Stocks have moved mostly higher in morning trading on Tuesday, adding to the strong gains posted last week.
Stocks have moved mostly higher in morning trading on Tuesday, adding to the strong gains posted last week.
Bitcoin's average daily range to date in 2021 is $3,765.
A stock market plunge could drive investors into the safe-haven U.S. Dollar that could lead to renewed pressure on gold prices.
(Bloomberg) -- Unimaginable just six months ago, investors are piling in to bets that will pay out if the Bank of England raises interest rates for the first time since 2018.The central bank sparked the game-changing moment earlier this month, after policy makers signaled optimism that the U.K.’s vaccine push would see growth rebound from the worst recession in more than 300 years. Officials further emphasized that sub-zero rates weren’t an imminent prospect, even as a report on their feasibility encouraged preparation for such a scenario.This marked a sharp turnaround from September when the BOE first flagged such a report was being undertaken, rubbing salt in to the wounds of traders who joined crowded bets on interest rates falling below 0% for the first time ever.Money markets can double current expectations and price in a 25 basis-point rate hike over two or three years, according to Bob Stoutjesdijk, a Rotterdam-based fund manager at Robeco Institutional Asset Management who cited higher U.K. growth and inflation rates later this year, the nation’s proneness to price increases and the continued global reflation theme.Traders are targeting even more rate hikes for further ahead, buying options on short-sterling futures that will pay off if the central bank raises rates 100 basis points by the end of 2024, compared to 50 basis points now.The Bank Rate was last seen above 1% over a decade ago when the central bank slashed interest rates by more than 400 basis points in response to the global financial crisis.Money markets have almost erased BOE easing bets, pricing two basis points of cuts by early next year, ahead of testimonies later Wednesday by policy makers including Governor Andrew Bailey and Deputy Governor Ben Broadbent.(Adds BOE rate pricing in the final 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.
"Bytedance plans to make Singapore its epicenter for the rest of Asia-Pacific in its quest to find a neutral ground amid the ongoing trade tensions between the US and China."
Electric-car maker Fisker Inc said it will work with Apple Inc supplier Foxconn to produce more than 250,000 vehicles a year beginning in late 2023, sending its shares up 18%. The deal, codenamed "Project PEAR" (Personal Electric Automotive Revolution), is looking at markets globally, including North America, Europe, China and India, Fisker said. Foxconn, Apple's main iPhone maker, has ramped up its interest in electric vehicles (EVs) over the past year or so, announcing deals with Chinese electric-car maker Byton and automakers Zhejiang Geely Holding Group and Stellantis NV's Fiat Chrysler unit.
Tesla shares comes under severe selling pressure. Here's the latest.
Spirit gets a big chunk of its revenue from Boeing Co, which was forced to cut back production due to the grounding of its 737 MAX jet and a slump in air travel due to the pandemic. The MAX was finally cleared late last year to fly after being grounded for nearly two years and Spirit hopes to benefit from a ramp-up in production at the planemaker. Boeing 737 MAX deliveries fell to 19 shipsets from 153 a year earlier.
Even after a price plunge of more than $10,000 over the past couple days, analysts see further selling ahead.
Shares of Churchill Capital IV Corp fell more than 40% on Tuesday, as its merger with electric vehicle maker Lucid Motors sparked concerns about the real worth of the company which has yet to start regular production. The share slump followed weeks of speculation about the deal that had pushed the stock of Churchill Capital IV, a special purpose acquisition company (SPAC), up more than 500%. Still, even after the slide, Churchill Capital IV's stock price implied a $56 billion market capitalization for Lucid once the deal closes, making it one of the highest valued vehicle makers in the world, and marking a hefty premium to the price at which the Lucid agreed to merge with Churchill Capital IV.
