US FINANCIAL MARKET
Stocks Weaken as China Contagion Risks Weighed: Markets Wrap – Bloomberg, 8/14/2023
- Equity markets wobbled and US Treasury yields rose as investors weighed the potential for policy action by Chinese regulators to address mounting financial and property risks.
- Stocks were mixed in light trading as the tech-heavy Nasdaq 100 and favorites like Nvidia clung to gains.
- The S&P 500 was little changed. The Nasdaq 100 rose 0.2%. The Dow Jones Industrial Average fell 0.1%.
- Smaller stocks fared worse with the Russell 2000 falling to the lowest in over a month as risk-appetite waned.
- Treasury yields ticked higher, with the policy sensitive two-year extending an advance into the fourth day to trade at 4.95%, high-grade corporate bond sales Monday are expected to weigh on prices.
- Investors sitting on record first-half gains are having to contend with central bankers warning they are in no rush to cut interest rates.
- Updates from China unnerved markets on Monday.
- The country’s banking regulator announced it would set up a task force to examine risks at private-wealth manager Zhongzhi Enterprise Group, which missed payments on investment products sold to high-net worth clients.
- Meanwhile, Country Garden Holdings is seeking to extend a maturing bond for the first time and halted trading in local notes.
- The company, once China’s biggest developer, has emerged as the latest flashpoint of the country’s property woes.
- Focus later this week will be on minutes of the Federal Reserve’s latest policy meeting as traders seek clues on the central bank’s next move.
- Investors who’d bet on a pivot to easier policy this year are having to adjust their bets as officials signal they will keep interest rates higher for longer.
- US Steel surged 26% after the company rejected a $7.25 billion takeover offer from peer Cleveland-Cliffs and said it will instead start a review of its strategic options.
- Tesla slipped triggering a selloff for other producers of electric vehicles, after it rolled out a new round of price cuts in China.
- Nikola plummeted after the manufacturer announced it will recall trucks and temporarily stop sales after several battery fires.
- The Stoxx Europe 600 was little changed.
- The Bloomberg Dollar Spot Index rose 0.4%.
- The yield on 10-year Treasuries advanced five basis points to 4.21%.
- West Texas Intermediate crude fell 0.6% to $82.69 a barrel.
- Gold futures fell 0.6% to $1,935.80 an ounce.
U.S. Steel rejects a $7.3 billion offer from rival Cleveland-Cliffs; considers alternatives – CNBC, 8/14/2023
- United States Steel said Sunday that it rejected a $7.3 billion buyout proposal from rival Cleveland Cliffs and was reviewing “strategic alternatives” after receiving several unsolicited offers.
- Pittsburgh-based U.S. Steel said it rejected the offer because Cleveland-Cliffs was pushing it to accept the terms without being allowed to conduct proper due diligence.
- “At this juncture, we cannot determine whether your unsolicited proposal properly reflects the full and fair value of the Company. For all of the above reasons, the Board has no choice but to reject your unreasonable proposal,” U.S. Steel CEO David Burritt said in a letter, released Sunday, to Cleveland Cliffs CEO Lourenco Goncalves.
- Cleveland-Cliffs announced earlier Sunday that it had made an offer valuing the U.S. Steel at $7.3 billion, based on $17.50 a share in cash and 1.023 shares of Cliffs stock.
- Cleveland-Cliffs said the value of the offer was $35 a share, a premium over U.S. Steel’s closing stock price of $22.72 on Friday.
- The company said it decided to reveal the private offer after U.S. Steel rejected it.
Ford hires Apple veteran to lead consumer software efforts – CNBC, 8/14/2023
- Ford Motor said Monday that it has hired Apple veteran Peter Stern to lead a newly created division focused on developing and marketing software-enabled customer experiences for the automaker.
- Stern, who most recently served as vice president of services at Apple, will be president of “Ford Integrated Services.”
- He starts with the automaker immediately.
- Monetizing emerging software offerings such as advanced driver-assist systems as well as other safety and convenience features is viewed as a major challenge for automakers, as they try to increase reoccurring revenue through software subscriptions.
- Stern will report directly to CEO Jim Farley, who has added a slew of executives from outside the automotive industry to his management team – many from the tech sector – to assist in implementing the company’s Ford+ restructuring plan.
PayPal Appoints Intuit Executive as New CEO. – Barron’s, 8/14/2023
- PayPal Holdings has named Inuit executive Alex Chriss as its next chief executive.
- Chriss will take up the role as CEO of PayPal on Sept. 27.
- He currently runs the Small Business and Self-Employed group for the business-software company Intuit.
- “The appointment follows a thorough CEO search process, conducted by the Board over the last number of months, with the mandate to appoint a next generation leader with extensive global payments, product, and technology experience,” PayPal said in a statement.
