David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Powell Remarks Friday at Jackson Hole Full Text

    This speech by Jay Powell may be of interest to subscribers. Here is the conclusion:

    As is often the case, we are navigating by the stars under cloudy skies. In such circumstances, risk-management considerations are critical. At upcoming meetings, we will assess our progress based on the totality of the data and the evolving outlook and risks. Based on this assessment, we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data.

    Restoring price stability is essential to achieving both sides of our dual mandate. We will need price stability to achieve a sustained period of strong labor market conditions that benefit all.

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    Micro E-mini S&P 500 Futures Surpass 1 Billion Contracts Traded

    This news release from the CME may be of interest. Here it is in full:

    "At just over three years old, our Micro E-mini S&P 500 futures have become some of the most actively traded and deeply liquid equity index products at CME Group, averaging more than 1.1 million contracts traded per day," said Paul Woolman, Global Head of Equity Index Products at CME Group. "At one-tenth the size of their benchmark E-mini counterpart, these micro-sized futures allow market participants to hedge or trade with enhanced flexibility around major market-moving events by executing trading strategies more nimbly and scaling index exposure up or down."

    "The S&P 500 is widely regarded as the best single gauge of the U.S. equity market and serves as the foundation for a wide range of liquid investment vehicles around the world," said Bruce Schachne, Chief Commercial Officer at S&P Dow Jones Indices. "S&P DJI extends its sincere congratulations to CME Group for reaching another significant market milestone, the first to cross this threshold within its complex. We are proud of the growth that we've seen within our indices business and look forward to continuing to provide leading index solutions across varying geographies and asset classes."

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    Danaher Is Said to Be in the Lead to Acquire Abcam

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Danaher Corp. has emerged as the leading bidder for biotechnology supplier Abcam Plc, according to people familiar with the matter. 

    Danaher has pulled ahead of other bidders and is negotiating with the Cambridge, England-based company to reach a deal, the people said, asking not to be identified because the matter is private.

    Nothing is finalized and talks could still fall apart. It’s still possible another bidder could prevail, the people said.

    A representative for Abcam declined to comment. A representative for Danaher couldn’t immediately be reached for comment. 

    Bloomberg reported in June that Abcam had attracted initial interest from US life sciences company Danaher and Agilent Technologies Inc.

    Abcam said in June that it was starting a process to explore strategic options including a sale after receiving interest from multiple parties.

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    BRICS Summit key themes and challenges

    Thanks to a subscriber for this report from Standard Bank which may be of interest. Here is a section:

    Expanding intra-BRICS local currency settlement. In our view, the conversation around the creation of a BRICS currency is a sidenote to the real topic, which is the expanded use of the Chinese RMB in BRICS commercial exchanges. China is keen to push for change in the international monetary system, eager to expand the geographical reach of the RMB. This objective is uncontested amongst the BRICS. We expect to see concrete policies emerging from the summit, creating mechanisms and avenues for greater use of RMB in transactions and promoting direct trading between RMB and BRICS currencies.

    China’s towering role in the BRICS remains a strength, and a risk. Except for the surge in India’s crude and coal imports from Russia, which pushed India’s imports up from USD8.6bn in 2021, to USD41bn in 2022, trade with China accounts for the vast majority (75%) of intra-BRICS trade. China is the largest bilateral trade partner for three BRICS members: SA, Brazil, and Russia. Indeed, China’s participation in BRICS imbues the group with much of its broader influence, and potential. And yet, for the group to be a legitimate and collaborative reflection of the interests of the Global South (and of each of its members) it must push against the agenda being singularly established by Beijing. How this tension is navigated will not only be a defining feature of the upcoming summit, but the group’s future relevance and capacity for cohesion more broadly.

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    Great Economic-Reset Outlook Update

    Thanks to a subscriber for this report from Mike McGlone at Bloomberg. Here is a section:

    3. Stuff That May Matter More Than Ever In the category of stuff that doesn't matter until reaching extremes: the inverted US yield curve and leading indicators. Our bias is to heed the warnings, particularly in the context of the unprecedented aberrations that got us here. The graph shows the leading index of 10 economic indicators at minus 7.5% and the New York Fed's probability of recession from the Treasury spread at the most since 1982. What might be most significant is the elongated period of near-zero interest rates that buoyed the roughly 600% advance in the S&P 500 from the March 2009 low to the 2022 peak. This period of exceptional risk-asset appreciation may face some normal reversion, particularly because the primary fuel has turned around. The fed funds upper-bound target of 5.5% is the highest since 2001 and may portend headwinds for risk assets.

