DiGenova & Toensing’s Victoria Toensing and Joe diGenova discuss the fallout from Special Counsel Robert Mueller’s Russia investigation and a new report that discredits’ Christopher Steele’s story.
DiGenova & Toensing’s Victoria Toensing and Joe diGenova discuss the fallout from Special Counsel Robert Mueller’s Russia investigation and a new report that discredits’ Christopher Steele’s story.
Gold may have risen following the release of the CPI data, but it was not because of concerns over inflation.
(Bloomberg) -- Bond veteran Greg Wilensky has seen hype about a surge in inflation crushed too many times to get carried away with this year’s great reflation trade.“I’ve been managing bond portfolios for 25 years, through very large monetary programs, big deficits, and the Fed trying to raise inflation expectations,” the Janus Henderson money manager said in an interview. “As much as I can see legitimate reasons why it might happen this time -- I could have said that very often over the last 12 years too.”Wilensky’s skepticism epitomizes the cooling investor enthusiasm for bets linked to a rapid economic recovery and higher prices. Trades favoring economically-sensitive value stocks, steeper yield curves and a rebound in commodities have faltered after a stellar first quarter.The MSCI AC World Value Index has lagged its growth counterpart by about 6 percentage points since March 8. Benchmark Treasury yields have retreated some 13 basis points already this quarter, even as U.S. inflation data begin to beat expectations. And Tuesday’s strong 30-year Treasury auction suggested demand for even the most interest rate-exposed bonds is returning.One of the biggest questions money managers confront now is whether the stimulus-fueled rebound in growth and inflation -- in particular in the U.S. -- can transition to a sustainable expansion that will keep pushing equities and bond yields higher. The International Monetary Fund recently upgraded its 2021 global growth forecast to the strongest in four decades, but the outlook beyond that is less clear-cut.Envisaging a trajectory for price levels beyond this year is even harder for investors given the warping effect of coronavirus shutdowns, temporary supply bottlenecks and base effects from last year’s disinflation. A surge in five-year U.S. breakevens-- a gauge of inflation expectations -- has petered out since they hit their highest since 2008 in mid-March.Simple Math Is About to Cause an Inflation Problem: QuickTake“Inflation and rates, especially as a bond investor right now, is the call that you have to make,” said Elaine Stokes, fixed income portfolio manager at Loomis Sayles. “It’s the make-or-break call of your year.”The response to the stall for many investors has been to pare back some trades geared to the sharpest stage of the economic rebound. Vishal Khanduja, fixed income fund manager at Eaton Vance Management, has halved his portfolio’s overweight in U.S. inflation-linked bonds from the start of the year.“Inflation expectations were dislocated in 2020” in a “surgical recession,” Khanduja said. “The typical post-recession positioning that you see happen over multiple years is quickly going through the market.”Franklin Templeton’s Gulf Arab bond fund has removed its hedges against the risk of accelerating U.S. inflation, as it sees another spike in Treasury yields as “possible, not probable,” according to its Dubai-based manager.As for some traditional inflation hedges in the commodities markets, the story is about to get more complicated than the year-to-date rebound in oil and copper prices would suggest. Strategists at the BlackRock Investment Institute anticipate a divergence within the asset class, as factors such as climate risks are more fully captured in pricing.“The lift for oil from the economic restart is likely to be transitory, while some metals may benefit from structural trends such as the ‘green’ transition for years to come,” a team including Wei Li wrote in a note this week.Tremendous ChallengeMeanwhile, in the bond market, traders are not reacting to signs of inflation as one might expect. On Tuesday, data showed U.S. consumer prices climbed in March by the most in nearly nine years, yet 10-year Treasury yields fell five basis points to their lowest in three weeks.“The tremendous challenge right now, especially this year is that the quality of almost any of the numbers we’re looking at, whether it’s the short-term inflation numbers, the economic growth numbers, these things are being very much distorted by the economic volatility,” Janus Henderson’s Wilensky said.(Adds Franklin Templeton move in 10th 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) -- As Bitcoin hits records and Coinbase Global Inc. goes public, ETF issuers are betting en masse that U.S. regulators will green-light a fund tracking the largest cryptocurrency at long last.No fewer than eight applications for a Bitcoin ETF have now been filed with the Securities and Exchange Commission since late December, after billionaire Michael Novogratz’s Galaxy Digital Holdings Ltd. joined the list on Monday.It is racing with the likes of Fidelity Investments for first-mover advantage as conviction grows that the SEC will relent after years of rejected applications. With the first North American Bitcoin ETF in Canada already at $1 billion in assets, industry-watchers are wagering the agency will follow its northern neighbor’s lead.“Anyone who wants to launch a Bitcoin ETF and has been waiting wants to make sure their hat is in the ring if/when the SEC approves,” Bloomberg Intelligence analyst James Seyffart said. “So if they’re not first, they’re at least on the radar.”Bitcoin rose for a seventh straight day on Wednesday morning, hitting the highest on record and trading at about $63,900 as of 6:12 a.m. in New York. The all-time high comes as Coinbase, the largest U.S. crypto exchange, prepares to list on the Nasdaq.Whether Gary Gensler, the nominee to be next SEC chairman, will prove more open-minded toward a Bitcoin ETF than his predecessor Jay Clayton remains unclear. The agency has rejected every crypto ETF application since the first was filed in 2013 amid concerns about manipulation and criminal activity.An SEC spokesperson declined to comment.This time around, there’s more attention on the potential benefits of a Bitcoin ETF as a way to reduce market distortions.The Grayscale Bitcoin Trust (ticker GBTC) is the largest crypto product. In its current structure as an investment trust, it lacks the share creation and redemption process that helps an ETF keeps its price in line with its holdings. That makes GBTC vulnerable to dislocations like its monster premium at the end of 2020 relative to the Bitcoin it held, or the record discount it swung to earlier this year.In a report on Friday, JPMorgan Chase & Co. touted the benefits of a listed ETF over the closed-end trust to reduce tracking errors. Grayscale Investments LLC, the firm behind GBTC, has said it is “100% committed” to converting GBTC into an ETF.That means the pipeline is even larger than the eight official applications.“There’s a huge amount of pressure on the SEC to do something,” said Nic Carter, a partner at crypto-focused venture firm Castle Island Ventures. “The trust has way outgrown its structure and the lack of an arbitrage mechanism is causing a fair amount of harm to holders.”Between events like the Reddit-fueled GameStop Corp. mania and the recent blowup of Bill Hwang’s Archegos Capital Management, the SEC may have bigger priorities. But the Bitcoin ETF clock is ticking.The regulator has now acknowledged applications from VanEck Associates Corp. and WisdomTree Investments, meaning it has a limited period of time in which to approve or reject their proposals, though it can also extend its deliberations.“They would have to either approve or deny both WisdomTree and VanEck in 2021,” Seyffart said. “Personally, I just can’t see the SEC denying both of them, unless something changes.”Other ETF watchers are similarly bullish on a turning of the regulatory tide.“At some point, if we’re not already there, the SEC runs out of reasons for not approving,” said Nate Geraci, president of advisory firm The ETF Store.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.
