What a difference a few months make.

2016 began with a series of stock routs in China and a collapse in oil prices to below $30 a barrel, prompting panic in the market for bonds issued by energy companies.

The riskiness of so-called high-yield debt spiked to record levels, and a new crisis looked imminent.High-yield debt is all about greater risk and greater reward, and it specifically refers to debt issued by companies given a credit rating of BBB- or below by the credit-rating agencies.

It's the risky end of the debt market, as it is more volatile than safer debt such as government bonds, but it has become popular because it offers high returns in an era of near-zero interest rates.

At the end of last year, some investment funds that were focused on the high-yield market imploded, causing a wave of panic. In December, the US fund Third Avenue said it would liquidate its Focused Credit fund and freeze withdrawals because it was unable to sell its high-yield bonds fast enough.

In the same month, Lucidus Capital Partners liquidated its entire portfolio to return the $900 million it had under management to investors.

Analysts predicting doom were out in force, with Societe Generale's Albert Edwards predicting that pain in the debt markets would hit stocks, forecasting a 75% drop in the US S&P 500.

Instead, markets rallied.

Analysts at the investment bank Jefferies, led by Sean Darby, attribute this to two factors: easing monetary conditions, which makes it cheaper to borrow and swap out maturing debt, and a recovery in oil.

Here's what they have to say (emphasis ours):

US monetary conditions have loosened as the inflation rate has climbed and real rates have gone negative despite last year's rate hike. China's monetary conditions through the double whammy of a cut in the RRR and increased bank loan growth have further eased monetary conditions in the dollar bloc.

The drop in non-OPEC oil production (primarily led by the US) and tentative verbal agreements amongst some OPEC members appears to have put a bottom in oil prices.

The bottom line is that the 'perfect storm' is passing and that a number of unrelated factors have caused monetary conditions to ease.

As a result, a relative calm has returned to the high-yield debt market, and money is flowing back in.

Here's the chart from Jefferies:

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Jefferies Group just reported results for its first quarter, and the numbers shed a little light on how tough it has been, and the extent to which trading conditions are getting better.

The investment bank reported a net loss of $167 million for the quarter ended February 29, after a challenging period through January and February. 

The results were just plain horrible. Fixed income revenues were $57 million, down from $126 million the same period a year earlier. Equities revenues fell from $203 million to $2 million, driven in part by a $82 million mark-to-market loss on two equity positions. 

That shouldn't really be that much of a surprise, though. Jefferies has had a tough run as the distressed debt and high-yield markets have taken a hammering. Third and fourth quarter results were also disappointing, with the firm losing money on 23 out of 63 trading days in the fourth quarter. 

Here's Jefferies executives explaining the most recent performance, in a statement (emphasis ours):

A quiet December was followed by an extremely challenging January and first few weeks of February.  Almost every asset class, including equities and fixed income, suffered significantly amid concerns about the pace of global economic growth, outflows from the high yield market, forced selling from hedge funds, uncertainty over China, a potential Brexit, and an overall void in liquidity.  New issue equity and leveraged finance capital markets were virtually closed throughout January and February, which resulted in many of our potential Investment Banking capital markets transactions being postponed until some stability returns to the markets.  

Business Insider has written about these dynamics plenty. Morgan Stanley, JPMorgan and Citigroup have all sounded the alarm over trading conditions in the first quarter ending March 31, with the latter two forecasting double digit declines in sales and trading revenue. Corporate bond trading has been especially challenging. 

Investment banking revenue, or fees from equity and debt deals and mergers and acquisitions, are forecast to fall by 25%. 

The challenging start to the year is especially noteworthy, as a big chunk of trading revenues are usually booked in the first quarter. Industry executives have questioned whether banks will be able to make back the lost revenue later in the year. 

One factor that may help is the recent improvement in trading conditions. Jefferies chief executive Rich Handler and executive committee Chairman Brian Friedman cited record-breaking inflows into high-yield funds, a pick up in equity prices, and an uptick in the oil price.

This echoes others on Wall Street who have noticed an improvement in trading conditions. Goldman Sachs analyst Alex Blostein said a note Saturday that risk appetite was returning to the market, with money moving in to high yield and emerging markets again. Equity trading volumes have also been grinding higher, he said. 

It is unclear how big a factor this rebound will play in the first quarter results, but it is clear that trading conditions have improved. Here are Handler and Friedman again (emphasis ours):

While we are early in the second quarter and one can never predict the future, it appears markets have not only stabilized, but aggressively snapped back.  Bank holding company stocks in the US and globally have halted their sell-off, high yield inflows have been at record levels, hedge funds appear to have stabilized, equity markets have rebounded, and energy/commodity prices have improved significantly.  We are experiencing mark-ups in our block equity positions and believe there may be potential upside in the value of the loans held for sale in Jefferies Finance should the current market tone continue.  Our core businesses are performing well, with total sales and trading net revenues for the first ten trading days of our second quarter averaging above our recent periods' mean results, and our investment banking backlog is stronger.

In a note after the earnings release, Credit Suisse analyst Susan Katzke said that the recent improvement in market conditions mentioned in Jefferies' earnings statement had a positive read across for the rest of Wall Street. 

"To the degree that more recent trends can be sustained—reliant on both macro factors and sentiment—this would obviously be a net positive," she said. 

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Jefferies has hired Goldman Sachs managing director and former Navy SEAL Joseph V. Femenia to join its distressed-debt-trading team.

He's joining as a senior trader and manager in the high-yield group, according to a person familiar with the hire.

Bloomberg News first reported the hire.

Femenia, 39, graduated from the US Naval Academy in 1998. He served in the US Navy until July 2005, serving in Iraq and Afghanistan. Afterward, he earned his MBA from Columbia University.

He began his career at Goldman Sachs as a vice president in distressed-debt trading. He was made a managing director in November 2013.

It's been a challenging environment for distressed trading across Wall Street. Jefferies was one the firms that took a big hit in distressed trading in 2015, especially during the period of volatility in August.

Shortly afterward, CEO Rich Handler sent out a motivational memo to clients and employees addressing the trading desk's pain.

