2023-11-27 19:56

Nov 27 (Reuters) - Rivian Automotive (RIVN.O) on Monday announced the launch of leasing for its R1T electric pickup truck for customers in select U.S. states. The option, which has been made available in states including California, New York, Florida and Texas, comes days ahead of the launch of Tesla's (TSLA.O) Cybertruck which competes with the R1T. The $7,500 federal tax credit for electric vehicle purchases also applies to customers who prefer to lease, boosting demand. Rivian, earlier this month, raised its production forecast for the full year by 2,000 vehicles to 54,000 units on the back of sustained demand. High interest rates have affected demand for EVs with Tesla sparking a price war earlier this year to improve sales and grab a larger market share. https://www.reuters.com/business/autos-transportation/rivian-launches-leasing-r1t-electric-pickup-truck-some-us-states-2023-11-27/

2023-11-27 19:44

NEW YORK, Nov 27 (Reuters) - A record amount of price-pinched holiday shoppers are expected to use buy now, pay later services for Cyber Monday to relieve stress on their wallets, according to Adobe Analytics. Shoppers are slated to spend between $12 billion and $12.4 billion online on Monday, with $782 million of purchases made with BNPL services, including Klarna and Affirm (AFRM.O), representing a surge of nearly 19% from last year, the data company said. While BNPL has consistently been growing in popularity over the past several years, its usage is getting a further boost from budget-conscious shoppers trying to avoid the additional fees and interest that come with purchases made through credit cards. Economists anticipated the holiday season would be slower than recent years due to economic pressure on consumers who are dealing with higher interest rates and lingering inflation. A survey by Klarna found nearly half of those surveyed worried that they would not be able to pay off credit card bills in full from holiday spending. The buy now, pay later firm saw a 29% increase in orders placed by U.S. shoppers on Black Friday, with some of the most popular items being personal electronics, televisions and kitchen appliances. "The scale of the adoption (of BNPL) has just gotten so big. It's become really, really, really popular," said Dan Dolev, an analyst at Mizuho Securities. Affirm shares surged 11% on Monday after Adobe Analytics released the upbeat BNPL data. Average basket sizes for buy now, pay later orders on Black Friday declined 32% compared to last year, according to a report from Quantum Metric, a sign that shoppers aren't making as big of purchases this year. https://www.reuters.com/business/retail-consumer/more-us-shoppers-tack-buy-now-pay-later-debt-cyber-monday-2023-11-27/

