Le Figaro : L'Iran confirme négocier indirectement avec les États-Unis à Oman

L'Iran confirme négocier indirectement avec les États-Unis à Oman

L'Iran a confirmé des informations sur la poursuite de négociations indirectes avec les États-Unis à Oman en dépit des tensions entre les deux pays qui n'ont pas de relations diplomatiques, selon un média officiel iranien.

Le site d'information américain Axios a fait état vendredi de discussions ayant eu lieu «cette semaine» entre Téhéran et Washington sur la «manière d'éviter une escalade des attaques» au Moyen-Orient.

La représentation de l'Iran à l'ONU a confirmé «les informations publiées sur les négociations indirectes entre l'Iran et les Etats-Unis à Oman», a rapporté l'agence officielle Irna, précisant que ces discussions se sont tenues dans le cadre d'«un processus en cours».

Irna n'a pas fourni de détails sur la date et le contenu des réunions, en indiquant qu'elles «n'étaient pas les premières» et «ne seront pas les dernières».

Les négociations ont été menées côté américain par le conseiller du président américain pour le Moyen-Orient, Brett McGurk, et l'envoyé pour l'Iran, Abram Paley, a précisé Axios, disant ignorer qui représentait Téhéran.

Ces discussions, menées par l'intermédiaire de responsables du sultanat d'Oman, se sont tenues un peu plus d'un mois après l'attaque inédite menée le 13 avril par l'Iran contre Israël, avec 350 drones et missiles, dont la plupart ont été interceptés avec l'aide des Etats-Unis et de plusieurs autres pays alliés.

Cette attaque, qui avait suscité des craintes sur le risque d'une guerre régionale, a fait suite à une frappe aérienne contre le consulat d'Iran à Damas attribuée à Israël, ayant tué sept membres des Gardiens de la Révolution, l'armée idéologique de la République islamique, dont deux généraux.

À lire aussiLes États-Unis annoncent de nouvelles sanctions contre l'Iran visant des auteurs de piratage informatique

Washington accuse par ailleurs Téhéran de soutenir les rebelles yéménites houthis qui mènent des attaques contre des navires en mer Rouge, en affirmant agir en solidarité avec les Palestiniens à Gaza, où Israël est en guerre contre le Hamas depuis le 7 octobre.

Principal allié d'Israël, les Etats-Unis n'ont pas de relations diplomatiques avec l'Iran depuis 1979 et sont représentés à Téhéran par l'ambassade de Suisse.

Ces dernières années, les deux pays ont mené des négociations indirectes autour d'un échange de prisonniers, de la libération de fonds iraniens bloqués à l'étranger et de mesures visant à limiter le programme nucléaire de l'Iran.

FT : Pharma’s next big obesity win will be a challenge

Pharma’s next big obesity win will be a challenge
The sector’s holy grail of an effective, easily manufactured weight loss pill does not look imminent

Weight loss jabs are rarely out of the spotlight — and not just because of memes about celebrities’ “Ozempic face”.

Two studies this week found patients who used Novo Nordisk’s Wegovy anti-obesity injection sustained weight loss for up to four years and showed a lower risk of heart disease.

How weight loss drugs, which also include Eli Lilly’s Zepbound jab, might relieve public health burdens is prompting Big Pharma and investors to search for the next breakthrough. The most valuable prize will be the first pill that can deliver similar results to Wegovy and Zepbound. That may be possible — but finding a pill that can be easily manufactured is a bigger challenge.

Companies such as AstraZeneca argue oral treatments, which are generally easier and cheaper to produce, could reach more people and are preferred by patients.



Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour.

Novo already sells tablets containing semaglutide, the active ingredient in Wegovy as well as Ozempic, a diabetes treatment often prescribed off label for weight loss. The US regulator approved Rybelsus semaglutide tablets in 2019 for adults with type 2 diabetes.

A higher dosage 50mg semaglutide tablet is among the most advanced oral obesity treatments under development. Novo could file for approvals for the daily pill this year — though it has previously warned that any launch would be contingent on manufacturing capacity.

It is already struggling to keep up with demand for injectables. A single 50mg pill would require more than 20 times the amount of semaglutide contained in a once-weekly shot of Wegovy, and is taken daily. In pill form, higher doses are needed to have the same therapeutic effect.

Analysts are carefully watching progress of Eli Lilly’s rival pill — a different and more easily manufactured molecule. Late-stage trial results are expected in 2025. Other pills, including a treatment from Structure Therapeutics, are at earlier stages. Some, such as Pfizer’s twice daily pill, have already fallen by the wayside.

Yet hype around an oral treatment is contributing to big share price moves on results from even very early trials. Novo’s stock hit a fresh record in March after it told investors about results of a phase 1 trial of another potential weight loss pill.

Market leaders Lilly and Novo trade on tech-like forward price/earnings multiples of 58 times and 35 times respectively. That compares with an average of 14 times for US and European rivals that aren’t in weight loss treatments or are years behind.

Pharma’s holy grail of an effective, easily manufactured weight loss pill doesn’t look imminent. Still, any moderation in the frenzy around this drug class is still some way off.

FT : Dollar rally falters as falling inflation raises hopes of rate cuts

Dollar rally falters as falling inflation raises hopes of rate cuts
US currency on track for first negative month of the year after end to months of above-forecast CPI data

A rally in the US dollar this year has gone into reverse as investors bet that falling inflation in the world’s largest economy will give the Federal Reserve more room to cut interest rates.

