Something’s Broken In The VIX-Stocks Relationship

The S&P 500 Index and CBOE Volatility Index have historically moved in opposite directions about 80 percent of the time, but that’s changed recently…

As Bloomberg reports, both gauges are heading for declines this month, after the two rose in tandem in February.

That’s weakened their inverse correlation, sending it to levels not seen since April 2005

 

After March/April 2005, the S&P 500 dropped around 8% (breaking down as the correlation reverted to norm)

In May 2012, the S&P 500 dropped 11% after VIX and Stocks’ decoupled and correlation surged.

The smaller spikes in VIX-Stock correlation also saw notable equity market drawdowns (Feb/March 07 down 6.6%, Oct 09 down 6.5%, Dec 2012 down 3.5%)

So what will happen this time?

The post Something’s Broken In The VIX-Stocks Relationship appeared first on crude-oil.news.

Something’s Broken In The VIX-Stocks Relationship

The S&P 500 Index and CBOE Volatility Index have historically moved in opposite directions about 80 percent of the time, but that’s changed recently…

As Bloomberg reports, both gauges are heading for declines this month, after the two rose in tandem in February.

That’s weakened their inverse correlation, sending it to levels not seen since April 2005

 

After March/April 2005, the S&P 500 dropped around 8% (breaking down as the correlation reverted to norm)

In May 2012, the S&P 500 dropped 11% after VIX and Stocks’ decoupled and correlation surged.

The smaller spikes in VIX-Stock correlation also saw notable equity market drawdowns (Feb/March 07 down 6.6%, Oct 09 down 6.5%, Dec 2012 down 3.5%)

So what will happen this time?

The post Something’s Broken In The VIX-Stocks Relationship appeared first on crude-oil.news.

