Random Market News, 8 August
"U.S. private equity posts 12.9% gain, best in 3 years.
US private equity had its best annual return since 2013 with 4.5% for the quarter and 12.9% for the year ended Dec. 31, while U.S. venture capital returned -0.1% and 0.3%, respectively, according to the latest performance information from Cambridge Associates' U.S. private equity and venture capital indexes released Tuesday.
Cambridge's indexes are capital weighted, pooled horizon internal rates of return, net of fees, expenses, and carried interest."
That said, public equity in pension funds returned ~15-20%.
"IRR calculations remain under SEC spotlight.
Fund managers must be explicit in their IRR calculation disclosure to investors, or face the wrath of the regulator, writes Vivek Pingili, vice-president of compliance at Cordium."
"Moody's: US corporate cash grows despite lower borrowing; tech extends lead over other sectors.
Aggregate cash relative to debt rose 37% in 2016, up from 34% in 2015 and above the 35% average for the past decade. Borrowings declined for the first time last year since 2007, falling $74 billion to $4.95 trillion. Debt among rated issuers in the energy sector declined the most, by $148 billion, while the technology sector increased debt the most, by $181 billion.
Meanwhile, cash flow from operations declined by nearly 6% last year, to $1.45 trillion. Excluding the energy sector, cash flow from operations fell by less than 1% and capital spending slipped by 5%, the first decline since 2009. After reaching a new high in 2015, spending on plant and equipment fell by 18% in 2016 led by reduced energy sector spending.
Reflecting the decline in cash flow from operations that was more than offset by reduced capital expenditures, US non-financial corporates generated a record $720 billion in discretionary cash flow in 2016, up 11% from 2015. The technology sector has, on average, turned 72% of EBITDA into discretionary cash flow in the past 10 years, making it the most efficient sector in this regard."
"Elevated Levels of Special Mention and Classified Shared National Credits Are Credit Negative for US Banks.
Last Wednesday, the US Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency jointly released their 2017 interagency Shared National Credits (SNC) program review. SNCs are loan commitments of $20 million or more shared by three or more financial institutions, typically US banks, foreign banks or non-bank entities. The SNC review showed that despite the benign economic environment, special mention1 and classified2 commitments remain elevated historically, driven primarily by criticized leveraged loans, a credit negative for US banks."
"U.K. Tech IPOs Nearly Halt as Brexit Looms.
While companies await clarity on Britain’s decision to leave the European Union, tech IPOs are at a high globally."
"China Is Taking on the ‘Original Sin’ of Its Mountain of Debt.
Characterized in state media as the “original sin” of China’s financial system, leverage has swelled over the past decade -- partly because policy makers were trying to cushion a slowdown in growth from the old normal of 10 percent plus. What’s fueled the leverage has been a rapid expansion in household and corporate wealth looking for higher returns in a system where bank interest rates have been held down."
Nice breakdown by products. 2016 GDP was CNY 74tr and year-end total debt was officially CNY 244tr.
"Siemens’ Power Troubles.
The engineering conglomerate could face thousands of cuts in its power division, which has failed to keep up with rival General Electric."
"South Africa's power family, the Guptas: what you need to know.
As President Jacob Zuma faced a further vote of no-confidence, his close association with the Gupta business family came under renewed spotlight after thousands of emails were released. Who are the Gupta family?"
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 ~10.96. 10-yr treasury volatility (TYVIX) ~4.00.
"Stock market closes near lows, VIX pops, as Trump warns N. Korea of 'fire and fury'
U.S. stocks end lower; Dow snaps 10-day streak of gains.
