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Monday, 31 August 2015

Bank of England stance on rates unchanged by China - Carney

Bank of England Governor Mark Carney (L) talks with U.S. Department of Commerce Chief Economist Susan Helper during the Federal Reserve Bank of Kansas City's annual Jackson Hole Economic Policy Symposium in Jackson Hole, Wyoming, August 29, 2015. REUTERS/Jonathan Crosby

Bank of England Governor Mark Carney said on Saturday that a slowdown in China's economy could push down further on inflation but it did not change, for now, the central bank's position on when and how it might increase interest rates.

Carney, speaking at an annual U.S. central banking conference in Jackson Hole, Wyoming, reiterated his view that the recovery in Britain's economy "will likely put the decision as to when to start the process of gradual monetary policy normalization into sharper relief around the turn of this year."

That comment echoed one he made in mid-July, before global financial markets took a hit in recent days over concerns about the health of China's economy.

The BoE cut rates to 0.5 percent, a record low, at the height of the financial crisis in 2009. Although inflation in Britain is almost zero, the Bank is likely to start raising rates in the first quarter of next year as wage growth picks up, economists predict.

Carney said on Saturday a Chinese slowdown could add to pressure pushing down on prices in Britain and risk aversion in global markets could make financial conditions in the country tighter, which would also weigh on inflation.

"These are possibilities, not certainties. Their evolution needs to be monitored, not taken for granted," he said, before adding the direct exposure of Britain's economy to China was relatively modest.

He also said the BoE could "look through" the temporary dis-inflationary impact on inflation from lower demand in China for commodities but would watch for any longer-lasting impact on Britain from a slowing of the world's No.2 economy.

"Developments in China are unlikely to change the process of rate increases from limited and gradual to infinitesimal and inert," Carney said.

The BoE's main guidance on interest rates has been that when the time comes to raise them, they will go up gradually and to a level lower than before the financial crisis.

Carney stressed that his comment on the timing of a decision by the BoE on rates did not prejudge any particular decision.

"But it does indicate that recent events do not yet, to my mind, merit changing the MPC’s (Monetary Policy Committee's) strategy for returning inflation to target," he said.

Reference: HOWARD SCHNEIDER AND JONATHAN SPICER

Fed's Fischer sees inflation rebound, allowing gradual rate hikes



U.S. inflation will likely rebound as pressure from the dollar fades, allowing the Federal Reserve to raise interest rates gradually, Fed Vice Chairman Stanley Fischer said on Saturday in a speech careful not to overreact to a possible Chinese slowdown.

The influential U.S. central banker was circumspect whether he would prefer to raise rates from near zero at a much-anticipated policy meeting on Sept. 16-17. But he said downward price pressure from the rising dollar, falling oil prices, and slack in the U.S. labor market is fading.

The cautious confidence from Fischer, as well as from Bank of England Governor Mark Carney who spoke at a conference alongside him, suggests at least two major central banks are poised to look beyond a week of financial-market turmoil brought on by fears that China's economy is faltering.

"Given the apparent stability of inflation expectations, there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further," Fischer told a central bankers' conference in Jackson Hole, Wyoming.

"With inflation low, we can probably remove accommodation at a gradual pace," he added. "Yet, because monetary policy influences real activity with a substantial lag, we should not wait until inflation is back to 2 percent to begin tightening."

Central banks and governments globally are bracing for the Fed decision, which could weaken foreign currencies and put even more pressure on emerging markets already reeling after the volatile global stocks selloff.

At the same time, Fischer, Carney and other policymakers are wrestling with the world's stubbornly low levels of inflation, and recognizing that the rapid pace of globalization over the last quarter century may have made it harder for any individual country to move inflation higher.

"There are profound secular and cyclical disinflationary forces at work in the global economy," Carney said, making it harder for central banks in London, Washington and elsewhere to reach the inflation targets they have set as a core policy goal.

The Fed has said it wants to be reasonably confident that inflation, which has been stuck below its 2-percent target for a few years, will rebound in the medium term. The pickup in prices could stall, however, if a slowdown in China and falling commodity prices drag down the global economy.

"At this moment, we are following developments in the Chinese economy and their actual and potential effects on other economies even more closely than usual," said Fischer, a close ally of Fed Chair Janet Yellen.

The Fed's preferred measure of inflation slipped to 1.2 percent in July, the lowest in more than four years.

Fischer said the dollar's year-long rise played a big role in that weakness, and it could restrain U.S. gross domestic product growth through 2016 and even into 2017 - all the more reason to "proceed cautiously" in raising rates, he said.

Outside the conference on Friday, Fischer made an impromptu television appearance to say it was too early to say whether the Fed should in September hike rates for the first time in nearly a decade. Markets, on alert for any sign policymakers were ruling out a September liftoff, read Fischer's remarks as suggesting a tightening would at least come this year.

While central banks in China, Japan, and Europe are ramping up monetary stimulus to fight off deflation or boost growth, the BoE, like the Fed, is plotting when to begin tightening policy.

Carney said a slowdown in China could depress UK inflation further but it did not, for now, change his central bank's position on when and how it might raise rates.

Economists predict the Bank of England is likely to start raising rates in the first quarter of next year.

The developments "are unlikely to change the process of rate increases from limited and gradual to infinitesimal and inert," Carney told the conference, reiterating that the BoE's policy decision would become clearer "around the turn of the year."

Reference: JONATHAN SPICER AND HOWARD SCHNEIDER

Friday, 28 August 2015

U.S. second-quarter GDP growth rate revised up to 3.7 percent

People are seen walking through Roosevelt Field shopping mall in Garden City, New York February 22, 2015. The U.S. homeland security chief said on Sunday he takes seriously an apparent threat by Somali-based Islamist militants against prominent shopping sites in the West including the Mall of America in Minnesota and urged people there to be careful. REUTERS/Shannon Stapleton

Aug 27 The U.S. economy grew faster than initially thought in the second quarter on solid domestic demand, showing fairly strong momentum that could still allow the Federal Reserve to hike interest rates this year.

Gross domestic product expanded at a 3.7 percent annual pace instead of the 2.3 percent rate reported last month, the Commerce Department said on Thursday in its second GDP estimate.

The GDP report, which was released in the wake of a global stock market sell-off, should offer assurance to both investors and cautious Fed officials that the United States was in good shape to weather the growing strains in the world economy.

Concerns over slowing economic growth in China sent global equity markets into a tailspin last week, raising doubts that the U.S. central bank would raise its short-term interest rate next month.

On Wednesday, New York Fed President William Dudley said that prospects of a September lift-off in the central bank's key lending rate "seems less compelling to me than it was a few weeks ago."

The upward revisions to second-quarter growth also reflected the accumulation of $121.1 billion worth of inventories, up from the previous estimate of $110.0 billion. That meant inventories contributed 0.22 percentage point to GDP instead of subtracting 0.08 percentage point as reported last month.

While the huge inventory build will likely weigh on growth in the third quarter, the blow could be softened by rebounding business investment on capital goods.

Economists polled by Reuters had expected that second-quarter GDP growth would be revised to a 3.2 percent rate. Underscoring the economy's solid fundamentals, a measure of private domestic demand, which excludes trade, inventories and government expenditures, increased at a 3.3 percent rate, instead of the previously reported 2.5 percent pace.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 3.1 percent rate, rather than the 2.9 percent pace reported last month. Consumer spending got off a to brisk start in the third quarter, with retail sales rising solidly in July.

A strong labor market, cheaper gasoline and relatively higher house prices, which are boosting household wealth, are helping to support consumer spending.

Investment in nonresidential structures was revised to show it rising at a 3.1 percent rate, reflecting stronger spending on commercial and healthcare construction. It was previously reported to have contracted at a 1.6 percent pace.

Spending on residential construction was raised to a 7.8 percent pace from a 6.6 percent rate. Business spending on equipment was not as weak as initially thought.

The energy sector continued to weigh on growth as it struggles with the lingering effects of deep spending cuts by oil-field companies like Schlumberger (SLB.N) and Halliburton (HAL.N) in the aftermath of a more than 60 percent plunge in crude oil prices since last year.

Spending on mining exploration, wells and shafts plunged at a 68.3 percent rate in the second quarter, the largest decline since the second quarter of 1986. This category was previously reported to have contracted at a 68.2 percent pace.

The trade deficit was smaller than previously reported, adding 0.23 percentage point to GDP growth. The GDP report also showed after-tax corporate profits rebounded 1.3 percent in the second quarter after declining 7.9 percent in the first quarter. A strong dollar has constrained the profits of multinational corporations.

Reference: Reuters

Thursday, 27 August 2015

China stocks buoyed by U.S. rally, yuan edges up

Investors look at an electronic board showing stock information at a brokerage house in Shanghai, China, August 26, 2015. REUTERS/Aly Song

China's turbulent stock markets rose on Thursday, helped by a strong rebound on Wall Street on expectations that the U.S. Federal Reserve will respond to days of China-led volatility by delaying an expected interest rate rise next month.

Chinese stocks had fallen again on Wednesday - taking their losses to more than 20 percent in just five days - underscoring fragile investor confidence and deep doubt over whether the previous day's policy easing by the People's Bank of China's (PBOC) could stabilize the economy.

Concerns about China's slowing growth have been rising all year with a constant drip-feed of deteriorating economic data, including an official purchasing managers' survey last week suggesting that factory activity shrank this month at its fastest pace in almost 6-1/2 years.

A Reuters poll of August manufacturing activity on Wednesday confirmed a rapid slowdown.

