Dollar Climbs To New Six-Year High Against Yen

September 10th, 2014 by James

Today, the US dollar rose to a new six-year high against the Japanese yen as the Australian dollar nursed a second session of heavy losses after further gains in U.S. Treasury yields.

Dollar Climbs To New Six-Year High Against Yen

U.S. Treasury yields have moved up as a result, with the two-year US2YT=RR within sight of a three-year peak of 0.590 percent set in late July. On Wednesday the 10-year yield US10YT=RR popped back above 2.50 percent, off a recent low of 2.30 percent, and was at 2.505 percent in Asian trade.

“People missed their chance to buy the dollar on dips,” said Kaneo Ogino, director at Global-info Co in Tokyo, a foreign exchange research firm.

“The interest rate outlook is in focus, as Japanese yields will keep to lower levels,” he said.

The Australian dollar skidded 0.4 percent to $0.9162 AUD=D4, after dropping as low as $0.9154. This was due to a pick-up in market volatility pushing investors to pare back carry trades. The setback of Aussie dollar was sparked by a broad rally in the U.S. dollar. “Traders could see a further correction lower if we see a daily close south of $0.9175, which is a key support level,” said Stephen Innes, senior trader at OANDA Asia Pacific.

The euro edged down against the US dollar, moving back toward a 14-month trough of $1.2859 EUR= plumbed in European trade on Tuesday. The dollar index .DXY edged down slightly to 84.234 from Tuesday’s 14-month high of 84.519.

Foreign Fund Managers In India Can Hold More Government Debt

July 30th, 2014 by James

India on July 24 allowed foreign fund managers to hold more government bonds. The country however stipulated that they in future will not be able to hold debt of less than three years.

Foreign Fund Managers In India Can Hold More Government Debt

India permitted foreign institutional investors to hold a combined $30 billion in India government debt at any one time, comprising $20 billion for all foreign investors and $10 billion for long-term investors such as multilateral agencies, foreign central banks and pension, sovereign wealth funds, insurance and endowment funds.

On July 24, the country announced that the $20 billion limit will be raised to $25 billion but debt bought after the rule comes into force will have to be of at least three years. In the past, foreign investors were allowed to buy government debt of more than one year. Under the new rule announced by the Reserve Bank of India, the additional $10 billion of debt earmarked only for sovereign wealth funds, multilateral agencies, foreign central banks and pension, insurance and endowment funds – but not fund managers – will be reduced to $5 billion.

The central bank said the overall debt held by foreign institutional investment (FII) as a result will stay at $30 billion.

“I think a reasonable amount of money will flow in,” said Ashish Vaidya, executive director and head of trading and asset liability management at DBS Bank in Mumbai.

The country is expecting that its new business-friendly Prime Minister Narendra Modi will give a boost to the country by implementing faster reforms. Foreign funds have bought a net $11.95 billion in equity and $12.73 billion in debt so far this year.

Amex Set To Face U.S. In Antitrust Trial

July 14th, 2014 by James

Amex Set To Face U.S. In Antitrust Trial

American Express Co (AXP.N) is set to face off against the U.S. government and 17 states in a trial over claims that it stifles competition from credit card providers that charge lower processing fees.

The trial, which is expected to last two to three months, will have American Express rules at trial that bar its millions of merchants from offering incentives for customers to use less-expensive credit cards or cash when making purchases. According to the government, Amex charges the highest processing fees on average of any card network. The government, in a pre-trial brief, remarked that merchants would testify that they would like to use discounts and other tools for promoting competition among the card networks that would help them negotiate lower fees.

According to the Justice Department, the evidence presented at trial will reveal that rules of Amex  prevent credit card networks from competing for merchant business and deny merchants a way for reducing their costs.

The U.S. Justice Department and several states sued Amex, Visa Inc (V.N) and MasterCard Inc (MA.N) in 2010. The latter two settled the case the same day it was filed. The states include Michigan, Ohio, Texas, Missouri, Maryland, Arizona, and Iowa.

U.S. District Judge Nicholas Garaufis of Brooklyn will preside over the non-jury trial.

The case is United States of America, et al v. American Express Co, U.S. District Court for the Eastern District of New York, No. 10-04496.

Oil Prices Jump On Iraq Concerns

June 17th, 2014 by James

Crude oil prices hit a high of nine months on Thursday over supply concerns and equities sold off as violence threatened to result in instability in Iraq.

Iraqi Kurdish forces took control of the northern oil hub of Kirkuk after Sunni Islamist rebel march towards Baghdad to threaten the future of Iraq as a unified state. U.S. President Barack Obama did not rule out U.S. action against the militants. “If this conflict knocked out Iraq as an exporter, that would have significant impact on prices,” said Christopher Bellew, a trader at Jefferies Bache.

Oil Prices Jump On Iraq Concerns

The Thomson Reuters/Jefferies CRB index .TRJCRB rose 1.1 percent, the most in two months. Brent crude futures LCOc1 rose 3 percent to $113.27 a barrel while U.S. crude CLc1 added 2.2 percent to $106.71, the highest reading for both since September.

