Risk Channel delivers the latest, most relevant and useful business intelligence to key decision makers and influencers, each weekday morning.

China has slammed a new U.S. law aimed at boosting American semiconductor manufacturing. U.S. President Joe Biden signed the bipartisan Chips and Science Act into law to enhance his country’s competitiveness against China. The new law is indicative  of Washington’s “growing lack of self-confidence” in the face of China’s rise, said a Global Times editorial. The law seeks to lure semiconductor talent and investments into the U.S., while attempting to stop global chip companies including Taiwan Semiconductor Manufacturing Co and Samsung Electronics from expanding their capacity in China if they use U.S. funding. Under the legislation, the U.S. would set aside nearly $53bn to fund domestic semiconductor production. Recipients of subsidies are prohibited from expanding production in China beyond “legacy semiconductors” – defined as chips made with 28-nanometre process technology or older – for 10 years. Separately, the EU says a new U.S. tax credit plan aimed at encouraging Americans to buy electric vehicles could discriminate against European producers and contravene World Trade Organisation (WTO) rules. Under the $430bn climate and energy bill passed by the U.S. Senate, Congress would lift the cap on the existing $7,500 tax credit for electric vehicle purchasers but impose restrictions, including barring vehicles not assembled in North America from receiving the credit. "We think it's discriminatory, that it is discriminating against foreign producers in relation to U.S. producers," said European Commission spokesperson Miriam Garcia Ferrer. "Of course this would mean that it would be incompatible with the WTO."

 

South China Morning Post

U.S. News & World Report

Former Treasury Secretary Lawrence Summers has lamented the stripping of a global corporate minimum tax from the Democrats’ recent tax-and-climate change bill. “It’s very sad how much special-interest lobbyists were able to stop things that are clearly in the public interest,” Summers said, adding, with regard to corporations fighting against tax provisions in the legislation, “I am pretty offended by what’s happened here.” He also decried the removal of a proposal to scale back the so-called carried-interest tax break, which allows investment managers to use a lower rate than for regular income. He described this as “outrageous.”  Summers also said that the lack of  any steps in the Inflation Reduction Act to put the U.S. in compliance with last year’s international agreement on a 15% minimum corporate tax, negotiated by Treasury Secretary Janet Yellen, is “Even more unfortunate.” He said the proposed deal involving nearly 140 nations is “probably going to collapse now, or may well collapse, because Congress wouldn’t pass the enabling legislation by going after tax havens.”

 

Bloomberg

U.S. suppliers raised prices in July at the slowest annual pace since last fall as energy costs dropped, adding to signs price pressures in the economy have eased slightly. The Labor Department's producer-price index increased by 9.8% annually in July, the smallest annual rise since October 2021’s 8.9% increase. Producer prices decreased a seasonally adjusted 0.5% in July from the prior month, down sharply from June and the first decline since April 2020. “A potential peak in annual inflation measures is a welcome sign,” said Mahir Rasheed, U.S. economist at Oxford Economics. “Historically elevated price dynamics churning in the economy will likely persist through the end of the year. However, with the Fed remaining laser-focused on tightening policy to restrict inflation pressures, producer price inflation will downshift significantly in 2023.”

 

CNBC

Washington Examiner

Wall Street Journal

U.S. wholesale inventories increased less than initially thought in June as businesses slowed the replenishment of their stocks as they continue to draw down on excess inventories amid softening consumer spending. The Commerce Department said on Wednesday that wholesale inventories rose 1.8%, instead of 1.9% as reported last month. Stocks at wholesalers advanced 1.9% in May. Economists polled by Reuters had expected June inventories would be unrevised. Wholesale inventories increased 25.5% in June on a year-on-year basis. Wholesale motor vehicle inventories rose 2.6% after rising 2.5% in May. Wholesale inventories, excluding autos, increased 1.7% in June. Sales at wholesalers rose 1.8% after increasing 0.7% in May. At June's sales pace it would take wholesalers 1.26 months to clear shelves, unchanged from May.

 

US News and World Report

Bloomberg

Credit card debt surged in the United States from April through June as Americans borrowed billions of dollars to continue spending in the face of growing inflation. A Federal Reserve Bank of New York report said that credit card balances increased $46bn in the second quarter, a 5.5% rise, while there was also an uptick in new credit card accounts. The 13% increase from the second quarter of 2021 to the second quarter of 2022 was the biggest such jump in more than 20 years. Total outstanding credit card debt rose to $890bn in the second quarter, a $100bn increase from the same time last year. Household debt increased in the second quarter by $312bn, or 2%, compared with the first quarter. Total balances are now $2tn higher than before the pandemic.

 

Washington Post

McDonald's is to reopen some of its locations in Ukraine, roughly six months after Russia’s invasion of the country caused the fast-food chain to pause its operations there. “We have decided to institute a phased plan to reopen some restaurants in Kyiv and western Ukraine, where other businesses have safely reopened,” Paul Pomroy, McDonald’s corporate senior vice president for international operated markets, said in an email message to employees. Mr. Pomroy said the company will be working on getting the locations ready for reopening over the next few months. He didn’t say how many of the more than 100 stores it owns and operates in Ukraine would reopen or provide a specific timeline. McDonald’s has 109 restaurants in Ukraine but didn’t say how many would reopen, when exactly it would start happening or which locations would be the first to welcome back customers. The company said it would start working with vendors over the next few months to get supplies to restaurants, prepare those stores, bring back employees and launch safety procedures with the war still raging to the east.

