Barron’s Weekend Summary: Larry Culp, the retired CEO of Danaher, saved General Electric from a disastrous financial situation in October 2018
Cover:
-Larry Culp, the retired CEO of Danaher, saved General Electric from a disastrous financial situation in October 2018. The company's debt load of $112B was growing unwieldy, leading to downgrades from major credit-rating firms and a slashing of its dividend. In 2021, Culp announced that GE would split into three separate companies, GE HealthCare Technologies and GE HealthCare. Since the spinoff, shares of General Electric have gained about 120% and 50%, outperforming the S&P 500 index. The final move is due on April 2, with the parent company renaming itself GE Aerospace (to focus on airplane engines) and the power business being spun off and named GE Vernova.
Interview:
-This week, Barron’s interview features Mary Barra. Mary Barra, the CEO of General Motors (GM), has been in charge of the company since 2013, following its bankruptcy and return to the public market. With a 40-year tenure, Barra has managed a challenging period, including the sale of European operations in 2017, the Covid pandemic, and the rise of electric vehicles. Last year, GM saw a 10% increase in sales and issued operating-profit guidance for 2024, exceeding expectations. However, investors remain skeptical of Barra's agenda, as the stock has only risen by 3% in the past five years, compared to an 80% gain in the S&P 500 index. GM trades at a mid-single digit multiple of earnings, making it one of the cheapest large stocks in the market. Barra recently discussed the company's plans for electric and autonomous vehicles and opportunities in China.
Tech Trader:
-No update this week
The Trader:
-The Nasdaq Composite and S&P 500 are on track to close at new all-time highs, with the Nasdaq Composite set to close the week at a new all-time high of 1.6%. The gains are driven by an economy that is neither too hot nor too cold, with the personal consumption expenditures price index rising 2.4% year over year in January and durable-goods orders coming in lower than expected. The Federal Reserve is considering when to start cutting interest rates, with the federal-funds futures market suggesting that the Fed's most likely course of action this year will be to cut rates three times. This dynamic is why investors are eager to miss out on the rally and believe it can continue. However, two risks loom large: the Bloomberg U.S. Financial Conditions Index, which tracks how easy or difficult it is to borrow money, is near its easiest level since late 2021, suggesting that conditions are likely to tighten, and when financial conditions tighten, the S&P 500 usually drops.
-Snowflake stock has fallen after CEO Frank Slootman resigned and the company offered disappointing guidance. Slootman, 65, oversaw rapid growth at Snowflake, whose software allows companies to analyze large amounts of data. His departure adds uncertainty to the company's growth. Sridhar Ramaswamy, who has been running the company's artificial-intelligence strategy, will assume the CEO role immediately. However, the company's GAAP guidance for fiscal 2025 sales of $3.25B represents 22% year-over-year growth, lower than 2024's 36%. The problem is Snowflake's business model, which allows customers to pay for software on a per-usage basis, which could lead to slower growth when budgets tighten due to a slowing economy.
Features:
-UPS is set to bring investors better returns as the leading package-delivery service seeks to cut costs, increase automation, boost margins, and lift volumes to offset higher expenses from a contract with the Teamsters union. UPS stock has fallen 7% since the company offered disappointing 2024 guidance. However, the stock, now around $148, looks appealing due to its valuation, which is 18 times projected 2024 earnings of $8.28 a share. UPS offers a 4.4% dividend yield, the highest among the 20 companies in the Dow Jones Transportation DJT average. CEO Carol Tome said on the January earnings call that UPS is "rock solid" and confident about the dividend. UPS is valued at $126B and carries modest net debt of $15B. David King, lead manager of the Columbia Flexible Capital Income fund, believes that UPS can execute against a cost-focused program to drive margin expansion and upside in the stock.
-Demand for AI servers is not decreasing, according to Dell Technologies and Hewlett Packard Enterprise. Dell's backlog for orders for AI servers nearly doubled to $2.9B in the fourth quarter, with demand exceeding supply. The company's flagship PowerEdge XE9680 Rack Server, which incorporates Nvidia graphics processing units, is the fastest-ramping solution in its history. HP Enterprise also reported strong AI server demand, with lead times for GPU orders still elevated at 20 weeks or more. The companies' comments are important as some skeptics have pointed to falling lead times for Nvidia's H100 as a sign of weakening demand. Dell and HP's remarks show orders are transitioning to newer products like the H200 and GH200, indicating that demand will remain robust over the longer term.
Europe:
-Norwegian Cruise Line Holdings is expected to report a surprise profit in the first quarter amid record demand, boosting cruise stocks. Despite posting a wider-than-expected loss in the fourth quarter, investors are focused on its strong 2024 outlook. The sector had a stellar 2023, but all three stocks have faced choppy waters early this year, with Carnival and Norwegian down 20% in 2024 and Royal Caribbean down 8% for the year. Norwegian's booked position is currently at a record high due to healthy consumer demand, with some of the best booking weeks in its history since Black Friday in November last year. The cruise operator reported an adjusted loss of 18 cents per share on revenue of $1.99B in the fourth quarter, compared to analysts' expectations of 12 cents per share on revenue of $1.96B. CEO Harry Sommer aims to capitalize on the positive momentum and strong demand for cruise, which resulted in turning the year at record highs in both booked position and pricing.
