|Bid||42.68 x 3000|
|Ask||42.69 x 800|
|Day's Range||42.24 - 43.00|
|52 Week Range||36.74 - 51.53|
|Beta (3Y Monthly)||1.32|
|PE Ratio (TTM)||9.17|
|Earnings Date||Jul 16, 2019 - Jul 22, 2019|
|Forward Dividend & Yield||1.20 (2.75%)|
|1y Target Est||54.24|
(Bloomberg) -- The drumbeat for a Federal Reserve interest rate cut is getting louder, with one policy maker calling for a 50 basis point reduction.Minneapolis Fed President Neel Kashkari said Friday that he’d advocated for such a move at the central bank’s June 18-19 meeting, where officials ended leaving rates unchanged.Other policy makers speaking on Friday didn’t go as far as Kashkari, considered one of the Fed’s more dovish officials. But their comments reinforced expectations that the Fed is on course to reduce rates, perhaps as soon as its July 30-31 gathering. President Donald Trump, who’s sharply criticized Fed Chairman Jerome Powell for keeping credit too tight, said Thursday that he expects the central bank to lower rates. “Can’t win it all. Eventually he’ll do what’s right,” the president said of Powell.Powell deputy Richard Clarida said on Friday that the argument for easier policy has strengthened recently as the economic outlook has turned more uncertain.“The case for providing accommodation has increased,” Fed Vice Chair Clarida said in a Bloomberg Television interview. “There’s been a marking down in global growth prospects. There’s been uncertainty about international trade.”Trump is slated to meet Chinese President Xi Jinping at the June 28-29 summit of Group of 20 nations in Osaka, Japan, to try to head off a further escalation in the trade war between the world’s two biggest economies. The president also has threatened to impose tariffs on auto imports from Japan and the European Union. ‘Downside Risks’Adding to the uncertainty are heightened tensions in the Middle East after Iran shot down a U.S. drone and Trump tweeted he came within minutes of launching a retaliatory attack. On Saturday Trump said that military action is “always on the table.” Fed Governor Lael Brainard also sounds open to a rate cut, even as she describes the U.S. economic outlook as solid.Recent weeks “have seen important downside risks,” Brainard said Friday at a Fed event in Cincinnati, adding that the central bank must take those into account when setting policy. A gauge of U.S. factory activity fell in June to the lowest since late 2009 while a separate measure of the service sector edged down to a three-year low, according to surveys of business purchasing managers by IHS Markit.The data suggest that “economic activity is rapidly downshifting,” said Joseph LaVorgna, chief economist for the Americas at investment bank and asset manager Natixis.What Our Economists Say“The messaging from the June FOMC meeting showed policy makers demonstrating heightened sensitivity to both market and economic signals...Bloomberg Economics now projects the Fed to execute 50 bps of rate cuts by year-end in an attempt to reduce inversion pressures on the yield curve, and to avoid orchestrating policy in a manner contrary to the increasing dovishness among other major foreign central banks.-- U.S. economists Carl Riccadonna and Yelena ShulyatyevaClick here to read more.The Federal Open Market Committee’s vote on Wednesday to leave rates unchanged -- in a 2.25% to 2.5% range -- wasn’t unanimous. St. Louis Fed President James Bullard sought a quarter-point rate cut.His vote marked the first dissent of Powell’s 16-month tenure as chairman. (Kashkari isn’t a voting member of the FOMC this year, although he will be in 2020). In a blog posting on Friday explaining his dissent, Bullard said he favored a cut to guard against downside risks of too-low inflation and weaker growth.“Even if a sharper-than-expected slowdown does not materialize, a rate cut would help promote a more rapid return of inflation and inflation expectations to target,” he said. Inflation TargetThe Fed has failed to convincingly hit its 2% inflation objective since 2012. What’s more, inflation expectations, particularly in financial markets, have fallen recently and Fed officials themselves have marked down their forecast of price rises this year, to 1.5%, from 1.8% in March.Kashkari zeroed in on tepid inflation and inflation expectations in his call for easier monetary policy at this month’s FOMC meeting.“I advocated for a 50-basis-point rate cut to 1.75% to 2% and a commitment not to raise rates again until core inflation reaches our 2% target on a sustained basis,” Kashkari wrote in an essay. “I believe an aggressive policy action such as this is required to re-anchor inflation expectations at our target.”Ellen Zentner, chief U.S. economist at Morgan Stanley, said that rate cuts are the best way for the Fed to boost inflation expectations, stabilize financial markets, counter global growth and trade risks, and support the economy.“There’s one answer right now for their ills, and that’s for them to drop rates,’’ Zentner, who expects a half-point cut next month, said in a Bloomberg Television interview Friday. “It’s the right prescription to start aggressively.’’ \--With assistance from Christopher Condon, Matthew Boesler and Steve Matthews.To contact the reporter on this story: Rich Miller in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Margaret Collins at email@example.com, Ros KrasnyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Goldman Sachs Group Inc. and Morgan Stanley improved on last year’s poor results in the first round of the latest Federal Reserve stress tests, a sign they may have more flexibility to boost payouts to shareholders.In figures posted Friday by the Fed, the pair didn’t come as close to breaching regulatory minimums as they did last year, offering hope they will escape limits on dividends and stock buybacks imposed back then. All 18 banks in the exam demonstrated an ability to withstand a hypothetical financial shock. The second and final round next week determines whether firms win approval to boost capital payouts.Results posted so far show banks are getting better at coping with what’s become one of the most rigorous supervisory efforts: They maintained a collective common equity Tier 1 ratio that was double the regulatory minimum even at the depths of the theoretical recession. Lenders have been building capital for years, and while this year’s exam was harsher on credit-card loans, trading losses were down from last year at four of the five biggest Wall Street firms.Still, when the process wraps up next week, analysts expect big banks to slow the expansion of payouts to shareholders after two years of surging dividends and buybacks.Goldman Sachs and Morgan Stanley were allowed to dip below the required minimums in the second part of last year’s test because some of the decline was a result of one-time charges related to the 2017 federal tax overhaul. After next week’s round, Goldman is expected to modestly reduce its total payout in dollar terms while Morgan Stanley modestly increases it, according to analyst estimates compiled by Bloomberg before Friday’s results.This year, Goldman Sachs’s supplementary leverage ratio fell to as low as 4% in the first round of the Fed’s test, an improvement from 3.1% last year. Morgan Stanley’s ratio was 3.9%, compared with 3.3% last year. To carry out proposals to distribute capital, banks need to remain above 3% by that measure in next week’s test.Taking ‘Mulligan’Lenders are given a chance to adjust and resubmit their cash distribution plans before the second set of results is released June 27. A record number of firms used the so-called mulligan last year to adjust their original payout requests to stay above the minimum requirements.The 12 largest U.S. lenders tested are expected to boost payouts by $5 billion in the next four quarters, after dividends and buybacks jumped by more than $30 billion each of the past two years. Still, the increase means they’ll likely pay out more than 100% of their annual profit.In past years, some banks had initial proposals for payouts reined in after they projected their capital and leverage ratios would hold up better than what the Fed calculated. In some cases, the Fed even took issue with the strength of their capital planning.This year, a half dozen firms including Bank of America Corp. posted internal calculations that were instead lower than the Fed’s, indicating they were even more conservative than examiners. Still, several companies were more optimistic. Morgan Stanley, for example, calculated its leverage ratio would be 1.7 percentage points higher than what the Fed found. Altogether, the 18 banks tested would suffer a $115 billion pretax loss in the severely adverse scenario, the Fed said. That amounts to 0.8% of the banks’ average assets, the same ratio as under last year’s test. Their hypothetical revenue before provisions and trading losses was projected by the Fed to be 2.4% of assets, down from 3% last year.A steeper yield curve foreseen in last year’s scenario helped prop up pre-provision revenues because banks make more money when the gap between short-term and long-term rates widens. The change in assumptions about interest rates this time helped banks book gains in their Treasury portfolios even as it lowered their pre-provision revenues.Credit CardsThis year’s stress scenario featured a harsher hypothetical recession and the worst increase in unemployment used in the tests so far, yet its stock- and bond-market losses were less severe than last year. That helped Goldman Sachs and