MS - Morgan Stanley

NYSE - NYSE Delayed price. Currency in USD
33.85
-0.05 (-0.15%)
At close: 4:02PM EDT
Stock chart is not supported by your current browser
Previous close33.90
Open33.56
Bid33.79 x 900
Ask33.99 x 1000
Day's range32.86 - 34.30
52-week range27.20 - 57.57
Volume15,297,943
Avg. volume18,534,496
Market cap51.872B
Beta (5Y monthly)1.38
PE ratio (TTM)6.52
EPS (TTM)5.19
Earnings date14 Apr 2020 - 19 Apr 2020
Forward dividend & yield1.40 (4.13%)
Ex-dividend date29 Jan 2020
1y target est48.25
  • Morgan Stanley (MS) Stock Moves -0.18%: What You Should Know
    Zacks

    Morgan Stanley (MS) Stock Moves -0.18%: What You Should Know

    Morgan Stanley (MS) closed at $33.84 in the latest trading session, marking a -0.18% move from the prior day.

  • Morgan Stanley plans to hold annual meeting in person
    Reuters

    Morgan Stanley plans to hold annual meeting in person

    The company said in the event it is not possible or advisable to hold the meeting at its Westchester headquarters in New York, it will announce alternative arrangements which may include holding a virtual meeting.

  • LBO Deadlines Are Here, Leaving Bankers on the Hook for Billions
    Bloomberg

    LBO Deadlines Are Here, Leaving Bankers on the Hook for Billions

    (Bloomberg) -- Banks that agreed to help finance leveraged buyouts are starting to feel the pain from a freeze in the market for risky corporate debt.Lenders including Morgan Stanley, Bank of Ireland Group Plc and Citizens Financial Group Inc. have been forced to self-fund at least $1 billion of loans in recent weeks to ensure private-equity led acquisitions close as planned, according to people with knowledge of the matter.Unable to syndicate the debt to institutional investors, the banks have become unintentional holders of speculative-grade loans to a filtered-water company, a pet-food manufacturer and a U.K.-based maker of audio mixing consoles for DJs, said the people, who asked not to be named because the details are private.The loans represent only a small slice of over $30 billion in junk-rated debt that lenders may be forced to take onto their balance sheets this quarter if the market remains fragile. And while the exposure is a fraction of the commitments they held heading into the 2008 financial crisis, it nonetheless risks consuming precious capital just when banks need it most.While the high-yield bond market is starting to show signs of thawing, the cost of borrowing has soared. That could erode the fees banks are due depending on the terms of lending commitments they agreed to before the sell-off, and expose them to losses if they’re eventually forced to offload the debt at a steep discount.Read more: Wall Street is quietly telling companies not to draw their loansA group of lenders led by Morgan Stanley were forced to come up with $350 million at the end of March to allow Culligan NV, a filtered-water company owned by buyout firm Advent International, to close its takeover of AquaVenture Holdings Ltd., according to the people. The funded loan was smaller than the $500 million the banks had initially agreed to underwrite because AquaVenture sold its water-treatment unit to Morgan Stanley Infrastructure Partners, one of the people said.Just a couple weeks earlier, Citizens Financial had to fund a $285 million leveraged loan it agreed to provide J.H. Whitney Capital Partners-owned C.J. Foods Inc. for its acquisition of American Nutrition Inc. In Europe, a group led by Bank of Ireland got stuck with around $400 million of debt for private equity firm Ardian’s acquisition of Audiotonix Ltd., a U.K.-based maker of mixing consoles used in music and broadcasting, according to people with knowledge of the deal.Representatives for Morgan Stanley, Bank of Ireland, Advent and Ardian declined to comment, while Citizens Financial and J.H. Whitney didn’t respond to requests for comment.The leveraged loan market has been shut for roughly three weeks now. While smaller financings aren’t especially painful for banks to hold, they can become difficult to offload in the broadly-syndicated market even when conditions improve, given competition from bigger, more liquid transactions.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.

  • Morgan Stanley, Goldman Get Nod for Majority Stakes in China JV
    Zacks

    Morgan Stanley, Goldman Get Nod for Majority Stakes in China JV

    With the approval of increasing their stake in respective securities JV, Morgan Stanley (MS) and Goldman (GS) are set to further diversify their revenues.

  • Bloomberg

    Morgan Stanley, Goldman Win China Nod to Control Ventures

    (Bloomberg) -- Morgan Stanley and Goldman Sachs Group Inc. were granted approvals to take control of their securities joint ventures in China as policy makers push ahead with the opening of the nation’s $45 trillion finance industry even as they fight to contain the coronavirus outbreak.Morgan Stanley plans to boost its stake to 51% from 49% with the approval from the China Securities Regulatory Commission, the New York-based bank said in a statement Friday. Goldman said it also won approval to control its partnership, lifting the stake from 33%.The move comes as China pledges to further open its investment banking and asset management industries on April 1 by allowing foreign banks to apply for full ownership of their partnerships, or start their own ventures. Global banks are rushing in to capture an estimated $9 billion in annual profits in commercial and investment banking alone. China has also swung the door open wider for insurers.“Good news for foreign capital under the virus situation with lots of uncertainties and prospects of global recessionary economic situations, where China assets and interest rates could be relatively attractive,” said Lou Jian,Shanghai-based partner at consulting firm Roland Berger. “It shows China’s commitment to openness in capital markets and foreign participation.”The finance industry opening, which was sped up in the January trade deal with the U.S., is designed to draw in foreign investment to support economic growth. The world’s second-largest economy is now in the midst of what could be the slowest expansion in more than four decades as large parts were shuttered because of the virus outbreak that’s now spreading around the world.Goldman Sachs has said it will seek full ownership of its joint venture, going beyond the 51% controlling stake for which it filed for approval last August. The New York-based bank is embarking on a five-year expansion plan that includes doubling its workforce in the country to 600, ramping up businesses including asset and wealth management.“We will be seeking to move towards 100% ownership at the earliest opportunity,” Todd Leland, co-president of Asia Pacific ex-Japan, said in the statement.Read more: China Is Dismantling Its Great Financial Wall: A Guide to 2020UBS Group AG , JPMorgan Chase & Co. and Nomura Holdings Inc. have already taken majority control of their local joint ventures. JPMorgan Securities (China) Co., in which the U.S. bank holds a 51% stake, has opened and started brokerage, investment advisory and underwriting businesses earlier this month, according to an emailed statement.Even with the massive potential of the Chinese market, foreign firms face a bevy of hurdles to win market share. China is home to the world’s four largest banks by assets, the biggest global fintech company and other formidable competitors. Its tightly-controlled system is opaque and arbitrary when it comes to licenses, and the regulatory burden is heavy. Recruiting talent has already proved tricky with experienced local executives often preferring state-backed companies.(Adds Goldman comment 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.

