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(Bloomberg) -- The prospect of a comeback for the populist Italian firebrand Matteo Salvini was hanging over markets on Wednesday after a key political rival stepped down, raising the chances of an early election that could pave the way for him to pursue his euroskeptic agenda.The resignation of Luigi Di Maio as leader of the Five Star Movement has unsettled investors wary of another standoff between Italy and the European Union. Bonds fell as much as eight basis points on fears about the government’s stability but then recovered as the fragile coalition held together.For now investors see a weaker government whose key members are compelled to cling to power and avoid a snap election that they would be likely to lose.“Our economists’ base case is that the coalition government survives through 2020,” George Cole, managing director at Goldman Sachs International in London, said in a client note. He expects the Italian bond yield premium to narrow against Spanish and Portuguese peers as data stabilizes and the European Central Bank continues to snap up assets in the region.Bank stocks in the country bore the brunt of selling, and the FTSE Italia All-Share Banks Index dropped 1.6% as of 3.39 p.m. in London.The key focus now will be local elections this weekend: Gains for the League party could send the spread between benchmark Italian bonds and their German peers to beyond 200 basis points, predicts Peter McCallum, rates strategist at Mizuho International Plc in London. The gap is steady at 162 basis points.“Even a benign election result at the weekend would likely still leave an uncertain political situation,” McCallum said.The developments threaten to add pressure to the nation’s bonds, which have been drifting lower in recent months after a stellar run in 2019. The yield on the benchmark posted the biggest annual drop in five years as the ECB, a key buyer of Italian debt, resumed its stimulus measures.Despite the apprehension there are some who think the market could live with a Salvini government. A general election campaign would likely herald higher volatility and wider spreads, but these could re-tighten even if Salvini wins, according to Antoine Bouvet, a senior rates strategist at ING Groep NV in London.“Historically the League has been seen as a more pro-business party,” he said. “Some of their planned tax cuts would threaten the deficit but it could also boost growth. Once the election is out of the way, with presumably a League victory, I think markets will come to terms with a Salvini-led government.”Here’s what other strategists are saying:MUFG Bank Ltd. (League government could be negative for the euro)Lee Hardman, currency strategist.“It is a more euro-negative threat with respect to the Italian government’s commitment to at least bring public finances in line with euro-zone ideals. If the League were to take over, then at face value there is more risk of confrontation between the EU and the Italian government further down the line, and that is something that could be destabilizing and euro negative. At this stage it is all ifs, buts and maybes.”Societe Generale SA (Politics for now will have little impact on credit)Juan Valencia, credit strategist.“If BTPs really underperform, some Italian credit would widen in sympathy. For the overall market, it won’t matter much, unless things deteriorate badly. There is big demand for credit and people keep buying.”“If you start seeing weakness in BTPs, then the banks are going to come under pressure and some corporates but I would see this as a temporary setback, probably an opportunity to buy.”Rabobank (Sell-off is a buying opportunity)Lyn Graham-Taylor, senior rates strategist.“I would fade today’s sell-off” as the Democratic Party and Five Star are lagging in the polls and have little incentive to call a snap election.Colombo Wealth SA (League win in Sunday’s elections could create opportunities)Alberto Tocchio, chief investment officer.“Of course it could create some unwanted political instability in Italy and Europe and to me the best trade is to go long the widening of the BTP-bund spread.”“If there is an over-reaction on Monday with a substantial sell-off of Italian equities, it could be a nice entry opportunity in a unloved market with some decent stocks that are offering an high dividend yield.”ING Bank NV (Spreads could tighten on a Salvini government)Antoine Bouvet, rates strategist.“There is a more technical reason why spreads will re-tighten even if Salvini is elected: investors cannot stay underweight/short Italian bonds for too long. They offer a much better carry than other government bonds and represent too large a portion of the market for investors to ignore them.”(Adds comment from Goldman Sachs in fourth paragraph and new chart.)\--With assistance from Anooja Debnath, Tasos Vossos and Ksenia Galouchko.To contact the reporters on this story: William Shaw in London at email@example.com;James Hirai in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Dana El Baltaji at email@example.com, Cecile Gutscher, Sam PotterFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Like the majority of investors, you're most likely working on a retirement portfolio that will provide a large enough nest egg to give you a comfortable retirement. Make sure you know all about what financial planners call the accumulation and distribution phases of retirement planning.
