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Citigroup Inc. will pay almost $136 million in fines to US bank regulators over issues related to data-quality management and risk controls. The Federal Reserve said Wednesday that its penalty was for Citi violating an enforcement action from 2020. The bank will pay $61 million to the Fed and about $75 million to the Office […]
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(Bloomberg) — The euro climbed with European stock-index futures on speculation Marine Le Pen’s far-right party will struggle to win an outright majority in French elections, easing investor concern that Europe’s second-largest economy was headed for a more radical policy shift.
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Futures on French government bonds edged higher, while those on German bunds dropped after the first round of voting showed Le Pen’s National Rally in front of President Emmanuel Macron’s centrist alliance, albeit less comfortably than some polls projected. A very strong showing for her party would have increased the odds of expansive fiscal policy in France, whose deficit already exceeds what’s allowed under European Union rules.
Most Asian shares rose, with Japanese and South Korean benchmarks both gaining. Chinese equities slipped after a report showed factory activity contracted for a second month in June. While data showed the Caixin manufacturing gauge edged up last month, Bloomberg Economics said the marginal improvement did little to counter the worrisome message from official surveys. Hong Kong financial markets are shut for a holiday.
“We are starting off in Asia with that sense of relief that the far-right parties did not get the kind of majority that was feared,” Charu Chanana, a market strategist for Saxo Capital Markets in Singapore, told Bloomberg Television’s David Ingles and Stephen Engle.
In addition to French politics, investors will be looking to the European Central Bank for clues, she said, adding that “there’s been some sense of stability for the euro zone economy after that first rate cut, but we certainly don’t look like we’re out of the woods yet.”
France’s second round of voting will be held on July 7. The French political world is now embarking on a period of horse-trading. In constituencies where three people qualified for the runoffs, the third-placed candidate can withdraw to boost the chances of another mainstream party defeating the far right.
Japan Confidence
Confidence among Japan’s large manufacturers rose, data on Monday showed, leaving the door open for the central bank to consider an interest-rate increase later this month. The yield for the nation’s 10-year bond rose 2 basis points to 1.07%.
One in three economists surveyed by Bloomberg predicts a rate hike at the BOJ’s next gathering. The yen dropped to the lowest level since 1986 last week, prompting some analysts to flag a heightened risk of a rate move as Governor Kazuo Ueda has pledged to watch the yen’s impact on inflation closely.
A swath of data indicated the US biggest economy is cooling without lasting damage to consumers. US consumer sentiment declined by less than initially estimated on expectations inflationary pressures will moderate and the Fed’s preferred inflation gauge marked its smallest advance in six months. Ten-year treasuries were little changed on Monday.
“Going into the second half, there’s a lot of election election uncertainty and we think the dollar will be the best risk-off hedge,” Alex Loo, foreign exchange and macro strategist at TD Securities, told Annabelle Droulers and Shery Ahn on Bloomberg Television. “We do like its appeal as a safe-haven currency.”
In commodities, oil was little changed as traders weighed China’s economic outlook and geopolitical risks in Europe and the Middle East. Gold was also little changed.
Key events this week:
Eurozone S&P Global Eurozone Manufacturing PMI, Monday
Indonesia CPI, Monday
India HSBC Manufacturing PMI, Monday
UK S&P Global / CIPS UK Manufacturing PMI, Monday
US construction spending, ISM Manufacturing, Monday
ECB President Christine Lagarde speaks, Monday
Bundesbank President Joachim Nagel speaks, Monday
RBA issues minutes of June policy meeting, Tuesday
South Korea CPI, Tuesday
Eurozone CPI, unemployment, Tuesday
Fed Chair Jerome Powell speaks, Tuesday
ECB President Christine Lagarde speaks, Tuesday
Australia retail sales, Wednesday
China Caixin services PMI, Wednesday
Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday
Poland rate decision, Wednesday
US FOMC minutes, ISM Services, factory orders, trade, initial jobless claims, durable goods, Wednesday
ECB President Christine Lagarde speaks, Wednesday
New York Fed President John Williams speaks, Wednesday
Sweden’s Riksbank issues minutes of June meeting, Wednesday
Australia trade, Thursday
Brazil trade, Thursday
UK general election, Thursday
European Union provisional tariffs on China EVs set to be introduced, Thursday
ECB publishes account of June’s policy meeting, Thursday
US Independence Day holiday, Thursday
Philippines CPI, Friday
Taiwan CPI, Friday
Thailand CPI, international reserves, Friday
Eurozone retail sales, Friday
France trade, industrial production, Friday
Germany industrial production, Friday
ECB President Christine Lagarde speaks, Friday
Canada unemployment, Friday
US unemployment, nonfarm payrolls, Friday
New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.3% as of 12:50 p.m. Tokyo time
Hang Seng futures fell 0.4%
Nikkei 225 futures (OSE) rose 0.1%
Japan’s Topix rose 0.4%
Australia’s S&P/ASX 200 fell 0.3%
The Shanghai Composite rose 0.3%
Euro Stoxx 50 futures rose 1.1%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.4% to $1.0752
The Japanese yen was little changed at 161.04 per dollar
The offshore yuan was little changed at 7.3016 per dollar
Cryptocurrencies
Bitcoin rose 2.4% to $63,373.65
Ether rose 2.3% to $3,495.2
Bonds
The yield on 10-year Treasuries was little changed at 4.39%
Japan’s 10-year yield advanced two basis points to 1.070%
Australia’s 10-year yield advanced seven basis points to 4.38%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess.
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©2024 Bloomberg L.P.
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Evolve Bank & Trust confirmed it was the victim of a cyber attack and that customer data had been posted on the dark web, less than two weeks after the Arkansas-based lender was ordered by regulators to improve its risk management and get approval before entering into any new partnerships. The Russian-linked hacker group LockBit 3.0 on […]
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NatWest Group Plc has agreed to acquire J Sainsbury Plc’s banking business as the British lender looks to seize more market share in retail banking. Britain’s second-largest grocer agreed to pay NatWest £125 million ($159 million) as part of the transaction, the companies said in a statement on Thursday. The deal will give NatWest a […]
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Banco Bilbao Vizcaya Argentaria SA is planning to open a digital consumer bank in Germany, using existing technology to expand at relatively low cost. The project is led by Javier Lipuzcoa, the head of BBVA’s digital bank in Italy, according to people familiar with the matter. The lender is currently preparing a feasibility study and […]
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A $30 billion settlement between Visa Inc., Mastercard Inc. and retailers to cap credit-card swipe fees is likely to be rejected by a federal judge in Brooklyn, a setback in the two decade-long litigation. Judge Margo Brodie of the US District Court of the Eastern District of New York indicated in a hearing Thursday that she probably […]
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Starling Bank reported its third annual profit after higher interest rates helped boost revenue, as the British mobile lender seeks to roll out its banking software globally. The bank posted a pretax profit of £301.1 million ($384 million) for the 12 months through March compared with £195 million a year earlier, with revenue jumping to […]
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(Bloomberg) — CoreWeave Inc., a closely held cloud computing provider, has offered to acquire Bitcoin miner Core Scientific Inc. for about $1 billion, a person with knowledge of the matter said.
