Friday, November 11, 2016

Rs 500, Rs 1000 Notes Abolished

Indian Currency abolished

Demonetization of Rs 500 & Rs 1000 Rupee Notes


In an important effect to check black money, the Prime Minister has announced demonetization of Rs 500 and 1000 rupee notes with effect from midnight of November 9 which makes these notes invalid on black money, corruption and fake currency.The decision of PM Narendra Modi to eliminate Rs. 500 and Rs. 1000 rupee notes with a view to control the flow of black money has been mentioned by almost all in Bollywood.

The decision had been effective abolishing Rs 500 and Rs 1000 rupee value notes as legitimate tender. To get to know on the implications on this financial decision, an interaction had been conducted with leading film exhibitor Akshaye Rathi who mentioned that the impact could be of two levels namely micro and macro.

With regards to film that would be coming in the future, it was essential to comprehend the pattern of audience which could be beyond the metros.In areas like Bengaluru, Delhi, Kolkata, Mumbai and Pune, individuals seem to be comfortable in utilising plastic money as well as online transactions.

However there is a massive population which is beyond the metros who do not approve of utilising plastic money. Then there is a still bigger crowd which goes to the bank and withdraw money, making their payment through cash.

Impact on Industry – Positive


People in places such as Kanpur and Satara tend to go to the bank on the first day of the month for withdrawal of cash for their monthly expenditure where the payment is done by cash. Hence, individuals would find it difficult in being unable to use the denominations of 500 and 1000 rupees when they go for a movie or intend to dine out with their family or friends.

Carrying a few five or hundred rupee notes tends to be much easier than carrying a good amount of hundred rupee notes in your wallet which could cause a bit of inconvenience to the individuals. With regards to Bollywood, Akshaye envisions the decision affecting the industry crowd in a positive manner and is of the belief that it would go a long way in eliminating bribes as well as corruption. He stated that the impact on the industry would be a very positive one.

A producer shooting is troubled by several entities such as organisations, political outfits and associations who tend to come and upset the shoot, by asking for bribe. The producer then provides them with the option of card or cheque payments. With this decision, all these bribes and loopholes have been stopped since one cannot pay a bribe with hundred rupee notes.

New Notes of Rs 2000 & Rs 500


Modi has mentioned that people having Rs 500 and Rs 1000 could deposit them in their bank and post office account from November 10 to December 30. He also mentioned that the notes would not be legal tender from midnight of November 9 and that they would be just useless piece of paper.

But he also added that all notes in the lower demolition of Rs 100, Rs 50, Rs 20, Rs 10, Rs 5, Rs 2 and Re 1 together with the coins would continue being valid.

He informed that new notes of Rs 2000 together with Rs 500 would be introduced and that there would be no modification of any kind of currency exchange be it DD. Cheque, payment through credit/debit card etc.

Tuesday, October 25, 2016

Snapchat Is Pumping the Next Tech Bubble with More Hot Air

Bubble

Tech Bubble Likely to Burst


For greater part of the year, apprehension has been mounting that the second tech bubble is likely to burst. Contrasting from the dotcom bust of 1999 as well as 2000, that had been generated due to the unexpected downfall of companies on the stock market, the second coming has been established on the eye of valuation which the latest generation of tech companies had organised in achieving through private fund-raisings.

Scores of business all over the world have attained the so-called `unicorn’ status, an estimate of over $1bn. Overall, it is reaching 200 universally which have succeeded this mythical tag. Some of them seemed to be `mega-unicorns’ companies that have exceeded the $10bn target though a handful of superstars have hit the extraordinary levels.

Uber the taxi app is presently worth over $60bn while Airbnb, the favourite of the sharing economy has raised funds valued at $30bn. Meaningless estimates of young companies some of which make no money and you have the makings of a bubble which will certainly have to burst at some point of time with catastrophic consequences for global markets. Indications have been there for some time. Confidence in private market has taken a blow with a drop in funding rounds for start-ups.

Fidelity – Instigated Panic


A high profile tech investor, Fidelity had instigated panic when it had dropped the evaluation on dozen investments. On the other hand, some start-ups comprising of Uber had been compelled to go overseas in raising funds at higher assessments where the assessments of several big tech companies already on the stock market had collapsed.

However, in spite of the anxieties, the bubble is likely to be pumped with more hot air due to another burst of vastly over-priced floats. One of the most high profile is Snapchat which is a company that several people of a particular age would possibly not have heard it but has instantly become the social network of choice among millennial who tend to utilise the same in sharing photos, video drawings and texts.

