April 12, 2023
- Brookfield Infrastructure Partners struck a deal to buy Triton International Ltd., the world’s largest owner of intermodal containers, for $4.7 billion. The takeover bid is for $85 a share, including $68.50 in cash, the companies said early Wednesday, and is expected to close in the fourth quarter. It’s a 35% premium to Tuesday’s closing price. “Triton is an attractive business with highly contracted and stable cash flows, strong margins and a track record of value creation,” Sam Pollock, chief executive officer of Toronto-based Brookfield Infrastructure, said in a statement. Including debt, the deal is worth $13.3 billion.
- Former Bank of Canada Governor David Dodge says interest rates are bound to stay higher for longer, despite market bets that the central bank will lower borrowing costs later this year. “Traders have got it all wrong. I’m sitting with a lot of cash in my personal accounts at the moment, just waiting for those long rates to go up — not down,” Dodge, who was the governor from 2001 to 2008, said in an interview. The 79-year-old economist, now a senior adviser at law firm Bennett Jones in Ottawa, says the global economy is entering a new phase where real interest rates and inflation are higher. For Canada, he sees “either excess demand or deficiency of supply” exerting more upward pressure on consumer prices than expected through 2024.
- Canada’s economy was supposed to be stalling by now. It’s still charging ahead, creating a challenge for the central bank as it prepares to hold its policy rate at 4.5% for a second straight decision. Bank of Canada officials have said they’re confident higher borrowing costs are working to slow demand. Economic data, though, keep surprising to the upside. The jobs market is running hot, and there are abundant vacancies. Wage pressures remain strong. Home prices, after a yearlong slump, may have found a bottom. In January, when policymakers led by Governor Tiff Macklem first declared their intention to pause rate hikes, they forecast the economy would grow at just a 0.5% annualized pace in the first quarter. Early indicators show growth coming in around 2.8%, defying predictions of a stall and potential recession.
- European equities edged higher on Wednesday as traders looked ahead to consumer price index data from the US for clues on the Federal Reserve’s next steps in its fight against inflation. The Stoxx Europe 600 Index was up 0.3% by 11:05 a.m. in London. Among sectors, media and utilities outperformed, while travel and leisure and technology shares retreated. More broadly, Europe’s main equities benchmark has resumed its advance in recent weeks, putting it on course to recapture February’s high amid hopes that peak central bank rates are near. However, the sentiment remains fragile as policymakers continue to insist that their hawkish stance is warranted, and as investors brace for the start of the earnings season, which is expected to show margin and revenue pressure.
- US equity futures ticked higher with European stocks as investors awaited US inflation data that may shed light on the Federal Reserve’s next policy move. Contracts on the S&P 500 added about 0.2% in muted trading before the report that could stoke fresh volatility. Treasury two-year yields rose, holding above 4%, while the dollar was broadly lower. US headline inflation is expected to slow, with the core reading forecast to ease both on a monthly and yearly basis, supporting market expectations that the Fed will deliver one more rate hike before a pause and pivot to easier policy in the second half of the year. The dollar weakened against most of its Group-of-10 peers, while the euro advanced for a second day. The British pound was the only major currency to fall versus the greenback, extending its decline into a fifth day.
- Asian stocks fluctuated in a narrow range as investors awaited US inflation data due later today that could affect the market’s outlook on the monetary policy of the Federal Reserve. The MSCI Asia Pacific Index swung between gains and losses as communication shares fell and material stocks rose. Japan’s stock market was the region’s best performer, extending gains after media reports on Tuesday said Warren Buffett is turning his focus back to the nation’s equities. Benchmarks also advanced in Australia and South Korea ahead of the US inflation figures that could serve as a crucial factor for the Fed’s next policy meeting. Conditions including credit tightening from stricter bank regulations, higher crude oil prices and inflation are boosting the risk of a US recession, according to JPMorgan strategist Rie Nishihara.
