In today's top stories, Amazon workers decide not to unionize, another social media company's users' data was breached and a Transformer robotic toy that responds to voice commands.
In today's top stories, Amazon workers decide not to unionize, another social media company's users' data was breached and a Transformer robotic toy that responds to voice commands.
(Bloomberg) -- Chinese corporations are defaulting on local bonds at the fastest pace on record, as authorities ramp up efforts to introduce more financial discipline and transparency in the world’s second-largest debt market.Firms so far this year have failed to make payments on 99.8 billion yuan ($15.5 billion) of onshore bonds, according to Bloomberg-compiled data. While 2021 is set to be the fourth straight year the 100 billion yuan level has been topped, it previously hadn’t happened before September. For all of 2015, when China’s stock market crashed, defaults totaled just 8.9 billion yuan.Missed payments are running at a record pace this year, following the late 2020 defaults of some state-linked firms which affirmed convictions that authorities in China are increasingly willing to not bail out weak firms. The recent tumult surrounding bad debt manager China Huarong Asset Management Co. raised fresh questions about support for central state-owned firms, even as the risk of contagion remains relatively contained. Signs of a maturing credit market have helped Chinese officials’ effort to refocus on financial risks in areas like asset prices and debt levels.Ultimately, more defaults are part of a healthy credit market with a genuine high-yield onshore sector and adequate pricing of risk, according to Jean-Charles Sambor, head of emerging-market debt at BNP Paribas Asset Management.“Policy makers are willing to draw a line in the sand between what is systemic and what is not,” he said. “They want to inject more credit risk in the system and change the mindset of investors, forcing them to look more at stand alone credit risk rather than speculating on the likelihood of support from the central government.”Delinquencies are crucial in helping develop a mature and efficient market that improves transparency, reduces moral hazard and prompts a reassessment of risk. Increased financial discipline for companies and improved credit ratings serves Beijing’s longer-term goal of attracting more foreign cash to the country’s capital markets-- especially from more stable sources like pension funds and insurers instead of hot money flows.China’s central bank, in its first-quarter monetary report published Tuesday, urged establishing a mechanism that holds local party and government leaders accountable for major financial risks.Developer DefaultsReal estate firms are leading this year’s surge in onshore bond defaults, as authorities tighten access to funding in the debt-laden sector. Developers have made up about 25% of those missed payments with the government’s “three red lines” policy increasingly weighing on these borrowers. Payment failures at China Fortune Land Development Co. and Tianjin Real Estate Group Co. topped 10 billion yuan in the first quarter, according to Bloomberg-compiled data. They also did for chipmaker Tsinghua Unigroup Co. and Hainan Airlines Holding Co.Defaults on offshore bonds have also ramped up -- logging a combined $3.7 billion in January and February but none since, according to Bloomberg-compiled data. Still, that’s nearly half of 2020’s full-year $8.3 billion.(Adds details of central bank report in the seventh paraphraser.)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 stock gained downside momentum at the start of this week and made an attempt to settle below the $600 level.
