2024-05-09 18:04

May 9 (Reuters) - Robinhood Markets' (HOOD.O) New Tab, opens new tab suite of new products, including its credit card and futures trading platform, will be crucial to drive growth as market fluctuations and regulatory risks cloud the near-term outlook for its legacy business, analysts said. The expanded offerings show that the 11-year old trading app, best known for its appeal among retail traders, is beginning to mature into a full-fledged financial services provider. "Traders are searching for more sophisticated and diversified offerings post the meme-stock era and Robinhood must expand their services to keep up," said Dan Raju, CEO of brokerage platform Tradier. Here are some graphics explaining the state of play at the Menlo Park, California-based company: CREDIT CARD More than 1 million customers have joined the waitlist for a credit card Robinhood launched for its Gold subscribers in March. The card charges no annual or foreign transaction fees and offers 3% cash back, in the form of reward points, on spends. Analysts believe it is crucial to boosting subscriptions to the premium tier. "Robinhood and other neobanks on the market are proving they can be formidable competitors in the banking industry," said Emarketer's financial services analyst Lauren Ashcraft. RETIREMENT ACCOUNT Robinhood offers a retirement account for customers. Eligible contributions into the account can earn a percentage match, subject to a five-year holding period. Retirement assets under custody totaled $4.2 billion at the end of March, compared with $0.3 billion at the end of last year. GOLD SUBSCRIPTIONS Gold subscribers in the first quarter jumped 42% to reach a record high of 1.7 million, Robinhood said. The Gold subscription offers customers access to several premium features - like higher match on their retirement account contributions, bigger rates of interest on their uninvested cash and cheaper margin loans. "While the company has been successful in attracting new clients to the platform, the longer-term question of profitability remains for investors," analysts at Barclays said. FUTURES, INDEX OPTIONS TRADING Robinhood has said it is laser-focused on being the platform of choice for users who trade more actively and use more sophisticated products. It is expected to launch trading in futures and index options later this year. "We intend to make (the economics) very, very competitive, but also profitable for the company on a segment basis," CEO Vlad Tenev said. TRANSACTION REVENUE Robust crypto trading volumes due to the optimism stemming from the approval of the first spot bitcoin exchange-traded funds in January helped the company post a better-than-expected profit for the first quarter on Wednesday. "Despite the strong quarter, we emphasize that it is a great environment for Robinhood and its customers and one that is probably more unusual than normal," J.P.Morgan analysts said. Robinhood said the momentum had continued in the second quarter, though some called for caution. "Given the natural fluctuation of its trading and crypto volume, along with some regulatory uncertainty following the Wells Notice, it's going to be hard to maintain this level of growth," Emarketer's Ashcraft said. Sign up here. https://www.reuters.com/business/finance/robinhood-makes-headway-beyond-trading-2024-05-09/

2024-05-09 16:47

WASHINGTON, May 9 (Reuters) - U.S. mortgage rates fell this week for the first time in more than a month amid signs of slowing economic activity, but remain too high to provide a significant boost to the housing market. The average rate on the popular 30-year fixed-rate mortgage was down to 7.09% as of May 9, from 7.22% last week, ending five straight weekly increases, mortgage finance agency Freddie Mac said in a statement on Thursday. It averaged 6.35% during the same period a year ago. The average rate on the 15-year fixed-rate mortgage fell to 6.38% from 6.47% last week. That compared to an average of 5.75% a year ago. The decline in mortgage rates coincides with a drop in the 10-year Treasury yield following recent data showing a moderation economic and job growth. "An environment where rates continue to hover above seven percent impacts both sellers and buyers," said Sam Khater, Freddie Mac's chief economist. "Many potential sellers remain hesitant to list their home and part with lower mortgage rates from years prior, adversely impacting supply and keeping house prices elevated. These elevated house prices add to the overall affordability challenges that potential buyers face in this high-rate environment." Sign up here. https://www.reuters.com/markets/us/us-30-year-fixed-rate-mortgage-falls-709-still-too-high-boost-housing-2024-05-09/

