|Day's Range||1.9500 - 2.2000|
In a move that confirms market speculation, the largest mortgage lender in the U.S. is preparing to hit the stock exchange. Quicken Loans has filed to launch an initial public offering (IPO). In addition to making its debut on the public markets, the company will also undergo a name change to Rocket Companies.
JPMorgan Chase and Wells Fargo shares dropped more than the overall market Thursday, despite upgrades of the two banking giants from Wolfe analyst Steven Chubak. The analyst's move comes as a prelude to the banks' second-quarter earnings reports, which are both expected July 14. Chubak lifted his rating to outperform for JPMorgan and peer perform for Wells Fargo, based on months of their share prices trailing Goldman Sachs and Morgan Stanley and on an improving outlook for loans.
Wells Fargo & Co will donate over $400 million toward helping small businesses recover from the coronavirus pandemic, giving away all proceeds from its participation in the Payroll Protection Program. "The hardest hit business in this are minority owned," president of consumer banking Mary Mack said in an interview. "If we look at the communities we serve and the intent and spirit of the program, we believe it was to lean in to help those businesses that were perhaps the most fragile."
European shares rose on Thursday after a two-day wobble, as Chinese markets continued their charge, while investors propelled gold to a nine-year high. Chinese stocks set their longest winning streak in two years, and the yuan had strengthened past 7 per dollar overnight , despite rising tension over Hong Kong and the economic uncertainty caused by COVID-19. It was the Shenzhen blue-chip index's eighth straight day of gains, adding another 1.5% to its 15% surge this month, and it helped Europe on an upward trajectory after initial hesitation caused by uninspiring German data.
The stock market has battered the largest U.S. banks because of coronavirus, but they have plenty of ways to make money, even when interest rates are very low.
(Bloomberg Opinion) -- In the past six months, investors across the globe witnessed the world turn upside down. Then, just as suddenly, sweeping coordinated action by central banks and governments left many major financial markets unchanged at worst — and at record highs at best. Just from looking at asset prices, things appear mostly right-sided, even though millions are unemployed, bankruptcies are piling up and new coronavirus outbreaks raise doubts about reopening efforts.After experiencing such a whipsaw, could you blame investors for heading into the second half of 2020 wanting to bet against something? Anything? While it’s still early days, U.S. high-yield corporate bonds are starting to look like the flashpoint for this anxiety. Investors pulled a whopping $5.55 billion from junk debt funds in the week ended July 1, the fourth-biggest outflow ever and the largest in more than two years, according to data compiled by Refinitiv Lipper. An additional $2.6 billion left exchange-traded funds tracking speculative-grade bonds last week, Bloomberg News’s Katherine Greifeld reported. Generally, high-yield pros are chalking this up to individual investors taking profits after the strongest quarter in more than a decade.Some other troubling signs are starting to crop up, however. Traders are taking bearish options positions on the $27.3 billion iShares iBoxx High Yield Corporate Bond ETF (ticker: HYG), with about $2.5 billion in notional put volume changing hands on July 6, the most since June 11. Total call volume, by contrast, slid to the lowest in a month. Whether for hedging or just outright speculation, these wagers would suggest limited upside and potentially large losses ahead.I admit, this is a tempting narrative. Maybe U.S. stocks can keep climbing thanks to the near-invincible large technology companies. Perhaps total returns on investment-grade bonds should be at a record high with the Federal Reserve buying a broad index of the securities and pledging to keep benchmark interest rates near zero for the foreseeable future, pegging borrowing costs at rock-bottom levels for creditworthy companies. But if the world is in for a slow and uneven recovery, what exactly is the case for junk bonds? They’re a natural asset class to show the first signs of skittishness.Indeed, U.S. bonds and loans trading at distressed levels rose for a second consecutive week through July 2, by 5.9% to $369 billion, according to data compiled by Bloomberg. Before that stretch, that figure hadn’t expanded since April. While it’s still a far cry from the peak of $930 billion in March, this week-by-week chart of bankruptcies from Bloomberg’s Josh Saul shows that corporate America’s struggles are far from over:The superlatives are stunning. More airlines sought U.S. bankruptcy protection this year than at any time since the global financial crisis. Energy filings grew at the fastest pace since oil prices collapsed in 2016. More retail companies turned to court protection in the first half of 2020 than in any other comparable period ever, with Brooks Brothers Group Inc. adding to that tally this week and the owner of the brands Ann Taylor and Lane Bryant reportedly soon to follow. Not all of these companies have unsecured bonds on their books, but the pace is nonetheless ominous.Could the past few months have been a Fed-induced head-fake before the real storm? “Sharp corrections are common in highly volatile distressed cycles, and we think the exuberance may mirror spring 2008’s