“It’s a bit of a crisis mode here,” said Timothy Ghriskey, chief investment officer at Solaris Asset Management LLC in New York. “Geopolitical concerns have definitely taken over. It’s a very fluid situation and things are happening very fast, it seems.”

The Dow Jones industrial average .DJI fell 109.69 points or 0.65 percent, to 16,734.19, the S&P 500 .SPX lost 13.78 points or 0.71 percent, to 1,930.11 and the Nasdaq Composite .IXIC dropped 34.30 points or 0.79 percent, to 4,297.63. The violence in Iraq drove investors into U.S. Treasuries. U.S. 10-year notes were up 15/32 in price to yield 2.5861 percent, from 2.641 percent late on Wednesday. The 30-year bond rose 1-4/32 to yield 3.4084 percent.

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Leveraged ETFs Could ‘Blow Up’ Whole Industry, Says BlackRock CEO

May 30th, 2014 by James

Leveraged exchange-traded funds contain structural problems that may “blow up” the whole industry one day, BlackRock Inc (BLK.N) Chief Executive Officer Larry Fink said.

blackRock Inc Chief Executive Officer Larry Fink

“We’d never do one (a leveraged ETF),” Fink said at a Deutsche Bank investment conference in New York. “They have a structural problem that could blow up the whole industry one day.”

“If you want to create a safer and sounder marketplace, it has to be at the product level,” Fink said. He added regulators should focus on the structure of financial products.

ProShares, a leading leveraged ETF firm, disagreed with the remarks of Fink. “Leveraged ETFs are well regulated, transparent products and there is no credible evidence that they have any harmful effect on the markets or our industry,” said Tucker Hewes, a spokesman for ProShares.

Deborah Fuhr, managing partner of ETF research firm ETFGI LLP, said there were nearly 270 leveraged ETF funds with $30.3 billion in assets at the end of April. Fuhr added leveraged ETFs have attracted $1.8 billion in net new assets during the first four months of 2014.

The industry’s largest leveraged ETF is the ProShares UltraShort 20+ Year Treasury (TBT.P), which has about $4 billion in assets.

Leveraged ETFs account for 1.2 percent of the $2.5 trillion in global ETF assets under management.

In the past, U.S. Securities and Exchange Commission staffers have issued warnings about leveraged ETFs but no action has been taken till date to curb their availability.

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Pfizer Considering $100 Billion Bid For AstraZeneca

April 22nd, 2014 by James

Pfizer (PFE.N), U.S. pharmaceutical giant, has approached British rival AstraZeneca (AZN.L) for proposing a 60 billion pound ($101 billion) takeover, according to Britain’s Sunday Times.

Pfizer Considering $100 Billion Bid For AstraZeneca

The newspaper cited senior investment bankers and industry sources as saying that informal talks about a deal had taken place between the two but that no talks were presently underway after AstraZeneca resisted the approach. AstraZeneca, Britain’s second-biggest pharmaceuticals group, is commonly touted as a potential takeover target as it fights with patents expiring on a number of best-selling drugs.

The company has managed to attract attention for experimental cancer drugs it is developing and its acquisition may be good news for Pfizer that has faced patent losses of its own, notably anti-cholesterol treatment Lipitor. Pfizer could use cash it has accumulated through overseas subsidiaries that if repatriated to the U.S. would be heavily taxed.

AstraZeneca has a market valuation of around $80 billion, compared with Pfizer – valued at $193 billion, according to Thomson Reuters’ data. In the fourth quarter of 2013, earnings at AstraZeneca fell 6 percent and the company said it is expecting earnings to keep falling in 2014 as generic competition to Nexium takes a big bite out of U.S. profits from late May.

The last big acquisition of Pfizer was in 2009, when it bought U.S. rival Wyeth for $68 billion.

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Chevron Allowed To Fraud Claims Against Patton Boggs

April 3rd, 2014 by James

A New York judge has allowed Chevron Corp to sue Patton Boggs over claims that the Washington law and lobbying firm indulged in fraud while making attempts to enforce a multibillion-dollar environmental judgment for a group of Ecuadorean villagers.

Chevron Allowed To Fraud Claims Against Patton Boggs

On Monday, U.S. District Judge Lewis Kaplan gave his ruling in Manhattan federal court. The judge remarked he had difficulties with the argument of Patton Boggs that a New York court did not have jurisdiction to hear the case. Patton Boggs partners in question “at least arguably were domiciliaries of the states of the United States” and the firm had the burden of proving partners intended to give up their U.S. domiciles or take up domicile in a foreign country, said the judge.

“This is about holding accountable all those who are responsible for trying to enforce this travesty of justice that occurred in Ecuador,” Chevron’s lawyer, Randy Mastro, said in an interview. “Now there will be the opportunity to hold Patton Boggs accountable for its role.”

