First Impressions

JLN Summer Intern Education Series To Hit New York And Chicago
John Lothian News is hosting its third annual MarketsWiki Education 2015 Chicago and New York World of Opportunity Summer Intern Education Series – in New York on July 15 and in Chicago August 4, 5 and 7.

We plan to add another speaker event in London this fall.

The series will feature speakers from around the financial industry who will present short 10 to 15 minute talks that cover the entire scope of our markets, from exchanges to trading firms, indexes, regulation and technology. Interns and new employees will get personal stories as well as valuable information about trends in the markets and what it takes to succeed in this industry.

In short, this is a great opportunity to introduce young talent to the financial space, give them some ideas on how and where they can get started, and help expand our industry in the years to come.

To read more, click here.

Quote of the Day

“The European Union’s principles are democracy, solidarity, mutual respect. These principles were not based in blackmails and ultimatums, especially in these crucial times. No one has the right to put in danger these principles.”

Greek Prime Minister Alexis Tsipras in the story, “Greece Standoff Could Drag On Regardless of Deal, Document Reveals”

Lead Stories

Greece Standoff Could Drag On Regardless of Deal, Document Reveals
Gabriele Steinhauser and Andreas Kissler – WSJ
Greece and its creditors are set for another clash over how to reduce the country’s debt, even if they manage to agree on the terms of new bailout funding in the coming days, documents seen by The Wall Street Journal show.

Never Mind Greece, Euro Seen Driven Toward Parity by ECB Policy
Chikako Mogi and Kazumi Miura – Bloomberg
If Greece is forced to default, sell the euro. If Greece reaches a deal with its creditors, sell the euro.
That’s the message from strategists including Barclays Plc and Bank of Tokyo-Mitsubishi UFJ Ltd., who say what matters for the currency is the European Central Bank’s bond purchases.

Euro-Area Bank Lending Grows at Fastest Pace Since February 2012
Alessandro Speciale – Bloomberg
Euro-area banks expanded lending at the fastest pace in more than three years in a sign that credit is starting to support the region’s recovery.

You Spin Me Right Round — Given our reflections on global debt and leverage, there are tactical and strategic approaches to investing that can be taken.
Matthias Paul Kuhlmey – Wealth Management
My two daughters are still at an age where they “hit” every playground with eager excitement. Observing them is quite interesting, and recently left me to consider a once-central thesis of physics that may also apply to financial markets (nerd father alert). When taking a turn on the merry-go-round, a question to ponder is whether my girls are spinning around the world, or if the world is instead moving around them; i.e., what is fixed, and what is not, at least from their perspective? Equally uncertain is the collective opinion when it comes to global monetary policy and asset prices. After our previous entries, Apex 2015: An Unobstructed View and Old Medicine In New Bottles, this is the third blog exploring the impact of a persistent low-rate environment and unprecedented quantitative easing.

Fed’s Esther George: U.S. Payments System Needs Improvement
Michael S. Derby – WSJ
In a speech that highlighted the need for further improving the U.S. payments system, Federal Reserve Bank of Kansas City President Esther George also said there’s a renewed focus on bolstering security.
Among industry participants and central bankers, “I sense a greater degree of consensus around the security challenges we face,” Ms. George said in the text of a speech to be delivered at her bank Friday. In her remarks, the official touted what she hoped would be a collaborative process to further modernize the way money is shifted around in the U.S. economy

Tsipras Cites Blackmail as Merkel Prods Greece to Take Offer
Patrick Donahue, Birgit Jennen and Nikos Chrysoloras – Bloomberg
German Chancellor Angela Merkel pressed the Greek government to accept a “generous” offer made by creditors, as Prime Minister Alexis Tsipras lamented the terms demanded in return for aid.

The West Ignores China at Its Own Peril
Mike Norman – TheStreet
The headlines are blaring: “China points away from a bear market. 20% down.”
20% down? Who sells markets 20% down?
Seriously, what kind of a strategy is that, and why are reporters and pundits screaming that to people? You wonder why most never make money in the stock market or in any form of investing? They follow that kind of ridiculous advice.

Why It Won’t Be a Default If Greece Misses Next IMF Payment
Andrew Mayeda – Bloomberg
If Greece fails to pay the $1.7 billion it owes the International Monetary Fund on Tuesday, it might be worse for the lender than for Greece.

Look Beyond Greece and U.K. Bonds Show Investors Wary of Hawks
Lukanyo Mnyanda – Bloomberg
In a week when Greece’s debt talks dominated markets, U.K. government bonds responded nonetheless to signs of a strengthening local economy.

