WSJ : Quantitative Easing: Central Banks’ Old Faithful

Quantitative Easing: Central Banks’ Old Faithful

The day when central-bank balance sheets might shrink looks ever further off

For a while, it looked like quantitative easing’s star had faded a little. Negative rates had become the latest central-banking fad. But the Bank of England’s decisions last week mark a break with that trend and a new strand in the policy divergence debate.

The BOE itself had appeared to cool on the prospects of further bond buying. Active purchases have been dormant for some time: Monday’s debut operations under the new £60 billion ($78.4 billion) program mark the first time the BOE has sought to increase its stock of gilt holdings since late 2012.

Even Thursday’s vote showed less enthusiasm for gilt purchases than for the other stimulus measures the Bank announced, with three members of the nine-strong Monetary Policy Committee voting against this particular part of the package. But Gov. Mark Carney’s aversion to negative rates is clear: something must be done, and quantitative easing is it.

That is even though the tool’s efficacy remains in doubt in terms of promoting growth and inflation, although it may have helped prevent worse outcomes. The BOE itself says corporate bond purchases could provide a bigger bang for the Bank’s buck; but the limited size of the U.K. market means it is buying only £10 billion of company debt over 18 months. The size and liquidity of government bond markets means the BOE can make a splash quickly.

Even in nations like the U.S. and U.K. where active quantitative easing had stopped, its ghost has lingered. Both the U.S. Federal Reserve and the BOE have been reinvesting the proceeds of maturing securities to prevent their balance sheets from shrinking. That will actually boost the flows around the BOE’s latest foray: in September alone, £12 billion of paper held from earlier purchase operations will mature and be reinvested, on top of new purchases.

That matters for investors. While central banks are focused mainly on the stock of holdings, markets are driven by flows. In the U.K.’s case, there will now be negative net government bond issuance for the rest of the year, Bank of America Merrill Lynch forecasts. The BOE will more than soak up the amount of new securities being brought to market.

Meanwhile, policy globally is now diverging further. There is still the big divide between a Fed seeking to tighten, and the BOE, European Central Bank and Bank of Japan looking to loosen policy. But there is a local twist to the policy response in each case; the ECB has been most willing to take rates negative, while the BOJ got its fingers burned.
Bond purchases, however, look like a key mainstay, especially as the debate widens to include possible fiscal responses. The ECB is expected to do more; some analysts are already projecting another round of BOE purchases.
The point at which central bank balance sheets might shrink lies ever further off. The age of quantitative easing is far from over.

(9to5Mac) Iphpone 7 new leak : Video...not impressive for me...

More chassis and components leaks point to Space Black iPhone 7 color


Over the weekend, a few photos appear to show that the iPhone 7 will indeed come in a new Space Black color variant, as previously rumored. The black chassis, SIM tray and mute button pictured are markedly darker than the Space Grey color seen with iPhone 6s.
The new black color mirrors the Space Black option for Apple Watch. It is unclear if the Space Black iPhone 7 would be released alongside the Space Grey color option, or if it would replace it in the lineup.

A new color option may be a big factor in driving iPhone 7 sales as other rumors are pointing towards a more iterative hardware update. Apple is breaking its usual tick-tock upgrade cycle by retaining the same external design for three years in a row; the iPhone 7 will largely look like the iPhone 6s and iPhone 6 in chassis.
In terms of new features, some models of the iPhone 7 will feature a dual-camera system. This will include two image sensors for substantially better quality photos but leaks have shown that this feature will be limited to specific versions of the 5.5 inch iPhone 7 Plus only. However, a larger, improved, camera is also expected for the 4.7 inch phone — technical details of the improvements are not yet known.
You can see the three kinds of iPhone 7 in the video below.
The iPhone 7 has also been rumored to become fully waterproof this year, a first for the iPhone lineup. Waterproofness is a common feature on high-end Android phones. The iPhone 7 will also include the usual improvements to graphics and compute performance with a new SoC, likely dubbed the ‘A10’.



Moreover, it is all but confirmed that the iPhone 7 will feature a base jump in storage space. Apple will (finally) drop the 16 GB iPhone from the lineup, instead starting at 32 GB. It will also add a higher-end 256 GB SKU. Many rumors have suggested a SKU lineup of 32/128/256 GB.
Apple will release the new iPhone 7 sometime in September, the current expected release date is September 16. The company will announce the new product at a media event about two weeks earlier, around September 7.

