Aurelia Butler

Here’s what to expect in the coming days, from Rae Wee in Singapore, Lewis Krauskopf in New York and Amanda Cooper and Naomi Rovnick in London. 1/ WILL THEY, WON’T THEY? Hints of whether the Fed still expects interest rate cuts at some point this year takes centre-stage for investors at the central bank’s meeting that concludes on Wednesday. Rate action is unlikely, but comments from Fed Chair Jerome Powell about the potential for policy easing later in 2024 will be scrutinized. In March, the Fed projected three rate cuts this year but stronger-than-expected inflation reports are casting doubt on whether it will be able to ease policy that much – and that soon. A ratcheting down of rate cut expectations has been a key factor behind the rise in Treasury yields and recent pullback in stocks. Fed futures markets now predict some 35 bps of easing in 2024 down from 150 bps expected at the start of the year.2/ TECH TALK The last of the “Magnificent Seven” megacaps that drove a fiery stock rally in 2023 to report are Amazon, reporting Tuesday, and Apple, on Thursday.Some of their peers such as Tesla (NASDAQ:TSLA) and Facebook parent Meta Platforms (NASDAQ:META) have given a mixed performance.Apple shares (NASDAQ:AAPL) have lost their lustre in 2024, tumbling over 10%. The iPhone maker is expected to post a decline in first quarter earnings after China smartphone shipments fell 19%.Amazon’s cloud computing business will be in focus while investors will be attuned to the online retailing giant’s view of consumer spending. Its shares are faring better so far this year, having risen 18% as of Wednesday. Meanwhile, tech regulation is also on the front burner. President Joe Biden just signed legislation that bans TikTok in the United States if Chinese owner ByteDance fails to divest the short video app over the next nine months to a year.3/ RAY OF HOPEFollowing last month’s upside surprises on manufacturing activity in China, April’s readings are set to indicate whether the long-awaited economic recovery is indeed gathering steam.Official figures for China’s purchasing managers’ index (PMI) are due on Tuesday and the Caixin/S&P Global manufacturing PMI survey is expected shortly afterwards.Upbeat data could revive animal spirits in the world’s second largest economy, bringing relief to policymakers who have been trying to shore up growth and bolster investor sentiment.Global investment houses have turned increasingly bullish on Chinese stocks, helping the blue-chip index tack on more than 10% from a February trough. But Beijing has lately found itself in a bind over its currency. The yuan is sliding against a perky dollar but is stronger against its major trading partners – an unwelcome sign for China’s export-reliant economy.4/ PAVING THE WAYEuro zone inflation and economic growth data due out on Tuesday could strengthen market bets for the European Central Bank to lower its deposit rate from a record 4% in June, although policy makers are not expected to move very fast thereafter. Gross domestic product in the euro zone currency bloc probably expanded by just 0.1% in the first quarter, year-on-year, economists polled by Reuters expect the data to show. April inflation numbers could also convince the ECB it’s time to cut, after consumer price growth slowed unexpectedly to 2.4% in March and policymakers signalled that the central bank was willing to move. But with U.S. inflation running hot and the Fed viewed as likely to hold rates high, markets price 60 bps of cuts by the ECB this year as it remains wary of the euro weakening too much against a supercharged dollar. 5/ SELL IN MAYConventional wisdom has it that May is the ideal point to take profit on equities and lay low until later in the year.”Sell in May and go away” is based on the premise that the best six-month period for stock market returns is November to April, while the leanest is May to October. Over the last 50 years, the S&P 500 has gained an average of 4.8% between November and April, and just 1.2% between May and October, according to Reuters calculations.However, this pattern fades over a shorter time-frame.Over the last 20 years, the out-performance of November-April over May-October narrows to 1%. Over 10 years, November-April has underperformed May-October by 1 percentage point and over the last five years, it has underperformed by 3 percentage points. It might be time to find words that rhyme with “November”. (Graphics by Kripa Jayaram, Sumanta Sen, Vineet Sachdev and Amanda Cooper, Compiled by Karin Strohecker; Editing by Gareth Jones) More

