Late day jolts in China stocks

The Wall Street Journal has a write up on what has been the force in driving late day jolts. The two factors identified were:

1) Afternoon margin calls from lenders.
2) Presence from authorities.

Australian PPI grew by 0.3%

Producer Price Index (PPI) in Australia recorded a growth of 0.3% in the June quarter. In comparison, the index rose by 0.5% in the first quarter. The full report can be read here.

New Zealand business outlook pessimistic

The ANZ business confidence index dropped to -13.5 in July compared to -2.3 in June.

The full report can be found here.

US economy grows by 2.3% in the second quarter

The US advanced GDP for the second quarter grew at a pace of 2.3%. The official GDP report can be found here.

Bloomberg has a write up on the GDP data as well.

China`s manufacturing PMI slows down

China`s manufacturing PMI (purchasing managers index) was at a level of 50.0 in July compared to 50.2 in June. This is a 5 month low according to Bloomberg.

Advanced report for US goods trade balance

The advanced report for US goods trade balance indicated a deficit of $62.3 billion in July. The report can be found here.

Weekly unemployment claims at 267 thousand

The US weekly unemployment claims rose a little to 267 thousand compared to 255 thousand claims last week. The press release can be found here.

Australian building approvals falls by -8.2%

Building approvals suffered a sharp contraction by 8.2% in June. The full report can be viewed here.

FOMC statement

The FOMC (Federal Open Market Committee) statement for the month of July can be found here. Economic growth is said to be expanding at a moderate growth.

Bloomberg has a concise write up on this and mentioned that the terms "further gains in the job market" and "declining unemployment" indicate a reduction in labour slack.

RBNZ Wheeler`s speech

The Reserve Bank of New Zealand (RBNZ) Governor Wheeler spoke earlier today at the Tauranga Chamber of Commerce. He touched on the issue of inflation and monetary policy. His full speech can be read here.

Conference Board: Consumer confidence in the US declines

The CB (Consumer Board) confidence index declined to 90.9 in July after a slight improvement in June. The full report can be found here.

UK second quarter GDP grew by 0.7%

The preliminary GDP for the second quarter in the UK grew by 0.7% compared to a 0.4% growth in the first quarter. The other key points include:

• Output increased in 2 of the main industrial groupings within the economy in Quarter 2 (Apr to June) 2015. Services increased by 0.7% and production increased by 1.0%. Construction growth was flat. In contrast agriculture decreased by 0.7%.

• GDP was 2.6% higher in Quarter 2 (Apr to June) 2015 compared with the same quarter a year ago.

• In Quarter 2 (Apr to June) 2015, GDP was estimated to have been 5.2% higher than the pre-economic downturn peak of Quarter 1 (Jan to Mar) 2008. From the peak in Quarter 1 (Jan to Mar) 2008 to the trough in Quarter 2 (Apr to June) 2009, the economy shrank by 6.0%.

• The preliminary estimate of GDP is produced using the output approach to measuring GDP. At this stage, data content is less than half of the total required for the final output estimate. The estimate is subject to revision as more data become available, but these revisions are typically small between the preliminary and third estimates of GDP.

• All figures in this release are seasonally adjusted.

The full GDP report can be found here. 

US core durable goods orders grew by 0.8% in July

Core durable goods orders grew by 0.8% in June, the second time in 2015. Bloomberg mentioned "while the US economy is moderately positive, the global economy remains relatively stagnant."

German business confidence up

Business confidence in Germany increased in July to 108.0 after a 2 month drop. Reuters has a write up on the Ifo business climate.

French and German PMI red

The French manufacturing PMI (purchasing manager`s index) fell to 49.6 in July compared to 50.4 recorded in the previous period. The German PMI fell to 51.5 compared to 51.9 in the previous period. The Greece issue has adversely affected the economy of members of the euro area.

Trading floor has a write up on these PMI numbers.

China`s manufacturing PMI at a 15 month low

China`s manufacturing PMI (purchasing manager`s index) was at 48.2 in July, down from 49.4 in June. A level below 50.0 indicates a contraction. This is the lowest level in 15 months.

In addition, Bloomberg mentioned that this has caused the Australian dollar to reach a 6 year low. This is due to the fact that the Australian economy tends to move in parallel to China`s. The PMI report can be found here.

