Google monopolist, US inflation within expectations, rising oil reserves and other news
Market Reviews
• Moderate U.S. inflation readings this week bolstered market confidence that the Fed will cut borrowing costs for the first time in four and a half years in September, but there remains debate over whether policymakers will opt for a broad cut of 50 basis points or a more standard cut. cut by a quarter point. However, minds can change quickly. The estimated probability of a 50 basis point cut fell to 36%, down from 50% just a day earlier, following a moderate but potentially sticky CPI reading. It rose to 71% earlier this month when surprisingly weak US employment data roiled global markets across all asset classes.
• US inflation as expected. There were no surprises
US CPI Core (YoY): +3.2% (expected +3.2%), in June it was +3.3%.
US CPI (YoY): +2.9% (expected +3.0%), in June it was +3.0%
Eurozone GDP grew by 0.6% y/y, as expected
Inflation in the UK rose from 2.0% to 2.2% (expected 2.3%)
Core CPI fell from 3.5% to 3.3% (3.4% expected).
• Today, retail sales are a key indicator, given that consumption drives about two-thirds of U.S. economic growth. We'll also hear from some regional Fed officials, including St. Louis Governor Alberto Musalem and Philadelphia Governor Patrick Harker.
• The dollar fell against the euro overnight to its lowest level since late last year. Sterling was even weaker, falling about 0.5% against the single European currency. The reason was weaker-than-expected consumer inflation in the UK, which led to speculation about a faster and deeper interest rate cut by the Bank of England.
• The market reacted neutrally to the inflation data - there were no unpleasant surprises. The VIX fear and greed index is gradually returning to normal.
• Berkshire may have completed its sale of Apple stock, holding exactly 400 million shares. Buffett holds the same amount of Coca-Cola shares. They say he likes round numbers. Berkshire is buying shares of Ulta Beauty and Heico, selling Snowflake and increasing its position in insurer Chubb in the second quarter.
• Telegram turns 11 today. On August 14, 2013, the messenger appeared in the App Store and from that moment its great history began. The billion user mark is expected to be reached by the end of the year.
• The Norwegian sovereign wealth fund made a profit of $138 billion in the first half of the year. This is what it means to manage pension savings correctly.
• The US Department of Justice is considering the division of Alphabet after Google was recognized as a monopolist in the field of online search, Bloomberg writes. GOOGL shares fell 2% yesterday. If the Justice Department moves forward with its split plan, the most likely units to be sold would be the Android operating system and the Chrome web browser, the people said. Officials are also considering a forced sale of AdWords, the platform the company uses to sell text-based advertising. Wall Street actually loves spin-offs, but probably isn't counting on one with Google any time soon. And there's not even a guarantee that the court will approve any motion to break up Google. It will be at least several more years before the true consequences of this case become known.
• Mars enters into a deal to buy Pringles maker Kellanova for more than $29 billion - WSJ. The deal will link two major food companies in one of the biggest deals of the year. K shares were up 8% yesterday.
• Victoria's Secret shares rose 16% yesterday. The lingerie retailer has announced the appointment of Hillary Super as CEO, effective September 9.
• Elon Musk’s startup xAI introduced a new chatbot Grok-2 - FT. The performance of the Grok-2 is considered better than the Meta and Anthropic models, according to the LMSYS rating. It will be available to paid X subscribers.
• US crude oil inventories rose after six weeks of decline - WSJ. Commercial crude oil inventories rose 1.4 million barrels over the past week, defying analysts' expectations for a fall, but remain about 5% below the five-year average.
• German defense giant Rheinmetall AG will acquire the American manufacturer of military tracked systems Loc for $950 million amid record growth in the arms market after the Russian invasion.
• Avon filed for bankruptcy. This comes after more than 380 lawsuits alleging that talc in Avon products causes cancer. Avon Products chief restructuring officer Philip Gund said the company has already spent $225 million on defense against personal injury claims and settlement payments. The company now does not have “sufficient liquidity to pursue litigation and/or settlement” of the cases.
• Nubank's earnings growth drives rally, outweighing credit concerns. Shares in Nu Holdings, one of the world's largest digital banks, rose after second-quarter profit more than doubled from a year earlier, eclipsing analyst concerns over rising delinquency rates and falling provisions for bad loans.
• The Hollywood union has reached an agreement with advertisers to reproduce actors' voices using artificial intelligence - Reuters. Hollywood actors' union SAG-AFTRA announced Wednesday an agreement with online talent platform Narrativ that will allow actors to sell advertisers the rights to reproduce their voices using artificial intelligence.
