US FINANCIAL MARKET
S&P 500 Tops 4,500, Yields Drop on Economic Data: Markets Wrap – Bloomberg, 8/30/2023
- Stocks rose, while Treasury yields fell as another batch of economic data cemented bets the Federal Reserve is approaching the end of its interest-rate hikes.
- The S&P 500 topped 4,500. Visa and Mastercard climbed on plans to boost the fees that many retailers pay when accepting customers’ credit and debit cards.
- Texas Instruments slid after an analyst downgrade while HP sank on a bearish outlook.
- Salesforce will report earnings after the close, and investors will be looking for signs on whether new artificial-intelligence products can help boost revenue growth.
- Two-year yields dropped four basis points to 4.85%.
- The dollar retreated against all of its developed-market peers.
- Swap contracts tied to Fed meeting dates priced in less than a 50% chance of another quarter-point rate increase this year.
- US gross domestic product rose at a revised 2.1% annualized pace in the second quarter — below the government’s previous estimate — amid a more moderate business investment.
- American companies added the fewest jobs in five months, according to figures published by the ADP Research.
- The euro rose as inflation slowed less than expected in Germany and quickened in Spain, offering European Central Bank officials a partial picture of the region’s price pressures as they judge whether to raise interest rates again.
- The Bloomberg Dollar Spot Index fell 0.2%.
- The yield on 10-year Treasuries declined two basis points to 4.10%.
- West Texas Intermediate crude fell 0.2% to $81.03 a barrel.
- Gold futures rose 0.4% to $1,973 an ounce.
Visa, Mastercard Plan to Add New Card Fees in the Coming Months – Bloomberg, 8/30/2023
- Visa and Mastercard are planning to boost the fees that many retailers pay when accepting customers’ credit and debit cards.
- The additional Visa charges are slated to begin in October for online transactions, followed in April by new fees for commercial credit, debit and prepaid cards, according to a document seen by Bloomberg News.
- For Mastercard, a new pre-authorization fee for credit-card purchases will start in October, the document shows.
- With the increases, merchants could pay more than $500 million in additional fees each year, according to merchant-consulting company CMSPI.
- In all, US merchants shelled out a record $160.7 billion on so-called swipe fees last year, up 16.7% from 2021, according to the Nilson Report industry publication.
J&J expects double-digit 2023 profit growth after Kenvue spinoff – Reuters, 8/30/2023
- Johnson & Johnson on Wednesday forecast double-digit profit growth for 2023 after spinning off consumer health company Kenvue, unveiling the first outlook for its standalone drugs and medical device businesses.
- J&J finalized the biggest shake-up in its 137-year history earlier this month through an exchange of its shares with Kenvue’s, leaving the pharmaceutical giant with a reduced 9.5% stake in its former unit.
- J&J expects 2023 adjusted reported earnings per share of $10 to $10.10, which is 12.5% higher at the midpoint compared with 2022.
- The company also said it would present its consumer health business as discontinued operations and record a gain of $20 billion in the third quarter as a result of the spinoff.
Oil rises on US stockpile draw and hurricane jitters – Reuters, 8/30/2023
- Oil prices extended gains on Wednesday after industry data showed a large draw in crude inventories in the U.S., the world’s biggest fuel consumer, and as a hurricane in the Gulf of Mexico kept investors on edge.
- Brent crude futures for October rose by 34 cents, or 0.4%, to $85.83 a barrel by 1325 GMT.
- The October contract expires on Thursday and the more active November contract was at $85.24, up 33 cents.
- Both benchmarks rallied by more than a dollar on Tuesday as the U.S. currency weakened after soft U.S. jobs data reduced the likelihood of further increases to interest rates.
- U.S. crude stocks fell by a bigger than expected 11.5 million barrels in the week ended Aug. 25, market sources said, citing American Petroleum Institute figures on Tuesday.
- Investors also had an eye on Hurricane Idalia as it moved over the Gulf of Mexico to the east of major U.S. oil and natural gas production sites.
- The region accounts for about 15% of U.S. oil output and about 5% of natural gas production, according to the Energy Information Administration (EIA).
