Member Briefing April 24, 2024
World Primed for More Balanced Growth as U.S. Cools, Peers Pick Up Pace
Surveys of purchasing managers released Tuesday pointed to a surprise cooling of activity in the U.S. as the second quarter began, while eurozone activity gained for the second straight month, helped by Germany’s return to growth for the first time in nearly a year. Similar surveys for Japan, India and Australia also pointed to acceleration in growth during April. The U.K. booked a stronger-than-expected rise in activity, suggesting the country is on track for a sustained recovery after slipping into a shallow recession at the end of last year.
“If we compare the euro area with the U.S., it’s clear that our growth is lower,” said Luis De Guindos, vice president of the European Central Bank, in an interview published Tuesday. “The leading indicators in Europe point to a modest recovery in the second half of 2024. But we will have a growth rate of less than 1%, below our potential, which is a very low outcome.” While the surveys indicate that the growth gap between the two economies may be narrowing, policy makers at the European Central Bank don’t expect it to close soon.
Read more at American Machinist
Boeing Compensates Airlines for 737 MAX Groundings
United Airlines reached an agreement with Boeing Co. on compensation for financial damages related to the grounding of the carrier’s 737 MAX 9 jets during January of this year, as well as for damages involving delivery delays for the Boeing 737 MAX 10 jets. The terms of both agreements are confidential but were reported in a Q1 filing by United with the federal Securities and Exchange Commission. The compensation will be made by way of Boeing crediting the airline on future jet purchases.
United Airlines is among Boeing’s largest customers, with 776 Boeing aircraft in service now and nearly 500 more jets on order. It is the largest operator of the 737 MAX 9 aircraft, with 79 in service and 144 more on order. And United is due to be the launch customer for the delayed 737 MAX 10, with 167 on order. Previously a filing by Alaska Airlines revealed that Boeing made a $160-million cash payment to that carrier – which was the operator of the Boeing aircraft involved in the mid-flight door-plug failure on January 5 that led the Federal Aviation Administration to ground the 737 MAX 9 series for about a month.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Mass Arrests Made as US Campus Protests Over Gaza Spread - BBC
- Iran's Israel Strike Coincided With Crackdown on Dissent at Home - Reuters
- Review of UN Agency Helping Palestinian Refugees Found Israel Did Not Express Concern About Staff - AP
- Israel Wants Hamas Out of Gaza but Even Rooting It From the North Hasn’t Worked - WSJ
- Netzah Yehuda: Why is US Imposing Sanctions on Israeli Battalion? - Reuters
- Interactive Map- Israel’s Operation in Gaza – Institute for the Study of War
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
Ukraine
- Ukraine and Russia: The Latest News – The Guardian
- U.S. Is Preparing To Sanction Chinese Banks Supporting Russia, Report Says - Forbes
- Turning a Vault Into a Bomb Shelter: How Citigroup Has Kept Its Bank Running Inside Ukraine - WSJ
- Ukraine Launches Military Charm Offensive as Conscription Flags – Reuters
- Russia Will Ramp Up Strikes on Western Arms in Ukraine, Kremlin Warns - Politico
- Famine Risk 'Very High' in Gaza, Especially in North, US Official Says – US News
- Russia Warns it’s Ready to Retaliate if the West Seizes Frozen Assets, Says Europe Will be Hurt Most - CNBC
- Biden Vows to 'Quickly' Supply New Military Aid to Ukraine - BBC
- Interactive Map: Assessed Control of Terrain in Ukraine – Institute for the Study of War
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Other Headlines
- Australia’s Prime Minister Berates ‘Arrogant’ Elon Musk—Escalating Feud Over X’s Handling Of Church Stabbing Videos - Forbes
- Blinken to Warn China Over its Support for Russia’s Military During this Week’s Visit - CNBC
- Inside the Strategies That Made China a Shipbuilding Powerhouse – WSJ Video
- Haiti Situation 'Catastrophic' and Growing Worse, UN Warns - BBC
- Haiti Health System Nears Collapse as Medicine Dwindles, Gangs Attack Hospitals and Ports Stay Shut - AP
- Sixteen Dead, 28 Missing After Boat Capsizes off Djibouti Coast - U.N. Agency – Reuters
- China’s Economy Is ‘Failing,’ U.S. Indo-Pacific Commander Says - WSJ
- What is UK's Plan to Deport Asylum Seekers to Rwanda? - Reuters
Policy and Politics
Senate Passes Ukraine, Israel Funding After Months-Long Stalemate
The Senate on Tuesday passed a $95 billion emergency foreign aid package, ending months of bitter fighting over $61 billion for the war in Ukraine that had deeply divided the Republican Party. The measure passed by a vote of 79 to 18 and now goes to President Biden for his signature. The package also includes $15 billion in military aid for Israel and $9 billion in humanitarian aid for Gaza and other war-torn areas, which became another flashpoint among conservative Republicans who argued it didn’t have adequate safeguards to keep it from going to Hamas.
