Brief: A potential bidding war for UK holiday resort group Parkdean that could include offers from Apollo Global Management and Blackstone underscores a revived appetite for hospitality and leisure—an industry that was on its knees just two years ago, but is now offering marked post-pandemic opportunities. Apollo, which is reportedly eyeing Parkdean at a £2 billion (about $2.6 billion) valuation, isn't the group's only suitor. Bourne Leisure, a rival holiday business that Blackstone bought for around £2.7 billion at the start of 2021, is also said to be mulling a bid. Like Blackstone before it, Apollo is trying to capitalize on the "staycation" trend in the UK, where more tourists are favoring domestic vacations, which has accelerated over the course of the pandemic. Last year saw a significant rebound in hospitality and leisure globally, with $55.14 billion transacted across 342 deals, according to PitchBook data. Blackstone's Bourne Leisure deal was the biggest, as lockdown measures were eased or disappeared altogether both in the UK and around the world.
Brief: Everyone is talking about inflation these days. Knowing that products and services you buy are going to cost more can be frightening, especially if you’re locked into an income that doesn’t keep pace with inflation. Paying more for toothpaste may be the least of your worries, as retirement accounts take the biggest hit when the value of the dollar decreases. If you’re concerned about what inflation can do to your retirement dollars, it may be time to consider inflation-hedging investments. Unlike stocks, bonds and mutual funds, investing in real estate can make inflation actually work for you, increasing your income as inflation rises. While real estate investing is a proven wealth-building tool, most busy professionals don’t have time to be DIY landlords dealing with tenants, toilets and trash. However, it is possible to achieve the same inflation-hedging advantages without the headaches by investing passively through private-equity-firm-sponsored real estate syndications.
Brief: Just as Regeneron’s COVID-19 antibody combination, REGEN-COV, is sidelined in the U.S. thanks to omicron, the drug has hit a hiccup on its quest for a full FDA nod. The FDA has extended the review of REGEN-COV by three months to July 13, Regeneron said Thursday. The agency wants to take the time to review additional data on how well the therapy could prevent COVID before exposure to the SARS-CoV-2 virus, the company said. An FDA nod in what’s known as the pre-exposure prophylaxis setting would be an expansion from REGEN-COV’s existing emergency use authorization, which currently only covers treatment of mild-to-moderate non-hospitalized patients and COVID prevention after exposure to the coronavirus. Regeneron is currently seeking full approval for all three uses. The FDA appears to have some questions about the pre-exposure prophylaxis use. The extension comes after Regeneron submitted additional data on that use from a prophylaxis trial during “ongoing discussions” with the FDA. The agency hasn’t requested any new studies at this point, the company added.
Brief: The crippling cost of debt financing for many developing countries has hamstrung their recovery from the COVID-19 pandemic, forced cutbacks in development spending, and constrained their ability to respond to further shocks, according to a new report launched by the United Nations today. The 2022 Financing for Sustainable Development Report: Bridging the Finance Divide finds that while rich countries were able to support their pandemic recovery with record sums borrowed at ultra-low interest rates, the poorest countries spent billions servicing debt, preventing them from investing in sustainable development. The pandemic shock plunged 77 million more people into extreme poverty in 2021, and by the end of the year many economies remained below pre-2019 levels. The report estimates that in 1 in 5 developing countries’ GDP per capita would not return to 2019 levels by the end of 2023, even before absorbing the impacts of the Ukraine war. “As we are coming up to the halfway point of financing the world’s Sustainable Development Goals, the findings are alarming,” UN Deputy Secretary-General Amina Mohammed said. “There is no excuse for inaction at this defining moment of collective responsibility, to ensure hundreds of millions of people are lifted out of hunger and poverty. We must invest in access for decent and green jobs, social protection, healthcare and education leaving no one behind.”
Brief: Goldman Sachs Group Inc reported a 43% drop in profit but beat Wall Street expectations on Friday, as strong performances in its wealth management and trading businesses partly offset a slump in equity underwriting as stock market listings dried up. Wall Street banks have come under pressure amid a slump in dealmaking globally, but volatility fueled by concerns around interest rate hikes and the economic fallout of the Ukraine war helped Goldman's trading desks smash expectations. The bank's global markets segment reported net revenue of $7.87 billion, a 4% jump from last year when accommodative monetary policy from the U.S. Federal Reserve led to bumper levels of trading activity. The robust performance was driven by a 21% rise in fixed income revenue, the bank said. The Wall Street bank has also been taking measures under Chief Executive David Solomon to diversify its revenue stream and earn more from predictable sources like consumer banking, wealth and asset management
Brief: JPMorgan Chase & Co's Chief Executive Jamie Dimon warned of economic uncertainties arising from Russia's invasion of Ukraine and soaring inflation, after first-quarter profits at the largest U.S. bank slumped 42%. JPMorgan had reported record profit during the first quarter last year, benefiting from a dealmaking boom after the Federal Reserve pumped liquidity into capital markets to mitigate the economic impact of the COVID-19 pandemic. This year, however, investment banking revenues declined as companies delayed takeovers and stock market listings amid a surge of volatility in equity markets. The bank also set aside $902 million to cover potential loan losses. JPMorgan is seen as a bellwether for the U.S. economy and its lackluster results set the tone for first-quarter earnings from Wall Street banks as the Fed looks to rein in inflation and the trading bonanza banks enjoyed during the pandemic tapers off.