Emerging Markets:
-No update
Commodities:
-Commodity markets are not performing well due to weak prices, largely due to the weakness of Chinese financial markets. Traditional speculative flows into the commodity complex have been reduced. Indifference and the use of the commodity complex as a source of funds, particularly in precious metals like gold, have contributed to this. Gold ETF holdings have declined, reaching a new four-year low at 82.54M oz., indicating that the market is not fully reliant on traditional financial markets.
Streetwise:
-No update from Jack Hough this week
Weekend Papers Summary
FINANCIAL TIMES
-US President Joe Biden has criticized Israel for not allowing more aid into Gaza, stating that it has "no excuses" for not allowing more aid. The US will soon begin airdropping food into the enclave, as the humanitarian crisis worsens due to Israeli attacks. Biden's announcement comes amid growing frustration with Israeli Prime Minister Benjamin Netanyahu. The US is also exploring the possibility of opening a marine corridor for humanitarian assistance. The move reflects concerns over the civilian cost of Israel's war in Gaza and the threat of lives due to disruption to aid shipments. The decision comes after over 100 Palestinians were killed in a chaotic attempt to supply aid to civilians in northern Gaza.
-Germany and France have expressed alarm at the deaths of dozens of Gazans seeking aid as Israel faces backlash over its troops opening fire near a humanitarian convoy. Germany, a staunch ally of the Jewish state, called for an explanation from Israel and urged a humanitarian ceasefire in the conflict, which has killed over 30,000 Palestinians. The German government is participating in international discussions on the best way to conduct an investigation, stating that the "appalling" images of the incident necessitate a change in the war's conduct.
-Noted academic Francis Fukuyama, of “the end of history” fame, has written an Op-Ed article in FT. Fukuyama writes that American institutions are facing a crisis, with nearly a third believing the 2020 election was stolen by President Joe Biden. Polls suggest voters would re-elect Donald Trump, who propagated this lie. Trump has refused to support Ukraine and invited Russia to attack NATO ally countries without paying an imaginary debt for US protection. With five primary victories, Trump is poised to be the Republican candidate, with consequences affecting the global community.
-Shareholders who defeated Elon Musk's $56B Tesla pay package have requested a Delaware state court to award them shares worth nearly $6B as payment. The lead counsel for the plaintiffs, Bernstein Litowitz Berger & Grossmann, conceded the award was "unprecedented" in absolute value but noted the implied percentage of value won remained conservative and in line with previous Delaware awards. The structure links the award directly to the benefit created and avoids taking Tesla's stock for fees.
-Boeing is in talks to acquire Spirit AeroSystems, a fuselage supplier spun off nearly 20 years ago, as the company faces pressure to improve its safety record. The Virginia-based group confirmed the preliminary discussions, believing that the reintegration of Spirit would strengthen aviation safety, improve quality, and serve the interests of customers, employees, and shareholders. Both companies' shares fell 1.8% to $200, while Spirit's shares closed 15.4% higher at $32.98, valuing it at almost $4B. The news came as both companies are undergoing an audit by the US Federal Aviation Administration.
-Formula One's president, Mohammed Ben Sulayem, has criticized Red Bull Racing chief Christian Horner for allegedly inappropriate conduct towards a female colleague. He said the allegations are damaging the sport on a human level and that the governing body has no plans to conduct its own investigation. Red Bull dismissed a complaint against Horner following a barrister-led investigation, which he denied. A cache of messages was anonymously sent to Sulayem, F1 chief Stefano Domenicali, and Mercedes boss Toto Wolff. Horner denied the allegations and denied the anonymous speculation.
THE NEW YORK TIMES
-Russian forces are making rapid gains outside the eastern Ukrainian city of Avdiivka, partly due to dwindling Ukrainian ammunition and declining Western aid. The Kremlin's troops are also advancing in the area due to poor Ukrainian defenses, with sparse, rudimentary trench lines populating the area west of Avdiivka. These trench lines lack additional fortifications that could slow Russian tanks and defend major roads and terrain. Avdiivka has become the site of a fierce standoff over the last nine months, and Russian troops have captured three villages west of the city in a week, and they are contesting at least one other.
-President Biden announced that the US would begin airdropping aid to Gaza to alleviate suffering, while European leaders condemned Israel for the deaths of hungry Palestinians who were killed while surrounded by the aid convoy. Gazan health authorities claim Israeli troops killed over 100 people and wounded 700 others in a "massacre" as the convoy rolled along a dark road. Israeli military spokesman Rear Adm. Daniel Hagari stated that Israeli soldiers fired when the mob moved in a manner that endangered them, but not on people seeking aid. Most people died in a stampede and some were run over by trucks in Gaza City.
-The European Union plans to increase funding for UNRWA, the main UN agency providing aid to Palestinians in Gaza, this year. The agency is fighting for survival following Israel's allegations that some staff members were involved in the Hamas-led attacks on October 7. The EU's president, Ursula von der Leyen, emphasized that innocent Palestinians should not pay the price for the crimes of terrorist group Hamas. Israeli accusations in January claimed that a dozen UNRWA employees played an active role in the attacks on Israel or its aftermath, leading to nearly 20 countries and institutions suspending their financing for the agency.
-President Biden announced that the US will begin airdropping humanitarian relief supplies into Gaza, following the deaths of Palestinians as Israeli forces opened fire near an aid convoy in Gaza City. Biden emphasized the need for more aid to help innocent people in the war, stating that aid is insufficient. The US will work with Jordan and other allies to deliver aid by air and sea, with supplies potentially being delivered by sea. Biden and Italian Prime Minister Giorgia Meloni discussed efforts to prevent the war in Gaza from becoming a larger conflict, support for Ukraine, and steps to address human trafficking and global migration.
