Banks

Carney: UK is ‘investment banker for Europe’

The governor of the Bank of England has repeated his calls for a “smooth and orderly” UK exit from the EU, saying that a transition out of the bloc will happen, it was just a case of “when and how”. Responding to the BoE’s latest bank stress tests, where lenders overall emerged with more resilient […]

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Currencies

China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

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Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Property

Zoopla wins back customers from online property rival

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate. OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply […]

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Archive | Equities

Scary movie sequel beckons for eurozone markets

Posted on 30 November 2016 by

Just as horror movies can spook fright nerds more than they expect, so political risk is sparking heightened levels of anxiety among seasoned investors.

Investors caught out by Brexit and Donald Trump are making better preparations for political risk in Europe, plotting a route to the exit door if the unfolding story of French, German and Dutch elections poses a serious test for markets.

One key measure of risk aversion is the relationship between the bond yields of Germany and periphery countries. The difference between Italian and German bond yields has been widening as investors cast a nervous glance towards the first big political risk event, Sunday’s constitutional referendum in Italy, while the euro is under sustained pressure.

The European Central Bank’s trade-weighted euro index has slipped to its lowest level since March, thanks mainly to a post-US election fall of 4 per cent against the dollar.

The prospect of pro-growth polices under president-elect Donald Trump accounts for much of that slide, driving investors to buy the dollar. However Europe can play its own part in pushing euro-dollar to where several analysts now expect it to go — parity and beyond.

“If political risks do materialise, the downside for the euro is a lot more substantial than generally appreciated,” says Adam Cole, G10 FX strategist at RBC Capital Markets.

Not all share that view and think investors are worrying unduly.

After Brexit and Trump political risk looks more unreadable than ever, but there is a danger the market gets paranoid about the risk of European populists sweeping to power in 2017.

Investors scarred by pollsters misreading Brexit and Trump could hardly be blamed for fearing that the anti-establishment tide is coming Europe’s away.

“Anxiety will increase and market volatility will surely move higher ahead of these elections,” says Patrick Moonen of Dutch-based asset manager NN Investment Partners.

Volatility is already here. The euro rose almost 1 per cent early Monday in response to polls showing that François Fillon, winner of the centre-right primary to contest next year’s French presidential elections, would beat the National Front’s Marine Le Pen comfortably in a run-off.

The euro’s gain was then reversed at “breathtaking” speed, says Marc Chandler at Brown Brothers Harriman — proof, he says, that “the bearish sentiment toward the single currency remains intact”.

Still, the European version of political risk is complex, says Bilal Hafeez, FX strategist at Nomura. Tempting though it is to liken these upcoming events to Brexit or Trump, “the nature of the euro area political system is such that those types of outcomes are less likely”, he says.

A move through euro-dollar parity requires significant negative political news in Europe or a material surge higher in US Treasury yields, suggests Roger Hallam, currency portfolio investment officer at JPMorgan Asset Management.

Yes, investors are “absolutely focused” on European politics, he says, but he doubts a No vote in Sunday’s referendum represents an earthquake for Europe (“it’s more of a status quo”), while he considers a Le Pen victory a low probability.

None of this is a comfortable place for European Central Bank president Mario Draghi, who can add the US election outcome to the list of challenges he already faces.

With its current round of bond purchases set to end in March, the ECB is expected to unveil the third leg of its quantitative easing strategy at its council meeting next week. But then what?

Though a weaker euro at face value helps boost inflation and growth, policymakers must balance that against concerns Mr Trump’s win triggers a wave of protectionism that prevents eurozone exporters from reaping the gains of stronger US growth.

The recent rise of governments’ borrowing costs in the eurozone is also a concern. Their task is further complicated by the Italian referendum, with a No vote likely to trigger a further rise in Rome’s borrowing costs.

The ECB appears to be bracing itself for that outcome. Yields on Italy’s benchmark 10-year bonds fell on Tuesday on market speculation that the central bank was ready to speed up Italian government debt purchases in an effort to calm market nerves.

Policymakers cannot determine the outcome of European political events, but at least they can try to prepare investors for them.

