| Good morning. Hong Kong stocks give back some gains. France's Macron backs companies tax plan. And LVMH signs Formula One deal. Here's what |
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| Good morning. Hong Kong stocks give back some gains. France's Macron backs companies tax plan. And LVMH signs Formula One deal. Here's what people are talking about. | |
| Chinese shares in Hong Kong fell as investors hit pause on their world-beating rally over the past month. Japanese stocks advanced after fresh weakness in the yen. A gauge of Hong Kong-listed Chinese companies dropped as much as 4.9%, halting a 13-day rally that was fueled by optimism over measures to stimulate the economy. The Hang Seng Index sank as much as 4.5%, its biggest intraday drop in almost two years. Markets in mainland China remain shut for Golden Week. Oil gained for a third day amid tensions in the Middle East, while US equity futures fell. Japan's Topix index rose more than 1% after new prime minister Shigeru Ishiba said the economy isn't ready for another interest-rate increase. The yen fell to a more than one-month low against the dollar, extending its 2% decline Wednesday. | |
| French President Emmanuel Macron endorsed a temporary tax on the country's largest companies, supporting his new government's strategy even as it departs from his longstanding pro-business stance. The French government on Wednesday announced plans of around €60 billion ($66 billion) in spending cuts and tax hikes next year in an effort to rein in a widening budget deficit and bolster investor confidence in the country. Just under €20 billion will be generated by boosting government revenues, with tax increases for wealthy individuals and large companies, as well as increased green taxation. The endorsement from Macron is a stark contrast with the previous seven years of his presidency, when economic policy was governed by a pro-business mantra based around avoiding raising the tax burden. | |
| OpenAI has completed a deal to raise $6.6 billion in new funding, giving the artificial intelligence company a $157 billion valuation and bolstering its efforts to build the world's leading generative AI technology. The funding round was led by Thrive Capital, the venture capital firm headed up by Josh Kushner, which put in $1.3 billion. Microsoft, OpenAI's largest backer, put in about $750 million, on top of the $13 billion it had already invested in the startup, according to a person familiar with the matter. The deal is one of the largest-ever private investments, and makes OpenAI one of the three largest venture-backed startups, alongside Elon Musk's SpaceX and TikTok owner ByteDance. The size of the investment underscores the tech industry's belief in the power of AI and its appetite for the extremely costly research powering its advancement. | |
| Efforts to allow use of tokenized shares of money-market funds from Wall Street behemoths like BlackRock and Franklin Templeton as collateral in trading took a big step forward as a group of financial firms voted to approve guidelines for their use. A subcommittee of the Commodity Futures Trading Commission's Global Markets Advisory Committee has to pass its recommendations on the topic to the full committee, according to two people familiar with the matter. These recommendations would apply existing policies and procedures to support the use of blockchain for non-cash collateral in a manner consistent with the margin requirements of the CFTC, other US regulators and derivatives clearing organizations. The full committee is expected to vote on the recommendations later this year. | |
| LVMH and the organizers of the Formula One races have signed a major sponsorship deal potentially worth $1 billion, with the French luxury goods group taking over from Rolex. LVMH Moët Hennessy Louis Vuitton SE will start sponsoring races from 2025, with brands including Louis Vuitton, Moët Hennessy and TAG Heuer all involved, according to a statement Wednesday. The 10-year tie-up could be worth more than $1 billion with annual sponsorship fees topping $100 million, people familiar with the negotiations previously told Bloomberg News. The deal is both a blow to Rolex, the top Swiss watch brand that has been the timekeeping sponsor of F1 since 2013, and marks LVMH's bid to capture the boom in sports investment and viewership. | |
| Today we will see CPIs from Switzerland and Turkey, PMIs from Spain, Italy, France, Germany, the euro zone, the UK and the US. Jobless claims, factory orders and the ISM services index are also due stateside. Central bank speakers include Riksbank's Jansson, Poland's Glapinski and the Fed's Kashkari, Schmid and Bostic. | |
| This is what's caught our eye over the past 24 hours. | |
| Breakeven rates on 10-year bonds rose to the highest since July this week as investors price in a pickup in inflation. Forces are aligning for a sustained rebound in the market-based measure of expected inflation that aides the core bear steepening bias. The rate is calculated by comparing the yields of a nominal bond with an inflation-linked bond of the same maturity, with the difference being the rate that investors demand to compensate for the risk of future price increases. Here are five reasons why breakevens are pricing in a possible inflation trend: - Strikes at US ports are expected to be temporary, conjuring up memories of when the Federal Reserve thought inflation would be transitory. A prolonged strike though can spike shipping costs. Loaded container ships unable to be emptied clog striking US ports. That lowers available capacity in the container-shipping system and can lead to higher freight rates. Goods then are delivered via alternative, longer and more expensive routes, according to Bloomberg Intelligence. Surcharges are already planned should the strike last a few weeks.
- Oil gained nearly 3% after Iran fired ballistic missiles at Israel. With Israel vowing retaliation, crude oil prices could easily push higher — raising prices of goods and services for consumers as costs are passed along.
- Devastation from Hurricane Helene might cause semiconductor shortages after two mines that produce goods required for chips were shuttered in the path of the storm. With manufactured goods, particularly in the electronics and automotive sectors, relying on semiconductors to function, the shortage could pressure prices.
- Six of 10 Federal Reserve bank reports telegraphed warning signs on inflation and corporate pricing power. As an example, factories in Philadelphia showed prices paid rose the highest since December 2022 with almost 100% of firms showing no relief on inflation — meaning they are paying the same or higher prices in the month with not much relief in six months time.
- This week's JOLTs report showed more job openings and slower quit rates. At the same time, ADP reported annual pay of job changers outpaced that of job stayers by nearly two percentage points. With labor still in demand, job stayers will eventually become quitters as companies continue to poach talent. That can be a source of wage inflation.
Alyce Andres is a rates strategist for Bloomberg's Markets Live blog. | |
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