US FINANCIAL MARKET
Treasury Rout Unnerves Traders as Stocks Retreat: Markets Wrap – Bloomberg, 8/3/2023
- Treasuries deepened a selloff, driving the 10-year yield to a nine-month high, and equities slumped as investors grew increasingly worried about rising borrowing costs.
- The S&P 500 extended Wednesday’s losses and European stocks fell almost 1%.
- The S&P 500 fell 0.2%. The Nasdaq 100 was little changed. The Dow Jones Industrial Average fell 0.2%.
- The dollar strengthened for a fourth day.
- Jobless claims numbers out Thursday underscored resilient demand for workers and the strength of the American economy, while a reading on the US service sector showed activity expanded at a more moderate pace in July, restrained in part by a softening of employment growth.
- Apple and Amazon.com are due to report later in the day.
- The bond selling has come on the heels of robust US economic data and news that the Treasury will issue $103 billion of securities next week, slightly more than forecast.
- The decision by Fitch Ratings to strip the US of its AAA credit ranking has also put a spotlight on the country’s booming fiscal deficits.
- “Berkshire bought $10 billion in US Treasurys last Monday. We bought $10 billion in Treasurys this Monday. And the only question for next Monday is whether we will buy $10 billion in 3-month or 6-month” T-bills, CNBC cited Buffett as saying.
- Tesla’s China deliveries slumped in July to the lowest level this year, as the electric vehicle maker struggles to attract buyers despite price cuts and other incentives.
- Qualcomm, the largest maker of smartphone processors, gave a tepid sales forecast for the current quarter, indicating that demand for mobile devices remains weak.
- Moderna raised its Covid-19 vaccine sales outlook for the year, finalizing contracts with Japan and several American health-care companies as the US government largely stops paying for the shots.
- The Stoxx Europe 600 fell 0.8%.
- The Bloomberg Dollar Spot Index was little changed.
- The yield on 10-year Treasuries advanced eight basis points to 4.16%.
- West Texas Intermediate crude rose 1.8% to $80.89 a barrel.
- Gold futures fell 0.1% to $1,973 an ounce.
Warren Buffett Is Buying Treasuries Regardless of US Downgrade by Fitch – Bloomberg, 8/3/2023
- It’s business-as-usual for Warren Buffett’s Berkshire Hathaway after Fitch Ratings’ downgrade of the US.
- “Berkshire bought $10 billion in US Treasuries last Monday. We bought $10 billion in Treasuries this Monday. And the only question for next Monday is whether we will buy $10 billion in 3-month or 6-month” T-bills, Buffett said on CNBC.
- “There are some things people shouldn’t worry about,” he said. “This is one.”
Saudis Extend 1 Million-Barrel Oil Cut, Say Can Be Deepened – Bloomberg, 8/3/2023
- Saudi Arabia extended its unilateral oil production cut by another month, and said it could be prolonged further or even deepened.
- The leader of the Organization of Petroleum Exporting Countries will continue the cutback of 1 million barrels a day — launched last month — into September, according to a statement on state Saudi Press Agency.
- That will hold output at about 9 million barrels a day, the lowest level in several years. Crude futures jumped.
- The measure — which comes on top of supply curbs Riyadh was already making with others in the OPEC+ producers group — is intended “to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets.”
- Its ally Russia also said it will extend output curbs, but taper them slightly.
Qualcomm, Stung by Sluggish Smartphone Market, Plans Layoffs – Wall Street Journal, 8/3/2023
- Qualcomm’s stock fell Wednesday after the maker of mobile-phone chips reported disappointing sales and said it expects a new round of layoffs.
- Overall, Qualcomm’s sales fell 23% to $8.45 billion, below Wall Street estimates. Its profit fell by more than half to $1.8 billion.
- Qualcomm on Wednesday said revenue from chips for handsets was $5.26 billion in the latest quarter, a 25% fall compared with the same period last year and below analysts’ expectations in a FactSet survey.
