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The acquisitive Toronto-based company is buying Barrett Asset Management, a New York City-based wealth manager that advises on $2.5 billion in client assets.
The acquisitive Toronto-based company is buying Barrett Asset Management, a New York City-based wealth manager that advises on $2.5 billion in client assets.
A metal coatings plant in China's manufacturing hub has been hit by price increases of up to 30% for raw materials including steel, aluminium, thinner and paint since the Chinese New Year in February. The firm has had no choice but to pass most of these higher costs on to its clients, including those in the United States, said King Lau, who helps run Dongguan-based Kam Pin Industrial Ltd, in Guangdong province. With their profit margins already tight, Chinese factories are passing on higher raw material and component costs to overseas clients, which will only reinforce the inflation loop.
The British pound initially shot higher during the trading session on Friday but has been a bit noisy in the process of breaking above the hammer from the previous session.
The list of big-name companies hiking wages in the hopes of attracting workers is rising....fast.
“They just want to gauge how you react and how you think through a response.”
(Bloomberg) -- Stock sales are reaping a windfall for the world’s richest shareholders.Corporate insiders including Amazon.com’s Jeff Bezos and Google co-founder Sergey Brin have ramped up stock sales recently, cashing in on a 14-month long bull market that’s helped boost fortunes to the tune of trillions.U.S. public company insiders offloaded shares worth $24.4 billion this year through the first week of May, with about half sold through trading plans, according to data compiled by Bloomberg. That’s almost as much as the $30 billion total they disposed of in the second half of 2020.Large shareholders frequently sell stock in planned intervals, often through pre-arranged trading programs. Yet the prolonged rally in equities markets has made the value of these disposals, whether planned or opportunistic, strikingly high.There are multiple reasons an investor of any size might be motivated to sell. After the pandemic-defying rally, valuations are increasingly under pressure from rising inflation. Investors are wary the post-Covid recovery could prompt tightening measures from the Federal Reserve. And President Joe Biden’s proposed tax hikes -- including a near doubling of the capital gains rate -- have created uncertainty.Bezos, EllisonWhatever the reason, the sales are flooding the market with yet more liquidity, the consequences of which will ripple through philanthropy, the art market, real estate and other niches.Bezos has sold $6.7 billion worth of Amazon shares this year. While a relative pittance for the world’s richest person, it’s more than two-thirds the value of shares he sold in 2020. Larry Ellison unloaded 7 million Oracle shares in the past week for total proceeds of $552.3 million. Charles Schwab has sold $192 million worth of shares of his eponymous brokerage this year.Brin, who has signaled that he intends to sell as many as 250,000 Alphabet Inc. shares, has disposed of $163 million worth of stock in recent days, his first sales in more than four years, filings show.Mark Zuckerberg and his charitable foundation, the Chan Zuckerberg Initiative, meanwhile, accelerated their sales of Facebook stock in the fall. Zuckerberg or his charity has divested shares at a near-daily clip since November, for a cumulative total exceeding $1.87 billion.The surging markets have exacerbated the concentration risk of the single-stock-dominated fortunes typical of many tech billionaires, said Thorne Perkin, president of Papamarkou Wellner Asset Management.“From a portfolio-management perspective, it makes sense to spread it around,” he said.Covid EconomyAlso among the biggest sellers are some noteworthy beneficiaries of the Covid economy. Zoom Video Communications founder Eric Yuan and used-car retailer Carvana Co.’s Ernest Garcia II have together received more than $1.75 billion from stock sales since March 2020, according to the Bloomberg Billionaires Index. George Kurtz, chief executive officer of cybersecurity firm CrowdStrike, has sold shares worth at least $250 million over that period.Zoom founder Yuan -- the poster child, in many ways, for the coronavirus economy -- has stepped up his sales this year as the firm’s share price slumped. In 2020, he typically offloaded about 140,000 shares a month through a trading plan, which generated more than $350 million over the course of the year.Since March, he’s sold almost 200,000 shares a month on average, yielding him about $185 million. He also donated more than a third of his stake in the San Jose-based company as part of “typical estate planning practices,” according to a spokesman. Some of the cash from his share sales fund donations to unspecified “humanitarian causes.”(Updates with Charles Schwab’s sales in seventh paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- First they struck California, then Texas. Now blackouts are threatening the entire U.S. West as nearly a dozen states head into summer with too little electricity.From New Mexico to Washington, power grids are being strained by forces years in the making — some of them fueled by climate change, others by the fight against it. If a heat wave strikes the whole region at once, the rolling outages that darkened Southern California and Silicon Valley last August will have been previews, not flukes.