Putin urges restraint in Middle East

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

---

1.

Middle East conflict: Russian President Vladimir Putin has urged all sides in the Middle East to refrain from any action that could trigger an escalation resulting in catastrophic consequences for the region. Putin reportedly spoke to Iranian President Ebrahim Raisi by phone on Tuesday to discuss the “retaliatory measures taken by Iran” over the weekend, when the country launched over 300 drones and missiles into Israel. The Kremlin said that "Putin expressed hope that all sides would show reasonable restraint and prevent a new round of confrontation fraught with catastrophic consequences for the entire region […] Ebrahim Raisi noted that Iran's actions were forced and limited in nature.” The comments come as Israel’s War Cabinet is set to meet for a third time to discuss the country’s response to Iran’s attack, and Israel’s wartime decision makers – Prime Minister Benjamin Netanyahu, Defence Minister Yoav Gallant and the former head of the Israeli military, Benny Gantz – are struggling to find a unified response. (Reuters)(Wall Street Journal)

2.

Macro growth risks: Despite the likelihood of a soft landing having improved, the International Monetary Fund’s (IMF) World Economic Outlook found that challenges in China’s property sector and the Middle East conflict are key downside risks that could weaken global growth. The IMF projects the world economy to continue growing at 3.2% during 2024 and 2025. The IMF anticipates that the US will grow at twice the rate of any other G7 country in 2024, raising its forecast for growth to 2.7%. By comparison, the IMF projects growth in China to slow from 5.2% in 2023 to 4.6% in 2024, and 4.1% in 2025. It explains that in the absence of a comprehensive restructuring policy package for the property sector in China, a larger and more prolonged drop in real estate investment could occur. While markets reacted “exuberantly” to the prospect of central banks exiting tight monetary policy stances, on inflation, the IMF flagged that recent core and headline inflation numbers inching upward gives markets reason to remain vigilant. (Capital Brief)(IMF World Economic Outlook)

3.

Dealmaking deliverance: Bank earnings kicked off on Monday this week with Goldman storming through Q1 with a 28% profit surge, while Bank of America (BofA)'s profits fell 18% during the first three months of 2024. BofA's drop in Q1 profit fell to USD6.7 billion ($10.46 billion) from USD8.2 billion a year earlier. Morgan Stanley and BNY Mellon also reported on Tuesday, beating profit estimates with Q1 profits surging 14% and 5% respectively. Investment banking helped drive Morgan Stanley’s Q1 performance, as an increase in dealmaking pushed the division’s revenue up 16% from a year earlier. Despite BofA’s profit drop, investment banking also proved to be a silver lining as IB fees jumped 35% to USD1.6 billion from the year prior – working to offset a decline in interest payments linked to easing borrower demand. Trading revenues for Morgan Stanley also surpassed expectations, coming in at USD5.33 billion, while the bank’s wealth unit delivered USD6.88 billion in revenue. New assets in the wealth management division rose to USD95 billion. (Capital Brief)

4.

Paper giants: US-based International Paper has agreed to buy its UK rival, DS Smith, in a £7.8 billion deal, quashing a competing bid from Mondi which had valued DS Smith at around £6.2 billion, including debt. DS Smith board members recommended that shareholders accept the US firm’s offers of 415p per share, which will see DS Smith shareholders own around one third of the combined group. The offer represents a 48% premium to the value of DS Smith’s shares on February 7 this year, prior to the Mondi bid becoming public. As part of the deal, International Paper will seek a secondary listing of its shares on the London Stock Exchange. CEO of DS Smith, Miles Roberts, said: "The combination with IP is an attractive opportunity to create a truly international sustainable packaging solutions leader that is well positioned in attractive and growing markets across Europe and North America.” (Financial Times)

5.

Low battery: Shares in the world’s largest EV maker, Tesla, dipped more than 4% during trading on Tuesday, edging the stock closer to a 12-month low. The declines brought Tesla’s year-to-date drop to 38%, and pushed the company’s market valuation below USD500 billion. Tesla stock began to sputter in late 2023, when a global EV slowdown began to bruise the industry. The EV carmaker temporarily lost its position as the world’s largest in Q4 2023 when China’s BYD briefly overtook it on the number of EVs sold. Tesla regained its crown in Q1, despite both companies reporting disappointing sales. Reports emerged earlier this week that Tesla plans to lay off around 10% of its global workforce, amounting to around 14,000 employees, in efforts to reduce costs and increase productivity. According to sources cited by Reuters, the job cuts will impact staff in the automaker’s largest markets, the US and China. (Bloomberg)(Reuters)

6.

Nu frontier: The world’s largest standalone digital bank, Nu Holdings, will invest USD100 million into its Mexico subsidiary, making its total investment in the country USD1.4 billion. Nu said that it plans to use the new funds to expand its loan portfolio and to launch new products, increasing its focus on the market where less than 50% of the population currently has a bank account. In Q4 2023, Nu México registered around one million new customers, taking its total for new customers in 2023 to 5.2 million. Earlier this year, the company also announced that it had surpassed the 5.5 million customer mark, and told the Financial Times that it could become the region’s largest in the sector by customer numbers. (Bloomberg)

7.

Beyond the Rubrik: Microsoft-backed cloud and data security startup, Rubrik, is looking to raise up to USD713 million in its IPO, which could secure the company a market value of around USD5.4 billion. According to an SEC filing, Rubrik plans to market 23 million shares for USD28-$31 each. At the top price Rubrik would gain a fully diluted valuation of as much as USD6.4 billion (accounting for the stock options, conversions of redeemable preferred stock and restricted share units in the filing). Should the IPO go ahead, the company could join a cohort of tech companies which have notched gains after their 2024 listing met or surpassed fundraising goals, including Reddit and Astera Labs. Microsoft invested in Rubrik in 2021, valuing the startup at USD4 billion at the time. Bain Capital Ventures, Lightspeed Venture Partners, Greylock Partners and Khosla Ventures, are also backers of Rubrik, which has raised a total of USD1.18 billion to date. (Bloomberg)

8.

US housing data: The pace of new home construction in the US during March fell 14.7% from the previous month, reaching a seasonally adjusted annualised rate of 1.32 million. The US Department of Commerce released the data on Tuesday, which shows that new housing has fallen to its lowest level since August last year, despite a severe shortage of existing homes that continues to reinforce demand for new builds. Single family housing starts fell 12.4% and the multifamily housing sector saw starts fall by 20.8%. Permits to build single family homes were 4.3% fewer than in February, but were up 1.5% from a year earlier. (Financial Times)

BofA reported a drop in Q1 profit, falling to USD6.7 billion ($10.46 billion) from USD8.2 billion a year earlier.