Finance

He has a high-stakes job. War and natural disasters keep him on his toes. He is often on a plane to far-flung places, travelling to negotiate with local leaders. He has the best intelligence money can buy. And as November’s election nears, he will spend lots of time looking at lines on charts. The American president and swashbuckling oil traders, it turns out, have a lot in common.Indeed, Joe Biden also seems to have a knack for the oil trade. Two years ago his administration initiated the largest ever sell-off from America’s Strategic Petroleum Reserve (SPR), an emergency store of crude oil, to counteract price surges caused by Russia’s war in Ukraine. Back then, dwindling stocks left observers twitchy. What if there was another shock to the system? So far, however, Mr Biden has got away with the gamble. He is now refilling America’s tanks, and began a new round of bidding on May 7th. Although inflation and war have marked his presidency, domestic fuel prices have been relatively stable and American production high. More

Great investors are often known by a signature style. Warren Buffett made it big by investing in companies he thought cheap and holding on for many years. George Soros bet on macroeconomic events, at one point almost breaking the Bank of England. Jim Simons, who died on May 10th at the age of 86, was more mysterious. He plumbed the quantitative depths in often unexplainable ways.He may also have been the best of the lot. “There is one GOAT [greatest of all time]. His name was Jim Simons,” as Clifford Asness, co-founder of AQR, a hedge fund, put it to the Wall Street Journal. The flagship Medallion fund of Renaissance Technologies, Mr Simons’s firm, generated a whopping $100bn in trading profits over the three decades to 2018. Its 66% average annual return was even more astounding. No other big fund came close. More

Berkshire Hathaway has bought nearly 26 million shares of Zurich-based Chubb for a stake worth $6.7 billion.
The property and casualty insurer became Berkshire’s ninth biggest holding at the end of March.
Berkshire has been keeping this purchase secret for three quarters straight.

Warren Buffett speaks during the Berkshire Hathaway Annual Shareholders Meeting in Omaha, Nebraska on May 4, 2024. 

Warren Buffett finally revealed his secret stock pick in a new regulatory filing, and it’s insurer Chubb.
His conglomerate Berkshire Hathaway has bought nearly 26 million shares of Zurich-based Chubb for a stake worth $6.7 billion. The property and casualty insurer became Berkshire’s ninth biggest holding at the end of March.

Shares of Chubb jumped nearly 7% in extended trading following the news of Berkshire’s stake. The stock has gained about 12% year to date.
Insurer Ace Limited acquired the original Chubb in 2016 for $29.5 billion in cash and stock, and the combined company adopted the Chubb name. Evan Greenberg, CEO of Chubb, is the son of Maurice Greenberg, the former chairman and CEO of insurance giant American International Group.

Stock chart icon

Chubb shares over the past year.

The Omaha-based Berkshire has a large footprint in the insurance industry, from auto insurer crown jewel Geico to reinsurance giant General Re and a slew of home and life insurance services. The conglomerate also acquired insurance company Alleghany for $11.6 billion in 2022.
Berkshire recently exited positions in Markel and Globe Life in the same industry.
Mystery unveiled
Berkshire has been keeping this purchase secret for two quarters straight. Berkshire was granted confidential treatment to keep the details of one or more of its stock holdings confidential.

The topic of this mystery holding didn’t come up at the Berkshire’s annual meeting in Omaha earlier this month.
Many had speculated that the secret purchase could be a bank stock as the conglomerate’s cost basis for “banks, insurance, and finance” equity holdings jumped by $1.4 billion in the first quarter after an increased of $3.59 billion in the second half of last year, according to separate Berkshire filings.
It’s relatively rare for Berkshire to request such a treatment. The last time it kept a purchase confidential was when it bought Chevron and Verizon in 2020. More

Chinese electric car company Nio revealed Wednesday that the first car for its new, lower-priced brand, Onvo, will be about $4,000 cheaper than Tesla’s comparable Model Y.
Onvo aims to set a “new standard” for the family car, Alan Ai, president of the Nio sub-brand, said at Wednesday’s launch event in Mandarin, translated by CNBC.
Fierce competition in China’s electric car market has invited new entrants and prompted many companies to cut prices.

Chinese electric car company Nio launched its lower-cost brand Onvo on Wednesday, May 15, 2024, in Shanghai, China.
CNBC | Evelyn Cheng

SHANGHAI — Chinese electric car company Nio revealed Wednesday that the first car for its new, lower-priced brand, Onvo, will be about $4,000 cheaper than Tesla’s comparable Model Y.
Deliveries for Onvo’s first car, the L60 SUV, are set to begin in September, the company said. Pre-sales began after Wednesday’s launch event.

