Week of Nov 1 2019 Weekly Recap & The Week Ahead
The investor of today does not profit from yesterday’s growth. — Warren Buffett
1. Fiat, PSA Confirmed Deal to Merge — Fiat Chrysler and Peugeot owner PSA have officially agreed to join forces through a 50-50 share swap, creating the world’s fourth-largest automaker. “In a rapidly changing environment, with new challenges in connected, electrified, shared and autonomous mobility, the combined entity would leverage its strong global R&D footprint and ecosystem,” the companies said in a statement. The deal calls for paying a special dividend of €5.5B to Fiat (NYSE:FCAU) investors and for PSA (OTCPK:PEUGF) to spin off to its shareholders a €3B stake in parts maker Faurecia (OTCPK:FURCF).
2. China Manufacturing Activity Shrinks Again in October — Factory activity in China contracted for the sixth straight month in October and by more than expected, while service sector growth eased as companies face the weakest economic growth in nearly 30 years. Weighed down by slowing global demand and the Sino-U.S. trade war, the manufacturing PMI fell to 49.3, versus 49.8 in September, according to the country’s statistics bureau. The figures will heap pressure on policymakers to roll out more stimulus to avoid a sharper slowdown and job losses.
3. Fed Cuts Rates for Third Meeting in a Row, Signals Pause — the Federal Reserve cut its benchmark interest rate for the third straight meeting and signaled it may pause before further changes to monetary policy to see whether these easing steps are enough to sustain the economic expansion. At the policy meeting on Wednesday, officials said they would lower the federal-funds target rate by a quarter percentage point, to between 1.5% and 1.75%. Chairman Powell said “Looking ahead, we will be monitoring the effects of our policy actions, along with other information bearing on the outlook, as we assess the appropriate path of the target range for the fed funds rate,” he said. “Of course, if developments emerge that cause a material reassessment of our outlook, we would respond accordingly. Policy is not on a preset course.”
3. LVMH Bids $120 a Share for Tiffany — Tiffany (NYSE:TIF) has received a $120/share offer from LVMH (OTCPK:LVMUY), valuing the company at $14.5B, 22% above Friday’s close. According to informed sources, it will need to sweeten the offer to get the deal done.
4. 5G Goes Online in China — China turned on its 5G networks ahead of schedule on Nov 2nd 2019 – after initially targeting a 2020 launch – amid an ongoing trade war with the U.S. that has turned into a battle over tech supremacy. President Trump said earlier this year that “the race to 5G is on and America must win,” and has been seeking to convince other countries to ban Huawei from their next-generation networks. China Telecom (NYSE:CHA), China Unicom (NYSE:CHU) and China Mobile (NYSE:CHL) all unveiled 5G plans that start at around 128 yuan ($18) per month, though experts have warned of challenges to adoption, including price and a lack of 5G capable handsets.
5. Lagarde Takes Reins of the ECB from Mario Draghi — Christine Lagarde begins her new job atop the European Central Bank today at a time when persistently low inflation and weak growth are showing the limits of monetary policy. Under a 2012 pledge to do “whatever it takes” to save the eurozone from collapse, predecessor Mario Draghi drove interest rates deep into negative territory and pumped trillions of euros into the economy through QE. With an almost exhausted ECB monetary toolkit, unprecedented dissent has broken out between those eurozone members who back this policy and those who are losing faith in further easing.
The week ahead — Economic data from Econoday.com:
