Former LVMH Chairman of North America & author of 'Aesthetic Intelligence' Pauline Brown joins Yahoo Finance’s Zack Guzman and Kristin Myers on YFi PM to discuss the potential impact the coronavirus could have on luxury retailers.
Former LVMH Chairman of North America & author of 'Aesthetic Intelligence' Pauline Brown joins Yahoo Finance’s Zack Guzman and Kristin Myers on YFi PM to discuss the potential impact the coronavirus could have on luxury retailers.
U.S. energy firms added oil and natural gas rigs for a second week in a row as higher oil prices prompted some drillers to return to the wellpad.
The traders on Wall Street continue to look at bad news as good news, as we have seen a disappointing jobs figure only to see Wall Street celebrate by buying more stocks.
(Bloomberg) -- It’s all very simple. The economy isn’t strong enough for the Federal Reserve to taper stimulus, therefore stay-at-home tech shares will rally. And any efforts to heal the economy are likely to drive up inflation, meaning banks and airlines will benefit.Such is the can’t-lose logic underpinning American stocks in May 2021, almost 14 months since the pandemic crashed the market and left an 8 million-job hole in the U.S. labor market. To strategists at JPMorgan Chase, now is no time to doubt equities -- as long as Fed Chair Jerome Powell and President Joe Biden are in charge of the recovery.Anyone looking for confirmation need only recall Friday’s reaction to one of the largest downside misses on record for a U.S. employment report. Small caps surged, buoyed after President Biden used Friday’s numbers as justification for his multi-trillion fiscal aid package. The Nasdaq 100 also jumped as investors took April’s jobs whiff to mean that the Fed won’t be turning off the taps anytime soon, keeping rates low and helping to sustain sky-high tech valuations.“It doesn’t hurt equities to know the Fed is still the backdrop with lower rates for longer,” Ryan Detrick, chief market strategist at LPL Financial. “The stay-at-home and the tech names are going to get a little bit of a bid here on worries about the reopening but I think it’s more of a near-term blip and the bigger cyclical names will still take the baton over the coming months.”Federal Reserve Bank of Minneapolis President Neel Kashkari said as much, telling Bloomberg Television that Friday’s print validates the central bank’s new outcome-based approach -- the idea that policy makers won’t change anything based on economic forecasts, but actual data.Every sector in the S&P 500 rallied in the aftermath, with tech vying with cyclical energy and industrial shares for the top spot. The Russell 1000 Value Index and its growth counterpart both ended Friday 0.8% higher, after value outperformed every day this week.Meanwhile, JPMorgan strategists led by Marko Kolanovic are doubling down on the reflation trade. Just days after warning that many money managers need to quickly switch gears from their deflationary playbook or risk an “inflation shock,” Kolanovic recommended clients increase their tilt toward cyclical and value assets. He advised investors to cut holdings in cash and credit, using the money to buy commodities and stocks.“We expect a strong pickup in inflation this year, which the market will likely be slow to recognize and is poorly positioned for,” Kolanovic and his colleagues wrote in a note Friday. “A combination of boomy global growth and significant bottleneck price pressures should keep inflation on an upward trajectory while most central banks remain committed to their very accommodative stances and are looking through the inflation pickups.”And even for all the hand-wringing over inflation, the latest batch of quarterly reports suggests it’s already here and helping corporate America. Faced with rising prices for everything from lumber to oil to labor and computer chips, chief executive officers have cut costs and boosted prices for their products.As a result, first-quarter income from S&P 500 companies is jumping five times as fast as sales, data compiled by Bloomberg Intelligence show. Based on actual results and analyst estimates for those yet to report, profits probably surged to an all-time high of $48.21 a share. That’s 13% above the record set in 2018 of $42.79.The next test for the equity market’s cheer comes in Wednesday’s inflation data, which is expected to show that price pressures jumped by the most on an annual basis since 2011. But given that Fed chief Powell has said that the central bank will need to see a “string” of strong data before shifting their stance, it’s likely that April’s payroll miss was a big enough blow to keep them on the sidelines.“It justifies the Fed, it keeps them from having their tapering discussion or thinking about raising rates,” said Ross Mayfield, investment strategy analyst at Robert W. Baird & Co.. “That by and large is supportive for equity markets.”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.
The S&P 500 initially pulled back during the course of the week only to show signs of strength yet again. The jobs number of course is a huge disappointment, thereby allowing Wall Street to play the “liquidity game.”
