Many investors saw a good opportunity to trade in currency divergence this quarter. The divergence is definitely there, it’s just the opposite of what many analysts thought would happen.
Following the announcement in Tokyo of a spending plan that the majority of financial specialists considered weak, the yen soared to a monthly peak on Wednesday. There were also important announcements across the pacific as the Federal Reserve indicated they will tighten up monetary stimulus, and a report released on Q2 growth was more disappointing than forecast, causing the greenback to continue its slide.
The paths for the yen and greenback seem to be upside down, opposite to the predictions of prominent hedge funds and other specialists in the past 30 days. The past week’s events have destroyed trader’s strategies of staying underweight on bullish yen bets and putting money on dollar increases.
“It looks like the major stimulus that everyone was expecting in Japan just didn’t happen,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview.
“Helicopter money seems out of the question too and the Fed were far less hawkish than predicted, so where does that the leave the dollar-yen relationship? Probably, it will go even lower,” Lane added, and he is now forecasting the yen to increase further to 96 versus the greenback by December which would be a three year high.
The yen’s continued jump has thrown hedge fund strategies into disarray. Other experienced financial speculators have also lost out, many of whom dropped their net-bullish wagers on the yen by 50% in the last month. Meanwhile, the same investors were upping their net-bullish bets on the greenback to the most since the beginning of 2016.
The yen’s rise comes after the Japanese finance ministry made public a 5 trillion yen plan for extra spending in 2016, in their attempts to kick start the nations faltering economy whilst also trying to stay within the range of their fiscal health projections.
The funds added to the system are part of Shinzo Abe’s promised “28 trillion yen stimulus package” that he made public in a short statement to financial press last Monday. Many believe the announcement was designed to impress the public rather than help the economy.
The Bank of Japan last week expanded their exchange-traded funds program but decided to leave negative interest rates the same.
Friday, August 5, 2016
Thursday, August 4, 2016
Bitcoin shares plunge amid exchange theft
In a security breach reminiscent of the Mt. Gox 2014 case, hackers have stolen nearly $70 million worth of bitcoin from Hong Kong-based exchange Bitifinex, sending shares for the digital currency plunging.
Bitifinex is one of the largest exchanges for bitcoin in the world and it halted trading after the theft was discovered. Shares dipped 6 percent versus the greenback as of 3pm on Wednesday in the Tokyo afternoon session, with its two day slump at 14 percent.
Bitifinex said in a brief statement, which acknowledged that bitcoins were stolen from its users, that they were “thoroughly investigating the breach and will release more details as and when they become clear.”
“In the coming week we will look carefully at the situation and attempt to address the issue of user losses,” said the exchange on their blog. “We beg for patience in the bitcoin community as we investigate the breach.”
Bitfinex confirmed that hackers stole nearly 120,000 bitcoin, equivalent to around $70 million at the current exchange rate. “Although we stopped trading on all our digital currencies, the only one to suffer losses was bitcoin,” they added.
“It’s a huge breach,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview yesterday.
“We’ve seen in the past with similar events that bitcoin is fairly resilient however. This can be devastating in the short term and we all remember Mt. Gox filing for bankruptcy after a similar theft caused a 25 percent drop in bitcoin prices. But fairly quickly it bounced back,” Lane added.
The result of the current incident has been almost $2 billion being wiped from the currency’s market capitalization, according to data from CoinDesk, a news site specializing in bitcoin and digital currencies.
The latest theft comes only a year after Bitfinex announced it was hiring Palo Alto-based BitGo to handle its upgraded security. BitGo has an intricate multi-layer security protocol used to safely store deposits online.
After the new security partnership was made public, Bitifinex said, “It’s very difficult for attackers to get through as two separate organizations need to be compromised in order to gain access.”
Other exchanges, for example OKCoin, choose to store most of its funds offline. Only time will tell if Bitifinex decide to go down that route in the future. Judging by the magnitude of the latest attack, it may be something they are likely to consider.
Bitifinex is one of the largest exchanges for bitcoin in the world and it halted trading after the theft was discovered. Shares dipped 6 percent versus the greenback as of 3pm on Wednesday in the Tokyo afternoon session, with its two day slump at 14 percent.
