A daily market update from FS Insight — what you need to know ahead of opening bell

“If something’s important enough, you should try. Even if the probable outcome is failure.” — Elon Musk

Overnight

ECB ready to start cutting interest rates, says chief economist (FT)

Chinese giant Alibaba’s e-commerce platform AliExpress hires David Beckham as its first global brand ambassador (Semafor)

Guyana’s president welcomes Chevron’s bid to buy into $150bn oil project (FT)

Hamas launched a barrage of rockets from Gaza aimed at Tel Aviv, the first attack on the central Israeli city since January (Semafor)

Hedge funds hit by lack of PE exits (FT)

Swedish insider trading probe involves PE employees (BBG)

Janet Yellen expressed concerns over rising living costs (FT)

More U.S. high-grade borrowers at risk of downgrade as economy slows (FT)

Google’s AI search is producing embarrassingly wrong results (TV)

U.K. life insurers triple use of controversial reinsurance deals (FT)

Trafigura faces off with aluminum bulls over huge metal stash (BBG)

Most UK-focused pension funds severely lag index tracker (FT)

US municipalities pile into Israel’s wartime debt (FT)

UBS successor to CEO Ermotti to come from within bank (FT)

Equity funds see massive weekly inflows on rate-cut hopes (RT)

‘Asset famine’ in China curbs central bank’s bond trading ambitions (RT)

China’s property stimulus raises risks for banks in smaller cities (RT)

Citigroup asked 600 staffers to RTO full-time (RT)

Boeing sees six-fold rise in employee concerns on safety and quality (RT)

China sets up third fund with $47.5 billion to boost semiconductor sector (YF)

ABN AMRO to buy private German bank for EUR672 million (WSJ)

Eli Lilly to spend $5.3 billion to make more Mounjaro, Zepbound (WSJ)

Elon Musk’s AI startup now valued at $24 billion after fresh funding (NBC)

Nongshim, Korea’s largest maker of instant noodles, to boost global expansion (WoS)

What faster trading cycles will mean for U.S. markets (MS)

The hidden driver of soaring home insurance costs (WSJ)

What our brains know about stocks—but won’t tell us (WSJ)

The Shiba Inu who became the face of Dogecoin cryptocurrency preferred napping (WSJ)

Citi isn’t the only one with a fat-finger problem (WSJ)

Colombia explores a sunk 18^th-century Spanish galleon dubbed the ‘holy grail of shipwrecks’, laden with up to £16bn ($20bn) in treasure to which it has a good claim (DM)

Venezuela, an oil-deposit-rich country, runs out of gasoline, forcing swaths of the country’s economy to shutter (Semafor)

Beachgoers encouraged to report sightings of great white sharks in New England  – yes, New England – via the Sharktivity app (Semafor)

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

Nine companies are reporting this week.

Of the 481 companies that have reported so far (96% of the S&P 500):

• Overall, 81% are beating estimates, and those that “beat” are beating by a median of 8%.
• Of the 18% missing, those are missing by a median of -5%.
• On the top line, overall results are beating estimates by a median of 4% and missing by a median of -4%, and 61% of those reporting are beating estimates.

Click HERE to view the report in PDF format. 

TECHNICAL

HERE is our technical strategy video dated 5/24/24.

To view the corresponding Upticks report, click HERE.

CRYPTO

To cap off what might have been the most bullish regulatory week in the history of the crypto industry, we received approval of the 19b-4 rule change application for exchanges to list spot ETH -1.30% ETFs. Unfortunately, the vote was done under delegated authority to the trading and markets division of the SEC, so we won’t be seeing any details behind a commissioner vote. The SEC still needs to review the issuer S-1 filings and approve those, which, based on popular estimates, could take a few weeks to finalize. This not only opens the door for a new cohort of investors into ETH -1.30% , but is constructive for any assets currently affiliated with SEC regulatory actions such as UNI -1.13% and COIN -1.14% . ETH -1.30% is currently consolidating after an extremely volatile 24 hours, mostly due to the massive leverage built up around the SEC decision.

Despite consolidation late last week, the flows story remains net bullish for crypto relative to April. CME futures volumes for both ETH -1.30% and BTC -1.40% are elevated compared to several weeks ago, with ETH -1.30% futures open interest doubling over the past few days. The aggregate trend in stablecoin market cap remains on an upward trajectory, albeit slightly less pronounced than a week ago. The rolling 7-day change in aggregate stablecoin market cap is still in the green, meaning investors are moving capital into the crypto ecosystem on a net basis. BTC -1.40% ETF flows have also posted nine consecutive days of net inflows across all spot products. Thursday showed another net inflow day of over $100 million, with substantial participation from IBIT investors.

