European Political Turmoil Roils Global Markets

Kwasi Kwarteng, Britain’s chancellor of the Exchequer, promised more ambitious fiscal policies were coming.Credit…Toby Melville/Reuters

European politics spark global markets volatility

U.S. stock futures are edging lower this morning, following declines in Europe and Asia. Investors started the week with a bang by fleeing risky assets for safer ones — read: the U.S. dollar. They appear to be especially wary of the British pound and U.K. government debt, as Britain’s new government commits to risky growth-focused tax cuts.

Kwasi Kwarteng, Britain’s chancellor of the Exchequer, doubled down this weekend on the government’s plan to cut taxes even as the country borrows billions to fund an energy relief package for homes and businesses. “There’s more to come,” he told the BBC.

The pound briefly hit a decades-long low against the dollar, at $1.03, before recouping some of its losses. But that recovery appears largely tied to expectations that the Bank of England will make a rare extra hike in interest rates to head off inflation spurred by the government’s new fiscal policy. Markets are now pricing in a series of increases to bring the benchmark to 6 percent by next summer.

Italy’s elections are having a less dramatic effect on markets. The prospect of a hard-right coalition led by Giorgia Meloni winning yesterday’s general election seemed to divide investors. As of 1 p.m. Milan time, Italian stocks were up 0.5 percent, outperforming markets elsewhere in Europe. Italian bonds fell, but the closely watched difference between Italian sovereign debt and the more stable German bund remains below levels seen in July, when the government led by Mario Draghi collapsed.

Markets are unsure what to make of Meloni, who has previously been a skeptic of the E.U. but has dialed back that criticism on the campaign trail — particularly as the European Central Bank continues to buy huge amounts of Italian debt.


Florida braces for Ian. The tropical storm has been gathering strength in the Caribbean and is now a hurricane. It could make landfall in the U.S. this week. Gov. Ron DeSantis of Florida declared a state of emergency for every county and warned of power failures and evacuation orders.

Who’s on the hook for the new U.S. corporate minimum tax? Just six companies — including Amazon and Berkshire Hathaway — would have paid half of the estimated $32 billion in tax revenue the new levy would have generated had it been in place last year, researchers found. The 15 percent tax is set to take effect in January.

Unilever’s C.E.O. lays out plans to step down. Alan Jope said he would retire at the end of 2023, after leading the consumer products giant since 2019. His tenure as C.E.O. has been marked by a languishing stock price, a failed attempt to buy GlaxoSmithKline and the arrival of the activist investor Trian.

Credit Suisse tries to allay concerns about its future. The leaders of the Swiss bank told employees that it was performing “a rigorous and diligent evaluation of all options,” after news reports suggested that the firm might take drastic moves like breaking up its investment bank. Credit Suisse is expected to formally announce its turnaround plan next month.

Exclusive: Peloton loses its chief marketing officer

Dara Treseder, who has been Peloton’s chief marketing officer since 2020, is leaving the ailing exercise equipment maker to run marketing at Autodesk, DealBook is first to report. Her move comes two weeks after Peloton’s co-founder and former C.E.O., John Foley, announced his exit amid a broader management shake-up. Reached by DealBook, a spokesman wished Treseder luck, adding that she had helped to more than double its membership to more than 6.9 million.

The departures leave in question the future of the brand. Treseder, who is staying at Peloton through Oct. 4, helped oversee the launch of four new products, including its $3,195 rowing machine. Treseder, formerly of Apple, Goldman Sachs and General Electric, also set up a content partnership with Beyoncé. Meanwhile, Foley had been the public face of the brand since its founding in 2012; Treseder called him “the greatest of all time.”

Treseder’s exit comes amid a broader restructuring. The pandemic darling of home workouts has had to pump the brakes on its rapid expansion in the past year as demand fizzled once lockdown measures were eased. In an effort to revive the business, Peloton hired Barry McCarthy, the former Spotify C.F.O., as its chief executive in February; he has since focused on trimming costs and revamping the subscription model. Peloton has laid off workers, announced plans to close stores, outsourced production and sell its bikes on Amazon. It’s been an uphill battle: Peloton reported a $1.2 billion quarterly loss, its sixth straight, and shares are down 75 percent through the year.

Marketing is key to its turnaround plans. The pandemic made Peloton’s workout bikes a household name. “Covid was the marketing campaign the company could never have afforded,” McCarthy told DealBook in February. Now, he wants to put Peloton’s fitness-focused app at the center of marketing efforts as the company looks to slash operating costs by $800 million this year. “We need to lean in and figure out whether or not we can actually increase the unaided brand awareness in a cost-effective way,” McCarthy said at an investor conference this month. “That’s the marketing challenge. And so that’s what we’re trying to sell for now.”