An unexpected devaluation of the yuan CNY=CFXS two weeks ago added to suspicions that Beijing was worried about its exporters, which have led its breakneck growth for two decades.

The yuan had edged up against the dollar by midday on Thursday, buoyed by the rise in stocks, though the PBOC set the daily guidance rate, from which the spot rate can vary by up to 2 percent, at its lowest level since 2011.

"The recovery on the yuan may be just a flash," said a trader at a foreign bank in Shanghai. "Many companies and big investors are worried about the prospect of the currency's depreciation."

Late on Tuesday the PBOC cut interest rates and freed up banks to lend more, but that stimulus had failed to convince local stock markets of Beijing's ability to reverse the slowdown in the world's second biggest economy.

"FANTASY GROWTH"?

Markets in New York had also been unimpressed by China's efforts to calm investors' nerves, until New York Fed President William Dudley said the prospect of a September rate hike seemed "less compelling" than it was just weeks ago.

That fueled a 3.95 percent rise in the Dow Jones Industrial Average, its biggest one-day gain in four years, which carried over into Asia.

The CSI300 index .CSI300 of the biggest stocks in Shanghai and Shenzhen was up 2.1 percent after the morning session, and the Shanghai Composite Index .SSEC rose 1.6 percent. Futures contracts on the CSI300 CIFc1 were up 3.7 percent at 2,929, but still more than 5 percent below the underlying index, which suggests investors expect further weakness.

Not all, however.

"From today, I'm no longer pessimistic," said Jiang Chao, a strategist at Haitong Securities, who correctly predicted China's year-long bull run, which ended in mid-June.

China's two main stock indexes have never been reliable barometers of the domestic economy and unlike most developed-world bourses are dominated by retail investors, which makes them particularly volatile, but the weight of worsening economic news finally helped bring an end to the bull run.

Even if China hits its official target of 7 percent growth this year that will still be its slowest pace of expansion in 25 years.

Many economists suspect that the official figures are too optimistic.

On Thursday, one of China's richest men, Wang Jianlin, chairman of property and investment firm Dalian Wanda (3699.HK), said China should give up the "fantasy" of 7-8 pct economic growth and accept a slower rate.

For all that, a majority of economists predict a continued deceleration - rather than a crash - for China's economy, and most dismiss comparisons with the 2008 global financial crisis or the 1997/98 crisis in Asia.

Japan's central bank governor Haruhiko Kuroda said on Wednesday that market players had become "too pessimistic" about China, and he expected its growth would likely remain at 6-7 percent this year and next and would not have a very negative impact on Japanese exports.

Reference: PETE SWEENEY AND SAMUEL SHEN

Wall Street up on data, may end six-day losing streak



U.S. stocks rose in morning trading on Wednesday, helped by stronger-than-expected durable goods data, raising hopes that Wall Street will snap its six-day losing streak.

Although stocks were off their highs by late morning, all 10 major S&P 500 sectors were up, led by the technology index's .SPLRCT 2.6 percent gain.

Apple Inc (AAPL.O) provided the biggest boost to the three major U.S. indexes.

Durable goods orders rose 2 percent in July, compared with analysts' average forecast of a 4 percent fall. Orders for core capital goods, a proxy for business investment, rose 2.2 percent - their biggest gain in 13 months..

The data suggested U.S. economy was in good shape.

Wednesday's gains followed a dramatic day of trading on Tuesday, when the three main indexes reversed course suddenly to close sharply lower amid lingering worries about slowing growth in China.

"I think today's early rally is because nothing particularly bad happened overnight and while everyone is looking at China very nervously, today's data showed that the U.S. is growing," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

› NYSE invokes Rule 48 for market open in anticipation of volatility
The stronger durable goods data appeared to improve the case for a U.S. interest rate increase in September.

However, New York Fed President William Dudley said an interest rate hike next month seems less appropriate given the recent global market turmoil.

At 11:17 a.m. ET, the Dow Jones industrial average .DJI was up 261.56 points, or 1.67 percent, at 15,928, the S&P 500 .SPX was up 30.83 points, or 1.65 percent, at 1,898.44 and the Nasdaq Composite .IXIC was up 75.83 points, or 1.68 percent, at 4,582.32.

All 30 stocks in the Dow were up.

Up to Tuesday's close, the Dow had lost 10.71 percent in the past six trading days, while the S&P 500 .SPX dropped 11.71 percent and the Nasdaq composite .IXIC 11.5 percent.

The S&P 500 rose as much as 2.9 percent on Tuesday before closing down 1.35 percent, while the Dow rose as much as 2.8 percent before closing down 1.29 percent. The Nasdaq rose as much as 3.6 percent before ending down 0.44 percent.

The Shanghai Composite Index .SSEC ended down for the fifth straight day, underscoring fragile confidence and deep doubt over whether the Chinese central bank's cuts in interest rates and reserve ratios on Tuesday could stabilize the economy.

The dollar index .DXY, which touched a 7-month low earlier in the week, was up 0.13 percent after the U.S. data. Treasury prices fell.

Google (GOOGL.O) shares were up 4.5 percent at $640 after Goldman Sachs raised its rating to "buy" from "neutral" and added it to its conviction buy list.

Cameron International (CAM.N) soared 41.2 percent to $59.94 after Schlumberger (SLB.N), the world's No.1 oilfield services company, said it would buy the oilfield equipment maker in a $14.8 billion deal. Schlumberger fell 4.8 percent to $69.08.

Abercrombie & Fitch (ANF.N) jumped 13.1 percent to $19.53 after the teen apparel retailer reported better-than-expected quarterly sales.

Advancing issues outnumbered decliners on the NYSE by 2,026 to 959. On the Nasdaq, 1,646 issues rose and 1,033 fell.

The S&P 500 index showed no new 52-week highs and 22 new lows, while the Nasdaq recorded three new highs and 85 new lows.

Reference: TANYA AGRAWAL AND SWETA SINGH

Wednesday, 26 August 2015

Europe blue-chip shares on the cheap? Think again


A trader works at the trading floor of KBC bank in Brussels, Belgium August 25, 2015.  REUTERS/Yves Herman - RTX1PKZI

Stock markets are rebounding after a bruising 48-hour sell-off. But with China still battling to revive its slowing economy, Europe's "screaming buys" come with risks.

There is no doubt the recent correction has created opportunities. Even taking into account the 4.5 percent jump in the STOXX Europe 600 index on Tuesday, European stocks are still down 14 percent from this year's peaks and trade at a discount to the U.S. S&P 500 and Japanese Nikkei.

But while the U.S. had its "Apple at $99" opportunity during the worst of Monday's rout, when the world's biggest company hit its lowest level in almost a year, finding a safe haven in big European names like Nestle or Unilever is proving trickier.

For a start, the engine of growth for these global companies in recent years has been emerging markets - precisely where economic growth is faltering and triggering market fears of fresh deflationary pressures.

Six European sectors, including food and beverages, autos and chemicals, derive more than 15 percent of their revenue from the Asia-Pacific region and have delivered the worst relative total returns since Aug. 5, according to Citi research.

Fund managers and strategists said the better buys were stocks and industries more exposed to a domestic recovery.

"Some of the consumer staples considered to be defensive have quite significant exposure to China ... They aren't necessarily a sanctuary," said Rory Powe, manager of the Man GLG Continental Europe fund, which has 174 million pounds ($275 million) under management.

Powe said a company such as Fielmann, a German spectacles maker with a market value of 4.6 billion euros ($5.27 billion), was an example of a better bet in the long run.

Valuation is another issue. Many of Europe's blue chips on the STOXX Europe 50 index trade at a premium to the broader market, including oil company Total, consumer-goods maker Unilever, British American Tobacco and brewer Anheuser-Busch Inbev.

Credit Suisse strategists recommended clients buy telecom stocks for dividends and cash flow and also backed employment agency Adecco, Southern European banks like Intesa Sanpaolo and Germany's SAP. They warned against consumer staples' valuation and emerging-market focus.

While top blue chips are no slouch in terms of dividend yield - the STOXX Europe 50 yields around 4.3 percent - Goldman Sachs strategists warned they came with risks.

"(There is) the possibility that investors will hide in the perceived safety of defensive "bond proxies" and consumer staples in particular ... it should be stressed that many of the companies in these sectors have high emerging-markets exposure and are seeing a slowdown in earnings (growth)," they said.

FALLING KNIFE

Among the beneficiaries of the rebound on Tuesday, driven by China's cut in benchmark interest rates, were bombed-out sectors like mining and commodities that have been battered by worries over slowing Chinese demand. Glencore was up 4 percent and Antofagasta rose 6.8 percent.

Some investors warned that trying to buy beaten-up commodities stocks was like catching a falling knife, though.

"We remain bearish in oil and metals ... These sectors, although now looking very cheap, may get cheaper still," said Lorne Baring, Managing Director of B Capital.

Despite the risks involved in picking up bargains, some fund managers pointed out that economic signals coming from developed economies suggested demand was broadly healthy - even if the global growth outlook looked bruised.

"There are solid reasons to be worried about the global growth outlook given emerging markets and systemic fears in China," said Valentijn van Nieuwenhuijzen, head of multi-asset strategy at NN Investment Partners.

"However, it is a risk – not yet a reality – that this will spread to the developed world."

For now, the opportunities should be taken with a pinch of salt.

"Some of these sectors are oversold and extremely unloved ... But we just have to be careful of the knock-on effects," said Man GLG's Powe.

