Week 24.06 - 30.06 : EU vs Tech, Volkswagen's electric plans, Banks Pass Stress Tests and more...
Weekly Financial Digest
Apologies for the delay on this one. Wishing you all a great week.
Key Stats of the Week
🏦 £2.55B - Amount BlackRock is paying to acquire UK data group Preqin
✈️ $4.7B - Value of Boeing's deal to buy Spirit AeroSystems
🚗 $5B - Volkswagen's investment in electric car company Rivian
✈️ €72 - Maximum "green fee" Lufthansa will charge on flights from Europe
🇦🇷 5.1% - Year-over-year shrinkage of Argentina's economy in the first quarter
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Chart Of The Week
This chart shows the S&P 500 index from 2001 to 2022, highlighting its 40 best and worst performing days.
Here are the key insights from this chart:
✅Crisis opportunities: The largest clusters of best days often occur right after the worst days, especially during financial crises (2008-2009) and market shocks (2020). Be ready to buy during panics.
✅Recovery speed: Markets often recover faster than expected. The 2020 Covid crash saw a V-shaped recovery, while the 2008 recovery was slower but still relatively quick.
✅Missing top days is costly: If you miss just the 10 best days in a decade, your returns could be cut in half. Stay invested.
✅Volatility isn't bad: Big down days are often followed by big up days. Don't let short-term swings shake you out of good long-term positions.
✅Bear market behavior: During prolonged downturns (2001-2003, 2008-2009), we see multiple clusters of volatile days. Prepare for extended periods of uncertainty.
✅Bull market calmness: Long bull runs (2013-2019) have fewer extreme days. Use these periods to rebalance and prepare for future volatility.
✅Compounding power: Despite crashes, the S&P 500 grew from about 1,000 to over 4,000 in this period. Time in the market beats timing the market.
✅Sector rotation matters: Different sectors lead in different periods. Diversify across sectors to capture various growth phases.
✅Dollar-cost averaging works: Regular investing smooths out the impact of volatile days and takes advantage of market dips automatically.
Weekly Sector Performance
🤝 M&A Roundup
🏦 Asset Management: BlackRock is set to acquire UK data group Preqin for £2.55bn →reflecting the growing demand for detailed financial information.
✈️ Aerospace: Boeing agreed to buy Spirit AeroSystems in a $4.7bn deal to bring the parts supplier back under its wing after two decades apart.
🎓 Education: TDR Capital, the Asda backer, is pursuing the sale of City training business BPP
🧬 Biotech: Swiss buyout firm Partners Group acquired a stake in €900mn biotech firm FairJourney Biologics
🎮 Gaming: EQT is moving towards a £2.1bn takeover of UK-listed Keywords Studios, with the Dublin-based games company "minded to recommend" the offer.
💊 Consumer Health: Haleon is selling its non-US nicotine replacement business for £500mn, focusing on higher-growth areas like toothpaste.
🚚 Food Delivery: Takeover talks between DoorDash and Deliveroo hint at further consolidation in the food delivery sector.
💼 Investment Trusts: Alliance Trust and Witan are joining forces to create a £5bn investment trust → marking the latest in a series of industry consolidations.
Volkswagen Teams Up with Rivian
Volkswagen is investing $5 billion in Rivian, an electric car company.
Rivian reported a $1.4 billion loss in the first quarter of the year.
The partnership is meant to help both companies compete in the growing electric vehicle market, especially against Chinese competitors.
Lufthansa Adds Green Fee
Lufthansa will charge extra for flights from Europe to cover new environmental rules.
The fee will be between 1 and 72 euros ($77 at the high end). This starts after December 31st.
This is likely to raise ticket prices and affect travel demand.
Other airlines might follow suit to cover the cost of using 2% sustainable aviation fuel.
European Commission vs Apple on App Store
The European Commission accused Apple of unfairly preventing app developers from steering users to alternative payment methods outside the App Store.
The consequence might be forced changes to Apple's App Store model in Europe - with a definite impact on its revenue from app sales and in-app purchases.
Banks Pass Stress Tests
The Federal Reserve's yearly stress tests show all 31 big banks passed.
Their combined potential losses in a severe scenario would be $685 billion.
The banks' average capital ratio dropped from 12.7% to 9.9%.
It essentially means banks seem stable, but with slightly less cushion.
This could affect their ability to lend or pay dividends in the future.
Tech Giants Face EU Scrutiny
Microsoft and Apple are in trouble with European regulators.
Microsoft is accused of unfairly pushing Teams.
Apple is delaying new AI features in the EU due to regulatory uncertainty.
What it means: Big tech might face more rules in Europe, potentially affecting their products and profits in this large market.
Nvidia Stock Rollercoaster
Nvidia's stock fell up to 13% from its peak, but then rebounded.
This happened after being briefly the world's most valuable company.
Argentina's Economy Shrinks
Argentina's economy shrank 2.6% in the first quarter compared to the previous quarter.
Year-over-year, it's 5.1% smaller. Unemployment rose to 7.7%.
Argentina's economic troubles could spread to neighbouring countries - and affect investments in South America.
Self-Driving Taxis Expand in San Francisco
Waymo is now offering self-driving taxi rides to everyone in San Francisco.
About 300,000 people have signed up.
This is a significant step for autonomous vehicle technology.
It might be time to disrupt traditional transportation and look into new investment opportunities in that field.
Worth looking into.
British Winemaker Considers Selling
Chapel Down, Britain's biggest winemaker, is considering selling its business.
British wine production has grown from 5.3 million bottles in 2017 to an estimated 20-22 million in 2023, thanks to favourable climate conditions.
It’s interesting to see climate change create new opportunities in unexpected industries.
And it might be an interesting area for investors looking at how businesses adapt to climate shifts.
Airbus Faces Engine Problems
Airbus lowered its plane delivery target from 800 to 770 this year due to engine shortages.
Their stock price fell 10% on this news.
This is sort of signs of ongoing supply chain issues.
It is doomed to affect Airbus's revenue and profits, as well as airlines waiting for new planes.
Stocks
📈WINNERS:
Nvidia (NVDA, +4.98%)
Amazon (AMZN, +6.25%)
Apple (AAPL, 4.43%)
Salesforce (CRM, +6.79%)
Tesla Inc (TSLA, +14.99%)
📉LOSERS:
Visa (V, -4.89%)
Home Depot (HD, -4.03%)
Micron Technology(MU, -7.71%)
Nike (NKE, -22.17%)
Air Products & Chemicals (APD, -8.09%)
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