Morgan Stanley's Gorman says bank targeting $1 billion in FICC trading per quarter

• Reuters

• Jun. 14, 2016, 1:43 PM
• 124

Morgan Stanley Chairman and CEO Gorman speaks during the Institute of International Finance Annual Meeting in WashingtonThomson Reuters

(Reuters) - Morgan Stanley is targeting quarterly revenue of around $1 billion for its fixed income, currencies and commodities trading unit, Chief Executive James Gorman said on Tuesday.

The Wall Street bank is seeing revenues grow in its bond trading business even with reduced headcount, Gorman said, speaking at the bank's U.S. Financials Conference in New York.

Last year, Morgan Stanley cut 25 percent of its fixed income trading jobs. Wall Street firms broadly are struggling with weakness in their fixed income units as regulations have made trading less profitable.

(Reporting by Olivia Oran; Editng by Alan Crosby)

Read the original article on Reuters. Copyright 2016. Follow Reuters on Twitter.

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China just took a left hook to its self-esteem

• Linette Lopez
 
•   

• 21h
• 12,544
 
• 4
 

Reuters

I'm going to say this in English first.

China's government really wanted the country's stock market - the A-share market - to be included in a very special club (an index, really) and it thought that that was going to happen on Thursday.

In fact, it was so excited that the country's normally quiet officials were coming right out and saying that China's inclusion was a"historical certainty."

But that's not what happened, and you can expect an angry government, and possibly some very angry state media decrying this tomorrow.

Now I'll talk about the details.

China was very close to joining a special club, the MSCI Emerging Markets Index. It includes a basket of stocks from emerging market economies with stock markets deemed stable enough for investors around the globe. Investors put money into funds that follow that index, which means that inclusion can help bolster demand for stocks.

So you can see how inclusion would be a matter of respect to China - or, as China watchers would put it, a matter of "face." And you can see how a delayed inclusion would be a slap in that face.

Remy Briand, global head of research at MSCI, said that China had taken significant steps in "addressing the remaining accessibility issues," but investors polled by MSCI clearly didn't think that the Chinese government had done enough.

"In keeping with its standard practice, MSCI will monitor the implementation of the recently announced policy changes and will seek feedback from market participants," he added.

China will have another chance to join in 2017.

Well, why not?

The bottom line here, through all the mumbo jumbo about "capital mobility policy changes" and "trading suspension policies," is this.

First, investors don't think that China's A-share market is stable enough. Second, they don't know whether they can get their money in or, more importantly, out fast enough.

Part of this is likely because of what happened last summer and then again in February. In both instances, a deteriorating Chinese economy prompted three separate multiday death drops at stock exchanges in Shanghai and Shenzhen.

A scary year for the Shanghai Composite. Yahoo Finance, Business Insider

China is trying to pull off a difficult transition from an investment-based economy to one based on domestic consumption. That means that old companies in declining industries - like steel and coal - have to shrink (or die) and new ones in service spaces (like tech and finance) must rise.

The problem is that these old Chinese companies have a ton of debt and employ a bunch of people, and many are partly state-owned and the government is having trouble winding them down.

The economy is slowing much more dramatically than analysts thought, and government stimulus is doing less to mitigate the pain of this slowdown.

China loves a club

So you can see why investors might be a little concerned about the companies that make up China's stock market.

After two crashes last summer, Goldman Sachs CEO Lloyd Blankfein called China's management of the situation "ham-handed."

"They don't have a lot of experience at this market stuff," he told Bloomberg TV.

Another reason why they could be concerned is that the Chinese government is just getting the party started again after its latest turmoil.

The investors that the government told to get out are being coaxed back in ever so slowly. China's huge pension system started buying again at the end of March, and the country's brokerages have started providing margin loans to investors again. But rules China implemented to satisfy global investors are untested at this point.

To put this in perspective, Pakistan - which is not the world's second-largest economy - was included in the MSCI this go-round and China was not.

And so China will wait, but probably very angrily.

The most important things you need to know ahead of the Federal Reserve's big announcement

• Akin Oyedele
 

• 7h
• 9,105
 
• 9

Federal Reserve Chair Janet Yellen before making a scheduled speech in Philadelphia on June 6. AP/Matt Rourke

The Federal Reserve's next big policy event is on Wednesday.

To end its two-day meeting, the Federal Open Market Committee, which steers Fed policy, will publish its latest statement at 2 p.m. ET. We'll get updates to its forecasts for growth, interest rates, and inflation.

Fed Chair Janet Yellen will then hold a news conference starting at about 2:30 p.m. ET.

Virtually no one expects that the Fed will raise its benchmark rate now or even in July.

That's mostly because a lot suddenly changed on the first Friday in June.

On that day, we got the May jobs report showing that the economy added 38,000 jobs - the fewest in six years. The unemployment rate fell to a new cycle low of 4.7%, mostly because fewer people bothered to find a job, as the participation rate fell to a 2016 low.

