Factors Affecting Global Markets
Among the factors affecting the Global stock markets are oil prices which have fallen by 1.6% to $78.44 per barrel due to the weaker-than-expected Chinese economic growth forecast. which is lower than the market expectation of 5.5%. Secondly, Tesla has slashed the prices of its Model S and Model X in the US by $5,000 and $10,000, respectively, for the second time this year, as the company aims to increase demand in the final month of the quarter.
Thirdly, Softbank’s chip designer Arm is expected to raise at least $8 billion from a US IPO later this year. Fourthly, US Senator Mark Warner is introducing a bill that aims to prohibit foreign technology, such as TikTok, in the US due to concerns about content and data privacy.
Lastly, Amazon is closing its cashier-less stores in some cities, including New York City, San Francisco, and Seattle, as part of its cost-cutting measures, along with pushing back the construction of the next phase of its Virginia headquarters, months after announcing plans to cut 18,000 jobs.
Jerome Powell’s Speech in Congress
US stock indices closed sharply lower on Tuesday, with the Dow Jones Industrial Average falling 574.98 points, the S&P 500 losing 62.05 points, and the Nasdaq Composite dropping 145.40 points after Federal Reserve Chair Jerome Powell told Congress that the central bank will likely need to raise interest rates more than previously expected to rein in stubbornly high inflation. In his prepared remarks for a hearing before the Senate Banking Committee, Powell said that “the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.” He also said that “if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.” Oil prices fell by $3 a barrel after Powell’s comments, with Brent crude futures shedding $2.89 to settle at $83.29 a barrel, and the US West Texas Intermediate crude futures dropping $2.88 to close at $77.58 per barrel. The dollar also extended gains against a basket of currencies after Powell’s hawkish testimony.
HelloFresh Company and the Increase in Food Prices
HelloFresh, a meal kit and food delivery company based in Germany, has warned of higher marketing costs to retain customers as food and energy bills continue to rise and people return to offices. The company expects adjusted core profit (AEBITDA) of between €460m and €540m ($492m and $577m) in 2023, compared to analysts’ estimates of €547m. Its shares, which have fallen over 50% in the last year, fell 12.7% at the open but later recovered to be down 3% by 0839 GMT. The firm expects the number of active customers to decline slightly in the first half of 2023 before picking up again in the second half. HelloFresh’s CEO, Dominik Richter, stated that price increases are a tool at the company’s disposal but the company aims to keep price rises below the overall food price inflation level. He added that there are no plans for layoffs at the moment, but refrained from giving an update on the mid-term outlook.
The Blackstone-Thomson Reuters Consortium
An investor consortium including Blackstone and Thomson Reuters is selling £1.7bn ($2.01bn) worth of shares in the London Stock Exchange Group (LSEG) to trim its joint stake. Investment banks managing the sale of 23 million LSEG shares had orders for all the stock in the offering. The transaction follows the publication of LSEG’s 2022 earnings last week, which showed an increase in total income to £7.74bn from £6.54bn the year prior, beating analysts’ expectations. The bourse operator plans to buy back up to £750m of stock from the Blackstone-Thomson Reuters consortium by April 2024. Blackstone and Thomson Reuters have been shareholders in LSEG since they sold financial data provider Refinitiv to the UK group in 2021, in a landmark deal valued at $27bn. Following the latest stake sale, the consortium will not be able to offload any further shares for a 90-day period, according to a bank term sheet. Barclays, Citi, Goldman Sachs, and Morgan Stanley are joint global coordinators on the transaction, with Blackstone’s own capital markets unit acting as co-lead manager.
Global stock markets are likely to open on a cautious note on Wednesday as investors digest the sharp decline in US stocks overnight. The sell-off came after Federal Reserve Chair Jerome Powell warned that the central bank may need to raise interest rates more than previously expected to tackle rising inflation. Meanwhile, Germany’s HelloFresh has warned of higher marketing costs to retain customers, as food and energy bills continue to rise and people return to offices. In other news, an investor consortium, including Blackstone and Thomson Reuters, is selling £1.7bn ($2.01bn) worth of shares in the London Stock Exchange Group, while oil prices have fallen due to weaker-than-expected Chinese economic growth forecasts.
The stock market in India is expected to open in the red following the trends in the SGX Nifty, which indicate a negative opening for the broader index after a steep fall in US markets and lower trading in Asian peers.