August 17, 2022
- Ontario Teachers’ Pension Plan Board, one of Canada’s largest public-sector pension managers, is among shortlisted bidders to acquire a stake in specialty packaging company GPA Global from buyout firm EQT AB. OTPP, as the investment firm is known, is competing with Asian private equity firm FountainVest Partners, the people said, asking not to be identified because the matter is private. Talks are advanced and a buyer could emerge within the next few weeks, the people said. Considerations are ongoing and EQT could decide not to proceed with the deal, the people said. Representatives for EQT and OTPP declined to comment, while a spokesperson for FountainVest didn’t immediately respond to a request for comment.
- European equities steadied after five days of gains as bond yields rose, with investors assessing central banks’ next policy steps while questioning whether inflation has peaked. The Stoxx Europe 600 dipped 0.1% by 10:34 a.m. in London, snapping the longest winning streak since March. European bonds declined across the curve, following UK gilts lower and yields rose after UK inflation accelerated more than expected last month to the highest in 40 years. European stocks have extended July’s rally this month as traders bet inflation is close to peaking, leaving central banks room to be less hawkish and protect the economy from a serious downturn. Investors will be monitoring the Federal Open Market Committee’s minutes for their July meeting due later on Wednesday to assess the impact of their policy plans on the world’s biggest economy.
- US stock-index futures fell as concerns over the Federal Reserve’s aggressive rate-hike path outweighed robust corporate earnings and China’s stimulus plans. September contracts on the S&P 500 Index slipped 0.8% after the equity benchmark posted modest gains Tuesday amid a rally in retailer stocks. Nasdaq 100 futures retreated 0.9% signaling a selloff in technology names will continue. The dollar and Treasury yields rose as investors awaited the minutes of the Fed’s last policy meeting for clues on policy makers’ sensitivity to weaker economic data. US stocks have rallied on signs of peaking inflation and an earnings-reporting season that saw four out of five companies meeting or beating estimates. Yet, continuing rate hikes and the likelihood of a recession in the world’s largest economy are weighing on sentiment. Meanwhile, concern is growing that Fed rate setters will remain focused on the fight against inflation rather than supporting growth.
- Asian equities climbed as Japanese exporters were boosted by a weaker yen and traders assessed potential stimulus measures in China. The MSCI Asia Pacific Index advanced as much as 0.8%, with consumer-discretionary and industrial stocks such as Japanese automakers Toyota and Honda among the leaders on Wednesday. The benchmark Topix erased its year-to-date loss. Chinese food-delivery platform Meituan also rebounded after dropping more than 9% in the previous session on a Reuters report that Tencent may divest its stake in the firm.
- Oil pared early losses on Wednesday after China signaled it would take steps to boost a flagging economy, as traders awaited further news about the potential resumption of the Iran nuclear deal. West Texas Intermediate futures edged higher to $86.91 a barrel after dropping to a fresh seven-month low, while Brent continues to trade above $92 a barrel. Additional supply could heap more pressure on prices as concerns over an economic slowdown cloud the demand outlook. Time spreads have narrowed significantly, signaling an easing of tight crude markets. Meanwhile, the American Petroleum Institute reported crude inventories fell by 448,000 barrels last week, while gasoline stockpiles increased by more than 4 million barrels, according to a person familiar with the figures. Government data is due later Wednesday.
- Gold steadied before the release of minutes from the US Federal Reserve that may provide clues on the future direction of the central bank’s monetary policy. Wednesday’s minutes are eagerly anticipated as traders try to get a feel for how the central bank may react to a mixed picture for the economy at its September meeting. Recent data has shown inflation cooling in the US, possibly giving the Fed room to be less aggressive with rate hikes, though the labor market remains robust. Other reports on New York manufacturing and housing starts painted a less rosy picture of the economy this week. Gold has rallied from a near 16-month low in July as traders bet that a possible recession would lead to a looser monetary policy from.
- Natural gas in Europe rose again, extending a rally as a scorching summer boosts demand while supplies from Russia remain limited. Benchmark futures jumped as much as 4.7%, reversing earlier declines. Energy market concerns are deepening as the hot and dry weather boosts gas consumption for cooling. It’s also drying up the Rhine River, key for transporting everything from coal to diesel, and forcing utilities to use more gas as a replacement. That could throw governments’ plan to cut demand ahead of the winter into disarray. The concerns are being partially countered by storage sites across the region continuing to be replenished in line with the five-year average. European inventories are 75% full, and Germany has reached an intermediate refill target two weeks ahead of schedule. But the country’s energy regulator warned that stockpiles would last only two and a half months if Russia cuts off supply completely.