(Bloomberg) -- The surging cost of commodities to industries and households is a threat to China’s economic growth and the purchasing power of its citizenry.As prices soar for everything from the copper and steel used in construction, to the coal that heats homes and powers factories, to the corn that feeds animals, what can Beijing do to control the record-breaking rally?The answer is complicated by several factors, including policies on pollution and imports that have only served to exacerbate supply constraints. Beijing has imposed output curbs on metals like steel and aluminum to reduce emissions as part of President Xi Jinping’s commitment to deliver a carbon neutral economy by 2060. And it has cut purchases of coal and other commodities like copper from major supplier Australia as relations between the two nations have soured.Moreover, the world’s biggest consumer of commodities is being forced to compete for materials just as global economies bounce back from the pandemic, driven by massive government stimulus, particularly in the U.S.That can only dilute China’s efforts to rein in markets. Still, short of imposing price controls, Beijing has options that range from precise strikes on individual commodities to blunter tools that would affect the whole economy.Trading RestrictionsChina’s busy commodities bourses are a usual suspect for Beijing whenever the government feels price moves are getting a bit too wild. True to form, Monday’s dramatic jump in iron ore triggered a stern response. The Dalian Commodity Exchange vowed to “severely punish” unspecified violations in iron ore trading as it raised margin requirements and narrowed daily trading bands. The Shanghai Futures Exchange also pledged to tighten trading on steel, while the Zhengzhou bourse made a similar move on thermal coal.The goal is to cool speculative flows that can draw in waves of investment and generate dizzying price spikes. The trouble is that this approach doesn’t necessarily help to manage a physical market with its own momentum. Steel prices are rallying worldwide without having a really significant futures market, for example. Still, iron ore futures in Dalian dropped slightly on Tuesday, while rebar and hot-rolled coil in Shanghai marched to new highs ahead of the new restrictions. Thermal coal also forged a fresh record.Inducing SupplyChina is able to lean on its vast state sector to ease shortages, an effort that has recently met with only mixed results at best. Last month, the top economic planning agency told coal miners to produce at their maximum winter output levels, which has barely put a dent in the market’s subsequent rise to all-time highs. For gas, unusually cold winter weather led to an official dressing down for importers following their inability to meet demand, which seems to have motivated some to bring forward their purchases for this year.The efforts to boost energy supplies have been upset by diplomatic tensions with Canberra. China has banned Australian coal imports, one of a number of restrictions on a swathe of goods from barley to wine. And at least two of China’s smaller gas importers have been told to avoid purchasing additional gas from Australia for delivery over the next year.Releasing StockpilesChina has considered selling about 500,000 tons of aluminum from its state reserves to cool the market. Prices plunged initially on the plan before rising again to their highest level in a decade. China’s output of the lightweight metal was 37 million tons last year, more than half the world’s total.The nation holds stockpiles of materials like copper to foodstuffs like soybeans, as well as massive crude oil reserves, but the amounts are undisclosed. Any indication that the reserves bureau is a buyer or seller has the potential to dramatically move markets. The longer-term plan might include adding more base metals to strategic reserves to ensure domestic supply and cushion potential shortfalls, although any state-purchasing program now would risk adding fuel to the current rally.Stockpiling FoodChina is building up its agricultural buffer as well. The government has bought huge amounts of U.S. corn for state reserves and may release them to quell any price spikes ahead of the domestic harvest in the fourth quarter. Authorities have also imposed curbs on state wheat sales amid concern that increased purchases by feed mills to replace expensive corn could push up prices of the new wheat crop, which will be reaped in June.Beijing is also replenishing its soy reserves, adding locally grown soybeans for the first time since 2017 to curb any possible food inflation. The domestic crop isn’t genetically modified and is used for foods such as tofu rather than animal feed. China has also frequently released pork reserves to cool rising prices of the nation’s most widely consumed meat.Fiscal StimulusTo rescue an economy that had cratered because of the pandemic, China reached for its usual play book: massive state-funded construction to stimulate demand and an expansion in credit that fed through into the real estate market. That helped put a rocket under the price of steel and other building materials like copper and aluminum.China has trimmed this year’s quota for the debt sales that typically fund infrastructure, and local governments have been slow off the mark in