Bloomberg

(Bloomberg) — Starboard Value has built a sizable position in Vertiv Holdings Co., as another company that went public via a blank-check deal becomes a target for activism. 

Starboard disclosed a 7.4% stake in the supplier of equipment and services for data centers in a regulatory filing Thursday, confirming an earlier report by Bloomberg News. The firm said in the filing that it believed the company was undervalued. 

Starboard is believed to be seeking operational improvements at Vertiv, according to people familiar with the matter, who asked not to be identified because the matter is private.  

The New York-based hedge fund has held discussions with Vertiv’s leadership and appears to support its focus on improving profitability under Chairman David Cote and Giordano Albertazzi, who will take over as chief executive officer next year, the people said. 

Starboard Chief Executive Officer Jeff Smith is expected to discuss the new investment at the Capitalize for Kids Investor Conference in Toronto on Thursday, the people said. 

Shares in Vertiv rose as much as 12% in early trading on Thursday. The stock was up 9.2% at 9:46 a.m. in New York, giving the Columbus, Ohio-based company a market value of about $4.7 billion.

Representatives for Starboard and Vertiv weren’t immediately available for comment.

Activist Targets

Industry watchers have speculated that companies that have gone public through special purpose acquisition companies will increasingly be targeted by activists because they have problems that might have deterred traditional initial public offering investors, such as governance issues or regulatory risks. 

This will be at least the second time that a high-profile activist investor has targeted the successor of a SPAC. Earlier this year, Dan Loeb’s Third Point began pushing Cano Health Inc. to explore a sale. 

Vertiv, previously a division of Emerson Electric Co., went public in 2020 via a merger with a SPAC backed by Goldman Sachs Group Inc. and led by Cote, who was previously CEO of Honeywell International Inc. and TRW Inc. 

The company’s shares had fallen 54% this year through Wednesday amid a pullback in spending for data centers, higher costs and lingering supply chain issues. This month, Vertiv cut its profit forecast for the fourth quarter, primarily due to foreign exchange headwinds.

Salesforce, Splunk

Vertiv provides critical infrastructure for data centers in 130 countries around the world, including equipment, software, analytics and other services. 

Starboard has pushed for changes at several high-profile companies in recent years. This week, the firm disclosed new positions in Salesforce Inc. and Splunk Inc., both of which it said it believes can make operational improvements. Smith said at a conference in New York Tuesday he also believed Splunk Inc. may be an attractive takeover target for strategic and financial buyers. 

(Updates shares in sixth paragraph.)

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — Snap Inc. may have at least one more shock in store for investors before the social-media company closes out its year to forget. 

The Snapchat owner reports third-quarter earnings late Thursday and, based on option volatilities, traders are pricing in a 23% stock move in either direction on Friday, according to data compiled by Bloomberg. Over the past five years, the average move up or down in Snap shares has been 20% the day after earnings, the data show. 

Snap shares have tumbled 87% from their record close in September 2021. It owns the distinction of being the only US company that was worth more than $100 billion a year ago and is now worth less than $20 billion. So much bad news is priced in now that the surprise this time may be a positive one, said Angelo Zino, senior equity analyst at CFRA Research.

The “set up looks more favorable for bulls given price action in recent months,” he said. “Estimates have been coming down all year and we expect a relatively conservative outlook when the company reports.” 

Snap’s report will be the first from big internet companies that depend on advertising, so it will set the stage for what investors can expect when larger players like Alphabet Inc. and Meta Platforms Inc. announce next week. 

Social media platforms like Snapchat, Facebook and Instagram have had to work around privacy rules that Apple Inc. introduced last year that have made it more difficult to serve up ads to customers based on their online activity. 

To make things worse, 2022 has been ruthless on the technology sector, with the Federal Reserve spooking investors by raising interest rates to control inflation and ad dollars coming under pressure as fears of a global recession loom. 

Over the past 12 months, analysts have slashed their 2022 revenue estimates for Snap by almost a quarter. They now expect growth of 14%, which would be the company’s slowest ever, according to Bloomberg data. After its dismal second-quarter results in July, at least 14 brokerages and investment banks have cut their recommendations on the stock.

“They’ve disappointed us so many times it’s almost expected that they’re gonna disappoint us again,” said Dennis Dick, head of markets structure and a proprietary trader at Bright Trading. “You never know with Snapchat. You lower the bar and they seem to find a way to get under the lower bar.” 

Tech Chart of the Day

Netflix Inc. has rallied 65% from its May low as the video streaming giant makes changes to its business to attract more subscribers onto its platform. Share soared 13% on Wednesday after the company handily beat estimates for paid subscribers, signaling the worst of the slowdown is likely over. However, heavy losses in the beginning of the year means that the stock is still down 55%, putting it on track for its worst year in more than a decade. 

