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☆ Fed’s SVB review finds there’s no “I” in “blame”
▼ + stars: | 2023-04-28 | by ( John Foley | ) www.reuters.com time to read: +4 min

So many, in fact, that the report makes it hard to point the blame anywhere in particular. The 114-page post-mortem of SVB, compiled in just over six weeks at the behest of supervisory chief Michael Barr, points out some obvious but undeniable truths. But this ailing dog of a bank also had a too-long leash, thanks to timid, consensus-seeking supervisors. Using pre-rollback rules, SVB would have fallen visibly short of its required liquidity levels by the end of 2022. But the report skirts over the extent to which the Fed’s top staff were aware of risks at SVB.

☆ Cool investors buy time for First Republic fix
▼ + stars: | 2023-04-28 | by ( ) www.reuters.com time to read: +1 min

NEW YORK, April 28 (Reuters Breakingviews) - If investors are worried that stresses at First Republic Bank (FRC.N) will hurt other lenders, they aren’t showing it. Stocks of regional U.S. banks are generally faring well despite fears that the San Francisco-based lender might fail. As the government and the private sector mull a rescue, the market’s composure buys precious time for reaching a deal. The difference between now and March, when Silicon Valley Bank and Signature Bank crumpled, is marked. Regional Bank exchange-traded fund (IAT.P) closed with a 0.7% gain.

☆ First Republic could make failure safe again
▼ + stars: | 2023-04-27 | by ( John Foley | ) www.reuters.com time to read: +4 min

NEW YORK, April 27 (Reuters Breakingviews) - When Silicon Valley Bank and Signature Bank failed in March, U.S. authorities bailed out their depositors regardless of size. The slower destruction at First Republic Bank (FRC.N) could provide an opportunity to reverse the regrettable precedent. And while it’s never good when a business fails, there’s a potential benefit to letting First Republic go. First Republic had $233 billion of assets at the end of March, and $104 billion of deposits compared with $176 billion at the end of December. Silicon Valley Bank, owned by SVB Financial, was taken into receivership on March 10, while Signature Bank was closed by the Federal Deposit Insurance Corp on March 12.

☆ US economy rides a shopping cart to nowhere
▼ + stars: | 2023-04-27 | by ( ) www.reuters.com time to read: +2 min

NEW YORK, April 27 (Reuters Breakingviews) - The American consumer held the U.S. economy afloat in the first quarter, driving an annualized GDP growth rate of 1.1% - less than expected though still enough to avoid recession. But the signs that shoppers are getting tired are already in plain sight. Consumption added 2.5 percentage points to GDP growth, which is close to levels seen in the past. Spending by American households counts for 70% of GDP – meaning shoppers effectively decide whether the U.S. economy is headed for recession or recovery. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ MLB roundup: Cubs' Drew Smyly flirts with perfection vs. Dodgers
▼ + stars: | 2023-04-22 | by ( ) www.reuters.com time to read: +11 min

Los Angeles starter Julio Urias (3-2) allowed five runs, seven hits (including two homers) and two walks in 3 1/3 innings. Seven of Urias' 10 earned runs allowed this season have come against Chicago. Philadelphia starter Aaron Nola tossed a season-high seven innings and allowed four hits and three runs with three strikeouts and three walks. Pittsburgh starter Mitch Keller (2-0) allowed two runs and four hits in six innings, with five strikeouts and a walk. Pivetta (1-1) allowed three runs on seven hits in 5 2/3 innings, striking out seven with one walk.

☆ Wall Street aces its real-life stress test
▼ + stars: | 2023-04-20 | by ( John Foley | ) www.reuters.com time to read: +7 min

One flaw in this plan is that the Federal Reserve, which designs the stress test, has tended to assume that when bad times come, interest rates would fall, not rise. Because their clients also fear sudden shifts in interest rates, they call on fixed-income securities desks to help offlay the risk. One clear outcome of higher interest rates is that banks are lending less, and more carefully. Reuters Graphics Reuters GraphicsFollow @johnsfoley on TwitterCONTEXT NEWSLarge U.S. banks reported their first-quarter earnings between April 14 and April 19. Both said that trading revenue had declined from first quarter 2022, but it was substantially higher than the last three months of the year.

