World Street | Japan's Nikkei 225 plunges 4%, OpenAI stares at losses, China to cut mortgage rates and more

China’s central bank announced on Sunday that it would instruct banks to lower mortgage rates for existing home loans by October 31, as part of broader efforts to stabilise the struggling property market amid a slowing economy, Reuters reported. Commercial banks are expected to reduce interest rates in phases, bringing them to at least 30 basis points below the Loan Prime Rate (LPR), the central bank’s benchmark rate for mortgages. On average, the reduction is expected to trim mortgage rates by around 50 basis points.

Distress call

OpenAI, the creator of ChatGPT, is projected to face around $5 billion in losses this year despite generating $3.7 billion in revenue, The New York Times reported. Last month alone, OpenAI raked in $300 million in revenue, a staggering 1,700 percent spike since early last year. The company anticipates $11.6 billion in sales next year, according to the report.

According to The New York Times, an analysis by a financial expert who reviewed OpenAI's documents reveals that the anticipated $5 billion in losses this year are primarily due to the high costs of running its services, along with expenses for employee salaries and office rent. These operational costs are significant factors contributing to the company's financial deficit, despite its impressive revenue growth.

Struggles continue

China's factory activity contracted for the fifth month in a row in September, putting into focus the ongoing challenges in reviving growth in the world’s second-largest economy. The official manufacturing Purchasing Managers' Index (PMI) came at 49.8 for the month, an improvement from August’s 49.1, July’s 49.4, and June’s 49.5, according to the National Bureau of Statistics. While the reading came in slightly above the 49.5 forecasted by economists polled by Reuters, it remains below the 50 mark, which signals continued contraction in manufacturing activity.

Money matters

Apple has exited negotiations to participate in an OpenAI funding round expected to raise approximately $6.5 billion, according to a report by the Wall Street Journal on Friday. Citing sources, the report also suggests that Apple recently withdrew from the talks, with the round expected to close next week. However, other tech giants like Microsoft and Nvidia have been in discussions to participate, with Microsoft reportedly planning to invest around $1 billion, building on its previous $13 billion investment in OpenAI.

Sitting on cash

Australia has achieved its second consecutive budget surplus at  $10.91 billion (A$15.8 billion) for the year ending June 2024, the government announced on Sunday. This surplus comes ahead of the A$9.3 billion forecast in May and follows Australia's first budget surplus in 15 years, which was A$22.1 billion for the previous fiscal.

The surplus, attributed to lower government spending, comes as Australians, squeezed by inflation and high mortgage rates, have focused their spending on essential services like healthcare. Finance Minister Katy Gallagher highlighted that the surplus is a "key part of our plan to take pressure off inflation while providing relief to families under financial strain."