2023-11-27 19:01

New home sales drop 5.6% to a rate of 679,000 units Median house price plunges 17.6% to $409,300 from year ago WASHINGTON, Nov 27 (Reuters) - Sales of new U.S. single-family homes fell more than expected in October as higher mortgage rates squeezed out buyers even as builders cut prices, but the setback is likely temporary amid a persistent shortage of previously owned houses on the market. The decline in sales reported by the Commerce Department on Monday was in line with a recent deterioration in homebuilder sentiment, which came as the rate on the popular 30-year fixed-mortgage approached 8%, leaving builders anticipating slower buyer traffic. Mortgage rates have since retreated from two-decade highs and are at levels last seen in late September, which could pave the way for a rebound in sales. "The market for new homes remains very solid by any historical standard and continues to be boosted by extremely low existing home inventory," said Daniel Vielhaber, an economist at Nationwide in Ohio. New home sales dropped 5.6% to a seasonally adjusted annual rate of 679,000 units last month, the Commerce Department's Census Bureau said. September's sales pace was revised lower to 719,000 units from the previously reported 759,000 units. Economists polled by Reuters had forecast new home sales, which account for 15.2% of U.S. home sales, would fall to a rate of 723,000 units. The share is the largest in at least a decade. New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They, however, can be volatile on a month-to-month basis. Sales increased 17.7% on a year-on-year basis in October. Monthly sales rose in the Northeast and densely populated South. But they tumbled in the Midwest, the most affordable region, and in the West, where housing is expensive. The supply of previously owned houses on the market is nearly 50% below its pre-pandemic level, according to the National Association of Realtors, which last week reported that home resales plunged to more than a 13-year low in October. Most homeowners have mortgage rates under 3%, making many reluctant to sell, boosting demand for new construction. Stocks on Wall Street were mixed. The dollar was steady against a basket of currencies. U.S. Treasury prices rose. SALES REBOUND EYED The rate on the 30-year fixed-rate mortgage jumped to an average of 7.79% in late October, the highest level since November 2000, according to data from mortgage finance agency Freddie Mac. Mortgage rates soared as the Federal Reserve aggressively raised interest rates to fight inflation. The 30-year fixed rate mortgage has fallen in recent weeks, and averaged a still-high 7.29% last week, tracking the decline in the 10-year Treasury yield amid optimism that the U.S. central bank was likely done hiking interest rates and could start easing monetary policy by mid-2024. "We would look for a rebound in new home sales, which are a more timely indicator of housing demand, in November or December as mortgage rates fall again," said Veronica Clark, an economist at Citigroup in New York. The median new house price in October was $409,300, a 17.6% drop from a year ago. That was the largest percentage decline since the government started tracking records in 1964 and probably reflected incentives, including price cuts, being offered by builders to attract buyers. The National Association of Homebuilders said this month that more than a third of builders reported cutting home prices in November. Price cutting has been the norm this year. Economists cautioned against reading too much in the price drop, noting that other measures like the Federal Housing Finance Agency's house price index showed strong price growth. "High prices are also weighing on homebuying activity," said Daniel Silver, an economist at JPMorgan in New York. "Although the median sale price in the new home sales report fell, we should keep in mind that this is not a very reliable house price gauge because it does not control for changes in the mix of sales." Houses in the $150,000 to $499,999 price range accounted for a large share of the transactions last month. There were 439,000 new homes on the market at the end of October, slightly up from 433,000 in September. Most of the inventory was houses under construction. At October's sales pace it would take 7.8 months to clear the supply of houses on