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Brief: HSBC Holdings Plc will require all employees to have a valid vaccine pass to enter its premises in Hong Kong from March 28, as the Asian financial hub battles its worst outbreak since the pandemic started. “All HSBC employees, contractors and third parties will need to be vaccinated or have a valid medical exemption to enter any HSBC premises, including all branches,” the bank said in a memo on Wednesday. The new requirement won’t apply to customers entering HSBC branches. A spokesman for the lender confirmed the content of the memo. The Hong Kong Monetary Authority last month urged banks to consider imposing a vaccine mandate at the workplace and required them to inform the regulator whether they will do so. Goldman Sachs Group Inc. earlier introduced rules requiring all staff to get their shots before entering the office from Feb. 24.
Brief: Hong Kong’s escalating Covid-19 crisis and its desperate bid to rid the population of the virus is pushing the economy into contraction again. Economists have been downgrading their growth forecasts for Hong Kong this year alongside the government’s ever-tighter virus control measures, from travel bans to business closures. With mass testing of residents on the cards in March, more disruptions to the economy are expected. Gross domestic product is now predicted to contract 1% in the first quarter, according to a Bloomberg survey of economists. While growth is set to rebound in the second quarter, the outlook is far from clear, given speculation of a full lockdown in the city. That would be unprecedented for Hong Kong and raise the prospect of an extended slump in the economy. There’s been no official information of a shutdown yet, though residents are already emptying store shelves to prepare for the worst.
Brief: The Covid pandemic has taken a dire toll on mental health, the World Health Organization (WHO) said today, indicating that cases of anxiety and depression had swelled by over 25% globally. In a fresh scientific brief, WHO also found that the Covid-19 crisis had in many cases significantly impeded access to mental health services and raised concerns about increases in suicidal behaviour. The brief, which was based on an umbrella review of a vast number of studies, determined that the world saw a 27.6% increase in cases of major depressive disorder in 2020 alone. During the first year of the pandemic, there was also a 25.6% hike in cases of anxiety disorders worldwide, it found. “In terms of scale, this is a very large increase,” said Brandon Gray of WHO’s mental health and substance use department, who coordinated the scientific brief. The brief, he told AFP, “shows that Covid-19 has had a large impact on people’s mental health and wellbeing”.
Brief: New York City Comptroller Brad Lander on Tuesday unveiled an online dashboard tracking how the city is spending and allocating more than $11 billion in federal stimulus funds. Lander pointed to several deficiencies in the city’s accounting of those funds, with unclear links between the source of funding and expenditures and sparse measures of the outcomes of that spending. He is hoping to work with fellow Democrat Mayor Eric Adams on addressing these issues left behind by the administration of Mayor Bill de Blasio. The city and its residents are expected to receive as much as $26 billion through the 2026 fiscal year in various forms of direct and indirect federal aid including stimulus checks, unemployment insurance, and federal grants, among others.
Brief: Bank of Nova Scotia and Bank of Montreal got an earnings boost with commercial clients ramping up their borrowing as economies emerged further from the pandemic. Scotiabank increased fiscal first-quarter government and commercial loans 8.2 per cent from a year earlier in its international division and 16 per cent in its Canadian unit. At Bank of Montreal, business loans rose 9.9 per cent in its Canadian banking unit and 9.1 per cent in its U.S. division. Both banks’ overall profit topped analysts’ estimates. Canada’s banks had weathered the COVID-19 crisis with strong mortgage growth, helped by the country’s hot housing market. That lending strength is now broadening to other categories as economies recover from the earlier phases of the pandemic and omicron-variant infections dissipate, prompting businesses and consumers to borrow more.
Brief: Returns, volatility and market depth: the Autorité des Marchés Financiers (AMF) and the Autoriteit Financiële Markten (AFM) have examined the effects of the temporary ban applying to French securities by comparing their respective markets. In March 2020, as the pandemic triggered exceptional lockdown measures around the world, financial markets underwent an episode of high volatility and sharp price declines. To curb any amplification of the unidirectional nature of the markets and restore investor confidence, six European regulators, including France’s Autorité des Marchés Financiers, imposed a temporary ban on short selling. Other European regulators chose not to take any temporary measures. In particular, the Netherlands Authority for the Financial Markets (AFM) considered that it had not observed any market failures requiring supervisory intervention, and therefore did not consider a short selling ban as an effective measure against the effects of the pandemic on the markets.
Brief: Early in the pandemic, an allocator told an audience on the audio app Clubhouse that he never invests with a new manager without doing an on-site visit; he said he needs to look the manager in the eyes before he commits capital. Egging him on, I asked what he would do if the manager had no physical office. He said he would never invest with such a manager. I’d like to think that this never-ending pandemic would have revealed to him and his cohorts the shallowness of such orthodoxy, but a recent survey shows that though allocators are fully prepared to transition to a hybrid of in-person and virtual meetings, only about a quarter said they had allocated to a new manager without physically meeting that person. Granted, the survey was completed in August 2021, but if 18 months of a global pandemic couldn’t change allocators’ minds, then I would not expect Omicron to be the catalyst.
Brief: The pandemic has highlighted the tragic impact of substandard conditions at nursing homes, which are home to many of our most at-risk community members. More than 1.4 million people live in over 15,500 Medicare- and Medicaid-certified nursing homes across the nation. In the past two years, more than 200,000 residents and staff in long-term care facilities have died from COVID-19—nearly a quarter of all COVID-19 deaths in the United States. Without decisive action now, these unacceptable conditions may get worse. Private equity firms have been buying up struggling nursing homes, and research shows that private equity-owned nursing homes tend to have significantly worse outcomes for residents. Private equity firms’ investment in nursing homes has ballooned from $5 billion in 2000 to more than $100 billion in 2018, with about 5% of all nursing homes now owned by private equity firms. Too often, the private equity model has put profits before people—a particularly dangerous model when it comes to the health and safety of vulnerable seniors and people with disabilities. Recent research has found that resident outcomes are significantly worse at private equity-owned nursing homes.
Brief: Historically, many family-owned businesses have not been inclined to accept funding from private equity investors, as they typically view such investors as being more interested in making a quick profit than improving the company’s long-term performance. The pandemic has upended the way global business is done. Like other corporate executives, family-owned business leaders are feeling the stress from Covid-19, but the effect for them is magnified as their personal wealth and income is deeply tied to their businesses. Such business owners may be more open to private capital than ever before, as they look to shore up their liquidity to weather the pandemic and sustain their business. This will give investors many more opportunities than in the past to take minority stakes in such businesses.
Brief: A large portrait of C.D. Howe stares down at the mere mortals who enter the minister’s office on the top floor of the building that houses Innovation, Science and Industry/Economic Development. As minister and deputy minister, we developed and implemented Canada’s Innovation and Skills Plan from 2015 to 2020 under the steady gaze of Canada’s postwar “Minister of Everything.” Much like after the Second World War, this is a crucial time for Canadians to take bold and decisive action. To get back on track after COVID-19, Canada must relaunch and refocus a comprehensive innovation plan. The focus should be on the long term, while drawing lessons from the past. As the architects of the past Innovation and Skills Plan, here are some lessons we learned to help secure growth and living standards. The four pillars of the past plan remain foundational today, with the pandemic further amplifying their relevance.
Brief: Citigroup Inc (C.N) Chief Financial Officer Mark Mason and investment banking head Paco Ybarra have tested positive for COVID-19, forcing the company to hold its investor day as a virtual day on Wednesday instead of in person. The change in plans was announced in an email from Citigroup to those who planned to attend. The names of the executives was confirmed by a spokesperson. Citigroup executives have been working for weeks to prepare presentations for the investor meeting, its first in five years. The conference is seen as a critical event for the company which has been unable to convince investors that it will be able to improve its financial performance to the level of its big bank peers. "While we hoped to host our Investor Day in person, health and safety must be our top priority,” CEO Jane Fraser said in the email.
Brief: How was your pandemic? That’s a question bond buyers can now get some clarity on, with the omicron variant fading. Issuers can now tell you how they fared financially in the nearly two years of the pandemic, how much they have received in federal assistance, and how much they spent. A not-so-little college town in Massachusetts that’s coming to market this week is a case in point. Cambridge is just outside Boston, and is the home of Harvard University and the Massachusetts Institute of Technology. The city of nearly 120,000 (according to the 2020 Census) is selling $92.3 million in limited tax general obligation bonds this week to help pay for construction of two schools, a fire station headquarters, sidewalks and sewers, among other things. There was some concern very early on in the pandemic that remote learning and closed campuses would hurt college towns dependent upon students’ presence. But Cambridge isn’t your typical small college town.
Brief: A list of companies that may have applied fraudulently for emergency loans during the pandemic has been complied by the U.K. Cabinet Office and is circulating among high street lenders, according to people familiar with the matter. The Cabinet Office has shared the information with the British Business Bank which has passed it on to the banks who issued the loans. The list includes companies with duplicate names and firms that had already been dissolved when they applied for support, according to an executive at a bank who asked not to be named given the sensitivity. “We work closely with Cabinet Office counter fraud function, who undertake data analytics for us which identifies possible cases of fraud which we can then share with lenders to investigate, or we can take other action as appropriate,” a spokesman for the British Business Bank said in an email. A spokesman for the Cabinet Office declined to comment.
Brief: The lowest-income Americans are facing a financial conundrum: Inflation is eating into a substantial part of their household budgets, while savings built up during the Covid pandemic are starting to dwindle. Meanwhile, federal supports like monthly payments of the child tax credit and a pause on student loan payments have ended or will soon lapse. And officials have already warned of delayed tax refunds, which low earners generally rely on more than higher-earning families. Consumer prices in January rose 7.5% from a year earlier, the fastest annual pace in 40 years. However, households don’t feel those price shocks equally. The lowest-income working households (which earn less than $20,000 a year) faced the highest inflation rate of any income group in 2021, according to an analysis by researchers at the University of Pennsylvania’s Wharton School. These families funneled more of their budgets to necessities like energy and transportation, prices of which grew more rapidly than other goods and services.
Brief: One of Canada’s largest business groups is calling on Prime Minister Justin Trudeau’s government to pare back stimulus plans, and turn its attention to climate transition goals and innovation strategies to address future economic challenges. In a five-page letter to Finance Minister Chrystia Freeland, the Business Council of Canada outlined areas of focus for the federal government’s coming budget to spur long-term growth, including a call for more spending discipline to restore the nation’s fiscal capacity. “Fiscal policy should be used judiciously to enhance Canada’s long-term productive capacity, rather than further stimulating an economy that is already overly dependent on household consumption,” Goldy Hyder, chief executive officer of the Ottawa-based lobby group, said in the letter.
Brief: Wall Street strategists are cutting their forecasts on European equities on concern that the war in Ukraine will hurt economic growth, while investors pull money from the region’s stock market at the fastest pace in three months. Bank of America Corp. and Goldman Sachs Group Inc. both lowered their index targets, with the latter now expecting virtually no full-year returns for Europe’s Stoxx 600 in 2022. Credit Suisse Group AG reduced its overweight, while EPFR Global data showed $1.8b outflows from the regional equity funds.The conflict has exacerbated an energy crunch in Europe, which is heavily reliant on Russian imports, just as central banks prepare to tighten policy to tackle already-high price pressures. Europe is also expected to be hit harder than the U.S., due to its closer economic ties and geographical proximity to the conflict. “Higher energy prices will likely push up inflation further and any tightness or disruption to the supply of energy, especially gas, in Europe would also have implications for production and GDP,” Goldman strategists led by Sharon Bell wrote in a note to clients.
Brief: Q4 was another solid quarter for hedge funds, with most strategies and all AUA categories delivering positive results, according to the Citco 2021 Q4 Hedge Fund Update. Overall weighted average returns for hedge funds were 1.52 per cent. The quarter once again largely continued a trend for funds on the Citco platform with net positive inflows for the months intra-quarter, and the quarter-end trading cycle experiencing some net outflows. In aggregate, investors added a net total of USD5.7 billion over the whole three-month period. In terms of flows into and out of strategies, Private Capital Hybrid saw impressive net capital of USD11.4 billion, while Multi Strategy and Equities saw meaningful outflows of USD2.7 billion and USD3.1 billion respectively. A year of record-breaking activity in Treasury continued into the final quarter, with total volumes breaking through the 100,000 mark after 39,790 payments in December. The grand total for Q4 came in at 102,549, 47 per cent higher than Q4 2020’s 69,905 payments.
Brief: January was a "negative month" for the European fund industry, as estimated net outflows from mutual funds and ETFs topped €12 billion during the month, according to new figures.The latest data from Refinitiv Lipper showed that overall fund flows amounted to net ouflows of €12.4 billion in January. Of the asset types, equity funds were the best-selling, recording net inflows of €38.6 billion in the same month.Detlef Glow, head of EMEA research at Refinitiv Lipper, said: “Despite the deteriorating situation with regard to the Covid-19 pandemic and the sluggish market environment, it was not surprising that January 2022 was, in general, a negative month for the European fund industry.” Promoters of mutual funds “faced outflows” of €38 billion, while promoters of ETFs saw inflows of €25.6 billion, he added.Glow said: “Within this market environment and given the economic uncertainties, it is somewhat surprising that European investors sold money market products, which are normally considered as safe haven investments. As a result, the overall fund flow numbers are heavily impacted by the high outflows from money market products (-€56.3 bn).
Brief: We are all hoping that the pandemic is almost over and the global economy is now on a path back to normal. However, what constitutes the ‘new normal' is uncertain and inevitably such uncertainty creates market volatility. Investors have to figure out where this path is leading them. As tepid as the post-Global Financial Crisis recovery was, the post-lockdown recovery has so far been very fast. Post-2008 high inflation was not an issue but in this cycle it has been higher and stickier. Moreover, demographics, deglobalisation and decarbonisation all suggest that the post-1980 disinflation is a thing of the past and that inflation will settle higher and retain upside risks.This is important because inflation pressures and central bank reaction functions will most likely define the tenor of this business cycle. If higher inflation is the new normal, then central banks are right to implement faster rate hikes.For equity investors this dilemma has so far played out as a rotation from growth to value. Strong economic growth and high inflation suggest upward sloping yield curves. Within equities, this is perfect territory for banks and commodity stocks. The prospect of higher discount rates also suggests the sell-off in technology stocks may have another leg to run.
Brief: Earnings last year jumped to 7.3 billion euros ($8.3 billion), the Paris-based insurer said Thursday in a statement, beating the average estimate in a Bloomberg survey of analysts. The figure was more than double earnings posted for 2020, when the firm booked a 1.5 billion-euro charge due to the pandemic. “Regarding Axa’s fundamentals, we are extremely confident,” Chief Financial Officer Alban de Mailly Nesle said in a call with reporters. “This is what we showed in 2021, and we start the year with confidence. Axa is emerging from a difficult period for insurers, which were hit by simultaneous claims across various industries when the coronavirus pandemic shut down large parts of the economy. Munich Re also reported a profit rebound for 2021, saying Wednesday that profit more than doubled, which will allow the company to return 2.5 billion euros via a share buyback and higher dividend.
Brief: A world economy that’s still recovering from Covid-19 faces new risks from an energy-priceThe pandemic laid bare gaping holes in the reach and quality of health care services, research, and technology. Even though health care has long been fertile ground for investors, Covid-19 has created even more urgency. Allocators, hedge funds, private equity, and traditional managers are now hiring and investing in new resources to uncover a range of opportunities in the sector. This week alone, UBS O’Connor, the multi-strategy hedge fund manager that is part of UBS Asset Management, and Goldman Sachs Asset Management made big moves. O'Connor expanded its healthcare-focused investment team with the hiring of three medical doctors: Jason Bonodio is joining as a portfolio manager, while Robert Sweeney and Adam Sandler are signing on as research analysts. GSAM has formed a new healthcare advisory council, a group of internal staffers and other resources that will provide expertise and insights for the firm’s private investing strategies.
Brief: COVID-19 vaccine sales jumped 44% for Moderna in the final quarter of 2021, and the drugmaker expects demand for booster shots to fuel more growth in 2022. Moderna said Thursday that it has signed purchase agreements for about US$19 billion in sales for 2022 with options for an additional $3 billion that would cover any updated boosters the company is developing. Company leaders told analysts they firmly believe more booster shots will be required next fall, and they expect sales to be greater in the second half of the year. Shares of the Cambridge, Massachusetts, company soared Thursday, even as broader indexes fell after Russia launched a military attack on Ukraine. Moderna booster shots have already been administered to more than 40 million people in the U.S. The company is working to develop several different versions, including one that targets the omicron variant of the virus that started spreading rapidly late last year.
Brief: Industry setbacks have pressured credit metrics, but asset de-risking and the favorable regulatory environment provide a constructive outlook. Regulated U.S.-based utilities have faced a number of headwinds in recent years, from the 2017 Tax Cuts and Jobs Act's negative impact on cash flows to COVID-19 and irregular weather events. These are generally viewed as one-time or transitory issues, although weather events have become more frequent. The transition from carbon-heavy coal generation to renewables is positive for earnings growth but puts structural pressure on credit metrics as debt is utilized to fund new projects. Funds from operations (FFO) to debt, a leverage ratio commonly used in the industry, have declined nearly 500 basis points since 2017 to around 15%, partially due to the issues mentioned above.
Brief: Stocks fell worldwide on Thursday after Russia’s attack of Ukraine sent fear coursing through markets and upped the pressure on the high inflation already squeezing the global economy. On Wall Street, the S&P 500 sank 1% to continue its dismal start of the year, though it was able to moderate its losses after starting the day down 2.6%. The heaviest losses hit stocks in Europe, after officials called Russia’s nearby moves a “brutal act of war,” with the German DAX down more than 4%. Beyond its human toll, the conflict looks set to send prices rising even higher at gasoline pumps and grocery stores around the world. Russia and Ukraine are major producers not only of energy but also grains and various other commodities. War could upend global supplies, as could sanctions brought by the United States and other allies. Oil prices on both sides of the Atlantic jumped toward or above $100 per barrel to their highest levels since 2014, up more than 5%. As with stocks, prices in Europe swung more sharply than in the U.S. Wholesale prices also shot higher for heating oil, wheat and other commodities. The spot price in Europe for natural gas, for which the continent relies on Russia to supply, jumped as much as 31%.
Brief: A recent study conducted by Forrester Consulting on behalf of intelligent pricing platform, Flintfox reveals that retail, manufacturing and consumers goods companies are facing fundamental challenges in managing their profit margins, due to the ongoing impact of COVID-19, inflation and supply chain issues. 90% of businesses report that COVID is having a critical impact on the ability to manage pricing across their product range, with 39% stating they are unable to keep up with the scale of real-time price fluctuations in the market. This is having a significant effect; with businesses losing on average $1m a year in lost profitability due to their inability to respond quickly enough to market forces. The study of over 900 business leaders has revealed that existing business models prevent them from managing the pace of change, with 41% still relying on manual processes to manage price fluctuations. Over half (53%) state that the pandemic has forced them to need better visibility into business performance on profitability and margins to respond accordingly.
Brief: A world economy that’s still recovering from Covid-19 faces new risks from an energy-price spike as the standoff between the West and Russia escalates. The U.S. and its European allies unveiled limited sanctions on Tuesday, in response to Russian President Vladimir Putin’s decision to recognize two breakaway republics in eastern Ukraine, and warned that tougher penalties may follow. Russia, whose troops are massed around Ukraine, says it has no plans for a full-scale invasion. The crisis has driven oil prices toward $100 a barrel and sent tremors through other commodity markets too, threatening another wave of price pressures on top of already-high pandemic inflation. Russia is a commodities powerhouse and a key supplier of energy to Europe. Western nations are caught between the desire for harsh sanctions to deter Putin, and concern that they’ll suffer blowback themselves. For now, Europe and the U.S. have shied away from blocking Russia’s energy exports, or freezing it out of dollar-based finance. Even so, U.S. President Joe Biden warned Americans Tuesday that there’ll be a price to pay at gasoline pumps back home.
Brief: Fraud and error on the U.K.’s coronavirus support programs is expected to cost British taxpayers as much as 15.7 billion pounds ($21.4 billion), an influential panel of lawmakers said, calling on the government to ensure transparency around ongoing costs associated with the pandemic. Some 5.3 billion pounds of cash lost through fraudulent or mistaken claims is estimated to have been in Chancellor of the Exchequer Rishi Sunak’s flagship furlough program, the cross-party Public Accounts Committee said in a report published Wednesday. That’s 8.7% of payments made under the program, which paid idled workers as much as 80% of their wages. Other loans and grants programs added to what the panel branded as “unacceptable” losses. The government has spent 261 billion pounds on 374 different measures tackling Covid so far, according to the panel. That is expected to reach 370 billion pounds over the lifetime of the measures, with some loan repayments not due for two decades. It pointed also to other losses, including 21 billion pounds of loans that the government doesn’t expect to ever be repaid.
Brief: There are two things that give Marko Kolanovic confidence in his bullish stocks call for 2022, even after a difficult start to the year for financial markets, with rising inflation and Russia-Ukraine tensions. The co-head of global research at JPMorgan Chase & Co. has been asserting for some time that investors should buy dips in stocks -- but now he sees the acute pandemic phase of Covid nearing an end and better times ahead from China, which he expects to offset Federal Reserve tightening. And he sees scope for significant rotation within equities as these changes take place. “Our base case is the end of the pandemic completely,” Kolanovic said in an interview. “During the spring and summer we will have a very strong recovery because omicron is in fast decline and now the immunity rates are really, really high.” He added that when looking at pandemics in the last century, they lasted about two years and maybe three to four waves, “and then for the next 10 to 20 years nothing. We think we’re basically at that point, two-plus years of pandemic, we’ve had the four major waves. And so we think now maybe we’ll be fine for the next 10 or 20 years.”
Brief: Fiera Real Estate UK (FRE UK) has held the final close of Fiera Real Estate Opportunity Fund V (FREOF V) at GBP180 million. FREOF V is the fifth and largest Fund in the Firm’s value add series which has raised over GBP780 million to date. The firm launched FREOF V in November 2019 to take advantage of the unprecedented transitional buying opportunities created by Brexit and the Covid-19 pandemic. The fund is targeted to deliver a 15 per cent total net IRR to investors with little to no leverage. The GBP180 million came from both UK and overseas investors, which, coupled with its successful close during the pandemic, reflects the resilience of UK real estate as an asset class and increased global investor confidence in the UK market.
Brief: As competition in private credit heats up, larger managers have begun to squeeze their smaller and newer competitors out of the market. While private credit funds reached a new fundraising record in 2021, less established managers generally had to settle for a smaller piece of the pie. Forty-two percent of capital raised by private credit managers last year was taken in by the ten largest funds, according to Charles McGrath, author of Preqin’s latest Global Private Debt report. The private debt industry has seen continued growth in assets under management since the onset of the pandemic. Distressed debt, for example, was a big hit for investors interested in betting on a wave of corporate defaults caused by Covid-19. As the market matures, however, the rules of the game are being rewritten by the bigger players. “Just as we see in private equity, experience is a big draw for investors,” McGrath said. “Experienced managers generally raise larger funds and also take a larger share of the market.”
Brief: Allianz is close to agreeing settlements with the major investors in its failed Structured Alpha hedge funds, which failed during the early days of the global pandemic, according to a report by Bloomberg. Speaking in an interview on Bloomberg TV, Chief Financial Officer Giulio Terzariol, said: "We achieved an agreement with the majority of the investors. There are still ongoing conversations with remaining plaintiffs. We are in conversations with the US Department of Justice, and this conversation is very constructive." Blue Cross & Blue Shield and New York's Metropolitan Transportation Authority as well as other pension funds are among the investors to have brought multiple lawsuits against Allianz over the failure of the funds, leading the German insurer to last week announce that it would take a EUR3.7 billion charge in relation to the legal action and regulatory investigations.
Brief: HSBC, the biggest lender in Hong Kong, has donated HK$100 million (US$12.8 million) to help low-income households hit hard by the Covid-19 outbreak, the biggest so far by the city's financial sector. The lender has joined a slew of companies, including Bright Smart Securities, Futu Securities, Ant Group and FWD, which over the past week have offered support ranging from monetary donations, testing kits and other assistance to the city facing record infections nearly every day amid the fifth wave of the coronavirus outbreak. The Hongkong Bank Foundation, the bank's charitable arm, has teamed up with the Hong Kong Red Cross to help households who need to undergo compulsory home quarantine because of infections among family members or lockdowns of residential buildings for tests.
Brief: After hitting records in 2021, deal-making looks like it may be coming down to earth this year. In 2021, the total value of mergers and acquisitions reached an all-time high of $5.9 trillion, up from $3.7 trillion the year before, according to a report on global M&A in 2022 from Bain Consulting. In January, however, the number of M&A deals declined for the first time in almost two years, according to data from II’s sister company, BCA Research. In a daily briefing, BCA noted that the dimming M&A outlook is a result of decelerating economic growth, sluggish equity returns, rising interest rates, and strong regulatory headwinds. “The environment is now less conducive for mergers and acquisitions,” according to BCA. “This is compounded by the fact that the number of M&A deals over the past 12 months far exceeds previous peaks, which raises the likelihood that dealmaking activity experiences a mean reversion.”
Brief: Business leaders and unions have warned the government that scrapping free Covid tests in England and watering down sick pay will discourage workers from self-isolating and could damage the economy. Although welcoming Boris Johnson’s ambition to ease restrictions almost two years into the pandemic, company bosses said the prime minister’s newly unveiled “living with Covid” strategy came with major risks and could do more harm than good. Claire Walker, co-executive director of the British Chambers of Commerce (BCC), said the changes inched companies closer to pre-pandemic conditions. “However, for many firms, this move will not be without its challenges, and government must not pass public health decisions on to the business community, who are not public health experts.”
Brief: The prolonged era of ultra-low interest rates has pushed many investors into riskier "high-yield" assets. Older investors who are at or near retirement have never had as high allocations into risk assets as they do today. This issue has only worsened with inflation which has lowered real yields to unprecedented levels. At the same time, the global economy is slowing at a faster-than-expected pace, and, finally, interest rates are starting to rise back to normal levels. Today, investors face an undoubtedly odd set of market conditions with a multitude of both inflationary (supply & labor shortages) and deflationary forces (extreme public and private debt). In such an environment, high-risk assets, particularly credit assets, can easily lose most of their value if market conditions continue to sour. Thus far, most riskier credit assets have failed to hold their weight, given the rise in interest rates. This issue can already be seen in the breakdown of popular riskier-credit funds such as PIMCO Dynamic Income Fund (PDI).
Brief: UK retail sales increased by 1.9% during January following a 4% fall in December, according to figures released today (18 February) by the Office for National Statistics, with home improvements significantly contributing to the uptick. While non-food items provided the biggest bump, having risen by 3.4% during the month, food store sales volumes fell below pre-Covid levels for the first time, dropping 0.8% below where they were in February 2020. Sales volumes across the piste were 3.6% above their pre-pandemic levels, although 76% of consumers say they can now feel the impact of rising inflation. Neil Birrell, chief investment officer and fund manager on the Premier Miton diversified fund range, said given the rise in inflation and borrowing costs, as well as spikes in energy prices and tax increases, "we are likely to see some patchy data in the coming months".
Brief: More people are choosing to work from home because they want to, even if their office is open and they’re less concerned about Covid risks, according to new findings from Pew Research Center. According to a January survey of 5,889 workers, 61% of people working from home today say they’re not going into their workplace because they don’t want to, and 38% say their office is closed. It’s a reversal from October 2020, when 64% of people were working from home because their office was closed, and 36% were doing so out of preference. Even as more offices open up, “people are making a conscious choice to work from home, rather than just out of necessity,” says Kim Parker, Pew’s director of social trends research. Teleworkers say they’re choosing to stay home for better work-life balance, productivity or because they’ve relocated away from the office. Fewer people say Covid is the main reason why they’re working from home (42% now vs. 57% in 2020).
Brief: An uneven economic rebound is complicating discussions among finance chiefs and central bank governors of the world’s biggest economies as they meet this week to navigate a fragile global recovery. “Some are facing this with high growth and inflation, so they have to adjust their policy domestically, but at the same time other countries are still left behind,” Indonesia’s Finance Minister Sri Mulyani Indrawati told Bloomberg Television’s Yvonne Man and Haslinda Amin in an interview Friday from the sidelines of the Group of 20 meetings. “That can create an environment for policy that is not easy.” Indonesia, which is taking the helm of the G-20 for the first time, is seeking to release a communique when the meeting ends Friday that can address equal access to financing and ensure the transition to renewable energy can be affordable to all countries. An uneven economic rebound is complicating discussions among finance chiefs and central bank governors of the world’s biggest economies as they meet this week to navigate a fragile global recovery.
Brief: British-based, Asia-focused bank HSBC has closed down several floors of its landmark main Hong Kong office from Friday after several staff tested positive for Covid-19. The closure comes as Hong Kong’s business and financial institutions react to a coronavirus outbreak that is growing rapidly despite a so-called “dynamic zero” government policy that calls for suppression rather than containment of the virus. Health officials are expected to a record 3,600 new cases on Friday, with a further 7,600 testing preliminarily positive. People who test positive in Hong Kong for the virus are sent to public hospitals for isolation while their close contacts are ordered to isolate for 14 days, sometimes in austere government facilities. HSBC said that it would temporarily close the BL1, L3, L5 and L6 levels of its headquarters in Hong Kong’s Central district. The bank did not indicate how long the closure would last or how it would affect operations in the iconic Norman Foster-designed tower in the heart of Hong Kong’s Central district.
Brief: The Covid pandemic had a massive effect on the global commercial real estate market. The preliminary success of return to work continues to decline as new Covid-19 variants emerge, making a mass return to work more unlikely, while the retail industry is taking big hits from e-commerce and the expansion of home delivery services. Despite the outlook, a number of real estate sectors give reason for optimism, one of those is life sciences real estate. With the market already seeing strong demand conditions attributed to an ageing population, rising healthcare spending, and enthusiastic venture capital investments, the start of the pandemic has only accelerated this growth. The rapid development of several effective Covid-19 vaccines led to a significant increase in capital focusing on the life science office sector. Research and development of vital medicines, as well as increased testing and treatments to tackle Covid-19, have also boosted occupancy levels.
Brief: The Great Resignation improved in most U.S. states in December but worsened in eight, with Alaska, Virginia and Ohio seeing the largest increases in their quits rates. The quits rate -- or the number of quits as a percent of total employment -- fell in 36 states and the District of Columbia in the final month of 2021, according to Labor Department data released Thursday. Six states saw no change. Meanwhile, the quits rate in Alaska rose 1.6 percentage points at the end of 2021 to 5.5% and jumped 0.7 point to 3.3% in Virginia. With a near-record number of job openings nationwide, the number of Americans voluntarily leaving their jobs has surged. Those leaving can often secure a job with better pay, more flexibility or both. The unemployment rate has fallen to 4% nationally, and companies have bid up wages in an attempt to attract and retain employees. While all states have struggled with similar issues, the extent of the problem differs by location. Thirty-four states had higher quits rates than the national figure of 2.9% in December. North Carolina, Illinois and Georgia saw the largest decline in the number of people quitting in the month.
Brief: Market watchers are optimistic that Hong Kong’s plans for mass Covid-19 testing could stem the resurgence of virus cases, with stocks tied to economic reopening advancing in a volatile session Thursday. Leveling out daily infections could ultimately lay the groundwork for an eventual reopening - even if that seems far away, they say. Hong Kong is intensifying efforts as the latest outbreak rips through the city, with local media reporting about 5,000 new Covid cases on Thursday. While broader markets in the financial hub and in Asia were whipsawed by renewed geopolitical tensions over Ukraine, shares of Macau casino operators and cosmetics makers climbed in Hong Kong. Further gains could help broaden the rise in the MSCI Hong Kong Index, which has rallied more than 8% since a December low, among the top-performing stock benchmarks in Asia. The advance was boosted by financials, which make up about half of the gauge’s weighting, amid a surge in global bond yields.
Brief: U.S. Treasury Secretary Janet Yellen urged her counterparts from leading industrialized countries to support the establishment of a new World Bank fund intended to prevent and prepare for future global health crises. A new “financial intermediary fund” under the auspices of the World Bank would help address gaps in preparedness, particularly among low-income countries, Yellen said, according to prepared remarks she’s scheduled to deliver virtually on Thursday to a meeting of finance ministers and central bank governors from Group of 20 countries. “We don’t see this as a pool of money that sits idly waiting to respond to the next pandemic,” Yellen said. “It will be used in the near term to incentivize countries to make investments to fill existing gaps in their ability -- and our collective capacity -- to prevent and prepare for the next crisis.”
Brief: Prime Minister Justin Trudeau’s emergency orders aimed at cutting off funds to protesters have cast a wide net across the Canadian financial industry, forcing portfolio managers and securities firms to take a harder look at who they are doing business with. The new rules make demands of a broad list of entities — including banks, investment firms, credit unions, loan companies, securities dealers, fundraising platforms, insurance companies and fraternal benefit societies. They must determine whether they’re in “possession or control of property” of a person who’s attending an illegal protest or providing supplies to demonstrators, according to orders published by the government late Tuesday night. If they find such a person in their customer list, they must freeze their accounts and report it to the Royal Canadian Mounted Police or Canada’s intelligence service, the regulations say. Any suspicious transactions must also be reported to the country’s anti-money-laundering agency, known as Fintrac.
Brief: Finnish software maker Relex Solutions raised 500 million euros at a valuation of 5 billion euros ($5.7 billion) in a funding round spurred by demand from retailers suffering from supply-chain disruptions. Relex’s artificial intelligence products let businesses such as grocery stores forecast which products to buy, in what quantities, and where best to allocate space for the inventory in stores and warehouses. “Global supply chain disruptions were one of the reasons why we decided to do the round, to enable us to grow,” Relex Chief Executive Officer Mikko Karkkainen said in an interview. “The past couple of years have shown many companies vulnerabilities in their supply and value chains.” Relex said in a statement Thursday that it has about 1,300 employees, and the CEO said the company will use some of the money raised to hire hundreds more across roles in software development, marketing, customer support and delivery.
Brief: The global pandemic continues to significantly impact investment strategies among global asset managers, according to new research from Clearwater Analytics (CWAN). A poll of over 140 asset managers and owners representing more than USD5 trillion in AUM showed more than a third of investors investment strategies will change this year in response to Covid. The study asked how investment strategies had changed since the start of the pandemic, and how this compares to what they have planned for 2022 in the wake of the recent omicron surge. At a macro level, 58 per cent of companies reported making changes to their strategy two years ago, albeit only 13 per cent said the change was material. Looking forward from today, 33 per cent plan further changes to their strategies and 5 per cent said they will be material changes.
Brief: While Wall Street banks press employees to return to the office this month, its regulators in Washington are largely sticking with a flexible approach to remote work. The U.S. Securities and Exchange Commission, which has a staff of about 4,500, pushed back until June 6 its earliest date for requiring employees to return, according to a person familiar with the plans. The Federal Reserve in Washington remains mostly in a remote posture, and at the Office of the Comptroller of the Currency, no final decision has been made on when workers will be called back on a mandatory basis. At other agencies across the government, employees are largely still working from home. Meanwhile, financial giants from Citigroup Inc. to Goldman Sachs Group Inc. have pressed to bring back staff this month after a nationwide surge in coronavirus cases at the end of last year and in the early weeks of this year.
Brief: Conditions at most of the world’s large meat, fish and dairy producers are said to be “incubating” future pandemics, according to a report by the FAIRR Initiative. An assessment of the industry as part of the organisation's Emerging Disease Risk Ranking found that 63% of animal protein producers are failing to take the necessary steps to prevent future zoonotic pandemics. Jeremy Coller, chair of the FAIRR Initiative, said: "Business-as-usual animal agriculture risks incubating the next zoonotic pandemic, posing both an intolerable investment risk and a threat to global public health. The sector must improve rapidly, starting with welfare conditions for animals and workers." FAIRR highlighted that three out of four new diseases are zoonotic ones like Covid-19, which means they have jumped from animals to humans.
Brief: Inflation in the UK rose to 5.5% in January, up from 5.4% in December 2021, continuing the streak of reaching the country’s highest inflation rate in thirty years. The Office for National Statistics said that the 12 month UK Consumer Price Index was at the highest level since records began in January 1997 and was last higher in the historical modelled series in March 1992, when it stood at 7.1%. The ONS said that the largest contributors to rising inflation came from clothing and footwear, furniture and household goods, food and non-alcoholic beverages, and alcohol and tobacco. It also credited the price rises for gas and electricity following the increase in the cap on energy prices. In contrast, the ONS said it saw large downward contributions to change from restaurants and hotels, and transport.
Brief: Investors are betting on the fastest pace of interest-rate hikes since 2010 across the world’s biggest developed markets, pressuring policy makers who want to slow inflation without crash landing their economies. That’s the backdrop to this week’s meetings of central bank chiefs and finance ministers from the Group of 20 nations, who hold virtual and in-person discussions in Jakarta on Thursday and Friday, their first gathering of the year. It’s a remarkable turnaround from when they last met in October, a period when Federal Reserve Chair Jerome Powell was still describing inflation as “transitory” and markets were pricing in at most two Fed rate increases this year. Now, six Fed hikes are priced in.
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