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JPMorgan to buy UK digital wealth manager Nutmeg

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Sign for J.P. Morgan on 7th March 2020 in London, United Kingdom. JPMorgan Chase & Co. is an American multinational investment bank and financial services holding company headquartered in New York.

Mike Kemp | Getty Images

LONDON — JPMorgan Chase said Thursday it has agreed to buy British online investment management platform Nutmeg for an undisclosed sum.

The U.S. banking giant said the deal, which is still subject to regulatory approval, would complement its plans to launch a standalone digital bank brand in the U.K. later this year.

With more than £3.5 billion ($4.9 billion) in assets under management, Nutmeg is one of the U.K.’s largest robo advisors. The company offers a range of investment accounts, including ISAs, pensions and general investment accounts. Rivals include the likes of Wealthsimple, Moneyfarm and Moneybox.

JPMorgan CEO Jamie Dimon said last year that he would be “much more aggressive” in searching for acquisitions to help the biggest U.S. bank by assets add capabilities. He may have been motivated by the deals that rival Morgan Stanley has made in recent years – spending $20 billion to snap up E-Trade and Eaton Vance.

Dimon has also talked about girding JPMorgan against both fintech players like PayPal and Big Tech firms including Alphabet.

By striking out a digital-first effort in the U.K., the bank can expand outside the U.S., where it has an extensive network of physical branches and leading positions across retail and institutional businesses. Those efforts could eventually be applied beyond the U.K., the bank has said previously.

“We are building Chase in the U.K. from scratch using the very latest technology and putting the customer’s experience at the heart of our offering, principles that Nutmeg shares with us,” Sanoke Viswanathan, CEO of international consumer at JPMorgan, said in the statement.

“We look forward to positioning their award winning products alongside our own, and continuing to support their innovative work in retail wealth management.”

The deal comes months after the two companies announced a partnership that allowed the fintech firm to offer ETFs created with help from JPMorgan, the biggest U.S. bank by assets.

This isn’t the first time JPMorgan has bought a fintech firm after initially partnering with it. In December, JPMorgan said it was acquiring 55ip, a Boston-based start-up that helps financial advisors automate the construction of tax-efficient portfolios.

Nutmeg CEO Neil Alexander said customers should “expect the same level of transparency, convenience and service that helped make us a leading digital wealth manager in the U.K.”

Britain is home to an increasingly crowded retail banking market, with challengers like Revolut, Monzo and Starling gaining a following thanks to their digital-only checking accounts. The U.K.’s fintech market is thought to be one of the world’s largest, attracting $4.1 billion in venture capital funding last year, according to industry body Innovate Finance.

Instead of using investment technology already developed in the U.S., the bank opted instead to purchase the 10-year old start-up. That’s because the U.K. and Europe have different regulatory requirements, the companies said. JPMorgan’s U.S.-based automated investing service You Invest has garnered about $50 billion in assets, Dimon revealed this week.

JPMorgan Securities acted as JPMorgan’s financial advisor for the transaction, while Freshfields Bruckhaus Deringer served as legal counsel. Nutmeg was advised by Arma Partners as financial advisor and Taylor Wessing as legal counsel.

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Stock futures are flat after major averages turn positive for the week

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U.S. stock index futures were flat in overnight trading on Wednesday, after the major averages advanced during regular trading to turn positive for the week.

Futures contracts tied to the Dow Jones Industrial Average gained 27 points. S&P 500 futures and Nasdaq 100 futures were marginally higher.

During the session the Dow gained 286 points, or 0.83%, while the S&P climbed 0.82%. The Nasdaq Composite was the relative outperformer, rising 0.92%. Energy was the top-performing S&P group, advancing 3.5% as oil prices rebounded.

Wednesday’s gains built on Tuesday’s strong session, and the major averages have now erased the losses from Monday’s sell-off. The Dow dropped more than 700 points to start the week as rising Covid cases worldwide hit sentiment. The yield on the 10-year Treasury dipped to a five month low of 1.17% at the beginning of the week, which also caused investors to offload equities. On Wednesday the yield on the 10-year rose 8 basis points to 1.29%.

“The truth is investors have been very spoiled by the recent stock market performance,” noted LPL Financial chief market strategist Ryan Detrick. “Incredibly, we haven’t seen as much as a 5% pullback since October. Although we firmly think this bull market is alive and well, let’s not fool ourselves into thinking trees grow forever. Risk is no doubt increasing as we head into the troublesome August and September months.”

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A busy week of earnings will continue on Thursday. AT&T, D.R. Horton, Southwest Air, American Airlines, Abbott Labs and Union Pacific are among the names on deck before the opening bell. Intel, Twitter, Snap and Capital One will post quarterly updates after the market closes.