Surprise trade deficit for New Zealand

New Zealand recorded a deficit of 60 million in the month of June compared to a surplus of 371 million a month earlier. Other key points include:

• Fruit helps quarterly exports rise 0.4 percent 
• Quarterly imports rise 0.4 percent
• Trade deficit shows little change in June 2015 quarter
• Monthly exports at highest June month value
• Monthly imports rise 9.0 percent
• Trade deficit in June 2015 is $60 million
• Exchange rate movements

The full report can be viewed here. 

US weekly unemployment claims down

Weekly unemployment claims dropped to 255 thousand this week compared to 281 claims made last week.

UK retail sales contracts by 0.2%

Retail sales entered negative territory in June by contracting at a rate of 0.2%. The other main points include:

• Year-on-year estimates of the quantity bought in the retail industry continued to show growth for the 27th consecutive month in June 2015, increasing by 4.0% compared with June 2014. This was the longest period of sustained year-on-year growth since May 2008, when there were 31 periods of growth.
• The underlying pattern in the data, as suggested by the 3 month on 3 month movement in the quantity bought, continued to show growth for the 28th consecutive month, increasing by 0.7%. This is the longest period of sustained growth since consistent records began in June 1996.
• Compared with May 2015, the quantity bought in the retail industry was estimated to have decreased by 0.2%. Falls were reported by predominantly food stores, other stores, household goods stores and petrol stations.
• Average store prices (including petrol stations) fell by 2.9% in June 2015 compared with June 2014. This is the 12th consecutive month of year-on-year price falls with all store types reporting decreases. The largest contribution came once again from petrol stations which fell by 10.0%, the 22nd consecutive month of year-on-year falling prices in this store type.
• In June 2015, the amount spent in the retail industry increased by 0.9% compared with June 2014, but decreased by 0.1% compared with May 2015. Non-seasonally adjusted data show that the average weekly spend in the retail industry was £7.1 billion, unchanged from the previous month and the June 2014 figure.
• The value of sales made online in June 2015 increased by 1.4% compared with May 2015 and accounted for 12.4% of all retail sales. Online sales increased by 11.4% compared with June 2014.
• Revisions in this release were caused by the incorporation of late data. The earliest revisions point for current price, non-seasonally adjusted data was June 2014. More information on revisions can be found in the background notes.

Bloomberg  mentioned that "persistently low inflation and stronger wage growth are leaving Britons with more pounds to spend and helping them support expansion". The full report can be viewed here. 

WSJ: Hedge funds are preparing for a big short

The title sounds similar to Michael Lewis`s "The Big Short" and the concept remains the same. The Wall Street Journal reported that hedge funds are preparing to make huge returns in case the market tanks.

As with Michael Lewis`s book, hedge funds can make a bet that a bond defaults by buying credit-default swap (CDS) contracts. Here are two other ways mentioned by the Journal on how to profit from a bearish market:
- Buy a put option on an ETF.
- Increase cash holdings.

The full article can be found here.

New Zealand`s cash rate cut by 25 basis points to 3%

The Reserve Bank of New Zealand (RBNZ) cut the cash rate by 25 basis points to 3.0%. In the statement, it was stated although the New Zealand dollar has depreciated by significantly since April, more is necessary given the weakness is export commodity prices.

The statement can be found here.

MPC votes remain

The Monetary Policy Commitee (MPC) Bank Rate votes remained unchanged.

The meeting minutes for July can be found here.

RBA Stevens: Issues in economic policy

The Reserve Bank of Australia Governor Stevens delivered a speech at the Anika Foundation Luncheon regarding the issues in economic policy. He touched briefly on Greece and China.

His full speech can be read here.

Australian CPI up by 0.7%

Consumer price index (CPI) grew by 0.7% this quarter compared to a 0.2% growth recorded in the previous period. The inflation report can be found here.

Bloomberg has a write up on the CPI as well.

Dodd-Frank creators say the American banking system is better off

One of the reasons why I like the Wall Street Journal is that it offers multiple views on a particular issue. Also in today`s issue, there`s a write up saying the banking system is better off thanks to the statute. 

The legislation sponsors, former Senator Christopher Dodd and former US Representative Barney Frank sat down with the WSJ for a question and answer session. The article can be found here. 

Wall Street Journal claims Dodd-Frank is a failure

Today marks the 5th year anniversary since the Dodd-Frank Act was signed by President Obama. The Wall Street Journal had a write up stating that this has been a failure so far. The article mentions that instead of aiming at Wall Street, it hit Main Street hard. In addition, the law is said to have crushed small banks, restricted access to credit and planted the seeds of financial stability.

