February 25th, 2019
Daily Market Commentary
- Barrick Gold Corp. is going hostile in its bid to acquire Newmont Mining Corp. and create the world’s largest gold producer by offering $17.8 billion for the company in an all-share deal. The offer raises the potential for a three-way fight between some of the world’s largest gold miners, and comes after Newmont’s chief executive blasted talks about a takeover as a “desperate” and “bizarre” move by Barrick. Barrick, based in Toronto, said it’s offering “at market” valuation of 2.5694 a share for each Newmont share. That implies that it’s valuing Colorado-based Newmont at $17.8 billion and $33.50 a share, an 8 percent discount to Friday’s close.
- European stocks advanced in early trading amid renewed optimism over trade talks after U.S. President Donald Trump extended the deadline to raise tariffs on Chinese goods beyond March 1. The Stoxx Europe 600 Index rose 0.5 percent, with all sectors gaining. Sectors sensitive to trade talk news include miners, semiconductors and autos. Elsewhere, telecommunications will be in focus this week, with the Mobile World Congress taking place in Barcelona. In the world of drugmakers, Roche Holding AG will buy Spark Therapeutics Inc. for $4.8 billion, while French biopharmaceutical company Ipsen SA will acquire Clementia Pharmaceuticals Inc. in a deal valued at up to $1.3 billion.
- U.S. stock-index futures rose as President Donald Trump said he would delay a planned increase in tariffs on Chinese goods after a “very good weekend” of talks. E-mini contracts on the S&P 500 Index expiring March extended gains again to 0.4 percent as of 9:40 a.m. in London, after paring an advance when China’s official Xinhua News Agency published a more skeptical commentary. Futures on the Dow Jones Industrial Average and Nasdaq 100 Index gained 0.5 percent.
- Japanese shares advanced as optimism spread in markets that the ongoing U.S.-China trade negotiations will yield positive results. Electronics and automakers bolstered the benchmark Topix index as all but one industry group advanced. President Donald Trump said in a tweet Sunday that both sides had made “substantial progress” on important issues including intellectual property protection, technology transfer and currency, among others. As a result, tariff increases scheduled for March 1 will be delayed, he said. China’s official Xinhua News Agency echoed Trump’s remarks, citing “substantial” progress.
- Oil steadied near a three-month high in New York as a U.S. move to extend a trade truce with China raised hopes that the world’s two biggest economies would soon resolve a stand-off on tariffs. West Texas Intermediate futures were little changed after settling at a three-month high on Friday. President Donald Trump said he’ll delay a tariff increase on Chinese goods that was set for March 1 after “substantial progress” in negotiations. Meanwhile, American drillers reduced the number of working oil rigs for the first time in three weeks.
- Gold trod water as investors weighed the implications for metals and the dollar of progress in trade talks between the U.S. and China, including a decision by Donald Trump to extend a deadline to raise tariffs. Palladium hit a record, and platinum rose to the highest in three months.
- AT&T Inc. could learn as soon as Tuesday whether it can finally move forward with its acquisition of Time Warner and put behind it a lengthy legal battle with U.S. antitrust enforcers over the $85 billion deal. The company and the Justice Department are awaiting a decision from the U.S. Court of Appeals in Washington about the government’s effort to reverse a lower-court decision allowing the merger. Oral arguments were held in December. Under an agreement with the Justice Department, AT&T promised to put Time Warner’s Turner Broadcasting in a business unit separate from AT&T’s DirecTV business. It also agreed to a firewall between the two. That agreement, which was intended to prevent a full integration of the companies if the government prevails in its appeal, expires Thursday.
- Investors added money to exchange-traded funds that buy emerging market stocks and bonds last week. This was the 19th straight week of inflows. Inflows to U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $1.1 billion in the week ended Feb. 22, compared with gains of $315.3 million in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totalled $17.4 billion.
- Hammerson Plc is in discussions to sell about 900 million pounds ($1.2 billion) of its properties as it comes under pressure from activist shareholder Elliott Advisors. The landlord committed to selling at least 500 million pounds of property this year as the value of its portfolio dropped 5.9 percent, the company said in a statement on Monday. It also announced plans to form a new committee to oversee the disposals program.