Abbott has given up on debt and deficit reduction, but few have noticed
Stephen Koukoulas – The Guardian
In less than two years in office, the Abbott government has added almost $100bn to the level of Commonwealth government debt. This is a 35% increase from the $273bn level of gross government debt at the time of the September 2013 election. This increase flies in the face of the Coalition’s pledge prior to the election – and occasionally since – of reducing debt and at some stage, paying it off.

BofAML: These Asset Classes Are Most at Risk When Interest Rates Rise
Julie Verhage – Bloomberg
As we enter the second half of the year, more and more investors are talking about when the Federal Reserve will first increase its benchmark interest rate. A number of FOMC members have continued to speak out on a liftoff sometime this year, so it’s no wonder that investors and analysts are thinking about which asset classes are the most exposed to the loss of zero interest rate policies, or “Zirp.”
In a note entitled “from feast to famine,” Bank of America Merrill Lynch’s Chief Investment Strategist Michael Hartnett and his team outline which investments they think are the most vulnerable to rising interest rates.

Unconstrained Global Investing In An Extraordinary Monetary Policy Environment – Franklin Templeton
Monetary policy divergences have given global investors much to think about—and debate about— this year. Speaking at Franklin Templeton’s 2015 Global Investment Forum in New York last month, Michael Hasenstab, chief investment officer of Templeton Global Macro, offered plenty of food for thought on the subject. He believes the markets are at a critical juncture, and said it’s time to reevaluate one’s fixed income portfolios as traditional drivers of return may no longer be able to provide. He shared his team’s approach to navigating what could be the end of an era of historically low US interest rates, while other parts of the world continue fueling liquidity with easy monetary policies.

Short-Term Pain Ahead
Rising rates and economic weakness is a recipe for market slumps. The likelihood, though, is that the pain will be short-lived, as it has been in the recent past.
Bonds and other interest sensitive investments will have a tough time the rest of the year, but the question is: when? Although we originally thought that the Federal Reserve would raise short-term rates in June, it will likely hold off because the economic recovery still appears shaky.

Treasury Secretary Jack Lew speaks out on his wild week
Andy Serwer – Yahoo Finance
Barring a financial meltdown, the Treasury Secretary’s work is usually behind-the-scenes stuff. Weighty to be sure, but not exactly headline grabbing. This week has been an exception, which Jack Lew acknowledged as he sat down for an interview Thursday at the historic Treasury Building in Washington, D.C. With the conversation zipping from a sweeping trade bill, to high-profile, tough-love negotiating with the Chinese, to a possible Greek denouement — oh and did we mention a little controversy over the $10 bill — Lew appeared to be positively energized, and dare we say, even a bit outspoken, for this usually oh-so measured man.

Economic challenges ahead
Kumiharu Shigehara – The Japan Times
Back in June 1997, Paul Samuelson, a Nobel Prize laureate in economics, wrote an article in which he noted:
“The 1990s have brought gloom to Japan … I have been critical of the passive acceptance by Japan of its continuing slump. A program of deregulation and privatization is a good thing for long-run efficiency and growth. But no nation ever cured a short-run recession or depression with such a program. What will be needed is vigorous use of fiscal expansionism.”
In July 1997, just a month after Samuelson’s article was published, the Asian financial crisis broke out. The ensuing contraction of domestic demand in East Asia and appreciation of the yen weakened Japanese exports. A series of expansionary fiscal measures were introduced in Japan in vain to reflate the domestic economy and turned its fiscal position into the worst among advanced countries.

China’s Latest Reform Shouldn’t Be Its Last
William Pesek – Bloomberg
When the Chinese government proposed this week to end its decades-long policy of capped bank lending, there was good reason to be skeptical about its motives. China had just had its biggest weekly stock plunge since 2008. The new policy — which would scrap a rule limiting bank lending to 75 percent of deposits — seemed like the government’s latest attempt to artificially sustain economic growth at 7 percent.

Central Banks

Here’s How Quickly Yellen Wants to Raise Interest Rates, According to a Former Fed Policy Maker
Craig Torres – Bloomberg
Former Federal Reserve Governor Laurence Meyer has a guess at where Chair Janet Yellen’s interest rate forecast might be.

