Finance

Source: Finance – cnbc.com More

American inflation has left its mark across the country’s economy and the world’s financial markets. It has also reared its head between the Golden Arches. Since 1986 The Economist has tracked the price of a McDonald’s Big Mac around the world as a light-hearted guide to the fair value of currencies. Our index shows that the median price of the burger in its home market rose to $5.58 in July, an increase of over 4% since January and 8.3% compared with a year earlier. That is the beefiest rate of American McFlation recorded in our index since July 2012.Compared with the rest of the world, however, Americans have escaped lightly. From January to July the price of a Big Mac has risen more than twice as fast in the euro zone and Britain, and nearly four times as fast in Canada (see chart). What does this mean for the fair value of currencies? According to the theory of purchasing-power parity, a currency’s fundamental value reflects the amount of goods and services it can buy, including burgers. If the price of the Big Mac rises, the currency can buy fewer of them. Its fair value has therefore declined. Since the price of burgers is rising even faster in Europe, Japan and Canada than in America, their currencies’ purchasing power is dropping faster than the dollar’s. That is bringing their fair values closer into line with their market values. In January the fair value of the euro, judged by its burger-buying power, was $1.10. That is because €10 could purchase as many Big Macs in Europe as $11 could buy in America. But on the foreign-exchange markets, €10 cost only $10.90. By this measure, the euro looked cheap and the dollar expensive. That is no longer the case. Thanks to the rise in Big Mac prices in Europe and a small fall in the dollar, the fair value of the euro is now $1.06, less than its market exchange rate. The euro now looks overvalued against the dollar for the first time in two years. America’s currency is still expensive relative to the British pound and the Canadian dollar, but there is no longer much in it. In fact the euro, the Canadian dollar and the pound now all trade within 5% of the dollar value suggested by the Big Mac index. The greenback looked too expensive to begin with, so America’s weakening exchange rate and its milder inflation, relative to elsewhere, has brought the currency pairs and the fundamentals closer together.Why had the dollar risen so high? The explanation may lie in another currency-market conjecture: that of “uncovered interest parity”. It says that exchange rates should move to equalise, across borders, the returns to buying safe assets like government bonds. When interest rates rise—as they did more dramatically in America last year than in many rich countries—a currency should first jump, before gradually weakening over time. Bond investors receive a high rate of interest, but suffer a gradual capital loss on the currency. Perhaps that process is now playing out.This theory also helps explain one of the Big Mac index’s biggest misses this year: its prediction that a dollar should buy only 81 Japanese yen. In fact it buys 142. That suggests the yen is spectacularly cheap, undervalued by 43% against the greenback. The gap is likely to persist until the Bank of Japan feels the need to raise interest rates closer into line with America’s. That day may not be as far off as investors seem to assume. Last month the central bank unexpectedly tweaked its monetary policy. And even Japan is not immune to McFlation. A Big Mac there costs 9.8% more than it did six months ago. ■ More

Most young people are ultimately getting jobs, but ones that might not pay the best or match their area of study, according to CNBC interviews with six students and recent graduates.
The primary reason for high youth unemployment is insufficient demand from businesses, said Zhang Chenggang, director of a research center for new employment forms at the Capital University of Economics and Business in Beijing.
Youth unemployment has remained persistently high over the last three years, while the overall jobless rate for people in cities has officially stayed far lower, near 5%.

The unemployment rate for young people ages 16 to 24 in China has soared to record highs above 20% in May and April.
Kevin Frayer | Getty Images News | Getty Images

BEIJING — Ask young people about the Chinese job market, and the frequent answer is things are more difficult this year.
Most people are ultimately getting jobs, but ones that might not pay the best or match their area of study, according to CNBC interviews with six students and recent graduates. Many requested anonymity since youth unemployment can be a sensitive topic in China, especially for those in the middle of a job search or just starting a career.

The job market can be so tough that one student from a top university told CNBC his classmates are sending out at least 100 resumes, if not more.
“Some classmates have sent out more than 200,” the student said, noting he felt fortunate having applied to 80 positions before getting three job offers. He just graduated from Shanghai Jiao Tong University and is set to start work at Huawei later this summer. Shanghai Jiao Tong University is ranked third in China, and 89th globally, according to U.S. News and World Report rankings.

