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Epstein links catch up with Barclays chief Staley

By Iain Withers and Lawrence White

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Epstein links catch up with Barclays chief Staley
© Reuters. FILE PHOTO: Barclays’ CEO Jes Staley arrives at 10 Downing Street in London, Britain january 11, 2018. REUTERS/Peter Nicholls

By Iain Withers and Lawrence White

LONDON (Reuters) – For nearly six years running British bank Barclays (LON:), American Jes Staley built a reputation as a corporate survivor but the former JPMorgan (NYSE:) dealmaker could not escape his past.

During a tumultuous tenure, Staley, 64, fought off a corporate raider’s attempts to break up the bank, survived a probe into his mistreatment of a whistleblower, and navigated Britain’s third-biggest lender through the coronavirus pandemic.

But it was Staley’s links to convicted sex offender Jeffrey Epstein starting from his time at JPMorgan that finally forced him out.

Barclays said on Monday that Staley had stepped down as chief executive following an investigation by British regulators into his characterisation of his relationship with Epstein – both to Barclays and the regulators.

Details of the findings have yet to be published but the Bank of England and the UK’s Financial Conduct Authority have said previously the investigation was focused on how truthful Staley was about his ties to Epstein, who died in jail in August 2019 awaiting trial on charges related to sex trafficking.

While it was known that Epstein was Staley’s client at JPMorgan, media reports have painted a picture of a potentially deeper relationship, including a trip with his wife to Epstein’s Caribbean island.

Barclays said Staley intended to contest the findings of the UK investigation. It said the probe did not find that Staley either saw, or was aware of, any of Epstein’s alleged crimes.

Staley has said previously he deeply regretted his ties to Epstein, which he says began in 2000 while at JPMorgan and ended in late 2015 – before he joined Barclays in December that year.

Epstein was registered as a sex offender in 2008 after a conviction for soliciting a minor for prostitution. The New York Times reported that Staley visited Epstein in prison when he was serving his sentence.

Staley did not respond to a request for comment made through Barclays on Monday.

QUESTIONABLE JUDGMENT

Staley joined Barclays when its board rolled the dice and hired the U.S banking veteran – once tipped as a successor to JPMorgan Chief Executive Jamie Dimon – to turn around its investment bank, which was badly trailing Wall Street rivals.

After years of underwhelming trading results at the division, the bank faced a big test when activist investor Edward Bramson built up a stake of more than 6% stake and pushed to split the investment bank from its retail business.

Staley stuck to his guns and fought off the attack. His strategy was vindicated when volatile markets during the COVID-19 pandemic led to a jump in investment banking profits. Bramson admitted defeat in May this year.

Barclays insiders, especially traders in its investment bank, generally revered Staley for returning some swagger as the bank took on Wall Street rivals on their home turf, following the comparatively dour tenure of his predecessor Antony Jenkins.

Staley, who says he greatly admires his former boss Dimon, sought to emulate his mentor by hiring a raft of lieutenants from JPMorgan as he bet big on investment banking at a time when British rivals were cutting back.

He worked at the U.S. bank for 34 years, climbing up the ranks to lead its private bank, asset management unit and later chair its investment bank before leaving in 2013 to join a hedge fund after being sidelined in a management reshuffle.

Staley’s judgment has been questioned during his time at Barclays. Lawyers said he was lucky to survive an investigation by regulators into his attempts to unmask a whistleblower who sent letters criticising a senior employee.

Regulators found that the bank’s efforts to track down the whistleblower became a transatlantic effort, with Staley’s office enlisting the support of the lender’s security team and an employee in the United States.

Staley was fined a combined 1.1 million pounds by regulators and Barclays but escaped more severe sanctions.

“This is not the first time Staley has faced negative headlines,” said Russ Mould, investment director at AJ Bell. “Ultimately his departure shows how important governance can be, particularly for a high profile company like Barclays which faces the glare of political and regulatory pressure.”

Stock Markets

Morgan Stanley: bear market rally to continue

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One of Wall Street’s best-known bears, Michael Wilson, thinks the S&P 500 will rise another 7% before turning down, so the bear market rally will continue for now, writes Market Watch.

After the Dow Jones, S&P 500 and Nasdaq Composite joined their strongest weekly gains since at least May last Friday, Wilson, who is chief strategist and head of U.S. equity markets at Morgan Stanley (NYSE:MS), told clients that there could be another 5% to 7% before the downward trajectory of U.S. stocks resumes during the latest bear market recovery.

