Fed’s Bostic: ‘High bar’ to any rate hike given need to raise inflation

There is a “high bar” to the U.S. Federal Reserve raising interest rates given the need to raise inflation and guard against any drop in inflation expectations, Atlanta Fed president Raphael Bostic said on Monday.

“We worry about that. It is going to be a pretty high bar for us to make policy more contractionary,” Bostic said. “We are going to let the economy run and run hot enough to let inflation move.”

Citi’s corporate banking arm aims to pick up steam as market cools down

When Citigroup Inc (C.N) combined businesses that cater to big companies in 2018, management wanted dealmakers, traders and traditional corporate bankers to combine forces and propel Citi toward the top of Wall Street market-share rankings.

The third-largest U.S. bank has made some progress. Its overall market share across advisory, syndicate lending and equity and debt origination edged up to 5.1%, from 4.9% in 2018. But Citi’s rankings in those business lines were unchanged in 2019, according to Dealogic data.

In December, bankers from Citigroup’s capital markets, investment banking and corporate lending teams gathered for their first full-year review meetings since the groups were combined. The tone in the meetings was positive, executives said, but after a year of stagnant rankings the unit still has a lot of work to do.

Citigroup has struggled to gain traction since it has yet to snatch away meaningful market share from powerful incumbents like JPMorgan Chase & Co (JPM.N), Goldman Sachs Group Inc (GS.N), and Morgan Stanley (MS.N).

And, as it moves along with its strategy in 2020, the outlook is not great, industry insiders and analysts said.

Trade wars, recession fears and international events — ranging from Brexit to Hong Kong protests to political chaos in Venezuela to the United States killing an Iranian leader this month — have unpredictable outcomes that affect prices of goods and services in local markets, as well as global companies’ ability to acquire or transact between them.

The geopolitical uncertainty is also keeping some corporate clients, who would otherwise be looking for deals or other financing, on the sidelines, executives have said.

However, Citi’s expertise as a deeply international bank that helps companies grow and do business across borders, may not position them well for the current business trends, said Marty Mosby analyst at stock broker-dealer Vining Sparks.

“The world that was becoming more and more integrated is becoming less integrated and becoming a little bit more isolated,” he said. “And that’s not to Citigroup’s advantage.”

The values of global dealmaking and initial public offerings industry wide are each expected to drop more than 20% this year according to estimates by law firm Baker McKenzie.

“The investment banking business has never been more demanding,” said Tyler Dickson, the New York-based co-head of Citi’s Banking Capital Markets and Advisory group.

Citigroup has prided itself on being the most global of the big banks for decades, but after the 2007-2009 financial crisis, it pulled back from many regions and businesses. Even so, the bank still operates in 98 countries, partly to ensure that multinational clients have access to markets in which they operate.

Citigroup executives say they can win business from big corporations, even if the overall industry revenue pie shrinks.

Last year, the bank was able to grow the transaction value of the deals it advised by 11% despite the wallet being down 2% for the industry, according to Refinitiv data. Citigroup can still capture market share even with bleak 2020 outlook, Dickson said.

Dickson is co-head alongside Manolo Falco, who is based in London. On the first anniversary of their professional marriage, the two sent balloons and a cake, respectively, to the other’s office to celebrate a job well done.

The bank is focused on getting more business from existing corporate customers and adding new companies that fit into a certain rubric, executives told Reuters.

That includes technology and healthcare companies, as well as small-but-promising startups that might grow fast.

But the bank is not looking to gain share among smaller mid-sized companies that competitors including JPMorgan Chase, Bank of America or Goldman Sachs are targeting.

“Between the two growth paths, I like that path better,” said Cary Kochman, Citi’s co-head global head of M&A.

Yen slips, yuan ascends as U.S. drops China FX manipulator label

The yen plumbed eight-month lows while China’s yuan climbed to its highest level since July on Tuesday, as the U.S. Treasury Department reversed its decision in August to designate China as a currency manipulator.

The announcement came as Chinese Vice Premier Liu He arrived in Washington ahead of Wednesday’s signing with U.S. President Donald Trump of a preliminary trade agreement aimed at easing tensions between the two countries.

“Washington’s decision to lift its designation of currency manipulator on China has added to the positive mood that has been already in place ahead of the signing of the trade deal,” said Minori Uchida, chief currency strategist at MUFG Bank.

People familiar with the negotiations said that although the manipulator designation had no real consequences for Beijing, its removal was an important symbol of goodwill for Chinese officials.

The dollar rose as much as 0.25% to 110.22 yen, its highest since late May against the safe-haven Japanese currency. It last stood at 110.04 yen, capped at a technical resistance from Bollinger band around 110.22.

