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Bloomberg
13 hours ago
- Business
- Bloomberg
Goldman Says US Stock Rally to Continue Before Fading in August
The S&P 500 will add to its rally this month, spurred higher by improving liquidity, collapsing volatility, fading recession fears and seasonal factors, and then start to fade, according to flow specialists at Goldman Sachs Group Inc. 'We think this rally will continue for the next couple weeks but lose steam into August,' they wrote in a note to clients on Monday.
Mint
24-06-2025
- Business
- Mint
A Key Gauge Signals Waning Demand for US Dollar in $7.5 Trillion Market
A measure of demand in the $7.5-trillion-a-day foreign-exchange market is catching the attention of Wall Street, pointing to diminished appetite for the US dollar even during market turbulence that would otherwise send investors flocking to the greenback. Analysts at a handful of banks including Morgan Stanley and Goldman Sachs Group Inc. all point to recent shifts in so-called cross-currency basis swaps — a gauge of how much it costs to exchange one currency for another beyond what would normally be implied by borrowing costs in the cash markets. As demand for a particular currency increases, that extra cost or premium rises, and likewise declines or even can go negative when appetite isn't as strong. These analysts note that when markets melted down in April following US President Donald Trump's 'Liberation Day' tariff announcement, the preference for dollars as measured by basis swaps was relatively minor and short-lived. Meanwhile, demand for other currencies such as the euro and yen has grown. That stands in sharp contrast to previous scrambles for safety over the last two decades, such as the onset of the pandemic, which saw the dollar command a premium in global funding markets for a sustained period. Over time, this waning preference for dollar liquidity, particularly relative to the euro, could ultimately make it more expensive to borrow Europe's common currency relative to the greenback — presenting a challenge for the US currency at a time when its preeminent position in world finance is facing growing doubts. 'Recent cross-currency basis movements suggest investors have less appetite to buy dollar-denominated assets and more appetite to buy those denominated in euro and yen,' the Morgan Stanley team including Koichi Sugisak and Francesco Grechi wrote in a June report. In fact, the US tariff impact appeared to be 'triggering a temporary withdrawal from dollar assets,' the Morgan Stanley analysts wrote. The cross-currency basis matters because it effectively sets the price of long-term, foreign-exchange hedging for companies and investors the world over. It's also an indication of the shifting trends in vast flows of assets between economies and asset classes. Already, the Bloomberg Dollar Spot Index is down more than 8% this year — the measure's worst start to a year since the gauge launched two decades ago. The focus on basis swaps comes at a time of a broader questioning of the US currency's role as a haven, against a backdrop of both policy uncertainty associated with the Trump administration as well as the nation's fiscal outlook in the years ahead. Of course, geopolitical risks still abound that show persisting demand for dollar assets in times of stress. The dollar briefly touched a three-week high on Monday as oil prices climbed following the Israeli and US strikes on Iran; Treasuries have also rallied alongside other global debt amid the Middle East tensions. But the Wall Street analysts are more focused on enduring shifts in global capital flows over a longer time horizon. 'Generally the theme that's linked to the cross-currency basis is: Are investors, particularly in Europe, repatriating money from the US?' Guneet Dhingra, the head of US interest-rate strategy at BNP Paribas SA, said in an interview. 'Our view at BNP is that there is definitely a fair bit of cross-border flow, particularly from the US to Europe.' At Goldman Sachs, Simon Freycenet and Friedrich Schaper argued that the unwind of the European Central Bank's balance sheet will likely persist beyond the Federal Reserve's own quantitative tightening efforts. Combined with Europe's positive net international investment position — especially compared to the US, which is the world's major international debtor — these dynamics should support the tightening of euro funding relative to the dollar over time. 'The modest currency base moves in the wake of 'Liberation Day' are notable, likely also reflecting the absence of a dash for dollars amid a more resilient global financial system than before,' Freycenet and Schaper said. Goldman ultimately sees potential for the euro to become more expensive than the dollar in the cross-currency basis swap markets — a rare phenomenon over the last two decades. This article was generated from an automated news agency feed without modifications to text.