($1 = 0.6338 pounds)

($1 = 0.8724 euros)

Reference: Lionel Laurent

China stocks end morning higher but rate cuts don't dispel fears

Investors look at an electronic board showing stock information at a brokerage house in Shanghai, China, August 26, 2015. REUTERS/Aly Song

China stocks ended higher on Wednesday morning after wild swings in early trade as investors hoped fresh interest rate cuts by the central bank would stabilize the economy and stop a stock market rout that has seen prices fall 20 percent in four days.

But the market was generally unimpressed with China's strong monetary easing measures announced on Tuesday night, believing much more official support is needed, and traders said shares remained vulnerable to another selloff.

Blue chips reversed early losses, but small-caps continued to slide, with some traders attributing the volatility to margin calls and mutual fund redemptions.

After opening 0.7 percent at open, the blue-chip CSI300 index .CSI300 fell as much as 3 percent but managed to end the morning up 1.7 percent at 3,094.03 points.

The Shanghai Composite Index .SSEC also reversed early losses of nearly 4 percent, rising 0.8 percent to 2,988.76 points by the lunch break.

Stock index futures CIFc1, which slumped 10 percent for two days in a row, rose sharply by midday, after regulators restricted trading in the instruments in the latest effort to crack down on speculation.

The People's Bank of China cut interest rates and lowered the amount of reserves banks must hold for the second time in two months, in an apparent move to aid the economy and the slumping stock market.

"As I look at the screen – a few greens, a few reds. In short, the market was not impressed," wrote DBS Chief Investment Officer Lim Say Boon.

"You can't stimulate consumption via interest rate cuts. At least not in Asia anyway ... Also, you don’t stimulate net exports through interest rates."

The monetary easing nevertheless propped up shares in banking .CSI300BI and real estate .CSI300REI stocks, sectors that investors believe will benefit the most from additional liquidity.

Major carmakers, including BYD 002594.SZ, Dongfeng Auto (600006.SS) and Changan Auto 000625.SZ also rose sharply as investors bet the central bank's supportive policies toward auto financing and leasing firms would aid car sales.

But small-caps remained under selling pressure, with Shenzhen's start-up board ChiNext .CHINEXTC down 1 percent, and the CSI500 index .CSI500 tracking small listed companies declining 0.5 percent.

"The previous days' slumps have triggered margin calls and forced liquidation in some stocks, which is why you see some investors dumping shares at whatever prices they can sell,” said David Dai, Shanghai-based investor director at Nanhai Fund Management Co.

He added that some blue-chips are relatively cheap now and have attracted bargain hunters.

Improved sentiment in mainland and regional markets aided Hong Kong stocks.

The Hang Seng index .HSI added 0.2 percent, to 21,443.80 points, while the Hong Kong China Enterprises Index .HSCE gained 1.3 percent, to 9,638.14.

All main industry indexes, except for services .HSCIS, rose in the city.

Reference: Reuters

Tuesday, 25 August 2015

FTSE snaps losing streak, extends recovery after China cuts rates



The FTSE 100 looked set for its biggest one-day rise since 2011 on Tuesday after China cut interest rates to try to calm markets following turbulence that has rocked equities globally.

The FTSE 100 .FTSE rebounded after dropping to its lowest level since 2012 in the previous session, having fallen for 10 straight days as concerns about China's economy mounted.

Following weak data on Friday, China's failure to deliver substantial stimulus over the weekend was cited as driving Monday's dramatic falls in global markets.

However, investors took heart after China's central bank cut interest rates and simultaneously relaxed reserve requirements for the second time in two months, cranking up support for a stuttering economy and its plunging stock market.

"The initial reaction in the equity market was aggressive as many expected that this news would be out at the weekend," Guardian Stockbrokers' director of trading, Atif Latif, said.

"It does however highlight that the economy in China continues to see downward pressures, but there are measures in place that will stem the flow."

The benchmark FTSE 100 rose 184.41 points, or 3.1 percent, to 6,083.28 points by 1113 GMT.

Shares in mining companies rebounded from China-related falls, having been under the cosh from commodity price weakness, with the FTSE 350 mining sector .FTNMX1770 up 5.7 percent from its lowest levels since 2009. Base metals rose modestly.

Glencore (GLEN.L) rallied 8 percent from all-time lows hit on Monday, while Antofagasta was up 7 percent, saying it was targeting savings of about $160 million this year.

BHP Billiton (BLT.L) also jumped about 6.8 percent despite reporting a 52-percent slump in annual profit to a decade low, as the world's biggest miner said it would cut spending more deeply to shore up dividends.

"Whilst the numbers were fairly ugly reading, I think the thing that the market was most concerned about was that the dividend should be maintained, which it was," Hargreaves Lansdown head of equities, Richard Hunter, said.

RSA (RSA.L) rose 4.4 percent after receiving a 550 pence all-cash takeover proposal from Zurich Insurance (ZURN.VX), paving the way for one of Europe's largest insurance deals.

reference: Reuters

Asian shares bounce off three-year lows while China's suffering goes on

A man walks past an electronic board displaying various Asian countries' stock price index outside a brokerage in Tokyo August 21, 2015.  REUTERS/Issei Kato

Volatile global markets showed signs of a respite from the recent blood-letting on Tuesday, as bargain hunters helped Asian stocks off three-year lows hit on fears that China's economy was risking a hard landing, with Chinese shares losing another 5 percent.

The MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS jumped 1.7 percent after an initial dip to three-year lows while Japan's Nikkei .N225 index also erased most of its early losses after an initial drop of 4.3 percent.

"There appears to be buyback as many markets look oversold after panicky selling in the last few days. Even the shares that had little business ties with China were sold," said Yukino Yamada, senior strategist at Daiwa Securities.

U.S. stock futures ESc1 also gained 2.0 percent in Asia, paring a part of its 5-percent fall the previous day.

But mainland Chinese shares bucked the trend, with Shanghai Composite Index .SSEC falling another five percent even after 15 percent fall in the last three days, including 8.5 percent drop on Monday.

"Global investors are cannibalizing each other. Calling it a market disaster is not an overstatement," said Zhou Lin, an analyst at Huatai Securities.

"The mood of panic is dominating the market ... And I don't see any signs of meaningful government intervention."

Underlining concerns about China, Japanese Finance Minister Taro Aso said on Tuesday he hoped China would take action to stabilize its economy and that Tokyo had no plan for now to unveil its own new economic stimulus package.

MSCI's all country world index .MIWD0000PUS is up 0.2 percent in Asia after having fallen 3.8 percent on Monday to a 10 1/2-month low, its biggest fall in almost four years.

Global share markets have been hit by worries that the Chinese economy, the most important engine for the world economy, was growing at a much slower pace than Beijing's 7 percent target for 2015.

Investors are also unnerved by uncertainty over U.S. monetary policy. The Federal Reserve has said it plans to raise interest rates this year for the first time in almost a decade.

The heavy fall in share prices worldwide over the past week has sharply reduced expectations of a U.S. rate hike in September, but the outlook is far from clear.

Atlanta Fed President Dennis Lockhart, whose comments earlier this month sparked expectations of a hike in September, said on Monday that the Federal Reserve will likely begin raising rates "sometime this year."

On Wall Street, the S&P 500 Index .SPX fell 3.9 percent to a 10-month low on Monday. The CBOE volatility index .VIX, a key measure of U.S. equity volatility, shot up to more than 50 percent at one point for the first time since the 2008 global financial crisis.

Because some investors often fund their investment in risk assets by borrowing low-yielding euro and yen, the sell-off in shares helped send both currencies to seven-month highs.

The euro rose as high as $1.1715 EUR= while the yen strengthened to 116.15 to the dollar JPY=.

But both currencies stepped back in Asia. The euro slipped 0.7 percent to $1.1531 while the yen retreated to 120.02 to the dollar.

Oil prices also stabilized in Asia after having plunged more than 6 percent on Monday to 6 1/2-year lows.

U.S. crude futures CLc1 traded at $38.73 per barrel, gaining a dollar from Monday's low of $37.75.

Brent crude futures last stood at $43.20 after having fallen to $42.23 on Monday.

Brent still stood not far from $36.20, its low hit in the aftermath of the global financial crisis, having fallen more than 66 percent from last year's peak.

Reference: HIDEYUKI SANO

Monday, 24 August 2015

Great fall of China sinks world stocks, dollar tumbles



Alarm bells rang across world markets on Monday as a 9 percent dive in Chinese shares and a sharp drop in the dollar and major commodities panicked investors.

European stocks opened more than 3 percent in the red after their Asian counterparts slumped to 3-year lows as a three month-long rout in Chinese equities threatened to get out of hand. [.SS]

Safe-haven government bonds [EUR/GVD] and the yen and the euro rallied as widespread fears of a China-led global economic slowdown and currency war kicked in.

"It is a China driven macro panic," said Didier Duret, chief investment officer at ABN Amro. "Volatility will persist until we see better data there or strong policy action through forceful monetary easing."

With serious doubts now emerging about the likelihood of a U.S. interest rate rise this year, the dollar slid against other major currencies. It was last at 120.25 yen its lowest in three months.

The Australian dollar fell to six-year lows and many emerging market currencies also plunged [EMRG/FRX], whilst the frantic dash to safety pushed the euro to a 6-1/2-month high. [FRX/]

"Things are starting look like the Asian financial crisis in the late 1990s. Speculators are selling assets that seem the most vulnerable," said Takako Masai, head of research at Shinsei Bank in Tokyo.

Commodity markets took a fresh battering. Brent and U.S. crude oil futures hit 6-1/2-year lows as concerns about a global supply glut added to worries over potentially weaker demand from China. [O/R][GOL/]

› Markets tumble as investors dump risky assets on China weakness
U.S. crude was down 3 percent at $39.20 a barrel while Brent lost 2.4 percent to $44.40 a barrel.