It provides $8 billion in security assistance to deter Chinese aggression in the Indo-Pacific. And it includes language to force the Chinese owner of TikTok to divest from the popular app, which is used by more than 140 million Americans, or otherwise face a ban within the United States.
NY Becomes First State In US To Mandate Paid Prenatal Leave
With its budget passage Saturday, New York became the first state in the U.S. to implement paid leave for pregnant employees to attend doctor's appointments, expanding its paid family leave law to create a new bank of up to 20 hours for this purpose. Paid prenatal leave was included as part of the state's $237 billion budget for fiscal year 2025, which the state Legislature cleared over the weekend. Gov. Kathy Hochul first floated the proposal in January, citing Centers for Disease Control and Prevention data that found the infant mortality rate had ticked up 3% nationwide from 2021 to 2022.
The proposal will require employers to create a separate pot of paid sick time, a total of 20 hours, for employees to use for prenatal medical care without cutting into their existing sick time, according to the governor's office. Hochul's initial proposal had called for 40 hours. The initiative adds to a growing body of policies and laws that recognize the accommodations and flexibilities pregnant and postpartum workers must have to protect their health and retain their jobs.
25M Could Get Student Debt Forgiveness: Who's Eligible in Biden's New Mega-Plan?
The Biden administration on Tuesday filed paperwork for a new regulation that would cancel or reduce student loan debt for more than 25 million additional borrowers. The latest proposal, which is more targeted than the one the U.S. Supreme Court struck down last year, was posted in the Federal Register for a 30-day comment period. If implemented as proposed, it would bring the total number of borrowers getting relief to more than 30 million. To date, the administration has approved debt cancellation for nearly 4.3 million borrowers, totaling $153 billion in debt forgiveness through various actions.
The Biden administration said it plans to start implementing some parts of the new proposal as soon as this fall, ahead of the presidential election, using the education secretary's authority to implement rules early in certain cases. Republicans staunchly oppose any broad student loan cancellation, saying it's an unfair bailout for people who went to college.
Health and Wellness
A Cheap Drug May Slow Down Aging. A Study Will Determine if it Works
A drug taken by millions of people to control diabetes may do more than lower blood sugar. Research suggests metformin has anti-inflammatory effects that could help protect against common age-related diseases including heart disease, cancer, and cognitive decline. Scientists who study the biology of aging have designed a clinical study, known as The TAME Trial, to test whether metformin can help prevent these diseases and promote a longer healthspan in healthy, older adults.
Metformin was first used to treat diabetes in the 1950s in France. The drug is a derivative of guanidine, a compound found in Goat's Rue, an herbal medicine long used in Europe. The FDA approved metformin for the treatment of type 2 diabetes in the U.S. in the 1990s. Since then, researchers have documented several surprises, including a reduced risk of cancer. "That was a bit of a shock," Austad says. A meta-analysis that included data from dozens of studies, found people who took metformin had a lower risk of several types of cancers, including gastrointestinal, urologic and blood cancers.
