Asian Stocks Track US Decline for a Second Day: Markets Wrap
(Bloomberg) — Asian equities tracked US stocks lower for a second day as signs of economic weakness overwhelmed the market’s optimism surrounding interest-rate cuts. Shares in Japan, South Korea and Australia dropped. The S&P 500 fell 0.8% Thursday, extending a drop from the prior session and placing the benchmark on track for its largest weekly decline since April.
Macron Repels French Left as Center Retains Top Parliament Job
(Bloomberg) — French lawmakers re-elected a centrist candidate from Emmanuel Macron’s party to a second term leading the National Assembly in a sign the president’s coalition may be best placed to form a new government after he dissolved the legislature last month.
Fed Prepares for September Cut as Powell Shifts Focus to Jobs
(Bloomberg) — For more than two years, inflation has eclipsed everything else at the Federal Reserve. In a shift eagerly awaited by global markets, that’s poised to change. US central bankers are ready to cut interest rates in September amid growing confidence that price stability is within sight while risks to the labour market have grown.
Japan’s Inflation Speeds Up, Keeping BOJ Rate Hike in Play
(Bloomberg) — Japan’s inflation accelerated for a second month in June, leaving the door open for central bank officials to consider raising interest rates when they gather to set policy at the end of the month. Consumer prices excluding fresh food gained 2.6% from a year ago, quickening from 2.5% in May on slightly higher energy costs, the ministry of internal affairs.
Fed’s Daly Says Incoming Inflation Data Very Good, Not There Yet
(Bloomberg) — Federal Reserve Bank of San Francisco President Mary Daly said some recent inflation data has been “really good” but the central bank hasn’t yet achieved price stability. “We’re not there yet,” Daly said Thursday in a moderated conversation in Dallas.
JAPAN REACT: CPI’s Solid Service Prices Back BOJ July Hike
(Bloomberg Economics) — OUR TAKE: Japan’s core CPI inflation for June was a little slower than expected, but the details signal that service prices are starting to heat up as firms pass on higher wage costs. The Bank of Japan is likely to see the data as compelling evidence that the wage-price cycle is gathering momentum after this year’s spring pay negotiations (shunto) delivered the biggest raises for workers in decades.
Blackstone’s Gray Expects ‘New Cycle’ for Real Estate Market
(Bloomberg) — Blackstone Inc. President Jon Gray said that world’s largest alternative asset manager is ready to pounce on a pickup in property markets. “The cost of capital has begun to decline, which should be further helped by Fed cuts later this year,” he told Wall Street analysts Thursday after the firm reported its second-quarter results.
Balyasny, Square point Hire Gas, Power Traders as Sector Heats Up
(Bloomberg) — Hedge funds including Balyasny Asset Management and Square point Capital Llp are scooping up traders and analysts who specialize in natural gas and power as volatility in those markets creates opportunities to profit.
Biden Faces Mounting Speculation, Pressure to Drop Bid
(Bloomberg) — President Joe Biden’s grasp on the Democratic presidential nomination appeared to be slipping Thursday, as he weighed increasingly public warnings from his party’s top lawmakers while in isolation for a Covid-19 infection at his Delaware beach house.
Chinese Investors Dump Record Amount of US Stocks and Bonds
(Bloomberg) — Chinese investors dumped a record amount of US securities, both stocks and bonds, in May as diplomatic tensions remained elevated between the world’s largest economies. Funds in the Asian nation offloaded a net $42.6 billion worth of long-term securities consisting of Treasury, agency and corporate bonds as well as equities.
China Quants Defend Sector Amid Calls to Ban Algorithmic Trades
(Bloomberg) — China’s top quantitative hedge funds are defending the beleaguered industry against pundit calls to ban algorithm-driven trading following regulatory tightening. Yanfu Investments LLC and Zhejiang High-Flyer Asset Management, two of the largest quants managing more than 100 billion yuan ($13.8 billion) combined
Israel Weighs EU, Palestinians Controlling Rafah Crossing
(Bloomberg) — Israeli officials are considering transferring control of Gaza’s Rafah border crossing to the European Union and Palestinians, according to people familiar with the matter. Though Prime Minister Benjamin Netanyahu has scorned the idea of Israel ceding the crossing, Israeli officials are in talks with the EU and US about the proposal, the people said.
Pelosi Has Told House Democrats That Biden May Soon Be Persuaded to Exit Race
Former House speaker Nancy Pelosi has told some House Democrats she believes President Biden can be persuaded fairly soon to exit the presidential race amid serious doubts he can win in November, according to three Democratic officials familiar with her private discussions. Following Biden’s halting debate performance last month.
Regional Banks Join Net Interest Income Turnaround Party
(Bloomberg) — Regional banks began to turn the corner on net interest income in the second quarter, yet questions remain about their exposure to the troubled commercial real estate market. PNC Financial Services Group Inc. and M&T Bank Corp. reported their first quarterly NII increases since 2022, while US Bancorp snapped a streak of four quarterly declines.
