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Investing.com - Shares of athleticwear giant Nike (NYSE:NKE) rose in midday trading, setting an all-time high thanks to an upgrade from Bank of America Merrill Lynch (NYSE:BAC) that said the company can move past the troubles it’s faced for three years.
BofA's (BAC) Q3 earnings are expected to reflect disappointing trading activities, lower interest rates, weak lending scenario and muted investment banking performance.
Wall Street was set to fall for the first time in four sessions on Monday on signs there was more hard work to be done before a partial trade deal with China announced by President Donald Trump on Friday could be sealed. The S&P 500 and Dow Jones indexes ended Friday with their first weekly gain in a month after the U.S. President announced an accord he said would see both sides ease the tit-for-tat measures that have hammered global growth this year.
The coming week’s docket of economic reports and earnings releases comes just following the Trump administration’s announcement of a partial trade deal with China late last week.
Earnings season kicks off next week with the big banks reporting first. Analysts say the key for earnings at the large financial institutions will be expense control.
On Thursday, Barclays CEO Jes Staley called pressure on the stock “deeply frustrating,” citing three causes for its poor performance: Brexit, low interest rates, and lingering regulatory measures that stemmed from the financial crisis.
(Bloomberg Opinion) -- Strategists at Bank of America Corp. published a report on Friday that said “the Fed needs a bazooka of asset purchases.” However, they said, that’s unlikely to happen, and the central bank will probably buy only $25 billion to $50 billion a month in Treasury bills, “to guard against the perception of QE.”Well, the Federal Reserve brought the heavy artillery.The bank announced on Friday that it will begin purchasing $60 billion of bills a month, starting Oct. 15, to keep control over short-term interest-rate markets. It will keep doing so “at least into the second quarter of next year,” which gives officials some flexibility to change the pace and length of purchases. On top of that, the Fed will continue to conduct overnight and term repo operations until at least January, presumably to ensure there are no serious flare-ups in short-term interest rates around the end of the year.A few things stand out about this announcement. First is the timing. Presenting the Fed’s plan now, rather than as part of its Oct. 30 interest-rate decision, is a transparent effort to emphasize that the bill purchases are not about easing monetary policy but rather a more mechanical process of adding reserves. Indeed, the central bank noted in its statement that “these actions are purely technical measures” and “purchases of Treasury bills likely will have little if any impact on the level of longer-term interest rates and broader financial conditions.”In other words, it’s not QE. (Which is still true, by the way.)At the same time, the magnitude of the purchases seems destined to complicate the message for Fed Chair Jerome Powell and other policy makers. Yes, the $60 billion a month is probably rooted in some analysis of what needed to, as the statement says, “ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities.” But the figure is nonetheless a bit of sticker shock to traders who just three months ago were dealing with a period of balance-sheet reduction.Since the Fed announced it would stop balance-sheet normalization, it has cut interest rates twice, and the bond market is indicating it could do so again later this month. Basically, the end of the runoff ushered in a wave of rate cuts. Now the central bank is actively buying bills. Even though it’s technical in nature, it’s going to be a continuing battle to convince traders that the fed funds rate could hold steady in the next several months if the economic data come in as expected.It’s true, as Bank of America notes, that the Fed has already added about $180 billion in reserves through repo operations. But revealing outright Treasury purchases nevertheless signals that the central bank overestimated how far it could reduce its balance sheet without straining implementation of its monetary policy. Bank of America, in its “bazooka” comment, said the Fed could consider adding firepower by buying short-term Treasury notes as well, but the central bank stopped short of that. For almost two years, the Fed was allowing some of its maturing debt to run off, in what former Chair Janet Yellen once equated to “watching paint dry.” That gradual approach worked when reserves were on their way down. On the way up, we have what Bloomberg Intelligence’s Ira Jersey calls a “big bang.” If there’s one thing made clear by this announcement, it’s that the Fed is ready and willing to pull out all the stops to tame the short-term rate markets after their tantrum last month.To contact the author of this story: Brian Chappatta at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- After spending almost the whole year betting Brexit