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Video: Goldman's Kostin says dividend-paying stocks will outperform in 2016
Capital Markets
<p>David Kostin, chief equity strategist at Goldman Sachs, says companies that pay big dividends and engage in stock buybacks will out perform in 2016. This is hardly a new trend, he tells CNBC's Sqawkbox.</p> <p>"Historically speaking, it's been a great strategy for the last 20 years. Seventy percent of the time in the last 20 years, the market has rewarded those companies that have returned cash — dividends and buybacks — as compared with those companies that are investing in [capital expenditures] or pursuing M&amp;A," Goldman's chief U.S. equity strategist told CNBC's "Squawk on the Street."</p>
Daily Scan: Asia caps the day mixed; European shares climb
Capital Markets
<p>Updated throughout the day</p> <p>November 10</p> <p>After a long and valiant fight to remain deep in the green, the Shanghai Composite finally succumbed to all the bad news reported by the nation and finished the day down 0.18%. Hong Kong’s Hang Seng Index meanwhile slumped a massive 1.43%, while over in Japan, bargain hunters and a weak yen led the Nikkei Average to gain a surprise 0.15%. As for the rest:</p> <p> Hang Seng China Enterprises Index: -1.82%<br /> Shenzhen Composite: +0.82%<br /> Straits Times Index: -0.42%</p> <p>Elsewhere in the world, European bourses are brushing off China’s weak inflation data to notch up some pretty decent gains. At pixel time, the U.K.’s FTSE 100 is up 0.27%, while Germany’s DAX 30 and France’s CAC 40 are up 0.39% and 0.44%, respectively. U.S. stock index futures meanwhile are narrowly higher with S&amp;P 500 contracts climbing 0.05%, DJIA futures nudging 0.06%, and Nasdaq contracts advancing 0.02%.</p> <p>Here’s what else you need to know:</p> <p>Cameron warns EU over U.K. terms. Prime Minister David Cameron has said that Britain will question its commitment to the European Union if his demands for changes to the U.K.’s membership are rebuffed. Wall Street Journal (paywall)</p> <p>China inflation figures miss estimates. Chinese consumer inflation climbed just 1.3% in October, slower than September’s 1.6% reading and lower than a Wall Street Journal survey of a 1.4% gain. Producer prices meanwhile slumped for the 44th-straight month. Wall Street Journal (paywall)</p> <p>Japan’s current account surplus shrinks. The land of the rising sun’s current account, a gauge of trade and financial flows, came in at just Y1.468 trillion ($11.9 billion) in September, 11% less than October’s showing. The figure was much less than the Y2.15 trillion reading analysts had expected. Financial Times (paywall)</p> <p>SCMP changes editor-in-chief amid staff exodus. In a move one employee called “staggering,” the South China Morning Post announced that it will be replacing Wang Xiangwei, the English-language paper’s editor-in-chief the past four years, with Tammy Tam beginning January 2016. The switch comes in the middle of a massive staff exodus which includes several award-winning journalists. HKFP</p> <p>Ericsson and Cisco form a $1 billion alliance. The Swedish mobile maker and U.S. teleco have formed a business and technology partnership that should generate additional revenues of $1 billion by 2016. The deal should strengthen the pair against China’s Huawei and Finland’s Nokia. Reuters</p> <p>Myanmar’s NLD confident of victory. Myanmar’s opposition National League for Democracy says it expects to win about 70% of seats. Party leader Aung San Suu Kyi said: “I think you all have the idea of the results.” BBC</p> <p>Israel’s Netanyahu still committed to a two-state solution. U.S. President Barack Obama and Israeli PM Benjamin Netanyahu said on Monday that they have not given up on the Middle East peace process despite the poor prospects of reaching a lasting agreement. Financial Times (paywall)</p> <p>Russia accused of state-sponsored doping at Olympics. The World Anti Doping Agency has accused Russia of operating a huge state doping programme that sabotaged the London 2012 Olympics, adding the country should be banned from athletics. Guardian</p> <p>Volkswagen gives $500 to car owners. The car manufacturer is handing over the money to VW car owners affected by the emissions cheating scandal, but owners say it’s too little too late. The $500 will come in the form of a gift card that can be used anywhere. Owners will also get a $500 card to be spent at VW or Audi dealerships, and free 24-hour roadside assistance for the next three years. CNN</p> <p>Brevan Howard cuts 50 support staff. The European hedge fund has laid off 50 people globally in back and middle office positions. The firm suffered its first annual loss in 2014, and the fund was down 0.7% in September. Reuters</p> <p>Wall Street bonuses likely to fall for the first time since 2011. A report by Johnson Associates predicts debt traders w