"We don't like this at all, but we are in the business of providing liquidity and capital to our clients. Generally, when we pick the right clients to support, they remember who was there for them in challenging times and are fair partners over the long term — and we all know it is a very long race, indeed,"he wrote.

In the bank's third-quarter earnings release, Jefferies revealed that it had losses totaling $90 million over the previous nine months across more than 25 distressed-energy positions.

Jefferies' 'tribe'

Back in January, Jefferies held an off-site leadership program where executives were addressed by Clint Bruce, a retired US Navy SEAL officer and a former NFL player.

In a memo to employees, CEO Rich Handler wrote that during Bruce's talk, they were taught the importance of thinking like a tribe as opposed to a team.

"A team is a collection of people all working for a common goal. A tribe is a collection of people who know why they are together, are passionate about each other, bleed for a unified common cause and trust each other implicitly," Handler wrote.

Welcome to the tribe, Femenia.

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A bunch of US regulators decided in 2013 that the leveraged-lending market was overheating, and that it needed to be curtailed.

Wall Street did not like this one bit.

Leveraged loans are loans to companies rated below investment-grade, and they're often used to finance takeovers.

The regulators, including the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., issued guidelines on everything from underwriting standards to how the risks of these loans should be rated.

The regulators were concerned about the rate of growth in leveraged lending, and what they considered deteriorating underwriting standards. In other words, banks were taking on too much risk.

The guidelines in effect capped loan multiples, putting a stop to some of the more aggressive deals that were taking place at the time. These loans were typically financing private-equity acquisitions.

I remember speaking to a very senior Wall Street banker about the guidelines around that time. He was furious.

He told me that when he met with the regulators shortly after the guidelines were published, he walked around the room shaking their hands. They found this curious, and asked him why he was doing it.

The reason, he said, was because this was the last time he'd be seeing them. The guidelines these regulators had published meant that either:

1. His job wouldn't exist inside a bank any longer, and so he'd probably be doing the same thing for a hedge fund.
2. The new rules would have such an impact on lending that economic growth would slow, meaning that the regulators would likely be out of a job.

Well, that was then. The market has bedded down with the new rules, and seems to operating just fine. The banker is still employed by the bank, but it seems that he was partially right about one thing.

The Federal Reserve Bank of New York's Liberty Street Economics blog just published some research from staff there, and yes, it seems that nonbanks did step in to the void left behind by the big banks.

From the post:

Banks overseen by the Large Institution Supervision Coordinating Committee (LISCC)—the institutions that may pose elevated risks to U.S. financial stability—reduced their leveraged lending most aggressively in response to the guidance.

In contrast, nonbanks increased their leveraged lending—even after the first quarter of 2013.

Now, some people might think that this is just fine. The risk no longer resides with LISCC banks, a group that includes JPMorgan, Goldman Sachs, and Credit Suisse. There was a fair bit of reporting awhile back that the likes of Jefferies and Nomura, which don't carry the LISCC designation, were stepping in.

Maybe that is OK, because regulators care about only the banks that are critical to the economy.

The counter-argument is that the risk hasn't been reduced, just moved, and the system is still just as risky.

Here is the Liberty Street Economics post (emphasis added):

Even though not all lenders have cut their leveraged lending in response to the regulators' guidance it appears that key players, such as LISCC banks, have. This reduction in lending, however, did not necessarily result in an equivalent risk reduction because nonbanks increased their borrowing from banks, possibly to finance their growing leveraged lending activity. This evidence highlights an important challenge of macroprudential policies. Since those policies reach beyond individual banks and target risk in the entire banking system, they are more likely to trigger significant responses that may have unintended consequences.

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The peer-to-peer lender LendingClub is on the cusp of being investigated by the US Department of Justice and the Securities and Exchange Commission, and it is in emergency talks to coax more buyers onto its platform to shore up the business.

LendingClub made the disclosures in a regulatory filing on Monday. It follows the shock ousting of LendingClub founder and CEO Renaud Laplanche last week after an internal review. The stock crashed 26% on the day and is down over 50% since then.

The board cited issues with "data integrity and contract approval monitoring and review processes" for Laplanche's exit, as well as issues surrounding an apparent financial conflict of interest in an investment Laplanche made in a company doing business with LendingClub.

The forced exit of Laplanche has sent LendingClub into a full-blown crisis that threatens the very core of its business.

And in the process, the poster child of US marketplace lending is threatening the existence of the whole US online lending industry.

UPDATE: Since publication LendingClub has provided BI with the following statement:

We are not surprised to receive a Department of Justice subpoena in light of our public disclosures and the focus of the Department on financial services. The Company is fully cooperating and has engaged in a productive and orderly dialogue through counsel. While the investigation is still in its early stages, the Company is pleased with the open and positive interactions that have occurred to date.

Dodgy loans

LendingClub was founded in 2007 and is a peer-to-peer lender; consumers can take out loans of up to $40,000 (£27,654), supplied by a third party, that are then packaged up and sold to institutional investors who want to receive the stream of interest payments in return. It matches lenders with investors, a little like UK companies such as Zopa.

The company pioneered the model in the US and has been hugely successful, lending over $18.7 billion to date and in December 2014 enjoying the first stock market listing of a peer-to-peer lender.

But a recent internal investigation found an issue with $22.3 million worth of loans sold to a single investor, which The Wall Street Journal reported was the bank Jefferies, in March and April. Some of the loans didn't meet the buyer's criteria but were doctored to look as if they did.

LendingClub says:

In one case, involving $3.0 million in loans, an application date was changed in a live Company database in an attempt to appear to meet the investor's requirement, and the balance of the loans were sold in direct contravention of the investor's direction.

The review concluded that "the company's internal control over financial reporting was ineffective"— a hugely damning statement. A subsequent review of all loans from mid-2014 to present, however, found that 99.9% were above board.

But Laplanche also failed to disclose his personal interest in a fund that LendingClub was considering investing in, and The Journal claims he had invested millions in that fund so it could buy LendingClub's loans, effectively to boost demand.

The vehicle, which Bloomberg said was Cirrix Capital, bought $114.5 million worth of LendingClub loans in the first quarter of the year, according to Monday's filing. LendingClub director John Mack and Laplanche are all investors in Cirrix, according to Bloomberg. Cirrix is now helping Lending Club with emergency funding.

