October 18, 2023
- Canada’s government is examining new measures to rein in short-term rental services such as Airbnb Inc. as policymakers try to cool inflation in apartment and house rents. Finance Minister Chrystia Freeland said Tuesday the government is looking at what laws or regulations it can bring in to curb the use of platforms that offer rented accommodation for a few days or weeks at a time. She heaped praise on the province of British Columbia, which this week introduced a proposed law to restrict many residents from renting their investment properties on Airbnb, Flipkey and similar services. Airbnb said more housing supply is needed, but disputed the idea that short-term rentals are a major contributor to the current shortages. The San Francisco-based company criticized the proposed BC law, saying it would “take money out of the pockets of British Columbians, make travel more unaffordable for millions of residents who travel within BC, and reduce tourism spending in communities where hosts are often the only providers of local accommodations,” according to a written statement attributed to Alex Howell, its policy manager for Canada.
- Canada Pension Plan Investment Board said Alberta’s provincial government is engaged in “troubling” tactics that are aimed at building support for withdrawing from the national pension plan, rather than soliciting genuine feedback from the public on the idea. Alberta is running advertising and surveys as part of a consultation process on whether to start its own retirement scheme and exit the C$575 billion ($421 billion) Canadian one. In the process, it’s highlighting only the potential upsides of an Alberta Pension Plan without providing information on risks or drawbacks, Michel Leduc, a spokesman for CPPIB, said in a letter to Jim Dinning, the official who’s leading a provincial panel on the matter. The advertising campaign “is undisguised in its bias toward the APP,” Leduc said. “It highlights supposed benefits that would arise only if a narrow set of assumptions prove to be correct. This is despite many experts discrediting the analysis upon which the advertisements are based.”
- European stocks edged lower on Wednesday, weighed down by disappointing results from ASML Holding NV and Swiss industrial conglomerate ABB Ltd., and as traders assessed escalating tensions in the Middle East. The Stoxx Europe 600 fell 0.1% by 9:45 a.m. in London. Chip equipment firm ASML Holding NV dropped as much as 5% after its order intake plunged in the third quarter amid a slump in the semiconductor industry. ABB declined the most in two years after posting worse-than-expected earnings and flagging slowing orders in Europe and China. The drop also weighed on the broader industrial goods sector. Europe’s stock benchmark has been treading water this month with sentiment souring following Hamas’s attack on Israel. A planned summit between President Joe Biden, who arrived in Israel Wednesday, and Arab leaders was canceled following an attack on a hospital in Gaza. Market positioning has turned more cautious and investors have rotated into defensive sectors and value stocks.
- S&P 500 and Nasdaq 100 contracts lost more than 0.4%. Crude’s advance accelerated after the foreign minister of Iran, a major oil exporter, called for an embargo against Israel. Gold prices rose as investors snapped up haven assets. Amid the geopolitical concerns, traders are also tracking the latest earnings. Procter & Gamble Co. gained in premarket after organic sales topped estimates. United Airlines Holdings Inc. fell 6%, leading declines for other carriers, after the company warned of a potential sharp profit impact from suspended flights to Tel Aviv.
- Asian equities fell as concerns over the Middle East conflict and China’s property sector stress weighed on investor sentiment. The MSCI Asia Pacific Index declined as much as 0.5% as investors assess exposure to geopolitical risks should the Israel-Hamas war spreads to the region and leads to a further rise in crude oil prices. Chinese stocks closed lower, despite better-than-expected GDP growth in third quarter, as property investment and home sales data underwhelmed, and investors turned their attention to the ongoing earnings season. The CSI 300 Index declined as much as 0.8% and closed at its lowest level in a year. A Bloomberg gauge of Chinese property stocks sank to its lowest level in 14 years, as Country Garden said that it was unlikely to make interest payment on its offshore debt.
