Battle royale

MARKETS

  • U.S. markets: 167 companies in the S&P 500 report earnings this week. We won’t write up all 167, but we will give you the programming highlights down below.
  • Trade: Leaders from the U.S. and China are meeting to talk trade this week. It’s the first face-to-face between the world’s two biggest economies since talks hit the skids in May.

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DEALS

It's All Refinitiv

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The London Stock Exchange (LSE, but not the one where your econ major friends studied one summer in college) confirmed it’s in advanced talks to buy Refinitiv in a $27 billion deal.

Refinitiv, which is majority-owned by a consortium including U.S. private equity giant Blackstone, provides companies with global financial data analytics. That's a fancy British way of saying it sends 40,000+ traders and investors the pre-crunched numbers they need to do their jobs. Looking for a button? Refinitiv’s Eikon terminals are the main alternative to Bloomberg Terminals on most trading floors.

The LSE knows data wins arguments

It might have earned its reputation running stock exchanges and clearing derivatives, but the LSE has large-scale data ambitions, too.

Already, it runs Mergent, a private company information service; XTF, an information service for exchange-traded funds; and The Yield Book, a fixed-income indexing service. Adding Refinitiv to the roster gives the LSE firmer data footing while diversifying its revenue streams.

  • Refinitiv was valued at $20 billion last year.
  • The LSE is penciling in annual combined revenue of more than 6 billion pounds.

Zoom out: Exchange groups around the world have found themselves inching toward consolidation as stock and bond trading becomes increasingly electronic (and profits from more traditional business fall). To keep up, groups like the LSE need faster data sources...which they can also conveniently charge clients more for.

Today, information services account for almost 40% of the LSE’s roughly $2.7 billion in annual revenue. Post-trade services account for a little over one-third. And traditional capital markets like stock trading and IPOs? 19% of revenue last year, compared with 46% a decade ago.

Worth keeping in mind: We’d be willing to bet our tea and crumpets there will be a long antitrust review before this deal closes.

MARKETS

Stock Market Déjà Vu

“Everyone had the same idea, huh?” isn’t just a saying for dads when there’s a 20-minute wait at Chili’s.

As stocks push to new highs, everyone is piling into the same trades at record levels, per the WSJ. Among this season’s hottest? Mastercard, Microsoft, Amazon, PayPal...and plenty of other tech names.

What they have that others don’t: Momentum. Stocks that rose the fastest last year are valued almost 25% higher than normal relative to their next 12 months of earnings, according to Bank of America data. And the valuation gap between growth and value stocks is at a record, per DWS Group.

But you know what they say about bright stars. One bum earnings report from one of those widely held stocks could have an outsized impact on the broader market when everyone's holding it. Don’t forget that Nasdaq correction in May thanks mostly to a few Big Tech firms that got bent out of shape.

Bottom line: In year 10 of this economic expansion, being original isn’t exactly a priority. Investors are hesitant to end the good thing they’ve got going—especially as global growth starts to sputter.

PHARMA

Pfizer and Mylan Believe in Safety in Numbers

Pfizer is reportedly in talks to divest its off-patent business and merge it with Mylan to pform a pformidable generic drug seller, per the WSJ. When the Brew went to e-print, no deal had been finalized, but one could be announced as early as today.

What’s in it for Pfizer: Combining its portfolio with Mylan’s products and IP will help Pfizer stay competitive against lower-priced rivals and (hopefully) give sales a much-needed boost. Already, newcomers are gunning to unseat Pfizer’s market-leading off-patent Lipitor cholesterol pills and Viagra...Viagra.

Mylan’s play is pretty similar. The EpiPen producer has struggled to compete in an increasingly hostile generic drugs market. It’s worth about $9.5 billion and holds over $13 billion in long-term debt. Shares are down almost 50% in the past year, while its public image is down even more given its involvement in a civil price-fixing suit.

