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Wednesday: Job Openings, FOMC Minutes

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Wednesday: Job Openings, FOMC Minutes

Wednesday: Job Openings, FOMC Minutes

by Bill McBride on 10/11/2016 07:51:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rate Trend is Not Your Friend

Mortgage Rates were higher again today, marking the 9th straight day without any improvement. 3.625% is quickly becoming the most prevalent conventional 30yr fixed quotes on top tier scenarios, though quite a few lenders remain at 3.5%.
emphasis added

Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 10:00 AM, Job Openings and Labor Turnover Survey for August from the BLS. Jobs openings increased in July to 5.871 million from 5.643 million in June.

• At 2:00 PM, The Fed will release the FOMC minutes for the Meeting of September 20-21.

Read more at http://www.calculatedriskblog.com/2016/10/wednesday-job-openings-fomc-minutes.html#JqP79qYIutiHeCZL.99

by Bill McBride on 10/11/2016 07:51:00 PM

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Published at Tue, 11 Oct 2016 23:51:00 +0000

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UBS to launch digital wealth management platform in Britain

 

 

UBS to launch digital wealth management platform in Britain

The logo of Swiss bank UBS is seen on a building in Zurich, Switzerland December 19, 2012.REUTERS/Michael Buholzer/File Photo

UBS said on Monday it was launching a new digital platform to provide online advice for wealth management clients in Britain.

The Swiss bank will introduce the SmartWealth product next month, with a full roll-out planned for 2017. The platform, which provides regulated and real-time advice online, is aimed at customers with a minimum of 15,000 pounds ($19,000) to invest.

“UBS SmartWealth is a strategically important move for UBS,” said Dirk Klee, chief operating officer of UBS Wealth Management. “It enables us to bring our advice and expertise to a much wider audience, at first in the UK, but in time to other geographies too.”

The launch marks a major step by UBS, the world’s biggest private bank, into digital wealth management.

Sometimes called “robo advisers”, online services such as Wealthfront in the United Sates ask customers questions about who they are and what they are saving for, just like conventional advisers, but then use an algorithm to devise an investment strategy.

It is in stark contrast to traditional private banking for millionaires and billionaires, which has often relied on a personal relationship between a client and their banker.

A digital platform could give UBS the scale to bank for the so-called mass affluent – clients with tens of thousands in assets – who are typically higher margin than ultra-high and high-net worth individuals.

UBS Wealth Management President Juerg Zeltner told Reuters in June that UBS was working on a new digital platform which it hoped to launch later this year or at the start of 2017.

(Reporting by John Revill, additional reporting by Joshua Franklin; Editing by Susan Fenton)

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Published at Mon, 10 Oct 2016 19:34:47 +0000

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BP boss Dudley sees oil prices at $55-$70 for rest of the decade

oil

 

BP boss Dudley sees oil prices at $55-$70 for rest of the decade


BP Chief Executive Robert Dudley said on Tuesday he expects global oil prices to stabilize at around $55-$70 per barrel for the rest of the decade.

 

Dudley was speaking at the World Energy Congress in Istanbul.

 

 

 

(Reporting by Ron Bousso; Writing by Nick Tattersall

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Published at Tue, 11 Oct 2016 07:24:10 +0000

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S.Korea regulator says to examine Google’s Android agreements

 

 

S.Korea regulator says to examine Google’s Android agreements

A 3D printed Android logo is seen in front of a displayed cyber code in this illustration taken March 22, 2016.REUTERS/Dado Ruvic/Illustration

Head of South Korea’s antitrust regulator said the agency will closely examine whether Google’s agreements with handset manufacturers on the U.S. firm’s Android mobile operating system limits market competition.

Jeong Jae-chan, chairman of the Korea Fair Trade Commission, said the agency will re-examine anti-competition issues over Google’s policies on the Android platform but did not elaborate on specifics.

The agency said in August it was looking into whether the U.S. firm, whose corporate parent is Alphabet Inc., has violated South Korean anti-competition laws but did not elaborate on what potential charges might be brought against Google.

(Reporting by Se Young Lee; Editing by Michael Perry)

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Published at Tue, 11 Oct 2016 01:49:11 +0000

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Duy: Jobs Data Keeps Hawks Sidelined

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Duy: Jobs Data Keeps Hawks Sidelined

by Bill McBride on 10/10/2016 05:52:00 PM

From Tim Duy: Jobs Data Keeps Hawks Sidelined

Federal Reserve hawks face an array of labor market data that threatens a key pillar holding up their policy view. That pillar is the assertion that monthly nonfarm payroll growth over roughly 100k will soon force unemployment far below the natural rate, thus placing the US economy in grave danger from inflationary forces. By this view, the decline of unemployment long ago justified further rate hikes. Hawks failed to anticipate that the unemployment rate would flatten out at 5 percent despite steady payrolls growth. This outcome does not fit in their worldview. Fundamentally, they were supply-side pessimists. The recent strength in labor force growth suggests their pessimism was sorely misplaced and undermines their argument for immediate rate hikes. The key elements of the FOMC – the permanent voters – now stand as supply-side optimists and are prepared to hold rates at current levels through the next meeting, and perhaps even longer. A December rate hike is still not a foregone conclusion.

Bottom Line: A November rate hike remains dead. We have two labor reports until the December meeting. A continuation of recent trends would leave a rate hike at that meeting in doubt. Odds favor that meeting currently, but it is not a foregone conclusion. The doves are supply-side optimists. They want to let this rebound run for as long as possible. And remember, those closest to Federal Reserve Chair Janet Yellen are now those that inhabit the halls of Constitution Ave. Be wary of the words of hawkish Fed presidents; they have been very misleading this year.

There is much more in the post.

