Finance

To meet the world’s biggest news junkies, head not to Washington or Westminster. Instead, make your way to a trading floor, where information from every corner of the globe must be parsed the instant it emerges. Whatever the news, from coups to company-earnings reports, it probably affects the price of something. This year, amid a seemingly never-ending series of elections, the addicts are not short of a fix. Electorates representing most of the world’s population are heading to polling booths, and not just market-makers but investors everywhere face the tantalising prospect of trading on the results. More

In a video clip that has gone viral recently, Kamala Harris quotes her mother asking her whether she thought she had just fallen out of a coconut tree. The probable Democratic nominee for president breaks into a laugh at the turn of phrase before explaining, somewhat philosophically, the message of the story: “you exist in the context of all in which you live and what came before you.” For Ms Harris some of that context is esoteric economic theory. Her father, Donald, is an 85-year-old, Jamaican-born economist, formerly a professor at Stanford University. More

In September 1985, eight months after Ronald Reagan, America’s 40th president, began his second term, finance ministers and central bankers from America, Britain, France, Japan and West Germany met at the Plaza Hotel in New York. They discussed ways to bring down the value of the dollar, which had risen by nearly 50% on a trade-weighted basis between 1980 and Reagan’s second inauguration. Other countries had expressed alarm; the American trade deficit had ballooned. After the group announced that “orderly appreciation of the non-dollar currencies is desirable” and that they were ready to “co-operate more closely to encourage this”, the dollar plummeted. By the late 1980s, it was back where it traded in 1980. More

Chinese electric car companies are outspending Tesla and traditional fuel-powered cars on research and development as a ratio to sales.
Many Chinese automakers already spend as much as or more than their global peers on R&D as a percent of revenue, a significant increase from many years ago, Paul Gong, autos analyst at UBS, told CNBC.
Geely’s vice president of autos R&D, Ren Xiangfei, told CNBC late last month that while the company is looking to improve both hardware and software for cars, the latter can provide more differentiation.

Nio’s second factory in the city of Hefei has around 2,000 human workers and 756 robots.
CNBC | Evelyn Cheng

BEIJING – U.S.-listed Chinese electric car companies are spending more on research as a ratio to sales than Tesla, according to CNBC analysis of the four automakers’ first-quarter earnings.
It’s a strategy for survival in China’s cutthroat auto market, the largest in the world. New energy vehicles, which include both battery and hybrid-powered cars, have grown rapidly to more than 40% of sales.

Many Chinese automakers already spend as much as or more than their global peers on R&D as a percent of revenue, a significant increase from many years ago, Paul Gong, autos analyst at UBS, told CNBC. “In certain cases, even in terms of absolute dollars, it has bypassed.”
Of the four U.S.-listed Chinese electric car companies, Nio ranked first, spending nearly 29% of revenue in the first three months of the year on research and development. That’s far higher than Tesla’s ratio of 5.4% in the first quarter and 4.2% in the second. Elon Musk’s company is known for having a relatively low ratio.
It’s less clear whether that higher spending can translate into long-term competitiveness.
Nio has operated at a loss for years and only seen deliveries for its premium-priced cars pick up in the last several months. In addition to car launches, the company has in recent years held events to promote its battery services and other tech, including one on car “quality” in late June.

“Everyone is talking about involution right now,” Feng Shen, chairman of Nio’s quality management committee said in Mandarin at the event, translated by CNBC. He was referring to a popular term in China to describe fierce competition, especially in the electric car industry.

“What companies should [compete] on is quality,” Shen said, adding that “if you can’t do a good job on quality, there’s nothing you can say.” He laid out Nio’s wide-ranging plan for boosting product quality, starting primarily with new tech and supply chain innovation.
Shen, who is also executive vice president of Nio, was previously president of luxury EV brand Polestar in China and worked in quality management at Ford Motor in the U.S. and China.
Nio in September 2022 opened its second factory in Hefei city, a manufacturing hub for many car companies. The factory has around 2,000 human workers and 756 robots, which automate much of the production.
“The key is to digitize every stage of manufacturing,” William Li, founder and CEO of Nio, told reporters in June, according to a CNBC translation of the Chinese remarks. He said if the digital system can be integrated across multiple levels of suppliers, the company can easily identify problems.
When asked about global production, Li said Nio would adhere to the same manufacturing standard but did not detail overseas plans.

