Fri, 23rd June 2017

Anirudh Sethi Report


Archives of “June 19, 2017” Day

Britain and EU agree to provisional dates for Brexit talks

Three initial negotiating groups for Brexit talks have been scheduled

  • First three dates will be July 17, Sept 18 and Oct 9
  • Talks on citizens’ rights and financial settlement will be on the agenda
  • A UK source cited by Reuters said Britain stood by a demand that the talks on the future relationship will run parallel with talk of Britain’s exit
  • Same source said first day of talks was “incredibly positive” and made “awful lot of progress”

The talks got underway today.

European Indices closed with SOLID GAINS

All major indices advance. Dax closes at record high.

The European stocks are closed and the major indices are racking up some solid gains:
  • German Dax up 1.1% and at a record close.
  • UK FTSE up 0.9%
  • France’s CAC up 1.0%
  • Spain’s Ibex is up 1.1%
  • Portugal’s PS120 is up 1.07%
  • Italy’s FTSE MIB is up 0.35%
In the 10 year debt market today:
  • Germany 0.28%, unchanged
  • UK 1.027%, up 1 bp
  • France 0.629%, unchanged
  • Spain 1.451%, unchanged
  • Portugal 2.877$, – 4.2 bp
  • Italy 1.956%, – 3.0 bp
US stocks near midday are up nicely as well with the Nasdaq leading the way. The S&P and Dow are making new record highs. The Nasdaq lags still:
  • The Nasdaq is up 1.17% or 71 points to 6223.55
  • The S&P is up 15.57 points or 0.64% to 2449
  • The Dow is up 103.65 points or +0.49% to 21488.
US debt yields are higher
  • 2 year 1.356%, up 4 bp
  • 5 year 1.7731%, up 3 bp
  • 10 year 2.170%, +1.9 bp
  • 30 year 2.774%, unchanged.


Argentina to sell 100-year bond in landmark offering


Argentina has launched the sale of debt maturing in 100 year’s time.

Coming just two year’s after the country ended currency controls, a successful sale will mark the latest step in a swift market rehabilitation for a nation which spent more than a decade fighting investors who held out against its most recent default, in 2001.

A global investor conference call with Nicolas Dujovne and Luis Caputo, co-heads of the reorganised finance ministry, was scheduled for 9am. The deal was expected to price on Monday, and the banks leading the transaction are Citi, HSBC, Nomura and Santander.

Japanese Prime Minister Shinzo Abe’s approval rating plunges amid lingering school scandal

Support for Japanese Prime Minister Shinzo Abe’s government has dropped below 50% for the first time in more than a year as respondents expressed dissatisfaction with his response to allegations of preferential treatment toward a conservative educator.

The cabinet’s approval rating plunged to 49% in a weekend poll by Nikkei Inc. and TV Tokyo, down 7 percentage points from May and 11 points compared with April. The government’s disapproval rating climbed 6 points to 42% — the highest since October 2015.

 This marks the Abe cabinet’s most serious setback in public opinion since that year, when legislation expanding the armed forces’ remit ignited a public debate on Japan’s commitment to peace.

Now, the prime minister is facing allegations of favoritism over plans to establish a veterinary school in a government-designated special zone for deregulation. The prospective school operator, Kake Educational Institution, is headed by a friend of Abe’s.

The government insists that all of the proper procedures were followed in approving the new school. But a purported memo describing the project as in line with “the prime minister’s wishes” — a document whose credibility the government had questioned — has been found at the ministry of education after a second internal investigation.

The ruling coalition’s move to cut short the upper house debate on anti-conspiracy legislation also seems to have contributed to the drop in support. Among other things, the recently enacted law makes it a crime to plot terrorist attacks. Nearly half, or 47%, of respondents support the law, which has raised concerns among civil liberties groups, while 36% are opposed.

The cabinet’s approval rating fell among both men and women. Only 24% of respondents unaffiliated with any political party expressed support for the government, down 5 points from the previous survey.

Japan, Trade balance for May: Y -203.4bn (vs. expected Y 43.3bn)

My, my, hey, hey

It’s the Japanese Trade balance for May

(I know, my poetry is amazing)

A big miss, coming in at a deficit of 203.4 bn yen
  • expected Y 43.3bn, prior was Y 481.1bn
Trade balance (adjusted): Y 133.8bn
  • expected surplus Y 345.5bn, prior was Y 97.6bn
Exports y/y: 14.9% (miss)
  • expected +16.0%, prior was +7.5%
Imports y/y:  +17.8%
  • expected 14.5%, prior was 15.2%
While a miss on expectations its not as if exports have collapsed, up 14.9% y/y. Expectations were for better; export performance has been a bright spot for Japan’s economy and has helped propel industrial output. To the extent this impacts on the BOJ (it won’t much at all) it’s a yen negative.
  • May exports to the US +11.6% y/y
  • To China +23.9% y/y
  • To Asia +16.8 % y/y
  • To EU +19.8% y/y