FT : Biggest Chinese mutual funds near limits on offshore investment

Biggest Chinese mutual funds near limits on offshore investment
Institutions seek higher returns elsewhere as growth slows at home

China’s biggest mutual funds are nearing government limits on offshore investment, as they seek higher returns elsewhere against a backdrop of slower growth at home.

China’s so-called Qualified Domestic Institutional Investor scheme, introduced in 2006, allows banks, brokerages and asset managers to bypass the country’s strict capital controls and buy securities abroad.

Beijing has steadily increased the total quota from $87bn a decade ago to its current level of $166bn across 184 institutions but has only made small additions since late 2021.

While no official data is provided on the use of the quota, several investors and legal representatives across the asset management industry said rising appetite for overseas-targeted funds was pressuring individual allowances.

An analysis of public fund data shows fund management companies Guangfa, E Fund and China Asset Management are close to the limits published by the State Administration of Foreign Exchange, which administers the scheme.

The rising demand offers insight into how yield-hungry funds across China’s nascent but rapidly growing asset management industry are navigating Beijing’s strict capital control regime in order to participate in overseas market rallies. It also comes as Beijing grapples with slower economic growth, weak financial returns and a wider loss of confidence.

“There’s a huge demand for outbound investment funds this year,” said Ding Wenjie, investment strategist of global capital investment at China Asset Management, who pointed to the “relatively high returns” on overseas stocks.

Across the fund management industry, incomplete figures make gauging total use difficult. Data from consultancy Z-Ben Advisors shows mutual funds held $44.5bn in QDII funds at the end of July, up from $33bn at the end of 2021. This is against a total available quota of $75bn for the fund management industry. Some small funds may not have the resources to use their quota, while certain fund investments may not be included in available totals.

The rest of the $166bn quota is held by banks, insurers and trust companies.

“Many of the top players are running low or tight with their QDII quota . . . and we do see a lot of demand from retail investors,” said Ivan Shi, head of research at Z-Ben Advisors.

One person in the industry in mainland China suggested higher yields in the US were behind the rise in demand, noting that Beijing had made only small increases in the quota in recent years. Last month the State Administration of Foreign Exchange added $2.7bn in a move seen as a response to high demand.

The QDII scheme is part of a wider policy of controlling flows of money in and out of China. The controls limit each individual’s outbound expenditure to $50,000 a year, excluding education and tourism expenses. When investors in China exit QDII funds, they receive the proceeds domestically in renminbi.

Industry participants pointed to high appetite for Japan’s Topix and Nikkei indices, which have rallied this year compared with Chinese counterparts. The combined fund size of the four exchange traded funds in mainland China that target Japanese securities increased nearly fivefold to $1.65bn from March to July, according to data from financial information provider Wind.

A mutual fund manager at one the four ETFs said it was considering adding more offshore portfolios through a Hong Kong subsidiary, a move that would allow it to bypass the QDII quota.

The website of the China Securities Regulatory Commission lists dozens of funds currently awaiting approval for QDII-related products. A legal adviser for one mutual fund house said while mutual funds and securities companies had in many cases almost reached their limits, they were saving some for bets on “possible year-end rallies in offshore shares”.

E Fund, Guangfa Fund and the State Administration of Foreign Exchange did not immediately respond to requests for comment.

FT : Dubai property developer Damac to buy London office space for first time

Dubai property developer Damac to buy London office space for first time
Group known for luxury hotels aims to buy at bargain prices in bet struggling market will bounce back

Dubai-based property developer Damac plans to buy London office space for the first time in a bet the struggling market will bounce back.

The luxury group, known for developing Donald Trump’s golf course in the Middle East, aims to snap up the offices at bargain prices and turn them into plush places to work that meet ESG standards.

“London is still a cosmopolitan city,” Damac chair Hussain Sajwani told the Financial Times.

“Demand is there if you find the right asset, the right price, fix it, change the tenant mix, make it more friendly environmentally and push it to a higher end.”

Sajwani did not disclose how much he was planning to spend overall, but said he would look at property on a case-by-case basis with the intention of paying £100mn or £500mn per office, depending on location.

The company will target prime areas, including Mayfair, Victoria and Canary Wharf and favours locations where planning permits are easier to secure.

