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Yahoo
34 minutes ago
- Yahoo
Analysis-Foreign investors increase dollar hedges on US stock portfolios
By Laura Matthews NEW YORK (Reuters) -Overseas asset managers and pensions are adding protection against a weakening dollar, concerned about the U.S. currency's diminishing ability to diversify their U.S. equity portfolios. Because such stock funds carry built-in dollar exposure, investors with other home currencies that had not neutralized the foreign exchange risk were cushioned when the dollar was strong if Wall Street performed badly. But the dollar's correlation with other U.S. assets, and the impact of its fall on portfolio performance, came into sharper focus when the Trump administration announced far-reaching global tariffs on April 2, sending U.S. stock indexes and the greenback sharply lower. The dollar hit a three-year low against a basket of currencies, raising risks for investors whose portfolios once benefited from the natural hedge. Now, managers are reducing dollar exposures and increasing the hedge ratios for U.S. stock portfolios where clients' investment policies allow them to do so. About 10% of Russell Investments pension fund clients in Europe and the UK have already increased hedge ratios on their international stock portfolios, said Van Luu, global head of solutions strategy for fixed income and foreign exchange for Russell in London. One client raised it to 75% from 50%, highlighting the desire to have a greater portion of U.S. stocks protected against the weakening dollar. "If what we're seeing persists... then you will have more clients taking action in that direction," said Luu. 'MORE HOSTILE' The dollar is down 10% for the year, and 6.5% since U.S. President Donald Trump's so-called Liberation Day in April. Meanwhile, the S&P 500, the benchmark U.S. stock index, has recovered 24% since an April slump and is up 5.3% this year, flirting with record highs. The MSCI gauge of global stocks, minus the U.S., has risen 16% for the year. "It's not enough to look at the stock market and say it is more or less back to where it was, so nothing happened," said Peter Vassallo, FX portfolio manager at BNP Paribas Asset Management, who manages currency exposures across its asset classes. BNP has been reducing dollar exposures for its clients that include pension funds, sovereign wealth funds and central banks. It has sold U.S. dollars across stock and fixed income portfolios, and built up what Vassallo described as a sizable position in options for funds that allow these strategies. He said the euro, yen and the Australian dollar are among the primary currencies it bought against the dollar, a big contrast to how the asset manager ended the previous year with a small "overweight" in the U.S. dollar. "This switch towards a more uncertain policy regime created an environment where we as market participants see the U.S. as more hostile to international capital flows, international trading," Vassallo said. After a June review, Justin Onuekwusi, chief investment officer at St. James's Place, said it is maintaining a strategic hedge that allows it to reduce overseas currency exposure in favor of the pound by up to 20%. The strategy "has been beneficial for our clients' returns year to date," he said. Onuekwusi said he now sees the dollar as closer to its longer-term fair value and has marginally reduced dollar hedging across managed portfolios. Foreign investors hold more than $30 trillion in U.S. securities, about $17 trillion of which is in equities and more than $12 trillion in long-term debt, according to data published in April by the U.S. Treasury Department. Marcus Fernandes, global head of currency management at Northern Trust, said the divergence in the correlation of risk is more than in the past. "That's why people are thinking faster than before, 'I need to increase my hedge ratio'," he said. "Once those conversations start, they usually end with increased hedge ratios," he said. COST INCENTIVE Data from Russell showed that a euro-hedged version of the MSCI USA index was flat for the year through May, while the euro-unhedged version was down 8.3%, showing the benefit of hedging for euro-based investors. The dollar is down 13% against the euro on concerns about flip-flopping U.S. trade policies and growth. "FX is back on the boardroom agenda," said Joe McKenna, head of fund solutions at MillTech, a London-based FX and cash management company. "What was once handled quietly in the back office is now drawing the attention of CIOs and CFOs, driven by renewed dollar volatility." Managers hedge currency exposure by selling the dollar against their respective base currency like the euro or the pound in the