July 19, 2023
- Dockworkers on Canada’s west coast are on strike again after a contract reached last week was rejected by the union. The International Longshore & Warehouse Union caucus has voted down the terms recommended by a federal mediator, the union representing 7,000 workers said in a release Tuesday. Workers were set to return to the picket line at 4:30 p.m. Vancouver time. The union’s decision means the resumption of a labor dispute that had paralyzed trade out of west coast ports including Vancouver, Canada’s busiest. Canadian Manufacturers & Exporters, a trade group, had estimated the strike caused daily trade disruptions amounting to C$500 million ($380 million).
- Onex Corp. is seeking $750 million for a new fund dedicated to transportation investments, people familiar with the matter said, a test of its ability to raise money in a tough climate for private equity. The Toronto-based firm has hired eight people for the fund, led by Wes Dick, a former senior executive at aircraft leasing firm BBAM LLC. Onex is targeting a 12% net internal rate of return, said one person, who asked to remain anonymous due to the confidentiality of the matter. Onex announced its plans last year to launch a strategy that targets middle market transportation businesses — looking for investments in the aviation, road, rail, maritime and intermodal sectors, primarily in North America and Europe.
- UK and European shares gained as British inflation fell below 8% for the first time in more than a year, boosting sentiment. The Consumer Prices Index in the UK was 7.9% higher than a year ago in June, a sharp drop from the 8.7% reading in May, the Office for National Statistics said Wednesday. Economists had expected a decline to 8.2%. The FTSE 100 Index advanced 1.4% as of 10:55 am in London following the inflation data, which revived speculation about how many more rate hikes the Bank of England will deliver to contain prices. The more domestically-focused FTSE 250 Index rose 3.1%, the most in almost six months. Across Europe, the Stoxx 600 Index was 0.5% higher, with real estate and consumer stocks outperforming, while basic resources and media declined.
- US futures were flat after Wall Street stocks rose on Tuesday, as results from Bank of America Corp. and Morgan Stanley bolstered bank shares. AT&T Inc. rose in US premarket trading after the telecommunications company reassured investors by saying less than 10% of its nationwide copper-wire telecom network had lead-clad cables. Carvana Co. jumped after the used-car retailer reached an agreement to restructure debt and reported second-quarter revenue that beat estimates.
- Asian stocks erased early losses, aided by a late recovery in Hong Kong equities and gains in Japanese shares. The MSCI Asia Pacific Index was little changed after declining as much as 0.4%, with sub-gauges of industrials and consumer discretionary stocks climbing the most and technology shares falling. Benchmarks in Japan advanced more than 1% after the nation’s central bank governor indicated a continuation of easy monetary policy until there’s a shift in its assessment for stably achieving its inflation target. Hong Kong’s key gauge pared most of its losses amid buying by onshore Chinese investors. Markets in Malaysia and Indonesia were shut for holidays. Stocks rose elsewhere in Southeast Asia, while Taiwan’s benchmark slipped.
- Oil rose to trade around $80 a barrel in London as traders weighed signs of tightening in the global crude market against a shaky economic backdrop. Brent futures added 0.6% in thin trading volumes on Wednesday. It rose the previous session as data showed that Russia’s crude shipments fell to a six-month low in the four weeks to July 16. The curbs suggest that Moscow is fulfilling a pledge with its partners in the OPEC+ coalition to rein in supplies. Oil has been buffeted over the past couple of months as investors weigh China’s stuttering recovery against supply cuts by OPEC+ heavyweights Saudi Arabia and Russia, and indications that the Federal Reserve may be close to concluding a cycle of interest-rate hikes. Prices have made a decisive break higher since late June on signs that the market may finally be tightening, but are still lower for the year.
- Gold hovered near the highest since May, as investors weighed mixed US data that could impact inflation, along with the potential for interest rates there to peak sooner than expected. Swaps traders have been positioning for another hike in July for weeks, a scenario that’s largely already been priced in for gold. Still, the choppy inflation picture is making it difficult for investors to reach a consensus on when US monetary tightening will halt, with higher rates typically negative for non-interest bearing bullion. Spot gold was little changed at $1,977.52 an ounce as of 9:50 a.m. in London, after ending Tuesday up 1.2%. The Bloomberg Dollar Spot Index strengthened for a second day. Silver, palladium and platinum were all steady.