Read more at http://www.calculatedriskblog.com/2016/10/duy-jobs-data-keeps-hawks-sidelined.html#4sISYHHISRktZKTb.99

by Bill McBride on 10/10/2016 05:52:00 PM

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Published at Mon, 10 Oct 2016 21:52:00 +0000

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Wall Street rises as Clinton seen winner of second debate

Wall Street rises as Clinton seen winner of second debate

 

 

Traders work on the floor of the New York Stock Exchange (NYSE) as the market closes in New York, U.S., October 3, 2016. REUTERS/Lucas Jackson
By Caroline Valetkevitch

Wall Street rose on Monday morning amid gains across most sectors, driven by oil prices, and as Democrat Hillary Clinton was widely seen as the winner of the second presidential debate.

A Clinton presidency would be more positive for the markets because her positions are more well known than those of her Republican rival Donald Trump, according to a Reuters poll.

A CNN/ORC snap poll of debate watchers found that 57 percent thought Clinton won the encounter, versus 34 percent for Trump.

Oil prices rose 2.8 percent and touched their one-year high as speculators raised bets that prices would gain on the back of an agreement among OPEC producers to rein in record output levels. [O/R]

“Investors will ponder the presidential debate and follow the events in the commodity markets, especially oil,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

 

Investors are also bracing for the third-quarter earnings season, which unofficially kicks off on Tuesday when aluminum producer Alcoa (AA.N) reports.

“The markets seem to be looking for a repeat of last quarter, with most companies exceeding Street consensus but obviously on a scaled back earnings growth,” Cardillo said.

Earnings of S&P 500 companies are expected to drop 0.7 percent, according to Thomson Reuters data.

The dollar .DXY, which has been swinging between gains and losses for the past five trading days, was up 0.2 percent against a basket of major currencies. The pound GBP=fell again on Monday.

The U.S. bond market was closed for the Columbus Day holiday.

At 9:39 a.m. ET (1339 GMT), the Dow Jones Industrial Average .DJI was up 127.61 points, or 0.7 percent, at 18,368.1.

The S&P 500 .SPX was up 12.42 points, or 0.58 percent, at 2,166.16 and the Nasdaq Composite .IXIC was up 34.29 points, or 0.65 percent, at 5,326.70.

Ten of the 11 major S&P 500 indexes were higher, led by a 1.36 percent rise in the energy sector .SPNY. Telecom service providers .SPLRL were the lone losers.

Exxon (XOM.N) and Chevron (CVX.N) were among the top influences on the S&P and the Dow

Twitter (TWTR.N) dropped 12.3 percent after Bloomberg reported on Saturday that “top potential bidders” had lost interest in the company.

Mylan (MYL.O) was the top gainer on the S&P, rising 11.4 percent. The drugmaker on Friday said it would pay $465 million to settle questions over whether it underpaid U.S. government healthcare programs by misclassifying its EpiPen emergency allergy treatment.

Merck (MRK.N) rose 2.1 percent after clinical data showed its Keytruda immunotherapy offered big benefits in previously untreated lung cancer patients, either when given on its own or with chemotherapy.

Advancing issues outnumbered decliners on the NYSE by 2,314 to 369. On the Nasdaq, 1,795 issues rose and 426 fell.

The S&P 500 index showed 15 new 52-week highs and one new lows, while the Nasdaq recorded 56 new highs and seven new lows.

 

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D’Silva)

 

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Published at Mon, 10 Oct 2016 20:56:36 +0000

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Q3 Review: Ten Economic Questions for 2016

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By PublicDomainPictures from PixabayQ3 Review: Ten Economic Questions for 2016

by Bill McBride on 10/10/2016 09:59:00 AM

Q3 Review: Ten Economic Questions for 2016

by Bill McBride on 10/10/2016 09:59:00 AM

At the end of last year, I posted Ten Economic Questions for 2016. I followed up with a brief post on each question. The goal was to provide an overview of what I expected in 2016 (I don’t have a crystal ball, but I think it helps to outline what I think will happen – and understand – and change my mind, when the outlook is wrong).

By request, here is a quick Q3 review. I’ve linked to my posts from the beginning of the year, with a brief excerpt and a few comments:

10) Question #10 for 2016: How much will housing inventory increase in 2016?

Right now my guess is active inventory will increase in 2016 (inventory will decline seasonally in December and January, but I expect to see inventory up again year-over-year in 2016). I don’t expect a double digit surge in inventory, but maybe a mid-single digit increase year-over-year.  If correct, this will keep house price increases down in  2015 (probably lower than the 5% or so gains in 2014 and 2015).

According to the August NAR report on existing home sales, inventory was down 10.1% year-over-year in August, and the months-of-supply was at 4.7 months.  It now appears inventory will decrease in 2016.  I changed my view on this earlier this year.

Two of the key reasons inventory is low: 1) A large number of single family home and condos were converted to rental units. Last year, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the U.S., up from 10.7 million in 2000. Many of these houses were purchased by investors, and rents have increased substantially, and the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers. 2) Baby boomers are aging in place (people tend to downsize when they are 75 or 80, in another 10 to 20 years for the boomers). Instead we are seeing a surge in home improvement spending, and this is also limiting supply.

9) Question #9 for 2016: What will happen with house prices in 2016?

Low inventories, and a decent economy suggests further price increases in 2016. However I expect we will see prices up less in 2016, than in 2015, as measured by these house price indexes – mostly because I expect more inventory.

If is early, but the recently released Case-Shiller data showed prices up 5.1% year-over-year in July. The price increase is a little lower than in 2015 (prices were up 5.25% nationally in 2015), even with less inventory.

8) Question #8 for 2016: How much will Residential Investment increase?

My guess is growth of around 4% to 8% in 2016 for new home sales, and about the same percentage growth for housing starts. Also I think the mix between multi-family and single family starts will shift a little more towards single family in 2016.

