29.85 +0.03 (0.10%)
Pre-market: 8:42AM EDT
|Bid||29.82 x 2200|
|Ask||29.89 x 4000|
|Day's range||29.75 - 30.10|
|52-week range||22.66 - 31.37|
|Beta (3Y monthly)||1.64|
|PE ratio (TTM)||10.61|
|Earnings date||16 Oct 2019|
|Forward dividend & yield||0.72 (2.40%)|
|1y target est||33.19|
(Bloomberg) -- Signs that stress in U.S. funding markets is rebuilding ramped up pressure on the Federal Reserve to permanently increase reserves by boosting Treasury holdings, even as it was preparing a temporary liquidity injection for a fourth straight day.The New York Fed plans to do another $75 billion overnight repo operation on Friday. It follows liquidity doses of the same size Thursday and Wednesday, and $53.2 billion on Tuesday. The central bank is deploying this remedy for the first time in a decade.The Repo Market’s a Mess. (What’s the Repo Market?)This week’s actions have helped calm the funding market, with repo rates declining to more normal levels after soaring to 10% Tuesday, four times last week’s levels. However, swap spreads tumbled to record lows Thursday amid concern Fed policy makers haven’t announced more aggressive steps. Swaps are signaling less appetite for Treasuries, driven by concern traders won’t be able to fund purchases through the repo market.“The Fed needs to do at least double what they offered now and maybe even be more vigilant and do something even more significant,” said Thomas Simons, senior economist at Jefferies LLC. “This attitude of trying to kind-of fix the problem is not great.”There are others signs of investor apprehension about future funding levels, which is manifesting in different ways.Treasury bill sales on Thursday were met with a poor reception, as investors demanded to be compensated via higher yields for locking up cash. Meanwhile, in cross currency basis -- which show floating-rate payments in different currencies -- the premium for the Australian dollar over its U.S. counterpart collapsed by the most in eight years during Asian trading hours.So while overnight general collateral repurchase agreement rates have retreated, trading around 1.95% Friday, around Thursday’s levels, market participants say the Fed needs to reveal a permanent fix, rather than these ad-hoc overnight operations.“We expect these episodes of funding stresses to become more frequent with demand for funding and U.S. Treasury supply forecast to increase heading into year-end and the Fed’s reserve levels likely to drop further,” Jerome Schneider, head of short-term bond portfolios at Pacific Investment Management Co., wrote in a note Wednesday with his colleagues.The operations, once common before the 2008 financial crisis, temporarily add cash as the Fed takes government securities as collateral. Wall Street bond dealers submitted about $84 billion of securities for Thursday’s Fed action, the most in the three days.The latest addition of liquidity follows the Federal Open Market Committee’s move Wednesday to reduce the interest rate on excess reserves, or IOER, by more than their main interest rate, an attempt to quell money-market stresses.Given the added supply, banks’ holdings of Treasuries have risen and are increasingly being financed by money-market funds investing in repo, which leaves “U.S. funding markets more fragile,” Schneider wrote. He said this adds to other reasons why the Fed needs to do more to engineer a long-term fix.Cap BustedAfter policy makers wrapped up the two-day meeting Wednesday, Fed Chairman Jerome Powell said the central bank will keep doing these repo operations if that’s what it takes to get markets back on track. He spoke hours after the effective fed funds rate busted through the central bank’s cap.Powell also said the Fed would provide a sufficient supply of bank reserves so that frequent operations like the ones they’ve done this week aren’t required.The only way “to permanently alleviate the funding stress is to rebuild the buffer of reserves in the system,“ according to Morgan Stanley strategist Matthew Hornbach.Relying on repo operations doesn’t resolve the issue of reserves declining as the Treasury rebuilds balances, Hornbach wrote in a note. Having regular operations will also increase market uncertainty as the Fed could halt purchases at any time, while the size of its buying will have to expand over time as reserves drop, he said.“It is certainly possible that we’ll need to resume the organic growth of the balance sheet sooner than we thought,” Powell said, referring to the central bank potentially buying securities again to permanently increase reserves and ensure liquidity in the banking sector.Read: Fed Should Be Worried About ‘Collateral Damage,’ BofA SaysMany strategists had predicted the Fed would take even more aggressive measures to reduce the pressures. One idea that’s gotten a fair amount of attention is something called a standing fixed-rate repo facility -- a permanent way to ease funding pressures. Many analysts even predicted a Wednesday announcement that the Fed would start expanding its balance sheet.That didn’t happen. However, with the Fed apparently ready to keep injecting liquidity whenever it’s needed, “it’s enough for now,” said Jon Hill of BMO Capital Markets.“This week’s dramatic moves in the short-term funding markets serve as a case in point for the need to carefully consider liquidity in the financial system,” Rick Rieder, global chief investment officer of fixed income at BlackRock Inc., wrote in a note.“All of this funding market gyration points to the increasingly obvious fact that the end of Fed reserve draining is insufficient to stabilize these markets,” he said.(Updates with Friday repo levels.)\--With assistance from Edward Bolingbroke and Stephen Spratt.To contact the reporters on this story: Liz Capo McCormick in New York at email@example.com;Alexandra Harris in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Benjamin Purvis at email@example.com, Nick Baker, Mark TannenbaumFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Tottenham Hotspur Football Club has completed a 637 million pound ($798.67 million) stadium refinancing package that included a bond issue to U.S. investors and a term loan, the company said in a statement. The English football club said on Friday it has raised 525 million pounds from issue of long-term bonds to U.S. investors through a private placement, and another 112 million pounds from a loan from Bank of America Merrill Lynch, who also managed the bond issue. The company was originally targeting to raise 400 million pounds from the bond issue, a source told Reuters last month.
