Finance

Stock futures were flat in overnight trading on Thursday after two straight days of gains pushed major averages into positive territory for the week.
Futures on the Dow Jones Industrial Average were up 20 points. S&P 500 futures and Nasdaq 100 futures were little changed.

The market staged a two-day relief rally after the Federal Reserve signaled no imminent removal of its ultra-easy monetary policy. Investors also bet that the debt crisis of China’s real estate giant Evergrande wouldn’t trigger a ripple effect across global markets.
The blue-chip Dow advanced 500 points on Thursday for its best daily performance since July 20. The S&P 500 gained 1.2%, while the tech-heavy Nasdaq Composite rose 1%.

The major averages have wiped out the steep losses earlier this week and are on pace to post a winning week. The Dow is up 0.5% week to date, on pace to break a three-week losing streak. The S&P 500 have gained 0.4% this week, and the Nasdaq is up about 0.1%.
Some expect Evergrande to default on bond payments as it’s still unclear if the developer was able to pay $83 million in interest on a U.S. dollar-denominated bond due Thursday. Bloomberg News reported that government regulators instructed Evergrande to avoid a near-term dollar bond default. Bondholders could also be eyeing a 30-day grace period. Regardless of the outcome, investors seem to hope that the impact on Wall Street would be contained.
“If Evergrande fails, the exposure outside of China appears limited, and since the government will do whatever it takes to contain it,” said Edward Moya, senior market analyst at Oanda. “If China is successful, global risk appetite may not be dealt that much of a blow.”

On Wednesday, the Fed said a tapering of its monthly bond-buying program “may soon be warranted,” but it did not give a specific timeline on when it may begin moderating its purchases.
“While we are far from the end of QE and near-zero rates, the tide seems to be beginning to change,” said Anu Gaggar, global investment strategist at Commonwealth Financial Network. “So far, the market had welcomed bad news as good news, but a market reacting to signs of an economy able to stand on its own without the monetary policy crutches is a refreshing change.”
Nike shares fell 2.5% in extended trading Thursday after the sneaker giant reported quarterly revenue that missed analysts’ expectations due to softening demand in North America.

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Fed officials indicated Wednesday that they’re ready to begin “tapering” — the process of slowly pulling back the stimulus they’ve provided during the pandemic.
Bond purchases have added more than $4 trillion to the Fed’s balance sheet, which now stands at $8.5 trillion.
Tapering represents a teeing up of future rate hikes, though they appear to be at least a year in the distance.

The Marriner S. Eccles Federal Reserve building in Washington.
Stefani Reynolds/Bloomberg via Getty Images

The Federal Reserve will likely start to tiptoe into the unknown before the end of the year.
Central bank officials indicated Wednesday that they’re ready to begin “tapering” — the process of slowly pulling back the stimulus they’ve provided during the pandemic.

While the Fed has gone into policy retreat before, it has never had to pull back from such a dramatically accommodative position. For most of the past year and a half, it has been buying at least $120 billion of bonds each month, providing unprecedented support to financial markets and the economy that it now will start to walk back.
The bond purchases have added more than $4 trillion to the Fed’s balance sheet, which now stands at $8.5 trillion, about $7 trillion of which is the assets bought up through the Fed’s quantitative easing programs, according to the central bank’s data. The purchases have helped keep interest rates low, provided support to markets that malfunctioned badly at the start of the pandemic crisis, and coincided with a powerful run for the stock market.
In light of the role the program has played, Fed Chairman Jerome Powell assured the public Wednesday that “policy will remain accommodative until we have reached” the central bank’s goals on employment and inflation.
Markets thus far have taken the news well, but the real test is ahead. Tapering represents a teeing up of future rate hikes, though they appear to be at least a year in the distance.

“It’s certainly been communicated well, so I don’t think that should be a shock to anybody or cause a disruption to the market,” Charles Schwab head of fixed income Kathy Jones said. “The question really is more around asset prices than [interest] rates. We have very high valuations across the board in asset prices. What does this shift away from very easy money do to asset prices?”

The answer so far has been … nothing. The market rallied Wednesday afternoon despite what amounted to a preannouncement for Fed tapering, and roared higher again Thursday.
How things go the rest of the way likely depends on how the Fed stage manages its exit from its money-printing operations.