Saudi Arabia Expected to Prolong Oil Cut Again, Survey Shows – Bloomberg, 8/30/2023
- Saudi Arabia is expected to extend a 1 million-barrel oil supply cut into October, as it seeks to shore up prices against a faltering economic backdrop.
- While global crude markets are tightening as demand climbs toward record levels, this summer’s price rally has stalled on mounting concern over economic growth in China.
- The pullback poses risks for Riyadh, which has seen its foreign reserves slump to the lowest since 2009.
- Twenty of 25 traders and analysts surveyed by Bloomberg forecast that the kingdom will continue the measure for at least another month.
- Several delegates from the Organization of Petroleum Exporting Countries and its allies privately predicted the same outcome.
- The full 23-nation OPEC+ alliance is due to meet in late November to review production policy for 2024.
Grayscale’s Court Win Over SEC Lifts Hopes for Bitcoin ETF Approval – Wall Street Journal, 8/30/2023
- A federal appeals court ruled Tuesday that the Securities and Exchange Commission must reconsider the crypto asset manager Grayscale Investments’ application to launch the first bitcoin exchange-traded fund, the latest setback for SEC Chair Gary Gensler’s efforts to regulate the upstart industry.
- “The denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products,” Circuit Judge Neomi Rao wrote on behalf of the court, noting that the SEC has approved bitcoin futures ETFs. The ruling was unanimous in a three-judge panel.
- The decision by the U.S. Court of Appeals for the D.C. Circuit marks the latest legal setback to Gensler’s approach to regulating crypto markets.
- The agency had denied Grayscale’s application to convert its bitcoin trust, known as GBTC, into an ETF on the basis that spot markets for bitcoin are unregulated and subject to market manipulation.
U.S. FAA updates airworthiness directive on Boeing 777s – Reuters, 8/30/2023
- U.S. aviation regulators have issued an updated directive regarding a cracking issue with all of Boeing’s 777 model airplanes, according to a notice posted online on Tuesday.
- The Federal Aviation Administration’s superseding airworthiness directive “was prompted by a report of a crack found in a front spar lower chord,” it said in the Federal Register notice.
- Errors in the earlier directive also “introduced a new unsafe condition related to the application of certain fastener cap seals,” it said.
- Although Boeing submitted an initial report of errors in late 2022, the company did not produce “detailed and complete documentation of these errors was not received until late July 2023” due to the length and complexity of the requirements bulletin, the FAA said in the notice.
- Although Boeing intends to revise the bulletin, the FAA issued the new directive as “this work will take longer to accomplish than the risk to public safety allows,” the agency said.
US ECONOMY & POLITICS
US Second-Quarter Growth Rate Cut to 2.1% on Business Spending – Bloomberg, 8/30/2023
- The government’s main measure of US economic activity in the second quarter was revised lower, as more moderate business investment than initially reported outweighed stronger consumer spending.
- Gross domestic product rose at a revised 2.1% annualized pace in the second quarter, below the government’s previous estimate.
- The downward revision to GDP reflected less inventory and nonresidential fixed investment.
- Household spending, the engine of the US economy, was revised higher, to a 1.7% pace.
- A gauge of the income generated and costs incurred from producing goods and services — gross domestic income — rose 0.5% after contracting in the prior two quarters, Bureau of Economic Analysis figures showed Wednesday.
- The average of the two measures rose 1.3%, the most in nearly a year. The group that officially determines the timing of business cycles watches the average closely.
- Adjusted pretax corporate profits fell 0.4% in the April to June period, reflecting a drop at financial corporations. From a year earlier, profits were down 6.5%.
- Meanwhile, key inflation gauges watched closely by the Fed were revised lower. The personal consumption expenditures price index excluding food and energy rose at a 3.7% pace in the second quarter, the slowest in more than two years.
US Pending Home Sales Unexpectedly Rise for a Second Month – Bloomberg, 8/30/2023
- Pending purchases of US previously owned homes unexpectedly rose in July, a respite in an otherwise lackluster resale market bogged down by high financing costs and prices.
- The National Association of Realtors’ index of contract signings to purchase previously owned homes edged up 0.9% to 77.6, the highest in three months, the group reported Wednesday.
- The median estimate in a Bloomberg survey of economists called for a 1% drop.
- Compared with a year earlier, pending home sales were down nearly 14% on an unadjusted basis.
