—— Starbucks Hires Chipotle CEO; July US PPI Continues to Moderate; Brightspeed to Cut $1.1bn of Debt; Nvidia Gain $400bn in Market Cap in 4 Days; Market Implied Recession Risk Increases Materially; US to Sell $20bn Military Equipment to Israel; Justice Department Considers Breaking Up Google
1. Starbucks Hires Chipotle CEO
Starbucks Corp. has appointed Brian Niccol, the current CEO of Chipotle Mexican Grill Inc., as its new CEO and chairman, succeeding Laxman Narasimhan, who held the role for just over a year.
Niccol is set to begin his new position on September 9, according to a company statement. Until then, Starbucks’ current chief financial officer will oversee the company. Following the announcement, Starbucks shares surged by a record 23% in New York trading, while Chipotle’s shares dropped by as much as 13%.
This sudden leadership change follows reports that activist investors Elliott Investment Management and Starboard Value have acquired stakes in Starbucks. The coffee chain’s shares had already fallen 20% this year, driven by two consecutive quarters of declining comparable sales.
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2. July US PPI Continues to Moderate
U.S. producer prices in July rose by less than expected, signaling a continued easing of inflationary pressures, with services costs experiencing their first decline of the year.
According to a Bureau of Labor Statistics report released on Tuesday, the producer price index (PPI) for final demand increased by 0.1% from the previous month, falling short of the 0.2% gain forecasted by economists in a Bloomberg survey. On a year-over-year basis, the PPI rose by 2.2%.
Excluding the volatile food and energy sectors, the core PPI remained unchanged in July compared to the previous month, marking the tamest reading in four months. The core PPI increased by 2.4% from a year earlier.
These wholesale inflation figures come ahead of the more closely monitored consumer price index (CPI) data, which is expected to show a modest increase when released on Wednesday. The cooling inflation pressures, combined with weak July jobs data, have led economists to anticipate a series of interest rate cuts by the Federal Reserve beginning next month.
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3. Brightspeed to Cut $1.1bn of Debt
Apollo Global Management Inc.’s Brightspeed has struck a deal with a group of lenders to reduce the telecom company’s debt by $1.1 billion and secure $3.7 billion in new capital.
The new capital will come from Brightspeed’s secured lenders and Apollo, as stated in a recent announcement. The restructuring involved changes to the company’s existing loan and credit agreements, which eliminated the debt.
Bloomberg reported in July that Apollo and Brightspeed’s lenders, including Bank of America Corp. and Barclays Plc., were negotiating a restructuring plan that would require banks to accept a reduction in the value of their existing loans.
Both Apollo and Brightspeed have declined to provide further comments beyond the statement. Barclays’ spokesperson also declined to comment, and Bank of America representatives did not respond to requests for comment.
Brightspeed represents one of the last remaining portions of so-called hung debt that banks were unable to offload to investors following the Federal Reserve’s interest rate hikes in 2022.
Other similar deals that had been stuck on bank balance sheets but have since been resolved include the debt related to Apollo’s acquisition of autoparts company Tenneco and the buyout of Citrix Systems Inc.’s parent company by Vista Equity Partners and Elliott Investment Management.
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4. Nvidia Gain $400bn in Market Cap in 4 Days
Nvidia Corp. shareholders have faced a challenging six weeks, marked by a historic decline that wiped out significant market value and a subsequent period of intense volatility. However, signs suggest that the worst may be behind them.
In the past four trading sessions, Nvidia’s stock has surged nearly 17%, adding over $400 billion in market value to one of the world’s largest companies. This rebound has also boosted the broader market, with Nvidia contributing approximately 22% of the S&P 500’s gains during this period—twice the impact of any other single stock. The S&P 500 has experienced its best performance since early July, providing some relief to investors who, on August 5, faced the worst single-day drop in nearly two years.
Ivana Delevska, founder and chief investment officer of Spear Invest, noted, “There was a lot of positive news for Nvidia from the hyperscalers this earnings season, but the impact of the carry trade was so significant that it overshadowed this. Now that the technical pressure has eased, we’re seeing a return to the fundamental story, which explains the current surge.”
The recent Nvidia rally has surprised options traders who had been betting on further declines. According to Bloomberg data, the cost of options protecting against a 10% drop in Nvidia’s stock over the next 60 days is near its highest level since May 2023 compared to contracts that would benefit from a 10% rise.
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5. Market Implied Recession Risk Increases Materially
Financial markets are signaling an increased likelihood of a potential recession following a recent market turbulence that briefly unsettled Wall Street.
While a recession is still considered a remote possibility, models from Goldman Sachs Group Inc. and JPMorgan Chase & Co. indicate a significant rise in the market-implied probability of an economic downturn. This increase is evident from signals in the US bond market and, to a lesser extent, the performance of stocks sensitive to the business cycle.
According to Goldman Sachs, the combined equity and bond markets now assign a 41% probability to a US recession, up from 29% in April. This increase reflects market expectations of a more aggressive pace of Federal Reserve rate cuts and weaker performance in stocks that are highly responsive to economic cycles.
JPMorgan’s similar model estimates a 31% chance of recession, up from 20% since late March, driven by significant repricing in US Treasuries.
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6. US to Sell $20bn Military Equipment to Israel
The Biden administration has authorized the sale of up to 50 F-15 fighter jets, along with vehicles and ammunition, to Israel in a deal valued at over $20 billion. This move underscores the administration’s commitment to continuing military support for Israel despite ongoing concerns about the conduct of Israeli forces in the Gaza conflict.
The deal includes up to 50 Boeing F-15IA jets, upgrade kits for 25 existing F-15s, radar systems, air-to-air missiles, tank and mortar ammunition, and Medium Tactical vehicles, totaling up to $20.3 billion. However, the new jets will not be delivered to Israel until at least 2029.
While Congress has the ability to block such deals, Tuesday’s announcement highlights President Joe Biden’s resolve to maintain military aid to Israel amidst increasing criticism over civilian casualties in Gaza.
Since the October 7 attack by Hamas, which resulted in around 1,200 deaths, Israeli operations in Gaza have reportedly caused nearly 40,000 fatalities, according to the Hamas-run health ministry.
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7. Justice Department Considers Breaking Up Google
The U.S. Department of Justice is considering a rare move to break up Alphabet Inc.’s Google following a landmark court ruling that determined the company monopolized the online search market, according to sources familiar with the discussions.
If pursued, this would be Washington’s first attempt to dismantle a company for illegal monopolization since the unsuccessful efforts to break up Microsoft Corp. two decades ago. Less drastic measures under consideration include requiring Google to share more data with competitors and implementing safeguards to prevent it from gaining an unfair advantage in AI products, the sources said.
Regardless of the final approach, the government is expected to seek a ban on the exclusive contracts that were central to its case against Google. If the Justice Department decides to push forward with a breakup, potential targets for divestment could include the Android operating system and Google’s Chrome web browser.
Additionally, there is consideration of forcing a sale of AdWords, Google’s platform for selling text advertisements, according to one of the sources.
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本文内容来自《Financial Times》、《Bloomberg》，以及《The Real Deal》等多家财经新闻媒体。