Nio CEO William Li said he expects Onvo to begin selling its cars overseas at some point but didn’t specify when, according to an interview with CNBC’s Eunice Yoon.
Since launching about 10 years ago, Nio has focused on the premium segment of cars, priced around 300,000 yuan (US$41,500) or higher. The company has since expanded to Europe, but its monthly deliveries in China have generally remained modest versus the competition.
Onvo’s L60 starts at 219,900 yuan (US$30,439) versus the Model Y’s 249,900 yuan (US$34,617). Elon Musk’s electric SUV has been one of the best-selling pure battery-powered electric cars in China.

Fierce competition in China’s electric car market has invited new entrants and prompted many companies to cut prices.
Smartphone company Xiaomi in late March entered the electric car market with its SU7 sedan to rival Tesla’s Model 3 with a price that was also about $4,000 cheaper.

The Model 3 has since cut its price by about $2,000 to 231,900 yuan (US$32,124), according to Tesla’s China website. Xiaomi said Wednesday it had delivered 10,000 SU7 vehicles.
BYD, which sold more cars than Elon Musk’s automaker last year when including hybrids, mostly sells cars in the range of 100,000 yuan (US$13,851) or below. BYD has started to expand into higher-price segments in the last few years.
Nio CEO Li confirmed to CNBC that the L60 is using lower-priced batteries from BYD.
Global competition from Chinese electric-vehicle makers has also prompted stiff new tariffs from the Biden administration on imports of the vehicles to the U.S. Chinese EVs will be subject to a 100% tariff, the administration announced on Tuesday.
When asked about the new levies, Li called them “completely unreasonable,” according to a CNBC translation from Mandarin to English. Li also noted the impact on consumers and climate goals.

A ‘new standard’ family car to rival Tesla

Onvo aims to set a “new standard” for the family car, Alan Ai, president of the Nio sub-brand, said at Wednesday’s launch event in Mandarin, translated by CNBC.
The brand’s name stands for “On Voyage,” while its Chinese name “Le Dao” is meant to evoke a family having a happy time together.
Ai made many comparisons to the Model Y and other cars during his presentation.
He said the L60’s interior was more spacious than that of Tesla’s Model Y and Toyota’s Rav4. He also said Onvo’s new car had better shock absorption and cut tighter figure-eights compared with competitors.
Onvo’s advertised driving range on a single charge is at least as far as — or even further — than that of the Model Y depending on the version.
As a sub-brand, Onvo vehicles can access many of Nio’s battery swap and charging stations, Ai said.
Ai also showed videos of Onvo models using driver-assist technology to navigate through country roads and city streets.
Tesla’s driver-assist software, Full Self-Driving, isn’t available in China yet but is widely expected to be nearing Beijing’s approval for rollout.

Don’t miss these exclusives from CNBC PRO More

A GameStop store operates in a strip mall in Chicago on March 16, 2023.
Scott Olson | Getty Images

GameStop and AMC shares fell in premarket on Wednesday as the meme stock trading frenzy showed signs of fizzling.
The brick-and-mortar video game retailer fell 13% in premarket trading, while the movie theatre chain dropped 12%. Before Wednesday, GameStop and AMC were up 179% and 135% this week, respectively.

Stock chart icon

AMC Entertainment

The sell-off in AMC shares came after the firm announced a debt-for-equity swap. AMC will issue 23.3 million shares in a debt-for-equity exchange for $163.9 million of bonds that mature in 2026. The firm also completed a $250 million stock sale on Monday.
The two meme stars both experienced jaw-dropping rallies and explosion in trading volumes at the start of the week, but this time retail interest seems to be much smaller and short lived. In terms of net retail trader inflows, it pales in comparison to the epic mania three years ago.
For example, GameStop and AMC saw more than $15.8 million and $37.5 million, respectively, in net retail trader inflows on Monday, data from Vanda Research shows. But that is dwarfed by peak daily inflows of about $87.5 million for GameStop and $170 million for AMC seen in late January 2021.

Stock chart icon

The speculative run was reignited Monday by a rare social media update from “Roaring Kitty.” The man, whose legal name is Keith Gill, posted a picture on the X social media platform of a video gamer sitting forward on their chair — a meme used by gamers to indicate they are taking the game seriously.
Gill, also known as DeepF——Value on Reddit, is a former marketer for Massachusetts Mutual Life Insurance, who previously led a host of day traders piling into GameStop back in 2021.

