Finance

Check out the companies making headlines before the bell:
Tesla (TSLA) – Tesla delivered 254,695 vehicles during the second quarter, down 17.9% from the first quarter and below what analysts had predicted. China’s Covid-19 shutdowns were a key factor in holding back production. Tesla fell 1% in premarket trading.

Occidental Petroleum (OXY) – Occidental gained 1.3% in the premarket following news that Berkshire Hathaway (BRKb) once again added to its stake in the energy producer. Berkshire bought 9.9 million more shares, boosting its stake to 17.4%.
Exxon Mobil (XOM) – Exxon rose 1.3% in premarket trading following its late Friday announcement that second-quarter earnings could be as much as $18 billion. Exxon’s results are getting a boost from rising oil and natural gas prices and higher refining margins.
Crocs (CROX) – Crocs jumped 2.4% in premarket action after the casual shoe maker’s stock was upgraded to “buy” from “hold” at Loop Capital.
Stellantis (STLA) – Stellantis shares slid 6% in the premarket after a union workers report said the worldwide chip shortage could cut the automaker’s Italy-based production by about 220,000 vehicles this year. Stellantis produced about 14% fewer vehicles during the first half of 2022 compared with the same period a year ago.
Hecla Mining (HL) – The mining company announced a deal to acquire all of the Alexco Resource shares it didn’t already own in a stock swap transaction. Hecla will also pay Wheaton Precious Metals (WPM) $135 million to terminate its joint venture with Alexco. Hecla rose 1% in premarket action.

HP Inc. (HPQ) – The computer and printer maker’s shares fell 1.9% in premarket trading after Evercore downgraded the stock to “in line” from “outperform”. The downgrade comes amid a slowdown in demand for personal computers.
AstraZeneca (AZN) – The drug maker announced a deal to buy biotech firm TeneoTwo in a deal that could be worth up to $1.17 million if certain milestones are reached. AstraZeneca fell 1.1% in the premarket.

WATCH LIVEWATCH IN THE APP More

China’s Vice Premier Liu He and U.S. Treasury Secretary Janet Yellen held a virtual call Tuesday about macroeconomic issues, according to official statements from both sides.
The Chinese readout mentioned U.S. tariffs and sanctions on China, but not geopolitics.
The U.S. readout did not mention tariffs or sanctions, while noting the global economic impact of Russia’s war against Ukraine.

Chinese Vice Premier Liu He represented his country in the signing of a trade agreement with the U.S. in January 2020.C
Saul Loeb | AFP | Getty Images

BEIJING — China’s Vice Premier Liu He and U.S. Treasury Secretary Janet Yellen held a virtual call Tuesday about macroeconomic issues, according to official statements from both sides.
The Chinese readout stated the importance of coordinating the two countries’ macro policies and maintaining the stability of global supply chains. The statement also mentioned U.S. tariffs and sanctions on China, but not geopolitics.

The U.S. readout noted general discussion of economic and financial developments in both countries and abroad. But the statement did not mention tariffs or sanctions, while noting the global economic impact of Russia’s war against Ukraine.
U.S. President Joe Biden has said the White House could drop tariffs imposed on Chinese goods during former President Donald Trump’s administration.
Readouts from both countries described the conversation as “candid,” and said the two sides agreed to maintain communication.

WATCH LIVEWATCH IN THE APP More

Traders on the floor of the NYSE, July 1, 2022.
Source: NYSE

Stock futures inched higher in overnight trading after the major averages finished another losing week.
Stock futures tied to the Dow Jones Industrial Average rose 18 points or 0.06%. S&P 500 futures inched 0.18% higher, and Nasdaq 100 futures added 0.43%.

The moves come as markets finished one of the worst halves in decades on Thursday, and major averages posted their fourth week of losses in five despite modest gains during Friday’s trading session.
Last week, despite modest Friday gains, the Dow dipped 1.3%, the S&P 500 dropped 2.2%, and the Nasdaq fell 4.1%. During Friday’s trading session, the Dow Jones Industrial Average added 321.83 points, or 1.1%, to 31,097.26, the S&P 500 gained 1.1% to 3,825.33 and the Nasdaq Composite edged 0.9% higher to 11,127.85.
In this shortened holiday week, investors are looking ahead to the release of June jobs report data on Friday. According to Dow Jones estimates, job growth likely slowed in June with 250,000 nonfarm payrolls added, down from 390,000 in May. Economists surveyed expect the unemployment rate to hold at 3.6%.
This week’s economic calendar also includes Wednesday’s release of minutes from the Federal Reserve’s latest meeting. May factory orders are expected for Tuesday, with earnings from WD-40 and Levi Strauss scheduled for Friday.

