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Business

Brazil court grants bankruptcy protection for retailer Americanas

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SAO PAULO, Jan 19 (Reuters) – A Rio de Janeiro court on Thursday accepted Brazilian retailer Americanas SA’s (AMER3.SA) bankruptcy protection request, days after the company disclosed nearly $4 billion in accounting inconsistencies that have sparked a legal feud with creditors and investors.

Americanas, a 93-year-old company with stores all over Brazil and a major e-commerce unit, said in a securities filing that it would restructure debts of about 43 billion reais ($8.2 billion).

Shares in the company plunged about 42.5% to 1.00 real following news of the filing, extending its year-to-date drop to around 90%.

The firm, backed by the billionaire trio that founded 3G Capital, said the move had come “despite the efforts and measures that the management has been taking in the past few days alongside its financial and legal advisers to protect the company from the effects” of the accounting scandal.

Investors had expected the decision, with some deeming it unavoidable, especially after lender BTG Pactual (BPAC3.SA) obtained on Wednesday a court decision overturning part of the firm’s protection from creditors.

Americanas is also facing seven different investigations launched by securities regulator CVM, as well as an arbitration process requesting compensation of 500 million reais to the firm and the trio that founded 3G Capital.

In a document filed with the court, law firms Basilio Advogados and Salomao Kaiuca Abrahao attributed the urgency in filing for bankruptcy to the creditors’ decision to seize the companies’ assets.

The retailer also mentioned a debt downgrade by ratings agencies, which prevented any new loans from being extended. S&P, Moody’s and Fitch all downgraded Americanas’ credit ratings following the accounting scandal.

Earlier, Americanas had said that its current cash position stood at only 800 million reais, down from a previously reported 7.8 billion.

Lucas Pogetti, a partner at M&A advisers RGS Partners, said a large part of Americanas’ previously disclosed cash position was linked to the prepayment of receivables or deposited with creditors.

“Naturally, when the banks became aware of the company’s real situation they began to adopt a more aggressive posture to protect themselves, consequently restricting access to resources,” Pogetti said.

In the filing, Americanas asks to exclude its fintech, Ame, from the bankruptcy protection, as it is regulated by the central bank, and for authorization to increase its capital.

Americanas’ stores are ubiquitous at Brazilian shopping malls. It e-commerce unit, which traded as a separate company before a recent restructuring, is one of the country’s top online retailers.

Chief executive Sergio Rial resigned last week, less than two weeks after taking the job, citing the discovery of “accounting inconsistencies” totaling 20 billion reais.

Rial, the former head of Banco Santander’s Brazilian arm (SANB3.SA), attributed the inconsistencies to differences in accounting for the financial cost of bank loans and debt with suppliers.

Chief financial officer Andre Covre, who had just joined Americanas as well, also left the firm, which has Brazilian billionaires Jorge Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles as reference shareholders.

Americanas said the reference shareholders intended to maintain the company’s liquidity at levels that allowed for a “good operation” of its stores, digital channel and other entities.

($1 = 5.2226 reais)

Reporting by Gabriel Araujo, Tatiana Bautzer and Peter Frontini in Sao Paulo and Carolina Pulice in Mexico City; Editing by Rosalba O’Brien and Bradley Perrett

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Texas AG to halt most of Citigroup’s municipal offerings on gun law row

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Jan 18 (Reuters) – Citigroup Inc (C.N) has discriminated against the firearms sector, the office of Texas Attorney General Ken Paxton said, making a decision that “has the effect” of Texas halting Citi’s ability to underwrite most municipal bond offerings in the state.

Republicans have been ramping up pressure on the finance industry over environmental, social and governance (ESG) investment practices. Texas enacted a law in 2021 prohibiting government contracts with entities that discriminated against the firearms industry.

“It has been determined that Citigroup has a policy that discriminates against a firearm entity or firearm trade association”, the assistant attorney general chief of the public finance division of Texas AG wrote on Wednesday in the letter seen by Reuters.

“Citi’s designation as an SB-19 discriminator has the effect of halting its ability to underwrite most municipal bond offerings in Texas,” Paxton’s office told Reuters, referring to the law.

Until further notice, The Texas AG will not approve any public security issued on or after Wednesday in which Citigroup purchases or underwrites the public security, she added in the letter.