Wall Street indexes closed mixed on Wednesday, with the Nasdaq Composite and S&P 500 falling despite another record intraday high for the latter and big banks' stellar results on the first day of earnings season. Shares of Goldman Sachs Group Inc and Wells Fargo & Co rose 2.3% and 5.5% respectively on bumper first-quarter profits. Goldman capitalized on record levels of global dealmaking activity, and Wells reduced bad loan provisions and got a grip on costs tied to its sales practices scandal.
Sweden's Polestar, the electric car maker controlled by Volvo and its parent, the Chinese automaker Geely, has raised $550 million in external funding, the company said on Thursday. The financing is Polestar's first external funding and comes amid a year of sustained sales and share price growth for electric vehicle (EV) makers such as Tesla Inc and Nio Inc. "Our new investors have recognised that Polestar offers an alluring combination of established industrial and technological capability alongside superlative growth potential as the global auto industry goes electric," Polestar's CEO Thomas Ingenlath said in a statement emailed to Reuters.
(Bloomberg) -- U.S. stocks retreated after climbing to an all-time high. Treasuries fell with the dollar. Oil rallied.PayPal Holdings Inc. and Nvidia Corp. paced losses among tech companies in the S&P 500, which had fluctuated for much of Wednesday’s session as traders sifted through earnings from some of the world’s biggest banks. Bitcoin slid in the wake of the debut by cryptocurrency company Coinbase Global Inc. on the Nasdaq.Read: Goldman, JPMorgan Traders Show the Reddit Crowd How It’s DoneWith equities lingering near a record, investors are looking to the earnings season for further catalysts. Expectations of a strong profit rebound have helped markets rally, setting the bar high as reporting gets underway. More broadly, investors are monitoring vaccine developments for any threats to the economic recovery. The Federal Reserve said in its Beige Book that activity has picked up pace amid an improvement in consumer spending.“You’re going to see this tug-of-war continue within markets as investors weigh the prospects of a strengthening economy with the risk of rising inflationary pressures,” said Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors.A quarter that began with retail investors declaring the end of the status quo on Wall Street just ended with big banks tallying surprisingly massive hauls. Goldman Sachs Group Inc. and JPMorgan Chase & Co. -- two of the most gilded names in finance -- kicked off bank earnings season with revenue windfalls from trading and dealmaking, defying warnings from within the industry that good times couldn’t last.Goldman Sachs’s stock jumped, while JPMorgan’s slipped -- undermined by concern over weak demand for loans.Some key events to watch this week:U.S. data including initial jobless claims, industrial production and retail sales come Thursday.China economic growth, industrial production and retail sales figures are on Friday.These are some of the main moves in financial markets:StocksThe S&P 500 fell 0.4% at 4 p.m. New York time.The Stoxx Europe 600 Index gained 0.2%.The MSCI Asia Pacific Index advanced 0.7%.CurrenciesThe Bloomberg Dollar Spot Index fell 0.2%.The euro climbed 0.3% to $1.1979.The Japanese yen appreciated 0.2% to 108.89 per dollar.BondsThe yield on two-year Treasuries rose less than one basis point to 0.16%.The yield on 10-year Treasuries rose two basis points to 1.63%.The yield on 30-year Treasuries climbed two basis points to 2.31%.CommoditiesWest Texas Intermediate crude gained 4.5% to $62.89 a barrel.Gold weakened 0.5% to $1,736.65 an ounce.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.
Coinbase's listing on Nasdaq sends a powerful signal of legitimacy to the U.S. crypto community, as well as to the crypto-curious in the traditional financial sector.
Oil prices surged more than 4% on Wednesday, after a report from the International Energy Agency, followed by U.S. inventory data boosted optimism about returning demand for crude. Brent crude futures rose $2.70, or 4.2%, to $66.37 a barrel by 11:05 a.m. EDT (1505 GMT). U.S. West Texas Intermediate (WTI) crude futures were up $2.78, or 4.6%, to $62.96 a barrel.
