Author Archives: Blanco

Hong Kong now has more super-rich people than any other city

07 Sep 18
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BY Daniel Shane

SOURCE https://money.cnn.com/2018/09/06/investing/world-richest-people-cities/index.html

 

New York is no longer the city with the biggest super-rich population.

Hong Kong overtook the Big Apple to become the top destination for the planet’s wealthiest people last year, according to a study published Thursday by research firm Wealth-X. The number of ultra-high-net-worth individuals (UHNWIs) residing in the Asian financial hub rose by almost a third in 2017 to 10,000, the study said.

New York had held the top spot since Wealth-X first started ranking cities in 2011. The firm defines a UHNWI as a person worth $30 million or more.

It said the rise in the number of ultra rich in Hong Kongwas propelled by its booming stock market and growing financial links with the broader Chinese economy.

China’s rapid economic growth in recent decades has helped drive a dramatic increase in the number of ultra-rich people in the region.

Hong Kong skyline FILE RESTRICTED
A view of Hong Kong skyline from Victoria Peak.

Among Hong Kong’s most prominent billionaires are Li Ka-shing, whose Cheung Kong (CKHUY) empire controls ports, telecommunications networks and energy companies across the globe.

No single city in mainland China made it into Wealth-X’s top 10 in terms of its number of super-rich individuals.

It said that was because Chinese wealth was not concentrated in any one area, but distributed around the country. Its wealthiest citizens include tech tycoons Jack Ma and Pony Ma who founded internet juggernauts Alibaba (BABA) and Tencent (TCEHY), respectively.

“The dynamism of wealth creation across China’s vast landscape is nevertheless staggering,” the report read.

Overall, the United States remains the preferred country for the world’s richest and is home to almost a third of the world’s ultra-high-net-worth individuals.

But Asia, and China in particular, are catching up. Last year the number of ultra-rich people in Asia rose by 20%. Rising Asian wealth has been helped by increasing consumer spending, more investment in infrastructure and economic reforms, among other factors, Wealth-X said.

“Asia-Pacific is forecast to close the ultra-wealth gap with other regions over the next five years,” the report added.

For the past four years, the region’s tally of people with $1 million in investable assets has been higher than anywhere else in the world, according to another study by consulting firm Capgemini. And by one estimate, China alone already has more billionaires than the United States.

But things could get tougher in 2018. China faces headwinds from its trade war with the United States and the huge levels of debt in its financial system. Chinese stocks entered a bear marketthis year, while its currency has plunged versus the dollar.

Globally, the number of ultra-rich individuals rose by 13% last year to more than 250,000. Their combined total wealth hit $31.5 trillion, boosted by an upturn in the global economy and good performances of stock markets.

Other cities in the top 10 for global wealth included Tokyo, Los Angeles, Paris and London.

 

Mark Carney willing to lead Bank of England through Brexit aftermath

07 Sep 18
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BY Charles Riley

SOURCE  https://money.cnn.com/2018/09/04/news/economy/brexit-mark-carney-bank-of-england/index.html?iid=SF_LN

 

Mark Carney has indicated that he’s willing to extend his tenure as governor of the Bank of England to help manage the consequences of Brexit next March.

Carney confirmed he had discussed with the government how he could help the United Kingdom transition out of the European Union, and said he expected an announcement to be made “in due course.”

“I am willing to do whatever else I can in order to promote both a smooth Brexit and an effective transition at the Bank of England,” Carney said.

Carney is the first foreigner to serve as Bank of England governor. When he was appointed in 2013, he indicated he would serve until 2018 but later extended that deadline to June 2019.

“I fully recognize that during this critical period, everyone does everything they can to help with the transition to exiting the European Union,” Carney said Tuesday before a UK parliamentary committee.

Speculation had mounted in recent weeks that Carney would offer, or be asked by the government of Prime Minister Theresa May, to remain at the central bank. An extension would remove one major source of uncertainty as the clock ticks down to Brexit.

The Bank of England has made tentative moves to increase interest rates under Carney’s watch, most recently in August.

While critics have raised doubts about the case for rate hikes, Carney has also been attacked by some Brexit supporters over what they view as his interventions in political debate.

Jacob Rees-Mogg, a member of parliament and strident supporter of Brexit, described Carney in August as “the high priest of project fear” after the central banker warned there was an “uncomfortably high” risk of Britain crashing out of the European Union.

Leaving the bloc without a deal on trade could require the Bank of England to slash interest rates and introduce emergency measures in an effort to steady the financial system and wider economy.

Carney, a Harvard-educated economist and former Goldman Sachs (GS) banker, was governor of the Bank of Canada before his UK appointment.

Trump Gets Last-Minute Earful From Business Before China Tariffs

07 Sep 18
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BY   Andrew Mayeda, Mark Niquette. and Shawn Donnan

SOURCE  https://www.bloomberg.com/news/articles/2018-09-06/u-s-businesses-stage-last-minute-scramble-as-china-tariffs-loom?srnd=economics-vp

Some of America’s most prominent technology companies and retailers made a last-minute push to convince President Donald Trump to reverse course on a plan to impose tariffs on $200 billion in Chinese imports.

Members of the public had until Thursday to comment on the administration’s plan to slap tariffs on everything from bicycles and baseball gloves to digital cameras, paving the way for Trump to announce the tariffs as early as Friday.

Trump in an interview with Bloomberg News last week showed no sign of backing down, repeating his long-standing complaint that China has taken advantage of the U.S. and its leaders for decades. “It’s time to stop. We can’t let this happen,” the president said.

“We think there’s a high likelihood it happens sometime soon,” said Josh Kallmer, executive vice president for policy at the Information Technology Industry Council, referring to levies on $200 billion in goods. “It’s becoming a lot more difficult for the administration to do what it said it’s trying do, which is minimizing harm to consumers.”

The U.S. Trade Representative’s office didn’t respond to a request for comment.

Tariff Plea

On Thursday, Cisco Systems Inc., Hewlett-Packard Enterprise Co., and other technology companies sent a letter to U.S. Trade Representative Robert Lighthizer urging the administration to avoid imposing more tariffs. By increasing duties on telecommunications networking gear, the administration would raise the cost of accessing the Internet and slow the roll-out of next-generation wireless technologies, the companies said.

Manufacturers and small and mid-sized firms, in particular, can’t quickly adjust and the tariffs imposed so far haven’t led to any meaningful concessions, a coalition of the National Retail Federation and 150 organizations said in separate comments to Lighthizer. The administration should cease further tariffs actions and give another shot at talks for a trade deal with with China, it said.

“Tit-for-tat tariffs are counterproductive and so far have only produced increased costs for American businesses, farmers, importers, exporters and consumers,’’ the coalition said.

The latest installment of tariffs would bring to $250 billion the total value of Chinese goods hit with duties, covering nearly half of all imports into the U.S. last year. Beijing has threatened to retaliate with duties on $60 billion in American products.

China will be forced to retaliate if the U.S. ignores resistance in public hearings and imposes additional tariffs, said Gao Feng, a Ministry of Commerce spokesman, at a regular briefing on Thursday in Beijing.

The trade conflict between the world’s two biggest economies shows little sign of abating, roughly two months after the U.S. imposed its first round of tariffs on Chinese goods, and negotiations to defuse the tensions have stalled. The International Monetary Fund has warned that a trade war could undermine the strongest global upswing in years.

Business Warnings

At public hearings last month, companies warned that fresh duties on Chinese imports could hike costs and stifle innovation. Almost 350 individuals from companies, trade associations and other entities testified, with most opposed to the levies. Many lawmakers, including from Trump’s own Republican party, oppose the president’s zeal for tariffs but have limited options for curbing such sanctions.

Efforts to negotiate a U.S.-China truce have proved fruitless. Two days of talks in Washington in August failed to yield a breakthrough following three rounds of unsuccessful talks earlier in the year, dimming hopes of a compromise.

The two nations have maintained contact on a working level since Vice Commerce Minister Wang Shouwen visited the U.S. last month, Gao said on Thursday.

U.S. trade officials are juggling a number of high-profile files, in addition to the China tariffs. Lighthizer has been trying since last week to reach a deal with Canada on a revised North American Free Trade Agreement with Mexico, and he heads to Brussels on Monday to meet with EU officials to discuss the outlines of a trade deal announced in late July.

