Finance

Five major car companies in Shanghai saw production plunge by 75% in April from March, the China Passenger Car Association said.
Shanghai is home to auto producers like Ford, Tesla and SAIC’s joint companies with Volkswagen and GM, according to Citi.
The auto industry in China accounts for about one-sixth of jobs and roughly 10% of retail sales, according to official figures for 2018 compiled by the Ministry of Commerce.

Although Shanghai began in mid-April to prioritize several hundred companies for resuming work, foreign business organizations have said that doesn’t mean the factories can operate at full capacity.
Tian Yuhao | China News Service | Getty Images

BEIJING — Auto production plunged in April as Covid lockdowns halted nearly all non-essential business in the metropolis of Shanghai, according to a report from the China Passenger Car Association.
Five major car companies in Shanghai saw production plunge by 75% in April compared to March, the association said in a report Tuesday. Production at major foreign automakers’ joint ventures in the northern city of Changchun — which also temporarily locked down to control Covid — dropped by 54% during that time, the report said.

Nationwide, China’s passenger car production also plunged in April, dropping by 41.1% year-on-year and by 46.8% compared to the previous month, the report said.
The auto sector in China accounts for about one-sixth of jobs and roughly 10% of retail sales, according to official figures for 2018 compiled by the Ministry of Commerce.
According to Citi, Shanghai is home to many auto producers: SAIC Motor, SAIC’s joint companies with Volkswagen and GM, Nio, Tesla and Ford.
Shanghai began locking down in earnest in late March.
Although the city began to prioritize several hundred companies for resuming work in mid-April, foreign business organizations have said that doesn’t mean the factories can operate at full capacity. Suppliers may also remain closed or unable to transport parts.

Tesla’s Shanghai Gigafactory, which reopened with much fanfare about three weeks ago, remains subject to ongoing Covid uncertainty.
This week, the company had to reduce production in Shanghai due to Covid-related issues, according to JL Warren Capital CEO and Director of Research Junheng Li. A supplier had to close temporarily due to Covid, limiting the availability of parts for Tesla’s Model Y.
Tesla did not respond to a request for comment.
— CNBC’s Lora Kolodny contributed to this report.

Read more about electric vehicles from CNBC Pro

WATCH LIVEWATCH IN THE APP More

China’s consumer price index rose by 2.1% in April from a year ago, the fastest since November.
A surge in energy and fresh vegetable costs sent prices higher, as did moderation in pork prices’ plunge.
Excluding food and energy prices, the consumer price index rose by a muted 0.9% in April from a year ago.

Fresh vegetable prices rose by 24% year-on-year in April as consumers stocked up to prepare for potential stay-home orders. Pictured here is a delivery driver for Alibaba’s Hema Fresh supermarket in Beijing on May 10, 2022.
Jade Gao | Afp | Getty Images

BEIJING — China’s consumer and producer prices rose more than expected in April, according to data from the National Bureau of Statistics released Wednesday.
The consumer price index rose by 2.1% last month from a year ago, boosted by a surge in energy and fresh vegetable costs. The reading topped expectations for a 1.8% rise forecast by a Reuters poll.

April’s figure was also the highest since November’s 2.3% print and well above the 18-month average of 0.9% consumer price inflation. China’s official CPI target for 2022 is “around 3%.”
“The main driver was a pick up of food prices due to rising transportation costs and restocking demand from tighter Covid restrictions,” Goldman Sachs analysts said in a report Wednesday.
“In year-over-year terms, we expect CPI inflation to rise and PPI inflation to fall on base effects,” the report said. “Sequentially CPI inflation may moderate in the near term as the inflationary pressures from food prices might ease with the improved Covid situation in China.”
Since March, mainland China has tightened travel restrictions and imposed stay-home orders in many parts of cities to contain the country’s worst Covid outbreak since early 2020. The controls have prevented many factories from producing at full capacity or moving goods between suppliers and customers.

Fresh vegetable prices rose by 24% year-on-year in April, while fresh fruit prices increased by 14.1% during that time. Pork prices, a major contributor to China’s CPI, posted a relatively rare 1.5% increase from the prior month for a more moderate year-on-year drop of 33.3%.

Fuel prices for transportation climbed by 28.4% from a year earlier, reflecting recent surges in oil and commodities prices.