terms of new issuance. Metals traders will be looking for further evidence that fiscal policy is tightening as the government shifts its focus to preventing asset bubbles.Monetary PolicyThe broadest concern is that record commodities prices will fuel inflation globally and central banks will act too slowly to stem the tide. Last month saw the fastest growth in Chinese factory-gate prices since October 2017, a surge that’s likely to have furrowed brows at the People’s Bank Of China.All of China’s financial markets are on tenterhooks for any indication that the PBOC will accelerate monetary tightening as the nation completes its recovery from the pandemic. For metals, tougher lending requirements would affect demand across sectors, from real estate to autos and consumer goods. Still, Bloomberg Economics doesn’t think the central bank will be motivated to act quite yet, as consumer prices remain relatively subdued.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) -- Short selling, a strategy that was all but left for dead in the wake of the meme-stock mania, is working pretty well at the moment.Hedge funds in particular seem to have timed recent tech stock declines almost perfectly, pushing up bearish bets just before the market rolled over. A basket of the 50 most-shorted stocks slipped in 10 of the past 11 sessions, the best run for bears since December 2018, data compiled by Goldman Sachs Group Inc. and Bloomberg show.The reward comes right after professional speculators recharged, boosting short sales on single stocks from a decade low reached in February. Their short book as a percentage of total equity exposure crept up over the last two months, rising roughly 2 percentage points to 26%, according to prime broker data compiled by Morgan Stanley.Short interest is still far from a peak of about 35% that Morgan Stanley’s fund clients accumulated in 2018 and 2020. Still, it’s a victory for short sellers who had been driven almost into extinction as the S&P 500 rallied as much as 90% from the pandemic trough in March 2020, with all but two members climbing. Hedge fund managers bold enough to revive bearish wagers are now reaping gains after being stung by Reddit-driven short squeezes on GameStop Corp. and other meme stocks earlier this year.Morgan Stanley did not specify what kind of stocks hedge funds are targeting, though a look at exchange-traded fund and futures trading shows growing distaste for technology, where stock losses are piling up as inflation concern puts pressure on their stretched valuations. Unprofitable tech firms are particularly vulnerable, having fallen 36% from their February peak as a group.“The timing is coming from the fact that the pull-back in long-term rates that took place in April has come to an end,” said Matt Maley, chief strategist at Miller Tabak + Co. Short interest “is growing now, but it’s not back to extreme levels, so the hedge funds are less worried about getting squeezed. In fact, if the sector continues to fall, they’ll actually add to their shorts.”Both the biggest ETF tracking the Nasdaq 100 and Cathie Wood’s ARK Innovation ETF experienced a spike in short sales in recent weeks. Large speculators in the futures market, mostly hedge funds, were net short Nasdaq 100 mini contracts for an 11th straight week, a stretch of bearishness seen only one other time since the global financial crisis, according to Commodity Futures Trading Commission data.The strategy is paying off, at least for now. The Nasdaq 100 has dropped more than 5% from its April high. The reward is more pronounced among single stocks. Two-thirds of the stocks in Goldman’s most-shorted basket are down this quarter, led by electric-vehicle maker Workhorse Group Inc., which fell 44%, and solar company Sunpower Corp. with a drop of 38%. GameStop, which burned short sellers in January, has worked in bears’ favor as well, losing a quarter of its value.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.
BEIJING (Reuters) -China should implement its commitments to equal treatment for foreign business and abandon "implicit" guidance to replace foreign products with domestic alternatives, the American Chamber of Commerce in China said on Tuesday. In an annual white paper, the chamber, also known as AmCham, which represents 900 companies, also called on the United States and China to communicate more and cooperate on climate change and public health. The relationship between the world's two biggest economies deteriorated rapidly over the past few years over issues ranging from trade to China's response to COVID-19.
A senior Republican U.S. senator on Tuesday asked the chief executives of Toshiba America Electronic Components, Seagate Technology, and Western Digital Corp if the companies are improperly supplying Huawei with foreign-produced hard disk drives. Senator Roger Wicker, the ranking member of the Commerce Committee, said a 2020 U.S. Commerce Department regulation sought to "tighten Huawei's ability to procure items that are the direct product of specified U.S. technology or software, such as hard disk drives."
What is a dividend and which companies have the best-yielding dividends? Read on for a primer on how best to approach this method of investing.
Stocks fell Tuesday, with the major indexes adding to Monday's losses as inflation concerns rose.
