Wall Street Breakfast: G20, Jobs, Fed Report

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Tough talks on issues of free trade, climate change and international security await the world's leaders as the G-20 summit kicks off in Hamburg, Germany. Tens of thousands of people have already taken to the streets of the port city to display their frustrations about inequality in what they dubbed a "Welcome to Hell" rally. A spotlight is also shining on President Trump and Vladimir Putin as they hold their first face-to-face meeting on the sidelines of the summit.

Economy

U.S. employers likely stepped up hiring in June and boosted wages for workers, signs of labor market strength that could keep the Fed on course for a third interest rate increase this year. The Labor Department's closely watched employment report today will probably show that nonfarm payrolls increased by 179,000 jobs last month, after gaining 138,000 in May. The unemployment rate is forecast steady at a 16-year low of 4.3%.

Ahead of Janet Yellen's appearance in Congress next week, the Federal Reserve will issue its semi-annual report outlining recent policy decisions and describing its plans for reducing its asset holdings. Usually it's issued simultaneously with the Fed Chair's testimony, which happens twice a year, but this time around the report will be issued a few days ahead of time.

The Bank of Japan stepped up plans for its bond-buying overnight as JGB yields crept higher, causing the yen and oil to drop. That came amid a selloff in global bond markets amid expectations that some major central banks, including the U.S. Federal Reserve, the Bank of England and the ECB, were turning more hawkish and were likely to begin removing some accommodative measures.

The four Arab countries leading the boycott against Qatar have vowed to enact fresh sanctions after the state refused to comply with their initial demands. Any measures taken by Saudi Arabia, the UAE, Egypt and Bahrain would be aimed at the Qatari government but not its people, they said, without elaborating on when the new steps would be announced or what they would entail.

More than one-third of U.S. states have sued the U.S. Education Department and Secretary Betsy DeVos over the recent suspension of rules that would have swiftly canceled the student loan debt of people defrauded by Corinthian Colleges (OTCPK:COCOQ) and other for-profit schools. Last month DeVos pressed pause on the rules, due to take effect on July 1, saying they needed to be reset.

Stocks

Electricity is now one of its largest businesses. Berkshire Hathaway (BRK.A, BRK.B) has struck a deal to buy bankrupt Energy Future for $9B in cash, giving it Texas-based Oncor (including debt, the deal has an enterprise value of about $18B). The move is a bold bet by Warren Buffett, as Texas regulators blocked two earlier attempts to sell Oncor, one of the largest U.S. power transmission networks.

Tesla has agreed to build the world's largest lithium-ion battery storage project in South Australia as the state battles outages that have driven up energy prices. The company outbid 91 other firms for the contract to install a 100 megawatt facility, while Elon Musk said that if the project is not completed in 100 days, it will be free. TSLA +2.5% premarket.

As part of a set of ambitious new environmental goals, France expects to do away with the sale of diesel and gas vehicles by 2040. The target is less ambitious than ones set by countries like Norway and India, but the declaration is coming from a major car-producing country. It also comes days after Volvo (OTCPK:GELYY) pledged to have all its new car models at least partly electric from 2019.

Siemens has set up a task force to investigate reports that its turbines had been delivered to Crimea. "If there were any re-routings of recently purchased turbines, it would constitute a clear violation of contractual agreements," Siemens (OTCPK:SIEGY) said in a statement. "We will continue to fully cooperate with all stakeholders."

Is the fight still going on? Elliott Advisers is seeking to remove the chairman of Akzo Nobel (OTCQX:AKZOY) again over his handling of a €26.3B takeover proposal from PPG Industries (NYSE:PPG). The investor, which holds a 9.5% stake in the paint giant, is seeking an extraordinary general meeting through an interim relief court lawsuit. PPG dropped its attempt to buy Akzo on June 1.

Riding hot demand for its components, Samsung Electronics (OTC:SSNLF) is forecasting Q2 operating profit that will easily be the company's highest ever. Semiconductors and memory pushed earnings to about 14T won ($12.1B), a 72% increase from the same period a year ago. Earlier this week, Samsung said it planned to invest $18B in its chip business to extend its lead in the smartphone market.

The legal battles between Apple (NASDAQ:AAPL) and Qualcomm (NASDAQ:QCOM) rage on as the latter filed patent infringement complaints with the International Trade Commission and Federal Court. Qualcomm wants to bar iPhones and iPads sales in the United States that use chips made by rival Intel (NASDAQ:INTC) on the grounds that the devices infringe on six of its patents.

