Posts Tagged ‘Goldman Sachs’

‘Modest fashion’ looks to move from niche to mainstream

January 19, 2019

Goldman Sachs’ stake in Turkey’s Modanisa comes as more western brands embrace growing sector

Muslim consumers spent $270bn on fashion in 2017, with analysts forecasting it will hit $360bn by 2023

By Laura Pitel in Istanbul and Javier Espinoza in London

When Kerim Ture was first building his online fashion retailer for Muslim women, would-be investors would make Islamophobic jokes.

“They would say: ‘Let me guess the colour of this year . . . is it black?’” he recalled. But Mr Ture looks to be having the last laugh after his Istanbul-based company announced that Goldman Sachs had taken a minority stake.

Modanisa — and its range of conservative clothing in a kaleidoscope of colours — is part of the rapidly growing “modest fashion” sector.

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Analysts say the interest from Goldman demonstrates that the sector is no longer considered a novelty, but is instead being taken seriously and entering the next phase of growth.  “It brought a smile to my face to see the story,” said Shelina Janmohamed, vice-president at Ogilvy Noor, a division of the London-based marketing agency Ogilvy that helps brands target Muslims around the world. She said that the investment showed “the big corner that we’ve turned”.

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Ogilvy Noor

“When you’ve got billions being spent, large institutional investors investing, and brands selling to dozens of countries around the world, it’s time to start treating it less like a passing fad or a passing curiosity but a serious sector in its own right.”

The global Muslim population of 1.8bn people is the world’s youngest and fastest-growing consumer group, according to analysts. Last year’s State of the Global Islamic Economy Report, by Thomson Reuters and DinarStandard, estimated that Muslim shoppers spent $270bn on fashion in 2017, rising to $361bn by 2023. Not all of the world’s Muslim women wear a headscarf or adopt the more covered-up style of dressing that often comes with it.

In Turkey — where the headscarf is a deeply divisive and highly political issue — many women would be quick to point that out.

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Noor Neelofa Mohd Noor

The honest fact is that mainstream investors and the mainstream brands want to do modest fashion because it is good business Franka Soeria, fashion consultant But the report pointed to a “noticeable shift” in established western brands interest in modest fashion. French perfume and cosmetics brand Lancôme unveiled Malaysian actress Noor Neelofa Mohd Noor as its first hijab-wearing ambassador and Nike launched a sports hijab in 2017. Last year, luxury brand Dolce & Gabbana, US department store chain Macy’s and fast fashion giant H&M Hennes & Mauritz all rolled out lines specifically aimed at Muslm women.

Image result for Nike sports hijab, Pictures

Nike sports hijab

“I am super happy that mainstream brands have started to realise we are here,” said Franka Soeria, an Indonesian fashion consultant.

“The honest fact is that mainstream investors and the mainstream brands want to do modest fashion because it is good business.” Modanisa was launched in 2011 by Mr Ture and four friends. The company has taken advantage of Turkey’s long history of textile production to work with 650 designers and suppliers, many of them small ateliers run by women.

Its website serves as an online portal for these different brands.

While many Turkish online retail start-ups have felt little need to look beyond Turkey’s 80m-strong domestic market, Modanisa has succeeded in expanding globally. Exports comprise 80 per cent of the business — making it well-placed to take advantage of last year’s dramatic slide in the Turkish lira.

Its biggest international markets are Saudi Arabia, the UAE, Jordan, Germany, the UK and the US. The site sells to 2m customers in 130 countries and analysts estimate it has annual sales of between $120m and $150m. Its main competition is Indonesia’s Hijup and local rival Sefamerve, as well as Dubai-based high-end website The Modist.

Modanisa has undergone several funding rounds, including a $5.5m injection from Saudi Telecom’s corporate ventures fund in 2015. In the latest round, Dubai-based venture capital firm Wamda Capital increased its existing holding and Goldman took a stake.

The size of the deal was not disclosed, but it is understood to be less than $50m. Khaled Talhouni, managing partner of Wamda Capital, said there was “significant room” for growth. “Modanisa can truly become a wider emerging market player beyond” Turkey, he said. Online fashion retailer Modanisa sells to 2m customers in 130 countries © Getty

Modanisa said it would use the cash to further expand overseas operations. New logistics centres in Europe and the Middle East are being planned in order to enable faster shipping times and make it easier for customers to return items. The company is also set to open an office in London this year, followed by others in Amsterdam and the UAE.