Mixed Inflation Readings Complicate Fed’s Confidence Hurdle
Jon Hilsenrath – WSJ
The Federal Reserve has said it will begin raising short-term interest rates when officials are reasonably confident that inflation is on a path to move toward 2%. Can they get reasonably confident at a time when one of their key measures of inflation is decelerating?
The Commerce Department reported Thursday that its personal consumption expenditure price index, excluding volatile food and energy prices, was up 1.2% in May from a year earlier, the smallest increase since May 2014. It has slowed from increases of 1.5% between May and October of last year.

The Future of Global Central Banking Is Already Upon Us
Simon Kennedy – Bloomberg
A brace of interest-rate cuts delivered 11,000 miles apart this month reveals how central banks are finding a modern way to keep monetary policy easy.

Negative Policy Rates Working For Now: Capital Economics
The introduction of negative policy rates by four European central banks over the past year has helped to trim longer-term interest rates and to stem the upward pressure on some currencies, notes Capital Economics.
Respected macro research firm, Capital Economics in its June 25, 2015 report titled: “Are negative policy rates here to stay?” notes despite looming Fed tightening, the global easing cycle is not over yet.

Carney Says BOE Concerned About Fixed-Income Liquidity Risks
Jill Ward – Bloomberg
Bank of England Governor Mark Carney said officials are monitoring whether the fixed-income market is vulnerable to liquidity risks.

Raghuram Rajan thinks the world is now facing Great Depression-era problems
Mike Bird – Business Insider
Reserve Bank of India governor Raghuram Rajan was one of the few senior economists credited with seeing the 2008 financial crisis coming.
So when he says the world is making a policy mistake that it made during the Great Depression, people are likely to take note.

IMF Has More Advice for U.S. Federal Reserve
Amey Stone – Barron’s
The International Monetary Fund (IMF) made headlines earlier this month when it cut its estimates for U.S. growth and suggested the Federal Reserve should not raise interest rates until next year.
Thursday the IMF followed up with a suggestion that the Fed should stop publishing the “dots” every three months. The Fed’s dot plot shows the anonymous interest rate projections of Fed officials and indicates if there is disagreement about where things are headed.

IMF Would Be Other Casualty of Greek Default
Mohamed A. El-Erian – Bloomberg
All sides are working hard to prevent Greece from defaulting on its debt obligations to the International Monetary Fund — and with good reason: Such an outcome would have dire consequences not only for Greece and Europe but also for the international monetary system.
The IMF’s “preferred creditor status” underpins its ability to lend to countries facing great difficulties (especially when all other creditors are either frozen or looking to get out). Yet that capacity to act as lender of last resort is now under unprecedented threat.

China money rates stabilise after injection trims weekly spike
Lu Jianxin and Pete Sweeney – Reuters
Chinese money market rates rose this week on cash calls near the end of the half year and from subscriptions to a slew of stock initial public offerings (IPOs), but the rates have stabilised by Friday after the central bank injected cash into the market, traders said.

QE Undoubtedly Distorted Equity Markets: Chillingworth (VIDEO)
Rathbones Chief Investment Officer Julian Chillingworth discusses Chinese equities and monetary policy from various central banks. He speaks with Mark Barton on Bloomberg Television’s “On The Move.”


Renminbi trading in the UK is booming – and the Government loves it
Andrew Trotman – The Telegraph
Renminbi trading in London is booming, according to a new report, in a boost to the Government’s efforts to forge closer links with China.
Forex trading in the Asian currency has grown six-fold in just four years, while total deposits have jumped by more than a third in the past 12 months alone.

Taiwan to settle euro remittances on local forex platform
J.R. Wu – Reuters
Taiwan will begin clearing euro currency remittances on its foreign currency settlement platform, another step in making forex settlements more efficient on the island, the central bank said Friday.

What’s in Store for Bitcoin and Cryptocurrency Regulation
Vivian Maese and Yvette Valdez – Institutional Investor
What will the future hold for regulation of cryptocurrency derivatives? Whereas the Commodity Futures Trading Commission hasn’t yet released explicit regulatory guidance, it has left clues that indicate what the regulation of Bitcoin and other cryptocurrency derivatives could look like. After all, increased acceptance and usage of cryptocurrency indicate a clear need to hedge the risk of volatility. At Latham & Watkins, we’ve examined how the current U.S. derivatives regulatory regime of the CFTC may apply to Bitcoin and other cryptocurrencies. Here are some points investors, start-ups, payment processors and financial institutions should keep in mind.

