Finance

The last time the Japanese yen dipped below 130 to the American dollar, in 2002, China’s economy was smaller than France’s, Vladimir Putin was meeting Western officials with a smile, and the rapper Eminem was atop the pop-music charts. The yen’s slide to that abyss, first reached on April 28th and every day since, has been precipitous: it stood at just 115 to the dollar at the start of this year. Japanese policymakers have begun to fret, leading markets to speculate about whether they will intervene to halt the fall. That would probably prove futile: deep forces are driving the yen’s depreciation.The most important one is the widening gap in interest rates between Japan and America (see chart). While prices have risen sharply in America, inflation in Japan has remained below the Bank of Japan’s (boj) 2% target. And though inflation may touch that mark later this year, the boj reckons it is being fuelled by one-off increases in costs; idiosyncrasies of Japan’s labour market have meant limited wage growth. As a result, even as the Federal Reserve has begun tightening rates, the boj has maintained its ultra-loose stance. At a monetary-policy meeting last week, the boj reaffirmed that direction, pledging to keep buying ten-year bonds. With more money to be made holding American bonds than Japanese ones, investors have snubbed the latter, dampening demand for the yen.Trade also plays a role in the yen’s woes. Japan’s current-account balance went into the red in December. Rising import costs have been the biggest culprit: fuel and raw materials make up one-third of Japan’s import bill. In order to buy pricier foreign goods, importers have had to sell more yen. Japan’s borders have remained closed to inbound tourism due to the pandemic, further weakening Japan’s balance of payments.Policymakers have traditionally seen a weak yen as a positive for Japan and its powerful export-focused industries. Some still do. They also now hope a bit of cost-push inflation may help to break Japan’s entrenched deflationary mindset and to force zombie firms out of the market. Yet the yen has sunk to such lows that concerns are mounting. Consumers are getting squeezed; the government announced another fiscal-stimulus package in April to ease the pain ahead of upper-house elections expected for July. Business sentiment has also turned, even in the manufacturing sectors, says Baba Naohiko of Goldman Sachs, a bank.One reason is Japanese firms’ sustained efforts to mitigate the risks of currency appreciation by offshoring production. “The flip side,” Mr Baba says, “is that they can’t reap as many benefits from depreciation.” The stuff that is still exported from Japan tends to be high-value-added goods, but the pandemic and supply-chain snags have hampered the export of some of these products, such as automobiles.Some reckon the yen could continue falling, perhaps to 150 to the dollar, a level unseen even during the Asian financial crisis of 1997-98. Inside the boj, some have argued for shortening the target of the yield-curve control policy from ten-year bonds to five-year ones, a form of soft tightening, but that seems unlikely in the remainder of the term of the current governor, Kuroda Haruhiko. A turning point might come when Japan reopens to foreign tourists, as expected following the elections. Ultimately though, argues Jesper Koll, a Tokyo-based economist, “the yen’s fall from grace will stop and reverse exactly when Japanese investors begin buying their mother markets.” And bringing Japanese securities back to the top of the charts is not a job for the boj, but for Japan Inc. More

Boxes containing the Moderna COVID-19 vaccine are prepared to be shipped at the McKesson distribution center in Olive Branch, Mississippi, December 20, 2020.
Paul Sancya | Pool | Reuters

Check out the companies making headlines in midday trading Monday.
Global Payments — Shares of the company sank 9.2% despite a better-than-expected earnings report. The payments technology company reported adjusted quarterly profit of $2.07 per share, beating a Refinitiv forecast by 3 cents. Revenue also topped analyst forecasts. The company also issued full-year revenue guidance that was roughly in line with analyst expectations.

Vertex Pharmaceuticals — The biotech company’s shares fell 4.1% after the Food and Drug Administration placed a study of Vertex’s treatment for type 1 diabetes on hold, after determining there is insufficient information to support dose escalation with the product.
Moderna – Shares of Moderna jumped 5.7% after the company said its Covid-19 vaccine for children under 6 years old will be ready for review in June by a Food and Drug Administration panel. Moderna applied for emergency use authorization for the treatment last week.
Moody’s Corp — The risk assessment firm dropped 4.9% after the company cut its full-year earnings guidance. The company now expects full-year earnings to range between $10.75 and $11.25 per share excluding items. Previous guidance projected between $12.40 and $12.90 per share. Analysts estimated $11.92, according to FactSet.
Align Technology — Shares of the medical device maker jumped 6.5% after the company announced a $200 million accelerated stock repurchase program.
EPAM Systems — Shares of the software company EPAM Systems gained 8.7% after Piper Sandler upgraded them to overweight from neutral, citing its program checks.

