TheChek News Flow

Home prices remain high and many buyers are sticking to the sidelines

U.S. home sales fell in August as the recent decline in mortgage rates failed to offset home prices that remain near record highs.

Sales of previously owned homes in August fell 2.5% from the prior month to a seasonally adjusted annual rate of 3.86 million, the National Association of Realtors said Thursday, the fifth time sales have declined over the past six months.

The average rate for a 30-year fixed mortgage has slid steadily from the spring to 6.09% this week, the lowest level in more than a year, according to Freddie Mac. But with high housing prices and the inventory of homes for sale still lower than normal, many buyers are waiting for rates to fall further.

Those buyers may not get much more relief soon, said Lawrence Yun, NAR’s chief economist. The Federal Reserve cut short-term interest rates by half a percentage point Wednesday. But the mortgage market has already priced in expectations for additional Fed rate cuts, which means mortgage rates might not fall further in the coming months, he said.

“Any further decline in mortgage rates will be minimal,” Yun said.

On an annual basis, existing-home sales, which make up most of the housing market, fell 4.2%.

The national median existing-home price in August was $416,700, a 3.1% increase from a year earlier, NAR said. While that is down from the recent high, it is the highest median home price for any August, Yun said. Prices aren’t adjusted for inflation.

“August home sales are a disappointment,” Yun said. “The positive influencing factor of mortgage rates and [rising] inventory has yet to impact the market.”

The housing market remains out of reach for millions of would-be buyers. The high cost of housing has become a hot topic on the campaign trail, with both parties promising to help increase the supply of homes.

Despite the slow end to the summer, some real-estate agents and loan officers expect a pickup in activity this fall if rates decline further.

“We could have another busy end of the year depending on where rates go,” said Lauryn Dempsey, a real-estate agent in the Denver area. “There’s obviously lots of talk about the Federal Reserve dropping interest rates, and that always catches clients’ eyes.”

Nationally, there were 1.35 million homes for sale or under contract at the end of August, up 0.7% from July and up 22.7% from August 2023, NAR said.

At the current sales pace, there was a 4.2-month supply of homes on the market at the end of August. That is at the low end of what is considered a balanced market between buyers and sellers.

The inventory of homes for sale is rising because some sellers who have been waiting for interest rates to fall are deciding they can’t wait any longer, said real-estate agents.

Douglas MacLachlan and Michelle Evans had a 2.5% mortgage rate on the Chicago condo they bought in 2021, but they wanted to move out of the city after having a child in 2022. The couple bought a four-bedroom house in Arlington Heights, Ill., in July and sold their condo in August. Their current mortgage rate is 6.99%, but they hope to refinance in the future if rates decline, MacLachlan said.

“If we didn’t have our daughter and we didn’t have a reason to move, we would not have left our condo,” MacLachlan said. “But life happens.”

The firm is likely to pay as much as $100 million to settle a probe of a trading scandal.

edge-fund powerhouse Two Sigma is likely to pay as much as $100 million to settle a Securities and Exchange Commission investigation into a trading scandal at the firm.

The New York firm would likely face blame for how it oversaw an ex-employee at the center of the misconduct, according to people close to the matter. The episode led to hundreds of millions of dollars in unexplained losses and gains after the researcher allegedly adjusted trading models without authorization.

Two Sigma is still negotiating with the regulator and could pay a lower amount as a result of the talks, the people said. The five-member commission would have to approve any final settlement. A spokeswoman for the firm and an SEC spokesman declined to comment.

The quant-trading firm’s co-founders, John Overdeck and David Siegel, in August said they were stepping down as co-chief executives following a yearslong clash that has distracted executives and captured attention in the hedge-fund business. Last year, Two Sigma said Overdeck and Siegel’s squabbles made it difficult for the firm to make key decisions.

Last month, Scott Hoffman and Carter Lyons took over as Two Sigma’s new co-chief executives. Overdeck and Siegel will remain as co-chairmen, the firm said.

The SEC’s investigation relates to a senior researcher’s alleged unauthorized adjustment of the hedge fund’s investing models. The move led to losses in some funds and big gains in others. The Wall Street Journal first reported the alleged trading scandal last year and that the SEC was looking into the matter.

The researcher, Jian Wu, a senior vice president who joined Two Sigma in 2018, was trying to boost his compensation, the firm told clients last year, without identifying Wu.