(Bloomberg) -- Just last year, the world’s most valuable startup, ByteDance Ltd., was being squeezed from all sides.The Trump administration wanted the Chinese firm, which owns the ubiquitous TikTok video-sharing platform, to get rid of assets. Beijing was cracking down on tech businesses, and India blacklisted some of its social-media apps.For all the obstacles, ByteDance kept growing. Now its founder, 38-year-old Zhang Yiming, is among the world’s richest people -- a distinction that lately has carried increased risks in China.Shares of the company trade in the private market at a valuation of more than $250 billion, people familiar with the dealings have said. At that level, Zhang, who owns about a quarter of ByteDance, could be worth more than $60 billion, placing him alongside Tencent Holdings Ltd.’s Pony Ma, bottled-water king Zhong Shanshan and members of the Walton and Koch families in the U.S., according to the Bloomberg Billionaires Index.ByteDance, famous for its short-video apps and news aggregator Toutiao, more than doubled revenue last year after expanding beyond its core advertising business into areas such as e-commerce and online gaming. It’s now weighing options for the initial public offering of some businesses.“Zhang is someone who’s known for thinking long-term and not easily dissuaded by short-term setbacks,” said Ma Rui, partner at venture-capital firm Synaptic Ventures. “He is set on building an enduring, global business.”Surging ValuationDuring its last fundraising round, ByteDance reached a $180 billion valuation, a person with knowledge of the matter said. That’s up from $20 billion about three years ago, according to CB Insights. But in the private market, some investors recently were asking for the equivalent of a $350 billion valuation to part with their shares, people familiar have said. The company’s value for private-equity investors is approaching $400 billion, the South China Morning Post reported. That would mean an even bigger fortune for Zhang.ByteDance representatives didn’t respond to requests for comment.It’s a tough time to be wealthy in China as the government seeks to rein in the country’s most powerful corporations and their billionaire founders. Just ask Jack Ma: After opening an antitrust probe, regulators fined Alibaba a record $2.8 billion and the central bank ordered an overhaul of his Ant Group Co. fintech empire so it’d be supervised more like a bank. On Tuesday, China ordered 34 internet companies to rectify their anti-competitive practices in the coming month.While ByteDance hasn’t been singled out as a target, its dominance in social media and war chest for deal-making are sensitive areas the government is looking into.“There are no more silly games in the U.S. with Trump and potential bans or forced asset sales,” said Kirk Boodry, founder of investment research firm Redex Holdings. “But the pressure on tech-share prices and China in particular might make $250 billion a tough sell,” he added, referring to ByteDance’s value in private transactions.Born in the southern Chinese city of Longyan, Zhang, the only son of civil servants, studied programming at Tianjin’s Nankai University, where he built a following on the school’s online forum by fixing classmates’ computers. He joined Microsoft Corp. for a brief stint after graduating, later calling the job so boring he often “worked half of the day and read books in the other half,” according to an interview with Chinese media. He went on to develop several ventures, including a real estate search portal.His breakthrough came in 2012, when working in a four-bedroom apartment in Beijing he created ByteDance’s first hit -- a joke-sharing app later shut down by censors. It then turned to news aggregation before winning over more than 1 billion global users with its short-video platforms TikTok and Chinese twin app, Douyin. In the process, it attracted big-name investors such as SoftBank Group Corp., Sequoia Capital and proprietary-trading firm Susquehanna International Group, making it a rarity among Chinese internet startups that usually get absorbed into the wider ecosystems of Tencent and Alibaba Group Holding Ltd.Novel ConceptOne of Zhang’s earliest supporters, Susquehanna has become ByteDance’s largest outside backer with a 15% stake, according to a Wall Street Journal story in October. The initial bet was made at the start of 2012, when ByteDance’s news app Toutiao was just a concept that Zhang had drawn up on napkins, according to a 2016 blog post by Joan Wang, who led that investment for Susquehanna’s Chinese venture-capital unit.With TikTok facing scrutiny in the U.S. and India, Zhang has put more effort into ByteDance’s nascent and fast-growing Chinese businesses, which range from gaming to education to e-commerce. That helped it increase sales to about $35 billion last year and operating profit to $7 billion, a person familiar with the results said.Investors are eyeing the IPO of some of ByteDance’s businesses after Chinese competitor Kuaishou Technology raised $5.4 billion in February in the biggest internet listing since Uber Technologies Inc., with its market value now nearing $140 billion. Last month, ByteDance hired former Xiaomi Corp. executive Chew Shou Zi as its chief financial officer, filling a long vacant position that will be crucial for its eventual market offering.But for Zhang, it’s not all about immediate payoffs. The affable founder is known for his business philosophy of “delaying satisfactions” as he puts the focus on long-term growth -- a message he stressed again during his spiel to employees at the company’s ninth anniversary celebration last month.“Keep an ordinary mind, that’s something that sounds easy but important to do,” he said. “Put in the plainest words, when hungry, eat, when tired, sleep.”(Adds latest on China crackdown in ninth 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) -- China ordered 34 internet corporations Tuesday to rectify their anti-competitive practices within the next month, signaling that Beijing’s scrutiny of its most powerful firms hasn’t ended with the conclusion of a probe into Alibaba Group Holding Ltd.Shares in Tencent Holdings Ltd. and Meituan extended losses after the State Administration for Market Regulation issued a stern statement emphasizing it will continue to eradicate abuses of information and market dominance among other violations. Also summoned to an ad-hoc meeting with the watchdog on Tuesday were industry leaders including TikTok owner ByteDance Ltd., search giant Baidu Inc. and JD.com Inc.Regulators warned internet companies to “heed Alibaba’s example,” reaffirming their intent to abolish forced exclusivity among other practices. The meeting -- organized jointly with the cyberspace and tax regulators -- came days after Beijing wrapped up a four-month probe into Alibaba by slapping a record $2.8 billion fine on the e-commerce giant for abuse of market dominance.The penalty was less severe than many feared and lifted a cloud of uncertainty hanging over founder Jack Ma’s internet empire. It also came after the Chinese central bank ordered an overhaul of his Ant Group Co. fintech titan.Alibaba’s shares have gained 7% since the start of the week, but its fellow Chinese internet giants have gyrated while investors digest the rapid-fire announcements and concerns grow that Beijing’s scrutiny will extend beyond Alibaba. On Tuesday, Tencent gave up early gains to finish down slightly while Meituan, video service Kuaishou Technology and JD all slid more than 3% in Hong Kong.