As some franchise films have struggled to match opening expectations this summer, Sony (NYSE:SNE) will attempt to bring Spider-Man to the big screen this weekend with Homecoming. One major difference this time is the involvement of Marvel Studios (NYSE:DIS). Superheroes like Iron Man in the film should provide a much-needed hit for Sony, which has struggled at the box office in recent years.

People injured by Takata's defective air bags have been given an official role in the bankruptcy of its U.S. unit, allowing them to challenge Takata's (OTCPK:TKTDY) restructuring plans that plaintiffs' lawyers have criticized as protective of automakers. A seven-member official committee will represent economic loss and personal injury or tort claimants, said David Buchbinder, a lawyer with the DOJ's bankruptcy watchdog.

A former engine development manager at Audi (OTCPK:AUDVF) was charged in the U.S. for his role in a wide-ranging emissions scandal at Volkswagen (OTCPK:VLKAY) that has already led to the indictment of seven others and a $2.8B criminal fine for the German automaker. Giovanni Pamio has been accused with conspiracy to defraud the United States, wire fraud and violation of the Clean Air Act.

What went sour? Shares of Blue Apron (NYSE:APRN) began trading at $10 a share on June 29, but since then, the stock has cratered nearly 20%. "As long as its costs keep rising faster than its sales, it's hard to see how Blue Apron can become profitable, but if they cut back on their spending? Jeez, then the competition might steamroll them," said Jim Cramer. Options contracts on Blue Apron will debut on CBOE Holdings' exchanges on Monday.

Issuing an update on the "Petya" ransomware attack that hit it last week, Mondelez (NASDAQ:MDLZ) said the company is "making good progress" in restoring systems but the incident will trim three percentage points from its Q2 revenue growth. The attack disrupted shipments and its ability to invoice sales during the last four days of the quarter. MDLZ shares fell 2% AH on the news.

Jamie Dimon met Irish Prime Minister Leo Varadkar in Dublin on Thursday to discuss expansion plans, two months after JPMorgan (NYSE:JPM) bought an office building in the city with room for 1,000 staff. Reports have previously suggested that the U.S. investment bank plans to move hundreds of back- and middle-office roles to the Irish capital as the financial sector deals with Brexit.

Robots are moving on to the trading floors of investment banks, and they're not just doing back-office tasks. "We decided to start a conversation with the front-office guys on whether there were processes we could use a robot to do and we found a number of them," said UBS's Beatriz Martin Jimenez. The AI systems will automate post-trade allocation requests, as well as develop new strategies for trading volatility.

MetLife is asking for another delay in the long-running case over whether the U.S. government should have labeled it as "too big to fail," warning that the Trump administration may want to withdraw the government's appeal. A U.S. Appeals court in May granted Metlife (NYSE:MET) a 60-day abeyance in the appeal filed under President Obama, but the pause ends next week.

Today's Markets 

In Asia, Japan -0.3%. Hong Kong -0.5%. China +0.2%. India flat. 
In Europe, at midday, London +0.1%. Paris -0.3%. Frankfurt -0.2%. 
Futures at 6:20, Dow flat. S&P +0.1%. Nasdaq +0.2%. Crude -3.1% to $44.10. Gold -0.2% to $1220.80. 
Ten-year Treasury Yield flat at 2.37%

Today's Economic Calendar

8:30 Non-farm payrolls
10:30 EIA Natural Gas Inventory
1:00 PM Baker-Hughes Rig Count

Companies reporting earnings today »

Source: https://goo.gl/F9PA7r

For Singapore, globalization is still the future, despite ‘dark shift’ to protectionism

Roslan Rahman | AFP | Getty Images

A Singapore Mass Rapid Transit (SMRT) train plies along a line at the Jurong East interchange (back R) in Singapore on July 18, 2016.

Singapore has planted a fresh flag to promote global trade - in stark contrast to what it sees as a "dark shift" toward protectionism in other developed markets.

The city-state's Committee on the Future Economy (CFE) on Thursday released its long-awaited report on how the island-nation will address challenges from stagnant economic growth as key industries, such as trade and commodities, suffered from a slowdown and digital disruption.

The CFE was set up last year to develop strategies to prepare the workforce for economic and social challenges, including digital disruption and an aging population.