Bitifinex said in a brief statement, which acknowledged that bitcoins were stolen from its users, that they were “thoroughly investigating the breach and will release more details as and when they become clear.”
“In the coming week we will look carefully at the situation and attempt to address the issue of user losses,” said the exchange on their blog. “We beg for patience in the bitcoin community as we investigate the breach.”
Bitfinex confirmed that hackers stole nearly 120,000 bitcoin, equivalent to around $70 million at the current exchange rate. “Although we stopped trading on all our digital currencies, the only one to suffer losses was bitcoin,” they added.
“It’s a huge breach,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview yesterday.
“We’ve seen in the past with similar events that bitcoin is fairly resilient however. This can be devastating in the short term and we all remember Mt. Gox filing for bankruptcy after a similar theft caused a 25 percent drop in bitcoin prices. But fairly quickly it bounced back,” Lane added.
The result of the current incident has been almost $2 billion being wiped from the currency’s market capitalization, according to data from CoinDesk, a news site specializing in bitcoin and digital currencies.
The latest theft comes only a year after Bitfinex announced it was hiring Palo Alto-based BitGo to handle its upgraded security. BitGo has an intricate multi-layer security protocol used to safely store deposits online.
After the new security partnership was made public, Bitifinex said, “It’s very difficult for attackers to get through as two separate organizations need to be compromised in order to gain access.”
Other exchanges, for example OKCoin, choose to store most of its funds offline. Only time will tell if Bitifinex decide to go down that route in the future. Judging by the magnitude of the latest attack, it may be something they are likely to consider.
Wednesday, August 3, 2016
S&P 500 rallies past Wall St. targets
Traditionally, even stocks that have soared to record new heights can be forecast to go even higher by the professionals on Wall Street. That trend might not fit reality now however.
The S&P 500 was forced down to 2,147.61 on Tuesday, representing over a 1 percent slump in response to U.S. shares dipping to a new monthly low.
Fifteen national brokerages were surveyed on their forecasts regarding a year-end target for the S&P 500, with the average being 2,146 at the start of this month. With yesterday’s 0.5 percent drop, that’s 10 points below the closing mark on Tuesday. It’s the first time in two years that the index has finished above analyst forecasts.
“If you view the market as a fundamentalist, then the reaction we’ve seen in the last couple of days actually makes sense,” says Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management.
“There is no factor that we can see driving the market in an upward direction even though sentiment has swung to be positive in general. There is some divergence among prominent analysts in the financial sector with firms like Goldman Sachs staying relatively bearish on equities and sitting on their cash.”
Market analysts on Wall Street are usually a dependable source of enthusiasm and their annual predictions never fall below market prices for prolonged periods. The members of the survey set the index over two years ago at 2,141 and it has fluctuated around that mark steadily.
However, that solid bullish sentiment has declined this year with the bump in equities, and some analysts have reduced their projections which resulted in a fall of the surveyed average.
A champion of the bearish stance most recently has been Goldman Sachs Group Inc. who set a low target for both the S&P 500 and Europe’s Stoxx 600 gauge, saying they would both dip about 15 percent in the next quarter.
In a report by the firm’s equity strategists they said, “We are staying pretty neutral as we look towards next quarter and remain underweight on stocks and overweight on cash. As we see it, due to equities staying on the expensive side and growth in earnings levelling out, equities could well be at their ceiling for their recent rally.
David Kostin, the company’s U.S. equity chief strategist said the main stock indices may fall sharply as we get close to the holiday season.
The S&P 500 was forced down to 2,147.61 on Tuesday, representing over a 1 percent slump in response to U.S. shares dipping to a new monthly low.
Fifteen national brokerages were surveyed on their forecasts regarding a year-end target for the S&P 500, with the average being 2,146 at the start of this month. With yesterday’s 0.5 percent drop, that’s 10 points below the closing mark on Tuesday. It’s the first time in two years that the index has finished above analyst forecasts.