Morgan Stanley, which derive more of their income from securities trading than lending.Historically, losses tied to credit cards and commercial loans tended to be similar amounts. But this year, losses tied to cards under the central bank’s severely adverse scenario reached $107 billion, outpacing the $73 billion in losses produced by their commercial counterparts.The central bank said credit-card loss rates increased “due in part to the final phase-in of changes to the supervisory credit-card model.” That model changed how Fed treats uncollected interest and fees at the time of default.Foreign BanksFriday’s results also included what would happen to the capital ratios of six foreign banks’ U.S. units under the same scenario. HSBC Holdings Plc’s U.S. arm saw its leverage ratio fall to within a percentage point of the minimum, the narrowest margin in this year’s group. Next week, units of foreign banks also face a qualitative evaluation of their risk management, data-collection capabilities and capital planning. That’s where some of them could trip up.Foreign firms failing the test can’t repatriate profits earned in the U.S. to their parent companies. For Deutsche Bank AG, whose U.S. units have failed the test three times already, a failing grade will be yet another blow to investor confidence as it struggles with restructuring efforts and profitability. The Fed placed the firm’s U.S. arm on a list of troubled lenders last year because of deficiencies in its internal oversight.The exams are in flux because the Fed is working on a rule that will more closely marry the stress testing process with day-to-day capital decisions at the banks. And the agency has tried to make the regime more transparent -- an effort that has accelerated amid President Donald Trump’s deregulatory agenda.As part of that effort, Congress passed a law last year ordering less strict treatment of smaller banks. That prompted the central bank to ease the stress test burden on a dozen regional U.S. lenders and half a dozen smaller foreign banks, which are now tested every other year and weren’t included in this year’s exercise.(Updates with companies’ own projections from the ninth paragraph.)\--With assistance from Jenny Surane and Gregory Mott.To contact the reporters on this story: Yalman Onaran in New York at firstname.lastname@example.org;Jesse Hamilton in Washington at email@example.comTo contact the editors responsible for this story: Michael J. Moore at firstname.lastname@example.org, ;Jesse Westbrook at email@example.com, David Scheer, Dan ReichlFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The largest banks in the U.S.—including Morgan Stanley, Goldman Sachs, Bank of America, Citigroup, and JPMorgan—have sufficient capital that would allow them to weather a severe recession, the Federal Reserve said.
(Bloomberg) -- Slack Technologies Inc.’s trading debut was everything Wall Street wanted it to be: nothing flashy.The company’s advisers anticipate that more firms will adopt the so-called direct-listing model for going public, and give the banks an edge over rivals who have little to no experience in pulling off a listing like Slack’s.There could be five direct listings next year -- or more, depending on how the overall market for public offerings shapes up, said Colin Stewart, global head of technology capital markets at Morgan Stanley. His firm, along with Goldman Sachs Group Inc. and Allen & Co., are the only three companies to have had lead roles on high-profile Silicon Valley direct listings.“This will be something that companies need to consider as part of a toolkit to access the public markets,” Stewart said. “It’s clear that the model is attractive. The question will be on applicability -- how many companies will use it.”While a direct listing tends to pay banks less than a typical initial public offering, the fees are shared among fewer firms -- meaning Goldman, Morgan Stanley and Allen & Co. gain significantly by being leaders in the market. In the case of Slack, that meant at least 90% of the $22 million in fees split among the three banks, people familiar with the matter have said. The banks’ biggest rivals have yet to work on a deal of Slack’s magnitude. And the two mega-banks handled the lion’s share of the trading volumes, according to three people with knowledge of the matter, who asked not to be identified discussing private flows.‘New Model’“It has been very exciting to pioneer this new model alongside our clients, and we expect other clients to increasingly utilize this path when it best achieves their objectives,” William Connolly, co-head of the West Coast financing group and head of technology equity capital markets at Goldman, said in an email.That doesn’t portend a complete overhaul to the model for going public -- there are hundreds of traditional IPOs a year -- but Stewart’s prediction would mean more than double the number of direct listings from the past year. Unlike in an IPO, a company opting for a direct listing isn’t raising money with a sale of new stock. Instead, shares already held by founders and other early investors are simply listed for trading, making those shares easier to sell.Goldman and Morgan Stanley have been in talks with more than a dozen firms considering the direct-listing option, people familiar with the matter have said. They include Airbnb Inc., one of the hottest IPO candidates in the next year. Adding to the encouragement is that Slack’s listing went smoother that Spotify Technology SA’s last year, with the work-collaboration company’s shares staying close to its opening price in the first two days of trading -- an execution win for market makers. A Slack investor who made a recent purchase when the shares were private is up about 43%.IPO OpeningsThat’s roughly the same as standard public offerings, with this year’s technology and communications IPOs opening almost 50% above their offering prices on average, according to data compiled by Bloomberg.Bloomberg Beta, the venture capital arm of Bloomberg News parent Bloomberg LP, is an investor in Slack.While Morgan Stanley, Goldman and Allen & Co. have been most prominent in leading direct listings, other Wall Street giants have been involved in the space. JPMorgan Chase & Co., for example, has led direct listings for companies including Colony Real Estate Credit Inc., which started trading last year.Citadel Securities was picked as the designated market maker for Slack’s trading debut, and its role, along with Morgan Stanley’s as adviser to the market maker, a role the bank created ahead of Spotify’s listing, was applauded by venture capitalist Bill Gurley in a Twitter post Thursday.“Other banks want to position direct listings as ‘exceptional’ or ‘rare.’ MS believes they are 1) a better mousetrap, and 2) can be used broadly,” he wrote.John O’Farrell, a partner at Andreesen Horowitz, one of Slack’s largest early investors, was on the floor of the New York Stock Exchange for the listing Thursday, and stuck around after the crowd faded to shake hands with the market makers. His firm may have reaped $2.6 billion, according to CB Insights. Venture capital firm Accel, which held 24% of Slack as of the stock’s debut, now has a $4.6 billion stake, the research company said.Yet investors may not all cheer the model.Gurley argues that personal relationships, ties to banks and an investor’s brand determine whether it can participate in an IPO, as opposed to the algorithms used in direct listings. In the Slack and Spotify direct listings, large shareholders weren’t promised allocations beforehand. Instead, the highest bidders end up getting the biggest exposure on the first day of trading.“The hand-allocated IPO is archaic and it’s time for it to be a thing of the past,” Gurley said in a phone interview. “In a day and age of a globally connected Internet, it’s very easy for a company to be discovered and for investors to be educated about that company without visiting people one on one.”But that also means investors may have to buy in at a higher price and therefore miss out on the initial IPO pop that many in the market have gotten used to. That could be a tough reality for large investors like Fidelity Investments that are often big buyers in an IPO, and increasingly buying more stock in private markets.Smooth DebutStill, the fact that Slack’s debut went so smoothly may spur different types of companies to choose a listing method that the company described in its regulatory filings as “novel,” said Joe Mecane, head of execution services at Citadel Securities.Slack didn’t have many of the characteristics Wall Street tends to expect for a direct listing, Mecane said. Such companies typically have a well-known brand and a large base of existing shareholders to ensure stock liquidity -- and don’t have an immediate need to raise funds.Unlike Spotify, Slack is seen by many as a business-to-business company and had a more concentrated investor base than that of the music-streaming service. Also, Slack burns a significant amount of cash.\--With assistance from Drew Singer.To contact the reporters on this story: Sonali Basak in New York at firstname.lastname@example.org;Eric Newcomer in San Francisco at email@example.comTo contact the editors responsible for this story: Michael J. Moore at firstname.lastname@example.org, Daniel Taub, Liana BakerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The annual stress-test report cards for large U.S. financial companies are due out Friday. The consensus is that the banks are largely well-capitalized.
(Bloomberg Opinion) -- Ruchir Sharma, chief global strategist at Morgan Stanley Investment Management, wrote a provocative op-ed in the New York Times last weekend. Titled “When Dead Companies Don’t Die,” it argues that unprecedented monetary stimulus from global central banks created a “fat and slow” world, dominated by large companies and plagued by a swarm of “zombie firms” — those that should be out of business but survive because of rock-bottom borrowing costs.I would add that central bankers are creating a horde of zombie investors as well.By now, bond markets have adjusted to the unabashedly dovish shift from European Central Bank President Mario Draghi and Federal Reserve Chair Jerome Powell. In the U.S., benchmark 10-year Treasury yields fell below 2% for the first time since Donald Trump was elected president, and some Wall Street strategists expect it’ll reach a record low around this time in 2020. Across the Atlantic, 10-year German bund yields plumbed new lows of negative 0.33%, French 10-year yields hit zero for the first time, and the entire yield curve in Denmark was on the cusp of turning negative.With any sort of risk-free yield largely zapped worldwide on the prospect of further monetary easing, is it any surprise what happened next? Investors turned to the tried-and-true playbook of grabbing anything risky. No matter that the global recovery has lasted nearly a decade, trade concerns abound and central banks see economic weakness — the S&P 500 Index promptly rose to a record high as investors mindlessly plowed in. And in a more specific example highlighted by my Bloomberg Opinion colleagues Marcus Ashworth and Elisa Martinuzzi, bond buyers were all-too-eager to snap up subordinated Greek bank debt from Piraeus Bank SA, which tapped European capital markets for the first time since the financial crisis. “The offer would have been unthinkable a year ago,” they wrote.Are these really the characteristics of healthy financial markets? It hardly seems ideal that individual investors, pensions and insurers are effectively forced into owning lower-rated bonds, equities or even alternative assets like timber to meet their return targets. In fact, that sounds like the textbook definition of a bubble. But as Sharma points out, permanently easy policy aims to create an environment in which those bubbles can’t pop.“Government stimulus programs were conceived as a way to revive economies in recession, not to keep growth alive indefinitely. A world without recessions may sound like progress, but recessions can be like forest fires, purging the economy of dead brush so that new shoots can grow. Lately, the cycle of regeneration has been suspended, as governments douse the first flicker of a coming recession with buckets of easy money and new spending. Now experiments in permanent stimulus are sapping the process of creative destruction at the heart of any capitalist system and breeding oversize zombies faster than start-ups.To assume that central banks can hold the next recession at bay indefinitely represents a dangerous complacency.”Time and again, market watchers will warn that the credit cycle is on the verge of turning. “The future looks pretty bleak,” Bob Michele, JPMorgan Asset Management’s head of global fixed income, said this week as he advocated selling into high-yield rallies. “We have probably the riskiest credit market that we have ever had,” Scott Mather, chief investment officer of U.S. core strategies at Pacific Investment Management Co., said last month. Morningstar Inc. just suspended its rating on a fund owned by French bank Natixis SA because of concerns about the “liquidity and appropriateness” of some corporate bond holdings, adding to jitters about a broader liquidity mismatch in the money-management industry.It’s hard to take this fretting too seriously when central banks persistently come to the rescue. What’s more, in many ways it’s in the best interest of all involved not to get too worked up about those risks.U.S. households and nonprofits had a combined net worth of $109 trillion in the first quarter of 2019, a record, according to Fed data. Dig a bit deeper, and it’s clear that a surge in the value of their equity holdings plays a crucial role. They directly owned $17.5 trillion of stocks, which represents 110% of their disposable personal income. That ratio reached 120% in the third quarter of 2018, very nearly topping the all-time high of 121.2% set just before the dot-com crash. Add in “indirectly held” stocks, and individuals look as exposed to equities as ever. At $12.3 trillion, those holdings were worth 78.6% of DPI in the third quarter, compared with 69.5% at the dot-com peak.To put it more plainly, since the start of the economic recovery in mid-2009, their total assets have increased by almost 70%. Financial assets(1) have appreciated 76%. Stock holdings have soared by more than 140%.Effectively, the sharp rally in equities has turbocharged a resurgence in the overall wealth of Americans. The prospect of losing those gains is almost too painful to think about. Perhaps that’s why, as DoubleLine Capital’s Jeffrey Gundlach pointed out in January, investors were “panicking into stocks, not out of stocks” during the late-2018 sell-off. “People have been so programmed” to buy the dip, he said, that it reminded him a bit of how the financial crisis developed. Call investors programmed; call them zombies — it’s the same thing.The Fed, for its part, argues that it’s doing good by sustaining the expansion. Notably, Powell said the economic recovery is starting to reach segments of the U.S. population that had been largely left out thus far — communities that “haven’t had a bull market” and “haven’t had just a booming economy.” Overall, he said officials don’t see signals that the U.S. is at maximum employment. Morgan Stanley’s Sharma argues wage growth is sluggish because bigger companies have more power to suppress worker pay, given that they crowd out (or acquire) startups and other competition.There are no easy answers to these large-scale problems. That includes central banks simply lowering interest rates or purchasing more government bonds. Powell said as much, noting “we have the tools we have.” But at least he has some room to maneuver toward a soft landing. The ECB, which has pushed yields on some corporate bonds in the region below zero, and the Bank of Japan, which owns large swaths of local exchange-traded funds, have done virtually no tightening and may soon need to ease even further.The most troubling part of this heavy-handed approach among central banks is that it eliminates the option for investors to earn any sort of return above inflation on safe assets. This delicate balance seems as if it can only last as long as business and consumer sentiment allows. It has been more than a decade since the Fed last cut interest rates, and during that period, it paid handsomely to be a zombie investor throwing money at the S&P 500. With the next easing cycle upon us, much is riding on the status quo prevailing.(1) Aside from stocks, this includes deposits, direct-benefit promises, non-corporate businesses and other financial assets.To contact the author of this story: Brian Chappatta at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Slack (WORK) is the most recent listing, hitting the exchanges today and immediately surging more than 50% from its reference price. Slack has taken a much different approach to make their share available to the general public.
