U.S. Federal Reserve board member James Bullard has warned that fundamental changes stemming from potential policies of incoming president Donald Trump could mean that the Fed would need to adjust their strategy in the coming months, but he still made it clear he feels a rate hike is coming this holiday season.
Bullard, who is president of the St. Louis Fed, said the central bank is now focusing primarily on how they will tackle the 2017 rate path, leading many observers to conclude that a December rate increase is a done deal.
“We are concerned first and foremost on how the President-elect’s policies on taxation and spending are going to interact with Federal Reserve strategy next year,” Bullard told a conference in Germany’s business centre of Frankfurt.
“A December move by the FOMC is what the markets are betting on and I’m supporting that particular view.”
Traders recently upped their bets on a December rate hike by pricing in a 90 percent chance yesterday.
Many investors are expecting some of Trump’s new policies to have a definite impact on the American economy in the short term but that some of his proposals could take longer than he would hold the White House to bear any fruit.
“Trump can only stay in power for eight years, so some of his long term goals regarding immigration and infrastructure probably won’t be realised while he’s still in power,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International in an email to clients. “Trade agreements are another policy that can take a long time to come about, years of negotiations and stoppages. There can be an impact in these areas but not before many years, maybe even a decade.”
Some areas that could have an immediate effect are tax reforms and regulatory changes, especially in the financial sector. Investors and policymakers at the Fed are both keen to see the details of Trump’s proposed changes.
Monday, November 21, 2016
Friday, November 18, 2016
Greenback strides to 30 year high versus yen
The stellar dollar rise continued this week reaching its highest peak against its basket currency competitors since 2002 and putting in its best two-weekly performance versus the yen since 1988 on the back of republican candidate Donald J Trump’s surprise win in the U.S. presidential race.
The dollar was further bolstered by remarks from Janet Yellen, U.S. Federal Reserve Chair, who said last week that she expected interest rates to rise “sooner rather than later” giving the clearest indicator yet that, as the markets expect, the hike will come before the end of the year.
The U.S. currency gained around 8 percent in the last two weeks to hit a six-monthly high against the yen of 110.926. That’s the dollars best performance over a fortnightly period for three decades and its second best performance since floating exchange rates began.
“We are most definitely seeing a very large scale shifting of investments stateside,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International in an interview with BBC business news yesterday.
“Not since March 2003 have we seen the dollar index at this kind of level, it shot to 101.36 yesterday. Of course this is all based on the perception that Mr Trump will follow through on his promises to lower taxation and increase spending on major infrastructure projects and defence,” Coleman continued.
As expectations drive asset prices in the U.S., investors are being deterred from stocks in Europe due to continued economic and political concerns, like the effect of the Brexit vote and ever increasing bailouts flowing to Athens. This serves to further bolster the greenback.
Favourable data reports have given even more credence to those speculating on a December rate hike, as encouraging housing starts numbers, which hit a decade long peak, prompted Yellen to say a rate hike was in the offing. Consumer prices posted a semi-annual high and jobless claims hit a 44 year low.
According to research firm, CME FedWatch, traders are now pricing in a 91 percent chance of a rate hike during the holiday season. The Fed is due to convene for their monthly meeting on December 13-14 to decide on policy and will release the minutes the following day.
Olivier Korber, SocieteGenerale senior strategy consultant, said in a recent blogpost, “We might expect the euro to keep falling if certain protectionist policies come into play at the start of 2017.”
The dollar was further bolstered by remarks from Janet Yellen, U.S. Federal Reserve Chair, who said last week that she expected interest rates to rise “sooner rather than later” giving the clearest indicator yet that, as the markets expect, the hike will come before the end of the year.
The U.S. currency gained around 8 percent in the last two weeks to hit a six-monthly high against the yen of 110.926. That’s the dollars best performance over a fortnightly period for three decades and its second best performance since floating exchange rates began.
“We are most definitely seeing a very large scale shifting of investments stateside,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International in an interview with BBC business news yesterday.
“Not since March 2003 have we seen the dollar index at this kind of level, it shot to 101.36 yesterday. Of course this is all based on the perception that Mr Trump will follow through on his promises to lower taxation and increase spending on major infrastructure projects and defence,” Coleman continued.
As expectations drive asset prices in the U.S., investors are being deterred from stocks in Europe due to continued economic and political concerns, like the effect of the Brexit vote and ever increasing bailouts flowing to Athens. This serves to further bolster the greenback.