Mr Hallam thinks policymakers will find investors receptive. “There’s a general sense around European political risk that we’ve watched this movie twice before and we were twice surprised at the ending, so let’s not have it happen a third time,” he says.

European equities a global laggard on political risk

Posted on 29 November 2016 by

Donald Trump’s victory in the US elections has delivered a boost to some of the world’s most important equity markets.

All of the major US stock indices hit record highs last week, as optimism over the performance of the US economy gathered pace. In Japan, a weak yen has helped propel the Topix index to its highest level since early January.

It’s a different story entirely for Europe. Its main equities index has gained a paltry 0.2 per cent since the end of October.

The underperformance is particularly confusing given the weakness of the euro, which has fallen nearly 4 per cent in value against the dollar so far in November. Given the fact that 40 per cent of Eurozone sales are made abroad, a weaker euro should be positively reflected in the shares of European companies.

“When the bond yields and the dollar go up, Europe should outperform,” says Mislav Matejka, a strategist at JPMorgan. “It hasn’t happened yet. That’s what we’re highlighting — this underperformance is strange.” The bank also notes that both Eurozone composite PMI data and consumer confidence have hit their best levels this year.

Among investors, there is one resounding answer to the conundrum of persistent European weakness: politics.

“It’s mostly political — that’s the concern we see from investors.” says Martin Todd, a portfolio manager at Hermes Investment Management. “It’s something we’ve been scratching our heads about”.

Unexpected results in the UK referendum on European membership, as well as Trump’s victory in November elections, mean many fund managers are now preoccupied with the threat of future shocks.

Given the weak euro, you would have expected a better performance,” Mr Todd adds. “Global funds have been net sellers for months on end. It’s reflecting these age old concerns about a lack of headline growth in Europe and political uncertainty”.

Flows out of European equities reflect an extremely negative global view towards the asset class. So far this year up to late November there has been a total of $98bn of outflows from European equities, according to data from EPFR on funds it tracks, which shows money leaving the asset class in the vast majority of weeks during 2017.

There is a rising sense among global investors that Europe is going to be difficult to judge, given a packed calendar of potential risks. The Italian referendum on Sunday is the most immediate concern, followed by elections in France in 2017.

Italian banks — which have lost over half of their equity value so far this year — began the week on the defensive over referendum jitters. The continent’s financials have been a crucial part of Europe’s difficulties in 2016, with share prices falling sharply in February. The European sector is down 20 per cent, compared to just 7 per cent for the broader Euro Stoxx 600.

An environment of low interest rates has hampered the banking industry, which, unlike the US sector, is not yet seen as having overcome its crisis travails.

Despite stagnant performance in Europe, equities as an asset class have been less volatile than many other areas of financial markets since the US election.

“The moves in rates, oil, gold and FX are creating rotation within the equity market which mechanically keeps overall index volatility in check as correlation decreases,” says Antonin Jullier, global head of equity trading strategy at Citi. He adds that Trump has “opened a pandora’s box of fiscal easing”.

Any potentially dramatic changes in policy will take time for the market to digest. In a world of rapidly changing political institutions, initial weakness in one regional equity market may not last long.

Not everyone, moreover, is pessimistic on European stocks. Analysts at Morgan Stanley predict that European earnings per share will grow for the first time in five years in 2017, pointing to a moderate recovery in global GDP and a “reflationary theme”.

They also point to European financials as best positioned to outperform, “given the prospect of higher yields, improving earnings, and easier regulation against valuations that remain historically low”.

Others suggest that the aversion to European political risk is overdone. Market-friendly results in the referendum could provide dramatic upside if current prices already reflect expectations of the reforms failing.

“Investors are now shifting to a view that what were previously tail risks should now be seen as base cases … that you should expect the unexpected,” says Mr Matejka. “Our view is: no. Yes we had these surprising outcomes, but we think we’re almost at the peak of uncertainty now.”

And while the continent’s equities have endured huge outflows this year, there have been small inflows in each of the last two weeks, according to EPFR. Investor pessimism may overly rely on the recent memory of historical shocks. If Europe’s political landscape is less chaotic than expected, global flows could provide rapid boosts to the market, especially in monetary policy remains accommodative.

