US FINANCIAL MARKET
US Stocks Drift as China Economic Recovery Slows: Markets Wrap – Bloomberg, 7/17/2023
- US stocks and bonds drifted as more evidence pointed to a slowdown in China’s economy.
- Gross domestic product in China grew at a slower-than-expected pace of 6.3% in the second quarter, adding to risks for the global economy, reliant on Chinese spending.
- The S&P 500 was little changed on Monday, starting the week on a downbeat note following last week’s historic stock-market gains.
- The S&P 500 was little changed. The Nasdaq 100 rose 0.1%. The Dow Jones Industrial Average was little changed.
- Activision Blizzard was higher after Microsoft kicked off its hotly-anticipated UK antitrust hearing.
- Ford Motor was lower after cutting the price on the electric version of its F-150 truck.
- Meanwhile, oil and gold fell, while the dollar was stronger against major peers.
- “Many countries do depend on strong Chinese growth to promote growth in their own economies, particularly countries in Asia, and slow growth in China can have some negative spillovers for the United States,” Treasury Secretary Janet Yellen said in a Bloomberg Television interview Monday.
- “Growth has slowed, but our labor market continues to be quite strong. I don’t expect a recession.”
- For a time, analysts believed Chinese shoppers coming out of Covid lockdowns would be able to carry the global economy — despite rising US and European interest rates. However, that narrative is looking increasingly shaky.
- Yellen said she sees the US on a “good path” to bringing down inflation without a major weakening in the labor market.
- Last week, Treasury yields fell and stocks rose as a slowdown in the rate of inflation bolstered speculation the Federal Reserve is close to ending its cycle of interest rate hikes.
- The next pressure point for markets will be earnings, with hundreds of companies reporting over the next few weeks.
- S&P 500 firms are expected to post a 9% drop in profits in the second quarter, making it the worst season since 2020, according to data compiled by Bloomberg Intelligence.
- Meanwhile in Europe, it may be even worse, with a projected 12% slump.
- Elsewhere in commodity markets, crude futures dropped as traders weighed disappointing Chinese data and restarting Libyan supplies against signs of a tightening market.
- And wheat futures jumped after Russia terminated a grain-export deal, jeopardizing a key trade route from Ukraine, one of the world’s top grain and vegetable oil shippers.
- The Stoxx Europe 600 fell 0.6%
- The Bloomberg Dollar Spot Index rose 0.2%
- The yield on 10-year Treasuries was little changed at 3.83%
- West Texas Intermediate crude fell 0.9% to $74.72 a barrel
- Gold futures fell 0.6% to $1,952 an ounce
Ford Cuts Price of F-150 Lightning Electric Truck by Up to 17% – Wall Street Journal, 7/17/2023
- Ford Motor said it is cutting prices of its electric Lightning pickup truck up to nearly 17% on some versions as it scales up production and lowers costs.
- The Dearborn, Mich., automaker said it is cutting the price of its F-150 Lightning Pro by almost $10,000 to $49,995.
- Ford is cutting the price of its highest-end Platinum Extended Range F-150 Lightning by about $6,000 to $91,995.
- After Ford launched the electric-version of the F-150 truck, supply-chain issues and rising material costs drove up the price, said Marin Gjaja, chief customer officer of Ford’s electric-vehicle business.
- The company has been working through some of those issues, he said.
Tesla Starts Cybertruck Production Two Years Behind Schedule – Bloomberg, 7/17/2023
- Almost four years after Elon Musk first unveiled Tesla’s debut pickup, the automaker has built its first Cybertruck.
- Tesla shared the development on Twitter, posting a photo of workers in safety vests and helmets obscuring much of the vehicle.
- When Musk first showed a prototype of the wedge-shaped truck in November 2019, the plan was for production to start two years later.
- “It’s going to be hard to make the cost affordable because it is a new car, new manufacturing method,” Musk said.
- “In the grand scheme of things, relative to the production rate of all the other cars we make, it will be small. But it’s still very cool.”
Eli Lilly’s Alzheimer’s treatment shows promise in early stages of disease — but safety concerns remain – Market Watch, 7/17/2023
- The Eli Lilly investigational Alzheimer’s treatment donanemab has shown particular promise in treating patients at younger ages and in the earliest stage of disease, according to new late-stage trial results released Monday.