• Apple finally allows Spotify to show pricing information to EU iOS users - Reuters. After much controversy earlier this year, Spotify on Wednesday said it had received permission from Apple to display pricing information in its iOS app to EU users. The company does not agree to Apple's new business rules under the EU Digital Markets Act.
• In July 2024, the total capitalization of the cryptocurrency market grew by 6%. According to analysts, the reason was Germany's sale of 50,000 BTC to centralized exchanges and Donald Trump's statement at the Bitcoin Conference 2024.
• Cryptocurrency players have bet nearly $600 million on the 2024 election - TechCrunch. Vice President Kamala Harris is seen by many as the front-runner, but cryptocurrency players are investing in the chances of a Trump presidency.
• Tencent's profits fuel hopes for a revival of China's gaming industry. Although its performance also shows consumer malaise that has emerged during a sustained economic downturn.
• Meta's Instagram failed to remove offensive comments aimed at female politicians. Who are potential candidates for the 2024 US elections, according to a report by the non-profit Center to Counter Digital Hate.
• CSCO shares rise 6% after the report. Company executives have touted the rise of AI. But the real star of the show was its strong profitability, driven by both growth in corporate orders and cost cuts. Cisco will cut 7% of its workforce.
• GDP estimates and a number of other data, including industrial production, will be published today. Traders are divided on the likelihood of another Bank of England rate cut in a month after the Bank of England launched a campaign to cut interest rates in a difficult decision earlier this month.
• In the shorter term, Norges Bank will announce its policy today and its officials are expected to delay any easing as they fear further weakening of the Norwegian krone.
Key events that could impact markets on Thursday:
- A report on retail sales in the US for July will be published. He will talk about the power of consumers. Growth is expected to be 0.3% m/m after 0% in June.
- St. Louis Fed President Alberto Musalem will give a speech on the US economy and monetary policy.
- UK GDP, services, industrial production, manufacturing output.
- Norges Bank Policy Decision
- Industrial Production, Initial Jobless Claims, Philadelphia Fed PMI
- National Association of Home Builders releases housing market index for August. The consensus estimate is 42.5, slightly higher than in July. A reading below 50 indicates developers face a bleak outlook for the housing market over the next six months.
- DE and WMT will report.
International reviews
• China's home sales data suggests continued weakness in the real estate sector. New home prices in China's 70 major cities fell 5.3% year-on-year in July, faster than the 4.9% year-on-year fall recorded in June, according to China's National Bureau of Statistics.
Of the 70 cities surveyed by the statistics bureau, 66 reported monthly price declines in July, down from 64 cities in June.
Unemployment in China rose from 5% to 5.2% (5.1% expected).
Industrial production slowed from +5.3% y/y to +5.1% (expected +5.2%).
Retail sales accelerated from +2% to +2.7% y/y (+2.6% expected).
• Japan's economy grew last quarter on healthy consumer spending and business investment. Japan's GDP grew at an annual rate of 3.1% between April and June, recovering from a contraction in the previous quarter. Exports grew by 5.9%.
• The yen has strengthened and this will have a negative impact on both exports and Japan's GDP in the 3rd quarter.
• Protests took place in Slovakia against Fico's government. Thousands of people protested in Bratislava on August 13 against the left-wing populist government of Prime Minister Robert Fico and Culture Minister Martina Simkovicova.
• German prosecutors issued an arrest warrant for a Ukrainian due to the Nord Stream bombing. The wanted man is Vladimir S., a diving instructor who until recently lived near Warsaw, say the authors of the investigation, conducted jointly by the publications ARD, Süddeutsche Zeitung and Die Zeit.
• The United States asked Turkey to influence Iran in order to ease tensions in the Middle East. US Ambassador to Turkey Jeff Flake said:
• Kamala Harris is already ahead of Trump in 6 out of 7 key states. Which will decide the outcome of the election - data from a Cook Political Report survey.
• Chinese government emissary Li Hui discussed the “Ukrainian crisis” with the Vatican. “The parties also exchanged views on the current situation in the Ukrainian crisis and the process of peace negotiations.” Li Hui "praised the Vatican's consistent commitment to mediating the Ukrainian crisis and providing humanitarian assistance."
• English will become the main foreign language in Mongolian schools from September. Previously, in most schools in Mongolia, the main foreign language for learning was Russian.