Finance

Presidential hopeful Donald Trump’s new running mate JD Vance stuck to a hard line on China in his first speech since being selected earlier in the week.
“Together we will protect the wages of American workers and stop the Chinese Communist Party from building their middle class on the backs of American citizens,” Vance said on the third night of the Republican National Convention.
China’s middle-income group had a per capita disposable income of 32,195 yuan ($4,436) last year, according to official data.

Relations between Washington and Beijing are at their lowest in decades amid disputes over trade, technology, human rights and China’s increasingly aggressive approach toward its territorial claims involving self-governing Taiwan and the South China Sea.
Jason Lee | Reuters

BEIJING — U.S. presidential hopeful Donald Trump’s new running mate JD Vance stuck to a hard line on China in his first speech since being selected earlier in the week.
“Together we will protect the wages of American workers and stop the Chinese Communist Party from building their middle class on the backs of American citizens,” Vance said on the third night of the Republican National Convention.

He also called for more factories in the U.S. and restrictions on foreign workers, but did not name specific actions.
Vance, a former critic of Trump, rose to fame for his book “Hillbilly Elegy” — a first-hand account that seeks to describe the impact on the U.S. economy as manufacturing shifted out of the country. As the current Ohio Senator, Vance proposed in September a legislation for promoting gas and hybrid-powered cars made in the U.S. and canceling electric car subsidies.
The ruling Communist Party of China has been increasingly focused on developing advanced manufacturing and said one of its goals for the year 2035 is to “substantially grow the middle-income group as a share of the total population.”

China has 1.4 billion people, more than four times the U.S. population of 336.7 million. McKinsey predicts the number of China’s upper-middle and high-income households could reach 200 million next year.
However, China remains far poorer than the U.S. on a per capita basis.

China’s middle-income group had a per capita disposable income of 32,195 yuan ($4,436) last year, slightly lower than the nationwide level of 39,218 yuan, according to the National Bureau of Statistics. The bureau defined each income category by dividing all surveyed households into five equal parts, including upper-middle-income, middle-income and lower-middle income groups.
Per capita disposable income across the U.S. was multiples higher at $61,033 as of December, according to U.S. Bureau of Economic Analysis data.
When looking at the U.S. middle class, median income was $106,100 in 2022, according to Pew Research.
But the share of Americans that were considered middle class fell to 51% in 2023, down from 61% in 1971, Pew said. The share of upper-income Americans grew by slightly more than that of the lower-income segment during that time, the research showed.
Vance in his speech criticized Wall Street and “cheap foreign goods” from China. He also blamed China for the fentanyl crisis.
Since joining the World Trade Organization in 2001, China has increased its role in global supply chains. Many of the world’s largest companies have relied on lower-cost manufacturing hubs in China for supplies.
Trump has said he plans to raise tariffs on Chinese goods to 60% if reelected in fall. He increased duties on Chinese products when he was president about six years ago, and the Biden administration left them intact.
Vance told Fox News earlier this week that instead of the war in Ukraine, China was the “real issue” for the U.S. and posed the “biggest threat.”
Asked about Vance’s comment, China’s Ministry of Foreign Affairs spokesperson Lin Jian said Tuesday at a daily press briefing, “We are always opposed to making China an issue in U.S. elections.”
— CNBC’s Lora Kolodny contributed to this report. More

Keeping with statements from other policymakers, Waller’s sentiments point to an unlikelihood of a rate cut when the Federal Open Market Committee meets later this month, but a stronger likelihood of a move in September.
Central bankers have become more optimistic from data in recent months that has shown inflation easing after a surprisingly higher move for the first three months in 2024.

Federal Reserve Board Governor Christopher Waller poses before a speech at the San Francisco Fed, in San Francisco, California, U.S., March 31, 2023. 
Ann Saphir | Reuters

Federal Reserve Governor Christopher Waller on Wednesday suggested that interest rate cuts are ahead soon as long as there are no major surprises on inflation and employment.
“I believe current data are consistent with achieving a soft landing, and I will be looking for data over the next couple months to buttress this view,” Waller said in remarks for a program at the Kansas City Fed. “So, while I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted.”

