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Financial Services Roundup: Market Talk

6 Jan 2018 9:20 am

The latest Market Talks covering Financial Services. Exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET.

2054 GMT - Fidelity Investments' asset-allocation research team expects the global expansion to remain intact in 2018, but foresees "some fraying in the near-perfect backdrop," that drove assets prices up and volatility down in 2017, it says. The probability of a US recession is low, while global inflation trends appear firm enough to keep policymakers moving toward a reduction in monetary accommodation, the team says. The shifting monetary conditions will slow the liquidity growth that has fueled asset-price increases in recent years, potentially bringing more market volatility, it adds. The team is less confident about making large asset-allocation tilts now compared to earlier stages in the cycle, and recommends prioritizing diversification in 2018. Within the context of smaller cyclical tilts, it's favorably disposed to international equities and inflation-resistant assets. (Daisy.Maxey@wsj.com; @DaisyMaxey)

1921 GMT - Assets in US-listed exchange-traded funds and products rose 34.3% in 2017 to a high of $3.42 trillion at the end of December, ETFGI says. The increase from $2.55 trillion at the end of 2016 represents the greatest growth in ETF/ETP assets since 2009 when markets recovered after the 2008 financial crisis, ETFGI says. The majority of the inflows can be attributed to the top 20 ETFs by net new assets, which collectively gathered $209B in 2017, it says. The record comes on the eve of the 25th anniversary of the listing of the first ETF in the U.S., the SPDR S&P 500 ETF (SPY), which commenced operations on Jan 22, 1993, ETFGI notes. (daisy.maxey@wsj.com; @DaisyMaxey)

1609 GMT - Former Fed governor Daniel Tarullo predicted at the Fed's September 2012 policy meeting that the failure to adequately address problems related to underwater mortgages, where borrowers owed more than their homes were worth, would ultimately go down as the greatest policy mistake following the 2008 financial crisis. Tarullo made the comment by way of noting the importance for the Fed to take strong action even if monetary policy could not address the biggest problems facing the economy. "We have to take the world as it is presented to us, and then balance the costs and benefits of the actions we can take in light of the good and bad decisions that other parts of the government and consumers and firms are themselves taking," he said according to transcripts released by the central bank. (nick.timiraos@wsj.com; @NickTimiraos)

1606 GMT -While not as high as consensus estimates, today's jobs numbers reflect a strong economic growth backdrop, says Rick Rieder, BlackRock's chief investment officer of global fixed income. While there is likely a debate taking place at the Fed regarding the character and durability of today's growth, BlackRock expects as a base case the Fed will ultimately raise rates in March and two more times this year, with a chance of four hikes in the year. But any pullback in growth, geopolitical risk, or moderation in inflation may keep the Fed on a slower path, he says. Economic tailwinds supporting jobs growth include more corporate capital expenditures, a weaker dollar and "pervasively strong global growth," and wages have also begun to accelerate, Rieder adds. (Daisy.Maxey@wsj.com; @DaisyMaxey)

1302 GMT - European shares rise as the euro declines against the dollar ahead of U.S. non-farm payroll data due later. The Stoxx Europe 600 climbs 0.6%, or 2.32 points, to 396 as the single currency falls 0.14% to $1.2051. "If the single currency takes a turn lower from here, we could see eurozone stocks shine in a way that they singularly failed to do in the latter half of 2017," says Chris Beauchamp at spread-betting firm IG. Danish bio-tech Genmab advances 4.4% on a reported broker upgrade, while Admiral Group is the biggest pan-European faller after JPMorgan reportedly downgraded the insurer. (philip.waller@wsj.com)

1226 GMT - The FTSE 100 hits all-time highs as upgrades for utility stocks help offset a downgrade for insurer Admiral Group PLC. The index last trades up 0.3% at 7719.79, having reached a high of 7727.73. Leading gainers is British Gas owner Centrica PLC, up 3%, after Credit Suisse upgraded the stock to outperform from neutral. The Swiss bank also raised United Utilities from underperform to neutral, and these shares gain 2.2%. At the other end of the scale, car insurer Admiral Group PLC drops 4.7% after a reported downgrade by J.P. Morgan and following downbeat U.K. new car sales data. Other insurers also drop. (philip.waller@wsj.com)

1213 GMT - Holders of benchmark-size euro covered bonds are set to receive around EUR20 billion this month, according to ING calculations. Some EUR17 billion will come from the repayment of maturing covered bonds and EUR3 billion is due from interest payments. Most maturities, around EUR3.1 billion, come from the Netherlands, followed by Spain (EUR3 billion), Germany (EUR2.9 billion) and the U.K. (EUR2.7 billion). Analysts follow flows to bond holders also to determine potential reinvestments. Covered bonds are a safe type of bank debt backed by assets, typically mortgages.(tasos.vossos@wsj.com; @tasosvos)

1152 GMT - UniCredit expects the asset-swap spreads of NordLB's 6% 2020 tier-2 bonds to keep converging to the iBoxx Euro Banks Lower Tier 2 index, even following its outperformance over the past months. Relatively strong performances in other segments should help offset--at least partly--shipping-related loss provisions in coming years, while the German regional bank is already ahead in its shipping-sector reduction plan and may report a 2017 profit. Also, the bank's owners--comprising the states of Lower Saxony and Saxony-Anhalt, and some savings bank associations--may support it in a worst-case scenario, UniCredit says. (tasos.vossos@wsj.com; @tasosvos)

(END) Dow Jones Newswires

January 06, 2018 04:20 ET (09:20 GMT)

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