Junk-rated energy bonds have plummeted after the spread of coronavirus hit oil prices, highlighting the strains on a sector that already led US defaults last year. Oklahoma-based Laredo Petroleum’s $600m bond, which was priced at 100 cents on the dollar in mid-January, dropped to as low as 90 cents after just a week of trading. Meanwhile, the yield on a widely watched junk-rated energy bond index run by Ice Data Services jumped 0.77 percentage points to a high of 9.02 per cent this week, reflecting a broad sell-off in lower quality debt from the sector. The bonds were picking up somewhat while energy prices stabilised on Wednesday, but the shake-out marks a sharp downturn in investor sentiment that had been buoyed coming into 2020 by rising oil prices stemming from global production cuts and tensions in the Middle East. Debt that had been issued in the brighter environment has now been punished, alongside other struggling energy companies’ debt.
Apple reported new records for both revenue and income during its holiday sales period, achieving one of the biggest quarterly profits for any company and helping to justify a stock price that has more than doubled in the last year. The Cupertino-based tech giant said revenues rose 9 per cent to $91.8bn in the quarter ended December 28, as iPhone revenues climbed 8 per cent and sales of AirPods and watches accelerated along with its services division. Net profit grew 11 per cent to $22.2bn, enough to surpass its $20.1bn record quarter from two years ago. Earnings per share were even better, climbing 19 per cent to $4.99. Both top-line and bottom-line figures were significantly higher than projections, which had estimated revenues at $88.1bn and profits at $20.1bn, according to an analyst poll compiled by Visible Alpha.
Global equity markets and oil prices fell sharply on Monday as the fast-spreading coronavirus hit sectors from travel to a wide range of manufacturing, prompting concerns that the disease would slow China’s economic growth. The S&P 500 index ended the day 1.6 per cent lower in New York while both the UK’s FTSE 100 and the European composite Stoxx 600 closed 2.3 per cent lower. Brent crude, the international benchmark, fell 3 per cent to $58.89 a barrel. Markets in China and Hong Kong were shut for the lunar new year. Investors are braced for a hit to first-quarter domestic growth in China as the virus curbs consumer spending and travel during the new year holiday — which Chinese authorities extended until next week in an effort to contain the outbreak.
China’s leaders are bracing for a blow to first-quarter economic growth as the deadly coronavirus weighs on consumption and travel during the lunar new year and threatens to hit manufacturing. The virus, which originated in the central Chinese city of Wuhan, has caused the cancellations of holiday events across the country. As the number of deaths and infections mounted, the government has been forced to extend the new year break. As of Monday morning, the coronavirus had killed at least 80 people and infected 2,744, leading authorities to impose an unprecedented lockdown on a population of about 40m in Hubei province.
Wall Street retreated on Friday after health officials reported a second case of coronavirus in the US, handing the S&P 500 its steepest drop in more than three months. Confirmation of a patient in Chicago brought a return of investor angst over an outbreak of the deadly virus in China, where authorities have shut down public transportation in multiple cities. The S&P 500 erased early gains and was down 0.9 per cent, locking up its worst weekly performance since August. The benchmark index was down 1.3 per cent at its low mark of the day. The last time it closed more than 1 per cent lower was on October 8, resulting in what has been one of the index’s longest quiet streaks on record.
China reported a 60 per cent increase in the number of people who have died in the new coronavirus outbreak to 41 on Saturday as France confirmed the first cases of the disease in Europe and Australia and Malaysia reported their first patients. There were now 1,287 people infected with the disease, with China shutting down more than 10 cities around Wuhan, the central metropolis where the outbreak is believed to have originated, and the US confirming its second case of the Sars-like virus. US officials said on Friday that a woman in her 60s living in Chicago had been diagnosed after travelling from Wuhan, adding that she was now in hospital.
The stock market value of the electric car maker Tesla has topped $100bn for the first time, capping a dramatic rally that has seen its share price rise 125 per cent in the past three months. The milestone marks a moment of vindication for Elon Musk after a controversial period in which the Tesla chief executive has at times been almost at war with Wall Street. It also comes days after his rocket company, SpaceX, completed a test that puts it on track to become the first private company to take astronauts into orbit. The dramatic start to the year has cemented Mr Musk’s reputation as the most accomplished salesman — and showman — in US business. Speaking in Davos on Wednesday, President Donald Trump compared him to the serial inventor Thomas Edison and called him one of the world's “great geniuses”. Mr Trump marvelled at SpaceX’s successful reuse of its rocket boosters, “where the engines come down with no wings, no anything, and they’re landing. I said, I’ve never seen that before.”
