Random Market News, 31 July
"US Banks’ Net Interest Margins Continue to Grow, a Credit Positive.
The US Federal Reserve’s recent increases in short-term interest rates drove banks’ NIM higher. Over the past three quarters, the Fed has made three increases of 25 basis points each. As a result, banks’ NIMs have also increased for three consecutive quarters, as shown in Exhibit 1. Over the past year, average NIM has increased by 15 basis points [to 3.04%], boosting banks’ profitability."
"Germany calls for EU countermeasures against US following Russian sanctions.
Germany's economy minister has urged the EU to consider countermeasures against the US after it imposed new sanctions against Russia. Brigitte Zypries has said the US sanctions end up affecting German firms."
"Not Made in America - Wal-Mart looks overseas for online vendors.
Walmart.com, trailing Amazon.com Inc in the number of goods for sale on its website, is recruiting vendors in China and other countries to boost its online offerings in a pivot away from Wal-Mart's Made-in-America campaign."
"Labor Disputes in China at All-Time-High.
In 2016, the Ministry of Human Resources and Social Security (MOHRSS) in China registered 1.8 million labor disputes – an increase of almost 118 percent compared to the previous year. Is this reason enough for local enterprises to outsource their production? The Taiwanese electronics supplier for Apple, Foxconn, plans to open its first major factory in the U.S."
"China Asks Waldorf Owner Anbang to Sell Assets Abroad, Sources Say.
The government has also asked Anbang to bring the proceeds back to China after disposing of holdings abroad, said the people, who asked not to be identified because details are private. It is not clear yet how Anbang will respond, the people said."
"The apparent failure of health care reform keeps in place the taxes devoted to paying for the ACA, while recent statements from congressional and administration officials suggest later and smaller fiscal stimulus than what was expected immediately after the election. Overall, recent data suggest a reduced risk of economic overheating, but while this could support continued moderate gains for equities and only modest increases in interest rates, high valuations in both U.S. stocks and bonds, combined with lukewarm U.S. economic growth, underscore the importance of international diversification."
"Fixed Income Insight: Credit Volatility Near All-Time Lows, Too.
At the same time that implied volatility metrics for the stock and US Treasury markets are near extreme lows, we are witnessing similar dynamics in credit. Spreads are still hovering above cycle tights, but implied volatility for high yield bonds has broken below 2014 levels (see chart). Adam Richmond, head of US credit strategy for Morgan Stanley & Co., suggests that this extreme reading reflects current market conditions in which the market for credit default swaps is stable because investors are selling options to enhance their yields. We are watching this market as an early warning sign of rising risk aversion."
"Record Number of S&P 500 Companies Beating Sales Estimates for Q2.
As of Friday, 57% of the companies in the S&P 500 have reported actual earnings and sales numbers for the second quarter. Of these companies, 73% have reported sales above estimates and 27% have reported sales below estimates."
"Buyout Funds on Track to Break 2007 Record.
Strong investor demand is helping buyout firms raise bigger funds faster.
Private-equity firms collected $184 billion in the first seven months of 2017, a pace that may shatter the record in 2007 when buyout funds raised $249 billion, according to Preqin, a financial data provider. Apollo Global Management underscored the trend in recently raising a $24.7 billion buyout fund in just seven months, Preqin said in a July 27 announcement."
"European Loan Fund Boom Sparks Concern Over Risk-Taking.
Institutional investors such as pensions have been increasing their allocations to private loan funds to broaden their income sources in a low-yield environment.
At the end of July direct lending funds in Europe were sitting on a total $27.9 billion of capital to invest in deals, up from $25.5 billion at the end of 2016, according to financial data provider Preqin."
Implied rate hike probability for September 20th is ~1.4%, November 1st is ~7.3%; 0% probability of rate cut through June 13th, 2018.
VIX ~10.26. 10-yr treasury vol (TYVIX) ~4.00.
"Dow Jones Hits Record High, S&P 500 & Nasdaq Slide
The Dow Jones gained 61 points or 0.3% to a fresh record high of 21891 as earnings results continued to improve investors' mood and WTI crude oil surpassed the $50 per barrel benchmark to book a 9-week high. In contrast, the S&P 500 edged down 2 points or 0.1% to 2470 and the Nasdaq lost 27 points or 0.4% to 6348.
Mexico Annual GDP Growth at 3-Year Low in Q2
The Mexican economy advanced 1.8 percent year-on-year in the second quarter of 2017, well below a 2.8 percent rise in the previous period and compared to market expectations of a 1.6 percent rise. It is the lowest growth rate since the second quarter of 2014, due to a fall in industrial output, preliminary estimates showed.
