Aurelia Butler

The changes, first proposed in February 2022, would require hedge funds and private equity firms to detail all fees and expenses on a quarterly basis, ban charging customers for unperformed services or for adviser examination, and lower the bar for investors to sue fund managers. Fund advisers, even those not registered with the agency, would be prohibited from conflicts of interest or giving any investor preferential treatment without disclosing it.At the time it was proposed, SEC Chair Gary Gensler said the changes would benefit investors in such funds, typically wealthy individuals and institutional investors like pension funds, and companies raising capital from them.”Private fund advisers, through the funds they manage, touch so much of our economy. Thus, it’s worth asking whether we can promote more efficiency, competition, and transparency in this field,” he said. Democratic Senators including Sherrod Brown and Elizabeth Warren have voiced support, saying in a May letter that they address a “critical need for greater transparency” for a sector that has grown in market significance. Private funds reported holding $20.4 trillion in gross assets by the end of 2022, versus $8 trillion about a decade earlier, according to data available on the SEC’s website. Industry groups and funds including Citadel LLC have pushed back against the plan, saying the SEC is reaching beyond its authority by scrapping agreed-upon liability terms and banning specific fee models.”These changes will increase cost, decrease competition and transparency and, as a result, harm investors by giving them fewer opportunities,” Jennifer Han, chief counsel at the Managed Funds Association, said in an interview. Investors may see higher fees as the liability risk for fund managers increases, some said.”We don’t see that the SEC is solving anything with this,” said Jack Inglis, CEO of the Alternative Investment Management Association. More

1. Eagerly awaited Nvidia results on deckEarnings season may be gradually winding down, but investors still have major results to examine, including the latest quarterly figures from chipmaker Nvidia (NASDAQ:NVDA).The California-based company, which manufactures the graphics processors that power generative artificial intelligence, has been at the center of global euphoria around the development of the nascent technology.Shares in Nvidia have tripled this year, thanks in large part to a stellar forecast in May that propelled the stock’s market capitalization to above $1 trillion – a valuation approaching tech industry behemoths like Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL). The announcement initiated a fresh wave of hype around AI’s potentially game-changing applications, an excitement that in turn pushed up other Big Tech players and drove a broader stock market rally earlier this summer.For these reasons, analysts claim that Nvidia’s returns and its outlook for the rest of the year could influence the near-term course of not only the AI boom but broader market sentiment.2. Fed’s Barkin warns of ‘reacceleration’ as Jackson Hole loomsThe Federal Reserve must be ready to address a reacceleration in the U.S. economy despite an unprecedented series of aggressive interest rate hikes aimed at corralling inflation and slowing growth, according to Richmond Fed President Thomas Barkin.Speaking with Reuters on Tuesday, Barkin pointed to recent data showing hotter-than-expected retail sales and increasing consumer confidence as hints that the economy could remain strong even as prices stay elevated.Such a scenario, Barkin flagged, may indicate a wider “playing field” of outcomes beyond a recession or a so-called “soft landing,” which would see the Fed cool inflation without sparking an economic meltdown. It may also support the case for more monetary policy tightening, Barkin suggested.The comments come ahead of a highly anticipated economic symposium in Jackson Hole, Wyoming this week. Fed Chair Jerome Powell is due to deliver remarks on Friday, with traders keen to receive any update on the central bank’s outlook for inflation. Last week, minutes from the Fed’s latest meeting showed that most policymakers believe more rate rises may be required to address lingering “upside risks” to inflation — a statement that has helped fuel a recent surge in bond yields.3. Urban Outfitters reports earnings beat; more retail results aheadUrban Outfitters (NASDAQ:URBN) posted better-than-expected profit per share in its second quarter, sending shares higher in premarket trading, as the apparel group was boosted by record net sales and lower transportation costs.Earnings per share of $1.10 in the three months until the end of July topped estimates of $0.89, due in part to a decrease in inbound transportation expenses. Net sales also surged to a record $1.27 billion, thanks to surging demand at the Philadelphia-based group’s Free People brand that helped offset weakness at its eponymous Urban Outfitters label.Meanwhile, La-Z-Boy (NYSE:LZB) also unveiled fiscal first quarter income that beat projections, but the recliner and sofa manufacturer warned of “soft” consumer trends, hinting at the challenges faced by many retailers as inflation-hit consumers pull back on spending on nonessential items. Shares fell premarket.On Wednesday, other retail firms Kohl’s (NYSE:KSS), Peloton (NASDAQ:PTON), Foot Locker (NYSE:FL) and Abercrombie & Fitch (NYSE:ANF) are scheduled to deliver their quarterly returns before the bell.4. Futures point higherU.S. stock futures edged into the green on Wednesday as traders geared up for the release of Nvidia’s earnings and looked ahead to the Federal Reserve’s symposium in Jackson Hole, Wyoming later in the week.At 05:25 ET (09:25 GMT), the Dow futures contract added 124 points or 0.36%, S&P 500 futures rose by 22 points or 0.51%, and Nasdaq 100 futures jumped by 100 points or 0.67%.The main indices had a mixed session on Tuesday, with both the 30-stock Dow Jones Industrial Average and benchmark S&P 500 slipping by 0.3% and 0.5%, respectively and the tech-heavy Nasdaq Composite ticking up by 0.06%.5. Crude slides amid U.S. crude stock data, Jackson Hole anticipationOil prices inched lower Wednesday despite another fall in U.S. crude stocks, although trading ranges remain tight ahead of the Jackson Hole symposium.Crude inventories dropped by about 2.4 million barrels last week, according to data from industry body American Petroleum Institute Tuesday. This follows the massive draw of 6.2M barrels a week earlier, suggesting overall supply conditions are still tight.The weekly report from the Energy Information Administration, the statistical arm of the U.S. energy department, is due later Wednesday.Elsewhere, traders will be looking out for any potential clues about the future path of monetary policy as officials from the Federal Reserve, Bank of England, European Central Bank, and Bank of Japan all congregate for an annual meeting in Jackson Hole.By 05:25 ET, U.S. crude futures traded 0.9% lower at $78.95 a barrel, while the Brent contract dropped 0.8% to $83.33. More

