November 9, 2023
- Caisse de Depot et Placement du Quebec is exploring the sale of as much as $2 billion of private equity assets in the secondary market to free up cash for other investments, according to people familiar with the matter. Canada’s second-largest pension manager is scouting the market and may end up selling a smaller stake or not selling at all, depending on the price, the people said, asking not to be identified discussing confidential matters. Evercore Inc. is advising on the sale, the people said. CDPQ, which had C$424 billion (about $307 billion) of assets at the end of June, declined to comment. Some North American pension plans have maxed out how much they can allocate to private assets after years of piling into the illiquid asset class when interest rates were near zero. What’s more, a tough market for deals is making it hard for private equity fund managers to exit investments and return capital to investors.
- Big-box retailer Canadian Tire reported normalized earnings per share for the third quarter that missed estimates and said it plans to cut 3% of staff, as well as eliminating many vacancies. Rogers Communications posted results that beat estimates after a strong back-to-school season for its wireless business. The company didn’t change its guidance for the year. Bank of Canada Senior Deputy Governor Carolyn Rogers speaks in Vancouver. Her remarks will be posted on the central bank’s website at 11:45 a.m. New York time.
- European stocks fell on Tuesday as worries about economic growth and losses across energy stocks overshadowed some positive earnings updates. The Stoxx Europe 600 Index closed 0.2% lower in London, with energy stocks the biggest losers as oil declined, while more cyclical sectors like miners, autos and banks also fell. Technology and financial services stocks outperformed. German industrial output fell for a fourth month in September, highlighting the challenge that Europe’s largest economy faces in averting a recession. European equities have rallied in November, rebounding after recently reaching their lowest level in nearly 10 months amid worries over rising bond yields, a disappointing earnings season and the Israel-Hamas conflict.
- US stock futures ticked higher after the S&P 500 notched an eight-day streak of gains. Treasuries fell ahead of more speeches by central bank officials. While the momentum has fizzled out, the S&P 500 has inched higher this week and if the index closes up for another day, it would mark the longest winning run since 2004. In pre-market trading, Walt Disney Co. gained 4% after profit beat estimates. Arm Holdings Plc sank 6% as its first earnings report since its initial public offering gave a disappointing sales forecast. In global equity markets, the recent upswing is down to conviction that the Federal Reserve and other policy makers are done hiking interest rates, even as officials caution that they won’t be quick to cut. European Central Bank Vice President Luis de Guindos told Slovenia’s Finance newspaper that any talk of lowering borrowing costs in the coming months is too early.
- Oil recovered after plunging to a three-month low on concerns about global consumption. Brent futures edged back above $80 a barrel, as some technical gauges suggested the slump in prices may be overdone. Markets globally have been looking for clues on whether the Federal Reserve will dial back a higher for longer stance on interest rates, while for oil in recent days the focus has shifted to softness in demand and higher supplies. Still, on Thursday Saudi Arabia’s energy minister said consumption remains healthy. That echoed remarks from the Secretary General of the Organization of Petroleum Exporting Countries earlier in the week. Oil prices have tumbled sharply over the past three weeks amid growing concerns over weaker demand. The focus has returned to fundamentals, with refining margins falling and stockpiles swelling in China, the biggest importer. Asia’s largest economy returned to deflation, according to data released Thursday.
- Gold steadied near the lowest in more than three weeks as investors awaited further insight on the outlook for interest rates, with Jerome Powell due to speak at the IMF’s annual research conference. The US Federal Reserve Chair is set to discuss monetary policy challenges on the panel later Thursday. Markets are pricing in almost no chance of an interest-rate increase in December, amid mounting expectations that the current level of the Fed’s benchmark will mark the peak of the tightening cycle. Higher rates are typically negative for non-interest bearing bullion. Spot gold edged lower to $1,948.12 an ounce as of 9:45 a.m. in London. The Bloomberg Dollar Spot Index was steady. Silver, palladium and platinum declined.
- Apple Inc. risks having to pay a €13 billion ($14 billion) tax bill to Ireland after an adviser to the European Union’s top court said the iPhone maker’s victory in an earlier challenge should be thrown out. Advocate General Giovanni Pitruzzella of the EU Court of Justice said in an advisory opinion that Apple’s win in a lower EU court should be re-examined because it was riddled with legal mistakes. The top EU tribunal is set to issue its binding ruling in the landmark state-aid dispute in the coming months and follows such advice in the majority of cases. EU antitrust chief Margrethe Vestager — who’s on temporary leave to pursue a bid for the presidency of the European Investment Bank — sparked outrage from the iPhone maker’s Cupertino, California headquarters to the White House when in 2016 she chose to home in on the company’s tax arrangements in Ireland. It’s by far the biggest case in Vestager’s decade-long campaign for tax fairness which has also targeted the likes of Amazon.com Inc. and carmaker Stellantis NV’s Fiat. She argued that selective tax benefits to big firms are illegal state aid, banned in the EU.
- Speaker Mike Johnson, the little-known Louisiana congressman who emerged from a hardliner revolt as House Republicans’ new leader, is short on both time and experience to avert a US government shutdown. The novice to major Washington negotiations plans to release as soon as Thursday his proposal for temporary government funding that will set the tone for talks and signal the risk of a Nov. 18 federal funding lapse. That gives the new speaker barely a week to make his opening gambit and choose how far to go in his demands to bolster his support among ultra-conservatives who ousted his predecessor, Kevin McCarthy.
- AllianceBernstein Holding LP’s head of alternatives Matthew Bass is getting cozy with some of the world’s biggest banks. The US fund manager that oversees almost $670 billion of assets is offering lenders a slice of its balance sheet — enabling the banks to keep their most prestigious clients sweet — in return for a cut of the fees and access to their client contact books. AllianceBernstein has been working with a range of large global institutions and smaller regional banks in need of a capital partner to originate real estate and consumer finance loans. “We’re able to leverage the banks’ relationship with borrowers, which they’ve developed over many years,” Bass said in a telephone interview. “At the same time, banks are able to keep those relationships if they continue lending, which provides a win/win for the bank and asset manager.”
- It took just over 18 months, but Bitcoin is finally back to where it traded before the event that precipitated the last crypto crash. The dominant cryptocurrency rose as much as 3.9% to $36,990 on Thursday. That’s the highest since May 5, 2022 — just before the TerraUSD stablecoin collapsed and ignited a daisy chain of failures across the cryptoasset space. Bitcoin completed its full recovery from that debacle almost exactly to the year after the rout reached its nadir when Sam Bankman-Fried’s exchange FTX filed for bankruptcy. Unlike in previous boom cycles, Bitcoin staged this year’s recovery in fits and starts, with sharp advances interspersed with long lulls of low volatility. To get here, it had to overcome the steepest monetary tightening by the Federal Reserve in four decades, along with increasingly stringent industry regulations.
- Aides to the Ukrainian president sought to paper over cracks emerging between the nation’s political leader and its top military commander after the general warned of a “stalemate” as the war with Russia heads into its second winter. Speculation about a growing rift between Ukrainian President Volodymyr Zelenskiy and the country’s army chief Valeriy Zaluzhnyi arose after the widely respected military commander wrote in The Economist last week that the fight against Russia is becoming “positional” and needed technological breakthroughs to give his country an edge. Zelenskiy publicly contradicted his top general at a joint press conference with European Commission President Ursula von der Leyen, saying there was no stalemate, and Ukraine was trying to spare its soldiers in the face of Russia’s control of the sky over the battlefield.
- London’s home rental cost showed signs of easing, with a drop in demand and evidence that tenants are refusing to pay record costs to secure a place to live, a survey of property appraisers showed. The Royal Institution of Chartered Surveyors said tenant demand across the UK recorded the slowest quarter-on-quarter increase in October since 2021. London is the only region where demand for rentals declined during the period. “After a bullish increase in rental rates, particularly smaller flats, we see these flattening out as tenants simply reach affordability limitations,” said Jonathan Price, an estate agent at Southside Property Management Services Ltd. in Bromley on the southern outskirts of London.
- The Federal Reserve is scrutinizing whether Morgan Stanley’s wealth management business is taking adequate measures to prevent potential money laundering by wealthy clients from outside the US. The New York-based bank’s top regulator is pressing the firm to improve controls and processes, according to a person with knowledge of the matter. Fed officials privately reprimanded the firm earlier for not making all of the changes it sought, the person said, asking not to be identified discussing the confidential talks. Andy Saperstein, who has oversight over the division, has met with Fed officials and promised to rectify any shortcomings, according to an earlier report from the Wall Street Journal on the regulator’s interest.
- The US and South Korea condemned North Korea for providing arms to Russia for its war in Ukraine, with the Biden administration’s top diplomat saying cooperation between Moscow and Pyongyang has increased global security risks. Secretary of State Antony Blinken also reaffirmed Washington’s “ironclad” commitment to ally South Korea when he had talks Thursday with top officials including President Yoon Suk Yeol and Foreign Minister Park Jin. “We are seeing a two-way street,” Blinken said at a news conference with Park. “We are seeing the DPRK provide military equipment to Russia for pursuing its aggression against Ukraine, but we are also seeing Russia provide technology and support to the DPRK for its own military programs,” he said, referring to North Korea by its formal name, the Democratic People’s Republic of Korea.
- Walt Disney Co., embroiled in another fight with activist investor Nelson Peltz, posted fourth-quarter profit that beat analysts’ expectations and said it will cut an additional $2 billion in expenses. Fiscal fourth-quarter earnings rose to 82 cents a share, excluding some items, Disney said Wednesday. That beat the 69-cent average of analysts’ estimates compiled by Bloomberg. Revenue grew 5.4% to $21.2 billion, compared with estimates of $21.4 billion. The activist investor, whose Trian Fund Management controls a roughly $2.5 billion stake in Disney, plans to seek several board seats at the Burbank, California-based company. Iger had previously committed to cutting more than $5.5 billion from annual expenses and has already eliminated 8,000 jobs this year.
- An effective and massively popular weight-loss drug has made Novo Nordisk A/S billions of dollars and turned it into the most valuable company in Europe. With the US Food and Drug Administration approval of another option from Eli Lilly & Co. on Wednesday, the Danish drugmaker now has some serious competition. Novo has reaped mega-profits from its obesity drug Wegovy by selling it for a premium price of $1,349 a month in the US — significantly higher than its diabetes drug, Ozempic, even though the two contain the exact same active ingredient. On Wednesday, Lilly undercut that price with its newly approved weight-loss drug Zepbound. The drugmaker said it plans to charge more than 21% less — or about $1,060 a month — for its shot, which will hit US pharmacies after Thanksgiving. Lilly also already sells the same drug for diabetes under the brand name Mounjaro. That retails for around $37 less a month.
- Wall Street’s so-called Magnificent Seven has been living up to its name again, but none more so than Microsoft Corp. The software giant has led a broad rebound in the biggest technology and internet stocks and closed at a record high on Wednesday. The rally in Big Tech has helped add about $1.5 trillion in market value to the Nasdaq 100 in recent days, suggesting a period of skepticism surrounding the pricey market leaders may be ending. Microsoft has risen for nine straight sessions, its longest streak in about four years. Shares have gained 15% since the end of September, making them the top performer among the seven megacaps that have powered the market’s gain this year. The advance has resulted in a market capitalization of $2.7 trillion, not far from Apple Inc., which at $2.84 trillion is the biggest public company.
- Earlier this year, Amazon.com Inc. began testing a grocery delivery service for people who don’t subscribe to its Prime loyalty program. Now the e-commerce giant is rolling out the service to the rest of the US as it prepares to open more supermarkets next year. The expansion, announced Thursday, is part of a grocery reboot reported by Bloomberg in August. Shoppers will be eligible for the offering anywhere the company operates its Amazon Fresh service. Non-Prime members will be charged $4.95 to $13.95 for delivery, while members now pay $6.95 to $9.95, with free deliveries over $100. Claire Peters, the worldwide vice president of Amazon Fresh, said in an interview that executives were “pleasantly surprised” at the number of people who ordered groceries during the trial. Delivery from Whole Foods Market stores is also coming to non-Prime subscribers “in the very near future,” she said.
- FanDuel owner Flutter Entertainment Plc fell as much as 9.4%, the worst intraday decline since March 2022, after it missed sales estimates. Revenue was £2.04 billion ($2.5 billion) in the third quarter, missing the £2.15 billion average estimate from analysts surveyed by Bloomberg. Earnings from sports betting in the quarter were affected by unsurprising sporting results, which are more favorable to bettors than bookmakers. The results were “disappointing,” Goodbody analyst David Brohan said. He pointed to further hits to Flutter’s earnings resulting from currency exchange rates, a tax change in India and weaker results in Australia.
- Rates traders are betting that the steepest global tightening cycle in a generation is over and that monetary easing will begin from mid-2024. Swaps signal the average cash rate for developed economies will be steady over the coming six months, the first time in two years that they’re not pricing in a hike over that time frame, according to data compiled by Bloomberg. They also show a 50-basis point reduction in the aggregated rate within a year, the biggest bet on easing since the pandemic. From Europe to the US and Australia, bonds have bounced back this month as traders speculate that central banks may soon call a halt to monetary tightening as price pressures recede. To be sure, it’s a risky bet as previous wagers to that effect backfired after inflation proved to be stickier than anticipated and expectations of a recession failed to materialize.