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Global Markets May Be Too Optimistic About U.S. Debt Ceiling Talks

Barry Adams
16 May, 2023
New York City

Investors remained hopeful that Washington lawmakers will avert a government shutdown, but ground realities are sending different signals.

With President Biden's international travel commitments over the next few weeks. an agreement has to be in place this week because it still needs approvals from both chambers of the U.S. Congress before the first week of June.

President Joe Biden is scheduled to travel to Japan for a G7 meeting followed by a trip to Papua New Guinea and then to attend a meeting of Quad nations, Japan, India, Australia and the United States.

Moreover, the agreement has to be codified in a bill and needs approvals from both chambers of Congress and signed by the U.S. President no later than June 7.

With each passing day without an agreement on debt ceiling, averting the U.S. government shutdown is looking difficult.

Moreover, raising the debt limit is not going to increase federal government spending but the agreement will only allow the federal government to implement a spending plan that is already authorized by the Congress and president.

Treasury Secretary Janet Yellen reiterated on Monday that the federal government is most likely to run out of cash as early as two weeks and the failure to suspend or lift the debt ceiling is costing the Treasury in higher interest rates.

The yields on Treasury notes maturing in four weeks has jumped to 5.60%.

Standard & Poor's lowered the U.S. government debt rating to AA+ from AAA in 2011 after congressional Republicans threatened a government shutdown.

Last time the U.S. federal government shut down for 35 days between December 22, 2018 and January 25, 2019.

Investors were also rattled after Home Depot forecasted sales and comparable store sales in 2023 to decline between 2% and 5% from 2022

U.S. Retail Sales Advanced Slightly Higher

Retail and food services sales increased 0.4% in April to $686.1 billion, the U.S. Census Bureau reported Tuesday. Sales increased 1.6% from a year ago.

Preliminary estimate of retail and food services sales are adjusted for seasonal and calendar variations but not for inflation.

The consumer price inflation from the previous month was 0.4%, indicating that sales are just keeping up with inflation but real sales are not expanding.

Retail trade sales were up 0.4% from the previous month, and up 0.5% from a year ago and nonstore retailers were up 8.0% while food services and drinking places were up 9.4%.

Sales of motor vehicles and parts dealers increased 0.4% and building materials and garden supplies advanced 0.5% and sporting goods stores decreased 3.3%.

Sales at gasoline stations declined 0.8% in April, despite the rise in gasoline prices, on top of 14.6% fall in sales in the month a year ago.

Core retail sales, which excludes automobiles, gasoline and building materials, accelerated to 0.7%, indicating sustained consumer demand.

U.S. Indexes & Yields

The S&P 500 index decreased 0.34% to 4,118.83 and the Nasdaq Composite rose 0.06% to 12,369.66.

The yield on 2-year Treasury notes increased to 4.03%, 10-year Treasury notes edged up to 3.53% and 30-year Treasury bonds held at 3.87%.

Crude oil rose $0.55 to $70.55 a barrel and natural gas prices fell 1 cent to $2.36 a thermal unit.

U.S. Stock Movers

Home Depot Inc decreased 2.2% to $282.54 after the home improvement retailer reported smaller-than-expected revenue.

Dish Network Corp increased 7.2% to $6.57 after director James DeFranco said in a regulatory filing the purchase of 3 million shares.

Capital One Financial Corp increased 6.5% to $94.95 after Warren Buffett controlled Berkshire Hathaway acquired a new stake in the company for $950 million.

Nu Holdings Ltd increased 5.7% to $6.42 after the fintech company reported first-quarter revenue of $1.6 billion and adjusted earnings of $182.4 million.

European Markets Near Flatline, Eurozone GDP Barely Advanced

European markets showed little movement amid a flood of economic data and corporate earnings.

Investors generally stayed on the sidelines after China reported weaker than expected rebound in retail sales, fixed investments and industrial production in April.

In the UK jobless rate increased to 3.9% in the first quarter from 3.8% in the last quarter of 2022, the Office for National Statistics reported Tuesday.

The slight increase in the jobless rate supported the case that the Bank of England may pause rate hike at its next policy meeting on June 22.

Closer to home, investors digested economic growth data in the eurozone in the first quarter.

Euro Area GDP Barely Increased In Q1

Seasonally adjusted GDP in the first quarter in the Euro Area barely increased 0.1% from the previous quarter and 0.2% in the Eu, according to the flash estimate released by Eurostat Tuesday.

Compared with the same quarter of the previous year, seasonally adjusted GDP increased 1.3% in the euro area and 1.2% in the EU in the first quarter, after rising 1.8% in the euro area and 1.7% in the EU in the fourth quarter of 2022.

During the first quarter of 2023, GDP in the United States increased 0.3% compared to the previous quarter and increased 1.6% from a year ago.

Spain led the region with GDP expanding 3.8% from a year ago followed by 2.6% in Ireland, 2.8% in Romania, 2.5% in Portugal, 0.8% in France and -0.1% in Germany.