The greenback, which had gained as much as 5 per cent this year by mid-April against a basket of currencies, is now on track for its first down month of 2024 after the rate of consumer price inflation eased in line with forecasts on Wednesday.

The reading, after months of higher than expected inflation, has helped allay fears that the Fed may not be able to cut rates much this year, or may even have to raise them again from a 23-year high to control price growth.

“Fed pricing matters more than anything else in markets at the moment,” said Athanasios Vamvakidis, head of G10 foreign exchange strategy at Bank of America.

“The inflation data this week meant another rate hike is off the table . . . now it’s just a matter of time until they start cutting,” he added.

Investors had a major rethink on the path of interest rate this year as US inflation rose in both February and March. That helped lead traders to drastically reduce bets on rate cuts, while hedge funds tore up their bearish bets against a resurgent dollar.

But after Wednesday’s reading showed a fall in inflation to 3.4 per cent, traders have raised their wagers on the Fed delivering two quarter-point rate cuts this year.

The dollar suffered its worst day of the year on Wednesday. Despite a partial rebound later in the week, it is still down 1.4 per cent this month.


Analysts say the recent softening of US data, which started early this month when a critical jobs report undershot expectations, could be the start of a sustained period of dollar weakening, although given the economy is still relatively robust any declines could take time. 

“I think we are at a turning point but we are going to faff around here for some indeterminate period of time,” said Kit Juckes, a foreign exchange strategist at Société Générale. “The dollar bull is running short of arguments for the next leg higher.”

The dollar has weakened alongside a fall in US government borrowing costs, which has helped drive stock markets in the US, Germany and the UK to record highs this week.

The benchmark 10-year US Treasury yield — a key driver of asset prices across the globe — has fallen to 4.3 per cent, having reached 4.7 per cent late last month, as traders have raised bets on more than one Fed rate cut this year. Yields fall as prices rise.

This month’s dollar weakening follows a recent build-up of bets against the currency among hedge funds, which started selling the currency last month and have become “firmly short”, according to Sam Hewson, head of foreign exchange sales at Citigroup.

Asset managers, however, maintain their overweight positions, Hewson said. When their positioning differs from hedge funds, “historical patterns suggest . . . it is best to be short” the dollar, he added. 

The recent moves come as welcome news to central bankers around the world, who have been struggling to deal with rising US Treasury yields and the dollar’s persistent strength. That has particularly been the case in Japan, where the ministry of finance is thought to have sold around $59bn of dollars in recent weeks to support its ailing currency. 

“A weaker dollar makes life a little bit easier for Tokyo,” said Chris Turner, a currency strategist at ING, pointing out that the Japanese currency is more sensitive to shifts in US rate expectations than to rising borrowing costs in its own market. 

The evaporation of expectations for a possible US rate rise could also increase room for manoeuvre at the European Central Bank which is widely expected to start cutting interest rates in June. 

ECB President Christine Lagarde has been clear that Europe can start lowering borrowing costs ahead of the Fed. But if the US central bank were to raise rates again this year while rates come down in Europe, that could put the bloc’s currency under significant pressure and risk stoking inflation. 

“The latest US data is good news for the ECB,” said BofA’s Vamvakidis. “It means the ECB can cut in June without being too concerned the euro would weaken.”

WSJ : Dimon Led Bank CEOs to Fend Off Tougher Capital Rules

Dimon Led Bank CEOs to Fend Off Tougher Capital Rules
Regulators discuss slashing proposed capital requirements in sign of banks’ increasing clout

WASHINGTON—JPMorgan Chase’s JPM 1.15%increase; green up pointing triangle Jamie Dimon and other big-bank CEOs played hardball with the Federal Reserve over proposals that the lenders hold more capital. Now, it looks like those tactics are paying off.

The Fed and two other federal regulators are moving toward a plan that would significantly lessen a nearly 20% mandated increase in capital for the biggest U.S. banks, according to people familiar with the matter.

Required increases in capital for banks like JPMorgan and Goldman Sachs GS 0.69%increase; green up pointing triangle—meant to ensure they have sufficient buffers to absorb potential losses—would on average be about half as much as originally floated.

It would be a big win for the banks and Dimon. Banks say the rules as originally proposed would have cut into profits and crimped lending. It also represents a shift in the balance of power between big banks and their regulators, turning the page on an era in which the Fed held the upper hand.

Dimon at a meeting in Washington last fall told his fellow CEOs to bypass Michael Barr, the central bank’s vice chair for banking supervision and the main architect of the original plan. Dimon urged his fellow bankers to instead press other Fed governors, in particular Chair Jerome Powell, to alter the proposed capital rules.

By doing so, the bankers hoped to capitalize on internal disagreement and concern on the seven-member Fed board over the regulatory proposals.

Dimon has characterized Barr’s proposal as “flawed and poorly calibrated” and publicly pushed for other Fed governors to speak out. “What person, in what ivory tower thinks that that is a rational thing to do?” Dimon said at a conference last September. “I’d like to know what the other governors think.”

He also expressed frustration with regulators in general, saying in his annual shareholder letter that banks’ relationships with them “have deteriorated and…are increasingly less constructive.”

Big U.S. bank CEOs met with Powell more than a dozen times between last July and March, according to the central banker’s public calendar. Those included four meetings or calls with Dimon.

On Friday, the Fed released calendars for Barr showing he met 15 times with the CEOs of the largest U.S. banks during the same period. He also met with Dimon in April and in May, a Fed spokesman said.