Trade tensions between London and Washington erupted on Wednesday, as the US threatened to impose “arbitrary” tariffs on UK car exports and Britain said it would give precedence to a commerce deal with the EU. Donald Trump wants to secure a swift trade deal with Britain before US presidential elections this autumn, but relations were soured as UK chancellor Sajid Javid confirmed plans to introduce a digital services tax, which will mainly hit big American technology companies. Steven Mnuchin, US Treasury secretary, retaliated by threatening to impose tariffs on British car exports, including leading brands manufactured in the UK such as Mini, Bentley and Rolls-Royce, if a digital tax is introduced in April. In a further sign of tension, Mr Javid said London would prioritise a post-Brexit trade agreement with the EU over a deal with the US.
A slowdown in the US continues to weigh on Netflix’s subscriber growth as it faces an onslaught of new competition. Netflix added 8.8m subscribers in the final three months of 2019, eclipsing its guidance for 7.6m and analyst forecasts for 7.9m. This was welcome news for the first quarter that the streaming group competed head-on with Disney and Apple, which launched rival services in November. However in the US, its largest market, Netflix added only 420,000 subscribers in the fourth quarter — below its guidance for 600,000 and well behind the 1.5m it added in the same period a year ago. Netflix blamed the US weakness on price increases last year and new competition from rival streaming launches. The company also warned that this softening in its home market would weigh on results for the current quarter.
China’s National Health Commission has confirmed the first cases of human-to-human transmission of the new Sars-like virus, fuelling concerns about the spread of the disease after Beijing reported a sharp rise in the number of people infected with the virus. Chinese authorities said 224 patients with the coronavirus had been identified, including 217 confirmed cases and seven suspected ones. The outbreak comes as hundreds of millions of Chinese prepare to travel across the country and around the world to celebrate the lunar new year later this week. Of the 217 confirmed cases, 198 are in the central Chinese city of Wuhan, five are in Beijing and 14 are in Guangdong province, which borders Hong Kong. The virus has killed three people since it was identified earlier this month.
China’s economy last year grew at the lowest rate since 1990 while the country’s birth rate fell to a record low, highlighting the domestic challenges facing Beijing despite a truce in its painful trade war with the US. Gross domestic product grew 6.1 per cent in 2019, hitting analysts’ expectations but also revealing an economy under pressure from weak consumer spending, rising unemployment and problems in the banking system. Growth between October and December reached 6 per cent, lower than some economists had expected. China’s CSI 300 of Shanghai and Shenzhen-listed stocks was up 0.6 per cent following the data, setting the index up for its seventh weekly gain. Hong Kong’s Hang Seng and Japan’s Topix gained 0.4 per cent. China’s onshore renminbi strengthened 0.1 per cent to Rmb6.8651 against the dollar, its strongest since July.
The US and China have signed an agreement to pause the trade war that has weighed on the global economy for nearly two years, while leaving in place tariffs on hundreds of billions of dollars of Chinese imports. The so-called phase one deal signed at the White House on Wednesday offers some relief following the anxiety in global markets and uncertainty for business that marked the lengthy period of economic conflict between Washington and Beijing. The 86-page English-language text contains eight chapters, ranging from stricter rules on intellectual property in China to a pledge by Beijing to purchase at least $200bn in US goods and services over the next two years, as well as a commitment by China not to manipulate its currency.
Tesla’s soaring share price has put Elon Musk within touching distance of the first tranche of a $50bn incentive package designed to keep him at the helm of the electric car maker. The company’s shares gained 2.5 per cent on Tuesday, closing in on $538 a share, valuing its equity at $97bn, a higher market value than Ford and General Motors combined. If the stock reaches $554.80, Tesla would hit a valuation of $100bn. If it holds that level for six months, it would unlock the first of several potential share-based payments to Mr Musk, worth just under $350m. The award would count as one of the largest bonuses in the corporate world but is overshadowed by the increased value of Mr Musk’s 18.9 per cent stake in Tesla, which has doubled in six months to $18.3bn.