Yellen spoke in Philadelphia the following Monday, emphasizing the economy's strengths.

She said it was important to not attach too much importance to one month's data. But Yellen and the Fed would definitely want to be sure that the slowdown was temporary, possibly ruling out the next rate hike until at least September.

The statement would most likely reflect that economic growth picked up after a first-quarter slowdown. But talk of global economic risk may make a return given the British referendum on its European Union membership next week, Jefferies' Ward McCarthy said in a note.

The next dot plot is crucial

The dot plot shows where FOMC members think the target fed funds rate should be at the end of the next few years and in the longer term. The dots were lowered in March to reflect two rate increases in 2016, halving the earlier projection.

And with half of 2016 over, markets will most likely shift to what the Fed is communicating about next year, according to LPL Financial chief economic strategist John Canally.

The Fed has indicated it won't wait for the futures market to catch up.Wells Fargo

That could make the disconnect between the Fed's and the market's thoughts on where rates should be more troubling, Canally said.

But Yellen may look past this and other excuses to delay rate hikes"because monetary policy affects the economy with a lag," she said recently in Philadelphia.

The key thing to watch with the dots is how many officials see just one hike this year, Neil Dutta, head of economics at Renaissance Macro, said in a note.

That's because the Fed is now grappling with what is the right level of rates to maintain full employment and 2% inflation. And given the recent drop in the participation rate and continued low productivity, the longer-run estimate is likely to fall to 3% from 3.25%.

"This is all consistent with the notion that low policy rates on their own likely overstate the degree of monetary accommodation in the economy," he said.

Inflation is a big risk

While the Fed's forecasts for gross domestic product and unemployment may be cut, "we would not be surprised to see a modest bump to future inflation," Wells Fargo's Sam Bullard said in a note.

Renaissance Macro

But that would be at odds with households' long-term inflation expectations, which steer the actual trend, and fell to a new low of 2.3% in June, according to the University of Michigan's consumer sentiment survey.

Since the March meeting, two of the big transitory factors holding down inflation have improved - commodities have rallied and the broad US dollar has weakened a bit.

But the drop is enough to put July off the table, prompt the FOMC to rethink its central forecast for two hikes this year and push back 2017 expectations, Dutta said.

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The price of bitcoin is skyrocketing ahead of the 'halvening'

• Rob Price
 

• Jun. 13, 2016, 8:22 AM
• 15,091
 
• 6
 

It's a good time to own bitcoin. China Photos/Getty Images

Bitcoin has broken $700!

The digital currency has gone on a wild streak over the weekend, peaking above $700 on Monday, and is currently hovering around that point - $700.58 as of writing.

(All figures come via bitcoin news site CoinDesk's price analysis tool.)

In the space of a month, bitcoin's value has jumped by more than 30% - from around $450 (£317.38) in mid-May to the $700 mark it is hovering around today.

This is the highest bitcoin's price has been in around two years - it last broke the $700 mark back in February 2014, when it was trending downwards following all-time highs of more than $1,100.

Bitcoin is infamously volatile. This time last year, it was just a third of its current value, around $230. But it has slowly regained value since, gathering pace over the last few weeks.

The price surge comes ahead of a "halvening" or "halving" later this month . This is a reduction in the amount of bitcoins produced by mining - the process whereby computers dedicate processing power towards creating new bitcoin. When it hits, the amount of bitcoin being introduced in a set time period will halve. As you'd expect when supply is about to be constrained, the price is spiking.

Previous recent surges have also been driven by Chinese investors as the yuan at a time of a weak yuan.

Here's the price of bitcoin over the last month:CoinDesk

And here is the price of bitcoin since its inception:

CoinDesk

BREXIT POLLS: The euro and the pound are diving as Britain still backs Leave

• Oscar Williams-Grut and Hideyuki Sano, Reuters

• Jun. 13, 2016, 2:33 AM
• 1,858

zFile photo illustration of a two Euro coin pictured next to a one Pound coin on top of a portrait of Britain's Queen Elizabeth Thomson Reuters

TOKYO (Reuters) - The British pound and the euro fell to their lowest level since 2013 against the yen on worries a UK referendum later this month could pull Britain out of the European Union, possibly disrupting European political and economic affairs.

The pound is down 1.61% to 150.10 against the yen at 11.25 a.m. BST (6.25 a.m. ET), its lowest level since August 2013.

Investing.com

Meanwhile, the euro is down 0.79% to 119.47 against the yen, a level not seen since early 2013.Investing.com

Both currencies are falling ahead of the referendum next week on Britain's membership of the European Union. The latest polls by YouGov show the Leave campaign, which has been gaining momentum, still has a narrow lead. Leave is polling 43% to the Remain camp's 42%.

Investors fear that a so-called Brexit - Britain's exit from Europe - will cause financial and political ructions for not just Britain but the European Union too. That's why currency traders are ditching the pound and euro and turning to the yen, which is seen as much more stable at the moment.