Supply chain proximity

Hefei is the capital of Anhui province to the west of Shanghai. The region is called the Yangtze River Delta, which China claims is home to so many factories that a new energy vehicle manufacturer can find all the necessary parts within a four-hour drive.
China’s Ministry of Industry and Information Technology told CNBC in a statement that it has worked with car manufacturers and suppliers to create hundreds of best-practice cases and application benchmarks for smart manufacturing in the industry.
“A key competitive advantage for Chinese companies in China is actually the highly effective or efficient supply chain,” said Jing Yang, a director in Fitch Ratings’ Asia-Pacific corporate ratings division, with a focus on Chinese autos.
She noted that can help Chinese electric car companies respond more quickly to customers and market needs than traditional automakers.
Another part of the region, Zhejiang province, is home to Hong Kong-listed auto giant Geely and its U.S.-listed electric car subsidiary Zeekr.
Zeekr’s first-quarter results show the company spent 13% of sales on research and development. Parent Geely, which did not break out the figure in its first-quarter report, has spent at least 4% of revenue on research in the last four years, up significantly from prior years.  
Geely’s vice president of autos R&D, Ren Xiangfei, told CNBC late last month that while the company is looking to improve both hardware and software for cars, the latter can provide more differentiation.
“From users’ perspective, the functions that bring more surprises must be implemented through software,” Ren said in Mandarin, translated by CNBC.
Car software includes driver-assist, in-car entertainment and security features.
Ren noted that new energy vehicles can support more of these functions since they come with a larger battery than traditional fuel-powered cars.
“This will introduce a new concept, the software-defined car,” he said.
Geely last month launched its “Aegis Short Blade Battery,” which the automaker claims passed above-industry standard tests without exploding.
It’s a rival to BYD’s “blade battery” that arguably launched the company into its position as an EV leader. Geely ranked second in new energy vehicle sales in the first half of the year, putting Tesla in third place, according to the China Passenger Car Association.
Ren said the new battery, which is set for initial deployment in Geely cars, increases production costs by about 1,000 yuan (about $137.69) versus competitors’ vehicles.
Since the chemical formula for making batteries is relatively mature, it’s now more important to ensure consistency in manufacturing, he said. “That requires the support of a smart factory.”
Geely has also released an electric car architecture called SEA that it says allows for quicker production of different sized vehicles.
“Vehicle platform is probably the most important thing to look at, and then consistency with their approach,” said Taylor Ogan, Shenzhen-based CEO of Snow Bull Capital.
He said it’s important to see that a company is delivering something fairly soon after announcing it, and that there are separate teams already working on future product releases. “I think that’s the clear differentiator,” he said.

Tech companies vs. automakers 

UBS’s Gong cautioned the ratio of research spend to sales, sometimes called R&D intensity, isn’t a definitive measure of tech innovation.
“If they can sell more cars with a better profitability that basically means their innovative ways are probably right. Some of it may not be in cool features,” Gong said, noting it could include systemized cost cutting. “Less fancy, but really powerful.”
Xpeng had an R&D intensity of 20% in the first quarter. Li Auto’s was only 11% but the company’s range-extender cars have far outsold pure battery-electric vehicles.
When it comes to absolute U.S. dollars, Hong Kong-listed BYD spent the equivalent of $1.47 billion on research in the first quarter, or 8.5% of its revenue. That’s more than Tesla’s $1.15 billion spend on research and development during that time.
For the future, electric car companies are trying to differentiate themselves in terms of battery and software – two categories dominated by CATL and Huawei, respectively, said Jing Liu, professor of accounting and finance, and director of the investment research center at the Cheung Kong Graduate School of Business.
Liu said it’s unlikely that a company can produce a better product than either supplier, but that means that ultimately it is difficult for automakers to stand out in a market where consumers can easily switch between brands.
Huawei has touted it spends at least 10% of revenue on R&D. CATL’s intensity ratio was 5.4% in the first quarter.
— CNBC’s Sonia Heng contributed to this report. More