“I have not felt bereft of attention from the banking lobby,” Barr said in a statement.

Top officials from all three agencies involved in the pending capital rules—the Fed, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency—are still negotiating substantive and technical revisions, and there is no guarantee that a deal will come together. It also could be late this year before any plan is ready.

The pending rules are the last in a series of steps global regulators agreed to in the wake of the 2008-09 financial crisis, which are aimed at boosting the resilience of the banking system and guarding against taxpayer-backed bailouts. The latest proposal also seeks to protect against a variety of other risks, including the potential to lose money from cyberattacks.

Its July release kicked off the biggest regulatory fight in at least a decade, featuring fierce lobbying from big banks as well as pushback from a bipartisan chorus of lawmakers and others including affordable-housing advocates. Unlike other fights over financial regulation, the campaign involved a series of pricey television ads during National Football League games warning of dire economic consequences.

Goldman Sachs spent millions on its own advocacy campaign. The Financial Services Forum, which represents the eight largest U.S. banks, also asked its members to chip in $2 million apiece on another ad campaign.

Among those leading the charge was Dimon, who urged bank executives to bypass Barr during a fall board meeting of the Bank Policy Institute, a Washington lobbying group. In addition to Powell, banks have also viewed Philip Jefferson, the Fed’s vice chair, as a key swing vote.

Barr is still in charge of shepherding the plan day-to-day, but is now closely coordinating with Powell, who is playing a more active role.

In March, Powell said that the new rules won’t be finalized without broad and material changes. He also said any plan would have broad support on the board and opened the door to scrapping the existing plan and starting over again with a fresh proposal. The FDIC and OCC are resistant to starting over.

Even if the agencies eventually reach an agreement to finalize the rules this year, the banks could still challenge them in court.

One recent wrinkle in the negotiations revolved around the way banks account for the value of their trading positions and other capital-markets activities. The issue is likely to have an outsize effect on five of the largest Wall Street firms, which besides Goldman and JPMorgan include Morgan Stanley, Bank of America and Citigroup C -0.11%decrease; red down pointing triangle.

Powell and other Fed officials support reducing the amount of capital reserves tied to such activities, relative to the proposed rule. The issue accounts for a significant amount of the overall increase in capital envisioned for the largest banks. Officials at the two other agencies involved in drafting the rules were resistant to watering down market-risk provisions, worried it would undermine a key pillar of the new framework.

If the FDIC and OCC convince the Fed to leave the provisions largely untouched from the proposal, Fed officials have indicated they want to compensate with cuts elsewhere in the plan.

WSJ : Want to Buy SpaceX Stock? You Have to Know Someone

Want to Buy SpaceX Stock? You Have to Know Someone
Shares in Elon Musk’s rocket and satellite company are a hot ticket for investors, but SpaceX tightly controls access

SpaceX has become one of the investing world’s most exclusive clubs.

Invites circulate via group chats, word of mouth and emails marked confidential. Investment vehicles providing access to Elon Musk’s closely held rocket and satellite company have generated hefty demand, and fees for those arranging them. For years, the company’s value has only gone in one direction—up.

Hawthorne, Calif.-based SpaceX—which flirted with bankruptcy not long after Musk founded the company more than two decades ago—now dominates the launch business.

And it has built its satellite-internet division, Starlink, into an industry and geopolitical force.

Current and former employees, venture capitalists and creators of SpaceX investing vehicles have all benefited from the intense investor appetite for the company. Gaining access to SpaceX shares can mean sizable costs. SpaceX also carefully tracks its investor base, and not everyone gets in.

As a private company, SpaceX isn’t required to report financial results. The Wall Street Journal reported last year that the company in 2022 doubled its revenue compared with the previous year’s total as Starlink gained customers, and global attention, for its role in Ukraine. Many investors are betting that growth will continue for years to come.

“You can argue about where it’s trading in terms of valuation, whether that’s the right place to buy. But there’s a whole lot of believers in this stock,” said Glen Anderson, chief executive of Rainmaker Securities, which operates a marketplace where investors can trade investment interests in private companies such as SpaceX.

Investor demand has been a factor in SpaceX’s steadily climbing valuation over the past decade, providing executives and other staff the chance to cash out company stock at ever-higher prices. That is a benefit akin to programs used by publicly traded companies to attract talent.

It has also enabled SpaceX’s longer-term investors to mark up the value of their stakes, bolstering their portfolios’ performance.

SpaceX has raised $9 billion in primary funding over time, and investors who have participated directly in the company’s traditional funding rounds include blue-chip firms such as Fidelity and Alphabet’s Google. SpaceX hasn’t raised money for itself in a couple of years, a sign of its improving financial performance and strong cash position.

For many other investors, fresh batches of shares now often come from former and current SpaceX employees, who have the opportunity to sell during so-called liquidity events the company sets up. Securing access isn’t easy: Opportunities can bubble up informally, through phone calls or via online lists that don’t circulate widely, people familiar with the deals say.

Shares of SpaceX were valued at $97 each during the most recent employee stock sale, implying a $180 billion valuation for the company, according to people familiar with the matter. That was up from a $12 billion valuation in 2015.

Some of the strongest demand comes from wealthier people who meet financial requirements to purchase slices of special investment companies set up to hold SpaceX stock. Investors can also purchase interests in vehicles that own shares in those special investment companies—a nesting-doll effect.

Musk, SpaceX’s chief executive, has grappled with challenges involved in operating Tesla, the one public company he leads. At the electric-car maker, he has battled securities regulators and faced government probes.

