Notable market news this past week (03-Mar-24)
Here is the Skeptivest roundup of the latest market headlines for the week
🇺🇸 FTC files lawsuit to prevent supermarket merger
Blocking mega supermarket merger: FTC announced on Monday that it’s suing to block the $25b Kroger–Albertsons merger, combining the second and fourth largest grocery store chains in the US. The merger will enable the new entity to control 15-20% of the market - still short of Walmart's 25% market share.
Albertsons and Kroger argues lower prices: Both companies claim customers would actually see lower prices if they teamed up due to economies of scale.
FTC challenges merger: While the FTC contends that the merger would lead to reduced wages and inferior working conditions, Kroger and Albertsons emphsize their predominantly unionized workforce. They argue that by joining forces, they can effectively compete with major nonunionized players such as Amazon, Costco, and Walmart. Despite Kroger already pledging $500m to reduce prices and $1b to increase wages, and offering to divest ~400 stores, FTC still calls the proposal "inadequate".
FTC has been challenging mergers that may drive up consumer prices: Amidst the Biden Administration, the FTC opposes mergers potentially elevating consumer prices, like the JetBlue-Spirit deal.
☕️ Quick fire happenings to note
🌏 Global macro
- Stellar earnings by US companies: The earnings growth of S&P 500 companies hit approximately 8%, surpassing the anticipated 1.2% increase forecasted prior to the earnings season. This indicates that companies have managed to weather the macroeconomic uncertainty quite effectively.
- US Personal Consumption Expenditures (PCE) data alleviates market concerns: The headline PCE price index increased 0.3% in January, picking up speed from December’s 0.1% jump. core PCE reading - which strips the index of food and energy prices - increased 0.4% in January. Despite the upticks on the monthly readings, both headline and core PCE increases slowed on an annual basis, rising 2.4% and 2.8% in January vs the 2.6% and 2.9% annual jumps in December. This brought about relief for markets sweating on the potential it would spark fresh hawkishness from US policymakers.
- Elon Musk sues OpenAI for violating its own founding mission: The lawsuit alleges OpenAI strayed from its mission of developing AI for public benefit by focusing on profit, with a for-profit subsidiary bound by the nonprofit's mission. It accuses OpenAI of effectively becoming a Microsoft subsidiary after the tech giant's $13b investment for a 49% stake. Additionally, it claims OpenAI improperly licensed its GPT-4 AI model to Microsoft, contrary to its obligation to create such advanced tools for nonprofit purposes.
- India's robust growth: India experienced an acceleration in economic growth during the last quarter of 2023, surpassing economists' forecasts. The Statistics Ministry reported a year-on-year increase of 8.4% in GDP on Thursday, propelled by robust private-sector investment and increased spending on services.
- Gaza incident threatens cease-fire talks: A deadly incident in Gaza, with over 100 reported casualties, disrupts cease-fire negotiations. Israeli forces allegedly opened fire, but claimed that majority of deaths were due to convoy of trucks running over civilians. The Hamas-led Gaza Health Ministry blamed Israel, prompting a pause in cease-fire talks.
🏦 Individual stocks/companies
- Disney and Reliance merge media businesses in India in a $8.5b JV: The companies are set to merge their individual Star India and Viacom18 units into the newly established Star India joint venture, valued at approximately $8.5b post-money, excluding synergies. Reliance, under the leadership of Mukesh Ambani, Asia’s wealthiest individual, will hold control over the joint venture and inject $1.4b into its growth strategy upon completion of the transaction.
- Apple abandons electric vehicle project: Apple halted a decade-long endeavor to develop an electric vehicle, relinquishing one of its most ambitious projects to date. The revelation, conveyed internally, caught nearly 2,000 employees involved in the project off guard.
- Google's credibility took a hit due to Gemini's mishaps: Last week, Gemini faced criticism for providing diverse yet inaccurate responses to historical queries, generating images of an Asian founding father, a female pope, and a Black Nazi. Google suspended Gemini's capability to generate images of people last Thursday. However, users noticed discrepancies in the AI's text-based responses over the weekend, as it declined to compare the impact of Adolf Hitler and Elon Musk on the world. With high expectations surrounding Google, analysts caution that AI errors could swiftly erode trust in the company's brand and operations.
- SATS earnings: In Q3 FY24, SATS announced a net profit of S$31.5m, marking a 41.9% surge from the previous year. This boost in profit was propelled by enhanced performance across its business units, coupled with robust seasonality in its cargo operations.
🇸🇬 Singapore related
- Singapore's Total Fertility Rate (TFR) hits record low in 2023: A TFR of 0.97 in 2023 is well below the replacement rate of 2.1 and a slight drop from the 1.04 in 2022 and 1.34 in 2019.
- SSB returns rebound: This month, the Singapore Savings Bonds (SSB) saw a resurgence in their 10-year average return, climbing above 3%. This offers an opportunity for investors seeking to secure interest rates over an extended duration.