Top Tech Stories

• Elon Musk said he and other investors are “obviously overpaying” for Twitter Inc. The billionaire said he is “excited about the Twitter situation,” describing the social media company as an asset that has “sort of languished for a long time” but has “incredible potential.”
• China’s top technology overseer convened a series of emergency meetings over the past week with leading semiconductor companies, seeking to assess the damage from the Biden administration’s sweeping chip restrictions and pledging support for the critical sector.
• Amazon.com Inc. faces a UK class-action lawsuit over claims the tech giant uses a “secretive” algorithm to abuse its dominant position in the online marketplace.
• Indonesia’s largest tech company GoTo Group is in talks with its major owners for a controlled sale of roughly $1 billion of their stakes, aiming to avoid a potential stock crash when a lock-up on their holdings ends next month.
• The Biden administration’s trade restrictions on China are wreaking havoc with the chip-equipment industry, but ASML Holding NV and Lam Research Corp. forecasts show that the pain won’t be spread evenly.
• Murata Manufacturing Co. expects this year’s drop in smartphone sales to keep going well into 2023, led by a sharp downturn in China.
• Tesla Inc. shares declined in early trading after the electric-car maker reported lower-than-expected revenue and acknowledged it isn’t immune from economic headwinds.
  • China is experiencing a downturn similar to a recession driven by the housing market slump that has lasted for over a year, according to Musk.
  • Musk said it’s likely that Tesla Inc. will do a “meaningful” share buyback.

–With assistance from Tom Contiliano.

(Updates to market open.)

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©2022 Bloomberg L.P.

(Bloomberg) — Tesla Inc. shares declined in early trading after the electric-car maker reported lower-than-expected revenue and acknowledged it isn’t immune from economic headwinds.

Third-quarter sales rose 56% to $21.5 billion, short of analysts’ average estimate of $22.1 billion. The maker of Model 3 sedans and Model Y SUVs said it expects to come up short of its target for 50% growth in vehicle deliveries, in part because of trouble it’s having getting cars from plants to customers.

Chief Executive Officer Elon Musk kicked off Tesla’s earnings call with ebullience, telling analysts he was looking forward to an “an epic end of year.” He later allowed that downturns in China and Europe and the Federal Reserve’s interest rate increases are having an effect on orders.

“Demand is a little harder than it would otherwise be,” Musk said. “But as I said earlier, we are extremely confident of a great Q4.”

Tesla shares fell 7.6% to $205.20 at 9:37 a.m. in New York. The stock has dropped 37% this year through Wednesday’s close.

Getting cars onto ships, trains and trucks proved costly and challenging in the latest quarter, as much of the EV maker’s output was concentrated in the final weeks. This contributed to Tesla producing over 22,000 more cars than it delivered during the period, which concerned some investors going into the earnings report.

Chief Financial Officer Zachary Kirkhorn cautioned that investors should expect a gap between production and deliveries again in the fourth quarter, with more cars still in transit at year-end that will be delivered early in the first quarter.

Kirkhorn also said that costs linked to ramping up output at Tesla’s newest factories in Austin, Texas, and near Berlin weighed on profitability. While those expenses will continue to put a damper on margins as the year ends, the company expects less of an impact than the third quarter.

The company’s automotive gross margin narrowed to 27.9% in the quarter, falling short of the 28.4% average analyst estimate.

“Tesla is a company that typically has been beating numbers,” said Gene Munster, managing partner of Loup Ventures, a venture capital company. “The reaction you’re seeing is that people are a bit taken aback by the fact that they missed.”

Tesla said profit excluding some items rose to $1.05 a share, exceeding the $1.01 average estimate compiled by Bloomberg.

To address the transportation bottlenecks, Tesla is trying to smooth its delivery and logistics processes and move away from its costly end-of-quarter rush of hand-overs to customers.

In April, Musk said Tesla would produce more than 1.5 million vehicles this year. The company has made 929,910 through the first three quarters, meaning it needs to crank out more than 570,000 in the fourth quarter to meet that target. It produced 305,840 vehicles in the final three months of 2021.

Tesla is sticking to its long-held plans to increase vehicle deliveries by 50% on average annually over multiple years. Musk said he expects to be present for the first Semi truck deliveries to PepsiCo in December and that the company is in the “final lap” of work on Cybertruck, which will start production in the middle of next year.

After dangling the prospect of a share buyback during Tesla’s annual meeting in August, Musk said that the board has been debating the idea and “generally thinks that it makes sense.” A repurchase on the order of $5 billion to $10 billion is “certainly possible” even if next year is very difficult, he said.

He also speculated that Tesla’s market value, now at $696 billion, could one day exceed the combined capitalization of Apple Inc. and Saudi Aramco, two of the world’s most valuable companies. Together, they are worth more than six times Tesla’s capitalization at around $4.4 trillion.

“This is the first time I’ve seen that potential,” Musk said. “We’ve got the most exciting product portfolio of any company on earth, some of which you’ve heard about, some of which you haven’t.”

(Updates trading in fifth paragraph.)

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©2022 Bloomberg L.P.

(Bloomberg) — Decentralized finance, the once red-hot slice of the crypto universe that was at the center of this year’s collapse of the digital-asset world, is facing a rapidly increasing new challenge: financial hacking. 

After being plagued for years by hackers seeking to exploit coding flaws to siphon funds from crypto projects, more assailants are now using the automated software programs that power DeFi platforms to manipulate transactions to gain control of the millions of dollars in assets locked in various protocols that allow users to borrow and lend without intermediaries. 

Over the past weekend, the DeFi application Mango DAO agreed to let a self-proclaimed trader keep almost half of the $100 million in assets he seized in exchange for releasing the rest of the funds while promising no criminal prosecution. The technique used by the Mango exploiter has been tied to other high-profile attacks. Harvest Finance lost $34 million in 2020, while Beanstalk was hit for $182 million in April. On Tuesday, the decentralized credit platform Moola Market suffered a $9 million exploit. 

The rising trend appears to fall into a gray area legally, putting the industry at a crossroads. Transgressors and other hardcore crypto enthusiasts consider these maneuvers, as the Mango exploiter wrote, “a profitable trading strategy.” That’s leading to industry participants to call for greater regulatory clarity to quash the practice, which risks further eroding investor confidence as the blockchain sector contends with a steep market downturn. Others are calling it outright financial manipulation.

“We’re sort of driving cars without seat belts right now,” said Ken Deeter, a partner at Electric Capital, a venture-capital firm that has invested in companies like digital-asset exchange Kraken and the nonfungible token marketplace Magic Eden. 

‘Financial Hacking’

The Mango attacker used two accounts funded with the stablecoin USD Coin to take large positions in Mango perpetual swaps, which are futures that allow traders to keep a position open. That helped to push up the token’s spot price, which allowed the exploiter to use the now more valuable position as collateral for loans that drained roughly $100 million from the protocol, leaving depositors with nothing.

“This is different from the code exploits we’ve typically seen this year in hacks of DeFi services, and not something that increased security measures can simply prevent,” said Erin Plante, vice president of investigations at crypto-security firm Chainalysis. 

The incident amounts to “financial hacking,” a phenomenon unique to crypto, according to Steve Walbroehl, co-founder and chief information security officer of Halborn, a blockchain-security startup. In these scenarios, perpetrators are taking advantage of the interconnectedness of different DeFi platforms as well as the lack of credit checks and other safety controls used in traditional finance. They then subvert the market to their own benefit. 

“This whole open financial system of democratized service and access to funding is great, but also opens up vulnerabilities for it to be used as a weapon against itself,” Walbroehl said. 

Mango’s decision only seemed to embolden the self-declared alleged exploiter, who goes by Avraham Eisenberg on Twitter. Just days after Mango reached the agreement, he has begun to circulate similar strategies for use on the Aave lending platform.  Eisenberg declined to confirm his identify when contacted by Bloomberg News.

Chris Tarbell, co-founder of cybersecurity firm NAXO, said Aave should take the tweet as a threat. “It’s not an arrestable offense — no threat of bodily harm, but if I were internal to this company, I’d certainly be worried. This is using weaknesses in the system to his advantage.”

Tarbell, who is also a former Federal Bureau of Investigation special agent and has helped arrest notorious crypto hacker and darknet website operator Ross Ulbricht, said exploits like the Mango hack are illegal. 

“Someone holds $150 million that’s not their property and uses your own property against you — to me that’s a crime,” Tarbell said. 

On Wednesday, the Eisenberg account claimed that they had been advised that Aave “is perfectly safe.” They provided their trading strategy in a text message screen-shot, which provided a playbook similar to the Mango attack. 

Tarbell said Eisenberg’s tweets show that the exploiter perhaps crave admiration. “Someone comes in and commits a bank robbery, they rarely take the mask off,” he said. “This guy takes off the mask.”  

–With assistance from Emily Nicolle and Philip Lagerkranser.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — Ukrainians were warned of rolling blackouts because of damage to the country’s power infrastructure from Russian missile attacks this month, and President Volodymyr Zelenskiy urged people to use as little electricity as possible. 

