Wall Street Banks Warn Downturn Is Coming – Trending Stuff

HSBC Holdings Plc, Citigroup Inc. and Morgan Stanley see mounting evidence that global markets are in the last stage of the rallies before a downturn in the business cycle.

Analysts at the Wall Street behemoths cite signs including the breakdown of longstanding relationships between stocks, bonds and commodities in addition to investors ignoring valuation principles and data. All of it means credit and stock markets are at risk of a painful drop.

“Equities have become less correlated with FX, FX has become less correlated with prices, and everything has become less sensitive to oil,” Andrew Sheets, Morgan Stanley’s chief cross-asset strategist, wrote in a note published Tuesday.

His bank’s version shows assets throughout the world will be the least correlated in almost a decade, even after U.S. stocks joined high-yield credit in a selloff triggered this month by President Donald Trump’s political standoff with North Korea and racial violence in Virginia.

Morgan Stanley

Just like they did in the investors are pricing assets based on the risks specific to an individual safety and industry, and shrugging off broader drivers, like the latest release of manufacturing data, the model shows. As traders look to remain bullish, traditional relationships within and between asset classes tend to break down.

“These low macro and micro correlations confirm the concept that people’re in a late-cycle environment, and it’s no accident that the last time we saw readings this low was 2005-07,” Sheets wrote. He advocates boosting allocations to U.S. stocks while reducing holdings of corporate debt, where consumer intake and energy is more heavily represented.

That dynamic is also helping to keep volatility in currencies, bonds and stocks feeding risk appetite according to Morgan Stanley. Regardless of the turbulent past two weeks, the CBOE Volatility Index remains to post a year of declines.

Morgan Stanley

For Savita Subramanian, Bank of America Merrill Lynch’s head of U.S. equity and qualitative strategy, signals that investors aren’t paying much attention to earnings is another indication that the global rally may soon run out of steam. Companies that outperformed analysts & #x 2019; sales and profit quotes across 11 sectors saw no benefit from investors, according to her research.

“This absence of a reaction could be another late-cycle signal, indicating positioning and expectations more than reflect excellent results/guidance,” Subramanian wrote in a note.

Zero Alpha Beats – Bank of America Corp

Oxford Economics Ltd. macro strategist Gaurav Saroliya points to another red flag for U.S. equity bulls. Non-financial companies after inflation’s gross value-added — a measure of the value of merchandise after adjusting for the costs of production — is negative on a basis.

“The cycle of actual profits has turned enough to be a possible source of concern in the four quarters,&#x201D. “That, together with the most expensive equity valuations among major markets, should stress investors in U.S. stocks. ”

The thinking goes that a classic late-cycle growth — an economy with full employment and slowing momentum — tends to see a decrease in corporate profit margins. The U.S. is in the mature stage of the cycle — 80 percent of conclusion since the previous trough — based on margin patterns going back to the 1950s, according to Societe Generale SA.

After finishing credit markets are overheated, HSBC’s global head of fixed-income research, Steven Major, told clients to cut holdings of European corporate bonds earlier this month. Premiums don’t compensate investors for the prospect of liquidity risks, capital losses as well as an increase according to Major.

Citigroup analysts say markets are on the cusp of entering a summit in front of a recession that pushes on bonds and stocks into a bear market.

Spreads may widen in the coming months thanks and as investors fret over company leverage that is elevated, they compose.  But, stocks are anticipated to rally further partly due to buybacks, the strategists conclude.

“Bubbles are common in these equity Citigroup analysts led by Robert Buckland said in a note Friday.

Read more: http://www.bloomberg.com/

Citigroup Glorified Secretary Fired After Accusing Boss

A former Citigroup Inc. broker in New York sued the bank claiming she was reduced to a glorified secretary because of her gender and fired when she reported a superior for violating rules designed to prevent insider trading.

Erin Daly claims she lost the ability to make stock allocations among clients at Citi Private Bank. People with the power to distribute shares in initial public offerings were seen as extremely valuable by clients and by other employees, she said in a complaint filed Monday in Manhattan federal court.

When she questioned in an e-mail whether her authority was taken away because shes a woman, Daly said she was reprimanded by human resources and forced to apologize.

Daly, who said she worked for Citigroup from 2007 to 2014, said she was fired two weeks after reporting a supervisor who demanded she pass along protected inside information so he could be given to favored clients. Daly claimed the firm included false, negative information about her in a filing with the Financial Industry Regulatory Authority that will make it impossible for her to work in finance in the future.

We believe the claims alleged are without merit and intend to vigorously defend against them, Citigroup spokeswoman Danielle Romero-Apsilos said Monday in an e-mail.

Daly is seeking unspecified damages, including front pay and double her lost back pay.

