Closing post
And finally…
The UK competition watchdog has opened an investigation into Paramount Skydance’s $110bn (£82bn) takeover of Warner Bros Discovery (WBD).
The deal will create a media powerhouse controlling assets including the Paramount and HBO Max streaming services, Channel 5 and TNT Sports, which broadcasts Champions League, Premier League and the Olympics, the Hollywood studios behind franchises including Superman, Batman and Top Gun, as well as HBO, home to shows including Game of Thrones, The White Lotus and Succession.
Here's the full story:
Existing-home sales in the US accelerated to their fastest pace of the year in May.
Sales rose by 3.2% to an annualized rate of 4.17 million last month, according to data from the National Association of Realtors, beating forecasts.
“More Americans are on the move, with home sales rising to the highest level since December,” said Lawrence Yun, NAR’s chief economist.
“This is great news for the housing market and the economy.”
Oil exports help to narrow US trade deficit
The US trade deficit has narrowed, thanks to the Iran war.
The trade deficit fell to $55.9bn in April, down from $56.6bn, thanks to a rise in exports which outpaced an increase in imports.
The increase in exports was largely due to the surge in petroleum exports since the Middle East conflict disrupted supplies from the region.
Exports of goods increased by $8.7bn to $221.3bn in April, the US Census Bureau and the US Bureau of Economic Analysis reported, including a $6.4bn jump in crude oil exports.
They say:
Capital goods increased $4bn, including:
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Computers increased $2.5bn.
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Civilian aircraft increased $1.0bn.
Industrial supplies and materials increased $2.5bn, including:
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Crude oil increased $6.4bn.
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Fuel oil increased $1.3bn.
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Other petroleum products increased $1.0bn.
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Nonmonetary gold decreased $5.8bn.
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Other precious metals decreased $1.9bn.
Consumer goods increased $1.7bn.
Grace Zwemmer, US economist at Oxford Economics, says:
The strength in exports relative to imports provides some upside risk to our forecast for net trade to pose a 0.6ppt drag on GDP in Q2
Zwemmer added that capital goods imports, including computers, computer accessories, and semiconductors, remain strong thanks to ongoing demand for AI hardware, saying:
The reliance on electronics equipment from abroad means that AI spending has had a marginal impact on GDP so far.
Updated
US semiconductor sector bouncing back
US chip company shares are rallying in early trading, following the recovery on South Korea’s market overnight.
The Philadelphia Semiconductor Sector (SOX), which tracks America’s semiconductor industry, is up 1.8% in early trading, adding to its 5.6% gains on Monday.
Intel’s shares are up 2.1%, while Nvidia are 0.5% higher.
This follows a sharp fall in chip share prices on Friday, which saw the Philadelphia Semiconductor Index plunged -10.26%.
That was one of its worst days on record, as Jim Reid of Deutsche Bank explains:
That marked its worst day since March 2020 and… the fourth-worst session since data for the index is available in 1994, spanning more than 8,000 trading days. Notably, the five worst days now include two from 2000, two from 2020, and now one from 2026.
US stock market opens higher
Wall Street has opened higher, as technology shares continue to recover from last week’s sell-off.
The S&P 500 shares index has risen by 40 points, or 0.55%, in early trading to 7,446 points, with the tech-focused Nasdaq up 0.75%.
Investors may be keen to ‘buy the dip’ after losses last week, which culminated in sharp losses after a strong US jobs report on Friday.
Oxford Economics told clients:
This is the correction we flagged: a healthy unwinding of stretched sentiment. It’s an attractive opportunity to add to long US equity positions, particularly in AI.
Paramount has pledged to work constructively with the CMA as the regulator probes its $110bn takeover of Warner Bros.
A Paramount spokesperson said in an emailed response to Reuters.
“Today’s milestone is consistent with our expected timeline. We look forward to continuing to work constructively with the Competition and Markets Authority and all regulatory agencies as they advance their review process.”
Neil Woodford’s firm hits out at FCA’s legal threat
Neil Woodford’s firm has hit out at the City regulator for taking legal action against the former star investor and his new online platform for allegedly doling out unauthorised investment advice.