It’s over: Britain files for divorce from the EU

Author: 
AP
Thu, 2017-03-30 03:00
ID: 
1490812257198427500

LONDON: The UK filed for divorce from the EU on Wednesday, overturning four decades of integration with its neighbors, demolishing the notion that EU expansion is inevitable and shaking the foundations of a bloc that is facing challenges to its identity and its place in the world.
Britain’s top envoy to the EU, Tim Barrow, hand-delivered a letter to European Council President Donald Tusk formally triggering a two-year countdown to the final split.
“Today the government acts on the democratic will of the British people,” Prime Minister Theresa May told lawmakers in the House of Commons, adding: “This is a historic moment from which there can be no turning back.” Tusk tweeted that “after nine months the UK has delivered,” followed by a photo of Barrow handing him the letter in front of British and EU flags in Brussels.
There is “no reason to pretend this is a happy day,” Tusk told reporters later, emphasizing that the priority now is to minimize costs for EU citizens and member states.
To Britain, he said: “We already miss you.”
But for Britons who voted 52 to 48 percent to leave the bloc in a referendum nine months ago, it was a time for celebration.
“I voted for Brexit and today is the day that vote starts to count,” said Charles Goodacre, a former taxi driver, in the northern England city of Sunderland. “Things have been bad round here for a while and we needed a change. There’s been a lot of arguments about what happened but we can now get on with it.”
Former UK Independence Party leader Nigel Farage, who campaigned for years to take Brexit from fringe cause to reality, said Britain had passed “the point of no return.”
“I can still, to be honest with you, scarcely believe today has come,” he said.
For “remain” campaigners, it is now time to fight for a divorce settlement that preserves what they see as key benefits of EU membership, including free trade in goods and services and the right to live and work anywhere in the bloc.
“The phony war is over,” said Joe Carberry, co-director of the pro-EU pressure group Open Britain. He said Britain had decided that it would leave the bloc — but “the issue of how we will leave, and the democratic checks and balances along the process of the negotiations, remains unresolved.”
May’s six-page letter to Tusk was polite and conciliatory, stressing that Britons want to remain “committed partners and allies to our friends across the continent.”
She said the two sides should “engage with one another constructively and respectfully, in a spirit of sincere cooperation.”
But there was a hint of steel in May’s assertion that without a good deal, “our cooperation in the fight against crime and terrorism would be weakened.” That could be seen by some in Europe as a threat to withdraw British cooperation on crime and counterterrorism if the UK does not get its way. The loss of a major member is destabilizing for the EU, which is battling to contain a tide of nationalist and populist sentiment and faces unprecedented antipathy from the new resident of the White House.
It is even more tumultuous for Britain. For all the UK government’s confident talk of forging a close and friendly new relationship with its neighbors, it cannot be sure what its future relationship with the bloc will look like — whether businesses will freely be able to trade, students to study abroad or pensioners to retire with ease in other EU states. Those things have become part of life since the UK joined what was then called the European Economic Community in 1973.
It is not even certain that the UK will survive the exit intact. Scotland’s Parliament voted Tuesday to back First Minister Nicola Sturgeon’s call for a referendum on independence within two years.
Scottish voters backed remaining in the EU in last year’s vote, and Sturgeon insists Scotland must not be “taken down a path that we do not want to go down without a choice.”
May insists “now is not the time” for a referendum, setting her on course for a showdown with the Edinburgh administration just when the UK government wants to devote all its energies to the EU talks.
The trigger for all the economic and constitutional uncertainty is Article 50, a previously obscure clause of the EU’s Lisbon Treaty that allows a member state to withdraw from the bloc. The two sides now have until March 2019 to agree on a divorce settlement and — if possible — establish a new relationship between Britain, the world’s fifth-largest economy, and the EU, a vast single market stretching over 27 countries and half a billion people.
Tusk said he will respond by Friday with draft negotiating guidelines for the remaining 27 member states to consider. Leaders of those nations will meet April 29 to finalize their negotiating platform before instructing the EU’s chief negotiator, French diplomat Michel Barnier.
Talks between Barnier and his British counterpart, Brexit Secretary David Davis, are likely to start in the second half of May. Barnier on Wednesday tweeted a group photo with the words “Our #Brexit team is ready. We will work for #EU27 member states, EU institutions & citizens; together with all Commission services.”
As in many divorces, the first area of conflict is likely to be money. The EU wants Britain to pay a hefty bill — Jean-Claude Juncker, president of the EU’s executive Commission, put it at around €50 billion ($63 billion) — to cover pension liabilities for EU staff and other commitments the UK has agreed to.
Britain acknowledges it will have to pay something, but is sure to quibble over the size of the tab.
Negotiations will also soon hit a major contraction: Britain wants “frictionless” free trade, but says it will restore control of immigration, ending the right of EU citizens to live and work in Britain. The EU says Britain can not have full access to the single market if it does not accept free movement, one of the bloc’s key principles.
Both Britain and the EU say a top priority will be guaranteeing the rights of 3 million EU citizens living in Britain, and 1 million Britons living elsewhere in the bloc.
The two sides also appear to disagree on how the talks will unfold. EU officials say the divorce terms must be settled before negotiators can turn to the UK’s future relationship with the bloc — and a deal on that could take a decade. British officials want the two things discussed simultaneously.
May conceded Wednesday that there would have to be a “phased process of implementation” once the two years are up.
May has suggested that if talks stall she could walk away, saying that “no deal for Britain is better than a bad deal for Britain.” That prospect of no deal alarms many British businesses. If Britain crashed out of the EU without a trade deal it would fall back onto World Trade Organization rules, meaning tariffs and other barriers to trade.
May backed away from that notion Wednesday, saying in her letter that both sides should “work hard to avoid that outcome.”
Brexit has profound implications for Britain’s economy, society and even unity. The divisive decision to leave the EU has given new impetus to the drive for Scottish independence, and undermined the foundations of Northern Ireland’s peace settlement.
It is also a major blow to the EU, after decades of expansion, to lose one of its largest members. Anti-EU populists including French far-right leader Marine Le Pen hope the impulses that drove Britain to turn its back on the EU will be repeated across the continent.
Many Britons who voted to leave were seeking to regain control of migration, by removing the UK from the EU’s principle of free movement among member states.
That is what worries many on the other side. Many British businesses rely on European workers, and about 3 million citizens of other EU states live in the UK — and have been uncertain about their future since the referendum in June.
Piotr Wierzbicki, a Polish engineer flying to London from Warsaw airport, said that the British “shot themselves in the foot” by voting to leave the EU, and predicted it would be harder for Europeans to travel to and from the UK
“It will be bad for their economy and it will be bad for the EU,” he said.

Main category: 

