An important lesson in trading
Archives of “May 16, 2019” day
rssJail time sought for ex-Deutsche, Nomura staff over Monte Paschi scandal
Milan prosecutors have asked for four former Deutsche Bank employees and two former Nomura employees to serve prison time for their alleged role in a complex derivatives scandal at Italian bank Monte dei Paschi di Siena.
The prosecutors also asked for the seizure of about €441m from Deutsche Bank and €445m from Nomura.
Deutsche Bank declined to comment. Nomura did not immediately respond to phone calls and emails seeking comment.
The two and a half year old trial has struck at the core of European finance and is related to allegations complex derivatives deals were undertaken at what was Italy’s third-largest bank by assets to mask losses from investors.
Prosecutors also asked for eight years of prison time for former Monte Paschi chairman Giuseppe Mussari and former chief executive Antonio Vigni. They asked for six years of jail time for former finance chief Gianluca Baldessari.
Italy took a 70 per cent stake in Monte Paschi in 2017 in a precautionary recapitalisation. The bank had failed to recover from losses incurred during Italy’s debt crisis and the triple dip recession that followed.
The three financial institutions and in total 13 former employees are standing trial over allegations of market manipulation, false accounting and misleading regulators.
The alleged crimes occurred between 2008 and 2012.
Wilbur Ross: Huawei order will be effective starting tomorrow
Commerce Sec. Wilbur Ross speaking
- Huawei order will be effective starting tomorrow
- Action is not part of trade talks with China
- Huawei wasn’t discussed during US-China trade talks
US stocks have come off marginally from high levels.
The S&P is trading at 2885.30, with a high at 2892.15
The Nasdaq is trading at 7922 after reaching a high at 7946.23
A good day for European indices
Indices move higher with German Dax up 1.7%
The major European indices are ending the day higher. It is a good day for investors.
The provisional closes are showing:
- German DAX, +1.7%
- France’s CAC, +1.3%
- Britain’s FTSE, +0.8%
- Spain’s Ibex, +0.6%
- Italy’s FTSE MIB, +1.3%
The benchmark 10 year yields are trading mostly lower, with the riskier countries ( Spain, Italy, Portugal) moving the most.
In other markets as London/European traders look to exit:- spot gold, $-11.80 or -0.91% at $1285
- WTI crude oil futures are up $1.28 or 2.06% $63.30
US stocks continue their surge higher and are trading near highs for the day
- S&P index +37.5 points or 1.32% at 2888.57
- NASDAQ index +112 points or 1.43% at 7934
- Dow Jones up 279 points or 1.08% at 25926
Here’s a Look at the World’s Worst Bad-Loan Ratios
USDJPY makes a break toward topside targets
USDJPY breaks above its 100 hour MA and trend line
The USDJPY has made a break above its 100 hour MA at 109.559 (blue line) and a trend line on the hourly chart near the same level. That is a bullish play. Staying above the level keeps the bullls in charge (it is risk for longs as well).
The run higher has stalled so far in the swing area defined by the highs this week at 108.769 to 109.825. The high today reached 109.795 so far – between that swing area. A move above that area will have the 200 hour MA at 10988 and then the 38.2% and the swing highs from May 10 at 110.01-045 to get above. So there are some resistance land mines to get above, but breaks above would help to turn the beat around if down.
So bulls are trying to take more charge on the breaks today, but there is work to be done. Look for dips toward the 100 hour MA to find buyers (with stops on a break below).
Huawei says that US restrictions will put the country behind on 5G deployment
The firm comments in a statement about US’ executive order overnight
- Will engage with US government regarding product security
- Willing to come up with effective measures to ensure that
- Committed to foster ‘close relationships’ with European countries and carriers
Trump has urged his European counterparts to also ban Huawei from its markets but they haven’t done so as of yet. With US-China trade tensions already skating on thin ice, the situation regarding Huawei – should it escalate much more – could just be the tipping point that results in things breaking down.
And even if it doesn’t, it will no doubt add to the weight of tensions we’re seeing between both countries at the moment.
Sketch of the Euro You are Looking For
Here is an overview of the broad macro considerations for the euro, with some thoughts about the price action, including volatility. It is shared not so much as an argument as a sketch the considerations that drive a view.
1. An 18-month low for the euro was set on April 26 a little above $1.11, immediately after the US reported a stronger than expected Q1 GDP report. The euro has been consolidating here in May and has been unable to rise above the $1.1265 area on two attempts.
2. The eurozone economy appears to have stabilized after slowing in 2018. Surveys have been weaker than hard data. Inflation appears to have bottomed (~1.4%), and the combination of higher oil prices and the weaker euro will help underpin CPI through the summer. Nevertheless, the plans for a new targeted long-term refinancing operation (TLTRO) are still going forward.
