US Equities Decline on Mixed Earnings
US equity futures declined while bond yields rose on Wednesday as traders analyzed the most recent corporate earnings reports against the background of another high inflation print from one of the world’s major economies. The rates-sensitive Nasdaq 100 (NASDAQI:NDX) fell 0.8%, and the S&P 500 (SPI:SP500) was down 0.6%. Morgan Stanley’s (NYSE:MS) pre-market trading declined after mixed results. U.S. Bancorp (NYSE:USB) advanced after reporting a rise in deposits, while Citizens Financial Group Inc. (NYSE:CFG) dropped after cutting its full-year guidance. Tesla Inc. (NASDAQ:TSLA) also slipped after reducing prices on some models ahead of first-quarter results, which were due on Wednesday.
European Stocks Slide, Inflation eases
European stocks lost 0.4% on Wednesday as UK inflation decreased in March, falling less than expected. Additionally, investors were watching for indications of slowing growth and the impact of higher interest rates as they awaited a new set of US corporate earnings. Germany’s Dax (SBI:DAX) and France’s CAC 40 (EU:PX1) both declined 0.2%, while the region-wide Stoxx 600 (STOXX:SSXP) fell 0.4%. Eurozone inflation fell to 6.9% in March from 8.5% in February, according to data released earlier in the day.
Morgan Stanley’s Profit Declines
Morgan Stanley (NYSE:MS) reported on Wednesday that first-quarter profit had declined 19% from a year ago, dragged down by a continued slowdown in deal-making. The bank posted a profit of $2.98 billion, or $1.70 a share. Although revenue fell 2% to $14.52 billion in the quarter, it exceeded expectations of $13.97 billion. Investment banking revenue, including fees from mergers and acquisitions, fell 24% from a year ago to $1.25 billion in the first quarter.
Sega Acquires Angry Birds
Sega Sammy Holdings Inc. (TYO:6460) is on the verge of acquiring the company behind the “Angry Birds” mobile game for approximately $1 billion, according to people familiar with the matter. The Japan-based entertainment conglomerate could finalize the purchase of Rovio Entertainment Oyj by early next week. Sega Sammy was created in 2004 through the merger of Japanese slot-machine company Sammy Corp. and Sega Corp., the videogame maker behind the character Sonic the Hedgehog. The combined company offers a range of entertainment products, including arcade games, toys, and animated video content.
Traditional Portfolio Strategy Obsolete
According to a report from the BlackRock (NYSE:BLK) investment institute, BlackRock has warned that a classic 60/40 portfolio will not serve investors well in the long run, despite a simultaneous rebound for equities and bonds this year. The strategy has been a cornerstone for many asset managers for more than 30 years. However, the report claims that changes in markets and the global economy, such as low interest rates, high debt levels, and elevated inflation, have made this traditional investing approach less viable.
HSBC Criticized by Ping An
Ping An, the largest shareholder of HSBC (NYSE:HSBC) , has criticized the bank for overstating the “costs and risks” involved in spinning off its Asian operations. Ping An’s chair, Michael Huang, said that while there would be some initial costs involved in a split, the benefits should be considered as well. Huang added that Ping An had suggested several ideas for a split over the past two years, including listing HSBC’s Asia business in Hong Kong and consolidating its operations across the region.
GSK’s $2 Billion Bellus Health Deal
GSK (NYSE:GSK) has agreed to purchase Canadian biotech Bellus Health (NASDAQ:BLU) for $2 billion, in what is its biggest acquisition since spinning off its consumer health division last year. The deal aims to boost GSK’s drug pipeline by adding Bellus Health’s specialty medicine for a severe and persistent cough, a condition that affects 10 million people. This acquisition is part of GSK’s ongoing efforts to replenish its drug pipeline in preparation for the anticipated loss of exclusivity on its HIV drug dolutegravir towards the end of the decade.
Glencore Willing to Improve Bid
Glencore (LSE:GLEN) has said that it is willing to improve its $23 billion bid for Teck Resources (NYSE:TECK) , should the Canadian miner agree to hold talks. Glencore CEO Gary Nagle, addressing Teck shareholders for the first time, urged the company’s board to come to the negotiating table, stating that the current offer was not the “best and final.” However, Teck has repeatedly rejected Glencore’s advances and has instead proposed a plan to split into a coal company and a metals business.
Volkswagen to Build Innovation Center in China
Volkswagen (ETR:VOW3) is planning to invest €1 billion in setting up a new innovation center in China, where it seeks to appeal better to the preferences of local consumers in the world’s largest car market. The German carmaker has announced that it will establish a new company called 100%TechCo that will employ around 2,000 people and play a significant role in the development of a future Volkswagen model set to launch next year. While VW has traditionally dominated sales of combustion engine cars in China, it has lagged behind domestic rivals, particularly BYD, in the rapidly growing electric vehicle category.
Merck’s $10.8 Billion Acquisition
Merck (NYSE:MRK) has agreed to acquire Prometheus Biosciences (NADSAQ:RXDX) for $10.8 billion, marking a significant move into the market for immune-disease treatments. Merck’s acquisition of Prometheus comes at a roughly 75% premium to where shares closed on Friday, at $114.01, and marks the company’s push into a lucrative market. The deal is expected to close in the third quarter of 2023. As of Friday’s market close, Prometheus had a market cap of $5.4 billion, and its shares are up about 4% year-to-date.