U.S. stock-market benchmarks ended in the red on Tuesday, as President Donald Trump issued a verbal warning to North Korea amid mounting tensions between Washington and Pyongyang. The Dow Jones Industrial Average slipped 0.2%, and ended the blue-chip gauge's attempt at a 10th straight close in record territory. The S&P 500 index SPX, -0.24% closed off 0.2%, while the Nasdaq Composite Index COMP, -0.21% finished down 0.2% on the day. The three major equity benchmarks dipped firmly lower, before coming off lows, in late-afternoon activity following President Trump's warning that North Korea would be met with "fire and fury" if the Hermit kingdom continues to provoke the U.S. with missile tests and acerbic rhetoric. "They will be met with fire and fury like the world has never seen," Trump said from his golf club in Bedminster, N.J. The comments come as as the Washington Post reported that North Korea has successfully produced a miniaturized nuclear warhead that it can fit inside a missile, a fact that, if true, further escalates global tensions. Trump's comments during his vacation also bumped the so-called fear index, CBOE Volatility Index VIX, +10.37% slightly higher, up 11%, at 10.98. That still represents a historically low reading for the index, which is used to bet on sharp swings in the S&P 500 index 30 days in the future. (MarketWatch)
Chile Inflation Rate Steady at 1.7% in July
Chile's consumer prices increased 1.7 percent year-on-year in July of 2017, the same pace as in the previous month. Cost slowed for: food and non-alcoholic beverages (1 percent vs 1.3 percent in June); education (4.3 percent vs 4.4 percent); miscellaneous goods and services (2.5 percent vs 2.6 percent) and household equipment (0.7 percent vs 1 percent). In addition, prices advanced at the same pace for housing and utilities (3 percent) and decreased for recreation and culture (-0.8 percent vs -1.2 percent). On the other hand, cost recovered for transport (0.3 percent vs -0.2 percent) and rose faster for restaurants and hotels (4.5 percent vs 4.4 percent). Annual core inflation rate went up 2 percent, the same pace as in June. On a monthly basis, consumer prices went up 0.2 percent compared to a 0.4 percent decline in June.
Argentina Interest Rate Held Steady At 26.25%
The Central Bank of Argentina kept its benchmark interest rate steady at 26.25 percent for the eighth straight meeting on August 8th of 2017, saying inflation expectations remain above its target range of 12-17 percent, currently at 17.1 percent for 2017 and 15.5% for 2018. The central bank will continue with an anti-inflationary bias. The country's monthly inflation rate stood at 1.2 percent in June. On an annual basis, it stood at 21.70 percent and 21.90 in Buenos Aires.
Swiss Jobless Rate Steady at 32-Month Low in July
Swiss unadjusted unemployment rate stood at 3.0 percent in July of 2017, the same as in June and in line with market estimates. The jobless rate remained at its lowest since October 2014, as the number of unemployed and jobseekers fell. Adjusted for seasonal factors, the unemployment rate came in at 3.2 percent, the same as the prior three months.
The number of jobs vacancies in Germany has hit another record-high in the second quarter of this year. Skilled workers are particularly sought after in the manufacturing sector. (Handelsblatt)
Stocks in Italy Hit 20-month High
FTSE MIB increased to a 20-month high of 22041.
Turkish Industrial Output Grows 3.4% in June
Turkey's industrial production increased 3.4 percent year-on-year in June 2017, easing slightly from a 3.5 percent gain in the previous month, as electricity, gas, steam and air conditioning supply grew at a slower pace (2.5 percent from 6 percent in May), while mining and quarrying contracted (-0.5 percent from 5.1 percent). Meanwhile manufacturing output grew further by 3.8 percent after increasing by 3.1 percent in May. On a monthly basis, industrial production dropped 0.4 percent. In the second quarter of 2017, output grew 1.7 percent from the previous period and 4.5 percent year-on-year.
South African Rand Gains Ahead of No-Confidence Vote
The South African rand strengthened 0.2% against the US dollar to ZAR 13.189 on Tuesday ahead of a no-confidence vote by secret ballot against president Jacob Zuma this afternoon.
South Korea Jobless Rate Falls To 3.6% In July
South Korea’s seasonally adjusted unemployment rate declined to 3.6 percent in July 2017 from 3.8 percent in the previous month. The number of unemployed persons decreased by 11 thousand from the previous month to 0.963 million and the number of employed rose by 313 thousand to 26.916 million people. The participation rate edged down to 63.7 percent (vs 63.8 percent).
Stocks in New Zealand Hit All-time High
NZX 50 increased to an all-time high of 7772.
Aluminum Prices Hit Nearly 3-Year High
Aluminum prices rose 1.9 percent to $2,001.5 per metric ton around 12 PM London time. It is the highest price in almost three years as China’s Shandong province, which is main production hub, today announced a closure of 3.21m tonnes of unlicensed smelting capacity by 12 months. Aluminum prices have been up almost 20 percent in last 12 months as China has been cracking down on its polluting aluminum industry to protect the environment.
Copper Hits 26-month High
Copper increased to a 26-month high of 2.9175 USD/Lbs."
"July hottest month for new bulker orders.
Privately owned Greek entities top the list for newbuilding orders, followed by Chinese and Turkish as dry bulk rates recover."
"JLL research takes deep dive into trends impacting North America-based container shipping.
Recent research from industrial real estate firm JLL, entitled “Docked and Loaded: Five Trends turning the tide of the North American shipping industry,” takes a close look at various factors impacting the ocean shipping sector."