The UK defense secretary said a Russian warplane in late September fired a missile “in the vicinity of” an unarmed RAF jet flying in international airspace over the Black Sea. 

NATO Secretary General Jens Stoltenberg, meanwhile, called on Iran not to support President Vladimir Putin’s war in Ukraine with drones or missiles as the EU adopted sanctions against the Islamic Republic for selling drones to Russia. Repeated attacks by Russian forces in recent weeks have been linked to Iranian-made drones. 

(See RSAN on the Bloomberg Terminal for the Russian Sanctions Dashboard.) 

Key Developments

• APEC Finance Ministers Meeting Latest to be Split Over Russia’s War 
• US Calls for Security Council Briefing on Russia, Iranian Drones
• Ukraine Faces Rolling Blackouts After Attacks on Power Stations
• Ukraine’s New Central Banker Focuses on IMF Aid: Decision Guide
• Italy’s Rising Coalition Dealt Blow After Berlusconi Lauds Putin

On the Ground

Russia hit Mykolaiv and the surrounding region with C-300 missiles on Thursday morning, Kyrylo Tymoshenko, deputy head of the president’s office, said on Telegram. Ukrainian forces repelled Russian assaults near nine settlements in the Donetsk and Luhansk regions, including Bakhmut, Ukraine’s General Staff said. Russia hit an industrial facility and energy infrastructure in the Kryvyi Rih district of the Dnipropetrovsk region overnight, inflicting serious damage, local authorities said on Telegram. 

(All times CET)

Push For New EU Sanctions on Russia (2:41 p.m.) 

Estonia, Lithuania, Latvia and Poland proposed broadening EU sanctions on Russia by adding a ban on cooperating with Russia on nuclear energy, according to a document seen by Bloomberg News. The nations also want to ban the sale of real estate to Russian citizens and companies and limit the concessions that Belgium previously won on the import of steel products from Russia.

The ninth sanctions package should broaden the ban on information and communication technology services to include computer software and extend the scope of a ban on business services to cover marketing and opinion poll services, according to the document. 

“Schemes involving marketing and leasing services are regularly used in Russia as a cover-up to facilitate flows of a large scale providing funds for military sector,” the countries said.

Ukraine Expects Electrical Equipment Next Week (2:10 p.m.)

Generators, components and spare parts needed to replace equipment damaged by recent Russian strikes are expected to start arriving in Ukraine next week from Italy, France, Lithuania, Finland, Germany and Poland, Ukraine’s foreign minister said. 

“The equipment will help to ensure uninterrupted functioning of Ukrainian households, hospitals and schools,” Dmytro Kuleba said in a statement.

Separately, on Twitter, Kuleba welcomed the EU’s moves against Iran for its provision of drones used by Russia in recent attacks on energy infrastructure and other targets. 

Ukraine Sanctions Thousands of Russian Citizens, Companies (2 p.m.) 

Ukraine sanctioned 1,374 Russian companies and companies affiliated with Russia, and 2,507 individuals, mainly Russian citizens, in decrees signed on Wednesday. 

Billionaire Roman Abramovich was sanctioned, with the proviso that the measures only take effect after an exchange of prisoners and bodies of deceased soldiers between Ukraine and Russia is complete. 

Among others, Ukraine sanctioned billionaire Mikhail Fridman; Petr Aven; Eugene Kaspersky, CEO of the cybersecurity firm Kaspersky Lab, and the daughter of President Vladimir Putin, Ekaterina Tikhonova.  

UK Says Russia Fired Missile Near RAF Jet in September (1:34 p.m.) 

A Russian aircraft released a missile on Sept. 29 near an unarmed British plane patrolling in international airspace over the Black Sea, UK Defense Secretary Ben Wallace told parliament during an update on the situation in Ukraine. 

The UK temporarily suspended patrols after the “potentially dangerous” incident and raised its concerns with Russian Defence Minister Sergei Shoigu. Russia, in an Oct. 10 response, blamed a “technical malfunction” by its fighter jet, Wallace said. After consulting with allies, “I have restarted routine patrols but this time escorted by fighter aircraft,” he added. 

Russia’s defense ministry doesn’t immediately respond to requests from Bloomberg News for comment. 

Ukraine Keeps Key Rate Steady (1:04 p.m.)

Ukraine’s central bank, as expected, kept its benchmark borrowing rate unchanged at 25% as the body’s new governor presses ahead with negotiations with the IMF on a financial lifeline for the war-battered economy. 

“Continued cooperation with international partners remains an important factor in maintaining the Ukrainian economy during the full-scale war and post-war recovery,” the Kyiv-based bank said in a statement. 

Russia Controls Only 1.8% of Kharkiv Region, Official Says (12:58 p.m.)