Stock picks and investing trends from CNBC Pro:

“With two quarters of consecutive negative economic growth, a Federal Reserve seemingly intent on aggressive tightening regardless of the economic and market backdrop, and signals of a more marked slowdown, an earnings season that surprises to the upside rather than the expected downside, could help restore a semblance of stability in markets,” said Quincy Krosby, chief equity strategist for LPL Financial.

WATCH LIVEWATCH IN THE APP More

A hacker, or hackers, took over the Twitter and YouTube accounts of the British Army on Sunday.
The army’s Twitter profile was altered to show images of fake NFTs and promote crypto giveaway schemes.
Its YouTube account, meanwhile, aired livestreams with clips of Elon Musk and directed users to crypto scam websites.

A screenshot of the British Army’s Twitter profile when it was hacked, via Wayback Machine. Its profile and banner pictures were changed to resemble a nonfungible token collection called “The Possessed.”

A hacker compromised the social media accounts of the British Army to push people toward cryptocurrency scams.
The army’s Twitter and YouTube profiles were taken over by the hacker, or hackers — the identity of whom is not yet known — on Sunday. The Twitter account’s name was changed to “pssssd,” and its profile and banner pictures were changed to resemble a nonfungible token collection called “The Possessed.”

The Possessed’s official Twitter account warned users of a “new verified SCAM account” impersonating the collection of NFTs — tokens representing ownership of pieces of online content.
Earlier Sunday, the account was renamed “Bapesclan” — the name of another NFT collection — while its banner image was changed to a cartoon ape with clown makeup on. The hacker also began retweeting posts promoting NFT giveaway schemes.
Bapesclan didn’t immediately respond to a CNBC direct message on Twitter.
The name of the U.K. military’s YouTube account, meanwhile, was changed to “Ark Invest,” the investment firm of Tesla and bitcoin bull Cathie Wood.
The hacker deleted all the account’s videos and replaced with them with livestreams of old clips taken from a conversation with Elon Musk and Twitter co-founder Jack Dorsey on bitcoin that was hosted by Ark in July 2021. Text was added to the livestreams directing users to crypto scam websites.

Both accounts have since been returned to their rightful owner.
“The breach of the Army’s Twitter and YouTube accounts that occurred earlier today has been resolved and an investigation is underway,” Britain’s Ministry of Defense tweeted Monday.
“The Army takes information security extremely seriously and until their investigation is complete it would be inappropriate to comment further.”
A Twitter spokesperson confirmed the British Army’s account “was compromised and has since been locked and secured.”
“The account holders have now regained access and the account is back up and running,” the spokesperson told CNBC via email.

A YouTube representative was not immediately available for comment when reached by CNBC.
Tobias Ellwood, a British Conservative lawmaker who chairs the defense committee in Parliament, said the breach “looks serious.”
“I hope the results of the investigation and actions taken will be shared appropriately.”
It’s not the first time a high-profile social media account has been exploited by hackers to promote crypto scams. In 2020, the Twitter accounts of Musk, President Joe Biden and numerous others were taken over to swindle their followers of bitcoin.
— CNBC’s Lora Kolodny contributed to this report

WATCH LIVEWATCH IN THE APP More

Manufacturing companies in China snagged the most investment deals in the first half of the year among 37 sectors tracked by business database Qimingpian.
During that time, roughly a quarter of early-stage to pre-IPO manufacturing deals were related to semiconductors, preliminary data showed.
The interest in the industry came despite an overall drop in deals in China.

A factory in Suqian, Jiangsu province, China, on May 9, 2022.
Future Publishing | Future Publishing | Getty Images

BEIJING — By the numbers, manufacturing companies in China snagged the most investment deals in the first half of the year among 37 sectors tracked by business database Qimingpian.
In fact, the number of early-stage to pre-IPO deals in manufacturing rose by about 70% year-on-year despite Covid controls and a plunge in Chinese stocks during the last six months.

About 300, or roughly a quarter of those deals, were related to semiconductors, preliminary data showed. Several of the investors listed were government-related funds.
Data on early-stage investments aren’t always complete due to the private nature of the deals. But available figures can reflect trends in China.
Investor interest in chip companies comes as Beijing has cracked down on consumer-focused internet companies, while promoting the development of tech such as integrated circuit design tools and equipment for producing semiconductors.
Manufacturing accounted for about 21% of investment deals in the first half of the year, according to Qimingpian. The second-most popular industry was business services, followed by health and medicine.

Electric car and transportation-related start-ups ranked first by capital raised, at 193 billion yuan ($28.82 billion), based on available data. Monetary amounts were not disclosed for many deals.