Employment Expands in Euro Area and EU

The number of employed persons increased 0.6% in both the euro area and the EU in the first quarter of 2023, compared with the previous quarter.

In the fourth quarter of 2022, employment had increased 0.3% in both the euro area and the EU.

On an annual basis, employment increased 1.7% in the euro area and 1.6% in the EU in the first quarter, after rising 1.5% in the euro area and 1.3% in the EU in the fourth quarter of 2022.

Europe Indexes & Yields

The DAX index decreased 0.1% to 15,897.93, the CAC-40 index fell 0.1% or to 7,406.01 and the FTSE 100 index fell 0.4% to 7,751.08.

The yield on 10-year German Bunds inched down to 2.26%, French bonds traded slightly lower to 2.89%, the UK gilts inched lower to 3.74% and Italian bonds decreased to 4.14%.

The euro edged higher to $1.089, the British pound to $1.253 and the Swiss franc to 89.29 cents.

Brent crude decreased 36 cents to $74.86 a barrel and the Dutch TTF natural gas decreased €0.49 to €31.82 per MWh.

Europe Stock Movers

Vodafone Group dropped 5% to 85.02 pence after the company said it plans to cut as many as 11,000 jobs in the next three years.

The newly appointed chief executive Margherita Della Valle also said free cash flow in 2023 is likely to decline by €1.5 billion.

Embracer Group plunged 16% to SEK 44.40 after the game developer reiterated its annual earnings outlook.

Britvic Plc increased 1.2% to 939.28 pence after the beverage maker reported an increase in first-half pre-tax profit driven by higher sales.

Imperial Brands plc declined 0.6% to 1,862.72 pence after the cigarette maker reiterated its full-year outlook.

Bouygues SA decreased 2.5% to 30.92 after the French construction to telecom group reported a slight increase in first quarter net loss.

Movers: Capital One, Dish Network, Home Depot, Nu Holdings

Scott Peters
16 May, 2023
New York City

Stocks traded sideways and lacked momentum after retail sales highlighted stretched consumer budgets and sales at gasoline stations declined despite the rise in gasoline prices.

The S&P 500 index decreased 0.34% to 4,122.34 and the Nasdaq Composite fell 0.06% to 12,358.06.

Home Depot Inc decreased 2.2% to $282.54 after the home improvement retailer said fiscal year revenue is expected to decline.

The home improvement chain blamed the sale decline on softening of lumber prices and poor weather conditions in several parts of the U.S.

Home Depot forecasted same store and comparable sales in 2023 to decrease between 2% and 5%.

Sales in the first quarter decreased 4.2% to $37.3 billion and comparable sales declined 4.5% and in the U.S. store fell 4.6%, operating margin rate between 14.0% and 14.3% and diluted earnings per share to fall between 7.0% and 13.0% a year ago.

Dish Network Corp increased 7.2% to $6.57 after director James DeFranco said in a regulatory filing the purchase of 3 million shares.

Capital One Financial Corp increased 6.5% to $94.95 after Warren Buffett controlled Berkshire Hathaway acquired a new stake in the company for $950 million.

Nu Holdings Ltd increased 5.7% to $6.42 after the fintech company reported first-quarter revenue of $1.6 billion and adjusted earnings of $182.4 million.

Brazil-based online bank said revenue in the first quarter increased 85% to $1.6 billion from $877.2 million and the company swung to a net income of $141.8 million from a loss of $45.1 million a year ago.

The company added 4.5 million customers on its digital platform in the quarter and reached a total of 79.1 million. In Brazil, the company added 1.5 million net new customers on its digital platform.

Deposits in the quarter increased 34% on currency neutral basis to $15.8 billion and total loans surged 54% to $12.8 billion.

Net interest margin increased 2.2 percentage points and 7.2 percentage points from the previous year to a record high of 15.7%.

Nu's customers in Brazil now account for 46% of the country’s adult population, versus 44% in the previous quarter and in Mexico increased 52% to 3.2 million and in Colombia soared 200% to 635,000.

Stocks In Holding Pattern, Treasury Debt Cost Rises as Debt Ceiling Standoff Continues

Barry Adams
16 May, 2023
New York City

Stocks lacked direction as investors awaited an update on debt ceiling talks and consumer health worries resurfaced after retail sales barely kept up with inflation.

President Joe Biden and congressional leaders are scheduled to meet today and investors are hoping that two sides could find a compromise and avert the federal government shutdown.

Treasury Secretary Janet Yellen reiterated on Monday that the federal government is most likely to run out of cash as early as two weeks and the failure to suspend or lift the debt ceiling is costing the Treasury in higher interest rates.

The yields on Treasury notes maturing in four weeks has jumped to 5.60%.

Investors were also rattled after Home Depot forecasted sales and comparable store sales in 2023 to decline between 2% and 5% from 2022

Retail Sales Just Keep Up with Inflation

Retail and food services sales increased 0.4% in April to $686.1 billion, the U.S. Census Bureau reported Tuesday. Sales increased 1.6% from a year ago.

