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Egan-Jones backs 4 of Macellum’s dissident board director candidates at Kohl’s

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© Reuters. FILE PHOTO: The logo and trading informations for Kohl’s is displayed on a screen on the floor at the New York Stock Exchange (NYSE) in New York, U.S., January 13, 2020. REUTERS/Brendan McDermid

By Svea Herbst-Bayliss

NEW YORK (Reuters) – Proxy advisory firm Egan-Jones recommended that Kohl Corp shareholders elect four of the 10 board nominees nominated by activist investment firm Macellum Advisors as the department store considers selling itself.

Egan-Jones said shareholders should back Jeffrey Kantor, Pamela Edwards, Francis Ken Duane and Jonathan Duskin, Macellum’s founder and portfolio manager, arguing that the retailer has failed to properly address its underperformance.

“The board’s lack of commitment to value creation hinders the opportunities for growth and consideration of strategic alternatives that could be in the best interests of the Company and its shareholders,” the report, seen by Reuters, said.

“There is an urgent need for change in the board room to cease the trend of underperformance and instead, focus on unlocking shareholder value,” it said.

Kohl’s (NYSE:KSS) shareholders are set to vote for directors at the company’s annual meeting scheduled for Wednesday, May 11.

A representative for Kohl’s did not respond to a request for comment while a representative for Macellum declined to comment.

Previously Institutional Shareholder Services (ISS), Egan-Jones’ significantly larger rival, recommended that investors back two Macellum nominees; Jeffrey Kantor and Pamela Edwards.

This year’s vote comes after Macellum and several partners last year reached a settlement to drop a similar fight. In return the hedge funds got two of their nominees board seats. The company added a third independent director to the board at the same time.

Macellum has argued that Kohl’s has done too little to turn its business around and is now pressing the board to sell the company. The company said it has met with more than 20 potential buyers.

Stock Markets

Shares slide as global growth fears mount

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© Reuters. FILE PHOTO – An investor sits in front of a board showing stock information at a brokerage office in Beijing, China, December 7, 2018. REUTERS/Thomas Peter

By Stella Qiu and Alun John

BEIJING/HONG KONG (Reuters) – Asian stocks slid on Thursday, tracking a steep Wall Street selloff, as investors worried about global inflation, China’s zero-COVID policy and the Ukraine war, while the safe-haven dollar eased.

European equity markets also looked set for another rough day. The pan-region Euro Stoxx 50 futures fell 0.52%, German DAX futures were down 0.63% while FTSE futures were 0.51% lower.

Nasdaq futures eased 0.15%, although S&P500 futures reversed earlier losses to be 0.05% higher.

Overnight on Wall Street, retail giant Target Corp (NYSE:TGT) warned of a bigger margin hit due to rising costs as it reported its quarterly profit had halved. Its shares plunged 24.88%. The Nasdaq fell almost 5% while the S&P 500 lost 4%.[.N]

“The bounce on Tuesday was proven to have been ‘too optimistic’, thus the self-doubt stemming from the misjudgement only makes traders click the sell button even harder,” said Hebe Chen, market analyst at IG.

MSCI’s broadest index of Asia-Pacific shares outside Japan snapped four days of gains and slumped 1.8%, dragged down by a 1.5% loss for Australia’s resource-heavy index, a 2.1% drop in Hong Kong stocks and a 0.3% retreat in mainland China’s bluechips.

Japan’s Nikkei shed 1.7%.

Tech giants listed in Hong Kong were hit particularly hard, with the index falling more than 3%. Tencent sank more than 6% after it reported no revenue growth in the first quarter, its worst performance since going public in 2004.

China’s technology sector is still reeling from a year-long government crackdown and slowing economic prospects stemming from Beijing’s strict zero-COVID policy, even though soothing comments from Vice Premier Liu He to tech executives had buoyed sentiment on Wednesday.

Two U.S. central bankers say they expect the Federal Reserve to downshift to a more measured pace of policy tightening after July as it seeks to quell inflation without lifting borrowing costs so high that they send the economy into recession.

“It must be said that the concern for inflation has never gone away since we stepped into 2022. However, while things haven’t reached the point of no return, they are seemingly heading in the direction of ‘out of control’. That is probably the most worrying part for the market,” IG’s Chen said.

The U.S. dollar, which had rallied on falling risk appetite, eased 0.15% against a basket of major currencies, after a 0.55% jump overnight that ended a three-day losing streak.

The Aussie gained 0.8%, while New Zealand’s kiwi bounced 0.6% to, as an easing in Shanghai’s COVID lockdown helped sentiment. [FRX/]

Data on Wednesday showed that British inflation surged to its highest annual rate since 1982 as energy bills soared, while Canadian inflation rose to 6.8% last month, largely driven by rising food and shelter prices.

Bilal Hafeez, CEO of London-based research firm MacroHive, said there was a strong bias toward safe-haven assets right now, particularly cash.

“There may be short-term bounces in equities like the last few days, but the big picture is that the era of low yields is over, and we are transitioning to a higher rates environment,” Hafeez told the Reuters Global Markets Forum.

“This will pressure all the markets that benefited from low yields – especially equities.”

U.S. Treasuries rallied overnight and were largely steady in Asia, leaving the yield on benchmark 10-year Treasury notes at 2.9076%.

The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 2.6800% compared with a U.S. close of 2.667%.

Oil prices recovered from early losses, as lingering fears over tight global supplies outweighed fears over slower economic growth.

Brent crude rose 1.2% to $110.41 per barrel, while U.S. crude was up 0.8% to $110.48 a barrel.

