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UBS Ends $10 Billion State Backstop That Helped Seal Merger

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The decision offers reassurance on “the health of the Credit Suisse non-core portfolio,” Citigroup analysts said in a note. “The early voluntary repayment could potentially also help in other matters, such as negotiating the retention of the Credit Suisse Swiss business.” 

The fate of the Swiss bank has been widely watched as Swiss-based companies and politicians have voiced concerns over the market power that the combined bank would exercise. UBS plans to make a decision in the third quarter on whether it will fully integrate it with its own Swiss unit or seek another option such as spinning it off or listing it publicly.



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Secular bull markets versus industrial revolutions



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Borrowers Flock to Bonds as Fed's Anti-Inflation Vow Hits Loans

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The high-yield bond market is becoming a favorite of companies that once raised cash using leveraged loans, luring borrowers with lower costs and a wealth of investor demand.

US firms have sold $55 billion of secured notes in the junk-bond market so far in 2023, marking a 17% year-over-year increase, according to CreditSights data. It’s the biggest issuance jump in more than a decade — and an indication that companies are replacing floating-rate debt in the wake of the Federal Reserve’s most-aggressive monetary tightening cycle in decades.

“It’s a good way to balance each of these markets off each other, and honestly, a better cost of capital,” said John Cokinos, global head of leveraged finance at RBC Capital Markets. “You can hedge naturally by just having fixed-rate debt.”



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Colombian President Says No One is Above the Law as Son Charged

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Colombian President Gustavo Petro said that an investigation into whether his son took money from organized crime must be allowed to follow its course, since “no one can be above the law.” 

A prosecutor said Thursday that Petro’s eldest son Nicolás put some of the tainted money to his father’s successful 2022 campaign and kept some of it for himself. 

Gustavo Petro, center, waves to supporters alongside his son Nicolas Petro Burgos, right, on election night in Bogota, Colombia, on May 29, 2022.

The scandal is likely to further weaken the leftist government’s ability to pass its radical health, pension and labor reforms, and may also hurt its performance in upcoming regional elections in October. 

“The Petro administration lost a lot of leverage with this,” said Sergio Guzman, the director of Colombia Risk Analysis, a Bogota-based consultancy. “It was going to have a difficult time to move things through in congress, but this makes it all the more difficult.”

Even so, people who think Petro is now finished are “jumping the gun”, Guzman said. 

Investors often welcome developments that hinder Petro’s welfare reforms, fearing these will blow out the fiscal deficit. The peso was 1.9% stronger at 10.40 a.m. in Bogota, the best performance in emerging markets. 



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Chile fires the starting gun on EM easing cycle

This article from Schroders may be of interest. Here is a section:

The decision by policymakers to cut rates by a consensus-busting 100bp to 10.25% on Friday made Chile the first major EM to lower its key policy rate since the aggressive post-pandemic tightening cycle across the emerging world. With the economy struggling, a marked improvement in the outlook for inflation encouraged policymakers to get on with the job of reversing past hikes that saw Chile’s policy rate climb from just 0.5% in mid-2021 to a peak of 11.25% in late-2022.

As we noted earlier this year, further steep declines in inflation, led by food, should make space for additional easing in the months ahead.

Who’s next?
Attention now turns to which EM central banks are likely to be the next to start cutting rates. Prior to lowering rates on Friday, the CBC was one of a handful of EM central banks that had already been on pause for longer than usual. Others in that category include Brazil and the Czech Republic, where monetary policy announcements are due this week on Wednesday and Thursday respectively.



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LVMH Drops Most in Year as Results Stoke US Worries

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Mixed set of results with the stronger-than-expected recovery in China offsetting the decline in cognac, mainly in the US

“Demand for entry-price leather goods, jewelry and cognac from US aspirational customers will not recover immediately and visibility for the rest of the year remains low,” notably due to an uncertain macro-economic environment in China.



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Rolls-Royce Stock Surges as Turnaround Under CEO Takes Hold

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The upbeat outlook is a vindication for Chief Executive Officer Tufan Erginbilgic, who is in the middle of an extensive turnaround after calling the prime UK manufacturer a “burning platform” shortly after taking over at the start of the year.

The company, which primarily makes engines for widebody jets that connect long-haul destinations, saw demand wiped out at the height of the pandemic when airlines were forced to ground fleets amid travel restrictions and quarantines. 

“Better profit and cash generation reflects greater productivity, efficiency and improved commercial outcomes,” Erginbilgic said in the statement. “Despite a challenging external environment, notably supply chain constraints, we are starting to see the early impact of our transformation in all our divisions.”



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Unilever Shares Gain on Resilient Demand as Inflation Cools

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Investors are scrutinizing the first set of results presented by Chief Executive Officer Hein Schumacher for hints of his strategy to revive Unilever’s sluggish performance. The new CEO, weeks into the job, raised the full-year forecast slightly, predicting revenue growth of more than 5% this year. The guidance may be conservative, as analysts are forecasting 6.1%.

The company chose an external CEO to help fix its bureaucratic culture and deal with critiques that it had become too focused with the so-called “social purpose” of the consumer products it sells. 

Schumacher, the former boss of Dutch dairy cooperative Royal FrieslandCampina, is expected to revisit the debate over splitting food brands like Hellmann’s mayonnaise from the faster-growing personal care, beauty, and wellbeing units.



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A Bug Exterminator That Trades Like Nvidia

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None of this bodes particularly well for humanity, of course, and there are signs that the warming climate could increase the demand for pest control even further into new areas. The termite population is getting hungrier. The mosquito season is growing longer. And some bugs, including the German cockroaches, are losing their sensitivity to existing pesticides. One way or another, Americans — led by those newly christened Floridians and Texas that arrived in the past several years — are going to have to learn to live in a world full of unpleasant critters, and that’s likely to add to the extermination industry’s reputation as a recession-proof juggernaut.



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Cocoa Factories Slowing Down Spell Trouble for Chocolate Makers

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“The demand issues are multifold,” said Judy Ganes, president of consultancy J. Ganes Consulting, who has followed the market for more than 30 years. “There’s not just cocoa prices that are high, but sugar prices are also high, and manufacturers always look for ways to meet margins and work to put fewer chocolate chips in a cookie, or they shrink the bar sizes.”

Factories usually process cocoa several months before products are turned into chocolate. That means the slowdown likely signals the industry is expecting less demand ahead. Barry Callebaut AG, the world’s largest maker of bulk chocolate, said earlier this month that its sales volume fell 2.7% in the first nine months of the year, with its gourmet and specialists’ business seeing the biggest drop. 
 



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