News review 16.09.2022
INTERNATIONAL NEWS
UN Secretary General calls for taxing excess profits of companies that extract fossil fuels
Will they start with Russia?
U.S. suspended $130 million in military aid to Egypt because of human rights problems in this country
McDonald's (MCD) CEO expects a recession in the U.S. in 2023
And a stronger recession in the EU.
Inflation in Argentina surpassed 78% in August
And Argentina's central bank raised its discount rate by 5.5% to 75%.
Iran has signed a memorandum on joining the SCO.
Putin approved the application.
In response, a delegation of 80 Russian companies will visit Iran next week.
Trilateral meeting of leaders of Mongolia, China and Russia held
It seems that Mongolia is being prepared to be divided, like Poland in 1939.
But meanwhile, they talked about oil and gas pipelines and Mongolia's natural resources.
Two more hot spots
Armenia and Azerbaijan
Tajikistan and Kyrgyzstan.
The weakening of Russia weakens their allies as well.
Kazakhstan plans to build a nuclear power plant.
Eurozone trade deficit continues to deteriorate fast
From €25 billion in June to €34 billion in July.
U.S. industrial production showed weakness in August
Majority of MEPs recognize Hungary as a country with a "hybrid regime of electoral autocracy"
China's economy showed signs of improvement in August
Industrial production rose 4.2% y/y after rising 3.8% y/y in July. Economists had expected a 4% growth.
Retail sales rose 5.4% y/y after rising 2.7% in July. Analysts had also expected a 4% growth.
Fixed-asset investment in China rose 5.8% in January-August, up from 5.7% in the first seven months of the year.
China's urban unemployment rate was 5.3% in August, up from 5.4% in July. The unemployment rate for young workers aged 16 to 24 also fell from a record high of 19.9% in July to 18.7% in August.
MARKET NEWS
Biden says tentative agreement has been reached with railroad workers, preventing a strike
This helped railroad stocks soar in early trading.
Ray Dalio: Raising rates to 4.5% will cause stocks to fall 20%.
"It would reduce private sector credit growth, which would reduce private sector spending and therefore the economy."
T-Mobile (TMUS) CEO: we're 2 years ahead of the competition in 5G
Yesterday, the market "celebrated" the anniversary of the Lehman Brothers bankruptcy (September 15, 2008)
Rumor has it that Adobe (ADBE) is close to buying Figma for $20 billion.
ADBE stock is down 17% in response to this and the quarterly report.
The U.S. Consumer Financial Protection Agency plans to regulate BNPL ("buy-now, pay-later" - buy-now, pay-later) transactions
This was a negative for SQ stock, PYPL, AFRM
Kanye West ends partnership with Gap
Gap (GPS) stock is down slightly, minus 3.6%.
On September 19, the U.S. will start auditing companies from China
The U.S. Federal Trade Commission announced Thursday that it plans to fight the exploitation of gig workers, who the agency says are entitled to protections regardless of their qualifications
Warnings have been sent to AMZN, UBER, LYFT, DASH and a subsidiary of TGT. Other gig economy companies could also be affected.
There are a disproportionate number of people of color among gig workers in the U.S. - according to an FTC report, Hispanic, black and Asian adults make up 69% of gig workers, and only 12% of workers identify themselves as white.
According to the policy statement, the FTC will focus on issues in the gig economy that include deceiving or misrepresenting how much workers can earn and how much flexibility they actually have, as well as the responsibilities placed on workers compared to regular companies.
The Commission noted that gig companies control gig workers through algorithms that are hidden in a system that promotes a "power imbalance," making workers "more susceptible to harm from unfair, misleading and anticompetitive practices and can amplify such harms when they occur."
U.S. accounting rules changed, raising taxes for numerous companies
Companies with high research and development costs could be affected: RTX, LLY, BIIB, AMZN, GOOGL, NVDA, FTV, TSLA and others.
Accounting standards for tax authorities and GAAP accounting standards have always been a little different - tax authorities and investors have different goals.
The IRS wants to maximize cash flow for the government and a new rule, adopted back in 2017 but delayed and not enacted until 2022, changes the tax treatment of R&D expenses, which will ultimately increase taxes.
Raytheon (RTX) was the first of the big ones to announce the new rules: the company announced that the new rule would reduce free cash flow in 2022 by about $2 billion, from $6 billion to $4 billion.
RTX stock's reaction to the news on Tuesday was markedly negative - it was down nearly 5 percent on stable earnings and other operating forecasts.
The rule change will matter more later in the year as more companies inform investors about the IRS rule, which will reduce free cash flow.
Whoever spends more on R&D will suffer more.
R&D spending used to reduce taxes.
This is a prime example of a tactical victory for the state budget at the expense of a strategic defeat in the country's innovative development.
Or does the U.S. not need innovation anymore?
Financial markets
Yesterday the stock market resumed a decline and stock indices fell 1-2%. The defensive sectors XLU and XLP were under pressure again. And only XLV and banks were on the plus side. The market is trying to grow in very narrow segments and falling in broad front. This is a characteristic of the recession game. And increased pressure from federal authorities, including the FTC and IRS, on businesses is only adding fuel to the bear market fire.
Stock index futures are down again this morning, by 0.6-0.9%. I guess we have the FTC to thank.
Asian stocks are down about 1%.
Oil fell sharply yesterday, though it managed to hold above its recent lows.
Gold fell markedly to $1670. These are lows since 2020. High interest rates give no reason to buy precious metals. And commodities are under pressure from the threat of recession.
Crypto-assets are declining. Bitcoin is back below $20k, and ether is a major loser - falling below $1500 (-9%) this morning. The transition to the new PoS algorithm was generally successful, but everything was at a price.