Economic digest 18.05.21
Financial news
EuroNews
European stock markets traded higher Tuesday, helped by promises of continued Federal Reserve largesse along with better than expected U.K. employment data.
At 3:30 AM ET (08:30 GMT), the DAX in Germany traded 0.6% higher, at an all-time high, the CAC 40 in France rose 0.6%, climbing to a new 52-week high, the U.K.’s FTSE 100 climbed 0.7%, while the blue-chip Euro Stoxx 50 gained 0.7%, also to an all-time high.
European stock markets have struggled of late over worries that growing inflationary pressures could force the Federal Reserve to start tapering its ultra-easy monetary policies in the near future.
However, Dallas Federal Reserve President Robert Kaplan on Monday reiterated his view that he does not expect interest rates to rise until next year, while Federal Reserve Vice Chair Richard Clarida pointed to the recent disappointing jobs report as evidence the U.S. economy had not yet reached the threshold to warrant scaling back the central bank’s massive bond purchases.
These comments have helped to reassure the markets, and put the focus firmly on Wednesday’s release of the minutes from the Federal Reserve’s April policy meeting, which could shed more light on the policymakers’ outlook on inflation.
Adding to the positive tone, Britain’s unemployment rate unexpectedly fell again to 4.8% between January and March, a period which the country spent under a tight Covid lockdown, and hiring rose further in April as the country reopened.
In the Eurozone, Germany’s Constitutional Court rejected a suit that aimed to stop the ECB’s buying of government bonds, helping sentiment at the margins.
Slowly but surely, Karlsruhe is losing its role of lender of last resort for German euro critics, said Carsten Brzeski, an economist with ING, via Twitter.
Next up is the release of the flash estimate of Eurozone first-quarter gross domestic product, which is expected to show that the bloc contracted by 0.6% in the first quarter, and by 1.8% on an annual basis, as the region struggled with fresh lockdowns.
In corporate news, Generali (MI:GASI) stock rose 1.1%, to a 52-week high, after the Italian insurer’s first-quarter profits beat expectations, helped by the positive contribution from the non-life and asset management businesses.
Imperial Brands (OTC:IMBBY) stock rose 2.4% after the tobacco company maintained its full-year outlook despite its first-half profit and sales falling short of expectations, hurt by lower retailer demand for cigarettes in the United States.
On the flip side, Vodafone (NASDAQ:VOD) stock slumped 6.2% after the mobile operator reported a 1.2% drop in full-year adjusted earnings, coming in at the bottom of its guidance and missing market expectations, after Covid-19 hit roaming revenue and handset sales. Warnings of higher capital spending ahead also weighed on the stock.
Buying up shares in the United States
A number of well-known US hedge funds have been buying stocks and blank-check companies, selling off some of the winners of a tech equity rally as bond yields rose during the first quarter, data released on Monday showed.
Specialized acquisition companies, known as SPACs, have proved popular with hedge fund managers, including Saschem Head, adding stock by SPACs, FinTech Acquisition Corp V, and healthcare company Orion Acquisition Corp (OHPA.O) in their portfolios.
Tiger Global added shares in Revolution Healthcare Acquisition Corp and Soaring Eagle Acquisition Corp and reduced its position in Facebook Inc.
Activist investor Starboard Value has invested in a number of other so-called SPACS that exist to buy private companies and bring them to market, including Montes Archimedes Acquisition Corp, Altimar Acquisition Corp, Churchill Capital Corp II, and Forest Road Acquisition Corp.
More than 400 SPACs have placed their shares since the start of 2021, although most are lagging behind the stock market as a whole.
At the same time, several hedge funds were added to financial, energy, and consumer companies. Third Point has added a new position in Carvana Co (CVNA.N) and Uber Technologies Inc (UBER.N), while Epoch Investment Partners has added new positions in energy companies such as Exxon Mobil Corp (XOM.N), Pioneer Natural Resources Co (PXD.N) and Diamondback Energy Inc (FANG. O).
Billionaire Ray Dalio’s Bridgewater Associates, the world’s largest hedge fund manager, has added a new position at General Motors Corp (GM.N), Ecolab Inc (ECL.N) and Johnson Controls International PLC (JCI. N) in selling its position in media companies including the New York Times Co, News Corp and Discovery.
The rise in stock prices, which benefit from a broadly growing economy, came during a quarter in which so — called value stocks — in industries such as finance and materials that grow as a result of economic growth-surged and interest rates rose as investors braced for a resurgence in global trade. the economy after the coronavirus pandemic.
Music earnings
Vivendi could sell an additional 10% of its Universal Music Group business, the label behind artists such as Lady Gaga and Taylor Swift, which the French media conglomerate is planning to list in Amsterdam.
Vivendi is seeking to cash in on its crown jewel asset, the world’s biggest music label, as the music industry benefits from growth in streaming revenues.
The group is analysing the opportunity of selling 10% of UMG shares to an American investor or initiating a public offering (IPO) of at least 5% and up to 10% of UMG shares, Vivendi said in a statement on Tuesday.
Universal is currently 20% owned by a consortium led by Chinese giant Tencent, following the sale of two 10% stakes. The remaining 80% is owned by Vivendi.
