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


Saudi foreign minister lands in US for official visit

Updated 1 min 21 sec ago
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Saudi foreign minister lands in US for official visit

DUBAI: Saudi Arabia's Foreign Minister Prince Faisal bin Farhan landed in the United States on Tuesday, Al Arabiya Television reported. 


Lebanon judge paves way for indictment of ex-central bank chief Salameh

Updated 6 min 15 sec ago
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Lebanon judge paves way for indictment of ex-central bank chief Salameh

BEIRUT: A Lebanese judge published a new court decision in the charges against former central bank chief Riad Salameh for embezzlement of public funds, according to a copy of the decision seen by Reuters on Tuesday, paving the way for an indictment.

Judge Bilal Halawi published a “presumptive decision” concluding that Salameh, who served as central bank governor for 30 years before his term ended in disgrace in July 2023, had engaged in “illicit enrichment” by knowingly transferring funds from the central bank to private accounts.

Salameh’s media office said the decision was the result of a “hastily prepared file” and was “marred by numerous and blatant legal flaws.” The ex-governor, who was detained in September and remains in custody, has denied all wrongdoing. He did not respond to a request for comment from Reuters on Tuesday.

After taking the helm of the central bank following a devastating 15-year civil war, Salameh built a reputation as a competent steward of the financial system and was once seen as a possible president.

But his legacy was tainted by the collapse of Lebanon’s financial system in 2019, as well as Lebanese and European charges that he and his brother Raja embezzled public funds over more than a decade. The brothers deny the accusations.

Salameh was arrested in September over alleged financial crimes linked to a brokerage company known as Optimum Invest, a Lebanese firm that offers income brokerage services.

Optimum Invest said at the time that a financial audit completed in late 2023 had found “no evidence of wrongdoing or illegality” in the company’s dealings with the central bank.

Thursday’s decision paves the way for an indictment in the case, according to a judicial source with direct knowledge of the court proceedings. 


Life expectancy in Kingdom rises to 78.8 years, says Health Ministry

Updated 8 min 45 sec ago
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Life expectancy in Kingdom rises to 78.8 years, says Health Ministry

  • Reflects efforts to improve healthcare quality and strengthen preventive measures
  • Ministry continues to enhance preventive and curative healthcare services, expand health education programs, and intensify early screening for diseases and tumors

RIYADH: Life expectancy in Saudi Arabia rose from 74 years in 2016 to 78.8 years in 2024, the Ministry of Health has said.

It reflects efforts to improve healthcare quality and strengthen preventive measures, the Saudi Press Agency reported.

The announcement was made on World Health Day, celebrated annually on April 7, this year under the theme “Healthy Beginnings, Hopeful Futures.”

Saudi public health efforts are part of the Health Sector Transformation Program under Vision 2030, aimed at creating a vibrant society with better health and well-being, the SPA added.

Under the ministry’s supervision, the healthcare system launched targeted initiatives and awareness campaigns to promote healthy habits, encourage walking and support daily wellness practices.

This has contributed to improved public health and quality of life, paving the way toward the goal of raising life expectancy to 80 years by 2030, the SPA reported.

The ministry also implemented health and nutrition reforms in collaboration with various government entities, such as banning hydrogenated oils, reducing salt in foods, and mandating calorie labeling on food products and in restaurants. These measures contribute to better public health and a reduction in chronic diseases.

The ministry continues to enhance preventive and curative healthcare services, expand health education programs, and intensify early screening for diseases and tumors.

This aims to increase life expectancy, reduce chronic illnesses and improve quality of life, paving the way for a healthier, more prosperous and sustainable future.

Meanwhile, the World Assembly of Muslim Youth praised Saudi Arabia’s commitment to its health sector and the implementation of health programs, highlighting that societal advancement depends on individual well-being.

The organization said that Vision 2030 prioritizes the health sector, leading to improved medical services, better patient safety and satisfaction, and enhanced recovery through infrastructure development and institutional restructuring.

It also highlighted Saudi Arabia’s support for the global health sector, extending to numerous countries through health programs and medical convoys as part of the Kingdom’s humanitarian efforts.


MBC launches second season of reality survival show ‘Million Dollar Land’

Updated 4 min 31 sec ago
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MBC launches second season of reality survival show ‘Million Dollar Land’

  • 30 contestants compete over 30 days for the grand $1 million prize
  • The show, comprising 13 episodes and 60 dailies, promises unpredictable and jaw-dropping twists

DUBAI: MBC’s reality survival game show “Million Dollar Land” has returned for a second season, with 30 contestants from across the Arab world navigating grueling challenges in Saudi Arabia’s NEOM desert for a shot at the grand $1 million prize.

The show, comprising 13 episodes and 60 dailies, promises unpredictable and jaw-dropping twists as participants compete over 30 days in new games that will be revealed throughout the series.

