Barron’s Weekend Summary: The new wave of US chip manufacturing reflects a paradoxical new reality
Sat, 14 Oct 2023 13:00 PM EST
Cover:
-The new wave of US chip manufacturing reflects a paradoxical new reality: Geopolitics are colliding with economics, and what’s good for one is pressuring the other, says Barron’s. The example they cite is Apple. Your next iPhone won’t be stamped Made in America. But pry open the casing in 2025 and you may see semiconductor chips that were etched into silicon in the Arizona desert. That’s because Taiwan Semiconductor Manufacturing plowing $40B into the project, aiming to crank out 600,000 wafers a year. Apple CEO Tim Cook, at a “tool in” ceremony last year, said Apple would be “proud” to be the fab’s biggest customer. That’s no coincidence. Apple is TSMC’s largest source of business, worth billions in annual revenue. Apple is looking for chip security, among many companies seeking to shore up supplies amid rising geopolitical tensions and fears over disruptions.
Interview:
-This week, Barron’s features its conversation with Henrietta Treyz, director of economic policy research at Veda Partners and, in particular, how she interprets the events in Washington DC for the benefit investors. And there is a lot to decipher these days, what with two wars, a massive buildup of government debt, a congressional spending fight, and a continued struggle over who will replace ousted House of Representatives Speaker Kevin McCarthy. Treyz has been helping investors understand the implications of politics and policy, most recently at Veda, where she is a managing director. Her advice: Know which lawmakers to watch, and understand what motivates them, to know how they will vote.
Tech Trader:
-Earnings season is coming. When it comes to tech stocks, they came out roaring in 2023, with the Nasdaq Composite rallying 32% over the year’s first six months. But the group’s momentum is gone, with the same index down 1% since June 30. The Federal Reserve has increased interest rates beyond Wall Street’s expectations. Meanwhile, the early mania over generative artificial intelligence has become more nuanced in the second half. Following the initial hype, there are concerns about the economics of AI, which involves costly investment in processors and other hardware, with an uncertain payoff. Those investments now threaten the “year of efficiency” margin improvements that Meta Platforms and other tech firms have been touting. It’s all unfolding amid new worries about the near-term prospects for corporate IT spending. Netflix kicks off the earnings parade Wednesday. Investors will likely focus on its password-sharing program, its still-nascent advertising-supported subscription tier, and the lingering effects of the labor actions in Hollywood, where actors remain on strike, even after a settlement by writers.
The Trader:
-The oil price’s response to the Gaza crisis has been largely muted even as the Israeli armed forces have launched heavy airstrikes on the densely populated territory and appear to be preparing for an imminent ground invasion of Gaza. Futures tied to the US price of crude oil spiked to around $86.50 barrel on Monday, from near $83 on Friday. That gain reversed over the next few trading days, with oil back to $83 a barrel by Thursday—meaning no additional premium for the events of the past week. That’s because, the U.S. is now a net exporter of crude and has a strategic petroleum reserve that can be used to smooth out disruptions to the global oil supply (even if it’s currently less full than usual). What’s more, the initial attack and response have done little to affect the supply of oil, which continues to flow.
-Federal Reserve officials seem ready to reverse course; and they’ve been going out of their way to dismiss the likelihood of another hike, largely because the bond market has been doing the central bank’s work for it. The inverse relationship between bond yields and stock prices held firm this past week. After a relentless rise since the late summer to a nearly 5% yield on the 10-year U.S. Treasury note—and several losing weeks in a row for major stock indexes—yields reversed and stocks bounced. Many Fed speakers have conceded that the surge in bond yields had resulted in tighter financial conditions—raising borrowing costs for business, consumers, and the US government.
Features:
-The North American power grid system will face a test today, Saturday October 14, as an annular solar eclipse, a so-called ring of fire, will cause the US’s solar energy output to swing. That’s because, the skies will darken for about three hours as the moon will block the sunlight, taking most solar-power generation in states from California to Texas offline. Grid operators in the affected states are bolstering backup supplies to get ready. The eclipse will start on the West Coast in Oregon and head toward the Sunbelt. While the shadow will pass solar hot spots like Arizona and Nevada, it will bring the most impact to California and Texas.
As California falls under partial shadow, solar output there could drop to less than a quarter of what is typical on a sunny October day, according to the California Independent System Operator, the organization that runs the state’s grid.
-Wall Street expects Rivian to post an operating loss of about $1.4B in the third quarter, but the losses shouldn’t surprise anyone. The car business is a scale business. For example, Tesla wasn’t consistently profitable until it was selling roughly 100,000 units per quarter. Rivian delivered just under 16,000 units in the third quarter. The per-car loss works out to about $90,000. When Tesla was delivering about 12,000 cars a quarter it was losing about $20,000 per car. But Tesla got its manufacturing plant in California for a song from General Motors and Toyota Motor. It was also selling relatively expensive luxury cars. Ford, one of the only traditional auto makers that discloses profits and losses by vehicle type, reported an operating loss of about $32,000 per car in its EV business in the second quarter. It sold about 34,000 all-electric vehicles and hybrids in the quarter.