-The funeral of opposition leader Aleksei A. Navalny on Friday marked a significant moment in Vladimir V. Putin's Russia. Navalny, who spent his last three years in prison under increasingly inhumane conditions, was laid to rest, underlining Putin's dominance. However, the day also saw pent-up dissent re-emerge on Moscow's streets. Many opposition-minded Russians still saw Navalny as their Nelson Mandela, poised to ascend as the leader of a democratic Russia. The hope for a better Russia died the day Navalny was killed.
-In the five months since Hamas invaded Israel on October 7, Donald Trump has largely remained silent on the issue. He criticized Prime Minister Benjamin Netanyahu, but later shifted to supporting Israel. Trump claimed that the invasion would not have happened had he been president, but his overall approach has been laissez-faire. In an interview with Univision, Trump advised Netanyahu and the Israelis to improve their public relations, as the Palestinians were "beating them at the public relations front." This approach reflects Trump's anti-interventionist shift in the Republican Party over the past eight years and his feelings towards Netanyahu, who he may never forgive for congratulating Biden for his 2020 victory. His hands-off approach to the Middle East conflict reflects his anti-interventionist shift in the Republican Party.
-South Korea is increasingly reliant on foreign labor to maintain its factories and farms, as the country faces a demographic crisis due to a shrinking and aging population. The country broke its record for the world's lowest total fertility rate last year. To address this, President Yoon Suk Yeol's government has doubled the quota for low-skilled workers from less-developed nations, including Vietnam, Cambodia, Nepal, the Philippines, and Bangladesh. Hundreds of thousands of these workers work in small factories, remote farms, or fishing boats, jobs considered dirty, dangerous, or low-paying by locals. Many foreign workers face predatory bosses, inhumane housing, discrimination, and other abuses. One example is Chandra Das Hari Narayan, a Bangladeshi worker who was ordered to cut down a tall tree without a safety helmet, resulting in a head injury and blood spilling from his nose and mouth.
-Oregon voters approved a decriminalization plan three years ago, hoping to stop drug users' jailing. However, the state's efforts to fund treatment programs struggled, leading to a surge in fentanyl overdoses. Portland, a major city, continued to struggle with drug addiction and despair. Recently, liberal politicians, including Gov. Tina Kotek, have supported an end to the experiment. A bill that will re-impose criminal penalties for possession of some drugs won final passage in the State Legislature, with State Senator Chris Gorsek, who had supported decriminalization, stating that adjustments were needed to address the situation in their communities. The bill passed by a 21-8 margin, highlighting the impact of addictions and overdoses on families.
-Senator Mitch McConnell's decision to step down from leadership at the end of the year has sparked a nine-month battle among Senate Republicans to succeed him in the midst of a presidential race and a campaign for chamber control. The contenders have been wooing their colleagues for the chance to become the first new face of their party in the Senate in almost two decades. The secret-ballot outcomes in Congressional leadership contests are determined by personal relationships, grudges, and who lawmakers see as the best option for their ambitions, as well as serious policy positions or the state of the institution
THE NEW YORK POST
-President Biden denied interfering with the business associates of his brother James and son Hunter Biden, despite Hunter confirming that his father attended DC dinners with foreign patrons. Biden criticized House Speaker Mike Johnson's claim that Biden is lying about these interactions during the Republican-led impeachment inquiry into alleged corruption. He called on Johnson to read the record of every witness and demanded that the corrupt officials stop their actions.
-BlackRock CEO Larry Fink's commitment to environmental, social, and governance (ESG) policies could potentially negatively impact the investment giant's core business. The company admitted in a regulatory filing that its ESG policies could be viewed differently by various stakeholders, potentially affecting its reputation and business. The firm's annual 10-K filing with the Securities and Exchange Commission revealed that its ESG policies are a risk factor for the world's largest asset manager. BlackRock has an ESG portfolio valued at $700B, a small percentage of its $10T total assets under management. It has projected that by 2030, at least three quarters of its investments will be with issuers of securities with scientific targets to cut greenhouse gas emissions on a net basis. Fink, who has emphasized climate change's long-term threat to the economy and investment opportunities, has pioneered go-green initiatives.
British Ship Rubymar Hit by Houthi Missile Sinks in Red Sea
The cargo vessel carried fertilizer, threatening the region’s marine ecosystem
A British-owned ship struck last month by Yemen’s Iran-backed Houthi forces has sunk into the Red Sea, U.K. and Yemen officials said Saturday, threatening to cause an environmental disaster with its cargo of fertilizer.
A Houthi missile strike on Feb. 18 had blown a hole in the cargo vessel, Rubymar, which was shipping 22,000 metric tons of Saudi fertilizer to Bulgaria. That evening, the crew abandoned the vessel, flagged in Belize, and it vanished into the sea late Friday after taking on water for two weeks.
The Houthis have carried out more than 60 attacks in the Red Sea region, upending the shipping industry’s ability to travel through one of the world’s busiest commercial waterways, which connects Asia to Europe and beyond through Egypt’s Suez Canal.
The U.S. and its allies have sent warships to the Red Sea, and the U.S. and the U.K. have conducted airstrikes against the Houthis in Yemen to deter the group from more attacks on the shipping industry. But the Houthis have proved resilient, saying they will continue to attack what they say are ships connected to Israel in response to its invasion of Gaza, though many of the vessels have no connection to Israel.
