FT : Novartis set to buy Avidity Biosciences for more than $10bn

Novartis set to buy Avidity Biosciences for more than $10bn
Deal would be biggest acquisition under chief executive Vas Narasimhan

Novartis is close to announcing a deal to buy Avidity Biosciences, a biotech focused on rare diseases, in the biggest acquisition by the drugmaker in more than a decade.

The deal, which is expected to be worth more than $10bn, will be Novartis’ biggest acquisition under the tenure of longtime chief executive Vas Narasimhan. The transaction is set to be announced later on Sunday, according to two people familiar with the matter.

Talks between Novartis and Avidity were first reported by the Financial Times in August. A takeover of Avidity would help in the large pharmaceutical group’s efforts to offset impending patent cliffs, by adding the biotech’s pipeline of potential drugs for muscular dystrophy — a potentially fatal muscle-wasting disease. 

Shares in Avidity closed at about $49 a share on Friday, giving the San Diego-based biotech a market value of nearly $6.7bn.

The deal would value Avidity at a large premium to its closing price, the people said. Including an upfront cash component and further payouts when certain clinical trial milestones are hit, the deal could value Avidity at up to $12bn, they added.

In September, Avidity reported positive mid-stage trial results from its lead drug Del-zota, which is part of a new class of therapeutics that uses RNA. The company plans to submit an application for regulatory approval before the end of the year.

Novartis last month bought cardiovascular biotech Tourmaline Bio for $1.4bn. Earlier this year, it also acquired heart drug biotech Anthos Therapeutics for up to $3.1bn from Blackstone’s life sciences arm, and struck a deal of up to $1.7bn for kidney disease biotech Regulus Therapeutics.

It has also struck a collaboration worth up to $5.2bn for rights to a cardiovascular drug from Chinese company Argo Biopharma.

Novartis and Avidity did not respond to requests for comment.

FT : US expects China to delay rare earth export controls as trade deal nears

US expects China to delay rare earth export controls as trade deal nears
High-level talks yield progress ahead of summit between Trump and Xi

US officials expect China to delay introducing sweeping export controls on rare earths, after two days of talks in Malaysia raised hopes that Donald Trump and Xi Jinping would agree to extend a trade truce at their high-stakes summit this week.

Beijing’s announcement of the controls this month triggered a sharp escalation in trade tensions between the world’s two biggest economies and threatened to torpedo plans for Trump and Xi’s first summit since 2019.

Following a weekend of negotiations in Kuala Lumpur, a senior US official told the Financial Times that Beijing’s likely delay was prompted by Washington’s threat of additional tariffs as well as pressure from other countries that rely on the minerals.

US Treasury secretary Scott Bessent told ABC News that he expected China would delay the controls on minerals used in fighter jets, smartphones and electric vehicles for a year while Beijing re-examined them. They are due to come into force in coming weeks.

Li Chenggang, the top trade negotiator in China’s delegation, did not comment on a possible delay but told reporters that Beijing and Washington had reached a “preliminary consensus” on export controls, fentanyl and extending a trade truce that is set to expire on November 10.

The truce, which the two sides last extended in August, paused the 145 per cent tariffs that Trump imposed on China when he started his trade war in April. Xi retaliated by slapping 125 per cent levies on US exports.

The US official told the Financial Times that they expected the truce would be extended by more than the previous 90-day period.

“We think it would give great stability and great certainty to the global economy and to the US-China relationship,” they said.

In a separate interview on CBS, Bessent said that Trump’s threat this month to raise US tariffs on Chinese imports by an extra 100 per cent was “effectively off the table”.

“I can tell you we had a very good two days,” the Treasury secretary said.

The prospect of the US and China extending their truce came after Trump arrived in Malaysia on Sunday as part of a week-long trip to Asia — and his first to the region since returning the White House.

The US president flies to Japan on Monday to meet Sanae Takaichi, the new prime minister, before heading to South Korea for his meeting with Xi on Thursday.

