News > Capital Markets

China cuts interest rate in unexpected move
<p>From the Guardian:<br /> China’s rate cut is the sixth since last November as the authorities try to kickstart the slowing economy. The People’s Bank of China has lowered its one-year benchmark bank lending rate by a quarter point to 4.35%, effective from 24 October. The one-year benchmark deposit rate was also cut by 25 basis points, to 1.5%.</p> <p>This is China’s most aggressive policy easing cycle since the global financial crisis in 2008/09, Reuters said.<br /> Photo: Michaël Garrigues</p>
Think about the little guy, Fitch warns Fed
<p>A couple of weeks ago the IMF raised the specter of widespread corporate debt defaults and economic misery in emerging countries that could cause a 2008-type sclerosis in the international financial system. Now here’s another report warning the Fed about being too parochial as it ponders an interest rate hike.</p> <p>Fitch Ratings points out that vulnerable emerging markets are already a threat to global growth as a collapse in commodity prices and political shocks worsen secular slowdowns.</p> <p>“Our latest forecast for global growth of 2.3% in 2015 is the weakest since the global financial crisis in 2009. Against this backdrop, the Fed's looming tightening of monetary policy after an unprecedented period of historically low rates will add to the macroeconomic and external financing pressures on emerging markets (EM),” notes Fitch.</p> <p>“EM bonds were boosted in the last decade by international investors' search for yield and increased funding disintermediation in local debt markets. This makes EM borrowers vulnerable to rising US rates and the reversal of previously strong capital flows,” Fitch adds.</p> <p>The most exposed? Turkey, followed by most of Latin America.<br /> Photo: bass_nroll<br /> &nbsp;</p>
Fight is on for new HSBC HQ
<p>The U.S. is looking like the top contender in the competition to hold HSBC's headquarters, as the largest European bank looks to leave the U.K, reports The Financial Times.</p> <p>Not that we're biased or anything, but the U.S. does make an awesome HQ location...<br /> Photo: istock </p>
Daily Scan: Hang Seng climbs 1.34% as Draghi rally reaches new heights
<p>Updated throughout the day</p> <p>October 23</p> <p>Good evening everyone. With Super Mario ready to reload the stimulus bazooka, Asian shares capped the week on a high note Friday. Hong Kong’s Hang Seng Index and Japan’s Nikkei Average both hit their two-month highs today, while China’s Shanghai Composite posted its third week deep in the red. Here’s the score this week:</p> <p>&nbsp;<br /> Day<br /> Week</p> <p>Hang Seng Index<br /> +1.34%<br /> +1.02</p> <p>Hang Seng China Enterprises Index<br /> +1.34%<br /> +1.79%</p> <p>Shanghai Composite<br /> +1.30%<br /> +0.68%</p> <p>Shenzhen Composite<br /> +2.94%<br /> +2.53%</p> <p>Nikkei 225<br /> +2.11%<br /> +3.06%</p> <p>Straits Times Index<br /> +1.11%<br /> +1.63%</p> <p>The European markets meanwhile look set to post their third straight weekly gain. The U.K.’s FTSE 100 has so far climbed 1.32%, while France’s CAC and Germany’s DAX have each jumped 1.30% and 0.69% respectively. As for Wall Street, it seems to be geared up to join the party too, with S&amp;P 500 futures climbing 0.12% at pixel time.</p> <p>Here’s what else you need to know:</p> <p>Japan “flash” PMI hits 19-month high. Japan’s manufacturing sector rebounded sharply this month, with the Nikkei Flash Japan Manufacturing PMI coming in at 52.5 – its highest level since March 2014 – versus a 50.5 reading expected by analysts. It also beat September’s final reading of 51. Markit</p> <p>PNG to resettle Manus Island refugees.  