China's central bank slashes lending rates again this week

Good morning. Here's what happened overnight and what you need to know today.

1.

POBC moves: China's central bank surprised markets for a second time this week, unexpectedly lowering the rate on its one-year lending facility by 0.20 percentage points to 2.3%, the most since April 2020. The Thursday cut by the People’s Bank of China (PBOC) followed a surprise 0.10 percentage point reduction in the seven-day reverse repo rate on Monday, signalling increased support for the slowing economy. “It is basically a coordinated effort across all the key interest rates to ease monetary policy,” ING Bank Greater China chief economist Lynn Song told Bloomberg. The central bank also injected 235.1 billion yuan ($49.68 billion) into seven-day reverse repos at 1.70% in a move it said was to maintain “month-end banking system liquidity.” Analysts expect further monetary easing following weaker-than-expected GDP data due to severe deflationary pressures and weak consumer demand. Although cuts might be insufficient without substantial fiscal measures, they said. (Bloomberg)(Reuters)

2.

Ackman’s IPO campaign: Bill Ackman has slashed the fundraising target for the IPO of Pershing Square USA, his US investment fund by up to 90%. Bloomberg reported Pershing was aiming to raise USD25 billion ($38 billion) as recently as June. However, in a private letter to investors this week the billionaire investor said the fund expects to raise between USD2.5 billion and USD4 billion, with a potential cap of USD10 billion depending on demand. The 24 July letter had to be disclosed on Thursday in a regulatory filing to the SEC ahead of the listing, which is slated for next week. In the letter, Ackman urged participation, writing “this is a moment when you can be very helpful to Pershing Square by participating in the PSUS offering and giving your order to the banks, the sooner the better,” in underlined typeface. The letter also disclosed commitments from Baupost, Putnam and the Teachers Retirement System of Texas. (SEC filing)(The Wall Street Journal)

3.

Musk consolidation: Elon Musk said he will seek Tesla’s board approval to invest USD5 billion ($7.64 billion) in his artificial intelligence startup xAI, as it furthers plans to transform from an electric vehicle manufacturer into a robotics and AI company. Musk’s statement on X, previously Twitter, followed a poll weighing support for the investment among his followers. “Looks like the public is in favor. Will discuss with Tesla board,” Musk posted on Thursday as the poll showed 68% of respondents voted yes. During Tesla’s earnings call on Wednesday, Musk said xAI’s Grok chatbot could enhance Tesla's autonomous systems and help “building up” Tesla’s new data centre. The company’s robotaxi and self-driving technology is facing delays and regulatory challenges but Musk expects its first ride by the end of next year. xAI raised USD6 billion in May and is valued at USD24 billion, with investors including Andreessen Horowitz and Sequoia Capital. Tesla shares were 4% higher on Thursday, recovering some of the steep losses a day earlier after second-quarter margins fell short of Wall Street expectations. In other automotive news, Ford shares were on track for their worst day since 2008, leading sector falls with losses of over 18% after results disappointed investors. And California’s supreme court upheld a landmark ruling allowing gig economy companies like Uber and Lyft to treat workers as independent contractors. (Financial Times)

4.

Resilient economy: US economic growth surged more than expected in the second quarter, with GDP increasing at a 2.8% annualised rate, twice the 1.4% rate in the first quarter, according to the Bureau of Economic Analysis. The data is good news for Fed rate cuts as it shows a cooling but resilient US economy amid higher borrowing costs. Personal spending, the main driver of growth, rose 2.3%, exceeding projections. Overall growth remained slower compared to last year as high interest rates dampened consumer spending and broader economic activity. Underlying inflation eased to 2.9%, still above estimates. Business investment saw its fastest growth in nearly a year, while government spending, particularly on defence, also boosted GDP. Residential investment, however, declined due to high mortgage rates. The economy is expected to slowdown in the latter half of the year as the labour market weakens and income growth decelerates. Recent earnings reports from Nestle, Pepsi, Nike and several airlines suggest Americans are beginning to cut back and are increasingly financially strained. (Capital Brief)(US Bureau of Economic Analysis)(Bloomberg)

5.