How it works

Here’s what tapering could look like:
Powell said the official tapering decision could happen at the November meeting, and the process would commence shortly thereafter. He added that he sees tapering being finished “sometime around the middle of next year.” That timeline, then, offers a view into how the actual reductions will go down.
If the taper indeed begins in December, reducing the purchases by $15 billion a month would get the process down to zero in eight months, or July.
Jones said she would expect the Fed to cut Treasurys by $10 billion a month and mortgage-backed securities by $5 billion. There have been some calls from within the Fed to be more aggressive with mortgages considering the inflated state of housing prices, but that seems unlikely.

Federal Reserve Chair Jerome Powell testifies during a U.S. House Oversight and Reform Select Subcommittee hearing on coronavirus crisis, on Capitol Hill in Washington, June 22, 2021.
Graeme Jennings | Pool | Reuters

Powell’s general tone during this post-meeting news conference surprised Jones. The chairman repeatedly said he is satisfied with the progress made toward full employment and price stability. With inflation running well above the Fed’s comfort zone, Powell said “that part of the test is achieved, in my view, and in the view of many others.”
“The tone was perhaps a little bit more hawkish than the market expected when it comes to tapering,” Schwab’s Jones said. “That comment that the Fed will finish by the middle of next year, it was like, ‘OK, we had better get a move on here if we’re going to do that.'”
Jones said that Powell’s comments and the Fed’s tapering intentions reflected a high level of confidence that the economy continues to recover from the pandemic-induced recession, which was both the shortest and steepest in U.S. history.
“The Fed is telling us that it collectively expects growth and inflation to be pretty strong over the next year, and they’re ready to withdraw the easy policy,” she added.

A view to a rate hike

What happens after the taper is what’s really important.
The summary of individual members’ rate forecasts — the vaunted “dot plot” — indicated a slightly more aggressive posture. The 18 members of the policymaking Federal Open Market Committee are about split on whether to enact the first quarter-point hike next year.
Officials see as many as three more hikes in 2023 and in 2024, bringing the Fed’s benchmark borrowing rate to a range between 1.75% and 2%, from its current 0 to 0.25%. Powell stressed the Fed will move carefully before raising rates and likely will wait until tapering is complete, but the market will be watching for more hawkish indications.
“The next Fed meeting could be really interesting. It should give us a lot more volatility than we’re seeing now,” said John Farawell, head trader with bond underwriter Roosevelt & Cross. “They did sound more hawkish. It’s going to be data-driven and going to be about how Covid plays out.”
For investors, it will be a new world in which the Fed is still providing support but not as much as before. While the mechanics sound simple things could get complicated if inflation continues to run above the Fed’s expectations.
FOMC members upped their 2021 core inflation estimate to 3.7%, increasing it from the 3% projection in June. But there’s plenty of reason to believe that there’s considerable upside to that forecast.
For instance, in recent days economic bellwether companies including General Mills and Federal Express have indicated that prices are likely to rise. Natural gas is up more than 80% this year and will mean substantially higher energy costs heading into the winter months.
UBS forecasts that economic conditions and the tapering news will start putting upward pressure on yields, driving the benchmark 10-year Treasury to 1.8% by the end of 2021. That’s about 40 basis points from its current level but “should not have a significant adverse effect on borrowing costs for companies or individuals,” UBS said in a note for clients.
Yields move opposite prices, meaning that investors will be selling bonds in anticipation of higher rates and less Fed support.
Analysts at UBS say investors should keep in mind that the Fed is moving forward because it is getting more confident in the economy, and still will be providing support.
“While higher bond yields lower the relative attractiveness of equities, a gradual rise in bond yields should be more than offset by the positive impact from rising earnings as economies return to normal,” the firm said. “Tapering should thus be seen as the gradual withdrawal of an emergency support measure as conditions normalize.”

