Thursday, June 8, 2017

Thursday, June 8, Morning Global Market Roundup: Asian Stocks On Edge Before UK Election, ECB, Comey Testimony

By Hideyuki Sano
June 8, 2017

Asian shares wobbled on Thursday as investors braced for any surprises from the UK election, a European Central Bank policy meeting and congressional testimony from ex-FBI director James Comey who was fired by President Donald Trump last month.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was little changed, through China edged up on unexpectedly solid trade data, while Japan's Nikkei .N225 dropped 0.4 percent.

European shares were expected to open steady to slightly firmer, with spread-betters looking at a 0.2 percent rise in Germany's DAX .GDAXI and a flat opening in Britain's FTSE .FTSE.

Wall Street shares ticked up on Wednesday, despite sharp declines in energy prices, after written testimony from Comey did not add major revelations about an investigation into Russian meddling with last year's U.S. presidential election.

The British pound GBP=D4 held firm at $1.2957, near its highest levels in two weeks, supported in part by polls showing Prime Minister Theresa May is on course to increase her majority in parliament.

The pound gained as much as 4 percent after May called a snap election seven weeks ago, as polls had initially suggested a landslide win for her Conservative party that would give the prime minister a stronger hand in Britain's negotiations on leaving the European Union.

Yet traders are cautious given the Brexit shock last year and as her once-commanding lead over the Labour Party and its veteran hard-left leader Jeremy Corbyn has been narrowing through the campaign.

"If the conservatives win big, that will lead to a big relief in markets and buy-back in the pound. But if they win only a wafer-thin majority or even lose an outright majority, that will be a major negative surprise," said Shuji Shirota, head of macro economist strategy at HSBC in Tokyo.

To see a Reuters interactive graphic on the election polls and results, click on

Britons have until 2100 GMT to vote, and there will be an exit poll as soon as voting ends. The first handful of seat results are expected to be announced by 2300 GMT.

Ahead of the UK vote results, the European Central Bank will meet, with a policy announcement due at 1145 GMT, followed by President Mario Draghi's news conference at 1230 GMT.

With no policy change expected, market players are focusing on how the central bank may alter its economic assessment and policy guidance in light of a strengthening euro zone economy.

ECB policymakers are set to take a more benign view of the economy and will even discuss dropping some of their pledges to ramp up stimulus if needed, sources with direct knowledge of the discussions have told Reuters.

Still many market players expect the ECB to wait until September before signaling further tapering in its bond buying.

The euro EUR= traded at $1.1259, near its seven-month high of $1.1285 touched earlier this month.

The dollar stayed near its seven-month low against a basket of currencies as doubts over Trump's ability to push through his stimulus plans have eroded the greenback's gains made late last year.

The dollar index stood at 96.713 .DXY =USD, near Wednesday's seven-month low of 96.511.

Against the yen, the U.S. currency faltered to 109.40 yen JPY= not far from Wednesday's 1-1/2-month low of 109.115 as Japanese Government Bond yields rose partly on speculation about the Bank of Japan's exit strategy from stimulus.

The BOJ has insisted it has no plans to start tapering any time soon, but many analysts and traders believe the pace of its bond buying appears unsustainable.

The two-year JGB yield JP2YTN=JBTC rose to minus 0.09 percent, the highest level since February last year.

"At a time when the ECB could change its guidance, possibly with an eye on exit from stimulus, and the Federal Reserve is already talking about shrinking its balance sheet, the BOJ's exit could easily come to a focus as well," said Yusuke Ikawa, Japan strategist at BNP Paribas.

But Ikawa added the BOJ is still a long way off from ending its massive stimulus and that the Japanese market is likely to steady soon.

The 10-year U.S. Treasuries yield stood at 2.180 percent US10YT=RR after having fallen to a seven-month low of 2.129 percent on Tuesday.

Many investors are wary ahead of Comey's Senate appearance later in the day for any hints Trump may have been engaged in obstruction of justice - an offense that could lead to impeachment hearings.

"If the hearing does not produce clear-cut evidences of obstruction of justice, uncertainties will remain but for market the issue will likely be put on a back burner," said Hiroko Iwaki, senior fixed income strategist at Mizuho Securities.

"Unless you assume there will be a complete chaos in U.S. politics or a downturn in the U.S. economy, it is hard to see further falls in U.S. bond yields," she said.

Takuro Nishida, manager of investment planning at Sompo Japan Nipponkoa Insurance said the risk-on mood is likely to return once Comey's testimony will be out of way.

"If the Fed is going to raise interest rates as expected later this month, U.S. bond yields are likely to rise back," he added.

Oil prices licked wounds after sharp falls on Wednesday to a one-month low, following an unexpected increase in U.S. inventories of crude and gasoline that fanned fears that output cuts by major world oil producers have not done much to drain a global glut.

Brent crude futures LCOc1 traded at $48.39 per barrel, up 0.7 percent so far on Thursday, though they had fallen 4.1 percent the previous day.

Article Link To Reuters:

On Eve Of Election, May Tries To Put Focus Back On Brexit

By William James and Kylie MacLellan 
June 8, 2017

On the eve of an election Prime Minister Theresa May returned to her core message that only she can deliver a good Brexit deal, moving on from a heated national debate over security after two deadly Islamist attacks.

May unexpectedly called the snap vote seven weeks ago, seeking to increase her working parliamentary majority of 17 seats ahead of the start of negotiations on leaving the European Union.

But the campaign has seen unexpected twists - a steep decline in May's once-commanding poll lead over the opposition Labour Party, and attacks in Manchester and London that killed 30 people.

Pollsters still expect May's Conservatives to win, although talk of a landslide majority of more than 100 seats has faded. A final flurry of polls put her party's lead in a range between 1 and 12 percentage points, with most of them suggesting she would increase her majority.

The polls started narrowing after May launched a new policy on care for the elderly that proved unpopular. She backtracked days later, prompting opposition parties to pour scorn on her claim to offer "strong and stable leadership".

Then came a suicide bombing at a pop concert in Manchester on May 22 that killed 22 children and adults, and a van and knife attack on London Bridge and in nearby Borough Market that killed eight people on June 3, five days before the election.

The attacks threw the campaign spotlight onto security and prompted questions from May's opponents and media about her record overseeing cuts in police numbers during her years as interior minister from 2010 to 2016.

But the security issue was not seen as helpful to her main rival, Labour leader Jeremy Corbyn, who has voted against counter-terrorism legislation and expressed reservations in the past about police shoot-to-kill tactics.

May vs, Corbyn

On Wednesday, the eve of the vote, May tried to bring the campaign back to Brexit.

"When it comes to the election tomorrow, I think the choices and the questions that people need to ask are exactly the same today as they were right at the beginning of the campaign," she told a campaign rally in Norwich, eastern England.

"And the first is a question of who do you trust to actually have the strong and stable leadership that is going to deliver the best deal for Britain in Europe."

May has sought to portray Corbyn as the weak leader of a spendthrift party which would crash Britain's $2.5 trillion economy and lead the country to ruin in chaotic Brexit negotiations.

Corbyn, a veteran left-winger who unexpectedly won the Labour leadership in 2015 after three decades on the party fringe, has hit back that Conservative fiscal austerity has hurt the poor and increased social inequalities.

Labour propose to build a fairer society through policies such as increasing tax for the richest 5 percent, boosting workers' rights, scrapping university tuition fees and investing 250 billion pounds in infrastructure.

"The choice is quite simple. Five more years of a Tory government, five more years of austerity, five more years of cuts. Or something different," Corbyn told supporters in Colwyn Bay, north Wales, to cheers and applause.

For May, the challenge is not only to win but to surpass handsomely the 12-seat majority her Conservative predecessor David Cameron won in 2015.

A narrow victory would undermine her authority both inside her party and at talks with the 27 other EU leaders.

Up to five more opinion polls are expected before voting begins at 0600 GMT on Thursday.

Britons have until 2100 GMT to vote, and there will be an exit poll as soon as voting ends. The first handful of seat results are expected to be announced by 2300 GMT, with the vast majority of the 650 constituencies due to announce results between 0200 GMT and 0500 GMT on Friday morning.


London police were still dealing with the fallout from Saturday night's attack, when three jihadis drove a van into pedestrians on London Bridge before running into narrow streets bustling with nightlife, stabbing and slashing people indiscriminately.

They said they arrested three more people on Wednesday and searched two locations in connection with the attack. They have also made 25 arrests for hate crimes since Saturday and had stepped up their presence in communities to provide reassurance.

