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Aug 19, 2016

Bloomberg Markets - August 19, 2016: 5 THings To Start Your Day

The dollar's flagging along with most global stocks, while oil swings from bear to bull. Here are some of the things people in markets are talking about today.

Oil rebounds

Buoyed by data that show U.S. crude and fuel stockpiles are declining, oil has entered bull-market territory. Although futures were little changed in New York, erasing an earlier gain of 1.1 percent, they were still poised for weekly increase of 8.5 percent, as both WTI and Brent benchmarks extended their gains past 20 percent over the past three weeks. While speculation OPEC is poised to agree a production freeze has fueled the rally, divisions between major powers over output targets remain ahead of next month's meeting in Algiers. Saudi Arabia reported yesterday that it hiked its oil and refined-product exports to the highest level for June ever recorded, at 8.83 million barrels a day, as the kingdom seeks to grow market share and address its budget deficit.

Dollar remains on course for a decline

The U.S. currency trimmed its losses this morning, rising against all 16 of its major counterparts, but that's unlikely to be enough to stem its second weekly decline as markets continue to waver on whether the Federal Reserve will hike rates this year. Its losing streak against this year's best-performing G10 currency, the yen, is even longer at a fourth consecutive week of losses: the Japanese currency traded at 100.07 to the greenback by 5:21 a.m. ET, near its strongest levels in almost three years. The next sturdy signal of the Fed's intent is likely to arrive next week at the Jackson Hole monetary symposium on August 26.

Asian markets

Asian stocks are on course for their biggest weekly drop in a month. The MSCI Asia Pacific Index had fallen 0.3 percent to 140 as of 4:51 a.m. E.T., and is headed for a 0.7 percent decline this week, the biggest such loss since July 8. The gauge rallied 23 percent from a February low through Thursday, and touched a one-year high last week, as speculation that central banks will maintain loose monetary policy is fueled by lackluster data from the world’s biggest economies. Meanwhile signs of weak growth from smaller economies are also making headlines: Poland's growth is lagging expectations, and ahead of tonight's Fitch review Turkey's deputy prime minister said the country may not meet its expansion target this year.
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Bank mergers

Bank of East Asia Ltd., the Hong Kong lender facing pressure from Paul Singer’s Elliott Management, reported a 38 percent drop in first-half profit amid a slowdown in China that caused loan impairments to surge. In Italy, troubled lender Banca Monte dei Paschi di Siena S.p.A. said Chief Executive Officer Fabrizio Viola acted “with complete propriety,” after media reports said he is under investigation for allegedly falsifying accounts. Meanwhile the rules that are meant to tackle 'too big to fail' may be having the opposite effect in the U.S., pushing mergers to a seven-year high.

Diamond in the rough

Bob Diamond's buyout firm Atlas Mara Ltd. is trading at an all-time low of $3.10 in morning trading, extending the stock's year-to-date decline past 40 percent. Fears are growing the slump in commodity prices could crimp revenues generated in the seven African countries in which it operates. Renaissance Capital cut its target price on the stock on Thursday by almost one-third to $4.50, amid concerns Atlas Mara's full-year profit could fall by almost a half. In Nigeria, where Atlas Mara has a 30 percent stake in Union Bank Nigeria PLC, the naira dropped to a record low of 350 to the dollar this morning, as the economy struggles to fight of recession risks, dollar shortages and declining oil revenues.

Here’s what Sid’s interested in this morning

The rally in emerging-market assets raises a question for investors: when the capital tide turns, which economies will be left most exposed? After all there's been a jump in the foreign-currency indebtedness of non-financial corporates in a slew of developing nations, through overseas bond markets and cross-border banking flows. That's further exposed their domestic credits cycles to monetary policy plot twists in their developed coutnerparts. A report this week from the Bank for International Settlements highlights the scale of the challenge for investors and policy makers seeking to assess macro vulnerabilities: a clutch of emerging market corporates have borrowed through offshore subsidiaries, something that's generally missing from official debt statistics, the BIS notes. If such corporates unwind their exposures, the extent to which financial conditions in their home country will deteriorate is an open question. In other words as the Fed hums and haws about raising rates, all bets are off on the stability of wholesale deposits in local banks, lending spreads, and the behavior of households.

And finally, here's what you should read today

To read the pulse of the dairy industry, you must travel to the end of the world.
Take more risks, says hedge fund manager Paul Tudor Jones.
...Even while one economist says the future of investing is in following the herd.
Trump strikes a conciliatory tone.
Goldman Sachs Group Inc. wants you to meet Marcus.
Bolt's going for the treble-treble in the final weekend of the Olympic games.
How do you fight poverty in an era of rampant globalization?