Finance

The past three months have afforded investors little pause for thought. Since a run on Silicon Valley Bank (svb) in March, markets have had to judge first whether one American lender would collapse (yes), then others (yes, though mercifully few), then whether the contagion would spread overseas (just to Credit Suisse). With the takeover of First Republic, another regional lender, on May 1st, bank failures seemed to have petered out. But by then it was time to worry about whether America’s politicians would throw global markets into chaos by defaulting on their sovereign debt. As this column was published, they at last appeared to have decided not to, provided a deal between President Joe Biden and Kevin McCarthy, the Republican speaker of the House of Representatives, makes it through Congress.All this drama has given markets a holiday of sorts: it offered a break from obsessing about how high interest rates will need to rise to quash inflation. Since the Federal Reserve started hoisting borrowing costs in March last year, little has mattered more to investors. But after svb’s fall, the question was not how much the Fed was prepared to do to fight inflation; it was how much it might need to do to stabilise the financial system.Now attention is turning back to interest rates. Once again, they are on the rise. In early May the yield on two-year Treasuries, which is especially sensitive to expectations of the Fed’s policy rate, fell to 3.75%. It has since increased to 4.4% as officials briefed journalists they were contemplating raising rates further than their present level of 5-5.25%. Traders in futures linked to interest rates, who were until recently anticipating rate cuts within months, have also switched to betting on another rise.The new mood music can be heard outside America as well. In Britain former rate-setters have warned that the Bank of England’s benchmark rate may rise to 6% from its current 4.5%. Yields on government bonds have climbed to within touching distance of levels last September, which at the time were only reached amid fire sales and a market meltdown.For Jerome Powell, the Fed’s chairman, this may come as a relief. In early March he appeared to have convinced investors that the central bank was serious about lifting interest rates and keeping them high. He and his colleagues had spent months saying so; traders had spent months trying to call their bluff. But then something in the market’s psyche snapped, and investors at last priced in the same path for rates as the Fed. Days later banking turmoil broke out and they abandoned the bets as fast as depositors fled svb. That the market has now realigned itself with the Fed’s view of the world counts as a win for monetary guardians.The return of rising rates feels more ominous for investors. True, part of the story is that the economy has held up better than expected at the start of the year, and certainly better than feared once banks began to buckle. Yet the bigger part of the story is that inflation has proved unexpectedly stubborn. As of April “core” American prices, which exclude food and energy, were 5.5% higher than a year ago. Although recession has been avoided or delayed, few are predicting stellar growth. In these circumstances, rising rates are bad for stocks and bonds. They hurt share prices by raising firms’ borrowing costs and marking down the present value of future earnings. Meanwhile, bond prices are forced down to align their yields with those prevailing in the market.Does this mean another 2022-style crash? Certainly not in the bond market. Last year the Fed lifted rates by more than four percentage points. An extra quarter-point rise or two this year would have nothing like the same effect.Shares, though, look vulnerable on two counts. One is that most of the stockmarket ran out of momentum some time ago. The s&p 500 index of large American firms has risen by 10% this year, but the entire increase is down to its biggest seven tech stocks, all of which seem gripped by ai euphoria. Such a narrowly led, sentiment-based climb could easily be reversed. The second source of market vulnerability is the earnings yield, which offers a quick-and-dirty guide to potential returns. The s&p 500’s is 5.3%. This means stockholders are taking the risk of owning equities for an expected return that the Fed may shortly be offering risk-free. Stay tuned for more drama.■Read more from Buttonwood, our columnist on financial markets:The American credit cycle is at a dangerous point (May 24th)How to invest in artificial intelligence (May 17th)Investors brace for a painful crash into America’s debt ceiling (May 10th)Also: How the Buttonwood column got its name More