The 30-member committee was co-chaired by Finance Minister Heng Swee Keat and Minister for Trade and Industry S. Iswaran, and included cabinet ministers, members of parliament and business leaders. The report will form the basis for Singapore's upcoming budget statement later this month.

Singapore, despite being less than a quarter of the size of the state of Rhode Island, often punches well above its weight diplomatically and can help to set the rhetorical tone for the region. It is Southeast Asia's only country with developed nation status.

But the city-state has long hung its hat on openness to global trade and among the various challenges to the country's economy, the delayed CFE report honed in on recent political developments in the U.S. and Europe.

"Most worryingly, the world saw a dark shift in mood away from globalization in 2016. It no longer seems certain we are on an inexorable course towards greater globalization, stronger multilateral institutions and a more connected world," the report said.

Roslan Rahman | AFP | Getty Images

People use their phones while taking the Mass Rapid Transit (MRT) train in Singapore.

"Instead, we saw nativist politics and protectionist economics growing in strength and influence in Europe and the U.S. The anti-globalization trend will undermine international trade, hurting all economies, but particularly small open ones like Singapore, with two-thirds of our gross domestic product (GDP) generated by external demand."

That followed U.S. President Donald Trump's decision last month to formally pull the U.S. out of the Trans-Pacific Partnership (TPP), which would have created a 12-country Pacific rim free-trade bloc, including Singapore. The TPP, which was negotiated during President Barack Obama's term in office, hadn't yet been voted on or ratified by Congress.

Trump also signalled he planned to renegotiate the North American Free Trade Agreement (NAFTA), enacted in 1994, which eliminated most tariffs between Mexico, the U.S. and Canada.

Following a referendum last year, the U.K. has also moved to exit the European Union trade bloc and in France, nationalist National Front party leader Marine Le Pen, who is opposed to the EU and globalization, has advanced in election polls.

Singapore's CFE, however, said the city-state's future remain focused on developing international ties, although the report placed great emphasis on regional ties as important for future economic growth.

       
"We must resist the threat of rising protectionism. Singapore must continue to work with like-minded partners," the report said, including "less traditional" ones.

"The U.S. and Europe continue to have innovative companies and people, whom we can work with. We also see strong potential in many Asian markets – in particular Southeast Asia, China and India – as well as in emerging markets farther afield," the report said.

It particularly cited the opportunities from the rise of the middle class and urbanization in Asia.

"We cannot know which industries will succeed," the report said. "What we do know is that Singapore must stay open to trade, talent and ideas and build deep capabilities."

The report offered seven strategies, some of which were previously announced efforts.

One strategy was to continue to work to reduce trade barriers and tariffs, as well as to build further "innovation alliances."

That included tie-ups between universities and foreign and domestic start-ups as well as opportunities for Singaporean students to study overseas. The report also advocated for greater market research across the region, to deepen specialized knowledge of markets.

        

The report cited existing industrial and business parks the city-state's companies have been developing in India, Indonesia and Vietnam, as well as township projects in China.

In what could represent a cultural shift for Singapore's strong emphasis on education, the report advocated moving away from "the pursuit of the highest possible academic qualifications early in life" and toward life-long learning and retraining approaches.

The report also targeted increasing commercialization of the government's investments in research and development.

The CFE also advocated continuing Singapore's efforts to become a start-up hub in the region, aiming to encourage partnerships between small and large enterprises and improve access to venture capital.

It particularly advised increasing digitization and encouraging it among small businesses. Singapore already has been a global leader in moving government functions online. Going further, the CFE advised developing data analytics and cyber security industries and data science programs.

The CFE also advised greater digital connection with other economies as well as greater infrastructure connections. It cited the continued expansion of the city-state's airport as well as other projects, including a high-speed rail between the city-state and Kuala Lumpur, the capital of Malaysia, its neighbour to the north.

Developing "exportable capabilities," such as research on self-driving vehicles and water technologies, were also cited.

By Leslie Shaffer | Yen Nee Lee

Source:  http://www.cnbc.com/2017/02/09/for-singapore-globalization-is-still-the-future-despite-dark-shift-to-protectionism.html

The Best Way to Invest in Foreign Stocks

Image source: Getty Images

Foreign stocks can be a good addition to your portfolio, as they can help you hedge against foreign exchange rates and get exposure to countries whose economies are growing faster than our own. Rather than buying individual foreign stocks, however, most investors choose to get foreign stock exposure through mutual funds or ETFs.

