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BofA Merrill Lynch Fund Manager Survey Finds Bear Market Sentiment Is Back
Investors Move out of U.S. and into Emerging Markets
July 13, 2010--Investors have turned bearish in their outlook for the global economy and corporate earnings, according to the BofA Merrill Lynch Survey of Fund Managers for July.
The survey shows a net 12 percent of respondents predicting the global economy will deteriorate in the coming 12 months, the first negative forecast since February 2009. This represents a big turnaround from June when a net 24 percent forecast the economy to strengthen.
A net 4 percent of the panel expects corporate profits to worsen in the coming year, also the first negative outlook in more than a year. It compares with a net 28 percent forecasting earnings growth just last month. A net 1 percent says that profit margins will fall in the coming year, compared with a net 31 percent predicting improved margins in May.
Risk appetite has dipped with investors moving into cash and reducing exposure to cyclical stocks. Cash now comprises 4.4 percent of an average portfolio, up from 4.1 percent in May. A net 39 percent of the panel is taking lower than normal risk, more than double the proportion in May. Allocations towards Pharmaceuticals, a classic bear market sector, increased to the highest level since March 2009.
"July's survey echoes the sentiment that investors expressed during the recession in early 2009," said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research. "Growth and profit expectations have double-dipped. Should upcoming data fail to confirm a double-dip, risk assets will have a much better third quarter," said Michael Hartnett, chief Global Equity strategist at BofA Merrill Lynch Global Research.
Out of the U.S., into Emerging Markets and eurozone
Investors are more concerned about the outlook for U.S. equities than at any point since November 2006, with a net 14 percent of the panel saying it is the region they would most like to underweight. In June a net 14 percent said the U.S. was the region they most wanted to overweight. Global asset allocators have already reduced exposure to the region, with net 7 percent of panel overweight U.S. equities, down from a net 20 percent in June.
Global Emerging Markets (GEM) has been gaining in popularity while investors are also returning to the eurozone -- in spite of weakened economic sentiment towards China and Europe respectively.
A net 34 percent of global asset allocators are overweight GEM equities, up from 19 percent in May. A net 48 percent of investors identify GEM as the region they would most like to overweight over the next 12 months, more than double the reading in May. Over the same period, the proportion of respondents predicting a weaker Chinese economy has surged to a net 39 percent up from a net 3 percent. The proportion of asset allocators underweight eurozone equities has fallen to a net 10 percent, down from a net 27 percent in June. At the same time, a net 17 percent of European investors expect the region's economy to weaken.
Buying expensive bonds; selling cheap equities
Respondents have scaled back positions in global equities while moving into bonds in the past two months. The proportion of asset allocators overweight equities has slipped to a net 11 percent from 30 percent in May. The proportion underweight bonds has fallen to a net 15 percent, down from 29 percent in May. This is despite investors acknowledging that equities are increasingly undervalued and bonds increasingly overvalued. The spread in perceived valuations of bonds and equities is at its widest since 2003.
Risk aversion is not restricted to long-only investors. Hedge funds have reduced their net equity exposure to its lowest since March 2009.
Four out of 10 investors predict no Fed rate hike for a year
Inflation concerns have eased as sharply as growth concerns have appeared. A net 12 percent of investors predict inflation to fall in the coming year, a turnaround from June when a net 12 percent were forecasting higher inflation. As a result investors are pushing back the date they expect next to see a rate hike in the U.S. or eurozone. Four out of 10 respondents to the Global Survey are ruling out any rate hike by the Fed before July 2011, and only 4 percent predict an increase this year. The Regional Survey shows 47 percent of European investors predict no rate hike from the ECB before July 2011.
Survey of Fund Managers
A total of 202 fund managers, managing a total of US$530 billion, participated in the global survey from 1 July to 8 July. A total of 170 managers, managing US$393 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Global Research with the help of market research company TNS. Through its international network in more than 50 countries, TNS provides market information services in over 80 countries to national and multi-national organizations. It is ranked as the fourth-largest market information group in the world.
Source:Bank of America Merrill Lynch
Presentation by Andrei Kirilenko, Senior Financial Economist, CFTC Office of the Chief Economist on High Frequency Traders and Asset Prices
July 13, 2010--Committee Meeting to Discuss Best Practices for HFT/ALGO.
view presentation
Source: CFTC.gov
CFTC Announces Members of the CFTC’s Technology Advisory Committee – Committee to Meet on July 14, 2010 to Discuss Best Practices for HFT/ALGO
July 12, 2010--The first meeting of the CFTC’s Technology Advisory Committee (TAC), titled “Technological Trading in the Markets,” will be held on July 14, 2010 at 1:00 p.m., at the CFTC’s Washington, DC headquarters’ Hearing Room. The meeting will address the topics of algorithmic (Algo) and high frequency trading (HFT). Andrei Kirilenko, a Senior Financial Economist in the CFTC’s Office of the Chief Economist, will present his paper, High Frequency Traders and Asset Prices; Richard Gorelick of RGM Advisors, LLC, will present a high frequency trading firm’s perspective on HFT; and a representative from FIA will present the paper Market Access Risk Management Recommendations regarding standards on direct market access.
