Instability related due to the Brexit vote appears to be abating as markets adjust to new realities. Equities have been recovering for the better part of the week following an initial sell-off. Bargain-hunters by now have found most of their bargains and many now will be cautious in to quarter-end today and on Friday into a long U.S. weekend. The flight to safety bid in sovereign debt markets has abated as well.
The equity to S&P correlation has working again as the algos are back in force. Higher oil prices have been helpful for the depressed energy sector and help stocks generally. Higher equities are also an indicative of a reduction in flight to safety demand. The yield on the U.S. 10-yr is back at 1.543% +3.6bps. Still, in my opinion, any yield below 1.70% is seriously depressed.
This remains an active week for U.S. data. The week concludes with the long Independence Day weekend. Thursday features weekly U.S Jobless Claims and the Chicago PMI. Friday sees an avalanche of monthly PMI data.
John M. Bland, MBA co-founder Global-View.com
dc CB 21:13:15 GMT - 06/29/2016
Citigroup Plans $8.6b Buyback; Lifts Qtr Div to 16c From 5c
JPMorgan Chase Plans $10.6b Buyback, Maintains qtr Div at 48c/shr
Goldman Sachs plans buybacks of stock, boosts quarterly dividend
dc CB 21:03:14 GMT - 06/29/2016
in other words TO THE MOON ALICE> TO THE MOON.
So Brexit wasn't so bad after all. Almost historic lows in yields... and no the FED didn't "plan" to release this 2nd stress report the afternoon, after the close, the day before the End of the Month, Quarter, Half. And no those banks didn't have anncements of Buybacks and Dividend raises all set to go.
No that's Tin-Foil Hat Stuff.
dc CB 20:53:20 GMT - 06/29/2016
moments ago the Fed released the second part of its stress test, the Comprehensive Capital Analysis and Review (CCAR), one which gives banks the green light (or in some cases not) to return capital to shareholders.
Bank of America Authorizes $5b Buyback; Boosts Div to 7.5c-Share
Huntington Bancshares to Boost Qtr Div. to 8c From 7c/Shr
U.S. Bancorp to Buy Back $2.6b of Shares, Boosts Div. by 9.8%
Capital One Expects to Buyback $2.5b of Shrs; Maintains Dividenda
Zions Bancorp Plans to Boost Dividend, Buyback
Citi to buy back up to $8.6 billion in shares, boost dividend to 16c/share
State Street to Buy Up to $1.4b; Boosts Dividend to 38c Vs 34c
expect many more to boost their dividend and buyback plans before the night is over. And since all of these transactions will be debt-funded, and since other banks will pocket the commission, expect a feeding frenzy of cross bank revenue thanks to yield starved investors who have no choice but to give banks their money all as a result of the Fed's policies which today pushed the 30Y just shy of record low yields.
Market Sentiment Indicators
The Fed Funds Market Sentiment Barometer reflects current sentiment about a future change in Fed policy. Odds for one rate hike by yearend are 0% (= rate cut) from -11% late Tuesday.
Spot EURUSD: 1.1123
20-day avg: 1.1250
Pivot Point: 1.1096
WIDE DIVERGENCE has narrowed slightly although Brexit fallout remains in play. 0% odds now on one rate hike by year end.
Investors went bargain-hunting Wednesday as we noted early on. The equity to S&P correlation was working well over the session. Higher oil prices are helpful for the depressed energy sector and help stocks generally. Higher equities are indicative of a reduction in flight to safety demand.
Nevertheless yields on the U.S. 10-yr remain at a low 1.483%. In my opinion, anything below 1.70% is a seriously depressed yield. My best guess is that some reserve managers have been moving funds out of EUR assets with negative yields post-Brexit into USD securities. This might explain in part some of the EURUSD selling over the day.
This remains an active week for U.S. data. The week concludes with the long Independence Day weekend. Next week will see the critical June U.S. employment data. The PCE deflator remained soft in the latest week. A sharp rise in Pending Homes Sales a month ago was reversed by weak data in May and a large downward revision in the previous month's data.
Thursday features flash June EZ HICP data, revisions to 1Q16 UK GDP and weekly U.S Jobless Claims. Friday sees an avalanche of monthly PMI data.
John M. Bland, MBA co-founder Global-View.com
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