- Oil held near the highest closing level since January as slowing flows from Russia, production cuts by OPEC+ and falling US inventories pointed to a tightening market. West Texas Intermediate traded above $81 a barrel after rallying by 2.2% on Tuesday. Russian shipments slid below 3 million barrels a day for the first time in eight weeks, after Moscow vowed to reduce production in retaliation for international sanctions, tanker-tracking data show. In the US, crude stockpiles at the national storage hub in Cushing, Oklahoma, fell by 1.4 million barrels last week, according to people familiar with data from the industry-funded American Petroleum Institute. If confirmed by government figures later on Wednesday, that would be a sixth consecutive drawdown.
- Gold extended gains above $2,000 an ounce, inching closer to a record as investors awaited US inflation data that may offer fresh insight into the Federal Reserve’s next rate move. Bullion was up 0.4% by mid-morning in London, rising for a second day to trade about 3% below a record set in 2020. Activity across global markets was muted as traders braced for inflation figures due later on Wednesday, which are expected to show an easing in price pressures that could set the stage for a loosening in monetary policy over the second half of the year. Spot gold rose 0.4% to $2,011.21 an ounce as of 10:52 a.m. in London, as the dollar weakened. Platinum and silver edged higher, while palladium was little changed. Industrial metals including copper and aluminum were flat to lower, with investors weighing signs of supply tightness in some markets against mounting worries about the outlook for global growth.
- Some of the world’s top private equity firms are scooping up the debt of their own portfolio companies from banks at steep discounts as they seek juicy returns amid a lull in deal making. Advent International Corp. recently bought a portion of a loan that helped fund its buyout of a Royal DSM unit, while Clayton Dubilier & Rice has purchased debt supporting at least two of its deals over the past year. Just last week Elliott Investment Management snapped up a $550 million chunk of bonds backing its acquisition of Citrix Systems Inc. at 79 cents on the dollar, following a similar move in September. The trades come as banks have stepped up efforts to offload billions of dollars of debt stuck on their balance sheets — the product of a sharp repricing of risk assets last year that upended underwriting pledges. With Wall Street willing to realize significant losses in some cases to shed the risk, buyout firms coming off the weakest quarter for M&A since 2020 are finding the often double-digit yields on debt of companies they’re already well acquainted with too good to pass up.
- The Biden administration deflected British calls for a resumption of trade talks, saying such discussions might next come up in June at a planned meeting with UK Prime Minister Rishi Sunak. US President Joe Biden, who’s in Northern Ireland to celebrate the 25th anniversary of the Good Friday peace agreement, will instead discuss peace and investment in the region and efforts to support Ukraine with Sunak, Amanda Sloat, the National Security Council’s senior director for Europe, told reporters in Belfast. “I don’t anticipate that the two leaders are going to be talking about a free trade agreement on this trip,” Sloat said on Wednesday. “I expect the two leaders will have the opportunity to talk in more detail about economic issues when they have the opportunity for a longer conversation in June,” she said, referring to a planned trip by Sunak to Washington.
- Elon Musk declared that most of the advertisers who abandoned Twitter after his $44 billion acquisition have returned, suggesting the struggling platform is regaining its footing. Musk, speaking in a rambling Twitter Spaces interview with the BBC that played out before millions of listeners, reaffirmed Twitter is operating at about breakeven and could become cash-flow positive as soon as this quarter. More than 3 million concurrent users tuned in to the almost two-hour-long conversation, which at times became combative as the billionaire turned the tables on his interviewer and questioned the BBC’s track record on everything from Covid misinformation to hate speech.
- The Federal Reserve will offer new insight Wednesday into how policymakers reached one of their most difficult decisions in years, shrugging off bank failures that roiled markets last month to deliver a quarter-percentage-point rate hike amid signs of stubborn price pressures. The Fed’s rate increase last month, which brought their benchmark rate to a range of 4.75%-5%, had a “very strong consensus” among committee members, Chair Jerome Powell told reporters in a press conference following the March 21-22 Federal Open Market Committee meeting. All eyes will be on the minutes from that gathering, set to be released Wednesday at 2 p.m. in Washington, for details about the debate. “The overall message should still be that there’s a lot of uncertainty, but we know that we have an inflation problem still — that will be number one,” said Citigroup Inc. economist Veronica Clark.