Preliminary estimate of retail and food services sales are adjusted for seasonal and calendar variations but not for inflation.

The consumer price inflation from the previous month was 0.4%, indicating that sales are just keeping up with inflation but real sales are not expanding.

Retail trade sales were up 0.4% from the previous month, and up 0.5% from a year ago and nonstore retailers were up 8.0% while food services and drinking places were up 9.4%.

Sales of motor vehicles and parts dealers increased 0.4% and building materials and garden supplies advanced 0.5% and sporting goods stores decreased 3.3%.

Sales at gasoline stations declined 0.8% in April, despite the rise in gasoline prices, on top of 14.6% fall in sales in the month a year ago.

Core retail sales, which excludes automobiles, gasoline and building materials, accelerated to 0.7%, indicating sustained consumer demand.

U.S. Indexes & Yields

The S&P 500 index decreased 0.34% to 4,122.34 and the Nasdaq Composite fell 0.06% to 12,358.06.

The yield on 2-year Treasury notes increased to 4.03%, 10-year Treasury notes edged up to 3.53% and 30-year Treasury bonds held at 3.87%.

Crude oil rose $0.21 to $71.27 a barrel and natural gas prices rose 3 cents to $2.41 a thermal unit.

U.S. Stock Movers

Home Depot Inc decreased 2.2% to $282.54 after the home improvement retailer reported smaller-than-expected revenue.

Dish Network Corp increased 7.2% to $6.57 after director James DeFranco said in a regulatory filing the purchase of 3 million shares.

Capital One Financial Corp increased 6.5% to $94.95 after Warren Buffett controlled Berkshire Hathaway acquired a new stake in the company for $950 million.

Nu Holdings Ltd increased 5.7% to $6.42 after the fintech company reported first-quarter revenue of $1.6 billion and adjusted earnings of $182.4 million.

Movers: Britvic, Bouygues, Embracer Group, Imperial Brands, Vodafone

Bridgette Randall
16 May, 2023
Frankfurt

Vodafone Group dropped 5% to 85.02 pence after the company said it plans to cut as many as 11,000 jobs in the next three years.

The newly appointed chief executive Margherita Della Valle also said free cash flow in 2023 is likely to decline by €1.5 billion.

Revenue in the fiscal 2023 ending in March increased 0.3% to €45.7 billion from €45.6 billion and net income increased to €12.3 billion from €2.7 billion and basic earnings per share rose to 42.77 cents from 7.71 cents a year ago.

The reported earnings sharply rose reflecting the sale of Vantage Towers unit, adjusted earnings declined 1.3% to €14.7 billion on higher energy cost and weak market conditions in Germany.

The company declared a final dividend of 4.5 cents totaling 9.0 cents for fiscal year 2023.

Embracer Group plunged 16% to SEK 44.40 after the game developer reiterated its estimate for the full-year adjusted EBIT.

The company said net sales in the fiscal third quarter ending in December soared 128% to SEK 11,6 billion and basic earnings per share was SEK 1.38 compared to a loss of SEK 1.38 a year ago.

The company reiterates its previously published forecast for adjusted EBIT of SEK 8.0 to 10.0 billion in the financial year 2023 and SEK 10.30 to 13.60 billion in the financial year 2024.

Britvic Plc increased 1.2% to 939.28 pence after the beverage maker reported an increase in first-half pre-tax profit driven by higher sales.

Revenue in the first-half ending in March increased 7.9% to £794.0 million and after-tax profit soared 21.4% to £54.4 million.

Basic earnings per share increased 22.5% to 21.0 pence from 17.2 pence a year ago.

The company announced an additional stock repurchase program of £75 million over the next twelve months.

Imperial Brands plc declined 0.6% to 1,862.72 pence after the cigarette maker reiterated its full-year outlook.

Revenue in the first-half increased 0.3% to £15.4 billion from £15.3 billion and operating profit increased 27.7% to £1.5 billion from £1.2 billion and earnings per share rose 11.2% to 117 pence from 105.2 pence a year ago.

The company increased its interim dividend to 43.18 pence from 42.54 pence a year ago.

Bouygues SA decreased 2.5% to 30.92 after the French construction to telecom group reported a slight increase in first quarter net loss.

European Indexes Hold Amid Data Deluge, Eurozone GDP Barely Expanded

Bridgette Randall
16 May, 2023
Frankfurt

European markets showed little movement amid a flood of economic data and corporate earnings.

Investors generally stayed on the sidelines after China reported weaker than expected rebound in retail sales, fixed investments and industrial production in April.

In the UK jobless rate increased to 3.9% in the first quarter from 3.8% in the last quarter of 2022, the Office for National Statistics reported Tuesday.

The slight increase in the jobless rate supported the case that the Bank of England may pause rate hike at its next policy meeting on June 22.

Closer to home, investors digested economic growth data in the eurozone in the first quarter.

Euro Area GDP Barely Increased In Q1

Seasonally adjusted GDP in the first quarter in the Euro Area barely increased 0.1% from the previous quarter and 0.2% in the Eu, according to the flash estimate released by Eurostat Tuesday.

