Closing Commodities: Crude breaks out of its 3-session downtrend on headlines OPEC has cut over 1 mln barrels/day of oil out of the 1.2 mln barrels/day agreed to late last year; API on tap after the bell
- Crude oil broke out of its 3-session downtrend ahead of tonight's API on headlines that OPEC has surpassed 1 mln barrels/day in output reductions
- Mar crude oil futures rose $0.14 (+0.3%) to $52.76/barrel
- Color on price action in oil:
- Mar 2017 crude oil futures snapped out of a 3-session downtrend. Crude sharply reversed off of session lows after dropping as much as -0.7% initially, following headlines that OPEC has cut more than 1 mln barrels/day of the promised 1.2 mln barrels/day in planned oil production cuts (the OPEC portion).
- Crude oil supply from the 11 OPEC members with targeted production reductions avged 30.01 mln barrels/day in Jan, compared to 31.17 mln in Dec.
- Other factors to consider:
- U.S. oil production has risen by ~6.3% since July last year to almost 9 mln bpd, according to EIA data.
- Concerns these increases in US production will offset the coordinated OPEC/non-OPEC output reductions initially put pressure on crude futures in morning pit trading.
- Also initially adding pressure on oil prices was this morning's statements from Goldman regarding an estimation that y/y U.S. oil production will rise by 290k barrels/day in 2017, if a backlog on rigs that are still to become operational is accounted for.
- Note: The spread between Brent and WTI crude has been increasing, as market participants appear willing to pay a premium for Brent, as oil supply in the Middle East shrinks due to OPEC reductions, while US WTI crude oil is becoming increasingly plentiful.
- Data reminders:
- API data will be released today at 4:30 pm ET.
- EIA data will be released tomorrow at 10:30 am ET.
- Baker Hughes rig count data will be released Friday at 1 pm ET.
- Natural gas closed pit trading lower for the third day in a row ahead of Thursday's inventory data on updated warmer weather forecasts across much of the US
- Mar natural gas closed $0.11 lower (-3.4%) at $3.12/MMBtu
- EIA natural gas inventory data will be released Thursday at 10:30 am ET
- In precious metals, gold extended yesterday's gain, silver rallied on continued weakness in the dollar index
- April gold ended today's session up $15.40 (+1.3%) to $1,211.40/oz
- Gold futures have switched their front month to April from Feb, as indicated by the active amount of volume in the contracts
- Mar silver closed today's session $0.39 higher (+2.3%) at $17.54/oz
- The dollar index was -0.8% around the 99.62 level, boosted precious metals
- Commodities, as measured by the Bloomberg Commodity Index, were +0.7% around the 87.59 level
Spoke to JNJ - getting alot of questions here this is what we learned, can only send to US clients if you prefer - -“Aware of the letter at the time. We signed the deal on the 26th and the letter came out on the 24th, we were well aware. And we did a lot of due diligence on ATLN.”
-There is a MAC clause, a very specific MAC clause due to Swiss law, she said. It’s a financial condition for EBIT change for the whole of company (not a drug).
-Demerger agreement will be filed with 8-K this week, prospectus with tender will be filed by 2/16.
-No plans to PR anything, they (JNJ) does NOT deem this worthy of a PR, and no need to issue a PR.
-Reiterated they were very well aware before signing agreement and how much due diligence they did.
-IR handholding as much as they can today, IR busy returning phone calls explaining what they can.
Buy-to-let landlords shrug off UK tax rise in £1bn Treasury boost
Stamp duty surcharge raises nearly £1bn in six months as move fails to dampen sector
A tax surcharge on purchases of buy-to-let and second homes generated nearly £1bn for the Treasury in the last six months of 2016, suggesting landlords largely shrugged off efforts to dampen activity in the sector.
A three percentage point surcharge introduced in April 2016 raised £962m on residential property purchases in the six months to December, according to figures released on Tuesday by HM Revenue & Customs. The tax take comprised £519m in the last three months of the year and £443m in the quarter before that.
“Everyone is surprised that the 3 per cent [surcharge] has raised as much as it has,” said Lucian Cook, director of residential research at estate agent Savills. “The rise suggests landlords were starting to price it in and were getting used to the new environment.”
Those buying with cash were likely to be responsible for much of this activity: the number of loans issued for buy-to-let purchases in November 2016 was one-third down on the previous November, according to data from the Council of Mortgage Lenders.
Cash buyers, though hit by the stamp duty surcharge, have been unaffected by several other government and regulatory measures aimed at dousing an exuberant private rental market. These include the ending of higher-rate tax relief on mortgage interest payments — to be phased in from April 2017 — and new affordability constraints on buy-to-let lenders.
