Markets - Twenty-Five Years After LTCM, Emerging Markets Keep Burning Investors

Cboe boss resigns over undisclosed personal relationships with colleagues

Financial Times

23-09-19 13:17

The CEO of Cboe Global Markets, Edward Tilly, has resigned after failing to disclose personal relationships with colleagues. Tilly had been with the company for 35 years. His resignation comes after an investigation by Cboe's board and external lawyers. Fredric Tomczyk, a board member, will take over as CEO. This news follows the recent resignation of BP CEO Bernard Looney, who also failed to disclose personal relationships.
Unexpectedly hot inflation reading curbs bets that BoC is done with hiking rates

The Globe and Mail

23-09-19 13:00

Canada's annual inflation rate rose to 4% in August, exceeding expectations and well above the Bank of Canada's 2% target. The increase was driven by higher gasoline prices, as well as increases in mortgage interest costs and rent. The higher-than-expected inflation data has led to speculation that the Bank of Canada may need to raise interest rates to combat inflationary pressures. Money markets have adjusted their expectations, with swaps markets now pricing in a higher likelihood of a rate hike in December and fully pricing out any rate cuts throughout 2024. However, economists note that the central bank is unlikely to change course based on one reading and may remain hesitant about further rate hikes due to signs of economic stagnation and weakness in the economy.

The higher inflation rate in August is seen as bad news for the Bank of Canada, but economists caution that it may be too soon to conclude that the central bank will need to hike rates again. They note that there are still signs of economic weakness and expect the Bank to remain on hold at its next meeting in October, provided that the September inflation report does not show another surprise increase. The rise in inflation is also expected to reduce discretionary spending in other areas, which could help mitigate some inflationary pressures.

Overall, the higher-than-expected inflation data has made the outlook for further policy moves by the Bank of Canada more uncertain. While markets are now pricing in a higher likelihood of a rate hike, economists believe that the central bank will remain cautious and hesitant about further rate hikes due to the ongoing economic weakness.

Price tops $95 a barrel raising fears of return to rising inflation


23-09-19 12:07

The price of crude oil has surpassed $95 a barrel, which could lead to higher petrol prices and increased inflation. Markets are predicting that the latest inflation figures from the Office for National Statistics will show an increase in the annual rate of consumer price inflation to 7% in August. This could pose a problem for both Chancellor Rishi Sunak, who promised to halve inflation by the end of the year, and the Bank of England, which is tasked with bringing inflation back down to its 2% target.
Instacart's IPO surges as the grocery delivery company goes from the supermarket to the stock market

The Toronto Star

23-09-19 18:19

Grocery delivery firm Instacart saw its shares surge 30% shortly after they started trading on the Nasdaq stock exchange. The company raised $660m in its initial public offering, selling 22 million shares at $30 apiece, giving it a market value of approximately $10bn. The grocery delivery market has become increasingly competitive, with rivals including DoorDash and Uber Eats entering the sector.
Bank of Canada: Underlying inflation is inconsistent with 2% target


23-09-19 17:47

The Bank of Canada has said that recent volatility in headline inflation is not unusual, but the underlying trend shown by core measures is inconsistent with bringing inflation down to the 2% target. August inflation figures showed a jump in the headline number to 4.0% from 3.3% in July, higher than most analysts had forecast. Deputy Governor Sharon Kozicki said that "underlying inflation is still well above the level that would be consistent with achieving our target of 2% CPI inflation". After the release of the data, money markets raised bets for a rate hike at the next policy meeting on October 25.
China LGFV Bond Sales Boom Again as Beijing Steps Up Support


23-09-19 23:00

China's local government financing vehicles (LGFVs) are seeing a surge in yuan bond sales as the government intensifies efforts to address risks from the highly indebted group of borrowers. Domestic bond issuance by LGFVs reached nearly CNY620bn ($85bn) in August, a 50% increase from July and the third-highest monthly figure on record. Financially weaker provinces such as Heilongjiang saw a significant increase in LGFV bond sales, indicating that investors believe the central government will intervene to prevent defaults. However, most of the bonds sold have short-term maturities, reflecting concerns about the borrowers' long-term health.
The Economics Story China Doesn’t Own


