April 3, 2023
- Canada’s Teck Resources Ltd. rejected a proposal from Glencore Plc to buy the company for shares and then spin off their combined coal businesses, in the latest sign of dealmaking heating up across the mining industry. Glencore’s proposal on March 26 represented a 20% premium at the time, according to Teck, and would be worth about $23.2 billion at Friday’s closing prices, according to Bloomberg calculations. Glencore’s approach comes as the world’s biggest miners shift back into dealmaking mode after years on the sidelines. It also shows how large producers of coal like Teck and Glencore are grappling with the future of those business — mining companies are seeking to focus more on metals like copper and nickel that will benefit from the clean-energy transition, and yet coal still remains a big profit driver.
- Ovintiv surges 7.3% premarket after the oil and gas producer agreed to buy substantially all leasehold interest and related assets of Black Swan Oil & Gas, PetroLegacy Energy and Piedra Resources, which are portfolio companies of funds managed by EnCap Investments.
- Saputo Inc. announces today it has entered into a definitive agreement to sell two fresh milk processing facilities in Laverton North, Victoria, and Erskine Park, New South Wales, to Coles Group Limited, an Australian-based supermarket, retail, and consumer services chain, in a transaction valued at approximately CDN$95 million.
- European stocks inched higher on the first trading day of the second quarter as energy shares jumped and investors shrugged off concerns about inflation following a surprise oil production cut by OPEC+. The Stoxx 600 was up 0.3% by 10:08 a.m. in London. Energy stocks surged after OPEC+ announced a reduction of more than 1 million barrels a day to output, abandoning previous assurances that it would hold supply steady. Banks and telecoms also gained, while travel and leisure underperformed. European stocks just wrapped up their worst March performance since 2020 and also lagged behind US peers for the first time since October as banking turmoil led to renewed worries of a recession. The month also saw a big sector rotation, with investors swapping economically-sensitive cyclical sectors for defensive and growth stocks. Still, sentiment recovered last week as the Stoxx 600 posted its best weekly advance since early January after economic data pointed to cooling inflation.
- Global markets made a shaky start to the second quarter of 2023 as OPEC+’s surprise plan to cut oil production revived concerns of elevated inflation and pushed traders to prune their wagers on a dovish tilt by the Federal Reserve. Monday’s market moves presented a contrast to a consensus view that drove up asset prices at the end of the first quarter, when Treasuries and stocks rallied amid expectations the banking turmoil in rich nations will encourage the Fed to pause interest-rate hikes and opt for a cut later this year. Those bets were now being revised: Money markets raised the probability of a quarter-point interest-rate hike in May to 65% from 55% seen earlier.
- Asian stocks dropped as a surprise announcement by OPEC+ to cut crude outputs sparked concerns over further inflation risks. The MSCI Asia Pacific Index fell as much as 0.4%, dragged by tech stocks. Energy shares were the biggest gainers on the regional gauge. Benchmarks in Japan, mainland China, Australia and Singapore rose while those in South Korea fell. The unexpected production cut by OPEC+ overshadowed Friday’s data that indicated US inflation was cooling, which may cloud outlook on the Fed’s rate hike path.
- Oil surged after OPEC+ unexpectedly announced crude output cuts that threaten to tighten the market, delivering a fresh inflationary jolt to the world economy and irking the White House. West Texas Intermediate soared as much as 8%, the biggest intraday move in more than a year, and traded at $79.95 a barrel at 10:03 a.m. in London. In wider markets, the dollar advanced along with Treasury yields. The Organization of Petroleum Exporting Countries and allies including Russia pledged on Sunday to make cuts exceeding 1 million barrels a day from next month, with Saudi Arabia leading the way with 500,000 barrels. Traders had expected OPEC+ to hold output steady. The shock move came outside the group’s scheduled timetable for reviewing the market and members’ supply.