Election 2024
- Pennsylvania’s Primary Will Cement Casey, McCormick as Nominees in Battleground US Senate Race - AP
- The States to Watch on the 2024 Electoral Map - NPR
- The 2024 Battleground Counties: Douglas County, Nebraska – US News
- Real Clear Politics Latest GOP Primary Polls – Real Clear Politics
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Latest Polls - FiveThirtyEight
Industry News
US New Home Sales Rebound to Six-Month High; Rising Mortgage Rates a Concern
Sales of new U.S. single-family homes rebounded in March from February's downwardly revised level, drawing support from a persistent shortage of previously owned houses on the market, but momentum could be curbed by a resurgence in mortgage rates. The report from the Commerce Department on Tuesday also showed the median house price jumped to a seven month-high from February, likely as fewer builders offered price cuts and sales shifted to higher priced homes. Rising prices and mortgage rates could make housing even more unaffordable, especially for first-time buyers.
New home sales jumped 8.8% to a seasonally adjusted annual rate of 693,000 units last month, the highest level since September, the Commerce Department's Census Bureau said. The sales pace for February was revised down to 637,000 units from the previously reported 662,000 units. Though the new housing market remains underpinned by the dearth of previously owned homes for sale, rising mortgage rates are taking a toll on affordability. The average rate on the popular 30-year fixed-rate mortgage has risen back above 7%, data from mortgage finance agency Freddie Mac showed.
Starbucks Takes on the NLRB Before the US Supreme Court
Starbucks heads to the Supreme Court on Tuesday in a bid to limit a government labor board that has been eager to support union drives, a case that comes as other top companies are mounting aggressive defenses against the agency. In the Biden-era, the National Labor Relations Board, which referees disputes between employers and workers, has expanded pathways for forming a union and made it easier for employees to challenge workplace practices. It also has broadened the types of remedial compensation workers can receive if an employer treats them unfairly.
The Starbucks case at the Supreme Court is an outgrowth of an employee unionizing campaign at a store in Memphis, Tenn. The union alleged the company engaged in a series of unlawful tactics to stifle the campaign, culminating with the firing of seven union activists. The NLRB filed a complaint alleging unfair labor practices and asked a federal court to issue a temporary injunction to restrain Starbucks. A judge among other things ordered the interim reinstatement of the terminated employees. An appeals court affirmed that order. Starbucks said the fired employees broke several company policies, including by allowing a news crew into the store after hours to promote the unionization drive. The company petitioned the Supreme Court to hear the case on the grounds that some lower courts—including the judges in this litigation—have followed a legal standard that makes it too easy for the NLRB to win injunctions.
UnitedHealth Paid Ransom to Bad Actors, Says Patient Data Was Compromised
UnitedHealth (UNH) said a preliminary review of data involved in February’s cyberattack on its Change Healthcare unit indicates that personal information was involved and that a "substantial proportion of people in America" could be impacted. The health insurer said around 80% of Change’s functionality has been restored, with full restoration expected in the coming weeks. The hackers behind the hack reportedly gained access to computer systems nine days before launching the ransomware attack using compromised credentials. UnitedHealth had paid a ransom to the hackers to protect patient data, although the amount has not been disclosed
UnitedHealth, which has more than 152 million customers, said it has also determined that the cyberthreat actors accessed files containing protected health information and personally identifiable information, according to a release Monday. The files “could cover a substantial proportion of people in America,” the release said.
GM Posts Higher Q1 Profit, Ups 2024 Financial Guidance
General Motors on Tuesday raised its 2024 guidance after beating Wall Street’s top- and bottom-line expectations for the first quarter. The automaker said it was boosting its forecast after strong North American operations offset losses elsewhere during the first quarter. The company now expects adjusted earnings of $12.5 billion to $14.5 billion, or $9 to $10 a share, up from a previous range of $12 billion to $14 billion, or $8.50 and $9.50 a share. GM also raised expectations for adjusted automotive free cash flow to a range of $8.5 billion to $10.5 billion, up from an earlier forecast of $8 billion to $10 billion.
