Focus: Equities versus fixed income

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Updated 08 May 2020
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Focus: Equities versus fixed income

What happened:

Stock markets turned risk-on after a positive conference call between US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer with Chinese Vice Premier Liu He to discuss the implementation of “Phase One” of the US-China trade agreement. Both countries expect to fulfill their obligations under the deal.

April trade statistics for China show a contraction of imports from the US, which could be a roadblock. Despite the harsh anti-China rhetoric regarding the spread of the coronavirus (COVID-19) pandemic, US Secretary of State Mike Pompeo was optimistic on the agreement as long as China made good on promises regarding trade, intellectual property and the opening of its investment markets.

China reported a current account deficit of $297 billion for the first quarter 2020. 

The earnings season continues:

Bristol Myers Squibb’s (BMS) revenues skyrocketed by 82 percent to $10.8 billion, which was attributed to the acquisition of Celgene in November 2019. Several BMS pre-acquisition drugs also performed well. The COVID-19 pandemic boosted revenue in the first quarter by around $500 million, with buyers stocking up inventories out of fear of supply chain interruptions. Earnings per share were $1.72, up 56 percent year over year.

ViacomCBS revenues came in at $6.1 billion, down 6 percent, while net earnings fell by 74 percent to $508 million. Advertising revenues were down 19 percent, while content licensing revenues were up 9 percent. Domestic streaming and digital video revenue rose 51 percent during the quarter.

Hilton net income was $18 million and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $363 million for the first quarter. Currency-adjusted system-wide revenue decreased by 228 percent compared to the same quarter in 2019. The outlook for the second quarter is bleak as lockdowns in the major economies of Europe and North America will hit the company hard. Both IHG and Marriott reported similarly pessimistic outlooks, while all of them abandoned guidance.

Siemens posted an operating profit of €1.6 billion ($1.7 billion), down 18 percent compared to the same period last year. Revenues were stable at €14.2 billion. This did not include Siemens Gas and Power/Siemens Gamesa Renewable Energy, which are separated into Siemens Energy. CEO Joe Kaeser said that the entity's initial public offering would take place later this year as scheduled. The company abandoned guidance. Kaeser expects the next quarter to be the worst. He observed that his clients are attempting to regionalize supply chains and voiced particular concerns about India. Of the 24 currently closed factories, 20 are located in India.

ING’s net result came in at €1 billion, down 35.7 percent compared to a quarter ago. Lending was up by €12.3 billion and net deposits by earnings came in at €12.4 billion, reflecting liquidity provided last month. Net customer deposit inflow amounted to €9.2 billion. The bank will take guidance quarter by quarter going forward.

Background:

Equity markets recovered nicely from their March 24 lows. On Thursday, the Nasdaq recovered its losses for the year. The gains are partly fueled by monetary and fiscal rescue packages and do not reflect the situation in the real economy.

They are also in contrast to government bond markets. The yields for 2-year and 5-year treasury have reached new lows, giving rise to concerns about US interest rates turning negative. This could be a reflection of investors turning to safe assets rather than the Fed really envisaging negative interest rates, particularly when looking at Japan and Switzerland. In both cases, negative interest rates only had a temporary effect. The yen and the Swiss Franc (two classic safe haven currencies) kept appreciating each time after rates had been lowered.

The pandemic has clearly shown the safe haven status of both US treasuries and the US dollar, which means that it may be appropriate for the Federal Reserve to learn lessons from across the Pacific and the Atlantic.

Where we go from here:

US first-time jobless claims rose by 3.2 million in the week ending April 1. While increases declined since the week ending March 27, they still exceeded 3 million week after week.

The US department of labor released the non-farm payroll data earlier on Friday. Job losses amounted to 20.5 million for the month of April, bringing the unemployment rate up to 14.7 percent. This is the highest level since the 1940s, wiping out a decade of job gains in the US.

San Francisco Fed President Mary Daly expects the economy to contract in 2020 and recover in 2021 with the caveat that it depends on the spread of the virus as well as the development of a vaccine or medicine to keep the spread in check.