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ON SEPTEMBER 20TH the Bank for International Settlements (BIS), the central banks’ central bank, released data showing that corporate borrowing around the world remains at an all-time high. A notable case is in China, where there is even more business borrowing as a share of GDP than in Japan at the peak of its bubble-related borrowing spree in the 1990s. But it is high everywhere (see chart). Corporate debt in the rich world stood at 102% of GDP at the end of March, compared with 92% before the outbreak of the covid-19 pandemic. Could high levels of debt threaten the recovery in advanced economies?Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

“DIVERSIFICATION IS BOTH observed and sensible; a rule of behaviour which does not imply the superiority of diversification must be rejected both as a hypothesis and as a maxim,” wrote Harry Markowitz, a prodigiously talented young economist, in the Journal of Finance in 1952. The paper, which helped him win the Nobel prize in 1990, laid the foundations for “modern portfolio theory”, a mathematical framework for choosing an optimal spread of assets.The theory posits that a rational investor should maximise his or her returns relative to the risk (the volatility in returns) they are taking. It follows, naturally, that assets with high and dependable returns should feature heavily in a sensible portfolio. But Mr Markowitz’s genius was in showing that diversification can reduce volatility without sacrificing returns. Diversification is the financial version of the idiom “the whole is greater than the sum of its parts.”An investor seeking high returns without volatility might not gravitate towards cryptocurrencies, like bitcoin, given that they often plunge and soar in value. (Indeed, while Buttonwood was penning this column, that is exactly what bitcoin did, falling 15% then bouncing back.) But the insight Mr Markowitz revealed was that it was not necessarily an asset’s own riskiness that is important to an investor, so much as the contribution it makes to the volatility of the overall portfolio—and that is primarily a question of the correlation between all of the assets within it. An investor holding two assets that are weakly correlated or uncorrelated can rest easier knowing that if one plunges in value the other might hold its ground.Consider the mix of assets a sensible investor might hold: geographically diverse stock indexes; bonds; a listed real-estate fund; and perhaps a precious metal, like gold. The assets that yield the juiciest returns—stocks and real estate—also tend to move in the same direction at the same time. The correlation between stocks and bonds is weak (around 0.2-0.3 over the past ten years), yielding the potential to diversify, but bonds have also tended to lag behind when it comes to returns. Investors can reduce volatility by adding bonds but they tend to lead to lower returns as well.This is where bitcoin has an edge. The cryptocurrency might be highly volatile, but during its short life it also has had high average returns. Importantly, it also tends to move independently of other assets: since 2018 the correlation between bitcoin and stocks of all geographies has been between 0.2-0.3. Over longer time horizons it is even weaker. Its correlation with real estate and bonds is similarly weak. This makes it an excellent potential source of diversification.This might explain its appeal to some big investors. Paul Tudor Jones, a hedge-fund manager, has said he aims to hold about 5% of his portfolio in bitcoin. This allocation looks sensible as part of a highly diversified portfolio. Across the four time periods during the past decade that Buttonwood randomly selected to test, an optimal portfolio contained a bitcoin allocation of 1-5%. This is not just because cryptocurrencies rocketed: even if one cherry-picks a particularly volatile couple of years for bitcoin, say January 2018 to December 2019 (when it fell steeply), a portfolio with a 1% allocation to bitcoin still displayed better risk-reward characteristics than one without it.Of course, not all calculations about which assets to choose are straightforward. Many investors seek not only to do well with their investments, but also to do good: bitcoin is not environmentally friendly. Moreover, to select a portfolio, an investor needs to amass relevant information about how the securities might behave. Expected returns and future volatility are usually gauged by observing how an asset has performed in the past. But this method has some obvious flaws. Past performance does not always indicate future returns. And the history of cryptocurrencies is short.Though Mr Markowitz laid out how investors should optimise asset choices, he wrote that “we have not considered the first stage: the formation of the relevant beliefs.” The return from investing in equities is a share of firms’ profits; from bonds the risk-free rate plus credit risk. It is not clear what drives bitcoin’s returns other than speculation. It would be reasonable to believe it might yield no returns in future. And many investors hold fierce philosophical beliefs about bitcoin—that it is either salvation or damnation. Neither side is likely to hold 1% of their assets in it.This article appeared in the Finance & economics section of the print edition under the headline “Just add crypto” More