Although the sector is growing, Alia Khan, chairwoman of the Islamic Fashion and Design Council, pointed out that companies needed to keep pace with the obstacles facing retail as a whole. “Let’s not fool ourselves and think there’s some kind of magic pill that makes us exempt from all the other challenges that retailers face online and offline,” she said.

Modanisa has sought to boost its brand by sponsoring a series of Modest Fashion Week events in London, Istanbul, Dubai and Jakarta, and teaming up with social media influencers with hundreds of thousands of Instagram followers.  Despite the challenges, Ms Khan said the Modanisa investment was a testament to the progress of the sector: “It speaks to where this industry is going. It’s really getting catapulted to another level.”

https://www.ft.com/content/3380fa18-19bc-11e9-9e64-d150b3105d21

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Asian markets mixed — Brexit worries continue — US lawmakers talk banning exports to Huawei, ZTE

January 17, 2019

Asian markets were mixed Thursday as renewed concerns about China-US tensions overshadowed a positive lead from Wall Street following a better-than-expected round of corporate earnings.

The pound extended gains against the dollar after Prime Minister Theresa May survived a no-confidence vote as she prepares to draw up new proposals to leave the European Union that is palatable to a majority of MPs.

After a tumultuous December, global equities have enjoyed a broadly strong start to the year, largely thanks optimism China and the US will resolve their trade row.

But confidence took a knock Wednesday from a report that said US officials were carrying out a criminal probe into Chinese tech giant Huawei and could soon indict the firm over allegations of theft of trade secrets from its US business partners.

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Lawmakers have also introduced a bill to ban the export of American parts and components to Chinese telecom companies that are in violation of US export control or sanctions laws — with Huawei and fellow Chinese firm ZTE the likely targets.

“Huawei is effectively an intelligence-gathering arm of the Chinese Communist Party whose founder and CEO was an engineer for the People’s Liberation Army,” said Republican Senator Tom Cotton, one of the bill’s sponsors.

The developments follow the arrest last year in Canada of Huawei’s chief financial officer Meng Wanzhou, who is the daughter of the company founder and faces extradition to the US on Iran-linked fraud charges.

It also muddies the waters in trade talks between Beijing and Washington, which looked to be on a positive course after officials held three days of talks earlier this month, with both sides seemingly upbeat.

– Cost of US shutdown –

In early trade Hong Kong eased 0.1 percent and Shanghai shed 0.3 percent while Tokyo was down 0.2 percent by the break and Singapore slipped 0.4 percent.

But Sydney edged up 0.1 percent while Seoul put on 0.2 percent with Taipei, Wellington, Manila and Jakarta also in positive territory.

On Wall Street all three main indexes closed with gains after earnings reports from Bank of America and Goldman Sachs that overshot forecasts, while executives said they were confident the US economy was in rude health.

The Federal Reserve’s closely followed “Beige Book” report pointed out that while political and trade uncertainty was weighing on business confidence, growth was continuing at a modest pace in most of the country.

However, there are increasing worries about the impact of the US government shutdown as it moves towards a fifth week, with Oxford Economics estimating it is slashing growth by $700 million a week.

On currency markets the pound edged up against the dollar with dealers optimistic that Britain will not leave the EU without a deal in place, despite May’s exit plan being thrown out by MPs Tuesday.

On Wednesday she survived a no-confidence vote and is now planning her next move, with speculation swirling that the March 29 date for leaving will be delayed or another referendum will be called.

“Nothing has happened in the last 24 hours to dissuade us from the view that we are headed in the direction of an (exit) delay, softer Brexit… or no Brexit,” said National Australia Bank strategist Ray Attrill.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: DOWN 0.2 percent at 20,402.36 (break)

Hong Kong Hang Seng : DOWN 0.1 percent at 26,881.22

Shanghai – Composite: DOWN 0.3 percent at 2,563.16

Pound/dollar: UP at $1.2886 from $1.2877 at 2140 GMT

Euro/dollar: UP at $1.1400 from $1.1395

Dollar/yen: DOWN at 108.95 yen from 109.05

Oil – West Texas Intermediate: DOWN 20 cents at $52.11 per barrel

Oil – Brent Crude: DOWN 22 cents at $61.10 per barrel

New York – DOW: UP 0.6 percent at 24,207.16 (close)

London – FTSE 100: DOWN 0.5 percent at 6,858.16 (close)

AFP

Weak Demand Plagues China’s Factories slowed sharply in December

January 10, 2019

China’s economy is slowing at a worrying pace

The cost of producing goods in China’s factories slowed sharply in December, a sign demand remains weak as the US trade war drags on, while consumer inflation also flagged, official data showed Thursday.