The Fed seeks to remain focused on analyzing incoming economic data to determine future moves. Heathy domestic economy and several streamlining efforts are likely continue supporting bank stocks.
Bank of America today announced findings from its annual 2019 Workplace Benefits Report, which reveals that more than twice as many companies are offering workplace financial wellness programs to employees today compared to four years ago (53 percent today versus 24 percent in 2015). Now in its ninth edition, this report tracks the importance of benefit programs and uncovers an expanded set of opportunities for employers to improve their employees’ financial wellness. Majority of employees feel financially well: 55 percent of employees today rate their own financial wellness as good or excellent, down from 61 percent a year ago.
As part of its 2019 capital plan, JPMorgan (JPM) announces a 12.5% dividend hike. One should take a look at its fundamentals and prospects before taking any investment decision.
LONDON--(BUSINESSWIRE)-- Company Bank of America Corporation TIDM BAC Headline Notification of Filing of Documents NOTIFICATION OF FILING OF DOCUMENT A copy of the document described ...
(Bloomberg Opinion) -- There’s still plenty of time for things to go off the rails, but 2019 is shaping up to be one of those rare years when the global stock, bond, commodities and foreign-exchange markets are all poised to deliver positive returns. The last time that happened was in 2010. Investors say three things would keep the good times rolling; unfortunately, two of those items are unlikely to happen, starting with the Federal Reserve’s monetary policy decision on Wednesday.The latest monthly survey of global fund managers by Bank of America Merrill Lynch found that German fiscal stimulus, a 50-basis-point rate cut by the Fed and Chinese infrastructure spending would be the most bullish policies for risk assets over the next six months. But the famously austere Germans look hesitant to fend off a slowdown in Europe’s largest economy just by spending. Finance Minister Olaf Scholz said last week that Germany would stick to a balanced budget, but was ready to act in moments of crisis. As for the Fed, the odds that policy makers on Wednesday will announce a half-point cut in their target rate for overnight loans between banks instead of a quarter-point reduction has shrunk to less than 15% from more than 40% last month. This follows a string of data showing that, thanks to the consumer, the U.S. economy is holding up pretty well amidst the ongoing trade war with China. There are even some economists and strategists, such as those at Brown Brothers Harriman, who say the Fed maybe doesn’t need to lower rates at all this time. The most likely scenario is that the central bank will ease monetary policy on Wednesday, while saying any further loosening will depend on the data, which is something that isn’t exactly priced into markets. “There is a risk that absent a strong signal that the Fed is clearly at the beginning of a sustained easing cycle, we could see some disappointment,” BNY Mellon strategist John Velis wrote in a research note Tuesday.So if the Germans and the Fed disappoint, that leaves the heavy lifting to China. Here, though, there is some good news. Bloomberg News reported last month that China is considering allowing provincial governments to issue more bonds for infrastructure investment. Policy makers may raise the annual quota for so-called special bonds from the current level of 2.15 trillion yuan ($305 billion), Bloomberg News reported, citing people familiar with the situation who asked not to be named as the matter wasn’t yet public.OIL MARKETS HAVE A DEEP THROATOne day after soaring almost 15% following an attack that wiped out about half of Saudi Arabia’s output capacity, oil plunged as much as 7% as Reuters reported the kingdom’s output will be fully back on line in the next two to three weeks, which is much sooner than the months some expected it would take. No matter that Reuters cited one unidentified Saudi source who was briefed on the timeline – traders wanted to believe. It helped that Saudi officials later confirmed that at least one of the damaged facilities will be back to producing oil at pre-attack levels by the end of the month. However, oil traders might be wise to be a bit more skeptical. It’s not crazy to think that Saudi officials would want to downplay the success of the strikes at a time when its military is getting a lot of criticism for not detecting and stopping whatever it was that crippled the facilities. “We flip from worst case scenario to best case scenario in less than 24 hours,” John Kilduff, a partner at Again Capital LLC, told Bloomberg News. “We still need damage assessments and what it takes for those repairs.”CAN’T SPELL FUNDING WITHOUT ‘FUN’The repurchase, or repo, market went haywire for a second straight day on Tuesday, forcing the Fed to inject billions of dollars of cash into the system for the first time in a decade to temper a surge in short-term rates. All of this sounds concerning, especially since the financial crisis was partly exacerbated by a seizing up of the funding market. But that’s not what’s happening here. Market participants say the spike in short-term rates is a result mainly of a confluence of technical events, including the sudden withdrawal of cash from money-market funds by companies needing to pay taxes. But there are still reasons to be concerned. The first is that this all comes with the new York Fed still without a formal head of its markets group following the abrupt departure of the widely respected Simon Potter earlier this year. The implication is that if Potter were still around, traders at the central bank might have been better prepared to handle any unforeseen stresses in funding markets. The second reason for concern is that the move in the repo market has definitely had some knock-on effects, especially in overnight bank funding costs. Those reached 45 basis points Monday before easing to 41.9 basis points Tuesday, levels that are more in line with times of broad market turbulence. Bank earnings are already under pressure from a flat yield curve, and this