Exxon could also receive about $300 million in contingent payments based on an increase in commodity prices. Exxon said on Wednesday HitecVision, which bought Exxon's Norwegian North Sea assets for $4.5 billion in 2019, was making the purchase through its British unit Neo. Exxon's share of production from the fields, which was about 38,000 barrels of oil equivalent per day (boepd) in 2019, will more than double NEO's output to around 70,000 boepd, making it among the top five oil and gas producers in the UK.
Liink, JPMorgan’s blockchain banking network, is based on a fork of Ethereum.
(Bloomberg) -- Now that the lights are back on in Texas, the state has to figure out who’s going to pay for the energy crisis that plunged millions into darkness last week. It will likely be ordinary Texans.The price tag so far: $50.6 billion, the cost of electricity sold from early Monday, when the blackouts began, to Friday morning, according to BloombergNEF estimates. That compares with $4.2 billion for the prior week.Some of those costs have already fallen onto consumers as electricity customers exposed to wholesale prices wracked up power bills as high as $8,000 last week. Other customers won’t know what they’re in for until they receive their gas and power bills at the end of the month. Ultimately, the financial pain will probably be shared by ratepayers and taxpayers alike, said Michael Webber, a professor at the University of Texas at Austin and chief science officer for French power company Engie SA.If prior U.S. power market failures are any guide, Texans could be on the hook for decades. Californians, for example, have spent about 20 years paying for the 2000-2001 Enron-era power crisis, via surcharges on utility bills.CPS Energy, which is owned and run by the city of San Antonio, said on Twitter it was looking into ways to spread costs for the last week over the next 10 years. That didn’t sit well with its customers, who railed against the company’s proposal during a board meeting on Monday.“Spreading the cost of this event over a decade is unacceptable,” said Aaron Arguello, an organizer with Move Texas. “Customers are already in debt with student loans, mortgages and other payments.”But companies that ran up huge losses as the cost of electricity skyrocketed last week will inevitably try to recoup those through their customers, taxpayers or bonds. How quickly Texans pay depends on who their provider is.Gas utilities usually pass the costs onto customers at the end of the monthly billing cycle, said Toby Shea, a senior credit officer at Moody’s Investors Service. Municipal utilities, co-ops and regulated power providers have the ability to spread out costs over a longer time-frame. “It’s very easy for a government to spread this out for many years and even a few months,” he said.CPS Chief Executive Officer Paula Gold-Williams said last week the company may also issue bonds to help pay for the natural gas it bought at inflated prices.Some utilities are looking to secure hundreds of millions of dollars in liquidity to spread out costs for 10 to 20 years, said Scott Sagen, an associate director in U.S. public finance at S&P Global Ratings. Rayburn Country Electric Cooperative Inc., for example, has fully drawn its $250 million syndicated line of credit and has recently entered into a $300 million bilateral line of credit with National Rural Utilities Cooperative Finance Corp. for one year, according to an S&P report published Monday.A number of utilities are in talks with their banks to get liquidity to pay off their current debts so they can then take out a bridge loan that they’ll convert to long-term bonds. “They’re trying to smooth out these costs as much as possible and provide cover for their customers,” Sagen said.But small retailers who tend to be more thinly capitalized and less robustly hedged have limited options. One such company, Griddy, said last week it would challenge the prices set by the grid operator during the crisis, in an apparent bid to recoup losses for itself and its customers. Another company, Octopus Energy, said Monday it would forgive any energy bill in excess of the average price of electricity for the week, and eat the resulting losses which could be millions of dollars.The state’s utility regulator on Sunday blocked power sellers from disconnecting customers for non-payment, saying the governor and lawmakers need time to come up with a plan to address sky-high bills, first. Texas lawmakers will likely take up the discussion of consumer relief as part of their committee hearings on the crisis which will begin this week, a spokesman for the Public Utility Commission of Texas said.In theory, the legislature could pass an emergency bill that could cover the excessive costs charged by generators during the crisis, said Julie Cohn, an energy historian with affiliations at Rice University’s Center for Energy Studies and the University of Houston’s Center for Public History. “Another piece would be to say you can have a competitive power market that we have, but prohibit the provider from linking the price directly to the wholesale price, as Griddy does.”That would be easier to do in a state that takes a more heavy-handed regulatory approach to its electricity market, according to Webber. But Texas decided to take a more hands off approach with its deregulated system, he said.“The question is where is the money going to come from?” Shea said. “Will Texas go and bail out certain customers? That’s not their attitude toward how they manage their market or manage their economy.”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.
