April 20, 2023
- Sumitomo Metal Mining says it will vote in favor of Teck Resources’s plan to split its businesses at the Canadian company’s annual shareholder’s meeting on April 26 amid a takeover proposal from Glencore. Says it “confirms its continuous support for Teck’s plan” to split its base metal and steelmaking coal businesses. Sumitomo Metal says it holds 18.9% of Teck’s Class A shares and 0.1% of Class B shares as well as a 49% interest in Temagami Mining, which owns 55% of Teck’s Class A shares
- Canada got over $13.3 billion of investor orders for its largest transaction in the US currency on record, according to a person with knowledge of the matter, as the inversion in the Treasury yield curve continues diving. Debt arrangers for the top-rated country priced $4 billion of five-year notes at a spread of 11 basis points over US Treasuries, lower than preliminary price discussions Tuesday of around 14 basis points, said the person, who asked not to be identified. The order book doesn’t include potential demand from the deal’s managers, the person said. The inversion in the Treasury yield curve has steepened for much of the past five weeks as economic data implies another interest rate hike from the Federal Reserve, which next meets on May 3. The extra yield of two-year over the five-year is at around 52 basis points, the widest inversion in more than a month.
- European equities declined on a busy earnings day as investors weigh the risks from persistently-high inflation and central bank rate hikes. The Stoxx 600 Index fell 0.3% by 10:26 a.m. in London. Automakers slid as Renault SA slumped amid worries about the firm’s pricing strategy while US firm Tesla Inc. reported first-quarter adjusted earnings per share that fell short of estimates. Germany’s autos-heavy DAX index underperformed. European stocks have recovered from last month’s selloff that was spurred by banking sector worries, with the region’s main benchmark recently hitting its highest level since February 2022. However, central bank efforts to tame inflation remain a concern, and Wednesday’s data showing bigger-than-expected UK consumer price rises weighed on shares as bond yields jumped.
- US equity futures dropped along with European stocks following mixed corporate earnings and as investors studied the latest assessment on the US economy for clues on the path for interest rates. Contracts on the S&P 500 fell about 0.7% and those on the Nasdaq 100 were down more than 1%. Tesla slumped as much as 8.5% in premarket trading after the electric-vehicle maker signaled more price cuts even as first-quarter results showed narrowing profit margins. Apple Inc. declined after its most important chipmaker warned that demand from the mobile and PC industries would remain “soft” for now. The Federal Reserve’s monthly Beige Book survey released on Wednesday showed the US economy “stalled,” with narrower access to credit. Federal Reserve Bank of New York President John Williams said the recent trend of slowing inflation continues but that price gains remain too high. Trader bets continue to lean toward a rate hike next month.
- Asian stocks edged lower as volatility across global markets remained subdued, with investors awaiting new catalysts and digesting recent corporate earnings. The MSCI Asia Pacific Index dropped as much as 0.4% before paring its loss. Most major benchmarks were up or down by less than 0.5%, with South Korea and mainland China leading the declines. China tech earnings so far have been in line, “could have been better but we stay more optimistic,” given positive initiatives from companies such as Alibaba, Xiaolin Chen, head of international at Kraneshares, told Bloomberg TV. “Overall you see very encouraging and constructive policies get introduced by policymakers or corporates themselves to become more market oriented.”
- Oil retreated for the third time in four days as further signs of a US slowdown overshadowed a substantial draw in crude stockpiles. Global benchmark Brent dropped below $82 a barrel after closing 2% lower on Wednesday. The US economy stalled in recent weeks, the Federal Reserve said in its Beige Book survey, casting a cloud over prospects for energy demand. The dollar has also ticked higher, providing another headwind for commodities. In Asia, gasoline markets are showing signs of weakness as profits from producing the fuel slump. Diesel is also lagging, with some refiners considering cuts to processing as margins decline. That’s weighing on prices of crude grades like Murban, which briefly traded in a bearish contango structure.
- Gold held losses that pushed it back below $2,000 an ounce, with traders weighing expectations for further interest rate hikes against early signs that the US economy is stalling. The rate of inflation in the US appears to be slowing, the Federal Reserve said in its monthly Beige Book survey. A slightly more negative shift in tone from the previous report raised concerns about a recession, which may eventually cause the central bank to change course. Spot gold was up 0.2% at $1,998.07 an ounce as of 10:47 a.m. in London, after closing 0.5% lower on Wednesday. The Bloomberg Dollar Spot Index was little changed. Silver was steady, and platinum and palladium both declined.
- European natural gas prices swung between small gains and losses amid indications that demand for the fuel — especially from industry — has yet to recover. Benchmark futures dropped as much as 2% on Thursday before paring losses. While an unplanned outage at a facility in Norway is lending some support to prices, the onset of warmer weather is likely to continue weighing on gas demand. In Germany, Europe’s largest economy, industrial demand for the fuel was down 21% in March compared to usual levels before the war in Ukraine, according to a Bruegel report, with similar trends seen across other European countries. Households also reduced their gas needs.
- Treasury Secretary Janet Yellen said the Biden administration was prepared to accept economic costs as it sought to protect US national security interests from threats posed by China, even as she appealed to Beijing to cooperate on shared global concerns. “National security is of paramount importance in our relationship with China,” Yellen said in excerpts released by the Treasury of a speech she’s scheduled to deliver Thursday morning in Washington. “We will not compromise on these concerns, even when they force trade-offs with our economic interests.” The remarks, set against a backdrop of deteriorating relations with Beijing, outline three priorities in dealing with China. The administration will defend its national security interests and express concerns over China’s behavior; seek healthy and fair economic competition; and aim to engage on issues like climate change and debt relief in the developing world.
- Elon Musk indicated Tesla Inc. will keep cutting prices to stoke demand even after markdowns early this year took a significant toll on profitability. Tesla’s operating margin shrank to 11.4% in the first quarter, a roughly two-year low, after the company marked down its electric vehicles in January and March. Musk has done several more rounds of price cuts already this month and said he’s comfortable making less money on each car sold. Tesla’s discounts have been dramatic both in scale and time span — it’s dropped the starting price of the Model Y by 29% in just over three months. Musk’s moves have ignited debate over whether he’s operating from a position of strength or weakness. While Tesla remains the top seller of EVs and is in the rare position of manufacturing them profitably at scale, its growth has slowed dramatically as borrowing costs rise and more automakers roll out competitive plug-in models.
- Changxin Memory Technologies Inc. plans to file for a domestic initial public offering this year that could value the Chinese chipmaker north of $14.5 billion, a milestone debut that could help galvanize the country’s technology aspirations. The memory chip maker known as CXMT aims to list on Shanghai’s Nasdaq-style STAR board at a valuation of no less than 100 billion yuan ($14.5 billion), according to people familiar with the matter. It’s in the process of picking underwriters and the size of the IPO hasn’t been finalized, said the people, asking not to be named discussing private matters. CXMT is one of a handful of major Chinese firms that embody Beijing’s ambitions to match the US technologically, particularly in the semiconductors that drive most advances from AI to self-driving cars. It’s one of the largest Chinese makers of DRAM storage chips, an industry dominated by Samsung Electronics Co., SK Hynix Inc. and Micron Technology Inc. but that could serve as a launchpad for more advanced semiconductor development down the road.
- Blackstone Inc.’s first-quarter profit fell as dealmaking at the world’s largest alternative-asset manager slowed in a tumultuous stretch when rising interest rates roiled markets. Distributable earnings fell 36% to $1.25 billion, or 97 cents a share, from a year earlier, New York-based Blackstone said Thursday in a statement. That exceeded the 94-cent average estimate of 16 analysts surveyed by Bloomberg. Assets under management edged closer to the $1 trillion mark, rising 8% to $991.3 billion. Blackstone has grown into a dominant force in the financial universe outside stocks and bonds. It is a giant in take-privates, buyouts and real estate deals. Now it has to wrestle with how the Federal Reserve’s rate increases are crimping dealmaking and ending a period of rapid growth.
- The Biden administration on Thursday will pledge $500 million over five years to fight deforestation in Brazil, a White House official said, in a move that would make the United States one of the largest donors to the global Amazon Fund. But the pledge would require approval from Congress, where Republicans are overwhelmingly opposed to international climate assistance and have made it difficult for President Biden to deliver on his promises to help poorer nations cope with climate change. Brazil’s president, Luiz Inácio Lula da Silva, has been working with the Biden administration on several issues, including climate change, despite Mr. Lula’s criticism of U.S. support for Ukraine in its war with Russia.
- AT&T Inc. missed analysts’ estimates for free cash flow in the first quarter but said it’s still on track to meet the full-year forecast. The shares slid in early trading. Free cash flow was $1 billion in the period, the Dallas-based phone giant said in a statement on Thursday. That was well below the $3.02 billion Wall Street predicted, according to a Bloomberg survey, and about 6% of the $16 billion the company expects for the year. The shortfall revives concerns that AT&T is struggling with high costs of phone inventory, network construction and lower contributions from its declining DirecTV joint venture. The company said it expects higher free cash flow levels in the second half of the year.