- Gold edged higher as markets were rocked by a surprise oil production cut by OPEC+ that threatens to add to global inflationary pressures. Bullion advanced after it rose 7.8% in March, its biggest monthly gain since November, as turmoil in the banking sector spurred haven demand and diminished expectations for more monetary tightening. Those concerns have since dissipated after swift action from the US and Swiss authorities, though gold is holding most of its gains. Spot gold rose 0.5% at $1,978.72 an ounce as of 1:02 p.m. in London. The Bloomberg Dollar Spot Index weakened 0.2%. Silver and platinum slid, while palladium edged higher.
- Morgan Stanley’s Michael Wilson — among the most prominent bearish voices on US equities — warns the rally in tech stocks that’s exceeded 20% isn’t sustainable and that the sector will return to new lows. The Nasdaq 100 has soared into a bull market as investors fled economically sensitive sectors like banks following the collapse of several US lenders. Wilson said this rotation is taking place partly because tech is being viewed as a traditional defensive sector, though he disagrees with that thesis and sees utilities, staples and health care as having the better risk-reward profile. “Tech is actually more pro-cyclical and bottoms coincidently with the broader market in bear markets,” the strategist — who ranked No. 1 in last year’s Institutional Investor survey after he correctly predicted the selloff in stocks — wrote in a note.
- Endeavor Group Holdings Inc. has agreed to buy World Wrestling Entertainment Inc. in a deal that values the company at $9.3 billion including debt. The combined businesses will have an enterprise value of more than $21 billion, the companies said in a statement on Monday. Endeavor will hold a 51% controlling interest in the new company, and existing WWE shareholders will have a 49% interest. The company will be led by Ariel Emanuel, chief executive officer of Endeavor. Emanuel will also continue in his role as CEO of Endeavor. Dana White will continue in his role as president of UFC, and Nick Khan will serve as President of WWE.
- Indebted theater chain Cineworld Group Plc aims to raise $2.26 billion as part of its plan to shave debt and exit bankruptcy. The capital raise will comprise of a first lien senior secured debt credit facility of $1.46 billion, as well as the issuance of new common stock for an aggregate purchase price of $800 million, according to a document filed on Sunday with the Bankruptcy Court for the Southern District of Texas. Cineworld last week reached a deal with creditors to trim billions of dollars of debt from its balance sheet. The world’s second-largest theater chain has been struggling to find buyers for the company.
- McDonald’s Corp. is temporarily closing US offices this week as it looks to notify corporate employees about layoffs as part of a broader restructuring plan, the Wall Street Journal reported. The company said in an internal email last week to US employees and some international staff that they should work at home from Monday through Wednesday so it can deliver staffing decisions virtually, the newspaper reported. McDonald’s announced in January it would be cutting corporate jobs and eliminating certain initiatives, even as it accelerates new store openings. The job cuts would be final by April 3, the fast-food company said at the time. It had about 150,000 employees as of end-2022, according to data compiled by Bloomberg.
- Five years after the US Navy’s costliest warship was crippled by flawed engine gears, prime contractor HII says it may be close to resolving a claim against subcontractor General Electric Co. over who will pay for fixing the defect. The propulsion problem that forced the USS Gerald R. Ford to return to port in 2018 was one of many issues of varying severity that the $13 billion aircraft carrier has faced since its May 2017 delivery. The Navy declared the gears fixed in May 2019, and the service advanced funds to HII to fix the issue. “At some point you’ve got to pay them to get the work done,” Vice Admiral Thomas Moore, head of the Naval Sea Systems Command at the time, said in 2019. But who will ultimately foot the bill remains unresolved. While no current estimates of the cost were available, in 2018 the Navy asked Congress to shift $30 million from other accounts to start repairing the damage.
- British lenders are warning regulators not to get ahead of other countries with their first big set of rule changes following Brexit and the recent banking collapses. Banks are asking for more time to adopt Basel 3.1 capital reforms if there are delays to the process in the US and European Union, so that large lenders do not have to contend with different regimes, according to a document published by trade body UK Finance on Friday. All three jurisdictions have said they will implement the guidelines, agreed upon in 2017 and postponed several times, from January 2025. However, the US is yet to publish its Basel 3 plans and the EU’s timetable could also slip, according to industry figures who contributed to UK Finance’s paper.
