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The S&P 500 is down 14.4% year-to-date. U.S. consumer prices rose less than expected in October, supporting the view that inflation was ebbing. Further ahead, some of Wall Street’s biggest banks are now forecasting that the Fed's monetary policy tightening will bring on a recession next year. In options markets, traders appear more preoccupied with not missing out on more gains in stocks than guarding against future declines. The one-month moving average of daily trading in bearish put contracts against bullish calls on the S&P 500 index-tracking SPDR S&P 500 ETF Trust's options is at its lowest since January 2022, according to Trade Alert data.
An index tracking high-yield dollar bonds of Chinese developers (.IBXXAX13) has jumped more than 70% from its Nov. 3 low, but is still down about 70% from its peak in May, 2021. A growing list of Chinese developers have entered into or are preparing to kick-off debt restructuring talks with offshore bondholders after defaulting on payments. Of 241 dollar-denominated bonds issued by Chinese property firms, 211 are trading in distressed territory below 50 cents on the dollar, Refinitiv data shows. The recent rally in developers' shares and bonds on the back of funding support measures, however, has given investors some respite. "A recovery in property sales would be firmer in a re-opening scenario," said Justin Ong of Columbia Threadneedle, which holds China property bonds, as it would offer a clearer timeline for re-opening.
"The Fed is likely going to show signs of becoming successful in their attempt to rein in inflation by softening the labor market," he said. "That's probably also going to be allowing for volatility within rates and across markets to compress to some extent." The Fed has raised interest rates by 375 basis points so far this year as it attempts to bring down the highest inflation in decades. Cabana expects the central bank to increase rates three more times until reaching a terminal rate of 5.25% in March. Ten-year Treasury yields - a global benchmark for a swathe of other asset classes - are set to decline from 4% in the first quarter next year to 3.25% by year end, Cabana said.
"While we have been cautious, there is an important shift going on with the COVID reopening." The protests were the strongest public defiance during Xi's political career, China analysts said. If protests were to continue, this would add to the risk premium, said Sean Taylor, chief investment officer for Asia-Pacific at DWS Group. Social discontent stemming from the zero-COVID policy added to risks in executing and implementing government policies, said Mark Haefele, global wealth management CIO at UBS in Zurich. We also view China’s sluggish recovery as a risk for the global economy and markets."
REUTERS/Brendan McDermidNov 3 (Reuters) - Investors trying to navigate this year's relentless interest rate rises have more reasons to play it safe, after a pessimistic message from the U.S. Federal Reserve clouded the outlook for asset prices. Yet Chairman Jerome Powell’s message at Wednesday’s press conference – which followed its fourth straight 75 basis-point rate increase – did little to bolster the case for a less hawkish Fed. Investors are bracing for U.S. employment data on Friday for clues on whether the Fed’s rate hikes have begun to erode the economy’s strength. Signs that inflation is beginning to slow after the Fed’s barrage of rate hikes could bolster the case for a less aggressive monetary policy in coming months. Bartolini is becoming more bullish on mortgage-backed securities, which he expects to benefit from a decline in volatility sparked by smaller rate increases.
Here is a quick primer on what a steep, flat or inverted yield curve means, how it has predicted recession, and what it might be signaling now. The yield curve, which plots the return on all Treasury securities, typically slopes upward as the payout increases with the duration. read more read moreWHAT DOES AN INVERTED CURVE MEAN? Before this year, the last time the 2/10 part of the curve inverted was in 2019. When the yield curve steepens, banks can borrow at lower rates and lend at higher rates.
ZURICH/NEW YORK, Oct 28 (Reuters) - After months of reflecting, Credit Suisse's chairman Axel Lehmann revealed an overhaul "to rebuild Credit Suisse as a strong ... bank with a firm foundation, rock-solid like our Swiss mountains". On Thursday, Credit Suisse outlined plans to raise 4 billion Swiss francs from investors, cut thousands of jobs and shift its focus from investment banking towards its rich clients. Credit Suisse said its clients pulled funds in recent weeks at a pace that led the lender to breach some regulatory requirements for liquidity, underscoring the deep impact of wild market swings and social media speculation about its health. It will separate its investment bank to create CS First Boston, focused on advisory work such as mergers and acquisitions and arranging deals on capital markets. And that's the pond that Credit Suisse is swimming in."