  • Goldman, Morgan Stanley receive approvals for majority stakes in China ventures
    Reuters

    Goldman, Morgan Stanley receive approvals for majority stakes in China ventures

    BEIJING/HONG KONG (Reuters) - Goldman Sachs and Morgan Stanley said on Friday they had received the final regulatory approvals to take majority stakes in their China securities joint ventures, as Beijing continues to open its financial sector to foreigners. Goldman and Morgan Stanley received the nods from the China Securities Regulatory Commission to raise their stakes in Goldman Sachs Gao Hua Securities and Morgan Stanley Huaxin Securities from 33% to 51% and 49% to 51%, respectively, the two Wall Street banks said in separate statements.

  • Morgan Stanley promises no job cuts in 2020 as coronavirus crisis grows
    Reuters

    Morgan Stanley promises no job cuts in 2020 as coronavirus crisis grows

    The contents of the memo were confirmed by a Morgan Stanley spokesman. "While long term we can't be sure how this will play out, we want to commit to you that there will not be a reduction in force at Morgan Stanley in 2020," Chief Executive Officer James Gorman said in the note. Gorman also spoke about the Federal Reserve's "extraordinary" actions, calling them necessary.

  • Big banks reassure staff about potential job cuts
    Reuters

    Big banks reassure staff about potential job cuts

    Morgan Stanley , Goldman Sachs Group Inc , Wells Fargo & Co , Deutsche Bank AG , HSBC Holdings PLC and Citigroup Inc were among those on Thursday reassuring staff privately or through public statements that job cuts are not on the table. "At the end of this year, we will know what we are dealing with, and hopefully the economy will be on the mend by then," Gorman said in a memo to all 57,000 employees on Thursday.

  • Bloomberg

    Singapore's 10% Hit Is Pretty Standard for a Crisis

    (Bloomberg Opinion) -- A tiny country that’s long been the barometer of global commerce is sending up distress flares. How big a blow the Covid-19 pandemic inflicts on Singapore’s economy will depend much on events outside its control.Gross domestic product fell an annualized 10.6% in the first quarter, the Singapore government reported Thursday in an advance reading. That's worse than many economists — already bracing for a bad number — had forecast. Officials project a contraction of 1% to 4% for the year; GDP hasn’t hit that lower boundary since Singapore split from Malaysia five decades ago.As grim as all this sounds, Singapore's economic performance since January has echoes in the swings of global and regional capitalism. The city-state took a big hit during the Asian financial crisis, the aftermath of the Sept. 11 terrorist attacks (which also constrained international travel) and in the Great Recession. Growth shrank 10% in the first quarter of 1998 as regional markets cratered and neighboring Indonesia seethed with political upheaval. It contracted 10% from April to June in 2001 and 8.6% the following quarter. In the first quarter of 2009, the economy declined 9.9%. Singapore pulled through, as did the world, despite what many called “unprecedented” crises.To be sure, Thursday’s numbers are inauspicious, particularly in a landscape cluttered with downgrades. Few economists anticipate the pandemic causing anything less than a global recession. Morgan Stanley tips a drop of 30.1% in U.S. GDP during the second quarter; Goldman Sachs Group Inc. expects a dip of 1% for the world in 2020.But there’s plenty Singapore is doing to stave off the worst of outcomes. The government, praised at home and abroad for its response to the virus, has been frank with its citizens, and has responded with ample fiscal stimulus and the promise of more to come. An easing by the central bank appears all but certain next week. The mix of fiscal and monetary policy is correct.For a city reliant on tourism, Singapore’s steps to curb the flow of people also shows seriousness. Short-term visitors have been barred while citizens and residents returning are required to self-isolate. Bars and cinemas will close. Yet schools remain open and there's no lockdown or state of emergency resembling that in Malaysia, the Philippines or parts of Indonesia. Authorities are trying to thread the needle. To its credit, the death toll is among the lowest in the Asia region.Since its inception, Singapore has been a locus of capital flows, trade and international labor markets. What happens to the world's major commercial powers is often reflected in its economic data. With much of the global economy powering down, it will be tough for Singapore to push ahead.This downturn is unique in that the world's major economies have all been dented at more or less the same time. China and Japan, two of Singapore’s biggest trading partners, are trying to restart after effectively grinding to a halt. Whether the U.S. is open for business next month or next quarter, America will be slower to restart than Asian powers.In the past, bounces in the U.S. and China’s unstoppable growth trajectory helped Singapore regain its footing. With China in a long-term slowdown before the virus outbreak, that will be difficult to replicate. But, in time, both poles will revive, albeit with scars. The tides of global economics have buffeted the city-state before. For signs of eventual recovery, look here first.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.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.

  • Is Vince McMahon Ready to Tap Out?
    Bloomberg

    Is Vince McMahon Ready to Tap Out?

    (Bloomberg Opinion) -- Vince McMahon was once tossed into a grave and almost buried alive by the Undertaker. But that’s nowhere near as bad as the year he’s having now. The burial, of course, was staged, while the agony of 2020 is very real. The coronavirus pandemic has temporarily taken down the business of live sports — both real and fake. That’s left McMahon’s World Wrestling Entertainment Inc. to hold matches in empty arenas, making the spectacle feel even more theatrical than sports-like, with dramatic monologues delivered directly to the camera instead of to the shouting fans that normally line the stands. Meanwhile, McMahon’s XFL football league, which he rebooted earlier this year, had to cancel the rest of its season. XFL is privately held by McMahon; however, shares of WWE have plunged more than 40% since December.McMahon, the 74-year-old chairman and CEO of WWE, is now looking to free up funds without relinquishing his control over the wrestling empire. On Tuesday, the company disclosed that McMahon entered into a prepaid variable forward contract, which essentially functions as a cash advance from a bank. The way it works is, McMahon agrees to eventually sell some of his shares at some future date — March 2024, in this case — receiving the money now, but without having to actually turn over the stock or pay taxes on the sale yet.According to Bloomberg News’s Drew Singer, the bank was Morgan Stanley and the deal priced 2.26 million shares at $38 apiece, representing more than $80 million in freed-up liquidity. In the meantime, McMahon gets to collect the usual dividends on those shares, and he can keep the holdings by settling the contract for cash. The agreement also doesn’t affect McMahon’s other 25 million or so class B shares, which represent just over 70% of the company’s total voting power.Even before the coronavirus began sweeping through the U.S., WWE was having a tough year, amid a shrinking number of subscribers to its streaming-TV service, WWE Network, and setbacks with international distribution deals. After the latest earnings disappointment, McMahon fired co-presidents George Barrios and Michelle Wilson, citing “different views” on how to achieve the company’s strategic goals, in what came as a disconcerting sign to investors. McMahon, as revered as he is by wrestling fans — his own ring persona, Mr. McMahon, is based on the real him — he has faced some criticism lately for not keeping the franchise fresh enough. He also came under fire last year following John Oliver’s scathing “Last Week Tonight” segment on the health and treatment of WWE’s wrestlers. Notably, while other sports leagues aren’t having their teams play to protect them from the spread of the virus, WWE’s cast is still having to work — and in close contact, too. WrestleMania, the company’s biggest annual event, is still being held April 4-5 — though without any fans allowed to attend in person, it will lose out on important ticket and merchandise sales. Viewers can watch on the $10-a-month WWE Network app or on pay-per-view. (Walt Disney Co.’s ESPN, struggling to fill its own programming schedule, has been airing WrestleMania classics.)In bringing back the XFL, which played just one season in 2001, McMahon was hoping to inject some of the WWE flavor into a sport that he sees as dull under the National Football League’s rules and style. When he announced the XFL would return in February 2020, news stories questioned whether it would work this time, giving McMahon something to prove. Now both his babies are hurting, and his wealth is tied up in them. For years, WWE has been considered an attractive takeover candidate for media giants and live-events companies. It holds a ton of valuable intellectual property in its characters and story lines, which in theory leaves open a realm of possibilities for a buyer with Disney-like ingenuity, building on WWE the way Disney has with the Marvel comic books. Likewise, WWE might appeal to those looking to invest more in sports, as Fox Corp. has stated it’s doing. Media companies are also paying big sums for content with which to stock their new streaming services, such as the Peacock app being introduced next month by Comcast Corp.’s NBCUniversal. McMahon has long been opposed to selling the company, wanting it to stay in the family. His daughter Stephanie McMahon manages the brand, and her husband Paul “Triple H” Levesque oversees talent and live events — both are wrestlers. The PVF contract helps protect that ownership. It may also help to have Donald Trump connections: McMahon's wife, Linda McMahon, runs the pro-Trump super PAC called America First Action, after stepping down as the president's head of the Small Business Administration last year.That said, with money tight, the outlook for traditional cable networks souring and McMahon’s XFL passion project meeting an untimely finish once again, now may be the time for any interested buyers to take their shot. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.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.