Saudi Arabia plans bond binge
Capital Markets
<p>The protracted slump in oil prices is forcing Saudi Arabia to turn to international investors. The decision follows issuance of domestic bonds in the summer to fund a rapidly deteriorating budget deficit, as the price of crude more than halved to $50 a barrel in less than a year .</p> <p>"Saudi officials say the kingdom could increase debt levels to as much as 50% of gross domestic product within five years, up from a forecasted 6.7% this year and 17.3% in 2016," reports the Financial Times. (paywall)</p> <p>"While banks have yet to receive any mandates, some lenders have already sent unsolicited proposals to guide the kingdom in approaching international markets," it adds.</p> <p>Saudi's foreign reserves have plunged from last year’s high of $737 billion to a three-year low of $647 billion in September, as its attempts to put rival oil producers out of business by over-producing in a falling market failed dismally.</p> <p>Now it intends to be a big issuer of international bonds just when yields are set to rise.<br /> Photo: Al Jazeera English</p>
Emerging markets winners and losers: Q3 2015
Capital Markets
<p>&nbsp;</p> <p>Investor risk aversion battered emerging market (EM) assets during the third quarter. Local currency and hard currency markets both posted negative gains and EM equities posted double digit losses.</p> <p>The carnage in emerging markets during Q3 was largely driven by China, with prolonged depressed commodity prices and US dollar strength also contributing to declines. The August market meltdown was led by the Chinese stock market collapse, its precipitous fall triggered massive selling across global equity markets, spiking volatility and moving investors out of risk and EM. The delayed Fed rate hike, a reaction to market turmoil, kept investors defensively positioned with many calling into question the prospects for global growth.</p> <p>The convergence of these difficult macroeconomic conditions accelerated EM capital outflows, which worsened on the heels of Brazil’s downgrade to junk by S&amp;P and lead to a re-pricing of EM assets in the third quarter.</p> <p>Currency</p> <p>In Q3, the JP Morgan GBI-EM Global Diversified Index was down -10.54% in USD terms. The rout in commodity prices played a key role, with high beta currencies plunging on low oil and negative sentiment.</p> <p>Latin America, down -16.19%, was the index’s worst regional performer in Q3. Underperformance was led by Brazil, down -25.66%, which is struggling with ballooning inflation, a looming recession and a government that lacks the political capital to restore fiscal order.</p> <p>High beta Asian currencies were also delivered a blow in the third quarter. Both Malaysia, down-14.48%, and Indonesia, down -14.15%, have seen capital outflows fueled by global risk aversion and magnified by China-related risk.</p> <p>Romania was the top performer in the index, up 4.0% at the close of September. European growth has been strong in 2015, making emerging Europe a bright spot in the local markets during Q3.</p> <p>Sovereign USD Debt</p> <p>The JP Morgan Emerging Markets Bond Index Global (EMBIG) ended the 3rd quarter down -2.04%. Once again there was a substantial divergence in returns between the investment-grade and high yield segments. The high yield component posted flat returns, outpacing the investment grade segment, which was down -3.13%. High yield was almost entirely supported by the recovery in Ukraine.</p> <p>Ukraine was the top performer in Q3, posting a massive 50.18% gain. Ukraine completed restructuring talks with creditors, bond prices railed on better than expected terms for bondholders.