“Citi does not discriminate against the firearms sector and believe we are in compliance with Texas law”, a Citigroup spokesperson said in an emailed statement to Reuters, adding that the company would remain engaged with the Texas AG office to review options.

In 2018, Citigroup put restrictions on new retail business clients that sell guns, requiring that they pass background checks. That followed a high school shooting in Florida in February of that year in which 17 people died.

Bloomberg News first reported the news on Thursday.

Reporting by Lavanya Ahire and Akanksha Khushi in Bengaluru,Additional reporting by Urvi Dugar and Mrinmay Dey; Editing by Bradley Perrett, Bernadette Baum and David Gregorio

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Crypto lender Genesis preparing to file for bankruptcy, Bloomberg News reports

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Jan 18 (Reuters) – Cryptocurrency lender Genesis Global Capital is planning to file for bankruptcy as soon as this week, Bloomberg News reported on Wednesday, citing people with knowledge of the situation.

A bankruptcy filing has been expected for weeks, after the company froze customer redemptions on Nov. 16 following the downfall of major cryptocurrency exchange FTX.

The collapse of FTX in November has claimed several victims including crypto lender BlockFi and Core Scientific Inc , one of the biggest publicly traded crypto mining companies in the United States, both of which filed for bankruptcy protection in the following months.

Genesis, its parent Digital Currency Group and creditors have exchanged several proposals, but have so far failed to come to an agreement, the Bloomberg report said, adding that Kirkland & Ellis and Proskauer Rose have been advising groups of creditors.

Genesis did not immediately respond to a Reuters request for comment.

Genesis is also locked in a dispute with Gemini, founded by the identical twin crypto pioneers Cameron and Tyler Winklevoss.

Gemini offered a crypto lending product called Earn in partnership with Genesis, and now says Genesis owes it $900 million in connection with that product.

The U.S. Securities and Exchange Commission last week said it had charged Genesis and Gemini with illegally selling securities to hundreds of thousands of investors through their crypto lending program.

Reporting by Niket Nishant and Mehnaz Yasmin in Bengaluru; Editing by Sriraj Kalluvila

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Wall St stumbles after weak data, hawkish Fed comments

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  • Fed’s Bullard, Mester back rate increases
  • U.S. retail sales drop in December
  • Indexes down: Dow 1.28%, S&P 1.07%, Nasdaq 0.78%

Jan 18 (Reuters) – Wall Street’s main indexes fell on Wednesday after weak economic data and hawkish comments from Federal Reserve officials sparked worries that the central bank may not pause interest rate hikes any time soon.

Before the market opened, U.S. economic data showed retail sales and producer prices declined more than expected in December. Also production at U.S. factories fell more than expected in December and output in the prior month was weaker than previously thought.

With Wall Street’s major averages showing gains so far for 2023, Sam Stovall, chief investment strategist at CFRA research, said some investors saw the week data as an opportunity to take profits while others worried about the prospects for a recession.

“The market was overbought. Today’s economic data served as a trigger to initiate a profit taking spell and the groups with most profits to take have been the ones that have done best last year,” said Stovall.

By 2:14PM ET, the Dow Jones Industrial Average (.DJI) fell 434.27 points, or 1.28%, to 33,476.58, the S&P 500 (.SPX) lost 42.57 points, or 1.07%, to 3,948.4 and the Nasdaq Composite (.IXIC) dropped 87.02 points, or 0.78%, to 11,008.10.

The weakest sectors on the day are the defensive consumer staples (.SPLRCD), down more than 2%, and utilities (.SPLRCU), which was last down 1.8%.

The benchmark S&P and the blue-chip Dow were both on track for their second straight day of losses, while the Nasdaq, if it ends lower, would snap a seven-day winning streak.

U.S. stocks had started 2023 on a strong footing, with the S&P having closed up almost 4% year-to-date on Tuesday, on hopes that a moderation in inflationary pressures could give the Fed cover to dial down the size of its interest rate hikes.

Roughly halfway through January, the S&P was up 2.7% for the month so far while the Nasdaq was up more than 5% and the Dow, the best performer of the three for 2022, was up 0.9%.

Earlier, St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester stressed on the need to raise rates beyond 5% to bring inflation to heel.

The Fed commentary also highlighted the disparity between the U.S. central bank’s estimate of its terminal rate and market expectations, which were of the rate peaking at 4.88% by June. Traders are now betting on a 25-basis point rate hike in February.