“In the last 12 months I think that there’s been a lot of hot capital chasing after a few deals that are in sectors that the government is promoting heavily,” said Gobi Partners managing partner Chibo Tang, without naming specific industries. He said the trend has resulted in dramatic increases in valuation, while fundamentals haven’t changed much.
A two-month lockdown in Shanghai and Covid-related restrictions hit business sentiment and prevented people from traveling to discuss and close deals.
In the first half of the year, the overall number of investment deals in China dropped by 29% from the same period a year ago, and declined by 25% from the second half of last year, according to CNBC calculations of Qimingpian data.
“Given the market downturn in the recent months, there is a lot more capital on the sidelines,” Gobi Partners’ Tang said Monday on CNBC’s “Squawk Box Asia.”
His firm expects more early-stage investment opportunities will arise in the next 12 months, as valuations drop. Tang noted how many start-ups that raised capital 18 months ago had growth forecasts that now are being reset lower.
“Founders are having a more difficult time raising money,” he said, “so the conversations we are having with them is how they should conserve capital, how they should extend their runway.”

Read more about China from CNBC Pro

Over the last 12 months, Beijing’s crackdown on tech and education companies following Didi’s IPO in New York has paused the ability of investment funds to cash out easily on their bets via an initial public offering.
While the future of Chinese stock listings in the U.S. remains in limbo, many start-ups have opted for a market closer to home.
But as of June 14, more than 920 companies were still in line to go public in mainland China and Hong Kong, according to an EY report. That was little changed from March.
“Pipelines remain strong partly due to backlog from some delayed IPOs since Q1,” EY said in the report.
Sentiment in mainland markets picked up as Covid controls eased in the last few weeks. Despite year-to-date declines of more than 6%, the Shanghai composite surged by nearly 6.7% in June for its best month since July 2020.

WATCH LIVEWATCH IN THE APP More

Welcome to the American corporate-debt market of 2022. Often the only risky bonds that are being issued are the legacy debts of a now ancient-seeming time—when interest rates were low and a recession was unthinkable. Elsewhere, the high-yield market has almost ground to a halt. A paltry $83bn of risky debt has been issued so far in 2022, 75% less than in the same period last year. A sharp rise in interest rates in the first half of this year has cooled credit markets, wrong-footed investors and complicated bankers’ lives. In January Bank of America, Credit Suisse, Goldman Sachs and a handful of other banks agreed to finance a $15bn deal for two private-equity firms to buy Citrix, a software company. They promised to issue the riskiest $4bn of that debt at a maximum interest rate of 9%. At the time, the average yield on bonds with a credit rating of ccc, a speculative grade, was around 8%. The Citrix deal is expected to close some time in July. If bankers cannot sell the debt below the interest-rate cap they will be on the hook for the difference. But the yield on ccc-rated bonds has soared above 14%, making it difficult for the banks to sell the debt to investors below the cap. “If the market is anything like it is today, those banks are going to lose hundreds of millions—and potentially a billion—dollars on this deal alone,” says Roberta Goss of Pretium, a debt-investment manager. The stakes in aggregate are far higher. A steady decline in interest rates over the past 30 years encouraged companies to borrow record amounts. Now the cost of servicing and refinancing that debt mountain is climbing, profits are being dented by rising costs and inventories are piling up at some firms as demand slows. Does a corporate-debt meltdown loom?America’s last big debt crisis, in 2007-09, was in housing. The stock of household debt relative to gdp had climbed sharply as lenders had aggressively issued mortgages and property prices had soared. When interest rates rose, borrowers began to default. Some 3m households were eventually foreclosed on in 2008. This time it seems far less likely that households will be the borrowers struggling. Lending standards have been tightened and debt levels have fallen. Household debt to gdp peaked at 99% in 2008 but has since tumbled to just 75%. By contrast, corporate debt as a share of gdp, at around 80%, has been at or near record highs during the past two years (see chart). To understand where problems might arise, it is important to look across the many funding options available to firms and their owners. American companies owe around $12.5trn. Some $6.7trn of that is in bonds, mostly issued by large or mid-size public companies. An additional $1.3trn is loans from banks, and another $1.1trn is mortgage debt. The rest—over $3trn—is financing from non-banks, comprising mostly of either private credit, typically loans made for private-equity buy-outs, or “syndicated” loans, which originate in banks but are split into pieces and sold to investors, or sometimes bundled into other debt securities. The bond market, as the biggest source of debt, might seem like the natural place to go looking for trouble. But firms that issued bonds are “relative winners” of the rise in interest rates, says Eric Beinstein of JPMorgan Chase, because most bonds pay fixed coupons. Of the $5trn-worth of corporate bonds issued since the start of 2020 some 87% pay fixed coupons. And those coupon rates are at all-time lows. The average coupon on an investment-grade bond is just 3.6%—half the rate in the early 2000s and still below the level in 2019. That will insulate borrowers as rates rise. These fixed-rate bonds are not due to mature soon, either. The riskier high-yield end of the bond market—the roughly $1.5trn owed by sub-investment-grade issuers, which tend to be smaller or heavily indebted companies—saw a wave of refinancing in 2020 and 2021. The result is that only a tiny $73bn-worth of high-yield bonds are due to mature in 2022 and 2023. The peak of risky-bond maturation will not come until 2029.The impact of rising rates is likely to be much greater in the syndicated-loan and private-debt markets, which typically issue floating-rate debt (although some of that rate risk may have been hedged). They have also seen explosive growth. Between 2015 and 2021 the value of outstanding high-yield bonds grew a little, from around $1.3trn to $1.5trn. By contrast, syndicated loans grew from $900bn in 2015 to $1.4trn over the same period. Private credit was the runt in 2015, with just $500bn in assets under management. Now, with $1.1trn in assets, it rivals its other risky debt peers.John Kline of New Mountain, a private-credit firm, argues that the growing market share of private credit is a reflection of the fact that it offers issuers price certainty and is “much easier to deal with” than slicing up a bank loan through a syndication process, or issuing a bond. He points out that the barbarian days of private-equity shops leveraging firms with 85% debt to total value are long gone. The average debt-to-value ratio for private-equity deals last year was closer to 50%.Still, that ratio is less reassuring once you consider how far private-equity valuations might have fallen this year (the formal figures are revised infrequently, unlike public-market valuations). And with great growth seems to have come fresh risk. Compared with the profits of the firms they acquired, debt levels look much higher: equal to an average of six times gross operating profit, a little higher than the record set in 2019 or in any of the past 20 years. “Whenever a market grows quickly, there can be a sort of reckoning if the environment changes,” says Mr Beinstein. The challenge, he says, is getting hold of any details or data on private deals. In the bright lights of public markets it is easy enough to find evidence suggesting that companies are not facing an imminent crisis. The problem is that a chunk of the debt lurks in the shadows. ■ More