☆ Bank chiefs move fluttering interest-rate needle
▼ + stars: | 2023-04-19 | by ( John Foley | ) www.reuters.com time to read: +3 min

NEW YORK, April 19 (Reuters Breakingviews) - Bank bosses are adding some dramatic tension to the U.S. monetary policy saga. It’s a possibility rather than a prediction, but when Wall Street’s highest and mightiest opine, it pays to listen. At the same time, the bank chiefs may be talking their books. He added that interest rates of “high 5% or 6%” would be “not shocking.”JPMorgan on April 15 reported $12.3 billion of quarterly earnings, a 56% increase from a year earlier, driven by rising interest rates. Dimon has previously warned that rates could hit 6%, and said in April 2022 that the bank was prepared for “drastically” tighter monetary policy.

☆ MLB roundup: Clayton Kershaw blanks Mets, gets 200th win
▼ + stars: | 2023-04-19 | by ( ) www.reuters.com time to read: +13 min

Martinez hit two home runs in his first multi-homer game with the Dodgers and the 19th of his career. In addition to his milestone win, Kershaw (3-1) also improved to 11-0 in 17 career regular-season starts against the Mets. Mets starter Tylor Megill (3-1) gave up three runs on seven hits over five innings. Bassitt (2-2) allowed three hits and walked one batter while notching five strikeouts in 6 1/3 innings. Philadelphia chased Lance Lynn (0-2) with one out in the sixth; he allowed five runs on 10 hits, fanning seven.

☆ Al-Balad: Where Saudi Arabia’s tourism industry began
▼ + stars: | 2023-04-18 | by ( Lilit Marcus | ) edition.cnn.com time to read: +7 min

But the beating heart of this city, Al-Balad, is more than a thousand years old, and it has been immaculately preserved as a reminder of Saudi Arabia’s history – specifically, Jeddah’s role as a key point of entry for religious pilgrims. He devoted city resources to the remaining Al Balad buildings and prevented some from being torn down, Parry says. The Al-Balad area was inscribed to the UNESCO World Heritage list in 2014 as Historic Jeddah, the Gate to Mecca. This pale-blue color is one of the most popular for doors and windows in the old city. Over two nights, Al-Balad’s old buildings were lit up while acts like Busta Rhymes, Xzibit and Lupe Fiasco performed alongside some of the Arab world’s biggest musicians.

☆ Goldman has its fingers in the wrong pies
▼ + stars: | 2023-04-18 | by ( John Foley | ) www.reuters.com time to read: +4 min

NEW YORK, April 18 (Reuters Breakingviews) - Rising interest rates have been a gift to big U.S. banks – except Goldman Sachs (GS.N). Boss David Solomon is reshaping the firm, but for now Goldman has to earn its money the hard way. Goldman, with interest just 15% of its revenue compared with roughly half at its banking peers, missed out. Solomon wants to remold Goldman as a bank for all seasons, but he isn’t there yet. Goldman’s fixed-income trading revenue fell 17% year-on-year, with “significantly lower” revenue in currencies and commodities.

SINGAPORE, April 17 (Reuters) - The dollar edged higher on Monday after the April survey of business activity in New York state rose for the first time in five months and bolstered expectations the Federal Reserve will raise interest rates in May. The new orders index rose 47 points to 25.1, while the shipments index added 37 points to 23.9, substantial increases after they had declined in recent months, the Federal Reserve Bank of New York said. "It's the best reading since last July with a big jump in orders and has taken the dollar higher on this," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. The outlook of U.S. interest rates relative to the monetary policies and economies of other countries can boost or erode the dollar's value. The Mexican peso lost 0.51% versus the dollar to trade at 18.12, while the Canadian dollar fell 0.31% versus the greenback to 1.34 per dollar.

SINGAPORE, April 17 (Reuters) - The dollar climbed to a one-month high against Japan's yen on Monday as traders eyed up another interest rate hike from the Federal Reserve, while the Bank of Japan stuck to its easy money policies. Expectations of higher interest rates relative to global peers tend to boost a currency by making investments there look more attractive, and vice versa. Reuters GraphicsMeanwhile, pricing in derivatives markets shows traders think there's a roughly 84% chance the Fed will hike rates again by 25 basis points in May, up from around 69% last week . It hit a one-year high of $1.108 on Friday, with traders expecting further interest rate hikes from the European Central Bank even as the Fed nears a pause. Foley expects one more 25 basis point rate hike from the Fed in May before it holds rates steady for the rest of the year.