The Trump administration may roll out the tariffs on the $200 billion in phases. It waited about three weeks after announcing in mid-June that it was imposing tariffs on $34 billion of Chinese goods before they were implemented. The next stage of tariffs on $16 billion of goods took effect in August.

The tariffs are intended to punish China for what the Trump administration says are unfair trading practices, including the forced transfer of intellectual property from U.S. companies trying to get a foothold in the Chinese market.

Investors in U.S. assets have generally shrugged off the escalating trade war with China, said Kristina Hooper, chief global market strategist at Invesco Ltd., which manages $988 billion in assets. At some point, the duties will start to hurt American companies, she said.

“If we continue on our current trajectory, I do believe we’ll experience some kind of reckoning,” Hooper said. “It may take longer to figure out what the repercussions are, but the U.S. will not be unscathed.”

Stocks making the biggest moves premarket: KSS, MDT, SJM, TOL & more

21 Aug 18
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BY PETER SCHACKNOW

SOURCE https://www.cnbc.com/2018/08/21/stocks-making-the-biggest-moves-premarket-kss-mdt-sjm-tol–more.html

 

Kohl’s – The retailer earned $1.76 per share for its latest quarter, 12 cents a share above estimates. Revenue also beat forecasts. Comparable-store sales rose 3.1 percent, higher than the 2.7 percent increase anticipated by analysts surveyed by Thomson Reuters, and Kohl’s also raised its full-year earnings forecast.

Charles Schwab, E*Trade, TD Ameritrade – The discount brokerages are seeing their stocks pressured, following a CNBC.com report about a new JPMorgan Chase app that offers free stock trading.

Medtronic – The medical device maker reported adjusted quarterly profit of $1.17 per share, 6 cents a share above estimates. Revenue also topped Street forecasts. Medtronic raised its full-year revenue guidance, as it sees strong sales in its cardiac and vascular businesses.

J.M. Smucker – The food producer came in 2 cents a share above estimates, with adjusted quarterly profit of $1.78 per share. Smucker’s revenue missed forecasts, however, and the company also cut its full-year outlook based on divestitures as well as slower sales of some products.

Coty – The beauty products maker earned an adjusted 14 cents per share for its latest quarter, beating estimates by a penny a share. Revenue fell below forecasts, however, hurt by supply chain disruptions.

Toll Brothers – Toll reported quarterly profit of $1.26 per share, beating the consensus estimate of $1.03 a share. The luxury home builder’s revenue also topped forecasts as it sold more homes at higher prices. Toll raised the lower end of its fiscal 2019 average home price forecast by $5,000, now seeing an average price between $835,000 and $860,000.

Hertz Global — Chief Financial Officer Thomas Kennedy resigned after nearly five years on the job. The car rental company’s chief accounting officer Robin Kramer will service as interim CFO until September 10, when former Nielsen Holdings finance chief Jamere Jackson will take over.

BHP Billiton – BHP reported better-than-expected profit and a record high dividend for the fiscal year that ended June 30, but the mining company said it was more apprehensive about the short term outlook. The U.S.-China trade dispute and rising costs are among the factors cited as potential negatives for BHP.

Tesla – Tesla suppliers are worried about the automaker’s finances, according to The Wall Street Journal, which cited a survey saying 18 of 22 respondents believe Tesla is now a financial risk to their companies.

Microsoft – Microsoft said Russian hackers linked to cyberattacks during the 2016 election are now widening their targets to include the upcoming midterms as well as conservative groups. The company took down six domains last week that were registered to a Russian hacking group. Russia denied the allegations.

Hewlett-Packard Enterprise – The software company’s stock was downgraded to “market perform” from “outperform” at Bernstein, which said that the stock is fairly priced after a strong run and that secular worries remain for HPE’s markets.

Bank of America boosts Apple stock outlook on app store strength

21 Aug 18
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BY MICHAEL SHEETZ

SOURCE  https://www.cnbc.com/2018/08/21/bank-of-america-raises-apple-price-target-diversifying-app-store.html

Bank of America Merrill Lynch bumped its price target on Apple stock up to $250 per share from $230 per share on Tuesday, citing confidence in the tech giant’s push to diversify its mobile application offerings.

