|Bid||512.85 x 800|
|Ask||514.80 x 1000|
|Day's range||503.00 - 513.57|
|52-week range||323.98 - 576.81|
|Beta (5Y monthly)||1.29|
|PE ratio (TTM)||19.02|
|Earnings date||17 Jul 2020 - 21 Jul 2020|
|Forward dividend & yield||14.52 (2.86%)|
|Ex-dividend date||04 Mar 2020|
|1y target est||515.00|
(Bloomberg) -- Emerging-market stocks and currencies gained last week amid optimism progress is being made toward developing coronavirus vaccines, and as more nations roll back lockdowns. Sentiment was tempered as the week progressed by signs U.S.-China tensions are increasing once again, including escalating rhetoric from President Donald Trump and Senate legislation that may lead to delisting of Chinese companies from American stock exchanges. China announced plans to impose a national security law on Hong Kong, further adding to geopolitical frictions.The following is a roundup of emerging-market news and highlights for this week through May 22:Highlights:The U.S. threw its weight behind one of the fastest-moving experimental solutions to the coronavirus pandemic, pledging as much as $1.2 billion to AstraZeneca Plc to help make the University of Oxford’s Covid vaccineAn experimental vaccine from the U.S. biotechnology company Moderna Inc. showed signs it can create an immune-system response to fend off the coronavirusRead: U.S. Raises Ante in Vaccine Race With $1.2 Billion for Astra (2)Leading Chinese vaccine developer CanSino Biologics Inc. has signed a deal to test and sell a separate Canadian vaccine candidateFederal Reserve Chairman Jerome Powell said the central bank is prepared to use its full range of tools and leave the benchmark lending rate near zero until the economy is back on track; he reiterated that more fiscal aid may be neededFed policy makers saw the coronavirus posing a severe threat to the economy when they met last month and were also concerned by the risks to financial stabilityChina has abandoned its usual practice of setting a numerical target for economic growth this year due to the turmoil caused by the coronavirus; it reiterated a pledge to implement the first phase of its trade deal with the U.S.China projected defense spending growth of 6.6% this year, the slowest increase since at least 1991; the nation is pushing ahead with major investment in new infrastructure, assigning it top importance this yearChina announced plans to rein in dissent by writing a new national security law into Hong Kong’s charter, prompting democracy advocates to call for protestsPresident Donald Trump escalated his rhetoric against China, suggesting that leader Xi Jinping is behind a “disinformation and propaganda attack on the United States and Europe”The U.S. Senate overwhelmingly approved legislation that could lead to Chinese companies such as Alibaba Group Holding Ltd. and Baidu Inc. being barred from listing on U.S. stock exchangesU.S. Secretary of State Michael Pompeo broke with past U.S. practice and issued a statement congratulating Taiwan President Tsai Ing-wen ahead of her inauguration. China denounced the message as “wrong and very dangerous”Tsai urged China’s Xi Jinping to “find a way to co-exist” with the island’s democratic government as she started her second termArgentina will improve the terms of its offer to restructure $65 billion of overseas bonds after sinking into default when it failed to make an interest paymentSouth Africa’s Reserve Bank cut its benchmark rate for the fourth time in four months to support an economy forecast to slump deeper into recession; Turkey’s central bank delivered a ninth straight rate cut in less than a year after measures to prop up the lira drove out foreign investors; Indonesia’s central bank unexpectedly left its benchmark unchanged to bolster the currency; Bank of Thailand cut its key rate to a record and said it was ready to use additional policy tools if neededIndia’s central bank cut interest rates in an unscheduled announcement, ramping up support for an economy it expects will contract for the first time in more than four decadesBrazil overtook the U.K. to become the world’s third most-infected nation and reported record daily deaths; government still hasn’t picked a new health minister following Nelson Teich’s resignationRussia sees its economy contracting 5% this year, according to updated forecast from Russian Economy MinistryPresident Vladimir Putin may announce a snap ballot within weeks on proposed changes to the constitution that allow him to sidestep term limits, said people familiar the matterAsia:Chinese President Xi Jinping pledged to make any coronavirus vaccine universally available once it’s developed, part of an effort to defuse criticism of his government’s response to a pandemicChina’s regulator and some lenders have discussed extending loan relief beyond a June 30 deadline for corporates hurt by the virus outbreakChina is considering targeting more Australian exports including wine and dairy, according to people familiar with the matterShanghai Stock Exchange has started a trial program to allow companies to issue short-term local bondsChina’s house-price growth accelerated in April as the central bank’s credit easing gave the property market a lift out of the coronavirus shutdownBank of Korea said it will provide 80% of a special purpose vehicle’s 10 trillion won ($8.1 billion) of funds to buy corporate debt including lower-rated bonds and commercial paperSouth Korean students are returning to their classrooms after a five-month break as government health officials declared the country may have avoided a second wave of infectionsInitial South Korea trade figures for May signaled deep global trade weakness as the coronavirus smothers global economic activity. Though the value of shipments to China fell 1.7%, this was far less than in previous monthsIndia’s coronavirus infections crossed the 100,000 mark and are escalating at the fastest pace in Asia, just as Prime Minister Narendra Modi further relaxed the country’s nationwide lockdownThe biggest cyclonic storm over the Bay of Bengal in two decades wreaked havoc along India’s east coast and in Bangladesh, flooding low-lying areas and affecting power supplyIndia’s capital market regulator has allowed some categories of debt mutual funds to invest more in government bonds and treasury billsIndia’s government said the central bank will increase support for troubled shadow lenders, to stave off defaults as record repayments come due next monthIndonesian President Joko Widodo ruled out an immediate easing of social distancing rules and ordered officials to strictly enforce a ban on travel during the busy holiday season to prevent a spike in new coronavirus casesIndonesia will extend $10 billion in financial support to a dozen state-owned companies to tide over the impact of the coronavirus, Finance Minister Sri Mulyani Indrawati saidThailand sees its economy contracting as much as 6% this year as the coronavirus outbreak cuts travel to the tourism-reliant nation and shutters commerceGovernment agreed to extend state of emergency as suggested by National Security Council, Deputy Prime Minister Somkid Jatusripitak saidThe Philippine central bank sees “no apparent and immediate” need to avail itself of the new short-term liquidity line being offered by IMF to members as part of pandemic response, according to Governor Benjamin Diokno; policy space is still sufficient, he said separatelyThe Philippines is considering downsizing lockdowns to villages from regions, as it balances further reopening its economy with stemming the virus outbreakMalaysia’s king warned lawmakers against resorting to hostility and slander, as he spoke at the country’s first parliament sitting since its chaotic change of government two-and-a-half months agoThe trial of Malaysia’s former leader Najib Razak resumed on Tuesday, as a settlement deal by his stepson spurred concern over how the new government is handling the 1MDB casesTaiwan’s unemployment rate has reached the highest level in more than 6 years, according to government data released today. The coronavirus pandemic sent April’s jobless rate to 4.1% leaving over 480,000 people unemployedEMEA:Russia sold the most debt on record in its weekly bond auctions, benefiting from low borrowing costs to fund stimulus plansRussia’s Finance Ministry placed 112 billion rubles ($1.6 billion) of bonds due in October 2027 at its first auction on Wednesday, the most ever for a single offeringTrump has decided to withdraw from the Open Skies treaty, an arms-control pact designed to promote transparency between U.S. and Russia, claiming Russian violationsTurkey secured a fresh source of foreign exchange from Qatar, leaning again on the gas-rich Gulf nation that’s consistently come to the rescue as part of an alliance born after a coup attempt against President Recep Tayyip ErdoganRomania’s surprise first-quarter economic growth may help the country avoid a credit-rating downgrade next month as investors rush to buy its debt, the finance minister saidAbu Dhabi raised more money from international debt markets just weeks after a $7 billion bond sale as it took advantage of a drop in borrowing costs to bolster its financesThe emirate sold an additional $3 billion of its three-tranche deal priced in April, according to people familiar with the matterEgypt may reduce financing in local markets over coming weeks as it tries to cut debt-service costs for one of the Middle East’s most indebted countries, the Finance Ministry saidEgypt raised $5 billion in its first sale on international bond markets since NovemberLebanese banks urged the government to sell state assets and defer maturities to avoid defaulting on its domestic debt and driving the country’s finances into an even deeper crisisSaudi Aramco became the first major global oil producer to see its stock recover to the level it traded at before the price war between Russia and Saudi ArabiaZambia is seeking to restructure its debt after years of “over-ambition” in borrowing to plug an infrastructure deficit, the Finance Minister saidBank of Zambia cut its key interest rate for the first time in more than two years to counter the impact of the coronavirus on the economy, even as inflation surged to a 43-month high in AprilMoeketsi Majoro became Lesotho’s new prime minister, a day after his predecessor resigned amid an investigation into the murder of his ex-wifeZimbabwe’s supply of foreign exchange has increased by 35% since restrictions on using the U.S. dollar for domestic payments were