Johnson Controls — Shares rose 2.8% after Bank of America initiated coverage of the HVAC producer with a buy rating. Johnson Controls International has 42% upside from here because of the trend toward decarbonization, specifically in the construction of smart buildings, according to Bank of America.
Activision Blizzard — Shares of Activision Blizzard rose 3.3% after Warren Buffett said Berkshire Hathaway has been upping its stake in the video game publisher and owns about 9.5% as it bets that Microsoft will close its proposed acquisition of the company.
Amazon — Amazon lost 3% before turning slightly positive, following sharp losses from last week, when it reported a big net loss for the most-recent quarter and a issued bleak financial forecast. Wedbush Securities also removed the stock from its Best Ideas list.
— CNBC’s Sarah Min, Samantha Subin and Hannah Miao contributed reporting.

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In-person attendance at Goldman’s U.S. offices is between 50% and 60%, down from a pre-Covid figure of roughly 80%, Solomon told CNBC on Monday.
“We want people to generally come together,” Solomon said. “It’s going to take some time, you know; behavior shifts take time generally, and I think over the course of the next couple years, our organization will generally come together.”

Goldman Sachs CEO David Solomon’s campaign to summon more of his employees back to the office is a work in progress that could take years, he said.
In-person attendance at U.S. offices is between 50% and 60%, down from a pre-Covid figure of roughly 80%, Solomon told CNBC’s David Faber on Monday. That figure is higher in European offices and 100% in Asian cities that aren’t on lockdown, Solomon added.

“We want people to generally come together,” Solomon said. “It’s going to take some time, you know; behavior shifts take time generally, and I think over the course of the next couple years, our organization will generally come together.”
Solomon has been one of Wall Street’s leading voices in trying to bring his people back to the office; he’s called the remote work era “an aberration” that he would correct as soon as possible.
While rivals CEOs at JPMorgan Chase and Morgan Stanley have made similar comments, the ongoing push and pull at Goldman has gotten the most attention. Last year, the investment bank set up an array of food trucks outside its Manhattan headquarters and gave employees free meals to entice them to return.
But the figures cited by Solomon are not much higher than the 50% attendance reported for the bank’s New York headquarters back in February, when the firm made a renewed push after the latest wave of Covid subsided.
Fully half of the bank’s roughly 50,000-person workforce are in their 20s, Solomon said. He cited a McKinsey report stating that Gen-Z workers crave more mentorship, which presumably happens more in an office environment than in remote settings.

Media reports last month cited Solomon’s efforts to have workers return five days a week, and subsequent reports indicated some junior bankers were unhappy with their attendance being tracked by management. However, a person with knowledge of the bank said those reports were overly simplistic, focused on a handful of hard-to-verify complaints and that employees have more flexibility than is portrayed.
“You waged a public campaign, it would seem, to have people show up five days a week,” Faber said. “It feels like you lost.”
Solomon said Monday that his campaign was “never as binary” as reports made it seem.
“I have always had a view that’s been rooted in flexibility and taking care of our employees,” he said. “It’s been portrayed sometimes as much more dogmatic than it is.”

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Ken Griffin, Founder and CEO, Citadel
Mike Blake | Reuters

Billionaire investor Ken Griffin’s hedge fund wowed the industry with big outperformance in April, overcoming a brutal market rout and extreme volatility.
Citadel’s multistrategy flagship fund Wellington rallied 7.5% last month, bringing its year-to-date performance to 12.7%, according to a person familiar with the returns.

Griffin’s other funds also outperformed significantly, with tactical trading and global fixed income funds up 3% each and its equity fund jumping more than 4% in April, the person said.