Favourable data reports have given even more credence to those speculating on a December rate hike, as encouraging housing starts numbers, which hit a decade long peak, prompted Yellen to say a rate hike was in the offing. Consumer prices posted a semi-annual high and jobless claims hit a 44 year low.
According to research firm, CME FedWatch, traders are now pricing in a 91 percent chance of a rate hike during the holiday season. The Fed is due to convene for their monthly meeting on December 13-14 to decide on policy and will release the minutes the following day.
Olivier Korber, SocieteGenerale senior strategy consultant, said in a recent blogpost, “We might expect the euro to keep falling if certain protectionist policies come into play at the start of 2017.”
Friday, November 11, 2016
Shares in Fitbit rise on buyout rumours
Fitbit Inc, a San-Francisco-based tech firm that produces wearable gadgets, saw its shares gain as much as 10 percent after a little known private equity firm said it had approached the company with a buyout offer. The shares then gave up some of those gains after Fitbit said they had not been in talks with anyone concerning a sale.
The purported buyers, ABM Capital Ltd, issued a statement on Wednesday saying that their offer had been received by the SEC offices; however a spokesman for Fitbit denied any knowledge of the offer from ABM or anyone else.
Details of the filing are sketchy, but Reuters were able to determine that ABM wanted to purchase Fitbit for $12.60 per share. ABM was not reachable using the telephone number on the case sheet.
“This offer looks suspicious and we are definitely taking it with a pinch of salt,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International. “The legitimacy of a company has to be called into question when they make spelling mistakes on a filing and their offices can’t be reached by phone.”
According to the U.S. Securities and Exchange Commission (SEC) they received the filing early Tuesday morning but did not comment on the veracity of ABM other than to say they had not received any previous filings from the Beijing-based company.
The SEC has a publicly accessible database called Edgar where thousands of fund managers and public companies make filings. Sector watchdogs have been worried about the security of the database after a previously unknown company called PTG Capital Partners offered to purchase cosmetics giant Avon Products Inc for $4 billion last year.
Fitbit shares rose as much as 10 percent in the morning session as news broke of the offer but sank back down to only $8.89 per share, well below the offer price of $12.60, which would have represented a 47 percent premium.
Fitbit’s performance has been slumping this year, losing 65 percent of their $2 billion valuation amid rising competition from international manufacturers.
Executives of Fitbit declined to comment on the recent developments, but a statement last month said the company are bringing in new initiatives to increase revenue.
The purported buyers, ABM Capital Ltd, issued a statement on Wednesday saying that their offer had been received by the SEC offices; however a spokesman for Fitbit denied any knowledge of the offer from ABM or anyone else.
Details of the filing are sketchy, but Reuters were able to determine that ABM wanted to purchase Fitbit for $12.60 per share. ABM was not reachable using the telephone number on the case sheet.
“This offer looks suspicious and we are definitely taking it with a pinch of salt,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International. “The legitimacy of a company has to be called into question when they make spelling mistakes on a filing and their offices can’t be reached by phone.”
According to the U.S. Securities and Exchange Commission (SEC) they received the filing early Tuesday morning but did not comment on the veracity of ABM other than to say they had not received any previous filings from the Beijing-based company.
The SEC has a publicly accessible database called Edgar where thousands of fund managers and public companies make filings. Sector watchdogs have been worried about the security of the database after a previously unknown company called PTG Capital Partners offered to purchase cosmetics giant Avon Products Inc for $4 billion last year.
Fitbit shares rose as much as 10 percent in the morning session as news broke of the offer but sank back down to only $8.89 per share, well below the offer price of $12.60, which would have represented a 47 percent premium.
Fitbit’s performance has been slumping this year, losing 65 percent of their $2 billion valuation amid rising competition from international manufacturers.
Executives of Fitbit declined to comment on the recent developments, but a statement last month said the company are bringing in new initiatives to increase revenue.
Thursday, November 10, 2016
ConocoPhillips will streamline to focus on core business
As it attempts to bolster its core businesses, one of the United States’ largest independent oil producers, ConocoPhillips, have announced in a statement that they will offload nearly $10 billion worth of their natural gas assets.
Two years of low commodity prices have squeezed margins for Conoco and similar players in the market and the desire to sell off large chunks of peripheral operations reflects the continued efforts by oil companies to push towards further efficiency and streamlining.