Sluggish consumer demand

However, China’s rising consumer price index doesn’t mean locals face the same pressure that Americans do.
U.S. consumer prices have surged by their most since the early 1980s, even when stripping out food and energy. The April figure due out later on Wednesday is forecast to remain near the decades-high increase of 8.5% seen in March.
In China, excluding food and energy prices, the consumer price index rose by a muted 0.9% in April from a year ago.
Longer-term, analysts warn that overall consumer demand in China remains depressed due to uncertainty about future income.
Some businesses have even cut prices to attract buyers.
The Caixin Services PMI for April — a monthly sentiment survey — found that businesses cut prices at the fastest pace since May 2020, “with a number of firms lowering their fees in order to attract new business amid muted demand conditions,” a release said.
A similar survey of manufacturers found that despite a sharp rise in the cost of production, selling prices increased only modestly as firms tried to remain competitive and attract new business.

Factory costs remain high

In April, China’s producer price index moderated for a fourth-straight month, rising 8% year-on-year. That was still above Reuters’ forecast for a 7.7% increase.
Within PPI, purchase prices rose far more quickly than so-called factory gate prices — the price of goods sold from factories for further manufacturing or sale to distributors.
That’s an indication that cost pressures are unevenly distributed across industries, said Bruce Pang, head of macro and strategy research at China Renaissance.
He said that means different businesses will face different kinds of impact on their profit margins.
There’s an “urgent need” for monetary and fiscal policy to provide targeted support for companies seriously affected by the pandemic, Pang said in Chinese, translated by CNBC.

Read more about China from CNBC Pro

China’s central bank and other authorities have announced a number of measures to support growth in the last few weeks, although the scale of those measures has generally disappointed markets.
“The Covid lockdowns have eroded the effectiveness of policy easing, and muted demand more than supply,” Morgan Stanley’s Chief China Economist Robin Xing and a team said in a note Tuesday.
In late April, the firm cut its GDP target for China to 4.2% based on expectations that Covid controls will disrupt supply chains will last longer. That’s down from the prior forecast of 4.6%.

WATCH LIVEWATCH IN THE APP More

The logo for Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, is displayed on the Nasdaq MarketSite jumbotron and others at Times Square in New York, U.S., April 14, 2021.
Shannon Stapleton | Reuters

Check out the companies making headlines after the bell: 
Coinbase — Shares sank 11.5% in extended trading after Coinbase reported first-quarter revenue below expectations. Coinbase posted revenue of $1.17 billion versus the Refinitiv consensus estimate of $1.48 billion. The company said lower crypto asset prices and market volatility impacted first-quarter results.

Electronic Arts — The stock rose 2.2% after hours despite Electronic Arts narrowly missing Wall Street’s revenue estimates. The video game company reported quarterly revenue of $1.75 billion, while analysts surveyed by Refinitiv expected revenue of $1.77 billion on average.
Roblox — Shares dropped 6.9% in extended trading after the video game company missed analyst projections on the top and bottom lines. Roblox reported a first-quarter loss of 27 cents per share on revenue of $631 million. Analysts had expected a loss of 21 cents per share on revenue of $645 million, according to Refinitiv.
Unity Software — The stock plunged 31.6% in extended trading after the video game software company posted revenue below expectations. Unity Software reported $320 million in revenue in the first quarter, while analysts surveyed by Refinitiv expected $322 million.
Wynn Resorts — The hotel and casino operator stock fell marginally after hours following a weaker-than-expected quarterly report. Wynn posted an adjusted loss of $1.21 per share while analysts expected $1.15, according to Refinitiv. Revenue came in at $953 million versus the consensus estimate of $986 million.
SoFi — The stock rose 1% after hours following a plunge of 12% in the regular trading session, after SoFi accidentally released quarterly results early. SoFi posted better-than-expected numbers on the top and bottom lines, but issued weaker-than-expected forward guidance.
Occidental Petroleum — The stock fell 1% despite a better-than-expected quarterly report. Occidental reported first-quarter earnings of $2.12 per share on revenue of $8.53 billion. Analysts had expected a profit of $2.03 per share on revenue of $8.08 billion, according to Refinitiv.

