|Bid||50.20 x 3100|
|Ask||50.44 x 1800|
|Day's Range||50.14 - 51.15|
|52 Week Range||36.74 - 51.15|
|Beta (5Y Monthly)||1.38|
|PE Ratio (TTM)||10.74|
|Earnings Date||Jan. 15, 2020 - Jan. 20, 2020|
|Forward Dividend & Yield||1.40 (2.76%)|
|1y Target Est||53.80|
(Bloomberg) -- Palladium set its sights on a record $2,000 an ounce, with the metal’s blistering rally showing no sign yet of cooling off.Prices climbed for an unprecedented 16th day after signs of a breakthrough in the U.S.-China trade talks, fueling hopes for a rebound in the auto industry, palladium’s biggest consumer. The metal that reached another record surged this week as mining disruptions in major producer South Africa threatened to tighten a market already hobbled by a persistent deficit.“We’re already in uncharted territory,” said Daniel Briesemann, a Commerzbank AG analyst. “The $2,000 mark seems to be a very attractive target to overcome. We also think some speculative financial investors may be pushing the price higher.”Spot palladium climbed as much as 2.1% to $1,982.01 an ounce, before trading at $1,969 at 10:25 a.m. in New York, according to Bloomberg generic pricing.The metal has gained more than 50% this year even as global car sales remain weak. Citigroup Inc. forecast prices could hit $2,500 next year.Tight supplies, which have trailed demand since at least 2012, mean that autocatalyst makers are scrambling to get hold of the metal to meet stricter pollution rules.“The physiological $2,000 level now acts as such a magnet to the market,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. “The strong momentum driven by tight fundamentals was given a further jolt on news that a phase-one trade deal has been reached.”South Africa, the world’s No. 2 palladium producer, expanded rolling blackouts to a record level earlier this week, disrupting miners’ operations. The situation has eased and most operations have returned to normal, although the country continues to experience power cuts.Still, given the relatively small size of the market, a pullback in palladium prices could be sharp, said ABN Amro Bank NV strategist Georgette Boele.“What goes exponentially up can eventually also drop like that,” she said. “It will not defy gravity forever.”Beijing and Washington have agreed on the text of a phase one trade deal, which will see the removal of tariffs on Chinese goods in stages, Vice Commerce Minister Wang Shouwen said. That averts the Dec. 15 introduction of a new wave of U.S. tariffs.Gold and silver swung between gains and losses, while platinum declined. The metal used in autocatalysts mainly for diesel-fueled vehicles will probably remain in surplus, Morgan Stanley said this week.The Bloomberg Dollar Spot Index reached the lowest since July.\--With assistance from Justina Vasquez.To contact the reporters on this story: Ranjeetha Pakiam in Singapore at firstname.lastname@example.org;Elena Mazneva in London at email@example.comTo contact the editors responsible for this story: Phoebe Sedgman at firstname.lastname@example.org, ;Lynn Thomasson at email@example.com, Liezel HillFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.Japan’s large manufacturers were losing optimism for the first time in more than six years as the government mulled measures to prop up the economy, according to a survey released by the Bank of Japan ahead of its meeting next week.Sentiment among Japan’s biggest product makers slid to 0 from 5, according to the quarterly Tankan survey released Friday. Economists forecast a reading of 3. Confidence has now weakened for four consecutive quarters, with the drop to zero indicating there are now as many pessimists as optimists.The results of the survey, which are mainly from the last half of November, reveal the depth of concern among large manufacturers at that time about business conditions amid an uncertain global outlook and the fallout from October’s sale tax hike and a destructive typhoon.But the report also contained some positives. Sentiment at large companies outside the factory sector held up better than expected and capital spending plans actually edged up from the previous quarter.Key Insights“The results show companies are cautious about the impact of the tax hike,” said Hiroshi Miyazaki, a senior economist at Mitsubishi UFJ Morgan Stanley, noting larger-than-expected falls in recent consumption data. The U.S.-China trade negotiations were also compounding their outlook, he added.Still, resilience in the service sector suggests the damage from the global slowdown is still largely contained to Japan’s manufacturers. The service industry has been a key prop for overall growth in the economy this year.Longer term, there are reasons for optimism. Along with signs of progress in U.S.