• Stocks Trade Mixed; Yen Rises, Treasury Yields Dip: Markets Wrap

    (Bloomberg) -- Asian stocks put in a mixed performance Tuesday ahead of the highly anticipated Federal Reserve meeting, while Treasury yields dipped and the yen climbed.Stocks slid in Japan, rose in Australia, Hong Kong and South Korea, and fluctuated in Shanghai. European futures pointed lower. Investor focus remained firmly on the Fed’s statement and press conference Wednesday to see whether Chairman Jerome Powell and his colleagues will validate widespread expectations for interest-rate cuts. There was little cue from Wall Street’s Monday trading, when the S&P 500 Index closed flat, though tech stocks did send the Nasdaq 100 higher.The Aussie ticked lower after the Reserve Bank of Australia said that further easing is more likely than not in the period ahead. The euro was higher ahead of the European Central Bank’s annual gathering in Sintra, Portugal.Traders are refraining from putting on big bets ahead of the key central bank decision Wednesday, where they will look for signals on the likelihood of interest-rates cuts ahead. There’s a widespread desire for proof the Fed is ready to act, but too much change could raise alarm.“We know that the Fed doesn’t like to surprise people and the idea at this point of them digging in their heels and saying ‘absolutely no cuts,’ I think is very unlikely,” Josh Kutin, head of asset allocation for Columbia Threadneedle, said in an interview at Bloomberg’s New York headquarters. “Will it be the full number that’s priced in right now? I think that’s unlikely as well. I think somewhere between is pretty fair.”Elsewhere, oil retreated with OPEC nations still unable to agree on a date for their next meeting -- adding to uncertainty over whether production cuts would be extended.Here are some key events coming up:The European Central Bank’s annual symposium in Sintra, Portugal, takes place June 17-19Federal Reserve, the Bank of Japan and the Bank of England all set monetary policy, along with central banks in Norway, Brazil, Taiwan and Indonesia.The Fed meeting begins Tuesday with a decision and press conference the next day. Officials are expected to debate a rate cut to shelter the U.S. economy, in part, from the fallout caused by escalating trade disputes.In the U.K. Tuesday there will be a second ballot on the leadership contest to choose Theresa May’s successor as leader of the country’s ruling party.Final May CPI data for the euro zone are due Tuesday.These are the main moves in markets:StocksThe MSCI Asia Pacific rose 0.2% as of 3:05 p.m. in Tokyo.Topix Index fell 0.7%. Kospi Index rose 0.4%.S&P/ASX 200 Index rose 0.6%.Hang Seng Index rose 0.8%.Shanghai Composite fell 0.1%.S&P 500 Index futures were little changed.Euro Stoxx 50 futures fell 0.2%.CurrenciesThe yen rose 0.3% to 108.27 per dollar.The euro was at $1.1236, up 0.2%.The offshore yuan was little changed at 6.9358 per dollar.The British pound was little changed at $1.2532.BondsThe yield on 10-year Treasuries fell two basis points to 2.07%.CommoditiesWest Texas Intermediate fell 0.3% to $51.77 a barrel.Gold rose 0.5% to $1,345.96 an ounce.To contact the reporter on this story: Cormac Mullen in Tokyo at cmullen9@bloomberg.netTo contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Joanna OssingerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.


  • Oil group Total hopes new supercomputer will help it find oil faster and more cheaply

    Energy major Total said its new supercomputer - which has propelled it to a world ranking as the most powerful computer in the sector - will enable its geologists to find oil faster, cheaper and with a better success rate. The Pangea III computer build by IBM will help process complex seismic data in the search for hydrocarbons 10 times faster that before, Total said on Tuesday. The computing power of the Pangea III has been increased to 31.7 so-called 'petaflops' from 6.7 petaflops in 2016, and from 2.3 petaflops in 2013, Total said, adding that it was the equivalent of around 170,000 laptops combined.