It will be the first time the group, which also owns Italian luxury fashion house Roberto Cavalli, has bought office space in Europe.

It chose London because of the bargain prices in a sluggish market with vacancy rates rising due to a combination of hybrid working and higher debt costs undermining demand and depressing prices.

Central London office investment volumes were £1.4bn in the second quarter or 60 per cent below the long-term average — the weakest on record except for the second quarter of 2020 at the height of the Covid-19 pandemic, according to CoStar data.

Damac, founded in 1982 and known for its focus on luxury residences and hotels having developed more than 75 towers including the Paramount in Dubai, did not rule out repurposing some of the office space into flats.

It has already dipped its toes into the residential market in London, developing the luxury Nine Elm tower near Battersea, which was furbished by fashion house Versace and opened to residents last year.

Although demand has fallen for many London offices, analysts say it has held up for high-end, green buildings in top locations, which are in short supply.

Some owners are likely to be forced by lenders to dispose of their offices in the coming months as loans mature and they struggle to refinance their debt because of rising rates, analysts add.

“When it comes to the refinancing point, if there’s just no availability to refinance at the level they are looking for, it might not be your decision anymore,” said Jackie Bowie, head of Europe at Chatham Financial.

Sajwani said he hoped to take advantage of the “softened” market and an upcoming wave of refinancing in order to buy assets that owners can no longer afford to keep.

There was, however, still “a bit more time [to go] for sellers to accept the new reality”, he said, adding that many were not ready to dispose of their assets at market price yet. 

“It takes time for people,” he said. “But as time goes by, some of them will find a solution and keep their assets and some of them will have to give up their assets.”

He concluded: “For us from the Middle East, London is like a second home: the culture, the language, the rules, the regulation.” 

FT : $700mn superyacht tied to Putin is being refitted while impounded

$700mn superyacht tied to Putin is being refitted while impounded
Italy is allowing the unnamed owner of the Scheherazade to pay for staff, maintenance and a refit

It has been 15 months since Italy impounded the Scheherazade, a $700mn superyacht linked to Vladimir Putin.

But the time the yacht has spent sitting in the Tuscan port of Marina di Carrara has not been wasted: Italy has allowed its unnamed, but sanctioned, owner to pay not just for its staff and maintenance, but also for it to be refitted.

The 140 metre-long yacht, which is only four years old and boasts 22 guest cabins with gold-plated bathrooms, two helicopter decks and a spa, is being refurbished by the Milan-listed Italian Sea Group.

The company confirmed that a “refit” of the ship continued after the asset was frozen by authorities, and that the yacht’s owner has been paying for the works and for maintenance, but declined to give further details, including the identity of the owner.

The Agenzia del Demanio, which manages seized assets, confirmed it had agreed, along with the finance ministry, to allow the ship’s owner to pay for the “maintenance works”, but declined to go into further detail because “information about frozen assets is classified”.

Italy has never publicly identified the yacht’s owner, although at the time it was seized it said there was “evidence of meaningful economic and business connections with prominent elements of the Russian government subject to EU sanctions”.

According to people with knowledge of the situation in Rome and Brussels the owner is Eduard Khudainatov, the former chief executive of the Russian state oil company Rosneft who was sanctioned by the EU in June 2022.

A Bloomberg report last year said US officials had alleged in court filings that Khudainatov was the “straw owner” of two yachts, including the Scheherazade, on behalf of Putin. The Financial Times traced the boat’s ownership to a Marshall Islands-based entity called Beilor Asset Limited.

Meanwhile researchers working for the jailed Russian opposition activist Alexei Navalny have also alleged that the Scheherazade’s real owner is the Russian president, because a number of its crew were members of the Federal Protection Service, responsible for Putin’s security. The Kremlin denied the allegations at the time. The staff on board the yacht was subsequently replaced.

Kremlin spokesman Dmitry Peskov said in response to a question from the Financial Times: “All rumors about this are unfounded.”

A European Commission spokesperson said that “members states are responsible for implementing sanctions,” and that asset freezes do not affect the ownership of the assets.

When asked about the payment scheme for the Scheherazade’s upkeep, the spokesperson said that “maintenance costs of frozen assets can be paid by the designated person” under a “standard derogation”.

Public authorities in the relevant member state can also pay the maintenance costs given the “risk that the designated person will not be willing to . . . or that the designated person will be denying beneficial ownership of the asset,” the spokesperson added.