</p> <p>Argentina was another top performer, up 7.28%. The rally was driven by positioning, as investors bet the new government, elected in October, will resolve the country’s decade long battle with creditors and lift the country out of default.</p> <p>The worst performer for the quarter was Ecuador, down -18.67%. Bonds have continued to decline as prolonged low oil prices force government spending cuts.</p> <p>Emerging USD Corporate Debt</p> <p>The JP Morgan Corporate Emerging Bond Index (CEMBI) returned -2.76% in the third quarter, with high yield, down -5.79% underperforming investment grade, which was down -1.08%.</p> <p>In the 3rd quarter, Russia was the best performing country, up 2.21%. Market volatility in Latin America (Brazil was down-16.86%) and Asia (Indonesia was down -12.06%) rotated investors back into Russia, which has been EM’s second best performer this year.</p> <p>Looking across sectors, returns were muted. Resilience by the large, highly rated conglomerates in Hong Kong drove returns in the diversified sector, up 0.33%.</p> <p>Equities</p> <p>The MSCI Emerging Markets Index was the major underperformer in Q3, down a blistering -17.77%. The massive downturn was led by Chinese equities; the Shanghai composite was down -29.69% over the same period.</p> <p>2015 Outlook</p> <p>Looking ahead to the end of 2015, the landscape for EM assets is challenged, with investor sentiment remaining cautious. The fundamental backdrop for many emerging countries has deteriorated, which has also lead to substantial asset re-pricing. Valuati
Daily Scan: Stocks slide as OECD raises concerns about trade; VW gives diesel owners $500
Capital Markets
<p>Updated throughout the day</p> <p>November 9</p> <p>Stocks fell Monday as the U.S. edges closer to December, and a potential interest rate rise. The Dow, Nasdaq, and S&amp;P 500 all fell 1%. The Stoxx Europe 600 was down 1.1% for the day as well. Globally, investors were concerned about a report by the Organization for Economic Cooperation and Development that said trade flows had declined to levels usually associated with recessions. Overnight, China reported exports fell 6.9% and imports tumbled 18.8%. In the U.S., Caterpillar shares dropped 2.6%, and Nike lost 1%. Priceline, which gave a dour outlook in its quarterly earnings, tumbled 9.6%. Pharmaceutical maker Mallinckrodt found itself in the cross-hairs of short-seller Citron Research and plunged 17%.</p> <p>Here's what else you need to know:</p> <p>Volkswagen gives $500 to car owners. The car manufacturer is handing over those affected by the emissions cheating scandal. Owners aren't impressed with the $500 gift cards, which will cost VW $250 million. Owners will also get a $500 card to spend exclusively at VW or Audi dealerships, and free 24-hour roadside assistance for the next three years. CNN</p> <p>Wall Street bonuses likely to fall for the first time since 2011. A report by Johnson Associates predicts debt traders will get slammed with a 10%-20% drop. Bankers who manage bond and stock raises should see their bonuses reduced by 5% to 15%. Still in line to get a raise -- equities traders and M&amp;A bankers. Wall Street Journal (paywall)</p> <p>U.S. and Israel leaders hold first post-Iran deal meeting.  Barack Obama and Benjamin Netanyahu met in Washington for the first time since relations deteriorated over Iran. Netanyahu told Obama that he is still committed to a two-state solution to the Israeli-Palestinian conflict, but that a Palestinian state would have to be demilitarized and recognize Israel as the homeland of the Jewish people. Reuters</p> <p>Pimco wants Bill Gross's suit gone. The California firm told a court that Gross's civil suit is "legally groundless" and a "sad postscript" to Gross's career. Gross called foul on the firm he helped found, saying it violated his contract and forced him out. Wall Street Journal (paywall)</p> <p>Virginia frat sues Rolling Stone. The University of Virginia's Phi Kappa Psi is suing the magazine for $25 million over the now-discredited article about a 2012 gang rape. The story, published in November 2014, alleged that the gang rape happened at the fraternity. Rolling Stone retracted the story in December. Reuters</p> <p>Mizzou football players force university president to resign. University of Missouri President Tim Wolfe has been under fire for his lack of response to racism on campus. The school's football