Brief: Shionogi & Co. slumped the most in more than a decade after the drugmaker said studies on animals showed its experimental COVID drug disturbed fetal development, triggering concerns about its approval. The stock fell as much as 16% in Tokyo trading Wednesday, the biggest intraday decline since March 2011. Shionogi shares are down 8.4% this year through yesterday. The drug likely won’t be recommended for pregnant women, Kyodo News reported Tuesday, without giving attribution. The animal data, which showed harm when it was given at high doses, was submitted to Japanese regulators in February when the company sought a priority review required for conditional approval, a Shionogi spokesman said. The pill’s chance of commercial success fell to 5% from 50% after the report tying it to birth defects, which may make it less competitive, said Stephen Baker, an equities analyst at Jefferies & Co.
Brief:Confidence levels among hedge fund mangers remain resilient despite the war in Ukraine, Russian economic sanctions, and global inflationary concerns, according to AIMA. Hedge fund returns have been mixed, with some strategies struggling while others have racked up bumper returns, resulting in wide performance dispersion across the industry. While some fund strategies have experienced a challenging start to the year, others have thrived. "Despite these challenges and the threat of more still to come, the industry’s global confidence score for Q1 reflects the fact that hedge funds are reinforcing their value proposition of offering investors financial security and uncorrelated returns during uncertain times," writes AIMA. Global macro (+19) and multi-strategy (+18) strategies reported the highest confidence scores in AIMA's latest Hedge Fund Confidence Index poll and both are currently among those strategies most appealing to investors looking to make hedge fund allocations.
Brief: China’s central bank is struggling to drive up lending in the economy despite cutting interest rates and giving banks a cash boost. With a worsening Covid outbreak locking down mega cities Shanghai and Shenzhen, worries about jobs and incomes mean businesses and consumers are unwilling to take on more debt. Banks are reluctant to extend more loans too as a property downturn drives up bad debts and squeezes profits. That creates a challenge for the People’s Bank of China, which is set to diverge further with a tightening U.S. Federal Reserve by possibly cutting policy interest rates for a second time this year on Friday. Many economists also expect the central bank to reduce the amount of cash banks must hold in reserve, freeing up more money for lending. Problem is, with restrictions to contain the spread of omicron amid China’s ongoing Covid Zero strategy keeping consumers on edge, any new stimulus may end up being parked at banks rather than flowing through to the real economy.
Brief: Making money in the stock market will likely look different over the next few years compared to the low interest rate era seen from the end of the Great Financial Crisis, says BlackRock's CIO of U.S. fundamental equities Tony DeSpirito. "It's a really big deal," says DeSpirito on Yahoo Finance Live. DeSpirito explains that since the end of the financial crisis, the economy has experienced very low growth, very low inflation and very low rates. But those factors largely ended during the pandemic, with that regime being one with high inflation and a love for stay-at-home stocks. Now things are changing once more as home prices have shot higher at this point in the pandemic, stock prices are still elevated, the unemployment rate is sub 4% and interest rates are headed upward. This emerging backdrop means investors have to search for companies that have pricing power and sell unique products. All in, it will be a more complicated backdrop for investors to navigate, concedes DeSpirito. "This is fertile ground for individual stock pickers," says DeSpirito.
Brief: If the latest numbers from the Investment Funds Institute of Canada (IFIC) are any indication, the pandemic has created a resurgence in active management. Investors who rushed to beat the March 1 registered retirement savings plan (RRSP) contribution deadline pumped nearly $10 billion into mutual funds in February alone, according to IFIC. As of March 1, total mutual fund assets reached $2 trillion in Canada. A big chunk of that came from a $111.5-billion bump in mutual fund sales in 2021. That’s nearly four times the $29 billion in mutual fund sales in 2020, which was in line with average annual sales going back to 2000. In comparison, sales in passively-managed exchange-traded funds (ETFs) totaled $4 billion in February, bringing total assets to $317.7 billion by March 1. Over half of February’s mutual fund sales went into balanced funds, which have been the funds of choice throughout the pandemic. Like the name implies, balanced funds attempt to strike a balance between equities and fixed income.
Brief: Global growth optimism has sunk to an all-time low, with recession fears surging in the world’s investment community, according to the latest Bank of America Corp. fund manager survey. The share of investors expecting the economy to deteriorate is the highest ever, according to the April survey. Stagflation expectations jumped to the highest since August 2008, while monetary risk increased to a historic high, BofA strategists said, after surveying 292 panelists with $833 billion in assets under management in the first week of April. The results highlight how gloom is taking hold among investors as the Federal Reserve turns more aggressive in its attempt to tame soaring inflation. The bearishness has been extreme enough to trigger BofA’s own buy signal, a contrarian indicator for detecting entry points into equities. Global stocks have been under pressure this month after rallying from lows in March as bond yields have soared. BofA’s strategists disagree with the tactical buy signal, saying they “remain in ‘sell-the-rally’ camp,” as the stock market slump earlier in the year was just an “appetizer not main course of 2022.”