WATCH LIVEWATCH IN THE APP More

WITHIN DAYS of Vladimir Putin’s invasion of Ukraine, Russia’s financial system seemed on the verge of collapse. The West imposed a range of financial sanctions, notably on the Russian central bank’s foreign-exchange reserves, that sent the rouble plunging and led citizens to withdraw cash frantically. Once the central bank raised interest rates, imposed capital controls and injected liquidity into the banking system, however, some of these misfortunes reversed. And although a chunk of Russia’s currency reserves remains frozen, the country still generates about $1bn a day from its energy exports.Russia has stopped publishing detailed monthly trade statistics. But figures from its trading partners can be used to work out what is going on. They suggest that, as imports slide and exports hold up, Russia is on track for a record trade surplus.On May 9th China reported that its exports to Russia were broadly flat in April, compared with the previous month, while its imports from Russia rose by 13%. Germany reported a 62% monthly drop in exports to Russia in March, and its imports fell by 3%. Adding up such flows across eight of Russia’s biggest trading partners, we estimate that Russian imports have fallen by about 44% since the invasion of Ukraine, while its exports have risen by roughly 8%.Imports have collapsed partly because sanctions on the Russian central bank and the expulsion of some lenders from the SWIFT interbank messaging network have made it harder for consumers and firms to buy Western goods. Elina Ribakova of the Institute of International Finance (IIF), a bankers’ group, says that regulatory uncertainty was also a big factor at first, as Western firms were unsure which Russian banks came under sanctions. Logistical disruptions, including decisions by Western firms to suspend deliveries to Russia, mattered, too. The early depreciation of the rouble also dampened Russian demand for imports, says Claus Vistesen of Pantheon Macroeconomics, a consultancy.Russia’s exports, meanwhile, have held up surprisingly well, including those directed to the West. Sanctions permit the sale of oil and gas to most of the world to continue uninterrupted. And a spike in prices has boosted revenues further.As a result, analysts expect Russia’s trade surplus to hit record highs in the coming months. The IIF reckons that in 2022 the current-account surplus, which includes trade and some financial flows, could come in at $250bn (15% of last year’s GDP), more than double the $120bn recorded in 2021. That sanctions have boosted Russia’s trade surplus, and thus helped finance the war, is disappointing, says Mr Vistesen. Ms Ribakova says the efficacy of financial sanctions may have reached its limits. A decision to tighten trade sanctions must come next.But such measures could take time to take effect. Even if the EU enacts its proposal to ban Russian oil, the embargo would be phased in so slowly that the bloc’s oil imports from Russia would fall by just 19% this year, says Liam Peach of Capital Economics, a consultancy. The full impact of these sanctions would be felt only at the start of 2023—by which point Mr Putin will have amassed billions to fund his war. For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Stock futures were little changed in overnight trading Tuesday ahead of a key inflation reading.
Futures on the Dow Jones Industrial Average shed about 15 points. S&P 500 futures were marginally lower and Nasdaq 100 futures were near flat.

The moves come after the Dow fell for a fourth consecutive day Tuesday in a volatile trading session alternating between gains and losses. The S&P 500 ticked up 0.25% and the Nasdaq Composite gained about 1%.
Mega-cap technology names, which have struggled in recent weeks, led gains Tuesday. Microsoft and Apple each rose more than 1%.
Investors are awaiting the release of April’s consumer price index Wednesday morning for the latest temperature check on inflation. Rising prices have been front-of-mind, particularly as the Federal Reserve is hiking interest rates and trimming its balance sheet to address inflation.
“We are seeing signs on a month-over-month basis that inflation is peaking,” Brian Belski, BMO Capital markets chief investment strategist, told CNBC’s “Closing Bell: Overtime” on Tuesday. “But are we going to see some sort of a surprise number? That could really get things going.”
Economists expect the CPI to rise 0.2% from the month prior and 8.1% year over year, according to the Dow Jones consensus estimate. That compares with March’s 8.5% year-over-year pace.
Investors are also looking to earnings reports from companies including Toyota Motors, Walt Disney and Beyond Meat.

WATCH LIVEWATCH IN THE APP More

A Peloton Interactive Inc. logo on a stationary bike at the company’s showroom in Dedham, Massachusetts, U.S., on Wednesday, Feb. 3, 2021.
Adam Glanzman | Bloomberg | Getty Images

Check out the companies making headlines in midday trading.
Peloton – Shares tumbled 8.7% after the equipment maker disclosed it’s piling up excess inventory and burning through cash in a disappointing earnings report. Peloton also issued a dim fiscal fourth-quarter sales outlook and expects an upcoming price hike may lose the company some subscribers.

