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Liontrust Dealer's Roar - 29/06/2012

“Culture is difficult to define……but for me the evidence of culture is how people behave when no one is watching.” Bob Diamond, CEO of Barclays Bank, born July 27th 1951


Summary

  • Wall Street rallies hard in last 90 minutes of trading to end down by just 0.2%
  • All night jaw-jaw in Brussels brings a positive outcome (see below)
  • Announcement made in time to give Asian markets a boost in afternoon trading
  • The Euro rallies, but not massively…..
  • ……peripheral bond yields tighter (Spain 10 year -35bps, Italy 10 year -26bps)……
  • …..and European equities joined the relief rally, with most European markets up by between 2% and 3%
  • Also see a big rally in other “risk-on” sensitive plays (Gold +2.7% oil price +4.3%, copper +3.9% by 14:15)
  • But there is a decent helping of scepticism about the rally and the likelihood of it being sustained (see below)
  • A raft of macro data across Europe much as expected, except for some surprisingly weak retail sales numbers in Germany (although it is a very volatile series)
  • Surprisingly, Eurostoxx volume was below the 20 day average at lunchtime (having been very strong first thing…….not what you would expect from a market up by 3%)
  • Rally gather momentum as Euro rally accelerates in early afternoon trading
  • US macro data all much as expected…….Chicago Purchasing Manager survey slightly better than forecast, University of Michigan confidence slightly worse
  • Further good news from Germany that opposition leader Steinmeier expects ESM to be approved on Friday evening despite the new elements
  • By the end of the day FTSE was up by 1.42% and the S&P was higher by 1.95%, but those rises were dwarfed by most European markets as the table below shows: 

Liontrust Dealer's Roar – 28/06/2012

“Vice does not lose its character by becoming fashionable” John Wesley, co-founder (with brother Charles) of the Methodist movement, June 28th 1703 – March 2nd 1791

Summary

  • Wall Street closed 20bps higher than the level when we shut up shop yesterday, primarily driven by short covering ahead of today’s EU summit
  • Asia followed the lead, buoyed by the stronger than expected US durable goods data……
  • ….although China closed lower, hit by a profit warning from CR Cement
  • European markets open as flat as the Fens…..
  • ….but soon start to drift as bond yields head higher once again and the Euro gives up overnight gains
  • Headlines such as “EU summit will produce no detailed decisions, but seeks to accomplish important work on ambitious EU roadmap” not helpful either
  • ….and not was news of Turkey deploying rocket launchers and anti-aircraft guns along its border with Syria
  • New York times reporting that JPMorgan’s losses from credit derivatives trading may total as much as $9bn…..
  • ……would CEO Jamie Dimon still refer to the losses as a “complete tempest in a teapot”?
  • Final UK Q1 GDP sees small downward revision: year-on-year at -0.2% against initial estimate of -0.1%
  • Latest Italian bond auction passed off well, with size coming in towards the very top of the consensus range
  • ……but markets continue to drift on woeful volume( Eurostoxx volume down 29% against average of past month at 11am)
  • Storm clouds continue to build over Barclays misdemeanours in the LIBOR market, with the shares more than 15% lower by lunchtime
  • US final Q1 GDP bang in line with expectations, with jobless claims data slightly worse than expected
  • Markets rally on the following headline from the Wall Street Journal….. WSJ: GERMAN FIN MIN: EFSF COULD CO-INVEST IN PRIMARY MARKET AUCTIONS……
  • ……..followed within half an hour by a denial from a finance ministry spokesman of any such comment by Schaueble!
  • The market subsequently decided to ignore soundbytes from Euroland for the remainder of the session!
  • UK bank shares took another pounding on a news story from Sky News suggesting another mis-selling scandal about to break
  • President Obama’s healthcare overhaul upheld by US Supreme Court
  • FTSE ended the day down 0.56%, having rallied late, as did much of Europe…….probably nothing more than position squaring ahead of the outcome of the EU summit
  • Meanwhile, Wall Street was trading lower by just under 1%

Liontrust Dealer's Roar – 27/06/2012

“No man shall have the right to fix the boundary to the march of a Nation” – Charles Stewart Parnell, Irish political leader, 27th June 1846 – 6th October 1891.