Kraft Heinz Names Carlos Abrams-Rivera as Next CEO – Wall Street Journal, 8/14/2023
- Kraft Heinz has designated Carlos Abrams-Rivera, the head of its North American operations, to succeed Miguel Patricio as chief executive of the company, effective Jan. 1.
- The maker of sliced cheese and ketchup on Monday said Abrams-Rivera, who has served as president of its North America zone since December 2021, becomes president of the Pittsburgh-based company, effective immediately.
- Abrams-Rivera has been with Kraft Heinz since February 2020. He will also join the company’s board when he becomes CEO.
- Patricio, who has been CEO since 2019 and chairman since 2022, will continue to serve as nonexecutive chairman.
Nikola recalls all battery-electric trucks, halts sales after fire probe – Reuters, 8/14/2023
- Nikola said on Friday it was recalling all the battery-powered electric trucks that it has delivered till date and is suspending sales after an investigation into recent fires found a coolant leak inside a battery pack as the cause.
- There are a total of 209 battery-powered electric trucks in the marketplace between dealers and customers and the company is recalling those vehicles and is in the process of contacting all parties, a spokesperson for Nikola told Reuters.
- The preliminary findings of the probe by a third-party investigator were corroborated on Thursday by a “minor thermal incident” on one pack on a parked engineering-validation truck, the company said, adding that no one was injured.
- “Foul play or other external factors were unlikely to have caused the incident,” Nikola said in a statement, adding efforts were underway to provide a remedy.
- Internal investigations from Nikola’s safety and engineering teams indicate a single supplier component within the battery pack as the likely source of the coolant leak that caused the vehicles to catch fire, the company said.
US ECONOMY & POLITICS
Maui Wildfire Death Toll Climbs to 96 as Lahaina Residents Brace for More Victims – Wall Street Journal, 8/14/2023
- Maui officials increased the death toll to at least 96 following the catastrophic wildfires on the Hawaiian island as they continue the painstaking search for victims in the rubble.
- Residents are bracing for a higher death toll as searchers find more human remains in the charred town of Lahaina. Officials have estimated over $5 billion is needed to rebuild from last week’s wildfire event, the most deadly in the U.S. in more than a century.
- Official probes into the fires’ origins are expected.
- Investigators are likely to consider several possible sources that sparked the blazes, including a campfire, lightning, transmission equipment and the electric grid, according to longtime fire investigators and electrical-grid experts.
- Hawaiian officials said over the weekend that crews using cadaver dogs had searched only 3% of the disaster zone.
EUROPE & WORLD
China Finance Giant’s Missed Payments Alarm Regulators, Markets – Bloomberg, 8/14/2023
- One of China’s largest private wealth managers has triggered fresh anxiety about the health of the country’s shadow banking industry after missing payments on multiple high-yield investment products.
- The turmoil at Zhongzhi Enterprise Group, a secretive financial conglomerate that manages about 1 trillion yuan ($138 billion), surged to the fore after several of its corporate clients disclosed overdue payments by a trust unit.
- In a sign that Chinese authorities are worried about potential contagion, the banking regulator has set up a task force to examine risks at Zhongzhi, according to people familiar with the matter.
- While little known outside China, Zhongzhi is among the biggest players in the country’s $2.9 trillion trust industry, which combines characteristics of commercial and investment banking, private equity and wealth management.
Tesla cuts prices in China for select Model Y versions – Reuters, 8/14/2023
- Tesla on Monday said it has cut prices in China for its Model Y long-range and performance versions starting on Aug. 14, sending its shares lower on concern of further pressure on its profit margins.
- The electric-car company reduced the starting prices of both models by 14,000 yuan ($1,934.58).
- The Model Y Long Range’s starting price drops 4.5% to 299,900 yuan and the starting price of the Model Y Performance is now 349,900 yuan, down 3.8%.
- In the same announcement, Tesla also said it would offer insurance subsidies in China of 8,000 yuan between Aug. 14 and Sept. 30 for buyers of the entry-level, rear-wheel-drive versions of the Model 3 vehicles in inventory.
iPhone Maker Hon Hai Cuts Outlook After Mobile Demand Sags – Bloomberg, 8/14/2023
- Hon Hai Precision Industry now expects 2023 sales to fall after previously forecasting flat revenue, sounding a warning about demand for the devices it makes for Apple and other global firms.
- The Taiwanese company now expects most of its main business segments, including smartphones, to contract “slightly” this quarter and over the entire year, as global economic malaise depresses consumer spending on electronics.
- It reported a larger-than-expected 30% slide in operating income to NT$30.9 billion ($968 million) for the June quarter.
- Hon Hai on Monday reported net income of NT$33 billion, surpassing the NT$25.9 billion average of analyst estimates partly because of gains from sales of real estate, among other items.