Launched only five years back by three ex-Stanford University students, the same has been amazing. Snapchat tends to generate sales of only £300m each year, in spite of being utilised by 150m users each day and is uneconomic due to its free services.

Bubble – Low Interest Rate Environment


But these matters seem to be of no concern to the experts of Silicon Valley and Wall Street who tend to value the app at $25bn. However, it could prove to be the next Apple or Facebook and many are of the opinion though the same has been said regarding Twitter, Groupon as well as LinkedIn which tend to be over-hyped.

Snapchat will probably be followed by other hot tech firms comprising of Pinterest, Dropbox and SpotifyIt may only need one failure to affect it badly and 2016 may be the year the dotcom bubble 2.0 would eventually goes pop. The founder of PayPal and a billionaire tech investor, Peter Thiel states that we are in a bubble owing to the low interest rate environment that had been talked over earlier.

 He comments that `I think we have a bubble in the US in government bonds, due to the quantitative easing and the adverse real interest rates and to some extent that increases asset values all over the board inclusive of start-ups’

Saturday, September 17, 2016

Mark Carney ‘serene’ about pre-referendum economic warnings

Mark Carney

Governor of Bank of England – Serene on Judgement of MPC/FPC


With the indications increasing, that economic activity had held up more than expected since the June referendum, the Governor of the Bank of England, Mark Carney has fortified his blatant warnings regarding the negative impact of Brexit on the economy before MPs. In recent weeks with the firming of business activity surveys together with resilient retail spending data, has led to assertions from supporters of Brexit that the warnings of recession of the Governor has now been shown as scaremongering together with the quick to reduce interest rates, by the Bank’s Monetary Policy Committee – MPC, after the vote.

 However, these charges were denied by Mr Carney at the time of replying to the questions before the Treasury Select Committee. He stated that considering all the events since the referendum he was absolutely serene regarding the judgements made by the MPC as well as the FPC – Financial Policy Committee. He further added that they certainly welcome the signs of stabilisation and that the Bank had anticipated a bounce back in the much observed Purchasing Managers’ Index – PMI surveys when the interest rates were reduced on 4 August.

Biggest Downgrade in Modern History – Growth Forecasts


That recover had provoked the economic forecasters of a host of City of London to revise their expectation of a recession in the second half of the year, though a sharp go-slow in the growth is yet extensively predicted. Mr Carney had mentioned before the EU referendum in May that a technical recession would be possible in case of a majority Brexit vote by the British public.Interest rates were reduced last month by the Bank to a new historic low of 0.25% and had pushed on another £70bn of Quantitative Easing as it revealed its biggest downgrade in its modern history in growth forecasts.

Mr Carney had repudiated the charges that levelled by the pro-Brexit Conservative MP Jacob Rees-Mogg stating that the Ban had issued dire warnings before the vote, replying that he had heighted risks aptly. Moreover, the Governor had also added that the financial impetus the Bank had instigated together with its rapid offer of liquidity to the banking system had been one of the main causes the financial conditions seemed to be alleviated.

Traders Clambering Back


Moreover the Governor had also added that the implementation of the Bank on monetary stimulus and its rapid offer of liquidity to the banking system had been the main cause of financial situations being steadied. He commented that they had made the crystallisation of those risks less probable. Mr Carney had also mentioned that the Bank had `helped ensure that what was surprise for financial markets passed smoothly and that allowed us not to have an overshoot’.

Sterling has faced a record fall against the dollar in the two day in the wake of June 23 vote, dipping to its lowermost rate against the US currency in the last 31 years.The Bank of England had stated in August, that it could cut the interest rates again later in the year if the economy declined on the predictable. Presently the traders are clambering back their bets on another cut in view of the more positive economic data.

Thursday, September 1, 2016

Oil Prices Fall As Production Freeze Expectation Fades

Oil

Oil Prices Dropped – Oversupply/Decline Expectation of Production Freeze


Oil prices had dropped on Thursday while market concentrated on oversupply and declining expectation of a production freeze. Global crude oil benchmark Brent had been down by 10 cents at $48.95 per barrel by 1230 GMT after closing down at 1.8% on Wednesday and U.S. light crude oil fell by 15 cents at $46.62 a barrel, after slipping by 2.8% on Wednesday.

In the first three weeks of August the oil prices had increased over 20% on talk of a probable deal by oil exporters to freeze production levels in an attempt to support prices. On September 26-28, members of the Organization of the Petroleum Exporting Countries would be meeting on the side-lines of the International Energy Forum, with groups and consumers in Algeria.