The producer price index (PPI) — an important barometer of the industrial sector that measures the cost of goods at the factory gate — rose 0.9 percent on-year in December, compared with a 2.7 percent rise the previous month.

The reading marks the lowest growth since September 2016, and fell short of forecasts in a Bloomberg News survey.

There is speculation that factory gate inflation could turn into deflation, which could hit economics growth and corporate profits

There is speculation that factory gate inflation could turn into deflation, which could hit economics growth and corporate profits.  AFP

A slowdown in factory gate inflation reflects sluggish demand, while a turn to deflation could dent corporate profits.

It “may enter negative territory very soon given the negative sequential growth it already recorded”, Goldman Sachs economists forecast.

“This disinflation is reflected already in the industrial profit data, which entered negative territory,” they wrote in a research note.

The consumer price index (CPI) — a key measure of retail inflation — rose 1.9 percent, compared with 2.2 percent in November.

“Both readings fell short of market forecasts,” said Nomura economist Lu Ting. “Rapidly falling inflation, especially factory-gate PPI inflation, is further evidence that China’s economy is slowing at a worrying pace. Slumping PPI inflation suggests corporate earnings will almost surely continue to fall in coming months.”

Lu said the PPI was expected to turn negative, which would put “further downward pressure on China’s growth”.

The weak figures come as China’s trade war with the US starts to bite and economic growth slows, with data last week showing manufacturing sector contracted in December for the first time in more than two years.

There are hopes for a breakthrough in the trade row, with a US negotiating team leaving Beijing on Wednesday after three days of talks that China said had “laid the foundation” to resolve concerns held by both sides.

AFP

China Can’t Meet ‘Draconian’ U.S. Demands, Says Ex-Goldman Exec

January 7, 2019

“China has proven it can build infrastructure very quickly and there are merits to this model,” he said. Meanwhile “the U.S. government can be shut down over a wall.”

Photographer: Bloomberg/Bloomberg

China has moved quickly to meet “reasonable demands” from the U.S. to help end the ongoing trade war but shouldn’t dismantle its governance model as some in U.S. President Donald Trump’s administration want, former Goldman Sachs China chairman Fred Hu said Monday.

Lower taxes on automobile imports and a new law banning forced technology transfers were sincere efforts by Beijing to resolve a U.S.-China trade conflict that has roiled markets for almost a year, Hu said at an annual conference on Greater China organized by UBS Group AG. Hu, founder of the investment firm Primavera Capital Group, is also on the board of UBS.

Trade officials from the two nations will meet in Beijing this week for the first face-to-face negotiations since the U.S. President Trump and Chinese President Xi Jinping agreed in December to a 90-day truce. The standoff has led to factories seeing orders slump in both countries. American farmers are hurting as is Apple Inc., while Chinese markets ended 2018 with the world’s worst stock rout.

While China has made taken some steps, it cannot and should not meet “aggressive and draconian” demands from some of the more hawkish Trump advisers such as dismantling the entire Chinese model of state-led capitalism, according to Hu. He added that instances of forced technology transfer were “very rare” in his multi-decade experience in advising overseas companies operating in the Asian country.

The Chinese style of state-led development has proved effective in reducing poverty and building public infrastructure, said Hu. “China has proven it can build infrastructure very quickly and there are merits to this model,” he said. Meanwhile “the U.S. government can be shut down over a wall.”

https://www.bloomberg.com/news/articles/2019-01-07/china-can-t-meet-draconian-u-s-demands-says-ex-goldman-exec

Nervous markets: how vulnerable is China’s economy?

January 5, 2019

“Domestic sentiment [in China] is definitely very bad, perhaps even worse than during the 2008 global financial crisis.”

As an economic slowdown rattles investors around the world, unlike in 2008, Beijing has less room to launch a new stimulus

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By Gabriel Wildau in Shanghai and Sam Fleming in Washington

A relatively obscure economics professor at Renmin University in Beijing sparked a minor furore last month when he claimed a secret government research group had estimated China’s growth in gross domestic product could be as low as 1.67 per cent in 2018 — far below the officially published rate of 6.7 per cent for the year up to September.

Most experts dismissed the speech by Xiang Songzuo as implausible, despite longstanding doubts about the reliability of China’s official GDP data.

Yet although discussion of his claims was quickly scrubbed from the Chinese internet, the presentation has been viewed more than 1.2m times on YouTube — an indication of the raw nerve Mr Xiang touched with his doom-laden warnings.