Job seekers are feeling less confident about their ability to land a new gig.
The labor market has cooled from a red-hot pace in 2021 and 2022. The unemployment rate has increased and businesses aren’t hiring as readily.
While data suggest the labor market remains strong, further cooling could be troublesome, economists said.

Nitat Termmee | Moment | Getty Images

Workers are souring on the state of the job market.
Job seeker confidence in Q2 2024 fell to its lowest level in more than two years, according to a quarterly survey by ZipRecruiter, which has tracked the metric since Q1 2022. That decline suggests workers are more pessimistic about their ability to land their preferred jobs.

Workers had reason for euphoria two to three years ago: The job market was red-hot and, by many metrics, historically strong.
It has remained remarkably resilient even in the face of an aggressive interest-rate-hiking campaign by U.S. Federal Reserve to tame high inflation.
However, the labor market has slowed gradually. Workers are now having a harder time finding jobs and the labor market, while still solid, could be in trouble if it continues to cool, economists said.

“There actually now is reason in the data to understand why job seekers are feeling kind of gloomy,” said Julia Pollak, chief economist at ZipRecruiter. “The labor market really is deteriorating and jobseekers are noticing.”
Demand for workers surged in 2021 as Covid-19 vaccines rolled out and the U.S. economy reopened broadly.

Job openings hit record highs, giving workers ample choice. Businesses competed for talent by raising wages quickly. By January 2023, the unemployment rate touched 3.4%, its lowest level since 1969.
More from Personal Finance:You may get a smaller pay raise next yearWhy employees are less interested in workCFPB cracks down on popular paycheck advance programs
Workers were able to quit their jobs readily for better, higher-paying ones, a period that came to be known as the great resignation or the great reshuffling. More than 50 million people quit in 2022, a record high.
The U.S. economy was able to avoid the recession that many economists had predicted even as inflation declined significantly. However, many Americans still felt downbeat on the economy, a so-called “vibecession” — a sentiment that persists despite the overall economy’s relative strength.
Many job metrics have fallen back to their rough pre-pandemic levels, however. The rate of hiring by employers is at its lowest since 2017.
“The postpandemic excesses of the U.S. job market have largely subsided,” Preston Caldwell, senior U.S. economist for Morningstar Research Services, recently wrote.

The unemployment rate has also ticked up to 4.1% as of June 2024. While that rate is “consistent with a strong labor market,” its steady rise is the “troubling factor,” Nick Bunker, economic research director for North America at the Indeed Hiring Lab, wrote in early July.
The labor market’s broad readjustment has been “mostly welcome” as it comes back into its pre-pandemic balance, Bunker said. But any further cooling “is a riskier proposition,” he said.

“For now, the labor market remains robust, but the future is uncertain,” he wrote in early July after the federal government’s latest batch of monthly jobs data. “Today’s report shows the temperature of the labor market is still pleasant, but if current trends continue the weather could get uncomfortably cold.”
Worker sentiment could rebound if and when the Fed starts cutting interest rates, which could help households by reducing borrowing costs, Pollak said.
“People seize on good news and get very excited,” she said. More

The typical worker will get a 4.1% annual raise for 2025, down from 4.5%, according to a WTW survey.
That growth is still high relative to the recent past.
Company pay increases are largely dictated by supply-and-demand dynamics in the labor market.
The job market has cooled from a scorching level in 2021 and 2022.

Hinterhaus Productions | Stone | Getty Images

Many workers will see their annual raise shrink next year as the job market continues to cool from its torrid pace in the pandemic era.
The typical worker will get a 4.1% pay raise for 2025, down from 4.5% this year, according to a new poll by WTW, a consulting firm.