“When we speak to the companies, most of them are just getting on with things,” says Hermes’ Mr Todd. “They talk more optimistically than a lot of market commentators.”

European stocks hovering under Italian nerves, waning US momentum

Posted on 29 November 2016 by

Stock markets in Europe are stuck in the mud after Wall Street retreated from record highs as the rally on hopes for a Trump-led US economic boost shows signs of losing momentum.

US index futures suggest the S&P 500 will recover 2 points to 2,204 when trading gets under way later in New York, having retreated 12 points on Monday from its best ever close. The cautious tone sees oil lead industrial commodity prices lower, but encourages buyers of Treasuries, nudging down yields.

European markets remain wary of the Italian constitutional referendum this weekend.

The Euro Stoxx 600 Banking index is down 15 per cent this year, against a 7 per cent decline for the region’s market as a whole. On Tuesday, the FTSE MIB, the Italian equity benchmark is recovering 0.4 per cent, still leaving it down 24 per cent for 2016. The yield on 10-year Italian government bonds is up 2 basis points to 2.08 per cent, meaning investors demand a yield premium of 1.88 percentage points for Italian debt over German yields, around the most since October 2014.

What to watch

Keep an eye on the US dollar for signs that the “Trumpflation trade” may be fading. The dollar index (DXY), which measures the buck against a basket of its peers, towards the end of last week hit a near 14-year high of 102.05 having jumped on expectations president-elect Donald Trump’s mooted spending policies would deliver a stronger US economy and thus tighter monetary policy.

This reasoning has also helped drive gains for growth-focused assets like industrial commodities and equities.

But Tuesday sees the DXY off fractionally to 101.30, in line for a third down day in a row ahead of US third-quarter GDP data, due at 13:30 GMT and a November US consumer confidence report, scheduled for 15:00 GMT.

And traders will also be aware of the US monthly jobs report on Friday. However, the data would have to be particularly poor to dissuade the Federal Reserve from raising interest rates in December, given the market is currently placing a 100 per cent probability on a 25 basis point hike.

Equities
The pan-European Stoxx 600 is down 0.3 per cent, with financials striving to recover some poise but energy groups under pressure.

Japanese stocks were lower after the decline in the dollar caused the yen to strengthen overnight. The Topix benchmark dipped 0.1 per cent, ending 12-day’s of gains that were powered by the yen being the main casualty of recent dollar strength. The Nikkei 225 fell 0.3 per cent.

Much of Asia noted the soft lead from Wall Street, causing Australia’s S&P/ASX 200 to ease 0.1 per cent, while Hong Kong’s Hang Seng was down 0.4 per cent. However, China’s Shanghai Composite, bucked the trend, adding 0.2 per cent even though the technology-focused Shenzhen Composite lost 0.7 per cent as investors absorbed news that Beijing is to restrict the flow of outward investment.

Forex
The yen is again weakening as European trading gets under way, off 0.3 per cent to ‎¥‎112.30 per dollar. The currency strengthened briefly following the release of retail sales and household spending data that showed a less severe contraction in October.

A notable major Asian currency on Tuesday was China’s renminbi, up by one-third of 1 per cent at Rmb6.892 per dollar as the greenback weakened and the country’s central bank fixed the currency’s trading range with the US dollar stronger.

The South Korean won is 0.2 per cent firmer at 1,169.17 per greenback — and the stock market was flat — after the country’s scandal-mired president offered to stand down.

Commodities
Oil prices are weaker ahead of Wednesday’s much-anticipated meeting between Opec members that markets hope will result in supply cuts.

Brent crude, the international benchmark, is down 0.9 per cent at $47.82 a barrel, while West Texas Intermediate is slipping by 0.8 per cent to $46.77. Prices jumped 2 per cent on Monday on hopes that the Opec meeting would yield a deal.

Base metals are generally softer after their recent good run, while gold is down $3 to $1,1910 an ounce.

Fixed income
The market’s broadly tentative tone is supporting US bonds, but moves across the spectrum are meagre and mixed.

The 10-year Treasury yield, which moves inversely to the bond price, is down a fraction of a basis point to 2.31 per cent.