eased, the central bank Governor saidSouth African factory output contracted for the ninth month in February even before a nationwide lockdown aimed at limiting spread of the coronavirus pandemic shuttered all non-essential activityInvestors declined to take up all of the five-year bonds on offer at an auction in Kenya this weekRwanda plans to increase budget spending for the coming fiscal year by 8%, saying it needs more money to fend off the Covid-19 pandemic, the Finance Minister saidNigeria’s early move to tap cheap loans improved its risk perception among foreign investors, leading to a decline in the country’s borrowing costsLatin America:Argentina’s economic activity slid 9.8% in March, a record biggest monthly decline, amid a nationwide lockdownA video of a controversial meeting between Brazil’s Jair Bolsonaro and members of his cabinet became public on Friday, fueling a political crisis that embroils the president just as the coronavirus pandemic grips the countryBrazil overtook Russia and is now second in number of virus cases in the world, trailing only the U.S.Health Ministry loosened protocols for the use of chloroquine, under orders of the president, who ordered the military to ramp up production of the drugThe city of Sao Paulo brought forward holidays to increase social isolation rates, which are typically higher on weekends and holidaysBolsonaro asked for state governors and congress to support his veto on an increase in public servants wagesCentral bank President Roberto Campos Neto promised to step up currency intervention if neededInvestors holding debt protection for Ecuador are in line to share compensation of about $60 million after the nation struck a deal with creditors to suspend coupon payments on its foreign debtAshmore Group Plc and BlackRock Inc. are joining together to present a united front for restructuring talks in EcuadorIDB approved a $250 million loan to Ecuador and nation is launching a $1.2 billion program to revive the economyEcuador is launching a program with $1.15 billion of funding from international partners to support workers and entrepreneurs, the Finance Minister saidChile’s economy is bracing for a contraction even after activity unexpectedly grew in the first three months of the year during the onset of the coronavirus pandemicQuarantine in capital Santiago was extended for a weekMexico’s President Andres Manuel Lopez Obrador said he is working on a new indicator to measure growth and progress as the country’s economy heads to its biggest contraction in almost a centuryMexico’s interest rates will continue to be cut, central bank board member Jonathan Heath saidInflation quickened more than expected in early May as food prices jumpedPeru’s economy contracted in the first quarter as the country entered what may be its deepest slump since the 1880s. GDP fell 3.4% from a year earlierCountry extended its nationwide quarantine for five weeks, while the reopening of the economy will enter its second phase as plannedFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- As BlackRock starts to kick the tires of Sweden’s credit market at the behest of the Riksbank, a world of trouble is about to reveal itself.“This market seems completely dead,” said Hakan Karlsson, chief executive of MaxFastigheter i Sverige AB, a property firm with an unrated bond maturing in September. “If we want to retain the possibility of raising money through bonds, some kind of support is needed for it to function.”BlackRock Financial Markets Advisory, a unit of the world’s biggest asset manager, was just hired to help Sweden’s Riksbank figure out how to buy into an asset class that recently suffered its worst rout since the financial crisis. Against the backdrop of a dispute with parliament over the legality of such purchases, the Riksbank has pledged to acquire parts of Sweden’s $45 billion krona-denominated corporate bond market.Most corporate issuers are holding back until those purchases start. They “want to see the real effect” of the Riksbank’s promise, said Gustav Bjorck, who runs the bond syndication desk at Swedbank in Stockholm.For the CEO of another real-estate issuer the current market is simply too expensive. “Only those who really need to issue bonds go to the market right now,” FastPartner’s Sven-Olof Johansson said.The CrashBesides questions of legality and issuer angst, there are basic concerns about market dysfunction. Many issuers have started relying more on bank credit instead of bonds. And investors are wary of a market whose recent crash was in part caused by excess representation of some high-risk industries, such as real estate.Investors just want the dysfunction to end. “The secondary market for investment grade bonds is far from functioning well so I think the Riksbank’s program will lead to better liquidity,” said Karin Haraldsson, a portfolio manager at Lannebo Fonder.She says the Riksbank will probably buy investment grade bonds, allowing the primary market to “open up for that category.” If the Riksbank could buy newly issued notes, “that would help even more,” she said.Back in March, the failings of Sweden’s corporate bond market were forced into plain view as 35 credit funds resorted to gatings to halt a client exodus. Investors say the Riksbank’s presence in the market would make a repeat unlikely.Going for JunkMeanwhile, Sweden’s credit market is getting riskier. An increasingly large share is junk-rated or unrated, and these issuers have found it impossible to raise funds since March.“The high yield market in Sweden has not yet opened,” said Nordea’s head of debt capital markets, Antti Saha.Fredrik Tauson, who manages an alternative credit fund at Nordic Cross, says Sweden’s junk bond market “can from time to time be inefficient and dysfunctional.” But if the Riksbank were to buy higher rated notes, investors would be more inclined to go for riskier debt as they search for better returns, he said.That kind of change doesn’t happen overnight, but Tauson said it’s not clear the market can wait, “considering the depth of the current crisis.”For issuers like MaxFastigheter, time is running out. According to its CEO, “It’s almost impossible to place a bond today.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Pandemic-induced market volatility and warnings from Wall Street that tax rates are bound to rise have more Americans preparing to move money from traditional individual retirement accounts into Roth IRAs.It’s an attempt at tax arbitrage. With traditional IRAs, a saver is required to begin making annual withdrawals and paying income taxes on them at age 72. If tax rates are likely to be higher then, the thinking goes, why not pay taxes on some of the money held in tax-deferred accounts now, at today’s presumably lower rate, and let it grow tax-free in a Roth?That option has become more appealing this year, as stock market declines have shrunk the value of accounts, along with the tax bill for converting assets. Fidelity Investments said Roth conversions surged 76% in the first quarter from a year ago.The strategy can also make more sense for those in lower tax brackets due to job losses or salary cuts. As well, the CARES Act allows those required to take annual distributions from traditional IRAs to skip it this year, which can provide wiggle room within their tax bracket for maneuvers like a partial Roth conversion.Daniel Lash at VLP Financial Advisors in Vienna, Virginia, did Roth conversions for about 10 clients in late March and early April, as equity markets were at their lows for the year.“We moved mostly small- and mid-cap U.S. stock funds, and since completing the conversions the funds have increased significantly, but now on a tax-free basis in the Roth,” he said.The S&P 500 has surged 31% since bottoming out on March 23.Some people assume they’ll be in a lower tax bracket when they retire. But a growing number of Wall Street luminaries predict that personal or corporate tax rates will probably rise as massive government stimulus programs swell federal budget deficits. They include BlackRock Inc. Chairman Larry Fink, Bridgewater Associates’ founder Ray Dalio and Goldman Sachs Group Inc. chief U.S. equity strategist David Kostin.In addition, the Republican tax cuts enacted in late 2017 are scheduled to expire after 2025, reverting to previous levels. Today’s top marginal tax rate of 37% looks modest next to top marginal rates during other turbulent periods of American history. In 1918, during the last pandemic, the top marginal tax rate was 77%. In 1932, near the height of the Great Depression, rates on top earners rose to 63% from 25%. The highest top marginal tax rate on record came in 1944, during World War II, at 94%.There was $11 trillion in traditional and Roth IRA accounts at the end of 2019, or more than a third of the U.S. retirement market, according to the Investment Company Institute. More than 36 million U.S. households own traditional IRAs funded with pretax money on which they’ll pay taxes on future withdrawals. About 25 million Americans have contributed after-tax money to Roth IRAs.“Backdoor Roths”While people with high incomes are precluded from opening Roth IRAs, conversions are a different story. The income caps where the ability to open a direct Roth IRA end -- $139,000 of modified adjusted gross income for individuals and $209,000 for married couples -- don’t apply to conversions, which are sometimes called “backdoor Roths.”Many planners are prepared but waiting to pounce if there’s another market pullback. Some are holding off until a client’s taxable income picture is more complete later in the year. That allows them to fine-tune the Roth conversion amounts to ensure clients stay in lower marginal brackets. But sometimes, even if a conversion makes long-term financial sense, clients may not act -- reducing a cash cushion to pay taxes is never pleasant, and during uncertain times cash can bring valuable peace of mind.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
BlackRock, Inc. (NYSE:BLK) today announced that Laurence D. Fink, Chairman and Chief Executive Officer, is scheduled to speak at the 2020 Deutsche Bank Global Financial Services Conference on May 27th, 2020, beginning at approximately 12:05 p.m. ET. A live audio webcast will be accessible via the "Investor Relations" section of BlackRock’s website, www.blackrock.com. A replay of the webcast will be available within 24 hours of the presentation and will remain accessible through the Company’s website for three months.
