>>> Weekly Market Update

Weekly Market Update: Volatility persists as market surprises continue to come fast and furious

Global stock markets experienced an exceedingly volatile week of trade as unexpected economic and political developments continued apace. A surprise rate cut by China’s PBOC was overshadowed by President Biden’s Sunday announcement that he was dropping out of the race. Democrats began lining up with endorsements of Kamala Harris, especially from state Governors who essentially threw their hats in the ring for the VP spot. No formidable challengers emerged and by the end of the week Harris appeared to have locked up the nomination, getting the Obamas’ endorsement on Friday. Nevertheless, debate over the ‘Trump-trade’ lingered, with continued outperformance in small cap value relative to mega-cap technology shares. Others pointed back to the cool June CPI and the subsequent string of soft data points which have forced the market to price in Fed rate cuts later this year as the main factor underpinning the rotation.

Steepening of the US yield curve accelerated notably with the 2- 10-year spread popping above -15 bps as the VIX rose sharply through Thursday. A letter from former NY Fed President Dudley may have increased investors’ willingness to position for a Fed rate cut. The Bank of Canada cut rates at the second straight meeting while global PMI readings continued to point to some softening outside of services. Pulte’s home orders came in below analyst consensus before June existing home sales missed expectations, despite supply rising to levels not seen since the beginning of the pandemic. Richmond Fed data was also decidedly weak after several major industrial and chemicals companies cut their outlooks. June PCE data revealed “further progress” for the Fed and echoed what investors have heard on a host of quarterly conference calls, where discretionary spending has come under increased pressure as a softening consumer is clearly pushing back against price hikes after years of inflation.

Bitcoin prices climbed ~5% this week into an appearance by former President Trump at a popular crypto conference. Speculation swirled his campaign would unveil a plan for a national strategic Bitcoin reserve. The dollar was largely steady as investors pondered what a second Trump administration could mean for the longer term trajectory of USD exchange rate. The Yen continued to rise amid speculation the BOJ could hike rates next week. USD/YEN briefly dipped towards the 200-day moving average for the first time since early January. Gold prices and the S&P 500 test below the 50-day moving averages this week before both bounced back on Friday. WTI crude prices fell for the third straight week. Equities indices performance reflected the ongoing rotation, with the DJIA gaining 0.8% and Russell surging 3.3%, while the S&P lost 0.8%, and the NASDAQ dropped 2.1%.

In corporate news this week, earnings news remained at center stage with stocks getting greatly rewarded or punished based on results and guidance. Key earnings reports from Google and Tesla did little to curtail volatility. Risk off trade resurfaced in a major way after Tesla missed estimates and Google's YouTube ad revenues missed the mark. AI enthusiasm clearly waned after Google didn't get as granular and or show as much headway on AI monetization efforts as investors may have hoped. Ford Motor saw shares tumble after a big earnings miss as the company continues to lose tens of thousands of dollars on each EV it produces. 3M shares surged on Friday morning after the firm posted a big earnings beat, despite noting that consumer discretionary demand for hardline goods remains soft and industrial end markets are mixed.


