November 14, 2023
- Glencore Plc agreed to buy a majority stake in Teck Resources Ltd.’s coal business for $6.93 billion, ending a months-long saga and setting the stage for the commodity giant to spin off its own coal unit. Glencore will own 77%, and steelmakers Nippon Steel Corp and Posco will hold the remainder of the business, the companies said in statements Tuesday. The deal implies an enterprise value of $9 billion for Teck’s coal business. The agreement will mark the end of a more than seven-month wrangle over the future of Teck. Glencore originally sought to buy the whole company in an unsolicited $23 billion bid, but was ultimately forced to scale back its ambitions to target the Canadian miner’s coal unit instead.
- Sun Life Financial Inc. reported lower than expected third-quarter profit as debt financing costs weighed on results. Underlying net income slid 2% from a year earlier to C$930 million ($674 million), or C$1.59 a share, the Toronto-based insurer said Monday in a statement. That missed the C$1.63 average estimate of analysts in a Bloomberg survey. Sun Life said its loss on corporate expenses almost doubled to $109 million as it faced higher costs across multiple business lines plus an increase in debt financing payments. Still, the company pointed to growth in Asia, where underlying net income rose 8% to C$166 million, as well as its Canadian and asset-management businesses as positives.
- City National Bank said Chris Doll will succeed John Bai as its chief financial officer, the third new leader in recent weeks after the lender’s parent Royal Bank of Canada injected capital into the division to clean up its balance sheet. Ahead Tuesday, Canaccord Genuity Group Inc. and CAE Inc. will report quarterly earnings.
- European stocks were steady, as investors assessed improving economic expectations for Germany and looked ahead to US inflation data for clues on the direction of the Federal Reserve’s monetary policy. The Stoxx 600 Index was flat at 12:59 p.m. in Paris. Telecoms were among the worst performing sectors, dragged down by Vodafone which reported weaker-than-expected profits in core European markets such as Italy and Spain amid high energy costs. Basic resources outperformed, as Glencore shares jumped after it agreed to buy a majority stake in Teck Resources Ltd.’s coal business for $6.9 billion. Among other major individual movers, Delivery Hero SE rose after laying out a more optimistic outlook for the year.
- US equity futures and Treasury bonds edged higher on speculation that a crucial US inflation report will show price pressures slowing last month, cementing the view that interest rates have peaked. Contracts on Nasdaq 100 advanced 0.2% and Treasury 10-year yields slipped two basis points to 4.62%. Apple Inc. rose 0.4% in premarket trading after strong profits from iPhone maker Hon Hai Precision Industry. Snap Inc. gained 5% on report of a tie-up with Amazon.com. Nvidia Corp. was set to extend gains into a 10th straight session, its longest winning streak in almost seven years. US inflation probably eased to an annual rate of 3.3% in October from 3.7% in September, according to a Bloomberg survey of economists. However, core inflation which strips out energy and food costs, is predicted to be unchanged, implying slow progress toward the Federal Reserve’s 2% inflation target.
- Asian stocks advanced, led by a rally in South Korean shares, while investors awaited a meeting between US and Chinese leaders. The MSCI Asia Pacific Index rose as much as 0.7%, driven higher by material and energy shares. Korea’s Kospi Index jumped more than 1%, boosted by tech and EV battery stocks. Japan also advanced as positive earnings and a weak yen supported the market. India was closed for a holiday. Korean shares were supported by President Yoon Suk Yeol’s defense of the country’s short selling ban. He said the trade causes huge losses to individual investors. Chinese stocks fluctuated following data that showed the nation’s credit expansion remained weak in October. Traders are also awaiting Wednesday’s meeting between President Joe Biden and China’s Xi Jinping for signs of an easing of tensions.
- Oil steadied as the International Energy Agency indicated the market isn’t as tight as previously expected, even as demand continues to climb. Brent traded just under $83 a barrel. The global benchmark is still up more than 3% from its closing price on Nov. 8, when it settled at the lowest since July. The global oil supply shortfall is set to shrink by 30% to 900,000 barrels a day in the fourth quarter, the IEA said in its monthly report. The market has been weighing several competing signals. Saudi Arabia, the biggest producer in the OPEC+ coalition, is keeping its output at the lowest level in years. Meanwhile, flows from the Middle East remain unaffected by the Israel-Hamas war, and shipments from Russia and the US have increased.
- Gold steadied ahead of US inflation figures that may influence the outlook for monetary policy. The numbers will be closely watched for indications of whether the Federal Reserve will need to raise rates again, which would be bearish for the non-interest bearing gold. Bloomberg Economics sees the print reinforcing the central bank’s tightening bias. Gold has fallen for two straight weeks, giving up gains seen after Hamas’s attack on Israel, as concerns about spillover from the conflict faded. Hedge funds cut back on bullish bets across precious metals last week, a sign of growing bearishness toward the broader space.
- China plans to provide at least 1 trillion yuan ($137 billion) of low-cost financing to the nation’s urban village renovation and affordable housing programs in its latest effort to shore up the struggling property market, according to people familiar with the matter. The People’s Bank of China would inject funds in phases through policy banks with the money ultimately trickling down to households for home purchases, the people said, asking not to be identified discussing a private matter. Officials are considering options including the so-called Pledged Supplemental Lending and special loans, the people said, adding that the government may take the first step as soon as this month. The plan, part of a new initiative by Vice Premier He Lifeng, would mark a major step-up in authorities’ efforts to put a floor under the biggest property downturn in decades, which has weighed on economic growth and consumer confidence. Market concerns have mounted over the financial health of the nation’s largest surviving developers after record defaults in the industry.