-China trade talks, the stimulus package launched last week by the Abe administration has raised Japan’s growth prospects for next year, even if the situation in the current quarter remains challenging.Economists surveyed by Bloomberg forecast the economy will shrink by an annualized 2.6% this quarter, as the higher sales tax crimps consumer spending and production contends with a continued global slowdown and October’s super typhoon.Around 70% of businesses had responded to the survey by Nov. 27, according to the BOJ, long before the government’s announcement of the 13.2 trillion yen ($122 billion) of fiscal stimulus, though it was known a package was in the pipeline.“Capital spending remains strong and that means the BOJ can still stick to its view for a moderate recovery,” said economist Hideo Kumano at Dai-ichi Life Research Institute. “It’s likely that the BOJ will stand pat next week.”What Bloomberg’s Economists Say...“Our view is that business activity is likely to slow. The sales-tax hike has piled more pressure on companies, and a contraction in the economy looks certain in 4Q. It’s not clear how strong the bounce will be in 1Q next year. Our recession probability model is signaling bigger risks. Further out, though, fiscal stimulus should help to prop up the economy..”\--Yuki Masujima, economistClick here to read moreGet moreBusinesses said they plan to increase spending by 6.8%, an uptick from a quarter ago when they forecast a 6.6% increase. Economists had expected the number to drop to 6%.Sentiment among large service businesses dipped to 20 from 21. The forecast was for a drop to 16.An index that measures large manufacturers’ outlook registered 0, worse than analysts’ forecast of 3.Large manufacturers expect the yen to be 107.83 per dollar this fiscal year. The currency was trading around 109.40 early Friday in Tokyo.(Adds detail throughout.)\--With assistance from Yoshiaki Nohara and Tomoko Sato.To contact the reporter on this story: Toru Fujioka in Tokyo at firstname.lastname@example.orgTo contact the editors responsible for this story: Malcolm Scott at email@example.com, Jason Clenfield, Paul JacksonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Morgan Stanley has replaced a top executive at one of its fixed-income trading units.Mitchell Nadel, head of so-called macro trading for North America, is leaving the New York-based firm, according to an internal memo obtained by Bloomberg. He will be replaced by David Flowerdew, currently the head of U.S. rates, according to people familiar with the matter.Nadel was one of the top executives at Morgan Stanley’s macro business, which deals in products tied to interest rates and currencies. The unit has been hit by some cuts as the bank eliminates about 1,500 jobs globally and is the subject of an internal probe into whether traders mismarked derivative positions tied to the Turkish lira that may have lost more than $100 million, Bloomberg has reported.Although Nadel was among the macro division’s most senior officials, he had a minimal role in the day-to-day operations of the derivatives business that executed the trades in question, the people said. While the reasons for Nadel’s departure are unclear, he isn’t suspected of being involved in the alleged mismarking of trades or concealment of losses, the people said.“Throughout his career, Mitch has promoted the firm’s values and culture,” Jakob Horder, global head of the macro business, said in the memo. Mark Lake, a spokesman for Morgan Stanley, confirmed the contents of the memo and declined to comment further.Nadel, who joined Morgan Stanley in Japan almost a decade ago, declined to comment. Flowerdew didn’t respond to requests for comment.\--With assistance from Sridhar Natarajan and Stefania Spezzati.To contact the reporter on this story: Donal Griffin in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Michael J. Moore at email@example.com, ;Ambereen Choudhury at firstname.lastname@example.org, Sree Vidya BhaktavatsalamFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- After a year in which semiconductor stocks defied conventional wisdom with a seemingly unstoppable rally in the face of gloomy fundamentals, analysts are loathe to go all in.With signs of a rebound in demand still scant, the key question for the new year is where chipmaker shares can go when they’re trading at the highest price to future earnings multiples in nearly a decade. Most analysts expect business to improve in 2020, aided by things like 5G technology and cloud infrastructure spending. But valuations are cause for concern, especially when accounting for lingering tariff uncertainty.“It is challenging to argue that a good amount of the future return potential hasn’t simply been pulled forward on hope,” said Bernstein analyst Stacy Rasgon.At the end of 2018, most of Wall Street saw little to get excited about in the semiconductor industry. Chipmakers had begun axing forecasts as customer orders slowed and inventories swelled as the U.S.