“This market is very hopeful that we’re going to get a soft landing and every time you have hawkish comments from the Fed, it feels you’re not going to get that,” Dennis Dick, trader at Triple D Trading.

Investors are also focused on the fourth-quarter earnings season as a window into how corporate America is doing against the backdrop of higher interest rates.

Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.6% for the quarter, according to Refinitiv data, compared with a 1.6% decline in the beginning of the year.

IBM Corp (IBM.N) was down 2.6% after Morgan Stanley downgraded the company’s shares to “equal weight” from “overweight”.

Early gainers Microsoft Corp (MSFT.O) and Tesla Inc (TSLA.O) erased gains by late afternoon trading with Microsoft down 1.2% and Tesla off 2.7%.

Moderna Inc (MRNA.O) rose 3.6% after reporting data which demonstrated the effectiveness of its respiratory syncytial virus (RSV) vaccine.

PNC Financial Services Group Inc (PNC.N) was down 5.4% after the company missed estimates for fourth-quarter profit.

Declining issues outnumbered advancing ones on the NYSE by a 1.38-to-1 ratio; on Nasdaq, a 1.66-to-1 ratio favored decliners.

The S&P 500 posted 9 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 71 new highs and 14 new lows.

Reporting by Sinéad Carew in New York, Shreyashi Sanyal and Amruta Khandekar in Bengaluru; Additional reporting by Shubham Batra; Editing by Shounak Dasgupta and David Gregorio

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Exclusive: ECB union says staff losing faith in leadership over inflation, pay

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  • 40% of ECB staff has low or no trust
  • Two-thirds say confidence is damaged
  • 63% worried about ECB’s ability to protect purchasing power

FRANKFURT, Jan 18 (Reuters) – (This Jan. 17 story has been corrected to restore the dropped words in paragraph 11)

European Central Bank staff are losing confidence in the institution’s leadership following the ECB’s failure to control inflation and a pay award that lagged the leap in prices, according to a survey by trade union IPSO.

The responses underline that even central banks, whose primary responsibility is fighting inflation, are not immune to staff dissatisfaction with the sharply rising cost of living.

The survey was organised in the context of a dispute between IPSO, which holds six out of nine seats on the ECB’s staff committee, and the central bank’s board over pay and remote-working arrangements.

An ECB spokesperson did not comment directly on IPSO’s findings when asked but pointed to a separate staff survey, run by the ECB itself last year, showing that 83% of nearly 3,000 respondents were proud to work for the ECB and 72% would recommend it.

Results of IPSO’s survey, which largely focused on pay and remote-working arrangements but also included questions about trust in the board, were sent to ECB staff on Tuesday in an email, seen by Reuters.

They showed two-thirds of roughly 1,600 respondents said their trust in Lagarde and the rest of the six-member ECB board had been damaged by recent developments such as high inflation and a pay increase that did not match the rise in prices.

Asked how much trust they had in Lagarde and the board when it comes to leading and managing the ECB, the central bank for the 20 countries that use the euro, just under half of respondents said “moderate” (34.3%) or “high” (14.6%).

But over 40% of respondents said they had “low” (28.6%) or “no” (12%) trust, while 10.5% could not say.

“This is a serious concern for our institution, as no one can correctly lead an organisation without the trust of its workforce,” the union said in its email.

INFLATION SURGE, PAY BATTLES

The survey was the first by IPSO to ask about trust in top management since Christine Lagarde took over as ECB President in late 2019.

A similar IPSO survey of ECB staff, taken just before her predecessor Mario Draghi stepped down, showed 54.5% of 735 respondents rated his presidency “very good” or “outstanding”, with support for his policy measures even higher.

Then, however, inflation in the euro zone had been low for a decade. Its recent surge to multi-decade highs in countries around the world has seen a revival in battles over pay between workers and the companies and institutions that employ them.

And a majority of respondents in the October 2019 survey also complained about a lack of transparency in recruitment and perceived favouritism under Draghi.

The most recent Bank of England staff survey, also conducted in 2019, showed 64% of respondents had “trust and confidence in the Bank’s leadership”.

A 2022 U.S. government survey of employees at departments and federal agencies found that 61% of respondents had “a high level of respect” for their organisation’s senior leaders – roughly stable compared to the previous two years.

