Global Market and Economic Updates
Chinese shares bounced back from their earlier lows on Monday as weak China factory activity reinforced views that Beijing will roll out more stimulus measures to support its slowing economy. The HSBC final Purchasing Managers’ Index fell to 48.9, its fastest drop in a year, down from the preliminary reading of 49.2 and weakening from the 49.6 print in March. Meanwhile, the IMF is close to declaring China’s yuan as fairly valued for the first time in more than a decade, a milestone that follows years of IMF censure of Beijing’s management of the currency.
The eurozone’s manufacturing sector expanded in April, although at a slightly slower pace than in March, as orders continued to flow and companies added staff. Markit’s final April manufacturing PMI fell to 52.0, revised up from a flash reading of 51.9 but shy of March’s 10-month high of 52.2. The recent dip in the PMI “will serve to check recent optimism that the ECB’s quantitative-easing program has bought a guaranteed ticket to recovery for the region,” said Markit’s Chief Economist Chris Williamson.
Russian President Vladimir Putin ratified an accord Saturday to set up a $100B reserve fund for the so-called BRICS nations, aimed at reshaping the Western-dominated international financial system centered around the IMF and World Bank. China is poised to provide the largest share of $41B to the pool, while Russia, Brazil and India will provide $18B each. South Africa is set to chip in the remaining $5B.
Negotiations between Greece and its international lenders over reforms to unlock bailout aid have made headway and an agreement could be closer this month, a government official said on Sunday. “There were very important steps made at the Brussels Group (talks) which bring an agreement nearer,” the official said. “All sides aim for an agreement at a Brussels Group level within May.” Talks between Athens and the troika will resume today and are expected to continue through Wednesday. Greece owes the next repayment of its debt package to the IMF on May 12.
U.S. companies have issued a record $39B of bonds in 2015 that mature in more than three decades, more than five times the amount sold in the same period last year, according to data compiled by Bloomberg. Oracle (NYSE:ORCL) joined the fold this past Tuesday, selling $1.25B of securities due in 2055. Another notable is Microsoft (NASDAQ:MSFT), which sold its first 40-year bond in February. Treasurers are embracing what may be their last opportunity to lock in cheap long-term funding costs before the Fed raises rates, while investors are snapping up the longer-dated securities because they offer a higher yield over shorter-term debt.
Charter Communications is heading toward a potential merger with Time Warner Cable (NYSE:TWC) again, WSJ reports, but is now opting for a more amicable approach compared to last year’s unsolicited bid. John Malone, chairman of Charter’s (NASDAQ:CHTR) biggest shareholder Liberty Broadband (NASDAQ:LBRDA), called TWC’s Rob Marcus “in recent days” to express Charter’s interest in pursuing friendly deal talks. The two sides will continue discussing their options this week, when Charter CEO Tom Rutledge meets Marcus at the annual National Cable & Telecommunications Association convention in Chicago.
Looking to squeeze more value out of a series of long-neglected aluminum and nickel assets, BHP Billiton’s (NYSE:BHP) shareholders are expected to approve the biggest ever spin-off in the mining industry on Wednesday. The new company, South32, risks a tough May 18 debut on the Australian bourse, with investors nervous about weak commodity prices, short mine life spans and declining ore grades. As a result of the uncertainty, analyst valuations vary widely. Morgan Stanley is predicting it may start with a market cap worth A$8.5B ($6.7B) and Investec around $12B.
“I make no apologies whatsoever for Clayton’s lending practices,” said Warren Buffett at Saturday’s annual shareholders meeting, declaring that Clayton has “behaved very well.” The Oracle also defended his partnership with 3G. With regards to a SIFI designation, Buffett rejected the idea that Berkshire Hathaway (BRK.A, BRK.B) was “too big to fail” and stated that there was no logical reason why the sprawling conglomerate should classified as one.
McDonald’s will formally introduce its turnaround plan on Monday with a video, press release, and conference call with executives. While there have been some hints over the last few weeks over what measures McDonald’s (NYSE:MCD) has in mind to stoke sales growth, today’s announcement could include some unexpected initiatives.
General Motors aims to grab at least 5% market share in India within the next decade, as it sees that market overtaking Japan as the world’s third largest. GM (NYSE:GM), which is losing money in India even after 18 years there, will unleash a product blitz aimed at reviving slumping sales in the country and make India a new global manufacturing and export hub. The move will also take some of the strain off production in South Korea, where labor costs have risen by nearly half in just five years.
Chinese regulator SAIC accused Siemens’ (OTCPK:SIEGY) healthcare unit last year of committing “commercial bribery,” sources told Reuters, stating that the company allegedly donated medical devices in return for promises to exclusively buy from it the expensive reagents needed to run them. The investigation (which involved as many as 1,000 hospitals) also follows a wide-reaching probe into the Chinese pharmaceutical industry that last year saw GlaxoSmithKline (NYSE:GSK) fined nearly $500M for bribing officials to push its medicine sales.
The U.S.’s two largest food distributors, Sysco (NYSE:SYY) and U.S. Foods, and the Federal Trade Commission will square off in a Washington federal court tomorrow, in a seven-day hearing that will decide the fate of their planned merger. The FTC filed suit in February to block the merger after investigating it for more than a year, arguing that the deal would “eliminate significant competition…and create a dominant national broadline food service distributor.”
Shooting down a Bloomberg report from Friday, SAP (NYSE:SAP) said it hasn’t ever considered acquiring online rival Salesforce.com (NYSE:CRM). “There is no truth whatsoever to the suggestion SAP is considering or ever did consider acquiring Salesforce.com,” announced an SAP spokesperson in an e-mailed statement. Many rumors have been on the loose since reports first surfaced last Wednesday stating Salesforce had been approached by a potential acquirer.
BT Group is expected to make its case for the £12.5B takeover of the mobile operator EE this week, beginning a lengthy process that is likely to continue into 2016. The Competition and Markets Authority will analyze potential antitrust issues caused by the acquisition and address concerns of rivals. Last week, BT (NYSE:BT) was given the go-ahead for the acquisition by its shareholders, with more than 99% voting in favor of the deal.