Economy

Founded in 1988, Trimont, which primarily serves non-bank and alternative lenders, will manage combined $640 billion loans in the U.S. after deal is closed. The “strategically important transaction” will position Trimont to be a key partner to real estate capital providers, said Jim Dunbar, Chair of Trimont and Partner at Värde Partners.Wells Fargo, which has doubled down focus on its core businesses, was last trading down marginally. The stock is up around 15% so far this year.”This transaction is consistent with Wells Fargo’s strategy of focusing on businesses that are core to our consumer and corporate clients,” said Kara McShane, executive vice president and head of Wells Fargo Commercial Real Estate, in a statement. “We remain committed to our market-leading Commercial Real Estate business,” McShane added. Funding for the deal will be provided by Värde Partners, an alternative investment firm, which acquired and has owned Trimont through certain funds since 2015.The move comes at a time when the banking industry in the United States faces increasing pressure due to elevated interest rates and challenges in the CRE market. They have also suffered a sharp fall in valuations post-pandemic due to a jump in office vacancy rates.The deal, for which no value was disclosed, is expected to close in early 2025, pending certain conditions, and will result in Trimont managing over $715 billion in U.S. and international commercial real estate loans.Wells Fargo Securities served as the exclusive financial advisor to the bank. J.P. Morgan Securities served as a financial advisor with Goldman Sachs, providing additional advisory services to Trimont and Värde Partners. More

(Reuters) – The S&P 500 will trade near current record levels at year-end, according to a Reuters poll of market strategists that suggests the AI rally is losing steam as investors wait for a widely-expected U.S. central bank interest rate cut next month. The benchmark S&P 500 will end 2024 at 5,600 points, according to the median forecast of 41 equity strategists, analysts, brokers and portfolio managers collected Aug. 8-20. The index closed at 5,608 on Monday.In a May poll, market strategists expected the S&P 500 to trade nearly unchanged for the rest of the year but the index has climbed over 5% since then.Overall, the S&P 500 has surged around 17% so far in 2024, backed by sharp gains in Nvidia (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT) and other Wall Street heavyweights as they race to dominate emerging AI technology.The U.S. stock market has turned volatile in recent weeks, partly on recession fears, but also related to the unwinding of large leveraged positions in markets as a result of a sudden, sharp rise in the Japanese yen, used as a funding currency.Fading recession concerns helped boost stocks last week, marking their biggest weekly gains since November.Investors have also become nervous about massive spending by Google-parent Alphabet (NASDAQ:GOOGL), Microsoft and Meta Platforms (NASDAQ:META) to build their AI infrastructure. “The AI sugar high is fading and the market is coming to grips with a possible slowdown in GDP,” said Synovus (NYSE:SNV) Trust portfolio manager Daniel Morgan, warning as well of “little room for error” due to stretched valuations.The S&P 500 dipped 0.2% on Tuesday ahead of an annual central banking conference at Jackson Hole, Wyoming later this week that could offer clues about the trajectory of interest rate cuts. The index is down about 1% from its record high close on July 16.Nvidia’s stock has surged 158% in 2024, and analysts expect the chipmaker’s quarterly net income to more than double when it reports its results next week, according to LSEG.The S&P 500 will trade at 5,900 points by the end of next year, a 5.2% gain from Monday’s close, the survey showed.Stock strategists struggle to accurately predict the market, but their forecasts offer a glimpse of sentiment across Wall Street and Reuters poll medians often correctly predict the direction of trading.A neck-and-neck race between former President Donald Trump and Vice President Kamala Harris means additional uncertainty for investors ahead of the Nov. 5 U.S. presidential election.As well, turmoil in the Middle East and uncertainty over how many interest rate cuts the Fed will deliver make it particularly difficult right now to forecast the stock market, said Chase Investment Counsel President Peter Tuz. Money market traders mostly expect a 25 basis point rate cut at the Fed’s September policy meeting, with a total of at least 75 basis points in reductions by year end, according to CME Group’s (NASDAQ:CME) FedWatch.Asked by Reuters, over half of poll respondents said a stock market correction of at least 10% is likely by the end of September. More than half predicted corporate earnings would beat expectations through the end of 2024.While the AI rally has benefited the U.S. stock market’s most valuable companies, much of the market has lagged. The median S&P 500 stock has gained around 9% this year, while the S&P 500 consumer discretionary, real estate and materials sector indexes have languished with year-to-date gains of about 5% each.Following this year’s rally, the S&P 500 is trading at 21 times expected earnings, compared to a 10-year average of 18, according to LSEG.Goldman Sachs lowered the odds of a U.S. recession in the next 12 months to 20% from 25% following recent upbeat jobless claims and retail sales reports.(Other stories from the Reuters Q3 global stock markets poll package) More