FX forwards market, and also use derivatives like options. When the dollar weakens, the hedge position gains in value while the dollar exposure on the underlying stock portfolio loses. Forward selling of the dollar is the largest in four years, according to John Velis, Americas macro strategist at BNY Markets, suggesting investors are unwilling to carry long dollar exposures, even with the potential for it to rally if U.S. tariff policy changes or the Israel-Iran conflict resumes. Investors reallocating to U.S. assets to meet benchmark weights after April's selloff are now hedging those exposures, he told Reuters. "It communicates that dollar volatility is a concern," said Velis. "It can be policy volatility as well as macroeconomic volatility that's causing people to... not keep that dollar exposure because of the fears of the dollar decline." 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Yahoo
37 minutes ago
- Yahoo
Trump tariffs live updates: Trump suggests he won't extend tariff pause, floats higher tariff level for Japan
On Tuesday, President Trump renewed threats that he may stick to his self-imposed July 9 deadline for making trade deals and issue new tariff levels to trading partners, forgoing another pause to "Liberation Day" duties. "No, I'm not thinking about the pause," Trump said aboard Air Force One when asked if he would extend the tariff pause, per Bloomberg. "I'll be writing letters to a lot of countries." The president's comments come after a Financial Times report Tuesday suggested that Trump's team is no longer aiming for big trade deals with many countries. Instead, they are trying to make smaller, quick agreements before July 9, when Trump plans to bring back his toughest tariffs. These mini deals could help countries avoid those harsh levies, but partners would still face existing tariffs while talks continue. Talks continue to take place, and Trump is still threatening new tariffs on key sectors like cars, steel, and aluminum — and on key trading partners like Japan. Trump stated that his team would force Japan to accept higher tariffs of "30%, 35% or whatever the number is that we determine." Notably, that proposal is higher than the 24% "Liberation Day" level and the current baseline 10% tariffs in place while the two sides negotiate. 'I'm not sure we're going to make a deal," Trump said Tuesday. "I doubt it with Japan. They're very tough. You have to understand, they're very spoiled." Top administration officials have been providing mixed signals on the malleability of the July 9 deadline while countries race to finalize talks. But on Monday, Treasury Secretary Scott Bessent had warned that "recalcitrant" countries would face a return of steep "Liberation Day" tariffs. Meanwhile, the European Union has signaled it was willing to accept a 10% universal tariff on many of its exports but is seeking exemptions for pharmaceuticals, alcohol, semiconductors, and commercial aircraft as part of a trade deal, Bloomberg reported. The EU is also seeking quotas and exemptions to lower duties on autos, steel, and aluminum, the report said. On the North American front, Canada scrapped its digital services tax on US technology companies, such as Apple (AAPL), Amazon (AMZN), and Alphabet (GOOG, GOOGL) late on Sunday. The White House said trade talks between the two countries had resumed after Trump threatened to cut off trade talks. Read more: What Trump's tariffs mean for the economy and your wallet Here are the latest updates as the policy reverberates around the world. President Trump on Tuesday, amid days of renewed whiplash on the tariff front, suggested he wouldn't extend a July 9 deadline for higher tariffs to resume on trade partners. He also threatened a tariff level on goods from Japan that would be higher than those he levied on the country in April. From Bloomberg: The publication added that Trump "sounded more optimistic" about an agreement with India. Read more here. US manufacturing remained weak in June. New orders were low and input costs went up slightly. This shows Trump's tariffs on imports are still making it hard for businesses to plan. Reuters reports: Read more here. The European Union has hardened its stance in trade trade talks with US President Donald Trump and are insisting the US drops its tariffs on the EU immediately as part of any framework deal ahead of the July 9 deadline. Trade commissioner Maroš Šefčovič has been told he must take a tougher line on his trip to Washington this week as Brussels attempts to remove or at least cut Trump's levies in the long term. The FT reports: Read more here. Bloomberg reports: Read more here. Federal Reserve Chair Jerome Powell said that tariffs are causing the central bank to take