Through August, starts were up 6.1% year-over-year compared to the same period in 2015.  New home sales were up 13.3% year-over-year.  My guess is starts will increase about 4% to 8% this year (as expected), new home sales will be little higher.

7) Question #7 for 2016: What about oil prices in 2016?

It is impossible to predict an international supply disruption, however if a significant disruption happens, then prices will move higher. Continued weakness in Europe and China seems likely, however sluggish demand will be somewhat offset by less tight oil production. It seems like the key oil producers (Saudi, etc) will continue production at current levels. This suggests in the short run (2016) that prices will stay low, but probably move up a little in 2016. I’ll guess WTI will be up from the current price [WTI at $38 per barrel] by December 2016 (but still under $50 per barrel).

As of this morning, WTI futures are at $51 per barrel.

6) Question #6 for 2016: Will real wages increase in 2016?

For this post the key point is that nominal wages have been only increasing about 2% per year with some pickup in 2015. As the labor market continues to tighten, we should start see more wage pressure as companies have to compete more for employees. I expect to see some further increase in nominal wage increases in 2016 (perhaps over 3% later in the year). The year-over-year change in real wages will depend on inflation, and I expect headline CPI to pickup some this year as the impact on headline inflation of declining oil prices fades.

Through September, nominal hourly wages were up 2.6% year-over-year. This is a pickup from last year – and wage growth appears to be trending up. It looks like Wages will increase at a faster rate in 2016.

5) Question #5 for 2016: Will the Fed raise rates in 2016, and if so, by how much?

I’ve seen several people arguing the Fed will be cutting rates by the end of 2016 – I think that is unlikely. Instead I think the Fed will be cautious – and they will not want to reverse course. Right now I think something around three rate hikes in 2016 is likely.

Events have pushed the Fed to delay rate increases, and it now looks like zero or one are the most likely number of rate hikes in 2016.  My guess right now is the Fed will hike rates in December.

4) Question #4 for 2016: Will the core inflation rate rise in 2016? Will too much inflation be a concern in 2016?

Due to some remaining slack in the labor market (example: elevated level of part time workers for economic reasons), I expect these measures of inflation will be close to the Fed’s target in 2016.

So currently I think core inflation (year-over-year) will increase further in 2016, but too much inflation will not be a serious concern in 2016.

It is early, but inflation has moved up close to the Fed target through August.

3) Question #3 for 2016: What will the unemployment rate be in December 2016?

Depending on the estimate for the participation rate and job growth (next question), it appears the unemployment rate will decline to around 4.5% by December 2016. My guess is based on the participation rate declining slightly in 2016 and for decent job growth in 2016 (however less in 2016 than in 2015).

The unemployment rate was 5.0% in September, unchanged from 5.0% in December.  I still expect the unemployment rate to decline later this year.

2) Question #2 for 2016: How many payroll jobs will be added in 2016?

Energy related construction hiring will decline in 2016, but I expect other areas of construction to be solid. For manufacturing, growth in the auto sector will probably slow this year, but the drag on manufacturing employment from the strong dollar should be less in 2016.

As I mentioned above, in addition to layoffs in the energy sector, exporters will have a difficult year – but probably not the severe contraction as in 2015, and more companies will have difficulty finding qualified candidates. Even with some boost from lower oil prices – and some additional public hiring, I expect total jobs added to be lower in 2016 than in 2015.

So my forecast is for gains of around 200,000 payroll jobs per month in 2015. Lower than in 2015, but another solid year for employment gains given current demographics.

Through September 2016, the economy has added 1.6 million jobs; or 178,000 per month.  It now appears employment gains will be lower than in 2015 (as expected), and somewhat below 200,000 per month in 2016.

1) Question #1 for 2016: How much will the economy grow in 2016?

In addition, the sharp decline in oil prices should be a net positive for the US economy in 2016. And, hopefully, the negative impact from the strong dollar will fade in 2016. The most likely growth rate is in the mid-2% range again …

GDP growth was sluggish again in the first half (just up 1.1% annualized), and GDP is now tracking 2.1% in Q3.

Currently it looks like 2016 is unfolding mostly as expected with some key exceptions (one of the reasons I write down what I think will happen).  I changed my view on Fed rate hikes earlier this year, and now I expect only 1 hike in 2016.  I’ve also revised down my outlook for GDP and existing home inventory is declining again this year.

Residential investment, house prices, oil prices, inflation, wage growth and employment are unfolding about as I expected.

Read more at http://www.calculatedriskblog.com/2016/10/q3-review-ten-economic-questions-for.html#wJhtHIuzl8jPRA9A.99

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Published at Mon, 10 Oct 2016 13:59:00 +0000

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European stocks rise helped by oil stocks; Deutsche Bank rebounds

European stocks rise helped by oil stocks; Deutsche Bank rebounds

 

(ADVISORY- Follow European and UK stock markets in real time on
the Reuters Live Markets blog on Eikon – see cpurl://apps.cp./cms/?pageId=livemarkets)
Adds details, closing prices)

 

* STOXX 600 rises 0.7 pct

* Oil stocks biggest sectoral gainer

* Deutsche Bank rises at end of volatile day

* William Hill rises on Amaya merger talks

By Sudip Kar-Gupta and Danilo Masoni

 

LONDON/MILAN, Oct 10 European shares rose on
Monday, reversing earlier weakness as oil stocks rallied on the
back of stronger crude prices.

The pan-European STOXX 600 index rose 0.7 percent,
rising for the first time in four sessions days.

The STOXX Oil index rose 1.9 percent, making it the
biggest gainer, as Brent crude prices rose to their highest in a
year after Russia said it was ready to join a proposed deal to
cap oil production in a bid to stem a price slide.