- Qualcomm estimated in a presentation Wednesday that handset sales this year would be down by at least a high-single-digit percentage, which it attributed to a weaker global economy and slow recovery in China.
- The midpoint of Qualcomm’s revenue outlook for the current quarter of between $8.1 billion and $8.9 billion also was behind forecasts.
Shopify Stock Drops After Earnings Top Estimates. Management Is Upbeat. – Barron’s, 8/3/2023
- Shopify posted better-than-expected results for the second quarter, sending share of the e-commerce software provider higher in late trading Wednesday.
- For the quarter, Shopify posted revenue of $1.7 billion, up 31% from a year earlier, and ahead of the Wall Street consensus forecast of $1.63 billion.
- Gross merchandise volume was $55 billion, up 17% from the year earlier quarter, and above the consensus of $53.5 billion.
- On an adjusted basis, Shopify earned 14 cents a share, well ahead of the consensus call for six cents.
- For the third quarter, Shopify sees revenue increasing at a percentage in the low 20s from the year-earlier level.
- Adjusting for the recent sale of the logistics business would boost the growth rate by 3 to 4 percentage points.
- Street consensus estimates had implied 18% growth.
- Shopify expects third-quarter gross margin will be 2 to 3 percentage points above the 49.3% recorded in the second quarter.
MercadoLibre Surges to Highest Since May as Profits Double – Bloomberg, 8/3/2023
- Shares from e-commerce and fintech provider MercadoLibre surged to their highest since May as business booms and the firm seeks to allay concern over its Argentina exposure ahead of a key vote this month.
- While an inflationary environment in Argentina — which accounts for 24% of the company’s sales — led to “flat-ish” marketplace volumes in the country, it also boosted demand for offerings from its fintech division, according to Andre Chaves, a senior vice president at the firm.
- That led to an 80% jump in the number of users of investment products and invested resources, he said in an interview.
- MercadoLibre’s net sales in the three months through June 30 jumped to a record $3.4 billion, lifted by strong growth in its 1P — direct sales — segment in Brazil, Chaves said.
- The company’s fintech segment accounted for about 44% of total revenue.
- Payment volume $42 billion, estimate $40.1 billion.
- Gross merchandise volume $10.5 billion, estimate $9.95 billion.
- Net income more than doubled from a year earlier to $261.9 million in the second quarter, above the $213.9 million forecast by analysts, as it continued to gain market share in Brazil and also benefited from accelerated growth at its highly-profitable digital advertising business.
- Operating margins totaled 16.3%, beating even the most bullish estimate.
- A currency depreciation of 100% would negatively impact its operating income by about 22%, MercadoLibre said, adding that the hit would be offset by the fact the company has a lot of peso-denominated expenses allocated in other markets such as Brazil and Mexico.
PayPal Sees Pressure on Margin With Loan Provisions Climbing – Bloomberg, 8/3/2023
- PayPal Holdings shares slumped after the payments giant said a key measure of profits shrank in the second quarter as the company had to set aside more money to cover souring loans it has made to merchants.
- Total payments volume rose 11% to $376.5 billion, higher than the $372 billion average of analyst estimates compiled by Bloomberg and faster than the 10% growth the company posted in the first three months of the year.
- That pressure seemed to continue in the second quarter: volume through PayPal’s branded checkout options climbed by a percentage in the “mid-single digits,” compared with 11% growth for the company overall.
- In the quarter, PayPal saw its transaction margin — a measure of how profitable the firm’s core business of processing transactions is — shrink to 45.9%, marking the third consecutive quarter that metric narrowed.
- PayPal’s adjusted operating margin narrowed to 21.4% in the second quarter from 22.7% in the first three months of the year, the San Jose, California-based company said in a statement after the close of regular trading Wednesday.
- That missed the 22% guidance the company had previously provided and came as the company tightened underwriting standards for loans it has made to merchants in recent months.