Summary

  • Modest gains in the US as pick in up house prices offsets weaker consumer confidence
  • Italian/Spanish yield blowing out & Merkel comments kept a lid on proceedings however
  • Story in China Securities Journal helps Asia, report govt may introduce more proactive policies to ensure stable growth
  • Egan-Jones downgrade Germany
  • But Europe opens small up despite downgrade (+0.3% on the bell)
  • Mid morning Italy sells €9bn bills (on target) at 2.957% vs 2.104% in May
  • Merkel repeats again: “strongly disagrees with joint debt liability proposals, Eurobonds are economically wrong!”
  • Italian business confidence better (88.9 vs 85.5 forecast), German regional CPI data looks fine
  • Spain’s Rajoy says important for Spain to be able to fund itself
  • Stock movers include profit warnings from Yule Catto (-22%), Salzgitter (-5%) & good numbers from Colruyt (+12%)
  • German government formally backs introduction of financial transaction tax
  • US durable good order number better on the headline, but ex transport (i.e. core) data weaker & negative revision
  • Another decent US housing number (pending home sales) +5.9% MoM for May vs expectations 1.5%
  • Spain & Cyprus application to join EFSF is accepted
  • US market comes in, squeeze begins!!...though no obvious catalyst
  • Strong finish in Europe FTSE up 1.4%, Eurostoxx up 1.4%, Spain up 2%, Italy up 2.5%
  • Odds on anticlimax tomorrow/Friday?

Liontrust Dealer's Roar - 26/06/2012

“If you want to understand today, you have to search yesterday” – Pearl S. Buck, American novelist, 26th June 1892 – 6th March 1973 

Summary

  • US trades sideways post our departure, in a “quiet low volume” trading day
  • Move lower started in Europe & seemed to be a function of preparation for disappointment ahead of Thurs/Fri
  • US home builders had a nice bounce on the home sales number but unable to hold levels
  • Post close Moody’s downgraded 28 Spanish banks as rumoured, by one to four notches
  • FT releases a leak draft EU summit document..more below
  • Chinese commerce ministry says trade improving
  • Bundesbank Jens Weidmann says “EMU is in a critical condition”
  • Europe opens slightly better after stable Asian session, French & German consumer confidence better than hoped
  • But Italian retail sales looked awful & UK public borrowing grew more than expected
  • Spanish auction, raise more than expected but yield materially higher vs May (2.36% v 0.85%, 3.24% v 1.74%)
  • Similar for Italy, get paper away but at a higher rate..starts to push out market yields
  • Cyprus ask for EU bailout (no numbers yet)..Deutsche Bank estimate up to €6bn
  • Miles & King sound dovish at Treasury Committee meeting
  • Afternoon see Siemens (-1.5%) hit after CFO says it’s a “RockyRoad” for meeting 2012 targets
  • Infineon (-11.8%) also slammed after announcing an unexpected slight decline in revenue compared to Q2.
  • US Case Shiller home prices data better, US consumer confidence a tad worse
  • Weakness into the close on Siemens/Infineon & peripheral bonds creeping wider
  • Day ends with following winner:
  • GERMANY'S MERKEL SAYS EUROPE WILL NOT HAVE SHARED LIABILITY FOR DEBT AS LONG AS SHE LIVES – REUTERS
  • FTSE -0.07%, Germany +0.07%, France -0.3%, Spain -1.44%, Italy -1.11%, US +0.2%..see bond spreads below!