Arrows pointing outwards

The standout performance came as the overall market suffered a steep sell-off on concerns about the Federal Reserve’s aggressive tightening, Russia’s invasion of Ukraine as well as surging inflation at a 40-year-high. The S&P 500 lost 8.8% in April, its worst month since March 2020 at the onset of the Covid pandemic.
Technology stocks were the epicenter of the April sell-off amid high interest rates and supply chain issues stemming from Covid-19. The Nasdaq Composite fell about 13.3% in April, its worst monthly performance since October 2008 in the throes of the financial crisis.
All five core investment strategies at Citadel — equities, commodities, global fixed income and macro, credit, and quantitative strategies — registered gains last month and are in the green for 2022, the person said.
Investors have been seeking downside protection amidst the volatility spike triggered by fears of inflation and rising rates as well as geopolitical tensions. The hedge fund industry attracted its largest inflows in seven years during the first quarter.
Citadel’s asset under management exceeded $50 billion as of the start of May, the person said.

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Warren Buffett and Charlie Munger at Berkshire Hathaway shareholder meeting, April 30, 2022.

Warren Buffett bought the dip in his No. 1 stock Apple during the tech giant’s sell-off in the first quarter.
Berkshire Hathaway’s Chairman and CEO told CNBC’s Becky Quick that he scooped up $600 million worth of Apple shares following a three-day decline in the stock last quarter. Apple is the conglomerate’s single largest stock holding with a value of $159.1 billion at the end of March, taking up about 40% of its equity portfolio.

“Unfortunately the stock went back up, so I stopped. Otherwise who knows how much we would have bought?” the 91-year-old investor told Quick on Sunday after Berkshire’s annual shareholder meeting.

Arrows pointing outwards

There have been plenty of buying opportunities for Buffett this year as Apple shares came under pressure amid fears of rising rates and supply-chain constraints. The stock fell 1.7% in the first quarter with multiple three-day losing streaks throughout the period. Apple once declined for eight days in a row in January and the stock is down nearly 10% in the second quarter.
Berkshire began buying Apple stock in 2016 under the influence of Buffett’s investing deputies Todd Combs and Ted Weschler. Berkshire is now Apple’s largest shareholder, outside of index and exchange-traded fund providers.
Buffett previously called Apple one of the four “giants” at his conglomerate and the second-most important after Berkshire’s cluster of insurers, thanks to its chief executive.
“Tim Cook, Apple’s brilliant CEO, quite properly regards users of Apple products as his first love, but all of his other constituencies benefit from Tim’s managerial touch as well,” Buffett’s 2021 annual letter stated.

The “Oracle of Omaha” said he is a fan of Cook’s stock repurchase strategy, and how it gives the conglomerate increased ownership of each dollar of the iPhone maker’s earnings without the investor having to lift a finger.
Apple said last week it authorized $90 billion in share buybacks, maintaining its pace as the public company that spends the most buying its own shares. It spent $88.3 billion on buybacks in 2021.
Cook was in attendance at Berkshire’s annual meeting last weekend.
The conglomerate has also enjoyed regular dividends from the tech giant over the years, averaging about $775 million annually.

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Take a look at some of the biggest movers in the premarket:
Activision Blizzard (ATVI) – Activision shares jumped 2.7% in premarket trading after Warren Buffett told the Berkshire annual meeting that the company had increased its stake in the videogame maker.

Bilibili (BILI) – The China-based online gaming company’s stock slid 4.2% in the premarket after Jefferies cut its price target to $51.30 from $61.50 per share, citing Bilibili’s recent cut in its revenue outlook due to the resurgence of Covid cases in China.
Moody’s (MCO) – The credit ratings company missed estimates by a penny a share, with quarterly profit of $2.89 per share. Revenue was slightly above analysts’ projections. Moody’s also cut its full-year revenue outlook due to its expectation of continued market volatility, and the stock fell 3.6% in the premarket.
Global Payments (GPN) – The payments technology company reported quarterly profit of $2.07 per share, beating estimates by 3 cents a share. Revenue also topped analysts’ forecasts. The company also said it is making progress with a strategic review of its Netspend consumer business.
Berkshire Hathaway (BRK.B) – Berkshire posted a mixed quarter, with first-quarter earnings beating estimates as revenue fell short of Wall Street forecasts. Earnings were down from a year ago due to stock market turbulence and an increase in insurance claims.
HSBC (HSBC) – HSBC is under pressure from its largest shareholder — China-based insurance company Ping An – to break itself up, according to a source familiar with the matter who spoke to Reuters. Ping An is said to have presented its breakup plan to the bank’s board of directors.

