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Japanese bank Nomura says it’s facing a loss of $2 billion as a hedge fund blow up

  • Japanese investment bank Nomura announced on Monday it’s facing a $2 billion loss on a US client.
  • Nomura said in a press release it didn’t believe the loss would impact the company’s solvency.
  • The announcement follows a wild week for markets dominated by a reported liquidation of positions held by Archegos Capital Management.

Japanese bank Nomura announced on Monday that it is facing a $2 billion loss.

The financial hit, it said in a statement, came out of “a significant loss arising from transactions with a US client.” The firm declined to name the client.

Nomura said it would no longer be issuing planned US dollar senior notes, noting that “an event that occurred after pricing that could impact the company’s consolidated financial results,” according to Reuters.

Following the news, Nomura’s shares were trading down 15% Monday morning.

The loss follows a wild week for markets dominated by a reported liquidation of positions held by Archegos Capital Management, an investment firm led by Tiger Asia founder Bill Hwang. The liquidation appears to have been led by Goldman Sachs and Morgan Stanley.

The two investment banks sold billions of dollars worth media and Chinese stocks, with ViacomCBS and Discovery dropping as much as 35% on the heavy selling. Chinese companies Tencent, Baidu, and Vipshop also saw a major drop. Market watchers told The Wall Street Journal the “size and speed” of the sell-off was “unprecedented.”

Despite the sell-off, the market saw a last-minute rally on Friday, with the Dow ending up 450 points and the S&P 500 closing at a record high.

Nomura said the $2 billion loss shouldn’t impact operations.

“As of the end of December 2020, Nomura maintained a consolidated Common Equity Tier 1 ratio of over 17 percent, which is substantially higher than the minimum regulatory requirement,” the statement continued. “Accordingly, there will be no issues related to the operations or financial soundness of Nomura Holdings or its US subsidiary.”

Nomura operates in 30 countries worldwide, as has total assets of $432.2 billion.

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European Economics Preview: UK Mortgage Approvals Data Due

Mortgage approvals data from the UK is due on Monday, headlining a light day for the European economic news.

At 1.00 am ET, consumer and industrial confidence survey results are due from Finland.

At 4.00 am ET, IHS Markit releases Austria’s manufacturing PMI survey results.

Half an hour later, the Bank of England publishes mortgage approvals data for February. The number of mortgages approved in February is seen at 95,000 versus 99,000 in January. At 6.00 am ET, February retail sales data is due from Ireland. Sales had declined 21.8 percent on month in January.

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Massive ship blocking the Suez Canal has been freed

  • After being stuck since Tuesday, the Ever Given is now afloat.
  • The massive cargo vessel caused a blockage in the Suez Canal, straining global trade.
  • It’s still not known when the canal will be open the hundreds of ships waiting to enter.

A massive container ship stuck in the Suez Canal has been refloated, Bloomberg News reported, citing shipping services provider Inchcape. Inchcape said in a tweet the boat is now being “secured.”

The Ever Given had been stuck sideways across Egypt’s canal since Tuesday, clogging a vital artery for the global economy and forcing multiple ships to turn around and reroute through Africa.

Tugboats are now working on straitening the vessel’s course so it can continue moving up the canal, the Wall Street Journal reported.

“It is good news,” Osama Rabie, chairman of the Suez Canal Authority, told The Journal. “We are not finished yet, but it has moved.”

It’s unclear how soon the canal would be opened up to the hundreds of ships that are stuck waiting for it to clear.

The 1,300 foot-long cargo ship, one of the world’s largest, became wedged in the Suez Canal early Tuesday morning. Egyptian officials initially blamed the weather, including strong winds and a dust storm. But on Saturday, officials said the logjam could be the result of “technical or human errors.”

The nearly six-day blockage forced some ships to take a costly, dangerous detour thousands of miles around the southern tip of Africa, and was reportedly costing the global economy $400 million an hour in delayed goods.

Tugboats and dredgers had been working to free the ship for days with little success.

In video shared on Twitter, boats could be heard honking after the ship was freed. Another clip appeared to show the ship moving again as the sun was rising.

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Finnish Current Account Balance Swing To Deficit

Finland’s current account balance swung to deficit in January, data from Statistics Finland showed on Friday.

The current account balance registered a deficit of EUR 0.1 billion in January versus a surplus of EUR 2.041 billion in December.

The balance of goods trade showed a surplus of EUR 0.2 billion versus EUR 1.384 billion in the previous month.

The services trade balance registered a deficit of EUR 335 million in January versus a surplus of EUR 146 million in the previous month.

The primary income account showed a surplus of EUR 321 million, while the secondary income account logged a shortfall of EUR 256 million.

On a 12-month moving average basis, the current account surplus was EUR 1.4 billion.

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Philippine Trade Deficit Falls In January

The Philippine trade deficit decreased in January from the last year amid declines in both exports and imports, the Philippine Statistics Authority showed on Friday.

Exports declined 5.2 percent yearly in January, after a 1.7 percent increase in December.

