Finance

Goldman Sachs is preparing for its third round of layoffs since September as Wall Street firms adjust to a slump in deals activity.
The company is expected to trim fewer than 250 jobs in the coming weeks, according to a person with knowledge of the bank’s plans.
Managing directors and some partners will be affected, according to the person, who declined to be identified speaking about layoffs.

David Solomon, CEO, Goldman Sachs, speaks during the Milken Institute Global Conference in Beverly Hills, California, April 29, 2019.
Kyle Grillot | Bloomberg | Getty Images

Goldman Sachs is preparing for its third round of layoffs since September as Wall Street firms adjust to a slump in deals activity.
The company is expected to trim fewer than 250 jobs in the coming weeks, a person with knowledge of the New York-based bank’s plans said Tuesday.

Goldman Sachs, led by CEO David Solomon, was among the first major Wall Street firms to trim jobs in September, cutting a few hundred positions. It then slashed more jobs in January, releasing about 3,200 employees. Morgan Stanley announced about 3,000 job cuts this month, and JPMorgan Chase cut about 500 jobs, CNBC reported last week.
But Goldman is more tied to the ups and downs of Wall Street than its rivals. Its combined 16% drop in first-quarter trading and advisory revenue contributed to a disappointing start to the year.
Managing directors and some partners will be affected by the Goldman cuts, according to the person, who declined to be identified speaking about layoffs. The Wall Street Journal reported the news earlier Tuesday.
Goldman had 45,400 employees as of March 31, a 6% decline from the fourth quarter of 2022.
Clarification: This story was updated to reflect that JPMorgan Chase had cut about 500 jobs last week. More

Stablecoin firm Tether said Tuesday it plans to invest its resources into renewable energy production for the mining of bitcoin.
Mining bitcoin is notoriously power-intensive, relying on a distributed network of computers around the world to verify transactions are legitimate and release new coins into circulation.
Earlier this month, Tether said it would shift its treasury management strategy to start investing a portion of its net profit in bitcoin.

Paolo Ardoino, Tether’s chief technology officer, said the company estimates that the excess reserve will increase by $700 million in the current quarter, which is not yet over.
Justin Tallis | Afp | Getty Images

Cryptocurrency giant Tether is setting up a bitcoin mining operation in Uruguay using renewable energy, as the company looks to diversify the revenue mix to support its USDT stablecoin.
The company said Tuesday that it plans to invest its resources into renewable energy production, marking its first foray into the energy sector.

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Tether is also on the hunt for “experts in the area” to support its expansion into the renewable energy space, it said. Mining bitcoin is notoriously power-intensive, relying on a distributed network of computers around the world to verify that transactions are legitimate and release new coins into circulation.
“By harnessing the power of Bitcoin and Uruguay’s renewable energy capabilities, Tether is leading the way in sustainable and responsible Bitcoin mining,” said Paolo Ardoino, CTO of Tether.
“Our unwavering commitment to renewable energy ensures that every Bitcoin we mine leaves a minimal ecological footprint while upholding the security and integrity of the Bitcoin network.”
Earlier this month, Tether said it would shift its treasury management strategy to start investing a portion of its net profit in bitcoin.
The company committed to use up to 15% of its net profit to purchase bitcoin, mimicking similar strategies from businesses such as Tesla and MicroStrategy.

Tether issues what is known as a stablecoin. This is a token that, unlike bitcoin and other cryptocurrencies, is meant to hold a stable value at all times.
USDT is the largest stablecoin in the market, with a circulating supply of more than $83.2 billion, according to CoinGecko data. It competes with Circle’s USD Coin and Binance’s BUSD.
Stablecoins are used by traders to move in and out of different cryptocurrencies without converting money back into fiat currencies.
Tether says that each of its USDT tokens in circulation are backed 1-to-1 by an equivalent amount of U.S.-denominated assets held in reserve.
The company has gotten into hot water in the past, as regulators and economists have questioned the integrity of the assets backing its token.
Tether previously held most of its assets in commercial paper, a less liquid form of a corporate debt. It has more recently replaced all of its commercial paper with U.S. Treasurys.
Uruguay is seen as a leader in renewable energy production, sourcing more than 98% of its electricity output from renewables, primarily wind and hydropower, according to the U.S. International Trade Administration.
WATCH: Can crypto clean up its dirty image? More

A ChargePoint station at the New Carrollton Branch Library in New Carrollton, Md.
Tom Williams | Cq-roll Call, Inc. | Getty Images

Check out the companies making some of the biggest moves in premarket trading:
ChargePoint — Shares of the electric vehicle charging station company jumped 5% premarket after Bank of America upgraded the stock to buy. The Wall Street firm called ChargePoint a best-in-class way to play the EV charging theme, highlighting the company’s scale and diversity as keys to sustainable growth.