(Bloomberg) -- Goldman Sachs Group Inc. and BlackRock Inc. predict Europe’s most indebted companies will shift their money raising toward bonds and reduce reliance on loans in the post pandemic world, echoing the last financial crisis.The move to bonds will largely reflect investor demand as fixed income funds have seen seven consecutive weeks of inflows since the credit-market crash earlier this year. At the same time, issuance of collateralized loan obligations -- bonds backed by leveraged debt -- has slowed to a trickle, hobbling a market that typically absorbs half of new loans to European companies.“Steadily we’re going to see an increase in issuance, and a number of companies that have relied more on the loan space will look to access high yield bonds,” said Michael Marsh, head of credit finance for Europe, the Middle East and Africa at Goldman Sachs. “The bond market is a little more robust right now, it’s less constrained than the loan market.”Recent deals suggest the trend has already started. Two borrowers that have made previous use of both markets -- BMC Software Inc. and Merlin Entertainments Ltd. -- raised bonds in preference to loans in recent weeks.It’s a change from the pre-Covid market when a healthy CLO market drove loan demand. Only eight new European CLOs have priced since the start of March, the same number often seen in a single month until recently.More DiversityAnother driver of the switch to bonds is the deteriorating credit quality of corporate borrowers following the economic shock of a global pandemic. S&P Global Ratings had cut the credit scores on 173 issuers in the EMEA region by May 20 since the start of the current crisis.A rising number of firms being stripped of their investment-grade status will contribute to the net supply of high-yield bonds outpacing loans this year, according to research by Barclays Plc. The bank now forecasts the volume of available bonds in 2020 will increase by between 40 billion euros and 45 billion euros, up from the 35 billion euros it originally predicted. Loan supply will rise by 20 billion euros, down from the previously expected 30 billion euros.Corporate borrowers that have suffered a downgrade on account of pressures on their business from the pandemic may find the bond market more receptive than loans because it’s bigger, with a more diverse investor base.“Lower-rated borrowers are more likely to choose bonds as the more diverse return profiles of bond investors makes it easier to find a price for the risk,” said James Turner, who heads European leveraged finance at BlackRock, overseeing bond, loan and CLO strategies.“European borrowers can alternate between loans and high-yield bonds, but during times of stress, issuers can lean more heavily on the high-yield market.”The shift may hand more power to investors. Loans have a flexibility that can play to the advantage of borrowers because they can be easily repaid or repriced if the issuer thinks it can get a better deal. But bonds’ usually have a non-call period written into their structure. This allows investors to lock in coupons for several years without the risk of getting repaid and offered new debt with worse terms as soon as conditions improve for the borrower.That’s a valuable feature in today’s market, so much so that some companies raising loans are adopting it. Apcoa Parking AG, for example, which can’t repay its new loan for one year.Some companies are still choosing loans. Insurance broker Financiere CEP SASU launched a 725 million-euro buyout loan this week and others are raising small liquidity facilities. And bonds may not suit those with urgent financing needs that have never yet tapped that market, since it can take first-timers around two months to prepare accounts and documentation.But for those that need large sums of money whether for acquisitions, refinancing or to boost liquidity, raising as much as possible from high-yield could be the best option.“Arrangers will be thinking about market capacity. If the company can raise dollars or euro high-yield bonds, that’s helpful as the European loan market has taken the longest to recover,” said Sarah Mackey, EMEA head of leveraged capital markets at UBS Group AG.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Wall Street heavyweights including Stan Druckenmiller and David Tepper may be sounding the alarm about stocks, but some of the world’s biggest investors are sticking with or boosting their holdings.Money managers and strategists at Capital Group, Franklin Templeton and BlackRock Inc., which together oversee about $8.8 trillion, say equities remain attractive even as the threat of a second wave of coronavirus infections looms at a time when there’s no medical solution.Their reasons? We’re past the first stage of the outbreak, central banks and governments are supporting markets, and shares are appealing compared to other asset classes such as bonds.“I am cheered by the declining growth rates of new infections and mortality,” said Steven Watson, a portfolio manager at Capital Group who helps oversee about $227 billion. “I won’t go as far as to say we’re at the beginning of the end, but I think we can say we’re at least at the end of the beginning.”An index of global equities has recouped more than half its losses in the pandemic, rising about 28% from a low on March 23. As stocks continue to recover despite stark outlooks for economies, legendary investors including Druckenmiller and Tepper have said the risk-reward of holding shares is the worst they’ve encountered in years.Wall Street Heavyweights Are Sounding Alarm About StocksWatson says he’s made few changes to his portfolio, only selling some shares whose “recovery runway” looks long. He says his optimism has one caveat: central banks will need to provide the monetary responses needed to restart growth. He views Asian stocks as likely to have a stronger run in coming months, given the “relatively bright outlook on the Covid-19 front.”“As for the risk of reinfection, yes, further waves of infection will push the markets lower,” he said. “We need to brace ourselves for that, but I wouldn’t let it keep me out of the market.”Franklin Templeton’s multi-asset solutions group, which manages about $123 billion, tentatively increased equities in mid-March, moving back to a neutral position on the asset class just before stocks started to climb.The team is betting global equities will outperform bonds until the end of 2021, according to Wylie Tollette, its head of client investment solutions. That’s because of the low yields provided by most developed market sovereign debt and expected volatility in bond markets, particularly in credit spreads. Like Capital Group, it’s sticking with equities despite the risk of a second wave of infections.‘Cautiously Positive’“Our base case is that we will see several surges in Covid cases until a medical solution is found,” he said. “Looking over the next 12 to 18 months, we are cautiously positive on equities versus bonds from a risk-adjusted return perspective.”Tollette says his team is leaning toward “defensive sectors and regions” as it predicts a slow and uneven economic recovery until a vaccine or effective treatment is found. It’s likely to be Nike Inc. “swoosh” shaped rather than V or U shaped, he said. Like Watson, he notes that Asian countries are further along in addressing the impact of the pandemic.“We do not expect global GDP to fully recover until late 2021 or 2022,” he said. “This would make the Covid crisis longer-lasting -- from a GDP standpoint -- than the global financial crisis but significantly shorter and less severe than a depression.”BlackRock is also sticking with its neutral weighting on equities, favoring buying quality stocks across regions. It points to the trillions of dollars pumped in by central banks and governments to contain the crisis.“We see the unprecedented policy response to cushion the pandemic’s blow as key to support global equity markets -- against a backdrop of historic uncertainty for activity and earnings,” analysts led by BlackRock Investment Institute Global Chief Investment Strategist Mike Pyle wrote in a note. “We still prefer an up-in-quality stance and like economies with ample policy room.”Capital Group’s Watson says he remains hopeful about the outlook for his stock picks, partly because he lived through the SARS epidemic of 2003.“I have little cash today and I like all the companies I hold,” he said. “I find myself more optimistic than some.”(Corrects story published May 20 to fix title in ninth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Even if Argentina defaults for the ninth time in its history, creditors say the issue could be cured quickly as the two sides work to restructure $65 billion in overseas bonds.Although an event of default will be hard to avoid for Argentina, there is willingness to resolve the negotiations, said Greylock Capital Management LLC’s Chief Executive Officer Hans Humes at an online event. The country is just a day away from a May 22 deadline, when $500 million in overdue payments come due.Humes, whose fund is part of one of three key creditor groups, the Argentina Creditor Committee, said that a resolution was in all parties’ best interest, and that greater flexibility was needed by both sides to reach an agreement.“Any kind of default event can be cured in short order,” Humes said. “I would hate to have something as disorderly as a hard default.”Even if there’s a default, that wouldn’t be immediately followed by litigation because taking legal action amid the talks wouldn’t be productive, said Guggenheim Securities’ senior managing director Mark Walker, a restructuring expert.Argentina said it would extend the deadline for creditors to consider an initial debt restructuring offer until June 2 as both sides need more time reach a deal, according to a government statement. The government received two formal counteroffers from creditors last week, after the bondholder groups roundly rejected an initial government offer.The government is planning to stick to the same formal offer it presented in mid-April, allowing several more weeks for talks between the parties to continue, said the people, who could not be named because the negotiations are private. In the meantime, Argentina plans to miss a delayed interest payment on about $500 million due Friday, the people said.Read More: Here’s What You Need to Know About Argentina’s Debt Crisis: Q&AThe Exchange Bondholder Group -- alongside the Argentina Creditor Committee, Fintech Advisory and Gramercy Funds Management -- submitted a joint proposal to the government last Friday that people familiar with the matter said would give bondholders about 55 cents on the dollar. A separate group that includes BlackRock Inc., Ashmore Group Plc and Fidelity Investments sent a plan that the people valued at about 59 cents on the dollar.After several weeks of impasse, some progress has been made in recent days. In an online forum Tuesday, Economy Minister Martin Guzman said there was a “big chance” that negotiations extend past Friday.“We are having a constructive dialog with the bondholders,” Guzman said.Negotiations started more than two months ago, and Argentina’s proposal had sought $40 million of debt relief and a three-year moratorium on debt payments. The country, home to South America’s second-largest economy, says it can’t meet its obligations amid high unemployment, a sharp drop in the value of its currency, accelerating inflation and a deep recession made worse by the coronavirus pandemic.(Adds government statement of extension of negotiation deadline to June 2 in sixth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
BlackRock, Inc. (NYSE:BLK) today announced that its Board of Directors has declared a quarterly cash dividend of $3.63 per share of common stock, payable June 23, 2020 to shareholders of record at the close of business on June 5, 2020.