- Oil leaped higher after Iran called for an embargo against Israel by Muslim countries, following a deadly explosion at a Gaza hospital that raised the risk of wider hostilities in the Middle East. Brent futures rose 3% to trade near $93 a barrel. Iran’s foreign minister called for a full and immediate boycott of Israel by Muslim countries, including an oil embargo on the country. While Israel’s oil imports are small in the context of global supply and little comes from the Middle East, the comments were significant in that they marked verbal escalation over the war between Israel and Hamas, which is considered a terrorist organization by the US and European Union.
- Gold jumped to the highest level in four weeks as the intensifying conflict in the Middle East bolstered haven demand, with hopes for a diplomatic resolution deteriorating after a deadly explosion in Gaza. Gold climbed even as data showed US retail sales exceeded all forecasts and industrial production strengthened last month. The figures reinforced the case for the Federal Reserve to keep interest rates higher for longer. Higher borrowing costs are typically negative for gold. Spot gold climbed 1.1% to $1,943.57 an ounce as of 11:14 a.m. in London. The Bloomberg Dollar Spot Index was steady. Silver, platinum and palladium gained.
- UK inflation failed to slow as forecast in September as rising oil prices offset downward pressures from food costs. The Consumer Prices Index rose 6.7% from a year earlier, the same pace as the previous month, the Office for National Statistics said Wednesday. Economists had been expecting inflation to fall back to 6.6%. The miss firms up the case for the Bank of England to leave interest rates at their highest level in 15 years for the forseeable future. Traders are betting the policy makers will leave the key rate unchanged next month, but that there’s a strong chance of one more hike early next year to ensure inflation falls back to the 2% target.
- BHP Group Ltd. agreed to sell two Australian coking coal operations to Whitehaven Coal Ltd. for at least $3.2 billion, as the world’s biggest miner extends its withdrawal from fossil fuels. Whitehaven will pay $3.2 billion for the assets, along with additional payments of up to $900 million contingent on realized pricing exceeding agreed thresholds, it said in a statement Wednesday. It is also considering selling a minority stake in the assets to global steel producers through a joint venture, it added. BHP co-owns the mines, which supply metallurgical coal to steelmakers in markets including China and India, in a 50:50 joint venture with Mitsubishi Corp. The bidding process for the two mines drew competition from rivals including Indonesia-based mining contractor Bukit Makmur Mandiri Utama PT, Stanmore Resources Ltd. and Peabody Energy Corp.
- President Joe Biden, in some of his first comments after arriving in Tel Aviv on Wednesday, suggested the Israeli military was not responsible for a deadly blast at a Gaza City hospital that left hundreds dead and spiked tensions across the Middle East. “I’m deeply saddened and outraged by the explosion at the hospital in Gaza yesterday. And based on what I’ve seen that appears as though it was done by the other team, not you,” Biden told Israeli Prime Minister Benjamin Netanyahu. The two sides have traded accusations over the explosion, with Hamas blaming an Israeli air raid and Israel pointing to a video of what its military said was a malfunctioning rocket shot by Palestinian militants. Outrage over the incident led to the cancellation of a planned summit between Biden and Arab leaders following his visit to Israel.
- Republican Jim Jordan’s hardball tactics cost him votes Tuesday in his campaign to be US House speaker, dragging out efforts to fill a congressional leadership vacuum into a third week. Twenty GOP holdouts withheld support from the ultra-conservative backed by former President Donald Trump on an initial ballot Tuesday. Republicans later postponed any more speaker votes until Wednesday at 11 a.m., a sign he wasn’t able to demonstrate momentum. The House has been paralyzed since the Oct. 3 ouster of Speaker Kevin McCarthy and unable to address an impending government shutdown and an escalating war in the Middle East since the Oct. 3 ouster of Speaker Kevin McCarthy.
- South Africa’s cabinet will consider a proposal on whether to include the Netherlands and Denmark in its landmark $8.5 billion climate-finance pact with some of the world’s richest nations. Expanding the so-called Just Energy Transition Partnership could give momentum to the implementation of an agreement that’s been bogged down by delays and opposition from South African coal miners since it was announced almost two years ago at the COP26 climate summit in Glasgow. The pact with the UK, US, France, Germany and the European Union to help South Africa reduce its reliance on coal, which is used to generate more than 80% of its electricity, is seen as a blueprint for deals agreed later with other coal-dependent developing nations such as Indonesia and Vietnam. South Africa is the world’s 14th-largest source of climate-warming greenhouse gases.