(Bloomberg) -- The U.S. job market is suffering from growing pains as the economy rapidly reopens.While economists are optimistic about future growth, employers are facing hiring challenges as well as supply chain disruptions and higher costs. Friday’s jobs report from the Labor Department showed the U.S. added 266,000 jobs in April, far short of the 1 million gain economists had forecast.The data suggest that the recovery from the pandemic will continue to be volatile in the coming months.Despite surging job openings, companies say they’re having trouble recruiting workers because of ongoing fears of catching the virus, child care responsibilities, generous unemployment benefits and other factors. The global semiconductor shortage, record-high materials costs and shipping logjams are also a drag on the labor market.“Ultimately the biggest obstruction to the recovery right now is the pandemic,” said Daniel Zhao, senior economist at Glassdoor Inc. “And today’s report is just a humbling reminder that the road to recovery is not a straightforward one.”While coming in worse-than-expected, the April jobs numbers showed meaningful gains in leisure and hospitality -- primarily at restaurants, which were among the hardest-hit during the pandemic.Labor force participation also improved, indicating that more Americans are looking for work. Another positive sign: average hourly earnings rose.“You’ve had businesses reopen I think faster than a lot of workers have been able to come back and so we certainly see all indications point to demand for workers remaining strong,” said Sarah House, senior economist at Wells Fargo & Co. “Part of this was a supply-demand imbalance and just the frictions to reopening the economy.”Ongoing supply chain disruptions held some businesses back in April and could continue to be a hindrance in coming months. Manufacturing employment edged down, primarily due to job losses in motor vehicles and parts production. That could be due to plant shutdowns and lower output at most carmakers, who’ve been hit hard by a global chip shortage.Temporary-help agencies saw the largest industry decline, which could be a positive sign, if it means people are shifting to full-time work instead of short-time gigs.Shifts in consumer behavior as the economy reopens and vaccinations are distributed more widely explain some of the job losses that hindered a more robust addition to payrolls.Transportation and warehousing jobs fell, led by a more than 77,000 drop in couriers and messengers -- possibly reflecting a shift back to in-person shopping rather than online ordering. Food and beverage store employment declined by nearly 50,000, suggesting Americans are eating out instead of cooking at home.Read More:Biden Gets New Opening to Pitch Agenda With Weak U.S. Job GrowthWomen Leaving Workforce Again Shows Uneven U.S. Jobs RecoveryU.S. Job Growth Disappoints in Challenge to Economic Recovery‘Job Paradox’ Baffles Economists as U.S. Employers See ShortageFriday’s report also underscored that the recovery continues to be uneven, particularly for women and minorities. The unemployment rate for Black workers rose slightly, to 9.7%, the highest among any race group tracked. Women also dropped out of the workforce last month amid ongoing challenges related to child care and patchy school reopenings.Speaking about the report, President Joe Biden said it’s “clear the economy still has a long way to go” and that fiscal stimulus is still needed. He’s proposed $4 trillion worth of long-term infrastructure and social spending in addition to the $1.9 trillion rescue package signed in March.Federal Reserve Chair Jerome Powell has previously said any changes to monetary policy will depend on months of strong employment. The April data could move the Fed’s timeline further into the future, according to some economists.“The ‘string’ of payroll gains that Fed Chair Jerome Powell calls a pre-requirement of talking about tapering and policy normalization looks like it will take considerably longer to materialize,” Bloomberg economist Carl Riccadonna said in a note.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.
The downside momentum appears to be strong enough to drive the index into the February 25 main bottom at 89.655 over the near-term.
Silver markets have rallied significantly during the course of the week to reach towards the $28 level. However, as we close out the week, we are certainly trying to get to the upside.
