Category: FINANCE NEWS

President Donald Trump’s allies in the business world and an army of bundlers have been courting executives across the country in an effort to help raise millions of dollars for the 2020 reelection effort.

So far, the campaign has recruited at least 400 experienced fundraisers to work with the Trump leadership, according to people with direct knowledge of the matter.

The Trump bundler program was rolled out in May and is being advised by George W. Bush’s former national finance director, Jack Oliver.

“What you need is people who have networks through their synagogues, churches, mosques, businesses and even sports teams,” Oliver told CNBC. “The bundling program is a way for people to drum up support through people who know there have been results with this president.”

Among the executives and lobbyists reaching out to fellow business leaders are:

• Real estate magnate Stanley Chera
• Atlas Merchant Capital managing director Patrick Durkin
• Travis Brown, founder of political consulting firm Pelopidas
• Jeff Miller, an energy lobbyist

The donor outreach campaign has been a resounding success. The strengthening of the president’s formidable campaign war chest has led his organization, along with the Republican National Committee, to raise over $100 million in the second quarter.

Miller, the founder of lobbying firm Miller Strategies, bundled over $110,000 in the second quarter for Trump, a Federal Election Commission filing says. While Miller has been identified in a recent FEC filing as an official bundler for the campaign, it’s unclear whether Chera is making calls to financiers as anything more than a favor to a president to whom they’ve been loyal since he entered the White House. Durkin and Brown, according to people familiar with the outreach, have started actively bundling for the campaign.

A senior Trump campaign spokeswoman told CNBC that the success of the bundling program has spread across the country and it’s leading to donors who stayed away from Trump in 2016 to jump on board this time around.

“Friends are talking to friends and working together to help President Trump win reelection in 2020,” the spokeswoman said. “People who have never given a cent to any campaign before or stayed out of the mix last time are coming off the sidelines in droves to support President Trump.”

The White House declined to comment. Chera, Miller and Brown did not return a request for comment.

Democrats, meanwhile, are fighting among themselves to capture donors who will finance a formidable campaign versus Trump in the general election. With these business leaders and influential lobbyists using their networks to rake in donors for the campaign, it could give Trump an insurmountable fundraising advantage over his eventual opponent.

Donors who have agreed to back Trump cite his business-friendly policies such as tax cuts and reduced regulations, while arguing the Democratic Party is going too far to the left. A person familiar with the Trump donor outreach, who spoke on the condition of anonymity, said many of the people making calls to GOP executives are working to raise over $300,000 each.

In another good sign for the president’s fundraising hopes, several financiers who backed Trump’s opponents in 2016 flipped to his side in the previous quarter.

“Fundraisers were divided in 2016. That’s not the case this time.” Republican donor Dan Eberhart told CNBC. “Everybody is behind the president toward the common goal of another four years. Those grumblers about the president don’t like his style but they darn sure like his policies.”

Syed Javaid Anwar, a Texas based oil mogul who financed former Florida Gov. Jeb Bush’s super PAC three years ago, gave a combined $175,000 to Trump Victory, a joint fundraising committee that also helps the RNC. Frank Bisignano, the CEO of financial services company First Data, backed Bush and Florida Sen. Marco Rubio in 2016 but spent $125,000 this past quarter on Trump. John Bookout, the former CEO of Shell Oil Company, gave over $20,000 to Sen. Ted Cruz’s presidential efforts, only to invest $35,000 in Trump’s campaign.

The shift in allegiances was noticeable during a June fundraiser at the Trump International Hotel in support of Trump Victory. The event, which featured Trump himself, raised $6 million with 225 people in attendance. One senior campaign advisor explained what was most surprising was how many donors and bundlers were from camps that didn’t back Trump in 2016.

“I looked around the room and there were a ton of Bush supporters. There were Rubio people. There were Walker people in the room. I’m guessing they wouldn’t have been avid Trump people,” this person said, referring to former Wisconsin Gov. Scott Walker. “This has been building over the past year.”

The pace of companies moving production out of China is accelerating as more than 50 multinationals from Apple to Nintendo to Dell are rushing to escape the punitive tariffs placed by the U.S., according to the Nikkei Asian review.

The trade war between the U.S. and China has dragged on for more than a year with 25% tariffs placed on $200 billion of Chinese goods. President Donald Trump is still threatening to slap duties on another $325 billion of goods. In wake of the intensifying battle, more and more companies announced plans or are considering shifting manufacturing from China.

American personal computer makers HP and Dell could move up to 30% of their notebook production in China to Southeast Asia, Nikkei reported. Apple has asked its major suppliers to assess the cost implications of moving 15% to 30% of their production capacity from China to India, according to an earlier report from the Nikkei.