Moderna (MRNA) – Moderna said its Covid-19 vaccine for children under 6 years old will be ready for review by a Food and Drug Administration panel when it meets in June. Moderna applied for emergency use authorization for the treatment last week.
China EV Makers – Li Auto (LI) and Nio (NIO) both reported a drop in April deliveries compared to a year ago, saying production took a hit from the resurgence of Covid in China. Rival Xpeng (XPEV), however, reported an increase in deliveries compared to April 2021. Li Auto fell 1.7% in the premarket while Nio lost 2%.

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The cryptocurrency mining process is underpinned by something known as “proof of work.” And it uses up an incredibly large amount of energy.
Governments around the world are growing concerned. Some countries, such as China, have gone so far as to ban crypto mining outright.
In northern Sweden, Canadian firm Hive Blockchain is relying on a local hydropower plant to power its crypto mining facility in the region.

BODEN, Sweden — Tucked away in snowy Swedish Lapland is a modern-day gold mine. But instead of picks and shovels, it’s filled with thousands of computers.
These machines, known as mining rigs, are working around the clock to find new units of cryptocurrency — in this case, ethereum, the second-largest token globally.

To do so, they must compete with others around the world to find the answer to a complex math puzzle, which grows in difficulty as more and more computers, known as “miners,” join the network. The aim is to ensure the security of the system and prevent fraud.

This ethereum mining facility is run by Hive Blockchain, a firm that focuses on using clean energy to mine crypto.
Benjamin Hall | CNBC

The whole process is underpinned by something known as “proof of work.” And it uses up an incredibly large amount of energy. Bitcoin, the world’s biggest digital currency, also uses this framework. It now consumes as much energy as entire countries.
Governments around the world are growing concerned. Some countries, such as China, have gone so far as to ban crypto mining outright.

Switching to renewables

The mine in question, a warehouse-like building located in the military town of Boden, houses 15,000 of these mining rigs in total. At 86,000 square feet, it’s bigger than a standard soccer pitch.
The facility is run by Hive Blockchain, a Canadian firm that focuses on using green and renewable energy to mine crypto.

At 86,000 square feet, Hive’s Swedish mining facility is bigger than a standard soccer pitch.
Benjamin Hall | CNBC

Hive’s Swedish operation is powered by a local hydropower plant in Boden, in the north of the country. The region is renowned for its surplus of cheap, renewable electricity.
“In the north of Sweden, 100% of the power is either hydro power-based or wind power-based,” Johan Eriksson, an advisor at Hive, said. “It is 100% renewable.”
Eriksson says crypto miners are using excess energy capacity that would have otherwise been wasted — in other words, it’s not required by households in the region.
But the vast amount of power needed to run operations like Hive’s has alarmed officials.

These machines, known as mining rigs, work round the clock to find new units of cryptocurrency.
Benjamin Hall | CNBC

Finansinspektionen, the Swedish finance watchdog, is calling on the European Union to ban crypto mining due to its huge energy usage.
“Crypto-asset producers are keen to use more renewable energy, and they are increasing their presence in the Nordic region,” the agency said in a statement last year.
“Sweden needs the renewable energy targeted by crypto-asset producers for the climate transition of our essential services, and increased use by miners threatens our ability to meet the Paris Agreement.”

Is decarbonization enough?

Edinburgh-based crypto firm Zumo is part of the Crypto Climate Accord, a coalition of companies that aims to achieve net-zero emissions in the crypto industry by 2030.