In a blitz of deals on Sunday, Trump struck trade and mineral agreements with Malaysia and Cambodia, as well as agreeing frameworks for others with Thailand and Vietnam.

He also presided over a peace treaty being signed between Cambodia and Thailand following their violent border dispute this summer.

On Sunday, Bessent, who led the US delegation, said the sides had agreed on a “very positive” framework for Trump and Xi to approve when they meet at the Asia-Pacific Economic Cooperation forum in South Korea.

China’s state-run news agency Xinhua said Washington and Beijing had reached a “basic consensus” on a framework to “address their respective concerns”. It said the negotiations in Malaysia — the fifth round between the parties this year — had covered exports controls, levies against Chinese shipping, fentanyl and agricultural trade.

Beijing’s plan to tighten its grip on rare earths triggered alarm in Europe, with European Commission president Ursula von der Leyen warning last week that the risk of a crisis in their supply was “no longer a distant risk”.

A second US official told the FT that “it was the president’s very clear message . . . that the rare earths regime was unacceptable and would result in massive countermeasures”, adding that it “was really important that other countries . . . stood up”.

“When you have the EU say we’re drawing up countermeasures against China . . . that is not something they usually do,” they said.

The weekend of talks had also yielded a commitment from China to buy American soyabeans, the first US official told the FT, adding that Beijing had agreed to “stop using soyabeans as pawns in the global trade game”.

The Trump administration has faced mounting pressure from US farmers after China curbed purchases of US soyabeans.

China had also shown interest in taking concrete measures to stop the export of chemical ingredients for fentanyl, the deadly synthetic opioid, that could merit “a little bit of relief from our side”, they added.

The US imposed a 20 per cent tariff on Chinese goods as a punitive measure related to the fentanyl problem.

FT : ‘Prop betting’ allegations rock the NBA

‘Prop betting’ allegations rock the NBA

Terry Rozier of the Miami Heat © AP
The NBA returned on Tuesday night with a stellar display from San Antonio Spurs’ centre Victor Wembanyama. But by Thursday morning, all anyone was talking about was a betting scandal that has rocked the world’s top basketball league.

At a press conference in Brooklyn, prosecutors in the Eastern District of New York unveiled charges against Terry Rozier of the Miami Heat, accusing him of using inside information to help people make bets on games. Rozier’s lawyer described it as a “non-case”, and said his client “looks forward to winning this fight”.

The allegations are linked to an earlier scandal involving Toronto Raptors player Jontay Porter, who was banned from the NBA for life last year and is awaiting sentencing for conspiracy to commit wire fraud.

Prosecutors also charged Chauncey Billups, head coach of the Portland Trail Blazers, in a separate indictment related to poker matches. Both Rozier and Billups have been placed on leave.

But it is the Rozier case that really matters for the NBA because it raises serious questions about whether the explosion in online sports betting poses a real risk to the integrity of the competition.

The danger comes predominantly from what people in the US call “prop betting” — bets that relate to individual or team performances rather than the outcome of a match. That means how many points an individual player might score, for example, or how many rebounds they might collect.

Major League Baseball is also grappling with these issues, having put two Cleveland Guardians pitchers on leave in July amid a gambling probe. One of those players, Luis Ortiz, was reportedly placed under investigation by MLB after a betting-integrity firm flagged two individual pitches that had received unusual gambling activity.

In football, equivalents would be betting on a player receiving a yellow card, how many shots a player might have during a game, or how many times they might commit fouls. This is also where allegations of wrongdoing have surfaced in recent years. In tennis, another sport with a rough history when it comes to betting, it might be how many double faults a player scores in a single set.

Speaking days before the indictments were announced, NBA commissioner Adam Silver told The Pat McAfee Show that he had asked gambling companies to cut back on prop bets. “It’s too easy to manipulate something which seems otherwise small and inconsequential to the overall score,” he said.