Time for Caribbean countries to ditch fixed exchange rate to dollar
Ronald Sanders – Antillean
Is the fixed currency exchange rate between the US and some Caribbean countries affecting the latter’s international competitiveness? This is a question that deserves review as Caribbean countries struggle with difficult economic conditions caused, in part, by the rapid change in their terms of trade and the value of currencies in which such trade occurs.

ProShares Launches Currency Hedged Europe and Japan ETFs
ProShares announced the launch of two currency hedged equity ETFs: ProShares Hedged FTSE Europe ETF (HGEU) and ProShares Hedged FTSE Japan ETF (HGJP).

Indexes & Index Products

HSBC ends sponsorship tie-up with Markit for China PMI, emerging markets indexes
Pete Sweeney and Michelle Price – Reuters
HSBC has ended its marketing tie-up with financial information firm Markit Ltd, both companies told Reuters on Friday, winding down a five-year relationship that some industry insiders said may have become too expensive and a potential political liability for HSBC in China.

A New Measure of Active vs. Passive Investing – Total Return
Daisy Maxey – WSJ
A new measure from Morningstar may bring more clarity to the debate over whether active or passive investing is superior.
The Active/Passive Barometer report, introduced Thursday, measures the performance of U.S. active mutual-fund managers relative to the performance of passive funds net of fees.

The S&P 500 P/E Ratio Is 19, Unless It’s Actually 27; Even Robert Shiller doesn’t know what to make of price-earnings data that make stocks look expensive.
Michael P Regan – Bloomberg
“Stocks are cheap!” “Stocks are expensive!” It’s one of the oldest debates on Wall Street—and an especially good way to divide investors into competing camps as the U.S. bull market soldiers on in its seventh year.

iShares MSCI United Kingdom Index Declares $0.35 Semiannual Dividend (EWU)
Mark Watkins – Dakota Financial News
iShares MSCI United Kingdom Index (NYSE:EWU) announced a semiannual dividend on Thursday, June 25th, AnalystRatings.Net reports. Shareholders of record on Monday, June 29th will be paid a dividend of 0.3466 per share on Wednesday, July 1st. This represents a yield of 3.65%. The ex-dividend date of this dividend is Thursday, June 25th.

Lawson Products Set to Join Russell 3000 Index
Press Release
Lawson Products, Inc. is set to join the broad-market Russell 3000 Index as well as the Russell Global Index at the conclusion of the Russell indexes annual reconstitution on June 26, according to a preliminary list of additions posted June 12 on the FTSE Russell website.


China’s Gold Market Targets ‘Speedy Growth’, Cross-Listing with Comex, LBMA Forum Told
Adrian Ash – Gold News
Gold market prices in wholesale London trade slipped near yesterday’s 2-week lows on Thursday, edging down after a quiet session in China despite fresh wrangling in Europe over Greece’s worsening debt crisis.

Gold Volatility Slides to Lowest Since November as Demand Wanes
Joe Deaux – Bloomberg
Gold’s lackluster year is continuing to drive away investors and send the metal’s volatility even lower.

Shanghai Gold Exchange in talks to list products on CME
A. Ananthalakshmi – Reuters
The Shanghai Gold Exchange (SGE) is in talks to list its bullion products on CME Group’s trading platform and launch yuan-denominated bullion contracts in Dubai, an exchange official said.

Bull or Bear, These are the Need to Knows for Trading Silver
Teddy Sloup – Inside Futures
The current silver trading environment reminds me of driving down an unfamiliar dirt road in a fog storm. You barely know where you’re at and you certainly have no idea what’s ahead. The markets are always unpredictable, especially silver, but it’s hard to remember the last time silver had so many different currents that could take it sharply in either direction. For traders that thrive on chaos and volatility, the setting ahead is intriguing. Below, I’ll layout the bullish and bearish market factors and potential scenarios at play for silver traders.


U.S. repo rate falls to five-week low
Richard Leong – Reuters
The borrowing cost on a key source of overnight loans for Wall Street fell to a five-week low from a near three-month peak in volatile trading on Friday.
Uncertain outcome on the negotiations between Greece and its creditors before a debt repayment due next week sparked an early scramble among some banks and dealers to finance their trades and loans through the $5 trillion repurchase agreement market, analysts said.

Small Banks Fight for Regulators’ Attention
American Banker
The best way to give deserving banks regulatory relief without walking back necessary aspects of Dodd-Frank is to ease rules for institutions that keep their businesses simple, according to Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig. That means staying away from most derivatives and maintaining an equity-to-assets ratio of at least 10%, among other suggested qualifications.

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