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CoreWeave’s all-cash bid of $5.75 per share for Austin, Texas-based Core Scientific was made on Monday, and comes as the company seeks to expand its artificial intelligence data center capacity, according to the person.
Shares of Core Scientific jumped as much as 39% on Tuesday. The stock was up 35% to $6.59 at 11:53 a.m. in New York, giving the company a market value of about $1.2 billion.
The companies announced late Monday they signed a series of 12-year contracts under which Core Scientific will deliver about 200 megawatts of infrastructure to host CoreWeave’s operations. Core Scientific is among the Bitcoin miners trying to take advantage of a shortage in data center space and large amounts of power amid the AI boom to expand beyond crypto.
CoreWeave’s offer represents a 55% premium to Core Scientific’s three-month volume-weighted average price as of May 31, the person said, asking not to be identified discussing confidential information.
Representatives for Roseland, New Jersey-based CoreWeave and Core Scientific declined to comment.
Growing Demand
The hosting agreement is one of the largest for a crypto miner. The contracts with CoreWeave are estimated to generate $3.5 billion in revenue, making the crypto miner a sizable infrastructure provider even among traditional data centers. Core Scientific has already provided such services to CoreWeave, which was also a crypto mining company, since 2019.
“The agreements underscore the growing demand for energy infrastructure and professional data center management, as well as investors’ expectations of the increasing value of these assets in the future,” said Matthew Kimmell, digital asset analyst at CoinShares.
Core Scientific is among the top mining companies by computing power. With its total of 1.2 gigawatts of contracted power, the miner is able to deliver nearly 500 megawatts of HPC power to be used for alternative compute workloads based on geographic proximity to major cities and fiber lines, according to its statement on Tuesday. That would put the company among the largest data center operators in the US.
“As AI and data centers buy out all of the large power opportunities in the US, Bitcoin miners that sit on those assets will be able to monetize them for large premiums on invested capital,” said Ethen Vera, chief operating officer at crypto-mining services company Luxor Technology.
CoreWeave last month raised $8.6 billion in funding that included a $1.1 billion preferred equity deal that gave the startup a $19.1 billion valuation. It separately raised $7.5 billion in debt. The company’s investors include Nvidia Corp., Coatue Management, Altimeter Capital and Fidelity Management & Research Co.
Read More: Cloud Firm CoreWeave Obtains $7.5 Billion in Private Debt
–With assistance from David Pan.
(Updates shares, adds analyst reaction from third paragraph.)
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(Bloomberg) — A renewed bout of volatility gripped US stocks in the final stretch of May, with dip buying pushing the market higher amid a rotation between technology and other industries.
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In a late-day comeback, the S&P 500 rose almost 1% Friday to notch its best month since February. The gauge had fallen almost as much earlier in the session, dragged down by megacaps. Investors betting tech giants will continue to power gains could be in for a rough ride when other sectors start to catch up, according to strategists at Bank of America Corp. — who said the outperformance of value over growth as market breadth improves could be the next “pain trade.”
“Leaders to losers… for now,” said Dan Wantrobski at Janney Montgomery Scott. “We are seeing breaks of initial support in some leadership areas. Net-net we are still expecting a bumpy ride for US equities as we enter the month of June.”
Meantime, Treasuries extended gains at the end of their best month in 2024 as the core personal consumption expenditures price gauge met estimates, while posting the smallest increase this year. What’s more, spending unexpectedly dropped. For a data-dependent Federal Reserve, the report was seen by traders as “not quite as bad”, “slightly constructive” and “marginally dovish.”
“While we don’t necessarily want to see a weakening consumer, softening retail spending should help stoke the flames for lower rates in the second half of 2024,” said Bret Kenwell at eToro. “We’re not there yet, but the inflation reports were a constructive first step.”
The S&P 500 briefly broke below 5,200, but closed above that level — as every major group but technology advanced. The Dow Jones Industrial Average of blue chips rose 1.5% — the most since November. The Nasdaq 100 finished flat after dropping almost 2% Friday. The tech-heavy measure posted its best month in 2024.
US 10-year yields fell five basis points to 4.4985%. The dollar was little changed Friday, but saw its first monthly loss since December.
Matt Maley at Miller Tabak says that usually when we get some “rotation” in the stock market, that’s viewed as a positive development. However, since the rotation between tech and everything else has gone in both directions over the past two weeks, he views it as a negative development.
“In other words, the kind of ‘rotation’ we’ve seen recently can be viewed as ‘churning,” he said. “This is not negative in-and-by-itself, but when it comes after a nice rally, it tends to indicate that the advance is becoming tired. Thus, it is frequently followed by some sort of a pullback — even if it’s only a mild one.”
Technology shares now appear overextended, suggesting a correction may be on the horizon, according to Fawad Razaqzada at City Index and Forex.com.
“After months of substantial gains and no new bullish catalysts, a correction wouldn’t be surprising,” he said.
Hedge funds’ exposure to US technology behemoths hit a record high following Nvidia Corp.’s estimate-thumping earnings report this month, according to a recent report from Goldman Sachs Group Inc.’s prime brokerage.
The so-called Magnificent Seven companies — Nvidia, Apple Inc., Amazon.com Inc., Meta Platforms Inc., Alphabet Inc., Tesla Inc. and Microsoft Corp. — account for about 20.7% of hedge funds’ total net exposure to US single stocks, the report showed.
A strong start of the year for US stocks suggests above average performance in the second half of 2024, according to data analyzed by Scott Rubner at Goldman Sachs Group Inc.
Going back to 1950, there have been 21 episodes when the S&P 500 was up more than 10% by the end of May.
Out of these, the only two instances where the S&P 500 ended the rest of the year down were 1987 when it fell 13% and 1986 when it slipped 0.1%, meaning that the index was up about 90% of the time.
Amid the several twists and turns in stocks, traders also waded through the latest inflation report.
The so-called core PCE, which strips out the volatile food and energy components, increased 0.2% from the prior month. Inflation-adjusted consumer spending unexpectedly fell 0.1%, dragged down by a decrease in outlays for goods and softer services spending. Wage growth, the primary fuel for demand, moderated.
“Markets see inflation on a slow, but steady path lower,” said Quincy Krosby at LPL Financial. “The question is still how much more the Fed needs in terms of slower inflation before initiating an easing cycle.”
Overnight index swap contracts tied to upcoming Fed policy meetings continue to fully price in a quarter-point rate cut in December, with the odds of a move as soon as September edging up to around 50%. For all of 2024, the contracts imply a total of 35 basis points of rate reductions, up slightly from the close on Thursday.
While the PCE data will likely be welcomed by the Fed, the core gauge has still risen at an annualized rate of 3.5% in the last three months, according to David Donabedian at CIBC Private Wealth.
“So, it’s way too early for any sort of victory lap for the Fed,” he noted.
In fact, inflation may not return to the US central bank’s 2% target until mid-2027, according to research from Fed Bank of Cleveland.