- Among trial participants with lower levels of tau, a brain protein linked with disease progression, donanemab slowed decline in patients with mild cognitive impairment by 60% on an Alzheimer’s rating scale combining measures of function and cognition, while slowing decline by 30% for those with mild dementia, Lilly said Monday.
- The analysis also showed more slowing of decline for those under age 75 than for older patients.
- The effects of donanemab increased throughout the trial, Lilly said, with the biggest differences versus placebo seen at 18 months.
- The results were released at the Alzheimer’s Association International Conference in Amsterdam and simultaneously published in the Journal of the American Medical Association.
United Pilots Would Get Raises of Up to 40% Under Preliminary Deal – Wall Street Journal, 7/17/2023
- United Airlines Holdings struck a preliminary contract agreement with its pilots that would provide pay raises of 34.5% to roughly 40%, the latest move by major airlines to boost wages and incentives while carriers grapple with a pilot shortage.
- The deal underscores the new dynamics for pilots in the now-booming airline industry, as pilot unions at Delta Air Lines and American Airlines Group have also reached new labor agreements that include substantial pay raises and other benefits.
- United’s agreement, which still needs to be made final and ratified by its pilots, also includes changes to work rules aimed at giving pilots more control over their schedules, union leaders said.
- The Air Line Pilots Association, the union that represents United’s pilots, said Saturday that the deal is worth about $10 billion.
- Pilots would initially get pay bumps of 13.8% to 18.7% followed by additional raises in later years.
US ECONOMY & POLITICS
New York Manufacturing Barely Grows, While Price Gauges Retreat – Bloomberg, 7/17/2023
- A measure of New York state factory activity barely expanded in July as orders edged up and inflationary pressures eased.
- The Federal Reserve Bank of New York’s general business conditions index decreased 5.5 points to 1.1, data showed Monday.
- The median projection in a Bloomberg survey of economists called for minus 3.5.
- Measures of prices paid and received by New York state manufacturers slid to levels not seen since mid-2020.
- However, the outlook for prices received picked up.
- State manufacturers had diverging views of business conditions, with roughly 29% reporting an improvement and some 27% citing a deterioration.
- The New York Fed’s new orders index barely increased to 3.3, while shipments grew at a slower pace.
- The report showed manufacturers added workers after five months of paring payrolls.
- The Fed bank’s forward-looking measures of demand and capital expenditures deteriorated.
Yellen Says China Slowdown Risks Spillovers But No US Recession – Bloomberg, 7/17/2023
- Treasury Secretary Janet Yellen said China’s economic slowdown risks causing ripple effects across the global economy, though she doesn’t expect a recession in the US.
- “Many countries do depend on strong Chinese growth to promote growth in their own economies, particularly countries in Asia — and slow growth in China can have some negative spillovers for the United States,” Yellen said in a Bloomberg Television interview Monday hours after a raft of Chinese economic data came in weaker than expected.
- In the US, “growth has slowed, but our labor market continues to be quite strong — I don’t expect a recession,” Yellen said.
- The economy is on a “good path” to bring inflation down without a major weakening in the labor market, she said.
- “The labor market’s been so strong, it has encouraged more prime-age people to enter” the workforce, taking some of the heat out of the market, she said.
- “Wage growth is moderating and inflation is subsiding.”
- “It looks like consumers are more focused on building back their savings buffers,” Yellen said.
EUROPE & WORLD
China Growth Disappoints as Beijing Hints at Muted Stimulus – Bloomberg, 7/17/2023
- China’s economic recovery lost momentum in the second quarter, putting Beijing’s growth target for the year at risk and adding to concerns about a slowdown in the world economy.
- Gross domestic product grew at a slower-than-expected pace of 6.3% in the second quarter compared with a year earlier, when dozens of Chinese cities were in lockdown, but just less than 1% from the first quarter.
- Data for June released by the National Bureau of Statistics showed a slowdown in growth of consumer spending, which has been the main driver of China’s economy this year.
- Retail sales rose 3.1% in June from a year earlier, down from 12.7% in May.
- Industrial output rose 4.4%, compared with a projection of 2.5%, and up from 3.5% in May.
- Fixed-asset investment gained 3.8% in the first six months of the year from a year earlier, down from 4% in the January-May period, but higher than the 3.4% forecast by economists.
- The urban jobless rate was unchanged at 5.2% in June, while the youth unemployment rate climbed to 21.3%.