Russia retains control over 1.8% of the area around Kharkiv in the east of Ukraine, Kharkiv Governor Oleh Syniehubov said on Telegram. 

“Since September, our military has expelled the occupiers from 544 settlements in the region. Only 1.8% of the region’s territory remains under temporary occupation — that’s 32 settlements,” Syniehubov told. 

Ukraine’s armed forces and local authorities have formed three lines of defence in liberated areas, he said. Kremlin troops continue “limited assaults” in a bit to recapture lost territory, according to the Institute for Study of War. 

Germany Probing Fire at Refugee Shelter (11:45 a.m.)

German authorities are investigating a suspected arson attack which local media said almost completely destroyed a property in the east of the country housing Ukrainian refugees.

Interior Minister Nancy Faeser said in a tweet that if arson is confirmed the perpetrators would “be prosecuted with the utmost severity” and thanked emergency services for rescuing all of the residents from the building. 

“People who found shelter with us from Putin’s war had to be rescued from the flames,” Faeser wrote. “It is very fortunate that everyone was unharmed.”

Italy’s Rising Coalition Dealt Blow After Berlusconi Lauds Putin (11:30 a.m.)

Giorgia Meloni, the right-wing leader poised to form a new Italian government, said she’d give up on the fledgling coalition if her allies can’t commit to supporting Ukraine along with Italy’s European Union and NATO partners. 

Meloni commented after audio surfaced of coalition partner Silvio Berlusconi saying he rekindled his friendship with Russian President Vladimir Putin and laying the blame of Russia’s invasion of Ukraine on President Volodymyr Zelenskiy. 

EU Adopts Sanctions Against Iran for Drone Sales to Russia (11:23 a.m.)

Bloomberg reported the measures targeting three Iranian generals and Shahed Aviation Industries, a company responsible for the design and development of the Shahed series of Iranian drones that have been supplied to Russia and are currently being used in Ukraine. Iran denies sending weapons to Russia.

EU States Split on Forming War Crimes Tribunal for Ukraine (10:33 a.m.)

Some EU member states are wary about setting up a war crimes tribunal for atrocities committed in Ukraine, following what some said were mixed experiences of the court set to deal with such crimes committed during the 1990s in the former Yugoslavia, according to a person familiar with the issue.

An early version of the EU summit conclusions contained a reference suggesting a special tribunal to investigate crimes of aggression be formed, but the reference to the “special tribunal” was removed in a subsequent draft after opposition from a few countries. Some nations are not pushing to have it restored.

NATO Chief Calls on Iran to Not Back Russia Against Ukraine (10:21 a.m.)

While NATO Secretary General Jens Stoltenberg said “every indication points to Iran supplying Russia with drones,” he declined to confirm reports the country is also sending missiles to Russia, saying he wouldn’t go into specific intelligence.

Sweden to Work With Turkey on Support for NATO Bid (10:15 a.m.)

Sweden’s new cabinet will “redouble efforts” to work with Turkey to allay its concerns so that it’s able to ratify the Nordic country’s accession to NATO, Prime Minister Ulf Kristersson told reporters in Brussels. He added that he’s prepared to visit Ankara as soon as possible, with preparations for the trip already being made.

EU Leaders to Discuss Ukraine’s Emergency Needs (9:41 a.m.)

European Union leaders meeting in Brussels will discuss how to help Ukraine’s emergency energy needs following Russia’s attacks on critical infrastructure this month, according to people familiar with the matter.

The issue was a late addition to the agenda for the summit starting Thursday, the people said. Kyiv has provided a list of its most urgent needs, covering dozens of items such as circuit breakers, disconnecters, transformers and relay protection automation devices. 

Other requirements include surge arresters, aerials, power cables, vehicles, as well as several types of switches and high-voltage inputs, according to a document seen by Bloomberg.

Grid Operator Warns of Possible Blackouts Across Ukraine (7:57 a.m.)

Ukrenergo, the state-run energy company, warned about possible blackouts all over Ukraine and urged citizens to reduce electricity consumption on Thursday. 

“Russian constant missile attacks destroy our energy infrastructure, and energy workers need time to restore it,” the company said on Telegram. “We need to be very conscious and frugal with our electricity consumption in order to get through the coming winter as well as possible.”

US Hands Out Charges in Plot to Buy Chips for Russia (2:05 a.m.)

The US Justice Department accused seven people of evading US sanctions as part of a purported plot to sell Venezuelan oil to Russia and China and use the proceeds to buy black market chips for Russia to install in high-tech weapons on the battlefields in Ukraine.