The vial is familiar, the liquid inside could be water—but the price tag is a little more unusual. A shot of Zolgensma, a gene therapy for spinal-muscular atrophy, comes to $2.1m. It is one of a new generation of ultra-expensive medicines. Treatments for beta-thalassemia and haemophilia, two blood disorders, cost $2.8m and $3.5m, respectively. Their prices may be overtaken by gene therapies for sickle-cell disease expected to be approved this year, and one for Duchenne muscular dystrophy, which could be approved any day now.Such therapies will be beyond the means of many middle- and low-income countries. They will also cause trouble in the richest, not least America. Pharmaceutical firms point out the drugs are expensive to develop, mostly for rare disorders and may offer benefits that last a lifetime. Governments and insurers must decide if the medicines are worth it at current prices and, if not, try to negotiate them down. Health-care experts wonder if this process could, in time, force sweeping changes in how American states pay for medication.Vertex, one of the firms working on sickle-cell-disease therapies, argues that current treatment for the worst-affected patients can cost $4m-6m over the course of a lifetime. Yet the Institute for Clinical and Economic Review, a think-tank, calculates that the firm’s new medicine would only be cost-effective at a shade under $2m a patient, both because the initial cost would earn a return if put to other uses and because there is uncertainty over how long the benefits of the drug will last.Sickle-cell disease, which can lead to extreme pain, strokes, serious infections and lung difficulties, is a particular problem for governments and insurers, since it is relatively common. In America there are 100,000 people who suffer from it, and many are covered by Medicaid, an official health-care scheme for the poor. Michael Kleinrock of the iqvia Institute for Human Data Science, an analytics firm, expects that Medicaid will have to prioritise patients when the drugs are approved, as it will be unable to afford to pay for everyone who might benefit at the same time.In the medium term, a change of approach may be necessary. Francis Collins of the National Institutes of Health, which funds medical research, says there is recognition in government that there will have to be “special creative thoughtfulness to make access [to these medicines] happen”. A report by the cms Innovation Centre, an official agency, suggests a move to a system in which the government negotiates on behalf of state Medicaid outfits, in the hope of using federal heft to win better deals. Although the details are yet to be worked out, the hope is payments can be linked to drug performance, as already happens in Britain, France and Germany. Private insurers will face difficulties, too. Many have imposed outright exclusions or restriction on access to gene therapies in their policies. As insurers have a high turnover of customers, they may not benefit from the savings of a cure, which will accrue over a lifetime. There is talk of reinsurance programmes and risk pooling, but little progress has been made. Some argue that costs will come down over time. Zandy Forbes, chief executive of Meiragtx, says that her firm is working on a gene therapy for Parkinson’s disease that will be competitive with existing treatments. To achieve this, the company has decided to bring all its development and manufacturing in house in order to radically reduce costs. History demonstrates that drops in the price of pharmaceutical goods are possible. Between 1998 and 2009 manufacturing improvements brought about a 50-fold reduction in the cost of goods of monoclonal antibodies. They are now routinely used in medicine.There is another option, which is that breakthroughs go to waste. Some states have been unwilling to pay the price needed to eliminate Hepatitis c, a viral disease, despite the availability of antiviral therapies that cost around $20,000 per patient, says Dr Collins; this results in all kinds of obstacles being put up for those receiving treatment. It would be an extraordinary waste were the same to happen with the new wave of gene therapies. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