“We had many years of easy money and low interest rates where companies owned by private equity took advantage,” said Jeanine Arnold, an executive at rating agency Moody’s. That’s in response to private equity’s biggest names including KKR and Bain Capital handing over distressed companies to the lending arms of rivals as higher interest rates, stubborn inflation and supply chain issues hit private equity firms hard.It also demonstrates the growing influence of credit provided by the lending arms of the same large private equity firms. Private credit has been a faster growing business than buyouts in recent years, including for Apollo, Carlyle and KKR. Bain Capital’s European business recently ceded ownership of German manufacturer Wittur to KKR’s credit arm, according to people familiar with the deal while in the US, KKR’s investment in healthcare company Envision was wiped out in a deal for a group of senior lenders including Blackstone to take over the company in May.Private equity-owned businesses are struggling partly because some of the debt used to finance buyouts was not hedged against interest rate rises. As rates have gone up, loan repayments have increased and companies have had to spend more money servicing their debt. Read more about how the tough economic situation is affecting private equity here.Here’s what else I’m keeping tabs on today:Nvidia: Investors are set to assess whether enormous demand for artificial intelligence products can help offset a decline in global sales for computer hardware when the world’s most valuable chipmaker reports its highly anticipated quarterly results.Peloton: Interactive fitness group Peloton is expected to post a loss of 39 cents a share in the last quarter, almost 90 per cent smaller than the year-ago period as it works to cut costs and boost sales while contending with lower post-lockdown demand.US politics: Barring a last-minute change of heart, Donald Trump’s absence from tonight’s Republican presidential debate in Wisconsin is set to divide his rivals in the party and deepen his rift with host Fox News.Economic data: S&P Global releases flash purchasing managers’ indices for the US, the UK, the EU, France and Germany. Economists project that US new home sales rose to 705,000 in July from 697,000 in June as a lack of available existing homes drive up demand for new residences.Five more top stories1. Saudi Arabia consulting boom bolsters PwC’s UK partner pay, after rising costs last year looked set to dent the Big Four firm’s profits. Partners in the UK firm, which encompasses its Middle East operations, were paid an average of £906,000 for the 12 months to June, down £119,000 from the previous year when a windfall from the sale of a business unit propelled their average takings to more than £1mn. Read more about how revenues at the Middle East business rose here.2. Crypto has ‘amplified financial risks’ in emerging markets, according to central banks. The Bank for International Settlements said on Tuesday that novel solutions to payments challenges should not be classified as “dangerous” simply because they are different. However, the global central banking body added that the appeal of crypto was “illusory”.3. Pension funds are backing crypto prime broker Hidden Road, a company that helps hedge funds take bigger bets on volatile digital assets. Retirement plans such as those of US defence contractor Lockheed Martin are among those putting their money into the London-based broker. Here’s why analysts think the investment is risky. 4. The White House has told China to be more transparent about its economic health after Beijing halted publication of data on its soaring youth unemployment last week and cracked down on corporate due diligence reporting in the country. The US national security adviser criticised the moves as not “responsible”. Read more from Jake Sullivan’s remarks to reporters yesterday.Chinese policy: The central bank’s modest interest rate cut highlights Beijing’s dilemma of boosting its stuttering economy without destabilising its $56tn banking system.Brics summit: Chinese leader Xi Jinping and his South African counterpart said they found common ground on expanding the emerging markets bloc. Joseph Cotterill reports on the group’s meeting from Johannesburg. 5. Exclusive: Britain will proscribe the Wagner group as a terrorist organisation “within weeks” after officials spent months building up a detailed legal case, government insiders revealed. The home secretary is expected to announce the designation for the Russian mercenary network as part of a fresh crackdown after criticisms of inaction.More UK politics: Chancellor Jeremy Hunt faces mounting calls from Tory MPs to cut taxes after new data showed public borrowing was lower than expected last month.The Big Read

