2024-08-05 21:48
Aug 6 (Reuters) - A look at the day ahead in Asian markets. Asian markets open on Tuesday still reeling from a wild session on Monday that saw Japan's second-biggest stock crash ever spill over into world markets, helping to unleash a wave of volatility usually associated with major crises. The curious thing is though, there's no smoking gun that explains the scale of the selloff, either in Japan or globally. At least not a singular or obvious one. Yes, the yen carry and other leveraged trades were probably overcooked, the Bank of Japan was maybe too hawkish and is now headed for a policy error, ditto the Fed by not cutting rates last week, and the AI-inflated Big Tech bubble on Wall Street was well overdue a reversal. But is that enough to warrant a 12% plunge in Japanese stocks - a fall only exceeded by the 15% slump on Oct. 20, 1987 after Black Monday - or the surge to 65.0 on the U.S. VIX volatility index, a level only ever topped in the market meltdowns of 2008 and 2020? Perhaps. But there's a case to make that it's excessive. On the economic side, there's no obvious sign of collapse - Japanese and U.S. services purchasing manager index numbers on Monday showed pretty solid growth. Indeed, the U.S. services PMI data was enough to push short-dated Treasury yields higher on Monday, halting the recent decline that had also reached historical magnitudes. This is the febrile atmosphere traders in Asia on Tuesday will received the Reserve Bank of Australia's latest policy decision, inflation figures from Taiwan and the Philippines, and more corporate results from Japan. The RBA is widely expected to hold rates at 4.35% but could the current turmoil force a cut? Traders are putting a one-in-10 probability on it. It remains to be seen whether the current volatility proves to be a market-centric episode wiping out leveraged trades across a range of assets without spilling over into the "real" economy, or something more serious. There have already been calls in some quarters for an emergency, inter-meeting Fed rate cut and earlier on Monday U.S. rates markets had begun to price in the possibility of just that or a 75 basis point cut next month. But unless there is a clear deterioration in the economic data or deeper market dislocation, this is unlikely. By the U.S. close on Monday that pricing had eased and the VIX index had halved from its peak. Classic "safe haven" assets gold and two-year Treasuries ended lower, although the yen hit a seven-month high. It has rallied around 13% in three weeks, virtually wiping out its year-to-date losses. Further signs of yen stress and dislocation may come from the cross-currency basis market, a gauge of funding costs and demand for dollars. Traders will be watching. Here are key developments that could provide more direction to markets on Tuesday: - Australia interest rate decision - Philippines inflation (July) - Taiwan inflation (July) Sign up here. https://www.reuters.com/markets/asia/global-markets-view-asia-graphic-pix-2024-08-05/
2024-08-05 21:29
NEW YORK, Aug 5 (Reuters) - Wall Street's most-watched gauge of investor anxiety logged its largest ever intraday jump on Monday and closed at its highest since October 2020, as traders scrambled to hedge against market volatility during a global selloff fueled by U.S. recession fears. The Cboe Volatility Index (.VIX) , opens new tab jumped to a high of 65.73 before the market open, up about 42 points from its close on Friday. The index pared gains and closed at 38.57, its highest close in nearly four years. The S&P 500 was down as much as 4.3% on Monday and closed down 2.98%. The benchmark index has lost more than 8% from a record high reached last month. The surge in the VIX, which measures investor demand for protection against stock swings, dwarfed moves in the volatility index that took place during past bouts of intense selling - including the Covid-related massive selloff in March 2020, when the S&P 500 sank more than 10% in a single day. Joe Tigay, portfolio manager for Rational Equity Armor Fund said the VIX’s move, which comes on the heels of a three-day selloff that began on Thursday, was "very, very unusual." "There's no question that last week something was broken (in markets) and it's going to take some time to fix this damage," he said SHATTERED CALM Investors believe there are several factors driving the sharp rise in the volatility gauge, including a rapid unwinding of strategies that bet on continued low market gyrations, under–hedged traders rushing to protect their downside and poor trading liquidity around the open of U.S. trading. The return of volatility to markets follows an unusually long period of market calm, where the S&P 500 (.SPX) , opens new tab went 356 sessions without