The statute was intended to "end too big to fail" and "promote financial stability".

The Wall Street Journal article can be found here.

Australian Monetary Policy Minutes

A slight red flag in this month`s statement, the term "average" was used to describe the economic growth of Australia`s major trading partners. It was noted that the US economy was stronger while China was somewhat weaker.

Members also noted that the recent volatility in the Chinese equity markets and potential spillovers from developments in Greece would require close monitoring.

The full statement can be found here.

Janet Yellen`s testimony

The FED Chair, Janet Yellen testified before the Senate Banking Committee. Her full testimony can be found here. She noted that while wage growth has picked up, it still remained subdued, consistent with other indicators of slack.

C-span has a video feed of her testimony.

US unemployment claims down this week

The weekly unemployment claims fell to 281 thousand this week compared to 296 thousand previously.

Webcast of the ECB press conference

The video feed can be streamed here.

ECB monetary policy decision

The European Central Bank (ECB) kept the minimum bid rate at 0.05%. The full report can be found here.

Greek bailout approved

The Greek government debt crisis was passed. Bloomberg has a write up regarding the bailout.

New Zealand CPI 0.4%

Inflation increased in New Zealand for the June quarter. The consumer price index (CPI), a leading indicator of inflation grew to 0.4% compared to a negative growth of 0.3% in March.

Other key points include:

• Quarterly rise of 0.4 percent on higher petrol prices
• Quarterly non-tradable inflation lowest since the December 2009 quarter
• Annual inflation at 0.3 percent influenced by housing-related costs
• CPI analytical series
• Seasonally adjusted CPI rise of 0.3 percent in the quarter 
• Field prices now collected electronically

The full report can be found here. 

China`s trade deficit shrinks

The trade deficit in June reduced to 46.5 billion compared to 59.5 billion in May. Bloomberg has mentioned that this is due to the rise in exports. Exports in June rose for the first time in four months.

Tech glitch: NYSE suspended for nearly 4 hours

The New York Stock Exhange (NYSE) was suspended for nearly 4 hours due to a tech glitch. CNN has a coverage on this.

Interestingly around the same time, even the Wall Street Journal had issues. Politico has covered the issue in its post.

UK official bank rate unchanged

The Bank of England held the official bank rate steady at 0.5%. The report can be found here.

June inflation increases in China

Inflation in China was up in June. The consumer price index (CPI), grew by 1.4%. Reuters has a write up on the inflation data.

Australian labour force

The Australian unemployment rate climbed to 6.0% in June compared to 5.9% in May. In terms of new jobs being created, a mere 7 300 new openings were available last month. A stark difference compared to May, when 40 000 new jobs were created.



The labour force report can be found here.

FOMC minutes

The Federal Open Market Committee (FOMC) released its minutes earlier this morning. It is a pretty long report and Bloomberg has a summarised version.

UK annual budget

UK`s annual budget was unveiled yesterday. The video feed can be obtained from the Parliament`s web feed. According to the Wall Street Journal, the Bank of England`s fiscal worries ease.

US trade deficit increases marginally

The trade balance deficit in May stood at 41.9 billion compared to a deficit of 40.7 billion in April. The full report can be found here.

UK industrial output up in May

According to Reuters, the industrial output was up in May due to the strong oil and gas production. However, the manufacturing production dropped to -0.6% compared to -0.4% in April. 

The main points of the report includes:

• Total production output is estimated to have increased by 2.1% in May 2015 compared with May 2014. There were increases in 3 of the 4 main sectors, with the largest contribution coming from mining & quarrying, which increased by 7.3%.
• Manufacturing output increased by 1.0% in May 2015 compared with May 2014. The largest contribution to the increase came from the manufacture of transport equipment, which increased by 11.0%, due to a rise in the manufacture of air & spacecraft and related machinery.
• Total production is estimated to have increased by 0.4% in May 2015 compared with April 2015. There were increases in 3 of the 4 main sectors, with the largest contribution coming from mining & quarrying, which increased by 4.9%.
• Manufacturing output decreased by 0.6% in May 2015 compared with April 2015. The largest contribution to the decrease in manufacturing came from basic metals & metal products, which decreased by 3.7%.
• In the 3 months to May 2015, production and manufacturing were 9.2% and 4.6% respectively below their figures reached in the pre-downturn gross domestic product (GDP) peak in Quarter 1 (Jan to Mar) 2008.
• In this release, the earliest period open for revision was April 2015, in line with the National Accounts revisions policy. There was no impact on previously published GDP estimates resulting from revisions to this period

The full report can be obtained here. 

