August 6, 2022
- Barrick Gold Corp. became one of the few major mining companies this earnings season to deliver a positive surprise, navigating cost inflation and production challenges to exceed analysts’ estimates. The world’s No. 2 gold producer on Monday reported adjusted earnings of 24 cents a share for the second quarter versus the 23-cent average estimate. Shares rose slightly before the start of regular trading. Since taking Barrick’s reins after its 2018 takeover of Randgold Resources, Chief Executive Officer Mark Bristow has never missed estimates. On his watch, the Toronto-based firm has coped better than most with inflationary headwinds by unlocking savings following the Randgold acquisition, migrating to a younger workforce and building up stockpiles of inputs such as explosives. But there’s only so much a CEO can do in the face of lingering supply-chain disruptions spurred by the pandemic, the war in Ukraine and Chinese lockdowns. With labor, energy and supplies getting pricier industrywide, Barrick’s all-in sustaining costs rose 4.1% from the first quarter.
- Nutrien Ltd. named Ken Seitz as its new chief executive officer, months after a boardroom shakeup at the world’s largest fertilizer maker. Seitz was named interim CEO in January after former CEO Mayo Schmidt made a surprise exit after just eight months in the top job. The new role is effective immediately, according to a statement Monday from the Saskatoon, Saskatchewan-based company. “Nutrien’s record performance and disciplined execution of strategy during some of the most turbulent times we have seen globally underscore the strength of Ken Seitz’s leadership,” Russ Girling, chair of Nutrien’s board said in the statement. Seitz joined Nutrien in 2019 as the head of the company’s potash business and executive vice president. Before that, he was the CEO of Canpotex, a joint venture that markets potash outside North America for Nutrien and Mosaic Co.
- European equities climbed after falling the most in three weeks on Friday as investors brushed off the risks from the Federal Reserve’s rate increases and focused on robust earnings. The Stoxx Europe 600 rose 0.8% by 11:46 a.m. in London. Technology stocks were among the top advancers, as bond yields retreated. FTSE MIB Index underperformed with banking stocks after an Italian centrist party quit its alliance with the Democrats and Italy’s sovereign rating outlook was lowered to negative by Moody’s Investors Service. European stocks dropped on Friday after a blowout US jobs tempered recession worries and signaled the Fed is likely press on with steep interest-rate hikes to thwart inflation. San Francisco Fed President Mary Daly said the central bank is “far from done yet” in bringing down prices and suggested a 50 basis-point rate increase isn’t the only option on the table for the next meeting.
- US equity futures and European stocks climbed as bond yields pared their recent surge and investors weighed prospects of aggressive Federal Reserve rate hikes against reassuring earnings. S&P 500 and Nasdaq 100 contracts both rose by at least 0.5% as the 10-year Treasury yield slipped to 2.8%. Technology led the advance in Europe’s Stoxx 600 benchmark as rates on benchmark German and UK government debt fell. Friday’s stronger-than-expected US non-farm payrolls data added to the case for more Fed monetary tightening, and traders are looking to inflation numbers due this week for clues on the policy path. Rate-hike expectations have pushed up Treasury yields and the dollar, while a key part of the US bond curve is close to the most inverted level since 2000, suggesting investors foresee a recession as the Fed applies the brakes on the economy.
- Asian stocks edged lower as concerns about more aggressive interest-rate hikes by the Federal Reserve and fresh Covid lockdowns on the Chinese resort island of Hainan weighed on sentiment. The MSCI Asia Pacific Index dropped as much as 0.5% before paring, with losses in technology and consumer discretionary shares offsetting gains in materials firms. Hong Kong stocks led declines around the region, even as the government cut the hotel quarantine for inbound travelers to three days from seven. A better-than-expected July jobs report in the US fueled expectations of fasterFed monetary tightening, with investors monitoring this week’s inflation data for further clues. Meanwhile, the lockdowns in China’s Hainan province have stranded tens of thousands of tourists, dealing a blow to its duty-free retail industry.
- Oil swung between gains and losses in volatile summer trading as investors continue to weigh the potential hit to demand from an economic slowdown. West Texas Intermediate was down 0.7% near $88 a barrel, after earlier rising above $90. Investors have backed away from commodities in recent months as slowing growth fuels concern that energy usage will drop, including for gasoline. That helped WTI to sink by almost 10% last week. One of the market’s most bullish voices, Goldman Sachs Group Inc., cut its near-term price forecasts. The bank previously expected $140 for Brent in the third quarter, but now sees $110. It said it remains bullish, however, as stockpiles continue to decline and prices haven’t yet reached a level at which demand is being destroyed.