MetLife Profits Dip as Company Prepares for Reinsurance Deal – Bloomberg, 8/3/2023
- MetLife, the biggest US life insurer, said second-quarter profit dipped year-over-year as softer investment income from real estate brought down results.
- Total revenue came in at $16.6 billion, compared with $15.4 billion for the same time last year, the New York-based firm said Wednesday in a statement.
- Premiums, fees and other revenues clocked in at $13.6 billion in the period, a slight uptick from the prior year quarter.
- Net investment income gained 42% year over year, as certain securities gained value.
- Variable investment income came in at $221 million, improving from the prior quarter but trailing “historical returns,” Chief Financial Officer John McCallion said in a video released alongside earnings.
- Adjusted earnings decreased to $1.94 a share from $2.13 a year earlier, but still beat the $1.87 average estimate of analysts surveyed by Bloomberg.
DoorDash Sees Record Orders, Showing Appetite For Delivery – Bloomberg, 8/3/2023
- DoorDash reported a record number of delivery orders in the second quarter, showing consumers’ commitment to takeout despite rising prices.
- Revenue rose 33% to $2.13 billion, slightly beating analysts forecasts for $2.05 billion.
- Customers placed 532 million orders in the quarter and the gross value of those orders rose 26% to $16.5 billion, the company said in a statement.
- Its share of the market for US food-delivery sales rose to 65% as of June, according to research from Bloomberg Second Measure.
- DoorDash said adjusted earnings before interest, tax, depreciation and amortization reached $279 million during the period, beating Wall Street’s estimate of $214.5 million.
- The US’s biggest food delivery company reported a net loss of $172 million, driven by higher stock-based compensation expenses as well as spending to expand outside of meal-delivery.
- The company boosted its outlook for gross order value for the full year to $64.2 billion to $65.2 billion.
Albemarle boosts profit forecast on surging lithium demand, shares jump – Reuters, 8/3/2023
- Albemarle, the world’s largest producer of lithium, raised its 2023 profit forecast on Wednesday after reporting better-than-expected quarterly results, and it shares jumped as the company cited rising global appetite for the metal used to make electric vehicle batteries.
- Sales in the company’s Energy Storage division, which sells lithium, more than doubled to $1.76 billion.
- Excluding one-time items, Albemarle earned $7.33 per share. By that measure, analysts expected earnings of $4.44 per share, according to IBES data from Refinitiv.
- For the year, Albemarle expects the price at which it sells its lithium to jump nearly 30% from 2022 levels.
- For the full year, Albemarle raised its forecast for adjusted earnings to a range of $25 to $29.50 per share.
- The company previously had expected its adjusted earnings for the year to come in at between $20.75 and $25.75 per share.
EVgo revenue beats analyst expectations as private-label charging business booms – CNBC, 8/3/2023
- EV charging network operator EVgo on Wednesday reported second-quarter revenue that beat Wall Street’s expectations and posted a narrower-than-expected loss, as more electric vehicle drivers used its network and revenue from its private-label eXtend unit boomed.
- Revenue: $50.6 million vs. $29.6 million expected.
- EVgo’s “network throughput” is a measure of the total amount of electricity provided to its charging customers.
- That figure grew 147% year over year to 24.9 gigawatt-hours in the second quarter, and by about 30% per individual charging stall, on average.
- EVgo also reported significant growth in its “eXtend” unit, which provides and manages chargers for business clients under those businesses’ own brands.
- Revenue from eXtend totaled about $33.3 million in the second quarter, or nearly 66% of EVgo’s total revenue for the period.
- As of June 30, EVgo had approximately 3,200 fast charging stalls in operation or under construction, up from about 3,100 at the end of the first quarter.
- The company added more than 82,000 new customer accounts during the period, for a total of about 688,000 as of June 30, up 55% year over year.
- Loss per share: 8 cents vs. 27 cents expected.
- EVgo now expects revenue between $120 million and $150 million for the full year, up from $105 million to $150 million in its prior guidance.
