May 15, 2023
- Gold giant Newmont Corp. secured a A$28.8 billion ($19.2 billion) deal to buy Australian rival Newcrest Mining Ltd., consolidating its position as the world’s biggest bullion producer with mines across the Americas, Africa, Australia and Papua New Guinea. The transaction, now unanimously approved by Newcrest’s board but pending regulatory approval, is the gold mining sector’s largest deal to date, surpassing Newmont’s purchase of rival Goldcorp Inc. in 2019. Newcrest, whose then chief executive officer stepped down abruptly at the end of last year, rejected initial overtures, though it had indicated earlier this month that it planned to recommend an improved takeover offer from its suitor. Newmont’s acquisition adds more exposure to gold at a time when bullion is testing a record high, and the deal will crucially also boost its resources of copper — a metal where demand is expected to outpace supply as the transition away from fossil fuels gathers pace.
- Vermilion Energy Inc. on Monday said it has restored about 60% of the 30,000 barrels of oil equivalent per day of production that was temporarily shut-in due to wildfires in west-central Alberta. After conducting inspections, the company confirmed there was no major damage to its facilities or well sites. Vermilion said it will bring the remaining curtailed production back online as soon as it is safe to do so. As a result, second-quarter production is now expected to average 80,000 to 83,000 boe/d. The company maintained its annual production guidance of 82,000 to 86,000 boe/d for 2023. This comes after Paramount Resources Ltd. (POU.TO) overnight Sunday said the third-party Wapiti natural gas processing facility and the company’s fields producing to the facility have again been shut down amid the ongoing Alberta wildfires.
- European equities advanced as investors considered the results of the earnings season along with the outlook for monetary policy. The Stoxx Europe 600 edged 0.3% higher by 8:03 a.m. in London. Banks and travel and leisure sectors led the gains on Monday, while energy underperformed on oil’s weakness. European stocks have been trading in a tight range this month, with volatility sinking, as traders weigh a mixed outlook for economic growth and rates while monitoring earnings. About 70% of the MSCI Europe companies that reported results so far have beat estimates this season, according to data compiled by Bloomberg Intelligence. Meanwhile, the European Central Bank will hold interest rates at their peak for longer than previously thought as underlying inflation pressures persist, according to economists polled by Bloomberg.
- Stocks and commodities climbed as investors bet that US politicians will be able to negotiate a solution to the debt-ceiling standoff, with President Joe Biden voicing optimism that a deal could be reached. S&P 500 futures advanced 0.4%, signaling a rebound from Friday’s retreat. The US debt ceiling remains the biggest focus for investors this week and strategists are warning about market turmoil and economic disaster if politicians don’t agree to raise the government’s $31.4 trillion borrowing limit. Joe Biden, House Speaker Kevin McCarthy and other congressional leaders are planning to hold further talks on Tuesday. They were previously scheduled to meet on Friday, but postponed it as staff level discussions continued throughout the weekend.
- Asian equities gained, with a late rally in Chinese stocks putting the regional benchmark on track for its first advance in five days. The MSCI Asia Pacific Index rose as much as 0.7%, led by financials and communication services shares. In Japan, the key Topix gauge inched closer to reaching its highest level since 1990, with the nation’s biggest banks predicting their highest profits in years. Thailand’s benchmark was the worst performer in Asia following elections on Sunday, owing to uncertainty over talks between opposition parties to form a coalition government. China’s benchmark CSI 300 Index jumped the most since Feb. 20. Financials rallied following a state media reported that the Shanghai stock exchange will host a seminar to discuss topics including boosting the sector’s valuation. Gauges in Hong Kong also climbed, with Tencent being a key contributor ahead of its earnings scheduled for Wednesday.
- Oil prices steadied after four consecutive weeks of losses as the market balanced concerns over the US economy and China’s muted recovery against expectations of a rise in future demand. West Texas Intermediate futures traded around $70 a barrel, with most markets trading in the expectation of a breakthrough in the US debt ceiling standoff. Oil is down about 12% this year as fears over a possible US recession outweigh supply cuts pledged by OPEC+. Spreads for US crude are largely flat. Demand for physical barrels appears weak, while refinery margins — the profits that refiners make from processing crude into petroleum products like diesel and gasoline — remain low but are recovering.
- Gold edged higher — after a three-day drop — as nervousness over the US debt-ceiling impasse offset signs the Federal Reserve may have to keep hiking rates to cool sticky inflation. Bullion traded near $2,020 an ounce after shedding 1.2% in the final three days of last week. President Joe Biden said he expects to meet House Speaker Kevin McCarthy on Tuesday to discuss budget negotiations to avoid a default. More than half of finance professionals said gold is what they would buy if the US fails to honor its obligations, a Bloomberg survey showed. Spot gold rose 0.3% to $2,016.50 an ounce as of 10:04 a.m. in London. The Bloomberg Dollar Index declined 0.1% after rising 1% over the previous two sessions. Platinum, palladium and silver climbed.
- Iron ore rose for a second day — climbing above $100 a ton — as steel prices in China strengthened and iron ore inventories kept declining. The steel-making staple jumped more than 5% in Singapore. Chinese crude steel output rose in the first weeks of May, according to researcher Mysteel. The country’s biggest cities also reported more home buying last week, contributing to market optimism. Chinese inventories of iron ore slipped for an 11th straight week, suggesting mills are boosting production. Steel stockpiles at major Chinese mills fell 2.8% to 17.6 million tons in early May compared with late April, according to data from China Iron and Steel Association.