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Ford Motor — Shares of the automaker rose more than 2% after Jefferies upgraded the stock and said the automake has a strong plan and management that can help it close the gap with rivals. The analyst also raised his price target on the shares, implying they could rally more than 30%.
Tesla — Shares gained 3% premarket. On Monday, Reuters reported a private jet used by CEO Elon Musk arrived in China. Musk is expected to meet with senior Chinese officials and visit Tesla’s Shanghai plant, Reuters said. Last Thursday, Tesla and Ford announced a partnership giving Ford owners access to Tesla Superchargers.
Coinbase — Shares gained 4% in premarket trading. On Tuesday, Atlantic Equities upgraded Coinbase to overweight from neutral. Analyst Simon Clinch maintained his $70 price target, implying 23% upside from Friday’s close.
Nvidia — Shares continued to near $1 trillion in market value, up 3.7% in premarket trading. The AI semiconductor company has been soaring since its blockbuster earnings report last Wednesday.
C3.ai — AI stocks built on their post-Nvidia earnings gains, with C3ai up 8.7%. UiPath gained 6.4% and Palantir Technologies was ahead 6.2%. C3.ai reports its next quarterly results on Wednesday.

Advanced Micro Devices — Semiconductor stocks continued to move higher after Nvidia’s earnings last week. AMD added 3.4%, Qualcomm gained 2% and Broadcom was higher by 1.8%. Intel, which initially dropped on Nvidia’s earnings, gained 3%.
Paramount Global — The media stock rose 2.4% on Tuesday morning, extending a gain of nearly 6% from Friday. The company’s majority shareholder National Amusements announced a $125 million preferred equity investment from BDT Capital Partners last week.
—CNBC’s Jesse Pound, Tanaya Macheel and Yun Li contributed reporting. More

Chinese consumer spending won’t return to pre-Covid levels anytime soon, a problem for international brands such as Starbucks, Morgan Stanley said in a report.
After an expected 9% rebound in Chinese consumers’ spending this year, the analysts forecast an increase of 4.8% next year — 0.5 percentage points lower than before the pandemic.
Meanwhile, the number of coffee stores grew by 16% year-on-year in April — mostly local brands, the Morgan Stanley report said.

Starbucks opened its 6,000 store in mainland China in September 2022.
Bloomberg | Bloomberg | Getty Images

BEIJING — Chinese consumer spending won’t return to pre-Covid levels anytime soon, a problem for international brands such as Starbucks, Morgan Stanley said in a report Sunday.
Not only are people more cautious, but they now have more choices.

On the spending side, three factors are weighing on China’s consumer this year, the Morgan Stanley analysts said.
First, China has not handed out stimulus checks to consumers as the U.S. and other parts of the world did in the wake of Covid.
Second, pandemic restrictions and regulatory changes have eliminated 30 million service sector jobs that would have existed prior to Covid, the analysts estimated.
About 20 million of those jobs are likely to return later this year and next, the report said. But the analysts expect the remaining 10 million will take longer to restore since they were affected by Beijing’s crackdown on education, internet technology and property.
Third, the housing market has remained persistently soft in the wake of government efforts to limit speculation.

Previously, as recently as during the first half of 2021, property sales had led the recovery, the Morgan Stanley analysts pointed out.

Covid-19 and measures to control it from 2020 to 2022 dragged down China’s economy. Since the abrupt end of those restrictions in December, growth has only recovered modestly.
After an expected 9% rebound in Chinese consumers’ spending this year, Morgan Stanley analysts forecast an increase of 4.8% next year — 0.5 percentage points lower than before the pandemic.
For Starbucks, the analysts expect the industry metric of same-store sales in China to grow by about 7% this year. That’s still “down roughly low-teens” versus 2019 levels, the report said.