The five Russians and two Venezuelans, “knowingly sought to conceal the theft of US military technology and profit off black market oil,” FBI Assistant Director in Charge Michael Driscoll said in announcing the charges in New York. “This network schemed to procure sophisticated technology in direct support of a floundering Russian Federation military industrial complex.”

Zelenskiy Urges Citizens to Conserve Power (1:40 a.m.)

Zelenskiy urged Ukrainians to use as little electricity as possible on Thursday after electrical grid operator Ukrenergo warned of rolling blackouts because of damage to power infrastructure from Russian missile attacks.

“It is very important energy is consumed with awareness tomorrow,” Zelenskiy said in his nightly address. “We are preparing for all possible scenarios in the light of approaching winter season. We proceed from the fact that Russian terror will be directed at energy facilities until, with the help of our partners, we can shoot down 100% of enemy’s missiles and drones.”

All regions in Ukraine may face four-hour cutoffs between 7 a.m. and 10 p.m., a necessary step because of a shortage of power generation, Ukrenergo said.

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(Bloomberg) — US stock futures fluctuated as investors assessed resilient company earnings against an unexpected drop in jobless claims. The pound was firmer and UK bonds climbed as Liz Truss announced she was stepping down as UK prime minister.

S&P 500 and Nasdaq 100 contracts were little changed as AT&T Inc. and American Airlines Group Inc. climbed in premarket trading after beating estimates Tesla Inc., however, dropped after the electric-vehicle maker’s miss on sales. Oil stocks and luxury names outperformed in Europe. 

Truss resigned Thursday as UK prime minister after a brief and chaotic tenure that saw her announce a massive package of unfunded tax cuts before unwinding most of it in the face of a market rout.

The yen weakened past the closely watched 150 per dollar level, marking a 32-year low and keeping investors on high alert for further intervention to support it. The move followed a surge in US Treasury yields to multi-year highs that widened the gap with Japanese equivalents. A Bloomberg gauge of dollar strength edged lower.

 

A generally strong start to the third-quarter earnings season has bolstered sentiment toward equities. But investors are having to balance signs of corporate resilience against fears about the impact of persistent inflation, hawkish moves by the Federal Reserve and other central banks and threats to the economy.

“I think the market now is looking at 2023 and baking some kind of mild downturn into the price,” Hugh Gimber, global market strategist at JPMorgan Asset Management, said on Bloomberg Television. “The key is that inflation number coming down, because if it does, 5% for the Fed looks to me roughly as the right figure and then the market can have a clearer picture.”

In the latest data for Fed policymakers to parse, jobless claims unexpectedly fell to a three-week low, indicating firm labor demand for workers despite concerns about the economy.

Initial unemployment claims declined by 12,000 to 214,000 in the week ended Oct. 15, Labor Department data showed Thursday. The median estimate in a Bloomberg survey of economists called for 233,000 new applications.US weekly jobless claims fell to 214,000 against estimates for 233,000.

Federal Reserve Bank of St. Louis President James Bullard said he expected the US central bank to end its “front-loading” of aggressive interest-rate hikes by early next year and shift to keeping policy sufficiently restrictive with small adjustments as inflation cools.

The Fed is expected to raise interest rates by 75 basis points at its Nov. 1-2 meeting — its fourth straight increase of that size — as central bankers seek to cool the hottest inflation in four decades. 

Elsewhere in markets, oil advanced as Chinese officials debated easing some Covid rules, a policy that has weighed on its economy and energy demand. Gold rose after trading near a three-week low.

Key events this week:

• US existing home sales, initial jobless claims, Conference Board leading index, Thursday
• Euro area consumer confidence, Friday

Some of the main moves in markets:

Stocks

• Futures on the S&P 500 were little changed as of 8:43 a.m. New York time
• Futures on the Nasdaq 100 fell 0.3%
• Futures on the Dow Jones Industrial Average rose 0.2%
• The Stoxx Europe 600 fell 0.2%
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro rose 0.4% to $0.9811
• The British pound rose 0.5% to $1.1271
• The Japanese yen was little changed at 149.85 per dollar

Cryptocurrencies

• Bitcoin fell 0.2% to $19,167.08
• Ether was little changed at $1,295.11

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.14%
• Germany’s 10-year yield advanced three basis points to 2.40%
• Britain’s 10-year yield declined five basis points to 3.83%

Commodities

• West Texas Intermediate crude rose 2.1% to $87.32 a barrel
• Gold futures rose 0.5% to $1,641.80 an ounce

–With assistance from Brett Miller and Allegra Catelli.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — Basketball star Kevin Durant is purchasing a Major League Pickleball expansion team as the upstart sport expands and attracts new investors.