  • Nike’s Workout App Beats the Coronavirus Blues
    Bloomberg

    Nike’s Workout App Beats the Coronavirus Blues

    (Bloomberg Opinion) -- As consumer groups grapple with how to cope with the unprecedented impact of Covid-19, Nike Inc., one of the world’s most successful brands, has given a useful road map.Unlike Britain’s Next Plc last week, Nike didn’t quantify the financial hit as the pandemic spreads. But it did give some helpful operational pointers, using its experience in China to identify four phases of the outbreak’s impact that retailers can expect to see on both sides of the Atlantic: The first is containment, characterized by large scale stores closures. The second is recovery, when brick and mortar outlets gradually begin to reopen. That is then followed by a return to normal conditions, and finally, sales growth.Nike estimates that China has now progressed through its recovery phase and is returning to normal, with the maker of  the Air Jordan and Flyknit sneakers expecting sales growth to come roaring back in early 2021. Clearly, Europe and much of the U.S. is still in the containment phase. Based on the experiences in China, Japan and South Korea, this could last five to six weeks, Nike said.The retailer weathered the China store closures far better than expected — with sales in China down 4% excluding currency movements in the third quarter —  and its strategy in the face of the coronavirus offers some interesting lessons for other retail brands in how to cope with an extended shutdown.While stores were closed, Nike fired up online operations effectively. It also activated other digital ways of connecting with customers, such as home fitness apps offered for free. It worked. Weekly active users rose 80% in China over the course of the third quarter, as people were confined to their homes. That in turn drove them to purchase new workout gear, boosting digital sales by more than 30%.It also helps that fitness equipment is still in demand when people are stuck at home. The same can’t be said for many products, such as glam dresses.As the number of Covid-19 cases spreads in other markets, it’s of course not a given that every company can soldier on as seemingly seamlessly as Nike, which has been doing well for a long time. The company generated a better-than-expected $10.1 billion of revenue in the third quarter, even with the impact from China. Nike has a strong balance sheet and is highly cash generative. Even so, inventories rose 7% in the third quarter to $5.8 billion, partially reflecting the drop-off in demand from China. Retailers across the board will be scrambling with how to deal with a surfeit of stock.Nike’s success has enabled it to invest heavily in its digital offering. Its fitness apps, which have come into their own in this crisis, are a case in point. Not all groups have been — or have the resources to be — so proactive. So it’s fair to expect that the companies with strong balance sheets, well-known brands and developed digital offerings should be able to navigate the crisis. Spain’s Inditex SA, owner of the Zara chain, fits the bill here.By contrast, those companies that were already struggling, or burdened with large borrowings, will be particularly challenged by the first phase of containment.As I have noted, the U.S. department stores look particularly susceptible to shuttered stores and shell-shocked shoppers. On Monday, Bloomberg News reported that Neiman Marcus Group Inc., the luxury retailer that has been struggling to ease its $4.3 billion debt load, was mulling options that could include a bankruptcy filing. And another Bloomberg report said J. Crew Group Inc. is suspending the initial public offering of Madewell, its most popular brand, a move necessary to cut its borrowings.Elsewhere, taking into account store leases, as well as other forms of financial obligations and upcoming debt maturities, analysts at Morgan Stanley have identified companies including L Brands Inc., Macy’s Inc., The Gap Inc. and Michael Kors owner Capri Holdings Ltd. as having particularly high levels of leverage, making them potentially less resilient in the current downturn.So while Nike can just do it, some laggards may truly struggle to get through this crisis.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.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.