This is a midyear estimate from 1,888 U.S. organizations that use a fiscal calendar year. Actual raises may change by year-end when the companies finalize their salary budgets.

The size of workers’ salary increases is “driven primarily” by the supply and demand of labor, said Lori Wisper, WTW’s work and rewards global solutions leader. Affordability and industry dynamics play lesser roles, she added.
Companies in the survey would likely pay their annual raises by April 1, 2025, she said.

Job market was ‘unbelievably robust’

Worker pay in 2021 and 2022 grew at its fastest pace in well over a decade amid an “unbelievably robust” job market, Wisper said.
Demand for workers hit records as Covid-19 vaccines rolled out and the U.S. economy reopened broadly. Workers quit their jobs readily for better, higher-paying ones, a trend dubbed the great resignation. More than 50 million people quit in 2022, a record.

Companies had to raise salaries more than usual to compete for scarce talent and retain employees.

The prevalence of incentives like signing bonuses also “grew dramatically,” said Julia Pollak, chief economist at ZipRecruiter.
Almost 7% of online job listings offered a signing bonus in 2021, roughly double the pre-pandemic share, according to ZipRecruiter data. The percentage has dropped to 3.8% in 2024.
“I’m not sure I’ll ever see that kind of job market in my lifetime again,” Wisper said of 2021 and 2022.
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Now, the job market has cooled. Hiring, quits and job openings have declined and the unemployment rate has increased.
Companies may feel they don’t need to offer as much money if they’re not getting as many applications and have fewer job openings, Pollak said.

Almost half — 47% — of U.S. organizations expect their salary budgets to be lower for 2025, according to WTW. (Companies set a salary budget and use that pool of money to pay raises to workers.)  
The current environment “feels like we’re seeing more normal circumstances, where demand is back to where it was pre-pandemic in 2018 and 2019, which was still a very healthy job market,” Wisper said.
Additionally, after two years of declining buying power amid high inflation, the lessening of pricing pressures in recent months has boosted workers’ buying power.

Still high relative to recent past

While the typical 4.1% projected raise is smaller than that during the last pay cycle, it’s “still kind of high” relative to recent years, according to Wisper.
For example, the median annual pay raise had largely hovered around 3% in the years after the 2008 financial crisis, she said.

The increase to more than 4% during the pandemic era was notable: Salary growth tends to fall instead of rise, Wisper said. For example, it was around 4.5% to 5% in the years leading up to the financial crisis, and had never fully recovered, she said.
It’s “something that’s never happened before,” Wisper said. “And [the raises] have stuck, to a degree.”

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Four of the world’s largest chip equipment manufacturers have more than doubled the share of their China revenue since late 2022, Bank of America analysts said.
“China accelerated its purchase of semi manufacturing equipment since the U.S. imposed tighter export restrictions in October 2022, aiming to develop its own semi manufacturing capability,” the report said.
The research found the companies’ China revenue more than doubled from 17% of total revenue in the fourth quarter of 2022 to 41% in the first quarter of 2024.

A worker produces chips at a semiconductor manufacturing enterprise in Binzhou, China, on June 4, 2024.
Nurphoto | Nurphoto | Getty Images

BEIJING — Four of the world’s largest semiconductor equipment manufacturers, including ASML, have seen the share of their China revenue more than double since late 2022, Bank of America analysts said in a report Monday.
“China accelerated its purchase of semi manufacturing equipment since the U.S. imposed tighter export restrictions in October 2022, aiming to develop its own semi manufacturing capability,” the report said.