-China trade war heated up. Despite all of that, the Philadelphia semiconductor index embarked on a relentless advance, logging just two down months the entire year.The gauge that tracks 30 semiconductor-related stocks has risen 56% so far in 2019, which would be the biggest annual gain in a decade. That eye-popping number was aided by a brutal market sell-off at the end of 2018 that hit technology stocks particularly hard. Chip shares notched new highs Thursday after President Trump said the U.S. and China are “very close” to a “big” trade deal.To keep the rally going, semiconductor companies will need to start posting better-than-expected financial results, according to Morgan Stanley analyst Joseph Moore, who was one of the first analysts on Wall Street to get cautious on the group in the second half of 2018. Moore now advocates holding a select group of stocks including Intel Corp. and Nvidia Corp., which he expects to benefit from higher cloud spending in 2020.“The period where stocks are going to go up on bad numbers is largely behind us,” he said in an interview. “If the numbers come up, then we can have some good performance. I don’t think there’s room for these multiples to come up too much more.”In that regard, the third quarter was a good start. With results in from all members of the chip benchmark except for Broadcom Inc., more than three-quarters of companies beat profit and revenue estimates, according to data compiled by Bloomberg.Still other indicators are worrisome. Inventory levels for many chipmakers remain elevated, according to Moore, and tariffs haven’t been resolved. U.S. goods on some electronics imported from China are set to increase on Dec. 15 if there’s no trade deal.Despite the trade uncertainty, 2020 is “looking decent” from a fundamental standpoint, according to Bloomberg Intelligence analyst Anand Srinivasan. He expects cloud spending to improve, 5G spending to kick in, and stability in mobile devices and personal computers.“The growth themes that we have been positing are going to be manifested in 2020, particularly in the second half,” he said. “We think it still could be a bumpy ride from a stock perspective but we feel optimistic about 2020.”See AlsoSoftware Analysts See More Volatility in an Uncertain 2020Airbus Secures Lead Over Boeing as 737 Max Weighs Into 2020After ‘Blood-Spilled’ Year, Pot Firms Brace for Repeat in 2020Small-Caps Set to Retake 2020 Market Lead After Three-Year LagS&P 500 Melt-Up Is So Hot It’s Making Cheerleaders Into Skeptics(Updates shares and Trump comments in fifth paragraph, adds P/E chart.)\--With assistance from Lu Wang.To contact the reporter on this story: Jeran Wittenstein in San Francisco at email@example.comTo contact the editors responsible for this story: Catherine Larkin at firstname.lastname@example.org, Jennifer Bissell-LinskFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Sign up to our Next Africa newsletter and follow Bloomberg Africa on TwitterWhen South Africa’s state-owned utility announced record power cuts on Monday afternoon, Impala Platinum Holdings Ltd. had two hours to hoist thousands of workers from 1 kilometer (0.6 miles) deep shafts.“It was drastic, it makes life very difficult,” said Johan Theron, a spokesman for Implats. “We can’t operate like this but if we don’t cut the power, the national grid collapses.”Johannesburg-based Implats was ordered to cut electricity usage to 55 megawatts from about 300 megawatts, forcing it to reduce power to furnaces by 90% and shutting down refrigeration and compressor plants.The escalating crisis at debt-ridden Eskom Holdings SOC Ltd. shut down South Africa’s key mining industry for 24 hours, hitting gold and platinum producers that had been enjoying a renaissance on the back of higher metal prices. The rolling blackouts threaten to tip South Africa’s economy into recession and hobble miners already impacted by community protests and xenophobic violence.“The world will still need the minerals and metals that South Africa has, but in the short term this is potentially damaging to investment prospects,” said Ross Harvey, an independent economist and mining analyst. “For as long as Eskom remains in its current state, we are not going to see the kind of investment that we need.”Power is critical to keep South Africa’s mines running and Eskom is responsible for supplying 95% of the electricity used by the continent’s most advanced economy. Some companies, such as Anglo American Platinum Ltd., can minimize losses by using expensive diesel generators, but they remain dependent on the utility’s baseload supply.Stability Needed“South Africa urgently needs to stabilize Eskom,” said Jana Marais, a spokeswoman for Amplats. “Frequent load curtailments pose a risk to our operations as they risk the safety of our people and can lead to loss of production and revenue.”Worse outages could force smelters and refineries to throttle back production and further impact underground mines, RMB Morgan Stanley analysts including Christopher Nicholson said. Electricity supply disruptions raise the costs of operating furnaces, RMB said.