 

Shares in oil majors Royal Dutch Shell, Total
and Eni all rose by more than 2 percent.

Deutsche Bank rose 3.4 percent, reversing earlier
losses after Austria’s finance minister Hans Schelling said he
believed the German lender’s problems could be resolved without
collateral damage.

However some investors were cautious on the stock, which
fell as much as 3.7 percent earlier in the session due to
disappointment at a lack of progress in the company’s battle
against a demand by U.S. authorities for up to $14 billion over
misselling allegations.

 

“I would still steer clear of Deutsche Bank. They were never
going to sort out the U.S. issues that quickly, and whatever
happens, I still think they will need to have a rights issue,”
said Terry Torrison, managing director at Monaco-based McLaren
Securities. The stock is down around 50 percent so far in 2016.

Shares in William Hill climbed 2.8 percent after the
British gambling company said it was in merger talks with
Canadian online peer Amaya.

EasyJet, which issued a profit warning last week,
fell 2.3 percent after SocGen cut its rating on the stock to
“sell” from “hold”.

Some traders said equities remained their favoured asset
class, since record low interest rates in the euro zone and
Britain had hit returns on bonds and cash, driving investors to
the better returns on offer from the stock market.

“My view remains to buy the dip with interest rates
remaining at these low levels,” said Lex Van Dam, hedge fund
manager at Hampstead Capital LLP.

(Editing by Mark Heinrich)

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Published at Mon, 10 Oct 2016 16:10:58 +0000

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UPDATE 1-Markets lean more toward Clinton win after Trump video

 

Republican presidential nominee Donald Trump is reflected in a mirror (R) as he meets with hispanic business leaders during a campaign stop in Las Vegas, Nevada, U.S., October 5, 2016.
By Caroline Valetkevitch and Rodrigo Campos | NEW YORK

Wall Street stock index futures were little changed throughout Sunday’s highly contentious presidential debate, indicating that markets continue to view that Democrat Hillary Clinton holds an edge in the Nov. 8 election against her Republican rival, Donald Trump.

The 90-minute debate got off to a chilly start when Clinton and Trump greeted each other without the traditional handshake.

It quickly turned into an acrimonious discussion of a 2005 video that emerged on Friday in which Trump was heard using vulgar language and talking about groping women without consent.

Investors said there was not enough in terms of policy substance in Sunday’s debate to change the market’s perception of the direction of the race.

“I don’t think it changed people’s opinions in the investing community that Clinton is more likely to win, as she was before the debate, certainly after Friday,” said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

In a video released on Friday, Trump is heard talking on an open microphone in 2005 about groping women and trying to seduce a married woman. The video was taped only months after Trump married his third wife, Melania.

“There is still time to go and more things that could happen, but financial advisors are probably starting to feel they need to think about a Clinton win in terms of an investment thesis for 2017,” Meckler said.

He said such a thesis would likely include government intervention in healthcare, particularly medicine prices, and little support for coal as an energy source.

S&P e-mini futures remained in a tight range throughout the debate, slightly higher than at the close on Friday.

“The market declared tonight’s debate a draw and has no more clue after debate than before, at least not in watching the S&P futures. Once again the debate was great theater, but did not give the market any insight,” said JJ Kinahan, chief market strategist at TD Ameritrade.

“Despite the night’s civil ending, it was hard to glean much information, as a good part of the debate was simply a name-calling fest.”

Strategists in a recent Reuters equity poll mostly viewed an election victory on Nov. 8 by Clinton as more positive for the stock market through the end of the year, largely because her positions -unlike her opponent’s- are well known.

Steven Englander, global head of G10 currency strategy at CitiFX in New York, said: “Both Trump and Clinton supporters expected that emerging market currencies and U.S. equities would go down and the VIX .VIX would go up if Trump were to win and vice versa if Clinton wins,” he added.

Trump has been critical of a U.S. trade deal with Mexico and Canada as well as other trade deals, and has promised to build a border wall and make Mexico pay for it.

 

The Mexican peso rose as much as 2 percent on Sunday and was last trading up 1.3 percent versus the greenback. S&P 500 e-minis ESc1, which were up 6 points shortly after opening three hours before the debate began, were up 5.25 points, or 0.24 percent.

“It’s a positive reaction (in stocks), and it’s very consistent with what the market has been discounting, which is that Clinton will win and that’s good news,” said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York, before the debate.

“It’s also saying the House of Representatives will stay in the hands of the Republicans,” he added.

U.S. stocks briefly gained ground following a perceived win by Clinton in the first presidential debate last month.

(Reporting by Caroline Valetkevitch; Additional reporting by Jennifer Ablan; Editing by Alan Crosby, Alistair Bell & Shri Navaratnam)

REUTERS/Mike Segar

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Published at Mon, 10 Oct 2016 01:04:36 +0000

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An Important Question for Active Traders

 

An Important Question for Active Traders

One question active traders too often fail to ask is, “What would I be doing with my life if I weren’t trading?”

We’re familiar with the direct costs of trading, such as the expenses we incur for software, commissions, and the like.  Less clear are the indirect costs–and especially the opportunity costs–associated with trading.  When we’re glued to screens, there are many activities we cannot participate in.  Some of those activities may represent areas of strength, ones where we could excel and contribute.  

I meet many traders who limp along in their profitability, afraid to ask the big questions, because they not sure what they would do with their lives if they weren’t trading.  They justify trading as a “passion”, when in fact it’s a black hole that has sucked them in so far that they cannot see an alternative future.

Is your trading giving you the financial and emotional returns you desire?

Are you a better person for your trading, or does trading interfere with relationships and other important parts of life, such as your physical fitness and emotional well-being?

Are there things you could–and maybe even should–be doing in your life that can’t be accomplished because trading gets in the way?