It was supposed to bring respite. Instead, Turkey’s election, which surprised investors by re-anointing Recep Tayyip Erdogan as president on May 28th, has deepened the country’s economic malaise. In the past fortnight the lira has lost 5% of its value against the dollar, falling to a rate of 21 to one. Some economists think it could hit 30 by the year’s end, despite the government’s attempts to prop it up. The central bank’s net foreign-exchange reserves are now in the red, having been depleted as savers and investors flee the currency. Such difficulties are symptoms of eccentric monetary policy. In 2021, facing inflationary pressure that caused central banks everywhere to raise interest rates, Turkey cut them. Believing that low rates lower inflation—the opposite of economic orthodoxy—Mr Erdogan has repeatedly strong-armed Turkey’s central bank to slash its policy rate. Indeed, the overnight policy rate now stands at a cool 8.5%. According to official figures, annual inflation hit 86% in 2022 (see chart 1). Inflation has since softened—either to 44%, according to official estimates, or to something higher, according to independent ones. Mr Erdogan’s lackeys boast he was right all along. In fact, inflation has dropped because of a fall in energy prices, central-bank intervention in currency markets and “base effects”, where past price rises lift the base from which inflation is calculated. Regardless, Mr Erdogan looks likely to continue with his policy, at least for a time. In his victory speech he maintained that, alongside looser monetary policy, “inflation will also fall”. Mr Erdogan is right about something, however. Inflation in Turkey is a puzzle for economists, even if not in the way he suggests. The persistence of low interest rates and high inflation suggests Turkey’s real interest rate has been deeply negative for some time. This ought to become rapidly unsustainable, since it enables speculators to profit handsomely by borrowing in lira and investing in stable assets such as housing or other currencies, further depreciating the lira and turbocharging inflation. How, then, have real interest rates stayed negative for so long? And what does it mean for the future path of inflation? Fishing for answersTo start, one must first understand Mr Erdogan’s approach. This was best articulated in 2018, when Cemil Ertem, an adviser, provided an outline, referring to an equation baked into many economic models and named after Iriving Fisher, a pioneering economist. The “Fisher equation” states that the nominal interest rate is a sum of the real interest rate and the expected rate of inflation. Most economists believe the real rate is determined by factors, such as the long-term growth rate, over which policymakers have little sway. A lower nominal rate should, at least according to Mr Ertem’s interpretation, reduce inflation. Mr Ertem argued that this would happen if firms passed on lower borrowing costs to consumers as lower prices.Yet when the theory was put to the test in late 2021, Mr Erdogan was proved wrong. After all, inflation continued to rise. The problem was that the other channels through which interest rates affect inflation dominated the cost channel by which Mr Ertem expected inflation to be reduced, says Selva Demiralp of Koc University. This still leaves the mystery of Turkey’s persistent deeply negative real interest rate. But it starts to unravel when other types of real rates, which have not been as negative, are considered. As Emre Peker of the Eurasia Group, a consultancy, argues, “the [policy] rate has become irrelevant.” In some cases, interest rates are distorted by government policy. In the commercial sector, for instance, banks are told not to lend above a certain interest rate. The result is that they simply avoid making most loans. Only favoured industries, such as construction, receive credit. Turkey has also required banks to hold bonds against foreign-exchange deposits, in effect subsidising state borrowing. In the sectors where interest rates are less distorted, though, nominal interest rates have moved in the opposite direction to the policy rate (see chart 2). Since investors do not believe the central bank will act to stop inflation in the future, inflation expectations have risen. This has fed into higher consumer-lending rates, especially for longer-term loans, because investors demand a higher return the lower the purchasing power they expect the lira to hold in the future. Therefore judged by consumer-loan rates, real interest rates may not be all that negative.Similarly, returns on other assets are much higher than the central bank’s policy rate suggests. This is causing firms, households and investors to flee the currency. The government wants to support the lira, but there is only so much it can do. Your correspondent was blessed with many thanks when—short of time—he paid for a taxi in Istanbul using dollars at the market exchange rate, rather than the less generous black-market one. Suppliers are taking matters into their own hands, pricing items in dollars, points out Bekir, a shop owner in Istanbul’s Grand Bazaar. Assets other than foreign currencies are also attracting investment, as parties scramble to protect their savings. Ms Demiralp notes there are, for instance, “long lines outside car dealerships”. House prices have grown at triple the rate of official inflation. Some speculate about the potential for an attack on the lira from foreign investors.The government has tried to stem currency flight. Exporting firms must sell 40% of their foreign currency revenues to the central bank. In late 2021 the government introduced a scheme whereby some lira deposits are protected against depreciation. In an extremely costly and not entirely sustainable situation, almost a quarter of all deposits are now covered. What, then, to make of the Fisher equation? Short-term policy rates have been quite negative, but they are much less relevant for borrowing, since market rates have either risen owing to higher inflation expectations, or credit has been rationed. In other areas the result has been a dash from the lira, prompting use of soft capital controls. If Mr Erdogan were to hold down market interest rates across the board, the result might well be hyperinflation.Some economists think Mr Erdogan, armed with victory and facing a brewing currency crisis, may soften his approach. Turkey will have some economic respite over the summer, when energy consumption will fall and tourism revenue rise. Mr Erdogan has been able to keep the lira afloat thanks to one-off foreign-exchange agreements with friends including Russia and Saudi Arabia. Yet come autumn he may have to let up on his promise to continue the low-rate policy, perhaps via indirect means like softening limits on commercial-lending rates. Warm weather and friendly favours do not last for ever. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

