Aurelia Butler

(Reuters) – Rivian Automotive on Tuesday raised its full-year production forecast, and its chief executive said the electric vehicle maker has enough money to last it through 2025 as it keeps a lid on costs.Shares in Rivian, which initially rose nearly 3% after results were published, were up 1% in choppy extended trading. The stock has soared nearly 80% in the past three months.The Amazon-backed company, like other EV rivals has been burning through cash to ramp up production and keep up with market leader Tesla (NASDAQ:TSLA), which has slashed prices.Rivian, though, has fared better than smaller firms as demand for its pickup trucks and sport-utility vehicles has risen despite high borrowing costs for consumers.The competition and a tight funding environment led two EV firms – Lordstown Motors and Proterra – to file for bankruptcies in June and this week, respectively.In an interview with Reuters, Rivian CEO RJ Scaringe said his company was in a far stronger financial position.”The cash balance that we have today takes us through 2025,” Scaringe said. “We will be very thoughtful and intentional on how we secure additional capital to support the growth of the R2 program,” he added, referring to the company’s upcoming lineup of smaller, cheaper cars.Rivian’s cash balance fell by nearly $2 billion in the second quarter to $9.26 billion. After struggling to ramp up production because of a shortage of parts such as power semiconductors, Rivian has moved to building in-house Enduro powertrains to cut costs and reduce dependency on suppliers.Scaringe, however, said while supply chain visibility had improved, conditions weren’t back to pre-pandemic levels. “There’s always going to be risk associated with supply chain,” he said. “That contemplation of that risk is what’s informed the guidance that we provided.”The company on Tuesday said it expected to make 52,000 vehicles in the year, up from its previous forecast of 50,000 units. It posted second-quarter revenue of $1.12 billion, topping Wall Street estimates of $1 billion, according to Refinitiv data and reported a smaller quarterly loss. That follows deliveries of 12,640 vehicles in the April-June period, beating analysts’ estimates of 11,000. Second-quarter gross margins improved to a negative 37%, compared with negative 81% in the first quarter. It posted an adjusted loss of $31,595 per vehicle sold, compared with a loss of $67,329 in the previous three months. More