The question remains as to when and how the job market will recover. It will depend on the shape and speed of the economic recovery. We should focus on how many high-quality jobs will return and whether jobs in the less skilled and l ess compensated gig economy will grow disproportionately.

 

— Cornelia Meyer is a Ph.D.-level economist with 30 years of experience in investment banking and industry. She is chairperson and CEO of business consultancy Meyer Resources.
Twitter: @MeyerResources


Attempts to smuggle methamphetamine thwarted in Saudi Arabia

This inspection uncovered 1.944 kg of methamphetamine concealed within the truck’s side compartments. (SPA
Updated 44 sec ago
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Attempts to smuggle methamphetamine thwarted in Saudi Arabia

RIYADH: Saudi authorities at the ports of Al-Batha and Rub’ Al-Khali have thwarted attempts to smuggle methamphetamine, concealed within two vehicles entering the Kingdom.

During the first attempt, a truck entering the Kingdom through the Al-Batha port was subjected to customs procedures and inspected using advanced security techniques. This inspection uncovered 1.944 kg of methamphetamine concealed within the truck’s side compartments.

In the second attempt, a vehicle entering the Kingdom through the Rub’ Al-Khali port underwent customs procedures. Upon inspection, 4.140 kg of methamphetamine were discovered, hidden inside the battery compartment.

Officials coordinated with the General Directorate of Narcotics Control to ensure the arrest of the drugs’ intended recipients, resulting in two arrests.

Saudi authorities said they are committed to protecting the Kingdom’s borders and would remain vigilant to thwart any smuggling attempts in cooperation with the General Directorate of Narcotics Control.

 

 


Oil tanker in Russia’s ‘shadow fleet’ adrift off German coast

Updated 30 min 12 sec ago
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Oil tanker in Russia’s ‘shadow fleet’ adrift off German coast

BERLIN: Germany charged that a heavily loaded tanker adrift off its northern coast Friday was part of the “shadow fleet” Moscow uses to avoid sanctions on its oil exports.
Foreign Minister Annalena Baerbock criticized Russia’s use of “dilapidated oil tankers” and labelled it a threat to European security.
She spoke after the 274-meter-long Eventin, carrying almost 100,000 tons of oil, was reported adrift and “unable to manoeuver” in the Baltic Sea.
An emergency tug intercepted the Eventin in waters off the island of Ruegen to stabilize the ship, which was carrying around “99,000 tons of oil.”
No oil leaks were detected by several surveillance aircraft overflights, but two more tug boats were on their way to the ship, the command said in a later statement.
A four-person team of emergency towing specialists would soon be winched onto the deck from a federal police helicopter to coordinate the operation, it added.
The sea was rough with 2.5-meter-high (8 feet) waves and strengthening wind gusts, the command also said, adding that no decision had yet been taken on whether and when to tow the ship to a port.
Although the tanker was navigating under the Panamanian flag, the German foreign ministry linked it to Russia’s sanctions-busting “shadow fleet.”
Baerbock said said that “by ruthlessly deploying a fleet of rusty tankers, (Russian President Vladimir) Putin is not only circumventing the sanctions, but is also willingly accepting that tourism on the Baltic Sea will come to a standstill” in the event of an accident.
Following Moscow’s invasion of Ukraine, Western countries have hit Russia’s oil industry with an embargo and banned the provision of services to ships carrying oil by sea.
In response, Russia has relied on tankers with opaque ownership or without proper insurance to continue lucrative oil exports.
The number of ships in the “shadow fleet” has exploded since the start of the war in Ukraine, according to US think tank the Atlantic Council.
In addition to direct action against Russia’s oil industry, Western countries have moved to sanction individual ships thought to be in the shadow fleet.
The European Union has so far sanctioned over 70 ships thought to be ferrying Russian oil.
The United States and Britain on Friday moved to impose restrictions on some further 180 ships in the shadow fleet.