Compared with the same quarter of the previous year, seasonally adjusted GDP increased 1.3% in the euro area and 1.2% in the EU in the first quarter, after rising 1.8% in the euro area and 1.7% in the EU in the fourth quarter of 2022.

During the first quarter of 2023, GDP in the United States increased 0.3% compared to the previous quarter and increased 1.6% from a year ago.

Spain led the region with GDP expanding 3.8% from a year ago followed by 2.6% in Ireland, 2.8% in Romania, 2.5% in Portugal, 0.8% in France and -0.1% in Germany.

Employment Expands in Euro Area and EU

The number of employed persons increased 0.6% in both the euro area and the EU in the first quarter of 2023, compared with the previous quarter.

In the fourth quarter of 2022, employment had increased 0.3% in both the euro area and the EU.

On an annual basis, employment increased 1.7% in the euro area and 1.6% in the EU in the first quarter, after rising 1.5% in the euro area and 1.3% in the EU in the fourth quarter of 2022.

Europe Indexes & Yields

The DAX index increased 0.1% or 20.14 points to 15,937.81, the CAC-40 index rose 0.02% or 1.62 points to 7,419.83 and the FTSE 100 index advanced 0.08or 6.12 to 7,783.96.

The yield on 10-year German Bunds inched down to 2.26%, French bonds traded slightly lower to 2.89%, the UK gilts inched lower to 3.74% and Italian bonds decreased to 4.14%.

The euro edged higher to $1.089, the British pound to $1.253 and the Swiss franc to 89.29 cents.

Brent crude decreased 7 cents to $75.15 a barrel and the Dutch TTF natural gas increased €0.05 to €32.36 per MWh.

Europe Stock Movers

Vodafone Group dropped 5% to 85.02 pence after the company said it plans to cut as many as 11,000 jobs in the next three years.

The newly appointed chief executive Margherita Della Valle also said free cash flow in 2023 is likely to decline by €1.5 billion.

Embracer Group plunged 16% to SEK 44.40 after the game developer reiterated its annual earnings outlook.

Britvic Plc increased 1.2% to 939.28 pence after the beverage maker reported an increase in first-half pre-tax profit driven by higher sales.

Imperial Brands plc declined 0.6% to 1,862.72 pence after the cigarette maker reiterated its full-year outlook.

Bouygues SA decreased 2.5% to 30.92 after the French construction to telecom group reported a slight increase in first quarter net loss.

Debt Ceiling Uncertainties Keep U.S. Stock Averages On Tight Leash

Barry Adams
15 May, 2023
New York City

Beyond rhetoric, there was little to drive stocks on Wall Street as lawmakers of both parties jockeyed to get upper hand in media attention.

Stocks on Wall Street lacked direction as investors awaited a resolution to debt ceiling negotiations as neither party is conceding its position to move discussion forward.

With each passing day, investors are worried that a last minute deal may be more elusive than previously expected and avert the Federal government shutdown as early as two weeks from today.

Benchmark indexes traded sideways after two down weeks in a row after the ongoing rate path and inflation worries were replaced by the debt ceiling uncertainties and regional bank fallout.

President Joe Biden is expected to meet top Congressional leaders on Tuesday but both parties are sending mixed signals and lowering expectations of an agreement.

The Treasury Secretary Janet Yellen said in an interview with the Wall Street Journal on Saturday offered hope.

"I'm told they have found some areas of agreement," Yellen said while attending a meeting of G7 finance ministers in Japan.

Despite the positive tone, two sides remain apart in how to limit federal government spending and the debt limit increase and duration.

The Treasury Secretary had said earlier that the U.S. government is expected to run out of cash as early as June 1 if the debt ceiling of $31.4 trillion is not lifted.

U.S. Indexes & Yields

The S&P 500 index increased 9.87 points to 4,133.44 and the Nasdaq Composite increased 72.07 points to 12,352.86.

The yield on 2-year Treasury notes increased to 4.00%, 10-year Treasury notes edged up to 3.50% and 30-year Treasury bonds held at 3.80%.

Crude oil rose $0.98 to $71.05 a barrel and natural gas prices rose 10 cents to $2.46 a thermal unit.

U.S. Stock Movers

Newmont Corporation increased 1.4% to $46.60 after the company and Australia-based Newcrest Mining Ltd reached a binding agreement to proceed with the proposal to acquire 100% of Newcrest.

Newmont agreed to pay 0.4 of Newmont share for each Newcrest share held and shareholders will be entitled to receive a special dividend of up to US$1.0 a share just ahead of the completion of the deal.

After considering the full amount of the special dividend, the deal value Newcrest Mining at A$29.27 a share an implied equity value of A$26.2 billion and enterprise value for Newcrest of A$28.8 billion

Newcrest shareholders will own 31% of the combined group and value the company at a 30.4% premium to Newcrest’s closing price of A$22.45 per share on February 3, before the first announcement of the deal.

