—— US Trade Gap Widens; Trafigura Pleads Guilty for Bribes; Google May Acquire HubSpot; Sora Could Train with YouTube; US Property Tax Jumps; Stocks Tank On Fed Debate; Investors Dump PE Investment At Loss
1. US Trade Gap Widens
In February, the United States experienced a third consecutive increase in its trade deficit, with imports surpassing exports in value. According to data released by the Commerce Department on Thursday, the deficit in goods and services trade grew by 1.9% compared to the previous month, reaching $68.9 billion. This marks the largest deficit seen in almost a year, slightly surpassing the $67.6 billion gap projected by economists in a Bloomberg survey.
The value of imports climbed to nearly $332 billion, while exports also saw an increase, reaching $263 billion. It’s important to note that these figures are not adjusted for inflation.
This ongoing trend of a widening trade deficit is anticipated to have a negative impact on the gross domestic product (GDP) for the first time since early 2022. Prior to this latest data, the GDPNow forecast from the Federal Reserve Bank of Atlanta indicated that trade would detract nearly half a percentage point from first-quarter growth.
Although there has been an improvement in the US trade balance since 2022, the demand for imported goods is likely to remain high. This is attributed to sustained consumer spending and inventory levels that are better aligned with sales.
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2. Trafigura Pleads Guilty for Bribes
Commodity trading giant Trafigura Group has acknowledged that its founder and former CEO, Claude Dauphin, authorized payments of bribes for oil deals in Brazil. This marks the first instance of a top executive in the industry being implicated in a series of corruption cases in the United States.
Last week, Trafigura pleaded guilty in a Miami court, becoming the latest among the world’s largest commodity traders to admit to paying bribes to secure business deals. The specifics of Dauphin’s involvement were disclosed in a statement of facts as part of the plea agreement with the US government, which the company acknowledged as accurate.
Dauphin, who helmed Trafigura from its inception in 1993 until his passing in 2015, held a significant role within the company and the broader trading sector. Trafigura described him as an influential figure whose character profoundly influenced all aspects of the company, according to an obituary published by the company upon his death.
Following its guilty plea last week, Chief Executive Officer Jeremy Weir stated, “These historical incidents do not align with Trafigura’s values or the conduct we expect from every employee.”
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3. Google May Acquire HubSpot
Alphabet Inc. is reportedly in discussions with financial advisers regarding a potential acquisition offer for HubSpot Inc., an online marketing software company valued at approximately $34 billion, as reported by Reuters on Thursday.
According to sources familiar with the matter, Alphabet, the parent company of Google, has recently engaged with investment bankers at Morgan Stanley to explore the possibility of making an offer for HubSpot.
If realized, such a significant acquisition would represent an uncommon move for a Big Tech firm like Alphabet, especially amidst heightened regulatory scrutiny of the sector by antitrust authorities. Google is currently facing multiple antitrust challenges, including a lawsuit filed by the Justice Department alleging monopolistic practices in online search, as well as another lawsuit concerning its digital advertising tools.
Following the news, shares of HubSpot surged by 6.7%, while Alphabet experienced a 1.5% decline in trading on the New York Stock Exchange.
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4. Sora Could Train with YouTube
The use of YouTube videos to train OpenAI’s text-to-video generator would be a infraction of the platform’s terms of service, YouTube Chief Executive Officer Neal Mohan said.
In his first public remarks on the topic, Mohan said he had no firsthand knowledge of whether OpenAI had, in fact, used YouTube videos to refine its artificial intelligence-powered video creation tool, called Sora. But if that were the case, it would be a “clear violation” of YouTube’s terms of use, he said.
OpenAI’s Chief Technology Officer, Mira Murati, mentioned in an interview with the Wall Street Journal last month that she was uncertain whether Sora had been trained using user-generated videos sourced from platforms such as YouTube, Facebook, and Instagram.
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5. US Property Tax Jumps
Last year, US homeowners faced an average property tax bill of over $4,000, marking the most substantial increase in total levies in five years.
According to data compiled by ATTOM, a real estate data firm that monitored property taxes for 89.4 million single-family homes, government entities collected over $363 billion in 2023. This reflects a notable surge of 6.9%, nearly double the 3.6% growth recorded in the previous year.
Rob Barber, CEO of ATTOM, commented on the trend, stating, “Property taxes experienced an unusually significant upward trajectory last year, leading to an increase in effective rates, while significant disparities in average tax bills across different regions of the country persisted.”
In 2023, the states with the highest effective property tax rates were Illinois, New Jersey, Connecticut, New York, and Nebraska.
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6. Stocks Tank On Fed Debate
The S&P 500 and Nasdaq Composite indexes relinquished their early gains and dipped by 0.8 percent during afternoon trading.
The shift in direction occurred following remarks by Minneapolis Federal Reserve President Neel Kashkari, who indicated plans for two interest rate cuts this year. However, he also mentioned that if US inflation remained stable, it would prompt him to reconsider the necessity of those rate cuts.
Meanwhile, Chicago Fed President Austan Goolsbee expressed concerns about housing inflation, stating that if it did not subside, it could impede the central bank’s ability to achieve its overall 2 percent inflation target.
US stocks shifted into negative territory following a series of statements from Federal Reserve officials, leading investors to reevaluate the likelihood of future interest rate cuts by the central bank.
Source: Financial Times – US stocks turn negative as Fed officials stir debate on rate cut outlook
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7. Investors Dump PE Investment At Loss
US institutional investors are divesting more of their private equity holdings at a discount as they reduce their exposure to this illiquid asset class.
Led by pension funds and endowments, significant investors sold 99 percent of their private equity holdings at or below their net asset value on the secondary market last year, according to Jefferies. This represents the highest percentage since 2017, when Jefferies began tracking this data. In 2022, the figure was 95 percent, and in 2021, it was 73 percent.
Investors have increasingly turned to the secondary market due to subdued activity in stock listings and mergers and acquisitions, which are traditional avenues for private equity investors to exit their investments.
Additionally, many pension plans are obligated to make payouts to their beneficiaries, which compels them to turn to the secondary market as a means to raise cash more expeditiously.
Source: Financial Times – Private equity stakes unloaded at a discount as investors seek exits
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The content of this article comes from various financial news media such as The Wall Street Journal, Financial Times, and Bloomberg.