April 4, 2023
- Teck Resources Ltd. is willing to entertain offers from potential suitors after it finishes the spinoff of its steelmaking coal business, according to people familiar with the matter. The Canadian miner said Monday it rejected an unsolicited $23 billion proposal from Glencore Plc and will forge ahead with an April 26 shareholder vote on separating its metals and coal divisions. If investors approve, the split is expected to happen by the end of May, with the base metals producer being renamed Teck Metals Corp. At that point, the Teck board is likely to be open to hearing offers from prospective partners or buyers including Glencore, the people said, asking not to be identified as the matter is private.
- Thomson Reuters said it will return proceeds from its sale of shares in London Stock Exchange Group to holders via a cash distribution of $4.67 per share. Total about $2.2 billion. Will also implement a reverse stock split to reduce the number of outstanding shares on a basis that is proportional to the cash distribution
- European equities gained as investors weighed the outlook for economic growth alongside rising bond yields, prompting a slight reversal of the rotation seen in the past weeks into defensive stocks. The Stoxx 600 Index added 0.5% by 11:13 a.m in London. Real estate, banks, automakers and insurance sectors rebounded, while more defensive utilities, healthcare and food and beverages lagged. France’s CAC 40 Index added as much as 0.7%, set for the highest close on record, while the Euro Stoxx 50 is less than 2% away from its highest close since 2007. The region’s stocks had their worst March since 2020, and faced with mixed economic data, the outlook for monetary policy is getting harder for traders to predict. However, sentiment improved last week, with the Stoxx 600 posting its biggest weekly gain since early January as inflation data in major economies plunged, fueling optimism. The index is now less than 1% away from erasing its drop after US lender Silicon Valley Bank collapsed in March.
- US index futures and global stocks rose amid signs inflation expectations are receding and central banks are no longer in a rush to accelerate monetary tightening. Contracts on the S&P 500 and Nasdaq 100 indexes added at least 0.3% each. Traders are overcoming their initial bearish reaction to the oil cartel’s plan and are now betting that the impact of higher crude prices on economic recovery won’t allow the Federal Reserve to speed up the pace of interest-rate hikes. US equity-index futures erased losses. While the Fed’s monetary path remains a key concern for equity investors, they are turning their attention to upcoming earnings releases. The latest reporting season is yet to pick up steam, though 14 of the 15 companies in the S&P 500 that have announced results so far have beaten estimates. Investors will be watching whether US corporate performance improves after a relatively sluggish prior quarter when only 69% of companies managed to surpass expectations.
- Asian stocks slipped, on course for their first drop in six sessions, as Chinese tech names declined and investors parsed weak US factory data and inflation risks from a surge in oil prices. The MSCI Asia Pacific Index lost as much as 0.4%, dragged down by Alibaba and Meituan. Hong Kong’s benchmark gauge ended its own five-day winning streak on profit-taking ahead of a holiday. The Hang Seng Tech Index dropped 1.6%, weighed down by Chinese electric-vehicle makers.
- Oil built on the largest gain in a year after OPEC+ set out to punish short sellers with a surprise production cut that tightened the global market and widened key timespreads. West Texas Intermediate was near $81 a barrel after closing more than 6% higher on Monday. The surprise reduction wrong-footed the market, and prompted many banks to raise price forecasts, although some bears remain. The gap between the nearest two December contracts for Brent rose to $5.72 a barrel in backwardation — a bullish pattern — from $3.80 on Friday. The move was aimed at catching out speculators that have been betting that oil prices would fall. The Organization of Petroleum Exporting Countries and its allies began to see the need for a change in policy on March 20, according to people familiar with the matter, when Brent slid to a 15-month low near $70 a barrel as a banking crisis threatened to hobble the economy.
- Gold held Monday’s gain that came after data showed higher interest rates slowing the US economy, ahead of a much awaited labor market report. The precious metal steadied on Tuesday, after a 0.8% climb in the previous session as a gauge of US manufacturing activity showed a slump in March to the lowest since 2020. The measure suggests tightening lending conditions are taking a toll on business sentiment, slowing economic activity and further boosting gold’s appeal. Spot gold declined 0.1% to $1,983.58 an ounce by 9:20 a.m. in London. The Bloomberg Dollar Spot Index was flat, after falling 0.4% on Monday. Silver, platinum and palladium were steady.
- Wheat rose for a second day in Chicago as the US winter crop emerges from dormancy in the worst shape in records spanning three decades. Drought has gripped some of the country’s key winter-wheat growing regions for months, including Kansas and Oklahoma. Soil moisture levels are becoming more vital with crops resuming growth as spring sets in. That’s left just 28% of fields in good or excellent condition as of April 2, the US Department of Agriculture said Monday in its first national report after a winter break. The figure is the worst rating for the 13th week of the year since at least 1989, although data wasn’t reported until the 14th week during some years.
- Finland is set to become the 31st member of NATO, completing a tumultuous process of accession sparked by Russia’s invasion of Ukraine that upended the European security landscape. In a bittersweet moment, Finland will gain Article 5 security guarantees and deterrence, but will be forced to leave its close neighbor Sweden behind on the doorstep of the North Atlantic Treaty Organization. NATO foreign ministers will mark the accession with a flag-raising ceremony in Brussels later Tuesday. The accession of just one of the two Nordic countries will make the alliance’s northern enlargement incomplete as NATO seeks to boost its presence in the Arctic, with the High North area’s significance increasing, as well as to gain more clout in the Baltic Sea.