Local market gets tougher

Also making things harder for international brands is growing local competition.
In fact, the U.S.-based coffee giant is “least favored to lever China’s recovery,” among to the Morgan Stanley analysts’ U.S. “restaurants” stock picks.
In April, China saw a 16% year-on-year increase in the number of coffee stores — mostly local brands, the Morgan Stanley report said. “As a result, MNCs like SBUX have been losing market share (though still growing stores at a robust pace).”
“The brand has more competition from relatively nascent but rapidly growing concepts like Luckin, Cotti, and Tim Hortons.”

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Tim Hortons parent versus Starbucks

China-based Luckin Coffee now has more than 9,000 stores, while Tim Hortons has more than 600 locations after entering the country in 2019, according to the companies. New brand Cotti Coffee is so popular its website warns of people trying to impersonate the brand.
Starbucks opened its 6,000th store in mainland China in September 2022. More

Stronger-than-expected U.S. jobs figures and GDP data have highlighted a key risk to the U.S. Federal Reserve potentially taking its foot off the monetary brake.
Economic resilience and persistent labor market tightness could exert upward pressure on wages and inflation, which is in danger of becoming entrenched.
Patrick Armstrong, chief investment officer at Plurimi Group, told CNBC last week that there was a double-sided risk to current market positioning.

Traders react as Federal Reserve Chair Jerome Powell is seen delivering remarks on a screen, on the floor of the New York Stock Exchange (NYSE) in New York City, March 22, 2023.
Brendan McDermid | Reuters

The market has long been pricing in interest rate cuts from major central banks toward the end of 2023, but sticky core inflation, tight labor markets and a surprisingly resilient global economy are leading some economists to reassess.
Stronger-than-expected U.S. jobs figures and gross domestic product data have highlighted a key risk to the Federal Reserve potentially taking its foot off the monetary brake. Economic resilience and persistent labor market tightness could exert upward pressure on wages and inflation, which is in danger of becoming entrenched.

The headline U.S. consumer price index has cooled significantly since its peak above 9% in June 2022, falling to just 4.9% in April, but remains well above the Fed’s 2% target. Crucially, core CPI, which excludes volatile food and energy prices, rose by 5.5% annually in April.
As the Fed earlier this month implemented its 10th increase in interest rates since March 2022, raising the Fed funds rate to a range of 5% to 5.25%, Chairman Jerome Powell hinted that a pause in the hiking cycle is likely at the FOMC’s June meeting.
However, minutes from the last meeting showed some members still see the need for additional rises, while others anticipate a slowdown in growth will remove the need for further tightening.
Fed officials including St. Louis Fed President James Bullard and Minneapolis Fed President Neel Kashkari have in recent weeks indicated that sticky core inflation may keep monetary policy tighter for longer, and and that more hikes could be coming down the pike later in the year.

The personal consumption expenditures price index, a preferred gauge for the Fed, increased by 4.7% year-on-year in April, new data showed Friday, indicating further stubbornness and triggering further bets on higher for longer interest rates.

Several economists have told CNBC over the past couple of weeks that the U.S. central bank may be forced to tighten monetary policy more aggressively in order to make a breakthrough on stubborn underlying dynamics.
According to CME Group’s FedWatch tool, the market currently places an almost 35% probability on the target rate ending the year in the 5% to 5.25% range, while the most likely range by November 2024 is 3.75% to 4%.
Patrick Armstrong, chief investment officer at Plurimi Group, told CNBC last week that there was a double-sided risk to current market positioning.
“If Powell cuts, he probably cuts a lot more than the market’s pricing, but I think there is above 50% chance where he just sits on his hands, we get through year-end,” Armstrong said.
“Because services PMI is incredibly strong, the employment backdrop incredibly strong, consumer spending all strong — it’s not the kind of thing where the Fed really needs to pump liquidity out there unless there is a debt crisis.”
European slowdown
The European Central Bank faces a similar dilemma, having slowed the pace of its hiking increments from 50 basis points to 25 basis points at its May meeting. The bank’s benchmark rate sits at 3.25%, a level not seen since November 2008.
Headline inflation in the euro zone rose in April to 7% year-on-year, though core price growth posted a surprise slowdown, prompting further debate as to the pace of rate rises the ECB should be adopting as it looks to bring inflation back to Earth.
The euro zone economy grew by 0.1% in the first quarter, below market expectations, but Bundesbank President Joachim Nagel said last week that several more rate hikes will be needed, even if that tips the bloc’s economy into recession.

