(Bloomberg) — A share-price surge in Japan’s trading houses triggered by Warren Buffett’s $6 billion investment is already fading, due to a lack of fresh catalysts and a downturn in commodity markets.

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Shares of two of the five “sogo shosha” — as the commodity-centric Japanese conglomerates are called — are now trading at or below levels before Buffett’s Berkshire Hathaway Inc. announced its stake purchase. The August announcement, among the largest-ever investments by Buffett in Japan, not only sparked a rally in stocks, but also boosted overall investor interest in the trading companies.

The failure of share prices to sustain the higher levels despite Buffett’s vote of confidence highlights the challenges faced by the shosha as the coronavirus pandemic erodes demand for commodities. It also speaks to the challenges for a Japanese equity market heavily weighted toward so-called value shares, with the benchmark Topix Index on track to lag the MSCI AC World ex-Japan Index for a fifth straight year in 2020.



chart, line chart: Japan's shosha are losing much of their Buffett-led gains


© Bloomberg
Japan’s shosha are losing much of their Buffett-led gains

Berkshire announced on the last day of August that it had bought stakes of about 5% in each of Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co. and Sumitomo Corp. That saw shares of all five firms jumping, with Sumitomo gaining more than 9% on the day.

As of Tuesday, Itochu and Sumitomo have given up all or most of their gains since the announcement. Only Mitsubishi remains substantially higher — with a 7.8% gain since, versus a 2.6% advance in the Topix index in that period.

“The Buffett purchase gave investors a chance to review the shosha stock prices, but since then, they’ve been sold as sentiment wasn’t as strong as hoped for,” said Yoshihiro Okumura, a general manager at Chibagin Asset Management.

LONDON (Reuters) – The London Stock Exchange

said its pan-European share trading arm Turquoise will offer trading in EU-listed shares on its Dutch platform from the end of next month if there is no agreement on future direct access to the bloc by then.

Brussels is assessing whether to allow Britain’s financial sector to serve EU investors under its “equivalence” system, which checks if UK market rules are as robust as those in the EU.

After Britain left the EU last January, direct access to the single market under transition arrangements ends on Dec. 31.

“Turquoise can confirm that it is planning on invoking its Brexit contingency plans on Monday 30 November 2020, unless relevant equivalence decisions to allow cross-border services between the EU and UK are agreed prior to this date,” the UK exchange said in a statement. All shares would still be available for trading in London as well.

The LSE set up its Dutch hub as insurance against no direct access to EU investors.

CBOE, the biggest pan-European share trading platform, which is based in London, has also set up a hub in Amsterdam that is already open for business but with little trading so far, while London-based Aquis Exchange has set up its Brexit hub in Paris.

Without equivalence, EU investors would have to trade EU companies inside the bloc, even though many of them are heavily traded in London.

Banks have warned that fragmenting trading liquidity would make markets less efficient for users.

(Reporting by Huw Jones; Editing by Susan Fenton and Mark Potter)

Copyright 2020 Thomson Reuters.

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(RTTNews) – Stocks are likely to move to the upside in early trading on Monday, adding to the strong gains posted last week. The major index futures are pointing to a higher open for the markets, although the Dow futures are up a relatively modest 71 points compared to more than 220-point jump by the Nasdaq futures.

The markets may continue to benefit from optimism about a new stimulus bill even though House Speaker Nancy Pelosi said talks will “remain at an impasse” until “serious issues” with the Trump administration’s latest proposal are resolved.

The White House has increased its offer to $1.8 billion in its latest proposal, but Pelosi still called the administration’s proposed bill “grossly inadequate.”

“The news is filled with the numbers in terms of dollars. The heart of the matter is: can we allow the virus to rage on and ignore science as the Administration proposes, or will they accept the scientific strategic plan in the Heroes Act to crush the virus,” Pelosi said in a letter to her Democratic colleagues.

“We have other differences in terms of who benefits from the spending,” she added. “But in terms of addressing testing, tracing and treatment, what the Trump Administration has offered is wholly insufficient.”

Meanwhile, Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows sent a letter to members of the House and Senate accusing Democrats of refusing to compromise on bipartisan legislation.

“It is not just about the top-line number but also about legislation that can be passed by both the House and the Senate and signed into law by President Trump to help the American people,” Mnuchin and Meadows wrote.

Mnuchin and Meadows urged Congress to vote on a bill allowing the administration to spend unused Paycheck Protection Program funds while negotiations

As you know, once a month, we look at 29 currencies in search of the evidence of popular delusions and the madness of crowds. The idea is to find anomalies and bullish or bearish divergences that will break the trend, not prolong it. It is a painful exercise, but also highly rewarding.

In order to find the most overbought and oversold currencies, I conduct five econometric studies: over-extension analysis, secular performance analysis, oil correlation review, economic divergence analysis and effective exchange rate study. Additionally, I look at traders’ positioning to understand the psychological state of the market.

Analyzed currency pairs: AUD/USD, EUR/USD, GPB/USD, NZD/USD, USD/CAD, USD/CHF and USD/JPY.

Relevant ETFs (most popular): CROC, OTC:ERO, EUFX, FXA, FXB, FXC, FXE, FXF, FXY and OTC:GBB.

Macro Forces

Before revealing the results, let me first say a few words about the current global market environment. This is important because global macro conditions cannot be numerically measured and cannot be directly factored into econometrical models. They must be studied in qualitative terms. In my opinion, the most important theme impacting global foreign exchange market right now is the spread of coronavirus and the possible economic damage that it may cause.

See below the outlook on the world’s major economies (China, the Eurozone and the United States) for two scenarios: one with and one without a second wave of the virus.

Source: ABN AMRO; Baseline scenario: second wave less severe, no renewed lockdowns; Negative scenario: a second wave of infections and a second lockdown.

Although the risks of a renewed lockdown are still substantial, the baseline scenario assumes that the virus remains reasonably under control. Local outbreaks will continue (as at present) and fresh measures will be taken where necessary, but no national lockdowns

TOKYO – The dollar inched up in early Monday trade as riskier currencies slipped after negotiation on a U.S. stimulus package ran into resistance and as the yuan dropped after China’s central bank took a measure seen as aimed at curbing its strength.

The euro slipped 0.15% to $1.1818 EUR= while the Australian dollar shed 0.25% to $0.7223 AUD=D4.

The yen was little changed at 105.65 to the dollar JPY=.

WHY EVERY ONE OF YOUR DOLLARS DURING CORONAVIRUS NEEDS A NAME: DAVE RAMSEY

The U.S. dollar index edged up to 93.104 =USD, bouncing back from Friday’s near-three-week low of 92.997. The index saw its biggest loss in six weeks on Friday on hopes that a deal for new U.S. stimulus would be reached.

President Donald Trump on Friday offered a $1.8 trillion coronavirus relief package in talks with House Speaker Nancy Pelosi – moving closer to Pelosi’s $2.2 trillion proposal.

But Trump’s offer drew criticism from several Senate Republicans, many of whom are uneasy about the nation’s growing debt and concerned a deal would cost Republicans support in the upcoming presidential election, denting the risk-on mood.

The dollar inched up in early Monday trade as riskier currencies slipped after negotiation on a U.S. stimulus package ran into resistance and as the yuan dropped after China’s central bank took a measure seen as aimed at curbing its strength. (iStock


Still, with Nov. 3 election only weeks away, investors bet that Democrat Joe Biden is more likely to win the U.S. presidency and offer a larger economic package.

“On the whole, the big picture has not changed that much,” said Kyosuke Suzuki, director of forex at Societe Generale.

The offshore Chinese yuan dropped after the People’s Bank of