Asian Stocks Edge Higher as CPI Calms Wall Street: Markets Wrap
(Bloomberg) — Asian equities rose early Thursday after in-line US inflation data calmed market jitters on Wall Street as traders prepared for Federal Reserve rate cuts next month. Shares in Japan led gains in the region after economic growth data exceeded forecasts, while stocks in Australia also advanced.
S&P 500 closes higher for fifth straight day as easing inflation bolsters rate cut hopes
The Dow Jones Industrial Average ticked up Wednesday after the release of more encouraging U.S. inflation data. The 30-stock Dow climbed 242 points, or 0.61%, to end the day at 40,008.39. The S&P 500 inched up 0.38% to close at 5,455.21, and marked its fifth straight winning day. The Nasdaq Composite shook off earlier losses to close higher by just 0.03% at 17,192.60. Consumer prices increased 2.9% year-over-year, down from 3% in June and the lowest reading since March 2021, the Bureau of Labor Statistics said on Wednesday. Month-over-month, prices ticked up 0.2%. Economists polled by Dow Jones expected a 0.2% increase from the prior month and a 3% gain year-over-year. So-called core inflation, which strips out food and energy from the headline number, advanced 0.2% on the month, also in line with expectations. The report comes a day after lighter-than-expected wholesale inflation figures gave stocks a boost. The Dow rose about 1%. The S&P 500 climbed 1.7%, while the Nasdaq gained 2.4%.
Oil prices rise on hopes of U.S. rate cuts boosting fuel demand
Oil prices rose on Thursday, recovering some of the previous day’s loss, on hopes of potential U.S. interest rate cuts boosting economic activity and fuel demand, though lingering concerns over slower global demand capped gains. Brent crude futures climbed 17 cents, or 0.2%, to $79.93 a barrel by 0029 GMT. U.S. West Texas Intermediate crude increased by 23 cents, or 0.3%, to $77.21 per barrel. Both benchmarks fell more than 1% on Wednesday after U.S. crude inventories rose unexpectedly and on easing worries about a wider Middle East conflict. U.S. consumer prices rose moderately in July and the annual increase in inflation slowed to below 3% for the first time in nearly 3-1/2 years, reinforcing expectations the Federal Reserve will cut interest rates next month.
Gold slips 1% as large rate-cut hopes dim after U.S. CPI data
Gold prices fell 1% on Wednesday after data showed U.S. consumer prices rebounded as expected in July, pouring water on expectations for a sizeable rate cut from the Federal Reserve next month. Spot gold fell about 1% to $2,440.62 per ounce by 1637 GMT. U.S. gold futures slipped 1.2% to $2,478.80. A September cut is a mortal lock; at the moment the data is suggesting the Fed will start with 25 bps which would be a disappointment to the market which likes to overshoot, said Tai Wong, a New York-based independent metals trader. The U.S. consumer price index increased 0.2% last month, after falling 0.1% in June, the Labor Department’s Bureau of Labor Statistics said. In the 12 months through July, the CPI increased 2.9%, after advancing 3% in June. Markets now see a 41% chance of a 50 basis point rate cut by the Fed in September versus that of 50% prior to the release of U.S. CPI data, according to the CME FedWatch Tool.
Michael Burry Raises Alibaba Stake, Cuts Stock Portfolio in Half
(Bloomberg) — Michael Burry, the hedge fund manager famous for his 2008 bet against the US housing market, further increased his stake in Alibaba Group Holding Ltd. while slashing his overall equity portfolio in half in the second quarter. Scion Asset Management, Burry’s investment firm, reported an $11.2 million position in Alibaba in the quarter.
(Bloomberg) — Hedge funds continued to buy into some of the biggest technology companies including Apple Inc. in the second quarter while trimming positions in Nvidia Corp., as they reshuffle their positions in the artificial intelligence boom that had fueled a blistering rally in the US stock market.
Klarna Is Said to Near Picking Goldman as Lead Bank for US IPO
(Bloomberg) — Klarna Bank AB is close to selecting Goldman Sachs Group Inc. to lead the financial technology firm’s US initial public offering next year, according to people familiar with the matter. The potential move comes as the Stockholm-based lender is in talks with investors for a sale of existing shares that would come before the proposed IPO, Bloomberg News has reported.
Japan’s Economy Sees Consumption-Led Rebound in Tailwind for BOJ
(Bloomberg) — Japan’s economy rebounded to growth in the second quarter on the back of an increase in private consumption, in a sign that a virtuous cycle long sought by the central bank linking rising incomes to increased spending may be starting to emerge. Gross domestic product expanded at an annualized pace of 3.1% in the three months through June.
Iran Suspense Grows as Israel and Its Allies Brace for Attack
(Bloomberg) — Two weeks after Iran vowed to retaliate for the killing of a senior Hamas leader, the biggest surprise has been that the attack still hasn’t happened yet. As they’ve been saying for days, officials believe an attack could come at any time, and take one of many forms, all with the goal of sending a clear message to Israeli Prime Minister Benjamin Netanyahu.