The unemployment rate for China’s young people ages 16 to 24 climbed to a new record high in June of 21.3%.
The primary reason for high youth unemployment is insufficient demand from businesses, said Zhang Chenggang, director of a research center for new employment forms at the Capital University of Economics and Business in Beijing.
Businesses aren’t certain about the future right now, making them reluctant to hire young workers — who typically need to be trained, regardless of the education system, Zhang said.

Youth unemployment has remained persistently high over the last three years, while the overall jobless rate for people in cities has officially stayed far lower, near 5%.
In the U.S., the unemployment rate for people ages 16 to 24 hit a high of 27.4% in April 2020, before falling to near 7% this year, according to U.S. Bureau of Labor Statistics data.
One 2023 graduate in China said her class missed out on job opportunities because large internet companies were only looking for current students (not graduates) to begin internships that might turn into jobs. In contrast, she said that when she was still a student, the pandemic was still ongoing and she had not heard of such opportunities.
“I feel like our employment [situation] is much harder,” she said in Mandarin, translated by CNBC.

Slowing growth

China’s economic rebound from the pandemic has slowed in recent months. Exports have fallen steadily. The massive real estate sector has yet to turn around.
Hiring plans have fallen, according to a monthly survey of mostly non-state-owned businesses run by alumni of the Beijing-based Cheung Kong Graduate School of Business. The CKGSB recruitment index fell to 54.2 in June, continuing a drop from 64.6 in April.
A similar business survey for May by Caixin found a slight increase in the service sector’s demand for workers. But manufacturers’ hiring plans fell to the lowest since February 2020.

Competition everywhere

Even in the government-supported, popular industry of semiconductors, the job search is getting harder.
The “hot” period of expansion has passed and the industry is in a period of settling, said Zimri Sun, who is starting his job search this summer ahead of graduating from his master’s program next year. That’s according to a CNBC translation of his Mandarin-language remarks.
Sun is studying information and communication engineering at Shanghai Jiao Tong University. He said he’s confident he will find a job, but knows the process will be hard.
For some fields, the pandemic and regulatory changes have eliminated many of the jobs once popular among young people in China — while the annual graduating class has swelled to record highs. The class of 2023 had nearly 11.6 million students, according to official estimates.

Read more about China from CNBC Pro

Zhang expects the unemployment rate for young people to drop toward the end of the year, after the summer graduation season.
He noted that since many families in China have become more affluent, more young people can also afford to take their time to prepare for higher education exams and find a job with work-life balance.
For some, the situation may even prompt inaction.
“Every year people say it’s hard to find a job. This year, people are more relaxed,” another 2023 graduate said, noting recent world events have demonstrated the futility of planning. That’s according to a CNBC translation of the Mandarin.

Taking more time for tests

In a broader search for job stability, a record 7.7 million people took the civil service exam in China this year. More than 4.7 million people registered for an annual postgraduate studies exam in December, a new record, according to state media.
When Sirui Jiang was about to graduate last year, she said she applied for another master’s program as she’d rather pursue that than a job she didn’t want.
“These years are really challenging, especially for the newly graduated students, because we don’t have experience and it’s quite hard for us to find jobs not only in China but all over the world,” she said.
Jiang, who studied abroad in Europe, said she focused on making her resumes show why she was a fit for a company — something she said students didn’t always do well.
She now works remotely from her hometown in China as a sci-tech engagement coordinator at GFI Consultancy, a Shanghai-based firm focused on the alternative protein industry.
— CNBC’s Yulia Jiang contributed to this report. More

Robinhood CEO and co-founder Vlad Tenev and co-founder Baiju Bhatt pose with Robinhood signage on Wall Street after the company’s initial public offering in New York City, July 29, 2021.
Andrew Kelly | Reuters

Check out the companies making headlines in extended trading.
Robinhood — Shares of the trading platform slipped 4.7% after it reported quarterly results. The firm reported adjusted earnings of 3 cents per share in the second quarter, while analysts polled by Refinitiv forecast a loss of 1 cent. The company said monthly active users came in at 10.8 million, while analysts called for 11.2 million, according to StreetAccount.

