Good news for global markets
Yesterday’s impressive demonstration in US stocks and bonds has spread around the world this morning as investors see central banks making progress in their fight against inflation. Added to the good news was breakthrough in the House last night that could prevent a government shutdown.
S&P 500 futures signal fresh gains as opening bell rings. The question now is whether this represents a false dawn on inflation or the beginning of a lasting slowdown in rising costs (and interest rates).
Here’s what investors are excited about: from yesterday colder than expected Data from the Consumer Price Index have Discussion displaced in the markets. from potential interest rate hikes to cuts, and what that could mean for stocks. President Biden, whose popularity ratings in polls have been affected by inflation, also applauded the numbers.
Other promising data emerged this morning. Inflation in Britain fell to its lowest level in two years. And consumer spending and industrial production in China recovered last montha hopeful sign for the world’s second economy.
Market bulls have increased their bets on rate cuts. This morning, futures markets pointed to the Federal Reserve beginning to reduce borrowing costs in May, earlier than previously estimated, closer to the end of 2024.
Less hawkish is Mohit Kumar, chief financial economist at Jefferies, who wrote today that big rate cuts would begin after next year’s presidential election. Jefferies predicts the Federal Reserve’s prime lending rate will rise to 3 percent by the end of 2025 from its current level of 5.25 to 5.5 percent.
Others are more cautious. Pessimists point out that the “core” inflation data in yesterday’s CPI reading, which excludes volatile energy and food prices, was just a tenth of a percentage point below estimates. “I fear that inflation will not disappear so quickly,” JPMorgan Chase’s Jamie Dimon he told Bloomberg Television.
Washington gave markets another reason to rejoice. The House’s passage of a stopgap spending bill appears to eliminate the risk of a shutdown, which has been seen as a potential drag on the U.S. economy.
But even here, political tensions in Congress – including some threats of physical violence — give reasons to be cautious. (Remember that last week Moody’s lowered its credit outlook in the US. to negative, citing “continued political polarization” in Congress that hinders legislation). The House funding bill required Democratic support to pass, and Politico reports that far-right Republicans can hold the House hostage with an avalanche of procedural votes.
A reminder: Warner Bros. Discovery’s David Zaslav, JPMorgan Chase’s Jamie Dimon and others will appear at the DealBook Summit on November 29; apply to attend here.
THIS IS WHAT’S HAPPENING
The United States and China reach a climate agreement. The countries committed to intensify their Use of wind, solar and other renewable energy sources. hoping to displace fossil fuels, ahead of a meeting between President Biden and Chinese leader Xi Jinping today in San Francisco. Between US CEOs to meet With Xi are Elon Musk of Tesla, Jane Fraser of Citigroup and Darren Woods of Exxon Mobil.
The FDIC chairman faces tough questions about the agency’s culture. The senators asked Martin Gruenberg yesterday about how the regulator handles harassment and discrimination allegations after The Wall Street Journal reported on toxic working conditions there. (“What the hell is going on at the FDIC?” asked Sen. John Kennedy, R-La.) Gruenberg said he was “personally disturbed” by the report and that he was conducting an internal review.
The Times takes a closer look at David Zaslav. Times magazine published a depth profile of the CEO of Warner Bros. Discovery, while another article analyzes his tumultuous CNN oversight. One question that emerges from the pieces: Will debt-ridden Warner Bros. Discovery soon be up for sale? “It’s there for the taking,” Barry Diller, the media mogul, told the Times. “Whether that happens depends on whether someone wants to accept it. Saudi Arabia? Do not laugh”.
Rory McIlroy resigns from the PGA Tour board of directors. He professional golfer quit five months after the tour announced a deal with Saudi Arabia’s sovereign wealth fund, LIV Golf’s sponsor, to try to create a joint venture that would end the money-driven battle for the sport’s supremacy. McIlroy has been among the most outspoken critics of that effort by LIV. Meanwhile, the PGA Tour said it would give players capital in that combined company if it is formed.
Leaders and laggards in AI in the banking sector
As the promises of artificial intelligence and its transformative potential grow, banks are among the companies racing to incorporate the technology into almost everything they do.
But in its latest ranking of how the industry is adopting AI, data startup Evident found a growing gap between the leaders and everyone else. Its founders shared the new report first with DealBook.