a 2% or larger move lower, the longest such streak since 2007. That period of placid trading, along with big gains in stocks earlier this year, produced an environment ideal for “short-volatility” strategies, which thrive when market gyrations are muted. The strategies come in various flavors, including exchange-traded funds that profit from calm markets and options selling strategies that generate income when gyrations are low. The rush to exit these positions all at once can boost market volatility beyond what a regular drop in the market would, strategists said. "(There is an) unwind of short volatility trades that were prevalent into July - and this unwind is likely exacerbating VIX levels," Brent Kochuba, founder of financial insights company, SpotGamma, said. BLAME 0DTE? Growth in popularity of short-dated options, known as 0DTE options, may have contributed to Monday’s VIX surge, said Jim Carroll, portfolio manager at Ballast Rock Private Wealth. These options, which expire at the end of the trading day, are favored by investors seeking to protect against short-term market fluctuations. But as volatility surged over the last few days, investors have urgently reached out for longer term hedges, Caroll said. Because 0DTE options do not figure in VIX calculations but longer-term ones do, the shift may have caused the volatility index to spike, Carroll said. LOW LIQUIDITY The high VIX reading, calculated using real-time quotes for certain S&P 500 Index options, may have also been affected by a lack of liquidity outside of regular trading hours, Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, said. The VIX hit 65.73 at 8:37 a.m. (1237 GMT), prior to the start of regular trading, when trading conditions might not be as liquid as during regular hours. BUY SIGNAL? While there is no telling how long market volatility will last, some investors see a jump in the VIX as an opportunity to buy stocks on the cheap. "It's tough to say where it will peak at, but our back-testing suggests that the S&P 500 is a buy on a 12-month forward basis when the VIX is above 35," Lori Calvasina, head of global equity strategy research at RBC Capital Markets, said in a note. When the VIX closes above 35, the S&P has on average gone on to rise 6.5% and 14.5%, over the next three and six months, respectively, an RBC analysis showed. "A 40 VIX implies 2.5% daily moves in the S&P 500, so levels above there are difficult to sustain outside of a major crisis," Little Harbor Advisors' Thompson said. Sign up here. https://www.reuters.com/markets/us/wall-street-fear-gauge-posts-record-intraday-jump-stocks-slide-2024-08-05/
2024-08-05 21:17
Aug 5 (Reuters) - U.S. railroad operator CSX (CSX.O) , opens new tab narrowly beat second-quarter profit estimates on Monday, helped by higher shipment volumes and robust pricing, sending its shares up 5% after the bell. Improving intermodal volumes, or goods moved via two or more modes of transport, have helped railroads squeeze out profits along with higher-than-inflation pricing, even as the overall freight industry continues to face a downturn. CSX's revenue from intermodal shipments was $506 million in the reported quarter, 3% higher than a year ago. The Jacksonville, Florida-based company reported revenue of $3.7 billion in the second quarter, in line with analysts' estimates. It reported a profit of 49 cents per share, above analysts' estimate of 48 cents per share, according to LSEG data. Its operating margin was 39.1% for the quarter, down 50 basis points from a year earlier. CSX's east-coast competitor Norfolk Southern (NSC.N) , opens new tab also reported second-quarter profit above estimates last month, helped by higher pricing. Sign up here. https://www.reuters.com/business/autos-transportation/csx-beats-second-quarter-profit-better-volumes-strong-pricing-2024-08-05/
2024-08-05 21:09
Aug 5 (Reuters) - Morgan Stanley (MS.N) , opens new tab said on Monday it had received requests from the enforcement division of the U.S. securities regulator regarding advisory account cash balances swept to affiliate bank deposit programs. The company said it was in talks with the U.S. Securities and Exchange Commission since April over the matter and compliance with the Investment Advisers Act of 1940. The law, which regulates investment advisers, requires firms compensated for advising others about securities investments to conform to regulations designed to protect investors. Advisory accounts offer investment advisory services to clients for a fee, wherein they can choose from a variety of investment strategies managed by the adviser. Such accounts may include stocks, bonds, mutual funds, money market funds, exchange-traded funds and cash. A cash sweep in investment advisory accounts allow