Latest news with #DavidAspell
Bloomberg
23-07-2025
- Business
- Bloomberg
Bloomberg Daybreak Asia: US, Japan Reach Trade Deal; Mag Seven in Focus
The record-breaking run in global stocks got fresh fuel to power the rally after the US reached a trade deal with Japan, an agreement with a key trading partner that eases concerns about the tariff war. MSCI's benchmark gauges for global equities and Asian shares both rose Wednesday. Contracts for the S&P 500 edged up on the tariff news after closing at its highest level Tuesday. Stocks in Japan jumped more than 2% with Toyota Motor Corp. and other automakers leading the gains. We break down the day's developments with David Aspell, Partner and Co-Chief Investment Officer at Mount Lucas Management. Plus - investors are also focused on megacap companies this week. Big Tech's strength will be on full display over the next few weeks as the group begins unveiling quarterly earnings. Tesla Inc. and Alphabet Inc. are reporting Wednesday. The so-called Magnificent Seven companies are expected to post a combined 14% rise in second-quarter profits, while earnings for the rest of the US equity benchmark are predicted to be relatively flat, according to Bloomberg Intelligence data. We discuss the role AI will play in those reports with Stephanie Leung, Chief Investment Officer at StashAway.
CTV News
23-06-2025
- Business
- CTV News
Muted market reaction to U.S. strikes on Iran ‘surprising,' expert says
Sorry, we're having trouble with this video. Please try again later. [5006/404] Financial markets were largely unphased to start the trading week after the U.S. military carried out strikes over the weekend on several nuclear sites in Iran. One expert says he wasn't expecting the muted reaction from investors. 'It's a little surprising – it does look like they're unphased currently,' David Aspell, co-CIO at Mount Lucas Management, told BNN Bloomberg in an interview on Monday morning. In midday trading in New York on Monday, the S&P 500 index was 0.6 per cent higher, while The Dow Jones Industrial Average and the Nasdaq composite were each also up by less than one percentage point. Toronto's S&P/TSX composite also gained. The sudden involvement of the U.S. in the war between Israel and Iran is however leading to increased volatility in energy markets, but as of Monday morning there hadn't been any major swings, Aspell said. 'The worries run straight through the oil market, which currently seems like it's fairly calm. I think oil prices are trying to judge the likelihoods and the potential impacts. Iran itself is not a particularly large producer of oil,' he said. 'Where you get market turbulence runs through if you get some closing of the Strait of Hormuz that gets oil out. That is likely to be the channel. Currently, there's some threatening of it but it doesn't seem like that's happening so far.' The Strait of Hormuz, located between Iran and Oman, connects the Persian Gulf to the Gulf of Oman and the Arabian Sea. It is a vital chokepoint along one of the most important oil shipping routes in the world. If Iran decided to blockade the strait, oil prices would likely climb significantly, though doing so could backfire on Iran's own economy, The Associated Press reported on Monday. For oil investors, monitoring the flow of oil through the Strait of Hormuz will be the 'key thing' to watch in the coming days and weeks, said Aspell. 'Do they stop the flow of oil out? If you see tankers starting to turn around, if Iran starts to attack ships or send drones or just try and make it very difficult for oil to get out, I think that's the worry,' he said. Aspell argued that the movement of oil through the strait is also linked to broader financial markets. 'Stocks currently I think are at the levels they're at because they're predicated on the idea that commodities are not going to go up a lot and that central banks around the world are able to continue easing,' he said. 'If you get some spikes in commodities, I think the (U.S. Federal Reserve) should look through that but I think if it looks like the Fed would not, or those things do start to come to pass, that's the lens through which I think you start to see more worries.'
CTV News
23-06-2025
- Business
- CTV News
Muted market reaction to U.S. strikes on Iran ‘surprising,' expert says
Sorry, we're having trouble with this video. Please try again later. [5006/404] Financial markets were largely unphased to start the trading week after the U.S. military carried out strikes over the weekend on several nuclear sites in Iran. One expert says he wasn't expecting the muted reaction from investors. 'It's a little surprising – it does look like they're unphased currently,' David Aspell, co-CIO at Mount Lucas Management, told BNN Bloomberg in an interview on Monday morning. In midday trading in New York on Monday, the S&P 500 index was 0.6 per cent higher, while The Dow Jones Industrial Average and the Nasdaq composite were each also up by less than one percentage point. Toronto's S&P/TSX composite also gained. The sudden involvement of the U.S. in the war between Israel and Iran is however leading to increased volatility in energy markets, but as of Monday morning there hadn't been any major swings, Aspell said. 'The worries run straight through the oil market, which currently seems like it's fairly calm. I think oil prices are trying to judge the likelihoods and the potential impacts. Iran itself is not a particularly large producer of oil,' he said. 'Where you get market turbulence runs through if you get some closing of the Strait of Hormuz that gets oil out. That is likely to be the channel. Currently, there's some threatening of it but it doesn't seem like that's happening so far.' The Strait of Hormuz, located between Iran and Oman, connects the Persian Gulf to the Gulf of Oman and the Arabian Sea. It is a vital chokepoint along one of the most important oil shipping routes in the world. If Iran decided to blockade the strait, oil prices would likely climb significantly, though doing so could backfire on Iran's own economy, The Associated Press reported on Monday. For oil investors, monitoring the flow of oil through the Strait of Hormuz will be the 'key thing' to watch in the coming days and weeks, said Aspell. 'Do they stop the flow of oil out? If you see tankers starting to turn around, if Iran starts to attack ships or send drones or just try and make it very difficult for oil to get out, I think that's the worry,' he said. Aspell argued that the movement of oil through the strait is also linked to broader financial markets. 'Stocks currently I think are at the levels they're at because they're predicated on the idea that commodities are not going to go up a lot and that central banks around the world are able to continue easing,' he said. 'If you get some spikes in commodities, I think the (U.S. Federal Reserve) should look through that but I think if it looks like the Fed would not, or those things do start to come to pass, that's the lens through which I think you start to see more worries.'
