Thursday 26th November 2015
NEWS TICKER, THURSDAY, NOVEMBER 26TH: In the last six months River and Mercantile Group (R&M) says has been appointed to design, execute and provide ongoing management of over £1.7bn of structured equity options mandates for pension clients, including the Royal Mail Pension Plan and another FTSE 100 company’s pension scheme. James Barham, global head of Distribution at R&M, says, "With increased volatility in equity markets, we have seen a growing number of clients that are taking advantage of our market leading derivative capabilities to manage the downside exposure in their equity portfolios. The derivatives team at R&M has an exceptional long term track record in designing and managing structured equity solutions for clients over the last ten years. We continue to see significant demand from pensions and institutional clients for structured equity to actively manage the profile of their equity investment returns while maintaining their allocation to equities. The design and execution of these mandate demonstrates R&M’s ability to design innovative, outcome oriented solutions for our clients, which are delivered to meet their governance requirements.” - Demand to borrow Asian stocks surged in the wake of the recent market volatility reports Markit. While short sellers have since pulled back slightly, the current demand to borrow shares across the region is still up by a fifth since the start of the year. Short interest across Asia is up by 18% year to date, reaching 2.7% of free float. However, says Markit, Japanese short selling has been relatively flat since the start of the year. The firm adds that consumer sectors have made Australia the most shorted country in the region - Trayport, a provider of energy trading solutions to traders and exchanges, says Power Solutions Enerji Ticaret ve Danışmanlık Anonim Şirketi has chosen Trayport’s GlobalVision Broker Trading SystemSM (BTS) for trading in the Turkish power market. Power Solutions, founded in Turkey in 2015, provides OTC Brokerage services in the Turkish electricity market.. The Trayport BTS offers brokers access to a growing network of traders using Trayport’s trading technology - The Dutch residential mortgage-backed securities (RMBS) market remained strong during the three-month period ended September 2015, according to the latest indices published by Moody's The 60+ day delinquencies of Dutch RMBS, including Dutch mortgage loans benefitting from a Nationale Hypotheek Garantie, continued to decrease to 0.73% in September 2015 from 0.81% in June 2015. The 90+ day delinquencies also continued to decrease to 0.56% in September 2015 from 0.64% in June 2015. Cumulative defaults increased to 0.78% of the original balance, plus additions (in the case of master issuers) and replenishments, in September 2015 from 0.70% in June 2015. This compares to cumulative defaults of 0.49% in September 2014. Cumulative losses increased to 0.15% in September 2015 from 0.14% in June 2015. Moody's has assigned definitive credit ratings to two new transactions since the last publication of the Index on September 9th, including five classes of notes issued by STORM 2015-II BV. and two classed of notes issued by Hypenn RMBS IV BV. As of the end of September, the 107 Moody's-rated Dutch RMBS transactions had an outstanding pool balance of €217.9bn, representing a year-over-year decrease of 4.8% - Thanksgiving holidays in the US has coloured trading today. In the Asia-Pac, low commodities prices are weighing on the Australian economy. Australia's S&P/ASX 200 gained 0.3% in thin trading volumes across the whole Asia-Pac region. With the exception of the Australian dollar, trading volumes were ridiculously small EUR/USD traded within a 10 pips range between 1.0615 and 1.0625. Similarly, GBP/USD traded sideways between 1.5115 and 1.5131. According to Yann Quelenn, market analyst at Swissquote: “When commodities price lower, there is a transfer of wealth between exporters (producers) and importers of commodities. The decline favours industries that need commodities as primary source for manufacturing products. Australia is on the exporters’ side. Indeed, an important part of the Australian’s revenues accounts for the revenues on the extraction of gold, silver, platinum and other metals. Materials shares fell 1.3%, and are down 4.6% so far this week, with commodities like copper and nickel having tumbled to multiyear lows. In Japan, The Nikkei Stock Average ended the day up 0.5% at 19944.41, while and South Korea's Kospi rose 1.1%. The Shanghai Composite Index fell 0.3% and Hong Kong's Hang Seng Index closed flat. Japan shares have posted one of the strongest rebounds in the region since September. The Nikkei is the second-best performing market in Asia year to date with a gain of 14%. China's Shenzhen Composite Index is up 65% year to date. The Straits Times Index (STI) ended 6.89 points or 0.24% lower to 2884.69, taking the year-to-date performance to -14.28%. The top active stocks today were OCBC Bank, which declined 0.91%, SingTel, which gained 0.26%, UOB, which declined 1.79%, DBS, which declined 0.36% and Global Logistic, with a 1.91% fall. The FTSE ST Mid Cap Index declined 0.05%, while the FTSE ST Small Cap Index declined0.84%.In Brazil, the BCB left rates unchanged at 14.25% yesterday in spite of rampant inflation. The latest economic survey by the central bank showed that inflation expectations are not anchored yet as it is expected to reach 10.33% by year-end and 6.64% by the end of 2016. Broadly, expectations the U.S. Federal Reserve will raise interest rates in December has pushed the yen weaker. The currency has weakened 3.1% against the U.S. dollar in the past three months. Japan shares nevertheless remain vulnerable to global central bank moves and geopolitical tensions - The London Metal Exchange's three-month copper contract closed down 1.3% at $4,549 a metric ton on Wednesday. Copper last traded at $4,692.50 a metric ton, up from the opening price of $4,538 a ton on Thursday. Overnight, the latest U.S. report on jobless claims pointed to a strengthening employment picture, pushing the dollar higher. U.S. stocks ended mostly unchanged as consumer discretionary and health-care shares offset losses in other sectors on the last full trading day of the week before the Thanksgiving holiday. Brent oil futures fell 0.2% to $46.06 a barrel. US crude-oil futures rose 0.2% to $43.13 a barrel. Gold prices were up 0.3% at $1,073.50 a troy ounce.