the market, up from 7.2 months in September. The government also reported on Monday that permits for future home construction were higher than previously estimated in October, increasing 1.8% to a rate of 1.498 million units. Building permits were earlier this month reported to have risen 1.1% to a pace of 1.487 million units. Strong demand for new construction resulted in residential investment rebounding in the third quarter after contracting for nine straight quarters. With mortgage rates still a constraint, some economists doubted residential investment would continue to expand in the fourth quarter, adding to expectations for a sharp moderation in the broader economy. Growth estimates for the fourth quarter are mostly below a 2% annualized rate. The economy grew at a 4.9% pace in the July-September quarter. "The risk to our forecast is to the upside if builders continue to successfully attract potential homebuyers with incentives," said Bernard Yaros, lead U.S. economist at Oxford Economics. https://www.reuters.com/markets/us/us-new-home-sales-fall-more-than-expected-october-2023-11-27/

2023-11-27 18:39

Nov 27 (Reuters) - Activist investor Elliott Investment Management on Monday said it was ready to nominate directors at Crown Castle International and push for the ouster of the wireless tower owner's executives and board members, whom it blames for years of underperformance. The hedge fund in a letter released on Monday said the company needs "comprehensive leadership change." It said it was ready to appeal to other shareholders to make changes to the 12-member board, signaling a possible proxy fight next year. It also wants the company, which is headquartered in Houston and has a market value of $45 billion, to review its fiber strategy, including considering a possible sale of the business, optimizing its incentive plan and improving corporate governance. It is the second time the U.S. hedge fund is publicly pressuring the company after it urged management to rethink its fiber infrastructure strategy and criticized the company's returns in 2020. Elliott, which said it now owns a $2 billion stake in the real estate investment trust, said operational underperformance and flawed capital allocation contributed to a sagging share price. The share price has dropped 22% since the start of the year. On Monday, news that Elliott is pushing for improvements fueled a gain of 4%. By comparison, Castle Crown's rivals have performed better. American Tower (AMT.N) shares have fallen 6% while SBA Communications (SBAC.O) have slid 15% since the start of the year. "We are prepared and intend to make our case directly to shareholders with a majority slate of alternative directors at the company's 2024 annual meeting," Elliott managing partner Jesse Cohn and senior portfolio manager Jason Genrich said in the letter. Crown Castle said it values all shareholders' views and wants to understand their perspectives. "We look forward to reviewing Elliott’s materials and are open to commencing a constructive engagement with Elliott," the company said in a statement, adding that it "remains confident in Crown Castle’s executive leadership as the company continues to act in the best interests of all shareholders." Elliott sharply criticized management and the board saying a "lack of oversight ... contributed to its irresponsible stewardship and flawed financial policy." The hedge fund said the company "disregarded our data-driven analysis" and added that "our recommended changes were neither made nor taken seriously." "The company's strategy, led by CEO Jay Brown since 2016, has been a failure, as demonstrated by the breathtaking magnitude of its underperformance," the letter said. Three years ago when Elliott had a roughly $1 billion stake, Crown Castle responded to the hedge fund's prodding by refreshing its board of directors and announcing that five directors with an average tenure of 20 years would not be seeking re-election. The window for investors to nominate directors to the board opens early next year. Elliott has recently called for the ouster of several corporate chiefs. Data from Diligent Market Intelligence show that activists' demands for the removal of top personnel rose by 46% in 2022 compared with 2021. https://www.reuters.com/markets/us/activist-investor-elliott-pushes-changes-crown-castle-2023-11-27/

