A daily market update from FS Insight — what you need to know ahead of opening bell

“Every virtue is a mean between two extremes, each of which is a vice.” — Aristotle

Over the Weekend

A year after the troubles at First Republic Bank, regulators seize Philadelphia’s troubled Republic First Bank (WSJ)

JPMorgan sees rising default risk in the private-credit market (WSJ)

Knight-Swift hunting for trucking acquisitions (WSJ)

TPG Telecom agrees to regional network-sharing deal with Optus (WSJ)

Northrop’s rocket-fuel factory slow to take off (WSJ)

Biden administration shelves plan to ban menthol cigarettes (WSJ)

Russian President Vladimir Putin signaled he could impose a rare tax hike to help finance the war in Ukraine (Semafor)

SpaceX launches European Commission’s Galileo satellites on Falcon 9 rocket from the Kennedy Space Center (SFN)

Ban on non-compete agreements send shockwaves across Wall Street (FT)

Big asset managers adopt ‘vulture’ tactics in distressed debt fights (FT)

Japan’s oldest VC firm is eying a 200% gain (BBG)

Elliott built a ‘large’ take in Buffett-favored Sumitomo (BBG)

U.S. executive pay jumped 9%, widening U.S.-U.K. gap (FT)

Chinese bonds dodge global debt selloff as yield gap widens (BBG)

Troubled borrowers seen fighting for runway without rate cuts (BBG)

Commodity prices could keep inflation high (FT)

Chinese regulators warn against SVB-style meltdown (FT)

China firms go underground on Russia payments as banks pull back (RT)

Lending and consumer data cements case for ECB rate cuts (RT)

Dutch kick-start European attempts at carbon capture (FT)

U.S./global equity funds see fourth-straight week of outflows (RT)

Google becomes fourth company to reach $2T market cap (TV)

U.S. Treasury refunding set to offer relief from supply rises (RT)

Apple intensifies talks with OpenAI for iPhone generative AI features (BBG)

BHP Group is considering making an improved proposal for Anglo American after the London-listed miner rejected its $39B takeover offer as significantly undervalued (BBG) 

L’Occitane International billionaire owner Reinold Geiger is close to making a take-private offer that would value the skincare company at ~$7B, including debt (BBG) 

Tech-focused PE firm Thoma Bravo agreed to acquire U.K. cybersecurity company Darktrace at an equity value of ~$5.3B (BBG) 

Carlyle Group and the family owners of Tamko Building Products are mulling a sale that could value the roof shingles maker at over $3.5B (BBG) 

Apollo Global Management, KKR, and Stonepeak may inject billions of dollars into a JV that will help fund Intel’s semiconductor fabrication facility in Ireland (BBG) 

Food giant General Mills is exploring a sale of its North America yogurt business including its Yoplait brand in a deal that could be worth over $2B (RT) 

Blackstone is finalizing a revised offer to buy Hipgnosis Songs Fund that will be a significant improvement on the $1.5B bid made by Concord (BBG) 

UMB Financial is in talks to acquire rival Heartland Financial USA, which has a $1.5B market cap, in what could be the largest regional bank merger this year (BBG) 

Apollo Global Management will acquire frac-sand provider U.S. Silica Holdings in a  $1.2B cash deal (BBG) 

Czech billionaire Daniel Křetínský will acquire a 20% stake in German conglomerate  Thyssenkrupp’s steel business at an estimated ~$749M equity value (FT) 

KKR-backed French media group Mediawan agreed to acquire KKR-owned German rival Leonine in a $536M all-share deal (FT)

Billionaire Lawrence Stroll is in early talks to sell up to a 25% stake in his Aston Martin F1 team (BBG) 

Agricultural commodities trader Louis Dreyfus sweetened its offer for Namoi Cotton to $81M (BBG)

UAE-backed RedBird IMI is set to walk away from its takeover of The Telegraph, which will likely trigger another bidding war for the U.K. newspaper group (BBG) 

CVC Capital Partners’ shares rose 24% at open after its $2.15B Amsterdam IPO to become Europe’s best trading debut since 2021 (BBG) 

French energy giant TotalEnergies is ‘seriously’ considering a New York primary listing (RT)

First news

• If it’s social and financial success you want, immigrate to an English-speaking country
• Seaweed can power more than human bodies; it is now seen as a source of metals that can power batteries
• Extreme weather is not just closing schools and making ACs work overtime; wine production in the European Union is down by double digits thanks to it
• Next time you have a disagreement with someone, don’t bet money; bet that the loser has to read a book the winner recommends.

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

Two weeks ago, we noted that equities were about to face a fragility test, given the dual risks of fears of inflation resurgence + Middle East conflict. And at that time, we expected stocks to face knee-jerk de-leveraging, a test we expected stocks to ultimately survive. As we exit April, the rally of the past week has bolstered our confidence that the worst of the selling is done, and thus we believe probabilities favor stocks to stage further gains in May.

Click HERE for more.

TECHNICAL

The daily SPX chart below shows the success in closing back over last Wednesday’s highs, which is a structural positive heading into this week’s FOMC meeting and AAPL and AMZN earnings. SPX managed to log its best weekly gain of the year. Overall, we feel that lows are in on this prior three-week decline and, given last week’s recovery, gains should occur into the early part of May.

Click HERE for more.