The end of a loveless marriage

Author: 
AFP
Thu, 2017-03-30 03:00
ID: 
1490812257158427200

LONDON: Britain’s relationship with the EU was always an awkward marriage of convenience rather than a case of love at first sight.
And after 44 years — during which trade ties always took precedence for Britain over closer integration — London has filed for divorce.
Anand Menon, a professor of European politics at King’s College London university, said the relationship was always “transactional” and therefore the break-up is “pretty logical.”
“It’s been a utilitarian relationship since 1973 and the emphasis was always on the economic dimension, not on the political one,” said Pauline Schnapper, professor of contemporary British history at the Sorbonne University in Paris.
“The sentimental dimension is near non-existent,” she said.
The path toward today’s EU began after World War II as the shattered continent tried to rebuild and deepen integration as a way of bolstering the peace. The project did not immediately appeal to Britain.
“I think we didn’t feel vulnerable enough to join, quite simply,” Menon said.
Britain preferred to focus on its special relationship with the US and the remains of its empire.
London nevertheless supported the push for closer integration on the European continent: Wartime Prime Minister Winston Churchill called for the creation of a “United States of Europe” in a 1946 Zurich speech.
But in the early 1960s, Britain’s fortunes changed for the worse.
Its economic growth started lagging behind that of France and Germany, making the European single market on its doorstep seem an appealing option.
Britain on Wednesday began what is expected to be two years of difficult divorce negotiations with a formal notification by letter to EU President Donald Tusk.
Joining the European fray in the first place was not an easy task.
In 1961, France’s then-President Charles de Gaulle vetoed Britain’s first application, seeing it as a “Trojan Horse” for the US and doubting Britain’s European spirit.
Another French veto followed in 1967 and the UK was only finally welcomed into the European Economic Community (EEC) in 1973.
Unfortunately for Britain, the first oil crisis struck that same year and so the much-hoped-for economic boost failed to materialize.
Nevertheless, 67 percent of the British people voted to remain in the EEC in a 1975 referendum.
“The fact that we joined late is one of the reasons there are suspicions because obviously there is a sense that we joined a club that others had set up to suit themselves,” Menon said.
Britain and the EEC soon locked horns and London began opting out of the major attempts to step up European integration.
In 1979, London refused to participate in the European monetary system, defending its national and fiscal sovereignty.
Six years later, it refused to ratify the Schengen Agreement — abolishing internal border checks — and in 1993, it opted out of the European single currency.
Britain’s anti-federalist approach was spelled out by Prime Minister Margaret Thatcher during a 1988 speech at the College of Europe in Bruges.
In it, she rejected the idea of a “European super-state exercising a new dominance from Brussels.”
Conservative MP Bill Cash, a prominent euroskeptic, said earlier this month of the Brexit trigger: “This is a historic moment for which I and my colleagues have fought for 30 years. This is the moment.”
“This is a vindication of the battles we fought,” he said.
In the 1990s, Britain’s defiance toward Brussels accelerated further with the creation of the UK Independence Party (UKIP), which campaigned for the country’s exit from the EU.
The opposition party’s successes, particularly in the 2014 European Parliament elections when it topped the polls, pushed the government to harden its rhetoric.
The eurozone crisis, large-scale immigration from the EU and the refugee crisis of the past few years stoked the discontent, pushing Prime Minister David Cameron to call the June 2016 referendum.
Patricia Hogwood, a reader in European politics at the University of Westminster, said the referendum campaign failed to show the positive side of EU membership.
“This is an island mentality,” she told AFP.
“We were always so scared of losing our control, losing our grip, our sovereignty,” Hogwood added.
In the end, 52 percent of voters opted for Brexit.
Neither side is likely to end up the happier after the divorce, said John Springford, director of research at the Center for European Reform in London.
“I am not convinced that Britain leaving the EU will help Britain or help the EU.”

Main category: 