The ECB spokesperson also pointed to internal surveys in 2020-21 that found roughly 80% of respondents were satisfied with health-and-safety measures taken by the ECB in response to the coronavirus pandemic.

The latest IPSO survey showed 63% of staff who responded were worried about the ECB’s ability to protect their purchasing power after being handed a pay increase of just 4% last year – or roughly half the rise in consumer prices.

The ECB has been criticised by politicians, bankers and academics for initially underestimating a surge in the cost of living and then making up for it with large and painful increases in borrowing costs.

Lagarde, who is not an economist and had not been a central banker before joining the ECB, colourfully defended her board at an event with staff last month.

“If it wasn’t for them I’d be a sad, lonely cowgirl lost somewhere in the Pampa of monetary policy,” Lagarde said, according to a recording of the Dec. 19 town hall seen by Reuters.

She and fellow board members have long worried about the risk of a potential “wage-price spiral”, where higher salaries feed into prices, which they argue would make it harder for the ECB to bring inflation back down to its 2% target.

But IPSO said that concern is misplaced and workers should not be made to bear the brunt of the current bout in inflation.

“The ECB might be preaching lower real wages, but this is not our stance as your staff union,” it wrote in its message to ECB employees.

Editing by Catherine Evans

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Goldman misses profit estimates as dealmaking slumps, consumer business hit

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Jan 17 (Reuters) – Goldman Sachs Group Inc (GS.N) on Tuesday reported a bigger-than-expected 69% drop in fourth-quarter profit as it struggled with a slump in dealmaking, a drop in asset and wealth management revenue and booked losses at its consumer business.

Wall Street banks are making deep cuts to their workforce and streamlining their operations as dealmaking activity, their major source of revenue, stalls on worries over a weakening global economy and rising interest rates.

Goldman is also curbing its consumer banking ambitions as Chief Executive Officer David Solomon refocuses the bank’s resources on strengthening its core businesses such as investment banking and trading.

Solomon confirmed that the bank was cutting 6% of its headcount, or around 3,200 jobs, and was making changes to the consumer business to navigate an uncertain outlook for 2023.

“We tried to do too much too quickly,” he said about the consumer business such as its direct-to-consumer unit Marcus. “We didn’t execute perfectly on some so we’ve taken a hard look at those, and you make adjustments.”

Goldman reported a net loss of $660 million at its platform solutions unit, which houses transaction banking, credit card and financial technology businesses, as provisions for credit losses grew while the business was expanding.

Full-year net loss for the platform solutions business was $1.67 billion, the bank said, even though net revenue of $1.50 billion for 2022 was 135% above 2021.

Goldman on Tuesday confirmed that it is planning to stop making unsecured consumer loans after it moved Marcus into its asset and wealth management arm. The checking account launch for Marcus has also been postponed.

Goldman’s investment banking fees fell 48% in the latest quarter, while revenue from its asset and wealth management unit dropped 27% due to lower revenue from equity and debt investments.

Solomon said the investment banking outlook could be better in the “back half” of 2023, as people are softening their views on the economic outlook for this year.

Shares were down nearly 7% at $347.66 in midday trade.

[1/2] The logo for Goldman Sachs is seen on the trading floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., November 17, 2021. REUTERS/Andrew Kelly

Reuters Graphics Reuters Graphics

GROWING COSTS

Wall Street’s biggest banks have stockpiled more rainy-day funds to prepare for a possible recession, while showing caution about forecasting income growth in an uncertain economy and as higher rates increase competition for deposits.

Total operating expenses at Goldman rose 11% to $8.1 billion in the quarter. A source told Reuters last week that the bank would lay off 3,000 employees in an attempt to rein in costs.

Goldman Chief Financial Officer Denis Coleman said severance charges will be adjusted in 2023.

The bank reported a profit of $1.19 billion, or $3.32 per share, for the three months ended Dec. 31, missing the Street estimate of $5.48, according to Refinitiv IBES data.

“Widely expected to be awful, Goldman Sachs’ Q4 results were even more miserable than anticipated,” said Octavio Marenzi, CEO of consultancy Opimas.

“The real problem lies in the fact that operating expenses shot up 11% while revenues tumbled. This strongly suggests more cost cutting and layoffs are going to come,” he added.