CRYPTO

• Ethereum developer ConsenSys has filed a lawsuit against the SEC, challenging the regulator’s authority over Ethereum and its associated services. The lawsuit seeks to affirm that ETH is not a security and that MetaMask, a product of ConsenSys, does not fall under the definition of a broker, nor does its staking service violate securities laws. The complaint, filed in the Northern District of Texas, stems from a Wells Notice received from the SEC on April 10th, indicating potential enforcement action against ConsenSys for its MetaMask wallet. ConsenSys argues that the SEC’s actions contradict previous designations of Ethereum as a commodity and violate Constitutional protections, including the Due Process Clause, and encroach on the scope defined by Congress, particularly citing the “major questions doctrine.” The broad consensus, no pun intended, is that going on the offensive in a potentially favorable jurisdiction is a savvy strategic move. 
• Stripe, the fintech giant, is set to reintroduce crypto payment options later this year, focusing initially on Circle’s USDC stablecoin across the Solana, Ethereum, and Polygon (MATIC-3.54%) blockchains. This move comes after a hiatus since 2018 when Stripe ceased supporting Bitcoin due to its volatility and impracticality as a medium of exchange during the first crypto winter. Stripe’s resurgence in the crypto payments field aligns with their previous explorations into crypto transactions since 2014 and recent endeavors like the fiat-to-crypto payment project launched in 2022. The reintroduction aims to provide a much-improved user experience in handling crypto transactions, leveraging enhanced transaction speeds and reduced costs. This initiative by Stripe offers yet more evidence that stablecoins have achieved product market fit and are indeed one of crypto’s killer use cases.

Click HERE for more.

FIRST NEWS

Something in the Way They Speak. In what sounds very much like a Master-of-the-Obvious-type conclusion to this naturalized U.S. citizen, immigration to Anglophone countries tends to be more successful than immigration to other places, as reported in the Financial Times. In France, North African immigrant communities are less likely than their native-born Francophone peers to progress in education, but in the U.S., U.K., and other English-speaking countries, immigrants often earn more than the average citizen, are imprisoned less often, and are net tax contributors, while elsewhere the opposite is the case. Anglophone countries have the additional advantage of drawing from a huge pool of educated English speakers (think India, Pakistan, Bangladesh et al.), but also often integrate newcomers better. Semafor, FT

Live Metal, Breathe Metal, Eat Metal. As reported in the coastal science-focused Hakai Magazine, preliminary research shows seaweed can trap and store valuable elements, pointing to a more sustainable way to extract the metals used to power the green energy transition. U.S. scientists given grants to explore whether seaweed mining is a practical alternative for extracting rare-earth minerals are searching for the best place to grow the seaweed and seeking an extraction method that leaves the plants still usable as fuel, food, etc. The project is still “very exploratory,” one of the lead researchers said. “The chances of success are low. But if we succeed, then the implications are huge.” Semafor

Your Balthazar Is Now a Methuselah. An ongoing heat wave covering South and Southeast Asia is forcing schools cancellations of in-person classes in the Philippines and driving energy demand to record highs in Thailand. The temperature in Manila toyed with 102 degrees Fahrenheit on Saturday, melting a record last set in 1915. While Bangladesh was also forced to cancel classes last week, officials in India mull how to mitigate the impact of the heat wave on voters during the massive elections there. A World Meteorological Organization report warned last week that Asia is “the world’s most disaster-hit region from weather, climate and water-related hazards” and the impact from heat waves is becoming more severe.

In the meantime, the wine industry is blaming climate change for its worst harvest in 62 years. The International Organisation of Vine and Wine (OIV) said “extreme environmental conditions” in 2023 partly led to the lowest production of wine in its 50 member states since 1962. A wet spring in much of Europe plagued crops with mildew, while other areas suffered from drought and wildfires; as a consequence, wine production in the E.U. was down 10% in 2022. Thanks to inflation, China’s economic slowdown, and changing behavioral patterns, the wine industry is suffering at both ends, as wine consumption is at its lowest level since 1996. Semafor

Book Bookie. Disagreements offer valuable opportunities to improve our understanding of the world, yet – as anyone who’s, say, used social media lately, knows – expressing dissent constructively is a challenge. People tend to argue from entrenched positions that confirm their existing worldviews, rather than critically evaluating the probabilities underlying their beliefs. Using stakes, such as monetary bets, can lead to more rigorous analysis. Still, challenging someone to a monetary bet can feel confrontational.

Enter book bets – a more congenial way to have intellectual skin in the game. Instead of money, participants wager a number of books from the other party that they are willing to read if proven wrong. The odds of the bet reflect each person’s confidence in their position.

Here’s how it works: Two people with differing forecasts define a specific, falsifiable claim, a timeframe, and a trusted source for resolution. They agree on odds – with the more confident party potentially accepting underdog odds as proof of strong belief. After the outcome is known, the winner selects the specified number of books for the loser to read.

Book bets have several benefits:

1. Real stakes -> Real consideration: Having to commit time to reading books one disagrees with compels more careful calculation of probabilities and less overconfidence
2. Clarifying resolvable questions: Like monetary bets, book bets endow abstract disagreements with concrete, measurable terms conducive to uncovering truth
3. A learning opportunity: For the loser, the reading provides insight into the winner’s perspective, potentially reshaping their views.

Rather than promoting aggressive posturing, as regular betting does, book bets actually promote meaningful, evidence-based discussion and mutual understanding, turning a potential conflict into a chance to grow. To wit, as the place to get your evidence-based financial research, we are working on a running list of book recommendations that we will release and update over the coming weeks.

Stay tuned. Hashtag ‘bookrecs’. @Abstraction