woes would weaken the pound, traders are now on red alert as the potential for a divorce deal sends sterling flying higher.The U.K. currency jumped the most over two days since 2009 after Thursday’s positive meeting between Prime Minister Boris Johnson and Ireland’s Premier Leo Varadkar. That was followed by further supportive comments, before a recommendation that Britain and the European Union enter into line-by-line negotiations on a Brexit accord.Markets are taking these developments to be a game-changer. One-month options have never shown a stronger bias in favor of contracts to buy the pound, based on Bloomberg data going back to 2003. U.K. bank stocks surged along with domestically focused equities and government bonds sank for a third day.The “pivotal moment” of a meeting between the British and Irish leaders was enough to convince strategists at Deutsche Bank AG to terminate a recommendation to sell sterling. Further progress on talks before the end of the month would risk greater pain for traders betting against the currency, and also spell danger for holders of U.K. government bonds and FTSE 100 stocks.“We cannot recall a time during the Brexit process of the last year at which the Irish government raised expectations to this extent,” wrote Oliver Harvey and George Saravelos, strategists at Deutsche Bank, who forecast correctly in 2015 that the pound would drop to its weakest level since 1985 in the following years. “We are no longer negative on the pound.”The pound stormed higher after Varadkar and Johnson said Thursday they could see a pathway to a deal before the Brexit deadline of Oct. 31. While much uncertainty still remains, if Ireland -- one of the most important protagonists in talks -- sees a way forward, that could at the least help avoid a crash exit, the worst-case outcome for the U.K. economy and the pound.European Council President Donald Tusk said Friday he has received “promising signals” that a Brexit deal is possible. A meeting between the European Commission’s chief negotiator Michel Barnier and his British counterpart Stephen Barclay was also described by both sides as being “constructive.” Barnier recommended that detailed talks can begin in earnest.Risk reversals, a barometer of market sentiment and positioning, surged for options that benefit from a stronger sterling. And demand for pound calls, which give the right to buy the currency, outweighs that for puts at a 2:1 ratio since the Johnson-Varadkar meeting, according to data from the Depository Trust & Clearing Corporation.It’s potentially bad news for hedge funds and asset managers, which were structurally short the U.K. currency, holding a net position close to record highs, according to U.S. Commodity Futures Trading Commission data.The pound gained 1.9% to $1.2678 by 3:00 p.m. in London Friday, following a 1.9% jump on Thursday. U.K. government bonds fell, sending 10-year yields 11 basis points higher to 0.70% as a Brexit deal may bode well for the economy and inflation.The currency may rally even more should a lack of bad news between the negotiating parties begin to turn into materially good news, according to Nomura International Plc strategist Jordan Rochester. The bank is recommending investors short the euro versus sterling. The pound jumped 1.4% to 87.20 pence per euro, reaching its strongest level since May.The U.K.’s FTSE 100 index rose 0.5%, but underperformed a rally of nearly 2% for the STOXX Europe 600 Index as a stronger pound may dent earnings from abroad. Both Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc climbed more than 12%, rallying with homebuilders, domestically focused stocks on the FTSE 250 index, and Irish equities.Shorts WhackedInvestors remain more cautious on sterling’s longer-term prospects. A September fund manager survey from Bank of America showed the U.K. has been the least favored region by investors in terms of equity allocation globally. Thirty percent of fund managers said they were underweight U.K. stocks.While demand for options that look for a weaker pound has waned, the market is still biased in favor of downside protection. That may partly reflect the dollar’s allure amid global growth concerns and trade jitters. A further improvement in market sentiment could come from trade talks between the U.S. and China, and that in turn may see bets on a stronger pound gain additional traction.“Momentum feeds momentum in sterling,” said Lars Merklin, a strategist at Danske Bank A/S. “Without more details it is impossible to say this time is the big one where a deal gets done.”(Updates with Bank of America survey, Danske comment.)\--With assistance from Blaise Robinson.To contact the reporters on this story: Vassilis Karamanis in Athens at firstname.lastname@example.org;John Ainger in London at email@example.comTo contact the editors responsible for this story: Paul Dobson at firstname.lastname@example.org, Neil ChatterjeeFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
In 2011, Warren Buffett invested $5 billion in Bank of America (BAC). BAC is now Berkshire Hathaway's second-largest holding and is worth about $27 billion.