India is on course to become the world’s largest energy consumer, and Prime Minister Modi is now making natural gas the centerpiece of the nation’s energy plans
Venezuela is shipping jet fuel to Iran in return for vital gasoline imports for the South American nation as part of a swap deal agreed by the two state-run oil firms, three people with knowledge of the matter told Reuters. Iran has ramped up assistance to Venezuela since last year as the United States tightened sanctions on both countries, hitting oil exports by state-run firms Petroleos de Venezuela and National Iranian oil Company (NIOC). Iran has sent flotillas of state-operated tankers carrying gasoline and feedstock for motor fuel to Venezuela, as well as equipment and spare parts to help the once-prosperous OPEC nation restart its dilapidated refineries.
(Bloomberg) -- Less easy financial conditions will likely lead to lower overall returns in global markets while favoring growth stocks over value, according to UBS Group AG.Growth and earnings will become bigger drivers of returns next quarter, strategists including Bhanu Baweja wrote in a note Monday. A bottoming in real rates and credit spreads will signal the end of a liquidity “tailwind,” they said.“While these changes don’t imply a big drawdown, they do make for an important change in the nature of the rally,” the strategists wrote. “Liquidity tailwinds have been the biggest contributor to market gains.”A recent surge in U.S. real yields has raised alarm among investors who see negative real rates as a cornerstone of the risk-asset rally which has sent global equities to all-time highs. While higher real yields signal the economy is gaining traction, they can lead to a tightening in financial conditions and a shift in asset allocation.The rate on 10-year Treasury Inflation-Protected Securities jumped to as high as minus 0.77% last week from minus 1.08% on Feb. 11. It was at minus 0.83% on Wednesday.“A small increase in real rates will likely not be a big concern, but as real rates accelerate, each incremental move becomes more challenging for markets,” wrote Baweja and his team.Real Yields’ Rise Is Canary in the Coal Mine for Risk Assets The “phase change” from a liquidity-driven market to one based on growth and earnings will come as “inflation enthusiasm” peaks and will precede any tapering of Federal Reserve support, according to the UBS team.An analysis of similar episodes when liquidity drivers shift to neutral from loose suggests lower market returns and growth stocks marginally outperforming value shares, UBS said.The dollar usually sees modest gains against emerging-market currencies and a rotation out of the U.S. into other markets becomes less compelling, the strategists wrote.(Updates with latest TIPS yield in 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.