Brief: China stocks rebounded in afternoon trading to close higher on Tuesday, as hopes of easing in COVID-19 curbs in some pilot areas lifted tourism and consumer goods sectors, while expectations of policy support for the economy lifted sentiment. The blue-chip CSI300 index ended 2.0% higher at 4,179.97, while the Shanghai Composite Index gained 1.5% to 3,213.33 points. The Hang Seng index rose 0.5% to 21,319.13, while the China Enterprises Index gained 0.8%, to 7,264.43 points. Tourism stocks surged 8.4%, transport firms soared 5.1%, while consumer staples added 3.9%. An unverified document about picking pilot regions, including Shanghai, for relaxed quarantine requirements is circulating and traders say it pushed up related sectors. New bank lending in China rose more than expected in March, while broad credit growth accelerated from the previous month.
Brief: Runaway inflation and a shaky economy are setting the stage for financial uncertainty, igniting fear in Wall Street investors that bonds and other investments backed by consumer debt might be weighed down by high risk. “When we’re investing, we’re investing less,” Clayton Triick, Angel Oak Capital Advisors portfolio manager told the Wall Street Journal on Tuesday (April 12). He added that investments backed by debt that is owed by borrowers with lower credit scores are especially troublesome. When the COVID-19 pandemic gripped the world in 2020, investors were less than enthusiastic about bonds backed by consumer debt. The assumption was that defaults would be the rule rather than the exception as businesses locked down and people were furloughed and laid off. Government stimulus programs and lender forbearance made many of those fears unfounded as even the most borderline borrowers stayed current. Many consumers used the extra funds to pay down debt beyond staying current, and anything leftover was squirreled away.
Brief: Near-record low unemployment, a $250 billion national savings pool and rising wages will see shopping centers bounce back strongly over the next 12 months according to AMP Capital. AMP Capital Head of Retail and Investment, Marco Ettorre said Australians remained reluctant to travel internationally due to COVID-19 and have continued to save over the last two years, pointing to a strong boost for shopping centers. "As COVID restrictions wane and consumers regain the confidence to go shopping, conditions for retail real estate are starting to look favourable again. And for all the pain of the pandemic, households in 2022 are in a better position to spend," Marco Ettorre said. "It's not back to the pre-Covid levels but there are good returns available and retail-led mixed-use opportunities for investors on the right shopping center assets," he added. Newer shopping centers that cater for a mix of uses should deliver excellent returns. "Leading shopping centers are blurring the lines across real estate categories by adding office space, residential, education facilities, healthcare and other services under the same roof," Mr Ettorre said.
Brief: Stocks are opening lower again on Wall Street as the market extends a losing streak from last week. The S&P 500 was down 0.9% in the early going Monday. Technology companies were again doing worse than the rest of the market. That pulled the Nasdaq down 1.5%. Both indexes fell last week for the first time in four weeks. Twitter was in focus after mercurial Tesla billionaire Elon Musk said he wouldn’t be joining the company’s board after all. Musk recently became the company’s biggest shareholder and is now free to increase his stake.Global stock markets and Wall Street futures sank Monday after the Federal Reserve indicated it might raise interest rates more aggressively to cool U.S. inflation and President Emmanuel Macron emerged from the first round of France's election facing a challenge from the far right. London and Frankfurt opened lower. Shanghai, Tokyo and Hong Kong retreated. Oil fell more than $2 per barrel on concern global economic growth might weaken.
Brief: Oil prices dropped by more than $2 a barrel on Monday after a second straight weekly decline on plans to release record volumes of crude and oil products from strategic stocks and on continuing coronavirus lockdowns in China. Brent crude for June delivery was down $2.97, or 2.9%, at $99.78 a barrel. U.S. West Texas Intermediate crude lost $3.32, or 3.4%, to trade at $94.96. Bank of America maintained its forecast for Brent crude to average $102 a barrel for 2022-23, but it cut its summer spike price to $120. Swiss investment bank UBS also lowered its June Brent forecast by $10 to $115 a barrel. “The release of strategic government oil reserves should ease some market tightness over the coming months, reducing the need for oil prices to rise to trigger near-term demand destruction,” said UBS analyst Giovanni Staunovo.
Brief: Wall Street’s dealmaking boom came to an abrupt halt amid the war in Ukraine and a global shift toward rising interest rates, leaving big banks set to post a quarterly slump in investment-banking revenue. The record merger-and-acquisition pipelines bank executives touted at the start of 2022 are still on the horizon, but have been put on the back burner amid gyrating markets and rampant inflation, according to Barclays Plc analyst Jason Goldberg. “Many deals did not get launched given the market volatility throughout the quarter,” Goldberg said. “We do think pipelines remain strong and have just been more elongated than canceled.” Another pressure point is the Biden administration’s more-skeptical view of mega mergers. U.S. antitrust enforcers earlier this year announced an effort to toughen merger reviews, saying a new framework is needed to combat a surge in deals that threatens to worsen already high concentration across industries.