The Zacks Analyst Blog Highlights: Roche, Royal Dutch Shell, Citigroup, UnitedHealth and Costco Wholesale
(Bloomberg) -- Will this finally be the year European companies deliver profit growth?It’s the question that’s been on investors’ lips for a long time. While earnings in the U.S. have steadily risen in the decade since the global financial crisis, European figures have stagnated. Time after time, bullish predictions have given away to a disappointing reality. Now, with equities already at a record high and monetary policy more likely to normalize than ease further, profit growth might be the key factor to make or break the rally.Bottom-up analysts expect profits for Stoxx Europe 600 Index members to grow 8.2%, up from last year’s tepid 1% increase. That’s close to the 8.6% expansion expected for the U.S. However, many strategists are skeptical, calling the consensus too optimistic, and analysts typically tend to slash estimates as the year goes on, neither of which bodes well for a dramatic comeback.“With Europe on a relatively low valuation compared to the United States, investors can be more patient for earnings to develop as we continue into 2020,” said Edward Park, deputy chief investment officer at Brooks Macdonald Asset Management. “That said, for European equities to continue to rally from here we would need to see earnings come through.”What could help is an economic recovery, with recent releases showing tentative signs of stabilization. While political crises in Europe have played a part in keeping investors at bay, the region has also been plagued with weak macro data and corresponding lack of earnings growth in recent years. Banks, once the heavyweights for profits, have seen their might dwindle amid a lower-for-longer rates environment.So despite higher dividends and a near record-low valuation discount, the Stoxx 600 has underperformed the S&P 500 Index.Deutsche Bank AG strategists noted last month that European equities have lagged U.S. peers in the past eight years, after 40 years of keeping pace. Excluding the period around the European financial crisis and adjusting for the impact of U.S. corporate-tax cuts, they say earnings growth has been identical. Their baseline view, which assumes a pickup in European and global growth, is for the region’s earnings-per-share growth to match that of the U.S. in 2020.Not everyone is as bullish. The reporting season, which kicked into full gear on Tuesday with UBS Group AG’s annual release, is likely to bring mixed results, according to Morgan Stanley strategists. They say consensus expectations for 2020 are “optimistic but not implausible,” and note that European equities have been increasingly resilient to earnings downgrades in the past year.Goldman Sachs Group Inc. strategists led by Guillaume Jaisson say that analysts have been reluctant to slash earnings forecasts because of the stock market rally and cyclicals’ outperformance, which explains why fourth-quarter profit downgrades have been limited to just 1%. The current level of economic activity would suggest a 6% negative earnings revision, according to Goldman.The Stoxx 600 surged 23% last year in its best performance in a decade, even as a Citigroup Inc. index shows profit downgrades have mostly outnumbered upgrades since May. The dissonance shows that equity gains were driven purely by an expansion in valuations, which presents a risk to further stock gains, according to Alain Bokobza, Societe Generale SA’s head of global asset allocation.“We do not expect earnings growth to deliver any significant good news in 2020, under our assumption of a slowing global economy,” said Bokobza by email. “A valuation expansion process can’t continue forever.”While overall earnings growth has disappointed, digging deeper into sectors shows that most defensives have reported “solid growth” in recent years, according to Christian Stocker, a strategist at UniCredit SpA. The trend is likely to continue, he said.Among European sectors, telecoms, technology, retail, utilities and oil firms are projected to show double-digit growth this year, according to Bloomberg data. The slowest pace of expansion -- less than 7% -- is seen in financials, basic resources and media companies.Energy and mining sectors, which saw double-digit earnings contraction in 2019, remain vulnerable to weaker global manufacturing and commodity price swings, according to Brooks Macdonald’s Park. Oil has had a particularly volatile start to 2020 following the spike in U.S.-Iran tensions.Forecasts are most bullish for tech earnings, even as a gauge tracking shares in the sector is near levels last seen in the dot-com bubble days. That’s driven by increased automation and corporate investments into the sector that will enhance margins, says Park.Global GrowthFor the exporter-heavy Stoxx 600, global growth and the strength of the euro will be key factors for corporate profits.The single currency has been on the rise since September, when it reached its lowest since 2017, while the International Monetary Fund this week trimmed its outlook for world economic expansion to 3.3%. Although that’s slower than the 3.4% projected in October, it’s still the first pickup in three years.The Stoxx Europe 600 advanced 0.2% on Wednesday following two days of declines. Gains were limited by declines in Italian banking stocks after the resignation of the leader of the anti-establishment Five Star Movement raised political risk.“Europe is traditionally more cyclical and globally exposed in many ways, so if and when a firm global recovery develops, this side of the pond has room to step up,” said Tim Craighead, a European strategist at Bloomberg Intelligence.(Updates with today’s market move in penultimate paragraph.)\--With assistance from Namitha Jagadeesh, Michael Msika and Jan-Patrick Barnert.To contact the reporter on this story: Ksenia Galouchko in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Blaise Robinson at email@example.com, Namitha Jagadeesh, Morwenna ConiamFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
LONDON/FRANKFURT (Reuters) - European buyout fund Eurazeo has hired Citigroup and Evercore to prepare the sale of its payments business Planet in a deal that could value the Irish firm at up to 2 billion euros (£1.6 billion), three sources told Reuters. Eurazeo wants to launch an auction process in March as it seeks to capitalise on the rise of online shopping and mobile phone payments, two sources with knowledge of the matter said. Citi and Evercore won a contest in December to handle the sale, which comes just days after U.S. private equity firm Silver Lake agreed to merge Planet's rival Global Blue with Far Point - a vehicle set up by hedge fund Third Point and led by the former president of the New York Stock Exchange.