- The European Commission raised its euro-zone inflation outlook and warned of “persistent challenges” even as it acknowledged the resilience of the region’s economy. Citing the strength of underlying pressures, European Union officials lifted their projections for consumer-price growth to 5.8% this year and 2.8% in 2024 from 5.6% and 2.5% respectively. Forecasts for economic expansion were also increased throughout the horizon. Key to the higher inflation outlook was a three quarters of a percentage point gain in the commission’s assessment for so-called core inflation, which strips out volatile elements such as food. That measure will exceed the headline gauge for price growth both this year and next, according to Brussels officials.
- President Joe Biden and House Speaker Kevin McCarthy will soon offer the clearest sign yet about whether a deal can be reached to avert a historic US default. The two leaders are poised to reconvene Tuesday after staff-level talks held throughout the weekend, with the White House sending signs of guarded optimism. Biden said talks were “moving along” while National Economic Director Lael Brainard said the negotiations were serious and constructive. The meeting will be a key litmus test of whether a deal can be reached before a potential default in June — and comes before Biden leaves Wednesday for a trip to Japan, Papua New Guinea and then Australia.
- KKR’s Envision Healthcare Corp. filed for Chapter 11 bankruptcy protection after its performance deteriorated and talks with creditors failed. The medical staffing company filed in the Southern District of Texas as it looks to swap $5.6 billion of bonds and loans into equity, the company said in a statement. That excludes the firm’s revolving credit facility for working capital, it said. The Chapter 11 filing marks a bruising outcome for Envision, which raised more than $1 billion in fresh cash just last year. Many creditors were riled by the rescue financing, which involved moving a valuable ambulance surgery business — AmSurg — out of their reach.
- Hedge funds are starting to doubt the pound’s rally will last much longer after a surprising run that’s made it the best-performing major currency in the developed world this year. Money managers are cashing in on sterling’s gain of more than 3% against the dollar in 2023, as the good news driving it — mainly a stronger-than-expected economy that allowed for higher interest rates — is now seen as well priced in. Analysts say the Bank of England’s eye-popping upgrade to its growth forecasts last week raised the bar for positive data surprises, limiting room for further pound strength. Leveraged investors scrapped a position that profits from a stronger sterling and turned the most negative on the currency since December 2021, according to data from the Commodity Futures Trading Commission for the week ended May 9. The change came just before the British currency hit the strongest against the dollar so far this year.
- Apollo Global Management Inc. has walked away from a possible takeover of John Wood Group Plc after a months-long pursuit of the Scottish engineering group. The private equity firm said in a statement on Monday that it does not intend to make an offer for Aberdeen-based Wood. The news sent Wood shares down as much as 41% in London for their biggest intraday fall since March 2020. Apollo’s decision not to pursue a deal comes after Wood granted it access to due diligence materials in April. Wood had already rejected four approaches from Apollo before a £1.66 billion ($2.1 billion) proposal convinced it to open its books.
- Turkey is set to head to a runoff in a vote that’s become the strongest electoral test yet of President Recep Tayyip Erdogan’s two decades in power. While preliminary results Monday showed Erdogan with a lead of more than 2 million votes, it wasn’t enough to secure the more than 50% of the ballot and avoid a second round. Another vote on May 28 will pit him against top rival Kemal Kilicdaroglu, 74, who’s backed by Turkey’s broadest-ever grouping of opposition parties. A runoff is now seen as the most likely outcome, people with direct knowledge of the vote tally said. Millions of ballots were still being counted Monday, with 99% of the ballot boxes opened.
- The UK and Switzerland are kicking off negotiations for a new free trade agreement to boost the exchange of services between the two countries post-Brexit. Trade Secretary Kemi Badenoch on Monday will fly to the Swiss capital, Bern, for a meeting with her counterpart, Federal Councilor Guy Parmelin, according to a statement on Monday from the Department for Business and Trade. The formal negotiations will start next week. Switzerland is the UK’s 10th biggest commercial partner, with bilateral trade totaling about £53 billion ($66 billion) a year.
- Global investors seeking to trade China’s reopening will have a new strategic tool from Monday: onshore interest-rate swaps that had an annual turnover of $3 trillion last year. The so-called Swap Connect program between mainland China and Hong Kong provides overseas funds with easier access to the derivatives that will help hedge their exposure to the world’s second-biggest bond market. The channel also enables them to bet on key money-market rates that are sensitive to China’s monetary policy. The new program kicks off just as China’s sovereign bond market puts on a seven-week rally, with traders growing more confident the central bank will ease policy as an economic recovery stutters. The channel also helps Beijing’s aim of opening up to more global investors after regulatory crackdowns, and rising geopolitical tensions fueled concern over the nation’s investability even after it scrapped Covid controls and re-opened its borders.
- Media upstart Vice Media LLC and home security company Monitronics International Inc. were among at least seven firms filing for US Chapter 11 bankruptcy protection in the past 24 hours as companies feel the crunch from a year of interest hikes. The wave of bankruptcies comes as companies struggle to re-negotiate burdensome debtloads accumulated during the era of ultra-low interest rates. Others filing Chapter 11 petitions include KKR’s Envision Healthcare Corp., British chemical producer Venator Materials Plc, oil producer Cox Operating LLC, Kidde-Fenwal Inc. and Athenex Inc. Companies from all sectors have been struggling with higher interest costs, making it more challenging for them to refinance loans and bonds coming due. In an environment of higher rates, companies are also facing more scrutiny from investors and creditors.
- Argentina will unveil a set of emergency measures in a bid to stem additional currency losses, including a large increase to its key interest rate, as inflation spirals out of control in the run up to presidential elections, according to officials at the Economy Ministry and the central bank. The monetary authority will raise its benchmark rate by 600 basis points to 97% on Monday while boosting intervention in the foreign exchange market, the officials said, asking not to be named before measures are formally announced by Economy Minister Sergio Massa. Policymakers are struggling to contain a selloff in the peso, which in parallel markets has lost 35% of its value against the dollar so far this year.