(Bloomberg) -- Argentina plans to extend the deadline for creditors to consider a $65 billion debt restructuring offer into early June as both sides need more time to reach a deal, according to people with direct knowledge of the matter.The government will stick to the same offer it presented in mid-April, allowing several more weeks for talks between the parties to continue, said the people, who could not be named because the negotiations are private. In the meantime, Argentina plans to miss a delayed interest payment on about $500 million due Friday, the people said.Argentine officials, who are still digesting the bondholder counteroffers received last week, don’t plan on presenting their own new proposal for now as both sides remain far apart on the net present value needed to reach a deal, the people added. The talks may be extended by at least 10 days, one of them said.Read More: Argentina Debt Proposals Far Apart With Deadline LoomingNegotiations started more than two months ago, with Argentina proposing $40 billion of debt relief and a three-year moratorium on debt payments. Bondholders already rejected that offer firmly. The country says it can’t meet its obligations amid high unemployment, a sharp drop in the value of its currency and a deep recession made worse by the coronavirus pandemic.Missing the debt payment on Friday, when a grace period ends, would lead the South American country into its ninth debt default in 200 years. President Alberto Fernandez’s government doesn’t think creditors will immediately seek the repayment of all their bonds, a process commonly known as acceleration, as long as restructuring talks continue, the people added.An Economy Ministry spokesman in Buenos Aires declined to comment.While Argentina is less flexible to change the interest coupons and grace period from its original proposal, the government is willing to make some concessions on maturities and the overall haircut, according to the people.The nation’s bond due in 2028 rose seven cents on Thursday morning, trading at 32.86 cents on the dollar.ARGENTINA INSIGHT: What a Debt Deal Must Look Like for SolvencyAfter several weeks of impasse, some progress has been made in recent days. In an online forum Tuesday, Economy Minister Martin Guzman said there was a “big chance” that negotiations extend past Friday.“We are having a constructive dialog with the bondholders,” he said.The Exchange Bondholder Group -- alongside the Argentina Creditor Committee, Fintech Advisory and Gramercy Funds Management -- submitted a joint proposal to the government last Friday that people familiar with the matter said would give bondholders about 55 cents on the dollar. A separate group that includes BlackRock Inc., Ashmore Group Plc and Fidelity Investments sent a plan that the people valued at about 59 cents on the dollar.(Updates with sovereign bond price in eighth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Not too long ago, BlackRock Inc. was super bullish on the prospect of exchange-traded bond funds. While it took 17 years for these passive vehicles to reach $1 trillion in assets under management, doubling that would take a fraction of the time, the investment manager predicted. These funds have become “disruptors” of the once opaque and difficult-to-access global bond market, it said. Passive funds have indeed become popular. More than 60% of institutional investors used debt ETFs last year, up from 20% in 2017. Meanwhile, emerging market bond ETFs represent the fastest growing segment, rising at an annualized rate of 38% over the last decade, to $82 billion in assets under management. As much as BlackRock’s marketing executives may tout “disruption,” instability is one thing developing markets can do without — especially now that they’re issuing debt left and right. Investors are understandably starting to ask who will pay when things go pear-shaped. If they bail, the passive funds they’ve gobbled up could well kill emerging-market investing. Take a look at BlackRock’s $13 billion iShares J.P. Morgan USD Emerging Markets Bond ETF. It’s well-liked by investors because it tracks sovereign dollar issues, which takes the problem of currency volatility off the table. But its exposure doesn't accurately reflect the gross domestic product of its constituents. China, for instance, has a weighting of just 3.8%, making it the eighth-largest component of the ETF. Meanwhile, Argentina, Turkey, South Africa, Egypt and Colombia — the new Fragile Five according to Bloomberg Intelligence — together have a 14% weight, data compiled by Bloomberg show. Add the next five in line, and about 35% of your ETF’s holdings are vested with the most vulnerable nations.(1) BlackRock is simply tracking the widely followed J.P. Morgan index, which is by no means the only one with a heavy tilt toward troubled countries. The Bloomberg Barclays EM USD Aggregate Sovereign Index, for instance, also has more than a third of its weight behind the Fragile 10. Since the collapse of Lehman Brothers Holdings Inc., quantitative easing has driven billions of dollars of capital into emerging markets. With rates near zero in the developed world, investors have eagerly taken on extra risk in the pursuit of yield. As a result, nations with current account and fiscal deficits, such as Indonesia, ended up issuing plenty of dollar bonds. Meanwhile, healthier ones, like export-oriented China and South Korea, developed their domestic government bond markets instead. After all, it’s cheaper to raise money in your own currency. Beijing only raises dollar bonds when it feels like showing off its prime rating abroad.Now, the virus is raising uncomfortable questions. Economies big and small are on lockdown, facing large shortfalls in government revenues and big fiscal spending plans. How will the most vulnerable ones meet their debt obligations?In mid-April, the Group of 20 agreed to halt repayments for the poorest countries. That won’t be enough. African economies, for instance, have the largest external funding gap among the low-income group analyzed by Moody’s Investors Service Inc. That amounts to around $40 billion to $50 billion this year, or about 4% to 5% of their combined GDP. The G-20 debt relief is worth only $10 billion.If, say, a few African countries lit up the global news headlines by walking a tad too close to default, would ETF investors sell out of their positions altogether? It wouldn’t be irrational. Thanks to passive funds’ transparency, we know at least one-third of our positions are vested with some of the most fragile emerging economies.BlackRock created retail products from an asset class once preserved for professionals. This great democratization experiment is a double-edged sword. Sure, it helps struggling nations raise money. But in times of distress, contagion becomes the word. Stock pickers — value investors, in particular — have long argued ETFs distort equity markets. That assessment isn’t far off for fixed income, either.(1) Bloomberg Intelligence has assigned a vulnerability rating based on current account balance, short-term external debt, reserve coverage, government effectiveness and deviation from inflation targets.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- It turns out the corporate bond market still needs traders.The algorithms that dealers use to buy and sell bonds with their customers failed in March at the height of extreme volatility from the coronavirus pandemic, according to investors and price data. The nimble analysis of flesh-and-blood traders was suddenly needed to price bonds, edging out machines that normally can trade large portions of the market without any human input.The bond market has been one of the last corners of finance to move into the digital age, slowly modernizing from the rise of electronic trading to new venues that will remove much of the interpersonal communication from the process of selling company debt. Yet even as digital platforms set record volumes in the first quarter, market watchers said the bots failed a test when Treasuries and credit spreads were so disorderly.“Good old-fashioned blocking and tackling is still very much a part of the business,”said Chris Coccoluto, head of investment-grade bond trading at Manulife Investment Management. “It was almost nice to see in a way you had to rely on your relationships.”The virus-related disruptions were profound. At the height of the volatility, Treasuries rallied to record low yields and corporate bond spreads gapped out to levels last seen in 2009. The securities are linked as the vast majority of investment-grade bonds trade at a premium to Treasuries, adding an extra layer of complexity when neither market was fully functional.While humans were able to spot the new patterns quickly, the bots couldn’t adapt because algorithms are built on historical data, said Chris White, founder of advisory firm ViableMkts LLC.“This is a reminder to a lot of people who may have been vilifying human interaction in the bond-buying process,” said White, a former fixed-income executive at Goldman Sachs Group Inc. “When things get really volatile, people become extremely valuable to the process.”Cutting RiskFor decades, banks have stepped back when prices are unpredictable and buying too much from a customer could trigger multimillion-dollar losses in just days. At the end of March, dealers cut risk-taking mainly by shutting off algorithms that were spitting out incorrect prices left and right.With Wall Street pulling back, asset managers stepped up to fill the void, according to MarketAxess Holdings Inc. data. Voice trades -- in which counterparties agree to a price over the phone, but process and hedge digitally -- rose to a record, according to Tradeweb Markets Inc.Roughly 70% of the investment-grade corporate bond market still trades with some element of human interaction, especially larger transactions over $2 million. The record credit trading volumes handled on MarketAxess, Tradeweb and Trumid Financial LLC show how traders took advantage of platforms to execute smaller, simpler transactions electronically, which in turn allowed them to focus their attention on more difficult deals that require complex analysis, said Chris Bruner, head of U.S. credit at Tradeweb.“Taking out any of the steps of manual work flow was really important in March so people could focus on risk,” Bruner said. “They were less worried about exact price, and more worried about moving an entire risk profile.”Bloomberg LP, the parent company of Bloomberg News, competes with Tradeweb, MarketAxess and Trumid in providing fixed-income trading services.Market turmoil also led to record volumes in portfolio trading, a relatively new practice that can price and sell a bundle of hundreds of bonds in minutes. Barely a concept three years ago, it is now a fast-growing part of the market. New data-analysis tools that allow prices to be fully automated are part of the reason that traders have seen their ranks greatly thinned in recent years.The events of this year may end up making bots better. JPMorgan Chase & Co. found that algorithms can in fact learn from humans in tempestuous markets. An algorithm it trained to recommend trades based on human market commentary significantly outperformed those based on only market observable features in March, strategists led by Joshua Younger said in a report dated April 23.The pace of tech innovation and disruption won’t be slowed by the events of March -- in fact, it will continue to gain speed, said James Switzer, global head of fixed-income trading at AllianceBernstein Holding LP. In March and April, his firm boosted by 500% its usage of MarketAxess’s all-to-all protocol, which allows for anonymous trading and can match investors with each other, as well as banks, on the other side of a transaction.“That’s what’s going to come out of this, a desire by the buy side to embrace all-to-all trading because we can’t always depend on dealer balance sheets,” Switzer said. “If we have to find the other side of the trade in an anonymous all-to-all fashion, we’ll do it.”Electronic powerhouses like AllianceBernstein and BlackRock Inc. have forged ahead to embrace technology. While both value having traders with market experience, they’ve also expanded recruiting criteria to include coding skills.Others like Mike Nappi, head of investment-grade credit trading at Eaton Vance, still like the old school way of getting the job done.“We don’t have a fully automated trading desk for a reason -- I want our traders to have a sense of what’s going on in the market,” Nappi said. “We’ll never live long enough to see who the winner is. But through our careers, there are going to be humans needed, just maybe not as many.”