“It’s really the same case in different parts of the West,” said Elliot Mainzer, chief executive officer of the California Independent System Operator, which runs most of the state’s grid. “It’s revealed competition for scarce resources that we haven’t seen for some time.”The specter of blackouts highlights a paradox of the clean-energy transition: Extreme weather fueled by climate change is exposing cracks in society’s move away from fossil fuels, even as that shift is supposed to rein in the worst of global warming. States shuttering coal and gas-fired power plants simply aren’t replacing them fast enough to keep pace with the vagaries of an unstable climate, and the region’s existing power infrastructure is woefully vulnerable to wildfires (which threaten transmission lines), drought (which saps once-abundant hydropower resources) and heat waves (which play havoc with demand).On Wednesday, California's grid managers warned that while they're better positioned than last summer, the risk of power shortages during extreme heat remains a clear possibility. Wildfires, already getting started after a dry winter, could compound the danger if they threaten transmission lines. “We are headed to yet another very dangerous fire year,” U.S. Agriculture Secretary Tom Vilsack said during a briefing Thursday. “We're seeing a higher level of risk and an earlier level risk.” For many, California’s power crisis in 2020 was the first indication of how serious the regional power shortfall had become. While the blackouts highlighted the state’s reliance on solar power — a resource that ebbs in the evening just as demand picks up — an equally significant problem was California’s dependence on imported electricity. Utilities routinely source power supplies from out of state, drawing electricity across high-voltage transmission lines to wherever it’s needed. But last summer, neighboring states coping with the same heat wave as California were straining to keep their own lights on, and imports were hard to come by.This year, that dynamic is playing out on a larger scale. Across the West, states have grown dependent on importing power from one another. That works fine in temperate weather, when electricity demand is relatively low. But it's a problem when a widespread heatwave blankets the entire region. The Western Electricity Coordinating Council, which oversees electricity grids throughout the western U.S. and Canada, estimates that without imports, Nevada, Utah and Colorado could be short of power during hundreds of hours this year, or the equivalent of 34 days. Arizona and New Mexico could be short for enough hours to total 17 days, according to a report by the organization that looked at worst-case scenarios to help states develop plans to head off potential outages.“It’s no longer necessarily a California problem or a Phoenix problem,” said Jordan White, vice president of strategic engagement for the group, known as WECC. “Everyone is chasing the same number of megawatts.” While blackouts aren’t a guarantee in any region, traders are already betting on supply shortages and sending power prices soaring throughout the West. At the heavily traded Palo Verde hub in Arizona, prices have nearly quadrupled since last summer’s outages, while the Pacific Northwest’s Mid-Columbia hub has tripled.“We are already seeing record-breaking prices across the West, some of which can be attributed to a fear factor being priced in,” said JP McMahon, a market associate for Wood Mackenzie. “Last year was a bit of a wake-up call.”The reasons behind the shortfall are two-fold: Climate change is making it harder to forecast demand for electricity while the shift to clean energy is straining power supplies.Where utilities and grid managers were once able to rely on predictable consumption patterns season to season — more air conditioner use in August, less in October — they’re now reckoning with record-hot summers and historic winter storms that cause great, unexpected surges in demand.“It’s becoming challenging to take out the crystal ball to know with any level of certainty how hot it it’s going to be,” White said.At the same time, older coal and gas plants capable of providing power 24 hours a day are being pushed out by climate change regulations and their own dwindling profitability. In the West, power generation from such plants slipped 6% from 2010 through 2018, according to WECC. While wind and solar capacity have more than tripled in the region, the output from those resources varies by the hour, making them harder to rely on during an unexpected demand crunch. Massive batteries can help make up the difference, but their installation is just beginning.It’s a global phenomenon. Sweden this summer is bracing for power outages and curbing electricity exports after nuclear retirements have left the country with too little spare capacity to balance big swings in demand. In China last winter, even a surplus of coal plants couldn’t keep the lights on during a severe cold blast.At this point, no subregion in WECC’s coverage area generates enough electricity to meet its own needs during periods of high demand; they all rely on imports to avoid outages.In the aftermath of the California crisis, utilities have been signing up contracts for more emergency power supplies and are trying to make sure they aren’t relying on the same suppliers as everyone else. Some entities, including the Imperial Irrigation District of Southern California are working to curb their reliance on imports. But it’s not clear that all utilities in the highest-risk areas plan to do much differently. The situation is, if not dire, getting close. Temperatures in the West are expected to be above average through the summer, with the worst heat slamming the Southwest. More than 84% of land in the 11 Western states is gripped by drought.Following last summer’s outages, California is among the best positioned going into summer. The state is plugging roughly 1,500 megawatts of batteries into the grid, has postponed the retirement of several aging gas plants and raised the price cap on power trades to incentivize imports if outside supplies are necessary and available. Even if imports are readily available for those that need them, there’s no guarantee that transmission lines will be able to carry those electrons where they need to go. Extreme weather can take out the high-voltage conduits that stitch the Western states together, and wildfires are notorious for knocking out transmission lines. Although it received little attention at the time, a major transmission line in the Pacific Northwest that suffered damage in a storm last spring limited power flows into California throughout the summer energy crisis.Energy consultant Mike Florio, who used to sit on the board of California’s grid operator, said other states can learn from the West’s dilemma. They should keep a variety of resources as they decarbonize, learning how to balance the daily rhythms of solar and wind, and not move too quickly to shutter old gas-burning plants that can provide power in a pinch.