A decade ago, China played a vital role in rescuing the world economy from the financial crisis by launching an unprecedented Rmb4tn stimulus programme. Today, the fear in markets is the opposite. Already unnerved about rising rates in the US and slowing growth in Europe, many investors now worry that China could lead the global economy into the next recession.

A warning from Apple on Wednesday about slowing iPhone sales in China has heightened concerns following a drumbeat of grim economic data, including outright declines in auto sales, home sales and factory profits.

GDP growth slowed to 6.5 per cent in the third quarter last year, the weakest 3-month figure since the crisis-era low point in early 2009, and UBS said yesterday that fourth-quarter growth probably slowed further to 6.2 per cent. Nationalist tabloid Global Times reported widespread lay-offs in the technology sector in December.

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U.S. President Donald Trump with his guest Xi Jinping at Mar-a-Lago, April 2017

“Domestic sentiment is definitely very bad, perhaps even worse than during the 2008 global financial crisis,” says Fred Hu, founding partner of Primavera Capital, a Hong Kong-based private equity group, and former Greater China chairman for Goldman Sachs.

“In theory, China has wide latitude to boost domestic demand to offset the trade war hit on external demand. But with sagging business and consumer confidence, private spending on both capital expenditure and personal consumption is more likely to trend down.”

The signs of decelerating growth are by no means confined to China. Five advanced economies including Germany and Japan recorded contractions in the third quarter. In the US, almost half of US chief financial officers surveyed by Duke University believe the economy will be in recession by the end of 2019, and 82 per cent expect a recession by the end of 2020.

In addition, the pent-up effects of nine quarter-point interest rate increases by the Federal Reserve may drag on the US economy. But even more than these concerns, the question that is hanging over global markets is just how vulnerable is China to a much sharper slowdown?

Ominously, the recent downturn has occurred even though the expected hit to Chinese exports from the trade war has not yet materialised.

In fact, analysts say exports probably received a one-off boost in recent months as traders front-loaded shipments to beat the expected tariff rise from 10 per cent to 25 per cent that US president Donald Trump threatened would take effect in January.

Nothing else matters very much.   Photographer: Thomas Peters/Getty Images AsiaPac

That rise is now on hold due to the 90-day truce that Mr Trump agreed with Chinese president Xi Jinping at the G20 meeting in Argentina last month. The last time China caused such angst in global markets was almost exactly three years ago. In the opening days of 2016, a botched “circuit breaker” mechanism — intended to prevent uncontrolled drops in the Shanghai and Shenzhen stock markets — instead sparked panic selling that led the blue-chip index to shed 7 per cent in a single day.

That capped a tumultuous six-month period during which Beijing’s heavy-handed intervention failed to prevent a stock market bubble from bursting and a poorly executed currency devaluation sparked rampant capital flight.

In the three years since, China seemed to prove its doubters wrong. The country tightened capital controls to stabilise the currency, while infrastructure stimulus and a housing rally powered a brisk recovery. The economy shined in Mr Xi’s crucial political transition year of 2017, helping him to consolidate power by eliminating term limits.  Fred Hu, chairman of Primavera Capital: ‘Domestic sentiment [in China] is definitely very bad’ © Bloomberg Starting in mid-2016, policy shifted from stimulus to austerity, a response to years of warnings about financial risks from a rapid debt build-up.

A “regulatory windstorm” targeting shadow bank lending, which had channelled loans to the riskiest borrowers, led to a sharp drop on off-balance sheet credit.  Tighter credit combined with stricter environmental enforcement and a drive to shutter low-end factories — part of Mr Xi’s broader call for a “new era” in which growth quality would take priority over quantitative targets.

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“To some extent the slowdown is a result of the government’s own priorities. China is transitioning from relatively low cost to high cost, so a lot of old industries need to be shut down,” says Huang Yiping, vice dean at Peking University’s National School of Development, who stepped down from the People’s Bank of China’s monetary policy committee in June.

“The key economic policy battles like cleaning up the environment and containing financial risk all contributed to the slowdown in economic activity,” he says. But the crackdowns on shadow banking and pollution brought unintended consequences. Both campaigns disproportionately hit smaller, privately owned businesses, which contribute around 60 per cent of GDP growth and 90 per cent of new jobs. Meanwhile, less efficient state-owned enterprises continue to enjoy preferential access to traditional bank loans.

