The euro hit a new one-year low this morning, falling as far as $1.3119 against the dollar, as worries of escalating violence in Ukraine kept the currency on the defensive ahead of the ECB policy meeting later this week.
The ruble also tumbled to a fresh low, as the dollar rose by 0.7% to 37.33 against the ruble in early trade. The plunge follows the European Commission President Jose Manuel Barroso's warning over the weekend that the situation in Ukraine was approaching "a point of no return."
Carlyle Group (NASDAQ:CG) is now the last to settle allegations against the world’s largest private equity groups, which previously accused the firms of conspiring to fix the prices of LBOs.
Although Carlyle has now agreed to pay $115M, it still denies wrongdoing and does not regard the settlement as an admission of guilt.
The decision follows similar settlements from the Blackstone Group (NYSE:BX), Goldman Sachs (NYSE:GS), KKR (NYSE:KKR), Bain Capital, Silver Lake Partners and TPG Capital, which were all accused of conspiring not to jump each others' deals.
"Most of the reason that banks are underearning relative to their historical norms ... is economic and not regulatory," says Richard Pzena (NYSE:PZN), who remains bullish on the TBTFs. Low interest rates, weak trading, and "government persecution" are the three factors, and - should these normalize - earnings could nearly double at Bank of America (NYSE:BAC) and Citigroup (NYSE:C), though JPMorgan's (NYSE:JPM) boost would be more modest. Goldman Sachs (NYSE:GS) is another favorite.
Another cheap sector is energy, says Pzena, and based on relative valuation against the broader market - whether price-to-book or price-to-earnings - the major integrated oil companies are selling near all-time lows.
What the market is missing, says Pzena, is the nature of oil investment. The old days saw capital spending one year, and boosted volume the next. Projects nowadays are far larger and require several years of spending before returns roll in. "We think those big new projects are going to perform and produce decent returns." HIs favorites: BP, RDS.A, RDS.B, XOM, TOT.
Yesterday, Tower Group (NASDAQ:TWGP) received a letter stating "the SEC is conducting an investigation and attaching a subpoena for various documents." (8-K)
The company also discloses A.M. Best has downgraded Tower's debt ratings further into junk territory. Tower says its ratings "remain under review with developing implications pending the planned merger with ACP Re Ltd."
Euro zone inflation continued to fall in August, with consumer prices rising just 0.3% Y/Y, well below the ECB's target of just below 2%.
The new figures released by Eurostat boost expectations that the central bank will announce further stimulus measures, and will likely result in lively discussion at the ECB's Sept. 4 policy meeting next week.
At Jackson Hole last Friday, ECB President Mario Draghi also hinted at further stimulus measures.
Morgan Stanley (NYSE:MS) is filing plans to build, own and operate one of the first U.S. compressed natural gas export facilities and submitted its application to the Department of Energy in May.
The move is the first sign that the bank is returning to the physical commodity markets even as it sells its global oil business.
Morgan Stanley, along with Goldman, are the only two Wall Street banks that are allowed to own and operate infrastructure of raw materials due to their "grandfather" status for any commodities activities they engaged in before 1997.
Bank of America (NYSE:BAC) has asked Judge Jed Rakoff to dismiss the jury verdict which found its Countrywide unit guilty of past mortgage fraud that resulted in a $1.3B penalty.
Known as the "hustle" case, the lawsuit accuses BofA of selling toxic mortgages to Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC), although the bank argues that the evidence at the trial does not support the claims.
The motion comes just one week after BofA agreed to a record $16.7B settlement with the U.S. government to settle charges over its role in mortgages leading up to the financial crisis.
Blackstone (BX +1.3%) was able to lure talent from the likes of Ziff Brothers Investments and Serengeti Asset Management and the new teams will each be given $100M, the permission to leverage that amount 4x, and a long leash.
Eventually Blackstone hopes to have up to 30 separate teams, each starting out with at least $100M.
The name of the hedge fund will be Blackstone Senfina Advisors (Senfina means "everlasting" in Esperanto).
The new traders aren't Blackstone employees, but can only manage money from the P-E firms clients. They'll be paid on a flat percentage management fee based on AUM, but the big cheese will come from bonuses tied to performance that needs to beat stock market averages.
The FHFA launched 18 lawsuits in 2011 against banks over about $200B in MBS. Many have settled - the latest being Goldman Sachs last week - but HSBC, Nomura (NYSE:NMR), and RBS (which is a defendant in the Nomura case) are among a group which hasn't.
The ruling from federal Judge Denise Cote sets up a Sept. 29 trial start date for HSBC, and the bank has estimated $1.6B in possible exposure.
It's another round of fee cuts from Vanguard on a range of its European mutual funds and ETFs, as well as the company's entire suite of LifeStrategy funds. Annual management charges on Vanguard's index mutual funds will now range from 8 to 38 basis points, and fees on four ETFs have been cut by 7 to 29 bps, effective Monday.
Vanguard came onto the fund scene in Europe five years ago and doubled mutual fund sales in 2013 to €8.6B, making it the 4th best-selling manager (from 20th in 2012). ETF flows look good as well, with $4.3B of inflows this year already surpassing $3.6B for all of 2013.
Watching the competition are BlackRock (BLK -1.5%) and Deutsche Asset & Wealth Management (DB -2.1%).
In contrast to cuts at the major investment banks, SunTrust (STI) plans to hire up to 200 (which would boost headcount by 20%) at its investment bank, according to Mark Chancy, head of wholesale banking. The plan is to expand its capital markets and stock research businesses, particularly targeting energy and healthcare.
"[SunTrust has] a competitive pay scale and a very attractive platform and culture to be able to acquire and retain what we believe is top talent," says Chancy.
“We are focused on making responsible real estate decisions to ensure the wise use of resources," says a Fannie Mae (OTCQB:FNMA -0.3%) spokesperson of the company's plans to sell it's sprawling headquarters as part of a consolidation of its 5 D.C. offices into a single leased office building.
Discover (DFS -0.5%) now ties with American Express for the highest customer-satisfaction ranking by cardholders, according to J.D. Power. It's the first time ever Discover has taken the top spot - it's come in 2nd to AmEx ever year since the survey began in 2007.
Behind Discover's big move, says J.D. Power's Jim Miller, are its efforts to improve customer service both over the phone and online, and TV viewers are certainly aware of the large volume of Discover commercials emphasizing the friendliness of its people.
Another long-time issue - that Discover's cards aren't accepted as widely as Visa and MasterCard - is fading, with the number of U.S. locations taking Discover up 24% since 2009 vs. 15% for Visa and MC.