☆ Big bank investors owe thanks to Team America
▼ + stars: | 2023-04-14 | by ( John Foley | ) www.reuters.com time to read: +4 min

Wells Fargo has managed to keep even more for itself, passing on just 26%. Finance chief Jeremy Barnum reckons $50 billion of deposits flowed into his bank and stayed put, more than offsetting other outflows. Elsewhere in Dimon’s letter, he describes himself as a “red-blooded, patriotic, free-enterprise and free-market capitalist.” Investors may lap that up, but his bank’s earnings show other forces at work too. Wells Fargo reported $4.7 billion of earnings, 34% higher than the previous first quarter, and took a $1.2 billion quarterly provision for credit losses. Citigroup reported $4.3 billion of earnings, a 7% annual increase, while smaller rival PNC made $1.6 billion, an 18% increase.

☆ For some US banks, it’s still a wonderful life
▼ + stars: | 2023-04-13 | by ( John Foley | ) www.reuters.com time to read: +7 min

Bank customers are still sitting on a pile of savings manufactured by pandemic-era government stimulus and curtailed consumption. Among all banks, deposit balances have fallen 5% year-on-year; to get back to their pre-Covid trend, they’d need to fall 20%. What of small banks that can’t match either advantage? Better placed within communities to soothe the nerves of mostly local customers, small banks can instill trust and loyalty while allaying fears. This edge for small banks should also insulate them from the worst effects of a deposit price war.

☆ Buyouts are getting complicated
▼ + stars: | 2023-04-13 | by ( ) www.reuters.com time to read: +2 min

The terms say that the buyer cannot be forced to close before Oct. 15 – seven months after the deal’s announcement. A Tuesday proxy filing shows that’s to give Platinum enough time to sort out its debt financing. Qualtrics, meanwhile, sold in March for $12.5 billion – but it turns out it almost got more. An unnamed bidder offered $21 per share, more than the $18.15 that Qualtrics accepted from Silver Lake and CPP Investments. Buyouts are getting done, but they’re also getting complicated.

☆ Inflation beds down, gets comfortable
▼ + stars: | 2023-04-12 | by ( ) www.reuters.com time to read: +2 min

Price growth is now fueled more by non-essentials, like air fares and new cars, than food and energy. That’s a problem, since those core prices are historically less volatile and therefore less likely to drop. As costs edge higher, Americans will probably have to endure a longer, and more expensive, inflation battle. Core inflation is now outpacing broader CPI by the widest margin since the pandemic began, signaling those sticky prices that rarely drop are playing a bigger part in keeping inflation high. High core inflation means the Federal Reserve will probably raise rates again next month, making money even more expensive for households and businesses.

The euro was up 0.52% at $1.0918 and the pound rose a similar amount to $1.2439 as most European markets returned from the long Easter weekend. "Bank earnings will also be important, they don't often reach across to FX markets directly, but they might, given the recent jitters," Foley added. Tuesday's moves were also affected by European markets' reopening after the break, said Simon Harvey, head of FX analysis at Monex Europe, given the limited liquidity on Friday and Monday with most European markets closed. He said algorithms trading currencies based on the difference between European and U.S. rates might have sold euros for dollars when U.S. Treasury yields rose after the jobs data while European bond markets were closed. European bond yields rose sharply on Tuesday, catching up after the break.

The euro was up 0.4% at $1.0903 and the pound was up 0.5% at $1.2439 as most European markets returned from the long Easter weekend. "Bank earnings will also be important, they don't often reach across to FX markets directly, but they might given the recent jitters," Foley added. Tuesday's moves were also affected by European markets' reopening after the break, said Simon Harvey, head of FX analysis at Monex Europe, given the limited liquidity on Friday and Monday with most European markets closed. He said algorithms trading currencies based on the difference between European and U.S. rates might have sold euros for dollars when U.S. Treasury yields rose after the jobs data while European bond markets were closed. European bond yields rose sharply on Tuesday catching up after the break.

☆ Electric cars get a reality check
▼ + stars: | 2023-04-11 | by ( ) www.reuters.com time to read: +2 min

NEW YORK, April 11 (Reuters Breakingviews) - Regulators want to encourage electric vehicles by flattering them less. The U.S. Department of Energy has proposed tweaking a decades-old formula for calculating EVs’ fuel efficiency. The overhaul will lower electric mileage ratings – but could encourage automakers to ditch fossil fuels more quickly. Automakers must meet a minimum overall CAFE mileage; falling short results in penalties. GM and rivals already want to catch up to electric leader Tesla – and its $600 billion valuation.