(Bloomberg) -- China’s fragile economic stabilization could be at risk if authorities fail to contain the new virus currently sweeping across Asia, economists have warned.UBS Group AG, Nomura Holdings Inc. and Barclays Bank PLC reached back to the 2003 SARS outbreak for guidance on potential impact.UBS noted that “history does not repeat itself, but it rhymes,” while Nomura said that based on the outbreak 17 years ago, it expects “increased downward pressure on China’s growth, particularly in the services sector.” Barclays expects the “economic impact from the virus is likely to be transitory, with the effects felt more in transportation and retail sales.”Chinese officials are stepping up monitoring of domestic transport links as the death toll increased to nine from six previously. Health officials around the world are racing to gauge the danger posed by the SARS-like virus as confirmed cases have stretched to five additional countries, including the first diagnosis in the U.S.While the virus’s arrival in the U.S. highlights the dangers of it spreading and impacting economies around the world, even if it’s contained to China, there would still be a hit to global growth. That’s because China’s weight has more than doubled since the 2003 SARS epidemic. It is estimated to account for about one-fifth of the world economy this year, compared with 8.7% at the time of SARS, International Monetary Fund data show.What Bloomberg’s Economists Say...“The changing structure of China’s economy increases the risks. A larger services sector and bigger role for consumption mean a disease outbreak that hits shopping, eating out, and other leisure activities will have a bigger impact. A larger role for financial markets means more potential for shocks to trigger a blow to sentiment.”\--Tom Orlik and Chang ShuTerminal clients can read the full note HEREUBS economists Wang Tao and Ning Zhang noted the ongoing peak travel season around the Lunar New Year “is a tremendous challenge, which could complicate the disease diffusion.”“If the pneumonia couldn’t be contained in the short term, we expect China’s retail sales, tourism, hotel & catering, travel activities likely to be hit, especially in Q1 and early Q2,” UBS said. “Our forecast of sequential growth rebound in Q1 and Q2 2020 would face some downside risk. The government would likely strengthen its policy easing to offset the shock from the pneumonia, especially for those directly affected sectors.”Barclays economists including Chang Jian also see prospects for targeted credit and fiscal support if the spread intensifies.(Updates with Barclays comments in the third paragraph.)\--With assistance from Garfield Reynolds.To contact the reporter on this story: Michael Heath in Sydney at firstname.lastname@example.orgTo contact the editors responsible for this story: Malcolm Scott at email@example.com, James MaygerFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- The worst-case scenarios for Boeing Co.’s 737 Max crisis no longer look far-fetched.The airplane maker said Tuesday that its “best estimate” for when regulators will lift a flying ban on its Max jet is now mid-2020. The once top-selling plane has been grounded since March following two fatal crashes. The updated timeline reportedly reflects a new, recently discovered software flaw connected to how the Max’s flight computers power up and verify they’re receiving valid data, as well as the need to correct vulnerabilities in certain wiring bundles. Boeing said it’s also accounting for “further developments that may arise in connection with the certification process.”Perhaps the company is finally taking a more conservative attitude toward the Max crisis after a series of overly optimistic promises left its reputation in tatters and CEO Dennis Muilenburg without a job. The Federal Aviation Administration, for its part, reiterated that there’s no time frame for the Max’s return and that safety is its first priority. Airlines and suppliers now have to recalibrate accordingly, and this latest delay will be by far the most painful for them.With its stockpile of undeliverable jets growing and its cash burn deepening, Boeing had already made the call to halt production of the Max once it became clear it wouldn’t meet its previous deadline for a return to service by the end of 2019. The shutdown, which began in January, has already forced suppliers to idle their factories as well and, in some cases, to lay off employees. In one of the more extreme examples, Spirit AeroSystems Holdings Inc., which gets more than half its revenue from the Max, saw the rating on its debt cut to junk by Moody’s Investors Service earlier this month and is cutting about 2,800 workers. In total, economists from Barclays and JPMorgan Chase & Co. estimated the Max production shutdown could subtract half a percentage point from U.S. gross domestic product in the first quarter. Investors were expecting total compensation to affected airlines to amount to about $10 billion, according to a survey conducted