- Gold held its biggest decline in two weeks after strong US jobs growth tempered recession fears, suggesting the Federal Reserve is likely to persist with steep interest-rate hikes to curb inflation. Bullion dropped 0.9% on Friday as US nonfarm payrolls jumped by more than double what economists had forecast. That spurred gains in the dollar and Treasury yields, reducing the appeal of non-interest-bearing gold. The data support the case for the Fed to raise its benchmark rate by 75 basis points next month, matching the moves it made in June and July. It also means the central bank may need to keep borrowing costs higher for longer, contrary to market expectations for rate cuts in 2023. US inflation figures later this week will provide more clues on the likely path.
- European corn futures have become more expensive than wheat, a rare occurrence highlighting the toll that drought is taking on the region’s fields. European corn futures have become more expensive than wheat, a rare occurrence highlighting the toll that drought is taking on the region’s fields. November corn futures in Paris, which track supply after the next harvest, traded at 323 euros ($329.44) per ton. That puts them ahead of December milling-wheat futures, with the ratio reaching the highest since 2017.
- Pfizer Inc. has agreed to buy Global Blood Therapeutics Inc., the maker of a drug for sickle-cell disease, in a deal worth $5.4 billion. The drug giant will pay $68.50 for all outstanding shares of Global Blood, the companies said Monday in a statement before US markets opened. The boards of both companies have unanimously approved the transaction. Pfizer will gain Oxbryta, Global Blood’s therapy for sickle-cell disease, a painful and sometimes life-threatening condition that mainly affects Black people. The drug was approved in the US in November 2019 and is has been cleared in the European Union and other countries. Net sales for Oxbryta were approximately $195 million in 2021, according to the statement.
- President Joe Biden and his party finally scored the win they’ve been waiting for heading into the November congressional elections. But it’s uncertain it will be enough to save them from the nation’s sour mood over inflation. The tax and climate bill passed by the Senate Sunday was a shadow of the $10 trillion plan progressives sought more than a year ago. Nonetheless it represents a cornerstone achievement of the president’s first term, even if the White House stayed on the sidelines as Senate Majority Leader Chuck Schumer and two moderate Democrats, Joe Manchin and Kyrsten Sinema, shaped its final form.
- SoftBank Group Corp.’s Masayoshi Son said he plans widespread cost cutting at his Japanese conglomerate and its Vision Fund investment arm after a record $23.4 billion loss on plunging portfolio valuations and foreign currency losses. The Tokyo-based company lost the vast majority of that money — $17.3 billion — in the Vision Fund, as it marked down the value of holdings such as Coupang Inc., SenseTime Group Ltd. and DoorDash Inc. SoftBank also reported a $6.1 billion foreign exchange loss because of the weaker yen. The 64-year-old struck a darkly somber tone after the results, taking responsibility for buying into startups at the height of the market and pledging to slash expenses to get back on track. Son said he will review “everything” for potential cuts without any “sacred cows.” SoftBank will scrutinize senior and junior employees in both front and back offices to an extent never experienced before.
- India seeks to restrict Chinese smartphone makers from selling devices cheaper than 12,000 rupees ($150) to kickstart its faltering domestic industry, dealing a blow to brands including Xiaomi Corp. The move is aimed at pushing Chinese giants out of the lower segment of the world’s second-biggest mobile market, according to people familiar with the matter. It coincides with mounting concern about high-volume brands like Realme and Transsion undercutting local manufacturers, they said, asking not to be identified discussing a sensitive matter. Exclusion from India’s entry-level market would hurt Xiaomi and its peers, which in recent years have increasingly relied on India to drive growth while their home market endures a series of Covid-19 lockdowns that crippled consumption. Smartphones under $150 contributed to a third of India’s sales volume for the quarter through June 2022, with Chinese companies accounting for up to 80% of those shipments, according to market tracker Counterpoint.
- A dimming earnings outlook is at odds with the recent rebound in stock markets, according to strategists at Morgan Stanley and Goldman Sachs Group Inc. Both Morgan Stanley’s Michael J. Wilson and Goldman’s David J. Kostin expect corporate profit margins to contract next year given unrelenting cost pressures, they wrote in separate notes. According to Wilson, who has been one of the most vocal bears on US stocks, “the best part of the rally is over.” The forecasts come on the heels of a better-than-feared second-quarter earnings season, which sparked a sharp rally in US stocks last month as investors bet that margins could withstand inflationary pressure. Optimism around a dovish tilt in Federal Reserve policy amid weaker economic data has also lifted sentiment.
- Whirlpool Corp. has agreed to buy Insinkerator, Emerson Electric Co.’s waste-disposal business, in a $3 billion transaction. The all-cash deal is expected to close in the fourth quarter of this year, subject to regulatory approvals, the company said in a statement Monday. It’s expected to add about $1.25 to Whirlpool’s earnings per share in its 2023 fiscal year. The acquisition comes as Whirlpool conducts a review of its business to focus on segments with high growth and margin potential while centering its efforts on the Americas and India. It announced the sale of its Russian operations in late June.
