Finance

Deal-making activities worldwide could hit a record $6 trillion by the end of the year as businesses continue to embrace cheap financing and the pandemic recovery, says KPMG.
Global mergers and acquisition volumes have so far surpassed $4.3 trillion this year, up from the $3.6 trillion totaled in 2020.
With “pent-up energy” from pre-pandemic fundraising still in full swing, KPMG’s Stephen Bates says the surge looks set to continue.

Deal-making activities worldwide could hit a record $6 trillion by the end of the year as businesses continue to embrace cheap financing and the pandemic recovery, KPMG has said.
Global mergers and acquisition volumes have so far surpassed $4.3 trillion this year, according to Refinitiv data, moving closer to the all-time high of $4.8 trillion set in 2015.

It marks a surge from a total of $3.6 trillion reached in 2020. With “pent-up energy” from pre-pandemic fundraising still in full swing, Stephen Bates, KPMG partner and head of transactions for Singapore, said he sees no sign of it slowing down.

The M&A market is absolutely turbocharged at the moment.

Stephen Bates
partner and head of transactions (Singapore), KPMG

“The M&A market is absolutely turbocharged at the moment,” Bates told CNBC’s “Street Signs Asia” Friday.
“There’s a lot of pent-up energy from the fundraising [in 2018 and 2019] that didn’t happen last year. That dry powder is now being deployed,” he said.

Corporates, private equity and SPACs lead the charge

The technology, financial services, industrials and energy sectors account for the majority of deals this year, which are being led primarily by corporates, private equity and SPACs, or special purpose acquisition companies.
SPACs, which have soared in popularity, have no commercial operations and are established solely to raise capital from investors for the purpose of acquiring one or more operating businesses. They raise capital in an initial public offering and use the cash to merge with a private company and take it public.

The U.S. still accounts for the majority of deals, said Bates, though Europe has recorded the fastest growth at 50% year-on-year. Asia, meanwhile, grew 20% year-on-year.
The surge in deals comes against the backdrop of low interest rates and stagnant growth amid the coronavirus pandemic, which has led businesses to look for alternative sources of growth. Indeed, according to a September KPMG survey, eight in 10 (86%) CEOs say inorganic means will be their main source of growth in the next three years. Examples of inorganic growth include mergers and acquisitions, joint ventures and strategic alliances, the report noted.

As that momentum still continues, I think we’ll see that flow into the first quarter of next year.

Stephen Bates
partner and head of transactions (Singapore), KPMG

“We’re in a fairly low-growth environment and that means CEOs are looking to other markets to grow products, markets and capability,” said Bates.
That trend is set to continue until the end of the year, when deals could hit “nearly the $6 trillion mark,” and perhaps into early 2022, said Bates.
“With interest rates staying low, the positive sentiment still there … I think as that momentum [will] continue. I think we’ll see that flow into the first quarter of next year,” said Bates.

WATCH LIVEWATCH IN THE APP More

Global supply chain hiccups caused by the coronavirus have put a damper on economic growth, but the problem will be a fleeting one, according to JPMorgan Chase CEO Jamie Dimon.
“I should never do this, but I’ll make a forecast,” Dimon said Monday at a conference held by the Institute of International Finance. “This will not be an issue next year at all.”
Consumers are spending 20% more than they were before the pandemic, Dimon said.

JP Morgan CEO Jamie Dimon gives a speech during the inauguration of the new French headquarters of US’ JP Morgan bank on June 29, 2021 in Paris.
Michel Euler| AFP | Getty Images

Global supply chain hiccups caused by the coronavirus have put a damper on economic growth, but the problem will be a fleeting one, JPMorgan Chase CEO Jamie Dimon said Monday.
“I should never do this, but I’ll make a forecast,” Dimon said at a conference held by the Institute of International Finance. “This will not be an issue next year at all. This is the worst part of it. I think great market systems will adjust for it like companies have.”