“We forget that we’re still learning a lot about how to run a system like this,” Florio said. “We probably want to keep our existing gas capacity, at least in reserve. It may be used less, but something that’s already built is cheap insurance.”(Adds quote from U.S. agriculture secretary in sixth paragraph. )For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- The Bank of Canada is closely monitoring recent gains in the nation’s currency, to ensure the appreciation doesn’t create headwinds for the nation’s economic outlook, according to the central bank’s head.At a press conference Thursday, Governor Tiff Macklem said the recent appreciation reflects in part higher commodity prices, which are good for the nation’s economy. Still, a continuation of the gains could begin to pose a risk to the central bank’s most recent forecasts released last month, which assumed an exchange rate of $0.8 per Canadian dollar.The Canadian dollar is up 4.9% so far this year, the best performing major currency. It weakened after Macklem’s comments, falling to C$1.2179 per U.S. dollar, or $0.8211 per Canadian dollar at 1:12 p.m. in Toronto trading.“If it moves a lot further that could have a material impact on our outlook and it’s something we’d have to take into account in our setting of monetary policy,” Macklem said Wednesday. “If the dollar were to continue to move -- particularly if its not reflecting good developments for Canada -- that could become more of a headwind on our export projection.”The Canadian dollar has been tracking resource prices higher this year. The Bank of Canada commodity price index -- a gauge that tracks movements of commodities produced in the country -- has hit the highest since 2014 after gaining 30% so far this year. Excluding energy, the index is at an all-time high.But the currency also appears to have gotten a lift from Macklem’s messaging, after the Bank of Canada last month accelerated the timetable for a possible interest-rate increase and pared back its bond purchases.“Macklem only said that if the currency were to appreciate absent fundamental reasons, then they’d be more concerned about competitiveness implications but that so far that’s not the case,” Derek Holt, an economist at Bank of Nova Scotia, said by email.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Earlier, the three major indexes rebounded after declining sharply earlier this week.
(Bloomberg) -- Asian stocks are falling further behind their global peers, buffeted by a resurgence of Covid-19 cases across the region and mounting investor concern over inflation.The MSCI Asia Pacific Index slumped 3.2% this week, and is now down 2.7% in May. That’s put the gauge on track for its worst monthly performance since March 2020 -- when markets took the biggest hit from the pandemic. The regional benchmark is also trailing MSCI’s broadest measure of global equities for a fourth straight month, and market watchers are citing several reasons why this underperformance may continue.While inflation has emerged as the most immediate concern for equity investors worldwide, confidence in Asia has also been hit due to a worsening Covid-19 outbreak from Taiwan to Singapore. Earnings upgrades are slowing and valuations still remain relatively high in some growth sectors, analysts say.“The sentiment now is definitely not positive,” said Banny Lam, head of research at CEB International Inv Corp. “Asian stocks are swayed by the inflation in the U.S. People are very worried about that the U.S. will start to roll back stimulus earlier than expected.”The worst of this week’s selloff came after data on Wednesday showed U.S. consumer prices climbed in April by the most since 2009. The MSCI Asia Pacific Index slumped 1.8% on Thursday.The virus remains the other major sore point for Asian investors. Singapore, one of Asia’s top-performing markets this year, saw its stock benchmark plunge as much as 3.2% on Friday, the most in the region, as the city-state said it will return to the lockdown-like conditions it last imposed a year ago to contain a rising number of untraceable infections.At the same time, India, Japan and other parts of Southeast Asia are also batting a fresh surge in cases and tightening restrictions, with relatively slow vaccine rollouts and delays in reopening borders compounding concerns for investors.“You have to have a strong vaccination program in order to open up and rejoin the rest of the world and keep the virus at bay,” said Mark Matthews, head of Asia research with Bank Julius Baer & Co. “Unfortunately, most of Asia has not had very strong vaccination program.”Having led global equity gains in 2020, Asia is sharply underperforming peers in the U.S. and Europe in 2021. While the Asian benchmark is now little changed for this year, the S&P 500 Index and the Stoxx 600 Index are both up about 11%.Seasonality also seems to have played a role in the recent selloff. May has historically been the worst month for the MSCI Asia Pacific Index, with the benchmark averaging a 2% decline over the past 10 years, according to data compiled by Bloomberg.Profit, InflationWhile companies across Asia were early beneficiaries when it came to the pandemic recovery after strict lockdowns at the start of 2020, those gains have largely been priced in. Twelve-month earnings estimates for the Asia Pacific gauge have been raised 11% this year by analysts, according to Bloomberg data. That’s compared to 17% in the U.S.Inflation fears may pick up over the next few months as U.S. demand for services accelerates over the summer, according to Tomo Kinoshita, a global market strategist at Invesco Asset Management in Tokyo. “Once the inflation pickup slows pace, markets could calm down,” he said.U.S. Producer Prices Top Forecasts, Adding to Inflation PressureChina FactorAs new Covid-19 outbreaks across Asia add uncertainty to the pace of the demand recovery, Tai Hui, chief Asia market strategist at JPMorgan Asset Management, points to the low correlation between Chinese and global stocks.U.S., Europe Likely Preferred Markets in 2021: JPMorgan’s Hui (Video)“The