Bet on Fed Rate Cut Pays Off
A bet was made in January that the Federal Reserve would lower its benchmark rate to 1.5% by the end of the year, and it appears to have been closed for a profit of $10 million after almost becoming worthless in February due to banking turmoil. The bet was a 100,000-contract call spread in Secured Overnight Financing Rate options, which was purchased for $3.75 million. On Wednesday, 20,000 of these contracts were sold, indicating the near-complete unwind of the original trade, following two other significant sales of the structure since last week.
US Equity Futures Rise
US equity futures rose, as investors bet that the peak in interest rates is near, and bank turmoil will further ease. This caused the dollar to decline, and the retail shares led gains as the Stoxx Europe 600 Index rose to a three-week high. Hennes & Mauritz AB’s (ST:HM-B) shares jumped the most since June 2001 after the Swedish clothing company’s results surpassed expectations. S&P 500 contracts and those on the Nasdaq 100 both climbed by at least 0.6%.
Large US Banks Gain Deposits
In the aftermath of SVB’s collapse (NYSE:SVB), the 25 largest US banks gained $120 billion in deposits, according to Federal Reserve data. Meanwhile, all the US banks below that level lost $108 billion in deposits over the same period, marking the largest weekly decline in smaller banks’ deposits in dollar terms on record. More than $220 billion flowed into money-market funds over the past two weeks, according to data from Refinitiv Lipper.
Bonus Pool Decreases on Wall Street
Wall Street bonuses decreased by 26% last year as a result of a decline in dealmaking and banks’ efforts to contain costs that weighed on compensation. According to an analysis by New York State Comptroller Thomas DiNapoli, the industry-wide bonus pool decreased to $33.7 billion, down 21% from 2021. This resulted in the typical bonus paid to employees in New York’s securities industry falling to $176,700, the lowest since 2019.
Disney Limits Board Control
Walt Disney Co. (NYSE:DIS) approved changes last month that limit the external control by the board that governs its theme park, ahead of a controversial takeover by Governor Ron DeSantis’ hand-picked representatives. The changes could limit the powers of the new board members for decades and extend the clash between Disney and Republicans in the state. One of the new board members, Bridget Ziegler, accused Disney of arrogance on Twitter, stating that “we won’t stand for this and we won’t back down.”
H&M Surprises with Profit
Hennes & Mauritz’s (ST:HM-B) shares rose on Thursday as the world’s second-largest fashion retailer announced a surprise profit and reduced excess stock to the lowest level in years. The Swedish group is making progress on its cost-cutting programme and anticipates that raw material price increases will ease towards the end of the year. In the three months to the end of February, operating profit at H&M rose to SKr725mn from SKr425mn a year earlier. This was well ahead of analysts’ expectations of a loss of SKr1.2bn, although it included a SKr1bn gain from revaluing its stake in second-hand chain Sellpy.
Binance Sued by Regulators
Binance Holdings Ltd., a crypto exchange, has been sued by regulators for running a “VIP” program that gave high-frequency traders faster access to the exchange’s core systems than other customers. The lawsuit also claims that Binance allowed U.S.-based trading firms to access its international derivatives market, Binance.com, despite publicly declaring that market off-limits to U.S. customers. The trading firms used offshore entities to circumvent the ban, according to the Commodity Futures Trading Commission.
China Vanke Posts Profit
China Vanke Co. (HKSE:2202), the nation’s second-largest developer by sales, posted 22.6 billion yuan ($3.3 billion) in annual profit, arresting an earnings slump and highlighting the divide between private firms and those with state support amid a liquidity crisis. The Shenzhen-based company said that its profit growth was largely flat for 2022, after dropping 46% a year earlier, according to a filing on Thursday.
Mubadala Bids for Diaverum
Mubadala Investment Co. is one of the final bidders for Bridgepoint Group Plc’s (LSE:BPT) European dialysis clinic chain Diaverum, a deal that could value the business at about $2.5 billion. The Abu Dhabi sovereign wealth fund is exploring the acquisition of the Sweden-based company. The deal is still private, and the sources requested anonymity.
Roku to Restructure Business
Roku Inc. (NASDAQ:ROKU) is planning to restructure its business and cut about 200 employees, or 6% of its workforce. The San Jose, California-based company said it will prioritize projects that it believes will have a higher return on investment and will vacate or sublet some unused office space. Roku, which makes set-top boxes used to stream services like Netflix, estimates one-time costs of $30 million to $35 million to cover severance payments and other charges. The majority of job cuts will be completed by the end of the second quarter of the fiscal year.