“The base line of policies cannot be crossed, the red line of laws cannot be touched,” the market watchdog said in the statement on Tuesday.The investigation into Alibaba was one of the opening salvos in a campaign seemingly designed to curb the power of China’s internet leaders, which kicked off after Ma infamously rebuked “pawn shop” lenders, regulators who don’t get the internet, and the “old men” of the global banking community. Those comments set in motion an unprecedented regulatory offensive, including scuttling Ant’s $35 billion initial public offering.The 34 firms summoned Tuesday must now undergo complete rectification after conducting internal checks and inspections over the next month, and make a pledge to society to obey rules and laws, the antitrust watchdog said in its statement. Regulators will organize follow-up inspections and companies that continue to engage in abuses like forced exclusivity -- a practice that “flagrantly trampled and destroyed” market order -- will be dealt with severely.The regulator also highlighted abuses like acquisitions that squeeze out smaller rivals and burning through cash to grab market share in community group buying, currently the hottest e-commerce arena in China. Firms also need to address issues like counterfeiting, data leaks and tax evasion, according to the statement.“This is positive because the SAMR is giving the platforms one month to review their practices, rather than dish out fines and penalties without warning,” Bloomberg Intelligence senior analyst Vey-Sern Ling said. “They are using Alibaba as an example to deter misbehavior from the rest of the industry players. If these companies toe the line, industry competition can become healthier. ”(Updates with share action from the 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.
As Coinbase Global Inc's multi-billion dollar stock market listing accelerates cryptocurrency's leap to the top table of finance, its founder and CEO Brian Armstrong is poised to reap the benefits of the company's nine-year journey. Armstrong owns 21.7% of the San Francisco-based cryptocurrency exchange, filings show - a stake worth around $20 billion given Coinbase's projected value. Such a paper fortune might have been hard to imagine when Armstrong founded Coinbase in 2012, just four years after bitcoin was invented by the pseudonymous Satoshi Nakamoto.
(Bloomberg) -- Investors in GameStop Corp.’s junk-rated bonds are finally cashing in on the video-game retailer’s wild ride in the stock market.The company’s plan to go virtually debt free drove its 10% notes due in 2023 to an all-time high on Wednesday. The Grapevine, Texas-based firm will have to pay the so-called make-whole premium to retire the debt early, which is meant to compensate investors for any missed future interest payments.The notes were up 3.4 cents to 108.5 cents on the dollar as of 12:18 p.m. in New York and were the biggest gainer in the U.S. high-yield bond market, according to Trace data. Meanwhile, the shares rallied as much as 23%, snapping a seven-day losing streak.The decision to repay debt caps months of speculation among investors on whether GameStop would be able to capitalize on a stock rally fueled by an army of day traders who share tips on Reddit. The company announced earlier this month plans to sell as much as $1 billion worth of additional shares to accelerate its transformation.GameStop said it will use cash on hand to redeem the 2023 bonds, on which it has $216.4 million outstanding. Last month, the company announced it had also redeemed the remaining $73.2 million that was outstanding on its 2021 notes.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) -- It’s just a quarter of the way through 2021 and stocks have already leaped past Wall Street’s year-end forecasts. They’ve jumped 10% and priced in so much optimism that it will take two more years for earnings to catch up.Is that enough for bulls? Nope. In a market that has plowed through records once every five days, the only things expanding faster than valuations are investor expectations. At Citigroup, an indicator that compares levels of panic to euphoria in the market has been pinned on elation all year, while a Bank of America model weighing optimism among sell-side analysts sits at a 10-year high.To be sure, animal spirits have calmed at the market’s loopiest edge, with penny-stock volume down and the meme craze receding. But robust appetite persists in its tamer -- and still speculative -- districts. And while fortunes would have been sacrificed repeatedly by anyone expecting this rally to overheat, the juxtaposition of stretched sentiment and a still-healing economy is a source of growing anxiety for professionals.“It is strange to see these sentiment measures elevated at the same time the economy is still recovering,” said George Mateyo, chief investment officer at Key Private Bank. “We’ve had a shot in the arm with respect to fiscal and monetary stimulus” and its impact on the economy “is likely to continue for a while longer, but at some point it’d fade.”Not that there aren’t a lot of reasons to stay optimistic, with many data points coming in stronger than expected, vaccine rollouts (mostly) continuing and earnings expected to buttress the bull case. Taking any single sentiment indicator at face value and relying on it as a sell signal could have meant missing out on one of the largest year-over-year rallies ever recorded.Sentiment readings “are hovering at extremely high levels and we could have been worried about them three months ago -- we could have been worried about them one month ago,” Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, told Bloomberg TV. “They are telling us that the gains are going to be harder to come by, that if we do get negative catalysts, we are vulnerable to the downside. But I think it’s hard to view any of this data as an automatic sell signal right now.”Doubters point to everything from potential Fed tapering and tax hikes to the potential for fatigue among retail investors. A look under the surface already shows a shift in leadership that’s tilting toward companies whose growth is seen as more resilient during an economic slowdown. The frenetic buying of cyclical shares like energy and banks has cooled during the past month. Vaulting back to the top of the leader board are defensive stocks like technology, real estate and utilities.Bank of America’s “sell side indicator,” which aggregates the average recommended equity allocation by strategists, has risen for a third month to a 10-year high. But the cyclical rebound, vaccines and stimulus are all largely priced in already, wrote strategists led by Savita Subramanian. Meanwhile, a record amount of equity funds is being absorbed: Inflows to stocks over the past five months, at $576 billion, exceed inflows from the prior 12 years, according to the bank.Citigroup’s panic/euphoria model, which tracks metrics from options trading to short sales and fund flows, has remained in “euphoric” territory for much of this year, “generating a 100% historical probability of down markets in the next 12 months at current levels,” according to the bank’s chief U.S. equity strategist Tobias Levkovich.Options traders are placing bets the calm won’t last. The middle part of the VIX curve shows many are expecting volatility to pick up, with the spread between the VIX -- the market’s fear gauge -- and futures on implied 30-day volatility four months from now near the highest level in about five years. One trader last week wagered that the fear gauge will rise toward 40, and won’t be lower than 25, in July. The trader appears to have bought a total of about 200,000 call contracts, an amount almost as big as the total daily volume of VIX calls, based on the 20-day average.