Slack (WORK) opened for trading on June 20 at around 12:00 ET. The stock opened at $38.25, 47% higher than the reference price of $26 set by the NYSE. At that price, the company is valued at over $23 billion.
(Bloomberg) -- Slack Technologies Inc. opened at $38.50 on the New York Stock Exchange Thursday, valuing the office chat software maker at about $19.5 billion.Shares started trading at 12:08 p.m., almost three hours after Slack Chief Executive Officer Stewart Butterfield rang the opening bell at the exchange.Unlike a traditional initial public offering, Slack’s decision to pursue a direct listing means there was no offer price for the shares. Instead, advisers spent the morning gathering buy and sell orders to assess what the first-trade price should be. The stock exchange set a reference price Wednesday of $26 a share.The market valuation of the company is based on the outstanding Class A and Class B shares, and doesn’t include restricted stock units.Slack shares trade under the ticker WORK. Goldman Sachs Group Inc., Morgan Stanley and Allen & Co. advised on the listing.To contact the reporter on this story: Elizabeth Fournier in New York at email@example.comTo contact the editors responsible for this story: Aaron Kirchfeld at firstname.lastname@example.org, Elizabeth Fournier, Matthew MonksFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Oracle Corp. shares rose to record levels on Thursday after the company reported better-than-expected revenue and gave an outlook that pointed to ongoing momentum.While the results were seen as a sign of progress for a company that has lagged the overall technology sector for years, analysts weren’t convinced they represented an inflection point. UBS questioned whether the growth in the quarter was sustainable, while Morgan Stanley said the debate was on whether the quarter represented a “bounce or something more durable.”The stock gained as much as 7.1% to hit all-time intraday highs.Here’s what analysts are saying about the results:Morgan Stanley, Keith WeissThe print “likely reopens the debate on Oracle’s growth potential,” but the firm questions whether the results represent a “bounce or something more durable.”“While the Q4 numbers represent a poignant data point in favor of significant growth potential within Oracle’s large database installed base, the preponderance of evidence still suggests a muted top line growth outlook ahead.”Affirmed equal-weight rating and $59 price target, although “our interest is piqued.”Jefferies, John DiFucci“We don’t want to get ahead of ourselves,” but “we’ve been waiting for signs of what we believe will be a multi-year product cycle on the back of database options.”It may take another 18 months “before we start to see something as relevant as this start to boost total revenue by mid-single digits, which in turn should drive double-digit cash flow growth” for years.Buy rating, price target raised to $66 from $61.UBS, Jennifer Swanson LoweAfter this quarter, the debate is “likely to be whether demand for autonomous database can sustain that healthy license revenue growth” in fiscal 2020.The first-quarter outlook suggested “we may not be fully out of the woods yet, but management was optimistic that growth in star businesses was starting to offset declines in legacy businesses.”Neutral rating, price target raised to $57 from $54.RBC Capital Markets, Matthew Hedberg“Encouraged” by the results, but will “look for signs that Autonomous DB and Cloud at Customer are moving beyond the trial phase at a meaningful number of customers to become more constructive.”Sector-perform rating, price target raised to $59 from $57.Deutsche Bank, Karl KeirsteadResults were “better than feared,” but “we’d caution that a good portion of the license revs upside was due to one-time 606 accounting issues.”Notes management didn’t cite any demand softness on its conference call.Hold rating, target raised to $52 from $48.What Bloomberg Intelligence Says:“Oracle’s substantial cash generation enables its large stock repurchases. Yet if management continues to execute buybacks at historically high current rates, underperformance may emerge relative to peers.”-- Analyst Conor Cuddy-- Click here for the research(Updates stock and chart to market open, adds BI commentary.)To contact the reporter on this story: Ryan Vlastelica in New York at email@example.comTo contact the editors responsible for this story: Catherine Larkin at firstname.lastname@example.org, Steven Fromm, Will DaleyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- As 2019’s bumper crop of initial public offerings either languishes or wildly exceeds expectations, Slack Technologies Inc. is taking a route to the trading floor that it hopes will yield a much more boring outcome.Following in the footsteps of music-streaming service Spotify Technology SA last year, the workplace messaging application is set to start trading on the New York Stock Exchange Thursday via a direct listing. It’s just the second large company to test the unusual method and will be closely watched by other potential candidates to see how successfully the company and its advisers pull it off.Investors got their first hint of how things are going when Slack’s reference price was set at $26 per share on Wednesday. Unlike the offering price paid by investors in a traditional IPO, the reference price doesn’t establish the valuation, though it’s partly based on recent trading in private markets. Its main purpose is to provide a starting point to allow trading to begin under New York Stock Exchange rules.Slack gained its first buy rating on Thursday, ahead of its debut, as Atlantic Equities said the adoption of the company’s messaging technology within businesses is proving as viral as WhatsApp has been for consumers.With IPO heavyweight advisers from Goldman Sachs Group Inc., Morgan Stanley and Allen & Co. helping to steer Slack through its listing alongside market maker Citadel Securities, all eyes will be on how the first day of trading plays out. But the company and its investors aren’t looking for a meaningful stock pop -- and want to avoid the volatility -- that often accompanies high-profile share sales, according to a person familiar with the process.On Wednesday, Slack said that its investors had converted additional Class B stock to Class A shares, increasing the number that could be sold to 194 million from 181 million, out of a total of 504.4 million. Especially because there’s no lock-up period, there’s a risk of too few investors wanting to buy or too many wanting to sell.“A direct listing can be considered risky for a variety of reasons," Alejandro Ortiz, an analyst at SharesPost, said in a note. “There is an increased chance of substantially more supply than demand for Slack’s shares. All of this could result in heightened volatility in the early hours and days of trading.”Reference PriceFifteen months after its own direct listing, Spotify trades about 12% above its reference price of $132, at about $148 a share on Wednesday. That’s well below where the stock opened on its first day of trading in April 2018, though, at $165.90 apiece.On Thursday, much of the attention at the exchange will be focused on one man. Pete Giacchi, a longtime market maker at the NYSE for Citadel Securities, will be tasked with opening the stock –- just as he was for Uber Technologies Inc.’s listing in May, people with knowledge of the matter said. It could be a long wait: Spotify’s shares took more than three hours to start trading, and it will take a while to make sure that the pricing and trading volumes coming in are at levels that Slack and its advisers are comfortable with.Supply, DemandMorgan Stanley, as the named adviser to the designated market maker, will be constantly trying to get a sense of supply and demand for the shares to advise on that opening price. The bank’s team includes global head of technology capital markets, Colin Stewart, as well as David Chen, who leads software banking. John Paci, the co-head of U.S. equities trading, will help advise the designated market maker on where the stock should open based on buying and selling interest gleaned from investors, according to people familiar with the details.At Goldman Sachs, the work will be led by Nick Giovanni, co-head of the global technology, media and telecommunications group, equity capital markets head David Ludwig and Will