(Updates with JPMorgan report in 14th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The world’s largest credit ETF has ballooned since the Federal Reserve said it will backstop the market.Total assets in BlackRock’s iShares iBoxx $ Investment Grade Corporate Bond exchange-traded fund, ticker LQD, touched a record $46.7 billion on Tuesday, according to data compiled by Bloomberg. That compares to $28.2 billion on March 19, just days before the central bank said it would purchase investment-grade corporate bonds and certain ETFs that tracked them.The Fed’s move spurred a rally in high-grade bond markets, where investors were shedding their holdings in an effort to raise cash amid dire economic data. The central bank’s pledge combined with the asset class’s strong fundamentals makes investment-grade bonds look appealing, according to Columbia Threadneedle’s Ed Al-Hussainy.“Investment-grade credit is particularly attractive at the moment -- it captures large corporates with solid balance sheets and good access to market financing to weather this recession,” said Al-Hussainy, a senior strategist at the firm. “And of course, the asset class has an explicit Fed backstop.”LQD has rallied since the Fed announced the Secondary Market Corporate Credit Facility on March 23, which kicked off its first purchases last week. Corporate-debt funds led the intake for fixed-income ETFs last week, with investment-grade funds posting inflows and high-yield funds seeing outflows.The Fed’s touch has also been felt in the junk-bond market, with BlackRock’s iShares iBoxx High Yield Corporate Bond ETF, ticker HYG, also hitting a record size of $21.7 billion this week. U.S. policy makers expanded the bond-buying program to include recently downgraded debt last month, though the “preponderance of ETF holdings” will be concentrated in funds tracking high-grade credit.In addition to the Fed’s backstop, the economy’s reopening should benefit small-cap stocks and junk bonds, which tend to have weaker balance sheets, according to Academy Securities.“For me, it’s all about the reopen and a ‘rotation’ from work-from-home,” said Peter Tchir, Academy’s head of macro strategy. “High-yield does well generally when small caps do, so the upside will be in high-yield and leveraged loans.”But for Columbia’s Al-Hussainy, betting on junk bonds is still too risky of a proposition at this stage.“Right now, I would say investment-grade offers best risk/reward as a bet on the Fed’s balance sheet,” Al-Hussainy said. “Equities and high-yield are a bet on the effectiveness of fiscal policy.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Argentina and creditors seeking to hash out a $65 billion bond restructuring are still far apart, just days away from a deadline that could plunge the country into default.Talks have continued since bondholders sent two counterproposals Friday, but there’s a gap of about 20 cents on the dollar between the government’s offer and the most aggressive creditors, according to people with direct knowledge of the matter. Argentine officials have asked advisers to work on a new proposal that incorporates investors’ feedback but maintains a three-year moratorium on debt payments, some of the people said.Read More: Here’s What You Need to Know About Argentina’s Debt Crisis: Q&AIn an online forum Tuesday, Economy Minister Martin Guzman said he expected negotiations to extend past May 22, when the grace period expires on $500 million of overdue interest payments. Failure to hand over the money or reach an accord by then would mark the country’s ninth default in its 200-year history and potentially set off a painful court battle if bondholders decide there’s little chance of an agreement and move to file a lawsuit instead.“We are having a constructive dialogue with the bondholders,” Guzman said in the online event.The Exchange Bondholder Group -- alongside the Argentina Creditor Committee, Fintech Advisory and Gramercy Funds Management -- submitted a joint proposal to the government Friday that people familiar with the matter said would give bondholders about 55 cents on the dollar. A separate group that includes BlackRock Inc., Ashmore Group Plc and Fidelity Investments sent a plan that the people valued at about 59 cents on the dollar.An Economy Ministry spokesman declined to comment.Argentine creditors are unlikely to immediately seek to accelerate debt payments if the May 22 deadline is missed as long as talks are continuing, Alberto Bernal, the chief global strategist at XP Investments, wrote in a note to clients. It’s crucial the government maintains an “inclusive tone in the negotiations,” he added.The group that formed a joint proposal released the portion of its plan for bonds that were issued in 2005 and 2010 late Monday. It called for giving investors an instrument tied to gross domestic product, called for a shorter moratorium on coupons and a longer one on principal payments.Read More: Argentina Exchange Creditors Suggest GDP Instruments in DealThe BlackRock-led group sought recovery levels near 50 cents on the dollar for par bonds due 2038 as well as recovery levels above 60 cents on the dollar for discount bonds due in 2033 and bonds issued after 2016, said some of the people.The government’s original offer was an average of about 39 cents on the dollar, said the people.Negotiations started more than two months ago, and Argentina’s proposal had sought $40 million of debt relief and a three-year moratorium on debt payments. The country, home to South America’s second-largest economy, says it can’t meet its obligations amid high unemployment, a sharp drop in the value of its currency, accelerating inflation and a deep recession made worse by the coronavirus pandemic.(Add Alberto Bernal’s quotes in 6th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- A sudden spate of multibillion-dollar stock sales and corporate takeovers has raised hopes of a rebound from the severe dropoff in dealmaking brought on by the coronavirus crisis.JDE Peet’s, the world’s largest pure-play coffee company, on Tuesday unveiled plans for an Amsterdam initial public offering. The share sale could raise as much as 2 billion euros ($2.2 billion), according to people with knowledge of the matter, which would make it Europe’s biggest market debut in more than a year. Separately, Uber Technologies Inc. is negotiating a purchase of food-delivery rival Grubhub Inc., which has a market value of about $5.4 billion, Bloomberg News has reported. KKR & Co. agreed last week to invest in beleaguered cosmetics company Coty Inc. and take control of some hair-care brands it owns.Billionaire Masayoshi Son’s SoftBank Group Corp. also plans to announce a deal as soon as this week to offload about $20 billion of T-Mobile US Inc. stock, a person with knowledge of the matter said. This would follow PNC Financial Services Group Inc.’s sale of a $14 billion stake in BlackRock Inc., which helped equity capital markets desks make up some revenue lost in the frozen IPO market.In the U.K., London-listed catering provider Compass Group Plc is seeking to raise 2 billion pounds ($2.5 billion) in the biggest European share placement this year. Earlier this month, Telefonica SA and billionaire John Malone’s Liberty Global Plc agreed to combine their U.K. units to create the country’s largest phone and internet operator valued at about 31.4 billion pounds.Banking OptimistsGlobal mergers and acquisitions volumes fell in April to the lowest monthly level since 2004 as the viral pandemic took hold and remain down 41% this year, according to data compiled by Bloomberg. In the equity markets, recent deals have been aimed at shoring up companies’ balance sheets rather than bold expansion moves. IPO fundraising has fallen about 8% this year from the same period in 2019.The potential deals will add to optimism among bankers, including those at Goldman Sachs Group Inc., who predict transactions will pick up in the second half of the year. Senior dealmakers at Citigroup Inc. and UBS Group AG have said the Covid-19 crisis will give way to a wave of capital raisings and consolidation across key industries in Europe.Bankers are hoping that transformational deals are on the horizon. Companies that are well-positioned at the start of a crisis have historically been able to pursue strategic deals that wouldn’t otherwise have been possible, according to an analysis by JPMorgan Chase & Co.Attractive TermsBuyers who take the initiative can often secure attractive financial terms on acquisitions, JPMorgan’s global M&A co-heads, Anu Aiyengar and Dirk Albersmeier, wrote in a report Monday. They said buyers must be prepared to pay a premium to acquire healthy companies and face near-term stock pressure.Other deals in the pipeline include European infrastructure operator Atlantia SpA’s planned sale of a stake in its 2 billion-euro toll payment unit Telepass, Bloomberg News reported this week. Telecom Italia SpA confirmed late Monday it’s in exclusive talks to sell a minority holding in its wireless tower arm to a group of investors led by private equity firm Ardian SAS.To be sure, as long as uncertainty over the duration and severity of the Covid-19 pandemic remains, live transactions are in danger of collapse. ForeScout Technologies Inc. said on Monday that buyout firm Advent International wouldn’t close its $1.9 billion acquisition of the cybersecurity company as planned.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Federal Reserve Chairman Jerome Powell rejected a U.S. senator’s criticism of BlackRock Inc.’s involvement in coronavirus-relief efforts because of its interests in China, saying the central bank’s sole focus was on supporting American jobs.“We hired BlackRock for their expertise in these markets,” Powell said to Senator Martha McSally, a Republican from Arizona. “It was done very quickly due to the urgency and need for their expertise. We’re not trying to reach out for other public policy objectives.” BlackRock has been hired by the Fed to manage potentially billions of dollars of assets purchased under emergency lending facilities launched to keep credit flowing during the pandemic.Powell said the Fed plans to rebid the contract in the future. The firm stands to bring in as much as $40 million a year in fees to purchase and oversee corporate debt as part of a U.S. program to juice capital markets and counter the economic calamity of the pandemic, according to an analysis of the firm’s contract for the deal.China “unleashed this virus on America and the world with their classic communist cover-up” and BlackRock is “one of the leading investment banks in Chinese funds,” McSally said. Powell didn’t comment on China, but said the topic was not pertinent to the Fed’s emergency lending program. “All large asset managers buy Chinese securities. These are global asset managers. I’m not here to defend or criticize them for that. It’s not really relevant to the work we want them to do.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Argentine bonds extended a rally after the country’s largest creditor groups presented new debt restructuring proposals, fueling speculation the parties could be closer to reaching a deal.The $4.5 billion in overseas securities due next year advanced for a 10th straight day, bringing their gains to 40% in that span. The notes added 1.4 cent to about 39.6 cents on the dollar Monday morning.Argentina and its creditors are seeking to reach an accord on the $65 billion restructuring before May 22, when grace periods for $500 million in overdue interest payments expire. That deadline seems out of reach, but even signs of significant progress on a deal will probably keep investors from immediately taking Argentina to court over the default.“Will the government move its position enough to close a deal this week? Maybe,” said Diego Ferro, founder of M2M Capital in New York. “But if they don’t, while technically a default, it won’t matter. There’s nothing wrong with this negotiation continuing into next week, as it’s extremely unlikely creditors will initiate legal action with the talks ongoing.”The latest optimism bubbled up late Friday when separate creditor groups released new proposals. One came from a committee led by BlackRock Inc. that also includes Ashmore Group Plc and Fidelity Investments. The other was a joint plan from two groups encompassing the Argentina Creditor Committee, Fintech Advisory, Gramercy Funds Management and the Exchange Bondholder Group.Bondholders had previously rejected Argentina’s initial proposal, presented in mid-April. It asked creditors for a three-year moratorium on bond payments, a steep cut on interest and a 5.4% reduction on the bonds’ principal.While the two counter proposals signal there’s still a gap in what’s being sought by the disparate creditor groups, they also show that at least negotiations are continuing. The government said in a statement that it received the new proposals, without providing details of their content.Both counteroffers call for better terms for bondholders than Argentina’s offer, with the BlackRock-led group’s plan seeking a smaller haircut, according to the people familiar with the proposals who asked not to be identified discussing confidential matters.President Alberto Fernandez’s administration is aiming for $40 billion in debt relief, arguing the country can’t pay in full as its budget deficit and inflation soar and the Covid-19 pandemic deepens a recession that began two years ago.