Microsoft Corp increased 0.1% to $309.40 after the European Union's regulatory arm approved the purchase of Activision Blizzard for $69 billion.

Activision Blizzard Inc increased 1.1% to $78.27.

European Markets Advanced On Growth Outlook Revision

European markets advanced after the European Commission revised higher its economic growth outlook for 2023.

Benchmark indexes traded higher in France and Germany traded higher after the EC lifted its annual economic growth estimate for the European Union to 1.0% from the previous estimate of 0.8% and for the Euro Area to 1.1% from 0.9% respectively.

Investors overlooked the sharp decline in industrial production in the region in March and the decline in wholesale prices in April.

Euro Area industrial Output Dropped In March

Seasonally adjusted industrial production in the Euro Area declined 4.1% in March from the previous month, Eurostat reported Monday.

On a monthly basis, in the Euro Area, production of capital goods fell 15.4%, intermediate goods 1.8%, energy 0.9% and non-durable consumer goods 0.8%, while production of durable consumer goods rose 2.8%.

On an annual basis in the Euro Area, production of energy fell 6.1%, intermediate goods 4.7%, capital goods 2.1% and durable consumer goods 0.8%, while production of non-durable consumer goods rose 6.8%.

Industrial output dropped the most since 2020, driven by a significant decline in production of capital goods.

Germany's Wholesale Prices Declined In April

Germany wholesale prices declined 0.5% in April from a year ago, the first fall since December 2020, the Federal Statistics Office reported Monday.

On an annual basis, the wholesale price index in March increased 2.0% and in February jumped 8.9%.

The annual price decline was mainly driven by the price decrease of mineral oil products by 15.7%, scrap and residual materials 31.5 %, cereals, raw tobacco, seeds and feedstuff 25.2%, ores, metals and semi-finished metal products 20.5% and chemical products 5.4%.

However, the selling prices in wholesale trade for fruit, vegetables and potatoes surged 22.0%, building materials and elements 13.9% and living animals 11.4%.

The wholesale price index declined 0.4% in April from the previous month reversing the 0.2% increase in March.

Europe Indexes & Yields

The DAX index increased 0.2% or 35.26 points to 15,949.29, the CAC-40 index rose 0.4% or 29.78 points to 7,443.59 and the FTSE 100 index advanced 0.5% or 35.67 to 7,790.29.

The yield on 10-year German Bunds inched down to 2.29%, French bonds traded slightly lower to 2.88%, the UK gilts inched lower to 3.78% and Italian bonds decreased to 4.18%.

The euro edged higher to $1.087, the British pound to $1.250 and the Swiss franc to 89.60 cents.

Brent crude increased 20 cents to $74.27 a barrel and the Dutch TTF natural gas increased €0.27 to €32.50 per MWh.

Europe Stock Movers

Siemens Energy increased 3.3% to €23.01 after the maker of capital equipment for the power sector revised higher its 2023 outlook.

Diploma plc increased 2.4% 2,920 pence after the UK-based company reported higher-than-expected pre-tax profit and revenue growth in the first-half.

British American Tobacco increased 0.3% to 2,717.0 pence after the company appointed finance director Tadeu Marroco as its chief executive officer.

AXA SA gained 0.3% to € 27.56 after the French insurer reported an increase in gross premium in the first quarter.

Movers: Activision Blizzard, Microsoft, Magellan Midstream, Newmont Corp, OneOK, shake Snack

Scott Peters
15 May, 2023
New York City

Newmont Corporation increased 1.4% to $46.60 after the company and Australia-based Newcrest Mining Ltd reached a binding agreement to proceed with the proposal to acquire 100% of Newcrest.

Newmont agreed to pay 0.4 of Newmont share for each Newcrest share held and shareholders will be entitled to receive a special dividend of up to US$1.0 a share just ahead of the completion of the deal.

After considering the full amount of the special dividend, the deal value Newcrest Mining at A$29.27 a share an implied equity value of A$26.2 billion and enterprise value for Newcrest of A$28.8 billion

Newcrest shareholders will own 31% of the combined group and value the company at a 30.4% premium to Newcrest’s closing price of A$22.45 per share on February 3, before the first announcement of the deal.

Microsoft Corp increased 0.1% to $309.40 after the European Union's regulatory arm approved the purchase of Activision Blizzard for $69 billion.

Activision Blizzard Inc increased 1.1% to $78.27.

Shake Shack Inc soared 9.5% to $71.26 after activist investor Engaged Capital acquired 6.6% stake in the company and the investor is looking to plan a proxy request to add three seats on the company board.

The news was first reported by the Wall Street Journal.

Magellan Midstream Partners LP jumped 13.6% to $63.04 after the company agreed to be acquired by OneOk, Inc for about $18.8 billion.

OneOk, Inc declined 8.5% to $58.18.

OneOk agreed to pay $25.0 in cash and 0.6670 shares of ONEOK common stock for each outstanding Magellan common unit, representing a current implied value to each Magellan unitholder of $67.50 per unit, a 22% premium, based on May 12 closing prices.