“The strong growth rate of non-gaming categories gives us increased confidence in the sustainability of strong App Store sales, and reduces risk of dependence on one single category of Apps,” analyst Wamsi Mohan wrote in a note.

Apple shares rose 0.4 percent in trading. Bank of America’s price target represents a 16 percent premium on the stock from Monday’s close of $215.46 per share.

“We raise our Services revenue estimate for 2019 by about $800 million and factor in slightly higher margins, and reiterate Buy on strength in Services, stable hardware & strong capital returns,” Mohan said.

The firm’s analysis of third-party data “indicates” that mobile games contribution to the App Store’s revenue is coming down, despite remaining the largest contributor overall. App Store revenue growth each year is “now being driven by non-gaming categories,” Mohan said.

“Categories like Entertainment Apps and Photo & Video Apps are becoming an incrementally larger portion of the App Store,” Mohan added.

China central bank official rebuts Trump’s claim it is manipulating the yuan

21 Aug 18
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BY  Liz Moyer

SOURCE  https://www.cnbc.com/2018/08/21/china-official-refutes-trumps-claim-it-is-manipulating-the-yuan.html

A senior official of China’s central bank told a briefing on Tuesday that the yuan’s exchange rate is set by the market, rebutting President Donald Trump’s claim a day earlier that the country was manipulating its currency.

China is not manipulating the yuan, the official, Li Bo, is quoted as saying in a report in the South China Morning Post. He told reporters in Beijing that the country would not use its currency as a weapon in a trade war.

“We won’t use policy to devalue the yuan and we won’t use the exchange rate as a weapon to react to external pressures from trade conflicts,” the report quotes Li as saying. Li, who did not name Trump directly, is director of monetary policy at the People’s Bank of China.

On Monday, Trump told reporters from Reuters in an interview that China was manipulating the yuan lower to make up for tariffs imposed by the U.S. on its goods. “I think China’s manipulating their currency, absolutely,” he said.

The yuan has fallen sharply against the dollar as the trade war between the two nations escalated this summer. Earlier this month, the dollar was trading at nearly 7 against the yuan, a level not seen in a decade. On Tuesday, the dollar/yuan trade was 6.86. The dollar has strengthened as the Federal Reserve raises interest rates.

Trump has accused China of currency manipulation in the past. A weaker currency makes a country’s goods more attractive to overseas buyers, so forcibly pushing it down would offset any effects from tariffs imposed by others.

In an interview with CNBC in July, Trump said China’s “currency is dropping like a rock, and our currency is going up, and I have to tell you it puts us at a disadvantage.”

A weakening currency also has a downside: capital flight out of the country, something China has been trying to stop.

Chinese officials are expected to be in Washington later this week to renew trade talks with the U.S. as fresh U.S. tariffs on $16 billion of Chinese goods are supposed to kick in Thursday. China has pledged to retaliate.

The Gates Foundation is now one of Berkshire’s largest shareholders

23 Jul 18
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By Paul R. La Monica

Source https://money.cnn.com/2018/07/23/investing/bill-gates-warren-buffett-melinda-berkshire-hathaway-stock/index.html

Warren Buffett for years has been giving away some of his considerable wealth to the foundation run by his pals Bill and Melinda Gates.

As a result, the Bill and Melinda Gates Foundation — along with Gates himself — now owns more than 5% of Buffett’s Berkshire Hathaway.

Berkshire Hathaway (BRKA) disclosed the ownership stake following an annual gift of more than 13.5 million shares on July 16. The shares are worth just under $13 billion. Gates also owns some Berkshire stock apart from the foundation.

According to the SEC filing, the Bill and Melinda Gates Foundation plan to sell 60 million shares by June 30, 2020 to donate to charity.

Buffett is the world’s third-wealthiest person. Gates, who co-founded Microsoft (MSFT), is the second. They have been friends for years and Buffett has been gifting money and shares to the Gates foundation — along with several other philanthropic groups — since 2006.

In another regulatory filing, Berkshire disclosed that Buffett recently donated more than 1.35 million class B shares to a charity bearing the name of Buffett’s late wife Susan Thompson. Buffett also donated 950,000 class B shares to three other charities run by his children.

