Major global financial headlines from overnight and this morning include the following.
Iran is reported to have received a letter from U.S. Vice President Vance, and Tehran has signaled that its conditions for ending the war remain unchanged. Israeli Prime Minister Netanyahu's camp is leading but has not secured a majority, leaving the country's coalition-building outlook uncertain. Intel (ASX: INTC) issued a quarterly revenue forecast that fell short of expectations, weighed down by weak PC demand and component supply shortages. Amazon.com (ASX: AMZN) reported a sharp increase in capital spending while growth in its core e-commerce business remained sluggish. Microsoft (ASX: MSFT) made its first major bond issuance in nearly a decade, drawing subscription demand of up to $115 billion. The European Central Bank kept interest rates unchanged, and Lagarde played down the risk of inflation broadening.
Iran reported to have received letter from Vance, Tehran signals no change in war-ending conditions
According to a report by Iran's semi-official Tasnim news agency, Iran has received a letter from U.S. Vice President Vance addressed to its top security official, and a senior Iranian negotiator subsequently signaled that Tehran will not compromise on its position regarding ending the war. Tasnim did not disclose the contents of the letter addressed to Mohsen Rezaee, nor did it say whether Tehran was prepared to reply. However, after Iran was reported to have received the letter, Iranian parliament speaker Ghalibaf, who had previously participated in ceasefire negotiations, said in a post on X that "Iran's conditions have been clearly conveyed to the mediators many times." "The carrot-and-stick approach does not work on Iran," Ghalibaf continued. He did not mention Vance's letter or say whether these remarks constituted a formal response.
Netanyahu's camp leads but falls short of majority, Israel's coalition outlook still unclear
Israeli Prime Minister Netanyahu and his allies won 53 seats in this week's election, leading the main opposition camp's 48 seats, but still falling short of the majority threshold needed to govern without additional support. According to final vote counts released by election officials on Thursday, two Arab parties are expected to hold 19 seats in the 120-seat parliament, nearly doubling their previous seat count. It remains unclear whether main challenger Gadi Eisenkot will agree to work with the two Arab parties that oppose Netanyahu to form a government. The final vote count showed that Netanyahu's Likud party won 27 seats, the most of any single party. Israeli President Isaac Herzog must now decide who will be first to attempt to form a coalition. If neither Netanyahu nor Eisenkot, leader of the largest opposition party Yesh Atid, can ultimately cross the 61-seat threshold, Israel may hold another election early next year.
Intel's quarterly revenue outlook misses expectations, dragged down by weak PC demand and component supply shortages
Intel (ASX: INTC) issued a quarterly revenue outlook that fell short of analyst expectations, as demand for personal computer processors remained weak and profitable data center components faced supply chain problems. The company's shares plunged after hours. Intel said on Thursday that it expects fourth-quarter revenue of $15 billion to $16 billion. Data showed that analysts on average expected $17 billion, with some forecasts even exceeding $18 billion. Excluding certain items, fourth-quarter earnings per share are expected to be 25 cents, while Wall Street expected 43 cents. Intel is dealing with a severe downturn in the personal computer market. Its main customers, laptop and desktop manufacturers, are facing a shortage of memory chips and surging component prices, leading to lower PC shipments and weaker user demand. Intel CEO Chen Liwu said that if not for shortages of some raw materials and the shutdown of a plant in Israel, the company's data center business would have performed better. Intel is working to resolve these supply issues.
Amazon's capital spending surges while growth in its core e-commerce business weakens
Amazon.com (ASX: AMZN) reported higher-than-expected capital spending, while revenue growth in its e-commerce business slowed, and the company's holiday-quarter sales outlook suggested that the online business may struggle to rebound quickly. Amazon said third-quarter spending on property and equipment exceeded $77 billion, far above analyst expectations. The company is continuing to build data centers to meet demand for artificial intelligence services. Related spending caused Amazon's free cash flow outflow to reach $42.4 billion. Amazon said in a statement on Thursday that revenue rose 12% to $201.9 billion. Holiday-quarter sales are expected to be $240 billion to $247 billion. Analysts on average expected $244.5 billion. Although revenue at its cloud computing unit AWS accelerated for a sixth consecutive quarter, signs of sluggish growth appeared in the core business. Online sales rose only 2% to $68.5 billion, the slowest growth since early 2023, when Amazon was still dealing with a post-pandemic slump in online retail.
Microsoft makes first major bond issuance in nearly a decade, subscription demand reaches $115 billion
Microsoft (ASX: MSFT) drew unusually strong demand for a large bond issuance. Although investors' portfolios were already filled with AI-related debt, they still made room for the highest-rated company's first major bond sale in nearly a decade. According to people familiar with the matter, the deal's issuance size is expected to be at least $25 billion, with peak subscription orders exceeding $115 billion. Based on aggregated data, this makes it one of the most heavily demanded U.S. corporate bond issuance deals on record. According to people familiar with the matter, the world's largest software company plans to issue bonds in up to 10 tranches, with maturities ranging from 2 years to 40 years.
ECB keeps rates unchanged, Lagarde plays down risk of inflation broadening
European Central Bank President Christine Lagarde played down the risk of inflation spreading from energy into other areas. Earlier, news that she would step down early overshadowed the attention given to the ECB's decision on Thursday to keep interest rates unchanged. Lagarde sought to keep the press conference focused on monetary policy and revealed that she had discussed the possibility of a rate hike with other policymakers, but ultimately rejected the idea. The reason was that there is currently a lack of evidence that soaring energy prices are triggering excessive wage demands or significantly pushing up inflation expectations. However, given that investors tend to expect the ECB to raise the deposit rate by another 25 basis points in December, Lagarde still left room for further tightening, saying the ECB's direction was "clear." Lagarde told reporters in Frankfurt on Thursday, "We are watching closely. At the moment, we do not see risks of second-round effects beyond what is already included in the projections. Right now, we do not see clear risks of second-round effects."
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