Goldman Sachs is still grappling with the discrimination issues highlighted in the class action lawsuit filed by the bank’s female employees in 2010, according to a report in the Financial Times. While there are fewer signs of overt sexism, women complain of inaccessible cultures, exclusion and a lack of support. “I would’ve been better compensated if I wasn’t a mom, for guys, most of the people I interacted with, their wives didn’t work”, said one woman who recently left the bank. Among other complaints, female employees note Goldman’s culture remains less receptive to women who have no interest in sports and the difficulty of confronting controversial issues without damaging their careers, as one junior employee said. Goldman Sachs agreed to pay $215m, one of the biggest payouts in US corporate history, to settle the discrimination case.
Investor sentiment towards Japanese equities is shifting as its larger peers, the US and China, face growing headwinds. The Topix index has reached its highest level since 1990, driven by rising inflation, investment by domestic firms and Warren Buffett's endorsement. Experts predict that Japan could see further gains of between 10% and 15%. Investment divisions at Morgan Stanley, Man GLG and JPMorgan Asset Management all expect more upside, while EPFR data reveal that overseas funds have boosted stakeholdings in Japan this month, shifting $15.9bn in April alone.
While cash has remained attractive given the subdued performance of stocks and bonds, the risk of missing out on bigger gains elsewhere is growing. Investors staying with cash run the risk of losing out on the appeal of other opportunities beyond short-term gains. However, adjusting to longer-term funds may present attractive rewards despite interest income being only slightly above inflation. Reputable short-term government bonds and corporate bonds are also worth considering as alternative opportunities.
The Export-Import Bank of China and “several other Chinese banks” will fund the $3bn debt to build the controversial East African Crude Oil Pipeline. The announcement ended speculation that the project would stall after dozens of lenders and insurance companies refused to take part in financing. Uganda and Tanzania plan to build the 1,445 km conduit to transport crude oil from two oilfields at Lake Albert in northwestern Uganda to the port of Tanga in Tanzania on the Indian Ocean. The pipeline is expected to transport 216,000 bpd of oil to international markets. Financing for the pipeline is set at a 60:40 debt-to-equity ratio; the US$3bn will be secured as debt, and the remaining $2bn will be financed by shareholders through equity contributions. French oil major TotalEnergies owns the biggest stake in the project at 62%, and China National Offshore Oil Corporation owns the remaining 8% of the project.
The chances of the Federal Reserve raising interest rates next month have fallen from 36% to 18.6%, and some experts believe the central bank won't raise rates again in June. Wall Street had been betting on the latter scenario, after the Fed meeting earlier this month created hopes that it was done with rate hikes, but a slate of strong economic data last week led to some nerves. Key data points set for release before the June 14 rate decision include the April Personal Consumption Expenditures price index, the May jobs report, the May Consumer Price Index and the May Producer Price Index.
US companies are rushing to sell debt in case the country’s debt-ceiling stand-off causes turmoil during the summer. Highly rated US companies have issued bonds worth $112bn so far this month, up from $46bn in May and over triple the amount sold in April. Fears have intensified over the US economy entering a downturn and now broader concerns around the US government running out of cash. The x-date, the moment at which the government runs out of money and risks defaulting on its debt, could come as soon as 1 June.
Profits at Western banks in China slumped in 2021 due to COVID-19 lockdowns and tensions between the US and China, according to data seen by the Financial Times. Credit Suisse, Deutsche Bank, Goldman Sachs and HSBC all reported losses, while Morgan Stanley's profits fell. UBS and JP Morgan were the only banks to post higher profits, although HSBC's unit lost less money than in previous years. Seven Western banks have units in China and all have been operating at losses in the country for years, investing in lossmaking outfits in the expectation they would eventually prove profitable.
Morgan Stanley CEO James Gorman has announced that he will be stepping down within a year, but will remain as executive chairman with a yet-to-be-revealed successor to take his place as CEO. Under Gorman's leadership since 2010, the firm made a series of major acquisitions, including Eaton Vance, E*Trade and Solium Capital, transforming it into a wealth management firm that manages up to $15tn. Gorman has so far made no announcement regarding the length of his tenure as executive chairman. Morgan Stanley's co-presidents Ted Pick and Andy Saperstein, along with head of investment management Dan Simkowitz, are viewed as potential successors to Gorman.
While investment in India's commercial property sector is still a fraction of that in other Asian markets, economic reforms mean the country's real estate industry is undergoing a "once-in-a-generation shift and opportunity for companies and investors," writes Nicholas Spiro in the Financial Times. India has a national digital infrastructure underpinned by a biometric identity scheme, a single goods and services tax, and a regulatory regime to encourage real estate investment trusts, among other changes. Furthermore, India is proving to buck global real estate trends; for example, Indian office occupancy rates are higher because of the physical presence needed for tech services employees to do their jobs.
Beijing has reportedly launched punitive action against American chipmaker Micron over concerns regarding its products’ network security, thus denting the tech giant’s revenues by a “single-digit percentage”. This retaliation is most likely in response to the extensive chip export controls introduced by Washington last October. Foreign policy experts suggest that the use of tough rhetoric against China may hurt the possibility of cooperation with the west. The US successfully persuaded European countries to take a harder line over China, and an early test will come this week when China’s commerce minister Wang Wentao becomes the first senior official to visit Washington since 2020. Thus, global efforts are being made to build alternative chip supply chains that have the impetus of worsening relations between China and Taiwan, the country that produces more than 60% of the world’s chips and 90% of the most advanced. As the tech battle between the US and China continues, another Big Read suggests the AI revolution is transforming education, forcing schools and universities to restructure how they teach and test students.
JPMorgan Chase is to spend $15.7bn on new initiatives, including investments in technology, marketing and hiring, according to co-head of the bank’s consumer and community division, Marianne Lake. Her unit is set to spend $7.9bn on new investments, which represents an $800m increase from 2022. The announcement comes on the back of a year in which smaller lenders have faced pressure and represents the latest example of the widening gap between small and large US banks. The wider spending will be $2bn more than the bank spent last year.
