Here are five things you need to know this morning:
Inconvenient truths: Markets had been pricing in rate cuts on the premise that inflation would resolve itself this year. This morning’s read of inflation in the U.S. offers an inconvenient truth. Headline inflation unexpectedly accelerated 3.4 per cent, higher than the 3.2 per cent projected. Core inflation was also higher than expected. However, core inflation is now 3.9 per cent, which is a slight deceleration from the month before and the first sub-four per cent reading since May 2021. Markets are pretty stoic right now. Futures are flat and we saw only a modest rally in the bond market. We will see if that holds and where investors find comfort in the numbers. I’m already seeing some excuse the hotter numbers away by pointing out they were largely driven by housing (if only people could dismiss their housing expenses as easily as economists). Nevertheless, the numbers may not support a U.S. rate cut in March, the odds of which still sit at 70 per cent.
Bitcoin win: After 10 years of trying, history was made yesterday when the SEC granted the approval of 11 applications for the first spot bitcoin ETFs in the U.S. Now begins the race to amass assets. Eric Balchunas at Bloomberg notes the record for first day inflows is US$2.1 billion for Blackrock’s climate change ETF. The decision itself was particularly spicy. SEC Commissioner Hester Peirce, who voted to approve, said the SEC “squandered a decade of opportunities to do our job” by taking so long to approve the ETF. On the flip side, SEC Commissioner Caroline Crenshaw, who is opposed to the ETF, said she was “deeply concerned” about the approval. Crenshaw expressed worry about these products in the hands of U.S. households who can’t afford to lose their savings, and about the precedent it sets for future products. Indeed, Ether actually seems like the big winner, as investors turn their attention to the next digital asset ripe for ETF-ification.
Better than feared: We will watch the reaction to Artizia’s latest set of quarterly results. Artizia managed to grow sales nearly five per cent, after analysts were worried sales might fall. Profit also came in above expectations. While margins declined from last year, they improved from the last quarter. Artizia forecasted margin expansion for 2025. It was good enough for Raymond James, which upgraded the stock on the back of the results. They seem tentative about it, noting it is still a “wait and see” story. But given valuation, they are confident with the upgrade here.
Checkmate: Thomson Reuters has offered to buy Swedish e-invoicing and tax solutions company Pagero for about US$627 million. The bid tops an earlier offer from U.S. tax technology firm Vertex. Pagero’s board is now recommending shareholders accept the Thomson’s offer.
Ouch: Shares of Hertz are under pressure after announcing plans to sell 20,000 electric vehicles and swap them for gas-powered cars. Hertz says this is because demand just isn’t there for EV cars. Is this a canary in the coal mine when it comes to EV adoption? Shares of Tesla and Rivian are down more than one per cent right now. 2024 is off to a rocky start in particular for Tesla, which is the worst-performing of the “magnificent seven” tech stocks.