To most economists, putting a price on greenhouse-gas emissions is the best way to tackle climate change. It is efficient, allowing society to identify the cheapest unit of carbon-dioxide equivalent to forgo. It is fair: polluters pay; the proceeds can be redistributed. And it aids other forms of decarbonisation: complying with a carbon price forces companies to track their emissions and investors to work out which of their assets are the dirtiest. According to the World Bank, there are now 73 carbon-pricing schemes across the world, covering 23% of global emissions. That is up from just 7% a decade ago. The bank’s tally includes both emissions-trading schemes, where polluters can trade permits in a market, and carbon taxes, where a government sets a price directly. The largest scheme is in China and was launched in 2021. It covers the country’s energy industry, and therefore 9% of global emissions. Even in America, which is immune to the charms of carbon pricing at a federal level, an increasing number of states are setting their own prices. Washington state, the latest convert, launched its emissions-trading scheme in January. Yet a growing number of centre-left economists, who might be expected to be vociferous supporters of carbon prices, have soured on the policy. These critics focus on two points. The first is that carbon prices are not aggressive enough. The eu’s emissions-trading scheme, one of the most comprehensive, nevertheless excludes buildings and transport. Allowances are given to airlines and heavy industry in the name of competitiveness. Prices are relatively high in Europe, reaching a record €100 ($107) a tonne of carbon-dioxide equivalent in February, but too low elsewhere. The World Bank reckons less than 5% of emissions are priced at or above the level that would be required, by 2030, in order for temperature increases to be limited to 2°C above pre-industrial levels.This tentative action reflects the critics’ second worry: equity. They argue that rather than ensuring polluters pay, the cost of carbon prices falls too heavily on the poor. Such initiatives raise energy prices—usually the only area of the economy that is entirely subject to them—and push industrial jobs overseas, beyond the reach of emissions-trading schemes. Anticipating pushback on these grounds, politicians water down the schemes. Therefore the promised emissions cuts never materialise. These are the arguments. How does the evidence stack up? Measuring the impact of carbon prices is challenging. Carbon prices, like interest rates, both affect and are affected by the economy. All else being equal, a higher carbon price will lower economic activity and raise consumer prices. But a stronger economy will also raise the price of a carbon permit. Politicians may also be more comfortable raising carbon taxes when the economy is booming. They might take steps to cut them in bad times. For instance, in May last year the European Commission announced an auction of surplus permits during the energy crisis that followed Russia’s invasion of Ukraine, in order to bring down prices Thankfully, there are ways to disentangle cause and effect. Marion Leroutier of the Stockholm School of Economics uses a “synthetic control” method to examine a top-up tax on the eu’s emission-trading scheme that was introduced by Britain in 2013. To see the effect of this higher carbon price, Ms Leroutier employs data from other eu countries to fashion a hypothetical version of Britain that did not introduce the tax—akin to a control group in an experiment. In reality, interconnectors allow Britain to import electricity from neighbours, potentially making the control group also subject to the treatment. But having included an estimate of such “spillovers”, Ms Leroutier estimates that the tax led to a 20-26% reduction in emissions from the energy industry.In a forthcoming paper Gilbert Metcalf of Tufts University and James Stock of Harvard University attempt to account for the broader economic context. They look at 31 European countries, controlling for past emissions and economic growth, in order to isolate variation in carbon prices that is unexplained by the state of the economy. The authors find that carbon taxes reduce greenhouse-gas emissions much as economists have previously predicted. Significantly, they also find virtually no effect, either positive or negative, on economic growth and employment, perhaps because there was more innovation than anticipated.A final method of disentangling cause and effect is to employ an “event study”. These are often used to assess the impact of monetary-policy decisions. By looking at the near-instantaneous reaction of carbon prices to a policy announcement, it is possible to remove the effects of background economic conditions, which do not change at the same speed. The impact of the change in price can then be tracked through the economy. In a recent working paper Diego Känzig of Northwestern University did just this, finding that higher carbon prices lower emissions and encourage green innovation. Yet these gains come at a cost. The higher prices raise energy costs and thus reduce the incomes of the poor.Get the green rightCarbon prices have successfully cut emissions when used. They could be more palatable, however. In another paper, Mr Känzig compares the eu’s More

