After Hours Summary: Airlines jumping on Treasury deal -- JBLU +12.6%, AAL +10.3%, HA +9%, DAL +8.3%
After Hours Gainers:
Airlines are sharply higher on government aid deal (see Treasury press release): JETS +12.9%, JBLU +12.6%, AAL +10.3%, HA +9%, DAL +8.3%, UAL +8.1%, ALK +7.6%, SKYW +7.5%, LUV +6.4%, ALGT +5.9%...also BA +2.9%
Companies trading higher in after hours in reaction to earnings/guidance: HWM +8.7% (reports prelim Q1 results with revs down ~9% yr/yr), ANGI +5.8% (sees Q1 revs below consensus; withdraws 2020 guidance), JBHT +3.9% (misses by $0.03, beats on revs), TDOC +3.6% (guides Q1 revenue above consensus; has experienced an unprecedented surge in demand), AGX +0.1% (reports Q4 (Jan) results)
Companies trading higher in after hours in reaction to news: AAL +10.1% (states that it will receive $5.8 bln from the Department of the Treasury's Payroll Support Program), LUV +6.7% (expects disbursements totaling more than $3.2 bln), PG +2.1% (dividend increase, accelerates third quarter earnings release to April 17), CSIQ +1.4% (receives approval for build-transfer agreement with Entergy Mississippi, also issues comment regarding Solaria patent complaint), CCL +1.2% (Princess Cruises and Seabourn extend temporary pauses of global ops thru June 30)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: CVA -14.4% (lowers future dividends; withdraws 2020 guidance), FLDM -2.9% (sees Q1 revs below consensus; withdraws 2020 guidance)
Companies trading lower in after hours in reaction to news: GLAD -0.2% (lowers monthly cash distributions for April, May and June).
Andreessen Horowitz aims to raise $450m for second cryptocurrency fund
Venture capital firm’s push comes two years after investor raised $350m for its first version
Andreessen Horowitz is aiming to raise $450m for a second cryptocurrency investment fund, two people briefed on the matter said, deepening the venture capital firm’s commitment to the sector as the global coronavirus outbreak rattles start-up investors.
Best known for backing social media companies such as Facebook and Twitter, Andreessen was one of the first venture firms with a large fund dedicated to cryptocurrencies, raising $350m in 2018 for start-ups working on the blockchain technology underpinning digital coins.
The fund has also been one of the staunchest backers of Facebook’s controversial Libra currency project and holds a seat on the association’s board.
Andreessen could finalise the new fund in about a week but has not yet placed a hard cap on its size, one of the people said. The firm declined to comment.
The fundraising comes at a difficult time for both venture capital and cryptocurrencies, as tech investors grow cautious about the impact of coronavirus on lossmaking companies.
Venture capital investment in blockchain technologies grew more than three-fold to almost $4.3bn in 2018, according to CB Insights data, but dropped by one-third last year following an extended rout in bitcoin.
Cryptocurrencies have largely weathered the coronavirus-led turmoil in capital markets. The Bloomberg Galaxy Crypto Index was up about 6.5 per cent this year as of Tuesday, recovering from a sell-off in early March.
Andreessen is seeking the new funding less than two years after raising its first version. Venture capital firms typically seek new funds about every three years but have recently quickened their usual pace of fundraising following a frenzied stretch of investment in recent years.
The Silicon Valley-based investor gained a foothold in cryptocurrencies with an early investment in Coinbase, the payments and trading company that has been valued at about $8bn. Its first cryptocurrencies fund has largely focused on new protocols such as the computing company Dfinity and projects involving digital currencies backed by reserve assets such as the US dollar.
Andreessen said it designed the first fund to be able to hold investments for more than 10 years, longer than the typical venture fund, and directly purchase digital coins and tokens.
The firm registered as a financial adviser last year, subjecting its partners to greater regulatory scrutiny but allowing it to invest in cryptocurrencies and tokens with fewer constraints.
Some other venture capital firms have put a pause on cryptocurrency investments following initial excitement in 2018, seeing few near-term practical uses for the technology.
IMF warns of deepest economic plunge since 1930s
Pandemic could expose ‘cracks’ in global financial system, says fund
IMF warns of deepest plunge since 1930s
The loss in global economic output caused by the coronavirus pandemic will “dwarf” that of the 2008 financial crisis, the IMF warned today, forecasting the worst contraction since the Great Depression of the 1930s.
Most economies will shrink by 5 per cent, even after a potential sharp recovery in 2021, the fund said. World output will decline by 3 per cent this year, more than six percentage points down from the IMF growth forecast of 3.3 per cent made in late January. Public finances will be shredded, unemployment will rise sharply and in 90 per cent of the IMF’s 189 member countries incomes per person will fall.
It is emerging economies, however — with neither the necessary health or economic resources — that will suffer the most, the IMF acknowledged.
Yesterday it announced a write-off of $214m in debt for the world’s poorest countries. It has also backed efforts by the G20 group of nations to reach a deal on a much broader suspension of debt payments hanging over low-income nations — a plan that received a boost today when G7 finance ministers and central bank governors endorsed the idea.
Debt crises in the developing world — alongside high levels of corporate indebtedness and weaknesses in the investment industry — could also expose “cracks” in the global financial system, according to a separate IMF report.
Martin Wolf, the FT’s chief economics commentator, argues against “negative-sum economic nationalism,” making a plea for richer countries to help their poorer counterparts. “We must remember above all that in a pandemic, no country is an island. We do not know the future. But we do know how we should try to shape it. Will we? That is the question. I greatly fear our answer.”
Markets
The world’s diamond sector has ground to a halt because of the exodus of 200,000 migrant workers from Surat in India — the global hub of diamond manufacturing — to their rural hometowns. India processes 90 per cent of the world’s stones.
The US Federal Reserve decision to help states and large cities but not smaller localities with emergency funding is facing strong criticism. Some say the plan — purchasing up to $500bn of short-term debt directly from states, counties with at least 2m residents and cities with a population of at least 1m — fails to recognise the role that small municipalities can play in keeping people employed. Some believe the Fed will intervene further if outflows from municipal funds pick up again or if issuers are unable to sell new debt.
Mohamed El-Erian, chief economic adviser at Allianz and an FT contributing editor, says markets and economists are far too bullish about the prospects for global economic recovery. They have failed to recognise the severity of the shutdown, an inherently messy restart, and consequent changes to the post-crisis landscape. The US earnings season will show how big companies remain in the dark on what lies ahead, he writes. A decisive rebound will only come with firm medical progress.
Saudi wealth fund agrees £300m deal to buy Newcastle United
Premier League club’s owner Mike Ashley strikes accord with investor group
An investor group led by Saudi Arabia’s sovereign wealth fund has reached a £300m deal to acquire Newcastle United Football Club from UK retail tycoon Mike Ashley, three people with direct knowledge of the matter told the Financial Times.
The agreement comes even as the world’s most popular sport faces an unprecedented disruption from the coronavirus pandemic, which has wreaked havoc on the global football schedule and halted the English Premier League with no indication of when the current season will be finished.
If completed, the deal will deliver another deep-pocketed Middle Eastern investor to global football. Saudi Arabia’s Public Investment Fund, which is steered by Crown Prince Mohammed bin Salman, is putting up roughly 80 per cent of the all-cash £300m purchase price, the people said.
The deal is being structured through a vehicle created by Amanda Staveley, the British financier. Her PCP Capital Partners will put in 20 per cent of the consideration for Newcastle, with 10 per cent of the funds coming from Ms Staveley personally, two people added, and the remainder from David and Simon Reuben, the wealthy British property investors.
Documents filed at Companies House last week appear to show that the entity through which Mr Ashley owns the club is providing Ms Staveley with a “vendor loan”, an arrangement where the seller of an asset lends money to the buyer to help them complete the transaction.