The return of the meme stock phenomenon brought GameStop and AMC shares up over 70% on Monday, with the stock extending gains into Tuesday. Enthusiasm appeared to be fading by the close of the previous session.
Smead Capital Management CEO Cole Smead described the meme stock craze as “frankly stupid,” saying it’s “gambling” on CNBC’s “Street Signs Europe.”
— CNBC’s Alex Harring contributed reporting. More

As China’s economy moves into the second quarter of the year, a few indicators are pointing to sluggish growth ahead if things don’t turn around, raising expectations for monetary policy easing.
The People’s Bank of China over the weekend released new loan data for April that pointed to a sharp slump in demand, with several metrics at their lowest in at least two decades.
On Friday, China plans to issue its first ultra-long bond — 30 years in term — as Beijing kicks off a previously announced program for a total of 1 trillion yuan ($138.25 billion) in funds for major strategic projects.

People purchasing fruit at an agricultural trade market on May 11, 2024 in Lianyungang, Jiangsu Province of China.
Vcg | Visual China Group | Getty Images

BEIJING — As China’s economy moves into the second quarter of the year, a few indicators are pointing to sluggish growth ahead if things don’t turn around, raising expectations for monetary policy easing.
The National Bureau of Statistics is due to release data on retail sales, industrial production and fixed asset investment for April on Friday. Analysts polled by Reuters as of Tuesday expect a slight increase compared to March.

The same day, China plans to issue its first ultra-long bond — 30 years in term — as Beijing kicks off a previously announced program for a total of 1 trillion yuan ($138.25 billion) in funds for major strategic projects. The Ministry of Finance has not specified what the first tranche will be used for.

Some of the weakness speaks to genuine sluggish demand in China at present.

Goldman Sachs

“With issuances running all the way until November, it is likely some of the proceeds spending (and therefore benefit to the economy) will only feature in H1 next year,” Louise Loo, lead economist at Oxford Economics, said in a note Tuesday.
The firm expects this week’s economic data releases to show a “softening in economic momentum,” affirming its forecasts for the central bank to cut rates by the end of June.
The central government bond program comes as the drag from real estate persists, while businesses and consumers largely remain conservative about spending.
The People’s Bank of China over the weekend released new loan data for April that pointed to a sharp slump in demand, with several metrics at their lowest in at least two decades.

Goldman Sachs and other firms’ analysts were quick to point out the one-month figures were affected by changes to how official data is calculated, as well as a crackdown on loans used for financial purposes rather than business expansion.
“Some of the weakness speaks to genuine sluggish demand in China at present,” said Hui Shan, Goldman Sachs’ China chief economist, in a note Sunday.
Outstanding loans in Chinese yuan grew by 9.6% year-on-year in April, the same pace as March and the lowest since records began in 1978, according to official data accessed through Wind Information.

Businesses’ loan demand falls

New bank loans to businesses and government organizations dropped sharply in April from March, as did new loans to households, according to official data accessed through Wind Information.
What’s concerning to analysts at Clocktower Group is that the 12-month moving average for both categories of new loans has started to trend downward for the first time since the financial crisis in 2008.
“If the public sector does not come to support credit growth in a timely manner, a sharp growth deceleration is likely to occur going forward as economic agents will be forced to cut consumption and investment to meet their debt obligations,” the firm said in late April.
On a 12-month moving average basis, the new bank loans category including businesses saw a slight increase in April versus March, while new household loans fell during that time, according to CNBC analysis of data accessed through Wind.
The amount of new business loans is still far higher than what it was in 2019, although that of households has fallen below that level, the data showed.
A survey by The China Beige Book in April found that corporate borrowing fell, dragged down by services, while manufacturing saw an increase in demand. The overall decline came despite more loans getting approved and lower interest rates, making it cheaper to borrow.
M2, a measure of money supply that includes cash, cash equivalents and certain deposits, grew by 7.2% in April from a year ago, its slowest pace on record going back to 1986, according to official data accessed through Wind Information.

Less emphasis on credit expansion

“Looking ahead, the growth of new CNY loans and M2 may gradually slow down further, as the PBOC highlighted weakening relationship between economic growth and credit expansion,” Goldman analysts said in a separate report Sunday, referring to the central bank’s quarterly monetary policy report released Friday.
“We continue to expect two more RRR cuts and one policy rate cut through the remainder of this year,” they said.
RRR refers to banks’ reserve requirements, or the amount of cash they need to have on hand. PBOC Governor Pan Gongsheng told reporters in March there was room to further cut that reserve requirement.