☆ Tupperware Brands boxes itself into a corner
▼ + stars: | 2023-04-10 | by ( ) www.reuters.com time to read: +2 min

TORONTO, April 10 (Reuters Breakingviews) - Tupperware Brands’ (TUP.N) options are looking less airtight. As with other direct selling companies, it casts doubt over its business model, as well as how speedily it can remake itself as consumer habits shift. An earnings misstatement, which has left it late in filing its annual report, could cause creditors to declare Tupperware has violated its debt covenants. Even if Tupperware can appease its creditors or find new investors, the rise of e-commerce has dented the fortunes of companies that lean on direct selling. Compared with the company’s heyday, customers have more options for food storage, more places to buy from, and less time for Tupperware parties.

The short-lived fight nonetheless underscores the lengths at which scrappy restaurant operators will go to chase consumer dollars. For restaurants that have been open longer than 13 months, Chipotle’s sales grew faster than Sweetgreen’s in the fourth quarter. That could explain why Chipotle’s valuation, at nearly 5 times forward sales, is more than double that of Sweetgreen’s. Follow on @sharonlam_ TwitterCONTEXT NEWSChipotle Mexican Grill sued rival U.S. take-out chain Sweetgreen for violating its trademarks rights in a similarly branded burrito bowl on April 4, leading to a prompt settlement. Chipotle had argued that Sweetgreen’s “Chipotle Chicken Burrito Bowl” violated its trademark rights.

The short-lived fight nonetheless underscores the lengths at which scrappy restaurant operators will go to chase consumer dollars. For restaurants that have been open longer than 13 months, Chipotle’s sales grew faster than Sweetgreen’s in the fourth quarter. Sweetgreen billed itself as a tech innovator when it first went public and acquired robotic-kitchen company Spyce back in 2021. Follow on @sharonlam_ TwitterCONTEXT NEWSChipotle Mexican Grill sued rival U.S. take-out chain Sweetgreen for violating its trademarks rights in a similarly branded burrito bowl on April 4, leading to a prompt settlement. Chipotle had argued that Sweetgreen’s “Chipotle Chicken Burrito Bowl” violated its trademark rights.

☆ Real estate warning: beware the backward cap
▼ + stars: | 2023-04-05 | by ( Lauren Silva Laughlin | ) www.reuters.com time to read: +6 min

The commercial real estate industry has a different kind of backward cap – one that’s also a sign of a losing streak. The cap rate comes from dividing a property’s net operating income in any given year – money from rent minus associated costs – by the asset’s value. For more than 10 years, that gap remained positive even though cap rates were falling in virtually all real estate subsectors, from shopping malls to apartments. Reuters GraphicsAsk a large-scale real estate owner – or several – about this and they are characteristically optimistic. Reuters GraphicsWhen Lehman Brothers went bankrupt, the narrowed spread between cap rates and interest costs didn’t last for long.

☆ How FDIC dropped the ball and picked up the tab
▼ + stars: | 2023-04-04 | by ( John Foley | ) www.reuters.com time to read: +7 min

NEW YORK, April 4 (Reuters Breakingviews) - Bank watchdogs don’t have a crystal ball when it comes to spotting bank runs. The FDIC is one of several agencies that watches over American banks, but it’s the one that picks up the tab when a lender fails. Gruenberg, on the FDIC board since 2005, did not support the rapid phased prototyping data project, fretting that it amounted to outsourcing supervision, according to people familiar with the situation. For all but the biggest banks, the FDIC continues to rely on quarterly snapshots known as “call reports,” and the findings of its on-the-ground inspectors. Reuters GraphicsThe death of the 2020 project – and the fact it didn’t start years sooner – reflect deeper challenges at the FDIC.

☆ Peloton shares are on the up — but will it last? Here's what Wall Street thinks
▼ + stars: | 2023-03-31 | by ( Ganesh Rao | ) www.cnbc.com time to read: +4 min

Shares of Peloton Interactive are making a comeback, with the stock up by 30% this year. But many investors who bought into the connected fitness company during the pandemic are still nursing big losses; shares are down 93% from their all-time high in late 2020, currently trading around $10.40. The consensus price target of 30 analysts ($17) points toward a 63% upside over the next 12 months. They also noted that digital-only subscriptions, which are separate from the connected fitness subscribers, fell marginally in the latest quarter. UBS' price target of $8 represents a more than 20% drop from the current share price.

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