Market Commentary | EU stocks snap losing streak

Panic subsided in the global financial markets, halting this week’s slide. Major European bourses ended the day higher, with the FTSE 100 leading the pack with gains slightly over 1% despite unofficial estimates from think-tank the National Institute of Economic and Social Research which point to a contracting UK economy in June. Wall Street opened higher on strong labour market data but gave up most of the gains later on, with some indices finishing the day lower. Non-farm payroll data is due to be released this afternoon in the US, in what is usually a volatile session. Sovereign bond prices were slightly higher, energy and precious metals were lower. In the currency space, the news is all about the British pound which managed to rally before falling back to Wednesday’s levels in the late afternoon.

M&A Roars Back

News of two major deals across two different industries hit the wires this morning. Avast Software will be acquiring AVG Technologies for $1.3 billion, creating a combined company with significant clout. Avast, a private firm, will pay $25 per share in an all-cash deal – a 33% premium. Avast has received financing commitments from investment banking firms Credit Suisse, Jefferies and UBS. Avast also contributed $150 million in equity to fund the transaction, which upon approval is expected to close in September or October of 2016.

Danone, the world’s biggest yoghurt maker will be paying out $12.5 billion dollars for the acquisition of WhiteWave Foods. Shares in the French company rose 7% while the US-based organic foods group saw a jump of over 18% in its share price after Danone said it would pay $56.25 per share, in cash. The acquisition, which is expected to be completed by the end of the year, is Danone’s largest in a decade. WhiteWave Foods has long been considered a potential takeover target for rivals such as Campbell Soup, Kellogg Company and General Mills, and has forecast solid sales growth this fiscal year which would put the company amongst the industry leaders.

Demand for more healthy food and beverages is driving a massive change in the US food industry, forcing companies to slash costs, reformulate recipes and invest in smaller, faster-growing companies focused on the latest food trends. PepsiCo has and still is undergoing such a transformation, and has started to reap some of the benefits. The maker of Gatorade, Mountain Dew and Frito-Lay chips said it is now getting 9% of its revenue from new products, although volumes remain low.

PepsiCo’s shares rose as much as 2% after its latest quarterly profit beat expectations on stronger sales volume driven by lower pricing and reduced costs. For the quarter, the company earned $2.01 billion, or $1.38 per share. The company now anticipates slightly higher full-year earnings of $4.71

This article was issued by Andrew Martinelli, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.