The methodology: Evident rates institutions in four main areas (talent, innovation, leadership and transparency) using publicly available data such as press releases, research articles and employment data. The company nearly doubled the number of banks it rates to 50, expanding eligibility to institutions with $200 billion in total assets and including lenders in the Asia-Pacific region.
Here are the top 10 banks:
The first users have expanded their tracks. While all banks have committed to AI (“I don’t think there is a single bank in the index that hasn’t doubled down on AI,” said Alexandra Mousavizadeh, CEO of Evident), some are clearly ahead. JPMorgan, which led the latest survey, was back on top, ranking first or second in each of the four main criteria.
But Capital One, a smaller American rival and a new entrant to the list, came out on top. It ranked first in talent, with the highest proportion of AI developers and engineers relative to total staff of any institution. And in May he hired Prem Natarajanformer executive of Amazon’s Alexa business, as its chief scientist and head of enterprise AI.
Other notable developments:
Banks are taking different steps to showcase their AI credentials. JPMorgan and the Royal Bank of Canada are leaders in research, while Capital One and Bank of America (15th) are among the most prolific in patent pursuits.
Europe has some strong performers, including UBS, which retained much of Credit Suisse’s AI talent when it bought its Swiss rival. But many of the region’s lenders still prioritize specific solutions over comprehensive plans, according to Annabel Ayles, co-CEO of Evident.
Canadian lenders continue to exceed expectations, ranking strongly on talent, leadership, transparency and ethics criteria. “Some of the highest quality patents come from Canada,” Ayles said.
Haley’s growing fortune may attract more major sponsors
Things are looking up for Nikki Haley in the Republican presidential primary (relatively speaking, given Donald Trump’s dominance). Her poll numbers have risen in recent weeks thanks to her strong showing in GOP debates, while rivals like Tim Scott abandon the race.
Now reports suggest Haley may be gaining ground in another important area: backing from deep-pocketed corporate donors.
Citadel’s Ken Griffin is close to deciding whether to back her. “We are at the finish line about that election,” the billionaire financier told Bloomberg Television yesterday. Griffin, who has said he would not endorse Trump, is one of the most prolific Republican donors, having given about $72.7 million in the 2022 election cycle alone.
Their support could provide Haley with crucial financial ballast as she battles Ron DeSantis to become the front-runner for anyone other than Trump.
And Haley has reportedly impressed Jamie Dimon, according to Axios. An anonymous source told the publication that the CEO of JPMorgan Chase, who has donated to both Democrats and Republicans in recent election cycles, he liked his positions about the economy and the role of business in government.
Haley already has the support of notable wealthy donors, including oil tycoon Harold Hamm, Jim Haskel of the hedge fund Bridgewater Associates and dealmaker Aryeh Bourkoff.
How the Microsoft case of the 90s could apply to Google
A two-month antitrust trial against Google is coming to an end in Washington as the search giant faces a separate legal challenge in a San Francisco court, where he is accused of exercising monopoly power over the operation of his application store.
One of the government’s last big victories against Big Tech came against Microsoft in the 1990s. That fight has taken on great importance in the Google trial, Steve Lohr writes for The Times: The Justice Department and a group of states say Google is applying something similar to Microsoft’s monopoly playbook to dominate the search market. Google rejects that analogy.
Those cases have these things in common:
Economy of digital platforms: The Microsoft case highlighted the power of the “network effect,” in which a digital product becomes more valuable the more people use it. In the case of Google, the government argues that the huge use of search gives Google more data to train and improve its search algorithms.
That, in turn, attracts more users and advertisers. Google has argued that its internal innovation and investment explain its market leadership.
Contracts with competitors: With Microsoft, agreements with personal computer manufacturers and Internet service providers were a big focus. Some of those partners felt they had to strike a deal with Microsoft to get access to its Windows desktop software, the main virtual space in the early days of the web.
The Google case involves large payments – known as default payment contracts – to Apple, Samsung, Mozilla and others to make Google the featured search engine on their devices and browsers.
A potential outcome: If the government and states prevail in the Google case, a possible remedy could involve banning pay-for-default agreements. This would also mirror the outcome in the Microsoft case, where the company was prohibited from making exclusive deals that thwarted competition.
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