2025-05-16 17:43

Clients hit after Trump's tariffs sparked jump in Swiss franc Clients' combined losses run into hundreds of millions, source says UBS says it's 'analyzing potential unexpected effects' LONDON/ZURICH, May 16 (Reuters) - UBS (UBSG.S) , opens new tab is in talks to compensate some clients for losses after they were sold complex foreign-exchange derivatives that wiped out much of their investments when U.S. President Donald Trump's tariffs sparked wild moves in currencies, sources familiar with the matter said. Several hundred customers of the Swiss banking giant are affected, the sources said, some of whom have seen a significant hit to their investments. They include clients in Switzerland and their combined losses run into hundreds of millions of francs, one of the sources said. Sign up here. Among those asking for compensation from UBS for the losses incurred are wealthier retail customers who argue they were sold complex products that they did not understand, the second source said, adding that they were only suitable for sophisticated investors. In one example, a UBS client has lost more than 50% of an investment made in February into an FX derivative designed to bet on the direction of the dollar versus the Swiss francs, according to a document detailing the performance of the investment dated May 9 and seen by Reuters. That client, together with three others, have accumulated more than 4 million Swiss francs ($4.7 million) in losses from the derivatives, one of the sources with knowledge of their cases said, speaking on the condition of anonymity because of the sensitivity of the matter. Reuters could not ascertain the total amount of clients' losses and how much UBS is considering in compensation. "The extreme volatility in the markets of the last few weeks has impacted certain investments," UBS said in a statement in response to questions. "The vast majority of our clients hold diversified investment portfolios and have done relatively well in this volatile time. We are analyzing potential unexpected effects with our clients," it added. While the scale of the client losses reported by sources so far is a small fraction of the $5.9 trillion overseen by UBS, the world's No. 2 wealth manager, it is rare for banks to consider compensation. Banks are required to ensure financial products are suitable for the clients to which they sell them. Discussions over client losses come at a sensitive time for UBS, with the Swiss bank awaiting a government proposal on how much additional capital it might have to hold to reflect its bigger size following its rescue of Credit Suisse in March 2023. A spokesperson for Swiss Financial Markets regulator FINMA said it does not comment on its supervisory activities or individual cases and that it closely monitors developments at the supervised institutions, including with partner authorities, without further elaborating. Trump's announcement of tariffs in early April sparked a sharp drop in the dollar and the biggest monthly gain for the safe-haven Swiss franc since 2015. UBS sold clients 'conditional target redemption forwards', a February prospectus of the product seen by Reuters and sources said. These are exotic derivative FX products that allow clients to buy dollars and sell Swiss francs at a more favourable rate than the prevailing market rate, but can cause big losses if the rate moves past certain levels over a set period of time, according to the prospectus. Losses accumulate and can exceed an initial investment. In the disclaimer accompanying the prospectus, UBS said that "the instruments are not suitable for all investors, and trading in these instruments is considered risky and is only suitable for experienced investors". It also added that "these instruments may involve a high degree of risk and be highly volatile in response to fluctuations in interest rates, exchange rates, and other market conditions." SUITABILITY The Swiss Association for the Protection of Investors, a non-profit organization, told Reuters that more than 30 people had come forward including via a platform launched on Thursday to report damages suffered from structured currency derivative products marketed by UBS. Most of the clients who had got in touch were wealthy private individuals with assets of more than 1 million francs, but who lacked the relevant knowledge of the products such as those sold by UBS, the association said. Swiss media including NZZ, SonntagsZeitung and blog Inside Paradeplatz previously reported that several hundred clients were affected by the losses. Target redemption forwards are typically sold to corporate clients and well-heeled and sophisticated investors. In the example of the product that caused more than 50% losses, the investor agreed to buy dollars and sell francs in $300,000 chunks if the market rate moved above or below certain thresholds, according to a prospectus for the investment dated February 10 and seen by Reuters. But below a 'kick-in level' defined in the terms of the investment, the customer is forced to buy dollars at an exchange rate that locks in a loss, the term sheet showed. Asked on an earnings call with journalists at the end of April about clients facing FX losses, CFO Todd Tuckner said that "when there's volatility, there's going to be clients that generate gains from that volatility and clients who generate losses." https://www.reuters.com/business/finance/ubs-talks-with-clients-over-fx-derivative-losses-trump-volatility-sources-say-2025-05-16/