The equivalent maturity German Bund yield is adding 1bp to 0.20 per cent and UK gilts are up 1bp to 1.39 per cent

Russia’s rehabilitation trade prompts delight and scepticism

Posted on 28 November 2016 by

There is no mistaking the delight with which investors in Russia regard Donald Trump’s ascension to US presidency.

And after more than two years near the top of the list of countries to avoid, international equity and bond traders are placing bets Mr Trump’s victory will not just improve ties between the historic adversaries, but facilitate Russia’s rehabilitation on the global stage.

“We’re seeing that with the rouble holding up, more money is looking at Russia,” says David Nangle, managing director at Vostok Emerging Finance, a private equity firm with stakes in several Russian companies. “It’s clearly good for Russia Inc whether you are a quality company or a less quality company. Everyone benefits.”

Still, campaign trail praise for Vladimir Putin and calls for a better relationship with Russia are only the start of a long road to ending economic sanctions imposed by Europe and the US following the country’s intervention in Ukraine in 2014.

Some investors and bankers are also sceptical warmer relations would do more than exacerbate existing trends in a country already helped by this year’s return of capital to developing markets.

“You’d see growth in fixed-income trading, which is growing anyway because Russia has such high yields compared to other emerging markets,” says a senior Moscow investment banker. “But it wouldn’t do much to equities because the fundamentals don’t really change.”

Russia’s problems have been compounded by the fact that as sanctions bit, the price for crude oil — the country’s key export — fell from more than $100 per barrel to less than $50 as global supplies outweighed demand. As foreign investment ground to a halt, the economy sunk into the doldrums.

The sanctions affect a range of companies in different ways. State banks and energy companies are currently banned from raising debt of more than 30 days’ maturity from western markets. Other bans exist on companies in Russia’s defence sector, dealing with the annexed Crimean peninsula, importing dual-use technology, and doing business with people blacklisted for their role in the Ukrainian conflict or closeness to Mr Putin.

Their existence also adds obstacles to investing in non-sanctioned Russian companies for overseas investors. Viktor Szabo at Aberdeen Asset Management says internal compliance required that every position in Russia be confirmed as a non-sanctioned asset.

Andrei Kostin, chief executive of state-run VTB, Russia’s second-largest bank, released a statement hours after Mr Trump’s victory saying he expected “new possibilities for restoring constructive relations between Russia and the US, [and] improving the geopolitical situation in general. If that happens, then we could soon see an easing or even the repeal of US financial sanctions.”

Even before Mr Trump’s election win, Russia’s fortunes had been looking healthier. Within the country there are hopes that a stagnant financial services industry will be fired up with an influx of new investment. UBS has made buying Russian debt one of its top trades for 2017 while Moscow’s stock index trades at a record high.

Mr Nangle said Russia’s state banks and commodities companies would be obvious investment targets. But, he adds, “a lot has to go right before big global corporations have to take Russian risk again”.

The rouble’s fall had pushed production costs in Russia down, while sanctions prompted deleveraging that sent corporate debt levels to a five-year low, making investment more attractive.

While the country has not returned to regularly issuing Eurobonds, investors are far more relaxed about the risk of investing in Russian bonds. In January, the annual cost of insuring $10m of Russian debt against default was $400,000, according to Markit. Now it is $227,000.

International investors say they have space to include more Russian assets in their portfolios after the extended lack of issuance.

In the popular JPMorgan index of dollar-denominated emerging market bonds, Russia’s weighting is just 4.3 per cent — down from 5.75 per cent of the index in 2012.

However, there is a fair chance that markets may be getting ahead of themselves in expecting a radical new phase of Russia-US relations.

“Does Russia want better relations?” asks Mr Szabo. “Concrete signs of detente are hard to pin down and Vladimir Putin has used the idea of opposing the US as an enemy to shore up his popularity in the past.”

Alexander Morozov, chief financial officer of Sberbank, Russia’s largest bank, is more cautiously optimistic. “There’s a Russian joke where an optimist and a pessimist meet,” he told the FT.

“The optimist says, ‘It can’t get any worse,’ and the pessimist agrees with him: ‘It can’t get any worse!’