Copper, seen as a barometer of global industrial demand, tumbled 2.5 percent, with three-month copper on the London Metal Exchange hitting a six-year low of $4,920 a tonne. Nickel slid 4.6 percent to its lowest since 2009 at $9,730 a tonne.

GREAT FALL OF CHINA

The near 9 percent slump in Chinese stocks was their worst performance since the depths of the global financial crisis in 2009 and wiped out what was left of the 2015 gains, which in June has been more than 50 percent.

The latest rout was rooted in investor disappointment that Beijing did not announce expected policy support over the weekend after its markets shed 11 percent last week.

Compounding the real-time falls all index futures contracts <0#CIF:> <0#CIC:> <0#CIH:> slumped by their 10 percent daily limit, pointing to more bad days ahead.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 5.1 percent to a three-year low. Tokyo's Nikkei was down 4.1 percent and Australian and Indonesian shares hit two-year troughs.

"China could be forced to devalue the yuan even more, should its economy falter, and the equity markets are dealing with the prospect of a weaker yuan amplifying the negative impact from a sluggish Chinese economy," said Eiji Kinouchi, chief technical analyst at Daiwa Securities in Tokyo.

There was further evidence that developed markets were becoming synchronised with the troubles. London's FTSE which has a large number of global miners and oil firms, was down for its 10th straight day, its worst run since 2003.

The pan-European FTSEurofirst 300, meanwhile, was down 3.1 percent by 0830 GMT at 1,382.15 points, wiping around 260 billion euros ($298.61 billion) off the index and taking its losses for the month to more that 1 trillion euros. [.EU]

U.S. stock futures also pointed to larger losses for Wall Street's main markets, with the S&P 500, Dow Jones Industrial and Nasdaq expected to open down 1.8, 2.2 and 3.1 percent respectively.

"We are in the midst of a full-blown growth scare," strategists at JP Morgan Cazenove said in a note.

Reference: MARC JONES

China fears and global growth doubts grip markets

A trader works inside a booth on the floor of the New York Stock Exchange, August 21, 2015. REUTERS/Brendan McDermid

Markets will be watching for China's next move as signs of a slowdown in the world's second-largest economy stack up, raising expectations it will act to stoke growth.

A looming snap election in Greece and a closely watched conference hosted by the Federal Reserve in the United States are also likely to keep investors on their toes next week, in particular as they look for hints on when the U.S. will raise interest rates.

Fears that Chinese growth is weakening, dragging down the global economy with it, are already hammering commodities and world stock markets.

Both tumbled on Friday after a survey showed Chinese manufacturing slowed the most since the global financial crisis in 2009 - adding to other worrying clues about the country's health, including its falling exports.

China devalued the yuan earlier in August, by pushing its official guidance rate down 2 percent. The central bank has said there was no reason for the currency to fall further, but investors are also bracing for further interest rate cuts.

"It will be all eyes on the Chinese authorities for any further policy support steps, alongside the People's Bank of China yuan fixings and trading swings," analysts at Investec Economics said in a note to clients.

China is also widely expected to relax reserve requirements ratios for its banks again in the coming months, a measure intended to spur lending by reducing the cash they need to hold. It is trying to keep its economy on course to grow 7 percent in 2015 - its slowest pace in a quarter of a century.

"We continue to expect a total of 100 basis points of reserve requirement ratio cuts by end-2015, with the first cut likely to take place within the next two weeks," economists at Standard Chartered said.

The cash reserves ratio has already been cut three times this year.

EYES ON FED, GREECE

By the end of next week attention may shift away to the Rocky Mountains, where policymakers are due to gather from Aug. 27-29 for the Fed's conference of central bankers, finance ministers, academics and financial market participants in Jackson Hole.

Fed chair Janet Yellen is not expected to attend, raising the prospect that other Fed officials may be more tight-lipped about the likelihood of the first rate increase in almost a decade, some analysts said.

The prospect of an increase as soon as September receded this week as the Fed released minutes of July meeting. They gave no clear signals as to the timing of such a move - which would affect markets across the world and could cause more pain for emerging market assets, already being hit by China's woes.

Fed policymakers are still concerned about the weakness of the global economy, the minutes showed, but they were also more confident about US growth prospects.

Further clues on both matters should be gleaned from data releases this week, including second-quarter gross domestic product figures for the United States, due on Thursday.

Quarter-on-quarter GDP growth in the period is expected to be revised upwards to 3.2 percent from 2.3 percent, according to a Reuters poll.

In the euro zone, investors will also be looking at an German economic sentiment survey due on Tuesday for a better idea of the scope of the bloc's recovery.

Preliminary August consumer price readings for Germany and Spain on Friday will provide further insight into how effective the European Central Bank's bond-buying efforts have been at warding off deflation.

But the spotlight will mainly fall once again on Greece, where Prime Minister Alexis Tsipras has resigned. That opened the way for early elections after he secured much-needed funds from the country's third international bailout program.

The current Greek government aims to strengthen its position in the election after accepting a rescue deal it once opposed. But that creates more uncertainty for markets already on edge over whether Greece will deliver on promised reforms and get its economy and banks back on track.

Reference: Reuters

Friday, 21 August 2015

Strong jobs, weak inflation data muddy Fed rate debate: minutes

Federal Reserve Chair Janet Yellen attends a news conference after chairing the second day of a two-day meeting of the Federal Open Market Committee to set interest rates in Washington in this June 17, 2015 file photo. REUTERS/Carlos Barria

U.S. Federal Reserve officials widely agreed last month the economy was nearing the point where interest rates should move higher, but worried lagging inflation and a weak global economy posed too big a risk to commit to "liftoff."

Only one Fed policymaker was ready to vote for a rate hike at the central bank's July 28-29 policy meeting, while some others "viewed the economic conditions for beginning to increase the target range for the federal funds rate as having been met or were confident that they would be met shortly," according to minutes from the meeting released on Wednesday.

"Most judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point," the minutes said.

That sentiment, combined with a broader recognition among "many members" that full employment was close, led the Fed to say in its post-meeting statement that it only needed to see "some" more improvement in labor markets before hiking rates.

But that feeling was offset by apparently widespread concern about weak inflation, tepid wages, and the fact that a six-year recovery had not moved inflation nearer to the Fed's 2 percent inflation target.

"Almost all members ... would need to see more evidence that economic growth was sufficiently strong and labor market conditions had firmed enough for them to feel reasonably confident that inflation would return to the committee's longer-run objective over the medium term," the minutes said.

The Fed has said it wants to be "reasonably confident" in the inflation outlook before a rate hike.

Yields on long-term U.S. government bonds fell, U.S. stocks pared losses and the dollar weakened after the release of the minutes, suggesting investors saw them as an indication the Fed would be cautious about hiking rates.

The minutes, however, reflected a now month-old snapshot of Fed opinion, with the data since that meeting having shown steady job growth and an uptick in consumer spending and housing that confirm the central bank's view of a growing economy.

"The overall message of the minutes is: 'we are getting there,'" wrote Harm Bandholz, chief U.S. economist for UniCredit Research.

The minutes did not make an overt reference to a possible September rate hike.

Several Fed policymakers have said publicly they felt a rate hike will likely be justified next month, though they are monitoring jobs and other data closely.

In the over-the-counter market, three-month overnight indexed swap rates implied traders now see a 35 percent chance of the Fed hiking rates in September, compared to 46 percent late on Tuesday, according to data from inter-dealer broker Tullett Prebon.

Though the initial hike will have little impact on consumer or business borrowing rates, which have already risen, it will still mark the start of a process that gradually makes it more expensive to buy homes and cars, or fund a vacation on the credit card.

But the discussion at the Fed's July meeting seemed to set the table for that eventuality. It began discussing the mechanics of how to end its current policy of reinvesting the proceeds of maturing bonds and other assets purchased by the central bank during three rounds of a stimulus program known as quantitative easing.

The Fed has pledged not to reduce its asset holdings until after it begins raising rates.

Policymakers also took steps to clean up their quarterly presentation of economic forecasts, notably by agreeing that once they begin raising rates they will no longer need to publish an existing chart indicating the year in which officials think rates will rise.

That particular graph had become very lopsided: as of June, 15 members said they felt the rates "liftoff" would occur this year, with only two expecting it in 2016.

Reference: Reuters

Asian shares slide; dollar loses edge on Fed minutes

A pedestrian using his mobile phone walks past electronic boards showing the stock prices outside a brokerage in Tokyo, Japan, August 17, 2015.  REUTERS/Yuya Shino

Concerns about slowing growth in China sent Asian shares to two-year lows and pressured oil prices on Thursday while minutes from the U.S. Federal Reserve's July meeting dented expectations for a rate hike in mid-September.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS shed 0.9 percent with all markets in the region except New Zealand posting declines.

Hong Kong's Hang Seng Index .HSI hit an 8-month low while Singapore-listed shares .FTSTI fell to 1 1/2-year lows. Malaysian shares .KLSE sank to three-year lows.

Mainland Chinese shares .SSEC also dropped 1.2 percent while Japan's Nikkei .N225 fell 0.7 percent.

"Markets are nervous of risks and investors are pulling funds out of emerging economies and resource exporters," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

Fears that Chinese growth, which carried the global economy following the 2008 international financial crisis, is slowing in the long term are affecting the outlook for many industries, with the commodities sector among the hardest-hit.

U.S. crude oil prices CLc1 eased 0.8 percent after a fall of more than 4 percent on Wednesday following an unexpectedly large increase in U.S. stockpiles, barely holding above its 6 1/2-year low of $40.40 per barrel.