spike in funding cost won’t help, which may explain why the KBW Bank Index fell the most in more than two weeks on Tuesday.SHAKING THE BEARS OUTTo say it hasn’t been a good month for the U.S. Treasury market would be an understatement. The Bloomberg Barclays U.S. Treasury Index was down 1.96% in September through Monday, putting the benchmark on track for its worst monthly performance since it dropped 2.67% in November 2016 following President Donald Trump’s election victory. The swift decline has many wondering whether the bond market is at the beginning of a sustained turn for the worse. The evidence, though, suggests the move has been more about positioning than anything fundamental. That is seen in the Bank of America survey. For the second straight month, it found that being “long” Treasuries was the most crowded trade in global markets, followed by being “long” technology and growth stocks and being “long” gold. So, with so many investors and traders leaning one way, it doesn’t take much for a move in the opposite direction to force traders to rebalance. On the positive side, JPMorgan Chase & Co.’s widely followed weekly survey of bond traders released on Tuesday suggested that the sell-off may be ending. Its index tracking clients who are “short” is back near its lowest level since 2016, suggesting all those who want to bet against the bond market have already done so.EARNINGS DON’T MATTERThe latest Bloomberg News survey of where Wall Street strategists expect the S&P 500 to end the year came out on Tuesday, and the results confirm just how reliant equities are on low interest rates. It’s not so much that strategists see the S&P 500 ending the year at 3,000, or little changed from current levels; it’s that they expect equities to be resilient in the face of ever lower profit forecasts. They now forecast 2019 earnings per share of $166.35 for the gauge, down from their estimate of $172.25 at the start of the year. Also back then, the strategists we’re only expecting the S&P 500 to end the year at 2,913. So they’ve raised their forecasts for how high the index will go while also cutting their earnings estimates. That may seem counter-intuitive, until you consider that simple discounted cash-flow analysis shows how lower rates make future earnings more valuable now, justifying higher multiples for equities even without profit growth. So, logic would dictate that the lower rates go, the better for equities. This makes Wednesday’s Fed meeting all the more important for equities, especially with the S&P 500 trading at about 18.2 times this year’s expected earnings, which is the highest since January 2018.TEA LEAVESA big drop in mortgage rates is giving new life to the U.S. housing market despite a slowing economy. The National Association of Home Builders/Wells Fargo Housing Market Index released on Tuesday increased to 68 in September from an upwardly revised 67 in August. The current level is at an 11-month high. Also on Tuesday, the Mortgage Bankers Association said its data show that mortgage applications for new home purchases increased 33% in August from a year earlier. Both reports are good omens for Wednesday’s government report on housing starts and permits. The median estimate of economists surveyed by Bloomberg is for starts to have rebounded 5% in August after falling 4% in July. Permits are seen declining 1.3%, but that shouldn’t be worrisome after July’s outsized 6.9% gain, which was the biggest since 2017.DON’T MISS Chaotic Funding Market Fell Asleep at the Wheel: Brian ChappattaStock Pickers Are Just Imagining an Index Bubble: Nir KaissarConflicted Dealers Shouldn't Advise the Treasury: James BiancoDraghi Lets Lagarde Pick Up the Pieces: Ferdinando GiuglianoEmpty Hair Salons Can't Be Saved by a Central Bank: Daniel MossTo contact the author of this story: Robert Burgess at firstname.lastname@example.orgTo contact the editor responsible for this story: Beth Williams at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Robert Burgess is an editor for Bloomberg Opinion. He is the former global executive editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Many of JPMorgan Chase & Co.’s clients are worried that the rise in bond yields threatens the stock market rally. For the broker and a number of major fund managers it’s actually a blessing.This month’s retreat in fixed income has fueled concerns about the possible risk to the equity bull run. Yet, so far, the stock market has defied the doomsayers, and the reason behind the jump in yields -- improved economic optimism -- has reassured the likes of Eaton Vance Management and Fidelity International that the rally can continue.The flight from havens and crowded bond proxies has triggered a switch into equity sectors that are more sensitive to the economy. The broadening of the gains to include value and cyclical stocks will support the rally, said JPMorgan in a note to clients. In the past decade, equities rose every time bond yields spiked by at least 50 basis points, climbing by 6% on average, it said.The cause for the shift in sentiment is key to understanding the equity market’s nonchalant attitude toward the bond market sell-off. The rise in yields happened amid optimism that the U.S.-China trade talks will continue, which is a positive signal for economic growth and as a consequence, for stocks.“Government bond yields offer less of a signal for equity investors than they have in the past,” said Eddie Perkin, chief equity investment officer at Eaton Vance Management. “If bond yields are rising due to optimism about the economy, that should be good for equities, especially since a lot of recession fears had recently been priced into the equity market.”If the yields continue to climb rapidly or the economic picture becomes overly rosy, fueling speculation about a halt to central bank rate cuts, things could “get scary” for stocks, according to Legal & General’s John Roe. But this appears unlikely, he said.Modest investor positioning in stocks also supports the bulls. Despite the MSCI World Index posting a 17% return in 2019, investors have pulled $198 billion from global stocks, while $342 billion surged into bonds as traders sought havens amid trade-war-related concerns.