He made changes that led to gains of $450 million in total for some Two Sigma funds—including those in which the firm’s own executives and employees invest, as well as those available to clients, the people said. But they also led to a total of $170 million in losses for other funds compared with how they otherwise would have fared—losses largely borne by clients. Two Sigma, which has $60 billion under management, has made investors whole.

Two Sigma let Wu go. He sued the firm for defamation.

The SEC’s enforcement investigation has focused on Wu’s conduct. It couldn’t be learned whether the agency plans to sue him or seek a settlement to resolve the allegations, the people said.

The SEC has sought higher fines under the Biden administration to resolve enforcement investigations. The agency’s leaders have said that past settlements weren’t tough enough to deter wrongdoing in the industry.

Wu is a Ph.D., having received his degree in operations research from Cornell University in 2017, according to his LinkedIn profile. In 2011, he received a bachelor of engineering degree from Beijing’s Tsinghua University.

The Wall Street Journal has previously reported that the SEC has also been looking into the discord between Overdeck and Siegel and how it might impact the firm.

Drop in electric vehicle sales puts manufacturers at risk of ‘multibillion-euro’ fines and production cuts

European carmakers have said they face the prospect of “multibillion-euro” fines or significant production cuts when new EU carbon emissions standards come into force next year, adding to pressure on Brussels to water down the rules.

Acea, the European car industry body, on Thursday called for an “urgent review” of emissions rules to be applied in 2025 and of a ban on new internal combustion engine cars in 2035. Both are core elements of the EU’s Green Deal climate law that aims to push the bloc to net zero emissions by 2050.

The Acea board, which includes the chief executives of Renault, Nissan and Toyota, said carmakers faced the “daunting prospect of either multibillion-euro fines . . . or unnecessary production cuts, job losses, and a weakened European supply and value chain”.

The warning comes a day after Italian Prime Minister Giorgia Meloni called the EU’s ban on new internal combustion engines from 2035 a “self-destructive” policy, warning that it could result in “destroying thousands of jobs, or dismantling entire industrial segments that produce wealth and employment”.

Her comments have been echoed by politicians across the bloc but particularly by centre-right and rightwing lawmakers in major car manufacturing hubs of Germany and eastern Europe.

Carmakers have said that they do not want to stall the transition to cleaner vehicles but a significant slowdown in sales of electric vehicles has major implications for their output.

New registrations of electric vehicles in the EU dropped 44 per cent in August compared with a year earlier with their total market share falling from 21 per cent to 14 per cent year on year, according to Acea figures published on Thursday.

A paper drafted by Renault, seen by the Financial Times, suggested that if the current market share of EVs remained the same in 2025, car and van manufacturers could face penalties of up to €13bn as a result of the new rules.

According to the paper, the EU carmakers need to have a market share of about 20 to 22 per cent to comply with the regulations, but that share has stagnated at less than 15 per cent, meaning they need to significantly cut production and sales of petrol vehicles or face large fines.

“You see really momentum building that there is recognition there is something the matter and it needs to be addressed sooner rather than later,” Sigrid de Vries, Acea’s director-general, told the Financial Times.

“We see reality hitting very hard now and in 2025 that may have serious implications.”

De Vries said that one of the major issues with the EU rules was that they had set thresholds for vehicle emissions but not provided incentives for customers to buy EVs instead.

“There is a structural failure in the fabric of the EU approach. Mandates do not make a market,” she said.

“Incentivisation is very important and that can be in financial and non-financial ways,” she added, pointing to the example of Norway, which has reduced parking fees for electric vehicles and allowed EV drivers to use bus lanes.

Luca de Meo, Renault’s chief executive and president of Acea, has repeatedly called for more flexibility in the CO₂ regulations as the European car industry grapples with not just the slowing growth in EV sales but an overall decline in car demand.

In August, Stellantis, which is behind the Jeep, Peugeot and Fiat brands, suffered a 30 per cent year-on-year decline in new vehicle registrations, while those for Volkswagen and Renault fell 15 per cent and 14 per cent respectively.

The legislation sets an overall emission threshold for all European cars of no more than 93.6g of Co2 per kilometre. That compares with average emissions of 108.1g of Co2 per km in 2022, according to the European Environment Agency.

Manufacturers have individual targets that apply across their car production in Europe in order to meet the fleet-wide standard.

The European Commission said that it had received Acea’s letter and would respond in due course. It is due to review the combustion engine ban in 2026.

In her political guidelines for the next commission due to take office later this year, von der Leyen backed the ban saying that it “creates predictability for investors and manufacturers”.

