Raphael Stevens

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    Why have markets grown more captivated by data releases?

    EIGHT-THIRTY in the morning on the first Friday of every month is a special time for bond traders: it’s when America’s Bureau of Labour Statistics usually releases its monthly jobs data. Despite the vast sums that some hedge funds spend on alternative data, landmark releases like the employment report or the consumer-price index (CPI) can still convulse markets. When the September payrolls numbers, released on October 4th, blew past expectations, bond yields jumped by eight basis points (0.08 percentage points). Stocks spiked, too, though the move was short-lived. More

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    Can the world’s most influential business index be fixed?

    Everybody loves a league table. Across areas as varied as sports, education and consumer goods, competitive rankings have a magnetic appeal. The question of what or who rose, fell or clinched the top spot can lend a sense of drama to even the most strait-laced subjects. More

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    Can markets reduce pollution in India?

    India’s battle with pollution has gone literal. To clean up Delhi’s filthy air, officials now routinely deploy “anti-smog” guns across the capital. The band-aid solution reflects desperation: air pollution, India’s public-health enemy number one, kills around 2m people a year. Recent research, however, suggests that it may be vulnerable to a more abstract weapon: market forces. More

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    7-Eleven’s parent company cuts full-year earnings forecast, presses ahead with restructuring

    Japanese convenience retailer Seven & i Holdings slashed its earnings forecasts for the fiscal year ending February 2025.
    The owner of 7-Eleven stores said it will set up an intermediate holding company for its supermarket food business, specialty store and other businesses, amid growing pressure from investors to trim down its large business portfolios.

    A customer is seen inside a 7-Eleven convenience store along a street in central Tokyo on September 9, 2024.  
    Richard A. Brooks | Afp | Getty Images

    Japanese convenience retailer Seven & i Holdings slashed its earnings forecasts and pressed ahead with restructuring plans that include spinning off non-core businesses into a standalone subsidiary.
    The company slashed its profit forecast for the fiscal year ending February 2025 and now expects net income of 163 billion yen ($1.09 billion), a 44.4% reduction from its prior forecast of 293 billion yen. The reduction comes as it reported first-half net profit of 52.24 billion yen on 6.04 trillion yen in revenue. While sales came in higher than forecast, profits significantly below its own guidance for 111 billion yen.

    Seven & i said it saw fewer customers at its overseas convenience stores as they took a “more prudent approach to consumption.” The company noted it recorded a charge of 45.88 billion yen related to its spin-off of Ito-Yokado Online Supermarket.
    In a separate filing, the owner of 7-Eleven said it will set up an intermediate holding company for its supermarket food business, specialty store and other businesses, amid growing pressure from investors to trim down its portfolio.
    The restructuring, which would consolidate 31 units, comes as the Japanese retail group resists a takeover attempt by Canada’s Alimentation Couche-Tard.
    In September, Seven & i rejected the initial takeover offer of $14.86 per share, claiming that the bid was “not in the best interest” of its shareholders and stakeholders and also cited U.S. antitrust concerns.
    After receiving that proposal, Seven & i sought and obtained a new designation as “core business” in Japan. Under Japan’s Foreign Exchange and Foreign Trade Act, foreign entities need to notify the government and submit to a national security review if they are buying a 1% stake or more in a designated company.

    Revised offer

    Seven & i confirmed Wednesday that it received a revised bid from ACT, but did not disclose further details. Bloomberg previously reported that the Canadian operator of Circle-K stores had raised its offer by around 20% to $18.19 per share, which would value Seven and i at 7 trillion Japanese yen. If finalized, the deal could become the biggest-ever foreign takeover of a Japanese company.