Italian banks fall fast on referendum jitters

Posted on 28 November 2016 by

Italian banks led sharp declines across the wider European financial sector on Monday, on concern about the risks to the financial system that could follow next weekend’s reform referendum.

Italians will vote on reforming the country’s constitution on Sunday, and centre-left prime minister Matteo Renzi has vowed to step down if the referendum is rejected, a result suggested by current polls

The prospect of political turmoil in the eurozone’s third-largest economy threatens plans to clean up Italy’s oldest bank Monte dei Paschi. Banks were at the forefront of selling from Milan, to Paris and Frankfurt and London.

All the constituents in the Euro Stoxx banking sub-index were in the red sparked by contagion fears for the wider sector, as it fell 1.4 per cent to a two-month low, outpacing a decline of 0.7 per cent on the main Euro Stoxx 600 index.

Milan’s FTSE MIB fell 1.4 per cent overall, a sharper decline than the FTSE 100’s 0.7 per cent fall in London and a 0.9 per cent loss for Frankfurt’s Xetra Dax.

“We see a non-trivial risk that a new, prolonged period of ineffectual governments leads to systemic instability in the medium term,” warned analysts from Deutsche Bank.

“A muddle-through scenario means a very low likelihood of significant reforms; in our view Italy’s economy will continue to perform poorly in both absolute and relative terms,” said Marco Stringa, strategist at Deutsche.

Unicredit — Italy’s most systemically important bank — was the biggest single faller, with its shares down 4 per cent, while Banco Popolare, Banca Popolare di Milano and Banco Emilia fell more than 3 per cent.

Senior bankers have told the FT they fear Mr Renzi’s resignation would deter private investors from pumping fresh funds to recapitalise lenders, leading to concerns they will need to be put under a new EU “resolution” mechanism that would force losses on creditors.

The reaction was less severe on capital markets. Italian subordinated bank bonds, the most risky exposure to the sector after equities, fell but many are still trading far above levels they touched earlier this year. A €1bn Unicredit subordinated bond was trading at 85 cents on the euro. In February it was trading at 71 cents. Similarly, an Intesa subordinated bond is at 94 cents, compared with February when it was below 86.

A “No” vote “would likely usher in a period of increased political uncertainty in Italy and would represent a major setback for economic reform efforts”, noted Elsa Lignos at RBC Capital Markets

“Italy continues to be a long-term risk for the euro area, but that is a two-year rather than a two-month trade,” said Ms Lignos.

Nonetheless, there were voices of support for the sector.

James Sym, an investor at Schroders, said of the selling: “We just feel it’s getting overdone. We’ve got to a level in the banking system where I think that’s broadly priced in.”

He added that the “big question” is the situation with non-performing loans held by Italian banks, and the discount rate used to value them.

“I sort of take a view that just as in 2012, 2013, there was a point where the market decided Spain had done enough provisioning. At some point we’re going to get to that point in Italy. It’s always the darkness before the dawn,” he added.

US stocks head for Black Friday shopping spree

Posted on 25 November 2016 by

US stocks are likely heading for yet another record high when Wall Street returns from the Thanksgiving break, but the dollar is easing back slightly from near-14-year highs.

US futures suggest the S&P 500 will be in line for another record, looking to add 1.5 points to 2,206.3 when the opening bell rings later in New York.

What to watch
Friday’s Wall Street session is just half a day, meaning attendance will be thin and this should have implications for volumes across Europe, too.

Standout story
The yen has been the whipping boy of the greenback’s recent advance, sliding more than 10 yen since Mr Trump’s election. Early on Friday it was approaching ¥‎114 to the dollar as the selling continued, helping the exporter sensitive Topix equity index to record an 11th straight day of gains.

But perhaps some traders think the recent slide for the yen was too stretched, because it has recovered to trade 0.5 per cent firmer at ¥112.76, possibly helped by news that the Japanese economy may be emerging from deflation.

Data released on Friday showed that headline consumer prices turned positive in October for the first time since February, while a measure of underlying inflation that strips out food and energy prices rose last month after registering zero growth in September.

Equities
The pan-European Stoxx 600 is dipping 0.2 per cent as miners gain ground but banks and energy groups pull back.