(Reuters) – A former McKinsey & Co partner sued the global consulting firm on Friday and accused it of defaming him and making him a “scapegoat” to distract attention from its work advising OxyContin maker Purdue Pharma and other manufacturers of opioid pain medications.Arnab Ghatak, who was fired in 2021, filed the lawsuit in New York state court just two days after Reuters and others reported that the U.S. Department of Justice was conducting a criminal investigation of McKinsey’s role in the U.S. opioid epidemic.Part of that investigation concerns whether McKinsey obstructed justice, an inquiry related to McKinsey’s disclosure that it had fired two partners who communicated about deleting documents related to their opioids work, people familiar with the matter said.Those partners included Ghatak, who had been a senior partner and McKinsey’s global head of medical affairs. In his lawsuit, Ghatak alleged that McKinsey and its global managing partner, Bob Sternfels, lied to the U.S. Congress and the public about his role deleting emails.Ghatak accused Sternfels of misleading Congress when he testified before a House of Representatives committee in 2022 that the two partners were terminated for violating a document retention policy, one that Ghatak said in fact did not exist.He said McKinsey knew no evidence existed of him improperly deleting emails, yet had promoted the narrative “to create a scapegoat as a diversion from their own decades long work in non abuse deterrent opioids.”The lawsuit seeks unspecified compensatory and punitive damages from McKinsey and Sternfels, who was also named as a defendant. A spokesperson for McKinsey called the complaint “entirely meritless.””We terminated him for serious violations of our professional standards,” the McKinsey spokesperson said. “We fully stand by our decision to terminate Dr. Ghatak and by our public statements on the matter.”A U.S. Department of Justice spokesperson did not respond to a request for comment.McKinsey previously agreed to pay nearly $1 billion to settle widespread opioid lawsuits and other related legal actions by states, local governments, school districts, Native American tribes and health insurers accusing it of contributing to a deadly U.S. opioid addiction epidemic.McKinsey in 2019 said it would no longer advise clients on any opioid-related businesses. McKinsey did not admit to wrongdoing in those civil settlements.Purdue pleaded guilty in 2020 to charges over its handling of opioids. A multi-billion-dollar settlement it reached in bankruptcy court resolving lawsuits alleging it fueled the epidemic is on hold while the U.S. Supreme Court considers a challenge by the Biden administration to the deal. More

By Niket Nishant and Manya Saini(Reuters) – New York Community Bancorp (NYSE:NYCB) will have to lure buyers for its commercial real estate (CRE) loans with steep discounts and diversify its revenue as it races to shore up its finances.The bank’s new management has promised to unveil a turnaround plan this month after losses on CRE loans, NYCB’s core business, sparked a rout that wiped nearly $6 billion off its market value and sparked ratings downgrades.A $1 billion investment led by former U.S. Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital has shored up the bank for the short-term, but it still needs to bolster its capital and shrink its exposure to the CRE sector, which has been hammered by higher interest rates.NYCB’s future depends on the new management offloading some CRE loans and diversifying its balance sheet, said half a dozen analysts and investors. But with rivals also retreating from CRE, and private equity and other institutional buyers seeking steep discounts, good deals will be hard to come by, they said. “If you’re a hedge fund or an asset manager, you know NYCB has to sell. So, you’re going to factor that into your pricing,” said Brian Graham, co-founder of financial services investment firm Klaros Group, adding it will be difficult for the bank to find loans it can sell at a premium.Multi-family apartment blocks comprise roughly 44% of NYCB’s loans and about half of those are on buildings with controls on how much landlords can raise rents, dimming their appeal.Last month, the new management team, led by former Comptroller of the Currency Joseph Otting, said NYCB had sold a commercial co-operative loan at a gain and that non-bank bidders were interested in other loans, although it did not provide details.But with interest rates now expected to remain elevated longer than previously anticipated amid sticky inflation, NYCB’s loan books will probably have to be repriced to reflect this, said Brian Mulberry, client portfolio manager at Zacks Investment Management, which holds several bank stocks. “To attract any level of buyer interest it will necessitate bigger discounts today to offset a higher cost of refinancing in the future,” Mulberrry said, although he added that investors had mostly priced in any more potential bad news from the bank. NYCB’s shares are down 70% since the beginning of the year, their lowest level since around 1996.Depending on the size of the discount and how the loan is valued on the bank’s balance sheet, NYCB might have to take a loss on some CRE loans.A spokesperson for the bank referred Reuters to remarks Otting made last month indicating he will share his strategy and provide forecasts during first-quarter earnings. The bank has yet to say when it will report as of Tuesday.Wall Street analysts expect NYCB to report a loss, compared to a profit a year earlier. “Investors will want a clearer picture of NYCB’s underlying credit quality and capital adequacy while determining future earnings power,” said Michael Ashley Schulman, chief investment officer at multifamily office Running Point Capital. DIVERSIFICATION PUSHNon-performing CRE loans as a percentage of U.S. banks’ portfolios doubled to 0.81% by the end of 2023 from 0.4% a year earlier, the International Monetary Fund said this month. Ratings agency Moody’s (NYSE:MCO) said NYCB’s CRE concentration, which equaled about six times its tangible common equity as of Dec. 31, 2023, is the highest of the rated U.S. banks.The involvement of private-equity buyers is helpful in stabilizing capital, but long-term uncertainties around governance and strategy remain, the ratings agency added. NYCB will have to pull back from New York real estate – the bedrock of the 165-year-old bank’s business for five decades – and diversify into other lending and fee businesses. While high rates have reduced short-term demand for home loans, the bank’s Flagstar mortgage business could provide greater revenue diversity when rates eventually fall, said Fitch Ratings analyst Anthony Di Tomasso.Investors will also be looking for evidence that the bank’s existing streams of non-interest income are offsetting the CRE losses, said Mulberry. That could be by improving income elsewhere, such as from loan servicing fees or through cost savings, although the bank will also need to invest in compliance after disclosing control failures, said analysts. Investors and analysts will focus on NYCB’s progress integrating failed Signature Bank (OTC:SBNY) assets which it acquired last year, pushing its balance sheet above a $100 billion regulatory threshold that triggered tougher capital and liquidity rules. That deal aimed to diversify the bank away from CRE by adding $33.5 billion of deposits and roughly $11.7 billion of commercial and industry loans. However, NYCB warned last month that the fair value of those assets could change, underscoring the ongoing uncertainty over the state of the bank’s balance sheet.”Bank turnarounds often take years not weeks,” said Schulman. More