RBA statement

The cash rate was left unchanged at 2.0%. There is no change in the monetary policy. The full statement can be found here.

NZIER down

The NZIER report shows that the New Zealand economy is losing momentum. Profitability levels are expected to drop among other things. The full report can be read here.

Bursa Q2 recap

The second quarter has been a disaster for Bursa. On 29 June, the index dipped below 1700 points. The companies that represent the index have been falling in term of prices. In addition, CIMB is offering 11% of its work force the VSS (voluntary separation scheme) while Axiata plans to trim its work force by 20%.

Historical data was obtained from Yahoo Finance.

Greece`s Finance Minister resigns

After yesterday`s referendum, Finance Minister Varoufakis announced that he resigned in a blog post.  In addition to that, his blog contains useful posts which you may want to follow.

In the money call warrants (Week 28)

I`ve not written about warrants for 10 weeks since my last post in April . I am not particularly comfortable with where the market is heading and to me, having integrity and being ethical is of utmost importance. This is the reason why I have not sold my research reports yet to subscribers.

Nevertheless, I have compiled a list of call warrants that are in the money this week.

No	Call Warrant	Discount rate (%)
1	Berjaya Auto CD	3.57
2	Berjaya Food WA	1.52
3	Borneo Oil WB	2.26
4	Cahya Mata Sarawak CI	5.77
5	Cliq Energy WA	9.09
6	Managepay Systems WA	7.02
7	MISC CV	5.17
8	N2N Connect WA	7.01
9	Westports CJ	7.91

Note that the N2N WA is an American styled call warrant which means it can be converted on any date up to expiry. The trading idea is to buy the warrant, convert to the money share and either collect the difference between acquisition cost and market value or hold it for more capital gains. 

Getting paid to borrow

Before Iceland went bankrupt in October 2008, many Icelanders devised a creative way to reduce the effective cost of their loan. Back then, the local interest rate was 15.5% and the krona was appreciating fast against other currencies. They then decided that the smart thing to do was to borrow in yen, which had an interest rate of 3.0% and at the same time make a nice sum from currency trade. There are two ways on how the cost of borrowing was reduced here: by borrowing at a cheaper rate (3% versus 15.5%) and the appreciation of the krona.

The bubble eventually broke and with the krona crashing downwards, locals were left with a huge debt. In Michael Lewis`s Boomerang, it was described that there were two ways to sell their Range Rovers when they can`t pay the loan. The first was to ship it to Europe and get paid in a currency that still has value while the second was to burn it and collect the insured sum.

Linking this to the present, there are a couple of was for the cost of borrowing could be reduced when say one wants to buy a house in the US:

1) Borrow in euros. The interest rate in Europe is cheaper than US and the euro has been depreciating against the dollar.
2) Borrow in yen. Same case for the yen, it carries a lower interest rate and it has been depreciating against the dollar.

The challenge would be how to structure such a loan.

US unemployment rate is down but...

That`s right, the unemployment rate in June fell to 5.3%, the lowest since April 2008 but average hourly earnings recorded no growth at all, bringing the year to year growth at 2.3%. The non-farm employment change added 223 thousand new jobs, missing the estimated 231 thousand. In contrast, 251 thousand new jobs were created in May.

For me, I do feel that the unemployment figure is a little cooked up. It was at 5.5% last month. Is 223 thousand new jobs sufficient to bring down the unemployment figure by 0.2%? All that is needed to tweak the unemployment rate results is how it is defined.

The full employment situation in June can be found here. In addition, Bloomberg has a good write up as well.

UK construction sector on a rebound

The construction sector output in the UK is at a four month high. The construction PMI (purchasing managers index) rose to 58.1 from 55.9 in May. Other key points include:

- Sharp and accelerated expansion of business activity.
- Job creation picks up to its fastest recorded so far in 2015.
- Confidence regarding the 12-month outlook reaches its highest for over 11 years.

The full report can be found here.

Australian trade deficit: $ 2.75b

The Australian trade deficit in May fell to $ 2.75 billion from $ 4.1 billion in April. Missing the target of $ 2.21 billion, the Australian dollar eased against major currencies.

The full report can be found here.