its time before cutting interest rates. Powell is speaking today about the Fed's policy stance at an ECB forum in Sintra, Portugal. When asked if the Fed would have cut interest rates by more by now if it weren't for higher tariffs, Powell stated, "I think that's right." "In effect, we went on hold when we saw the size of the tariffs," Powell continued. "Essentially, all inflation forecasts for the United States went up materially as a consequence of the tariffs." Powell noted that the US economy remains healthy overall but that he expects to see the effects of tariffs if they filter through the economic data in the coming months. In recent days, Powell has faced increased pressure from President Trump to lower interest rates, including in the form of handwritten notes. "Ignore the tariffs for a second," Powell said of the economy. "Inflation is behaving pretty much exactly as we have expected and hoped that it would. We haven't seen effects much yet from tariffs, and we didn't expect to by now." Watch Powell speak live below: Perhaps the moral of this story really is — as Amex likes to say — "Don't leave home without it." Nowhere was this more true than for CEO Robert Keeley, who when faced with an $11,000 tariff bill decided to cash in 1.83 million American Express reward points to pay it. Bloomberg News reports: Read more here. From President Trump's tariffs to the Federal Reserve rate cut saga, the US stock market has just completed a roller-coaster first half of the year. The S&P 500 (^GSPC) is up 5% year to date, rebounding from its April slump after Trump's "Liberation Day" tariffs were announced. But what should investors watch for in the second half of 2025? Here's a look at six key questions facing US stock investors at the start of the second half. Reuters reports: Read more here. Reuters reports: Read more here. It seems that President Trump will bag a second trade deal soon. India is currently on track to seal an interim trade agreement with the US as soon as next week, according to a report in the FT on Tuesday. The FT, who received exclusive information from people briefed on the talks, reported that an interim deal between the US and India would be a step closer to a comprehensive bilateral accord between Washington and New Delhi. It would also be the first with a major US trading partner. The FT reports: Read more here. President Trump's team has decided to focus on smaller trade deals instead of big, wide-ranging agreements, according to a report in the FT, who cited people familiar with the matter. The Trump administration is hoping these quick deals will stop the US from bringing back tough tariffs. Officials want to reach phased deals with countries that are most ready to talk before July 9. That is when Trump plans to reimpose harsh tariffs if no agreements are made. These smaller deals mean countries could avoid the worst tariffs for now. But they would still face some existing tariffs while talks on harder issues continue. Talks remain complicated and Trump is also thinking about new tariffs on key industries. This approach shows how he uses the threat of tariffs to push countries to agree to US demands. The European Union, looking to clinch a trade deal with the US before a July 9 deadline, is prepared to accept a "universal" tariff of 10% on goods exported to the US, according to a Bloomberg report Monday. But the bloc is seeking exemptions on key sectors, including pharmaceuticals, alcohol, semiconductors and commercial aircraft. From Bloomberg: Read more here. President Trump said on Monday afternoon he was willing to impose a higher tariff rate on Japan, saying the country refused to accept US rice exports. "To show people how spoiled Countries have become with respect to the United States of America, and I have great respect for Japan, they won't take our RICE, and yet they have a massive rice shortage," Trump posted on Truth Social. "In other words, we'll just be sending them a letter, and we love having them as a Trading Partner for many years to come." Trump's statement that he would send a letter to Japan outlining the new tariff rate comes a little more than a week before a July 9 deadline and after months of being locked in trade talks with Japanese leaders. Trump has threatened to send letters to trading partners should negotiations break down. During trade talks, Japan has sought an exemption from the Trump administration's 25% auto duties. Broad tariffs on Japanese goods were set to jump back up to 24% on July 9 if no deal is reached and the tariff pause is not extended. Read more here. Treasury Secretary Scott Bessent warned "recalcitrant" countries that their tariff levels could soon snap back to "Liberation Day" levels, the latest