Japan’s Nintendo is also going to pull a portion of its video game console production from China to Vietnam, according to Nikkei.

Not only are foreign companies rethinking its production location, a handful of Chinese companies are also leaving China. Chinese multinational electronics company TCL is moving its TV production to Vietnam, while Chinese tire maker Sailun Tire is transitioning its manufacturing line to Thailand, Nikkei reported.

The prolonged trade battle seems to be taking a toll on the Chinese economy. Data on Monday showed its economic growth slowed to 6.2% in the second quarter — the weakest rate in at least 27 years.

Trump claimed the slower growth is evidence that China is losing the trade war as the country faces an exodus of companies.

“The United States Tariffs are having a major effect on companies wanting to leave China for non-tariffed countries. Thousands of companies are leaving. This is why China wants to make a deal,” Trump said in a twitter post on Monday.

—Click here to read the original story from the Nikkei Asian Review.

Market researcher James Bianco believes Wall Street is teetering closer to an earnings recession.

Unless the Federal Reserve intervenes with a bigger-than-expected 50 basis point cut, he’s worried that year-over-year earnings growth rates for the second and third quarters will go even lower.

“The estimates for the third quarter are somewhere just below zero. This is not earnings growth. This is just struggling to stay at zero,” the Bianco Research president told CNBC’s “Trading Nation ” on Wednesday.

Bianco is building his case on an ominous trend in the current quarter’s S&P 500 earnings expectations.

“The estimates have just gone negative in the last week or so,” said Bianco. “They’re only down a couple of 10ths, but they are negative. And, they’ve been in a downtrend of several months.”

Bianco, who calls himself a “market guy,” has been firmly in the rate-cut camp. He has been calling for the Fed to slash rates four times over the next 12 months.

He is concerned the longer the 10-year and 3-month U.S. Treasury yields are inverted, corporate profits could sustain more damage.

“It’s telling you that money is too tight for four or five months,” Bianco said. “Better to go 50 [basis point cut] now and you can raise rates later.”

Morgan Stanley on Thursday beat analysts’ estimates for second-quarter profit as a buoyant stock market helped two of the investment bank’s three main businesses. 

The bank posted earnings of $2.2 billion, or $1.23 a share, exceeding the $1.14 estimate of analysts surveyed by Refinitive. The company’s revenue came in at $10.24 billion, exceeding the consensus estimate by almost $250 million, on better-than-expected results in the firm’s wealth management and investment management divisions. 

Morgan Stanley’s wealth management division, one of the biggest in the world, posted a record $4.41 billion in revenue, exceeding analyst’s estimate by $60 million. Its investment management division, an asset manager that creates mutual funds, posted $839 million in revenue, exceeding estimates by about $130 million. The business benefited from “higher assets under management” across asset classes, according to the firm.  

Rising markets helped in “both the wealth business, in terms of the assets we manage, as well as our investment management business, it’s fee times the balances,” Chief Financial Officer Jonathan Pruzan said in a phone interview. “If the markets go down, you’d expect to see pressure in that area.”

Under CEO James Gorman, Morgan Stanley has emphasized its wealth management division, a far steadier business than its trading operations. The brokerage benefits from rising markets as fees typically climb along with assets under management.

Results were more mixed in the firm’s biggest business, institutional securities, which houses its Wall Street investment banking and trading operations. Equities trading produced $2.13 billion in revenue, under the $2.2 billion estimate of analysts surveyed by FactSet. Fixed income trading made $1.13 billion in revenue, missing the $1.32 billion estimate. Investment banking generated $1.47 billion in revenue, edging out the $1.4 billion estimate.

Morgan Stanley shares fell 1% at 8:25 a.m. in premarket trading ahead of a conference call with analysts. 

Shares of the firm have climbed 10% this year before the earnings report, trailing the KBW Bank Index and competitors including Goldman Sachs and J.P. Morgan Chase.

The bank said last month that it won permission from the Federal Reserve to increase its quarterly dividend to 35 cents a share from 30 cents and repurchase $6 billion in shares.

Morgan Stanley is the last of the six largest U.S. banks to report second-quarter earnings. Citigroup, J.P. Morgan, Wells Fargo, Goldman Sachs and Bank of America all beat analysts’ profit expectations as most of the firms benefited from one-time items including a gain on the IPO of electronic trading platform Tradeweb.

Here’s what Wall Street expected:

• Earnings: $1.14 a share, 12% lower than a year earlier, according to Refinitiv
• Revenue: $9.99 billion, 5.8% lower than a year earlier
• Wealth management: $4.35 billion, according to FactSet
• Trading: Equities $2.2 billion, fixed Income $1.32 billion

With reporting from CNBC’s Leslie Picker. 