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Etsy — The e-commerce company fell almost 6% in extended trading after Etsy gave guidance on third-quarter revenue and the lower end of the range was below what analysts anticipated. The company is calling for revenue ranging between $610 million and $645 million, while analysts called for $632 million, per Refinitiv.
DoorDash — The food delivery giant added 4.6% Wednesday after posting quarterly results. DoorDash’s revenue for the second quarter was $2.13 billion, while analysts called for $2.06 billion, per Refinitiv. However, the company posted a wider-than-expected loss of 44 cents a share, while analysts called for a loss of 41 cents per share.
Qualcomm — Shares declined 7% after the company reported lower-than-expected revenue for its third fiscal quarter. Qualcomm posted $8.44 billion in adjusted revenue, while analysts polled by Refinitiv forecast $8.5 billion. Guidance for the fourth quarter was also light.
Zillow — Stock in the online real estate company pulled back 2% after the company issued disappointing guidance for the third quarter. Zillow forecasts revenue of $458 million to $486 million, while analysts polled by FactSet are calling for revenue of $488.1 million.
Qorvo — Shares climbed 3.7% after an earnings beat. Qorvo posted fiscal first-quarter earnings of 34 cents per share, excluding items, on revenue of $651 million. Analysts polled by FactSet called for 15 cents per share in earnings and revenue of $640.3 million.

Clorox — Clorox stock ticked up 7% after flying past earnings expectations. The company reported adjusted earnings of $1.67 per share on $2.02 billion in revenue, while analysts polled by Refinitiv expected earnings of $1.18 per share and revenue of $1.88 billion.
Tripadvisor — Tripadvisor shares gained 4%. The company reported revenue of $494 million in the second quarter, while analysts polled by Refinitiv anticipated $473 million.
MGM Resorts — Shares of the casino operator dropped 5%, even as the company posted beats on the top and bottom lines in the second quarter. MGM reported adjusted earnings of 59 cents a share on $3.94 billion in revenue. Analysts polled by Refinitiv called for 54 cents a share in earnings and revenue of $3.82 billion.
PayPal — PayPal shares tumbled nearly 6% after the company posted earnings that were in line with analysts’ predictions. The payments company reported adjusted earnings of $1.16 per share, the same expected by analysts polled by Refinitiv. Revenue came in higher than anticipated, with PayPal posting $7.29 billion, versus analysts’ estimates of $7.27 billion.
Unity Software — Shares of the software company popped about 5% after Unity trounced analysts’ estimates for revenue in the second quarter. The company posted $533 million in revenue, while analysts polled by Refinitiv sought $518 million.
— CNBC’s Darla Mercado contributed reporting. More

A Solarpro employee installs a SolarEdge Technologies inverter at a residential property in Sydney, May 17, 2021.
Brendon Thorne | Bloomberg | Getty Images

Check out the companies making the biggest moves midday.
SolarEdge Technologies — The solar stock tumbled 18.36% after the company reported $991 million in revenue, missing analysts’ estimates of $992 million, according to Refinitiv. SolarEdge also issued disappointing third-quarter revenue guidance.

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CVS Health — The retail pharmacy stock gained 3.3% Wednesday after the company posted strong earnings and revenue for the second quarter. CVS reported earnings of $2.21 per share on revenue of $88.9 billion, while Wall Street analysts expected $2.11 per share on earnings of $86.5 billion, according to Refinitiv.
Norwegian Cruise Line — The cruise stock sank 3.97%, a day after reporting weaker-than-expected guidance for the third quarter. Its second-quarter earnings, however, topped analysts’ estimates. Shares were also downgraded by Susquehanna to neutral from positive. The Wall Street firm said Norwegian’s return to pre-pandemic EBITDA margin will take some time.
Emerson Electric — Shares rallied 3.83% following Emerson Electric’s earnings and revenue beat for its fiscal third quarter. The company reported adjusted earnings per share of $1.29, topping the $1.10 expected from analysts polled by StreetAccount. Revenue was $3.95 billion, compared with the $3.88 billion expected by Wall Street.
Pinterest — The social media platform slid 3.83% despite beating expectations on revenue for the second quarter. Pinterest posted $708 million against FactSet’s $696.4 million consensus estimate. Pinterest’s third-quarter revenue growth forecast, however, missed expectations.
Starbucks — Shares edged 0.86% higher following the coffee giant’s earnings report. Starbucks’ adjusted earnings per share for the fiscal third quarter was $1, versus the 95 cents expected by analysts, per Refinitiv. However, revenue fell short at $9.17 billion compared with the $9.39 billion expected.