LendingClub claims to take no credit risk itself, but it clearly has some exposure to the risk if it is investing in a fund that is buying its loans. Discussing LendingClub's investment in the vehicle that bought the loans, LendingClub says it "determined none of these events were required to be recognized or disclosed."

Still, Laplanche has now been ousted over the investment saga and the lax controls over selling on loans.

Grand jury subpoena

As a result of the whole fiasco, LendingClub has received a grand jury subpoena from the US Department of Justice and has been contacted by the SEC, it said in a filing on Monday. The company says "no assurance can be given as to the timing or outcome of these matters."

LendingClub also warns that it may face legal proceedings over the whole thing, but it says it doesn't think any liabilities from an eventual judgment will have a "material effect on its financial condition."

LendingClub is already facing two class-action lawsuits in the US, both filed since the start of the year.

One, filed in California, accuses the company of "making materially false and misleading statements in the registration statement and prospectus issued in connection with the IPO regarding, among other things, the company's business model, compliance with regulatory matters, and their impact on the company's business, operations, and future results."

Another, lodged in New York, claims people "received loans, through the company's platform, that exceeded states' usury limits in violation of state usury and consumer protection laws."

'The company may need to use its own funds to purchase these loans'

The immediate concern for LendingClub's management is to prop up the flagging business and stop it from imploding.

LendingClub says: "A number of investors that, in the aggregate, have contributed a significant amount of funding on the platform, have paused their investments in loans through the platform. As a result, the company may need to use its own funds to purchase these loans in the coming months."

In other words, LendingClub is going to fundamentally shift its business model from taking no risk to taking on the risk of borrowers defaulting. The startup sold itself as simply a marketplace, connecting borrowers with investors, but now it is buying its own product. The equivalent would be Airbnb buying up loads of houses to list on its own platform, to keep it growing.

Management acknowledges that investors who have "paused" buying loans "may not return to our platform." The board is "actively exploring ways to restore investor confidence in our platform and obtain additional investment capital for the platform loans" and says (emphasis ours):

These efforts may take a number of different structures and terms; including equity or debt transactions, alternative fee arrangements or other inducements including equity. These structures may enable us or third-parties to purchase loans through the platform. There is no assurance that we will be able to enter into any of these transactions, or if we do, that the final terms will be beneficial to us.

In other words, LendingClub may have to give away shares in the business to persuade people to buy loans over the platform again. And it's also considering a deal in which it buys its own loans through some sort of structure — again, eschewing the traditional model and gaining exposure to credit risk.

If all that fails, LendingClub says, it will simply have to buy more of its loans off balance sheet and slow down loan origination. In effect, hit the brakes.

LendingClub has $583 million in the bank. That won't last forever. It needs to coax buyers back to the platform or accept a sizable haircut on its business size and share price, which has already taken a battering.

It's likely that this scandal will have a wider impact on the online lending and fintech industry, at least in the US. The Journal reports that "investors and analysts say they have grown more cautious about the entire online-lending sector" since Laplanche's exit.

LendingClub was seen until last week as the gold standard in fintech startups, with grandees on its board including Mack, the LendingClub director and former Morgan Stanley CEO, and former Treasury Secretary Larry Summers.

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"Merely stable versus robust."

That was how Jefferies described trading conditions in the three months ended May 31.

The Wall Street investment bank on Tuesday announced an uptick in revenues for its fiscal second quarter, after a torrid start to the year. 

"We are pleased to report quarterly results at a more normal level, reflecting better equity and fixed income secondary trading conditions, although new issue capital markets activity remained somewhat muted," Jefferies executives said in a statement.

Revenues came in at $719.4 million, up from $299 million the previous quarter, but down from the same period of last year. Here are the key takeaways by business:

• Equities revenues of $223.5 million, up from just $1.7 million in the first quarter, but down slightly from the same period a year earlier.
• Fixed income revenues of $238.5 million, up sharply from both the first quarter and the same period last year. 
• There was one trading day with a loss, excluding the impact of KCG (a market maker Jefferies has a stake in), versus 12 the previous quarter, and five in the second quarter of 2015.
• Total investment banking revenues of $253 million, up from the first quarter, but down heavily from $404.3 million in the second quarter of 2015. 
• Net earnings of $54 million, versus a $166.8 million loss in the first quarter, and a $59.8 million in the same period in 2015.

Jefferies tends to be something of a bellwether for Wall Street, and market watchers look for a read across from the firm's results to the big banks that report a month later. 

In its first quarter results, for example, it hinted at improved trading conditions through March. Many of the bulge bracket investment banks later confirmed the same trend: a pick-up in trading starting March.

That pick up has continued through April, May and June for Jefferies. Several banks have said they expect to report solid second quarter trading revenues. 

But as Jefferies points out in its statement, the improvement isn't that dramatic. Total revenues were still down year-on-year. Trading conditions aren't great; they're just not awful. 

Here's the excerpt (emphasis ours):

"We are particularly pleased with these results as the trading environment was merely stable versus robust, and our performance shows the continued opportunity and potential of our business after a significant bottoms up rightsizing and strengthening, and an overall reduction in risk."

The bank has been making changes. Business Insider reported in May that it had hired five bankers from Credit Suisse, for example. The Jefferies statement said:

"We believe our industry is experiencing yet another fundamental and strategic inflection point. We expect this will lead to further consolidation of market share and we are all working hard to ensure that Jefferies is a major beneficiary. To this end, we are particularly focused on continuing to expand our investment banking footprint in the US and Europe, and are meeting and hiring talented individuals who we believe will enhance our ability to serve our clients.”

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Financial-market volatility has returned with a vengeance.

Stocks are getting pummeled, commodities are being crunched, high-yielding currencies are being whacked, and, as opposed to other periods of acute volatility seen recently, government bonds are also getting smoked.

It has been wham, bam, thank-you ma'am, almost out of nowhere.

According to the Jefferies global equity strategy team of Sean Darby, Kenneth Chan, and Irene Zhou, bond yields have driven the recent bout of market volatility.