Beny Steinmetz mounts fresh attempt to have bribery conviction overturned, pointing to a cache of hacked documents

Lawyers for Israeli mining tycoon Beny Steinmetz have mounted a fresh attempt to have his bribery conviction overturned, with a cache of hacked documents they say proves alleged illegal behaviour by the Swiss prosecutor who put him in jail.

Steinmetz, a multi-billionaire investor who made his fortune in diamonds, became one of the most influential and controversial figures in the global mining business before his takeover of the world’s largest iron ore deposit led to a spectacular fall from grace.

In January 2021, a Geneva court found him guilty of having bribed Guinean officials to secure the mining rights to the Simandou’s iron ore, sentencing him to five years in jail. An appeal attempt last year failed to overturn the conviction but saw his sentence commuted to three years.

Steinmetz’s lawyers are already contesting that appeal with the Swiss Supreme Court, but last week filed a new motion to have his conviction in Geneva declared invalid, demanding a retrial.

Seen by the Financial Times, the motion contains a series of documents lawyers claim were hacked from the Israeli Ministry of Justice.

A trove of Israeli Ministry of Justice files were dumped online by an unknown hacking group in April in an apparent attempt to discredit Israel’s treatment of Palestinians. The Israeli MoJ’s files also contained documents on Steinmetz, an Israeli citizen.

Steinmetz’s lawyers claim the documents show the Geneva prosecutor responsible for his case, Claudio Mascotto, travelled to Israel and allegedly entered into secret negotiations with the key witness who testified against Steinmetz, his former business partner Ofer Kerzner.

Mascotto promised Kerzner that he would not be prosecuted, as long as he testified against his former associate, Steinmetz’s lawyers allege.

Under Swiss law, any form of plea bargaining is illegal.

Steinmetz’s lawyers are seeking the annulment of all legal findings against him since 2017. They request a retrial and ask that the testimony of Kerzner, and another key witness is struck from the record.

“We are talking about a man who has been unjustly found guilty on the basis of unreliable evidence. And if we’ve come this far, it’s because the prosecution has breached fundamental norms of procedure in order to gather evidence it wanted to rely on in support of an indictment,” Steinmetz’s lawyer, Daniel Kinzer said.

A spokesperson for the Geneva prosecutor declined to comment, citing their official obligation to remain silent about current legal proceedings.

Steinmetz has long argued — without evidence — that Mascotto held a personal grudge against him and overstepped his remit as a prosecutor on the case. After his appeal failed last year, he also accused the billionaire George Soros of having funded a campaign against him and unduly influenced Swiss courts.

The Guinean government stripped Steinmetz’s company BSG Resources of its rights to Simandou — one of the richest prizes in mining — in 2014, after having concluded he had bribed public officials.

Steinmetz’s putative partner in the project, the Brazilian mining group Vale, subsequently launched its own legal action against him, accusing him of having fraudulently lured the company into the deal.

Vale dropped a $1.2bn personal claim against Steinmetz in London in 2022, however, on the basis that too much time had elapsed since the contested events for a legal claim to be valid under UK law.

Publicis Buys Mars United Commerce in Deal Valuing Agency at $600 Million

The acquisition comes as advertising holding companies compete to help brands boost sales online and in stores

Advertising holding company Publicis Groupe said it bought Mars United Commerce, a commerce marketing agency that helps brands optimize how they present their products to consumers online and in stores, among other offerings. The deal values Mars at around $600 million, according to a person familiar with the matter.

Publicis said it would match its information on shoppers with Mars’s own consumer data to give marketers more insights into buying behavior and how they can influence it. The ad giant also said Mars’s understanding of retailers’ media, marketing, merchandising and other operations would help its clients push their products in physical and digital locations with better campaigns.

Publicis didn’t disclose terms of the deal.

Ad holding companies have been bolstering their commerce offerings as brands increasingly seek more direct relationships with consumers. E-commerce and retail media, in which businesses such as grocery and big-box chains offer advertisers ways to reach consumers using customer data, have seen explosive growth in recent years.

Paris-based Publicis, which owns agencies including Leo Burnett and Saatchi & Saatchi, has cited its commerce offerings as a growth driver in recent years. In 2022, it acquired Profitero, an e-commerce software company that provides analytics for brands, including helping clients compare prices with competitors and monitor product availability.