Thirty Five Ventures, the investment firm run by Durant and Rich Kleiman, will own and operate a team full-time, running personnel, merchandise, sponsorships and marketing. The squad is set to first compete in the 2023 season. Financial terms weren’t disclosed.

The surging popularity of pickleball, a paddle sport in which players hit a ball back and forth over a net on a much smaller court than in tennis, has been a boon for MLP, a new professional league that debuted last year.

In recent months, the league has lured many new backers to join its ownership ranks. NBA stars LeBron James, Draymond Green and Kevin Love are now co-owners of a pickleball team, and hedge fund Knighthead Capital Management leads a new ownership group that includes quarterback Tom Brady and former world No. 1 tennis player Kim Clijsters.

Durant’s venture firm has investments in other sports as well, including the National Women’s Soccer League’s Gotham FC, New York esports organization Andbox, the Athletes Unlimited network of women’s leagues and the Premier Lacrosse League.

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©2022 Bloomberg L.P.

(Bloomberg) — Liz Truss invited key Conservative Party lawmaker Graham Brady for talks in 10 Downing Street, fueling the sense that her premiership is on the brink of collapse after a series of humiliating U-Turns.

The meeting is potentially very significant because Brady represents rank-and-file Tory MPs and ultimately decides party rules for leadership contests. With events moving rapidly in Westminster, the unscheduled talks could well mark the beginning of the end for an administration in tatters.

Anger in Truss’s party has intensified in the last 24 hours after Truss fired Home Secretary Suella Braverman and a Parliament vote descended into chaos. Truss had already been forced to fire Kwasi Kwarteng, after the economic plan she designed with her former chancellor blew up in the face of market turmoil.

UK bonds rallied on Thursday, easing earlier losses, as traders pared interest-rate bets amid doubts over whether Truss can cling onto power. The pound flipped to gains, rising 0.3% to $1.1249.

In theory, Truss is protected from a leadership challenge for a year under existing Conservative Party rules. But if enough MPs come out against Truss, Brady will be under huge pressure to change the rules to allow a confidence vote. In reality, it’s unlikely to get that far — Brady telling Truss she’s lost support of her party would probably prompt her to quit.

Key Tory Figures

The arrival of Tory party Chairman Jake Berry in 10 Downing Street soon after Brady is a further indication that talks about Truss’s future may be under way.

Truss’s Government on Brink as Tories Agitate for Her to Go

Cabinet ministers took part in late night conversations about whether Truss should resign, according to two people familiar with the discussions. And a growing number of MPs now want Truss to resign immediately — including her former backer Sheryll Murray, who said the premier’s position is “untenable.”

“We need to effect a change, frankly, today in order to stop this shambles,” veteran Tory MP Crispin Blunt told the BBC.

Even the Cabinet minister sent out to speak for the government on its morning broadcast round didn’t sound confident about the premier’s prospects. Asked on Times Radio whether Truss, 47, will lead the Conservatives into the next election, Transport Secretary Anne-Marie Trevelyan replied: “At the moment that is still the case.”

‘Difficult Day’

Truss’s spokesman, Max Blain, told reporters at a regular briefing that Truss acknowledges Wednesday was a “difficult day,” but insisted the prime minister believes she will lead the Tories into the next election. That is due by January 2025 at the latest.

One potential stumbling block for Truss’s opponents is that they lack an obvious unifying candidate to replace her. Former Chancellor of the Exchequer Rishi Sunak and House of Commons leader Penny Mordaunt are widely seen as the most likely candidates, having come second and third to Truss in the party leadership contest.

Jeremy Hunt, who was parachuted into government to replace Kwarteng as Chancellor of the Exchequer to try to calm financial markets, is another.

Still, they all have their opponents in the party. Until Wednesday, there was a widely-held view in the party that a leadership change should wait at least until Hunt announces a new economic plan on Oct. 31.

Events Accelerate

But Truss’s sacking of Braverman — and the debacle in Parliament hours later — have lit a fire under efforts to resolve the impasse over her replacement. 

Truss’s attempt to regain control — bringing in Grant Shapps in place of Braverman — backfired because the former transport secretary has himself been openly plotting with Tory MPs to remove the prime minister. The move appeared desperate, and fueled the growing view that Truss’s short tenure in Number 10 may have entered its final phase.

If Truss does go, she’ll become the shortest-serving prime minister in British history. The current holder of that ignominious record, George Canning, died in office of tuberculosis after 119 days. Truss is currently on 44 days.

Veteran Tory MP Charles Walker told Bloomberg News that there should be a “papal conclave” of Mordaunt, Sunak, Hunt and Defence Secretary Ben Wallace to divide up the biggest jobs. There is no indication the party will adopt the idea.

“The ship is sinking,” Walker said. “It’s a question of how many we can get into the lifeboats.”