clients to earn a return on uninvested cash balances. Morgan Stanley also disclosed that it had reached a conditional settlement agreement last month to resolve a 2017 lawsuit related to the initial public offering of Danish marine fuel oil supplier OW Bunker. The company was among the defendants named in the lawsuit, which alleged the underwriters had misled institutional investors about the 2014 listing of OW Bunker. OW Bunker had filed for bankruptcy within a few months of going public, after it suffered hedging losses of almost $300 million. The agreement is subject to approval of the settlement by a Danish court, Morgan Stanley disclosed. Sign up here. https://www.reuters.com/business/finance/morgan-stanley-discloses-us-sec-requests-information-advisory-account-cash-2024-08-05/
2024-08-05 20:59
Aug 5 (Reuters) - Diamondback Energy (FANG.O) , opens new tab on Monday raised its full-year oil and gas production estimates by about 4,000 barrels per day as operational efficiencies helped boost output. U.S. shale producers are using technological advancements and drilling longer well laterals to extract more oil per well. The efforts generally have boosted output and reduced drilling times without increasing spending. "We are clearly doing more with less and becoming more operationally efficient each quarter," Travis Stice, Diamondback's chief executive officer, said in a letter to investors. The company raised its full-year production guidance to between 462,000 barrels of oil and gas per day (boepd) and 470,000 boepd, up from a previous range of 458,000 to 466,000 boepd. Meanwhile, Diamondback tightened its capital budget range to between $2.35 billion and $2.45 billion from a range of $2.3 billion to $2.55 billion. The company, which aims to become one of the largest oil producers in the prolific Permian basin after it closes the acquisition of Endeavor Energy, said second-quarter production rose 5.5% to 474,670 boepd per day, higher than it had forecast. The Midland, Texas-based company reported adjusted earnings of $4.52 per share for the three months ended June 30, compared with analysts' average estimate of $4.51 per share, according to LSEG data. Shares of the company were little changed in after-market hours trading at $185. Diamondback said it expects the Endeavor deal to close in the third or fourth quarter of this year, adding that it was working with the Federal Trade Commission to comply with a second request for information. Sign up here. https://www.reuters.com/markets/commodities/diamondback-energy-beats-quarterly-profit-estimates-2024-08-05/
2024-08-05 20:17
TORONTO, Aug 5 (Reuters) - Water has begun to overflow over a natural dam created by a landslide blocking Chilcotin River, British Columbia officials said, triggering evacuation orders for people along the banks of Chilcotin and Fraser rivers in western Canada. Bowinn Ma, B.C.'s Minister of Emergency Management and Climate Readiness warned of additional landslides as the water gushing through the channel picked up pace carrying debris. "The likelihood of a worst case scenario is decreasing, but make no mistake, the risks are still there," she said in a media briefing. "Now is not the time to go boating. Now is not the time to go take a look at the water." The water began to trickle over the natural dam Monday morning at 7.5 cubic metres per second and the pulse rose to 750 cubic metres per second by 1330 pacific time (1630 ET/2030 GMT) as the water began to gush, increasing the size of the channel and carrying large wooden debris and sediments. Officials are closely watching the situation and warned the pulse of water could increase as a large amount of water stored behind the natural dam is discharged. Evacuation alerts have been issued in Cariboo, Thompson-Nicola regional districts in remote parts of western Canada, as officials urged the local population and tourists to stay off the river and the banks. The region has been under watch since Wednesday after a landslide blocked the river in the region, creating worries about flooding and triggering emergency alerts to ensure communities are ready to move to safer areas. Even if the water elevation in an area may be similar to spring flooding levels, the water will react differently with greater momentum and force, than a gradual increase in water levels, officials said. Nathan Cullen, B.C.'s minister of water, land and resource stewardship said the government was aware of the threat on wild salmon and fish species, as well as cultural sites along the rivers and was working with partners to prepare to go to sites once it is safe to do so. Sign up here. https://www.reuters.com/business/environment/evacuation-ordered-water-begins-overflow-chilcotin-river-landslide-western-2024-08-05/