“Bond yields have moved too far year-to-date as we are not expecting a recession,” said Nick Peters, a multi-asset portfolio manager at Fidelity International, which oversees about $413 billion and favors equities. “As a result, we could see a sell-off in bonds without equities being impacted in the short term.”Stocks are traditionally sensitive to sharp moves in debt, with the latest example occurring last month, when the inversion of the yield curve fueled a retreat from riskier assets. But the correlation between bonds and equities remains “resolutely” negative and higher yields shouldn’t pose a problem to stocks, according to JPMorgan.“Higher yields usually go hand in hand with improving inflation and growth outlook,” said JPMorgan strategists led by Mislav Matejka. “This is usually a good combination for equities.”This creates an environment for an equity rotation away from more defensive bond proxies and in favor of more volatile shares that are sensitive to economic growth. Financial and energy sectors have roared ahead in September, leaving the likes of real estate, healthcare and utilities behind.The Bank of America Corp. survey published on Tuesday showed that fund managers don’t expect this outperformance to last, with just 7% of surveyed investors forecasting that value equities will beat growth stocks over the next 12 months.Eaton Vance, Wells Capital Management and GW&K Investment Management are among the funds that have picked up cyclical and value stocks this month. Just like bonds, growth and momentum stocks had gotten “too expensive” and this is a “healthy correction,” said Dan Miller, a director of equities at the $40-billion GW&K.“If we do see growth expectations improve a little and inflation expectations firm a little, that could lead to an environment where yields rise and equity markets still tread water or help us touch new highs,” said Brian Jacobsen, a multi-asset strategist at Wells Capital Management.(Updates with BofA fund manager survey in third-last paragraph.)To contact the reporter on this story: Ksenia Galouchko in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Blaise Robinson at email@example.com, Jon Menon, John ViljoenFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Seventy percent of mentored small businesses survive past the five-year mark—nearly twice the rate of non-mentored businesses . As part of a shared commitment to empower small businesses, Mastercard and Bank of America are announcing the third annual Grow Your Biz Contest, which calls on small business owners to pitch their business growth plans for the opportunity to win $25k and business consultation with industry experts . “We’re excited to partner with Mastercard for the third year of this contest and look forward to working with creative and passionate business owners from all over the country,” said Sharon Miller, head of Small Business, Bank of America.
(Bloomberg) -- Prosus NV, which listed in Amsterdam just last week, is splitting opinion among the first investment banks to cover the stock.While Jefferies rates the Naspers Ltd. tech-investments unit underperform, Bank of America Merrill Lynch recommends that investors buy the stock.Jefferies began coverage of Prosus, which owns a 31% stake in Chinese tech giant Tencent Holdings Ltd., with a price target of 61 euros, implying a downside of around 16% from current levels.Analyst Ken Rumph wrote in a note that there is “frustration” that while Naspers and Prosus have been good investors, there has been no return of any gains. While unattractive operations were spun off and the Dutch listing accessed more passive capital, the e-commerce disclosure remains “thin” for a public company, Rumph also said. He expects Prosus’s net asset value to be largely driven by Tencent.“After current index flows, we expect Prosus to trade back toward a wider discount as active investors realize they have an ambitious patient capital investor, not a value-maximizing wind-up on their hands,” he wrote in a note.Bank of America Merrill Lynch analyst Cesar Tiron is more optimistic, with his 97-euro price objective implying potential upside of 33%. Prosus offers exposure to “best-in-class” emerging-market internet assets, he wrote in a note.Cape Town-based Naspers carved out Prosus for a separate listing to attract a more global investor base and realize more value, while weakening the group’s dominance over the Johannesburg stock exchange.Prosus shares fell as much as 2.1% Monday and traded at 72.97 euros as of 12:47 p.m. Amsterdam time, with the retreat taking them 4% below their 76 euros debut level last Wednesday.Last week, Spin-Off Research began its coverage of Prosus with a buy rating and 99 euros price target.(Updates to add BofAML rating and analyst comments.)To contact the reporter on this story: Kit Rees in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Celeste Perri at email@example.com, John Viljoen, Paul JarvisFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- September is only halfway done and already the S&P 500 Index is up 20% for the year. This is a remarkable achievement, given that earnings growth has stalled and the bond market is pricing in almost a 40% chance of a recession over the next 12 months. That just shows the degree to which lower interest rates have supported stocks. And yet, as is often the case in life, too much of a good thing isn’t always, well, good.This year’s rally – during which the S&P 500’s forward price-to-earnings multiple expanded to 17.6 from 14.5 at the start of January – can be credited to the Federal Reserve’s dovish pivot, which led to the central bank’s first rate cut since 2008 and sparked big declines in market rates. The yield on the benchmark 10-year Treasury note dropped to as low as 1.43% earlier this month from 2.80% back in January.Simple discounted cash-flow analysis shows how lower rates make future earnings more valuable now, justifying higher multiples for equities even without profit growth. So, logic would dictate that the lower rates go, the better for equities. But the experience in Europe shows that there comes a point where ever lower rates begin to work against stocks.In a research note