Italy and the European Commission did not confirm who the “designated person” is for the Scheherazade.

The EU has imposed sanctions on almost 1,900 Russian individuals and entities since Moscow’s first invasion of Ukraine in 2014, freezing their assets and banning them from travelling around the bloc. The assets are frozen, rather than seized, and would be returned if sanctions are lifted.

According to a list of Russian assets seized in Italy seen by the FT, the Scheherazade is the only one whose owner is not specified. The vessel is merely described as: “superyacht Scheherazade sailing under the Cayman Islands flag with a value of around €650mn.”

FT : Agaves/tequila: end of spike fortifies high plains snifter

Agaves/tequila: end of spike fortifies high plains snifter
A price decline in the plants is a boost to distillers

Wine connoisseurs are not the only ones who earnestly discuss the impact of “terroir”. The relative merits of tequila distilled from highland and lowland agaves now passes for dinner-party conversation between the spirit’s devotees.

Tequila’s rising popularity has driven the price of the spiky plants up tenfold over the past decade. But there are signs that the agave boom may be turning to a bust. 

It is not difficult to see why the price of agaves jumped from 2.7 pesos/kg in 2012 to over 30 in 2022. Tequila has undergone a reinvention, from party shot to posh tipple.


As a result, US tequila sales rose by 20 per cent annually between 2018 and 2021, according to Bernstein analysis, outpacing the wider drinks market. High-end, 100 per cent agave tequila is outperforming the lower rated 51 per cent mixes.

Agave production, concentrated in the Mexican state of Jalisco, is singularly inflexible. Plants take seven years to mature. Harvesting the fat central stem kills them off. That means supply is lumpy and takes a long time to respond to price signals. 

An agave downcycle may already be under way. The start of the tequila boom dates back to the mid 2010s. Demand is now moderating. Volume growth, which peaked above 20 per cent in 2021, has fallen to mid to high single teens.

This combination of factors has already halved agave spot prices to 16 pesos per kg. In a glut, further falls would be inevitable. 

That changes the economics of tequila. It takes 7kg of agaves to make a litre of spirit. By this reckoning, the reported price decline would add $6 to the margin for each litre.

Good news for tequila producers. The biggest, Jose Cuervo, controlled by Mexico-listed Becle, accounts for some 30 per cent of volumes. Diageo is also exposed to the trend. Its premium Don Julio and Casamigo tequilas have been growing rapidly, and now account for 9 per cent of total sales. A sustained fall in agave prices warrants a tequila toast for distillers.

FT : Investors warm to riskiest US corporate debt

Investors warm to riskiest US corporate debt
Lowest-rated junk bonds benefit from ‘soft landing’ hopes for world’s biggest economy

Investors are warming to the riskiest US corporate debt, as optimism about the state of the world’s biggest economy narrows the gulf between the top and bottom rungs of the $1.35tn junk bond market.

The gap between the yield on double-B and triple-C bonds narrowed to its tightest level in 15 months at 6.53 percentage points in recent days, before widening slightly to 6.74 percentage points at Friday’s close — underscoring investors’ growing confidence that the US can avoid a recession even as the Federal Reserve has raised interest rates 11 times since March last year.

Such hopes of a “soft landing” follow a flurry of positive data, with persistent evidence of easing inflation and better than expected second-quarter growth US growth figures.


The shrinking gap between the top and bottom of the junk debt market — a closely watched barometer of US investors’ risk appetite — marks a turnaround from the aftermath of the failure of two US regional banks in March which compounded fears of a recession and piled pressure on highly-indebted companies’ bonds. The spread between double-B and triple-C bonds widened to 8.52 percentage points in April as investors shunned debt issued by companies most at risk of default in the event of an economic downturn.

“A few months have passed without more bank failures after First Republic”, Marty Fridson, chief investment officer of Lehmann Livian Fridson Advisors, referring to the collapse of another lender in May. Many investors are also betting that the Fed has implemented its last interest rate hike, he added. “They’re clinging to that idea, even if [Chair Jay Powell] didn’t give a clear message that they’re done”.

Yields and spreads on junk bonds remain far higher and wider than their lows in 2021, when Fed stimulus was still sloshing around the financial system. Valuations have also been supported this year by a shrinking market, investors say, with upgrades to investment-grade territory and relatively low new issuance anchoring prices at artificial levels.