US Companies Add 177,000 Jobs, Smallest Gain in Five Months – Bloomberg, 8/30/2023
- US companies in August added the fewest jobs in five months, a private report showed, adding to signs of moderating labor demand.
- Private payrolls rose by 177,000 in August following an upwardly revised 371,000 increase in the prior month, according to figures published Wednesday by the ADP Research Institute in collaboration with Stanford Digital Economy Lab.
- The median estimate in a Bloomberg survey of economists called for a 195,000 advance.
- Hiring in leisure and hospitality, a main driver of growth during the pandemic recovery, was the slowest since March 2022.
- But despite the slowdown, no sector shed jobs, and the largest gains were in education and health services, as well as trade and transportation.
- Workers who stayed in their job saw a 5.9% median pay increase in August from a year ago, the smallest advance since 2021.
- For those who changed jobs, the median rise in annual pay was 9.5%.
Overtime Pay to Be Extended to Millions of Workers Under Biden Administration Plan – Wall Street Journal, 8/30/2023
- Millions more Americans would be eligible for overtime pay if they work more than 40 hours a week, under a new rule proposed by the Biden administration.
- The Labor Department said Wednesday that workers who make around $55,000 a year or less would now be eligible for overtime by default. That would raise the annual salary threshold from the current $35,568 a year, which was set by the Trump administration. The median full-time worker in the U.S. makes around $57,000 a year, according to the Labor Department.
- The proposal would extend overtime eligibility to 3.6 million workers, the department said.
- The department also said it wants to start automatically raising the overtime salary threshold every three years to reflect current earnings data.
Hurricane Idalia Knocks Out Power in Florida and Snarls Flights – Bloomberg, 8/30/2023
- Hurricane Idalia has knocked out power to hundreds of thousands of customers, grounded more than 800 flights and unleashed floods along Florida’s coast far from where it came ashore as a Category 3 storm earlier Wednesday.
- Idalia’s top winds dropped to 110 miles (177 kilometers) per hour about an hour after it came ashore near Keaton Beach, Florida, the US National Hurricane Center said in an 9 a.m. New York time advisory. Earlier, its winds had reached 130 mph, making it a Category 4 storm on the five-step Saffir-Simpson scale, before dropping to Category 3 as it made landfall.
- While Idalia hit a sparsely populated area, it could still bring on $10 billion in damages as it moves across northern Florida into Georgia and South Carolina in the coming days, said Chuck Watson, a disaster modeler with Enki Research.
- No storm of this intensity has struck Apalachee Bay, near where Idalia made landfall, with a direct hit since modern record-keeping began in 1851, the National Weather Service in Tallahassee said Tuesday.
Following Donald Trump, GOP Candidates Talk Tough on Trade – Wall Street Journal, 8/30/2023
- Donald Trump’s antipathy to free trade has become Republican Party orthodoxy.
- Candidates for the 2024 GOP presidential nod, including front-runner Trump, are pushing for more protectionist stances, especially toward China.
- They are calling for ending permanent normal trade relations with China—restricting the rights of U.S. businesses to expand there—and for boosting domestic manufacturing, even through government subsidies, something the Biden administration also has championed.
- Trump’s latest proposals go beyond China, calling for a universal baseline tariff on U.S. imports, perhaps 10%, that would increase on countries that “manipulate their currency or otherwise engage in unfair trading practices.”
- He has renewed a call for Congress to give the president authority to counter any country that imposes a higher tariff on American-made goods.
- DeSantis, who is among several presidential candidates who have called for ending normal trade relations with China, said he favors a move toward decoupling the two economies. “You can’t just flip a switch, obviously,” he said. “We’ve integrated so much that you’re going to have to be thoughtful.”
- The Republican Party’s emerging consensus on trade unwinds decades of open-border policies that gained momentum with free trade agreements in the 1980s and 1990s, culminating in China’s accession to the World Trade Organization in 2001, a move that had been championed by Democratic President Bill Clinton.
Miami Mayor Francis Suarez Drops Out of GOP Presidential Race – Wall Street Journal, 8/30/2023
- Miami Mayor Francis Suarez became the first Republican presidential candidate to drop out of the race, ending a long-shot campaign after failing to qualify for last week’s debate.