- Lowe’s Cos. shares climbed in early trading after the home-improvement retailer reported earnings that beat estimates even as renovators wrestle with a slumping US housing market and the highest inflation in decades. Earnings per share in the fiscal second quarter ended July 29 were $4.67, topping the $4.61 average estimate of analysts surveyed by Bloomberg. Lowe’s said Wednesday that it now sees operating income and earnings per share toward the top of its prior outlook for the year. On the flip side, comparable sales trailed estimates in the quarter, falling 0.3%. Analysts had expected an increase of 2.3%. Lowe’s maintained its guidance for annual sales but expects to be closer to the bottom end of the prior range. Lowe’s revenue is trailing rival Home Depot Inc. in part because Lowe’s generates 75% of its sales from do-it-yourself customers, who are facing higher prices in stores on top of rising food and gas expenses. Combined with high mortgage rates and a deteriorated economy, the once-booming US housing market now looks to be sputtering. Lowe’s said sales to DIY customers were hurt last quarter by the shortened spring season and lower demand in certain discretionary categories.
- Elon Musk joked on Twitter about buying Manchester United Plc, letting 4 1/2 hours go by before clarifying he was kidding about purchasing the English football club listed on the New York Stock Exchange. The Tesla Inc. chief executive officer and world’s richest person sent his initial missive about the storied club in a reply to an earlier post about his political allegiances. When a Tesla fan club account asked whether Musk was serious, he replied no, he isn’t buying any sports teams. Manchester United shares rose 4.9% to $13.40 as of 5:30 a.m. Wednesday, paring a 17% gain on thin volume at the start of early trading. Musk has a long track record of tweeting in jest. He’s also run afoul of the US Securities and Exchange Commission, most infamously by claiming in 2018 he had the funding to take Tesla private. That led to securities fraud charges and a settlement agreement that Tesla would appoint an in-house “Twitter sitter” who would pre-approve posts containing material information about the company.
- China called on the US to refrain from sailing naval vessels through the Taiwan Strait, saying Beijing would take further action in the wake of House Speaker Nancy Pelosi’s visit to Taipei. China’s ambassador to Washington, Qin Gang, said Tuesday that China viewed such Taiwan transits as an escalation by the US and an effort to support the “separatist” government in Taipei. He delivered the warning after Senator Edward Markey, a Massachusetts Democrat, wrapped up the second trip to the island in less than two weeks by a US congressional delegation. “The US side has done too much and going too far in this region,” Qin said in response to a question about potential naval patrols. “I do call on our American colleagues to refrain, to exercise restraint, not to do anything to escalate the tension. So if there’s any moves damaging China’s territorial integrity and sovereignty, so China will respond. China will respond.”
- Global oil markets face a high risk of a supply squeeze this year as demand remains resilient and spare production capacity dwindles, the new head of OPEC said. Fears over slowing consumption in China and the wider world — which have pushed crude prices 16% lower this month — have been exaggerated, OPEC Secretary-General Haitham Al-Ghais said in an interview with Bloomberg Television. At the same time, producers in the Organization of Petroleum Exporting Countries and beyond are running out of extra supplies they can bring to market, Al-Ghais said at OPEC’s Vienna headquarters. The Kuwaiti oil executive was appointed as the group’s top diplomat this month.
- Target Corp.’s profit badly lagged behind Wall Street’s estimates in the second quarter, and the retailer ratcheted up the pressure on its fiscal second half by sticking with its forecast of a dramatic rebound in its results. Adjusted earnings tumbled to 39 cents a share during the three months ending July 30, hit by an aggressive push to reduce inventory, Target said in a statement Wednesday. That trailed the lowest analyst estimate compiled by Bloomberg. On average, Wall Street had expected 72 cents. The profit plunge — a sharp contrast to Walmart Inc.’s better-than-expected results released Tuesday — reflects decisions Target outlined in June to slash prices on home appliances, patio furniture and other discretionary items as customers pulled back from a two-year spending spree. Now, Target says it’s poised to benefit from strong customer traffic, and the company maintained its outlook for operating income of about 6% of sales during the second half.
- For most movie fans, their dream selfie with a Hollywood star never quite materializes. But on a Friday night in June, Bruce and Deborah Cooke spotted one of their favorite movie heroes, just feet away. They moved in and asked for a photo. Adam Aron, the chairman and chief executive officer of AMC Entertainment Holdings Inc., greeted the couple warmly, making small talk as they arranged themselves for the camera. Bruce was dressed in slacks and a button-down. Deborah wore a striking green dress. “I put my arm around you, I go to jail,” Aron, who’s 67, playfully said to Deborah, who’s 55. Everyone laughed. Three days earlier, Aron had announced on Twitter that he would personally be hosting a screening of Pixar’s new movie, Lightyear, at an AMC theater in Olathe, Kan. The Cookes, who together own a small mortgage company in Sacramento, had vowed on the spot to make the pilgrimage to Kansas.