2025-05-16 17:40

May 16 (Reuters) - Galaxy Digital, founded by Mike Novogratz, made its Nasdaq debut on Friday, capping off a momentous week for cryptocurrency in public markets, with Coinbase joining the S&P 500 and retail brokerage eToro also going public. Galaxy Digital (GLXY.O) , opens new tab, a crypto investment company that also specializes in artificial intelligence data center infrastructure, had been listed on the Toronto Stock Exchange, but began trading on the Nasdaq on Friday at $23.50 per share after a lengthy transition period. Shares in the company were last trading at $24.89. Sign up here. "I think we're at the beginning of the race, not the end of the race," said Novagratz, who is Galaxy's CEO and a prominent crypto investor, in an interview with Reuters. "Sometimes it feels like it's been such a struggle. You ring the bell and you're crossing the finish line, but it really is the starting bell." Digital assets have enjoyed a resurgence under President Donald Trump, who courted cash from the crypto industry on the campaign trail by pledging to be a "crypto president." In his first week in office, Trump ordered creation of a cryptocurrency working group to propose digital asset regulations. In March, he signed an executive order to create a federal stockpile of bitcoin. Those moves have buoyed cryptocurrency prices, including bitcoin , which is up more than 10% so far this year. Robinhood rival eToro -- which offers stocks and cryptocurrencies to retail investors -- also made its Nasdaq debut this week, securing a valuation of $5.64 billion after its shares surged 34% on Wednesday. Also this week, the S&P announced that Coinbase (COIN.O) , opens new tab would be included in the S&P 500 index beginning May 19, becoming the first digital asset player to be included in the benchmark. "I think we're the beginning of what will be a trend of other (crypto) companies going public," Novogratz said. https://www.reuters.com/business/mike-novogratzs-galaxy-digital-debuts-nasdaq-bumper-week-crypto-2025-05-16/

2025-05-16 16:28

LONDON, May 16 (Reuters) - Romania holds the deciding round of its presidential election on Sunday with hard-right eurosceptic front-runner George Simion facing off against reformist Nicusor Dan. The stakes are high for the EU and NATO member, especially given the stances of the two hopefuls and its eyewateringly large fiscal deficit. Sign up here. The charts below show how the country's currency and other financial markets have been rattled by the potential outcome. 1/CURRENCY SHOCK Romania's currency, the leu, fell nearly 3% against the euro in the wake of Simion's unexpectedly strong first round election win, the subsequent collapse of the pro-Western coalition government and his anti-Brussels views and pledges to abandon tax hikes. It resulted in its biggest weekly fall since 2009 and forced the central bank to spend billions of euros trying to stabilise it, analysts estimate. Before that the leu had been almost motionless for years. 2/FORWARD THINKING Forward swaps markets - where traders and investors go to position for future currency moves - currently see the leu dropping from 5.1 to the euro to 5.2 to the euro in 3 months-time and to 5.4 per euro by this time next year. However, some analysts think it could even dive to 6 if things really sour, a government proves hard to form, Romania's credit rating gets cut and a disgruntled Brussels starts cutting off EU funding. "The outcome of the election could be quite binary and the downside for asset prices even from here could be quite substantial if Simion wins," Yvette Babb, a portfolio manager at William Blair said. 3/DEGRADING Romania's prized investment grade credit rating seems to have been dangling by a thread for years but analysts are increasingly convinced this could be the moment it gets cut down to 'junk' grade. It could even be the start of a series of downgrades. The cost to insure Romania's bonds using derivatives - or Credit Default Swaps - has shot up over the last month and is now as expensive as insuring a much lower BB bracket country. The underlying issue is that Romania's budget deficit was 9.3% of its GDP, or economic output, last year, nearly double the government's target and without major spending cuts or tax hikes is likely to be well over 7% this year as well. On the positive side, its debt pile at 55% of GDP is still well below the 81% average among EU countries. That, however, does include the likes of Greece, Italy and France. "The issue is whether they are going to have a functioning government that can implement fiscal measures," Aberdeen portfolio manager Viktor Szabo said. "It could be months". 4/BURN RATE Analysts estimate the central bank spent between 9-11 billion euros of its reserves stabilising the leu in the manic aftermath of Simion's first round win. Those reserves stood at around 62 billion euros - equivalent to five months of import cover - so a large chunk is likely to have be wiped out and one of the reasons JPMorgan thinks the leu might fall as much 20% as if the uncertainty worsens. Romania has tapped international bond markets twice this year but is expected to need to borrow at least 7 billion euros more, a task that will now be far more costly than it would have been. 5/DEBT STRAINS Concerns about finances and the potential loss of investment grade status have whacked both local and international bonds that are denominated in euros and were a big favourite of German, French and other leading euro zone investment funds looking to pick up some additional yield. Most of those bonds have lost roughly 10% this year while the premium investors demand to hold Romanian debt rather than the bonds of neighbouring Hungary - where eurosceptic Viktor Orban is in charge - has ballooned considerably. "The bonds have sold off to a level that is almost inconceivable," Robeco's head of Emerging Market debt Diliana Deltcheva said, given that Romania would still get EU funding, even if reduced somewhat. https://www.reuters.com/markets/europe/five-charts-romanias-election-driven-market-jitters-2025-05-16/

