1. Global Stocks Rally; Silver Jumps to 2013 High
Global stocks and U.S. futures climbed as concern over volatile retail trading receded and China took steps to ease a cash crunch. Silver surpassed $30 an ounce for the first time since 2013 in a Reddit-fueled buying frenzy. GameStop, AMC extended gains in early U.S. trading. The MSCI Asia Pacific Index added 1.7%, the biggest gain in three weeks. Silver futures surged as much as 12% as speculators flocked to the metal and a weekend buying binge overwhelmed online sellers of bars and coins.
Futures on the S&P 500 Index increased 0.9% as of 8:56 a.m. New York.
The Stoxx Europe 600 Index declined 1.9%.
The MSCI Asia Pacific Index advanced 1.6%.
The MSCI Emerging Market Index advanced 1.6%.
2. Biden’s Promised $1,400 Checks Are Dividing the White House
Even within President Joe Biden’s White House, there’s debate about how to meet his promise to issue Americans another $1,400 each in stimulus checks. At least two of the president’s top economic advisers, Heather Boushey and David Kamin, have privately expressed reservations about the size of the checks and at what level they would begin to phase out for higher-income people. The aides worry that the checks will cost so much that there won’t be enough left over in Biden’s proposed pandemic relief bill for other priorities – supplemental unemployment benefits, an expanded child tax credit, or aid to states and local governments.
3. Apple Selling Bonds After Cautious Outlook Masks Best Quarter
Apple is selling bonds just days after a blowout period for sales, still eager to take advantage of cheap borrowing costs amid a cautious earnings outlook. The company is issuing debt in six parts. The longest portion of the offering, a 40-year security, may yield between 115 and 120 basis points above Treasuries. Apple is coming off a quarter in which revenue topped $100 billion for the first time. Executives didn’t provide an official forecast in reporting earnings but warned that sales growth from AirPods and other wearables will decelerate in the current period. The tech giant said it will use the proceeds for general corporate purposes, including buying back stock and paying dividends. It may also be used in funding for working capital, capital expenditures, acquisition and repayment of debt.
4. India to Borrow Big for Nearly Half-Trillion Dollar Budget
India unveiled a spending plan worth almost a half-trillion dollars as Prime Minister Narendra Modi’s government seeks to dig Asia’s third-largest economy out of a pandemic-induced slump. Fueled by bigger-than-expected spending deficits and borrowing, as well as sales of government assets and dividends from state firms, the 35 trillion rupees ($480 billion) budget sent bonds tumbling and stocks rallying. It also aims to bolster the nation’s financial stability, by increasing the foreign investment cap in insurance to 74% from 49%, planned to set up separate firms to manage stressed debt held by banks and to buy investment-grade bonds to boost confidence in the nation’s corporate debt market.
5. HSBC Doubles Down on China With New Greater Bay Area Office
HSBC will establish an office to spearhead its strategy in China’s fast-growing Greater Bay Area, stepping up its bet on the world’s second-largest economy. Daniel Chan, currently head of business banking at HSBC in Hong Kong, was named head of the unit, which will oversee the strategy to “capture opportunities” in Guangdong, Hong Kong and Macau. The move comes as Hong Kong leader Carrie Lam last week endorsed a stronger presence for HSBC in the former British colony, where it has come under criticism for freezing the accounts of activists and supporting the financial hub’s sweeping national security law. Hong Kong’s government has embraced closer ties with China since unrest hit the city in 2019, promoting the Greater Bay Area concept that seeks to create a Silicon Valley-style regional economic zone with the nearby mainland cities of Guangzhou and Shenzhen.
6. Melvin Lost 53% in January, Hurt by GameStop, Other Bets
Melvin Capital lost about 53% in January on GameStop and more than a dozen other bets after the firm found itself on the receiving end of a short squeeze started by retail investors motivated on Reddit. Melvin now has the lowest amount of leverage since the firm was founded in late 2014. The hedge fund said last week that it had “repositioned the portfolio,” including covering its GameStop short.
7. Nintendo Smashes Expectations With Best Quarter Since 2008
Nintendo raised its annual forecasts a second time after continued momentum for the Switch console helped the company to its best quarterly earnings since 2008. The Kyoto-based games company reported operating profit of 229.7 billion yen ($2.2 billion). Nintendo now expects full-year Switch sales of 26.5 million units, having already surpassed its previous projection of 24 million. The company also boosted its forecast for operating profit by 24% on the back of a surge in sales brought on by the coronavirus outbreak and hit game Animal Crossing: New Horizons. Sales remained strong even after the holidays and Nintendo has sufficient components supply for now despite industry-wide shortages.
8. London Bankers Face Location Limbo as ECB Targets Brexit Moves
A senior banker hired to work in London last year was asked just weeks later to pack his bags and move to Europe. Some trading managers at one U.S. bank still don’t know whether they’ll be able to stay in the U.K., while a young trader starting a new job at a European lender this month is waiting to learn just where that job will be. Despite years of planning for Brexit, global banks and their employers face continuing uncertainty as a threadbare trade deal for financial services and a pandemic keep the world in flux. Meanwhile, regulators are cranking up pressure on banks to execute relocation plans that were set out before Britain left the bloc on Dec. 31.
9. EU Wins Boost From Bayer; U.K. Gets Vaccines: Virus Update
Chancellor Angela Merkel will hold crisis talks with pharmaceutical executives, regional German leaders and European Commission officials Monday to speed up the continent’s stuttering vaccination push. In a shot of welcome news before the meeting, Bayer agreed to produce CureVac NV’s experimental coronavirus vaccine to help speed up the roll-out of a promising shot. Meanwhile, Valneva, a French vaccine developer, said the U.K. government exercised an option to order 40 million extra doses of its shot for next year. Infections continued to show a slowing trend across many regions of the globe, including the U.S., though concerns remain about new variants. Italy will ease restrictions for most of the country starting Monday.
10. JPMorgan Strategists: Reddit Army Won’t Spur Big Market Drop
The battle between retail traders and hedge funds is unlikely to cause a major setback for markets, according to JPMorgan Chase & Co. Major drawdowns have usually occurred when there’s a worse outlook for growth, as well as signs of overvaluation beyond price-earnings ratios and credit spreads, JPMorgan strategists led by John Normand wrote in a note Friday. Few markets show signs of extraordinary price momentum or excessive investor leverage, he said. “The retail versus hedge fund conflict unfolding currently should be much less severe than the roughly 10% drops that have been occurring almost annually for the past two decades,” Normand wrote. “Our bubble tracker based on extreme price momentum, valuations and investor leverage isn’t flashing red at the asset class level, even if it might at the security level.”