It last stood at $40.47, with a break below $40 seen as likely to trigger a fresh wave of selling.

Brent crude futures LCOc1 fell 0.6 percent to $46.90, edging near the six-year low of $45.19 touched in January.

Falls in oil and other commodity prices hit many resource-exporting emerging economies hard, and they have already suffered shocks from capital outflows as the prospect of higher U.S. interest rates looms larger.

MSCI's emerging market index .MSCIEF set a new four-year low, having fallen 22 percent from this year's high hit in April and coming within a stone's throw of its Oct 2011 trough.

Minutes from last month's Fed monetary policy meeting showed officials in broad agreement that the U.S. economy was nearing the point where interest rates should move higher.

But they also noted lagging inflation and a weak global economy posed too big a risk to commit to "lift off", leading some investors to question the likelihood of a rate hike in September.

U.S. Treasury yields fell and money market futures <0#FF:> <0#ED:> rolled back expectations of a rate rise in September.

The 10-year U.S. Treasuries yielded 2.122 percent, having declined from an eight-month high of 2.500 percent touched in June.

The dollar also lost its edge against other major currencies. It fell to a three-week low of 123.68 yen JPY= on Wednesday and last stood at 123.92 yen while the euro also rose to $1.1138 EUR=, extending its rebound from this week's low of $1.10165 touched on Tuesday.

Gold also gained XAU=, rising to a one-month high of $1,135.40 per ounce.

"Following the July FOMC minutes, we retain our call for September lift-off. However, we see the bar for the rate hike as having been pushed a bit higher. The higher bar, combined with lower energy prices and a modest deterioration in the international outlook since the July FOMC, has raised risks over this call," Rob Martin, economist at Barclays said in a report.

Reference: HIDEYUKI SANO

Thursday, 20 August 2015

Credit Suisse in talks to settle 'dark pool' allegations - WSJ

Construction workers build a scaffolding beside the logo of Swiss bank Credit Suisse at a construction site at the Bahnhofstrasse in Zurich July 2, 2015. REUTERS/Arnd Wiegmann

Credit Suisse Group AG (CSGN.VX) is in talks to settle allegations related to its Crossfinder "dark pool" trading venue, which could result in a fine running in the high tens of millions of dollars, the Wall Street Journal reported, citing people familiar with the matter.

Dark pools are broker-run trading venues that let investors trade shares anonymously and only make trading data available afterwards, reducing the chance of information leaking about trade orders.

The case against Credit Suisse include allegations that it facilitated unfair advantages for some traders, did not follow rules against pricing of stocks and was not able to properly disclose how Crossfinder works to investors, the WSJ said. (on.wsj.com/1PiYX6D)

The bank is in negotiations with the New York Attorney General and the Securities and Exchange Commission and a deal could come as early as the next several weeks, the paper said.

Credit Suisse declined comment. Representatives at the SEC and the New York Attorney General's office were not immediately available for comment.

Credit Suisse shares fell 1.5 percent to 27.74 Swiss francs in early trade, while the Stoxx European banking sector index .SX7P was down 1.3 percent.

The settlement under negotiations would be the biggest fine ever levied against an operator of a private trading venue, the WSJ reported, adding that talks could still fall apart.

Last year, the New York attorney general brought a lawsuit against Barclays Plc (BARC.L) accusing the bank of misleading clients in its dark pool.

In April, Barclays failed to persuade a U.S. judge to dismiss a lawsuit accusing it of defrauding shareholders about the trading platform.

Dark pools were designed to let people quietly trade shares before investors in the broader market could learn about and bet against their trades.

Reference: Reuters

Germany backs Greek bailout as Tsipras mulls early polls



Germany's parliament approved a third bailout for Greece on Wednesday after Finance Minister Wolfgang Schaeuble argued the country should get "a new start", while in Athens the government agonised over whether to call a snap election.

The Bundestag's vote cleared one of the final obstacles to Greece getting funding so that it can make a 3.2 billion euro debt repayment to the European Central Bank on Thursday.

But a sizeable number of conservative lawmakers rebelled against Chancellor Angela Merkel, objecting to pouring yet more billions into Greece.

In Athens, Prime Minister Alexis Tsipras and his inner circle debated whether to take on anti-bailout rebels within his own radical left Syriza party by calling a parliamentary confidence vote or to go straight to early elections.

Popular misgivings about more aid for Athens run deep in Germany, the euro zone country which has already contributed most to Greece's two previous bailouts since 2010.

But Tsipras secured the third programme by promising to impose reform and austerity policies that are so onerous that a sizeable number of Syriza lawmakers rejected the deal in parliament last Friday.

Schaeuble, who took a tough negotiating stand with Greece as it came close to financial collapse, admitted he wasn't sure whether the Tsipras government would stick to its promises.

Nevertheless, he urged the Bundestag before the vote to back the new package which offers bailout loans worth 86 billion euros ($95 billion). "Of course, after the experience of the last years and months there is no guarantee that everything will work and it is permissible to have doubts," he said.

"But in view of the fact that the Greek parliament has already passed a large part of the measures it would be irresponsible to not use the opportunity for a new start in Greece," he said, making the case for the government.

The Bundestag, whose backing is essential for the release of bailout funds, approved the plan by 454 votes to 113, with 18 abstentions. Altogether 63 of the 311 conservative members voted against and a further three abstained.

Support from parties including the Social Democrats, Merkel's junior coalition partner, and the opposition Greens ensured the approval. However, the rebellion delivered a blow to Merkel's authority.

If the third bailout is completed, Greece will have taken 320 billion euros in loans from the euro zone and International Monetary Fund, although it has paid back some of it, including interest.


› Greek PM calls on European Parliament to join quartet of creditors
› Dijsselbloem - IMF, euro zone can agree on Greek debt
Greek banks also already owe the ECB and Bank of Greece a further 110 billion euro, mostly in emergency loans provided to save the financial system from collapse.

This - and a possible forced Greek exit from the euro zone - was narrowly averted at the end of June when Athens closed the banks for three weeks and imposed capital controls on money leaving the system. These have since been eased slightly, but not removed.

MAKE UP YOUR MIND TIME

Greek ministers have spoken openly about the possibility of a parliamentary confidence vote leading to elections since Tsipras had to rely on opposition lawmakers to win approval for the bailout on Friday.

But Deputy Culture Minister Nikos Xydakis said on Wednesday that Tsipras had yet to make up his mind, possibly considering a delay until the first review of progress under the new bailout, which Greece's creditors will conduct in October.

"There are two views in order to have a strengthened government - elections either before or after the first bailout review. It is a decision the prime minister will make," he told the state TV channel ERT.

Former energy minister Panagiotis Lafazanis, who leads a hard left faction within Syriza, has already taken a step toward breaking away from the party by calling for a new anti-bailout movement.

On Wednesday Lafazanis repeated his opposition to the bailout and signalled he might refuse to support Tsipras in any confidence vote. "We ... will not under any guise or pretext give the 'green light' to anyone to implement this third bailout," he told the real.gr news website.

On Friday, support for the government from within its own coalition parties fell below 120 votes, the minimum needed to survive a confidence vote if some others abstain in the 300 seat parliament.

Tsipras has held a series of meetings with senior ministers, including on Tuesday with Finance Minister Euclid Tsakalotos who negotiated the bailout, and Energy Minister Panos Skourletis on Wednesday.

"It’s a matter of hours for the prime minister to decide his next steps on the political front, maybe a matter of 24 hours," a government official said, without indicating whether this decision might involve a confidence vote leading to elections.

Reference: Reuters

Wednesday, 19 August 2015

BoE's Forbes highlights policy paradox for UK rate-setters

An engraved door is seen on the outside of the Bank of England in the City of London, August 7, 2013. REUTERS/Toby Melville

Bank of England official Kristin Forbes has become the latest rate-setter to highlight the bank's central dilemma: how to square a strong domestic economy, which points to higher interest rates, with global disinflationary forces.

Forbes sent the pound higher against the euro after she warned Britain's economic recovery could be damaged if the BoE waits too long before raising interest rates.

She pointed to the strong momentum in the economy and improving wage data.

But she also noted that sterling's strength, falling energy prices and the devaluation of China's yuan currency, might dampen international inflation.

While emphasising that some of these factors might obscure rising underlying cost pressures in Britain, her comments were a reminder that the outlook for British monetary policy hinges to a large extent on global pressures.

Writing in an opinion piece in the Telegraph newspaper, Forbes, a member of the rate-setting Monetary Policy Committee (MPC), reiterated BoE Governor Mark Carney's view that the exact timing of a rate hike cannot be predicted in advance.

"If you go through her comments, they were a little bit more balanced and nuanced than the 'rates to rise soon' headlines might have led you to believe," said Ross Walker, economist at RBS.

"I think her comments were less hawkish than the market reaction perhaps suggests."

Most economists think the BoE will wait for the U.S. Federal Reserve to raise interest rates from record low levels before following suit, with the U.S. central bank looking on track to hike in September.

Britain releases headline inflation data for July on Tuesday, which economists expect will stay flat at zero.

Walker from RBS said lower petrol and utility bill prices would probably continue to weigh on inflation, while falling oil and metal prices would keep on depressing input prices for producers.

"In other words, we could go into the February MPC meeting with the December CPI print only a little over zero. Now, you could say that they'll look through that, but you could say they could look through the present weakness now to a greater extent, if they wanted to."

In its latest economic outlook, the BoE stressed that a recent strengthening in the pound and a renewed fall in oil prices would push down inflation until at least the middle of next year and said the impact of the rise in sterling could persist even longer.