IT IS ONCE again time for that most bizarre of economic spectacles, a debt-ceiling showdown in America. In the name of fiscal responsibility, the world’s biggest economy is flirting with an act of brazen irresponsibility: a sovereign default. The government has just about exhausted its current statutory debt limit of $28.5trn, after which it will struggle to honour its obligations. Janet Yellen, the treasury secretary, has warned that the government will probably run out of cash sometime next month.Most economists and executives assume that America will come to its senses before then. After all, Congress simply has to raise or suspend the debt limit, which it has done nearly 80 times since 1960, even if occasionally leaving it to the last minute. Should that occur again—and it almost certainly will—the debt ceiling will fade from view until the next clash, serving mainly as evidence of America’s polarised politics (as if any were needed).America’s ritualistic threats of economic self-harm are unique. But the debt ceiling is an extreme version of something that many other countries do: they limit government borrowing through fiscal rules. Germany applies a “debt brake”, capping its structural deficit at 0.35% of GDP (though it has ignored that cap since the outbreak of the covid-19 pandemic). In Britain the Conservative government aims to match its spending and revenues over a three-year horizon. Rishi Sunak, the chancellor, is expected to unveil even tighter rules in next month’s budget, including a commitment to lower the debt-to-GDP ratio.The purpose of fiscal rules is to deal with what economists call a “common pool” problem—namely, that beneficiaries of government spending ignore the costs imposed on taxpayers and future generations. The fear is that without a strict cap on spending, elected officials will burn through cash. Taken to an extreme, bond and currency markets might punish profligacy. Better not to test them. Hence the need, supposedly, for clear boundaries.Yet the past decade has shown that the boundaries are quite a bit wider and fuzzier than previously thought. In America federal debt was about one-third of GDP in 2000; today it is just about 100%. Far from precipitating a financial meltdown, the rising debt burden has become more, not less, manageable thanks to ultra-low interest rates. In nominal terms the cost of servicing all the debt (the annual interest payments on it) is just over 1% of GDP, nearly half what it was two decades ago. Similar trends have played out throughout the rich world. There may be no such thing as a free lunch, but governments have learned that they can get much larger portions for half the price.One response is to soften the limits. Take the European Union’s rule that member states must cap their debt at 60% of GDP—which is largely observed in the breach, with average EU debt levels now hurtling past 90% of GDP. Economists such as Zsolt Darvas of Bruegel, a think-tank, suggest that this limit should be treated as a long-term anchor rather than any kind of near-term target.Such a softening would help. But it would fail to deal with a more basic flaw with debt limits, which is that they are intrinsically arbitrary. There is little empirical basis for keeping debts to 60% of GDP, much less to exactly $28.5trn in America. The very arbitrariness of these red lines risks creating a boy-who-cried-debt syndrome. As borrowing levels blow past them and yet the economy continues to perform well, some politicians may conclude that any and all calls for fiscal restraint are best ignored.A more sophisticated response is to focus fiscal rules on what really matters about debt: the cost of servicing it. In a paper in 2020 Larry Summers and Jason Furman suggested that governments should aim to stop their real interest payments from rising above 2% of GDP. If they succeed, debt-to-GDP targets would be rendered all but superfluous. More generally, economists recognise that so long as a country’s pace of growth is higher than its interest rates, its path to fiscal sustainability ought to be easier, because its burden of existing debts will steadily shrink.However, these more elegant fiscal rules have their own problems. Why cap debt-servicing costs at 2% of GDP and not, say 3%. Moreover, the confidence that economic growth can surpass interest rates stems from the belief that rates will remain subdued well into the future as the population ages. But America’s ongoing bout of inflation has shown just how uncertain that is. Should central banks need to jack up interest rates to quell price pressures, debts would quickly spiral higher.You only give me your funny paperDoing away with indefensible lines in the sand altogether is a good alternative. In a paper this year Peter Orszag, Robert Rubin and Joseph Stiglitz argue for a new fiscal architecture. An important part would be to index long-term spending to underlying drivers. For example, social-security benefits could automatically be made less generous to take into account increasing life expectancy. This can be thought of as a fiscal rule that would commit governments to sensible budgetary decisions, rather than specifying debt targets with spurious precision.In another paper this year Olivier Blanchard and others proposed general fiscal standards for the EU, such as requiring governments to ensure that their debts are sustainable, but leaving it to them to choose their policy mixes. Independent fiscal councils could then use detailed debt-sustainability criteria to assess their budgets. If done methodically, this would be more scientific than the fiscal rules now seen in America and Europe.Alas, all these clever ideas may amount to nothing in America. There is little chance that the government will abandon its debt ceiling, for in one dimension it is most effective. Republicans have become dab hands at wielding it as a cudgel to stall the agendas of Democrat presidents and to portray them as spendthrifts. No other fiscal rules can deliver that kind of return. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Rules of engagement” More