“Argentina hopefully will be a model of how this can be done with good will, with both sides walking off saying ‘we wish this hadn’t been but we have to live with reality, not with a fictional world,’” Joseph Stiglitz, an economist at Columbia University, said in an interview on Bloomberg Television.(Updates with analyst quote in fourth paragraph, adds chart)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Traders have fled China-focused equity funds at the fastest pace in at least four years on the heels of renewed Sino-American tensions.As Wall Street weighed the latest dramas between the world’s two largest economies last week, investors pulled $330 million from BlackRock Inc.’s iShares China Large-Cap fund, the most since 2016, data compiled by Bloomberg show.All in, money managers divested $2.7 billion from Chinese stocks in the five days to May 13, the most since at least 2016, according to Goldman Sachs Group Inc. That brings the four-week total to $6.2 billion, outpacing emerging-market counterparts.While pandemic-lashed investors are cheering any signs of a rebound in Asian investment and consumption, the geopolitical backdrop is darkening.In the latest salvo, White House trade adviser Peter Navarro suggested that Beijing sent airline passengers to spread the infection worldwide. The missive follows reports last week that the White House planned to block Huawei Technologies Co. from global chip suppliers. “Tensions with U.S. spurring equity outflow,” Goldman FX strategists including Zach Pandl wrote in a note. “At this point we have not built higher tariffs or other aggressive action (e.g. potential delisting of Chinese firms on U.S. exchanges) into our baseline forecasts.”Overall market participants in recent weeks have focused squarely on positive data signaling how China is bouncing back from the pandemic. The country’s industrial output increased in April for the first time since the coronavirus outbreak, adding to early signs of a recovery that economists cautioned would be slow and challenging.Global stocks have rallied more than 25% from March lows on soothing actions from central banks coupled with signs that the lockdown is easing across major economies. The question now is how much credence should investors give to the recent jawboning between the two powers.Wild Cards“It is one of the biggest wild cards in the 2020 outlook; the main uncertainty is whether the confrontation will be mainly rhetorical or evolve into concrete actions,” JPMorgan Chase & Co. strategists including Haibin Zhu wrote in a note. “But it is clear that the bilateral confrontation will expand beyond trade into other areas, including technology, finance, and geopolitical issues.”At TD Securities, strategists led by Mark McCormick suggest a “rise in rhetoric” even without concrete actions would likely be enough to “spook markets” given the fragility of the economic backdrop.Meanwhile at Nordea Bank ABP, Andreas Steno Larsen and Joachim Bernhardsen are telling clients to go long the dollar against Chinese currency risk as a high-conviction call, citing the breakdown in economic relations.“The trade deal was always ‘born to die’,” the strategists wrote in a note. “But no one had an incentive to reveal it until after the U.S. election. The coronavirus has offered the Trump administration an opportunistic chance to opt for China bashing instead.”Still, one widespread view maintains that President Donald Trump can scant afford to alienate his Asian counterparts given their mutual interest in combating both the virus and the global downturn -- clearing the path for cross-asset bulls.“There is co-dependency there which reduces a chance of a big fallout at this stage,” said Seema Shah, chief strategist at Principal Global Investors.All the same, Wall Street strategists recommend cross-asset hedges while they’re cheap.At Susquehanna, Chris Murphy points out that the 30-day implied volatility for the BlackRock ETF, ticker FXI, has been trading largely in line with its American counterpart, the SPDR S&P 500 Trust. Yet the market calm looks potentially unsustainable -- a backdrop that has previously rewarded options traders using the popular ETF to hedge trade-war risk.“Given China’s dependence on trade as nations look to rebuild supply chains from within, combined with risk of increased tensions with the U.S. and a potential for reinstatement of tariffs, I think volatility is too low (especially compared to SPY),” the derivatives strategist wrote in a recent note.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Wall Street veteran Charles Myers got a surprise Wednesday in his Park Avenue home office. The longtime Democratic donor and former vice chairman at investment bank Evercore was sitting near photos of Barack Obama, Bill Clinton, and Margaret Thatcher when he read the names on Joe Biden’s new economic policy task force.None of his financial industry friends were there. Myers saw one congresswoman, two labor leaders and five economists from academia or think tanks.“I literally don’t know any of them -- I’ve never heard of them,” Myers said after Biden and vanquished rival Senator Bernie Sanders announced the members of the “unity” policy committees, part of a broader Biden effort to keep progressives engaged with his campaign.Yet the banker isn’t bothered. Wall Street’s Democratic insiders, who have been cutting checks and winning access for decades, say they have plenty of sway in Biden’s orbit, despite his very public wooing of the progressive left. Some finance veterans have even begun to think about the spots they might land in Washington if Biden wins.Myers, a bundler for the Biden Victory Fund and chairman of Signum Global Advisors, said keeping bankers off the task force was “a very tactical and very smart move.”Biden, Sanders Unveil Policy Groups Including AOC, Kerry, Holder“But it doesn’t mean that, in the end, the selection of Cabinet members will be determined by these people,” Myers said.Close Biden adviser Ted Kaufman, a former U.S. senator, said personnel decisions would be guided by the principles Biden has campaigned on. Biden has argued that he’s better suited than President Donald Trump to rebuild the economy in 2021, citing his oversight of the stimulus money released by the Obama administration when he was vice president.“We’re going to have people involved in the administration who, as he’s said time and time again, make sure that we deliver an economic recovery that redounds to the benefit of the middle class -- not like the coronavirus stimulus and not like the Trump tax bill, where the majority of the benefits went to the top 1%,” he said.Trump, who picked Goldman Sachs Group Inc. alumni to be his Treasury secretary and first economic adviser, has cut taxes for the rich and the companies they run, and is now consulting billionaires from the hedge fund and the private equity industries on reopening the economy as the coronavirus pandemic eases.Lots of IdeasIf Biden wins in November, one top Wall Street executive is hoping to get a position in the Defense Department, and a veteran of a global bank wouldn’t be interested in anything but the top Treasury spot, they said, asking not to be named.Myers said he doesn’t want an administration job, but has ideas for Biden on possible appointees. He’d recommend Tom Nides, a vice chairman of Morgan Stanley, Evercore founder Roger Altman, BlackRock Inc. boss Larry Fink, Blackstone Group Inc.’s Tony James, and Blair Effron, co-founder of Centerview Partners, where Goldman executive-turned-Treasury Secretary Robert Rubin is a counselor, among others.They’re all members of the centrist wing of the Democratic Party, a group of executives that tend to celebrate Wall Street rather than try to undermine it, and who were often annoyed by Sanders’s and Senator Elizabeth Warren’s presidential bids.Throwing FundraisersSeveral have been throwing or attending fundraisers for Biden for months. Rubin was spotted at a fundraiser at the Carlyle Hotel last year, where the candidate said he “may not want to demonize anybody who has made money.” Top Goldman executive Stephen Scherr and former Goldman partner Eric Mindich were there, too.Sarah Bianchi, who worked for Mindich’s hedge fund before she became Biden’s head of economic and domestic policy in the Obama administration, is now head of public policy for Evercore. She also ran the Biden Institute’s policy advisory board, a group that included Mindich, Nides, former Treasury Secretary Larry Summers, and JPMorgan Chase & Co. executive Peter Scher. Summers is a commentator for Bloomberg Television and its “Wall Street Week” program.Jeff Zients, a former Obama economic adviser who now runs the Cranemere Group, a holding company that buys businesses, threw a Washington fundraiser for Biden. It was co-hosted by Michael Froman, Obama’s U.S. Trade Representative and now an executive for Mastercard Inc.Fink, the billionaire who runs the world’s largest asset manager, has been seen on Wall Street for years as a potential Treasury secretary. BlackRock’s head of sustainable investing, Brian Deese, and the chairman of its investment institute, Tom Donilon, both had top roles in Obama’s White House. Obama’s two Treasury chiefs, Jacob Lew and Timothy Geithner, are now private equity executives.‘Not Bad Folks’”Wall Street are not bad folks, but they didn’t build this country,” Biden said last week during a fundraiser hosted by Comcast Corp. executive David L. Cohen. “The middle class built the country, ordinary women and men capable of doing extraordinary things, that’s who I believe in, that’s why I’m in this race.”Not everyone thinks Biden will surround himself with bankers and billionaires, and Biden himself has been careful to balance his need for their advice and money and his quest to attract middle-class and progressive voters.“The Biden camp includes people who believe that government has too often been captured by the industries that it ought to regulate -- it also includes people who have helped industries co-opt government,” said Jeff Hauser, who runs the Revolving Door Project at the Center for Economic and Policy Research, a progressive think tank in Washington.“I am optimistic that Biden understands that his legacy involves shifting to the left, and becoming more populist on a variety of economic issues. He has had an instinct for understanding the movement of the Democratic Party for two generations,” Hauser said.Robert Wolf, a former UBS Group AG executive, believes Biden can win over a majority of Wall Street and business leaders, who could then help him in the years to come. “The nation is his Rolodex,” said Wolf, who now runs the firm 32 Advisors LLC. “And he’ll have a group of experts to choose from to lead the recovery.”Campaign spokesman Andrew Bates said Biden’s aim is to build a stronger middle class “with the most progressive, far-reaching, bold and transformational agenda of any president since the Great Society. That mission will dictate all of his decisions when it comes to building a Biden administration.