(Bloomberg) -- With Tesla Inc. leading another selloff in momentum darlings amid rising bond yields, some investors are fearful that this means the 11-month bull market is in trouble.The spike in yields in the past week has certainly rattled nerves across assets. At the stock market’s fringe, where signs of excess have become obvious, investors are bailing. Tesla was down more than 10% as of 10 a.m. in New York after an 8.6% drop Monday. Bitcoin tumbled as much as 18%.Viewed more broadly, though, rates remain relatively low. When compared to measures of earnings yields, equities still offer a premium almost four times bigger than the historic average. If anything, earnings may be set to explode as economists up and down Wall Street boost their economic growth forecasts to heights not seen in decades. That would justify stock valuations that by some traditional measures look stretched.The bulls’ case for stocks in a period of rising rates is that the bond selloff is caused by signals emanating from commodities markets and economic data like retail sales. The Biden administration is poised to pass a massive spending bill and Federal Reserve Chair Jerome Powell, who testifies before Congress Tuesday, is committed to keeping short-term rates pinned near zero.“When we look at the landscape today, rates are going up for the right reasons,” said Peter Mallouk, chief executive officer of Creative Planning. Though some think that the market has to come down since it’s trading at the upper end of valuations, he said, “the reality is, it can stay high while earnings grow into it.”The stocks under the most pressure this week own sky-high valuations that become harder to justify as Treasury yields surge. And a valuation methodology sometimes called the Fed model that compares corporate profits to bond rates has started to move against bulls. Right now, the S&P 500’s earnings yield -- how much profits you get relative to share prices -- is about 1.79 percentage points above the yield on 10-year Treasuries, the smallest advantage since September 2018.But any warning flashing from that metric is dim. The current premium is still way above the average of 48 basis points in Bloomberg data going back to 1962. That means, all else equal, that equities can still be framed as being attractive relative to history when 10-year yields stay below 2.67%. Yields recently sat near 1.36%.In a note published earlier this month, Goldman Sachs Group Inc. strategists including Ryan Hammond and David Kostin said that equities are usually able to digest gradual increases in interest rates, especially when driven by growth rather than Fed policy. What tends to cause equity turmoil are sharp increases. Stocks typically fall on average in a given month when rates increase by two or more standard deviations, which is 36 basis points in today’s terms. Yields have gone up 30 basis points this month, reaching a 12-month high.Katie Nixon, chief investment officer at Northern Trust Wealth Management, agrees.“While interest rates may have risen under the tailwind of upward revisions to both growth and inflation, both of these variables tend to also be positive for equities -- to a point,” Nixon said. “It is only when rates rise in a disorderly fashion that risk-asset markets react negatively.”Still, anyone who’s nervous that stocks have gone ahead of fundamentals can take comfort in the latest run-up in yields. In August, when the S&P 500 fully recovered from the losses during the 2020 bear market, 10-year yields were sending an ominous signal with a drop to record lows. In a way, the catch-up in yields indicates that the bond market is finally endorsing the bullish economic message that stocks have been flashing since last March.Another way to look at it: Stocks do look extremely stretched based on reported earnings for the past 12 months that included the pandemic recession. On that metric, the S&P 500’s price-earnings multiple sat at 32, eclipsing the peak level seen during the dot-com era.The value case gets a bit more encouraging when measured against this year’s earnings. With analysts expecting profits to jump 23% to $171 a share, the P/E ratio comes down to 23.Should companies continue to beat estimates by a big margin, the picture would get even better. Fourth-quarter profits came in 16% higher than expected, a pace of positive surprises that if sustained would push 2021 earnings to $198 a share. That’d yield a multiple of 20.“What seem like very lofty U.S. stock valuations are defensible if (and only if) earnings bounce back strongly in the second half of the year,” Nicholas Colas, co-founder of DataTrek Research, wrote in a recent note. “There are certainly micro-bubbles (some SPACs, IPOs), but there’s also a good case that stocks as a whole can and will earn their way into lofty valuations.”That’s not to say yields don’t matter for stocks right now. Money quickly moved out of highly-valued stocks such as Tesla, with the Nasdaq 100 falling for a sixth day, the longest losing streak since August 2019. At the same time, companies seen benefiting from an economic recovery delivered gains fared better.“Investors are not positioning in areas like financials and energy that are really the beneficiaries of things like rising yields, rising commodity prices. I think there is a little scramble,” Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, said in an interview on Bloomberg Television. “It’s more of a story of repositioning within U.S. equities, as opposed to getting out of U.S. equities.”(Updates with Tuesday prices in the second and penultimate paragraphs)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.
China's central bank will join a project looking at using central bank digital currencies (CBDC) for cross-border payments, the Bank of International Settlements said on Tuesday. CBDCs are like banknotes or coins, and give holders a direct claim on the central bank, potentially leapfrogging commercial banks. The People's Bank of China (PBOC) has its own domestic CBDC project, the e-CNY, one of the most advanced initiatives of its kind in the world, in which real-life trials took place in several major cities.