FIRST NEWS

Black-Hole-Sized Loophole. The IRS is looking at potentially stricter regulations on donor-advised funds (DAFs) – popular vehicles for the ultra-rich to claim tax deductions by contributing cash or substantial stock holdings into charitable accounts. There are minimal requirements for the funds to promptly distribute the donated assets to qualified nonprofit organizations. One of the largest DAFs, the Silicon Valley Community Foundation, manages a staggering $10.1 billion in net assets, originating from some of the nation’s most prominent technology tycoons. These donors can immediately claim tax benefits upon contributing to the fund, even if the assets have yet to be disbursed to charitable causes. There is also the fact of limited oversight of how DAFs allocate their funds, raising concerns that wealthy donors may use these vehicles as conduits to direct their wealth toward pet projects under the guise of charitable endeavors. (AP)

How to Talk Yourself out of a Job. A recent study suggests that business school professors’ roles significantly overlap with AI capabilities, pointing to a potential risk of their positions becoming obsolete in the near future. One business school professor argues that this overlap does not necessarily equal replacement, but rather disruption and transformation within the field. The idea is that academia is on the cusp of substantial changes along four key avenues.

First, AI will likely accelerate the pace of writing and reviewing research papers, streamlining these processes. Second, AI has the potential to reshape the way academics conduct research itself, a shift that is beginning to be recognized. Then AI can bridge the gap between academia and the general public by making quicker sense of the often-dense academic papers, making their findings more accessible and comprehensible. Finally, and perhaps most significantly, given the profound and poorly understood impact of AI itself on various domains, AI may ultimately influence the very subjects and areas of research pursued in ways we still find hard to imagine. (Semafor)

Better for The Better Half. The highly likely victory of PM Narendra Modi in India’s general election is likely to be overshadowed by one of the most profound modern transformations in Indian society: the introduction of the Aadhar digital ID system. This 12-digit number, allocated to each citizen, finally allows for easier access to various government benefits while making various digital services possible. One significant way it’s reshaping the country is by helping women to access finance more easily.

The India Stack, a unified software platform partially built on Aadhar, is no less than revolutionizing the operational landscape for female entrepreneurs. By allowing women who’ve previously had problems obtaining credit from the formal banking system to access loans through digital communities, the platform allows them to market their products and services effectively. The country is aiming for prosperity for all Indians, including those who have been traditionally left behind, yet immense challenges persist: just 0.3% of venture capital funding went to women-led Indian startups in 2021. (Interweave)

Oh, Oh, Oh, It’s Magic. This is going too sound a bit grand: a quiet rise in desire-modification techniques poses profound ethical and philosophical questions about the nature of human identity and the pursuit of happiness. The prospect of modifying our fundamental desires and cravings is tantalizing. It also challenges long-held notions of what it means to be human and raises concerns about the unintended consequences of hacking one of the most fundamental mechanisms of the human – perhaps even mammalian – brain.

The development of GLP-1 drugs and the exploration of neuromodulation techniques via brain implants present a new frontier in our ability to alter the most fundamental aspects of human psychology and decision-making processes. Alleviating addictions and suppressing harmful cravings are just two of the potential therapeutic applications. Per Danish researchers hard at work on a new treatment that targets the brain’s natural plasticity, which could offset bad side effects and provide more long-term benefits, the current breakthrough weight-loss drugs are only the beginning.

According to a study by the Novo Nordisk Foundation Center for Basic Metabolic Research,

“Where current GLP-1 drugs mimic the natural hormonal response following eating, signaling ‘fullness’ and slowing the emptying of the stomach, the new treatment instead uses GLP-1 peptide to “smuggle” molecules across the blood-brain barrier and into the appetite control center…[T]his new approach could harness the brain’s plasticity to cement new pathways in its appetite center – pathways that would remain in place long after treatment had ceased.”

Naturally, the ability to manipulate our desires raises ethical concerns. After all, if our desires and motivations can be altered through external interventions, it begs the question of whether we truly retain control over our authentic selves, and whether avenues for nefarious uses, such as mind control or coercion, open up. New Atlas