June 13, 2023
- US agribusiness Bunge Ltd. agreed to buy Glencore Plc-backed Viterra for $8.2 billion in stock and cash, creating a trading giant capable of competing with the world’s biggest agricultural players. Viterra shareholders will eventually own about 30% of the combined business after the transaction, the companies said Tuesday in a joint statement. Roughly 75% of the payment would be made in Bunge stock, and another 25%, or $2 billion, in cash. Combining the two will create a trader big enough to take on the industry’s elite: Minneapolis-based Cargill Inc. and Chicago’s Archer-Daniels-Midland Co. The deal is the culmination of Bunge Chief Executive Officer Greg Heckman’s transformation of the once troubled St. Louis-based crop trader into a cash-rich oilseeds champion.
- European stocks erased their opening gains as initial optimism that China is considering a broad package of stimulus measures gave way to edginess ahead of the US inflation report due later in the day. The Stoxx 600 Index was little changed as of 11:47 a.m. in London, with mining and technology stocks gaining most, and real estate and utilities declining. Ahead of this week’s meetings of the Federal Reserve and the European Central Bank, investors will be keeping a close eye on US consumer prices data. Expectation of a benign number is giving the market confidence in a more dovish Fed on Wednesday, said Marija Veitmane, senior multi-asset strategist for State Street Global Markets.
- Stocks gave up some of their advance as traders awaited a crucial US inflation print and assessed the impact of economic stimulus from China. US equity benchmarks were set for modest gains after the Nasdaq 100 and the S&P 500 closed at the highest levels since April 2022 on Monday. Agribusiness Bunge Ltd. dropped in premarket trading after reporting that it will buy Glencore Plc-backed Viterra in a stock-and-cash deal. Confidence is mounting that the latest reading of the US consumer price index due Tuesday will show pressures have cooled enough to allow Federal Reserve policymakers to put their tightening campaign on pause Wednesday. It would mark the first time they forgo a rate hike after 10 consecutive moves in the key rate since March 2022.
- Asian stocks advanced for a third day as investors braced for a potential pause in the Federal Reserve’s monetary tightening this week. Chinese shares climbed on hopes for a broad stimulus package to revive the economy. The MSCI Asia Pacific Index rose as much as 1.2%, lifted by technology and communication shares. Most regional markets gained, with Japan’s Topix rising for a third day, extending gains that have taken the index to the highest level since 1990. Shares in Taiwan and South Korea also climbed. Chinese benchmarks edged higher after Bloomberg reported the nation is considering a broad package of stimulus measures to boost the economy, including property support and interest rate cuts. The central bank lowered the seven-day reverse repurchase rate, signaling more potential easing ahead.
- Oil rose from its lowest level in almost three months as China weighed measures to kickstart the world’s second-largest economy. West Texas Intermediate futures climbed toward $68 a barrel, after losing more than 7% over the previous three sessions. Global benchmark Brent edged higher from its lowest close since December 2021. Some of crude’s sharp loss Monday was reversed as China tried to spur growth with an unexpected short-term interest rate cut on Tuesday. Beijing is also mulling a broad package of stimulus measures, according to people familiar with the matter.
- Gold edged higher as the dollar weakened on bets for a pause in Federal Reserve tightening and more stimulus from China. Bullion has traded in a relatively tight range this month between about $1,940 and $1,980 an ounce, after falling in May amid easing fears of US bank-crisis contagion and the resolution of the debt-ceiling crisis. The metal has found recent support on speculation that the Fed is nearing the end of its aggressive monetary-tightening cycle. Spot gold rose 0.2% to $1,962.52 an ounce as of 9:12 a.m. in London after losing 0.4% in the prior two sessions. The Bloomberg Dollar Spot Index slipped 0.2%. Silver, platinum and palladium gained.
- Embracer Group AB, the game developer who owns the rights to Tomb Raider and The Lord of the Rings, will cut costs and lower debt after losing out on a $2 billion deal. Embracer, which has taken on debt to finance fast growth in recent years, lost half of its market value two weeks ago after the deal with an unnamed counterparty crashed. It triggered an uproar among shareholders, with some demanding a “swift change to articulate the future strategy.” The shares rose as much as 12% in Stockholm on Tuesday. The restructuring program includes a dramatic cut in net debt to below 10 billion Swedish kronor ($930 million) by the end of March 2024, compared with 15.6 billion kronor in March of this year. The firm also said it will cut costs by at least 10% and reduce capital expenditure by at least 2.9 billion kronor.
- Donald Trump is due in a Miami federal court Tuesday afternoon to face charges alleging he jeopardized national security by violating the Espionage Act, even as he leads the Republican field for next year’s presidential race. Trump is accused of willfully retaining and mishandling classified documents, including top-secret nuclear information and war plans, after he left office. No other former president has ever been indicted federally, let alone faced national security claims. Legal experts say that the US Justice Department has historically treated such cases as among the most serious.