Chinese onshore market’s low correlation with international equities could be a blessing in disguise in this choppy environment,” Hui wrote in an email.China’s local stocks have been showing early signs of relative strength against their Asian peers after spending much of the year under pressure. The CSI 300 Index rallied 2.3% this week, outperforming the region.A gauge of 30-day correlation between the CSI 300 Index and the MSCI ACWI Index has turned negative for the first time since October 2019, according to data compiled by Bloomberg.Analysts See Local Opportunities in China Weakness: Taking StockFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- The U.K.’s fraud prosecutor opened a probe into Sanjeev Gupta’s GFG Alliance over suspicions of fraud and money laundering, causing a potential lender to the group to withdraw from agreements to provide new financing.The Serious Fraud Office is investigating “suspected fraud, fraudulent trading and money laundering in relation to the financing and conduct of the business,” according to a statement. The probe includes the financing arrangements with Greensill Capital UK Ltd. The SFO has been looking at GFG since Greensill’s collapse in March and decided to open a formal probe, according to a person familiar with the investigation.As a result, White Oak Global Advisors LLC is pulling out of discussions to provide loans to Gupta’s businesses. “As with any regulated financial institution, we are not in a position to continue discussions with any company that is under investigation by the Serious Fraud Office for money laundering,” a spokesperson for the group in London said.The Financial Times first reported that White Oak was pulling out of financing talks. A representative for GFG declined to comment on White Oak’s decision. Last week, Bloomberg reported Gupta had agreed a 200 million pound ($282 million) facility with the San Francisco-based lender to provide working capital to his U.K. steel businesses. He had also secured the refinancing of one of his Australian units.It’s a massive setback for the tycoon, who appeared to be just on the cusp of securing a lifeline for his beleaguered metals empire. He now faces the extremely difficult task of negotiating new loans while being subject to a fraud probe.Prosecutors are starting to round in on both Gupta and Greensill, after months of scrutiny from lawmakers and the media over its financing practices. Earlier this week, the U.K. Financial Conduct Authority said it was also investigating Greensill and cooperating with counterparts in other U.K. enforcement and regulatory agencies.It’s also working with German, Australian and Swiss authorities. The FCA and SFO probes are completely separate although inevitably will involve cross-over and information sharing, according to the person familiar with the investigation.Read More: Lex Greensill Says His Investors Knew What They Were Buying“GFG Alliance will co-operate fully with the investigation,” a GFG spokesperson said. Grant Thornton, Greensill’s administrators, declined to comment.While the SFO has collected billions in fines in recent years from companies with deferred prosecution settlements, its track record in the criminal courts is patchy. Last month a trial into two Serco Group Plc directors collapsed and the agency lost a mammoth case against Barclays Plc bankers in 2020.GFG has come under the microscope after the collapse of Greensill Capital in March revealed it had been a recipient of financing based on expected future invoices, for sales that were merely predicted.What has also come to light is the activities of the tycoon’s trading business Liberty House Group. Four banks stopped working with the company, starting in 2016, after they became concerned about what they perceived to be problems in paperwork provided by Liberty, Bloomberg News reported.Read More: As Gupta Rose From Trader to Tycoon, Several Banks Backed AwayGreensill was Gupta’s largest source of financing before its collapse. The London-based lender supplied billions of dollars in loans to GFG, many of which were packaged and sold onto investors in funds run by Credit Suisse Group AG. Greensill fell into administration after a key insurance partner didn’t renew coverage on loans made to some of its customers, including GFG.Much of the financing extended to GFG by Greensill was from the finance firm’s German banking unit. Germany’s financial watchdog shuttered Bremen-based Greensill Bank AG and asked law enforcement officials to investigate accounting irregularities at the lender in March. The bank was closed after the lender identified problems in how Greensill Bank booked assets tied to Gupta’s companies.The announcement of the probe came a day after former Prime Minister David Cameron was grilled by lawmakers over his employment by Greensill. He defended his intensive lobbying on behalf of the firm as part of a parliamentary inquiry that’s raised questions over private dealings at the top of the British government.(Updates with detail of White Oak talks collapsing.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
A metal coatings plant in China's manufacturing hub has been hit by price increases of up to 30% for raw materials including steel, aluminium, thinner and paint since the Chinese New Year in February. The firm has had no choice but to pass most of these higher costs on to its clients, including those in the United States, said King Lau, who helps run Dongguan-based Kam Pin Industrial Ltd, in Guangdong province. "Our customers understand, because it is happening to many different kinds of industries including home appliances, mobile phones, vehicles," Lau said, referring to price hikes by Chinese exporters.
TAIPEI (Reuters) -Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world's biggest contract chipmaker, said some of its facilities experienced a "brief power dip" on Thursday after an island-wider power outage, raising concerns that a global chip shortage could worsen. Officials at three major science parks in Hsinchu, Tainan and Taichung, where TSMC, and other semiconductor firms all have large operations, told Reuters there was no impact on the operations of the chipmakers. Shares in TSMC traded up 0.016% in New York.