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  • Expect a Market Brawl If Fed Doesn't Show It's Ready to Act

    (Bloomberg) -- Rates traders should prepare for turbulence around this week’s Federal Reserve decision: Markets aren’t giving up on rate cuts without a fight.Avoiding a volatile session Wednesday could require some fancy policy-making footwork. There’s a widespread desire for proof the Fed is ready to act, but too much change could raise alarm. Central bankers can adjust their message in a variety of ways, but none of them are likely to produce significantly higher yields, according to investors including Loomis Sayles & Co.’s Elaine Stokes.The market’s doves have the Fed cornered. If it sticks to its May pledge to be “patient” as it judges future rate moves and keeps the door open to a hike next year, riskier assets like stocks will probably slide and yields will sink further as traders rush to havens.“The market riots on that,” said Stokes, a fixed-income portfolio manager.Instead, the Fed is expected to take another dovish turn, just as it’s done all year as weak inflation, deteriorating growth and U.S. trade policy uncertainty sent Treasury yields tumbling. But the Fed hasn’t caught up with rate-cut expectations and probably won’t now, with positioning as aggressive as ever. Anxiety over the Group-of-20 meeting this month has mired the yield on two-year notes around 1.85% -- down from almost 3% in November -- and spurred bets that the Fed policy rate will drop 65 basis points by year-end.Here’s what to look for in the Fed’s statements and press conference Wednesday and some potential scenarios for reactions in the $16 trillion Treasuries market.Delicate BalanceInvestors are anticipating some combination of the following to demonstrate the Fed’s readiness to cut:Dropped reference to policy patience and inflation being dragged down by transient factorsEmphasis on weak inflation and growth risks from trade hostilitiesEnding the balance-sheet unwind sooner than SeptemberDownward revisions of the rate-projection dot plotThe right balance of these could nudge yields a bit higher, as traders exit some rate-cut hedges. Amherst Pierpont Securities LLC’s head of Treasury trading, Paul Murphy, expects weakening in the two-year note and related futures contracts. But if the Fed convinces investors it’s ready to cut rates, wagers for a move in the third quarter won’t go away.“The market could have a little bit of a relief sell-off and little bit of a repricing, but that would be somewhat innocuous,” Murphy said.Don’t expect much action further out the curve, either. T. Rowe Price fixed-income portfolio manager Chris Brown said if markets are comfortable with the Fed’s messaging -- and even if the G-20 summit stirs optimism on the trade front -- the 10-year yield probably can’t get much higher before buyers step in. The past month’s rallies have carved out a range for the 10-year between 2% and 2.40%, he said.Release the DovesIt would be tough for the Fed to surpass the market’s expectations, but a rate cut might. As of Monday, pricing reflected only a 16% chance of a 25-basis point reduction at this week’s meeting.Rewarding these bets would not clear them out, however, according to Loomis’s Stokes. By over-delivering, policy makers would only raise the suspicion that they’re responding to a bigger, undisclosed threat. Futures contracts beyond this year would gain on the prospect of more easing to come, if traders reason that “this doesn’t feel like insurance, this feels like a Fed cycle,” she said.“If there are expectations that this is the beginning of a more drawn-out easing cycle, the impact on the curve is the most important to look at,” with a more pronounced steepening the most likely outcome, said Amherst Pierpont’s Murphy.‘Double Jeopardy’If the Fed doesn’t bend closer to the market’s vision, T. Rowe’s Brown expects a tantrum in three stages. Higher yields is the first and the most fleeting.“If the Fed comes off as hawkish I think you’ll see a knee-jerk selloff at the front end,” Brown said. That would quickly give way to a bullish move as a meltdown in risk assets drives buying in long-dated Treasuries, in a second wave of curve flattening. The delayed reaction is for the curve to re-steepen, he said, as investors move back into short-dated Treasuries on the conviction that the Fed will have to take emergency action later.To Murphy of Amherst Pierpont, this is the “double-jeopardy” scenario whereby stock-market volatility exacerbates the recent tightening in financial conditions due to trade policy uncertainty. “Then the market’s really going to force them to do something later in the year,” he said.(Updates two-year yields in fifth paragraph)To contact the reporter on this story: Emily Barrett in New York at ebarrett25@bloomberg.netTo contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Nick Baker, Mark TannenbaumFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.