“We are in a not at all easy phase, because inflation is sticky and it’s not moving as we would all hope it would, so it’s quite important as Joachim Nagel said today that the ECB stays open for further rate hikes as long as it needs until the drop-off is done,” former Bundesbank executive board member Andreas Dombret told CNBC last week.
“Of course, this will have negative implications and negative effects on the economy too, but I strongly believe that if you let inflation [de-anchor], if you let inflation go, those negative effects will be even higher, so it is very important for the credibility of the ECB that the ECB stays the course.”
The Bank of England
The U.K. faces a much tougher inflation challenge than the U.S. and the euro zone, and the U.K. consumer price inflation rate fell by less than expected in April.
The annual consumer price index dropped from 10.1% in March to 8.7% in April, well above consensus estimates and the Bank of England’s forecast of 8.4%. Meanwhile core inflation jumped to 6.8% from 6.2% in March, which will be of greater concern to the Bank’s Monetary Policy Committee.
With inflation continuing to prove stickier than the government and the central bank had hoped, now almost double the comparable rate in the U.S. and considerably higher than in Europe, traders increased bets that interest rates will need to be hiked further in order to curtail price rises.

“Supply shocks, still de-anchored inflation expectations, fewer promotional discounting, and some potential margin building are likely keeping prices from normalising as quickly as traditional models would imply,” explained Sanjay Raja, chief U.K. economist at Deutsche Bank.
“We now expect a slower descent to target, and with price and wage inflation now likely to remain stronger than anticipated, we raise our terminal rate forecast to 5.25%. Risk management considerations will, we think, force the MPC to push rates higher and further than previously intended.”
Deutsche Bank now sees monetary policy shifting “firmly” toward a “higher for longer” era, Raja added.
The market is now pricing a 92% chance of a further 25 basis point rate hike from the Bank of England at its June meeting to take the main bank rate to 4.75%, according to Refinitiv data on Friday afternoon.
But despite the expectations for rates to rise further for longer, many economists still see a full reversal of course before the end of this year.
Berenberg had previously projected three cuts by the end of 2023, but cut this down to one in response to last week’s inflation print.

The German bank kept its end-2024 call for a 3% rate unchanged, projecting six 25 basis point cuts over the course of next year, but also put a 30% probability on a further 25 basis point hike in August to take the bank rate to 5%.
“Policy changes operate with uncertain effects and variable lags. As a consequence of the shift away from floating-rate mortgages towards fixed products over the past decade, the pass-through of monetary policy to consumption via the housing market takes longer than in the past,” said Berenberg Senior Economist Kallum Pickering.
“This highlights the risk that, if the BoE overreacts to near-term inflation surprises, it may set the stage for a big inflation undershoot once the full effects of its past policy decisions play out.” More