(Bloomberg) -- Drive down any highway in the world and you’ll see countless reminders that the price of Big Oil’s primary product is rising. What’s less obvious is how the inflationary pressures from transport fuel are being amplified by another part of this sprawling industry -- chemicals.The cost of the building blocks for everything from plastics to paint has surged over the past year. That’s great for companies like Exxon Mobil Corp. and Royal Dutch Shell Plc, whose petrochemical units just earned their biggest profit in years.But it’s unwelcome news for consumers as commodities from copper to lumber are already testing record highs. The price of materials like PVC and ethylene, staples of construction and manufacturing, have risen to the highest in at least seven years on a combination of pandemic-driven demand, the broader post-Covid recovery and once-in-a generation supply disruptions.“The demand is coming from food, packaging, medical goods, protective equipment,” said Oswald Clint, senior research analysts at Sanford C Bernstein Ltd. “Does it add to inflation? Yes.”Oil has advanced steadily this year, coming within a whisker of $70 a barrel in London this week. Yet even as higher crude prices boosted earnings from the oil majors’ exploration and production units, the performance of their petrochemical businesses really stood out.In the first three months of this year, Exxon made $1.4 billion from chemicals, more than in any quarter since at least 2014, when oil prices were above $100 a barrel. More than a fifth of Shell’s $3.23 billion of adjusted net income for the period came from the division, the highest in four years.Global WinnersIt’s not just the oil majors seeing sales surge. Chemicals was the fastest growing unit at Indian conglomerate Reliance Industries Ltd. in the first three months of 2021, compared with the prior quarter.Other winners from the boom include Brazil’s Braskem SA, Indorama Ventures PCL from Thailand, Celanese Corp., Dow Inc. and LyondellBasell Industries NV in the U.S., and Saudi Basic Industries Corp., according to Jason Miner, Bloomberg Intelligence chemicals analyst.“It’s a story of the strength of the intermediates,” Shell chief financial officer Jessica Uhl told investors on April 29, referring to compounds that are derived from basic petrochemical feedstocks. Demand is growing as the economy recovers, notably in Asia, she said.For example, the price of styrene monomer -- used in medical devices and latex -- surpassed $1,000 a ton in the first quarter, Uhl said. The average price of the chemical at the port of Rotterdam in the Netherlands was about $700 a ton in 2020, according to data compiled by Bloomberg.The global vaccination drive and large stimulus packages are boosting consumer sentiment and demand from health care, packaging, consumer durables, textiles and automobiles, Reliance said in its earnings presentation last week. Demand for polymers and polyesters has been particularly strong in India, it said.Trouble in TexasThis isn’t just a story about strong demand. The chemicals industry is also just coming back from several major supply disruptions.Back-to-back hurricanes on the U.S. Gulf Coast last year were followed by unusually cold weather in February, which knocked out much of the electricity grid in Texas and forced giant petrochemical facilities to shut down. Two months later, many are still not back working at full-capacity.The region has become a dominant player in the world’s plastics trade thanks to natural gas liquids -- a cheap petrochemical feedstock -- coming out of the Texas shale boom. For example, North America is the world’s biggest producer of high-density polyethylene, used in everything from shampoo bottles to snowboards. It’s also the largest exporter of PVC.“The big freeze sent a shockwave through global petrochemical markets,” Vienna-based consultant JBC Energy GmbH said in a note. While almost all of the plants that were disabled by the weather have been brought back online, inventories of many chemicals are still low, keeping prices elevated, it said.The price of ethylene, the chemical building block for everything from plastics to solvents, reached a seven-year high of 59.5 cents a pound in March, according to ICIS, a data and analytics provider. PVC reached a record high of $1,625 a ton that month.Even recycled plastic is in high demand, with the price of polyethylene terephthalate, or PET, used for drinks bottles and packaged food, reaching a 10-year high of 1,250 euros ($1,519) a metric ton in northwest Europe on Wednesday, according to S&P Global Platts. The price remained at that level Friday. “If you were able to get back up and running quickly after the storm” you found a marketplace desperate for your product that “would almost pay any price to get it,” said Jeremy Pafford, head of North America at ICIS.The tight supply and demand balance for many chemicals looks set to continue in the second quarter, Exxon Chief Executive Officer Darren Woods said on a call with analysts last week. Dow and LyondellBasell have said they are currently selling everything they produce and don’t anticipate being able to restock inventories until the third or fourth quarter.To manufacture enough chemicals to satisfy customer demand and start building up its stockpiles again, the U.S. needs “four dull months” without any further disruption, said Pafford.But hurricane season is just around the corner, and the global economy does not have time on its side.The world is expected to see a surge in spending in the coming months as many countries end their lockdowns and cooped-up consumers dip into their savings or stimulus checks. That could happen alongside the continuation of pandemic-driven trends such as high demand for plastic medical goods as new strains of Covid-19 trigger fresh outbreaks around the world.