similar two-month window of calm, which didn’t last,” wrote Philip Brendel, a senior credit analyst at Bloomberg Intelligence. “That correction also reveled in Fed largesse as the central bank stood behind JPMorgan’s Bear Stearns acquisition in March 2008.”Hearing comparisons to the global financial crisis might make an investor rush to a new ETF that Tabula Investment Management introduced this week (ticker: TABS), which effectively bets against 100 high-yield bonds by tracking the performance of the CDX North American High Yield Credit Short Index. “Investors need to review their exposure to high-yield U.S. debt and consider strategies for protecting against any rise in defaults,” said Jason Smith, Tabula’s chief investment officer.For individual investors, it’s one thing to take profits after a blockbuster quarter. It’s quite another to make an outright bet against high-yield bonds. There are several reasons to doubt a full-scale collapse is in the offing, starting with the fact that junk-debt issuance reached $58 billion in June, the busiest month ever. That suggests a large swath of companies, particularly those rated double-B like the preponderance of the CDX index, have successfully raised funds to offset any immediate revenue shortfalls, which in turn lowers the stakes for the coming months if mutual-fund withdrawals persist.Moreover, as I’ve noted before, distressed-debt investors have raised tens of billions of dollars for an opportunity to snap up cheap bonds and loans when companies run into trouble. Some already missed out on the biggest bargains in March; it stands to reason that they’ll be more eager to pounce at the first hint of another selloff, or attractive businesses falling on temporary hard times. On top of that, Bank of America Corp. estimates these investors might sell $200 billion of investment-grade securities in the next several months — money that would likely be deployed into riskier securities.This wall of cash alone won’t save every company from bankruptcy, of course. But one reason that Hertz Global Holdings Inc. went bust while Avis Budget Group Inc. hasn’t is because investors lined up in early May to lend Avis $500 million for five years in exchange for a huge 10.5% coupon. Since then, Avis’s longest-dated bonds have rallied to 84 cents on the dollar from 56 cents, while the new securities trade at 114 cents to yield 6.3%, about the same as the Bloomberg Barclays high-yield index. It went from a company on the brink to an average speculative-grade borrower in just two months.This kind of resolution seems more likely than a 2008 redux. Plus, the Fed wasn’t buying corporate debt and ETFs in 2008, nor was Congress so quick to extend lifelines to businesses and individuals alike. By all accounts, we’re living through a unique economic recession and recovery.Investors shouldn’t assume anything about the behavior of speculative-grade debt in this environment. By all means, take some chips off the table if the persistent drip of bankruptcy filings is unnerving. But bet against the broad junk-bond market at your own risk.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Few aerospace companies have been left unscarred by Covid-19, but those that were struggling even before the pandemic are experiencing a unique kind of hell.Boeing Co. was already up against it after grounding its 737 Max jets and it’s expected to burn through as much as $16 billion of cash this year. Among suppliers, few were as vulnerable going into the crisis as Rolls-Royce Holdings Plc, the British jet engine manufacturer. It invested billions of pounds in several new engine designs, only to discover that one — the Trent 1000 — isn’t totally reliable. Fixing this will cost 2.4 billion pounds ($3 billion), and now the collapse in air travel has taken its own toll on Rolls-Royce’s finances.On Thursday, a trading update laid bare just how devastating the virus has been for a company whose propulsion systems power 38% of the world’s wide-body passenger jets, including the Boeing 787 and Airbus A380. The group expects to consume about 4 billion pounds of cash this year. Like Boeing, Rolls-Royce’s liabilities now far exceed its balance-sheet assets.Even in normal times the company loses more than 1 million pounds on each large jet engine it sells, and makes most of its commercial aviation revenue from maintenance contracts. When planes are grounded, precious little cash comes in to cover the company’s high fixed costs. The number of hours Rolls-Royce engines were in flight fell by 75% in the second quarter; they’re expected to more than halve this year. With intercontinental flying likely to remain subdued, many of the twin-aisled jets that Rolls-Royce powers will remain underutilized. A strategic decision to focus on the wide-body aircraft market is coming back to haunt the company. Bloomberg reported last week that Rolls-Royce was considering raising up to 2 billion pounds in equity capital. But, for now, it has announced only a new 2 billion-pound government-guaranteed loan.A large capital increase would heavily dilute shareholders that don’t participate but Rolls-Royce has surely run out of other options, having already scrapped its dividend and announced 9,000 job cuts. The shares have declined by more than 60% this year, valuing the business at just 5.1 billion pounds. At its 2013 peak, Rolls-Royce was worth more than 4 times that.The company still has 4.2 billion pounds of cash and 8.1 billion pounds of total available liquidity, a decent cushion considering the scale of the