2024-05-09 16:40

May 9 (Reuters) - Airbnb shares (ABNB.O) New Tab, opens new tab tumbled nearly 7% in afternoon trading on Thursday after weak forecasts for the second quarter stoked investor fears about slowing growth at the vacation rental firm and took the shine off a strong quarterly profit beat. The Easter holiday occurring in the first quarter rather than the second and currency-exchange impacts were partly to blame for Airbnb projecting current-quarter revenue below lofty Wall Street estimates. It also forecast the growth rate of room nights booked would be relatively flat on a sequential basis, but the company's average daily rate is expected to be modestly higher year-over-year. Normalizing leisure travel demand in the U.S. has also been a concern for investors. "Airbnb failed to deliver a beat/raise on nights, which we believe was necessary to ease concerns about slowing growth and risk of downside to consensus estimates for accelerating growth in (the second half of 2024 and in 2025)," Jefferies analysts said. According to BTIG analysts, Airbnb's forecast implied nights booked of about 125 million to 127 million in the second quarter. That compared with consensus estimates of 129.2 million, LSEG data showed. "While Airbnb topped the Q1 guide, it was shy of more aggressive buyside expectations in the quarter and the Q2 outlook," BTIG's Jake Fuller wrote in a client note. Still, some analysts noted the slump in shares was stemming from undue investor concern. "We think the pullback is an overreaction to weaker second-quarter guidance ... the outlook for 2024 is relatively unchanged, in our view," said Morningstar analyst Dan Wasiolek. Shares of Airbnb, which have gained 16% so far this year through last close, were at $148.23 by 1625 GMT on Thursday. They were trading about 33.31 times their forward profit estimates, compared with Booking Holdings' (BKNG.O) New Tab, opens new tab 19.40 multiple. Sign up here. https://www.reuters.com/business/airbnb-slumps-gloomy-forecast-fans-slowdown-fears-2024-05-09/

2024-05-09 16:22

WASHINGTON, May 9 (Reuters) - The U.S. Transportation Department Office of Inspector General (DOT OIG) will audit the Federal Aviation Administration's oversight of United Airlines maintenance practices, the agency watchdog said on Thursday. "We will evaluate FAA’s actions to address maintenance non-compliances and violations at the air carrier," the DOT OIG said on its website. Over the past five years, the inspector general has issued several audit reports and recommendations on FAA’s oversight of maintenance at Allegiant Air, Southwest Airlines (LUV.N) New Tab, opens new tab, and American Airlines (AAL.O) New Tab, opens new tab and is currently reviewing SkyWest Airlines (SKYW.O) New Tab, opens new tab. United and FAA did not immediately comment. In March, the FAA said it was increasing its oversight of United following recent safety incidents, saying it would initiate a formal evaluation to ensure the Chicago-based airline was complying with safety regulations. The DOT OIG said on Thursday: "recent safety events with United Airlines -- such as flight diversions that can be traced to mechanical problems -- serve to remind us that FAA oversight of maintenance programs is paramount." The FAA said in March it may delay future United certification projects "based on findings from oversight." A 2020 DOT OIG report said Southwest operated more than 150,000 flights carrying 17.2 million passengers on the jets without confirming it had completed required maintenance. In 2020, the FAA sought to impose a $3.92 million fine on Southwest for alleged weight infractions on 21,505 flights in 2018 on 44 aircraft, and in 2021 the investigation was resolved with a $200,000 civil penalty and deferring the remaining civil penalty based upon corrective actions accomplished by Southwest. A 2021 DOT OIG report said the FAA lacked effective oversight controls to ensure American Airlines corrective actions for maintenance issues address root causes. The report found that in one instance American "flew an aircraft with an inoperable emergency evacuation slide for 877 days before reporting the non-compliance to FAA." Sign up here. https://www.reuters.com/business/aerospace-defense/us-transportation-department-watchdog-audit-faa-over-united-airlines-maintenance-2024-05-09/

2024-05-09 16:20

BRASILIA, May 9 (Reuters) - Brazil's markets fell on Thursday after the central bank cut rates in a split decision that saw appointees of the current government advocating for a larger reduction, sparking concerns of a forthcoming dovish monetary policy influenced by politics. The Brazilian real weakened over 1% against the dollar while the yield curve on interest rate futures steepened, with longer-term futures jumping as much as 30 basis points. Local benchmark stock index Bovespa (.BVSP) New Tab, opens new tab fell more than 1%. Brazil's central bank cut interest rates on Wednesday by 25 basis points to 10.50%, delivering a smaller reduction after six straight cuts of twice that size, with dissent from all four directors appointed by President Luiz Inacio Lula da Silva. "Despite the decision being more hawkish, the market is already starting to anticipate what the new board would look like next year: in theory, a more dovish composition," said Daniel Leal, fixed income strategist at BGC Partners and a former Treasury analyst. "Combined with the already announced fiscal concerns, especially with the floods in Rio Grande do Sul, which could pave the way for further spending, the market has entered risk aversion mode," he added. Finance Minister Fernando Haddad said he would comment on the decision only after the meeting minutes are released, which is scheduled to happen next Tuesday. He told a news conference that the "technical debate" regarding the central bank's decision was "natural". FUTURE BOARD Bank of America stressed in a note to clients that the minutes of the decision could clarify the rationale behind the split decision. However, it already anticipated a deterioration in inflation expectations for 2025. These expectations have been increasing in recent weeks, and policymakers cited them as one factor behind higher uncertainties that ultimately justified the slower easing pace. Many associate this deterioration with doubts about a politically-driven central bank once governor Roberto Campos Neto ends his term in December, under an autonomy law passed in 2021. Campos Neto was chosen by former right-wing president Jair Bolsonaro. From then on, the board members appointed by leftist Lula, who assumed his third non-consecutive term with strong criticism of the tight monetary policy, will have the majority in the nine-member rate-setting committee. Economist Tony Volpon, a former central bank director, wrote on X that Wednesday's policy decision was worse than a unanimous vote for a larger cut. "Everyone loses: the 'hawks' who wanted to anchor expectations and the 'doves' who, as they will soon be the majority, will be entering power with a credibility deficit," he said. Sign up here. https://www.reuters.com/world/americas/brazil-markets-fall-central-bank-split-decision-triggers-concern-about-dovish-2024-05-09/