>>> FT : Midea edges towards Kuka acquisition

Chinese consumer appliance company Midea Group is one step closer to taking control Germans robotics company Kuka.
Midea announced on Monday that 81.04 per cent of Kuka’s shares have been tendered to an offer made by Midea subsidiary Mecca International. This will add to the 13.51 per cent stake it already holds in Kuka.
In May Midea made a €4.5bn offer for Kuka, prompting concerns in Europe that a deal could transfer critical German technical know-how into Chinese hands. Kuka makes robots used by carmakers such as Audi and BMW, as well as US aircraft manufacturer Boeing.
From the statement:
81.04% of all existing shares of KUKA AG (KUKA), a leading global supplier of intelligent automation solutions, were tendered into the offer made by its subsidiary MECCA International (BVI) Limited by the end of the additional acceptance period at midnight August 3, 2016 (Central European Summer Time). With the expiration of the additional acceptance period, no further KUKA shares can be tendered as a part of the takeover offer.
The deal is still subject to regulatory approval.

(TechCrunch) Airbnb raising a reported $850M at a $30B valuation

Airbnb raising a reported $850M at a $30B valuation

Tech unicorn and sharing economy darling Airbnb has informed the State of Delaware that it’s raising another heap of cash.

TechCrunch independently verified that Airbnb indicated in a 28 page filing on July 28th that it has plans to bring in additional late-stage capital. Almost a year after its last raise of $1.6 billion, the company is said to be adding $850 million to its coffers, according to information obtained by Equidate.

While $850 million is a ton of cash, it is not the largest round the company has raised. Last year, the company raised $1.5 billion in one of the largest VC rounds in history. The additional capital would only move Airbnb from the fifth to the forth most valuable tech unicorn at a potential valuation of $30 billion (tear).

Mega-rounds have been popular this year with Uber raising a $3.5 billion equity round from Saudi Arabia’s Public Investment Fund. After the round, Uber followed up with another $1.15 billion, this time in leveraged loans.

Even as a late-stage company, Airbnb has to be increasingly conscious of the capital it takes on. Too much equity dilutes early investors, while too much debt could put investors at risk if valuations were to suddenly tank. Debt as an asset class is paid off before equity.

Airbnb has notoriously taken actions to strategically prolong an IPO, bringing on a $1 billion credit faculty last year to support growth without diluting investors.

The company previously had an approximate valuation of $27 billion, so while the round is large, it doesn’t deviate from prior anti-dilution strategies. With respect to deals that Airbnb reportedly walked away from, the $850 million dollar deal is tame. The Wall Street Journal reported that Airbnb left money on the table, rejecting a deal that would have valued the company at $34 billion.

Also according to the WSJ, investors are concurrently planning to buy approximately $200 million in stock from employees in a buyback program. Stock buyback programs are particularly common among late-stage companies looking to remain private while offering some liquidity to early employees. Buyback programs are catered towards employees rather than venture investors and typically only apply to common stock.

Early investors would have to be bought off the company’s cap-table to remove any pressure from preferred stock holders. Sequoia led a $615,000 seed round in Airbnb back in 2009. According to PitchBook, Sequoia utilized its XII fund for that investment and all follow-on Airbnb investments. That fund was created all the way back in 2006.

This all comes amidst legal battles at home and abroad. Most recently, Airbnb sued the city of San Francisco over a law requiring Airbnb to verify that hosts had filed with the city before advertising their homes.

TechCrunch reached out to Airbnb and other parties involved and will update this post as information comes in.

FT : Smith & Nephew sells gynaecology unit; unveils $300m buyback

Medical device-maker Smith & Nephew has offloaded its gynaecology business for $350m and unveiled a $300m share buyback.

The company, which has been suffering from weaker than expected demand in emerging markets of late, said:
The planned sale of our Gynaecology business demonstrates our disciplined strategic approach to capital deployment.
The company said:
The [$300m] buy-back programme, the purpose of which is to reduce the Company’s share capital, commences today and will end no later than 31 March 2017.

FT : Spain enjoys tourism boom as terror fears stifle rival regions

Spain enjoys tourism boom as terror fears stifle rival regions

Balancing shakily on her two-wheeled Segway, Valerie Matthews, who has travelled from the US city of Nashville to Spain with her 13-year-old granddaughter for a summer holiday, says she is up for a challenge.
“As many steps and bumps as possible, please,” she tells the guide from Madseg, one of several companies offering tours around Madrid on the battery-powered upright scooters. “Let’s make this interesting.”