- Nokia Oyj reported weaker-than-expected earnings, amid a slowdown in demand for its 5G gear in some of the company’s more mature markets. Adjusted operating profit was €479 million ($525 million) for the first quarter, the Espoo, Finland-based mobile network company said in a statement on Thursday. That compares to an average analyst estimate of €544 million, according to a Bloomberg survey. Adjusted earnings per share came to 6 cents, less than the 7 cents estimated by analysts. The growing economic headwinds seen in the fourth quarter continued to pressure 5G equipment vendors, with sales shifting toward lower-margin markets like India and spending at US carriers declining. The ramp up in India deployments during the quarter more than offset a slowdown in North America spending, Nokia said.
- President Joe Biden on Thursday will implore world leaders to strengthen their carbon-cutting ambitions and unite behind a pledge to make half of all light-duty vehicles sold in 2030 emission-free models. Biden will make the requests as he opens a meeting of the Major Economies Forum on Energy and Climate that brings together some of the world’s top emitters, such as China, Japan, Germany and Saudi Arabia.
- Contemporary Amperex Technology Co. Ltd. reported an 83% jump in revenue that well outdid market expectations, fueled by climbing demand for cleaner vehicles and falling raw materials costs. Sales at the world’s biggest maker of battery cells for electric cars came in at 89 billion yuan ($13 billion) for the three months ended March 31, according to an exchange statement Thursday, better than the 75.1 billion yuan forecast by analysts. Net income at the Tesla Inc. supplier was 9.8 billion yuan, up from 1.5 billion yuan the previous corresponding quarter when an extraordinary first-quarter derivatives charge shrank earnings.
- American Express Co. saw spending growth on its network unexpectedly accelerated in the first quarter, even as the firm set aside more money to cover souring loans, weighing on profit. Spending volume jumped 14% to $398.9 billion in the first three months of the year, fueled by the popularity of its Platinum Card and other premium products, New York-based Amex said Thursday in a statement. That topped the 13% average estimate of analysts surveyed by Bloomberg. Provisions for loan losses totaled $1.1 billion the period, more than the $890 million average estimate of analysts surveyed by Bloomberg. That was a reversal from a year ago, when the bottom line was helped by a reserve release.
- AutoNation Inc., one of the biggest car dealership chains in the US, posted record first-quarter earnings as the retailer squeezed more profit out of fewer auto sales and grew its maintenance and repair business. AutoNation said Thursday that first-quarter earnings per share rose to $6.07, a record for the period and better than the $5.69 average forecast by analysts. Revenue declined 5% from a year ago to $6.4 billion as sales of new and used cars tumbled. Chief Executive Officer Mike Manley pivoted to used cars as the chip shortage drained dealer lots during the pandemic. Now that rising interest rates are pushing more consumers to the sidelines and new-car prices are coming down as inventories recover, Manley’s leaning on AutoNation’s parts and service business to sustain earnings growth.
- Goldman Sachs Group Inc.’s Urban Investment Group teamed up with the Michaels Organization and the Community Development Trust to buy a $1.15 billion portfolio of 90 affordable housing complexes. The deal is for more than 10,000 apartments that on average rent for less than $1,000 per month, executives said in an interview. When Goldman became a bank holding company in 2008, it was subject to the Community Reinvestment Act that pushes institutions to address the credit needs of individuals and businesses in low-income neighborhoods. UIG, formed in 2001, is responsible for ensuring the bank’s compliance with the law.
- SpaceX will make a second attempt to launch its massive Starship rocket into space, a crucial step in its goal of taking humans to the moon and Mars. The closely held firm, co-founded by Elon Musk, delayed its first try on April 17 just a few minutes before launch because of a frozen pressure valve. This attempt, which also won’t have any people on board, is targeted for 9:28 a.m. New York time, with a 62-minute launch window, on Thursday from the company’s Starbase facility in Boca Chica, Texas. The stakes are high. SpaceX has invested heavily in developing Starship and already has a nearly $3 billion contract with NASA to develop the vehicle into a lander to take astronauts to the moon. At about 400 feet tall, it’s the biggest spacecraft ever built with enough thrust to carry a payload possibly four times larger than the company’s most powerful rocket in operation.
- International Business Machines Corp. gave a forecast for annual revenue in line with analysts’ projections, delivering a cautiously optimistic signal about technology spending in an uncertain economy. Sales will increase from 3% to 5% in 2023, the company said Wednesday in a statement, meeting analysts’ estimates. The company affirmed a previous free cash flow forecast of $10.5 billion for the year. IBM reported first-quarter revenue of $14.3 billion, little changed from the period a year earlier and slightly below analysts’ average estimate. Profit, excluding some items, was $1.36 a share in the quarter ended March 31. Analysts projected $1.25 a share, according to data compiled by Bloomberg.