Diamonds are not forever

Also in today’s edition: Tight pockets, still; AI fatigue is here

Good morning! Horlicks and Boost will no longer be sold as health drinks. According to The Economic Times, Hindustan Unilever (HUL) is ditching that label after the Ministry of Commerce told e-commerce sites to remove Mondelez's Bournvita from the "health drink" category. Remember when last year a viral reel on Instagram questioned Bournvita for its allegedly high sugar content? Yep, that's when it all started. Anyway, what's the new name for these beverages? Drumroll, please... HUL will now sell them as "functional nutritional drinks." Huh. 

🎧 Plastic treaty: to phase-out or to recycle? Also in today’s episode: dissecting Meta’s earnings report. Tune in on Spotify, Apple Podcasts, Amazon Music, Google Podcasts, or wherever you get your podcasts.

Soumya Gupta and Anup Semwal also contributed to today’s edition.

The Market Signal* 

Stocks & Economy: US GDP growth slowed to 1.6% in January-March as imports surged and inventories piled up. It was the slowest pace in two years. Yet, personal consumption spending shot up at a pace of 3.4% in the first quarter of 2024 compared to 1.8% in the previous quarter. The output decelaration could be a temporary blip as corporate earnings are showing strong growth. 

Google parent Alphabet is expected to be valued at over $2 trillion, joining fellow tech giants, after it beat street expectations in the first quarter. CEO Sundar Pichai said the company was “well under way with our Gemini era”.

Shares opened in the green across Asia on strong Big Tech performance. The Bank of Japan is expected to discuss liquidity tightening measures at a meeting on Friday. 

The GIFT Nifty indicates a flat start for Indian equities with an upward bias at open.

CONSUMER

Where’s That (In)Discretionary Spend?

Ordinary Indians still aren’t reaching for their wallets. The country’s biggest FMCG firm, HUL, posted a tepid set of numbers for the March 2024 quarter (pdf): 2% drop in the higher-margin beauty and personal care business and a 6% drop in the company’s profit after tax. Underlying volume growth, a measure of mass consumption, was a paltry 2%. 

HUL says consumer demand is recovering gradually, but a lot hinges on adequate monsoons. 

Dimmed stars: Meanwhile, Indians don’t seem to be in the mood for movies either. Cinemas are struggling as films flop in quick succession and audiences stay clear of the big screen. PVR-Inox, the country’s largest multiplex chain, is ditching ads to run more shows. Still, the June 2023 quarter is likely to be a washout: even the ongoing heatwave isn’t convincing people to spend on air-conditioned entertainment. 

PODCAST

Tune in every Monday to Friday as financial journalist and host Govindraj Ethiraj gives you the most important take on the latest in business and economy.

Today, he speaks to tax and audit expert TP Ostwal about inheritance tax. Also in today’s episode: Manisha Kapoor, CEO, Advertising Standards Council of India, on why it’s becoming tougher to get away with misleading product claims.

ARTIFICIAL INTELLIGENCE

The Next Big Thing Gets A Reality Check

Wall Street's message is clear: They'll get behind AI if tech giants prove they can make money off it.

Microsoft got the memo. Integrating OpenAI's tech across its products is working out for the world’s largest public company. Beating expectations, its revenue rose 17% year-on-year. 

Meta, on the other hand, disappointed despite posting better than expected earnings. It reported it would spend billions of dollars more this year on AI efforts while projecting weaker revenue for the current quarter. Zuck also made it clear AI won’t bring in money anytime soon. Investors got spooked, and Meta suffered its worst stock decline since October 2022. 

Alphabet reported a 15% increase in revenue from the same period last year, thanks to its search advertising business going strong and growing demand for its AI-powered cloud services. Caveat: users shifting to querying chatbots over using Google Search will disrupt its core business.

COMMODITIES

Precious, Precious Copper

In what could be one of the biggest megadeals this year—leave alone in the mining sector—Australia’s BHP, the world’s largest mining company with a market cap of $149 billion, has offered to buy UK-based Anglo American (AA). AA, valued at about $39 billion, announced that the proposal is “unsolicited, nonbinding and highly conditional”. The condition is that AA demerge two South Africa-listed units: Kumba Iron Ore and Anglo American Platinum.

If the deal goes through, BHP will get access to AA’s copper mines in South America and account for nearly 10% of global output of the metal, eclipsing even Freeport-McMoran, the US’ largest copper miner. In late 2023, global copper producers had warned of a dearth of new mines to meet burgeoning demand. Freeport-McMoran resorted to using new technology to extract copper from mining waste.

The Signal

This development spotlights the stark difference in forecasts for copper and precious metals/stones such as platinum and diamonds.

AA, which owns 85% of diamond major De Beers, has been walloped by low prices not least because of the growing popularity of lab-grown diamonds. That business may now be sold off.

On the other hand, copper is critical not only for energy transition, but for electrification in general. That means, unlike price crashes in other ‘green’ metals like nickel, copper is buffered by use cases such as artificial intelligence and increasing power consumption in developing economies.

FYI

Loan wolf: Adani Green Energy is in advanced discussions with DBS, Rabobank, SMBC, and MUFG for a $400 million loan, The Economic Times reports.

Waiting, watching: Despite a red-carpet welcome, Elon Musk’s Tesla is yet to conduct ground studies or speak to state governments to manufacture in India, Mint reports.

Another fail: ICICI Bank revealed sensitive information of 17,000 credit cards to the wrong customers due to a glitch in its iMobile app.  

Cha-ching!: Food delivery firm Swiggy has received shareholder approval for a $1.2 billion IPO while e-retailer FirstCry may withdraw its IPO papers following questions from the markets regulator. No look-see: In arguments against India’s IT Rules 2021, lawyers for WhatsApp Inc. told the Delhi HC the messaging app would shut down were it forced to break its end-to-end encryption. 

THE DAILY DIGIT

Rs 92.1 crore

Or approximately $11 million. That’s how much IT services firm Wipro is paying its outgoing CEO Thierry Delaporte as severance. He is leaving the job with more than a year left in his contract. (The Economic Times) 

FWIW

Tourism tsunami: Kyoto, Japan's ancient capital, famed for its Buddhist temples and bamboo forests, is drowning in a tidal wave of tourists. The culprit? A weak yen that's luring travellers like moths to a flame. Last year, this city of 2.5 million played host to a staggering 32 million overnight guests, leaving locals crying "tourist pollution". Overtourism has apparently left Kyoto's transportation system gasping for air, with residents forced to endure hours upon hours of waiting to board buses crammed to the gills with tourists and their luggage. One city council even had to ban "Geisha paparazzi"—photo-hungry tourists harassing the city's geisha—from private alleys. Locals’ frustration peaked in February when they elected a mayor who vowed to stem the excesses of tourism. But in a stunning reversal, the new mayor is now saying locals should understand tourism's benefits. Talk about a plot twist. 

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