FIA president commends Saudi Arabia’s efforts in organizing Dakar Rally

Updated 32 min 40 sec ago
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FIA president commends Saudi Arabia’s efforts in organizing Dakar Rally

  • Mohammed Ben Sulayem speaks of Kingdom’s commitment to delivering top-notch experience for participants
  • Rally resumes on Saturday with 7 stages remaining

Ha’il: The International Automobile Federation’s President Mohammed Ben Sulayem commended the Kingdom’s efforts in organizing the Dakar Rally during his visit to Saudi Arabia’s rally bivouac on Friday.
Ben Sulayem also praised the Kingdom’s commitment to delivering a top-notch experience for participants and highlighted the warm hospitality and generosity that embody the spirit of the Saudi people.
The FIA president highlighted that Saudi Arabia’s success in hosting global sporting events, such as the Dakar Rally, has set a benchmark and become a source of pride. He also acknowledged the hard work and teamwork of all rally participants, noting their role in strengthening the Kingdom’s reputation as a world-class motorsport hub.
The participants have taken a well-deserved rest after enduring several days of tough desert challenges. Meanwhile, support teams have continued their vital work, ensuring vehicles are maintained and ready for the next stages to help competitors perform at their best.
After covering about 2,579 km of special stages, 299 vehicles arrived at the bivouac camp in Ha’il. Vehicles included 118 bikes, 58 cars, two stock vehicles, 45 challengers, 33 SSVs, and 43 trucks.
The rally resumes on Saturday with seven stages remaining. Participants will head to Al-Dawadmi, covering 829 km, including 605 km of timed special stages.
The journey will then take them through a circular stage in Al-Dawadmi, followed by Riyadh, Haradh, and finally Al-Shubayta.
The rally concludes with two final stages in Al-Shubayta on Jan. 16 and 17, marking the end of this year’s Dakar Rally.


Trump gets no-penalty sentence in his hush money case, while calling it ‘despicable’

Updated 58 min 44 sec ago
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Trump gets no-penalty sentence in his hush money case, while calling it ‘despicable’