Oct 26 (Reuters) - Credit Suisse Group AG (CSGN.S) is set to announce a major strategic overhaul on Thursday after a string of losses and risk management failures have put the embattled Swiss lender under investor scrutiny. Reuters Graphics Reuters GraphicsCredit Suisse Chairman Axel Lehmann, who pledged to reform the bank, said its capital base was strong. Reuters GraphicsSo far, questions about the bank's restructuring, and whether or not it will need fresh capital to fund it, remain open. On Wednesday it was close to levels seen before the early October market rout. Reuters Graphics($1 = 0.9891 Swiss francs)Reporting by Vincent Flasseur and Davide Barbuscia; Editing by Chris ReeseOur Standards: The Thomson Reuters Trust Principles.
Speculation about a potentially more dovish Fed - despite U.S. inflation remaining hot - was visible in money markets. But they climbed back again, with the benchmark 10-year Treasury yields up at 4.229% and two-year note yields at 4.498%. On the long end, 30-year Treasury yields rose to an 11-year high of 4.359%. "If the Fed is going to be data dependent, these data points should be a focus point for them. Whether or not that actually happens, is yet to be seen," said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.
NEW YORK, Oct 21 (Reuters) - Some investors believe Treasury yields are close to peaking, even as markets continue pricing in more hawkishness from a Federal Reserve bent on taming the worst inflation in decades. Others think higher yields will soon start luring investors into Treasuries. Vanguard, the world’s second-largest asset manager, last month told Reuters that U.S. Treasuries are near the end of a painful decline. Zhiwei Ren, managing director and portfolio manager at Penn Mutual Asset Management, believes yields may subside if the economy enters a recession. But he said persistent labor shortages, broken supply chains and other long-term changes in the global economy are likely to keep inflation elevated.
The logo for Goldman Sachs is seen on the trading floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., November 17, 2021. REUTERS/Andrew Kelly/File PhotoNEW YORK, Oct 19 (Reuters) - Goldman Sachs Group Inc's (GS.N) strategy pivot has solved one problem for investors who didn't love its foray into consumer banking. Solomon's response: Goldman Sachs is focusing on its fundamental operations while maintaining its financial targets. "Ultimately the investment banking business is a great business, it has always done well," he said. "While the consumer strategy has been successful in generating deposits for Goldman Sachs, its expansion has also been costly in terms of operating expenses and provisions.
The bank will now have three operating segments - asset and wealth management, global banking and markets, and platform solutions. Goldman Sachs outlined leadership changes for the new units, with Marc Nachmann becoming global head of the asset and wealth management division. In the consumer and wealth management business, Goldman saw revenue jump 18% to $2.38 billion in the quarter, reflecting higher demand for loans and higher fees from managing assets. Goldman said its consumer unit will be folded into two separate businesses - wealth management and the newly created platform solutions. The Platform Solutions unit will include GreenSky, the fintech lender Goldman bought in a $2.2 billion deal.
NEW YORK, Oct 17 (Reuters) - Government bonds may not offer much protection in a recession if surging inflation pressures central banks to continue tightening monetary policy, the BlackRock Investment Institute said. Risks of a global recession have increased as central banks around the world tighten monetary policy to bring down consumer prices. While central banks have typically eased monetary policy to boost economies when they showed signs of contraction, "That era is over. Now central banks are set to induce recessions by over-tightening policy," BlackRock, the world's largest asset manager, said. BlackRock expects the correlation between bonds and stocks to remain positive, meaning bonds will unlikely protect investors from falls in stocks valuations.
Oct 14 (Reuters) - The U.S. Treasury Department is asking primary dealers of U.S. Treasuries whether the government should buy back some of its bonds to improve liquidity in the $24 trillion market. The Treasury is also querying whether reduced volatility in the issuance of Treasury bills as a result of buybacks made for cash and maturity management purposes could be a "meaningful benefit for Treasury or investors." But it let that exclusion expire and big banks had to resume holding an extra layer of loss-absorbing capital against Treasuries and central bank deposits. The Treasury Borrowing Advisory Committee, a group of banks and investors that advise the government on its funding, has said that Treasury buybacks could enhance market liquidity and dampen swings in Treasury bill issuance and cash balances. The Treasury is posing the questions as part of its regular survey of dealers before each of its quarterly refunding announcements.
