Hong Kong Dollar's Volatility Fuels Talk on How FX Peg May Shift
A fresh debate about the sustainability of Hong Kong's decades-long currency peg has analysts ruminating on what might eventually replace it.
It's an issue that's gaining traction after intervention by authorities to defend the peg set off a bout of volatility in the local dollar in recent weeks. The currency continues to hover near the weak end of its trading band following a slide in the city's interest rates to a three-year low.
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Yahoo
33 minutes ago
- Yahoo
Trump Pledge of Quick China Magnet Flows Has Yet to Materialize
(Bloomberg) -- Almost 10 days since President Donald Trump declared a 'done' trade deal with Beijing, US companies remain largely in the dark on when they'll receive crucial magnets from China — and whether Washington, in turn, will allow a host of other exports to resume. Security Concerns Hit Some of the World's 'Most Livable Cities' One Architect's Quest to Save Mumbai's Heritage From Disappearing JFK AirTrain Cuts Fares 50% This Summer to Lure Riders Off Roads NYC Congestion Toll Cuts Manhattan Gridlock by 25%, RPA Reports Taser-Maker Axon Triggers a NIMBY Backlash in its Hometown While there has been a trickle of required permits, many American firms that need Chinese minerals are still waiting on Beijing's approval for shipments, according to people familiar with the process. China's system is improving but remains cumbersome, they said, contrary to Trump's assurances rare earths would flow 'up front' after a June 11 accord struck in London. The delays are holding an array of American industries hostage to the rocky US-China relationship, as some firms wait for magnets and others face restrictions selling to China. That friction risks derailing a fragile tariff truce clinched by Washington and Beijing in Geneva last month, and triggering fresh rounds of retaliation. Interviews with multiple Western buyers, industry insiders and officials familiar with discussions revealed frustration over vague policies in both countries and lingering confusion about what level of magnet approvals from China would trigger Trump to abandon his tit-for-tat export curbs. 'Even if export approvals accelerate, there are so many unknowns about the licensing regime that it's impossible for companies to have a strong sense of certainty about future supply,' said Christopher Beddor, deputy China research director at Gavekal Research. 'At a minimum, they need to factor in a real possibility that talks could break down again, and exports will be halted.' In response to China's sluggishness on magnets, Trump last month restricted US firms from exporting chip software, jet engines and a key ingredient to make plastic to China until President Xi Jinping restores rare-earth exports. Companies subject to Washington's curbs have halted billions of dollars in planned shipments as they wait for players in unrelated sectors to secure permits from Beijing, which could take weeks or even months to process, given the current pace. Corporate chiefs affected by the export-control spat have sought clarity from the administration on its strategy, according to people familiar with the matter. The Commerce Department — which administers the rules — has offered few details, they added. Oil industry executives have tried to convince Trump officials that blocking exports of ethane — a gas used to make plastics — is contrary to US national security interests, according to people familiar with the deliberations. Business leaders have asked for export restrictions to be removed but that's been unsuccessful so far, the people said. Energy and chemical giant INEOS Group Holdings SA has one tanker full of ethane waiting to go, while Enterprise Products Partners has three to four cargo ships stuck in limbo, according to a person familiar with the matter. That's particularly galling because China has adequate ethane supplies in reserve and can switch to using naphtha from the Middle East and other regions for much of their production, the people said. Representatives from the companies did not respond to requests for comment. Industry figures have consistently told the Trump administration the ethane export restrictions are inflicting more pain on US interests than on China, according to the people. China's Ministry of Commerce, which administers export licenses, hasn't responded to Bloomberg's questions on how many for rare earths have been granted since the London talks. At a regular briefing in Beijing on Thursday, spokesperson He Yadong said Beijing was 'accelerating' its process and had given the go-ahead to a 'certain number of compliant applications.' Access to rare earths is an issue 'that is going to continue to metastasize until there is resolution,' said Adam Johnson, chief executive officer of Principal Mineral, which invests in US mineral supply chains for industrial defense. 