MON 07-22
(CN) CHINA PBOC CUTS STANDING LENDING FACILITY (SLF) RATES BY 10BPS FOR THE OVERNIGHT, 7-DAY AND 1-MONTH MATURITIES (1st cut since Aug 2023)
(CN) China to extend tariff exemptions for imports of some US products until Feb 28th, 2025
(UK) UK Chancellor of the Exchequer (Fin Min) Reeves: Will run UK economy with "iron discipline"; Suggest to give public sector workers an above-inflation pay raise to help end a wave of strikes and strife – press
(US) Democratic National Convention's Rules Committee said to meet on Wed, July 24th in the afternoon to implement a framework to select a new nominee - WSJ
(US) Democratic National Convention Chair Harrison: If only one candidate reaches 300 delegate threshold, virtual voting could happen as early as Aug 1st; Democratic Party will deliver a Presidential Nominee by Aug 7th - US press
(US) VP Harris has enough pledged delegates (verbal commitments) for Democratic Presidential nomination during the first round of voting, expected between Aug 1st and 7th ahead of DNC - press
Reportedly investors could be underestimating the risk that surging shipping costs will push up inflation and slow the pace of interest rate cuts by the ECB and BOE - FT citing economists
LOGI Reports Q1 $1.13 v $0.89e, Rev $1.09B v $1.03Be; Raises FY25 outlook
MAT L Catterton said to have approached Mattel with buyout offer – press
RYA.IE Reports Q1 Net €360M v €512Me (2 est), Rev €3.63B v €3.69Be; Have 'almost zero' Q3 and Q4 visibility; See a bit of push back from consumers on fares; They are a bit more frugal and cautions
TUES 07-23
(FR) French Pres Macron calls for a “political truce” during the summer Olympics in Paris; Reportedly Macron may Not appoint a new head of French govt until after the Olympic games end on Aug 11th - press (update)
(RU) Russia Dep PM Novak: Russia to reinstall gasoline exports ban from Aug 1st; Considering extending the restriction into the autumn
(US) House investigation finds drug middlemen that promise to control costs have instead steered patients toward higher-priced medicines and affiliated pharmacies; PBMs push patients to pricier medicines – WSJ
(US) Tier1 analysts July Spending Survey (conducted July 9-15th): Plans to buy a New Home over the next 12 months remain at 20%+ levels despite the decline from 24.0% in June; More respondents are noticing the most dramatic price increases at Restaurants/bars sequentially and y/y
(US) Redfin: U.S. home prices +0.2% in June, the smallest m/m increase since Jan 2023; Prices in June were still up 6.9% y/y, the lowest annual growth since Jan 2024.
(US) VP Harris confirms she has enough delegates to get Democratic nomination
522.HK Reports Q2 (HK$) Net 135.1M v 208.2Me, Rev 3.34B v 3.24Be; Guides Q3 Rev $370-430M v $503Me; Cuts interim dividend; Announces first orders for hybrid bonding aligned to HBM
7211.JP Reports Q1 Net ¥29.5B v ¥48.0B y/y, Op ¥35.5B v ¥45.2B y/y, Rev ¥627.5B v ¥635.9B y/y
ACI Reports Q1 $0.66 v $0.66e, Rev $24.3B v $24.1Be
AIR.FR CEO Faury: Clients are vocal that they need planes; No slowdown in demand for commercial aircraft; Not aware of any shortage on aluminum - comments from Farnborough International Airshow
AKZA.NL Reports Q2 adj EBITDA €400M v €397M y/y, Rev €2.78B v €2.74Be; Adjusts outlook towards lower end
ALO.FR Reports Q1 Rev €4.4B v €4.4Be; Affirms FY24 outlook
BA Spokesperson: Confirms Boeing has resumed deliveries of 737 Max planes to China - Aviation Week
GE Reports Q2 $1.20 v $0.97e, Rev $8.22B v $8.38Be; Raises FY eps and cuts rev outook
GM Reports Q2 $3.06 v $2.64e, Rev $48.0B v $44.9Be; Raises outlook
GOOGL Reports Q2 $1.89 v $1.85e, Rev $71.4B v $70.6Be; "Innovating at every layer of the AI stack"
GOOGL *TTN Earnings Call Summary: Our AI infrastructure and generative AI solutions for cloud customers have already generated billions in Rev; Some of AI models' use cases are seeing traction; Expects quarterly Capex to remain at or above Q1 of $12B (v $13B in Q2); Seeing tremendous momentum from our AI investments; Decided to commit to a new multiyear investment of $5B in Waymo
JCI To sell Residential and Light Commercial HVAC businesses with Hitachi to Bosch Group for $6.7B; Reports prelim Q3 adj EPS slightly ahead of its previously issued guidance range v $1.08e (prior $1.05-1.10); Has begun working on a comprehensive restructuring plan to minimize dilution post-close
KO Reports Q2 $0.84 v $0.80e, Rev $12.4B v $11.9Be; Organic Rev +15%, Raises guidance
LMT Reports Q2 $6.85 v $6.45e, Rev $18.1B v $17.1Be; Raises outlook
MC.FR Reports H1 Net €7.3B v €8.4B y/y, Rev €41.7B v €42.5Be; Q2 Organic Rev +1% y/y v 2.9%e
RR.UK CEO: Supply chain environment is worst possible; Making good progress on mid-term targets as they are front-end loaded - comments from Farnborough Air Show
TSLA Reports Q2 $0.52 v $0.62e, Rev $25.5B v $25.1Be; Notes overall consumer sentiment improved; Plans for new vehicles remain on track for production in H1 2025; Timing of Robotaxi deployment depends on technological advancement and regulatory approval
TSLA Exec & CEO Musk: Confirms Robotaxi unveiling to be October 10th (prior: Aug); Does not make sense to invest in Mexico if Trump puts heavy tariffs on vehicles produced in Mexico - earnings call comments
TXN Reports Q2 $1.22 v $1.16e, Rev $3.82B v $3.80Be
TXN TTN Earnings Call Summary: Would say industrial, some of the sectors are forming a bottom; In auto, this is our third quarter of decline; We are a very unique supplier in the sense of we can provide the capacity at scale, meaning the amount of wafers and the size of our - the capacity that we are building is very high; It is a mistake to assume China is only doing simple chips
UPS Guides H2 domestic Rev growth 5.0% - earnings's slides
UPS Reports Q2 $1.79 v $1.98e, Rev $21.8B v $22.3Be; Restarts share buyback with around $500M for 2024 and $1B annual target; Expect to return to profitable growth
UPS CEO: Shippers chose ground over air services and SurePost over ground; 'Growth rate will not be as high as we projected in the beginning of the year' - earnings call comments
V TTN Earnings Call Summary: Saw a slight moderation in lower consumer segment, little bit correlated to some of the volume numbers that we are seeing in the quarter related to credit versus debit; Growth in the high-spend consumer segment remained stable compared to prior quarters
V Recent July 1-21st U.S. Payments Volume Growth was around +4% y/y v +6% y/y during June - earnings supplement