Connolly, co-head of the West Coast financing group and head of technology ECM.One thing Slack’s listing will have in common with an IPO: executives including Chief Executive Officer Stewart Butterfield and finance chief Allen Shim are expected to be pacing the floor of the NYSE for the open. They may not stick around all day, though. They will likely spend some time at the offices of their advisers before celebrating with employees and customers, according to a person with knowledge of the matter.Representatives for Slack, Goldman Sachs, Morgan Stanley and Citadel Securities declined to comment.Private FundsSlack’s decision to bypass a traditional IPO -- and the opportunity it brings to raise funds -- is yet another sign of how benevolent private markets have been to tech startups in recent years. Slack’s earliest major investor, venture capital firm Accel, has directed a fire hose of money at the messaging company over the years, investing from several of its funds to accumulate a 23.8% stake.In addition to Accel, Slack captured the imagination of elite investors such as Andreessen Horowitz and Social Capital. But it was SoftBank Group Corp.’s behemoth Vision Fund, which also owns stakes in Uber and WeWork Cos., that accelerated Slack’s fundraising when it led a $250 million investment in 2017.One of the main reasons that Slack has remained well capitalized, however, is that it burns through less cash than some of SoftBank’s other investments. Uber, for instance, accumulated more than $10 billion in operating losses in three years. While Slack expects higher-than-usual losses in the second quarter, that still amounts to only about $75 million to $77 million for the three months, even including expenses related to the listing.Growth vs. ProfitabilityThe high demand for IPOs by the likes of money-losing companies including Uber, Lyft Inc. and Beyond Meat Inc. proves that investors remain focused on growth prospects over profitability –- in the short term at least.With Uber leading the pack with its $8.1 billion offering, 79 companies have raised $28.88 billion in U.S. IPOs this year, according to data compiled by Bloomberg. That includes five other listings topping $1 billion, including the $2.34 billion IPO by Uber’s ride-hailing rival Lyft.With no lock-up period for a direct listing, Slack investors could be jittery about any updates from the company, perceived competitive threats or other risks.Tiny SpeckIn its filings, Slack has warned investors that it’s a relatively new business, launching only in 2014 after existing for several years as a gaming company called Tiny Speck. Its rocket-ship ascent has attracted plenty of investors, but gives new potential shareholders only a limited trajectory to study.Another challenge for Slack is one that fellow mega startups like Uber have grappled with, namely whether they can move beyond the core offering that their early years of success were built on. While Slack has improved its product so that it can serve larger companies, many customers still consider it an easy-to-use, aesthetically pleasing workplace messaging platform, despite speculation that it could evolve into a catch-all portal for business applications.One thing that could make Slack’s debut more unpredictable than Spotify’s is its investor base. Because the company’s ownership is more concentrated among fewer, larger shareholders, it could be more difficult to gauge the supply of shares that are likely to be traded, one person with knowledge of the process said. Both buyers and sellers may also hang back on day one to see how trading goes before getting involved: Just 30 million of Spotify shares changed hands in its trading debut, less than a third of the total available.(Updates with Atlantic in fourth paragraph.)\--With assistance from Crystal Tse and William Hobbs.To contact the reporters on this story: Eric Newcomer in San Francisco at email@example.com;Sonali Basak in New York at firstname.lastname@example.org;Ellen Huet in San Francisco at email@example.comTo contact the editors responsible for this story: Mark Milian at firstname.lastname@example.org, ;Michael J. Moore at email@example.com, Elizabeth Fournier, Michael HythaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a coming daily newsletter that untangles a world embroiled in trade wars. Sign up here. As peers in the U.S. and Europe take a dovish turn, Bank of Japan Governor Haruhiko Kuroda signaled he’s unfazed as bond yields in his own country get caught up in the global shift lower."There is no need to be extremely and strictly mindful about a concrete range for the rate" on Japan’s benchmark 10-year bond yield, Kuroda said. The BOJ targets that rate to be about 20 basis points plus or minus zero. His flexibility egged on buyers, with the yield pushing as low as minus 0.18% as he spoke during an afternoon news conference.The market is likely to test just how flexible Kuroda is in the days and weeks ahead."The BOJ is trying to secure a free hand," said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities Co. "But it’s gradually becoming more difficult because other central banks, namely the Fed and ECB, are indicating they will act and they have measures to do so, whereas the BOJ’s toolbox is nearly empty."The BOJ kept its benchmark interest rate at -0.1% and 10-year yield target at around 0% earlier in the day. Hours before that, the Federal Reserve followed the European Central Bank in signaling a willingness to cut rates in the face of rising threats to global growth.The dovish tide was on display elsewhere in Asia on Thursday.Almost 5,000 miles to the south in Adelaide, Reserve Bank of Australia Governor Philip Lowe reiterated that it was “not unrealistic” to expect another rate cut there. The quarter-point reduction to a record-low 1.25% this month was unlikely to “materially shift” the current trajectory of slower economic growth and static unemployment, Lowe said in a speech.Indonesia’s central bank signaled it’s ready to cut rates after adding stimulus to the economy by lowering reserve limits for banks. But economists’ expectations for a cut in the Philippines were dashed as the central bank held rates steady after inflation quickened last month. In Taiwan, the central bank kept its benchmark rate unchanged as expected.Fed TriggerEconomists surveyed by Bloomberg unanimously forecast no change at today’s BOJ meeting, but for the first time in more than two years, a majority had predicted the BOJ’s next policy move will be to increase stimulus. Some see action as early as next month.Many BOJ watchers say Fed rate cuts, seen as increasingly likely, could force the BOJ’s hand by pushing the yen to what it would consider an uncomfortably strong level.A stronger yen would hamper the BOJ’s efforts to hit 2% inflation. Core inflation, to be released Friday, is expected to have fallen in May to 0.7% and is forecast to drop further in coming months. The dollar fell to as low as 107.47 versus the yen Thursday in Tokyo, paring losses after Kuroda’s news conference.Again, Kuroda expressed comfort with taking a wait-and-see approach, saying that in the end a Fed cut may not have much of an impact if the markets have already priced it in. "At any rate, monetary policy isn’t targeted at foreign exchange rates," he said.BOJ’s DilemmaStill, Kuroda reiterated that the BOJ stands ready to add stimulus if momentum toward its 2% inflation goal is threatened. But it won’t be that simple. The BOJ also faces concerns about the accumulation of side effects from six-plus years of radical stimulus.In any case, many economists doubt the BOJ could even have much impact with whatever it chose to do. Its toolbox is almost empty -- complicating the risk-reward scenario.Japan’s trade-dependent economy showed some resilience in the first three months of the year, but some economists are warning of a contraction in the current quarter. Exports fell for a sixth-straight month in May, data released Wednesday showed.The BOJ still expects conditions to improve in the second half of the year, but escalating trade tensions are heightening concerns about global demand among policy makers and businesses.