The headquarters building of Micron Technology Inc. stands in Boise, Idaho, U.S.
Matthew Staver | Bloomberg | Getty Images

WATCH LIVEWATCH IN THE APP More

FTX signed a deal with BlockFi that gives it the option to buy the lender at a maximum price of $240 million. The company did not provide a minimum price.
FTX also upped its prior loan of $250 million to $400 million.
It comes as one of BlockFi’s counterparties, hedge fund Three Arrows Capital falls into liquidation and crypto’s bear market causes more casualties.

Sam Bankman-Fried, CEO of cryptocurrency exchange FTX, at the Bitcoin 2021 conference in Miami, Florida, on June 5, 2021.
Eva Marie Uzcategui | Bloomberg | Getty Images

FTX has signed a deal giving it the option to buy crypto lending company BlockFi.
The agreement gives FTX the ability to buy BlockFi at a maximum price of $240 million, the company announced Friday. The deal price is based on certain performance targets. The company it did not give a minimum deal price.

CNBC reported Thursday that a term sheet would be signed by the end of this week, with a source saying it could be as low as $25 million. Even at the high end of FTX’s deal price, it marks a significant decrease in the value of BlockFi. The Jersey City, New Jersey-based company was last worth $4.8 billion, according to PitchBook. 
The term sheet also pads BlockFi’s balance sheet with a larger loan.
FTX increased a previous $250 million revolving credit facility to a total $400 million. BlockFi executives said the company had not drawn on this credit facility to date, and has “continued to operate all our products and services normally.”
FTX CEO Sam Bankman-Fried has been seen as a lender of last resort in the space. In addition to BlockFi, Bankman-Fried’s company Alameda Research provided a $500 million loan to Voyager.
As to why BlockFi agreed to move forward with the deal, the company pointed to crypto market volatility and the failure of hedge fund Three Arrows Capital. It also pointed to embattled crypto company Celsius, which froze customer deposits two weeks ago citing “extreme market conditions.” BlockFi said it had seen an uptick in client withdrawals that week, despite having no exposure to Celsius.

BlockFi said it has suffered $80 million in losses “which is a small fraction of losses publicly reported by other lenders.” Its losses with the hedge fund will be part of Three Arrows’ ongoing bankruptcy case, the company said.
“Outside of this transaction, we realize that there is a lot of fear, uncertainty, and doubt in the crypto markets,” BlockFi CEO Zac Prince said. “From our vantage point, we continue to see a healthy ecosystem on the rise.”
Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.

WATCH LIVEWATCH IN THE APP More