Sterling hit a 7-1/2 year high earlier this month and is up almost 7 percent this year on a trade-weighted basis.

Forbes said she would keep an eye on the pass-through from sterling and on core inflation, which strips out volatile energy prices, when assessing the next rate move.

Reference: Reuters

U.S. stocks fall as Wal-Mart, energy stocks weigh

A crane flies an American flag over a construction site in downtown Los Angeles, California October 29, 2014.    REUTERS/Mike Blake

U.S. stocks fell in early afternoon trading on Tuesday, dragged down by Wal-Mart's (WMT.N) weaker-than-expected results and a selloff in energy and material shares on renewed fears about China.

Wal-Mart fell as much as 3.3 percent to a nearly 2-1/2 year low of $69.55 after its weak results and forecast. The stock was the biggest drag on the Dow and the S&P.

Chinese stocks plunged again, re-igniting fears that Beijing may be intent on a deeper devaluation of the yuan and pushing oil prices and industrial metals, including copper, to near six-year lows.

All 10 major S&P sectors were lower. The steepest fall was the energy index's .SPNY 0.63 percent decline, led by Exxon's (XOM.N) 1.3 percent decline. The index was down for the fourth straight session.

The materials index .SPLRCM was down 0.6 percent, with Freeport-McMoRan's (FCX.N) 3 percent fall leading the declines. The index previously fell as much last week when China devalued the yuan.

At 13:09 p.m. EDT (1709 GMT) the Dow Jones industrial average .DJI was down 39.48 points, or 0.23 percent, at 17,505.7. The S&P 500 .SPX was down 6.07 points, or 0.29 percent, at 2,096.37 and the Nasdaq composite .IXIC was down 25.55 points, or 0.5 percent, at 5,066.15.

Dow component Disney (DIS.N) fell 1.8 percent after Wells Fargo cut its rating on the stock and also on the stock of five other media companies, including CBS (CBS.N). Disney was the second-biggest drag on the Dow and S&P.

The market weakness was partially offset by strong results from Home Depot (HD.N) and data that showed U.S. housing starts rose to a near eight-year high in July.

Home Depot rose as much as 3.4 percent to a record high of $123.80 and gave the biggest boost to the Dow and the S&P 500.

Home improvement companies and home builders are enjoying a spot in the sun. D.R. Horton (DHI.N), Toll Brothers (TOL.N), Lennar (LEN.N), PulteGroup (PHM.N) and KB Home (KBH.N) all rose between 1 and 3 percent following the data.

"The good data on housing is certainly helpful since its 4 percent of the U.S. GDP," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

"It's something we know the Fed looks at relative to not only its impact on employment and things residual to the housing market but as well as to the wealth effect of homeowners."

In other retail news, TJX (TJX.N), jumped 6.7 percent to a lifetime high of $76.43 after it reported a better-than-expected rise in quarterly comparable store sales.

Declining issues outnumbered advancers on the NYSE by 2,057 to 933. On the Nasdaq, 1,835 issues fell and 858 advanced.

The S&P 500 index showed 40 new 52-week highs and eight new lows, while the Nasdaq recorded 63 new highs and 66 new lows.

Reference: Reuters

Tuesday, 18 August 2015

Oil prices fall again as U.S., Asia demand looks set to weaken

A drop of diesel is seen at the tip of a nozzle after a fuel station customer fills her car's tank in Sint Pieters Leeuw December 5, 2014. Wholesale petrol prices have slumped by 35.5 percent since reaching their peak for the year in June, but in more than half of European Union countries prices after tax have fallen by less than half this amount.   REUTERS/Yves Herman   (BELGIUM - Tags: ENERGY BUSINESS)

Oil prices dipped again on Tuesday as traders braced for lower refinery consumption after the U.S. summer, while Asia's weakening economies and high global production stoked concerns about oversupply.

Both crude oil benchmarks are now almost a third below their last peak in May, with data showing speculators have taken huge bets on further falls.

"Fundamentals suggest downside risks still remain in key markets - particularly iron ore and crude oil - in the months ahead," ANZ bank said on Tuesday, expecting U.S. stockpiles to rise in coming months as refiners reduce operations for maintenance.

U.S. crude futures CLc1 were trading 10 cents lower at $41.77 per barrel at 0429 GMT (0029 EDT), not far off more than six-year lows touched earlier this week.

Brent futures LCOc1 were at $48.60 a barrel, down 14 cents but still some way from their 2015-low of $45.19.

BMI Research, a subsidiary of Fitch Ratings, said the market may have overshot to the downside, expecting a modest recovery in prices towards the fourth quarter.

"The downward move has been largely speculative, driven by the Iranian nuclear accord, economic uncertainties surrounding China and bearish repositioning in the futures market," BMI Research analysts said.

Many oil traders are positioning themselves to profit from a further drop in U.S. prices. As well as betting on further outright falls, traders have been aggressively taking up put options - an option to sell a contract once it has fallen to a certain level - at prices as low as $35 and even $30 per barrel.

"The amount of queries we've received recently about leveraging bets on further price falls has been astonishing," one broker said.

Underscoring the bearish sentiment, money managers and hedge funds cut their net long holdings of Brent crude futures for a fourth straight week, exchange data showed on Monday.

The long-term outlook also remained bearish, with BMI Research expecting "oil prices will remain anchored until 2018".

"The return of Iranian oil to the market, coupled with strong project pipelines in North America, the Middle East, West Africa and Kazakhstan, will see global supply growth outstrip the growth in global consumption for the next two years," they said.

The firm forecasts Brent to average $56 and $55 in 2016 and 2017 respectively, with U.S. crude averaging $53 in both years.

Reference: JACOB GRONHOLT-PEDERSEN AND HENNING GLOYSTEIN

Dollar in favor with Fed back in focus, yuan scare ebbs

An employee checks U.S. dollar bank-notes at a bank in Hanoi, Vietnam August 12, 2015. REUTERS/Kham

The dollar held firm against its peers on Tuesday, as focus shifted back to the prospects of interest rate hikes by the Federal Reserve amid receding concerns that last week's devaluation of China's yuan could spark a global currency war.

The euro stood within reach of a five-day low of $1.1063 plumbed overnight, and was last trading at $1.1073 EUR=.

The dollar gained modestly to 124.43 yen JPY=, continuing to pull away from a 12-day low of 123.79 struck last week when Beijing's surprise move dented expectations of the Fed raising rates in September.

China's central bank has since reined in the yuan's slide, soothing anxiety of further devaluation - a scenario markets feared could stoke worldwide disinflation and lead to a global currency war.

The relative calmness in yuan trading has allowed markets to focus back on when the Fed could begin hiking interest rates.

The dollar took a knock after a New York Federal Reserve survey released overnight showed manufacturing activity in New York state plunged in August to its weakest level since 2009.

But underlying sentiment toward the dollar remained positive.

"The New York Federal Reserve data was not a positive one but employment and prices remain the key points towards a potential rate hike," said Shinichiro Kadota, chief Japan FX strategist at Barclays in Tokyo.

The dollar also managed to shake off a relatively steep drop in U.S. two-year and 10-year Treasury yields that occurred in the wake of manufacturing survey.

"The focus remains on the Fed, including what it might or might not do in the wake of China's yuan move, and the dollar took the yield declines in stride," Kadota at Barclays said.

Sterling slipped slightly to $1.5578 GBP=D4. It reached a two-week high of $1.5690 overnight after comments from Bank of England policymaker Kristin Forbes reinforced expectations of an impending rate hike, but has pulled back on caution ahead of inflation data due later in the session.

Analysts said British inflation may be forecast to remain soft in the short term, but many - including the BoE - expect it to climb in coming months as the economy and wages pick up. ECONGB

The Australian dollar edged down 0.1 percent to $0.7365 AUD=D4 but was still comfortably above a six-year low of $0.7127 hit last week when the yuan's plunge churned the currency markets.

Reference: SHINICHI SAOSHIRO

Monday, 17 August 2015

China, Hong Kong stocks rise as yuan depreciation fears ease

A man walks past a panel displaying the Hang Seng Index at the Hong Kong Exchanges in Hong Kong, China July 8, 2015. REUTERS/Tyrone Siu

China stocks climbed on Friday morning, with the Shanghai market heading for its biggest weekly rise in two months, as investors turned bullish after the central bank soothed fears created by the yuan's shock devaluation.

The yuan CNY=CFXS held steady against the dollar on Friday after suspected intervention by the central bank, who said on Thursday there was no reason for it to fall further.

"Yuan devaluation suddenly became a concern for stock investors earlier this week, but now this issue is fading out of their radar," said Qi Yifeng, analyst at consultancy CEBM.

"Some bold investors are going back into the market, chasing hot concepts, but I don't think they would hold the shares for a long time."

The Shanghai Composite Index .SSEC gained 0.8 percent, to 3,987.57 points, bringing the week's gain to 6.5 percent, the most since early June. The CSI300 index .CSI300 rose 0.6 percent.

The Hong Kong market was also calmer, with both the Hang Seng index .HSI and the Hong Kong China Enterprises Index .HSCE up 0.2 percent at midday.


China's regulators told to promote transparency, reduce complexity
In a sign of improving confidence in the mainland market, the outstanding margin loans - money investors borrowed from brokerages to buy stocks - increased slightly over the past week, signalling an end to weeks of rapid deleveraging.

Waigaoqiao FTZ (600648.SS) surged 10 percent, the daily upward limit, after the Shanghai government-controlled company announced a major restructuring of its assets.