Per Bob Marley’s question above, are you truly satisfied with the life you’re living?

Most traders ask how they can become better traders.  Few ask whether they truly should be trading.  

Sometimes the answer is not trading versus not trading, but figuring out how to make trading fit into your life, rather than fitting your life to marketsWhen I developed a medium term trading model, I discovered that opportunity is asymmetrically distributed during any given year.  There are stretches of time with little opportunity, other periods with more opportunity, and a few periods with unusually good opportunity.  It’s possible to participate during occasions with high opportunity, profit from markets and market involvement, and still have a life for a fulfilling career, family, and personal pursuits.

The goal is not to be a profitable trader.  The goal is to profit from the life you live.

Further Reading:  Trading as an Addiction
.

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Published at Sun, 09 Oct 2016 13:58:00 +0000

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Banks ponder the meaning of life as Deutsche agonizes

Banks ponder the meaning of life as Deutsche agonizes

A statue is pictured next to the logo of Germany’s Deutsche Bank in Frankfurt, Germany September 30, 2016.

REUTERS/Kai Pfaffenbach/File Photo

 

By Carmel Crimmins and Olivia Oran | WASHINGTON

It wasn’t just Deutsche Bank that was grappling with big questions about the future at the International Monetary Fund meetings in Washington last week.

The German bank is scrambling to overhaul its operations as it faces a multi-billion dollar fine for selling toxic mortgage-backed securities in the United States.

But many others in the banking industry are also still figuring out what they should be doing, nearly a decade after the financial crisis, as they grapple with anemic economic growth, wafer-thin returns on lending and the possibility that regulators will further hike their cost of doing business.

“This new world of low interest rates and even negative interest rates is something that is very difficult,” said Frederic Oudea, the chief executive of French bank Societe Generale.

“It is a game changer, not just for banks but for the whole financial industry,” he told an audience from the Institute of International Finance (IIF), a trade group for big banks that holds its annual meeting alongside the IMF.

Deutsche Bank’s immediate obstacle is the U.S. Department of Justice’s demand for a massive fine over the sale of bad mortgage bonds that could far exceed the 5.5 billion euros ($6.2 billion) in provisions that the bank has set aside. Such a bill could require it to raise more capital.

But Deutsche Bank’s fundamental problem is that its large investment banking business doesn’t fit the post-crisis era.

Chief Executive John Cryan is in the middle of an overhaul, cutting jobs and selling assets. But with interest rates showing no signs of lifting, he needs to move fast.

Since the crisis of 2008, banks on both sides of the Atlantic have shored up their defenses against future losses, adding hundreds of billions of dollars in equity capital and shedding loss-making assets.

Sergio Ermotti, the chief executive officer of Swiss bank UBS, said those defenses had proved their worth in recent weeks when other European banks were largely insulated from the lurch in Deutsche Bank’s shares.

But with rates expected to stay lower for longer, more banks will be under pressure to change with the IMF warning last week that lenders in Germany, Italy and Portugal needed to take urgent action to address old, non-performing loans and bloated, inefficient business models.

“Crisis is the wrong word. We are in the middle inning of the reshaping of the financial landscape,” said Mark McCombe, global head of institutional client business at asset manager BlackRock.

THE MEANING OF LIFE

U.S. bankers attending the IIF meeting were far more upbeat than their European counterparts.

JPMorgan Chase CEO Jamie Dimon, Morgan Stanley head James Gorman and Citigroup boss Michael Corbat, did their version of the “Three Amigos,” taking to the stage together to talk up the strength of the U.S. consumer and their own roles in the global economy.

In a separate session, Goldman Sachs Group President Gary Cohn said the U.S. banking system was in the “best shape it has ever, ever been by far.”

Like their European rivals, many U.S. banks are struggling to get shareholder returns above their cost of capital, but they are making more progress because they wrote off larger portions of their bad loans earlier – enabling them to return to growth more quickly – and most of their crisis-era litigation costs are behind them. The U.S. economy is also improving at a faster clip than Europe.

“Is it sustainable for any sector to have a return on equity in the long-term that is below what shareholders expect? I don’t think so. Shareholders have been, so far, relatively patient. We should aim to sort out what can be sorted out,” said Oudea.

Britain’s vote to exit the European Union, known as “Brexit,” is another headwind facing international banks, with the UK financial industry risking a loss of up to 38 billion pounds ($48.34 billion) in revenue if the country has only limited access to the European Union’s single market, according to one study.

“The big winner for Brexit will be New York; you’ll see more business moving to New York,” Gorman said at the IIF meeting.

The competition from technology companies in banks’ traditional markets, such as lending and payments, has also ramped up the pressure to change.

In the pre-crisis days, banks would have merged to cut costs, but regulators are now much less in favor of allowing the creation of big, cross-border lenders which could disrupt markets if they got into trouble.

Instead, banks are left to swing the ax where they can and ideally build big market positions in areas that are not penalized by big capital charges, such as consumer lending and asset management.

“The transformation process is still ongoing and it is painful,” said Alex Manson, global head of transaction banking at Standard Chartered Bank. “But the quicker you can define what it is you stand for, the quicker you can go to execution from meaning of life mode.”

($1 = 0.8928 euros)

(Editing by Bill Rigby)

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Published at Sun, 09 Oct 2016 11:05:19 +0000

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Kuroda says no change to BOJ’s balance sheet management

Kuroda says no change to BOJ’s balance sheet management

Bank of Japan Governor Haruhiko Kuroda speaks to reporters at the Willard Intercontinental Hotel during the annual meetings of the IMF and World Bank Group in Washington, October 6, 2016.REUTERS/James Lawler Duggan

Oct 8 Bank of Japan Governor Haruhiko Kuroda said on Saturday there will be no significant changes in the management of the central bank’s balance sheet going forward under its new framework.

