Rail Stoppage to Fuel More Inflation

MARKET MOVERS

• US rail strike risks inflation boost. The looming US rail strike threatens to push inflation even higher across the country. About 125,000 workers could walk off the job if a deal isn’t reached by Friday’s deadline. The stoppage would be the largest of its kind since 1992, and it would snarl a wide range of goods transported by rail, from food to metal and auto parts.
  
  
• Wholesale prices fell 0.1% in August amid inflation fears. The prices that producers receive for goods and services declined in August, a mild respite from inflation pressures that are threatening to send the U.S. economy into recession. The producer price index declined 0.1%, in line with expectations. On a year-over-year basis, the index, which is a gauge of wholesale prices, increased 8.7%, the lowest increase since August 2021.

• Diesel and commodities are driving food prices. Fuel prices have continued to be a major component in inflation figures, but while gasoline prices have cooled considerably over the last 3 months, diesel prices have remained fairly elevated. Diesel prices are a major component of inflation in other areas of the economy, such as the cost of groceries.

• Twilio to cut 11% of staff after growing too fast. The company will cut about 11% of jobs and restructure the company in a push for profitability after a period of rapid expansion. Sales strategy, research, and administrative staff will be most affected by the workforce reductions, Chief Executive Officer Jeff Lawson wrote in a letter to employees Wednesday.

• Oil prices climb on talk of an SPR refill and a weekly fall in U.S. gasoline stockpiles. Oil futures headed higher on Wednesday, buoyed by speculation that the Biden administration may consider refilling the U.S. oil reserve at $80 a barrel and a weekly decline in U.S. gasoline supplies, even as crude stocks post an increase. The IEA projected that European power producers would boost demand for oil as they switch away from natural gas.

• EU court upholds antitrust ruling against Google, trims fine to $4.12 billion  The EU’s General Court in Luxembourg on Wednesday largely upheld a 2018 decision by the EU competition regulator that fined Google $4.33 billion for allegedly abusing the market dominance of its Android operating system for mobile phones to promote and entrench its Google search engine and Chrome browser on mobile devices. Read more here.
  

WHAT TO WATCH

• Starbucks plans 3,000 new China stores despite sinking sales from Covid policies. Starbucks set a China store target of 9,000 by 2025 at an investor meeting during which executives outlined a wide-ranging revamp. The company also said it expects sales to nearly double in China over the next three years, adding that it plans to experience outsize growth in same-store sales starting in fiscal 2023 following this year’s slump.

• SoftBank considers launching a third Vision Fund. The Tokyo-based tech conglomerate, by far the world’s largest startup investor in recent years, would likely use its own cash for what would be the third SoftBank Vision Fund if it moves ahead with the plan. The company is also considering putting additional money into Vision Fund 2, its main investment fund for the past few years, instead of starting a new fund.

• This bear market has more room to run, says Bernstein. For one, most major global downturns ended with a moderate inflation/low-growth regime. In addition, return correlations of major global markets with U.S. markets have been increasing, which typically coincide with big market drawdowns. Lastly, hopes for a more accommodative Federal Reserve have been dashed.
  Read more here.

• GM’s Cruise will expand Robotaxi service to Phoenix and Austin. The company plans to expand in the next three months with a target of adding $1 billion in revenue by 2025. The autonomous-vehicle firm began charging fares in its ride-hailing business in June with a pilot in San Francisco. Kyle Vogt, Cruise’s chief executive officer, said the technology is performing well enough to justify the expansion.