Evergrande Posts $66 Billion 2021 Loss in Long-Awaited Results – Bloomberg, 7/17/2023
- China Evergrande Group recorded losses of about $66 billion for 2021, according to a delayed earnings report by the world’s most indebted developer.
- The company posted a loss attributable to shareholders of 476 billion yuan for the year, the firm said in a Hong Kong stock exchange filing Monday.
- The net loss for 2022 was 105.9 billion yuan.
- Releasing the financial statements helps Evergrande move one step closer toward resuming trading since being suspended in March 2022.
- It also gives offshore bondholders something more to digest as they consider the company’s debt restructuring proposal.
- Evergrande expects to apply to courts in late July to move ahead with the plan.
Call of Duty Will Stay on PlayStation After Microsoft-Activision Deal – Wall Street Journal, 7/17/2023
- Microsoft reached an agreement with Sony Group to keep Activision Blizzard’s popular Call of Duty series on Sony’s PlayStation system if its $75 billion deal for Activision is completed.
- Sony has been an opponent of the megamerger, which has a closing deadline of Tuesday.
- Over the past year and a half, Microsoft made agreements with Nintendo, Nvidia and other rivals—but not Sony—to make Call of Duty equally accessible to them over a 10-year period.
- Microsoft said Sony had declined to sign such an agreement, making it an outlier.
- Now, the software giant said, Sony is on board.
- A key concern among regulators scrutinizing the deal has been whether the acquisition would harm competition in the global videogame industry, namely if Microsoft were to make Activision’s games—including Call of Duty, one of the most popular series of all time—exclusive to its Xbox system.
- Some regulators also raised concerns that Microsoft could delay the release or degrade the quality of Call of Duty games for rival distributors. Microsoft has repeatedly said it wouldn’t do those things.
Russia Says It Is Pulling Out of Ukraine Grain Deal – Wall Street Journal, 7/17/2023
- Russia said Monday it was withdrawing from an international agreement that allowed Ukraine to resume much of its Black Sea grain exports, raising concerns about a key link in the global food supply chain.
- Kremlin spokesman Dmitry Peskov told journalists on Monday the deal had been “terminated” but that Russia would rejoin the agreement if its demands were met, according to state news agency TASS.
- Russia has repeatedly threatened to pull out of the agreement, demanding that the West facilitate its food and fertilizer exports, which it says have been hampered by sanctions.
- Russia’s invasion of Ukraine last year forced a halt to all exports from Ukraine’s main Black Sea ports, contributing to a surge in global food prices and contributing to fears that the war could push millions of people around the world closer to starvation.
- The agreement between Russia, Ukraine and Turkey, facilitated by the United Nations, was signed in Istanbul in July last year, permitting Ukrainian exporters to resume shipping corn, wheat, sunflower oil and other goods from three ports around the city of Odesa.
Ukrainian Strike Disables Bridge Between Crimea and Russia – Wall Street Journal, 7/17/2023
- A Ukrainian strike disabled the only road bridge connecting Russia with the occupied Crimean Peninsula, hitting once again a major symbol of President Vladimir Putin’s rule and constricting Russian supplies to the front lines in southern Ukraine.
- Russia’s National Antiterrorism Committee said Kyiv used two naval drones against the bridge, hitting the structure at around 3 a.m. local time on Monday.
- Ukrainian media, citing government sources, also said that naval drones were involved.
- Artem Degtyarenko, a spokesman for Ukraine’s SBU intelligence service, told news agency Interfax Ukraine that all the details of how the attack had been organized would be made public after Ukraine’s victory.
- “Any illegal structures used to deliver Russian instruments of mass murder are necessarily short-lived,” said Mykhailo Podolyak, President Volodymyr Zelensky’s adviser.
- Footage from the Kerch Bridge, which runs 12 miles and cost $4 billion to build, showed a westbound span of the highway collapsed and the parallel eastbound span displaced.
Russia Steps Up Economic War With West, Seizing Assets of Big Conglomerates – Wall Street Journal, 7/17/2023
- Russia has unexpectedly seized the local operations of Carlsberg and Danone, two of the world’s largest consumer-goods companies, in a move that escalates economic hostilities with the West.
- In a decree signed by President Vladimir Putin on Sunday, Russia placed Danone and Carlsberg’s local operations under temporary management, putting them under the control of the federal state property management agency, Rosimushchestvo.
