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Brief: U.S. consumer confidence dropped in August to a six-month low, suggesting concerns over the delta variant and elevated prices are weighing on Americans’ views of the economy now and in the coming months. The Conference Board’s index fell to 113.8 from a revised 125.1 reading in July, according to the group’s report Tuesday. Economists in a Bloomberg survey had called for a decline to 123. The figures suggest the spread of the delta variant has dented consumers’ views of the economy and threatens to undermine spending on services. The latest spike in Covid-19 infections has already curbed restaurant reservations, airline travel and hotel occupancy. At the same time, Americans are paying more at the grocery store and at the gas pump, which may be further weighing on sentiment.
Brief: Covid-19 has accelerated many behavioural changes for consumers. But one tradition – vacations – is highly unlikely to change. If anything, we believe the suppressed travel of the last 18 months is likely to give way to a travel boom when people feel safe to get back on trains and planes and to stay in hotels. However, the recovery of travel around the world is unlikely to be uniform. But with the help of big data, we can observe how vacation appetites are playing out in real time this summer and develop actionable investment insights. Travel has recovered in fits and starts so far. In the US, a major milestone was reached over the July 4 holiday as passengers screened at US airports exceeded pre-pandemic levels for the same week in 2019. Hotel bookings confirm the US recovery as higher prices at US hotels have helped offset volumes that remain slightly below 2019 levels.
Brief: European stocks edged higher on Tuesday, on the cusp of their longest monthly win streak since 2013 amid a brightening outlook for risk assets on the policy and pandemic fronts. The Stoxx 600 Index was up 0.1% at 8:17 a.m. London time, with gains led by miners, technology stocks and autos. The FTSE 100 Index was little changed following a U.K. holiday on Monday. While risks such as China’s regulatory crackdown and the early withdrawal of stimulus have haunted markets recently, Friday’s speech from Federal Reserve Chair Jexrome Powell reassured investors that the central bank was in no rush to raise rates. Coupled with Europe’s vaccination push to curb the spread of the coronavirus, the backdrop for equities is looking rosier heading into September. The region’s equity benchmark is set to post a gain of about 2.4% for August, during which it hit a series of record highs.
Brief: Stocks fluctuated as traders assessed whether lofty valuations can withstand the unwinding of pandemic-era stimulus. The S&P 500 edged lower after hitting its 12th all-time high in August, while European shares retreated as a governing member of the region’s central bank said it may be time to discuss the bond-buying program. Investors also sifted through data showing a drop in U.S. consumer confidence, the biggest jump in home prices in more than 30 years and signs of a slowdown in Chinese growth. The dollar declined. American equities still headed toward their seventh straight monthly advance -- the longest winning streak since January 2018 -- amid a tonic of strong corporate profits and moderate monetary policy. The rally is stirring doubts, with warnings mounting over a slower economic recovery as the delta coronavirus variant delays reopenings in some parts of the world.
Brief: One of the major lifestyle trends emerging from the pandemic has been movement out of cities to smaller suburban or rural locations. U.S. Postal Service change-of-address data showed that in the February – July 2020 period, New York City saw a 487% increase over 2019 in change of address forms to other locations. Chicago saw its change-of-address requests double from 2019.Remote working allowed many people the opportunity to relocate to places with less density and more distance between neighbors. In New York, the move to home offices has led some commercial office towers to begin converting to apartments. It’s one sign of a changing downtown environment in many cities. But are these trends here to stay? In the latest episode of The Economists, CME Group Chief Economist Blu Putnam and Senior Economist Erik Norland look at the health of cities 18 months into the pandemic and explore whether the movement trend was only temporary.
Brief: European Central Bank Governing Council member Francois Villeroy de Galhau said policy makers should take into account more favorable financing conditions in the region when they decide on the pace of emergency bond-buying next week, hinting a slowdown may be in the cards. Any changes in the program dubbed PEPP would not amount to tapering like that announced by U.S. Federal Reserve Chair Jerome Powell on Friday, according to Villeroy, who is also the governor of the Bank of France. Yet the ECB should be coherent with the principle that has led it to purchase assets at a significantly higher pace since March to ensure conditions supported a recovery in the euro area. “On monthly volumes, we are looking at the favorable financing conditions, and we should underline that they are more favorable than at our June meeting,” Villeroy said on BFM Business radio. “We have to decide the monthly volumes for the fourth quarter.”
Brief: The stock market rally may be getting “a little tired” but it has more than enough fuel to continue, says veteran strategist Robert Doll. The Standard & Poor’s 500 Index is up more than 20% this year and has rallied more than 90% since a plunge near the beginning of the Covid-19 pandemic in March 2020. Some investors are concerned that such a high valuation may not be sustainable, with the delta variant still hindering growth in some businesses. A “still good” economy means that stocks will “generally go up,” Doll, chief investment officer at Crossmark Global Investments Inc., said in an interview on Bloomberg TV’s Surveillance on Monday. “A good economy means good earnings so the path of least resistance has been and likely will continue to be to the upside.”
Brief: When stay-at-home favorite Zoom reports quarterly results on Monday, Wall Street will look for details on how the video conferencing platform plans to attract more users as its meteoric growth brakes to its slowest rate since going public. Zoom's revenue growth has been decelerating as the economy slowly reopens, users complain of "Zoom-fatigue" and as vaccinated people return to school and offices. Wall Street analysts expect revenue to grow only 49% in the to-be-reported quarter, compared with multiple-fold growth rates in the past year. Zoom raked in millions of new users as the pandemic forced more people to work, study and communicate with friends and family remotely. The company is now looking to win bigger contracts from businesses, an area dominated by rivals like Cisco, Microsoft's Teams and Salesforce's Slack."Long term, we expect Zoom will grow into a broader enterprise communication and collaboration platform," said Rishi Jaluria, RBC Capital Markets analyst.
Brief: Shares in Asia-Pacific mostly rose on Monday trade, with Australian stocks recovering from an earlier slip as Covid cases in the country spike. In Japan, the Nikkei 225 advanced 0.54% to close at 27,789.29 while the Topix index gained 1.11% to 1,950.14. South Korea’s Kospi ended the trading day up 0.33% at 3,144.19. Mainland Chinese stocks were mixed on the day as the Shanghai composite rose 0.17% to 3,528.15, while the Shenzhen component dipped fractionally to 14,423.37. Hong Kong’s Hang Seng index closed 0.52% higher at 25,539.54. The S&P/ASX 200 in Australia closed 0.22% higher at 7,504.50. The country’s most populous state New South Wales had reported on Monday a record one-day rise in new Covid-19 infections, according to Reuters. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.91%. Investors in the region looked ahead to the release of earnings from Chinese food delivery giant Meituan on Monday.
Brief: Despite the seemingly endless supply of brainpower and cutting-edge technology that’s put to work in financial markets, at times it feels as if nobody knows anything. That’s perhaps the hardest-to-digest lesson learned—or at least reinforced—from the past year and a half, during which the U.S. stock market doubled at the fastest pace since 1932: The accrued wisdom of Wall Street can be a swiftly depreciating asset. “If someone would have told me in March of last year, when COVID was first rearing its ugly head, that 18 months later we would have case counts that are as high—if not higher—than they were on that day, but that the market would have doubled over that 18-month period, I would have laughed at them,” says Steve Chiavarone, a portfolio manager and head of multi-asset solutions at Federated Hermes Inc.
Brief: While the financial world waits for the Federal Reserve to start reversing its ultra-loose policy stance, recent moves by a clutch of other central banks signal the days of pandemic-era accommodation are already numbered even as COVID-19 continues to impede smooth economic recoveries around the world. South Korea's central bank on Thursday raised its benchmark interest rate by a quarter of a percentage point to blunt rising financial stability risks posed by a surge in household debt, becoming the first major monetary authority in Asia to do so since the coronavirus broadsided the global economy 18 months ago.Even before the rate hike in South Korea, though, central banks in Latin America and eastern and central Europe had begun lifting interest rates this year to beat back inflation that is building on the back of currency fluctuations, global supply chain bottlenecks and regional labor shortages.
Brief: The Federal Reserve continues on its path towards tapering its quantitative easing programme, but rising uncertainty resulting from the Delta variant has stifled economic confidence. Speaking at the Jackson Hole symposium, Fed chair Jerome Powell said the strong monetary policy employed over the past 18 months had led to a "vigorous but uneven recovery", one which stands as "historically anomalous". He referenced the July meeting of the Fed, in which he and his fellow bankers suggested the tapering of its QE programme "could be appropriate", however despite continued progress towards maximum employment, the uncertainty of the Delta variant had left "much ground to cover". Powell highlighted lessons learned from the period of the 1950-80s in which stabilisation policy enacted too soon in response to transitory inflation had created a negative effect as evidence for the current policy.
