News updates from June 28: Biden vows to stay in presidential race; US PCE inflation falls to 2.6%

US banking giants Bank of America, Citigroup, JPMorgan Chase and Wells Fargo told shareholders on Friday they planned to increase their dividend payouts after passing annual “stress tests” from the Federal Reserve.

The Fed said earlier this week that all 31 of the banks tested successfully weathered its stress test. They ranged from the largest lenders including JPMorgan and BofA to mid-size banks such as Citizens and PNC as well as US subsidiaries of foreign groups as in UBS and Deutsche Bank.

The test gauges the largest US banks’ ability to weather a severe economic downturn and is used to update minimum capital requirements, which are in place to absorb potential losses.

US stocks closed lower in the final trading session of the first half of the year, paring gains after major indices touched intraday records earlier in the day.

The benchmark S&P 500 fell 0.4 per cent, dragged lower by the consumer cyclicals and utilities sectors. It declined across five sessions, ending a three-week run of gains. The Nasdaq Composite declined 0.7 per cent, but finished the week higher for the fourth time in a row. Every Magnificent Seven tech group except Tesla finished in the red on Friday.

Treasuries reversed an early rally. The yield on the 10-year bond was up 0.09 percentage points at 4.38 per cent, its highest level in two weeks.

President Joe Biden’s odds of winning the next election have dropped significantly since Thursday night’s debate with Donald Trump.

Biden’s implied probability of victory fell from 36 per cent immediately before the debate to 22 per cent three hours later, according to electionbettingodds.com, which averages data from four different betting and prediction markets.

Gavin Newsom, the governor of California who is seen by some as a potential replacement for Biden as Democratic nominee, increased his chances to 10 per cent.

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Thursday night’s US presidential debate was watched by 48mn television viewers, a sharp drop from the numbers that tuned in to the showdowns between Joe Biden and Donald Trump in the 2020 campaign.

CNN, the Warner Bros Discovery-owned network which hosted the event, said just over 9mn viewers had watched on its own channels, narrowly ahead of Fox News and ABC News, with cable rival MSNBC drawing about 4mn viewers. Another 30mn people tuned in on CNN’s digital channels or YouTube, it added.

The combined television audiences were well below the totals for previous presidential debates, however, extending a pattern of US media outlets reporting less interest in their election coverage this year.

Trump and Biden drew 73mn viewers for their first debate in 2020, while Trump and Hillary Clinton pulled in an audience of 84mn for the opening clash of their 2016 contest.

US equities fluctuated in the final trading session of the first half of the year, paring gains after major indices touched intraday records earlier in the day.

The Nasdaq Composite was flat in Friday afternoon trading, but had risen as much as 1 per cent earlier in the session to top 18,000 points for the first time on record. Shares in five Magnificent Seven tech groups were in the red.

The S&P 500 was up 0.1 per cent — about 60 per cent of the benchmark index’s constituents advanced.

Nike was the worst performer on the index, falling 20 per cent to its lowest level since 2020 after it issued a weak outlook on Thursday evening.

Treasuries reversed an early rally. The yield on the 10-year bond was up 0.06 percentage points at 4.35 per cent, its highest level in two weeks.

Online fast-fashion group Shein has a back-up plan to seek a listing in Hong Kong, as its ambition for an initial public offering in London encounters rising scrutiny in the UK and China.

Singapore-headquartered Shein is keeping alive a fallback option to list in Hong Kong despite filing confidential paperwork earlier this month with the UK’s financial regulator as a prelude to a London IPO, said five people familiar with the situation.

While a London flotation could fetch the China-founded ecommerce group a £50bn market valuation — marking a blockbuster success for the UK’s otherwise lacklustre capital markets — Shein is also facing pushback over the plan. This ranges from activists who have set up a legal challenge, to some fund managers warning a UK listing could “struggle” to gain investor support.

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The US Supreme Court has narrowed the use of an obstruction charge brought against hundreds of individuals in connection with the attack on the US Capitol on January 6 2021, in a decision that poses a new legal hurdle to prosecutors pursuing those cases.

The decision centres on a criminal charge — obstruction of an official proceeding — that the US Department of Justice has used against more than 350 defendants who stormed the Capitol in an attempt to halt the certification of Joe Biden’s election victory.

The obstruction charge in question stems from a section of the Sarbanes-Oxley Act enacted in 2002 in response to several accounting scandals, including Enron.

In a 6-3 opinion, the high court on Friday endorsed a more limited application of that law, saying a lower court had erred in construing it more broadly.