That’s because the inflationary impacts of pandemic-era shocks have largely resolved and the remaining forces that are keeping inflation elevated are “very persistent,” Cleveland Fed economist Randal Verbrugge wrote in a report Thursday.
Another aspect is that consumer spending in the first month of the new quarter slowed as real disposable incomes fell, remarked Jeff Roach at LPL Financial.
“Businesses need to prepare for an environment where consumers are not splurging like they were last year,” he noted.
“We are in a be-careful-what-you-wish-for moment because if slowing consumer spending leads to lower inflation and the Fed is able to cut slowly as a result then that will be good for markets,” said Chris Zaccarelli at Independent Advisor Alliance. “However, if consumer spending – and the economy – slows too quickly, then corporate profits and stock prices will go down much more quickly than the Fed will be able to cut rates, so we would be careful at this point.”
Corporate Highlights:
Dell Technologies Inc. fell the most since it returned to the public market in 2018 after its first revenue increase since 2022 wasn’t enough to impress investors with high expectations for the company’s AI server business.
Carl Icahn has amassed a sizable position in Caesars Entertainment Inc., people familiar with the matter said, but has no plans to repeat a previous activist campaign at the hotel and casino group.
Hedge-fund manager Bill Ackman is selling a stake in Pershing Square as a prelude to a planned initial public offering of his investment firm, according to a person familiar with the matter.
Gap Inc. reported better-than-expected results and raised its outlook for the full year, showing the apparel retailer’s bid to rebuild the business is moving forward.
Penn Entertainment Inc. soared after an activist investor called for the sale of the casino company, saying a failed deal and growing pattern of guidance misses have damaged management’s credibility.
Moderna Inc. gained US approval for its RSV vaccine in older adults, giving the biotech company a second product as it seeks to move beyond its reliance on the fading market for Covid-19 shots.
Hess Corp. shareholders approved the company’s proposal to be acquired by Chevron Corp. for $53 billion by a razor-thin majority of 51% of shares outstanding.
—————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————-
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.8% as of 4 p.m. New York time
The Nasdaq 100 was little changed
The Dow Jones Industrial Average rose 1.5%
The MSCI World Index rose 0.7%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.2% to $1.0852
The British pound was little changed at $1.2744
The Japanese yen fell 0.3% to 157.26 per dollar
Cryptocurrencies
Bitcoin fell 1.1% to $67,712.85
Ether rose 1.3% to $3,785.14
Bonds
The yield on 10-year Treasuries declined five basis points to 4.4985%
Germany’s 10-year yield advanced one basis point to 2.66%
Britain’s 10-year yield declined three basis points to 4.32%
Commodities
West Texas Intermediate crude fell 0.9% to $77.17 a barrel
Spot gold fell 0.6% to $2,328.92 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sagarika Jaisinghani and Natalia Kniazhevich.
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©2024 Bloomberg L.P.
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(Bloomberg) — A slide in bonds dragged down stocks as another weak sale of Treasuries raised concern about swelling supply that could keep driving yields up at a time when the Federal Reserve is in no rush to cut rates.
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Traders also sifted through the Fed’s latest Beige Book survey of regional business contacts, which said economic activity expanded — and most districts saw slight growth. The report also said that prices increased at a modest pace, while employment rose slightly.
Federal Reserve May Beige Book Summary (Text)
The US sold $44 billion of seven-year notes at 4.650% — above the pre-auction level of 4.637%. That’s just a day after two other US offerings totaling $139 billion saw tepid demand. Those bond sales are exerting a growing sway over several asset classes, underscoring how the uncertainties over Fed policy continue to grip markets as inflation shows little signs of moderation.
“Similar to yesterday’s poor 5-year auction, today’s 7-year was weak as well and after a mediocre 2-year,” said Peter Boockvar at The Boock Report.
Treasury 10-year yields climbed six basis points to 4.61%. The dollar advanced against all of its developed-market peers.
The S&P 500 dropped below 5,300. American Airlines Group Inc. tumbled on a disappointing outlook. UnitedHealth Group Inc. led industry losses after saying it sees a “disturbance” coming as states pare enrollees in their Medicaid programs. Marathon Oil Corp. surged as ConocoPhillips agreed to acquire it in a $17 billion deal. BHP Group abandoned its bid for Anglo American Plc.
“Not only are yields rising again in the US, but they are moving higher in other parts of the world,” said Matt Maley at Miller Tabak + Co. “That is not good news for a stock market that’s trading at 22 times forward earnings.”
European bond issuance this year has topped the €1 trillion ($1.1 trillion) mark more than a week before the previous record. German bond yields hit a six-month high as inflation accelerated. Australia’s latest inflation reading suggested rates will remain high for now.
Fed Chair Jerome Powell and his colleagues have stressed the need for more evidence that inflation is on a sustained path to their 2% goal before cutting the benchmark interest rate, which has been at a two-decade high since July.
“We continue to believe that US sovereign yields should end the year lower as inflation and economic growth slow and the Fed cuts rates in the last months of the year,” said Solita Marcelli at UBS Global Wealth Management.
Meantime, the options market is betting that the S&P 500 will see muted swings following this week’s bond auctions and the Fed’s favorite underlying inflation gauge Friday, with traders instead looking ahead to next month’s reading on consumer prices and the central bank’s upcoming meeting.
The benchmark equities gauge is implied to move just 0.5% in either direction following the personal consumption expenditures price index, based on the cost of at-the-money puts and calls, per Stuart Kaiser, Citigroup Inc.’s head of US equity trading strategy.
The reading is less than the implied move on June 7 — the next jobs report — and CPI and the Fed’s upcoming rate decision — both on June 12, which would be the largest ahead of a central bank meeting since December, Kaiser said.
Economists expect the PCE minus food and energy to rise 0.2% in April. That would mark the smallest advance so far this year for the measure. The overall PCE price index probably climbed 0.3%. Increases this year stand in contrast to relatively flat readings in the final three months of 2023, underscoring uneven progress for the Fed in its inflation fight.
Bank of America Corp. clients were net sellers of US equities for a fourth consecutive week as they offloaded $2 billion dollars worth of shares during the five-day period ended last Friday.
Outflows came chiefly from hedge funds and retail investors as institutions were net buyers, quantitative strategists led by Jill Carey Hall wrote.
Hedge funds’ exposure to US technology behemoths hit a record high following Nvidia Corp.’s estimate-thumping earnings report last week, according to Goldman Sachs Group Inc.’s prime brokerage.
The so-called Magnificent Seven companies — Nvidia, Apple Inc., Amazon.com Inc., Meta Platforms Inc., Alphabet Inc., Tesla Inc. and Microsoft Corp. — now account for about 20.7% of hedge funds’ total net exposure to US single stocks, the report showed.
Corporate Highlights:
Exxon Mobil Corp. investors voted in line with board recommendations on all shareholder proposals at its annual meeting Wednesday despite vocal opposition to the company’s lawsuit against activists.