Lucid, run by an ex-Tesla engineer, is the latest firm to tap the initial public offering market, with investors rushing into the EV sector, spurred by the rise of Tesla Inc and with emissions regulations toughening in Europe and elsewhere. The deal, which has a transaction equity value of $11.75 billion, includes a $2.1 billion cash contribution from CCIV and a PIPE (private investment in public equity) investment of 2.5 billion from investors. Reuters was first to report last week that Michael Klein had launched a financing effort to back the Lucid deal.
(Bloomberg) -- The S&P 500 Index erased a drop to end the day higher after reassuring comments from Federal Reserve Chairman Jerome Powell on inflation and the outlook for growth spurred traders to buy the dip.The benchmark stock gauge closed 0.1% higher after declining as much as 1.8% amid a rout in technology shares on concern the high-flying stocks had become overvalued. The Nasdaq 100 ended just slightly lower, mostly erasing a loss that reached 3.5% after Powell signaled the Federal Reserve was nowhere close to pulling back on its support for the economy. Airlines, lodging companies and cyclical shares set to benefit from the end of pandemic lockdowns outperformed.So-called growth shares are having their worst month against value counterparts in more than two decades as vaccination campaigns gather pace and bond yields hover near a one-year high. Bets on faster growth have pushed the gap between 5- and 30-year yields to the highest level in more than six years.As Powell reassured investors on stimulus, he voiced expectations for a return to more normal, improved activity later this year and said that higher bond yields reflected economic optimism, not inflation fears. That helped fuel a return of the buy-the-dip mentality that has limited equity drawdows in recent months, with investors betting on a global economic recovery spurred by vaccines and U.S. spending.“There was something in there for everyone today,” Leo Grohowski, chief investment officer at BNY Mellon Wealth Management, said in a Bloomberg TV interview. “Powell did recognize medium-term improvement in the economy but I think laid to rest some percolating inflation fears.”Elsewhere, stocks in Asia were mostly higher as European shares slumped. Bitcoin tumbled below $50,000 after a bout of volatility highlighted lingering doubts about the durability of the token’s rally.Some key events to watch this week:EIA crude oil inventory report is out Wednesday.Finance ministers and central bankers from the Group of 20 will meet virtually Friday. U.S. Treasury Secretary Janet Yellen will be among the attendees.These are some of the main moves in markets:StocksThe S&P 500 Index rose 0.1% as of 4 p.m. New York time.The Stoxx Europe 600 Index fell 0.4%.The MSCI Asia Pacific Index rose 0.1%.The MSCI Emerging Market Index was little changed.CurrenciesThe Bloomberg Dollar Spot Index fell 0.1%.The euro fell 0.1% to $1.215.The British pound rose 0.4% to $1.4114.The Japanese yen fell 0.2% to 105.27 per dollar.BondsThe yield on 10-year Treasuries was little changed at 1.36%.Germany’s 10-year yield jumped two basis points to -0.32%.Britain’s 10-year yield rose four basis points to 0.72%.CommoditiesWest Texas Intermediate crude rose 0.5% to $62.03 a barrel.Gold fell 0.2% to $1,805.81 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.
(Bloomberg) -- HSBC Holdings Plc will shift billions of dollars of investment to Asia’s faster growing economies as it looks to become the go-to bank for the region’s wealthy.The London-based bank said it would divert capital from its investment bank in Europe and the U.S. to fund the expansion of its Asian businesses. Europe’s largest lender said it would spend more than $6 billion over the next five years to expand its Asian operations, in particular its wealth management arm.“We are going to stop trying to be everything to everyone,” said Chief Executive Officer Noel Quinn, speaking on a call with analysts. “The new story here is Asia wealth.”The bank said it expected Asia’s share of group capital to rise from about 42% to more than half the total within the next years, a move that is likely to be accompanied by the relocation of several of the company’s top executives from London to Hong Kong.“It’s logical to have more of the management team down there,” Chief Financial Officer Ewen Stevenson said in an interview with Bloomberg Television. “Fifty percent of our revenues, and the bulk of our profits, now come from Asia and certainly the thrust of our growth aspirations are in Asia.”While earnings beat consensus forecasts, adjusted pretax profit halved, the bank said. Despite the profit slump, HSBC said it would resume paying a dividend of $0.15 after British regulators relaxed a ban intended to preserve capital last year after the virus outbreak.The bank also said it was looking to reduce its “office footprint” by 40% over the next years as more of its staff move to hybrid working arrangements pioneereed during the pandemic.The bank said it was largely sticking to cost cutting plans that will reduce its workforce by about 35,000. HSBC said it shrank staff numbers by 11,000 in 2020 and that more shrinkage was inevitable.Analysts at Jefferies said the strategy looked “a bit dull in our view” and pointed to the lack of anything “concrete” in terms of the future of its retail businesses in France and the U.S.Shares were down 2% at 12:26 p.m. in London. Shares in HSBC had risen as much as 6% in Hong Kong on the back of the announcement before paring gains.The bank’s planned Asian investments include $3.5 billion earmarked for its wealth business, which is expected to hire more than 5,000 new wealth planners over the next three to five years. The investment comes at the expense of HSBC’s global banking and markets division, which houses its investment banking operations.Volatility in the markets brought on by the pandemic saw revenue from fixed income trading rise 33% over 2020 to $6.3 billion. But a 2% rise at the equities unit fell well short of its Wall Street rivals, and advisory fees fell 2% to $3.8 billion“We are essentially reducing the amount of capital we have invested in our global banking and markets business globally and reinvesting that capital into wealth and commercial banking,” said Quinn, speaking in a telephone interview with Bloomberg.“Much of our global banking and markets business in the U.S. and Europe were low-return businesses, so you could assume that that capital is coming out of global banking and markets, principally Continental Europe and the U.S., in order to fund the investment in capital we are making into wealth and commercial banking, primarily in Asia, but also in the Middle East.”The bank hopes commercial banking and markets will drive “double-digit growth in profit.” It singled out markets in southeast Asia such as Singapore, as well as China and Hong Kong.China’s crackdown on Hong Kong has increasingly forced HSBC to accept criticism from the U.S. and U.K. as a cost of doing business in the region. Quinn was summoned to testify to British lawmakers this month over the lender’s decision to close the accounts of an exiled Hong Kong democracy activist.Expected credit losses last year hit $8.8 billion, as expected at the low end of a previously announced range of $8 billion to $13 billion. HSBC expects them to be materially lower this year.The bank is targeting getting its cost base down to $31 billion or less in 2022 as well as a $100 billion reduction in gross risk-weighted assets. It doesn’t expect to reach a return on average tangible equity target of between 10% and 12% in 2022, but will now target a return of 10% or above in the medium term.What Bloomberg Intelligence Says:HSBC’s updated guidance, with a more ambitious, $5-5.5 billion cost-savings target combined with robust across-the-board 4Q results are signs the lender has turned the corner, paving the way for what could be a number of significant analyst upgrades, even after its shares’ 50% rally from 2020’s lows.Jonathan Tyce, BI financials analystThe bank divulged little news on its plans for Europe and the U.S.HSBC said it’s in talks on selling its French retail bank and is likely to post a loss on any divestment. It’s exploring “strategic options” for its U.S. retail franchise and wants to focus on high-net worth clients.HSBC has one of the largest U.S. businesses of any non-American bank, partly a result of its ill-fated acquisition of Household International in 2003, the subprime lender that ended up costing the company billions of dollars in writedowns. Quinn said the U.S. retail bank “could be attractive to buyers.”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.