UK still partner in NATO, Europe: Berlin

Author: 
AFP
Thu, 2017-03-30 03:00
ID: 
1490812257108426900

BERLIN: Britain remains a key ally even though it is leaving the EU, the German government said Wednesday, while warning of tough negotiations ahead.
Calling for swift clarity as British Prime Minister Theresa May triggered the exit process, Berlin also cautioned that uncertainty unleashed by the talks could be “poison” to both citizens and commerce.
“We must not forget that the UK is still a partner, in NATO and in Europe,” Chancellor Angela Merkel’s spokeswoman Ulrike Demmer told journalists, adding that London’s Brexit notification would offer clues on how Britain planned to handle the divorce process.
“On this basis, the 27 member states and EU institutions will define their interests and aims,” Demmer said, adding that Berlin was “well prepared” for the coming negotiations.
Foreign Minister Sigmar Gabriel acknowledged that the talks would “certainly not be easy for both sides.” Although the split may generate “bad feelings,” he said that should not form the basis of Britain’s future relationship with the EU’s remaining 27 members.
“The sentence often used in private divorces, ‘let’s stay friends,’ rings true in this case,” said Gabriel.
“Britain remains our neighbor, like the European Union is for Britain. We need each other. We should do everything to maintain a good and friendly relationship in the future,” he added. At the same time, a Foreign Ministry source also pointed out that “a close friend is still somewhat different from remaining part of the family of 27.”
“That is hopefully also clear to the Britons,” said the source, adding that both sides are aware that “Britain’s decision to separate from the EU at a time when the old order seems to be breaking apart … is reckless.”
Underlining what is at stake, Foreign Ministry spokesman Martin Schaefer emphasized that “uncertainty is poison for the people — the EU citizens, Germans who live in Britain and what their future status would be, likewise for British citizens living in the European Union.”
“Perhaps it’s even more poisonous for economic trade and investment relations,” he added, questioning if London “really understood what kind of impact there could be for the British economy when all these questions have to be addressed,” and noting the “damn tight” two-year negotiation period.
“We are proud of the clear, unanimous stance of the EU 27, that they stood their ground that there would be no pre-negotiations,” he added.
“They begin now.
Next steps
Here are the key steps ahead:
• European Council President Donald Tusk will issue draft “negotiating guidelines” on Friday. He is due to give a press conference with Maltese Prime Minister Joseph Muscat on Friday in Valletta. These are overall political red lines for the next two years and will be circulated to the capitals of the 27 remaining EU countries. Diplomats known as sherpas make further preparations and then ministers will finalize the guidelines in late April.
• EU 27 leaders will hold a special Brexit Summit in Brussels, without Britain, to rubber-stamp the negotiating guidelines.
• A day or two later, the European Commission negotiator Michel Barnier will issue an initial “Recommendation to Open Negotiations” with his suggestions for how the talks should go.
• The EU 27’s European affairs ministers — the so-called General Affairs Council — will meet in May to draw up detailed “Negotiating Directives” that will bind Barnier during the talks. The ministers already have a scheduled meeting on May 16 but could meet sooner for Brexit. The guidelines will include the three “divorce” issues the EU wants to deal with before talks on any future trade deal: Britain’s exit bill, the rights of EU citizens in Britain and vice versa, and the flashpoint border in Northern Ireland.
• EU ministers will formally give Barnier the mandate to start negotiations so that formal Britain-EU talks actually begin, nearly a year after Britain voted to leave. Informal talks however could begin earlier to work out practical issues such as what language the talks will be held in — Barnier is French — and the timetable
“There’s nothing to stop us talking about procedure before we get the mandate as long as we are not actually negotiating,” one diplomat told AFP.
• The EU says it will only discuss the leaving bill, citizens rights and Northern Ireland at first. It will only move on to a trade deal once they are sorted out.
• Barnier has set October 2018 as the latest feasible date for a draft Brexit deal to give it time to be approved by the British Parliament, by EU leaders and by the European Parliament, which will have the final say.
• The European Parliament will hold a crucial binding vote on the Brexit deal. National parliaments may also vote on it.
• Britain will formally leave the EU two years after the notification of Article 50. Whether that happens with a new trade deal included, a transitional arrangement while one is sorted out, or no trade deal remains to be seen.
• Even if Britain does manage to make a deal with the EU, the accord is likely to be partial or transitional.
A full deal for the future relationship will probably take years — up to seven years according to Tusk, or even a decade, according to reported comments by Britain’s former ambassador to the EU.

Main category: 

Bank of America: “Our Clients Bought The Dip”

Having become a habitual response among the investing community, with sellside research reports dedicated to the phenomenon of buying the dip which no matter what the Fed does, refuses to go away…

…  it will probably not come as a surprise that as Bank of America writes in its latest weekly client flow trend report, following last Tuesday’s sharp selloff in stocks, “hedge funds & retail bought the dip“, in the words of the bank.

As BofA’s Jill Hall elaborates, last week, during which the S&P 500 fell 1.4% (the biggest weekly decline since early November), the bank’s clients resumed their post-election buying streak after a five-week break.

Among BofA’s main “smart money” clients, both hedge fund and private clients were net buyers for the second straight week, while institutional clients sold stocks for the sixth week.

Clients bought a little of everything: large, mid and small caps alike all saw inflows for the first time since early January, as a slowing in sales of single stocks was coupled with a pick-up in ETF inflows.

Predictably, Hall adds that “we could see more buying on dips by clients, as the strategy has worked in recent years and we expect to see both higher volatility and higher stock prices this year.” For those worried they may have missed the last of the BTFD opportunities out there, don’t worry: according to BofA, “the end of a bull market typically sees capitulation-like inflows, which have so far been absent, and the “Great Rotation” has yet to occur.