After a record 2018, buybacks so far in 2019 are strong but just below 2018’s record, according to a new report from J.P. Morgan.

As buybacks hit records last year (about $800 billion) a predictable political backlash developed. Corporations were spending too much of their free cash flow buying back stock and should spend more investing in their businesses, critics claimed.

Maybe, but J.P. Morgan concludes that buybacks do accomplish their main goal. They improve stock prices.

“Stocks of companies that buy back their shares tend to outperform both short and long term, and we estimate over 4% outperformance for high-buyback companies in the U.S. and Europe over the past 20 and 25 years,” the report concludes.

That’s because overall buybacks have been reducing the amount of shares outstanding. Net buybacks — the actual amount bought back minus the value of new options that are passed on to employees — is about $400 billion, half the gross buyback figure of $800 billion, but still a big chunk of cash.

Are buybacks rising too fast and consuming too much of corporate free cash? The report concludes that the level of buybacks is about in-line with the 15-year average (they are about 2% of the market capitalization of the S&P 500 each year), and only appear higher because profits are higher and the markets are at a record.

What about the argument that corporations should spend more money on reinvestment?

Higher profit growth is lifting all boats, including capital expenditures. Capex was up 12% and R&D was up 11% in the fourth quarter of 2018, and they expect reinvestment activity to remain robust throughout this year at an annualized rate of about $1 trillion.

Why is the level of buybacks at record highs?

The stock market is at a record high, and earnings are at record highs. Earnings have risen more than what companies need for capex, equity capital, or dividends.

Another factor: low borrowing costs make it easy for companies to issue debt, some of which is used to fund buybacks.

European banks are finally showing signs of recovery and investors should be looking to reduce their bearish positioning in the beleaguered sector, according to Barclays strategists.

In a note published Wednesday, Barclays’ European banking and European equity teams projected that the stabilization of euro zone economic data and bond yields may bolster the banks, which have the most positive correlation to these two metrics of all European sectors.

“Euro zone composite PMI (purchasing managers’ index) is stabilizing and the key domestic drivers of activity are well oriented,” the note stated.

It added that in the meantime, bond yields and inflation expectations are “trying to find a floor,” which gives a breather to value stocks, those which trade at a lower price relative to their fundamentals.

On top of this, the Italian government is “showing some fiscal discipline” and the European Central Bank (ECB) has opened the door to new quantitative easing while “seeking to mitigate the drag from negative rates on banks.”

European banks suffered a sharp sell-off in the second quarter of 2019, shedding more than 13% over the past three months, and are down 18.64% over the past year.

However, they have begun to rebound slightly in recent weeks, gaining 5% over the past 30 days, and though consensus has the European banking sector at an underweight position, Barclays is maintaining an equal weight.

The Barclays strategists, led by head of European equity strategy Emmanuel Cau, also highlighted that bank stocks at present are cheap and under-owned. As the third-worst performing sector year-to-date, many banks are trading at a “near-extreme valuation discount and offer and attractive dividend yield of 6%,” the note said.

Combined with depressed valuations and current bearish positioning from investors, this environment could lead to further “short-covering,” the buying in of securities that have been sold short (when traders bet they will lose value) in the hope of minimizing losses if the share price increases.

The note highlighted, however, that “structural headwinds are not going away,” with earnings remaining constrained by negative interest rate policy, and trade tensions, Brexit and anti-money laundering issues continuing to cloud the outlook.

But the analysts identified several banks which offer “quality at a reasonable price,” and have established overweight positions in Lloyds, Caixabank and ABN while remaining “skeptical of certain restructuring stories” involving Deutsche Bank, Standard Chartered, UBS and BNP Paribas.

The note suggested Deutsche would struggle to achieve the revenue it sought from a recent mass strategic overhaul, and questioned whether the German lender might need to raise equity within the next 12-24 months.

“In our view, many investors simply believe the sector is not investible anymore and see it as a value trap,” the note stated.

“While we agree that its medium-term profitability backdrop remains challenging, we think the some of the macro headwinds that exacerbated its recent underperformance are easing.”

European stocks are set to open lower Thursday, as investors digest fresh corporate results and keep an eye on global trade developments.

Britain’s FTSE 100 was seen 17 points lower at 7,511, Germany’s DAX down 87 points at 12,250, and France’s CAC off by 27 points at 5,542, according to IG index data.

Investors are staying across the latest earnings season, with a slew of companies reporting their results this week. On Thursday, SAP, Novartis, Publicis and Danske Bank are among the major corporates due to post earnings.