The pandemic has laid bare how interconnected global supply systems are. For instance, a shortage of semiconductor chips has hampered manufacturers of cars and electronics. A dearth of willing workers has resulted in container ships idling at major ports and delays in shipping goods to retailers.
While some experts believe some pain will continue through 2023, Dimon has a rosier view. He said Monday that he believes the economy is set up for growth over the next few years. Part of that is because of the strength of the consumer, he said.
“Keep in mind, the consumer’s buying other stuff,” Dimon said. “They can’t buy cars, they’re buying home improvement; they can’t travel internationally, they travel domestically. The spend level is very high.”
“Because of the strength of the consumer, which is extraordinary, they’re spending 20% more than they were spending pre-Covid,” he added. “And companies are in great shape, they can continue to spend at these levels for a long time.”
Supply chain disruptions may end up merely elongating the recovery rather than derailing it, Dimon said.

Become a smarter investor with CNBC Pro. Get stock picks, analyst calls, exclusive interviews and access to CNBC TV. Sign up to start a free trial today.

WATCH LIVEWATCH IN THE APP More

New England Patriots cornerback Stephon Gilmore (24) stretches during the New England Patriots practice session in Foxborough, MA on Oct. 22, 2020.
Barry Chin | Boston Globe | Getty Images

Check out the companies making headlines in midday trading.
Energy stocks – Oil stocks rose Monday as futures for West Texas Intermediate crude traded above $81 per barrel, though many later came off their session highs as the broader market rolled over. Shares of Halliburton climbed 3%. Diamondback Energy rose as much as 3% but closed slightly into the green. Solar stocks also moved higher, with Sunrun and Enphase Energy jumping more than 4%.

Freeport-McMoRan – Shares surged 3% and were among the biggest gainers in the S&P 500 midday. The stock’s jump came amid a rally in the energy and industrials sector and a pop in copper prices.
Retailers – Apparel makers’ shares fell after cotton prices hit a 10-year high Friday of $1.16 per pound. Gap and Levi Strauss lost %4. Ralph Lauren shares slid by 1.5%.
Charter, Comcast – Both cable stocks fell Monday after Raymond James downgraded them to market perform. Comcast lost more than 4% and Charter slipped 1.5%.
SoFi Technologies — Shares of the online personal finance company surged more than 13% after Morgan Stanley initiated coverage with an overweight rating. The Wall Street firm is bullish on SoFi’s student loan refinancing business and said the potential approval of SoFi’s bank charter application is another possible catalyst for a boost.
Aspen Technology — The industrial software maker’s stock jumped 12% after it announced a deal with Emerson Electric to merge with two of its software businesses. The cash-and-stock deal is valued at about $160 per share.

Cleveland-Cliffs — Shares of Cleveland-Cliffs gained more than 4% after the steel producer announced it would acquire Ferrous Processing and Trading, a scrap metal company. The acquisition will mark Cleveland-Cliffs’ entrance into the scrap business.
DraftKings — Shares of the sporting betting company popped about 2% after Citi initiated coverage with a buy rating. The Wall Street firm said the company is the “market leader” in betting.
Southwest Airlines — The air carrier’s stock price slid more than 4% after it canceled more than 2,000 flights over the weekend, blaming air traffic control issues, bad weather and its own staffing shortage.
Coinbase — The cryptocurrency exchange saw its shares fall jump more than 3% as bitcoin extended a two-week rally toward an all-time high. Coinbase’s stock tends to trade in tandem with cryptocurrency prices because most of its revenue is derived from trading fees.
 — CNBC’s Yun Li, Maggie Fitzgerald, Jesse Pound and Hannah Miao contributed reporting

Become a smarter investor with CNBC Pro. Get stock picks, analyst calls, exclusive interviews and access to CNBC TV. Sign up to start a free trial today

WATCH LIVEWATCH IN THE APP More

Take a look at some of the biggest movers in the premarket:
Southwest Airlines (LUV) – The airline canceled more than 1,800 flights over the weekend, citing bad weather, air traffic control issues and staff shortages. Southwest disputed speculation that its high level of cancellations compared to other airlines was due to employee protests of a Covid-19 vaccine mandate. Southwest fell 2.8% in premarket trading.