Los Angeles Times
20-06-2025
- Business
- Los Angeles Times
Traders resist defensive stocks' haven status amid Mideast risk
U.S. equities investors are reluctant to seek safety amid flaring geopolitical tensions, raising the risk of getting caught off guard if the conflict between Israel and Iran takes an unexpected turn in the days ahead. Normally, this level of anxiety would be enough to send money managers scurrying into stocks offering shelter, especially with President Trump weighing whether to offer Israel military backing in its conflict with Iran. That step could roil crude prices and stoke worries about inflation, and potentially reignite a rush for investment havens. Yet, the events since last week have only triggered a modest shift into so-called defensive sectors such as utilities, consumer staples and health care. That's even as US stocks whipsaw their way higher, with the Standard & Poo'rs 500 Index is just 2.7% away from a new all-time high. For Matt Maley at Miller Tabak + Co., it's an ominous setup that leaves investors vulnerable given the fluid situation. 'The war may or may not get worse, but given that any upside potential for stocks is limited due to extended valuations, investors should be taking more precautions,' said the firm's chief market strategist. Underscoring how safer stocks have been on the sidelines lately, defensive sectors' influence on the benchmark — measured by the combined weight of the groups in the gauge — is currently at a 35-year low, Strategas' Todd Sohn found. What's more, a Goldman Sachs Group Inc. pair-trade basket that represents going long cyclicals and short defensives has seen a modest uptick since Israel launched airstrikes against Iran's nuclear program and military targets last week. If traders were rushing to safety due to concerns over the economy the basket would decline, like it did in early April, when investors feared the impact of tariffs on growth. Trump will decide within two weeks whether to strike Iran, his spokeswoman said on Thursday. Some say there's good reason for investors to be reluctant to jump into defensives in the face of geopolitical unrest. First, data from UBS shows the impact of such events on equity markets tend to be short-lived. In the past 11 major geopolitical events, the S&P 500 on average fell just 0.3% one week after the event, while 12 months later it rose 7.7%. According to Christopher Murphy, co-head of derivatives strategy at Susquehanna, positioning among hedge funds remained light. In other words, many institutional investors did not aggressively chase the recent rally higher, limiting their need for a forced pivot on geopolitical shocks. Even on the day of strikes, investors showed little fear of a volatility breakout, and were adjusting their exposure and not exiting markets, the strategist said. 'Investors are still hedging with precision, but the dominant behavior remains risk-adjusted engagement — not panic,' he said. That may be the case but there's one outlier trade. Investors are piling into energy stocks, which tend to behave defensively in times when crude oil supply is at risk. Any escalating Iran-Israel conflict could push oil prices even higher. Meanwhile, some market pros are starting to advise investors to make a bigger defensive move. The Wells Fargo Investment Institute recommended boosting exposure to such stocks amid the uncertainty surrounding tariffs that will extend through the rest of the year. The utility sector stands out to Wells Fargo strategists. The group, which can act as a hedge against market volatility and economic risks, is relatively shielded from tariffs given the businesses are primarily domestic, they wrote in a note. Utilities are also set to benefit from the infrastructure buildout in artificial intelligence. Moreover, valuations are relatively favorable, they added. The S&P 500 Utilities Index is trading at a forward price-to-earnings multiple of 17 times, compared to the S&P 500's 22 times. Dennis DeBusschere at 22V Research said he won't be buying any surge in defensives, given the firm's view that Israel will not strike Iran's oil exporting facilities, thereby limiting the impact on interest rates and inflation expectations. Dey writes for Bloomberg.