Like a game of dominoes, or the fluttering of a butterfly's wings in the Amazonian rain forest, government bond yields, after hitting record low after record low earlier this year, have suddenly started to reverse course.

First it was Japanese government bonds, then UK gilts, then German bunds, and, reaching its peak last Friday, US Treasurys.

After weeks of placid markets, the move to a chase for yield became a race to the exits, ending in a spectacular market rout.

Investors are now wondering what comes next.

Was it a one-off move or the start of a longer-lasting trend, sucking what were previous market gains into ever deeper losses?

While investors mull over what actually ignited the move in bond yields — be it smaller chance of additional central-bank stimulus or the belief that governments will issue more longer-dated bonds, or other factors — Darby and his team believe that "certain segments of the equity market will be 'no-go' areas until yields have stabilised."

It would surprise few that utilities, telecommunications, and consumer staples — favoured destinations for yield-hungry investors — were particularly hard hit on Friday.

So what should stock investors expect in the period ahead? That answer, they say, will come down to movements in real US yields and the US dollar in the period ahead.

For some background, here's a chart from Jefferies that looks at real US bond yields, simply derived by taking the nominal 10-year note yield and subtracting CPI on a year-on-year basis.

"Essentially equities have been tracking real yields on an absolute basis and have been trading relative to other indices based on FCF [free cash flow] yield," they wrote on Monday.

"Provided US real rates don't rise towards 2% and the dollar doesn't strengthen, equities will probably only experience a 'correction.'"

From an asset-allocation perspective, the Jefferies trio believes that investors should remain overweight emerging markets yet acknowledges that "weaker candidates should be cut."

"We currently don't recommended 'reach for yield' within the global asset allocation," it says. "We continue to seek uncorrelated assets such as China A shares."

As for the near-term outlook for US rates, Jefferies says the Federal Reserve is unlikely to move next week.

Here's a table that shows which markets Jefferies is bullish toward and those it thinks look bearish.

For all the talk of a more hawkish Federal Reserve being behind the spike in yields, market expectations for a US rate — be it in September or December — barely budged on Friday.

September is still seen as a one-in-three chance of an interest-rate hike, with a two-in-three chance for December.

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Investment bank Jefferies Group LLC on Tuesday reported a jump in third-quarter profit, driven by strong revenue in its fixed income trading business.

Net earnings rose to $41.2 million in the three months ended Aug. 31, from $2.1 million a year earlier.

The bank posted fixed-income trading revenue of $195.3 million, compared with a negative $18.2 million a year earlier.

Jefferies, a unit of Leucadia National Corp, kicks off the reporting season for investment banks and is often viewed as an indicator of the performance of Wall Street banks.

"Aside from a volatile two week period following the unexpected outcome of the UK 'Brexit' referendum in June, fixed income and equity secondary market conditions remained reasonably steady for much of the third quarter," Chief Executive Officer Rich Handler said in a statement.

Overall trading revenue soared about 86 percent to $343.6 million.

However, revenue from investment banking fell 24.3 percent to $294.9 million, down for the third straight quarter hurt by fewer initial public offerings.

There were 55 IPOs in the United States this year as of Sept. 15, down 64 percent from a year earlier, according to Thomson Reuters data.

Jefferies said revenue from advising on mergers and acquisitions was "solid" and that its backlog for the four quarter was the highest it has been all year. (Reporting by Sudarshan Varadhan in Bengaluru and Olivia Oran in New York; Editing by Saumyadeb Chakrabarty and Jeffrey Benkoe)

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Republican Donald Trump has shocked the world by becoming the 45th President of the United States.

The result has left financial markets reeling around the world with most pricing in a win for Democrat Hilary Clinton, who had a projected slim lead going into the vote.

Stock markets are now tanking and currencies are jumping against the dollar.

Analysts at investment banks are beginning to react to the shock victory, exploring what it will mean for global stock and currencies markets.

Here's what they think is about to happen:

HSBC: 'This is a potentially game changing result'

Chief US economist Kevin Logan says: "We would expect a Trump Presidency to lead to major changes in federal fiscal policy, with lower taxes, higher deficits, restrictions on trade and the international flow of capital, and potentially a sizable reduction in the labor force if Trump's deportation plans are put into effect." (You can read more on Logan's view here.)

HSBC's US head of FX strategy Daragh Maher says: "The risk-off knee-jerk reaction to a possible Trump victory is already underway. It is likely to be sizable and to persist for some time as the market scrambles to digest what would be a surprising and game-changing result.

"The degree of FX impact from this potential election result hinges on whether Trump delivers on the bulk of his campaign promises. This may not be the case but the market will have to price in some possibility that each component would materialise. These probabilities will shift over time, depending on Trump's rhetoric and the degree of support coming from a Republican-dominated Congress.

"In the end, this is a potentially game changing result for the FX market and quite possibly gold. The near-term price action would be dominated by the risk off mood, heightened volatility and uncertainty. The medium-term implications would be determined by the pace and scale of policy implementation by the Trump administration."

Deutsche Bank: 'It will reinforce the backlash against globalisation'

Deutsche Bank strategist Jim Reid says: "A Trump win is likely to be viewed negatively across a wide range of assets in the short-term but the range of medium-term outcomes are much wider. It increases the chance of higher fiscal spending but it will also reinforce the backlash against globalisation and associated forces of which migration policy and trade are obviously likely to be heavily scrutinised.

"So as the trend is already pointing to, expect lower risk assets at first, lower bond yields on a flight to quality but then higher yields once his spending plans are digested and an equity market that might at some point benefit from reflationary policies but with greater risks (lower trade and global openness) and higher volatility.

"It's very easy to say this is a big negative for the global economy but current policies around the world are perpetuating the soporific post-GFC [global financial crisis] recovery. A shake up is badly needed but whether Trump is the right version of the shake up is open to debate."

Fidelity: 'Calls into question the pillars of the post-WWII settlement'

Dominic Rossi, Fidelity International's Global CIO of Equities, says: "We are heading into a world of unprecedented political risk which calls into question the pillars of the post-WWII settlement. It’s unsurprising investors are heading for cover.