(Bloomberg) -- Sanjeev Gupta’s plans to save his embattled industrial empire suffered a major setback as the U.K. opened a fraud investigation, prompting a potential financial partner to walk away.For two months, Gupta has been scrambling to refinance after the collapse of his group’s main lender, Greensill Capital, and recently looked close to winning a reprieve -- helped along by a surging commodity prices.But on Friday, the Serious Fraud Office announced a probe into Gupta’s GFG Alliance, including into the financing arrangements with Greensill. That prompted White Oak Global Advisors LLC -- which had recently offered a lifeline with terms for a 200 million-pound ($282 million) loan for Gupta’s U.K. steel business -- to walk away. White Oak was also behind funding for part of Gupta’s Australian assets, the Australian Financial Review has said.“As with any regulated financial institution, we are not in a position to continue discussions with any company that is under investigation by the Serious Fraud Office for money laundering,” White Oak said in a statement.GFG said Friday it will co-operate fully with the SFO investigation. It declined to comment on White Oak’s decision.The fraud probe also puts other efforts to replace about $5 billion Gupta had borrowed from Greensill in question.On Thursday, Gupta had conveyed a much brighter outlook, expressing confidence of a “new future” for his sprawling group of companies. On a podcast for employees, he said it had been “relatively easy to get refinancing” for the Whyalla mill in Australia. He also said that GFG had been “inundated by offers to help and to finance,” partly due to strong commodity markets.The picture is now bleaker in the wake of the SFO investigation, which follows months of scrutiny from lawmakers and the media over Gupta and Greensill’s financing practices. GFG has come under the microscope after the collapse of Greensill in March revealed it had been a recipient of financing based on expected future invoices, for sales that were merely predicted.Trading ActivitiesThe exact scope of the SFO investigation isn’t yet clear. Bloomberg has reported four banks stopped working with Gupta’s Liberty House Group trading business, starting in 2016, amid concerns about what they perceived to be problems in paperwork provided by Liberty, Bloomberg News has reported. In one example, the company had presented a bank with what seemed to be duplicate shipping receipts. A spokesman for Gupta has denied any wrongdoing.The two-month period it took from starting to covertly look into GFG and its financing by Greensill to announcing a formal probe is a quick turn-around for the SFO, which often takes years to publicly confirm it’s taking action against a company.It will now start to gather evidence, including securing devices and documents. However, it’ll likely take years for the office to make any tangible updates to the investigation, including whether it decides to charge individuals as part of the probe.The funding from Lex Greensill’s eponymous firm helped GFG expand at an astonishing rate in the past five years by targeting old, unwanted assets. His loose collection of companies now employs some 35,000 people worldwide, with steel and aluminum plants in the U.S., U.K., France, Romania and Australia.Staying afloat would enable Gupta to enjoy some of the best times his industrial businesses have seen. Steel prices are near an all-time high as demand recovers from the coronavirus pandemic and China cuts capacity to curb pollution. Aluminum, Gupta’s other major business, hit a three-year high this week amid a broad commodities boom.Still, Greensill’s collapse has already taken a major toll on Gupta’s businesses. On Thursday, his Wyelands Bank said it would be wound up if it can’t find a buyer. His steel units in France and Belgium have started creditor protection procedures, he’s approached buyers for some of his engineering assets, people familiar with the matter have said, and also sought buyers for two steel plants in France.For governments too, there is much at stake. Countries that once feted him as a savior for buying decrepit assets may have to pick up the pieces, due to the jobs at risk and some assets’ strategic importance to industry.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- A crack in a bridge over the Mississippi River has stranded more than 700 barges, cutting off the biggest route for U.S. agricultural exports when the critical waterway is at its busiest.The route is shut near Memphis while the Tennessee Department of Transportation inspects a large crack in a highway bridge spanning the river, according to the U.S. Coast Guard. A queue has expanded to 47 vessels and 771 barges, with 430 of those heading north and the rest going south, Petty Officer Carlos Galarza of the Coast Guard’s 8th District said Thursday afternoon by email.The Mississippi River is the main artery for U.S. crop exports, with covered barges full of grain and soy floating to terminals along the Gulf of Mexico, while crude oil as well as imported steel also travel through sections of the waterway. Any sustained outage would disrupt shipments out of the Gulf. Corn futures tumbled by the most allowed under CME Group rules partly on speculation that exports would back up.“The river is the jugular for the export market in the Midwest for both corn and beans,” said Colin Hulse, a senior risk management consultant at StoneX in Kansas City. “The length of the blockage is important. If they cannot quickly get movement, then it is a big deal. If it slows or restricts movement for a longer period it can be a big deal as well.”The stoppage along the Mississippi River is the latest calamity to upend the commodities world in recent weeks. Back in March, the Suez Canal was blocked by a giant container ship that got stuck sideways in the vital waterway for almost a week, paralyzing global shipping. And late last week, a cyberattack brought down the largest fuel pipeline in the U.S. for five days, leading to widespread gasoline shortages from Florida to Virginia.A lengthy halt on the Mississippi River could further roil crop markets, where soybeans and corn futures have hit multiyear highs amid adverse weather in Latin America and a buying spree from China. Corn futures fell Thursday by the exchange limit of 40 cents, or 5.6%, to $6.7475 a bushel in Chicago.As a workaround, traders could in theory also send some supplies on trains and divert to ports along the U.S. Pacific Northwest. Few grain and soy buyers were bidding for barges north of the river closure amid uncertainty on when vessel traffic would resume.The crack halting vehicle and waterway traffic is in the truss of the Interstate 40 Hernando DeSoto Bridge, which was found during a routine inspection, according to a Tuesday statement from the Tennessee Department of Transportation.