Aurelia Butler

(Reuters) -Payments processor Stripe on Wednesday raised $6.5 billion in a funding round led by existing and new investors at a sharply reduced valuation of $50 billion, down nearly 50% from two years ago.Stripe said it would use the cash to cover a large tax bill associated with stock granted to employees and to provide liquidity to employees. About $3.5 billion of the newly-raised capital will be used to cover the tax bill, with the rest being used to buy shares from employees, according to a person familiar with the matter, who requested anonymity as these discussions were confidential.The latest funding marks a steep decline in the valuation of the fintech startup, which was valued at $95 billion in March 2021.Stripe said it did not need the new funds to run its business. Venture capital firms including Andreessen Horowitz, Baillie Gifford, Founders Fund, General Catalyst, MSD Partners, and Thrive Capital led the latest funding round, according to a statement from the company. While Stripe still plans to eventually proceed with an initial public offering, that is unlikely this year, the person said.Stripe had initially targeted a fundraising of about $4 billion, but ended up garnering more demand from investors than it initially anticipated, the person added. New investors such as Singapore’s sovereign wealth fund GIC, Goldman Sachs (NYSE:GS) Asset and Wealth Management and Temasek also participated in the round, Stripe said. After years of signing big checks for high-flying startups, investors have turned more cautious as the U.S. Federal Reserve’s monetary tightening drains out excess liquidity.Startup metrics such as profitability and cash burn are being scrutinized more closely. Last year, Swedish buy now, pay later giant Klarna also raised capital at a significantly lower valuation.Stripe, which counts Amazon.com Inc (NASDAQ:AMZN), Ford Motor (NYSE:F) Co, Salesforce (NYSE:CRM) and BMW among its customers, has previously said it is aiming to turn profitable before going public.Goldman Sachs served as the sole placement agent on the funding round. J.P. Morgan acted as a financial advisor to the company, Stripe said. More

(Reuters) – With just six days to go before Federal Reserve policymakers sit down in Washington, exactly what decision they’ll make on interest rates now and in coming months has become pretty much anyone’s guess, and investors and Wall Street economists are doing just that. Over the past year, Fed leadership has gone out of its way to signal its intentions on interest rate hikes aimed at quashing hot inflation, relying on a steady stream of economic data inputs to guide its actions.But now Fed Chair Jerome Powell and his colleagues find themselves needing to respond in real time to turmoil in the banking system after the collapse of two large regional U.S. banks and Swiss regulators having to pledge assistance to Credit Suisse, developments that are reshaping domestic and international financial conditions on a daily – or even hourly – basis.In one of the most vivid – and relevant – examples, on Monday the yield on the 2-year Treasury note, among the top traded securities in the world that also stands as a proxy for Fed policy expectations, plummeted by more than half a percentage point, the most since the day after Black Monday in October 1987. It then recovered roughly half that on Tuesday only to drop by another third of a point on Wednesday.And it is all unfolding during the central bank’s premeeting blackout period that prevents officials from offering public clarity on their assessment of the situation, and its effect on monetary policy decisions The Fed’s next move? The Fed’s next move?, https://www.reuters.com/graphics/USA-FED/zjvqjnkwypx/chart.png It was only last week that Powell signaled the central bank might accelerate its interest-rate-hike campaign in the face of persistent inflation. Traders moved to price in a half-point hike in the benchmark interest rate at the Fed’s March 21-22 meeting, from its current 4.5%-4.75% range, and further rate hikes beyond. Traders now see next week as a tossup between a smaller quarter-point hike and a pause, with rate cuts seen likely in following months as the turbulence at Credit Suisse renewed fears of a banking crisis that could cripple the U.S. economy.Analysts also sought to make sense of fast-moving events, including Friday’s failure of Silicon Valley Bank, the creation over the weekend of an emergency Fed backstop for the banking sector, fresh data showing slow progress in the inflation fight, and a renewed banking stock swoon on Wednesday.”I think they do indeed hike 25 bps next week,” said Jefferies’ Thomas Simmons. “They need to keep up the fight on inflation to maintain credibility, and a pause here at these levels isn’t going to stop the bleeding in the markets.” A pause, he argued, risks undoing the work of the Fed’s 4.5 percentage points of rate hikes since last March. “They’d also risk sending a signal to the market that the macroeconomic impact of these microeconomic phenomena is worse than we think,” he said. Former Boston Fed President Eric Rosengren took the opposite view. “Financial crises create demand destruction,” Rosengren said on Twitter. “Banks reduce credit availability, consumers hold off large purchases, businesses defer spending. Interest rates should pause until the degree of demand destruction can be evaluated.”WILD SWINGSAt heart, the uncertainty over the Fed’s next move comes down to difficulty knowing how swiftly and deeply the current turmoil in the banking sector will filter through to the real economy. After all, the Fed’s rate hikes are designed to slow the economy, and for months some policymaker have expressed puzzlement over why after such aggressive policy tightening there was so little of that to see beyond the sharply-hit housing sector. After the bank failures in recent days, “We’re getting a better sense of who’s suffered due to the Fed’s aggressive tightening,” JPMorgan (NYSE:JPM)’s Michael Feroli wrote. Slower growth in lending by mid-size banks will sheer off a half to a percentage point of economic growth overall, he predicted, “broadly consistent” with the view that higher interest rates will trigger a U.S. recession that will in turn slow inflation. But the Fed’s work in Feroli’s view is not yet done. A key inflation report earlier this week showed a 6% rise in the consumer price index last month from a year earlier. “A pause now would send the wrong signal about the seriousness of the Fed’s inflation resolve,” Feroli said. The Fed next week will publish new projections for the future path of the U.S. benchmark rate. In December policymakers had seen it topping out at 5.1%, and as recently as last week traders expected it to rise above 5.5%. Now, they are looking for one more Fed rate hike if that, and then a string of reductions to bring the target range down below 4% by year end. “The Fed has a very difficult policy decision to make at next week’s meeting,” said Paul Ashworth, chief North America economist at Capital Economics, which for now still leans towards the Fed raising interest rates by a quarter percentage point. “It is a very close call… the risk of a full-blown contagion remains, and a lot can happen in the week until the announcement.” More