NEW YORK: President-elect Donald Trump was sentenced Friday to no punishment in his historic hush money case, a judgment that lets him return to the White House unencumbered by the threat of a jail term or a fine.
With Trump appearing by video from his Florida estate, the sentence quietly capped an extraordinary trial rife with moments unthinkable in the US only a few years ago.
It was the first criminal prosecution and first conviction of a former US president and major presidential candidate. The New York case became the only one of Trump’s four criminal indictments that has gone to trial and possibly the only one that ever will. And the sentencing came 10 days before his inauguration for his second term.
In roughly six minutes of remarks to the court, a calm but insistent Trump called the case “a weaponization of government” and “an embarrassment to New York.” He maintained that he did not commit any crime.
“It’s been a political witch hunt. It was done to damage my reputation so that I would lose the election, and, obviously, that didn’t work,” the Republican president-elect said by video, with US flags in the background. Beside him at his Mar-a-Lago property was defense lawyer Todd Blanche, whom Trump has tapped to serve as the second-highest ranking Justice Department official in his incoming administration.
After the roughly half-hour proceeding, Trump said in a post on his social media network that the hearing had been a “despicable charade.” He reiterated that he would appeal his conviction.
Manhattan Judge Juan M. Merchan could have sentenced the 78-year-old to up to four years in prison. Instead, Merchan chose a sentence that sidestepped thorny constitutional issues by effectively ending the case but assured that Trump will become the first president to take office with a felony conviction on his record.
Trump’s no-penalty sentence, called an unconditional discharge, is rare for felony convictions. The judge said that he had to respect Trump’s upcoming legal protections as president, while also giving due consideration to the jury’s decision.
“Despite the extraordinary breadth of those protections, one power they do not provide is the power to erase a jury verdict,” said Merchan, who had indicated ahead of time that he planned the no-penalty sentence.
As Merchan pronounced the sentence, Trump sat upright, lips pursed, frowning slightly. He tilted his head to the side as the judge wished him “godspeed in your second term in office.”
Before the hearing, a handful of Trump supporters and critics gathered outside. One group held a banner that read, “Trump is guilty.” The other held one that said, “Stop partisan conspiracy” and “Stop political witch hunt.”
Manhattan District Attorney Alvin Bragg, whose office brought the charges, is a Democrat.
The norm-smashing case saw the former and incoming president charged with 34 felony counts of falsifying business records, put on trial for almost two months and convicted by a jury on every count. Yet the legal detour — and sordid details aired in court of a plot to bury affair allegations — didn’t hurt him with voters, who elected him in November to a second term.
“The American voters got a chance to see and decide for themselves whether this was the kind of case that should’ve been brought. And they decided,” Blanche said Friday.
Prosecutors said that they supported a no-penalty sentence, but they chided Trump’s attacks on the legal system throughout the case.
“The once and future president of the United States has engaged in a coordinated campaign to undermine its legitimacy,” prosecutor Joshua Steinglass said.
Afterward, Trump was expected to return to the business of planning for his new administration. He was set later Friday to host conservative House Republicans as they gathered to discuss GOP priorities.
The specific charges in the hush money case were about checks and ledgers. But the underlying accusations were seamy and deeply entangled with Trump’s political rise.
Trump was charged with fudging his business’ records to veil a $130,000 payoff to porn actor Stormy Daniels. She was paid, late in Trump’s 2016 campaign, not to tell the public about a sexual encounter she maintains the two had a decade earlier. He says nothing sexual happened between them and that he did nothing wrong.
Prosecutors said Daniels was paid off — through Trump’s personal attorney at the time, Michael Cohen — as part of a wider effort to keep voters from hearing about Trump’s alleged extramarital escapades.
Trump denies the alleged encounters occurred. His lawyers said he wanted to squelch the stories to protect his family, not his campaign. And while prosecutors said Cohen’s reimbursements for paying Daniels were deceptively logged as legal expenses, Trump says that’s simply what they were.
Trump’s lawyers tried unsuccessfully to forestall a trial, and later to get the conviction overturned, the case dismissed or at least the sentencing postponed.
Trump attorneys have leaned heavily into assertions of presidential immunity from prosecution, and they got a boost in July from a Supreme Court decision that affords former commanders-in-chief considerable immunity.
Trump was a private citizen and presidential candidate when Daniels was paid in 2016. He was president when the reimbursements to Cohen were made and recorded the following year.
Merchan, a Democrat, repeatedly postponed the sentencing, initially set for July. But last week, he set Friday’s date, citing a need for “finality.”
Trump’s lawyers then launched a flurry of last-minute efforts to block the sentencing. Their last hope vanished Thursday night with a 5-4 Supreme Court ruling that declined to delay the sentencing.
Meanwhile, the other criminal cases that once loomed over Trump have ended or stalled ahead of trial.
After Trump’s election, special counsel Jack Smith closed out the federal prosecutions over Trump’s handling of classified documents and his efforts to overturn his 2020 election loss to Democrat Joe Biden. A state-level Georgia election interference case is locked in uncertainty after prosecutorFaniWillis was removed from it.


What We Are Reading Today: ‘NOVEL RELATIONS’

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Updated 10 January 2025
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What We Are Reading Today: ‘NOVEL RELATIONS’

Author: ALICIA MIRELES CHRISTOFF

‘Novel Relations’ engages 20th-century post-Freudian British psychoanalysis in an unprecedented way: as literary theory.

Placing the writing of figures like D. W. Winnicott, W. R. Bion, Michael and Enid Balint, Joan Riviere, Paula Heimann, and Betty Joseph in conversation with canonical Victorian fiction, Alicia Christoff reveals just how much object relations can teach us about how and why we read.

These thinkers illustrate the ever-shifting impact our relations with others have on the psyche, and help us see how literary figures — characters, narrators, authors, and other readers — shape and structure us too.