Cleaning up any damage to the Red Sea and its coastal areas from the Rubymar’s fertilizer cargo will be complicated by the continued threat from the Houthis. “There won’t be anyone to help under missile threat,” said Ami Daniel, chief executive of maritime artificial-intelligence provider Windward.
Even before the Rubymar was lost, the attack on the ship had already caused an 18-mile oil slick, according to the U.S. Central Command, which is responsible for U.S. military operations in the Middle East. Roy Khoury, chief executive of Blue Fleet Group, the ship-management company operating the ship in Beirut, said he had been struggling to bring salvaging companies to tow or at least repair it because they were concerned about operating in a war zone.
Ahmed Bin Mubarak, prime minister of the internationally recognized Yemeni government in Aden, which has been engaged in a civil war with the Houthis for a decade, said on X that the environmental disaster caused by the fertilizer cargo sinking “threatens the lives of our people and generations for decades.”
Shell, the giant U.K. oil company, has suspend all transit though the key waterway over fears of its oil tankers being struck and causing oil spills, The Wall Street Journal has previously reported.
The attack on Rubymar was the worst in the Middle East since 2006, when a suspected attack by Lebanon’s Hezbollah sank an Egyptian ship loaded with cement, said Windward’s Daniel, a former Israeli Navy officer, who witnessed the incident.
The Rubymar was flagged in Belize. Commercial ships are often flagged in offshore jurisdictions, separate from their owners’ headquarters, to benefit from their lax tax, labor and environmental regulations.
Former Macquarie star trader agrees terms to join Swiss house Mercuria
Nick O’Kane, who earned more than Jamie Dimon last year, to grow trading group’s gas and power business from Dubai
The former Macquarie star commodities trader Nick O’Kane has agreed terms to join Mercuria as the Swiss trading house seeks to expand its gas and power business, according to people with knowledge of the discussions.
Under the preliminary agreement, O’Kane would be initially based in Dubai, the people said. The fifty-year old Australian is to join in a senior leadership role to grow Mercuria’s gas and power activities, particularly in Asia, one of the people added. The appointment has yet to be finalised, the person cautioned.
O’Kane, who quit Macquarie last month after almost three decades, was the group’s best paid executive in 2023, earning A$58mn ($38mn), or 75 per cent more than chief executive Shemara Wikramanayake. His pay also exceeded that of JPMorgan chair Jamie Dimon and Goldman Sachs chief David Solomon.
Commodity traders are anticipating huge increases in demand and volatility in gas and electricity markets as the global energy system transitions away from more polluting oil and coal. Mercuria’s rivals including Trafigura, Vitol and Gunvor have also been expanding their gas and power teams.
Mercuria and O’Kane declined to comment.
While at Macquarie O’Kane turned the Australian bank into an energy trading power house. Last year the commodities and global markets business he helped build and ran accounted for almost 60 per cent of Macquarie’s profits. The trader had been tipped as a potential successor to Wikramanayake.
Privately owned Mercuria has not outlined a succession plan for chief executive and co-founder Marco Dunand, is 63 this year. A person close to Dunand said he had no immediate plans to step down.
Mercuria — founded by Dunand and fellow former Goldman Sachs trader Daniel Jaeggi in 2004 — has hired senior bankers before. In 2014, the company recruited Magid Shenouda, a former co-head of commodities at Goldman Sachs. Shenouda was previously tipped as a possible successor to Dunand and Jaeggi.
In 2021, Frederic Barnaud, former boss of Singapore’s Pavilion Energy, joined Mercuria as chief strategy and commercial officer but left after less than a year.
Unlike Trafigura, Vitol and Gunvor, which remain more focused on physical oil trading, Mercuria has also pushed into financing, offering services more akin to those offered by investment banks. In 2014 it bought part of JPMorgan’s physical commodities trading business to bolster its operations, particularly in US power markets.
The company recorded net income of $3bn in 2022 on revenues of $174bn, up from $1.25bn in 2021, as volatility in commodity markets supercharged profits for traders.
Oil trading represents about 30 per cent of total revenues, but alongside gas and power trading, the group is also investing in green technologies such as battery storage and biogas. Dunand has said that half of the company’s investments each year will go into energy transition projects.
Weekly Market Update: Earning’s season surged in volume as BTC soared above a faulty moon lander
Out of the tumult from the headiest first quarter of earning’s season, this week recorded another lunar landing, Putin’s vitriolic response to NATO involvement in Ukraine, PMI figures out of China, Germany, Italy, and the US, as BTC lead the bull to its next halving event in April 19th.
Focus lead a favorable eye on the markets influenced by the Jan PCE Deflator reading that came out on Thursday in-line with expectations, likely signaling continued steady moderation for inflation continuing in 2024.
In Asia, satellite images exposed China’s floating barrier in the disputed Scarborough Shoal, Chinese brokerages and funds cut the size of their quantitative tightening, and China’s PMI data expanded a point higher than consensus; Japan’s MUFG analysts anticipate the BoJ to exit from negative rates, and Japan’s CPI data concurred by beating estimates; Taiwan Jan exports improved and Russia again banned gasoline exports for 6 months.
In Europe, Parliament approved 10 second instant money transfers; ECB planned to narrow the corridor between lending and deposit rates; Spain and Germany’s prelim CPIs contracted a point; Italy’s Feb PMI contracted four points, while Russia cited justification for nuclear posturing.