(Bloomberg) -- As global tensions escalate and signs of a slowdown mount, more investors are turning to gold. Worldwide holdings in bullion-backed exchange-traded funds have expanded for 17 days in a row, the longest run of inflows since 2009.The total stash now stands less than 35 tons away from a record set in 2012, according to the latest tally by Bloomberg. The consistent influx has come even as prices struggled to extend gains above $1,500 an ounce in recent weeks.Bullion has climbed 18% in 2019 as the U.S.-China trade war hurts global growth and central banks loosen policy. The rise in ETF holdings comes as investors fret that high-level talks between Washington and Beijing set for later this week are unlikely to yield a breakthrough. In addition, Federal Reserve Chairman Jerome Powell hinted on Tuesday at the possibility of another interest-rate cut.“Gold inflows are likely to persist,” Citigroup Inc. said in a note, sticking with its forecast for a rally to $1,700 an ounce over six to 12 months. “Markedly weak manufacturing and services ISM data show that the slowdown in global trade is starting to bite the U.S. economy.”Gold futures, a traditional haven and beneficiary when investors shun risk, advanced on Wednesday ahead of the trade talks and as markets awaited minutes from the Fed’s September meeting. Prices pared gains before bouncing off the day’s lows as investors weighed whether news that China is said to be open to agreeing to a partial trade deal would be enough to damp the precious metal’s haven appeal.Read more: China Open to Partial U.S. Trade Deal Despite Tech Blacklist“Over the last few days, it’s been fairly noisy as far as trade headlines,” Ryan McKay, a strategist at TD Securities in Toronto, said by phone. “I don’t think the gold market’s ready to jump on one headline more than another, so at this point it’s fairly choppy on either side of $1,500 here until we get something more concrete from the meeting here at the end of this week.”The series of warnings this week about risks encompasses the trade standoff and other long-running frictions. Societe Generale SA Chairman Lorenzo Bini Smaghi said a hard Brexit could plunge the world into recession and would be a disaster for the financial system. Kristalina Georgieva -- in her first major address as head of the International Monetary Fund -- warned the global economy is now looking at a “synchronized slowdown.”“Gold obviously stands to benefit” if China and the U.S. can’t reach a mini deal this week, Adarsh Sinha, co-head of Asia FX and rates strategy at Bank of America Merrill Lynch, told Bloomberg TV Wednesday.Gold futures for December delivery rose 0.6% to settle at $1,512.80 an ounce at 1:30 p.m. on the Comex in New York. Silver also gained, while on the New York Mercantile Exchange, platinum and palladium advanced. The Bloomberg Dollar Spot Index was little changed.\--With assistance from Elena Mazneva and Justina Vasquez.To contact the reporter on this story: Ranjeetha Pakiam in Singapore at email@example.comTo contact the editors responsible for this story: Luzi Ann Javier at firstname.lastname@example.org, Jake Lloyd-Smith, Joe RichterFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Benchmarks closed in the negative territory on Tuesday as U.S. blacklisted 28 Chinese companies and imposed visa restrictions on Chinese officials, dampening hopes on trade negotiations.
Exxon Mobil Corp has appointed Bank of America Merrill Lynch to run the sale of its Malaysian oil and gas assets as the U.S. firm accelerates a vast disposal program, banking and industry sources said. The Malaysian assets, which include stakes in two large fields, are expected to fetch up to $3 billion, the sources said.
As previously announced, Bank of America will report its third-quarter 2019 financial results on Wednesday, October 16. The results will be released at approximately 6:45 a.m. ET, followed by an investor presentation at 8:30 a.m.