Commissioner Scott D. O’Malia, Chairman of the TAC, has requested that members come to the first meeting prepared to debate the impacts Algo and HFT have on the market and whether or not best practices and/or regulatory standards related to Algo and HFT should be implemented by the Commission.
“The new TAC includes members with a wide range of technology expertise in the financial markets and will be charged with keeping the TAC abreast of new technological advances. With the depth of knowledge of the various TAC members, this new committee can play a vital role assisting the Commission’s efforts to better oversee the evolution of the derivatives markets,” stated Commissioner O’Malia.
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Source: CFTC.gov
NYSE Liffe U.S. to Become Sole U.S. Exchange for MSCI-Based Futures
For Futures on MSCI’s Emerging Markets and EAFE Indices, No Later Than June 2011, New Products Coming
July 12, 2010--NYSE Liffe U.S., the U.S. futures exchange of NYSE Euronext (NYX), today announced that it will coordinate with its global customer base to complete the orderly transition of trading and open interest of all existing MSCI-linked stock index futures in the U.S. to its platform no later than June 17, 2011. Earlier today, MSCI announced that other contracts listed in the US under its existing licenses are expected to cease trading on that date. To ensure the transition is effective, NYSE Liffe U.S. will begin working with market participants immediately.
“Listing of futures based on MSCI EAFE and EM Indices is part of our plan to be the premier venue for customers to access a diverse global equity product offering based on the well-known MSCI family of indices. In the coming months, we will continue to expand our offering by introducing additional contracts based on MSCI indices,” said Thomas F. Callahan, CEO, NYSE Liffe U.S. “We anticipate that customers who need to move open interest onto our exchange will want to begin that process well in advance of the June 2011 deadline and we’ll be working closely with these firms to support them throughout the process. Our goal is to build a unique exchange with exceptional liquidity, technology and service to our global customers.”
In May 2009, NYSE Liffe U.S. signed a license agreement with MSCI to offer a broad suite of domestic and international index futures products built on a range of MSCI equity indices. These indices include style and sector exposures as well as flagship MSCI indices like the MSCI Emerging Markets (EM), MSCI EAFE and MSCI BRIC Indices. MSCI calculates over 120,000 equity indices daily as part of a diverse index portfolio including broad and efficient market coverage of U.S. and European equity markets. MSCI indices are recognized and used by leading asset managers around the world.
A unit of NYSE Euronext, NYSE Liffe U.S. recently sold a substantial minority ownership stake to six leading market participants, Citadel Securities, DRW Ventures LLC (an affiliate of DRW Trading Group), GETCO, Goldman Sachs, Morgan Stanley, and UBS. NYSE Liffe U.S. utilizes the proven LIFFE CONNECT® trading platform designed and maintained by NYSE Technologies that matched more than 3 million contracts per day in 2010 year-to-date on the NYSE Liffe European markets. NYSE Liffe U.S. offers a wide variety of global connectivity options allowing members to efficiently transact on the platform in a highly cost-effective manner.
For more information on licenses for these indices please see MSCI’s announcement at http://www.mscibarra.com/products/indices/licd/changes_to_licensees_for_futures_contracts.html
and the NYSE Liffe U.S. website at www.nyse.com/nyseliffeus
Source: NYSE Euronext
Emerging Markets Week in Review -7/5/2010 - 7/9/2010
July 12, 2010--The Dow Jones Emerging Markets Sector Titans Composite Index was up a strong 3.71% last week, its largest weekly increase since April. Financials and Consumer Services led the market up, increasing 4.74% and 4.39% respectively, while Utilities were up the least with a 1.23% return.
As markets continue to be driven by weak economic data from the United States, focus will shift this week to China as it releases its latest figures for GDP, inflation and production.
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Source: Emerging Global Advisors
RYDEX|SGI Becomes Industry's Largest Provider of Alternative Investment Mutual Funds With the Launch of Four Funds (2)
Rydex|SGI Combines Quality Investor Education With a Broad Alternative Investments Lineup, Including 12 Alternative Mutual Funds and 9 Exchange Traded Products
July 12, 2010--Rydex|SGI continues to build on its reputation as a leading provider of alternative investments with the introduction of four mutual funds that may help investors weather the ups and downs of challenging market environments. The firm today announced the launch of the following funds:
Rydex|SGI Event Driven and Distressed Strategies Fund (RYDSX, H-Share Class)
Rydex|SGI Long Short Interest Rate Strategy Fund (RYBUX, H-Share Class)
Rydex|SGI Long Short Equity Fund (RYJLX, H-Share Class)
Rydex|SGI Alternative Strategies Fund (RYETX, H-Share Class)
With the addition of these new funds, the company's alternatives lineup includes 12 mutual funds and nine exchange-traded products, making Rydex|SGI the industry's leading provider of alternative investment mutual funds as measured by the number of product offerings.