Advanced Micro Devices — The chipmaker’s shares declined 7.02% in reaction to its second-quarter earnings release Tuesday after the bell. While the company posted better-than-expected earnings in the prior quarter, its forecast for the third quarter was weaker than analysts’ estimates amid a weak PC market. Several Wall Street firms, including Bank of America and JPMorgan, said the company may be nearing the peak of its rally.
Humana — Shares popped 5.6% after the health insurer reported second-quarter adjusted earnings per share of $8.94, topping the $8.76 per share anticipated by analysts, per StreetAccount. Humana forecast its Medicare Advantage business will grow by about 825,000 members in 2023.
Generac — Shares dropped 24.4% after the company posted a second-quarter earnings miss. Adjusted earnings per share came in at $1.08, versus StreetAccount’s estimate of $1.16. The company also lowered its forecast for residential product sales in the second half, citing a softer-than-expected consumer environment.
Scotts Miracle-Gro — The stock sank 19.01% after the maker of consumer lawn, garden and pest control products reported an earnings and revenue miss for its third quarter. Scotts also forecast a bigger-than-expected revenue decline for the fiscal 2023 year.
Freshworks — Shares popped 18.48% after the software as a service company beat expectations for both earnings and revenue. Canaccord Genuity upgraded the stock to buy from hold and hiked its price target to $25 from $15, suggesting 37% upside from Tuesday’s close.
Robinhood — The retail brokerage’s stock shed 3.34% ahead of the company’s quarterly results, due after the bell. Analysts are expecting a quarterly loss of 1 cent, according to StreetAccount.
Paycom Software — Shares tumbled 19.19% despite the payroll provider’s earnings and revenue beat after the bell Tuesday. However, the company’s revenue guidance for the third quarter was $410 million to $412 million, compared with the $412 million expected from analysts polled by StreetAccount.
Chinese tech stocks — Shares of Chinese technology stocks dropped after regulators in China proposed limits on smartphone use for minors. U.S.-listed shares of JD.com slid 4.47%, Baidu fell 4.24%, Alibaba dropped 5.02%and Tencent Music shed 4.78%.
— CNBC’s Hakyung Kim, Pia Singh and Alex Harring contributed reporting. More

The Fitch Ratings downgrade of the United States’ long-term credit rating ultimately doesn’t matter, JPMorgan Chase CEO Jamie Dimon told CNBC on Wednesday.
“It doesn’t really matter that much,” because it’s the market, not rating agencies, that determines borrowing costs, Dimon told CNBC’s Leslie Picker.
Still, it is “ridiculous” that other countries are rated higher than the U.S. when they depend on the stability created by the U.S. and its military, Dimon added.

The Fitch Ratings downgrade of the United States’ long-term credit rating ultimately doesn’t matter, JPMorgan Chase CEO Jamie Dimon told CNBC on Wednesday.
“It doesn’t really matter that much” because it’s the market, not rating agencies, that determines borrowing costs, Dimon told CNBC’s Leslie Picker.

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Still, it’s “ridiculous” that other countries have higher credit ratings than the U.S. when they depend on the stability created by the U.S. and its military, Dimon added.
“To have them be triple-A and not America is kind of ridiculous,” Dimon said. “It’s still the most prosperous nation on the planet, it’s the most secure nation on the planet.”
Fitch downgraded the country’s rating to AA+ from AAA on Tuesday, pointing to “expected fiscal deterioration over the next three years,” an erosion of governance and a growing general debt burden.
The agency put the U.S. rating on watch in May after members of Congress butted heads over raising the debt ceiling and brought the country to near-default.
“We should get rid of the debt ceiling,” Dimon said. “It’s used by both parties” in ways that sow uncertainty for markets, he said.

