• As regulators scrutinise FTX, rival exchanges try to reassure investors
Bitcoin and other cryptocurrencies remained under pressure following last week’s collapse of crypto exchange FTX while rival exchanges sought to reassure jittery investors of their own stability.
• Biden, Xi stress need to work together as they meet for talks ahead of G20
Chinese leader Xi Jinping and U.S. President Joe Biden met for long-awaited talks that come as relations between their countries are at their lowest in decades, marred by disagreements over a host of issues from Taiwan to trade.
• Elon Musk trial opens to decide fate of his $56 billion Tesla pay
Tesla CEO Elon Musk is scheduled to take the stand this week to defend his $56 billion pay package against shareholder allegations it was rigged with easy performance targets and that investors were duped into approving it.
• Russian software disguised as American finds its way into U.S. Army, CDC apps
Thousands of smartphone applications in Apple and Google’s online stores contain computer code developed by a technology company, Pushwoosh, that presents itself as based in the United States, but is actually Russian, Reuters has found.
• Electric vehicle makers burning cash, slammed by sky-high costs
Every time Lucid or Rivian Automotive sells an electric car, they are losing hundreds of thousands of dollars due to staggering raw material and production costs, their latest earnings statements showed.
BEFORE THE BELL
Wall Street futures declined amid fading expectations of a less aggressive Federal Reserve interest rate hike after Governor Christopher Waller said the central bank was not softening its fight against inflation. Falling risk appetite strengthened the dollar, while gold prices slipped. European shares made modest gains, as media stocks were boosted by Britain’s Informa. Japan’s Nikkei closed lower as investors booked profits and market heavyweight SoftBank tumbled after its Vision Fund investment arm reported another big quarterly loss. Oil prices fell due to surging coronavirus cases in China and firmer dollar.
STOCKS TO WATCH
• Embraer SA: The Brazilian planemaker reported a narrowed third quarter net loss while boosting its free cash flow outlook for the full year to reflect better-than-anticipated figures in the first nine months of 2022. Embraer posted an adjusted net loss of $17.62 million in the third quarter, narrowing from the 179.7 million-real loss seen a year ago despite net revenues dropping 3% to 4.87 billion reais. Apart from a boost to its free cash flow full-year outlook, the company said on Monday it was keeping all financial and delivery forecasts for 2022 unchanged heading into the fourth quarter, which tends to concentrate deliveries. The company increased its free cash flow outlook for the full year to $150 million or more from a previous estimate of $50 million or more, saying results so far have outperformed initial expectations.
• Mitsubishi UFJ Financial Group Inc, Mizuho Financial Group & Sumitomo Mitsui Financial Group Inc: The banking groups reported strong second-quarter profits on demand from overseas clients looking to lock in loans ahead of higher interest rates. Sumitomo Mitsui, Japan’s second-largest bank by assets, lifted its net profit forecast for the full year to March by 5% to 770 billion yen after posting an 8% profit increase for July-September. “Expectations for higher interest rates drove overseas clients, mainly in the United States, to lock in loans,” Sumitomo Mitsui CEO Jun Ohta told a press briefing. Lending in Japan was also brisk as companies made fresh investments as part of their post-pandemic business strategies, he added. Smaller rival Mizuho posted a 29% increase in quarterly net profit, also citing growth in lending overseas. Meanwhile, second-quarter net profit plunged 70.5% to 117.41 billion yen at Japan’s largest lender Mitsubishi UFJ Financial Group Inc because of a one-off accounting loss related to the sale this year of U.S. unit MUFG Union Bank. But Mitsubishi UFJ, which owns about 22% of Morgan Stanley, also saw healthy growth in overseas lending. Mitsubishi UFJ and Mizuho both maintained their full-year profit outlooks. Mitsubishi UFJ and Sumitomo Mitsui announced share repurchases of worth up to 150 billion yen and 200 billion yen, respectively. The heads of the top three lenders all sounded a note of caution about their earnings outlooks, however.
Deals Of The Day
• United Rentals Inc : The company said it will acquire the assets of smaller rival Ahern Rentals in an all-cash deal for about $2 billion, as the equipment rental firm looks to expand its U.S. presence. It expects to fund the deal with a mix of newly issued debt and existing capacity under its Asset-Based Loan (ABL) facility. Ahern Rentals, founded in 1953, is a family-owned equipment rental firm with about 2,100 employees across 106 locations in 30 U.S. states. The deal is expected to close before the end of this year, United said.