  • A Rent Wipeout Could Ignite a Mortgage Crisis
    Bloomberg

    A Rent Wipeout Could Ignite a Mortgage Crisis

    (Bloomberg Opinion) -- The rent is too high. And that’s causing consternation across Wall Street desks still traumatized by the 2008 financial crisis.As the days go by in an unprecedented shutdown of the U.S. economy to slow the coronavirus outbreak, any amount of rent looks increasingly difficult to cover for a wide swath of Americans, from recently fired service workers to local small-business owners. Unfortunately for those most affected, these payments can’t simply be wiped out — at least, not without dire repercussions. My Bloomberg Opinion colleague Noah Smith wrote a column this week arguing that people need a break on all sorts of debts. But when it comes to rent, there’s pretty much no way around people eventually paying what they owe, ideally with the help of the U.S. government, or else risk “turning a health crisis into a banking crisis.”This, more or less, is the catastrophic “domino effect” that real-estate investor Tom Barrack, chief executive officer of Colony Capital Inc., warned about this week. Simply put, if commercial tenants don’t pay rent because of a lack of cash, then property owners might be squeezed and default on their mortgage payments. The same goes for homeowners. That could bring the problem squarely onto the balance sheets of large U.S. banks, which will suffer steep losses on their loans.At first, it might have seemed as if Barrack was simply talking his book. But as more details emerged about the carnage across the $16 trillion U.S. mortgage market, it’s clear that the complex web of financial obligations tied to real estate could again be the flashpoint that leads to a financial crisis without some sort of intervention.Part of the reason that mortgages are again veering into crisis mode is because the modern market has so many moving parts. My Bloomberg Opinion colleague Matt Levine laid it out in a five-part list, which you can (and should) read here. Suffice it to say, if money is being lent twice-over in the repo market, the players are highly leveraged and vulnerable to an unexpected shock. The coronavirus outbreak certainly qualifies as such — some 47,000 U.S. chain stores temporary closed in the span of a week, Bloomberg News reported Tuesday. The median estimate for initial jobless claims on Thursday is 1.5 million, up from 281,000 previously.This mortgage-market meltdown is happening largely because everyone in the money chain is anxious and wants to cash out at the same time. But it also comes back to rent. It’s anyone’s guess when the American economy will be up and running again and what sort of assistance the federal government will provide to those companies forced to close and those individuals suddenly out of a job. It’s hard to blame banks for not wanting to wait around for answers and instead issue margin calls on mortgage real estate investment trusts.Those jitters caused emergency sales from the REITs, including relatively safe (and more liquid) agency debt. But that can’t last forever. On Tuesday, Invesco Mortgage Capital Inc. said it could longer fund margin calls, following in the footsteps of AG Mortgage Investment Trust Inc., which said it failed to meet some margin calls on Friday and doesn’t expect to meet them in the future, and TPG RE Finance Trust Inc., which is seeking flexibility from lenders. They’re almost certainly not the only ones.For now, there’s only so much the Federal Reserve can do to address these strains. It announced open-ended purchases of both U.S. Treasuries and agency mortgage-backed securities on Monday. The central bank is wasting no time flexing its muscle: It’s targeting $250 billion of agency MBS purchases this week after buying $67 billion last week. The previous record was $33 billion in March 2009, according to Morgan Stanley. Many observers are confident that the Fed’s “whatever it takes” model will restore order to the agency MBS market in no time.For non-agency securities, there’s not yet a dedicated lifeline. My Bloomberg Opinion colleague Marcus Ashworth suggests these assets may be the next order of business for the Fed. It’s hard to argue with that, given the central bank’s already unprecedented moves into the corporate and municipal markets.Before the Fed launches yet another emergency facility, though, central bankers should assess the fiscal stimulus package from Congress. If lawmakers provide enough relief for the most affected Americans to get through these next few months and cover their rent, lease and mortgage payments, it might be enough to prevent the first domino from falling in Barrack’s example.The coronavirus outbreak has suddenly halted cash flows of all kinds. Washington needs to keep the spigot open.This column does not necessarily reflect the opinion of 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.

  • Gold Investors Are Betting That It’s 2008 All Over Again
    Bloomberg

    Gold Investors Are Betting That It’s 2008 All Over Again

    (Bloomberg) -- Gold’s haven reputation took a serious beating, with prices tumbling as investors sought to free up cash amid a broad and devastating market rout.Sound familiar?Sure, it’s the story of gold for much of this month. But that’s only half the answer. It’s also a scenario that played out in the depths of the 2008 global financial crisis, right before gold started a years-long rally that culminated in the 2011 price record still in place today.For many analysts and investors, the parallels with 2008 suggest there’s a good chance that gold will bounce back strongly after this month’s pummeling.“If its price trajectory proves similar to 2008, we could see the precious metal’s benefits resurging as market stress continues to assert itself,” said Catherine Doyle, an investment specialist in the real-return team at Newton Investment Management. “We continue to have significant exposure for this very reason.”Spot gold rose 1.4% on Tuesday, after the Federal Reserve announced a massive second wave of initiatives to support a shuttered U.S. economy. Prices have still dropped about 7.5% from a peak on March 9, amid wild price swings. In late 2008, gold lost more than 20% over a month to bottom out near $700 in November, before haven buying returned.While there’s concern that the impact on the global economy from the coronavirus could be worse than the last global financial crisis, many also expect a bigger policy response.Another similarity with 2008 is that, while gold has fallen in recent weeks, the drop has been far outpaced by declines in equity markets and other commodities, so its relative purchasing power has risen, said Matthew McLennan, head of the global value team at First Eagle Investment Management, which manages about $101 billion in assets.“When the Fed progressively removes liquidity fears, provides forward guidance on rates, and when it possibly even controls the yield curve, and the economic softening is observable across the whole economy, the potential hedge value of gold can reassert itself powerfully,” he said.And while inflation expectations are plunging, fiscal authorities are likely to act aggressively, McLennan said.“The world at large has little appetite for deflation,” he said.Central banks from the Asia Pacific to Europe have already pledged to spend billions of dollars and implemented new policy steps. The U.S. has drawn up plans for a $2 trillion stimulus, although the process stumbled after Senate Democrats voted to reject the latest version of the legislation.Still, gold may have further to fall before it’s ready to rebound, assuming macro markets follow the playbook from the global financial crisis, Citigroup Inc. analysts said in a report Monday. They see the potential for the metal to touch fresh nominal highs above $2,000 an ounce in 2021.“But for now, many market participants may be repeating the mantra of ‘cash is king,’ and in particular the King Dollar.”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.

