Barclays slashes hundreds of investment banking jobs worldwide

• Reuters

• 6h
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Thomson ReutersRaindrops are seen on the logo of a rental bicycle sponsored by Barclays in London

By Anshuman Daga and Lawrence White

HONG KONG (Reuters) - Barclayshas embarked on a fresh round of job cuts to its investment banking business worldwide on Thursday which would result in a complete exit from cash equities in Asia, an internal memo showed, as new Chief Executive Jes Staley wields the axe in a bid to slash costs and boost returns.

The harsher-than-expected cuts are among the most sweeping worldwide culls by an investment bank in recent years, as Staley in common with peers at other European lenders moves to reduce costs amid a tough global environment for banks.

Barclays will shutter its investment banking businesses in countries including Australia, Indonesia, Malaysia, Philippines, Russia, South Korea, Taiwan and Thailand, the memo said, with those markets to be covered from financial hub cities in their respective regions.

A spokesman for Barclays in Hong Kong declined to comment on the cuts because they are not public.

With 10 of Europe's biggest lenders announcing 130,000 job losses since June, bank chief executives are looking to cut in businesses where they lack scale to focus on more profitable markets.

The reduction in jobs are also in response to the turmoil in global equities and commodities markets, which is making it harder for investment banks to make money in the traditional business lines.

The cuts in the London-headquartered bank were announced to staff in meetings on Thursday across the Asia-Pacific region, according a source with direct knowledge.

"Asia is bearing the brunt," the source added.

The total number of jobs to be shed in the latest Barclays reduction is unclear, but a source with direct knowledge of the matter said the Asian equities cuts alone could total about 200 people. A separate source with knowledge of the cuts said the Asia total would be 450 people.

The Financial Times previously reported that Barclays would shed as many as 1000 jobs worldwide in the latest cull.

Barclays is also exploring the sale of its global precious metals business, the memo said, as well as shuttering cash equity sales across Central Europe, the Middle East and North Africa, the memo showed.

The lender will also end its onshore markets coverage in Brazil.

Reuters on Jan. 5 reported the cuts in the Asia investment banking business and exits from South Korea and Taiwan, as Barclays retreated from peripheral Asian businesses to focus on hubs including Hong Kong and Singapore.

(Reporting By Anshuman Daga and Lawrence White, additional reporting by Xiaowen Bi; Editing by Denny Thomas and Stephen Coates)

Read the original article on Reuters. Copyright 2016. Follow Reuters on Twitter.

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Deutsche Bank just announced preliminary earnings — and they're terrible

• Portia Crowe
 
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• 20h
• 3,162
 
• 1

REUTERS/Kai PfaffenbachDeutsche Bank CEO John Cryan.

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The must-read guide to the key issues at every major Wall Street bank

Senior bankers are doing something unheard of with their bonuses to hold on to junior staff

Deutsche Bank just announced preliminary fourth-quarter earnings and they are not good.

The firm said it expects to report a full-year net loss of 6.7 billion euros ($7.3 billion). Before income taxes, the loss will be about 6.1 billion euros ($6.6 billion).

The firm cited "challenging market conditions" in the fourth quarter, leading to a drop in revenues in the Corporate Banking & Securities division.

It also said it would pay multiple non-tax-deductible legal charges adding up to about 1.2 billion euros ($1.3 billion), plus "restructuring and severance charges" of 0.8 billion euros ($872 million) related to its Private & Business Clients unit.

(To get the must-read guide to the key issues at every major Wall Street bank, click here.)

Here's the full statement from the bank:

Deutsche Bank (XETRA:DBKGn.DE/NYSE: DB) today announced that it expects to incur a number of charges that will contribute to an overall loss for the fourth quarter 2015:

• Expected litigation charges of approximately EUR 1.2 billion, the majority of which are not anticipated to be tax deductible. These provisions are preliminary and may be further changed by events before publication of the bank’s annual financial statements on 11 March 2016
• Restructuring and severance charges of EUR 0.8 billion. These charges are largely related to the Private & Business Clients (PBC) segment. PBC will also take a EUR 0.1 billion charge for the impairment of software

The bank expects to report full year 2015 revenues of EUR 33.5 billion. As a result of the above charges, the bank expects to report a full year 2015 loss before income taxes of approximately EUR 6.1 billion and a net loss of approximately EUR 6.7 billion. The full year results include previously disclosed impairments taken in the third quarter of EUR 5.8 billion of goodwill and intangibles, full year litigation provisions of approximately EUR 5.2 billion and restructuring and severance charges of approximately EUR 1.0 billion.

Challenging market conditions in the quarter contributed to a year-over-year decline in fourth quarter revenues, principally in Corporate Banking & Securities (CB&S). As a result of these revenue developments and the specific charges for the fourth quarter mentioned above, the bank expects to report revenues of EUR 6.6 billion, a loss before income taxes of approximately EUR 2.7 billion and a net loss of approximately EUR 2.1 billion for the fourth quarter.

Deutsche Bank currently expects to report a fully-loaded CRR/CRD4 Common Equity Tier 1 (CET1) ratio at the end of the fourth quarter of approximately 11%. The regulatory capital treatment of the bank’s Abbey Life business has changed in the fourth quarter, resulting in an approximate 10 basis point reduction in the CET 1 ratio. Additionally, the previously announced agreement to sell the bank’s 19.99% stake in Hua Xia Bank is expected to close in the second quarter 2016. This sale, on a pro-forma basis, would have improved Deutsche Bank’s Common Equity Tier 1 capital ratio (CRR/CRD 4 fully loaded) as of 31 December 2015 by approximately 50 to 60 basis points.

All of these amounts are estimates. Details of the preliminary fourth quarter and annual results will be disclosed on 28 January 2016.

SEE ALSO: The must-read guide to the key issues at every major Wall Street bank

NOW WATCH: Hillary Clinton’s new Wall Street plan targets big banks and executive bonuses

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RAY DALIO: There is no longer any engine to drive global growth

• Jay Yarow
 
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• 6h
• 12,594
 
• 22

Larry Busacca/GettyRay Dalio.

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Ray Dalio says he buys this nasty narrative about China that's starting to get play again

Ray Dalio, the leader of the world's largest hedge fund, Bridgewater Associates, is worried about growth in the global economy.

As he sees it, there is no "locomotive" to drive growth.

For the past few years, China has driven a third of all the growth in the world, but it's slowing down, which will act as a drag on global growth.

He's also worried about the effectiveness of monetary policy right now. He wonders whether it can do anything to spur growth.

We interviewed Dalio in Davos, Switzerland, at the World Economic Forum. Here's what he said:

Traditionally, the United States was a world locomotive. In other words when it began its growth, that would help to create exports to other countries. Since 2008, China represented a third of world growth, not only the growth in China, but their imports — countries were benefiting from that growth — that's what I mean by a locomotive. And right now, the world doesn't have a locomotive — they don't have a country that is driving world economic growth.

[We interrupted to say, "So, that's pretty scary ..."]

I think the monetary policy is the issue. Decreased effectiveness of monetary policy. I think that's an important issue. Are we at the end of central banks' abilities to squeeze out more debt or money growth? Are we approaching the pushing-on-a-string phenomenon? I believe we are. I think that warrants a lot of discussion and attention about how to deal with that issue.

When we're look at markets I'm describing, there's this asymmetric risk. Because, when they push to zero, and they go to quantitative easing, that's the buying of assets. It pushes the asset prices up, pushes their future returns down. They don't have much in the way of premium. That premium, or that spread lacking, diminishes the effectiveness of the transmission mechanism.

Like, if you buy a bond, a bond is very much like cash nowadays. That becomes the big question. When we have a weaker asset market and weaker economy and we have risk that monetary policy might be affected, that should be at least on our minds when we're setting monetary policy.

I don't think that was of paramount consideration to the Fed. I think should be looked at, because that's the bigger risk.

ECB set to take cautious stance as markets tumble

• Reuters

• 5h
• 61

Thomson ReutersECB President Draghi waits for the start of a eurozone finance ministers meeting in Brussels

By Francesco Canepa and John O'Donnell

FRANKFURT (Reuters) - The European Central Bank is likely to keep interest rates on hold when its policymakers meet on Thursday, even as a market crash, tumbling bank stocks and ebbing inflation set the stage for action later in the year.

The meeting of the Governing Council comes shortly after it cut the deposit rate in December, increasing the charge on banks for parking money at the ECB, and expanded its purchase program to buy chiefly government bonds.

This recent action, albeit short of what many on financial markets hoped for, has led economists to conclude that no significant further steps will be taken on Thursday but could follow as soon as March.

ECB President Mario Draghi may address the threat of low inflation, as oil plunges, as well as the market ructions caused in part by weaker Chinese growth.

Draghi may also face questions about falls in the price of shares and bonds of several banks, particularly in southern European countries such as Italy. The cost of insuring against a default of many of these banks has risen sharply in recent weeks amid fears over unpaid loans, signaling bleak times ahead.

Having raised expectations too high in December, however, Draghi is likely to stop short of making concrete promises, emphasizing instead the bank's readiness and ability to act.

"I believe the ECB will loosen policy but not today," said Joerg Kraemer, an economist with Commerzbank. "A further reduction in the deposit rate could happen in March."

A similar view was held by Reinhard Cluse, an economist with UBS. "The ECB is on hold for now," he said. "Draghi can say: 'we gave the medicine and now we have to let it work'".

A cut to its forecast for inflation in March, which the ECB has pledged to keep at close to 2 percent, could prompt action.

The ECB's December projections were based on crude oil prices averaging $52.2 this year, but Brent crude is trading around $28 per barrel and even 2022 oil futures are below $50, indicating little confidence in a quick rebound.

CREDIBILITY

Some ECB policymakers have argued that it should focus on core inflation, which excludes energy and food.

But low energy prices are now impacting other goods and services, pushing even core inflation far from the bank's goal of close to 2 percent and jeopardizing the credibility of that target.

"There is a risk that the world at large stops believing that the ECB will deliver on its target," ABN Amro economist Nick Kounis said. If that happened, "very low inflation could become entrenched."

The ECB earlier estimated that a 10 percentage point change in oil prices would change headline inflation by about 0.2-0.3 percentage point in the first year, with a further, second-round effect coming later.

Once companies stop believing in the inflation target, they might also curb wages, in turn putting a brake on the economy.

Draghi, who holds his news conference at 1330 GMT, will emphasize that the bank's 1.5 trillion euro quantitative easing program has flexibility, giving the bank plenty of room to act.

Minutes from the bank's December rate meeting also indicated a greater willingness on the part of policy makers to cut the deposit rate further. Many analysts predict that rate - which at -0.3 percent already charges commercial banks to park cash at the ECB - could drop by another 10 basis points as soon as June.

"(That) remains the low-hanging fruit and is priced by the third quarter," Deutsche Bank said.

Draghi's view on the global outlook could change given China's difficulties. In December, policymakers argued that earlier concerns about developments in China had not been borne out.

But stock market turmoil there since the start of 2016, a falling yuan and the weakest full-year growth figure in a quarter century suggest the risks have in fact increased.

An even weaker yuan would export China's deflationary risk and reduce the effectiveness of any rate cuts by limiting the ECB's ability to weaken the euro.

Weakness in China could also persuade the U.S. Federal Reserve to slow its rate increases, also putting the euro under firming pressure.

(Additional reporting by Balazs Koranyi and Frank Siebelt Editing by Jeremy Gaunt)

Read the original article on Reuters. Copyright 2016. Follow Reuters on Twitter.

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Bill Ackman is getting slammed in 2016

• Julia La Roche
 
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• 18h
• 5,259
 
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Thomson ReutersWilliam Ackman, founder and CEO of hedge fund Pershing Square Capital Management, speaks during the Sohn Investment Conference in New York

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Disclaimer

Hedge fund titan Bill Ackman's Pershing Square Holdings, the fund's publicly traded vehicle, has fallen 14.5% in 2016, according to a performance update.

That performance is through January 19. 

Pershing Square had its worst year in its history last year, falling 20.5%. 

Ackman, a well-known activist investor, makes large, concentrated bets in a handful companies.

His five largest holdings include Valeant Pharmaceutical (-12% year-to-date), Air Products & Chemicals (-9.6%), Canadian Pacific (-18%), Mondelez (-9.3%), and Zoetis (-8.6%).

Ackman is also an investor in Platform Speciality Products, which has dropped 40% this year. Meanwhile, Howard Hughes Corp, another one of his long equity holdings, has fallen about 15%.

Ackman's only short is Herbalife, a multi-level marketing company that sells weight loss shakes. Ackman has been crusading against Herbalife since December 2012 because he believes the company is a "pyramid scheme." He's betting that the stock goes to $0. 

Shares of Herbalife have fallen more than 13% this year.

Foxconn said to offer about 600 billion yen for Japan's Sharp

Foxconn Technology Group has offered about 600 billion yen (S$7.3 billion) to buy Japan's Sharp Corp, according to a person familiar with the talks. 

PHOTO: BLOOMBERG NEWS

JAN 21, 20161:22 PM

[TOKYO] Foxconn Technology Group has offered about 600 billion yen (S$7.3 billion) to buy Japan's Sharp Corp, according to a person familiar with the talks.

A decision to accept or reject the bid is expected before the end of January, the person said, asking not to be identified as the discussions are private. Chu Wen-min, a spokesman for Foxconn's Hon Hai Precision Industry Co, declined to comment Thursday.

"We're talking with several companies about the structural improvement of liquid-crystal-display business. We don't comment on the details of individual talks," said Yoshifumi Seki, a spokesman for Sharp.

Sharp is considering a US$5.3 billion offer from Foxconn and a competing bid from Innovation Network Corp of Japan, the Wall Street Journal reported earlier citing unidentified people familiar with the matter.

BLOOMBER
G

Short sellers are making an even bigger killing than you think

JAN 21, 20162:18 PM

[MADRID] Last year was the most profitable ever for short sellers, by one measure. And 2016 is starting off even better for bears.

It's no secret that betting on declines is proving profitable in what has been the worst start to a year ever for global stocks. What is surprising, according to research firm Markit Ltd, is that returns for shorts are even higher than those generated during the 2008 financial crisis, when considered on a relative basis.

Back then, it was the housing bubble and the collapse of the banking industry. Now it's China, oil and the end of zero- interest rate policy in the US Sustained worries about an economic slowdown and the rout in commodities has added momentum to short strategies into the end of last year, with shorting activity peaking in the closing weeks of 2015 and showing no sign of slowing, Markit said in a report last week.

"Over the last five, six years, you've been conditioned to use weakness as a buying opportunity, and when other people are scared you've been paid to be brave," said Michael Shaoul, head of Marketfield Asset Management LLC, where he co-manages a US$2.4 billion long-short fund. "At this point in the cycle, weakness needs to be treated at face value. When one sector starts to deteriorate, there's no reason to expect it to get better." In the US, Markit found, the most hated stocks - the top 10 per cent most costly to short - underperformed the market by a record 26 per cent in 2015. In 2008, they trailed by 19 per cent. Those shares are now on track for the worst month ever - or the best ever, from a short seller's perspective. Two weeks in, they're already trailing the market by 6.7 per cent.

Giving an extra boost to shorts this time around: the widest split between winners and losers since the 1990s, a commodity rout that made shorting related stocks a no-brainer, and an unprecedented era of cheap debt that could come back to haunt overlevered companies. Favourite shorts, Markit says, include Chesapeake Energy Corp, Peabody Energy Corp and Sears Holdings Corp.

Compared with 2008, when the Standard & Poor's 500 Index plunged 38 percent in a broad selloff, the market last year was more fragmented. Even as the benchmark slipped 0.7 per cent, the average decline in the 10 worst stocks was 64 percent, while the 10 best surged 71 per cent, according to data compiled by Bloomberg. Amazon.com Inc and Netflix Inc were among star performers that more than doubled.

"It might as well have been 2008 for commodities and 2000 for technology," Mr Shaoul said.

This year, the S&P 500 has lost more than 10 percent as stocks around the world enter bear territories.

But market trends are just that - trends, says Robert W Baird & Co's Patrick Spencer. Betting on slumps in the same stocks and industries that did poorly last year may prove costly down the road, says the equities vice chairman based in London.

Still, the backdrop for shorts could hardly be better. And that's even without the added concern stirred by the Federal Reserve. The central bank's withdrawal of years of life support to the economy is a jolt not lost on any investor, long or short, says BGC Partners' Michael Ingram.

"If you were a bear fund during those years of QE you had massive problems," said Ingram, a market strategist at BGC in London. He has been bearish since early last year. "Now, the performance of shorts tells you that this juggernaut of momentum, supported by the idea that central banks have your back, is over. The game has changed."

BLOOMBERG

    
 

US oil import binge: distorted derivatives or shale bust?

JAN 21, 20162:14 PM

[NEW YORK] New York and London oil futures markets are sending a dangerously misleading signal to the real world, according to a growing number of analysts and physical traders. The message: the United States wants more oil.

Oil derivatives traders have bid US benchmark West Texas Intermediate crude to a premium versus global market Brent for the first time since the shale boom began in 2010, a rally that emerged after the abrupt end of an export ban that producers said had forced them to sell domestic oil at below-market rates.

As a result of the inversion, which is now evident in every contract out to August 2017, importing light, sweet crude to the United States has become economical for the first time in years. Vessels carrying up to 500,000 barrels of day of Norwegian and Nigerian crude are expected to arrive at US ports in the coming weeks.

While the economics may work today, some traders in the cash market for domestic US crude worry that it is sowing the seeds of a further slump in prices that could emerge this spring.

The hedge funds and speculators who dominate global futures markets are overestimating the impact of ending the export ban and the eventual decline in domestic shale production, they say, ignoring the fact that the gaping spread has spurred an armada of import cargoes that could deluge the US market.

The second quarter could be a moment of reckoning, they warn, with the extra imported crude arriving just as many US refiners shut down for work. The spring maintenance is expected to be particularly extensive in the Midwest region where excess crude tends to accumulate. "The spread is showing that we 'need' crude, but how much crude does the US really need?" said one US physical crude trader. "With all these imports and turnarounds, there's going to be just too much oil around." The unwind has begun to emerge this week. On Wednesday, the March spread between Brent and WTI crude WTCLc1-LCOc1 ended at 47 cents, down from a five and a half year high of US$1.45 a barrel on Friday. The front spread had traded at around minus US$3 in early December, before the ban was eliminated.

WTI could fall to as much as a US$2 a barrel discount to Brent in the second quarter on growing nationwide stocks, analysts at UK bank Barclays warned last week.

To be sure, most dealers say the issue is about a short-term dislocation, not the longer-term outlook.

Most expect US crude to trade at parity or a premium for much of the next several years as domestic output declines further and demand remains strong, while global output is rising amid wobbles in economic powerhouse China.

There are several alternate explanations for the inversion.

For instance, US crude oil production could be falling far more swiftly than current estimates reflect, tightening the market. Most reliable output data is months in arrears. November production from North Dakota emerged only last week - and showed output rising for a second month, despite repeated forecasts for a decline from the US government itself.

But such an explanation would seem at odds with outright prices, which have crashed more than 25 per cent so far this year on worries that the glut is worsening rather than improving.

The positive WTI/Brent spread is "completely out of sync"and will need to flip if US output doesn't fall, says Clayton Vernon, a trader and economist with proprietary trader Aquivia LLC in New Jersey.

Another option is that exports are already flowing so quickly that they have buoyed domestic prices at the cost of Brent, adding to a global market share battle.

This too seems dubious. Only two small cargoes of US crude have been exported since Congress moved surprisingly quickly to end the decades-old ban in mid-December.

Those cargoes may be part of the disconnect in the market. Most dealers said that at current prices, it makes little sense to ship the crude to Europe rather than sell it domestically. But some companies may be eager to show they are taking advantage of the open window, skewing markets.

The chief concern of physical traders is Cushing, Oklahoma, the biggest US storage hub. Inventories here have risen to record highs at just 9 million barrels shy of their theoretical limit, US Energy Information Administration data show, and filling to the brim could trigger another leg down in the 18-month price rout. "After you build stocks for 10 weeks in a row, we all know what path we're on. March looks to be a good litmus test," said John Saucer, vice president of research and analysis at Mobius Risk Group in Houston.

The builds in Cushing will likely be exacerbated by BP Plc conducting two weeks of planned work on its 250,000 barrel-per-day crude unit in Whiting, Indiana, starting in early March.

REUTERS