In January, Musk lost a shareholder lawsuit over his pay package. Last year, he recommended that companies go public only if they absolutely need to.

Musk is both a draw and a risk for investors at SpaceX, according to investors and documents viewed by the Journal.

A recent investment offering for SpaceX listed Musk as a factor they should account for. “Mr. Musk has become an increasingly public personality and makes public statements regularly, with many of those statements causing controversy,” a document viewed by the Journal shows.

Musk and a SpaceX spokesman didn’t respond to requests for comment.

“I think investors in SpaceX know exactly what they are doing. And they are lucky to be investors in SpaceX,” said Tim Draper, a longtime venture investor and an early backer of SpaceX.

Hank Medina, an investor behind Litquidity who has been dubbed the “meme lord” of Wall Street, said in an interview that the syndicate sold about $2 million worth of exposure to SpaceX, or double its original allocation. The minimum check size to get in: $50,000.

In December, Litquidity Syndicate, an investment group that usually focuses on early-stage companies, emailed a list of investors, saying they had the chance to get access to SpaceX by purchasing interests in a special investment vehicle. That vehicle would be exposed to SpaceX shares through another investment vehicle, according to the email, a copy of which was viewed by the Journal.

Investors who bought access would pay a 4% management fee for the first year, split between two other firms involved in the deal. Litquidity itself would get 5% of potential future profits, with another partner taking 20%, according to the email. Medina said the fees partly reflected pent-up demand for SpaceX and investor conviction in the company.

“I wouldn’t have done this if I didn’t think there wasn’t more room to run,” Medina said.

Demand for SpaceX-linked investments is part of how the rocket launcher ensures there are buyers for current and former employees looking to sell holdings. Still, SpaceX has worked to keep a tight grip on who ultimately owns its stock.

A Hong Kong subsidiary of Leo Group, a China-based company with businesses such as pump manufacturing and digital marketing, in 2021 said it contributed $50 million into a vehicle that would invest in SpaceX, according to securities and legal filings.

Shortly after Leo disclosed the investment in a securities filing in China, the investment vehicle’s managers moved to cancel the deal, according to a lawsuit the subsidiary filed in the U.S.

They sought to disqualify Leo’s subsidiary because SpaceX’s chief financial officer “was unhappy with media coverage of Leo Group’s disclosure of its investment in SpaceX,” the lawsuit alleged.

The suit is pending in Delaware state court. Aaron Marks, a lawyer at Kirkland & Ellis representing the defendants, who have contended in court their actions were appropriate, declined to comment. Leo Group couldn’t be reached. Andrew Stern, a lawyer at Sidley Austin representing the Leo subsidiary, declined to comment.

SpaceX documents viewed by the Journal unrelated to the case say employees can’t transfer shares to other holders without company and board approval. Transfers to potential competitors, non-U.S. holders or entities the company considers unfriendly are unlikely to ever be permitted, according to the documents, which relate to a stock-purchase program.

SpaceX also says in the documents that it doesn’t plan to approve transfers of employee stock arranged through “any public posting, message board, trading portal, internet site or similar manner.”

The company has another reason for keeping close tabs on its shareholder base: U.S. securities law.

Private companies are typically required to make periodic disclosures of their financial performance once they hit certain milestones, such as having more than $10 million in assets and 2,000 official owners. Those thresholds generally exclude so-called beneficial holders, or those who have an indirect interest in the company’s shares.

The regulatory limits are the reason SpaceX cannot offer stock to anyone who wants to buy it, Musk said on X last year.

SpaceX executives have spoken publicly about potentially spinning off Starlink as a public company, but they have also voiced confidence in their ability to continue cashing out staffers seeking money for their shares.

“I think the reason to take any company public is to give employees liquidity,” SpaceX President Gwynne Shotwell told reporters at a conference in early 2023. But at SpaceX, “We have been able to give employees liquidity.”

WSJ : U.S. Fears Undersea Cables Are Vulnerable to Espionage From Chinese Repair

U.S. Fears Undersea Cables Are Vulnerable to Espionage From Chinese Repair Ships
Google, Meta Platforms and others partially own many cables, but they rely on maintenance specialists, including some with foreign ownership

WASHINGTON—U.S. officials are privately delivering an unusual warning to telecommunications companies: Undersea cables that ferry internet traffic across the Pacific Ocean could be vulnerable to tampering by Chinese repair ships.

State Department officials said a state-controlled Chinese company that helps repair international cables, S.B. Submarine Systems, appeared to be hiding its vessels’ locations from radio and satellite tracking services, which the officials and others said defied easy explanation.

The warnings highlight an overlooked security risk to undersea fiber-optic cables, according to these officials: Silicon Valley giants, such as Google and Meta Platforms, partially own many cables and are investing in more. But they rely on specialized construction and repair companies, including some with foreign ownership that U.S. officials fear could endanger the security of commercial and military data.

The Biden administration’s focus on the repair ships is part of a wide-ranging effort to address China’s maritime activities in the western Pacific. Beijing has taken steps in recent decades to counter U.S. military power in the region, often by seeking ways to stymie the Pentagon’s communications and other technological advantages in case of a clash over Taiwan or another flashpoint, officials say.

U.S. officials have told companies, including Google and Meta, about their concerns that Chinese companies could threaten the security of U.S.-owned cables, a person familiar with the briefings said. In some cases, the conversations have included discussion of Shanghai-based S.B. Submarine Systems, the person said.