On the statement’s release, shares of Conoco dropped around a percentage point to $45.22 in the morning session in New York and U.S. crude prices fell by the same margin overall.
Chief Executive Ryan Lance has been praised in recent years for his drive to reduce the company’s $30 billion debt, and the sale of the gas assets is another step towards his vision of sustainability for the Houston-based firm.
“Getting debt off our balance sheet is of primary importance both to the board and to shareholders and potential investors,” said Lance in a BBC interview. “The assets in question are not a good fit for the company in the long term so selling now is good on two fronts, to reduce debt and to streamline our operations.”
The planned divestiture is estimated at between $9billion and $11 billion worth of North American gas assets and comes after the company slashed its budget by 50 percent in 2015.
“What the board are essentially doing is not betting on commodity prices coming back to normal levels,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International. “Instead they are wisely adapting their business model so it can withstand these kinds of price cycles. We don’t know how long the current dip in crude is going to last for.”
The capital inflow expected from the sale will allow Conoco to focus on maintenance of their shale operations in the U.S. and development of new exploration projects in Europe. The company were previously active in 30 nations across the world, but have cut that figure in half in the last ten years.
Brent crude was trading at $45.97 on Friday; a price that still makes it difficult for large oil companies to be profitable. The benchmark figure is $50. This has forced firms like Conoco to develop new methods to raise funds, and Lance recently announced a share repurchase program worth around $4 billion.
Two years of low commodity prices have squeezed margins for Conoco and similar players in the market and the desire to sell off large chunks of peripheral operations reflects the continued efforts by oil companies to push towards further efficiency and streamlining.
On the statement’s release, shares of Conoco dropped around a percentage point to $45.22 in the morning session in New York and U.S. crude prices fell by the same margin overall.
Chief Executive Ryan Lance has been praised in recent years for his drive to reduce the company’s $30 billion debt, and the sale of the gas assets is another step towards his vision of sustainability for the Houston-based firm.
“Getting debt off our balance sheet is of primary importance both to the board and to shareholders and potential investors,” said Lance in a BBC interview. “The assets in question are not a good fit for the company in the long term so selling now is good on two fronts, to reduce debt and to streamline our operations.”
The planned divestiture is estimated at between $9billion and $11 billion worth of North American gas assets and comes after the company slashed its budget by 50 percent in 2015.
“What the board are essentially doing is not betting on commodity prices coming back to normal levels,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International. “Instead they are wisely adapting their business model so it can withstand these kinds of price cycles. We don’t know how long the current dip in crude is going to last for.”
The capital inflow expected from the sale will allow Conoco to focus on maintenance of their shale operations in the U.S. and development of new exploration projects in Europe. The company were previously active in 30 nations across the world, but have cut that figure in half in the last ten years.
Brent crude was trading at $45.97 on Friday; a price that still makes it difficult for large oil companies to be profitable. The benchmark figure is $50. This has forced firms like Conoco to develop new methods to raise funds, and Lance recently announced a share repurchase program worth around $4 billion.
Wednesday, November 9, 2016
Jewellery chain looks to Jefferies for $1 billion sale
Investment bank Jeffries LLC have announced that they are assisting jewellery chain, Kendra Scott, in a sale of the company, and both parties insist a figure of around a billion dollars is achievable, according to sources who prefer to remain anonymous.
Analysts say the accessories firm has achieved remarkable growth since its 2002 inception when the eponymous founder started making jewellery in her garage.
The sources mentioned annual earnings in 2017 are forecast to be around $80 million for the Texas-based company, before depreciation and tax.
Both Jeffries and Kendra Scott declined to answer questions on the news and the sources asked for names to be withheld due to the sensitive nature of talks.
Kendra Scott has made a name in a niche market selling custom shaped rings, charms and necklaces using natural stones and fine gold finishing. The company also offers customers further customization of their items at special “colour bars” both on the high-street and at their e-store where they can micromanage their build.
The company has dozens of stores across the United States, especially the south of the country where it originally opened in Austin over 6 years ago. It also supplies department stores at wholesale prices.
“The amazing thing about Kendra Scott is that they seem to have struck a remarkable balance between price and fashion. Most of their pieces are under a hundred dollars and yet have featured on catwalks from Paris to New York,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International in a note to clients.