In Other News
• Alibaba Group Holding Ltd: The e-commerce platform opted not to disclose the final sales tally of its annual Singles Day shopping festival for the first time since it started the event in 2009, saying only that results were in line with last year. Last year’s 8.5% rise in gross merchandise value (GMV) for Alibaba’s platforms had been its lowest yet, following a 26% jump in 2020. Before 2020, the festival was a one-day event. The company said in a press release early on Saturday that the event had “delivered results in line with last year’s GMV performance despite macro challenges and COVID-related impact.” Alibaba did not say which brands sold well but said sales of high-tech beauty devices, such as gadgets to cool and lift facial skin, had surged some 5,570% from last year, while carpet cleaners and smart kitchen appliances had been selling extremely well. Rival JD.com also did not publish GMV or sales growth but said Apple sold over $140 million worth of products in the first minute of the event’s final sales period on Thursday evening, which is marked by deeper discounts.
• Amazon.com Inc: Germany’s antitrust watchdog said it had expanded two probes into the U.S. e-commerce giant making use of new regulation allowing it to prohibit any anti-competitive behaviour at an earlier stage. “We are examining in both proceedings whether and how Amazon impedes the business opportunities of sellers that are active on the Amazon marketplace and compete with Amazon’s own retail business,” Federal Cartel Office President Andreas Mundt said in a statement. Changes to Germany’s antitrust laws for digital corporations, which came into effect last year, give the cartel office more power in identifying and prohibiting some companies’ dominant positions. According to the cartel office, Amazon operates the most important marketplace in e-commerce, giving it a key position in that area that allows it to set the rules for competition on its platform. “Our new competencies, which are precisely intended to restrict such power to set rules, allow us to intervene more efficiently against Amazon’s anti-competitive practices,” Mundt said.
• Apple Inc & Alphabet Inc: Thousands of smartphone applications in Apple and Google’s online stores contain computer code developed by a technology company, Pushwoosh, that presents itself as based in the United States, but is actually Russian, Reuters has found. The Centers for Disease Control and Prevention (CDC), the United States’ main agency for fighting major health threats, said it had been deceived into believing Pushwoosh was based in the U.S. capital. After learning about its Russian roots from Reuters, it removed Pushwoosh software from seven public-facing apps, citing security concerns. The U.S. Army said it had removed an app containing Pushwoosh code in March because of the same concerns. That app was used by soldiers at one of the country’s main combat training bases.
• BlackRock Inc: Saudi Arabia’s sovereign wealth fund and BlackRock have signed an agreement to jointly explore infrastructure projects in the Middle East, focused on Saudi Arabia. The Public Investment Fund (PIF), which manages more than $600 billion in assets, said their non-binding memorandum of understanding will serve as the anchor for BlackRock’s Middle East Infrastructure strategy. It added that the world’s biggest fund manager plans to build a dedicated infrastructure investment team in Riyadh. Industries to be targeted include energy, utilities, transport and telecoms. “PIF and BlackRock plan to work together to attract regional and international investors to participate in investment projects, boost foreign direct investment (FDI) into Saudi Arabia, add value to the Saudi Arabian economy and the wider market while facilitating knowledge and skills transfer.” Separately, Blackrock has put off the launch of an exchange traded fund (ETF) that invests in Chinese bonds, amid growing tension between Washington and Beijing, the Financial Times said on Saturday
• BioNTech SE & Pfizer Inc: The German biotech firm that developed a widely used COVID-19 vaccine with Pfizer, acquired a manufacturing facility in Singapore, its first in Asia, the company said. The facility, bought from a Novartis unit, will be its first messenger ribonucleic acid, or mRNA, facility in Singapore and support its vaccines production for the Asia Pacific region, BioNTech said in a statement, without disclosing financial details. BioNTech said the facility, which will also double as its regional headquarters, will initially be used to make a range of mRNA-based product candidates as well as authorized vaccines and therapeutics, which may include its COVID-19 vaccine. The aim is to eventually expand production to other drug classes such as cell therapies, said BioNTech, which also plans to set up research and manufacturing centres in Australia. The Singapore facility is expected to be fully operational by 2023 and create more than 100 jobs by 2024.
• Celsius Holdings Inc & Goldman Sachs Group Inc: Roger Ng, the former Goldman Sachs banker convicted for helping loot Malaysia’s 1MDB sovereign wealth fund, on Friday sued the government’s star witness Tim Leissner for more than $130 million, alleging fraud. In a complaint filed in a New York state court in Manhattan, Ng accused his former boss of repeatedly lying in order to steal his investments in energy drink maker Celsius Holdings and artificial intelligence company Sentient Technologies. The complaint said Leissner, a former Goldman partner, stole Ng’s money to cover his own defense costs in a related criminal case where he pleaded guilty in 2018, while depriving Ng of funds to defend himself and appeal his conviction. “Ng is in the unimaginable position of having to defend himself against allegations made by the person who defrauded him and who stole the money that plaintiff Ng needs to defend against those same allegations,” the complaint said.