LONDON (Reuters) – The Bank of England will not succeed in returning inflation to its 2% target before 2028 at the earliest, according to forecasts from a leading academic think-tank which warned the British economy was succumbing to stagnation.The National Institute of Economic and Social Research (NIESR) forecast inflation will fall from 7.9% now to 5.2% by the end of 2023 but will be slower to drop thereafter, averaging just above the BoE’s 2% target in 2025, 2026 and 2027.The economy would grow by a meagre 0.4% this year and 0.3% in 2024 – little changed from NIESR’s growth forecasts three months ago of 0.3% and 0.6% for this year and next.”Inflation, political churn, a global economy slowdown, oil shocks, strikes – there are a lot of nouns there that are resonant with the 1970s,” NIESR director Jagjit Chadha said.”And there’s the re-emergence of ‘the British disease’,” he added, referring to stagnant growth at a time of rising prices.British economic output is not on track to return to its pre-pandemic peak until late 2024, representing zero growth over a five-year period, NIESR predicted. By the end of 2024, there was even a 60% chance the economy would be back in recession as it wrestled with problems including shortages of skilled workers, weak productivity, a lack of public investment and underdeveloped regional economies.”Brexit has done a great service by revealing even more clearly the underlying problems in the British economy but has not yet located solutions,” Chadha said.NIESR’s near-term growth forecasts are similar to those announced by the BoE last week, but its forecast for inflation is higher than the central bank’s projections for price growth to fall below its 2% target in 2025.Unlike the BoE, NIESR expects wage growth to hold at 6% next year as well as this year due to a lack of candidates to fill vacancies, easing some of the squeeze on living standards but pushing up costs for employers.British inflation is currently the highest of any advanced economy, but NIESR expects the BoE to raise interest rates just once more to a peak of 5.5%, after last week’s rise to 5.25%.The BoE had struggled to explain its policy strategy to financial markets and it appeared to be buffeted by individual pieces of data that came in higher than expected, NIESR said.”The communication has not been clear,” NIESR deputy director Stephen Millard, a former BoE economist, said.Rather than talk of multiple potential paths for interest rates to return inflation to target, as it did last week, the BoE would do better to state clearly how it would decide if rates were high enough to return inflation to 2%, he added. More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.The first round of top-tier Chinese economic data this week was a blow for those hoping the world’s second-largest economy was emerging from its deep funk, so what will the second round on Wednesday bring?Further disappointment, most probably.Figures on Wednesday are expected to show that Chinese consumer prices fell 0.4% in July from the same month a year ago, meaning China will be the first G20 country to fall into deflation since Japan last posted negative CPI growth two years ago.With cracks also reappearing in the Chinese property sector and Wall Street knocked off course by U.S. banking downgrades by ratings agency Moody’s (NYSE:MCO), risk appetite in Asia is likely to be in short supply on Wednesday.After Tuesday’s trade data showed that exports fell a larger-than-forecast 14.5% last month and imports plunged more than twice as fast as expected, the balance of risks for July’s CPI print is probably to the downside.Nobody can say they haven’t been warned. Producer prices in China have been falling on an annual basis every month since October, and more importantly, the pace of decline has accelerated this year.June’s 5.4% fall marked the deepest factory gate deflation since 2015. Figures on Wednesday are expected to show a slight cooling off to 4.1% in July, but again, would anyone be completely shocked if it came in below forecasts?The range of PPI forecasts is -6.1% to -2.9%, and the CPI range is -0.9% to 0.5%, according to Reuters polls.Staying with China, Country Garden said on Tuesday it has not paid two dollar bond coupons due on Aug. 6 totaling $22.5 million, confirming market fears that the biggest privately-owned developer in China is slipping into repayment troubles.Hong Kong’s benchmark property index lost nearly 5% on Tuesday, and with sentiment already badly soured by the trade figures, China’s blue chip CSI 300 index fell for a second day and the yuan fell to a four-week low against the dollar.On the Asian corporate calendar, Bridgestone, Honda and Sony (NYSE:SONY) are among the major Japanese firms publishing their latest earnings reports on Wednesday.Asian stocks will likely open on the defensive after the downgrading of several U.S. lenders by Moody’s reignited fears about the health of U.S. banks and the economy.Moody’s cut ratings on 10 small- to mid-sized lenders by one notch and placed six banking giants on review for potential downgrades. After coming within 5% of their lifetime highs last month, the S&P 500 and Nasdaq have both fallen five sessions out of six so far this month.Here are key developments that could provide more direction to markets on Wednesday:- China CPI and PPI inflation (July)- South Korea unemployment (July)- Japan broad money supply (July) (By Jamie McGeever; editing by Deepa Babington) More

Shares of Synovus Financial, the parent company of the bank, rose 2.8% in extended trading. KKR, which made the investment through its private credit funds and accounts, said the deal aligns with its asset-based finance strategy.The sale comes as regional banks shed consumer loan portfolios to reduce risk in rising interest rate environment and look to improve balance sheet liquidity following a sector-wide crisis earlier this year. In late June, asset manager Ares Management (NYSE:ARES) also inked a deal with PacWest Bancorp for a $3.54 billion lender finance portfolio. More

OTTAWA (Reuters) – The shortage of affordable housing in Canada is “a very serious challenge” that could ease as inflation eases and interest rates become more predictable, newly-appointed Housing Minister Sean Fraser told Reuters on Tuesday.Fraser was appointed last month as part of a wide-ranging shuffle by Prime Minister Justin Trudeau to focus on cost-of-living issues. An election must be held by October 2025 and the ruling Liberals trail in the polls amid accusations from the opposition Conservatives that Trudeau has mismanaged the economy and made housing unaffordable.The housing issue is one that the opposition Conservatives have seized on, with leader Pierre Poilievre last week citing figures showing rents and mortgage payments roughly doubling since the Liberals took power in 2015. Critics say one reason for the crunch is an immigration plan that seeks to attract more than 400,000 people a year, or 1% of the population, without addressing where newcomers will live.Housing is primarily the responsibility of lower levels of government in the provinces and municipalities. Ottawa has focused on strategies designed to speed up what it sees as a sluggish construction rate.In 2022 the federal government announced plans to double construction over the next decade. Housing starts, however, will decline to 212,000 units in 2023 from 262,000 in 2022.Fraser said the pandemic hit supply chains, forcing up building costs. The Bank of Canada lifted rates to a 22-year high in July and inflation in June stood at 2.8% compared to a peak of 8.1% in June 2022.The lower rate of inflation, and the potential for interest rates to stay stable, should give the building industry more confidence going forward, Fraser said in a phone interview.”We have an opportunity under this new, more stable environment … to make a major difference.” Fraser, immigration minister until the shuffle, ruled out major changes to official policy.”The answer to our housing challenges is not to welcome fewer newcomers. The answer to our housing challenges is to build more houses,” he said. More