“If you view the market as a fundamentalist, then the reaction we’ve seen in the last couple of days actually makes sense,” says Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management.
“There is no factor that we can see driving the market in an upward direction even though sentiment has swung to be positive in general. There is some divergence among prominent analysts in the financial sector with firms like Goldman Sachs staying relatively bearish on equities and sitting on their cash.”
Market analysts on Wall Street are usually a dependable source of enthusiasm and their annual predictions never fall below market prices for prolonged periods. The members of the survey set the index over two years ago at 2,141 and it has fluctuated around that mark steadily.
However, that solid bullish sentiment has declined this year with the bump in equities, and some analysts have reduced their projections which resulted in a fall of the surveyed average.
A champion of the bearish stance most recently has been Goldman Sachs Group Inc. who set a low target for both the S&P 500 and Europe’s Stoxx 600 gauge, saying they would both dip about 15 percent in the next quarter.
In a report by the firm’s equity strategists they said, “We are staying pretty neutral as we look towards next quarter and remain underweight on stocks and overweight on cash. As we see it, due to equities staying on the expensive side and growth in earnings levelling out, equities could well be at their ceiling for their recent rally.
David Kostin, the company’s U.S. equity chief strategist said the main stock indices may fall sharply as we get close to the holiday season.
Saturday, July 30, 2016
Euro zone stocks battered by weak crude and bank industries
Commerzbank was the biggest faller in a slew of disheartening banking results in the euro zone this week, while weak crude prices also buffeted the financial bloc.
The German lender reported a steep decline in its Q2 capital and the STOXX 600 index dropped nearly 0.5 percent to 339.6 in this morning’s early session. Overall, the index has declined 8 percent this year even though it reached a 4 week high in the last session.
After the announcement of Commerzbank figures went public, shares dropped 5 percent. Reasoning for the decline was put down to Italian sovereign debt exposure and pension liabilities.
Experts in the field say that while the company still has an exceptional purchase rating, and the current valuation for its stock is on the low side.
“Profitability remains a slight issue,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management.
“Overall though, Commerzbank has done extremely well to shuffle around its business to adapt to the challenges of recent years and we will see the bank return to its previous high levels before too long,” he added.
Friday saw the release of key European bank stress tests and investors were understandably cautious, reflected by a 2 percent drop in the bank index making the banking sector the worst performing industry not just of the quarter but of the whole year.
Super-low interest rates have not helped the situation in Europe and some of the top banks have seen their capital stretched to critically low levels. Lenders such as Deutsch Bank and UniCredit are down 6 percent.
Meanwhile, in the oil sector, BP failed to keep up with second-quarter targets and dropped nearly 3 percent due to falling oil prices affecting their operating margins. The British oil major announced they would reorganize its investment budget for the coming year in response to the decline.
Another Q2 faller was Mediaset, an Italian broadcaster, who were in line for a merger with a French media company who later pulled out of the deal. Their stock dipped 13 percent.
According to data from Goldman Sachs, there have been pleasant surprises included in the start of the earnings season, with basic resources and industrial goods doing well. The worst performers were real estate, banking and household goods, the report said.
By the end of next week over 50 percent of the companies on the STOXX 600 will have reported their earnings.
The German lender reported a steep decline in its Q2 capital and the STOXX 600 index dropped nearly 0.5 percent to 339.6 in this morning’s early session. Overall, the index has declined 8 percent this year even though it reached a 4 week high in the last session.
After the announcement of Commerzbank figures went public, shares dropped 5 percent. Reasoning for the decline was put down to Italian sovereign debt exposure and pension liabilities.
Experts in the field say that while the company still has an exceptional purchase rating, and the current valuation for its stock is on the low side.
“Profitability remains a slight issue,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management.
“Overall though, Commerzbank has done extremely well to shuffle around its business to adapt to the challenges of recent years and we will see the bank return to its previous high levels before too long,” he added.
Friday saw the release of key European bank stress tests and investors were understandably cautious, reflected by a 2 percent drop in the bank index making the banking sector the worst performing industry not just of the quarter but of the whole year.