3. The escalating US-China trade conflict is not good for Europe. Foreign producers in China, servicing the US market may shift out of China, but Europe is unlikely to be a significant beneficiary. Also, the US tariffs could deflect China’s export prowess more toward Europe. One of China’s responses will be to emphasize “self-reliance,” which can be expressed as an import substitution strategy. This undermines the export-driven economies, especially Germany, in Europe.
4. President Trump has threatened a 25% tariff on auto imports and decision is expected before the end of May. Should such a tariff be implemented, the euro would likely sell-off, even though Europe would retaliate.
5. An important low for the euro is probably not in place, and there still seems to to be potential for another leg lower than could take it to the $1.08-$1.10 area. Such potential drivers would include, disappointingly weak growth in Germany, mainstream parties lose a majority in the European Parliament, new political and/or economic challenges from Italy, or US auto tariffs. After a period of relative calm, Italian politics and the doom loop linking banks and the sovereign remains very much intact, and risks here appear to be mounting and may build further ahead of the EU Parliament elections.
6. Analysts have been bearish the dollar in general since what is often described as the Fed’s dovish pivot. They have relented only in the very near-term, Bloomberg surveys show median forecasts look for the euro to outperform the forward in H2 19. Speculators (non-commercials) in the futures market are extremely short the euro. The net short position is the largest in three years. The gross short position is near 260k contracts (125k euros per contract). There have only been five or six periods in which the bears have been willing to amass such a short position over 250 contracts.
7. The implied euro volatility tends to rise now as the euro falls. Three-month implied volatility recorded a five-year low near 4.80% in the second half of April. When the euro recorded its low on April 26, vol briefly traded above 6%. During the consolidative/corrective phase here in May, the implied volatility has eased back to 5.3%.
8. The two-year interest rate differential has narrowed as the market prices in Fed rate cuts. It has been trending lower since peaking at more than 350 bp last November. It is now near 280 bp, the lowest since February 2018. The 10-year differential has narrowed by 30 bp to less than 250 bp over the past six months.
9. In the big picture, the dollar’s third big rally since the end of Bretton Woods remains intact. However, in the past, the last phase of the dollar bull cycle took place while interest rate differentials moved against the US. If this holds, this super-cycle that began more than a decade ago is nearly over.
10. The major currencies (OECD) typically do not move much more than 20% +/- its purchasing power parity (PPP) calculation. The euro is now about 23% undervalued. It did reach nearly 30% undervalued in late 2016.
Buffett’s Berkshire Hathaway reveals $861m Amazon stake
Berkshire Hathaway, the conglomerate controlled by billionaire investor Warren Buffett, disclosed on Wednesday its stake in Amazon was valued at $860.6m at the end of March.
Mr Buffett first revealed earlier this month that Berkshire had invested in the e-commerce giant, telling CNBC, “I’ve been a fan, and I’ve been an idiot for not buying”. Berkshire also has partnered with Amazon and JPMorgan Chase on a joint healthcare venture called Haven.
Berkshire held 483,300 Amazon shares as of the close of the first quarter, according to a 13F filing with the US Securities and Exchange Commission. It amounts to a stake of roughly 0.1 per cent in the company. Based on Amazon’s share price on Wednesday, the same investment would currently be worth $904m.
The filing also revealed that Berkshire raised its holdings in JPMorgan, Delta Air Lines and Red Hat while cutting stakes in Wells Fargo, Phillips 66, Southwest Airlines and Charter Communications.
The group’s stake in Apple remained at 249.6m shares, or 5.4 per cent, and was worth $47.4bn, its single largest investment.
Berkshire bumped up its stake in JPMorgan by 18.8 per cent to 59.5m shares, which were valued at $6bn. It owns 1.8 per cent of the bank’s shares.
Its stake in Wells Fargo, the US bank beset by scandals, narrowed by 4 per cent to 409.8m shares worth $19.8bn. Berkshire, which owns 9.1 per cent of shares, is Wells Fargo’s top shareholder.
Berkshire’s 13F filing is closely watched by investors seeking insights into the investment philosophies of Buffett and his portfolio managers Todd Combs and Ted Weschler.
Shares in Amazon were up 0.2 per cent in after-hours trading.
More on “Trump signs order setting stage to ban Huawei from U.S.”
The move was expected, pre-empted yesterday:
- US President Trump expected to sign order paving way for U.S. telecoms ban on Huawei
The formalities were completed just a few hours ago;
- Trump signs national emergency order on telecommunications networks
- US says Huawei activities are a threat to national security
The question for markets is what’s next and how will China retaliate?
But, for a closer look, background etc, check this out:
- Trump signs order setting stage to ban Huawei from U.S.
This has been simmering for a long time.