BERLINERS, MORE than four-fifths of whom rent their homes, have an unusual opportunity on September 26th to vent their anger over the rising cost of housing. A referendum, on the same day as Germany’s national and municipal elections, will give them a say on whether or not the city should in effect “expropriate” some of Germany’s largest residential-property firms, affecting up to 240,000 homes. The vote is non-binding. But its impact on the housing market is already having an effect. On September 17th two giant property investment trusts, Vonovia and a firm it is targeting in a €19.1bn ($22.5 billion) takeover, Deutsche Wohnen, said they would sell almost 15,000 flats to the city for €2.5bn. They portrayed it as a friendly gesture. But it was also a thinly veiled attempt to stop being stripped of the keys to their own homes.Whatever the outcome of the referendum, it serves as a warning for institutional investors piling into residential property in Europe and America. Real-estate investment trusts (REITs), private-equity firms, insurance companies and pension funds see the single-family rental housing market as a relatively high-yielding hedge against inflation that has been spared the impact of pandemic-related lockdowns on offices and shops. But housing affordability has high political sensitivity. In Berlin, rents have roughly doubled in a decade. Across Europe their rise has outpaced wage increases. In America, where a quarter of renters pay more than half of their income to landlords, rents in June were up 7.5% compared with last year, when they rose by 1.4%. The highest increases were in Phoenix and Las Vegas, up by 16.5% and 12.9%, respectively over the same time period. Nationally it is hard to lay the blame for the rent rises on institutional investors. But in some cities where they concentrate their portfolios, faceless megacorps are increasingly being seen as part of the problem.The biggest names are well known. BlackRock and JPMorgan Chase’s asset-management business feature among the stampede of buyers. KKR, a private-equity firm, is building out a new single-family landlord entity in America. The sums involved are rising fast. An estimated $87bn of institutional money went into America’s rental-home market during the first half of this year, according to Redfin, a residential brokerage. Around 16% of single-family homes for sale were bought by investors in the second quarter, up from more than 9% a year earlier. A similar shift is under way in Europe where firms such as Goldman Sachs, Aviva and Legal & General are wading into the market. Lloyds Banking Group, Britain’s largest mortgage lender, is also moving into housing with a target to purchase 50,000 homes within the next decade. That could make it the country’s largest landlord.It is not the first time the investment market has been hot. Blackstone, a financial conglomerate, was one of the first big investors to purchase foreclosed homes, many of them vacant or in disrepair, after the 2007-09 global financial crisis. The firm showed up at foreclosure auctions in America’s courthouses and drove street by street, comparing neighbourhoods and school districts. In 2012, it paid $100,000 for its first purchase in Phoenix. Soon it was spending $125m on homes each week. That same year Blackstone created Invitation Homes, now the largest owner of single-family rental houses in America, before taking it public in 2017 and selling off its shares two years later. Today Invitation Homes owns 80,000 homes out of a total market of 16.2m single-family rental homes. Altogether the bet on housing earned Blackstone nearly $7bn in dividends paid before and since Invitation Homes listed its shares, or more than twice its initial investment. The firm, which has returned to the market, recently made a $6bn acquisition of Home Partners of America, which owns more than 17,000 single-family homes. It gives its tenants the option to buy.The main impetus for the renewed investor enthusiasm is different from a decade ago. It is partly because of demography. Following the financial crisis, many millennials favoured metropolitan flats as they established their careers. As more of them enter middle age—the 35- to 44-year-old age cohort in America is expected to grow at double the pace of the average over the next five years—they want more space. It is also because of the pandemic. If remote working remains attractive, it will increase demand for homes that are farther from city centres. That helps explain why institutional buyers have piled into secondary cities such as Phoenix, Raleigh, Greensboro and Dayton.Many of this cohort would prefer to buy than to rent, but high house prices are an impediment. In America, the median home cost around 4.3 times the median household income in 2019, up from 3.9 times in 2002. In Britain the average home currently costs more than eight times average earnings—a level that has only been breached twice in the past 120 years. Even if rents are rising, too, leasing a suburban home with an office and room to raise children can be an interim option.Some people blame large investors for both skyrocketing house prices and rising rents. At an aggregate level that’s a hard case to make. Professional investors own just 2% of the total rental-housing stock in America. In Europe, less than 5% of residential real estate is in the hands of large, publicly traded funds. But in those cities where institutional investors are increasingly active, they may have more of an impact. They also frequently pay with cash, giving them an edge over buyers with a mortgage in a competitive market. One in six home sales in America went to an investor between April and June, according to Redfin. In cities such as Atlanta, Miami and Phoenix, the figure was one in four.That may explain some of the political scrutiny. “Institutional investors are walking on a tightrope,” says Cedrik Lachance of Green Street, a property-analysis firm. On the one hand, rising rents make investments more attractive. On the other hand, they invite tougher policy responses. The White House is placing limits on the sale of lower cost homes to large investors. In Ireland, property taxes were raised to stop institutional investors from snapping up family homes that would normally be marketed to first-time buyers.Such regulatory responses may be crowd pleasers. They will not solve the rental problem. One study showed that rent-control policies in Catalonia, a region of Spain, not only failed to make the market more affordable, but actually worked against it. The number of homes available fell by 12% while prices remained unchanged. Similarly, researchers studying the impact of a five-year rent freeze in Berlin found that the number of rental properties slumped last year. Catalonia’s law has been challenged by a constitutional court. Berlin’s has been struck down.Instead, more homebuilding is the answer. Some landlords argue that they increase the housing stock by offering developers the certainty of bulk purchases. Lennar, America’s largest home builder by revenue, recently signed a $4bn deal with investors that includes building over 3,000 homes. Additionally, REITs in America such as Invitation Homes and American Homes 4 Rent are either building more homes or striking partnerships with homebuilders to boost their supply. In Britain, where one in five newly built homes could be institutionally-owned by the end of the decade, Lloyds has announced a fund to boost house building in return for a share of the profit. Professional landlords that own multiple properties also claim that they’re able to offer better services, more maintenance and longer leases than individual landlords who could sell up at any moment.But in the wake of the pandemic, homebuilding globally is anaemic. Shortages of labour and material have stalled growth. Fewer homes coming onto the market meant that single-family institutional investors in America increased their portfolios by 1.5% in 2020, down from 9.2% in 2018, according to Amherst Capital, a property firm. Less homebuilding increases the chance that rents will continue to rise. Annual returns in America and Europe are expected to be as high as 15.1% and 17.5% respectively over the next few years. The asset class will therefore remain enticing from an income standpoint, but more risky from a regulatory one. Even if a majority of Berlin’s renters vote against the landlords, it’s hard to imagine meaningful law changes to curb property rights. But for the greediest investors, the writing is on the wall, four windows and a door. ■This article appeared in the Finance & economics section of the print edition under the headline “The new rent-seekers” More

