March 27, 2023
- A Brookfield Asset Management Inc.-led consortium agreed terms on a A$18.7 billion ($12.4 billion) deal, including debt, to acquire Australian utility Origin Energy Ltd. after months of delays. The consortium, which includes EIG Global Energy Partners, increased the value of its proposal following further talks in recent weeks and the pact will value Origin’s shares at A$8.912 each, the target said Monday in a filing. The announcement confirms an earlier Bloomberg News report that the parties planned to complete the deal within days. Adding Origin allows Brookfield to add further exposure to the shift away from fossil fuels in Australia, where utilities are accelerating plans to shutter coal plants and expand in renewables.
- Cameco said the Canada Revenue Agency issued revised reassessments for the 2007 through 2013 tax years that will result in the company being refunded about C$300m. Refund to consist of C$89m in cash and $211m in letters of credit.
- European stocks rebounded from Friday’s slump, with banks advancing as reassurances from US officials about the health of the financial system helped soothe investors’ concerns. The Stoxx Europe 600 rose 1.3% by 12:10 p.m. in London. Banks were among the leading sectors, with Deutsche Bank AG climbing more than 5%, after tumbling on Friday in a move some attributed to hedge funds seeking to profit from the broader turmoil roiling the financial industry. The selloff prompted German Chancellor Olaf Scholz to publicly back the lender. This month is set to be the worst month for Europe’s equity benchmark since 2020 amid banking sector concerns and the rising likelihood of a recession. The turmoil in the financial sector hasn’t swayed central banks from their hawkish path, with the Federal Reserve, Bank of England and European Central Bank pressing on with rate hikes to battle inflation.
- US futures rose with European stocks as the prospect of further support from US authorities eased some concerns over the troubled regional banking sector. Contracts on the S&P 500 rose about 0.3%. First Republic Bank shares jumped 34%, leading regional peers higher, after Bloomberg reported that US authorities are considering expanding an emergency lending facility that would give the lender more time to boost its balance sheet. The Treasury 10-year yield rose about nine basis points. A gauge of dollar strength was steady. Traders are in for another bumpy week: developments in the banking sector will be closely watched, while remarks from multiple Federal Reserve officials and data on a key US inflation measure are also due. Fed Minneapolis President Neel Kashkari said over the weekend that bank turmoil had increased the risk of a US recession.
- Asian stocks fell for a second day as traders continued to monitor the health of the global financial sector, while a slew of lackluster earnings dragged down Chinese technology firms. The MSCI Asia Pacific Index dropped as much as 0.6%, with Hong Kong leading the slump. A gauge of Chinese tech shares slid 2.8% after Meituan and Xiaomi’s earnings disappointed the market. Alibaba pared losses after founder Jack Ma returned to China. Onshore Chinese stocks also fell after official data showed profits at industrial firms plunged in the first two months of the year as factories had yet to fully recover from a Covid-induced slump. Shares in Japan and Australia rose.
- Oil extended a weekly gain, with investors awaiting further economic data as the fallout from the banking crisis continued to ripple across markets. West Texas Intermediate futures edged toward $70 a barrel after climbing almost 4% last week. As the bank-sector turmoil sparks recessionary fears, US authorities are considering expanding an emergency lending facility — among several options on the table. Oil remains on track for its steepest first-quarter loss since 2020 as a potential US recession, French strikes and resilient Russian output weigh on the outlook. In the days ahead, traders will look to Federal Reserve officials for clues on the path forward for monetary policy, and a key measure of US inflation is due.
- Gold dipped as investors weighed the latest comments from Federal Reserve officials for clues on the central bank’s interest rate path. Bullion ended last week down 0.6% after surging almost 10% over the previous three weeks. The banking crisis has curbed expectations for more rate hikes by the Fed, with swaps traders now pricing in multiple cuts this year. Lower rates are typically positive for non-interest yielding bullion. Spot gold slipped 0.3% to $1,971.44 an ounce as of 9:19 a.m. in London. The Bloomberg Dollar Spot Index was little changed. Silver, platinum and palladium declined.