team announced over the weekend that it wouldn't play until Wolfe resigned, which he did Monday morning, effective immediately. Washington Post</p> <p>Brevan Howard cuts 50 support staff. The European hedge fund has laid off 50 people globally in back and middle office positions. The firm suffered its first annual loss in 2014, and the fund was down 0.7% in September. Reuters</p> <p>Match Group sets IPO. The online dating company, which includes the popular brands Tinder and OKCupid, says it will raise up to $536.7 million, selling 33.3 million shares at $12 to $14 each. The high end would make Match worth more than $3.4 billion. Wall Street Journal (paywall)</p> <p>An Olympics without a Russia-U.S. rivalry just won't be the same. The World Anti-Doping Agency found that Russia's track-and-field athletes have participated in state-sponsored doping for years. The commission recommends that the Russian athletes be banned from the 2016 Olympics. Wall Street Journal (paywall)</p> <p>China lifts ban on IPOs and markets celebrate. The Shanghai Composite finished the session up 1.58% and is now firmly in bull market territory while the Nikkei 225 – ignited by a weaker yen – capped the day up 1.96% to close at an 11-week high. The markets chose to shrug off news that China's exports slid 6.9% in October, much more tha
Video: The US needs more fiscal policy, not monetary policy, says Lawrence Summers
Capital Markets
<p>"I think there's a better way to [boost the economy] than with extraordinarily easy monetary policy," says Lawrence Summers, former Treasury Secretary. The U.S. needs to boost spending on infrastructure, says Summers. "If we push the economy forward using fiscal policy, there would be less need for monetary and financial excess to try to drive the economy forward," he says.</p> <p>&nbsp;</p> <p>&nbsp;</p>
China Huarong to issue dollar-denominated bonds
Capital Markets
<p>After raising $2.3 billion in a highly-anticipated and heavily-scrutinized float in Hong Kong, China Huarong Asset Management is setting its sights on bond investors.</p> <p>According to the Wall Street Journal, the “bad” bank turned asset manager has hired Credit Suisse, Standard Chartered Bank, Wing Lung Bank International, and Huarong Securities to handle its upcoming U.S. dollar-denominated bond sale, with the bonds expected to be rated quite favorably by ratings agencies:<br /> “Huarong, which is rated A3 by Moody's, A- by Standard &amp; Poor's and A by Fitch, will issue the bonds under its US$5 billion medium-term note programme, the document said. Its planned bonds are expected to be rated Baa1 by Moody's, BBB+ by Standard &amp; Poor's and A by Fitch.”<br /> The firm – which will issue the notes via its offshore unit – will begin meeting investors on November 10 in Hong Kong and Singapore, though how much the bonds are expected to yield is still unknown at the moment.</p> <p>Offering dollar-denominated bonds continues to be popular among China’s larger companies. Industrial &amp; Commercial Bank of China (ICBC) for instance recently raised $1 billion through a similar offering, while Chinese property developers – until the PBOC rate cut, at least – predominantly relied on offshore bonds to raise capital.<br /> Photo: Philip Taylor</p>
Perfect storms
Capital Markets
<p>"The perfect storm" is a succinct metaphor for a confluence of factors that produce a catastrophic effect, but perhaps it's getting a little tired. Derived from the 2000 disaster movie of the same name, it is used to describe several forces(normally three) to explain a nasty outcome.</p> <p>Monday's Financial Times has people using the expression twice in different stories:</p> <p>“The outlook is uncertain for our industry,” Andrea Orcel, UBS investment banking boss, told the Financial Times in the week his bank reported a return on equity of about 30 per cent. “We’re facing somewhat of a perfect storm, from market, regulation and competitor headwinds.” (paywall)</p> <p>And accounting for an exodus of senior staff from Franklin Templeton this year:</p> <p>"Rory Callagy, an analyst at Moody’s, the rating agency, said Franklin has been at the centre of a “perfect storm”: overexposure to emerging markets, misguided bets on energy prices, weak performance and heavy withdrawals."</p> <p>Any other "perfect storms" we should be worrying about, or is it time to change the metaphor?<br /> Photo: Emilio Küffer<br /> &nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p>