Canada Producer Prices Fall 1% in June
Producer prices in Canada slumped 1 percent month-over-month in June of 2017, following an upwardly revised 0.1 percent rise in May and much worse than market expectations of a 0.3 percent fall. The decrease was mainly due to lower cost of energy and petroleum products (-4.1 percent), which experienced their largest decline since February of 2016, namely motor gasoline (-4 percent), diesel fuel (-6.1 percent) and light fuel oil (-5.6 percent). Other downward pressure came from cost of motorized and recreational vehicles (-1.5 percent); primary non-ferrous metal products (-2.2 percent) and chemical products (-1.6 percent). Year-o-year, producer prices increased 3.3 percent, the lowest producer inflation since January.
Eurozone Inflation Rate Flat at 1.3% in July
Consumer prices in the Euro Area are expected to increase by 1.3 percent year-on-year in July 2017, the same pace as in the previous month and in line with market expectations, the flash estimate showed. The inflation rate stood at its lowest level since December last year, as prices of services rose at a slower pace while cost of energy grew further. Annual core inflation, which excludes volatile prices of energy and unprocessed food and tobacco and at which the ECB looks in its policy decisions, rose to 1.2 percent from 1.1 percent in June.
South Korea Factory Activity Contracts Again In July
The Nikkei Manufacturing PMI for South Korea dropped to 49.1 in July of 2017 from 50.1 in June. Output fell the most in just under two years, new export orders declined for the sixth month in a row and new orders stagnated while business confidence hit the lowest since April. In addition, companies reported that orders from important industries such as autos were down. Moreover, manufacturers sought to meet sales directly from stock while simultaneously reducing their backlogs of work. Meantime, margins were protected by a slight reduction in input prices.
Japan Factory Activity Growth At 8-Month Low In July
The Nikkei Japan Final Manufacturing PMI fell to 52.1 in July of 2017, compared to a preliminary reading of 52.2 and a final 52.4 in June. It was the lowest reading since November 2016, as output and new orders rose at slower paces while new export orders increased the least in nearly a year. Also, employment grew at the slowest rate so far this year. On the price front, output charges increased marginally while input costs continued to went up at a noticeable pace. Meantime, optimism improved to its highest level in over five years of data collection, amid positive projections for demand, planned new product launches and preparations for the 2020 Tokyo Olympics.
Thailand Manufacturing Sector Contracts Again
The Nikkei Manufacturing PMI in Thailand fell to 49.6 in July of 2017 from 50.4 in June and reaching the lowest reading since November 2016. Output declined the most since November last year, employment dropped again and optimism was well below the historical average. Meantime, new orders and new export orders stagnated. Also, backlogs of work were broadly unchanged, reflecting a lack of incoming new work. On the price front, the rate of input cost inflation increased the least in eleven months. However, subdued inflationary pressures did not prevent firms from raising output charges.
Malaysia Factory Activity Contracts For 3rd Month
The Nikkei Manufacturing PMI in Malaysia came in at 48.3 in July of 2017 from 46.9 in June. It was the third straight month of decline in manufacturing activity, as output dropped for the third month running, new orders contracted further while new export orders stagnated. At the same time, buying activity declined for the third straight month. Meanwhile, manufacturers added to their workforces, partly in anticipation of an increase in production over the coming year. Also, business confidence remained inside positive territory. Input price inflation slowed for a fifth consecutive month, but price pressures remained elevated due to a weak exchange rate and gains in raw material prices.
Stocks in Norway Hit All-time High
Oslo Bors All-Share increased to an all-time high of 809.44.
Stocks in Vietnam Hit 9-year High
VN increased to a 9-year high of 785.34.
Crude Oil Hits 9-week High
Crude Oil increased to a 9-week high of 50.3 USD/Bbl.
Dollar Index Hits 14-month Low
US Dollar decreased to a 14-month low of 92.89."
"Freight rates on the rise and box carriers get ready to reap the rewards.
Container spot rates from Asia to the US, and Asia to Europe were given a lift this week ahead of August GRI and FAK increases.
The increase was most notable on the transpacific where the Shanghai Containerized Freight Index (SCFI) components for the US west coast and the US east coast leapt 37.6% and 20.2% respectively, to $1,687 and $2,685 per 40ft."
"Liner ‘oligopoly’ a major concern to shippers.
The increasing concentration of market share among an emerging “oligopoly” of major container shipping groups and alliances is already reducing service standards for customers and could drive up freight rates further, according to shipper representatives."
"UPS Says Rash of Shuttered Stores Weighs on Business Deliveries.
A rash of shuttered retailers means less demand for package deliveries to businesses, UPS Chief Financial Officer Richard Peretz said on a conference call Thursday. Along with a more sober outlook for industrial production, that kept the courier from raising its 2017 profit forecast even after recent price increases. “We are a little challenged because the number of stores that are closing is having an impact on growth” in business-to-business shipments, Peretz said."