Kirsteen Harrison, Zumo’s climate policy advisor, says the initiative is working on a piece of software that would be able to verify the source of energy used in mining crypto as renewable.
“There’s quite a lot of trials going on with that at the moment,” she said. “If that’s successful, then hopefully that will filter out to the rest of the sector.” 
Simply decarbonizing the production of cryptocurrencies may not be enough though, according to some activists.
Greenpeace and other environmental groups are calling for the bitcoin community to replace its proof of work mechanism with one called “proof of stake” instead. That would remove the huge computational cost of verifying new crypto transactions.
Ethereum is currently in the middle of a lengthy transition to proof of stake, a move advocates say would reduce its energy consumption by over 99%. And other cryptos, like cardano and solan, already operate on proof of stake networks.
But, as Harrison explains, moving a cryptocurrency like bitcoin away from proof of work is easier said than done.
“I don’t believe that there’s an option to do away with proof of work, precisely because not one single player has control of the system,” she says.

Not everyone’s on board

Although Hive and other crypto firms are increasingly turning to green energy to fuel their operations, there are plenty of others who aren’t yet on board with the shift to renewables.

Some are deliberately using gas that would otherwise be flared to generate electricity for crypto mining, for example.
Since China banned crypto mining, bitcoin’s backers had hoped this would make the cryptocurrency greener.
But a peer-reviewed study released in February found bitcoin mining only got dirtier in 2021, with miners actually flocking to regions that more reliant on coal and other fossil fuels, including Kazakhstan and southern U.S. states like Texas and Kentucky.
Part of the problem is the decentralized nature of cryptocurrencies like bitcoin. While there are various groups now claiming to represent the industry, bitcoin has no central authority and anyone can participate in the network.

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Traders work on the floor of the New York Stock Exchange. 

U.S. stock index futures were flat during overnight trading Sunday after the Nasdaq Composite Index posted its worst month since 2008, pressured by rising rates, rampant inflation, and underwhelming earnings from some of the largest technology companies.
Futures contracts tied to the Dow Jones Industrial Average slid 11 points. S&P 500 futures were flat, while Nasdaq 100 futures declined 0.2%.

The major averages sank on Friday, accelerating April’s losses. The Dow sank 939 points during the session, bringing its loss last week to roughly 2.5%. It was the 30-stock benchmark’s fifth-straight negative week.
The S&P 500 declined 3.63% on Friday, its worst day since June 2020, and posted its fourth-straight negative week for the first time since September 2020. The Nasdaq also posted a fourth-straight week of losses, after falling 4.2% on Friday. Both indexes registered their lowest closing levels of the year.
“This has become a classic trader’s market as spikes in volatility and increasingly bearish headlines reverberate,” said Quincy Krosby, chief equity strategist for LPL Financial.
The Dow and S&P 500 are coming off their worst month since March 2020, when the pandemic took hold. The Dow finished April 4.9% lower, while the S&P tanked 8.8%.
The selling was even more extreme in the tech-heavy Nasdaq Composite, which plunged 13.26% in April, its worst month since October 2008. The steep decline follows underperformance from large tech companies, including Amazon, Netflix and Meta Platforms.

“[D]isappointing guidance from technology giants Amazon and Apple have exacerbated concern that a decidedly more hawkish Fed, coupled with still intractable supply chain issues, and rising energy prices may make the hope of a ‘soft landing’ from the Fed more elusive,” Krosby said.
Netflix is down 49% over the last month, with Amazon and Meta losing 24% and 10.8%, respectively. Tech stocks have been hit especially hard since their often-elevated valuations and promise of future growth begin to look less attractive in a rising-rate environment.

Stock picks and investing trends from CNBC Pro:

Investors are looking ahead to Wednesday, when the Federal Open Market Committee will issue a statement on monetary policy. The decision will be released at 2 p.m. ET, with Federal Reserve Chairman Jerome Powell holding a press conference at 2:30 p.m.
“Rising cost pressures and uncertain outlooks from the largest technology names have investors agitated…and investors are not likely to be comfortable any time soon with the Fed widely expected to deliver a 50 basis point hike along with a hawkish message next week,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.
Another key economic indicator will come Friday when April’s jobs report is released.
Earnings season is now more than halfway finished, but a number of companies are set to post results in the coming week, including a host of consumer-focused restaurant and travel companies.
Expedia, MGM Resorts, Pfizer, Airbnb, Starbucks, Lyft, Marriott, Yum Brands, Uber eBay and TripAdvisor are just some of the names on deck.
Of the 275 S&P 500 companies that have reported earnings so far, 80% have beat earnings estimates with 73% topping revenue expectations, according to data from Refinitiv.

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