Earnings per share were $2.62 and revenue was $43.01 billion. GM said revenue during the first three months of this year was up 7.6% from roughly $40 billion a year earlier. Its net income during the first quarter was up about 26% to $2.95 billion. The automaker’s net income attributable to stockholders, which excludes some dividend payouts, was up 24.4% to $2.98 billion, or $2.56 per share, from the first quarter of 2023 when the company reported net income attributable to stockholders of about $2.4 billion, or $1.69 per share. Adjusted earnings before interest and taxes were $3.87 billion, or $2.62 per share, during the first quarter.
PepsiCo Earnings Beat Estimates as International Demand Boosts Sales
PepsiCo on Tuesday reported quarterly earnings and revenue that beat analysts’ expectations, despite a recall of some Quaker Foods cereal and bars that dented U.S. volume. Earnings per share were $1.61. revenue was $18.25 billion. Pepsi reported first-quarter net income attributable to the company of $2.04 billion, or $1.48 per share, up from $1.93 billion, or $1.40 per share, a year earlier. Net sales rose 2.3% to $18.25 billion. The company’s organic revenue, which excludes acquisitions, divestitures and foreign exchange, increased 2.7% in the quarter.
But the company’s volume is still under pressure. Pepsi, along with many of its rivals, has seen its volume fall in response to higher prices for its Gatorade, Fritos and other products in its portfolio. A recall of many Quaker Foods cereals and bars only worsened Pepsi’s volume problem. The company issued the first recall for potential salmonella contamination in December, then widened it in January.
Tesla Reports Sharp Drop in First-Quarter Earnings
Tesla reported a 9% drop in first-quarter revenue on Tuesday, the biggest decline since 2012, and missed analysts’ estimates, as the electric vehicle company weathers the impact of ongoing price cuts. Earnings per share were 45 cents adjusted and revenue was $21.30 billion. Revenue declined from $23.33 billion a year and $25.17 billion in the fourth quarter. Net income dropped 55% to $1.13 billion from $2.51 billion a year ago.
The drop in sales was even steeper than the company’s last decline in 2020, which was then due to disrupted production during the Covid pandemic. Tesla’s automotive revenue declined 13% year-over-year to $17.34 billion in the first three months of 2024. In its shareholder deck, Tesla said “volume growth rate may be notably lower than the growth rate achieved in 2023,” as the company looks to launch its “next generation vehicle and other products.”
Google Fires More Workers Over Israeli Cloud Contract Protest After CEO Says Leave Politics At Home
Google has fired another round of workers in the wake of sit-in protests against Project Nimbus, a cloud computing contract the company has with the Israeli government and military, according to news reports, after nearly 30 workers at the company were fired following similar demonstrations as Israel’s war with Hamas grinds on. The company has already fired 28 employees in connection with the demonstration last week.
The latest round of firings comes days after CEO Sundar Pichai addressed the unrest in a memo to employees. While it’s “important to preserve” Google’s “culture of vibrant, open discussion,” Pichai stressed Google is a workplace with clear policies and expectations for its workers. “This is a business, and not a place to act in a way that disrupts coworkers or makes them feel unsafe, to attempt to use the company as a personal platform, or to fight over disruptive issues or debate politics.” Pichai urged workers to put disruption aside and put the “mission first” at this critically important time. “When we come to work, our goal is to organize the world’s information and make it universally accessible and useful. That supersedes everything else and I expect us to act with a focus that reflects that.”