- Goldman Sachs Group Inc.’s profit plunged as the Wall Street giant notched one of its weakest quarters for profitability under Chief Executive Officer David Solomon. Earnings fell 58% on an investment-banking slump, real estate markdowns and a goodwill writedown in the consumer business, which houses the GreenSky lending business. Return on equity, a key measure of profitability, slid to 4% in the quarter — the worst among the top US banks. The firm had been actively tamping down expectations heading into the report, prompting analysts to slash their estimates for quarterly profit by almost half since mid-June. Shares of the company fell 2% in early New York trading.
- Carvana Co. reached a deal to restructure debt and filed to sell as much as $1 billion of shares as the used-car retailer tries to regain its footing following a pandemic boom and bust. The agreement with bondholders announced Wednesday will eliminate about 83% of Carvana’s 2025 and 2027 unsecured note maturities and lower required cash interest expense by $430 million a year for the next two years. The used-car retailer expects to reduce its total debt outstanding by more than $1.2 billion. The deal sent Carvana shares soaring as much as 48% in premarket trading, though they pared gains after the company filed for the stock offering. It’s planning to sell 35 million shares and expects at least $350 million in gross proceeds.
- Joe Biden is announcing three new federal actions, including updated guidance on antitrust enforcement, as part of his administration’s push to lower costs for Americans while he’s pursuing reelection in 2024. At a White House event Wednesday, Biden will put forth a partnership with state attorneys general to fight price-gouging on agricultural goods and an effort to reduce rental housing fees. As a part of the rollout, Zillow, Apartments.com, and AffordableHousing.com will unveil new website features that display the fees associated with applying for certain apartments to prospective tenants, a move the White House views as significant in the country’s tight rental market.
- US mortgage rates fell back below 7% last week, largely erasing the prior week’s surge. The contract rate on a 30-year fixed mortgage fell 20 basis points to 6.87% in the week ended July 14, according to Mortgage Bankers Association data out Wednesday. The group’s gauge of refinancing applications jumped 7.3% with the move. Even with the latest retreat, mortgage rates remain extremely elevated, tempering demand. The gauge of home-purchase applications fell 1.3%, while the overall measure of mortgage applications rose just 1.1%.
- North Korea launched two missiles into waters off its east coast in a show of anger hours after the US brought a submarine capable of firing nuclear ballistic missiles to a port in South Korea for the first time in about four decades. North Korea fired two, short-range ballistic missiles early Wednesday from a site near Pyongyang’s international airport at around 3:30 a.m. and 3:46 a.m., South Korea’s Joint Chiefs of Staff said in a statement. The missiles flew about 550 kilometers (340 miles), it said, calling the launches a “grave provocation.” The missile test escalated tensions on the peninsula after the USS Kentucky, an Ohio-class ballistic missile submarine, arrived in the South Korean port of Busan on Tuesday and North Korea detained a US soldier who intentionally walked across the border from the south side of a joint truce village in the Joint Security Area.
- Russia named a relative of Chechen leader Ramzan Kadyrov and an ally of President Vladimir Putin to head the seized local operations of France’s Danone SA and Denmark’s Carlsberg A/S. Yakub Zakriev, 32, who’s Chechnya’s agriculture minister, is now listed as general director of Danone Russia, according to the official Spark-Interfax disclosure service. He’s a nephew of Kadyrov, the Chechen ruler who’s a protege of Putin and who has been repeatedly accused of human rights violations in the southern Russian republic. The Federal Property Management Agency also appointed Taimuraz Bolloyev to lead Carlsberg’s Baltika Brewing Co., according to a spokesman for the Russian company. Russia’s RBC and Vedomosti newspapers reported the appointments earlier.
- Broadcom Inc.’s proposed $61 billion takeover of VMware Inc. was provisionally waved through by the UK’s antitrust watchdog, easing the path toward one of the largest technology deals in history. The Competition and Markets Authority said it took an initial view that the deal wouldn’t substantially reduce competition in the supply of key computer server products, according to a statement published Wednesday after an in-depth review. It comes just days after the CMA appeared to rethink its tough stance on tech mergers by opening the door to new talks with Microsoft Corp. on its $69 billion Activision Blizzard Inc. deal.
