Macquarie hit with $117m bill to settle SEC’s fraud charge

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

---

1.

Retail squeeze: Macquarie Investment Management Business Trust was charged with fraud and will pay USD79.8 million ($117 million) to settle the charges, the SEC said. Macquarie’s unit is accused of inflating the value of about 4,900 illiquid investments, overstating the performance of some clients’ accounts and of executing cross trades between clients that favoured certain clients over others. It agreed to pay USD70 million in penalties and USD9.8 million in disgorgement and interest, without admitting or denying the SEC’s findings. The charges stem from overvaluing illiquid collateralised mortgage obligations (CMOs) and executing cross trades with affiliated accounts, in some instances retail mutual funds, at elevated prices rather than selling the overvalued securities into the market.Macquarie has agreed to a cease and desist order and to an undertaking. “It is alarming that a fiduciary took advantage of retail mutual funds it advised and executed unlawful cross trades to mitigate its overvaluation of fund assets,” said SEC director Eric Bustillo. (Capital Brief)

2.

Fed rally: US stocks surged to record highs after the Federal Reserve kicked off its rate-cutting cycle with a half-point reduction. Renewed hopes of a soft landing without a major downturn sparked a rally across major indexes. The S&P 500 and Dow Jones hit record highs, with tech giants Microsoft, Tesla and Apple leading gains. Semiconductor stocks also surged, with Nvidia, AMD and Broadcom rising sharply. Banks such as Citigroup and Bank of America also gained as amid lowered prime rates. Better-than-expected weekly jobless claims data boosted sentiment. The Nasdaq and Russell 2000 followed the upward trend. The Fed indicated further rate cuts are likely, with BofA analysts now expecting a 75-basis-point reduction by year’s end. Cryptocurrencies also spiked, with Bitcoin up 5.7%. The dollar fell, while US Treasuries and other global bonds saw yields rise. Oil and gold prices climbed. (Reuters)(Bloomberg)

3.

Cautious curve: The Bank of England (BoE) held its interest rate at 5%, with an 8-1 vote favouring keeping rates on hold. Only Swati Dhingra, the committee's most dovish member, dissented, advocating for a 0.25% rate cut. The decision follows the BoE’s 0.25 percentage point rate cut in August that lowered rates from their 16-year peak, and the US Federal Reserve 0.5 percentage point rate reduction on Thursday that marked the start of its easing cycle. With inflation still above target and wage growth an ongoing concern, the BoE wants to avoid cutting rates "too fast or by too much," Governor Andrew Bailey said. The BoE plans to reduce its bond holdings without accelerating the pace, with its quantitative tightening programme continuing at a £100 billion ($194 billion) pace over the next year, in line with expectations. The bank now expects inflation to rise to 2.5% by the year-end. (Capital Brief)

4.

Data harvest: Social media companies’ monetisation of personal data has created a market for commercial surveillance via social media and video streaming services, with “woefully inadequate” practices and without guardrails to protect consumers. That is the message from a report by the US Federal Trade Commission (FTC) after it reviewed the practices of Facebook’s parent Meta, WhatsApp, Reddit, YouTube, ByteDance’s TikTok, X (formerly Twitter), Discord, Snapchat’s maker Snap and Amazon’s Twitch. The report says users have little control over how their personal information is used for AI-fuelled systems. The social media companies are using personal data, including from non-users, to train their AI systems and algorithms, with little transparency or control for users, and inadequate monitoring of those automated processes, the report says. It criticised the data management and retention policies of the platforms, calling them “woefully inadequate”, but without naming any company in particular. (Capital Brief)

5.

Job strength: US weekly jobless claims fell by 12,000 to 219,000 for the week ending 14 September, the lowest level since May, the Labor Department said. The data came in below expectations, with economists polled by Reuters predicting 230,000 claims. Continuing claims, a measure of ongoing benefits, dropped by 14,000 to 1.829 million, the lowest in three months. The four-week moving average for jobless claims also decreased to 227,500, the lowest since June. The data reflects a resilient labour market despite slowing hiring. It comes a day after the Federal Reserve cut interest rates by half a percentage point to support the labour market. Chair Jerome Powell said policymakers are watching the jobs market closely but do not expect an imminent rise in layoffs. (Capital Brief)

6.

Slack’s out: Disney is phasing out Slack as its workplace collaboration tool after a hack exposed over a terabyte of data, The Wall Street Journal reported citing an internal memo. The hack, carried out by a group called Nullbulge, compromised a manager's computer and resulted in the release of over 44 million Slack messages, 18,800 spreadsheets, and 13,000 PDFs containing financial, strategic and personal information. In the memo, CFO Hugh Johnston said that most Disney businesses will stop using Slack by the end of 2024, transitioning to other integrated collaboration platforms. The company filed a report in August confirming the breach, saying it wouldn’t significantly affect operations. Slack and Disney declined to comment to the WSJ. (WSJ)

7.

Tariff tango: The European Commission and China agreed to ramp up efforts to avoid EU tariffs on Chinese electric vehicles (EVs), Reuters reported citing a Commission spokesperson. EU Trade Commissioner Valdis Dombrovskis and Chinese Commerce Minister Wang Wentao held discussions, with both sides reaffirming their commitment to finding a solution that addresses concerns, is enforceable and compatible with WTO rules. The parties may re-examine a minimum-price deal previously rejected by the EU, the spokesperson said. The talks come as EU countries prepare to vote on tariffs up to 35.3% on China-built EVs, in addition to the standard 10% import duty. Dombrovskis defended the EU’s anti-subsidy investigation and raised concerns over Chinese investigations into EU imports of brandy, pork and dairy. (Reuters)

8.

Redline fury: Israel launched airstrikes against Hezbollah targets in Lebanon on Thursday after Hezbollah leader Hassan Nasrallah accused Israel of crossing "all red lines" by detonating thousands of pagers and walkie-talkies across Lebanon this week. Nasrallah called it a "major security and military blow," with the attacks killing 32 people and injuring thousands, the Financial Times reported. He claimed the explosions targeted civilian areas and vowed severe retaliation against Israel. Israel's military confirmed airstrikes along Lebanon’s southern border but did not comment on the explosions. In a separate incident, an Israeli businessman was charged with aiding an Iranian plot to assassinate Prime Minister Netanyahu and other officials. The accused was smuggled into Iran twice and demanded USD1 million ($1.47 million) for surveillance efforts, though he only received €5,000. It was just one of multiple attempts by Iran and Hezbollah to recruit operatives for espionage and assassinations, Israel's officials said. (FT)