“They also have an excellent online footprint, especially in social media. It’s obvious they are heavily targeting “millennials” who have come to love anything customizable, especially if they can tinker online,” Coleman added.
Another big player in the online jewellery industry, Blue Nile Inc, said that they had agreed to be taken private and will be assisted by private equity company Bain Capital in a deal worth around half a million dollars.
Analysts say the accessories firm has achieved remarkable growth since its 2002 inception when the eponymous founder started making jewellery in her garage.
The sources mentioned annual earnings in 2017 are forecast to be around $80 million for the Texas-based company, before depreciation and tax.
Both Jeffries and Kendra Scott declined to answer questions on the news and the sources asked for names to be withheld due to the sensitive nature of talks.
Kendra Scott has made a name in a niche market selling custom shaped rings, charms and necklaces using natural stones and fine gold finishing. The company also offers customers further customization of their items at special “colour bars” both on the high-street and at their e-store where they can micromanage their build.
The company has dozens of stores across the United States, especially the south of the country where it originally opened in Austin over 6 years ago. It also supplies department stores at wholesale prices.
“The amazing thing about Kendra Scott is that they seem to have struck a remarkable balance between price and fashion. Most of their pieces are under a hundred dollars and yet have featured on catwalks from Paris to New York,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International in a note to clients.
“They also have an excellent online footprint, especially in social media. It’s obvious they are heavily targeting “millennials” who have come to love anything customizable, especially if they can tinker online,” Coleman added.
Another big player in the online jewellery industry, Blue Nile Inc, said that they had agreed to be taken private and will be assisted by private equity company Bain Capital in a deal worth around half a million dollars.
Tuesday, November 8, 2016
Beer brands up for sale as AB InBev complete $150 billion takeover
As part of Anheuser-Busch InBev’s huge buyout of SABMiller which was finalized in late October, the company have put several brands of their beer up for sale and at least seven separate industry heavyweights and private funds are expected to table bids before the end of November.
Likely interested parties include Polish firms Lech and Tyskie, Czech Republic’s Pilsner and, according to inside sources, some Asian companies.
The beer brands are thought to be worth upwards of $5 billion and sources revealed Japanese brewer Asahi Holdings have teamed up with Czech investment firm PPF Group to muster a substantial bid.
Polish juice maker MaspexWadowice Group and an unnamed Hungarian energy conglomerate have also combined to put in an offer.
“Early rumours are fairly complex with news that there are a multitude of offers from individual companies and consortiums,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International. “We’ve seen rapid consolidation in the sector already this year as companies feel the pinch amid increased competition from small breweries and the rise in popularity of local craft beer.”
Sources also mentioned other consortiums involving private equity firms were interested in putting forward offers before the end of the year, as second and third round bids will be taken.
One entity that has dropped out of the running is BC Partners, a European private equity firm who last week announced that they were in preliminary talks with Anheuser-Busch but failed to reach common ground.
Several stake holders in SABMiller are also interested in selling their shares and taking a closer look at AB InBev brands, including Polish billionaire Sebastian Kulczyk and China Resources who run SABMiller’s China arm.
AB InBev produces famous beer brands such as Budweiser, Corona and Stella Artois and has several separate listings on global stock exchanges.
A spokesperson for the company said, “We can confirm that we are looking at several offers at the moment but that there are due to be many bidding rounds for our branded beers. We are looking forward to sitting down to serious talks with those interested parties in the next few months and hopefully we can make an announcement to our shareholders before the second quarter of 2017.”
Likely interested parties include Polish firms Lech and Tyskie, Czech Republic’s Pilsner and, according to inside sources, some Asian companies.
The beer brands are thought to be worth upwards of $5 billion and sources revealed Japanese brewer Asahi Holdings have teamed up with Czech investment firm PPF Group to muster a substantial bid.
Polish juice maker MaspexWadowice Group and an unnamed Hungarian energy conglomerate have also combined to put in an offer.
“Early rumours are fairly complex with news that there are a multitude of offers from individual companies and consortiums,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International. “We’ve seen rapid consolidation in the sector already this year as companies feel the pinch amid increased competition from small breweries and the rise in popularity of local craft beer.”
Sources also mentioned other consortiums involving private equity firms were interested in putting forward offers before the end of the year, as second and third round bids will be taken.
One entity that has dropped out of the running is BC Partners, a European private equity firm who last week announced that they were in preliminary talks with Anheuser-Busch but failed to reach common ground.