- Oil prices could potentially rise as much as 12 percent from current levels, though the rally may prove fleeting, according to Goldman Sachs Group Inc. Top OPEC member Saudi Arabia is cutting output faster than U.S. shale drillers can fill the gap, leaving a void in the market that may push global benchmark Brent crude to $70-$75 a barrel in the near future, bank analysts led by Jeffrey Currie said in a note. At the same time, supply disruptions in Venezuela are likely to accelerate in coming months, they wrote. “The oil market will likely continue to tighten significantly this March and April,” Currie said. “While prices could easily trade in a $70-$75 a barrel trading range, we believe such an environment would likely prove fleeting,” he said, reaffirming Goldman’s forecast for Brent to end the year at $60.
- Vivendi SA has stepped up its campaign to shake up the board of Telecom Italia SpA at the phone carrier’s annual meeting next month and signaled more openness to deals such as a merger of its landline network with a rival. In a 48-page document that outlines concerns with five directors backed by Elliott Management Corp., Telecom Italia’s largest shareholder reiterated calls to replace them with candidates proposed by the French media company.
- Roche Holding AG’s $4.8 billion bid for Spark Therapeutics Inc. raises the stakes further in the bidding for makers of therapies that promise to treat rare, debilitating diseases by correcting inborn flaws in DNA. Purchasing Philadelphia-based Spark will put Roche near the front of the pack with Basel-based neighbor Novartis AG in developing the promising new area of medicine, and highlights growing enthusiasm for a field that’s become the focus of a flurry of deals. Roche is entering gene therapy after Novartis agreed last year to pay $8.7 billion for AveXis Inc. and the Zolgensma DNA therapy that treats — and may cure — spinal muscular atrophy, a rare muscle disease that’s the leading genetic cause of death in infants.
- Russian President Vladimir Putin defended the decision to prosecute U.S. fund manager Michael Calvey on fraud charges in a case that’s shaken investors and drawn criticism from top Kremlin insiders. At a closed-door meeting last week, Putin was asked about attacks on the handling of the case and the damage it might do to the investment climate, but said that investigators’ suspicions Calvey and his associates had stolen a large amount of money — 2.5 billion rubles ($39 million) — couldn’t be ignored, according to three people familiar with the meeting. They spoke on condition of anonymity to discuss a private session.
- Fortis Healthcare Ltd. petitioned India’s market regulator to arrest its founders after the Singh brothers failed to repay 4 billion rupees ($56 million) that the watchdog had found they had fraudulently taken out. The company earlier this month had requested the Securities and Exchange Board of India to use its legal authority to recover the money from Malvinderand Shivinder Singh, said Fortis spokesman Ajey Maharaj. The regulator in October had ordered the Singhs, formerly controlling shareholders, to return the money, plus interest, within three months.
- Ping An Insurance (Group) Co., China’s largest insurer by market value, is gearing up for an initial public offering of its OneConnect unit that could value the financial management portal at about $8 billion, according to people familiar with the matter. Ping An is now targeting to list OneConnect in Hong Kong as soon as the second half of this year, one of the people said, asking not to be identified because the information is private. The share sale could raise roughly $1 billion, according to the people.
- GE shares gained 7.3% in early trading after announcing an agreement to sell its BioPharma business to Danaher for a total consideration of $21.4 billion, including $21 billion in cash and Danaher’s assumption of certain pension liabilities.
- Peloton Interactive Inc. has chosen Goldman Sachs Group Inc.and JPMorgan Chase & Co. to lead its initial public offering, which could value the home exercise startup at more than $8 billion, according to people familiar with the matter. Banks took part in a competitive pitching process, known as a bake-off, over the past few weeks, said the people, who asked not to be identified as the details aren’t public. No final decision has been made on the timing or size of the IPO, they said.
- French biopharmaceutical company Ipsen SA agreed to acquire Clementia Pharmaceuticals Inc. in a deal valued at up to $1.3 billion, in a bid to expand its rare-disease portfolio. Ipsen will pay $25 a share in cash upfront for the Canadian company, plus a contingent value right of $6 a share, it said in a statement Monday. The initial cash consideration represents a premium of 77 percent to Clementia’s 30-day volume-weighted average stock price, according to the statement.
*All sources from Bloomberg unless otherwise specified