Weekly Performance
Dow +0.11% S&P +0.81% Nasdaq +1.61% Russell +2.59% Brazil -2.02% EuroStoxx -0.30% FTSE +0.67% CAC +0.34% Dax -0.03% Ibex -0.19% MIB -3.25% SMI +0.31% Nikkei +3.41% Hang Seng -0.83% CSI +0.01% Shanghai -0.10%
The post US election money flows largely extended into a second week, but moderation was seen across various sectors and asset classes. The Trump reflation trade continued to push interest rates higher and was aided by economic data and Federal Reserve commentary that essentially clinched a rate hike is coming at next month's monetary policy meeting. Outside of the chatter surrounding the President-elect's rumored cabinet picks, the question markets shifted most of their focus onto was just how many more hikes could follow in 2017. Against that backdrop the US benchmark 10-year yield rose above 2.3% for the first time since ealry 2015. The spread over the comparable German 10-year yield widened to levels not seen since the late 1980's. The US Dollar continued to surge, particularly against emerging market currencies, including another 1% move against the Chinese Yuan this week. Currency traders prepared for seasonal FX liquidity to ebb which could allow for further aggressive moves. The Euro is within striking distance of the post financial crisis low of 1.0460 and after that potentially parity. Japan's Nikkei touched a fresh 10-month high powered by the USD/JPY which rose to a level not seen since June. WTI crude futures bounced 6% off a Monday low to surpass $46 as producers met in Doha on Friday and by most accounts remained adamant an output deal will be reached by the November 30th meeting.
Macro :
Keep an eye on :
- FP FP : Petrobras in negotiations with Total to sell stakes in oil fields, two power-plants
Lacklustre US earnings drag down global dividends
Payouts tumble as flat profits add to fears over Trump, China and Brexit
Global dividends have fallen sharply as subdued earnings in the US hit payouts alongside growing uncertainty because of the election of Donald Trump, worries about China’s economy and Brexit.
The slump in dividends in the third quarter is the weakest performance in more than a year as lacklustre company earnings and low special dividends in the US undermined headline growth at a time of rising concern over the global economic outlook.
Underlying dividend growth, which excludes specials, has also been slowing as profits have disappointed. As the US is the largest contributor to dividends, this has a significant impact, according to the Henderson Global Dividend Index.
Jane Shoemake, investment director of global equity income at Henderson, said: “There have been a few years of double-digit dividend growth in the US and it had to come back down to more sustainable levels.
“US profits are also subdued because we are in a low growth environment and it is challenging for companies to get strong top-line growth. The strength of the dollar has also been a headwind for US corporates.”
John Roe, head of multi-asset funds at Legal & General Investment Management, added: “There is a lot of uncertainty because of concerns about a Chinese hard landing, European economic problems and potential risks from a US rate rise.”
Other investors say the election of Mr Trump as president, despite the boost to US stocks, has also created uncertainty, while the repercussions from the UK vote to leave the EU continues to reverberate and raise concerns over growth in the UK and EU.
Global dividends fell 4 per cent on a headline basis in the third quarter to $281.7bn. This was $11.9bn lower than a year ago.
US payouts fell to $100.4bn, down 7 per cent on a headline basis, mainly due to lower special dividends. Even taking this into account, underlying growth in the US was the slowest since the survey was launched in 2014, at 3 per cent on the year.
Henderson said the slower growth reflected poor profit growth in the US and also a return to more sustainable levels of increases after a period of double-digit rises.
UK dividends fell 13.9 per cent in headline terms to $26.3bn, largely reflecting the steep drop in sterling against the dollar following the Brexit vote in June. In underlying terms, they fell 2.9 per cent as big cuts in the mining sector and from Barclays and Rolls-Royce took effect.
In Asia, slow growth continued, up 2.8 per cent in headline terms and 0.5 per cent higher on an underlying basis. Once again, headline dividend growth of 36.7 per cent was inflated by the strong yen and underlying growth at 1.4 per cent was more modest.
Emerging market dividends fell for the third consecutive quarter. At $42.9bn, they were 7.1 per cent lower in headline terms and 7.7 per cent lower in underlying terms.
