June 27, 2023
- An arm of Canadian investment giant Brookfield has made a cash and stock bid for American Equity Investment Life Holding Co. valuing the insurance firm at about $4.3 billion. Brookfield Reinsurance Ltd. is proposing to buy all the American Equity shares it doesn’t already own for $55 apiece, according to a statement Tuesday. The offer represents a 35% premium to American Equity’s closing price on Friday, the last full trading day before Bloomberg News reported Brookfield’s interest. American Equity’s board will review the proposal with advisers. Brookfield said in a separate statement it’s aiming to negotiate terms of a definitive agreement and announce a transaction by June 30. The bid includes $38.85 per share in cash plus $16.15 per share in class A stock of Brookfield Asset Management Ltd.
- Former federal politician Olivia Chow will be Toronto’s first Asian-Canadian mayor after earning a narrow victory in Monday’s municipal election. Chow had 37% of the vote as of 9:48 p.m. Toronto time with nearly all polls counted, according to Canadian Broadcasting Corp., holding off a surge from former deputy mayor Ana Bailao, who had 33%. A prominent voice in progressive politics, Chow marks a shift for Canada’s financial capital after eight years of rule by John Tory, a conservative-leaning mayor who resigned in February over an extramarital affair with a former staffer.
- European stocks slid for a seventh day as hawkish comments from central bankers is fueling the market’s longest streak of losses since 2018. The Stoxx Europe 600 Index was slightly lower at 10:01 a.m. in London, set for its longest losing streak since February 2018. Auto stocks were dragged down by Volkswagen, after the German carmaker announced it is planning to cut back production of one of its electric SUV models due to weak sales. Most of Europe’s tech stocks fell following losses on Wall Street, but the subindex edged slightly higher on Prosus. At the European Central Bank’s annual forum in Sintra, Portugal, President Christine Lagarde said the bank probably won’t be able to declare the end of its historic interest-rate hiking cycle anytime soon, even as rising borrowing costs raise the prospect of recessions.
- Equity markets attempted to shake off recent weakness amid bets on Chinese stimulus and optimism that an economic downturn may prove less severe than feared. Nasdaq 100 futures added 0.4%, showing that traders are positioning for a rebound after the tech benchmark sank 1.4% on Monday. Tesla Inc. shares added 1.7% in pre-market trading, while Advanced Micro Devices Inc. and Meta Platforms Inc. advanced. Markets are coming to terms with the view that the Federal Reserve won’t cut interest rates this year and other central banks will continue raising rates to quell inflation. Morgan Stanley economists said in research note on Tuesday that they see the Fed hiking by 25 basis points next month.
- Asian stocks advanced as Chinese equities in Hong Kong rebounded from a five-day selloff, with the nation’s central bank stepping up its support for the yuan. The MSCI Asia Pacific Index gained as much as 0.6%, poised to snap a six-day losing streak, as Tencent and Alibaba charged the gauge higher. Performance was mixed elsewhere as equities in Japan and Taiwan fell while those in Australia and India rose. The Hang Seng China Enterprises Index rallied as China’s central bank set its daily reference rate for the managed currency at a stronger-than-expected level for a second day. China will roll out more practical, effective steps in order to expand domestic demand and activate market vitality, Premier Li Qiang said at the World Economic Forum event in Tianjin, without announcing any new stimulus measures.
- Oil held near $69 a barrel as traders weighed the potential for China stimulus measures against the outlook for higher interest rates. West Texas Intermediate steadied after a choppy session on Monday, following a short-lived uprising in Russia over the weekend. Chinese Premier Li Qiang said Tuesday that the government would roll out more practical, effective measures to boost domestic demand, but those promises were largely reiterations of prior statements made by officials. Meanwhile, after several policymakers struck a hawkish tone on interest rates last week, the president of the European Central Bank said it probably won’t be able to declare the end of its historic interest-rate hiking cycle any time soon.
- Gold steadied as traders weighed the prospect of further monetary tightening from the Federal Reserve ahead of a slew of US economic data. The precious metal has fallen around 7% from this year’s peak reached early last month as prospects for higher rates continue to keep a lid on bullion, which doesn’t yield any interest. Investors flocked to gold in March and again in May during the aftermath of a series of US bank collapses, which fueled bets that the Fed may have to cut rates sooner than anticipated. Spot gold added 0.1% to $1,925.31 an ounce as of 10:16 a.m. in London. The Bloomberg Dollar Spot Index weakened slightly. Silver, platinum and palladium all rose.
- Iron ore rallied along with copper after Chinese Premier Li Qiang said that growth has picked up this quarter and more stimulus was in store, boosting the outlook for consumption in the biggest metals importer. China will roll out more practical, effective measures to expand domestic demand and stoke market vitality, Premier Li told the World Economic Forum in Tianjin. Iron ore, used to make steel, surged by almost 4%. Industrial metals rallied at the start of the year as China reopened after Covid Zero was ditched, but the upswing stalled this quarter as manufacturing and the property market disappointed. While the central bank cut policy rates this month to aid the economy, investors expect more steps will follow, although it’s unclear if they’ll be enough to significantly revive growth.
- Owners of Czech power utility CEZ AS approved a record dividend but uncertainty about a government plan to overhaul the company’s ownership continued to weigh on its shares. An annual general meeting voted late on Monday to pay out 145 koruna per share, representing virtually all of last year’s adjusted profit of 78.4 billion koruna ($3.6 billion) and three times more than a year ago. That amount was demanded by the state, which owns 70% of CEZ, and exceeded the management’s original proposal. Investors in the biggest listed power generator in eastern Europe, with a market value of $26 billion, benefited from last year’s surge in electricity prices that boosted the company’s profits. Still, minority shareholders used the AGM to criticize the state for what they said was lack of clarity about its plans to gain bigger control over CEZ’s power stations.