Papua New Guinea (PNG) is to begin resettling refugees from the controversial Manus Island immigration detention center, Australia has said. Australian Immigration Minister Peter Dutton said the move would allow refugees there to "have a fresh start." BBC</p> <p>South Korea GDP growth rebounds in third quarter. South Korea’s economy picked up pace in the third quarter, helped by rising consumption and construction activity, but weak exports ensured it remained on course for a full-year slowdown worse than official targets. Financial Times (paywall)</p> <p>Korean families say their final farewells. North and South Korean families were forced to say their last goodbyes on Thursday after meeting for the first time in more than 60 years. On the third and last day of their all-too brief reunion in a North Korean mountain resort, the families were given two hours in the morning to say their last goodbyes. Channel News Asia</p> <p>UK backs China bid for EU free-trade pact. Britain yesterday threw its weight behind China's effort to reach a free-trade pact with the European Union, as the two countries issued a joint statement during President Xi Jinping's state visit. South China Morning Post (paywall)</p> <p>Japan, China, South Korea to reinstate annu</p>
Daily Scan: Stocks soar; Clinton defends herself on Benghazi
<p>Updated throughout the day</p> <p>October 22</p> <p>Good evening. Stocks had a strong rally Thursday, as the Dow exited correction territory. The Dow added 1.9%, its highest close in more than two months. The S&amp;P 500 gained 1.7%, and the Nasdaq grew 1.65% after steady gains all day. Caterpillar's stocks rose 2.9% even though the company cut its profit projections for the year. 3M shares gained 4.1%, but also reduced its earnings forecast as it moves to cut 1,500 jobs. McDonald's is lovin' its earnings, and the stock rose 8.1% Thursday. Jobless claims are in, totaling 259,000 compared to the estimate of 265,000.</p> <p>Here’s what else you need to know:</p> <p>Clinton talks Benghazi. Former Secretary of State Hillary Clinton was grilled by lawmakers Thursday about her role in the American diplomatic mission in Libya that ended in the death of four Americans. Clinton, who has faced criticism from Republicans since the 2012 attacks, was poised in her defense throughout the interrogation. The hearing adjourned for a break after almost three and a half hours when the Republican committee chairman and two Democratic committee members started a shouting match over Clinton's personal email exchanges. During a 2013 hearing, Clinton accepted responsibility for the security lapses in Benghazi. New York Times</p> <p>Google's ABCs look strong. Alphabet, the Google parent company, reported revenue gains Thursday. Shares are up 23% this year, and continued to rise Thursday. Third quarter net income reached $3.98 billion, compared to $2.74 billion during the same time last year. Wall Street Journal</p> <p>American killed during hostage rescue in Iraq. About 70 hostages facing "imminent mass execution" were saved during a helicopter assault operated by U.S. special ops troops, as well as Kurdish and Iraqi forces. One U.S. service member was fatally wounded during the mission. CNN</p> <p>Masked man kills two in Swedish school. The man killed a student and a teacher, and another teacher and student are being treated for knife injuries. The suspect, who has died of gunshot wounds, was armed with a sword and several knives. BBC</p> <p>U.S. investigating Venezuelan oil company. The probe takes a look at alleged kickbacks  and "other schemes" that Petróleos de Venezuela required from anyone who wanted to do business. PdVSA is alleged to have looted billions. Wall Street Journal (paywall)</p> <p>CIT chief John Thain to retire. The move was unexpected for the 60-year-old executive who landed at the helm of Merrill Lynch during the financial crisis, and was drummed out after controversial bonus payouts and a $1.2 million spending binge to re-decorate his office. Thain, a former top Goldman Sachs officer, will be succeded by CIT board member Ellen R. Alemany. Wall Street Journal (paywall)</p> <p>Europe in holding pattern ahead of ECB meeting. The European Central Bank is in Malta and most watchers expect more stimulus, in part to keep the eu</p>
Deference and deal-making: The absurdity of Xi's UK tour