There are a few compelling reasons that all stock investors should put some of their money into the stocks of foreign companies.Why invest in foreign stocks?

The No. 1 reason for investing in foreign stocks is diversification. You're probably familiar with the concept of diversifying your investments. For example, you shouldn't put 100% of your money in bank stocks because any financial sector weakness could be devastating to your portfolio. Similarly, it's not a great idea to be 100% reliant on one geographical area, as any localized weakness or economic turbulence could be devastating.

Investing in foreign stocks diversifies your currency exposure as well. For example, let's say that the value of the U.S. dollar drops by 50% against the Euro. If 100% of the companies you invest in earn dollar-denominated revenue, you'll get crushed. On the other hand, if a substantial portion of your portfolio does business in other currencies, the impact is likely to be much less.

Also, some of the world's best brands are based outside of the U.S. and aren't listed on major U.S. stock exchanges ( Nestle and Nissan are excellent examples). Why just invest in U.S. food companies or car manufacturers, when you could invest in the best from around the world?

Because of inverse currency relationships (U.S. goes up, foreign currencies go down), as well as certain other factors, U.S. stocks and foreign stocks tend to make up for each other's performance weaknesses, which can actually produce better investment returns over time. In fact, Fidelity found that a 100% U.S. stock portfolio would have produced 11.3% annualized returns over the past 50 years, while 100% of foreign stocks would have returned 10.9%. However, a 70%/30% blended U.S. and foreign portfolio would have beaten both, with 11.4% average annual returns.

Finally, many foreign economies are growing at a faster rate than the U.S., so investing internationally allows you to take advantage of this. Specifically, countries known as emerging markets have significantly higher growth potential, so investing in stocks based in these countries could produce strong gains if things go well.

The best way to invest in foreign stocks (for most people)

Choosing foreign stocks can be difficult and risky, especially when it comes to emerging markets. Many of these companies can be difficult to analyze, and it's always difficult to pick long-term winners in undeveloped economies.

For this reason, the majority of U.S. investors are better off getting their foreign stock exposure through mutual funds or ETFs. This ensures that your foreign holdings are diversified, so your investment performance won't be too reliant on any single foreign company.

It's also important to mention the difference between foreign, international, and global stock funds. If a fund is labeled as "foreign" or "international," it generally invests its assets exclusively in non-U.S. companies. On the other hand, a "global" or "world" stock fund invests in countries all over the world, including the U.S.

A sampling of foreign stock ETFs worth a look

I generally prefer ETFs to mutual funds for their instant trade execution and lower share prices, so here's a list of eight of my favorite foreign stock ETFs, listed in no particular order. If you prefer mutual funds, or are investing through a 401(k), you can generally find funds that achieve the same objectives as these.

Fund name	Symbol	Total Assets	Dividend Yield	Expense Ratio	Type of Investments
iShares Core MSCI Emerging Markets ETF	IEMG	$15 billion	2.02%	0.16%	Emerging markets
Schwab Emerging Market Equity ETF	SCHE	$2 billion	2.09%	0.14%	Emerging Markets
iShares Core MSCI Europe ETF	IEUR	$960 million	4.55%	0.12%	European Stocks
Vanguard FTSE Developed Markets ETF	VEA	$62 billion	2.70%	0.09%	Foreign Large-Cap Blend
iShares MSCI EAFE Growth ETF	EFG	$2 billion	1.85%	0.40%	Foreign Large-Cap Growth
Schwab Fundamental International Large Co. ETF	FNDF	$1 billion	1.96%	0.32%	Foreign Large-Cap Value
Vanguard FTSE All-World Ex-US Small Cap ETF	VSS	$3 billion	2.53%	0.17%	Foreign Small-Cap Blend
Vanguard Global ex-U.S. Real Estate ETF	VNQI	$4 billion	3.49%	0.18%	Foreign Real Estate

How much should you invest in foreign stocks?

It depends on your risk tolerance. While it does add diversification to your investments, foreign markets can be more volatile than the U.S., especially when it comes to emerging markets. As a general rule, I suggest allocating between 15% and 30% of your portfolio to high-quality international ETFs like the ones mentioned here. If you have a lower risk tolerance, stick to the lower end of this range, and if you can stomach a little extra risk, allocate a little more to your foreign holdings.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Nestle.

By Matthew Frankel, Motley Fool

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Source: http://www.nasdaq.com/article/the-best-way-to-invest-in-foreign-stocks-cm669966