Reuters
21-03-2025
- Business
- Reuters
Hedge fund dominance latest risk for febrile UK debt markets
LONDON, March 21 (Reuters) - Hedge funds have crowded into debt-fuelled bets on UK government bonds, increasing the potential for instability in the gilts market, a benchmark for borrowing costs in Britain including mortgages, investors and hedge fund sources say. Bank of England chief Andrew Bailey said in February that non-bank institutions like hedge funds "can propagate liquidity stress in core UK financial markets, notably the gilt market". here. That is partly due to their activity in short-term lending markets, which more than a dozen sources - including portfolio managers, hedge fund executives and a former central banker - described to Reuters. Hedge funds borrow to fund a variety of trades based on 10-year gilts . Data from electronic trading platform Tradeweb shows they accounted for 60% of UK government bond trading volumes in January and February, up from around 53% at end-2023 and at least a five-year high. "UK rates markets sometimes trade quite chaotically because large hedge funds push them around and at times there's not that much real money in them relative to the hedge funds," said David Aspell, senior portfolio manager at $1.7 billion macro hedge fund Mount Lucas Management, which has flipped in and out of gilt trade positions this year. With roughly 2.5 trillion pounds ($3.2 trillion) of debt outstanding, the gilts market is dwarfed by the $28 trillion market for U.S. Treasury bonds. Volatility in bond markets affects government borrowing costs and credit conditions for households and businesses. KEY TRADES Hedge fund participation in European bond markets has grown in recent years, and while their positioning has sometimes been a worry, some officials have said they help provide liquidity. But UK regulators are eyeing how hedge funds use repo markets to position in gilts. Repos - short for repurchase agreements - are a source of funding that can be crucial during times of market stress. Hedge funds that use repo and are active in gilt markets include Brevan Howard, Capula Investment Management, Millennium Management and Rokos Capital Management, which trade many different financial asset classes under one roof, the sources told Reuters. Capula, Brevan Howard, Millennium and Rokos, which oversee a combined $150 billion, declined to comment. Hedge funds currently use repo financing for three distinct bets against gilts, said seven of the sources. One takes advantage of 10-year gilt prices relative to their futures derivatives. Speculators buy the futures, which currently trade at a premium, and "short" the cash bonds - often called shorting the basis trade. When an investor goes short they borrow securities to sell, hoping to later buy them back more cheaply. A second bet, that UK inflation will remain high, involves shorting 10-year gilts and buying two-year bonds. A third trade has seen trend funds put on bets against 10-year gilts for seven out of the past nine weeks, JPMorgan data from March 17 shows. Such trades are only a slice of hedge funds' individual portfolios but their combined impact has raised concerns. The sources all said that, to fund their gilt positions, hedge funds are using up a disproportionate share of borrowing available in the UK repo market, a key part of the financial system's plumbing. Jillien Flores, chief advocacy officer at the Managed Funds Association, said diversity of participants helped improve liquidity and market efficiency, adding: "Alternative asset managers help reduce the cost of UK government borrowing through their participation in the gilt market." Exclusive data from S&P Global Markets for Reuters shows average use of repo on 10-year gilts over a year-high in February. Repo markets allow the holder of a bond to lend it out temporarily in exchange for cash, a quick and cheap way of borrowing. Typically banks lend bonds to hedge funds, pension funds, large corporations and each other. The BoE warned in November that hedge funds' rising share of repo borrowing could deprive other institutions of funding, especially if banks lend less during spells of market stress. Among those vulnerable to gilt selloffs are pension schemes, which borrow in repo markets to finance hedging positions. These derivatives contracts require more cash to secure them when gilt yields rise, which if the repo market is tight can trigger fire sales of liquid assets - including gilts, accelerating the selloff. "This is where a market selloff can start," said Andy Hill, managing director at the International Capital Markets Association. "You need the repo market to work. There is the risk that, in highly volatile times, as balance sheets become more expensive, banks might step away from intermediating." When gilts sold off in January, pension funds posted 3 billion pounds ($3.9 billion) in extra collateral, said a BoE blog on March 6, opens new tab. To ease that risk, the BoE has developed a new liquidity facility for gilt holders like insurance companies and certain pension schemes, but to apply they must hold at least 2 billion pounds worth of UK bonds. The March 26 release of official growth and borrowing forecasts is seen as the next big test of UK market sentiment. James Athey, fixed income manager at Marlborough, warned of disruption if hedge funds rush to the exits. "When you have market shocks and changes, rapid unwinds of positions because of these changes can escalate and cause stability issues," he said. ($1 = 0.7704 pounds)