2025-05-16 16:02

WASHINGTON, May 16 (Reuters) - European Central Bank chief economist Philip Lane argued on Friday that publishing alternative economic scenarios alongside the ECB's economic projections may raise more problems than it solves. Caught on the hop by a surge in inflation in 2021-22, the ECB and other central banks around the world are pondering ways in which they can incorporate and communicate the risk that economies perform differently to what they expect. Sign up here. While the ECB sketched out scenarios diverging from its baseline at times in the past, including during the height of the COVID-19 pandemic, Lane preferred a richer discussion behind closed doors before consensus is reached. "It is also not clear whether such a curated approach would be superior to a 'many scenario' internal staff analysis (possibly augmented by machine learning algorithms)," he told an event at the Federal Reserve. "A basic concern is that the selected curated scenarios might turn out to have shined the spotlight on risk factors that proved to be immaterial and might give the impression that the risk analysis was too narrow in scope." Lane added that picking a few scenarios out of many possible ones for each policy meeting would be "logistically taxing" for an ECB Governing Council that includes 26 members. ECB board member Isabel Schnabel floated the notion of publishing each policymaker's expected rate path last year, but this prospect was quickly shot down by her colleagues. https://www.reuters.com/business/finance/ecbs-lane-queries-value-publishing-economic-scenarios-2025-05-16/

2025-05-16 13:17

COPENHAGEN, May 16 (Reuters) - Discussions between Novo Nordisk (NOVOb.CO) , opens new tab and the Novo Nordisk Foundation that controls the company regarding a CEO change have been ongoing for the past few weeks, the company's board Chair Helge Lund told Reuters on Friday. Meanwhile, outgoing Chief Executive Lars Fruergaard Jorgensen told Danish broadcaster TV2 that he was surprised by the decision, and that he had only been informed "very recently". Sign up here. "I did not see this coming," Fruergaard Jorgensen told TV2. https://www.reuters.com/sustainability/boards-policy-regulation/talks-replace-novo-nordisk-ceo-lasted-several-weeks-board-chair-says-2025-05-16/

2025-05-16 12:45

WASHINGTON, May 16 (Reuters) - U.S. single-family homebuilding fell in April as tariffs on imported materials and high mortgage rates remained major obstacles for the housing market. Single-family housing starts, which account for the bulk of homebuilding, dropped 2.1% to a seasonally adjusted annual rate of 927,000 units last month, the Commerce Department's Census Bureau said on Friday. Sign up here. President Donald Trump's , opens new tab aggressive and erratic tariffs, including duties on lumber and steel, have left builders reeling. The United States and China de-escalated their trade war over the weekend, but uncertainty remains over what happens after the 90-day truce they agreed on. There is also no clarity on the fate of country-specific duties which were delayed until July. A National Association of Home Builders survey on Thursday showed sentiment among single-family homebuilders plunged to a 1-1/2-year low in May, with 78% of builders reporting "difficulties pricing their homes recently due to uncertainty around material prices." There is also a glut of unsold new homes, with inventory at levels last seen in late 2007. Permits for future construction of single-family housing declined 5.1% to a rate of 922,000 units in March. Residential investment, which includes homebuilding, rebounded in 2024 after steep declines in the prior two years caused by a surge in mortgage rates. It grew at a moderate pace in the first quarter of 2025. https://www.reuters.com/business/us-single-family-housing-starts-building-permits-fell-april-2025-05-16/