(Bloomberg) -- The onshore yuan advanced to its strongest level since 2018 as it defied attempts by the central bank to slow its gains amid an improving outlook for China’s economy.The currency rose as much as 0.3% to 6.4114 a dollar, the strongest since June 2018, after breaching its previous year-to-date high of 6.4245 reached in January. The move follows a slump in the greenback on Friday after U.S. jobs data missed economists’ estimates.The yuan’s ascent comes even after the central bank tried to cap its gains by setting the daily fix at a weaker-than-expected level on Monday. China’s currency has climbed 1.8% this year to outperform all its Asian peers, and a rapid appreciation threatens to erode the competitiveness of the nation’s exports.“The yuan will continue to strengthen, as apart from a weaker dollar, the Chinese currency is also being supported by capital inflows and large trade surplus,” said Tommy Ong, managing director for treasury and markets at DBS Hong Kong Ltd. “The PBOC will likely use the fixing to slow the gains but it won’t use direct intervention.”The yuan’s rise mirrors the Chinese economy’s gains, where surging exports and retail sales are in stark contrast to the uneven recovery seen in the U.S. and the euro zone. Gross domestic product climbed 18.3% in the first quarter from a year earlier, powered by a jump in consumer spending.Apart from the dollar, the yuan also strengthened against a basket of its trading partners’ currencies. The CFETS RMB Index, which tracks the yuan versus 24 peers, is close to the highest level since 2018.Chinese banks, including joint-stock and state lenders, boosted purchases of the dollar after the yuan advanced rapidly on Monday afternoon, traders said. The transactions helped to stabilize the exchange rate, according to the traders, who asked not to be named as they aren’t authorized to comment on the market publicly.“While the broad dollar declines are certainly supportive of Asian currencies, the yuan has become even more attractive because of its strong data and effective Covid-19 containment measures,” said Fiona Lim, senior currency analyst at Malayan Banking Berhad in Singapore. The onshore yuan will advance to 6.36 in the coming 12 months, she added.(Adds traders’ comments in second to last paragraph and Maybank analyst’s comments 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.
(Bloomberg) -- Novavax Inc. shares extended declines after the close of trading Monday following first-quarter results in which the company said it doesn’t plan to file for authorization for its Covid-19 vaccine in the U.S. and Europe until the third quarter.The firm’s stock fell more than 11% post-market following an 8.8% decline during the session that came on the heels of a Washington Post report that said the biotech’s plans to seek emergency use authorization for its closely-watched Covid-19 vaccine would be delayed.The drug developer will not publish results from a highly-anticipated study of the vaccine until the end of the month, according to the report, which is weeks later than many on Wall Street anticipated. Investors fear there may be issues beyond just a simple delay in the vaccine’s results that may be preventing it from filing for emergency use. The company also needs to reach an agreement with U.S. regulators over issues for an assay, which helps check the quality of its vaccines, the report said.“As we continue our dialogue with regulatory authorities for authorization, we remain committed to promptly delivering our vaccine globally,” Novavax Chief Executive Officer Stanley Erck said in the earnings statement.While Novavax and vaccine developing peers were hit last week by concerns surrounding a U.S.-backed effort to waive patent protection for Covid-19 vaccines, Monday’s news flow was less cut and dry. As Novavax had its lowest close in two months, peer BioNTech SE rallied 10% after raising its Covid-19 vaccine sales forecast to $15.1 billion for this year.“These are growing pains and I would remind investors this will be a three horse race basically between Moderna, BioNTech-Pfizer and Novavax,” said B. Riley analyst Mayank Mamtani, who rates Novavax a buy and has a Street-high price target of $365. “This is a great entry point for investors.”The company’s shares closed Monday at $160.50.Novavax earlier published positive results from a combination trial of its Covid-19 vaccine candidate and its seasonal flu vaccine in hamsters.(Adds post-market trading, first quarter results beginning in headline, 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) -- A hole in Britain’s finances is starting to worry economists and stoke concerns about the pound. This time, the vast budget deficit created by the pandemic is not the issue.The focus is gradually shifting to the current-account shortfall, the difference between money coming into the U.K. and money going out. The gap is forecast to reach its widest since World War II this year as Britain grapples with post-Brexit ties with the European Union and an imports-fueled rebound from the pandemic.That will test the willingness of foreign investors to keep on funding the spending habits of the nation by buying British assets. Data on Wednesday will likely show that the U.K. had one of its biggest trade deficits on record in the first full quarter since completing the withdrawal deal with the EU.