2023-11-27 18:30

LONDON, Nov 27 (Reuters) - A new front has emerged in Israel's fight against the funding of Iran-backed militant groups from Hamas to Hezbollah: A fast-growing crypto network called Tron. Quicker and cheaper than its larger rival Bitcoin, Tron has overtaken its rival as a platform for crypto transfers associated with groups designated as terror organizations by Israel, the United States and other countries, according to interviews with seven financial crime experts and blockchain investigations specialists. A Reuters' analysis of crypto seizures announced by Israeli security services since 2021 reflects the trend, showing for the first time a sharp rise in the targeting of Tron wallets and a fall in Bitcoin wallet seizures. "Earlier it was Bitcoin and now our data shows that these terrorist organizations tend to increasingly favor Tron," said Mriganka Pattnaik, CEO of New York-based blockchain analysis firm Merkle Science, citing Tron's faster transaction times, low fees, and stability. Merkle Science says it counts law enforcement agencies in the United States, Britain and Singapore as clients. Israel's National Bureau for Counter Terror Financing (NBCTF), which is responsible for such seizures, froze 143 Tron wallets between July 2021 and October 2023 that it believed were connected to a "designated terrorist organization" or used for a "severe terror crime," the Reuters analysis found. The Oct. 7 attacks by Hamas on Israel killed around 1,200 people. Israel's subsequent bombardment and ground invasion of Gaza has killed some 14,000 people. In its response, Israel has also stepped up scrutiny of Hamas' financing. Contacted by Reuters with a summary of this article, Hayward Wong, a spokesperson for British Virgin Islands-registered Tron said all technologies could "in theory be used for questionable activities," citing as an example U.S. dollars being used for money laundering. Wong said Tron did not have control over those using its technology and that it was not linked to the groups identified by Israel. Almost two-thirds of Israel's Tron seizures – 87 - were this year, including 39 wallets that Israel said in June were owned by Lebanon's Hezbollah, and 26 it said in July belonged to Palestinian Islamic Jihad, a Hamas ally that joined the assault on Israel from Gaza. The seizures have also included 56 Tron wallets NBCTF said were linked to Hamas, including 46 in March last year it connected to a single Gaza-based money exchange company called Dubai Co. For Exchange. Weeks after the Hamas assault, Israel announced its biggest known seizure of crypto accounts yet, freezing around 600 accounts it connected to Dubai Co., without stating which crypto networks or coins were used. More than a dozen people whose funds were frozen in that seizure told Reuters they had been using Tron. They said they traded crypto to help their business or personal finances and denied any connection with Hamas or Islamic Jihad. One of the people, who identified themselves only as Neo, said it was possible they had transferred money on one occasion to somebody associated with Hamas. Israel calls Dubai Co. a terrorist group "due to the aid that they provide to the Hamas terrorist organization, particularly its military arm, in transferring funds on a scale of tens of millions of dollars a year." A representative for Dubai Co., whose email was listed on the seizure order, did not respond to a request for comment. The armed wing of Hamas, which had raised crypto funds since at least 2019, said in April it would cease Bitcoin fundraising, citing increased efforts to prevent donations. Hamas did not mention Tron in the statement. Reuters could not independently determine whether Hamas had used Tron. NBCTF declined to comment for this story, including about its understanding of the shift to Tron and how it linked the wallets to the militant groups. Hamas, Hezbollah and Islamic Jihad did not respond to requests for comment. Six people listed on Israel's previous Tron seizure notices who responded to Reuters questions denied connections to militant groups. They included people based in Venezuela, Dubai and the West Bank city of Jenin. 'AXIS OF RESISTANCE' In the June statement, Israel said it seized funds "intended for use by the terrorist organizations financed by Iran." Iran counts Hamas, Hezbollah and Islamic Jihad in a so-called Axis of Resistance opposing Israeli and American power in the Middle East. In the seizure statements, NBCTF did not affirm Tehran was the source of the funding. Iran's foreign ministry did not respond to a Reuters request for comment about using Tron to fund groups it supports. Iran has previously used Tron to skirt U.S. sanctions. Reuters reported last year that Iranian firms used it for $8 billion in transactions between 2018 and 2022. Estimates of the sums of money that reach proscribed groups through crypto are unreliable because it is hard to say whether money sent to seized wallets was really destined for those groups. The value of crypto transactions and the digital wallet addresses used for them can be traced on the blockchain - a public ledger that underpins crypto. However, it is hard for those outside law enforcement or crypto trading platforms to know the real identity of those involved in the transactions. The people Reuters consulted additionally said their research showed the cryptocurrency Tether was dominant across the Tron network. Tether, the world's biggest so-called stablecoin, is backed by reserves and aims to keep a 1:1 peg with the dollar. The company said in a statement that it regularly traced and froze tokens "used for nefarious purposes," and coordinated these efforts with law enforcement. Tether is the third-largest crypto token, with a market value of $89 billion, up by around a third in the past year, according to CoinGecko data. Despite its lack of name recognition outside crypto circles, Tron is the dominant blockchain for Tether transactions, currently hosting $48 billion of the tokens, according to Tether's website. Average daily transactions on Tron hit 9.1 million from April-June, according to data firm Messari, up over 70% from the same period last year. Justin Sun, who founded Tron in 2017, was sued by the U.S. Securities and Exchange Commission in March for allegedly artificially inflating trading volumes and selling Tron tokens as an unregistered security. Sun said the SEC charges "lack merit." Binbin Deng, a representative of Sun, referred Reuters to Tron spokesperson Wong's statement. 'BLINDSPOT' Since its 2008 birth, the Bitcoin blockchain, and since then crypto more widely, have been magnets for criminals drawn by liquidity and a reputation for anonymity. Of all crypto transaction volumes, the illicit share was 0.2% in 2022, down from 2% three years earlier, according to blockchain tracker Chainalysis. In Israel, Bitcoin seizures have been scarce by comparison with Tron. In 2021, the first year NBCTF published seizure notices, it froze 30 Bitcoin wallets. No Bitcoin wallets appear in notices in the subsequent years. The Financial Action Task Force, a Paris-based G7 body that fights illicit finance, warned last month that terrorist organisations were seeking to further boost donor anonymity, citing the growing popularity of Tether transfers on Tron. Four of the people consulted by Reuters said law enforcement's increased capability to trace transactions on Bitcoin was driving such groups to Tron. Tron initially drew less attention from blockchain analysis firms, said Shlomit Wagman, a senior fellow at Harvard University who was director-general of the Israel Money Laundering and Terrorism Financing Prohibition Authority from 2016 to 2022. "There was until now this blindspot," she said. Transaction fees on Tron cost far less than on Bitcoin, U.S. investment firm VanEck says. Militant groups were also using stablecoins on Tron instead of more volatile bitcoin tokens to ensure the "value of their crypto is being preserved," Wagman said. https://www.reuters.com/world/middle-east/new-crypto-front-emerges-israels-militant-financing-fight-2023-11-27/

