FTG Blog - Shell Loads Oil in Libya for the First Time in Five Years

Shell Loads Oil in Libya for the First Time in Five Years

Royal Dutch Shell Plc, the world’s largest oil trader, is said to have loaded its first crude from Libya in five years over the weekend, adding to evidence of the OPEC nation’s comeback. The cargo on Saturday is for 600,000 barrels of crude from the Zueitina port, according to two people familiar with the matter who asked not to be identified because the information is private. A Shell spokesperson declined to comment on the shipment, but said the company’s Shell International Trading & Shipping “has a history marketing Libyan crudes. We welcome new business opportunities with Libya’s National Oil Corp.” Read more

FTG Blog - Musk Revs Up Tesla Bond Buyers by Selling Them Debt With a Dream

Musk Revs Up Tesla Bond Buyers by Selling Them Debt With a Dream

Tesla Inc.’s Elon Musk is selling his dream. Bond investors seem to be closing their eyes and buying it. Musk brought his charm offensive to the debt market at a meeting for bond buyers in Manhattan on Monday and came away with orders for $600 million after just a few hours, according to investors briefed on the matter. The session was part of a four-day debt-marketing extravaganza aimed at raising $1.5 billion to support the electric carmaker’s new mass-market Model 3. Read more

FTG Blog - World's Top Stock Market Really Just a Handful of Top Stocks

World’s Top Stock Market Really Just a Handful of Top Stocks

Among the world’s biggest stock markets, there haven’t been any better investments this year than Hong Kong’s Hang Seng Index. But under the surface of that 26 percent surge, gains are getting more concentrated — and that means for some shares, volatility is on the rise. Take one of the Hang Seng’s heaviest weighted stocks, Tencent Holdings Ltd. It’s the second-best performer this year with a 68 percent surge, accounting for around a quarter of the index’s gain, according to data compiled by Bloomberg. And its 30-day volatility has jumped 51 percent, as price swings across the index grow ever more muted.

Market watchers say mainland Chinese investors are causing the phenomenon, favoring Hong Kong’s biggest shares as they funnel cash into the city through exchange links. While that creates opportunities — and pitfalls — for stock pickers, some strategists see the lack of breadth as a risk for passive money too, in that it’s a sign of a fragile rally.

“There are certain funds coming down from China and they are buying into well-known stocks from their point of view, like Tencent or Ping An. The Hang Seng Index has moved quite considerably upwards but then the second or third liners haven’t been able to follow,” said Victor Au, chief operating officer at Delta Asia Securities Ltd. The rally’s reliance on just a few stocks means “an external shock would give the market a good excuse to have a big correction,” he said. “Investors are too complacent to the current situation.”

The Hang Seng Index’s ascent in 2017 marks a departure from years of underperformance versus global equities, with the Hong Kong measure delivering more than twice the S&P 500 Index’s gain amid signs of a stabilizing Chinese economy and brighter earnings prospects. The Hong Kong gauge climbed 0.3 percent as of 10:52 a.m. local time Monday.

The advance has been narrow — just seven of the index’s 49 stocks, including Tencent, Ping An Insurance (Group) Co. and AIA Group Ltd. have accounted for almost 70 percent of the advance. Their 30-day price swings have jumped 25 percent on average this year, while the HSI Volatility Index holds near a decade low.

Market Risk

A similar pattern is happening in the U.S., where rallies in giant technology companies like Apple Inc. and Facebook Inc. are dominating indexes, and whether this is something to worry about has been hotly contested.

Cliff Asness at AQR Capital Management has argued that four or five stocks always shoulder a disproportionate amount of upside — nothing to get excited about. Howard Marks, the co-chairman of Oaktree Capital Group LLC, has listed addiction to FAANG-fomented gains among a handful of vulnerabilities that could spell the end of what is now the second-longest bull market ever.

“It’s usually not a good sign for there to be a narrowing of the market in a bull market,” said Richard Harris, Hong Kong-based chief executive officer of Port Shelter Investment Management. “It very often means that eventually people are going to run out of things to buy.”

