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5.1% profit on JD.com in our uptrend view

JDexit

Shares of Chinese clinical-stage novel drug developer Kintor Pharmaceutical Ltd rise as much as 7% to HK$16.48, their highest since June 8, on track to end two straight sessions of decline.
Kintor says the collaboration with Chinese e-commerce retailer JD can improve the company's capacity in commercial retail channels.

JD.com Inc All Sessions 20200612 17.48

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European Car Makers Problem

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New-car sales in the European Union, in its affiliate free-trade association partners and in the U.K. fell 57% in May from a year earlier to 623,812 vehicles, according to data published Wednesday by the European Automobile Manufacturers’ Association.

Each of the 27 EU member states reported double-digit-percentage declines in new-car sales, and the U.K. was down 89% from a year earlier. The data marked a small improvement following steeper drops in March and April, but new-car sales across the region remain far below last year’s.

Production is still well below precrisis levels, but with such comatose demand even this reduced output is creating a surplus of new cars, producing a bottleneck that is slowing down the industry’s recovery and threatening jobs and profits.

While Europe continues to fall, China’s auto market is posting gains. Volkswagen AG VOW -0.14% , the world’s largest auto maker by sales and the largest foreign car manufacturer in China, reported steep declines in sales everywhere in the world except China last month, where it posted a 6% increase in sales.

Countries such as France and Germany, two of the biggest auto markets in Europe, have approved billions of euros in cash incentives to encourage consumers to buy cars. But while France is supporting purchases of both conventional and electric cars, Germany is focusing on electric and hybrid vehicles, doing nothing to help address the glut of unsold gasoline and diesel cars.

Fed Promised to Buy Bonds but Is Finding Few Takers

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The Federal Reserve thawed credit markets in March by promising a whatever-it-takes program to buy corporate bonds. Ten weeks later, the Fed has yet to buy a single bond.

Just the announcement of the backstop ended panic selling, boosted prices and fueled a record surge of new corporate-bond sales. Companies are now reluctant to sign up for Fed purchases because such a move could be seen as a sign of weakness during a market rebound, some bond fund managers and bank executives said.

The Fed has yet to officially launch the initiative, which enables it to buy limited amounts of new and pre-existing bonds of companies, in part because it is hashing out the technical details. Only companies that certify they are U.S.-based and haven’t received other aid under the Cares Act—a $2 trillion financial-relief package that includes loans and grants to businesses—can participate in the program, which would disclose their names, the amount of their bonds that the Fed would purchase and the prices paid.

The Fed indirectly bolstered corporate-bond prices in May by purchasing $3 billion in shares of exchange-traded bond funds. But that is a fraction of the up to $750 billion earmarked for corporate debt purchases.

The program should be “ready to go by the end of this month,” Fed Chairman Jerome Powell said in Senate testimony in May. “I don’t say that it won’t be a day or two into June, but that’s our expectation.” A spokeswoman for the Federal Reserve Bank of New York declined to comment beyond Mr. Powell’s statement.

Fear of stigma isn’t the only thing deterring participation. Some companies don’t want the Fed buying their bonds now because that would limit how much the central bank could purchase if another wave of coronavirus roils markets, said one investment banker who covers large U.S. corporations. The Fed can’t use more than 1.5% of its backstop funds to lend directly to any single company, according to disclosures by the New York Fed.

A Scramble for Gold Is Redrawing the Map of the Market

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New York faces a gold rush after the pandemic threw precious-metal markets into disarray, setting off a scramble by traders to cut their losses.

Bullion vaults approved by the Comex division of the New York Mercantile Exchange house a record 29.7 million troy ounces, according to FactSet data back to 2013. Almost three quarters of that gold—weighing as much as nine, fully loaded Boeing 737-700 airplanes—has arrived in the past three months.

The displacement was set off by dysfunction in the market in March and early April, caused by fears of a breakdown in ordinarily frictionless gold supply chains. It has reversed the normal flow of bullion from west to east, redrawing the map of the international gold market.Conventional gold routes could take months to resume because demand has been crimped in two major buyers of bullion, China and India.

The scramble to get gold to New York stemmed in part from the demand among U.S. investors for the precious metal, seen as a safe store of wealth by many. Gold prices have climbed almost 15% this year, and rose 1.3% Thursday to $1,745.30 a troy ounce.The influx gained traction after the pandemic made the global gold market seize up in late March.

Investors, banks and miners use New York’s Comex to buy and sell gold futures, while the U.K. is the main venue for purchasing physical bullion. Prices in the two markets are normally within a few dollars per troy ounce of each other. Traders know that banks can fly gold from Europe to New York to deliver against Comex futures if prices were to diverge, bringing them back together.

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Bank Dividends: Oasis or Mirage?

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Dividend yields may simultaneously be the best reason right now to buy American bank stocks and the best reason to avoid them.

Thanks to big banks’ share-price decline, combined with their firm line so far on dividends, the largest lenders are expected to yield as much on average as they have at any time since the financial crisis over the next year. They look particularly tempting when compared with 10-year U.S. Treasurys.

It is more than just a question about the economy. If it were, in purely earnings terms it seems feasible for now. After ending share buybacks, and despite large additions to loan-loss reserves, big banks still have capital at levels above what would mandate dividend cuts.

But current earnings aren’t the sole variable. The results of stress tests currently being conducted this month by the Federal Reserve, under a new set of capital rules with additional stresses emulating Covid-19 added in, are difficult to predict. The results of the examination could add potentially larger “stress capital buffers” to their requirements, raising the bar.

Under the new rules, though, banks also have choices about how to proceed. They could subsequently raise additional capital or shrink their balance sheets. Neither option is particularly attractive, and banks might find themselves under political scrutiny if they were reducing loans to preserve payouts.

There is also the question of how the Fed might proceed strategically if banks faced that choice. Sometimes the thinking has been that having all lenders make defensive moves, even if they don’t all need to, helps to not single out individual banks and focus investor and counterparty pressure on them.

But that might not be how things work this time around, especially since this isn’t presently a crisis emanating from banks. Selective dividend cuts could instead send the signal that the stress test was very strenuous, but that most banks passed this super-tough exam with the ability to maintain their payout. Allowing banks to proceed individually could be a sign of systemic strength while discouraging excessive risk taking.

3.1% profit on BNP Paribas in our uptrend view

BNP Paribas SA EXIT

Diana Shipping Inc. Announces Signing Of A Supplemental Agreement With Bnp Paribas For A 2.5 Year Extension Of The Maturity Of The Existing Facility With The Bank.

BNP Paribas SA 20200624 18.00

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