REUTERS/Andrew KellyOct 14 (Reuters) - Profits slid at Wall Street's biggest banks in the third quarter as they braced for a weaker economy while investment banking was hit hard, but investors saw a silver lining with some banks beating estimates. Banks set aside more money in preparation for a hit from a potential economic slowdown. Marinac said investors would want to see banks build reserves at this point in the economic cycle. Morgan Stanley's earnings showed that investment banking revenue more than halved to $1.3 billion with declines across the bank's advisory, equity and fixed income segments. Corporations' interest in mergers, acquisitions and initial public offerings dried up, particularly hitting banks strong in investment banking.
Overall net inflows were positive in the quarter, with long-term net inflows of $65 billion, as momentum from ETFs offset the hit from retail clients withdrawing about $5 billion. Net inflows into ETFs were about $22 billion in the quarter, boosted by $37 billion of flows in bond ETFs. "We saw $37 billion of net inflows into bond ETFs, which is the second best quarter we've had in history ... Net income fell to $1.4 billion, or $9.25 per share, for the three months ended Sept. 30, from $1.68 billion, or $10.89 per share, a year earlier. Fink said BlackRock has about 20% of the LDI market in the U.K., or about $250 billion.
Oct 13 (Reuters) - BlackRock Inc (BLK.N) posted a smaller-than-expected drop in quarterly profit on Thursday as strong demand for exchange-traded funds and other low-risk products cushioned the hit to fee income from a global market rout. That still surpassed analysts' expectations of $7.07 per share, according to IBES data from Refinitiv, as BlackRock managed to partially offset the market downturn thanks to its diversified business model spearheaded by iShares ETFs. Shares of the company, down 42% so far this year, gained 0.4% in premarket trading after the results. BlackRock's net income fell to $1.4 billion, or $9.25 per share, for the three months ended Sept. 30, from $1.68 billion, or $10.89 per share, a year earlier. Register now for FREE unlimited access to RegisterReporting by Manya Saini in Bengaluru and Davide Barbuscia in New York; Editing by Devika SyamnathOur Standards: The Thomson Reuters Trust Principles.
"I'm now being attacked equally by the left and the right so I'm doing something right, I hope. Register now for FREE unlimited access to RegisterBlackRock is ready to fund U.S. energy pipelines as soon as the projects receive government approvals, he said. The company is one of the largest financiers of pipelines in the world, investing in pipelines in Texas, Saudi Arabia and the United Arab Emirates. Energy security is in focus following the latest move by OPEC+ to cut its oil production target over U.S. objections. Fink was speaking ahead of BlackRock's release of its third-quarter results on Oct. 13, when it is expected to show a fall in quarterly revenue.
Oct 13 (Reuters) - BlackRock Inc (BLK.N) on Thursday posted a 16% drop in third-quarter profit as volatile global markets pressured fee income and sent assets under management further below the $10 trillion mark hit last year. While overall net inflows were positive in the quarter, coming in at $65 billion, BlackRock's retail clients withdrew about $5 billion, spooked by the weak market conditions. Net income fell to $1.4 billion, or $9.25 per share, for the three months ended Sept. 30, from $1.68 billion, or $10.89 per share, a year earlier. Analysts on average had expected the asset manager to report a profit of $7.07 per share, according to IBES data from Refinitiv. Register now for FREE unlimited access to RegisterReporting by Manya Saini in Bengaluru and Davide Barbuscia in New York; Editing by Devika SyamnathOur Standards: The Thomson Reuters Trust Principles.
Citing factors such as an acceleration in building new supply chains, which were hit hard by the COVID-19 pandemic, Fink said measures to counter inflation may, in the long run, weigh on price pressures. "I just started to see more threads of declining inflation, but they're not in the numbers yet," Fink said at an Institute of International Finance (IIF) event in Washington. Register now for FREE unlimited access to RegisterFinancial markets have been slammed this year as global central banks have raised interest rates to fight stubbornly high inflation. Fink said declines in stocks and bonds valuations, however, present opportunities for investors, and that his firm is witnessing a "really big interest in bonds". Register now for FREE unlimited access to RegisterReporting by Davide Barbuscia and Lananh Nguyen; Editing by David GregorioOur Standards: The Thomson Reuters Trust Principles.