2023-11-27 17:03

Nov 27 (Reuters) - Earlier this fall, Morgan Stanley (MS.N) bought $300 million worth of protection against losses on some of its loans from Blackstone Group (BX.N) and other investors, two sources familiar with the matter said. The transaction, details of which have not been previously reported, was effectively insurance, structured as a sale of bonds called credit-linked notes, according to the sources and regulatory filings. By transferring the risk to investors, the $1.4 trillion asset bank could reduce the amount of capital it has to hold against those loans to cover for potential losses. Morgan Stanley and Blackstone declined to comment. The deal is one of several such credit risk transfer transactions that U.S. banks are considering in the aftermath of a March crisis in the sector and as regulators look to increase capital they have to hold, bankers, lawyers and investors said. Interviews with eight people involved in the deals show different forms of credit-linked notes and insurance contracts are being discussed to free up precious capital. While it is known that banks have been looking to offload risk through such transactions, these interviews offer new details on the types of deals and their terms, providing a rare window into a market that's shrouded in secrecy. These deals help banks meet capital requirements more efficiently, allowing them to keep lucrative businesses that would otherwise become unprofitable. But they come with risks. Investors in these deals include lightly-regulated entities like hedge funds, shifting risk to the shadow banking sector. That raises the prospect that regulators will have less visibility and understanding of the dangers that lurk in the financial system. The ability to shed the risk could also encourage banks to get more aggressive on lending, leading to problems later. "If a bank didn't manage interest rate risk well, does it appreciate potential risks associated with these transactions?" said Jill Cetina, associate managing director at Moody’s. "It raises the need for better and more fulsome disclosure in banks' regulatory filings." Over the last few months, banks including JPMorgan Chase (JPM.N), Merchants Bank of Indiana and US Bancorp (USB.N), have sold the risk of losses on billions of dollars of loans for cars, multi-family homes, private funds, junk-rated companies, commercial equipment and consumers, these industry sources said. Jon-Claude Zucconi, head of tactical situations at Apollo's (APO.N) ATLAS SP Partners, which structures such deals, said many U.S. banks are setting up programs to issue credit linked notes for the first time. He expects U.S. banks to sell the risk on nearly $100 billion of assets over the next 12 months, freeing up nearly $15 billion of equity capital. Investors get yields ranging from 8% to 15% from such transactions, Zucconi said. JPMorgan and US Bancorp declined to comment, while Merchants Bank did not respond to requests for comment. Wall Street's financial engineering is causing concerns among some lawmakers and regulators. The Federal Reserve approved the Morgan Stanley transaction in late September but set limits, including on size, and is watching closely. "If they perform as intended, then they might be more generally available," said Fed Vice Chair for Supervision Michael Barr in Congressional testimony this month. "If we see risks arising in those transactions, then we would limit their use for capital mitigation." SIGNIFICANT INCREASE The surge in interest in these transactions comes after regulators, led by Barr, proposed capital requirements earlier this year that were tougher than what banks had hoped. Smaller banks not affected by the proposal have also been looking at these deals as a way to free up capital as conditions tightened after the regional banking crisis. "Banks are spending a lot of time on their loan books and figuring out how to optimize what they have," said Missy Dolski, global head of capital markets at Varde Partners, which invests in such transactions. Some banks have sold loan portfolios, businesses and cut down their lending, which were not optimal strategies because it reduces their market share and competitiveness, said Sam Graziano, managing director at advisory firm Chatham Financial. Some considered raising capital by selling shares and preferred equity but it was expensive due to low stock valuations and high interest rates, Graziano said. Credit risk transfer is another tool for them to pursue after the Fed’s clarification on what is allowed, said Cory Wishengrad, head of fixed income at Guggenheim Securities. Jed Miller, a partner at Cadwalader, Wickersham & Taft, said often these transactions were structured so that proceeds must be retained by the bank on deposit for the life of the trade. The upfront cash gave Fed comfort in Morgan Stanley's case, according to Barr's testimony. DIFFERENT DEALS Credit risk transfers are common in Europe, where banks transfer the loans to off-balance sheet entities, called special purpose vehicles (SPVs), before selling the risk on those loans. Those deals are called synthetic credit linked notes. But SPVs can come with tax and other complexities. Morgan Stanley's transaction kept the loans, a portfolio of revolving credit lines to private funds, called subscription lines, on its balance sheet, according to the sources and the regulatory filing. U.S. Bank followed up with a similar deal in late October and received approval from the Fed last week for a similar transaction, according to sources and a regulatory filing. Reuters could not determine why Morgan Stanley and U.S. Bank chose to do a direct credit linked note rather than a synthetic one. Other U.S. banks have been opting for synthetic deals. One of the earlier ones this year was done by Merchants Bank, an Indiana-based lender with $16 billion in assets. The details of its structure shed light on how these deals work. Merchants priced a $158.14 million credit-linked note on March 24, providing credit protection on some commercial mortgages, including loans to nursing and assisted-living facilities, the deal's terms show. The transaction freed up Merchant's capital, allowing it to use it to make new loans. Through the trade, the bank would absorb the first 1% of losses on the portfolio, while the next 14% would be absorbed by investors, according to the term sheet. That means Merchants sold the riskiest tranche of the loan portfolio, maximizing the capital relief it could get on it. The investors deposited cash in a collateral account as protection to Merchants Bank, the term sheet shows. Merchants did not respond to requests for comment. Then last month, JPMorgan did one of the largest trades of this kind. It placed synthetic credit linked notes for $2.5 billion with investors, three sources said. They referenced a pool of mortgages and loans totaling about $20 billion, the sources said. Deborah Staudinger, banking and loan finance partner at Hogan Lovells, said banks are also considering transactions to lower risk on a single loan or a portfolio by buying insurance. The deals, which are yet to happen, can be secured by cash or other collateral posted by one or more insurers. Whether U.S. regulators will allow such insurance deals to qualify for capital relief is still untested, Staudinger said. https://www.reuters.com/markets/us/wall-street-gets-creative-regulators-demand-more-capital-2023-11-27/