Dutch F-16s Deployed as Russian Jets Flew Toward NATO Airspace – Bloomberg, 8/14/2023
- The Netherlands and Denmark deployed F-16 fighter jets Monday as two Russian bombers approached NATO airspace over the North Sea.
- The Russian planes turned back after being identified and never left international airspace.
- The two Dutch F-16 jets took off and were prepared to guard the Netherlands’ area of responsibility following an alert at 7:19 a.m. local time, according to a statement from the government.
- “This doesn’t happen often, but today’s incident demonstrates the importance of rapid deployment,” according to the statement.
- The Danish government also deployed its own F-16s to identify the planes, but the Russians remained in international airspace, according to a spokesperson for the Danish Defense Command.
- The Dutch F-16s were airborne and flying in a holding pattern, said a spokesperson for the defense ministry in The Hague.
Taiwan Vice President Flashes Defiance Against China During U.S. Stopover – Wall Street Journal, 8/14/2023
- Taiwan’s vice president vowed not to back down in the face of threats from China during a brief stopover in New York, part of a U.S. visit that Beijing and Washington have both appeared to approach with restraint to avoid reigniting tensions.
- Lai Ching-te spent around 24-hours in the city, delivering remarks at a Sunday luncheon attended by more than 500 people at a ballroom in Manhattan after arriving the night before.
- He was met at a riverfront location by a boisterous group of pro-Beijing protesters, who dispersed after he entered.
- “At this crucial moment, I hope that here and now, we can once again reaffirm our commitment—no matter how significant the threat of authoritarianism to Taiwan may be—we will never fear and retreat,” Lai said.
- He also thanked the U.S. government for “not succumbing to pressure” in helping arrange his American stops, an indirect reference to Beijing.
- Lai, the current front-runner in a presidential election set to be held in January, was on the first leg of a weeklong trip to Paraguay, where he plans to attend the inauguration ceremony of the country’s incoming President Santiago Peña Palacios on Tuesday.
- He plans to stop over in San Francisco on Wednesday before returning to Taipei the next day.
Russian Ruble at Weakest Level Since Early Days of Ukraine War – Wall Street Journal, 8/14/2023
- Russia’s currency hit its weakest level in over a year, weighed down by Western sanctions and a wholesale reorientation of the economy toward supplying the war in Ukraine.
- The ruble’s decline picked up pace in recent weeks, and on Monday the currency fell past 100 to the U.S. dollar for the first time since the weeks after Russia invaded Ukraine.
- So far this year, the ruble has lost almost 30% of its value against the dollar.
- The ruble’s sharp fall points to mounting financial anxiety in the economy.
- It has also revealed fissures among top Russian officials over how to manage the situation, with a senior Kremlin aide blaming the weak currency on a lax central bank.
- “The main source of ruble depreciation and inflation acceleration is loose monetary policy,” Maxim Oreshkin, President Vladimir Putin’s top economic adviser, wrote in comments carried by Russian state newswire TASS Monday.
- “It is in the interests of the Russian economy to have a strong ruble,” he wrote.
Kim Jong Un Calls for Sharp Rise in North Korean Weapons Production – Wall Street Journal, 8/14/2023
- North Korean leader Kim Jong Un called for a drastic increase in weapons production as the U.S. and South Korea strengthen their military cooperation to counter the North.
- For the second time in as many weeks Kim visited military factories, this time observing the making of tactical missiles, mobile launch platforms and artillery shells on Friday and Saturday, Pyongyang state media reported on Monday.
- He ordered increased production of artillery shells for front-line units to be “fully prepared for coping with any war at any moment,” according to state media.
- The U.S. and South Korea are set next week to begin major military drills, which North Korea routinely refers to as rehearsals for invasion.
Agnellis’ Exor Buys 15% Stake in Philips for $2.8 Billion – Bloomberg, 8/14/2023
- The Agnelli family’s Exor bought a minority stake in Koninklijke Philips, a vote of confidence for the troubled Dutch medical company as it grapples with a costly product recall.
- Exor bought a 15% holding in Philips through on-market share purchases and an agreement with a major financial institution, according to a statement Monday.
- The deal is valued around €2.6 billion ($2.8 billion).
- While Exor doesn’t plan to buy more Philips shares in the short term, the deal allows the company to eventually increase its stake to 20%, according to the agreement.
- Exor will get a seat on the Dutch company’s supervisory board.
- International forces entered Beijing, China, in an effort to suppress the antiforeign uprising known as the Boxer Rebellion. – 1900
- The Social Security Act became law. – 1935
- Japan surrendered to the United States, ending World War II. – 1945
- Pakistan became independent of British rule. – 1947
- Shannon Faulkner became the first female cadet at the Citadel, the state military college of South Carolina. – 1995
- Timothy McVeigh was sentenced to death for the Oklahoma City bombing. – 1997
- The largest blackout in North American history hit the northeast. – 2003