ongoing cash burn. But its finances are in a worse state than those numbers suggest, something Rolls-Royce’s complex accounting, large working capital swings and invoice-financing arrangements (since discontinued) helped paper over.Rolls-Royce’s net indebtedness could rise to as much as 16.6 billion pounds, according to an estimate from JPMorgan analyst David Perry that preceded Thursday’s trading update. That’s when you include the cash that customers have advanced Rolls-Royce ahead of the maintenance work it must still carry out, as well as its operating leases, provisions for fixing faulty engines and other liabilities.About half of Rolls-Royce’s revenue comes from making power-generation and defense equipment, businesses that haven’t been as badly affected by coronavirus. Power-generation sales fell but defense is holding steady. A group target to achieve 750 million pounds of free cash flow in 2022 gives investors something to cling to. Chief Executive Officer Warren East believes the company has an attractive and independent future.And yet, Rolls-Royce will emerge from this crisis as a smaller group with less cash-flow potential and more debt. As a key military supplier to Britain and one of the country’s last truly world-class manufacturers, the government will be keeping a close eye on its financial health. The state had to rescue the company when it went bust in the early 1970s, and it still holds a so-called “golden share,” allowing it to block a foreign takeover.Investors seem to think more state assistance will be forthcoming if needed.(2) The company’s 550 million euros of senior unsecured 1.625% coupon bonds, which mature in 2028, trade at 90 cents on the euro. That’s not great, but it’s not disastrous either. Standard & Poor’s has already cut the credit rating to junk. If Rolls-Royce does prove too fragile to stand alone, the idea of merging it with BAE Systems Plc could be revived. It’s too important to fail.(1) So far Rolls-Royce has tapped 300 million pounds from the U.K.’s Covid Corporate Financing Facility and now has another 2 billion pound government-guaranteed loan available to it.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
European shares were rising again after a two-day wobble on Thursday as China's markets continued their charge, and something between fear and greed propelled gold to a nine-year high. Chinese stocks set their longest winning streak in two years and the yuan had strengthened past 7 per dollar overnight, despite rising tension over Hong Kong and the economic uncertainty caused by COVID-19. Trade- and commodity- related currencies also reacted to China's gains.
An initial public offering from Alibaba's Ant Group by year-end would give equity capital markets in Hong Kong a timely boost after a new security law cast in doubt the city's future as a global financial centre, analysts said on Thursday. With new deals worth $4.17 billion in the first half, Hong Kong's exchange accounted for 7.6% of the global IPO market, though down from a share of 11%, and deals worth $7.91 billion, in the same period last year, Refinitiv data showed. The fall in value ranked Hong Kong as the fourth most active exchange after the Nasdaq, mainland China's new Star Market and the Shanghai stock market.
Surging Chinese stocks led Asia's equity markets higher on Thursday, as investors looked past Sino-U.S. tension and renewed coronavirus lockdowns and hoped stimulus washing through the world economy finds its way to company earnings. Asia's investors are riding high after a front-page editorial in Monday's China Securities Journal extolling market fundamentals was seen as official encouragement to buy stocks. European futures point to gains from London to Frankfurt, with FTSE futures up 0.5% and Germany's DAX futures up 1.2%, while U.S. stock futures fell 0.1%.
Plans by the biggest U.S. bank to bring back as many as half of its workers to buildings in the city between July 13 and Labor Day are on hold indefinitely, Bloomberg News first reported https://www.bloomberg.com/news/articles/2020-07-08/jpmorgan-puts-plans-for-ohio-office-return-on-hold-indefinitely?sref=V7uxlNge, citing people briefed on the decision. The bank is making plans to start a first phase of returning workers to offices in additional states including Delaware starting in mid-August, Bloomberg said.
Asian equity markets ground higher as investors tried to look past gathering Sino-U.S. tension and renewed coronavirus lockdowns to upcoming company earnings, hoping that global stimulus efforts will yield upbeat outlooks. The Chinese yuan rose to a four-month high of 6.9872 per dollar and the greenback sat near a one-month low against a basket of currencies . China was hit first and so is emerging first from the COVID-19 pandemic.
Black-owned small businesses face deeper liquidity problems than the average small business, raising questions over how entrepreneurs can navigate the COVID-19 crisis.
Credit Suisse wants to raise its China securities joint venture stake to 100% and increase its market share after getting the regulatory green light to take a majority holding, the head of its Asia business said. Switzerland's second-largest bank is also looking to hire more staff and invest in China, the world's second-biggest economy, as its most significant business opportunity in the world, its APAC boss Helman Sitohang told Reuters. China has gained in relevance for Credit Suisse and other international banks after Beijing fast-tracked the opening of its financial markets to foreigner investors.