Fed, A.I. and Ukraine

In the wide-ranging interview, Dimon touched on topics including artificial intelligence, the U.S. economy, bank regulation and geopolitics.
He called artificial intelligence technology such as ChatGPT “a game changer” that will likely help future generations live longer, better lives.
“It needs to be done right,” Dimon added. “I do worry about it because bad guys are going to use it too.”
The U.S. economy, he said, is being supported by consumer and business strength, low unemployment and healthy balance sheets.
“It’s pretty good, even if we go into recession,” Dimon said. “The storm cloud part is still there,” he added, referring to a warning he gave last year on the economy.
What worries Dimon most are the geopolitical risks created by the Ukraine war and the Federal Reserve’s effort to rein in its balance sheet known as quantitative tightening, he said.

Consumer impact

Dimon lambasted regulators’ efforts to tighten standards on U.S. banks, saying the proposals unveiled last week were “hugely disappointing.” At one point, he held up a chart showing the web of regulators that banks deal with.
Banks will be forced to hold more capital as a cushion against a variety of risks, which will affect consumers, because the industry will cede more products to nonbank players, Dimon warned. That’s what happened in the U.S. mortgage market, which is dominated by firms including Rocket Mortgage.
Part of the changes involve banks ditching internal risk models for more standardized versions from the Federal Reserve.
“If I was the Fed, I’d be careful about saying their models are perfect,” Dimon said. “Remember, their models didn’t show inflation and didn’t show 5% interest rates.” More

Schmid has held positions at the Federal Deposit Insurance Corporation and Mutual of Omaha Bank, which he helped establish.
Schmid will serve the remainder of George’s five-year term helming the Kansas City Fed.

Jeffrey Schmid, the new president and CEO of the Kansas City Fed.
Courtesy: Federal Reserve Bank of Kansas City

The Kansas City Federal Reserve is about to get a new leader as the inflation-fighting central bank plots its course ahead.
Jeffrey R. Schmid, with more than 40 years of experience as a regulator and banker, will take over Aug. 21 for Esther George, who retired earlier this year.

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Most recently, Schmid has served as president and CEO of Southern Methodist University’s Cox School of Business, where he worked after holding positions at the Federal Deposit Insurance Corporation and Mutual of Omaha Bank, which he helped establish.
“Jeff’s perspective as a native Nebraskan, his broad experience in banking and his deep roots in our region will be an incredible asset to the Federal Reserve, both as a leader of the organization and in his role as a monetary policymaker,” said Maria Griego-Raby, president and principal of Contract Associates in Albuquerque, New Mexico. As deputy chair of the bank’s board of directors, she led the search for George’s successor.
The appointment comes after the Fed approved a series of 11 interest rate increases aimed at bringing down inflation that had been running at a 40-year high. George was long thought to be one of the rate-setting Federal Open Market Committee’s more hawkish members in favoring tighter monetary policy.
Schmid will serve the remainder of George’s five-year term helming the Kansas City Fed, which will take him to Feb. 28, 2026.
Interestingly, he arrives at the Fed just before the Kansas City district hosts its annual Jackson Hole summit, which this year will run from Aug. 24-26. The retreat features a keynote address from the Fed chair and often is pivotal in laying out policy strategy. More

Rampant bot activity on Twitter helped pump the price of FTX-listed and Alameda Research-traded cryptocurrency, a new study found.
Researchers at the Network Contagion Research Institute also found that bot activity and price action significantly increased after X Corp. CTO Elon Musk shared Tweets about two altcoins.
Bankman-Fried and his executives were acutely aware of the influence that Twitter had on the crypto markets.

Sam Bankman-Fried, co-founder and chief executive officer of FTX, in Hong Kong, China, on Tuesday, May 11, 2021.
Lam Yik | Bloomberg | Getty Images

Rampant bots on Twitter helped to pump up the price of cryptocurrency, including coins traded by insiders at FTX hedge fund Alameda Research before its collapse, according to a new study from the Network Contagion Research Institute published Wednesday.
NCRI researchers conducted a scaled analysis on Twitter (now known as X) examining over 3 million tweets from Jan. 1, 2019, to Jan. 27, 2023, pertaining to 18 different cryptocurrencies in partnership with New Jersey GovSTEM Scholars. They also shared their findings with X Corp. days ahead of publication.