The transaction is expected to be earnings per share accretive beginning in 2024 with EPS accretion of 3% to 7% per year from 2025 through 2027, and free cash flow per share accretion averaging more than 20% from 2024 through 2027.

The combined company is estimated to generate an average annual $1.0 billion in free cash flow in the first four years following the close of the transaction.

Newmont Sealed $19 Billion Deal to Buy Australia Based Newcrest Mining

Scott Peters
15 May, 2023
New York City

Newmont Corporation increased 1.4% to $46.60 after the company and Australia-based Newcrest Mining Ltd reached a binding agreement to proceed with the proposal to acquire 100% of Newcrest.

Newmont agreed to pay 0.4 of Newmont share for each Newcrest share held and shareholders will be entitled to receive a special dividend of up to US$1.0 a share just ahead of the completion of the deal.

After considering the full amount of the special dividend, the deal value Newcrest Mining at A$29.27 a share an implied equity value of A$26.2 billion and enterprise value for Newcrest of A$28.8 billion

Newcrest shareholders will own 31% of the combined group and values the company at a 30.4% premium to Newcrest’s closing price of A$22.45 per share on February 3, before the first announcement of the deal.

Stocks Meandered Amid Debt Ceiling Turmoil, EU Approves Microsoft's Acquisition of Activision Blizzard

Barry Adams
15 May, 2023
New York City

Stocks on Wall Street lacked direction as investors awaited a resolution to debt ceiling negotiations.

Benchmark indexes traded sideways after two down weeks in a row after the ongoing rate path and inflation worries were replaced by the debt ceiling uncertainties and regional bank fallout.

President Joe Biden is expected to meet top Congressional leaders on Tuesday.

The Treasury Secretary Janet Yellen said in an interview with the Wall Street Journal on Saturday offered hope.

"I'm told they have found some areas of agreement," Yellen said while attending a meeting of G7 finance ministers in Japan.

Despite the positive tone, two sides remain apart in how to limit federal government spending and the debt limit increase and duration.

The Treasury Secretary had said earlier that the U.S. government is expected to run out of cash as early as June 1 if the debt ceiling of $31.4 trillion is not lifted.

U.S. Indexes & Yields

The S&P 500 index increased 0.82 points to 4,124.78 and the Nasdaq Composite increased 46.30 points to 12,330.26.

The yield on 2-year Treasury notes increased to 4.00%, 10-year Treasury notes edged up to 3.50% and 30-year Treasury bonds held at 3.80%.

Crude oil rose $0.98 to $71.05 a barrel and natural gas prices rose 10 cents to $2.46 a thermal unit.

U.S. Stock Movers

Newmont Corporation increased 1.4% to $46.60 after the company and Australia-based Newcrest Mining Ltd reached a binding agreement to proceed with the proposal to acquire 100% of Newcrest.

Newmont agreed to pay 0.4 of Newmont share for each Newcrest share held and shareholders will be entitled to receive a special dividend of up to US$1.0 a share just ahead of the completion of the deal.

After considering the full amount of the special dividend, the deal value Newcrest Mining at A$29.27 a share an implied equity value of A$26.2 billion and enterprise value for Newcrest of A$28.8 billion

Newcrest shareholders will own 31% of the combined group and value the company at a 30.4% premium to Newcrest’s closing price of A$22.45 per share on February 3, before the first announcement of the deal.

Microsoft Corp increased 0.1% to $309.40 after the European Union's regulatory arm approved the purchase of Activision Blizzard for $69 billion.

Activision Blizzard Inc increased 1.1% to $78.27.

European Markets Advanced On Growth Outlook Revision, Euro Area Industrial Output Dropped

Bridgette Randall
15 May, 2023
Frankfurt

European markets advanced after the European Commission revised higher its economic growth outlook for 2023.

Benchmark indexes traded higher in France and Germany traded higher after the EC lifted its annual economic growth estimate for the European Union to 1.0% from the previous estimate of 0.8% and for the Euro Area to 1.1% from 0.9% respectively.

Investors overlooked the sharp decline in industrial production in the region in March and the decline in wholesale prices in April.

Euro Area industrial Output Dropped In March

Seasonally adjusted industrial production in the Euro Area declined 4.1% in March from the previous month, Eurostat reported Monday.

On a monthly basis, in the Euro Area, production of capital goods fell 15.4%, intermediate goods 1.8%, energy 0.9% and non-durable consumer goods 0.8%, while production of durable consumer goods rose 2.8%.

On an annual basis in the Euro Area, production of energy fell 6.1%, intermediate goods 4.7%, capital goods 2.1% and durable consumer goods 0.8%, while production of non-durable consumer goods rose 6.8%.

Industrial output dropped the most since 2020, driven by a significant decline in production of capital goods.

Germany's Wholesale Prices Declined In April

Germany wholesale prices declined 0.5% in April from a year ago, the first fall since December 2020, the Federal Statistics Office reported Monday.