"Service issues are front and center in STB letter to CSX.
Spurred by what it called concerns about deteriorated service resulting from recent operating changes at Jacksonville, Florida-based CSX Transportation, the Department of Transportation’s Surface Transportation Board (STB) sent a letter to CSX CEO Hunter Harrison regarding a number of informal complaints from both CSX customers and railroad industry stakeholders."
"CBRE opens up Omnichannel Real Estate Practice
Industrial real estate firm CBRE recently announced it has opened its Omnichannel Real Estate practice, which is said is geared towards customers focused on effectively meshing their brick-and-mortar store portfolios with expanding real estate networks for e-commerce distribution and fulfillment."
"JPMorgan develops robot to execute trades.
JPMorgan will soon be using a first-of-its-kind robot to execute trades across its global equities algorithms business, after a European trial of the bank’s new artificial intelligence (AI) programme showed it was much more efficient than traditional methods of buying and selling."
"24 Industries Other Than Auto That Driverless Cars Could Turn Upside Down.
Fast food, real estate, hotels, and airlines — many large industries will have to shift their strategies in the wake of driverless cars."
"These cheap phones come at a price -- your privacy.
How much do you value your privacy and security? Researchers at Black Hat found a series of phones that are secretly sending data to Chinese servers."
"States find rewards from high-tech investments, given time and patience.
High-tech happens organically in places with built-in advantages, but it can happen elsewhere too, and state investments can play a part, says University of Illinois sociology professor Kevin Leicht, the lead author on a nationwide study of such investments."
"The Wizards of Armageddon set up shop in Silicon Valley.
Ready and waiting at an arms reach from the government, the Research and Development Corporation (RAND) has helped the U.S. think through some of the toughest scientific and regulatory challenges since the 1940s. This year, the think tank is opening its first office in the San Francisco Bay Area. It’s positioning itself to weigh in on some of Silicon Valley’s largest research projects, like autonomous vehicles, drones, AI, cybersecurity and telemedicine."
"Snapdeal calls off Flipkart merger, to pursue ‘independent path’."
"Nvidia uses AI to create 3D graphics better than human artists can.
Nvidia spans both gaming graphics and artificial intelligence, and it is showing that with its announcements this week at the Siggraph computer graphics event in Los Angeles."
"Asteroid Flyby to Help NASA's Planetary Defense.
For the first time, NASA will use an actual space rock for an observational campaign to test NASA's network of observatories and scientists who work with planetary defense."
"Dean Kamen Opens Organ-Building Institute.
Sununu was one of a parade of state and federal dignitaries lavishing praise and congratulations on inventor Dean Kamen at the official launch of BioFabUSA, a public-private partnership meant to bring together the technologies needed to create human organ factories. “We are here today on the birth of an entire new industry,” exclaimed Sununu.
In December 2016, the DoD awarded ARMI US $80 million over 5 years to scale-up manufacturing of human tissues and transplant organs, especially for injured soldiers and vets. Industry and university partners contributed an additional $214 million to the effort..."
"Prehistoric Cave Art of Maros Pangkep.
A torch beam finds a stencil of a hand, its ochre outline surprisingly vibrant given its age. Next to it, a sketch of a babirusa—a type of wild “pig-deer” found in Indonesia—shows such attention to detail that the gender of the animal (female) is still clear nearly 36,000 years after its creation. It’s thought to be the oldest known example of figurative art in the world."
When Indonesia was connected to Australia during the last Ice Age.
"U.S. Inbound Travel & Tourism is America's Most Valuable Export Service."
AU: RBA Announcement, 12:30 AM ET
IN: PMI Manufacturing Index, 1:00 AM ET
GB: Nationwide HPI, 2:00 AM ET
FR: PMI Manufacturing Index, 3:50 AM ET
DE: PMI Manufacturing Index, 3:55 AM ET
DE: Unemployment Rate, 3:55 AM ET
EZ: PMI Manufacturing Index, 4:00 AM ET
GB: CIPS/PMI Manufacturing Index, 4:30 AM ET
EZ: GDP Flash, 5:00 AM ET
US: Personal Income and Outlays, 8:30 AM ET
US: Redbook, 8:55 AM ET
US: PMI Manufacturing Index, 9:45 AM ET
US: ISM Mfg Index, 10:00 AM ET
US: Construction Spending, 10:00 AM ET
ALL: Global Manufacturing PMI, 11:00 AM ET
US: Gallup US ECI, 2:00 PM ET
NZ: Labour Market Conditions, 6:45 PM ET
https://tradingeconomics.com/calendar (More complete listing, including consensus)