Goldman’s trading business was a bright spot as it benefited from heightened market volatility, spurred by the Federal Reserve’s quantitative tightening.

Fixed income, currency and commodities trading revenue was up 44% while revenue from equities trading fell 5%.

Overall net revenue was down 16% at $10.6 billion.

Reporting by Niket Nishant and Noor Zainab Hussain in Bengaluru and Saeed Azhar in New York; Additional reporting by Bansari Mayur Kamdar; Editing by Anil D’Silva and Mark Porter

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Cryptoverse: Bitcoin is back with a bonk

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Jan 17 (Reuters) – Bitcoin is on the charge in 2023, dragging the crypto market off the floor and electrifying bonk, a new meme coin.

The No.1 cryptocurrency has clocked a 26% gain in January, leaping 22% in the past week alone, breaking back above the $20,000 level and putting in on course for its best month since October 2021 – just before the Big Crypto Crash.

Ether has also risen, by 29% this year, helping drive the value of the overall global cryptocurrency market above $1 trillion, according to CoinGecko.

“After a rough year last year for cryptos, we are seeing a form of mean reversion,” said Jake Gordon, analyst at Bespoke Investment Group, referring to the theory of asset prices returning to long-term averages.

Researchers said investor bets on a rosier macroeconomic picture were driving a jump in riskier assets across the board.

Few crypto tokens have benefited more than bonk, which was launched at the end of December on the Solana blockchain and had rocketed 5,000% by early January. It has since fallen back, though remains up 910% since the start of the year.

It is the latest entrant to the hyper-volatile world of meme coins, cryptocurrencies inspired by online memes and jokes, and is modeled after the same grinning Shiba Inu dog as dogecoin – which itself was catapulted to fame by Elon Musk tweets.

Bonk’s a puppy, though.

Even at its peak it was worth just $0.000004873759 with a market capitalization of about $205 million.

Other meme tokens are also up, with dogecoin and Shiba Inu up 19% and 27% respectively in 2023.

But buyers beware.

“Investors need to be especially cautious when it comes to coins like doge, Shiba Inu and bonk,” said Les Borsai, co-founder of digital assets services firm Wave Financial.

“They fall just as hard as they surge.”

Nonetheless, some market players pointed to the relative cheapness of these tokens – doge is worth about eight cents – as a reason why speculators were willing to place bets on them.

“Meme coins belong to crypto, it’s part of the culture,” said Martin Leinweber, digital assets product specialist at MarketVector Indexes. “It just takes a few lines of codes to create a meme token and if you have a community for it, people love that.”

RUMORS OF SOL’S DEATH EXAGGERATED

Bonk is a meme coin with a mission. It was created, in part, to support the Solana blockchain, which has seen an exodus of funds and users since crypto exchange FTX filed for bankruptcy in November, and its native Solana token drop over 37%.

The Solana token has now indeed jumped as bonk has gained traction: it’s up 131% in 2023, the biggest gainer among major cryptocurrencies.

“Rumors of Solana’s death seem to have been greatly exaggerated,” said Tom Dunleavy, senior research analyst at data firm Messari. “Despite the recent price appreciation seemingly being driven by speculation, the underlying ecosystem remains quite strong.”

Reuters Graphics

TOO EARLY TO CALL A CRYPTO REVERSAL

Some researchers chalked the crypto gains up to optimism that inflation had peaked, reducing the need for tighter central bank policy.

“Bitcoin and crypto tend to front-run everything, which is why we’ve seen notable relative strength in this asset class of late,” said Wave Financial’s Borsai.

There’s certainly been an increase in activity.

The dollar value of bitcoin trading volumes on major exchanges over a 7-day period jumped to $151 million, the highest in nearly two months, according to data from Blockchain.com.

Total bitcoin flows – representing all uses including trading and payments – have increased by 13,130 bitcoin on average in the last 7 days, the largest rise in 64 days, Chainalysis data showed.

However, market watchers warned against celebrating too soon, noting trading volumes remained low and the macroeconomic environment uncertain.

“It’s too early to declare a definitive reversal for the crypto market despite the recent strength we’ve seen of late,” said Aaron Kaplan, co-founder of Prometheum, a digital asset securities trading platform.

“If interest rate increases are below what the market expects, then risk assets will benefit and crypto prices will likely continue the uptrend, but there’s just too much uncertainty right now.”