“A big jump in the trade deficit can put into question whether it can be sustained by capital flows,” said Sonali Punhani, European Economist at Credit Suisse. “This can increase the premium investors demand to invest in U.K. assets.”The deficit is adding to the longer-term risks gathering over the pound, which also include the prospect of another Scottish independence referendum. While the currency has rallied this year amid a brightening economic outlook, strategists say further significant gains are unlikely.The current-account gap, which also includes flows of investment income, may almost double to 6.4% of economic output this year, according to the U.K.’s fiscal watchdog. The forecast reflects an export performance hobbled by Brexit and strong demand for foreign-made goods as the economy rebounds at pace from the pandemic.What Bloomberg Economics Says...“It’s well known that the U.K. is a serial borrower from the rest of the world. One of the potential consequences of recovering earlier and more quickly than the rest of the world is the U.K.’s current account deficit widens even further as export growth lags imports. That’s likely to catch the eye of investors if the U.K.’s recovery proceeds as expected.”-- Dan Hanson, senior U.K. economist.The Bank of England, which upgraded the U.K.’s economic outlook significantly last week, predicts an 8.5% surge in imports and almost no growth in exports. The International Monetary Fund says Britain will have the biggest shortfall among major industrial nations.In recent years, Britain has had no problems funding the gap. Foreigners attracted by a robust legal and financial systems and the prospect of decent investment returns have proved eager buyers of British firms and high-end London properties. They also bought U.K. equities and debt.While they may continue to regard the U.K. as a good bet -- the economy is forecast to outgrow its major peers this year -- Brexit has raised some awkward questions.The U.K. is no longer part of the EU single market, access to which was a key reason for many firms choosing to invest in Britain.The government also appears to have jettisoned the idea of trying to lure investors by turning Britain into a “Singapore of Europe” with low taxes and light-touch regulation. In his March budget, Chancellor Rishi Sunak raised taxes to levels not seen in half a century, with businesses bearing the brunt, in an effort to rein in the biggest budget deficit in peacetime.In a recent research report, RBC Capital Markets said Britain can no longer count on being a “natural haven” for foreign direct investment, with neither the pound nor U.K. equities currently trading at cheap levels.“There is no strong reason to think there will be a flood of foreign capital inflows looking to pick up bargains,” said RBC chief currency strategist Adam Cole.Cole sees the pound falling to $1.25 and 91 pence per euro by the end of this year and weakening further in 2022. Sterling is currently at $1.41 and 86 pence per euro.To be sure, large current-account deficits do not hold the fear they did in past decades, when crises were precipitated by attempts to support fixed exchange rates by exhausting gold and currency reserves. The 1967 devaluation of the pound that humiliated Harold Wilson’s Labour government followed years of balance of payments problems.Now the pound floats freely, meaning that the exchange rate can fall to a level where foreign investors once again find British assets attractive, sparing Britain an abrupt funding crisis.With British assets owned by foreigners now worth around six times the size of the economy, an adjustment may not be without pain, however. Cole at RBC points out that recent inflows have shifted toward loans and deposits -- “hot money” that could quickly leave the country if sentiment on Britain soured.“Seemingly unsustainable deficits can be sustained for a very long period and they don’t seem to matter until they do matter,” he said on Monday. “When they do, nothing else seems to matter.” For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- The U.S reduced its forecast for oil output through 2022 as drillers across the prolific shale patch pledge austerity over the allure of increasing prices.Oil explorers throughout the country will produce 20,000 barrels a day less than previous forecasts for this year, at 11.02 million barrels. Supply next year is set to reach 11.84 million barrels day, down from prior estimate of nearly 11.9 million, the Energy Information Administration said in a report Tuesday. This marks the second straight downward revision for 2021 and 2022 forecasts.The agency’s reduced forecasts come even as U.S. crude futures prices have risen more than 30% this year. In fact, the EIA raised its price projections for West Texas Intermediate oil next year by 25 cents a barrel.Still, pressure from Wall Street investors has put a lid on any potential supply growth, forcing drillers to increase cash flow and dividends to shareholders. In their quarterly earnings calls last month, the largest U.S. drillers, Chevron Corp. and Exxon Mobil Corp., indicated they are holding firm to austerity measures adopted during last year’s pandemic-fueled crisis, easing concerns that recent price recovery would spur another round of runaway production growth.With the U.S. unlikely to return to previous peak output, the Organization of Petroleum Exporting Countries and its allies have moved to roll back part of their supply cuts starting in May. OPEC itself boosted estimates for the call on its output this year by a modest 230,000 barrels a day as supply from the group’s biggest rival declines again.Nonetheless, the EIA expects producers to add new wells while oil prices stay above $55 a barrel, but only enough to offset natural declines from existing wells. Oil supply will also benefit from the new projects in the U.S. Gulf of Mexico, the agency said in its Short-Term Energy Outlook. It added that the nation has fully recovered from February’s cold snap-related supply outages, with volumes rebounding more than 1 million barrels a day to nearly 11 million barrels a day in April.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.