"The immediate sense of bewilderment at the shift rightwards in American politics will need to give way to a more sober risk assessment. The immediate impact will be on the Fed. The probability of a hike in interest rates in Dec, followed by two further hikes 2017, has fallen sharply. The dollar which has been trending higher in anticipation, has consequently reversed. Both were threats to the bull market, and these have now been postponed. Monetary policy will remain accommodative.

"However, these known financial risks have been displaced by an unprecedented level of unknown political risks. We can only speculate whether Trump will follow through on his more protectionist slogans with substantive policies. Investors, particularly those overseas, will stand back and wait."

People around the world are reeling from Republican Donald Trump's shock victory in the US election.

The big question most are asking now is: what exactly is Trumpism?

The Republican candidate has promised to stand up for America's "forgotten man and woman," but what that means in terms of actually policies and actions is a little unclear at the moment. Pretty much all financial analysts are using the word "uncertainty" to describe the state of global politics and financial markets at the moment.

Janet Henry, HSBC’s global chief economist, says in a note this morning: "Huge uncertainty about the future direction of US economic and foreign policy under its new president is already causing big ructions in FX and global stock markets and could feed into business and consumer confidence globally."

Trump made plenty of promises on the campaign trail but keeping track of them can be a challenge. Societe Generale and Jefferies have produced charts setting out all of his key policy ideas. Here's the SocGen chart, circulated in a note to clients on Wednesday:

And here's Jefferies take, also circulated in a note on Wednesday morning:

HSBC's chief US economist Kevin Logan says in a note also circulated on Wednesday that Trump's economic policies "would likely put the economy into a recession after a year or two" if fully enacted.

However, he adds: "Whether his proposals will actually be implemented depends on the willingness of Congress to enact legislation to put his proposals into law."

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Jefferies CEO Rich Handler and Chairman Brian Friedman sent an open letter to their staff expressing what they are grateful for this Thanksgiving.

"This is the beginning of the season where we remind ourselves of our blessings and all we have to be thankful for in our lives," the note read.

In particular, the executives highlighted their gratitude for their country, which "encourages free speech, the pursuit of happiness, checks and balances, and the peaceful transition of rule," they said.

They also said they are thankful for the year ending "far better" than it started. Stock markets plummeted in the first six weeks of 2016, and deal activity cratered. Both banking and trading businesses have since picked up.

"We are thankful that our company, industry, and American way of life affords us the ability to provide well for our families," the note continued.

Here's the full memo:

This is the beginning of the season where we remind ourselves of our blessings and all we have to be thankful for in our lives.  We would like to share with each of you our personal Gratitude List:

1. We are thankful for the health and well-being of our loved ones, friends, associates and ourselves.   

2. We are thankful to live in a country that encourages free speech, the pursuit of happiness, checks and balances, and the peaceful transition of rule. 

3. We are thankful that the New York Giants spent so much money on their defense to supplement Eli and our amazing receivers and that we may actually be playoff contenders once again.  (Hopefully we didn’t just jinx it!) 

4. We are thankful and appreciative of the loyalty and continual expansion of our client base who consistently trust us with their important business. 

5. We are thankful that our year is ending far better than it started and setting up for a hopefully very strong 2017. 

6. We are thankful for the long term patience, confidence, and commitment from all of our Jefferies and parent company Leucadia shareholders, bondholders, rating agencies, and Boards of Directors. 

7. We are thankful that we have a firm with a wonderful and true culture that is based on integrity, transparency, flatness, commitment, tenacity, and entrepreneurism. 

8. We are thankful for all of our armed service people, policemen, firemen, and EMS that work so hard and dedicate and risk their lives to keep us all safe. 

9. We are thankful that our company, industry, and American way of life affords us the ability to provide well for our families, help friends in need, and give to important causes and those less fortunate.

10. We are thankful for having the best jobs anyone could ever ask for and each of you are the 3,321 reasons why.  Your hard work, commitment, dedication, loyalty, passion, sense of humor, and trust mean everything to both of us.  We would like to thank each of you and your families for being integral to the overall Jefferies family.  We are also deeply appreciative of the 28,677 other fine people who have dedicated themselves to our Leucadia investee and affiliated companies. 

Happy Thanksgiving and we hope you all enjoy everything that is important to each of you.

With Appreciation,
Rich and Brian

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Jefferies has "not been operating at normal levels" this year, but is well-positioned for 2017.

That's according to a candid letter CEO Richard Handler sent to staff Thursday to mark the end of the fiscal year.

"The first quarter of 2016 was one of the most painful periods we have experienced in our careers," Handler and chairman Brian Friedman wrote.

"Our results were horrible, as we dug ourselves into a pretty good-sized hole."

Banks across the board were wiped out in the first quarter of this year.

Performance has since bounced back at Jefferies, Handler said, although "the aggregate result for 2016 clearly will not be acceptable for any of us."

Important markets like initial public offerings and leveraged finance were quieter than normal even after the first quarter, Handler said. The firm has "shrunk or eliminated" challenged businesses and will continue to do so going forward.

Shares of Jefferies' parent company, Leucadia National Corporation, are up 32% year-to-date.

"We believe in our bones that 2017 should be a year in which we can truly break out and optimize all our hard work over these past two challenging years," he wrote.

Handler finished the letter by asking staff to be honest and realistic in their year-end compensation expectations, to "give December their all in terms of work ethic," and to be ready to "hit the ground running full force" on January 3 next year.

Here's the full note:

"Today, we start Jefferies’ 2017 fiscal year. We would like to share with each of you our brief perspective on our 2016 and on our future together:

"The first quarter of 2016 was one of the most painful periods we have experienced in our careers. Our results were horrible, as we dug ourselves into a pretty good-sized hole. This was not done maliciously, carelessly, or by just a small group of individuals or teams. Instead of blaming the environment or others, or pretending it didn’t happen, we collectively rolled up all our sleeves and went to work to overcome this mess. With our strong culture, flat operating structure, and strong sense of pride and ownership, we stayed in the game and our entire firm pivoted from being on the wrong side of an impossible market to being even more focused and even better situated to help those who depend upon us. We spent the next three quarters performing for our clients, and executing for our shareholders and bondholders. The environment has been less ugly since the first quarter, but until very recently it was far from robust. Many of our important markets (such as IPO and Leveraged Finance) were quieter than normal even after the first quarter. Even though we were not operating at normal levels on many of our cylinders, we did a much better job these past three quarters and our results have been generally solid. While the aggregate result for 2016 clearly will not be acceptable for any of us or our fellow shareholders, given where we were at the end of Q1, the two of us are thrilled with how you handled this adversity and we take pride in all that each of you have accomplished, especially over these past nine months.