“We’re still quite a long way from where we were at the beginning of 2022”, added Andzrej Skiba, head of Bluebay US fixed income at RBC GAM, pointing to the period just before the Fed started tightening monetary policy. 

Skiba “is not looking to add exposure in triple-Cs in any meaningful fashion”, he said. “[But] I can easily see how managers are increasingly tempted to add exposure to lower-rated issuers. When the music is playing, people get sucked in into buying lower-rated assets.”

FT : Berkshire Hathaway’s cash pile nears all-time high at $147bn

Berkshire Hathaway’s cash pile nears all-time high at $147bn
Warren Buffett backs short-term Treasuries despite Washington political climate

Berkshire Hathaway’s cash and investments in short-term Treasuries surged to $147bn at the end of the second quarter, underscoring Warren Buffett’s faith in the backbone of global financial markets despite the rocky political climate in Washington.

The sprawling conglomerate — which owns the BNSF railroad and Geico insurer — increased the holdings by nearly $17bn in the second quarter, to sit just below an all-time high of $149bn set in 2021.

The disclosure came days after rating agency Fitch stripped the US of its prized triple A rating. Analysts cited Washington’s repeated stand-offs over the debt ceiling, which drove the Treasury’s cash balances to dangerously low levels.

Buffett, who has led Berkshire for more than half a century, told CNBC last week that Fitch’s decision would not change the company’s investment strategy and that he was not worried about the US dollar or Treasury market.

“Berkshire bought $10bn in US Treasuries last Monday,” he said. “We bought $10bn in Treasuries this Monday. And the only question for next Monday is whether we will buy $10bn in three-month or six-month” bills.

Berkshire has long kept cash in short-term Treasuries to give the company the flexibility to pay out catastrophic insurance losses and to have reserves ready to splash out on multibillion-dollar acquisitions.

“There are some things people shouldn’t worry about,” he said. “This is one.”

The company on Saturday reported that it swung to a profit of $35.9bn between April and June, from a loss of $43.6bn in the same period the year before.

The figures are distorted by movements in the value of Berkshire’s mammoth $353bn stock portfolio, which includes stakes in Apple, American Express and Bank of America. Berkshire is required by US accounting rules to include those shifts in its earnings, even if it has not sold the stocks.

Excluding those gains, Berkshire’s smattering of businesses reported operating earnings of $10bn, up from $9.4bn a year before. The results were buoyed by the company’s core insurance businesses, where underwriting profits climbed 74 per cent to $1.2bn, as well as its large holdings of cash and Treasury bills.

The company, which uses the premiums it receives on insurance policies to fund its investments, has benefited from the Federal Reserve’s move to increase interest rates. Berkshire disclosed it earned $1.4bn of interest income in the quarter and just over $2.5bn in the first half of the year.

“Our investment income is going to be a lot larger this year than last year, and that’s built in,” Buffett said at the company’s annual meeting in May. He estimated the Treasury bill portfolio could earn the company $5bn annually in income, given interest rates are now above 5 per cent.

Berkshire’s insurance results stood out in an industry that has struggled with higher costs to repair or replace automobiles, as well as the string of catastrophic storms that caused billions of dollars in property damage.

Geico reported a second quarter of underwriting profits, following more than a year of losses. The unit cut advertising spending, lifted insurance premiums and said it had significantly reduced the number of consumers it was insuring.

The company spent $1.4bn on share buybacks, a far slower pace than in the first three months of the year when it repurchased $4.4bn of its stock.

Barrons : The Fed Eventually Will Disappoint Wall Street and Main

The Fed Eventually Will Disappoint Wall Street and Main

If you ever doubted that the markets and regular folks inhabit two different planets, consider the latest employment report released this past Friday.

The Bureau of Labor Statistics reported that the jobless rate fell back to 3.5% in July, matching the halcyon days in 1969 when men first walked on the moon. Payrolls expanded by 187,000 while hourly wages were up 4.4%, a Goldilocks combination of a not-too-hot or -cold labor market, as economists see it. At the same time, Bank of America and J.P. Morgan have joined the list of forecasters that have canceled their recession calls for 2023.