Europe:
-Novo Nordisk said Friday that it now expects 2023 sales growth of between 32% and 38%, an increase from prior expectations of 27% to 33%. The company also said it expects operating profit growth to be between 40% and 46%, higher than previous estimates of 31% to 37%. Novo Nordisk attributes its improved outlook to the strong performance of Ozempic and its cousin drug Wegovy. The demand for these drugs has skyrocketed as patients use them to assist with weight loss. Analysts surveyed by FactSet expect Novo Nordisk to report third-quarter Ozempic revenue of $3.32B and Wegovy revenue of $1.07B. Novo Nordisk also noted that Ozempic showed strong success in a trial for kidney failure in diabetes patients. Because of the results, the company decided to end its study early.
Emerging Markets:
-no update this week
Commodities:
-Hamas’ surprise attack on Israeli territory has set off a conflict that in past eras would have upended oil markets. This time, the effect on prices lasted just one day and registered as a blip in the longer-term models of most analysts. But as war rages in the world’s largest storehouse of oil reserves, there are risks that the calm won’t last. The wild card this time is Iran, Israel’s most powerful foe and a growing force in oil markets. Past Middle East crises have often forced profound political shifts and more-prosaic changes in consumer behavior. The financial fallout is different this time. Brent crude, the international oil benchmark, rose 4%, to $88 a barrel, this past Monday, the first full day of trading following the attacks, before giving back nearly all of its gains in the following three days. On Friday, prices rebounded again, but largely because of the US increased enforcement of sanctions on Russian oil, raising the prospect that global supplies will fall. US consumers aren’t likely to feel the impact of the war; gasoline prices have dropped consistently. Stocks of oil producers, meanwhile, have mostly traded in the same range they’ve been in since August, about 10% off their 52-week highs.
Streetwise:
-Jack Hough said that US companies are expected to report zero quarterly earnings growth in the weeks ahead; and, he thinks that’s actually good news, given that for three straight quarters, earnings have fallen year over year. So zero is a step in the right direction. And things look even better with some adjusting, excuse-making, and outright fantasizing. Earnings season traditionally kicked off with results from Alcoa; because it was the first to report among companies in the DJIA. But it went through a Dow ejection, spinoff, name change, and private-equity buyout, so the company called Alcoa today is a mere smelting stub of the one from before. Along the way, earnings season needed a new kicker-offer.
Queuing Is Not A Luxury Experience
It’s time for executives to rethink the lines outside luxury stores, writes Imran Amed.
LONDON — One of the most frustrating things about shopping for luxury fashion in the post-pandemic era is queuing — or “lining up,” as North Americans say. The default experience at luxury brands is increasingly arriving at a store — be it Chanel, Dior or Balenciaga — and being told by someone with an iPad that you must wait outside, often behind scores of other people, before you’re allowed in to have a look around.
This is something I have encountered everywhere from Bond Street to Bicester Village, and what’s bizarre is that sometimes these stores seem to have massive queues outside while the store inside looks completely empty.
If you have a direct relationship with a sales associate and are able to make an appointment in advance, you might be able to circumvent the queue, but this makes it difficult to pop by spontaneously. And it’s not a particularly smart strategy if brands want to welcome new customers to explore their stores, something that is more important now that the post-pandemic luxury boom is waning.
When I’ve quizzed luxury executives about the thinking behind this system, they’ve said it’s to ensure they can assign one sales associate to each customer to deliver the best shopping experience while also helping to manage the higher levels of shoplifting that they’ve had to contend with in recent years.
The thing is, these days one of the greatest luxuries of all is time. And sometimes I just want to efficiently pop into a store and have a look around. I don’t need a sales associate to assist me with that and I don’t want to wait in a line.
That’s why it was so refreshing to walk into a Celine store on London’s Bond Street over the weekend, and to be welcomed in without a hassle. Even though the store was very busy and a sales associate wasn’t available to help me right away, I was told I could have a look around on my own and they would send someone over when they became available. So simple, but so effective and as a customer, it made me feel like the brand valued my time.
At the other end of the fashion spectrum, I found myself at Uniqlo the other day to stock up on some socks. When I arrived at the till to pay, there was a short queue. A sales associate guided me to the self-checkout, and I cringed. (There is nothing I hate more than scanning my own groceries and then having to wait for the staff to help with the inevitable problems that arise.)
But there’s a twist! According to The Wall Street Journal, Uniqlo recently started using a “next-generation process powered by radio frequency identification readers inside the checkout machines, which automatically read hidden RFID chips embedded in price tags.” Using RFID also helps Uniqlo with stock keeping, managing inventory and loss prevention.
So, I was able to bypass the queue, put my socks into a checkout basket and, like magic, it calculated my bill in an instant, without having to scan each item individually. I tapped my credit card and I was off in less than a minute.
Now that’s a real luxury experience.