- It now expects an adjusted EBITDA loss of between $68 million and $78 million, a narrower range than the $60 million to $78 million in its earlier guidance.
- EVgo still expects to have between 3,400 and 4,000 fast charging stalls in operation or under construction at year-end, unchanged from its earlier guidance.
Moderna’s stock jumps 5% premarket after narrower-than-expected loss and revenue beat – Market Watch, 8/3/2023
- Moderna stock rallied in premarket trade Thursday, after the COVID vaccine market posted a narrower-than-expected second-quarter loss and revenue that was far below last year’s but still topped consensus estimates.
- Revenue fell sharply to $344 million from $4.749 billion a year ago, when demand for COVID vaccines remained strong.
- The company had a net loss of $1.38 billion, or $3.62 a share, for the quarter, after income of $2.197 billion, or $5.24 a share, in the year-earlier period.
- The FactSet consensus was for a loss of $3.93 and revenue of $308 million.
- Sales of the company’s COVID vaccine came to $300 million for the quarter, and are expected to total $6 billion to $8 billion for all of 2023, depending on U.S. vaccination rates.
Warner Bros. Discovery Slashes Debt, Sees Dip in Streaming Subscribers – Wall Street Journal, 8/3/2023
- Warner Bros said it is making significant strides toward reducing its debt, and said its streaming subscriber base shrank slightly in the latest quarter as a result of the launch of Max, which combined the company’s two main streaming platforms.
- For the quarter ended June 30, total revenue fell 4% on a constant-currency basis to $10.36 billion, missing analysts’ estimates of $10.44 billion, according to FactSet.
- Revenue from the studio dropped 24% in constant currency to $2.58 billion, with declines across TV, games and theatrical.
- The company’s direct-to-consumer segment, which includes the Max and Discovery+ streaming services, lost 1.8 million subscribers since the end of last quarter amid fierce competition for viewers.
- The losses are lower than the company had previously anticipated due to about four million overlapping subscribers of the two services.
- The streaming services produced a smaller loss for the company but were still operating in the red, with an adjusted loss of $3 million.
- Warner Bros’s loss narrowed to $1.24 billion, or 51 cents a share, from a loss of $3.42 billion, or $1.50 a share, a year earlier as the company continued to pay down its debt.
- Analysts polled by FactSet expected a loss of 35 cents a share.
- The company announced its latest step to pay down its debt as it announced earnings Thursday, launching a debt tender offer for up to $2.7 billion.
- Warner Bros launched its new Max streaming service, which combines HBO and Discovery content, in May, replacing predecessor HBO Max.
- The company has sought to reduce the churn—when subscribers drop a service—of its streaming operations.
Expedia Falls as Sales Miss Estimates, Signaling Travel Slump – Bloomberg, 8/3/2023
- Expedia Group reported second-quarter revenue that missed analysts’ estimates, signaling a potential slowdown in travel demand as the busy summer season gets into full swing.
- Revenue increased 6% to $3.36 billion, slightly below analysts’ average estimate of $3.37 billion.
- Gross bookings across Expedia’s platforms, which include flight reservations, hotel stays, car rentals, activities and vacation rentals, grew 5% to $27.3 billion, according to a statement Thursday.
- That was less than analysts’ projections for $28.9 billion.
Robinhood Needs to Steal More Users – Wall Street Journal, 8/3/2023
- Robinhood Markets turned a surprise profit in the second quarter. But that may not be enough to nab back its momentum just yet.
- Monthly active users declined by about a million over the course of the second quarter, to 10.8 million.
- Transaction-based revenue from equities, options and crypto trading is also falling, dropping 8% quarter over quarter.
- Net deposits grew at an annualized 21% rate in the quarter, and the company’s Gold cash sweep accounts—which now pay a 4.9% yield—have more than doubled since the start of the year, to $11 billion.
- Robinhood’s annualized yield on earning assets fell from 3.68% in the first quarter to 3.51% in the second.