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    Corn Harvest Is in Trouble as US Heat Fuels More Damage

    This article from Bloomberg may be of interest. Here is a section:

    “Things are changing right in front of our eyes,” said Thayne Larson, who has grown alfalfa, hay, corn in Kansas for 50 years. “It’s so disappointing when you have what you thought could be a healthy crop, and then the conditions just become extremely, extremely challenging.”

    Crops Go ‘Backwards’ 
    With food security already under threat from Europe to Asia, the world has been counting on a big corn harvest to help keep food inflation at bay. A disappointing US harvest could have ripple effects on markets across the globe.

    Much will come down to Iowa, the No. 1 US corn grower and where sixth-generation farmer Ben Riensche is for the first-time ever watching his crop go “backwards” because of the heat. 

    His corn stalks went from bright and green to slightly gray. Instead of sitting tight against the plant, the corn ears are flopping down, the husk has turned brown and the bottom of the stalk — where the plants connects to the roots that go deep underground — looks like it’s been burned. It means that the plant is dead.

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    Nvidia Stock Soars Past $500 After Chipmaker Demolishes Q2 Estimates

    This article from Benzinga may be of interest. Here is a section:

    Nvidia Corp. (NASDAQ:NVDA) strong positioning in artificial intelligence technology is taking the chipmaker into the stratosphere Wednesday.

    Santa Clara, California-based Nvidia’s second-quarter non-GAAP earnings per share rose 422% year-over-year from 51 cents to $2.70. Sequentially, the measure improved 148% from the previous quarter’s $1.09 per share.

    Analysts, on average, expected the bottom-line result to come in at $1.91.

    The earnings growth reflected strong revenue, which climbed 101% year-over-year and 88% sequentially to $13.51 billion. The topline came ahead of the consensus estimate of $10.3 billion and the company’s guidance of $11 billion plus or minus 2%.

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    Pencils down

    Thanks to a subscriber for this edition of Jim Grant’s free letter. Here is a section:  

    Arm’s prospective transition to the public realm is no small development, as Wall Street impatiently awaits the return of capital markets activity. Conventional IPO fundraising (i.e., excluding special purpose acquisition companies) stands at $10.2 billion in the year-to-date per Dealogic, double the full-year tally logged last year but a fraction of the $39.7 billion and $105.5 billion outputs seen during 2020 and 2021, respectively. “Recent summer weakness is clearly pushing [SoftBank] to list Arm sooner rather than later,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, tells Reuters.

    On the bright side for SoftBank and its teeming roster of 28 investment banks leading the offering, recent events in the IPO market suggest that risk appetite remains robust despite the August selloff.  Last Tuesday, shares in Sacks Parente Golf, Inc. vaulted 624% in their Nasdaq debut, briefly conferring a $400 million market cap on the micro-cap manufacturer of putting equipment, which lost $3.5 million on $190,000 in net revenues a year ago.

    Noting that the Sacks Parente priced its offering at $4 per share, the bottom of its indicated $4 to $5 per share range, while reducing the allotment to 3 million shares from 4.4 million, Renaissance Capital senior strategist Matt Kennedy marveled to Bloomberg that “in a typical IPO, it would be bizarre for a company to price at the low end of its range and then pop 600%. . . There’s still a sub-segment of the IPO market where the casino is open.”  Sacks Parente’s hot streak soon abated however, as the stock finished today south of $3, completing a round trip and then some.

    Then there’s VinFast Auto Ltd., which also began trading on the Nasdaq last Tuesday via a merger with blank-check firm Black Spade Acquisition Co. The Vietnam-based electric vehicle maker has since enjoyed a hotter ignition, with shares ripping higher by 109% today, building on a 280% rally in its first trading day one week ago. VinFast, which remains under 99% control by its founder Pham Nhat Vuong and which posted a $599 million net loss in the first quarter on $84 million in sales, ended the day with a market cap of roughly $85 billion, nearly equivalent to that of Ford and General Motors combined.

    The water’s warm, Masa and Co."

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