Reporting by Medha Singh and Lisa Mattackal in Bengaluru; Editing by Pravin Char

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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Shares rise, yen climbs as BOJ battles bond bears

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  • BOJ under intense pressure as it defends yield policy
  • Yen hits 7-mth high, yuan climbs as dollar eases
  • More earnings ahead, many central bank speakers
  • Britain’s FTSE flirts with record high

SYDNEY/LONDON, Jan 16 (Reuters) – Shares firmed on Monday as optimism over corporate earnings and China’s reopening offset concerns the Bank of Japan (BOJ) might temper its super-sized stimulus policy at a pivotal meeting this week, while a holiday in U.S. markets made for thin trading.

The yen climbed to its highest since May after rumours swirled the BOJ might hold an emergency meeting on Monday as it struggles to defend its new yield ceiling in the face of massive selling. read more

That had local markets in an anxious mood, and Japan’s Nikkei (.N225) slipped 1.3% to a two-week low.

Yet MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) added 0.27%, with hopes for a speedy Chinese reopening giving it a gain of 4.2% last week.

And European shares opened positively with the STOXX 600 (.STOXX) up 0.1% by 0850 GMT driven by healthcare stocks (.SXDP) which gained 0.6%.

Britain’s benchmark FTSE index (.FTSE) edged close to the record high of 7903.50 it hit in 2018, with banks and life insurance companies among the top gainers.

Earnings season gathers steam this week with Goldman Sachs (GS.N), Morgan Stanley (MS.N) and Netflix (NFLX.O) among those reporting.

World leaders, policy makers and top corporate chiefs will be attending the World Economic Forum in Davos, and there are a host of central bankers speaking, including no fewer than nine members of the U.S. Federal Reserve.

The BOJ’s official two-day meeting ends on Wednesday and speculation is rife it will make changes to its yield curve control (YCC) policy given the market has pushed 10-year yields above its new ceiling of 0.5%. read more

The BOJ bought almost 5 trillion yen ($39.12 billion) of bonds on Friday in its largest daily operation on record, yet 10-year yields still ended the session up at 0.51%.

Early on Monday, the bank offered to buy another 1.3 trillion yen of JGBs, but the yield stuck at 0.51%.

“There is still some possibility that market pressure will force the BOJ to further adjust or exit the YCC,” JPMorgan analysts said in a note. “We can’t ignore this possibility, but at this stage we do not consider it a main scenario.”

“Although domestic demand has started to recover and inflation continues to rise, the economy is not heating up to the extent that a sharp rise in interest rates and potential risk of large yen appreciation can be tolerated,” they added.

THE YEN UN-ANCHORED

The BOJ’s uber-easy policy has acted as a sort of anchor for yields globally, while dragging down the yen. Were it to abandon the policy, it would put upward pressure on yields across developed markets and most likely see the yen surge.

The dollar has been undermined by falling U.S. bond yields as investors wager the Federal Reserve can be less aggressive in raising rates given inflation has clearly turned the corner.

The Japanese yen rose to a more than seven-month peak against the dollar on Monday, as market sentiment was dominated by expectations that the BOJ would make further tweaks to, or fully abandon, its yield control policy.

The yen jumped roughly 0.5% to a high of 127.215 per dollar, before easing to 128.6 by 0915 GMT.

The dollar index, which measures the U.S. unit against a basket of major currencies, recovered from a 7-month low touched earlier in the session to be at 102.6 .

Futures now imply almost no chance the Fed will raise rates by half a point in February, with a quarter-point move seen as a 94% probability.

Yields on 10-year Treasuries are down at 3.498%, having fallen 6 basis points last week, close to its December trough, and major chart target of 3.402%.

Alan Ruskin, global head of G10 FX Strategy at Deutsche Securities, said the loosening of global supply bottlenecks in recent months was proving to be a disinflationary shock, which increases the chance of a soft landing for the U.S. economy.

“The lower inflation itself encourages a soft landing through real wage gains, by allowing the Fed to more readily pause and encouraging a better behaved bond market, with favourable spillovers to financial conditions,” Ruskin said.

“A soft landing also reduces the tail risk of much higher U.S. rates, and this reduced risk premia helps global risk appetite,” Ruskin added.

Commodities prices which had rallied last week, dipped on Monday.