A wave of de facto nationalisations hit the private sector last year as cash-starved companies were forced to sell to better-financed state groups. A drive to increase collection of social insurance contributions from employers — a requirement local governments have long declined to enforce on smaller groups — added to cost pressure.

Despite the slowdown, most economists are not forecasting a recession in China or even a slowdown to sub 5 per cent growth over the next two years.

Recommended Martin Wolf Martin Wolf: The future might not belong to China

And while some analysts viewed the Apple sales fall as another sign of slowing consumption, others saw shifting consumer preferences at play.

“The slowdown has not affected some of Apple’s rivals — particularly its local Chinese ones — suggesting that the US company is also lagging in terms of its product appeal,” says Ana Nicholls, head of industry researchat the Economist Intelligence Unit in London.

Mr Huang acknowledges that the official growth rate may be overstated. But he says that the so-called “ Li Keqiang Index” — a gauge of tamper-resistant indicators such as electricity production and freight volumes, which premier Li Keqiang privately told a US ambassador in 2007 that he views as more trustworthy than GDP — still point to growth of “6 per cent or slightly below”.

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Slowing iPhone sales heightened concerns over the Chinese economy, but consumer preferences are changing © AFP

Still, global investors are wondering whether the government will now support the economy with a more forceful stimulus. A cabinet meeting in late July marked a decisive break with austerity, as policymakers called for new stimulus measures and cited “uncertainties in the external environment” — an oblique reference to rising trade tensions.

Since then, China has implemented a series of monetary and fiscal stimulus measures, including pumping liquidity into the banking system and jump-starting big infrastructure projects like subways. But the scale of these efforts has been more modest than previous rounds in 2008-09 and 2014-15.

“I don’t think they’re going to go for major stimulus. Policymakers know they’ve reached the boundaries of stimulus as being very helpful. So we’re stuck with the mild stimulus that we’ve seen,” says Yukon Huang at the Carnegie Endowment and former World Bank country director for China.

The government’s light-touch approach to stimulus partly reflects the reduced policy flexibility today compared with 2008, when debt levels were lower and a simpler growth model based on investment in housing and infrastructure had more room to run.  The amount of new capital investment required to generate a given unit of GDP growth has more than doubled since 2007, according to Moody’s Analytics.

In other words, investment stimulus produces little bang for Beijing’s buck, even as it adds to the debt levels. But restrained stimulus has left markets underwhelmed. The blue-chip CSI 300 index fell 25 per cent in 2018, including 15 per cent since the July cabinet meeting.  As a result, the government appears to be stepping up support for growth.

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PBoC

At the annual central economic work conference in late December, which sets the policy agenda for the coming year, leaders pledged further tax cuts and signalled monetary loosening. Global stocks rebounded yesterday after the PBoC cut banks’ required reserves by $117bn in a fresh cash injection intended to boost lending. “They [Beijing] will soon have no choice but to launch massive stimulus,” says Alicia García Herrero, chief Asia Pacific economist at Natixis in Hong Kong.

“They do not want to give away their credibility because they said they wouldn’t do it, but there is no time to be cautious any more. Not having growth is ultimately the worst outcome of all.”

https://www.ft.com/content/5839f5dc-0fdd-11e9-a3aa-118c761d2745

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Traders Don’t Need Steven Mnuchin to Tell Them Stocks in Trouble

December 24, 2018
  • Treasury secretary calls banks to check on liquidity
  • S&P 500 futures rise after worst week for equities since 2011
Steven Mnuchin Photographer: Andrew Harrer/Bloomberg

If the Treasury Secretary wants to keep tabs on the financial system when the market is tumbling, that’s fine. But the idea Steven Mnuchin can do anything to stop the worst market meltdown in a decade was met with skepticism among investors — and in some cases, concern.

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Mnuchin called top executives from the six largest U.S. banks over the weekend to check on their liquidity and lending infrastructure, he said Sunday on Twitter. On Monday he’ll convene a call with the President’s Working Group on financial markets, a panel created in the aftermath of the Crash of 1987.

NYSE by @following_nyc

“Nothing says don’t panic like saying ‘I’m calling the plunge protection team tomorrow,”’ Michael O’Rourke, JonesTrading’s chief market strategist, said by phone. “I honestly think that’s the type of event that’s going to startle markets and create more panic and fear when it’s meant to create confidence.”

The secretary spent the weekend in triage mode, first issuing tweets saying President Donald Trump had no plans to fire Federal Reserve Chairman Jerome Powell. The plan to convene the working group comes five days after he told Bloomberg News that market structure players like high-frequency traders might be contributing to market volatility.

