Market Beats | Biden Campaign Secures $700M in Funding; U.S. Core PCE Accelerates in January; Two Property Tycoons Snap Up Chicago Skyscraper; UBS Extends $700M Loan to ION; U.S. Auto Loan Approval Rate Hits Record Low

—— January US Core CPI Rises Rapidly; Biden Campaign Gets $700M in Capital Support; Two Real Estate Moguls Snatch Up Chicago Buildings; Embracer Sells $500M Game Subsidiary; UBS Offers $700M Loan to ION; US Auto Loan Approval Rate Hits Record Low; US Pending Home Sales Fall Below Expectations

1. January US Core PCE Rises Rapidly

The U.S. government released data today showing that in January, the core CPI excluding food and energy rose 0.4% month-over-month, marking the fastest increase in nearly a year. The data supports the Federal Reserve’s decision not to rush rate cuts.

Economists believe the core PCE is a better measure of inflation. This index rose 2.8% year-over-year in January.

According to the latest report from the U.S. Bureau of Economic Analysis, inflation-adjusted U.S. consumer spending also declined for the first time in five months. Real disposable income showed little change.

Service costs excluding housing and energy rose 0.6% month-over-month, the highest since March 2022.

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2. Biden Campaign Gets $700M in Capital Support

According to political insiders familiar with campaign fundraising, organizations supporting President Biden have provided him with a total of $700 million in backing, built on the $130 million he already held in early February.

In contrast, Trump is entangled in multiple lawsuits, and his legal and campaign expenses far exceed the amount raised. This week, a court also ordered Trump to pay $540 million in damages, which will impact his personal assets.

This year’s election is expected to be tightly contested, making campaign cash reserves extremely important. According to OpenSecrets, total spending by all candidates is set to break the $14.4 billion record from 2020.

Last year, Biden received $282 million from various super PACs and raised $240 million personally.

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3. Two Real Estate Moguls Snatch Up Chicago Buildings

Developers Michael Reschke and Quintin Primo revealed that their companies plan to jointly purchase several office buildings in Chicago and have submitted an application to renovate a property on LaSalle Street.

Like many large U.S. cities, Chicago’s commercial real estate has yet to recover from the blow dealt by the pandemic. Making things worse, several major corporations have relocated their headquarters out of Chicago.

In Q4 last year, the vacancy rate in Chicago’s central business district rose to a record high. This year, a 41-story office building was sold at half its price from six years ago.

Michael said current prices for office buildings are extremely rare, and in his 40-year career, he has never seen such low valuations for high-quality properties.

Last year, fewer than five major office buildings were sold, with average losses ranging from 50% to 90%.

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4. Embracer Sells $500M Game Subsidiary

According to sources, Swiss game company Embracer Group AB will sell one of its largest subsidiaries, Saber Interactive, for $500 million.

Saber, which employs about 3,500 people, will be privatized after the deal and will continue developing the remastered version of the Star Wars series.

Last year, Embracer announced a large-scale cost-cutting plan, laying off employees and closing several global game studios.

In 2020, Embracer acquired Saber for $525 million. The latter developed games such as “World War Z.”

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5. UBS Offers $700M Loan to ION

Sources say UBS is ready to provide a $757 million loan to ION Group’s holding company to acquire Italian asset management firm Prelios SpA.

ION may also use some of its own cash or other funding sources, so it may not need the entire loan, but UBS’s loan offer is valid until the end of March.

However, the acquisition of Prelios still requires approval from the Italian government and the Bank of Italy, so the process may take longer.

ION is a globally known financial services group. Due to multiple leveraged acquisitions in the past, its interest expenses have exceeded $1.3 billion.

According to Bloomberg calculations, ION’s interest costs could account for 40% of its 2023 revenue.

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6. US Auto Loan Approval Rate Hits Record Low

In Q4 2023, auto loan approval rates fell 1.6% year-over-year to the lowest level since August 2020, according to Cox Automotive. The share of auto loans with delinquencies over 90 days also rose to 2.66%, above the 15-year average of 2.16%.

In states like California, cars are essential for daily life. But rising interest rates and car prices over the past two years have made vehicles increasingly unaffordable.

Cox’s Jonathan Smoke said delinquency rates may drop in March and April as Americans receive tax refunds. However, the average refund this year is only $1,741, down 13% year-over-year.

People who can’t afford new cars are forced to keep driving older ones, which is bad for both consumers and dealerships.

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7. US Pending Home Sales Fall Below Expectations

The National Association of Realtors (NAR) reported that its pending home sales index dropped 4.9% in January to 74.3, after rising in December to an 8-month high. The decline exceeded all economists’ forecasts, showing that high mortgage rates are still suppressing demand.

NAR chief economist Lawrence Yun said that while the current economic environment is favorable for home buying, interest rates and seasonal factors still weigh on sales.

In the South, the index dropped 7.3%, and in the Midwest it fell 7.6%, while the Northeast and West saw gains of 0.8% and 0.5%, respectively.

The U.S. mortgage application index has now declined for five consecutive weeks.

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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.