- Shipping in the Taiwan Strait began to return to normal on Monday, though China’s announcement of a new military exercise near the island signaled that risks remain for the industry. More than 40 vessels have transited through a China military drill zone south of Taiwan’s main port since Saturday, according to ship-tracking data compiled by Bloomberg. The latest ship positions show four of the total six zones being traversed. Shipping in the Taiwan Strait, a key route for supply chains and commodities, has faced uncertainty and delays since Beijing began its most provocative military drills in decades in the wake of House Speaker Nancy Pelosi’s trip to Taiwan last week. Some shipowners barred their vessels from transiting the strait, while others navigated around the drill zones. Vessels had also been hesitant about approaching the major port of Kaohsiung in southern Taiwan, seeking to avoid the large drill zone located just offshore.
- Apple Inc., which used to acquire a company every three or four weeks, has dramatically slowed its dealmaking in the past two years, a sign the tech giant is being more choosy in the face of a shaky economy and heightened government scrutiny. The company spent just $33 million on payments connected to acquisitions in its last fiscal year and $169 million in the first nine months of the current year, according to regulatory filings. That’s down from $1.5 billion in fiscal 2020. Apple is famous for avoiding the kind of blockbuster acquisitions that have enticed its Silicon Valley peers. But the company has spent much of its history snapping up promising startups, some of which formed the basis for popular features such as Siri and Face ID. Just last February, Chief Executive Officer Tim Cook noted that Apple had acquired 100 companies in the past six years — more than one a month on average.
- Buyout firm Vista Equity Partners agreed to acquire tax-management software provider Avalara Inc. for $8.4 billion including debt. Vista will purchase Seattle-based Avalara for $93.50 per share in cash, according to a statement Monday, which confirmed an earlier Bloomberg News report. The offer represents a 27% premium to Avalara’s closing price on July 6, the last trading day before news of a potential transaction first emerged. Private equity has been aggressively going after technology companies, which have seen their valuations plummet amid a broader market selloff in recent months.
- Norway is working on a mechanism to preserve its low hydropower reservoirs, effectively limiting electricity exports to western Europe just as its energy crunch deepens. Refilling dams will be prioritized over power production when levels fall below seasonal averages, Petroleum and Energy Minister Terje Aasland said in a statement on Monday. The country is one of Europe’s top exporters of electricity, but water levels in southern Norway are already so low that the government says it needs to act now to prevent domestic shortages this winter. As Europe’s energy crisis worsens, any restriction would be yet another blow for nations from Germany to the UK who rely on cheap Norwegian hydropower to help keep the lights on.
- Chinese exports to Russia are back near levels seen before the Kremlin’s invasion of Ukraine, propelling a rebound in trade that’s helped cool off a historic rally in the ruble. Russia bought $6.7 billion of goods in July from China, an increase of more than a third from the previous month and up by more than an annual 20%. By contrast, its imports from Russia — which surged in March-May — rose only slightly last month after a drop in June, according to data from China’s customs authority. Chinese goods are filling the niche left by the exodus of western brands after the war with Ukraine prompted sweeping financial and trade sanctions against Russia.
- Electric vehicle and renewable energy stocks rallied in premarket trading on Monday after the US Senate passed a key tax, climate and health-care bill, which Democrats called the largest investment in fighting climate change ever made in the country. Tesla Inc. led the charge with its stock up 2.6%, with fellow EV makers Rivian Automotive Inc. and Lucid Group Inc. and Detroit-based automakers Ford Motor Co. and General Motors Co. also trading higher. The bill extends a popular $7,500 per vehicle consumer tax credit for the purchase of electric vehicles, though new cars that cost more than $55,000 for pickups and $80,000 for SUVs won’t qualify for these credits. Renewable energy companies also stand to benefit from generous tax credits, sending shares of solar energy firms First Solar Inc., ReneSola Ltd. and SunRun Inc. higher in trading before the bell. Meanwhile, shares of hydrogen and fuel cell company Plug Power Inc. were up 2.4%.
- Bitcoin spearheaded a rally in crypto tokens Monday as investors turned to digital assets in the wake of robust US jobs data. The largest cryptocurrency by market value rose as much as 4% above the $24,000 mark by mid-morning trading in London, while Ether was up 3% at around $1,770. The sector was buoyed alongside similar moves in European stocks and US equity futures after the strong payrolls print suggested the world’s biggest economy may avoid a hard landing even as the Federal Reserve tightens aggressively. Altcoins added to the sea of green, Bloomberg pricing data showed, with Solana’s SOL, Polkadot’s DOT and Avalanche’s AVAX all gaining more than 3% in the past 24 hours.
“Do what is right, not what is easy nor what is popular.” —Roy T. Bennett
*All sources from Bloomberg unless otherwise specified