Sports leagues across the world have been beefing up their ability to spot potentially dubious behaviour, largely through deals with technology companies such as Genius Sports and Sportradar.

These companies track patterns in the betting market, and have algorithms that set off alarm bells if someone, somewhere appears to bet an unusually large sum on a specific event. The smaller the market, the more likely a big wager will look out of place.

Betting companies can flag their concerns to the rest of the market too. Most are false alarms, but some lead to investigations, such as watching back live footage to see if there is any sign of foul play.

With more sophisticated defences evolving all the time, and the size of the market for many of these niche bets limiting returns, perhaps the bigger question is why highly paid sports stars would bother to get involved in such schemes in the first place.

FT : Amazon Prime: where sport and shopping collide

Amazon Prime: where sport and shopping collide

If you want to understand Amazon’s approach to sport, it’s best to take a step back and remember what Amazon really is: a massive shop. The guiding aim is to sell goods to customers as often and as seamlessly as possible.

This week the company’s sports strategy was made even clearer when it announced a deal with the NFL to air a game globally as part of a special “Black Friday” schedule. The match between the Philadelphia Eagles and the Chicago Bears will stream on Amazon Prime Video in 240 countries and territories, with no membership required to watch. Later, two NBA games will also be shown worldwide.

Jay Marine, head of Prime Video US and global sports, said in a statement: “We cannot wait to provide fans with best-in-class coverage and a full day of action, holiday deals and surprises.”

The key words here are “holiday deals”. For Amazon, big ticket sport is still largely a mechanism for getting subscribers to log into their Prime accounts and sit there for hours. Once they are in, the company can deploy its arsenal of techniques to turn passive viewers into active shoppers.

That these games are going global is a sign of how successful US retailers have been at exporting the concept of Black Friday, despite the rest of the world having no cultural ties to the post-Thanksgiving tradition. Black Friday deals are now widely available at some of the most un-American retailers — such as John Lewis and Argos in the UK. Ask the average British person where Black Friday comes from, and you’ll likely get a shrug.

So how does that chime with the other Amazon Prime announcement this week — a further expansion of its pay-per-view offering to include a bunch of South American football games. A handful of French football and Nations League matches are already available in certain markets on a pay-per-view basis.

In this instance, Amazon is simply serving as a point of sale, much as it would if it were selling another brand’s underpants or kettles. The sport available on pay-per-view is typically the kind that has little or no value on the open market for media rights — traditional broadcasters aren’t going to pay to stock it. Amazon is offering to step in as a shop window, logistics hub and payment processor. Rights holders with nothing to lose get to see if someone, somewhere is willing to pay something for their goods.

Amazon’s approach of picking up a collection of premium sports assets likely to attract big audiences makes sense. It doesn’t need a huge inventory of stock, just enough to get certain groups of people logging on with predictable frequency. Hence it shows Champions League on Tuesdays, NFL games on Thursdays, and NBA on Fridays.

Meanwhile Netflix explained this week it has a different approach. On an earnings call, co-CEO Ted Sarandos said the streamer was not looking at “big season packages” but rather wanted more “big live events”. Presumably he means more deals like the one with the NFL, where Netflix shows two games on Christmas Day.

“We believe these big events that attract mass audiences are kind of differentially valuable for our members”, Sarandos said. “These events typically have outsized positives for conversation and for acquisition, and we strongly suspect retention.”

For rights holders, then, the future looks set to be about chopping things up into bite-sized pieces designed to hit the sweet spot with each of the various streamers looking at sport.

FT : TotalEnergies ready to restart $20bn Mozambique LNG project

TotalEnergies ready to restart $20bn Mozambique LNG project
One of Africa’s biggest investment projects was halted after a terrorist attack in 2021

TotalEnergies is close to restarting one of Africa’s biggest energy projects four years after it was halted by a terrorist attack, with the French group and its partners judging that it is safe to proceed.