Chinese dividends and payouts fell 4.5 per cent in headline terms, 10.8 per cent on an underlying basis, the second year of dividend declines. Chinese banks make up 80 per cent of the total and they are reducing payout ratios, leading to dividend cuts.
Weekly Performance
Dow +0.11% S&P +0.81% Nasdaq +1.61% Russell +2.59% Brazil -2.02% EuroStoxx -0.30% FTSE +0.67% CAC +0.34% Dax -0.03% Ibex -0.19% MIB -3.25% SMI +0.31% Nikkei +3.41% Hang Seng -0.83% CSI +0.01% Shanghai -0.10%
The post US election money flows largely extended into a second week, but moderation was seen across various sectors and asset classes. The Trump reflation trade continued to push interest rates higher and was aided by economic data and Federal Reserve commentary that essentially clinched a rate hike is coming at next month's monetary policy meeting. Outside of the chatter surrounding the President-elect's rumored cabinet picks, the question markets shifted most of their focus onto was just how many more hikes could follow in 2017. Against that backdrop the US benchmark 10-year yield rose above 2.3% for the first time since ealry 2015. The spread over the comparable German 10-year yield widened to levels not seen since the late 1980's. The US Dollar continued to surge, particularly against emerging market currencies, including another 1% move against the Chinese Yuan this week. Currency traders prepared for seasonal FX liquidity to ebb which could allow for further aggressive moves. The Euro is within striking distance of the post financial crisis low of 1.0460 and after that potentially parity. Japan's Nikkei touched a fresh 10-month high powered by the USD/JPY which rose to a level not seen since June. WTI crude futures bounced 6% off a Monday low to surpass $46 as producers met in Doha on Friday and by most accounts remained adamant an output deal will be reached by the November 30th meeting.
Macro :
- Trump Presidency to Put Economic Pressure on Europe: Atos CEO
- Kentucky Pension May Stay in Some Hedge Fund Strategies: Peden
- A $19 billion hedge fund is trying to recruit tech talent with a coding contest
- Dealbook: Trump Adviser Takes Stake in China Ride-Sharing Company
- Network Rail Break-Up Mulled by U.K. Government: Sunday Times
- Moscovici Urges More EU Fiscal Stimulus: El Pais
- Airbnb Seeks to Complete 700 Tax Agreements in Cities: FT
Keep an eye on :
- AIR FP : Airbus Faces New Fines for Delays of A400M Plane: Spiegel
- AIXA GY : Aixtron Says Cfius to Recommend Against Purchase by Grand Chip
- ATC NA : Altice/SFR Media to Cease Publishing Expansion, AFP Reports
- BAYN GY : Bayer’s Financing for Monsanto Purchase Is Secure: Tagesspiegel
- BCP PL : BCP to Postpone Shareholder Meeting on Voting Rights: Negocios
- BCP PL : Fosun International Agrees to Buy 16.7% of BCP for EUR174.6 Mln
- BT/ LN : BT Says Openreach Dispute Delays GBP6b Investment: Telegraph
- CSGN VX : Credit Suisse’s Swiss Unit Kicks Off Operations Ahead of IPO
- DAI GY : Daimler Electric Shift Could Hit 6 of 7 Jobs: Manager Magazin
- ENGI FP : Engie in Advanced Talks With Neptune Over Oil Unit Sale: Times
- FB US : Facebook Reports Stock Buyback of Up to $6b of Class A Shares
- GSK LN : GSK Gets FDA Approval for Expanded Use of FluLaval Quadrivalent
- INTC US : Intel Said to Plan Job Cuts in Wearables Group: TechCrunch
- LHN VX : LafargeHolcim Sees ‘Very Encouraging’ U.S. Prospects: Investir
- NESN VX : Some Nestle Foods Lose Swiss Cross on Labels: Unit CEO in SamS
- PAH3 GY : Peter Daniell Porsche Willing to Join VW Supervisory Board: FAS
- SLB US : Hess Sues Schlumberger for $200 Million-Plus on Faulty Valves
- SFR FP : Altice/SFR Media to Cease Publishing Expansion, AFP Reports
- GLE FP : SocGen Sounding Investors on Italy Consumer Unit Sale: Sole
- FP FP : Petrobras in negotiations with Total to sell stakes in oil fields, two power-plants
- UTDI GY : United Internet May Pay Higher 2016 Dividend: Euro-am-Sonntag
- VOW3 GY : VW Should Reclaim Board Bonuses, CDU’s Fuchs Tells RND
- VOW3 GY : VW’s Hohmann-Dennhardt Defends Unequal Payout for Customers
- VOW3 GY : Peter Daniell Porsche Willing to Join VW Supervisory Board: FAS
Airbnb looks to secure 700 tax deals with cities
Agreements will help mitigate regulatory risk and reduce complex filings for hosts
Airbnb is aiming to secure 700 tax agreements in cities that generate more than 90 per cent of its revenue by the end of next year, as the Silicon Valley accommodation company tackles regulatory battles in key markets such as New York and San Francisco.