Senior Biden administration officials have also received briefings in recent months about the risks posed by Chinese companies, including SBSS, working on repairs to undersea cables, according to the person.

The security of undersea cables “is rooted in the ability of trusted entities to build, maintain, and repair” them “in a transparent and safe manner,” the National Security Council said in a statement, noting that satellite ship tracking “is one such measure that supports vessel monitoring and safety.”

The administration declined to comment on SBSS. Google and Meta declined to comment about the Biden administration’s concerns related to SBSS. SBSS didn’t respond to requests for comment.

The gaps in the company’s ship-location data could be explained by spotty satellite coverage rather than as an effort to hide their positions, according to another person who is familiar with the company. The cable owners often have representatives aboard repair ships at sea, which would make any potential meddling with cable gear hard to hide, the person added.

The vessels—named the Fu Hai, Fu Tai, and Bold Maverick—periodically disappeared from satellite ship-tracking services, sometimes for days at a time, while operating off Taiwan, Indonesia and other coastal locations in Asia, according to a Wall Street Journal analysis of shipping data.

The data gaps were unusual for commercial cable ships and lacked clear explanation, the officials and industry experts said.

Hundreds of thousands of miles of underwater fiber-optic cables carry almost all the world’s international internet traffic. Dozens of lines lace the Pacific Ocean floor, shuttling data between the Americas, Asia and many island chains.

SBSS is part of a regional consortium of companies that provides ships to fix undersea cables, including some belonging to major U.S. companies, by winching them to the surface, resplicing broken fibers that carry internet data and returning the lines to the sea floor.

U.S. and congressional officials who disclosed their concerns about SBSS wouldn’t say whether their worries stemmed from classified intelligence about maritime espionage or only potential threats to internet infrastructure. But commercially available satellite tracking data showed numerous gaps while the company’s ships were at sea, they said.

Underwater cables are vulnerable to tampering when they are brought to the surface for repairs, U.S. officials say. Tapping global data flows is still far easier on land, industry experts say. But at-sea repair could still offer an opportunity to install a device to remotely disable a cable or to study the technology in advanced signal repeaters installed by other companies.

U.S. officials said that cable repair ships pose a security threat because they could engage in clandestine tapping of undersea data streams, mapping of the ocean floor to conduct reconnaissance on U.S. military communication links, or theft of valuable intellectual property used in cable equipment. The ships could also lay cables for the Chinese military, they said.

Liu Pengyu, a spokesman for the Chinese Embassy in Washington, said he wasn’t aware of U.S. concerns about SBSS.

“It is nothing wrong for Chinese companies to carry out normal business in accordance with the law,” he said. “We firmly oppose the U.S. to generalize the concept of national security and attack and smear Chinese companies.”

The SBSS vessels’ location-tracking beacons have been inoperative periodically over the past five years, according to radio and satellite data from commercial data provider MarineTraffic that was reviewed by the Journal.

In early February 2021, the Fu Hai left its berth near Shanghai and sped north up the coast into the Yellow Sea. Then the 340-foot, red-hulled vessel stopped broadcasting its location signal for two days before it popped up back near Shanghai. The signal went on and off for a few more days back near Shanghai before the ship docked again, tracking data show.

It wasn’t clear whether the vessel’s automatic identification systems—satellite and radio transponders that ships use to broadcast their location—were turned off or suffered an unintentional outage.

The Fu Hai has seen other significant gaps in reporting its tracking data at least a dozen times over the past five years, according to the MarineTraffic data.

A gap in transponder data alone isn’t necessarily a red flag, a senior U.S. government official said. “But it would raise suspicions if it happens repeatedly, especially if they are operating in the vicinity of a cable that might have strategic significance,” such as those ferrying military communications, the official said.

The U.S. intelligence community has warned for years about the security of undersea cables, noting in a 2017 report that industry consortia that maintain cables might “present vulnerabilities” and could be “susceptible to threats from insiders.” Cable integrity has long been a U.S. concern in the event of a direct conflict with China, former intelligence officials said.

SBSS was formed in 1995 as a Chinese-British joint venture. State-owned China Telecom has long held 51% of the business and is in the process of buying the remainder from U.K.-based Global Marine Systems, according to people familiar with the matter. A member of the Chinese Communist Party serves on the SBSS management team, according to the company’s website. He didn’t reply to a written message seeking comment.

The U.S. in 2021 stripped China Telecom’s licenses, arguing that it was subject to “exploitation, influence and control by the Chinese government.” The move didn’t affect U.S. companies’ ability to use the repair consortium that includes SBSS.

Safeguarding underwater cables has been a focus of U.S. national-security officials since the Cold War, when fears of Soviet espionage were paramount. In the 1970s, the U.S. secretly placed wiretaps on underwater Soviet lines in an intelligence coup known as Operation Ivy Bells.

Beijing’s rapid military buildup in the South China Sea in recent decades has heightened American government worries about the cables’ vulnerability to disruption or tampering.

U.S. officials say they are especially concerned about the security of cables that carry sensitive data to American bases and other military assets in the Pacific and around the globe. Though encrypted, that data can pass through commercial internet lines.

To prevent interruptions from damaged lines, the U.S. government is funding several Pacific cable projects along with American internet companies, such as Google. Google this year said it was investing $1 billion in new cables and other infrastructure projects in the region.