Buoyed by petrodollar windfalls, oil-rich Gulf states are determined to chart their own courses in an era of polarising, shifting global dynamics. At the forefront are Saudi Arabia, the world’s top oil exporter, and the United Arab Emirates, the region’s dominant trade hub. The common theme in both Gulf powerhouses is one of self-assured, assertive leaders who are no longer willing to accept “with us or against us” US demands — and an increasing focus on the east.We’re also reading . . . New bacterial ‘dark matter’: Scientists are finding new ways to sift through many of the world’s bacterial species that grow unseen as they cannot be conventionally grown in a lab. On Tuesday, an international team announced that they had identified a potential new antibiotic lurking in the sandy soil of North Carolina.Consumer prices: Some of the world’s biggest companies have signalled they might be ready to slow price rises, but shoppers would still feel the pinch of expensive goods.Irish economy: A puzzling bump to EU data recently came entirely from a 13.1 per cent surge in industrial production growth from Ireland, highlighting how the country’s wild data is distorting the region’s statistics.Niger coup: Who lost Niger? Apart from France’s policy failure in west Africa, the US’s “difficult” talks with the military junta have also led nowhere, writes Le Monde’s Sylvie Kauffmann.Chart of the dayGlobal stock markets have lost about $3tn in value this month, as a “witches’ brew” of gloomy Chinese economic data and surging US borrowing costs sour investor sentiment after a bumper start to the year. Take a break from the newsWhy has an orthopaedic shoe long-favoured by dentists and gardeners become a fashion favourite? The clog is hardly known for its elegance but what was once a piece of peasant workwear has become a high-fashion staple for the style-obsessed.

The clog has evolved from peasant workwear to a high-fashion staple © Hedvig Jenning/Ganni

Additional contributions from Benjamin Wilhelm and Tee Zhuo More

NEW YORK (Reuters) -A recent spike in U.S. bond yields has come alongside muted expectations for inflation, a sign to some bond fund managers that economic resilience and high bond supply are now playing a larger role than second-guessing the Federal Reserve.Benchmark 10-year nominal yields on Tuesday hit near 16-year peaks on concerns about U.S. Federal Reserve Chair Jerome Powell sending a hawkish message about keeping rates high at the annual Jackson Hole symposium on Friday. Bond yields, which move inversely to prices, tend to rise in an inflationary environment because inflation erodes the value of a future bond payout.But while higher moves in bond yields in the last several months were often driven by investors pricing in higher interest rates as the Fed sought to tame rising inflation, expectations on the pace of price rises have moved lower in recent weeks.“The narrative has very much changed over the last few months,” said Calvin Norris, Portfolio Manager & US Rates Strategist at Aegon (NYSE:AEG) Asset Management.Investors see evidence that a fresh set of drivers has taken hold, including the Bank of Japan letting yields go higher, which may reduce foreign investors’ appetite for Treasuries, and an increase in supply of U.S. government bonds, with investors demanding more for holding more debt.While the timing and size of the central bank’s monetary tightening actions have preoccupied bond investors for well over a year, the market may have reached “an inflection point in terms of the primary driver of sentiment,” BMO Capital Markets analysts said in a note last week.”The source of uncertainty is moving away from the (Fed) and toward the derivative of monetary policy in the economic fallout from policy rates at their highest level since 2001,” they said. “The issues of longer-term growth, term premium, and issuance are accounting for an increasing share of the price action.”SOFT LANDINGAnnual consumer price growth has slowed down from a peak above 9% in June 2022 to around 3%, considerably closer to the Fed’s 2% target after policymakers delivered 525 basis points of rate hikes starting in March 2022.Meanwhile, expectations for inflation over the next decade as measured by the Treasury Inflation-Protected Securities market have remained relatively stable in recent months. The 10-year breakeven inflation, at 2.35%, is about 5 basis points higher since the beginning of the year, while 10-year nominal yields have increased by about 50 basis points. “We’re pricing in a soft landing, which means we’re seeing things working out in the Fed’s favor, as inflation is coming down and the probability of a recession has been reduced,” said John Madziyire, senior portfolio manager and head of U.S. Treasuries and TIPS at Vanguard Fixed Income Group.Long-term Treasury yields account for factors such as inflation expectations and term premiums, or what investors demand to be compensated for the risk of holding long-term paper.”A lot of the move that we’re seeing now has to do with more long term structural questions, be it around growth or around term premiums,” said Anthony Woodside (OTC:WOPEY), head of U.S. fixed income strategy at LGIM America.Yields are also a reflection of expectations around the so-called neutral rate – the level at which interest rates are neither stimulative or restrictive for the economy. A recent string of strong economic data despite higher interest rates has strengthened investor beliefs that interest rates will remain higher for longer, even if inflation is tamed.“The fact that growth has been so strong and is still very resilient, even at these restrictive rates, means that potentially the neutral rate is now higher,” said Madziyire.While such longer-term factors have become more prominent recently, the Fed’s more immediate monetary policy actions could land right back in the driver’s seat in case of a reacceleration of inflation or a sharp deterioration in the economy.Money markets expect the Fed to maintain rates in the current 5.25%-5.5% range until the second quarter next year before starting to ease, but many will be looking for clues about possible additional rate hikes from Powell’s Jackson Hole speech on Friday.“I still think there’s some risk that the Fed goes further, but the market is not giving that a whole lot of credence right now,” said Aegon’s Norris. More