With the capital still jittery, police carried out a controlled explosion near the site where a new U.S. embassy is being built in southwest London because of two suspicious vehicles, but later said it had been a false alarm.

Police confirmed on Wednesday the Saturday death toll had risen to eight after they found a body in the River Thames. They also made another arrest in east London in connection with the attack.

The dead include people from France, Australia, Canada, Spain and Britain. The attack left 48 injured, of whom 29 were still in hospital on Wednesday. Health authorities said 10 were in a critical condition.

Security has been increased nationwide and the violence has dominated the final weeks of campaigning.

May responded to the attack with a pledge to crack down on Islamist extremism and strengthen police powers.

"If human rights laws get in the way of doing these things, we will change those laws to make sure we can do them," she said in an interview with the Sun.

The head of campaign group Amnesty International said the pledge was outrageous and a gift to autocratic leaders around the world.

Two of the three London Bridge attackers, who were all shot dead at the scene by police, had been known to authorities beforehand.

Italy said it had flagged Youssef Zaghba as a potential risk after he moved to England last year, while Khuram Butt was known to British security services.

Article Link To Reuters:

Toshiba Aims To Name Buyer Of $18 Billion Chips Business On June 15

By Makiko Yamazaki, Liana B. Baker and Kentaro Hamada 
June 8, 2017

Toshiba Corp (6502.T) aims to name a winner for its prized semiconductor business next week, people familiar with the matter said on Wednesday, as a row with one of the bidders over the sale appeared to escalate.

Sources told Reuters the choice has narrowed to one bid from U.S. chipmaker Broadcom Ltd (AVGO.O) and U.S. tech fund Silver Lake and another from Toshiba chip partner Western Digital Corp (WDC.O) and Japanese government-related investors.

Toshiba is rushing to find a buyer for the world's second-largest producer of NAND chips, which it values at $18 billion or more, to cover billions of dollars in cost overruns at its now-bankrupt U.S. nuclear business Westinghouse Electric Corp.

The laptops-to-nuclear conglomerate will hold a board meeting on June 15 to decide on the preferred bidder, two sources said, declining to be identified as they were not authorized to speak to the media.

Western Digital, which jointly operates Toshiba's main chip plant in Yokkaichi, western Japan, has complicated the sale effort with a legal challenge, accusing Toshiba of a serious breach of contract over the joint venture.

It argues that the unit cannot be sold without its consent and has demanded exclusive negotiating rights.

But in a letter seen by Reuters, Toshiba struck back, again asking Western Digital to stop challenging the plans.

"Toshiba encourages Western Digital to redirect the considerable efforts that it has put into disrupting Toshiba's sale process into more productive channels."

Toshiba did not immediately respond to requests for comment.

Western Digital confirmed in a statement that it had received Toshiba's letter but added that any move by Toshiba to sell the unit without its consent "clearly violate the transfer restrictions in the joint venture agreements."

Western Digital said it was "best positioned to assist Toshiba in addressing its challenges and advancing its legacy of technological innovation in Japan."

The Broadcom-Silver Lake bid is seen as attractive because of its higher price of 2.2 trillion yen ($20 billion), sources have said.

Western Digital by comparison has an offer of less than 2 trillion yen and could also face antitrust hurdles because the firm is the third-largest maker of NAND flash-memory chips.

"Naturally, for the Toshiba corporate side, Broadcom is the best choice," one source said.

Toshiba shares rose as much as 6 percent on Thursday on the news that the company was closing in on a buyer. The stock has lost some 36 percent since late December when the company flagged huge losses at its U.S. nuclear power operations.

Other bidders include U.S. private-equity firm Bain Capital with South Korean chipmaker SK Hynix Inc (000660.KS), and Taiwan's Hon Hai Precision Industry Co Ltd (2317.TW) with its Japanese unit Sharp Corp (6753.T).

Article Link To Reuters:

Oil Rises Off One-Month Lows Struck After Surprise Stock Build

By Aaron Sheldrick
June 8, 2017

Crude futures edged up in early Asian trading on Thursday following heavy losses in the previous session after official data showed that U.S. inventories rose for the first time in 10 weeks, reawakening concerns of a supply glut.

U.S. crude futures CLc1 were up 24 cents, or 0.5 percent, at $45.96 a barrel. On Wednesday, they closed down 5.1 percent, or $2.47 a barrel, to the lowest settlement since May 4.

Brent crude prices LCOc1 rose 29 cents, or 0.6 percent, to $48.35 a barrel, after falling 4.1 percent in the previous session, also to the lowest since May 4.

"We are at this stage holding the line nervously near the low levels" of Wednesday's session, said Ben Le Brun, market analyst at OptionsXpress in Sydney.

"The situation is complicated by the fact that we have got all these major political-economic watch events on the horizon," he added, referring former United States Federal Bureau of Investigation Director James Comey's congressional appearance, the European Central Bank's policy meeting and the UK general election, all later on Thursday.

Many investors are wary ahead of Comey's Senate appearance later in the day for any hints that U.S. President Donald Trump may have been engaged in obstruction of justice - an offense that could lead to impeachment hearings.

ECB policymakers are set to take a more benign view of the economy and will even discuss dropping some of their pledges to ramp up stimulus if needed, sources with direct knowledge of the discussions told Reuters.

None of those events "are directly related to oil but all of them could have an impact on the dollar and risk attitudes generally," Le Brun said.

In the U.S., stocks of crude oil and gasoline surprisingly rose last week as refinery runs declined and exports fell, official data showed on Wednesday.

Crude inventories USOILC=ECI rose by 3.3 million barrels in the week ended June 2, compared with expectations for a decline of 3.5 million barrels, the Energy Information Administration said.

It was the first increase in 10 weeks and came as refineries eased off from record processing levels reached a week earlier. U.S. refiners are still producing at a very high rate.

The data surprised analysts and undercut a growing view that inventories were finally showing steady progress toward drawing down to seasonal averages.

Article Link To Reuters:

U.S. Oil Exports Double, Reshaping Vast Global Markets

The pace of exports hit 1 million barrels a day this year, contributing to the downward pressure on crude prices.

By Lynn Cook
The Wall Street Journal
June 8, 2017

American oil exports are emerging as a disruptive new force in global markets.

The U.S. exported 1 million barrels of oil a day during some months so far this year—double the pace of 2016—and is on track to average that amount for all of 2017, according to a Wall Street Journal analysis of data from the U.S. Energy Department and the International Trade Commission.

In another era, a domestic glut and low prices, currently hovering under $50 a barrel, might have caused companies to slow the pace of drilling. But since Congress lifted a ban on oil exports at the end of 2015, shipments out of Texas and Louisiana have skyrocketed, taking the fruits of the U.S. fracking revolution to new markets.

“The glut of crude around the world, coupled with extremely low prices to rent oil tankers, is upending petroleum flows,” said Kurt Barrow, vice president at consulting firm IHS Markit.

While U.S. exports make up just 1% of global oil volumes, they are a new factor helping to tamp down prices and keep them rangebound between $45 and $55 a barrel. U.S. oil prices on Wednesday declined more than 4% to around $46 a barrel after weekly inventory data showed a surprise increase in stockpiles.

Exports represent a relief valve for U.S. drillers, who are ramping up production at a pace to surpass 10 million barrels a day, a new record, by next year if not sooner.

The U.S., which shipped more than 110 million barrels to foreign buyers from January to April, according to ITC data, is benefiting in part from a decision by the Organization of the Petroleum Exporting Countries to temporarily reduce output.

The U.S. still imports a lot of foreign crude, averaging 10 million barrels a day last year, because it is the world’s No. 1 oil consumer. But that level has dropped sharply in recent years.

A major reason why U.S. exports are rising is that American crude has been selling at a discount of roughly $2.50 a barrel to the international oil-price benchmark, Brent, for much of this year.

That spread makes it profitable to pay to transport U.S. oil to farther flung locales. If U.S. oil’s discount to Brent gets bigger, American shipments will ramp up. If it shrinks, less U.S. oil will flow overseas.

Another big reason for the increase in exports is so-called back-haul economics, said Mason Hamilton, an analyst with the Energy Department. Tankers carrying crude from the Middle East to Texas used to unload and go home empty. Now U.S. oil can be loaded on those tankers and make a pit stop in Europe on their way back.

In late May, Occidental Petroleum Corp. successfully tested docking a supertanker that can hold more than 2 million barrels of crude. The test at its shipping terminal in the Port of Corpus Christi was part of a plan to eventually export bigger shipments from Texas to Asia and Europe.