The tone across Asia was broadly positive, with Australia’s S&P/ASX 200 up 0.4 per cent and Hong Kong’s Hang Seng adding 0.5 per cent. China’s Shanghai Composite recovered an initial loss to gain 0.6 per cent.

Currencies
In general, foreign exchange is where the fireworks have been this week, with the likes of the Chinese renminbi, Indian rupee, Malaysian ringgit and Philippine peso all hitting multiyear lows against the US dollar. The ringgit is at a fresh trough but other EM currencies are a bit more chipper, with the Mexican peso, for example, gaining 0.3 per cent.

The dollar index hit a fresh near 14-year high of 101.92 early in the session, but is now off 0.3 per cent to 101.41 as the euro adds 0.4 per cent to $1.0590. So-called commodity currencies like the Aussie and Canadian dollars are firmer as the “Trumpflation trade” trundles on.

Fixed income
The US Treasury market has returned to action after a day’s holiday and the benchmark yield is again moving up as investors reprice inflation and monetary policy expectations in the wake of Mr Trump’s election victory.

The US 10-year yield is up 3 basis points to 2.38 per cent, only a few basis points off its highest since July 2015, while equivalent maturity German Bunds are easing 1bp to 0.26 per cent.

The yield on the US 2-year note, which is particularly sensitive to monetary policy moves, is up 1bp to 1.15 per cent — its most in six years as the market puts the probability of a December rate rise by the Fed at 100 per cent.

Commodities
Gold is benefiting from the softer buck, the bullion adding $8 to $1,192 an ounce. Brent crude is down 1 per cent to $48.52 a barrel as some traders remain sceptical that Opec can reach a deal to cut production during its meeting at the end of the month.

European stocks climb in Thanksgiving week

Posted on 23 November 2016 by

European bourses are higher, tracking another mostly positive performance in Asia, as fresh records on Wall Street continue to buoy global investor sentiment.

The dollar and benchmark Treasury yields are steady near recent highs, while industrial commodities struggle to extend their rallies.

Trading is likely to be muted for much of the session. Japan’s markets were shut for a holiday and many US-based traders may be travelling for the Thanksgiving break.

Wall Street is closed on Thursday and will be open for just half a day on Friday.

But US investors look set to tuck into their turkey in bullish mood as futures suggest the S&P 500 will add half point to 2,203.5, leaving the benchmark index in line for another record close.

US stocks have rallied hard in the wake of Donald Trump’s shock victory in the country’s presidential election, with many analysts citing hopes that his plans for massive infrastructure spending and a lighter regulatory touch will boost the economy and corporate earnings.

The feelgood mood is spreading across developed markets. Germany’s Dax index is up 0.1 per cent, flirting with its best level of the year, and the UK’s FTSE 100 is gaining 0.4 per cent.

UK-focused investors will be keeping an eye on the government’s Autumn Statement, due to begin on Wednesday at 12:30 GMT, the first set piece fiscal policy event since the summer’s Brexit vote.

In the meantime the pound is down 012 per cent to $1.2406 and 10-year gilt yields, which move opposite to the bond price, are adding 1 basis point to 1.38 per cent.

Equivalent maturity US Treasury and German Bund yields are easing 1bp to 2.31 per cent and up 1bp to 0.23 per cent. At the more policy-sensitive end of the yield curve, US 2-years are steady at 1.10 per cent while German 2-years are minus 0.74 per cent.

This 1.84 basis point difference — the widest in 11-years, according to Reuters — reflects expectations that the US Federal Reserve will raise interest rates next month but that its eurozone counterpart remains in easing mode.

The expanding yield differential has been supporting the greenback of late, pushing the dollar index (DXY) to a 13-year high of 101.48 at the end of last week. But the buck’s rally looks to be fading on Wednesday, with the DXY slipping 0.1 per cent to 100.96.

The euro is barely changed at $1.0624 and the Japanese yen is 0.1 per cent firmer at ¥111.05, the buying of the currency “haven” perhaps reflecting trader caution going into the US break.

The Australian dollar is among the bigger movers, up 0.5 per cent at $0.7440. The currency shrugged off data showing the value of construction work done during the September quarter had fallen at its fastest quarterly pace in 16 years, and instead rallied as a survey of Chinese business conditions showed continued improvement in November.