In the US, Trump won Michigan’s Republican Primary (as expected), while Illinois ruled to remove him from the ballot, counting as the third state to do so; Feb S&P Manufacturing PMI rose whereas Feb University of Michigan’s confidence and Jan prelim wholesale inventories contracted. There were also data improvements in crude and Feb Richmond manufacturing index following a trend of other metrics reported throughout the week.
Earnings season peaked in volume as notable companies met with, or were a tad shy of, consensus estimates. Companies of note that beat their consensus were Autodesk, American Tower, Best Buy, Dell, Republic Services, and Workday, among others. INTC announced a new Edge Platform; Toyota is yet to reach a union agreement following their second meeting; DOJ is expected to file an antitrust suit against Apple before the end of March; SEC subpoenaed OpenAI; Airbus is reportedly exploring a purchase agreement for Spirit Aerosystems’ A220 wing plant; BTC crossed the 60k barrier, resting at 62K at the time of writing.
Mon 2/26
(CN) Reportedly new satellite images of the disputed Scarborough Shoal in the South China Sea show a new floating barrier across its entrance blocking the mouth of the shoal; China said to have removed the barrier a few hours after the Philippines' BFAR vessel left - press
(JP) JAPAN JAN NATIONAL CPI Y/Y: 2.2% V 1.9%E; CPI EX FRESH FOOD (CORE) Y/Y: 2.0% V 1.9%E (Core CPI above target for 22 months, but Jan at slowest pace of rise since Mar 2022)
(RU) Navalny's ally Pevchikh: Navalny was close to being freed in a prisoner swap; Navalny was killed on Feb 16th, while on the evening of Feb 15th I received a confirmation that exchange negotiations were in the final stages
(IL) Palestinian PM Shtayyeh and his govt resign – press
(EU) European Parliament formally approves new law to allow people to transfer money instantly within 10 seconds at any time of the day, including outside business hours, in the same country and to any other EU country; Expected to enter into force formally by Apr 2024 – press
(US) FEB DALLAS FED MANUFACTURING ACTIVITY: -11.3 V -15.0E
(US) Fed's Schmid (non-voter; hawk): No need to preemptively adjust policy; Fed is not out of woods on inflation - debut speech
(US) JAN NEW HOME SALES: 661K V 684KE
(US) NY Fed takes $524.96B (v $520.1B prior) in RRP program at 5.30%; 81 participating and accepted counterparties
(US) TREASURY $64B 5-YEAR NOTE AUCTION DRAWS 4.320% V 4.055% PRIOR, BTC 2.41 V 2.31 PRIOR AND 2.49 OVER THE LAST 12
AEP Reports Q4 $1.23 v $1.27e, Rev $4.6B v $5.22Be
CCO Reports Q4 Net $24.8M v $98.7M y/y, Rev $632.1M v $612Me; Guides Q1 strong; Notes out-of-home industry is forecasted to deliver healthy growth in 2024; Initiates sale process for its Latin American businesses alongside Europe-North segment
DPZ Reports Q4 $4.48 v $4.36e, Rev $1.40B v $1.42Be; Announces additional $1B share buyback; Raises Quarterly dividend 24.8% to $1.51 from $1.21 (indicated yield 1.39%)
WDAY Reports Q4 $1.57 v $1.44e, Rev $1.92B v $1.91Be
ZM Reports Q4 $1.42 v $1.15e, Rev $1.15B v $1.13Be; Board authorizes stock repurchase program of up to $1.5B
INTC Announces new Edge Platform, a modular, open software platform enabling enterprises to develop, deploy, run, secure, and manage edge and AI applications at scale with cloud-like simplicity
WFC CFO: Consumer continues to be resilient but expecting some deterioration in credit going ahead - UBS conference comments
Tues 2/27
(RU) Russia to again ban gasoline exports for 6 months from Mar 1st - Russia state media
(RU) Russian govt spokesperson Peskov: French Pres Macron comments about not ruling out sending NATO troops to Ukraine are very important new element; If this happens, talks would have to shift to the inevitability of a conflict with NATO
(IR) Iran reportedly has told militia groups in Iraq and Syria to curtail assaults on targets such as military installations – NYT
(IL) Hamas official: US Pres Biden's comments on halt to Gaza war are premature; Leaked truce proposal does not meet our demands
(TW) Taiwan Jan Export Orders Y/Y: +1.9% v -3.6%e (2nd positive Y/Y pace in 16 months); Sees February orders down between -15.7% and -11% y/y
(JP) MUFG Securities Co. analysts believe BoJ is setting the stage for an exit from negative rates which could come as early as at the next meeting in March
(US) Atlanta Fed GDPNow: Raises Q1 GDP forecast from 2.9% to 3.2%
(US) FEB RICHMOND FED MANUFACTURING INDEX: -5 V -9E; New Orders -5
(US) Former US Pres Trump wins Michigan Republican Primary (as expected) - US press
(US) JAN PRELIMINARY DURABLE GOODS ORDERS: -6.1% V -5.0%E; DURABLES (EX-TRANSPORTATION): -0.3% V +0.2%E