GetYourGuide said it has raised $194 million of equity and debt financing from investors including UniCredit, Blue Pool Capital and KKR.
The online travel startup, which is backed by SoftBank, is now worth nearly $2 billion following the fresh round of funding, according to a person familiar with the matter.
GetYourGuide will use the fresh funds to expand in the U.S. and up its investment in AI and other product development.

GetYourGuide CEO Johannes Reck.
GetYourGuide

German online travel startup GetYourGuide raised $194 million from investors, hoping to capitalize on a bump in demand for travel services in the summer, further an expansion into the U.S., and invest in large language models and other artificial intelligence tools.
The Berlin-based company said Thursday it had raised the funding through a mix of equity and debt, with $85 million of equity investment being led by U.S. asset management firm Blue Pool Capital.

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The investment values the company at nearly $2 billion, up from GetYourGuide’s last publicly-disclosed valuation of $1.4 billion, according to a person familiar with the matter. Existing investors KKR and Temasek invested again in this round.
The debt portion of the deal was led by UniCredit and also backed by BNP Paribas, Citibank and KfW. Total investment in GetYourGuide, including both equity and debt, now stands at just over $1 billion.
GetYourGuide’s product differs from those offered by some other major players in the online travel space. Rather than advertise hotels, flights and other forms of transportation, GetYourGuide sells its users experiences and things to do in unexplored places.
These experiences are offered through third-party suppliers on its platform, with GetYourGuide taking a commission on each booking. 
The company has seen a massive jump in demand for its platform with travel returning back to normal following the ending of Covid-19 restrictions and the resumption of normal cross-border transportation.

Johannes Reck, the CEO and co-founder of GetYourGuide, said the company had seen its revenues erased during the early days of the pandemic — for multiple consecutive quarters the company made no revenue whatsoever, he said. 
“We were severely depressed in the pandemic,” Reck told CNBC. “The travel industry was very hard hit within the travel industry. GetYourGuide was probably one of the worst affected. Experiences were shut down. People didn’t go out.”
“There were some greenshoots in 2021 with the reopening of the U.S. but the real rebound only started when omicron turned out to be a more benign variant and people started to resume traveling in Easter of 2022 and then we had an exploding business on our hands,” he said.

GetYourGuide saw a doubling of its sales volumes in 2022 and a quadrupling in the first quarter of 2023 compared to 2019, Reck said, citing a pre-pandemic benchmark due to 2020 and 2021 being markedly lower in terms of activity.
To offset the decline in physical experiences, GetYourGuide started offering users virtual tours and other experiences. More recently, it began offering its own exclusive branded experiences called “Originals.”
They include the ability to turn on the lights of the Sistine Chapel in the Apostolic Palace, the pope’s official residence in Vatican City, and visit the Museum of Modern Art in New York an hour before regular opening hours.
Travel experiences is a market Reck believes is worth $300 billion today, while he thinks the total addressable market for experiences more generally could be worth $1.5 trillion.
GetYourGuide will use the fresh funds to expand its operations in the U.S., which has been a huge source of growth for the company over the past year. The company also intends to up its investment in AI and other product development, with the use of large language models or LLMs being a key focus. 
LLMs are algorithms trained on vast amounts of data that learn how to recognize, summarize and generate text and other types of content. They power so-called generative AI systems, which allow users to generate new content by entering certain prompts.
GetYourGuide says it is already integrating LLMs into its business to automate the generation of descriptions of experiences such as local pizza and pasta making classes, and riverboat cruises on the Seine in Paris.
LLMs can also be helpful for allowing people to discover new areas and find experiences with enhanced personalization of recommendations, Reck said. Google is rapidly advancing its work in AI amid worries about the threat of LLMs to its dominance in online search. More