'This is just a spigot that can be turned on and off by China.' China only agreed to grant licenses — if at all — for six months, before companies need to reapply for approvals. Firms doing business in the US and China could see recurring interruptions, unless the Commerce Ministry significantly increases its pace of process applications. Adding an extra layer of jeopardy for US companies, Chinese suppliers to America's military-industrial base are unlikely to get any magnet permits. After Trump imposed sky-high tariffs in April, Beijing put samarium — a metal essential for weapons such as guided missiles, smart bombs and fighter jets — on a dual-use list that specifically prohibits its shipment for military use. Denying such permits could cause ties to further spiral if Trump believes those actions violate the agreement, the terms of which were never publicized in writing by either side. That sticking point went unresolved during roughly 20 hours of negotiations last week in the UK capital, people familiar with the details said. Complicating the issue, companies often buy magnets from third-party suppliers, which serve both defense and auto firms, according to a person familiar with the matter. That creates a high burden to prove to Chinese authorities a shipment's final destination is a motor not a missile, the person added. Beijing still hasn't officially spelled out the deal's requirements, nor has Xi publicly signaled his endorsement of it — a step Trump said was necessary. 'The Geneva and London talks made solid progress towards negotiating an eventual comprehensive trade deal with China,' White House spokesman Kush Desai said. 'The administration continues to monitor China's compliance with the agreement reached at Geneva.' China's Commerce Ministry is working to facilitate more approvals even as it asks for reams of information on how the materials will be used, according to people familiar with the process. In some cases, companies have been asked to supply data including detailed product designs, one of the people said. Morris Hammer, who leads the US rare-earth magnet business for South Korean steelmaker Posco Holdings Inc., said Chinese officials have expedited shipments for some major US and European automakers since Trump announced the agreement. China's Advanced Technology & Materials said Wednesday it had obtained permits for some magnet orders, without specifying for which destinations. The company's customers include European aerospace giant Airbus SE, according to data compiled by Bloomberg. Around half of US suppliers to Toyota Motor Corp., for example, have had export licenses granted, the company said – but they're still waiting for those materials to actually be delivered. It's likely some of the delays are transport-related, one of the people said. Even with permits coming online, rare-earth materials are still scarce because overseas shipments were halted for two months starting in April, depleting inventories. Trump's agreement 'will allow for rare earths to flow out of the country for a short period of time, but it's not helping the auto industry because they're still talking shutdowns,' Hammer said. 'Nobody trusts that this thaw is going to last.' For many automakers, the situation remains unpredictable – forcing some to hunt for alternatives to Chinese supplies. Two days after Trump touted a finalized trade accord in London, Ford Motor Co. Chief Executive Officer Jim Farley described a 'day-to-day' dynamic around rare-earths licenses – which have already forced the company to temporarily shutter one plant. General Motors Co. has emphasized it's on firmer footing in the longer term, because it invested in domestic magnet making back in 2021. The automaker has an exclusive deal to get the products from MP Materials Corp. in Texas, with production starting later in the year. It has another deal with eVAC of Germany to get magnets from a South Carolina plant starting in 2026. In the meantime, GM and its suppliers have applied for permits to get magnets from China, a person familiar with the matter said. Scott Keogh, the CEO of Scout Motors — the upstart EV brand of Volkswagen AG — told Bloomberg Television his company is re—engineering brakes and drive units to reduce the need for rare earths. Scout is building a plant in South Carolina to make fully electric and hybrid SUVs as well as trucks starting in 2027. Until the rare-earth supply line is re-opened to Washington's satisfaction, Trump has indicated that the US is likely to keep in place its own export restrictions. Senior US officials have suggested the curbs are about building and using leverage, rather than their official justification: national security. Commerce Secretary Howard Lutnick said the measures were used to 'annoy' China into complying with a deal US negotiators thought they'd already reached. Restrictions on sales to China of electronic design automation software for chipmaking are emblematic of the standoff. Those EDA tools are used to design everything, from the highest-end processors for the likes of Nvidia Corp. and Apple Inc. to simple parts, such as power-regulation components. Fully limiting China's access to the best software, made by a trio of Western firms, has been a longtime priority in some Washington national security circles — and would build on years of US measures targeting China's semiconductor prowess. While some senior Trump officials specifically indicated the administration would relax some semiconductor-related curbs if Beijing relents on rare earths, EDA companies still lack details on when, and whether, their China access will be restored, said industry officials who requested anonymity to speak candidly. Even if that happens, there's worry that heightened geopolitical risks will push Chinese customers to hunt for other suppliers or further develop domestic capabilities. 'The risk is there for the London deal to fall apart,' said Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis. 'Because rare earths is a very granular issue and mistakes can be made.' --With assistance from Jennifer A. Dlouhy, David Welch, Lucille Liu, James Mayger, Jing Li, Joe Ryan and Nicholas Lua. 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Yahoo
