Gasoline prices for full serve and self serve are displayed at the Union 76 gas station ahead of the Labor Day weekend on August 28, 2023 in Beverly Hills, California.
Mario Tama | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Biggest monthly jump this year
The U.S. consumer price index for August rose 3.7% from a year ago and a seasonally adjusted 0.6% for the month, mostly in line with the expected 3.6% and 0.6%, respectively. Though expected, it’s still the biggest month-on-month increase in prices this year. Energy prices, which soared on the month, were mostly to blame. Core inflation, which excludes food and energy prices, was up 4.3% on the year and 0.3% on the month.
U.S. markets were mixed Wednesday, with the Dow Jones Industrial Average the only major index to fall. Asia-Pacific stocks mostly rose Thursday. Japan’s Nikkei 225 climbed 1.47% even as shares of Softbank slipped slightly. Australia’s S&P/ASX 200 added around 0.55% as data showed unemployment rate in the country holding steady at 3.7% in August.
The risks of shadow banks in China
The difficulties faced by China’s real estate sector recently have highlighted, once again, the risks of shadow banking — a term that refers to financial services offered outside the highly regulated banking system. Chinese developers “were able to borrow liberally from shadow banks,” a researcher said, which pushed up land prices and housing costs. That contributed to the developers’ huge debt today.
Taiwan is ‘not for sale’
At the All-In Summit, a conference on technology and markets, Elon Musk commented that China probably views Taiwan as “analogous to Hawaii or something like that, like an integral part of China that is arbitrarily not part of China.” It drew a swift rebuke from Taiwan’s Ministry of Foreign Affairs, which said Taiwan is “not part of the PRC and certainly not for sale!”
[PRO] An Arm and a leg
Arm is pricing its initial public offering at $51 per share, the top of its expected price range. That values the company at over $54 billion, giving it a price-to-earnings multiple of about 104. It’s a lofty multiple, comparable to Nvidia’s 110 for the previous 12 months. Read what four analysts have to say about the risks and benefits of buying Arm shares.
At first glance, August’s CPI report seems bad news. The month-over-month jump in prices is the highest in a year. And even core inflation came in hotter than expected. But look more closely and you’ll find things aren’t as terrifying as they seem.
The headline number was pushed up by rising oil prices, which have been steadily increasing in recent weeks, as we’ve talked about. Gasoline prices soared 10.6% in August, the largest contributor to inflation last month, according to the U.S. Bureau of Labor Statistics.
But it’s likely gasoline prices will fall after a month or two, according to Andrew Hunter, deputy chief U.S. economist at Capital Economics. And gasoline prices have actually retreated 3.3% from a year ago, suggesting that they’re still on a downward trend in the long run.
Excluding volatile energy prices, monthly core inflation was up 0.3% against the expected 0.2%. Here, shelter costs were the main culprit for the hotter-than-expected increase. “Housing continues to contribute an outsized share to the inflation measures,” said Lisa Sturtevant, chief economist at Bright MLS.
But, Sturtevant added, “rent growth has slowed considerably and median rents nationally fell year-over-year in August.” That slowdown in prices will show up in future reports, meaning that August’s core CPI numbers is just “a little bump in the road,” as Kayla Bruun, senior economist at Morning Consult, put it.
“It doesn’t mean it’s turning around and going in the other direction,” Bruun said. “Overall, most of the pieces are headed in the right direction.” Indeed, the annual measure of core CPI still dropped from 4.7% in July to 4.3% in August.
Markets took the numbers in their stride. The Dow was the only major index to fall, losing 0.2% as shares of 3M and Caterpillar sank. The S&P 500 added 0.12% and the Nasdaq Composite rose 0.29%, helped by gains in Tesla and Amazon. And traders are still betting the Federal Reserve won’t raise rates next week, according to the CME FedWatch Tool.
Markets can act in irrational ways sometimes. But sometimes, the crowd psychology of markets manifests as collective wisdom.
— CNBC’s Jeff Cox and Greg Iacurci contributed to this report
Volkswagen cites slow demand amid EV production cuts at German plants
Amid several reports that Volkswagen is cutting EV production at two German plants, the automaker revealed the reason – slowing demand.
Volkswagen suspends EV production in Germany
Last week, a report from the German newspaper Automobilwoche claimed Volkswagen was pausing EV production at its Dresden facility in Germany.
Volkswagen’s Dresden facility has built over 150,000 VW Phaeton, e-Golf, ID.3, and Bentley Flying Spur models since beginning production in 2002. Last year, 6,500 ID.3 EVs were built at the location.
The automaker will temporarily suspend ID.3 production at the plant for two weeks during the Saxon autumn holidays, as first reported by Germany’s DPA news. Starting October 16, the electric car will be built again in regular single-shift operation.
Dresden’s roughly 300 employees will be reassigned to other areas, including “innovative manufacturing and testing.”