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European stocks ended the second quarter of the year on the back foot, dragged lower by French equities ahead of the country’s legislative elections this weekend. 

The region-wide Stoxx 600 shed 0.2 per cent on Friday. That took its decline to 1.3 per cent in June and 1.3 per cent over the past three months.

France’s 40 closed 0.7 per cent lower ahead of the weekend vote. That took the index’s drop in June to 6.4 per cent - its biggest monthly fall in two years - and its quarterly decline to 8.9 per cent.

Germany’s Dax gained 0.1 per cent on Friday and London’s FTSE 100 dropped 0.2 per cent.

In the US, the blue-chip S&P 500 rose 0.3 per cent in morning trade in New York, hitting a fresh all-time high. The tech-heavy Nasdaq Composite also gained 0.3 per cent.

A measure of US consumer sentiment in June fell less than forecast but came in at the lowest level since November amid concerns over high prices and weakening spending power. 

The University of Michigan’s consumer sentiment index registered a final reading of 68.2 in June, beating economists’ expectations for a reading of 65.8, while trailing May’s reading of 69.1.

“While consumers exhibited confidence that inflation will continue to moderate, many expressed concerns about the effect of high prices and weakening incomes on their personal finances,” said Joanne Hsu, director of University of Michigan’s survey of consumers. 

Year ahead inflation expectations fell from 3.3 per cent to 3 per cent in June, while long run inflation expectations remained at 3 per cent for the third consecutive month.

The US Supreme Court has sharply clipped the wings of federal agencies, overturning a legal doctrine that for 40 years has given them significant latitude to set standards in areas ranging from environmental protection to securities regulation.

The legal doctrine at the centre of the 6-3 decision on Friday is known as the “Chevron deference”, stemming from a 1984 Supreme Court decision involving the oil major. Under the doctrine, courts generally defer to agencies’ interpretation of ambiguous rules and laws written by Congress.

Courts “may not defer to an agency interpretation of the law simply because a statute is ambiguous”, Chief Justice John Roberts wrote in the majority opinion.

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Shares in former president Donald Trump’s Truth Social media company swung in morning trading following Trump’s performance against President Joe Biden in Thursday night’s debate.

Trump Media & Technology Group — ticker DJT, Trump’s initials — rose as much as 8.7 per cent on Friday morning, before reversing course to trade 1.6 per cent lower.

The company has been a volatile performer since it went public earlier this year via a merger with a blank-cheque vehicle. Its shares have risen almost one-third this week in the run-up to the presidential debate.

US stocks rose early on Friday after the Federal Reserve’s preferred measure of inflation eased as expected in May.

Wall Street’s blue-chip S&P 500 advanced 0.2 per cent, boosted by interest rate-sensitive real estate stocks. Shares in Nike dropped 16.3 per cent after the world’s largest sportswear maker by revenue warned sales would fall this year.

The tech-heavy Nasdaq Composite rose less than 0.1 per cent. 

The dollar was steady against a basket of six other major currencies while the two-year Treasury yield slipped 0.04 percentage points to 4.67 per cent. Yields move inversely to prices. 

US stock futures extended their gains after data showed that the Federal Reserve’s preferred measure of inflation eased in May, in line with economists’ expectations.

Futures contracts tracking Wall Street’s S&P 500 share gauge rose 0.4 per cent, adding to an advance from earlier in the session, while those tracking the technology-heavy Nasdaq 100 index rose 0.6 per cent.

Government bond moves were muted in the minutes after the data release, with the policy-sensitive two-year Treasury yield down 0.02 percentage points to 4.69 per cent and the benchmark yield flat at 4.29 per cent.

US inflation eased to 2.6 per cent in the year to May, according to the metric the Federal Reserve uses to set its target for price pressures.

Friday’s data, published by the Bureau of Economic Analysis, on the personal consumption expenditures index was in line with economists’ expectations that headline US inflation would dip slightly from 2.7 per cent in April.

The Fed’s target for headline PCE index is 2 per cent a year.

“Core” PCE, which ignores changes in food and fuel prices, was 2.6 per cent, in line with expectations of economists polled by Reuters of a 0.2 percentage point drop from 2.8 per cent in April.

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US inflation: The metric the Federal Reserve bases its inflation target on is expected to have slowed last month, possibly giving policymakers a higher degree of confidence to push ahead with potential interest rate cuts this year.