“From the viewpoint of policymakers, a negative interest rate policy and asset purchases are not mutually exclusive,” Kuroda said in a speech at Brookings Institution.

He also played down the idea by some academics that central banks should raise their inflation targets from 2 percent to around 4 percent to address declines in inflation expectations.

“Based on Japan’s experience, the argument that a central bank can lift inflation expectations of various entities simply by raising its inflation target seems a bit naive to me.”

The BOJ last month shifted its policy target to interest rates from base money, a move some analysts saw as paving a way for a future tapering of the bank’s massive balance sheet. (Reporting by Leika Kihara; Editing by Andrea Ricci)

 

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Published at Sat, 08 Oct 2016 20:23:15 +0000

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Schedule for Week of Oct 2, 2016

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By PublicDomainPictures from PixabaySchedule for Week of Oct 2, 2016

Schedule for Week of Oct 2, 2016

by Bill McBride on 10/08/2016 08:01:00 AM

The key economic report this week is September Retail Sales on Friday.

A key focus will be on the second Presidential debate on Sunday, Oct 9th.

—– Sunday, Oct 9th —–

At 9:00 PM ET, the Second Presidential Debate, at Washington University in St. Louis, St. Louis, MO

—– Monday, Oct 10th —–

10:00 AM ET: The Fed will release the monthly Labor Market Conditions Index (LMCI).

—– Tuesday, Oct 11th —–

6:00 AM ET: NFIB Small Business Optimism Index for September.

—– Wednesday, Oct 12th —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

image: https://1.bp.blogspot.com/-iU_MYSuPOLk/V9AfIzW_7iI/AAAAAAAAotQ/SusAMjVlgpQCMv5JLVw78KU_O7pZAm9gQCLcB/s320/JOLTSJuly2016.PNG

Job Openings and Labor Turnover Survey10:00 AM: Job Openings and Labor Turnover Survey for August from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in July to 5.871 million from 5.643 million in June.

The number of job openings (yellow) were up 1% year-over-year, and Quits were up 9% year-over-year.

2:00 PM: The Fed will release the FOMC minutes for the September meeting.

—– Thursday, Oct 13th —–

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 254 thousand initial claims, up from 249 thousand the previous week.

—– Friday, Oct 14th —–

8:30 AM: The Producer Price Index for September from the BLS. The consensus is for a 0.2% increase in prices, and a 0.1% increase in core PPI.

image: https://2.bp.blogspot.com/-VzftSzizsus/V9qW8hQt-QI/AAAAAAAAowQ/ObvFU5zD_WQTtxRmDMEobKdMD4_o6PWCgCLcB/s320/RetailAug2016.PNG

Retail Sales8:30 AM ET: Retail sales for September will be released.  The consensus is for 0.6% increase in retail sales in September.

This graph shows retail sales since 1992 through August 2016.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for August.  The consensus is for a 0.1% increase in inventories.

10:00 AM: University of Michigan’s Consumer sentiment index (preliminary for October). The consensus is for a reading of 92.0, up from 91.2 in August.

1:30 PM: Speech by Fed Chair Janet Yellen, Macroeconomic Research After the Crisis, At the Federal Reserve Bank of Boston’s Annual Research Conference: The Elusive “Great” Recovery: Causes and Implications for Future Business Cycle Dynamics, Boston, Massachusetts

Read more at http://www.calculatedriskblog.com/2016/10/schedule-for-week-of-oct-2-2016_8.html#KyY1ITx1ds3Y0hlg.99

by Bill McBride on 10/08/2016 08:01:00 AM

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Published at Sat, 08 Oct 2016 12:01:00 +0000

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Hedge funds post modest rise in September, still lag stock market: HFR

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By Gellinger from PixabayHedge funds post modest rise in September, still lag stock market: HFR

 

Hedge fund returns inched ahead in September to finish their strongest quarter of the year, new data released on Friday showed, but they are still lagging the broader stock market’s gains.

 

The average hedge fund gained 0.62 percent in September, leaving it up 4.2 percent for the first nine months of 2016, research firm Hedge Fund Research said. The Standard & Poor’s 500 stock index has climbed 7.8 percent this year.

With stock markets rebounding in the last weeks, many hedge funds boasted relatively strong returns in September. Daniel Loeb’s Third Point climbed 1.1 percent, while Citadel’s Wellington fund gained 2 percent, and Barry Rosenstein’s Jana Partners returned 2 percent, the funds told investors. That leaves Third Point up 7.2 percent for the year, while Citadel is up 2.6 percent and Jana Partners trimmed its losses to 1.1 percent.

Hedge fund returns have drawn particular scrutiny in recent months as some large investors, including pension funds in Rhode Island and New Jersey, are pulling money out, complaining about lackluster returns and high fees. Poor performance has also forced some firms, including most recently Richard Perry’s Perry Capital, out of business.

 

As a group, hedge funds gained 3 percent during the third quarter with some, like Citadel which surged 7.3 percent, scoring even bigger gains. They gained 1.8 percent during the second quarter after a 0.60 percent loss for the first three months of the year.

 

Funds concentrating on technology and healthcare performed the best last month, notching 4 percent gains, HFR said. But as a group they suffered heavy losses at the start of the year and are up just 3.22 percent for the first nine months of 2016.

But for some funds, September was a tough month. David Einhorn’s Greenlight Capital saw its gains for the year shrink to 4.5 percent after losing nearly 1 percent in September and Bill Ackman’s Pershing Square Holdings fell 5.3 percent last month leaving the fund down 18.8 percent for the year, investor documents seen by Reuters show.