Meanwhile, at Volkswagen’s main BEV plant in Zwichau, one of the two production lines will shut down during the holidays, according to a spokesperson (via Automobilwoche).
The news comes after VW announced at a staff meeting earlier this month it would be cutting 269 temporary jobs at the site.
Although Volkswagen’s ID.3 and Cupra Born will be impacted by the halt, ID.4, ID.5, Audi Q4 e-tron, and Audi Q4 sportback e-tron models will continue regular production in three shifts.
Volkswagen is discussing with local labor reps how to proceed with EV production at the Zwickau plant.
The company did not specify how many units or employees would be affected by the changes.
Volkswagen is struggling to attract new EV orders amid higher inflation and weaning subsidies in Europe. Europe’s largest automaker also faces a growing threat from more advanced EV competitors like Tesla and BYD.
The core Volkswagen brand faces pressure as cheaper, more advanced EVs are taking market share at home and abroad.
In Volkswagen’s largest market by revenue (China), the automaker was surpassed by BYD as the best-selling car brand earlier this year.
In the wake of slowing demand, VW slashed ID.3 and ID.4 prices in the region. But how long can VW keep this up?
Volkswagen Group CEO Oliver Blume aims to boost VW brand returns to 6.5% over the next three years. Currently, it’s around 3.6%.
With EV makers like Tesla, BYD, and several other Chinese start-ups expanding rapidly, Volkswagen will need to act urgently to risk falling further behind.
Honda’s new electric sports car will debut next month, hinting at an NSX successor EV
At the Japan Mobility Show next month, Honda will showcase several new products and tech, including a new electric sports car that will headline the booth.
The new electric sports car will “enable the driver to experience the pure joy of driving,” according to Honda.
Although the automaker was light on the details behind the project, it claims the concept will represent “Honda’s continuous pursuit of the joy of driving” while embodying Honda’s universal sports mindset and distinctive characteristics.
Also ready to make an appearance at the booth is Honda’s SUSTAINA-C Concept and Pocket Concept, designed to use limited resources.
Both models are made of recycled and reused acrylic resin with the idea of “resource circulation” for environmental sustainability and future mobility freedom.
Other EV products set to make their world debut include the Honda CI-MEV. The two-seat, four-wheel mini EV uses Honda’s cooperative intelligence (CI) and automated driving for last-mile deliveries and areas with limited mobility options.
A prototype of Honda’s new commercial-use mini EV with a portable external power output device, Power Exporter e: 6000, will also be displayed.
Honda to unveil new electric sports car
Honda revealed plans to launch 30 new EV models globally by the end of the decade, including at least two electric sports cars.
One will be a specialty model, while the other will be a flagship. Speculation suggests one of the models will be an NSX, a two-seater sports coupe (An Acura model in North America), with the other being a GT.
Honda teased the upcoming electric sports cars under wraps, showing a low-profile vehicle with a similar body design to the NSX.
According to the British automotive magazine Car, Honda’s EV performance car will ride on the automaker e:n platform, featured in its e:Ny1 electric SUV.
The EV could also wear the Type R badge, as Honda’s technical consultant, Kotaro Yamamoto, said, “Type R stands for racing. It’s a pleasure transported. An electric car can deliver this, and a Type R is not obliged to use a combustion engine. Even in a fully electric society, there will still be Type Rs delivering ultimate driving pleasure.”
Other than that, Honda is keeping the details under wraps. We’ll learn more about the electric performance car next month.
The electric sports car will make its world debut at the Japan Mobility Show, running from October 28 to November 5, 2023. Media days will be October 25-26.
Is this the production Tesla Cybertruck?
New Tesla Cybertrucks, rumored to be “Master Candidates,” the final step before production, have been spotted coming out of Gigafactory Texas.
For the past month, Tesla has had full and at times, partial shutdowns, of production at Gigafactory Texas as it conducted factory upgrades.
Yesterday, a drone video shot by Joe Tegtmeyer confirmed that workers are now coming back to the factory.
The video showed new Model Y bodies coming out of the factory and new Cybertrucks.
There have been rumors that the shutdown at Gigafactory Texas might have been linked to the start of Cybertruck production.
Tegtmeyer, who often gets to talk to Giga Texas employees as he flyes drones there almost daily, claims that the new Cybertrucks spotted coming out of the factory are “Master Candidates,” the last step before production.
While it can’t be confirmed if they are master candidates or production versions, the two Cybertrucks spotted at the factory did look a lot more refined than the previously spotted prototypes:
The trims and fittings seem to blend better with the stainless steel body of the electric pickup truck.
While we can’t judge the vehicle’s fit and finish too closely because the footage is taken from a distance with a drone, the looks of those two Cybertrucks are encouraging.
Tesla is expected to officially start Cybertruck production any day now with deliveries to start at an event likely within the next month.
More Cybertrucks have been spotted parked at the homes of Tesla employees, which is a good sign that internal testing has expanded.
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