Eurozone businesses have been hit by sharp falls in output and new orders, according to a closely watched survey that raises doubts over whether the European Central Bank will raise interest rates next month.The HCOB flash eurozone composite purchasing managers’ index, a measure of activity at companies across the 20-country bloc, fell to a 33-month low of 47 after a sudden contraction of services activity and continued decline in manufacturing in August.By falling from 48.6 in the previous month, the index sank further below the 50 mark that separates contraction from expansion and increased fears of a slowdown during the second half of this year.The flash reading was well below the slight decline to 48.5 forecast by economists in a Reuters poll.Investors bet the grim economic outlook made it less likely the ECB would raise interest rates again at its meeting next month. The euro fell 0.3 per cent against the dollar to $1.108, while Germany’s rate-sensitive two-year bond yield declined 6.8 basis points to 3 per cent.The survey also found that companies reported a reversal of the recent declines in inflationary pressures. Average prices companies charge for goods and services accelerated for the first time in seven months, pushing the rate back above the long-run average.Input costs continued to fall for manufacturers, but the survey found “a slight upturn” in costs for services companies linked to rising wages and fuel prices.“The continuing sharp drop in the PMI data will test the ECB’s growth optimism,” said Mark Wall, chief European economist at Deutsche Bank. “We are expecting the ECB to pause in September, but it is not clear that inflation is where the ECB wants it yet. A pause should not be misinterpreted as the peak.”The decline in the eurozone PMI reading to its lowest level since November 2020 reflected a sharp downturn in the services sector, where activity contracted for the first time since December. That adds to a continued, albeit less severe, contraction of the manufacturing sector.“The service sector of the eurozone is unfortunately showing signs of turning down to match the poor performance of manufacturing,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. The third consecutive monthly fall in overall new business inflows, which excluding the pandemic fell at the fastest rate since 2012, prompted manufacturers to continue shedding jobs and led to a slowdown in hiring in the larger services sector.German companies suffered the steepest decline in activity for more than three years, taking the country’s PMI reading to a 38-month low after falling new orders, declining business output and shrinking inventories took their toll in August.The French PMI score remained deep in contraction territory at 46.6, as services activity in the country slid to a 30-month low and manufacturers continued to report heavy declines, albeit slightly less severe than in July.Andrew Kenningham, an economist at consultants Capital Economics, said the decline in services activity suggested “the rebound in tourism and hospitality is fizzling out”. He added: “There are plenty of reasons to expect the eurozone economy to head into recession in the second half of the year, with Germany likely to be the worst performer”.UK economic activity also declined more than expected in August, according to the S&P Global / Cips Flash UK composite output index, which fell to 47.9 in August, down from 50.8 in July, dropping below the neutral 50 threshold for the first time since January. More