Super-low interest rates have not helped the situation in Europe and some of the top banks have seen their capital stretched to critically low levels. Lenders such as Deutsch Bank and UniCredit are down 6 percent.
Meanwhile, in the oil sector, BP failed to keep up with second-quarter targets and dropped nearly 3 percent due to falling oil prices affecting their operating margins. The British oil major announced they would reorganize its investment budget for the coming year in response to the decline.
Another Q2 faller was Mediaset, an Italian broadcaster, who were in line for a merger with a French media company who later pulled out of the deal. Their stock dipped 13 percent.
According to data from Goldman Sachs, there have been pleasant surprises included in the start of the earnings season, with basic resources and industrial goods doing well. The worst performers were real estate, banking and household goods, the report said.
By the end of next week over 50 percent of the companies on the STOXX 600 will have reported their earnings.
Friday, July 29, 2016
Dow Chemical reports increased revenues as tie-up draws near
One of the United States best performing companies, Dow Chemical, comfortably beat Wall Street targets in the second quarter as it seeks to finalize a merger with its closest competitor, Dupont.
The reason for the company’s stellar figures is increased demand for its primary product, plastics.
According to a report by the company released Tuesday, operating earnings jumped to 90 cents a share, outperforming Wall Street forecasts by 5 cents.
Dow’s chairman and CEO Andrew Liveris said in a prepared statement, “This quarter our company has yet again delivered significant growth and expansion of operating profits. Considering the current climate in both the geopolitical and market spheres, it’s extraordinary that we could hit fifteen quarters of growth consecutively.”
Although Dow have comfortably and consistently outpaced their rivals, sales for the Michigan based company have dropped to $11 billion, a decline of 6 percent compared to the same quarter in 2015. Crude prices and the impact from the offload of Dow’s chlorine unit can be blamed for the dip.
The statement also mentioned that due to increased demand throughout all of its global demographic strongholds, volume grew 3 percent.
The company has worked hard to reduce costs this year, with the statement claiming that upwards of $80 million has been saved this quarter alone, bringing the semi-annual savings to $190 million. The company looks good to beat the $290 million savings target for the year end.
Earnings will also get a boost from the recent acquisition of Corning Corporation’s silicon unit, which could add over a billion dollars to the company’s profits per year.
The plastics and materials industry will get a shake up when Dow and DuPont complete the proposed merger, which was green lit by major shareholders in a meeting last week.
The agreement is valued at over $140 billion and the process is said to involve a future split into three separate entities, two of which will concentrate on science and agriculture, and will be headquartered in Delaware.
The third entity, a plastics and materials focused concern, will be based in Dow’s spiritual home of Michigan.
Dow produces a broad range of materials from paint to plastics including many products used in the automobile sector. The company employs over 60,000 staff, many in Michigan. However, there could be downsizing on the horizon.
“Everyone involved in the deal knows that there will be significant job cuts coming,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management. “DuPont already made thousands of employees redundant, and Dow announced last week that certain sacrifices will need to be made involving the workforce.”
The reason for the company’s stellar figures is increased demand for its primary product, plastics.
According to a report by the company released Tuesday, operating earnings jumped to 90 cents a share, outperforming Wall Street forecasts by 5 cents.
Dow’s chairman and CEO Andrew Liveris said in a prepared statement, “This quarter our company has yet again delivered significant growth and expansion of operating profits. Considering the current climate in both the geopolitical and market spheres, it’s extraordinary that we could hit fifteen quarters of growth consecutively.”
Although Dow have comfortably and consistently outpaced their rivals, sales for the Michigan based company have dropped to $11 billion, a decline of 6 percent compared to the same quarter in 2015. Crude prices and the impact from the offload of Dow’s chlorine unit can be blamed for the dip.
The statement also mentioned that due to increased demand throughout all of its global demographic strongholds, volume grew 3 percent.
The company has worked hard to reduce costs this year, with the statement claiming that upwards of $80 million has been saved this quarter alone, bringing the semi-annual savings to $190 million. The company looks good to beat the $290 million savings target for the year end.