Brief: The U.K. economy grew less than expected in February after industrial production and construction shrank. The 0.1% expansion followed a robust 0.8% gain in January, Office for National Statistics figures said Monday. Growth of 0.2% was forecast by economists. It left output 1.5% above its level in February 2020, before the pandemic struck. Manufacturing dropped unexpectedly, driven by shortages that held up output from carmakers. That reflects turmoil in global supply chains left over from the pandemic that’s likely to worsen with the war in Ukraine. Construction also fell in the month, driven solely by a decrease in repair and maintenance work. New business increased slightly. The rise in GDP, which reflected continued easing of coronavirus restrictions, leaves Britain on course for growth of around 1% in the first quarter. However, that may be a high-water mark, with soaring energy bills and inflation set to deliver an unprecedented hit to living standards this year.
Brief: Canada's unemployment rate dropped to a record low last month as more people jumped into a hot labour market — and economists say the jobless rate could yet fall even lower. The March unemployment rate registered at 5.3 per cent, down from the 5.5 per cent recorded one month earlier as the economy added 72,500 jobs. Statistics Canada said Friday it was the lowest jobless rate since comparable data became available in 1976 and down from the previous low of 5.4 per cent in May 2019. It was also a turnaround from the early days of the pandemic in May 2020 when the unemployment rate hit a record 13.4 per cent. CIBC senior economist Andrew Grantham said oil-producing provinces like Alberta and Saskatchewan were not at full employment before the pandemic struck and may have space for more job gains.
Brief: A Toronto businessman accused of orchestrating a $12-million pandemic-related Ponzi scheme was arrested and charged with fraud by Toronto police on Monday, just hours after investigators discovered his location, CBC News has learned. Mark E. Cohen's whereabouts had been unknown since last August. At the time, shadowy figures with ties to underground gambling rings, and others, began showing up at his former North York home demanding to know where he was and that he return large sums of money they had invested with him, according to a source familiar with the situation who is not authorized to speak publicly on the matter.CBC News previously reported on those efforts to find Cohen and three lawsuits accusing Cohen of convincing investors to help him buy used cars that would be resold at huge profits amid the pandemic-triggered vehicle shortage last year. The 42-year-old faces two charges of fraud over $5,000. A Toronto police spokesperson confirmed Cohen's arrest and the charges against him in an email to CBC News.
Brief: Fallout from Russia’s invasion of Ukraine will likely add to downward pressure on China investment in the United States this year. So believes Reva Goujon, senior manager at New York-headquartered Rhodium Group, which specializes in China research. Slower economic growth in China in recent years has already been weighing down inflows. “The current economic headwinds are strong and growing,” Goujon said in a telephone interview today. Longstanding U.S. national security concerns about Chinese investment have been intensifying yet also taking on a new twist. “On the U.S. side, some recent industry comments about Chinese investment are very interesting, such as the discussion of the possible CATL investment in North America,” Goujon noted.
Brief: About a third of San Francisco area voters in a poll by the Bay Area Council said they expect to do their jobs from home permanently, a shift that could subdue the level of growth of the tech hub hit hard by the rise of remote work. Indeed, about 68% of those surveyed by the business group are concerned about the future of the economy in the region, whose recovery of jobs that were lost during the height of the pandemic continues to lag that of the state and the nation. In the poll, 29% of respondents working remotely for at least part of their time said they were also going to a workplace, and 23% said they expect to do so within six months. In addition, the share of voters who said they feel safe returning to “normal” has almost tripled from last year to 30%, while 12% -- double that of last year -- said that will never happen. Nearly a quarter said it will take a year to three for a return to normal.
Brief: Pfizer Inc.’s acquisition of ReViral Ltd. chipped away at the drug maker’s stock-market slump. The company’s shares gained about 3.7% Thursday after the announcement that it was buying the lung-focused biotech firm for as much as $525 million, bucking the broader market’s drop. But the shares are still down almost 7% this year -- cutting some $34 billion from its market value -- amid investor concern about the loss of revenue as drug patents expire and the uncertain fate of its booster shots as the Covid-19 pandemic winds down. That’s left the company trading at a discount to health-care peers that have been hitting record highs as investors turn to defensive bets amid geopolitical turmoil and an uncertain economic outlook.Wall Street is itching for Pfizer to act to shore up growth, potentially by utilizing the $150 billion of capacity that Bank of Montreal estimates it has for acquisitions. Yet Thursday’s deal for a closely-held drug developer, ReViral Ltd. is likely too small to do much to change the pharmaceutical behemoth’s outlook.
Brief: Shares in Asia-Pacific were mixed on Friday, as Chinese tech shares slipped and investors watched the Covid situation in China. Hong Kong’s Hang Seng index fell 0.24% in afternoon trade, while the Hang Seng Tech index dropped 1.83%. Alibaba slid 2.47%, while JD.com shed 3.35%. Meituan lost 2.70%. Mainland Chinese markets were mixed. The Shanghai composite gained 0.47% to close at 3,251.85, while the Shenzhen component was down 0.11% at 11,959.27. Covid is in focus in China, with Shanghai reporting 20,398 new asymptomatic coronavirus cases and 824 new symptomatic cases on April 7. The city is under a strict lockdown in a bid to stop the spread of the virus. “Near-term sentiment [for Chinese shares] could stay curbed given a confluence of macro headwinds, Omicron spread, global liquidity uncertainty and US/China tension concerns,” according to a Morgan Stanley note dated April 7.