Robinhood (HOOD) – The trading platform’s stock fell 2.1% in premarket action, following a Securities and Exchange Commission filing that detailed the risks of increased regulation of cryptocurrency trading as well as possible new rules surrounding payment for order flow.
SoFi Technologies (SOFI) – The fintech company’s stock rallied 3.1% in premarket action after Morgan Stanley initiated coverage with an “overweight” rating, calling it a “powerful revenue growth story” as it gains market share in the consumer finance space.
Apple (AAPL) – Apple asked a judge to delay changes to its App Store that would require it to allow developers to bypass Apple’s in-app payment system. The changes stemmed from the case involving “Fortnite” creator Epic Games and is scheduled to go into effect December 9, but Apple is asking that its appeal be allowed to play out first.
Merck (MRK) – The drugmaker and partner Ridgeback Biotherapeutics announced the submission of an Emergency Use Authorization application to the Food and Drug Administration for their oral Covid-19 treatment molnupiravir. That follows positive study results that were unveiled earlier this month.
Starbucks (SBUX) – The coffee chain’s shares added 1% in the premarket after Deutsche Bank upgraded the stock to “buy” from “hold,” citing “incredible” U.S. momentum and the prospect of sustained unit growth in China.

Aspen Technology (AZPN) – The industrial software maker announced a deal to merge with two of Emerson Electric’s (EMR) software businesses in a deal worth approximately $11 billion. The cash-and-stock deal is valued at about $160 per share, with Aspen Technology holders receiving $87 per share in cash and 0.42 shares in the combined company for each share they now own. Aspen Technology had been up nearly 13% over the past two sessions since reports of talks between the two companies first surfaced.
Deere & Co. (DE) – Workers at the heavy equipment maker represented by the United Auto Workers Union rejected a tentative contract agreement. Union members say they want bigger raises and benefits than those proposed in the rejected six-year deal, based on strong profits for Deere.
Xpeng (XPEV) – The China-based electric vehicle maker said it has surpassed 100,000 cars produced, coming six years after the company launched. Shares rose 1.4% in the premarket, while Chinese rival Nio (NIO) gained 1.7%.
ConocoPhillips (COP) – The energy producer’s shares were downgraded to “neutral” from “buy” at Goldman Sachs, which cited valuation for the move. The stock has gained 88% this year and was up another 1.2% in the premarket.
Cleveland-Cliffs (CLF) – The steel and iron producer’s shares gained 2.1% in premarket trading after it announced the acquisition of iron scrap processor Ferrous Processing and Trading for about $775 million.

WATCH LIVEWATCH IN THE APP More

U.S.-listed start-up Xpeng said Monday it has produced 100,000 cars — six years since the company launched.
Its rival electric car start-up Nio said in April it reached that 100,000 vehicle production milestone.
For comparison, Elon Musk’s Tesla took 12 years from the company’s launch in 2003 to produce 100,000 vehicles, according to public filings.

Xpeng Motors launches the P5 sedan at an event in Guangzhou, China on April 14, 2021. The P5 is Xpeng’s third production model and features so-called Lidar technology.
Arjun Kharpal | CNBC

BEIJING — China’s electric car companies are racing to ramp up production, faster than Tesla did in its early days.
U.S.-listed start-up Xpeng said Monday it has produced 100,000 cars — it came six years after the company launched.

Rival electric car start-up Nio said in April it reached that 100,000 vehicle production milestone. The U.S.-listed company was founded in late Nov. 2014 under a different name, and became Nio in July 2017, about four years ago.
For comparison, Elon Musk’s Tesla took 12 years from its launch in 2003 to produce 100,000 vehicles, according to public filings. Tesla has faced numerous production delays, especially in its early years. The U.S.-based electric car maker has since increased its production capacity with new factories in Shanghai an Berlin.
To be clear, Tesla is still much larger in comparison.
The electric carmaker crossed the 1 millionth car mark more than a year ago in March 2020, Musk said in a tweet.

Production in the third quarter alone reached 238,000 vehicles. The company’s shares are up 11% year-to-date.

Xpeng’s U.S.-listed shares are down 12% so far this year. Nio’s stock is down more than 25% year-to-date.
Chinese electric battery and vehicle maker BYD said in May it produced 1 million passenger cars in the new energy vehicle category, which includes battery-only and hybrid-powered cars.
BYD’s Hong Kong-traded shares are up more than 25% so far this year. The company’s backers include American billionaire Warren Buffett’s Berkshire Hathaway.

