LIVE MARKETS M&A brainstorming

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  • European shares see choppy trading
  • Rate hike worries offset some earnings cheer
  • Wall Street set to bounce after selloff

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There seems to be a big sigh of relief lifting Unilever shares this morning after the consumer goods giant said there would be no sweetener added to its 50 billion pound offer for GlaxoSmithKline's consumer healthcare business.

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End of story?

Seems like it but there's actually a lot of brainstorming going on in the wake of that failed, or so it appears, deal.

"Some investors think that Glaxo may have overplayed their hand and Unilever has called their bluff", Barclays analysts reported in a research note.

"It is not impossible they accept Unilever’s offer but it makes the probability of no agreement much more likely", the analysts wrote, adding that the market price action pointed to the latter outcome.

"Now the question is whether GSK finds another suitor, there are candidates though it can just spin it off", wrote Neil Wilson.

Whether the state of capital markets would allow an IPO to match Unilever's offer is up for debate and the list of potential buyers appears quite scarce.

While P&G CEO Jon Moeller told CNBC he saw no need for a large acquisition, Nestle's name regularly comes up in speculative conversations about a suitor although the Swiss consumer giant would most likely only cherry-pick assets from GSK's consumer health portfolio.

As for private equity players, they would likely need to gang up and even so the price tag seems far fetched, particularly with the Fed embarking on a rate hike cycle.

And what about Unilever's next move?

"Unilever can probably find smaller prey that are easier to digest", Wilson argued while other analysts said focusing on its portfolio could make sense before considering another major acquisition.

"If Unilever can narrow the valuation discount with peers and deliver a better performance from the portfolio it has, then in time it may be possible to get shareholders on side but rebuilding credibility will take time", Barclays analysts argued.

Talking about M&A brainstorming, Microsoft's mega offer for Activision has also triggered a lot speculation, as shown already by the spike in the share price of Ubisoft for instance.

"We think it is impossible to dismiss the risk of M&A interest", said Citi analysts about the French firm.

At AJ Bell, investment director Russ Mould wondered how Netflix could react to the deal.

"Microsoft’s big move for gaming firm Activision Blizzard should put the spotlight on Netfix’s own ambitions in this space as the lines between different forms of screen-based entertainment get increasingly blurred", Mould wrote.

At UBS GWM, the analysts believe the gaming industry is ripe for some consolidation.

"Valuations now look relatively reasonable, and we think an uptick in M&A points could presage industry consolidation as dominant players seek to scale up and remain competitive".


(Julien Ponthus with Pamela Barbaglia)



With rate jitters on the rise, macro forces are back in the market's driving seat these days but this doesn't mean that the good old single-stock catalyst is out of the game.

And for those looking for companies with an upcoming catalyst that could move their share price in either direction over the current quarter, Barclays has compiled a list of 13 conviction ideas.

Eight are overweight with an average potential upside of 32% and comprise HelloFresh, STMicro, Swatch, H&M, KPN, Vinci, ABN Amro and Munich Re, while the remaining five underweights with a 13% potential average downside are Unibail, Ferragamo, SEB, SIG Combibloc and AAK.

The likely catalyst for all stocks in both groups are their upcoming earnings or outlooks, which Barclays says could trigger in some cases an upgrade or downgrade to consensus views.


(Danilo Masoni)



Rate hikes from the European Central Bank in 2022 seem to be in the cards according to money markets, and they would probably be consistent with the 10-year Bund yield rising above 0%.

But Unicredit analysts have a different opinion.

“To us, this (a 10 bps rate hike in September) is highly unlikely,” they say, adding they see a much greater likelihood compared to the U.S. “that the current bear market will converge into a nervous sideways range.”

Rate hikes this year “would require a pronounced U-turn by the ECB.”

“According to the current guidance, it would imply an upward revision of the inflation projections for 2023 and 2024, an end to net asset purchases no later than the first two months of 3Q22, immediately followed by the start of key-rate normalization,” they argue.

Money markets currently price in an 85% chance of 10 bps rate hike in September and an 89% chance of 20 bps rate hikes by December 2022.

The table below from Refinitiv shows money markets expectations on euro zone interest rates.


(Stefano Rebaudo)



European shares are off to an uncertain start this morning as investors remain on the cautious side after U.S. tech sold off yesterday amid continued worries over Fed rate hikes.

The STOXX 600 was volatile in early dealings, moving in and out positive territory, but was last down over 0.1% on the day, weighed down by weakness across healthcare and tech.

Miners extended their rally after top metal consumer China cut a key rate, sending the Basic Resources (.SXPP) index to its highest in more than 13 years.

The overall picture for top country benchmarks was mixed, as you can see in the snapshot.


(Danilo Masoni)



Prospects for war just do not bother markets the way they used to. U.S. President Joe Biden reckons Russia intends to "move in" on Ukraine, and even sowed doubt over whether the West would retaliate against any "minor incursion".

Yet buyers have stepped in to lift MSCI's world stocks index after two days of falls, that saw the mighty Nasdaq enter "correction" territory, essentially a 10% fall from recent peaks.

Wall Street, for the time being at least, appears set for a bounce, with Nasdaq futures up around 0.7%. And yields on "safe" bonds from Germany and the United States are moving up again after a late-Wednesday pullback.

Reasons for the regular dip-buying are well-documented -- abundant cash, negative inflation-adjusted rates, robust company earnings. And China's first mortgage reference rate cut in nearly two years, shows that policy-tightening in the developed world may be offset at least by Beijing's actions read more .

And despite this month's hectic bond selloff, a reminder that yields on a global debt benchmark, the Bloomberg Barclays Multiverse (7-10 years) have only just risen above 2%.

Finally, all around are signs the world economy is emerging from the Omicron knock back of late-2021 and supply chain delays continue to ease. Japan's exports and imports in December hit record highs in terms of their value in yen read more

Finally, so tight are labour markets in parts of the world that Australia even mulled letting 16-year olds drive forklift trucks, a proposal that's been put on ice, some may say fortunately. But the day may yet come.

Bloomberg Multiverse

Key developments that should provide more direction to markets on Thursday:

-More geopolitics; China said it warned away a U.S. warship and North Korea suggested it may resume nuclear and missile tests.

-Norway central bank announces interest rate decision at 0900 GMT (expect a hold)

-Euro zone inflation will decrease gradually, Lagarde says read more

-Philadelphia Fed Survey for January

-POLL-Turkish cenbank to halt easing

-Central banks also meet in Malaysia, Indonesia, Sri Lanka, Ukraine

-Final Euro zone HICP Dec, ECB Dec minutes due out

-US initial jobless claims/existing home sales

-US 10-year TIPs auction

-US earnings: Northern Trust, Union Pacific, Netflix, American Airlines

(Sujata Rao)



Never mind that a selloff on Wall Street deepened overnight confirming correction territory for the Nasdaq but stock futures point to a second day of gains for European equity markets.

Some good-looking earnings could provide support and after gains across Asian markets following another key rate cut in China, derivatives on the DAX, FTSE 100, and Euro STOXX 50 indices were all rising, between 0.3% and 0.5%.

On the watchlist are Unilever shares which could stand up after the company effectively abandoned its plans to buy GSK's consumer healthcare business, saying that it would not raise its 50 billion pound offer that GSK previously rejected.

Among those which reported trading updates, Bankinter, Deliveroo, Premier Foods and Entain were up in pre-market trading. Europe Inc is expected to deliver a 48% rise in Q4 earnings.

(Danilo Masoni)


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