LOS ANGELES (Reuters) – Four cargo ships, stuck for about a month at the Port of Baltimore by the ruins of the collapsed Francis Scott Key bridge, have exited this week via a temporary channel, according to shipping data. Large ship traffic to and from the port, the busiest in the U.S. for auto shipments, has been severely restricted since the hulking Dali container ship lost power and smashed into the bridge on March 26, bringing it down and blocking the channel. The FBI has launched a criminal probe into the incident, which killed six bridge workers. The Balsa 94, a general cargo carrier, on Thursday was the first to exit Baltimore Harbor via a new channel that is 300 feet (91 meters) wide and at least 35 feet (11 meters) deep. That Panama-flagged vessel, which had been at the Baltimore port since March 23, is now en route to Saint John, Canada, according to LSEG data.Other exiting ships were the Saimaagracht, a Netherlands-flagged general cargo ship, the Carmen car carrier owned by Norwegian/Swedish shipping firm Wallenius Wilhelmsen and the Thailand-flagged bulk carrier Phatra Naree. The Dutch-flagged Frisian Ocean, a general cargo ship, was among the vessels that used the new channel to enter the port before it temporarily closes on Monday so workers can remove the Dali.”We’re working to strike a balance between enabling temporary access to support commercial activity and undertaking necessary measures to fully reopen the Fort McHenry Channel,” said U.S. Coast Guard Captain David O’Connell, the federal on-scene coordinator for the Key Bridge response team. The reopening of the port’s main channel remains on track for the end of May, officials said.During the first nine months of 2023, the Port of Baltimore was the second-biggest port for U.S. coal exports, behind Norfolk, Virginia. Coal piled up at terminals before new shipments were diverted, kicking up dust, residents told Reuters. Two coal carriers, the JY River and Klara Oldendorff, remain stranded at the port. Some barges carrying agricultural goods, coal and metals will continue to have access to the port via a more shallow channel that opened during the weekend. Domino Sugar Baltimore said on the X social media site that the barge the Jonathan is again delivering raw sugar for its refinery. More

WASHINGTON (Reuters) -Erich Andersen, general counsel for TikTok and Chinese parent company ByteDance, will step down from that role in June to focus on fighting efforts to force a sale of the video app in the U.S., the company said on Friday.Andersen will remain at the company and become its special counsel to lead TikTok’s effort to overturn legislation signed into law by President Joe Biden on Wednesday that gives ByteDance 270 days to divest short-video app TikTok in the United States or face a ban. TikTok said this week it plans to file a lawsuit to challenge the legislation but has declined to say when it plans to do so.Andersen was a key player in the company’s successful challenge in 2020 to the Trump administration’s attempt to ban TikTok and last year’s challenge that resulted in a judge blocking the state of Montana’s ban. TikTok, which says it has not shared and would not share U.S. user data with the Chinese government, is set to challenge the bill on First Amendment grounds and TikTok users are also expected to again take legal action.TikTok CEO Shou Zi Chew praised Andersen and said he was delighted Andersen “has agreed to step into the role as special counsel to focus on this very important mission facing our company.”Chew said Wednesday the company expects to win its legal challenge to block the legislation that could ban the app used by 170 million Americans.Biden’s signing sets a Jan. 19 deadline for a sale – one day before his term is set to expire – but he could extend the deadline by three months if he determines ByteDance is making progress.Driven by widespread worries among U.S. lawmakers that China could access Americans’ data or surveil them with the app, the bill was overwhelmingly passed in recent days.The four-year battle over TikTok is a significant front in a war over the internet and technology between Washington and Beijing. More