- Between fully paid securities lending, in which investors can lend out their shares to earn passive income, and transaction revenue from instant withdrawals and debit cards, the company generated $24 million in revenue—just a million dollars shy of the revenue generated by equities trading in the quarter.
- All of this helped average revenue per user grow from $77 in the first quarter to $84 in the second quarter, the fifth straight quarter of growth.
Equinix projects quarterly revenue below estimates, shares slip – Reuters, 8/3/2023
- Equinix forecast third-quarter revenue below market estimates on Wednesday, a sign that demand for data centers was slowing as businesses curtail spending in an uncertain economy.
- In the three months ended June 30, Equinix’s revenue jumped 11% to $2.02 billion, in line with Wall Street expectations.
- Second-quarter adjusted core earnings rose 5% to $901 million, and Equinix said it expected a figure of between $908 million and $938 million for the current quarter, compared with expectations of $920.4 million.
- Adjusted funds from operations – a key measure of cash flow – came in at $8.04 per share, 6% higher than a year earlier.
- Equinix said it expects revenue of between $2.04 billion and $2.07 billion in the current quarter, compared with analysts’ estimates of $2.08 billion, according to Refinitiv data.
Occidental Buys Back $522 Million of Berkshire Preferred Stock – Bloomberg, 8/3/2023
- Occidental Petroleum bought back $522 million of Berkshire Hathaway Inc.’s preferred stock in the second quarter, demonstrating its willingness to repay Warren Buffett even as commodity prices drop.
- The purchase brings Occidental’s redemptions this year to 12% of Berkshire’s initial $10 billion investment, which was used to fund the producer’s acquisition of Anadarko Petroleum in 2019.
- Occidental shares dropped in after-market trading as the company missed analysts’ earnings estimates because of weaker realized prices for its gas production.
- The company raised its 2023 production guidance 1.3%, but also reported higher capital spending than expected.
MGM Resorts results beat expectations, but stock falls – Market Watch, 8/3/2023
- Casino and resort operator MGM Resorts International on Wednesday reported second-quarter results that beat expectations, helped by the lifting of pandemic restrictions in global gaming hub Macau, but shares fell after hours.
- Revenue rose to $3.94 billion, compared with $3.26 billion in the prior-year quarter, driven largely by the re-opening of Macau.
- Adjusted for gains on debt and equity and taxes, MGM earned 59 cents a share.
- Analysts polled by FactSet expected adjusted earnings per share of 56 cents, on revenue of $3.82 billion.
McKesson 1Q Revenue, Net Income Beat Expectations — Market Watch, 8/3/2023
- McKesson reported better-than-expected results in its latest quarter, with revenue growing on the back of higher prescription volumes in the U.S.
- The drug distributor posted revenue of $74.48 billion for the fiscal first quarter ended June 30, an 11% increase from $67.15 billion in the year-ago period.
- Analysts polled by FactSet expected $70.28 billion.
- McKesson attributed the 11% growth in revenue to its U.S. pharmaceutical segment as a result of higher prescription volumes.
- The Irving, Texas-based company logged adjusted earnings of $7.27 a share compared with $5.83 a share a year earlier.
- Analysts polled by FactSet expected $5.87 a share.
- McKesson raised its fiscal 2024 adjusted earnings-per-share guidance to between $26.55 and $27.35.
- It previously forecast between $26.10 and $26.90 in adjusted earnings a share.
Simon Property slashes annual profit forecasts as leasing demand slumps – Reuters, 8/3/2023
- Simon Property lowered its annual profit forecast on Wednesday, signaling a fall in leasing demand from retailers who are battling conservative consumer spending and higher rentals.
- Net revenue from lease income in the second quarter came in at $1.25 billion, in line with Street expectations.
- Simon Property’s reported funds from operations (FFO) per share of $2.88 in the quarter ended June 30 dropped from $2.91 a year ago.