“Should the incidences of blackouts worsen, there isn’t much the industry can do to mitigate the risk, and it will impact production,” RMB said.Eskom’s power cuts entered an eighth day on Thursday.Implats, along with Sibanye Gold Ltd., Petra Diamonds Ltd. and Harmony Gold Mining Co. resumed operations on Wednesday as Eskom scrambled to repair broken plants.Sibanye, which requires about 750 megawatts to run its platinum and gold operations, still doesn’t have sufficient power, said spokesman James Wellsted. The company has been forced to postpone pumping water from underground mines or reduce ventilation to manage supplies, he said.“It’s still very uncertain and you can understand why investors are being reluctant to invest,” Wellsted said.Other ConcernsOutput of key platinum metals declined 4.8% in October from a year earlier, Statistics South Africa said Thursday. The decline came after a week of power cuts that month.When platinum producers reached a wage settlement last month with the biggest and most militant labor union, it appeared to pave the way for them to capitalize on record palladium prices and for some to resume paying dividends next year. While the power cuts have fueled the rally in palladium by raising the prospect of an even bigger supply deficit, more problems are piling up for miners.Eskom’s struggles are the biggest drag on South Africa’s economy, but other issues have contributed to business confidence slumping to the lowest level in two decades. Community protests are leading to huge losses, and xenophobic violence is sapping investor appetite for South Africa, Amplats Chief Executive Officer Chris Griffith said in October.Rio Tinto Group’s Richards Bay Minerals shuttered its operations on Dec. 4 after violence in surrounding communities led to an employee being shot on the way to work.RBM is assessing the situation and “will return to normal operations when it is safe and sustainable to do so,” a spokesman for the company said. “The safety of our employees is our number one priority.”(Updates with palladium deficit in 15th paragraph)To contact the reporter on this story: Felix Njini in Johannesburg at email@example.comTo contact the editors responsible for this story: Lynn Thomasson at firstname.lastname@example.org, Dylan Griffiths, Alastair ReedFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- China-based cloud fintech platform OneConnect Financial Technology Co. cut its planned U.S. initial public offering set for Thursday by almost half.The company, one of several Ping An Insurance (Group) Co. businesses backed by SoftBank Group Corp., said in a filing Wednesday that it was reducing both the size of the share sale as well as the targeted price range. Instead of raising as much as $504 million, the listing is now targeting as much as $260 million.OneConnect is now planning to sell 26 million shares for $9 to $10 each, instead of 36 million for $12 to $14 as planned earlier, according to the filing.OneConnect opted for a New York listing despite U.S.-China tensions. The company earlier considered a Hong Kong listing with a target of raising about $1 billion at a valuation of about $8 billion, Bloomberg reported in February.OneConnect, backed by SoftBank’s Vision Fund, provides technology solutions that help increase revenue and manage risks for small and midsize financial institutions in China.SoftBank has placed bets on companies under the state-linked insurer Ping An, as part of its play in combining technology and insurance. Last year, Vision Fund invested in Ping An Good Doctor and Ping An Healthcare Technology.OneConnect had a net loss of $147 million on revenue of $218 million during the nine months ended Sept. 30, compared with an $82 million net loss on revenue of $128 million for the same period last year, its filings show. Since 2017, Ping An Group has extended to OneConnect more than $1 billion in loans with interest rates ranging from 4.55% to 7.3%.The offering is being led by Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Ping An Securities Group Holdings Ltd. OneConnect said in the filing that it plans to list its shares on the New York Stock Exchange under the symbol OCFT.To contact the reporter on this story: Crystal Tse in New York at email@example.comTo contact the editors responsible for this story: Liana Baker at firstname.lastname@example.org, Michael Hytha, Matthew MonksFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
E*TRADE's (ETFC) move to acquire Gradifi, a provider of student loan benefit, is likely to improve the company's financial capabilities.