“Demand for personal protective equipment is unlikely to fade soon,” said Armaan Ashraf, an analyst at consultant FGE. “E-commerce, retail, durable goods demand is also likely to remain strong through the rest of this year as well.”(Updates PET price in 17th 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) -- Investment firms shouldn’t be allowed to keep half a billion dollars Citigroup Inc. accidentally sent them because the payment wasn’t due for three more years, legal experts and advocacy groups said in asking a court to overturn the ruling.A group of law professors said in a brief filed Thursday with the federal appeals court in Manhattan that the lower-court ruling, allowing Revlon Inc. lenders to hold on to $504 million the bank wired them last August, misapplied legal precedent and could harm the industry’s standards.“The sheer magnitude of the transfer, constituting nearly 100 times the size of defendants’ scheduled coupon payments, was a giant ‘red flag,’” the professors told the court. They said the prepayment of the 2016 loan, at par and without notice, “constituted another glaring red flag that would have caused a reasonable person to inquire.”The law shouldn’t encourage similar “self-imposed ignorance in situations where it is nearly costless for a party” to “uncover and remedy the error,” the professors said in their friend-of-the-court brief offering the judge their views. They aren’t a party to the case.$900 Million BlunderThe conflict started after Citigroup inadvertently wired more than $900 million to asset managers for the Revlon lenders and then asked for it back. The bank sued firms, including Brigade Capital Management, HPS Investment Partners and Symphony Asset Management, that wouldn’t return the funds. It unexpectedly lost that battle in February.The embarrassing blunder forced Citigroup to answer to regulators and tighten its internal controls. The ruling was a boon to creditors, which had been locked in a battle with billionaire investor Ronald Perelman’s struggling cosmetics company over previous restructuring maneuvers.Read More: Citi Asks Court to Reverse $500 Million Transfer DecisionCitigroup has asked the appeals court to overturn U.S. District Judge Jesse Furman’s decision, saying it “sent shockwaves through the markets and generated outcry across the financial industry.” Oral argument in the appeal will be held in August or September.The professors said the funds “were not due until the term loan matured in 2023,” and full repayment required prior written notice from both Revlon and Citibank that never occurred and was never questioned. The payment occurred outside of the contract between the investors, the company and the bank, which was acting as administrative agent on the loan. That should have “put a reasonable lender on notice of Citibank’s mistake,” they said.‘Manual Touches’The Loan Syndications and Trading Association offered similar arguments in its own friend-of-the-court brief, saying the mistaken payment has already “significantly disrupted” the drafting and negotiation of credit facilities and the expectations of participants in the market. Mistakes will happen because the often automated transactions require “manual touches,” the trade group said.Another brief was filed by the American Bankers Association, the Bank Policy Institute, the Clearing House Payments Company LLC and the Clearing House Association LLC in support of Citi. They said allowing the decision to stand would “upset well-settled industry customs and practices” followed for 30 years.“The daily volume and size of wire transfers executed by banks have increased exponentially,” those groups said. “Banks should not solely bear the risk of human error visà-vis lenders who, in this case, would suffer no injury if the mistakenly transferred funds were returned.”Furman’s decision letting the investment firms keep the money was based on a 1991 New York state court case, Banque Worms v. BankAmerica International. In that case, New York’s highest court ruled that under a principle called discharge for value, when a third party mistakenly sends money from a debtor to a creditor, the creditor can keep the payment if it didn’t realize it was sent in error and didn’t make any misrepresentations.But the mistaken payment in the Banque Worms case was money due to the creditors at the time it was sent, critics of the Citi ruling noted.Read More: Citi Faces ‘Finders Keepers’ in Fighting $500 Million RulingThe Citi decision could have “substantial, detrimental effects” on the industry, including adding costs and risks in the leveraged loan market, “discouraging parties from engaging in collaborative contracting and punishing those who do,” and introducing “uncertainty into both new and already existing leveraged loan agreements,” the Loan Syndications and Trading Association said.The academic group includes Columbia Law School professors Eric Talley, Talia Gillis, Ronald Gilson, Joshua Mitts and Robert Scott; University of California at Berkeley professor Robert Bartlett; University of Michigan professor Albert Choi; and University of Pennsylvania professor David Hoffman, as well as Edward Morrison, co-director of the Richard Paul Richman Center for Business, Law, and Public Policy at Columbia.The appeal is Citibank NA v. Brigade Capital Management LP, 21-487, U.S. Court of Appeals, Second Circuit (Manhattan). The lower-court case is Citibank NA v. Brigade Capital Management, 20-cv-6539, U.S. District Court, Southern District of New York (Manhattan).(Updates with filing by other groups)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.