Setting aside the pipeline issue, the direction of crude oil prices this week is likely to be determined by the API and EIA gasoline inventory data.
(Bloomberg) -- Chinese debt is back in favor with overseas investors.After the nation’s government bonds suffered their first outflow in two years in March, foreigners added 52 billion yuan ($8.1 billion) to their holdings in April, bringing the total to a record 2.1 trillion yuan, data compiled by ChinaBond show.In a game-changing shift -- compared by some to the birth of the euro -- yuan-denominated debt has emerged as a refuge during this year’s global bond rout. Investors looking for diversification have piled in, seeking its relatively high yields and low correlation to other markets. While that partially reversed in March, as rising U.S. yields dimmed Chinese bonds’ appeal, the quick turnaround has underscored the resilience of demand and China’s growing clout since opening its fixed-income market.“The underlying case for Chinese bonds is still very, very strong,” said Pramol Dhawan, head of emerging markets portfolio management at Pacific Investment Management Company LLC. “Because of its low correlation to global rates, its high nominal yields and high real yields form a very important part of portfolio construction.”Foreign investment in China’s interbank fixed-income market, as compiled by ChinaBond, rose 65 billion yuan in April to an all-time high of 3.2 trillion yuan, the data showed. Those holdings more than doubled over the past two years as Chinese bonds were included in global benchmarks compiled by Bloomberg Barclays and JPMorgan Chase & Co. Still, foreign investors only account for 4.3% of the total debt in China’s interbank market.“We are increasing our exposure to the Chinese bonds,” said Kheng Siang Ng, Asia Pacific head of fixed income at State Street Global Advisors. “It’s hard for the markets to ignore.”Read More: China’s Bonds Only One to Gain Among Biggest Markets in RoutEven as foreign investors returned, the April numbers suggest the momentum of inflows has slowed from the breathtaking pace earlier this year. Last month’s inflow was less than half the amount seen in January.The yield premium of China’s benchmark 10-year bond over Treasuries narrowed by around 1 percentage point to about 154 basis points from a record in November. On top of that, FTSE Russell said in March that it will take three years to add Chinese debt into its global index, instead of the 12 months initially envisioned. That disappointed some investors who expected a faster inclusion.Defensive BuyersNick Maroutsos, head of global bonds at Janus Henderson Investors, is among those who aren’t yet ready to buy Chinese bonds.“We get asked this a lot, and my answer to whether we own or will own Chinese bonds is, ‘Not right now,’” said Maroutsos, whose firm managed more than $414 billion as of March.“Ultimately, we are defensive buyers, and I have a hard time looking at emerging markets as a safe haven for investors,” he said. “Chinese government bonds aren’t going to protect you and won’t behave in a manner similar to Treasuries.”China’s bonds have been dancing to their own tune, in part because they are less owned by foreign investors, and China’s independent economic and policy cycles set them apart from the rest of the world.Over the past 10 years, their correlation with the U.S. Treasuries was less than 0.2, according to a Bloomberg analysis. Yields on 10-year Chinese bonds were little changed this year, while equivalent Treasury yields surged 69 basis points.Read More: Carry Trades in China, Korea Are Best in Low-Yield Covid EraWhile the yield spread has narrowed, at 3.1%, China’s 10-year yield is almost double that of Treasuries. Even if U.S. yields rise further, Chinese bonds remain appealing because of their low correlation to global markets, which helps investors lower volatility in their portfolio, said Lucy Qiu, a strategist at UBS Global Wealth Management.“Investors still need to look for uncorrelated sources of returns, as negative bond-equity correlations may be challenged during a rapid rise in yield,” Qiu said.(Updates with performance data in third-from-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.