Left’s take on Hamas stuns American Jews — and threatens Democratic party split
Anti-Israel sentiment on university campuses and in street protests sparks anger and resentment
For Abraham Orden, a 43-year-old Jewish software executive from the Washington suburbs, the first inkling that the reaction to Hamas’s terror attack in southern Israel might not be what he anticipated came just hours after the assault had begun.
An Israeli woman on a WhatsApp group of mothers to which his wife belongs posted about her anguish — to which another mother reprimanded her with a post enumerating Palestinian grievances. The riposte quickly racked up likes.
“We were like, ‘well, that was weird’,” Orden said.
The next day, as details of Hamas’s slaughter of more than a thousand Israelis filtered out — with officials calling it the deadliest day for Jews since the Holocaust — New York City’s chapter of the Democratic Socialists of America rallied in Times Square to celebrate the Palestinian “resistance”.
Then some campus groups joined in. A statement endorsed by 34 student groups at Harvard University blamed Israel for the violence inflicted on its people. At California State University Long Beach one student group advertised a “Protest for Palestine” with a poster featuring a paraglider of the sort that Hamas gunmen used to attack Israelis — a motif that Black Lives Matter Chicago adopted.
“I never would have expected this kind of vitriol among educated elites,” Orden said. “And now I just can’t unsee it.”
For many American Jews, the slaughter in Israel has been devastating, frightening and all-consuming — an attack that some are likening to a modern replay of the pogroms a century ago in eastern Europe that brought their families to the US in the first place.
It is also a political moment in which an emerging hard left that is often anti-Israel — and often accused of antisemitism — has reared into full view, posing a test for a fragmented Democratic party that may ripple through the coming US presidential election. It is likely to become more agonising as Israel’s counteroffensive gathers pace and casualties mount among Palestinian civilians.
Daniel Faraci, a strategist who has advised Republicans, expects the party to criticise Joe Biden for his policy of engaging Iran, Hamas’s chief sponsor, including his recent deal to unfreeze $6bn in Tehran’s assets. But, Faraci warned, Democrats would also be made vulnerable by a fringe that appeared to endorse terrorist violence against Jews.
“Anybody that’s associated with them is going to pay a price,” Faraci said, predicting the hard left would be “a massive problem moving forward for Biden and the Democrats”.
Hank Sheinkopf, a Democratic strategist — and ordained rabbi — agreed. “The [Democratic Socialists of America] response, which was absolutely wrong-headed, will be used to tank the Democrats,” he predicted.
Orden, who voted for Biden in 2020, said he did not know what he would do in the next election. The trauma of the attack, he said, had been compounded by a sudden feeling of alienation from erstwhile allies.
That same sense was captured by Lawrence Summers, the former Harvard president, when he posted on X, formerly Twitter, that he was “sickened” by the university’s failure to distance itself from the statement of its pro-Palestine student groups.
“Why can’t we find anything approaching the moral clarity of Harvard statements after George Floyd’s death or Russia’s invasion of Ukraine when terrorists kill, rape and take hostage hundreds of Israelis attending a music festival?” Summers wrote in another post.
On Wall Street, Marc Rowan, a founder of private equity giant Apollo Global Management, called for the sacking of the president at his alma mater, the University of Pennsylvania, for fostering a “selective tolerance” in which antisemitic groups thrived. He also urged fellow donors to join him in closing their wallets.
Jennifer Laszlo Mizrahi, an activist and politician with long ties to Israel, recalled growing up in a Jewish community in North Carolina that supported the civil rights movement — and then discovering this week that some Black Lives Matter chapters were defending Hamas and condemning Israel.
“It’s so upsetting,” said Laszlo Mizrahi, who knew eight people who were killed by Hamas. A friend’s son was taken hostage. Her synagogue in Maryland did not wish to publish details of a planned vigil for fear it would be targeted, she said, while also expressing heartbreak for innocent Palestinians.
Others noted the irony that progressive students were embracing an Islamist group that punishes homosexuality in Gaza.
American Jews have overwhelmingly made their political home in the Democratic party. But the party is enduring a generational rift over Israel that runs through its Jewish constituency, too.
That divide broke into public view when Hillary Clinton and Bernie Sanders were vying for the 2016 Democratic nomination. Clinton championed the establishment line that unconditional support for Israel would help to eventually secure a Palestinian state. Sanders, the Vermont senator and avowed socialist — who is Jewish — represented a younger generation that was critical of Israel’s government and eager to place conditions on military assistance and other US aid.
Benjamin Netanyahu, Israel’s long-serving prime minister, has deepened those divisions with his support of the settler movement in Israel and undermining the country’s long tradition of bipartisanship in its US relations by embracing conservative Republicans, particularly former president Donald Trump.
When Netanyahu accepted a Republican invitation to address Congress in 2015 — over objections from Barack Obama’s White House, which was fighting with Israel’s prime minister over Iran policy — more than 50 Democrats boycotted the speech.
At the highest levels, Democrats supported Israel in highly visible fashion this week. Biden not only condemned Hamas but also recognised its atrocities. In Congress, members of a Jewish caucus who, as one consultant put it, “usually can’t even agree on a deli order”, swiftly found unity.
Ted Deutch, the former Florida representative who now leads the American Jewish Committee, called Biden’s address “one of the most important pro-Israel speeches I’ve ever heard in this country”, adding that the US response had been “overwhelmingly supportive”.
But others were focused on “the Squad” — the group of leftwing representatives who have entered Congress in recent years at the vanguard of an emerging progressive movement.
Alexandria Ocasio-Cortez, the New York representative who is the group’s de facto leader, backed out of the Times Square rally organised by the Democratic Socialists and later condemned it. “It’s very clear that AOC had a bit of a wake-up call,” Laszlo Mizrahi said.
Others, such as Minnesota’s Ilhan Omar and Michigan’s Rashida Tlaib — who is Palestinian American — did not mention Hamas in statements, let alone condemn it. Instead, Tlaib called for “dismantling the apartheid system that creates the suffocating, dehumanising conditions that can lead to resistance” and warned that the “cycle of violence” would continue unless military aid to Israel was cut.
Progressives’ criticisms of Israel have intensified during Netanyahu’s decade-long hold on power, inflamed by his abandonment of the peace process and restrictions on Palestinian communities in Gaza and the West Bank.
But even to many left-leaning American Jews, calls in the wake of the Hamas attack for “both sides” to immediately cease the violence rang like an effort to create a false moral equivalence.
“Israel is the only country in the world where when faced with the mass slaughter of a huge number of its civilians the world is already more interested in telling them what not to do,” said Jonathan Rosen, a Jewish New York City communications executive who helped bring progressives into office, including former mayor Bill de Blasio.
Rosen has been toggling between anger, grief and despair this week, he said. He is committed to establishing a political space in which progressive Jews can criticise Israel. But the complexities of doing so became evident when, riding the subway this week, Rosen saw the message from Ryna Workman, the president of the student bar association at his alma mater, New York University Law School.
“Israel bears full responsibility for this tremendous loss of life,” Workman stated. “This regime of state-sanctioned violence created the conditions that made resistance necessary. I will not condemn Palestinian resistance.”
Rosen said: “It is horrifying that people who profess that their life is all about the humanity of others — that maybe that humanity doesn’t extend to Jews.”
Ignoring U.S. Calls for Peace, Egypt Delivered Drones to Sudan’s Military
Bayraktar drone deliveries are latest instance of regional powers meddling in Sudan’s civil war
Egypt has delivered drones to the Sudanese military to bolster its fight against a powerful warlord, security officials said, a potentially dangerous escalation of a conflict that is drawing in more regional players.
The Turkish Bayraktar TB2 drones, which have helped alter the balance of power in a series of recent conflicts—including in Ukraine—were delivered to Sudan’s military last month, according to the officials. Members of the Sudanese military also trained in neighboring Egypt to improve their handling of the unmanned aerial vehicles, the officials said.
Spokesmen for the Egyptian Foreign Ministry and the Sudanese military didn’t return requests for comment. Egyptian officials have previously called for an end to the fighting.
The delivery of the drones is the latest instance of regional powers getting involved in the civil war in Sudan, a country long coveted for its strategic location on the Red Sea, its access to the Nile River and vast gold reserves. The Wall Street Journal reported in August that the United Arab Emirates was sending weapons to the Rapid Support Forces, a militia led by Lt. Gen. Mohamed Hamdan Dagalo that is battling Sudan’s military for control of the East African nation.
The shipments have raised the risk of widening the conflict and are undermining efforts by the U.S., the United Nations and others to mediate a cease-fire in Sudan.
Egypt’s involvement also highlights Cairo’s expanding, and increasingly complex, role as a power player in the Middle East and North Africa when the region is experiencing new violence and upheaval.
The government of President Abdel Fattah Al Sisi has been a close U.S. ally, largely for its efforts to mediate between Israel and Palestinian authorities—a task it has once again assumed following the deadly attacks by Hamas militants this weekend. But its supply of drones to the Sudanese military—similar to Egypt’s support to a rebel commander in Libya—runs counter to calls by the Biden administration for other countries to stay out of the Sudanese war.
At least 9,000 people have been killed since fighting broke out in April between Sudan’s military and Dagalo’s RSF, according to the Armed Conflict Location & Event Data Project, a nonprofit. The war has forced some 5.5 million people—about one in nine Sudanese—out of their homes and triggered a humanitarian catastrophe, with nearly half of the country’s citizens now in need of food and other aid.
Cairo has long backed the Sudanese military led by Lt. Gen. Abdel Fattah al-Burhan, the country’s de facto head of state. Burhan has been a key ally of Egypt in its dispute with Ethiopia, which is expanding a giant dam that the Sisi government says threatens to choke off the waters that run into the Nile. Egypt already sent warplanes to back the Sudanese military in the early days of the war.