- Nvidia Corp. shares are poised to extend gains for a 10th consecutive session, their longest streak of advances since a record-setting dash in December 2016, as the world’s most valuable chipmaker updates its artificial intelligence processor. The Santa Clara, California-based company has climbed about 20% during the course of this latest rally, adding about $200 billion in market value, according to data compiled by Bloomberg. That’s as rivals are scrambling to come up with alternatives to challenge its AI dominance. The stock has rallied more than 230% this year through Monday’s close, making it the best performing component on both the Nasdaq 100 and S&P 500 indexes as the AI-driven frenzy fueled rallies this year. The latest surge comes as technology stocks rebound amid hopes that Federal Reserve interest rates have peaked.
- Global investment houses are bracing for more failed trades as a result of plans to halve the time it takes to settle American stock transactions to just one day. Around 60% of asset managers fear a higher rate of settlement failures will be the consequence of regulations coming into force in May that will speed up the time it takes to complete a US security trade. That’s according to SIX Group’s Future of Finance report, which polled 343 C-Suite executives at financial institutions from around the world. The looming shift will put stocks in the largest equity market out of step with not only global peers but also the world of foreign exchange, where trades typically take two days to complete. That threatens to create new risks for firms unprepared for the transition.
- Private equity firms that amassed more than $1.5 trillion of assets in China in just two decades are now struggling to offload once-promising investments they were counting on for hefty returns. With public markets in a slump and offering unattractive valuations, buyout firms are exploring private sales. But mounting concerns about the risks of investing in mainland China have left so-called secondary buyers demanding discounts of 30% to more than 60%, according to people familiar with the market. Haircuts in Europe and the US are closer to 15%. Many firms are also looking at an alternative strategy, putting off sales by setting up so-called continuation funds to take over holdings for several more years, according to interviews with about a dozen of private equity investors and advisers. That’s also proving challenging.
- US and European Union officials agreed to meet again in January over an airport dispute that threatens to evict Dutch airline KLM from its longtime perch at New York’s John F. Kennedy International. The spat, stemming from capacity cutbacks at Amsterdam’s state-controlled Schiphol airport, risks snowballing as the US considers its response to JetBlue Airways Corp.’s ejection from the Dutch hub. The two sides discussed the matter Monday in Brussels, and with differences still outstanding, they agreed to hold another meeting in January to assess progress, a spokesperson for the European Commission said Tuesday in emailed response to Bloomberg’s questions.
- Home Depot Inc. narrowed its guidance for a decline in this year’s profit and revenue as home-improvement demand wanes. Between 2020 and 2022, locked-down consumers flocked to Home Depot for tools and products to take on new renovation projects. But now, maintaining sales growth has proven to be challenging with mortgage rates near their highest level in two decades, a steep drop in home sales, and a broader shift toward spending on travel and entertainment. In August, the company said 2023 would be a year of moderation as consumers shift their spending to services. This fiscal year, analysts expect both Home Depot and competitor Lowe’s Cos. to report their first simultaneous declines in revenue growth since 2010.
- Boeing Co. extended its successful order haul on the second day of the Dubai Air Show, winning a deal from Ethiopian Airlines for more narrow- and widebody aircraft while rival Airbus SE continued to chase an increasingly elusive deal with Emirates. Ethiopian will buy 20 737-8 short-haul aircraft as well as 11 787-9 Dreamliners, with options to expand the order to as many as 67 aircraft. Speaking at a press conference, Ethiopian Chief Executive Officer Mesfin Tasew Bekele said his airline would continue its fleet renewal push in coming years. It wasn’t an entirely unsuccessful day for Airbus, which pulled in an order from EgyptAir for 10 of its A350-900. But the manufacturer found itself at the receiving end of some harsh criticism from Emirates President Tim Clark, who said that the A350-1000 model doesn’t meet his technical requirements because the engines need too much maintenance. As a result, he wouldn’t order the plane before the engine was upgraded, Clark said. Boeing on Monday concluded a major deal with Emirates, while Airbus’s hopes for a similar accord looked increasingly bleak.
- Some of the largest US companies face billions of dollars in additional interest costs and hits to their profit if they refinance their 2024 maturities at current rates, with a third of them lacking the cash to repay upcoming debt. Non-financial companies in the S&P 500 have a combined $107.7 billion in debt coming due next year, with an average interest rate of 2.8%, according to a Calcbench analysis seen first by Bloomberg News. Refinancing at 5.44% – the rate of the one-year Treasury bill in early November – would add another $3.09 billion in collective interest expense, the financial research firm said in its analysis. Using companies’ trailing twelve-month earnings per share ending with the second quarter as a baseline, that higher interest expense would reduce average EPS at 57 businesses with maturing debt in 2024 by $0.11, or 2.92%, Calcbench said.
- China’s $6.5 billion loan to Argentina last month was a potential lifeline for presidential hopeful Sergio Massa. It was also a big bet on its future in Latin America, a key battleground in its geopolitical competition with the US. That’s because Argentina’s runoff vote this month has stakes far beyond this hard-fought local election: Massa, from the ruling leftist Peronist coalition that is seeking stronger links with China, against the libertarian outsider Javier Milei, who has referred to the Asian nation as an “assassin.” So for China, a Massa win would put it in prime position to reap the benefits of being one of the only sources of financing for the cash-strapped South American nation, where triple-digit inflation is raging and the economy is expected to contract again this year. A Milei victory, however, would likely slash China’s influence in Argentina for at least the next four years.