Friday, July 8th, 2016
Carlson Capital's Black Diamond Arbitrage Partners fund added 1.3% net fees in the first quarter of 2021, according to a copy of the firm's March 2021 investor update, which ValueWalk has been able to review. Q1 2021 hedge fund letters, conferences and more At the end of the quarter, merger arbitrage investments represented 89% of Read More
Futures are pointed higher thanks in part to a surprisingly strong June U.S. labour report. Nintendo bringing back Pokemon on mobile is probably helping too. More on the back of the jobs data, we have bonds down, gold down and the U.S. dollar up. Not giant moves, but decent.
Making planes is clearly a hard business. Airbus concedes that while it giant A380 is breakeven on an operating basis, they will never recoup the $32 billion it cost to develop. They have delivered 193 and have 126 in the order book after launching in 2007. Oh, they had initially predicted 1,200 over 20 years. Emirates has been the biggest customer (I flew on one, but not on the 2nd floor). No US carriers have purchased any and Japan has only bought a few. Boeing has seen the demand for its biggest plane drop as well. Seems nobody wants the giant planes at the moment. Farnborough starts on July 11, so there will be lots of airline news next week.
Rule, Britannia! Or not… Out of 31 major currency pairs, the British pound is now the worst performer this year. It’s even now beat out the Argentine Peso. Quite an accomplishment indeed. There hasn’t been a battle like this between the two nations since the Falklands conflict.
Ignazio Visco the Governor of the Bank of Italy has gone on record saying that intervention can’t be ruled out. “Given the risk that, in a context of high uncertainty, limited problems could undermine the trust in the banking system, a public intervention cannot be excluded”. Given the fragility of the European financial sector at the moment, it’s not surprising for bankers to state the full range of tools available to shore up confidence. After all, confidence in financial institutions is the grease which make the gears of finance run smoothly. The Italian system is burdened by about $400 billion of troubled loans. Italy is in talks with the European commission to recapitalize some banks but they are still in their infancy, which explains the market uneasiness at the moment.
Looking for some intellectual reading for this summer? Pseudoerasmus provides a comprehensive reading list of economic history.
From FiveThirtyEight breaks down the data like nobody else. This time it’s an interesting post on the weird world of expensive wine.
Diversion: A map of the U.S. showing the average income of the top 1% by location.
Roles Reversed: Kevin Heart & The Rock Impersonate Each Other
Polycom Inc (PLCM) has agreed to be acquired by private-equity firm Siris Capital Group. Polycom shareholders will receive $12.50 a share, valuing the company at ~$2 billion. Canadian telecommunications company Mitel Networks Corp (MNW.TO) announced a deal for Polycom in April. At yesterday’s close, the deal valued Polycom at ~$11 a share. Mitel is disappointed that the deal fell through; however, it stated that termination was a better option than increasing the bid. Read the full story from the WSJ here.
The NFP number came in much larger than expected. As such, the USD is rising and some commodity prices are falling. Oil did not move a lot before or after the number was released. As of 8:42 AM, it is trading at $45.42. The rest of the energy complex is relatively flat.
Gold spiked $10 into the number and then sold off hard immediately after. The low thus far was $1336.50. That said, prices have bounced back somewhat. As of 8:46 AM, it is trading at $1347. Silver, Platinum & Palladium are also down while copper is up marginally.
FIXED INCOME AND ECONOMICS
We have been waiting all week for this morning’s U.S. labor update and suffice to say it was certainly worth it. Nonfarm payrolls rose by +287K in June to best the consensus for a +180K gain and post the single highest monthly tally in 2016. Private sector hiring absolutely went through the roof with a +265K increase as every single category saw increases. The education (+59K), leisure (+59K), information (+44K), business services (+38K) and retail (+30K) sectors all improved while manufacturing rebounded with +14K more workers hired than prior. Government hiring rose by +22K as well. These numbers in the release are great but there’s always a few sour apples amongst every bag, and we will start with the May revision. Recall last month’s report that showed only +38K workers found jobs which was a major letdown — this number has been revised even LOWER to just +11K hires. The overall unemployment rate increased two ticks to 4.9% while participation rose from 62.6% to 62.7%. Wage inflation rose only by +0.1% versus the +0.2% expectation for the slowest pace of income acceleration since February. The construction sector posted zero hires in June and now has failed to post a labor increase in the sector for three months running. Markets are reacting to this report by shrugging off the misses however as yields are rising sharply across the curve in anticipation that the FOMC is now back on the tightening bandwagon. Fed futures are pricing in a 4% chance of a July 27 hike (versus 2% pre-release) and a 21% likelihood of a hike on December 14 (compared to 11% prior).
StatsCan has unveiled their June employment situation as well with Canada shedding just -700 jobs last month. That’s really not too bad and essentially flat when you consider that we were looking for a +5,000 increase. Part-time workers carried the load with +39,400 hires as full-time employment dropped by -40,100 people. Goods-producing work was hit particularly hard with manufacturing down -12,900 (third decline in four months), construction lower by -28,700 (most in six months) and in the natural resources category (-1,600 and fifth straight monthly drop). Government related work was down -27,900 workers for its largest drop in almost a year. Overall joblessness was down a tick to 6.8% (better than the 7.0% expected) but participation fell to offset that positivity. We were watching Alberta for signs of hiring improvement in the province and June saw just -1,900 people lose jobs — a negative for certain but at least must better than the -24,100 and -20,800 workers shed in May and April respectively. Reaction to this poor report is somewhat muted however with Canada benchmarks only slightly lower and the USD/CAD cross completely unchanged at 1.3000 after spiking nearly 80 pips post-release.
CHART OF THE DAY
QUOTE OF THE DAY
I destroy my enemies when I make them my friends.
– Abraham Lincoln