This would more than triple the number of Airbnb’s existing tax deals, which allow the company to collect and remit hotel taxes to local governments, chief executive Brian Chesky told the Financial Times.
Mr Chesky said these deals were important to mitigate regulatory risk. “When you have a tax agreement, you have an explicit agreement, therefore there is not an existential risk,” he said, arguing that regulation did not pose a long-term threat to Airbnb’s business.
Airbnb operates in more than 50,000 cities around the world and has tax deals in 200 jurisdictions, ranging from Amsterdam to Chicago to Nice. In Paris, its largest market, Airbnb collects a tourist and administrative tax of €0.83 per nights per room.
Reaching a tax deal does not always smooth out all the regulatory issues, however. In its home town of San Francisco, Airbnb already collects and remits a transient occupancy tax of 14 per cent — but the company is still locked in a legal fight with the city over host registration rules.
Related article
Airbnb moves beyond accommodation into tours and immersive trips
Silicon Valley company takes first step towards becoming all-inclusive travel platform
One of its key battles at the moment is in New York, which recently passed a law imposing heavy fines on short-term apartment rentals, which are a cornerstone of Airbnb’s business in New York City.
Airbnb is currently in discussions with the state in an effort to reach a new agreement, and regulators have not started fully enforcing the new law while those negotiations are under way. The company estimates that it could collect and remit $90m annually to the New York State if fully legalised.
In many jurisdictions, it is often the host, not Airbnb, that must pay hotel taxes, as they are required to have a business licence and work directly with local tax authorities.
“It is quite a task they [Airbnb] are taking on,” says Rob Stephens, general manager at Avalara MyLodgeTax, which provides tax services in the US to people who use HomeAway and Airbnb to rent their homes.
“People that are not in the tax world don’t appreciate the wrangling that goes on, these tax agencies aren’t always easy to work with,” he said, adding that there were more than 5,000 different tax jurisdictions in the US alone.
Striking tax deals will also resolve a key complaint from hosts who have to deal with complex tax filings.
Airbnb bookings could generate US state revenues of $440m this year if fully taxed, but most of that will go uncollected under current rules, according to a study released last month by AllTheRooms, an accommodation booking company.
Airbnb generates revenue by taking a cut of bookings of around 10 per cent, and Manhattan Venture Partners estimated earlier this year that its 2016 revenue would be around $1.6bn — a level that would imply total bookings of more than $10bn.
The company also announced last week that it will be expanding into tours and travel services.
Petrobras in negotiations with Total to sell stakes in oil fields, two power-plants - report (translated)
Brazilian state-controlled oil company Petrobras is in negotiations with French Total to sell stakes in oil fields located in the BMS-9 and BMS-11 blocks in the offshore formation known as ‘pre-sal’ in the Atlantic Ocean, Folha de Sao Paulo reported.
The oil fields in consideration are Iara, Berbigao, Sururu and Oeste de Atapu in the BMS-11 block, and the oil field Lapa in the BMS-9 block, the Portuguese-language article noted, without citing any source.
Shell will have the right of first refusal on the fields of the BMS-11 block as it is already in partnership with Petrobras in that area, the item added.
The deal may also include stakes in the infrastructure related to those oil fields used for the process and transporting of natural gas, the item added.
Petrobras is also looking to sell two power-plants to Total, and also offer a lease contract to operate a liquid natural gas regasification plant located in the Brazilian state of Bahia.