- “While I have decided to suspend my campaign for president, my commitment to making this a better nation for every American remains,” Suarez said Tuesday in a statement. He said he would work with other candidates to ensure the party puts forward a “strong nominee who can inspire and unify the country.”
- Suarez, who entered the race in mid-June, was never seen as a strong contender but thought his biography—a young, Latino leader and one of the country’s few Republican big-city mayors—could catch on with voters.
- He suffered embarrassment over the debate, claiming he had met fundraising and polling qualifications set by the Republican National Committee only to be left off the stage in Milwaukee.
EUROPE & WORLD
Stubborn Inflation in Germany and Spain Keeps ECB on Alert – Bloomberg, 8/30/2023
- Inflation slowed less than expected in Germany and quickened in Spain, offering European Central Bank officials a partial picture of the region’s price pressures as they judge whether to raise interest rates again.
- The numbers published Wednesday point to the possibility of a robust outcome when the euro-zone report is released the following day — data policymakers have highlighted as crucial to their Sept. 14 decision.
- Consumer prices in Germany, the region’s biggest economy, rose 6.4% in August from a year earlier, exceeding the median estimate of 6.3% in a Bloomberg survey of economists.
- While inflation in Spain was far lower, at 2.4%, that result marked a second month of acceleration, and an underlying measure stayed far higher.
- Data on Thursday will help complete the view for policymakers, starting with France. Inflation there is anticipated by economists to have resurged to 5.4%.
- The euro-zone outcome due later, concurrently with Italy, is seen likely to show price growth stuck above 5% too, far above the 2% level targeted by the ECB.
- Officials are most focused on the so-called core measure that strips out volatile items such as energy and food. That’s expected to come in at 5.3%, according to the median estimate.
Euro-Area Economic Confidence Falls Again as ECB Mulls Next Move – Bloomberg, 8/30/2023
- Euro-area economic confidence slowed more than anticipated this month, further overshadowing the region’s outlook.
- A sentiment gauge published by the European Commission slid to 93.3 from 94.5 in July.
- That’s the fourth monthly decline and worse than the median forecast in a Bloomberg survey of economists.
- Sub-indicators for services, industry and consumer expectations also decreased.
- Third-quarter indicators have been dire so far, with PMIs last week signaling the private-sector activity may be contracting in the euro zone and its top two economies.
Country Garden Posts Record Half-Year Loss Amid Default Fears – Bloomberg, 8/30/2023
- Country Garden Holdings posted a record first-half loss, underscoring how China’s real estate slump has brought the property giant to the brink of a debt default.
- The Foshan-based company posted a net loss of 48.9 billion yuan ($6.72 billion) in the six months ended June 30, compared with a profit of 612 million yuan a year earlier.
- The developer warned of the loss — the biggest since its 2007 listing in Hong Kong — earlier this month.
- Once the country’s biggest developer by sales, Country Garden is in a debt crisis that threatens to be worse than when peer China Evergrande Group defaulted because it has four times as many property projects.
China Moves to Stabilize Finances of Troubled Shadow Bank – Bloomberg, 8/30/2023
- China has asked two of the nation’s biggest financial firms to examine the books of Zhongrong International Trust, potentially paving the way for a state-led rescue of the troubled shadow lender, according to people familiar with the matter.
- Citic Trust, a unit of conglomerate Citic Group, and CCB Trust, backed by China Construction Bank, will lead the effort to stabilize operations at Zhongrong, said the people, who asked not to be identified discussing a private matter.
- It couldn’t immediately be determined what might result from their involvement, though a similar examination by Citic of Huarong Asset Management led to a $6.6 billion bailout of the bad-debt manager in 2021.
Huawei’s Mystery Phone Rallies China in Fight Against US Curbs – Bloomberg, 8/30/2023
- The surprise launch of a sophisticated $900-plus Huawei Technologies smartphone has captivated China’s technology industry, inspiring hopes that the country’s biggest firms can overcome US sanctions seemingly designed to thwart their ascendancy.
- The slim-bezeled Mate 60 Pro, which appeared this week for sale on online malls with little fanfare, ignited buzz among Chinese online users who saw in the gadget Huawei’s resurgence after years of fighting American curbs on software and circuitry. Many posted screenshots and videos of the gadget’s fast wireless performance, triggering speculation Huawei had managed to achieve 5G capabilities.