The group, controlled by billionaire Vincent Bollore, last week set out its plan to list Universal by Sept. 27, in a transaction that will see it distribute 60% of Universal’s capital to its current shareholders.
Vivendi values the whole of Universal at 33 billion euros ($40 billion) in its documents.
Excluding the potential sale of an additional 10% stake in Universal, Universal’s three biggest shareholders would be Vivendi (20%), the Tencent-led consortium (20%) and Bollore (16%) at the end of the IPO process.
In the event of such a sale, Vivendi would retain the remaining 10% stake for at least two years, it said in its statement.
The group also said there would be no “poison pill”, or mechanism to prevent future potential hostile takeover attempts on Universal.
The Paris-based company will also propose that Universal’s board be composed by a majority of independent directors and that shareholders be free to designate directors in accordance with majority conditions under Dutch law.
Preparing for an IPO
China Youran Dairy Group launched an investor briefing on Tuesday, planning to raise up to $ 800 million in an initial public offering (IPO) in Hong Kong, according to two sources with direct knowledge of the matter.
The company, backed by private equity group PAG, is expected to launch the deal next week, the sources added.
According to them, a final agreement on the amount of the fundraising will be reached after initial negotiations with investors.
Youran Dairy did not immediately respond to a Reuters request for comment. The sources could not be named, as the information has not yet been made public.
A preliminary list of terms of the deal, seen by Reuters, shows that the company plans to sell 15% of its shares in the IPO, which will lead to its valuation of more than $ 5.3 billion.
According to filings on the Hong Kong Stock Exchange, the company plans to use the proceeds to increase its breeding stock and increase feed and raw milk production.
Youran Dairy’s IPO was approved by the stock exchange’s listing committee last week, allowing the company to begin the IPO process.
Last year, it acquired two agricultural centers located in Yin and Yutyan counties for NZ $ 513 million, owned by New Zealand-based Fonterra.
PAG holds a 42.89% stake in Youran Dairy, while Inner Mongolia’s Yili Industrial Group holds another 40%, and the documents show that PAG will not become a controlling shareholder after the transaction. PAG has owned its stake in Youran Dairy since 2015.
Prediction for Bitcoin
Fundstrat’s Managing Partner Tom Lee has adjusted his Bitcoin price prediction from $100,000 to $125,000 by year-end. This news brings fresh hope for Bitcoin’s bounce-back, following Elon Musk’s reversal.
The Tesla CEO recently backed out of his decision to accept BTC payments for Tesla. The company cited the crypto’s adverse environmental effects as a reason. Despite this, Tom Lee remains optimistic that bitcoin bulls are here to stay.
I don’t think it’s going to get people negative on bitcoin, but it is going to get people to focus on the problems that are being created by digital assets, he told Insider.
It is probably better to view it as a call to action for the bitcoin industry to focus on renewables or more efficient ways to provide proof of work.
Lee’s statement comes as a surprise, as Bitcoin fell by more than 15% post the Tesla decision. Other top cryptocurrencies, such as ETH and XRP also plunged alongside it.
He pointed out that other people in the company and their ESG concerns must have influenced Musk’s reversal from Bitcoin. This is expected, as BTC’s energy consumption has created quite a controversy. It would, in fact, clash directly with the way Tesla positions itself.
Customers are bound to question why an environment polluter is working with a company that claims to be working for a sustainable future. Hence it is likely that major stakeholders in Tesla must have pressured Musk into making the decision.
However, Tom Lee believes that this will encourage the adoption of greener practices in the crypto industry. For this reason, he remains adamant that Bitcoin will climb back higher. At the time of writing Bitcoin trails around $45,590, up from a two-month low.
Application for Cardano
On Tuesday, Revuto completed a $1.7 million private token sale. The token sale proceeds will help deliver a subscription payment solution on Cardano.
In addition, the Revuto app has also recorded more than 1 million registrations in just 14 days. Surprisingly, one of the reasons for its fast-growing registrations is its referral program.
In line with this, starting at 8:00 AM UTC on May 19, 2021, the Revuto team will initiate a live event on Youtube. Here, they will be announcing their first public token sale on Cardano.
Prior to this, Revuto successfully launched the public sale of its native token REVU. Thus, several leading blockchain investors participated in the recent private round. BlackDragon VC led the round and attracted many other investors.
Josipa Majic, Revuto’s CEO stated,
We’re grateful to our private investors, including BlackDragon, for believing in Revuto’s team and tech, and for sharing our vision of making crypto spendable in everyday life. Having the right funding and investors that back our long-term vision is crucial.
It should be noted, Revuto is the first decentralized app (dApp) to launch on the Cardano blockchain. Consequently, Revuto also demonstrates the ADA network’s ability to support high transaction volume at a low cost. In fact, REVU can support recurring payments, for instance, movie and music subscriptions, cosmetics, food, and more.
Apart from this, REVU will be used to align incentives in the Revuto ecosystem. Moreover, the token will be used to unlock additional features and benefits. Lastly, it provides staking rewards and can be utilized for microlending in Revuto’s dApp.