Brief: U.S. consumer sentiment remained weak in late August amid ongoing concerns over inflation and the coronavirus pandemic. The University of Michigan’s final sentiment index fell to a near-decade low of 70.3 during the month from 81.2 in July, data released Friday showed. The figure was in line with the preliminary reading and just below the median estimate of 70.8 in a Bloomberg survey of economists. “Consumers’ extreme reactions were due to the surging Delta variant, higher inflation, slower wage growth, and smaller declines in unemployment,” Richard Curtin, director of the survey, said in a statement. “The extraordinary falloff in sentiment also reflects an emotional response, from dashed hopes that the pandemic would soon end and lives could return to normal without the re-imposition of strict Covid regulations,” he said.
Brief: Some two dozen Metro Bank Plc office staff got an early taste of what hybrid working will look like this week as they trialled their firm’s new approach to office life. Hovering outside the lender’s Moorgate branch in the City of London until it opened at 8:30 a.m., colleagues on the bank’s financial crime team greeted each other in person on Thursday after a year and a half of remote work. Walking into the branch, they turned left and passed through a glass gate before descending into a newly opened basement office below the store.The new space is part of a sweeping overhaul of the bank’s estate as the firm adopts a hybrid work model. It has vacated its standalone office building and redeveloped 78 of its branches to create office space above -- and in some cases below -- its branches. The bank, which employs about 3,000 office workers, has 1,100 desks under the new hybrid system. From Sept. 13, teams will have access to offices via a bookings system that allows staff to book a desk in their neighborhood up to six weeks in advance.
Brief: Emerging Markets (EM) hedge funds, led by funds investing in India, Russia, China, and the Middle East, extended strong gains through mid-year 2021 as EM hedge fund capital eclipsed another record, with performance again topping gains in EM regional equity markets and complemented by volatile cryptocurrencies. The HFRI Emerging Markets (Total) Index has returned +8.1 per cent YTD 2021 through July, led by the HFRI Emerging Markets: India Index, which surged +33.3 per cent, while the HFRI Emerging Markets: Russia/Eastern Europe Index vaulted +16.3 per cent YTD, as reported today with the releases of the HFR Asian Hedge Fund Industry Report and the HFR Emerging Markets Hedge Fund Industry Report from HFR. The investable HFRI 500 Fund Weighted Composite Index, which includes funds across all regions in both Emerging and Developed markets, has gained +8.8 per cent YTD 2021 through July.
Brief: Even in the 19th century, workers were beginning to resent the grind of office life. “You don’t know how wearisome it is to breathe the air of four pent walls without relief, day after day,” British essayist Charles Lamb wrote in a letter to poet William Wordsworth back in 1822, railing against his toil in the East India’s Company’s office in Leadenhall Street, London.For the last 17 months, however, Lamb’s modern successors have mostly worked from home, liberated from what he termed “official confinement.” Today’s white-collar staff are living through a radical transformation of professional life, one economists say is already beginning to jump-start economic productivity and accelerate innovation. The pandemic has weakened the gravitational pull of city centers, with new forces now reshaping knowledge-based economies.
Brief: Investment in technology and data infrastructure sit at the top of asset managers’ priorities as they position themselves to deliver business growth in the recovery from the Covid-19 pandemic. Fifty six per cent say their investment will focus on these areas over the next 12 months and for almost half (47 per cent) on ensuring ESG compliance across their product range. That's according to a new report by Funds Europe – The Future of Investment Operations – for Temenos (SIX: TEMN), the banking software company.The survey of global investment professionals across the asset management sector also reveals Covid-19 has pushed firms to review their IT strategies and transition to the public/hybrid cloud.
Brief: Lending to euro-area consumers resumed its pre-pandemic trend, supporting a recovery that’s increasingly driven by private spending. By contrast, credit growth to companies slowed further in July after spiraling last year when lockdowns paralyzed the economy and eroded income, ECB data showed Thursday. With lending an early indicator for investment, this trend could become a reason for concern if it persists into 2022, according to ING’s Carsten Brzeski.
Brief: Howard Marks, co-founder of distressed debt firm Oaktree Capital Management LLC, says he’s looking to find “hidden gems” in a world where too many buyers are driving returns down. “Ever since the Fed and the Treasury and the world’s central banks rescued the global economy,” and the Fed injected trillions of dollars into markets, investors have became “forced buyers,” Marks said in a video interview Wednesday afternoon. That turned bargain hunting into a “very challenging” activity, he said. Oaktree is one of the largest specialists in distressed debt, with about $37 billion committed to credit and private equity from troubled companies. The Los Angeles-based fund has thrived in times of economic stress, when bonds of companies in danger of defaulting fall to deep discounts.
Brief: After a planned initial public offering blew up spectacularly in 2019, WeWork Inc. was counting on the post-Covid era of flexible working to staunch big cash outflows and gain a fresh start. Its attempt to go public (again) is premised on people now preferring its shared workspaces over traditional corporate offices.But with virus cases surging in key markets like the U.S. and U.K., its recovery isn’t going as well as hoped. Last week it warned that full year revenues would be lower, and losses larger, than previously forecast. U.K.-listed rival IWG PLC issued a similar warning in June. There are signs that WeWork and IWG have overcome the worst — revenues have picked up again since the spring — but both are still losing money. The next weeks are therefore crucial: Even as virus worries re-emerge, they need to boost occupancy so their revenues better cover costs.
Brief: Fears of a new wave of increasingly contagious strains of Covid-19 have knocked investor confidence, with few prepared to make any changes to their portfolio. A poll by interactive investor of 1,617 visitors to its website between 17 and 23 August 2021 found 57% had concerns over the impact further outbreaks of Covid-19 would have on their portfolio. New variants of the virus topped the list of concerns for almost a quarter of the respondents, while almost a third said they were concerned about both new variants and a new wave of the virus. A fifth of those that took part in the poll said they would be increasing their exposure to the stock market, confident that markets will need to get used to Covid-related shocks. However, 65% confirmed they would not be making any changes to their investments.
Brief: As workplaces across the country unveil return-to-office plans, a new survey has found that most employers are shifting away from requiring work to be done in the office full-time. According to an ADP Canada survey conducted by Maru Public Opinion, more than half of Canadian workers will no longer be required to work in the office five days a week. One-third (33 per cent) of employees surveyed say they are expected to return to the office between two and three days a week, while slightly more than one-fifth (21 per cent) say they will have a flexible schedule with no set days in the office. The survey found that 40 per cent of employees will still be expected to come into the workplace five days a week, although Ann Buckingham, executive HR manager at ADP Canada, says this figure largely reflects industries where employees have to be in-person, such as manufacturing.
Brief: Japan’s economic recovery will be delayed more than previously expected as the delta variant pushes up infections to record levels, according to a Bank of Japan board member. “The current spread of infections is more than expected at the time of the July policy meeting,” Toyoaki Nakamura, one of nine members on the board, told reporters in Tokyo. “Downward pressure on the economy is going to continue for the time being.” Prime Minister Yoshihide Suga looks set to expand Japan’s state of emergency to almost 80% of the economy later Wednesday as he tries to contain the latest wave of cases that has put extra strain on the medical system. Nakamura said an expected spending uptick built on pent-up demand had failed to emerge in the summer break as surging infections kept consumers cautious.
Brief: Two months after Goldman Sachs Group Inc. led Wall Street’s return to the office, it’s copying pages from the pandemic playbooks of its more cautious rivals, requiring employees to don masks and prove they’ve been vaccinated against Covid-19 to enter the U.S. workplaces. The more stringent safety measures, announced to staff on Tuesday, signals escalating caution at Goldman, which greeted the return of employees in June with live music and food trucks. Masks will be required starting Wednesday regardless of vaccination status, a company spokeswoman said. People who aren’t fully vaccinated by Sept. 7 will be expected to work from home, she said. Goldman’s decision means all six U.S. banking giants have now instituted some sort of broad mandate that employees get shots or don masks inside buildings -- or in some cases do both.
Brief: Exchange-traded fund investors might be able to take advantage of the rebound in reopening trades. Stocks traded higher Tuesday after the Food and Drug Administration granted Pfizer and BioNTech’s Covid-19 vaccine full approval. Travel, energy and retail stocks were some of the biggest gainers. This means the market is now at an “inflection point,” J.P. Morgan Asset Management’s Bryon Lake told CNBC’s “ETF Edge” on Monday. “We do think that there’s an opportunity for investors to continue to participate in the reopening trade through the end of the year,” the firm’s head of Americas ETF client said. Three key areas are of particular interest to investors as they reposition for the second half of 2021, Lake said: income, short-duration investments and value.
Brief: Earnings at Bank of Nova Scotia and Bank of Montreal got some help from Canada’s economic reopening. The banks reported fiscal third-quarter results on Tuesday that topped analysts’ estimates on gains in domestic personal and business loans as well as continued strength in the Canadian housing market. That helped make up for slower rebounds in the lenders’ U.S. and international businesses. Canada’s vaccination campaign trailed the U.S.’s by a few months, pushing the revival of activities like restaurant dining and nonessential shopping across much of the country into June. The strong domestic results for Bank of Montreal and Scotiabank likely reflect that “initial jolt” of activity from the early phases of the reopening, said Paul Gulberg, an analyst at Bloomberg Intelligence.“Canada looks fairly decent,” he said in an interview. “You have modest growth in loans, and it looks like it’s in both consumer and business lending, not just the mortgage business.”