“Sentiment -- it’s not usually enough on its own to tip a bull market over, but it does mean that if there is something that causes the broad market to flinch, it can sell off quicker and harder,” said Ross Mayfield, investment strategy analyst at Baird. “When sentiment is running this hot, you’re hitting a new all-time high every day, at some point there will be a correction. Paying up for protection, if you have short-term money, makes plenty of sense.”Going all-in on equities for fear of missing out -- while staying protected against any downturn -- is the preferred posture of hedge funds. Lured by an almost uninterrupted rally since November, the industry has boosted their net exposure to equities to multi-year highs. Meanwhile, they’ve stepped up hedging through macro products such as index futures and exchange-traded funds. Their short sales on ETFs, for instance, increased 11% this year through March 26, according to data from Goldman Sachs Group Inc.’s prime brokerage unit.The hedged-long approach has gained traction on Wall Street. On Friday, JPMorgan Chase & Co. strategists led by Nikolaos Panigirtzoglou recommended investors hold on to risky assets such as stocks but add hedges through options in credit and stocks. One looming risk for the market is a continuing retreat from retail investors, a steadfast driver behind the yearlong bull market, they said.“We don’t believe that the equity bull market is yet exhausted,” the strategists wrote in the note. But “there is clear evidence of elevated equity positioning by retail investors and thus a vulnerability for the equity market going forward,” they said.Gene Goldman, chief investment officer at Cetera Financial Group, says his firm is looking for ways to de-risk its portfolios. “People are seeing the recovery, they’re seeing good things happening today, which is great, but it’s a classic case of ‘buy the rumor, sell the news’ and what they should be doing is looking six-to-nine months from now,” he said. “There are many headwinds that are going to hit the market.”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.
Three of e-commerce platform Shopify's seven top executives will be leaving the company in the coming months, chief executive officer and founder of Canada's most valuable company Tobi Lutke said in a blog post on Wednesday. The company's chief talent officer, chief legal officer and chief technology officer will all transition out of their roles, Lutke said, adding that they have been "spectacular and deserve to take a bow." "Each one of them has their individual reasons but what was unanimous with all three was that this was the best for them and the best for Shopify," he said.
(Bloomberg) -- JPMorgan Chase & Co.’s dealmakers just helped usher in the firm’s best quarter on record, but shares fell as the bank warned that loan demand remains tepid.Investment-banking fees soared 57%, beating analysts’ estimates and boosting net income to $14.3 billion, the most JPMorgan has ever earned in a single quarter, according to a statement Wednesday. A larger-than-expected reserve release added to the windfall as the bank determined it didn’t need as much socked away for future loan losses.Government stimulus programs and potentially massive infrastructure spending mean “the economy has the potential to have extremely robust, multiyear growth,” Chief Executive Officer Jamie Dimon said in the statement.Dimon said loan demand is still “challenged” but, on a subsequent conference call with journalists, he said he “made a mistake” in using that word. “What’s happened is the consumer has so much money they’re paying down their credit-card loans, which is good,” he said. “This is not bad news about loan demand, this is actually good news.”The CEO said last week in his annual letter to shareholders that he’s optimistic the pandemic will end with a U.S. economic rebound that could last at least two years. He pointed to an “extraordinary” amount of spending power from both consumers and corporations as the country opens back up.Still, investors are keen for signs that banks will soon expand their loan portfolios. Across the industry, credit-card balances have been dwindling and deposits soaring as a result of trillions of dollars of stimulus. Businesses have also been reluctant to borrow until the pace of the economic recovery becomes clearer.JPMorgan expects a pickup in consumer and small-business loan demand in the second half, Chief Financial Officer Jennifer Piepszak said on a conference call with analysts. Commercial-loan demand is muted and “probably will be for some time,” she said. “But, again, that’s incredibly healthy ultimately for the recovery.”At JPMorgan, loans fell 4% from a year earlier, driven by a 14% drop in card loans. Shares of the company slipped 0.7% to $153.04 at 10:06 a.m. in New York.Investment BankingInvestment-banking fees jumped to $2.99 billion, topping the $2.59 billion analysts were expecting. The bank posted a $5.2 billion reserve release, a metric Dimon said he doesn’t consider “core or recurring profits.” Piepszak said the bank expects more reserve releases because the forecast is for a robust economic recovery in the second half.Equity underwriting more than tripled to $1.06 billion, beating expectations as JPMorgan rode the wave in activity driven in part by a slew of special purpose acquisition companies that went public in the first quarter. The New York-based bank ranked 10th by volume in SPAC underwriting for the period, and fifth for global equity underwriting overall. Analysts had predicted the trend would boost revenue 176% in the first quarter for the five biggest U.S. banks.The bank’s traders generated $9.05 billion of revenue in the first quarter, up 25% from a year earlier and exceeding analysts’ expectations. That included a 47% increase in equities and a 15% jump in fixed income. Trading revenue remained elevated after a banner year as the coronavirus pandemic roiled markets and sent volatility soaring.The firm increased its full-year 2021 adjusted expense outlook to $70 billion, from $69 billion expected in February. Non-interest expenses were $18.7 billion in the first quarter, up 12% from a year earlier.Dimon and Piepszak again discussed JPMorgan’s appetite for acquisitions, a point that was punctuated last week when Dimon wrote in his letter that “acquisitions are in our future.” The CEO echoed previous comments that he prefers to use JPMorgan’s extra cash to invest in the business, rather than on share repurchases.“We’re buying back stock because our cup runneth over,” Dimon said. “We’re earning a tremendous sum of money and we really have no option right now. But I think the door’s open to anything that makes sense.”Also in JPMorgan’s first-quarter earnings:Net interest income was $12.9 billion, down 11% from a year earlier. The firm’s outlook for 2021 NII is about $55 billion.Total revenue was $32.3 billion in the first quarter, up 14% from a year earlier.The overhead ratio, a measure of profitability, was 58% in the quarter, up from 55% in the fourth quarter.(Updates with CEO, CFO comments starting in fourth 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.