“We saw a lot of selloffs in 2011, 2015-2016, and I don’t remember the presidents trying to convene the bank heads,” said Michael Antonelli, equity sales trader at Robert W. Baird. “I’m worried the White House is going to make a mistake by exacerbating the market concern. Trump needs a political win, a PR that looks like he’s on top of the situation, and that’s what the weekend strikes me as.”

With the S&P 500 down 17 percent since September, the benchmark is on pace for its worst quarter since 2008. U.S. stock-index futures rose Sunday evening, after swinging between gains and losses. March contracts on the S&P 500 Index climbed 0.5 percent as of 8:55 p.m. in New York.

Keeping an eye on the financial systems is an appropriate role for the Treasury Department, to be sure. Members of George W. Bush’s administration kept steady contact with bank and investment executives during the financial crisis, and events like the 1987 crash, in which the Dow Jones Industrial Average fell more than 20 percent in one day, begged for a governmental response.

But while the last few months in markets have been rough, right now the Dow is down less than 10 percent on the year — a decline well within the historical norm of volatility.

“Personally I take it as a huge negative,” said Scot Lance, managing director at California-based Titus Wealth Management. “He’s calling bank CEOs asking about their liquidity. That doesn’t make me feel all warm and fuzzy. The bottom line is there’s a crisis going on right now and it was born I believe as a political crisis exclusively last February in a trade war. That’s turned into an economic crisis.”

Not everyone saw Mnuchin’s efforts as counterproductive; after all, stock futures were flat.

“To me as a trader, that’s ruled out some tail risk,” Ilya Feygin, senior strategist at WallachBeth Capital, said by phone. “That’s better than nothing. They’re not going to say that banks are fine this week and announce that the banks are bust next week. Whether he’ll be able to appease the markets, we don’t know, but it’s very likely that the banks will rally tomorrow. What else can you do in a situation like this? What he did was creative and clever.”

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Top Trump official calls bankers, will convene ‘Plunge Protection Team’ — S&P 500 index near biggest percentage decline in December since the Great Depression

December 24, 2018

U.S. President Donald Trump’s Treasury secretary called top U.S. bankers on Sunday amid an ongoing route on Wall Street and made plans to convene a group of officials known as the “Plunge Protection Team.”

U.S. stocks have fallen sharply in recent weeks on concerns over slowing economic growth, with the S&P 500 index .SPX on pace for its biggest percentage decline in December since the Great Depression.

“Today I convened individual calls with the CEOs of the nation’s six largest banks,” Treasury Secretary Steven Mnuchin said on Twitter shortly before financial markets were due to open in Asia.

U.S. equity index futures dropped late on Sunday as electronic trading resumed to kick off a holiday-shortened week. In early trading, the benchmark S&P 500’s e-mini futures contract ESv1 was off by about a quarter of a percent.

The Treasury said in a statement that Mnuchin talked with the chief executives of Bank of America (BAC.N), Citi (C.N), Goldman Sachs (GS.N), JP Morgan Chase (JPM.N), Morgan Stanley (MS.N) and Wells Fargo (WFC.N).

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“The CEOs confirmed that they have ample liquidity available for lending,” the Treasury said.

Steven Mnuchin and Jerome Powell Photographer: Al Drago/Bloomberg

Mnuchin “also confirmed that they have not experienced any clearance or margin issues and that the markets continue to function properly,” the Treasury said.

Mnuchin’s calls to the bankers came amid a partial government shutdown that began on Saturday following an impasse in Congress over Trump’s demand for more funds for a wall on the border with Mexico. Financing for about a quarter of federal government programs expired at midnight on Friday and the shutdown could continue to Jan. 3.

The Treasury said Mnuchin will convene a call on Monday with the president’s Working Group on Financial Markets, which includes Washington’s main stewards of the U.S. financial system and is sometimes referred to as the “Plunge Protection Team.”

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The group, which was also convened in 2009 during the latter stage of the financial crisis, includes officials from the Federal Reserve as well as the Securities and Exchange Commission.

Wall Street is also closely following reports that Trump has privately discussed the possibility of firing Federal Reserve Chairman Jerome Powell. Mnuchin said on Saturday Trump told him he had “never suggested firing” Powell.

Trump has criticized the U.S. central bank for raising interest rates this year, which could further dampen economic growth. The Fed’s independence is seen as a pillar of the U.S. financial system.

Mnuchin’s calls come as a range of asset classes have suffered steep losses.