- Private equity firms hunting for acquisitions with their $1.5 trillion of unspent capital are struggling to seal deals as they hit roadblocks from heady price demands to difficult financing markets. Buyout funds have seen around $30 billion of potential deals hit trouble in recent weeks. Medtronic Plc is looking increasingly likely to spin off of its patient-monitoring and respiratory-intervention operations, after talks with Carlyle Group Inc. slowed and strategic bidders’ interest cooled, people with knowledge of the matter said. It was seeking a valuation approaching $10 billion, they said. Dentsply Sirona Inc.’s potential $1 billion sale of medical product unit Wellspect HealthCare is stalling after private equity bids didn’t meet expectations, the people said. Meanwhile, Cardinal Health Inc. said last week it’s holding onto its $2 billion nuclear medicine unit, which had drawn bids from CapVest Ltd. and HIG Capital.
- With the Denver Nuggets closing out the National Basketball Association Finals on Monday, billionaire real estate developer Stan Kroenke’s racked up his fourth championship win in just a year and a half. Alongside the Nuggets, the founder of Kroenke Sports & Entertainment also owns the National Football League’s Los Angeles Rams, the English Premier League’s Arsenal Football Club, the National Hockey League’s Colorado Avalanche, Major League Soccer’s Colorado Rapids and the National Lacrosse League’s Colorado Mammoth. Kroenke, who has spent well over $1 billion on his sporting assets, has notched wins over the past 18 months with the Rams, the Avalanche and the Mammoth, and now the Nuggets after they defeated Miami Heat over five games.
- British wages shot up and unemployment fell unexpectedly in April, the latest signs that the resilient UK economy continues to defy efforts to cool demand and dampen inflationary pressures. The unemployment rate dropped to 3.8% in the three months through April, undercutting forecasts for an increase to 4%, the Office for National Statistics said Tuesday. Average earnings increases excluding bonuses rose to the highest ever outside the pandemic. The data spurred traders to ramp up bets that the Bank of England’s Monetary Policy Committee will keep raising rates. Investors priced in 1.25-percentage-points of hikes to 5.75% this year and see a small chance of an increase to 6% by February. The odds of a 50-basis-point increase at this month’s meeting also increased. Short-term bonds tumbled, with the yield on two-year government notes rising to the highest level since the 2008 global financial crisis.
- Germany plans to buy six IRIS-T SLM air-defense systems for a total estimated cost of about €950 million ($1 billion) and is also moving ahead with the purchase of the Israeli-made Arrow air-defense system for as much as €4 billion. The procurements, which will be financed from a special €100 billion fund the government established to help modernize the military, are due to be approved by the lower house of parliament’s budget committee at a meeting Wednesday in Berlin, according to government documents seen by Bloomberg. At least 15 countries, mainly from the NATO military alliance, in October signed a letter of intent on joining a German-led project to create a European anti-missile shield. The initiative was first announced by Chancellor Olaf Scholz in a speech in Prague in August, when he said the country would invest significantly in its air defense as the continent had “a lot of catching up to do.”
- China is ramping up policy stimulus to boost its faltering economy, although soaring debt levels and concerns about financial stability mean the measures are likely to be limited compared with support packages in previous downturns. The People’s Bank of China unexpectedly cut its key short-term interest rate on Tuesday, paving the way for lower bank lending rates and fueling speculation of more easing. Officials are considering a broad package of stimulus proposals, which include support for areas such as real estate and domestic demand, according to people familiar with the matter. The moves suggest a shift in stance by Xi Jinping’s government from its cautious approach to stimulus, underscoring policymakers’ concerns about the economy’s slowdown after a consumer-led surge early in the year started to peter out. But the impact of any stimulus — and the government’s room for maneuver — are likely to be limited by already stretched balance sheets among local governments and the real estate sector.
- Federal Reserve officials seeking to put their tightening campaign on pause this week are set to receive support from consumer price index data due Tuesday, according to Bloomberg Economics. Falling energy prices in May should offset increases in other categories to leave the headline index roughly unchanged, Anna Wong, Bloomberg’s chief US economist, wrote Monday in a preview of the report. Excluding food and energy, prices probably rose 0.3% — a deceleration from April’s 0.4% increase, she said. Such monthly increases would result in moderation in year-over-year inflation rates for the headline and “core” indexes, which ought to be enough to keep the US central bank’s Federal Open Market Committee from opting for an 11th-straight increase in its benchmark interest rate at the conclusion of a two-day policy meeting on Wednesday.
- Short sellers are signaling it’s time to stop betting against emerging-market stocks. Bearish positions in the $24 billion iShares MSCI Emerging Markets Exchange Traded Fund have fallen to less than 1%, the lowest level since 2013, according to IHS Markit data. That means wagers of as much as $1.43 billion that called for declines in developing-nation stocks have been eliminated since February, taking them to $197.5 million, also a decade low. Despite a volatile first half, the benchmark MSCI Emerging Markets Index has eked out a 6% advance in 2023 and trades at a four-month high, driven by growing expectations for a peak in Federal Reserve tightening and a broader stimulus package in China.