Uchida said the dollar/yen is likely to face an uphill battle beyond the 110 yen mark, because the dollar is already expensive relative to the U.S.-Japan yield gap which it tracks fairly closely.

“The main driver of the dollar/yen is the yield gap. Last year, when the dollar was above 110 yen, the yield gap was about 2.4 percentage points. Right now it is about 1.8-1.9 percentage points. And we could see a setback if the upcoming trade deal does not go beyond what has been already reported,” he added.

In addition to hopes of easing in U.S.-China trade war, solid China’s trade data helped to boost optimism on the Chinese economy and the yuan.

Exports grew 7.6% and imports jumped 16.3% in December from a year earlier, both handily beating expectations.

In the onshore trade, the yuan strengthened to 6.8731 per dollar, its strongest level since late July, gaining 0.4% on the day.

The offshore yuan also firmed to its strongest level in six months, hitting 6.8662 before easing slightly to 6.8725.

“We are likely to see a cyclical recovery in the Chinese economy during the first half of this year. Chinese firms have slashed inventories to a very low level so any moves to rebuild them could easily lead to a pick up in growth for a quarter or two,” said Ei Kaku, senior strategist at Nomura Securities.

“That should also support capital inflows. The yuan is likely to stick around 6.8 per dollar though we think it could weaken in the second half of this year due to various risks and uncertainties,” she said.

The risk-on mood in financial markets mildly supported the euro against the dollar.

The European common currency, on a recovery after hitting a two-week low of $1.10855 on Friday, last traded at $1.1137 .

Sterling came under renewed pressure after data showed Britain’s economy grew at its weakest annual pace in more than seven years in November, raising the chances of a cut to interest rates.

Sterling traded at $1.2990, having fallen to a three-week low of $1.2961 on Monday. The currency has become the worst performer so far this year with fall of 2.0% against the dollar.

Money markets forecast a almost 50% probability of a cut at an upcoming meeting on Jan. 30.

The Australian dollar was lethargic, struggling to get any lift from upbeat economic data of late, as weeks of bushfires have darkened the mood toward the economy. The currency slipped 0.1% to $0.6893.

Canadian court denies media request to broadcast Huawei CFO hearing

A Canadian court on Monday denied a media consortium’s request to broadcast a portion of hearing seeking to extradite Huawei Technologies Chief Financial Officer Meng Wanzhou to the United States.

The consortium’s application, which Meng and the Attorney General of Canada opposed, sought to record and broadcast the “double criminality” portion of the proceedings set for Jan. 20, according to the ruling issued by the Supreme Court of British Columbia.

The consortium, consisting of 13 media organizations, says the “double criminality” portion of the proceedings will involve only a question of law, and that question will not directly engage Meng’s fair trial rights since it does not pertain to her guilt or innocence.

A crucial test in Canadian extradition law is “double criminality”, which means conduct must be illegal in Canada as well as in the country seeking extradition.

One of the reasons Meng was against media’s request was because she thought broadcasting of the hearings could compromise her fair trial rights in the extradition proceedings, and in a trial in the U.S. if she is extradited.

The Attorney General backed Meng and said there were risks of distorting the public perception of the proceedings and of disturbing the serenity of the court process, and the cumulative effect of those factors on Meng’s right to a fair trial in the U.S.

Meng, 47, was arrested at the Vancouver International Airport on Dec. 1, 2018, at the request of the United States, where she is charged with bank fraud and accused of misleading the bank HSBC about Huawei’s business in Iran.

Yuan soars, stocks scale heights as markets cheer imminent Sino-U.S. deal signing

Asian shares hit a 7-month high, China’s yuan jumped and safe-harbor assets slipped on Tuesday, amid signs of goodwill between China and the United States, as the world’s two biggest economies prepared to sign a truce in their trade war.

The U.S. Treasury Department on Monday said China should no longer be designated a currency manipulator – a label it applied as the yuan dropped in August.

China, meanwhile, allowed the tightly managed currency to climb to its highest point since July, after fixing the yuan’s trading-band midpoint at its firmest in more than five months.

The yuan sat 0.4% firmer at 6.8677 per dollar by mid session.

The moves come as a Chinese delegation arrived in Washington ahead of Wednesday’s signing of the Phase 1 trade agreement, seen as calming a dispute that has upended the world economy.

MSCI’s broadest index of Asia-Pacific shares outside Japan hit its highest since June in morning trade, driving world stocks to a record high.

Japan’s Nikkei added 0.7% and hit its highest point in a month. Hong Kong’s Hang Seng rose to its highest since May and Shanghai blue chips scaled heights not touched since January 2018, though both later pared gains.