23-09-19 22:00

China's economic slowdown is not resulting in interest-rate cuts in neighboring countries in Asia. Despite China's efforts to push down domestic rates and free up cash for lenders, the Federal Reserve's actions still dominate financial conditions in the region. Central banks in South Korea, Indonesia, the Philippines, Australia, and Japan are all hesitant to cut rates due to concerns about inflation and a desire to align with the Fed's policies. China's economic performance is a secondary consideration for these central banks.
Morning Bid: China rates eyed, oil hits new high


23-09-19 21:46

On Wednesday, China is expected to keep its benchmark lending rates unchanged as the rise in oil prices towards $100 a barrel continues to impact investor sentiment globally. Other key events in Asian markets include trade data from Japan, export orders from Taiwan, producer price inflation figures from South Korea, and New Zealand's second-quarter current account balance. The main event of the day, however, is the Federal Reserve's policy meeting where it will announce its latest interest rate decision and unveil its new forecasts. The Fed is expected to keep rates on hold, but the current momentum in oil prices and bond yields could influence its decision to raise rates again this year. Asian markets won't have the opportunity to react to the Fed until Thursday, so any direction on Wednesday could come from events locally. Additionally, attention will also be on the 78th United Nations General Assembly in New York for geopolitical developments.
EU’s Von Der Leyen Says Massive China Subsidies for EVs Requires a Probe


23-09-19 21:36

The European Union (EU) has called for an investigation into Chinese support for electric vehicles (EVs) due to the substantial subsidies provided to the industry. The EU's executive arm, the European Commission, announced an anti-subsidy probe last week, which could result in tariffs on EV imports from China. This move has been criticised by Beijing, which has called it an act of protectionism. If tariffs are imposed, China is expected to restrict access to its market. The investigation is part of a broader EU effort to manage its relationship with China and address perceived supply chain and national security risks.
Get Real, Beijing. Taiwan Isn’t Buying Your Chinese Dream


23-09-19 21:00

The Chinese government is attempting to persuade Taiwan to adopt the "Chinese Dream" and unify with China through peaceful means. However, this approach is failing, as Taiwanese people are increasingly identifying themselves as Taiwanese rather than Chinese. The Chinese economic dream is not appealing to the Taiwanese as China's economy slows down. The carrot-and-stick approach is only pushing the Taiwanese further away from China and strengthening their sense of Taiwanese identity. This article suggests that China needs to address the political system rather than focusing solely on closer economic integration.
Dollar firm but softens against yen ahead of FOMC


23-09-20 00:47

The US dollar remained steady on Wednesday ahead of the Federal Reserve's rate decision later in the day. The dollar index, which measures the greenback against a basket of rivals, stayed mostly flat at 105.13 as traders awaited the Fed's decision. Markets expect the Fed to keep rates on hold at 5.25% to 5.50%, with attention focused on the central bank's forward guidance. The yen edged higher against the dollar, while the Australian dollar rose after the Reserve Bank of Australia's minutes indicated more interest rate increases to come.
New Zealand current account deficit narrows in Q2


23-09-20 00:29

New Zealand's current deficit has narrowed in Q2 2022, but the country's external position remains unsustainable, according to official data. The quarterly deficit was NZD 4.208bn ($2.50bn) in the three months to June, down from NZD 4.662bn in the previous quarter. However, the annual deficit to June was NZD 29.76bn, equivalent to 7.5% of GDP, down from a revised 8.2% in Q1. The country's current account deficit as a proportion of GDP reached its highest level in over 30 years in Q4 2022, and remains at historically high levels. S&P Global has warned that the size of New Zealand's external imbalances is the key credit risk for the country.
Japan Exports Fall for Second Month as Global Demand Weakens