(Bloomberg) -- For Indian equity investors looking for an uptick in earnings growth, the wait has got longer.A slowdown in domestic growth and the lingering shadow banking crisis mean the September-quarter results season that kicks off Thursday will be similar to one seen over several quarters in recent years -- tepid and patchy.Analysts expect to see a contraction in profits across most industries, with Edelweiss Securities Ltd. forecasting sales growth for the stocks it tracks to be the lowest in a decade. The series of steps taken by the government to revive growth, including the $20 billion tax cut for companies, are too recent to reflect in the quarterly report cards, although analysts have since raised their estimates for 12-month forward earnings.“Overall, we expect a soft quarter and earnings revival could still take some time,” Edelweiss Securities Ltd. analysts Prateek Parekh and Padmavati Udecha wrote in a note on Oct. 7. The brokerage’s forecast for sales growth excludes banks and commodities-related companies.NSE Nifty 50 Index earnings for the year to March will shrink by about 4% from a year earlier, according to Edelweiss and Motilal Oswal Securities Ltd.Software exporters and industrial companies’ earnings growth likely fell below 5%, retail banks, oil refiners and consumer discretionary firms may post profit expansion topping 25%, Edelweiss’ Parekh and Udecha wrote.Earnings risks continue to be tilted to the downside because of the slowing economy, uneven asset quality patterns seen in financial-services companies and depressed commodity prices, according to Motilal Oswal.“At this point, tax rate cuts will largely limit the downgrades rather than driving big upgrades on the earnings front,” the brokerage said in a recent note.Here’s what brokerages expect from the earnings season that gets underway Thursday with results from Asia’s top software exporter Tata Consultancy Services Ltd.Kotak Institutional EquitiesWhile Nifty index’s pre-tax earnings are seen declining, banks led by Axis Bank Ltd., ICICI Bank Ltd. and State Bank of India Ltd. should post 34% growth, analysts led by Sanjeev Prasad wrote in Oct. 7 note.Pharmaceuticals are a top pick as the domestic drug business could see 10-12% growth from a year earlier.Motilal OswalProfit before tax for the firm's universe to grow 2% year-on-year but net profit to drop 6%, dragged by automobiles and metals. Ex-financials, PBT/PAT to decline 14% and 8% YoY.Private banks, consumer, cement and capital goods will provide some respite.Top picks: SBI, ICICI, HDFC among large-cap stocks; mid-cap bets include Indian Hotels, M&M Financials, Colgate and AlkemCitigroup Inc.Expects 3% decline in profit before tax for Nifty index; profit before tax ex-financials is expected to decline 12%Expects weak trends across consumer names, commodities, financials and pharmaceuticalsTop picks: Dr Reddy’s Laboratories Ltd., HDFC Ltd. and HCL Technologies Ltd.Bank of America Merrill LynchEconomic growth spurred by tax cuts is a ‘second order effect’ and may take time.Nifty’s EPS up by about 7% because of tax cuts but difficult to justify upside to the index based on ‘first order effect’ of the reduction.Prefer financials, industrials, cement; overweight software exporters as a hedge against currency risks.Antique Stock BrokingPoor consumer demand and narrower margins for commodities-related companies will weigh on Nifty profits. Antique will revise its 13,100 year-end target after the results season. The index was little changed at 11,135.85 at 11 a.m. in Mumbai.Margins for steelmakers to narrow sequentially due to weak demand, while upstream oil players’ profitability will be eroded by lower oil prices.(Adds section on analyst comments)\--With assistance from Ravil Shirodkar and Nupur Acharya.To contact the reporters on this story: Ishika Mookerjee in Singapore at email@example.com;Abhishek Vishnoi in Singapore at firstname.lastname@example.orgTo contact the editors responsible for this story: Lianting Tu at email@example.com, Margo Towie, Ravil ShirodkarFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Bank of America Corporation today announced the Board of Directors has authorized regular cash dividends on the outstanding shares or depositary shares of the following series of p
(Bloomberg Opinion) -- HSBC Holdings Plc’s interim Chief Executive Officer Noel Quinn is considering going much further than his former boss in cutting fat at the bank. He may triple job reductions announced just two months ago to as much as 6% of the workforce.Sure enough, Quinn may be trying to impress the board and investors to secure the No. 1 position at HSBC on a permanent basis. But his rivals at other financial firms could follow in his footsteps: Fresh revenue pressure and a lingering problem with costs at European banks don’t give many alternatives.HSBC is reportedly questioning why it has so many people in Europe, while it has double-digit returns in parts of Asia, the Financial Times has reported. London-based HSBC may target highly-paid bankers in the latest round of reductions and asset sales that could affect 10,000 roles.It isn’t hard to see why HSBC, Europe’s biggest bank, wants to tighten expenses. The London-based lender, which generated 80% of pretax profit in Asia in the first half, has made China a focus for growth. But the bank’s expansion there is now threatened by the economic slowdown stemming from the China-U.S. trade spat. The deepening unrest in Hong Kong, where it is the biggest