The Star
20-06-2025
- Business
- The Star
Top Morgan Stanley Asia banker targets US$10bil
LAST month, as the US-China trade war heated up, Morgan Stanley's co-president Dan Simkowitz made a discreet visit to Beijing. It was the first time a senior US executive from the bank had stepped foot in China in five years, and came days after a rare board meeting in Tokyo near the Imperial Palace. The low-key events underscore the focus the Wall Street giant is putting on Asia under recently installed chief executive officer (CEO) Ted Pick. After several tough years sparked by a slump in China that hammered global banks, Morgan Stanley is regaining traction in the region. Led by one of the deepest and longest-tenured teams of any of its rivals, Morgan Stanley posted record Asia revenue of US$7.64bil last year, topping arch-rival Goldman Sachs Group Inc for the third-straight time. The bank is now eyeing US$10bil in revenue within five years, its Asia chief Gokul Laroia said in a rare interview from his Hong Kong office. 'If you're diversified by geography and you're diversified by product, you have inherent hedges in your business,' said Laroia, who joined Simkowitz on the Beijing trip to meet with He Lifeng, the vice-premier who is also leading US trade talks. 'A combination of familiarity and confidence in the team over here is super helpful, particularly when times are tough.' The bank is counting on a widening array of investment banking and trading initiatives across the region. A growing presence in Japan and India will likely add to a China business that's slowly recovering even as trade wars rage. Still, the goal will be challenging. Despite investing billions, global banks have struggled to make meaningful profits on the Chinese mainland, squeezed by a sluggish economy and powerful local rivals. At the same time, the bank faces fierce competition in Japan, where many global firms saw sliding revenue last year. In India, fees are generally low and the regulatory landscape is hard to navigate. Laroia, a 30-year veteran of Morgan Stanley and co-head of global equities, is in charge of executing the Asia strategy. He joins a long list of top executives at the New York bank who cut their teeth in the region. At the top is Pick, a New Yorker who worked in South Korea for about six months early in his career. At a town hall last year after becoming CEO, Pick joked that the two people he's travelled most with in his life are his wife and Laroia. In the past two decades, Pick has made more than 60 trips to Asia. Simkowitz, who oversees the global institutional securities business, worked in Tokyo and Hong Kong in the 1990s, while Mo Assomull, co-head of investment banking, grew up in Hong Kong where he first joined the bank. Laroia is part of the bank's 12-member top executive body. His close ties to the top have been instrumental in helping the firm's bankers in Asia secure swift approvals and push key deals across the line, according to sources. He's led businesses across investment banking and sales and trading, making him one of the most well-rounded regional CEOs among global banks in Asia. During the bank's April earnings call, Pick gave a rare shout-out to Laroia, pointing to Asia's equities performance and its contribution to global results. Backbone of Asia Like its biggest US rivals, Morgan Stanley's stocks division is the backbone of Asia, and its momentum is pushing Greater China's share to about half of regional revenue. Overall, Japan delivers 20% to 25%, while India makes up roughly 10%. In the first quarter, the bank's revenue from Asia topped Goldman's by 27%, public filings showed. Morgan Stanley declined to comment on contributions by geography. While activity is picking up, Wall Street firms have gone through tough years following China's financial opening at the start of the decade. Since late 2022, Morgan Stanley has slashed more than 120 Asia investment banking jobs – many of then China-focused – as overall Asia revenue fell before rebounding in 2024, according to sources. Now, fresh China-US tension has again fuelled investor caution, imperiling growth prospects for most investment banks. 'The geopolitical dynamic is a complicated one,' said Laroia. 'Our role is to make sure that the business that we're doing in China is the risk that we're comfortable managing.' To confront the challenges in China, Laroia draws on challenges from navigating five major economic meltdowns, including the Asian financial turmoil and dotCom bust, severe acute respiratory syndrome, the global financial crisis and the Covid-19 pandemic. He tapped that experience earlier this year as US President Donald Trump's tariff shock caused Chinese stocks to plummet. Laroia kept in close phone contact with a leading hedge fund in London. He advised sticking with China, but to cut long-dated investments and avoid complex positions to preserve liquidity, according to the US$10bil portfolio manager, who asked not to be identified. Better access The long-time client said that the bank has generally provided better access to borrowable Chinese shares, citing one instance when its prime brokerage unit offered twice as many as rivals for short bets. This allows the bank to charge premiums in illiquid markets, the hedge fund manager said. Morgan Stanley has made a deliberate push to broaden its product suite across businesses in China to counter the deals slump. Its onshore units have secured multiple licences from derivatives to principal trading and research in the last few years. 'The sales and trading business continues to grow because there's a very broad cross section of global investors and increasingly a rapidly growing pool of local capital that is trading these markets more actively than they've traded in the past,' Laroia said. — Bloomberg Cathy Chan writes for Bloomberg. The views expressed here are the writer's own.