There are rumours that the meeting would agree to some kind of output curbs when similar attempts for production freeze had failed in April. Expectations however of a deal have been restrained by the record of OPEC output where some analysts envisage the vision of voluntary restrictions. Senior oil analyst at Commerzbank in Frankfurt, Carsten Fritsch, states that speculators pressed the price up expecting an output freeze that is doubtful to take place and perceives downside risk if the expectations are being scaled back.

Effects Minimal on Physical Market


U.S. investment bank Jefferies approved informing clients recently that even if a freeze had been agreed, the effects would seem to be minimal on the physical market. It was mentioned in a report that they did not expect a production freeze, let alone a production cut from the OPEC meeting.

With the output reaching almost record levels from several of the top producers and the demand unsteady, there seems to be little vision to the end of the surplus which had pulled down the prices of crude from more than $100 per barrel in 2014 to their present sub-$50 stages.

High storage levels too seemed to be weighing on the market. Commercial crude oil stocks, in the United States had increased by 2.5 million barrels to 523.6 million barrels, higher by 16% than a year ago.

Stocks across the world, with regards to refined products also brimmed as the demand slowed while refinery output seemed to stay high. BNP Paribas has commented that `ample inventories were due to weaker demand in Asia though more generally were driven by excess supply generated by refiners maximising runs, notably to produce gasoline in the U.S.’.

China’s Indirect Demand of Oil Dropped


According to Reuters’ calculations utilising official data, the indirect demand of oil of China had dropped by 0.3% from a year earlier to 10.58 million barrels a day in July.

After Saudi Energy Minister Khalid Al-Falih had informed Reuters that oil had paired some gains, he was of the belief that any substantial oil market intervention would be essential as the demand for crude would be picking up well around the world. He informs that there has been no discussion of substance still on the production levels of OPEC.

His comments strengthened the belief of several market participants which the September meeting would not resort to any production curbs particularly with the recent data portraying the Saudis and fellow OPEC member Iran were driving as much as they could.

Tuesday, August 16, 2016

Weak oil prices pull Wall Street away from record levels

Wall Street

U.S. Stock Indexes Move Back – Drop in Oil Prices


Stock indexes of U.S. moved back from its record levels due to drop in oil prices which overstretched energy stocks. The prices of oil dropped by 1.6% in cutting trading after the reports of the U.S. government of a surprise crude stockpile build. The energy index of S&P 500 fell by 0.9% and Exxon Mobil – XOM.N 1.5% drop was the top strain on the S&P 500 and the Dow. Since late June, a rally has left the S&P to almost 7% in 2016 as prospects of constant low interest rates motivated investors in buying into U.S. equities. The standard index this month had hit four record intraday highs.

 Regional investment director for The Private Client Reserve of U.S. Bank, Tim Dreiling had stated that once they had seen the new inventories, it certainly moved energy far lower dragging almost everything down.He further added that to grind higher, earnings improvements needed to be seen and that would come from economic improvement. The industrial average of Dow Jones – DJI had declined by 0.2% to finish at 18,495.66 points while the S&P 500 .SPX lost 0.29% to 2,175.49 points. The NASDAQ Composite .IXIC had dropped by 0.4% to 5,204.59.

Trading Volume – Lack of Market-Moving Information


Out of the 10 major S&P 500 index, six were lesser. Due tolack of market-moving information in a traditionally low-volume season, trading volume had been low. Around 5.92 billion shares had changed hands on the U.S. exchanges when compared to the 6.45 billion regular averages for the last 20 meetings. The shares of Walt Disney – DIS.N had ascended by 1.23% after the company recently had informedthe results which beat estimates stating that it is purchasing a 33% stake in video-streaming firm BAMTech. The stock offered the biggest increase to the S&P 500 and the Dow.

SunPower shares had fallen by 30% after the company had fluctuated to a second quarter loss, lowering its full year revenue prediction, stating that it would restructure its business. Perrigo dropped 11% to $85.06 after the company had reported a lower than expected earnings and dropped its remunerations forecast. JD.com soared to 8.6% to $24.28 after the company had stated the revenue within its forecast. The stock had given the biggest increase to NASDAQ. Weakening matters outstripped progressing ones on the NYSE by 1,610 to 1,259 and on NASDAQ; the issues dropped by 1,798 and advanced by 924.