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    Seven & i Holdings

    It’s “entirely possible” that ACT’s buyout bid to turn into a hostile takeover attempt, Nicholas Smith, a Japan strategist at CLSA told CNBC’s “Squawk Box Asia” on Thursday. A hostile takeover occurs when an acquiring company attempts to gain control of the target company against the wishes of its management and board of directors.
    “We’ve had a lot of problems with poison pills in Japan in recent years, and the legal structure is extremely opaque,” he added. Companies trying to shake off an acquirer may opt to deploy a “poison pill” by issuing additional stock options to dilute the attempted acquirer’s stake.
    However, “an outright hostile tender offer would be highly unlikely,” in the view of Jamie Halse, founder and managing director of Senjin Capital, as no banks would be willing to provide the financing.
    That said, if the offer gets to a “sufficiently attractive level,” he said it may be difficult for the board to continue to reject it.
    “Shareholders are likely already frustrated that no further negotiations have taken place despite the increase in the offer price,” he said, adding that an activist investor may seek to “harness those frustrations” and “effect a change in the board’s composition.”

    Seven & i shares were traded at 2,325 Japanese yen as of Thursday close. The Tokyo-listed shares have surged over 33% since the Canadian company’s buyout interest became public in August.
    ACT has about 16,800 stores globally, far fewer than Seven & i Holdings’ approximately 85,800 stores.
    The newly revised offer indicates ACT leaders are “committed,” Jesper Koll, head of Japan at Monex Group, told CNBC via email. He also pointed out that the new offer price suggests a 53% premium to where shares were trading before the initial offer.
    “The money they offer is good, but there is more at stake than just numbers,” Koll said.
    “I really can’t see ACT revising up its price tag,” Amir Anvarzadeh, a Japan equity market strategist at Asymmetric Advisors, told CNBC, “the pressure is on Seven & i management to prove that they can speed things up and stay independent.” More

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    Ripple launches crypto storage services for banks in bid to diversify

    Ripple said it is launching a slew of features aimed at helping banks and fintechs store digital tokens — as part of a broader push into crypto custody.
    Crypto custody, a type of service that helps clients crypto assets, is a nascent business for Ripple, which has consolidated its efforts under a single brand called Ripple Custody.
    Ripple is primarily known for the XRP cryptocurrency and RippleNet, a distributed interbank payment settlement platform.

    Jakub Porzycki | Nurphoto | Getty Images

    U.S. blockchain startup Ripple made a major foray into crypto custody on Thursday, launching new services aimed at helping banks and financial technology firms to store digital assets on behalf of clients.

    The San Francisco-based company told CNBC it is debuting a slew of features to enable its banking and fintech clientele to keep and maintain digital tokens — as part of a broader push into custody, a nascent business for Ripple under its recently formed Ripple Custody division.
    These features include pre-configured operational and policy settings, integration with Ripple’s XRP Ledger blockchain platform, monitoring of anti-money laundering risks to maintain compliance, and a new user interface that’s easier to use and engage.
    The move will help Ripple, which is primarily known for the XRP cryptocurrency and its RippleNet platform, to diversify beyond its core payment settlement business. RippleNet is a messaging platform based on blockchain — the technology that underpins cryptocurrencies such as bitcoin — which lets banks share updates on the status of money movements in a global, distributed network.
    Thursday’s development marks Ripple’s first significant move to consolidate its custody products under one brand, Ripple Custody, and take on a slew of companies that already offer products and services in this space, such as Coinbase, Gemini, and Fireblocks.

    Custodian

    Custody is a nascent but fast-growing space within the digital asset space. Custodians play a key role in the crypto market, helping clients safeguard private keys, which are the alphanumeric codes required to unlock access to digital assets and authorize transactions.