  • Hong Kong-Based Langham Is on the Prowl for Acquisitions in Europe

    There are a few things that Hong Kong-based Langham Hospitality Group wants changed. More than two decades after buying what is considered Europe’s first grand hotel, The Langham, London, and then giving the property a facelift that earned the group a badge as an ultra-luxury hotel player, the company has yet to establish any other […]The post Hong Kong-Based Langham Is on the Prowl for Acquisitions in Europe appeared first on Skift.


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  • Duterte Stands by China, Doubts Own Fishermen in Sea Collision

    (Bloomberg) -- Philippine President Rodrigo Duterte is standing by China over a collision involving the two nations’ boats in the South China Sea, with his spokesman casting doubts on local fishermen’s accounts of the incident.In his first public statement about what he described as a “maritime incident,” Duterte said China’s side should be heard on the collision that resulted in a Philippine vessel carrying 22 fishermen sinking in disputed waters on June 9. The crew were rescued by a Vietnamese fishing boat and a Philippine Navy ship.“It is best investigated. I don’t issue a statement now because there’s no investigation and no result," Duterte said in speech at a Philippine Navy event on Monday night. "The only thing we can do is wait and give the other party the right to be heard.”The Philippines will not escalate tensions with China by sending military ships to the South China Sea following the collision, he added, reiterating his nation isn’t ready to go to war with Beijing.At a briefing Tuesday, Duterte’s spokesman Salvador Panelo said there are "circumstances that give doubt to the version" of the Filipino fishermen, including how most of them were asleep when the collision happened.“The President doesn’t want this to be blown into an international crisis,” Panelo said. “We are being careful because there will be repercussions if we make the wrong move.”‘Passive’ PolicyDuterte stuck to his pro-China stance despite calls from the opposition, led by Vice President Leni Robredo, to change his “passive” China policy by actively asserting the nation’s rights in the disputed waters. Robredo, in a Facebook post Sunday, also called on Duterte’s government to demand the Chinese fishermen’s trial in the Philippines.Duterte now has to convince the public that friendly ties with China is still the way to go, said Jay Batongbacal, director of the University of the Philippines’ Institute for Maritime Affairs and Law of the Sea.“Between the Philippine government and the Chinese government the friendship policy has been set, but this incident has happened and casts doubt on the sincerity and wisdom of it to the Filipino people,” Batongbacal said.The Philippines’ long-term position in the South China Sea dispute may be weakened if Duterte maintains his pro-Beijing stance after the incident, said Professor Jeffrey Ordaniel, a fellow at Hawaii-based foreign policy research institute Pacific Forum. “The Duterte administration’s China policy is unfortunately helping the Chinese pursue their maritime ambitions.”Chinese Foreign Ministry spokesman Lu Kang described the incident as an “accidental collision" at briefing on Monday, adding that politicizing the collision “is not appropriate.” Beijing’s embassy in Manila earlier said the Chinese vessel’s captain tried to rescue the Philippine fishermen after bumping into their boat, but was afraid of being "besieged" by other Filipino fishing boats.The incident took place near Reed Bank, an area claimed by both Manila and Beijing where there’s a pending oil exploration plan by Philippines company PXP Energy Corp.\--With assistance from Dandan Li and Philip J. Heijmans.To contact the reporter on this story: Andreo Calonzo in Manila at acalonzo1@bloomberg.netTo contact the editors responsible for this story: Cecilia Yap at cyap19@bloomberg.net, Ruth Pollard, Caroline AlexanderFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.


  • Betting the house: investors demand higher premiums for risky Australian mortgage bonds

    Investors in Australian mortgage bonds are demanding higher premiums to buy the riskiest tranches of new debt, as a slowing economy stokes concerns a property downturn could get worse and increase home loan defaults. High-yield investors are receiving up to 40 basis points more than they were last year to buy the lower-rated and unrated portions, according to an analysis of recent deals by large lenders including AMP, National Australia Bank and Members Equity Bank. "When you are looking at those lower unrated tranches, they are deteriorating as one would expect at the late stage of the [property] cycle," said George Boubouras, chief investment officer at Atlas Capital.


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