But Publicis’s competitors also have made big bets in the commerce space. Last year, Omnicom Group said it would acquire Flywheel Digital, a company that helps brands sell on digital marketplaces such as those run by Walmart and Amazon, for a net cash purchase price of about $835 million, in what Omicom said then was its biggest acquisition ever.

Michigan-based Mars employs more than 1,000 people globally.

Helped by an uptick in U.S. demand, data from the Italian federation of woodworking and furniture industries and stone production chain forecast a positive finish, buoyed by exports, for 2024.

MILAN — Amid interest rates cuts in the U.S. and Europe, export data especially to the U.S. are sparking optimism at two key design supply chain federations here.

FederlegnoArredo, the Italian federation of woodworking and furniture industries and organizers of the Marmomac trade show, which represents firms from the entire stone production chain, said this week that demand is rising abroad for Italian goods.

On Wednesday, Marmomac said that exports of the Italian natural stone industry, ranked second globally, to the U.S. is driving the sector of stone products, including marble. Demand from the North American nation rocketed 56 percent in the last ten years and 2.6 percent in the first half of the year, versus the first half of 2023.

According to research and business consultancy Nomisma, import demand from the U.S. totaled 3.4 billion euros in 2023 and it is now the main world importer of stone products including raw and processed natural stones and machinery and technologies. Overall, Italy‘s trade balance of stone products rose 2 percent to 1.35 billion euros in the first half of 2024.

Trade show organizer Veronafiere together with Confindustria Marmomacchine, the Italian association of producers and processors of marble, granite and natural stones, Italian trade agency ICE and the Ministry of Foreign Affairs and International Cooperation has been focused strategically on boosting exports to the U.S. further. In May, a consortium of 12 marble firms met with architectural and interior design firms in Chicago. A similar mission is likely to take place in 2025, organizers said.

Sectorwide, finished and unfinished exports from the design industry have been hit over the past year by Houthi rebels targeting vessels in the Red Sea and switching shipping routes has had an impact on everything from retail prices to energy costs.

“Situations like the Middle East conflict and Ukraine…are the sort of situations that create difficulties in making forecasts for exports but not a lot of sectors can boast a trade balance like ours. We have ample export and a contained number of imports,” said Confindustria Marmomacchine honorary president Flavio Marabelli at a press conference in Milan.

Amid interest rate cuts from the Federal Reserve and the European Central Bank, FederlegnoArredo, the Italian federation of woodworking and furniture industries, said exports of Italian furniture in 2024 should remain stable versus 2023, despite falling consumer confidence and restrained spending patterns worldwide.

Overall, companies recorded turnover totalling 4.65 billion euros in the semester, down 5.2 percent versus the same period last year. And while the data was negative, the federation’s president Claudio Feltrin hinted at a trend reversal for the second half of the year. “Despite the slowdown in the first half of the year, many companies are looking to the second half of the year, maintaining a certain, albeit cautious, optimism,” Feltrin said, following revenue growth of 0.8 percent in July with exports rising 3.7 percent. Eyes will also turn to local political measures to boost investment and policies focused on boosting real estate.

“Now, aware that autumn will make the difference, we are also waiting to understand what measures the [Italian] government intends to adopt with the next budget law, regarding support for investments and internationalization, green policies aimed at real estate and energy transition in a broader sense, to understand what’s in store for 2025,” Feltrin said.

Italian companies like Dexelance said the increased appetite for Italian finished goods is palpable. In its first-half results, the Milan-based company that owns a galaxy of home to upscale brands like Saba Italia, Gervasoni and Meridiani said the fresh U.S. interest was a major boost to company sales, which were up 9.2 percent to 151 million euros compared to the same period in 2023. The company opened its first U.S. flagship in New York City last October — a space that hosts dedicated showrooms for Meridiani and Davide Groppi.

Following a series of mixed earnings of listed U.S. furniture firms like RH, Williams Sonoma and Arhaus, TD Cowen said earlier this month that the sector for finished goods in the U.S., isn’t quite out of the woods yet.

Risks to the companies in the sector include uncertainties associated with the global economic environment and consumer spending, as well as general competition within the consumer and fashion products industries and fluctuating consumer demand trends, which can create variability in sales and margins. “Increases in the prices of raw materials, rent, freight, labor, tariffs or manufacturers’ inability to produce goods on time or to specifications may negatively impact results.…Legal, regulatory, political, currency and economic risks, as well as challenges to maintain favorable brand recognition, loyalty and reputation for quality, may affect the ability to conduct business in both domestic and international markets,” the report said.