Australia’s S&P/ASX 200 rose 0.7% to a record intraday high. Gold fell and the safe-harbor Japanese yen dropped to a seven-month low.

“There have been a number of false starts,” said Vishnu Varathan, head of economics at Mizuho Bank in Singapore.

“The fact that this is really coming to the moment when the rubber hits the road is the most tangible evidence of traction in starting to resolve issues, that’s what’s driving optimism.”

Chinese economic data showing rising exports and imports in December also put a floor under gains.

Overnight Wall Street logged record closing highs, helped by sharp rises in technology stocks as investors bet firms such as Facebook Inc, Microsoft Corp and Apple Inc might have the most to gain from revived global growth. [.N]

The S&P 500 rose 0.7% to a record closing high, while the Nasdaq Composite added 1% and also closed at a record peak. The Dow Jones Industrial Average rose 0.29%.

With the text of the Sino-U.S. deal yet to be finalised, some fretted the gains could leave stocks exposed should anything go awry, with modest volumes in equity markets hinting at caution.

“The market appears to be fully pricing a signed agreement,” said CMC Markets’ chief strategist in Sydney, Michael McCarthy.

“It’s buy the rumor, sell the fact… Even a delay could see an extremely negative reaction,” he said.

United States Trade Representative Robert Lighthizer told Fox Business late on Monday that the Chinese translation of the deal’s text was almost done.

“We’re going to make it public on Wednesday before the signing,” he said.

YEN, GOLD SLIP

In tandem with the rally, safe-harbor assets slid lower on Tuesday. Gold extended Monday’s fall to trade 0.6% weaker at $1538.76 per ounce.

Oil nursed losses and yields on benchmark U.S. Treasuries rose as prices fell. Brent Crude was steady around $64.37 per barrel. Ten-year Treasury note yields rose to 1.8599% compared with the U.S. close of 1.848%.

In currency markets, the yen weakened past the 110 yen-per-dollar mark while the yuan’s strength helped lift trade-exposed currencies across Asia.

Besides the trade deal, investors are also looking to U.S. inflation data due later on Tuesday and the beginning of the fourth-quarter U.S. company results season.

Big banks JPMorgan Chase & Co, Citigroup Inc and Wells Fargo & Co are due to report earnings before market open on Tuesday.

Apple rejects claims it did not provide assistance in Pensacola shooting probe

Apple Inc on Monday said it rejects “the characterization that Apple has not provided substantive assistance” in the investigation into a shooting in Pensacola, Florida, last month.

Apple’s comments came after U.S. Attorney General William Barr called the fatal shooting of three Americans by a Saudi Air Force officer at a Florida naval base “an act of terrorism” and called on the technology company to help the Federal Bureau of Investigation unlock two iPhones involved in the case.

In its statement, Apple said it responded to all queries from law enforcement officials and turned over all information that it had access to. The company said it received the first inquiry on Jan. 6 but was not notified of a second iPhone until Jan. 8. It also said its engineering teams “recently had a call to provide additional technical assistance” to the FBI.

Visa to pay $5.3 billion to buy fintech startup Plaid

Visa Inc said on Monday it agreed to buy privately held software startup Plaid Inc in a $5.3 billion deal that will boost the payments giant’s access to the booming financial technology space.

The transaction highlights how traditional financial firms are willing to pay top dollar to acquire businesses which have established strong positions servicing the digital and cashless economy.

Plaid’s technology lets people link their bank accounts to mobile apps such as Venmo, Acorns and Chime, with the San Francisco-based firm saying its systems have been used by one in four people with a U.S. bank account.

The $5.3 billion price given in Monday’s statement is double what Plaid was reportedly valued at during its last fundraising, when it took a $250 million Series C round that was announced in December 2018.

It was later revealed by Plaid that both Visa and rival Mastercard Inc were investors in that round.

“Plaid is a leader in the fast growing fintech world,” Visa Chairman and CEO Al Kelly said in Monday’s statement.

“The acquisition, combined with our many fintech efforts already underway, will position Visa to deliver even more value for developers, financial institutions and consumers.”

Founded in 2013 and currently connecting with over 11,000 financial institutions across the United States, Canada and Europe, Plaid will be able to use the acquisition to leverage Visa’s global brand in expanding its own business, according to a source familiar with the matter.

Visa expects the deal to close in the next three to six months and benefit its adjusted earnings per share at the end of the third year.

Visa said it will fund the deal using cash on hand as well as debt that will be issued at a later date. The acquisition would not impact upon Visa’s previously announced stock buyback or dividend plans.

Visa and Plaid respectively used Lazard and Goldman Sachs as their financial advisors.