Gamestop Stock – G-7 unifies against tax havens, Senate unifies against China | Business
This week, Madison Business Review contributor Bryce Roth provides a recap of what happened in the business world and stock markets.
A global tax deal, inflation and a Senate act all played a role in pushing markets last week.
The S&P 500 and the Nasdaq Composite closed the week in the green, increasing 0.41% and 1.5%, respectively. The Dow Jones Industrial Average turned red and decreased -0.80%. Nevertheless, all three indices are up over 9% for the year, continuing a strong rebound from the pandemic.
An end to tax havens?
The Group of Seven (G7) has agreed on a worldwide minimum tax rate that aims to prevent businesses from avoiding tax laws set in their home country.
Since tax laws vary by nation, businesses have been pushing their profits to foreign subsidiaries with lower rates, potentially saving billions of dollars. However, the proposed rate might remedy this. It seeks to impose 15% on corporate profits globally, no matter where a company is located. According to The New York Times, it’s now up to the G-20 to accept the idea.
However, this deal may be heavily debated because low-tax haven countries — such as Ireland — could suffer severe consequences and “holes in their budget” if major corporations decide to leave. Ireland has long been a low-tax haven that many businesses have fled to, such as Apple; denying the U.S. the tax money from their corporate profits. The goal for this deal is to incentivize companies to move abroad while keeping their money in the U.S.
Inflation at its highest
Given the trillions of dollars spent on stimulus, fears of surmounting inflation have driven markets for some time now. On June 10, it was announced that U.S. inflation officially rose 5% from one year ago — the biggest surge since the last recession nearly 13 years ago.
With this, higher prices should be expected for most consumer purchases. A third of the rise in the consumer price index (CPI), which measures inflation, was driven by car and truck prices.
In May, other key indexes for furniture, airline fares and apparel also increased.
These numbers may be worrisome at first, but it’s important to note that the annual inflation measurements are being compared with figures from last year during the pandemic. With the economy recovering from the drastic price drops of last year, the 5% jump is valid. The Federal Reserve defines this as a base effect, a reason why this shouldn’t be too much of a worry for investors.
Technology bill changes gears on China
Last week, Senate lawmakers approved a massive $250 billion bipartisan bill, the Innovation and Competition Act, to boost technology research and production. About $50 billion of the bill will be given to the U.S. commerce department to boost semiconductor development, a major problem in recent months.
However, the main focus of this bill became apparent as Chuck Schumer, the Senate majority leader, said: “I believe that this legislation will enable the United States to out-innovate, out-produce, and out-compete the world in the industries of the future.”
Including some China-specific provisions, it’s understood that the act is meant as a solution to growing Chinese competition. With a Senate evenly divided between Republicans and Democrats, the act passed 68-32, signaling that the U.S. is actively focused on beating China on these particular issues.
China has since denounced the bill and has come out with a statement displaying their disappointment with the way the U.S. is advertising this bill. The National People’s Congress stated that “this bill seeks to exaggerate and spread the so-called China threat to maintain global American hegemony … and deprive China of its legitimate development rights.” Tensions between the U.S. and China continue to be high — the bill seems to be spurring the flames.
GameStop sees revenues soar
GameStop’s earnings were reported better than expected, with revenue of $1.28 billion, up 25% from a year ago. The company boosted its cash reserves by selling nearly $552 million of its shares during the previous quarter and used that to reduce debt. Even with earnings better than expected, it’s hard to justify how GameStop’s shares are up 1,506%. However, it’s worth watching to see if GameStop can keep their revenue and stock price growing.
Alzheimer’s drug met with ill response
The U.S. Food and Drug Administration (FDA) recently approved a drug that’s said to help with Alzheimer’s. More than six million adults suffer from the disease, a major cause of death in the U.S.
This is the first drug approved to help with the disease in over 18 years; however, there’s a large debate currently about the accelerated approval of this drug.
“Accelerated Approval is not supposed to be the backup that you use when your clinical trial data are not good enough for regular approval,” Dr. Kesselheim said via Twitter. Three FDA advisers have resigned over the recent approval, and the backlash the FDA is receiving doesn’t seem like it’ll die down soon.
Bryce Roth is a senior finance major. Contact Bryce at [email protected]