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mXa Roundup - Volume 9

October 9th - 13th, 2023

A resilient labour market and a modestly cooling inflation environment complicated equity and bond markets this week

  • The S&P 500 is up ~0.2%, the Nasdaq is up ~0.5%, and the Dow Industrials is up ~0.2% WTD; a continued environment of economic uncertainty in combination with positive labor developments left minor gains across domestic equity markets

  • The 10-Yr U.S. Treasury yield has increased 0.05% to a current 4.707%, whereas the 30-Yr U.S. Treasury yield decreased 0.12% to a current yield of 4.87%; the likeliest causes for the recent developments are attributed to a moderate CPI report, accelerated U.S. funding, and recent foreign policy attention in the middle east

  • India’s stock market is booming, helped by billions of dollars of inflows from international funds and a fast-growing army of small investors; the MSCI India index has gained more than 7% this year whereas the MSCI China Index has lost 11% [WSJ]

  • Municipal-bond funds that use borrowed money are suffering their worst stretch since the 2008-09 financial crisis [WSJ]

Amidst commodity effects from the Israel-Hamas War, oil and natural gas prices continue to increase in the face of an unknown future

  • Oil and natural-gas prices quickly climbed after Israel-Hamas War erupted, with 5% rise over the weekend; since then, crude oil has stabilized at $84/bbl

  • The resilience of iron-ore prices has surprised financial experts and suggests a temporary reordering of trade flows that could fan concerns about Chinese market power [WSJ]

  • US consumer spending has remained surprisingly strong despite rising interest rates; according to the Department of Labor, Americans aged 65 and older accounted for 22% of consumer spending last year, the highest percentage since records began in 1972 [WSJ]

  • Chinese property giant Country Garden failed to make an international debt payment and said it is unlikely to meet other offshore debt obligations—effectively saying that it expects to default in the next few weeks [WSJ]

  • Third-quarter earnings reports are expected to show that U.S. public companies’ profit slump is over [WSJ]

Despite sustained interest rates, the M&A market moved in the direction of large-sized deal-making within energy, biotech, and mining

  • ExxonMobil is nearing a ~$60B deal to acquire shale-focused Pioneer Natural Resources [WSJ]

  • Amgen completed its $27.8B acquisition of Horizon Therapeutics after it received approval from the FTC last month [RT]

  • Bristol-Myers Squibb will acquire cancer drugmaker Mirati Therapeutics for $4.8B [RT]

  • Newmont Corporation received all government regulatory approvals required for its $16.7B acquisition of Australian gold miner Newcrest Mining [RT]

  • Australian regulators gave conditional approval to PE firm Brookfield’s $12B takeover of Australia’s largest energy producer Origin Energy [BBG]

  • Illumina will expeditiously divest cancer test maker Grail, which it acquired for $7.1B, if the life sciences company loses either of the final appeals in US or European court [RT]

Recent developments across four key industries highlight energy consolidation, distressed debt, and geopolitical risks

Energy & Natural Resources

  • Exxon Mobil has agreed to acquire Pioneer Natural Resources in a $60 billion deal, the largest oil and gas deal since Exxon acquired Mobil in 1999; the acquisition solidifies Exxon’s position in the U.S. fracking industry and could spur further consolidation in the industry [WSJ]

  • Israel's order to shut down Chevron's Tamar gas platform in the Eastern Mediterranean amid ongoing conflict poses limited profit impact for Chevron but highlights the geopolitical risks in the region [WSJ]

Technology, Media, & Telecommunications

  • Social media platforms, including Elon Musk's X Corp., have faced difficulties in curbing fake and misleading content during the recent Israel-Hamas conflict, with concerns about reduced content moderation efforts and increased reliance on volunteers for fact-checking [WSJ]

  • More than 7 million 23andMe customers were the victims of a data breach, with the hackers specifically targeting users of Ashkenazi Jewish ancestry [NBC]

Healthcare & Life Sciences

  • While healthy habits can extend life and health, understanding the genetic factors behind longevity can potentially inform the development of drugs or lifestyle changes to promote healthier and longer lives [WSJ]

  • Walgreens Boots Alliance has named Tim Wentworth, the former CEO of Express Scripts, as its new chief executive, tasked with addressing profit challenges and labor issues in the pharmacy chain [WSJ]

Financial Services

  • Distressed debt anxiety is spreading across emerging markets, with 21 emerging markets trading at near or at distressed levels; rapidly rising treasury yields brought back fears of a potential waves of public defaults [BBG]

  • The autumn bond rout is challenging Wall Street’s long standing belief that the U.S. government can’t sell too many Treasurys [WSJ]

Outside of macroeconomic updates and M&A developments, the Israel-Hamas War and congressional developments led news cycles

  • Israel is in conflict with Hamas after a surprise attack by the terrorist group on Israeli territory resulted in numerous casualties, leading to retaliatory airstrikes and a blockade of Gaza; the attack's geopolitical consequences are significant, as it's seen as an attempt by Hamas and Iran to disrupt efforts to normalize relations between Israel and regional countries, such as Saudi Arabia, which have criticized the escalation [WSJ]

  • Robert F. Kennedy Jr. announced he will run for president in 2024 as an Independent, a decision his own siblings denounced as “dangerous” [CNN]

  • Steve Scalise is the GOP pick for House speaker; the House’s current No. 2 Republican beat out Judiciary Committee Chair Jim Jordan in a 113-to-99 vote behind closed doors to become their party’s nominee to replace ousted Speaker of the House Kevin McCarthy [WSJ]

  • Pharmacy employees at Walgreens went on a three-day walkout across the U.S., citing unsafe working conditions caused by understaffing amid a busy vaccine season [WP]

Gavin McManus

Oct 13, 2023

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