Brief: European Central Bank President Christine Lagarde tweeted Thursday that she tested positive for COVID-19 and has mild symptoms but will continue working from home. “I am vaccinated and boosted, and my symptoms are thankfully reasonably mild,” Lagarde, 66,wrote on Twitter. “I will work from home in Frankfurt until I am fully recovered. There is no impact on the ECB’s operations.” The news conference she typically holds following the meeting of the Frankfurt-based bank’s rate-setting council is slated to go ahead next Thursday, with the format to be decided in the coming days. Lagarde's tweet comes as numerous European countries have dropped nearly all their COVID-19 restrictions and arebattling a surge of the virusfueled by the highly infectious omicron subvariant BA.2. Another tweet from Lagarde shows her speaking unmasked with European finance ministers at a meeting Monday. U.S. House SpeakerNancy Pelosi also has tested positive for COVID-19, her spokesman said Thursday, a day after appearing unmasked at a White House event with President Joe Biden.
Brief: Investors withdrew £1.53 billion from equity funds in March, the largest outflow since July 2016 at the time of the Brexit referendum, according to Calastone’s latest fund flows report, as Russia’s invasion of Ukraine continued to rock markets. Investors actively sold out of funds, Calastone said, as opposed to going on a buy strike, and outflows increased week-on-week over the month before tailing off at the end of March. Global equities suffered the greatest impact, as investors sold down a net £992 million of their holdings in this category, while UK funds overweight commodity stocks benefitted from some protection. Fixed income funds also suffered outflows, totalling £274 million, making it the worst month for the asset class since the start of pandemic, though outflows were higher in February. “The world’s major stock markets were very volatile in March, but they have mostly regained the losses they sustained when Russia attacked Ukraine on 24 February,” said head of global markets at Calastone, Edward Glyn. “This has not been enough to reassure UK fund investors. Global risks are rising – growth prospects have deteriorated, and a recession is now a possibility in many developed countries. Inflation is taking hold, living standards are being squeezed and government budgets are also under pressure.”
Brief: As hedge fund assets rise and performance rebounds, prime brokers can be a critical part of the industry's growth. The hedge fund industry is on the up. Following several years of patchy manager performances, a number of high-profile closures, and sustained investor reluctance to continue coughing up hefty fees in exchange for often-lukewarm returns, the sector is enjoying something of a renaissance. In 2021 hedge funds generated their third biggest annual gain since the Global Financial Crisis, while global industry assets under management swelled to record volumes last year – in the neighbourhood of more than USD4 trillion in total. At the same time, investors are said to be once again looking at how hedge funds can provide diversifying returns in portfolios. A study of more than 2000 hedge funds by Barclays last year suggested hedge funds now offer a “compelling alternative” to fixed income allocations within a traditional 60/40 portfolio and could be key to strengthening returns amid a shifting market paradigm. “From the end of the financial crisis to the end of 2018, as market averages marched upward, it was very hard for alternative investment managers to stand out.
Brief: ASIC will allow the temporary relief inASIC Corporations (COVID-19—Advice-related Relief) Instrument 2021/268(COVID-19 Instrument) to be automatically repealed on 15 April 2022.The COVID-19 Instrument commenced on 15 April 2021. It extended the following forms of relief, initially introduced in April 2020: ‘Situations in which Statement of Advice is not required’ relief. This relief allows financial advisers to provide a record of advice, rather than a statement of advice, to existing clients requiring financial advice due to the impacts of the COVID-19 pandemic. ‘Urgent Advice’ relief. This relief allows financial advisers additional time to give their clients a time-critical statement of advice. ASIC undertook targeted industry consultation to better understand the effects of our approach. Based on feedback, we do not consider that the current status of COVID-19 responses in Australia provides a sufficient basis for a decision by ASIC to further extend the relief provided by the COVID-19 Instrument.
Brief: A total of £4m of blended finance, including £2m grant funding, will be made available to Black and minoritised ethnicity-led social enterprises and charities in England to help them recover from the fallout of Covid-19. The funding was announced by Social Investment Business (SIB), the Access foundation and social enterprise partners on Tuesday. This includes £2m of unrestricted grants from Access’ Flexible Financeprogramme, matched with £2m of loan money from the Recovery Loan Fund. The funding is expected to support 20 organisations. Social enterprises and charities must apply for a loan under the Recovery Loan Fund to be eligible to receive grants. The announcement came as the social investment sector in the UK has been heavily criticised over its failure to adequately serve social enterprises and charities led by people of colour.
Brief: Global government debt is set to soar by 9.5% to a record $71.6trn in 2022, according to the second annual Janus Henderson Sovereign Debt Index. The $6.2trn increase in debt will primarily be driven by the US, Japan and China, but every country across the world is likely to see its borrowing levels increase, Janus Henderson stated. In 2021 alone, global government debt jumped to $65.4trn, an increase of 7.8% year-on-year, as every country increased borrowing amid the Covid-19 pandemic. Meanwhile, the global interest burden is set to grow by around one seventh on a constant-currency basis to $1.16trn this year. Janus Henderson stated that the biggest impact here will likely be felt in the UK due to rising interest rates, the impact of higher inflation on the large amount of UK index-linked debt, and the cost of unwinding the country's quantitative easing programme. This is because "significant" fiscal costs come with unwinding QE as interest rates rise.