- Analysts on average had expected per share FFO of $2.92, as per Refinitiv data.
- The real estate trust has also raised its base minimum rent, which was up 3.1% in the quarter ended June 30, in order to protect margins.
- The company now expects annual net income attributable to shareholders to be between $6.39 and $6.49 per share, compared with its previous forecast between $6.45 to $6.60 per share.
Apple’s Goldman Sachs-Backed Savings Account Tops $10 Billion in Deposits – Bloomberg, 8/3/2023
- Apple and Goldman Sachs said that their new high-yield savings account has reached $10 billion in US deposits, showing strength in the face of speculation that the partners may be headed for a breakup.
- Since the service launched in April, 97% of users have chosen to get their Apple Daily Cash — a cash-back reward program — deposited into the account, the iPhone maker said in a statement Wednesday.
- The savings account is built into the Wallet app on iPhones and allows users to transfer money in and out like a traditional account, yielding 4.15% in interest.
- The announcement follows a report in June that Goldman Sachs is considering exiting the Apple partnership.
- The Wall Street Journal said the bank was in talks with American Express to take over the Apple credit card and other services that the companies offer together.
Meta’s Ray-Ban Smart Glasses Fail to Catch On – Wall Street Journal, 8/3/2023
- The Ray-Ban smart glasses launched by Meta Platforms almost two years ago have struggled to catch on with owners, many of whom appear to be using the devices infrequently, according to internal company data.
- Less than 10% of the Ray-Ban Stories purchased since the product’s launch in September 2021 are used actively by purchasers, according to a company document from February reviewed by The Wall Street Journal.
- Meta sold a total of 300,000 of the wearable devices through February, but the company only had about 27,000 monthly active users.
- The device, an important part of Meta’s hardware strategy, allows users to take photos and listen to music with the frames of their glasses, among other features.
- It has experienced a 13% return rate, according to the document.
- Among the top drivers of poor user experience were issues with connectivity, problems with some of the hardware features including battery life, inability for users to import media from the devices, issues with the audio on the product and problems with voice commands for the smart glasses, according to the document.
- “We’ll also need to better understand why users stop using their glasses, how to ensure we are encouraging new feature adoption, and ultimately how to keep our users engaged and retained,” the document said
US ECONOMY & POLITICS
US Initial Jobless Claims Tick Up, Still Near Lowest This Year – Bloomberg, 8/3/2023
- US applications for unemployment benefits held near the lowest levels of the year, underscoring resilient demand for workers.
- Initial claims for unemployment benefits ticked up by 6,000 to 227,000 in the week ending July 29, according to Labor Department data released Thursday.
- The median estimate in a Bloomberg survey of economists called for 225,000 applications.
- Continuing claims, which include those who have received benefits for longer than one week, edged higher to 1.7 million in the week through July 22.
- The four-week moving average, which smooths out some of that volatility, fell to 228,250, the lowest since March.
- On an unadjusted basis, claims fell to 205,012, the lowest in about two months and was led by Ohio, California and Georgia.
- Applications in Missouri rose by the most since early May.
- Another report Thursday from Challenger, Gray & Christmas Inc. showed an 8% decline in job cuts announced by US-based employers in July from a year earlier.
US Productivity Jumps by Most Since 2020, Blunting Labor Costs – Bloomberg, 8/3/2023
- US labor productivity logged its biggest increase in the second quarter in nearly three years, helping to offset rising labor costs.
- Productivity, or nonfarm business employee output per hour, rose at a 3.7% annual rate in the second quarter after registering a decline in the first three months of the year, according to figures out Thursday from the Bureau of Labor Statistics.
- The median estimate in a Bloomberg survey of economists had called for a 2.2% rise.
- Unit labor costs, or what a business pays employees to produce one unit of output, rose at a 1.6% rate after surging 3.3% in the prior period.
- Thursday’s report showed hourly compensation jumped 5.5%.
- Adjusted for inflation, it rose 2.7%, marking the first increase in almost a year.