Abercrombie & Fitch Co. shares jumped after the retailer blew past first-quarter sales estimates, extending its bounce back from the teen fashion graveyard.
Dick’s Sporting Goods Inc. raised its outlook for the year and reported sales that surpassed analysts’ estimates with strong demand for sports gear across categories.
Robinhood Markets Inc. announced a plan to repurchase as much as $1 billion of its own shares.
Lenovo Group Ltd. plans to sell $2 billion worth of zero-coupon convertible bonds to Saudi Arabia’s sovereign wealth fund, part of a broader strategic pact with the tech-hungry kingdom.
Key events this week:
Eurozone economic confidence, unemployment, consumer confidence, Thursday
US initial jobless claims, GDP, Thursday
Fed’s John Williams and Lorie Logan speak, Thursday
Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday
China official manufacturing and non-manufacturing PMI, Friday
Eurozone CPI, Friday
US consumer income, spending, PCE deflator, Friday
Fed’s Raphael Bostic speak, Friday
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.5% as of 2:02 p.m. New York time
The Nasdaq 100 fell 0.4%
The Dow Jones Industrial Average fell 0.9%
The MSCI World Index fell 0.9%
Currencies
The Bloomberg Dollar Spot Index rose 0.4%
The euro fell 0.4% to $1.0814
The British pound fell 0.4% to $1.2713
The Japanese yen fell 0.3% to 157.63 per dollar
Cryptocurrencies
Bitcoin fell 1% to $67,540.43
Ether fell 1.6% to $3,765.61
Bonds
The yield on 10-year Treasuries advanced six basis points to 4.61%
Germany’s 10-year yield advanced 10 basis points to 2.69%
Britain’s 10-year yield advanced 12 basis points to 4.40%
Commodities
West Texas Intermediate crude fell 0.6% to $79.39 a barrel
Spot gold fell 0.8% to $2,343.29 an ounce
This story was produced with the assistance of Bloomberg Automation.
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©2024 Bloomberg L.P.
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(Bloomberg) — The Federal Reserve’s first-line inflation gauge is about to show some modest relief from stubborn price pressures, corroborating central bankers’ prudence about the timing of interest-rate cuts.
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Economists expect the personal consumption expenditures price index minus food and energy — due on Friday — to rise 0.2% in April. That would mark the smallest advance so far this year for the measure, which provides a better snapshot of underlying inflation.
The overall PCE price index probably climbed 0.3% for a third month, according to median projection in a Bloomberg survey. Increases this year stand in contrast to relatively flat readings in the final three months of 2023, underscoring uneven progress for the Fed in its inflation fight.
Fed Chair Jerome Powell and his colleagues have stressed the need for more evidence that inflation is on a sustained path to their 2% goal before cutting the benchmark interest rate, which has been at a two-decade high since July.
The PCE price measure is seen rising 2.7% on an annual basis, while the core metric is expected at 2.8% — both matching the prior month’s levels.
Officials earlier this month coalesced around a desire to hold interest rates higher for longer and “many” questioned whether policy was restrictive enough to bring inflation down to their target, according to minutes of their last meeting.
Read more: Minutes Show Officials Rallying Around Higher-for-Longer Rates
The latest inflation numbers will be accompanied by personal spending and income figures. While demand grew at a solid pace in the first quarter, the data will inform on services spending after flat retail sales in April previously reported.
What Bloomberg Economics Says:
“The report will likely provide some encouraging signs that the disinflation process hasn’t completely stalled. With income growth slowing in a cooling labor market, consumers are gradually cracking, which should provide a continued disinflationary impulse in the rest of the year. Yet, with catch-up price pressures still in the pipeline, inflation will likely moderate only very gradually this year.”
—Anna Wong, Stuart Paul, Eliza Winger and Estelle Ou, economists. For full analysis, click here
Other data for the week include revised first-quarter gross domestic product on Thursday. Economists forecast growth probably cooled from the government’s initial estimate. The Fed on Wednesday will issue its Beige Book summary of economic conditions around the country.
Among the US central bankers speaking during the holiday-shortened week are John Williams, Lisa Cook, Neel Kashkari and Lorie Logan.
Looking north, Canada will release gross domestic product data for the first quarter. Waning monthly momentum in March and weak domestic demand would likely keep a June rate cut in play for the central bank.
Elsewhere, a likely pickup in euro-zone inflation, Chinese industrial data and PMI numbers, and price reports from Brazil will be among the highlights.
Click here for what happened in the past week and below is our wrap of what’s coming up in the global economy.
Asia
China’s manufacturing sector is in the spotlight in the coming week. Industrial data Monday will show whether profits bounced back in April after a sharp retreat in March dragged the pace of gains for the first three months to 4.3%.
Persistent deflation in producer-gate prices and soft domestic demand may keep profitability under pressure. China gets its official manufacturing PMI data on Friday, with the focus on whether the gauge stays above the 50 threshold that separates contraction from expansion for a third month in May.
Also on Friday, Japan’s industrial output growth is seen slowing while retail sales chug along in April.
Consumer inflation in Tokyo may pick up a bit in May, foreshadowing gains for the national figures.
Meanwhile, China asked South Korea to maintain stable supply chains as the countries began their first three-way summit with Japan since 2019.
Australia’s consumer price growth is forecast to slow to 3.3%, still hot enough to keep the Reserve Bank of Australia on hold.
Vietnam also reports CPI data, along with industrial output, retail sales and trade during the week.
In central banking, Kazakhstan sets its benchmark policy rate on Friday.
Europe, Middle East, Africa
In the euro zone, inflation probably accelerated in May to 2.5%, according to economists’ forecasts. An underlying gauge is anticipated to have stopped weakening for the first time since July, holding at 2.7%.
In tune with the wider euro-zone data, national releases that start with Germany’s on Wednesday are expected to have gone the wrong way in three of the region’s four biggest economies. Only Italy is seen to be experiencing slower price growth.
Such outcomes impede progress toward the ECB’s 2% target, but officials’ consistent signals for a quarter-point rate reduction on June 6 make it unlikely that one month of data will derail them. Even so, some policymakers are arguing against any rush to ease further.
“The probability is increasing that in 13 days we will see the first rate cut,” Bundesbank President Joachim Nagel, a policy hawk, said in an interview on Friday. “If there’s a rate cut in June, we have to wait, and I believe we have to wait till maybe September.”
Other reports in the euro-zone include Germany’s Ifo business confidence index on Monday, the ECB’s survey of inflation expectations on Tuesday, and economic confidence on Thursday.
ECB officials scheduled to speak in the coming week include chief economist Philip Lane and the Dutch, French and Italian governors. A pre-decision blackout period kicks in on Thursday.
The Bank of England has already gone silent, cancelling all speeches and public statements by policymakers during the campaign before the UK general election on July 4.
Among other European central banks, a financial stability report from Sweden’s Riksbank on Wednesday, and a speech in Seoul by Swiss National Bank President Thomas Jordan will be among the highlights.
