With the weaker Canadian dollar intended to spur a moribund export-based economy, one beneficiary of that has been Canadian National Railway (CNI). Canada’s largest railroad said it received a favorable boost in 2Q profits of C$28M due to converting US dollar denominated revenues to the weaker Canadian dollar, or about 3 cents per share. From March through June, USD/CAD fell to 1.067 from 1.105
CNI
The exchange sector was up 190 bps, 190 bps above global equities. Year-to-date the sector is outperforming global equities by 182 bps.
European Commission agreed with the proposal to suspend the status of derivatives deals entered into from March 18 until the region’s main regulator European Securities and Markets Authority determines which instruments should face mandatory clearing later this year. In a letter the EU commissioner Michel Barnier wrote to ESMA, he acknowledged that the implementation process “could jeopardize the principle of legal certainty” for market participants.
European regulators may start fining firms in order to motivate them to correctly report their over-the-counter and exchange-traded derivatives transactions. According to a the Trade News source, “there were over 6 billion reports this year and not a lot of them match up so we are fully expecting them to start honing into that particular problem soon….and they really have to, in order to make a statement.”
The Securities Exchange Commission (SEC) is considering some specific transparency rules for dark pools, such as disclosing what feed they use to obtain market data, naming their customers and revealing what, if any, special arrangement those clients have in place.
SEC is seeking information on 10 registered broker dealers in its current high frequency trading investigation, Reuters reported. According to the report, SEC is looking for information on tips, complaints, or referrals concerning the brokers and high frequency traders.
The European Union’s bid to set structure rules for around 30 of the region’s largest banks has been strongly opposed by a “substantial number of countries” which have “expressed serious concerns or reservations” about the proposed proprietary trading ban. According to Bloomberg, “only very few countries are explicitly in favor.”
NDAQ’s proposal to offer rebates to some of its options exchanges’ largest customers has been rejected by SEC, Reuters reported. According to SEC, it rejected the proposal as NDAQ’s plan would have broken rules stating that an exchange’s fees cannot be unfairly discriminatory of hinder competition.
Chicago Mercantile Exchange Group expressed its desire to administer the gold “fix”, and that it would bid to be involved in a new process, which may turn the current twice-daily price-setting conference call into an electronic auction, Reuters reported.
NDAQ is considering applying for full exchange status for NLX, its London-based derivatives platform, which is currently designated as a multilateral trading facility under UK regulation.
European markets slipped Monday as tensions between Russia and the West intensified and the Middle East endured the deadliest day of fighting between Israelis and Palestinians since the most recent conflict began.
The Stoxx Europe 600 was trading 0.4% lower by early afternoon, with losses extending across all the continent’s main bourses. In currency markets, the ruble fell against both the euro and U.S. dollar, while Russia’s Micex and the dollar-traded RTS Index declined 2.6% and 2.3% respectively, hitting fresh two-month lows. Futures don’t always accurately predict moves at the open, but the S&P 500 in the U.S. was indicated dwindling 0.2% after the bell.
Over the weekend, the U.S. leveled its most explicit allegations yet of Russia’s involvement in the downing of a Malaysia Airlines flight last Thursday that left 298 people dead, and subsequent efforts to conceal evidence.
European leaders threatened broad new sanctions against Moscow, departing from their initially muted reaction and marking a turning point in the standoff between the West and the Kremlin.
Also weighing on market sentiment, unrest flared across the Middle East over the weekend. Israel said 13 soldiers were killed and Gaza officials said 96 Palestinians were killed on Sunday, including 60 in the Gaza City neighborhood of Shajaiyeh where the battle of the tunnels was fought.
Initially markets showed a muted reaction to the developments Monday, with strategists at BNP Paribas noting that the tensions between Russia and the West will likely exert greater pressure on President Vladimir Putin to adopt a conciliatory approach, but later a sense of apprehension spread.
Deutsche Bank strategist Jim Reid described the situation as extremely dangerous and delicate. He added that despite the understandable conclusion that the market may be reaching, that diplomacy is the only sensible outcome, the risk of destabilization cannot be discounted.
“This story still has a long way to run,” he said.
Alberto Gallo, a strategist at Royal Bank of Scotland Group, said that investors may be putting too much faith in central banks to rein in tensions and stabilize markets.
“Central banks may manage to overshadow geopolitical tensions for now and the near future,” he wrote in a note, adding that emerging market bonds particularly, could become particularly exposed to risks.
Talib Sheikh, a manager of the J.P. Morgan multi-asset income fund, which is part of a multi-asset platform with over $25 billion under management, said that volatility was already edging higher in the wake of this, and that we could see some forced unwinding of risk-on positioning, if it continues to do so.
Typical safe-harbor assets such as gold and U.S. government bonds, having rallied in the direct aftermath of the Malaysia Airlines plane crash, were trading moderately stronger Monday, too.
Gold added 0.6% to hit $1,317.10 an ounce while the 10-year U.S. Treasury yield stood at 2.48%, down from around 2.56% before the crash on Thursday. Yields fall as bond prices rise.
UBS economist Paul Donovan said that if tensions in Russia and Gaza escalate further, energy prices would be the first to react. Brent crude, however, was trading little changed on the day, at $107.10 a barrel.
Elsewhere, the corporate earnings season moved into focus Monday.
Shares in Julius Baer Group AG led the pan-European index, adding more than 8%, after the Swiss bank said that assets under management rose 8% in the first half of this year and announced plans to take over Israeli lender Bank Leumi’s Swiss private banking operation.
In the U.K., engineer contractor Babcock International Group PLC rose to the top of the FTSE 100 after the group said that its order book for the coming year had risen to GBP13.5 billion ($23.1 billion).