LONDON (Reuters) – The United States and China may feel some financial detente is wise at this point – even if goading one another plays well domestically.A bruising August for both China’s economy, property sector and stock market on one hand and U.S. government debt on the other served as a reminder to both sides on how fragile the financial and economic relationship between the two can be.For all the talk of de-coupling, or ‘de-risking’ in Washington parlance, the world’s two largest economies are still linked in ways that make it dangerous to destabilise each other – even if political imperatives demand that.That interdependency – or the desire for it – is far less in a post-pandemic, post-Ukraine invasion world than it was 15-20 years ago when China was fast integrating into the global economy.Bilateral investment curbs, trade restrictions and supply chain redirection have this year followed months of spying and hacking claims as geopolitical tensions over Taiwan and Ukraine rumble and China postures as an alternative global leader.But elements of the once-feared bind of ‘mutally-assured financial destruction’ (MAFD) still apply. Chinese and Hong Kong entities still hold more than a trillion dollars of U.S. Treasury Securities, for example, and annual U.S.-China trade deficits are running at a more than a third of a trillion dollars.Pulling the rug out from under either – battering U.S. and Chinese demand in effect – seems to make little economic sense at least.More than a decade ago former U.S. Treasury Secretary Larry Summers adapted the nuclear ‘MAD’ doctrine to add the ‘F’ and reflect the symbiotic trade and financial relationship that had by then developed between the two economic superpowers.The web that bound them involved U.S. import demand and investment flows seeding China’s rapid growth and dollar surpluses, which Beijing then recycled mostly into U.S. Treasury debt by banking dollars it had accumulated. The official intervention and dollar stash, in turn, prevented the massive inflows boosting the yuan too quickly and making the exchange rate uncompetitive.All got something from it. America had new markets and investments and a seemingly durable new creditor that kept borrowing rates low and consumption up. China got cash injections, export-led growth, overseas know-how and a liquid home for savings.Even though potentially as stable as nuclear MAD, Summers argued at the time that rising U.S. government debt exacerbated Washington’s vulnerability in a world of “Fiscally Assured Destruction,” which may come back to haunt it.”Foreign governments and investors financing the superpower spending spree have no incentive to bankrupt the U.S. economy by suddenly dumping their dollar reserves,” he argued in a 2009 speech. “The ensuing financial crisis would seriously damage their own economies as well.””But having finally emerged from the Cold War’s military balance of terror, the United States should not lightly accept a new version of mutually assured destruction if it can be avoided.”‘MAFD’But is that where the situation has landed post-pandemic?There’s clearly been rising mutual suspicion over global influence and economic dominance over the past 10 years – along with concern about fair trade, deteriorating geopolitics around Ukraine and Taiwan and re-worked domestic priorities since the COVID-19 shocks.And going into next year’s U.S. elections, an anti-China trade stance clearly has bipartisan support from voters.Former Goldman Sachs global economist and UK government minister Jim O’Neill, who coined the BRICs acronym over 20 years ago to track the rise of the biggest emerging economies, reckons the U.S.-China relationship would be “really disastrous to unravel dramatically.”But O’Neill said his impression was the two sides had decided to put a floor under problems and any ongoing rhetoric from China at least was more likely symbolic.Certainly U.S. Commerce Secretary Gina Raimondo’s decision to press ahead and accept an invite to Beijing next week shows neither side wants to cut ties completely. And China’s commerce ministry hailed the lifting of U.S. export restrictions on 27 entities as “in line with the common interests of both sides.”BACK FROM THE BRINK?Hedge fund manager Stephen Jen at Eurizon SLJ thinks the idea of complete decoupling is riven with problems and has to be ‘calibrated’ – issues related to high tech and privacy concerns may be a red line but China would continue to produce goods to sate U.S. demand and hold U.S. debt.”The symbiotic relationship between the U.S. and China was so critical in allowing the US to over-consume and China to run excess savings,” he said. “It will need to continue to be the case – otherwise U.S. (borrowing) rates would rise.”And this goes to the heart of the U.S. problem Summers has routinely pointed out about rising Treasury debt – which, exaggerated by the pandemic, has more than doubled to more than $25 trillion over the past decade and has more than doubled as a share of annual output over 20 years.And yet China appears to have been backing away for years.Having stopped accumulating outright dollar reserves over the past 12 years to funnel its surpluses into its ‘Belt and Road’ trade initiative and state bank deposits instead, China’s share of outstanding U.S. Treasuries has been falling rapidly.While Beijing has at least partly offset that by loading up on other U.S.-dollar bonds and mortgage debt, the share of foreign Treasury holdings held by Chinese and Hong Kong entities has more than halved to less than 14% from a high watermark of more than 30% 12 years ago.Like much else in the bilateral financial bind, the dependency seems much reduced. And yet any shift in fragile financial markets may pack a punch for both sides equally and political signalling from here may prove as important as any real action in the background.The opinions expressed here are those of the author, a columnist for Reuters. More