  • Fed Unleashes Unprecedented Measures to Shore Up Reeling Economy
    Bloomberg

    Fed Unleashes Unprecedented Measures to Shore Up Reeling Economy

    (Bloomberg) -- The Federal Reserve, racing again to contain mounting economic and financial-market fallout from the coronavirus, unveiled a sweeping series of measures that pushed the 106-year old central bank deeper into uncharted territory.In a surprise announcement Monday before markets opened in New York, the U.S. central bank said it will buy unlimited amounts of Treasury bonds and mortgage-backed securities to keep borrowing costs at rock-bottom levels -- and to help ensure chaotic markets function properly. It also set up programs to ensure credit flows to corporations as well as state and local governments.The Fed’s latest steps landed as investors wait for U.S. lawmakers to deliver a multi-trillion dollar package of coronavirus support, which failed to come together Sunday when Democrats objected that it did not do enough for average Americans.Following a string of emergency measures last week, the moves also increasingly push the central bank into new territory by providing direct support to U.S. employers, municipalities and households, which would traditionally be viewed as fiscal policy.“Wow, just wow,” George Rusnak, head of investment management at Wells Fargo Private Bank, said on Bloomberg Television. “Hopefully you’ll come out of this with some fiscal stimulus as well, and you’ll be set with good growth opportunities in the long run.”In a sign, however, of just how unnerved investors are by the pandemic, the Fed’s moves failed to spark anything beyond a brief rally in stocks and corporate bonds Monday after weeks of staggering losses.Stocks fell 4.5% in New York. Yields on 10-year U.S. Treasuries initially sank below 0.69% as investors digested the news before pushing back to around 0.74%.Some pockets of the market reacted positively to the Fed moves. Signs of stress in the corporate debt sector eased, with the CDX Investment Grade index spread tightening. Bond ETFs eligible for central-bank purchases rallied and the dollar retreated versus major peers.Economic ShutdownMonday’s Fed action followed an already-dizzying number of steps taken by Chairman Jerome Powell in the past three weeks that would have been unthinkable just months ago. They represent a dramatic reaction to the sudden stop inflicted on the economy by the contagion and by the subsequent panic among investors.Group of 20 finance ministers and central bank chiefs separately joined an emergency call to work on a joint response to the economic blow dealt by the pandemic.The U.S. economy is reeling as cases rise and the death toll mounts. Federal Reserve Bank of St. Louis President James Bullard predicted the U.S. unemployment rate may hit 30% in the second quarter, along with a 50% drop in gross domestic product. Morgan Stanley expects the U.S. economy to plummet 30% in the second quarter.The package included several unprecedented steps for the Fed, including intervention in the corporate bond market, purchases of commercial asset-backed mortgages and exchange-traded funds, and, if Congress clears the way, a significant Main Street lending program directly aimed at aiding small businesses.Not a ‘Slush Fund’“This is not a slush-fund,” U.S. Treasury Secretary Steven Mnuchin told Fox Business earlier on Monday. “It’s a mechanism we can use working with the Federal Reserve to provide another $4 trillion of liquidity into the market. That’s on top of the Fed’s balance sheet. This is a massive liquidity program.”Beyond the unlimited quantitative easing program, the new emergency facilities will employ a total of $300 billion, backed by $30 billion from the Treasury’s Exchange Stabilization Fund.Roberto Perli, a former Fed economist and partner at Cornerstone Macro LLC in Washington, said he expects those facilities to grow substantially if Congress moves ahead with plans to pump more money into the ESF.The draft of an economic aid bill currently being hashed out on Capitol Hill included $425 billion for the ESF to support Fed actions.The Fed’s new credit facilities carry limits on paying dividends and making stock buybacks for firms that defer interest payments, but have no explicit restrictions preventing beneficiaries from laying off workers.The Fed said a week ago it would buy at least $500 billion of Treasuries and $200 billion of agency MBS. The Fed will now make those purchases unlimited and will take on a slew of new efforts, many aimed at directly aiding employers and households, as well as cities and states.“This is a great step forward,” said Julia Coronado the president of MacroPolicy Perspectives. “Getting to the corporate bond market was critical. A lot of people needed to be clear the QE was unconstrained.”Other HighlightsTwo more programs were created to support large employers -- a Primary Market Corporate Credit Facility for new bond and loan issuance, and a Secondary Market Corporate Credit Facility to provide liquidity for outstanding corporate bonds.Yet another program, a Term Asset-Backed Securities Loan Facility, will “enable the issuance of asset-backed securities backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration and certain other assets.”The central bank also said it would expand the existing Money Market Mutual Fund Liquidity Facility to include a wider range of securities, including municipal variable-rate demand notesFinally, the Fed said it would expand the existing Commercial Paper Funding Facility to also include high-quality municipal debt, another move to help cash-strapped states and cities.“The Fed’s latest moves signal a resounding ‘whatever it takes’ approach from the central bank, and dispel any notion that monetary policy makers are either sparing ammunition or running out of unconventional tools,” Andrew Husby and Carl Riccadonna, of Bloomberg Economics, wrote in a note to clients.(Updates with outlook for more actions in sixth paragraph, plus markets in ninth.)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.

  • McConnell to Try Again to Force Vote on Virus Stimulus Plan
    Bloomberg

    McConnell to Try Again to Force Vote on Virus Stimulus Plan

    (Bloomberg) -- Senate Majority Leader Mitch McConnell scheduled a vote Monday to try again to advance a $2 trillion stimulus plan after Republicans and Democrats failed to engineer a quick jolt to a sinking economy amid the rising coronavirus death toll, plunging financial markets and dire predictions of a deep recession.The Senate will take a vote at about about 1:30 p.m. Washington time aimed at getting the legislation to the floor. But the chamber’s Republican majority can’t do it without the votes of Democrats.“Why are the American people still waiting?” McConnell said on the Senate floor before scheduling the vote. “The markets are not doing well today.”Democratic leader Chuck Schumer said he has had “almost continuous negotiations” with Treasury Secretary Steven Mnuchin on Sunday and Monday. He said they are close to reaching a deal and his goal is to do so Monday.While many details of the plan had been hashed out, some fundamental differences hadn’t been bridged. The recriminations began immediately after McConnell’s first bid for a procedural vote failed Sunday.An incensed McConnell on Monday cited plummeting stock markets to express the urgency to act Monday, and the Kentucky Republican ripped Schumer and House Speaker Nancy Pelosi.He accused Democrats of pushing for unrelated “wish-list items” such as solar energy tax credits and new emission standards for airlines. “This is the moment to debate new regulations that have nothing whatsoever to do with this crisis?” McConnell said.On Sunday, Schumer complained that McConnell’s bill was partisan. He said it amounts to “a large corporate bailout” with insufficient oversight, and shortchanges the health-care response to the pandemic. He said there should be “much more money” for hospitals for equipment that is rapidly becoming in short supply.President Donald Trump sounded an optimistic note after Sunday’s failed vote, saying, “I think we’ll get there.” But there signs that he was growing frustrated with the broader situation in the country. Trump began talking privately late last week about reopening the nation because he’s worried about the economic damage from an extended shutdown, according to people familiar with his thinking.Senators from each party said Monday they expected a deal. In one potential sign of movement, Senator Chris Coons, a Delaware Democrat, Senators have agreed to provide funding for an an accountability board for the $500 billion bailout fund. That’s a key Democratic demand, but the details had yet to be worked out.“I don’t see that there is yet final agreement on the language of what is the scope of that accountability board,” he said on Bloomberg Television. Negotiations were ongoing Monday morning, he said.Financial markets have been roiled by the impact of the pandemic as it forces businesses to shutter and governments to keep people inside. The S&P 500 dropped at the open Monday, and the index has now erased almost all gains accrued during Trump’s presidency.McConnell at one point threatened to use the market turmoil to force the hand of Democrats, saying he would schedule another procedural vote for 9:45 a.m. Monday, “15 minutes after the markets open, and see if there’s a change of heart.” The Senate later adjourned until noon.The prospect of an election-year market meltdown will revive memories for many lawmakers of the standoff over the bank rescue plan amid the 2008 financial crisis.In September of that year, the House unexpectedly rejected President George W. Bush’s $700 billion Troubled Asset Relief Plan to bail out banks in the wake of the subprime mortgage collapse and to restore confidence in credit markets. The defeat was the result of a revolt by rank-and-file Republicans against their own president and it sent the Dow Jones Industrial Average down almost 7 percent.McConnell and then-Senate Democratic Leader Harry Reid worked to usher it through the Senate on a solid 74-25 majority two days later. Then on Oct. 3, the House reversed and narrowly cleared the legislation and sent it to Bush for his signature.Until Sunday’s procedural vote on the stimulus plan, Republicans insisted that an agreement with Democrats was close to fruition.To attract Democrats, McConnell had agreed to many of their demands, adding hundreds of billions of dollars in fresh spending, including a $600 per week increase per worker in unemployment benefits, a $75 billion public health package, and tens of billions more for transit, education, nutrition and assorted other programs.But Democrats, including Schumer and Pelosi, who flew into Washington Saturday, said a $500 billion chunk of the bill that can be used to help corporations, including airlines, gave too much discretion to the Treasury secretary and that it lacked transparency and accountability. They also said the aid for state and local governments and health care providers fell far short of what is needed.Republicans and Democrats have differed from the starton how much of the money should go toward traditional aid programs like unemployment insurance, food aid and similar programs.Many of those differences appeared to be resolved during the day Saturday as four groups of senators worked out differences. But sticking points remained, particularly when it came to final details such as who would oversee the disbursement of the aid for companies and how that would be disclosed. One Democratic aide said the package could theoretically be used to bail out the president’s own company without voters knowing about it for months.The total package includes about $2 trillion worth of proposals, including $350 billion for small businesses, a $500 billion chunk of the bill that can be used for loans to larger corporations including airlines or state and local governments, extensive corporate tax breaks and tax deferrals, and direct payments of $1,200 for middle-class and low-income Americans.Pelosi left a meeting in McConnell’s office earlier Sunday saying they had no deal and the House would write its own package -- a move that could add days of partisan wrangling. Pelosi later told House Democrats that the Senate bill was “very different” from the package they were crafting.Even before the defeat of the Senate’s procedural motion, House Democratic leaders were not planning to call the chamber’s members back to Washington on Monday, or even Tuesday. House Democrats have instead scheduled a caucus-wide telephone call Tuesday afternoon, rather than bringing members back by then, senior Democratic aides said.A major package remains likely, but it now could take additional time for the two parties to work out their differences, even as the virus continues to ravage not just the nation but Congress itself.The outbreak is hitting Congress directly. Republican Rand Paul of Kentucky, announced that he had tested positive for the coronavirus, and two other Republicans, Mitt Romney and Mike Lee, said they were self-quarantining because they had been in contact with him. Two House members, Republican Mario Diaz-Balart of Florida and Utah Democrat Ben McAdams, also have tested positive for the virus. In addition, Senator Amy Klobuchar, a Minnesota Democrat and former presidential candidate, said Monday that her husband tested positive for Covid-19 and was checked in to a hospital.(Updates with vote planned starting in first 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.