WED 07-24
(CA) BANK OF CANADA (BOC) CUTS INTEREST RATES BY 25BPS TO 4.50%; AS EXPECTED
(FR) French leftist alliance proposes anti-money laundering specialist Lucie Castets as candidate for new PM - press (update)
(FR) FRANCE JULY PRELIMINARY MANUFACTURING PMI: 44.1 V 45.9E (below all estimates, lowest since Jan 2024, 18th consecutive contraction); Notes the fastest increase in selling prices over the last three months
(JP) Further speculation Bank of Japan (BOJ) to consider rate hike next week; Reportedly 'long way to go' before rates are neutral; BOJ also set to unveil a plan to roughly halve bond purchases in coming years when it meets next week - press
(NZ) New Zealand sells total NZ$500M vs. NZ$500M indicated in 2029 and 2035 bonds
(UK) JULY PRELIMINARY MANUFACTURING PMI: 51.8 V 51.0E (3rd consecutive expansion and highest since July 2022)
(UR) Ukraine Foreign Min Kuleba signaled readiness to resume negotiations with Russia during China visit and said Ukraine is prepared to negotiate in good faith, though it has seen no sign of that from Russia side - SCMP
(US) Atlanta Fed GDPNow: Cuts Q2 GDP forecast from 2.7% to 2.6%
(US) JUN NEW HOME SALES: 617K V 640KE
(US) JUN PRELIMINARY WHOLESALE INVENTORIES M/M: 0.2% V 0.5%E
(US) Redfin: Nearly two-thirds (64.7%) of homes that were on the market in June had been listed for at least 30 days without going under contract v 59.6% y/y (highest share for any June month since 2020)
(US) Philadelphia Fed: In Q1, share of credit card balances 30 days and 90 days past due climbed to the highest levels in data back to 2012 (update)
(US) Former NY Fed Pres Dudley: Fed should cut, preferably at next week’s policy-making meeting; Although it might already be too late to fend off a recession; I’ve long been in the 'higher for longer' camp; The facts have changed, so I’ve changed my mind
(US) JULY PRELIMINARY S&P MANUFACTURING PMI: 49.5 V 51.7E (1st contraction since Dec 2023); Business confidence in the outlook falling for a second month, fueled in part by rising political uncertainty ahead of US Presidential Election
000660.KR Reports Q2 (KRW) Net 4.12T v 3.79Te; Op 5.47T v 5.24Te; Rev 16.4T v 16.1Te; PC memory chip demand recovery may be relatively weaker than initial expectations in H2; Expects to mass produce 12-layer HBM3E in Q3 and ship during H2
AKZA.NL CEO: European and US tariffs on Chinese chemicals imports could drive up prices for Western consumers; Tariffs are dangerous when used as economic warfare
CA.FR Reports H1 Adj €0.46 v €0.42 y/y, Recurring Op €743M v €700M y/y, Rev €40.6B v €45.5B y/y
COF Reports June net charge-offs 5.93% v 6.13% m/m; Domestic Card delinquencies: 4.14% v 4.13% m/m (update)
EZJ.UK CEO: Not seeing any signs of softening in demand - post earnings call
F Reports Q2 $0.47 v $0.64e, Rev $47.8B v $47.8Be; Raises FCF outlook
FI Reports Q2 $2.13 v $2.09e, Rev $5.11B v $4.81Be
GILD Full efficacy and safety results for Gilead Investigational Twice-Yearly Lenacapavir for HIV Prevention presented at AIDS 2024; PURPOSE 1 data showed zero infections and 100% Efficacy and Superiority of Lenacapavir to background HIV Incidence and Daily Truvada® for PrEP; PURPOSE 2 results expected late 2024/early 2025
IBM Reports Q2 $2.43 v $2.16e, Rev $15.8B v $15.6Be; Affirms FY24 Rev; Raises FCF
IBM Exec: Raises FY24 software segment outlook; Continued discretionary spending constraints impacted backlog realization during Q2 - earnings call comments
KER.FR Reports H1 Net €878M v €1.8B y/y, Recurring Op €1.6B v €2.7B y/y, Rev €9.02B v €10.1B y/y
LW Reports Q4 $0.78 v $1.24e, Rev $1.61B v $1.71Be; Guides initial FY25 EPS well below ests; Notes market share losses and a slowdown in restaurant traffic in US and many of its key international markets were greater than we expected
RCO.FR CEO: No sign of recovery in sales to end-costumers in Americas yet; July started better in the US, but unclear if this will continue - post earnings comments
RHM.DE Confirms ammunition factory to be built in Ukraine, receives low three-digit million euro range order to deliver a production line; To be completed within a few years; Intends to start ammunition production in Ukraine within 24 months; Rheinmetall will also be responsible for operating the plant
TSEM Reports Q2 $0.53 v $0.52 y/y, Rev $351M v $327M y/y; Experiencing a robust, rapidly expanding demand from both existing and new customers within the optical space
VRT Reports Q2 $0.67 v $0.59e, Rev $1.95B v $1.94Be; Raises outlook again

