2024-07-15 16:54
By Promit Mukherjee OTTAWA, July 15 (Reuters) - Canadian businesses expect interest rates to come down by upto 100 basis points over the next year but their investment spending remains below average owing to a weak demand outlook, the Bank of Canada said on Monday in its second-quarter survey. Fewer firms see a mild recession in the coming 12 months compared with the previous survey, the central bank said, adding that firms' expectation for inflation was now in the bank's inflation-control range of 1% to 3%. The Bank of Canada (BoC) targets 2% inflation - the mid point of the control range. Last month, the BoC cut its key overnight rate by 25 basis points for the first time in four years after keeping them at a two-decade high for almost a year. The cut has boosted hopes that more rate reductions are coming, with BoC Governor Tiff Macklem insisting that any future action would be data-dependent, primarily how inflation and growth evolves. The business outlook indicator, a metric of how business prospects look like under current economic conditions, fell to -2.9% in the second quarter from -2.39% in the quarter earlier. "Business sentiment remained relatively flat in the second quarter of 2024," the survey said, adding that it was weighed down by elevated interest rates, weak demand and ongoing high costs. Inflation in May accelerated after cooling for nearly five months, while GDP numbers showed that the economy expanded in April and is likely to post positive growth in May. Some 41% of respondents thought that inflation would be above 3% for the next two years, a tick higher than the 40% in the previous quarter, while 20% of the firms expect Canada to be in recession in the next 12 months, down from 27%. Uncertainty and cost pressures remained the most frequently mentioned concerns of businesses, the survey said. "Firms mentioned red tape and regulations as slowing their plans, and taxes, predominantly the carbon tax, as increasing their costs," it said. Financial markets see a 73% chance of another 25 basis point cut at the bank's July 24 interest rate announcement. A weak sales outlook has softened the demand for additional workers and as a result the expectations of average wage increase in the next 12 months has declined significantly, the survey showed. A resilient wage growth rate has been a constant irritant for the BoC, impeding the bank's efforts to cool inflation but Macklem said last month that wages were starting to moderate. A separate survey by the central bank on consumer expectations showed that perceptions of inflation are unchanged from a quarter ago, but their expectations for inflation over the next 12 months have declined significantly. "Most consumers continue to report spending cuts, and pessimism about future economic condition persists," it said. (([email protected] New Tab, opens new tab)) Keywords: CANADA CENBANK/ Sign up here. https://www.reuters.com/business/canadian-firms-keep-investment-plans-under-check-despite-rate-cut-expectations-2024-07-15/
2024-07-15 16:46
July 15 (Reuters) - The U.S. Centers for Disease Control and Prevention has deployed a nine-member field team to Colorado to help the state manage a bird flu outbreak in humans and poultry. Colorado confirmed four infections and a suspected fifth case on Sunday. The CDC, in a statement dated July 14, said its team of epidemiologists, veterinarians, clinicians and an industrial hygienist was working to support Colorado's assessment of the outbreak and the human cases. Based on current information, it said it believes the risk to the public to be low. The CDC said it had not seen any unexpected increases in flu activity otherwise in Colorado, or other states with bird flu outbreaks in cows and poultry. Workers were culling chickens at a commercial egg facility with a bird flu outbreak in northeast Colorado, the state said, without naming the facility. Colorado reported an outbreak of avian flu at a 1.8 million-bird egg farm in Weld County on July 8, according to the state's agriculture department. Workers at the farm presented mild symptoms, from conjunctivitis to respiratory signs, according to the state health department. These are the first reported cases in poultry workers in the United States since 2022. The CDC said genetic sequencing of the virus was underway and it would look for any mutations that could impact its risk assessment. Sign up here. https://www.reuters.com/world/us/us-cdc-sends-field-team-aid-colorados-bird-flu-response-2024-07-15/
2024-07-15 16:32
Donors offering $12 bln, mostly loans, for green energy South Africa still committed to net zero by 2050 Ramping up removing hurdles to investment in power grid PRETORIA, July 15 (Reuters) - South Africa told climate donors on Monday that it would miss its 2030 emissions goals, but was committed to "net zero" by mid-century as it races to remove financial and other hurdles to rolling out renewables, the new energy minister said. ""We have shared with the partners as late as this morning ... that we'll not be able to meet those targets by 2030, highly unlikely," Ramokgopa said in an interview with Reuters in his office in Pretoria. But he added that, "if you use a long horizon of 2050, we will not move (from) that". Under the Paris Climate Accords, South Africa was committed to cutting emissions to between 350 and 420 million tonnes by 2030, from 442 million tonnes in 2020, on the way to net zero. Ramokgopa said that from next week he would also meet with lenders and private power providers to hear their "frustrations" at project