Low Volume Could Skew Market in Any Direction


The S&P 500 index portrayed 18 new 52-week highs together with two new lows though the NASDAQ verified 61 new highs and 28 new lows. Market strategist at Prudential Financial, Quincy Krosby had stated that low volume was fairly standard at that time of the year and August seems to be a very irregular month and if one has low volumes, it could skew the market in any direction and that is what we have today. The trading volumes had been near year low since Monday as the second-quarter earnings seasons tends to wind down. Dollar index had slipped for the second straight day as weak U.S. productivity data on Tuesday dimming a bit the prospects of economic growth which would probably discourage the Federal Reserve from increasing the interest rates.

Wednesday, August 3, 2016

5 Technologies That Can Change Stock Markets Forever


1
Improved Insight on Risk Undertaken

Disturbance in digital system has been making the financial markets more apparent, reachable and efficient. Besides this it also tends to help the regulators in getting an improved insight on the risks which the applicants may seem to undertake. The following technologies could transform the financial markets in the forthcoming days:

Artificial intelligence and natural language processing 

Several of the financial companies are adopting algorithms in doing the tasks which humans have been performing for years. Mechanism learning systems have been enhanced considerably and with expanding processor potentials at lower cost, these systems are made available for larger usage. The techniques for artificial intelligence enable the system to learn from user connections as well as patterns without the need of being openly programmed for the same.

Machine learning together with other artificial intelligence technologies, in the past few years, has provided us with self-driving cars, real-world speech recognition, chess champions as well as more related as well as realistic web-searches. With regards to financial markets, we have software analysing voice patterns of recorded calls at investment banks, brokerages and on the client side too which could instantly distinguish irregularities and frauds, It can also look at keywords, decode conversational encryption of information and achieve difficult searches on the recordings.

Robo Advisers 

From the present situation, there could be probabilities that we would be seeing the last few Wolves of Wall Street and Dalal Street and moving ahead we may have only robots of Wall Street and Dalal Street. Though the systems hasprogressed in grasping the monetary goals, risk profiles together with the other complex details of investment to come up with personalised investment portfolio, it could alter funds, book profits or square off position depending on self-learning processes. The platform could be either for web-based and/or smartphone based, thus enabling easy access or adapt.This is said to be self-operated without the need of the user talking to a live person. Compared to a human advisor who tends to charge a portfolio management fee, the services here are rendered at no recurring expense.

Quantum `sealed envelope’

Outrages centred on information theft have often been a nightmare for performers in financial markets. Till now, hackers have somehow achieved to stay ahead of security programs as well as passwords though it could change very soon. A team of researchers inGeneva, Singapore, Cambridge and Waterloo and Ontario had utilised the breakthroughspeculative work co-authored by Dr Adrian Kent from University of Cambridge’s Department of Applied Mathematics and Theoretical Physics in providing `unconditionally guaranteed’ security as well as purity of message transferred from any two points on earth. Earlier trials using these digital `sealed envelopes’ is said to be successful and if all goes well, the monetary markets would be entirelysecured against any threat of statistics invasion.

Bitcoin and Blockchain technologies 

The distributed ledger, Blockchain technology after the virtual currency Bitcoin, tends to record the financial transaction of any digital interaction in secured, transparent, traceable and in an efficient manner. So it is appropriate in providing a universal virtual currency as well as for digital accounting and auditing financial transaction of any kind. The possibility of Blockchain technology is understood from the fact that 30 of the largest banks in the world had recently formed a global consortium to research, design and build Blockchain solutions further. Besides this, the Reserve Bank of India – RBI that had issued a cautionary note in 2013, against Bitcoin had changed its stance. The Indian central bank is now of the belief that the Blockchain technology could be helpful in the prevention of counterfeiting currency as well as financial transactions.

Big data and analytics 

Financial markets tend to generate enormous amount of data each second. Storing and analysing these details on real time basis could be critical. With a combination of private as well as public cloud tends to resolve the issue of storage as well as real-time access to this multitude of data at reasonable charges. Big data analytics tend to make it likely to highlight correlations which seem incredible for humans to locate. For instance, envisage a situation where 90% of orders that are positioned on NSE and BSE through high-frequency algorithmic dealing platforms tend to abruptly get cancelled within a span of less than 30 seconds.

 A human may never have known such trends with so much accuracy; RBI had highlighted this trend last year and alerted the market regarding it. Such kind of analysis could never be done without leveraging technology for big data scrutiny. There could also be software which could analyse thousands of social media feeds regarding the sentiments and news of a company and could try to forecast future as well as probable sentiments regarding the company. These visions could change the way institutional as well as retail investor trade in the market. Though some of these technologies could be in its initial stage of development and may need substantial enhancement together with market interest, the base has been set for digital alteration.