- The move is the second time Russia has seized Western assets in the country since the Kremlin unveiled a decree in April that allows the state to take temporary control of assets of companies or individuals from what Moscow calls “unfriendly” states.
- Russian officials have said that the seizures are in retaliation for similar moves by Western countries.
- In April, Russia took control of utilities owned by Germany’s Uniper and Finland’s Fortum.
- Many Western companies have struggled to wind up their operations in Russia and the latest asset seizures serve as a warning shot to those still looking to exit.
U.S. Looks to Head Off Trouble Over Visit by Taiwan Vice President – Wall Street Journal, 7/17/2023
- The Biden administration is trying to head off trouble with China over a U.S. visit by Taiwan’s vice president, with an official saying the trip will be low key and urging Beijing not to use it to raise tensions.
- Lai Ching-te will stop in the U.S. on his way to and from attending the inauguration of Paraguay’s president next month, Taiwan’s Vice Minister of Foreign Affairs Alexander Tah-ray Yui said at a news briefing on Monday.
- Yui said Lai plans to arrive in Paraguay in the morning of Aug. 14, a day ahead of the inauguration, but didn’t offer further information on his itinerary while he is in the U.S.
- Such trips are often sensitive given China’s hostility to U.S. support for Taiwan.
- This visit is particularly tricky for the Biden administration since Lai is campaigning for president and is deeply distrusted by Beijing.
- “This is how we’ve done it in the past,” Yui said on Monday, in response to a question about whether the trip could draw China’s ire. He noted that it would be the 11th time a Taiwanese vice president has stopped over in the U.S., saying there is “no justification for any harassment.”
- A Biden administration official said Sunday that Lai’s trip would hew to past such visits, with no stop in Washington, that Beijing shouldn’t take provocative actions in response, and that the U.S. is impartial in the election.
Ukraine Business Upbeat on Outlook for First Time Since Invasion – Bloomberg, 7/17/2023
- Ukraine’s business community struck an optimistic tone on the economy’s outlook for the first time since Russia invaded in February last year, according to a quarterly survey conducted by the central bank.
- Expectations for changes in the financial and economic condition of businesses were positive for the first time in five quarters, the National Bank of Ukraine said Monday on its website.
- More than 660 Ukrainian companies representing 21 regions took part in the second-quarter survey.
- “Respondents expect an increase in goods and services, while also being positive about the development of their own enterprises, given the restoration of the energy system, the gradual revival of domestic demand and the strengthening of the hryvnia exchange rate,” the NBU said.
- Businesses with foreign investment improved their expectations for increased output, while the share of respondents planning to attract foreign investment in the next 12 months increased to 23.1% compared with 21.3% in the previous survey.
- The construction and retail sectors expect to hire more people over the next 12 months, with respondents also seeing higher labor costs.
ECB’s Nagel Sees Hike in July But Data to Decide September – Bloomberg, 7/17/2023
- The European Central Bank must raise interest rates again this month and will base its decision at the following meeting on data, Governing Council Joachim Nagel said.
- “We have to hike next time and I expect another 25 basis-point hike for the July meeting,” the Bundesbank president said Monday.
- “For the September meeting, we will see what the data will tell us.”
- Speaking to Bloomberg Television in Gandhinagar, India — where he’s attending a meeting of Group of Twenty finance chiefs — Nagel described underlying inflation as “very sticky.”
- “For more or less all the developed countries, core is not coming down like it came down maybe in past cycles,” he said, again referring to inflation as a “greedy beast.”
- But he said it’s “too early to really declare a certain kind of a victory when it comes to our inflation fight.”
- “This time maybe we have to be a little bit more patient,” Nagel said.
- “The pace of the transmission channel is maybe not as fast as it was in the past.”
- Spain ceded Florida to the United States. – 1821
- Spain surrendered to the United States at Santiago, Cuba, ending the Spanish-American War. – 1898
- The British royal family changed its name from the House of Saxe-Coburg-Gotha to Windsor amid anti-German sentiment during World War I. – 1917
- “Wrong Way Corrigan” took off from New York, purportedly aiming for California and landing in Ireland. – 1938
- President Harry Truman, Soviet leader Joseph Stalin and British Prime Minister Winston Churchill meet at the opening of the Potsdam Conference. – 1945
- Disneyland opened in Anaheim, Calif. – 1955
- The American Apollo and Soviet Soyuz spacecraft linked up for the first time. – 1975