Fed’s Goolsbee Says He’s Growing More Concerned About Employment
(Bloomberg) — Federal Reserve Bank of Chicago President Austan Goolsbee said he is growing more concerned about the labor market than inflation amid recent progress on price pressures and disappointing jobs data. Goolsbee said current interest rates are very restrictive in an interview with Bloomberg News Wednesday.
RBNZ Aims to Lower Cash Rate at Measured Pace, Governor Says
(Bloomberg) — New Zealand’s central bank intends to reduce interest rates toward a more neutral setting at a measured pace, now that it has begun its easing cycle, Reserve Bank Governor Adrian Orr said. The RBNZ cut the Official Cash Rate by a quarter-percentage point to 5.25% yesterday and forecast it would decline to 3% by mid-2027.
Japan’s GDP Rebound on Private Engines Relief for BOJ: Economics
(Bloomberg Economics) — OUR TAKE: The consensus-beating rebound in Japan’s second-quarter GDP was driven by private consumption and investment, a sign that sustainable growth bolstered by domestic demand is starting to take hold. Large pay increases agreed in this year’s spring wage talks, shunto, and temporary income-tax cuts likely helped private consumption.
Harris Faces the Ire of Pennsylvanians Who Depend on Fracking
(Bloomberg) — Kamala Harris faces a problem in Washington County, Pennsylvania, where gas drilling rigs and well pads dot the rolling green farmland. Ask Mickey Molinaro, an asphalt worker with a bushy beard and easy-going smile. Harris, in her last White House run, called for a ban on fracking, before reversing her stance this year.
Trump Questions Importance of Economy at Economic-Focused Rally
(Bloomberg) — Republican nominee Donald Trump cast doubt on the economy as the most important election issue, one in which he has a significant voter trust advantage over his rival, Kamala Harris, who is planning to make a speech about consumer prices later this week.
China’s Government Bond Issuance Set to Surge Amid Buying Frenzy
(Bloomberg) — China’s government bond issuance is expected to jump this month at a time when policymakers are seeking to cool off a relentless demand for debt. Cinda Securities Co. is projecting net issuance of 1.4 trillion yuan ($195.7 billion) this month, up about 780 billion yuan from July. Huaxi Securities Co. sees sales of around 1.6 trillion yuan to 1.8 trillion.
JPMorgan Is Selling a New Type of Mortgage Credit Risk Transfer
(Bloomberg) — JPMorgan Chase & Co. plans to sell credit risk on a $531 million portfolio of adjustable-rate mortgages, a new kind of offering by the bank and the latest example of the industry’s efforts to de-risk balance sheets. Its offer includes more than $53 million worth of bonds to be sold through an auction, with pricing for the deal expected sometime this week.
Temasek Spent Billions on US Tech Stocks Before July Selloff
(Bloomberg) — Singaporean state-owned investor Temasek Holdings Pte. spent billions of dollars in the second quarter buying shares in US technology giants, just before the sector dropped in July. Temasek increased the value of its holdings in 11 big tech firms by $3.3 billion in the three months ended June 30, according to an analysis of its two most recent 13F filings.
XPO Is Said to Revive Sale of European Transportation Business
(Bloomberg) — XPO Inc. has revived a sale of its European transportation business, according to people familiar with the matter, almost two years since it last scrapped the attempt to divest the operation. The New York-listed logistics firm has been working with advisers and sounding out potential buyers for the business.
US Steel Outperforms on Bets Nippon Steel Deal Has Better Chance
(Bloomberg) — US Steel Corp. is beating peers in the stock market as investors speculate that political and labor opposition to its $14.1 billion takeover by Nippon Steel Corp. may be easing. Shares in the Pittsburgh-based firm are up more than 6% in the past month, recovering more of the ground lost when President Joe Biden and Donald Trump voiced opposition to the deal.
UBS Group AG posted higher than expected profit in the second quarter, as investment banking revenue and progress in integrating Credit Suisse helped bolster Chief Executive Officer Sergio Ermotti’s efforts to return capital to shareholders
UBS shares rose 5.3%. The bank said net income was $1.1 billion, about double analyst estimates. Growth in deal-making revenue at the investment bank beat many Wall Street peers, while a lower than expected loss at the unit dedicated to winding down Credit Suisse legacy assets helped offset a miss in the wealth management division. A year after completing the takeover of Credit Suisse, UBS is on track for pre-merger levels of profitability, and plans to repurchase some $1 billion in shares this year. Yet tougher Swiss regulation being designed over the next couple of years could mean sharply higher capital demands, prompting analysts to question whether the bank will have to reduce its payouts. Analysts broadly saw the results as solid, though Deutsche Bank AG noted that uncertainty around the capital return plans remains high.