- Five days after he became the first former US president to be indicted, Donald Trump will surrender to law enforcement officers in lower Manhattan to be booked, hear the charges against him and enter his plea: Not guilty. Trump, who is making a comeback bid for the White House, is set to be arraigned Tuesday afternoon following his March 30 indictment by a New York state grand jury. The city’s police department, the US Secret Service and other authorities are on high alert given the political firestorm over the case. The former president will plead not guilty “very loudly and proudly,” his lawyer Joe Tacopina said Sunday on CNN. The indictment stems from Manhattan District Attorney Alvin Bragg’s probe of hush money payments made just before the 2016 election to cover up an alleged decade-old affair. Trump’s then lawyer and fixer Michael Cohen, now a fierce critic, has testified that his boss covertly reimbursed him for the payments.
- Silicon Valley Bank’s blunders were encouraged by US regulation, went untested by the Federal Reserve and were “hiding in plain sight” until Wall Street and depositors grew alarmed. That’s JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon’s assessment of the US banking crisis that sent markets careening last month, an episode he predicts is “not yet over” and will be felt for years. He said US authorities shouldn’t “overreact” with more rules. In his wide-ranging annual letter to shareholders on Tuesday, Dimon described his firm’s aspirations for using artificial intelligence and ChatGPT, weighed in on geopolitics, and provided updates on JPMorgan’s activities in Ohio. This time, many of his sharpest remarks ripped at regulation, including capital rules that pushed banks to binge on low-interest assets that lost value as interest rates shot up.
- Credit Suisse Group AG faced imminent failure if it hadn’t been sold to UBS Group AG in an emergency rescue last month, according to the Swiss central bank. Without the government-brokered takeover, it’s “very, very likely a financial crisis in Switzerland and worldwide would have happened,” Swiss National Bank Vice President Martin Schlegel told broadcaster SRF in an interview that aired Monday. Credit Suisse “would then have been bankrupt.” The comments highlight the dramatic situation for the Swiss lender before it agreed to the 3 billion-franc ($3.3 billion) deal last month, when global markets were already fragile because of the Silicon Valley Bank failure in the US. They come as investors convene in Zurich’s hockey stadium Tuesday for Credit Suisse’s annual general meeting. Shareholders and proxy advisers have indicated they may vote against the reelection of several board members.
- Walmart Inc. is accelerating its push into online retailing in India, with its local payments business launching an app selling everything from electronics to groceries. PhonePe Pvt, owned by the US retailer, said Tuesday it will introduce a shopping app on a government-backed e-commerce network. The app, called Pincode, will offer products from local stores and merchants across categories such as food, electronics and fashion. The launch means Walmart will have two separate online shopping entities targeting India’s trillion-dollar retail market, of which e-commerce still accounts for a minuscule share. Walmart purchased leading online retailer Flipkart in a $16 billion deal in 2018 and now competes against rivals such as Amazon.com Inc. and a slew of local contenders.
- A risk-on mood fueling this year’s equities rally is likely to falter, with headwinds from bank turbulence, an oil shock and slowing growth poised to send stocks back toward their 2022 lows, according to JPMorgan strategist Marko Kolanovic. “The Fed indicated no intention to cut interest rates this year, yet risk assets are exhibiting an unprecedented rally, with European stocks trading near all-time highs and US stocks recovering recent losses,” Kolanovic wrote in a note to clients Monday. “We expect a reversal in risk sentiment and the market retesting last year’s low over the coming months.” In his view, the inflows into stocks over the past few weeks “make little sense” and were largely driven by systematic investors, a short squeeze and a decline in the Cboe Volatility Index, or VIX.
- French skincare giant L’Oréal SA has agreed to acquire luxury cosmetics brand Aesop, which was founded in Melbourne before developing a cult global following, for an enterprise value of $2.53 billion. The transaction caps months of negotiations as other companies, including private equity firm Permira and Chinese investment firm Primavera Capital also showed interest in the Australian brand, owned by Brazil’s Natura & Co., people familiar with the matter told Bloomberg last month. At L’Oreal, Aesop joins a cast of luxury brands such as Lancome and Yves Saint Laurent as the French company bets on a continued drift toward high-end cosmetics.
- Faced with soaring interest rates and market whiplash, companies are turning away from the loan market in a way that hasn’t been seen this decade. Several banks organizing corporate financing withdrew plans to bring loans to market last month and M&A activity, a big driver of loan sales, has slowed dramatically. Global sales of syndicated loans fell 43% in the first quarter to $493 billion, the lowest since 2010. “There are some clients who have more liquidity than they need,” said Susan Olsen, head of North America investment-grade loans at Citigroup Inc. “In syndicates, for a bank that is not really achieving its targeted return or doesn’t see a runway to do so, we’re certainly seeing them exit deals.”
- California’s relentless winter storms have left behind one of the state’s biggest snowpacks on record, while raising the risks of prolonged flooding this spring in parts of the Central Valley already under water. The snowpack’s water content measures 237% of normal for this time of year, officials with the California Department of Water Resources said Monday. That ties the previous record, set on April 1 of 1952, and it’s well ahead of the next runner-up: 227% in 1983. The start of April typically marks the snowpack’s peak for the year as winter storms give way to the warmer temperatures and longer days of spring. That shift now worries California’s water managers. Parts of the Central Valley’s Tulare Basin — a former lake drained for agriculture — have been flooded by the storms. And the mountains above the basin now hold enough snow to push spring runoff on the Kern River to 422% of average, said Sean de Guzman, manager of the department’s snow survey and water supply forecasting unit. The area could see prolonged flooding, warned department Director Karla Nemeth.