SubCom, a cable ship company owned by private-equity giant Cerberus Capital Management, receives $10 million in annual U.S. government payments for participating in the Cable Security Fleet, a program partly overseen by the Pentagon. It requires the ships to be available for critical cable repair or other emergencies.

At a congressional hearing in January, Rep. Ann Wagner, a Missouri Republican, said she was “very concerned about Chinese companies repairing or even having access to undersea cables that are owned by U.S. carriers.”

Nathaniel Fick, the State Department’s top cybersecurity official who was testifying at the hearing, said he shared her concern. “I believe when our adversaries tell us what they intend to do, we should believe them,” he said.

Fick said in a statement to the Journal that undersea cable security can’t be assured if the lines “are built, maintained, or repaired by suppliers who are subordinate to or are beholden to authoritarian governments.”

SBSS is one of three maintenance shipowners that are members of Yokohama Zone, a consortium used by internet cable owners in the northwest Pacific. The group keeps ships on standby, based in China, South Korea and Japan. SBSS parent China Telecom hosted a meeting of Yokohama Zone companies in Wuhan, China, in March, according to people familiar with the event.

In response to questions about SBSS, Yokohama Zone Chairman Masanori Araki, a submarine cable expert from Japanese telecom company and shipowner KDDI, said the Chinese company is in compliance with the consortium’s performance standards.

“Cable owners are receiving and enjoying assured service quality, whichever service provider they may use,” he said.

Industry analysts say that shifting responsibility for fixing Asian cables away from Chinese vessels could pose a tougher challenge. Cable owners have few choices among an aging fleet of roughly 50 ships around the world, according to Mike Constable, who runs telecom consulting firm Infra-Analytics and previously led China’s Huawei Marine Networks, now known as HMN Technologies.

“You’ve got a Chinese asset repairing U.S.-invested cables,” Constable said. “No one had really thought about that before.”

WSJ : Deck Maker’s $450 Million Bet on America’s Renovation Boom

Deck Maker’s $450 Million Bet on America’s Renovation Boom
Home-improvement spending is forecast to fall, but Trex is expanding

WINCHESTER, Va.—High-interest rates have squeezed the housing market, but a leading maker of weatherproof decking is betting $450 million that Americans will add on to their homes rather than try to move to new ones.

Trex TREX -1.13%decrease; red down pointing triangle, which makes composite boards with sawdust and old plastic bags, is building a factory in Little Rock, Ark., that will greatly boost its manufacturing capacity and give the firm a foothold in the South. It is also rolling out new lines of premium decking. One mimics hardwoods, like redwood and ipe. Another, for the Sunbelt expansion, is cooler on the feet.

It might seem like an untimely wager for a massive expansion given that renovation spending is forecast to sputter and home-improvement stores are reporting declining sales. Few expected deck-building to boom during the pandemic lockdown, though, and Trex could hardly keep up with demand that summer four years ago.

“The biggest risk is doing nothing,” said Trex Chief Executive Bryan Fairbanks. “If we have a recession in between now and when we launch it, or even a year after, fine.”

Trex sits at crosscurrents in the economy. Wall Street has been fearing recession since the Federal Reserve began raising interest rates in 2022. Yet the highest borrowing costs in a generation have hardly fazed consumers, whose spending has kept inflation up and delayed interest-rate cuts.

The construction and remodeling sectors have been especially resilient, given that they are usually among the first to decline and suffer job loss when borrowing costs are high.

Lately, however, cracks are beginning to show, particularly around the house.

A widely cited barometer of the remodeling market is pointing to the first annual decline in home-improvement spending since the housing bust of the late 2000s. That would follow a run up to last year’s record $481 billion, threatening a reliable source of economic growth and stock-market gains.

Companies usually try to avoid expanding into economic downturns. But if growth continues, or if Americans renovate through recession, firms like Trex risk not meeting demand and being replaced on store shelves and in blueprints. That is where the Arkansas plant comes in.

“The long-term value will be having that asset on the ground so that we can build into growth,” Fairbanks said.

Trex’s inventor is Roger Wittenberg, a Tampa, Fla., tinkerer who piled up plastic bags making animal feed with stale bread. Mobil, the oil company now part of Exxon Mobil, bought the business hoping to offset criticism of its plastic production by owning a recycler. The oil company lost interest, though, and executives running Trex bought the business and sold shares a few years later, in 1999.

Trex is betting it can win market share from wood and that homeowners locked into cheap mortgages will add outdoor living space rather than move.

“You see couches, pergolas, TVs, kitchens, all being built on these decks,” Fairbanks said. “It’s an efficient way for people to build on to their existing homes.”

Trex competes with Southern yellow pine, which is pressure-treated with chemicals to improve durability. Pine boards have tumbled from their pandemic highs to trade this spring at some of the lowest prices in nearly a decade. Sawmills are curtailing production.

At current prices, entry-level Trex boards cost about 50% more than pressure-treated pine. Customers interested in the company’s highest-level offerings aren’t very price sensitive, Fairbanks said.

A problem for the overall remodeling market is low turnover in the housing market. Much is spent sprucing up houses before they are listed for sale. Buyers practically run to the hardware store once they get keys. Millions of Americans are locked into some of the lowest home-loan rates ever. They might have to pay twice the rate of their current note for a mortgage these days.

Another issue is that a lot of people have just built decks and renovated their kitchens.

At Home Depot, business is down from contractors and do-it-yourselfers alike.

First-quarter sales declined 2.3%, and executives said there were 6.5% fewer big-ticket sales, or those of more than $1,000.

The prospect of the Fed cutting rates has customers putting off projects that they would have to finance or borrow against their home to pay for, said finance chief Richard McPhail.

“It’s not the inability to fund projects, it’s a deferral mindset,” he told investors this month.

What used to be a month of back and forth with drawings and emails has stretched to two or three with customers, said Ed Pacylowski, owner of ProBuilt Construction, which uses Trex’s composite boards to build elaborate decks around Baltimore and Washington, D.C. Still, business is steady for projects that usually cost between $80,000 and $100,000 and often involve swimming pools and outdoor kitchens.

“There’s a huge hesitation on the customers’ end,” Pacylowski said. “I’m having to go back to work a lot more as far as meeting the customers, answering their questions, trying to convince them to do it now rather than later.”

Yet there are powerful forces in favor of remodeling. Rising property values have given Americans $31.8 trillion of home equity. That mountain of money has become more expensive to tap, but it is viewed in C-suites and on Wall Street as dry powder to reignite the remodeling boom once rates decline.

Meanwhile, the American home, on average, keeps getting older. Many are in need of upkeep and upgrades. A lot of wood decks are worn out.

Wesley Brawner, in Kennesaw, Ga., said his company’s five decking crews are booked up for summer, though it took a little longer than usual. Clients rarely finance or borrow against their homes to pay for the decks, which can cost six figures.

It was a tough pitch when he started selling Trex deep in the pine belt, with its cheap and abundant wood. But composite lumber, which never needs staining or sealing, has caught on. Buyers who tend to be in their 50s or older and retired want decks without much maintenance. High rates typically don’t factor into their spending decisions—except in the sense that investment returns have yielded cash to pay for their dream decks.

“They’ve made their money,” Brawner said. “They’re on deck No. 2 or 3.”

At Trex’s plant in Winchester, Va., bales of pallet wrap and recycled grocery bags are piled onto conveyor belts that feed the polyethylene into grinders. The plastic is melted and mixed with wood dust made from scraps Trex gets from flooring and furniture makers.

A Trex board is roughly half wood, half plastic. A 400-square-foot deck contains more than 1,500 pounds of recycled material. Beyond that, Trex guards details of its manufacturing process like the recipe for Coca-Cola, prohibiting photography in its plants and rarely filing patents to protect its methods or machinery.

“Most of what we do, we don’t want on a piece of paper,” said Adam Zambanini, chief operating officer.

The Little Rock facility, being built on 300 acres with room to expand, probably won’t be producing decking until 2026. Until then, Trex is filling shelves east of the Rockies from Winchester.

Originally a record-pressing plant, the factory was expanded during the pandemic along with the company’s facility in Nevada, which supplies the West Coast. All together, the work cost about $200 million and boosted Trex’s manufacturing capacity by about 70%. That too was a big bet made amid economic uncertainty that has paid off, Fairbanks said.

“In 2020 we basically sold out,” he said. “I can’t imagine what the story about Trex would have been if we didn’t have this building coming online.”

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: Energy has been a focal point of global events

Cover:
-Energy has been a focal point of global events, including the Israel-Hamas war and the growing electricity consumption of artificial-intelligence applications. Investing in these events has proven challenging. A roundtable of industry experts, including Natasha Kaneva from J.P. Morgan, Stephen Byrd from Morgan Stanley, Stan Majcher from Hotchkis & Wiley, and Lucas White from GMO, discuss oil prices, geopolitics, and the green energy transition. The group also shared their favorite stock picks, including a few stocks that could potentially double or triple. The geopolitical risk premium in the oil market is zero due to three reasons. Firstly, the main players in the Middle East have strong incentives to prevent the conflict from expanding beyond their geographical positions. Gulf states, such as Saudi Arabia, are attempting to re-establish diplomatic relationships with Israel and Iran, but are aware that these transitions are impossible with a militarized Iran.

Interview:
-no interview this week

Tech Trader:
-Alphabet's shares have risen as investors believe it has not fallen behind ChatGPT developer OpenAI and its partner Microsoft. Alphabet's stock has risen 30% since early March when fears of AI rivals eroding its 90% share of search activity peaked. Google's annual developers conference began on May 14, and OpenAI demonstrated its next-generation technology, which provides quick written or spoken answers when prompted in audio, visual, or text input. Google's CEO Sundar Pichai and colleagues demonstrated their own multimedia abilities through its AI engine, Gemini. AI assistants and advisors will be embedded across Google's ecosystem, offering advice on projects and tracking user information. Google's travel tool, which draws on data on flights, hotels, local attractions, and weather, is a good case study for this. Other companies, such as Expedia and Booking.com, have also built AI travel assistants using OpenAI's platform. These tools could create new placements for search ads that bring Alphabet $200B a year.

The Trader:
-Uber Technologies' recent announcement of buying Foodpanda, Delivery Hero's Taiwan-based food-delivery business, for $950M in cash and investing $300M into the company for a 3% stake in the German company, has caused a 16% drop in Uber stock since its peak in March. The acquisition could weigh on Uber's near-term profits, as Delivery Hero is expected to see a $377M net loss this year. If Uber owned Foodpanda, around $11M of its net loss would be attributable to Uber, or about 0.5% of its expected $1.89B of net income this year. However, the market seems to be overreacting, as the deal is strategic and small losses are a short-term blip on the radar that will ultimately boost Uber's earnings substantially. Uber aims to establish itself in Asia, where it gets just over a tenth of its $38B of revenue, which is the highest growth market for food delivery.
-The stock market has seen gains this week, with the S&P 500 index rising 1.4%, the Nasdaq Composite up 2.1%, and the Dow Jones Industrial Average gaining 0.9%. The gains come after the April consumer price index release, which showed a 3.4% year-over-year increase in inflation, down from March's 3.5%. The market was concerned that the Federal Reserve would have to raise rates to bring prices down, but rate cuts are back on the table. The core CPI, which strips out food and energy, increased by 3.6%, and shelter prices, which comprise almost half of the core index, rose 5.5%. Core inflation remains too strong, and if inflation does start trending up again, many pillars of the current rally would fall. Bond yields, which slipped from nearly 5% in April to just over 4.3% this week, have certainly helped stocks rally, but a reversal could send the S&P 500 lower, as has happened in the recent past.