Several monetary decisions are scheduled in the wider region:
Israel’s central bank is expected to keep its base rate steady at 4.5% on Monday, largely to keep war-related inflationary pressures in check and provide support to the shekel. Governor Amir Yaron is wary of easing monetary policy and further widening the gap between borrowing costs in Israel and the US.
Ghana’s monetary authority is set to leave its key rate at 29% on Monday to vanquish sticky inflation and support its floundering currency.
On Wednesday, Mozambique’s policymakers are poised to cut borrowing costs, with consumer-price growth expected to remain in the single digits for the rest of the year.
And on Thursday — a day after elections where the ruling African National Congress risks losing its majority — South African monetary officials are predicted to maintain their key rate at 8.25%, with inflation yet to return to the 4.5% midpoint of their target range.
Latin America
Brazil in the coming week reports the mid-month reading of its benchmark consumer price index along with the May reading of its broadest measure of inflation.
The combination of Brazil’s tight labor market and weaker currency likely limit the scope for further disinflation from current levels, with inflation already running near consensus year-end forecasts.
The IPCA-15 price index fell back below 4% last month after jumping over 5% in September — which came just two months after hitting 3.19%, below the central bank’s 2023 target.
Also in Brazil, the central bank on Monday posts its weekly survey of economists, whose inflation expectations and interest rate forecasts are rising again, along with national unemployment, total outstanding loans, and budget balances.
Chile posts six separate indicators for April, with the highlights being joblessness, retail sales, industrial production and copper output.
Mexico’s light schedule will be dominated by the central bank’s publication of it quarterly inflation report, followed by a press conference hosted by Governor Victoria Rodriguez.
Banxico earlier this month marked up its inflation forecasts through the third quarter of 2025, while Wednesday’s report will reveal the bank’s revised GDP forecasts.
On Thursday, Mexico’s April labor market data are due. The early consensus sees the unemployment rate rising from the record low of 2.28% posted in March.
–With assistance from Robert Jameson, Piotr Skolimowski, Monique Vanek and Laura Dhillon Kane.
(Updates with Israel tout in EMEA section)
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(Bloomberg) — Stocks climbed after data showed American consumers tempered inflation expectations in late May, which bodes well for prospects of Federal Reserve rate cuts.
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The S&P 500 headed toward its fifth straight week of gains — the longest bullish streak since February. When traders come back from the US holiday weekend, the so-called “T+1” rule will come into effect — making US stocks settle in one day rather than two. Treasuries barely budged after Fed Governor Christopher Waller said the factors that lowered the so-called neutral rate may reverse.
Equities extended gains after University of Michigan data showed consumers expect prices will climb at a 3.3% annual rate over the next year, down from the 3.5% that was expected earlier in the month. In April, respondents expected year-ahead inflation of 3.2%.
“After further review, the consumer is not as pessimistic about the inflation trajectory,” said Jeff Roach at LPL Financial. “What we learned from this final estimate from UofM is consumer spending could slow, easing up inflationary pressures from the demand side of the economy.”
The S&P 500 topped 5,300. The Nasdaq 100 rose over 1% as Nvidia Corp. headed toward a fresh all-time high. Workday Inc. tumbled after the software company cut its subscription outlook.
Treasury two-year yields were little changed at 4.93%. The US bond market was due to close early ahead of the Memorial Day holiday. The dollar retreated. Bitcoin rose. Oil and gold edged up. Copper headed for its biggest weekly loss since February.
The stock market can keep soaring to all-time highs even if the Fed forgoes interest-rate reductions this year as the economy and earnings are growing, according to Deutsche Bank AG’s Binky Chadha.
Minutes from the two-day Federal Open Market Committee gathering ending May 1 released Wednesday showed that, while participants assessed monetary policy was “well positioned,” various officials mentioned a willingness to tighten further if warranted.
“It was another week dominated by ‘Fed anxiety’,” said Florian Ielpo at Lombard Odier Asset Management. “Let’s however remember that despite rising rates, company earnings appear resilient, subtly suggesting that the impact of what’s typically seen as positive economic news might be less straightforward.”
The rally in global equity markets is at risk of overheating, according to Bank of America Corp. strategist Michael Hartnett.
The bank’s so-called global breadth rule shows that about 71% of equity indexes are trading above both their 50- and 200-day moving averages. A reading above 88% would trigger a contrarian sell signal, he said.
Corporate Highlights:
Elon Musk’s SpaceX has initiated discussions about selling existing shares at a price that could value the closely held company at roughly $200 billion, according to people familiar with the matter.
Eli Lilly & Co. will spend $5.3 billion to boost production of a key ingredient in its weight-loss and diabetes shots after the treatments’ explosive popularity led to shortages.
Novo Nordisk A/S’s blockbuster diabetes drug Ozempic cut patients’ risk of dying in a kidney-disease study, the latest research pointing to the medicine’s usefulness in a constellation of disorders.
Intuit Inc. reported losing 1 million customers who use its TurboTax service for free, stoking concerns about demand for the software.
Lucid Group Inc. will eliminate about 400 jobs in the coming months, the latest move by an electric-vehicle maker to cut costs in a dramatically slowing market for plug-in cars.
CVS Health Corp. has been seeking a private equity partner to fund growth at Oak Street Health, the $10.6 billion primary care provider it bought a year ago, according to people familiar with the matter.
Bayer AG Chief Executive Officer Bill Anderson said the wave of lawsuits over its Roundup weedkiller is an “existential” threat to the company and farmers, ratcheting up the stakes as it considers a controversial legal maneuver.
Some market moves:
Stocks
The S&P 500 rose 0.8% as of 11:19 a.m. New York time
The Nasdaq 100 rose 1.2%
The Dow Jones Industrial Average rose 0.3%
The Stoxx Europe 600 fell 0.1%
The MSCI World Index rose 0.6%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.3% to $1.0851
The British pound rose 0.4% to $1.2748
The Japanese yen was little changed at 156.95 per dollar
Cryptocurrencies
Bitcoin rose 0.8% to $68,302.2
Ether fell 0.8% to $3,727.99
Bonds
The yield on 10-year Treasuries declined one basis point to 4.47%
Germany’s 10-year yield declined one basis point to 2.58%
Britain’s 10-year yield was little changed at 4.26%
Commodities
West Texas Intermediate crude rose 0.5% to $77.28 a barrel
Spot gold rose 0.4% to $2,337.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Alexandra Semenova and Sagarika Jaisinghani.
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(Bloomberg) — Boeing Co. scrapped a plan to generate cash again this year and said it will suffer another significant outflow in the current quarter as the embattled planemaker fights on multiple fronts to get production back in order and ramp up deliveries.
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The cash burn in the second quarter will be similar or even worse than in the first three months of the year, when Boeing ran through almost $4 billion, Chief Financial Officer Brian West said at a Wolfe Research conference on Thursday. The full year will now be “a use versus generation of cash flow,” he said.
While West cautioned just a few weeks ago that Boeing would experience a “messy” second quarter with a sizable cash outflow, the latest predictions paint a gloomier picture of the manufacturer’s recovery prospects. The company’s woes have been compounded by China’s request for additional certification on some aircraft parts. That, in turn, has halted deliveries to one of the world’s most important aviation markets, leading to a worsening financial profile.
