Bloomberg - Evening Briefing - Only the Fed can complain

Bloomberg Evening Briefing

More bad news for Fed Chair Jerome Powell. A broad gauge of US labor costs closely watched by the central bank accelerated in the first quarter. It’s another addition to a growing pile of indicators showing that inflation has no intention of leaving the party just yet. The employment cost index, which measures wages and benefits, increased 1.2%, the most in a year, after rising 0.9% at the end of 2023. Still, an influx of immigrants, women and older workers into the US labor market continues to push in the other direction, helping boost worker supply at a time when demand for labor is still healthy. And other measures of pay gains are pointing to softer growth. The Atlanta Fed’s wage growth tracker has largely cooled since peaking in 2022. And the government jobs report out Friday is forecast to show average hourly earnings stepped down in April from the year before. As Jonathan Levin says in Bloomberg Opinion, strong labor-cost data for the first quarter is, after all, good news for American workers. Only the Fed can complain

Here are today’s top stories

Electric vehicle owners can blame Elon Musk for that sudden pang of range anxiety they felt today. Tesla just eliminated nearly its entire Supercharger organization—you know, the one that’s built a vast US network of public charging stations that virtually every major automaker is in the process of tapping. The decision by Musk comes in addition to the thousands of Tesla employees he fired in mid-April. Easy access to high-speed charging is widely seen as critical to EV adoption, and Tesla invested billions of dollars into developing a global network of Superchargers that became the envy of other automakers.

The euro zone exited recession as its four top economies drove much speedier growth than expected. First-quarter gross domestic product increased by 0.3% from the previous three months—the strongest pace in 1 1/2 years. A separate release showed consumer prices rose an annual 2.4% in April, matching March’s pace and in line with analyst estimates. Helping the revival is Germany, which is being led out of the weeds by its industrial sector. June’s likely start of monetary easing by the European Central Bank should also provide a shot in the arm.

Shares of cannabis-related companies jumped Tuesday after the US Drug Enforcement Administration moved to reclassify marijuana to a less dangerous drug category, in what would be a historic shift for the industry. Tilray Brands jumped 40% while Canopy Growth gained 79%. The MJ PurePlay 100 Index, which tracks the industry globally, rose 22%, the most since October 2022. Meanwhile, the AdvisorShares Pure US Cannabis ETF surged 25% and was even halted for volatility in intraday trading. Investors have been awaiting DEA action on the reclassification of marijuana, which has been grouped with drugs such as LSD and heroin. Moving the substance to a different group would remove additional taxes that cannabis companies have to pay—a major overhang for the industry.

After the Washington Post reported that senior members of India’s intelligence agency allegedly approved a plot to kill a US-based Sikh activist, India came out swinging, dismissing the story—but simultaneously raising concerns about separatists sentiments made at a Sikh event in Canada. The Post reported that the former head of Research and Analysis Wing, India’s spy agency, and other senior ranking officials had approved the alleged plan to kill a Sikh activist, Gurpatwant Singh Pannun, on American soil last year. The report was based on interviews with several unidentified officials in the US, India and elsewhere.

A protestor holds a banner depicting Gurpatwant Singh Pannun, the alleged target of an India assassination plot, during a demonstration in New Delhi on Sept. 24. Photographer: Arun Sankar/AFP

Eli Lilly’s shares soared as its brighter outlook for 2024 raised the ceiling for new weight-loss drugs even higher. Supply and pricing for Zepbound and the diabetes treatment Mounjaro, both now somewhat hard to come by, will improve later this year, Indianapolis-based Lilly said Tuesday. The company lifted the top end of its annual sales forecast by $2 billion, even as most of its key drugs, except Zepbound, missed estimates for the quarter. Going into the earnings report, investors were concerned about Lilly’s ability to keep pace with demand, with Zepbound predicted to remain in shortage into the second half of the year. The company’s forecast alleviated those worries for now.

Starbucks sales fell for the first time since 2020 as half-off deals and new lavender lattes just weren’t enough to entice increasingly budget-conscious consumers. The shares sank 9.5% after the close of regular trading in New York. The company’s stock has declined 7.8% this year. The company is grappling with boycotts over its perceived stance on the Israel-Hamas war as well as a customer base that’s balking at $6 lattes. Under Chief Executive Officer Laxman Narasimhan, who has been on the job a little more than a year, the company has lowered its goals at least twice, but the latest results show investors might be looking for a bigger reset.

HSBC Chief Executive Officer Noel Quinn is stepping down, an unexpected move that comes as Europe’s largest lender tries to navigate the deterioration of ties between China and the US. During his four years at the helm, HSBC’s returns have soared, with profits touching a record last year. He also led a series of strategic reviews that culminated in a plan to boost the bank’s investment in its Asian business, while cutting back in developed Western markets such as the US and France.

Noel Quinn Photographer: Hollie Adams/Bloomberg

What you’ll need to know tomorrow

Where to Invest in Real Estate Right Now

This was supposed to be the year that real estate got some relief from higher interest rates. But hotter-than-expected inflation has cast doubt on the Fed’s plans to cut rates in 2024. That’s pushed mortgage rates higher, squashing hopes for a thaw in the housing market. Woes in commercial property, meanwhile, have been slow moving but significant, particularly when it comes to office buildings. But for savvy investors, crises present opportunities. We talked to the experts, and this is where they say to invest in real estate right now.

Photographer: Brendon Thorne/Bloomberg

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