last week, the strategists at Bank of America pointed out how even though 10-year bond yields in Germany have fallen below zero, stocks there only trade at a multiple of about 14 times earnings. That’s little changed from mid-2014, when yields were around 1.25% and the European Central Bank cut its benchmark deposit rate to below zero. The same is true for the broader euro zone, with the Euro Stoxx 600 Index trading at 14.5 times projected earnings, not much different from mid-2014.Of course, the euro zone’s struggles are worse than the U.S. Still, the increasing globalization of the world economy means America is having a much harder time shrugging off the slowdown elsewhere. Morgan Stanley says the U.S.’s share of global gross domestic product has shrunk from 22% in 1990 to 15% today. That’s a big reason traders are pricing in at least three more Fed rate cuts over the next 12 months, bringing its target rate for overnight loans between banks to 1.50% from 2.25% currently.On top of that, the number of Wall Street strategists slashing their Treasury yield estimates has grown in recent weeks, citing the outlook for weaker global growth and inflation. UBS Group AG and BNP Paribas SA, which are among the select group of dealers authorized to trade with the Fed, both slashed their 10-year forecasts, predicting yields will drop to 1% by the end of 2019. Could yields go even lower, tracking those in Europe and Japan by following below zero? Former Fed Chairman Alan Greenspan doesn’t thing that’s a crazy idea, telling Bloomberg News last month that he wouldn’t be surprised if they turned negative.It’s true that the stock market posted a massive rally between early 2009 and mid-2015, rising as much as 215%, as the Fed kept rates near zero and pumped money directly into the financial system via quantitative easing. But that was a time when investors largely believed that central banks still had a lot of arrows left in their quivers to stimulate the economy. That’s not really the case now. The S&P 500 fell four straight days after the Fed cut rates on July 31, dropping a total of 5.59%.Also back then, profits were in recovery mode and stocks were relative cheap, with the forward price-to-earnings ratio holding below 14 for much of that time and peaking at around 17 times in late 2014 – about where it is now - just before the S&P 500 turned in its first annual decline since 2008. This year, though, earnings growth is flat and Bank of America’s strategists are telling its clients that forecasts for an 11% increase next year are “too high.” Stocks have had a good run, with the S&P 500 closing last week at 3,007. The median estimate of strategists surveyed by Bloomberg in January only expected the benchmark to rise to 2,913 this year. But with economists moving up their time frame for when the next recession will hit to 2020 from 2021, earnings estimates coming down and price-to-earnings ratios on the high side, it won’t be easy for stocks to keep marching higher even if the Fed does continue to slash rates. To contact the author of this story: Robert Burgess at firstname.lastname@example.orgTo contact the editor responsible for this story: Beth Williams at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Robert Burgess is an editor for Bloomberg Opinion. He is the former global executive editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. China’s slowdown is deepening just as risks for the global economy mount, piling pressure on the authorities to do more to support growth.Industrial output rose 4.4% from a year earlier in August, the lowest for a single month since 2002, while retail sales came in below expectations. Fixed-asset investment slowed to 5.5% in the first eight months, with the private sector lagging state investment for the 6th month.The data add support to the argument that policy makers’ efforts to brake the slowing economy aren’t sufficient as the nation grapples with structural downward pressure at home, the risk of yet-higher tariffs on exports to the U.S. and now surging oil prices. Nomura International Ltd. said this all raises the likelihood that the People’s Bank of China will cut its medium-term lending rate on Tuesday.“In terms of policy room, we still think there’s quite a lot for both the Ministry of Finance and the PBOC, but now it’s a matter of whether they want to use it,” Helen Qiao, chief Greater China economist at Bank of America Merrill Lynch said on Bloomberg television. “What I worry about is that policy makers are hesitating at the moment because of the potential implications on the long term impact, so they’re really fallen behind the curve.”The Shanghai Composite swung between gains and losses before closing slightly lower. Futures contracts on China’s 10-year government bond regained losses after the data release to close at 0.07% higher on Monday.The slowdown in output was almost across the board, with food processing and general equipment manufacturing unchanged from last year. Car output rose after declining for four months. Growth in sales of consumer goods slowed to 7.2%, the lowest since April this year, but there was an increase in food sales. The unemployment rate fell to 5.2% from 5.3% in July, within the narrow band it has occupied all year even amid the slowdown.The record oil price surge after a strike on a Saudi Arabian oil facility couldn’t have come at a worse time for China and a world economy already in the grip of a deepening downturn. While the severity of the impact will depend on how long the oil price spike endures, it risks further eroding fragile business and consumer confidence amid the ongoing U.S.-China dispute and already slowing global demand.Saudi Arabia is the largest single source of China’s crude oil imports, which in turn supply about 70% of total demand.After China’s data release on Monday by the National Bureau of Statistics, Citigroup Inc. lowered its growth forecast for the world’s second-biggest economy to 6.2% for this year from 6.3% previously, and to 5.8% from 6% for 2020.