Brief: Citigroup Inc. is facing a lawsuit for pulling support from a European credit fund as the Covid-19 pandemic roiled the markets, then giving its own traders a potential profit at the fund’s expense. The New York-based bank was sued by Ver Capital Partners in London for forcing the fund to default on a 224 million-euro ($263 million) loan in March 2020 and selling linked assets to its trading desk. This liquidation process created a conflict of interest at the bank, while ignoring the chance of better offers from other possible buyers and leaving the fund further out of pocket, Ver said in a legal filing. Citigroup undervalued the assets it sold to the traders, acting “with the intention of generating a profit for itself” at the expense of “the best price reasonably obtainable,” Ver’s lawyers said in the filing made available last week.
Brief: Hybrid working looks likely to be the working model of the future, with just three-in-10 employees expecting their workforce back onsite full time in two years’ time, a survey by Willis Towers Watson has found.The majority (85%) of businesses have anticipated that most employees who would like to return to the workplace will have done so by the end of 2021, the insurance company found, however working practices are unlikely to return to their pre-pandemic state. Employers have estimated around a quarter (23%) of the workforce will work remotely on a full-time basis in two years' time, while just more than two-in-five (41%) will embrace hybrid working. Lucie McGrath, director of health and benefits GB at Willis Towers Watson, said hybrid working was here to stay, adding: "We've all weathered a huge amount of change over the last two years. Employers should think carefully about how to support their employees' mental health as we adjust to the new working world."
Brief: When clients call Andrew Slimmon for advice on how to position their portfolios given the rapid spread of the delta variant, he tells them in no uncertain terms: Prepare for an economic recovery, and soon. Slimmon, who oversees about $7.5 billion at Morgan Stanley Investment Management, says it’s not unusual to see economic hiccups this time of year. Going forward, “people will turn a little bit more optimistic,” which bodes well for equities that have sold off due to Covid-related worries. Rates could bottom in the coming months and recover in the fourth quarter as well, he added.“The opportunity set is in those stocks that got hit the most, namely the cyclical stocks, the energy stocks, the reopening stocks -- those are the ones that are down the most,” he said in an interview.
Brief: The rally on Wall Street after Pfizer’s Covid vaccine received full approval from the Food and Drug Administration showed “people are desperate to get into stocks,” CNBC’s Jim Cramer said Monday. “You rarely see a market that’s this straightforward, but anything with any cyclicality roared today on the Pfizer story,” the “Mad Money” host said. The S&P 500 advanced 0.8% to close at 4,479.53, while the Dow Jones Industrial Average added 215.63 points, or 0.6%, to finish at 35,335.71. The tech-heavy Nasdaq outperformed, rising 1.5% to close at 14,942.65. “What’s the market telling us here? ... It’s saying that people are desperate to get in, desperate to buy stocks even if they have to pay up. Now there’s a word for these gains, and that word is obvious,” Cramer said.
Brief: Dividends paid to investors are projected to hit $1.39 trillion in 2021, reflecting a recovery that’s stronger than expected, according to a new report from British asset manager Janus Henderson. The 2021 forecast for dividends is just 3% below the pre-pandemic peak, the firm found. Dividend payments in the second quarter jumped 26% from the same period last year to $471.7 billion, just 6.8% below the levels seen in the second quarter of 2019. Janus Henderson projected that dividend payouts will return to pre-pandemic highs within the next 12 months. The research, published Monday, said 84% of companies around the world either increased or maintained their dividends compared to the same quarter in 2020. Much of the growth was attributed to companies restarting frozen payouts and issuing higher special dividends on the back of strong earnings. Underlying dividend growth in the second quarter, stripping out the effects of special dividends and exchange rates, was 11.2%.
Brief: Expectations for a recovery in commodity prices and earnings growth are igniting bullish bets on emerging-market equities after more than a decade of underperformance that left them approaching a 20-year low against developed-nation stocks. Goldman Sachs Group Inc., Bank of America Corp. and Lazard Asset Management expect a boost for developing equities as investors capitalize on cheap valuations once vaccine rollouts pick up, helping the global economy to recover from the pandemic. South Africa, Russia and Brazil are among markets set to benefit, even as China’s regulatory crackdown continues to weigh on Asian equities. In the decade following the global financial crisis, MSCI Inc.’s emerging-market stock index gained just 8%, while the benchmark for developed nations more than doubled. That’s partly due to the slowdown of Chinese economic growth from above 10% in 2010 to around 6% by the end of the decade, resulting in a decline for commodity prices and weak earnings growth.
Brief: Britain's post-lockdown economic rebound slowed sharply in August as companies struggled with unprecedented shortages of staff and materials, though strong inflation pressures cooled a bit, a survey showed on Monday. The IHS Markit/CIPS flash composite PMI dropped for the third month in a row, sinking to 55.3 from 59.2 in July, its lowest since February and a sharper fall than a median forecast of 58.4 in a Reuters poll of economists. The pace of growth was still slightly above the pre-pandemic average but IHS Markit said there were clear signs of the recovery losing momentum after a buoyant second quarter. "Despite COVID-19 containment measures easing to the lowest since the pandemic began, rising virus case numbers are deterring many forms of spending, notably by consumers, and have hit growth via worsening staff and supply shortages," Chris Williamson, chief business economist at IHS Markit, said.
Brief: Investors in Canada's major banks will be looking for signs of loan growth, impacts of the Delta variant and hints of what the Big Six may do with their cash reserves when they report this week. The banks are widely expected to further unwind the record-breaking amounts of money they set aside last year — at least $16.5 billion across the Big Six — to cover widespread loan defaults that never materialized. Shareholders, however, have already largely factored in the earnings boost from the reserve winddown, as was already seen in U.S. bank earnings last month, said James Shanahan, senior equity research analyst for North American financials at Edward Jones. “In some cases there were earnings beats of 10, 20, 30 per cent, and the stocks were down. So the market clearly isn’t going to reward the Canadian banks if they deliver huge earnings beats and it’s just simply related to reserve releases.”
Brief: Energy-focused hedge fund manager Westbeck Capital Management’s flagship strategy has suffered its first monthly loss in eight months, after surging coronavirus rates in China, Europe and North America dented oil markets – but the fund remains up more than 70 per cent since the start of the year. The Westbeck Energy Opportunity Fund – a long/short directional hedge fund strategy which trades a mix of oil equities, futures and options – fell 5.3 per cent in July. By comparison, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), which tracks oil services companies, lost 14.4 per cent in July, while and Brent (total return) gained 2.1 per cent. The USD230 million manager – which is led by co-founders Jean-Louis Le Mee, CIO, and Will Smith, CEO and deputy CIO – has profited from a resolutely bullish stance on oil for much of this year.
Brief: Stocks reversed overnight declines to trade higher Friday, as investors considered the latest batch of earnings and economic data and continued to contemplate the path forward for monetary policy. The S&P 500 rose, though the index was on track to post a weekly decline for the first time in three weeks. Both the Nasdaq and Dow also moved to the upside. Traders this week have watched a number of market concerns unfold, with infections related to the Delta variant continuing to climb and the Federal Reserve suggesting in its latest meeting minutes that officials believed the economy might recover enough by the end of the year to warrant a shift in their massive asset purchase program. New weekly jobless claims fell more than expected to a fresh pandemic-era low, signaling a notable step forward in the labor market's recovery.
Brief: Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Bank of Montreal joined other major financial firms in requiring staff to be fully vaccinated against Covid-19 before returning to the office. All employees of the Toronto-based TD will be asked to register their vaccination status by Sept. 30, according to a memo sent to staff Friday. As of Nov. 1, full vaccination will be required of TD employees working in all company locations globally, a spokesman said. “We believe that the majority of TD colleagues have already been vaccinated. This is great news,” Kenn Lalonde, chief human resources officer, said in the memo. “However, Covid-19 remains with us and the delta variant, which is far more contagious, is spreading in our communities, primarily to those who are unvaccinated.”
Brief: U.K. government borrowing in the first four months of the fiscal year was running at little more than half the level a year earlier as the economy returned to normality after months of restrictions.The budget deficit stood at 78 billion pounds ($106 billion) between April and July, the Office for National Statistics said Friday. That compares with 139.7 billion pounds in the same period of 2020, when the economy was under siege from the coronavirus pandemic. July alone saw the deficit narrow to just 10.4 billion pounds as self-employed workers made payments ahead of a tax deadline. The shortfall was smaller than economists forecast. Tax revenue surged by almost 16% from a year earlier, and spending fell 3.5%.
Brief: On Thursday morning, we noted that challenges were emerging for the health of the economic expansion, mostly due to the still-raging COVID-19 pandemic. Those signs continued into the end of this week. After highlighting that at least two Wall Street firms had either cut or cautioned on their economic growth forecasts, the team at Goldman Sachs followed this week with a reduction in its third quarter gross domestic product (GDP) outlook. Goldman's economics team led by Jan Hatzius said in a note to clients third quarter growth should come in at an annualized rate of 5.5%, well below the 9% the firm was previously forecasting. The team at Oxford Economics also published its latest weekly recovery tracker, which showed a decline for the week ending Aug. 6. Nearly all of the index's components cooling off.