Woodford’s UAE-registered company W4.0 has issued a statement this afternoon, saying they had purposefully set up the company to ensure it would not have to deal with the UK regulator.
W4.0 says:
We were clear about W4.0’s purpose from the start: to inform and educate subscribers and to provide the research, analysis, and commentary they need to make their own decisions.
We deliberately informed readers that we were not regulated and did not provide financial advice. Like other publishers and platforms offering this kind of information, it was built to sit outside the regulatory perimeter, and we remain confident that it does.
Consequently, we do not accept the FCA’s characterisation of the service.
The statement also claimed that the FCA publicly announced its legal action before serving the company with proceedings “before any proceedings have been served on us, and before the dialogue we have been engaged in for the past nine months was concluded”.
W4.0 said that it had been trying to understand which of the features on the site needd to be regulated, adding that it “ made changes and adjustments in response to accommodate the FCA”, adding:
We have continued to engage with it to seek a resolution. We would have continued the dialogue, and it is regrettable that the FCA has chosen to litigate instead.
Woodford’s company indicated it would not be halting operations - a move which could put it on a collision course with the FCA. The company said:
Informed by subscriber feedback, we will continue to build the features, education, information, analysis and insight that W4.0 was created to provide, and we will have more to share with subscribers in due course.
Updated
BP to restructure into two units
UK oil giant BP has announced a restructuring, which appears to relegate its renewable energy division.
BP, which surprised the City by parting company with its chairman last week, is reorganizing into two business segments — upstream and downstream — as it tries to simplify its operations.
Upstream will include BP’s oil and gas regions, including exploration, development and production activities. Basically, the part of the company that finds and extracts fossil fuels.
Downstream will be the part of the business which moves and sells BP’s products to customers – that includes refining, terminals, pipelines, mobility and convenience, biofuels, aviation, hydrogen and its lubricant business Castrol.
But what about solar and offshore wind? They, BP says, will sit in its Technology division, as the company “continues to advance a capital-light model in these areas”.
This shake-up replaces BP’s current three-segment scructure: production and operations (P&O), gas and low carbon energy (G&LCE), and customers and products (C&P).
Meg O’Neill, who became BP’s chief executive two months ago and outlined today’s restructure in mid-April, says:
“Over the past two months, I have spent time with our teams, partners and investors around the world, and I am encouraged by the strong support for our strategic direction. Focusing BP around two distinct segments is an important step in accelerating delivery. It will reduce complexity and strengthen execution.
“BP has an incredibly capable team, with deep expertise across the oil and gas value chain. We are capitalizing on opportunities across our portfolio, strengthening the balance sheet and unlocking sustainable growth. We are moving firmly towards a simpler, stronger and more valuable BP.”
Updated
Investors build up cash piles ahead of tech IPOs
There are signs that institutional investors are stockpiling cash ready for OpenAi, SpaceX and Anthropic to float on the stock market.
Wall Street bank BNY has spotted that money fund assets have grown significantly in recent weeks.
They told clients that money market fund assets under management jumped more than $109bn last week, to a record $7.89tn.
That could be partly because such funds are offering higher yields, but another factor could be that investors are gathering “dry powder” to deploy into upcoming IPOs.
BNY say:
Institutional investors may be building cash ahead of high-profile IPOs, including SpaceX’s offering expected later this week.
The Bank of England has warned the public against falling for AI-generated scams after deepfake videos of Nigel Farage fighting its governor spread online.
Andrew Bailey, the head of the BoE, said AI-generated content related to central banks was spreading and urged people to be “vigilant”.
He spoke out after the videos of the Reform UK leader and Bailey fighting on the set of BBC One’s Question Time appeared on the social media platform X.
US small business confidence has fallen
Confidence among small US companies has fallen again, as they face rising costs from the Iran war.
The NFIB Small Business Optimism Index, which tracks morale in the sector, fell by 0.6 points in May to 95.3.
The Uncertainty Index rose 3 points from April to 91, remaining well above its historical average of 68.
“AI investment spending has contributed to some excitement in the economy,” said NFIB chief economist Bill Dunkelberg.