- Nickel on the London Metal Exchange resumed Asian-hours trading on Monday, marking a crucial step in efforts to repair the market after last year’s unprecedented turmoil. The metal opened for business at 1 a.m. London time, more than a year after the LME suspended trading and canceled billions of dollars worth of deals in response to a runaway short squeeze centered around top producer Tsingshan Holding Group Co. Prices surged 250% in a little over 24 hours in early March 2022, with the sharpest spike taking place during the Asian day. The market reopened a week later, but only from 8 a.m. in London. The LME had originally planned to resume Asian trading a week ago, but delayed the restart due to the risk of volatility after its discovery that a small number of bagged cargoes in its warehouse network contained stones instead of nickel. The LME said on Thursday that no further issues were identified during a global audit of nickel stored elsewhere in its warehousing network.
- European natural gas prices rose as strikes in France that are prolonging outages at the nation’s energy infrastructure increased worries about supply. Nuclear reactor availability in the country has dropped to 57%, driving up local power prices. The strikes have also hit oil refineries and liquefied natural gas import terminals. A short cold spell is passing through Europe this week, adding to the frequent chilly bouts that are keeping gas prices above normal levels for the time of year. Benchmark futures rose as much as 5.5% on Monday. Still, Europe has successfully managed to ride out the energy crisis that at one time had threatened to bring major shortages. The official end of the heating season is just days away, and gas storage sites have already started replenishing, with Italy and Germany leading the way. LNG imports also remain strong.
- First Citizens BancShares Inc. agreed to buy Silicon Valley Bank, which was seized by regulators following a run on the lender. The bank agreed to take on all deposits and loans, a deal that includes the purchase of about $72 billion SVB assets at a discount of $16.5 billion, according to a statement from the Federal Deposit Insurance Corp. The agency took control of the bank after SVB collapsed earlier this month. About $90 billion in securities and other assets will remain in the receivership for disposition by the FDIC, while the Federal institution also got equity appreciation rights in First Citizens worth as much as $500 million. The estimated cost of the failure to the Deposit Insurance Fund is about $20 billion, though the exact extent will be determined when receivership is terminated, according to the statement.
- Salesforce Inc. averted a potential proxy fight with activist investor Elliott Investment Management after its price rose and the enterprise software company made a series of strategic changes. Elliott won’t proceed with its planned director nominations following Salesforce’s 2023 fiscal year report, transformation initiatives and “clear focus on value reaction,” the companies said in a joint statement on Monday. Salesforce Chief Executive Officer Marc Benioff, who has run the company since it was founded in 1999, has been grappling with a growing number of activists. Revenue growth has slowed after a half-decade of steady hiring and large acquisitions, and the San Francisco-based company has been buffeted by executive changes since the November resignation of heir-apparent Bret Taylor and Slack co-founder Stewart Butterfield.
- Morgan Stanley’s Michael Wilson — among the most prominent bearish voices on US stocks — says turmoil in the banking sector has left earnings guidance looking too high, putting sanguine stock markets at risk of sharp declines. “Given the events of the past few weeks, we think guidance is looking more and more unrealistic, and equity markets are at greater risk of pricing in much lower estimates ahead of any hard data changes,” Wilson wrote in a note on Monday. The strategist — who ranked No. 1 in last year’s Institutional Investor survey after he correctly predicted the selloff in stocks — said that’s partly due to the divergence in stock and bond market action this month. Whereas bond volatility has spiked as investors priced in a potential recession following the collapse of a slate of regional US lenders, equities have recovered losses on bets of intervention from policy makers. The S&P 500 is on course to gain for a second straight quarter.
- US crypto exchange Coinbase Global Inc. encouraged developers working on its new blockchain to focus on how to create stablecoins that track the rate of inflation to preserve purchasing power. Coinbase said in a March 24 blog post that it’s particularly interested in these so-called “flatcoins,” adding that exploring the potential of stablecoins is “more important than ever” given the recent woes of the banking system. Stablecoins are supposed to hold a constant value, typically $1, giving crypto investors a place to park funds as they navigate the highly volatile digital-asset market. An inflation protection overlay would tap into demand for a cushion against elevated post-pandemic price pressures.