The U.S. still ships out nine times more refined petroleum—like gasoline, diesel and propane—than it does raw crude oil. But that could start to change.

“It takes years to establish markets,” Mr. Hamilton said. “Refiners are protective of their refineries. They want a consistent quality stream—no mystery crudes—so they are testing it out.”

In 2013, 99% of the small trickle of oil that flowed out of the U.S. on special permits went to Canada. Since the lifting of the export ban, American oil has flowed to more than 30 countries, with China, Colombia and the U.K. emerging as big buyers.

So far this year, Asian buyers have taken 39% of U.S. shipments as Canada’s share has dropped to 30%, according to the latest federal data, which runs through April. European refiners have bought 22% and Latin America 9%.

China, the world’s largest oil importer, traditionally gets more than half of its crude from OPEC members like Saudi Arabia, Angola and Iran. But China, which imported a record 8.6 million barrels a day in December 2016, is stepping up imports of U.S. oil, as well as crude from Brazil, after its own production dropped significantly last year, according to the Energy Department.

“We believe that more U.S. oil production will be needed to meet future global demand and offset production declines in China and Mexico during 2017 and 2018,” said Rob Thummel, managing director for Tortoise Advisors, an energy investment adviser with $16.8 billion under management.

Since the start of this year, more oil routes have been forged between the U.S. and India, Hong Kong, Australia and Denmark. Even Georgia, sandwiched between big oil producers Russia and Azerbaijan on the Black Sea, took a shipment of U.S. crude in March. In some cases, experts believe, countries are taking U.S. shipments to make a statement to their current suppliers: We have options.

Italy and the Netherlands, where the pipeline-linked Port of Rotterdam serves as a major gateway to Europe, are also emerging as destinations for U.S. crude. Royal Dutch Shell PLC, which operates the largest refinery in Europe in Rotterdam, is among the companies that have shipped U.S. crude to the Continent.

American crude’s place in Europe remains relatively small, at just shy of 25 million barrels in the first four months of the year. But the exports are a challenge to Russia, which toppled the U.K. and Norway as the top oil exporter into the Netherlands 12 years ago.

Article Link To The WSJ:

Crude Oil's Biggest Tumble Since March Shown In Three Charts

U.S. total crude and products supplies jump by most since 2008; WTI-Brent spread narrows, encouraging U.S. crude oil imports.

By Jessica Summers
June 8, 2017

Oil’s 5 percent tumble Wednesday, the biggest slide since March, followed government data that showed U.S. crude and fuel stockpiles unexpectedly soaring at a time of year when they normally decline. Here are three charts showing what made oil bulls run scared.

Stockpile Surge

Total U.S. inventories of crude oil and products such as gasoline and diesel fuel surged the most since 2008 last week, according to the Energy Information Administration. The 15.5 million-barrel jump took investors by surprise, sending the market off a cliff. What caused the increase? Higher imports of crude, as well as a sharp decline in exports. Add in a 505,000 barrel a day drop in gasoline demand and you end up with growing stockpiles.

“It’s about total stocks, crude and products, because that’s what the world wants to see, that’s what OPEC wants to see," Michael Wittner, head of commodities research at Societe Generale SA in New York, said by telephone. "A week ago, you could say three of the past four weeks, it has come down, you are starting to see a trend develop. And then today, boom, the whole thing falls apart.”

Dynamics Shift

What’s behind the import shift that helped cause the 3.3 million barrel build in nationwide crude supplies? The spread between the global crude benchmark Brent and its U.S. counterpart tightened during the second half of May, shrinking to a premium of $1.99 last week, the smallest since February. A narrower gap encourages imports and makes U.S. exports more expensive relative to oil from elsewhere. Imports rose by 356,000 barrels a day last week, while crude exports fell by 746,000 barrels a day, the biggest drop ever.

Iraqi Imports

Where did the flood of imports mostly come from? Imports from Iraq surged to 1.14 million barrels a day, the most since 2012, according to preliminary EIA data. That more than outweighed a drop in imports from Saudi Arabia, which sank 55 percent to the lowest level since January 2015.

“Today’s report was the straw that broke the camel’s back. We thought there would be no chance of a build in the oil market,” Phil Streible, senior market strategist at RJO Futures in Chicago, said by telephone. There’s a lot of chatter about oil heading back to the $20s again, he said.

Article Link To Bloomberg:

Sirius XM In Talks To Invest In Pandora

By Liana B. Baker and Greg Roumeliotis
June 8, 2017

Sirius XM Holdings Inc, the U.S. satellite radio company controlled by John Malone's Liberty Media Corp, is seeking to invest in internet music provider Pandora Media Inc, people familiar with the matter said.

Sirius XM is negotiating a private investment in public equity (PIPE) after talks about Sirius XM acquiring Pandora in its entirety ended unsuccessfully over price disagreements, the sources said on Wednesday.

If the negotiations between Sirius XM and Pandora come to fruition, the deal would come after private equity firm KKR & Co LP agreed last month to invest $150 million in Pandora.

KKR's agreement gave Pandora a 30-day-period to look for an alternative deal. This period expires on Thursday, and so Sirius XM was racing late on Wednesday to beat that deadline and clinch its own investment in Pandora, the sources said.

The terms of Sirius XM's proposed PIPE investment could not be learned, and sources cautioned that the latest negotiations between Sirius XM and Pandora could still fall apart. Liberty Media may also object to any deal, the sources added.

The sources asked not to be identified because the deliberations are confidential. Pandora declined to comment, while Sirius XM and Liberty Media did not immediately respond to requests for comment.

Any partnership between Sirius XM and Pandora would be a boon to both companies, given that they target a common audience. Pandora is seeking to become more popular with drivers, many of whom subscribe to Sirius XM, while Sirius XM is looking to expand its internet and mobile presence.

A PIPE deal involves the sale of a company's shares in a private offering, as opposed to a public secondary offering. Pandora shares ended trading on Wednesday at $8.48, giving the company a market capitalization of around $2 billion.

Pandora's stock is down 30 percent in the last 12 months, as the company faces stiff competition from services such as Sweden's Spotify, Apple Inc's Apple Music, Alphabet Inc's Google Play Music and Inc's Music Unlimited, which dominate the on-demand music service market.

KKR's $150 million investment gives it preferred Pandora stock that can be converted into common stock, cash, or a combination, at a conversion price of $13.50 per share.

Pandora had been urged to explore a sale by Corvex Management LP, an activist hedge fund run by Keith Meister, a protégé of activist investor Carl Icahn. Corvex owned 8.6 percent of Pandora as of the end of March.

Article Link To Reuters:

‘I’m Not Sure I Understand’ -- How Apple’s Siri Lost Her Mojo

Nimble competitors developed new voice-powered products for the home while Apple remained focused on its phone.

By Tripp Mickle
The Wall Street Journal
June 8, 2017

In late 2014, members of Apple Inc.’s AAPL 0.60% Siri team arrived at an Inc. event thinking they were ahead of the competition.

Apple’s three-year-old product had gained popularity for its ability to handle calendar appointments, text messaging and a few other simple tasks based on voice commands. Siri had no real competitors.

The outlook quickly changed as the team watched Amazon’s video showing off a small, voice-controlled speaker that could play music, order products and search the web. It demonstrated Amazon had figured out how to isolate voices from background noise and have a digital assistant respond to requests from a distance—abilities Siri hadn’t yet mastered.

“People at Apple’s anxiety level went up a notch,” said a former member of Apple’s Siri team who was there that night.

Today, Apple is playing catch-up in a product category it invented, increasing worries about whether the technology giant has lost some of its innovation edge.

On Monday Apple announced HomePod, a home speaker powered by Siri that will start selling in December. The device will perform Siri functions such as dimming lights and setting reminders, though Apple touted it mainly as an advanced home-stereo system with superior audio quality. It spent years developing it.

Apple also unveiled planned upgrades to Siri for the fall that will enable it to translate English phrases into five languages and to learn from users to deliver personalized suggestions for web surfing, messaging and other apps.

Apple will enter the home-speaker market a distant third, at best. Amazon, which has been selling its Echo speaker for 2-½ years, last month unveiled a device, also powered by the Alexa voice assistant, that includes a camera and a display for video calling. And it has partnered with companies to put Alexa into Ford Motor Co. cars, LG Electronics Inc. refrigerators, and General Electric Co. lamps.