“Despite the enthusiasm around AI, the overall picture is divided. More small business owners are struggling with significant and unpredictable hikes in fuel prices, which are more challenging for small businesses to pass on to their customers compared to their larger corporate competitors.”
UK competition authority launches inquiry into Paramount-Warner Bros deal
Britain’s competition authority has opened an inquiry into Paramount Skydance’s $110bn takeover of Warner Bros Discovery.
The Competition and Markets Authority has decided to begin a Phase 1 investigation into the deal, and will decide by 7 August whether to refer the merger for a more detailed “phase 2 investigation”.
The CMA had previously invited interested parties to submit comments on the impact that the deal could have on competition in the UK.
The deal would combine two Hollywood studios, and also bring news networks CNN and CBS together.
IF a hypothetical phase 2 inquiry were to find competition concerns, the CMA could demand changes to the deal; potential remedies include divestments.
In April, WBD shareholders voted to back the deal, which has already been agreed by both board’s companies after Paramount fought off a rival bid from Netflix.
Analysts have warned that the merger could result in thousands of job losses, and stifle creative innovation in Hollywood.
Two months ago, more than 1,000 film and TV industry professionals including Joaquin Phoenix, Ben Stiller, Mark Ruffalo, Yorgos Lanthimos and Kristen Stewart signed an open letter warning that the deal will “prioritise the interests of a small group of powerful stakeholders over the broader public good”.
The merger has also put the Ellison family – close allies of Donald Trump – under the spotlight. Paramount’s CEO, David Ellison, is the son of billionaire Larry Ellison who created tech giant Oracle.
Updated
Air passengers ‘risking lives by grabbing bags and filming in emergencies’
Air passengers are increasingly putting lives at risk by filming emergencies and retrieving bags instead of evacuating planes, industry experts have said, with some suggesting fines could be needed.
Passenger aircraft are designed to be fully evacuated in 90 seconds in an emergency – but people reaching for hand luggage can significantly increase that time, blocking exits and aisles as well as damaging slides or causing injury.
The global airlines body Iata has launched a safety campaign urging customers to “save a life, not a bag”after a number of evacuations filmed by passengers have appeared on social media, some showing people carrying luggage from burning planes.
Nick Careen, the Iata senior vice-president for operations and security, said the first priority was to educate passengers that it was “most important to leave hand baggage behind. We need to drive the message home.”
London’s stock market is lagging behind the rest of Europe, due to the lack of tech companies listed in the City.
Germany’s DAX index is up 0.5% while France’s CAC is 0.75% higher, and Italy’s FTSE Mib has gained almost 2%.
In Frankfurt, chipmaker Infinion (3.6%) are among the top risers, while STMicroelectronics (+1.5%) is among the stocks making gains in Paris.
Chinese exports climb as AI boom drives trade
Strong demand for AI-related products led to a surge in China’s exports last month, new data shows.
China’s exports rose by 19.4% year-on-year in May, up from 14.1% in April, with chip exports more than doubling on an annual basis.
China’s exports of hi-tech products (50.9%), semiconductors (110.9%), automatic data processing machines (66.0%), mobile phones (44.3%), autos (39.3%), and ships (31.0%) continued to grow strongly in May, reported Lynn Song, ING’s chief economist for Greater China.
Updated
The pound is strengthening against the US dollar today, as calm returns to the markets.
Sterling is up a third of a cent at $1.3376.
Enrique Díaz-Alvarez, chief economist at global financial services firm and FX firm Ebury, says:
A light week in terms of macroeconomic news out of the UK meant the focus for sterling traders was mostly elsewhere. We did see an MPC member (Greene) stating that she would consider voting for a hike at the next Bank of England meeting later this month.
A notable upward revision in the PMI business indices last week suggests that the initial confidence drop was overstated and that the UK economy is more resilient to the Middle East events than first feared. We look to this week’s April monthly GDP data, released Friday, to validate this modestly optimistic view.
Updated
OpenAI to float: What the experts say
Here’s some early reaction to OpenAI filing confidential paperwork for an initial public offering on the US stock market:
Chris Beauchamp, chief market analyst at investing and trading platform IG:
“Just when the supersized tech rally was looking a little tired, along comes the news of OpenAI’s decision to IPO.
