U.S. Crackdown on Inversion Deals and Eurozone Slowdown Hit Global Markets

Nichole Harper
23 Sep, 2014
New York City

On Wall Street market indexes struggled after the U.S. Treasury issued new rules to crackdown on inversion deals. At least eight large deals that are announced but not completed are likely to face higher costs or regulatory obstacles.

[R]11:50 AM New York – On Wall Street market indexes struggled after the U.S. Treasury issued new rules to crackdown on inversion deals. At least eight large deals that are announced but not completed are likely to face higher costs or regulatory obstacles.[/R]

Stocks on Wall Street traded lower after Treasure Department released new guidelines and rules to prevent U.S. corporations from relocating to lower tax jurisdictions.

The new rules will apply to mergers that are effective from today and will prevent U.S. corporations from using cash seating in overseas subsidiaries and finance the purchase of or merger with foreign corporations.

The so called inversion deals are the target of a crackdown led by Treasury Secretary Jacob J. Lew.

There are at least eight large deals that are likely to be affected including merger of Tim Hortons Inc with Burger King and deal between AbbVie Inc and Shire Plc.

S&P 500 index decreased 0.2% or 2.96 to 1,991.33 and the Nasdaq Composite Index declined 4.20 to 4,523.48.

European Markets

European market indexes dropped sharply on the worries that new rules in the U.S. will curb the merger appeal of European healthcare companies.

On the economic front, a private survey conducted by Markit Economics indicated manufacturing sector index declined to 50.5 in September from 50.7 in August.

The private measure on manufacturing is the latest in a series of weak economic data in the euro zone.

In London trading, FTSE 100 index slumped 1.3% or 84.89 to 6,688.74 and in Frankfurt the DAX index dropped 1.1% or 103.08 to 9,646.46.

In Paris, CAC 40 index declined 1.5% or 68.88 to 4,373.67.

Koninklijke Philips NV gained 1.5% to €23.86 after the Netherlands-based consumer products and healthcare equipment maker plans to split the company into two entities and merge its healthcare and consumer businesses into one company as HealthTech.

The company said its lighting business will operate as a standalone entity.

Tate & Lyle Plc tumbled 16.6% to 610.88 pence after the U.K.-based food, beverage ingredients maker forecasted adjusted pre-tax profits for the year to decline about 20% to between £230 million and £245 million. The company blamed the decline to problems in the supply chain.

The company estimated adjusted pre-tax profits for the first-half to between £95 million to £105 million.

Yara International ASA climbed 6.2% to 331.40 kronor after the Norway-based fertilizer producer is in talks with the U.S.-based CF Industries Holdings, Inc for a possible merger.

Asian Market

Markets in Asia traded lower for the second day of the week and markets in Japan were closed for a holiday.

In Mumbai trading, the Sensex Index declined 424.37 or 1.6% to close at 26,782.37. The CNX Nifty dropped 128.75 to 8,017.55.

Australian stocks opened lower on the worries that the euro zone growth difficulties will spill over world markets but market indexes rebounded in late afternoon after the release of Chinese manufacturing data.

The private survey in China showed manufacturing activities expanded unexpectedly in September, according to Purchasing Managers’ Index tracked by HSBC and Markit.

The preliminary survey showed the index increased to 50.5 in September from revised 50.2 in August. Any reading above 50 indicates expansion.

Australian dollar traded at 89.10 U.S. cents and in stock trading turnover increased to 770 million shares worth $5.07 billion.

ASX 200 index gained 52.70 or 0.9% to 5,415.70 and the broader All Ordinaries index jumped 47.70 to 5,415.90.