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Source: Rydex|SGI
IQ Hedge Macro Tracker ETF (MCRO) Marks One-Year Anniversary
The Global Allocation Index ETF Posts Strong Results During Turbulent Period
July 12, 2010--The IQ Hedge Macro Tracker ETF , a global allocation index Exchange-Traded Fund (ETF), marked its one-year anniversary on June 9th, the fund’s sponsor, IndexIQ, announced today.
MCRO seeks to replicate, before fees and expenses, the returns of the IQ Hedge Macro Index. IndexIQ launched MCRO as a vehicle for investors seeking to help reduce the volatility of their portfolios by hedging their equity exposure, while simultaneously participating in upside potential. As a hedged strategy, MCRO has the ability to generate positive returns while the equity markets are negative, and MCRO’s performance since inception, which period was one of the most turbulent periods in our markets’ history, underscores this key attribute of the MCRO ETF.
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Source: IndexIQ
U.S. International Reserve Position
July 12, 2010--The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S. reserve assets totaled $126,723 million as of the end of that week, compared to $126,620 million as of the end of the prior week.
I. Official reserve assets and other foreign currency assets (approximate market value, in US millions)
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July 9, 2010 |
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A. Official reserve assets (in US millions unless otherwise specified) 1 |
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126,723 |
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(1) Foreign currency reserves (in convertible foreign currencies) |
Euro |
Yen |
Total |
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(a) Securities |
8,951 |
14,683 |
23,634 |
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of which: issuer headquartered in reporting country but located abroad |
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0 |
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(b) total currency and deposits with: |
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(i) other national central banks, BIS and IMF |
13,187 |
7,211 |
20,398 |
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ii) banks headquartered in the reporting country |
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0 |
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of which: located abroad |
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0 |
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(iii) banks headquartered outside the reporting country |
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0 |
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of which: located in the reporting country |
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0 |
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(2) IMF reserve position 2 |
11,765 |
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(3) SDRs 2 |
55,183 |
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(4) gold (including gold deposits and, if appropriate, gold swapped) 3 |
11,041 |
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--volume in millions of fine troy ounces |
261.499 |
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(5) other reserve assets (specify) |
4,701 |
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--financial derivatives |
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--loans to nonbank nonresidents |
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--other (foreign currency assets invested through reverse repurchase agreements) |
4,701 |
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B. Other foreign currency assets (specify) |
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--securities not included in official reserve assets |
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--deposits not included in official reserve assets |
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--loans not included in official reserve assets |
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--financial derivatives not included in official reserve assets |
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--gold not included in official reserve assets |
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--other |
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read more
Source: U.S. Department of the Treasury
Exchange-Traded Funds: US ETF Weekly Update-Morgan Stanley
July 12, 2010--Weekly Flows: $4.8 Billion Net Inflows
Launches: 3 New ETFs
Deutsche Bank Acquires XSharesAs
ETFs had net cash inflows of $4.8 blnlast week, bouncing back from prior-week outflows
Weekly flows driven by US Large-Cap ETFs; specifically SPY, which had net inflows of $5.1 billion-EM Equity has experienced stronger flows vs. International Developed Equity on a 1-, 4-, and 13-week basis
Over 4-and 13-week period, Fixed Income had strongest inflows-$26.7 bln net inflows into ETFs over past 13 weeks; total assets rebounding toward $800 billion
US-Listed ETFs: Estimated Largest Flows by Individual ETF
SPY had the largest net inflows for US ETFs at $5.1 billion lastweek-Despite uneven flows in 2010, SPY still the largest US-listed ETF with 40% more assets vs. #2 (GLD)
Over a 1-week period, since the 0.15% fee cut, IAU was the only physical gold ETF with net inflows
Largest increase in short positions in QQQQ
Roughly $500 million in additional short interest
Largest decline in short interest in GLD
Roughly $800 million in reduced short interest
request report
Source: Morgan Stanley
Direxion files with the SEC
July 12, 2010--Direxion has filed a post-effective amendment, registration statement with the SEC for
Direxion Daily S&P 500 Bull 3X Shares, Direxion Daily S&P 500 Bear 3X Shares, Direxion Daily Basic Materials Bull 3X Shares, Direxion Daily Basic Materials Bear 3X Shares, Direxion Daily Consumer Discretionary Bull 3X Shares, Direxion Daily Consumer Discretionary Bear 3X Shares,
Direxion Daily Consumer Staples Bull 3X Shares, Direxion Daily Consumer Staples Bear 3X Shares, Direxion Daily Healthcare Bull 3X Shares, Direxion Daily Healthcare Bear 3X Shares, Direxion Daily Retail Bull 2X Shares, Direxion Daily Retail Bear 2X Shares, Direxion Daily Semiconductor Bull 3X Shares, Direxion Daily Semiconductor Bear 3X Shares, Direxion Daily Utilities Bull 3X Shares and Direxion Daily Utilities Bear 3X Shares
The combined prospectus can be viewed read more
Source: SEC.gov