23-09-20 00:00

Japan's exports have fallen for the second month in a row, raising concerns about the economy and its reliance on foreign demand. The value of exports fell by 0.8% in August from a year earlier, led by declines in mineral fuel and chip-making machinery. This follows the first drop in exports in over two years in the previous month. The decline in exports is worrying as consumers and businesses are cutting back on spending at home, limiting domestic drivers of growth. However, imports also fell for the fifth consecutive month, offering some respite for the country which has been hit by cost-driven inflation.
China Funds Look to Calm Once-Bitten Clients Hurt by Bond Losses


23-09-19 23:49

Money managers in China are reassuring clients that there won't be a repeat of last year's record bond market withdrawals, as bond losses pick up. The biggest lender in China, Industrial & Commercial Bank of China (ICBC), has told its private bank clients that a sharp pullback in the bond market is unlikely. ICBC argues that it is too early to call an end to monetary easing and give up on bonds, given the slow recovery in the world's second-largest economy. The pushback by China's money managers highlights efforts to head off another negative feedback loop for their products.
Indian stocks open lower; HDFC Bank leads drags


23-09-20 03:54

India's benchmark stock indexes opened lower on Wednesday, with the Nifty 50 down about 0.71% and the S&P BSE Sensex losing 0.75%. The decline was led by losses in HDFC Bank, as the country's largest private lender flagged a likely adverse impact of its merger with erstwhile HDFC Ltd on key ratios.
Morning Bid: Fed leaves shoe dangling in policy parade


23-09-21 10:14

Eight major central banks are meeting today to deliver updated policy settings, but global markets remain cautious after the Federal Reserve left the possibility of another rate hike this year on the table. The Swiss National Bank paused, like the Fed, but said more hikes might be necessary. The Bank of England is also meeting today, with markets divided on whether it will raise rates one last time or signal the end of its campaign at a peak rate of 5.25%. The Fed's "hawkish pause" has caused stock futures to remain in the red, and the VIX volatility gauge closed above 15 for the first time this month.
How U.S. Households Got Turned Upside Down by Higher Interest Rates


23-09-21 09:30

Higher interest rates in the US are starting to take a toll on households. While savers can benefit from higher interest rates, those looking to borrow for major purchases such as homes and cars are feeling the impact. Credit card users are also being hit as rates rise along with market interest rates. The Federal Reserve has indicated that it may raise interest rates once more this year, meaning rates are unlikely to decrease in the near future. The housing market has been particularly affected, with high rates locking many Americans out of homeownership.
Money managers divided on timeline of China’s economic recovery

The Globe and Mail

23-09-21 08:45

China's economic slowdown is a chance to buy into the world's second-largest economy at cheaper valuations, according to Arup Datta, senior vice president and head of global quantitative equity at Mackenzie Investments in Boston. While foreign investors are wary of China's struggling property sector and weak global demand for its manufactured goods, Datta describes the country's government as "pragmatic" and believes it is taking steps to boost its economy. In contrast, David Wallin, portfolio manager at Harbourfront Wealth Management in Vancouver, has exited investments in China in favour of Japan and India.
TSX hits 3-week low as hawkish Fed stance hurts commodity stocks


23-09-21 14:47

Canada's main stock index, the S&P/TSX composite, dropped to over three-week lows on Thursday as commodity stocks followed a decline in oil and metal prices. The materials sector, which includes miners and fertilizer companies, hit its lowest level in four weeks, while the energy sector fell 0.3%. The decline came after the US Federal Reserve indicated a hardening of its hawkish stance. Copper prices fell to near four-month lows, and gold extended its decline for a third day. The Canadian dollar weakened against the greenback, while yields on benchmark government bond climbed.
Most Gulf markets gain despite hawkish Fed


23-09-21 14:13

Most stock markets in the Gulf ended higher on Thursday despite the U.S. Federal Reserve stiffening its hawkish monetary policy stance, although the Saudi index extended losses from the previous session. The six-member Gulf Cooperation Council's monetary policy is usually guided by the Fed's decision as most regional currencies are pegged to the U.S. dollar. Dubai's main share index advanced 1%, buoyed by a 6.4% rise in blue-chip developer Emaar Properties. In Abu Dhabi, the index added 0.2%. The Qatari benchmark gained 0.3%, while Saudi Arabia's benchmark index declined 1%.