Weekend Scan: US says ISIS likely planted bomb on doomed Russian flight; China exports drop sharply
Capital Markets
<p>The consumer takes center stage this week as Fossil, JC Penney, Macy's, Nordstrom, and Priceline report earnings. With all those new jobs reported on Friday (up 271,000 in October) will they be opening up their purses? Last week, same-store sales edged down 0.2%., missing expectations for the seventh time this year. Analysts blamed unseasonably warm weather for keeping shoppers out of the stores. Autos, however, sold at a torrid pace. On Friday, the U.S. Census Bureau will report on sales of durable and nondurable goods. Analysts expect retail sales to rise from 0.1% in September to 0.3% in October; ex-autos, up 0.4%.</p> <p>Here's what else you need to know:</p> <p>Investigators say bomb caused Russian plane crash. The team in Egypt told Reuters they were 90% sure that a bomb was responsible for the disaster that killed 224 people over the Sinai Peninsula. U.S. authorities are also saying ISIS is behind the explosion. Reuters/Los Angeles Times</p> <p>China trade picture deteriorates in October. Exports fell 6.9%, more than twice the anticipated drop. The energy and commodities sector continue to get pummeled. Imports dropped 16%, the 12th consecutive month that they fell. The trade surplus has fallen 8% this year--nowhere near the 6% growth goal. ABC</p> <p>China, Taiwan presidents shake hands for a full minute. Okay, fotogs, did you get your shot? In the first meeting between leaders of the two countries since 1949, the pair did not call one another Mr. President. Afterward the 30-minute meeting, Ma Ying-jeou of Taiwan endured tough questioning in a 30-minute press conference. Xi Jinping of China waltzed through a pretend presser. China's official TV didn't even show what a real free press looks like. The Guardian/Quartz</p> <p>Stock market to be put to the test. Last week, the S&amp;P 500 rose 1%; the Nasdaq gained 1.9% and the Dow Jones Industrials 1.4%. Since the beginning of earnings season, the markets are up more than 6% -- even though S&amp;P 500 companies are on track for a profit decline of 2.2%. Monday, when traders hit their desks they will face tough economic news from China. Traders will also have used the weekend to digest the October jobs report released Friday and think about what its implications are for Federal Reserve policy and the markets. The U.S. Treasury market seemed to be screaming: Here comes rate liftoff. The 2-year note yield rose to 0.889%, the highest since 2010. MarketWatch/Wall Street Journal</p> <p>Facebook wowed. The social media giant turned in robust quarterly numbers, including a new milestone: one billion daily users. Its report also revealed that it is getting 8 billion daily views for its videos. Nipping at its heels: Snapchat with 6 billion daily views. Facebook posted new highs after the quarterly report at $110.65; it faded Friday when it warned that ad-blocking software could hurt revenue. The Street</p> <p>State pensions are sticking with hedge funds despite mediocre returns. Earlier this year the California Public Employees' Retirement System announced it was shedding the high-priced alternative investment managers. Their conclusion: They weren't worth the price. To the surprise of many, other pension funds are not following suit and are even increasing their stakes in a bid to close a yawning trillion dollar funding gap. New York Times (paywall)</p> <p>James Bond rakes in $73 million despite bad reviews. "Spectre" rated No. 1 at the box office at now in the reviews -- second only to "Skyfall," 007 box office of $88.4 million. Forbes called the newest 007 movie the worst in 30 years. "The Peanuts Movie" took in $45 million. USA Today/Forbes</p> <p>Suu Kyi followers jubilant after historic election in Myanmar. The country held its first free elections in 25 years on Sunday. The final results won't be known for at least 36 hours. Reuters<br /> You won't believe this:<br /> This is what happens when you name your kids with cool non-gender specific names. A 30-year-old photographer living in Seattle is getting fan mail intended for country star phenom Taylor Swift, age 25.