In a statement, Patton Boggs general counsel Charles Talisman called claims of Chevron “baseless and unlikely ever to proceed to litigation on the merits.” Talisman added the case was in its early stages and there were still jurisdictional arguments being made.

“If this case advances…we look forward to showing the lack of merit in Chevron’s allegations regarding our law firm,” he said. “We have no doubt that we acted ethically and properly in assisting these communities, and that we will be able to demonstrate this to the court if that becomes necessary.”

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European Shares Dip Due To Ukraine Concerns

March 20th, 2014 by James

With investors keeping a wary eye on the standoff over Crimea, European shares dipped and the safe-haven Yen rose.

European Shares Dip Due To Ukraine Concerns

After stocks gained in Asia and on Wall Street on Monday, the FTSEurofirst 300 .FTEU3 slipped at the open. The Japanese Yen gained but stayed below recent peaks against the dollar and gold.

Russian President Vladimir Putin signed a decree that approved a draft treaty on “adopting the Republic of Crimea into the Russian Federation”. Putin was due to address a special joint session of the Russian parliament on the issue later. This was after Ukraine’s mainly Russian-speaking region of Crimea voted overwhelmingly in a weekend referendum in favor of joining Russia. Condemned by Western States, the referendum resulted in sanctions by the United States and the European Union on a small group of Russian and Crimean officials.

“The sanctions taken against Russia are relatively soft, and there has been no real escalation in the tensions in the past week, which is good news,” Talence Gestion fund manager Alexandre Le Drogoff said.

“Overall, the market has been quite resilient in this Ukrainian crisis, but now it needs a positive catalyst to resume its rally, and we might have to wait for first-quarter corporate results for that.”

After data indicated the U.S. economy was improving after a winter slowdown, the S&P 500 index .SPX rebounded on Monday from its worst weekly fall in the past seven to end 0.96 percent higher as concerns eased over Ukraine.

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Latina Banker Selected By Obama To Lead Small Business Agency

February 13th, 2014 by James

Maria Contreras-Sweet was nominated by U.S. President Barack Obama to lead the Small Business Administration, an agency providing loans and assistance to small businesses for getting government contracts.

Latina Banker Selected By Obama To Lead Small Business Agency

The selection of 58-year-old Maria Contreras-Sweet fills the final slot in the president’s second-term Cabinet as the post of SBA administrator has been vacant since August, when Karen Mills accepted joint posts at Harvard Business School and Harvard’s Kennedy School of Government.

Gary Toebben, president and chief executive of the Los Angeles Area Chamber of Commerce, said Contreras-Sweet “is highly regarded in Los Angeles and throughout the state of California.” “She is articulate and passionate about helping small businesses,” Toebben said.

“She understands the needs of small business owners like herself. She knows how they can lift entire communities, and ultimately how they lift our country,” Obama said while making the announcement at the White House.

Maria is the second Hispanic nominated to Obama’s second-term cabinet after Labor Secretary Tom Perez. She is the founder of ProAmerica Bank, a Latino-owned community bank in Los Angeles, which emphasizes on lending to small- and medium-sized Latino businesses.

“Maria knows how hard it is to get started on a business, the grueling hours, the stress, the occasional self-doubt – although I have not yet seen self-doubt out of Maria,” Obama said.

Contreras-Sweet immigrated to the United States as a child and was California’s secretary of business, transportation and housing in the Democratic administration of Gray Davis.

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Asian Stocks On A Slippery Road, Euro Stuck Near Lows

February 2nd, 2014 by James

On Monday, Asian shares were giving ground at a slow pace as strains in emerging markets demonstrated little signs of abating while adding pressure for another policy easing in Europe shoved the euro to lows of 10 weeks.

Asian Stocks On A Slippery Road, Euro Stuck Near Lows

Japan’s Nikkei .N225 led the way with a loss of 1.2 percent while MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.2 percent, while Seoul’s KOSPI lost 0.6 percent .KS11.

This week, investors can expect a lot of event risk with a raft of global business surveys and jobs data from the United States to provide a clearer view on how well the global economy is performing.

It was cautioned by analysts that the ongoing Lunar New Year holiday that began on January 31 probably dragged on output as manufacturers shut up shop for the biggest annual holiday of China. This was after another downbeat report from China where the official Purchasing Managers’ Index (PMI) dipped to 50.5 in January from December’s 51, in line with market expectations.

The PMI of South Korea, on the other hand, edged up to its highest in eight months. “Manufacturing conditions continue to improve in Korea, boosted by stronger new orders on the external front,” said HSBC economist Ronald Man. “This suggests that Korea is on track for a gradual export-led recovery.”

Inflation in the euro zone ran at just 0.7 percent for the year to January, a level that has prompted the European Central Bank to ease in the past.

“We think the low inflation readings in the euro area, along with fears of a further decline into deflationary territory, will lead the ECB to cut the main refinancing rate by 15 basis points, and to cut the deposit rate by 10 basis points,” said Dean Maki, an economist at Barclays.

“Advanced economy growth is benefiting from the very accommodative monetary policy that has been fostered by low inflation readings.”

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