Alphabet Inc., which debuted its Google Assistant-based speaker last October, said last month it would make its voice product available through an app on iPhones. Microsoft Corp. in May unveiled a speaker for its voice robot, Cortana, and Samsung Electronics Co. is expected to install its planned Bixby assistant on home appliances.

Siri has remained largely a feature of the iPhone, although it is also available on a handful of other Apple devices, including the Apple Watch. Siri’s capabilities have advanced incrementally, with functions matched or exceeded by those of rival systems. Several independent studies have shown Siri is less accurate than Alexa or Google Assistant in responding to user queries.

Some former executives, close observers and even devoted customers say Apple’s innovative power appears to be waning, stymied by a lack of urgency and difficulty bringing ideas to fruition. In nearly six years under Chief Executive Tim Cook, Apple’s stock has soared but the company has not delivered a breakthrough product on par with the string of hits under late founder Steve Jobs, which included the iPod, iPhone and iPad.

One reason could be the iPhone itself, one of the most successful consumer products in history. It accounts for most of Apple’s sales and dominates much of the company’s focus, which former executives say has inhibited the company’s ability to develop products untethered from the phone, as rivals did with their brand-new voice-activated devices.

“Siri is a textbook of leading on something in tech and then losing an edge despite having all the money and the talent and sitting in Silicon Valley,” said Holger Mueller, a principal analyst Constellation Research, a technology research and advisory firm.

Apple’s supporters say it often has entered categories after rivals and assumed a commanding position. And Apple says the pace of its innovation has only accelerated. The company has tripled research-and-development spending over the past five years to $10 billion annually. It is working on a range of projects, including an autonomous driving system, that could become hits if they come to market. Apple notes that Siri, through its presence on the iPhone, is in the pockets of hundreds of millions of users globally—far more than any rival’s voice assistant.

“We’re very happy with where the company is from an innovation standpoint,” Eddy Cue, the Apple senior vice president whose portfolio includes Siri, said in an interview before Monday’s announcements, which also included augmented reality for developers and more-powerful Macs. “It’s part of our DNA.”

The race to develop digital assistants is one of the biggest areas of competition in the tech industry today. Industry executives say these products, powered by increasingly effective artificial-intelligence algorithms, are revolutionizing computing much like the PC and smartphone, leading to a future where computers will converse with humans, recall previous conversations and provide personalized responses without buttons or touchscreens.

Siri was one of Mr. Jobs’s last major new products. He became a fan in 2010 when it was launched by a small startup as a digital-assistant app for iPhones. In 30 phone calls over 45 days, he persuaded its founders to sell, according to Gary Morgenthaler, a Siri investor. He then pushed them to fine-tune a handful of features that would work flawlessly across millions of iPhones in multiple languages.

Touted as “the best feature” of the iPhone 4s in 2011 by Apple marketing chief Phil Schiller, Siri converted words to text and interpreted their meaning to describe the weather or make calendar appointments and helped fuel a 73% increase in iPhone shipments in its first year. A day after the announcement, Mr. Jobs died.

In the years since, former Siri team members say, progress has been slowed by a failure to set ambitious goals, shifting strategies and a culture that prioritizes user privacy—making it difficult to personalize and improve the product. The project also has suffered from the departures of key team members, some of whom went to competitors.

About a year after Mr. Jobs’s death, Apple hired Bill Stasior, an Amazon search executive, to oversee Siri. Mr. Stasior studied artificial intelligence at Massachusetts Institute of Technology, but his expertise was in search rather than speech or language. This led some members of the Siri team to believe he didn’t fully appreciate the product’s original vision: to expand beyond the iPhone to third-party apps.

To make Siri available to additional apps—so users, for instance, could check their bank balance or order a car service—Apple needed to create a platform and coding tools that allows developers to integrate the virtual assistant into apps for the iPad, iPhone or Apple Watch. It did so in 2016.

Apple declined to make Mr. Stasior available for an interview. He didn’t respond to emails seeking comment.

Siri co-founders Adam Cheyer and Dag Kittlaus left the team, citing personal reasons. They started a competing company, Viv Labs, to make a voice-based system available to third-party developers. Roughly a half dozen other members of the team followed. Samsung bought Viv last year for about $215 million.

In 2014, Apple moved Siri to a machine-learning system that used algorithms to improve its performance. Mr. Cue compared the new system to a brain transplant, saying it made Siri more versatile, allowing it to field requests no matter their phrasing. For example, it could answer both “Give me yesterday’s Yankees score” and “What was yesterday’s Yankees score?”

“The key about things like Siri is to make it not feel like something you have to think about,” Mr. Cue said. Apple said Siri’s error rate was cut in half.

Around the same time, Amazon introduced Alexa and its Echo speaker. The company pioneered a new category, blanketing television with quirky ads featuring Alec Baldwin. It sold an estimated 11 million home speakers in two years.

The device’s popularity caught Apple off guard. It was designed to not only play music and answer questions but also control light switches and other home appliances, a concept Apple had recently introduced through a software system called HomeKit that allows developers to design thermostats and door locks that could be controlled by Siri.

The iPhone, in many ways a huge advantage, was also becoming an impediment. Apple says more than 375 million of its devices access Siri each month across 21 languages, and that Siri fields nearly two billion requests a week. In the U.S. alone, it has 70 million unique users weekly. By comparison, Amazon’s Alexa is available only in German and English, and Google Assistant is available only in seven languages.

At the same time, the iPhone—accounting for two thirds of sales—so dominates internal focus that Apple largely abandoned the original Siri team’s vision for an assistant that would go beyond calendar appointments and text messaging.

Instead, Apple added languages, added a male voice to Siri’s original female voice, and allowed users to verbally create reminders while reading an article or viewing something on the iPhone. Apple and other large companies “tend to make improvements at the margin,” said Larry Gillick, a former Siri speech scientist who serves as chief technology officer at a startup called Semantic Machines.

Amazon and Google, which introduced its own assistant in 2016, also enjoyed advantages over Siri because they had more data from their robust search engines to train their assistants and less-restrictive privacy policies than Apple, former Siri employees said.

Apple protects user privacy by randomly tagging Siri searches and keeping the data tagged for only six months, unlike Google and Amazon, which keep data until users ask for it to be discarded. The practice has complicated efforts to improve Siri because Apple relinquished control of data before it could be used to gauge the impact of software tweaks, former Siri engineers said.

“You’re hamstrung,” said Jason Douglas, a former member of the Siri search team. “The iTunes store has great data but the scale of it is not Google or Amazon.”

Mr. Cue said Apple often uses generic data rather than user data to train its systems and has the ability to improve Siri’s performance for individual users with information kept on their iPhones.

After Siri’s brain transplant, plans to improve Siri’s conversational ability stalled. Apple tasked Alex Acero, an expert in language processing, with combining two rival teams: speech recognition and natural language. The first involves adapting software to recognize spoken words, and the second involves interpreting those words. Following an executive-level power struggle, the project was transferred to another leader without expertise in the field, said Chuck Wooters, who was on the speech-recognition team.

The change disillusioned some speech-recognition experts. One left for Google and another for Amazon, said Mr. Wooters, who also departed and joined the Semantic startup, which is developing technology to make virtual assistants more conversational.

Apple declined to comment. Mr. Acero, who still works on Siri, didn’t return requests for comment.

Other employees were discouraged by the reluctance to allow third-party apps to employ Siri. Apple added the ability to use Fandango to buy movie tickets in 2013, but Mr. Stasior tabled a plan to extend Siri’s abilities to more apps, two former employees said. By the time the project moved forward two years later, Apple had reduced the number of new commands developers would be able to use, a former engineer said.

In June of last year, Apple unveiled about 150 new commands, called intents, for Siri at its annual developer’s conference. It opened Siri to about seven types of apps, including payment and ride-sharing apps such as Venmo and Uber. By comparison, Amazon’s Alexa allows developers to create custom commands, which it calls skills, and some 12,000 have been created, allowing users to order coffee, start a guided meditation or check their bank-account balance.

The limited scope of Siri’s commands disappointed many developers, said Brian Roemmele, a developer who attended the announcement. “People went from being happy and excited to sitting in workshops and realizing, ‘I can’t use it,’ ” he said. “Some went back to that attitude: Siri’s always going to be dumb. They moved on to developing for Google and Alexa.”

Mr. Cue said Apple chose to open Siri to apps that people use frequently and make it versatile enough to understand requests said in a variety of ways. “These are things you do every day and use all the time,” he said.

Apple on Monday announced developers would be able to use Siri for four more types of apps, including notes and bank accounts.