  • Coronavirus could prompt 'worst recession in a century' in UK
    Yahoo Finance UK

    Coronavirus could prompt 'worst recession in a century' in UK

    Deutsche Bank thinks the UK economy could shrink by 5.5% this year due to Covid-19 and efforts to contain it.

  • Morgan Stanley (MS) Outpaces Stock Market Gains: What You Should Know
    Zacks

    Morgan Stanley (MS) Outpaces Stock Market Gains: What You Should Know

    In the latest trading session, Morgan Stanley (MS) closed at $30.93, marking a +0.59% move from the previous day.

  • Business Wire

    CORRECTING and REPLACING Morgan Stanley Announces $10 Million Cash Commitment to Support Coronavirus Relief Efforts

    Headline of release should read: Morgan Stanley Announces $10 Million Cash Commitment to Support Coronavirus Relief Efforts (instead of Morgan Stanley Launches Eagles for Impact Challenge at THE PLAYERS 2017).

  • What Happens to a Car Sector That Can’t Make Cars?
    Bloomberg

    What Happens to a Car Sector That Can’t Make Cars?

    (Bloomberg Opinion) -- What will become of the car industry if it cannot build cars? With car plants on both sides of the Atlantic shutting down for the next few weeks due to coronavirus, we’re about to find out.When the global financial crisis struck a decade ago, many U.S. and European carmakers idled production to prevent a build-up of unsold vehicles.This time, though, the shutdowns are happening simultaneously and slumping demand isn’t the only problem carmakers face. Workers are understandably fearful to step onto crowded production lines, plus the supply of key components risks being disrupted.Manufacturers hope the production hiatus will be brief but that could prove to be wishful thinking because the virus is a long way from being under control. (The fact that some have offered to re-purpose factory space to produce life-saving ventilators underscores the severity of this global health emergency).Even without coronavirus, 2020 was shaping up to be a difficult year for the car industry due to the massive cost of developing electric vehicles and overhauling factories to build them.Unlike a decade ago, when General Motors Co. and Chrysler sought bankruptcy protection, most carmakers have big cash piles they can draw on to tide them over a difficult period. Even after a 26 billion euros ($28 billion) cash outflow due to its diesel cheating, Volkswagen AG has 24 billion euros of cash and equivalents at its disposal.That’s fortunate, because due to high fixed costs and so-called negative working capital, much of the industry will burn through a lot of money.(1) (Besides protecting employees from potential virus exposure, one positive about closing plants is limiting the cash burn from rising vehicle inventories). In an extreme scenario Ford Motor Co and GM could each burn close to $4 billion of cash per month, say analysts at Morgan Stanley.  Meanwhile, if unemployment spikes, carmakers that lease lots vehicles via captive financial services divisions could be exposed to rising bad debts. In 2008, BMW AG had to take a 2 billion euros provision against loans going sour and falling values of used vehicles.It’s no wonder then that carmaker stocks have halved in value since the start of the year and the cost of insuring their debt against default has rocketed. Those with the weakest balance sheets have suffered most.The market capitalization of Renault SA, which struggled to generate positive free cash even before the virus showed up, has shrunk to less than 5 billion euros; adjusted for the 43% stake Renault owns in alliance partner Nissan Motor Co the equity value is negative.Jaguar Land Rover, owned by Tata Motors, is looking particularly sickly: 650 million euros of senior unsecured debt due in 2024 has tumbled to 60% of face value, yielding 17% — signalling concerns credit investors might not get all their money back.While the argument for consolidation is stronger than ever, so is the need to preserve cash. It’s questionable whether it’s still appropriate for Fiat Chrysler Automobile NV to pay its shareholders a 5.5 billion euros dividend prior to consummating a merger with Peugeot SA. Fiat’s balance sheet was already one of the weakest of the major car makers.Unlike in some service industries, car sales should eventually pick up some of the slack. Vehicles age and need replacing whereas a restaurant meal not consumed last week doesn’t necessarily mean you’ll have two the next.Plenty of folks cooped up at home will be dreaming of taking a long road trip when this is all over, encouraged no doubt by the cheaper cost of fuel.  But in the short term demand will probably fall hard – Chinese sales plunged 80% in February when much of the country was on lockdown. Consumer purchase incentives or government tax breaks probably won’t be as effective as in 2008-2009 because consumers can’t leave their homes.A car industry that can’t build cars won’t sell them. This year will see the paths of the better capitalized and financially weak firms diverge. It may not be immediate, but demands for external support, whether from taxpayers or shareholders, will come.(1) The German carmakers typically don't have negative working capital.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.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.

  • Fed walks tightrope on loosening bank regulations amid coronavirus response
    Yahoo Finance

    Fed walks tightrope on loosening bank regulations amid coronavirus response

    Regulators are encouraging banks to tap into capital and liquidity to lend into an economy affected by the coronavirus but further regulatory easing could be coming.