“April credit data are disappointing, but that’s mainly due to regulatory changes rather than a sharp deterioration in the underlying demand,” Macquarie’s Chief China Economist Larry Hu said in a report.
“Policymakers don’t want to have another credit-fueled recovery. Instead, they are happy to rely on exports and new energy sectors to drive growth, at least for now,” he said. He expects exports to remain on track for 5% growth this year, while noting the autos sector has done well.
China’s exports have held up despite rising trade tensions. Data released last week showed exports grew year-on-year in April, up by 1.5% and in line with expectations, while imports grew far more than expected.
Separate figures released over the weekend showed a modest pickup in consumer prices in April. But the measure of prices at factories continued to decline.
However, real estate, which once contributed to at least a quarter of China’s economy, remains a drag, despite a growing number of cities easing purchase restrictions.
Real estate sales are increasingly shifting to the secondary market, which means developers don’t benefit much in a market that is still “searching for a bottom,” S&P Global Ratings said in a report early last week.
The S&P analysts expect China’s primary residential market to shrink by 16% this year.
China’s index on home prices is also due out Friday. Looking further ahead, investors are awaiting a major government meeting scheduled for July for signals on longer-term economic policy.
“Separately, the PBOC suggests it will study policies to help digest existing housing inventory and improve new housing supplies in order to stabilize the property market,” Morgan Stanley analysts said.
“We think this echoes the message from the recent Politburo meeting regarding the property market, and shows monetary policy could potentially be used as part of the support measures to help China deal with its significant property inventory.”
— CNBC’s Michael Bloom contributed to this report. More

Fed Chair Jerome Powell reiterated Tuesday that inflation is falling more slowly than expected, likely keeping interest rates elevated for an extended period.
“We did not expect this to be a smooth road. But these [inflation readings] were higher than I think anybody expected,” Powell said in Amsterdam. “What that has told us is that we’ll need to be patient and let restrictive policy do its work.”
Tuesday brought a fresh round of discouraging inflation data, when the producer price index rose a higher-than-expected 0.5% in April.

Federal Reserve Chair Jerome Powell reiterated Tuesday that inflation is falling more slowly than expected and will keep the central bank on hold for an extended period.
Speaking to the annual general meeting of the Foreign Bankers’ Association in Amsterdam, the central bank leader noted that the rapid disinflation that happened in 2023 has slowed considerably this year and caused a rethink of where policy is headed.

“We did not expect this to be a smooth road. But these [inflation readings] were higher than I think anybody expected,” Powell said. “What that has told us is that we’ll need to be patient and let restrictive policy do its work.”
While he expects inflation to come down through the year, he noted that hasn’t happened so far.
“I do think it’s really a question of keeping policy at the current rate for longer than had been thought,” he said.
However, Powell also repeated that he does not expect the Fed to be raising rates.
The Fed has been holding its key overnight borrowing rate in a targeted range of 5.25%-5.5%. Though the rate has been there since July, it is the highest level in some 23 years.

“I don’t think that it’s likely, based on the data that we have, that the next move that we make would be a rate hike,” he said. “I think it’s more likely that we’ll be at a place where we hold the policy rate where it is.”

CNBC news on inflation

Markets vacillated as Powell spoke around 10 a.m. ET and major averages were near breakeven approaching noon ET. Treasury yields edged lower, and futures traders slightly raised the market-implied probability of the Fed’s first rate cut coming in September.
Powell’s comments mirrored sentiments he expressed during his May 1 news conference after the most recent Federal Open Market Committee meeting.
The committee unanimously voted to hold the line on rates while also expressing that it had seen a “lack of further progress” on getting inflation back to the Fed’s 2% target, despite a series of 11 interest rate increases.
Tuesday brought a fresh round of discouraging inflation data, when the Labor Department’s producer price index, a proxy for wholesale costs, rose a higher-than-expected 0.5% in April on the back of a surge in services prices.
Though the index on its surface indicated further price pressures, Powell called the report “mixed” as some of the components showed easing movement.
“Is inflation going to be more persistent going forward? … I don’t think we know that yet. I think we need more than a quarter’s worth of data to really make a judgement on that,” he said.

Don’t miss these exclusives from CNBC PRO More

Just over six years ago, when Donald Trump first announced tariffs on Chinese goods, it was as if a bomb had gone off. American stocks fell sharply at the prospect of a trade war, businesses warned of blowback and economists lined up to decry the move. Such is the protectionist mood in Washington now that Joe Biden’s announcement of new measures has been met with rather less panic—even though it concerns significantly higher tariffs.On May 14th, following a policy review, the White House decided to raise tariffs on, among other things, Chinese semiconductors and solar cells from 25% to 50%, syringes and needles from 0% to 50% and lithium-ion batteries from 7.5% to 25%. It hit electric vehicles with the biggest increase of all, quadrupling the tariff rate on China-made electric vehicles (EVs) from 25% to 100%. Lael Brainard of the National Economic Council said the actions would create “a level playing-field in industries that are vital to our future”. Yet it is American consumers who will pay the price. More