    Custodians don’t just store crypto. They also help with payments and settlements, trading, and ensuring regulatory compliance with global laws governing digital currencies. The crypto custody market is forecast to reach at least $16 trillion by 2030, according to the Boston Consulting Group.
    Ripple said that custody is one of the fastest-growing areas for the startup, with Ripple Custody posting customer growth of over 250% year-over-year growth this year and operating in seven countries. It counts the likes of HSBC, the Swiss arm of BBVA, Societe Generale and DBS as clients.
    Gambling that a growing number of real-world assets will become tradable as digital tokens in the future, Ripple said it will allow customers of its custody services to tokenize real-world assets — think fiat currencies, commodities like gold and oil or real estate — by using XRP Ledger.
    Ripple said that the integration with its XRP Ledger tech would give firms access to its own native decentralized exchange, a platform that helps match buyers and sellers of a range of digital assets without any middlemen involved for faster, low-fee trading.
    “With new features, Ripple Custody is expanding its capabilities to better serve high-growth crypto and fintech businesses with secure and scalable digital asset custody,” Aaron Slettehaugh, senior vice president of product at Ripple, said in a statement shared with CNBC on Thursday.
    Last year, Ripple acquired Metaco, a firm that helps other entities store and manage their crypto, in a bid to boost its nascent crypto custody business. The company this year also acquired Standard Custody & Trust Company, another crypto custody firm, to further bolster its efforts.
    Ripple’s diversification bid comes at a tenuous time for XRP. Last week, the price of the XRP cryptocurrency tumbled sharply after the U.S. Securities and Exchange Commission filed to appeal a 2023 court ruling that the token should not be considered a security when sold to retail investors.
    As the largest holder of XRP coins, Ripple has long battled the SEC over allegations that it sold the cryptocurrency in an illegal securities offering. Ripple denies the cryptocurrency should be considered a security. More

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    Fed officials were divided on whether to cut rates by half a point in September, minutes show

    Federal Reserve officials at their September meeting agreed to cut interest rates but were unsure how aggressive to get.
    Minutes released Wednesday indicated that “a substantial majority of participants” favored cutting by half a percentage point, through some expressed misgivings about going that large.
    Since the meeting, economic indicators have showed that the labor market is perhaps stronger than officials favoring the 50 basis point move had expected.

    WASHINGTON – Federal Reserve officials at their September meeting agreed to cut interest rates but were unsure how aggressive to get, ultimately deciding on a half percentage point move in an effort to balance confidence on inflation with worries over the labor market, according to minutes released Wednesday.
    The meeting summary detailed reasons that policymakers decided to approve a jumbo rate cut of 50 basis points for the first time in more than four years, and showed members divided over the economic outlook.

    Some officials hoped for a smaller, quarter percentage point reduction as they sought assurance that inflation was moving sustainably lower and were less worried about the jobs picture.
    Ultimately, only one Federal Open Market Committee member, Governor Michelle Bowman, voted against the half-point cut, saying she would have preferred a quarter point. But the minutes indicated that others also favored a smaller move. It was the first time a governor had dissented on an interest rate vote since 2005 for a Fed known for its unity on monetary policy.
    “Some participants observed that they would have preferred a 25 basis point reduction of the target range at this meeting, and a few others indicated that they could have supported such a decision,” the minutes stated.
    “Several participants noted that a 25 basis point reduction would be in line with a gradual path of policy normalization that would allow policymakers time to assess the degree of policy restrictiveness as the economy evolved,” the document added. “A few participants also added that a 25 basis point move could signal a more predictable path of policy normalization.”
    Markets moved little following the release, with major averages continuing on pace for big gains.