The US Treasury department has dropped the designation of China as a currency manipulator in a gesture that aims to ease tensions with Beijing ahead of this week’s signing of a deal to halt their trade war. “China has made enforceable commitments to refrain from competitive devaluation, while promoting transparency and accountability,” said Steven Mnuchin, Treasury secretary, citing the broader agreement the administration has secured with China on trade. The move reverses last summer’s controversial decision to tag China with the label of currency manipulator, when relations between Washington and Beijing deteriorated sharply. China’s renminbi strengthened to a five-month high against the dollar in Asian trade on Tuesday morning after the announcement.
Global investors pumped a record amount of cash into fixed-income funds for the week ending Wednesday, after the threat of war prompted them to seek shelter in safe havens. Fixed income mutual funds and exchange traded funds around the world took in $23.2bn, the largest total in data going back to 2001, according to EPFR Global. The activity included inflows of $15bn into US bonds, led by $8.4bn flowing into funds that invest in US investment grade corporate debt and mixed funds that include corporate debt and government bonds. It was the highest weekly tally since 2011 for US investment grade and mixed funds. The stampede into global bonds came in the wake of the assassination of Qassem Soleimani, Iran’s most senior general, on Friday and retaliatory missile strikes from Iran on Tuesday.
Donald Trump signalled that the US would not respond militarily to Iran’s attacks on American forces in Iraq, in a bid to de-escalate the crisis in the Middle East triggered by his order to kill Iran’s top general. Flanked by his top national security advisers, Mr Trump said on Wednesday at the White House there had been no American or Iraqi casualties after Iran fired more than a dozen ballistic missiles at two bases in Iraq on Tuesday night and that the attack had resulted in only “minimal damage”. The US president, who had previously threatened “disproportionate” military action against Iran in the event of a retaliatory attack, said America would instead move ahead with “punishing economic sanctions” while it evaluated “options in response to Iranian aggression”.
Iran launched more than a dozen ballistic missiles at US forces in Iraq in its first military retaliation for the killing of military commander Qassem Soleimani. The strikes on at least two bases where US troops are housed marked a dramatic escalation in the confrontation between Washington and Tehran and raised the spectre of a broader conflict in the Middle East. The Pentagon said al-Assad base in Iraq’s Anbar province and a facility in Erbil, in the autonomous Iraqi Kurdistan region, were targeted. There were no details of casualties. “We are working on initial battle damage assessments,” the Pentagon said in a statement. “In recent days and in response to Iranian threats and actions, the department of defence has taken all appropriate measures to safeguard our personnel and partners.”
Franklin Templeton is set to mark 2019 with more outflows than any other US fund manager, according to the latest data from research group Morningstar, led by an exodus of investors from a bond fund run by emerging markets guru Michael Hasenstab. Investors clawed back $21bn from the company’s mutual funds and exchange traded funds in the first 11 months of last year, a rate of $430m per week, according to the data. The outflows extend a string of annual investor withdrawals that stretch back to 2014 and represent a sizeable chunk of the group’s assets under management, which stood at $692bn at the end of November. This amount has fallen by a quarter in the last five years despite the surging markets that helped mask outflows from active funds at many of its peers.
Tehran will not abide by any of its commitments to the 2015 nuclear accord it signed with world powers, pushing the deal closer to total collapse as the fallout from the US killing of an Iranian commander intensified. Iran’s decision to no longer limit the number of centrifuges used for enrichment raised the spectre of the country developing a nuclear weapon. Sunday’s announcement came after Donald Trump threatened to attack 52 targets, including cultural sites in Iran, if Tehran retaliated for the killing of Qassem Soleimani. The US president added that he would impose sanctions on Iraq if Baghdad followed through with a parliamentary vote to expel US troops from Iraq in retaliation for the American air strikes on its soil that also killed an Iraqi militia leader.
General Qassem Soleimani, the head of the Iranian Revolutionary Guards’ overseas forces, has been killed in a targeted US air strike at Baghdad airport. A US Pentagon statement accused Soleimani of “actively developing plans to attack American diplomats and service members in Iraq” and said that US forces had “at the direction of the President” taken “decisive defensive action”. The death of the military leader — who controlled Tehran’s extensive influence across the Middle East from Lebanon to Iraq, Syria and Yemen through the Revolutionary Guards’ al Quds forces — represents a dramatic escalation in the conflict between the US and Iran under the Trump administration.
Carlos Ghosn said he arrived in his home country Lebanon, fleeing what he called “injustice and political persecution” in Japan. The stunning escape was achieved while the former Nissan chairman was under strict bail conditions and daily surveillance by police and prosecutors as he awaited trial to defend himself against charges of financial misconduct
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March 2021
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