<p>China’s decision to invest 6 billion pounds ($9.2 billion) into the U.K.’s Hinkley Point nuclear plant project is one of many deals being struck between the two countries as the U.K. rolls out the red carpet for Chinese President Xi Jinping. But the lavish welcome has both baffled economists and worried the U.K.’s traditional allies.</p> <p>The U.K. has spared little pomp in welcoming their guest. Highlights so far have included a state banquet at Buckingham Palace, afternoon tea with members of the royal family at Clarence House, and a ride in the Queen’s diamond jubilee state coach.</p> <p>The U.K. government is selling the five-day visit — now in its third day — as a boon for the U.K. economy, claiming the trip has already drummed up 40 billion pounds worth of business. But Prime Minister David Cameron has also come in for a lot of flak both at home and abroad, accused of "kowtowing" to Chinese interests.  </p> <p>The PM’s own former advisor Steve Hilton — now a Silicon Valley CEO — took to the pages of The Guardian newspaper to accuse Cameron of “sucking up to despots” and questioned the economic sense of chuming up so closely to China.</p> <p>He is not alone. Former Wall Street trader Michael Pettis, now professor at Peking University’s Guanghua School of Management, has also used his blog to call out the PM for the "almost teenagerish excitement" with which he has been “BFFing” China, He writes:<br /> “For a rich, developed country like England, inward investment almost always affects growth adversely (unless it brings technological and managerial advances with it) and never more obviously so than when interest rates are struggling against the zero bound and every country is urgently trying to export excess savings. As one of my exasperated PKU students asked me after class last Saturday when we discussed the president’s trip: ‘So everyone agrees that it is good for England to get much more foreign investment, and everyone also agrees that it is bad for England to have a much bigger trade deficit. Don’t they know it’s the same thing?’”<br /> And then there are the U.K.’s long-standing diplomatic partners. The Financial Times has reported the U.K.’s efforts to accommodate China has caused U.S.-U.K. relations to become frayed. Patrick Cronin, an Asia expert at the Center for A New American Security, warned:<br /> “There is a growing concern in Washington about China’s intentions with respect to deepening ties with our key ally in Britain. The Chinese are definitely insinuating themselves way into the inner sanctum of the British national security [world] through these investments.”<br /> Its easy to see how in the long run China may be the one that stands to gain the most from this new relationship. Not the U.K.<br /> Photo: Foreign and Commonwealth Office</p>
With stocks on shaky ground, a promising ballast in bonds
<p>Weekly Commentary Overview</p> <p> Stocks advanced last week, benefiting from mergers and acquisitions, and the recent drop in interest rates, a trend that continued last week.<br /> The gains we have seen in stocks, credit and even emerging markets in recent weeks have not been driven by signs of economic improvement, firming inflation or rising earnings.<br /> Instead, investors are once again taking solace in low rates and benign monetary conditions, which can and probably will persist for the remainder of the year. But that can only take the market so far.<br /> Meanwhile, another important trend is emerging: For investors looking for some longer-term ballast in their portfolios, particularly equity-centric portfolios, longer-duration bonds are reasserting their role as an effective hedge to equity risk.</p> <p>Stocks Advance, But on Wobbly Trends<br /> Stocks advanced last week, with the biggest gains in Asia. In the U.S., the Dow Jones Industrial Average rose 0.77% to 17,215, the S&amp;P 500 Index grew 0.94% to 2,033 and the tech-heavy Nasdaq Composite Index climbed 1.16% to close the week at 4,886. Equities continue to benefit from an active cycle of mergers and acquisitions. Last week's list included Dell's plans to buy hardware maker EMC and AB InBev raising its bid for SAB Miller.</p> <p>Stocks are also benefiting from the recent drop in interest rates, a trend that continued last week: The yield on the 10-year Treasury fell from 2.09% to 2.03%, and at one point dipped below 2%. German, Italian and Australian yields also dropped last week, as bond prices rose.