Brief: Research from Barclays Smart Investor revealed that 63% of investors believe that pandemic-hit industries such as hospitality and travel will bounce back, even though two thirds named new coronavirus variants as their biggest concern for financial markets. The survey of 2,000 UK investors also revealed that 59% of respondents are worried about rising inflation, while half the respondents said they are concerned about a market bubble bursting by the end of the year. A tech bubble is of a particular concern, with 42% of respondents naming this as a worry. Despite these fears, however, 59% of investors revealed they are feeling optimistic about financial markets for the rest of the year, while 60% are confident the successful vaccine rollout will help markets.
Brief: The “fluidity” of virtual conferencing has proved a “silver lining” during the pandemic, optimising allocator time during the investor due diligence process, according to new research by alternatives-focused software-as-a-service and data management company Vidrio Financial. In a new market commentary, Mazen Jabban, founder and CEO of Vidrio Financial, examined the sweeping changes and far-reaching impact of virtual manager meetings on hedge fund manager-investor relationships over the course of the Covid-19 pandemic. New Vidrio Financial research shows 100 per cent of those surveyed expect a transition to a hybrid mix of virtual and in-person meetings – the so-called “new normal” – when it comes to the due diligence and asset allocation process, with one manager not expecting return to in-person due diligence meetings until 2022.
Brief: According to IBM, 23 per cent of all cyber-attacks are directed at financial institutions, while the total cost of a single data breach is the second largest among all industries, costing financial organisations USD5.72 million on average. Another study indicated that 53 per cent of data breaches are financially motivated, so the industry is constantly on the cybercrime radar. In other sectors, malicious users get a foothold through social engineering, credential stuffing, and application vulnerabilities. However, the Finance sector is different as these users primarily compromise internal corporate networks. The pandemic has accelerated the digital shift, with enterprises focusing on securing cloud environments.
Brief: Stocks dropped, while Treasuries and the dollar rose as concern about the withdrawal of Federal Reserve stimulus mixed with growing angst around the coronavirus and global supply chains. The S&P 500 was down for a third day, and a gauge of equity volatility headed for its biggest weekly increase since January. Commodities sold off, with iron ore plunging and oil on track for its longest losing streak since the early days of the pandemic. The rout in Chinese companies listed in the U.S. deepened after the industry was hit with a fresh round of proposed regulations, with Alibaba Group Holding Ltd. and Baidu Inc. tumbling. Investors are bracing for the withdrawal of unprecedented liquidity as the developed world looks to mass vaccinations to keep the recovery on track. swings.
Brief: As Goldman Sachs Group Inc.’s top brass sounded the alarm of a return to pre-pandemic office life, one group of workers was reassured they’d get to keep some of their treasured flexibility. The Wall Street firm’s coders can continue to work from home two days a week, according to people briefed on the firm’s plans. They’re not alone. Across financial services, the software engineers who have been at the heart of talent wars are winning more freedom than the bankers they work with. Wells Fargo & Co. told employees last month that work from home will be capped at two days a week for many roles, but said it would make an exception for most of its technology team. Citigroup Inc. chalks up some of its recent wins around tech recruiting to the firm’s greater flexibility around remote work. Other lenders, including Barclays Plc, have also made clear that some roles would get more flexibility and the bank would leave the details of its hybrid approaches to the managers. The British bank is giving up its second office in London’s Canary Wharf financial district.
Brief: The pandemic remains a part of the economic story. In June 2020, Federal Reserve Chair Jay Powell said at a press conference, "The extent of the downturn and the pace of recovery remain extraordinarily uncertain and will depend in large part on our success in containing the virus. We all want to get back to normal, but a full recovery is unlikely to occur until people are confident that it is safe to reengage in a broad range of activities."In the year-plus that has followed, the economy has enjoyed a very strong recovery. But the current spread of the Delta variant throughout the U.S. now has economist cautioning that the pandemic is again throttling the speed at which the economy is bouncing back.
Brief: ONR, a leader in transforming the customer experience (CX) for Fortune 500 companies today has shared new data highlighting how consumers, and thus businesses have pivoted successfully acting on key learnings measured during the pandemic that will impact commercial relationships in a post-COVID-19 world. Looking forward, loyalty has taken on a major significance, with customers clearly seeking trusted brands that make them feel like "they are taken care of, and a part of the family." For companies, greater emphasis on more bespoke customer facing solutions will allow brands to acquire deeper understanding and the quicker ability to address new needs in the customer's experience and customer journeys.Coming out of the extended lockdowns caused by COVID-19 and now the Delta Variant, brands in all business segments have seen continued heightened consumer uncertainty, and sustained awareness and attention on health and wellness in not only the products purchased, but also the service experience for retailing and purchase.
Brief: CNBC’s Jim Cramer said Tuesday that investors need to be on their toes as Wall Street trudges through a period of frequently re-evaluating the Covid recovery. Reaction to Home Depot’s earnings report before the market open Tuesday demonstrates the need to be nimble, the “Mad Money” host said. “Don’t get too complacent in your negativity.” Shares of the home improvement retailer closed down more than 4% even after the company beat analyst expectations on revenue and earnings. However, same-store sales slightly missed forecasts, and the company also said it recorded fewer customer visits to stores during the second quarter. “In the end, Home Depot will be fine. ... The real issue is that the consumers sure picked an awful time to go back to travel and recreation,” Cramer said.
Brief: Stocks posted their biggest decline in a month amid concern that the global economic recovery will lose momentum with further shutdowns to contain a coronavirus resurgence. Traders watched closely Federal Reserve Chair Jerome Powell’s remarks during a town hall with educators and students, where he noted the central bank’s “powerful tools” have limitations. Powell also said that COVID-19 will likely stay “for a while,” and we’re not going back to a pre-pandemic economy. Policy makers will gather next week for the Jackson Hole symposium, the Fed’s most-prominent annual conference. “We’re essentially in a bit of a holding period ahead of Jackson Hole,” wrote Craig Erlam, senior market analyst at Oanda Europe. “While there is a fair amount of data releases this week, some of which may carry a little more weight than others, it’s all about the Fed in these markets at the minute, and that’s unlikely to change unless the delta situation gets dramatically worse.”
Brief: During the heightened volatility sparked by the outbreak of the Covid-19 pandemic, investors found liquidity, price discovery, usage, and transaction costs to be pressure points across sectors in the bond markets – including high yield, investment-grade corporate, emerging markets, and, for a short time, U.S. Treasuries. With stress permeating global markets and investment decision-making processes, institutional investors sought relief through the use of fixed income ETFs. According to a global survey of 766 institutional investors, 54%1 increased their use of fixed income ETFs to source, price, and transact in bond markets during heightened pandemic-related volatility. Based on what they experienced and learned during the pandemic an additional 34% say they are likely to increase their use of fixed income ETFs in the future.
Brief: Less than half of fund managers expect the European economy to improve over the next 12 months, down sharply from 80% in the previous month, as concerns about the spread of coronavirus dampen optimism, the latest Bank of America (BofA) European fund manager survey shows. The 17 August survey of 232 participants representing $702bn AUM showed 44% of participants expect the EU macro cycle to improve further, the least optimistic outlook for the bloc's prospects since June 2020 and marking a substantial decline from the March 2021 peak of 94%. BofA attributed the decline to coronavirus-related concerns, with 19% of investors citing the Delta variant as the biggest tail risk facing markets, up from 9% in May, closely behind inflation concerns (20%) and worries about a taper tantrum (22%).
Brief: No skills? No degree? You're hired. The hiring logjam showed some signs of easing in July. But companies in the trenches trying to match labor demand and supply still see a market that continues to be imbalanced — and tilted heavily towards those looking for work. "No matter what source you use right now, fundamentally there [are] 40% more jobs open today than there [were] before the pandemic began," ZipRecruiter CEO Ian Siegel told Yahoo Finance Live on Monday. "And that was already a white hot job market." As of the end of June, a record 10.1 million jobs were available in the U.S. But as ZipRecruiter (ZIP) said in its second quarter letter to shareholders, the labor market today is one of "disequilibrium."
Brief: Stocks dropped from a record as traders assessed the latest round of economic data amid growing concern that more shutdowns will be necessary to contain a fast-spreading pandemic. Most major groups in the S&P 500 fell, with consumer-discretionary, industrial and commodity shares leading losses. The dollar climbed. Home Depot Inc. sank after the retailer posted weaker-than-expected results in the second quarter. Chinese stocks listed in the U.S. faced another wave of selling as authorities in Beijing ramped up their crackdown on some of the nation’s largest companies. Alibaba Group Holding Ltd., Baidu Inc. and JD.com Inc. slumped at least 2.5 per cent. U.S. homebuilder sentiment sank to a 13-month low in August amid high costs as well as continuing supply shortages.