Burhan and Dagalo worked together in 2019 to oust Sudan’s longtime dictator, Omar al-Bashir, and again in 2021 to topple a civilian transitional government.
The Egyptian drone shipment, requested by Burhan, came as the Sudanese military was losing ground to Dagalo’s forces following the U.A.E. weapon supplies. Abu Dhabi is betting on Dagalo to help protect Emirati interests in Sudan, which include swaths of farmland and a stake in a planned $6 billion port on the Red Sea.
Burhan visited Egypt in late August, the general’s first known trip abroad since the fighting began. Days later, the Egyptian military delivered the drones to a military base in Sudan’s north, according to officers in the Sudanese military.
These drones have since been deployed to several air bases from where they have been used to launch strikes against the RSF, targeting its weapons warehouses, military vehicles and bases.
Military airstrikes have inflicted significant damage on RSF facilities and weapon warehouses around Khartoum since late August, according to ACLED, the nonprofit. Last month, the Sudanese military also regained control of Zalingei, the capital of Central Darfur, which had been captured by the RSF in early August. The drone strikes have also helped the military to successfully repulse a series of attacks on two large bases in the capital, Khartoum, inflicting heavy losses on the RSF, according to witnesses and humanitarian officials.
But some drone attacks have hit civilian targets, including a Sept. 10 strike that killed 40 people at an open market, according to local human-rights activists. More air force troops are being trained in Egypt to improve operational capacity and avoid such errors, Sudanese officials said.
The RSF has reacted to the drone attacks with artillery shelling and by obstructing food and medical supplies flowing to the military’s strongholds, according to witnesses.
A Soft Landing in the U.S. Could Be Hard for Everyone Else
Conflict in the Middle East, surging global interest rates and elevated oil prices threaten fragile recovery
The U.S. economy might be heading for a soft landing. But the rest of the world could be in for a jolt.
Global financial officials say they are grappling with an increasingly fractured economic outlook, as many countries struggle with the lasting scars of the Covid-19 pandemic while others power ahead.
Surprising strength in the U.S. economy poses a threat to the rest of the world, portending higher interest rates for longer and a stronger dollar that will weigh on other countries’ growth. A jump in oil prices since the summer is also threatening to reignite inflation just as many global central banks thought they were at the end of policy-tightening cycles.
International Monetary Fund Managing Director Kristalina Georgieva warned of a “deepening divergence in economic fortunes” during a week of meetings of financial officials in Marrakesh, Morocco, held just a month after the country was devastated by earthquakes.
The outbreak of conflict between Israel and Gaza now threatens to inject volatility back into energy markets, harking back to last year’s commodity chaos after Russia’s invasion of Ukraine.
“Geopolitical tensions are the real economic risks now and we are all aware of that,” said French Finance Minister Bruno Le Maire. “Any escalation in the region would, of course, have a significant impact on global growth.”
Fragmentation
Strong U.S. economic data, including September’s blockbuster hiring report, helped send Treasury yields to 16-year highs as investors bet the Federal Reserve would keep interest rates elevated for longer. The IMF this week boosted its growth projections for the U.S. economy, now forecasting 2.1% growth this year and 1.5% next year, a sign of “a softer landing than earlier expected.”
Its expectations for much of the rest of the world grew dimmer. China’s economy has been suffering under a downturn in the property market, weak exports and lower consumer demand. China has weighed on Germany—the only advanced economy the IMF projects to shrink this year—and helped turn Europe into a weak link.
Total global trade is set to grow only 0.9% this year, the IMF expects, a sharp drop from 5.1% growth last year.
The IMF is concerned that slowing global trade could mark a new era of deglobalization as nations orient economic policy toward national security rather than growth. Geopolitical conflicts such as Russia’s invasion of Ukraine—and friction between the U.S. and China—have already upended supply chains.
Supply disruptions not only slow growth but also have prompted investors to factor in more future risks from potential geopolitical shocks, helping drive up interest rates.
Higher for longer
The persistence of inflation continues to surprise global central banks and investors. The IMF boosted its inflation forecast for next year to 5.8%, up from its previous forecast of 5.2%. For most countries, the IMF doesn’t expect price growth to return to their central banks’ targets before 2025.
U.S. data on Thursday showed that the recent decline in inflation stalled in September.
Economies abroad face additional inflation risks from the rise in the dollar and higher oil prices. When the dollar rises, it becomes more expensive for other countries to buy foreign goods and commodities, most of which are priced in dollars.
“Central banks do not take pleasure in just keeping interest rates higher…but because inflation has been more persistent than we thought, we are going to have to keep policy rates higher,” Lesetja Kganyago, the governor of South Africa’s central bank, said in an interview. South Africa’s rand has fallen 6% against the dollar over the past few months.
That is why, even as higher U.S. rates pose problems for emerging markets, some central bankers want to see American inflation tamed. Abdellatif Jouahri, the Moroccan central bank governor, said declining inflation in the U.S. would help Morocco control prices.