“We don’t expect a growth rebound in the fourth quarter anymore, with the new forecast flat at 6.1% year on year,” wrote Yu Xiangrong, a Hong Kong-based economist with Citigroup, referring to the quarterly outlook. “In particular, we now hold a more cautious view on the recovery of infrastructure investment and retail sales.”The People’s Bank of China cut the amount of cash banks must hold as reserves this month to the lowest level since 2007, though it’s still holding off on cutting borrowing costs more broadly.Some 265 billion yuan ($37.5 billion) of 1-year loans from the PBOC to banks will mature on Tuesday. The central bank will likely roll-over at least some of these, giving it an opportunity to cut the rate it charges.Analysts are divided on whether the PBOC would actually take the chance to cut. Some see the need for more significant easing while the other argue the authorities would like to avoid announcing multiple stimulus at once, and they’ll watch the U.S. Federal Reserve before taking any actions themselves. The Fed is expected to cut rates this week.Morgan Stanley expects borrowing costs to be cut by 10-15 basis points as early as this week, likely in the form of an medium-term lending rate cut.What Bloomberg’s Economists Say..“We expect policy support to continue at a measured pace as Chinese authorities strive to put a floor under the slowing economy. Yet, officials are bracing for a long war, and are careful not to deplete their policy ammunition.”-- Chang Shu and David Qu, Bloomberg EconomicsFor the full note click hereIt’s getting more difficult to “safeguard 6%” expansion in the third quarter and growth will likely slow further from the pace in the second quarter, China International Capital Corp. economists led by Eva Yi wrote in a note. Not only is it necessary, but there is room to step up the intensity of counter-cyclical adjustment in a timely manner to make sure economic growth won’t slip below the targeted growth range of 6-6.5%, Yi said.There are likely to be more easing measures including cuts to banks’ reserve ratios and the PBOC’s mid-term lending rate, although that cut probably wouldn’t happen this week, said Peiqian Liu, China economist at Natwest Markets Plc in Singapore. The pace of economic slowdown is faster than expected and the impact of the trade war on Chinese manufacturers has been relatively big, she said.Goodwill TalksNegotiators from China and the U.S. plan to have two rounds of face-to-face negotiations in coming weeks. Both sides have taken steps to show goodwill, and U.S. officials are considering an interim deal to delay tariffs with China, people familiar with the matter told Bloomberg.However, even if those talks do go well and get the negotiations back on track, it may not be enough.“Even a reprieve on the trade front, with U.S. and Chinese negotiators back at the table, will not in itself cure China’s growth malaise,” said Frederic Neumann, co-head of Asian economics research at HSBC Holdings Plc in Hong Kong. “There is a growing risk that keeping the reins too tight may push growth much lower.”(Updates with Morgan Stanley comments and markets reaction.)\--With assistance from Amanda Wang, Tian Chen, Yinan Zhao, Enda Curran, Dan Murtaugh and Claire Che.To contact Bloomberg News staff for this story: Miao Han in Beijing at firstname.lastname@example.org;Tomoko Sato in Tokyo at email@example.com;Kevin Hamlin in Beijing at firstname.lastname@example.orgTo contact the editors responsible for this story: Jeffrey Black at email@example.com, James MaygerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- PJT Partners Inc. has hired Bank of America Corp. dealmaker Antonin Baladi to build up its European technology, media and telecommunications investment banking business, people familiar with the matter said.The London-based banker is joining PJT in a senior role, the people said, asking not to be identified because the information is private. Baladi, who was Bank of America’s head of media and internet investment banking for Europe, the Middle East and Africa, had been with the firm since 2010, according to his LinkedIn profile.Representatives for Bank of America and New York-based PJT declined to comment.PJT’s founder Paul J. Taubman has long been one of Wall Street’s top telecom and media dealmakers and has been on a hiring spree since taking his boutique advisory firm public in 2015. He has added several health care-focused partners, poached a top initial public offerings banker from UBS Group AG and last year hired David Perdue from Goldman Sachs Group Inc. to work on private equity deals.Taubman, 58, told analysts in July the firm feels “very positive” about its European franchise and is expanding its footprint in the region as it wins mandates in more industries and geographies. The number of strategic advisory partners at PJT globally will increase by five in the third quarter, including a partner who will focus on cross-divisional initiatives, Taubman said at the time.Below the partner level, PJT has hired more than 30 advisory professionals this year, he said. Global companies listed in the U.K. are attracting strategic takeover interest despite a challenging macroeconomic backdrop, and private equity activity is expected to rise in Europe given dislocations in stock prices, according to Taubman.PJT ranks eighth among advisers on U.S. mergers and acquisitions this year with an 11.1% market share, up from 12th place for all of 2018. In Europe, it ranks 29th this year with a 1.5% market share, according to data compiled by Bloomberg. Its largest deal to date in the region was its work with the independent board committee of Sky Plc on the U.K. satellite broadcaster’s takeover by Comcast Corp. last year.Shares of PJT shares have risen 14% in U.S. trading this year, outpacing rival Moelis & Co. but trailing Evercore Inc.’s 17% gain.To contact the reporters on this story: Dinesh Nair in London at firstname.lastname@example.org;Myriam Balezou in London at email@example.comTo contact the editors responsible for this story: Ben Scent at firstname.lastname@example.org, Amy ThomsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Investing.com – Wall Street fell after a weekend attack on Saudi Arabian oil installations crippled 5% of the world’s oil supply, raising fears for the global economy and increasing the risk of war between the U.S. and Iran.