Shares in retailer Tesco PLC advanced too, after the U.K.’s biggest retailer said Chief Executive Philip Clarke would leave the company in October to be replaced by Unilever executive Dave Lewis. That news offset Tesco’s latest profit warning.
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Swiss Frank CME
The Swiss National Bank and the People’s Bank of China have agreed to set up a currency swap line designed to boost trade and investment flows between the two countries and help to make Zurich an offshore hub for trading the yuan.
The Swiss and Chinese central banks Monday said the three-year agreement will allow them to buy and sell their currencies up to a limit of 150 billion renminbi, or 21 billion Swiss francs ($23.4 billion).
The deal will also allow the SNB to buy up to 2 billion francs worth of Chinese bonds, helping it diversify its foreign-exchange reserves which have swelled to almost 450 billion francs.
“From China’s perspective the agreement creates the infrastructure to solve two problems. The first is how domestic banks are going to be financed as the county opens its capital accounts and the second is to allow foreign investors to invest in the market,” said Diana Choyleva, economist at consultancy Lombard Street Research.
The Zurich-based SNB said the agreement will further strengthen collaboration between it and its Chinese counterpart and is a “key requisite for the development of a renminbi [yuan] market in Switzerland.”
The Swiss Department of Finance welcomed the agreement, which it said represented a key precondition for expanding the trade in yuan in Switzerland and in emphasizing the role played by Switzerland in expanding the global use of the Chinese currency.
The head of the department of finance, Eveline Widmer-Schlumpf, and SNB President Thomas Jordan met with the Chinese central bank governor, Zhou Xiaochuan, in June to discuss greater financial-sector cooperation.
Since 2009, as part of its effort to revamp the country’s creaky financial system, the Chinese government has been pushing for a greater role for the yuan on the world stage.
So far China’s central bank has signed currency-swap agreements with central banks in more than 20 countries–including the U.K. and Australia, and the European Central Bank.
The swap deals are designed primarily to allow central banks to ease liquidity squeezes during periods of financial market tension, but will also boost two-way investment.
“There is very little investment activity in the Chinese currency so this is good news for small and large Swiss banks,” according to UBS currency strategist Thomas Flury.
China is a key trade partner for the Alpine country, and represents its biggest export market outside of Europe and North America. Two-way trade between them reached about 5.4 billion francs in 2013, and this volume is likely to increase after the two last year signed a free-trade agreement, giving them improved access to each others markets.
In addition to the potential trade flow benefits, the swap deal also shows the SNB is actively trying to diversify its reserves of foreign currency, whose ratio has swelled to around 70% of its economic output, compared with less than 10% before the financial crisis erupted in 2008.
“Switzerland is not too late to the party,” Lombard Street Research’s Ms. Choyleva said.
Swiss authorities have to be very careful in assessing the risk associated with the Chinese bond market, she added.
Swiss Frank CME
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European markets slipped Monday as tensions between Russia and the West intensified and the Middle East endured the deadliest days of fighting between Israelis and Palestinians since the most recent conflict began.
The Stoxx Europe 600 was trading 0.5% lower by midmorning, with losses across the main bourses. In currency markets, the ruble fell against both the euro and U.S. dollar, while Russia’s Micex and the dollar-traded RTS Index declined 1.4% and 1.3% respectively, hitting fresh two-month lows. Futures don’t always accurately predict moves at the open, but the S&P 500 in the U.S. was indicated opening 0.2% lower.
Over the weekend, the U.S. leveled its most explicit allegations yet of Russia’s involvement in the downing of a Malaysia Airlines flight last Thursday that left 298 people dead, and subsequent efforts to conceal evidence.
European leaders threatened broad new sanctions against Moscow, departing from their initially muted reaction and marking a turning point in the standoff between the West and the Kremlin.
Also weighing on market sentiment, unrest flared across the Middle East over the weekend. Israel said 13 soldiers were killed and Gaza officials said 96 Palestinians were killed on Sunday, including 60 in the Gaza City neighborhood of Shajaiyeh where the battle of the tunnels was fought.
Initially markets showed a muted reaction to the developments Monday, with strategists at BNP Paribas noting that the tensions between Russia and the West will likely exert greater pressure on President Vladimir Putin to adopt a conciliatory approach, but later a sense of apprehension spread.
Deutsche Bank strategist Jim Reid described the situation as extremely dangerous and delicate. He added that despite the understandable conclusion that the market may be reaching, that diplomacy is the only sensible outcome, the risk of destabilization cannot be discounted.
“This story still has a long way to run,” he said.
Typical safe-harbor assets such as gold and U.S. government bonds, having rallied in the direct aftermath of the Malaysia Airlines plane crash, were trading moderately stronger Monday, too.
Gold added 0.4% to hit $1,314.60 an ounce while the 10-year U.S. Treasury yield stood at 2.48%, down from around 2.56% before the crash on Thursday. Yields fall as bond prices rise.
UBS economist Paul Donovan said that if tensions in Russia and Gaza escalate further, energy prices would be the first to react. Brent crude, however, was trading little changed on the day, at $107.34 a barrel.
Elsewhere, the corporate earnings season moved into focus Monday.
Shares in Julius Baer Group AG led the pan-European index, adding more than 8%, after the Swiss bank said that assets under management rose 8% in the first half of this year and announced plans to take over Israeli lender Bank Leumi’s Swiss private banking operation.
In the U.K., engineer contractor Babcock International Group PLC rose to the top of the FTSE 100 after the group said that its order book for the coming year had risen to GBP13.5 billion ($23.1 billion). Shares in retailer Tesco PLC rose too, after the U.K.’s biggest retailer said Chief Executive Philip Clarke would leave the company in October to be replaced by Unilever executive Dave Lewis. That news offset the retailer’s latest profit warning.
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Elliott Wave Harmonic 