\--With assistance from Russell Ward, Yoshiaki Nohara, Shoko Oda, Shiho Takezawa, Sophie Jackman, Lily Nonomiya, Brett Miller, Go Onomitsu, Emi Urabe, Kyoko Shimodoi, Yuko Takeo and Saburo Funabiki.To contact the reporters on this story: Toru Fujioka in Tokyo at firstname.lastname@example.org;Masahiro Hidaka in Tokyo at email@example.comTo contact the editors responsible for this story: Brett Miller at firstname.lastname@example.org, Henry Hoenig, Paul JacksonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a coming daily newsletter that untangles a world embroiled in trade wars. Sign up here. Apple Inc. has asked its largest suppliers to consider the costs of shifting 15% to 30% of its output from China to Southeast Asia in a dramatic shake-up of its production chain, the Nikkei reported.The U.S. tech giant asked “major suppliers” to evaluate the feasibility of such a migration, the newspaper cited multiple sources as saying. Those included iPhone assemblers Foxconn Technology Group, Pegatron Corp. and Wistron Corp., MacBook maker Quanta Computer Inc., iPad maker Compal Electronics Inc. and AirPod makers Inventec Corp., Luxshare-ICT and GoerTek Inc., Nikkei cited them as saying.China is a crucial cog in Apple’s business, the origin of most of its iPhones and iPads as well as its largest international market. But President Donald Trump has threatened Beijing with new tariffs on about $300 billion worth of Chinese goods, an act that would escalate tensions while levying a punitive tax on Apple’s most profitable product. Company spokeswoman Wei Gu didn’t respond to a request for comment.Two major Apple suppliers pushed back against the Nikkei report. The U.S. company has not asked for cost estimates for shifting production out of the world’s No. 2 economy, although suppliers are running the numbers on their own given the trade dispute, said one person familiar with the matter, asking not to be identified discussing internal deliberations. Another supplier said it too had not gotten such a request from Apple and that the Cupertino, California-based company had resisted a proposed production shift to Southeast Asia.Apple does have a backup plan if the U.S.-China trade war gets out of hand: Primary manufacturing partner Hon Hai Precision Industry Co. has said it has enough capacity to make all U.S.-bound iPhones outside of China if necessary, Bloomberg News reported last week.The Taiwanese contract manufacturer now makes most of the smartphones in the Chinese mainland and is the country’s largest private employer. Hon Hai, known also as Foxconn, has said Apple has not given instructions to move production but it is capable of moving lines elsewhere according to customers’ needs.Apple hasn’t set a deadline for the suppliers to finalize their business proposals, but is working together with them to consider alternative locations, the Nikkei said. Any move would be a long-term process, it cited its sources as saying.Beyond Apple’s partners, the army of Taiwanese companies that make most of the world’s electronics are reconsidering a reliance on the world’s second-largest economy as Washington-Beijing tensions simmer and massive tariffs threaten to wipe out their margins. That in turn is threatening a well-oiled, decades-old supply chain.Taiwan’s largest corporations form a crucial link in the global tech industry, assembling devices from sprawling Chinese production bases that the likes of HP Inc. and Dell then slap their labels on. That may start to change if tariffs escalate, an outcome now in the balance as Washington and Beijing spar over a trade deal.Apple is an outsized figure in that negotiation. The high-end iPhone, which accounted for more than 60% of the company’s 2018 revenue, drives millions of jobs across China as well as a plethora of different industries from retail to electronics. The country is also a major consumer market in its own right, yielding nearly 20% of last year’s revenue -- weakness there pushed Apple to cut its sales forecast in January.“Twenty-five percent of our production capacity is outside of China and we can help Apple respond to its needs in the U.S. market,” Hon Hai board nominee and semiconductor division chief Young Liu told an investor briefing in Taipei last week. “We have enough capacity to meet Apple’s demand.”(Updates with a source’s comments from the second parapraph.)To contact the reporter on this story: Debby Wu in Taipei at email@example.comTo contact the editors responsible for this story: Peter Elstrom at firstname.lastname@example.org, Edwin ChanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Disney is a stock that Wall Street is laser-focused on as the entertainment powerhouse prepares to launch its streaming TV platform in the fall. So is it time to buy DIS stock at new highs?
(Bloomberg Opinion) -- Expect “Pig-gate” to blow over. UBS Group AG’s ultra-rich Chinese clients are unlikely to desert the Swiss bank for local rivals, whatever the level of outrage over language used by its chief economist in a research report last week.The bank's potential loss of Chinese share-sale mandates isn’t a critical blow: UBS ranks a distant 11th in underwriting Hong Kong IPOs in 2019. (The bank fell behind after a one-year ban by the Securities and Futures Commission over deficiencies in its work on three companies that ran into trouble after listing.) Nor is the loss of bond mandates, such as its exclusion from a sale by state-owned China Railway Construction Corp.Wealth management is different. UBS is vying for a share of a Chinese private-banking market that was worth a record $24 trillion in 2018, according to Boston Consulting Group. The furor among local brokerages over UBS’s use of “Chinese pig” in a report on pork supply and inflation comes just as the Swiss firm and other foreign banks are muscling in on their turf. Switzerland’s Credit Suisse Group AG, Japan’s Nomura Holdings Inc., and Wall Street giants JPMorgan Chase & Co. and Morgan Stanley are among firms that have received approval to expand or are working toward taking majority stakes in China ventures.On top of that, Chinese regulators have cracked down on high-risk wealth management products sold by local banks and brokerage firms. That’s leveled the playing field for overseas competitors, which say their stricter compliance guidelines wouldn’t allow them to offer such investments.Still, it’s outside China where UBS has most to protect. Like all foreign banks, it’s a minnow in the mainland market. By contrast, there’s a treasure trove of Chinese money being managed offshore in cities such as Hong Kong, Singapore and New York, according to a survey by consulting firm Capgemini SE last year. Boston Consulting reckons that market is worth $1 trillion. And here, UBS is hard to beat.At the end of last year, the Zurich-based bank had $152 billion more in assets under management in Asia outside mainland China than Credit Suisse, its nearest rival. Chinese players don’t rank in the top 10 for bankers to well-heeled individuals in the region, according to data from Asian Private Banker.UBS took in an unprecedented $16 billion in net new money in the first quarter, driving its Asia-Pacific assets to $405 billion. Credit Suisse collected the equivalent of $4.4 billion. UBS was also the region’s top equities trading house in the region last year, ahead of Morgan Stanley and JPMorgan, according to data from London-based analytics firm Coalition Development Ltd. It’s been Asia’s No. 1 equities house since 2010. That’s key for high-net-worth individuals looking for ideas to trade on.Money tends to flow to where it earns the most, other things being equal. Also, many clients have bought derivatives from UBS, which can’t be unwound at short notice without heavy penalties. UBS can console itself with the thought that other foreign banks have been able to ride out similar difficulties in Asia. Time is on its side. To contact the author of this story: Nisha Gopalan at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Investment funds managed by Morgan Stanley Capital Partners (MSCP), announced today that they have completed an investment in Project Management Academy (“PMA” or the “Company”), a leading provider of training and exam preparation services for project management professionals. MSCP is partnering with the current CEO, Jason Cassidy, and the rest of the management team, who will remain in place and retain an equity stake in the business. Project Management Academy was founded in 2009 to provide best-in-class training for the career-critical Project Management Professional (PMP)® certification.