NEW YORK (Reuters) – U.S. bank shares slid on Tuesday after Moody’s (NYSE:MCO) downgraded several small to mid-sized banks and said it may revise the credit ratings of some of the nation’s biggest lenders, sparking concerns about the health of the lenders.Here’s what analysts are saying about the downgrade and the risks to the banking sector:BRIAN MULBERRY, PORTFOLIO MANAGER AT ZACKS INVESTMENT MANAGEMENT “The high interest rate environment will persist longer than what the market has priced in, which makes risks for financial firms higher, so the rating downgrade is not a surprise to us, and we are surprised with the market’s overreaction to it.”However, the timing of the rating action is a bit unexpected as nothing has materially changed in the last few months. The stress in the system hasn’t changed and we understand that the profitability is going to remain under pressure, but we do not believe that there is a high risk of bank failures or the environment is similar to what it was before the global financial crisis of 2008.”MIKE SANDERS, HEAD OF FIXED INCOME & PORTFOLIO MANAGER AT MADISON INVESTMENTS”The banks that had gotten into trouble in the first quarter 2023 had unique business models and were not similar to most of the banks that have seen a rating action. So we think that the risks that these banks are facing is more manageable and we are not very concerned.” MACRAE SYKES, PORTFOLIO MANAGER, GABELLI FUNDS”This (the rating downgrade) is just another reminder that there are still challenges in the regional banking space. High exposure to commercial real estate, rising deposit and funding cost are some of the key concerns that the banks are facing.”LIZ ANN SONDERS, CHIEF INVESTMENT STRATEGIST AT CHARLES SCHWAB “Additional risk-off sentiment surrounding the banking sector could tip the scales more toward recession in the recession-versus-soft landing debate.”KATHY JONES, CHIEF FIXED INCOME STRATEGIST AT CHARLES SCHWAB “As banks tighten lending standards and try to shore up their capital, there is less money flowing to the economy. Credit is the lifeblood of small and medium-sized businesses, so reducing the availability could contribute to a downturn.”CHRISTOPHER WOLFE, HEAD OF NORTH AMERICAN BANKS AT FITCH RATINGS “We have a deteriorating outlook on banks and it is proving to be a much tougher environment for the banking industry than it has been over the past few years. We did lower, what we call as the operating environments for the U.S, banks in June from AA to AA-. That didn’t translate into any rating changes, but that reduces the amount of rating headroom for banks in the U.S.”MICHAEL GREEN, CHIEF INVESTMENT STRATEGIST AT SIMPLIFY ASSET MANAGEMENT“Moody’s is recognizing its cost of funding for banks has risen dramatically. There is a recognition that unless U.S. banks start sharing some of the wealth from higher interest rates with their depositors, they’re going to see money continue to flow out. “While we’ve seen them stabilize, the cost of funding has risen significantly. That’s kind of the core of the Moody’s component.”JOE SCOTT, HEAD OF THE FINANCIAL INSTITUTIONS GROUP AT RATING AGENCY KBRA“We believe most KBRA-rated banks will be able to navigate the current uncertainties with their ratings unchanged. The vast majority of KBRA’s rated community and regional banks continue to have Stable Rating Outlooks. KBRA strives to produce durable ‘through the cycle’ ratings that encompass the ability of banks to manage through more difficult economic environments.” More