 

Bloomberg

Los Angeles Times

Wall Street Journal

BlackRock is launching a private trust that gives U.S.-based institutional clients exposure to spot Bitcoin. The move comes days after the investment firm announced a partnership with crypto exchange Coinbase, which will now be able to connect clients using BlackRock's Aladdin investment technology platform with Coinbase Prime. “Despite the steep downturn in the digital asset market, we are still seeing substantial interest from some institutional clients in how to efficiently and cost-effectively access these assets using our technology and product capabilities,” BlackRock said in a statement.

 

Insider

Investing

Financial Times

San Francisco-based meditation and wellness app Calm has laid off 20% of its staff, according to a memo delivered by CEO David Ko to employees. Calm employed roughly 400 people, and approximately 90 were laid off, according to people familiar with the matter. “Regrettably, today we are reducing our overall workforce by 20%,” Ko's memo said. “While some of you will be impacted, all of you will be affected. I can assure you that this was not an easy decision, but it is especially difficult for a company like ours whose mission is focused on workplace mental health and wellness.” One staffer who was laid off said company leadership cited macroeconomic trends in explaining the cuts.

 

Wall Street Journal

Elon Musk has cryptically teased X.com as a potential new social media platform to rival Twitter. When asked on Twitter whether he plans to create his own social media platform assuming his deal to purchase the micro-blogging app doesn’t go through, Musk simply replied with a website domain: X.com. Yahoo Finance reports that Musk purchased X.com in 2017 from PayPal, of which he is a former CEO. Musk actually co-founded X.com in 1999 as an online lender, before the website was merged with a competitor in 2000. Musk then bought X.com back 17 years later, explaining on Twitter that the domain had “great sentimental value.”

 

Gizmodo

Coca-Cola HBC AG has taken a one-time hit of €190m due to costs related to its Russian business, after it stopped the sale of Coca-Cola drinks in the country following the Ukraine war. The soft drinks bottler, which once counted Russia as one of its biggest markets, also said it expects to sustain financial charges of about €82m in the second half, as it depletes it stocks. For the six months to July 1st, it reported a 34% fall in net profit to €153m. Net sales increased to €4.21bn, from €3.25bn. Regarding its outlook for the year, Coca-Cola HBC said its performance across markets outside of Russia and Ukraine continue to show strong momentum and it expects to see double digit organic revenue growth for the year, excluding both countries.

 

Market Watch

Reuters

Bloomberg reports that U.S. workers are required to repay thousands, or even tens of thousands, in training costs if they leave too soon. Agreements whereby employees who quit had to repay training costs were once unheard of because employers believed it was their responsibility to pay for training. Jonathan Harris, an associate law professor at Loyola Marymount University in Los Angeles who has studied clawback deals, says they emerged in the 1990s in the finance sector, where employees might have to repay as much as $75,000 for a premature departure. They are now to be found in professions such as nursing and trucking. “In the last 5 to 10 years, they’ve really taken off,” Harris says. In 2020 the Cornell National Social Survey found that almost one in 10 American workers had signed one. Attorneys who advise companies say the agreements are almost indispensable in the current red hot labor market. “I’m seeing employers enter into these agreements, saying, ‘I’m not about to put out of pocket the amount of money that it takes to get this person sufficiently trained in order for them to just go take that over to a competitor,’” observes Angie Davis, chair of the labor and employment group at the law firm Baker Donelson in Memphis. “This is just a way for companies to protect themselves.”

 

Bloomberg

TikTok created what staff described as a “kill list” of colleagues that the company wanted to force out of its London office, indicative of an apparent culture clash with Chinese parent ByteDance.

 

Financial Times

Newell Brands, the company behind Sharpie markers and other consumer products, is spending more on capital investments this year to support its supply chain, in the expectation that it will lower shipping costs and deliver other savings. The Atlanta-based firm intends to spend around 20% more this year, or $350m, on capital investments, with around $100m going toward a project to consolidate its distribution centers and place them in more optimal locations across the country. Once Newell’s capital investments are complete, the company will operate seven distribution centers, including two new facilities in Pennsylvania and North Carolina along with five existing facilities, including two in California and one each in Missouri, Tennessee and Ohio. The company as a result of the investments will increase its reliance on East Coast ports, and will also reduce its shipping distances to customers in the eastern U.S. During the second quarter, Newell’s net sales declined 6%, to about $2.5bn. Core sales rose 1.7%, while profit increased 4%, to $204m.

 

Wall Street Journal

More than a third (35%) of U.S. teens are on social media almost constantly, according to a Pew Research poll. YouTube is the most popular platform among them, with 95% of the demographic saying they use the site or its mobile app. Video-sharing platform TikTok, which was launched in the U.S. in 2018, is used by about 67% of those aged between 13 and 17 years old. Almost half of U.S. teens say they are online “almost constantly,” compared with 24% who reported similar behavior to Pew in 2015. “It’s an evolving landscape on multiple levels — not just the platforms themselves with different names and things, but also even individual platforms [which] were one thing a while ago, and now are different,” said Lee Rainie, the director of internet and technology research at Pew and a co-lead author of the report, which was based on a survey of 1,316 teens.

 

Wall Street Journal