By Swissquote Analysts
Western Digital in Advanced Talks to Merge with Kioxia
Topic of the day
Western Digital Corp. (+7.8%) is in advanced talks to merge with Japan’s Kioxia Holdings Corp., according to people familiar with the matter, in a deal that could be valued at more than $20 billion and further reorder the global chip industry. Long-running discussions between the companies have heated up in the past few weeks and they could reach agreement on a deal as early as mid-September, the people said. Western Digital would pay for the deal with stock and the combined company would likely be run by its Chief Executive, David Goeckeler, the people said. There’s no guarantee Western Digital, which had a market value of around $19 billion Wednesday afternoon, will seal an agreement, and Kioxia could still opt for an initial public offering it had been planning or another combination. The Wall Street Journal reported in March that Western Digital and Micron Technology Inc. were examining potential deals with Kioxia, which makes NAND flash-memory chips used in smartphones, computer servers and other devices. Perhaps the biggest regulatory hurdle would be China, which has been increasingly aggressive in its antitrust enforcement, helping scuttle potential deals including Qualcomm Inc.’s proposed $44 billion purchase of Dutch chip maker NXP Semiconductors NV in 2018.
The Swiss stock market has positioned itself on Wednesday in the European-wide comparison with its daily development well behind. A few gains in the financial sector were offset by broad-based losses, including in the index heavyweights Nestle (-0.8%), Novartis (-0.8%) and Roche (-1.2%). Daily losers were ABB (-1.5%) The SMI lost 0.6 percent to 12,365 points. Bank stocks benefited from the further increase in yields, based on the development on the US bond market. There, the ten-year yield was last at 1.32 percent, after it had been 1.26 percent the previous day. The background to this is speculation that U.S. Federal Reserve Chairman Jerome Powell could announce a tighter monetary policy at the central bank meeting in Jackson Hole on Friday. Higher interest rates gain the lending business of the financial institutions more profitable. Credit Suisse was the clear winner of the day in the SMI with a plus of 3.1 percent, for UBS it went up by 1.1 percent. In the second tier, Julius Baer gained 1.7 percent. Sika ended the day 0.8 percent lighter. The specialty chemicals company had announced the acquisition of Shenzhen Landun, a manufacturer of waterproofing systems in China. The company offers a comprehensive range of products and technologies for waterproofing buildings and perfectly complements Sika's solutions, the Swiss group declared.
European shares were little changed Wednesday, with global markets trading in narrow ranges, as money managers continued to assess whether the Federal Reserve may slow down plans to pare back its easy-money policies. The Stoxx Europe 600 index ended almost at equilibrium (+0.01%, at 471.8 points). In Paris, the CAC 40 and the SBF 120 both gained 0.18%. In Frankfurt, the DAX 30 gave up 0.28% while in London, the FTSE 100 gained 0.34%. Investors are looking ahead to comments from Fed officials at the central bank's Jackson Hole Symposium later in the week for insights into the pace at which the central bank would taper bond purchases. Jerome Powell speaks virtually at the event Friday. "It is wait-and-see because we're getting to the point where we think we'll get some definitive information on tapering," said Daniel Morris, chief market strategist at BNP Paribas Asset Management. "On one hand, we've had the signaling on tapering, but on the flip side, you see people looking at a deceleration in activity.“ Pernod Ricard stock rose 1.3% after the drinks company said it expects to book additional profits of $163 million in the U.S. this year, including $33 million of profit from recurring operations, following a court ruling on import taxes. Pernod said the decision was in respect of a refund of import taxes. Shares in Augean jumped 17% after the U.K. waste-management group agreed a GBP341.2 million takeover from Eleia, a new company created by investment funds managed by Ancala Partners and Fiera Infrastructure. "The feeding frenzy on the U.K. market has showed no sign of letting up as Augean agreed to an offer," said AJ Bell analyst Danni Hewson. "This continuing global corporate raid suggests bidders still see a lot of untapped value in the U.K. market. The danger is that if it doesn't let up soon, London will be left looking like a bit of a wasteland for stocks.“
Economically sensitive stocks and banks led major U.S. indexes to another set of fresh records. The stock market on Wednesday continued its general upswing over the past few days after U.S. regulators gave full approval for one of the Covid-19 vaccines. Manufacturers got an additional boost as the government moved toward a September vote on a roughly $1 trillion infrastructure bill. Shares of banks climbed even higher as bond yields rose ahead of the annual Jackson Hole gathering of central bankers. That all helped send the S&P 500 up 9.96 points, or 0.2%, to 4496.19, notching a fifth straight day of gains and its 51st record of the year. The Dow Jones Industrial Average added 39.24 points, or 0.1%, to 35405.50, up four straight days, while the Nasdaq Composite rose 22.06 points, or 0.1%, to 15041.86, also hitting a record. Financial stocks led benchmarks higher. In the S&P 500, the sector gained 1.2%, while in the Dow, shares of Goldman Sachs, American Express and JPMorgan Chase all counted as top contributors. Industrial and material firms also rose, adding 0.6% and 0.4%, respectively. Among the gainers, shares of Caterpillar added $2.17, or 1%, to $214.76. Stocks popular with bets on the economic reopening were also out front. Caesars Entertainment added $3.84, or 4.1%, to $97.70, while MGM Resorts International advanced $1.22, or 3%, to $42.13. Energy stocks rose too, gaining 0.7% following a third straight drop in U.S. crude inventories.
On the stock exchanges in East Asia on Thursday the negative signs prevail. In Tokyo, the Nikkei 225 index shows little change after the Japanese government has extended emergency measures to other parts of the country due to rising Corona infection figures. In Shanghai, the Composite Index slips 0.5 percent. The downward shift in Hong Kong is more significant, where the Hang Seng Index drops 1.4 percent. On the stock exchange in Seoul, the Kospi falls by 0.6 percent. South Korea's central bank (BoK) raised its key interest rate by 25 basis points to 0.75 percent after a prolonged period of record-low rates. The BoK also increased its inflation forecast.
U.S. Treasury yields edged higher Wednesday, pushing the 10- and 30-year maturities to their highest in nearly two weeks, as major stock indexes extended their record ascent. Meanwhile, an auction of $61 billion U.S. five-year notes saw only moderate demand. The yield on the benchmark 10-year U.S. Treasury rose to 1.342% from 1.289% Tuesday.
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