The case is Daly v. Citigroup Inc., 16-cv-09183, U.S. District Court, Southern District of New York (Manhattan).

Read more: http://www.bloomberg.com//news/articles/2016-11-29/citigroup-glorified-secretary-fired-after-accusing-boss

Getting Chinese to Buy Your House Isn’t Easy Anymore. Just Ask Cate Blanchett.

Australian starlet Cate Blanchett wished to offer her house on Sydneys waterside. The purchaser who desired it was from China. The difficulty began right there.

Getting the cash from China showed difficult. The A$ 20 million ($14.9 million) cost was far in excess of the $50,000 limitation on exactly what Chinese are enabled to transform each year due to capital controls. The prospective purchaser couldnt settle, and the offer broke down– among lots of unsuccessful sales impacting Chinese nationals in Australia, inning accordance with a number of real estate agents managing such deals.

Cate Blanchetts Sydney house in 2005.
Photographer: Fairfax Media through Getty Images

As Chinese people start an extraordinary purchasing spree of foreign residential or commercial property, the Blanchett case highlights how such loan circulations have actually produced a political and financial reaction, both in China and abroad. No place is this clearer than in Australia, the industrialized country most exposed to China.

Chinese authorities are stepping up capital curbs simply as myriad limitations in Australia have actually made home mortgages difficult to obtain for immigrants, putting purchasers from China in a sandwich capture that might damage the residential or commercial property market down under. While thats not unwanted for Australias reserve bank, which is eager to take some steam from increasing costs, it shines a light on the battle to absorb Chinas money exodus as it streams even more afield into places from Malaysia to Florida.

“People are discovering its really tough to obtain a home mortgage here then discover they cant get their loan from China, and theyre stuck, stated Lulu Pallier of Sothebys International in Sydney, who deals with high-end sales to Chinese purchasers.

Chinese authorities fret that outflows of capital, intensified by the decreasing yuan, might be an ongoing chauffeur of decline. Approximated outflows in October reached $73 billion, getting once again after having actually slowed mid-year, according Capital Economics Ltd. Price quotes from Bloomberg Intelligence reveal about $620 billion drained in the 9 months through September.

President-elect Donald Trumps proposed tax cuts and facilities binge might speed up such circulations by accelerating U.S. development and inflation and pressing the Federal Reserve to raise rate of interest much faster than present market bets. The yuan has actually fallen practically 6 percent this year to the most affordable level considering that mid-2008.

“If the United States rates increase and the United States economy speeds up, it will refer time when more capital leaves China,” stated Stephen Jen, ceo of Eurizon SLJ Capital Ltd. and a previous International Monetary Fund economic expert.

Tighten Loopholes

Chinese banks have actually been informed to tighten up loopholes that permit people to avert capital controls, and authorities have actually begun detaining individuals in a project to avoid money finding its escape. Authorities have actually likewise prohibited pals or loved ones from organizing together currency quotas, suppressed the cross-border activities of underground banks and asked lending institutions to decrease foreign-exchange sales.

Still, there are a lot of alternative paths for identified purchasers. Entrepreneur can fund their house purchases through overseas trading business, while some Chinese designers permit customers to spend for abroad systems in yuan.

For a take a look at how Chinese money is improving Malaysias Johor Bahru, click on this link

But those who are successful in getting their loan from China are now facing increased constraints in Australia. In 2015, the federal government forced a business owned by Chinas Evergrande Real Estate Group Ltd. to offer an A$ 39 million Sydney estate, the highest-profile casualty of a crackdown on unlawful home-buying by immigrants.

This year, Australias 4 greatest lending institutions and Citigroup Inc. stated theyll not authorize home mortgage applications in Australia that depend on foreign earnings denominated in Chinese yuan and 4 other Asian currencies. Westpac Banking Corp. stated it wished to support Australians and irreversible locals home-buying rather.

Alternative Financing

So regional funding options are emerging. Australian billionaire designer Harry Triguboff has actually doubled the quantity hes providing to house purchasers, specifically those impacted by the Chinese capture, inning accordance with info supplied by his Meriton Group. Its home loan book has actually swelled by A$ 50 million over the previous 4 months to about A$ 120 million as bank financing dried up, it stated.

Australias reserve bank in its Financial Stability Review in October highlighted the danger from purchasers cannot close on home purchases. It stated the home market is revealing installing issue that this will end up being more typical in the cities of Brisbane, Melbourne and Perth.

These issues emerge from a mix of tighter funding conditions for buyers, specifically for non-residents and those reliant on foreign earnings, and evaluations at settlement listed below the contracted rate, the Reserve Bank of Australia stated.