- Alibaba Group Holding Ltd. injected $845 million into Lazada, its online retail business in Southeast Asia that’s facing intensifying competition from rivals such as Sea Ltd. and Amazon.com Inc. The capital infusion, disclosed in a regulatory filing in Singapore on Wednesday, brings the total that Alibaba has invested in the arm to several billion dollars since it gained control over the business in 2016. Alibaba and Lazada representatives didn’t respond to requests for comment. Lazada is part of the international online shopping unit that Alibaba is planning to potentially take public in the US. The Chinese tech behemoth is splitting into six parts to spur growth of its various businesses, which include e-commerce, logistics and the cloud.
- Even as UBS Group AG plans extensive job cuts for Credit Suisse’s workforce, there’s at least one place where it’s growing: the business of buying leveraged loans and bundling them into bonds. The bank is looking to bring on professionals including credit analysts for the collateralized loan obligation team in its asset management unit, according to people with knowledge of the matter. It’s also worked to keep key staff in the business, the people said. The Swiss bank earlier this year negotiated to retain John Popp, CSAM’s global head and chief investment officer of its Credit Investments Group, which focuses on high yield credit, according to people with knowledge of the matter. Popp effectively oversees the CLO group, and will join the investment management team at UBS Asset Management, reporting to Barry Gill, head of investments at the UBS unit, according to two of the people.
- The Justice Department appears to be on a fast track to charge former President Donald Trump with election interference before a potential case is brought in Georgia next month. The avalanche of legal troubles facing Trump comes just as the Republican presidential primary season heats up. Special Counsel Jack Smith notified Trump this week that he’s a target in the department’s investigation into efforts to overturn the 2020 election results, meaning that a new round of federal charges against the former president could be coming within days. The move signals that the Justice Department is aiming to get ahead of Atlanta-area district attorney Fani Willis, who has indicated she could announce charges against Trump and others in August for interfering in Georgia’s 2020 election.
- The strong long-term rate of return in US stocks is likely to run out of steam, according to Sanford C. Bernstein strategists. US equities are now expected to show an annualized total return of 4% over the next decade, much lower than the 12% seen in the previous 10 years, strategists Sarah McCarthy and Mark Diver wrote in a note. Their projection is based on one valuation measure: a long-term cyclically-adjusted price-to-earnings ratio, known as the Shiller PE. At 29.3 as of June, the index level is in the 94th percentile, the strategists said. A higher reading has generally equated to lower long-term equity returns.
- First Horizon Corp. said deposits topped analyst estimates as it reported second-quarter earnings following the dissolution of a deal by Toronto-Dominion Bank to buy the regional lender. The bank reported $65.4 billion in deposits at the period-end, surpassing the $61.61 billion analyst estimate, according to a statement. It also got an anticipated $225 million gain tied to the termination of its takeover by Toronto-Dominion Bank and reported merger-related costs of $30 million. This is the first quarter of earnings First Horizon has reported since TD abandoned the deal in May to buy the Memphis, Tennessee-based lender. The $13.4 billion deal, which would have been TD’s largest acquisition, collapsed after the Canadian lender said it couldn’t see a clear path to getting regulatory approval.
- Tesla Inc. investors have pushed its market value up by $540 billion this year, shrugging off shrinking profit margins as price cuts drive sales. Second-quarter results may force a rethink. When the electric vehicle-maker reports earnings on Wednesday, Wall Street analysts are expecting its automotive gross margin to come in at around 20%, according to the average of estimates compiled by Bloomberg. That would be a drop from around 28% in the same period a year ago. Dramatic price cuts on its vehicles have helped boost sales for Tesla but have weighed on profitability. With the stock trading at 70 times forward earnings — compared to around 5.8 times for General Motors Co. and about 8 times for Ford Motor Co. — Tesla faces scrutiny as to how it can maintain the lead in a market of slowing sales and rising inventories.
- Kering SA shares rose the most in eight months on optimism the departure of Gucci Chief Executive Officer Marco Bizzarri will mark a step toward reviving the once high-flying Italian label. Bizzarri, who’s been running Gucci since 2015, will depart on Sept. 23, Kering said Tuesday. He’ll be replaced by Jean-Francois Palus, currently group managing director, who’ll lead the brand for a transitional period. Bizzarri’s departure comes after growth at Gucci — which accounts for about two-thirds of Kering’s profit — lagged behind rivals in recent years. Its previous creative director, Alessandro Michele, left in November and was replaced by Sabato de Sarno, who’s scheduled to unveil his first collection for the brand in September.