“So all things considered, this will make our lives easier,” Jouahri said.
Emerging woes
Global officials fear rising interest rates and a stronger dollar also could usher in a new wave of debt distress across the developing world.
The strength of the dollar is already making it more expensive for emerging-market countries to pay back dollar-denominated debts. The rise in interest rates makes it harder for them to issue new debt to fund themselves and refinance bonds coming due.
“It’s a burden on very-low-income countries with a lot of debt without a lot of fiscal space,” Treasury Secretary Janet Yellen said in an interview. “These countries are already hurt by higher food prices, higher energy prices—spillovers from Russia’s war against Ukraine.”
Development officials warn rising debt costs are threatening vulnerable countries’ ability to spend on climate-change projects. According to the IMF, nearly 60% of low-income countries are in, or at risk of, debt distress, a classification that signifies a country can’t meet its debt obligations.
Countries such as Zambia and Sri Lanka that have already defaulted on foreign bonds continue to face a long road to debt relief. China’s emergence as a lender to the developing world has challenged the process for resolving debt issues, which for decades has been coordinated by a group of mostly wealthy Western countries known as the Paris Club that doesn’t include Beijing.
“Many of these countries have already lost access to market financing and so their ability to finance even the most basic public spending needs is limited,” said Vitor Gaspar, director of the IMF’s fiscal affairs department. “That’s one of the reasons why we’re so concerned with basic priorities, like food security.”
House lawmakers urge US airlines to quickly resume flights to Israel
Oct 13 (Reuters) - More than 30 U.S. lawmakers on Friday urged the chief executives of American Airlines (AAL.O), Delta Air Lines (DAL.N) and United Airlines (UAL.O) to resume flights to Israel "as soon as possible."
The three U.S. carriers have all suspended flights to Israel citing security concerns.
The letter to the CEOs Friday led by Democrat Debbie Wasserman Schultz urged the carriers "to prioritize resuming flight operations" to Tel Aviv and said lawmakers "stand ready to assist you in any way necessary to get the job done."
Weekend Papers Summary
FINANCIAL TIMES
-Thousands were on the move in Gaza on Friday, departing their homes in overcrowded minibuses, in cars and on foot as they contended with fuel shortages and destroyed roads.The warning for about half of the Gaza Strip’s population to relocate from the north to the south of the enclave came with what the UN said was a 24-hour deadline, as Israel maintained its siege and bombardment of the 40km-long territory, particularly its main city.
-Cairo has resisted pressure to allow Palestinians to flee to its territory in large numbers. On Friday Egypt’s foreign ministry warned that the order to leave was a “grave violation” of international humanitarian law.Al-Shanty said she believed that Gaza City, her home, would be flattened and that residents would be forced into Egypt. Israel “told us to go south in the direction of Rafah because they will destroy the city and expel us to Sinai”, she said.
-The weekend break in Congress was announced after Republicans in the House selected hardline conservative Jim Jordan as their newest nominee for Speaker in a secret ballot on Friday afternoon. But Jordan, the chair of the House judiciary committee and a prominent ally of former president Donald Trump, faces an uphill battle if he is to shore up enough support to win in a final vote on the floor of the House, where Republicans hold a wafer-thin majority over Democrats.
-JPMorgan Chase reported a 35% jump in profits for the third quarter, as the biggest US bank continues to reap the benefits from higher interest rates and lower than normal loan losses.
-J&T Express, a delivery company with operations in south-east Asia and China, was forced to lower the fundraising target due to lackluster investor response, according to three people familiar with the matter.The downsized listing of the group, which counts Chinese ecommerce giants Pinduoduo and ByteDance’s TikTok as its clients, comes as global investors are increasingly pessimistic over China’s growth outlook and frayed relations with the US.
-Shares in LVMH, owners of 75 luxury brands including Dior, Louis Vuitton and Tiffany, fell 7% on Wednesday after it disclosed that a post-pandemic luxury spree had slowed in Europe, and US sales of spirits such as Hennessy cognac had fallen.
-Russian authorities have detained three lawyers for Alexei Navalny after raiding their homes on extremism charges, a move allies of the jailed opposition leader say is meant to further isolate him from the outside world. Vadim Kobzev, Igor Sergunin and Alexey Liptser are being charged with being part of an extremist group, which carries a sentence of up to six years in prison, Navalny’s team said on Friday.
-A prominent US bankruptcy judge will step away from hearing large cases as a federal appeals court investigates his alleged failure to disclose a romantic relationship with a prominent bankruptcy lawyer. An order posted on Friday said cases classified as “complex”, or those with liabilities more than $200M, assigned to David R Jones, the chief judge of the US bankruptcy court for the southern district of Texas, will be transferred to other judges.
-Australia’s indigenous community leaders and Prime Minister Anthony Albanese have issued their final rallying cry in support of a historic referendum to improve the lives of the country’s First Nations population.Saturday’s referendum, known as “the Voice”, will ask Australians to decide whether to amend the constitution to recognize the country’s original inhabitants and to establish a non-binding body to advise parliament on issues that concern the 1M indigenous people.