THRS 07-25
(CN) China reportedly to allocate CNY300B (~$40B) of special bonds in trade-in program; Discloses for the first time amount of funds targeted for an initiative to give a makeover to China's stock of industrial and household equipment - press
(JP) JAPAN JULY TOKYO CPI Y/Y: 2.2% V 2.3%E; CPI (EX-FRESH FOOD) Y/Y: 2.2% V 2.2%E
(US) JUN PRELIMINARY DURABLE GOODS ORDERS: -6.6% V +0.3%E (below all estimates); DURABLES (EX-TRANSPORTATION): 0.5% V 0.2%E
(US) INITIAL JOBLESS CLAIMS: 235K V 238KE (moves off 1-year high last week); CONTINUING CLAIMS: 1.851M V 1.868ME
(US) Q2 ADVANCE GDP ANNUALIZED Q/Q: 2.8% V 2.0%E; PERSONAL CONSUMPTION: 2.3% V 2.0%E
(US) Q2 ADVANCE GDP PRICE INDEX: 2.3% V 2.6%E; CORE PCE Q/Q: 2.9% V 2.7%E
(US) BOFA INSTITUTE: WEEK-TO-JULY 20TH TOTAL CARD SPENDING -0.3% Y/Y V -0.5% AVERAGE IN JUNE; Online retail spending around Prime Day (including other retail promotions) appears to be tracking slightly ahead of 2023
(US) TREASURY $44B 7-YEAR NOTE AUCTION RESULTS: DRAWS 4.162% V 4.276% PRIOR, BID-TO-COVER RATIO: 2.64 V 2.58 PRIOR AND 2.56 OVER THE LAST 12
(UK) UK Chancellor of the Exchequer (Fin Min) Reeves reportedly urged by UK Treasury to impose flat 30% rate of tax relief, raising levy for higher rate payers - UK press
005380.KR Reports Q2 (KRW) Net 3.97T v 3.40Te (3.24T y/y); Op 4.28T v 4.20Te (4.24T y/y); Rev 45.0T v 44.2Te (42.3T y/y);
ABBV Reports Q2 $2.65 v $2.67e, Rev $14.5B v $14.0Be; Raises EPS outlook
BT.A.UK Q1 Trading Update: Adj EBITDA £2.06B v £2.03B y/y, Adj Rev £5.05B v £5.16B y/y
DECK Reports Q1 GAAP $4.52 v $3.59e, Rev $825.3M v $805Me; Raises FY EPS guidance
DOW Guides Q3 Rev $11.1B v $11.0Be; Regional demand remains resilient in the U.S; Global industrial growth remains largely unchanged, hampered by weaker building & construction and durable goods end-markets - earnings slides
EMN Reports Q2 $2.15 v $1.99e, Rev $2.36B v $2.37Be; Continue to see little evidence for end-market demand improvement in H2 2024, but benefiting from the end of destocking
GOOGL OpenAI plans to launch an experimental search product as it takes aim at Google - press
META Reportedly to be hit with first EU antitrust for linking marketplace and Facebook – press
NESN.CH Reports H1 (CHF) Net 5.6B v 5.6B y/y, Underlying Trading Op 7.8B -0.8% y/y, Rev 45.0B v 46.2B y/y; Cuts EPS outlook citing pricing come down faster than expected
NOC Reports Q2 $6.36 v $5.95e, Rev $10.2B v $10.1Be; Raises guidance
NYCB Reports Q2 -$1.05 v -$0.38e, Rev $671M v $701Me
ROG.CH Reports H1 (CHF) Core EPS 10.23 v 10.10 y/y, Core Op 11.3B v 10.9B y/y, Rev 29.8B v 29.8B y/y; Raises EPS outlook
RTX Reports Q2 $1.41 v $1.29e, Rev $19.7B v $19.3Be; Raises Rev, EPS, but cuts FCF outlook
SAN.FR Reports Q2 Business EPS €1.73 v €1.66e, Rev €10.7B v €10.87Be; Raises guidance
STLA Reports H1 Net €5.6B v €10.9B y/y, Rev €85.0B v €98.4B y/y; Notes price adjustments were possible in order to unload excess supply
TRU Reports Q2 $0.99 v $0.98e, Rev $1.04B v $1.02Be; Raises guidance
UNA.NL Reports H1 Rev €31.1B v €31.0Be; Productivity programme underway and separation of Ice Cream unit on track to be completed by end-2025
VOD.UK Q1 Trading Update: EBITDAaL £2.68B v £2.63B, Rev €9.04B v €8.79B y/y

FRI 07-26
(EU) ECB Jun Consumer Expectation Survey: 1-year CPI Expectations: 2.8% v 2.8% prior
(US) Atlanta Fed GDPNow: Initial Q3 GDP forecast at 2.8%
(EU) EU reportedly transfers €1.5B in profits from Russian assets to Ukraine – press
(US) US State Dept spokesperson: US does not believe that the Russian and Chinese bombers intercepted by US and Canadian fighter jets near Alaska posed a security threat (update)
(US) Tier1 week-to-July 25th US Truckload Demand Indicator for shippers' 0- to 3-month freight demand outlook increased to 53.2 v 50.0 prior; Some consumer Products Shipper feels a market bottom has been reached
(US) Tier1 analysts still expect the first Fed rate cut to begin in Dec 2024, do not think it is willing to signal Sept is a done deal; Think markets are back to being overly optimistic about the upcoming cutting cycle
(US) JUN PCE DEFLATOR M/M: 0.1% V 0.1%E; Y/Y: 2.5% V 2.4%E (lowest annual pace since Feb 2024, but Core PCI Y/Y remains sticky)
(US) JUN PERSONAL INCOME: 0.2% V 0.4%E; PERSONAL SPENDING: 0.3% V 0.3%E
AMS.CH Reports Q2 -€0.04 v -€5.14 y/y, adj EBIT €56M v €50M y/y, Rev €819M v €823Me; Sees weakening demand for its automotive semiconductor products in view of the recently reduced global light vehicle production forecast for H2 2024
BAS.DE Reports Q2 adj EBIT €969M v €1.03Be , Rev €16.1B v €17.3B y/y; Highlights weakness in its agricultural segment; Expects slight increase in demand in Asia and North America in H2, but there are risks from a stronger price reduction and lower volume growth than expected
CRI Reports Q2 $0.76 v $0.45e, Rev $564.4M v $567Me; Cuts again outlook citing market conditions were unexpectedly weaker in Q2; U.S. Retail segment were lower due to fewer visits and lower conversion rates; Notes cash flow through June trended better than planned
JPM Said to 'pitch' in-house AI Chatbot called LLM Suite as research analyst; JPM executives told staff LLM Suite can help them with writing, idea generation and summarising documents – FT
MBG.DE Reports Q2 Net €3.06B v €3.64B y/y, adj EBIT €4.05B v €5.21B y/y, Rev €36.7B v €38.2B y/y; Notes in China, it has a cautious view on the macroeconomic sentiment and fierce competition; Seeks to hold and defend pricing at current levels
MMM Reports Q2 $1.93 v $1.66e, Rev $6.26B v $5.89Be
MMM Consumer discretionary demand for hardline goods remains soft; Industrial end markets mixed; end customers remain cautious; Saw strength in electronics - earning slides
WCH.DE Reports Q2 EBITDA €160.1M v €156.7Me, Rev €1.47B v €1.50Be; Seeing first signs that economy is recovering and a gradual increase in demand again in some areas