The personal consumption expenditures index is forecast to have slipped to an annual rate of 2.6 per cent in May from 2.8 per cent the previous month. The Fed has a target of 2 per cent. The “core” measure, which strips out volatile energy and food prices, is also forecast to moderate slightly.

Markets: Ahead of the opening bell on the final trading day of June, the S&P 500 is up 3.9 per cent so far this month, 4.3 per cent ahead for the quarter and up 14.9 per cent in the first half of the year. Wall Street’s benchmark index has advanced in seven of the past eight months and six of the past seven quarters.

Oil prices have hit a two-month high, extending a rally that began in early June after Opec+ members agreed to extend deep cuts in production. 

Prices for Brent crude, the international benchmark, advanced 0.7 per cent on Friday to $87.04 a barrel, the highest level since late April. At its twice yearly meeting on June 2, the Opec+ cartel pledged to keep more than 3mn barrels a day of crude off the market until the end of next year. 

Rising tensions between Israel and Lebanon have further inflated prices, according to analysts. Ole Hansen, head of commodity strategy at Saxo, attributed recent moves to the “ebb and flow of a geopolitical risk premium” and speculative trading by hedge funds. 

A global financial watchdog has removed Turkey from its “grey list” of countries with lapses in anti-money laundering and counterterrorism financing policies, in a boon to Ankara’s economic turnaround efforts. 

The Financial Action Task Force unveiled on Friday its decision to remove Turkey from its list of jurisdictions requiring additional scrutiny, around three years after Turkey had been added to the list. 

The FATF’s move is a significant victory for finance minister Mehmet Şimşek, who has led a sweeping economic turnaround since his appointment following President Recep Tayyip Erdoğan’s re-election last year.

Şimşek has sought to court international investors who fled Turkey’s markets in recent years both by bolstering financial rules and regulations and also unwinding unorthodox policies that ignited a years-long economic crisis. 

Unemployment in Germany climbed by 0.1 percentage point in June, to 6 per cent, slightly above predictions.

German unemployment increased to 2.73mn in June, the country’s employment agency said on Friday. Claims climbed by 19,000 after a 25,000 increase in May.

The reading is a touch higher than the consensus 5.9 per cent, or 14,000 increase. 

Big share price moves in Europe today include London-listed video game services company Keywords Studios, Luxembourg-based telco Millicom and UK sportswear retailer JD Sports:

• Keywords Studios: Shares in the Dublin-based video game maker rose 5 per cent after the board said it was minded to recommend to shareholders a revised offer from private equity group EQT that would value the company at £2.1bn.

• Millicom International Cellular: Shares in the Luxembourg-based telco led gains on the region-wide Stoxx 600 index, rising 4.5 per cent after it confirmed late on Thursday that it had received a takeover offer from its top shareholder Atlas, French billionaire Xavier Niel’s investment vehicle. Millicom’s board said the undisclosed offer undervalued the company. 

• JD Sports: Shares in the UK sportswear retailer fell 4.2 per cent, leading losses on the Stoxx 600, after major sportswear brand Nike reported weaker than expected sales for its latest quarter and lowered its outlook for the year ahead. Rival brand Puma’s shares also fell 2.9 per cent in early trade. 

Spanish inflation fell in June due to slowing fuel and food prices, which offset a jump in the cost of leisure and cultural services as the summer tourist season started.

The Spanish statistics office said on Friday the headline rate of inflation fell from 3.8 per cent in May to 3.5 per cent in June, but was slightly higher than economists had forecast in an earlier Reuters poll.

Underlying inflation in Spain — stripping out energy and fresh food prices — was unchanged at 3 per cent. On a month-by-month basis, prices in the country rose 0.3 per cent in June, up from 0.2 per cent in May.

The risk premium on France’s debt continued to surge on Friday as investors prepared for the first round of voting in parliamentary elections this weekend.

The gap between benchmark French and German 10-year borrowing costs — seen as a barometer for the risk of holding France’s debt — rose to 0.84 percentage points in early trading, the highest level since 2012.

French bonds came under renewed pressure after German finance minister Christian Lindner surprised investors yesterday, commenting that an intervention by the European Central Bank if the election triggers a rapid sell off in French debt would raise some “economic and constitutional questions”.

French stocks slipped early on Friday ahead of the country’s legislative election this weekend.

The Cac 40 in Paris lost 0.3 per cent in morning trade even after inflation in France fell to 2.5 per cent in June. The two-round election will take place on June 30 and July 7, with a hung parliament the most likely outcome according to recent polls.