LA to Vegas in 2 Hours - Brightline West Breaks Ground
Brightline West on April 22 held an official groundbreaking ceremony for its $12 billion, 218-mile high-speed rail project linking Nevada and Southern California. The route, which has full environmental clearance, will run primarily within the I-15 highway median and offer stops in Las Vegas, Nev., as well as Victor Valley, Hesperia and Rancho Cucamonga, Calif. In December 2023, the Brightline West, in partnership with the Nevada Department of Transportation (NDOT), was awarded a $3 billion grant from the Federal Railroad Administration (FRA) through the Federal-State Partnership for Intercity Passenger Rail Grant program. Brightline West is slated to carry riders from Las Vegas to Southern California in two hours or almost half the time as driving.
Construction is expected to take about four years, and Brightline West has “an ambitious schedule of being open in time for the Los Angeles Summer Olympic Games in 2028,” according to NDOT. The project will cover more than 160 structures, such as viaducts and bridges, and include 322 miles of catenary and 3.4 million square feet of retaining walls. It will use 700,000 concrete rail ties, 2.2 million tons of ballast, and 63,000 tons of 100% American steel rail (download more details below). Austin, Tex.-based Atlas Technical Consultants Inc. has been selected among a team of consultants to manage the geotechnical engineering and design.
iPhone Sales In China Fell Nearly 20% In Q1, Report Finds
Apple’s smartphone sales in China fell 19.1% in the first quarter of 2024, according to a report published by Hong Kong-based Counterpoint Research on Tuesday, outlining the challenges facing the iPhone maker as it loses ground to local rivals in the world’s biggest smartphone market. According to the report, iPhones accounted for 15.7% of all smartphone sales in China in Q1 2024, down 19.7% year-on-year.
China’s Huawei, a key challenger to Apple in China’s premium segment, witnessed a major resurgence with its sales jumping 69.7% year-on-year in the first quarter—driven by the successful launch of its 5G-capable Mate 60 series of devices with a breakthrough chip. While Apple remained slightly ahead of Huawei's 15.5% market share, the iPhone maker dropped from first to third place behind Chinese brands Vivo and former Huawei subsidiary Honor.
Why US is Moving to Block $8.5 Billion Merger of Luxury Brands Coach, Michael Kors
The U.S. Federal Trade Commission on Monday sued to block the $8.5 billion acquisition of Capri Holdings by Coach and Kate Spade’s parent company, Tapestry. The move by regulators brings at least a temporary halt to a deal that would marry two major names in American luxury retail and put six fashion brands under a single company: Tapestry’s Coach, Kate Spade and Stuart Weitzman and Capri’s Versace, Jimmy Choo and Michael Kors. With the transaction, the luxury brands could be poised to better compete with European luxury names, such as Burberry and LVMH’s Louis Vuitton.
In a news release, the FTC said the combined company would harm shoppers and employees. It said Tapestry and Capri “currently compete on everything from clothing to eyewear to shoes.” Tapestry argued the federal agency “fundamentally misunderstands both the marketplace and the way in which consumers shop.” In a statement, the company said it must win the business of consumers who increasingly shop across brands, channels and price points.
Indian Point Owner Holtec Sues NY to Overturn Law Banning Radiological Water in Hudson River
The owners of the shuttered Indian Point nuclear power plant sued the state of New York today, claiming a law banning the discharge of radiological water into the Hudson River is a “blatant infringement” of the federal government’s role in nuclear safety. The lawsuit filed by Holtec International in U.S. District Court in Manhattan asks a judge to declare a law signed by Gov. Kathy Hochul in August unconstitutional. It claims the measure, backed by Democratic lawmakers from the lower Hudson Valley, was billed as a way to protect real estate values in river towns when the true intent was to regulate radiological health and safety.
“The failure of New York State to respect Federal Law, and follow the facts and science of the issue, left us no other means for remedy,” Holtec said in a statement issued today. “The passage of the bill has already delayed the planned completion of the decommissioning of Indian Point an additional 8 years, which hurts the local community’s desire to see the project completed and the property returned as an asset for economic development in the region. We look forward to the legal process moving along on this important decision.”