(US) NY Fed takes $519.7B (v $524.96B prior) in RRP program at 5.30%; 84 participating and accepted counterparties
(US) TREASURY $42B 7-YEAR NOTE AUCTION RESULTS: DRAWS 4.327% V 4.109% PRIOR, BID-TO-COVER RATIO: 2.58 V 2.57 PRIOR AND 2.53 OVER LAST 12 AUCTIONS
7203.JP Yet to reach wage agreement with union in 2nd meeting; Did not respond to the union's wage demand - Japanese press
A Reports Q1 $1.29 v $1.21e, Rev $1.66B v $1.57Be; Guides Q2 light, affirms FY24
AMT Reports FFO Q4 $2.29 v $2.18e, Rev $2.79B v $2.73Be
AAPL Follow up: DOJ expected to file Apple antitrust case before end of March; Apple reportedly met with DOJ last week in a final bid to avert Antitrust Suit - US financial press
BECN Jan Rev per day -4% y/y; Guides Q1 Rev up high single digits y/y - earnings slides
CRI Reports Q4 $2.76 v $2.52e, Rev $857.9M v $869Me; Guides Q1 below est; Raises quarterly dividend 7% to $0.80/shr; Assumes improved macroeconomic environment and consumer demand as the year progresses
GS CEO: Consumer behavior has softened, especially in lower tier of economy; Have work to do to narrow consumer business
RSG Reports Q4 $1.41 v $1.28e, Rev $3.83B v $3.72Be
URBN Reports Q4 $0.69 v $0.73e, Rev $1.49B v $1.49Be; Notes positive customer response to early spring offerings
VKTX Phase 2 VENTURE Trial of Dual GLP-1/GIP Receptor Agonist VK2735 in patients with Obesity achieves primary and all secondary endpoints; Intends to meet with FDA to discuss next steps in development of VK2735 and remain on track to report data from Phase 1 study of oral formulation later this quarter; total of 23 patients (13%) discontinued treatment in study
Weds 2/28
(CN) China Securities Regulator (CSRC): Confirms brokerages and funds to cut size of QT; Vow to enhance law enforcement efficiency; Will guide the securities industry to control business size and leverage
(JP) Japan's University of Tokyo top professor and BOJ counselor Yoshikawa: Of course it’s time for the BOJ to normalize policy; BOJ should make straightforward policy shift [**Note: Yoshikawa said to be a friend of BOJ Gov. Kazuo Ueda for more than five decades]
(RU) FT, citing secret Russian military files drawn up between 2008 and 2014, notes Russia's nuclear posture allows a tactical nuclear weapon to be used to try to prevent Russia from becoming embroiled in a sprawling war, particularly one in which the US might intervene
(RU) Moldova's pro-Russian Transnistria breakaway region asks Russia to protect it against Moldova pressure - press (as speculated)
(US) DOE CRUDE: +4.2M V +2.7ME; GASOLINE: -2.8M V -1.3ME; DISTILLATE: -0.5M V -2.0ME
(US) Fed’s Bostic (dove, voter): Reiterates sees first rate cut in Summer; Still work to do on inflation, haven't declared victory - Q&A
(US) FDA Chief Califf: Very concerned about sales of compounded or fake versions of new weight loss drugs
(US) Illinois judge rules to remove Trump from state ballot in the state; the Trump campaign will appeal the ruling - press [**Note: the third US state to block Trump from a Republican ballot after Colorado and Maine; decisions appealed in Supreme Court]
(US) JAN PRELIMINARY WHOLESALE INVENTORIES M/M: -0.1% V 0.2%E
(US) NY Fed takes $569.9B (v $519.7B prior) in RRP program at 5.30%; 87 participating and accepted counterparties
(US) Q4 PRELIMINARY GDP ANNUALIZED Q/Q: 3.2% V 3.3%E; PERSONAL CONSUMPTION: 3.0% V 2.7%E
(US) Q4 PRELIMINARY GDP PRICE INDEX: Q/Q: 1.6% V 1.5%E; CORE PCE Q/Q: 2.1% V 2.0%E
AAP Reports Q4 -$0.59 (unclear if comp) v $0.24e, Rev $2.50B v $2.47Be; Continues ongoing operational and strategic review of the business, including the separate sales processes for Worldpac and Canadian unit
AMC Reports Q4 -$0.54 v -$0.70e, Rev $1.10B v $1.06Be; Currently expect that the industry box office in 2025 will grow by $1-2B, or more, in size over 2024
BA US FAA gives Boeing 90 days to deliver quality control plan to address systemic quality control issues - FAA statement
BABA Public Cloud President: Cuts again cloud service prices by up to 55% (average price cut is ~20%); impacts >100 products; effective on Thurs. [Feb 29th]
BIDU Reports Q4 (CNY) 21.86 v 17.86e, Rev 35.0B v 35.0Be
BTC/USD *TESTS $60,000 (highest since Nov 2021); Bitcoin price currently up more than 40% MTD in Feb (biggest M/M gain since Dec 2020)
CRM Reports Q4 $2.29 v $2.26e, Rev $9.29B v $9.21Be; Guides initial FY24 EPS above ests; Initiates quarterly dividend of $0.40/shr; Share Repurchase Program authorization increased by $10B
EME Reports Q4 $4.47 v $2.63 y/y, Rev $3.44B v $2.95B y/y; Guides init FY24 strong; To Increase dividend 39% to $0.25/shr in Q2-24
FWRD Reports Q4 $0.81 v $0.97e, Rev $338.4M v $399Me