Australia authorized A$ 24 billion worth of Chinese property financial investments in the ended June 2015– or a quarter of all such approvals– inning accordance with the most current information offered. Chinese were without a doubt the biggest foreign purchasers, followed by Americans with $7 billion.

Additional Supply

Australian house rates have actually climbed up by more than 50 percent given that 2008 in the most significant cities, in part due to the fact that of Chinese purchases. Limitations on Chinese purchasers by both China and Australia might take some steam from Australias roaring east coast residential or commercial property market, offering the reserve bank scope to leave rate of interest the same for a prolonged duration as it looks for to support other locations of the economy.

Settlement problems from abroad purchasers indicates extra supply in pockets of urban Brisbane, Sydney and Melbourne where theres currently some emerging down pressure on costs, stated Su-Lin Ong, head of Australian financial and fixed-income method at Royal Bank of Canada in Sydney. If that has a wider causal sequence, together with a building cycle peak, it might provide the RBA more versatility.

Meanwhile, Oscar-winner Blanchetts sandstone manor in the Sydney residential area of Hunters Hill– with 6 bed rooms, a tennis court and a swimming pool with personal medical spa– is back on the marketplace. While theres still strong need for Australian residential or commercial property from Chinese purchasers, their failure to raise funds is moistening interest for handling the financially rewarding and formerly cash-laden group, inning accordance with Scott Kirchner, who runs China operations from Shanghai for Australias Beller home group.

We hesitate to handle brand-new customers unless they have 100 percent of the money for a home, he stated. Then theres the concern of how do they get the cash out of China.

Read more: http://www.bloomberg.com/news/articles/2016-11-28/cate-blanchett-s-sydney-home-hitch-shows-china-s-money-flow-fear

Citigroup Glorified Secretary Fired After Accusing Boss

A previous Citigroup Inc. broker in New York took legal action against the bank declaring she was lowered to a glorified secretary due to the fact that of her gender and fired when she reported a remarkable for breaching guidelines created to avoid expert trading.

Erin Daly declares she lost the capability to make stock allowances amongst customers at Citi Private Bank. Individuals with the power to disperse shares in going publics were viewed as incredibly important by customers and by other staff members, she stated in a grievance submitted Monday in Manhattan federal court.

When she questioned in an e-mail whether her authority was eliminated since shes a lady, Daly stated she was reprimanded by personnels and required to ask forgiveness.

Daly, who stated she worked for Citigroup from 2007 to 2014, stated she was fired 2 weeks after reporting a manager who required she pass along secured details so he might be offered to preferred customers. Daly declared the company consisted of incorrect, unfavorable details about her in a filing with the Financial Industry Regulatory Authority that will make it difficult for her to operate in financing in the future.

We think the claims declared lack benefit and plan to intensely prevent them, Citigroup spokesperson Danielle Romero-Apsilos stated Monday in an email.

Daly is looking for undefined damages, consisting of front pay and double her lost back pay.

The case is Daly v. Citigroup Inc., 16-cv-09183, U.S. District Court, Southern District of New York (Manhattan).

Read more: http://www.bloomberg.com//news/articles/2016-11-29/citigroup-glorified-secretary-fired-after-accusing-boss

Two Koreas Agree to End War This Year, Pursue Denuclearization – Trending Stuff

Two Koreas Agree to End War This Year, Pursue Denuclearization – Trending Stuff
  • Kim Jong Un, Moon Jae-in announce deal after historic summit

  • Statement provides no clear path to dismantling Kim’s arsenal

North Korean leader Kim Jong Un and South Korean President Moon Jae-in agreed Friday to finally end a seven-decade war this year, and pursue the “complete denuclearization” of the Korean Peninsula.

U.S. President Donald Trump hailed the move, declaring “KOREAN WAR TO END!” on Twitter. He’s agreed to meet with Kim at a time and place yet to be determined.

Kim and Moon embraced after signing the deal during a historic meeting on their militarized border, the first time a North Korean leader set foot on the southern side. They announced plans to replace the 1953 armistice that ended hostilities with a peace treaty by year’s end.

Their statement on a “common goal of realizing, through complete denuclearization, a nuclear-free Korean Peninsula,” stopped short of the “complete, verifiable and irreversible denuclearnization” long sought by the U.S. and its allies. The statement didn’t elaborate on what the term meant and Kim didn’t personally utter the word during remarks Friday.

When Kim Met Moon: In Pictures

“We have agreed to share a firm determination to open a new era in which all Korean people enjoy prosperity and happiness on a peaceful land without war,” Kim told reporters, without taking questions.

The agreement follows a rapid thaw in tensions on the peninsula after a flurry of North Korean missile tests and a hydrogen bomb detonation last year. The deal was expected to set up meeting soon between Kim and Trump soon, which would be the first summit between a North Korean leader and a sitting American president.

