April 17, 2023
- Teck Resources Ltd.’s controlling shareholder has given his clearest indication yet that the company will be up for sale, but only if investors throw their support behind a plan to split the Canadian miner in half. Norman Keevil, the 85-year-old magnate who controls Teck through “supervoting” Class A shares, offered investors the prospect of a future deal as the company scrambles to win over investors in the face of a competing proposal from Glencore Plc. Glencore’s $23 billion offer — to merge the businesses and then create two new companies that mine metal and coal respectively — gained traction toward the end of last week, putting Teck on the back foot. Two influential investor advisory groups came out against Teck’s plan, while Bloomberg reported on Friday that Teck’s largest investor, China Investment Corp., currently favors Glencore’s proposal. Teck investors will vote on the plan to spin off its coal mines in a little more than a week, and Glencore Chief Executive Officer Gary Nagle has said that the company will keep pursuing a deal if Teck’s investors vote down the restructuring plan.
- Home Capital Group said the Commissioner of Competition has issued a “no-action letter” on its acquisition by Smith Financial. The issuance of the no-action letter satisfies the Competition Act closing condition of the agreement. Closing remains subject to the receipt of regulatory approvals under the Bank Act and the Trust and Loan Companies Act
- Volvo Group subsidiary Nova Bus Inc. has landed a C$2.2 billion ($1.6 billion) contract to manufacture electric buses in Canada’s Quebec province, according to a person familiar with the matter. The deal is for about 1,200 buses, the person said. The vehicles will be produced and assembled at Nova Bus’s factory in Saint-Eustache, a Montreal suburb, La Presse reported, and the cost will be shared between the federal and provincial governments.
- European stocks were steady as traders prepared for the earnings season as the next key catalyst for assessing companies’ health in the face of an economic downturn. The Stoxx Europe 600 rose less than 0.2% by 9:27 a.m. in London. Construction and industrial shares outperformed. Technology shares were the biggest decliners as ASML Holding NV fell after a report that Taiwan Semiconductor Manufacturing Co. plans to cut its capital expenditure target to a range of $28 billion to $32 billion this year. European equities have climbed for the past four weeks as investors moved past the turmoil in the banking sector, anticipating central banks will pause rate hikes in the coming months. The immediate focus now turns to earnings as traders judge the effect of headwinds like higher rates and slowing demand on company profits.
- Contracts on the technology-heavy US Nasdaq index slipped on Monday, as the possibility of further Federal Reserve policy tightening lifted Treasury yields and investors stayed on the sidelines ahead of a set of crucial bank earnings. Contracts on the interest rate-sensitive Nasdaq 100 traded in the red and those on the S&P 500 flatlined, following moves lower on Friday when markets were unnerved by Fed Governor Christopher Waller’s comments favoring further policy tightening. On Monday, investors are awaiting reports on Monday from Charles Schwab Corp. and State Street Corp. The former will be in particular focus after a 40% share price plunge year-to-date, caused by rising interest rates. Later in the week, Bank of America Corp. and Goldman Sachs Group Inc. are due to deliver results along with Netflix Inc. and Tesla Inc.
- Asian stocks advanced as investors bet on a faster-than-expected recovery in China ahead of key economic data releases, offsetting losses in technology names. The MSCI Asia Pacific Index rose as much as 0.3%, with Hong Kong and China benchmarks leading gains in the region. GDP and retail sales data due Tuesday will probably show the economy picked up in the first quarter after Covid Zero ended. The housing market also showed signs of stabilization, with home prices increasing for a second consecutive month in March. The optimism about China countered weakness in tech, with shares of Indian IT services firm Infosys slumping the most in three years after disappointing earnings guidance and a wave of brokerage downgrades. Taiwan’s MediaTek also contributed to the sector’s losses on profit concerns.
- Oil lost ground after a fourth week of gains as a rallying US dollar and demand headwinds countered warnings from the International Energy Agency of higher prices ahead. West Texas Intermediate futures dipped below $82 a barrel on Monday after previously posting the longest run of weekly increases since June. A returning appetite for risk was fueling a greenback rally as stocks rose from Hong Kong to London. Lingering concerns over global inflation and demand for oil products were also a factor. The IEA warned on Friday that the surprise OPEC production cut announced earlier this month will lead to painful price increases for consumers. The supply curbs that begin in May should further tighten the outlook for the second half of the year, the agency said.
