MARKET MOVERS
- U.S. inflation hits a new four-decade high of 9.1%. The consumer-price index’s advance for the 12 months ended in June was the fastest pace since November 1981, the Labor Department said on Wednesday. A big jump in gasoline prices drove much of the increase, while shelter and food prices were also major contributors. The June inflation reading prompted investors and analysts to debate whether the Fed would consider a one-percentage-point rate increase. Read more here.
- Rents in the US rose at the fastest pace since 1986. An index measuring rent of a primary residence was 0.8% higher in June than the month before, an acceleration from the 0.6% increase recorded in May, according to the Labor Department’s report on consumer prices published Wednesday. In the 12 months through June, rents were up 5.8%. Those costs are soaring as home buyers get priced out by the fastest-rising mortgage rates in decades.
- Netflix picks Microsoft as its partner for ad-supported streaming services. Netflix COO Greg Peters said Microsoft offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for members. Netflix plans to offer more choices for consumers and a premium, better-than-linear TV brand experience for advertisers.
- Unity agrees to buy ironSource in a $4.4 billion videogame deal. The transaction, announced Wednesday, combines two providers of services for videogame and other software developers. It's an all-stock deal joining forces with the Israeli mobile app and ad-tech company. Unity’s deal for ironSource speaks to challenges Unity is facing with its core digital-advertising business and the broader pullback on digital advertising overall. Read more here.
- Housing demand weakened noticeably. Growing concerns about affordability contributed to non-seasonal declines in sales resulting in a slight increase in inventory and more moderate price appreciation. Commercial real estate conditions slowed. Loan demand was mixed across most Districts; some financial institutions reported increased customer usage of revolving credit lines, while others reported weakening residential loan demand amid higher mortgage interest rates.
- Builders are slashing home prices and slowing construction as buyers pull back. That’s according to a June survey of home builder sentiment by John Burns Real Estate Consulting. Demand for new homes is cooling as buyers cancel orders, and builders are slashing prices to offload homes, the survey found. Sales of new homes fell 31% this June as compared to last year. Cancelation rates jumped in June to 14.5% nationally. Read more here.
- IPO market stays dormant as Justworks and Fresh Market withdraw their filings. In the second quarter, the global IPO market slowed by 65% from a year earlier in terms of capital raised. The tech-heavy Nasdaq Composite has dropped 28% so far in 2022, underperforming the S&P 500, which is off by 20%. The picture is much bleaker for companies to hit the market of late, particularly those in and around the tech sector. Read more here.
WHAT TO WATCH
- Bank of America says the U.S. will fall into a ‘mild recession this year, unemployment to hit 4.6% in 2023. The bank expects 4Q/4Q real GDP in 2022 to decline by 1.4%, followed by an increase of 1.0% in 2023. In terms of labor markets, the combination of a moderate downturn this year and below-trend growth for much of next year pushes the unemployment rate 1pp higher from 3.6% currently to 4.6%. Read more here.
- China’s commodities imports might be close to a bottom. Chinese imports of key commodities grew by only 1% in June from a year earlier, missing a 3.9% forecast and slowing from May’s 4.1% expansion, the country’s customs data showed on Wednesday. Some of this reflects the lingering impact of lockdowns on demand, but it also points to subdued activity in heavy industry and construction.
- Panasonic is reportedly building a new factory to produce batteries for Tesla and the rest of the EV industry. A report out Wednesday from Nikkei Asia says that Panasonic is planning to build a new battery factory in Kansas to produce high-capacity cells. Tesla’s appetite for battery cells is increasing along with its ambitions to ramp up vehicle production at new factories near Austin, Texas, and Berlin.
- US banks set for lending earnings boost as Fed lifts rates. The biggest US banks report quarterly earnings this week and they’re expected to show bumper earnings from lending. They’re benefiting from the green shoots of rising interest rates, which have enabled them to charge more for the loans that they do make. And it’s a kind of two rising tides as well. It’s not just rising interest rates, but also there’s good demand for loans as well. Source(3:07)