Gold was slightly lower. Spot gold was traded at $1814.88 per ounce. [GOL/]

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Analysis-Crypto crash leaves El Salvador with no easy exit from worsening crisis

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© Reuters. FILE PHOTO – A sign reading “Pay with Bitcoin here” is set in a furniture store in San Salvador, El Salvador March 10, 2022. REUTERS/Jose Cabezas

By Nelson Renteria, Sarah Kinosian and Rodrigo Campos

SAN SALVADOR/NEW YORK (Reuters) – El Salvador’s big bet on bitcoin, which the Central American nation has been buying since September, has soured in recent weeks as a cryptocurrency rout shaved over a third of the value of the government’s holdings, Reuters calculations show.

Under populist President Nayib Bukele, a vocal cheerleader for the currency, El Salvador went all-in on bitcoin, not just becoming the world’s first country to adopt it as a legal tender but also sketching out plans for a volcano-powered crypto mining hub and plans to issue the first sovereign bond linked to the coin.

With global borrowing costs on the rise and a big debt repayment on the horizon, El Salvador has other fiscal headaches than the impact of the currency’s swoon. But the crypto slump has also closed some potential off-ramps from the crisis, including the now-postponed bitcoin bond.

“The government’s financial problems are not because of bitcoin, but they have gotten worse because of bitcoin,” said Ricardo Castaneda, senior economist and country coordinator for El Salvador and Honduras at think tank Central American Institute for Fiscal Studies (ICEFI). For the government, he said, “bitcoin ceased to be a solution and has become part of the problem.”

Bitcoin has fallen 45% since El Salvador officially adopted it in early September, and 26% from its May high as crypto assets have been swept up in a risk-off investing environment.

The combined market value of all cryptocurrencies recently fell to $1.2 trillion, less than half of where it was last November, based on data from CoinMarketCap.

El Salvador’s debt stood at $24.4 billion as of December, from $19.8 billion at end-2019, after the Bukele administration allocated millions of dollars to deal with the COVID-19 pandemic and its economic effects over the past couple of years.

The International Monetary Fund estimates that the current account deficit for its remittance and external financing-reliant economy will hover near $2 billion through 2025.

But adopting bitcoin set the country at loggerheads with multilateral lenders like the IMF, from which Finance Minister Alejandro Zelaya said https://www.reuters.com/article/us-el-salvador-economy-exclusive/exclusive-el-salvador-seeks-imf-funding-sees-golden-opportunity-for-economy-says-finance-minister-idUSKBN2AW1GV last year the government was seeking $1.3 billion.

The fund has recommended that El Salvador ditch bitcoin altogether. Any deal for a credit line would have to address risks including “those related to the adoption of bitcoin as legal tender as well as risks related to economic governance,” an IMF official said on Wednesday.

Ratings agencies have warned bitcoin adoption could facilitate money laundering, and importantly, the bitcoin risk has given bond investors another reason to demand higher returns

As of Wednesday, they were seeking a record-high premium of 2,445 basis points over U.S. Treasuries.

Bukele’s moves to centralize power, from removing all the top judges on the country’s supreme court to muscling through authorization to seek immediate re-election despite constitutional term limits, have helped drive the risk premium higher.

“If there isn’t potential for bitcoin-growth dividends or innovative bitcoin-financing, then the Bukele administration will have to prioritize spending priorities and identify financing options,” according to Siobhan Morden, head of Latin America Fixed Income Strategy at Amherst Pierpont.

Reuters calculations of a $36 million paper loss in bitcoin, enough to make at least some of those coupon payments, is based on Bukele’s tweets and an estimate of prices on the purchase dates. The government has spent some $104.2 million on 2,301 coins now worth just $67.9 million using Wednesday’s volume weighted average price.

The country has to service $329 million in interest due on its international bonds this year as well as $800 million in a bond set to mature in January.

ICEFI’s Castaneda listed financing options including the Central American and Latin American development banks – CABEI and CAF, respectively – as possible patches for financing the $800 million payment due in January. Another option, he said, is to nationalize the country’s pension fund to cover the fiscal deficit – which could be done by transferring the public’s savings to a government account.

A debt restructuring for El Salvador is “inevitable” if the country continues with the “current policy mix,” said Polina Kurdyavko, head of emerging markets at BlueBay Asset Management. “Debt in El Salvador could be sustainable with the right (IMF) program. But they have to act now.”

The country’s finance minister, Zelaya, declined to comment for this story.

Salvadoran bonds trade between 43.5 cents and 34 cents on the dollar except for the January maturity at 75 cents, reflecting cautious optimism that the country could make that payment.

The cost to insure investors against a Salvadoran sovereign default over the next five years on Wednesday hit its highest level since 2020, according to S&P Global (NYSE:SPGI) data.

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Generali posts smaller-than-expected net profit drop after Russia impairments

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© Reuters. FILE PHOTO: The emblem of Italy’s insurer Assicurazioni Generali is pictured in Rome, May 13, 2013. REUTERS/Stefano Rellandini

MILAN (Reuters) – Italy’s top insurer Assicurazioni Generali (BIT:GASI) said on Thursday it posted a smaller-than-expected drop in Q1 net profit after impairments on its Russian investments for 136 million euros ($142.75 million).

Net profit came in at 727 million euros, down 9.3% year-on-year, above an analyst consensus provided by the insurer of 651 million euros.

Generali said its operating profit, closely watched by the market, grew 1.1% to 1.63 billion euros, topping an average analyst consensus of 1.55 billion euros.

($1 = 0.9527 euros)

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