Thursday, July 21, 2016

The Brexit Effect -What’s next for Markets

Brexit

Britain’s Vote – European Union Likely to Disturb British/European Economies


Mentioning that Brexit vote on June 23 which had taken the financial market unaware could be an understatement and the pound, British stocks as well as the Gilt yields had mounted sharply in the week which lead up to the vote but crashed once the results began coming in.

Generally speaking, strategists on Credit Suisse’s Global Markets and Investment Solutions and Products (IS&P) teams anticipate markets to stay volatile in the forthcoming days and for the investors to favour safe assets to the uncertain ones.

 Some of the views have been highlighted from across the bank on how Britain’s referendum vote leaving the European Union is likely to disturb the British as well as the European economies and a broad range of financial resources.

The Economic Impact


The Credit Suisse’s Global Markets and IS&P team are of the belief that the Brexit vote would be creating a considerable amount of uncertainty for British businesses which would eventually lead to a weakening in GDP. Both the teams also tend to believe that the Bank of England would step in with cuts in rate.

Moreover, the Global Markets team believes that the Bank of England to cut rates from 0.5% to 0.05% and had another round of measurable easing to the tune of £ 75 billion which would not be later than August 2016.

Credit Suisse’s Chief Investment Officer for International Wealth Management, Michael O’Sullivan, pointed out that the central banks all over the work seems to be on alert to step in, ensuring that their own banking systems tend to have sufficient liquidity. Besides weak corporate spending, Global Markets economists anticipate growing inflation as well as the decline of the British pound to squeeze household expenditure.

Accordingly, they predicted that GDP would fall 1% between the third quarter of 2016 and the first quarter of 2016 which would have lessened their growth predictions for 2016 from 1.8% to 1% and the 2017 growth predictions from 2.3% to 1%.

Significant Slowdown in Growth


The analysts of Credit Suisse’ IS&P also expect a significant slowdown in growth and the teams contemplate it possible that the deteriorating value of the pound would be causing a front-page inflation to spike. The Global Markets team also seem to anticipate an impediment to the recent pickup in corporate spending especially in Europe together with the tightening of financial conditions.

The economists of the team had dropped their European GDP growth expectations from 1.7% to 1.5% in 2016 and from 2% to 1% in 2017. Credit Suisse’s IS&P team are of the belief that the Eurozone would not be following the U.K. into depression unless the Brexit vote ends in severe financial infection to peripheral economies like Italy. However, the analysts on the team envisage this as a tail risk. The IS&P team are of the belief that the European

Central Bank would lengthen its quantitative easing program whereas the Global Markets team consider that there is a possibility with added easing through the prevailing TLTRO program offering low-interest funding to commercial banks.Credit Suisse’s Investment Committee has downgraded European stocks to neutral as well as British stocks to drift whereas the U.S. stocks to neutral. Moreover strategists of Credit Suisse’s Global Markets had shifted their year-end goals from 6,600 to 6,200 on the FTSE 100, 2,150 to 2,000 on the S&P 500 and on the Eurostoxx 50, from 3,350 to 2,950.

Thursday, July 7, 2016

Bank of England Warns Property is a Key Risk to Economy

Bank of England

Bank of England Cautions – Commercial Property Main Key to Economy


The Bank of England has cautioned that commercial property would be the main key to the economy after the Brexit vote. The main concern is that the market from warehouses to office space to retail parks with regards to commercial property is deep distress. Foreign investors, who have purchased commercial property, have made around 45% of all commercial property bought and sold since 2009. The inflow of money to UK seemed to slow down, even before the Brexit vote and dropped by 50% during the first quarter of 2016.

A warning had been given by The Financial Policy Committee that `valuations in some sections of the market, particularly the prime London market had become stretched’. The Financial Stability Report of the Bank points that the real estate investment trust share prices had dropped severely and cautioned about the risk of `future marked adjustment in commercial real estate prices’. According to the translation from Bank of England, there is a risk that commercial property prices may crash.

Considerable amount of most of the valuable prime London commercial property is said to be in the City where some of the foreign investors like banks and investment manager have a
ssisted in financing a powerful and constant session of construction, which have been symbolised by iconic buildings with nicknames like the Gherkin, the Cheese-grater or the Walkie Talkie

Inflows of Foreign Investment in British Companies – Slowed Down


Since 1980, the UK had earned abroad, extremely less selling goods and services than it had spent on imports thus developing a current account deficit. Roughly there was more money going out than coming in. For years it was compensated by attracting money to the UK in two ways.