Brief: U.K. wage growth hit a record as companies posted more than 1 million new job vacancies for the first time in an unprecedented scramble for staff following the loosening of lockdown rules. Average earnings in the three months through June surged a record 8.8% from a year earlier, the Office for National Statistics said Tuesday. While the figure partly reflects distortions created by the pandemic, underlying wage pressures are also gathering pace. The pickup underscores the scale of the recovery from the deepest economic slump in 300 years. Although the Bank of England expects strains in the labor market to prove temporary, policy makers warned this month that meeting the 2% inflation target will require a modest withdrawal of monetary stimulus.
Brief: Leases have historically been slow to evolve. Traditional fixed rent leases are inherently predictable and inflexible, with a focus on security of occupation for tenants and income for landlords. This comes as no surprise given that, after staffing costs, the largest overhead for most businesses is real estate. However, in recent years there have been nudges towards greater flexibility and innovation, and the Covid-19 pandemic has thrown the suitability of traditional leases into question. The uncertainty created by the pandemic means there is considerable appeal for many in finding more flexible workspace solutions, provided through shorter term rolling contracts with smaller initial investments. This allows tenants the opportunity to move, expand and contract according to business needs while maintaining a degree of control over costs.
Brief: Here’s a market milestone to encapsulate how stunning the recovery rally has been: The S&P 500 just doubled its level from its pandemic closing low. The broad equity benchmark has rallied 100% on a closing basis from its Covid trough of 2,237.40 on March 23, 2020. It took the market 354 trading days to get there, marking the fastest bull market doubling off a bottom since World War II, according to a CNBC analysis of data from S&P Dow Jones Indices. The S&P 500 closed at a record 4,479.71 Monday, up 0.3% on the day and 100.2% higher than its low Covid close.During the financial crisis, the S&P 500 hit its bottom at 676.53 on March 9, 2009, and the benchmark did not double that number on a closing basis until April 27, 2011. On average, it takes bull markets more than 1,000 trading days to reach that milestone, the analysis showed.
Brief: There’s a whole class of Wall Street pundits whose lone job, it often seems, is to bash stock investors for assigning irrational valuations to companies. Rarely has the chatter from this crowd been as loud as it was in the Spring of 2020, when the pandemic was raging and the economy was collapsing and stocks were suddenly rebounding and nothing seemed to make any sense. It turns out in the end that they were right. Valuations were wildly off. But in exactly the opposite way that they had proclaimed they’d be. Corporate profits have roared higher in such a spectacular fashion that those valuations -- when analyzed against the actual earnings reported a year later -- were almost 20% cheaper than analysts thought when investors began piling into the S&P 500 in April 2020.
Brief: Stocks fell in early trading Monday, amid worries about rising coronavirus infections in the U.S. and around the globe, as well as geopolitical concerns out of Asia. The S&P 500 index fell 0.5% as of 10:05 a.m. Eastern. The Dow Jones Industrial Average lost 0.7% and the Nasdaq composite fell 0.8%. The Russell 2000 index of small company stocks was down 1.2%. Shares of Tesla fell more than 3% after the U.S. government announced a formal investigation into the company's automated driving features, following a series of collisions with parked vehicles. Data out of China showed the global coronavirus pandemic continues to hurt economies around the world. Chinese industrial production and retail sales both rose last month, but at a far weaker pace than what economists had expected.
Brief: Big Wall Street banks have started enforcing stricter mask and vaccine requirements for staff, sometimes communicating them behind the scenes, in an effort to combat coronavirus infections in their offices while avoiding a fierce national debate about individual rights, sources at the banks and consultants who work with them told Reuters. Specifics differ, but many big banks have tightened up policies or pushed back return-to-office dates from just a month ago. Now, Citigroup Inc and Morgan Stanley have the toughest rules at their New York headquarters, where staff entering must be vaccinated. PMorgan Chase & Co and Goldman Sachs Group Inc have not mandated vaccines the same way, but both require unvaccinated workers to wear masks and get tested at least weekly. Bank of America Corp will only allow vaccinated staff to return to its offices in early September, while encouraging other employees to get inoculated.
Brief: The Covid-19 pandemic has clearly mattered to our daily lives and the well-being of the global economy. But the impact on financial markets has been less straightforward. The response from financial markets to Covid-19 has been mixed. Equities appear to have looked through the economic consequences of the virus. Last year, the Covid-19 crisis triggered one of the deepest recessions in history which saw global growth contract by 3.6% year-on-year. After the initial selloff in stock markets, global equities - as measured by the MSCI AC World index - went on to deliver a 15% return in 2020. Over the past decade, with the rise of the technology sector, global growth stocks have outperformed their value peers. But the difference in returns between growth and value was stark in 2020, with the MSCI AC World Growth index beating the value equivalent by a historical record of 33%.
Brief: Since putting in a pandemic low on March 23, 2020, Nasdaq 100 futures have posted a stunning 125% rally in the subsequent 17 months, making an all-time high on July 26, 2021. This gain far outpaces the 100% rally of the broader S&P 500. The Nasdaq’s out performance has been generally attributed to several factors. The primary reason given for the initial gain was a belief that the pandemic and post pandemic economy would rely heavily on technology as work from home and remote communication became paramount. There was also the issue of interest rates. Technology companies tend to have a strong inverse correlation to interest rates because of commonly used discounted cash flow models. In short, the lower interest rates are today the more attractive the growth and technology sector becomes because of optimistic projections of future earnings.
Brief: The stock market continues to ignore worsening headlines on the COVID-19 Delta variant front and climb to fresh records. But given a shift in tone lately from corporate America, perhaps investors should be on high alert. Companies that had been bullish on the economic recovery from the depths of the pandemic are becoming increasingly cautious as the variant spreads. Here are three household names that have recently warned of a financial impact from the COVID-19 Delta variant. Investors may be ignoring the commentary below, but it could prove to be an earnings headwind in the current quarter — one that isn't priced into stock prices.
Brief: A surge in merger activity propelled profits at the U.K.’s largest law firms despite a collapse in the global economy triggered by the coronavirus pandemic. A year that started with virus-related uncertainty gave way to record deal activity that helped four elite London firms, known as the Magic Circle, report bumper financial results. Transactional lawyers around the world advised on over $4 trillion worth of deals in the year ending April 31, according to data compiled by Bloomberg. Freshfields Bruckhaus Deringer led the way posting a 5% revenue boost to 1.6 billion pounds ($2.2 billion) for the financial year -- much of the growth was attributed to their work on eye-catching deals. Those included AstraZeneca Plc’s $39 billion acquisition of Alexion Pharmaceuticals Inc. and the sale of Cazoo for $7 billion, one of the largest ever SPAC deals.
Brief: U.S. consumer sentiment dropped sharply in early August to its lowest level in a decade as Americans gave faltering outlooks on everything from personal finances to inflation and employment, a survey showed on Friday. The University of Michigan said its preliminary consumer sentiment index fell to 70.2 in the first half of this month from a final reading of 81.2 in July. That was the lowest level since 2011, and there have been only two larger declines in the index over the past 50 years. Economists polled by Reuters had forecast the index would remain unchanged at 81.2. U.S. stock market indexes slipped immediately after the report was released, while the price of gold, a safe-haven investment, gained ground. U.S. Treasury bond yields hit session lows. Economic growth is still expected to grow this year at its fastest pace in four decades after falling into a brief recession in 2020 caused by the coronavirus pandemic.
Brief: Philippine stocks tumbled the most in more than a year on fears coronavirus infections will rise further and spur the government to extend a two-week lockdown affecting the capital and other areas. The Philippine Stock Exchange Index plunged 3.6% to 6,320.19 at 1 p.m. in Manila, its lowest close in more than a year. Investors dumped key blue chips -- including SM Investments Corp. and unit SM Prime Holdings Inc. -- after the gauge had held a moderate decline for much of the day. “I was expecting a downward movement, but not this drastic,” said Manny Cruz, strategist at Papa Securities. “The fear is infections will further escalate, raising prospects the lockdown will run longer.”
Brief: CNBC’s Jim Cramer said Thursday short-sellers have helped propel Wall Street’s robust rally from its pandemic-driven sell-off, calling the cohort of bearish investors the “secret ingredient” to the stock market’s success since late March 2020. “Just like ordinary investors will throw in the towel and sell when their favorite stocks get obliterated, short-sellers throw in the towel when their favorite targets go up too much,” the “Mad Money” host said, shortly after the Dow Jones Industrial Average and S&P 500 yet again closed at record highs. “The invisible cover of their defeat is evident every day in this market and it’s something we don’t talk about enough—how the heck do you think we’ve managed to go six straight months without a 5% decline? Capitulating short-sellers are like a fifth column supporting the bulls, even if they’re not doing it by choice,” he added.