Brief: BNP Paribas SA reached one of the most comprehensive work-from-home deals among major banks, with as many as 132,000 employees given the option of doing their jobs from home for up to half the week. Staff in 22 countries across the region can decide to work from home every week for as much as 2.5 days or to adopt a more flexible rhythm, the lender said in a statement Wednesday. Employees will need to be in the office at least one day per week. The deal, which runs until 2024, extends a framework that was already applicable in France as lenders in the region adopt flexible arrangements to boost morale and save costs. Banco Bilbao Vizcaya Argentaria SA said last month it will permanently allow employees to work from home as much as 40% of their time, though that deal only covered about 12,000 employees in Spain. The push for more flexibility contrasts with Wall Street, where firms increasingly push for a full return to office.
Brief: Bank of America told staff earlier this week that it plans to bring workers back to offices by June 1, including those who are not vaccinated, Bloomberg reported on Tuesday. Staff will return in a series of stages, although workers have already begun returning to offices in some cities, including in New York, according to Bloomberg. The bank has been encouraging workers to get vaccinated and boosted for months, and previously only allowed vaccinated employees into the office.The bank is now proceeding with its return to office plans because COVID-19 cases are low or falling nationwide, and it will not require staff to get the COVID-19 vaccine or boosters, according to Bloomberg.
Brief: The Federal Reserve banned six former bankers, including two formerly at Bank of America Corp.’s wealth management unit, from the industry for fraudulently obtaining loans designed to provide economic relief to small businesses during the pandemic. The Fed on Tuesday announced the penalties for Autumn Jordan and Manuel F. Pinazo, who previously worked at Merrill Lynch Wealth Management, along with Dedryck O. Carson, Wendy Rodriguez Legon, Michael T. Lemley, and Tracy L. Mallory, who were at Regions Financial Corp. The regulator said all six applied for assistance under one of the government’s Covid-19 relief programs “based on false and fraudulent representations and used the funds for unauthorized personal expenses.” The former employees obtained funds through the Small Business Administration’s Covid-19 Economic Injury Disaster Loan program, according to the Fed. Authorities have been trying to crack down on abuses of that federal effort and others.
Brief: HP (HPQ) announced it would buy office headset-maker Poly (POLY) for $3.3 billion last week. It’s a big-ticket deal for a company that’s on the lookout for its next chapter. In recent memory, dealmaking has been inextricably tied to the old guard tech giant and its prospects but when the COVID-19 pandemic hit, everything changed. In 2020, Xerox (XRX) withdrew its offer to buy HP after a months-long, TV-worthy drama that involved threats of a hostile takeover, a poison pill plan, and activist investor Carl Icahn. HP has since pursued its own deals, some of which have been bets on hybrid work. In July 2021, HP bought remote computing software provider Teradici. In the release at the time, HP touted hybrid working-related projections by Fortune Business Insights, which estimated that the remote desktop software segment will grow at a “17% compound annual growth rate through 2028.”
Brief: As Japan moved to fully lift Covid-19 restrictions at the end of March, the country’s top chief executives said the lessons from the pandemic will be longer-lasting. “The ongoing threat of Covid-19 throughout 2021 reinforced for me the fact that improving human health around the world is an essential part of sustainable social development,” said Sunao Manabe, chief executive of Daiichi Sankyo. Manabe was the top-scoring chief executive in the biotech industry in Institutional Investor’s 2022 All-Japan Executive Team survey, as voted for by buy- and sell-side participants. Manabe says Japanese pharmaceutical companies have much to learn from early delays in the development and production of coronavirus vaccines in the country. Daiichi Sankyo was the first company to develop an mRNA vaccine in Japan, and the first in the world to use its proprietary cationic lipid, which it believes improves the safety of the shot. With support from the Japanese government, the company is developing a vaccine that targets a specific receptor binding domain of the novel coronavirus spike protein, which it hopes will be more effective and safer than other companies’ mRNA vaccines, which target the entire length of the spike protein. Daiichi Sankyo’s vaccine is being developed for general use by the end of 2022.
Brief: Moderna (NASDAQ:MRNA) stock fell 4% Tuesday as reports came in that two large buyers have declined options to purchase more of its Covid-19 vaccines, a sign of a waning pandemic bringing down demand. The African Union and Covax, the World Health Organization-backed group, decided not to obtain more of the vaccine as developing nations struggle to turn supplies into inoculations, Bloomberg reported. Less than two months ago, the company had forecast higher vaccine sales for the second half of the year, pinning its estimates on Covid-19 becoming a flu-like endemic illness that would lead people to take shots on a regular basis. While the African Union agreed to purchase 50 million doses for delivery in the first quarter, the body of 55 member states opted not to acquire another 60 million doses in the second quarter, according to the wire agency.