“The timeline is still undetermined” for the waterway reopening, department spokeswoman Nichole Lawrence said Thursday morning by email.The Army Corp of Engineers could figure out a way to keep automotive traffic closed in order for water traffic to resume under the bridge, according to CRU Group analyst Josh Spoores. It may cause bottlenecks, but most consumers already used to waiting months for supplies to ship are probably fine with some added delays, he said.The New Orleans Port Region moved 47% of waterborne agricultural exports in 2017, according to the U.S. Department of Agriculture. The majority of these exports were bulk grains and bulk grain products, such as corn, soybeans, animal feed and rice. The region also supports a significant amount of edible oil exports, such as soybean and corn oils and even attracted 13% of U.S. waterborne frozen poultry exports in 2017.Some traders speculated that, based on past experience, the river might be partially opened for restricted movements while repairs are being done.“My sense is that it is not a big deal for river traffic as it will be a short-term disruption,” said Stephen Nicholson, a senior analyst for grains and oilseeds at Rabobank. “The good news is most of fertilizer has already come up river and soybean exports are at their low point. However, corn exports continue at a strong pace, so we may see a slight delay in corn barges reaching” New Orleans.It may be difficult for exporters to shift much volume to rail, as the capacity to unload trains outside of the New Orleans area is limited, according to Curt Strubhar, vice chairman and risk management consultant at Advance Trading Inc.“There aren’t many rail unloaders South of the issue,” he said, adding that New Orleans “port elevators aren’t equipped to handle a sharply higher share of rail unloads either.”Of agricultural supplies that floated on barges north of Memphis, about 84% was corn and about 13% was soybeans, according to Mike Steenhoek, executive director of the Soy Transportation Coalition, citing USDA data. Overall shipments of corn and soy during the week ended May 8 were 18% higher than a year ago.Agricultural co-operative Growmark’s St. Louis port, which sends corn and soybeans south to New Orleans for export mostly to China and receives fertilizers, will likely close Friday, according to Matt Lurkins, executive director of the firm’s grain division.“Freight was already tight,” Lurkins said in a phone interview. “Then this kind of sent us over the edge.”If the pause drags on, he said, Growmark could send more grain to processors rather than loading it on barges for export.Small volumes of crude and partly refined oil are shipped by barge on the river as well. In February, 2.85 million barrels moved from the Midwest to the Gulf Coast via barge and tanker, according to government data.Imported steel on barges will be delayed as long as traffic is halted. About 25% of imported steel travels through at least a section of the Mississippi River, according to Wood Mackenzie analyst Cicero Machado, though he said newly arriving foreign steel to ports in New Orleans or Mobile, Alabama can be diverted onto rail cars or trucks.The river also is a major artery for steel shipments within the U.S. and delays could become an issue for automakers in the South that depend on high-strength steels produced in the Midwest, he said.“At this stage the big question is: is this going to last?” Machado said. “The issue is not actually in the river, it’s in a bridge over the river -- so perhaps they’re going to find a way to manage the traffic there.”(Adds Coast Guard update in second paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- With the global inflation debate intensifying, equity investors are fine tuning their portfolios to guard against the impact of price pressures.A preference for companies with the greatest pricing power is one approach adopted by investors from JPMorgan Asset Management to Pictet Wealth Management. While cyclical stocks remain in favor, fund managers are becoming more selective, as pockets of the economically-sensitive asset class may have run too far, too fast.“You hide in pricing power companies -- those companies that will be able to pass higher raw material costs and wages to the end customer,” said Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management in Geneva. “Luxury, concessions companies linked to inflation are some of the sectors that will benefit, but even some cyclical or commodity companies have now more pricing power than several years ago too.”A jump in U.S. consumer prices in April by the most in a decade has intensified an already-heated debate about how long inflationary pressures can last. Higher-than-expected factory prices in China last month and the surge in commodity prices, have added to the concerns.The worries have begun to weigh on stocks. MSCI Inc.’s global equity benchmark slipped 1.6% this week, its biggest drop since February. Technology shares bore the brunt of the weakness as investors bet the return of inflation will bring with it higher interest rates that could hurt stocks with elevated valuations.Wall Street Can’t Agree If Inflation Is Good or Bad for StocksPrice SettersStocks like U.S. railroad companies and paint manufacturers have historically been good at passing on price pressures, though usually with a time lag, according to Richard Saldanha, a portfolio manager at Aviva Investors.Yet there are differing views about how much this applies right now.