sign of ambiguity in President Trump's firmness around a July 9 deadline. Via Reuters: Administration officials — and Trump himself — have sent mixed signals on whether he may look to extend that deadline. Trump on Sunday suggested he didn't think he'd "need to" extend it. Tariffs pressures have started to hit goods, with prices on products made in China sold on Amazon (AMZN) rising faster than overall inflation, according to 1,400 different items which were analysed by DataWeave and provided exclusively to Reuters. Reuters reports: Read more here. CNN reports: Read more here. The European Union is pushing back against the US and its criticism of the bloc's tech rules, which many feared may have been included as part of trade negotiations. Reuters reports: Read more here. There is a belief among economists that President Trump's tariffs will help boost inflation over the next few months. But so far, muted price increases have called that belief into question. This has helped to embolden Trump, causing divisions with the Fed. Bloomberg News reports: Read more here. South Korea is looking for an extension to the July 9 tariff deadline as talks continue. The US has raised concerns over non-tariff barriers and broader defence. South Korea is not the only country looking to reach a deal with the US before the tariff deadline on July 9. "It seems some countries will reach a deal by July 8, some might be granted an extension to continue negotiations, while others will decide if they want to continue negotiating under tariffs or not," the South Korean official told a briefing. Here's how some of the other trading partners are managing the deadline. China The US and China reached a deal to resume rare earth exports in London this month, resolving delays in implementing the Geneva agreement, which was established in May. Both sides are keen to ease tensions before tariffs rise further on August 9, when broader duties could rise 50%. Canada Canada scrapped its planned digital services tax targeting US tech firms on Sunday in an attempt to revive stalled talks. President Trump threatened new tariffs within a week if no deal is reached. According to Reuters, talks aim for an agreement by July 21. EU EU negotiators are pushing to keep reciprocal tariffs below 10% but Washington is pursuing a 10% baseline rate on most goods. Talks continue as the EU faces a looming deadline of July 9. UK The US-UK trade deal was cemented at the G-7 Summit this month. The deal came into force this week, reducing levies on cars and aircraft parts but keeping 10% tariffs on exports. Steel and aluminium tariffs remain unresloved ahead of the July 9 deadline. Japan Japan is seeking exemption from US auto tariffs, which currently stand at 25%, while also facing a new 24% reciprocal tariff from July 9. Trump wants Japan to import more US energy to reduce its trade surplus. Mexico The US and Mexico are negotiating a quota deal to reduce Trump's 50% steel tariffs. An agreement may allow for lower import rates. As earning season approaches, Goldman Sachs (GS) said on Monday that US profit margins will be tested as investors await to see how President Trump's war has hurt companies. Goldman's David Kostin said Q2 earnings will show the immediate impact of tariffs, which have risen about 10% this year. Most costs will be passed on to consumers, but margins will suffer if firms absorb more than expected. Early results are mixed: General Mills (GIS) stock fell 5% last week due to a weak forecast and tariff warning, while Nike (NKE) rose 15% after announcing it will offset higher duties. Bloomberg News reports: Read more here. President Trump on Tuesday, amid days of renewed whiplash on the tariff front, suggested he wouldn't extend a July 9 deadline for higher tariffs to resume on trade partners. He also threatened a tariff level on goods from Japan that would be higher than those he levied on the country in April. From Bloomberg: The publication added that Trump "sounded more optimistic" about an agreement with India. Read more here. US manufacturing remained weak in June. New orders were low and input costs went up slightly. This shows Trump's tariffs on imports are still making it hard for businesses to plan. Reuters reports: Read more here. The European Union has hardened its stance in trade trade talks with US President Donald Trump and are insisting the US drops its tariffs on the EU immediately as part of any framework deal ahead of the July 9 deadline. Trade commissioner Maroš Šefčovič has been told he must take a tougher line on his trip to Washington this week as Brussels attempts to remove or at least cut Trump's levies in the long term. The FT reports: Read more here. Bloomberg reports: Read more