(Bloomberg) -- Oil eased gains after a surprise build in U.S. crude stockpiles contrasted with analyst expectations for a draw.Futures in New York edged lower after closing at the highest in nearly three months. The American Petroleum Institute reported a 1.41 million-barrel build in crude inventories last week, according to people familiar with the matter. That runs counter to a Bloomberg survey of analysts predicting a draw. The U.S. government will release its weekly inventory report Wednesday.“API’s report for a build in crude stocks, and the large builds in gasoline and distillates probably caused crude futures to fall,” said Michael Loewen, director of commodity strategy at Scotiabank in Toronto.Seasonally, U.S. crude inventories are higher than the five-year average. Industry-backed API reported that gasoline and distillate supplies rose by over 8 million barrels combined. The gasoline build would mark the fifth consecutive rise if government data confirms it.Demand concerns stemming from the prolonged U.S.-China trade war persist. President Donald Trump’s administration is set to put tariffs on a further $160 billion of Chinese goods Sunday, although Agriculture Secretary Sonny Perdue said they’re unlikely to be implemented. Chinese officials also expect the higher levies to be postponed, according to people familiar with the matter.West Texas Intermediate for January delivery traded at $59.10 a barrel on the New York Mercantile Exchange at 4:57 p.m. local time. The contract settled at $59.24.Brent for February settlement was down 8 cents at $64.14 a barrel on the London-based ICE Futures Europe Exchange. The contract settled at $64.34. The global benchmark crude traded at a $5.20 premium to WTI for the same month.“For the market to push even higher, the key element is the signing of a trade agreement” between China and the U.S., said Gene McGillian, manager for market research at Tradition Energy. “That will rekindle expectations of economic growth and fuel demand growth.” Nevertheless, “we don’t have proof that there’s actually going to be a trade agreement,” he said.On Friday, oil closed at the highest level since mid-September after the Organization of Petroleum Exporting Countries and its allies surprised the market with deeper-than-expected output cuts. But there are lingering concerns on adherence to the latest agreement, given under-compliance by some members in the previous round of reductions.To contact the reporter on this story: Sheela Tobben in New York at email@example.comTo contact the editors responsible for this story: David Marino at firstname.lastname@example.org, Catherine Traywick, Carlos CaminadaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
When it comes to investing in bank stocks, a flattening yield curve, Fed rate cuts and illiquid capital markets are typically considered red flags that send investors running for the hills.
Virgin Galactic Explodes Higher On Space Flight Hopes Virgin Galactic (NYSE:SPCE) shares are rocketing back into space, or at least to a $9.66 handle at time of writing, on the back of a Morgan Stanley (NYSE:MS) report predicting that shares could climb to $60 if the company executes its business goals. Basically, it wants to […]The post Market Morning: Virgin Rocket, Blain Bashes Tesla, Softbank Bails on Wag, Banks Fret on Repo appeared first on Market Exclusive.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Morgan Stanley was fined 20 million euros ($22.2 million) in France over accusations its London desk used “pump and dump” tactics to rig bond prices after a bet on the French sovereign turned sour amid Greece’s debt crisis.The enforcement committee of the Autorite des Marches Financiers said the bank manipulated the prices of 14 French bonds and 8 Belgian bonds in June 2015. The lender also manipulated the price of futures on French debt, the AMF said in a statement on Tuesday.“The seriousness of the infringements is also reinforced by the sophistication of the contentious transactions,” the French watchdog said. “The traders on the desk knew that on June 16, 2015 there was high volatility and low liquidity on the market, which would necessarily increase the impact of their operations.”At a hearing last month, AMF investigators said the bank’s London desk was long on French bonds and short on German debt, betting the yield spread would narrow. But the opposite scenario played out as the fallout from Greece’s impasse with creditors spread, causing the desk to lose $6 million on June 15, 2015, and another $8.7 million when markets opened the next day.To narrow its losses and avoid hitting a $20 million loss-limit set by Morgan Stanley’s management, the London desk allegedly acquired futures on French bonds on June 16, 2015, with the sole objective of increasing the market value of French and Belgian bonds before aggressively selling the latter. French and Belgian bonds are considered interchangeable, according to the AMF.Morgan Stanley said it would appeal the penalty, which is the regulator’s joint-highest. Two years ago, Natixis Asset Management got a then-record 35 million-euro penalty from the AMF but the French bank’s unit won a 15 million-euro cut last month.Market Maker“The activities in question were undertaken in accordance with market practice and as part of the firm’s role and obligations as a market maker and Morgan Stanley remains confident that it has acted in the best interests of the market and its clients,” the bank said in a statement.During the hearing, Stephane Benouville, a lawyer for the bank, said the accusations didn’t stand up to scrutiny. He added that fining Morgan Stanley would send a message that market makers aren’t allowed to hedge themselves and exit risky positions.The contentious purchases of futures took place between 9:29 a.m. and 9:44 a.m. Immediately after, Morgan Stanley traders on the London desk instantaneously sold French bonds for a total of 815 million euros and Belgian bonds for 340 million euros.During the 15 minutes when Morgan Stanley bought futures on French debt, the price of the underlying 14 bonds sold immediately afterwards increased by 0.17% to 1.13%, according to the AMF. The underlying Belgian bonds rose between 0.22% and 1.39%.Four MinutesThe AMF enforcement committee said Morgan Stanley’s actions disrupted the MTS France electronic trading platform, suspending contributions from primary dealers during four minutes and reducing liquidity significantly for 50 minutes. Several complaints were lodged by market participants to France’s debt office, according to the AMF.A spokesman at Agence France Tresor said the debt agency is examining “possible consequences” after the AMF’s decision.The Belgian Debt Agency said it is not considering any action against Morgan Stanley for something that was primarily related to France. It added that it’s not aware of any enforcement action from Belgium’s markets watchdog.(Updates with comment from French debt agency in 13th paragraph)\--With assistance from Michael Hunter.To contact the reporters on this story: Gaspard Sebag in Paris at email@example.com;Stephanie Bodoni in Brussels at firstname.lastname@example.orgTo contact the editors responsible for this story: Anthony Aarons at email@example.com, Peter Chapman, John AingerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
France's markets watchdog AMF said on Tuesday it had fined U.S bank Morgan Stanley 20 million euros (£17.18 million) for manipulation of sovereign bonds. AMF said the fine related to manipulating the price of 14 French government bonds (OAT) and 8 Belgian bonds (OLO) on June 16 2015, and also of an OAT futures contract. AMF had noted a large sale of government bonds on June 16, 2015 disrupted the French MTS Global Market bond trading system, causing transactions to be suspended for four minutes and liquidity levels to drop for about an hour.