Liontrust Dealer's Roar - 25/06/2012

“At fifty everyone has the face he deserves”George Orwell, British author, 25th June 1903 – 21st Jan 1950 (happy 50th for April Richard)

 

Summary

 

  • S&P continued the bounce post our departure as it recovered from Thursday’s sharp falls
  • Broad-based recovery, volumes good thanks to annual rebalance of Russell Indices
  • Weekend sees Der Speigel reporting German economy to shrink 10% in a year post Euro collapse
  • Il Sole 24 Ore reports Herman Van Rompuy to propose a plan to create a banking union controlled by ECB
  • Tony Blair says Euro can only be saved by a “grand plan” backed by the Germans
  • Troika visit to Athens on Sunday postponed as new PM & FM both in hospital
  • Week starts quietly in Asia, negative bias to trading, Korea worst faller after reports new Samsung (-4%) S3 catches fire
  • Indian Fin Min increased FII cap (amount of INR denominated debt overseas investors can own) hoping to arrest Rupee depreciation
  • Europe opens weaker ahead of EU summit this Thurs/Fri
  • Spain formally requests aid from EU of up to €100bn
  • Bank of International settlements says central banks are at limits of ability to boost growth
  • Stock news: Shire (-11%) plunge on generic competition, Nokia (-11%) continue to plummet post recent warning, ABI-Inbev (+2%) for Modello possible deal taken well
  • Rumours that Moody’s to downgrade ratings of Spanish Banks weigh in IBEX
  • Merkel rejects joint Eurobonds (again) speaking in Berlin. Rejects joint deposit insurance if it means joint liability.
  • Says living beyond means led to EU debt crisis & is worried summit will fixate on sharing debt
  • Juncker responds to Spanish bailout request..market doesn’t like the word “restructuring plans”
  • Late in the afternoon US new home sales data comes in better than expected for May (7.6% vs forecast 0.7%)
  • Can’t arrest the slide in markets however, bad day in the periphery:
  • UK down 1.1%, Germany down 2%, France 2.2%, Spain 3.7%, Italy 4%, Greece 6.8%. US is currently down 1.8%... 

Liontrust Dealer's Roar – 22/06/2012

 “Sometimes you get the best light from a burning bridge.” Don Henley, American musician, founder member of The Eagles, born June 22nd 1947

Summary

  • Wall Street very weak after Europe shut up shop yesterday, with the S&P shedding a further 1.3%
  • Second biggest drop for the S&P this year (2.23%)
  • Moody’s downgrade fifteen of the world’s banking giants overnight, as leaked yesterday afternoon
  • Spanish bank stress testing results much as expected (but see below……)
  • Asian falls sharply in sympathy with those who went before
  • UK and Europe open lower by about 1%
  • Latest German IFO survey paints a gloomy picture looking forward (see below)
  • Markets remain weak ahead of the lunchtime get-together of Merkel, Hollande, Monti and Rajoy (Finance Ministers meet in Luxembourg from 5pm)
  • Rumours surface that Spain may request bail-out within a matter of hours
  • IMF chief Lagarde advocating shorter-term fixes for the euro crisis, which Germany is resisting
  • Peripheral yields rally off the highs, but equities remain lower (except in Spain where 10 year yields were 20bps lower by mid afternoon)
  • As expected, the ECB announced easing of collateral criteria to allow “Triple B” (one notch above junk)……
  • ……which goes a long way to explaining the strength in Spanish bonds and equities today
  • FTSE ended the week lower by 0.95%, with most of Europe lower by between 0.5% and 1%, although Spain was higher by 1.4%
  • The S&P meanwhile was up by 0.34%
  • Finally, remember the latest instalment of Germany v Greece…….this time in the Euro 2012 quarter-final this evening, 7:45 kick-off. Rumours that they Greeks are calling up a number of last minute replacements (including Bankruptos, Defaultas and Noliquidios) are unfounded! 