Read more about electric vehicles from CNBC Pro

WATCH LIVEWATCH IN THE APP More

A “CREDIBILITY REVOLUTION” has transformed economics since the 1990s. Before that, theory ruled the roost and empirical work was a poor second cousin. “Hardly anyone takes data analysis seriously,” declared Edward Leamer of the University of California, Los Angeles, in a paper published in 1983. Yet within a decade, new and innovative work had altered the course of the profession, to such an extent that the lion’s share of notable new research today is empirical. For helping enable this transition David Card of the University of California at Berkeley shares this year’s economics Nobel prize, awarded on October 11th, with Joshua Angrist of the Massachusetts Institute of Technology and Guido Imbens of Stanford University.The messy real world can often defy economists’ attempts to establish causality. Working out how a rise in the minimum wage affects employment, for example, is complicated by the fact that some other influence (a chronically weak labour market, say) may have contributed to changes in both policy and employment. In other fields researchers establish causation by designing experiments where subjects are randomly assigned to different groups, only one of which receives a particular treatment, so that the effect of the treatment can be clearly seen. More economists are also using randomised controlled trials—indeed, the Nobel prize in 2019 rewarded such efforts. But many questions cannot be studied this way for reasons of politics, logistics or ethics.This year’s prizewinners surmounted such hurdles by using “natural experiments”, in which some quirk of history has an effect similar to an intentional trial. In a landmark paper published in 1994, Mr Card and Alan Krueger studied the impact of a minimum-wage increase in New Jersey by comparing the change in employment there with that in neighbouring Pennsylvania, where the wage floor was unchanged. Although theory predicted that a minimum-wage rise would be followed by a sharp drop in employment, such an effect, strikingly, did not seem to hold in practice. The paper inspired further empirical work and injected new energy into thinking about labour markets. Krueger, who died in 2019, would probably have shared the prize had he lived.The use of natural experiments quickly spread. Mr Card analysed another unique circumstance—Fidel Castro’s decision in 1980 to allow emigration out of Cuba—to examine the effects of immigration on local labour markets. About half the 125,000 Cubans who fled to America settled in Miami. By comparing the city’s experience with that in four other places that were similar in many respects, but which did not receive an influx of migrants, Mr Card found that neither the wages nor the employment of native workers suffered as a result of the migration.Mr Angrist, together with Krueger, used a similar technique to examine the impact of education on labour-market outcomes. Because students of a more scholastic disposition are likely both to spend more time in school and to earn more in work, what looks like a return to education could in fact reflect natural aptitude. In order to determine causality, the researchers made use of odd characteristics of America’s educational system. Although laws typically allowed students to drop out of school when they turned 16, all students born in the same year began school on the same date, regardless of their birthday. Those born in January, therefore, received more schooling, on average, than those born in December—and, the researchers found, also tended to earn more. Since the month of a student’s birth may be assumed to be random, they concluded that the added education caused the higher earnings.The study of schooling found that an extra year of education raised subsequent earnings by 9%. Such an effect seemed implausibly large to many economists. But that reflected a difference in definition, concluded Mr Angrist in work with Mr Imbens. The two scholars noted that the effect of a “treatment” would not be the same for everyone in a natural experiment. If the age at which students could drop out were raised from 16 to 17, for example, some would be forced to receive an additional year of schooling; others, who had always intended to stay in school for longer, would be unaffected.Together, the researchers developed statistical methods to make the conclusions from natural experiments more useful. Economists refer to the quirky factor used in natural experiments (like the birth month of a student) as an “instrument”. Messrs Angrist and Imbens explained the assumptions that need to hold in order for an instrument’s use to be valid: it must, for instance, only influence the outcome being studied (earnings, in this case) through its effect on the treatment (years of schooling), and not through other channels. By laying out these assumptions, the researchers allowed for more sophisticated analysis: the boost to earnings in the case above, for instance, only applies to students born early in the year and who are forced to stay in school for longer than they would have otherwise. Moreover, the methodology the researchers described improved the transparency of economists’ findings. The reader of a paper can judge for themselves how well an instrument satisfies the necessary assumptions, and discount the result accordingly.It’s only naturalThe credibility revolution, like any big upheaval, has had its excesses. Critics point to careless work and the mining of data in search of results that seem meaningful. Scholars are occasionally too eager to extrapolate findings from a particular natural experiment in ways that may not be justified, given the uniqueness of the circumstances. Yet the innovations developed by this year’s prizewinners unquestionably changed the field for good, illuminating questions once shrouded in darkness and forcing economists to push theory in directions that better describe real-world experience—a cause, indeed, for celebration. ■ More