(Bloomberg) -- Morgan Stanley is cutting about 1,500 jobs globally, including several managing directors, as part of a year-end efficiency push.The cuts are skewed toward technology and operations divisions, but also include executives in sales, trading and research operations, people with knowledge of the matter said. The reductions amount to about 2% of the firm’s workforce, according to one of the people, who asked not to be identified because the information is private. The bank plans to take a charge in the range of $150 million to $200 million in its fourth-quarter results tied to the cost of the cuts, one person said. Investment banks around the world have been trimming staff amid a multiyear slump in trading revenue and the expectation that more of the business will move to electronic platforms that require fewer humans. Citigroup Inc. and Deutsche Bank AG are among firms that have cut hundreds of trading jobs this year.A spokesman at New York-based Morgan Stanley declined to comment.The Wall Street firm has been in the spotlight for an investigation into its currency-options desks. The bank is probing whether traders improperly valued the esoteric securities, concealing as much as $140 million in losses, Bloomberg reported last month. The cuts being carried out also include senior executives in its currency and bond desks in New York and London.Chief Executive Officer James Gorman began slashing a quarter of the fixed-income workforce in 2015 and sold off large pieces of the commodities operation, concluding that new rules had permanently damaged prospects for the industry. Morgan Stanley, which reported a 21% increase in fixed-income trading revenue in the third quarter, generated $5 billion from the business last year.The strategy has largely paid off, with Morgan Stanley gaining market share even while it reduced headcount and capital dedicated to the business. Analysts expect the bank to end 2019 with 10% more fixed-income trading revenue than in 2015, while rival Goldman Sachs Group Inc.’s total is seen dropping about 20% in the same period.The firm’s stock is up about 25% this year, which would be its best performance since 2016.(Updates with fourth-quarter charge in the second paragraph.)\--With assistance from Matthew Monks and Sonali Basak.To contact the reporters on this story: Stefania Spezzati in London at firstname.lastname@example.org;Donal Griffin in London at email@example.com;Sridhar Natarajan in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Ambereen Choudhury at email@example.com, ;Michael J. Moore at firstname.lastname@example.org, Steve Dickson, Dan ReichlFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Spared from the job cuts are financial advisers in Morgan Stanley wealth management. The Wall Street investment bank and wealth firm has been trying to keep compensation expenses down because it expects revenue next year to be under pressure from market volatility, ongoing trade tensions and a global economic slowdown, according to the source. Morgan Stanley had 60,532 employees as of Sept. 30.