Mentions of certain altcoins by Tesla and SpaceX CEO Elon Musk, who led an acquisition of Twitter that closed last October, appear to have caused prices to spike by as much as 50% within one day, the researchers found.
The NCRI study pointed to Musk’s June 24, 2023, retweet of a post featuring a kitten and the caption, “I wake up there is another PSYOP,” a coin created by a pseudonymous Twitter influencer known as Ben.eth. Trading of this altcoin nearly doubled in volume over the next day, according to CoinMarketCap data.
Separately, a Musk tweet on May 13, 2023, featuring Pepe the Frog memes led to a more than 50% increase in the price of altcoin PEPE within 24 hours. Musk’s tweet fueled both authentic discussion and bot and promotional tweets about the altcoin, which is based on a popular far-right meme.
The NCRI findings raise significant questions about social media driven market manipulation in the broader crypto markets. The study also highlights the considerable challenge Musk faces in reigning in bot activity that was pervasive on the social media platform for years and still persists there.
Musk has claimed, without providing data, that bot activity has fallen since he acquired Twitter.

According to Alex Goldenberg, Lead Intelligence Analyst for NCRI, “Since Musk’s team took over Twitter last year, API changes were made to deter bot creation, possibly reducing crypto promotion and scams. However, these changes come with trade-offs as they also hinder independent audits by third-party researchers.”
Goldenberg recommends that if bot activity remains high, X Corp. could “consider stricter account verification, machine learning for bot detection, and special permissions for certified researchers to ensure transparency while combating malicious bot activity and other forms of online harm.”
X Corp. has been increasing the price to access data for researchers, while also filing lawsuits and threats against researchers looking into hate speech and other online harms on its platform. In recent weeks, X Corp. sued Bright Data and the Center for Countering Digital Hate, for example, raising the ire of House Democrats. NCRI partners with Bright Data for pro-bono access to social media data, Goldenberg noted.
X Corp. did not immediately respond to a request for comment.

FTX benefitted greatly from Twitter bot activity

The NCRI study also highlights how inauthentic activity on Twitter helped drive up the price of tokens listed on FTX in the months before the crypto exchange collapsed. “Bot-like accounts were used to manipulate market sentiment and drive up the price of FTX-listed tokens,” Goldenberg told CNBC in an interview.
Six small-cap tokens listed by FTX were significantly influenced by inauthentic social media activity on Twitter, NCRI found. The researchers said that “inauthentic chatter” was “successfully and deliberately deployed to influence changes in FTX coin prices,” for six tokens: BOBA, GALA, IMX, RNDR, and SPELL.
Alameda held at least five of these tokens before they were listed on FTX, and as bot-like activity on Twitter amplified the visibility of the tokens. For one crypto asset, RNDR, inauthentic posts and activity on Twitter concurred with or preceded double-digit percentage jumps in its price.
On four separate dates from 2022 to 2023, spikes in bot activity on Twitter preceded increases in RNDR’s price ranging from 11% to 30% within a single day, the NCRI analysis found.
FTX founder Sam Bankman-Fried and his team were well aware of Twitter’s influence on the crypto markets, and how sophisticated investors could extract value from social-media driven price action.
“People on crypto Twitter, or other sort of similar parties, go and put $200 million in the box collectively,” Bankman-Fried said in an 2022 interview on Bloomberg’s Odd Lots podcast. “In the world we’re in, if you do this, everyone’s gonna be like, ‘Ooh, box token. Maybe it’s cool. If you buy in box token,’ you know, that’s gonna appear on Twitter and it’ll have a $20 million market cap.”
FTX was one of the largest crypto exchanges in the world before it filed for bankruptcy in 2022.
Bankman-Fried, 31, now faces a federal indictment for allegedly committing securities and wire fraud. He’s also the subject of Securities and Exchange Commission charges, which alleges that he built his empire on a “foundation of deception.”
Representatives for Bankman-Fried declined to comment. The SEC and FTX did not immediately respond to a request for comment.
Read the full NCRI study here. More