 

(Reporting by Svea Herbst-Bayliss; Editing by David Gregorio)

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Published at Fri, 07 Oct 2016 20:53:23 +0000

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Earnings season begins as White House race heats up

Earnings season begins as White House race heats up

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 28, 2016.
By Caroline Valetkevitch | NEW YORK

The roughly month-long corporate earnings announcement season that kicks off on Wall Street next week coincides with the final, most intense stretch of the U.S. presidential campaign.

If a particularly strong or weak batch of earnings were to tip the market in one direction, stocks could help determine investors’ mood heading into voting booths on Nov. 8.

Strategists in a recent Reuters poll mostly viewed a victory by Democrat Hillary Clinton as more positive for stocks until year end than a win by Republican Donald Trump, largely because her positions are well known.

But the race is still close and two presidential debates remain, including one late Sunday, Oct. 9.

A perceived win by Clinton in the first debate on Sept. 26 briefly boosted stocks, but did nothing to pull the benchmark S&P 500 index from its sideways drift since early July. It is now 1.6 percent below its historic high set in August. Some analysts say uncertainty surrounding the election is adding to investor caution.

Earnings could move the bar for stocks more than anything else, especially because of their higher-than-average valuations.

“If there’s something that can help the outlook for earnings, then it’s going to be good news for the stock market. It is the most important variable,” said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York.

“What’s needed is something that’s going to make this look undervalued.”

The S&P 500’s forward price-to-earnings ratio sits at 17, above its long-term average of 15.

As earnings season kicks off next week, the hope among some investors is that the period will mark an end to the year-long U.S. profit recession.

While analysts expect third-quarter earnings will show a 0.7 percent decline from a year ago, that number is likely to move to the plus side based on the typically high percentage of companies that surpass analysts’ profit expectations, Thomson Reuters data shows.

From the start of an earnings season to the end, the S&P 500 earnings forecast has had a median gain of 3.4 percentage points since 2002, the data shows.

If that’s the case this time around, third-quarter S&P 500 earnings could end up with growth of about 2.7 percent, which would be biggest increase since the last quarter of 2014.

The increase, however, may not be large enough to convince some investors that stocks are ready for a late-year rally.

“I expect companies to beat expectations – they always do. Any way you slice it, we’re not going to see the growth that we were hoping for last spring. It’s not going to happen,” said Brad McMillan, chief investment officer for Commonwealth Financial in Waltham, Massachusetts.

 

Revenue for the past quarter is expected to have increased 2.5 percent, which would be the first year-over-year sales increase for S&P 500 companies since the end of 2014. It also is likely to rise as companies beat expectations.

A lot could depend on energy results, which again are expected to be the biggest drag on S&P 500 quarterly earnings.

U.S. oil prices averaged almost $45 a barrel during the third quarter, not far from the average during the same period in 2015. Prices have risen to nearly $50 recently and if that level can be sustained it could boost forecasts from energy companies, Johnson said.

The recent sharp decline in the British pound versus the U.S. dollar underscored lingering concern over Britain’s late-June vote to exit the European Union. A wide range of U.S. companies conceded in the last reporting period they expect a hit but were unsure how deep it may be.

Among companies due to report next week are Alcoa as well as several top banks: Citigroup, JPMorgan Chase and recently battered Wells Fargo.

(Reporting by Caroline Valetkevitch; Editing by Daniel Bases and James Dalgleish)

REUTERS/Brendan McDermid

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Published at Fri, 07 Oct 2016 22:58:44 +0000

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Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama

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By markusspiske from Pixabay

Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama

Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama

by Bill McBride on 10/07/2016 02:43:00 PM

By request, here is another update of an earlier post through the September 2016 employment report including all revisions.

NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I’ll just stick to the beginning of each term.

Note: We frequently use Presidential terms as time markers – we could use Speaker of the House, or any other marker.

Important: There are many differences between these periods. Overall employment was smaller in the ’80s, however the participation rate was increasing in the ’80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

First, here is a table for private sector jobs. The top two private sector terms were both under President Clinton.  Reagan’s 2nd term saw about the same job growth as during Carter’s term.  Note: There was a severe recession at the beginning of Reagan’s first term (when Volcker raised rates to slow inflation) and a recession near the end of Carter’s term (gas prices increased sharply and there was an oil embargo).

 

Term Private Sector
Jobs Added (000s)
Carter 9,041
Reagan 1 5,360
Reagan 2 9,357
GHW Bush 1,510
Clinton 1 10,884
Clinton 2 10,082
GW Bush 1 -811
GW Bush 2 415
Obama 1 1,921
Obama 2 9,1711
144 months into 2nd term: 10,005 pace.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). Presidents Carter and George H.W. Bush only served one term, and President Obama is in the final months of his second term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (blue) took office during the financial crisis and great recession. There was also a significant recession in the early ’80s right after Mr. Reagan (yellow) took office.

There was a recession towards the end of President G.H.W. Bush (purple) term, and Mr Clinton (light blue) served for eight years without a recession.

image: https://3.bp.blogspot.com/-YMlfzixuzQY/V8mUQeReQuI/AAAAAAAAorM/cb0M2Q-NJTgs4PqOk3SQqCYs5vSs61BbgCLcB/s320/PrivateAug2016.PNG

Private Sector PayrollsClick on graph for larger image.

The first graph is for private employment only.

The employment recovery during Mr. G.W. Bush’s (red) first term was sluggish, and private employment was down 811,000 jobs at the end of his first term.   At the end of Mr. Bush’s second term, private employment was collapsing, and there were net 396,000 private sector jobs lost during Mr. Bush’s two terms.

Private sector employment increased slightly under President G.H.W. Bush (purple), with 1,510,000 private sector jobs added.

Private sector employment increased by 20,966,000 under President Clinton (light blue), by 14,717,000 under President Reagan (yellow), and 9,041,000 under President Carter (dashed green).