Harris says that as well as the Hang Seng Index being swept up in a global trend for narrower rallies, the buying habits of Chinese mainland investors are having an impact.

Link Flows

Mainland investors have purchased a net 246 billion yuan ($37 billion) of Hong Kong stocks through Shanghai and Shenzhen trading links this year. Among the most actively traded in recent months include Tencent, Ping An, China Life Insurance Co. and HSBC Holdings Plc.

Crowd-following quants are also part of the story, according to Eric Liu, head of research at Vanda Securities Ltd. Systematic investors are targeting Tencent and some Chinese bank stocks and they tend to raise volatility on a subindex or a company level, while suppressing it on an overall index level, he said.

“It would not be unusual for there to be narrow market leadership, increasing volatility in those stocks as a forerunner that maybe the markets are getting a bit high and needs to come back to some sort of reality,” Port Shelter Investment Management’s Harris said. “I would expect some sort of pullback in the third quarter. Maybe sell in August, buy back in November.”

FTG Blog - Here’s What British Business Wants From Brexit

Here’s What British Business Wants From Brexit

Prime Minister Theresa May is stepping up her interactions with business leaders as Britain’s split from the European Union nears. While pleased by the overtures and also by signs the government is increasingly acknowledging the need for a transitional period, executives and lobbyists still have a long list of demands for the divorce deal and subsequent trade pact. Read more

FTG Blog - Tesla Burns Through Record Cash to Bring the Model 3 to Market

Tesla Burns Through Record Cash to Bring the Model 3 to Market

Tesla Inc.’s Elon Musk keeps getting the green light to do what it takes to bring electric cars to the masses, regardless of how much it’s going to cost. The company burned through $1.16 billion in cash during the second quarter by spending on capacity for its cheapest model yet and boosting battery output. Investors fixated instead on what Musk said is coming next: Hundreds of thousands of Model 3 sedan deliveries, installations of solar roofs and an all-new semi truck to add to the lineup. Read more

FTG Blog - Wall Street Is Mapping Stock Trades for a Post-Bond Bubble World

Wall Street Is Mapping Stock Trades for a Post-Bond Bubble World

Alan Greenspan says don’t kid yourself, if the bond market blows up the collateral damage to equities could be extensive. But does that mean you need to bail from the market completely? Read more

FTG Blog - Banks May Need $50 Billion New Capital After Brexit

Banks May Need $50 Billion New Capital After Brexit

Banks may need to find $30 billion to $50 billion of additional capital to support new European units in the aftermath of a hard Brexit, according to Oliver Wyman Inc. Read more

FTG Blog - Draghi Pledged 'Whatever It Takes.' It Took 1.2 Trillion Euros

Draghi Pledged ‘Whatever It Takes.’ It Took 1.2 Trillion Euros

So how much did it end up taking after European Central Bank President Mario Draghi memorably said five years ago he’d do “whatever it takes” to save the euro? Read more

FTG Blog - Europe's Butter Mountain Has Melted Away

Europe’s Butter Mountain Has Melted Away

Europeans are eating so much butter that the bloc’s stockpiles are nearly empty, adding to a rush of demand that has sent global prices skyrocketing. The star of the U.S. dairy market in recent years, butter costs have now soared to all-time highs in Western Europe and Oceania. The gains have been aided by shifting consumer views on its healthy attributes and a recent slowdown in the growth of global milk output. France’s Federation of Bakeries has called the price rise a “major crisis.” Read more

FTG Blog - U.K. Regulators Plan Senior-Manager Rules for All Finance Firms

U.K. Regulators Plan Senior-Manager Rules for All Finance Firms

U.K. regulators set out plans for ensuring senior staff of financial-services firms can be held to account for misconduct on their watch, extending rules already in place for banks to almost all firms. The Senior Managers and Certification Regime is a response to the 2008 crisis, which highlighted how responsibilities at banks, insurers and other companies weren’t clearly delineated. That allowed highly placed individuals to dodge responsibility for misconduct by their staff such as sales of unnecessary insurance products or rigging of benchmarks that have resulted in billions of dollars being paid out in fines and remedies. Read more