2024-05-09 16:17

BoE moves close to first rate cut, sterling falls Divergence between Europe and US rate outlooks widens Theme will play out in stock, FX markets - investors LONDON, May 9 (Reuters) - The Bank of England has sent a new signal that borrowing costs will fall earlier and further across Europe than in the United States, setting markets up for major shifts as investors play a monetary policy divide opening up across the Atlantic. Investors see European stocks and debt leading global markets this year as rate cuts boost spending, softer inflation burnishes bonds and weaker currencies lift exports. Traders stepped up bets for UK easing after the BoE on Thursday held rates at 16-year highs of 5.25% but trimmed inflation forecasts, pushing sterling down and stocks higher. That came after Sweden cut rates for the first time since 2016, while Switzerland cut rates in March and the European Central Bank has flagged a June cut. In contrast, the U.S. Federal Reserve is set to keep rates high for longer. "This is the European pivot," said Florian Ielpo, head of macro at Switzerland's Lombard Odier Investment Management, who is positive on European and UK stocks. Since 2020, the United States has generated the lion's share of global equity gains. Paul Flood, multi-asset portfolio manager at Newton Investment Management, said he was buying UK stocks on valuation grounds and was positive on UK government bonds because there was more potential for BoE rate cuts ahead. DOVES FLY Britain's exporter-focused FTSE 100 (.FTSE) New Tab, opens new tab hit a new record high after the BoE meeting. Europe's Stoxx 600 index is up 2% so far this week, poised for its best week since January (.STOXX) New Tab, opens new tab. Money markets are pricing in around 55 basis point (bps) of BoE rate cuts in total by year-end, 70 bps from the ECB and just 43 bps from a Fed still grappling with strong inflation. Economists polled by Reuters expect the U.S. economy to expand by 2.5% this year, versus 0.5% in the euro zone and 0.4% in the UK, as lavish government spending dubbed "Bidenomics" spurs investment but raises debt and the deficit. In terms of growth momentum, investors see Europe doing better, boding well for assets in the region over the longer term. "Europe is really accelerating, albeit from a weaker base at a time where the U.S. economy is cooling from a stronger starting point," said Hugh Gimber, global market strategist at J.P. Morgan Asset Management. Investors are querying whether the U.S. will run out of steam, other strategists said. But in the short term, if the U.S. can run up its debt and its deficit, then rates in the US will likely stay higher than in Europe, said Societe Generale strategist Kit Juckes. RISKY PIVOTS European government bonds could outperform the U.S. but are likely to stay volatile as the inflation path worldwide remains unpredictable, investors and analysts said. The BoE, the ECB and other European central banks might regret sounding too dovish too soon, Lombard Odier's Ielpo said. In the U.S., the Fed sent a strong signal in December that rate cuts were coming but then turned more hawkish after financial conditions became euphoric and inflation stalled above its target. UK gilts have lost investors 3.1%, this year, compared with 2.1% losses in the U.S. and 1.2% in the euro zone, based on LSEG data. BlueBay Asset Management portfolio manager Neil Mehta said the firm does not like bonds in the UK, partly because of relatively high inflation. The yield on Britain's rate-sensitive two-year gilt slipped 3 bps after the BoE decision to 4.28% as debt prices firmed slightly. The BoE last diverged significantly from Fed policy in August 2016 New Tab, opens new tab, when it cut rates by a quarter point to insulate the economy from Brexit while the Fed was on hold and preparing to raise. The ECB was a holdout dove with rates below zero from 2014 to 2022 but has followed the Fed since. The divergence theme would mostly play out in currency markets, Mehta added, with the dollar staying strong, in a further risk for inflation in Europe as import prices rise. The euro is down 2.6% so far this year to $1.07, Sterling is down roughly 2%. Matthew Swannell, economist at BNP Paribas, said this was not a particular risk for UK, whose biggest trading partner is the European Union. "So we do think the Bank of England can move before the Federal Reserve, and likewise the ECB (can too)," he said. Sign up here. https://www.reuters.com/markets/europe/europes-rush-rate-cuts-shifts-global-market-power-away-us-2024-05-09/