- A Danish pension fund with $19 billion of client assets has exited Repsol SA after deciding the Spanish energy company wasn’t moving fast enough to cut its greenhouse-gas emissions. “Repsol’s continued expansion of oil and gas production is entirely incompatible with the safeguarding of global climate goals,” Jens Munch Holst, the chief executive of AkademikerPension, said in an emailed comment. The fund held a $3.5 million stake at the end of 2022. Repsol’s market value was about $20 billion on Monday. AkademikerPension, which is based north of Copenhagen, unloaded most of its fossil-fuel stocks in 2019 and 2020, and then spent last year dumping its oil and gas bonds. Those steps followed an analysis by the pension fund that showed its $300 million fossil-fuel portfolio constituted a growing risk to returns. Only two companies survived the purge — Repsol and Eni SpA — based on an assessment by the fund that they were making reasonable efforts in the transition to clean energy.
- There’s been a noticeable increase in the number of Teslas on the roads in Australia in recent months, a sign that one of the developed world’s most reluctant adopters of electric cars is finally shifting. The supply-chain logjams that last year stretched wait times for a new Tesla out to nine months, and inflated the price of second-hand Model 3s to A$130,000 ($87,000), seem to be over. A new top-range Model 3 Performance ordered today in Sydney for A$90,300 could arrive within a week, according to Tesla’s website. The same can be said for the US, the company’s home market. Some degree of sanity is also returning to Australia’s second-hand market. In August, lucky owners of barely used Model 3s could offload them to impatient buyers for between A$130,000 and A$138,000 — more than one-third above the price of a new one.
- Ammar Al Khudairy, the chairman of Credit Suisse Group AG’s largest shareholder, has resigned just days after his comments helped trigger a slump in the stock and bonds that prompted the Swiss government to step in and arrange its takeover. Al Khudairy, who became chairman of Saudi National Bank in 2021 when it was created via a merger of National Commercial Bank and Samba Financial Group, is leaving “due to personal reasons,” according to a statement on Monday. His departure comes twelve days after he said in a Bloomberg TV interview that Saudi National Bank would “absolutely not” be open to further investments in Credit Suisse if there was another call for additional liquidity.
- Deutsche Bank AG shares rebounded and the cost of insuring its debt against default eased on Monday after sell-side analysts sought to reassure that the German lender’s financial health was sound. Shares of Germany’s largest bank were 5.4% higher as of 12:47 p.m. in Frankfurt, the best performing stock on Europe’s Stoxx 600 Banks Index. Commerzbank AG, Barclays Plc and Banco Santander SA were also among the biggest gainers. Though there was no clear trigger for the declines on Friday, hedge funds have seemingly turned their attention to Deutsche Bank in the wake of the collapse of Credit Suisse Group and three regional US banks.
- Germany’s air and rail services ground to a halt Monday during a one-day strike as workers join peers in France and the UK to fight for higher pay. The walkout also affects some ports, with the Verdi and EVG transport and railway unions coming together in a strike that resulted in severe disruption to travel. Verdi is demanding a raise of 10.5% for public sector workers. Major airports including Frankfurt and Munich won’t operate Monday. Frankfurt Airport advised passengers changing planes to avoid the hub. Long-distance, regional and local trains operated by Deutsche Bahn and other railway will also come to a standstill, EVG said. Frankfurt airport, Germany’s biggest, was expected to handle more 1,100 takeoffs and landing on a normal Monday.
- Funds that are hit by ESG ratings downgrades as part of a review by MSCI Inc. are likely to be put on notice by institutional investors keen to preserve the integrity of their portfolios, according the UK Pensions and Lifetime Savings Association. “Any significant adjustment to a rating is likely to lead to investors re-examining their portfolio to establish whether the fund continues to deliver in line with their strategy and investment beliefs,” said Joe Dabrowski, deputy director of policy at PLSA, whose members oversee a combined £1.3 trillion ($1.6 trillion). MSCI is planning a sweeping overhaul of how it applies environmental, social and governance scores to the fund industry. The changed methodology will affect up to 73% of the entire public fund universe, including exchange-traded funds, mutual funds, index funds and actively-managed funds, MSCI ESG Research told Bloomberg on Friday. The firm, which provides ESG ratings for tens of thousands of equity and fixed-income funds, said the decision will result in “more downgrades than upgrades.”