—— Biden to Announce New China Tariffs; US Consumer Sentiment Sharply Drops; Tesla to Invest $500m on Supercharger; Zeekr Jumps 40% After US IPO; Fed Cautious of CRE Loan Delinquency; Biden Advisor Proposes Higher Corporate Tax; Novavax Jumps 146% On New Deal
1. Biden to Announce New China Tariffs
The Biden administration is set to announce a major decision on China tariffs as early as next week, according to sources. This decision, a result of reviewing the Section 301 tariffs initiated by Donald Trump in 2018, will introduce new tariffs focused on crucial sectors such as electric vehicles, batteries, and solar cells, while keeping most of the existing tariffs on China unchanged. An announcement is planned for Tuesday, though it may be postponed.
This move, one of Biden’s most significant in the economic competition with China, follows his recent proposal to increase tariffs on Chinese steel and aluminum, and the initiation of a new investigation into China’s shipbuilding industry.
Following the news, the yuan dropped, and the CSI 300 Index of Chinese stocks initially fell by up to 0.6% in early trading, then later recovered.
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2. US Consumer Sentiment Sharply Drops
In early May, US consumer sentiment hit a six-month low, with the index dropping to 67.4 from 77.2, based on preliminary data from the University of Michigan. This decline, which was below all economist forecasts in a Bloomberg survey, reflects rising short-term inflation expectations and increased worries about the job market.
Consumers now anticipate prices to increase at an annual rate of 3.5% over the next year, the highest expectation in six months and an uptick from the 3.2% forecasted in April. Additionally, they expect a 3.1% rise in costs over the next five to ten years, slightly higher than the previous month’s expectations.
The decline in consumer sentiment was widespread across various demographic groups, including different ages, income brackets, and education levels. This downturn also reflects increasing concerns about high interest rates.
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3. Tesla to Invest $500M on Supercharger
Elon Musk announced plans to significantly expand Tesla Inc.’s Supercharger network, committing to invest “well over” $500 million this year. This declaration came just over a week after nearly all of the approximately 500 employees who managed the Supercharger business were laid off. Musk made this announcement on X, the social media platform he owns. Interestingly, just ten days prior to this, the Tesla CEO had stated that the company intended to slow down the pace of adding new chargers, concentrating instead on improving uptime and enhancing the services at existing locations.
Elon Musk has not provided details on how Tesla’s charging business will function after he dismissed its senior director and nearly all of her staff at the end of last month. This abrupt decision surprised both Tesla customers and other automakers who had begun to use Tesla’s Supercharger plugs.
Executives from companies that signed agreements last year to access Tesla’s Supercharger network have expressed their concerns, stating they have been unable to contact representatives from the Austin-based company since the layoffs.
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4. Zeekr Jumps 40% After US IPO
Shares of Zeekr Intelligent Technology Holding Ltd., the premium electric vehicle subsidiary of Zhejiang Geely Holding Group Co., surged up to 40% following an expanded initial public offering, marking the largest U.S. listing by a China-based company since 2021.
Zeekr’s American depositary shares (ADS) debuted at $26 each on Friday after the company successfully sold 21 million shares—3.5 million more than initially planned—at the top of its marketed price range of $18 to $21. By midday in New York, the shares traded at $28.70 each, valuing the company at approximately $7 billion.
The IPO’s underwriters have the option to buy up to an additional 3.15 million ADS in an over-allotment option. If exercised fully, this would increase the total offering to 24.15 million ADS, which would represent about 9.1% of Zeekr’s issued share capital.
Prior to the offering, notable investors such as Geely Auto, Mobileye Global Inc., and Contemporary Amperex Technology Co. Ltd. expressed interest in subscribing for up to $349 million worth of shares, as stated in Zeekr’s filings.
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5. Fed Cautious of CRE Loan Delinquency
According to the Federal Reserve, banks are bracing for more losses as delinquency rates on loans linked to office spaces continue to increase. In a statement released on Friday, the Fed noted that late payments on certain commercial real estate loans have now surpassed pre-pandemic levels. The central bank emphasized its commitment to enhancing the speed, force, and agility of its supervisory practices, as detailed in its semiannual report.
U.S. bank regulators, including the Federal Reserve, have been raising concerns about vulnerabilities in the commercial real estate market. Approximately a year ago, they urged lenders to cooperate with creditworthy borrowers experiencing difficulties in this sector. Property owners have been increasingly stressed as borrowing costs have escalated.
Earlier this year, the financial struggles faced by New York Community Bancorp highlighted these potential risks. The bank’s troubles were particularly tied to a large portfolio of apartment loans in New York’s rent-regulated complexes, underscoring the financial pressures in the commercial real estate sector.
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6. Biden Advisor Proposes Higher Corporate Tax
Apartment rents in Manhattan reached a new record high for April, suggesting the potential for another summer of unprecedented rent increases.
According to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate, the median rent for new leases signed last month was $4,250, a $9 increase from the previous April.
This marks the third increase in the past four months. With landlords raising prices and vacancies remaining near historic lows, prospective tenants are finding themselves with little choice but to accept higher rents. As warmer weather approaches, competition for apartments is expected to become even more fierce.
Jonathan Miller, president of Miller Samuel, commented on the trend, saying, “Based on where we are now, it seems like [we’re going to beat last summer’s all-time highs].”
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7. Novavax Jumps 146% On New Deal
Shares of Novavax Inc. experienced a significant surge after the company announced a $1.2 billion licensing agreement with Sanofi to commercialize a combined Covid-19 and flu vaccine. Under the terms of the deal, Novavax will receive $500 million upfront and could earn an additional $700 million if it meets certain development, regulatory, and launch milestones, as stated in a recent announcement.
In addition to the financial aspects of the agreement, Novavax will also receive tiered royalties from vaccine sales. Furthermore, Sanofi is acquiring a minority equity stake, about 5%, in the U.S.-based company.
This partnership unites two major entities in the vaccine industry, both of whom were relatively late to develop and commercialize Covid-19 vaccines during the pandemic, losing potential billions in sales to faster-moving mRNA vaccine developers like the Pfizer-BioNTech alliance and Moderna Inc.
The stock soared up to 146% in early trading in New York, positioning it for its largest one-day gain ever. Despite this jump, Novavax’s share price of $10.30 on Friday remains significantly below its peak of approximately $320 in early 2021.
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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.