The first way was that foreign investors had been willing to buy shares in UK companies and lending money to their government. The second was, the foreign companies had been ready in investing directly for instance, constructing new buildings in the City of London or in investing in business such as Jaguar Land Rover in order to turn it into success.

The report of the FPC had stated that all inflows of foreign investment in British companies had slowed down in the approach to the referendum.

Investors’ Belief – Risk in Investing in UK Companies


Investors are now of the belief that they will be taking a risk in investing in UK companies, that are reproduced in share prices, the biggest two-day slip in the value of sterling in more than forty years.There have been some reassuring words in the report. The banks for instance have been stress examined against scenario where the commercial property drops by 30% and residential by 35% with severe recession.Banks tend to have high quality liquid assets of £600bn like shares in top companies, government cash and bonds.

They could endure losses which were double as those undergone in the 2008 crisis without falling short of money. With that security, the Bank of England ruled on that the banks did not need to build up £150bn as a `counter-cyclical capital buffer’. The counter-cyclical buffer is just cash that is kept aside in good times so that it can be made available when the down-swing occurs

Friday, July 1, 2016

Markets Struggle with Brexit Hangover, Pound Sinks

Pound

Asian Stocks Dropped/British Pound Plunged – Brexit


Asian stocks dropped and British pound plunged over 2% on Monday while markets wriggled to shake off the uncertainty which had ignited due to Britain’s choice of leaving the European Union. Emotion seemed weak even though the most horrible of the uproar envisaged on Friday when the global stock markets had suffered one of their largest declines in almost five years, had improved. Senior foreign bond strategist at Mizuho Securities, Hiroko Iwaki, had stated that “things are so uncertain that investors still do not have a clear idea how much risk assets they need to sell. But it is safe to assume investors are not yet done with all the selling they need to do. I would not be surprised to see another 10% fall in share prices”. From the several questions regarding the British exit, or Brexit, which have generated are `just how much UK and European economies will slow, how they would negotiate their new relationship and how European leaders would try to improve the collapsing EU’. The world’s most traded stock futures; US S& P dropped 0.4% to 2,011.50, soaring close to the three and a half month low of 1,999 of Friday.

Brexit – First Surprise in Re-Calibration


The widest index of Asia Pacific shares MSCI, beyond Japan, shrank losses to 0.6% since the companies especially with UK exposure were under pressure.Equity strategist at Bank of America Merrill Lynch in Hong Kong, Ajay Singh Kapur had written in a note that they think Brexit could be the first surprise in a re-calibration of the world away from globalisation towards more inward-looking policy making’.He further added that `Brexit has now possibly opened up more uncertainty about the European Union project and that the already crashed down Asian and emerging equity market could receive asset allocation flows from Europe. Nikkei of Japan extended gains to 1.9% which was a fractional rebound after the hefty 7.9% of Friday’s fall. Stocks of Japan had been supported by stronger warnings from the officials of Japan that they would interfere in currency markets in stabilising the yen. However, the dollar still fell 0.3% against the secured yen, trading around 101.81 yen.

Sell-Off in Euro – Exit Referenda Builds


Shares of China also increased with the CSI 300 index as well as the Shanghai Composite both increased around 0.8%. British pound dropped 2% to $1.34, yet some distance from the 31 year low of $1.3228moved during wild trade of Friday. Moreover, euro had also come under additional pressure, falling against the dollar by 0.8% as the investors fret that Brexit would strengthen the anti-establishment mood in Europe and also communicated about breakdown of the union. The chairman of New Sparta Asset Management in London, Jerome Booth, had commented that “there will be sell-off in the euro as talk of other exit referenda builds. This sell-off will be more profound and long lasting and will be not just against the dollar and yen but also against the pound. It would also raise fears of significant loss of values for holders of Eurozone government bonds”. Since December 2010 on Monday, Euro’s weakness aided in pushing the Chinese Yuan to its weakest level against the dollar and dropped to 6.6396 per dollar on opening at 6.6360 a dollar, in comparison with the five and a half year low midpoint level of 6.6375 agreed by the central bank, reaching an intraday low of 6.6469.