Brief: It’s been a year that many of us would probably prefer to forget, but for asset managers the pandemic has turbocharged many underlying technology trends that were already in place before anyone had ever heard of Covid-19. The migration of more and more activities onto the cloud has been underway for years, of course – propelled above all by the sheer volumes of data which asset managers now juggle daily in order to shape their investment decisions. But those firms which had already shifted many of their activities into cloud-based solutions well before the pandemic hit last March found the transition to working with a dispersed workforce much easier – and faced less disruption compared to those heavily reliant on on-premise infrastructure and in-house teams of IT staff. John Kain of AWS, the world’s biggest cloud provider, says the charge into the cloud by the industry has been led by those firms which rely on the most data intensive investment strategies – above all the quant funds – but he thinks there is still plenty of room for overall growth as smaller firms and those with different strategies contemplate the long-term future of their tech stack post-pandemic.
Brief: For asset managers, the past 18 months have been a rollercoaster ride as the pandemic has forced them to embrace new ways of working. The implications have been profound as it has become more critical than ever for management firms to offer staff – everyone from portfolio managers to back office teams – the ability to access essential systems remotely. Many firms which were unable to do this initially have found themselves scrambling to update their technology. But the surge in home working has also fuelled mounting fears over cybersecurity. How can asset managers ensure their systems are as safe as they can be from the prying eyes of unwanted guests or from hackers seeking to disrupt or inject ransomware? “Businesses have increased the number of opportunities for cyber attacks massively, because every single device being used outside of traditional office network is of course an opportunity for cyber breach in essence we have decentralised cyber security,” says George Ralph (pictured), global managing director of RFA, an IT consultancy, which specialises in the alternative investment sector.
Brief: Industry commentators are forecasting that the UK economy will "comfortably" recover to its pre-pandemic levels by the end of the year, after a strong June reading that took year-on-year Q2 growth to 4.8%. The figure, reported by the Office for National Statistics (ONS) this morning (12 August), includes a 1% rise in June and is "strongly ahead" of US and European equivalents, according to Charles Hepworth, investment director at GAM Investments. He called the figures "a stunningly strong rate of growth compared to other western economies on a like-for-like basis", but warned this "record pace" is unlikely to continue now that coronavirus restrictions have been largely factored in to growth forecasts. "Consumer expenditure drove the increase over the second quarter despite a rise in coronavirus infections and a lot of that spending will likely cool from these levels," he said.
Brief: From travel to technology, employers across the globe are offering four day weeks as incentives to woo workers after the coronavirus pandemic upended their working patterns. Debate over the so-called 'Scandinavian model', which holds that productivity will rise if working hours are dropped, is not new but it has gained traction during the COVID crisis not only among companies but also the public sector and politicians. In Europe, Spain's left wing government is considering its own version to help its economy, while public administrations in Denmark and Iceland have already adopted 4-day weeks. With retail and hospitality now among the sectors struggling to attract and retain staff as economies recover from the crisis, many companies are introducing shorter weeks, the president of global staffing group Adecco said."After the (coronavirus) crisis, people became more aware their working conditions weren't always the best ... Now they're thinking, we don't want to sacrifice our personal life," Adecco's Christophe Catoir told Reuters.
Brief: The boom in online retail during Covid-19 is substantially reshaping the UK’s consumer sector, but Toscafund Asset Management’s Savvas Savouri believes e-commerce sales may peak sooner rather later as restrictions finally end. In a market commentary on Wednesday, Savouri – chief economist and partner at Martin Hughes’ hedge fund behemoth Toscafund – reflected on how the coronavirus pandemic sent online sales soaring as the UK entered a protracted lockdown. However, looking ahead, he believes that multi-channel retail operators that offer both digital sales and ‘bricks-and-mortar’ stores may now have reached a point where their online offering has gone from a “disruptive competitor” to their physical presence to a “stable companion”.Observing the rise in internet shopping, he noted that as recently as 2008, less than one-twentieth of UK retail sales were online; within a decade, that number had swelled to a fifth, as a result of online sales growing at an average of 20 per cent every year. But that 20 per cent levelled off towards the end of 2019 and into 2020, nearing what Savouri referred to as ‘retail internet penetration’ (RIP) – before spiking back up towards highs of almost 80 per cent UK’s first coronavirus lockdown in March 2020.
Brief: Macro strategies have advanced 7.82 per cent so far in 2021, according to data provider BarclayHedge, after managers posted a narrow gain of 0.19 per cent in July. In comparison, the broader Barclay Hedge Fund Index – which measures average industry performance across strategy classes – has risen almost 9 per cent year-to-date, BarclayHedge said this week. Macro managers take long and short positions across a wide range of markets and indices, including equities, bonds, currencies, and commodities, with bets shaped by their outlook on broader macroeconomic trends and events. Last year, the sub-strategy generated an annual return of more than 10 per cent. Despite macro hedge funds suffering the largest volume of investor outflows towards the end of the first half – allocators withdrew some USD5.57 billion from the sector in June, according to eVestment data – the outlook for managers remains positive.
Brief: While the damage wrought by the Covid-19 pandemic has been all-encompassing, research shows that it is women who have been disproportionately impacted. PWC's Women in Work 2021 research reports that women's job losses outpaced men's in 2020, with women forced to reduce their participation in the workforce due to the disproportionate burden of care. The findings point to a worrying reversal in progress towards gender parity in the workplace, prompting businesses across all sectors to reprioritise a recovery from Covid, which puts equality front and centre. Although discouraging, can these circumstances create a vital moment for change? And against this backdrop, what is the view from private equity, specifically? We know that the sector has historically had a reputation for being a less caring and socially inclusive place to work than many. Is this finally an opportunity for change?
Brief: U.S. stocks were off the highs of the day and the dollar weakened after data showed consumer prices increased at a more moderate pace in July, reducing concern about the timing of an unwinding of some of the stimulus that has helped the economy recover from the COVID pandemic. The S&P 500 and Dow Jones Industrial Average indexes climbed to records after data showed CPI rose 0.5 per cent in July after climbing 0.9 per cent in June. The tech-heavy Nasdaq 100 declined as investors rotated to cyclical shares from traditional growth favorites such as Amazon.com. The reaction was muted in the Treasury market, with yields lower on two-year notes and slightly higher on 10-year securities. Investor focus on U.S. price data comes as Federal Reserve Chair Jerome Powell and other officials discuss the prospects of unwinding stimulus that has helped the recovery from the pandemic. Chicago Fed President Charles Evans said he expects substantial further progress later this year on the central bank’s tapering intentions.
Brief: The FTSE 100 closed at an 18-month high on Wednesday, as stocks rallied around the world on stimulus hopes and easing inflation fears. The FTSE 100 (^FTSE) rose 0.8% to close at 7,220, its highest finish since March 2020. The index remains around 200 points off levels it was trading at before the onset of the COVID-19 pandemic. In Europe, Germany's DAX (^GDAXI) was up 0.3% and the CAC (^FCHI) rose 0.5%. Global sentiment was helped by signs that US inflation could be topping out. Consumer price figures published 1.30pm Europe time showed US prices growing at 5.4% in July. That was flat on the prior month and broadly in line with forecasts. "With US CPI having beaten expectation for most of 2021, it’s almost a surprise to see the numbers come out in line with expectations," said Mike Owens, a global sales trader at Saxo Market.
Brief: Stocks rose on Wednesday after inflation jumped, but not by quite as much as investors feared when stripping out volatile food and energy prices. The Dow Jones Industrial Average gained about 170 points, or 0.5%, to reach a new intraday record. The S&P 500 rose 0.1% to an intraday high. The Nasdaq Composite traded 0.45% lower.The 10-year Treasury yield turned flat following the CPI report, giving up an earlier gain and trading around 1.344%. July’s Consumer Price Index released Wednesday showed prices jumped 5.4% since last year, compared to expectations of 5.3%, according to economists surveyed by Dow Jones. The government said CPI increased 0.5% in July on month-to-month basis. But investors were concentrating on the core rate of inflation. CPI, excluding energy and food prices, rose by 0.3% last month, below the 0.4% increase expected. Core prices still jumped 4.3% on a year-over-year basis.
Brief: Investor confidence in Germany’s recovery dropped to the lowest level since late last year after a rise in infection rates stoked concerns over a possible tightening of pandemic curbs. ZEW’s gauge of expectations declined to 40.4 in August from 63.3 the previous month, with the institute’s President Achim Wambach warning of “increasing risks” to the economy. A measure of current conditions improved. Although more than half of Germany’s population is fully vaccinated, coronavirus infections in Europe’s largest economy are on the rise. The government has already tightened some travel rules and is set to discuss additional steps during a summit on Tuesday.
Brief: Slumping technology stocks briefly slowed the grind higher in U.S. equities, exposing the lingering concerns about the ability of the economy to weather less stimulus and rising COVID outbreaks. While the S&P 500 climbed to another all-time high, the Nasdaq 100 declined as Amazon.com slumped. Micron Technology led a decline in chip stocks, which are down for a fourth session. Energy shares rallied with oil. In Europe, the Stoxx 600 Index climbed for a seventh day.“The move lower in growth, especially the tech sector, may be two-fold,” said Dave Mazza, head of product at Direxion. “First, with the recent outperformance in the space, investors may be taking profits ahead of this week’s inflation data. Secondly, investors may be pricing in tapering by the Federal Reserve sooner then expected considering recent comments from officials.”
