Goldman Sachs is firing traders again

• Matt Turner
 
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• 17h
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Thomson ReutersGoldman Sachs CEO Lloyd Blankfein at a panel discussion at the North American Energy Summit in New York.

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Goldman Sachs on Thursday made job cuts in its securities business, according to people familiar with the matter.

The cuts bring the headcount reduction in the fixed-income, currencies and commodities (FICC) business to around 10%, the people said.

The news was first reported by The Wall Street Journal.

Goldman Sachs cut staff in a round of redundancies earlier in the year.

The bank had a lousy first quarter, posting a 37% decline in trading revenue versus the same quarter a year earlier. FICC revenues fell 47%.

Harvey Schwartz, CFO at Goldman Sachs, was asked if there might be more job cuts on the bank's first-quarter earnings call.He said (emphasis added):

In terms of other cost initiatives, I know there's been a lot of stuff in the press. I guess I would really summarize it as follows. I would just say we're shareholders and we're doing things that you would expect shareholders to do.

The FICC business in particular has seen a lot of change. It was announced late last month that the cohead of global fixed-income, currency, and commodities sales, Dalinc Ariburnu, would leave the bank. The other cohead is Tom Cornacchia.

In March, Cornacchia, described a cultural shift wrought with "friction" and "awkwardness"inside the global FICC business.

The Goldman Sachs news extends a miserable week for investment banks. Business Insider reported on Wednesday that Credit Suisse had fired about 130 people in the global-markets business in London.

Fitch downgrades Brazil, Meirelles calls for credible targets

• Reuters

• 13h
• 137

Thomson ReutersThe Fitch Ratings logo is seen at their offices at Canary Wharf financial district in London

By Alonso Soto and Aluisio Alves

SAO PAULO (Reuters) - Fitch Ratings downgraded Brazil's sovereign debt further into junk territory on Thursday, citing a deeper-than-expected economic contraction and changing fiscal targets that have undermined credibility.

Fitch downgraded Brazil to BB from BB+ with a negative outlook a week before a Senate vote that is expected to lead to the ouster of unpopular leftist President Dilma Rousseff.

Henrique Meirelles, a likely finance minister if Vice President Michel Temer becomes president, said the first step Brazil must take is to establish realistic targets.

"Everyone increasingly needs to know that what is signaled, what is declared a goal or a target, will be achieved," he said during a televised interview with Globo News.

The ratings agency in December had stripped Brazil of its investment-grade status in what was a bitter reversal for Latin America's largest economy, seven years after a commodities-fueled boom helped propel it to the coveted top rating.

Fitch said the outlook had weakened further since December, with a 3.8 percent economic contraction expected in 2016 due to "the high level of political uncertainty" as well as deteriorating labor markets and a slowdown in Brazil's top trading partner, China.

If the Senate votes on May 11 to try Rousseff on charges of allegedly manipulating budget accounts, as expected, she will immediately be replaced by Temer during the six-month trial.

"This (downgrade) is due to lack of fiscal control and the absence of political and economic direction in the country," Andre Perfeito, chief economist with Gradual Investimentos. "The arrival of Temer is not being seen as the solution to the fiscal problems which are very deep given the fall in revenues."

Fitch's Brazil director, Rafael Guedes, said in a phone interview the deterioration of Brazil's economic outlook is similar to that of neighboring Argentina in 2001.

He said, however, the country's debt could be upgraded quickly if the government takes action to reduce a ballooning debt burden.

Meirelles, a former central bank chief, said the country's main challenge is to pass measures that would make public debt levels sustainable. He has repeatedly expressed concern with the trajectory of Brazil's rising public debt.

A spokesman for the finance ministry said it did not plan to comment.

In February, ratings agency Moody's cut Brazil's rating by two notches to junk level, while S&P has Brazil at BB, two notches below investment grade.

(Additional reporting by Cesar Raizer and Raquel Stenzel; Writing by Caroline Stauffer; Editing by Diane Craft and Sandra Maler)

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

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Here's your complete preview of Friday's jobs report

• Akin Oyedele
 
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• 3h
• 2,634
 
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Reuters/Jim Young

The Bureau of Labor Statistics will release the April jobs report on Friday.

Here's what Wall Street is expecting, via Bloomberg:

• Nonfarm payrolls:+200,000
• Unemployment rate: 4.9%
• Average hourly earnings month-on-month: +0.3%
• Average hourly earnings year-on-year: +2.4%
• Average weekly hours worked: 34.5

The forecast for headline job gains is right where economists obsessed about just a few months ago. Anything below 200,000 was troubling.

"As we approach full employment, the monthly job growth of 200,000 may not be sustained," Marc Chandler, global head of currency strategy at Brown Brothers Harriman, told Business Insider.

"But this isn't a problem."

To put things in perspective, we haven't seen negative employment growth for 65 straight months.

And for April, indications of another robust month of job gains can be found in the second-straight rise of the ISM's non-manufacturing employment index, and the fact that initial jobless claims fell to the lowest level since 1973.

So rather than obsess over the headline, economists have recently turned their attention to other things.

FRED

The labor-force participation rate has unexpectedly crept higher since late last year.

It's been driven by demographics and the availability of jobs.

People born in the 1940s — so-called baby boomers — have hit their prime retirement age. 

Additionally, the near-record level of job openings is "pulling back into the labor force some workers who are right on the edge," said Glassdoor chief economist Andrew Chamberlain.

But he's seeing a yellow warning light on the tech sector, which was volatile in April after a slew of weak earnings. Even before that, there had been uncertainty in Silicon Valley that prompted some companies to reconsider their hiring plans.

Economy-wide, discouraged workers would change their minds faster if wages start to grow.

Slow wage growth has been one of the biggest laggards of the labor-market's recovery, and wage growth is the one thing everyone, from the average consumer to the Federal Reserve, needs right now.

Chamberlain forecasts that average hourly earnings grew 2.6% year-on-year, which is more than the consensus. He said it's puzzling that wage growth has been so slow, although it has trended upwards since early last year. 

Torsten Sløk, Deutsche Bank's chief international economist, pointed out a calendar quirk that could push the wage-growth data higher for April. 

Deutsche Bank

The Bureau of Labor Statistics surveys for the jobs report during the week of the 12th of every month. Payday for is on the 15th for those paid bi-weekly.

So when, like April, the 12th is early in the week and not at the end, more employers are likely to include the bi-weekly pay in the survey. 

Calendar effect or not, higher wages are something the Federal Reserve would welcome.

It would give them more confidence in their 2% inflation target, and suggest that consumer spending will continue to drive economic growth.

And for Marc Chandler, this is about the only thing that matters to the Fed right now in the labor market. The strong pace of job gains and the drop in the unemployment rate have not moved the needle on raising interest rates. 

"Another 200k increase in nonfarm payrolls is not a game-changer" for the Fed, Chandler wrote in a note. "The issue is not jobs or income; it is consumption and investment."

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There's one big problem with China's plan to transform its economy

• Elena Holodny
 
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• May 4, 2016, 11:30 PM
• 5,995

 More Charts

 
•  
 

One of China's long-term economic plans is to get its workers out of rural areas and into cities.

This is part of China's larger goal of transforming the country's economy into one based on services and consumer spending. Ultimately, the government wants to get about70% of its population into cities.

But it seems as if China may actually be on the edge of a reverse migration, as many migrants are returning back home.

Back in January, the National Bureau of Statistics reported that the migrant population in 2015 dropped for the first time in three decades — by 5.68 million.

Bloomberg View's Adam Minter previously noted that part of that drop could be attributed to economic reasons such as a deterioration in the manufacturing sector and an improvement in rural economies. He also suggested, however, that people were moving back home for noneconomic reasons, too, such as taking care of aging parents.

In a monthly research note to clients, Deutsche Bank's Torsten Sløk shared a chart showing the percentage of rural migrants seeking jobs outside their hometown over the past five years.

As the chart shows, the percentage has dropped close to zero, down from about 5.5% in 2010.

Deutsche Bank

One notable consequence from China's reverse migration is that China's ghost cities may end up staying ghost cities for much longer, as Seeking Alpha's Pater Tenebrarum noted.

Still, while this reverse migration may not be in line with China's master plan, it's not necessarily a bad trend.

As Bloomberg View's Minter noted:

It should help alleviate the overcrowding in China's biggest cities and the sharp income disparity between rural and urban areas. Returning migrants tend to be more worldly and wealthy than when they left, as well as more entrepreneurial: The number of people starting new businesses in rural China grew 3.1%, year over year, in the first half of 2015. In total, about 2 million migrants have returned home to start businesses.

And, arguably, the more pressing demographic issue is China's aging population; by 2050 its over-65 age group is estimated to be about equal in size to the combined total projected populations of Japan, Germany, Australia, and Egypt.

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How Capitalism is Killing Itself (Video)

How Capitalism is Killing Itself

2016 , 

Even 133 years after his death, the teachings of philosopher Karl Marx seem more relevant today than ever before. They've also gained in popularity. In a recent survey, 43% of young Americans under the age of 30 voiced favorable leanings to the notion of socialism. Is this a sign of a new anti-capitalism trendtaking over in the United States? The new documentary titled How Capitalism is Killing Itself, produced by the acclaimed series The Empire Files, seeks to find answers.

The film dissects the tenants of Marx's economic principles, which were largely born out of a humanist philosophy. As recounted by Dr. Richard Wolf, the film's chief interview subject, Marxist economist and Professor Emeritus of Economics at University of Massachusetts - Amherst, the philosopher set out to uncover the root of social inequality, and identified a purely capitalistic system as its major culprit. In his view, capitalism could only thrive by imposing various social ills upon society such as impoverishment, inequality and exploitation. Therefore, the Marxist-led socialist movement is characterized by a need to redefine the very foundations of what he viewed as a deeply flawed and immoral system.

There are many indications that the long reign of capitalism may be on the ropes, especially when observed through the prism of this year's United States presidential election. Self-confirmed democratic socialist Bernie Sanders has proven enormously successful in spreading the gospel that Marx first preached well over a century ago. The youth, in particular, has flocked in support of Sander's candidacy and his message in record numbers. As members of this new generation eventually assume the mantle of leadership in their country, could their firmly held beliefs facilitate the end of capitalism as we know it?

How Capitalism is Killing Itself is a fast-paced and informative expose, but it makes no illusions to an even handed treatment of its subject; its agenda is implicit in its title. But even for the most fervent skeptics or the uninitiated, the film proves illuminating in its attempts to dispel much of the misgivings, fear and misinterpretations of the Marxist philosophy.

Fitbit is getting destroyed

• Akin Oyedele
 
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• 1h
• 14,864

Fitbit

Fitbit shares fell as much as 15% on Thursday after the maker of smart wearables forecast second-quarter revenues lower than analysts expected.

Earnings released Wednesday topped expectations, but guidance for the current quarter missed even the lowest forecast.

The company reported adjusted earnings per share (EPS) of $0.10, beating the forecast for $0.02, according to Bloomberg. Revenues totaled $505.4 million, also topping the estimate for $443.3 million.

But guidance for the second quarter was light, at a range of $0.08-$0.11, versus $0.26 expected.

Fitbit said it sold 4.8 million devices during the first quarter.

Some analysts had raised questions about the company's ability to compete effectively with rivals like Apple. But Fitbit stands to benefit from a projected surge in wearable-device shipments over the next few years.

According to IDC, Fitbit moved the most devices globally in 2015 and had the largest market share.

Fitbit's guidance for profits this year also beat expectations. It sees full-year adjusted EPS at $1.12-$1.24, up from an earlier projection.

"Based on the first quarter’s performance and momentum, we are confident about the remainder of the year, which is reflected in our increased guidance," said CEO James Park.

Fitbit sees full-year revenues of $2.5 billion to $2.6 billion. Its second-quarter revenue forecast was better than expected, at a range of $565 million to $585 million, versus $531.3 million expected.

The stock has lost half its value since the company's initial public offering in June 2015.

Google

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Tesla beats on earnings

• Akin Oyedele
 

• 20h
• 6,411
 
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ChinaFotoPress/Getty ImagesElon Musk, Tesla's CEO.

Tesla just reported its first-quarter results, capping a busy news day for the electric-car maker.

The company generated $1.6 billion in revenue and a narrower-than-expected adjusted loss per share of $0.57.

Tesla was expected to report a quarterly adjusted loss of $0.60 per share and revenues of $1.61 billion, according to Bloomberg.

Tesla raised its forecast for capital spending this year by 50% to $1.5 billion.

The company said that it expects production and deliveries of its Model 3 in late 2017.

It expects to produce 20,000 vehicles in the second quarter, or 30% more than it did in the same period a year ago.

"Looking out beyond Q2, we remain confident that we can deliver 80,000 to 90,000 new Model S and Model X vehicles in 2016," CEO Elon Musk said in a statement, reiterating the company's earlier projection.

And of course, Tesla is no longer just about cars. The company said that it delivered 2,500 of its home batteries, called Powerwalls, in the quarter.

Tesla shares jumped by as much as 7% in after-hours trading before halving gains.

To recap the day's news, two executives responsible for building cars are leaving the company: Greg Reichow, vice president of production, and Josh Ensign, vice president of manufacturing.

This is a big deal because Tesla is preparing to launch its mass-produced Model 3. Bloomberg noted that every Tesla model since the Roadster has been delayed by at least six months.

The second big new story was that famed short seller Jim Chanos reiterated his bearish view on the company and said that he was short Tesla. Shares fell 4% in trading.

JPMorgan analysts had noted that the $35,000 price tag, although Tesla's lowest ever, could still limit demand. That's because it's likely to be more expensive after options are added.

More: Tesla Earnings

Tribune Publishing has thrown out Gannett's offer to buy it

• Akin Oyedele
 

• 19h
• 283

Fred Prouser/Reuters

Tribune Publishing has thrown out Gannett's offer to buy it for $815 million.

In a statement Wednesday, Tribune, whose titles include the Los Angeles Times, said its board unanimously rejected what it called Gannett's "opportunistic" offer.

"The board believes that the price reflected in the proposal understates the company's true value and is not in the best interests of our shareholders,"Tribune CEO Justin Dearborn wrote in a letter to Gannett.

Gannett publicized its proposal to buy Tribune for $12.25 a share in cash on April 25.

Tribune shares jumped 4% in after-hours trading. The company also reported first-quarter results that showed it swung to a loss totaling $6.5 million.

And that's probably why Gannett, the publisher of USA Today, wants to buy Tribune. Gannett chairman John Jeffry Louis had said the combined firm would help his publications but would also help Tribune thrive in a "challenging environment" for the newspaper industry.

Here's the full letter Tribune sent to Louis and CEO Robert Dickey:

Dear Messrs. Louis and Dickey:

The Board of Directors of Tribune Publishing Company (the “Company”) has carefully reviewed, with the assistance of its financial advisors, Goldman, Sachs & Co. and Lazard Frères & Co. LLC, and its legal advisor, Kirkland & Ellis LLP, your unsolicited proposal, as set forth in your April 12, 2016 letter and subsequent correspondence, for Gannett Co., Inc. to acquire all of the outstanding shares of the Company for $12.25 per share in cash (the “Proposal”). As we offered on April 24, we are sharing the Board’s position promptly following our earnings announcement.

Consistent with its fiduciary duties and past practices, the Board is always open to evaluating any credible proposal that the Board reasonably believes, in good faith, to be in the best interests of the Company and its shareholders.

After thorough consideration, the Board has unanimously concluded that it is not prepared to engage with Gannett about a combination of our companies based on the value you indicated in the Proposal. The Board believes that the price reflected in the Proposal understates the Company’s true value and is not in the best interests of our shareholders. In order to provide you some context for this conclusion, we have attached Exhibit I, which clearly indicates the opportunistic nature of the $12.25 offer and sets the record straight on the actual EBITDA multiple in the Proposal.

Tribune Publishing is in the very early stages of an exciting and compelling strategic transformation. Today we announced full-year 2016 Adjusted EBITDA guidance of $166-172 million and a plan to drive increasing monetization of our important brands, capitalize on the global potential of the LA Times, and significantly accelerate our conversion of content to revenue through an enhanced digital strategy. The Board is confident in our ability to generate shareholder value in excess of Gannett’s opportunistic proposal through our focused execution of this standalone plan. The Board has evaluated the Proposal in this context and concluded that it is not a basis for further discussion.

Sincerely,

Justin C. Dearborn,
on behalf of the Board of Directors

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China's all-important services sector slowed down last month

• David Scutt, Business Insider Australia

• 11h
• 413

Getty Images

The great hope for China’s economic transition — the nation’s services sector — saw activity levels slow modestly last month, according to the latest Caixin-Markit China services purchasing managers (PMI) report.

The PMI fell to 51.8 in April, 0.4 points below the 52.2 level struck in March.

The index measures changes in activity levels from one month to the next. Anything above 50 signals growth, while anything below that level means contraction -— so the higher the number the better.

While at 51.8 it’s activity levels are still improving, the index remains below its historic average.

Business Insider Australia

Though the headline index fell, you wouldn’t know it from the internal details of the report — they were largely good.

New order growth hit a three-month high with some firms commenting on improved underlying client demand and new product launches, according to Markit. 

Order backlogs also rose for the first time in 2016 with panelists indicating that improved inflows of new work contributed to renewed capacity pressures and higher unfinished workloads.

As a consequence, employment levels also rose, reversing the drop recorded in the previous month.

Like that seen in the separate manufacturing PMI gauge, price pressures also increased, signaling that inflationary pressures may be building.

The one weak spot came from the survey’s sentiment gauge which held steady after falling to a three-month low in March.

“Anecdotal evidence suggested that some companies expect improving market conditions, are planning operational expansions and are forecasting new projects to boost activity,” said Markit. “However, other businesses commented that relatively subdued market conditions could dampen growth.”

As opposed to the non-manufacturing PMI report released by China’s National Bureau of Statistics — a larger survey which takes in responses from both the public and private sector — the Caixin-Markit survey focuses on responses from smaller services firms from the private sector.

Despite differences in the construction of the surveys, both registered slower growth in April, indicating a continued moderation in momentum compared to levels seen in previous years.

Read the original article on Business Insider Australia. Copyright 2016. Follow Business Insider Australia on Twitter.

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