Presumably the move has been spurred along by Anthropic’s recent move towards a public listing, but and now markets face the test of yet another superheavyweight firm listing to test demand for these highly-valued companies that promise to reshape not just the investing landscape, but the entirety of human society.”
Susannah Streeter, chief investment strategist at Wealth Club:
The race is on to extract money out of the roar of enthusiasm for companies providing the backbone to the artificial intelligence revolution. There’s now a hat trick of mega listings on the cards, with OpenAI’s filing for an IPO coming hot on the heels of Anthropic and SpaceX. The research company behind the hugely successful ChatGPT had first-mover advantage, buoyed by an early deal with Microsoft, but Anthropic has gained ground and is tackling adeptly from behind, winning reams of enterprise contracts.
The price of staying at the top of the game is eye-watering for OpenAI – it’s estimated to be spending more than $100 billion a year on the infrastructure and processing power to support its services and power the next generation of AI models. To stay high and dry in its AI fortress, the company reckons that by spending at this level, it will create a moat too difficult to cross for the competition, enabling it to keep raking in revenues and eventually turn big profits.
But this is a risk, especially with technological developments moving so fast, and future models not necessarily needing the capacity. The risk is that swathes of this infrastructure could become obsolete.
Kathleen Brooks, research director at XTB:
OpenAI is currently valued at $850bn, the ‘baby’ of the group, since Anthropic is now valued ahead of OpenAI at $965bn. The company laid out the ‘third phase of OpenAI’ on Monday and said that it is undertaking research into artificial general intelligence, and looking at becoming a ‘product company’.
The latter is interesting for investors, since it would be a major potential source of future revenue. Although it is early days, if OpenAI launches its own product range, it could become a major competitor to Apple and Google, and their share prices are worth watching closely on Tuesday.
Major Gulf stock markets have rebounded today, on relief that Iran and Israel said yesterday they had stopped their latest spate of attacks.
Saudi Arabia’s benchmark index, the Tadawul, has gained 0.8%, with lender Saudi National Bank up over 3% earlier today.
Dubai’s main share index is up 0.75%, and Kuwait’s main market is 1.5% higher.
Updated
London’s stock market is slipping in early trading, down almost 0.5% or 48 points at 10,323.
The pharmaceuticals group GSK is the top faller, down 2.7%, after striking a $10.6bn (£7.9bn) deal to buy the US cancer specialist Nuvalent.
Mining stocks are also lower, as are oil producers BP and Shell.
Updated
UK accounting watchdog to investigate PwC's audit of WH Smith
The UK’s accounting regulator has launched an investigation into PricewaterhouseCoopers, over its auditing of travel retailer WH Smith.
The investigation will look into PwC’s auditing of WH Smith’s financial statements for the financial year ended 31 August 2024.
The Financial Reporting Council says:
The investigation will be conducted by the FRC’s Enforcement Division under the Audit Enforcement Procedure.
WH Smith is already being investigated by the City watchdog over an accounting error that misstated profits at its North American arm.
Surprise interest rate rise in Indonesia
We have a surprise interest rate rise, in Jakarta, triggered by the Iran war.
Indonesia’s central bank has raised interest rates by 25 basis points today, to 5.5%, as it tried to prop up the Indonesian rupiah.
The ‘off-cycle’ decision comes just a few weeks after the bank raised borrowing costs for the first time in two years,
The bank explained:
This increase is a follow-up measure to strengthen the stabilisation of the rupiah exchange rate against the impact of heightened global volatility caused by the war in the Middle East.
Updated
Oil drops as Trump says Iran peace deal in 'final throes'
The oil price is dropping this morning, after Donald Trump declared that negotiations towards an Iran peace deal are in their ‘final throes’.
The US president made the comments to reporters at JFK airport after attending the NBA Finals at Madison Square Garden (where he was roundly booed by the crowd)
Trump insisted that Iran and Israel “were going back and forth and now they both agreed through me to stop and we’re in the final throes of what will be a very, very good deal”.
Asked whether it would be matter of days or weeks, he said it would take “two or three days”, adding that the strait of Hormuz would “open up right away” once the deal was signed.
