Investor Relations Week: Global Recession Risk Rises, Shell Wants to Boost Shareholder Returns and Levi Strauss & Co Changes Reporting Schedule to Combat Uncertainty
– The outlook for the global economy has “darkened considerably” in recent months, the IMF chief warned, and the world faces a growing risk of recession over the next 12 months, The Guardian reported. The commodity price shock caused by the war in Ukraine has exacerbated the cost of living crisis for hundreds of millions of people, Kristalina Georgieva said on Wednesday – a situation that “is only getting worse”. Inflation has also been higher than expected, she said in a IMF blog post it came on the same day as the latest figures showed US prices rose to a 40-year high of 9.1% in June. According to the newspaper, economists and investors now believe the US Federal Reserve could raise interest rates by a historic 1% when its board meets in two weeks.
– Reuters (paywall) said Shell is looking to boost shareholder returns beyond the current 30% cash target on the back of windfall profits from soaring energy prices, while additional cash l will also help shift to renewable and low-carbon energy more quickly. Europe’s biggest oil and gas company, along with rivals including BP, have seen their profits rise this year after two years of declining revenue due to the pandemic.
CEO Ben van Beurden and Shell’s board are said to have deliberated for months on what to do with the unexpected windfall in profits that began with the recovery from the pandemic and was later boosted by the invasion. of Ukraine by Russia. “We have to take care of our shareholders because I think our shares are very significantly undervalued, and so giving more back to shareholders to help that part of the equation is going to be very important,” van Beurden told Reuters on the sidelines of the Aurora. Spring Forum in Oxford, UK.
– Levi Strauss & Co is adjusting its financial targets more frequently, setting them every six months instead of a year, as it faces an uncertain economic outlook, reported The Wall Street Journal (pay wall). The San Francisco-based denim maker shifted to a six-month financial planning cycle last year after pandemic-driven economic shifts demonstrated the need for mid-year updates, the chief financial officer says Harmit Singh. The company’s half-year plan includes revenue and earnings forecasts, as well as cash conversion, showing how quickly a company sells inventory or collects payments.
The more frequent forecast cadence helps Levi Strauss prepare for a potential economic downturn, new phases of the pandemic and any unforeseen geopolitical events, Singh said. “The reason it matters is because you don’t have a real line of sight into the future. Things are so uncertain,” he said, adding that he intended to submit his plan for the second half this week.
– In the week that CNN reported that Twitter has launched its widely anticipated lawsuit seeking to force Elon Musk to complete his $44 billion deal to buy the social media giant, the WSJ reported that the SEC asked the Tesla founder if he promptly disclosed his intention to terminate the deal. The regulator released a letter, dated June 2, that it had sent to Musk asking why he hadn’t updated a disclosure filing on a previous tweet suggesting the deal was in jeopardy. In the tweet in question, posted on May 17, Musk said the deal “cannot move forward” until the company is clearer on how many of its accounts are fake.
– JPMorgan Chase and Morgan Stanley “cast a veil” on Wall Street after reporting a bigger-than-expected drop in second-quarter profits that signaled the end of the industry’s pandemic-era earnings boom, the report reported. FinancialTimes (pay wall). Wall Street banks have reaped record fees during the coronavirus pandemic working through a flood of mergers and acquisitions, public listings and Spacs (special purpose acquisition companies), the newspaper said. But the deal pipeline, particularly the flow of IPOs, has slowed markedly since the start of the year as investors turn away from Spacs and loss-making start-ups. This is JPMorgan’s or Morgan Stanley’s first shortfall since the start of 2020.
– Hedge funds are increasingly turning their attention to digital assets, after witnessing “a cryptocurrency bloodbath” in the second quarter, said Institutional investor. Thirty-two percent of hedge fund managers believe digital assets will offer the greatest opportunity for alpha generation over the next three years, outpacing equities (18%) and fixed income securities (15%), the publication reported, citing data from the latest report. from quantitative technology provider SigTech. Nearly a quarter (23%) of hedge fund managers plan to significantly increase their allocations to digital assets, while 60% plan to increase slightly.
– In other hedge fund news, the FT reported that hedge funds have reduced positions in some markets they fear could suddenly become difficult to trade, following the London Metal Exchange’s (LME) decision to cancel thousands of nickel trades. The LME’s decision in March to cancel eight hours of trading reportedly prompted a number of hedge funds to reassess the risk they face in their portfolios in the event of human interference upsetting their positions.
Examples of hedge funds that have changed their positions include Rotterdam-based quantitative hedge fund Transtrend, which trades in global futures markets and manages $6.5 billion in assets, which told the newspaper that he had decided to stop trading on the LME – a decision that led to him running smaller positions in the metals than he would otherwise have held. Paris-based Capital Fund Management (CFM), which manages $10 billion in assets, began using “radical scenarios” to test its portfolios after trading at the LME was suspended. The FT reported that CFM stopped trading in Japanese government bonds a few months ago, “due to the Bank of Japan’s dominance in this market.” It also temporarily stopped taking a position on European natural gas, although it has since resumed operations.
– The U.S. Financial Industry Regulatory Authority (Finra) is seeking to strengthen market oversight by introducing trade reporting requirements for certain over-the-counter (OTC) options trades, according to Investment Directorwhich reported that Finra has launched a consultation on a new daily trade reporting requirement for OTC equity options which are essentially the same as listed options.
The self-regulatory body said its analysis found that a “significant amount” of options trading involves trading options over-the-counter with the same terms as listed options, but the regulator does not have OTC trading activity data. To close this regulatory loophole, Finra proposes to require companies to report OTC securities options transactions, including index options, that meet certain criteria.
– In its first public statements on HSBC since calling for a possible dissolution of Hong Kong’s largest currency-issuing bank, insurer Ping An Insurance Group called for a “debate on the future of the bank “, according to South China Morning Post. The Shenzhen-based company, which is HSBC’s largest shareholder with 9.2% of the shares, has privately approached HSBC’s board of directors over splitting the bank’s Asian business for a separate listing in Hong Kong. , according to various media.