- Ron DeSantis is venturing outside of Florida with stops in Ohio and New Hampshire after recent fumbles in the national glare left the Florida governor and 2024 presidential hopeful further behind Donald Trump in polls. DeSantis, widely expected to enter the Republican nomination contest sometime after the Florida legislative session ends in May, is the featured speaker at county GOP events in Akron and suburban Cincinnati on Thursday and at a New Hampshire Republican Party dinner on Friday in Manchester. New Hampshire is an early Republican primary voting state. Considered to be the most formidable potential primary challenger to Trump, he faltered while trying to articulate his stance on US aid for Ukraine in its war with Russia and to effectively respond to Trump’s incessant attacks. DeSantis, a Yale University and Harvard Law graduate, has sought to carve out a lane as someone who has policies similar to Trump’s, sans the drama and political baggage.
- Switzerland’s parliament is approaching a deal to push through government guarantees for UBS Group AG’s takeover of Credit Suisse Group AG after a upper houses compromise was met with approval in the lower chamber. “The majority of our party will vote for this proposal if the government will pursue higher capital ratios and restricted bonuses,” Social Democrat lawmaker Roger Nordmann said in the lower house in Bern on Wednesday. The stricter stance on banks is “a major development,” he said. The 200-member lower house late on Tuesday voted against the 109 billion francs ($120 billion) in guarantees. While that was a symbolic vote that can’t stop the deal, it clashed with the upper house’s approval earlier in the day.
- The largest US banks are about to reveal how they fared as customer deposits came under siege in the first quarter. Deposits at JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp. are expected to have tumbled $521 billion from a year earlier, the biggest drop in a decade, according to analysts’ estimates. The decline — which includes a $61 billion slide in just the first quarter — comes as a late influx of cash following a crisis at regional lenders failed to offset the steady drain of customers to products offering higher rates. Western Alliance Bancorp learned that lesson the hard way last week, when it released updated financial information that left out data on deposit levels. Shareholders sent the Phoenix-based firm’s stock tumbling, until it released deposit data later in the day that was better than some analysts had feared.
- US 30-year fixed mortgage rates fell for a fifth-straight week to the lowest level in two months, shoring up demand to buy a home. The contract rate dropped 10 basis points to 6.3% in the period ended April 7, Mortgage Bankers Association data showed Wednesday. The group’s index of mortgage applications for the purchase of a home increased 7.8%, the most since mid January. Mortgage rates have been falling as investors seek safety in Treasury bonds following the recent collapse of several banks. Even so, borrowing costs are still generally high and housing inventory is limited, which has kept a lid on homebuying activity.
- American Airlines Group Inc. said first-quarter profit will likely fall short of Wall Street’s estimates as persistently high costs counter some gains from travel demand. Adjusted earnings will be 1 cent to 5 cents a share for the period, according to preliminary results disclosed in a regulatory filing Wednesday. The midpoint of the range is below the 4.6-cent average of analyst estimates compiled by Bloomberg. Preliminary revenue is $12.19 billion, roughly matching analysts’ expectation for $12.21 billion. While airlines continue touting the strength of post-pandemic demand that has been resistant to inflation or recession fears, there have been signs of consumers opting for lower fares and a recent slowing in weekly bookings. Investors are keeping a close watch for signals about spring and summer demand — the busiest time for travel.
- Sanguine stock investors are at risk of being rocked by volatility during the rest of 2023 as concerns about a recession intensify, Goldman Sachs Group Inc. strategists say. Stress in the banking sector and weaker economic data have increased the potential for bigger moves in the second quarter, the team led by Christian Mueller-Glissmann wrote in a note. The strategists said a Goldman model assessing a combination of macro-economic factors, market indicators and broader uncertainties signals a 54% chance of high volatility for the S&P 500, against a 39% chance that moves will be milder. While bond-market volatility has spiked this year, with yields fluctuating wildly as investors priced the likelihood of an economic contraction, equities have resembled oases of calm by comparison. Stock traders have focused instead on bets that slowing growth could prompt the Federal Reserve to call an end to its interest-rate tightening campaign.