What I think I learned last week #34
Something to cure your ills: Japan’s Takeda Pharmaceutical has reached an agreement to buy Shire for £46 billion. This is the largest-ever overseas acquisition by a Japanese company.
Something is brewing: Nestlé has purchased the rights to sell Starbucks’ bagged coffee globally for $7.15 billion in cash. This greatly expands the US presence in coffee for Nestlé while allowing Starbucks to focus on its core in-store retail business.
Something tastes good: International Flavors & Fragrances is buying Israel-based Frutarom Industries. Frutarom is known for its natural ingredients which will helpe International Flavors & Fragrances, one of the world’s largest flavoring makers, meet consumer demand in this growing area.
Something to watch: Vodafone is purchasing Liberty Global’s cable networks in Germany and eastern Europe in a €18 billion takeover. It is Vodafone’s largest acquisition since 2000 when it acquired Mannesmann.
Something to like: Facebook has created a group that will explore ways to use blockchain technology across its products, “starting from scratch.” The question is whether Facebook is doing this for security reasons or if we might someday see it issue its own cryptocurrency FaceCoin.
Something to exchange: Chinese trade data was better than expected with the current account swinging from a $5 billion deficit in March to almost $29 billion surplus in April.
Something to cut back: Japanese household spending fell 0.7% in March from a year earlier to mark the second straight month of declines. Income fell 3.8% in March, the third consecutive month that income has declined.
Something to get worked up about: US job openings increased to the highest level on record in March in the Job Openings and Labor Turnover Survey (JOLTS) in the latest sign of the tightening of America’s labor market. This helped fuel a dollar rally.
Something to pocket: The US dollar rose early in the week as Fed Chairman Jay Powell warned that markets should not be surprised by further policy tightening from the US central bank in a speech in Zurich.
Something to get a rise out of: US core consumer prices, which strip out volatile food and energy components, rose less than expected by 0.1% last month. The year-on-year increase is now at 2.1%. However, Michael Pearce of Capital Economics noted that the three-month annualized core inflation rate, which hit a more than decade high a few months ago, had fallen to just 1.8% in April. The lower-than-expected inflation data cooled the dollar rally.
Something to buy: Now that earnings season is over, US companies are back buying stock. According to S&P Dow Jones Indices, S&P 500 companies that have reported earnings for the first three months of 2018 bought $158 billion of their own stock in the first quarter. This is on pace to be the biggest amount in any quarter. Ever.
Something to get angry about: Taper Tantrum hits emerging markets on dollar and tariff concerns in a revisit of 2013’s taper tantrum. MSCI’s Emerging Market index has fallen 10% from its January peak and the JPMorgan emerging market global bond index is down nearly 7% since its late-January high, with more than 90% of that drop having come since April 18.
Something to discuss: Argentina is starting talks with the International Monetary Fund to avoid a crisis after emerging market turmoil saw Argentina raise interest rates to 40% to try to halt the currency from falling further.
Something depressing: The US yield curve hit its flattest level in more than 10½ years on Friday as the spread (difference) between the two-year and ten-year Treasury dropped as low as 41.090 basis points. That is the lowest level since September 2007.
Something cheerful: The FTSE 100 notched up its eighth straight weekly advance, its longest winning streak in more than a decade.
Finally, something to think about: While not known for its human intelligence, the Trump administration, at a White House summit that included companies like Google, Facebook and Amazon, announced support for the artificial intelligence industry to develop freely in the US.
And that’s what I think I learned last week.
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