  • SoftBank Threatens to Unravel $3 Billion WeWork Stock Deal
    Bloomberg

    SoftBank Threatens to Unravel $3 Billion WeWork Stock Deal

    (Bloomberg) -- SoftBank Group Corp. told shareholders of WeWork that it could withdraw from an agreement to buy $3 billion of stock in the embattled co-working business, casting doubt on a deal that had been set to close in about two weeks.In a message to stockholders reviewed by Bloomberg, the Japanese conglomerate cited numerous government inquiries into WeWork, including those from U.S. attorneys, the Securities and Exchange Commission, attorneys general in California and New York and the Manhattan district attorney.SoftBank’s shares slid as much as 12% in Tokyo -- their biggest intraday fall since October 2012 -- weighed down also by an outlook cut by S&P Global Ratings on Tuesday. Spokeswomen for SoftBank and WeWork parent company We Co. declined to comment. The Wall Street Journal reported the email to shareholders earlier Tuesday.The WeWork stock purchase was part of a rescue financing from SoftBank after WeWork’s failed initial public offering last year. SoftBank already invested $1.5 billion as part of the bailout in October and is looking to arrange billions of dollars more in debt.Some investors were blindsided by Tuesday’s memo from SoftBank, said a person familiar with the matter who asked not to be identified. A delay or cancellation of the offer to buy stock would cut off a source of income many former and current WeWork employees had been counting on. Adam Neumann, who was ousted as chief executive officer during the turmoil, was slated to sell as much as $970 million in stock as part of the deal.Executives at SoftBank had been looking to alter the stock agreement since at least November. They discussed possible ways to reduce the purchase amount, a move that would be designed partly to limit Neumann’s payout, Bloomberg reported at the time.This week’s notice from SoftBank raises questions about whether it may seek to negotiate a lower price, delay the purchase until the economy stabilizes or withdraw entirely. SoftBank’s stock is down 27% this month, and economists from Goldman Sachs Group Inc. and Morgan Stanley say a global recession is underway.The worldwide market rout could hammer the value of SoftBank’s assets if it persists, S&P said in trimming the company’s outlook. The credit-rating agency said SoftBank’s plans to spend about $4.8 billion on a share buyback amid plummeting stock markets raises questions about its prioritization of financial soundness.Read more: S&P Cuts SoftBank Group Outlook to Negative, Affirms BB+ Rating(Updates with investor reaction in the fifth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Obscure Hedge Fund Behind Morgan Stanley Probe Also Roiled Citi
    Bloomberg

    Obscure Hedge Fund Behind Morgan Stanley Probe Also Roiled Citi

    (Bloomberg) -- In 2017, a tiny hedge fund emerged from obscurity in Hong Kong for a few months -- just long enough to leave a trail of casualties across Wall Street.The losses and finger-pointing from billions of dollars of exotic currency trades first roiled Citigroup Inc. Now they’re reverberating across Morgan Stanley.Both banks lost tens of millions of dollars in the transactions tied to the now-defunct Pandion fund, which was owned by one of China’s biggest finance firms, people familiar with the matter said. The blowup left its lender Citigroup with those positions; as the bank sought to unwind them, it questioned how Pandion’s counterparties at Morgan Stanley valued the deals. Citigroup complained, helping trigger an internal probe at Morgan Stanley and suspensions of top traders there, the people said.The fallout highlights the unknown market dangers that can blindside risk managers -- they don’t have to stem from a global pandemic. The account of the complex trades and the connection between the Citigroup and Morgan Stanley losses is based on interviews with 12 people with direct knowledge of the matter who asked not to be named because they’re not authorized to speak to the press.“Global finance has become vulnerable to the butterfly effect,” says David Knutson, head of credit research for the Americas at Schroder Investment Management, which oversees more than $500 billion. “Complex connectivity, correlations and Balkanized regulations can result in potential global cascading errors.”While a surge in fourth-quarter bond-trading revenue drove Morgan Stanley’s 2019 profit to an all-time high, the unit’s unpredictability underscores why Chief Executive Officer James Gorman has led a shift toward the more stable business of handling other people’s money. The firm last month agreed to buy E*Trade Financial Corp., an online retail brokerage, for $13 billion.Spokesmen for Morgan Stanley and Citigroup declined to comment. Guangzhou-based GF Securities Co., which owns Pandion’s parent, didn’t reply to requests for comment.The story begins in 2017 when Pandion hired Timothy Ball, an Oxford University graduate with a taste for exotic currency trades. He worked as a salesman in Hong Kong for Goldman Sachs Group Inc. before Elliott Management, the $40-billion hedge fund, hired him as a trader in 2013. After his managers there grew disenchanted with his focus on complicated deals, Ball left and joined the Pandion fund.Pandion was about 10 months old when Ball arrived and had less than $100 million under management. Around August 2017, Pandion traders began borrowing from Citigroup to finance its bets with Morgan Stanley. The positions included FX options and variance swaps, bespoke securities that are used to speculate on movements in asset prices. In this case, they were linked to emerging-market currencies, mainly Turkish lira. Many of the transactions weren’t set to expire for years, a feature that added to their risk.“The risk of crashes and their severity is harder to gauge in advance for emerging currencies,” said Uwe Wystup, founder of Math Finance AG and the author of a 2017 book on currency derivatives. “And the longer the time, the harder it gets to predict.”Morgan Stanley was a willing counterparty because executives there had identified complex currency derivatives as a key revenue generator and they were on the hunt for deals.The trades worked well at first. While Pandion’s net assets swelled to a peak of $109 million in August 2018 even as the Turkish lira melted down, they tumbled shortly thereafter, filings show. The fund lost $130 million within a few months and went into receivership -- a form of bankruptcy -- in April 2019.The implosion at Pandion led to losses of between $100 million and $200 million at Citigroup, then Chief Financial Officer John Gerspach told reporters last year. The setback was escalated to the bank’s board and led to a reorganization of the FX prime brokerage, the unit that catered to hedge funds betting on currencies. Sanjay Madgavkar, who ran the business, left in the aftermath.The next chapter opened when Citigroup took control of the Pandion positions and sought to unwind them with Morgan Stanley. Citigroup traders were puzzled by the valuations assigned by their Morgan Stanley counterparts and complained to them.To be sure, Wall Street banks often disagree with each other on such matters. The Pandion trades were over-the-counter deals, arranged in private rather than through a public exchange, and one firm’s valuation of such a transaction can differ from another’s.“We see discrepancies all the time,” said Jackie Bowie, co-head of Europe at Chatham Financial in London, which advises firms on financial risks and disputes. “Generally, how something is valued on a bank’s books is up to them.”Still, the disparity between Citigroup and Morgan Stanley on how they valued the Pandion trades was so large that they struggled to find a middle ground and left the trades in place. It’s unclear whether they’ve settled the disagreement.Around the same time, Morgan Stanley’s FX options team, which managed the Pandion transactions and related positions, began to lose money on another batch of trades; some of those were hedges linked to Pandion. At some point, executives at the bank decided to start a review of the division’s trading practices.Morgan Stanley’s FX options business lost about $150 million last year on deals linked to Central and Eastern Europe, the Middle East and Africa, according to a document reviewed by Bloomberg. While that’s hardly a catastrophic blowup for a fixed-income trading business that generated $5 billion in 2019 revenue, the unit is now at the center of the internal probe.The Morgan Stanley board is overseeing the review, which is focused on whether employees improperly priced some transactions, concealing millions of dollars of losses. The bank has installed a swathe of new leaders at its currency-trading business within the past few weeks, Bloomberg has reported.Back in Asia, GF Securities has faced problems of its own in the wake of the fund’s collapse. China’s securities regulator asked it to improve risk management and bolster compliance, as well as to submit a written report on who should be held responsible, filings show. In August 2019, the watchdog banned the firm from expanding in over-the-counter derivatives or adding new businesses for six months.Ball left the company in August, according to Hong Kong’s Securities and Futures Commission. He declined to comment. At Morgan Stanley, the outcome of the internal investigation and the future of the FX options business and the role of the executives who oversaw it remain open questions. And there’s the whole matter of episodic blowups that, more than a decade after the financial crisis, still expose banks’ vulnerabilities.“Do banks ever really know where the next risk is,” said Larry Tabb, founder of Tabb Group LLC, a capital markets research firm in New York. “Depending upon the product, leverage and reporting, it’s difficult for even a single bank to understand all of the data and risks they have within their four walls and its even more difficult when you try to aggregate this information across banks.“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.