Wilson has held a bearish view of the stock market for about 2 years and correctly predicted a sell-off this year.

Wilson explained in a research note sent out to clients on Monday that a pullback in the 38-50% drop in the stock market this year “would not seem like something unnatural, not consistent with the previous bear market rally.”

While growth concerns have triggered a sell-off in commodities and lowered inflation expectations, the fact that the U.S. economy is already slowing and heading toward recession means that any market rally is likely to be short-lived, and U.S. stocks are likely to eventually fall.

Wilson mentioned in the note that the bear market is not over yet, although it may appear otherwise in the next few weeks as the market takes the rate cut as a sign that the Fed can still manage a “soft landing” and prevent a meaningful revision to earnings forecasts.

U.S. stocks rose last week as investors now hope the slowing economy and falling commodity prices may inspire the Fed to raise interest rates less sharply. Federal funds futures, a derivative used by investors to bet on the pace of the Fed’s monetary policy changes, estimate with a high probability that the Fed will be forced to start cutting interest rates again as soon as next summer.

They also consider the lower peak in the federal funds rate: it will peak around 3.5% at the end of 2022 instead of 3.75% just a couple of weeks ago. Wilson also pointed out the drop in Treasury yields: the 10-year Treasury bond yield went from 3.230% to a low of 3.07% on Friday before rebonding again on Monday.

Wilson expects the S&P 500 index to fall to around 3,400 points if the U.S. Federal Reserve manages to get a “soft landing” for the economy — which Fed Chairman Jerome Powell said last week would be “a very difficult thing to do.”

Wilson expects that if the U.S. economy plunges into recession, the S&P 500 index will fall to around 3,000 points. In any case, Wilson believes that U.S. stocks are still highly valued because the risk premium — that is, the measure of compensation that investors receive for the extra risk of owning stocks instead of bonds — remains about 300 basis points higher than the 10-year Treasury bond yield, which is considered a “risk-free rate.” 



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Stock Markets

Easing chip shortages to help Volkswagen in H2 – CEO

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© Reuters. FILE PHOTO: Volkswagen logo is pictured at the 2022 New York International Auto Show, in Manhattan, New York City, U.S., April 13, 2022. REUTERS/Brendan McDermid/File Photo

BERLIN (Reuters) – Volkswagen (ETR:VOWG_p) sees a strong second half of 2022 and expects progress in catching up with rival Tesla (NASDAQ:TSLA) as easing chip shortages start to offset supply chain bottlenecks and rising costs, the carmaker’s CEO said on Tuesday.

“We are earning more than ever,” Chief Executive Herbert Diess said at a works meeting, adding Volkswagen is ramping up electric vehicle volumes in its biggest markets in Germany and China thanks to easing semiconductor shortages.

This should allow the carmaker to narrow the Volkswagen-Tesla gap this year and meet its goal of becoming market leader by 2025 if it seizes the moment while the U.S. electric car maker burns cash on large investments, the CEO said.

“Elon (Musk) has to ramp up two highly complex factories in Austin and Gruenheide at the same time – as well as expand production in Shanghai. That’s going to take strength out of him,” Diess said.

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Stock Markets

Reliance Chairman Mukesh Ambani steps down as director of telecom arm

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© Reuters. FILE PHOTO: Mukesh Ambani, Chairman and Managing Director of Reliance Industries, arrives to address the company’s annual general meeting in Mumbai, India July 5, 2018. REUTERS/Francis Mascarenhas

BENGALURU (Reuters) – Reliance Industries Chairman Mukesh Ambani has stepped down as director of Reliance Jio Infocomm Ltd, the conglomerate’s telecom arm said on Tuesday.

Reliance Jio said https://refini.tv/3Nrs773 it has appointed Mukesh’s son and non-executive director Akash Ambani as the chairman of its board. Akash has been involved with the telecom unit since its launch in late 2016, where he started as a director.

India’s telecoms sector had been upended after the entry of Jio, which triggered a price war that forced some rivals out of the market and turned profits into losses.

Jio, which started out offering mobile teleservices, has been aggressively investing in services like internet broadband and forging ties with handset makers to launch low-cost smartphones and providing 5G services.

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