(Bloomberg) -- The world’s largest money managers may be underestimating the durability of inflation after a record wave of money printing to combat the Covid-19 pandemic, according to veteran investor Mark Mobius.This will pose a particular problem in the U.S., where a rising inflation rate will weigh on the global reserve currency, said Mobius, who set up Mobius Capital Partners after three decades at Franklin Templeton Investments. At the same time, the quickening price growth is likely to support a rally in raw materials, even as the Bloomberg Commodity Index already hovers near its highest since July 2015, he said.READ MORE: Inflation Debate Hits Emerging Markets as Pimco Stands Firm Such a backdrop favors emerging markets, which will grow faster than their developed-nation peers in the years ahead, Mobius said. Chinese and Indian equities, recently beaten down by a rout in technology shares as well as the latest Covid-19 crisis, look particularly attractive, he said on Bloomberg TV. Yet he voiced caution about fully rotating into value stocks.“With continuing low interest rates, normal parameters like P/E ratios aren’t a good guide for where you should be,” Mobius said from Cairo. “The numbers to look at are return on capital and dividend yield. But I think you have to have a combination of value and growth.”His concerns on inflation were underscored Tuesday by new data showing a surge in Chinese factory-gate prices. Even so, central bankers from the U.S. and elsewhere maintain that price gains are temporary. In China, the world’s largest exporter, policy makers insist that price growth remains mostly under control. Still, officials have pledged to strengthen controls on the raw-materials market to limit costs to companies.(Updates with data on Chinese factory prices 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.
U.S. crude oil production is expected to fall by 290,000 barrels per day (bpd) in 2021 to 11.02 million bpd, the EIA said on Tuesday.
(Bloomberg) -- Meituan’s stock plunged to a seven-month low after the Chinese e-commerce company’s billionaire chief executive officer shared and then deleted a poem on social media that some interpreted as a veiled criticism of Beijing.The food delivery giant fell almost 10% in Hong Kong before closing 7.1% lower to wipe out about $16 billion. Wang Xing posted a classical poem about book burning by the emperor during the Qin dynasty on social media platform Fanfou.com, according to the Hong Kong Economic Times. He deleted it on Sunday and issued a clarification that he used the poem in reference to the company’s competitors. A Meituan spokesperson confirmed both posts and declined to comment further.Investors are jittery after business figures who appeared to criticize the government have faced consequences. Wang’s rival Jack Ma angered Beijing in October last year by blasting regulators publicly over what he considered to be an antiquated approach to oversight. That speech was followed swiftly by tightened rules over consumer lending, the scuppering of Ant Group Co.’s record $35 billion initial public offering as well as an antitrust probe into Alibaba Group Holding Ltd.“To a certain extent, one can interpret the poem posted by Wang Xing as similar to Jack Ma’s criticism of the banking regulators,” said Kerry Goh, chief investment officer at Kamet Capital Partners Pte. “This is not a good time to be too vocal!”China’s technology sector has come under intense regulatory scrutiny in recent months amid concern the largest firms have grown too powerful. That’s weighed on the shares, with the Hang Seng Tech Index tumbling almost 30% from its February high. The antitrust watchdog has launched an investigation into suspected monopolistic practices by Meituan, including forced exclusivity arrangements.The Shanghai Consumer Council criticized Meituan on Monday for practices that hurt consumers’ rights, including refund problems and misleading content on its mobile app. The company has vowed to submit a rectification report in the near term.Meituan reported a net loss for the final quarter of 2020, which prompted the three global credit-rating agencies to downgrade their outlooks. The firm raised $10 billion selling shares and convertible bonds in Hong Kong last month, after burning through cash trying to expand its business.The shares, which have more than 50 buy ratings and no sell recommendations, have fallen for a record nine days. They’re down 42% from their February high in one of the worst performances on the Hang Seng Index.The poem Wang shared is by Tang dynasty poet Zhang Jie about the book burning that took place under emperor Qin Shi Huang.