Ryanair’s profit has dropped 20% and more trouble is coming

23 Jul 18
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By Charles Riley

Source https://money.cnn.com/2018/07/23/investing/ryanair-results-pilot-strikes/index.html

 

Ryanair has a labor problem, and it’s about to get worse.

The low-cost carrier said Monday that higher fuel costs, rising wages and strikes by pilots and regional air traffic controllers had caused its first quarter profit to drop 20% over the previous year.

Ryanair (RYAAY) has been giving pilots raises since recognizing the right of unions to negotiate on their behalf for the first time in December. Staff costs climbed 34% in the three months ended June 30.

Adding to the pressure on its business, strikes by regional air traffic controllers caused “widespread damage” and forced the airline to cancel over 2,500 flights in the first quarter.

With additional strikes scheduled for the summer travel season, the carrier’s labor problems could soon deepen.

Pilots based in Ireland have scheduled a strike for Tuesday, and cabin crew in Spain, Portugal, and Belgium will follow on Wednesday and Thursday.

Shares in Ryanair declined 6% in early trading.

Ryanair said it has signed union recognition agreements in the United Kingdom, Germany and Italy. But it said that progress had been slower in smaller markets.

“We expect further strikes over the peak summer period as we are not prepared to concede to unreasonable demands that will compromise either our low fares or our highly efficient model,” the company said in its earnings statement.

“If these unnecessary strikes continue to damage customer confidence and [prices] in certain country markets then we will have to review our winter schedule, which may lead to fleet reductions at disrupted bases and job losses,” it added.

Sales at Ryanair increased 9% in the first quarter to €2.1 billion ($2.5 billion), but its margin dropped from 21% to 15%. Rising global oil prices pushed fuel costs up by 23% over the previous year to €631 million ($740 million).

 

Europe’s biggest low-cost airline is not the only carrier facing pressure.

Italian national carrier Alitalia went into administration in May after it was declared insolvent. Budget carrier Air Berlin filed for bankruptcy in August. Britain’s Monarch halted operations in the fall, leaving 110,000 customers temporarily stranded overseas.

A damaging pay dispute at Air France-KLM (AFLYY) forced the firm’s CEO to quit in May.

Nordea May Challenge $580,000 Fine Imposed by EU Markets Cop

23 Jul 18
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Source  https://www.bloomberg.com/news/articles/2018-07-23/nordea-may-challenge-580-000-fine-imposed-by-eu-markets-cop

 

The biggest Nordic bank is considering taking on the European Union’s top markets regulator after being handed a fine for providing credit ratings without a license.

Nordea Bank AB, together with four other major Nordic banks, was called out by the European Securities and Markets Authority for selling so-called shadow ratings to corporate clients without permission. Each firm was told to pay a fine of 495,000 euros, or $580,000, for the breach.

Nordea said on Monday that it discontinued shadow ratings in 2016, “although we disagree with ESMA” on the interpretation of the rules. “As for today’s fine, Nordea has just received the information and will decide if to appeal after having analyzed the information,” the lender said in a statement.

Nordea, Danske Bank A/S, SEB AB, Svenska Handelsbanken AB and Swedbank AB were hit with identical fines by ESMA for issuing credit ratings without authorization from June 2011 to August 2016. SEB continued the practice until May 2018, the regulator said. Handelsbanken said it’s preparing an appeal.

Nordic banks offered shadow ratings as a cheaper alternative to the credit grades provided by S&P Global Ratings, Moody’s Investors Service and Fitch Ratings. Lenders in the region said they were catering to smaller corporations that wanted access to debt markets without having to pay the higher fees that the major rating agencies required.

The practice “was generally considered by Nordic bond issuers and bond investors to have served the market well,” Nordea said. The lender said its reading of the rules was that “investment research materials are explicitly exempted” from the rule in question.

Handelsbanken said it’s of the opinion that it’s “compliant with the applicable EU regulations.” SEB described ESMA’s interpretation of the rules as narrow and said it may also appeal the decision. Swedbank said it will analyze ESMA’s conclusion, and noted that it has in the past “objected” to a preliminary decision by the authority.