    Since the meeting, economic indicators have showed that the labor market is perhaps stronger than officials favoring the 50 basis point move had expected.
    In September, nonfarm payrolls increased by 254,000, much more than expected, while the unemployment rate dipped to 4.1%.
    The data has helped cement expectations that while the Fed likely is in the early days of an easing cycle, future cuts likely would not be as aggressive as the September move. Chair Jerome Powell and other Fed officials in recent days have backed the expected 50 basis points in reductions by the end of 2024 as indicated by the “dot plot” unofficial forecast released after the September meeting.
    The minutes noted that the vote to approve the 50 basis point cut came “in light of the progress on inflation and the balance of risks” against the labor market. The minutes noted that “a substantial majority of participants” favored the larger move, without specifying how many were opposed. The term “participants” suggests involvement of the full FOMC rather than just the 12 voters.
    The minutes also noted that some members favored a reduction at the July meeting that never materialized.
    Though the document was more detailed about the debate over whether to approve the 25 basis point cut, there was not as much information about why voters supported the larger move.
    At his post-meeting news conference, Powell used the term “recalibration” to sum up the decision to cut, and the term also appears in the minutes.
    “Participants emphasized that it was important to communicate that the recalibration of the stance of policy at this meeting should not be interpreted as evidence of a less favorable economic outlook or as a signal that the pace of policy easing would be more rapid than participants’ assessments of the appropriate path,” the minutes stated.
    Such a recalibration would bring policy “into better alignment with recent indicators of inflation and the labor market.” Supporters of the 50 basis point cut “also emphasized that such a move would help sustain the strength in the economy and the labor market while continuing to promote progress on inflation, and would reflect the balance of risks.”
    Under normal circumstances, the Fed prefers to cut in quarter-point increments. Previously, the central bank moved by half a point only during Covid and, before that, the 2008 financial crisis.
    Market pricing is pointing to the fed funds rate ending 2025 in the 3.25%-3.5% range, about in line with the median projection of a 3.4% rate, according to the CME Group’s FedWatch. Futures markets previously had been indicating a more aggressive path and in fact now are pricing in about a 1-in-5 chance that the Fed does not cut at its Nov. 6-7 meeting.
    The bond market, though, has been acting differently. Since the Fed meeting, both the 10- and 2-year Treasury yields have surged about 40 basis points.

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    CVS, UnitedHealth, Cigna say FTC should take Lina Khan and two commissioners off drug middlemen case

    CVS Health, Cigna and UnitedHealth Group are demanding that FTC Chairwoman Lina Khan and two other commissioners recuse themselves from a lawsuit accusing the company and other drug middlemen of boosting their profits while inflating insulin costs for Americans. 
    The companies argued that all three commissioners have an extensive track record of making public statements that indicate “serious bias” against the companies’ so-called pharmacy benefit managers.
    The FTC filed the suit last month against the three largest PBMs, CVS Health’s Caremark, UnitedHealth Group’s Optum Rx and Cigna’s Express Scripts.

    FTC Chairwoman Lina Khan testifies during the House Appropriations Subcommittee on Financial Services and General Government hearing titled “Fiscal Year 2025 Request for the Federal Trade Commission,” in Rayburn Building on Wednesday, May 15, 2024. 
    Tom Williams | Cq-roll Call, Inc. | Getty Images

    CVS Health, UnitedHealth Group and Cigna are demanding Federal Trade Commission Chair Lina Khan and two other commissioners recuse themselves from a suit accusing the companies and other drug middlemen of boosting their profits while inflating insulin costs for Americans. 
    In separate motions filed Tuesday night with the FTC, the companies argued that all three commissioners have an extensive track record of making public statements that indicate allegedly serious bias against the companies’ so-called pharmacy benefit managers. 

    The companies accused Khan, as well as Commissioners Alvaro Bedoya and Rebecca Kelly Slaughter, of incorrectly asserting that PBMs are “price gougers” that hold significant control over the pricing and access to drugs like insulin. CVS said those statements demonstrate that the commissioners have “prejudged this matter,” so their participation in the case “violates due process.” 
    “If the opposite of ‘complete fairness’ is ‘blatant bias,’ the Three Commissioners would easily satisfy even that standard,” CVS wrote in a 23-page motion.
    Meanwhile, UnitedHealth’s 17-page motion said, “Any judge who made these remarks about a litigant at the outset of a lawsuit would immediately need to recuse for blatant bias.”
    Cigna, in one of three motions filed, said Khan has “prejudged the facts and law relating to this action.”
    “She has repeatedly and wrongly asserted that PBMs ‘control’ drug pricing and patient access to drugs,” Cigna said.