At least two private equity funds are seeking to acquire stakes in Venezuelan companies that have survived the country's economic crisis, spurred in part by optimism that the Biden administration could ease sanctions on the South American nation, according to a dozen sources familiar with the talks. The interest by funds, including Miami-based 3B1 Guacamaya Fund and Cayman Islands-based Knossos Asset Management, follows Venezuelan President Nicolas Maduro's abrupt 2019 liberalization of the economy https://www.reuters.com/article/us-venezuela-shops-idCAKBN1YK16X amid a sanctions program created by former U.S. President Donald Trump. Maduro's unexpected overhaul scrapped a price control system and permitted dollar transactions for the first time in decades, allowing a small group of firms to emerge from the wreckage of a four-year hyperinflationary crisis that prompted many multinationals to leave https://t.co/I8H1Kakhhs?amp=1 the country or sell subsidiaries.
Stocks traded mixed Friday as investors digested a disappointing April jobs report, which showed the U.S. economy added back far fewer jobs than expected last month despite easing stay-in-place restrictions.
The stage is set for an explosion in the amount of stock buybacks, says Goldman Sachs.
The longer-term uptrend is likely to remain intact as long as prices can hold above the major 50% level at $1788.50.
Families can get up to $50 off their bill to stay connected during the pandemic.
(Bloomberg) -- Abu Dhabi is seeking to create the largest steel and building materials company in the United Arab Emirates.ADQ, one of Abu Dhabi’s three sovereign wealth funds, plans to combine Emirates Steel Industries PJSC with Arkan Building Materials Co. and form an entity with total assets of about 13 billion dirhams ($3.54 billion). Arkan shares surged as much as 10% in Abu Dhabi.Abu Dhabi has been merging some companies as it looks to bolster the economy and diversify from hydrocarbon production. Since being founded in 2018, ADQ grew quickly to join the ranks of the world’s top 20 sovereign funds and is now the UAE capital’s third-largest after Abu Dhabi Investment Authority and Mubadala Investment Co.The wealth fund is betting that the combined group will be well placed to capitalize on an economic recovery as well as an acceleration in infrastructure projects on the back of government stimulus programs.As part of the offer, Arkan will issue a convertible instrument to ADQ-controlled Senaat, which owns Emirates Steel. The deal values Arkan at 1.4 billion dirhams and Senaat will own about 87.5% of the combined group post completion, the companies said on Sunday.“It would mark the first time that investors will have access to a steel producer on a UAE public market, which is expected to have a positive impact on overall demand and liquidity for the combined group’s shares,” Senaat said in a statement.Details of the offer:Conversion price is 0.798 dirham per Arkan share, the same as the stock’s close on ThursdayArkan shares have doubled from a July 2020 lowRothschild & Co. is the financial adviser to Senaat and its shareholderIf Arkan board recommends the offer, the transaction could close during the second half(Updates with Arkan share move 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.
As U.S. stocks head into a seasonally rocky stretch, investors are gauging to what extent markets have anticipated a number of factors that could sway asset prices, from massive government stimulus to looming inflation. Though equities remain near all-time highs, some sectors have gotten off to an uneven start this month, with the tech-heavy Nasdaq Composite down more than 2% so far this week while the Dow Jones Industrial Average rose to a record on Thursday. While retail investors have been net buyers of stocks for 10 straight weeks, hedge funds have been sellers, client data from BofA Global Research showed, with the four-week average of net sales of equities by hedge funds hitting their highest levels since the firm began tracking the data in 2008.