“What the CEO posted is a very famous anti-establishment poem, which shows that he might be under a lot of pressure from the ongoing investigations,” said Hao Hong, head of research at Bocom International in Hong Kong.The following is Wang’s clarification:“A poem from the Tang dynasty inspired me a lot lately: the Qin dynasty was afraid of scholars but Liu Bang and Xiang Yu, whose uprising overthrew the Qin regime, didn’t have much education. This has reminded me that the most dangerous competitors are often not those expected. Alibaba has been focusing on JD.com these years, only to see Pinduoduo exceed it in user numbers. Similarly, Ele.me looks to be the biggest rival of Meituan’s delivery business, but what could really cause a shock to the industry may be some companies and business models that haven’t come under our radar.”(Updates with Shanghai Consumers Council 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.
While the Colonial pipeline outage appears to have been resolved and there is enough gasoline to go around, panic buying has caused gasoline shortages in some areas on the East Coast
Stocks traded mixed on Monday, with technology stocks under more pressure as investors weighed the risks that higher inflation during the pandemic recovery might weigh on high-growth names.
(Bloomberg) -- Electronic Arts Inc.’s sales are holding up better than predicted as the video-game giant navigates a slowdown caused by the end of pandemic lockdowns.Though sales are expected to decrease to $1.25 billion in the fiscal first quarter, excluding some items, that’s above the $1.14 billion analysts projected. The forecast for profit was short of estimates, but the company’s full-year guidance was slightly ahead of what Wall Street predicted.The outlook was upbeat enough to reassure investors. After the stock initially slid in late trading, it recovered to a gain of as much as 3%.Electronic Arts -- and the video-game industry overall -- is hoping for a soft landing after a Covid-fueled sales surge last year. The company’s results come a day after Roblox Corp. said its gaming platform had stayed more robust than expected in April, sending its shares soaring on Tuesday.“Remember, last year’s Q1 was astronomical,” Electronic Arts Chief Financial Officer Blake Jorgensen said in an interview. “It was a huge quarter because of everyone staying at home.”The first-quarter earnings miss is also partly due to costs related to recent acquisitions, such as Glu Mobile, Jorgensen said.Meanwhile, the company has managed to establish social networks within its games, Chief Executive Officer Andrew Wilson said during a conference call. That should help maintain sales even as gamers head back to in-person schools and offices.“We don’t think anything goes back to what it was before -- we think the growth continues,” he said.Apex Legends helped fuel results in the just-completed quarter, which exceeded estimates for sales and profit. The battle-royale game has attracted more than 100 million players to date on consoles and personal computers. And a new version of Battlefield, another key franchise, is slated for release around the holidays -- with promotional trailers coming in June.“Historically they have been conservative around expenses and generally end up outperforming their margin targets,” said Matthew Kanterman, an analyst at Bloomberg Intelligence. “So overall there’s a lot of encouraging factors.Electronic Arts may continue to be acquisitive. “We are always looking for great mobile properties, great talent that could help us extend our skills in things like sports,” Jorgensen said.In May, EA bought baseball-game studio Metalhead Software, and in April it closed its acquisition of Glu Mobile, the mobile-gaming company. In February, Electronic Arts completed its purchase of Codemasters, known for its racing games.The shares climbed as high as $145.63 in extended trading. They had been down 1.6% to $141.36 this year through Tuesday’s close.(Updates share reaction starting in third 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.