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

    Rio Tinto Says Simandou Deal Close After Wrangles Over Railway

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

    Simandou offers a potentially huge new source of supply for Rio, the world’s largest iron ore producer, while China sees the project as key to easing its steel industry’s dependence on Australian output. The world’s top steel-producing nation recently embarked on one of the biggest shake-ups of the global iron ore market in more than a decade by setting up a new state-owned group, designed to be a hub for huge overseas mine investments and buying the steelmaking material from international suppliers.

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    Email of the day on fishing and mosquitoes

    Morgan Stanley Sees More Fed Hikes While JPMorgan Expects Pivot

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    While Morgan Stanley strategists say it’s too early to expect the Fed to stop tightening its policy even as fears of a recession grow -- suggesting stocks have more room to fall before finding a bottom, JPMorgan Chase & Co. strategists say bets that inflation has peaked will lead to a Fed pivot and improve the picture for equities in the second half.

    Sticky inflation is what will keep the Fed hawkish for longer this time around, according to Morgan Stanley’s Michael J. Wilson. While during the past four cycles the US central bank had stopped tightening its policy before the start of an economic contraction, triggering a bullish signal for stocks, current historic levels of inflation mean the Fed will likely still be tightening when a recession arrives, Wilson wrote in a note.

    Equity markets “may be trying to get ahead of the eventual pause by the Fed that is always a bullish signal,” Wilson said. “The problem this time is that the pause is likely to come too late.”

    Over at JPMorgan, Mislav Matejka said in a note on Monday that challenging activity momentum and softer labor markets could open doors to a more balanced Fed policy, leading to a peak in the US dollar and inflation.

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    Diabetes breakthrough restores insulin production using existing drug

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

    The team says that the new potential treatment has a few advantages over other techniques currently in use or under development. Pancreas transplants are effective, but subject to organ donor shortages and other complications like rejection. Other teams have converted skin cells into stem cells and used those to produce new beta cells, and although results have been promising in mice, immune-suppressing drugs need to be given to prevent rejection.

    The new treatment would work much faster, within a matter of days, and without the need for surgery. But perhaps the biggest advantage is that GSK126 is already approved by the US FDA and elsewhere in the world as a treatment for cancer. Its safety profile is already being assessed in clinical trials, which could reduce hurdles down the road for its use against diabetes.

    That said, the scientists caution that it is still very early days. These experiments were conducted on cells in culture – not even in animals yet – so there’s still plenty of work to do. Nevertheless, it remains an intriguing new possible tool.

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    Weaker ad landscape, higher regulatory risk expected to weigh on Alphabet's Q2

    This article from S&P Global may be of interest. Here is a section:
     

    Alphabet Inc. is expected to report another quarter of slowing growth as macroeconomic headwinds and intensifying regulatory scrutiny weigh on its core advertising business.

    Fears regarding a potential recession are driving many companies to scale back ad budgets, directly impacting Alphabet's growth prospects. The Google LLC parent company faces headwinds from difficult comparisons to 2021 when its revenue growth skyrocketed partly due to a rebound off early pandemic lows.

    Alphabet is expected to report second-quarter revenue of $70.10 billion, up 13.3% from the prior year, according to S&P Capital IQ estimates as of July 20. The projected growth rate is down from 23% growth in the first quarter and significantly below Alphabet's performance through 2021.

    "A challenging macro landscape and tougher comparisons will lead to a sharp deceleration in growth into the early parts of next year," said Angelo Zino, a senior equity analyst at CFRA Research.

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    Amazon to Use Rivian Vans as EV Maker Works Toward Delivery Goal

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

    Amazon.com Inc. is starting delivery of packages to US customers using the first of as many as 100,000
    electric vans built by Rivian Automotive Inc., which aims to hand over thousands of the vehicles this year.

    Vehicle roll-out starts Thursday in Chicago, Dallas, Kansas City, Phoenix, San Diego, Seattle and St. Louis

    Amazon expects to have Rivian vans deployed across more than 100 cities by year-end

    Amazon has delivered 430,000 packages and driven 90,000 miles using Rivian pre-production battery-powered vans since 2021

    Rivian CEO RJ Scaringe tells Bloomberg Television his company is working “as hard we can” to hit initial delivery target of 10,000 vans to Amazon by year-end
     “We’ll certainly have many thousands of vehicles on the road by the end of this year, but not providing a specific number,” Scaringe says in interview to air Thursday

    Scaringe says forthcoming layoffs to help company “more efficiently structure parts of the team”

    Rivian is “trying to be as intentional and thoughtful in terms of what that means for the business, what that means for the individuals, as we work through that process”

    Rivian has made “remarkable progress” since partnership between with Amazon was announced in 2019, Udit Madan, a transportation executive with Amazon, says in Bloomberg
    Television interview

    Rivian shares pared an early gain of as much as 6.1% to trade up 3.3% at 3:11 p.m. in New York

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    The Tension in Japan's Dialed-Up Defense Ambitions

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    DM: The government has begun a comprehensive review of Japan’s defense strategy. Why is that important and what are the likely outcomes?

    SS: A new national security strategy document is going to be issued. The first leader to issue was Shinzo Abe, in 2013. So this will be only the second statement by Japan, ever. It’s significant this is all together in one place, not just bombs and bullets. It’s about what Japan needs to do to achieve its interests in the world and how to proceed? In 2013, the language on China was pretty benign compared with what I think we will see in the next one. Russia will be near the top of concerns after the Ukraine invasion. North Korea continues to be a problem, given its missiles and the ability to launch them undetected.

    There will also be a cabinet decision in December on the next 10-year defense plan. This is where we will see how serious Kishida is about defense. Within the 10-year plan will be a five-year plan on how much Japan spends and on what. The other issue that needs to be handled deftly is that of counterstrike capability.

    DM: Japan is one of the most indebted economies. How does all this get financed? 

    SS: I don’t know how they pay for it. Debt servicing is somewhere near 23% of Japan’s budget. Social security is about a third. The budget doesn’t have a lot of latitude. I’m not convinced about 2% of GDP, but let’s use that as a reference point. Last year, Japan spent about 1.3% of GDP on defense. You get to 2%, you are basically doubling it. That’s big.

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