The Information : An Asbestos Lawyer’s New Crusade: Suing Social Media Companies

An Asbestos Lawyer’s New Crusade: Suing Social Media Companies
Matthew Bergman won $900 million for plaintiffs over a 25 year career filing asbestos lawsuits. Now he sues Meta, TikTok and other social media companies, claiming that they’re hooking teenagers on their apps.

In January, after members of the Senate Judiciary Committee had spent hours grilling tech CEOs about their platforms’ effects on children, Missouri Sen. Josh Hawley pounced on Meta Platforms CEO Mark Zuckerberg.

Hawley, a Republican firebrand and a vocal tech critic, accused Zuckerberg of ignoring internal company data that suggested Meta’s Instagram made life worse for some teenage girls and exposed them to unwanted sexual advances and nudity. He then asked Zuckerberg if he wanted to turn around and apologize to the families in the gallery at the hearing whose children had died or had been harmed after incidents involving the use of social media platforms, including Instagram.

“I’m sorry for everything that you’ve all gone through,” Zuckerberg said to the people, a couple dozen of whom stood holding pictures of their children.

One of the faces in the crowd, just a few yards from Zuckerberg, belonged to Matthew Bergman, a little-known Seattle-based attorney who for years had been working for a moment just like this. Many of the parents who stood to meet Zuckerberg’s gaze were clients of Bergman’s firm, the Social Media Victims Law Center, which he founded in 2021.

Bergman, who cut his teeth suing companies on behalf of asbestos exposure victims, has become an unexpected thorn in the side of big tech over the last three years. His firm, which he says is the first in the country exclusively dedicated to suing social media companies, has brought hundreds of lawsuits against companies like Meta and ByteDance, the parent company of TikTok, and has hundreds more in the works.

The subjects of the suits vary, but they generally focus on claims relating to adolescent social media addiction; the promotion of content encouraging eating disorders and suicide; and product features that allegedly allow kids to easily connect with drug dealers, sex traffickers or pedophiles.

It’s too soon to say whether his clients’ claims will be successful. Most of Bergman’s cases have been consolidated into two slow-moving legal proceedings, which are currently working their way through federal and state courts. But his track record in asbestos litigation suggests he has an eye for cases where plaintiffs can win big. Bergman said he’s recovered around $900 million for clients over the past 25 years.

“I always regretted that I was too young to have been a civil rights lawyer during the height of the civil rights movement,” Bergman said. “And this work to me has some of the same moral clarity and social purpose that the civil rights cases did.”

Bergman has become one of the leading practitioners of a novel legal strategy, now gaining wider adoption, to hold social media companies accountable for harms critics say they’re causing young people. The approach circumvents a key legal protection internet companies have relied on for decades—Section 230 of the Communications Decency Act of 1996—to immunize themselves against claims stemming from user-generated content.

Instead, Bergman and other lawyers aim to hold tech platforms responsible using theories of legal liability typically reserved for the manufacturers of defective physical products, from faulty silicone breast implants to car parts. In essence, the attorneys argue that platforms like Instagram and TikTok are addictive and harmful to kids’ mental health because they have been defectively and negligently designed.

Attorneys around the country have filed more than a thousand lawsuits making such claims against social media companies over the last two years, in addition to the ones involving Bergman’s firm.

It’s a strategy that would have seemed unfathomable just a few years ago, legal experts say. Eric Goldman, a professor at Santa Clara University Law School and co-director of its High Tech Law Institute, said he assumed judges would reject such claims of product liability, citing Section 230. He has been surprised by the number of courts now willing to entertain the theory, which has grown more popular among plaintiffs’ attorneys after a 2021 legal decision validated its use in a case involving Snap.

“The answer to this question could very well change the fate of the internet,” he said. “Because if plaintiffs win, we’ve just seen the tip of the iceberg.”

Still, as the list of lawsuits continues to grow, some critics worry that plaintiffs’ attorneys like Bergman are more interested in tapping into the tech industry’s deep pockets than they are in respecting legal precedent.

“It really has become a cottage industry,” said John Browning, a jurist in residence at Faulkner University and a former justice on Texas’ Fifth Court of Appeals. “This attitude of ‘We’re gonna turn big tech into the next big pharma or big tobacco’ seems to be more of an ambulance-chasing sort of mentality than actual concern for advancing a meaningful legal theory.”

Bergman, for his part, rejects that stereotype and says his motivation in taking on social media companies isn’t financial.

“I think some of the disparagement of plaintiffs’ lawyers might result from the idea that, unlike defense lawyers, we don’t get paid unless we win, and so we are often very resolute about how we prosecute the cases,” said Bergman. “Every field has its bad apples, but I don’t think you get into this work unless you care about people.”

U.S. consumers have long relied on personal injury litigation to hold companies responsible for harms in the absence of regulatory action. Early lawsuits against asbestos manufacturers and tobacco companies in the ‘70s and ‘80s helped advance legislative efforts and shift public perception.