- Procter & Gamble Co. reported sales and profit that surpassed analysts’ estimates as higher prices bolstered the business despite a lower volume of products sold. Organic sales rose 7% in the quarter ended Sept. 30, the maker of Tide detergent and Pampers diapers said Wednesday. Analysts had projected growth of 5.8%, according to data compiled by Bloomberg. Profit also beat estimates. In the company’s statement, Chief Executive Officer Jon Moeller said P&G is on track for the higher end of its organic sales and adjusted earnings guidance in the current fiscal year. P&G’s results underscore shoppers’ willingness to continue spending in the face of persistent inflation and economic uncertainty. A 7% increase in prices bolstered sales, offsetting global shipment volumes that dropped 1%. In the US, volume rose by about 3%, according to Chief Financial Officer Andre Schulten.
- Nvidia Corp. suffered its worst stock decline in more than two months after the Biden administration stepped up efforts to keep advanced chips out of China, a campaign that includes restricting the company’s sale of processors designed specifically for the Chinese market. Nvidia warned that the new rules could hinder product development and cause other difficulties, though the changes aren’t likely to take a financial toll in the short term. The latest regulations, announced Tuesday, also limit exports to two Chinese artificial intelligence chip firms that are seen as rivals to US-based Nvidia. The rules — aimed at preventing China from accessing cutting-edge technology with military uses — cast a cloud over Nvidia shares and other US chip stocks.
- Oil refiners in China, the world’s largest crude importer, ramped up daily usage to highest rate on record last month, offering fresh evidence of robust consumption that may help to support global prices. Processing swelled to 15.54 million barrels of crude a day in September, according to Bloomberg calculations based on official data. The monthly volume was 12% higher on-year at 63.62 million tons. Crude has rallied in recent months, supported by OPEC+ supply cuts, signs of strong consumption and, more recently, the outbreak of the Israel-Hamas war in the Middle East. The International Energy Agency forecast earlier this month that daily world fuel consumption remains on track to rise by 2.3 million barrels this year to a record 101.9 million barrels, driven by China.
- A measure of US mortgage applications stumbled to an almost three-decade low as borrowing costs increased for a sixth-straight week, indicating further downside momentum for a battered housing market. The Mortgage Bankers Association’s overall index of applications to purchase or refinance a home slumped 6.9% in the week ended Oct. 13 to 166.9. That was the weakest reading since May 1995. The contract rate on a 30-year fixed mortgage edged up 3 basis points to 7.7%, marking the sixth-straight weekly advance, data out Wednesday showed. The rate on a five-year adjustable mortgage jumped 19 basis points to 6.52%, the second-highest in MBA data back to 2011.
- Investors have pushed Tesla Inc. stock higher for months despite deteriorating fundamentals. The electric-vehicle maker’s results later Wednesday will test that strategy. Tesla’s third-quarter profit estimates have plunged by nearly 50% this year amid aggressive price cuts aimed at stoking demand for its cars. Yet the stock has more than doubled over the same period, adding more than $420 billion in market value. The conflicting signals are the result of bets that the automaker led by Elon Musk will maintain its dominance in the fast-expanding EV market and emerge as a leader of self-driving cars and artificial intelligence. But Tesla’s rapidly eroding margins are raising doubts about the viability of maintaining sales growth by waging a price war. When Tesla reports after markets close, a closely watched number will be automotive gross margin. This measure of profitability in the core car-selling business, is expected to drop to about 19% from 28% in the same period a year ago, according to the average of analyst estimates compiled by Bloomberg.