  • Mnuchin Discusses $850 Billion Stimulus and Checks to Americans
    Bloomberg

    Mnuchin Discusses $850 Billion Stimulus and Checks to Americans

    (Bloomberg) -- U.S. Treasury Secretary Steven Mnuchin is expected to seek a new round of coronavirus-related economic stimulus of $850 billion or more from Congress Tuesday, and is discussing the idea of combining it with a relief package the House passed over the weekend, according to people familiar with the proposal.A combined bill would have to go back to the House to get approved before going to Trump for his signature. House members left Washington Saturday, and aren’t currently scheduled to return until next week at the earliest.Mnuchin, speaking at a White House press conference Tuesday, said the administration wants to provide “business interruption payments” to Americans, possibly delivering checks within the next two weeks.“Americans need cash now and the president wants to give cash now,” Mnuchin said, adding that he expected to reveal details later in the day about possible payments.Mnuchin, who will take his stimulus proposal to Senate Republicans on Tuesday, told House Republicans Monday that the market needs more liquidity, one of the people said. After the call, Mnuchin met with Senate Majority Leader Mitch McConnell.The new proposal is expected to include $400 billion in steps taken by the executive branch -- including delay of tax deadlines and relief for student loan interest payments -- in addition to existing legislation now in Congress to expand sick leave and offer financial support for virus testing, Trump’s economic adviser Larry Kudlow said Monday. Kudlow said the administration was ready to double the next package to $800 billion, with “most” of that coming from a temporary cut in payroll taxes, which lawmakers from both parties have resisted.The U.S. airline industry on Monday asked the government to provide as much as $60 billion in grants and loans, though it is unclear how much Trump will sign on for, according to a person familiar with the matter. The administration is most likely to approve loans, but the Office of Management and Budget has yet to be asked to provide cost estimates, the person said.This could be included in the $850 billion White House proposal, along with a payroll tax cut worth $500 billion and $250 billion for small business loans, according to a person familiar with the matter.Among the possible provisions for small businesses, Mnuchin is considering postponing the due date for quarterly tax payments, and options for fast cash loans. He has been calling small business leaders to ask what aid they might need from the government as the coronavirus dents their income, according to other people familiar with the discussions.“The president has instructed his team to look very expansively on what we need to do and not be impeded by the potential price tag of what’s necessary here,” Eric Ueland, the White House legislative director, said Monday on Capitol Hill.Recession WatchU.S. stocks sought to bounce back at the open Tuesday after equity futures were whipsawed in overnight trading. Goldman Sachs Group Inc. and Morgan Stanley economists joined the rush on Wall Street to declare that the virus outbreak has triggered a global recession.The Trump administration is expected to ask Senate Republicans to combine the next stage of stimulus with the smaller package of virus-related economic measures already passed in the House.The Senate was planning to take up the House-passed bill as soon as Tuesday, when Mnuchin is planning to be back on Capitol Hill to meet with Senate Republicans during their weekly lunch.The dollar amount of the package Mnuchin would propose was reported earlier by Politico. Fox News also reported what will be included in the package.Alfredo Ortiz, president of the conservative Job Creators Network, said as busy as Mnuchin is, “he’s taking the time to listen to us and quite frankly even act on some” stimulus suggestions. Ortiz said he had three separate calls directly with Mnuchin on Monday.“One idea we proposed and he likes,” Ortiz said, is delaying the quarterly April tax payments for 90 to 180 days. Businesses would still have to file their taxes, but if a tax payment is due, the government could defer the cash payments. “That would be huge for small business owners,” Ortiz said.Delaying the deadline for estimated quarterly payments could be an additional benefit for small and medium businesses beyond the tax filing deadline Trump announced last week. This could allow them to delay paying their estimated taxes for the first quarter, and potentially the second quarter, of 2020 in addition to an extended deadline for paying any outstanding taxes due from 2019. The Treasury Department has not yet announced the details of a tax filing delay.Other ideas Mnuchin discussed include a rapid application for a line of credit from a bank, collateralized by Treasury, to cut through the Small Business Administration loan applications, which can take 3-5 months, Ortiz said.Also under consideration is a plan to encourage states to leverage unemployment insurance, and to pay workers 80% of the hourly pay the employees are used to, as well as paying tipped employees 80% of their weekly average income rather than their hourly wage.Trump has urged the payroll tax cut, which has been resisted by lawmakers on both sides of the aisle because it provides a slow infusion of cash over a long period, only helps people who have jobs, and would provide more to wealthier workers. The administration has said it would not affect Social Security.An alternative proposal by Mitt Romney to send checks of $1,000 or more to every American adult has some bipartisan support. Some senators, including Democrat Brian Schatz of Hawaii, want to target relief to those people who really need it.Targeting money can be harder and therefore slower to administer, however.Schumer ProposalDemocrats are floating their own proposals, with Senate Democratic leader Chuck Schumer calling for at least $750 billion.Granting a full payroll tax holiday for employees and employers with fewer than 100 workers could prove to be a big incentive for companies with workforces above that threshold to cut jobs to claim the tax break.Businesses bracing for a drop-off in business could cut staff and still meet demand. For example, a hotel could cut cleaning workers and food service staff to get below 100 workers and still be able to meet demand during the downturn and get the perk of the tax break.The House on Monday passed technical corrections to its coronavirus bill, which was first crafted over a week ago as the virus was intensifying in the U.S. Now the White House and most lawmakers are eager to send the bill to Trump for his signature and to follow up with more ambitious bills.“We have a lot more work to do,” Mnuchin said Monday on Capitol Hill. He said he spoke with Republican senators about about additional economic stimulus bills they will work on “ASAP.”Plunging stock prices and the abrupt drop-off of consumer spending during a time of social distancing has crystallized the need for Congress to act quickly and boldly. The Federal Reserve has already used much of its toolbox to shore up the economy, leaving policy makers to dull the extent of the damage with fiscal stimulus.(Updates with Mnuchin in third and fourth paragraphs.)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.

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