Credit…Denis Charlet/Agence France-Presse — Getty Images

Can TikTok finally clear the air with the U.S.?

Years after President Donald Trump threatened to block TikTok from the U.S. over its ownership by a Chinese tech giant, the wildly popular video platform is nearing a deal with the Biden administration to address national security concerns around Americans’ data, The Times reports. But plenty of hurdles — including political ones — remain.

The current plan: The draft preliminary agreement would have TikTok store its American data solely on U.S. servers, likely to be ones run by Oracle, sources told The Times. Oracle would also probably monitor the app’s recommendation algorithms, to help ensure that the Chinese government doesn’t use it to influence Americans. And TikTok would create a board of security experts who would report to the U.S. government and oversee its operations in the country.

Negotiations have been continuing between TikTok’s lawyers at Covington & Burling and Skadden and representatives for CFIUS, the government panel that reviews deals by foreign entities in American companies for national security issues.

Not everyone is satisfied with the terms. Officials at the Justice Department, including the deputy attorney general, Lisa Monaco, and the Treasury Department are worried that the agreement won’t resolve all national security concerns, The Times reports. The Biden administration has largely sought to maintain the hawkish position on China as its predecessor, despite using more diplomatic language.

Republican lawmakers are also unlikely to support any deal they see as insufficiently tough on TikTok and China. “Anything short of a complete separation” of TikTok from its Chinese parent, ByteDance, “will likely leave significant national security issues regarding operations, data and algorithms unresolved,” Senator Marco Rubio of Florida told The Times.

“We made a bit of progress, but I feel like that was almost a smoke screen.”

— Christie Pitts, an investor at Backstage Capital, on a sense that power in Silicon Valley has again become concentrated in the hands of a handful of white men and “bro” culture.

Medical pricing inquiry puts spotlight on McKinsey

In 2018, Providence, a nonprofit hospital chain based in Renton, Wash., was looking to save money. So it did what corporate America does when it wants to cut costs: it hired McKinsey. The result was the implementation of an aggressive collection strategy, called RevUp, that is now at the center of a lawsuit brought by the Washington state attorney general.

How Providence pursued low-income patients for bills they were not required to pay, and McKinsey’s involvement, are some of the revelations in an investigative story by The Times, which was published this weekend.

DealBook talked to Jessica Silver-Greenberg, an investigative reporter at The Times and one of the authors of the series, about what she uncovered.

What was McKinsey’s role?

RevUp, Providence’s plan to maximize profits from each patient, was developed with McKinsey. The consulting firm wrote the scripts that were used to coax patients, both low and high income, into paying. And McKinsey collected at least $45 million in fees for its work.

Did the strategy ultimately work?

In 2018, Providence spent 1.24 percent of its expenses on charity care. By last year that was down to below 1 percent. But an expert told us the real outcome that hospitals, like Providence, wanted was to make patients who couldn’t afford to pay so uncomfortable that they wouldn’t come back, even when they were in need of urgent care.

Providence called The Times’s findings “very concerning,” adding that it has since made changes to its collections practices. McKinsey declined to comment.



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  • A profile of SoftBank’s C.F.O., Yoshimitsu Goto, one of the few people who can say “no” to the tech giant’s voluble founder, Masa Son. (FT)

  • “Short Sellers Upended a Small Farm Real-Estate Company. This Is What It Looked Like.” (WSJ)


  • The World Bank’s president, David Malpass, said he won’t resign over criticism of his recent comments on climate change. (AP)

  • Corporate leaders are increasingly worried about growing U.S.-China tensions over Taiwan, going by risk factor statements in companies’ securities filings. (FT)

  • SiriusXM has suspended Brett Favre’s radio show amid a growing scandal over welfare spending in Mississippi that has ensnared the former N.F.L. quarterback. (Front Office Sports)

  • The I.M.F. has lent a record $140 billion to fiscally troubled nations so far this year. (FT)

Best of the rest

  • An internal study found that Exxon Mobil spent $138 billion more on oil and gas projects between 1998 and 2017 than initial estimates had called for. (Bloomberg)

  • An overlooked issue in America’s housing crisis is the disappearance of the starter home. (NYT Upshot)

  • “LinkedIn Ran Social Experiments on 20 Million Users Over Five Years” (NYT)

  • U.S. energy policy isn’t prepared to handle the growing need for air-conditioning in the summer. (WaPo)

  • Kyoto wants to welcome tourists back — without the excesses of Instagram-focused crowds. (NYT)

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