Take-Two acquisition, global M&A, UBS diligence - what's moving markets
The main Wall Street indices are on course to end the quarter with strong gains, helped by the return of global M&A. Take-Two seeks to buy a U.S. game developer, while UBS is still investigating Credit Suisse's books.
1. Futures flat; on track for winning quarter
U.S. stock futures traded largely unchanged Thursday, on course for a second consecutive winning quarter and fifth straight winning month ahead of the release of more widely-watched economic data.
By 05:15 ET (09:15 GMT), the Dow futures contract traded largely flat, S&P 500 futures dropped 2 points, or 0.1%, and Nasdaq 100 futures fell by 25 points, or 0.1%.
The major indices closed higher Wednesday, with the broad-based S&P 500 index gaining 0.9% to close at a record high, the Dow Jones Industrial Average gaining 1.2%, its best day this year, and the tech-heavy Nasdaq Composite rising 0.5%.
On a quarterly basis, the S&P 500 is up 10%, on pace for its best first-quarter gain since 2019. The DJIA is up 5.5%, on track for its strongest first-quarter performance since 2021, while the Nasdaq is up just over 9%.
Economic data due for release Thursday includes weekly jobless claims, fourth-quarter gross domestic product data and Michigan consumer sentiment.
The main focus, however, will be on Friday’s release of the Fed’s favorite inflation gauge, the core personal consumption expenditures price index, when the market is shut for Good Friday.
In corporate news, RH (NYSE:RH) stock soared over 9% premarket after the home furnishing company reported "exceptional" demand for its new catalog of products, even after its fourth-quarter results missed expectations, as adverse weather and shipping delays weighed.
2. Take-Two seeks to buy Gearbox Entertainment
Take-Two Interactive Software (NASDAQ:TTWO) took a step late Wednesday towards enhancing its video games offerings by agreeing to buy U.S. game developer Gearbox Entertainment for $460 million.
Take-Two is seeking to buy Gearbox from Sweden’s Embracer Group (ST:EMBRACb), and will thus obtain its popular "Borderlands" series.
Borderlands is by far Gearbox's most successful franchise, selling nearly 80 million copies, with Take-Two adding that it and Gearbox were in “active development” over the next installment in the Borderlands series.
The main focus for Take-Two, however, will be on the upcoming release of the sixth iteration of its very popular "Grand Theft Auto" franchise, which is slated for 2025. The game is a long-awaited follow-up to GTA 5, which is among the best-selling video games of all time.
The acquisition is expected to close in the first quarter of Take-Two’s fiscal year 2025.
3. UBS still reviewing Credit Suisse’s accounts
It’s just over a year after UBS (SIX:UBSG) agreed to buy rival Credit Suisse, and it has seemingly greatly benefited from the move as its share price is now over 50% higher.
CEO Sergio Ermotti has been rewarded for this, picking up 14.4 million Swiss francs ($1 = CHF0.9059) in 2023 after taking over the Swiss bank's helm for a second bout following the takeover.
However, the Swiss banking giant said Thursday, in its annual report, that it is still reviewing potential misstatements in Credit Suisse's financial reports, adding that there is a risk that "a material error" may not be detected.
A "material weakness" is how Credit Suisse reported its numbers could signal a significant misstatement in the financial statements, eventually leading to the demise of the lender.
4. Global M&A surges in first quarter
Global equity markets are ending the first quarter of 2024 on a high note, as investors celebrate the likelihood of prospective rate cuts from major central banks and the associated pickup in economic activity.
Wall Street's S&P 500 index and Europe's STOXX 600 index are near record levels.
This optimism has resulted in a pickup in global mergers & acquisitions, after a gloomy 2023, with total M&A volumes globally climbing 30% to about $755.1 billion in the first quarter, according to data from Dealogic.
The number of transactions worth more than $10 billion jumped to 14, compared with five during the same period last year.
It’s the U.S. and Europe where the deals have been concentrated, as U.S. M&A volumes surged 59% to $431.8 billion and European deals jumped 64%, while Asia Pacific volumes slumped 40%.
Credit card giant Capital One 's (NYSE:COF) $35.3 billion takeover of Discover Financial, the deal by software company Synopsys (NASDAQ:SNPS) to acquire design rival Ansys (NASDAQ:ANSS) for $35 billion, and Diamondback (NASDAQ:FANG) Energy's $26 billion tie-up with Endeavor Energy were the quarter's largest transactions.
5. Crude on track for strong quarter
Oil prices rose Thursday, on course for a strong opening quarter, with traders betting on tighter supplies, especially amid lower Russian production.
By 05:15 ET, the U.S. crude futures traded 0.4% higher at $81.66 a barrel, while the Brent contract climbed 0.3% to $85.64 per barrel.
Both contracts were set for strong gains in the first quarter of 2024, trading up between 11% and 14% over the past three months.
Prices were boosted chiefly by a tighter outlook for markets, as the Organization of Petroleum Exporting Countries and allies, including Russia, kept ongoing production curbs in place.
Moscow had earlier in March said it will deepen its ongoing production cuts, while a series of attacks by Ukraine on Russian fuel refineries has also hit fuel supplies in the country.
“Russia's actions could push Brent oil price to $90 already in April, reach mid-$90 by May and close to $100 by September,” JPMorgan analysts wrote in a recent note.
The main obstacle to this scenario is likely to come for the U.S., with high gasoline prices expected to become a contentious topic ahead of the 2024 Presidential elections.
The Biden Administration had drawn the country’s Strategic Petroleum Reserve to near 40-year lows in 2022 at the onset of Russia’s invasion of Ukraine, and could tap this reserve again to combat rising oil prices.
Source : Economy News by Investing.com / Mar 28, 2024