Australia’s S&P/ASX 200 also benefited from China economic optimism, adding 1.3 per cent, led by mining stocks after iron-ore futures jumped 8 per cent.

Hong Kong’s Hang Seng was up 0.1 per cent, but mainland China benchmarks bucked the regional trend, with the Shanghai Composite slipping 0.2 per cent and the technology-focused Shenzhen Composite off 0.4 per cent.

In oil, the rally of recent sessions is cooling. Brent crude saw strong gains at the start of the week on renewed hopes Opec members will agree to a supply cut at a meeting later this month. Gains were tempered in New York on Tuesday, and today Brent is flat at $49.13 a barrel.

US stocks set to extend record highs as oil climbs

Posted on 22 November 2016 by

Wall Street’s main equity gauges are poised for another round of record highs on Tuesday, as rising oil prices continue to buoy investor sentiment.

S&P 500 futures are up 0.2 per cent, Dow Jones futures rose 0.3 per cent and Nasdaq 100 futures are up 0.5 per cent an hour-and-a-half before the opening bell in New York.

The three indices finished at all-time highs on Monday, and their momentum carried through to equity markets in Europe and Asia. The pan-European Stoxx 600 gained 0.5 per cent, while Hong Kong’s Hang Seng rose 1.4 per cent. Japan’s Nikkei 225 closed 0.3 per cent higher after concerns of a strong earthquake in the morning faded.

Oil prices continued to rise on Tuesday as investors weigh the odds that Opec will reach a deal to reduce output. Brent crude was up 2 per cent to a session high of $49.96 a barrel, its highest point in nearly three weeks, while West Texas Intermediate gained 1.5 per cent to $49.20.

Meanwhile, bond markets and the US dollar are quiet. The yield on the 10-year US Treasury, which moves opposite to price, fell 2 basis points to 2.29 per cent, while the 2-year equivalent is up 2 basis points to 1.09 per cent. The dollar index, a measure of the currency against a basket of major peers, was flat at 101.05.

Sabadell shares slide after major shareholder sells stake

Posted on 22 November 2016 by

Shares in Banco de Sabadell are falling on an otherwise upbeat day for European bank stocks, after one of the Spanish bank’s largest individual shareholders sold the majority of his stake.

Shares in Sabadell are down 4.2 per cent at publication time, to €1.21, after Colombian billionaire Jaime Gilinski sold a 2.99 per cent stake in the bank at a discount to yesterday’s closing price.

Mr Gilinski, Colombia’s second richest man, now owns only 2.04 per cent of Sabadell shares, having previously been its biggest single shareholder with as much as 7.5 per cent.

In the rest of the continent, in contrast, financial stocks are sharing in the generally positive mood as record highs in Wall Street boost confidence. Despite the drag from Sabadell, the eurozone-wide Euro Stoxx Banks Index is up 1.3 per cent.

Italian stocks at lowest level for two months as referendum fears grow

Posted on 21 November 2016 by

Italy’s benchmark equity index has reached its lowest level since September as nerves build ahead of the country’s referendum on constitution reform in less than two weeks’ time.The FTSE MIB index is losing 1.18 per cent at publication time to 16,073.85, underperforming its peers in Europe.

By comparison:

    • The pan-European FTSE Eurofirst 300 index is off 0.58 per cent.
    • The FTSE 100 in London is 0.18 per cent lower.
    • The CAC-40 is down 0.37 per cent and
    • Germany’s Xetra Dax is losing 0.44 per cent.

    Italian prime minister Matteo Renzi has staked his political future on the referendum on December 4 but recent opinion polls have indicated an average 5-8 point lead for the “no” vote.

    As the FT’s James Politi reports, a loss for the prime minister could also spell the end of the centre-left PM’s political and economic reform programme, fuelling concerns that it could lead to a loss of investor confidence in the eurozone’s third biggest economy.

    Italy’s economic recovery has faltered this year with the country failing to grow in the second quarter. It eked out GDP growth of 0.3 per cent in the most recent three month period, ending in September.

    Chart from Bloomberg