The $20bn plan for a liquefied natural gas project in Mozambique has been on hold since 2021 when a deadly attack by Islamist militants in the Cabo Delgado province where the project is located prompted TotalEnergies to activate a contractual get-out, known as force majeure.

On Saturday, Total said that the consortium behind the project had “taken the decision to lift the Force Majeure” and that it had informed the Mozambican government.

The decision is a key step towards resuming a project that has been touted as potentially transformative for Mozambique’s economy. Also backed by Japanese energy company Mitsui, the project will have a maximum capacity of up to 43mn tons of LNG per year.

Mozambique’s government must approve updates to the budget for the project, known as MozambiqueLNG, before it is relaunched, Total added.

MozambiqueLNG has been backed with loans from countries including the US government and is strategically important project for Total, as it seeks to increase its production of LNG.

Following the 2021 attack, Mozambique’s military collaborated with Rwandan forces to restore order to the province, including protecting the Afungi Peninsula where the Total-led project and a $30bn development led by US oil company ExxonMobil are based.

Lifting of force majeure is a positive development for Exxon’s planned project. Last month the company’s chief executive Darren Woods sought reassurances from Mozambican president Daniel Chapo about security of the region.

TotalEnergies move to lift force majeure is a signal that concerns over the safety of employees and the security of the project have eased.

Despite the potential economic benefits of MozambiqueLNG, it has been dogged by controversy, including allegations of human rights abuses by Mozambican soldiers protecting the project.

This year, the FT reported that the UK government was seeking legal advice over how to pull out of its $1.15bn backing for the project, while it has also commissioned a human rights review of the development.

FT : Gatwick airport warns investment at risk if expected 300% tax rise imposed

Gatwick airport warns investment at risk if expected 300% tax rise imposed
Plans to inject billions into upgrades including new runway jeopardised by anticipated business rates increase

Gatwick airport has warned that plans to invest billions in a new runway and airport upgrades could be jeopardised if ministers push through a fourfold increase in its business rates bill in next month’s Budget. 

The airport’s investors are preparing to make the final investment decision on a £2.2bn expansion to open a long-awaited second runway that was approved by ministers last month. They are also planning to invest around £2bn in expanding facilities and upgrades. 

The UK’s second largest airport currently pays about £40mn in business rates annually.

However, the government’s Valuation Office Agency (VOA) has indicated to the airport that rates could rise by 300 per cent, pushing its bill as high as £160mn — close to Gatwick’s annual entire staff bill of £180mn. 

“We have made crystal clear to [the] Treasury that what we are really looking for is tax treatment that incentivises us to invest,” said Stewart Wingate, who was chief executive of Gatwick airport for 15 years and is now head of the UK for Vinci airports, its major shareholder. 

“We are looking down the barrel of having a [rates] bill that quite unbelievably could be equivalent to staff costs. Frankly, that is neither fair, nor proportionate to our business,” he said. 

In its submissions to the government, the airport warned that any increase in business rates of more than 40 per cent above its current levels — which would take its annual bill to around £56mn — would eat into its profits so much that it weighs on investment decisions. 

Accounts for 2024, the most recently available, show the company made a pre-tax profit of £294mn.

“We have laid out the 40 per cent cap, to make it clear that so long as the business rates increase fall within that cap, we will push ahead running the business and investing in the business,” Wingate told the FT.

“Any increase above that level is something that will be food for thought for our investors, before we commit ourselves one way or the other,” adding the airport would have to consider “the consequences” of any final decision by the government. 

Gatwick’s £2.2bn expansion would see its backup runway moved 12 metres, to be used alongside the existing one. The airport believes the project would create around 14,000 jobs, and help to grow passenger numbers to 80mn a year.

Airports in the UK are increasingly concerned they are facing a steep increase in business rates, after a change in the methodology used by the VOA. 

The new band comes into force in April 2026. Gatwick was told by the VOA in November last year that the rate could be a six-fold increase on current levels. Its latest discussions with the agency indicate a four-fold rise. 