-Former Barclays chief executive Jes Staley has been banned from working in the UK financial sector after allegedly misleading regulators about his relationship with sex offender Jeffrey Epstein.
NEW YORK TIMES
-Fears of escalation hang over battered Gaza as thousands flee south. Amid signs that Israel’s military was preparing for a ground invasion, an initial deadline that Israel gave for civilians to leave northern Gaza came and went.
-The secrets Hamas knew about Israel’s military. A gunman’s video suggests that Hamas had deep knowledge of Israel’s military secrets and weaknesses. Here is how the attacks unfolded.
-Palestinians fled from northern Gaza to the south after the Israeli army issued an unprecedented evacuation warning on Friday.
-The University of Pennsylvania is facing angry donors after an on-campus Palestinian literary conference.
-Nikki Haley knocked Donald Trump and Vivek Ramaswamy over their recent comments on Israel.
-Trapped in Gaza, Palestinian Americans said they felt abandoned by the US.
-After tension and rumors, a protest for Palestine in Times Square occurred without incident.
-Secretary of State Antony Blinken is trying to persuade Arab nations to limit their criticism of Israel.
-The CIA reports issued days before the Hamas attack did not foresee such a deadly strike.-Republicans have asked Jim Jordan (OH) for Speaker, but Delay Vote as Holdouts Balk. The Ohio congressman Jim Jordan was his party’s second nominee this week. But Republicans put off a House floor vote until next week.
-The current chaos in the House of Representatives is not the first time Republicans have found themselves rocked by a vacancy at the top.
-The charges against Senator Robert Menendez and his wife highlight how Egypt’s powerful intelligence agency wields influence.
-A teacher was killed in a terrorist stabbing at a school in France. A suspect was quickly arrested after the attack. President Emmanuel Macron said France had been “hit by the barbarity of Islamist terrorism.”
-Physicians unionize at big health care system. The physicians, at Allina Health in Minnesota and Wisconsin, appear to be the largest group of unionized doctors in the private sector.
-Kaiser Permanente has reached tentative deal with health workers, a week after a three-day walkout.
-The United Automobile Workers union said its strikes would become more unpredictable.
-In Alaska, a road to metals needed for clean energy could also cause harm. A proposed industrial road would cut through pristine wilderness in Alaska to reach a planned copper and zinc mine.
-The Supreme Court judges will hear another broad challenge to agency power. The justices apparently added the new case to ensure that Justice Ketanji Brown Jackson could take part in deciding whether to overrule a major precedent.
NY POST
-Murad Abu Murad, a top Hamas official who helped orchestrate last week’s attack in Israel, was killed during an overnight airstrike, according to the Israeli Air Force. Murad is the head of Hamas’ Air Force, the Jerusalem Post reported, citing Hebrew media. The country also recovered the bodies of several missing citizens during a raid on Gaza, the IDF confirmed.
-Walmart’s push to crack down on shoplifting at self-checkout counters with anti-theft technology has led to a surge in “hostile” encounters between hourly workers and shoppers, according to a report. The big-box chain — one of many retailers battling increasing theft that has eaten into their bottom lines — has armed employees with handheld devices that track purchases at self-checkout registers, an Insider report revealed.
The Week’s 10 Biggest Funding Rounds: Main Street Health Leads Slow Week
For weeks it seemed like investors couldn’t take part in enough nine-figure rounds. Well, that all stopped this week, as only one round topped $100 million (although by quite a lot!) and rounds all-in-all were relatively small. Did investors take a fall holiday? Is the big-round frenzy over? Stay tuned.
1. Main Street Health, $315M, health care: This huge round may have gone unnoticed. Value-based health care provider Main Street Health locked up more than $315 million led by Oak HC/FT. The health care organization focuses on rural America, partnering with primary care physicians in those areas. The firm currently partners with over 900 clinics in 18 states and plans to expand into another eight states next year. Founded in 2021, the Nashville-based firm has now raised $342 million, per Crunchbase.
2. Pair Eyewear, $75M, retail: The direct-to-consumer startup market is not what it used to be. All one needs to do is look at Birkenstock’s recent IPO to be reminded of that. Nevertheless, VCs are still willing to put cash into some such startups — including New York-based Pair Eyewear. The customizable eyewear brand raised a $75 million Series C led by Prysm Capital. The company makes prescription glasses for just $60 and has realized 24x revenue growth from 2020 to 2023. Clearly those numbers caught some investors’ attention. Founded in 2017, the company has raised nearly $150 million, according to Crunchbase.
3. Shine Technologies, $70M, Energy: Fusion has been very popular with investors for a while now. This week it was Wisconsin-based Shine Technologies that raised big, locking up a $70 million round led by existing investors including Baillie Gifford and Fidelity Management and Research Co. The round is a convertible note ahead of a Series D later, per Axios. Many feel the commercialization of fusion energy — created when two atoms are merged — is close to becoming a reality thanks to recent tech advancements in things like switches and modeling software. Founded in 2005, the company has raised $742 million, per Crunchbase.