Liontrust Dealer's Roar - 21/06/2012

“Only the guy who isn't rowing has time to rock the boat.” Jean Paul Sartre, French existentialist philosopher, June 21st 1905 – April 15th 1980

Summary

  • The S&P closed almost unchanged from its level when we closed yesterday.
  • Trading was volatile following the announcement from the FOMC
  • Highlights were an extension of Operation Twist, a downgrading of economic expectations and the reintroduction of an easing bias to policy
  • The 0.5% downgrades to US GDP knocked commodity prices hard, with oil and copper falling sharply
  • The flash Chinese PMI number for June was a very disappointing 48.1, down from 48.4 in May
  • Chinese banks hit by headlines suggesting that the big four banks lost 460bn Yuan of deposits in early June
  • The above three factors contributed to a weak session in the Far East
  • Europe opened in the same vein as the weather first thing
  • Mixed bag of PMI numbers from Europe (France good, Germany poor)
  • Stronger than expected UK retail sales
  • Latest Spanish bond auction passed off well, as was also the case in France
  • By early afternoon (driven primarily by the positive news from the bond auctions) equities had rallied
  • Rumours of an imminent Moody’s downgrade to UK banks
  • Speaking in Luxembourg, German finance minister Schaeuble says that the EFSF can buy in secondary market and can use leverage
  • US jobless claims data and the Markit PMI data slightly worse than expected…..
  • …..and more disappointing US data in the form of the Philly Fed index and home sales numbers for May
  • …..all of which knocked equities, with the S&P turning an anticipated small gain into a drop of about 0.5% shortly after the 15:00 data was released
  • …..and markets got their final “spook of the day” with an announcement from Germany that the ESM signing is to be delayed
  • FTSE ended the day down almost exactly 1%, most European markets not so soft
  • The S&P was lower by 0.93%

Liontrust Dealer's Roar - 20/06/2012pm

“It isn't what they say about you, it's what they whisper.” Errol Flynn, Australian born actor, June 20th 1909 – October 14th 1959

Summary

  • S&P flat post our departure…….trading water ahead of FOMC news tonight
  • Asia traded higher after data in Japan showed imports soared last month
  • Press reports (Telegraph and guardian) that EU leaders will announce that the ESM and EFSF will directly buy bonds……later denied by German officials and Monti
  • LCH raises margin costs for trading 10-15 year Spanish bonds from 13.6% to 14.7%
  • European markets open quietly, but edge higher as peripheral yields drop
  • Bank of England MPC minutes sound a much more dovish note than of late
  • Greek headlines remained positive over the day (eg, excellent appointment as Chairman of National Bank, Samaras to be sworn in as Greek Premier)
  • Peripheral yields continued to fall lending further support to equities
  • FTSE ended a pretty quiet day up by 0.64%
  • Most of Europe less exciting, bar Italy up by more than 2% and Spain by more than 1.5%
  • The S&P was lower by just 0.13%, treading water ahead of the FOMC decisions……more of that tomorrow methinks!

Liontrust Dealer's Roar - 20/06/2012

Absence diminishes mediocre passions and increases great ones, as the wind extinguishes candles and fans fires - Francois de La Rochefoucauld, French Author, Sep 15 1613 – Mar 17 1680

As you may have noticed the dealers Roar hasn’t been hitting your inbox for the past month as myself & Richard have been rather pre-occupied with our day jobs. Once a year Gary & James who look after your assets using The Cashflow Solution have a brand spanking new set of corporate report & accounts to crunch & recently they set about putting their new ideas to work. This as you may expect has kept us rather busy with other matters but happily one month and £580m worth of trades later & we’re back....

Disclaimer

Any opinions expressed should not be construed as advice for investment in any [product or] security mentioned or which may form the underlying content of any topics discussed in this blog.  The information and opinions provided in this blog take no account of the investors’ individual circumstances and should not be taken as specific advice on the merits of any investment decision.   Any opinions or information provided has been based on sources we believe to be reliable at the time of this blog’s preparation: no representation or warranty, express or implied, is made as to the accuracy, reliability or completeness of such information.  Neither Liontrust, nor any of its partners, employees, representatives or agents accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of our research or its contents.

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