The documents list as the loan’s security any potential proceeds from Ms Staveley’s high-profile lawsuit against Barclays bank.
Two people close to talks added that the deal is subject to approval from the Premier League, which may take as long as several weeks.
The investor group has been in discussions with Mr Ashley for months, with news of the talks first being disclosed in January. At the time, discussions put a price tag of £350m on the club.
Mr Ashley, who has owned Newcastle since 2007, has had a tense relationship with the club’s fans, who have shown disdain for what they have perceived as a lack of investment in the squad under his ownership.
The founder of the Sports Direct retail chain has flirted with selling Newcastle before, notably in 2018, when he rejected a £250m cash offer from PCP and said discussions with Ms Staveley had been “a complete waste of time”.
But talks resumed and intensified the following year, with Ms Staveley bringing PIF to the negotiating table. While Mr Ashley is one of Britain’s richest people, with a high street empire that also includes House of Fraser and Evans Cycles, a deal would see Newcastle pass into the portfolio of one of the world’s largest sovereign wealth funds, with around $300bn assets under management.
Known as the Magpies, Newcastle sat in 13th position in the Premier League when the season was suspended on 13 March.
Closing Stock Market SummaryIt was a good day for the stock market on Tuesday, as investors expressed optimism in an economic recovery despite the uncertainty signaled by some of the nation's most influential banks. The Nasdaq Composite rose 4.0%, pulling ahead of the S&P 500 (+3.1%), Dow Jones Industrial Average (+2.4%), and Russell 2000 (+2.1%), for its fourth straight advance.
JPMorgan Chase (JPM 95.50, -2.69, -2.7%) and Wells Fargo (WFC 30.18, -1.25, -4.0%) kicked off the Q1 earnings reporting season with underwhelming quarterly results, but more relevantly, they stirred some concern by substantially increasing their provisions for credit losses. The latter represented the challenges the companies are preparing for given the unprecedented circumstances.
The stock market wasn't concerned with uncertainty today, though, as it remained comforted in the notion that the economy will strategically reopen through a coordinated plan from federal and state officials. In addition, better-than-feared trade data for March out of China may have also aided investors sentiment.
The S&P 500 consumer discretionary (+4.2%) and information technology (+4.2%) sectors outperformed on the back of strong gains from Amazon (AMZN 2283.32, +114.45, +5.3%), Apple (AAPL 287.05, +13.80, +5.1%), and Microsoft (MSFT 173.70, +8.19, +5.0%). The health care sector (+3.3%) was led higher by Johnson & Johnson (JNJ 146.03, +6.26, +4.5%) following its quarterly results.
It appeared, then, that only the financials (+0.3%) and energy (-0.5%) sectors today reflected underlying concerns many investors still have with the economy. The energy space was specifically pressured by a 10% drop in oil prices ($20.22/bbl, -$2.20, -9.8%), as the industry remained burdened by the lack of meaningful oil demand despite the upcoming production cuts.
U.S. Treasuries held firm despite the bullish price action in the stock market. The 2-yr yield declined one basis point to 0.22%, and the 10-yr yield was unchanged at 0.75%. The U.S. Dollar Index declined 0.5% to 98.85.
Tuesday's economic data was limited to Import and Export Prices for March: import prices declined 2.3%, while prices, excluding oil, were unchanged. Export prices declined 1.6% in March, and prices, excluding agriculture, declined 1.5%.
Looking ahead, investors will receive a deluge of reports on Wednesday: Retail Sales for March, Industry Production and Capitalization Utilization for March, the Empire State Manufacturing Index for April, the NAHB Housing Market Index for April, the weekly MBA Mortgage Applications Index, Business Inventories for February, and Net Long-Term TIC Flows for February.
- Nasdaq Composite -5.1% YTD
- S&P 500 -11.9% YTD
- Dow Jones Industrial Average -16.1% YTD
- Russell 2000 -25.8% YTD