Global News 21/07/2015

  1. Bloomberg News
  2. Global News 21/07/2015

Bloomberg News

European Stocks Snap Nine-Day Winning Streak Amid Mixed

The Stoxx 600 retreated 1 percent to 402.66 at the close of trading, after earlier rising as much as 0.3 percent. Shares extended losses in late-afternoon trading, as U.S. stocks declined amid disappointing results from IBM Corp. and United Technologies. The volume of shares changing hands on the Stoxx 600 was 19 percent lower than the 30-day average.

“The earnings season is in focus for now and there’s a consolidation after the big rally post Greece — people are taking profits,” said Konstantin Giantiroglou, head of investment advisory and research at Neue Aargauer Bank AG in Brugg, Switzerland. “Some investors are a bit more cautious today seeing the markets have gone up a lot.”

A nine-day winning streak pushed the Stoxx 600 to within 2 percent of its record as Greece and its creditors reached an agreement paving the way for a new bailout and the European Central Bank increased emergency liquidity assistance. The nation reopened its banks on Monday after a three-week shutdown. The Athens Stock Exchange remains closed.

Credit Traders Restless to Make a Buck Turn to Leveraged Swaps

More companies are running into financial trouble, and fund managers want to make magnified bets on which ones will be the next to suffer difficulty paying their bills. To do so, investors are using complicated, leveraged credit derivatives called index tranches. “People want to take credit risk,” said Peter Tchir, head of macro strategy at Brean Capital LLC in New York.

The growing temptation to take credit risk with derivatives is easy to understand. It’s gotten harder to trade actual bonds. Plunging commodity prices are posing serious problems for energy companies such as Walter Energy Inc., which filed for bankruptcy this month, and KKR & Co.’s Samson Resources Corp., whose creditors are racing to line up cash to fund its restructuring.

When companies fail, that means there’s money to be made betting for or against them. And some credit traders are looking to hit a jackpot in structured, synthetic credit.

Greece ‘Fix’ Drives Yield Hunt at $80 Billion Danish Fund

After things fell into place in Greece, fixed-income markets are normalizing and are back to where they were for more than a year,” Henrik Henriksen, chief investment strategist at PFA in Copenhagen, said in a phone interview. “We’re looking high and low for alternative bond investments as returns on government bonds are very low.”

The strategy coincides with a slump in commodities and as speculation the U.S. may raise benchmark interest rates this year jolts bond markets. “We’re looking for things that will provide a better return and are looking more towards covered mortgage bonds, real estate assets and corporate bonds,” Henriksen said.

PFA is also betting bond purchases by the European Central Bank will support debt prices in the region even if the U.S. Federal Reserve starts raising rates.


The New York Times

Gold Falls to Lowest Price in Five Years: $1,106

Gold, often seen as a hedge against inflation and a weak dollar, slumped to its lowest price in five years on Monday. The price had surged in the years after the 2008 financial crisis, topping out at nearly $1,900 an ounce in August 2011 as investors guessed that the Federal Reserve’s low interest rate policy and huge bond-buying program would undermine the dollar and lead to inflation.

Instead, inflation has remained subdued and the economy has maintained its recovery, albeit at an uneven pace. That has increased demand for the dollar, and on Monday the price of gold sank another $25, to $1,106.70 an ounce — about 40 percent below its recent peak and the lowest price since March 2010. Gold’s allure as a store of value in times of crisis also appears to be fading. Neither the recent stock market crash in China nor the Greek debt crisis restored the attraction of gold.

Mexico Auctions Oil Blocks in Attempt to Increase Production

Nearly 80 years after kicking out foreign oil companies, Mexico reversed course on Wednesday, auctioning 14 exploration blocks in an effort to attract international energy giants and increase the country’s slumping production.

But the results were a disappointment. Only two blocks were successfully auctioned, and the largest companies capable of investing big sums did not bid or refused to participate. The current low price of oil was a reason for the low number of bids. Prices are hovering around $50 a barrel, about half the price of a year ago.

The goal of the government is to increase the country’s oil production over the next decade by approximately 40 percent to 3.4 million barrels a day, or nearly 4 percent of current world production.