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Wall Street Breakfast,Europe Half Day

Again Market Jitters, Tokyo Stocks Dive

It looks like another ugly day for world shares. Investors are concerned that a protracted period of slowing global growth, plunging oil prices and rock-bottom interest rates will combine to inflict pain on the world’s largest financial institutions, while the lofty valuations of tech stocks are further weighing on sentiment. The ‘fear factor’ in the markets is also being magnified by Fed Chair Janet Yellen’s testimony this week, sending traders stampeding into safe haven assets.

Today’s Markets

In Asia, Japan -5.4% to 16085. Hong Kong closed. China closed. India -1.1%to 24021.
In Europe, at midday, London -0.1%. Paris -0.4%. Frankfurt -0.7%.
Futures at 6:20, Dow -0.2%. S&P -0.2%. Nasdaq -0.2%. Crude +2.4% to $30.40. Gold -0.7% to $1189.40.
Ten-year Treasury Yield +3 bps to 1.76%


With most other markets in Asia closed for the Lunar New Year, Japan decided to make headlines, with the Nikkei plunging 5.4% and yen soaring to a 15-month peak. Yields on Japan’s benchmark 10-year government bonds also touched -0.01%, marking the first time a G7 nation’s 10-year yields have turned negative (although German bunds have come relatively close).

The economic woes sparking turmoil for global equities are a boon for gold, as traders bet on a big comeback for the yellow metal. Spot bullion climbed as much as 2.3% to $1,200.97 during yesterday’s session, its biggest intraday gain in two months and highest level since June 22. However, not everyone is a believer. Goldman Sachs predicts losses over the coming year as the Federal Reserve raises U.S. interest rates no fewer than three times.

German industrial production unexpectedly fell for a second month in December, in a sign that Europe’s largest economy ended 2015 on weaker footing. Output, adjusted for seasonal swings and inflation, fell 1.2% from November, when it declined by a revised 0.1%. The pullback comes at a time when record-low unemployment and low fuel costs bolster consumer spending, but a slowdown in major export markets counteract the positive trends to rein in production.

Argentina bonds outperformed on Monday after two of six holdout investors agreed to accept a government offer to pay a total of $6.5B to them (a 25% haircut). Daniel Pollack, the special master presiding over the negotiations, said Dart Management and Montreaux Equity Partners “stood solidly behind the deal,” praising President Macri for addressing the “long-festering problem.”

Stocks :

Fiat Chrysler fell 7.6% to a 52-week low yesterday after the NHTSA released documents that suggested that some of its vehicles can roll away when a driver thinks the transmission has been set to park. The probe into three Fiat Chrysler (NYSE:FCAU) models affects about 856K cars; 121 incidents have led to crashes, with 30 leading to injuries. FCAU -1.5%premarket.

Energy news: Responding to an earlier report that has cut the share price in half, Chesapeake Energy (NYSE:CHK) declared it “has no plans to pursue bankruptcy,” but is looking at its restructuring options “to maximize value for all shareholders.” Meanwhile, Cheniere Energy (NYSEMKT:LNG) is closing its newly formed crude oil trading desk, just two months after the company’s board ousted CEO Charif Souki and increased its focus on core businesses.

Swatch is reintroducing sunglasses under its namesake brand through a five-year alliance with Safilo (OTCPK:SAFLY), after a stint selling them in the 1990s. Swatch’s (OTCPK:SWGAY) diversification comes as the Swiss watch industry struggles to sell more timepieces amid slowing economic growth in its largest market, China. Low-end brands have also had to contend with competition from an increase in smartwatch adoption.

Verizon has given Tim Armstrong, chief executive officer of its AOL unit, a leading role in exploring a possible bid for Yahoo (NASDAQ:YHOO), Bloomberg reports. Sources say Armstrong may be picking up on conversations he had with Yahoo CEO Marissa Mayer at the Sun Valley media conference in 2014 – before AOL was bought by Verizon (NYSE:VZ) – while exploring the idea of combining AOL and Yahoo. The two are both former Google (GOOG, GOOGL) executives.


With China offline for the rest of the week, global markets have found a new Asian scapegoat  in the face of Japan which as reported last night saw its markets crash, and the Yen soar, showing that less than 2 weeks after the BOJ unveiled NIRP,  yet another central bank has lost control, given that outcomes are opposite of expected.

Japanese Bank stocks are down 25% since NIRP( Negative Interest Rates) was unleashed (and 32% since the start of the year)…

The Nikkei crashed 5.4%, the biggest drop since June 2013, plunging over 900 points to August 24 lows driven by collapsing bank stocks while the Yen soared to 114.50 overnight before the BoJ desperately tried to push the Yen lower, with London dealers reported the Japanese central bank was checking rates and levels to prompt short covering through 115.

Aside from Japan, everyone is looking at Germany’s Deutsche Bank, to see if yesterday’s desperate scramble to publicly confirm it has sufficient liquidity will sufficient will stop the price from dropping and its CDS drom blowing out. DB 13,135, – 4.69%.

“Volatility is getting very high,” Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany told BLoomberg. “Investors need to increase their cash and be careful in case they see any buying opportunities. A technical rally may easily get sold again, we won’t come back to calm waters soon.”

Risks Standings:

  • S&P 500 futures down 0.4% to 1844
  • Stoxx 600 down 0.6% to 312
  • DAX down 0.5% to 8926
  • German 10Yr yield up 5bps to 0.27%
  • Italian 10Yr yield up 1bp to 1.69%
  • Spanish 10Yr yield up less than 1bp to 1.76%
  • MSCI Asia Pacific down 2.9% to 118
  • Nikkei 225 down 5.4% to 16085
  • S&P/ASX 200 down 2.9% to 4832
  • US 10-yr yield up 1bps to 1.76%
  • Dollar Index down 0.06% to 96.52
  • WTI Crude futures up 2.0% to $30.29
  • Brent Futures up 2% to $33.54
  • Gold spot down 0.1% to $1,188
  • Silver spot up less than 0.1% to $15.32


Asian Top News

  • Yen Jumps to 2014 High as Japan 10-Year Yield Drops Below Zero: Yen rose against all 31 major peers as Topix tumbled 5.5%, 10 yr yield fell unprecedented decline below zero
  • Credit Risk Soars From Japan to Australia on Global Bank Anxiety: Credit-default swap costs in Japan, AU soared amid markets across much of Asia Pacific closed for Lunar New Year
  • Beefing Up Down Under: Aussies Find New Boom in China Demand: Aussie beef sales to China surged six-fold in 3 yrs to a record A$917m in 2015; export boom signals AU is successfully transitioning away from mining
  • India State Firms’ Valuation Discount May Trigger Rebound: Chart; Shrs of India’s state-run cos are cheapest in more than two yrs relative to stocks on nation’s benchmark index



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