On an annual basis, the wholesale price index in March increased 2.0% and in February jumped 8.9%.

The annual price decline was mainly driven by the price decrease of mineral oil products by 15.7%, scrap and residual materials 31.5 %, cereals, raw tobacco, seeds and feedstuff 25.2%, ores, metals and semi-finished metal products 20.5% and chemical products 5.4%.

However, the selling prices in wholesale trade for fruit, vegetables and potatoes surged 22.0%, building materials and elements 13.9% and living animals 11.4%.

The wholesale price index declined 0.4% in April from the previous month reversing the 0.2% increase in March.

Europe Indexes & Yields

The DAX index increased 0.2% or 35.26 points to 15,949.29, the CAC-40 index rose 0.4% or 29.78 points to 7,443.59 and the FTSE 100 index advanced 0.5% or 35.67 to 7,790.29.

The yield on 10-year German Bunds inched down to 2.29%, French bonds traded slightly lower to 2.88%, the UK gilts inched lower to 3.78% and Italian bonds decreased to 4.18%.

The euro edged higher to $1.087, the British pound to $1.250 and the Swiss franc to 89.60 cents.

Brent crude increased 20 cents to $74.27 a barrel and the Dutch TTF natural gas increased €0.27 to €32.50 per MWh.

Europe Stock Movers

Siemens Energy increased 3.3% to €23.01 after the maker of capital equipment for the power sector revised higher its 2023 outlook.

Diploma plc increased 2.4% 2,920 pence after the UK-based company reported higher-than-expected pre-tax profit and revenue growth in the first-half.

British American Tobacco increased 0.3% to 2,717.0 pence after the company appointed finance director Tadeu Marroco as its chief executive officer.

AXA SA gained 0.3% to € 27.56 after the French insurer reported an increase in gross premium in the first quarter.

Global Markets On Edge With Both Sides Holding Firm In Debt Ceiling Negotiations

Barry Adams
12 May, 2023
New York City

Markets are finally focusing on the lack of progress in finalizing the U.S. Federal government debt ceiling as lawmakers of both parties remain at odds.

President Joe Biden and congressional leaders postponed the closely watched meeting on Friday because neither side saw the reason to meet.

The U.S. lawmakers raised the debt limit by $2.5 trillion to a total of $31.4 trillion on December 16, 2021.

On January 19, 2023, that limit was reached, and the Treasury announced a “debt issuance suspension period” and began using “extraordinary measures” to borrow additional funds without breaching the debt ceiling.

The U.S. Treasury is expected to exhaust all measures sometime in the first two weeks in June, and if the debt limit is not increased or suspended the U.S. government will default on its obligation.

That default will not send the U.S. stock market in tailspin but also spike Treasury yields and send shockwaves to financial markets with unpredictable consequences.

"If the debt limit remains unchanged, there is a significant risk that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations, said the nonpartisan Congressional Budget Office.

The extent to which the Treasury will be able to fund the government’s ongoing operations will remain uncertain throughout May, even if the Treasury ultimately runs out of funds in early June.

That uncertainty exists because the timing and amount of revenue collections and outlays over the intervening weeks could differ from CBO’s projections," added the CBO in its latest report released Friday.

At heart of the impasse is the lack of agreement in which government programs should be funded and which programs need to be cut or completely eliminated.

President Joe Biden has insisted on raising the debt limit without any preconditions and House Speaker Kevin McCarthy has demanded cuts in government spending paired with the debt ceiling revision.

Markets are hoping that the both sides may work out a small deal to avert government default that will keep the U.S. government functioning till the year-end.

With no debt deal in sight, Treasury yields are expected to surge and stocks face more headwinds next week.

U.S. Import and Export Prices Rebounded In April

U.S. Import prices in April rose 0.4% form the previous month, the U.S. Bureau of Labor Statistics reported Friday.

Import prices rose for the first time in four months and increased to the most since May 2022. Import prices of fuel increased 4.5% after 5.7% higher petroleum costs and 17.4% decline in natural gas prices.

On a yearly basis, import prices declined 4.8% in April, matching the rate in March.

Nonfuel import prices were unchanged in April, after decreasing 0.5% the previous month. Foods, feeds, and beverages prices increased 0.2% in April following a 0.9% decline in March.

U.S. export prices increased 0.2% in April, after declining 0.6% in the previous month.

Higher prices for nonagricultural exports and agricultural exports in April each contributed to the overall increase.

The price index for U.S. exports fell 5.9% from a year ago in April, the largest over-the-year drop since a 6.7% fall in May 2020.

U.S. Indexes & Yields

The S&P 500 index increased 0.5% to 4,111.18 and the Nasdaq Composite increased to 0.7% 12,248.02.

The yield on 2-year Treasury notes increased to 3.99%, 10-year Treasury notes edged up to 3.46% and 30-year Treasury bonds held at 3.78%.

Crude oil fell $0.87 to $69.99 a barrel and natural gas prices rose 8 cents to $2.27 a thermal unit.

U.S. Stock Movers

Regional banks were in focus on the final day of the week as they have been for the last two months.