34 minutes ago
- Yahoo
The 5 Most Interesting Analyst Questions From Merck's Q1 Earnings Call
Merck's first quarter results drew a positive market reaction, reflecting operational resilience despite a 1.6% year-over-year revenue decline. Management identified continued strength in the oncology portfolio, especially KEYTRUDA and Welireg, alongside growth from new product launches like WinRevair and Cafaxib, as pivotal to performance. CEO Rob Davis cited 'increasing contributions from our newer commercialized medicines and vaccines and continued advancement of our pipeline.' Merck also managed through significant declines in Gardasil sales in China, emphasizing that underlying global demand outside China remained robust. Is now the time to buy MRK? Find out in our full research report (it's free). Revenue: $15.53 billion vs analyst estimates of $15.29 billion (1.6% year-on-year decline, 1.6% beat) Adjusted EPS: $2.22 vs analyst estimates of $2.14 (3.8% beat) Adjusted EBITDA: $7.72 billion vs analyst estimates of $6.88 billion (49.7% margin, 12.2% beat) The company reconfirmed its revenue guidance for the full year of $64.85 billion at the midpoint Operating Margin: 37.8%, up from 35.7% in the same quarter last year Constant Currency Revenue rose 1% year on year (12% in the same quarter last year) Market Capitalization: $199.1 billion While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Geoff Meacham (Citi): Asked how Merck plans to offset tariff headwinds. CEO Rob Davis explained supply chain restructuring and inventory management, emphasizing moves to 'U.S. for U.S.' manufacturing over price increases. Tim Anderson (Bank of America): Inquired about providing long-term guidance beyond KEYTRUDA's patent expiry. Davis reiterated confidence in the pipeline's potential but signaled no immediate plans for detailed long-term projections. Luisa Hector (Berenberg): Questioned the impact of FDA and HHS changes on vaccine approvals. Dr. Dean Li stated that near-term regulatory timelines remain on track, with no delays observed despite agency personnel transitions. Steve Scala (TD Cowen): Sought clarification on Gardasil's global growth outlook and long-term targets. CFO Caroline Litchfield noted the end of Japan's catch-up program and ongoing China headwinds, confirming the previous $11 billion Gardasil target has been withdrawn. Akash Tewari (Jefferies): Asked about the severity and impact of potential new tariffs. Davis declined to speculate on tariff rates but stressed Merck's preparedness through operational and manufacturing adjustments. In the coming quarters, the StockStory team will watch for (1) key data releases from late-phase clinical trials, especially in oncology and cardiovascular programs, (2) the impact of supply chain moves and tariff mitigation on cost structure, and (3) trends in Gardasil and other vaccine uptake outside China. Developments around regulatory filings and ACIP recommendations for vaccines will also be important markers to assess execution and pipeline momentum. Merck currently trades at $79.48, in line with $78.70 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it's free). The market surged in 2024 and reached record highs after Donald Trump's presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025. While the crowd speculates what might happen next, we're homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver's seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today. Sign in to access your portfolio
Forbes
an hour ago
- Forbes
Fed Holds Interest Rates Steady, But Signals Cuts May Happen This Year
Federal Reserve Board Chair Jerome Powell holds a news conference following the Federal Open Market ... More Committee meeting on June 18, 2025, in Washington, DC. (Photo by) Although recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated. However, the Federal Reserve's Federal Open Market Committee (FOMC) announced that interest rates will remain unchanged. Fed officials are taking a wait-and-see approach regarding President Trump's trade policies – including tariffs – that have constantly evolved since 'Liberation Day' on April 2, 2025. It is the fourth straight FOMC meeting without an interest rate cut. While small business owners hoping for lower rates were disappointed, the central bank has not ruled out rate cuts in 2025. It depends on inflation. Federal Reserve Chair Jerome Powell explained during his press conference in Washington on Wednesday, June 18, that it takes time for tariffs to work through the goods chain of distribution and that many goods being sold today by U.S. retailers were imported into the country months before President Trump imposed tariffs. They impact on inflation hasn't really been felt yet. "So we're beginning to see some effects, and we do expect to see more of them over coming months," he said. "We do also see price increases in some of the relevant categories, like personal computers and audio visual equipment and things like that attributable to tariff increases." Related: What Trump's Tariffs Will Mean For Small Businesses There also are concerns about unrest related to immigration policies, as well as foreign events, such as the current Iran-Israel military conflict, which the Fed chair says he is watching. 