Last year 1.2m people moved to Britain—almost certainly the most ever. Net migration (ie, immigrants minus emigrants) to Australia is currently twice the rate before the covid-19 pandemic. Spain’s equivalent figure recently hit an all-time high. Nearly 1.4m people on net are expected to move to America this year, one-third more than before the pandemic. In 2022 net migration to Canada was more than double the previous record. In Germany it was even higher than during the “migration crisis” of 2015. The rich world as a whole is in the middle of an unprecedented migration boom. Its foreign-born population is rising faster than at any point in history (see chart 1). What does this mean for the global economy? Not long ago it seemed as if many wealthy countries had turned decisively against mass migration. In 2016 Britons voted for Brexit and then Americans for Donald Trump—both political projects had a strong anti-migrant streak. In the global wave of populism that followed, politicians from Australia to Hungary promised to crack down on migration. Then covid closed borders. Migration came to a standstill, or even went into reverse, as people decided to return home. Between 2019 and 2021 the populations of Kuwait and Singapore, countries that typically receive lots of migrants, fell by 4%. In 2021 the number of emigrants from Australia exceeded the number of immigrants to the country for the first time since the 1940s.In some places the surge in migration has brought back a sense of normality. Singapore’s foreign workforce recently returned to its pre-pandemic level. In other places it feels like a drastic change. Consider Newfoundland and Labrador, Canada’s second-smallest province by population. Long home to people of Irish-Catholic descent—with accents to match—net migration to the province is running at more than 20 times the pre-pandemic norm. St John’s, the capital, once fairly homogeneous, feels more like Toronto every time you visit. Heart’s Delight, a small rural village, now has a Ukrainian bakery, Borsch. The provincial government is setting up an office in Bangalore to help recruit nurses. The new arrivals in Newfoundland are a microcosm of those elsewhere in the rich world. Many hundreds of Ukrainians have arrived on the island—a tiny share of the millions who have left the country since Russia invaded. Indians and Nigerians also appear to be on the move in large numbers. Many speak English. And many already have familial connections in richer countries, in particular Britain and Canada. Some of the surge in migration is because people are making up for lost time. Many migrants acquired visas in 2020 or 2021, but only made the trip once covid restrictions loosened. Yet the rich world’s foreign-born population—at well over 100m—is now above its pre-crisis trend, suggesting something else is going on. The nature of the post-pandemic economy is a big part of the explanation. Unemployment in the rich world, at 4.8%, has not been so low in decades. Bosses are desperate for staff, with vacancies near an all-time high. People from abroad thus have good reason to travel. Currency movements may be another factor. A British pound buys more than 100 Indian rupees, compared with 90 in 2019. Since the beginning of 2021 the average emerging-market currency has depreciated by about 4% against the dollar. This enables migrants to send more money home than before. Many governments are also trying to attract more people. Canada has an explicit target to welcome 1.5m new residents in 2023-25. Germany and India recently signed an agreement to allow more Indians to work and study in Germany. Australia is increasing the time period some students can work after graduating from two to four years. Britain has welcomed Hong Kongers looking to flee Chinese oppression—well over 100,000 have arrived. Many countries have made it easy for Ukrainians to enter. Even those countries hitherto hostile to migration, including Japan and South Korea, are looking more favourably on outsiders as they seek to counteract the impact of ageing populations.Economies that welcome lots of migrants tend to benefit in the long run. Just look at America. Foreign folk bring new ideas with them. In America immigrants are about 80% likelier than native-born folk to found a firm, according to a recent paper by Pierre Azoulay of the Massachusetts Institute of Technology and colleagues. Research suggests that migrants also help to build trading and investment links between their home country and the receiving one. A slug of young workers also helps generate more tax revenue. Your people shall be my peopleSome economists also hope that the wave of migration will have more immediate benefits. “High immigration is helpful for the Fed as it tries to cool down the labour market and slow down inflation,” says Torsten Slok of Apollo Global Management, an asset manager, expressing a common view. Such arguments may be a little too optimistic. Having more people does increase the supply of labour, which all else equal reduces wage growth. But the effect is pretty small. There is little sign that the countries receiving the most migrants have the loosest labour markets. In Canada, for instance, pay is still rising by about 5% year on year (see chart 2). Migrants also increase demand for goods and services, which can raise inflation. In Britain new arrivals appear to be pushing up rents in London, which already had a constrained supply of housing. A similar effect is noticeable in Australia. Estimates published by Goldman Sachs, a bank, imply that Australia’s current annualised net migration rate of 500,000 people is raising rents by around 5%. Higher rents feed into a higher overall consumer-price index. Demand from migrants may also explain why, despite higher mortgage rates, house prices in many rich countries have not fallen by much. Over the next year or so migration may come down a bit. The post-pandemic “catch-up” will end; rich-world labour markets are slowly loosening. Yet there is reason to believe that historically high levels of new arrivals will remain raised for some time. More welcoming government policy is one factor. More important, migration today begets migration tomorrow, as new arrivals bring over children and partners. Before long the rich world’s anti-immigrant turn of the late 2010s will seem like an aberration. ■ More

China’s pandemic-battered economy is starting to see consumers open their wallets wider, according to KraneShares’ Brendan Ahern.
“We’re seeing the incremental rebound from the Chinese consumer,” the firm’s chief investment officer told “ETF Edge” this week. “[But] it’s not like turning on a light switch.”

The National Bureau of Statistics of China reports retail sales have been increasing since last November.

Ahern, who’s involved with the firm’s China-focused ETFs, expects quarterly earnings for Chinese companies to improve with each consecutive quarter — a forecast that may already be unfolding.
Tech giants Baidu and Tencent beat revenue expectations for the fiscal first quarter of 2023. Alibaba, on the other hand, missed revenue estimates.
“We’re actually hearing that for many of the companies … in the management calls, they’re speaking to how Q2 already is outpacing Q1, which outpaced Q4 of last year,” Ahern said.
China’s reopening is also anticipated to have a positive impact on the airline industry.

Singapore Airlines, Japan’s All Nippon Airways and Japan Airlines all noted demand from China as a factor in future earnings while reporting net profits earlier this month for the financial year ended March 2023.
GraniteShares’ Will Rhind sees a similar growth trajectory.
“Domestic travel [is] rebounding … but we’ve yet to see that from the international sector,” the ETF provider’s CEO said. “It will come, but maybe just not yet.”
Rhind told CNBC in a special interview later in the week that international travel from China could start to rebound this summer following a sluggish start.
His forecast comes as a government-backed epidemiologist said the country’s new Covid wave could infect 65 million a week by the end of next month.
Rhind believes the recent Covid surge won’t affect the reopening’s trajectory, adding past lockdowns seen across China are “very, very much unlikely to be repeated.”

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The Paramount logo is displayed at Columbia Square along Sunset Blvd in Hollywood, California on March 9, 2023.
Patrick T. Fallon | AFP | Getty Images

Paramount Global shares jumped nearly 6% on Friday after an investor known as Warren Buffett’s favorite banker piled into the media company’s controlling shareholder.
National Amusements, Paramount’s majority voting shareholder, announced Thursday afternoon that it has entered into an agreement for a $125 million preferred equity investment from BDT Capital Partners, an affiliate of BDT & MSD Partners.

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Some Buffett watchers noticed a curious connection with the news. BDT & MSD Partners’ chairman and co-CEO is Byron Trott, who has long been known as Buffett’s preferred and trusted banker. It was Trott who suggested that Buffett throw a $5 billion lifeline to Goldman Sachs during the 2008 financial crisis.
The connection didn’t end there. Buffett’s Berkshire Hathaway is actually Paramount’s biggest institutional investor with a stake of 15.4%, according to FactSet. Berkshire initially took the stake in the first quarter of 2022, and the bet is worth about $1.32 billion after Paramount’s recent sell-off.
Paramount has slid more than 30% since the start of the second quarter after its quarterly earnings and revenue missed analyst estimates, and the CBS parent slashed its quarterly dividend.
“So what we now have here is Trott having a say on what happens at NAI. And NAI having a say in what happens to Buffett’s 15% stake in PARA,” Don Bilson, head of event-driven research at Gordon Haskett, said in a note. “Where this goes is TBD but with Buffett and his banker in the mix, this situation is more interesting today than it was when the week began.”
‘Not good news’
Asked about Paramount at Berkshire’s annual shareholders meeting early May, Buffett, 92, struck a negative tone about the big dividend cut, while signaling his pessimistic outlook for the streaming business.

“It’s not good news when any company passes its dividend, or cuts its dividend dramatically,” Buffett said. “The streaming business is extremely interesting to watch … there’s a lot of companies doing it. And you need fewer companies or you need higher prices. And, well, you need higher prices or it doesn’t work.”
It was unclear if it was Buffett who bought the Paramount position or his investing lieutenants, Ted Weschler and Todd Combs, each of whom oversees $15 billion at Berkshire.
Upgrade from Loop
Loop Capital on Friday upgraded Paramount to a hold rating from a sell in light of the BDT investment. The Wall Street firm said the bull case is that the financial pressure will force Paramount to find a buyer and shareholders will achieve private market value.
“While we still believe a turnaround of PARA will be a challenge, investors’ perception of the company could change with a motivated seller, clever bankers, and Berkshire’s purse strings,” Loop Capital said in a note. More