Takeover challenge: Skydance’s acquisition of Paramount Global is being challenged in a lawsuit claiming the USD8 billion ($12.22 billion) merger will cost Paramount’s shareholders over USD1.6 billion, Bloomberg reported Thursday. Filed in Delaware’s Chancery Court by investor Scott Baker, the suit targets media mogul Shari Redstone, her holding company National Amusements, Paramount board members, Skydance and its CEO, David Ellison. The complaint labels Redstone as a "relentless controlling stockholder" forcing an unfair transaction to rescue her "floundering" investment. It denounces Redstone's control over Paramount’s board and says the deal is “history repeating itself” from the CBS-Viacom merger that created Paramount and led to extensive litigation. “The Paramount board is packed with Redstone insiders, over whom she exercises control,” the suit says. “The directors were well aware of Redstone’s modus operandi of removing directors when she was not satisfied with them; and it is reasonable to infer that this thought weighed on the decisions they made.”(Capital Brief)(Bloomberg)

6.

Evicted homeless: California, the US most populated state, issued orders to clear thousands of homeless encampments on state land, after a Supreme Court ruling last month gave state governments greater authority to do so. In the largest state-level response to the ruling, California governor Gavin Newsom, a Democrat, on Thursday directed state officials to clear outdoor homeless shelters, The New York Times reported. The state, home to 39 million people, has an estimated 180,000 homeless people and faces a severe housing crisis exacerbated by high living costs and a lack of guaranteed housing rights. The directive requires state agencies to prioritize encampments posing health and safety risks, and to work with local services to offer support. While some local leaders support the action, others, like Los Angeles Mayor Karen Bass, criticise it as potentially inhumane. The order does not mandate shelter placement. (The New York Times)

7.

Tense meetings: Israeli Prime Minister Benjamin Netanyahu met with President Joe Biden and likely Democratic nominee Vice President Kamala Harris at the White House on Thursday, posing politely for the cameras amid underlying tensions and ongoing anti-war protests. The meeting comes amid strained relations over the Gaza conflict that has left over 39,000 people dead in Gaza, and stalled cease-fire negotiations. It follows Netanyahu’s defiant address to Congress on Wednesday, where he staunchly defended Israel’s actions in Gaza in the nine months since Hamas’s attack on 7 October, which killed nearly 1,200 in Israel. During the address, protests erupted outside the Capitol with some demonstrators burning an American flag. Biden refrained from commenting on the cease-fire efforts during the public session, while Netanyahu expressed gratitude for Biden's long-standing support for Israel. White House officials said Biden would push Netanyahu for final concessions on a cease-fire deal, the Times reported. Meanwhile, the Israeli military reported retrieving the bodies of five Israelis from Gaza, intensifying pressure for a cease-fire deal involving the release of the remaining 115 captives, several of whom are presumed dead. (The New York Times)(The Associated Press)

8.

Gaemi slick: Typhoon Gaemi hit mainland China after wreaking havoc in Taiwan and the Philippines, killing at least 25 people and sinking an oil tanker and a cargo ship. The MT Terra Nova, a marine tanker carrying 1,494 metric tonnes (1.5 million litres) of industrial fuel, sank off Limay, Bataan on Thursday, resulting in a massive oil spill and the death of one crew member. Sixteen of the seventeen crew were rescued, Reuters reported citing Philippine officials. The Philippines reported at least 21 fatalities from flooding and landslides. In Taiwan, the heaviest rainfall in eight years resulted in three deaths, while rescue officials were still searching for six missing sailors from a cargo ship that sank off the southern coast the Taiwan Strait, one the world’s busiest shipping lanes. Although weakened, the typhoon is drenching Fujian, where over 150,000 residents were relocated. Heavy rain is also expected to reach northern provinces in China, including the already saturated Henan, Shanxi, and Hebei. Efforts to combat the oil spill in the Philippines were being hindered by the dangerous weather conditions, with a four-kilometre oil slick posing a severe threat to the marine environment. (Capital Brief)(Reuters)(Associated Press)