Siri’s capabilities have lagged behind those of rivals elsewhere, as well. In tests across 5,000 different questions, it answered accurately 62% of the time, lagging the roughly 90% accuracy rate of Google Assistant and Amazon’s Alexa, according to Stone Temple, a digital marketing firm.

A separate study by Loup Ventures, a market-research firm, shows Siri performs better than rivals on core iPhone functions, so-called command-related queries—making calendar appointments, placing phone calls, sending text messages—but doesn’t do as well answering questions accurately from the web.

Apple has tried to close the gap through acquisitions. In 2015, it purchased VocalIQ, a Cambridge, England-based startup that designed a system to improve a virtual assistant’s conversational ability.

The plan was to feed Apple’s data through the system to make Siri more conversational, a former engineer said, allowing a user to ask for a nearby coffee shop and subsequently narrow the list by asking for one with Wi-Fi.

Google Assistant has begun to offer those conversational capabilities, but Siri still hasn’t made that advance. “I don’t think anyone does an A+ on conversation,” said Mr. Cue. “It’s a challenging problem and there’s a lot of work to be done in that area. It will get a lot better and needs to get a lot better.”

Article Link To The WSJ:

Amazon Lent $1 Billion To Merchants To Boost Sales On Its Marketplace

By Jeffrey Dastin
June 8, 2017 Inc has stepped up lending to third-party sellers on its site who are looking to grow their business, a company executive said in an interview on Wednesday.

The e-commerce giant has doled out more than $1 billion in small loans to sellers in the past 12 months, compared with more than $1.5 billion it lent from 2011 through 2015, said Peeyush Nahar, vice president for Amazon Marketplace. Sellers have used the money to expand their inventory or discount items on Amazon, he said.

Boosting sales for third-party merchants is lucrative for Amazon, which takes a cut of transactions on its site.

It also has made a business out of handling more leg work for sellers, too. They pay Amazon to fulfill their orders and boost their placement in search results, without which sellers might struggle to grab shoppers' attention.

More than 20,000 small businesses have received a loan from Amazon and more than half of those have taken a second loan from the company, it said.

Loans range from $1,000 to $750,000. Sellers have said interest rates are between 6 percent and 14 percent.

Rivals, including eBay Inc and Wal-Mart Stores Inc, now are doubling down on their marketplace businesses, but loans may help keep sellers close to Amazon's orbit.

"We do tell them it's to help them grow on the Amazon Marketplace," Nahar said.

Traditional lenders shied away from small merchants after the 2008 financial crisis, which created an opening for other sources of financing. While this exposes Amazon to additional credit risk, the company has near real-time data on sellers' businesses and access to their customer reviews, which are helpful in deciding whether to make a loan.

The loan program is invitation-only.

Amazon has issued loans to sellers in the United States, United Kingdom and Japan.

The company has said it would expand to other countries where it operates marketplaces, such as Canada, France and China. On the rollout's timing, Nahar said, "Stay tuned."

Article Link To Reuters:

ECB To Keep Taps Open As Economic Outlook Uncertain

By Balazs Koranyi and Francesco Canepa
June 8, 2017

The European Central Bank is likely to keep the money taps fully open at its meeting on Thursday as inflation remains below its target despite stronger economic growth in the euro zone.

The currency bloc's economy has been on its best run for a decade but ECB President Mario Draghi is yet to be convinced that the recent rebound in inflation is durable because wage growth remains sluggish.

Against this backdrop, the ECB is widely expected to keep policy unchanged on Thursday, including its 2.3 trillion euro ($2.59 trillion) bond-buying program and sub-zero interest rates, despite resistance from cash-rich Germany.

"We expect Thursday's press statement to reiterate that an 'exceptional degree of monetary accommodation' is still needed," said Luigi Speranza, an economist at BNP Paribas.

Sources have told Reuters the ECB is likely to nudge up its growth forecasts but trim its estimates for inflation when it presents its new staff projections for 2017-19.

The mixed outlook was seen strengthening the case for keeping the ECB's easy policy in place, including a pledge to cut rates further if necessary to bring inflation back to the central bank's target of just under 2 percent.

"It raises the probability that the ECB makes no changes to its language of forward guidance at this meeting," economists at Nomura wrote in a note to clients.

Among other factors making the ECB cautious are big debts overhanging governments and companies, the piles of unpaid loans weighing on banks in countries like Italy and Portugal, and political uncertainty ahead of elections in Germany and Italy.

Sources told Reuters last week the ECB will acknowledge the improved economic outlook by removing a reference to "downside risks" in its statement.

But any announcement on its quantitative easing (QE) program is likely to be put off until the autumn, when policymakers hope the economic picture will have become clearer. Asset purchases under the program are due to continue at least until December at a pace of 60 billion euros per month.

"We still expect a compromise to be reached, implying more QE into next year, but at a reduced monthly pace," economists at Societe Generale said in a note.

"While data-dependent, we also expect further quarterly 10 billion euro reductions, ending QE in September 2018."

Draghi is also certain to face questions about failing Spanish lender Banco Popular (POP.MC), which was bought by rival Santander (SAN.MC) on Wednesday in an ECB-orchestrated rescue.

Investors were wondering if the ECB move on Popular would have implications for two struggling banks in Italy's Veneto region, which like Popular are weighed down by bad loans.

Having failed to raise capital on the market, Popolare di Vicenza and Veneto Banca have applied for state help, for which they need ECB and European Commission approval.

Article Link To Reuters:

Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis

Bond investor says asset prices too high for risk-taking; Gross’s unconstrained bond fund has outperformed 22% of peers.

By John Gittelsohn and Erik Schatzker
June 8, 2017

U.S. markets are at their highest risk levels since before the 2008 financial crisis because investors are paying a high price for the chances they’re taking, according to Bill Gross, manager of the $2 billion Janus Henderson Global Unconstrained Bond Fund.

“Instead of buying low and selling high, you’re buying high and crossing your fingers,” Gross, 73, said Wednesday at the Bloomberg Invest New York summit.

Central bank policies for low-and negative-interest rates are artificially driving up asset prices while creating little growth in the real economy and punishing individual savers, banks and insurance companies, according to Gross.

The U.S. economy is expected to grow 2.2 percent this year and 2.3 percent in 2018, according to forecasts compiled by Bloomberg. Trump administration officials have said their policies will boost annual growth to 3 percent.

Despite being concerned about high asset prices, Gross said he feels required to stay invested and sees value in some closed-end funds. Examples he gave are the Duff & Phelps Global Utility Income Fund and the Nuveen Preferred Income Opportunities Fund. He also said he has about 2 percent to 3 percent in exchange-traded funds to get yield and add diversification.

“They’re appetizers, not entrees,” he said in an interview outside the conference.

Gross’s fund has returned 3.1 percent in the year through June 6, outperforming 22 percent of its Bloomberg peers. It has posted a total return of 5.4 percent since Gross took over management in October 2014 after he was ousted from Pacific Investment Management Co.

”If there’s a common factor it’s the expansion of credit,” Gross said on Bloomberg TV Wednesday. “And the credit that’s being generated by central banks. Money is being pumped out into the system and money that is yielding less than nothing seeks a haven not only in bonds that are under-yielding but in stocks that are overpriced.”

Gross said in the current environment “you basically tell your investors that it’s a changed world, that returns are going to be lower and that if you want to sleep at night, to accept the market as it is. Low volatility requires low returns.”

Janus Capital Group and Henderson Group completed a merger May 30 to form Janus Henderson Group Plc, creating a global investment manager overseeing more than $330 billion. It seeks to use its combined size to compete with lower-fee rivals, such as Vanguard Group, at a time when costs are rising for compliance and technology.

Gross said the merger will help his fund since Henderson will add to asset growth.

Article Link To Bloomberg:

Debt Limit Showdown Looms Sooner As Wealthy Bet On Trump Tax Cut

By David Morgan and Trevor Hunnicutt
June 8, 2017

The U.S. Congress may be headed for a reckoning with the federal debt limit within weeks, thanks to wealthy Americans and corporations deferring tax payments in the hope that they would benefit from the lower tax rates promised by President Trump.

Trump promised tax cuts during his election campaign last year and has reiterated those promises in recent months leading some wealthy Americans and businesses to shift accounting for income into the future, betting that lower tax rates will arrive, perhaps in 2018, wealth managers told Reuters.

"Everyone wants to talk about deferring income," said Mark Copeland, senior partner at Signature Estate & Investment Advisors LLC in Newport Beach, California.