Earnings will also get a boost from the recent acquisition of Corning Corporation’s silicon unit, which could add over a billion dollars to the company’s profits per year.
The plastics and materials industry will get a shake up when Dow and DuPont complete the proposed merger, which was green lit by major shareholders in a meeting last week.
The agreement is valued at over $140 billion and the process is said to involve a future split into three separate entities, two of which will concentrate on science and agriculture, and will be headquartered in Delaware.
The third entity, a plastics and materials focused concern, will be based in Dow’s spiritual home of Michigan.
Dow produces a broad range of materials from paint to plastics including many products used in the automobile sector. The company employs over 60,000 staff, many in Michigan. However, there could be downsizing on the horizon.
“Everyone involved in the deal knows that there will be significant job cuts coming,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management. “DuPont already made thousands of employees redundant, and Dow announced last week that certain sacrifices will need to be made involving the workforce.”
Thursday, July 28, 2016
This month’s biotech rally shows investor confidence
July saw a welcome comeback for the biotech industry as stocks increased, indicating a return of investor confidence in the sector.
As of the 28th of the month, with tomorrow still offering another full day of trading, there was a 12 percent jump in the Biotechnology index (NBI) with the gauge looking good for the largest monthly increase since 2013.
The current climate in the pharmaceutical sector has been unfavorable due to negative views on drug prices from many of the world’s leading governments. The NBI is still 20 percent below forecasts this year and over 25 percent below last year’s record breaking high.
Many analysts say shrewd investors are taking the chance to snap up the stocks. Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management said, “We seem to be on the precipice of a sentiment change. We are advising our investors to climb aboard the biotech train now while prices are low. The outlook has been bearish for some time, but indicators are right for investment in the industry.”
The downturn in the sector in the first 6 months of the year drove shares to record lows, with many of the largest US biotech firms trading at their cheapest levels in five years. Even today, they are still only 13 times earnings for their price-to-earnings ratios. The normal ratio for the last 5 years has been 17.
“Biotech stocks simply plummeted,” says RBC Capital pharma specialist Michael Yee. “The temptation is now there for investors to improve their portfolio for the industry, especially when many of the big companies were trading with pretty much no pipeline value in the first quarter.”
With the increased activity, stocks are now rising sharply. Biogen shares have gained 20 percent this month, with the firm’s end of month report indicating they will up its forecasts for the coming quarter. Alexion Pharmaceuticals, who produce specialist drugs, jumped 14 percent.
Prominent brokers are now marking the healthcare sector as a field investors should be looking to “overweight” and traders need not worry about volatile markets ahead of the US presidential elections, as those perceived fluctuations have been accounted for already.
Healthcare has pushed up the S&P 500 ladder with a 5 percent gain. Biotech has led the surge, however, the industry is still considered to be underperforming if the whole of 2016 is taken into account.
As of the 28th of the month, with tomorrow still offering another full day of trading, there was a 12 percent jump in the Biotechnology index (NBI) with the gauge looking good for the largest monthly increase since 2013.
The current climate in the pharmaceutical sector has been unfavorable due to negative views on drug prices from many of the world’s leading governments. The NBI is still 20 percent below forecasts this year and over 25 percent below last year’s record breaking high.
Many analysts say shrewd investors are taking the chance to snap up the stocks. Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management said, “We seem to be on the precipice of a sentiment change. We are advising our investors to climb aboard the biotech train now while prices are low. The outlook has been bearish for some time, but indicators are right for investment in the industry.”
The downturn in the sector in the first 6 months of the year drove shares to record lows, with many of the largest US biotech firms trading at their cheapest levels in five years. Even today, they are still only 13 times earnings for their price-to-earnings ratios. The normal ratio for the last 5 years has been 17.
“Biotech stocks simply plummeted,” says RBC Capital pharma specialist Michael Yee. “The temptation is now there for investors to improve their portfolio for the industry, especially when many of the big companies were trading with pretty much no pipeline value in the first quarter.”
With the increased activity, stocks are now rising sharply. Biogen shares have gained 20 percent this month, with the firm’s end of month report indicating they will up its forecasts for the coming quarter. Alexion Pharmaceuticals, who produce specialist drugs, jumped 14 percent.