Europe’s region-wide Stoxx 600 rose 0.2 per cent and Germany’s Dax gained 0.3 per cent. London’s FTSE 100 rose 0.4 per cent.

Inflation in France dipped to 2.5 per cent in June, slowing from the previous month in a slight boost to President Emmanuel Macron ahead of this weekend’s parliamentary elections.

A slowdown in energy and food prices helped to bring overall inflation down, according to figures from the national statistics agency on Friday. The dip from 2.6 per cent in May was in line with economists’ forecasts in a Reuters poll.

Macron’s government spent billions of euros on subsidies to keep French prices from rising as much as elsewhere in Europe. French annual inflation peaked just above 7 per cent in 2022 — well below the Eurozone high of 10.6 per cent. But surveys have shown few French consumers give the government much credit for this.

The board of London-listed video game services company Keywords Studios has said it is “minded to recommend” the latest takeover bid from private equity group EQT.

Keywords on Friday confirmed EQT had proposed an updated cash offer of £24.50 per share, an uplift of 12 per cent on its last closing price of £21.72 and a slight increase from the £24.30 put forward on Wednesday. The private equity group had previously made several other offers for the company.

EQT’s offer in May of £25.50 per share would have valued the company at £2.2bn and represented more than 70 per cent premium on the stock’s value at the time. 

EQT had a deadline of 5pm today to make a firm offer, but Keywords has requested an extension to July 3. 

The UK economy grew faster than previously estimated in the first quarter, according to official data that will provide some positive news for Prime Minister Rishi Sunak ahead of next week’s general election.

UK GDP increased by 0.7 per cent, revised up from a first estimate increase of 0.6 per cent, the Office for National Statistics said on Friday.

This was the fastest UK growth since the end of 2021, confirming the end of last year’s technical recession, and the highest of any G7 countries.

Growth was driven by services, which was up 0.8 per cent on the quarter with widespread growth across the sector; elsewhere the production sector grew by 0.6 per cent while the construction sector fell by 0.6 per cent.

Chinese stocks rose following a US presidential debate that reignited concerns about President Joe Biden’s age and after China’s President Xi Jinping pledged to create a more “market-oriented” business environment.

Xi said in a speech on Friday that Beijing would take “significant measures to further deepen comprehensive reforms”.

His speech alluded to Washington’s chip export controls, which he said “harm the common interests of the international community”.

China’s benchmark CSI 300 index led gains among major Asian bourses, rising 0.8 per cent. The small-cap CSI 2000, which has fallen 22 per cent in the past year, rose 1.9 per cent.

Germany jobs data: Labour market statistics for May will be released.

EU consumer sentiment: The European Central Bank’s Consumer Expectations Survey will be published.

UK economic data: Zoopla house price index for May is due; data for April showed a 0.1 per cent annual decrease in the average house price to £264,300. Final first-quarter GDP figures will be released.

Central banks: The Global Interdependence Center’s Central Banking Series starts in Paris. Speakers include Federal Reserve Bank of Richmond president Thomas Barkin and Bank of France governor François Villeroy de Galhau.

Tour de France: On Saturday the 111th edition of the world-famous cycling race begins, with the first stage starting in Florence, Italy.

Indian aviation authorities on Friday closed the recently revamped terminal 1 of New Delhi’s airport after heavy monsoon rains caused part of its roof to collapse.

Video posted on social media showed rain pouring through holes in the canopy and the partial collapse of the structure. The broadcaster India Today reported that one taxi driver was killed and six others were injured.

The Indira Gandhi International Airport confirmed the canopy collapse in a statement on its website, saying the incident happened at about 5am. All departures from the terminal were temporarily suspended.

Ram Mohan Naidu Kinjarapu, India’s civil aviation minister, said in a post on X that injured people had been evacuated to hospital and rescue operations were ongoing.

The yen weakened past ¥161 a dollar on Friday even as Japan’s benchmark Topix stock index neared a record high.

The yen fell 0.2 per cent against the dollar to ¥161.1 while an index tracking the dollar against a basket of six currencies rose to 106.1, close to its high for 2024.

Despite the weakening yen, equities in the export-oriented country rose in early trading, with the Topix rising 0.8 per cent, nearing its record high set in 1989. The exporter-focused Nikkei 225 added 1 per cent.

Equities elsewhere in Asia also rose despite the resurgent dollar.

State-backed Chinese property developer Sino-Ocean Group has received a winding-up petition from the Bank of New York, the real estate group said in a filing to the Hong Kong stock exchange on Friday morning.