Bowman’s prepared remarks to a gathering of bankers in Alaska reflect her continued stance as one of the Fed’s more hawkish policymakers. While she refrained for a second time from saying she stood ready, if necessary, to further lift rates, as has been her position previously, she offered little indication she is ready to endorse a rate cut at the Fed’s Sept. 17-18 meeting, as is now widely expected.Inflation should continue to fall under the current stance of policy, she said, and if inflation continues to fall sustainably toward the Fed’s 2% target, “it will become appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming overly restrictive on economic activity and employment.” But Bowman said “we need to be patient and avoid undermining continued progress on lowering inflation by overreacting to any single data point” – an apparent reference to the change in focus among several Fed officials in the aftermath of a July employment report that showed slower hiring and a rise in the unemployment rate to 4.3% – a post-pandemic high.Inconsistencies in the latest employment report warrant caution, she said, noting that while the strength of hiring over the last year may have been overstated, it is also possible that the rise in the jobless rate may exaggerate the level of labor market cooling underway.”Increased measurement challenges and the frequency and extent of data revisions over the past few years make the task of assessing the current state of the economy and predicting how it will evolve even more challenging,” Bowman said. “I will remain cautious in my approach to considering adjustments to the current stance of policy.” Financial markets now fully expect the Fed to cut its benchmark interest rate next month from the current 5.25%-5.50% range where it has been since July 2023. The question is over what size that first cut will be, with current market odds favoring a quarter-percentage-point reduction over a half-percentage-point move. More

President Emmanuel Macron has yet to name a new government since a snap legislative election in early July produced a hung parliament, leaving the current government to draft a budget that will likely be modified – possibly deeply – by its successor. Outgoing Prime Minister Gabriel Attal sent 2025 spending limits to each ministry on Tuesday, keeping overall state spending at 492 billion euros, unchanged from this year’s budget law, an official in Attal’s office told journalists.That implies budget tightening of about 10 billion euros because normally spending would be allowed to increase at least as much as inflation, the official said. Moreover about 20 billion euros in emergency spending cuts this year are also to be rolled over in 2025. “The prime minister is particularly mindful about restoring the public finances,” the official said, adding it was necessary if France is to stick to the outgoing government’s target of cutting the overall public sector budget deficit to less than 3% of output by 2027.As a first step, the current government had aimed to cut the budget deficit from an estimated 5.1% of gross domestic product this year to 4.1% in 2025, but the official said it was too early to say if that target would be retained as the social spending budget was still being prepared.Military spending would be one of the rare budgets to increase next year, while spending on employment support would be reduced as unemployment is relatively low, the official said.Macron is due to meet with party chiefs on Friday with a view to name a prime minister who will be tasked with forming a coalition government, whose first major challenge will be passing a budget before year-end in a deeply divided parliament.($1 = 0.9024 euros)($1 = 0.9022 euros) More