Keeping with statements from other policymakers, Waller’s sentiments point to an unlikelihood of a rate cut when the Federal Open Market Committee meets later this month, but a stronger likelihood of a move in September.
Central bankers have become more optimistic from data in recent months that has shown inflation easing after a surprisingly higher move for the first three months in 2024.
Waller outlined three potential scenarios in the days ahead: One, in which the inflation data turns even more positive and justifies a rate cut in “the not too distant future”; a second in which the data fluctuates but still points toward moderation; and a third in which inflation turns higher and forces the Fed into a tighter policy stance.
Of the three, he considers the third scenario of unexpectedly stronger inflation as the least likely.
“Given that I believe the first two scenarios have the highest probability of occurring, I believe the time to lower the policy rate is drawing closer,” Waller said.

However, he noted that while financial markets focus strongly on the date the Fed might move on a cut, FOMC members do not.
“Assuming there’s not a big shot to the economy, from a macro perspective it doesn’t really matter that much,” Waller said. “It’s not a particular meeting, it’s when do we think conditions are right to go.”
Waller’s comments on Wednesday are of particular note because he has been among the more hawkish FOMC members this year, or those who have advocated for tighter monetary policy as fears escalated that inflation is proving more durable than expected.
In May, Waller told CNBC that he expected cuts to be “several months away” as he awaited more convincing data that inflation was receding. His speech Wednesday indicated that the threshold is close to being met.
For one, he said the labor market “is in a sweet spot” in which payrolls are expanding while wage gains are cooling. At the same time, the consumer price index declined 0.1% in June, while the 3.3% annual rate for core prices was the lowest since April 2021.
“After disappointing data to begin 2024, we now have a couple of months of data that I view as being more consistent with the steady progress we saw last year in reducing inflation, and also consistent with the FOMC’s price stability goal,” he said. “The evidence is mounting that the first quarter inflation data may have been an aberration and that the effects of tighter monetary policy have corralled high inflation.”
The comments also are consistent with what New York Fed President John Williams told The Wall Street Journal in an interview published Wednesday. Williams noted that inflation data is “all moving in the right direction and doing that pretty consistently” and is “getting us closer to a disinflationary trend that we’re looking for.”
Markets again are pricing in a more accommodative Fed.
Traders in the fed funds futures market are pricing in an initial quarter percentage point rate cut in September followed by at least one more before the end of the year, according to the CME Group’s FedWatch measure.
Fed funds futures contracts currently are implying a 4.62% rate at the end of the year, about 0.6 percentage point below the current level.

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Houses in Bouldin Creek, a neighbourhood in Austin, Texas, are cavernous, but occupy only a small portion of their plots. Rules known as the “McMansion ordinance”, intended to preserve the area’s character, ensure there is plenty of space between them. Architects must squeeze the design of any new home into an imaginary tent rising five metres from the plot’s edge, then angling in at 45 degrees. The rules seek to prevent sprawling developments from replacing small houses. Instead, the cost of complying with them has ensured that only large, expensive homes are viable. More

HSBC announced on Wednesday that it has appointed Georges Elhedery as group CEO, starting Sept. 2.
Elhedery replaces Noel Quinn, who has held the position for nearly five years.
Elhedery will continue to serve as group CFO during the transition period, and his successor for the role has not been announced.

HSBC logo is displayed outside a branch of in the United Kingdom.
Matt Cardy | Getty Images

HSBC announced on Wednesday that it has appointed Georges Elhedery as group CEO, starting Sept. 2.
Elhedery, who is the current chief financial officer, will replace outgoing head Noel Quinn in September.