Boeing fell as much as 6.7% in US trading, the biggest intraday drop in almost four months. The US planemaker is in the midst of a deep crisis following a near-catastrophe in January on 737 Max 9 plane during flight. The planemaker has come under fire from regulators, lawmakers and airlines as the incident brought to light quality and safety lapses at its factories, and triggered the exit of its chairman, chief executive officer and its head of its commercial unit.
West said in April that the company would generate free cash flow “in the low single-digit billions,” for the full year as it ramps up deliveries again. He had also predicted that the second-quarter cash burn would “improve sequentially.”
Because China’s Civil Aviation Administration of China sought additional documents related to certification of batteries in cockpit voice recorders, the company has not been able to hand over aircraft to the country, West said. Deliveries in the period will be close to the numbers achieved in the first three months, he said.
China Setback
The CAAC move is a setback for Boeing, which had only just resumed deliveries of new aircraft to China after a five-year hiatus. Resuming deliveries of the 737 Max to China is vital for generating cash as well as whittling down its stockpile of already built aircraft lingering from a global grounding nearly five years ago and the Covid-19 pandemic that followed.
“Our operational and financial performance is going to get better, and it’s going to accelerate as we go through the third and fourth quarter, and that will be the benefit of all the work we’re doing right now,” West said. “I understand everyone would wish it would go faster, but it’s a long cycle business, and we have to be disciplined.”
The company still expects to win certification for its 777X widebody model in 2025, West said. Some customers have been concerned that that model — already five years late — may be further delayed as Boeing grapples with its many problems. The company is also experiencing part supply issues on its 787 model, including with heat exchangers and seats, though the problems won’t hurt the overall delivery schedule of the widebody model, West said.
West said he’s still optimistic that Boeing can “get something done” with Spirit AeroSystems Holdings Inc. in the second quarter to reintegrate its most important supplier. While “nothing is off the table” in terms of financing the deal, the company is keen to retain its investment-grade credit rating, he said.
Cash Burn
Boeing’s cash burn in the first quarter prompted Moody’s Ratings to cut the company’s credit grade to the edge of junk. The planemaker subsequently raised $10 billion from a bond sale.
The company is scheduled to deliver a 90-day plan to address shortcomings in its manufacturing processes and its safety culture on May 30, according to the Federal Aviation Administration. The plan will lay out steps the company intends to take to fix quality control issues at its factories after a door plug blew off a nearly-new 737 Max in January.
West said the 90-day plan is “not a finish line,” and that Boeing looks forward to continued engagement with the aviation regulator.
“We view this as a longterm investment that’s good for the company, good for our customers, good for the industry,” West of the road ahead.
–With assistance from Allyson Versprille.
(Updates with additional comments from CFO)
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JPMorgan Chase & Co. is immersing every new banking employee in artificial-intelligence training, preparing them for a technology Chief Executive Officer Jamie Dimon has likened to the impact of the printing press and steam engine. “This year, everyone coming in here will have prompt engineering training to get them ready for the AI of the future,” Mary […]
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(Bloomberg) — Alibaba Group Holding Ltd. reported a 6.6% rise in revenue after its main e-commerce and cloud businesses managed only modest growth.
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Revenue for the three months ended March rose to 221.9 billion yuan ($30.7 billion), compared with analysts’ estimates for 219.8 billion yuan. Net income dived a worse-than-expected 86% after accounting for losses from publicly traded holdings. Its shares slid about 5% in pre-market trading.
Investors are closely watching results from Alibaba, a barometer of Chinese consumer sentiment, amid persistent worries about a loss of business to rivals from PDD Holdings Inc. to ByteDance Ltd. The choppy economic recovery is also roiling the company as it tries to revive growth after a years-long regulatory crackdown that kneecapped China’s private sector.
On Tuesday, the company announced a $4 billion dividend for the fiscal year. Alibaba and Tencent Holdings Ltd. both reported results on Tuesday, offering clues to whether the Hong Kong equity rally has legs. Alibaba, which owns slices of public companies including SenseTime Group Inc. and Sun Art Retail Group Ltd., didn’t disclose which specific losses hammered net income, which came in well below expectations. Its main Chinese commerce division managed just 4% revenue growth, while the cloud arm grew 3%.
Alibaba Chief Executive Officer Eddie Wu and Chairman Joe Tsai, longtime lieutenants of Jack Ma who took the helm from Daniel Zhang in September, are spearheading a turnaround of the e-commerce pioneer. They nixed major initiatives conceived under Zhang including listings logistics arm Cainiao and the $11 billion cloud unit, then decided to refocus on what they dubbed the customer experience and innovation.
Wu took the helm after a period of unprecedented turmoil at Alibaba, which contended with Covid, Beijing’s internet crackdown and then a Chinese economic downturn in rapid succession.
Ma weighed in on Alibaba’s turbulence last month, with a rare memo aimed at shoring up sagging morale among the company’s 200,000-plus employees. He emphasized that growth was returning at the company, despite its recent flip-flops, while acknowledging past mistakes.
Wu this year took direct charge of the company’s e-commerce and cloud services arm, both under pressure after a series of mis-steps and regulatory scrutiny. It’s tried to enhance customer service, beef up its product lineup and introduced features such as easy returns. On the cloud front, the once-promising division is slashing prices to regain clients from state-backed companies such as China Telecom Corp. and the likes of Huawei Technologies Co.
Away from the business, it’s hiving off non-core assets like stakes in streaming platform Bilibili and electric-vehicle maker XPeng Inc. to raise capital. It’s then funneled some of that cash into AI research and fast-growing startups like MiniMax.
(Updates with share action in the second paragraph. A previous story corrected the scale of its net income drop.)
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(Bloomberg) — Asian stocks clawed back earlier losses as reports of a planned China ultra-long bond sale boosted optimism the funds raised will bolster the economy.
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Hong Kong’s equity benchmark climbed to the highest since August after the news, while mainland-listed shares trimmed declines. China’s 1 trillion yuan ($138 billion) ultra-long special bond issuance program will start Friday and eventually include 20-year debt, 30-year notes and 50-year securities, according to people familiar with the matter.
News of the planned debt issuance boosted sentiment toward regional equities after weak Chinese data published over the weekend had led to initial stock losses. The specter of further US-China trade tensions also intensified with a report on how much President Biden is set to increase tariffs on Chinese electric vehicles.
“You are looking at a slightly muddied growth outlook” for China, Sonal Desai, chief investment officer at Franklin Templeton said in an interview on Bloomberg Television before news of the debt sale was published. Regardless of who gets elected in the US election in November, we are going to see an escalation of US-China trade tensions, he said.
Bloomberg’s dollar index and benchmark 10-year Treasuries were both little changed. Japanese bonds fell after the central bank offered to purchase a smaller amount of government debt than at a previous auction.