The U.S. stock market has also rallied since Trump's election victory in November, partly on hopes for lower corporate tax rates.

“We are starting to prepare clients for potentially lower taxes in 2018," said Julia Carlson, chief executive and at Financial Freedom Wealth Management Group LLC in Oregon.

Trump promised to cut taxes as far back as September 2015 in a four-page plan and reiterated those promises in a two-page "Contract with the American Voter" before last November's election and again in a one-page document in April, but Republicans in Congress remain divided on tax reform.

The delay to tax payments could help to explain why tax receipts this fiscal year are coming in more slowly than projected, said tax experts and the Congressional Budget Office (CBO), an arm of Congress.

"Taxpayers may have shifted more income than projected ... to later years, expecting legislation to reduce tax rates to be enacted this year," the CBO said in a monthly report on Wednesday.

The weaker tax revenues this year have forced the U.S. Treasury to borrow more money than expected to cover the federal budget deficit and that is putting the government on track to hit its legal debt limit sooner than expected, experts said.

The U.S. government has a legal limit on how much it can borrow, currently set at about $19.8 trillion and the limit can only be increased by a vote of Congress.

The need to raise the debt limit usually creates partisan debate in Washington. Conservative Republicans like to use the debt limit issue as leverage to demand cuts in spending but Democrats and moderate Republicans usually oppose such ultimatums on the grounds that the borrowings are used to fund spending approved previously by Congress.

This year, with Trump's legislative agenda stalled and Congress preoccupied by Trump's firing of former FBI director James Comey, the House Republicans known as the House Freedom Caucus along with outside conservative groups are again demanding spending cuts for support to raise the debt limit.

In 2011 the failure to raise the debt limit in a timely way and the possibility that the U.S. government might default on its obligations led to the U.S. losing its prized triple-A credit rating from Standard & Poor's.

Since mid-March the U.S. Treasury has been using emergency funding powers to postpone hitting the debt limit and those measures had been expected to last until about October, but lower tax receipts so far this year may mean the debt limit will be hit sooner-than-expected.

Treasury Secretary Steven Mnuchin urged Congress last month to raise the debt ceiling before lawmakers break for a long August summer recess, a call echoed last week by House Democratic leader Nancy Pelosi.

Article Link To Reuters:

Why Investors Are Selling Stocks To Buy Bonds And Gold

Three events take place Thursday, so be prepared for opportunities with cash on hand.

By Nigam Arora
June 8, 2017

Four events are sending investors out of stocks and into the safety of gold, bonds and the Japanese yen.

How do I know this? I am looking at money flows.

The market reaction to Brexit and the Trump election is more than ample proof that investors do not come out ahead just by analyzing events and making predictions based on the prevailing wisdom. As an example, the prevailing wisdom was that if Trump got elected, the stock market would plunge. Initially, Dow Jones Industrial Average futures did plunge 700 points, and since then the market has staged an impressive rally.

A useful gauge is money flows. Due to the importance of money flows to investors, let us explore it before delving into the four important events.

Money Flows

Please click here for tables of important money flows. I have been watching and investing based on money flows for a very long time. Long ago I concluded that investing and trading on money flows alone did not give me the edge I was seeking. That led to the multi-year quest of developing algorithms to dissect money flows into various segments. Money flows from the following three segments are the most important.

• Smart money

• “Momo” (momentum) crowd

• Short squeeze

The tables linked above show current money flows for each of these three segments for stocks, gold, oil and bonds.

Now that you have been exposed to a better way of looking at money flows, you too can appreciate the impact of the four events with a new perspective that is likely to generate more profits and fewer losses. Here are the four events:

Qatar Crisis

Qatar is a small, but strategically located, Arab nation. It is different from most of the Arab population in that the majority of its citizens follow the Salafi branch within Sunni Islam. It has close relations with Iran.

The news is that Saudi Arabia, Bahrain, UAE and Egypt have cut off diplomatic relations with Qatar. They claim Qatar is supporting terrorism.

The news started an avalanche of buying in gold from the Middle East. ETFs of interest are gold ETF GLD, -0.53% silver ETF SLV, -0.66% gold miner ETF GDX, -0.63% and junior gold miner ETF GDXJ, -0.26% Day traders are having a heyday with leveraged miner ETF NUGT, -2.30%

Qatar itself is not a major oil exporter but is a big exporter of liquefied natural gas. Brent crude oil, the standard in Europe, initially moved up on the news.

WTI crude CLN7, +0.61% the standard in the United States, did not initially see as much buying as Brent did. When the buying did not continue, bears took charge with waves of aggressive selling, attempting to break support at $47. Every time the support broke, significant buying came in right under $47. This price action is leading to a short squeeze in oil as of this writing.

ETFs of interest are oil ETF USO, -5.12% major oil equities ETF XLE, -1.41% oil-services equities ETF OIH, -4.19% and oil-exploration ETF XOP, -4.12% Day traders are using leveraged oil ETFs DWT, +15.61% and UWT, -15.28%

Comey Testimony

Fired FBI Director James Comey will testify in front of Congress on Thursday. There is no telling exactly what he will say and how his testimony will affect Trump’s agenda.

The uncertainty is putting pressure on stocks. ETFs of interest are S&P 500 ETF SPY, +0.19% Nasdaq 100 ETF QQQ, +0.39% small-cap ETF IWM, +0.09% and DJIA ETF DIA, +0.17%

ECB Meeting On Thursday

The European Central Bank (ECB) meets Thursday. There is considerable uncertainty about the outcome. ETFs of interest are euro ETF FXE, -0.14% inverse euro ETF EUO, +0.25% Vanguard Europe ETF VGK, +0.05% iShares MSCI Eurozone ETF EZU, +0.22% SPDR Euro STOXX 50 ETF FEZ, +0.05% and WisdomTree Europe Hedged Equity Fund HEDJ, +0.31%

British Election On Thursday

Polls have narrowed going into the British election Thursday. This is causing considerable nervousness in international markets. Money is flowing into Treasury bonds and the Japanese currency. Bond ETFs of interest are TLT, -0.48% and TBT, +0.81% Yen ETFs of interest are FXY, -0.40% and YCS, +0.79%

As money flows into the yen, it has a negative effect on Japanese stocks. Japanese equity ETFs of interest are DXJ, +0.64% and EWJ, -0.04%

What To Do Now

The following is the current call from the morning capsule provided every morning to The Arora Report subscribers:

“It is important for investors to look ahead and not in the rearview mirror. Consider continuing to hold existing positions. Based on individual risk preference, consider holding cash or Treasury bills 18%-28%, short- to medium-term hedges of 15%-25% and very short-term hedges of 15%. It is worth remembering that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high-beta stocks. High-beta stocks are the ones that move more than the market.”

Article Link To MarketWatch:

Stocks Are One Bad Headline Away From 5-7% Drop

-- If Trump's agenda is stalled, there are going to be problems for the market, UCX's Jack Bouroudjian warned.
-- Bruderman Brothers' Oliver Pursche believes right now investors should be cautious.
-- However, Jim McCaughan, CEO of Principal Global Investors, is still pretty optimistic about U.S. equities.

June 8, 2017

The stock market is "one bad headline" away from a 5 percent to 7 percent drop, expert Jack Bouroudjian warned on Wednesday.

Investors are eagerly anticipating the Congressional testimony of former FBI Director James Comey on Thursday, and on Wednesday they appeared to hope it would be less damaging to President Donald Trump than previously feared.

U.S. stocks closed higher after the release of Comey's full opening remarks about Trump asking him to "drop" the probe into former national security advisor Michael Flynn.

However, Bouroudjian, chief economist and co-founder of UCX, told CNBC's "Closing Bell" that June has been historically been a bad month — and that is now coupled with "real serious headline risk."

The concern is how Comey's testimony and the investigation into Russia's alleged meddling in the U.S. election will effect Trump's agenda.

Oliver Pursche, chief market strategist at Bruderman Brothers, believes it is at best a distraction but is more likely something that stalls the Trump agenda, including tax and health-care reform, that the market's growth has been based on.

"That's very problematic because we're not seeing 3 percent plus GDP growth, we're not seeing strong numbers around the globe. You've got oil that fell today," he said in an interview with "Closing Bell."

"At this point investors are better to be cautious — tone down risk, stick with high quality stocks, stick with dividend payers, avoid some of the high fliers."

Bouroudjian agrees.

"If we don't get this pro-growth agenda passed through, we're going to have problems," he said.

