transport infrastructure and frequency of ocean and air connections drive the competitiveness of emerging markets again this year, as analysts rate “market connectedness” as a key economic indicator for expansion."
"Hapag-Lloyd begins 1,700 days of training for UASC staff.
Half the 500 planned training events to be completed by mid-July, to ensure a smooth integration of the two merging companies."
"FTR’s Shippers Conditions Index sees a decline.
For April, the most recent month for which data is available, the SCI was -3.6, which FTR called a modest deterioration and leaves it in a soft negative range of tightening capacity utilization that reflects the ability of shippers to fend off pricing increases from their contract carriers."
"AI, Robotics, And The Future Of Precision Agriculture.
Agricultural tech startups have raised over $800M in the last 5 years. Deals to startups using robotics and machine learning to solve problems in agriculture started gaining momentum in 2014, in line with the rising interest in artificial intelligence across multiple industries like healthcare, finance, and commerce."
A nice documentary with use cases.
"Nielsen: on-demand audio streaming hits record high, is up 62.4% over last year."
"Video Friday: DARPA's LUKE Arm, Human Support Robot, and Starting a Robotics Company."
Descending a long hill dominated by a giant statue of Hercules, the monumental water displays of Wilhelmshöhe were begun by Landgrave Carl of Hesse-Kassel in 1689 around an east-west axis and were developed further into the 19th century. Reservoirs and channels behind the Hercules Monument supply water to a complex system of hydro-pneumatic devices that supply the site’s large Baroque water theatre, grotto, fountains and 350-metre long Grand Cascade. Beyond this, channels and waterways wind across the axis, feeding a series of dramatic waterfalls and wild rapids, the geyser-like Grand Fountain which leaps 50m high, the lake and secluded ponds that enliven the Romantic garden created in the 18th century by Carl’s great-grandson, Elector Wilhelm I. The great size of the park and its waterworks along with the towering Hercules statue constitute an expression of the ideals of absolutist Monarchy while the ensemble is a remarkable testimony to the aesthetics of the Baroque and Romantic periods."
JP: Machine Orders, 7:50 PM ET (7/9)
CN: Consumer Price Index, 9:30 PM ET (7/9)
CN: Producer Price Index, 9:30 PM ET (7/9)
DE: Merchandise Trade, 2:00 AM ET
US: Labor Market Conditions Index, 10:00 AM ET
US: Consumer Credit, 3:00 PM ET
AU: Home Loans, 9:30 PM ET
https://tradingeconomics.com/calendar (More complete listing)