(Bloomberg Opinion) -- The end of Libor as a benchmark for interest rates on everything from mortgages to credit cards is just two years away, leaving the market in search of a viable substitute. More than $370 trillion of existing financial contracts are pegged to Libor worldwide; of those, roughly $200 trillion are denominated in U.S. dollars and need to be addressed immediately — a monumental task in such a short period.Fortunately, significant progress has been made in moving toward an alternative called the Secured Overnight Financing Rate, or SOFR, which is based on an average daily volume of more than $1 trillion of actual transactions in the U.S. Treasury repo market. I am chair of the Alternative Reference Rates Committee, a public-private committee convened and sponsored by the Federal Reserve to facilitate the transition in the U.S. It recommends institutions stop using Libor as quickly as possible and move to SOFR. As we all know, the best way to get out of a hole is to stop digging.There are misconceptions that SOFR’s daily variability makes it undesirable as a Libor successor. Given the importance of the transition, I am eager to address those concerns, which fundamentally misunderstand how SOFR is truly used in financial contracts. They also vastly oversimplify what SOFR’s variability represents. It’s especially important to understand these complexities as the end of the year approaches, which typically brings wider movements in money market rates.Repo market prices respond to changes in supply and demand. SOFR, which is based on actual transactions, reflects variability in actual market pricing. Unlike Libor, which has become increasingly based on estimates, SOFR accurately measures the market it was created to represent. This is a critical reason the ARRC selected it as its recommended alternative. The ARRC picked SOFR fully aware that market-based rates are inherently variable. Given that SOFR is averaged when used in financial instruments, variability should not be an issue. And as might be expected, those averages have been quite stable. For example, consider the period of money market pressure in September. Although SOFR rose sharply over a few days, a three-month average rose only 2 basis points compared with the weeks before those fluctuations. Over that same period, three-month U.S. dollar Libor rose 4 basis points. In fact, this SOFR average has been less volatile than three-month U.S. dollar Libor over a wide range of market conditions. Although market participants can calculate averages on their own, and some are already doing so, many are understandably uncomfortable with taking on that responsibility. They worry about the consistency of calculation relative to their peers and consumer transparency. That is why we need accessible SOFR averages.In November, the Federal Reserve Bank of New York outlined plans to produce SOFR averages along with a SOFR index. By publishing these averages on its website, which is expected to begin in the first half of 2020, the New York Fed will provide consistently calculated SOFR averages across various terms and an index to facilitate the calculation of averages over custom periods. Because they will be endorsed by the official sector, these averages should give all market participants the peace of mind that they can use the same reliable source.Once publication begins, more market participants will be able to directly reference SOFR averages. So instead of adding to existing Libor risks, market participants can start constructing new SOFR-based contracts, especially with the clock ticking to the expiration of Libor.To help ease the transition, if institutions must enter new Libor-referencing contracts, they can use fallback language the ARRC has released, which will help market participants safeguard their contracts should Libor no longer be available. They can also consult the ARRC’s practical implementation checklist, which outlines steps to consider during the transition.While many milestones have been reached, two years is a short period to close out the remaining tasks. The strength of institutions individually, and the architecture of the financial system broadly, relies on everyone doing their part to ensure a smooth transition to SOFR.To contact the author of this story: Tom Wipf 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.Tom Wipf is the chair of the Alternative Reference Rates Committee and vice chairman of institutional securities at Morgan Stanley.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Morgan Stanley’s drive into a lucrative niche in the foreign-exchange market has hit a major road block.The firm has more than doubled its activity since 2016 to overtake rivals such as Goldman Sachs Group Inc. in the bazaar for currency-linked derivatives known as FX options. Now, Morgan Stanley is probing whether traders improperly valued the esoteric securities, concealing as much as $140 million in losses, Bloomberg reported last week, citing people familiar with the matter.The world’s biggest stock brokerage adopted a “go big or go home strategy” in the business, said Mark Williams, a finance lecturer at Boston University’s Questrom School of Business. “Doubling their OTC FX option trading book in only three years, given an already sizable market presence, speaks to Morgan Stanley’s aggressive risk appetite.”While a potential loss would hardly be catastrophic for a broader fixed-income trading business that generated $5 billion in revenue last year, it contrasts with Chief Executive Officer James Gorman’s effort to fashion a steadier, less risky franchise. His approach has allowed Morgan Stanley to close a market-value gap with Goldman Sachs that was more than $50 billion after the financial crisis.Four years ago, Morgan Stanley’s then-equities chief Ted Pick also took control of the firm’s fixed-income unit with a pledge that it would stop trying to be “all things to all people” and pick spots in the bond and currency markets where it could find adequate