Customers walk through a shopping mall along the Magnificent Mile in Chicago, March 15, 2023.
Scott Olson | Getty Images

Check out the companies making headlines after the bell.
Nordstrom — Shares of the high-end department store jumped 9% in extended trading after its fiscal first-quarter sales beat Wall Street’s expectations. The strong results came even as the retailer reported a spending drop and predicted slower sales in the coming months. Nordstrom also reiterated its outlook for the full year.

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Salesforce — The software giant saw its stock fall nearly 4%. The company said capital expenditures in its latest quarter totaled $243 million, up about 36% and above the $205 million consensus among analysts polled by StreetAccount. Aside from this development, Salesforce posted quarterly results that surpassed estimates across the board and raised its full-year earnings guidance.
CrowdStrike — The cybersecurity firm’s stock tumbled nearly 12% in after-hours trading after the company reported slowing revenue growth. CrowdStrike reported quarterly revenue of $692.6 million, marking a 42% year-over-year increase, which is slower than the 61% growth it reported in the year-ago quarter. 
Okta — Shares of the software company dropped 13% in after-hours trading despite a stronger-than-expected quarterly report. It appeared the management’s warning about increasing “macroeconomic pressures” may have been the driver that sent shares lower. Okta also lifted guidance for the 2024 fiscal year.
C3.ai — The artificial intelligence tech company saw its shares tumble 18% even after it beat expectations on the top and bottom lines for its fiscal fourth quarter, according to Refinitiv. C3.ai expects to see fiscal first-quarter revenue of between $70 million and $72.5 million, which is less rosy than Wall Street had expected. The stock has skyrocketed more than 250% this year amid Wall Street’s enthusiasm toward AI.
Chewy — The pet retailer’s shares jumped about 12%. Chewy posted earnings of 5 cents a share, defying analysts’ predictions for a loss of 4 cents per share, according to Refinitiv. Revenue came in ahead of expectations at $2.78 billion, versus the $2.73 billion anticipated by Wall Street.

Pure Storage — Shares added 7% after the data storage company beat analysts’ expectations in the latest quarter. Pure Storage posted adjusted earnings of 8 cents a share on $589 million of revenue. Analysts called for earnings of 4 cents per share on $559 million in revenue, according to Refinitiv.
— CNBC’s Darla Mercado contributed to this report. More

Signage outside Intel headquarters in Santa Clara, California, Jan. 30, 2023.
David Paul Morris | Bloomberg | Getty Images

Check out the companies making the biggest moves midday.
Intel — Shares popped 4.83% after the chipmaker’s finance chief said the company could soon see a turnaround. Speaking at a conference, CFO David Zinsner said the company’s data center division is starting to “turn the corner,” while adding that China inventory should start to ease after the third quarter. He also said second-quarter revenue will come in at the high end of its guidance.

Advance Auto Parts — Shares sank 35.04% after the car parts retailer reported an adjusted earnings per share of 72 cents, widely missing analysts’ estimates of $2.57, per Refinitiv. The company also missed on revenue and cut its quarterly dividend and full-year guidance.
Avis Budget — The car rental company’s shares gained 2.77% Wednesday after Deutsche Bank upgraded shares to buy. The bank said a likely share-repurchase announcement later in 2023 could be a positive catalyst for shares.
Nvidia — Shares retreated 5.68%, taking a breather from its recent run. Nvidia rallied Tuesday, which briefly pulled the tech stock’s market cap above $1 trillion. The stock has been a focus of excitement amid booming interest in artificial intelligence.
C3.ai — Shares slipped 8.96% ahead of the AI software maker’s quarterly results after the bell. C3.ai has soared more than 250% so far this year.
Ambarella — The chip stock fell 11.76%. On Tuesday, Ambarella said it expected second-quarter revenue to range between $60 million and $64 million, below the $67.2 million guidance expected by analysts, according to Refinitiv. KeyBanc downgraded the stock to sector weight from overweight after the report. The fall came despite Ambarella reporting a smaller-than-expected adjusted loss in the first quarter.