HPQ Reports Q1 $0.81 v $0.82e, Rev $13.2B v $13.6Be
NTNX Reports Q2 $0.46 v $0.29e, Rev $565.2M v $552Me; Raises outlook
OPENAI.IPO SEC subpoenaed OpenAi after ouster of CEO Altman last year; the regulator is probing if investors were misled – WSJ
TJX Reports Q4 $1.12 adj v $1.12e, Rev $16.4B v $16.2Be; Plans to raise quarterly dividend 13% to $0.375/shr and $2.0-2.5B share buyback for FY25 (up to 2.2% of market cap)
WLN.FR Reports FY23 Rev €4.61B v €4.61Be
Thurs 2/29
(CN) CHINA FEB CAIXIN PMI MANUFACTURING: 50.9 V 50.7E (4th month of expansion)
(CN) CHINA FEB MANUFACTURING PMI (GOVT OFFICIAL): 49.1 V 49.0E (5th month of contraction)
(DE) GERMANY FEB PRELIMINARY CPI M/M: 0.4% V 0.5%E; Y/Y: 2.5% V 2.6%E
(DE) GERMANY FEB UNEMPLOYMENT CHANGE: +11.0K V +5.0KE; UNEMPLOYMENT CLAIMS RATE: 5.9% V 5.8%E
(EU) Reportedly ECB plans to narrow corridor between lending and deposit rates, bringing lending rate closer to its 4.0% deposit rate; To continue putting a "floor" under market interest rates in the years to come, but banks will play a greater role in deciding how much liquidity they want – press
(EU) ECB’s Holzmann (Austria, ultrahawk): Serious ECB rate cut discussion unlikely before June
(EU) Estonia PM Kallas: Western leaders must Not rule out sending ground troops to Ukraine; Everything on table to help Ukraine beat Putin
(ES) SPAIN FEB PRELIMINARY CPI M/M: 0.3% V 0.4%E; Y/Y: 2.8% V 2.8%E (lowest annual pace since Aug 2023)
(RU) RUSSIA PRES PUTIN: 'DO NOT THEY UNDERSTAND THERE IS A DANGER OF NUCLEAR CONFLICT?' - ANNUAL PARLIAMENT ADDRESS
(RU) Russia Pres Putin: Strategic forces are combat ready; Not planning to deploy nuclear weapons in space; Our military has gained colossal combat experience - annual parliament address
(UR) Ukraine reportedly sees risks that Russia will break through its defence by summer 2024 unless western partners increase ammunition supplies - press
(US) BOFA INSTITUTE: WEEK-TO-FEB 24TH TOTAL CARD SPENDING +0.4% Y/Y V -0.2% AVG IN JAN; OVERALL SPENDING REMAINED SOFT BUT STABLE IN FEB
(US) FEB CHICAGO PURCHASE MANAGER’S INDEX (PMI): 44.0 V 48.0E
(US) Fed's Goolsbee (non-voter for 2024); Even with Jan PCE data showing a month of rebound, should be careful to extrapolate
(US) JAN PENDING HOME SALES M/M: -4.9% V +1.5%E; Y/Y: -6.8% V -4.4%E
(US) JAN PERSONAL INCOME: 1.0% V 0.4%E; PERSONAL SPENDING: 0.2% V 0.2%E
(US) JAN PCE DEFLATOR M/M: 0.3% V 0.3%E; Y/Y: 2.4% V 2.4%E (lowest annual pace since Apr 2021)
(US) Nevada reports Jan casino gaming Rev $1.28B, +0.5% y/y, Las Vegas strip Rev $686.2M, -3.8% y/y
ADSK Reports Q4 $2.09 v $1.95e, Rev $1.47B v $1.43Be
BBY Reports Q4 $2.72 v $2.51e, Rev $14.7B v $14.5Be; Raises quarterly dividend 2.2% to $0.94 from $0.92 (indicated yield 4.72%)
DELL Reports Q4 $2.20 v $1.73e, Rev $22.3B v $22.1Be; To increase dividend 20%
Fri 3/1
(CN) China end-Feb Standing Lending Facility (SLF) at CNY0M (nil) v CNY2.70B m/m
(CN) US Commerce Dept opens probe into Chinese-made vehicles; More reports that Biden Admin reportedly may ban or restrict Chinese vehicle imports citing national security risks – press
(DE) GERMANY FEB FINAL MANUFACTURING PMI: 42.5 V 42.3E (confirms 20th straight contraction)
(EU) EURO ZONE FEB ADVANCE CPI ESTIMATE Y/Y: 2.6% V 2.5%E; CPI CORE Y/Y: 3.1% V 2.9%E (lowest Core CPI since spring 2022)
(IT) ITALY FEB PRELIMINARY CPI M/M: 0.1% V 0.3%E; Y/Y: 0.8% V 1.0%E
(IT) ITALY FEB PMI MANUFACTURING: 48.7 V 49.1E (11th straight contraction)
(RU) Russia Pres Putin: Reiterates Russia is not planning to deploy nuclear weapons in space
(US) Apollo's Chief Economist Slok: Fed will Not cut rates in 2024, US economy is simply not slowing down and Fed will spend most of 2024 fighting inflation
(US) FEB FINAL S&P MANUFACTURING PMI: 52.2 V 51.5E
(US) FEB FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 76.9 V 79.6E
KNIN.CH CEO: Volumes for sea freight have normalized in Q4; The trend will continue in 2024 - post earnings comments
PLUG Reports FY23 -$2.30 v -$1.25, Rev $891M v $872Me
Chinese Gangs Use Cryptocurrencies to Launder Billions
Tether and other tokens are allowing criminal organizations linked to the country to cover their tracks
Chinese crime syndicates are using cryptocurrencies to launder billions of dollars, including money raised from helping supply drugs to the U.S. or scamming American victims.
These gangs are exploiting the decentralized nature of cryptocurrency markets to evade the grasp of Chinese and foreign authorities. They are using crypto to launder the profits of drug dealing and illegal gambling, and have made huge amounts from investment scams that promise easy returns in the cryptocurrency markets.