Mars Inc. agreed to buy Kellanova for nearly $36 billion including debt, bringing together two major food companies in the biggest deal of the year
Mars will pay $83.50 a share in cash for the maker of Pringles chips and Eggo waffles, the companies said. The price represents a premium of 33% over Kellanova’s closing price on Aug. 2, the last business day before the talks were initially reported. Kellanova shares rose 7.8% Wednesday. Kellanova is faring better than most of its competitors with a string of strong earnings since it spun off the cereal business as WK Kellogg Co. late last year. Earlier this month, Kellanova raised its guidance for the full year as new products and marketing drove sales in the second quarter. The deal price includes about $6 billion in debt, according to Bloomberg calculations. Top Kellanova shareholder W.K. Kellogg Foundation Trust and the Gund Family, which collectively represent 20.7% of the company’s stock, have committed to vote for the deal, the companies said. It’s expected to close in the first half of next year. Buying Kellanova will help Mars diversify its chocolate-heavy portfolio away from cocoa, whose prices have risen to historic levels this year. The snack maker will also help Mars scale in international markets.
Cisco Systems Inc., the biggest maker of computer networking equipment, gave a bullish revenue forecast for the current period thanks to a rebound in orders, but announced plans to cut thousands of jobs as part of a strategy shift
Sales will be $13.65 billion to $13.85 billion in the fiscal first quarter, which ends in October, the company said. Analysts had estimated a number at the very low end of that range. Cisco shares gained 5.7% in afterhours trading following the announcement. The workforce reduction isn’t about trying to boost profits, according to Chief Financial Officer Scott Herren. Cisco needs to rapidly shift further into cybersecurity, cloud systems and artificial intelligence-related products, so it’s freeing up resources to do that, he said in an interview. Even with the push to sell more software and services, Cisco still counts on installations of new equipment for much of its revenue. On that front, it saw improvement in the latest quarter, a sign corporate customers are investing in their networks again. They had previously been more focused on installing gear they’ve already purchased.
Nike Inc. shares gained 3.3% in afterhours trading after Pershing Square Capital Management LP disclosed a new stake in the company
The investment firm run by Bill Ackman revealed in a regulatory filing Wednesday that it holds about 3 million shares in Nike worth $229 million. Wall Street has questioned whether activist investors would get more involved at Nike, which in June had its worst day on record when management said revenue is expected to fall this fiscal year. Ackman said in 2022 that he’s done with being a loud corporate agitator and would instead employ a quieter approach with management. Pershing Square’s filing didn’t say if the firm intends to seek changes at Nike. The company’s board is controlled by Nike co-founder Phil Knight, who with his son Travis owns nearly all the outstanding voting shares. Pershing Square has been involved with Nike before, making a $100 million profit in just a few months when it cashed out of a passive stake in 2018.
Berkshire Hathaway bought small stakes in Heico and Ulta Beauty in the second quarter, while adding to its holding in Chubb, according to the company’s quarterly 13-F filing released Wednesday after the market closed
Berkshire sold off its holding of 6.1 million shares of Snowflake, the software company, which it bought at the time of the company’s initial public offering in 2020. That holding was worth about $1.2 billion at the end of March. Berkshire bought 690,000 shares of Ulta Beauty that were worth $266 million at the end of the second quarter and just over a million shares of Heico, a supplier to the aerospace industry. That stake was worth $185 million on June 30. Berkshire also bought about a million shares of insurer Chubb. It held 27 million shares worth $6.9 billion on June 30.
Bank of Japan will take longer to hike rates given the yen’s rapid strengthening, BMI says
The Bank of Japan will adopt a more cautious approach to hiking interest rates to avoid rapid appreciation in the yen after the recent global market turmoil, Fitch Solutions’ BMI said in a recent note. We expect that the BoJ will take a more cautious approach and only hike by 25bps this year to 0.50%, down from our previous view for 50bps, said BMI’s analysts in a note on Wednesday. Interest rate hikes by the BOJ led to the unwinding of the popular yen carry trade, which led to a sharp sell-off in global markets last Monday. Japan’s benchmark Nikkei 225 plunged 12% to record its worst day since 1987. The benchmark has since made a sharp recovery and is well past its level prior to last Monday’s rout.
Schumer says a crypto bill can pass Senate this year; key Dems join Crypto4Harris call
On Wednesday evening, top Democrats joined a Crypto4Harris virtual town hall to show support both for the digital asset sector and for Vice President Kamala Harris’ campaign. It is the latest move by Democrats to try to recast their party as pro-crypto, after years of being viewed as skeptics of the industry. Senate Majority Leader Chuck Schumer helped kick off the event with a ringing endorsement that a crypto law could pass the Senate by the end of the year.
UK economy expands 0.6% in second quarter; June growth stalls
The U.K. economy grew by 0.6% in the second quarter of the year, the Office for National Statistics said Thursday, continuing the country’s cautious recession rebound. The reading was in-line with economists polled by Reuters, and follows expansion of 0.7% in the first quarter. Economic growth was flat in June, in line with a Reuters poll.