Gold traders may have priced in higher inflation, so the market could actually bounce higher even if the CPI numbers beat the forecast.
(Bloomberg) -- The Bank of England’s Chief Economist Andy Haldane will step down in June, removing the the Monetary Policy Committee’s most outspoken contrarian and inflation hawk.Haldane, 53, will leave after career spanning more than three decades at the central bank to become chief executive officer at the Royal Society for Arts, Manufactures and Commerce starting in September. He will remain in place through the bank’s rate decision on June 24. He’s departing as the U.K. emerges from its worst recession in three centuries, which pushed the central bank to unleash unprecedented stimulus including 150 billion pounds ($206 billion) of bond purchases this year. Haldane alone on the nine-member policy panel voiced concerns about inflation accelerating with a rapid bounce-back in growth as Prime Minister Boris Johnson winds back restrictions to contain the Covid-19.“The most interesting element to me is that he is probably the arch-hawk on the MPC, and his removal will certainly see a more dovish tone seep into meetings,” said Stuart Cole, chief macro strategist at Equiti Capital and a former BOE economist.Bank of England Governor Andrew Bailey will appoint a successor after the bank advertises the position. While the chief economist traditionally also sits on the MPC, it’s the Treasury’s decision to name members to that panel.In recent months, Haldane has warned about the risk of excessive pessimism about the economic outlook as the pandemic winds down, terming it “Chicken Licken” economics that could undermine the recovery.While many of his colleagues point out concerns about rising unemployment and signs of sluggishness in the economy, he said he expects a “rip-roaring recovery” and on inflation said a “tiger has been stirred” that may “prove difficult to tame.”Several economists said the improving outlook for the U.K. economy has already shifted debate on the MPC away from extra stimulus and toward whether the pace of bond purchases need to slow -- or even an eventual tightening in policy.“In 2022 the BOE is likely to set out an exit strategy from its ultra-easy policy stance before hiking the bank rate in 2023,” said Kallum Pickering, senior economist at Berenberg.Haldane joined the BOE in 1989 after gaining a masters in economics from Warwick University.He logged experience at the central bank in international finance, market infrastructure and financial stability during the financial crisis before clinching his current role under previous Governor Mark Carney in 2014. That year, “Time” magazine named him one of the world’s 100 most influential people.Haldane is known for his occasionally quirky speeches. He once used Dr. Seuss to bemoan the reading age needed to understand the central bank’s communications.His words sometimes raised eyebrows, notably when he compared pre-crisis economic projections to a famously inaccurate forecast by BBC weatherman Michael Fish before a 1987 storm that killed 18 people.In 2012, he drew the ire of his future boss with a speech -- titled “The Dog and the Frisbee” -- which called for simplicity in banking regulation. Carney, who was then the Bank of Canada governor and head of the global Financial Stability Board, said the speech was “uneven” and the conclusion “not supported by the proper understanding of the facts.”Haldane has also led the government’s Industrial Strategy Council until it was dissolved a few weeks ago and is the co-founder of charity Pro-Bono Economics.“If your business is trying to predict rates and quantitative easing, it will be a bit easier without Andy’s speeches somewhat clouding the issue,” said Tony Yates, a former BOE official who worked with Haldane. “If you’re trying to get up to speed on the latest things in monetary economics and finance, then it’s less good because there won’t be Andy picking up new things and explaining them.”(Updates with context and comment from the first 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) -- New Zealand’s central bank signaled it is in no rush to remove monetary stimulus, saying the outlook remains uncertain as the economy gradually recovers from the Covid-19 pandemic.The Reserve Bank’s monetary policy committee on Wednesday maintained its current stimulatory settings, holding the official cash rate at 0.25% and the Large Scale Asset Purchase program at NZ$100 billion ($71 billion). It reiterated it is prepared to lower the cash rate further if required.“The committee agreed that, in line with its least regrets framework, it would not remove monetary stimulus until it had confidence that it is sustainably achieving the consumer price inflation and employment objectives,” the bank said. “Given that uncertainty remains elevated, gaining this confidence is expected to take considerable time and patience.”Policy makers are assessing whether an expected pick-up in inflation this year will be sustained, and whether the labor market’s gradual recovery will be hurt by the possibility of a double-dip recession. At the same time, the government now requires the RBNZ to consider the impact of its decisions on New Zealand’s housing market, where soaring prices are raising concerns about widening social inequalities.“The New Zealand economy is evolving broadly in line with RBNZ expectations, and there’s time to see how more recent developments impact things,” said Sharon Zollner, chief economist at ANZ Bank New Zealand in Auckland. “The RBNZ is under no pressure to make any bold calls about how precisely things will turn out.”The New Zealand dollar rose after the statement. It bought 70.88 U.S. cents at 3:21 p.m. in Wellington, up from 70.60 cents beforehand.The RBNZ said the outlook for growth remains similar to the scenario it presented in its last statement in February. It said inflation is likely to exceed its 2% target “for a period” but this is likely to be temporary.