4. Saronic, $55M, defense: Fusion isn’t the only hot sector investors eyed this week. Defense tech also has seen a slight surge in funding, and this week Austin, Texas-based Saronic raised some cash in the space. The maritime autonomy company raised a $55 million Series A led by Caffeinated Capital. Saronic plans to use the new cash to accelerate research and development while expanding in-house manufacturing capacity for rapid production of its autonomous surface vessels. Founded in 2022, the company has raised $70 million, per Crunchbase.
5. Capital Rx, $50M, health care: New York-based pharmacy benefit manager Capital Rx closed a $50 million-plus strategic investment round from the likes of Atlantic Health System and Banner Health. The company’s health platform, Judi, connects the various parts of the pharmacy ecosystem and services more than 2.4 million members for Medicare, Medicaid and commercial plans. Founded in 2017, the company has now raised $253 million, per Crunchbase.
6. Mojo Vision, $44M, electronics: Saratoga, California-based Mojo Vision, a micro-LED developer, closed a $43.5 million Series A led by New Enterprise Associates and Khosla Ventures. Founded in 2015, the company has raised nearly $270 million, per Crunchbase.
7. Harri, $43M, human resources: New York-based employee experience platform Harri raised a $43 million Series B led by Atalaya Capital Management. Founded in 2012, the company has now raised $112 million, per Crunchbase.
8. Stash, $40M, fintech: New York-based investing app Stash raised $40 million in a convertible note led by funds and accounts advised by T. Rowe Price Investment Management. Founded in 2015, the company has raised $520 million, per Crunchbase.
9. Prophecy, $35M, data: Palo Alto, California-based data platform developer Prophecy locked up a $35 million Series B led by Insight Partners and SignalFire. Founded in 2017, Prophecy has raised $67 million, per the company.
10. BlueNalu, $34M, aquaculture: San Diego-based cellular aquaculture startup BlueNalu locked up a $33.5 million Series B from new and existing investors. Founded in 2017, the company has raised $118 million, per Crunchbase.
Big global deals
Main Street’s big raise led the way globally, but there was a big AI round overseas.
- China-based Dark Side of the Moon, an AI large-scale model company, raised a venture round of approximately $274 million.
UAW Spares Carmakers Further Strikes, but Says More Could Come
Union president says strike entering new phase, needs new approach
The United Auto Workers spared General Motors GM -1.55%decrease; red down pointing triangle and Chrysler-parent Stellantis STLA 0.20%increase; green up pointing triangle from a strike escalation Friday, two days after turning up the heat on Ford Motor F -1.04%decrease; red down pointing triangle with a surprise walkout that targeted one of its most profitable plants.
“We’re entering a new phase of this fight, and it demands a new approach,” UAW President Shawn Fain said in a livestream Friday. “We are prepared at any time to call on more locals to stand up and walk out.”
The UAW has sought to keep the pressure on all three automakers during bargaining with a strike strategy that targets specific facilities at each one depending on what movement, or lack thereof, happens at the negotiating table each week.
For the past month, Fain has typically announced additional walkouts during Friday livestreams, a pattern that he is now seeking to disrupt in an effort to keep the car companies on edge.
Fain specifically called out Ford as growing accustomed to the weekly updates and accused it of slow-walking the union with offers that aren’t substantially different.
“They stopped being interested in reaching a fair deal now and only became interested in gaming our system of announcing strike expansions on Friday,” Fain said.
The 88-year-old labor union initially walked out at three assembly plants for each automaker in mid-September and has since escalated the work stoppage unevenly among the Detroit Three, taking action at parts-distribution facilities as well as additional factories.
On Wednesday, the union suddenly ordered 8,700 workers to join the picket lines at a Ford pickup-truck factory in Kentucky, an assembly plant that is one of the nation’s largest and builds some of the company’s most profitable vehicles.
The move came after talks between Ford and the UAW during the week hit a standstill after a flurry of activity.
In all, more than 33,000 UAW workers are out on strike, about one-fifth of the union’s roughly 146,000 U.S. factory workers at GM, Ford and Stellantis.
Ford executives said Thursday the automaker was at the limit of what it could offer to the union. The latest proposal from the Dearborn, Mich. automaker included a 23% pay increase, the return of cost-of-living adjustments, and a faster timeline to convert temporary workers to full-time.
“We stretched to get to this point. Going further will hurt our ability to invest in the business,” Kumar Galhotra, president of Ford’s gas-engine business, said in a briefing with reporters Thursday.
Company executives said they had been bargaining this week around core economic issues, such as retirement benefits, as well as the future of Ford’s EV battery plants.
The battery facilities have become a core discussion topic after the union said last week that GM agreed to place battery production under its master agreement. Stellantis and Ford haven’t yet made similar commitments, with some executives noting that it is up to the workers to decide whether they want to join the union.