SharespectiveWall street, before your first coffee

Sat 29 Aug 2026 Issue 237

The Hike Nobody Priced Plus: Stripe and Advent walk away from PayPal, and the takeover premium leaves with them.

Good morning, and welcome to Saturday. Kevin Warsh gave his first Jackson Hole keynote as Federal Reserve chair on Friday, and spent about thirty minutes not saying the thing everyone wanted him to say. No hint of a cut, no reassurance, just a plain line that with inflation above target, prices are what the Fed should be worrying about. Traders had gone in pricing roughly a one-in-three chance of a rate rise in September. They came out pricing better than even.

The equity market took it about as well as you'd expect, which is to say quietly. The S&P 500 lost 0.25% and still finished the week up. The real reaction was in bonds, where a lot of money changed its mind in one sentence.

Market snapshot

US levels are the official 4​pm New York close on Friday 28 August. The NZX 50 and ASX 200 are Friday's local closes, and currencies were taken at the end of Friday's New York session.

Warsh used his Jackson Hole debut to put a rate rise back on the table

The new Fed chair did not promise a hike. He didn't have to. In a speech that stayed deliberately broad — his approach to running the place, rather than a forecast — Warsh said that with inflation above the 2% target, the Fed's main focus right now should be on prices, and that the central bank has no tolerance for inflation staying where it is. Pricing for a 25 basis point increase at the 15–16 September meeting jumped to between 48% and 57%, depending on the market, from about a third the day before.

What actually moved. Not shares — bonds, in a revealing pattern. Yields on two-year Treasuries, which track where investors think the Fed's rate is heading over the next couple of years, rose about eight basis points. Yields on ten- and thirty-year bonds fell. That combination is the market saying it believes the Fed will do something unpleasant in the short term, and that inflation over the long run will therefore be lower. It's the closest thing a bond market has to a compliment.

The backdrop is stubborn. The Fed's preferred inflation gauge, out on Wednesday, had prices up 3.7% over the year with the core measure at 3.3% — both unchanged from June, which is the problem. Inflation has stopped falling rather than started rising, and a central bank that spent two years explaining why it was patient now has to explain why it still is.

Stripe and Advent walked away from PayPal, and US$7 a share walked out with them

PayPal shares fell about 12.6% on Friday to US$53.74 after Bloomberg reported that the buyout firm Advent and the payments company Stripe had abandoned their pursuit of the business. The consortium had been offering US$60.50 a share, valuing PayPal at more than US$53 billion, which would have ranked among the largest leveraged buyouts ever attempted. Instead, everyone goes home, and the shares are back to being worth whatever the business is worth.

Why the deal died. Partly because PayPal did too well. Its most recent quarter beat expectations, and between those results and the takeover talk the stock had climbed close to 30% since the approach surfaced in July. A leveraged buyout is bought with borrowed money, so the maths only works at a price the buyer can service out of the target's own cash flow — every dollar the share price rises makes that harder. PayPal's board, meanwhile, thought the offer was too low. Both sides were arguing about the same number from opposite ends.

What's left is the company as it actually trades. PayPal is still fighting Apple Pay and Google Pay for the checkout button, still working through cost cuts and a management reshuffle, and still worth a fraction of the roughly US$356 billion the market put on it at the 2021 peak.

Air New Zealand's fuel bill turned a profit into a NZ$242 million loss

The national carrier reported a net loss of NZ$242 million for the year to June, against a NZ$108 million profit the year before, with the pre-tax line swinging from a NZ$164 million profit to a NZ$336 million loss. Revenue wasn't the issue — it rose 3.9% to NZ$7.0 billion, with passenger revenue up 4.8% on more seats, more people and higher fares. Operating costs rose 11.8%, the board declared no final dividend, and the shares sat at a record low of around 39 cents while the NZX 50 fell 0.8% on Friday.

Where the money went. Three things, only one of them ever within the airline's control. The Middle East conflict added roughly NZ$328 million of unbudgeted fuel costs, cut to NZ$205 million after hedging and to an estimated NZ$135 million hit to the pre-tax result once higher fares and trimmed flying were counted. Engine problems — the Rolls-Royce Trent 1000s and Pratt & Whitney's PW1100s, both grounding aircraft worldwide — cost about NZ$190 million. Maintenance added another NZ$139 million.

Management gave no guidance for the coming year, on the grounds that they cannot forecast either the geopolitics or the fuel price, which is honest and also slightly bleak. Brent crude is still near US$88 a barrel. The airline expects maintenance costs to fall by NZ$50–100 million as engines come back, offset by NZ$70–90 million of lease commitments for the aircraft standing in for them.

Newsworthy numbers

Worth a read

Wrapping up

The week ahead belongs to the Reserve Bank of New Zealand. The Monetary Policy Statement lands at 2​pm on Wednesday 2 September — 4​pm in Sydney — and 27 of 31 economists surveyed by Reuters expect a second consecutive 25 basis point rise, taking the cash rate to 2.75%. In the United States, the August payrolls report is out at 8.30​am New York time on Friday 4 September.

Broadcom reports on Wednesday 2 September after the US close, with consensus around US$29.4 billion of revenue; the line worth finding is custom AI accelerators. The same morning brings Australia's June-quarter national accounts at 11.30​am AEST, the first read on whether an economy the RBA may be about to tighten into is growing or coasting. The RBA itself meets on 28–29 September.

The kiwi finished Friday at 1.6929 per US dollar and the Australian dollar at 1.3965, both weaker on the day as the greenback firmed after Warsh spoke. The Aussie still held onto a gain for the week, because a hawkish Fed and a Reserve Bank of Australia that has just been dragged back towards hiking roughly cancel each other out.

Have a good weekend — we'll see you Monday.