Morgan Stanley today declared a regular dividend on the outstanding shares of each of the following preferred stock issues:
(Bloomberg) -- Pfizer Inc. will buy Array BioPharma Inc. for $10.6 billion to gain its promising new medicines for cancer, which could end or limit the use of punishing chemotherapy for some patients.The agreed price of $48 in cash is 62% above Array’s close last Friday -- already a record high. The company’s shares have soared thanks to drugs that target a mutation that’s found across a wide variety of tumor types, and could be used in treating a broad set of cancers in patients who carry the mutation. Array’s drugs, Braftovi and Mektovi, are already approved in the U.S. for use in advanced melanoma.Pfizer said in a statement that it will get royalties from the uses of drugs that Array has licensed out to other companies. It will acquire a pipeline of drugs in development, as well as future revenue from Braftovi and Mektovi in some other malignancies, such as colon cancer.Array shares rose 58% in to $46.67 at 9:32 a.m. in New York. Pfizer was little changed.Cancer has become one of the hottest areas for deal activity between drug and biotechnology companies. Research efforts dating back decades have helped scientists understand how genetic mutations cause some cancers to grow, and other scientific advances have helped them learn how tumors evade the body’s defenses. That knowledge has created an array of targets for drugmakers to attack, leading to new tailored therapies often defined by a tumor cell’s specific biology rather than its location in the body.Unlike other biotech stocks, many of which have pulled back from recent 2018 highs, Array’s shares have been on a steady march upward. The stock was already at a record before the deal announcement, following Array’s news last month of positive clinical trial results using Braftovi and Mektovi with Eli Lilly & Co.’s Erbitux. That combination could be the first chemotherapy-free regimen for some patients who have advanced colon cancer.Array’s drug targets a mutation called BRAF, which can show up in some forms of melanoma, colorectal and thyroid cancers, among others. Other drugs on the market target that mutation as well. Roche Holding AG’s Zelboraf is projected to bring in $168.7 million this year, according to a survey of analysts compiled by Bloomberg. Novartis AG’s Tafinlar is used in combination with another drug Mekinist, and the combination is expected to bring in $1.24 billion this year, according to analysts.The deal could also boost other biotech stocks, especially companies with drugs in the later stages of development that could be appetizing for big drugmakers. “We expect this announcement to provide a tailwind for the sector,” said Stephen Willey, an analyst with Stifel Nicolaus & Co. He called the premium for the Array deal appropriate, given the company’s positive clinical trial news.The deal is Pfizer’s biggest since its 2016 acquisition of Medivation for $14 billion, another blockbuster cancer deal that the New York-based company used to expand its oncology offerings. With that takeover, Pfizer gained Xtandi, a prostate cancer drug that last year Xtandi brought it $699 million.“From an overall capital allocation perspective, our priorities don’t change,” Pfizer Chief Financial Officer Frank D’Amelio said on a conference call Monday. The company will continue to look at dividends, buybacks and small or mid-size deals, and doesn’t see the need for a large merger, he said. Pfizer has lagged behind drugmakers like Merck & Co. and Bristol-Myers Squibb Co. that have brought to market best-selling drugs that use the immune system to attack tumors. But the company has acquired or developed a set of other treatments for breast, prostate other cancers that target disease based on its biological profile. Such methods can result in more effective drugs, fewer side-effects, or both.Pfizer plans to fund the deal with a combination of debt and cash. It said it expects the deal to close in the second half of this year. The deal comes with a $400 million termination fee, according to a regulatory filing by Array.Guggenheim Securities and Morgan Stanley & Co. served as Pfizer’s financial advisers, and Wachtell, Lipton, Rosen & Katz gave legal advice. Centerview Partners was Array’s financial adviser, and Skadden, Arps, Slate, Meagher & Flom LLP served as its legal adviser.(Updates with analyst comment in seventh paragraph. An earlier version of this story corrected the description of Pfizer’s advisers in the final paragraph.)\--With assistance from Marthe Fourcade and Cynthia Koons.To contact the reporter on this story: Drew Armstrong in New York at email@example.comTo contact the editors responsible for this story: Drew Armstrong at firstname.lastname@example.org, Cécile DauratFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- This year’s global stock rally has flown in the face of billions of dollars of outflows, mounting fears for economic growth, and most recently a bombardment of geopolitical shocks.But it might not be as defiant -- or as crazy -- as it seems.As a gauge of global shares looks to extend two weeks of gains, there’s mounting evidence that beneath the surface equity investors have been getting smart. Far from ignoring brewing risks, they’re increasingly positioned for bad news, bidding up defensive and quality companies at the expense of those more exposed to the economic cycle.It all challenges the narrative that the stock markets have paid no heed to the warnings screamed by global bonds, or that they are simply counting on accommodative central bankers to juice asset prices.“People are bracing for a bear market,” said Brian Jacobsen, a senior investment strategist of multi-asset solutions at Wells Fargo Asset Management, which oversees $476 billion. “Not predicting it. Just trying to be prepared.”As traders favor firms that can weather a potential downturn, the valuation discount of value to growth stocks has surged to the widest since 2001. The Goldman Sachs Group Inc. gauge of high quality shares is outperforming the S&P 500 Index this month. And the Russell 2000 Index of small caps is trading near the biggest discount versus the Russell 3000 Index since at least 2006.The extremity of this push into safer equities has seen the likes of Morgan Stanley warn about a “big unwind’’ if their performance stumbles. Riskier shares attempted a comeback last month, with weak balance sheet stocks in the U.S. outperforming peers with strong balance sheets.But the trend didn’t last. In June, investors are once again rewarding companies flush with cash and low debt, lifting their premium over those with less attractive financial profiles to near a record high.“Valuations don’t matter too much until they get to eye-watering extremes,” said Jacobsen. “I don’t think that they’re at eye-watering extremes” for defensive shares, he said.Momentum stocks have been another winner from the search for a place to hide, with the investing style outperforming value shares by a near-record 17% in May. They have continued beating cheaper stocks this month due to a strong overlap with quality and low-volatility equities, according to Morgan Stanley.At essence, stock investors appear to be trying to hedge their bets between two major outcomes. On the one hand, they’re staying invested on the prospect of an extension of the business and economic cycle, perhaps prolonged by a trade war breakthrough or central bank largess. On the other, they’re opting for safe shares in case the U.S.-China protectionist battle drags out or escalates, derailing global growth.