Wall Street bank earnings lifted by M&A revival

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

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1.

Bank earnings: Wall Street's biggest banks posted strong investment banking revenues in the third quarter of 2024, driven by increased mergers and acquisitions and corporate debt issuance. Goldman Sachs was a standout, posting a 45% jump in profit, driven by a 20% increase in investment banking fees. Bank of America and Citigroup also booked trading gains. Combined investment banking fees at Goldman, Bank of America, Citigroup and JPMorgan reached USD6.5 billion, according to Yahoo Finance calculations, a 27% rise from the previous year. It is the first reporting period since the Federal Reserve began cutting interest rates in September, boosting optimism and activity. (Capital Brief)

2.

Chip worries: ASML shares plummeted the most in decades and dragged tech stocks lower, after it accidentally reported a weaker-than-expected Q3 with bookings falling far short of forecasts while saying the semiconductor market recovery would take longer than expected. Shares in the Dutch computer chip equipment maker fell as much as 17.58% to USD719.22 ($1,072.89) each, their biggest one-day drop since at least 1998, according to Reuters. The company published its earnings a day early, by mistake, revealing net profit of €2.1 billion on sales of €7.5 billion. Bookings came well below expectations, with 2025 sales now forecast to grow between €30-35 billion, the lower half of earlier expectations. "While there continue to be strong developments and upside potential in [artificial intelligence], other market segments are taking longer to recover. It now appears the recovery is more gradual than previously expected," Christophe Fouquet, the company's president and chief executive officer, said in a statement. (Reuters)

3.

Oil relief? Oil prices dropped more than 4% to a two-week low as concerns about supply disruptions from Iran eased following a report by The Washington Post saying Israel would not target Iranian oil facilities. Brent crude fell to USD73.92 ($110.33) and the West Texas Intermediate price dropped to USD70.28 per barrel. The drop was also driven by a weak demand outlook, particularly in China and hedge funds reducing their long positions. The International Energy Agency cut its oil demand growth forecasts for 2024, highlighting a potential surplus in 2025 due to increased production from non-OPEC countries like the US and Brazil. That followed a similar cut to demand projections by the OPEC a day earlier, primarily due to weaker Chinese consumption and the shift towards electric vehicles. (Reuters)

4.

Humanitarian ultimatum: The US warned Israel to improve humanitarian aid access to Gaza within 30 days or face potential restrictions on US military aid, Axios reported citing a letter by US secretary of state Antony Blinken and defence secretary Lloyd Austin sent to Israeli officials. The letter, sent on Monday, expresses concerns over deteriorating conditions in Gaza and demands specific actions, such as increasing the number of aid trucks and instituting pauses in fighting. "The amount of assistance entering Gaza in September was the lowest of any month during the past year ... to reverse the downward humanitarian trajectory as consistent with its assurances to us, Israel must, starting now and within 30 days act on the following concrete measures," the contents of the letter say, according to Axios. The letter was confirmed by Reuters with US officials and is the most direct ultimatum since the Israel-Hamas conflict began. (Axios)(Reuters)

5.

Cash lifeline: Boeing moved to secure up to USD35 billion ($52.19 billion) in funds as it grapples with production challenges, a machinists' strike and major regulatory hurdles. The aerospace giant revealed plans to raise up to USD25 billion through shares or debt over three years and confirmed a new USD10 billion credit agreement. Boeing hasn't turned a profit since 2018 and is burning over USD1 billion per month since the strike began on 13 September. Analysts expect an equity raise, as debt levels are stretched to maintain its investment-grade rating. Both S&P and Moody’s are reviewing its credit ratings. A downgrade could push Boeing’s debt to junk status, making it the largest "fallen angel" ever. Such a downgrade would exclude Boeing's roughly USD52 billion in long-term debt from investment-grade indexes, flooding the high-yield bond market and raising its borrowing costs. (Capital Brief)

6.

AI training: The New York Times issued a cease-and-desist letter to AI startup Perplexity, demanding it stop using its content for AI-generated summaries, The Wall Street Journal reported citing the letter. “Perplexity and its business partners have been unjustly enriched by using, without authorisation, The Times’s expressive, carefully written and researched, and edited journalism without a license,” the letter says. Perplexity had assured the publisher it would stop using crawling technology, but NYT content continues to appear in the startup’s outputs, it adds. The Jeff Bezos-backed Perplexity has faced similar copyright infringement accusations from other publishers like Forbes and Wired, but has since implemented a revenue-sharing program. CEO Aravind Srinivas told the WSJ Perplexity will respond to the NYT’s letter by 30 October. “We have no interest in being anyone’s antagonist here,” he said. “We are very much interested in working with every single publisher, including the New York Times.” (WSJ)

7.

Aussie firepower: AustralianSuper invested USD1.5 billion ($2.24 billion) in data centre developer DataBank as part of a USD2 billion equity raise by the Dallas, Texas-based company to fund three new data centres in the US and meet the unprecedented demand for AI and cloud workloads. The investment, AustralianSuper’s first in the US data centre market, will help fund the build-out of three new facilities in Dallas, Virginia and Atlanta, tripling DataBank’s current power capacity to over 850MW. AustralianSuper will join DataBank’s board as a minority owner, with DigitalBridge remaining the majority investor. "DataBank will grow and further diversify our global digital infrastructure exposure," said AustralianSuper’s head of American real assets Derek Chu. (Capital Brief)

8.

Apple AI: Apple launched its new generation of the iPad mini with advanced AI features, including writing tools and an improved Siri assistant. Powered by the A17 Pro chip, the same processor used in the iPhone 15 Pro and Pro Max models, the new gadget has a 30% improvement in CPU performance over previous iPad minis, helping Apple's AI software, Apple Intelligence. Other AI-driven capabilities include image generation and ChatGPT-powered functions, to be rolled out over several months. The iPad mini starts at USD499 ($744.53) and ships next week.(Reuters)