Mint
17-06-2025
- Business
- Mint
Morgan Stanley's Top Asia Banker Targets $10 Billion in Revenue
(Bloomberg) -- Last month, as the US-China trade war heated up, Morgan Stanley's co-President Dan Simkowitz made a discreet visit to Beijing. It was the first time a senior US executive from the bank had stepped foot in China in five years, and came days after a rare board meeting in Tokyo near the Imperial Palace. The low-key events underscore the focus the Wall Street giant is putting on Asia under recently installed Chief Executive Officer Ted Pick. After several tough years sparked by a slump in China that hammered global banks, Morgan Stanley is regaining traction in the region. Led by one of the deepest and longest-tenured teams of any of its rivals, Morgan Stanley posted record Asia revenue of $7.64 billion last year, topping arch-rival Goldman Sachs Group Inc. for the third-straight time. The bank is now eyeing $10 billion in revenue within five years, its Asia chief Gokul Laroia said in a rare interview from his Hong Kong office. 'If you're diversified by geography and you're diversified by product, you have inherent hedges in your business,' said Laroia, who joined Simkowitz on the Beijing trip to meet with He Lifeng, the vice premier who is also leading US trade talks. 'A combination of familiarity and confidence in the team over here is super helpful, particularly when times are tough.' The bank is counting on a widening array of investment banking and trading initiatives across the region. A growing presence in Japan and India will likely add to a China business that's slowly recovering even as trade wars rage. Still, the goal will be challenging. Despite investing billions, global banks have struggled to make meaningful profits on the Chinese mainland, squeezed by a sluggish economy and powerful local rivals. At the same time, the bank faces fierce competition in Japan, where many global firms saw sliding revenue last year. In India, fees are generally low and the regulatory landscape is hard to navigate. Laroia, a 30-year veteran of Morgan Stanley and co-head of global equities, is in charge of executing the Asia strategy. He joins a long list of top executives at the New York bank who cut their teeth in the region. At the top is Pick, a New Yorker who worked in Korea for about six months early in his career. At a town hall last year after becoming CEO, Pick joked that the two people he's traveled most with in his life are his wife and Laroia. In the past two decades, Pick has made more than 60 trips to Asia. Simkowitz, who oversees the global institutional securities business, worked in Tokyo and Hong Kong in the 1990s, while Mo Assomull, co-head of investment banking, grew up in Hong Kong where he first joined the bank. Laroia is part of the bank's 12-member top executive body. His close ties to the top have been instrumental in helping the firm's bankers in Asia secure swift approvals and push key deals across the line, according to people familiar with the matter, who asked not to be identified. He's led businesses across investment banking and sales and trading, making him one of the most well-rounded regional CEOs among global banks in Asia. During the bank's April earnings call, Pick gave a rare shout-out to Laroia, pointing to Asia's equities performance and its contribution to global results. Like its biggest US rivals, Morgan Stanley's stocks division is the backbone of Asia, and its momentum is pushing Greater China's share to about half of regional revenue. Overall, Japan delivers 20% to 25%, while India makes up roughly 10%, a person familiar with the matter said. In the first quarter, the bank's revenue from Asia topped Goldman's by 27%, public filings show. Morgan Stanley declined to comment on contributions by geography. While activity is picking up, Wall Street firms have gone through tough years following China's financial opening at the start of the decade. Since late 2022, Morgan Stanley has slashed more than 120 Asia investment banking jobs — many of then China-focused — as overall Asia revenue fell before rebounding in 2024, according to people familiar with the matter. Now, fresh China-US tension has again fueled investor caution, imperiling growth prospects for most investment banks. 