    The FTC filed its complaint through its so-called administrative process, which initiates a proceeding before an administrative judge at the agency who would hear the case and issue an opinion. FTC commissioners then vote on that opinion.
    The FTC on Wednesday declined CNBC’s request for comment on the motion. 

    More CNBC health coverage

    Other corporate giants, including Amazon and Meta, have unsuccessfully pushed for Khan to be disqualified from previous cases or investigations, citing concerns about her objectivity. Khan has resisted those calls, saying she has never prejudged any case or set of facts. 
    The FTC filed the suit last month against the three largest PBMs, CVS Health’s Caremark, UnitedHealth Group’s Optum Rx and Cigna’s Express Scripts. All are owned by or connected to health insurers and collectively administer about 80% of the nation’s prescriptions, according to the FTC. 
    PBMs sit at the center of the drug supply chain in the U.S., negotiating medication rebates with manufacturers on behalf of insurers, creating lists of preferred medications covered by health plans and reimbursing pharmacies for prescriptions. The FTC has been investigating PBMs and their role in insulin prices since 2022.
    The agency’s lawsuit argues that the three PBMs have created a “perverse” system that prioritizes high rebates from manufacturers, which leads to “artificially inflated insulin list prices.” The suit also alleges that PBMs favor high-list-price insulins even when insulins with lower list prices become available. 
    The lawsuit also includes each PBM’s affiliated group purchasing organization, or GPO, which brokers drug purchases for hospitals and other health-care providers. Zinc Health Services operates as the GPO for Caremark, while Emisar Pharma acts as the GPO for OptumRx. Ascent Health Services is the GPO for Cigna.
    The lawsuit is just one of several headwinds CVS is facing. Shares of the company are down more than 20% this year as it grapples with runaway medical costs in its insurance segment and pharmacy reimbursement pressure. 
    CVS has engaged advisors in a strategic review of its business, which could potentially involve splitting the company’s insurer from its retail pharmacies. It’s unclear where Caremark would fall in the case of a breakup. 

    A general view shows a sign of CVS Health Customer Support Center in CVS headquarters of CVS Health Corp in Woonsocket, Rhode Island, U.S. October 30, 2023. 
    Faith Ninivaggi | Reuters

    In the motion Tuesday, CVS alleged that Khan has vilified PBMs during her entire professional career. For example, the company cited a 2022 statement in which Khan said PBMs “practically determine which medicines are prescribed, which pharmacies patients can use, and the amount patients will pay at the pharmacy counter.”
    CVS similarly pointed to Slaughter’s previous comments about the allegedly “disturbing,” “unacceptable” and “rotten” rebating practices of PBMs, and how she believes they create “competitive distortions in pharmaceutical markets.” Meanwhile, the company cited Bedoya’s suggestions that “a significant part of the blame” for insulin price increases rests on rebates demanded by PBMs. 
    CVS called the prior statements of the three commissioners “incorrect assertions” about Caremark and other PBMs. 
    The health-care giant also alleged that during the FTC probe, the three commissioners attended closed events to help fundraise for anti-PBM lobbying groups. Organizers of those events vilified PBMs as “bloodsuckers” and “vampires,” CVS argued in the motion.
    The Biden administration and lawmakers on both sides of the aisle have escalated pressure on PBMs, seeking to increase transparency into their business practices as many patients struggle to afford prescription drugs. Americans pay two to three times more than patients in other developed nations for prescription drugs on average, according to a fact sheet from the White House.

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    Bridgit Mendler’s space startup Northwood passes first test, connecting prototype antenna to Planet satellites

    Northwood Space, the startup led by former television star and singer Bridgit Mendler, passed its first major development test by connecting with Planet imagery satellites in orbit.
    “We’re building this global network to send data for satellites, built off of phased array technology that we have now successfully validated, both in the lab and in the field,” Mendler told CNBC.