"The best part of our 2016 story is how well we are all positioned for 2017. Our balance sheet and risk are resized to what we believe we are the right place for whatever 2017 throws our way. Our Jefferies tribe has never been better or more capable, as we have made (and will continue to make) key hires across the platform that complement our strong foundation of human capital. Our competitive position has never been stronger and we can all see the potential for future market share gains across every one of our businesses. We have shrunk or eliminated businesses that had challenges or did not have the long term potential to justify the investment by our shareholders. We are not done on this task, as it is always a work in process. Our brand has risen, while others have diminished. We believe in our bones that 2017 should be a year in which we can truly break out and optimize all our hard work over these past two challenging years. Nobody knows what the future will hold in our industry, but we would “rather be us” than anyone else!

"We have three specific goals to achieve in December:

1. We want everyone at Jefferies to be compensated fairly, taking all relevant information into account. We do this every year, and ask each of you to be honest and realistic when assessing your own performance, contribution and behavior, your business unit’s performance and contribution, and the firm’s overall results, as well as taking into account the compensation practices of our competitors and the market generally. Please don’t make this any more challenging than it should be. We are all very lucky and, if you can’t show it, you should please know it.

2. We want everyone to give December their all in terms of work ethic. This is the start of our 2017 year and we need to play offense while everyone else is winding down. We want and deserve a strong start to 2017.

3. We want each of you to find time to relax with your families, recharge your batteries, reflect on all the wonderful things you have in your lives and be prepared to hit the ground running full force on January 3, 2017.

"Happy Fiscal New Year to All,

"Rich and Brian"

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Credit Suisse AG said it has blocked an attempt by Jefferies Group LLC to lure a number of its senior bankers.

Of the eight bankers that had agreed to take on new roles at Jefferies, five are remaining at the Swiss bank, according to Credit Suisse spokeswoman Nicole Sharp.

This includes Jonathan Moneypenny, who had agreed to join Jefferies to co-head its global leveraged finance capital markets business, Reuters reported on Tuesday. Moneypenny has reversed his decision and will remain at the Swiss bank, Sharp said.

Jeb Slowik, who had also been hired at Jefferies to co-head leveraged finance originations, will also remain at Credit Suisse.

A number of other Credit Suisse senior loan team members, including Joseph Kieffer, John Bown and Brad Capadona, are joining Jefferies, Reuters reported on Tuesday.

Credit Suisse is trying to protect its leveraged finance franchise, which is among the most active on Wall Street, as Jefferies tries to rebuild its own.

Jefferies had also agreed to hire three senior investment bankers from Credit Suisse's real estate investment banking business. All three will now stay at Credit Suisse, including Dean Decker, who had been hired to co-head Jefferies' global real estate, gaming and lodging banking business.

A Jefferies spokesman did not respond to requests for comment.

This is the second time that Jefferies has tried to lure a number of Credit Suisse bankers in recent months.

Last year, a group of five Credit Suisse technology investment bankers left for Jefferies, prompting a court case.

(Reporting by Olivia Oran in New York; Editing by Alan Crosby)

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LONDON – Investment in prime office space in London is taking a double hit from both Brexit and a slowdown in interest from Chinese and Hong Kong-based buyers.

Jefferies analysts Mike Prew and Andrew Gill said in a note to clients that rental expectations for commercial real estate such as industrial, retail and office space are shrinking with a drop in demand following the Brexit vote in June.

"Since the Brexit vote there was some initial movement back into expected rental growth of nil or slightly positive, but this has slipped back with the government focused on a hard Brexit outside of passporting and the customs union, and the potential tightening of consumer belts as cost-led inflation puts pressure on household spending," they said.

Here's the chart, based on RICS survey data:

Jefferies said that take-up of central London office space "is nearly -25% below the 10 year average at 2.2 million sq ft vs. 2.8 million sq ft," giving a smaller pool of renters "increasing choice of available space as the pipeline market takes off."

At the same time, the flow of money from China is weakening, which is likely to depress prices further. A depreciating yuan and curbs on capital outflows are making it more expensive to invest.

"Chinese capital export restrictions are tightening with the yuan facing further depreciation," Jefferies said. "London office buyers are almost exclusively from Hong Kong and China, and with signs rents are falling the pricing support looks increasingly precarious.

Shortly after the Brexit vote, at least seven investment firms suspended trading in their property funds, freezing £15 billion ($19.4 billion) of assets, out of a total of £24 billion sunk into UK open-end real estate funds.

The value of real estate investment trusts, or REITs, took a beating in the process.

Here's the chart:

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LONDON — Tesco faces a crucial test this week when it delivers full-year result on Wednesday.

The supermarket chain's planned merger with food wholesaler Booker is facing pressure from two key shareholders and Bernstein's retail analyst Bruno Monteyne says "results need to impress to keep the deal on track."

James Grzinic and Caroline Gulliver at Jefferies, likewise, see Wednesday's 2016/17 results as an opportunity to "remain on the front foot on the Booker deal." However, Grzinic and Gulliver add that they are "trying to keep an open mind on booker for now but ultimately our concerns around the 2017 industry challenges remain."

If Tesco cannot impress investors with solid full-year numbers, then the £3.7 billion deal could be thrown into doubt.

The Tesco and Booker tie-up: key facts

Tesco announced in January plans to buy food wholesaler Booker in an ambitious deal that would take it into the "out of home" food market — people eating out at restaurants and at catered events. This market is growing faster than supermarket sales.

The deal is not straightforward. Booker supplies corner shops such as Budgens and Londis and the Competition and Markets Authority (CMA) has opened an investigation into the deal to decide if it gives Tesco too much control over the food market.