Brent crude has dropped by 1% this morning, to $93 a barrel – still around $20/barrel above its levels before the conflict began in late February.
The AI trade has continued to bounce back this morning, reports Deutsche Bank’s Jim Reid:
The KOSPI (+7.35%) is sharply higher after its 9th worst day in 45 plus years of history yesterday (-8.29%). The Nikkei (+2.19%) is also benefiting from a recovery in technology stocks after a decline of over -3.5% yesterday.
Chinese stocks are up just over half a percent and other markets are broadly flat. S&P 500 (+0.26%) and NASDAQ 100 (+0.54%) futures are also continuing to recover after a decent session yesterday.
Full story: OpenAI confidentially files for initial public offering
OpenAI has filed confidentially to go public on the US stock market, according to a company blogpost published on Monday. The artificial intelligence giant’s debut on Wall Street is expected to be one of the most highly valued listings in market history with a valuation at more than $850bn.
“We recently submitted a confidential S-1. We expect it to leak so we’re just announcing it,” the company’s post reads. “We have not decided on timing yet; it may be a while because there are things we want to do that are likely easier as a private company. But it’s a complicated set of tradeoffs and this gives us the option to go public sooner if that ends up being best.”
An S-1 is an investor prospectus submitted to the US Securities and Exchange Commission (SEC) in advance of an initial public offering (IPO). The confidential filing will give regulators a period to review and discuss the company’s financial disclosures before investors and the public are able to view them.
More here:
Introduction: Chip stocks bounce back ahead of ‘brat summer’ for AI firms
Good morning and welcome to our rolling coverage of business, the financial markets and the world economy.
For the second day running, circuit breakers have been triggered on the Seoul stock exchange. But this time, it’s because the market is rising unusually quickly, rather than tumbling like it did on Monday.
Shares in South Korea’s chip giants are surging today, as investors pile back into the market after yesterday’s sell-off.
This rally is boosting optimism that the recent drop in tech shares is a blip, rather than the long-feared AI market crash.
Samsung Electronics’s shares are up over 9% today, while memory chipmaker SK Hynix have surged by 15%.
Those two heavyweight stocks have driven South Korea’s KOSPI up by 8.4% in Tuesday’s session, a day after it tumbled by 8%. Today’s market rally triggered successive temporary suspensions of program buy orders, known as “sidecars” in South Korea.
SK Hynix was boosted by a new multiyear partnership with Nvidia to develop next-generation memory for AI systems, whicch saw Nvidia’s Jensen Huang tour Seoul, meeting tech firms and handing out fried chicken to journalists:
Ipek Ozkardeskaya, senior analyst at Swissquote, points out that the wild swings in the KOSPI are unusual, and worrying.
A day with a rise or fall of less than 5% in the Kospi has become rare – a sign of just how volatile this market has become and, therefore, how much of the move is driven by speculation. Indeed, the Kospi’s volatility index keeps rising to unbelievable levels, suggesting that when the music stops, there will be carnage.
Anyway, today we continue to observe the tech-versus-non-tech narrative play out – technology attracting flows while non-tech pockets of the market lag behind.
That narrative will be tested in the coming months, though, as several massive tech firms attempt to float on the stock market.
Last night, OpenAI filed for its initial public offering – which could value the firm behind the ChatGPT chatbot at more than $1tn. That puts OpenAI in a race with fellow artificial intelligence pioneer Anthropic, and Elon Musk’s SpaceX, which is due to float on Friday.
Kathleen Brooks, research director at XTB:
The OpenAI news means that we will hear more about how much revenue it is generating and how much cash it is burning through in the coming weeks.
2026 is set to be the ‘brat summer’* for these AI names, with their soaring valuations and big promises for how AI will change the world and send their revenues soaring.
[* For the benefit of any high court judges reading, here’s a guide to Charli xcx’s recent album, Brat]
The agenda
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7am BST: German trade data
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9:45am BST: Treasury Committee hearing on Financial Inclusion Strategy
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11am BST: NFIB’s US Business Optimism Index
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1.30pm BST: US trade data for April
Updated