He also believes the bond market is signaling there is a problem. The yield on the benchmark 10-year Treasury hit the low of the year on Tuesday.

"It's very, very difficult to really get bold on this market at this level," Bouroudjian said.

However, Jim McCaughan, CEO of Principal Global Investors, is still pretty optimistic about U.S. equities.

He believes there will be a continued cycling between different sectors and different stocks, including a possible setback in tech.

"This is a healthy environment in which to be a stock picker in, in which to be buying stocks on setbacks," he told "Closing Bell."

Article Link To CNBC:

China’s Exports Rise In May As Global Trade Outlook Brightens

Imports climb 14.8%, signaling domestic demand remains robust; Commodities purchases rise with global prices broadly stable.

Bloomberg News
June 8, 2017

China’s overseas shipments accelerated from a year earlier, as global demand shows signs of picking up.

Key Points

-- Exports rose 8.7 percent in May in dollar terms, more than the 7.2 percent increase forecast by economists in a Bloomberg survey
-- Imports surged 14.8 percent in dollar terms, more than the 8.3 percent forecast
-- The trade surplus widened to $40.81 billion

Big Picture

A brighter international outlook is supporting China’s manufacturing machine, with the World Trade Organization saying it expects trade to “expand moderately” in the second quarter. After a solid start to the year, the domestic economy had shown signs of weakening momentum, though May’s robust import figures could signal resilient domestic demand. While China’s import data can sometimes be skewed by big moves in commodity prices--it’s the world’s top ore buyer--the value of commodities remained broadly stable over May.

Economist Takeaways

The economy still has strong momentum, with major export destinations such as the U.S. and Europe "operating in a steady way," said Yao Shaohua, an economist at ABCI Securities Co. in Hong Kong, who had the most accurate imports forecast. He sees full-year import growth rising to 10 percent and exports increasing by 4 percent. "It’s good timing for regulators to cut financial leverage as the economy is strong. The PBOC will watch how the economy is doing when pacing its deleveraging efforts."

"Global external demand is strengthening," said Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA in Hong Kong. "The trade surplus figures are quite good and even more so if you look at import and export figures in volume. Exports are ballooning."

"Imports, in particular, held up surprisingly well,” wrote Julian Evans-Pritchard at Capital Economics in Singapore. “But given the approaching headwinds to the economy from policy tightening, we doubt this strength will last."

The Details

-- Imports of iron ore slipped to $6.72 billion in May from $6.86 billion
-- Imports of crude oil, steel products, copper and soybeans all rose in dollar terms

Article Link To Bloomberg:

With Leaders Like This, Britain Should Panic

The U.K. election has been a contest of inadequates.

By Clive Crook
The Bloomberg View
June 8, 2017

At a time when the U.K.'s most pressing need is for competent leadership, it's saddled with two of the most bungling party leaders in living memory. Even a well-run government would struggle to control the short-term damage likely to be inflicted by Brexit. Whatever happens in Thursday's vote, there's no prospect of a well-run government by Friday. On this evidence, exaggerating how much trouble Britain is in would be hard.

Prime Minister Theresa May called this snap election -- after suspending a law requiring fixed-term parliaments -- because she was sure of a huge win. She had every reason to think so. Jeremy Corbyn is an unreconstructed old-school leftist and every Tory's dream of a Labour Party leader. His own parliamentarians wanted to ditch him but were overruled by the party's wider membership. May duly started with an immense lead. Over the succeeding weeks, Corbyn's shambles of a Labour Party came much of the way back.

Why? Bizarrely, Brexit has almost nothing to do with it. Labour isn't challenging the referendum result, partly because so many of its own supporters want out of the European Union; and its position on how to manage Brexit is as vague as the Tories'.

Labour's remarkable traction during the campaign also wasn't because Corbyn came up with a compelling election manifesto and sold it pretty well. Quite the opposite: Content and marketing were fully as bad as the Tories could have wished. Nationalize this, nationalize that, make higher education free, pour resources into every kind of public service, and no we aren't quite sure what all of this will cost.

As this farcical program was set before voters, the Tories should have increased their lead, not seen it dwindle. May is the reason this didn't happen. And sadly for the U.K., her failure wasn't an error of strategy -- errors of strategy can be put right -- so much as plain political incompetence.

With Labour marching briskly hard-left, May tried to follow the example of her predecessor, David Cameron, and move the Conservatives further to the middle of British politics. A pro-market, pro-capitalist party can strengthen its appeal by addressing rising inequality and economic insecurity. There's no contradiction in that: Purblind statism isn't the only way to confront those issues.

But instead of championing a solidly pro-market centrism, May adopted a semi-skimmed leftism heavy on industrial-policy meddling and other piecemeal dirigisme. That went down badly not because voters are opposed to piecemeal dirigisme -- many quite like it -- but because it forced her to be vague and non-committal while standing in front of posters saying "Strong and Stable Leadership." Her refusal to debate head-to-head with Corbyn didn't look all that strong either.

Her single biggest mistake was to announce and then immediately take back a plan to make old people with assets pay more toward their care at the end of their lives. Again, please note, the idea wasn't wrong in principle. Households of modest means shouldn't have to pay higher taxes so that large inheritances can pass to the heirs of the well-situated. But May had no right to be surprised by the hostile reaction -- such policies are always unpopular. Worst of all was her decision to retreat, deny and dither in response. Strong and stable, my foot.

Despite everything, polls in the closing days of the campaign have shown the Tories ahead. For this, give Corbyn the credit. Thanks to him, May is still likely to be prime minister next week, perhaps with an enlarged majority. But at a time when the country needs clarity and strength of conviction above all -- in other words, a steady leader and an artful negotiator -- it has discovered just how far short of that May is likely to fall.

Article Link To The Bloomberg View:

An Election That Offered Few Answers

Instead of galvanizing Britain ahead of Brexit talks, Thursday’s election exposed a country ill at ease with its future.

By Charlie Cooper and Annabelle Dickson
Politico EU
June 8, 2017

It was the Brexit election that never was.

When she called Britain’s surprise election, U.K. Prime Minister Theresa May justified the snap poll as “the only way to guarantee the certainty and stability for the years ahead” — the “strong and stable” mandate she needed to take Britain into an uncertain period that would see it renegotiate its relationship not just with the EU but with the rest of the world.

Instead, the campaign that followed delivered little certainty and plenty of unanswered questions, many of which will remain unresolved whoever voters back as they go to polls Thursday.

The key choices and trade-offs looming with upcoming Brexit negotiations were barely mentioned. A radical, but previously no-hope Labour leader surged in the polls with a promise to overturn the economic orthodoxy of post-2008 crash Britain. In the campaign’s closing days, Britain’s vulnerability to home-grown terrorism shook nerves and overshadowed debate.

The campaign also exposed a country at odds with itself, doubtful of its place in the world and unhappy at home. Far from the jubilant, unifying coronation May might have hoped for, the vote will be held in an atmosphere of gloom and uncertainty not seen in the U.K. perhaps since the 1970s, when the country was — ironically — the sick man of Europe.

Two very different candidates

Part of that uncertainty, of course, comes from the stark choice Britain faces between two very different possible prime ministers.

While May remains the odds-on favorite to win a comfortable majority, her Labour challenger Jeremy Corbyn has far exceeded expectations as a campaigner and has increased Labour’s performance in the polls dramatically in seven short weeks of the campaign. As polling day dawns, he still has a slim but feasible chance of winning enough seats to deprive the Conservatives of an overall majority. In that scenario, a minority Labour government would be forced to rule with issue-by-issue support from smaller parties.

On the final day of campaigning the two leaders’ striking differences — in style and substance — were on clear display.

May visited a placid bowling green in the port city of Southampton in the morning, before flying by chartered plane to Norwich in the east of England to attend a staged event with Conservative activists.

It’s a city where the defeat of Labour rising star Clive Lewis — one of the early supporters of Project Corbyn — would signal a landslide for the Conservatives. The absence of a UKIP candidate put the Conservatives in play.

May’s small rally was held in a hall normally used by the evangelical Christian Proclaimers church, on an industrial estate on the outskirts of town. Watched by husband Philip, May delivered her message for “the remaining hours.”

“I want to ensure that this is a country that feels more confident in itself. I believe in Britain and in the British people,” she said. “There are great things that we can do together and I want us to reignite the British spirit. To show the opportunities and what we can be as a country.”

Later, she was back on the move for a final rally with her full cabinet — many of whom surely wondering whether they will still have a job next week — in Birmingham.