“Consensus believes that cyclical areas such as banks and industrials are the place to hide in an inflationary environment,” said Caroline Keen, a portfolio manager of JPMorgan Global Growth Fund. “We would counter that banks are generally not price setters and many industrial companies such as autos are struggling with cost increases, with an inability to pass these on to consumers.”Getting PriceyCyclical names are also getting more expensive. Banks now trade around 1.1 times their book value, above the sector’s 10-year average, according to data compiled by Bloomberg. The equivalent for materials stocks is even more extreme after recent surges in commodities like copper and iron ore.That has made UBS Asset Management portfolio manager Max Anderl “slightly wary” of classic inflation hedges like financials or miners after a strong rally this year. “We prefer to look at selected stocks in the IT and media sectors that continue to show exceptionally strong fundamentals but have corrected sharply in this factor rotation,” he said.Ricardo Gil, head of asset allocation at Trea Asset Management in Madrid, has chosen to exit industrial shares in favor of oil stocks and some banks.Idiosyncratic IdeasAnother approach is to sidestep the debate altogether and focus on single stock ideas or non-inflation related investment themes.With reflation bets triggering a sector rotation, equity correlations are falling, which is good news for fund managers looking to beat indexes through stock picking. If most equities are moving in different directions, it’s easier to choose one that stands out from the crowd.The S&P 500 Index’s three-month realized correlation -- a gauge of how closely the top stocks in the U.S. benchmark move relative to each other -- remains well below the average of the last 10 years.“Our way to cope is being overweight in equity alternatives such as Merger Arbitrage and CTAs and focus on idiosyncratic ideas rather than broader sectors,” said Bantleon AG portfolio manager Oliver Scharping.Transitory ShockStill, not everyone believes the world is set for a new era of higher prices and JPMorgan’s Keen isn’t making significant changes to her portfolio despite the recent inflation concerns.The portfolio manager sees inflation as transitory due to year-over-year base effects and temporary supply chain bottlenecks and is conscious of structural deflationary forces that remain in place such as technology, high debt levels and poor demographics.“Loan growth remains muted and fiscal stimulus comes with offsetting tax increases,” Keen said. “So far we have seen no evidence to suggest that we are entering a new inflationary regime.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Inflation fears are dogging Wall Street at a time when the U.S. rebound is picking up speed.
Not all industry participants are amused by dogecoin’s tricks.
The direction of the June Comex gold market on Friday is likely to be determined by trader reaction to $1827.40.
(Bloomberg) -- Buyers of newly-minted corporate bonds are already nursing losses as inflation fears send government bond yields climbing.About four fifths of high-grade non-financial corporate bonds priced in Europe this year are quoted below their issue price, based on data compiled by Bloomberg. Last Friday, the share of post-issue losers stood at under 50%.This bleak statistic underscores the damaging effect on credit investors of the so-called reflation trade -- bets on rapid economic recovery and an associated pickup in inflation -- prompting many to seek shelter from further sovereign debt sell-offs.Investment grade bonds are more sensitive than high-yield debt to any threat of higher interest rates in response to inflation, a vulnerability known as ‘duration risk.’ That’s because they have longer life spans than lower-quality peers and carry lower risk premiums. This attribute is hitting investors hard this year.“Duration is already a problem when you see that rate-sensitive sectors underperform and this is going to increase,” said Vincent Benguigui, a portfolio manager at Federated Hermes, which oversees $625 billion. “Clearly everything is stretched.”The year-to-date total return of euro-denominated investment-grade bonds has slumped this week, to minus 0.96% from minus 0.56% on Monday. A month ago the return since the start of 2021 stood at minus 0.3%, according to Bloomberg Barclays indexes. By contrast, the less rate-sensitive junk bond market has gained 2.2%.While the threat of higher yields to compensate for a potential rise in inflation has been a thorn for high-grade investors throughout the year, a European Central Bank pledge to pick up the pace of its emergency pandemic QE program had helped funds recover some losses before this week’s sell-off pushed them further into the red.Rate risk is the main driver of corporate bond losses, as spreads on most of this year’s new issues are trading tighter than at launch, according to data compiled by Bloomberg. The average risk premium of high-grade euro bonds over safer government debt is indicated at 83 basis points, the lowest in more than three years, thanks to continued ECB purchases and bets on the economic reopening.Click here for the spread performance of all bonds issued in Europe this yearBut spreads, with little room to tighten further, seem incapable of stemming duration-driven losses.“While the extended recovery in fundamentals should provide another layer of support, higher yields in the euro government bonds space should limit euro investment grade’s ability to attract inflows and limit tightening potential once rates stabilize,” wrote Cem Keltek, a credit strategist at Commerzbank AG, in a note to clients on Thursday. “Pressure on rates and tapering prospects later in the year render long-end risk-reward unattractive.”Some hedge funds have started betting on price drops in corporate bonds amid the threat of rising interest rates and stretched valuations. Short positions in junk bonds have jumped to their highest level since 2008 and bearish bets on high-grade bonds are at their highest since early 2014.Bonds that lose value shortly after issuance could potentially discourage investors from bidding aggressively for new deals.This leaves high-grade investors with only one realistic source of return: the income made by just holding the interest-bearing bond, unless they are willing to switch to riskier parts of the credit market.