Daily Scan: Equities lose momentum; China air pollution reaches record
Capital Markets
<p>Updated throughout the day</p> <p>November 9</p> <p>They may have fallen off their session highs but Chinese and Japanese equities still ended Monday on a high note. The Shanghai Composite – buoyed by the removal of the IPO ban – finished the session up 1.58% and is now firmly in bull market territory while the Nikkei 225 – ignited by a weaker yen – capped the day up 1.96% to close at an 11-week high. The Hang Seng Index meanwhile saw its recovery lose steam shortly after the noon break, leaving the Hong Kong benchmark to finish the day down 0.61%. As for the rest:</p> <p> Hang Seng China Enterprises Index: -0.47%<br /> Shenzhen Composite: +1.82%<br /> Straits Times Index: -0.55%</p> <p>Over in Europe, equities seem to be trading quite mixed. The U.K.’s FTSE 100 is currently up 0.37%, while Germany’s DAX and France’s CAC is down 0.21% and 0.39% respectively.</p> <p>Airpocalypse as China pollution reaches record levels.  Residents of north-eastern China donned gas masks and locked themselves indoors on Sunday after their homes were enveloped by some of the worst levels of smog on record. Guardian</p> <p>US and Israel leaders to hold first post-Iran deal meeting.  Barack Obama and Benjamin Netanyahu are set to meet in Washington for the first time since relations deteriorated over Iran. BBC</p> <p>German exports beat estimates. German exports posted a mighty strong recovery in September, expanding 2.6% versus August’s 5.2% decline and handily beating analysts’ forecasts of a 2% jump. The survey did end before the Volkswagen scandal broke out though, so it might be a little too early to pop those bottles. Financial Times (paywall)</p> <p>China's oldest investment bank CICC jumps in HK debut.  Shares in CICC jumped as much as 11% after the bank raised $811 million in an initial public offering. The  strong start was helped by China's decision on Friday to resume IPOs after a four-month halt. Nikkei</p> <p>Saudi Arabia has no plans to cut oil output. The gulf state is determined to stick to its policy of pumping enough oil to protect its global market share, despite the financial pain inflicted on the kingdom’s economy. Financial Times (paywall)</p> <p>Fires started at Australia detention center. Inmates lit fires at the Christmas Island detention centre in a "major disturbance" that is yet to be resolved. The immigration department confirmed that guards had been withdrawn for "safety reasons." BBC</p> <p>US candidate warns of "Chinese infiltrating" the Carribean. Republican candidate Ben Carson has endorsed US statehood for Puerto Rico, citing its “very strategic” location for military defence, but raised concerns over the influx of Chinese. SCMP (paywall)</p> <p>Chinese trade numbers miss estimates. Exports from the world’s second-largest economy tanked 6.9% in October, well below expectations of a 3% slump, while imports slid 18.8%, better than September’s 20.4% fall but still worse than the expected 16% decline.</p> <p>Vote counting begins in Myanmar. It is the country’s first openly contested national election for 25 years and the turnout is thought to have been 80% in the poll. Aung San Suu Kyi's National League for Democracy (NLD) is expected to win the most parliamentary seats, although she is barred from the presidency. BBC </p> <p>China ramps up anti-graft drive. In the past week alone authorities have ensnared top execs at three multibillion dollar state-owned enterprises this week alone. The arrests of the heads of three industry giants – in banking, aviation and auto manufacturing – belie expectations that President Xi Jinping was ready to wind up his signature campaign. Financial Times (paywall) </p> <p>India’s Modi faces election defeat. Indian Prime Minister Narendra Modi’s party suffered a defeat in pivotal state elections, a political blow that could make it harder for his government to move ahead with its economic agenda. Wall Street Journal </p> <p>U.S. defense secretary accuses China, Russia of endangering world order. Ash Carter expressed concern about Beijing’s expanding influence and Moscow’s inc