- Gold edged higher after ending last week with a steep loss on stronger-than-expected US inflation data that boosted bets on more monetary tightening. The precious metal traded above $2,000 an ounce Monday after tumbling 1.8% on Friday, when data showed US near-term inflation expectations unexpectedly surging in early April. Swaps traders are near to fully pricing in another rate hike at the Federal Reserve’s May meeting. Bullion is still holding onto gains seen after banking turmoil in the US and Switzerland, despite concerns of a full blown crisis dissipating. Official data continues to paint a mixed picture of the price pressures in the US economy, with two gauges of inflation cooling last month.
- The rally in the S&P 500 has been driven by only a handful of stocks, putting the index at risk of fresh lows if bond yields rise, according to Morgan Stanley’s Michael Wilson — one of the most bearish voices on Wall Street. The percentage of stocks outperforming the S&P 500 on a three-month rolling basis is the lowest on record, Wilson said. That “is the market’s way of warning us we are far from out of the woods with this bear market,” the strategist — who was ranked No. 1 in last year’s Institutional Investor survey for correctly predicting the stock slump — wrote in a note. The biggest risk could come from a slump in the technology sector if inflation proves sticky and bond yields rise, Wilson said. The tech-heavy Nasdaq 100 has surged 20% this year, partly as the sudden collapse of some regional US lenders sparked a rotation away from banking stocks and toward growth shares. Investors have also been betting that cooling inflation would prompt the Federal Reserve to stop hiking rates soon, but Wilson warned those expectations were premature.
- Fox News and Dominion Voting Systems Inc. are accelerating settlement talks on the eve of trial in the voting-machine maker’s $1.6 billion defamation suit against the conservative news network, according to people familiar with the matter. Delaware Superior Court Judge Eric Davis’s Sunday night announcement of a one-day delay to the trial was aimed at giving the parties more time to possibly reach a deal, the people said. Final jury selection and opening arguments scheduled for Monday were postponed to Tuesday.
- Slovakia is temporarily banning imports of Ukrainian grain, following moves by Poland and Hungary to block shipments over concerns they’re hurting their domestic markets. The bans by the three eastern European Union nations underscore splinters in the bloc’s efforts to support Ukraine. Member states have voiced dissent over issues including arming Kyiv, banning Russian energy imports and helping the war-ravaged country to export food that helps feed millions in developing nations. Poland and other neighboring nations had agreed to help Ukraine — a crucial grain supplier — to move its cargoes through their territory after Russia’s invasion temporarily blocked Black Sea exports last year. But part of that supply is now piling up in eastern Europe. That’s adding pressure on local farmers as global grain prices have slumped from last year’s peak.
- Global mergers and acquisitions activity is gearing up for a spring renaissance, with more than $20 billion of potential transactions emerging since the weekend. The latest charge is being led by Merck & Co., which agreed Sunday to buy Prometheus Biosciences Inc. for about $10.8 billion — continuing a theme of large biotechs looking for ways to boost pipelines and portfolios of new drugs. It’s the latest boost for dealmakers in health care, which is one of the few sectors that’s defied the global slump in M&A. Transaction values are still down 47% this year at $687 billion, according to data compiled by Bloomberg. But dealmakers could now start to claw back some meaningful ground as investor sentiment and conditions in financing markets improve following March’s mini-banking crisis. There are a number of possible big-ticket deals across a range of sectors that would go some way to helping them do that.
- BlackRock Inc.’s assets under management are set to exceed $15 trillion in five years’ time, analysts at Morgan Stanley said, with the broker predicting that fixed income and cash management will help propel the investment manager’s growth. The world’s top asset manager has already seen a boost amid the recent turmoil in the US banking sector, following the collapse of Silicon Valley Bank in March. BlackRock reported $110 billion of net inflows for the first quarter, beating estimates, while assets rose to $9.09 trillion. The gains are likely to continue, according to Morgan Stanley analyst Michael Cyprys, hiking BlackRock’s price target to $861 from $829, the second-highest among analysts tracked by Bloomberg. Cyprys, a BlackRock bull who has always had an overweight rating on the stock, identifies four “growth zones” for the firm, including fixed income, cash management, private markets and Aladdin, its investment-management technology platform. These are set to drive annual organic asset growth of 5% over the next three years.