In late April, HSBC unexpectedly announced that Quinn would depart after nearly five years at the helm.
Elhedery’s appointment as CEO comes less than two years after he was promoted to chief financial officer in January 2023. He will continue to serve as group CFO during the transition period, the company said in a statement.
“I am deeply honoured by the trust placed in me to lead this great institution into the future. Working together with our talented team, I look forward to delivering exceptional value to our clients and investors by driving strong performance on a sustainable growth trajectory,” Elhedery said.
HSBC Group Chairman Mark Tucker called Elhedery “an exceptional leader and banker who cares passionately about the Bank, our customers, and our people.”

Elhedery has worked across multiple regions during his career, spanning Asia, Europe and the Middle East. The bank said “he has demonstrated his strategic insight and vision, and deep international perspectives,” adding that the Board considered him an “outstanding candidate.”

The bank has not yet announced a successor to Elhedery as CFO.
Quinn will work closely with Elhedery to ensure a “smooth and order handover of responsibilities,” HSBC said. Quinn will remain available to the company while on gardening leave until his 12-month notice period ends on April 30, 2025. 

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Quinn has led the bank through challenges such as the Covid-19 pandemic and trade tensions between China and the West. He has been with the bank for 37 years, and was appointed as interim CEO in 2019.
Quinn said in April, “After an intense five years, it is now the right time for me to get a better balance between my personal and business life. I intend to pursue a portfolio career going forward.”
The bank’s Hong Kong shares were 0.15% lower Wednesday. More

An employee handles one kilogram of gold bullions at the YLG Bullion International Co. headquarters in Bangkok, Thailand, on Friday, Dec. 22, 2023.
Chalinee Thirasupa | Bloomberg | Getty Images

Gold jumped to a record Tuesday as rising expectations of a September interest rate cut bolstered demand for bullion.
Gold futures settled up 1.6% to an all-time closing high of $2,467.8 per ounce, after also hitting a new intraday record high of $2,474.5 during the session. Gold futures prices have climbed more than 19% this year.

Spot gold jumped 1.9% to $2,468.68 an ounce during the session. LSEG data shows that’s an all-time high going back to 1968, without adjusting for inflation.
Gold prices hit record highs earlier this year before pulling back as the prospect of higher-for-longer interest rates dampened investor enthusiasm for the precious metal. But interest in the asset has grown after June’s softer inflation data and some recently dovish comments from Federal Reserve Chair Jerome Powell combined to raise the odds of rate cuts coming this year. Markets are pricing in 100% odds of a rate cut in September now, according to futures trading tracked by the CME FedWatch tool.

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Gold futures, 5 years

A weakening dollar has also supported demand for bullion. On Tuesday, the U.S. greenback rebounded after falling to a five-week low.
“Interest to ‘buy-the-dip’ remained prevalent among investors amid strong sentiment towards gold, which is likely why the market was quick to rally on soft U.S. data prints and dovish Fed expectations,” UBS strategist Joni Teves said in a note on Friday.
“With the market sitting just above the psychological $2400 level, we think risks are skewed to the upside,” Teves continued. “We think positioning remains lean and there’s space for investors to build gold exposure.”

Gold rallied to record highs in the first half of 2024 on the back of a multiyear spike in demand from central banks around the world, as mounting global geopolitical risks boosted interest in the safe haven asset. According to UBS, central bank buying of bullion is the highest it’s been since the late 1960s.
“With some central banks now questioning the safety of holding USD- and EUR-denominated assets (following the financial and debt crises and more recently the war in Ukraine), many are choosing to instead fill their reserves with gold,” read a note last month from UBS.
Gold mining stocks also advanced on Tuesday. The VanEck Gold Miners ETF gained 3.4%, posting a fifth winning day in six. The U.S.-listed shares of Harmony Gold and Gold Fields rose 16.1% and 6.3%, respectively.