'It is a time of real change,' he said. 'Our focus is how to keep inflation low and employment high.' At his Washington, D.C. press conference, Chair Powell reiterated – as he does at each meeting – that the FOMC seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. 'Uncertainty about the economic outlook has diminished but remains elevated,' Powell said. 'The Committee is attentive to the risks to both sides of its dual mandate.' In support of these goals, the FOMC has decided to maintain the target range for the central bank's benchmark federal funds rate at 4 ¼ % to 4 ½ %. In considering the extent and timing of future adjustments to the target range for the federal funds rate, the Fed will carefully assess incoming data, the evolving outlook, and the balance of risks. Related: 3 Reasons Small Businesses Should Borrow At Today's Interest Rates 'The Committee is strongly committed to supporting maximum employment and returning inflation to its 2% objective,' Powell said. In formulating monetary policy, the Fed will continue to monitor the implications of incoming information for the economic outlook and is prepared to adjust the stance of monetary policy as appropriate if risks emerge that hinder the attainment of its dual objectives. Its assessments will consider a wide range of information, including readings on labor market conditions, inflation pressures, and financial and international developments. Interest Rates and Small Business Small business loans are usually variable loans. A drop in rates would cut the cost of capital for businesses that have existing loans and would make borrowing more palatable in the future. While many business owners were disappointed by that the Fed did not lower interest rates, it is important to keep in mind that the near 0% rates we saw in the period March 25, 2020 until Feb. 28, 2022 are unlikely to be occur again any time soon. Over the last two decades, the Federal Funds rate has had dramatic peaks and valleys. After the 2008 financial crisis, the rate was cut to near zero until December 2015. gradually increasing. The central bank gradually increased the rate, and in June 2018, it reached 2%. After that, the highest pre-COVID rate was a six-month stretch of 2.5% from December 2018 until June 2019. With such a long period of very low rates, it is easy to forget that prior to the downturn of 2007, the Federal Funds rate usually was in the mid single digits. Related: Federal Funds Rate History 1990 to 2025 The signals are that the Federal Reserve may lower rates later this year. However, the timing and the extent of the cuts depend on factors such as the impact of tariffs on inflation. Chair Powell said the FOMC is adapting in real-time to the effects of tariffs and that 'uncertainty about the economic outlook is diminishing, but still elevated.' Other wildcards in the equation are the labor market, and international events, such as the current Israel-Iran military showdown. The good news is that overall, we are in a pretty good economy, as Chair Powell acknowledged at his press conference. Inflation is relatively low, especially compared to 2023 and 2024, but it has not yet reached to the Fed's target of 2%. Small business owners seem to be optimistic toward the future, as earnings are rising and inflation is low, although not yet at 2%. The NFIB Small Business Optimism Index increased by three points in May to 98.8, slightly above the 51-year average of 98. Some key measures: "While the economy will continue to stumble along until the major sources of uncertainty are resolved, owners reported more positive expectations on business conditions and sales growth," said NFIB Chief Economist Bill Dunkelberg. With SMB earnings on the rise for much of the first half of 2025, this is still a good time for business owners to invest in their companies, and indications are that many are doing so. Many forecasters predict that the first cut may come as early as September if inflation and job data continue to move in the right direction. Chair Powell explained the FOMC's stance on interest rates this way: 'We think our policy is well positioned right now to deliver (a strong labor market and price stability)…We will be able to respond in timely way as the data leads us. The economy has been resilient.' Two days later, Federal Reserve Governor Christopher Waller told CNBC on Friday that he doesn't expect tariffs to boost inflation significantly and that policymakers might look to lower interest rates as early as next month.