Investor interest in listed state-owned companies was also rekindled by a stock ownership incentive plan announced by Chinese liquor maker Wuliangye Yibin (000858.SZ).

Reform expectations pushed up prices of state firms including Luoyang Glass (600876.SS) and Guangdong Electric Power (000539.SZ).

Many Tianjin-based companies, which slumped on Thursday following explosions in the northeastern port city, rebounded. Nearly a dozen companies issued statements saying their losses were limited.

The companies included Tianjin Port Holdings Co (600717.SS), Tianjin Economic-technological Development Area Ltd 000652.SZ and Binghai Energy (000695.SZ).

In Hong Kong, telecommunications .HSCIT and Utility stocks .HSCIU led gains, while energy .HSCIE and property shares .HSCIPC fell.

Reference: Reuters

U.S. crude oil dips below $42 on high U.S. stocks, Asia economy worries

A customer holds a nozzle to fill up his tank in a gasoline station in Nice December 5, 2014. REUTERS/Eric Gaillard

U.S. crude oil prices fell below $42 a barrel on Friday to prices not seen since March 2009 as rising U.S. stockpiles added to concerns about oversupply and a demand slump due to slowing economies in Asia.

Oil prices initially rose in early Asian trade following a sharp and sudden fall below $42, but dipped back under that level to trade nearly a third below their 2015-highs in May.

Prices already tumbled more than 3 percent on Thursday as data showing a big rise in key U.S. stockpiles intensified concerns over a growing global glut.

U.S. crude CLc1 was trading down 27 cents from its last settlement at $41.96 a barrel at 0423 GMT (0023 EDT). Brent futures LCOc1 were trading at $49.23 barrel, virtually flat and still some way off from their 2015-low of $45.19.

Goldman Sachs said that a weaker Chinese yuan was putting more downward pressure on commodity markets.

"The CNY (yuan) devaluation has been important for commodity markets and we believe it signals that global macro conditions have changed," Goldman Sachs said in a note to clients.

"Even China has now joined the negative feedback loop that is running between commodity deflation, growth and deleveraging trends... (and) we believe the net commodity market effects are bearish," it added.

Analysts said that prices could fall further.

"The lowest crude prices in six years might not be enough to put the brakes on the U.S. supply growth. U.S. shale players are actively cutting cost and some players are profitable at less than $30 per barrel," ANZ Bank said.

On the demand side, China's crude oil imports have so far remained strong as authorities take advantage of low prices to build up strategic reserves and consumers kept spending despite the slowing economy.

Yet there are signs of weakening, with the devaluation of the yuan potentially denting fuel imports.

China's implied oil demand fell in July from the previous month amid a continuing drop in the nation's vehicle.

And China's slump may be spreading across Asia. Japan's economy likely shrank in April-June as exports slumped and consumers cut back on spending, a Reuters poll showed.

China's economic slowdown and its impact on its trade-reliant Asian neighbors have also heightened the chance that any rebound in growth in July-September will be modest, analysts said.

Reference: HENNING GLOYSTEIN

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Friday, 14 August 2015

Price Action, Traders 14 Rules for Survival


Basic Trading Concepts Defined


8. Momentum is hard to kill.

Stopping the freight train is something a lot of newer traders attempt to do, but momentum is extremely hard to kill. When the professional move is finished, the amateurs take over, and the professionals resume thereafter. These movements always happen within a short window of time, and attempting to fade them is the equivalent of donating money to your broker. Follow the macro trend, and be conscientious of the fact that it takes a greater amount of momentum than what existed to flip a trend. When people latch onto something, they want a part of it, and stopping this mentality is a task that takes a tremendous amount of force.

9. No matter what you know in terms of price action, it can only help you should you ever decide to use anything else.

Regardless of your ultimate expertise, price action is component number one when it comes to charting of any form.

10. Failing to plan is planning to fail, as the cliche goes. Traders that sit down at their desks and immediately execute aren’t traders…..they’re donating cash.

The process prior to hitting the buy or sell button should include nothing short of a very long and careful assessment of a wide range of factors. Itchy trigger fingers always lose at the end of the day. Gaining a professional mindset means just being smart, and not careless or reckless. Do your homework.

11. If price is in an area that was just seen, it is going to wane. If price is making new highs or lows, it is going to go nuts.

When price retraces ex any stimulus, expect it to wane. Price has just seen these levels and so you can’t expect the same volatility that you had leading into them. Back off, and cool down. Take a methodical approach in terms of what you’re going to do next.

12. Keep asking yourself: “What am I missing?”.

A lack of thorough analysis is all it takes to get a bad trade, and a bad trade is all it takes to set back hours of very hard work and thought. Constantly dig for more, and ensure that you truly are looking at the proper, most effective means of entry and exit.

13. Trading for fun is an easy way to plow forward. Trading out of desperation leads to more desperation.

Think: “this is easy!” Traders usually have the most fun in the very beginning of their careers. They are hungry, exploring a wide range of options, and many times successful right out of the gate. Over time, that fades. Things are taken for granted and the trader loses the spark he or she had in the early days. Trading should be a challenge to the extent that it is not a stress-ridden activity. Stress kills a lot of things: relationships, flat stomachs, and trading accounts.

14. If you don’t understand it, don’t trade it.

You’re better off going to a casino. You probably won’t lose as much money because none of it is “digitized”. Back off until certainty presents itself. If your certainty comes around once every other day, then so be it until you master techniques that present more opportunity.
Reference: nobrainertrades.com

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Asia shares on track for weekly losses; crude oil slumps

People walk past a display showing the Nikkei average in Tokyo August 12, 2015.   REUTERS/Thomas Peter

Asian shares mostly fell on Friday, and were on track for a steep weekly losses in the wake of China's surprise currency devaluation on Tuesday.

Crude oil futures plunged to 6-1/2-year lows after data revealed a big rise in U.S. stockpiles.

Financial spreadbetters expected Britain's FTSE 100 to open flat to 1 point lower, Germany's DAX to open 7 to 14 points lower, or down 0.1 percent, and France's CAC 40 to open down 5 to 7 points, or 0.1 percent lower.

European shares are expected to have their biggest weekly loss in six weeks.

MSCI's broadest index of Asia-Pacific shares outside Japan reversed earlier gains to slip 0.2 percent, which left the index down 2.8 percent for the week.

Japan's Nikkei stock index ended down 0.4 percent, and was off about 1 percent for the week.

"This week's news from China has done some significant damage to overall sentiment in general, as the gains of the last two weeks have slowly dissolved," Michael Hewson, chief market analyst at CMC Markets in London, wrote in a note.

"The market's main preoccupation now is how much lower can the yuan potentially go in the coming weeks, and what effect will it have on price inflation in the coming months?"

The People's Bank of China (PBOC) on Friday set its midpoint yuan rate at 6.3975 per dollar prior to the market's open, firmer than the previous day's fix of 6.401.

The spot market opened at 6.3990 per dollar and was changing hands at 6.4001 after suspected intervention by the central bank to get the volatile market to settle into a range and to curb expectations that the currency will fall into a depreciation cycle.

The PBOC reassured investors on Thursday, saying there was no reason for the yuan to fall further given the country's strong economic fundamentals.

The dollar was trading at 124.40 against its Japanese counterpart, up slightly from late U.S. levels and extending its recovery from this week's low of 124.21 yen. For the week, it was up 0.2 percent. The euro was little changed at $1.1151, having gained 1.7 percent this week.

This week, the dollar came under pressure as the market instability caused by China's devaluation curbed expectations that the U.S. Federal Reserve's long-awaited interest rate increase would come as early as next month.

But strong U.S. retail sales data on Thursday provided evidence in support of views that the Fed is on track to hike.

U.S. retail sales rose in July and were revised up for June, while the trend of weekly jobless claims pointed to a tightening job market.

"Every new data point continues to solidify the likelihood of a September rate hike," Angus Nicholson, market analyst at IG in Melbourne, wrote in a note. With good U.S. industrial production and producer price numbers tonight, "trading on Monday will largely be driven by the prospect of further strengthening in the U.S. dollar."

In commodities trading, crude oil futures remained close to the lowest levels since early 2009, when the financial crisis was wreaking havoc on markets.

U.S. crude tumbled more than 3 percent to a 6-1/2-year low as a big rise in U.S. stockpiles intensified worries over a growing global glut.

U.S. crude oil was trading down 0.4 percent at $42.05 a barrel at 0600 GMT, while Brent was steady at $49.24, still some way off from their 2015-low of $45.19.

Reference: NICHOLA SAMINATHER AND LISA TWARONITE

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Thursday, 13 August 2015

Price Action, Traders 14 Rules for Survival


Basic Trading Concepts Defined

Price action is the #1 tool in any trader’s toolkit for a very simple reason: everything else is based upon it. If everything else is the derivative, then price action is underlying. Below is our brief summary that discusses price itself and the mental model required to follow.

1. Know your price patterns, and know them all. All it takes is a couple weeks of regular study to familiarize yourself with every single one of them.

Price structure is extremely helpful in identifying new opportunities. The more opportunities you have, the better able you are to hone in on what simply works best for you over the long haul. Getting married to one or two strategies that produce mediocre or poor results can leave you in limbo for a very long time. By dissecting price into various workable structures, you can wean your way forward by having more than enough options to chew at. If you need some help in this department, you can start with our own unique price patterns and this post leads to a great resource for the more conventional.