</p> <p>Recent weeks have seen stocks, credit and even emerging markets start to recover. Unfortunately, the gains have not been driven by signs of economic improvement, firming inflation or rising earnings. Instead, investors are once again taking solace in low rates and benign monetary conditions, which can and probably will persist for the remainder of the year. But that can only take the market so far. Meanwhile, another important trend is emerging: For investors looking for some longer-term ballast in their portfolios, particularly equity-centric portfolios, longer-duration bonds are reasserting their role as an effective hedge to equity risk.<br /> Sugar High<br /> In most countries, interest rates are being held down by persistently low inflation. For example, the latest readings on Chinese inflation came in below expectations while U.K. readings turned negative for only the second time since 1960. Even in the U.S., producer prices are falling at the fastest pace since 2009.</p> <p>As realized inflation has remained stubbornly low, inflation expectations have also been stuck. For example, U.S. five-year inflation expectations fell to around 1.15%, down from 1.25% the previous week. With inflation expectations still falling, a 2015 rate hike by the Federal Reserve (Fed) looks increasingly unlikely; even the odds of an early 2016 hike appear to be fading.</p> <p>This has all helped keep bond yields low. But with bonds providing little appeal and short-term rates fast approaching their ninth calendar year at zero, investors are once again relying on stocks to do the heavy lifting in their portfolios. But this comes with the cost of escalating valuations: Since Sept. 30, the trailing price-to-earnings ratio on the S&amp;P 500 has risen by 10%.</p> <p>That said, while stocks have managed to rebound from their lows, the S</p>
Daily Scan: Asia ex-China shares fall; Europe lower ahead of ECB decision
<p>Updated throughout the day</p> <p>October 22</p> <p>Good afternoon everyone. Asian shares finished the session lower Thursday, save for China, where stimulus bets led the Shanghai Composite up 1.45%. The Shenzhen Composite meanwhile – buoyed by tech shares – climbed 3.71%. Here’s how the rest did:</p> <p> Hang Seng Index: -0.63%<br /> Hang Seng China Enterprises Index: -0.46%<br /> Nikkei 225: -0.64%<br /> Straits Times Index: +0.44%<br /> Kospi: -0.98%</p> <p>Over in Europe, equities seem to be trending lower ahead of the ECB’s rate decision. The FTSE 100 is currently down 0.25%, the DAX – which climbed as much as 0.28% earlier – is currently up just 0.14%, while the CAC has slipped 0.13% so far.</p> <p>Here’s what else you need to know:</p> <p>Don't panic, says China, as outflows spike.  Recent outflows of money from China are “normal” and not a sign of panic capital flight, a senior official at the foreign exchange regulator said on Thursday, downplaying fears over growing outflows as the economy slows. SCMP</p> <p>U.K. retail sales beat estimates. U.K. retail sales rose sharply in September, punching in at 6.5% year on year versus a forecasted 4.7% climb. Month on month figures were also great, showing a 1.9% jump versus an expected 0.3% bounce. Interestingly, alcohol drove some of the gains. FXStreet</p> <p>South Korea rapper PSY in row with artist tenants.  PSY is fighting a legal battle with artist tenants who are reluctant to leave a building he owns in Seoul. The property dispute has struck a nerve in a country notorious for super-high rents that critics say are killing vibrancy in cities by spurring gentrification and evictions. SCMP</p> <p>China agrees $9.2 billion deal for U.K. nuclear power plant. The deal came in the wake of Chinese President Xi Jinping to Great Britain.  China General Nuclear Power Corporation (CGN) has entered into a deal with French state-owned energy firm EDF to acquire a one third stake in its Hinkley Point nuclear power plant in Somerset. The Telegraph</p> <p>Legoland heads to China. Merlin Entertainments has signed an agreement with China Media Capital to establish a Legoland park in Shanghai. It is part of a deal between the two to explore opportunities to build visitor attractions throughout China. BBC </p> <p>Singapore church leader pulled off $35 million fraud to support wife's failed singing career. The founder of a popular Singapore church, Kong Hee, has been found guilty of misappropriating more than $35.5 million in donations to support his wife's singing career, in a rare case of graft in the city-state. Aljazeera</p> <p>CIT chief John Thain to retire. John Thain, best known for leading Merrill Lynch during the financial crisis, will retire from CIT on March 31. He will remain onboard the lender as its chairman. CIT board member Ellen R. Alemany, will replace him as CEO. </p>