Brief: Billionaire investor Ray Dalio is concerned about the potential for a stagflationary economic backdrop to take form amid persistently high levels of inflation and rising interest rates. "I think that most likely what we're going to have is a period of stagflation. And then you have to understand how to build a portfolio that's balanced for that kind of an environment," the Bridgewater Associates founder and co-chief investment officer said in an interview for Yahoo Finance Presents. Stagflation can be defined as a period of slow economic growth, increased joblessness and rising inflation. And every which way an investor turns right now (even on Google, where searches for "stagflation" have surged 400% since the start of the year) it looks like a speeding train called Stagflation Express. The Consumer Price Index (CPI) rose by 7.9% in February, marking the fastest pace of annual inflation in 40 years amid a push higher in rent, food and used car prices. Meanwhile, the Personal Consumption Expenditures index (PCE) rose 6.4% in February, accelerating from a 6.1% increase in January.
Brief: The bond market on Monday continued to flash warning signs that the U.S. economy could be headed for a recession after U.S. Treasury yields inverted again. The yield on the 2-year Treasury yield inched marginally lower to 2.424, while the benchmark 10-year Treasury note rose about 4 basis points to 2.412%. The yield on the 5-year government bond moved 1 basis point higher to 2.56% and the 30-year Treasury bond climbed about 5 basis points to 2.473%. Yields move inversely to prices and 1 basis point is equal to 0.01%. 2-year and 10-year yields, which form the main part of the yield curve watched by traders, inverted once again on Monday. Those Treasury yields flipped on Thursday for the first time since 2019 and did so again on Friday, following the release of closely watched jobs data. “The yield curve inversion continues to be the focus of investors, triggering conversations around the timing of the next recession,” Nationwide chief investment of research Mark Hackett said in a note. “Historically, the yield curve inversion has meant that the fuse is lit for a recession. But the timing of a recession is impossible to predict at this stage.”
Brief: The U.S. Centers for Disease Control and Prevention plans to conduct a review after facing a wave of criticism for its response to the Covid-19 pandemic. In an agency-wide message to her leadership team and staff on Monday, CDC director Rochelle Walensky shared her plans to review the agency’s structure, saying that “never in its 75 years history has CDC had to make decisions so quickly, based on often limited, real-time, and evolving science.” She said that an external senior federal health official was hired for an evaluation of CDC’s structure, systems and processes, according to an earlier report published by the Washington Post. The agency has come under strain and scrutiny as it was forced to quickly take action during the pandemic based on data developed at top speed. “Work is needed to institutionalize and formalize these approaches and to find new ways to adapt the agency’s structure to the changing environment,” a CDC spokesperson said in an emailed statement confirming the review. The agency has repeatedly been criticized for Covid guidelines involving health workers, such as earlier this year when it shortened recommended periods for isolation and quarantine. After that, it came under fire for not backing routine testing for exposed people before resuming normal activities.
Brief: The Great Resignation shows no sign of easing and a dwindling supply of workers may be here to stay, according to Randstad NV, a global provider of employment services. Fewer people in the job market, underpinned by a long-term demographic trend, is allowing talented workers to have more options and they’re going where their needs are met, said Sander van ‘t Noordende, who took over as chief executive officer of the Dutch company on Tuesday. “That is sort of a change today: Employees are more prepared to attach consequences to their unhappiness or not getting what they want,” van ‘t Noordende said in a phone interview as Randstad revealed its latest Workmonitor report. “They’re prepared to quit their job if they’re not happy.” The Great Resignation has been a boon to employees searching for better working conditions and higher pay. Economies bouncing back from the pandemic and work from home options have made it easier for employees to quit unappealing positions and look for alternatives, driving up wages.
Brief: The collapse of Archegos and the GameStop short squeeze has radically upended the hedge fund prime brokerage space over the past year, raising fundamental questions over PBs’ lending activities and business models. The implosion of Archegos Capital Management in early 2021, coupled with the “meme stock” short-selling squeeze which saw amateur investors drive up the price of selected shorted stocks – handing hefty losses to certain hedge fund managers in the process – has brought renewed upheaval to a prime brokerage sector that had only recently adapted to the challenges of Covid-19 and a landscape of lower revenues and falling trading volumes post-2008. The sudden meltdown of Archegos – the New York-based family office led by Bill Hwang, a former ‘Tiger Cub’ who previously managed money at Julian Robertson’s Tiger Management – led to USD10 billion in losses for its brokers.
Brief: Over the last two years, funds that hold only a few huge companies — often only one – have come to dominate the private equity secondary market. These funds, called continuation funds or GP-led secondaries, allow general partners to hold onto what they believe are still-promising companies after a fund reaches the end of its life as well as raise new money from existing clients. In 2021, 44 percent of GP-led secondaries were invested in single-asset or highly concentrated continuation funds, up by 9 percentage points from the year before, according to private equity advisory firm Campbell Lutyens. Investors have been gravitating towards single-asset funds in part because they can “dig deeper into assets and into the work that particular general partners carry out,” according to Gonzalo Erroz, partner at the U.K.-based manager Hayfin Capital Management. The pandemic made it harder for investors to conduct due diligence on larger portfolios.