(Bloomberg) -- Gold rose for a third straight day, posting its biggest weekly increase since November after a report showed a surprise slowdown in U.S. job growth, supporting the case for continued economic stimulus and low interest rates.Non-farm payroll numbers show the U.S. added 266,000 jobs in April, compared with the 1 million median estimate of analysts. Treasury yields sank on the news as risk appetite faded and the dollar weakened, boosting demand for gold as an alternative asset.Gold has rebounded after a poor start to the year, when it came under pressure from gains in the dollar and bond yields. Both drivers have paused for now, while inflation expectations drive higher amid a commodities boom, lifting the metal’s appeal as a hedge. The jobs numbers reinforce views that monetary tightening remains distant, further helping non-interest-bearing bullion.The jobs data “is lagging, but suggest that, using last month’s data there was no urgency to change policy, which is price supportive for gold,” said Giovanni Staunovo, an analyst at UBS Group AG.Bullion surged on Thursday after several Federal Reserve officials played down concerns over inflation and pushed back on the idea of tapering bond purchases.Spot gold rose as much as 1.6% to $1,843.43 an ounce, the highest since mid February. Prices gained 3.5% this week, the most since early November. Futures for June delivery on the Comex rose 0.9% to settle at $1,831.30 an ounce. Spot silver and platinum also advanced. Palladium dropped as much as 4.1% as traders booked profit after a price rally that sent the emission-curbing metal to fresh record highs.The Bloomberg Dollar Spot Index retreated 0.7% after falling 0.5% on Thursday.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) -- Wall Street’s new overseer confirmed he won’t back down from tough battles with the financial industry as he laid out an agenda for increased regulation in numerous contentious areas.Gary Gensler, making his first appearance before Congress after being sworn in as Securities and Exchange Commission chairman, pledged Thursday to confront long-simmering issues in the stock market that led to this year’s wild price swings in shares of GameStop Corp. and fueled concerns that retail investors are getting short shrift from popular trading apps.Gensler, 63, didn’t stop there, as he also vowed to look at new rules for cryptocurrencies, corporate disclosures tied to climate risks and the derivatives that triggered the blow-up of Archegos Capital Management, Bill Hwang’s family office. Again and again, Gensler made clear that he believes tighter oversight is needed.Democrats, who spent the past four years decrying the Trump administration’s loosening of financial rules and warning of increased risks to Main Street investors, praised the SEC chief’s proactive stance.“I am very pleased,” said House Financial Services Committee Chairwoman Maxine Waters. The California Democrat added that she wanted to “put Wall Street on notice that we are watching closely.”Republicans on the panel were less enthusiastic and cautioned Gensler that additional regulations could threaten the commission-free trading that many consumers have embraced, as well as financial-market innovations and the booming markets for digital tokens.Still, Gensler mostly skirted criticism from either side of the political aisle and was given a pass when he declined to answer questions on issues like a financial transaction tax and the potential for Bitcoin exchange-traded funds. The former head of the Commodity Futures Trading Commission who also worked as a senior Treasury official under President Bill Clinton often begged off, explaining he had only been in the SEC job for several weeks.“I appreciate the dodge,” Representative Anthony Gonzalez, an Ohio Republican, told Gensler at one point. “This is not your first rodeo, obviously.”Here are some of the topics Gensler discussed in roughly four hours of testimony:Archegos SecrecyGensler provided an early look at how he might deal with what’s arguably one of the SEC’s biggest blind spots: a lack of knowledge about the undisclosed security-based swaps that Archegos used to make massive bets on companies.The SEC will consider adjusting some of its rules that require investors to publicly report large stock holdings so they will also cover swaps, Gensler said.Such a move, Gensler told lawmakers, “would be positive.” He also indicated that the agency would consider revising its margin rules for swaps, which have been approved but are not yet in effect.Crypto RulesA former professor at the Massachusetts Institute of Technology who taught a class on blockchain technology, Gensler was asked often about his views on cryptocurrencies. While many token-enthusiasts have heralded his appointment and assume Gensler will pave the way for new investments, he instead took a moderate stance.Gensler said the market “could benefit from greater investor protection.” He also urged Congress to work on legislation that gives the SEC oversight of crypto trading venues.“Right now the exchanges do not have a regulatory framework,” he said. He also reminded lawmakers that Bitcoin is not supervised by the SEC because it is considered a commodity rather than a security.