In December alone, the S&P 500 .SPX is down nearly 12.5 percent, while the Nasdaq Composite .IXIC has slumped 13.6 percent. The Nasdaq is now in a bear market, having declined nearly 22 percent from its record high in late August, and the S&P is not far off that level.

Corporate credit markets have been under duress as well, and measures of the investment grade corporate bond market are poised for their worst yearly performance since the 2008 financial crisis.

The high-yield bond market, where companies with the weakest credit profiles raise capital, has not seen a deal all month. The last time that happened was in November 2008.

Reporting by Jason Lange; Additional reporting by Dan Burns; Editing by Dan Grebler and Rosalba O’Brien

Reuters

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Ex-Goldman Malaysian banker faces US extradition over 1MDB scandal

December 19, 2018

Malaysia on Wednesday moved to extradite to the United States a former Goldman Sachs banker embroiled in the multi-billion-dollar 1MDB scandal, even as he faces charges in the Southeast Asian country.

Huge sums of public money were allegedly stolen from Malaysia’s 1MDB sovereign wealth fund and used to buy everything from yachts to artwork, in a scheme that allegedly involved former premier Najib Razak and contributed to his government’s shock election defeat in May.

The scheme to siphon billions from Malaysia's state fund 1MDB allegedly involved then-PM Najib Razak

The scheme to siphon billions from Malaysia’s state fund 1MDB allegedly involved then-PM Najib Razak The scheme to siphon billions from Malaysia’s state fund 1MDB allegedly involved then-PM Najib Razak AFP/File

Goldman helped 1MDB to issue $6.5 billion of bonds but Kuala Lumpur accuses the bank and its former employees of misappropriating $2.7 billion during the process.

Washington had requested the extradition of Ng Chong Hwa — a Malaysian former managing director at the bank — in October after bringing three criminal charges against him, including corruption and money-laundering.

Deputy public prosecutor Shukor Abu Bakar told AFP that a legal application has been filed under the extradition treaty between the two countries.

Goldman has pledged to fight the charges, insisting it was misled by the former Malaysian government and 1MDB.

The alleged offences by Ng — commonly known as Roger Ng — are punishable by jail in the United States.

Ng will fight the extradition attempt, his lawyer Tan Hock Chuan said.

On Monday, Malaysia’s new government announced it was also filing criminal charges against Ng, his boss and Southeast Asia chairman Tim Leissner, and Goldman Sachs.

Ng was brought to court on Wednesday and will be charged, officials said.

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Jho Low

Leissner has pleaded guilty to conspiring to launder money allegedly siphoned from 1MDB and paying bribes to Malaysian and Emirati officials.

Fugitive Malaysian financier Low Taek Jho — commonly known as Jho Low — the alleged mastermind of the fraud, was also charged by Malaysia this week with conspiring with Leissner and Ng.

He maintains his innocence.

Europe Has Little to Gain, Much to Lose in U.S.-China Trade War

December 19, 2018

Europe will be a loser should U.S.-China relations deteriorate further, even if some companies stand to benefit.

The administrations of both President Donald Trump and his counterpart Xi Jinping have signaled they’re willing to ramp up tariffs on each other in the event that a 90-day truce to negotiate doesn’t produce results.

Goldman Sachs Group Inc. said this week that Europe might boost sales to China if the Asian nation turns against the U.S. The bigger problem is that Chinese factories and consumers are now a key piece of the global economy.

“We would anticipate a negative impact on European trade through lowered final demand and broken supply chains, with only a partial possible benefit of increased exports to China,” Huw Pill, Goldman’s chief European economist, said in a note. “Even that partial benefit could be offset completely if China were to offload products in Europe, hurting producers, as the EU Commission claims they did in July 2018.”

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Here are some of the key linkages that will be affected:

Denting Demand

The U.S. and China are the two biggest destinations for European Union exports outside the 28-nation bloc, and German carmakers including Volkswagen and BMW have already been hurt by weaker demand this year. Manufacturers highlighted declining sales to China in a recent business survey.

According to Goldman, most European countries have exposure to China and the U.S. of around 1 to 2 percent of output each. Mounting uncertainty means businesses will be reluctant to invest and expand, said Ricardo Garcia, chief euro-zone economist at UBS Global Wealth Management.

Chain Effect

A significant portion of European businesses manufacture in China for U.S. customers. As a result, they are also hurt by Trump’s tariffs, according to the European Union Chamber of Commerce in China.