- Barclays Plc will cut about 100 roles in its investment banking group, as the slowdown in dealmaking and capital-markets businesses continues. Conversations with affected staff are set to take place this week, a person familiar with the matter said, asking not to be identified discussing internal matters. The job reductions come at a time when many banks are facing pressure from slowing deals and rising interest rates. Dealmakers at Barclays, like many of its rivals, are facing a continued drought with investment banking fees at the British lender falling about 50% year-on-year to £480 million ($596 million) in the fourth quarter. The London-based lender cut roughly 200 roles from the same division in November, which represented less than 3% of the unit’s global headcount, Bloomberg News reported at the time. Barclays as a whole had nearly 90,000 employees at the end of 2022, according to its annual report.
- Alphabet Inc. slid in early trading on Monday, indicating the Google parent could notch its biggest single-day decline in more than two months, after a report said Microsoft Corp.’s Bing may become the default search service on Samsung Electronics Co. devices. Suwon-based Samsung, the world’s leading smartphone maker, is considering making the switch, the New York Times reported on Sunday, putting at risk roughly $3 billion in annual revenue for Google, according to the newspaper. Bing’s threat to Google’s search dominance has grown more credible in recent months with the addition of OpenAI’s technology to provide ChatGPT-like responses to user queries. Samsung shipped 261 million smartphones in 2022, according to IDC data, all running Google’s Android software. The Korean company has long-established partnerships with both Microsoft and Google, and its devices come preloaded with a library of apps and services from both, such as OneDrive and Google Maps. Negotiations are still ongoing and Samsung may yet decide to keep Google as its default provider, according to the report.
- A quartet of the largest oil exchange-traded funds has capped the longest run of outflows since mid-2022 as investors pull cash after a recent rally and with the global demand outlook clouded. Combined, the funds — WisdomTree Brent Crude Oil, United States Oil Fund, WisdomTree WTI Crude Oil, and ProShares Ultra Bloomberg Crude Oil — have posted net outflows for four weeks, according to data compiled by Bloomberg. That’s the longest run since July, with a drawdown of $211 million last week. Crude futures — both for global benchmark Brent and US counterpart West Texas Intermediate — just wrapped up four weeks of gains after OPEC+ announced a surprise supply cut and key timespreads became more bullish. At the same time, however, some products, notably diesel, have flashed warning signals as investors fret about a global slowdown, including a possible US recession.
- Investors are piling in for LVMH’s first debt sale in three years, as the luxury goods maker seizes on quarterly results that blew past market expectations as well as calmer conditions in Europe’s credit market. The Paris-based owner of Christian Dior and Louis Vuitton has garnered over €3.6 billion ($3.95 billion) of investor bids for at least €500 million of new bonds due in 2025, according to a person familiar with the matter, who asked not to be identified because they aren’t authorized to speak publicly. It’s set to be LVMH’s first venture into global debt markets since April 2020, when the company sold debt in the wake of the pandemic. That sale came soon after a huge deal in February to support the acquisition of Tiffany & Co.
- Apple Inc.’s sales in India hit a new high of almost $6 billion in the year through March, highlighting the market’s increasing importance for the iPhone maker as Chief Executive Officer Tim Cook arrives in the country to open its first local stores. Revenue in India grew by nearly 50%, from $4.1 billion a year earlier, according to a person familiar with the matter, who asked not to be named as the information is not public. Apple is scheduled to post quarterly earnings on May 4 and has signaled it expects total global revenue to decline. Cook is set to inaugurate India’s first Apple stores this week, seeking to accelerate growth in a country of 1.4 billion where the company’s smartphones and computers have never held more than a minuscule market share due to their high cost. With tech demand slowing globally, Apple has identified India’s expanding middle class as an attractive opportunity and it’s also adding local production at an increasing rate.
- A mass wave of downgrades that shocked investors as they watched Europe’s top ESG designation get stripped from almost $200 billion may now be reversed. Many of the reclassifications, which saw a coveted ESG tag known as Article 9 get wiped off €175 billion ($192 billion) in funds in late 2022, appear to have been unnecessary in light of new guidance from the European Commission, according to Hortense Bioy, global director for sustainability research at Morningstar Inc. The upheaval last year led investors and regulators alike to question the basic construction of the environmental, social and governance investing rulebook that Europe enforced more than two years ago. The Sustainable Finance Disclosure Regulation, which EU officials had hoped would serve as a global standard, has undergone a series of updates since its enforcement to address a seemingly endless list of shortcomings.