So far 15% of the S&P 500 has reported earnings, with 88% beating earnings estimates, according to Refinitiv. Of the companies that have reported 84% have topped revenue expectations.

Investors will also be watching the weekly jobless claims number from the Department of Labor on Thursday. Economists polled by Dow Jones are expecting the number of first-time filings to be 350,000, down from the prior reading of 360,000. Existing home sales figures will also be released.

“We expect a continuation of sloppy trading through the seasonally-weak summer months; however, our base case remains that the primary trend over the next 12 months remains higher,” Keith Lerner, chief market strategist at Truist wrote in a note to clients. “The S&P 500, which just made a new record high last week, has gone one of the longest periods of the past decade without so much as a 5% pullback,” he added.

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Opportunities from struggle between the U.S. and China, economist says

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Chinese authorities have promoted the use of the yuan worldwide, while the U.S. dollar dominates global transactions.

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BEIJING — When it comes to the investment outlook, one Chinese economist predicts once-a-century opportunities will emerge from a “struggle for supremacy” between the U.S. and China.

This game-changing window comes from upheaval on both sides, said Liu Yuhui, director of a finance research department at a government think tank, the Chinese Academy of Social Sciences.

China is set on becoming a great nation, he said, while the U.S. has embarked on a dollar-printing policy since the coronavirus pandemic that has changed the financial balance.

That’s according to a CNBC translation of his Mandarin-language speech, titled “The bipolar world under the U.S.-dollar super-expansion cycle — The Chinese capital market’s ‘cognitive revolution.'”

Liu, also chief economist at Tianfeng Securities, was speaking Friday at asset manager ChinaAMC’s investment strategy conference. Founded in 1998, ChinaAMC is one of the country’s largest mutual fund managers and has 1.54 trillion yuan ($240.63 billion) in assets under management.

In Liu’s view, the U.S. is implementing the concept of “modern monetary theory“ (MMT), which holds governments with their own strong currency can print money to support the domestic economy without worrying too much about budget deficits.

One of the most well-known proponents of modern monetary theory is Stephanie Kelton, formerly chief economist for Democrats on the U.S. Senate Budget Committee and a senior economic advisor to Bernie Sanders′ 2016 presidential campaign.

The U.S., under the Trump administration and subsequently the Biden administration, has kept interest rates low and released trillions of dollars into the economy to support growth in the wake of the pandemic.

The stimulus program has drawn criticism for its scale. At conglomerate Berkshire Hathaway’s annual meeting in May, U.S. billionaire Warren Buffett’s longtime business partner Charlie Munger said modern monetary theory might be “more feasible than everybody thought. But I do know that if you just keep doing it without any limit it will end in disaster.”

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Meanwhile in China, the ruling Chinese Communist Party just celebrated its 100th anniversary on July 1, when President Xi Jinping called again for the “great rejuvenation” of China.

To Liu, the government’s stance means policy will focus on ensuring national security and cutting carbon emissions. He emphasized political correctness will be even more critical for investment in light of developments like Alibaba founder Jack Ma’s controversial speech last fall and the subsequent suspension of Ant Group’s IPO.

Mainland Chinese stocks with the highest probability of large gains will be those in the new energy, seed, optics and semiconductor industries, among others, Liu said.

As for digital currencies, on which Chinese authorities have intensified their crackdown this year, Liu cast them in geopolitical terms as well.

“In my view,” he said, “it’s just the U.S.’ way to tempt Chinese capital.”

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Australia stocks set for lower start; bitcoin price rebounds

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SINGAPORE — Shares in Australia looked set to to slip at the Thursday open, with markets in Japan closed for a holiday.

Futures pointed to a lower open for Australian stocks. The SPI futures contract was at 7,290 as compared with the S&P/ASX 200’s last close at 7,308.70.

Concerns over the coronavirus situation in Asia-Pacific may continue to weigh on regional sentiment on Thursday. Australia’s two largest states on Wednesday reported sharp increases in new Covid infections, while Indonesia saw record high deaths from the virus, according to Reuters.

Markets in Japan are closed on Thursday for a holiday.

Meanwhile, the price of bitcoin rebounded after recently falling below the $30,000 mark. It traded at $32,086.50 as of 7:33 p.m. ET Wednesday, according to Coin Metrics.

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Overnight stateside, the Dow Jones Industrial Average gained 286.01 points to 34,798 while the S&P 500 rose 0.82% to 4,358.69. The Nasdaq Composite advanced 0.92% to 14,631.95.

Currencies

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 92.754 after a recent fall from above 93.

The Japanese yen traded at 110.26 per dollar, weaker than levels below 109.5 seen against the greenback earlier this week. The Australian dollar changed hands at $0.7355, above levels below $0.732 seen yesterday.

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