Crypto addresses linked to a group of suspected chemical traders based in China have received more than $37.8 million worth of assets since 2018 in exchange for shipping a key ingredient of fentanyl, the research firm Chainalysis said in a report last year. These shipments are often sent to Central America and Mexico, where drug cartels use them to manufacture the drug, which is then shipped to the U.S.
In October, the U.S.’s Office of Foreign Assets Control sanctioned a network of individuals and companies based in China over the manufacturing and distribution of ingredients used in fentanyl and other drugs. Some of those individuals held cryptocurrency wallets to send and receive funds, the Treasury Department said.
Fentanyl use by Americans has become a major public health issue, contributing to more than 100,000 deaths a year, according to the latest figures from the Centers for Disease Control and Prevention. It has also been a rare area where the world’s two superpowers have appeared to be on the same side: Chinese and U.S. officials agreed this year to work together to tackle the issue.
These cases highlight the changing nature of money laundering, which is increasingly being done through cryptocurrencies rather than old-fashioned methods such as shipping suitcases of cash.
That is a problem for investigators, but it also gives them new ways to track money flows, since most cryptocurrency transfers are saved on a public ledger.
Scammers of several victims in China and Florida shared the same two crypto wallet addresses, implying they are likely parts of the same group, according to a joint investigation published in January by ChainArgos, a Singapore-based blockchain data platform, and Bitrace, a China-based blockchain research group. One of those wallets processed at least $20.7 million worth of tokens since early 2021, the report said. The study found that the stolen funds from those two addresses were later deposited onto two major crypto exchanges, OKX and Huobi, now called HTX.
It is tough for victims in the U.S. to recover their money because many of them lose $10,000 or less—big enough to be someone’s life savings but too small for organizations such as the Federal Bureau of Investigation to consider it a priority, said Jonelle Still, adjunct professor in blockchain analytics at the Middlebury Institute of International Studies.
The transnational nature of these syndicates adds further difficulty in catching criminals or helping victims recover their assets, since it requires cooperation between officials in different countries, say antifraud advocates.
Red Bull turmoil is ‘damaging’ F1, says boss of governing body
Comments by Mohammed Ben Sulayem come after email leak of messages involving Christian Horner
The president of the body that governs Formula One has warned that the furore over Red Bull Racing chief Christian Horner is “damaging” the sport, following allegations of inappropriate conduct by the British team boss.
Speaking on Friday after meeting Horner, Mohammed Ben Sulayem, president of the Fédération Internationale de l’Automobile, acknowledged the impact of the claims about the Red Bull team boss’s behaviour towards a female colleague.
“It’s damaging the sport . . . This is damaging on a human level,” Ben Sulayem told the Financial Times.
But he added that the governing body currently had no plans to conduct its own investigation because it had not received a formal complaint itself.
Red Bull said on Wednesday that a complaint against Horner had been dismissed following a barrister-led investigation into the allegations, which Horner repeatedly denied.
A day later, a cache of messages was anonymously sent to Ben Sulayem, F1 chief Stefano Domenicali, Toto Wolff, the boss of rival F1 team Mercedes, and other leading figures in motorsport. It contained screenshots of messages allegedly exchanged between Horner and the woman whose complaint had triggered the investigation.
Responding to questions about the email, Horner said he would not comment on “anonymous speculation” and reiterated that he had “always denied the allegations”.
“I respected the integrity of the independent investigation and fully co-operated with it every step of the way,” he said. “It was a thorough and fair investigation, conducted by an independent specialist barrister, and it has concluded dismissing the complaint made. I remain fully focused on the start of the season.”
Horner and Ben Sulayem met in Bahrain on Friday, a day before Red Bull begins the defence of its constructors’ and drivers’ titles in the Middle Eastern island state.
Ben Sulayem declined to comment on what the two men discussed but said a barrister had undertaken a “thorough investigation” on behalf of Red Bull.
The FIA president added that it was vital to “protect our sport from all of this”.
“It is the beginning of the season. F1 is becoming so popular,” he said. “We just need to enjoy the beginning of the season. Look at the competition. Why do we overshadow it with negativity?”
The Emirati former rally driver, who has led the FIA since his election in December 2021, cautioned that the governing body “cannot jump the gun” but that it had to “look into any complaint that comes through our compliance officer”.
Formula One, which is owned by US group Liberty Media, and Ben Sulayem’s FIA are discussing the situation, according to people with knowledge of the matter. F1 and the FIA declined to comment.
The investigation has drawn scrutiny from rival teams and from US automaker Ford, which is planning to re-enter F1 in 2026 through a partnership with Red Bull. The US car company, which had previously called for a transparent and rapid investigation, declined to comment on the latest allegations.
Asked about the cache, Red Bull said it would be inappropriate to comment on “a private matter between Mr Horner and another”. Red Bull Racing, the F1 team owned by the Austrian energy drinks group, declined to comment.
Red Bull has not published the investigation report, adding that the complainant can still appeal against its decision not to pursue the matter.
Horner, 50, has led Red Bull Racing since early 2005, shortly after the late Dietrich Mateschitz, founder of the drinks company, bought the F1 team.
The F1 team chief, who is married to former Spice Girl Geri Halliwell, has been one of the stars of the hit Netflix series Drive to Survive, which has been credited with boosting the popularity of the sport.
He has led Red Bull to six constructors’ championships — which measure the performance of the entire team — and seven drivers’ titles.