Traders work the floor of the New York Stock Exchange.

Stock futures edged lower Sunday night after finishing near the flat line Friday after investors shook off concerns about a much weaker-than-expected labor market report released on Friday.
Dow Jones Industrial Average futures fell 71 points, or 0.21%. S&P 500 and Nasdaq 100 futures lost 0.28% and 0.33%, respectively.

In regular trading Friday the Dow slipped 8.69 points to 34,746.25. The S&P 500 lost 0.2% to 4,391.34. The Nasdaq Composite fell 0.5% to 14,579.54.
The markets responded to a disappointing jobs report that first sent the major averages lower, although investors’ concerns eased up after digesting the data and realizing things perhaps aren’t as bleak as the data initially suggested. The Labor Department reported Friday that the economy added just 194,000 jobs in September compared to the Dow Jones estimate of 500,000.
“The three-month moving average on nonfarm payrolls is a solid 550,000,” Joe LaVorgna, chief Americas economist at Natixis CIB, said in a note. “At this pace, employment will recoup its pandemic-related losses by next July. The recovery in the jobs market has progressed enough that the Fed will initiate tapering next month with targeted completion around June next year.”

Stock picks and investing trends from CNBC Pro:

Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, added that it would have taken an “extremely bad” jobs report to derail the Federal Reserve’s plan to begin removing stimulus and that although the report was “disappointing, without a doubt, we don’t believe it is bad enough to stop them.”
Plus, the unemployment rate itself fell to 4.8%, much lower than economists’ forecast.

This week, major banks will kick off their third-quarter earnings. JPMorgan Chase, Goldman Sachs, Bank of America, Morgan Stanley, Wells Fargo and Citigroup are scheduled to report beginning Wednesday. Delta Airlines and Walgreens Boots Alliance are also on deck.
Analysts estimate an earnings growth rate of 27.6% for the S&P 500 in the third quarter and a 15% price increase for the index over the next 12 months, according to FactSet. However, the financials sector is expected to see the smallest price increase since it had the smallest upside difference between the bottom-up target price and the closing price on October 6.
There is no economic data scheduled for Monday.

WATCH LIVEWATCH IN THE APP More

Investors may want to hit the buy button the next time technology stocks sell off.
Invesco’s Kristina Hooper contends the group is playing a crucial role in corporate America’s desire to boost productivity.

“Technology over the longer term is going to benefit from increased corporate spending,” the firm’s chief global market strategist told CNBC’s “Trading Nation” on Friday. “There’s a lot of excitement there.”
But she suggests investors will need some patience.
“We may not see it in the short run just because yields are going up,” added Hooper.
Wall Street’s affinity for tech is waning chiefly because the 10-year Treasury Note yield is ticking higher. The yield hit a high of 1.617% during Friday’s trading — its highest level since June 4. Growth stocks, which include tech, typically underperform in a rising rate environment because it puts pressure on profits.
Over the past four weeks, the tech-heavy Nasdaq is off more than 5% from its all-time high, hit on Sept. 7. It fell 74.48 points on Friday to close at 14,579.54. But the index eked out a positive weekly performance by gaining 0.09%.

Hooper acknowledges the near-term backdrop favors cyclicals over tech. However, she believes it’s temporary and expects areas from software to cybersecurity to see significant benefits.
“There’s also going to be more spending by individuals. There’s elevated household net worth,” she noted.
To take advantage of the bullish trend and lock in robust profits, Hooper recommends having a 3 to 5 year time horizon.
“This is a great medium and long-term play,” Hooper said.
Disclaimer More