Henry Pryor, a buying agent, said the proportion of his clients buying second homes or buy-to-let properties with no borrowing was one-fifth higher in 2016 than the previous year. “The advantages of being leveraged aren’t as good as they once were,” he said.
Overall, stamp duty land tax on residential homes climbed to £8.28bn in 2016, 17 per cent higher than in 2015. For the final quarter, receipts were up 20 per cent on the previous year to £2.4bn.
The data showed investors’ attitudes towards the asset class remained favourable even as the authorities introduced new constraints on growth, Mr Cook said. “You’ve still got people who buy into the story of capital growth on residential property and the security of income in that context.”
The figures may give pause to those in the property industry who have been calling on the government to revisit the changes it has made to stamp duty since 2014. “The rise in total stamp duty revenue means those who argue that Philip Hammond should tinker with the regime, particularly at the top end, don’t yet have the data to support their argument,” said Mr Pryor.
Elsewhere in the figures, the tax take from residential properties owned by offshore companies jumped by 53 per cent to £178m last year, as the Treasury tightened its squeeze on home ownership structures used by wealthy foreigners.
HMRC said the rise in revenues in the year to April 2016 was driven by the increased rate and scope of the annual tax on “enveloped” dwellings (Ated), which was introduced in 2013 to deter people from owning expensive properties through companies.
As in previous years, about four-fifths of the tax was levied on properties in Westminster and Kensington & Chelsea.
The latest figures suggest the crackdown on offshore property structures — traditionally used to protect privacy and avoid inheritance tax — is starting to have an effect. HMRC said: “Declarations across all bands are likely to have fallen because many of the tax incentives for keeping a property in a corporate envelope have been removed.”
Although the number of buildings affected by the tax increased by 1,980 — or 53 per cent — over the year, this was solely because of the lowering of the threshold to £1m in April 2015, which brought an extra 2,260 properties into the tax.
Capital Group pushes for changes to stymie HFTs
The $1.4tn asset manager was an early backer of IEX, the equity exchange with a speed bump
Capital Group, one of the world’s biggest investment groups and a cornerstone backer of upstart stock exchange IEX, wants the incoming Trump administration to stymie high-frequency traders by overhauling one of the US equity market’s biggest but controversial regulatory planks.
Matt Lyons, global head of trading at $1.4tn Capital Group, was a big supporter of the anti-HFT exchange made famous by Michael Lewis’s book Flash Boys, making his firm its first investor and championing IEX’s business model to regulators, which last year gave it full exchange status.
But with the advent of a new government in Washington and fresh leadership of the Securities and Exchange Commission, Mr Lyons is eyeing an even more radical overhaul of the US equity market: changing parts of Regulation National Market System, or RegNMS, which critics say have led to conflicts of interest and dangerous complexity.
“I am hopeful,” he said. “I’ve been pleasantly surprised that over the past few years we finally have the ears of regulators. And I think that with a pro-growth and less regulatory attitude we could actually get something done.”
RegNMS was introduced by the SEC in 2007 to enhance the efficiency of US equity markets by encouraging competition between individual exchanges, and requiring all orders to be routed to all bourses to ensure the best possible prices.
This has woven individual US exchanges together into one highly liquid, electronic marketplace, with $7.3tn of orders whizzing around every day on average last year.
But to attract trading activity in this more competitive environment, exchanges have in recent years started offering various rebates for firms that “take” or “make” liquidity, in other words offer to post orders on their bourses or to fill them. Critics say these maker-taker rebates have proven catnip to hyperfast trading firms that machinegun orders at exchanges and have led to unnecessary and harmful complexity.
While Mr Lyons said the US stock market’s electronic evolution on the whole has been positive, bringing down costs to investors like Capital Group, he argued that there is still room for improvement, especially “low-hanging fruits” like scrapping the maker-taker model.
“We have now seen RegNMS operating for almost 10 years and we have a lot of data and understanding of the impact. I certainly think that some unintended consequences have come about, and changes to that could be benefit to the market,” he said.
Mr Lyons concedes that getting rid of the rebating structure might initially hurt liquidity, but overall improve the market’s health by reducing some of its immense complexity.
IEX was envisaged as a partial counter to increasing complexity, introducing a flat fee on all shares traded with no rebates and a “speed bump” aimed at holding HFTs at bay. However, in spite of its new exchange status, its share of the US equity market has remained steady at 2 per cent, in part because its fees are more expensive that those of rivals.
There is industry chatter that under new management the SEC could revisit RegNMS more broadly — or even scrap it altogether.
The Trump administration has nominated Jay Clayton, a capital markets lawyer at Sullivan & Cromwell, to chair the SEC. His views on the stock market’s structure and RegNMS in particular are not known, but Paul Atkins, a former SEC commissioner who is advising Mr Trump on regulatory matters, voted against RegNMS in 2005, warning that the reforms would spawn complexity and market distortions.