“This outlook remains highly uncertain, determined in large part by both health-related restrictions, and business and consumer confidence,” it said. “The committee agreed that medium-term inflation and employment would likely remain below its remit targets in the absence of prolonged monetary stimulus.”New Zealand’s economy has enjoyed a V-shaped recovery from its pandemic-induced recession and the housing market is booming, turning attention to when the RBNZ might begin to remove stimulus. The jobless rate fell to 4.9% in the fourth quarter and the central bank in February forecast that inflation will accelerate to 2.5% by June, exceeding the midpoint of its target range.Double-Dip Recession?Still, the economy unexpectedly contracted 1% in the final three months of 2020 and economists see little or no growth in the three months through March, raising the prospect of a double-dip recession.Some analysts are tipping the RBNZ will explicitly start to reduce its bond buying later this year, with a minority already projecting rate rises in 2022. But others see the central bank on hold for a prolonged period after the government in March announced a raft of measures to cool the rampant housing market, including tax adjustments to curb investor demand.The RBNZ said the extent of the dampening effect of the government’s new housing policies on house prices, and hence inflation and employment, will “take time to be observed.”New Zealand will start to allow travelers from Australia to enter the country without undergoing quarantine from April 19, which may deliver some relief for a decimated tourism industry. But the border is expected to remain closed to all other foreigners throughout 2021, and the country won’t start mass immunization until the second half.“The planned trans-Tasman travel arrangements should support incomes and employment in the tourism sector both in New Zealand and Australia,” the RBNZ said. “However, the net impact on overall domestic spending will be determined by the two-way nature of this travel.”In late February, the government instructed the RBNZ to consider the impact on housing when it makes monetary and financial policy decisions. Specifically, the monetary policy committee will to need to explain regularly how it has sought to assess the impacts of its decision on housing outcomes, Finance Minister Grant Robertson said at the time.“The committee’s initial assessment is that stimulatory monetary policy is playing a role in lifting house prices,” the bank said today. “Other factors are also influencing house prices including: the impact of low global interest rates on all asset prices, constrained housing supply and infrastructure, land use regulations, tax policies and the broader recovery in aggregate demand.”(Updates with economist in fourth 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) -- As Japan’s life insurers lay out their annual strategies this month, traders will be looking for the answer to one question -- what do some of the world’s biggest investors plan to do about Treasuries?With the path of Treasury yields set to determine investments across the financial world, the intentions of a large cohort of the biggest foreign holders of U.S. government debt will be a crucial input. Japanese investors were on track to be net sellers of Treasuries for the sixth year in seven in their fiscal year to March, according to U.S. Treasury data through January. Some predict a return to purchases in 2021.With combined assets equivalent to $3.6 trillion, and one-quarter of this in foreign securities, even minor shifts in Japanese insurer allocations can impact markets. Furious selling by Japanese funds in February helped fuel the biggest monthly decline in Treasuries since 2016, and with benchmark yields close to their highest in a year, bond investors are keen to know at what levels lifers will become more inclined to buy.“Life insurers are expected to be aggressive about investing in foreign bonds, and are probably looking for the right timing to buy when markets settle down,” said Hiroshi Yokotani, managing director and portfolio strategist for fixed income and currencies at State Street Global Advisors. “The U.S is seen to be the most attractive destination taking account of hedge costs.”Life insurers will start announcing their allocation plans for the new fiscal year later this month. Among them are the nation’s leading Nippon Life Insurance Co. and Japan Post, which is also known as Kampo Life.Treasuries AttractionAfter reaching a record closing low of around 0.5% last August, the 10-year Treasury yield has rebounded and traded at just over 1.60% on Wednesday. That increase makes Treasuries relatively more attractive to some of the credit products which have been preferred by Japan’s life insurers in recent years, where spreads have tumbled close to historic lows.“Credit investment has depressed spreads to historically expensive levels, so investing in Treasuries looks safer in the longer run,” said Akio Kato, general manager of strategic research and investment at Mitsubishi UFJ Kokusai Asset Management. “Abundant cash held by investors will keep money flowing into credit but it’s doubtful if the size will be big.”Given the recent flattening of the U.S. 10-year/30-year yield curve -- where the spread was about 68 basis points on Wednesday -- lifers may wait until it steepens back toward 100 basis points before buying Treasuries, Kato added.For State Street’s Yokotani, Treasuries are also more attractive than agency bonds -- such as those of Freddie Mac or Fannie Mae -- which tend to be more volatile when yields are rising.Hedge CallAside from choosing where to invest, Japanese investors also have to decide whether to hedge out their currency risk or not. The yen was the worst-performing Group-of-10 currency in the first quarter of 2021 and is down over 5% against the dollar year-to-date.Short-term rates pinned at low levels have kept hedging costs near historic lows, providing a favorable environment. Japanese investors currently get a yield of almost 1.3% from a 10-year Treasury note after taking account of hedging costs, compared to just 0.65% for local 30-year government bonds.“Returns generated from currency-hedged U.S. Treasuries investment could be too attractive to resist,” said Satoshi Nagami, head of the global strategies investment group at Sumitomo Mitsui DS Asset Management Co. Japanese investors “wouldn’t be too aggressive early in the new fiscal year, but I don’t think they feel negative about allocating funds into overseas debt this year.”Life insurers extended a net sale of foreign bonds for a ninth consecutive month in March, the longest ever streak in Ministry of Finance data going back to 2001. That made them a net foreign bond seller for a fiscal year for the first time in seven years.Still, not everyone is convinced Japan’s investors will rush back into Treasuries given the risk yields could continue to rise -- Masahiko Loo, fixed-income portfolio manager at AllianceBernstein Japan in Tokyo sees credit continuing to attract more interest. But a consensus does seem to have formed on where they will invest.“This year, Japanese investor strategy will be simple, to focus on the U.S.,” Loo said.(Corrects timing of announcements 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.