Check out the companies making headlines before the bell:
Darden Restaurants (DRI) — The Olive Garden parent reported earnings of $1.76 per share, higher than the $1.64-per-share forecast. The restaurant company also reported same-store sales that rose 47.5%, topping estimates. Shares rose 3% in premarket trading.

BlackBerry (BB) — The company reported better-than-expected quarterly earnings, with an adjusted gross margin of 65%. BlackBerry reported a loss of 6 cents per share, compared with the expected loss of 7 cents per share, according to Refinitiv. Revenue came in at $175 million, topping estimates of $164 million. Shares rose more than 7% premarket.
Salesforce (CRM) — The software company raised its full-year 2022 revenue guidance to between $26.25 billion and $26.35 billion. This is higher than the company’s previous estimate of revenue between $26.2 billion and $26.3 billion. Analysts expected $26.31 billion. Shares rose 2% in premarket trading.
KB Home (KBH) — Shares of the homebuilder rose in premarket trading despite missing top and bottom-line estimates. KB Home reported quarterly earnings of $1.60 on revenue of $1.47 billion. Wall Street expected earnings of $1.62 per share on revenue of $1.57 billion, according to Refinitiv.
Joby Aviation (JOBY) — Morgan Stanley initiated coverage of the air taxi start-up with an overweight rating, saying in a note to clients on Thursday that investors should take a look at a stock with major potential upside. Shares of Joby Aviation popped more than 5% in extended trading.
Biogen (BIIB) — The drugmaker’s stock rose in premarket trading after Needham initiated coverage of the stock with a buy rating, saying in a note to clients on Wednesday that the company’s controversial Alzheimer’s drug Aduhelm will be a big seller for the company long term.