Chancellor Rachel Reeves is expected to raise taxes in the Budget on November 26 to plug a hole in the nation’s finances estimated at between £20bn-30bn.

However businesses — which were hit by a £26bn increase in employers’ National Insurance last year — have warned that significant business rate increases would impact many crucial sectors, including the high street. 

In addition to its 40 per cent cap, Gatwick has asked the government for an overhaul of the way rates are set in order to give long-term certainty to its international investors. 

“It’s nigh on impossible to budget the business for the calendar year 2026, when the cost line was so “unpredictable and volatile”, Wingate added. 

The Treasury said: “Business rates valuations are set independently by the VOA. We support those hit hardest by revaluation increases and continue to engage with the sector on their concerns.”

FT : Is the Fed certain to cut interest rates next week?

Is the Fed certain to cut interest rates next week?
Market Questions is the FT’s guide to the week ahead

The US Federal Reserve is all but certain to lower interest rates when it meets on Wednesday, leaving traders’ attention fixed instead on whether the central bank opts to bring to an end its three-year quantitative tightening programme.

Investors were already almost unanimous in expecting the Fed to lower rates by a quarter percentage point to 3.75-4 per cent, even before data on Friday showed US inflation rose to 3 per cent in September, below economists’ expectations of 3.1 per cent.

With a further rate cut fully priced in by the end of the year — borrowing costs were lowered for the first time this year in September — all eyes will be on whether Fed chair Jay Powell signals a halt to the central bank’s balance sheet run-off, a process known as QT.

The Fed began using massive purchases of assets to stimulate growth, a policy known as quantitative easing, in the aftermath of the global financial crisis and continued doing so with a few pauses until 2022. Since then it has moved in the opposite direction, shrinking its balance sheet by $2.2tn as it drains the reserves available for commercial banks to conduct their daily business.

Earlier this month, Powell said “some signs have begun to emerge that liquidity conditions are gradually tightening” as he signalled that QT could come to an end sooner than previously expected. A day later, the cost for banks to borrow overnight secured against Treasury bonds had one of the largest single day increases this year.

“When Powell said last week that QT will likely end ‘in coming months’ we heard this as December, which he may have meant, but developments since that speech lead us to think it is now more likely that the committee will just go ahead and end QT next week,” said JPMorgan analysts. George Steer

Will the ECB change interest rates on Thursday?
The European Central Bank is all but certain to leave its policy interest rate unchanged at 2 per cent on Thursday, as it plays for time to assess the impact of the transatlantic trade war on growth and inflation. Separating the signal from the noise will be a particular challenge due to a mixed bag of economic data.

In August, Germany’s industrial production collapsed to levels last seen in 2005 as exports dwindled. But business sentiment for the wider euro area is running at its highest level in 17 months, the HCOB Flash Eurozone Composite PMI showed on Friday. Meanwhile, Eurozone inflation rose to 2.2 per cent in September, above the ECB’s 2 per cent target for the first time since April.

“The data since the September meeting has generally been on the softer side, but not soft enough to change the outlook painted by the September projections,” Morgan Stanley economists wrote in a note to clients.

Pantheon Macroeconomics warned that there was “not much for the ECB to talk about next week”, adding: “All eyes on December.” Policymakers will hold their final meeting of the year on December 18, when ECB staff will present their updated growth and inflation forecasts — key inputs for the monetary policy decision. Olaf Storbeck

Will Takaichi’s victory delay a BoJ rate rise?
The Bank of Japan is widely expected to hold interest rates at 0.5 per cent at its next monetary policy meeting on October 29-30, following fiscal dove Sanae Takaichi’s surprise victory in the contest to replace outgoing Prime Minister Shigeru Ishiba this month.

Having kept interest rates at ultra-low levels for years, the BoJ has since March last year been gradually trying to raise the cost of borrowing in an attempt to normalise monetary policy.