The London branch of BNY filed the petition in relation to the non-repayment of guaranteed notes issued by a unit of Sino-Ocean. The notes, due in 2026, had an interest rate of 3.25 per cent on a principal of $400mn. “Accrued interests” on the payments are also due, according to the filing.

“The company will oppose the petition vigorously,” Sino-Ocean said.

More than 20 Chinese developers have received liquidation lawsuits in Hong Kong since the country’s property sector crisis began in 2021.

Events: Mongolians vote in elections under a new system that expands the number of seats in parliament from 76 to 126. Iranians will vote in the country’s presidential election following the death of president Ebrahim Raisi in a helicopter crash.

Economic data: South Korea publishes data on industrial output and retail sales for May. Japan announces the Tokyo consumer price index for June and the May unemployment rate. Thailand releases trade figures for May while India releases data on infrastructure output.

Corporate updates: Chinese carmaker Geely announces quarterly earnings. The Industrial and Commercial Bank of China, Bank of China, Sinopec and Semiconductor Manufacturing International Corporation hold their annual shareholder meetings.

Shares of Nike tumbled in extended trading as the trainers and sportswear retailer indicated it was downgrading its outlook.

The company said on a conference call that it expected revenue to drop 10 per cent in the current quarter and for revenue in this fiscal year to decline by a percentage in the mid-single digits.

Nike’s revenues were slightly below expectations last quarter as Converse sales dropped 18 per cent, but the company’s earnings of 99 cents a share exceeded analysts’ forecasts by almost 20 per cent. Year on year, sales fell 1.7 per cent, while profit rose 48 per cent.

Nike’s shares tumbled more than 10 per cent in after-hours trading on Thursday.

“We are taking actions to reposition Nike to be more competitive, and to drive sustainable, profitable long-term growth,” chief financial officer Matthew Friend said.

Farming retailer Tractor Supply Co will eliminate all its diversity and inclusion roles and walk back its climate commitments following a weeks-long social media campaign by rightwing influencers. 

“We have heard from our customers that we have disappointed them,” the retailer said in a statement on Thursday.

The retailer, which focuses on rural regions of the US, said it would “retire” its current diversity and inclusion goals “while still ensuring a respectful environment”.

The statement comes as political pressure over so-called wokeness mounts on US companies, who have scaled back LGBT+ Pride displays after backlash last year. 

Joe Biden and Donald Trump are set to go head-to-head in the first presidential debate of the 2024 election campaign.

Follow along for the Financial Times’ live coverage from our commentators as well as our team of correspondents across the US.

EU leaders have endorsed a second five-year term for Ursula von der Leyen as European Commission president, people with knowledge of the decision told the Financial Times.

Italy’s Prime Minister Giorgia Meloni abstained, rather than voting in support for von der Leyen. Hungary’s Viktor Orbán voted against.

That meant a required majority of leaders at a summit in Brussels on Thursday night agreed to the former German defence minister remaining as the EU’s most senior official, alongside choosing António Costa, a former prime minister of Portugal, as EU Council president and Estonia’s Prime Minister Kaja Kallas as the bloc’s chief diplomat.

Von der Leyen must now win a majority vote in the European parliament to secure the extension.

US stocks climbed for the third day in a row as traders assessed a mixed picture of the US economy following several data releases.

The S&P 500 added 0.1 per cent on Thursday, helped by strength in the real estate and consumer cyclicals sectors. The Nasdaq Composite rose 0.3 per cent as every so-called Magnificent Seven company but Nvidia rose. The small cap-focused Russell 2000 added 1 per cent.

Treasuries rallied, pulling the yield on the two-year note down 0.04 percentage points to 4.71 per cent. The yield on the 10-year bond slipped 0.03 percentage points to 4.29 per cent.

The IMF has urged the US to “urgently” address its mounting fiscal burden, calling on lawmakers to raise taxes to plug the gap.

The fund’s projections showed the debt-to-GDP ratio of the world’s largest economy hitting 140 per cent by 2032 — way past its previous record high — on the back of successive projected fiscal deficits in the coming years. The finding came as part of the IMF’s annual Article IV health check of the US economy.

“Such high deficits and debt create a growing risk to the US and global economy,” the organisation said.

“These chronic fiscal deficits represent a significant and persistent policy misalignment that needs to be urgently addressed.”

The fund said politicians needed to “carefully consider” a range of tax rises, including on people’s incomes for those earning less than $400,000 annually. President Joe Biden has said that group will not pay more tax if he secures a second term in the White House.