Investors are scrutinizing comments by US officials for signs of how long the Federal Reserve will keep interest rates at elevated levels. Fed Bank of Dallas President Lorie Logan said last week it’s still too early to think about lowering borrowing costs, while Governor Michelle Bowman said she doesn’t expect it will be appropriate for the Fed to cut rates in 2024.
Potential major catalysts for markets this week include a policy rate decision from China on Wednesday and a US April inflation print the same day.
“There is growing confidence in the Chinese market, even though the economic indicators do not fully support this optimism,” said Tareck Horchani, head of prime brokerage dealing at Maybank Securities Pte. “The movement seems to be driven more by technical factors than fundamental ones.”
Read more: High-Risk Options Bet on Bond Rally at Risk of Losing Millions
The weak Chinese data weighed on oil Monday, with commodity traders also looking ahead to an OPEC+ meeting on supply policy.
Iraqi Oil Minister Hayyan Abdul Ghani initially said at the weekend that Baghdad had cut production enough and wouldn’t agree to more. But later, he said that any decision was a matter for OPEC, and it would stick to whatever the group decided. OPEC+ meets June 1.
Elsewhere this week, the euro area is set to report inflation and growth figures while a swath of Federal Reserve officials are due to speak including Chair Jerome Powell.
US and European stock futures were little changed.
Some key events this week:
Australia business confidence, Monday
New Zealand food prices, inflation expectations, Monday
India trade, CPI, Monday
Euro-area finance ministers meet in Brussels, Monday
Australia 2024-25 budget, Tuesday
Japan PPI, Tuesday
Germany CPI, ZEW survey expectations, Tuesday
UK jobless claims, unemployment, Tuesday
US PPI, Tuesday
Fed Chair Jerome Powell and ECB Governing Council member Klaas Knot speak, Tuesday
China rate decision, Wednesday
Eurozone industrial production, GDP, Wednesday
US CPI, retail sales, business inventories, empire manufacturing, Wednesday
Australia unemployment, Thursday
Japan GDP, industrial production, Thursday
China property prices, retail sales, industrial production, Friday
Eurozone CPI, Friday
Stocks
S&P 500 futures were little changed as of 12:18 p.m. Tokyo time
Nikkei 225 futures (OSE) fell 0.1%
Japan’s Topix was little changed
Australia’s S&P/ASX 200 fell 0.3%
Hong Kong’s Hang Seng rose 0.4%
The Shanghai Composite fell 0.3%
Euro Stoxx 50 futures were little changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0770
The Japanese yen was little changed at 155.80 per dollar
The offshore yuan was little changed at 7.2397 per dollar
Cryptocurrencies
Bitcoin fell 0.8% to $60,812.87
Ether fell 1.8% to $2,870.18
Bonds
Commodities
West Texas Intermediate crude fell 0.2% to $78.07 a barrel
Spot gold fell 0.2% to $2,356.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Ishika Mookerjee.
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(Bloomberg) — Palantir Technologies Inc. shares slid in extended trading on Monday as the market was unimpressed by the company’s outlook for annual sales after the stock has already tripled in the past year.
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The company nudged its annual revenue forecast slightly higher to a range of $2.68 billion to $2.69 billion. Analysts expected $2.68 billion, on average, according to data compiled by Bloomberg. The company raised its outlook for adjusted operating income to a range of $868 million to $880 million. Analysts had expected $846.6 million.
The stock tumbled 10% in extended trading in New York. Palantir is one of the marquee stocks of the tech world’s current AI frenzy, with new products helping to catapult it more than 200% over the last 12 months.
Co-founded by Peter Thiel, Palantir develops software and analysis tools for companies and government agencies allied with American interests. Palantir’s roots are in government sales — the venture arm of the US Central Intelligence Agency was among its initial backers — but “unbridled and growing demand” from US businesses for its artificial intelligence software now drives the business, Chief Executive Alex Karp told shareholders in a letter.
Palantir sells its AI software through boot camps, an engineer-led strategy to get customers up and running in just a few days instead of months and what the company credits for increasing US commercial customers by 69% to 262 during the first quarter. Revenue growth from government contracts is now growing at a slower pace than commercial revenue and analysts expect commercial sales to eclipse those from governments next year.
Palantir reported $335 million in government revenue in the first quarter, up 16%, and $299 million in commercial revenue, a 27% increase from a year earlier.
“Palantir’s commercial segment saw another strong quarter with 40% growth in the US, but gains are likely to taper” in the second half at this business and the government unit,” Bloomberg Intelligence analyst Mandeep Singh wrote in a research note. Billings growth of 2% in the first quarter “suggests a lack of pipeline visibility, even with commercial’s solid customer additions.”
The company posted sales of $634.3 million for the three months ended March 31, up 21% from a year earlier. Analysts had estimated $615.8 million in sales, according to data compiled by Bloomberg. Net income was $106 million, its largest quarterly profit ever, far surpassing the average estimate for $83 million. Palantir reported its first profitable year in 2023.
In the current quarter, Palantir said it expects revenue of $649 million to $653 million and adjusted income from operations of $209 million to $213 million.
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(Bloomberg) — The US Federal Trade Commission declined to challenge Exxon Mobil Corp.’s $60 billion purchase of Pioneer Natural Resources Co. but asserted that Scott Sheffield, Pioneer’s co-founder, must not take a seat on the supermajor’s board.
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The decision, announced Thursday in a filing, will ease concern the Biden administration will seek to block a series of oil and gas mega-mergers, but it came at a hefty price. The antitrust agency says it found evidence Sheffield sought to communicate with OPEC and fellow US producers about oil pricing and output, potentially driving up costs for consumers.
“Mr. Sheffield’s past conduct makes it crystal clear that he should be nowhere near Exxon’s boardroom. American consumers shouldn’t pay unfair prices at the pump simply to pad a corporate executive’s pocketbook,” Deputy Director of the FTC’s Bureau of Competition Kyle Mach said in a statement.
The FTC says its order will prevent Sheffield from engaging in “collusive activity” that would could drive up crude prices and force US consumers to pay higher fuel prices. The agency says he exchanged hundreds of text messages with OPEC representatives and officials about the oil market.
Exxon shares rose 0.3% before the start of regular trading in New York. Pioneer shares were unchanged.
The proposed consent order also bars Sheffield from serving in any advisory capacity at Exxon and prohibits the oil giant from appointing any Pioneer employee or director to its board for five years.
Exxon said in a statement that the company learned of the FTC’s allegations regarding Sheffield from the agency and that they are “entirely inconsistent with how we do business.” Exxon has agreed to the terms of the consent decree and plans to close its acquisition of Pioneer on May 3, the company said.
Pioneer said it was surprised by the FTC’s allegations and disagrees with the agency’s conclusions.
“Mr. Sheffield and Pioneer believe that the FTC’s complaint reflects a fundamental misunderstanding of the US and global oil markets and misreads the nature and intent of Mr. Sheffield’s actions,” the company said in a statement.