Novavax – Shares fell 2% midday, but closed 1.1% higher after the vaccine maker missed top and bottom line estimates for its latest quarter. The first quarter was, however, Novavax’s first profitable quarter. The company also reiterated its prior 2022 revenue forecast, anticipating vaccine sales will accelerate during the current quarter.
Vroom – The online used-vehicle seller saw shares popped 32.4% after posting a narrower-than-expected quarterly loss and better-than-expected revenue. Vroom also announced that chief operating officer Thomas Shortt would become CEO.
BioHaven Pharmaceutical – Shares of the drugmaker surged 68.4% after Pfizer announced a deal to buy BioHaven, whose main product is a migraine pill called Nurtec. Shares of Pfizer were up less than 1%.
Upstart – Shares of the AI lending platform plummeted 56.4% despite better-than-expected quarterly results. Upstart cut its full-year outlook, saying rising interest rates will hurt its loan volume.
AMC Entertainment – The stock fell 5.4% after the movie theater operator posted a smaller-than-expected quarterly loss as well as revenue that exceeded analyst forecasts. AMC was helped by the release of popular big-budget movies like “The Batman,” and the company noted a jump in per-patron revenue above pre-pandemic levels

Palantir – Shares of Palantir dropped 2.3% on Tuesday, extending a 21% decline from Monday that came on the heels of a disappointing first-quarter report with weak guidance. RBC Capital Markets downgraded Palantir to underperform, saying that the company would have trouble hitting its revenue growth goals.
Sunrun – The solar company’s shares fell about 3% after KeyBanc downgraded the stock to a sector weight rating from overweight. The firm cited “significant uncertainty presented by the recent proposed decision related to net metering reform in [California].”
— CNBC’s Jesse Pound and Sarah Min contributed reporting

WATCH LIVEWATCH IN THE APP More

Terry Angelos, Visa’s global head of fintech and crypto, will take over as CEO of start-up DriveWealth next week, CNBC has learned.
The $3.7 billion broker-dealer provides infrastructure that lets Block’s Cash App offer fractional stock trading, and is now focused on global expansion.
“Traditionally, people outside the U.S. don’t have the ability to open up a brokerage account. That’s something that we think we can help solve,” Angelos says.

Terry Angelos, Visa’s global head of fintech and crypto.
DriveWealth

One of Visa’s top executives is leaving the payments giant for a brokerage technology start-up, CNBC has learned.
Terry Angelos, Visa’s global head of fintech and crypto, will take over as chief executive officer of start-up DriveWealth next week. Angelos joined Visa seven years ago as part of its acquisition of TrialPay, which he founded and led as CEO.

DriveWealth lets consumer finance apps like Block’s Cash App and Revolut offer stock trading by providing necessary behind-the-scenes infrastructure. The Jersey City-based broker-dealer was one of the first to allow fractional investing, or buying stocks in smaller dollar amounts vs. whole shares.
While retail trading boomed during the pandemic, Angelos said the long-term opportunity is in taking U.S. equities international. He estimated roughly a billion people across the world, outside of China, access financial services from a digital wallet or a fintech app and are looking for exposure to blue-chip stocks.
“If you were to think about the single, most reliable long-term asset that people around the world want to own, it’s equity in U.S. companies,” Angelos said. “Traditionally, people outside the U.S. don’t have the ability to open up a brokerage account. That’s something that we think we can help solve.”
U.S. companies have been less of a safe haven this week with the Dow hitting its lowest level of the year on Monday. Still, over the past six decades, U.S. stocks have seen a roughly 10% annual return.
DriveWealth was last valued at $3.7 billion and is backed by Softbank, Fidelity’s venture capital arm and Citi Ventures among others, according to Pitchbook. The company operates as a licensed broker-dealer, providing clearing and settlement on behalf of its fintech customers, which handle the consumer experience and apps.

DriveWealth also provides custody for individual accounts and stocks. To connect to these apps, it uses software known as an API, or Application Programming Interface. The company said it doubled its customer base year over year, with 140% growth in international partners. While it’s starting with stocks, DriveWealth also offers crypto investing infrastructure.
Individual investor activity has slowed significantly from its 2021 peak at the time of the GameStop frenzy. The retail participation rate, measured by retail volume as a percentage of total trading volume, recently fell to its lowest level since the pandemic began, according to Rich Repetto, managing director and senior research analyst at Piper Sandler.
That pullback has hurt shares of Robinhood, which recently said it was cutting 9% of its workforce after ramping up hiring to keep up with demand, and other publicly traded brokerage firms.
Still, Angelos said DriveWealth has seen increased participation and account growth during the recent downturn, and pointed to the long-term value of U.S. stocks.
“We’re still in the growth cycle of making equities available to people who otherwise wouldn’t have had access and will continue to see growth, even though there may be volatility or pullbacks among more active traders,” he said.
As for an initial public offering, Angelos said it’s “potentially on the road map.” But for now, he said he’s focused on increasing its footprint and returning to the chief executive role after almost a decade at Visa.