- The Bank of Japan may scrap negative interest rates by the end of this year to adjust the currently excessive level of monetary easing, according to a former BOJ board member. “They could do it at any time and it won’t be a surprise, given the current economic recovery,” ex-board member Makoto Sakurai said in an interview Wednesday, explaining that real interest rates have fallen significantly. Under Governor Kazuo Ueda “the BOJ has appeared cautious, but they have steadily taken policy actions at a faster pace than expected,” Sakurai said. That’s why there’s a chance that the world’s last major central bank holding onto negative rates could get rid of the unorthodox policy as early as Oct. 31, Sakurai said. Raising the rate wouldn’t have much impact on the real economy compared with lifting the ceiling on 10-year yields for example, he added.
- China’s latest economic data put the government’s growth goal of about 5% well within reach and lessened the likelihood for more stimulus before the end of 2023. But the ongoing housing crisis remains a serious drag, clouding the outlook for next year. While third-quarter gross domestic product figures released Wednesday surpassed expectations on strong consumer spending, the data points to difficult months ahead for the world’s second-largest economy as efforts by President Xi Jinping’s government to stabilize the property sector and avert deflation have shown little effect. China’s economic challenges come in the face of persistent geopolitical tensions, as the US tightens curbs on advanced technology and Europe probes the country’s export dominance in electric cars. Economists surveyed by Bloomberg expect China’s growth in 2024 to slow to 4.5%.
- U.S. Bancorp said profit fell in the third quarter as the biggest US regional lender increased its provisions for credit losses. Adjusted earnings came in at $1.05 a share, above the $1 average analyst estimate but below the $1.18 posted in the same period last year, according to a statement from the Minneapolis-based bank Wednesday. Provisions for credit losses increased 42% from a year earlier, to $515 million. The bank reported results a day after it said it won approval from the Federal Reserve to retain its designation as a Category III bank on promises to shrink its balance sheet and reduce its risk profile, freeing it from more stringent regulations.
- Wall Street firms will soon face stiffer penalties for running afoul of US derivatives rules and more often admit their misconduct when settling with the Commodity Futures Trading Commission. When US regulators, including the CFTC, agree to resolve cases, financial companies are often allowed to pay fines while not admitting to the government’s allegations. But the commission’s top enforcement attorney, Ian McGinley, said Tuesday that the watchdog will start taking a tougher stance in negotiations. “For many years, the CFTC — and many other agencies — have resolved most matters on a no-admit, no-deny basis,” McGinley said in prepared remarks for a Tuesday speech in New York. “In negotiations, respondents should no longer assume that no-admit, no-deny resolutions are the default.”
- The Democrat-led Federal Communications Commission is heading into the next round of Washington’s longest-running fight over technology policy. On Oct. 19 the agency is slated to take a preliminary vote to reassert its authority to regulate broadband providers, clearing the way to pass a version of the net neutrality rules that it eviscerated during the Trump administration. For nearly two decades the tech policy world has fought over net neutrality—the principle that broadband providers should be prohibited from interfering with web traffic. It became a popular cause in Silicon Valley, then a mainstay issue during the Obama administration, when Democrats framed the rules as necessary to keep the internet open to all and to prevent cable and broadband companies from interfering with rivals’ web traffic and favoring their own content. Republicans and broadband providers have consistently said there’s little or no evidence of a problem. Further, they’ve described net neutrality as an unnecessary policy that will choke off investment, penalizing a sector that’s brought fast internet service to most US homes. Republicans have also said the FCC is overreaching: They point to the Trump-era FCC’s decision that said the agency lacked the authority to impose the Obama-era rules.
- Singapore’s financial regulator will conduct an on-site inspection of Credit Suisse Group AG after at least one of its customers was charged for money laundering in a scandal that has rocked the city-state. The local unit of Credit Suisse will be among banks the Monetary Authority of Singapore plans to examine to determine whether they properly handled the monitoring of wealthy clients, according to people familiar with the matter. Officials from the regulator are set to interview personnel and review documents within weeks, the people said, asking not to be identified as the information isn’t public. The planned inspection underscores the seriousness of the scandal that has ensnared at least 10 domestic and international banks in the Asian financial hub. More than S$2.8 billion ($2 billion) of assets from cash to jewelry have been seized from a group of alleged money launderers with Chinese origin.