Bergman hopes his social media suits will play a similar role. The lawsuits come as federal and state lawmakers are also pushing to shield children from online harms through a slew of bills designed to restrict minors’ use of social media and require more stringent privacy and safety features.

A bill recently signed into law in New York bans social media companies from showing children algorithmically curated feeds or sending late-night notifications without parental consent. The state’s lawmakers described those features as addictive and detrimental to the mental health of kids.

For his part, Bergman says he has worked with a bipartisan group of U.S. senators to advance bills like the Kids Online Safety Act, which would impose a “duty of care” on social media platforms catering to children that requires them to limit addictive features and take steps to prevent the promotion to young users of content related to suicide, eating disorders and substance abuse.

Critics say the bill restricts protected online speech and empowers the government to censor content it finds objectionable. But advocates of the bill, like Bergman and his clients, say the tech industry has been given carte blanche for too long to make products it knows can harm children’s mental health.

“One of the most disheartening things about this phenomenon is that the things that make social media so dangerous can also be easily fixed,” said Bergman, who pointed to recent legislation passed by the EU and United Kingdom as examples. “This is not a moonshot. This is simply tweaking the existing technologies in a less dangerous direction.”

Bergman’s interest in the law began when he was 12 and stumbled upon a book that had once belonged to his late grandfather: “Attorney for the Damned.” The book chronicles the arguments of Clarence Darrow, a lawyer best known for defending unpopular yet historically important clients in the 1920s, such as high school teacher John T. Scopes, who was tried for teaching evolution.

“I wanted to be just like him,” he recalled thinking about Darrow.

He went to law school with the goal of taking on cases representing what Darrow called “the weak, the suffering, and the poor.” For his first trial, his clients were farmworkers in eastern Washington who had been wrongfully terminated for consulting with a union. The workers didn’t speak English, and their foreman was extorting them to secure work, Bergman said.

“And we lost,” he recalled.

It was disappointing but also a learning experience. “There were opportunities to settle the case, and those opportunities did not come to fruition [because] I was riding on my high horse thinking I was a social justice warrior,” he said.

After a brief stint in corporate law, Bergman settled into a career representing asbestos victims as a plaintiffs’ attorney in 1995. A few years later, he founded his own law firm dedicated to representing victims of mesothelioma, a type of lung cancer connected to asbestos exposure.

“Oftentimes I would get the case right after they had received the terminal diagnosis.…In many cases they died during the pendency of the case or shortly thereafter,” he said.

In 2021, Bergman decided he was ready for something new. “I thought I might litigate civil rights cases in Mississippi; I might do some public service stuff and teach more,” recalled Bergman, who for years has taught a legal strategy course at his alma mater, Lewis and Clark Law School. The course is related to the teachings of Sun Tzu, a military general of ancient China and the author of “The Art of War.”

“I did not anticipate starting a new law firm and setting up a whole new law practice,” he chuckled. “But, you know, the fates intervened.”

Bergman wasn’t the most likely candidate to become a legal crusader against big tech.

He doesn’t use social media himself and prefers to spend his free time boating and fishing. “I clerked for a very wise judge on the Tenth Circuit who has a sign on his desk saying, ‘The worst day of fishing is better than the best day of work,’” said Bergman. “I try to live true to that judicial dictum.”

He has two adult children who grew up largely offline, too. His youngest child, now in her late twenties, used Facebook as a teen, but the app was a more innocent place for kids than it is now, Bergman recalled. “They would friend each other—they would say snarky things—but it was not this all-encompassing, addictive paradigm that has subsequently emerged.”

His first real exposure to the dark side of social media was in the spring of 2021, when he watched the Netflix docudrama “The Social Dilemma.” In it, tech experts and early Meta employees argue that social media platforms are designed to be addictive in order to maximize engagement, and consequently they can result in negative social outcomes for impressionable users.

Shortly after he saw the film, an attorney at Bergman’s asbestos firm offhandedly mentioned to him a recently decided product liability case that was making waves in their industry: Lemmon v. Snap. At his suggestion, Bergman researched the case.

“That was the eureka moment,” he recalled.

Lemmon v. Snap concerned three boys—two 17-year-olds and a 20-year-old—who died in a high-speed car crash one May evening in 2017. Just before the crash, one of the passengers opened the Snapchat app and took a photo using a built-in filter that recorded how fast they were going: 113 miles per hour.

At the time, some Snapchat users believed one of the ways to earn a special achievement on the app was by recording a speed of over 100 miles per hour using the feature, known as Speed Filter. The feature was one of many in Snapchat that in-app rewards and achievements had gamified.

In 2019, the parents of two of the boys filed a lawsuit against Snap, accusing the company of negligently designing a product that incentivized young people to drive dangerously in pursuit of Snapchat achievements. For its part, Snap, the app’s parent company, mounted the same defense most internet businesses in similar circumstances do: It argued that it had Section 230 protection and asked a judge to dismiss the case.

The district court hearing the case agreed to Snap’s request for a dismissal. But the plaintiffs appealed, and in 2021, the Ninth Circuit Court reversed the earlier decision. The court found that Section 230 wasn’t a viable defense in this case, noting in its decision that the suit wasn’t about user-generated content, like messages, which would fall under Section 230.

Instead, the suit sought to hold the company liable for the creation of the Speed Filter itself, the court said. The lawsuit “treats Snap as a products manufacturer, accusing it of negligently designing a product (Snapchat) with a defect (the interplay between Snapchat’s reward system and the Speed Filter); thus, the duty that Snap allegedly violated sprung from its distinct capacity as a product designer.”