In terms of her choice of holiday destination, however, Ms Matthews is playing it safe. As resorts in countries such as Turkey, Egypt and now even France, lose tourists due to the threat of terrorism or domestic strife, Spain has seen a surge in holidaymakers.
Egypt has reported a 60 per cent drop in visitor numbers so far this year, along with falls in other Middle Eastern and north African destinations after several years of instability. Hotel bookings in France’s southern Riviera region also dropped by as much as 30 per cent in the weeks after last month’s terrorist attack in Nice, according to France’s economy ministry
By contrast, in the first six months of this year, the number of foreign visitors to Spain was up 12 per cent on the first half of 2015. Tourist spending was also up 12.7 per cent in June, compared with the same month last year. Tourism offices in many destinations, especially the popular package resorts on the Costas, are reporting that hotels are packed.
“I first came to Spain 1996 and fell for the place,” says Ms Matthews. “I would love to visit the likes of Egypt but frankly the upheaval there puts me off. Why would I go at the moment? I’d like to visit France too, but look what happened in Nice — that also seems to be a problem. Spain is fine for me.”
Despite a spate of arrests of suspected jihadis across the country, and a warning from Isis and other groups that the Iberian peninsula is a target for attacks, Spain has so far been spared the violence seen elsewhere in recent months. Memories of the 2004 bombings by a local al-Qaeda cell at Madrid’s Atocha railway station are fading in the minds of tourists, say security experts.
Spain has come to rely ever more on tourism as it has emerged from recession, having been battered by a sharp downturn at the start of the decade. Tourism makes up 14 per cent of gross domestic product, according to the most recent central bank data in January.
Spain’s economy is expected to grow 2.9 per cent this year, overtaking previous estimates of 2.7 per cent. The country’s high unemployment rate — which at 20 per cent is second only to Greece among EU members — is also falling, partly thanks to tourism. On August 2, the registered jobless rate dropped to its lowest level in seven years, with the service sector accounting for more than 50,000 of the 84,000 jobs created in July.
“The tourism industry has been very good for Spain and, certainly in the short term, it is providing a boost to the economy. Doubts about other holiday destinations and a relatively low euro have really helped in recent years,” said Stephen Brown, European economist at Capital Economics.
However, Mr Brown added that tourism jobs often did not offer stability or long-term career prospects. “There is a danger that the government relies too much on tourism to justify improving employment patterns. Largely these are low-skilled jobs that can easily disappear.”
The changing fortunes of British tourists, the single largest group of visitors to Spain, pose another risk. The pound has lost about a tenth of its value against the euro since the UK’s vote to leave the EU six weeks ago. The Bank of England’s decision to cut interest rates this week will blunt Britons’ overseas spending power further.

But for now the surge in visitor numbers is instilling confidence. Officials in Benidorm, one of the Spanish coastal resorts famous for cheap package holidays, say hotel occupancy this summer is at a 16-year high of 93 per cent. The resort is also angling for wealthier travellers — it has even applied for Unesco World Heritage status.
“At the moment, we are struggling to find rooms for people who haven’t already booked,” says Carola Valls of Visit Benidorm, the resort’s marketing body. “Hoteliers have been able to charge much more than in recent summers and all the restaurants are full.”
Big Spanish cities are also welcoming more tourists — Madrid, for example, saw an 11 per cent jump in the number of tourists in the first half of this year. Ms Matthews and her granddaughter, who master their Segways within minutes, are just two of those arrivals.
This year’s jump in visitor numbers comes as no surprise to Antony Bruce, the Edinburgh-born owner of Madseg and a former Segway world champion.
“Even as recently as four years ago there were just three or four companies like mine. Now there are around 16,” he says. “Madrid, and the rest of Spain, is more popular than ever.”

FT : Global stocks hover near 12-month highs

Global stocks hover near 12-month highs

Monday 08:30 BST. Global stocks are near 12-month highs as risk appetite is underpinned by optimism on the US economy and a belief that central banks are minded to maintain ultra-loose monetary policy.
Government bond yields are mildly mixed, major forex pairings are muted and oil is firmer.

