1. Key US Inflation Gauge Falls to 2%;
2. US Considers Raising Tariffs on Chinese EVs;
3. Honda Recalls 2.5 Million Faulty Vehicles;
4. S&P Downgrades Brookfield Credit Rating;
5. China Bans Export of Rare Earth Processing Technology;
6. BlackRock’s Attempted Warburg Acquisition Fails;
7. S&P 500 Faces Rising Concentration Risk.
1. Key US Inflation Gauge Falls to 2%
Today, the core Personal Consumption Expenditures Price Index (Core PCEPI)—which excludes food and energy—was revised down to 2% for Q3, its lowest level since late 2020.
The Core PCEPI is the Federal Reserve’s preferred inflation gauge and has declined from 4% in the first half of 2023 to 1.9% in the second half.
Fed Chair Jerome Powell and his colleagues are now expected to begin rate cuts as early as March.
Omair Sharif, President of Inflation Insights, noted that clothing prices in November fell at the steepest rate for that month since 1942, and many other product categories also saw sharp declines. Core goods inflation in the final two months of the year has been far lower than expected.
Inflation in the services sector—a key Fed focus—also showed clear signs of cooling, boosting confidence that inflation could return to 2% within the next six months.
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2. US Considers Raising Tariffs on Chinese EVs
Sources say President Biden and his cabinet are weighing increased tariffs on Chinese electric vehicles and other goods in an effort to boost the competitiveness of US clean energy products.
Talks of increasing tariffs began soon after Biden took office, with many in the administration hoping for a decision in early 2024.
While Biden has maintained Trump-era tariffs affecting $300 billion in Chinese imports, he has refrained from imposing new duties to avoid straining US-China relations.
Currently, Chinese EVs face a 25% tariff, and many Chinese automakers have stopped selling EVs in the US altogether.
Experts believe raising tariffs on Chinese EVs would have little noticeable impact on the US market.
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3. Honda Recalls 2.5 Million Faulty Vehicles
Honda Motor announced today the recall of 2.5 million sedans and SUVs due to faulty fuel pumps. Affected models include the 2017–2020 CR-V, Accord, Acura MDX, and Acura TLX.
The issue lies in the fuel pump impellers, which may be deformed during the molding process, potentially impairing engine startup and even causing stalling during driving.
Honda’s website states that dealerships will replace the faulty fuel pumps free of charge.
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4. S&P Downgrades Brookfield Credit Rating
Amid rising borrowing costs and weakening office demand, S&P Global Ratings downgraded Brookfield Property Partners’ credit rating.
Brookfield Property was cut two notches from BB to BBB-, the lowest tier within investment grade. With many of its debts maturing over the next two years, the company gave a pessimistic outlook.
According to real estate analytics firm Green Street, US office buildings and malls have lost 35% and 20% of their value, respectively, compared to their Q1 2022 peaks.
Brookfield faces $2.3 billion in debt maturities in 2025 and has yet to announce a viable solution.
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5. China Bans Export of Rare Earth Processing Technology
In response to the US’s ban on advanced chip exports, China’s Ministry of Commerce announced a ban on the export of certain rare earth magnet extraction and separation technologies, without offering specific reasons.
China dominates global supply chains for many critical raw materials, which are essential for clean energy and defense products. Analysts believe the new rules are aimed at reinforcing China’s control over supply chains.
According to the International Energy Agency (IEA), China accounts for 60% of global rare earth mining and 90% of processing and refining.
The IEA believes Western nations will likely struggle to reduce dependence on China for critical minerals.
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6. BlackRock’s Attempted Warburg Acquisition Fails
Five sources revealed that two years ago, BlackRock and private equity firm Warburg Pincus began discussions over strategic cooperation, but differing views on the future caused talks to collapse.
BlackRock had initially hoped to acquire a controlling stake in Warburg Pincus, but the latter refused to relinquish control. The two firms then explored joint product development.
So far, no deal has materialized. BlackRock remains eager to acquire a private equity firm to accelerate its push into alternative asset management.
BlackRock’s goal is to break into the $27 trillion private equity market through acquisitions.
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7. S&P 500 Faces Rising Concentration Risk
The top 50 most valuable companies in the S&P 500 now account for 56% of the index’s total weight. This increasing imbalance highlights the growing concentration risk, with investors relying on fewer companies to drive returns.
Apple alone now has a market cap nearly equal to the entire French stock market.
Todd Sohn, ETF strategist at Strategas Securities, likens the situation to a team relying too heavily on star players: if the bench doesn’t contribute, the team could be in trouble.
The combined market cap of the S&P 500’s top 10 companies now exceeds that of the bottom 415. In 2013, that ratio was just 294.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.