A shiver went down Bergman’s spine as he read it, he recalled. It reminded him of Borel v. Fibreboard, a landmark 1973 product liability case that was the first successful lawsuit filed by an insulation worker against an asbestos manufacturer.

This was the first time a judge had ruled that parts of a tech company’s platform could be treated as a product and held liable for foreseeable defects. Snap and the plaintiff eventually settled the suit for terms not disclosed in court filings. Still, the appellate court’s ruling opened the floodgates for similar litigation, said Browning, the law professor.

“They proved that it could be done,” he said.

Bergman began transitioning out of his previous firm in the summer of 2021 and started researching social media addiction and its connection to what many researchers and parents view as a crisis in youth mental health.

Around the same time, The Wall Street Journal began publishing its Facebook Files series of stories, which relied on internal documents and other reporting from whistleblower Frances Haugen, a former Facebook employee. Haugen later told Congress that Meta, the parent of Facebook and Instagram, knowingly harmed children and should be regulated like big tobacco.

“I was, like, ‘Well, here it is. This is asbestos all over again,’” said Bergman. A month after Haugen testified, he founded the Social Media Victims Law Center.

Bergman sees parallels between asbestos and social media. Both were ubiquitous and popular products that people were unabashedly positive about for years.

“I mean, asbestos was the miracle fiber. It won World War II,” he said. At that time, it was commonly used as an insulator in Navy ships and for other military applications. “Similarly, when social media came out, it was going to flatten the world and make things better.”

In both cases, the initial exuberance eventually gave way to public health crises, Bergman said, pointing to the U.S. Surgeon General’s recent call for warning labels on social media due to the risks it poses to kids’ mental health.

A final parallel, he said, is misconduct. “You have companies that know that their products are hurting people and making self-conscious decisions to put their profits over the safety of the people that are using them,” said Bergman.

On that front, he says “the social media companies make the asbestos companies look like a bunch of Boy Scouts.”

Over the last three years, the Social Media Victims Law Center has grown from a solo operation into a team of six attorneys. “I’m working harder than I’ve ever worked in my life and I’m still behind,” said Bergman.

“We focus on kids that have suffered a particular physical or mental health harm and [are] being seen by a physician or psychotherapist in conjunction with that harm,” said Bergman. “If the standard of a case was: ‘Has a person suffered an adverse emotional reaction from social media?’ I mean, that would be everybody.”

One of Bergman’s clients is Tammy Rodriguez. In 2021, her 11-year-old daughter Selena died by suicide after suffering for years from an “extreme” addiction to Instagram and Snapchat, according to a complaint later filed by Bergman.

Adult Snapchat and Instagram users also solicited Selena Rodriguez for sexual content, which worsened her mental distress, the suit alleges. The suit accuses Instagram and Snapchat of creating products that failed to verify minor users’ age, had inadequate safeguards for young users and were designed to be addictive to children, among other things.

At first Bergman was surprised by the volume of outreach the firm received. “Not anymore,” he said. “I think we’ve just scratched the surface.”

Most of the Social Media Victims Law Center’s suits have been consolidated, along with hundreds of similar ones, into two sprawling umbrella cases—a federal multidistrict litigation in the Northern District of California and a California state consolidated proceeding in Los Angeles. Unlike in a class action, the individual lawsuits remain legally distinct from one another, but the grouping helps streamline pre-trial proceedings.

The two megacases recently completed “bellwether selection,” a process in which a small subset of the lawsuits are chosen to go to trial with the goal of giving plaintiffs and defendants a sense of which side is likely to prevail and the amount of damages juries might award. Bergman’s firm filed about 14% of the suits selected as bellwethers in the cases, including one of the 12 federal suits and four of the 23 state suits.

“We feel very strongly about our cases,” some of which will go to trial as early as next year, said Bergman.

Spokespeople from Meta, Snap and TikTok didn’t respond to requests for comment.

Some lawyers believe the fact that the litigation has progressed this far reflects growing skepticism about Section 230, which a growing number of lawmakers, including Ohio Sen. and Donald Trump’s running mate, J.D. Vance, have said they want to reform.

“The nature of precedent is that when a crack emerges in Section 230, other judges will start expanding that crack or reinterpreting that crack,” said Goldman, the Santa Clara University Law School professor.

Browning believes this type of litigation is getting traction because it exploits societal ills such as teenagers engaging in self-harm for financial gain.

“I think part of it is simply the fact that big tech and social media platforms have become this almost universally reviled target,” said Browning.

FT : Regulator sets out new rules to boost UK capital markets

Regulator sets out new rules to boost UK capital markets
Financial Conduct Authority proposes changes to document issuing for share sales in next phase of listings reforms

The UK’s financial regulator has proposed new rules aimed at making it cheaper and easier for companies to raise money, the latest in an ongoing programme of reform intended to boost Britain’s capital markets.

The proposals announced on Friday by the Financial Conduct Authority included lifting the threshold at which companies need to issue prospectuses for secondary fundraisings from 20 per cent of their issued share capital to 75 per cent.

“This is a huge change,” said Jamie Corner, partner at Simmons and Simmons. “You can do far more secondary issues of shares if you don’t need to produce a prospectus.”

He added the change would allow companies to act more quickly: “It takes easily a month and a half out of the process.”

The proposed changes come as the UK is in the midst of reassessing key capital markets rules in an effort to attract and expand new companies and encourage them to raise money at home.