Still, it was Kim’s symbolism-laden encounter with Moon — the third summit between leaders of the nations since the Korean War and the first since 2007 — that captivated much of the world Friday. The event marked Kim’s first live, unfiltered appearance on world television: South Koreans gathered around screens to watch Moon lead him past a military honor guard while a band played “Arirang,” an unofficial Korean anthem.

Moon said their agreement to seek a peace treaty represented a “fundamental change” for the peninsula. The leaders agreed to hold military talks next month and seek a “phased disarmament,” without providing more details.

Uneasy Truce

South Korea refused to participate in talks to end the Korean War, leaving an uneasy truce between North Korea and China on one side and United Nations forces — led by the U.S. — on the other. Although China long ago withdrew its troops, more than 28,000 American personnel remained based in South Korea, which the Kim regime views as an enduring threat.

“It all sounds good,” William Rhodes, former senior vice chairman of Citigroup Inc., told Bloomberg Television. “The question is how are you going to verify any denuclearization.”

Investors saw Friday’s deal easing risks. The cost of insuring South Korea’s sovereign bonds against non-payment fell 1.75 basis points to 44.75 basis points as of 6:10 p.m. in Seoul, Barclays Plc prices showed. The credit-default swap contracts, are on track for their lowest close since March 14, according to data provider CMA.

The question is whether the agreement can last longer than earlier ones by Moon’s predecessors that collapsed amid disputes over inspections, weapons tests and economic aid. North Korea, which committed to not pursuing nuclear weapons in 1992, now has an estimated 60 nuclear bombs and missiles believed capable of reaching any U.S. cities. — a step Trump has threatened war to stop.

Kim Optimistic

The announcement was followed by a tersely worded commentary from Kim’s Korean Central News Agency decrying sanctions and calling on the U.S. to drop its “anachronistic hostile policy toward” North Korea.

Any progress on dismantling the Kim’s weapons program would likely be slow and fraught, and involve visits by international inspectors. Prior efforts involving Kim’s late father when he was leader collapsed in acrimony, with North Korea blaming the U.S. for failure to adhere to the agreements.

Yet at least on Friday, optimism prevailed.

“There’ll be no victory without pain, no glory without frustration,” Kim said. “One day, we will remember this day with joy for overcoming challenges and hardship.”

Read more: http://www.bloomberg.com/

Bitcoin Ban Expands Across Credit Cards as Big U.S. Banks Recoil – Trending Stuff

Bitcoin Ban Expands Across Credit Cards as Big U.S. Banks Recoil – Trending Stuff

A growing number of big U.S. credit-card issuers are deciding they don’t want to finance a falling knife.

JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. said they’re halting purchases of Bitcoin and other cryptocurrencies on their credit cards. JPMorgan, enacting the ban Saturday, doesn’t want the credit risk associated with the transactions, company spokeswoman Mary Jane Rogers said.

Bank of America started declining credit card transactions with known crypto exchanges on Friday. The policy applies to all personal and business credit cards, according to a memo. It doesn’t affect debit cards, said company spokeswoman Betty Riess.

And late Friday, Citigroup said it too will halt purchases of cryptocurrencies on its credit cards. “We will continue to review our policy as this market evolves,” company spokeswoman Jennifer Bombardier said.

For more on cryptocurrencies, check out the podcast:

Allowing purchases of cryptocurrencies can create big headaches for lenders, which can be left on the hook if a borrower bets wrong and can’t repay. There’s also the risk that thieves will abuse cards that were purloined or based on stolen identities, turning them into crypto hoards. Banks also are required by regulators to monitor customer transactions for signs of money laundering — which isn’t as easy once dollars are converted into digital coins.

Bitcoin has lost more than half its value since Dec. 18, falling below $8,000 on Friday for the first time since November. The drop occurred amid escalating regulatory threats around the world, fear of price manipulation and Facebook Inc.’s ban on ads for cryptocurrencies and initial coin offerings.

Now, cutting off card purchases could exacerbate those pressures by making it more difficult for enthusiasts to buy into the market. Capital One Financial Corp. and Discover Financial Services previously said they aren’t supporting the transactions.

Mastercard Inc. said this week that cross-border volumes on its network — a measure of customer spending abroad — have risen 22 percent this year, fueled partly by clients using their cards to buy digital currencies. The firm warned that the trend already was beginning to slow as cryptocurrency prices fell.

Discover Chief Executive Officer David Nelms was dismissive of financing cryptocurrency transactions during an interview last month, noting that could change depending on customer demand. For now, “it’s crooks that are trying to get money out of China or wherever,” he said of those trying to use the currencies.

Read more: http://www.bloomberg.com/