returns. The bank had long struggled to compete in the area of interest rates and foreign exchange, known collectively as macro trading, where larger commercial banks benefited from the activity of their corporate clients.Morgan Stanley tapped Senad Prusac, who had risen up through the FX options unit, to lead global macro trading and find the bank’s niche in that world. Prusac left Morgan Stanley this year and was recently replaced by Jakob Horder, IFRE reported in September. Overseeing the operation was fixed-income head Sam Kellie-Smith, whose LinkedIn profile also cites a background in FX options trading.The strategy has largely paid off, with Morgan Stanley gaining market share even while it cut headcount and reduced capital dedicated to the fixed-income business. Analysts expect Morgan Stanley to end 2019 with 10% more fixed-income trading revenue than in 2015, while rival Goldman Sachs’s total is set to drop about 20% in the same period.FX options, a small corner of the $6.6-trillion-per-day currency market, provided some of the growth. In early 2016, Morgan Stanley had fewer of the securities than any other major Wall Street bank, according to a Bloomberg analysis of U.S. Federal Reserve filings. By last year, the firm had eclipsed Goldman Sachs and Bank of America Corp. and trailed only Citigroup Inc. and JPMorgan Chase & Co., the filings show.FX options can be a flexible and cheap way to speculate on currencies and hedge against losses, according to Beat Nussbaumer, who helped lead foreign-exchange businesses at firms including Commerzbank AG and UniCredit SpA. Daily trading volume has climbed 16% since 2016 to about $294 billion, according to the Bank for International Settlements.But the instruments can be hard to value and can magnify losses. The trades now in question were tied to the Turkish lira, a currency that whipsawed investors in 2018 and earlier in 2019 amid mounting political tensions, the people said. Those swings roiled a number of firms and Morgan Stanley is grappling with how its losses happened and whether there were efforts to cover them up. At least four traders have been swept up in the probe, including 27-year-old associate Scott Eisner in London, Bloomberg has reported. Morgan Stanley declined to comment on the matter.Investment banks tailor FX options based on client requests and they’re traded directly between parties, or over-the-counter, rather than through exchanges. While this makes them more opaque, it also makes them more lucrative, according to Nussbaumer.The biggest investment banks shared about $2.9 billion in revenue from FX options in 2018, a 40% increase from 2017, only to see income fall this year, according to data from Coalition Development Ltd.Even before the Morgan Stanley episode, sudden moves in currencies have triggered blowups. Citigroup lost more than $150 million in 2015 when the Swiss central bank let the franc trade freely against the euro, Bloomberg reported at the time. In 2016, Taiwanese banks were fined after selling leveraged structured products that bet on a rising Chinese yuan, which saddled clients with losses after the currency plunged.Morgan Stanley purchased FX option trades with a notional amount of about $718 billion at the end of September, according to the Fed filings. That compares with $512 billion in the same period in 2017 and $320 billion in 2016, the filings show. At the end of the first half of 2019, the firm’s FX options purchased, net of those it sold, was $48 billion, three times that of any other U.S. bank, according to Javier Paz, an analyst with Forex Datasource, an independent consulting firm.“They’re punching above their weight,” said Paz. “This is the repurposing of their expertise in equity options into currency markets.”\--With assistance from Sridhar Natarajan.To contact the reporters on this story: Donal Griffin in London at email@example.com;Stefania Spezzati in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Ambereen Choudhury at email@example.com, James Hertling, Michael J. MooreFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Investing.com – Etsy fell on Thursday after Morgan Stanley downgraded its outlook on the company on worries that recently introduced sales-tax legislation in some U.S. states and a decision to cut advertising investment may hurt growth.
(Bloomberg) -- JFrog Inc., a technology company that makes tools for software developers, has hired Morgan Stanley and JPMorgan Chase & Co. to lead its initial public offering next year, according to people familiar with the matter.JFrog could seek a valuation of $2 billion or more in a U.S. listing, said the people, who asked not to be identified because the matter is private.Plans for an IPO aren’t final and JFrog could decide to remain private, the people said.Representatives for JFrog, Morgan Stanley and JPMorgan declined to comment.JFrog was co-founded in 2008 by former Israeli Air Force Major Shlomi Ben Haim, who remains its chief executive officer, according to the company’s website. The Sunnyvale, California-based company raised $165 million in a funding round last year that included investors Insight Venture Partners, Spark Capital, Battery Ventures and Dell Technologies Capital, according to a statement.Software companies have delivered some of this year’s best IPO returns thanks to their steady business models. Globally, shares of companies such as Zoom Video Communications Inc., Crowdstrike Holdings Inc. and Datadog Inc. have risen an average of 38% from their IPO offer prices this year, according to data compiled by Bloomberg.IPOs this year by consumer-facing internet-related companies including Uber Technologies Inc. and Lyft Inc. haven’t fared as well. Shares of those companies have fallen an average of 7.5% from their offer prices, the data show.To contact the reporter on this story: Crystal Tse in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Liana Baker at email@example.com, Michael Hytha, Matthew MonksFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.