here. Federal Reserve Chair Jerome Powell said that tariffs are causing the central bank to take its time before cutting interest rates. Powell is speaking today about the Fed's policy stance at an ECB forum in Sintra, Portugal. When asked if the Fed would have cut interest rates by more by now if it weren't for higher tariffs, Powell stated, "I think that's right." "In effect, we went on hold when we saw the size of the tariffs," Powell continued. "Essentially, all inflation forecasts for the United States went up materially as a consequence of the tariffs." Powell noted that the US economy remains healthy overall but that he expects to see the effects of tariffs if they filter through the economic data in the coming months. In recent days, Powell has faced increased pressure from President Trump to lower interest rates, including in the form of handwritten notes. "Ignore the tariffs for a second," Powell said of the economy. "Inflation is behaving pretty much exactly as we have expected and hoped that it would. We haven't seen effects much yet from tariffs, and we didn't expect to by now." Watch Powell speak live below: Perhaps the moral of this story really is — as Amex likes to say — "Don't leave home without it." Nowhere was this more true than for CEO Robert Keeley, who when faced with an $11,000 tariff bill decided to cash in 1.83 million American Express reward points to pay it. Bloomberg News reports: Read more here. From President Trump's tariffs to the Federal Reserve rate cut saga, the US stock market has just completed a roller-coaster first half of the year. The S&P 500 (^GSPC) is up 5% year to date, rebounding from its April slump after Trump's "Liberation Day" tariffs were announced. But what should investors watch for in the second half of 2025? Here's a look at six key questions facing US stock investors at the start of the second half. Reuters reports: Read more here. Reuters reports: Read more here. It seems that President Trump will bag a second trade deal soon. India is currently on track to seal an interim trade agreement with the US as soon as next week, according to a report in the FT on Tuesday. The FT, who received exclusive information from people briefed on the talks, reported that an interim deal between the US and India would be a step closer to a comprehensive bilateral accord between Washington and New Delhi. It would also be the first with a major US trading partner. The FT reports: Read more here. President Trump's team has decided to focus on smaller trade deals instead of big, wide-ranging agreements, according to a report in the FT, who cited people familiar with the matter. The Trump administration is hoping these quick deals will stop the US from bringing back tough tariffs. Officials want to reach phased deals with countries that are most ready to talk before July 9. That is when Trump plans to reimpose harsh tariffs if no agreements are made. These smaller deals mean countries could avoid the worst tariffs for now. But they would still face some existing tariffs while talks on harder issues continue. Talks remain complicated and Trump is also thinking about new tariffs on key industries. This approach shows how he uses the threat of tariffs to push countries to agree to US demands. The European Union, looking to clinch a trade deal with the US before a July 9 deadline, is prepared to accept a "universal" tariff of 10% on goods exported to the US, according to a Bloomberg report Monday. But the bloc is seeking exemptions on key sectors, including pharmaceuticals, alcohol, semiconductors and commercial aircraft. From Bloomberg: Read more here. President Trump said on Monday afternoon he was willing to impose a higher tariff rate on Japan, saying the country refused to accept US rice exports. "To show people how spoiled Countries have become with respect to the United States of America, and I have great respect for Japan, they won't take our RICE, and yet they have a massive rice shortage," Trump posted on Truth Social. "In other words, we'll just be sending them a letter, and we love having them as a Trading Partner for many years to come." Trump's statement that he would send a letter to Japan outlining the new tariff rate comes a little more than a week before a July 9 deadline and after months of being locked in trade talks with Japanese leaders. Trump has threatened to send letters to trading partners should negotiations break down. During trade talks, Japan has sought an exemption from the Trump administration's 25% auto duties. Broad tariffs on Japanese goods were set to jump back up to 24% on July 9 if no deal is reached and the tariff pause is not extended. Read more here. Treasury Secretary Scott Bessent warned "recalcitrant" countries