(Bloomberg Opinion) -- Heading into September, the $16 trillion U.S. Treasury market was signaling dark days ahead for America’s economy.On Aug. 28, 30-year yields dropped to an all-time low of 1.9%, a shocking figure that indicated no fear of inflation or sustained growth. By Sept. 3, bond traders were betting the Federal Reserve would slash its benchmark lending rate to below 1% before the November 2020 presidential election, from an effective rate of 2.13% now. Many measures of the U.S. yield curve remained inverted. Recession signals flashed just about anywhere investors looked.Now, just days before the Fed’s next interest-rate decision, the outlook is remarkably brighter. Last week, the core consumer price index data showed a 2.4% increase in August relative to a year earlier, the strongest pickup in inflation since 2008. Retail sales also beat expectations. Before that, average hourly earnings and the ISM non-manufacturing gauge topped estimates, helping to push Citigroup Inc.’s U.S. economic surprise index close to a 2019 high.Much like the economists caught unawares, bond traders were also shocked, to say the least. By Friday, two-year yields had climbed 37 basis points from their lows earlier this month, while yields on 10- and 30-year bonds rose by almost 50 basis points, including a sharp double-digit increase on Friday. The only two comparable moves in the past several years occurred during the so-called Taper Tantrum in 2013 and after the presidential election in November 2016.Effectively, traders’ thinking comes down to this: Fed Chair Jerome Powell said nothing in his speech before the central bank’s blackout period to dissuade them from pricing in an interest-rate reduction this Wednesday. But, what then? The logical place to turn, it would seem, is the central bank’s economic projections, and in particular its “dot plot,” which aggregates officials’ expectations for the future path of interest rates. It’s due for an update this week for the first time since the June meeting. At that time, the median dot called for zero cuts to the fed funds rate in 2019, and only one reduction in 2020. Obviously, things changed in a way policy makers didn’t see coming.And therein lies the problem with relying on the dot plot. The Fed, for better or worse, is flying as blind as any time in the past few years, due in no small part to the unpredictability of President Donald Trump’s continuing trade war with China. Powell diplomatically acknowledged as much during his Sept. 6 remarks: “Sometimes it’s easy to get unanimity on things when the path is clear,” he said. “Other times it’s murky out there and there’s a range of views. This is one of those times.”Of course, that won’t stop Wall Street from predicting what those views will look like come Wednesday at 2 p.m. New York time. Strategists at Bank of America Corp. see the median for 2019 dropping to 1.625%, effectively indicating central bankers will cut rates once more either in October or December; after that, they expect the Fed to signal no changes throughout 2020, with gradual increases to resume again in 2021 and 2022. TD Securities strategists also expect the Fed to signal another cut before year-end. John Herrmann at MUFG Securities Americas says he counts at least five of the 17 dot-plot participants who would dissent over another reduction in rates after September’s. Add a few more to the mix after strong readings on inflation and retail sales, and maybe the Fed will signal a pause for the rest of the year.Rather than take a stab at what the dot plot will look like, Jon Hill at BMO Capital Markets focused instead on the question of whether the dots should simply be ignored:“In the best of times, it would correspond to the FOMC's path-dependent baseline scenario, assuming their baseline economic forecasts play out. This was arguably the case for much of 2017 and 2018 and corresponded to a regular and predictable quarter-point hiking cadence.Alternatively, in moments like this — when uncertainty is elevated and even the axiom that 'cutting rates will help spur growth' is up for debate — it's hard to interpret the dot plot as more than a general inclination and bias regarding the outlook. This has enormous value in providing insight into the Fed's reaction function to macroeconomic developments. Given the number of moving pieces, Powell wants to maintain flexibility both with regards to the current stance but also forward guidance.”This advice – to not read too much into the precise levels of the dots – is probably bond traders’ best bet. Powell has made it abundantly clear that he and his colleagues are focused on doing what’s necessary to sustain the expansion. That means if economic data persistently weaken, they will ease policy. And if Trump ratchets up the trade-war rhetoric, as he did less than 24 hours after the Fed’s last meeting, they will also probably ease policy. It also has to be said that the Fed has shown time and again to take its cues from the bond market. Traders had priced in a quarter-point rate cut on July 31 way back in early June, and Powell opted not to push back even though he probably could have. If policy makers think the economy is strong, but market prices suggest the opposite, investors have history on their side to anticipate the central bank will ultimately capitulate.It’s hard to say whether that trend ought to be comforting or frightening for bond traders, given the swift correction in Treasuries this month. Because if the Fed is flying blind, then so, too, are economists and investors, to some extent. A Bloomberg survey of 57 analysts, released on Sept. 13, showed a median estimate of 1.7% for the 10-year U.S. yield at year-end. The highest forecast was for 2.58%, and the lowest was 1%. The difference of opinion only widens in 2020.Obviously, whether Treasuries soar to new records or keep unwinding their recent gains will have enormous implications for profits and losses among bond