Brief: Global M&A activity saw a strong recovery in H1 2021, as dealmaking count and value are both set to reach or surpass the record highs of previous years, according to Pitchbook's latest Global M&A report. In total, more than 17,000 deals closed with a combined value exceeding USD2 trillion, as the bounce back from the pandemic-spurred lows in 2020 continued to pick up slack. Healthy stock market returns, optimistic executives, and cheap financing were all contributing factors to the deal bonanza, the report, which mapped M&A activity in the first half of the year, revealed. Moreover, the intense pace of IPOs and SPAC reverse mergers bodes well for global M&A activity overall.
Brief: European stocks inched higher on Tuesday, looking to break out from a cautious approach seen globally at the start of the week. The pan-European Stoxx 600 climbed 0.25% by late morning, with travel and leisure stocks adding 1.4% to lead gains while banks fell 0.6%. The cautious optimism in Europe reflects similar sentiment in Asia-Pacific, where shares mostly rose in Tuesday trade while South Korean game developer Krafton plunged in its debut. Worries about the impact of Covid on global growth continued to weigh on investor sentiment, with countries grappling with the spread of the highly transmissible delta variant of the virus.
Brief: During times of global turbulence, like the kind induced by the Covid-19 pandemic, cryptocurrencies may provide much-needed diversification to investment portfolios, according to a paper from researchers at the University of Bath. The researchers came to this conclusion after aggregating popular cryptocurrencies into nine equally-weighted portfolios based on the type of algorithm used in the blockchain of each currency, a methodology that gave them room to consider 553 cryptocurrencies in total. These categories included proof-of-work coins — popular mineable coins like Bitcoin and Ethereum — and proof-of-stake coins, a more energy-efficient alternative to PoW coins.
Brief: Hedge funds’ nine-month consecutive run of positive returns has been halted, with managers ending last month in the red as market volatility and renewed uncertainty over the impact of coronavirus variants. Hedge Fund Research’s main industry-wide benchmark, the HFR Fund Weighted Composite Index – which tracks the monthly returns of some 1400 single manager hedge funds across all strategy types – lost 0.60 per cent in July, its first down month since September 2020. The dent means hedge funds have now returned 9.45 per cent gain since the start of 2021. Before last month, the industry’s January-to-June advance – a rise of some 10 per cent – had been its best first-half performance since 1999, according to HFR data.
Brief: For the first quarter since the onset of the pandemic, the health of the UK’s Defined Benefit (DB) pensions schemes failed to improve, ending what had been four consecutive quarters of growth. However, it should be noted that funding levels remain far stronger than their pre-Covid levels, according to Legal & General Investment Management (LGIM). LGIM's Health Tracker, a monitor of the current health of UK DB pension schemes, found that the average1 DB scheme can expect to pay 98.2 per cent of accrued pension benefits as of 30 June 2021, the same figure recorded on 31 March 20212. The health of the UK’s Defined Benefit (DB) pension schemes had originally dropped as low as 91.4 per cent as of 31 March 2020, following the onset of the pandemic, having previously been at 96.5 per cent as of 31 December 20194. LGIM’s monitor has since shown a continuing improvement in each of the last four quarters, which has been brought to an end with the latest data.
Brief: Stocks fell Monday, losing some steam after rising to all-time highs late last week. Commodity prices tumbled as concerns over the coronavirus's spread resurged, with crude oil prices moving sharply to the downside. The S&P 500 fell as shares of oil companies including Occidental Petroleum (OXY), Apache Corporation (APA) and Diamondback Energy (FANG) dropped. The Dow also dipped, weighed down by a decline in shares of Chevron (CVX). U.S. West Texas intermediate crude oil futures (CL=F) dropped more than 4% at session lows Monday morning to hover around $65 per barrel, extending a more than 7.5% weekly decline last week. Brent crude (BZ=F), the international standard, also dropped. Other commodities also dipped Monday morning, including with copper, silver and gold futures each moving lower by at least 1%. Treasury yields fell across the curve, and the benchmark 10-year yield retreated to below 1.28%.
Brief: The S&P 500 is poised for its fastest 100% recovery in history and investors remain bullish on the US equity market but advise caution on the sustainability of such a rapid recovery. From its 20 March 2020 low point to 6 August 2021, the S&P 500 has risen 95% in under 17 months, according to data from FE fundinfo, well ahead of the pace of the current record recovery following the Global Financial Crisis, which took two years. While nothing is guaranteed, Juliet Schooling Latter, research director at Chelsea Financial Services, believes it is "highly likely" the previous record will be broken given the strength of US earnings combined with current monetary policy. "The difference between this crisis and post-GFC is that we have had faster and bigger amounts of fiscal stimulus which are helping us to recover faster," she explained. "The earnings growth is also extremely strong. People have been calling [it] another tech bubble because they have been focusing on share price charts for tech companies.
Brief: Goldman Sachs sees the U.S. labor market maintaining its momentum well into 2022. Economists at the firm led by Jan Hatzius lowered their year-end 2021 unemployment rate forecast slightly to 4.1% on Monday. For 2022, Hatzius and his team projects a 3.5% unemployment rate. If achieved, the unemployment rate would be at a 50-year low as the economy powers back from the COVID-19 pandemic. Employment at those levels in 2022 would bring the economy to full employment, Hatzius says. "We expect further solid job gains in the rest of the year. One reason is that labor demand remains very strong. We also see further scope for fairly quick job gains from additional reopening, the expiration of federal unemployment benefits, and the return of in-person school," explains Hatzius.
Brief: The first half of this year saw a total of 357 companies raise new capital through follow-on issues, raising £12bn in capital, according to investment bank Goodbody, which analysed stock exchange data. The figure is down from £17.3bn raised in H2 2020 and £17bn raised in H1 2020, but remains well above pre-pandemic levels, averaging £9bn each half year over the last decade. "In the face of unprecedented disruption, UK capital markets have proven to be an invaluable source of support for listed businesses," head of Goodbody's London office Piers Coombs said. "Through the backing of investors, management teams have been able to plot a course through the pandemic and protect jobs. Now, investors are backing UK businesses to build back better as they capitalise on new opportunities for growth."
Brief: The call from Morgan Stanley’s human resources office went out late Monday: Two vaccinated employees had Covid-19, and workers on the 14th floor of the firm’s Times Square headquarters should stay away until the area could be cleaned. But some staff missed the message and showed up Tuesday morning anyway. Others asked if the company would start mandating masks. For now, the answer was no. After all, you have to be vaccinated to be in the building. The episode, described by a person familiar with the matter, shows the swirl of confusion across Wall Street as banks summon employees back to their towers amid the spread of Covid’s highly transmissible delta variant. As the mutation shows its ability to jump between vaccinated people, executives are struggling on how to calibrate responses. Across an industry that was already split on returning to work, policies are diverging more than ever.
Brief: European markets were slightly higher on Friday as investors monitored a fresh round of corporate earnings and the global spread of the delta Covid-19 variant. The pan-European Stoxx 600 climbed 0.12% by mid-afternoon trade, with insurance stocks adding 1.4% to lead gains after strong earnings from Allianz, while health care stocks fell 0.8%. Shares in Asia-Pacific were also mixed in Friday’s trade as rising Covid cases continued to weigh on sentiment, while investors awaited the release of a key jobs report from the U.S. Labor Department. Stateside, U.S. stock futures were little changed in early premarket trade as investors reacted to a better-than-expected July jobs report from the U.S. Labor Department. Nonfarm payrolls increased by 943,000 for the month while the unemployment rate dropped to 5.4%.
Brief: Companies from Goldman Sachs Group Inc. to Havas SA are hoping the way to their employees’ hearts is through their stomachs as they try to lure staff back to the office. At Goldman Sachs, free breakfast, lunch and ice-cream are part of the pitch to convince employees from London to Hong Kong and New York to leave the comfort of their homes, where some have worked since March 2020 when the pandemic took hold. One of the most vocal proponents of bringing everyone back even allows those meals to be enjoyed on Plumtree Court’s landscaped roof garden — once reserved for clients and visiting royalty. “Food is playing a much more central part in office life and businesses are using their food offers to try and influence behavior,” said Robin Mills, U.K. and Ireland managing director at catering company Compass Group Plc. “We are now fully part of these reopening conversations and part of this new world as companies think about how to get people to come back.”
Brief: BlackRock Inc. and Wells Fargo & Co. are pushing their return-to-office plans back a month to early October, as Wall Street grapples with rising Covid-19 rates across the U.S. BlackRock is allowing workers to choose whether or not to come into U.S. offices through Oct. 1, according to a memo. Wells Fargo, with almost 260,000 employees, will now begin bringing back staffers who have been working remotely starting Oct. 4 rather than Sept. 7, as previously announced, according to an internal memo Thursday from Chief Operating Officer Scott Powell. The shift from both the world’s largest money manager and the firm with the largest workforce of any U.S. bank signals the financial industry is rethinking its return-to-office plans as the highly contagious delta variant sweeps across the country. While the biggest U.S. banks have so far stopped short of requiring their employees to be vaccinated, BlackRock has only allowed fully inoculated workers to come back.