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The push and pull of willpower & politics

Friday, 25 May 2012
The push and pull of willpower & politics June will be a battle between political will and economics. While European leaders continue to insist that they want Greece to remain in the eurozone, they are continually being reminded of the economic reality that a break-up of the single currency is almost certain. What is becoming more apparent day by day is that the markets will simply not allow the likes of Greece to have their cake and eat it without paying for it too. Whether Europe’s politicians will listen to those market siren calls for change has yet to be determined.

June will be a battle between political will and economics. While European leaders continue to insist that they want Greece to remain in the eurozone, they are continually being reminded of the economic reality that a break-up of the single currency is almost certain. What is becoming more apparent day by day is that the markets will simply not allow the likes of Greece to have their cake and eat it without paying for it too. Whether Europe’s politicians will listen to those market siren calls for change has yet to be determined.

If the Germans and French remain reluctant to put their money in the pockets by either using the ECB’s potential firepower or create a special eurobond then they could themselves become the very nemesis of the single currency that they tell us they are so desperate to keep. Even so, risk aversion continues to whittle down the markets; at the time of writing the index is at 5380, down some 25 points. Traders are watching term support trends at 5335, 5300 and 5275; hopeful bulls out there will be looking for resistance at 5490, 5615/45. This near term downward trend sees the index capped by a downward trend line that also puts some resistance at 5450. Over the longer term now that the index has broken below its 200 day moving average and its upward trend line a close below 5400 could been seen as very negative and we’re now in the ­territory of people not wanting to catch a falling knife.

While immediate market focus will remain on Europe and its affect on the macro picture, there are a couple of important pieces of data that UK investors should note. First, following a surprising improvement in April, unemployment numbers are likely to show a weakening labour market.  There’s little in the way of encouraging data from the UK at the moment, but last month’s data was the first ­indication that unemployment is ­starting to peak. Job creation has come largely from part time rather than ­permanent work and the tick downwards to 8.3% in the rate of unemployment is expected to rise back to 8.4%. Second, it will be interesting to see whether the upcoming Bank of England’s inflation report will encourage the central bank to stick to their hawkish guns or whether the ­confirmation of the double dip recession and a further downgrading of growth projections will result in a more dove-ish tone.

Other European indicators are not great either: Italian ten year yields have crossed back above 6% and for Spain back above 6.5%, meanwhile risk adverse investors piled into German bunds driving their cost of borrowing even lower. This is classic fear gripping the markets once again as the vicissitudes of 2012 look to be playing out in a very similar fashion to 2011. Financial markets detest uncertainty and at the moment they are riddled with them since Greece has been unable to form a government and has had to call for a new round of  elections on 17th June. Up until that point we can expect volatility to remain high and continued pressure to the downside.

The euro made a low of $1.2720 as the situation in Greece continues to deteriorate. Bears sold the single ­currency heavily after socialist leader Evangelos Venizelos announced that talks to form a coalition government had failed and that the public would have to go back to the polls next month. Gold continued to fall as traders dumped risky assets and piled into the safety of the US dollar. Spot gold traded as low as $1541 an ounce.  With little technical support seen until $1531 and no turn around in Greece on the horizon, the down trend looks set to stay firmly in place.

On top of all the European woes there’s also the growing concern that China is slowing down quicker than was previously thought. Add any downturn to the euro crisis and it has negative connotations for global growth.

As ever, ladies and gentlemen, place your bets...

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