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- The Federal Reserve’s stated mandate is to “promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates.” The first part is obviously a disaster right now, with more than 36 million Americans filing initial jobless claims in the past eight weeks, bringing U.S. unemployment to levels not seen since the Great Depression. The last objective is easily met, with benchmark Treasury yields hovering close to all-time lows.But what about stable prices?For years, Fed officials fretted that consumers’ inflation outlook was almost too stable at historically low levels. Vice Chair Richard Clarida, for one, follows University of Michigan data that surveys expected price changes during the next five to 10 years. That gauge fell to 2.2% in December, a record low. A year earlier, when it was at 2.6%, he called it “within — but I believe at the lower end of — the range consistent with price stability.” Since 2012, expectations have fluctuated in a tight window of 2.2% to 3%, including 2.6% in a report released Friday. The central bank generally views 2% as its target rate.The coronavirus pandemic has shaken American households to their core in any number of ways. At best, it’s acclimating to working from home and adjusting day-to-day behavior. At worst, the most economically vulnerable individuals are suddenly unemployed and unsure when — or if — they’ll be rehired.Fed Chair Jerome Powell previewed some of the devastation earlier this month from what was at the time an unreleased report. “Among people who were working in February, almost 40% of those in households making less than $40,000 a year had lost a job in March,” he said in prepared remarks. “This reversal of economic fortune has caused a level of pain that is hard to capture in words, as lives are upended amid great uncertainty about the future.”Though seemingly insignificant for now, the once-stable outlook for inflation appears to also have shifted drastically. As America comes out from under the Great Lockdown, how central bank officials handle what could be early signs of unanchored inflation expectations, and how the public responds, could play a crucial role in any recovery.In a blog post, New York Fed researchers found “unprecedented increases in individual uncertainty — and disagreement across respondents — about future inflation outcomes.” The share of people who expect deflation in 2021 increased from from less than 10% at the end of February to more than 20% a month later. Meanwhile, those who expect short-term inflation to be higher than 4% jumped from about 30% to almost 45% in the same period. In other words, although the median expectation might only show a small move, some households are bracing for a drastic swing.At a high level, these are two vastly different economic scenarios. Deflation frightens policy makers because rational consumers would postpone purchases to get goods and services at a cheaper price. That would curtail economic activity and potentially exacerbate the situation. Yet much higher inflation would erode the purchasing power of consumers, particularly those with lower incomes or who can’t afford to invest in assets that rise with price growth. Neither of these options is ideal, which is why the Fed is tasked with engineering a stable middle ground.It’s little surprise that people are so unsure on the direction. On the one hand, an oil futures contract traded at a negative price for the first time, the core consumer price index tumbled month over month by the most on record, and, as my Bloomberg Opinion colleague Tim Duy noted last month, there’s growing anecdotal evidence of wage cuts, no matter what the spike in last month’s average hourly earnings figure may suggest. Steven Blitz, chief U.S. economist at TS Lombard, argues that rent, which has been a source of consistent inflation for decades, will experience a drop that will “be bigger and last longer in this cycle.” Add to that a reckoning in higher education, a source of huge cost increases, and the argument starts to form for a deflationary period.And yet there’s also news about meat-processing disruptions in the U.S. that have cut pork and beef supplies and caused some steak prices to double in the past two months. It’s fair to wonder whether globalization is on the decline and the knock-on effects for the cost of goods. The concern among some inflation-watchers, as Michael Ashton at Enduring Investments LLC put it: “With money supply soaring and supply chains creaking, any return to normal economic activity is going to result in bidding for scarce supplies with plentiful money. You already see that in food, the one thing it’s easy to buy right now. That's the dynamic to fear when we reopen.”My Bloomberg Opinion colleague Barry Ritholtz wrote earlier that those worried about inflation are probably wrong, just as they were after the 2008 financial crisis. I tend to agree that price growth reaching 5% or higher would require a number of unlikely events to happen concurrently. With data starting to come in from U.S. states that are reopening, it’s becoming clear that a swift return to the pre-coronavirus economy is unlikely.Surveys are also gloomy. Just 31% of American adults would feel comfortable going to the movies in the next three months, according to responses from May 5-8 from Morning Consult. That’s little changed from 29% in the April 7-9 period. Feelings are about the same for concerts, museums, amusement parks, theater performances and the gym. The latest Small Business Pulse Survey from the Census Bureau showed that almost one-third of respondents expect it will take more than six months to return to normal levels of operation, and 6.2% believe their business will never get back to where it was. As a general rule, I’d only start to worry about inflation if few others seem concerned about it. It’s worth watching to see if a consensus starts to build in one direction. Admittedly, the idea that price growth was an underappreciated threat was BlackRock Inc.’s rationale for calling it one of the biggest risks in 2020, and obviously that didn’t pan out. Still, after the latest CPI data, Rick Rieder, the company’s chief investment officer of global fixed income, said that “2020’s broad deflationary influences may well lead to higher rates of inflation next year,” adding that the market’s expectations for price growth close to zero are “unrealistic and excessively pessimistic.” The longer something stays steady, the harder it can be to imagine what could push it outside the norm. That’s especially true for a prominent macroeconomic figure like inflation, watched by traders across markets. American households are signaling they don’t have a clue about what the pandemic will mean for future prices. How it shakes out could have significant consequences for the trajectory of any economic recovery.This 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/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Forget plunging oil prices and a collapse in consumer spending. Some of the world’s most-prominent investors are raising alarm bells over the looming threat of inflation, and turning to gold for protection.Money printing by central banks and vast state stimulus packages are rekindling interest in one of the oldest stores of wealth. It’s a revival of a trade that became popular in the wake of the 2008 crisis, as money managers piled into gold for similar reasons, but were ultimately disappointed as inflation was kept in check. Yet the unprecedented scale of the government response to the coronavirus crisis is feeding the argument that this time will be different.Hedge fund luminaries including Paul Singer, David Einhorn, and Crispin Odey are among those bullish on gold, according to recent letters to investors. So are large asset managers like Blackrock Inc. and Newton Investment Management.“Gold is the only escape from global monetising,” Odey wrote. Gold futures were the third-largest position held by his flagship Odey European Inc. fund at the end of March. “In the short term, the money will be made on the inflation bet.”The logic is simple: the massive expansion of central bank balance sheets around the world must eventually dilute the value of their currencies -- most importantly the dollar -- leading to inflation of hard assets like gold. The price of the metal has already risen sharply this year, touching a seven-year high of $1,751.69 an ounce on Friday. But some believe it has much further to go.“In recent months, gold has gone up in price to some degree, but we think that it is one of the most undervalued investable assets existing today,” Singer’s Elliott Management Corp. wrote in a letter to investors in April. He argued that low interest rates, mine disruptions and “fanatical debasement of money by all of the world’s central banks” would lead gold to rise to “literally multiples of its current price”.BofA Raises Gold Target to $3,000 as ‘Fed Can’t Print Gold’There’s just one problem: it’s a familiar investment thesis in the gold market, and last time it was tried, in 2008, it fell flat. The most prominent gold champion back then, John Paulson, predicted “massive inflation” and bet on gold as “the only asset that will hold value,” according to the 2009 book “The Greatest Trade Ever.”While the bet was initially a profitable one -- gold rose to a record of $1,921.17 in 2011 -- the high inflation Paulson predicted never materialized, and the gold market fell into a multi-year slump that weighed on his funds’ performance.Today the gold market faces a similar debate. Despite the warnings, market measures of investor expectations are pointing toward lower inflation as the world undergoes one of the sharpest economic downturns in history. The U.S. five-year/five-year breakeven, a measure of medium-term inflation expectations, has fallen from around 1.8% at the start of the year to 1.4% now.“The speed of money transmission has slowed down so much,” says Darwei Kung, head of commodities and portfolio manager at DWS Group. “Without that changing, it doesn’t really tell us we’re going to have a high-inflationary scenario coming back.”Those betting on gold argue that there are key differences between now and 2008.First, governments have responded to the coronavirus shock with larger stimulus measures, and show greater readiness to build up debt levels.“We expect policymakers to target and applaud mid-single digit inflation, which, combined with interest rate suppression, will be the only way to outgrow the mounting debts,” Einhorn’s Greenlight Capital argued in a letter to investors.Gold Bugs Finally See Their Predictions of Doom Coming True“It’s almost inevitable that there will be a fiscal tailwind for gold -- when markets wake up to the scale of the stimulus,” agrees Catherine Doyle at Newton Investment Management.Second, the current economic crisis is not just hitting demand for goods and services but also supply. Businesses have shut down and, in the longer term, the crisis may push companies to redraw supply chains.Even if hyper-inflation isn’t round the corner, the costs of holding gold are relatively low in the current economic environment. Russ Koesterich, portfolio manager of the $20.5 billion BlackRock Global Allocation Fund, points to gold’s inverse relationship with real interest rates: when interest rates, adjusted for inflation, are low, the opportunity cost of holding gold is similarly low. Currently, real rates are negative.That means even if inflation doesn’t accelerate, the prospect of policy interest rates near zero -- or even negative -- for the foreseeable future should boost the metal’s appeal.“In an environment in which bond yields are close to zero, and decidedly negative after inflation, there is no opportunity cost to holding gold. Historically, this is when gold has performed the best,” says Koesterich, who has been increasing his gold exposure.And, just as in 2008, the arrival of high-profile backers may continue to buoy the gold market. Exchange-traded funds tracking the precious metal have seen the biggest dollar inflows on record in the first five months of the year.“The people that were expecting QE to result in much higher gold prices in 2008, are now saying, ‘my god!,” said John Reade, chief market strategist at the World Gold Council and a former partner at Paulson & Co. “The key is, does that view become more widely held?”