HALISTER1: U.K. Stocks May Drop 10%-20%, Cable May Hit 1.30 on ‘Brexit’: MS

U.K. Stocks May Drop 10%-20%, Cable May Hit 1.30 on ‘Brexit’: MS

(Bloomberg) -- Sterling and U.K. equities will come under pressure between now and the June 23 vote on EU membership if polls are close and the perceived possibility of a vote to leave is high, Jacob Nell, a U.K. economist at Morgan Stanley, tells journalists in London.
  • GBP/USD would fall to 1.30 if the U.K. were to vote to leave
    • EUR/GBP is harder to call as Europe would also be affected by Brexit
  • The move lower would correct in the event of a vote to remain; see GBP/USD at 1.40 in that scenario
  • Favor stocks of companies with global cash flow in the event of Brexit as would benefit from a weaker currency, whereas companies with euro-area or U.K. cash flows will take a hit
    • In terms of sectors, Morgan Stanley recommends oil as it has the smallest share of sales exposure to U.K. and Europe
    • As little risk has been priced in to date, see stocks little changed relative to current levels on a vote to stay
    • In credit, see a 30bp tightening of spread vs EUR bonds, back to levels before the Scottish referendum if the U.K. stays, and a widening to new records on a Brexit
  • See 35% chance of a vote to leave
    • Next few days will be crucial; Cameron’s statement in parliament at 3pm will show how his party is managing this debate; London mayor Boris Johnson’s campaign strategy, opinion polls and betting markets are worth watching for signs on the likely outcome of the vote
    • Migration events, terror events, financial crisis events in Europe -- if they’re linked to EU membership -- will definitely be negative factors for the “remain” campaign
  • NOTE: Selling EUR/USD is the best Brexit trade as the U.K. voting to leave EU would suggest the Union may no longer expand and integrate, MS said on Friday
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Jacob Nell (Morgan Stanley)
Boris Johnson (Greater London Authority)

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UUID: 7947283

HALISTER1: UST MORNING CALL: Seasonals Suggest a ‘Backup in Rates’

UST MORNING CALL: Seasonals Suggest a ‘Backup in Rates’

(Bloomberg) -- “As the seasonals show, we’re moving into a period that has historically been associated with a backup in rates and while it’s clearly not the only influence, the bias is one that offers some modest pressure at this stage,” CRT strategist David Ader says in note.
  • “Downtrade is consistent with the negative momentum in Treasuries as well as Friday’s higher-than-expected inflation data,” and “without any single trigger or specific development to credit with the bounce in global equities, we’re left to characterize it as simply another example of the choppy price action that has become the norm recently”
  • Other observations from strategist morning notes:
  • BMO (Aaron Kohli): “Perhaps as a result of headlines suggesting an agreement to curb output may be finalized by March 1st, rising energy is putting pressure on rates”
    • “Belly is the weakest part of the curve, selling off 4bp with the long-end only about 2.5bp higher in yield”
  • FTN (Jim Vogel): “Stocks and bonds are still connected, just in a different way”
    • “Both in the US and abroad, improving stocks slowly ratchet up a floor on yields without increasing volatility within the range. UST are not selling off as their haven status becomes less important”
  • Marty Mitchell (independent): “Stability across the global markets in the last week is also feeding the improved risk appetite and is emboldening the bond market bears as trading gets underway this week,” and “$88b in fresh coupon supply scheduled for this week is also contributing to a push higher in yields”
    • “Global landscape is still treacherous and that should keep an underlying bid in Treasuries going forward,” and “upside correction in yields is a welcomed development”
    • “While we expect that last week’s lows will be retested (1.845% 10yr), much of the correction may have run its course”
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Aaron Kohli (Bank of Montreal)
David Ader (CRT Capital Group LLC)
Jim Vogel (Ftn Financial)
Marty Mitchell (The Mitchell Market Report LLC)

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UUID: 7947283

HALISTER: Google Ad Business Under Scrutiny as EU Said to Revive Probe

Google Ad Business Under Scrutiny as EU Said to Revive Probe

(Bloomberg) -- The European Union is reviving a probe into Google’s advertising practices with an inquiry that adds to active EU antitrust investigations into the company’s mobile operating system and shopping search services.
  • The EU has been quizzing companies involved in online advertising in recent weeks about Google’s behavior, according to three people with knowledge of the investigation who asked not to be named because the process is confidential
  • Officials are seeking data that may be used to build a statement of objections listing areas where they suspect Google breaches antitrust rules, they say
Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
GOOG US (Alphabet Inc)

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UUID: 7947283

HALISTER1: Barclays Euro, Sterling, Japan Projected Index Duration Changes

Barclays Euro, Sterling, Japan Projected Index Duration Changes

(Bloomberg) -- Barclays estimates the following duration extensions for March 1, 2016 as of Feb. 19.
  • Pan-Euro Aggregate: 0.10yrs
  • Pan-Euro Agg Treasury: 0.12yrs
  • Euro Aggregate: 0.12yrs
  • Euro Agg Treasury: 0.15yrs
  • Sterling Aggregate: 0.03yrs
  • Sterling Agg Tsy: 0.02yrs
  • Japan Aggregate: 0.07yrs
  • Japan Agg Treasury: 0.04yrs
  • NOTE: Forecast duration change may enable investors to gauge the extent to which passive portfolio managers will need to adjust their portfolio duration
  • NOTE: Barclays Projects U.S. Index Duration Changes for March
  • NOTE: Citi EGB Index Extension to Increase Most in a Year
  • NOTE: Mizuho see Large Month-End Extension in EGBs; OATs, BTPs to Benefit
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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HALISTER: Apple Moves to Shift Battle Over Unlocking iPhone to Capitol Hill

Apple Moves to Shift Battle Over Unlocking iPhone to Capitol Hill

Alert: HALISTER
Source: NYT (New York Times)

Tickers
AAPL US (Apple Inc)

People
Katie Benner (New York Times Co/The)
Cyrus Vance (New York County/NY)
James Comey (DOJ United States Federal Bureau of Investigation)
Sheri Pym ((US)Dist Court:)
Timothy Cook (Apple Inc)

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UUID: 7947283

HALISTER: Apple Would Participate If Congress Involved in Privacy Issues

Apple Would Participate If Congress Involved in Privacy Issues

(Bloomberg) -- Apple suggests it, congress to discuss privacy implications: AAPL comments on privacy issues on co. website.
  • Congress should form commission to discuss implications
  • NOTE: Feb. 21, Apple’s New Lawyer Says IPhone-Unlock Order Carries Global Peril
Link to Statement:Link
Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
AAPL US (Apple Inc)

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UUID: 7947283