Selling his company to Exxon and landing a seat on the board were a career capstone for Sheffield, who led Pioneer for more than 20 years and was one of the earliest proponents of fracking in the Permian Basin. After closing the merger, Exxon will be far and away the biggest producer in the Permian Basin of Texas and New Mexico, which now pumps more oil per day than Iraq, the second-largest OPEC-member.
More than 50 lawmakers urged the FTC in March to increase scrutiny over fears a $230 billion wave of consolidation in the past year would increase energy prices for consumers, squeeze suppliers and suppress wages. Investors had feared the agency, which has become more aggressive under Chair Lina Khan, would stand in the way of several large deals, especially in an election year when the Biden administration is seeking to prove its climate credentials and contain gasoline prices.
Chevron Corp., Occidental Petroleum Corp. and Chesapeake Energy Corp. are among companies with large pending takeover deals that are undergoing in-depth reviews before the FTC.
Oil executives claim the deals will benefit shareholders, consumers and the environment. Exxon Chief Executive Officer Darren Woods has said the Pioneer deal would lower its cost of production, making US barrels more competitive in the global market and provide a strong platform for growth, which would ultimately benefit consumers. Exxon also pledged to make Pioneer’s operations net zero by 2035, accelerating the prior target by 15 years.
Sheffield is a rare outspoken leader in the US shale patch, frequently appearing in media interviews and industry conferences. He was an early advocate of the industry’s push for capital discipline rather than ramping up production at all costs, and was one of the first CEOs to call on his company and others to reducing flaring.
But it was Sheffield’s public and private communications with OPEC and other industry executives that caught the attention of the FTC. He was a leading advocate of government-mandated rationing of Texas oil production during the early-2020 crude market collapse that saw prices plunge below zero. His efforts to convince the Texas Railroad Commission that oversees that state’s oil industry to impose output caps for the first time in decades was ultimately unsuccessful.
The Biden administration has frequently been at odds with the industry, but easing through what many executives see as the necessary consolidation of the oil patch is likely to improve relations. With crude prices up more than 10% this year and tensions rising the Middle East, the administration is vulnerable to Republican attacks on measures that hurt the oil industry and raise gas prices.
The Pioneer deal will combine two fast-growing Permian operations, lifting Exxon’s production in the basin to about 2 million barrels of oil equivalent a day by 2027, up from about 600,000 last year.
–With assistance from Joe Carroll, Joe Ryan and Mitchell Ferman.
(Adds statements from Exxon and Pioneer.)
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China can withstand any new tariffs the world throws at it—even the punitive ones Donald Trump is planning if he wins a second presidential term—because its prices are simply too competitive to resist.
That’s the predominant view at this month’s Canton Fair. Many buyers and sellers at China’s biggest trade event, held in the southern city of Guangzhou, shrugged off the risk of an escalating trade war.
“My customers told me even a 50% tariff won’t come close to driving them away,” said Jack Jin, who sells cargo-control tools and truck parts from southeast China. He says about half his orders come from Americans—who can sell his products for four times what they pay him.
Tension between China and its trading partners is escalating in a U.S. election year, amid allegations the world’s top manufacturer is dumping goods and unfairly subsidizing industries. The list of targeted products is getting longer, including metals and ships as well as electric vehicles.
Trump says he might impose an across-the-board China tariff of more than 60%. President Joe Biden—his opponent in November’s election—last week pledged to triple charges on Chinese steel, an area where emerging economies have voiced concerns too. The EU launched a probe into Chinese EV subsidies that could lead to new tariffs within months, and is scrutinizing the solar and rail industries.
But traders at the Canton Fair say the world will need Chinese goods no matter what. They’re coming up with workarounds for tariffs. And even buyers who are looking into supply-chain alternatives said they still expect China to remain their top source, because other countries lag in quality and cost.
Samuel Jackson, who was at the fair as a purchaser for a Bosnian furniture company, said he can get products of “very, very similar” standard at half the price that European makers charge. Tariffs might have some impact, he said, “but China is too big a country. They have other countries to sell to.”
For Alex Student, an auto accessories importer from California, it’s U.S. consumers who’ve borne the brunt of tariffs on China-made goods. His retailers at home refused to pay higher prices when Trump slapped on the taxes, and instead asked him to get the producers to supply a slightly cheaper version.
“At the end of the day, who paid? The consumer,” he said. “You either gave something up in terms of the quality of the product, or you gave up more money for the same product.”
Student described one way he found to offset the tariffs, by switching to so-called Free On Board pricing. That meant logistics and warehousing costs were left to his U.S. customers—and the sale price, on which tariffs are based, came down. There’s “a lot of different ways to skin the cat,” he said.
Chinese products are cheap even for buyers from less developed countries. Daniel Lulandala, owner of a machinery trading company in Tanzania, was on his first trip to China and excited about being able to negotiate directly with local manufacturers.
He found the prices on offer at the Canton Fair so low that it’s led him to expand his business ambition, and he’s now thinking of opening a factory back home to make building blocks, using a Chinese machine that costs about $8,000. He’s confident he could earn that back within just three months.
“If I was here a few years earlier, I could be somewhere higher now, business-wise,” Lulandala said.
Out of 125,000 foreign buyers who’d attended the fair through April 19, only 18% were from the U.S. and Europe, according to the organizers. That’s not just down to trade tensions, but also because ties with those economies are well established and the buyers tend to be larger if fewer in number. Two-thirds of attendees come from the mostly emerging nations that are part of Beijing’s Belt and Road infrastructure plan, up from about half a decade ago.
Of course, importers who made the trek to Guangzhou are likely among the China optimists—and some producers there did express trade-war concerns.
A saleswoman for a Shanghai producer of plastic strapping, who asked not to be identified discussing her concerns about the economy, said she was worried by the prospect of another Trump presidency. She said her company has been scraping by in the past few years, under pressure to keep developing more products even though profits were falling, and described business conditions as akin to a rat race.
If China’s falling production costs impress foreign buyers, they’re also a symptom of weak demand at home, where households are reluctant to spend after a prolonged real estate slump that’s left the country at risk of deflation. A pivot to exports may help meet this year’s growth target of around 5%, but it also undercuts the longer-term plan for domestic consumers to play a bigger part in driving the economy.
Jin, the truck-part seller, acknowledged being “a little” worried about Trump, who he sees as more unpredictable than Biden. He’s also aware of growing competition from other emerging nations. His company stopped making a metal ring used on trucks because Indian producers, unburdened by tariffs, were able to offer lower prices.
Student said he’s started looking for what he calls “contingency plans.” His firm imported some goods from Vietnam last year, the first time it’s bought from anywhere except China since the 2000s, and he’s looked at Thailand and Indonesia for certain products.
But all those countries have a long way to go before they’re competitive with China, he said. So even in a “worst-case scenario” China will still likely get about 75% of his firm’s business. “I can’t foresee it being less.”
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Goldman Sachs Group Inc. is closing down its automated-investing business for the masses after clinching a deal with Betterment. The bank has struck an agreement to transfer clients and their assets from the unit known as Marcus Invest to Betterment, a $45 billion digital investment-advisory firm. The transfer is expected to be completed by the […]
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