Musk visits China to pitch self-driving

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

1.

Car meet: Tesla boss Elon Musk made a surprise visit to China to meet with senior trade officials in Beijing on Sunday, as the carmaker faces challenges in the world's largest automotive market. Musk's visit comes amid slowing sales growth for Tesla's electric vehicles in China, intensifying competition from domestic rivals like BYD, and data security concerns raised by Chinese authorities. Despite Tesla's early success in China, facilitated by its Shanghai Gigafactory, the company has been losing market share to competitors with more aggressive release schedules for new models. Musk's meeting comes as he steps up efforts to push Tesla's Full Self-Driving software, with anonymous sources telling the Wall Street Journal he is attempting to persuade Chinese regulators to permit the company's autonomous driving features. (Financial Times)(Wall Street Journal)

2.

Rate rebuff: The debate within the US Federal Reserve is shifting from how much to cut interest rates in 2024 to whether to cut them at all, as recent inflation data shows it remains persistently high. While the Fed is widely expected to hold rates steady at this week's meeting, the focus will be on any pivot in tone in the post-meeting statement and Chair Jerome Powell acknowledging the lack of inflation progress. While some officials have suggested delaying rate cuts, others have floated the possibility of no cuts at all in 2024 or even hiking rates further if inflation worsens. Powell faces the challenge of maintaining unity among policymakers who hold different views, while also navigating the political scrutiny that could arise from any rate cuts closer to this year's presidential election. (Bloomberg)

3.

Sweeter offer: BHP is considering increasing its initial £31 billion ($59.4 billion) all-share bid for Anglo American after the mining giant rejected the "opportunistic" proposal last week, according to multiple reports. The Australian miner is discussing a revised, higher offer with advisers to be made in the coming weeks, according to anonymous sources speaking to Reuters and Bloomberg. BHP has until May 22 under UK takeover rules to formally bid again. While BHP reportedly hasn't decided the new proposal's size and structure yet, it is trying to convince key shareholders to back a deal that would create the world's largest copper miner with around 10% of global supply ahead of an expected shortage. Some Anglo investors believe the company is worth around £30 per share, above BHP's initial £25.08 bid. (Bloomberg)(Reuters)(Capital Brief)

4.

Vacant seat: TikTok has opted against replacing its former Australian general manager Lee Hunter, who departed earlier this year, amid mounting political pressure and a federal privacy probe into the Chinese-owned social video platform's data handling practices. Despite increasing calls for Australia to follow the US in effectively banning TikTok over national security concerns, the company's global business solutions head in Australia Brett Armstrong has dismissed a potential local ban as "hypothetical". Coalition senator James Paterson criticised TikTok's "lack of transparency," urging it to disclose details like how often Australian user data is accessed in China and what content is censored. While Prime Minister Anthony Albanese previously indicated Australia may not follow the US ban, the government is "monitoring events" and could take further action pending any sale or new information. (Capital Brief)

5.

New deal: Egypt has offered a new proposal for a truce between Israel and Hamas aimed at avoiding an Israeli military offensive in Rafah. The proposal involves releasing some Israeli hostages held by Hamas in exchange for Palestinian prisoners and a three-week ceasefire, followed by a 10-week truce period for further negotiations and the return of displaced Gazans. This represents the latest effort by mediators to revive stalled negotiations amid ongoing fighting that has killed a reported 34,000 Palestinians since Israel's invasion. While facing domestic pressure to secure the release of hostages, Israel has indicated willingness to delay Rafah operations for a hostage deal, though the US is urging Israel against invading the city at all. (Wall Street Journal)

6.

Executive dysfunction: Entertainment giant Paramount is preparing to fire CEO Bob Bakish, who has clashed with controlling shareholder Shari Redstone over a proposed merger with Skydance Media that would have Skydance CEO David Ellison take over Paramount. Bakish had opposed the Skydance deal's structure, which critics say benefits Redstone at the expense of other shareholders. As Paramount anticipates a potential counterbid from Sony and Apollo this week before Skydance's exclusive negotiating period ends, the media company is struggling with its money-losing streaming service, declining cable TV business and sinking USD8 billion ($12.8 billion) market valuation. The boardroom drama has seen four directors withdraw ahead of the June shareholder meeting, with one major investor calling it a "company in disarray" as opposing factions clash over potential deals and new leadership for the iconic Hollywood studio. (Financial Times)

7.

Skin in the game: L'Occitane International owner Reinold Geiger is nearing an offer to take the renowned skincare company private in a deal that could value it at around USD7 billion ($10.7 billion) including debt. Geiger, who is L'Occitane's chairman and already owns over 70% of the shares, is considering offering for the remaining stake as soon as today. The buyout is expected to be funded in part by around $1.7 billion in financing from Blackstone's tactical opportunities fund and Goldman Sachs' asset management arm. L'Occitane was founded in 1976 in Provence, went public in Hong Kong in 2010, and now operates 3,000 locations across 90 countries including Australia. It faces increasing competition from global giants and domestic brands in key markets like China. (Bloomberg)

8.

Power move: US investors are finding an unusual opportunity to capitalise on the AI boom through utility stocks, as the massive energy demands of AI data centres are expected to drive soaring electricity consumption and revenues for power companies. While the S&P 500 utilities sector lagged in 2023 due to high interest rates, it has rebounded in 2024 in part thanks to optimism that AI will be the biggest driver of future electricity demand growth. Utilities across the US are planning new power plants, transmission lines and grid upgrades to meet projected 900% increases in data centre demand, with companies like Dominion Energy, Exelon and Southern anticipating historic sales growth from powering the AI expansion. As an indicator of the trend, Goldman Sachs has set up two AI-themed investment baskets for clients who want to dabble in stocks in power generation, utilities and smart grid infrastructure. (Bloomberg)