BofA lays out the other notable flows in last week’s action, among which broad-based buying of small caps, ETFs

  • Net purchases by hedge funds last week were the biggest since early January.
  • Hedge funds, institutions and private clients all bought ETFs and small caps, while all three sold the defensive sectors of Staples Utilities, along with Materials.
  • Pension fund clients were net buyers of US stocks after two weeks of selling, with inflows across all three size segments. Their biggest purchases were of Industrials and Energy stocks, while ETFs and Tech stocks saw the biggest sales by this group last week. For more details, see Pension fund flows.
  • Buybacks by our corporate clients ticked up to their highest levels since early December, led by a pick-up in Tech buybacks. This helped bring cumulative YTD buybacks in-line with 2015 levels over the same period, but below 2014 and 2016 levels and with trailing 52-week buybacks still their lowest in nearly four years.

* * *

Below is a breakdown of the rolling four-week average trends by sector:

  • Net buying: ETFs since early Oct 2016; Materials since late Feb. 2017; Staples since mid-March 2017.
  • Net selling: Health Care since mid-March 2016; Consumer Discretionary since mid- Jan 2017; Real Estate (not shown—flows since Sept. 2016) since late Jan. 2017; Industrials since mid Feb. 2017; Energy since late Feb. 2017; Tech since early March 2017; Utilities since mid-March 2017.
  • Notable changes in trends: Telecom is now seeing net buying after net sales since mid-February 2017.

The post Bank of America: “Our Clients Bought The Dip” appeared first on crude-oil.news.

Bank of America: “Our Clients Bought The Dip”

Having become a habitual response among the investing community, with sellside research reports dedicated to the phenomenon of buying the dip which no matter what the Fed does, refuses to go away…

…  it will probably not come as a surprise that as Bank of America writes in its latest weekly client flow trend report, following last Tuesday’s sharp selloff in stocks, “hedge funds & retail bought the dip“, in the words of the bank.

As BofA’s Jill Hall elaborates, last week, during which the S&P 500 fell 1.4% (the biggest weekly decline since early November), the bank’s clients resumed their post-election buying streak after a five-week break.

Among BofA’s main “smart money” clients, both hedge fund and private clients were net buyers for the second straight week, while institutional clients sold stocks for the sixth week.

Clients bought a little of everything: large, mid and small caps alike all saw inflows for the first time since early January, as a slowing in sales of single stocks was coupled with a pick-up in ETF inflows.

Predictably, Hall adds that “we could see more buying on dips by clients, as the strategy has worked in recent years and we expect to see both higher volatility and higher stock prices this year.” For those worried they may have missed the last of the BTFD opportunities out there, don’t worry: according to BofA, “the end of a bull market typically sees capitulation-like inflows, which have so far been absent, and the “Great Rotation” has yet to occur.

BofA lays out the other notable flows in last week’s action, among which broad-based buying of small caps, ETFs

  • Net purchases by hedge funds last week were the biggest since early January.
  • Hedge funds, institutions and private clients all bought ETFs and small caps, while all three sold the defensive sectors of Staples Utilities, along with Materials.
  • Pension fund clients were net buyers of US stocks after two weeks of selling, with inflows across all three size segments. Their biggest purchases were of Industrials and Energy stocks, while ETFs and Tech stocks saw the biggest sales by this group last week. For more details, see Pension fund flows.
  • Buybacks by our corporate clients ticked up to their highest levels since early December, led by a pick-up in Tech buybacks. This helped bring cumulative YTD buybacks in-line with 2015 levels over the same period, but below 2014 and 2016 levels and with trailing 52-week buybacks still their lowest in nearly four years.

* * *

Below is a breakdown of the rolling four-week average trends by sector:

  • Net buying: ETFs since early Oct 2016; Materials since late Feb. 2017; Staples since mid-March 2017.
  • Net selling: Health Care since mid-March 2016; Consumer Discretionary since mid- Jan 2017; Real Estate (not shown—flows since Sept. 2016) since late Jan. 2017; Industrials since mid Feb. 2017; Energy since late Feb. 2017; Tech since early March 2017; Utilities since mid-March 2017.
  • Notable changes in trends: Telecom is now seeing net buying after net sales since mid-February 2017.

The post Bank of America: “Our Clients Bought The Dip” appeared first on crude-oil.news.

OPEC Compliance Nears 100% On Libyan, Nigerian Outages

OPEC’s compliance to the crude oil production cuts is expected to increase in March, from an already impressive 94 percent compliance rate reached in February. As UAE ratchets up its efforts to curb production and get behind the production cut agreement, compliance is expected to reach 95 percent in March—what Reuters is calling a record high. According to a Reuters survey, despite Saudi Arabia’s slight increase to its March output, the heavyweight producer will still have cut well beyond its fair share since the cuts were implemented…