by Bernstein analyst Douglas Harned. If that sounds bad, consider that the baseline case among investors and analysts before Tuesday’s update was that Max deliveries would resume by March or April.The major U.S. airlines have all pulled the Max from their schedules through June in what they thought would be a conservative call. The logistical challenges of bringing jets out of storage and putting pilots through the simulator training that Boeing has now decided to recommend means that the airlines will likely have to go without their Max fleets for yet another peak travel season. That is likely to drive even more market share toward Delta Air Lines Inc., which doesn’t fly the Max and has been benefiting from that fact. The longer the grounding lasts, the more permanent those share gains may be. Either way, expect airlines to significantly increase their demands for compensation.The biggest pain will be felt by Boeing’s suppliers. A three-month production shutdown is one thing; a six-month halt is something else, entirely. Getting supplier factories humming to the point where they could meet Boeing’s Max production pace required a logistical miracle and some parts-makers actually used the first few months of the grounding to play catch-up. At a minimum, suppliers run the risk of workers leaving for more secure jobs amid a buoyant labor market. Taco Bell is offering a $100,000 salary for a restaurant manager position, for heaven’s sake. For others, the damage may be more lasting. Boeing enjoys an effective duopoly with Airbus SE that has helped buoy profits over the years and arguably protected it from greater financial pain in the form of canceled Max orders. The flip side of that is that some suppliers depend heavily on Boeing for their business. The biggest producers such as General Electric Co., Honeywell International Inc. and United Technologies Corp. will be able to weather the hit from a prolonged production halt; smaller suppliers risk going bankrupt.This will all come back to haunt Boeing once it’s finally ready to restart production. With a legitimate debate about the sustainability of air traffic growth at the levels needed to maintain demand, it’s not out of the question that the company might not ever reach its target of producing 57 Max jets per month. Air Lease Corp. Chairman Steven Udvar-Hazy said Monday that his company had urged Boeing to drop the Max name to make the plane more palatable for fliers. But the longer the grounding drags on, the likelihood increases that Boeing will need to make more than just a name change for the latest iteration of its 737 model and instead plow billions into a true successor. To contact the author of this story: Brooke Sutherland at firstname.lastname@example.orgTo contact the editor responsible for this story: Beth Williams at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Schlumberger (SLB) reported upbeat Q4 earnings on strength in its international operations. Meanwhile, Eni (E) announced the flow of first oil from the Agogo field, offshore Angola.
(Bloomberg) -- Oil erased some earlier declines as concern mounted about supply disruptions in Libya and Iraq despite ample output from other major producers.Futures trimmed losses to settle little changed near $58 a barrel in New York on Tuesday. The Libyan port crisis that strangled exports from North Africa’s biggest oil supplier extended into a fourth day. Meanwhile, spreading unrest in Iraq threatened shipments from OPEC’s No. 2 producer.The Libyan disruption is significant because “there is a lot demand for light, sweet crude” among refiners working to comply with stricter fuel rules, said Phil Flynn, an analyst at Price Futures Group Inc.Oil prices also were pressured as a deadly virus from China spread to the U.S.“There’s obviously a lot of concern with this virus in China,” said Josh Graves, senior market strategist at RJ O’Brien & Associates LLC.West Texas Intermediate futures for February declined 20 cents to settle at $58.34 a barrel on the New York Mercantile Exchange. The contract expires Tuesday.Brent crude for March settlement dropped 61 cents to $64.59 on the ICE Futures Europe exchange in London.Libyan militia leader Khalifa Haftar has blocked ports in a show of defiance after world leaders failed to persuade him to sign a peace deal. In Iraq, protests halted production at one oil field and rockets reportedly hit the Green Zone in Baghdad after a weekend of unrest.\--With assistance from James Thornhill, Sharon Cho, Saket Sundria and Grant Smith.To contact the reporters on this story: Sheela Tobben in New York at firstname.lastname@example.org;Jackie Davalos in New York at email@example.comTo contact the editors responsible for this story: David Marino at firstname.lastname@example.org, Joe Carroll, Catherine TraywickFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Halliburton's (HAL) Drilling and Evaluation unit profit jumps from $185 million in the fourth quarter of 2018 to $224 million in the corresponding quarter of 2019.