- Nonfarm business output rose 2.4%.
Fed’s Barkin Says Inflation-Rate Drop May Be Soft-Landing Signal – Bloomberg, 8/3/2023
- Federal Reserve Bank of Richmond President Thomas Barkin said the greater-than-expected easing in inflation in June may be an indication that the US economy can have a “soft landing,” returning to price stability without a damaging recession.
- “There is still a plausible story that inflation normalizes in short order and the economy dodges additional trauma,” Barkin said Thursday in a speech in Blacksburg, Virginia.
- “Certainly, last month’s inflation read was a good one and I hope it is a sign. To be sure, the Fed’s objective is not to cause a recession; it’s to reduce inflation, in line with our mandate.”
- Barkin didn’t specifically address the need for still-higher interest rates.
- “We learned in the ‘70s that if you don’t get inflation under control, it comes back even stronger,” he said.
- “It’s unclear how much it affects borrowing rates. We’re focused on getting inflation under control and to the extent it moves rates up a little bit, maybe that means it’s a little less you have to do, but I think that’s very speculative,” he said.
- While a few industries — including housing, banking and commercial real estate — have had “mini-recessions,” much of the economy has been resilient, he said.
- “Consumers continue to spend, funded by excess savings accrued during the pandemic, elevated equity and housing wealth, and a robust jobs market,” he said.
- “This year, the drop in gasoline prices has freed up additional spending capacity.”
US Service Sector Activity Expanded at Slower Pace in July – Bloomberg, 8/3/2023
- US service sector activity expanded at a more moderate pace in July, restrained in part by a softening of employment growth.
- The Institute for Supply Management’s services index decreased 1.2 points to 52.7 last month, data showed Thursday.
- Growth in business activity and new orders slowed somewhat, though those indexes continued to illustrate solid consumer demand for services.
- Fourteen industries reported growth last month, including construction and accommodation and food services.
- The index for prices paid by service providers for inputs rose to a three-month high, but at 56.8, the measure has generally returned to pre-pandemic levels.
- The report did suggest service-sector employers are tapping the brakes on hiring, with the group’s employment gauge falling to 50.7 last month.
EUROPE & WORLD
BOE Raises Rates to 5.25% With Warning Policy Will Remain Tight – Bloomberg, 8/3/2023
- The Bank of England raised interest rates to a new 15-year high, warning that its fight against inflation may require tighter borrowing conditions for a prolonged period.
- The UK central bank lifted its key rate a quarter point to 5.25% on Thursday, which was in line with market expectations after a surprise half-point increase in June.
- Still, signs of debate between policymakers prompted traders to pare bets on the pace of further hikes, with markets priced in for rates to peak below 5.75% in February.
- The Monetary Policy Committee left the door open to further action if inflation persisted, and added language saying their stance would remain “sufficiently restrictive for sufficiently long” to bring it back to the 2% target.
- Asked when the bank would reverse course, Bailey said it was “far too soon to speculate on when we might see a cut.”
- Catherine Mann and Jonathan Haskel voted for a half-point hike. Swati Dhingra sought no change.
- The remaining six including Bailey and his deputies were in the majority and noted that their action will weigh heavily on households and businesses.
- The BOE maintained its guidance that “if there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required,” minutes of the meeting showed.
- It added a sentence suggesting that once the tightening cycle was finished, rates might remain elevated for some time.
- Britain’s economy will likely stagnate through to 2025, according to the BOE forecasts.
- It expects gross domestic product to grow 0.5% in both 2023 and 2024 and by 0.25% in 2025.
- By the end of the forecast period in 2026, GDP will be 0.75% lower than estimated in May.
Adidas 2Q Greater China Revenue Grew 16% – Market Watch, 8/3/2023
- Adidas’s recovery in China and easing of inventories helped its performance in the second quarter, the company said Thursday.