Daily Scan: Stocks fall at end of day; Wikileaks releases CIA director's emails
<p>Updated throughout the day</p> <p>October 21</p> <p>Good evening. U.S. stocks dipped at the end of Wednesday after holding steady most of the day. The Dow ended with a 0.3% loss, the S&amp;P 500 fell 0.6%, and the Nasdaq dropped 0.8%. The health care sector took a hit after Valeant Pharmaceuticals was called a "pharmaceutical Enron" by Citron Research. General Motors reported $1.4 billion in profits for the third quarter, surpassing expectations. But, the car manufacturer did report a heavy $575 million charge last quarter as part of its $900 million settlement over criminal charges about its defective ignition switches. Boeing reported earnings of $1.7 billion last quarter, a 25% increase from the same time last year.  The Mortgage Banks Association application index is up 9% year-over-year -- but it's been volatile of late due to regulatory changes. Housing has been a bright spot this year -- though the refinancing boom appears to be over. All this comes in time for "Back to the Future Day" Wednesday, or the day that Marty McFly travels to in "Back to the Future Part II." When Marty travels to October 21, 2015 from 1985, he sees a number of technological advances including big screen TV and video chats. Seems like we're right on track.</p> <p>Here’s what else you need to know:</p> <p>WikiLeaks releases CIA director's emails. John Brennan's personal email account was reportedly hacked this week by a high school student. The Daily Beast</p> <p>Chinese diplomats shot in Philippines. Two Chinese diplomats were killed and a third wounded in a restaurant in Cebu. A woman who works at the consulate and her husband have been arrested. BBC</p> <p>Joe Biden will not run for president. Biden announced in the White House rose garden that it is too late for him to mount a successful campaign for the Democratic nomination. While Biden won't be a candidate, he said that he will be very vocal throughout the election, and that the next president needs to continue President Obama's work. Biden spoke about the need for more affordable college educations, relief for the middle class, and an end to bipartisan politics. The vice president says that he will focus heavily on cure for cancer as he wraps up his time in office. Biden's son Beau died of brain cancer in May.</p> <p>Speaker election date set. Current Speaker John Boehner announced that the internal Republican election for speaker will take place Oct. 28, and the floor election will be October 29. After chatting with the GOP Tuesday, Wisconsin representative Paul Ryan may be the front runner. Politico</p> <p>Pearson stock drops. The former owner of the Financial Times saw its stock fall 18% Wednesday after it announced that its earnings would be worse that expected. The company blames lower U.S. college enrollment on the slump. Reuters</p> <p>Syria's President Assad makes surprise trip to Moscow. This marks Asad's first known trip outside Syria since the uprising began in 2011. Assad went to visit President Putin secretly Tuesday evening to say thank you for Russia's support in battling rebel forces; the Kremlin released photos on Wednesday. Middle East watchers suggest that Moscow has now supplanted Iran as Syria's No. 1 ally. </p>
Wells Fargo benefits from Credit Suisse private bank closure
<p>Wells Fargo struck a deal with Credit Suisse allowing Wells Fargo to recruit brokers from Credit Suisse's winding down private bank business, transitioning between the firms by early next year, reports The Wall Street Journal.</p> <p>Will the brokers take the bait? And if they do, what does this mean for the shrinking wealth management industry?<br /> Flickr: Prayitno / Thank you for (7 millions +) views</p>