that their tariff levels could soon snap back to "Liberation Day" levels, the latest sign of ambiguity in President Trump's firmness around a July 9 deadline. Via Reuters: Administration officials — and Trump himself — have sent mixed signals on whether he may look to extend that deadline. Trump on Sunday suggested he didn't think he'd "need to" extend it. Tariffs pressures have started to hit goods, with prices on products made in China sold on Amazon (AMZN) rising faster than overall inflation, according to 1,400 different items which were analysed by DataWeave and provided exclusively to Reuters. Reuters reports: Read more here. CNN reports: Read more here. The European Union is pushing back against the US and its criticism of the bloc's tech rules, which many feared may have been included as part of trade negotiations. Reuters reports: Read more here. There is a belief among economists that President Trump's tariffs will help boost inflation over the next few months. But so far, muted price increases have called that belief into question. This has helped to embolden Trump, causing divisions with the Fed. Bloomberg News reports: Read more here. South Korea is looking for an extension to the July 9 tariff deadline as talks continue. The US has raised concerns over non-tariff barriers and broader defence. South Korea is not the only country looking to reach a deal with the US before the tariff deadline on July 9. "It seems some countries will reach a deal by July 8, some might be granted an extension to continue negotiations, while others will decide if they want to continue negotiating under tariffs or not," the South Korean official told a briefing. Here's how some of the other trading partners are managing the deadline. China The US and China reached a deal to resume rare earth exports in London this month, resolving delays in implementing the Geneva agreement, which was established in May. Both sides are keen to ease tensions before tariffs rise further on August 9, when broader duties could rise 50%. Canada Canada scrapped its planned digital services tax targeting US tech firms on Sunday in an attempt to revive stalled talks. President Trump threatened new tariffs within a week if no deal is reached. According to Reuters, talks aim for an agreement by July 21. EU EU negotiators are pushing to keep reciprocal tariffs below 10% but Washington is pursuing a 10% baseline rate on most goods. Talks continue as the EU faces a looming deadline of July 9. UK The US-UK trade deal was cemented at the G-7 Summit this month. The deal came into force this week, reducing levies on cars and aircraft parts but keeping 10% tariffs on exports. Steel and aluminium tariffs remain unresloved ahead of the July 9 deadline. Japan Japan is seeking exemption from US auto tariffs, which currently stand at 25%, while also facing a new 24% reciprocal tariff from July 9. Trump wants Japan to import more US energy to reduce its trade surplus. Mexico The US and Mexico are negotiating a quota deal to reduce Trump's 50% steel tariffs. An agreement may allow for lower import rates. As earning season approaches, Goldman Sachs (GS) said on Monday that US profit margins will be tested as investors await to see how President Trump's war has hurt companies. Goldman's David Kostin said Q2 earnings will show the immediate impact of tariffs, which have risen about 10% this year. Most costs will be passed on to consumers, but margins will suffer if firms absorb more than expected. Early results are mixed: General Mills (GIS) stock fell 5% last week due to a weak forecast and tariff warning, while Nike (NKE) rose 15% after announcing it will offset higher duties. Bloomberg News reports: Read more here. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
an hour ago
- Yahoo
ARK Invest Sold $95M of Coinbase Shares After COIN's Surge to Record Highs
ARK Invest offloaded nearly $43.8 million worth of shares of cryptocurrency exchange Coinbase (COIN) on Monday. The sale follows similar moves last week for a total of 270,984 COIN shares offloaded in the last three trading days, worth just under $95 million based on Monday's closing price of $350.49. Coinbase shares surged to a record high of over $380 on June 26, which necessitated the sales from ARK. Cathie Wood's investment managing firm has a target weighing of its exchange-traded funds (ETFs), whereby no individual holding exceeds 10% of its total value. This leads to a trend of ARK selling large numbers of particular shares when their prices rally and acquiring them when they dip. ARK holds COIN in three of its ETFs: Innovation (ARKK), Next Generation Internet (ARKW) and Fintech Innovation (ARKF).Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