- The German sporting-goods firm last month set out preliminary results for the second quarter showing a slight drop in sales to 5.34 billion euros ($5.84 billion) and an operating margin that improved from the previous quarter to 3.3%.
- Greater China revenue rose 16% in the second quarter, marking a return to growth in the vital market after successive quarters of decline.
- Inventories, which dogged Adidas’s performance last year, rose only slightly in the second quarter, the company said.
- They stood at EUR5.54 billion, 6% higher on year adjusted for currency effects, Adidas said.
- Adidas confirmed that it now expects to book a narrower operating loss for the year at EUR450 million than the EUR700 million loss initially forecast.
- In the second quarter, the company’s net income from continuing operations stood at EUR96 million, less than last year but marking a return to profit from a net loss the previous quarter.
Bud Light Boycott Sparks Big U.S. Profit Drop for AB InBev – Wall Street Journal, 8/3/2023
- Anheuser-Busch said its U.S. sales and profit plunged in the second quarter as drinkers abandoned Bud Light, but the beer giant defended the brand, saying it is still viewed favorably by consumers.
- AB InBev said net revenue climbed to $15.12 billion from $14.79 billion in the same period last year.
- AB InBev’s second-quarter U.S. sales to wholesalers dropped 15% and sales to retailers dropped 14%, mainly because of the decline in Bud Light.
- North America volumes fell 14.1% on an organic basis.
- Volumes in the Asia Pacific region grew 9.5%.
- Volumes were flat in Europe, the Middle East and Africa, while in South America they declined 1.9%.
- Revenue per hectoliter rose 9%—a combination of AB InBev raising prices and selling more upscale beer—which offset a 1.4% drop in global volumes.
- The company attributed the big profit drop to losing market share as well as spending more on marketing and support for distributors who have been battered by the slump in Bud Light.
- The results cover the three months to June 30, providing the first look at how the consumer boycott of Bud Light, which began in April, has impacted AB InBev’s earnings.
- AB InBev said that while the company’s market share of the U.S. beer industry had declined over the quarter, it had been stable since the last week of April through the end of June.
- The brewer commissioned a survey of 170,000 consumers across the U.S. in the quarter, which it said showed that most people are favorable toward the Bud Light brand while 80% are favorable or neutral.
- It also reiterated its full-year guidance, sending shares up 1.8% in morning trading in Brussels.
Tesla China Deliveries Plunge 31% in July to Lowest This Year – Bloomberg, 8/3/2023
- Tesla’s China deliveries slumped in July to the lowest level this year, as the electric vehicle maker struggles to attract buyers despite price cuts and other incentives.
- The company’s Shanghai plant delivered 64,285 cars last month, a 31.4% drop from June, according to preliminary data published by China’s Passenger Car Association on Thursday.
- Still, Chinese EV startups are seeing a recent increase in sales, with BYD – the top-selling car brand — delivering 262,161 new energy vehicles in July.
- Xpeng, which has signed a deal to produce EVs with Volkswagen, reported a 28% increase in sales from June to 11,008 units, while Li Auto shipped 34,134 cars in July and Nio’s deliveries jumped to 20,462.
State Department Orders Partial Evacuation of U.S. Embassy in Niger – Wall Street Journal, 8/3/2023
- The State Department ordered Wednesday the departure of nonemergency U.S. government employees and eligible family members from Niger over concerns that tensions could escalate after the military junta detained the country’s elected president last week.
- The State Department updated its advisory, which had previously warned American citizens to reconsider travel to Niger because of crime, terrorism and kidnapping.
- It is unclear how many Americans are living in Niger, and the State Department said it is working to assess what can be done to ensure all Americans are safe.
- “The Department of State is ordering the temporary departure of nonemergency U.S. government personnel and eligible family members from the U.S. Embassy in Niamey,” the Department said in a statement.
- “Commercial flight options are limited. We updated our travel advisory to reflect this and informed U.S. citizens that we are only able to provide emergency assistance to U.S. citizens in Niger given our reduced personnel.”