Bloomberg - Evening Briefing - America’s nagging problem

Inflation is sticking around it seems. A key US price gauge topped forecasts for a third straight month thanks to rising rent and transportation costs. The so-called core consumer price index—which excludes food and energy—increased 0.4% from February. Paired with recent reports showing continued good news for American workers (labor market and economic activity remain strong), investors no longer see much chance that the Federal Reserve will start easing anytime soon. Wall Street on Wednesday responded accordingly. Forecasters have been waiting for a deceleration based on leading indicators, but progress has more or less stalled over the past nine months. “The sound you heard there was the door slamming on a June rate cut,” said David Kelly, JPMorgan Asset Management’s chief global strategist. “That’s gone.” —David E. Rovella  

A record-sized bullish bet on interest-rate futures made hours before Wednesday’s inflation report blew up in spectacular fashion when the actual reading triggered a market rout. The single trade stood to benefit from a more benign reading that would have supported the case for rate cuts this year. Instead the opposite happened, sending US yields soaring and prompting investors to pare back expectations for reductions. This afternoon, that position was roughly $50 million in the red.

A former Morgan Stanley banker punished in the block-trading probe that rattled Wall Street joined one of the firms that received confidential information he leaked. Pawan Passi is said to have been hired by Frank Fu’s CaaS Capital Management. CaaS made its name partnering with banks as they sought buyers for block trades, becoming one of the biggest US funds dedicated to buying big chunks of stocks. The federal investigation into block trading culminated in January after Morgan Stanley agreed to pay $249 million to the Justice Department and the Securities and Exchange Commission. 

Pawan Passi, a former equities executive at Morgan Stanley, arrives at a New York courthouse on Jan. 12. Photographer: Alex Kent/Bloomberg

The US sees a major missile or drone strike by Iran or its proxies in retaliation for an attack on the Iranian embassy in Syria as imminent, according to people familiar with the intelligence. Israeli government and military facilities may be targeted, the people said. Iran has threatened to hit Israel in retaliation for the attack on a diplomatic compound in Damascus last week that killed senior Iranian military officials. Iranian officials have also sought to implicate the US in the strike, while Washington has denied any prior knowledge. Israel has not confirmed it was behind the attack.

Philippine President Ferdinand Marcos Jr. said he’s “horrified” to learn of an agreement between his predecessor, Rodrigo Duterte, and China that bars Manila from shipping construction materials to a military outpost in a disputed shoal in the South China Sea. “If that agreement says we need to seek permission from another country to be able to do something within our own territory, it would probably be difficult to honor,” Marcos said. 

A Chinese Coast Guard ship fires a water cannon at a Philippine Navy chartered vessel on a resupply mission last month to troops stationed at Second Thomas Shoal in the South China Sea. Photographer: Ezra Acayan/Getty Images AsiaPac

That big shift from China to India seems to be picking up steam. Apple assembled $14 billion worth of iPhones in India last fiscal year, doubling production in a sign it’s accelerating a push to diversify beyond China. The US tech giant now gets as much as 14% or about 1 in 7 of its marquee devices from India. While China remains its largest iPhone-making hub and biggest overseas market, that’s also where Apple’s revenues are plunging, thanks to ascendant domestic Chinese rival Huawei and an expanding ban on the use of foreign technology in the workplace.

With Tesla’s stock taking a nose dive this year and his social media platform X (Twitter) in perpetual upheaval thanks in part to his irregular utterances, at least Elon Musk has his successful space enterprise to look to. Or not. SpaceX’s prized Starlink satellite business is still burning through more cash than it brings in. People familiar with its finances say Starlink has at times lost hundreds of dollars on each of the millions of ground terminals it ships, casting doubt on Musk’s claim that the business is in “profitable territory.”

Netflix co-founder Reed Hastings and ex-Google Chief Executive Officer Eric Schmidt are helping put money into African solar irrigation. The two billionaires are among investors who have invested $27 million in Nairobi-based SunCulture alongside others such as InfraCo Africa and Acumen Fund. The company supplies small solar powered water pumps, the cost of which is subsidized by the sale of carbon credits, to small-scale farmers, allowing them to replace diesel-powered pumps and boost yields in fields that weren’t previously irrigated.

A farmer waters his crop using a pump driven by solar power. Source: SunCulture

• Fitch cuts China outlook to negative on steady rise in debt.
• EU weighs NATO role to shield energy links from Russian attack.
• South Korea’s president suffers a big loss in parliament vote.
• McKinsey begins to fire hundreds of workers after record revenue year.
• When it comes to return on investment, these are the colleges to pick.
• Toyota aims to beat Hyundai and Ford with its all-new 4Runner.
• New York City’s return-to-office rate nears 80%, thanks to the banks.

The mathematics professor and hedge fund manager Edward Thorp rocketed to fame in the early 1960s by showing readers how to best casinos in blackjack. His book, Beat the Dealer, laid out a groundbreaking system of card counting, followed by guides to roulette and other gambling games. Thorp also invented or perfected a number of the quantitative hedge fund strategies being used today, and he delivered 30 years of 20% annual returns for the hedge funds he operated. Less well known is that Thorp, now a spry 91, has devoted his talents as much to health and longevity as to beating the house. 

Edward Thorp’s 1962 book, Beat the Dealer, laid out a system of card counting to help readers beat casinos at blackjack. Photographer: Pat Martin for Bloomberg Businessweek

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