The BofA analysis looked at Lam Research, ASML, KLA Corp. and Applied Materials.
The research found the companies’ China revenue more than doubled from 17% of their total revenue in the fourth quarter of 2022 to 41% in the first quarter of 2024.
“Tech, especially semi, is at the center stage of trade tensions with China, which could be more at risk if tensions further escalate from here,” the report said.
The U.S. in October 2022 started imposing sweeping export controls on U.S. sales of advanced semiconductors and related manufacturing equipment to China. Last week, Bloomberg reported, citing sources, that the Biden administration was considering broader restrictions on semiconductor equipment exports to China that could affect non-U.S. companies.
Beijing, meanwhile, has sought to bolster its tech self-sufficiency, a goal top leaders reaffirmed at a key policy meeting last week.
The VanEck Semiconductor ETF (SMH), which tracks U.S.-listed chip companies, has fallen in the last week but is still holding gains of nearly 46% for the year so far. More

A dog looks out the window from a Tesla electric vehicle charging at a Tesla Supercharger location in Santa Monica, California, on May 15, 2024.
Patrick T. Fallon | AFP | Getty Images

Check out the companies making headlines in extended trading:
Alphabet — The tech giant slipped 1% despite a beat on both top and bottom lines in the second quarter. Alphabet earned $1.89 per share on $84.74 billion in revenue. Consensus estimates had called for earnings of $1.84 per share on $84.19 billion in revenue. However, revenue at its YouTube advertising segment missed forecasts.

Tesla — Shares of the electric vehicle maker declined 4.7% after second-quarter earnings missed consensus estimates. Tesla reported adjusted earnings per share at 52 cents, while analysts surveyed by LSEG had called for 62 cents per share. On the other hand, the company posted $25.5 billion in quarterly revenue, which was slightly higher than the $24.77 billion estimated by the Street. 
Visa — Shares slipped more than 2% after the company posted a revenue miss in its fiscal third quarter. Visa reported $8.9 billion in revenue, which came in slightly below the $8.92 billion forecast by analysts polled by LSEG. Meanwhile, payments volume rose 7% in the quarter. 
Seagate — Shares rallied more than 6% after Seagate posted an earnings and revenue beat in the fiscal fourth quarter. Seagate earned $1.05 per share, excluding items, on $1.89 billion in revenue. Analysts surveyed by LSEG had estimated it would earn 75 cents per share on revenue of $1.87 billion. The company cited an improving cloud environment for its stronger performance.
Capital One Financial — Shares of the credit card issuer fell about 1% after its second-quarter profit fell from a year ago as the bank put aside more money to offset potential credit losses. Revenue rose 5% to $9.51 billion from the year-ago period, but was lower than analysts surveyed by LSEG had expected.
Texas Instruments — The chipmaker rallied 5% after reporting better-than-expected earnings. Texas Instruments recorded $1.22 in earnings per share versus the consensus estimate of $1.17 per share, per LSEG. The company’s revenue of $3.82 billion came in line with forecasts.

Mattel — The toymaker advanced more than 1% after announcing its second-quarter results. Its adjusted earnings per share of 19 cents topped analysts’ estimates for 17 cents per share, according to LSEG data. Revenue of $1.08 billion slightly missed forecasts of $1.1 billion. Mattel reiterated its full-year guidance and highlighted its gross margin expansion.
Cal-Maine Foods — Shares of the nation’s largest egg producer fell 1% as the avian flu outbreak continues to pressure its performance. In the fiscal fourth quarter, earnings of $2.32 per share were higher than a year ago, but shy of the $2.41 per share analysts predicted, according to FactSet. Sales of $640.8 million also fell short of the $652.3 million estimate.
Enphase Energy — The solar energy stock added 5% despite weaker-than-expected second-quarter results. Enphase posted earnings of 43 cents per share, after adjustments, which was 5 cents below consensus estimates, according to LSEG. Revenue of $304 million also fell short of the $310 million analysts forecast. However, shares rose on better-than-expected margins and its third-quarter forecast of between $370 million and $410 million in revenue, which was above the $404 million analyst estimate.
Chubb — The insurance company gained nearly 1%. Adjusted earnings per share came in at $5.38 in the second quarter, beating the consensus estimate of $5.14 per share, per FactSet. 
— CNBC’s Christina Cheddar Berk contributed reporting. More