delays, with a view to accelerating investment into green energy and catching up on its climate commitments. Owing to its heavy reliance on coal for electricity, South Africa is the world's most carbon-intensive major economy and its 15th biggest greenhouse gas emitter - higher than France, Italy or Turkey. After years of power cuts, South Africa had to prioritise energy security by boosting output from coal-fire power stations, Ramokgopa said. "But we are committed over a (longer) period of time and we are able to say to them, this is how we'll achieve it," he said, referring rich nations including the United States and several European countries that are offering $12 billion in funding, mostly loans, towards South Africa's energy transition. New policies he said would speed things up included removing bureaucratic hurdles to existing private tenders, expropriating land from farmers holding up the power grid buildout, and re-pricing deals with power providers that failed to close after the Ukraine war jacked up component prices. South Africa has abundant sun and wind, and the partly donor-funded plan to gradually wean itself off coal is being seen as a test case for such assistance to developing countries. "We have been moving at a slow pace, we need to be more aggressive and I'm committing to that," Ramokgopa said. Sign up here. https://www.reuters.com/sustainability/climate-energy/south-africa-appeals-donors-delay-its-climate-targets-minister-says-2024-07-15/
2024-07-15 15:24
July 15 (Reuters) - Concentra Group, a Select Medical (SEM.N) New Tab, opens new tab unit, is eyeing a valuation of $3.30 billion in its U.S. initial public offering, joining a growing list of firms testing the market after a near two-year dry spell. The occupational health services company is aiming to sell 22.50 million shares in the offering, priced between $23 and $26 apiece, to raise as much as $585 million, it revealed in a regulatory filing on Monday. U.S. IPOs are on the road to recovery as stock markets scale record highs and the economy shows resilience in the face of higher interest rates, giving companies the confidence to move ahead with their listings. Concentra, founded in 1979, is now the largest provider of occupational health services in the United States by number of locations, according to its IPO prospectus. Earlier this year, Select Medical had announced its plan to pursue the separation of Concentra, aiming to create two independent and publicly traded companies. Concentra is set to list on the New York Stock Exchange and trade under the ticker symbol "CON". J.P. Morgan, Goldman Sachs and BofA Securities are the lead underwriters for the offering. Sign up here. https://www.reuters.com/markets/deals/healthcare-firm-concentra-eyes-33-bln-valuation-us-ipo-2024-07-15/
2024-07-15 14:39
LOS ANGELES, July 15 (Reuters) - The cost to ship a standard 40-foot container of toys, auto parts or other goods from Shanghai to New York has jumped to nearly $10,000, fueling frustration among importers and prompting some experts to say the market is in a bubble. The Drewry World Container Index's spot rate for such a shipment hit $9,387 on July 11. That is more than double the rate from February but still below the peak of $16,000 early in the pandemic when it swelled due to spree buying by homebound consumers. Industry experts attribute the bulk of the run-up in off-contract shipping prices to Yemen's Houthi rebels' missile and drone attacks that have forced ships to avoid the Suez Canal trade shortcut. The alternative route around Africa takes longer, so fleets need more ships to move the same amount of cargo. This causes shortages, schedule disruptions and delays that drive up costs for sea transport that handles about 80% of international trade volume. U.S. retailers and other shippers have responded by bringing in goods earlier. This quickly made rates much more expensive in the busy "peak" season for importing back-to-school, Halloween and Christmas merchandise. "It is a bubble and it will eventually pop," Simon Heaney, senior manager for container research at Drewry, said of container rates. Customers polled by the consultancy expect prices to fall in the first half of next year, Heaney said. Meanwhile, the speed and magnitude of the increase has customers and industry experts asking whether market dynamics justify current rates. And some customers who remember the last round of inflation-driving ocean shipping costs worry that there are more increases ahead. "There's never transparency about what's actually driving it, only assumptions. What's the rhyme or reason?" said Greg Davidson, CEO of Lalo, which sells stylish infant high chairs online and through Pottery Barn Kids stores. Davidson said container shipping pricing is something of a black box and that large and small shippers in his professional network are bracing for rates of $20,000 per container. That is partly due to concern that Republican presidential candidate Donald Trump could impose sweeping tariffs on imports if the former president wins the election in November, he said. Importers will often rush in goods before tariffs hit, causing shipping rates to soar. The closely watched Shanghai Containerized Freight Index rate for Shanghai to the U.S. West Coast topped $8,100 this month to set a new record, even though sea cargo volumes remain below early pandemic highs. Drewry's index had the rate on that trade lane at around 60% of its pandemic peak of $12,400 per container. Large carriers like Maersk (MAERSKb.CO) New Tab, opens new tab and Hapag-Lloyd (HLAG.DE) New Tab, opens new tab have raised profit forecasts as robust demand and higher rates buoy their results. "It is difficult to understand the magnitude and pace of the rate rises," Deutsche Bank Research analyst Andy Chu said in a client note. For example, he said, May data on new orders from customers of manufacturing firms - which historically tracks with container demand - broke that trend. A drop in demand could quickly deflate prices, Chu said. "If demand is not sustained then rates could normalize quickly," he said. Sign up here. https://www.reuters.com/business/us-importers-balk-return-10000-container-shipping-rate-2024-07-15/