“It’s more or less carry at this point,” said Martin Hasse, a portfolio manager at MM Warburg & Co., which oversees 76.2 billion euros ($92 billion). “Maybe a little tightening but not so much. High yield and subordinated notes can see more of that.”EuropeHigh yield issuers are in command of the region’s syndicated bond market on Friday, accounting for three of the day’s four deals as global credit risk sentiment improves.The financing arm of U.S. autoparts maker Dana Inc., Italian technology companies Lutech SpA and Cedacri SpA are pitching new deals that are likely to wrap up by market closeWeekly issuance is likely to reach 33.5 billion euros, according to data compiled by BloombergEuropean credit default risk fell for both investment-grade and high-yield bonds as more-tempered commodity prices helped allay investor concerns about inflation risksAsiaA rush of borrowers early in the week boosted dollar bond sales in Asia ex-Japan, with issuance doubling compared with the previous week.Bond sales rose to $8.4b from $4.2b a week earlier, the highest in three weeks, according to Bloomberg-compiled dataAt least 22 borrowers came to the market, the busiest week in 2021 since January in terms of number of issuersGLP Pte’s $850m perpetual note offering was the biggest bond sale this week, followed by a $707m offering by JSW Hydro Energy and a $650m note from Cathay Pacific AirwaysDeals slowed from mid-week, coinciding with release of data on Wednesday that showed U.S. consumer prices climbed in April by the most since 2009Yield premiums on Asia’s high-grade bonds, excluding Japan, and the cost of protection against such debt both dropped 1-2bps on Friday, credit traders saidU.S.Alibaba Group Holding Ltd.’s revenue beat estimates after China’s e-commerce leader rode a post-pandemic recovery and begins to move past a bruising antitrust investigationAs cash balances have risen toward $70 billion, financial flexibility may enable Alibaba to endure a prolonged period of macroeconomic uncertainty related to the coronavirus, as well as regulatory risk, better than hardware-centric technology peers, write Bloomberg Intelligence credit analysts Robert Schiffman and Suborna PanjaIt seemed almost certain that supply would at least match syndicate desks’ projections of $45 billion this week after Monday’s almost $28 billion bonanza, however, macro uncertainty fueled by inflation fears seems to have curbed issuanceLess than $3 billion priced on Thursday, bringing the week’s volume to $42 billionFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Altimeter Growth Corp., the blank-check company merging with internet giant Grab Holdings Inc., is hovering just a few cents above its record low after cratering 28% since the deal was unveiled in April.Altimeter closed Thursday at $11.06, just shy of its $10.98 historical trough. That selloff came after Southeast Asia’s most valuable startup announced a deal on April 14 with the special purpose acquisition company of Brad Gerstner’s Altimeter Capital Management to go public in the U.S. by July, in the largest-ever merger with a blank-check company.The Singapore-based ride-hailing and delivery startup is set to have a market value of about $39.6 billion through the combination with Altimeter, the companies said at the time of the announcement. It’s raising more than $4 billion from investors including BlackRock Inc., Fidelity International and T. Rowe Price Group Inc. as part of the biggest U.S. equity offering by a Southeast Asian company. Grab declined to comment on Friday.“SPACs have seen a bit of selloff so it reflects the general sentiment,” said Angus Mackintosh, founder of CrossASEAN Research. The share price at current levels won’t make a big difference from Grab’s listing perspective, he added. “It just means profits your SPAC owners would realize are diluted to some extent. They have effectively locked in cornerstone investors at a $40 billion valuation. Whether Grab can sustain that lofty valuation after listing, given the competitive landscape, is a bigger question.”Nirgunan Tiruchelvam, head of consumer sector equity research at Tellimer in Singapore, said Altimeter’s share price drop suggested the market is uncomfortable with the valuation pledged for Grab, as well as indicative of weakness in the broader SPAC market.Blank-check companies completed $181 billion of U.S. listings over the last five quarters, accounting for 55% of all IPO fundraising in New York, according to data compiled by Bloomberg. At the peak of the frenzy, more than 50 SPACs unveiled plans to raise a combined $17 billion during a single week in February.But the pace of new deals has now slowed to a trickle, with only five blank-check companies submitting registration documents in the last week of April. U.S. regulators have been warning investors for months about the potential risks around SPACs. Last month, they spooked dealmakers by floating the potential of different accounting treatment for one aspect of SPAC deals, a move that has forced many companies to review their results.Read more: Singapore’s Grab to List in U.S. in $40 Billion SPAC DealSPACs are investment vehicles that go public despite having no real business. The plan is to raise money from investors and use it to buy into another company, typically a private one that’s yet to be chosen.The investors who buy into and fund SPACs when they first go public are typically institutions such as hedge funds, and the companies offer them the combination of a relatively small downside with a chance to make a tidy profit down the road. Blank checks typically go public at $10 a share and have 24 months to find a target. If the company fails to identify one, it liquidates, and investors get their money back. Investors also get to vote on a deal and have a chance to redeem their shares whatever the result.(Updates with analyst’s comment in fifth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.