The pound is also diving against the dollar on Monday morning too. Sterling is down 0.71% to 1.4154 at 11.30 a.m. BST (6.30 a.m. ET), its lowest point since early April. Investing.com

FXPro's chief economist Simon Smith says in an email this morning: "All the price action seen during the Asia session has been indicative of markets hunkering down and reducing risk."

CMC Markets' chief market analyst Michael Hewson says in an emailed statement this morning:

This shift in sentiment away from the complacency just over two weeks ago when it was widely expected that the "remain" camp would probably carry the day, has spooked already anxious markets, already concerned about further slowdowns in global economic growth particularly in light of recent weak economic data out the US, China and Japan.

(Reporting by Editing by Eric Meijer)

Read the original article on Reuters. Copyright 2016. Follow Reuters on Twitter.

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The pound is getting slammed after Brexit took a convincing lead in the polls

• Will Martin
 

• 5h
• 1,115
 
• 1

Sterling is getting crushed once again on Tuesday, as currency traders react to ever increasing odds that the UK will vote to leave the European Union when it goes to the polls in just over one week.

Around 1:00 p.m. BST (8:00 a.m. ET) the pound is lower by around 1% against the dollar to trade at $1.4132, having fallen by more than 1% earlier in the day, as Brexit jitters intensify in the markets. Here's a look at how sterling is performing so far on the day:

Investing.com

The big driver of Tuesday's sterling fall is the release of a poll on Monday night which showed another substantial lead for the Leave campaign. The online and telephone poll, conducted by ICM on behalf of the Guardian has the split at 53% for Leave, 47% for Remain.

"These results are consistent with the generality of numbers over the last couple of weeks, in which there has been some weakening in the remain position," Professor John Curtice who runs the polling aggregation site whattheukthinks.com said.

Also pushing the pound lower is the British newspaper, The Sun coming out in favour of Brexit.The paper, which has the biggest circulation of any physical paper in Britain, has an amazing track record in elections, and in general elections has always backed the winner. Should that success continue during the referendum, it looks like Britain will leave the European Union.

While sterling is currently getting slammed, it is also incredibly volatile, with one-month sterling volatility - a measure of how much the British pound is expected to fluctuate in the coming month - hitting its highest level of all-time on Monday, soaring to 26%, more than the previous all-time high of around 25%, reached during the global financial crisis.

It is expected that should Britain choose to back Brexit, the pound would crash, potentially dropping to its lowest level in more than 30 years, according to a survey of economists released by Bloomberg on Monday.

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REPORT: Legendary investor George Soros is trading again, and he's bearish on the global economy

• Matt Turner
 

• 16h
• 22,314
 
• 28

Reuters/Jorge SilvaGeorge Soros at the Avoided Deforestation Partners' organization conference on the sidelines of UN climate talks in Cancun, Mexico, on December 8, 2010.

Legendary investor George Soros is back to making big bets.

Soros has returned to trading after a long hiatus, according to Gregory Zuckerman at The Wall Street Journal.

He has recently directed a series of large bearish bets, selling stocks and betting on gold, the report said.

Soros, who ranks second on the list of the most successful hedge fund managers of all time, has spoken publicly about his concerns for the global economy.

He recently said that China's financial system right now "eerily resembles what happened during the financial crisis in the US in 2007-08."

And in Davos earlier in the year, he said that the world is running into something it doesn't know how to handle, and that he was betting against Asian currencies and commodity-linked economies.

China later warned Soros against going to "war" on its currency.

Soros stepped back from day-to-day trading some time ago, and his return to investing marks a turnaround.

Scott Bessent had been the top investor at Soros Fund Management, but he left last year tolaunch his own fund, Key Square Group. In January, Soros Fund Management named Ted Burdick as its news chief investment officer.

Read the full story at The Wall Street Journal >>

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Deflationary pressures in China appear to be easing

• David Scutt, Business Insider Australia

• 14h
• 386

Kevin Frayer/Getty Images

Chinese consumer price inflation (CPI) has missed expectations, rising by 2.0% in the year to May.

The figure was below expectations for an increase of 2.3%, a level that would have been unchanged from April.

It was the lowest annual growth rate recorded since January this year.

Over the month CPI fell by 0.5%, again below estimates for a smaller decline of 0.2%.

Continuing the theme of prior month, all of the strength was concentrated in food inflation, offsetting persistent weakness in non-food inflation.

Food inflation rose by 5.9% from a year earlier while non-food inflation rose by a far smaller 1.1%.

Business Insider Australia

Although CPI undershot market estimates, there was better news on producer price inflation with the annual decline narrowing to 2.8%.

This was well ahead of the 3.3% contraction expected and 3.4% decline seen in the 12 months to April.

It was also the smallest year-on-year drop since November 2014, suggesting that upstream deflationary pressures are moderating.

Read the original article on Business Insider Australia. Copyright 2016. Follow Business Insider Australia on Twitter.

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