But in the latest CNN poll, 51% of respondents said the economy still is in a downturn and getting worse. Even worse for President Joe Biden’s re-election prospects next year, his approval rating for handling the economy was 37%—and that was even lower than his overall approval rating, a dismal 41%. Those numbers were right in line with an array of other polls tracked by RealClearPolitics.

Consumer sentiment as tracked by the University of Michigan has been picking up, hitting 72.6 in the most recent reading, the highest since September 2021. Still, that remains well below the scores that bounced near 100 in the years before the Covid-19 pandemic hit in early 2020.

You’d also think that working Americans would be pleased to have their wages finally rising faster than prices. Average hourly earnings were up 4.4% in the latest 12 months and rose at a 4.9% annual rate in the past three months. Consumer prices were up 3% in the most recent 12 months ended in June, down by more than two-thirds from the four-decade inflation peak hit in 2022.

What has economists and market watchers more encouraged is that the economy and employment continue to expand even after the Federal Reserve has raised interest rates by a huge 5.25 percentage points while also shrinking its balance sheet. All of which has futures markets betting that the Fed is done hiking and will leave its federal-funds target at 5.25%-5.50%—and possibly begin cutting rates as early as next spring, according to the CME FedWatch tool.

As Fed Chairman Jerome Powell indicated following the latest hike on July 26, what happens at the next policy meeting on Sept. 19-20 will depend on data released by then. After Friday’s solid job report, attention turns to July’s consumer price index, due this Thursday. Economists’ guesses center around a 0.2% increase for the month in both the headline and core (ex-food and energy) measures. But the improvement in the headline year-over-year change could reverse, to 3.3% from 3.0% in June, owing to the comparisons from 2022.

Those base effects suggest that the inflation picture in the June CPI is as good as it gets. Meanwhile, the economy continues to chug along. After gross domestic product expanded at a 2.4% annual rate in the second quarter, up from 2% in the prior quarter, the Atlanta Fed’s GDPNow tracker for the third quarter is running at a 3.9% pace.

The just-right jobs report gave some respite to the bond market after its recent swoon, which lifted longer yields back to near 2022 highs. But the statistical reality of a solid economy and inflation stuck well above the Fed’s 2% target should keep monetary policy on hold longer than the futures market expects. That, in turn, could bring longer-term Treasury yields closer to the fed-funds rate. The resulting hit to stocks could then make Wall Street as blue as Main Street.

Barrons : Nike Stock Has Had a Tough Run. The Case for Buying Now.

Nike Stock Has Had a Tough Run. The Case for Buying Now.

If the stock market were a race, Nike would be near the back of the pack. Don’t expect it to stay there much longer.

Nike stock (ticker: NKE) has fallen 8.2% in 2023, putting it in the bottom quintile of all S&P 500 stocks this year. Its list of ailments runs long: There’s too much inventory; not enough demand; a sluggish economy in China, its second-largest market; and competition from upstarts like On and Hoka. Nike has also laid out big targets—targets that look increasingly out of reach—and trades at a premium valuation multiple, one that looks too high, given the aforementioned issues.

But like a runner who leaves enough for a big kick at the finish, Nike stock might be ready for a big push higher. Most of its problems—from high Covid-era shipping and raw-materials costs and too many shoes that no one wants to buy—are fading, while the focus has returned to innovation. As markdowns in the U.S. slow and China begins to recover, Nike’s rate of sales growth should start to accelerate and margins should improve. Investors would be wise to buy now in anticipation of that happening—or risk missing the move.

“Our view is that as soon as the market starts to sense [the] sales growth rate and margin improvement, the stock will start moving higher,” writes UBS analyst Jay Sole. “This could happen when Nike reports...earnings in late September or even sooner.”

Nike may be down, but it isn’t out. Its Jordan-branded sneakers and apparel, for example, raked in sales of about $6.6 billion for the 12 months ended in May, more than triple the $2.1 billion in expected sales this year for On. Anecdotally, people still love and trust the Nike brand and turn to it when considering a new pair of shoes.

“My go-to shoes and the brand [I] trust the most, for me it’s Nike,” says Payum Payman, a 39-year-old senior vice president at Citi Private Bank, who grew up playing tennis in Nike sneakers.