Features:
-Walmart's reliance on wealthier customers, defined as those with household incomes over $100,000, has contributed to its success in the past two years. However, former Walmart CEO Bill Simon warns that this reliance could be a double-edged sword. While attracting affluent shoppers during high inflation and a volatile economy is easy, retaining them once economic conditions improve is harder. Walmart has been gaining market share among wealthier shoppers, which make up about a third of its overall customer demographic. This is important as higher-income shoppers tend to buy more discretionary items, which carry higher margins than groceries. Both investors and company executives want share gains to improve and push revenue higher.
-Nestlé, the world's largest food company, has been experiencing a decline in its stock over the past five years. The company, which generates over $100B in annual revenue, has reported weak sales volume in recent quarters, causing a shift in sentiment towards the company since 2022. Nestlé's U.S. shares have fallen 15% to $105.47 over the past year, lagging behind the S&P 500 index, which has gained over 25%. However, CEO Mark Schneider believes that first-quarter sales were affected by one-time factors and that volume will rebound in the coming quarters. Nestlé's adjusted EPS were up 8% in 2023 and are expected to be at the lower end of the 6% to 10% range this year. Despite missed expectations and a loss of its premium, the company has a good opportunity to recover by delivering decent results in the second quarter and second half of 2024.

Europe:
-The Bank of England is set to become the first major central bank to have a majority of women voting on interest rates. Clare Lombardelli will join the Monetary Policy Committee in July, bringing the number of women on the panel to five. This diversity puts the BOE at the cutting edge for diversity, which psychologists say is important for high-quality decision-making. The change comes as central bank banks worldwide are under scrutiny after failing to see the surge in inflation following the Covid-19 pandemic. Research suggests that greater diversity guards against groupthink, and poor forecasts and ill-considered moves can have big consequences when setting interest rates.

Emerging Markets:
-Vietnam, once an economic tiger and manufacturing rival to China, has been plagued by political infighting. The country's president and parliamentary speaker have both resigned amid concerns of impropriety. Investors are concerned that Nguyen Phu Trong, head of Vietnam's Communist Party, could follow the example of China's President Xi Jinping, purging rivals to forge a quasi-dictatorship. Gregory Poling, director of the Southeast Asia program at the Center for Strategic and International Studies, or CSIS, believes that Trong will at best limp to the next Party Congress in 2026. Vietnam’s economic growth is expected to return to 6%-plus this year after a dip to 5% in 2023 on diminishing global trade. President Joe Biden's visit to Vietnam last autumn and a $250M from Nvidia have helped. Vietnamese talent is ideally suited to the semiconductor and AI sectors. This spells bargains in underappreciated Vietnamese stocks, with top picks such as FPT, an information-technology services pioneer, and Mobile World Investment, a retail chain expanding from its base in electronics to groceries. Still, corruption-linked purges at the top have a chilling effect on lower-level Vietnamese officials, delaying vital infrastructure improvements. The political stalemate may also delay important regulatory upgrades for banking and real estate, sectors highly prone to crisis and scandal. Fallen property tycoon Truong My Lan was sentenced to death last month after bilking a bank she controlled.

Commodities:
-Copper and gold have seen significant gains this year, with front-month futures in New York pricing copper around $5/lb., up over 25% since the start of the year. Gold is up around 16% and traded over $2,400/oz. on Friday, up 0.9%. Factors fueling copper's run include demand trends like utilities upgrading grids, electric vehicle usage, and home-building, as well as energy demand for data centers running AI apps and servers. A supply squeeze with the U.S. awaiting shipments of copper from South America and Australia may keep copper prices rising until shipments arrive. Technical factors are also lifting copper, with commodity traders scrambling to buy physical copper on US exchange CME 0.19%. However, futures markets don't see demand holding up in the near term, as copper futures trading about 6% lower than front-month futures contracts, suggesting demand is expected to fall.

Streetwise:
-McDonald's reported a 2.5% growth in US same-store sales for the first quarter, but its second quarter started flat. The company is set to launch a limited-time $5 meal starting June 25. Shares are down 8% year to date, despite an 11% gain for the S&P 500 index. This could be a sign of consumer stress, as Oreo maker Mondelez International has criticized increasing price sensitivity and Kraft Heinz has seen a pullback by low-income shoppers. UBS expects more promotional activity in the second half of this year, with chains with the most low-income exposure faring worse. Jack In the Box and Chipotle Mexican Grill have seen their shares sink and rise respectively. Starbucks, which skews posh, has seen its shares down 20% this year, including a one-day, 16% plunge after quarterly results. BofA Securities sees little sign of economic stress in average check sizes or add-ons, but Starbucks is likely affected by social-media boycotts related to Israel and Gaza.