November 18, 2024
China and commodities
China announced a 10 trillion yuan plan, roughly $1.4 trillion, to ease local government debt pressure. The reaction was weak, with the Hang Seng China Enterprises Index falling as much as 2.9%. Investors wanted more direct support for demand, confidence, and the property market, not only local-government debt relief.
Nigeria also signed a $1.2 billion deal with China's CNCEC to revive a 135 million standard cubic feet gas processing plant at the Aluminum Smelter Company of Nigeria. The project links gas processing to aluminum production, though Nigeria still faces inflation at a 28-year high, currency weakness, poverty, and protests tied to President Bola Tinubu's reforms.
Global food prices reached an 18-month high in October. The FAO food price index rose to 127.4, up 2% from September and 5.5% year over year, though still 20.5% below the March 2022 peak. Gold fell to $2,566 per ounce as the dollar strengthened to a one-year high. Brent rose 0.5% to $72.28, and WTI rose 0.5% to $68.43, while OPEC lowered global demand forecasts.
U.S. rates and deficits
U.S. inflation rose 2.6% year over year in October, up from 2.4% in September. Core inflation stayed at 3.3%, with core prices rising 0.3% month over month for the third straight month. Futures markets showed a 60% probability of another quarter-point Fed cut in December.
The fiscal picture added pressure. The U.S. budget deficit reached $257 billion in October, nearly four times the $67 billion deficit from the prior year. Receipts fell 19% to $327 billion, while outlays rose 24% to $584 billion. The recruiting takeaway is that rate-cut optimism gets less convincing when deficits, core inflation, and Treasury yields are all part of the same conversation.
Spirit and strategic updates
Spirit Airlines abandoned merger talks with Frontier after losing $2.5 billion since 2020 and facing more than $1 billion of debt maturities. The company announced a plan to restructure debt due in 2025 and 2026, delayed quarterly SEC filings, and reported that third-quarter operating margin fell 12 percentage points while revenue declined by $61 million.
Spirit is a straightforward distressed case. Weak margins, maturing debt, and a less differentiated low-cost model can shift a company from growth story to restructuring story very quickly.
Shell won an appeal against a Dutch court ruling that had required a 45% emissions cut by 2030. Nokia acquired Rapid's API hub to expand its Network as Code platform, which had partnerships with 27 companies. Klarna registered with the SEC for a possible U.S. IPO after falling from a $45.6 billion valuation in 2021 to $6.7 billion in 2022. The U.S. represented 29% of Klarna revenue, and the company had been using AI to cut costs ahead of listing.