- UK inflation accelerated more than expected last month to the highest in 40 years, intensifying a squeeze on consumers and adding to pressure for action from the government and Bank of England. The Consumer Prices Index rose 10.1% in July from a year earlier after a 9.4% gain the month before, the Office for National Statistics said Wednesday. The reading was higher than expected by both the BOE and private-sector economists. Rising food prices made the biggest contribution to the month’s increase, indicating inflationary pressures are spreading beyond energy. Investors moved to price in 2 percentage points of increases in the BOE’s key rate to 3.75% by May next year.
- Uniper SE reported a loss of more than 12 billion euros ($12.2 billion), ranking among the biggest in German corporate history and laying bare the unprecedented crisis engulfing Europe’s energy markets. The size of the hit for the utility, which last month received a government bailout, shows just how severe the situation is as the European Union braces for winter. Russia has curbed gas supplies to the EU amid heightened tensions over its invasion of Ukraine, with the effect rippling across the continent, fanning inflation and threatening to push some of the continent’s largest economies into recession.
- Britain’s low-income households are being hurt most by soaring prices, according to official findings that will add to pressure on the government to act. They suffered an inflation rate of 8.7% in the year to June, the Office for National Statistics said Wednesday. That’s well above the 7.8% felt by high-income households. The gap between the two is the widest since 2010, when it was the wealthy who were paying more. The figures highlight how a cost-of-living crisis is hitting British consumers unevenly, delivering a heavier blow to those who can least afford it and widening the gap between the rich and the poor.
- Chow Tai Fook Enterprises Ltd., backed by Hong Kong billionaire Henry Cheng, is preparing to kick off the sale of Australian power company Alinta Energy, in a deal that could value it at about $3 billion, people with knowledge of the matter said. Chow Tai Fook is working with Goldman Sachs Group Inc. on the potential divestment, said the people, who asked not to be identified as the information is private. The company has reached out to several prospective suitors to gauge interest in Alinta and is planning to formally launch the sale process as soon as the coming weeks, the people said. Deliberations are ongoing and details such as timing and price may change, according to the people. A spokesperson for Goldman Sachs declined to comment, while representatives for Chow Tai Fook Enterprises and Alinta Energy didn’t immediately respond to requests for comment.
- The Biden administration is weighing Iran’s response to a European Union proposal aimed at reviving the 2015 international nuclear agreement, with officials on both sides of the Atlantic signaling the possibility that a deal could emerge now after more than a year of false starts. While the US so far has refused to comment in detail on the proposal, floated by EU foreign policy chief Josep Borrell as a last-ditch effort to save the Joint Comprehensive Plan of Action, State Department spokesman Ned Price said Tuesday the big issues have been “largely settled” and that it was close to what the US was looking for.
- Republican Representative Liz Cheney called on Americans to unite across party lines to keep Donald Trump from winning the White House again following her crushing defeat on Tuesday to a primary challenger backed by the former president. Cheney, who has served three terms in Wyoming’s sole US House seat, lost to conservative lawyer Harriet Hageman in Tuesday’s Republican primary primary, and made a point of conceding to her opponent — something she has long criticized Trump for never doing after the 2020 election. Speaking to supporters on the grounds of a ranch not far from her own home as the sun set on the nearby Teton Mountain range, Cheney warned that the Jan. 6 US Capitol insurrection and the refusal of Trump and other Republican leaders to tamp down the rage behind it put the nation at risk.
- President Joe Biden’s signing of the Inflation Reduction Act on Tuesday caps nearly two years of efforts to pass sweeping climate legislation. But the real work is just getting started. For federal regulators, the moment Biden signed the bill was effectively the starting gun for a race to write new policies to implement its clean energy tax credits, climate programs and environmental mandates. It’s a monumental task that will involve regulators at nearly every federal agency. “We’ve been able to get an incredible thing done, but it is just the beginning,” said Andrew Reagan, executive director of Clean Energy for America, a group that advocates on behalf of clean energy workers. “All of the hard work over the next 10 years by folks in the government and folks in the private sector is going to be what makes this successful.”
“Do what is right, not what is easy nor what is popular.” —Roy T. Bennett
*All sources from Bloomberg unless otherwise specified