The drop in yields and the dollar had benefited the gold price, which jumped 2.9% last week, but the precious metal slipped 0.4% to $1,911 an ounce in early trading on Monday .

Oil prices slid as a rise in COVID cases clouded the prospects for a surge in demand as China reopens its economy.

Brent crude fell 73 cents, or 0.83%, to $84.57 a barrel by 0857 GMT, while U.S. West Texas Intermediate crude CLc1 was down 61 cents, or 0.6%, at $79.24 a barrel.

($1 = 127.8000 yen)

Reporting by Wayne Cole and Lawrence White;
Editing by Shri Navaratnam and Emelia Sithole-Matarise

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S&P 500 ends at highest in month, indexes gain for week as earnings kick off

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  • JPMorgan, Wells Fargo shares jump
  • U.S. consumers’ inflation expectations ease – survey
  • Tesla falls after price cuts on electric vehicles
  • Indexes: Dow up 0.3%, S&P 500 up 0.4%, Nasdaq up 0.7%

NEW YORK, Jan 13 (Reuters) – The S&P 500 and Nasdaq finished at their highest levels in a month on Friday, with shares of JPMorgan Chase and other banks rising following their quarterly results, which kicked off the earnings season.

All three major indexes also registered strong gains for the week, leaving the S&P 500 up 4.2% so far in 2023, and the Cboe Volatility index (.VIX) – Wall Street’s fear gauge – closed at a one-year low.

On Friday, financials (.SPSY) were among sectors that gave the S&P 500 the most support.

JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N) beat quarterly earnings estimates, while Wells Fargo & Co (WFC.N) and Citigroup Inc (C.N) fell short of quarterly profit estimates.

But shares of all four firms rose, along with the S&P 500 banks index (.SPXBK), which ended up 1.6%. JPMorgan shares climbed 2.5%.

Still, Wall Street’s biggest banks stockpiled more rainy-day funds to prepare for a possible recession and reported weak investment banking results while showing caution about forecasting income growth. They said higher rates helped to boost profits.

Strategists said investors will be watching for further guidance from company executives in the coming weeks.

“This has shifted the focus back to earnings,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“Even though the earnings were basically OK, people are just kind of stepping back, and you’re going to see a wait-and-see attitude with stocks” as investors hear more from company executives.

Year-over-year earnings from S&P 500 companies are expected to have declined 2.2% for the quarter, according to Refinitiv data.

Also giving some support to the market Friday, the University of Michigan’s survey showed an improvement in U.S. consumer sentiment, with the one-year inflation outlook falling in January to the lowest level since the spring of 2021.

The Dow Jones Industrial Average (.DJI) rose 112.64 points, or 0.33%, to 34,302.61, the S&P 500 (.SPX) gained 15.92 points, or 0.40%, to 3,999.09 and the Nasdaq Composite (.IXIC) added 78.05 points, or 0.71%, to 11,079.16.

The S&P 500 closed at its highest level since Dec. 13, while the Nasdaq closed at its highest level since Dec. 14.

For the week, the S&P 500 gained 2.7% and the Dow rose 2%. The Nasdaq increased 4.8% in its biggest weekly percentage gain since Nov. 11.

The U.S. stock market will be closed Monday for the Martin Luther King Jr. Day holiday.

Thursday’s Consumer Price Index and other recent data have bolstered hopes that a sustained downward trend in inflation could give the Federal Reserve room to dial back on its interest rate hikes.

Money market participants now see a 91.6% chance the Fed will hike the benchmark rate by 25 basis points in February.

Among the day’s decliners, Tesla (TSLA.O) shares fell 0.9% after it slashed prices on its electric vehicles in the United States and Europe by as much as 20% after missing 2022 deliveries estimates.

In other earnings news, UnitedHealth Group Inc (UNH.N) shares rose after it beat Wall Street expectations for fourth-quarter profit but the stock ended down on the day.

Shares of Delta Air Lines Inc (DAL.N) dropped 3.5% as the company forecast first-quarter profit below expectations.

Volume on U.S. exchanges was 10.77 billion shares, compared with the 10.81 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 1.79-to-1 ratio; on Nasdaq, a 1.78-to-1 ratio favored advancers.

The S&P 500 posted 12 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 105 new highs and 8 new lows.