After Japan led the Asia-Pacific region higher, the pan-European Stoxx 600 is up 0.3 per cent as banks rally and energy stocks are lifted by Brent crude’s 0.8 per cent advance to $44.61 a barrel.
The FTSE All-World index is adding 0.4 per cent to 275.55, flirting with its best level since mid-August last year.
Bullish sentiment is supported by the sight of US index futures showing the S&P 500 will hold near its record close of 2,183.
The Wall Street barometer claimed this virgin territory after Friday’s non-farm payrolls data showed the US economy added a better-than-expected 255,000 jobs in July, soothing nerves about the economic outlook.
While the data also boosted the prospects for the Federal Reserve lifting interest rates by year-end, few investors expect the Fed to rush to act.
Analysts at DBS said the “unequivocally strong” jobs report “more than keeps” a rate rise on the table as soon as September — though the Fed will not necessarily take action next month, DBS added, given it was only June when policymakers were warning about global risks.
“But officials toned down their assessment of global risks in July and several are publicly anxious to get back on the normalisation track. Two monster payrolls reports and accelerating core inflation and wage growth will give their arguments a lot of weight,” DBS pointed out.
Analysts at Bank of America Merrill Lynch were a little more cautious, but said the strong jobs numbers would give the Fed “sufficient reason” to raise rates this year if other economic data, such as gross domestic product, hold up.
“We think the Fed will wait until December given that there are still global uncertainties on the horizon, as well as the US election at home,” BAML said.
Fixed income markets place just a 26 per cent probability that the Fed will raise official borrowing costs by 25 basis points at its September meeting. Before the jobs data that figure was 18 per cent and so the dollar and US government bond yields, which move inversely to prices, have climbed in recent days.
The 10-year Treasury yield, which hit a record low of 1.32 per cent just a month ago, is a fraction of a basis point lower on the day at 1.58 per cent. Yields on UK, German and Japanese peers are notably more meagre, as central banks remain in monetary easing mode.
The 10-year gilt yield is off 1bp at 0.66 per cent after the Bank of England last week expanded its asset purchase programme and cut borrowing costs to a record low of 0.25 per cent in order to counteract a Brexit-induced economic slowdown.
Equivalent maturity Bunds are adding 1bp to minus 0.05 per cent after data on Monday showed German factories picked up steam in June, and Japanese paper firmed by 4bp to minus 0.05 per cent amid stronger investor risk appetite.
The yen tends to weaken when traders feel more upbeat and so the Japanese unit is down 0.3 per cent to ¥102.15 per greenback, its retreat contributing to a 2.4 per cent rebound for the exporter-sensitive Nikkei 225 stock average.
Hong Kong’s Hang Seng rose 1.5 per cent and the Shanghai Composite added 0.9 per cent to reclaim the 3,000 level as investors brushed off soft trade data from Beijing.
China’s exports contracted in July in dollar-denominated terms, down 4.4 per cent year-on-year, and with imports falling a sharp 12.5 per cent. Economists’ consensus forecasts were for declines of 3.5 per cent and 7 per cent, respectively.
“Signs of stronger manufacturing activity among many of China’s key trading partners have so far failed to lift export growth. At the same time, the renewed fall in global commodity prices is dragging down import growth,” said Julian Evans-Pritchard at Capital Economics.
Gold, which fell nearly $26 on Friday as the US jobs data pushed up the buck and bond yields, is down another $2 to $1,333 an ounce.

WSJ : PCP Capital Partners Looks to Invest $2 Billion in Greek Bank Loans

PCP Capital Partners Looks to Invest $2 Billion in Greek Bank Loans

Amanda Staveley’s investment vehicle sees an opportunity to buy Greek banks’ nonperforming loans, says a person familiar with the matter

PCP Capital Partners LLP is looking to spend around $2 billion snapping up nonperforming loans from Greek banks, according to a person familiar with the matter.

PCP, run by Amanda Staveley, a financier known for her close ties to Gulf investors, is aiming to lead a recapitalization of Pancretan Cooperative Bank, this person said. The small Greek lender could then be used as a vehicle to buy assets that other local banks want to shed over the next 12 months or so. PCP’s push into Greece is being backed by sovereign investors, this person added. Pancreten couldn't be reached for comment.

Cleaning up the roughly €110 billion ($122 billion) of soured loans festering on Greek bank balance sheets is becoming a priority for the government as it tries to get credit flowing through the economy again. As part of its latest bailout package the Greek parliament had to vote through laws making it easier to restructure loans or reclaim assets.

Foreign investors are being encouraged to help out. Earlier this year U.S. private equity group KKR & Co. signed an agreement with Greece’s Alpha Bank and Eurobank to manage up to €1.2 billion of their problem loans. The country’s largest lender, Piraeus, is planning to strike a similar deal with KKR. National Bank of Greece SA, is expected to follow suit, according to analysts.

Ms. Staveley, who is best known for orchestrating a £3.5 billion ($4.57 billion) investment from Abu Dhabi to prop-up Barclays PLC at the height of the financial crisis, has already put in place a management team in Greece, according to a person familiar with the matter. PCP is will work with a local group to collect or restructure debts. The fund will also look at acquiring Greek businesses.


How private equity groups fare will be a key test of the structural reforms the Greek government has put in place. Greek banks have dragged their feet selling loans to private equity groups at steep discounts, arguing they just need time to restructure them. The European Central Bank is now turning the screws, keeping detailed data on how much progress each bank makes in getting rid of bad loans and setting explicit targets, executives at several banks say.

In July the top management of Greece’s bank rescue fund—the Hellenic Financial Stability Fund—was forced out for not pressuring banks to get rid of bad loans fast enough.

Still some complain the legal system in Greece is too sclerotic. Pushing through bankruptcies remains slow, hampering the cleanup of bank balance sheets. If even the private-equity firms fail to grind out returns this could buy the banks some respite from regulators, one senior executive at a major bank says.