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DJ Private Equity Reaches Record of $4.74 Trillion in Assets -- Market Talk

· 02/04/2021 15:52

1552 ET - Private-equity and venture-capital firms worldwide reached a record of $4.74 trillion in assets under management in June, up 6.1% from the end of 2019, according to a report by Preqin. Private-equity's expansion is likely to accelerate as investors in general expect to increase their allocations to the asset class this year, the data provider says. The median allocation in the US, at 6.3% of AUM, is higher than in developing markets, but those are expanding fast. In Asia, for one, investors during 2020 bumped up their median allocation to private equity to 5% of AUM from 3.6%. (luis.garcia@wsj.com; @lhvgarcia)

1543 ET - 15:43 ET - The US dollar strengthens broadly, firming 0.6% against the euro and 0.5% against the yen. The WSJ Dollar Index is up 0.4% and at its highest since early December. Goldman Sachs still sees the dollar depreciating despite recent strength. "We see the degree of US outperformance this year as relatively small compared to the absolute growth numbers we are writing down for all regions (including +5.4% for the Euro Area)," Zach Pandl of Goldman Sachs says. "We therefore have stuck with our forecasts for broad USD depreciation. This thesis is currently on the back foot, and positioning suggests we could see a bit more USD strength over the very short-term." (jonathan.vuocolo@wsj.com; @jonvuocolo)

1207 ET - Any upside seen in US grains futures Thursday is limited due to a strengthening of the US dollar, says Terry Reilly of Futures International. "Higher USD is limiting upside potential in all major CBOT commodities this morning," Reilly says. The USD index trading on the Intercontinental Exchange is up 0.4% today, and has risen 1.9% since the start of the year. Meanwhile, CBOT grains are higher overall year-to-date, but soybeans and wheat in particular have given back much of their gains from highs reached in the first-half of January. (kirk.maltais@wsj.com; @kirkmaltais)

1108 ET - Texas's economy softened a bit last month, but optimism remains high for economic growth later in 2021, according to the Dallas Fed. "Results from the Texas Business Outlooks Surveys show that output growth largely stalled out in January in the manufacturing and service sectors, with the indexes signaling little change in output from December," said Dallas Fed senior business economist Emily Kerr. An index that tracks Texans' mobility via their phones fell in January versus December, although it notes Texans' mobility still exceeds the US. "Overall, outlooks are positive, and stimulus payments, PPP and the vaccination rollout are tailwinds for economic growth this year," Kerr says. (dan.molinski@wsj.com)

1048 ET - Parts of the new trade deal between the EU and the U.K. don't work and need a shake-up, says accountancy firm Blick Rothenberg. The decision to suspend Brexit checks on animal products and food items moving between Great Britain and Northern Ireland following tensions at the latter's ports has laid bare that aspects of the deal, such as the so-called NI protocol, are unworkable and require change, Blick says. "We've been calling for a phased implementation [of the protocol] and the government could have avoided this car crash," says Blick partner Alex Altmann. Blick says other parts of the Brexit deal also aren't working. "The new GB-EU customs-border rules are causing major disruption, costing British businesses millions," Altmann says. (philip.waller@wsj.com)

1046 ET - Rising gilt yields as the Bank of England dampened negative rate expectations Thursday helped to lift sterling against the dollar and euro, says David Page, head of macro research at AXA Investment Managers. "Financial markets reacted sharply to the BoE's views on negative interest rates and marginally on disappointment of no further easing," he says. A rise of 6 basis points and 7 bps in 2-year and 10-year gilt yields respectively had an impact on sterling, which rose to its strongest since mid-May against the euro after the announcement. (lorena.ruibal@wsj.com)

1038 ET - The Bank of England's hesitation to deploy negative interest rates may support sterling in the near-term but the currency will eventually be unable to escape the steady pull of a stronger dollar, TD Securities says. Unless a fresh catalyst emerges, gains in GBP/USD are unlikely to exceed the 1.3710/25 area at this stage, TD Securities strategist Ned Rumpeltin says. "Instead, we prefer to look for downside risks in GBP/USD once today's decision is fully absorbed." GBP/USD rises 0.2% to 1.3675. The BOE on Thursday said it didn't wish to signal it would use negative rates and would need at least six months to prepare lenders for cutting rates below zero, if deemed necessary. (renae.dyer@wsj.com)

1030 ET - New orders for factory goods in the U.S. rose 1.1% in December compared with the previous month, data from the Commerce Department shows. The reading, which marks the eighth straight month of gains, beats the 0.7% rise expected by economists polled by The Wall Street Journal, but stands below than the revised 1.3% registered in November. New orders for manufactured durable goods in December increased by 0.5%, up from the preliminary reading of 0.2%. TheU.S. manufacturing sector has shown strong momentum in recent months, and surveys such as the ISM PMI index point to continued growth early in 2021. (xavier.fontdegloria@wsj.com)

1029 ET - Global bankruptcies declined in 2020 despite a sharp fall in the world's gross domestic product, but they could still go up, Oxford Economics says. The contraction of the global economy last year should have prompted a surge in bankruptcies of 20% or more, the economic-forecasting firm estimates, but bankruptcies declined by an average of 12% across 18 major economies. The low level of bankruptcies in 2020 largely reflects successful government interventions but disguises underlying financial stress among businesses, says Adam Slater, lead economist at Oxford Economics. Insolvencies could still rise significantly in 2021 and 2022, and there are longer-term risks of increased "zombification" and rising bad loans at banks, Slater says. (maria.martinez@wsj.com)

1018 ET - Brazilian corporations have a hard time luring ESG investors because of the country's poor reputation on environmental, social and governance issues. On the flip side, whoever manages to cut through the barrier may access relevant funding. "No doubt it's a hurdle, but at the same time it is a big opportunity," says Rodrigo Cabernite, co-founder of Gyra+, a startup bank lending to minority-owned small businesses. "We want to show that we aren't part of that traditional group. It's a different mindset." (paulo.trevisani@wsj.com; @ptrevisani)

1013 ET - Gyra+, a financial startup in Brazil, a country fighting a bad ESG reputation, tries to tap global investors' preference for ESG business by focusing on the social element. "We're lending to very small firms that typically can't get a loan from a traditional bank," founder Rodrigo Cabernite says. By using credit-analysis technology and relying on a digital lending platform, Gyra+ is able to charge rates in line with the broader market, he says. "Since we have a natural impact, why not show to the market that our funds go to a good cause?" (paulo.trevisani@wsj.com; @ptrevisani)

1011 ET - Brazil's Gyra+ startup microcredit lender increasingly relies on debt issuance with ESG certification for funding, founder Rodrigo Cabernite says. In October, the firm raised 50M Brazillian reais ($9M) in its first issuance with ESG certification, provided by local firm Sitawi. Another one could happen by mid-year. Cabernite says Gyra+'s lending practices benefit small, minority-owned businesses, thus fulfilling the social element in ESG requirements. "I think we managed to bring one or two investors" in October thanks to the ESG credentials, he says, adding that "In the future, it may be a requirement to enter some portfolios." (paulo.trevisani@wsj.com; @ptrevisani)

(END) Dow Jones Newswires

February 04, 2021 15:52 ET (20:52 GMT)

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