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PALERMO, Sicily (Reuters) -Divers scoured the wreck of a luxury yacht off Sicily’s coast on Tuesday to find six missing people, including British tech entrepreneur Mike Lynch and his daughter, following an intense storm that sank the vessel on Monday.The British-flagged Bayesian, a 56-metre-long (184-ft) superyacht, was carrying 22 people and anchored off the port of Porticello when it was hit by the fierce, pre-dawn storm.Fifteen people escaped before it capsized and the body of one person who died was swiftly recovered. That left six passengers unaccounted for – Lynch and his 18-year-old daughter Hannah; Judy and Jonathan Bloomer, a non-executive chair of Morgan Stanley International; and Clifford Chance lawyer Chris Morvillo and his wife, Neda Morvillo. “The fear is that the bodies got trapped inside the vessel,” said Salvatore Cocina, head of civil protection in Sicily.The boat was lying at a depth of 49 metres (160 feet), giving divers only 8-10 minutes at the wreck site before they had to resurface. Entering the boat was also proving difficult, said the fire brigade, which is leading the search operation.”Inside the sailing ship the spaces are very confined, and if you hit an obstacle it is very complicated to move forward, just as it is very difficult to find alternative routes,” said fire spokesman Luca Cari.Fire department diver Marco Tilotta told reporters the vessel appeared to be intact and was lying on its right side. Divers had not ascertained whether the 72-metre-long mast had snapped somewhere along its length during the tempest.Karsten Borner, the skipper of a boat that had been moored alongside the Bayesian, said the yacht flipped on its side soon after the storm hit and sank within two minutes, giving those below deck little time to get to safety.LYNCH TRIALLynch, 59, is one of the UK’s best-known tech entrepreneurs. He built the country’s largest software firm, Autonomy, and was referred to as Britain’s Bill Gates. He sold the firm to HP (NYSE:HPQ) for $11 billion in 2011, after which the deal spectacularly unravelled with the U.S. tech giant accusing him of fraud, resulting in a lengthy trial. Lynch was eventually acquitted by a jury in San Francisco in June.Morvillo represented Lynch in the case, while Bloomer had appeared as a character witness on his behalf.In an extraordinary coincidence, Stephen Chamberlain, Mike Lynch’s co-defendant in the trial, died following a road accident in Britain over the weekend, his lawyer said on Monday.The Bayesian was owned by Lynch’s wife, who survived the disaster, and other guests on the yacht included Lynch’s colleagues. The only body so far retrieved was that of the onboard chef Ricardo Thomas, an Antiguan citizen.  The British government’s Marine Accident Investigation Branch said it sent four of its inspectors to Sicily to conduct a “preliminary assessment.” ‘DIDN’T SEE IT COMING’One expert at the scene of the disaster who declined to be named said an early focus of the official investigation would be whether the yacht’s crew had closed access hatches into the vessel before the storm struck.Investigators would look at whether appropriate measures had been taken, given the forecasts for bad weather overnight.Borner, whose yacht was moored near the Bayesian, said that although there had been warnings of possible thunderstorms, there had been no indication they would be particularly violent.”Thunderstorms can turn out good or bad and this one was a real violent squall … very violent, very intense, a lot of water, and I think a turning system like a tornado,” he told Reuters. Storms and heavy rains have ravaged Italy in recent days, after weeks of scorching heat warmed the sea temperature to record highs, raising the risk of extreme weather conditions, experts said.”The sea surface temperature around Sicily was around 30 degrees Celsius (86 Fahrenheit), which is almost 3 degrees more than normal,” said meteorologist Luca Mercalli.”We can’t say that this is all due to global warming but we can say that it has an amplifying effect,” he told Reuters. More

The platform includes several measures that, while not new, could become more relevant due to the necessity of enacting tax legislation in 2025. Key proposals include raising the corporate tax rate, increasing the stock buyback tax, and eliminating like-kind exchanges in real estate.Notably, the corporate tax rate could increase to 28% while tax rate on foreign earnings may double to 21%.Furthermore, the proposal to increase the stock buyback tax from 1% to 4% is expected to raise $166 billion, with TD Cowen highlighting that this could directly affect banks since regulators favor buybacks over dividends for capital returns.Another significant proposal is the elimination of like-kind exchanges in real estate, which allows investors to defer taxes on profits as long as those profits are reinvested in other real estate assets. This change “could hurt investor interest in commercial and residential properties,” TD Cowen analysts note and would raise around $20 billion.Overall, analysts view the majority of tax provisions in the Democratic platform as relevant, considering the need for Congress in 2025 to implement a tax package “that addresses the future of the Trump individual tax cuts.”“It means there is a path forward for these measures to advance next year,” they added.The Democratic platform’s tax provisions hold significance because they reflect demands that the party is likely to pursue, regardless of which party wins the upcoming election, TD Cowen explains.The investment bank points out that the need to offset the $4.5 billion cost of extending the Trump-era tax cuts “means that even ideas that normally would not get attention could be in play.” Among these ideas is the proposal to treat capital gains as ordinary income, a change that could potentially raise $289 billion.It also notes that banks, which typically face higher average tax rates than other sectors, would be more significantly impacted by the proposed increase in the corporate tax rate, a measure expected to generate $1.3 trillion in revenue. More