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Argentina’s largest creditors sent Alberto Fernandez’s government new counteroffers in an effort to reach a $65 billion restructuring deal in the coming week.A bondholder group that includes BlackRock Inc., Ashmore Group Plc and Fidelity Investments submitted one of the proposals late Friday, according to people with knowledge of the matter. Another joint plan was presented in separate statements, one by the Argentina Creditor Committee, Fintech Advisory and Gramercy Funds Management, and another by the Exchange Bondholder Group, said the people, who could not be named because the talks are private.The government said in a statement that it received the proposals, without providing details of their content.The separate submissions highlight the diverging investor views that potentially complicate the South American nation’s ability to reach a deal. Bondholders had already clashed with Argentine officials over their initial proposal, presented in mid-April. There’s little time to waste: The country could officially fall into default on May 22, when a grace period for about $500 million of interest payments ends.It remains to be seen how the government will react. Both counteroffers call for better terms for bondholders than Argentina’s initial proposal, with the BlackRock-led group’s plan seeking a smaller average haircut, according to the people. President Fernandez’s administration is aiming for $40 billion in debt relief, arguing the country can’t pay in full as its budget deficit and inflation soar and the Covid-19 pandemic deepens a recession that began two years ago.READ MORE: BlackRock-Argentina Feud Gets Heated and Sets Back Debt TalksArgentina received three counteroffers from creditors on Friday, the Economy Ministry said in a statement. The ministry and its financial advisers are analyzing each proposal to see how they fit with debt sustainability goals.The Argentina Creditor Committee, Fintech Advisory and Gramercy said in a statement that they submitted a plan concurrently with the Exchange Bondholder Group, which has focused on bonds issued in the country’s 2005 and 2010 exchanges. The group said its offer represented a “good faith effort” for an expeditious restructuring and a long-term sustainable debt profile.The counterproposal offers “Argentina substantial cash-flow relief by a combination of interest holiday, decreases in coupon payments and deferral of amortization payments,” according to the statement.READ MORE: Here’s What You Need to Know About Argentina’s Debt Crisis: Q&AEconomy Minister Martin Guzman had signaled potential progress earlier in the afternoon on a call with the Council on Foreign Relations.“We know creditors have been working hard on this in getting together to make an alternative proposal,” he said. “We want to listen, we want to see what the alternative ideas we can take in order to reach a deal that works for everyone.”The national government is not alone in struggling to pay back its overseas debt. The Province of Buenos Aires, Argentina’s largest, was declared in selective default by S&P Global Ratings late Friday after it failed to make a payment before its grace period expired this week. The province is now going through a “distressed exchange” as it continues to negotiate with creditors ahead of a May 26 deadline.(Updates to add bondholder group statement in seventh paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- After seven dizzying weeks of gains, Canada’s stock market is at an impasse.Two back-to-back days of heavy losses this week was enough to snap the S&P/TSX Composite Index’s winning streak as health officials warned on premature reopenings, Wall Street heavyweights called for caution and trade tensions between the U.S. and China heightened.Investors wagering on negative interest rates may be getting ahead of themselves as Federal Reserve Chairman Jerome Powell and other central bankers dismissed going below zero. The Fed also issued a stark warning Friday, just as the market closed, that stock and other asset prices could suffer “significant declines” should the coronavirus pandemic deepen.“We’ve effectively moved from the ‘shock and awe’ phase associated with massive fiscal and monetary stimulus to the ‘aw, shucks’ phase when investors recalibrate to the potential difficulties associated with containing and recovering from the global pandemic,” said Kurt Reiman, who sets strategy for the Canadian arm of BlackRock Inc.Case in point: Asian economies that have seen some of the most success quelling the coronavirus are now facing resurgences. It’s a painful reminder that as countries open up again and people resume normal life, flare-ups are likely. Closer to home, Quebec had to push back the time frame to restart the economy in Montreal as the city and its suburbs became Canada’s biggest Covid-19 hotspot. In contrast, Ontario announced it would begin to reopen most stores, except for those in shopping malls.The S&P/TSX Composite gained Friday, but was down 2.2% for the week, trimming its gains to 30% from the low on March 23.“It’s normal to see a pullback in markets in any environment, especially given the highly uncertain backdrop created by he Covid-19 pandemic,” said Lesley Marks, chief investment officer at BMO Private Wealth. “Investors are realizing that even though there is optimism for a recovery with easing restrictions globally, the recovery will be slow and not necessarily be a smooth path upward.”Reiman noted the uneven performance of various industries. Both growth and defensive sectors, like tech, utilities and consumer staples, had stronger earnings and returns in Canada and globally. Cyclicals like energy and financials experienced sharp earnings downgrades and dividend cuts.Markets -- Just The NumbersGetting DefensiveWhile markets may have priced in the bad economic data released so far, there’s more to come.“Our view is that in the coming months, we’re probably not going to see the same level of policy responses and announcements,” Craig Basinger, chief investment officer at Richardson GMP, said. “It’s hard to keep throwing a trillion dollars every month at the market. And at the same time, we’re going to start getting more bad more economic and earnings data.”Basinger said he has reduced exposure to stocks in his funds and has tilted to a more defensive view. Second quarter-earnings results will be “anyone’s guess,” added Chris Kerlow, portfolio manager at Richardson GMP.Blackrock’s Reiman prefers U.S. stocks for their greater exposure to companies with strong balance sheets and hefty U.S. fiscal and monetary-policy measures. He also prefers corporate bonds over stocks for higher and more stable income stream.Chart of the WeekEconomyAs far as the Bank of Canada is concerned, the country’s financial system remains resilient in the face of the Covid-19 pandemic and moves to keep credit markets functioning have been largely effective, though risks remain. The central bank’s balance sheet grew to C$416.6 billion, about 18% of Canada’s gross domestic product.Economic Contraction in Canada Seen Five Times Worse Than 2009Consumer confidence is showing signs of improving as Canadians’ views on their personal finances, job security and expectations for the economy all improved.Earlier this week, Justin Trudeau’s government unveiled a loan program for large companies with annual revenue of C$300 million ($212 million) or more that have been hit by Covid-19 and can’t get financing by conventional means. Firms in all sectors can apply for the funding except the finance industry.PoliticsThe world’s longest undefended border will likely remain shut until late June, according to a newspaper report. Prime Minister Justin Trudeau said at a media briefing this week that Canada will be “very, very careful about reopening any international travel including the United States.”TrendingInCanadaTorontonians reminisced about Kawhi Leonard’s basketball shot that sent the Toronto Raptors to the NBA Eastern Conference finals over the Philadelphia 76ers. It was arguably the greatest moment in Raptors franchise history since two weeks later the team won their first ever NBA championship. Given the season is still so far shut down, Toronto can take comfort in the fact that they are still, The Champs.(Updates to include Fed’s warning on asset prices in the third paragraph and TSX’s weekly move in sixth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
BlackRock, Inc. (the "Company") (NYSE:BLK) today announced that it has completed the secondary offering of 31,628,573 shares of common stock held by The PNC Financial Services Group, Inc. ("PNC") (NYSE:PNC), including exercise in full of the underwriters’ option to purchase additional shares from PNC, at a price of $420 per share. The Company also announced the completion of its repurchase of approximately 2.7 million shares, at a price of $414.96 per share (representing the price paid by the underwriters in the offering), for an aggregate purchase amount of $1.1 billion. PNC disposed of a total of 34,279,430 shares pursuant to the offering and repurchase, resulting in PNC exiting its entire ownership position in BlackRock, other than 500,000 shares PNC intends to donate to The PNC Foundation.
(Bloomberg) -- An effort by investment giants including BlackRock Inc. to redefine the $4 trillion U.S. exchange-traded fund universe has the industry’s smaller players bristling.The push to re-classify funds into four separate categories looks like a move by the biggest providers to further cement their dominance, the critics argue, and risks confusing retail investors in the ever-more complex world of passive markets.Under proposals sent to exchanges this week by a coalition of the largest asset managers, a host of products would lose their ETF designation, becoming instead exchange-traded instruments, notes or commodities.“They’ve decided they want to monopolize the ETF label for only uses they declare,” said Rob Nestor, president of Direxion, one of the largest issuers of leveraged and inverse ETFs, which would become ETIs if the plan succeeds. “It’s just going to sow confusion for investors and basically serve the interest of the largest providers in the space.”The consortium pressing for the changes -- which alongside BlackRock comprises State Street Corp., Vanguard Group, Charles Schwab Corp., Fidelity Investments and Invesco Ltd. -- says the four distinct categories will boost investor awareness of the different risks.The six firms together make up more than 90% of the U.S. ETF market, according to data compiled by Bloomberg.The industry has come under scrutiny in recent months as the coronavirus pandemic roiled markets. Regardless, this long-standing push -- which would result in the vast bulk of funds from big issuers retaining their ETF classification -- is leaving the smaller players up in arms.“What they’re trying to do is corner the market on the ETF brand,” said Alfred Eskandar, co-founder of Salt Financial. “It’s just the big trying to get even bigger.”‘Needlessly Confuse’BlackRock has been an advocate of re-classification in the ETF industry for several years. The world’s largest asset manager put forward a list of suggested categories in 2017 that mirror those in this week’s letter.The following year, the U.S. Securities and Exchange Commission’s Fixed Income Market Structure Advisory Committee -- of which BlackRock is a member -- submitted a similar proposal to the regulator.But the SEC declined to implement the proposed naming system when it passed a long-awaited rule streamlining the process for launching funds in 2019. Instead the agency encouraged issuers to engage with their investors and each other on ETF nomenclature.“This proposal, a retread of a scheme by Blackrock that has failed to gain traction numerous times in the past, would reverse 27 years of the common use of the term ETF,” said Michael Sapir, chief executive officer of ProShares, another heavyweight among leveraged ETF issuers. “It would draw arbitrary lines that would needlessly confuse investors, squash innovation, and further entrench the dominant financial players who are proposing it.”BlackRock itself maintains the drive is an attempt to simplify things, however.“ETF has become a blanket term for a range of products that can lead to significantly different outcomes,” said Samara Cohen, co-head of iShares Global Markets and Investments at BlackRock. The goal of the proposal “is to have a shared language to promote clarity and provide compass points to navigate the ETP landscape,” she said.Retail ComplaintsLeveraged funds in particular have come under fire after the virus spurred turbulence in the first quarter.The SEC said in April it received numerous complaints from retail investors about leveraged products, revealing a “widespread lack of understanding” about how the funds were intended to operate.Similar concerns were stoked just weeks later when the United States Oil Fund LP, ticker USO, was forced to take a series of unusual actions as crude prices plummeted. Retail investors had piled into the $4 billion fund just before the turmoil.If the re-classification is adopted, USO would likely fall under the umbrella of an exchange-traded commodity rather than an ETF. John Love, president of USO issuer USCF LLC, said in an email that the firm has no objection to the proposal.Still, there’s no shortage of market particpants worried that re-classifying funds will only add to the complexity in this booming corner of the investing world.“The $4 trillion industry already uses hard-to-follow jargon, such as smart-beta and semi-transparent active, to describe existing products,” Todd Rosenbluth, CFRA Research’s head of ETF and mutual fund research, wrote in a Thursday note. “A new system could lead to more confusion.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.