Brief: There’s more money than ever betting that apartment rents are heading to new heights. Investors spent $53 billion on multifamily real estate during in the three months ending in June, the most ever for the second quarter, according to data from Real Capital Analytics. The spree extended a busy year for apartment investors that has included purchases by Blackstone Group Inc. and Starwood Capital Group. It was also fueled by real estate money moving to housing from offices, hotels and malls, which have fared poorly in the pandemic. The influx of money has pushed prices higher and forced private equity firms to behave like the aggressive homebuyers in the frenzied housing market. Some investors are frustrated by current prices for apartment buildings. But many are raising their bids, waiving inspections and promising to close fast, with rising rents driving a flurry of deals.
Brief: The Covid boom times are coming to an end for tech companies. After reporting eye-popping growth throughout 2020 as more people turned to technology to work and play during pandemic lockdowns, companies from Apple to Roku are now warning the party is just about over. In general, tech companies beat earnings expectations for the second quarter, but investors still punished shares following weaker than expected guidance for the current quarter. Google’s parent company Alphabet was the most notable exception, however. To be clear, the biggest tech companies still expect to show nice growth in the third quarter, but warned they have lapped the hyper growth they saw last year. And it all appears to be a result of people turning away from tech and getting back out into the real world as the economy opens up and more folks get vaccinated.
Brief: Public plans tracked by eVestment reported 109 commitments to private markets real estate investments totalling USD7.5 billion in 2Q, a 9.5 per cent increase from the previous quarter, according to the just-released June 2021 Private Markets Monitor. Average commitment size also increased to USD68 million from USD64 million. These 2Q 2021 real estate commitments still represent a drop of 10.1 per cent compared to 2Q 2020, as some of the most severe months of the pandemic unfolded and the extent of the disruption in the current and future state of the real estate business was unknown. But the rebound in Q2 2021 reflects an overall strengthening of and confidence in real estate as an investment as normal work, shopping and entertainment activities resume.
Brief: U.K. Prime Minister Boris Johnson issued a rallying cry for the nation’s institutional investors to plow money into British companies and create a “big bang” that powers a recovery from the pandemic. In a joint letter with Chancellor of the Exchequer Rishi Sunak, Johnson called for “hundreds of billions of pounds” to be unleashed into longer-term U.K. assets, including “pioneering firms and infrastructure.” That would help secure better retirements for pensioners and support an “innovative, greener future,” he said. The language evokes the “Big Bang” of the 1980s, when Margaret Thatcher’s liberalization of finance made London the unrivaled financial hub of Europe. It’s also Johnson’s answer to criticism that his plans to bridge income gaps between London and the rest of the nation are too vague. Relying on investors would avoid further strain on the Treasury, which borrowed at record rates during the Covid-19 pandemic.
Brief: Increased investor concerns about China and a widening vaccination gap will keep pressure on emerging-market assets relative to their developed peers, according to some market participants. China’s sweeping clampdown of its technology sector at a time when its economy is slowing has helped push a global gauge of emerging-market shares to a 17-year relative low against their developed-market peers. The spread of coronavirus variants has also weighed, with vaccine rollouts in developing nations lagging those in the likes of North America and Europe. U.S. and European stock markets are expected to continue to outperform, as advanced economies rebound, travel resumes and vaccinations creep closer to herd immunity.
Brief: Despite seeing growth significantly impacted during the pandemic, the vast majority of UK startups are now confident about the next 12 months. That's the key finding of a survey of startup opinion, conducted by Angel Investment Network (AIN), the UK’s largest online angel investment platform. In the largest study it has ever conducted, AIN surveyed the views of 645 UK startups 18 months after the pandemic first hit. Despite 59 per cent seeing growth negatively impacted, nearly three quarters are now optimistic about the next 12 months (72 per cent), with 42 per cent very optimistic – up from 23 per cent when a similar survey was conducted at the start of the pandemic. Of those who have raised in the past year, 54 per cent reported being negatively impacted with investors pulling out. Meanwhile 68 per cent reported delaying fundraising as a result of Covid.
Brief: Investors waiting for a heads-up from the European Central Bank on the future of pandemic bond-buying in September will probably be disappointed, according to Governing Council member Martins Kazaks. With nearly 600 billion euros ($713 billion) left to spend and the program running at least through the end of March, it would be much too early for a decision on whether to extend or phase out purchases, he said in an interview. Coronavirus infections are rising again across much of the region, threatening new restrictions that could jeopardize the recovery.
Brief: Vanguard Group Inc. is offering $1,000 to employees who get vaccinated by October, according to a person familiar with the matter. The asset manager is extending the payments to all workers who can prove they’ve gotten a Covid-19 vaccine, even if they were inoculated before the firm extended the offer. A Vanguard spokeswoman confirmed the company is offering an incentive. “We are offering a vaccine incentive for crew who provide Covid-19 vaccination proof,” she said in an emailed statement, adding that the company rewards employees “who have taken the time to protect themselves, each other, and our communities by being vaccinated.”
Brief: North American markets moved up on the first day of August trading in Canada, even as concerns mount around rising COVID-19 case counts in the U.S. Scott Guitard, senior vice-president and portfolio manager at Fiduciary Trust Canada, said it was a typically slow start to the summer month in terms of volume. However, he said markets managed to continue upward movement on Tuesday thanks to second quarter earnings that beat expectations last week, and the belief that the U.S. is prepared to weather the Delta variant of the coronavirus.
Brief: The Delta variant is wreaking havoc on companies’ return-to-office plans. Uber, Apple and Google are among the latest to push their return dates back by a month – from September to October. Employment website Indeed took it one step further, announcing its employee return-to-office date is now Jan. 3, 2022. “Health risks are at a peak these days because of this pandemic, and we’re still learning about what’s going on every single day,” Paul Wolfe, Indeed’s Senior Vice President of Global Human Resources, told Yahoo Finance. “Our guiding principle through the entire pandemic has been the health and safety of our employees.” Commuting time and costs are a top concern for workers dreading a return to the office, according to a recent Indeed report published in July
Brief: Never mind banker burnout, return-to-office headaches, and new pandemic waves. A simple reality stands out for the biggest global investment banks: they’re minting money like never before. As the dust settles over earnings season, a total profit of more than $170 billion from a dozen of the biggest firms in the past four quarters shows how far the industry has come from the frazzled early stages of the pandemic. JPMorgan Chase & Co. was the standout, earning the equivalent of $131 million a day. A string of trading wins certainly helped the sector in the early days of Covid-19, and as last year’s market volatility faded, investment bankers were ready to fuel the boom in takeovers and fundraisings via special purpose acquisition vehicles.
Brief: Clorox Co. plummeted the most in more than two decades after forecasting a sales decline in 2022 as pandemic-fueled demand for its cleaning products wanes. The maker of disinfecting wipes and Glad trash bags posted fourth-quarter sales of $1.8 billion, missing the lowest analyst estimate. With consumers reallocating spending amid a reopening economy, Clorox expects organic sales to decline by 2% to 6% in the current fiscal year. The stock fell 11% at 9:55 a.m. in New York on Tuesday, the biggest drop since 2000. The shares had already declined 10% in 2021 through Monday’s close. Clorox’s guidance is a warning to investors about the bumpy road ahead for consumer-products companies that enjoyed a boom during the onset of the pandemic. The forecast reflects consumers’ new priorities, which now more closely resemble pre-pandemic trends as they spend less time at home and offices and businesses reopen.
Brief: Laura Pollock’s Third Street Partners launched its lift-out business 18 months ago, just before the pandemic began. “The pandemic has created an opportunity for individuals to reflect on what do they want their career to look like,” Pollock told Institutional Investor. With that comes opportunity for an executive search firm like Third Street. Its lift-out business involves facilitating an entire investment team’s next career move. Third Street acts as a “professional matchmaker,” as Pollock puts it, finding teams that would be good fits for existing asset managers — or that would do well if they spun out on their own.
Brief: Two days a week working from the office is expected to become the new normal as businesses adapt to the fallout of the coronavirus pandemic. With millions of employees already working from home, big firms are adopting a three days at home, two days in the office approach, reports the Mail Online. Several employers have already agreed the changes, while the Institute of Directors said two thirds of business leaders will allow remote working to continue. The institute’s director of policy Roger Barker said the pandemic had led to changes to the working week “greater than radical reform or regulation ever could have”. A recent YouGov survey found just one in five bosses will ask all staff to come in five days a week after the pandemic.
Brief: Investors may want to start August by lightening up on the reopening trades. Longtime market bear David Rosenberg warns surging Covid-19 delta variant cases paired with the culmination of fiscal stimulus will crush stocks tied to the economic recovery. “We have to be prepared here for the economy to sputter in the next several months,” the Rosenberg Research president told CNBC’s “Trading Nation” on Friday. “You don’t have to basically abandon the stock market, but I definitely would not be in the value reflation cyclical trade.”
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