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

“Every virtue is a mean between two extremes, each of which is a vice.” — Aristotle

Overnight

WikiLeaks founder Julian Assange leaves U.K. after plea deal (FT)

Kremlin bans 81 European news outlets as Russia seeks to put U.S. journalist on show trial (Semafor)

UNICEF chief warns four million children face malnutrition in Sudan (Semafor)

E.U. begins accession talks for Ukraine, a ‘dream made reality’ for Zelenskyy (Semafor)

Visa, Mastercard $30 billion swipe-fee settlement rejected by U.S. judge (RT)

Novo Nordisk’s Wegovy approved in China as weight-loss drug race heats up (Semafor)

Minimum tax on billionaires would raise up to $250bn a year, says report commissioned by the G20 (FT)

Hedge fund Coatue Management’s founder Philippe Laffont says geopolitics is a threat to Nvidia, chip industry (RT)

Canadian inflation rises unexpectedly three weeks after pioneering rate cut (FT)

Rivian shares soar 30% after Volkswagen takes $1 billion stake, with plans to spend up to $5 billion as part of a software-development partnership (CNBC)

Volkswagen slips on worries about cost and implications of Rivian deal (RT)

Airbus shares fall more than 10% as plane maker cuts profit forecast (FT)

Americans chasing high interest rates risk falling into a ‘cash trap’ (WSJ)

IRS apologizes to billionaire for leak of tax records (WSJ)

JPMorgan brings in over $15bn from wealthy clients looking to cut tax bills (FT)

Glen Point’s Neil Phillips avoids prison for FX manipulation (BBG)

KKR makes its biggest foray into apartments, betting on rising rents (WSJ)

The giant Exxon project that could create the world’s last petrostate (FT)

Blackstone draws €1bn into European private credit fund (FT)

Meet the highest paid CFOs of 2023 (WSJ)

Presidential election comes as Iranians face cost-of-living crisis (FT)

European banking’s biggest takeover battle enters uncharted territory (FT)

U.S. defense industry faces uncertainty despite production ‘boomlet’ (FT)

Central banks urged to keep pace with ‘game changer’ AI (FT)

Denmark to charge farmers €100 a cow in first carbon tax on agriculture (FT)

Tech investor Sean Parker leads rescue of struggling startup Stability AI (WSJ)

Brookfield to take over France’s Neoen in $6.5 billion deal (WSJ)

Kenyan forces land in Haiti on mission to bring order (WSJ)

Kenyans storm parliament over tax increases; police fire live rounds (FT)

China rover returns samples from far side of the Moon (LS)

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

May PCE on Friday 6/28 will matter, since this is the Fed’s preferred measure of inflation.
– The Street is looking for +0.13% Core PCE MoM
– this would be lowest reading since August 2021, or nearly 3 years

While Core PCE is at levels not seen in 3 years, there are many economists and pundits who think inflation is accelerating and the Fed should hike rates. Thus, this report could result in major re-calibration for the hawks.

TECHNICAL

The equity trend should be close to finding a bottom and turning back higher to new highs into July after just a minor three-day pullback in Technology. Broader market performance has proven impressive in the last week, and should be a driving reason why stock indices continue to push higher in the month of July. DXY and TNX look close to breaking down, and likely trend lower into September. Overall, despite Tuesday’s resumption in Technology strength while the broader stock market showed more weakness, we expect to see Sectors like Healthcare, Financials, Consumer Discretionary, and Industrials build on recent strength to rally in July. Trends remain bullish and supportive of a push higher to near 5700 in SPX, and it’s thought that mid-July could prove to be more important than mid-June. 

Click HERE for more.

CRYPTO

In our latest video, we discuss yesterday’s market recovery, analyze the sell-off from the day before that, and explore what the market is overlooking in the lead-up to the ETH ETF launch.

Click HERE for the video.

First News

Gain without Pain? Some call it the corporate carbon cycle, some – the barbell-shaped business world. What is it?

Well, companies grow, turn into behemoths, then – almost despite themselves – shed talent, ideas, and capital that organically seed smaller upstarts. It’s an age-old cycle that works well. These days, it’s spinning faster and faster, and that middle ground – undifferentiated, undercapitalized, and without the benefits of either speed or scale – is increasingly underwhelming.

In the investing world, financial superstores have overcome the gravity of specialists and are powering into the rarefied air. A year after the regional lending crisis, the same is happening to banks (more on that below).

The private-equity industry is splitting, with publicly traded firms on the order of Blackstone ($1 trillion in assets) and KKR ($580 billion) turning into financial supermarkets, leaving firms like Advent (with a mere ~$90 billion) facing a choice to try to beat them, by focusing on returns in their core businesses of corporate LBOs, or join them. Advent is taking the first option, for now, i.e. it says it has no plans to go public.

It’s happening in real estate, with Wall Street firms squeezing out smaller landlords (who can’t offer 24/7 maintenance) – although not so much home buyers, as home ownership rates have stayed steady at their historical mid-60% range. It’s also happening in banking, with midsized firms face fleeing deposits, growing compliance costs, and shrinking loan books, pointing to a possible future – another instance of a barbell – where there are a few dozen big banks on one side and small community lenders on the other.

One of the most trendy things in the world of finance is sports finance, and one of the most cutting-edge things in the world of sports finance is selling corporate sponsors on women’s soccer (so far, more of a DEI proposition than an ROI one; still, as the mores-driven pendulum swings back from its recent extreme, performative virtue may just be becoming a precursor to performance numbers). Another factor driving the change is the blockbuster media-rights deal the league signed last year: $240 million across streaming (Amazon) and linear TV (CBS, ESPN, and ION).

Not surprisingly, NWSL was the first major sports league to allow institutional investors to control teams. The idea is that sophisticated investors and capital, not to mention support from media partners and sponsors, ensure that the women’s league can compete with the Big Four in the men’s and not get stuck competing for viewers in a niche. The league’s choice to go with Amazon is to go as big as possible as soon as possible. Since virtually everybody in the country has a Prime Video membership, the league gets a streaming audience without burying it behind a paywall.

At the same time, since a sports team is not something you hold for, say, five years and expect to make money, it requires a different kind of investor – a large one. We have written about this before (Ball of Fire or Fireball?) The caveat here is that, if, as in the case of 777 (click the link above), an asset manager uses insurance funding to fund deals with long-term money at 4%, it’s a proposition that could end poorly for policyholders. Semafor