Brief: If the latest numbers from the Investment Funds Institute of Canada (IFIC) are any indication, the pandemic has created a resurgence in active management. Investors who rushed to beat the March 1 registered retirement savings plan (RRSP) contribution deadline pumped nearly $10 billion into mutual funds in February alone, according to IFIC. As of March 1, total mutual fund assets reached $2 trillion in Canada. A big chunk of that came from a $111.5-billion bump in mutual fund sales in 2021. That’s nearly four times the $29 billion in mutual fund sales in 2020, which was in line with average annual sales going back to 2000. In comparison, sales in passively-managed exchange-traded funds (ETFs) totaled $4 billion in February, bringing total assets to $317.7 billion by March 1.Over half of February’s mutual fund sales went into balanced funds, which have been the funds of choice throughout the pandemic. Like the name implies, balanced funds attempt to strike a balance between equities and fixed income.
Brief: It’s still a good time to buy stocks that benefit from a pandemic recovery, such as airline and travel companies, according to Sarah Ketterer, chief executive officer of Causeway Capital Management. Investments with upside that have been held down by the prolonged Covid-19 outbreak and Russia’s invasion of Ukraine include Google parent Alphabet Inc. and Ryanair Holdings Plc, Europe’s biggest discount airline, she said during an interview Friday with David Westin on Bloomberg Television’s “Wall Street Week.” “Alphabet is interesting to us, because some of their ads are related to travel and leisure and we see that recovering,” Ketterer said. “These are opportunities for investors, because we can’t assume that invasions last forever and this pandemic is thankfully dissipating.” Stocks rallied this week, recovering some of the ground lost so far in 2022, while bonds flashed a key recession warning sign as rates of short-term Treasuries exceeded longer-term debt in what’s known as a yield-curve inversion.
Brief: China’s economy faces so much new pressure from Covid that Beijing may increase stimulus — boosting overall growth, Citi said Thursday. “Given the strong start of the year and the anticipated government support, we revise up our growth forecast from 4.7% to 5.0% for 2022,” Xiangrong Yu, chief China economist at Citi, said in a report late Thursday. The new forecast is closer to the official gross domestic product target of around 5.5%, which was announced in early March. For January and February, China reported better-than-expected growth in retail sales, fixed asset investment and industrial production. The upgrade to Citi’s GDP forecast comes on the back of expectations of investment in projects such as infrastructure and affordable housing, according to the report. The official Purchasing Managers’ Indexes — which measure market conditions — for manufacturing and services businesses both fell into contraction territory in March. That’s the first time both indexes have done so since February 2020.
Brief: Airline stocks managed to outperform the S&P 500 Index in the first quarter as economies reopened and people started traveling again, but prospects for a sustained rally look shaky. An exchange-traded fund that tracks the sector is on pace for its biggest-ever monthly outflow in March. Since Russia invaded Ukraine more than a month ago, oil prices have shot above $100 a barrel and jet fuel prices have soared, and with the war showing no sign of abating, those headwinds are unlikely to go away anytime soon. The US Global Jets ETF’s outflow for March stood at about $335 million, according to Bloomberg data as of Thursday morning. The fund’s second-largest monthly outflow was in December, about $122 million. After a spate of upbeat outlooks from several carriers suggested demand for air travel was stronger than what the market had anticipated, airline stocks have rallied back over recent weeks from the lowest levels since October 2020.
Brief: Wall Street analysts are optimistic that health-care stocks are poised to keep rebounding from the first quarterly loss since the onset of the pandemic. As geopolitical tensions mount, inflation surges and the bond market flashes warning signals that interest-rate hikes may set off a recession, there are signs of investors circling back to health-care stocks that are often seen as a haven from swings in the economy. AbbVie Inc., AmerisourceBergen Corp., Anthem Inc. and UnitedHealth Group Inc. have all jumped back to record highs even though as a group they still trade at valuations below the S&P 500 Index. “There seems to be seem a sentiment shift since recent Fed commentary,” said Bloomberg Intelligence strategist Michael Casper. “Oversold sectors like health-care have caught a bid in sign of relief the Fed wasn’t more aggressive at the March meeting.”
Brief: The United States is unlikely to face an economic recession in the next two years despite bond markets flashing warning signs, inflation at its highest in decades and rising geopolitical risks, portfolio managers at PIMCO and Amundi said. A closely monitored part of the U.S. Treasury yield curve briefly inverted on Tuesday, a sign that investors were concerned the U.S. Federal Reserve's aggressive rate hikes to tame inflation could tip the economy into recession. "We see low probability of a recession this year or next. Our models show the risk is slightly higher than the historical average, but not at a level that is concerning," Erin Browne, multi-asset portfolio manager at bond giant PIMCO, told the Reuters Global Markets Forum on Wednesday. Browne's view was echoed by Ken Monaghan, co-head of high yield at the U.S. arm of Europe's largest asset manager Amundi, who told the forum he does not expect a recession in 2022 and reckons it is unlikely in 2023 despite some elevated risks.
Brief: American households had an extra $4.2 trillion of readily available cash at the end of last year compared with before the pandemic, after they received more government support and trimmed spending due to Covid curbs, according to the latest Federal Reserve data. Savings increased to $14.7 trillion from $10.6 trillion at the end of 2019, the Fed data show. The biggest portion of that increase came in the form of checking-account deposits and physical cash, which soared to $3.9 trillion from about $1 trillion. The rest of the extra liquidity is in the form of time deposits and short-term investments. The windfall is piling up at the top of the income distribution. About two-thirds of the excess savings were accumulated by the highest 20% of earners, with $1.2 trillion of it held by the top 1%.