Imports fell 14.9 percent annually in January, following an 8.2 percent decline in the previous month.

The trade deficit decreased to $2.421 billion in January from $3.504 billion in the same month last year. In December, the deficit was $2.148 billion.

Among major commodity groups, fresh bananas dropped 46.9 percent yearly in January and other manufacturing goods declined 12.8 percent. Exports of machinery and transport equipment and coconut oil fell by 11.9 percent and 11.7 percent, respectively.

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Malaysia Industrial Production Growth Slows In January

Malaysia’s industrial production rose at a softer pace in January, data from the Department of Statistics showed on Friday.

Industrial production rose 1.2 percent year-on-year in January, after a 1.7 percent increase in December. Economists had expected a 0.7 percent rise.

The growth in production was mainly driven by a rise in production of manufacturing industry.

Manufacturing output gained 3.5 percent yearly in January, after a 4.1 percent increase in the previous month.

Among other sectors, the mining and quarrying output decreased 4.5 percent and electricity output fell 4.6 percent.

On a monthly basis, industrial production rose 0.1 percent in January.

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Dutch Exports Rise In January

Dutch exports and imports increased in January, figures from the statistical office CBS showed on Friday.

Merchandise exports grew 3.6 percent year-on-year in January, after a 0.9 percent fall in December. In November, exports rose 1.1 percent.

The latest growth in exports was the highest since January last year, when it was up 3.9 percent.

In January, more machines and chemical products were exported, the agency said.

Imports increased 1.6 percent annually in January, after a 1.0 percent decline in the prior month. In November, imports grew 1.9 percent.

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UK GDP Contracts In January

The UK economy contracted at the start of the year due to the restrictions in place to control the pandemic, but the pace of fall was slower than economist’ expectations, data from the Office of National Statistics revealed on Friday.

Another report from the ONS showed that the January monthly fall in goods imports and exports were the largest monthly falls since records began in January 1997.

Gross domestic product declined 2.9 percent on a monthly basis, reversing an expansion of 1.2 percent in December. However, this was slower than the 4.9 percent contraction economists’ had forecast.

January’s GDP was 9.0 percent below the levels seen in February 2020, compared with 4.0 percent below October 2020, data revealed. In January, GDP was down 9.2 percent from the same period last year.

Despite a sizeable hit to January GDP, the economy looks poised for a decent recovery in activity through the second quarter, James Smith, an ING economist, said. But Brexit disruption, which contributed to a huge hit to trade at the start of 2021, will be slower to resolve.

The monthly decline in GDP was largely driven by falls in consumer-facing services industries and education. Services output was down 3.5 percent in January.

Likewise, industrial production fell 1.5 percent as the manufacturing shrank 2.3 percent, which was the first fall since the initial pandemic-driven fall in output in April 2020.

Economists had forecast industrial output to fall 0.6 percent and manufacturing to decline 0.8 percent.

After a 2.9 percent drop in December, the construction sector grew 0.9 percent in January driven by growth in new work.

After the end of the Brexit transition period, exports to EU countries declined 40.5 percent and imports from EU slid 28.9 percent, the ONS reported.

At the same time, overall exports of goods plunged 18.3 percent and imports were down 22.8 percent in January. Consequently, the visible trade gap narrowed to GBP 9.82 billion in January from GBP 14.3 billion in December. At the same time, the total trade deficit decreased to GBP 1.63 billion from GBP 6.2 billion a month ago.

While the plunges in exports and imports were not entirely due to Brexit, they increase the chances that Brexit will have a longer lasting influence on trade flows, Paul Dales, an economist at Capital Economics, said.

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German Inflation Accelerates As Expected

Germany’s consumer price inflation accelerated in February as estimated initially, latest figures from Destatis showed Friday. The consumer price index rose 1.3 percent year-on-year following a 1.0 percent increase in January, in line with the flash estimate. Prices rose for a second straight month.

Compared to the previous month, the CPI climbed 0.7 percent in February after a 0.8 percent increase in January. That also matched the initial estimate.

Inflation based on the EU measure of HICP was steady at 1.6 percent in February, in line with the flash reading.

The HICP rose 0.6 percent month-on-month in February, matching the initial estimate.

Energy prices rose 0.3 percent annually after a 2.3 percent fall in the previous month. Food prices climbed 1.4 percent following a 2.2 percent increase in January.

Excluding energy prices, the rate of inflation was 1.4 percent in February.

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Spanish Retail Sales Drop Sharply In January

Spain’s retail sales declined sharply in January, data published by the statistical office INE showed on Friday.

Retail sales decreased by an adjusted 9.5 percent year-on-year in January, slower than the 1.5 fall in December.

On an unadjusted basis, retail sales slid 10.9 percent versus a moderate 0.6 percent decrease in the previous month.

The annual fall was largely driven by a 13.8 percent fall in non-food product sales. Food sales also decreased in January, but at a marginal rate of 0.4 percent.

On a monthly basis, retail sales were down 7.6 percent, in contrast to December’s 1.3 percent growth.