The banks at the receiving end of ESMA’s fines are also part of a group behind a Nordic venture to create a new regional rating company. Nordic Credit Rating says it expects to be granted a license by ESMA as soon as next month.

NCR’s application would grant it permission to rate companies in the EU and the European Free Trade Association. The firm, which is owned by Nordic banks, bourses and investment funds, has said it is targeting about 500 companies across the region.

Deutsche Bank flunks Fed stress test; 3 other banks get flagged

02 Jul 18
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By   @MattEganCNN
Source http://money.cnn.com/2018/06/28/investing/deutsche-bank-fed-stress-test/index.html?iid=SF_LN 

Deutsche Bank was the only major financial institution to fail the Federal Reserve’s annual stress test exam, dealing another blow to Germany’s largest lender.

The Fed raised more moderate concerns about Goldman Sachs and Morgan Stanley that will limit the ability of those Wall Street banks to raise their dividends and buy back more of their stock. The stress test also revealed State Street would suffer “large losses” if one of its business partners came under financial pressure.

Despite those concerns, the Fed’s stress test results reflect a US banking system that has dramatically strengthened from the financial crisis a decade ago. Regulators gave a green light to the vast majority of the 35 largest US banks.

Those banks immediately announced plans to ramp up shareholder rewards. JPMorgan Chase(JPM) announced a 43% dividend hike and plans to buy back nearly $21 billion in stock. Citigroup (C) said it will boost its dividend by 41% and buy back up to $17.6 billion worth of shares. Wells Fargo (WFC) raised its dividend modestly and said it plans to buy back $24.5 billion of stock through mid-2019.

In a stress test, the Federal Reserve considers how banks would hold up under the severe strain of a recession or financial market turmoil. Lenders are also evaluated based on qualitative factors, including risk management, internal controls and government practices.

The Fed then passes judgment on each bank’s capital plan — how it rewards shareholders with higher dividends and stock buybacks.

This year’s exam shows that the largest banks have “strong capital levels” and after paying dividends “would retain their ability to lend even in a severe recession,” Federal Reserve Vice Chairman Randal Quarles said in a statement.

The glaring exception was Deutsche Bank (DB), which has stumbled repeatedly in recent years. The Fed objected to the capital plan of the German bank’s US subsidiary, citing “widespread and critical deficiencies across the firm’s capital planning practices.”

Although the stress test showed that DB USA would survive a recession, it also found “material weaknesses,” including over its data capabilities and controls, how it forecasts losses under stress and risk management functions such as internal audit.

“Together, these weaknesses raise concerns about DB USA’s ability to effectively determine its capital needs,” the Fed said.

The failure limits the ability of Deutsche Bank’s US arm to return cash to its German parent company, senior Fed officials told reporters on a conference call. The Fed will also require Deutsche Bank to address the concerns raised by the exam.

In a statement, Deutsche Bank said its US arm has made “significant investments” to improve its capital planning, controls and infrastructure. The company said it will keep meeting with regulators to address concerns.

Regulators took more of a middle-ground approach with Morgan Stanley (MS) and Goldman Sachs (GS).

Those Wall Street firms won’t be allowed to ramp up their dividends and buybacks beyond what they paid in recent years. That’s because both Morgan and Goldman originally submitted overly aggressive plans that would have dropped their capital levels below what the Fed considers acceptable.

The Fed said the concerns were the result of a one-time accounting hit caused by the corporate tax cut, not how they would perform under stress. In the long run, banks are expected to haul in fatter profits because of the tax law.

State Street (STT), a custodian bank that is paid to safeguard clients’ assets, also drew concerns from regulators.

The stress test showed that State Street would suffer losses if one of its largest trading partners defaulted. State Street will be required to take steps to address the matter, but the company was allowed to raise its dividend and buyback plan. A senior Fed official told reporters that the fix should be relatively straightforward.

The news came at something of an anxious time for banks.

The difference between short and long-term interest rates has flattened to levels not seen in a decade, making it harder for lenders to make money. The S&P Financial Index of bank stocks dropped 13 consecutive days through Wednesday. That’s the longest streak on record, according to LPL Financial.