Meta Eyes Stake in Maker of Ray-Ban in Smart Glasses Push
(Bloomberg) — Meta Platforms Inc. is in talks to take a minority stake in the maker of Ray-Ban sunglasses as the Facebook owner intensifies its push into smart glasses. Meta, which has collaborated with Essilor Luxottica SA on Ray Ban-Meta smart eyewear, is considering a stake of more than 3% and as much as 5% in the luxury eyewear group, which would be valued at about €4.5.
Market Chatter: Warner Bros. Discovery Considers Splitting Digital Streaming, Studio Businesses From TV Networks
Warner Bros. Discovery (WBD) is considering splitting its digital streaming and studio businesses from its television networks to boost its declining share price, the Financial Times reported Thursday, citing people familiar with the matter.
Trump Trades May Peak Amid Speculation Biden Will Drop Out Soon
Speculation that President Biden could exit the race as soon as the weekend is likely to initially spur traders to decide that fresh turmoil on the Democratic side of politics means even greater chances that Donald Trump wins this year’s presidential elections. Given the rapid rush for markets to price in that outcome, there’s strong potential for investors to decide the initial Trump trades have peaked, with Bitcoin, gold, and a steeper yield curve among the plays vulnerable to reversal. For one thing, if investors judge they can substantially boost their expectations of a Trump victory, the drop off in political uncertainty will increase their focus on other drivers for assets. The Federal Reserve’s expected move to start cutting interest rates in September is the most obvious of those. The question of whether a slowing economy is starting to show up in weaker earnings is another.
ABB shares fell 5.6% after the Swiss industrial giant reported orders below estimates as weaker demand for its automation products offset gains in its power-grid business.
SECOND-QUARTER RESULTS: Operating Ebita $1.56 billion, estimate $1.55 billion. Oper Ebita margin 19%, estimate 18.4%. Revenue $8.24 billion, estimate $8.38 billion. Net income $1.10 billion, estimate $1.03 billion. Orders $8.44 billion, estimate $8.64 billion. YEAR FORECAST: Still sees oper Ebita margin about 18%, estimate 17.9%. Still sees comparable revenue about +5%. COMMENTARY: Comparable orders remained on par with last year’s high level, supported by strong improvements in both the Electrification and Process Automation business areas. This was however offset by weakness primarily in the Machine Automation and E-mobility businesses, as well as by a softening from a fairly challenging comparable in the Motion business area. Jefferies’ Simon Toennessen (hold) says record electrification margins aren’t enough today given automation’s struggles. Automation weakness held back a FY guidance raise, which the bulls had hoped for.
Publicis shares rose 3% after the advertising agency boosted FY organic sales growth guidance, as the company flagged market-share gains and double-digit growth in China.
SECOND QUARTER RESULTS: Organic revenue +5.6%, estimate +4.78%. Net revenue EU3.46 billion, +6.8% y/y, estimate EU3.44 billion. FIRST HALF RESULTS: Operating profit EU1.16 billion, +6.1% y/y, estimate EU1.15 billion. Operating margin 17.3% vs. 17.3% y/y, estimate 17.3%. Ebitda EU1.40 billion, +4.9% y/y, estimate EU1.42 billion. Adjusted net income EU857 million, +5.4% y/y, estimate EU844 million. Adjusted EPS EU3.38 vs. EU3.21 y/y, estimate EU3.41. YEAR FORECAST: Sees organic revenue +5% to +6%, saw +4% to +5%, estimate +4.68%. Still sees operating margin 18%, estimate 18.1%.
Nokia shares fell 5% after the company reported sales in the second quarter that were the lowest of any period since 2015 and missed analyst estimates, as weak investment in mobile network upgrades continues to hobble the 5G equipment market.
Net sales declined 18% to €4.47 billion ($4.9 billion) in the quarter from a year earlier vs. an average €4.76 billion forecast. “The order backlog is growing and that’s obviously a factor that we are seeing” contributing to an improving dynamic, Nokia Chief Executive Officer Pekka Lundmark said. “No question volumes are extremely weak at the moment when you look at the top line.” The North American market is showing early signs of recovery, Lundmark said, echoing remarks by Ericsson CEO Börje Ekholm last week.
TSMC ADRs closed 0.4% higher Thursday, paring an earlier rally of as much as 4.4%, after its 2Q profit and gross margin beat consensus, while analysts welcomed its 3Q margin guidance that indicated wafer price increases.
Bloomberg Intelligence: 3Q margin target of more than 53.5% is impressive and indicates faster average price improvements and better capacity utilization, analyst Charles Shum wrote. Its full-year sales guidance revision is “somewhat conservative,” given that there could be more upside this year due to strong demand for its advanced chips and packaging services. JPMorgan (overweight, PT raised to NT$1,200 from NT$1,080): Raising target to reflect “a longer period of tighter supply for AI accelerators, which should keep PE multiples elevated for AI-enablers like TSMC,” analysts including Gokul Hariharan wrote. Expect gross margin to rise to 58%-60% in the next 5-6 quarters thanks to better pricing. The current Bloomberg consensus estimates for next year’s gross margin at 54.5% looks “extremely low.”
Abbott shares dropped 4.4% after the health-care products company issued third-quarter guidance that’s below analyst estimates at the mid-point.