Additional reporting by Shubham Batra, Ankika Biswas and Amruta Khandekar in Bengaluru; Editing by Subhranshu Sahu, Shounak Dasgupta and Grant McCool

Our Standards: The Thomson Reuters Trust Principles.

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Business

Goldman job cuts hit investment banking, global markets hard -source

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  • Mass redundancies, spending review beckons for Wall Street giant
  • Cuts to all major divisions expected, globally
  • Restructuring in Asian wealth unit kicks off Wednesday’s layoffs

NEW YORK/LONDON/HONG KONG, Jan 12 (Reuters) – Goldman Sachs (GS.N) began laying off staff on Wednesday in a sweeping cost-cutting drive, with around a third of those affected coming from the investment banking and global markets division, a source familiar with the matter said.

The long-expected jobs cull at the Wall Street titan is expected to represent the biggest contraction in headcount since the financial crisis. It is likely to affect most of the bank’s major divisions, with its investment banking arm facing the deepest cuts, a source told Reuters this month.

Just over 3,000 employees will be let go, the source, who could not be named, said on Monday. A separate source confirmed on Wednesday that cuts had started.

“We know this is a difficult time for people leaving the firm,” a Goldman Sachs statement on Wednesday said.

“We’re grateful for all our people’s contributions, and we’re providing support to ease their transitions. Our focus now is to appropriately size the firm for the opportunities ahead of us in a challenging macroeconomic environment.”

The cuts are part of broader reductions across the banking industry as a possible global recession looms. At least 5,000 people are in the process of being cut from various banks. In addition to the 3,000 from Goldman, Morgan Stanley (MS.N) has cut about 2% of its workforce, or 1,600 people, a source said last month while HSBC (HSBA.L) is shedding at least 200, sources previously said.

Last year was challenging across groups including credit, equities, and investment banking broadly, said Paul Sorbera, president of Wall Street recruitment firm Alliance Consulting. “Many didn’t make budgets.”

“It’s just part of Wall Street,” Sorbera said. “We’re used to seeing layoffs.”

The latest cuts will reduce about 6% of Goldman’s headcount, which stood at 49,100 at the end of the third quarter.

[1/3] A trader works at the Goldman Sachs stall on the floor of the New York Stock Exchange, April 16, 2012. REUTERS/Brendan McDermid/File Photo

The firm’s headcount had added more than 10,000 jobs since the coronavirus pandemic as markets boomed.

The reductions come as U.S. banking giants are forecast to report lower profits this week. Goldman Sachs is expected to report a net profit of $2.16 billion in the fourth-quarter, according to a mean forecast by analysts on Refinitiv Eikon, down 45% from $3.94 billion net profit in the same period a year earlier.

Shares of Goldman Sachs have partially recovered from a 10% fall last year. The stock closed up 1.99% on Wednesday, up around 6% year-to-date.

LAYOFFS AROUND GLOBE

Goldman’s layoffs began in Asia on Wednesday, where Goldman completed cutting back its private wealth management business and let go of 16 private banking staff across its Hong Kong, Singapore and China offices, a source with knowledge of the matter said.

About eight staff were also laid off in Goldman’s research department in Hong Kong, the source added, with layoffs ongoing in the investment banking and other divisions.

At Goldman’s central London hub, rainfall lessened the prospect of staff huddles. Several security personnel actively patrolled the building’s entrance, but few people were entering or leaving the property. A glimpse into the bank’s recreational area just beyond its lobby showed a handful of staffers in deep conversation but few signs of drama. Wine bars and eateries local to the office were also short of post-lunch trade, in stark contrast to large-scale layoffs of the past when unlucky staffers would typically gather to console one another and plan their next career moves.

In New York, employees were seen streaming into headquarters during the morning rush.

Goldman’s redundancy plans will be followed by a broader spending review of corporate travel and expenses, the Financial Times reported on Wednesday, as the U.S. bank counts the costs of a massive slowdown in corporate dealmaking and a slump in capital markets activity since the war in Ukraine.

The company is also cutting its annual bonus payments this year to reflect depressed market conditions, with payouts expected to fall about 40%.

Reporting by Sinead Cruise and Iain Withers in London, Selena Li in Hong Kong, Scott Murdoch in Sydney and Saeed Azhar in New York; Editing by Josie Kao and Christopher Cushing

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