- Switzerland’s top prosecutor opened a probe to gather information into potential crimes that may have taken place around UBS Group AG’s takeover of Credit Suisse Group AG, while the emergency combination of the nation’s two biggest banks begins to take shape. The deal signed last month may reduce the overall workforce by up to 30%, with as many as 11,000 cuts in Switzerland and another 25,000 worldwide, Swiss newspaper SonntagsZeitung reported on Sunday, citing an unidentified senior manager at UBS. Executives at the Swiss bank said last week that they’re looking to provide clarity on job cuts as soon as possible but that it was too early to give firm numbers.
- Tesla Inc. notched another record quarter of vehicle deliveries by a slim margin after cutting prices across its lineup early this year, suggesting orders may have slowed after an initial surge in demand. The electric-vehicle maker handed over 422,875 cars to customers in the first three months of the year, exceeding its fourth quarter total by about 4%. The result narrowly beat the average estimate of analysts surveyed by Bloomberg of 421,164 vehicles. After Tesla lowered the cost of its top-selling Model Y by as much as 20% and lopped up to $21,000 off its most expensive vehicles in the US, Chief Executive Officer Elon Musk said in late January that orders were running at almost twice the rate of production. The figures reported Sunday point to deceleration in demand the last couple months, as the company ended up making almost 18,000 more cars than it sold.
- One of the world’s biggest synthetic exchange-traded funds is starting to look like exhibit-A in the latest controversy to hit ESG ratings. The $15 billion ETF, which is managed by Invesco Ltd., uses swaps to offer clients exposure to the S&P 500. The ETF currently has a AA rating at MSCI ESG Research, the biggest provider of such scores. Under European Union rules, however, the fund is registered as Article 6, meaning the product doesn’t target any environmental, social or governance goals. The absence of consistency in ESG classifications shows the hurdles investors face when trying to allocate capital. Though Invesco hasn’t registered its synthetic ETF as an ESG product, the fund now sits in at least three other portfolios that claim to “promote” ESG in Europe, according to data compiled by Bloomberg.
- Chinese authorities warned the nation’s top banking executives that the crackdown on the $60 trillion industry is far from over in a private meeting late Friday, just as they were about to announce the probe of the most senior state banker in nearly two decades. Officials from the China Banking and Insurance Regulatory Commission and the Central Commission for Discipline Inspection called in top executives from at least six big state-owned banks to address the probe of Bank of China Ltd.’s former Chairman Liu Liange, according to people familiar with the matter, who asked not to be named as the information is private. The meeting was taking place just as the CCDI announced the investigation of Liu in a one-sentence statement, saying he is suspected of “serious violations of discipline and law.”
- The majority of Europe’s highest-rated real estate companies are looking like junk. There’s some €62 billion ($67 billion) in real estate bonds in Europe issued by companies that carry the highest scores from ratings agencies, but register at sub-investment grade, according to a quantitative model compiled by Bloomberg. In the most extreme cases, there’s a gap of nine rungs between the official rating and a company’s market-implied level. It’s an example of how European real estate has become a flashpoint in markets, with analysts saying that many companies are at risk of dropping into junk and becoming “fallen angels.” The industry is contending with soaring interest rates and high debt burdens, as well as the shift to more remote working.
- Extra Space Storage Inc. has agreed to buy real estate company Life Storage Inc. for $12.4 billion in an all-stock deal. The transaction will create a company with a value of about $47 billion, including debt, according to a statement on Monday. Life Storage shareholders will receive 0.8950 of an Extra Space share for each Life Storage share they own. Shares in Life Storage have risen by 33% this year, giving it a market value of $11.2 billion. The stock rose as much as 5% in premarket trading in New York. Bloomberg News reported in March that Extra Space was weighing an offer for Life Storage.