Wed, 02nd December 2015

Anirudh Sethi Report


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EM portfolio flows: back in the red

Portfolio flows to emerging markets turned negative again in November after a month of inflows in October, according to estimates by the Institute of International Finance, a financial industry association.

The IIF said there were combined cross-border outflows from EM stocks and bonds by non-resident investors of $3.5bn in November, after inflows of $13bn in October.

November was the fourth month of the past five to see outflows, although the total for the year to date remains positive at $63.2bn, according to the IIF.

The prospect of rising interest rates in the US has weighed on portfolio flows in recent months.

The US Federal Reserve’s decision not, after all, to raise rates at its September meeting prompted an apparent relief rally in EM assets — although many EM policymakers had called on the Fed to get its long awaited rate rise over with and end the uncertainty.

The IIF said firmer expectations of a rate rise this month had prompted November’s outflows, along with “a broader upward shift in the expected path for Fed tightening”.

American Petroleum Institute (API) crude oil inventories up 1.6mln bbls

American Petroleum Institute (API) crude oil inventory data for the week ended November 27

  • A stock build, while expectations were for a drawdown
  • US crude stock rise of 1.6 mln bbls
  • Stocks of crude at Cushing up 453K bbls

Note – The American Petroleum Institute data is out earlier to their subscribers (at 4.30pm ET) and released publicly at 4.35pm ET

  • The API data is closely watched as a guide to the EIA data due Wednesday morning (US time).
  • The consensus estimate for the EIA report is currently for a stock draw of 668.18K barrels

Zuckerberg To Donate 99% Of His Facebook Shares To “Advance Human Potential”

Mark Zuckerberg Celebrates Birth of First Born Child by Giving Away (Almost) All of His Facebook Shares (Eventually)Moments ago, in a joint letter with his wife Priscilla, Facebook founder Mark Zuckerberg announced that his wife had just given birth to a daughter, Max, but the real highlight of the letter is the part in the text in which he discloses that in order to “advance human potential” and “promote equality” for all children in the next generation, Zuckerberg begins the Chan Zuckerberg Initiative, and that in order to advance this mission, Zuckerberg will give 99% of his Facebook shares, currently worth $45 billion, to “advance this mission”

From the letter: 

For your generation to live in a better world, there is so much more our generation can do.

Today your mother and I are committing to spend our lives doing our small part to help solve these challenges. I will continue to serve as Facebook’s CEO for many, many years to come, but these issues are too important to wait until you or we are older to begin this work. By starting at a young age, we hope to see compounding benefits throughout our lives.

As you begin the next generation of the Chan Zuckerberg family, we also begin the Chan Zuckerberg Initiative to join people across the world to advance human potential and promote equality for all children in the next generation. Our initial areas of focus will be personalised learning, curing disease, connecting people and building strong communities.

We will give 99% of our Facebook shares — currently about $45 billion — during our lives to advance this mission. We know this is a small contribution compared to all the resources and talents of those already working on these issues. But we want to do what we can, working alongside many others.

U.S. Total Debt Soars By $674 Billion In November

When the US reached a debt ceiling deal in the beginning of November, it was common knowledge that there would be a debt accrual “catch up” to make up for lost time when the US was operating under emergency measures to avoid breach of the debt ceiling. And sure enough, when the accurate total debt number was released on November 2, this was indeed the case, when we learned that the US had added some $339 billion in debt during the “emergency measures” period.

However, what is unclear is how in the remaining 4 weeks of November, the US managed to add another $335 billion in total debt, bringing the total increase for the month of November to a whopping $674 billion, and total US debt to a record $18.827 trillion.

Overnight US Market :Dow Zooms by 168 points.Heading Towards 17977-18025

The broad U.S. stock market, coming off its second straight month of gains for the first time since May, was in rally mode — with the Dow ending up 168 points — as it kicked off its first trading day of December, a month that historically has been kind to investors.

The benchmark Standard & Poor’s 500 stock index eked out a gain of 0.05% in November, building on its sizable 8.3% rally in October. Wall Street is hoping to stretch the winning streak to three months as investors enter the homestretch of 2016.

Historically, December has been a profitable month for stocks. In the past 100 years, December has ranked No. 1 in performance, posting an average gain of 1.46%, although gains have downsized to 1.37% in the past 20 years.

Investors are digesting the results of Cyber Monday, which Adobe says is stacking up to be the “largest online sales day in history.” Adobe estimates that online sales yesterday totaled roughly $2.98 billion, a 12% increase over 2014 Cyber Monday sales.

German Automaker Volkswagen Downgraded To ‘BBB+’ from ‘A-‘ On Adverse Emissions Impacts; Outlook Negative -S&P

  • We expect Volkswagen AG (VW) to experience ongoing adverse credit impacts from its manipulation and misrepresentation of engine emissions and fuel consumption levels.
  • We see a tarnished reputation and brand image, reduced business prospects, a more challenging competitive position, substantial costs, and weaker leverage metrics.
  • We are lowering our long-term ratings on VW to ‘BBB+’ from ‘A-‘.
  • The negative outlook reflects the possibility that we may lower the long-term corporate credit rating on VW by one notch within the next one-to-two years. This could occur if leverage metrics remained weakened in 2016 and on a sustainable basis, with adjusted funds from operations to debt below 45% or adjusted debt to EBITDA above 2x, for example if VW incurs substantial fines or litigation damages without taking sufficient offsetting measures.

Treasury Bond Yields Are Collapsing As Dec Rate Hike-Odds Slide

With December rate-hike odds sliding the most since the last FOMC meeting (down from 75% to 70%), following abysmal data this morning, it appears investors are reaching for the safety of Treasuries as either a fed policy error is about to be unleashed and/or growth is signficantly weaker than all the talking heads proclaim. With traders the most net short in years, this rapid plunge in yields could quickly accelerate.

The entire curve is plunging…

With 30Y almost roundtripping to The FOMC (and back below 3.00%)…