PacWest Bancorp fell 2.5% to $4.60, Western Alliance Bancorp increased 0.4% to $27.01 and Zions Bancorporation dropped 1.5% to $22.30.

On Thursday PacWest reported additional 9.5% deposit outflow in the second quarter to May 10 after the closure and sale of First Republic Bank.

Tesla Inc edged up a fraction to $172.0 after chief executive Elon Musk appointed a new chief executive for Twitter Inc.

NBC Universal chief Linda Yaccarino is expected to lead Twitter in six weeks and Elon Musk will remain as chairman and chief technology officer of the social media platform.

Musk has been under fire from Tesla shareholders for handling multiple companies and being distracted from managing the electric vehicle maker.

First Solar Inc soared 22.6% to $224.46 after the company agreed to acquire Sweden-based Evolar AB for up to $80 million.

The company makes thin films used in solar panels to improve efficiency.

The efficiency of conventional silicon-based solar cells has stagnated at around 20% and the market has become highly commoditized over the last decade.

Evolar claims its PV Power Booster increases solar cell efficiency by 25% compared with conventional silicon-based solar panels,

Luxury and Financial Stocks lift European Indexes

European markets traded higher on the final day of a volatile week.

Benchmark indexes hovered near record highs supported by advances in financial and luxury products makers.

Trading sentiment was also supported by optimism that the U.S. Federal Reserve would pause rate hike at its next meeting in June after consumer price and wholesale price indexes cooled in April.

Luxury products makers traded higher after Richemont SA reported record quarterly results on the back of a sharp rebound in China.

Insurance companies traded higher after strong quarter results lifted stocks of special insurance and property and casualty companies.

French Consumer Inflation Accelerated In April

In domestic economic news, French consumer prices accelerated in April to 5.9% from 5.7% in March.

The French statistical agency INSEE confirmed the preliminary estimate in a release Friday.

This increase in inflation resulted from an acceleration in prices of energy to 6.8% from 4.9% in March, services to 3.2% from 2.9% and tobacco to 9.4% from 7.8%.

On the other hand, the prices of manufactured goods slowed to 4.6% from 4.8% in March and food to 15.0% from +15.9% respectively.

On a monthly basis, price increase slowed to 0.6% in April from 0.9% rise in March.

Core inflation, which excludes food and energy, increased to 6.3% from 6.2% in March.

UK Economy Barely Expanded In First Quarter

The U.K. economy expanded for the second quarter in a row matching the growth rate in the previous quarter, the Office for National Statistics reported Friday.

GDP rose 0.1% in the first quarter from the fourth quarter of 2022, matching the rate in the previous quarter.

Construction sector led the growth with a rise of 0.7% followed by a 0.5% increase in manufacturing and 0.1% in the service sector.

Consumption remained weak after aggregate household spending was unchanged because elevated inflation squeezed income.

However, gross fixed capital formation increased 1.3% but public expenditure declined 2.5% and weak international trade after exports fell 8.1% and imports declined 7.2%.

Europe Indexes & Yields

The DAX index increased 0.5% or 87.02 points to 15,921.90, the CAC-40 index rose 0.9% or 65.08 points to 7,446.09 and the FTSE 100 index advanced 0.3% or 24.63 to 7,755.15.

The yield on 10-year German Bunds inched down to 2.24%, French bonds traded slightly lower to 2.82%, the UK gilts inched lower to 3.74% and Italian bonds decreased to 4.13%.

The euro edged higher to $1.091, the British pound to $1.253 and the Swiss franc to 89.28 cents.

Brent crude increased 26 cents to $75.23 a barrel and the Dutch TTF natural gas increased €0.74 to €34.25 per MWh.

Europe Stock Movers

Allianz SE increased 0.1% to €211.90 after the German insurance company reiterated its full-year 2023 outlook and reported a rise in first quarter net income.

Societe Generale SA increased 1.3% to €22.13 after the French bank reported a decline in French retail banking business but international business advanced at a faster pace.

SCOR SE jumped 9.6% to €25.79 after the French property and casualty reinsurance company reported better-than-expected earnings.

Beazley PLC advanced 4.7% to 614.0 pence after the specialist insurance company reported high gross written premium in the March quarter.

Richemont SA gained 5% to CHF 156.95 after the Swiss luxury watch company reported record annual earnings from continuing operations after sales rose in all regions of the world.

Nordex SE decreased 0.9% to €10.62 after the German wind turbine company reported a wider first quarter loss because of higher operating costs.

THG PLC plunged 9.7% to 67.32 pence after the e-commerce company ended its talks to go private with Apollo Global Management.

Movers: First Solar, JD.com, News Corp, Regional Banks, Tesla

Scott Peters
12 May, 2023
New York City

Regional banks were in focus on the final day of the week as they have been for the last two months.

PacWest Bancorp gained 0.2% to $4.70, Western Alliance Bancorp increased 0.4% to $27.01 and Zions Bancorporation dropped 1.5% to $22.30.