Prominent brokers are now marking the healthcare sector as a field investors should be looking to “overweight” and traders need not worry about volatile markets ahead of the US presidential elections, as those perceived fluctuations have been accounted for already.
Healthcare has pushed up the S&P 500 ladder with a 5 percent gain. Biotech has led the surge, however, the industry is still considered to be underperforming if the whole of 2016 is taken into account.
$10 billion business software takeover imminent
U.S. software firm NetSuite Inc announced on Wednesday they are being taken over by business software maker Oracle Corp in a deal thought to be worth around $10 billion.
The deal is seen by many as an effort by Oracle to get a foot in the door of one of tech’s fasting growing fields, cloud computing.
Markets buzzed on news of the buyout, with NetSuite shares jumping a huge 19 percent to $108.08 after the noon session. Oracle shares remained at $40.95.
“Some might say it’s an expensive purchase for Oracle, with the current share price just under what they are offering,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview.
“We see this as a shrewd buy. The software and business services sectors have been overlapping for a while now and companies, which cover both bases are outperforming estimates, sometimes by 10 to 15 times the sales. Nearly 10 percent of Oracle’s revenue comes from cloud-software sales currently,” Lane added.
Both NetSuite and Oracle supply companies with business software applications that help them automate front and backend tasks across a wide range of sectors.
Given the decline in profits for the traditional software licensing business model Oracle, along with most of its rivals such as Microsoft, has tried to concentrate more on its ability to deliver applications to end users via cloud systems. This delivery method is being favored by most clients these days, especially small businesses who can’t afford their own hardware and tech workers.
Oracle has been very active with M&A in the sector, having already taken over cloud based firms Opower and Textura. The recent addition of NetSuite will add further clout to the company’s cloud expertise and will certainly increase earnings at the end of the first fiscal year of the buyout. NetSuit have reported profits that have exceeded forecasts for the past seven quarters.
Although the current deal is said to be overseen by a committee of independent executives, Larry Ellison, Oracle Executive Chairman, and his close family own about 50 percent of NetSuite shares, according to the company’s own released data.
NetSuite were the first firm to offer business apps over the internet in 1998, and have been pioneers in the cloud computing sector ever since. Their CEO, Zach Nelson, worked for Oracle for two years, heading up their marketing department.
The deal is seen by many as an effort by Oracle to get a foot in the door of one of tech’s fasting growing fields, cloud computing.
Markets buzzed on news of the buyout, with NetSuite shares jumping a huge 19 percent to $108.08 after the noon session. Oracle shares remained at $40.95.
“Some might say it’s an expensive purchase for Oracle, with the current share price just under what they are offering,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management in a phone interview.
“We see this as a shrewd buy. The software and business services sectors have been overlapping for a while now and companies, which cover both bases are outperforming estimates, sometimes by 10 to 15 times the sales. Nearly 10 percent of Oracle’s revenue comes from cloud-software sales currently,” Lane added.
Both NetSuite and Oracle supply companies with business software applications that help them automate front and backend tasks across a wide range of sectors.
Given the decline in profits for the traditional software licensing business model Oracle, along with most of its rivals such as Microsoft, has tried to concentrate more on its ability to deliver applications to end users via cloud systems. This delivery method is being favored by most clients these days, especially small businesses who can’t afford their own hardware and tech workers.
Oracle has been very active with M&A in the sector, having already taken over cloud based firms Opower and Textura. The recent addition of NetSuite will add further clout to the company’s cloud expertise and will certainly increase earnings at the end of the first fiscal year of the buyout. NetSuit have reported profits that have exceeded forecasts for the past seven quarters.
Although the current deal is said to be overseen by a committee of independent executives, Larry Ellison, Oracle Executive Chairman, and his close family own about 50 percent of NetSuite shares, according to the company’s own released data.
NetSuite were the first firm to offer business apps over the internet in 1998, and have been pioneers in the cloud computing sector ever since. Their CEO, Zach Nelson, worked for Oracle for two years, heading up their marketing department.
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