WATCH LIVEWATCH IN THE APP More

Watch Daily: Monday – Friday, 3 PM ET

Crypto investors are keeping a close eye on UST, a controversial stablecoin, as the organization that supports it is sitting on billions of dollars in bitcoin.
Terra’s UST token sank below 70 cents late Monday, as holders continued to flee the controversial stablecoin.
Traders worry the project might have sold, or will sell, a large portion of its bitcoin to prop up UST.

Bitcoin is now down 50% from its November all-time highs.
Artur Widak | Nurphoto | Getty Images

Investors in bitcoin are in panic mode as the controversial terraUSD stablecoin slips further from its intended $1 peg.
TerraUSD, or UST, sank below 70 cents for the first time late Monday, as holders continued to flee the token in what some have described as a “bank run.” The token fell as low as 62 cents before regaining ground to trade at 90 cents Tuesday, according to Coinbase data.

Created by Singapore-based Terraform Labs in 2018, UST is what’s known as an “algorithmic” stablecoin. Part of the Terra blockchain project, it’s meant to track the value of the dollar, like fellow stablecoins tether and USDC.
However, unlike with those cryptocurrencies, Terra doesn’t have cash and other assets held in a reserve to back its token. Instead, it uses a complex mix of code — alongside a sister token called luna — to stabilize prices.
It’s important for bitcoin investors as Luna Foundation Guard, an organization supporting the Terra project, is sitting on billions of dollars in bitcoin that could potentially be dumped onto the market at any point.
“Every professional investor in crypto has one eye on UST today, watching to see if it can maintain its peg to the dollar,” said Matt Hougan, chief investment officer at Bitwise Asset Management. “There’s clearly significant risk in the market.”

In simple terms, the Terra protocol destroys and creates new units of UST and luna to adjust supply. When the price of UST falls below the dollar, it can be taken out of circulation and exchanged for luna, making UST’s supply more scarce and boosting its price — at least, that’s how it should work in theory.

To further complicate things, Terra’s creator Do Kwon bought $3.5 billion worth of bitcoin to provide a backstop for UST in times of crisis. The theory was that UST could eventually be redeemed for bitcoin instead of luna, but this is untested and hasn’t yet been put into practice.
On Monday, Kwon’s Luna Foundation Guard said it would lend $750 million worth of bitcoin to trading firms to “help protect the UST peg,” while a further 750 million UST will be lent out to buy more bitcoin “as market conditions normalize.”
In a follow-up tweet, the organization said it had withdrawn 37,000 bitcoins — worth over $1 billion at current prices — to lend out. “Very little” of the borrowed bitcoins have been spent, Luna Foundation Guard said, but it is “currently being used to buy” UST.
Several crypto investors are also worried that Luna Foundation Guard might have sold, or will sell, a large portion of its bitcoin to prop up UST. Amid all of this uncertainty, UST’s decline has sent shockwaves throughout the crypto market.
Bitcoin, the world’s largest digital currency, briefly fell below $30,000, hitting its lowest price since July 2021. As of 7:00 a.m. ET, bitcoin was trading at $31,324, down around 5% in the last 24 hours. It’s now down more than 50% from its November all-time high.
Luna, UST’s counterpart, has roughly halved in value in the past 24 hours. It was last trading at a price of $32.
Adding to UST holders’ woes, Binance, the largest crypto exchange by market volume, temporarily suspended withdrawals of both UST and luna “due to a high volume of pending withdrawal transactions,” citing network congestion.
Binance has since resumed withdrawals, and says it “will continue to monitor” network conditions.
“I think the market is expecting some forced selling here on the part of Terra and the reserve,” Nic Carter, co-founder of Coin Metrics, told CNBC. “It is a calamity but very expected. No algorithmic stablecoin has ever succeeded and this is no exception.”
He added that the problem with UST is that it’s largely “backed by faith.”
“It’s not fully guaranteed, it’s certainly not fully backed by reserves,” he told CNBC. “It was really just backed by faith in the issuer effectively.”
Terraform Labs did not respond to multiple requests for comment. More