investors. Unfortunately for those looking for some direction, the Fed’s dot plot won’t be the guiding light to put them on the right side of the trade.To contact the author of this story: Brian Chappatta at email@example.comTo contact the editor responsible for this story: Beth Williams at firstname.lastname@example.orgThis 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) -- The next generation of telecommunications technology could be the key to ending years of stagnation in the industry. But it’s also set to create a difficult dilemma for European phone companies.Carriers shelled out $80 billion to power the world’s antennas last year, according to Nokia Oyj. The prospect of having to raise spending on electricity – energy demand could triple with the introduction of 5G equipment, according to industry body GSMA – won’t sit well with phone companies that are already struggling to pay their dividends. At the same time, firms such as BT Group Plc and Vodafone Group Plc have pledged to slash emissions, and that will require a rapid shift to renewable energy.Just as carriers are about to roll out vast quantities of power-hungry gear, they’re also promising to save the planet. And funds are tight. Accomplishing everything at the same time could be a tall order.“If they have set up ambitious targets for overall power consumption and CO2 emissions, those could potentially be in conflict when they start to roll out 5G,” said Jerker Berglund, industry consultant at JB Sustainable Approach AB. “Reducing total power consumption is going to be a challenge.”5G could unleash a 1,000-fold jump in data demand for connecting factories and cars and supercharging mobile devices, according to the GSMA. That’s an irresistible sales prospect for a telecom industry whose revenues have yet to recover from a slump that started in 2015.Next-generation antennas and masts can be 10 times more energy efficient than 4G’s. However, these power savings could get swamped by the surge in demand for new applications. 5G will link up billions of things that have never been connected before. To accommodate all these new connections, masts might have as many as 128 antennas, versus just four or eight on a typical 4G mast. Bouncing signals through cities may require thousands of transmitters and receivers to be bolted onto rooftops and street furniture. This looks like it will all require a lot more bandwidth, and a lot more power.What’s more, carriers can’t afford the cost of swapping out all their equipment at once, Berglund said. The rollout will have to happen gradually, so many masts will still carry less efficient 4G, 3G and 2G antennas alongside 5G ones. This situation could last for years – some 3G kit is still in place 18 years after that technology was introduced.This article is part of Covering Climate Now, a global collaboration of more than 250 news outlets to highlight the climate change story.Electricity already makes up about a third of carriers’ average operational costs, according to Nokia, and raising this will pressure balance sheets when the industry isn’t in a good place to cope. Vodafone has cut its dividend to conserve cash to pay for spectrum and capital investment. Bank of America Merrill Lynch analysts said Monday they expect BT to slash its dividend by as much as 40% to fund capital expenditure and price cuts.“As we consume more, power’s going up, and the industry is trying to bring that down as much as possible,” said Henry Calvert, head of future networks at the GSMA, the mobile industry trade body. “There’s a lot of activity in the industry about making the power we use more efficient.”But whatever fixes carriers make to lower energy bills – sharing networks, getting masts to autonomously power down at times of low data demand, introducing “beam-forming’’ so smart antennas can pinpoint devices instead of pumping out data indiscriminately – the surge in power usage creates a challenge for meeting emissions goals.Deutsche Telekom AG, for example, pledged a 90% reduction in carbon emissions between 2017 and 2030. In total, European carriers will have to reduce carbon dioxide emissions by 6 million metric tons within 11 years to achieve their carbon targets, BloombergNEF analyst Kyle Harrison said in a research note.One solution is for the telecom companies to shift their power supply to renewables, but this can’t be done at the flick of a switch. Clean-energy contracts are complicated and can take years to negotiate.Carriers will be under pressure to sign new ones quickly to cope with 5G’s power demands, Harrison said. They’ll be vulnerable to striking bad deals, and price fluctuations in energy markets can turn some arrangements that initially look good into losers in the longer term. “The switch to 5G is going to put more pressure on telecoms to purchase clean energy and reduce their emissions,” he said. “Many clean energy deals can result in losses for corporations. Telecoms will need to put extra consideration into this as their power demand goes up, especially if losses will impact their investments into 5G.”To contact the author of this story: Thomas Seal in London at email@example.comTo contact the editor responsible for this story: Jennifer Ryan at firstname.lastname@example.orgFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Rising long-term treasury yields are likely to support banks' financials to some extent. But lower interest rates and other concerns are expected to be headwinds.
Deutsche Bank (DB) agrees to pay settlement charges despite not admitting the allegations. Also, it agrees to share information with the regulators that can help prove other banks guilty.
Challenging operating backdrop and muted loan growth are likely to continue to adversely impact Morgan Stanley's (MS) prospects in the second half of 2019.
Zacks Market Edge Highlights: UnitedHealth, Centene, MasTec, Bank of America and Bristol-Myers Squibb
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