Monday, June 20, 2016

Yen soars and Nikkei tumbles as Bank of Japan rejects further stimulus


Japan


Yen Scaled High – Nikkei 224 Fell

The stockindex of Tokyo had plunged over 3% on Thursday as mounting yen beat exporters after the Bank of Japan decided against increasing its incentive. Nikkei 225 fell 3.05% to 15,434.14 in trading, late afternoon. The yen had earlier rushed to a 21-monthhigh against dollar in the wake of the BoJ’s intention of leaving its enormous 80 trillion yen asset-buying plan unaffected, since fears on the future of Britain in the EU pound financial markets. Investors incline to buy yen as a means of safe asses in case of turmoil, though the stronger currency seems to be bad for Japanese stocks since it tends to threaten the productivity of the exporting giants of the country.

The yen scaled high as 104.11 against the dollar, in afternoon deal, its strongest level since September 2014. The decision of Bank of Japan had come up on Wednesday, after the Federal Reserve had decided against increasing interest rates and Janet Yellen; its boss had announced a warning on the possible Brexit from the US. Markets in the world have been left in chaos over the past week tension regarding the global economic outlook and in recent days, a rising sense that the referendum of June 23 would be seeing Britons vote breaking away from the European Union.

Weaker Hiring/Uncertainty – Referendum of the EU

Senior economist at Mizuho Securities, Norio Miyagawa stated that `there is nothing in recent economic indicators which would now lead the BoJ to change its economic outlook. But the rising yen would place more downward pressure on consumer prices and so expects the BoJ to ease in July’.

The US Federal Reserve that had been cautiously considering to raise interest rates or not, had held back at its own meeting on Wednesday and had instead downgraded its economic predictions, quoting weaker hiring as well as uncertainty regarding the referendum of the EU. This week’ polls suggested a tight contest in the vote of next week, being a main factor regarding the rush for safe havens inclusive of the yen. FTSE 100 had opened at 0.7% lower on Thursday, a presentation which quickly removed the uneasy gains of Wednesday after four previous days of heavy fall which saw the index fall less than 6000 barrier.

Energy Stocks/Miners Safe from Latest Beating 

The energy stocks and miners only were safe from the latest beating on values. There were comparable falls in France as well as Germany. Moreover the pound was also under pressure against the dollar down 0.4% at 1.41.4 which is an 11% down a year ago. Head of trading at ETX Capital, Joe Rundle had mentioned that the `markets were on the defensive again as traders foreseen the risks of Britain leaving the EU. Since polls indicate more support for Vote leave, City watchers had begun to take the threat rather seriously and began to price in the option of a Brexit.

For the City, it could be big; most of the banks and airlines would have to consider seriously moving outside the UK if a Brexit tends to occur. He further added that a slump in sterling could be a massive boon for some FTSE 100 firms. Miners would be seeing development in their sterling-denominated balance sheet when they sell in dollars and retailers would also probably prefer to stay on in UK though they would want to spin off their European arms’.

Thursday, June 9, 2016

US dollar wallows near 4-week lows as Janet Yellen sounds cautious note

US dollar

Dollar Flanked, Close to Four-Weeks Lows


After the remark of Federal Reserve Chair Janet Yellen failed to toss a lifebuoy to the recently plunging greenback, the dollar flanked up though still reeled close to four weeks lows against a basket of currencies on Tuesday. The index of the dollar that tracks U.S. currency against a basket of six main rivals pushed up 0.1% to 94.017, though it stayed within sight of its overnight low of 93.745, the weakest level since May 11.

However Yellen had remained comparatively enthusiastic regarding the overall U.S. economic outlook, stating that the Fed would hike the interest rate, she provided no fresh clues about timing, calling the last month’s U.S. jobs data as `disappointing’. Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong, had commented that `she was positive though compared to her speech of May 27, when she had said a move would have been suitable `in the coming months’, she had not been specific regarding the timing’. The dollar seemed to be under pressure since the Friday reports of the U.S. nonfarm payrolls had indicated the slowest job growth in more than five years in May, suppressing prospects for a near-term U.S. interest rate rise.

Recent Currency Market `Orderly’


The U.S. interest rate futures implicated traders had all but priced out any chance the Fed would raise rates at its policy meeting next week, even before Yellen had spoken. The dollar had upturned its previous losses against the yen and rose 0.2% to 107.81 yen pulling away from the previous session’s low of 106.35, its weakest in a month.