SECOND QUARTER RESULTS: Adjusted EPS $1.14 vs. $1.08 y/y, estimate $1.10. Organic sales (excluding COVID-19 testing-related sales) +9.3% vs. +11.5% y/y, estimate +9%. Net sales $10.38 billion, +4% y/y, estimate $10.38 billion. THIRD QUARTER FORECAST: Sees adjusted EPS $1.18 to $1.22, estimate $1.21. YEAR FORECAST: Sees adjusted EPS $4.61 to $4.71, saw $4.55 to $4.70, estimate $4.63. Sees Organic sales (excluding COVID-19 testing-related sales) +9.5% to +10%, saw +8.5% to +10%, estimate +9.54%.
Domino’s Pizza Inc.’s shares fell 13.6% after it unexpectedly suspended its store growth target.
The company said it couldn’t promise it would reach its earlier guidance of more than 1,100 net stores because of uncertainty at a major franchisee. Australia-based master franchisee Domino’s Pizza Enterprises Ltd. said this week it would close as many as 80 low-volume stores in Japan and aims to reduce total store count in France by 10 to 20. “This unexpected update will shake investor confidence in the company’s broader guidance and put pressure” on the stock, Jon Tower, an analyst at Citigroup Inc., said. The chain’s US same-store sales in the second quarter also slightly missed estimates, rising 4.8% compared to the 4.9% analyst consensus. The company is also expecting comparable sales in the third quarter to be slightly below the second quarter on a one-year basis due to one less “boost week” promotion, Chief Financial Officer Sandeep Reddy said.
D.R. Horton Inc. shares soared 10.1% to a record high after the homebuilder reported a stronger-than-expected quarterly profit margin and expectations for lower mortgage rates lifted investor optimism.
The company’s gross margin for the quarter through June was 24%, according to Bloomberg Intelligence analyst Drew Reading. That beat D.R. Horton’s earlier guidance and consensus. The builder said it expects closings for 90,000 to 90,500 homes for its full fiscal year, which ends Sept. 30. The top end of that forecast also beat analysts’ expectations. While D.R. Horton missed expectations on orders, the results in general fed investor optimism for coming quarters, as many expect the Federal Reserve will start cutting interest rates as soon as September. Executives on the earnings call said the company didn’t lean too heavily on buyer incentives even as elevated mortgage rates caused demand to be choppy.
Trump RNC speech details assassination attempt: ‘I’m not supposed to be here tonight’
Former President Donald Trump recounted the assassination attempt that nearly took his life in his Republican National Convention nomination acceptance speech in Milwaukee. Trump only mentioned President Joe Biden by name a few times a striking shift away from the personal attacks that typically pepper his political speeches.
Ukraine risks North and South Korea-like division, says former Singapore diplomat
Before 1945, Korea existed as a unified country but was split into two after World War II.Bilarhari Kausikan, who was Singapore’s ambassador to Russia after the Soviet Union collapsed, says that the war in Ukraine could end up like how the Korean War ended in 1953. He also envisions that the U.S. under a Trump administration would have “tremendous leverage” on Ukraine, as Europe won’t be able to support Ukraine without the U.S. in any substantive way.
Stock futures are little changed as Wall Street looks to shake off Thursday’s market slide
Stock futures were quiet on Thursday evening as Wall Street looked to stabilize after a slide for equities. Futures tied to the Dow Jones Industrial Average inched up 28 points, or less than 0.1%. S&P 500 futures ticked up 0.1%, while Nasdaq 100 futures added 0.2%.
Netflix beats estimates as ad-supported memberships rise 34%
Netflix said its advertising-supported memberships grew 34% during the second quarter compared to the year-earlier period. The streamer’s global paid memberships rose 16.5% year over year to 278 million. This marks one of the last updates Netflix will release regarding its membership numbers.
Second Democratic senator urges Biden to drop out of election against Trump
Montana Democratic Sen. Jon Tester urged President Joe Biden to drop out of the 2024 election contest against former President Donald Trump. Biden faces mounting pressure by leading Democrats to step aside for a new nominee. The pressure on Biden stems from concerns that he could not only lose the White House, but also cost the Democratic Party its Senate majority and doom any chance it has of regaining a House majority.
Fed rate-cut hopes keep gold near record levels
Gold prices edged higher on Thursday, as expectations of a September interest rate cut from the U.S. Federal Reserve continue to gather momentum. Spot gold was down 0.21% at $2,453.23 per ounce. It hit an all-time high of $2,483.60 on Wednesday. U.S. gold futures fell 0.1% to $2,457.00.
Hawaiian Electric Among Firms in $4 Billion Maui Fire Deal
Hawaiian Electric Industries Inc. is among the companies that have tentatively agreed to pay more than $4 billion to resolve hundreds of lawsuits over the wildfires that ripped through Maui last year, according to people familiar with the deal. The proposed accord, which still awaits final approval, would settle suits on behalf of thousands of homeowners and businesses against Hawaiian Electric, which operates the utility on the island, said the people, who declined to be identified because they aren’t authorized to speak publicly about the agreement.