It has taken a while, but inventory has started to decline, and markdowns should get less onerous. Inventories fell to $8.5 billion in the second quarter of calendar-year 2023 from $8.9 billion in the first quarter of the year. Chief Financial Officer Matthew Friend said on Nike’s second-quarter earnings call that the company expects to see a “modest improvement in markdowns versus the prior year” in the second half of the year.

Nike’s big challenge is getting its “direct to consumer” channel to work the way it has envisioned, cutting out the middleman at places like Foot Locker (FL) and reaching shoppers online, through its website or app, and at Nike stores. That allows the company to keep the entire sale price, earning it a higher margin. Nike said on its most recent earnings call that it expects DTC sales to get to about 60% of total sales “long term,” from about 45% in its most recent quarter.

Worries about that strategy have cropped up recently, as Nike announced that it would start selling at Macy’s (M) once again—a sign, perhaps, that the DTC strategy isn’t going as well as it should. But Nike isn’t all that far away from meeting its goals. Its current-quarter sales guidance calls for a mid-single digit sales increase, and takes into account mild product markdowns and a stronger dollar. “Their DTC business is much better developed than most others,” says Oppenheimer analyst Brian Nagel, who has a $150 price target on the shares, reflecting a 40% upside from their recent $107.51. “Behind all this noise, the Nike model is frankly in great shape.”

If that’s the case, Nike should get more profitable. That’s what it predicted in 2021, when it said margins on earnings before interest and taxes would reach the high teens by 2025. Instead, Nike’s margins were 11.5% in fiscal-year 2023 and are expected to hit 12.3% in the current fiscal year.

UBS’ Sole, though, argues that Nike is much closer to its target than it appears. Strip out the higher shipping costs, the surging input prices, and the impact of inventories, and then account for the growth in Nike’s online business, and margins could get a 6.5-percentage-point boost, to about 18%. “While macro dynamics have impacted margins near term and macro could further delay the timing...the company still feels the targets are achievable,” he writes.

China is the wild card. Although Chinese consumer spending remains a question mark, the People’s Bank of China has recently cut several key lending rates that should help boost the economy. Longer term, middle-to-upper-income households in the country could grow at about 11% annually through 2025, to 209 million, according to a McKinsey report. That would drive more purchases of premium brands, including Nike. Indeed, Wall Street analysts model 13% annual sales growth in China through the next couple of years, to $9.9 billion, according to FactSet. That would help total sales get to about $65.7 billion by 2026 from an expected $52.3 billion this year.

All told, Nike could earn $5.50 a share in 2026, up 16% annually from 2023’s expected $3.52. Growth will need to take the stock higher. The stock probably won’t get much cheaper, but it might not get more expensive, either.

Jefferies analyst Randal Konik expects the DTC business to drive growth. That would go a long way toward convincing the market that Nike’s brand remains powerful—and drive upside. Konik has a $140 price target on Nike’s stock, reflecting a 30% upside for the shares.

For investors still wondering whether to buy the stock, there’s a simple answer: Just do it.

>>> US CLose Dow -0,43% S&P -0,53% Nasdaq -0,36% Russell -0,20%

Closing Stock Market Summary

The major indices saw somewhat choppy action today as participants digested a slate of factors. Market participants were reacting to the earnings results from Apple (AAPL 181.99, -9.18, -4.8%) and Amazon (AMZN 139.57, +10.66, +8.3%), the July Employment Situation Report, and falling Treasury yields.

The pullback in market rates was in response to the jobs report, which showed a slowdown in nonfarm payroll growth that has the market considering the idea that it may be enough to keep the Fed on hold. The 2-yr note yield fell 12 basis points to 4.78% and the 10-yr note yield fell 13 basis points to 4.06%.

Those moves were a welcome development after longer-dated Treasury yields jumped over the last few sessions, keeping pressure on equities. The 10-yr note yield still rose nine basis points on the week.

Stocks found some upside momentum shortly after the open when the S&P 500 bounced off the 4,500 level. The major indices were trading up until selling increased in the afternoon trade. There was no specific catalyst to fuel the afternoon selling, but profit-taking activity was likely a driving factor. Ultimately, the major indices closed near their lows of the day, which had the S&P 500 below 4,500. 

Shortly after the open, advancers led decliners by a 5-to-2 margin at the NYSE and a 3-to-2 margin at the Nasdaq. By the close, advancers had an 11-to-10 lead over decliners at the NYSE while decliners had the same lead over advancers at the Nasdaq.