Hewlett Packard Enterprise — Shares of the tech company slid 7.09% a day after the company posted a mixed quarterly report. Although earnings per share beat analysts’ estimates, revenue for the quarter came in below expectations, according to Refinitiv.
HP — The stock fell 6.05%. The action came a day after the tech hardware company reported mixed quarterly results. HP’s revenue of $12.91 billion fell short of the $13.07 billion expected from analysts polled by Refinitiv. Its adjusted earnings per share of 80 cents topped the 76 cents per share expected.
SoFi Technologies — Shares in the student loan refinancing firm gained 15.09%. The House is slated to vote on the debt ceiling bill Wednesday. The package includes a measure that would end the student loan payment pause.
Micron Technology — The chip stock dropped 4.87% following the company’s presentation at the Goldman Sachs Global Semiconductor Conference. Micron said its third-quarter trends have been consistent with guidance and the company sees no need to raise it. However, Micron noted revenue growth guidance near the high end of its previously stated range.
Carvana — Shares dropped 5.83%, erasing some of the big gains it has seen so far this year. Earlier this month, the stock surged after Carvana said it will achieve adjusted profit sooner than expected. Carvana is up nearly 160% year to date.
Twilio — The tech stock rallied 11.09%. On Tuesday, a news report indicated activist investor Legion Partners has met several times with Twilio’s board of directors and management. Legion is looking to make changes to the board, and asking the company to consider divestitures, according to The Information, which cited people familiar with the matter.
Regional banks — Regional banks fell Wednesday, adding to their steep losses for the month of May. KeyCorp lost 5.94% and Zions Bancorp shed 5.6%, while Citizens Financial Group fell 5.12% and Truist Financial slipped 1.99%.
— CNBC’s Hakyung Kim, Jesse Pound, Brian Evans, Tanaya Macheel and Fred Imbert contributed reporting.
Correction: An earlier version of this story incorrectly said C3.ai was behind ChatGPT. More