“There’s a lot of authority that the SEC currently has in the securities space and there are a number of cryptocurrencies that fall within that jurisdiction,” Gensler said. “But there are some areas, particularly Bitcoin trading on large exchanges, that the public is not currently really protected.”Gensler didn’t weigh in on whether the SEC intends to approve a Bitcoin ETF, one of the most consequential issues facing the industry.His comments may have cooled rallies for some of the hottest cryptocurrencies, with Dogecoin declining for the first time in five trading sessions and Ether snapping a 10-day streak that had seen it jump almost 50%. Bitcoin dropped from the highest levels of the day to trade around $56,000.GameStop FrenzyGensler said he’s pushing the SEC to finish a report by summer on the GameStop mania. The review is likely to touch heavily on brokerages like Robinhood Markets that have reshaped trading with slick mobile apps. Gensler acknowledged that the agency may need to “freshen up” some of its regulations.Another issue the SEC will look at is “gamification,” Gensler said, noting that the use of video game-like interfaces and behavioral prompts on apps is growing more common in finance.He said there’s no doubt in his mind that such features prompt consumers to trade more, which increases the risk of losing money. He added that this is particularly the case when retail investors are buying and selling options. Gensler has directed the SEC to seek public comment on gamification, a review that could lead to new rules.Apps “have made it easier to open accounts” but “we’ve lost that human in the middle saying, ‘is this appropriate,”’ Gensler noted.Market-Maker DominanceGensler fielded many questions about firms such as Citadel Securities and Virtu Financial Inc. that dominate the business of executing retail stock orders. That prompted him to reiterate multiple times that he thinks the industry is too concentrated among a few big players -- a situation that he said can lead to outsize profits for a handful of companies and bad outcomes for consumers.The market-makers pay retail brokers like Robinhood for the right to handle clients’ orders, an arrangement known as payment for order flow that Democrats argue poses conflicts. But the practice has also facilitated commission-free trades, something lawmakers’ constituents love.Gensler said at one point that he agrees there are “inherent” conflicts tied to payment for order flow and that the SEC is looking closely at whether it needs to revamp regulations. A crackdown could be particularly impactful on Robinhood, which plans an initial public offering later this year and makes lots of revenue from payment for order flow.In a Friday interview with CNBC, Gensler added to his remarks, saying boosting “disclosure alone may not do it” when it comes to regulating payment for order flow. He also said that it’s “not clear” that investors are getting best execution on their stock trades when market-makers handle orders.(Updates with comments on payment for order flow in last 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.
Sen. Elizabeth Warren (D-MA) has many concerns over cryptocurrencies, including concerns over its environmental impact.
(Bloomberg) -- BMW AG expects the global semiconductors shortage hobbling automotive production to be resolved in a couple of years as companies and governments work to overcome the shortfall.“There’s intense focus on the issue globally, so it’s to be expected for supply and demand to be back in balance within two years at the latest,” Chief Executive Officer Oliver Zipse said in an interview Thursday at the company’s driving academy near Munich.A lack of chips used in everything from navigation systems to certain rear-view mirrors has forced carmakers to curtail production just as demand picks up again in major economies that are easing pandemic restrictions. While Ford Motor Co. last month estimated the scarcity of semiconductors will slash earnings by $2.5 billion this year, BMW has only reported limited stoppages at two European plants.Zipse’s optimistic view contrasts with some of his carmaking peers. Renault SA CEO Luca De Meo said Thursday the chip crisis has exposed the “frightening” fragility of complex supply lines where entire industries depend on highly specialized manufacturers. Strategies that might have been valid two decades ago should be revisited, he said.Volkswagen AG has also cautioned that the semiconductor shortage will become more pronounced in the second quarter, though it still raised its full-year earnings outlook this week. BMW sent a similarly upbeat message on Friday, saying it expects automotive returns to reach the upper end of its 6% to 8% forecast. Strong demand spreading from China to the U.S. and Europe is helping offset higher prices for raw materials such as copper.“We cannot expect to remain completely unscathed by the chip shortage during the second quarter,” Zipse said. “But the extent won’t mean a significant impact on our earnings.”BMW rose as much as 2.1% in Frankfurt, extending gains this year to 18%. The carmaker said additional costs of as much as 1 billion euros ($1.2 billion) from rising commodity prices will be partially tempered by foreign-exchange gains, reducing the net impact to about 500 million euros. Higher rhodium, palladium and steel prices are particularly concerning, BMW said.Investment BoomThe chip shortages that arose after consumers snapped up electronic gadgets en masse while confined to their homes have spurred broad efforts to boost production. The European Commission plans to double the bloc’s output to at least 20% of world supply by 2030, a move that would reduce its reliance on foreign companies.U.S. President Joe Biden has vowed to better secure America’s supply chain by reviving domestic chip manufacturing. Taiwan Semiconductor Manufacturing Co. will spend as much as $28 billion on new plants and equipment this year.While waiting for investment programs to gather pace, manufacturers have had little choice but to idle plants or take the unusual step of stripping certain high-tech features from select models.Zipse said BMW has no plans to seek new partnerships or joint ventures, despite current restraints.“For critical components, we’ll stick with long-term supply contracts and a range of different partners,” he said. This will include battery cells critical to accelerating BMW’s rollout of EVs, he said. “From our point of view, we’ve covered the necessary supplies with long-term contracts.”(Updates with CEO comment 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.