- Hong Kong’s billionaire Cheng family is offering to buy the NWS Holdings Ltd. shares it doesn’t own in a HK$35.5 billion ($4.5 billion) deal that would help lower debt at its property conglomerate. The transaction would in effect shift cash from the family’s investment holding company to its builder New World Development Co., which owns a majority stake in NWS and stands to receive about HK$21.8 billion from the disposal. New World, founded by the late billionaire Cheng Yu-Tung, is one of the most indebted Hong Kong developers among its larger peers, with a net debt-to-shareholder-equity ratio of about 47%. The company’s net gearing would decrease to around 42% after the deal.
- Former President Donald Trump is heard discussing what he calls “secret information” that he says he doesn’t have the power to declassify in an audio recording of a 2021 meeting in New Jersey, after he had left the White House. The recording, broadcast on CNN’s Anderson Cooper 360 and posted by outlets including the New York Times, includes a moment when Trump appears to indicate he was holding a document regarding possible military action against Iran, according to the reports. “This was done by the military and given to me,” Trump is heard saying on the tape, which Bloomberg has not been able to independently verify. “It’s so cool,” he later says.
- Kering SA, the owner of Gucci, agreed to buy perfume maker Creed in an all-cash deal as the luxury conglomerate expands in the market for high-end fragrances. Kering’s beauty unit is buying 100% of Creed from funds controlled by BlackRock Inc. and current Chairman Javier Ferran, the Paris-based group said in a statement Monday. Further terms weren’t disclosed. Kering shares rose 1.5% in early trading in Paris on Tuesday. Creed was established in 1760 by James Henry Creed as a tailoring house serving European royal families. It still has family involvement.
- President Vladimir Putin condemned leaders of the Wagner mercenary group as traitors to Russia in a late-night speech to the nation, his first public comments since the weekend mutiny that posed the most serious threat to his nearly quarter-century rule. “The organizers of the rebellion betrayed their country and their people, and betrayed those who were dragged into the crime,” Putin said, without mentioning Wagner chief Yevgeny Prigozhin by name. “Their actions were criminal in nature, aimed at polarizing people and weakening the country.” Putin spoke hours after Prigozhin denied that his march on the capital was a coup attempt and said he’d keep his mercenary company going despite official efforts to shut it down. The monitoring group Belarusian Hajun reported Tuesday that the mercenary chief’s business jet landed at Belarus’s Machulishchi military airbase, though it was not immediately clear if Prigozhin himself was aboard.
- The Federal Reserve’s stress test is usually the most dreaded part of Wall Street firms’ annual capital planning. This year, it’s just the first hurdle to clear as regulators explore more stringent requirements on banks in the aftermath of several lender collapses. The test results, set to be released Wednesday afternoon, mark the beginning of a trio of regulatory actions that will impact how much capital banks are required to hold on their balance sheets. The two that follow are likely to be far more burdensome. Analysts largely expect banks to sail through the tests, which examine how lenders would hold up in a hypothetical severe global recession in which US unemployment peaks at 10%, commercial real estate prices plunge 40% and the dollar surges against most major currencies. In past years, the test results would be accompanied by a flurry of press releases from the largest US lenders announcing their plans to return any excess capital to shareholders.
- KKR & Co. agreed to buy Circor International Inc. for $1.7 billion including debt after boosting its offer for the maker of industrial valves and pumps. KKR increased the all-cash price of its previously announced merger agreement to $51 a share from $49, according to a statement Tuesday. KKR also has agreed to provide a full equity backstop for the completion of the merger. The decision by KKR to raise the price came after Burlington, Massachusetts-based Circor received an unsolicited proposal from a third party to buy the company for $52.65 a share in cash. Despite the price difference, Circor’s board unanimously decided in favor of KKR’s raised offer “because it offered more financing certainty and a clearer and faster path to receiving antitrust approvals,” the company said.
- Walgreens Boots Alliance Inc. shares tumbled after the pharmacy giant slashed its adjusted earnings forecast for the fiscal year as its transition deeper into health-care slowed and reduced spending on Covid-related services hurt profit. Annual adjusted earnings will be $4 to $4.05 a share, the Deerfield, Illinois-based company said Tuesday in a statement, down from the earlier range of $4.45 to $4.65. Adjusted earnings for the third-quarter were $1 a share, short of analysts’ average estimate of $1.06. Revenue in the period was $35.4 billion, beating Wall Street’s expectation of $34.2 billion. The shares fell as much as 8.2% before US markets opened. If the current decline in premarket trading holds, the stock is set to hit its lowest level since 2012. Shares of rivals CVS Health Corp. and Rite Aid Corp. fell 2% and 1.7% respectively.
- Delta Air Lines Inc. modestly boosted its 2023 earnings expectations as it capitalizes on strong demand and a drop in jet fuel prices at the outset of the busiest travel period of the year. Adjusted profit for the year will be at the high end of its prior guidance of $5 to $6 a share, Delta said in a regulatory filing Tuesday ahead of an investor presentation. The carrier was expected to earn $5.81 a share, the average from estimates compiled by Bloomberg. It also raised its forecasts for free cash flow and operating margin. International travel has expanded rapidly this year as most countries have dropped the last vestiges of pandemic restrictions, helping to boost revenue for carriers. Domestic demand has remained strong in the face of inflation and economic uncertainty, though it has begun to moderate. The industry expects summer travel to challenge the record traffic levels of pre-pandemic 2019.