Schroders and Artisan Partners, who of Tesco's biggest shareholders, have also come out against the deal. Schroders fund manager Nick Kirrage said in a letter that he believes Tesco is paying too high a price and the deal will destory value for investors. Hermes Fund Managers, an influential investment advisor, also criticised the deal.

A survey of investors by Bernstein's Monteyne last week found an estimated 70% support the deal, suggesting it will be approved, but Monteyne warned that there is a margin for error in his work and scope for Schroders and Artisan to sway key shareholders.

Wednesday's results: what to expect

This week's full-year results look like a crucial test for Tesco. CEO Dave Lewis must show strong progress for the supermarket, signalling that it is in good enough health to take on the task of a complex merger outside of its core business are.

Tesco's previously told the markets to expect full-year underlying earnings of £1.2 billion, but consensus has moved to around £1.25 billion after a solid update from the supermarket in January.

Grzinic and Gulliver say in a preview note last week:

"We assume H2 UK (including Republic of Ireland) margin largely unchanged vs H1, or +25bps year-on-year. Internationally we expect tougher trading conditions in Thailand to have led to a sharper margin fall in H2 (was -30bps ex-Turkey deconsolidation help in H1, Jefferies estimates closer to -60bps in H2). Closing net debt of c.£4bn for us and consensus would represent a year-on-year reduction of over £1bn. But at current levels of UK profitability (and given ongoing £270m p.a. pension cash top-up payments, which we expect to be reconfirmed with the upcoming triannual), the business requires working capital improvements and property proceeds in order to make appreciable progress on leverage."

The analysts add that: "Ultimately it is improvement in Tesco's UK relative sales momentum that is needed to defend a recovery multiple. Evidence on this front remains erratic."

Lewis was bought in to rescue Tesco in 2014. At the time, the supermarket was reeling from a £300 million accounting scandal and facing intense competition in the UK from discounters Aldi and Lidl. Lewis has helped Tesco return to better shape in the UK but some investors feel he has moved too soon on M&A.

Bernstein's Monteyne says: "There is a strong sense out there amongst investors that "Tesco's recovery has stalled"." However, he argues this is not true and expects "UK profits, cash generation and volume growth all set to surprise." Monteyne forecasts a UK and Republic of Ireland operating profit of £430 million, 15% above consensus forecasts.

Monteyne also expects Lewis' to unveil "Phase III" of his turnaround plan at Tesco. He writes:

"Dave Lewis announced phase II (rebuilding business) at the interims, putting closure to phase I (crisis-control). Dave is not a 2-phase CEO. Phase III will be about Innovation and Growth. Booker deal fits in perfectly with that. Shareholder vote is another 9 months off, so another set of UK results before then to assuage fears about the strength of the UK recovery."

If he can pull it off, Phase III could be a triumph for Lewis. But if his gamble doesn't pay off, then it could be a costly error for Tesco's CEO. Wednesday could well prove to be the decider.

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US investment bank Jefferies Group reported a 29.4% increase in quarterly profit on Tuesday, boosted by higher fees from advising on mergers and acquisitions and underwriting debt and equity offerings.

Revenue from its investment banking business, which includes underwriting and advisory services, jumped 39% to $351.9 million in the second quarter ended May 31.

New York-based Jefferies, a unit of Leucadia National Corp , traditionally kicks off the earnings reporting season for investment banks, and its results are viewed as an indicator of how big Wall Street banks are performing.

Jefferies' total equities and fixed income revenue dipped 6.9% to $430.1 million, as revenue from fixed-income trading fell by more than a third amid lesser market volatility throughout much of the quarter.

Strong trading revenue had boosted profits at large US banks in recent quarters even amid low interest rates as investors changed their positions around major economic events such as Britain's vote to leave the European Union and the US presidential election.

But banks including JPMorgan Chase & Co and Bank of America Corp have already warned that trading revenue in the second quarter of 2017 would be lower than year-ago levels, hurt by lesser volatility and weaker client activity.

Net income attributable to Jefferies Group rose to $69.8 million from $53.9 million a year earlier.

Net revenue climbed 8.3% to $779.3 million.

Reporting by Sweta Singh in Bengaluru; Editing by Sai Sachin Ravikumar

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Sept 19 (Reuters) - U.S. investment bank Jefferies Group LLC's third-quarter profit more than doubled from a year ago, as it earned more from advising on debt and equity financing as well as mergers and acquisitions.

Jefferies said on Tuesday net income attributable to the company rose to $83.8 million in the quarter ended Aug. 31, compared with $41.2 million, a year earlier.

Revenue from investment banking, which includes underwriting and advisory services, soared 61 percent to $475.7 million.

In the quarter, Jefferies provided debt financing to Sycamore Partners' $6.9 billion deal to buy Staples Inc . U.S. oil and gas company Penn Virginia Corp also hired Jefferies as it explored a possible sale.

New York-based Jefferies, a unit of Leucadia National Corp , traditionally kicks off the earnings reporting season for investment banks. Its results are viewed as an indicator of big Wall Street banks' performance.

Jefferies said total equities and fixed income revenue fell about 7 percent to $319.5 million, hurt by subdued trading volumes and volatility during much of the quarter.

JPMorgan Chase & Co, Bank of America Corp and Goldman Sachs have already warned that trading conditions during the third quarter will likely be poor as bonds and stocks continue to suffer from decreased market activity and volatility.

JPMorgan expects a 20 percent slide in trading revenue, while BofA and Citi expect a nearly 15 percent fall.

Jefferies said its net revenue jumped 22.3 percent to $800.7 million. (Reporting by Nikhil Subba in Bengaluru; Editing by Sai Sachin Ravikumar)

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• Sources: Palamon Capital Partners puts Feelunique up for sale.
• Online beauty retailer had revenues of £80 million last year.

LONDON — The private equity owner of online beauty retailer Feelunique is exploring a sale of the company, Business Insider understands.

Two sources told BI that Palamon Capital Partners has commenced a sale process in recent weeks. Investment bank Jefferies has been appointed to explore options for the business, one of the people said.

Palamon Capital Partners declined to comment. A spokesperson for Jefferies declined to comment. A spokesperson for Feelunique said: "Like all private equity-backed companies, Feelunique is asked frequently about corporate interest in the business. As a rule, we never comment."