Yahoo Finance’s Brian Cheung joins Zack Guzman break down new analysis from the Wall Street journal that shows how big banks may get billions in fees from PPP loans.
JPMorgan Chase & Co is pulling back on returning employees to offices in Columbus, Ohio, after coronavirus cases in the state jumped, Bloomberg News reported https://www.bloomberg.com/news/articles/2020-07-08/jpmorgan-puts-plans-for-ohio-office-return-on-hold-indefinitely?sref=V7uxlNge on Wednesday, citing people briefed on the decision. The bank is making plans to start a first phase of returning workers in additional states including Delaware starting in mid-August, Bloomberg said. JPMorgan did not immediately respond to a Reuters request for comment.
Chase Banking is teaming up with a coalition of four business advocacy groups to help black-owned businesses impacted by COVID-19. Christopher Hollins, Managing Director of Chase Business Banking, joins Yahoo Finance's The First Trade to discuss the details and more.
The economic fallout from the COVID-19 pandemic has been devastating for U.S. small businesses, with many experiencing dramatic declines in revenues and cash liquidity following the government-mandated closures that began in March. The effects of the economic downturn have been especially severe for Black-owned businesses— many of which entered this crisis undercapitalized.1
Amidst an unprecedented global pandemic and disruptions to the economy, more than 1 in 2 business leaders (53%) expect their companies to return to normal in the next 12 months, according to JPMorgan Chase’s Business Leaders Outlook Pulse Survey released today. The majority of business leaders remain hopeful in the face of adversity: while most (83%) are running at a reduced capacity, 68% are confident their businesses will thrive and just 2% are concerned their businesses may not survive.
Ford Motor Co is in discussions with its lenders to extend maturities on US$5.35bn in existing credit facilities, two sources familiar with the discussions said. The second-largest US automaker has reached out to lenders within its top 20 bank group for a one-year extension of its US$3.35bn three-year main corporate revolving credit facility and US$2bn three-year supplemental revolving credit facility. The company is offering an all-in spread of 225bp over Libor, split between a drawn spread of 175bp and an undrawn fee of 50bp for the main corporate and supplemental revolving credit facilities, one of the sources said.
DOW UPDATE Behind negative returns for shares of Boeing and American Express, the Dow Jones Industrial Average is in selloff mode Tuesday afternoon. Shares of Boeing (BA) and American Express (AXP) have contributed to the index's intraday decline, as the Dow (DJIA) was most recently trading 279 points, or 1.
As previously announced, JPMorgan Chase & Co. (NYSE: JPM) ("JPMorgan Chase" or the "Firm") will host a conference call to review second-quarter 2020 financial results on Tuesday, July 14, 2020 at 8:30 a.m. (Eastern). The results are scheduled to be released at approximately 7:00 a.m. (Eastern). The live audio webcast and presentation slides will be available on www.jpmorganchase.com under Investor Relations, Events & Presentations.
(Bloomberg) -- Earlier this year, thousands of lenders rushed to arrange loans under the U.S. government’s Paycheck Protection Program. Now, some of them will be rewarded handsomely.More than 30 banks across the country, including dozens of community banks and some lenders with more than $1 billion in assets, could generate fees that surpass their 2019 net revenue before set-asides for loan losses, according to a study distributed Tuesday by S&P Global Market Intelligence. The firms that will reap the biggest gains are the ones that punched above their weight in arranging loans for the rescue program.The Small Business Administration’s $669 billion Paycheck Protection Program was launched in April as part of the $2 trillion CARES Act passed by Congress to help the U.S. economy through the coronavirus pandemic. The program was initially marred by confusion and technological glitches as banks large and small raced to secure loan funding for their clients.As of June 30, lenders arranged almost 4.9 million loans supporting more than 51 million jobs, according to the SBA. Fees range from 1% to 5% for each loan, depending on its size.Cross River Bank, a Fort Lee, New Jersey-based firm with $2.5 billion in assets at the end of the first quarter, arranged more than $5 billion in PPP loans, making it the 13th-most-active lender, according to the SBA. S&P estimates that Cross River will pull in $163 million in related fees, more than double its pre-provision net revenue last year.JPMorgan Chase & Co., Bank of America Corp., Truist Financial Corp., PNC Financial Services Group Inc. and Wells Fargo & Co. were the top five PPP lenders by volume, arranging a combined $91 billion as of June 30, SBA figures show. JPMorgan could make $864 million in related fees, according to S&P, but that will “represent a modest boost to the top line.” And JPMorgan is among the lenders, also including Bank of America and Wells Fargo, that plan to donate the fees.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
DOW UPDATE The Dow Jones Industrial Average is trading down Tuesday afternoon with shares of American Express and Boeing facing the biggest losses for the index. The Dow (DJIA) was most recently trading 207 points, or 0.