London has struggled to compete with New York for listings and investment into high-growth businesses, and earlier this month approved the biggest overhaul of its IPO rules in three decades.

The UK’s new listing rules gave company founders more power such as by allowing dual class share structures and the ability to make more decisions without shareholder votes.

Despite the lack of IPOs, follow-on transactions in the UK have boomed so far this year. Follow-on transactions are when companies raise money after IPOs, either by investors offloading chunks of their stock or the company issuing new shares.

Richard Stone, chief executive of the Association of Investment Companies, welcomed the latest changes, adding they would cut the costs of making prospectuses, something which has been “particularly punitive for small issuers while adding nothing of value to investors”.

But Corner warned that some investors would dislike how high the threshold had been set, noting it would result in less disclosure for larger share sales.

If the proposal is agreed, the UK would diverge sharply with EU rules. European Union officials, who recently refreshed the bloc’s listing rules, lifted the threshold for issuing a prospectus from 20 per cent of issued shares to 30 per cent.

“The UK is diverging significantly from Europe and becoming far more company-friendly,” Corner added.

The FCA said: “These proposals will make sure investors get the information they need while significantly reducing the costs associated with further capital raises for companies.” 

The regulator is also consulting on new rules for “public offer platforms”, such as crowdfunding companies that help start-ups raise money from investors including retail.

>>> US Early premarket gappers

Early premarket gappers
  • Gapping up:
    • COUR +26.9%, UCTT +15.3%, MHK +14%, DECK +10.8%, KARO +9.4%, UVE +7.4%, NSC +6.1%, PODD +5.5%, NWG +5.2%, BYD +4.3%, TFII +4%, CLLS +3.9%, KNSL +3.9%, TXRH +3.7%, CNC +3.5%, E +3.2%, FIX +3%, VLTO +2.9%, SSNC +2.9%, HTBK +2.7%, BAK +2.5%, BOC +2.3%, ISSC +2.1%, TREE +2.1%, ICFI +1.9%, BKR +1.9%, DDD +1.8%, DOC +1.8%, SKX +1.8%, COHR +1.6%, BPRN +1.6%, CUBI +1.5%, APPF +1.5%, POR +1.5%, SPSC +1.4%, CUZ +1.3%, COLB +1.3%, VALE +1.3%, SCHW +1%
  • Gapping down:
    • DXCM -35.2%, ZYXI -23.2%, CRI -7.4%, OLN -5.8%, PFS -4.6%, TNDM -4.1%, HIG -4%, TBBK -3.9%, SAM -3.4%, VOYA -2.8%, HMN -2.5%, SBCF -2.3%, BVN -2.3%, PFG -2%, AMKR -1.3%, JNPR -1.1%, BJRI -1%, CALT -0.9%, CINF -0.9%

>>> Europe : Brokers Upgrades & Downgrades - 26th of July 2024 V3(++)

>>> Up
* AbbVie PT Raised to $210 from $190 at JPMorgan
* Altri Raised to Outperform at Renta 4; PT 6.20 euros (+)
* Anglo American Raised to Buy at UBS (++)
* Bureau Veritas Raised to Outperform at BNPP Exane (+)
* Delta Plus Raised to Add at IDMidcaps; PT 74 euros (+)
* Gecina Raised to Outperform at BNPP Exane; PT 120 euros
* Michelin Raised to Hold at Jefferies; PT 34 euros
* Netflix Raised to Buy at First Shanghai; PT $742 (+)
* Sonova Raised to Neutral at UBS (++)
* UCB Raised to Outperform at Oddo BHF; PT 168 euros (++)

>>> Down
* Alten Cut to Neutral at Oddo BHF; PT 110 euros (+)
* Andritz Cut to Hold at Hauck & Aufhaeuser; PT 64 euros (+)
* Ariston Cut to Neutral at Mediobanca SpA; PT 5.20 euros
* Greencore Group Cut to Hold at HSBC; PT 190 pence
* Groupe Okwind SAS Cut to Hold at TP ICAP Midcap; PT 16 euros
* Lloyds Cut to Sector Perform at RBC; PT 60 pence
* Neinor Cut to Neutral at JB Capital Markets; PT 14.10 euros (+)
* Nordnet Cut to Hold at Berenberg; PT 230 kronor (++)
* Nestle cut to Hold From Buy a Deutsche Bank, PT cut SFR95
* Nestle Cut to Hold at Berenberg (+)
* RWE Cut to Market Perform at Bernstein
* STMicroelectronics Cut to Equal-Weight at Morgan Stanley
* STMicroelectronics ADRs PT Cut to $45 from $55 at Susquehanna
* Tesla Cut to Sell at Phillip Secs; PT $135
* Valiant Cut to Reduce at Baader Helvea; PT 100 Swiss francs
* Vallourec Cut to Neutral at CIC (++)
* Wedia Cut to Hold at TP ICAP Midcap; PT 35 euros (++)

>>> Initiation
* Deliveroo Rated New Sell at Redburn; PT 115 pence
* Delivery Hero Rated New Neutral at Redburn; PT 22 euros
* DoorDash Rated New Buy at Redburn; PT $170
* Just Eat Takeaway Rated New Sell at Redburn; PT 9 euros
* Nestle ADRs Rated New Hold at Berenberg; PT $112 (++)
* Netflix Rated New Hold at LBBW; PT $672

>>> Call
* Evercore’s Schlosstein Says Trump Tariffs a Threat to Stocks
* Nestle Cut at Deutsche Bank, Berenberg (++)
* Sulzer Posts Solid Orders But Light Profits, Says Baader (+)