    The startup’s co-founders, from left: Chief Technology Officer Griffin Cleverly, CEO Bridgit Mendler and Head of Software Shaurya Luthra.
    Northwood Space

    Northwood Space, the startup led by former television star and singer Bridgit Mendler, passed its first major development test last week by connecting with Planet Labs imagery satellites in orbit.
    “We’re building this global network to send data for satellites, built off of phased array technology that we have now successfully validated, both in the lab and in the field,” Mendler, Northwood’s CEO, told CNBC.

    El Segundo, California-based Northwood, unveiled earlier this year, is focused on the ground side of the space connectivity equation. Ground stations are the vital link for transmitting data to and from orbit and are especially crucial for operating and controlling satellites.

    The company’s prototype antenna “Frankie” during testing in North Dakota on Oct. 5, 2024.
    Northwood Space

    The startup is developing ground stations to be mass-produced and betting that its phased array-based system, called Portal, can outperform the parabolic dish antennas traditionally used by ground station companies. It’s projecting Portal will be able to connect to as many as 10 satellites at once versus the typical one to three for parabolic dish antennas.
    “For Northwood, what we’re wanting to do is introduce a new standard for connectivity for companies,” Mendler said.

    Read more CNBC space news

    The ground station as a service, or GSaaS, market has companies going after the opportunity in managing the Earth-based side of space infrastructure. Along those lines, Amazon has launched its AWS Ground Station service, and satellite communications giant Eutelsat has proposed a nearly $1 billion deal in the sector.
    Mendler’s Northwood wants to take GSaaS a step further, eliminating what she sees as “connectivity very much stuck in a different era” of blackouts and “super expensive networks.”

    “Analogizing to the cellular industry — where we draw parallels to how cell towers and shared assets like that ultimately have super vertically integrated players — wound up offloading and selling their assets to the tower companies. We expected that the shared model is going to be an efficiency,” Mendler said.
    In her view, ground stations are “the third leg of the stool” of space technology, with the other two being rockets, or the cargo vehicles, and satellites, or the orbital infrastructure.
    “The industry is really at a point where there’s a lot of appetite for growth, and this is something that we can really interject into the industry and accelerate progress,” Mendler said.

    North Dakota testing

    Setting up the company’s prototype antenna in the early hours of Oct. 2, 2024.
    Northwood Space

    Last week the Northwood team was out in remote Maddock, North Dakota, to test its prototype antenna — “fondly dubbed Frankie,” Mendler noted — by connecting to a Planet satellite in orbit. 
    The effort is known as a TT&C — telemetry, tracking and control — test, with Northwood aiming to make contact with Planet’s satellite in both S-band and X-band frequencies. 
    “We were able to achieve bi-directional communications for the full duration of a pass with Planet’s satellites and achieved nominal communications for them. They were able to perform their operations as they would on their own system,” Mendler said.

    Testing the prototype on Oct. 5, 2024.
    Northwood Space

    Northwood designed and built Frankie in four months, the company said, and was able to deploy the antenna “from off the truck to live sky testing” in six hours. Planet, with more than 150 imagery satellites in orbit, heralded Northwood’s test as a “major milestone.”
    “Northwood is not only solving for historical issues like cost and scale, but has built and successfully field-tested their phased array antenna faster than previously thought possible. We’re proud to be a part of this breakthrough in ground station technology,” Joseph Breu, Planet’s senior director of global ground networks, said in a statement to CNBC.

    A rendering of a Portal site.
    Northwood Space

    Northwood has designed two antennas for its Portal system, with a larger 5-by-5-feet S-band frequency antenna and a smaller 18-by-18-inch X-band antenna.
    The company plans to deploy Portal sites that can support as many as 10 simultaneous satellite connections, with data rates over 1 gigabit per second per beam, beginning next year. Northwood is currently assessing locations in the U.S., Europe, Australia and New Zealand for its first Portal sites.
    “Performance-wise, we achieved everything we were hoping to achieve,” Mendler said, adding that Northwood is “really grateful for [Planet’s] participation and support throughout the test.”
    “It just unlocks a lot of things about the next chapter,” Mendler said. More