• Equinor ASA: Gas production at Norwegian energy firm’s Aasgard B gas processing platform remains shut and partly evacuated following a fire in a transformer late on Sunday, a company spokesperson said. Equinor is now working on getting an overview of the incident and starting the process to restart safe operations, the spokesperson said. “I have no projection for how long this might take,” he added. Aasgard B produces 17-20 million cubic metres (mcm) of natural gas, according to the spokesperson. As a precautionary measure, Equinor evacuated 65 of the total 118 people working at Aasgard B, located some 200 km (124.27 miles) offshore in the Norwegian Sea, to nearby installations Aasgard A and Heidrun, Equinor said. There were no injuries reported, the company spokesperson added.
• Exxon Mobil Corp: The U.S. oil major and Indonesian state-owned energy company Pertamina have signed a $2.5 billion agreement to further assess development of a regional carbon capture and sequestration hub in Indonesia, the White House said in a statement. The partnership “will enable key industry sectors to decarbonise” said the statement, citing the refining, chemicals, cement, and steel sectors. It said this would lower carbon emissions, ensure economic opportunities for Indonesian workers and help Indonesia achieve its net-zero ambitions in 2060 or sooner.
• Lucid Group Inc & Rivian Automotive Inc: Every time Lucid or Rivian Automotive sells an electric car, they are losing hundreds of thousands of dollars due to staggering raw material and production costs, their latest earnings statements showed. Quarterly reports from electric vehicle (EV) makers from the past two weeks show them struggling to hit delivery targets and rapidly burning through cash. Lucid’s cost of revenue surged to $492.5 million in the July-September quarter from $3.3 million a year earlier, and its losses widened as customers canceled orders fearing long wait times. The company, which went public a little over a year ago and is backed by Saudi Arabia’s Public Investment Fund, saw its market value shrivel by two-thirds this year to about $20 billion from $95 billion at its peak in November 2021.
• Meta Platforms Inc: The Facebook owner told employees on Friday that it would stop developing smart displays and smartwatches and that nearly half of the 11,000 jobs it eliminated this week in an unprecedented cost-cutting move were technology roles. Speaking during an employee townhall meeting heard by Reuters, Meta executives also said they were reorganizing parts of the company, combining a voice and video calling unit with other messaging teams and setting up a new division, Family Foundations, focused on tough engineering problems. The executives said that the first mass layoff in the social media company’s 18-year history affected staffers at every level and on every team, including individuals with high performance ratings. Overall, 54% of those laid off were in business positions and the rest were in technology roles, Meta human resources chief Lori Goler said. Meta’s recruiting team was cut nearly in half, she said. The executives said further rounds of job cuts were not expected. But other expenses would have to be cut, they said, noting reviews underway about contractors, real estate, computing infrastructure and various products.
• Omnicom Group Inc: The advertising and marketing conglomerate has recommended that clients pause their spending on Twitter in the short term, according to an internal memo seen by Reuters. The memo did not mention clients by name and it is not clear if any have paused Twitter advertising spending. The move, first reported by tech news site The Verge, emphasizes a growing skepticism among agencies and brands about the micro-blogging site’s future since Elon Musk’s $44 billion takeover. “Twitter’s ability to maintain their previous level of brand safety measures and effectiveness seem impeded in the immediate term,” according to the memo. “Whilst OMG believes this is unlikely to result in a significantly higher risk environment for advertisers, the risk of being associated with unsafe content could rise and as such should be considered when deciding on use of the platform.”
• Tesla Inc: The company’s CEO Elon Musk is scheduled to take the stand this week to defend his $56 billion pay package against shareholder allegations it was rigged with easy performance targets and that investors were duped into approving it. A Tesla shareholder hopes to prove during the five-day trial that Musk used his dominance over the electric vehicle maker’s board to dictate terms of the 2018 package, which did not even require him to work at Tesla full time. Separately, the U.S. automaker said on Sunday it will assist Chinese police investigating a crash involving one of its Model Y cars after local media reports said two people had died and three were injured when the driver lost control of the vehicle.
• Walt Disney Co: The company is planning to freeze hiring and cut some jobs as it strives to move the Disney+ streaming service to profitability against a backdrop of economic uncertainty, according to a memo seen by Reuters on Friday. Chief Executive Bob Chapek sent the memo to Disney’s leaders, saying the company is instituting a targeted hiring freeze and anticipates “some small staff reductions” as it looks to manage costs. “While certain macroeconomic factors are out of our control, meeting these goals requires all of us to continue doing our part to manage the things we can control – most notably, our costs,” Chapek wrote in the memo.
Investors face expensive quest for year-end cash and safe assets
As the most volatile period in years for traders draws to a close, the year-end dash for cash and high-quality assets will likely prove more challenging than usual in markets buffeted by decades-high inflation and aggressive central bank rate hikes.