- On Wednesday, shares in more than a dozen Chinese chip designers, gearmakers and Huawei suppliers surged between 8% and 20%.
- The rally grew out of hopes that Huawei had somehow managed to design, manufacture and deploy a 5G chip capable of matching some of the best America has to offer, despite a lack of access to advanced chipmaking at players including Taiwan Semiconductor Manufacturing Co.
- Several online outlets reported the chip employed 5-nanometer node technology — just a generation behind the latest. Bloomberg News couldn’t determine the manufacturer or sophistication of the chip.
Gabon Military Stages Coup, the Latest to Hit a Former French Colony in Africa – Wall Street Journal, 8/30/2023
- A group of officers in the central African nation of Gabon said Wednesday that they had ousted the country’s president, Ali Bongo, in the latest military rebellion in a former French colony and Western military ally on the continent.
- The officers’ announcement, made on national television, came shortly after Bongo, whose family has ruled the country since 1967, was declared the winner of Saturday’s presidential election with 64% of the vote.
- Local opposition parties have contested the results, which handed 64-year-old Bongo a third term in office.
- The group of a dozen officers, who called themselves the Committee of Transition and the Restoration of Institutions, said that the election hadn’t been transparent or credible and that it was canceling the results and taking control of the government.
- Gabon, a sparsely populated nation of around 2.4 million that boasts some of Africa’s most pristine forests and wildlife, is one of the continent’s leading oil producers and a member of the Organization of the Petroleum Exporting Countries.
- Despite its natural resources, which have made Gabon one of Africa’s richest nations in terms of per-capita gross domestic product, many of its people continue to live in poverty.
- The Bongo family has been close to the country’s former colonial power, France, which has some 350 troops stationed in the country, primarily to train Gabonese soldiers. French President Emmanuel Macron visited Gabon in March.
Ukrainian Drones Strike Deep Inside Russia, Hitting Military Airfield, Other Targets – Wall Street Journal, 8/30/2023
- Ukraine launched its largest drone attack on military targets across Russia since the war began, disabling several military aircraft in a strike on the Pskov air base, as Moscow unleashed the most sustained missile barrage on the Ukrainian capital in months.
- While Ukraine lacks the long-range cruise and ballistic missiles that Russia frequently fires into Ukrainian cities, destroying power stations, hotels, ports and residential buildings, Kyiv has developed an increasingly efficient force of domestically engineered strike drones that can travel several hundred miles into Russia.
- Several dozen such drones were launched overnight, heading to the Moscow, Kaluga, Orel, Ryazan, Bryansk, Tula and Pskov regions, in addition to Russian-occupied Crimea, according to Russian officials.
- While most of these drones were shot down, the attack on Pskov, more than 400 miles from Ukraine, proved to be among the most significant Ukrainian strikes on Russian soil since Moscow started the war 18 months ago.
- Four Il-76 military transport aircraft were hit on the Pskov airfield, and the city’s civilian airport shut down for the day, according to state news agency TASS. Another Russian news agency said six planes had been damaged.
Europe’s Biggest Wildfire This Century Rages in Greece – Wall Street Journal, 8/30/2023
- A wildfire in northern Greece has become the biggest observed in Europe this century, burning an area larger than New York City, and fueling a debate about Greece’s shortcomings in adapting to the dangers of southern Europe’s increasingly hot and dry summers.
- The fire in the Evros region, near Greece’s border with Turkey, has been raging for 12 days and has so far burned some 312 square miles, according to the National Observatory of Athens.
- The fire has killed at least 21 people, including a group of 18 migrants who were trapped by the flames in a forest last week.
- Another summer of drought and temperature records has turned many places around the Mediterranean into tinder boxes. Italy, France and Spain have also faced serious wildfires in July and August.
- But Greece’s wildfires have burned particularly large areas compared with other parts of Europe.
- The Second Battle of Bull Run took place during the Civil War. (1862)
- The two-year siege of Leningrad during World War II began. (1941)
- A hot line between the Kremlin and the White House went into operation to reduce the chances of an accidental war. (1963)
- East Timor residents voted to secede from Indonesia. (1999)