2. Draw your trend lines using the most historical hits (inner trend lines), as well as conventionally.

Conventional trend lines (thorough explanation here) follow the perimeter of price, and they are always the last to break. Oftentimes, because they are so obvious, price turns into a consolidated mess when it actually runs into the level. This makes entry extremely difficult with price behaving in a convoluted manner. Inner trend lines are drawn using historical hits, and in our experience, register much cleaner retests on the back end once broken. Additionally, these breaks happen ahead of the main, outer trend line, positioning yourself well ahead of the whipsaw price action regularly occurring around conventional trend lines.

3. Know the cardinal rule of price patterns: If every single one of them “fails”. Have a plan of attack for both potential scenarios.

In addition to trading them in the “conventional” sense, you should be able to identify “failures” (or as we call them, successes) on them as well. For instance, a bullish flag is violated when 38% of the initial thrust is broken to the downside. Prices then uses the back end of that level as resistance, etc.

4. Be curious. Whenever something happens that you don’t understand, find a way to “figure it out” to take advantage the next time it happens.

Nothing is more powerful or useful to your understanding of the way price “works” than that of raw observation, and your ability to find a way to recognize behaviors on a reoccurring basis. “Screen time” is only valuable if you are diligently finding ways to better grasp the way price moves during various circumstances. I am a huge proponent of using Fibonacci guides in order to do this. Forget the conventional wisdom and draw lines haphazardly in order to better make sense of regular price reversal points.

5. The little things can lead to massive gains. If you see price reacting off of a surpassed level, take the hint.

When a level is being used, used, and used some more, take the hint. Many times, traders will attempt to fade a level, only to have it quickly surpassed and witness a bullish or bearish thrust off of the level against his or her trade. These “signals” oftentimes offer better entry than the fade itself. Be prepared, and recognize the reaction when you see it. Alternatively, just sweat the small stuff.

6. Fibonacci numbers are a guide, though an extremely useful one. Use them to make sense of common occurrences, and adopt techniques that make complete sense to you.

Fibonacci levels can be used in a massive range of contexts, much more than just simply their traditional sense, over longer periods. For instance, we measure retracements on short term pullbacks in order to fade bottoms and tops. Sometimes, these retracements are as little at 12 or 15 pips, but when 68 or 74% gets hit, price makes it’s final turn in the opposite direction.

7. Trade the professional move, not the “scaredy cat” one. When price leaps out of an obvious range, go with the flow. As the trend gets larger, so does your risk of it fading.

There is an old saying that there are really two types of movements in this or any other market: the “professional” move, where price just keeps leaping higher or lower, and the “amateur” one, where the major move is done, but amateurs start to get on board just as price gets consolidated again. Drawing blocks around price ranges is an excellent way to tell you when a “professional” move is on, and it’s time to take out your trend following techniques.


To be continued tomorrow.

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Stocks, yields tumble after China lets yuan fall again


Stocks, the U.S. dollar, and emerging market currencies around the world remained under pressure for a second day on Wednesday after China's yuan weakened again, one day after the country devalued its currency.

Germany's 2-year yield fell to a new record low of minus 0.29 percent as investors feared the deflationary pressures of a slowdown in China's economy would sap growth globally.

The prospect of a U.S. interest rate rise by the Federal Reserve next month dimmed as a result, dragging the U.S. dollar, financial stocks and U.S. Treasury yields lower. The ten-year U.S. Treasury yield fell to 2.045 percent US20YT=RR, the lowest in more than three months.

“China is still a big unknown, and the market is pricing in the worst,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.

On Wednesday, the People's Bank of China (PBOC) set the yuan's midpoint rate CNY=SAEC lower than Tuesday's closing market rate, resulting in nearly a 4.0 percent devaluation of the yuan in two days against the U.S. dollar.

The yuan's spot value CNY=CFXS fell further after Beijing released weak July output and investment data, trading as low as 6.4510 to the dollar.

Sources told Reuters that the move to devalue the yuan reflects a growing clamor within Chinese government circles for a devaluation of perhaps up to 10 percent to help struggling exporters.

Major stock markets lost ground worldwide, with sectors exposed to China's economy falling most, as a lower yuan makes exports to China from the rest of the world more expensive.

Luxury goods stocks like the French giant LVMH (LVMH.PA) and Coach (COH.N) were lower along with automakers like Germany's BMW (BMWG.DE), which lost 2.6 percent, and General Motors (GM.N), which lost 2.4 percent.

The Dow Jones industrial average .DJI fell 247.56 points, or 1.42 percent, to 17,382.93, the S&P 500 .SPX lost 27.76 points, or 1.33 percent, to 2,056.31 and the Nasdaq Composite .IXIC dropped 78.33 points, or 1.56 percent, to 4,994.52.

The pan-European FTSEurofirst 300 index .FTEU3 and the euro zone's blue-chip Euro STOXX 50 index .STOXX50E fell 2.7 percent and 3.4 percent, respectively.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS hit a two-year low, falling 1.9 percent.

FED RATE INCREASE QUESTIONED

The U.S. dollar weakened against most major currencies, with U.S. debt yields lower also, as investors questioned whether China's devaluation would affect the Federal Reserve's plans to raise interest rates later this year.

Short-term U.S. interest rates markets signaled traders see no more than a 40 percent chance the U.S. central bank would raise rates at its Sept. 16-17 meeting, even though the effective fed funds rate rose to 0.15 percent on Wednesday, the highest since April 2013.

“Volatility is picking up and it’s causing turmoil, it’s pushing bond yields lower, and it’s casting more doubt on the Fed," said Axel Merk, president and chief investment officer of Palo Alto, California-based Merk Investments.

U.S. Treasury debt prices rose on Wednesday, with yields on benchmark 10-year notes brushing a three-month low.

Financials were the weakest sector in the U.S. stock market, falling 2 percent, as investors scaled back bets that the U.S. Federal Reserve would boost rates this year.

The euro rose 1.4 percent above $1.11 for the first time in three weeks EUR= and the U.S. dollar fell 1 percent against the yen, its biggest fall in more than a month, to 123.82 yen JPY=.

Emerging market currencies reeled as investors feared central banks could rush to weaken their own currencies in response to China's move.

The price of industrial commodities were lower at one point, with copper hitting a 6-year low, before rebounding.

Gold rose for the fifth consecutive day, hitting a three-week high of $1,119.890 an ounce XAU=. U.S. crude CLc1 was down 0.3 percent at $42.94 a barrel, while copper gained 1.2 percent to $5,186 a tonne.

Reference: Reuters

Wednesday, 12 August 2015

Wall St. rallies with energy, materials; Google jumps after the bell



U.S. stocks climbed on Monday, giving the S&P 500 its biggest increase since May as indexes rebounded sharply from last week's losses, buoyed by gains in commodity-related shares and optimism over Warren Buffett's latest deal.

Copper rebounded from six-year lows and oil prices also rallied, helping push the S&P 500 energy index .SPNY up 3.1 percent, its biggest daily percentage jump since January, and the materials index .SPLRCM up 2.5 percent.

Disappointing economic data in China boosted hopes for additional stimulus from Beijing, lifting Chinese stocks. Adding to investor optimism, Greece and international creditors could wrap up a multibillion-euro bailout accord by Tuesday.

Buffett's Berkshire Hathaway (BRKa.N) (BRKb.N) said it would buy Precision Castparts (PCP.N) in a deal valuing the company at $32.3 billion. Precision Castparts' shares jumped 19.1 percent to $230.92, while Berkshire's Class B shares dipped 0.1 percent to $143.42.

The Dow Jones industrial average .DJI rose 241.79 points, or 1.39 percent, to 17,615.17, the S&P 500 .SPX gained 26.61 points, or 1.28 percent, to 2,104.18 and the Nasdaq Composite .IXIC added 58.25 points, or 1.16 percent, to 5,101.80.

The benchmark S&P 500 index registered its biggest daily percentage gain since May 8.

After the bell, shares of Google (GOOGL.O) climbed 4.8 percent after it announced it is changing its operating structure by setting up a new company called Alphabet Inc, which will include the search business and a number of other units. Stock futures NQc1 rose further following the news.

During the regular session, Twitter (TWTR.N) shares jumped 9.1 percent to $29.50 after CEO Jack Dorsey joined other insiders in buying more shares, while the company also clinched a multiyear partnership with the National Football League.

On Friday, the Dow closed lower for the seventh straight session after solid U.S. jobs data for July pried the door open a little wider for a Federal Reserve rate hike in September.

With U.S. interest rates near zero for almost a decade, debt has been cheap. But with the Fed widely expected to hike rates later this year, merger and acquisition activity has accelerated.

July was the seventh strongest month for global deal activity since 1980. Through July, cross-border M&A activity totaled $913.5 billion, up 23 percent from a year earlier, according to Thomson Reuters data.

"We've had a whole lot of M&A throughout the year, and that's positive because it means businesses are upbeat on the prospects for the economy," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

In other deal news, ammonia maker CVR Partners' (UAN.N) deal to buy Rentech Nitrogen Partners (RNF.N) for about $533 million sent Rentech soaring 28.6 percent to close at $13.25 while CVR shares were down 2.9 percent at $10.38.

On the NYSE, advancing issues outnumbered declining ones by 2,329 to 734 for a 3.17-to-1 ratio on the upside. On the Nasdaq, 1,937 issues rose and 856 fell for a 2.26-to-1 ratio favoring advancers.

The S&P 500 index posted 35 new 52-week highs and three new lows, while the Nasdaq Composite recorded 58 new highs and 85 new lows.

About 6.5 billion shares changed hands on U.S. exchanges, compared with the daily average of 7.0 billion for the month to date, according to data from BATS Global Markets.

Reference: Caroline Valetkevitch