Feelunique claims to be Europe’s largest online beauty retailer with a choice of more than 30,000 products from 500 brands such as Benefit, L'Oreal, and Charlotte Tilbury. It sells make-up and skin care product across 120 markets and has dedicated websites for the UK, France, the EU, Germany, Norway, China and the US. 

Palamon, which also owns Sweden's Happy Socks, has owned Feelunique since 2012. It paid £26 million for the UK business.

Feelunique reported sales of £80 million in the year to March 2017, up 27% year-on-year. The company said on Wednesday that it sold £6 million-worth of goods during its recent Black Friday and Cyber Monday promotions, up 40% on last year.

CEO Joel Palix said in a statement at the time: "Feelunique’s trading through the Black Friday promotion is further compelling evidence of the shift in the beauty sector to online purchasing.

"The focus we have given to establishing the leading technology-led digital platform in the sector, building an online community and solidifying our brand relationships, is really coming to fruition."

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• Independent investment bank Jefferies had a record year in 2017.
• The bank posted all-time highs in revenues and profit thanks to strong debt and equity underwriting.

LONDON, Dec 19 (IFR) - Jefferies has posted record revenues and profit for the year ended November, following buoyant debt and equity underwriting activity in the final three months of the year.

The independent US investment bank said investment banking revenues in the quarter to the end of November jumped 27% from a year ago to US$528.7m. Equity underwriting surged 97% to US$122.4m, while debt underwriting jumped 36% to US$174.5m.

Meanwhile, Jefferies said its advisory fees were up 3% on the year to US$231.8m.

The strong investment banking performance helped offset a difficult quarter for the bank's fixed income trading business, where revenues fell 37% from a year ago to US$94.7m. Equities trading revenues were up 10% from a year ago to US$194.4m.

Despite the fall in trading revenues, the stellar quarter for underwriting quarter helped the bank to its best year in its 55-year history, however.

Jefferies, which is the investment banking unit of Leucadia National, reported net revenues of US$3.2bn for the year to the end of November, up 32% from a year before. Its pretax profit was US$504.9m, compared to just US$30m a year before.

"Our strategy of prioritising expansion of our investment banking effort continues to succeed and should yield further growth over the next several years," said Rich Handler, chairman and chief executive.

He said the competitive landscape continued to provide opportunities for Jefferies, which is not constrained by some of the rules imposed on its big Wall Street rivals.

Jefferies' December-November financial year means it reports a month ahead of most rivals so it is often seen as a barometer for Wall Street's health.

Several big investment banks have warned that trading revenues could be down about 15% in the fourth quarter from a year ago. (Reporting by Steve Slater; Editing by Gareth Gore)

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• Jefferies on Tuesday reported record earnings, driven by a strong year from its investment bank.
• It's part of a resurgence for the firm, which jumped two spots to ninth in US investment banking revenue.
• Investing in talent in recent years while others retreated has helped the bank snatch back market share, as has growing its business with private-equity firms.
• "If you do nothing too stupid or arrogant during the good times, you can take advantage during the bad times," CEO Rich Handler told Business Insider.

Jefferies on Tuesday announced a monster fourth quarter that helped the bank generate the best annual revenue and profit figures in its 55-year history.

The firm, whose fiscal year ends a month earlier than the rest of Wall Street, reported annual revenue of $3.2 billion, up 32%; investment banking revenue of $1.76 billion, up 48%; and profits of $358 million, up from just $15 million last year — all three records.

The robust performance is part of a resurgence for Jefferies, which jumped two spots to ninth in US investment banking revenue — which includes fees for providing loans and advising on mergers and acquisitions, debt capital markets, and equity capital markets — according to Dealogic's preliminary 2017 results released earlier this week.

It's the only independent bank in the top 10; the rest of the list is made up of bulge-bracket conglomerates with massive global operations.

Jefferies CEO Rich Handler says the bank is catching up to some of its competitors and stealing market share in part because it has been investing in talent the past couple of years — especially in telecommunications, healthcare, energy, and industrials — while others were more gun-shy.

"Our recent strategy was to basically shrink our balance sheet and invest in quality bankers and quality people," Handler, who has run Jefferies as CEO since 2001 and is the longest-tenured chief executive on Wall Street, told Business Insider.

He added: "Our industry expertise has improved and it's pretty robust. Quite frankly, we're in a good position, as many of our larger competitors have pulled back."

Handler, who joined the firm in 1990 and has been a managing director since 1993, has a knack for staffing up when others are retreating. He also added to his roster after markets got choppy in 1998 and 2001 and again after the financial crisis in 2008, he said.

"The hardest thing to do is to invest when things are not going well," Handler said. "It sounds kind of trite. If you do nothing too stupid or arrogant during the good times, you can take advantage during the bad times. We have done that fairly well over the past three decades."

Getting in on the private-equity boom

The fruits of that investment were on full display in the firm's fourth quarter, which saw record investment banking revenue of $529 million, a 27% increase from last year.

M&A advisory is up, but the independent bank has especially gained ground in underwriting debt and equity. For the full year, DCM revenue more than doubled to $649 million, while ECM revenue climbed 47% to $345 million.

Handler said that's partly a function of Jefferies snatching up a hefty chunk of business from private-equity firms, an industry that is booming with record amounts of fundraising and dry powder.

Through the first three quarters of 2017, Jefferies pulled in just shy of $300 million in fees from financial sponsors, as buyout firms are often called in the industry, an 18% increase from the same point in 2016, according to data from Thomson Reuters.

"We've gained a lot of market share on the sponsor side because of the breadth of our sell-side assignments," Handler said. "When you sell companies to the sponsor community, you tend to get the financing too."

Given that private-equity firms typically rely on debt to finance acquisitions, establishing ties with these clients helps explain why Jefferies' debt-underwriting business doubled this year.

It's all adding up to a lucrative 2017 for Jefferies' bankers. The firm is paying out $1.83 billion in compensation to its 3,450 employees around the world.

While payouts of course vary based on individual and department performance, that works out to an average of $530,000 an employee — the highest mark since the financial crisis in 2008.

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