“The second season brings with it numerous surprises — from structural changes to the format, to new layers of competition, narrative, and thrill,” said Bassam Al-Braikan, general manager of public relations and corporate communications at MBC Group.

He noted that the second season comes after the show’s overwhelming success two years ago, with updates and enhancements introduced.

The game show, a spin-off of the Dutch “Million Dollar Island” from Talpa Studios, will see participants from different countries and professions partaking in challenges that test their endurance in the harsh desert life, survival skills and mental and physical resilience.

Upon arrival, participants receive bracelets worth $10,000 each. Their goal is to collect as many bracelets as possible through various challenges.

To survive, they need to form the right alliances, friendships, and secret pacts as they chase the grand prize.

“While the main rules of building alliances and strategies to gather the biggest number of bracelets are the same in the second season, viewers can expect new twists and turns. There are changes in the gameplay, unexpected twists, and new clashes among contestants,” Jenane Mandour, the show’s director, told Arab News at the program’s exclusive screening at Vox Cinemas at the Mall of the Emirates in Dubai.

Mandour added that the number of contestants has been reduced to 30 from the first season’s 100 participants “to introduce a change from the first season and to get to know each and every candidate more and focus on their stories.”

Contestants were selected through a wide casting search of candidates between 18 and 70 years old, provided they had no pre-existing health issues.

“Conditions are harsh in the desert, and not anyone can handle the hot and dry climate. Participants need to have mental resilience and strategic thinking to be able to gather as many bracelets as possible,” said Mandour.

However, to ensure players’ safety, organizers set clear guidelines and kept a 24-hour medical team on site for any emergencies.

On the question of whether only one winner walks away with the grand prize, Mandour said “you have to watch till the end to know.

“Like in all game shows, participants have to play hard and well to earn the $1 million.”

The Dubai-based TV company Blue Engine Studios executive produced the Arabic version of the show for MBC and the third season of the Dutch “Million Dollar Desert” for NET5 in NEOM, which has emerged as a burgeoning audiovisual production hub.

Ziad Kebbe, CEO of Blue Engine Studios, said that “Million Dollar Land” fills a gap in regional reality TV and aims to respond to viewer demand.

“Reality competitions are a major component of television content globally. These shows put everyday people in unpredictable and sometimes harsh conditions, prompting the audience to ask: ‘What would I do in their place?’,” said Kebbe.

On choosing NEOM as the filming location, Kebbe described it as “visually cinematic and historically significant. It’s not just filming a show; it’s capturing the story of a nation reinventing itself.”

Saudi actor Mohammed Al-Shehri, who hosted the show, told Arab News that “Million Dollar Land” presented “a mini model of reality,” making it a layered social experiment.

“It was fascinating to see how people changed on a daily basis physically and mentally under pressure.”

The reaction of contestants to participants who withdrew also served as a reminder of the impact people make on each other, said Al-Shehri.

“What surprised me consistently was seeing people cry when someone withdraws even though they haven’t known each other for a long time. Difficult conditions create powerful bonds, and the reason why people cried over some people and not others reminded me that it’s the impact you have on people that makes you unforgettable,” he added.

The program also highlighted the importance of withholding judgment, he said. “Viewers might see a participant’s choice as wrong, but in that moment — with limited information — it may have been their only option. Right or wrong is subjective.”

For Al-Shehri, the show helped expand his reach to different audiences across the Arab world, beyond Saudi Arabia.

The second season of “Million Dollar Land” will broadcast every Wednesday night on MBC Group’s TV channels and on Shahid from April 9.


Saudi aid agency to support 1,000 orphans in Syria

Updated 29 min 55 sec ago
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Saudi aid agency to support 1,000 orphans in Syria

RIYADH: The Kingdom's aid agency, KSrelief, is providing humanitarian assistance to some of the world’s most vulnerable people, the Saudi Press Agency reported on Tuesday.

KSrelief signed a cooperation agreement with a civil society organization to support orphan care and economic empowerment in earthquake-affected areas of northwestern Syria.

The agreement aims to provide monthly cash allowances to 1,000 orphaned children in Jindires town and Aleppo governorate. It will also empower 400 women foster mothers through in-kind grants and vocational training, the SPA reported.

In Jordan, KSrelief organized recreational activities for 1,000 orphaned children from the Syrian refugee and host communities to improve their living conditions and bring joy.

In Yemen, KSrelief delivered more than 45 million liters of drinking and non-potable water to Hajjah and Saada governorates in one month as part of its water and sanitation project.

A mobile medical clinic in Hajjah governorate served 1,691 patients during the same period, the SPA added.

In Lebanon, KSrelief distributed 460 food baskets to vulnerable families in Koura, benefiting 2,300 people, and 6,181 vouchers as part of its clothing project.