(Reuters) -Richard Branson’s Virgin Orbit on Wednesday said it was pausing all operations from March 16 and a source familiar with the matter told Reuters that the satellite launch company was also furloughing nearly all of its employees.Chief Executive Dan Hart told staff in a meeting that the furlough was intended to buy Virgin Orbit time to finalize a new investment plan to help pull the company out of its financial woes, according to the source, who attended the meeting.Virgin Orbit’s shares dropped 18.8% to 82 cents in extended trading. The duration of the furlough was unclear, but Hart said he would provide employees an update by the middle of next week on when they could return, the source said. In a statement to Reuters, the company confirmed the operational pause but it did not give details on the furloughs. CNBC first reported the news. Last month, Virgin Orbit said it was investigating the failure of its mission in January to deploy nine small satellites into lower Earth orbit (LEO) from the coastal town of Newquay in southwest England. The mission failure was a major blow to the business and deepened its financial struggles.”On the ops side, our investigation is nearly complete and our next production rocket with the needed modification incorporated is in final stages of integration and test,” the company said on Wednesday. More

FRANKFURT (Reuters) – European Central Bank policymakers are meeting on Thursday amidst turmoil in financial markets that could force it to divert from plans for another hefty interest rate hike even though inflation remains too high. After embarking on a campaign to curb price growth that has seen it raise rates since July at its fastest pace on record, the ECB had been set for another 50 basis point increase on Thursday. But the collapse last week of Silicon Valley Bank in the United States has raised concerns about stresses across the banking sector and caused shares to plunge, with Credit Suisse, long dogged by problems, at the centre of the rout in Europe.Now the ECB must reconcile its inflation-fighting credibility with the need to maintain financial stability in the face of overwhelmingly imported turmoil.Complicating its task, the central bank for the 20 countries that use the euro currency has essentially already committed to a 50 basis point increase on Thursday.”Unless the ECB sees the inflation outlook significantly different than one week ago, anything but a 50 basis point move would be a big mistake and hurt credibility,” Danske Bank economist Piet Haines Christiansen said. Euro zone inflation was 8.5% in February, below its peaks of last autumn but way above the ECB’s 2% target, and the outlook is likely to remain grim.Although forecasts for headline inflation will be cut due to the fall in energy prices, the new figures will continue to show price growth significantly above the target in 2024 and slightly over in 2025, a source with direct knowledge told Reuters. Meanwhile projections for underlying inflation, an indicator of the durability of price growth, are set to be raised, suggesting that disinflation will be protracted and monetary policy will have to remain tight for some time. This outlook is so worrying that prior to the turmoil in the banking sector, which could derail the ECB’s strategy and the whole economy, a long list of policymakers had advocated rate hikes continuing beyond March.COLD FEET?Markets are nevertheless doubting the ECB’s resolve and have dialled back bets on the size of Thursday’s move and subsequent rate hikes. Money market pricing suggests that investors now see just a 30% chance of a 50 basis point increase, down from as high as 90% early on Wednesday. “Central Banks should not ignore the signs from the markets and the more likely recession forthcoming,” former ECB Vice President Vitor Constancio said. “They should tone down their hiking campaign. The ECB should do at most 25 bps and not the announced 50 bps.”The peak ECB rate, also known as terminal rate, is now seen at only around 3.25%, down from 4.1% last week, an exceptional reversal in market pricing.Hoping to prop up confidence, the Swiss National Bank said late on Wednesday that it was ready to provide Credit Suisse with liquidity, if necessary, though the bank met all capital and liquidity requirements. “Clearly there is a strong case for the ECB to wait and see how things develop,” Andrew Kenningham at Capital Economics said. “But our best guess at this stage is that the bank will press on with its pre-announced plan to raise the deposit rate from 2.5% to 3.0%, while stressing that policy is not on a predetermined path.”Even if the ECB goes ahead with the 50 basis point hike, it is almost certain to move away from its recent practice of signalling its next step and will leave the door open regarding the May meeting, even if a bias for higher rates remains.ECB President Christine Lagarde will almost certainly try to reassure investors on the health of the bloc’s banks, arguing that they are better capitalised, more profitable and more liquid than during previous periods of turmoil. But the ECB is likely to stop short of offering specific measures to help banks, especially since it has just removed a subsidy from a key liquidity facility in an attempt to wean lenders off central bank cash. Lagarde could nevertheless signal that the ECB is ready to step in should contagion start impairing the health of euro zone lenders, and thus preventing the ECB’s monetary policy from being deployed effectively.”The ECB will be minded to stick to the separation principle: gearing the monetary policy stance towards achieving the inflation aim; and using other tools to deal with financial stability,” BNP Paribas (OTC:BNPQY) said. “Indeed, interest rates are probably the wrong tool to address a liquidity problem. More