“They hate the uncertainty,” said Carlo D’Andrea, the chamber’s vice president. “It’s the sword of Damocles dangling over their head. ”

Substitution

Europe and the U.S. export similar goods to China — medical appliances and integrated circuits, for example. If tariffs stay in place or rise, European manufacturers — particularly those in Germany and the U.K. — are set to benefit because American goods will become more expensive. They’d suffer from a truce in which China would probably promise to buy more from the U.S.

Siemens Healthineers plans to keep production in China despite trade uncertainty. According to Leon Lei, a market specialist at China Med Device, a Boston-based consultancy which helps foreign companies to access the Chinese market, European makers of devices such as X-ray contrast agents, imaging equipment and MRIs will gain. Medical devices “are more like the aircraft industry,” he said. “If Boeing fails, Airbus will proceed.”

Market Access

Even the limited tariffs so far have “tilted the playing field” toward European companies, said Gabriel Felbermayr, director of the Ifo Center for International Economics. “If you order machines and the machines are tailor-made, it takes six months to a year to deliver, you don’t want to find yourself in a situation where you have to pay 25 percent punitive tariffs.”

European politicians may finally be gaining the clout to force China to address some much-criticized practices: market restrictions, intellectual-property theft and favorable treatment of state enterprises.

“Perhaps it’s a chance for Europe to negotiate and get a deal on some of these things for European companies,” said Guntram Wolff, director of the Bruegel think tank.

Goldman Sachs Ignored Warning Signs in Asia — Could hurt business with China — “Too slippery for China”

December 18, 2018

Goldman Sachs could face global sanctions, tougher US regulations and hurdles to doing business in China — after Malaysian prosecutors filed criminal charges against the bank over its role in the 1MDB scandal, analysts and lawyers told The Post.

The Wall Street bank on Monday was accused of trying to “defraud” Malaysia through three bond sales in 2012 to 2013 that raised $6.5 billion — but largely ended up going to pay for bribes, embezzlement, and the extravagant lifestyle of playboy financier Jho Low.

Goldman Sachs stall on NYSE floor

“Having held themselves out as the preeminent global adviser/arranger for bonds, the highest standards are expected of Goldman Sachs,” Malaysian Attorney General Tommy Thomas said in a statement. ”They have fallen far short of any standard. In consequence, they have to be held accountable.”

The accusations are the first criminal charges to be filed against the Wall Street bank related to its role in the Malaysian sovereign wealth fund, 1MDB.

It’s unlikely that Malaysia would send any Goldman bankers to prison, but it could extract large penalties to resolve the case, legal experts said.

The country’s finance minister has demanded the $600 million it paid in fees for the bond sales, and earlier this month a UBS analyst estimated the bank could set aside as much as $2.5 billion in legal reserve funds to defend itself globally.

The bank will defend itself against the charges and maintains that they’ll have no effect on its ability to do business globally, a Goldman spokesperson said.

Goldman also claims that 1MDB and two of its bankers, including Southeast Asia head Tim Leissner, had lied to the company about the deals.

“Certain members of the former Malaysian government and 1MDB lied to Goldman Sachs, outside counsel and others about the use of proceeds from these transactions,” spokesman Michael DuVally said in a statement.

“1MDB, whose CEO and board reported directly to the prime minister at the time, also provided written assurances to Goldman Sachs for each transaction that no intermediaries were involved,” he added.

But that argument likely won’t get Goldman off the hook with US authorities.

“If they’re going to make that case [that Goldman was misled], then I think the argument is going to be ‘you should have known,’ ” Dick Bove, analyst at Rafferty Capital Markets, told The Post.

“The fact that you did not know, when we’re talking about that magnitude of theft, indicates that your systems are not acceptable,” he added.

Aside from the US, the bank faces tougher restrictions abroad, too.

Many countries have restrictions on how they do business with companies that are accused of crimes.

While Malaysia is not a big player in international finance, China could use the new accusations to pressure Goldman to clean up its act if it wants to do business in the Asian country, according to legal experts.

“China loves nothing better than to bust chops,” one former US securities regulator told The Post.

“A lot of regulators are not going to be comfortable with them being charged with a crime,” he added.

https://nypost.com/2018/12/17/goldman-sachs-legal-woes-could-hurt-business-with-china/

See also:

Goldman Sachs Ignored 1MDB Warning Signs in Pursuit of Asian Business

https://www.wsj.com/articles/goldman-sachs-ignored-1mdb-warning-signs-in-pursuit-of-asian-business-11545088802?mod=hp_lead_pos2

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