Also in focus is the U.S.-China trade spat. The Wall Street Journal reported Wednesday that trade negotiations between the world’s two largest economies are at an impasse over restrictions on Chinese tech giant Huawei.

Over in Asia, stocks fell after Japan reported a slide in exports in June, down 6.7% from a year earlier. The Nikkei 225 fell over 1%, while MSCI’s broadest index of Asian shares excluding Japan traded 0.2% lower.

In terms of data, U.K. retail sales figures for June are set to be released at 4:30 a.m. ET.

German online bank N26 said Thursday that it raised a huge $170 million in additional funding, valuing the six-year-old fintech start-up at $3.5 billion.

Based in Berlin, N26 has made waves in Europe with its app-based checking account and debit card. The firm doesn’t operate any brick-and-mortar branches, and yet has managed to lure in over 3.5 million customers across 24 countries in the continent.

The latest capital injection is a top-up to the firm’s $300 million fundraising, announced back in January, which saw it valued at $2.7 billion. N26 said existing investors, including Peter Thiel’s Valar Ventures, Chinese tech giant Tencent and Singaporean sovereign wealth fund GIC, backed this latest round.

“I think investors around the world see the disappointment customers face in retail banking,” N26 CEO Valentin Stalf told CNBC in an interview. “At the same time they see it’s a huge market.”

He added that the firm’s eye-watering valuation is “decent and actually low” for a company of its kind. “I think the company has the opportunity to be worth much more in the future,” Stalf said. For comparison, British competitor Monzo was recently valued by investors at $2.5 billion in its latest round of funding.

The fresh cash will help N26 ramp up hiring and fuel its global expansion strategy. The company currently has 1,300 employees globally. Having recently launched in the U.S., the German fintech firm now has its sights set on Brazil, and is due to launch their next year.

Stalf described Brazil as “one of the most attractive” and “most confusing” retail banking markets. It will find a direct competitor there in the Latin American mobile lender Nubank.

The investment will also fund N26’s product development, as the company looks to redesign its app and bring in new features to drive engagement and win more customers over from the established banks. One feature in the pipeline is a tool called “shared spaces,” which will let users create sub-accounts that can be shared with friends.

Think of it as “sharing an account with friends like a WhatsApp group, ” Stalf said, letting them split bills or arrange vacations. N26 will also introduce a timeline for spending history, add the ability to connect multiple cards to the app and employ artificial intelligence to highlight irregular and potentially fraudulent transactions, the company’s boss said.

The fresh investment brings N26’s total funding up to more than $670 million. It follows a series of high-profile deals this year in Europe’s fast-growing financial technology sector. According to CB Insights, venture capitalists pumped $1.7 billion into the continent’s fintech industry in the first quarter of 2019 alone.

But while so-called neobanks like N26 have attracted millions of customers and plenty of investment, they’ve struggled to translate their wild growth into profits. Though it’s not a profitable company yet, N26 claims it’s seeing improving margins on a per-customer basis.

“Most neobanks are not profitable yet because they are growing rapidly and are new companies,” Andrew McCormack, partner at Valar Ventures, told CNBC. “N26 has very strong contribution margins on each customer, which are rapidly getting even better — that’s why investors are so eager to invest.”

WATCH: What is fintech?

The S&P 500’s performance so far this year has an “uncanny” resemblance to the index’s showing in 1998, and if history is any guide, the rest of the year could be a roller coaster for stocks.

Source: Bespoke

The S&P 500 has soared in 2019, with the index up nearly 20% since the start of the year. It hit an all-time intraday high at 3,017.80, and record close of 3,014.30 on Monday, marking the ninth all-time intraday high and and 11th record close of the year. The benchmark slipped slightly Wednesday.

Bespoke Investment Group screened the nine times in the index’s history that the S&P 500 was up more than 20% at this point in the year and the firm found a striking resemblance to the last time this was the case, in 1998.

In 1998, the S&P 500 peaked in late July around 1,184 but by the start of September, the index gave up all of its year-to-date gains because of the Russian debt crisis and the blow-up of hedge fund Long Term Capital Management, Bespoke said.

In the subsequent month after reaching its high in July, the S&P 500 lost nearly 8%, in the subsequent three months the index lost more than 15%.

The S&P 500 continued to sell off and hit a low in October of around 959.

However, once the debt crisis was over, the S&P 500 surged more than 25% from mid-October until the end of the year. The index ended the year up more than 4% since its earlier high in July around 1,229 and up more than 26% for the year.

Near-term threats that could send stocks tanking, like they did in July 1998, include a further breakdown in the U.S.-China trade war and a more severe economic slowdown.