Finimize - ✂️ The first (rate) cut is the deepest

What’s going on here?

The European Central Bank (ECB) cut its key interest rate for the first time since 2019, by 0.25%.

What does this mean?

The ECB was expected to trim rates from 4% to 3.75%, and it delivered. But investors can’t relax yet: the key for markets is how many cuts there’ll be and when – and that all depends on inflation. Now, energy and food had been driving prices higher, but they’ve been calming down lately. Problem is, wages have picked up recently – and because that means folk have money to spend, those increases are feeding back into inflation. The ECB doesn’t seem overly confident, either, revising its inflation forecasts to land above its 2% target for this year and next. Remember, inflation increasing could lead to rates staying higher for longer. No wonder the central bank wouldn’t commit to any particular path, saying decisions will be made meeting-by-meeting based on the latest data.

Why should I care?

Zooming out: The circle of life.

Interest rate cuts can really bolster an economy: they make borrowing cheaper, encouraging businesses, consumers, and governments to spend more money. It also helps that companies can afford to hire more staff, lining the wallets of workers. All that spending spurs on the economy and companies’ profit – which, in turn, makes stocks more appealing to investors.

The bigger picture: Domino effect.

The lower interest rates are, the less folk earn by sticking cash in a savings account. That pushes them toward riskier assets with the possibility of higher returns, like stocks. And right now, it looks like we’re heading in that direction: Switzerland and Canada have already cut rates, and the UK and US are expected to follow suit later this year. So as central banks keep trimming away, the effect could show up in the stock market.

What’s going on here?

The National Basketball Association (NBA) looked set to score three deals with major TV networks, leaving old-time partner Warner Bros. Discovery on the bench.

What does this mean?

The NBA hasn’t had to negotiate TV contracts for over ten years: multi-decade partnerships with Warner and ESPN brought dribbles and hoops into stateside living rooms. But now the league is back in the game, as they say. NBC said it'd shell out an average of $2.5 billion a year for the rights to show around 100 games each season – half of which would be exclusively available on its streaming service Peacock. Amazon’s bid is for a $1.8 billion-a-year deal, while Disney’s ESPN would cough up $2.6 billion each year. That means the NBA would be raking in nearly $7 billion a year from media revenue alone – more than double last year’s number.

Why should I care?

Zooming out: It’s drafting season.

Now, Warner could still match a rival offer if it wants to keep that partnership alive. After all, its “TNT” network has relied on basketball for ratings and revenue since 1988. Problem is, the studio's reportedly $40 billion in debt. So with legacy partnerships turning to dust, new deals like the NBA’s are changing the media industry’s pecking order – and setting the scene for major mergers down the line.

The bigger picture: It’s a high-stakes game.

American sports are big business: the National Football League (NFL) scored the boardroom equivalent of a touchdown last year, doubling its takings in a media rights deal worth about $10 billion annually. Of course, that’s a pricey fee for a network, but sports content is a surefire way to bring in viewers. Plus, at the end of the day, streaming companies know they can jack up subscription fees to cover more costs – so long as they have the right live games to back it up.