+ The timing is worth noting. Pfizer reports earnings tomorrow, and Mylan’s got an investor day planned Wednesday. Nothing keeps analysts' attention like a big, pfat merger.

GAMING

Fortnite Needs a Viewership Respawn

The first-ever Fortnite World Cup sold out NYC's 23,000-seat Arthur Ashe Stadium (which also hosts the U.S. Open) this weekend. Imagine a tennis tournament—but replace two 30-year olds furiously pounding yellow balls with 100 16-year-olds furiously pounding keyboards.

Some numbers to make you question higher education over joystick skills...

  • $30 million in prize money was distributed, with $3 million going to each winner of the solo and duo competitions. When Tiger Woods won the Masters in the spring, he took home $2 million.
  • 40 million players participated in online qualifiers, with $50,000 guaranteed for every qualifier.

But...viewership is in quicksand. A much-hyped monster fight on Saturday didn’t even make it into the top 10 most-watched Fortnite events by Twitch viewership. The 2018 Celebrity Pro-Am is No. 1 on that list with 1.5 million concurrent viewers. This year, viewership of that matchup tanked 73% when it kicked off the World Cup on Friday.

Bottom line: Nothing lasts forever, including Fortnite’s mega-popularity. But the battle royale game has still turned its publisher, Epic Games, into an industry juggernaut.

CALENDAR

The Week Ahead

Stock up on the Salonpas heading into this week. All your coworkers who spent the weekend flossing through that Fortnite World Cup are going to need it.

Monday: U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin travel to China for trade talks; President Trump to sign 9/11 Victim Compensation Fund bill into law; earnings (Beyond Meat, Sanofi)

Tuesday: Fed meeting begins; June core inflation and consumer spending stats released; earnings (Apple, Allstate, Procter & Gamble, Eli Lilly, Grubhub, Merck, Under Armour); Democratic primary debate night one

Wednesday: Fed announces its decision on rates (and Chair Jerome Powell holds a press conference); earnings (Fiat Chrysler, Fitbit, GE, Moody’s, Spotify); MLB trade deadline; Democratic primary debate night two

Thursday: ISM manufacturing; construction spending; earnings (Pinterest, Dunkin’ Brands, Crocs, Etsy, GoPro, GM, Kellogg, Shell, Square, Verizon); Summer X Games begin

Friday: July jobs report; trade deficit; consumer sentiment; earnings (Berkshire Hathaway, Chevron, Exxon, Restaurant Brands)

WHAT ELSE IS BREWING

  • Facebook has banned all sales of alcohol and tobacco between users on its core platform and on Instagram.
  • Jewelry brand Alex and Ani is suing Bank of America for $1.2 billion, arguing the bank’s gender bias and greed put it in a financial “death spiral.”
  • Reliance Jio Infocomm is now India’s biggest telecom operator with 331 million subscribers.
  • Boeing’s 737 Max grounding could stretch into the holiday season. Sorry to be a Grinch so early, but Southwest already pulled the planes from its schedule until next year.
  • Speaking of, the NYT uncovered some new details re: the FAA's Boeing oversight issues.

BREAKROOM

Greater Than, Less Than, or Equal to: Fast Food Edition

  1. Number of McDonald’s locations on Martha's Vineyard // Number of Starbucks locations on Martha’s Vineyard
  2. Average sales for a Chick-fil-A location // Average sales for a KFC location
  3. Beyond Meat market cap // Chipotle market cap
  4. Percentage of lower-income U.S. adults eating fast food // Percentage of higher-income U.S. adults eating fast food

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Breakroom Answers


Greater Than, Less Than, or Equal to

  1. Equal to. There are no corporate-owned retail chains on the island.
  2. Greater than. Average sales at a Chick-fil-A location in 2018 more than tripled those at the average KFC.
  3. Less than. Chipotle’s got it beat, $21.6 billion to $14.1 billion.
  4. Less than. Contrary to popular myth, the CDC found that income is positively correlated with fast food.
 

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