European Equities and Inflation Data
European equities rose along with US equity futures on Thursday as investors analyzed inflation data and comments from policymakers to determine the future direction of global central bank rate hikes. The Stoxx Europe 600 Index (STOXX:SSXP) posted a modest gain after a member of the European Central Bank’s Governing Council indicated that most of the interest-rate increases have already been completed. Contracts for US stocks pointed to a recovery after the S&P 500 (SPI:SP500) and Nasdaq 100 (NASDAQI:NDX) closed lower on Wednesday, and Treasury yields remained in a narrow range.
JPMorgan’s Awareness of Epstein
Legal filings in New York on Wednesday alleged that JPMorgan Chase (NYSE:JP) was aware by 2006 that Jeffrey Epstein had been accused of paying cash to have “underage girls and young women” brought to his home, seven years before the bank terminated its relationship with him as a client. According to the filings, a current head of asset management at the bank confirmed under oath in a recent deposition that JPMorgan knew about the accusations in 2006. The bank eventually ended its relationship with Epstein in 2013, as per the filings.
Apple’s Production Shift to India
Apple Inc. (NASDAQ:AAPL) tripled its production of iPhones in India to over $7 billion last fiscal year, making almost 7% of its iPhones in the world’s fastest-growing smartphone market, as it accelerated its move beyond China. The company expanded its partners from Foxconn Technology Group to Pegatron Corp., according to people familiar with the matter, a significant leap for India, which accounted for only 1% of the world’s iPhones in 2021.
Decline in Customer Deposits
The largest US banks, including JPMorgan Chase & Co. (NYSE:JP), Wells Fargo & Co. (NYSE:WFC), and Bank of America Corp. (NYSE:BAC), are expected to report a significant decline in customer deposits of $521 billion from a year earlier in the first quarter, the biggest drop in a decade, according to analysts’ estimates. The decline, which includes a $61 billion slide in just the first quarter, comes despite a late influx of cash following a crisis at regional lenders, as customers moved to products offering higher rates.
Investors Reluctant towards Risky Debt
Investors are showing reluctance towards the riskiest US corporate debt amid fears of an impending recession, leading to a growing divide between the highest- and lowest-rated companies in the $1.4 trillion high-yield bond market. Average yields on double-B rated US bonds, which represent the top rung of the non-investment-grade ladder and comprise half of the overall junk bond market, have fallen to 6.8% from a peak of 7.5% in mid-March, trading close to levels seen in early February. In contrast, borrowers with weaker ratings continue to face pressure, with an index of triple-C and lower bonds currently yielding 15.3%, albeit down slightly from a high of 15.6% in March but still significantly above levels from two months ago.
SoftBank and Arm’s Potential IPO
SoftBank (TYO:9984) chief Masayoshi Son is expected to sign off on an agreement with Nasdaq to list chip designer Arm, initiating a potential blockbuster initial public offering as early as this autumn. The Japanese investment group and the New York exchange reached a tentative agreement on Monday, according to sources, and Son is expected to sign off officially later this week, marking the first formal step in the IPO process. This comes after speculation over Son’s plans for Arm following the collapse of a deal to sell it to rival Nvidia in early 2022.
Alibaba’s Share Price Plummet
Alibaba’s (NYSE:BABA) share price plummeted after it was revealed that SoftBank will sell nearly all of its stake in the Chinese tech giant. According to the Financial Times, the Japanese investment group will sell approximately $7.2 billion worth of Alibaba shares through forward contracts, bringing down its stake to 3.8% from nearly 24% in June 2022.
LVMH’S Impressive Q1 results
China’s luxury market is recovering from the impact of the country’s strict zero-Covid policies, but sales growth in the US, which is the largest luxury market, has leveled off, as reported by LVMH (EPA:MC). The world’s largest luxury group, led by billionaire Bernard Arnault, posted global sales of €21 billion in the first quarter of the year, exceeding analyst expectations with a 17% rise compared to the same period last year. Sales of fashion and leather goods, LVMH’s largest division, remained robust, growing by 18% to €10.7 billion.
Vestas Facing €200 Million Lawsuit
Danish turbine manufacturer Vestas (CPH:VWS) is facing a lawsuit of over €200 million from Finnish client Fortum over the termination of contracts to deliver wind turbines to Russia. This case is one of the largest publicly known disputes related to sanctions compliance, and legal experts predict more similar cases to arise across various industries. The dispute revolves around a contract for Vestas to supply approximately 50 wind turbines to client WEDF, jointly owned by Fortum and Rusnano, a Russian state-owned nanotechnology company. Vestas terminated the contract in June 2022, citing compliance with EU sanctions following Russia’s invasion of Ukraine.
Leadership Changes in Goldman Sachs
Goldman Sachs (NYSE:GS) has made leadership changes in its global equities trading business following the departure of one of the division’s top earners last month, as stated in an internal memo to employees. Dmitri Potishko and Erdit Hoxha have been appointed as co-heads of Goldman’s global flow derivatives and emerging markets trading, according to the memo, confirming the contents of the memo. The reshuffle aims to fill the gap left by the retirement of Joe Montesano, formerly Goldman’s head of equity trading for the Americas, whose compensation in 2021 exceeded that of CEO David Solomon.