It stayed wary of levels above 109 yen, where it remained as recently on Friday. The Japanese Finance Minister, Taro Aso, earlier on Tuesday informed reporters that he would desist from commenting on the possible response of Japan on the currency market if the yen was to rise further. He also declined to comment on the remarks of U.S. Treasury Secretary Jack Lew over the weekend which described the recent currency market movement as `orderly’ as an indication of caution towards the currency intervention.

Recent Unstable Sterling Marked Hard Rebound


The euro had pushed up 0.1% to $1.1360, reversing toward the earlier sessions’ almost one-month high of $1.1393. The recent unstable sterling marked a hard rebound after dipping more than 1% to three week lows in the earlier session, resulting in several polls ahead of the June 23 poll preferred the chance of British voters choosing to leave the European Union.

However the two polls in Tuesday’s newspaper portrayed Britons narrowly preferred staying the EU, when compared to the surveys released earlier. The pound had added 0.7% to $1.4524 after moving a one-week high of $1.4664 and on Monday had followed a low of $1.4352, its deepest all-time low since May 16. The Australian dollar had risen 0.6% to $0.7413 to one-month high after Reserve Bank of Australia had held policy stable as anticipated. It stated that its decision had been steady with maintainable growth. According to a Reuter’s poll, the central bank is broadly likely to hold rates at record low of 1.75% after its cut in May, with 49 of 52 economist’s surveyed sightingthe RBA standing pat.

Tuesday, June 7, 2016

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Friday, June 3, 2016

Stronger Yen Weighs on Nikkei


Yen


Shares Hit by Yen Strengthening Against Dollar

Winning streak of five meetings for Japan’s Nikkei ended as shares were hit by the yen strengthening against the dollar. Benchmark of Japan, Nikkei 225 index dropped down to 279.25 (1.6% at 16,955.73). Dollar slipped below 110 yen. For Japanese exporters, stronger yen is usually seen as negative.

This resulted due to the Japanese Prime Minister; ShinzoAbe’s announcement, to a delay of a planned rise in sales tax. The rise in sales tax rate to 10% from 8%, planned for the year 2017, has now been pushed back to 2019.In individual stocks, Softbank had increased by 0.4% after the Japanese technology firm had stated that it would be offloading $7.9bn worth of shares in e-commerce giant of China - Alibaba.

 The transaction is said to reduce the stake of Softbank in Alibaba from 32.2% to 28%. The Shanghai Composite, in China, had edged down from 0.1% to 2,913.51 while the benchmark Hang Seng index in Hong Kong ended 54.11 points less at 20,760.98. The S&P ASX/200 index in Australia had closed down 55.39 points (1% at 5,323.17). Kospi index of South Korea was even for most of the session, closing at 1,982.72.

Strength of Yen – Decline of Exporters

Asian stock markets were generally higher on Tuesday tracking gains in U.S. stocks but Nikkei was assessed by the recent strength of yen and weak earnings results. The S&P 500 on Monday which had settled at a record high of 1593.61, lifted by a rally in the technology segment and the earnings sustained to be the main focus in the region. Japan’s Nikkei Stock Average dropped 0.2% to 13.860.86amidst the recent weakness of the dollar as well as the key ¥100 level continued to be elusive.

The dollar-yen pair had been at ¥97.70 from ¥97.77 in New York, late Monday. Nikkei had jumped to 11.9% till April and continues on course for its largest monthly increase since December 2009 irrespective of Tuesday’s drop. The strength of yen together with the disappointing results had led to the decline of exporters. A heavily weighted component, Fanuc, on the Nikkei had dropped to 5.6% after the company had informed that its operating profits slipped by 17% on-year to ¥184.8 billion for the fiscal year ended March 31.

Abenomic Effect on Consumer Confidence 

Ricoh had dropped to 8.4% after its fourth-quarter operating profit had come in at ¥23.0 billion considerably losing guidance and consensus forecasts, apparently owing to a fall in sales of the domestic office equipment as well as larger-than-expected rise in costs. CLSA equity strategist Nicholas Smith, noticing the data for March indicating an increase in household spending and a fall in the jobless rate commented that `regardless of stock price weakness, the signs for Japans’ economy are positive. Some of the data can be attributed to the `Abenomics’ effect on consumer confidence’.

 Household spending had increased to 5.2% in March signifying consumers are showing more inclination to spend whereas unemployment had dropped to 4.1% of the labour force in March from 4.3% in February, which decline to its lowest since November 2008. Industrial production in March had increase by 0.2% on-month for the fourth straight month. Investors would be paying consideration to separate strategy meetings by the European Central Bank and the U.S, Federal Reserve for indications, later in the week.