–With assistance from Ellen Milligan, Emily Ashton, Alex Wickham and Alex Morales.

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(Bloomberg) — AT&T Inc. exceeded analysts’ estimates for profit and wireless subscriber growth, suggesting that mobile-service providers remain insulated from tighter consumer budgets.

While the company may have dodged most of the effects of inflation, concerns about AT&T’s cash supply remain. The company’s $3.8 billion free cash flow in the third quarter came up short of the $4.28 billion average analyst projection, but AT&T still expects to reach its $14 billion target for the year. 

The company said it’s ahead of schedule on wireless upgrades in part due to “record levels” of spending on 5G and fiber-network build-outs in the first three quarters of the year. Looking ahead, the company says it expects spending to taper down by more than $2 billion in the fourth quarter.

AT&T shares rose 2.6% in early trading at 7:20 a.m. in New York. The stock is down more than 16% this year through Wednesday’s close, outperforming phone company peer Verizon Communications Inc., which is down 30%, but lagging the 17% gain by T-Mobile US Inc.

Investors became concerned about the company’s ability to pay its $8 billion dividend and hold to debt-reduction promises earlier this year when it lowered its free cash flow forecast from $16 billion in part due to late customer payments.

Subscriber Growth

The No. 3 US wireless carrier added 964,000 subscribers in the third quarter, topping analyst estimates of 913,000. That included 708,000 regular monthly phone customers, ahead of the 631,000 average projection.

Earnings, excluding some items, were 68 cents a share, while analysts were looking for 60 cents. Revenue came in slightly ahead of estimates.The company raised its full-year earnings forecast to at least $2.50 a share, up from a range of $2.42 to $2.46.

 

The results will ease investor concerns that consumers are pulling back on wireless spending in the face of decades-high inflation. Demand has held up despite AT&T’s recent $6 price increase on older plans.

In consumer broadband, AT&T added 338,000 new fiber customers in the quarter, exceeding the 316,000 added in the prior quarter. However, the gains weren’t enough to offset the number of nonfiber broadband customers who canceled service. AT&T posted a net loss of 29,000 consumer broadband customers in the third quarter.

Under Chief Executive Officer John Stankey, AT&T sold its media business to Discovery Inc. in order to focus entirely on 5G wireless and fiber broadband expansion. AT&T is exploring a JV to help build out fiber to new markets, as Bloomberg reported Wednesday.

 

(Updates with spending plans starting in second paragraph.)

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(Bloomberg) — Flexport Inc.’s trade financing arm received $200 million from KKR & Co. to expand the digital freight company’s reach into the growing market for supply chain lending.

The credit facility from the New York-based investment firm is Flexport Capital’s first outside funding since its inception in 2017. The unit has financed more than $1 billion in invoices for hundreds of companies across more than 20 countries, with a portfolio that’s up almost 150% year over year, Flexport said in a statement Thursday.

Nearly three years of supply disruptions have created financial headaches for importers and exporters — especially smaller companies — because parts shortages and shipping delays tie up working capital.

“You can have a six-month timeline between when you have to pay your suppliers and when you get paid by your customers. and that’s the gap that we’re talking about that we’re stepping into,” Justin Sherlock, head of Flexport Capital, said in an interview. “It’s a huge amount of a company’s financial well-being that’s trapped on a ship.”

After the pandemic lead to a surge in e-commerce, San Francisco-based Flexport invested heavily in the capital business this year and remains confident in its prospects even in the face of a slowing global economy and fragile asset markets.

“Despite the market gloominess, we think that there’s a lot of growth ahead for both Flexport and Flexport Capital,” Sherlock said.

Geographic Expansion

Loan offerings were expanded this year to five countries — Belgium, Canada, Luxembourg, the Netherlands and the UK. Flexport’s funding from KKR is a multiyear deal, Sherlock said, with eyes on “how fast we’re able to grow next year.”

“We look forward to supporting the company’s efforts with our long-term capital as industry demand for customized financing solutions continues to grow,” KKR Managing Director Avi Korn said in the statement.

Historically, large banks such as HSBC Holdings Plc and JPMorgan Chase & Co. have offered trade financing products that were largely unavailable to the middle market.

According to an overview of the products, Flexport’s logistics and inventory financing offers credit lines of as much as $20 million with monthly fees starting at 0.65%.

Sherlock said one of the goals is to build technology that better integrates the capital business with Flexport’s main logistics portals.

“The funding allows us to double down on the technology investment for this business,” he said. “The product is differentiated already, but it’s not as tech-enabled as we want it to be to be a core piece of the Flexport brand so we’re going to get it there in the next nine months.”

–With assistance from David Goodman.

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