“The correct positioning is not obvious and it’s a tough call,” said Edward J. Perkin, chief equity investment officer at Eaton Vance Management. “With the equity market near all-time highs, do you take economic risk by owning cyclicals, or valuation and interest rate risk by buying defensive sectors at high prices?”Perkin favors a middle ground: He likes companies with solid financials, though he’s focused on economically sensitive sectors that can outperform if growth remains strong. And he cautions that not all defensive sectors are attractive, warning against expensive yield-sensitive sectors and consumer staples due to their financial leverage and muted revenue growth.Meanwhile major asset managers like Wells Fargo Asset Management and Legal & General Investment Management say they now prefer a neutral stance, allowing them to easily maneuver depending on whether the U.S. strikes a trade deal with China or global growth falters.One thing the money managers all agree on: Despite seeing a need for caution, they’re not yet ready to call the end of this bull market.“It still may be too early to call the peak,” said Nick Alonso, director of the multi-asset group at PanAgora Asset Management. “I believe that, especially in uncertain times like these, focusing on portfolio construction as a means of achieving diversification through proper risk balancing can be a very powerful tool.”\--With assistance from Justina Lee.To contact the reporter on this story: Ksenia Galouchko in London at email@example.comTo contact the editors responsible for this story: Blaise Robinson at firstname.lastname@example.org, Samuel Potter, Jeremy HerronFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Morgan Stanley Wealth Management today announced the launch of a new suite of Impact Portfolios with a $10,000 minimum on its Investing with Impact platform. The six Portfolios utilize a range of Investing with Impact objectives including restriction screening, environmental, social and governance integration, and thematic investing. The Impact Portfolios leverage Wealth Management Investment Resources’ intellectual capital including: asset allocation advice, portfolio construction resources, manager analysis, risk management and ongoing portfolio monitoring to provide clients with a diversified multi-asset class portfolio.
Investment funds managed by Morgan Stanley Capital Partners , the middle market focused private equity team within Morgan Stanley Investment Management, announced today that they have completed an investment in Ovation Fertility .
(Bloomberg Opinion) -- UBS Group AG has managed to alienate an important client that it’s hoping to milk for millions in fees.State-owned China Railway Construction Corp. has decided against hiring UBS as a joint global coordinator on a dollar-bond sale, Cathy Chan of Bloomberg News reported Monday. Haitong International Securities Group Ltd. has already cut business ties with the Swiss bank, while the Securities Association of China recommended members shun research by global chief economist Paul Donovan over language used in a research report last week.At issue were Donovan’s comments on the rise of inflation in China:“Does this matter? It matters if you are a Chinese pig. It matters if you like eating pork in China. It does not really matter to the rest of the world.”Two debates ensued. The first is whether Donovan’s words are offensive and racist. Even linguists are chiming in. The second is whether U.S. President Donald Trump’s administration is right after all: Is doing business in China more perilous for foreign firms? Will Beijing continue to protect domestic players despite its vows to open up?As a native Chinese speaker, I don’t find Donovan’s comments racist, and certainly didn’t draw a connection with the pejorative term for Chinese laborers who built U.S. railroads in the 19th century. Rather, I find his choice of words unfortunate, and perhaps insensitive, given UBS is keen on luring wealthy Chinese clients.Bear in mind that 2019 is the Year of the Pig, which is supposed to be bountiful and abundant. Yet the nation, where pork remains the main source of animal protein, is suffering from a swine fever epidemic. To make matters worse, this year is shaping up to be another painful one for the economy: Growth is losing steam, despite Beijing’s trillion-yuan stimulus package, and the stock market is now in correction zone. Donovan’s comments were inauspicious, at a time when Chinese investors are already in a foul mood. I’d be willing to bet that we Chinese would better absorb his dry humor if the nation’s economic engine was running at full steam. You could say that China’s response has been a bit heavy-handed. But tough luck. It’s called the cost of doing business in emerging markets, and China is by no means an exception. Foreign banks have gotten into just as much trouble for lesser offenses. Two examples in the recent past come to mind.Andy Xie, an MIT-trained star economist, left Morgan Stanley in 2007 after an email he wrote citing “money laundering” as one reason for Singapore’s economic success. Never mind that it was an internal message. Donovan’s published report, meanwhile, presumably went through the requisite compliance hoops. Xie had disparaged Singapore, an Asian Tiger. Or consider what happened to JPMorgan Chase & Co. in Indonesia. In 2017, the government severed business ties with the bank, eliminating its role as a primary dealer in sovereign-bond auctions. That came after its research division downgraded the nation’s stocks to underweight, citing a “spike in volatility” following Trump’s surprise election win. The response also punished investment bankers for equity research, despite the well-established split between the businesses. That penalty certainly hurt: Indonesia is a mover and shaker in the bond world, with close to 40% of its sovereign issues taken up by foreigners.For UBS, even bigger asset-management fees are at stake. Unlike in the U.S., where passive funds now dominate, China is the last big market on earth where investors still have faith in active managers. That explains why global banks are falling over themselves to bulk up there.When I wrote about this in April, I warned that domestic brokers wouldn’t leave the field to the foreign “barbarians.” A cynic could ask about the conflict of interest apparent in Pig-Gate. After all, core members of the Chinese Securities Association of Hong Kong, which demands Donovan’s dismissal, and the Securities Association of China, which aims to block out UBS, compete with the Swiss bank for China money. In that light, the outcome with Haitong isn’t all that surprising. At the end of the day, beggars can’t be choosers. With its investment-banking business falling behind that of U.S. mega banks and Swiss rival Credit Suisse AG, UBS needs its wealth-management business. In that case, it had better start doing more to please a moody client.To contact the author of this story: Shuli Ren at email@example.comTo contact the editor responsible for this story: Rachel Rosenthal at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Investing.com - In what is set to be a busy week, the Federal Reserve’s latest interest rate announcement will dominate trader’s attention amid expectations that the central bank could flag plans to ease monetary policy.
After two years of surging payouts as regulators relaxed the reins on the biggest lenders, those firms are likely to boost dividends and buybacks by just 3% following this year’s stress test, according to analysts’ estimates compiled by Bloomberg. The Federal Reserve will release results of the first part of its annual review next week. Payouts to shareholders started to ramp up in 2016 after the Fed was satisfied that the largest lenders had adequately beefed up loss buffers and improved risk management.