The price of Brent crude has a decent claim to be the world’s most important number. Two-thirds of the 100m barrels a day of oil traded globally derive their price from it. So do millions of futures contracts that buyers and sellers employ to manage risk. Some governments use the oil price to set tax rates; customers, for their part, are exposed through heating-oil and petrol prices. Dated Brent, as the benchmark is formally known, also anchors markets beyond petroleum. It sets the price for liquefied natural gas in energy-guzzling Asia. And as an indicator for global economic health, it shapes the decisions of the world’s powerbrokers, from America’s Federal Reserve to China’s strategic planners. The four-decade-old index is named after a tiny cluster of wells some 190km north-east of the northernmost islands of Scotland. That it still wields such clout is a wonder—and, increasingly, a danger. The crude transactions that Platts, a price-reporting agency, observes to calculate the Brent price have become ever rarer, making it easier for traders to sway prices. So Platts is introducing a fix: for deliveries dated June 2023 onwards, it will add transactions of West Texas Intermediate (wti) Midland, an American crude, similar in quality to Brent, to the pool from which the benchmark is calculated, marking the first time oil from outside the North Sea will be included. How the experiment unfolds will determine whether trust in Brent endures, and whether the world’s biggest commodity market continues to function. Worries that Dated Brent might become insufficiently liquid have a pedigree. Output at the eponymous field peaked in 1984; now just two or three cargoes a month are loaded. Starting in 2002, four blends from other fields (one British, three Norwegian) were added to the pool. This buoyed volumes of Brent-graded cargoes, facilitating price discovery. It also made the price-reporting agencies’ job fiendishly complex. To discourage “squeezing” (attempts to drive up prices by hoarding cargoes) Dated Brent is based on the price of the cheapest blend in the pool as traded in London during a daily window. But each blend differs slightly from the original Brent—in density and sulphur content—requiring adjustments to ensure fair competition. These additions have bought time but failed to solve the fundamental problem: North Sea oil production has been steadily falling. Campaigns to corner the market have multiplied. They are especially likely in the summer, when maintenance at wells means even less oil is produced, says Adi Imsirovic, a former oil-trading chief at Gazprom, an energy giant. It was becoming plausible that doubts about the benchmark could one day cause market participants to declare millions of contracts invalid. Change was needed to avert chaos. Over a barrelIn theory, the market could have crowned an index from much bigger oil-production hubs than Europe, such as the Persian Gulf or Russia, to replace Brent. To gain credibility, benchmarks have to tick many boxes, notes Paul Horsnell of Standard Chartered, a bank. Having sufficient production of the underlying crude is one of them, and it is where Brent struggles. But aspiring substitutes have bigger flaws. Some are dominated by a single buyer or seller; many are impaired by distorting tax regimes, feeble rule of law and political interference. Despite trying for years, none of Brent’s rivals has managed to break out, says Colin Bryce, a former commodities boss at Morgan Stanley, another bank. The sole well-functioning alternative to Brent, which tracks prices of wti cargoes delivered in Cushing, Oklahoma, to satiate America’s home market, is too parochial.So the Brent show needed to go on. One way to prolong it might have been to add Johan Sverdrup, a prolific Norwegian field, into the Brent basket. The problem is that Sverdrup’s high density and sulphur content would have made it the odd one out. Such an addition may also have given too much power to Equinor, Norway’s state driller. Midland has issues, too. To make it comparable to North Sea grades, Platts will have to estimate and adjust for the cost of ferrying oil from America’s Gulf Coast to Rotterdam, making the index still more unwieldy. But the blend is similar to Brent, and the volumes of it delivered to Europe have surged of late, meaning it is a good mirror of oil demand in the bloc.Because Brent deliveries are priced up to 30 days in advance, the inclusion of Midland started coming into force in May. The market so far seems to be accepting the change. The price difference between Brent forwards (the purchase of cargoes in advance) and futures (financial bets on the future spot price), which is positive in a healthy market, has returned to near usual levels, notes Mr Imsirovic. It had contracted when the change was first discussed.Risks remain. One is that Midland swamps the benchmark. In April 1.1m barrels of the stuff landed in Europe, more than the other five Brent grades combined. Had it been part of the basket in 2021, Argus, a rival to Platts, estimates that Midland would have set the price of Brent 68% of the time. So far, though, Midland appears to be chosen less often, perhaps because its inclusion in the basket is creating a bigger market for it, boosting its value. Another worry is that the change could favour a coterie of marketmakers, such as Glencore and Trafigura, that account for a large share of Midland shippings, and which may now be the only ones able to keep track of how Dated Brent is formed. The cast of Brent barons has evolved over time, however, suggesting barriers to entry are surmountable. In the 1980s Europe’s once-dominant oil firms were supplanted by Japan’s mighty trading houses, which were themselves dethroned by Wall Street banks at the turn of the millennium. The new-look benchmark is already enticing new players. In May Koch Industries, an American conglomerate, sold its first forward Brent cargo in nearly a decade.The biggest risk may be of a different nature. Tweaks to Brent used to emerge from within the oil industry. This time the initiative has come from a price-reporting agency, Platts, which wants to pre-empt a crisis with its own solution. Now that a precedent has been set, insiders worry that the result could be endless tinkering, needlessly raising questions about Brent’s robustness—the very outcome price-reporting agencies want to avoid. In 1976 the nymex potato-futures market, based on a red variety from Maine, imploded after speculators holding 1,000 contracts involving 23,000 tonnes of the crop failed to deliver on time. At fault were reckless attempts to squeeze supply, such as coaxing buyers into rejecting cartloads of the stuff on the pretext that they did not meet standards. Investors got burnt. jr Simplot, America’s potato prince, was still compensating counterparties a decade later. No other potato price has since managed to gather such clout. Making a hash of a Brent revamp would leave many more people holding a sizzling-hot spud. ■ More