REUTERS/Brendan McDermid/File PhotoOct 12 (Reuters) - Signs of stress are growing in the global financial system, sparking worries over everything from contagion between markets to ruptures in financial products. This week alone, a gloomy report from the International Monetary Fund flagged risks of “disorderly asset repricings” and “financial market contagions” while JPMorgan chief Jamie Dimon predicted a looming recession. Global financial conditions, which reflect the availability of funding, touched their tightest since 2009 in late September, an index compiled by Goldman Sachs showed, lifted by surging interest rates, falling equities and a soaring dollar. “There are dollar funding shortages.”The IMF's Global Financial Stability Report, released Tuesday, also highlighted specific risks in open-end investment funds and the leveraged loan market. U.S. Treasury Secretary Janet Yellen on Tuesday said she has not seen signs of financial instability in U.S. financial markets despite high volatility.
NEW YORK, Oct 11 (Reuters) - Some U.S. corporate bond indicators have hit or are approaching new lows this week as a rout in the UK bond market and U.S. inflation worries slammed global debt valuations. BlackRock’s iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD.P) - a major exchange-traded fund tracking the U.S. investment-grade corporate bond market - fell to a low of $101.05 on Tuesday, its lowest since 2009. Its high-yield counterpart, BlackRock’s iShares iBoxx $ High Yield Corporate Bond ETF (HYG.P) fell to $70.92 on Monday, just a few cents away from hitting a new low since March 2020. Register now for FREE unlimited access to RegisterLong-dated U.S. treasury yields, which move inversely to prices and tend to sway other debt markets, on Tuesday shot to multi-year highs, with a sharp sell-off in the UK bond market contributing to widespread market volatility. The Bank of England said it would buy up to 5 billion pounds of inflation-linked debt per day, starting on Tuesday, until the end of this week in an effort to stem the bond market collapse.
As a result, we’re seeing significantly elevated correlations between bond markets," said Andy Sparks, head of portfolio management research at MSCI. "The high level of correlation across global bond markets means that allocating to ex-U.S. bonds is that much less effective," said Gregory Peters, co-chief investment officer at PGIM Fixed Income. Peters doesn't expect the correlations to moderate until central banks' monetary policies diverge significantly, and he has reduced his exposure to sovereign bonds outside the U.S. "That's something that brings these global issues on U.S. investors' radars, because they are becoming first order market drivers." Martin Harvey, portfolio manager of the Hartford World Bond Fund, expects monetary policy regimes to start diverging next year.
NEW YORK, Sept 28 (Reuters) - Recent increases in U.S. Treasury yields are set to improve the attractiveness of investment strategies such as the 60/40 portfolio, said Ken Griffin, the billionaire founder of Citadel Securities, one of the world's biggest market-making firms. "The 60/40 portfolio is much better today than at any point in recent time," he said, speaking at an investment conference in New York on Monday, and with reference to a common investment strategy which splits allocations between stocks and bonds on a 60%/40% basis to mitigate risk. Yields on the 10-year benchmark government bonds topped 4% on Wednesday, hitting a 12-year high. "Right now, that's a much more compelling value proposition than it was back then at 1% yield," Griffin said. Register now for FREE unlimited access to RegisterReporting by Carolina Mandl and Davide Barbuscia in New YorkOur Standards: The Thomson Reuters Trust Principles.
"There will be impacts, there’s correlations ... some market volatility, and then how it weighs in the global growth picture," said Paul Malloy, head of municipals at Vanguard. The wild swings in the pound have ricocheted across currency markets, where volatility was already climbing. According to the widely watched Deutsche Bank Currency Volatility Index , volatility across currencies on Wednesday hit its highest level since the March 2020 COVID-19- induced market meltdown, jumping more than 20% from levels last week. Closely followed indicators of financial stress remain contained. U.S. stock market volatility as measured by the "fear index," the VIX (.VIX), has also climbed in recent days but remains below its 2022 highs.
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