Only two of the S&P 500 sectors closed with gains -- consumer discretionary (+1.9%) and energy (+0.03%) -- while the information technology sector logged the biggest decline.

  • Nasdaq Composite: +32.9% YTD
  • S&P 500: +16.6% YTD
  • Russell 2000: +11.1% YTD
  • S&P Midcap 400: +10.3% YTD
  • Dow Jones Industrial Average: +5.8% YTD

Reviewing today's economic data:

  • Nonfarm payrolls rose by 187,000 in July (consensus 200,000) following a revised increase of 185,000 in June (from 209,000). 
  • Nonfarm private payrolls rose by 172,000 in July ( consensus 175,000) following a revised increase of 128,000 in June (from 149,000).
  • Average hourly earnings rose by 0.4% in July ( consensus 0.3%) following a 0.4% increase in June.
  • The unemployment rate fell to 3.5% ( consensus 3.6%) from 3.6% in June.
  • The average workweek fell to 34.3 hours ( consensus 34.4%) from 34.4.
    • The key takeaway from the report is that labor supply continues to be tight, which could make it difficult to achieve a more Fed-pleasing moderation in wage growth. That might not translate into another increase in the target range for the fed funds rate, but it does fit the notion that the Fed will be inclined to keep the policy rate higher for longer.

Notable economic data on Monday is limited to the June Consumer Credit report (consensus $13.0B; prior $7.3B) at 3:00 p.m. ET.

TechCrunch : SEC ends investigation into Better.com, which is bleeding cash ahea

SEC ends investigation into Better.com, which is bleeding cash ahead of planned SPAC vote

The U.S. Securities and Exchange Commission (SEC) said it does not intend to recommend an enforcement action against digital mortgage lender Better.com. The pronouncement comes after an investigation on the part of the SEC to determine if violations of federal securities laws had occurred.

Last July, the SEC began looking into whether Better.com had violated federal securities laws, requesting documents from both the company and SPAC partner Aurora Acquisition Corp. about their business activities.

Regulators sought information about the business activities of CEO and co-founder Vishal Garg and allegations made by Sarah Pierce, former executive vice president of customer experience, sales and operations, who claimed that Better.com had misrepresented the health of its business in order to move forward with a SPAC.

In an August 3 statement, the SEC also noted that while it does not recommend an enforcement action, the decision “must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff’s investigation.”

Meanwhile, the long-awaited vote for Better.com to go public is scheduled for August 11 ahead of the extended deadline to complete the merger deal on September 30. The company originally began making plans to go public via a $6 billion SPAC in May 2021. Things took a dramatic turn for the worse later that year, and the SPAC was delayed.

In late July, Aurora said in an SEC filing that shareholders would be asked to vote on a proposal that if the SPAC did take place, with Aurora surviving the merger, that Aurora would change its name to “Better Home & Finance Holding Company,”

It added: “If Aurora is unable to complete the merger with Better.com by the extended deadline of September 30 and is not able to complete another business combination by the specified date, Aurora will cease all operations within 10 business days except for the purpose of winding up.”

Last year, Better.com declared that it intended to move forward with its planned public debut, despite lackluster performance of blank-check combinations in previous quarters. Better.com itself had seen its fair share of turbulence since it announced its plans to merge with a SPAC, including multiple botched layoffs (more on those here and here) and changing market conditions that impacted parts of its business, including a surge in mortgage interest rates.

A company spokesperson told TechCrunch Friday that Better.com is still in a quiet period given the SPAC so it “cannot comment publicly.”

More recently, in June, Better.com announced it was exiting the real estate business.

The embattled fintech startup laid off its real estate team on June 7, shifting from an in-house agent model to a partnership agent model. It also continues to bleed cash.

According to HousingWire, other Aurora filings from July showed that Better.com had posted a net loss of $89.9 million in Q1 2023 and had slashed about 91% of its workforce over an approximately 18-month period. Specifically, as reported by HousingWire, the company had about 950 employees as of June 8 compared with a peak of about 10,400 employees in the fourth quarter of 2021. While Better.com seems to have narrowed its loss compared to a net loss of $327.7 million in the first quarter of 2022, it’s clearly still struggling.