2024-07-15 14:31
Funds' Nvidia positions have grown as the stock has soared, increasing risk US equity markets are increasingly powered by handful of giant tech stocks Actively managed funds that held Nvidia trounced peers that didn’t hold it so far this year NEW YORK, July 15 (Reuters) - Outsized positions in artificial intelligence darling Nvidia (NVDA.O) New Tab, opens new tab have boosted portfolio managers' returns this year but the bets stand to magnify risk if the chipmaker's red-hot shares see a reversal of fortune. Nvidia shares are up about 785% since the start of 2023 and have risen some 160% this year alone, boosted by demand for its chips, seen as the gold standard in the AI field. Nvidia briefly became the world's most valuable company in June before a dip in its shares returned that title to Microsoft. Asset managers’ holdings of the chipmaker have swelled alongside its stock price. Morningstar data showed that 355 actively managed funds held Nvidia positions that totaled 5% or more of their assets at the end of the first quarter, compared to just 108 funds in the same period last year. Funds can maintain large positions in a single holding for a variety of reasons, whether to maximize profits or to track a stock’s weight in an index to which the fund is benchmarked. “There's a mindset among some portfolio managers that they missed the boat on Apple or Microsoft and they don't want to be wrong on AI," said Jack Shannon, a senior Morningstar analyst. "They don't want to sell.” The oversized positions in Nvidia are another example of how investors have cast their lots with a handful of massive growth stocks, leading to one of the most concentrated market advances ever. Nvidia alone has accounted for around a third of the S&P 500’s nearly 17% gain this year, according to S&P Dow Jones Indices. Overall, markets are the third-narrowest since 1986, with only 24% of stocks in the S&P 500 outperforming the index in the first half, according to BofA Global Research strategists. Funds that owned Nvidia have so far reaped the benefits. Actively-managed U.S. equity funds that held the stock were up 16.3% on average over the first six months of 2024, compared with an average 5.7% return among those that did not own Nvidia, Morningstar data showed. Yet concentration in a single stock can hurt investors if Nvidia shares hit a rough patch. While the average price target for the stock among analysts stands at $133.45, some 3% above its current level, according to LSEG data, some market participants point to increasing competition, an expected balance between supply and demand as Nvidia ramps up production, and the company's rich valuation as possible reasons for a downturn. The stock trades at 39.3 times forward earnings, about 50% more than its industry median, according to LSEG. “Does having 6% or more of your portfolio in one stock create outsized risks? The answer is obviously, yes,” said Phil Orlando, chief equity market strategist at Federated Hermes. “The fact that one stock did take off like a rocket ship doesn’t mean that it was smart ... to have that many eggs in one basket.” Investors got a taste of how concentrated positions can be a two-way street last week, following a sharp, one-day rotation out of Big Tech stocks sparked by cooler inflation data. Nvidia fell nearly 6% on Thursday, its biggest daily drop in more than two weeks, while the tech-heavy Nasdaq 100 lost about 2.2%. Both pared those losses the following day. ‘TWINGE OF REGRET’ Technology-sector funds overall have the largest weightings in Nvidia, with four Fidelity funds each holding more than 18% of their assets in the stock, according to Morningstar. Yet other, more diversified, funds appear to be taking on similar risks, with the Baron Fifth Avenue Growth fund holding nearly 15% of its portfolio in Nvidia and the Fidelity Blue Chip Growth fund holding about 13% of its portfolio in the stock. Both firms declined to comment. Anthony Zackery, a portfolio manager at Zevenbergen Capital Investments, has owned Nvidia since 2016 and continues to maintain a core position, though he has trimmed it periodically to keep within his firm’s risk-tolerance guidelines. The fund can hold as much as 13% of one stock in growth portfolios to keep in line with weightings in its benchmark, the Russell 3000 Growth Index. "This is a company that is at the forefront of the next trend in technology," he said. Some who sold out entirely, on the other hand, wish they had held on longer. Kevin Landis, chief investment officer at Firsthand Capital Management, said he was "prudent" and took profits in 2020 in a Nvidia position he owned for several years. Still, he can’t help thinking about the gains he missed out on. "I can’t look at any of my screens now without feeling a twinge of regret," he said. Sign up here. https://www.reuters.com/technology/nvidia-investor-dilemma-how-much-is-too-much-stock-portfolio-2024-07-15/