"Heavier use of robotics by transportation expected soon.
Yet use of drones, autonomous vehicles, and even artificial intelligence will be uneven, survey finds.
In a recent technology survey of 455 U.S.-based companies across nine different industries by consulting firm ABI Research found that 30% of the transportation-focused respondents plan to introduce robotics into their business operations within the next year, while another 22% are actively “assessing” the use of technology."
"Eaten Up: The Consolidation Of The Food Delivery Space In One Timeline.
Grubhub's acquisition of Eat24 is another significant move in the further consolidation of the food delivery space.
M&A activity among food delivery startups has seen a massive increase in recent years as venture capital funding has declined, and as smaller players in the space seek to be acquired, or risk shutting down. Among all food delivery startups, only 28 mergers or acquisitions took place between 2012 and 2014. This rose to 41 M&As in 2015, 31 in 2016, and 15 so far this year as of 8/7/17."
"The new wave of Brazilian SaaS innovators.
In May 2017, with support from Signal Hill and Redpoint eventures, we surveyed 597 Brazil-based SaaS founders (49 percent CEOs) to launch the inaugural version of our survey, called “The Brazil SaaS Landscape 2017.”"
"Aerostat startup Altaeros gets $7.5M from SoftBank to bring broadband wireless to rural areas.
The SuperTower is a tethered aerostat that floats 800 feet above ground. Altaeros says it enables telecoms to expand their LTE (and future 5G) networks to rural areas at “up to 70% lower cost, in half the time and with significantly lower energy” than conventional towers. SuperTower can be deployed for permanent or temporary use, like during an emergency.
“Traditional aerostats are surprisingly labor-intensive to operate. They require large crews to manually handle the lines whenever they want to launch or recover a system,” Rein says. “The cost of keeping this crew on call has limited aerostats to mostly defense and government applications.”"
"How to Trick Your Heart into Thinking You Exercise.
Researchers have discovered that a protein called cardiotrophin 1 (CT1) can trick the heart into growing in a healthy way and pumping more blood, just as it does in response to exercise and pregnancy. They show that this good kind of heart growth is very different from the harmful enlargement of the heart that occurs during heart failure. They also show that CT1 can repair heart damage and improve blood flow in animal models of heart failure.
The results are published in Cell Research. The research team is from The Ottawa Hospital, the University of Ottawa, the University of Ottawa Heart Institute and Carleton University."
"DOE Backs AI for Clean Tech Investors.
The U.S. Department of Energy wants to make investing in energy technology easier, less risky, and less expensive (for the government, at least).
A new initiative by the DOE’s office of Energy Efficiency & Renewable Energy (EERE) is looking for ideas on how to reduce barriers to private investment in energy technologies. Rho AI, one of 11 companies awarded a grant through the EERE’s US $7.8-million program called Innovative Pathways, plans to use artificial intelligence and data science to efficiently connect investors to startups. By using natural language processing tools to sift through publicly available information, Rho AI will build an online network of potential investors and energy technology companies, sort of like a LinkedIn for the energy sector. The Rho AI team wants to develop a more extensive network than any individual is capable of having on their own, and they’re relying on artificial intelligence to make smarter connections faster than a human could."
Startup/SME of the Day.
"Fennex is a mobile app that offers augmented hearing. We enhance social experiences while overcoming challenging listening situations.
Volume Boost - Amplify the sound around you
Single/Group - Choose the focus of your conversation (microphone)
Balance - Regulate the volume of the left and right speaker
Compression - Apply compression to amplify or limit low/loud sounds
High/Low Frequency - Keep or remove high/low-pitched sounds
Equalizer - Adapt treble, mid and bass sounds to your needs."
The 20-mile causeway that separates the Netherlands from the sea.
The Afsluitdijk is a causeway linking together the provinces of Friesland and North Holland in the Netherlands. Built to protect the flat, coastal country from flooding, the Afsluitdijk dammed the Zuiderzee, an inlet of the North Sea, and created a freshwater lake called the Ijsselmeer."
IT: Industrial Production, 4:00 AM ET
US: MBA Mortgage Applications, 7:00 AM ET
CA: Housing Starts, 8:15 AM ET
US: Productivity and Costs, 8:30 AM ET
US: Wholesale Trade, 10:00 AM ET
US: EIA Petroleum Status Report, 10:30 AM ET
NZ: RBNZ Announcement, 5:00 PM ET
JP: Machine Orders, 7:50 PM ET
JP: Producer Price Index, 7:50 PM ET
https://tradingeconomics.com/calendar (More complete listing, including consensus)