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Federal Reserve Bank Chair Jerome Powell speaks during a House Financial Services Committee hearing on the Federal Reserve’s Semi-Annual Monetary Policy Report at the U.S. Capitol on July 10, 2024 in Washington, DC. 
Bonnie Cash | Getty Images

Traders are now 100% certain the Federal Reserve will cut interest rates by September.
There are now 93.3% odds that the Fed’s target range for the federal funds rate, its key rate, will be lowered by a quarter percentage point to 5% to 5.25% in September from the current 5.25% to 5.50%, according to the CME FedWatch tool. And there are 6.7% odds that the rate will be a half percentage point lower in September, accounting for some traders believing the central bank will cut at its meeting at the end of July and again in September, says the tool. Taken together, you get the 100% odds.

The catalyst for the change in odds was the consumer price index update for June announced last week, which showed a 0.1% decrease from the prior month. That put the annual inflation rate at 3%, the lowest in three years. Odds that rates would be cut in September were about 70% a month ago.
The CME FedWatch Tool computes the probabilities based on trading in fed funds futures contracts at the exchange, where traders are placing their bets on the level of the effective fed funds rate in 30-day increments. Simply put, this is a reflection of where traders are putting their money. Actual real-life probability of rates remaining where they are today in September are not zero percent, but what this means is that no traders out there are willing to put actual money on the line to bet on that.
Fed Chairman Jerome Powell’s recent hints have also cemented traders’ belief that the central bank will act by September. On Monday, Powell said the Fed wouldn’t wait for inflation to get all the way to its 2% target rate before it began cutting, because of the lag effects of tightening.
The Fed is looking for “greater confidence” that inflation will return to the 2% level, he said.
“What increases that confidence in that is more good inflation data, and lately here we have been getting some of that,” added Powell.
The Fed next decides on interest rates on July 31 and again on Sept 18. It doesn’t meet on rates in August.

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Here’s what they reported: Earnings of $1.82 a share vs. $1.65 a share LSEG estimate
Revenue of $15.02 billion vs. $14.3 billion estimate
Morgan Stanley shares dropped after the bank’s wealth management division missed estimates on a steep decline in interest income.

Morgan Stanley said second-quarter profit and revenue topped analysts’ estimates on stronger-than-expected trading and investment banking results.
Here’s what the company reported:

Earnings: $1.82 a share vs. $1.65 a share LSEG estimate
Revenue: $15.02 billion vs. $14.3 billion estimate

The bank said profit surged 41% from the year-earlier period to $3.08 billion, or $1.82 per share, helped by a rebound in Wall Street activity. Revenue rose 12% to $15.02 billion.
Morgan Stanley benefited from its Wall Street-centric business model in the quarter, as a rebound in trading and investment banking helped the bank’s institutional securities division earn more revenue than its wealth management division, flipping the usual dynamic.
Equity trading generated an 18% jump in revenue to $3.02 billion, exceeding the StreetAccount estimate by about $330 million. Fixed income trading revenue rose 16% to $1.99 billion, topping the estimate by $130 million.
Investment banking revenue surged 51% to $1.62 billion, exceeding the estimate by $220 million, on rising fixed income underwriting activity. Morgan Stanley said that was primarily driven by non-investment-grade companies raising debt.
But results in the bank’s wealth management underwhelmed. Revenue rose 2% to $6.79 billion, missing the $6.88 billion estimate.

While the division’s revenue rose thanks to higher stock market levels, interest income plunged 17% from a year earlier to $1.79 billion.
Morgan Stanley said that’s because its rich clients were continuing to shift cash into higher-yielding assets, thanks to the rate environment, which resulted in lower deposit levels.
Shares of the bank fell 3.4% in premarket trading.
“The firm delivered another strong quarter in an improving capital markets environment,” CEO Ted Pick said in the release. “We continue to execute on our strategy and remain well positioned to deliver growth and long-term value for our shareholders.”
Last week, JPMorgan Chase, Wells Fargo and Citigroup each topped expectations for revenue and profit, a streak continued by Goldman Sachs on Monday, helped by a rebound in Wall Street activity.
This story is developing. Please check back for updates. More