(Bloomberg) -- Bond traders searching for an opportunity to challenge central banks are starting to look Down Under, where a likely showdown over yield-curve control is set to test the power of policy makers to contain the next wave of reflation bets.The global trading day for bonds begins in earnest in Sydney each morning, giving developments in Australia’s $600 billion sovereign debt market an out-sized impact on sentiment. It was the scene of a dramatic “flash crash” last year when the yield program was announced, illustrating the potential for turmoil.While the Reserve Bank of Australia has largely tamed markets since then, as the economy’s recovery strengthens, wagers against the RBA’s ability to keep yields lower look poised to rise.“If inflation expectations do start to un-anchor, then I think the RBA will be one of the first central banks to be tested by bond traders,” said Shaun Roache, an economist at S&P Global Ratings in Singapore. “The RBA is a canary in the coal mine for central banks as it is ahead in its labor market recovery.”The RBA brought short-sellers quickly to heel when the global bond rout emboldened them to test its grip on yield control in February. After weeks of aggressive positioning by traders, the bank nudged up the cost of speculating on rising rates and the yield on benchmark three-year bonds fell neatly back into line with its 0.1% target.But keeping the market at bay next time may prove more difficult, as vaccination campaigns gather pace in major economies and the U.S. recovery nears an “inflection point,” emboldening traders. Pressure is already apparent in Australia’s three-year swap rate, which is increasing the costs of managing interest-rate risks for corporate borrowers.Read More: BOJ Seeks Only Tweaks to Stay Aligned with Fed, ECBIf yield control fails in Australia, it may fade away as a potential option for other monetary authorities in need of more policy ammunition. Especially because yield control’s record in Japan -- the only other country to officially employ it -- is patchy.Pinning the rate of one key bond maturity has helped the Bank of Japan reduce borrowing costs in general and also allowed it to slow the pace of bond purchases. But it has come at a cost. The nation’s debt market is lambasted as dysfunctional and an economic recovery strong enough to revive inflation looks as far away as ever.Widening GapBeneath the surface, problems are building Down Under too. While the RBA has its thumb on one specific bond line, there is a large gulf between the yield on this security and those maturing slightly later. There’s also a widening gap to rates on the suite of derivatives linked to three-year yields that flow through into borrowing costs for companies and consumers.The three-year swap rate surged through February and March, rising to four times the RBA’s target for three-year bonds amid pressure from higher U.S. yields and a rebounding economy at home.Australia’s bond futures tell a similar story. The yield implied by three-year futures doubled in the two weeks to Feb. 26 and remains elevated, even after retreating from its high point.“Lack of liquidity, a central bank that’s digging its heels in -- all that, for us, means there’s going to be more volatility in Aussie rates,” said Kellie Wood, a fixed-income portfolio manager at Schroders Plc’s Australian unit. “The RBA has succeeded in terms of round one. But we are starting to see cracks,” said Wood, who expects the market to challenge the 0.1% target again.Stephen Miller, an investment consultant at GSFM, an arm of Canada’s CI Financial Corp., agrees that higher yields may arrive in Australia sooner than the RBA thinks. “It will be powerless if the U.S. curve shifts upwards and other rates markets follow,” said Miller.Read More: Debate Over Next Move in Bonds Has Never Been FiercerNot everyone is prepared to bet against the RBA.For Fidelity International’s Anthony Doyle, taking on the RBA may be a recipe for steep losses if past lessons from the European Central Bank and U.S. Federal Reserve are anything to go by.Nine years ago, then ECB President Mario Draghi vowed to do “whatever it takes” to save the euro, leading to quantitative easing and bond purchases that are still in place. The Fed said more than a year ago that it would buy unlimited amounts of Treasuries to keep borrowing costs at rock-bottom levels, and it’s still holding firm.Holding the Cards“I don’t think it’s ever wise to fight anyone that has a printing press,” said Doyle, a cross-asset investment specialist at Fidelity in Sydney. “The RBA as a house holds all the cards. If they want yields lower, they’ll get it.”This caution is shared by JPMorgan Asset Management’s Kerry Craig.For now, the central bank “definitely has enough dry powder,” said Craig, a strategist in Melbourne. But he is concerned that with monetary policy and markets around the world moving in sync, “you can only fight so much if U.S. rates or global rates go higher -- it’s going to drag Australian ones up.”Yet Governor Philip Lowe isn’t doing everything he could to damp doubts over the RBA’s resolve. His reluctance to make an early switch in the yield target to bonds maturing in November 2024, from ones due in April 2024, is fueling debate about how soon the policy could be wound back.Lowe said at the conclusion of the latest board meeting on April 6 that a decision would be made later this year, without being more specific. He also indicated that the RBA expected to maintain “highly supportive monetary conditions” until at least 2024, even though the number of Australians with a job has returned to pre-pandemic levels.“We don’t think they’ll extend yield-curve control” beyond the current April 2024 bond, said Wood, who warned of potential taper tantrums.Lowe’s February win against short sellers, and a slide in yields at home and abroad over recent weeks, has given the RBA space to breathe. But it’s likely only a matter of time before bond traders come back for round two.“Everybody’s watching how this is going to unfold,” said S&P’s Roache. “The RBA may not want this role, but it is taking quite a starring role I think among global central banks.”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.