bank, will compound the hit to growth.Cutting back in Europe and the Americas, where analysts at Citigroup Inc. say HSBC has a structural profitability problem, seem the right thing to do – just over 30% of its full-time employees are in Europe and North America.But HSBC is not alone in facing challenges in Europe that will give lenders little choice but to accelerate and deepen cost cuts. The 60,000 jobs that have already been earmarked for the chop this year, mostly by European banks, are probably just a taste of things to come. Too many lenders are still far too inefficient.The top 20 European banks have done little to improve their cost-income ratios, which remained largely flat around the 68% to 70% level between 2016 and 2018, according to a Moody’s report from earlier this month. By contrast, their U.S. peers have improved efficiency considerably, lowering their ratios to closer to 62% from about the same starting point in 2014. As a result, Moody’s says banks in Germany, France, Italy and the U.K. lag those in the U.S. in a measure of operating profitability. Those in Germany, the most inefficient EU market, had the lowest score among institutions in the European Union .Even before the European Central Bank’s latest interest rate reduction, the average return on equity was about 6% across the industry, well below the cost of equity, estimated at 8% to 10%, according to Moody’s.It’s no surprise then that the mood at a recent banking conference was so subdued. Analysts at Bank of America Corp., which hosted 50 lenders and investors from Europe, the Middle East and Africa at the end of September, concluded that the outlook for revenue has declined “materially” with little scope for new loan demand. About one-fifth of the event’s participants said there’s nowhere for financial services firm to hide.While some are starting to pass the cost of negative rates on to individuals further down the wealth rankings, large charges to retail clients don’t appear to be on the cards just yet. The potential damage to their franchises is too much of an unknown quantity.The Bank of America analysts concluded that more cost cuts are on the way, though probably not till banks report full-year earnings. Competition in trading and lower rates will continue to hurt French banks, so much so that they said some conference participants expected “major cost saving plans.” UniCredit SpA in Italy is considering as much as 10,000 cuts, while in Germany Deutsche Bank AG and Commerzbank AG have both embarked on fresh plans.Analysts estimate that 2020 earnings per share (excluding one-time charges) should improve by 5.2% on a 1.5% increase in net revenue, according to data compiled by Bloomberg Intelligence. Both of those will probably come down.In signaling now that more pain is needed, HSBC’s Quinn may have shown his mettle, and he’s certainly upping the pressure on rivals.To contact the author of this story: Elisa Martinuzzi at firstname.lastname@example.orgTo contact the editor responsible for this story: Melissa Pozsgay at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
On October 1, Credit Suisse's Suresh Tantia told CNBC that the equity market will rebound from the current levels. However, the S&P; 500 declined by 1.2%
(Bloomberg) -- The Federal Reserve announced that it will extend through October the ad hoc liquidity lifeline that it’s been offering to U.S. funding markets since a spike in rates in the middle of last month.The Federal Reserve Bank of New York said Friday that it will conduct operations for overnight repurchase agreements through Nov. 4, having previously only scheduled them through Oct. 10. The central bank also announced eight new term offerings to provide additional funding through this month.The central bank has been injecting liquidity into the funding markets since Sept. 17, when the rate on overnight general collateral repo jumped to 10%, about four times greater than usual levels, as cash reserves were out of alignment with the volume of securities on dealer balance sheets.“This tells me that they’re serious about providing liquidity through the end of the month,” said Mark Cabana, Bank of America‘s head of U.S. interest-rate strategy. “This type of announcement, just like a couple of weeks ago, is a ‘whatever it takes’ type of announcement.”These measures are officially aimed at keeping the fed funds rate within the central bank’s target range. While those measures did bring the market more in line with this, there was a brief move upward in repo rates at the end of September as participants fulfilled quarter-end funding needs.Prior to Friday’s announcement, some market observers had also flagged the potential for further repo-market squalls in the fourth quarter -- possibly as soon as next week.Bank of America’s Cabana said the measures announced by the central bank had exceeded his expectations.“The fact that they are willing to roll this deeper into November and to commit for such a long schedule suggests that they want to provide transparency,” he said. “They’ve heard that from the market and the Desk is being responsive to concerns.”(Updates with comment, additional details.)To contact the reporter on this story: Alexandra Harris in New York at firstname.lastname@example.orgTo contact the editor responsible for this story: Benjamin Purvis at email@example.comFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The Zacks Analyst Blog Highlights: Bank of America, Home Depot, Philip Morris, NextEra and Eli Lilly