Several stake holders in SABMiller are also interested in selling their shares and taking a closer look at AB InBev brands, including Polish billionaire Sebastian Kulczyk and China Resources who run SABMiller’s China arm.
AB InBev produces famous beer brands such as Budweiser, Corona and Stella Artois and has several separate listings on global stock exchanges.
A spokesperson for the company said, “We can confirm that we are looking at several offers at the moment but that there are due to be many bidding rounds for our branded beers. We are looking forward to sitting down to serious talks with those interested parties in the next few months and hopefully we can make an announcement to our shareholders before the second quarter of 2017.”
Friday, October 7, 2016
E.U. chairman – Deutsche penalty too large, will hurt Europe
Jeroen Dijsselbloem, the chairman of euro zone financial ministers, has said that the fine laid down by the United States against Deutsche Bank is too big and will negatively affect the economic stability of the whole region.
Deutsche is one of the euro zone’s largest banking institutions, and Dijsselbloem commented that the size of the bank would not save it from failing, although he went on to say he thought Deutsche’s impressive solvency ratio and liquidity back-ups would mean the bank would steer itself away from trouble.
“From what our analysts are telling us we are confident that Deutsche is sufficiently prepared to come out of this on their own. We are not saying they are too big to fail,” Dijsselbloem said.
“It’s up to us though, to make sure they don’t fail. To do that we need to lobby on their behalf against this U.S. fine which we feel is totally overblown, let’s hope further negotiations get the amount reduced because a fine like that is only going to hurt Europe in general,” he added.
As punishment for their role in the sub-prime mortgage affair in 2007-2009, the U.S. financial authorities want to slap a $14 billion penalty on Deutsche.
“It’s a heavy fine, especially for such an influential bank that is trying really hard to restructure its operations and strengthen itself,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International in an email to clients. “The last thing in the world they need right now is this kind of capital outflow. Most experts feel this is going to be counter-productive to the macroeconomic system in the long run.”
Under new regulations brought in after the financial crisis, Deutsche Bank is finding it increasingly hard to adapt to the new environment and bring in the same kind of revenues as before. It is now significantly smaller than Wall Street competitors such as Goldman Sachs and JPMorgan.
Deutsche still have strong relationships with all the world’s most prominent financial organizations and houses, holding over 40 trillion euros of derivative positions with them.
Dijsselbloem continued, “Of course Deutsche have some creases they need to iron out, like all modern banks they need to adapt to new rules and tweak their business model. Streamlining is essential and most banks these days are focusing on becoming less complex.”
An IMF report recently singled out Deutsche as a bigger risk to the financial community than any other international banking house.
Deutsche is one of the euro zone’s largest banking institutions, and Dijsselbloem commented that the size of the bank would not save it from failing, although he went on to say he thought Deutsche’s impressive solvency ratio and liquidity back-ups would mean the bank would steer itself away from trouble.
“From what our analysts are telling us we are confident that Deutsche is sufficiently prepared to come out of this on their own. We are not saying they are too big to fail,” Dijsselbloem said.
“It’s up to us though, to make sure they don’t fail. To do that we need to lobby on their behalf against this U.S. fine which we feel is totally overblown, let’s hope further negotiations get the amount reduced because a fine like that is only going to hurt Europe in general,” he added.
As punishment for their role in the sub-prime mortgage affair in 2007-2009, the U.S. financial authorities want to slap a $14 billion penalty on Deutsche.
“It’s a heavy fine, especially for such an influential bank that is trying really hard to restructure its operations and strengthen itself,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International in an email to clients. “The last thing in the world they need right now is this kind of capital outflow. Most experts feel this is going to be counter-productive to the macroeconomic system in the long run.”
Under new regulations brought in after the financial crisis, Deutsche Bank is finding it increasingly hard to adapt to the new environment and bring in the same kind of revenues as before. It is now significantly smaller than Wall Street competitors such as Goldman Sachs and JPMorgan.
Deutsche still have strong relationships with all the world’s most prominent financial organizations and houses, holding over 40 trillion euros of derivative positions with them.
Dijsselbloem continued, “Of course Deutsche have some creases they need to iron out, like all modern banks they need to adapt to new rules and tweak their business model. Streamlining is essential and most banks these days are focusing on becoming less complex.”
An IMF report recently singled out Deutsche as a bigger risk to the financial community than any other international banking house.
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