It last raised rates in January this year, but US President Donald Trump’s “liberation day” tariffs then forced the central bank into an extended pause.

However, with a US-Japan trade deal finalised in July and hawkish signals from policymakers, by late September markets were pricing in a nearly 70 per cent chance of a rate increase in October.

Since then, there has been another twist. Takaichi’s unexpected win means BoJ policymakers are likely to put off any rise until they have greater clarity on her plans, analysts say.

“It makes sense for the BoJ to let the dust settle on the political and fiscal outlook before making the next move,” says Chris Scicluna, head of research at Daiwa Capital Markets.

Traders are now pricing in a more than 80 per cent chance that rates will remain on hold.

BoJ watchers will instead be focusing on forward guidance from governor Kazuo Ueda as well as fresh quarterly economic and inflation forecasts, which will be released alongside Thursday’s rate decision.

“Ueda is still likely to say that the BoJ is still ready to raise rates if the economy evolves as expected,” says Scicluna. “A December rate increase is still likely even if October is off the table.” Elettra Ardissino

FT : OpenAI shunned advisers on $1.5tn of deals

OpenAI shunned advisers on $1.5tn of deals
Altman tapped a handful of in-house dealmakers over his bankers and lawyers to design huge web of infrastructure agreements

OpenAI chief Sam Altman and an inner circle of executives masterminded deals worth as much as $1.5tn with little input from external advisers, despite unusual structures that tie the start-up’s fortunes to some of the world’s largest companies.

Altman largely shunned OpenAI’s bankers and lawyers to negotiate huge multiyear deals with Nvidia, Oracle, AMD and Broadcom to supply chips and other computing infrastructure.

Instead, he has leaned on a few lieutenants including the start-up’s president, Greg Brockman, chief financial officer Sarah Friar and Peter Hoeschele, recently promoted to a new role leading infrastructure financing, said people close to the company.

The unconventional dealmaking process has resulted in agreements that analysts have criticised for their lack of detailed financial terms — as well as circular structures that tie together suppliers, investors and customers.

Wall Street has rewarded OpenAI’s counterparts with big share price bumps as each deal was announced, based on the promise of hundreds of billions of dollars in income.

But Altman’s team has been focused on the technical aspects of the chips deals “first and foremost” with the financial details “coming later”, said one person involved.

OpenAI has structured its deals across multiple years, with payments linked to various milestones, giving it the option to scale back its chip orders in future if its needs to change or funding dries up.

Executives at the artificial intelligence start-up said their aim was to stimulate manufacturing and development of as many chips as possible, and that the financial specifics could be worked out later.

People close to the process describe Altman pitching bold visions for these collaborations to Friar and Brockman, whose small teams then worked out the structuring and governance.

“Sam is the visionary, but Greg and the team under him really pulled [these deals] together,” said a person close to the company. “He’s quiet and behind the scenes but Greg is the one that’s pushing when it’s not so simple.”

Brockman was part of the founding team at OpenAI in 2015. He was previously chief technology officer of fintech Stripe, dropping out of Massachusetts Institute of Technology to join the start-up.

Friar, who joined OpenAI last year from social networking app Nextdoor where she was chief executive, was also “a very strong voice” on the deals, a second person said, and was tasked with ensuring the deals can ultimately be financed by the start-up.

A former Goldman Sachs equity research analyst, who held senior finance roles at Salesforce and payments group Block, Friar led Nextdoor’s initial public offering in 2021 through a special purpose acquisition vehicle (Spac), valuing the group at $4.3bn. However, its stock price has since fallen by as much as two-thirds.

Altman has relied on former Citigroup banker Michael Klein as a financial adviser on fundraising agreements, but Klein did not work on the chip supply deals, said people close to the company.

A small team under former Deloitte consultant Hoeschele was tasked with increasing the supply of computing power to Altman’s ambitious goal of 1 gigawatt a week. They have been responsible for the finer details of recent partnerships, the people said.

The deals OpenAI has negotiated stem from a model it first tested with AI cloud provider CoreWeave in March, according to insiders.

OpenAI signed a $11.9bn deal for CoreWeave’s computing power and in exchange was handed $350mn of CoreWeave shares. The contract has since expanded to more than $22bn, while the data centre operator’s shares have tripled in value.

In many cases, the subsequent deals started with chip companies approaching OpenAI about working together, the people said. The open-ended agreements have relied on trust between Altman and his counterparts.

Altman has turned to direct employees rather than advisers in an effort to streamline dealmaking and make negotiations less adversarial, said a person with knowledge of the situation.

Neither Nvidia nor OpenAI sought external advice on their transaction in which Nvidia agreed to invest up to $100bn in OpenAI in exchange for it spending as much as $350bn on 10GW of chips, according to people close to both companies.

“Sam and Jensen have a long-standing relationship and talk constantly,” said a person close to the deal. “That one was very much them.”

A deal with AMD came together, after several years of talks about designing a new chip specifically for OpenAI’s use, when AMD chief executive Lisa Su “had another bite at it and said what are the terms we can do”, a person involved in the process said.

AMD granted the start-up warrants to purchase up to 10 per cent of the company for just 1 cent a share, in return for buying 6GW of chips. Law firm Sullivan & Cromwell advised OpenAI on the structure of the share purchases.

Meanwhile, OpenAI’s $300bn five-year partnership with Oracle began when Oracle’s original customer for a data centre being built in Abilene, Texas, pulled out in mid-2024, said a person close to the process.

Clay Magouyrk, then head of Oracle Cloud Infrastructure, approached OpenAI, which swooped on the site, the person said.

Altman is also expanding his roster of advisers. He hired Mike Liberatore, formerly chief financial officer of Elon Musk’s xAI, in September as business finance officer to lead financing for its push into AI infrastructure; he is expected to be crucial to future deals.