'The geopolitical dynamic is a complicated one,' said Laroia. 'Our role is to make sure that the business that we're doing in China is the risk that we're comfortable managing.' To confront the challenges in China, Laroia draws on challenges from navigating five major economic meltdowns, including the Asian financial turmoil and dot-com bust, SARS, the global financial crisis and the Covid-19 pandemic. He tapped that experience earlier this year as US President Donald Trump's tariff shock caused Chinese stocks to plummet. Laroia kept in close phone contact with a leading hedge fund in London. He advised sticking with China, but to cut long-dated investments and avoid complex positions to preserve liquidity, according to the $10 billion portfolio manager, who asked not to be identified. The long-time client said that the bank has generally provided better access to borrowable Chinese shares, citing one instance when its prime brokerage unit offered twice as many as rivals for short bets. This allows the bank to charge premiums in illiquid markets, the hedge fund manager said. Morgan Stanley has made a deliberate push to broaden its product suite across businesses in China to counter the deals slump. Its onshore units have secured multiple licenses from derivatives to principal trading and research in the last few years. 'The sales and trading business continues to grow because there's a very broad cross section of global investors and increasingly a rapidly growing pool of local capital that is trading these markets more actively than they've traded in the past,' Laroia said. Morgan Stanley is also counting on Japan for growth, as the economy emerges from decades of stagnation. The Tokyo board meeting was the first in the region in 14 years. Much of the discussion centered on regional goals and expansion, underscoring Asia's importance to the bank's strategy, a person familiar said. The firm has deepened its 17-year partnership with Mitsubishi UFJ Financial Group Inc., its largest shareholder. Beyond banking and trading, it merged research with MUFG to compete with local firms and expanded mid- and small-cap Tokyo stock coverage by two-thirds to more than 500 names. New growth levers include a tie-up with MUFG in foreign exchange and equities and a push into private credit. Still, hiring in Japan's booming finance sector is a headache, with fierce competition and talent shortages driving up pay. In India, where Laroia was born, the firm has launched foreign exchange capabilities to help investors trade and hedge currencies. It was an early mover in a special economic zone — known as GIFT City - designed to attract global clients seeking tax and regulatory clarity when trading Indian securities. It also faces competition from Goldman, JPMorgan Chase & Co and others, who are all ramping up in India, chasing deals and expanding corporate lending and flow business. Despite a surge in deals, investment banking in India remains a relatively low-margin business, prompting the bank to be selective in taking on fee-paying clients. While it has a big ultra-high-net-worth business in Hong Kong and Singapore, Morgan Stanley has yet to enter other core markets like Japan and India, and it's unclear if it will leverage its US mass-wealth model there. Asset management has also lagged, as the firm only started ramping up in 2023, hiring Mike Levin from Goldman to lead Asia distribution. Last year's departure of Chin Chou, the founder of its Asia private equity arm, has also left a leadership gap as global investors pulled back from China. For Laroia, the volatility and tumult comes with the territory in Asia, leading to plenty of tough moments and pressure. His once black hair has turned gray and white over the years, and he finds golf helps him stay grounded. With a handicap of just eight, he's good enough to beat a few of his clients if chooses to. 'The only time I shout is on a golf course, when I miss or hit a bad shot,' said Laroia, who plays at the Hong Kong Golf Club and Discovery Bay. 'That's how you release your stress.' More stories like this are available on