Roku (ROKU) — Shares of the streaming company rose 2% in premarket trading after Guggenheim upgraded the stocks to buy from neutral. The Wall Street firm assigned Roku a 12-month price target of $395, implying a 22% one-year return.
SoFi (SOFI) — Shares of the fintech company rose in premarket trading after gaining 11% during the regular session on Wednesday. Sofi is the 6th most-mentioned stock on Reddit’s WallStreetBets, according to quiver quant.
Accenture (ACN) — Accenture shares rose in extended trading after reporting better-than-expected earnings. The company also increased its dividend and buyback authorization.

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Ant Group will share credit data from its consumer lending business with China’s central bank as part of an overhaul of the fintech giant.
Information from Ant’s Huabei product, including date of account set up, amount in the credit line and status of repayment will be provided to the People’s Bank of China.
Chinese regulators ordered a restructuring of Ant Group after the company’s blockbuster listing in November was suspended.

GUANGZHOU, China — Ant Group will share credit data from its consumer lending business with China’s central bank as part of an overhaul of the fintech giant.
Huabei is a consumer loan product under Ant Group. Data from that lending product will be fed into the financial credit information database held by the People’s Bank of China (PBOC), Ant said in a statement Wednesday.

Information including date of account set up, amount in the credit line and status of repayment will be provided to the central bank. Users will need to authorize this. Specific information such as details about time of purchases or goods being bought will not be handed over to the PBOC.
Ant Group, which is controlled by billionaire Alibaba founder Jack Ma, had its blockbuster initial public offering suspended in November over regulatory concerns.
Ant’s lending business worked on a model in which it matched up borrowers to lenders, such as banks, but the company did not underwrite those loans. Instead, banks bore most of the risk.

This worried regulators who believed companies like Ant were acting like financial institutions but not being regulated like them.
Chinese regulators ordered a restructuring of Ant Group. In June, the company was given the green light to operate a consumer finance business with outside shareholders. This business houses its Huabei and Jiebei loan products and is called Chongqing Ant Consumer Finance Co. Ant will have to partly underwrite more of these loans.

Ant Group is currently in the process of becoming a financial holding company which will be overseen by the PBOC and other regulators.

A logo of Ant Group is pictured at the headquarters of the company, an affiliate of Alibaba, in Hangzhou, Zhejiang province, China October 29, 2020.
Aly Song | Reuters

The data-sharing requirements with the PBOC brings Ant Group in line with other financial institutions in the lending space which are required to do the same thing.
Ant Group said some users can already look up the Huabei-related records in their credit reports with the central bank.
The company looks to assuage fears that the sharing of users’ credit data from Huabei could affect their future ability to get loans.
“A comprehensive and proper set of credit records will enable financial institutions to better understand users’ creditworthiness and to better serve them,” Ant Group said in a statement.

In my view, this means the intent is to allow Ant to continue its business but under regulatory purview and rules.

Kevin Kwek

“Therefore, under general circumstances and with the normal usage of Huabei and timely repayments, the use of other financial services such as loan applications will not be impacted.”
Kevin Kwek, managing director and senior analyst at Bernstein, said the credit data-sharing agreement with the central bank clears “significant” regulatory uncertainty around Ant Group.
“Sharing of data of course erodes Ant’s edge, but doing so allows them to obtain regulatory blessings, such as getting the consumer finance license,” Kwek told CNBC.
“In my view, this means the intent is to allow Ant to continue its business but under regulatory purview and rules, and if it helps the broader consumer credit bureau agenda. It is important to note that Ant will continue to be dominant as a very large distributor given its user base, even if it now has to share some data.”

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