WASHINGTON (Reuters) – Federal Reserve officials gathering at the annual central banking conference in Jackson Hole, Wyoming, this week can take some satisfaction that the U.S. unemployment rate, at 4.3%, remains low by historical standards.But it usually is: The U.S. experience of unemployment since the late 1940s has involved jobless rates that far more often than not are below the 5.7% long-run average, until they rise fast and far above it, a phenomenon Fed officials are worried about repeating.The emerging trend is not fully clear.The steady rise in the unemployment rate from 3.7% in January of 2023 to 4.3% as of July 2024 has also been accompanied by an increase of 1.2 million in the number of people looking for work – something that is usually considered a positive sign for the economy but that can cause the unemployment rate to rise.In recent days, however, Fed officials have become more explicit that a potential weakening of the job market has them ready to cut interest rates after keeping the U.S. central bank’s benchmark policy rate in the 5.25%-5.50% range for more than a year. The current level is the highest in a quarter of a century.”The balance of risks has shifted, so the debate about potentially cutting rates in September is an appropriate one to have,” Minneapolis Fed President Neel Kashkari said in a recent Wall Street Journal interview, referring to the central bank’s Sept. 17-18 policy meeting.Other Fed officials including San Francisco Fed President Mary Daly said in other interviews they were gaining confidence that inflation was returning to the central bank’s 2% target and that they were open to rate cuts.The Fed is widely expected to reduce its policy rate by a quarter of a percentage point next month. In addition, policymakers will provide updated projections showing how they believe rates and the economy may evolve through the rest of this year and into 2025. Fed Chair Jerome Powell is expected to further pin down the view that the central bank is about to start to loosen credit conditions after taming the worst outbreak of inflation in 40 years when he speaks on Friday at the Kansas City Fed’s Jackson Hole conference. EYES ON OTHER MANDATEFed policymakers hope those cuts come in time to complete what has developed so far as a textbook “soft landing” in which inflation slows without the sort of sharp rise in the unemployment rate that has often accompanied central bank efforts to slow the pace of price increases by restricting the economy through higher interest rates. In past cycles of monetary tightening, once the unemployment rate has started to rise it has kept going.By contrast, the progress made on inflation in the current cycle has been dramatic. The personal consumption expenditures price index, which is tracked by the Fed for its 2% inflation target, peaked at an annual rate of 7.1% in June 2022, and was running at 2.5% as of July – honing in on that target.Yet the unemployment rate until recently had barely budged, remaining below 4% for two years running, while payrolls growth was far above the average seen in the decade before the COVID-19 pandemic.The trend began changing this year, and Fed officials have given increasing weight to the risks they feel they are running by keeping monetary policy too tight for too long.Recent labor market data shows why they are getting concerned.The U.S. government reported weaker-than-expected job growth in July, with employers adding just 114,000 positions. The July reading pulled the three-month average below the pre-pandemic trend, and pushed the unemployment rate up two-tenths of a percentage point to 4.3%.In addition, some of the ways in which the data are changing on a month-to-month basis, as people enter and leave a job or a job search, is not encouraging. While the labor force is rising on net, a constructive change, it also appears to be taking longer for people to find jobs – as shown by the rising number of people who join the labor force but go first through a spell of unemployment instead of directly into a job.In addition, federal labor flows data shows a rising number of people each month moving from a job to unemployment.Yet at the same time unemployment claims have not begun to rise dramatically, and in fact have kept pace with growth in the labor force.Amid still-strong consumer spending and economic growth that may be slowing but remains positive, the Fed is not yet ready to consider the job market in crisis – it just wants to avoid creating one.In comments to the Financial Times published on Sunday, Daly said that keeping rates high while inflation declined was a “recipe for getting the result we don’t want, which is price stability and an unstable and faltering labor market.”The same sentiment was largely echoed by Chicago Fed President Austan Goolsbee, who told the CBS “Face the Nation” program on Sunday: “If you keep too tight for too long, you will have a problem on the employment side of the Fed’s mandate.” More