>>> Barron’s Weekend Summary

Cover:
-Uncle Sam is becoming America's most powerful investor, taking big stakes in companies to strengthen supply chains and generate revenue for taxpayers. This shareholder activism has bipartisan support, suggesting it will likely outlast President Donald Trump's administration. The US is pushing the boundaries of its legal authority to invest billions of dollars in a growing number of companies in return for stock. A third driving force is to beat China, whose control over some materials and manufacturing processes has exposed critical national security weaknesses for the US amid trade tensions. Under Trump, the government has taken stakes in chip maker Intel and critical minerals firms such as MP Materials and Lithium Americas. Some company boards are clamoring to take on the government as a shareholder, while others are wary of giving up equity or control in exchange for permits or approvals.
Interview:
-Dave Bozeman, CEO of C.H. Robinson Worldwide, is a Midwestern-based executive with a background in engineering management and manufacturing design. The company, founded by Charles Henry Robinson, arranges for goods to be shipped via planes, trucks, ships, and rail. Bozeman's company has gained 41% since Bozeman became CEO in June 2023, trailing the S&P 500's 53% gain. The stock has gained almost 40% over the past six months, while the index has climbed 23% higher due to increased profitability. The company's strong performance came after an unexpected 20.8% increase in second-quarter earnings, despite revenue decreasing 8.0% to $8.2B. Investors are expected to see more growth when C.H. Robinson reports its third-quarter earnings.
Tech Trader:
-Meta Platforms CEO Mark Zuckerberg is focusing on disrupting the artificial-intelligence industry by finding creative private financing to fund its capital commitments and reshaping his staff. The company is on track to spend around $70B this year on new AI data centers, with more promised. Meta is buying all this computing capacity for its own use, not to rent it out to customers in the cloud. Despite capital expenditures weighing on Meta's financials, operations continue to excel, with operating profits up 38% in the second quarter. The company added over $10B in new debt last year, and in the second quarter, its debt and lease liabilities exceeded its cash and short-term investments for the first time.
The Trader:
-Microsoft's stock has been largely ignored since its last earnings report, but a "cloudy" outlook could help it regain momentum. The company's fiscal first-quarter 2026 results are due on October 29, and Wall Street forecasts a nearly 11% increase in earnings, driven primarily by Microsoft's Azure cloud-computing unit. Analysts expect revenue in that division to surge more than 30% from a year ago. Microsoft's partnership with artificial-intelligence leader OpenAI, the developer of ChatGPT, is expected to improve Azure's outlook further in the coming years. The stock is worth about as much as its Redmond, Wash.-based competitor.
-Investors are increasingly favoring junk stocks with poor fundamentals and exorbitant valuations over quality companies with healthy sales and earnings growth, solid balance sheets, and attractive prices. Goldman Sachs reported a 24% surge in heavily shorted stocks in the past month. The small-cap Russell 2000 index has seen a 10.6% increase over the past three months, more than doubling the 4.2% rise in the Invesco S&P 500 Quality exchange-traded fund. However, 40% of the Russell 2000 companies are losing money. Analysts at Kailash Capital Research argue that durability beats drama over time. Sticking with durable, high-quality stocks is challenging, especially when speculative markets make winners out of new objects. Retail investors are making up a larger share of daily trading volume, similar to the late 1990s dot-com bubble.
Features:
-Beijing's five-year plan for 2026 to 2030 focuses on economic, scientific, technological strength, national defense, and international influence. The plan, outlined in the Communist Party's Central Committee's Plenum, could further fuel tensions with the US due to the ongoing trade and export control fight. The plan aims to boost domestic demand and improve people's well-being, but also focuses on technology. The plan will be approved at the National People's Congress meeting in March.
-Progressive, the No. 2 U.S. auto insurer, has seen its stock price fall over 20% since its 1971 IPO, with shares flirting with a 52-week low. Despite rapid expansion, Progressive's growth has been slowing, with automobile insurance policies increasing 15% year over year in September. Pricing pressure is also affecting the company, with auto insurance prices increasing by double digits in 2023 and 2024, but a 0.3% decline in premiums in September. Progressive and other auto insurers are also grappling with increasing costs to repair damaged cars. Combined, these factors suggest that Progressive's growth could slow further, with profit margins expected to decline in 2026, resulting in lower earnings relative to 2025. However, Progressive still has advantages in technology and data, making it the industry leader. The stock is reasonably priced, with projected 2025 earnings of nearly $18 a share and estimated 2026 profits of $16.55 a share.
Europe:
-Moody's has lowered its outlook on French government bonds to Negative from Stable, following S&P's downgrade of French bonds to A+ from AA- on October 17. Moody's cited the country's political instability as a risk to the government's ability to address key policy challenges such as an elevated fiscal deficit, rising debt burden, and durable increase in borrowing costs. France has been trying to reform its pension system and get its deficit under 5% of GDP, but has failed to agree on a budget. Prime Minister Sébastien Lecornu resigned after just one month on the job, following François Bayrou's nine-month resignation over his plan to cut the budget by EUR 44B. The inability of France to effectively govern has caused 10-year bond yields to rise from 3.186% at the end of 2024 to 3.436%, higher than those of Greece, Italy, Portugal, and Spain.
Emerging Markets:
-No update
Commodities:
-Rare-earth stocks have experienced losses due to the US's move away from reliance on China for minerals, which are crucial components in electric vehicles, military equipment, and chips. President Trump and Australia's Prime Minister Anthony Albanese signed a critical-minerals agreement to unlock more capital for the sector, including an $8.5B project pipeline. The deal is seen as a significant step towards reducing risk and boosting growth in the rare-earths industry, which has seen rapid expansion in demand compared to 2014. The deal also includes over $3B in critical-mineral projects over the next six months, with recoverable resources estimated to be worth $53B.
Streetwise:
-No Update