There were only 1,921,000 more private sector jobs at the end of Mr. Obama’s first term.  Forty four months into Mr. Obama’s second term, there are now 11,092,000 more private sector jobs than when he initially took office.

image: https://1.bp.blogspot.com/-yugy9PWGGY8/V8mUSoucxsI/AAAAAAAAorQ/4XQLjnCkuugEeyiAnLjILXOY2y7xpWoIwCLcB/s320/PublicAug2016.PNG

Public Sector Payrolls A big difference between the presidencies has been public sector employment.  Note the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010.

The public sector grew during Mr. Carter’s term (up 1,304,000), during Mr. Reagan’s terms (up 1,414,000), during Mr. G.H.W. Bush’s term (up 1,127,000), during Mr. Clinton’s terms (up 1,934,000), and during Mr. G.W. Bush’s terms (up 1,744,000 jobs).

However the public sector has declined significantly since Mr. Obama took office (down 398,000 jobs). This has been a significant drag on overall employment.

And a table for public sector jobs. Public sector jobs declined the most during Obama’s first term, and increased the most during Reagan’s 2nd term.

 

Term Public Sector
Jobs Added (000s)
Carter 1,304
Reagan 1 -24
Reagan 2 1,438
GHW Bush 1,127
Clinton 1 692
Clinton 2 1,242
GW Bush 1 900
GW Bush 2 844
Obama 1 -708
Obama 2 3101
144 months into 2nd term, 338 pace

Looking forward, I expect the economy to continue to expand through 2016 (at least), so I don’t expect a sharp decline in private employment as happened at the end of Mr. Bush’s 2nd term (In 2005 and 2006 I was warning of a coming down turn due to the bursting of the housing bubble – and I predicted a recession in 2007).

For the public sector, the cutbacks are over.  Right now I’m expecting some further increase in public employment during the last few months of Obama’s 2nd term, but obviously nothing like what happened during Reagan’s second term.

Below is a table of the top four presidential terms for private job creation (they also happen to be the four best terms for total non-farm job creation).

Clinton’s two terms were the best for both private and total non-farm job creation, followed by Reagan’s 2nd term.

Currently Obama’s 2nd term is on pace to be the 3rd best ever for private job creation.  However, with very few public sector jobs added, Obama’s 2nd term is only on pace to be the fourth best for total job creation.

Note: Only 310 thousand public sector jobs have been added during the forty four months of Obama’s 2nd term (following a record loss of 708 thousand public sector jobs during Obama’s 1st term).  This is less than 25% of the public sector jobs added during Reagan’s 2nd term!

 

Top Employment Gains per Presidential Terms (000s)
Rank Term Private Public Total Non-Farm
1 Clinton 1 10,884 692 11,576
2 Clinton 2 10,082 1,242 11,312
3 Reagan 2 9,357 1,438 10,795
4 Carter 9,041 1,304 10,345
Obama 21 9,171 310 9,481
Pace2 10,005 338 10,343
144 Months into 2nd Term
2Current Pace for Obama’s 2nd Term

The last table shows the jobs needed per month for Obama’s 2nd term to be in the top four presidential terms. Right now it looks like Obama’s 2nd term will be 2nd or 3rd best for private employment, and probably 4th or 5th for total employment.

 

Average Jobs needed per month (000s)
for remainder of Obama’s 2nd Term
to Rank Private Total
#1 428 524
#2 228 461
#3 47 329
#4 -33 216

 

Read more at http://www.calculatedriskblog.com/2016/10/public-and-private-sector-payroll-jobs.html#yQoPVIsCRMmW46OV.99

by Bill McBride on 10/07/2016 02:43:00 PM

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Published at Fri, 07 Oct 2016 18:43:00 +0000

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Market (ES) Breakdown Starting Now

Yesterday we looked at the confirmation of the flag breakdown… See post here

http://thetraderswire.com/market-es-eminent-breakdown/

Today we are seeing the beginnings of this move. Traditional flag tech analysis 101 indicates a move towards the 2100 range.

You can clearly see the Fed trying to goose this and keep it from a trend day down, and we are a little off the lows of the day, but this is the start of a short-term down move – I believe.

Thoughts?

es-2016-10-07_10-59-36

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BRIEF-Moleculin Biotech announces plan for clinical trial drug production

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building-50084_640from Pixabay

BRIEF-Moleculin Biotech announces plan for clinical trial drug production


Oct 7 Moleculin Biotech Inc

 

* Has secured an agreement with Dermin Sp. Zo. O. (“Dermin”)
to utilize Dermin’s supply of Annamycin for its upcoming
clinical trial

 

* Agreement reached allows company to utilize Annamycin in
upcoming clinical trials rather than having to produce new
Annamycin for own use

 

* Expanded clinical trials on Annamycin by first half of
2017

 

* Company plans to begin expanded clinical trials on
Annamycin by first half of 2017

Source text for Eikon

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Published at Fri, 07 Oct 2016 12:14:17 +0000

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Friday: Jobs

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By geralt from Pixabay

Friday: Jobs

by Bill McBride on 10/06/2016 07:24:00 PM

On Hurricane Matthew, here is the NHC site.

And here is the Miami radar.

And the Melbourne radar.

And for Jacksonville.

Best wishes to all.

Friday:
• At 8:30 AM ET, the Employment Report for September. The consensus is for an increase of 168,000 non-farm payroll jobs added in September, up from the 151,000 non-farm payroll jobs added in August. The consensus is for the unemployment rate to decline to 4.8%.

• At 3:00 PM, Consumer credit from the Federal Reserve.  The consensus is for a $16.8 billion increase in credit.

Read more at http://www.calculatedriskblog.com/2016/10/friday-jobs.html#VETrLrc1oYjSBFYz.99

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Published at Thu, 06 Oct 2016 23:24:00 +0000

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