Corbyn, meanwhile, made his way by train (standard class) from Glasgow in Scotland, to Runcorn in north-west England, then on to Colwyn Bay in North Wales, to Watford and finally back to London — at every stop addressing packed crowds, as has become his trademark.

His appearance on the seaside promenade at Colwyn Bay had an air of borderline Beatlemania. Local children were given permission to skip school to go and see him; a toddler perched on his dad’s shoulders burbled: “Go Jeremy Corbyn!”

The Labour’s leader’s every campaign promise was greeted with hearty cheers from the crowd who chanted his name as if he were a soccer legend, to the tune of the riff from White Stripes’ “Seven Nation Army.”

Corbyn’s Labour surge has confounded pundits. Gareth Thomas, the Labour candidate for Colwyn Bay’s parliamentary seat, Clwyd West, was last an MP under Tony Blair. In 2005, he was deposed by Conservative David Jones, who is now a Brexit minister in May’s government. He hopes to overturn Jones’ majority of 6,730 and take the seat back.

Britain’s main opposition Labour Party leader Jeremy Corbyn greets supporters as he leaves after attending a campaign visit in Colwyn Bay, north Wales on June 7 | Oli Scarff/AFP via Getty Images

Under Corbyn, Labour has picked up support from ex-UKIP voters, from Lib Dems, from Welsh nationalists, he said.

This region backed Leave in the EU referendum, and many Brexiteers voted on a wave of anti-politics feeling, exacerbated by stagnant wages and falling living standards, as public sector cuts and pay freezes brought on by seven years of Tory austerity began to bite. May has called these people those “left behind” and “just about managing,” and has sought to win them over.

However, Thomas said “there are many in the ‘left behind’ category here and Corbyn appeals. He is picking up the protest vote.”

Corbyn ended the day at a huge rally in his Islington constituency in north London — the 90th such event of his campaign. Supporters crowded the streets outside, while inside the venue, under the domed roof of Union Chapel, Corbyn declared his movement “the new center-ground politics” and joked that he didn’t have a helicopter. “We had a train ticket.”

What Brexit?

Brexit is conspicuous by its absence on the doorstep, according to Thomas.

The biggest event to hit Britain since World War II has not been the campaign galvanizer many thought it would be. While May’s pitch has been that she is best placed to negotiate a good exit deal for Britain, the substance of what that deal will look like, and what it will mean for ordinary British people, has barely been up for debate.

“We’ve learnt nothing [about Brexit] because it suits Theresa May and Jeremy Corbyn to say next to nothing about it,” said Charles Grant, director of the independent Centre for European Reform think-tank.

“The political leaders have conspired to pull the wool over the eyes of the British people and avoid explaining that Brexit means painful choices.”

The reason, it would appear, is that neither is a hardened Brexiteer, and neither wants to tarnish their election pitch with difficult realities about the trade-offs that will be required in Britain’s settlement with the EU.

“On these issues there are trade-offs which can be summed up with the simple statement that if you want closer relations with the EU, which are economically beneficial, you have to trade in more sovereignty,” said Grant. “That’s the basic issue and May’s avoided levelling with the British people on that because there’s no good outcomes for her.”

“The tragedy is that the opposition have not made her talk about it, and the media have been pathetic.”

Missing detail

If May does win, economists are just as in the dark as the Brexitologists as to what kind of U.K. will emerge from this strange election.

Paul Johnson, director of the independent Institute for Fiscal Studies think-tank, said that May’s manifesto had not grappled with the fundamentals of the U.K.’s economy as it approaches a turbulent Brexit negotiation.

“It’s very difficult to say much about the Conservative manifesto because there’s so little in it, but there’s certainly nothing much in there which says we recognize that there have been eight or nine really pretty dire years, and there’s something significant we need to do in terms of investment, in terms of R&D, in terms of wages and productivity. There’s just not much in there at all,” he said.

“The Tory manifesto was extremely light on detail in terms of what they might do with taxes” — Paul Johnson, director of the independent Institute for Fiscal Studies think-tank

There was certainly no sign of the low-tax, pro-business, off-shore, Singapore-style economy that many Brexiteers dream of.

“The Tory manifesto was extremely light on detail in terms of what they might do with taxes. Spending looked broadly the same, continuing with more intervention than is traditional for Conservatives, but nothing too dramatic,” he said.

“Either they’ve got some ideas they’re not telling us about or they haven’t got any ideas.”

La grande illusion

Labour, one the other hand, had one big idea.

An extra £75 billion a year of public spending — to pay for scrapping tuition fees, bailing out the National Health Service, and ending the public sector pay squeeze among other things — would be paid for, in part, by £50 billion raised in higher taxes on corporations and top earners. The plans would take tax in the U.K. to its highest level in peacetime, according to Johnson.

Just as Britain turns away from Europe, it appears that at least some are flirting with a more European welfare state than ever.

“It’s obviously a radical change from where the U.K. has been but is clearly economically feasible. The issue I have is that I think they are not being terribly wise about how they say they would pay for it,” Johnson said.

“Other countries don’t pay for all of that simply by having enormous taxes on corporations and the various things Labour is talking about. They tend to have higher social insurance contributions, for example, and other taxes paid by individuals.”

Not for nothing did former Treasury permanent secretary Nick Macpherson tweet wryly this week about the fundamental tameness of both parties’ economic vision for the future of Britain. Neither was facing up to the U.K.’s “grande illusion” he said — it’s a country that has “EU levels of spending financed from U.S. tax rates.”

Left behind

One rare point of consensus in the campaign was both major party’s concern about inequality in the U.K.

Solutions, however, were harder to find.

For Torsten Bell, director of the independent Resolution Foundation think tank, neither party has fully addressed the pain felt by those on at the lower end of of the income scale.

“Rhetorically both parties have shown they understand how serious this issue is, from Theresa May’s focus on the just about managing to Labour’s recognition that the next few years do not look rosy when it comes to working people’s living standards,” he said.

Throw in economic turbulence that many predict will accompany Brexit — high inflation, stagnant wages, soaring living costs — and the future looks pretty gloomy for these people who will feel the pain the most.

With neither party offering clarity on Brexit, the economy or inequality, there will be some in Britain wondering if the outcome of this election matters at all.

Article Link To Politico EU:

Five Questions Raised By James Comey’s Testimony

Prepared remarks released ahead of Thursday’s hearing sparked more questions.

By Naftali Bendavid
The Wall Street Journal
June 8, 2017

Former FBI Director James Comey’s appearance Thursday is one of the most-anticipated congressional hearings in years. Mr. Comey released his prepared remarks ahead of the hearing, which answered questions for some observers—but they also raised some more. Here are five key questions:

Did the president’s actions amount to obstruction of justice?

Mr. Comey said he thought Mr. Trump was trying to create “some sort of patronage relationship” with him, suggesting some discussions made him feel Mr. Trump may have been seeking to exert improper influence. He described their conversation regarding former national security adviser Michael Flynn as “very concerning.” But Mr. Comey didn’t say he believed obstruction of justice occurred.

Why did Mr. Comey take notes after his meetings with President Trump, but not President Barack Obama ?

Mr. Comey made it clear in his testimony that he didn’t have a practice of memorializing his private meetings with Mr. Obama as he did with Mr. Trump. He said he had so few one-on-one meetings with the former president and felt no need to write memos about them.

Why did Mr. Comey have so few private meetings with President Obama, and so many with President Trump?

In Mr. Comey’s account, he met twice with Mr. Obama one-on-one, including a brief farewell meeting in late 2016. In contrast, he had nine one-on-one conversations with Mr. Trump in four months, three in person and six on the phone. Mr. Comey describes Mr. Trump as going out of his way to speak to Mr. Comey without others present, ensuring that people like Attorney General Jeff Sessions leave the room.

If Mr. Trump’s actions were objectionable to Mr. Comey, why didn’t he resign?

Mr. Comey didn’t address that issue in his testimony, but he did talk about how much he loved his job. He also said he appealed to Mr. Sessions to ensure that Mr. Comey never be left alone with the president, apparently to create a safeguard and ensure that no improper interactions would take place.

Why did top Justice Department officials not respond to Mr. Comey’s contacts?

Mr. Comey reported that he asked Mr. Sessions to prevent any further direct contact between the president and himself, but “he did not reply.” He also said he contacted then-Acting Deputy Attorney General Dana Boente for guidance after Mr. Trump asked what could be done to lift the “cloud” of the Russia investigation, but that he didn’t hear back from Mr. Boente.

Article Link To The Wall Street Journal: