Aurelia Butler

NEW YORK (Reuters) – Big U.S. banks survived a hypothetical 40% drop in commercial real estate values as a part of the U.S. Federal Reserve’s annual health test, easing fears about the banking sector as landlords struggle in a higher-for-longer interest rate world. As risks mount in the CRE space, investors were looking to the Fed’s “stress tests” to assess how exposed America’s lenders are at a time when pandemic-era work habits continue to empty office towers, sending vacancy rates past historic peaks to a record 20%. “In a lot of respects, there should be a sense of comfort that banks can weather a very nasty storm,” said Chris Marinac, head of research at Janney Montgomery Scott. “Though this doesn’t mean the Fed thinks commercial real estate is out of the woods. It’s still early innings in this credit cycle.”The Fed’s emergency drill tests banks’ balance sheets against an imagined severe economic downturn that also includes a 36% decline in U.S. home prices, a 55% drop in equity prices and an unemployment rate of 10%.The results, released on Wednesday by the Fed, examine whether banks would be able to continue lending to households and businesses in the event of a severe global recession. They also indicate the amount of capital banks need to be considered healthy – and how much they can return to shareholders through dividends and buybacks. The 31 large banks tested showed they have sufficient capital to absorb nearly $685 billion in losses. The Fed’s disaster test comes more than a year after the collapse of mid-size lenders Silicon Valley Bank, Signature Bank (OTC:SBNY) and First Republic. Those failures prompted criticism that the Fed had failed to gauge banks’ vulnerabilities against rising interest rates; instead, the Fed imagined interest rates would fall amid a severe recession. Commercial office space is being closely watched as $929 billion of the $4.7 trillion of outstanding commercial mortgages held by lenders and investors will come due in 2024, according to the Mortgage Bankers Association. This looming maturity wall comes against a backdrop of declining property values and lower rent rolls.Analysts predict a painful reckoning for CRE, with banks still retaining “considerable concentration risks,” according to Moody’s (NYSE:MCO) Ratings. Of the banks tested, Goldman Sachs had the highest projected loan loss for commercial real estate, at 15.9%. RBC USA, Capital One and Northern Trust (NASDAQ:NTRS) followed, with projections at 15.8%, 14.6% and 13%, respectively. One criticism of the Fed’s stress test by analysts was that it did not include the regional banks that hold the majority of CRE loans. Regional lenders are also less regulated than their larger peers. More

(Reuters) -Levi Strauss fell short of market expectations for second-quarter revenue on Wednesday, hurt by choppy wholesale demand in the United States.Shares of the company were down 12% in extended trading after Levi also maintained its annual profit and revenue forecast due to an adverse foreign exchange impact, as well as steeper marketing spend heading into the back-to-school and festive holiday seasons.Levi is pivoting to a direct-to-consumer business and prioritizing higher-margin products after an inventory glut last year caused several quarters of weakness in wholesale demand.In the reported quarter, Levi’s (NYSE:LEVI) U.S. wholesale revenue was down mid-single digits, although the company added the channel was “significantly more profitable” than last year due to improved inventory levels.”Our consumer is proving to be resilient. They’re coming into our stores and they’re shopping online. There are indications … certainly there’s some level of uncertainty as we look into the back half of the year and beyond,” said Levi’s Chief Financial Officer Harmit Singh on the post-earnings call.However, the company executives said the Dockers brand, known for its chinos and khakis, underperformed in the quarter, hurting Levi’s top line.This undermined robust denim demand – driven by full price sales in women’s clothing, as consumers shopped for denim dresses, tops and skirts.The company reported second-quarter adjusted profit per share of 16 cents, beating expectations of 11 cents, and gross margin grew 180 basis points.Levi added in a post-earnings call it now expects fiscal 2024 net revenue growth in constant currency to be at the upper end of its prior range of 1% to 3%.The company also maintained its forecast for annual adjusted profit of $1.17 to $1.27 per share.Second-quarter net revenue of $1.44 billion fell shy of estimates of $1.45 billion, as per LSEG data. More

(Reuters) – A look at the day ahead in Asian markets.Inflation scares in Canada and Australia this week are a reminder that the global monetary easing cycle expected to broaden out and accelerate in the second half of the year is by no means certain. This is a potential headache for investors in Asian and emerging markets as the mid-point of the year approaches, and could weigh on their investments for the next six months.Figures on Wednesday showed that Australian inflation in May rose much faster than expected, back up to 4% and enough to flip the interest rate outlook – traders now reckon a rate hike this year is more likely than a cut.The Aussie dollar’s rally quickly evaporated, however, much like the Canadian dollar’s rally following surprisingly strong Canadian inflation numbers earlier this week. Both succumbed to the U.S. dollar, which hit a two-month high against a basket of major currencies on Wednesday. Will the inflation pulse in Canada and Australia show up in U.S. data too, and prevent the Fed from cutting rates? This is the worry for Asia and emerging markets – a strong U.S. dollar tightens global financial conditions and steers capital towards U.S. assets at the expense of emerging markets.So does rising Treasury yields, and on Wednesday U.S. bond yields broke out of their recent slumber and spiked higher. Wall Street closed modestly higher, but the dollar and yields may have more influence on Asian trading on Thursday. Thursday’s Asia & Pacific economic calendar sees the release of Japanese retail sales, industrial profit numbers from China, an interest rate decision from the Philippines, and a speech from Reserve Bank of Australia deputy governor Andrew Hauser.The Philippine central bank is widely expected to keep its key policy rate on hold at 6.50% for a sixth consecutive meeting, according to a Reuters poll, and deliver the first cut in the last three months of the year.The Philippine peso is at its lowest level of the year against the U.S. dollar, down 6% year-to-date. That’s only half of the 12% decline registered so far this year by the Japanese yen, which hit a 38-year low against the dollar on Wednesday. It is now well below the 160.00 per dollar level that triggered large-scale yen-buying intervention from Japanese authorities nearly two months ago. Not this time, at least not yet. Unsurprisingly, short-dated dollar/yen implied volatility has spiked higher, but the magnitude of increase and levels reached hardly suggest traders are fearful of heavy-handed intervention. Overnight implied vol on Wednesday rose the most since mid-May but only back to where it was on Tuesday. One-week implied vol rose the most in four weeks, but again, only back to where it was in mid-June. Here are key developments that could provide more direction to markets on Thursday:- Philippines rate decision- Japan retail sales (May)- China industrial profits (May) More

(Reuters) – Sixteen Nobel prize-winning economists signed a letter on Tuesday warning that the U.S. and world economy will suffer if Republican presidential candidate Donald Trump wins the U.S. presidential election in November.The jointly signed letter, first reported by Axios, says the economic agenda of U.S. President Joe Biden, a Democrat, is “vastly superior” to Trump’s, the former Republican president seeking a second term.The economists say Trump’s economic plans would reignite inflation, in part because of his pledge to impose stiffer tariffs on Chinese imports, which they say will hike prices on many goods bought by U.S. consumers.”While each of us has different views on the particulars of various economic policies, we all agree that Joe Biden’s economic agenda is vastly superior to Donald Trump,” the economists state in their letter.”We believe that a second Trump term would have a negative impact on the U.S.’s economic standing in the world, and a destabilizing effect on the U.S.’s domestic economy.”The letter was signed by prominent economists including Joseph Stiglitz, who won the Nobel prize for economics in 2001, and Sir Angus Deaton, an economic Nobel laureate in 2015.Biden and Trump are locked in a close election race. The Nov. 5 contest will be decided by voters in a handful of battleground states which are closely contested because their voting preferences can swing to Republicans or Democrats.While headline inflation has slowed in the past two years, many U.S. consumers are still unhappy with the higher prices they have to pay for food, gas and other goods, according to public opinion polls.Trump has pledged to impose tariffs on foreign imports, and up to at least 60% on Chinese goods coming into the U.S., a cost the economists say will be passed on to U.S. consumers in the form of price hikes.”Many Americans are concerned about inflation, which has come down remarkably fast. There is rightly a worry that Donald Trump will reignite this inflation, with his fiscally irresponsible budgets,” the letter states.The Trump campaign did not immediately respond to a request for comment. James Singer, a Biden campaign spokesperson, called Trump’s economic agenda dangerous. The U.S. economy will be a major theme in the first presidential debate between Biden and Trump on Thursday. Trump blames Biden for high prices and inflation, while Biden claims Trump’s trade policies, including tariffs, will raise inflation. More