Market Watch I Kristal Weekly Feed I 30th September 2019
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Kristal Weekly Feed I 30th September 2019

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All you need to know, in under 1 minute.
Here’s a concise report on what made headlines in the global market last week.

Positives

  • Five stocks including Walgreens and AB expected to rise amid prolonged market rut
  • SEC passes long-awaited ruling giving ETFs their own set of regulations
  • Puerto Rico releases plans to pull the island out of bankruptcy

Negatives

  • Shadow banks behind repo-market drama?
  • Phantom fears take a toll on stocks

 

Now, for more detail.

 

Positives

1. Five stocks including Walgreens and AB expected to rise amid prolonged market rut

What You Should Know

After a stifling first half of the year, stocks have been in consolidation mode, maintaining modest gains during the past three months. A lacklustre performance since late June for broad stock indices, however, has masked not just an internal rotation into defensive and value stocks but has also steadily improving market internals, according to a Monday research note by technical analyst Mark Newton of Newton Advisors. He said, “while many correctly point to a minor slowdown over the last week, the ability of Advance/Decline to have pushed back to new all-time highs is thought to be positive for stock indices.”

What You Should Look Out For

According to Newton, this creates a situation where many individual names (stocks) are attractive buys even if broad measures of the stock market are set to bounce along in the coming months. The stocks expected to go up include retail conglomerate Walgreens, brewing company Anheuser Busch and others.

Suggested Reading

 

2. SEC passes long-awaited ruling giving ETFs their own set of regulations

What You Should Know

Last week, the Securities and Exchange Commission passed a long-awaited ruling giving ETFs their own set of regulations, a step that will enhance the ranks of funds available to investors by making it easier for issuers to launch funds.
Since the first ETF (SPY) -0.54% launched, 27 years ago, all ETFs have had to cram themselves into the framework of rules established in 1940 for mutual funds, even though they’re a very different type of product. Today, over $3.3 trillion in assets is held in about 2,000 ETFs.

What You Should Look Out For

“By treating ETFs as an investment product different from mutual funds, the SEC has taken steps to improve ETF investor education and make it easier for asset managers to run and launch products,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA, in a note to clients after the rule was released.

Suggested Reading 

 

3. Puerto Rico releases plans to pull the island out of bankruptcy

What You Should Know

On Friday, the federal control board that oversees Puerto Rico’s finances released a plan that would cut its debt by more than 60% and rescue it from bankruptcy. The plan comes three years after Congress created the federal oversight board, which allowed the territory to seek bankruptcy protection after years of facing its inability to pay its debt.
Puerto Rico had billions of dollars in public debt after decades of mismanagement, corruption and excessive borrowing to balance budgets. The government declared the debt un-payable in June 2015, and nearly two years later filed for the biggest municipal bankruptcy in US history.

What You Should Look Out For

The new plan targets bonds and other debt held by the government and will now go before a federal judge. The percentage of Puerto Rico’s taxpayer funds spent on debt payments will fall to less than 9%, compared to almost 30% before the restructuring. It will also cut pensions for retirees who receive more than $1,200 a month.

Suggested Reading 

 

 

Negatives

1. Shadow banks behind repo-market drama?

What You Should Know

It is becoming increasingly clear that the pressure in money markets that has led the Federal Reserve to step in to provide short-term liquidity may have become the result of financial troubles in the so-called shadow banking system, as per Joseph LaVorgna, Chief Economist for the Americas at Natixis. LaVorgna, on Twitter, said the magnitude and persistence of the Fed’s aid to the repo market were troubling. Shadow banking refers to a range of non-bank credit-market participants, including hedge funds, and some firms may have been caught on the wrong side of the “massive, violent sell-off” in the bond market earlier this month.

What You Should Look Out For

Brian Sack of hedge fund D.E. Shaw and Joseph Gagnon of the Peterson Institute for International Economics said that one way to prevent another seizure in funding markets would be for the central bank to expand its portfolio of securities by $250 billion over the next two quarters.

Suggested Reading

 

2. Phantom fears take a toll on stocks

What You Should Know

Stocks slid on Friday following a Bloomberg report that the Trump administration is examining curbs on U.S. investments in China, including limiting pension funds’ holdings of Chinese stocks and delisting those shares from U.S. exchanges. This would escalate the U.S.-China trade war by adding capital flows to the conflict, which already involves tariffs on billions of goods transactions. According to some analysts, this is proof that there is a ‘wall of worry’ in Wall Street which investors are finding difficult to climb given the geopolitical turmoils this year. With Trump’s impeachment inquiry on the horizon, and increasing sectoral and technological risks, Wall Street watchers are wondering if it’ll all prove too much for a sluggish economy to bear.

What You Should Look Out For

According to Leland Miller, who heads China Beige Book International, Trump’s latest offensive against China might plug a loophole exempting Chinese companies from the same disclosure requirements that other foreign and U.S. concerns face. These exemptions were granted by the Securities and Exchange Commission during the Obama administration. Legislation sponsored by Sen. Marco Rubio (R., Fla.) will also prevent U.S. pension funds from investing in opaque Chinese companies, rather than letting them pour money “into a black hole,” Miller adds. On paper, this sounds good. But when seen in the context of a trade-war related headline sinking a Friday index climb (for the second week in a row) it might foreshadow turbulence. As investors know, fear is the only thing that trumps greed in investing – and more of these phantom fears can cause unnecessary trouble for the markets.

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