December 29, 2017 Market Outlook

Wall Street Hopes to End the Year on a High Note

The Dow Jones Industrial Average recorded its highest ever close on Thursday at 24,837.51. The blue-chip index had an impressive run in 2017 and is up 25.7%. That’s the Dow’s best annual performance since 2013.

Today, the U.S. stock futures are pointing up again as Wall Street is seeking to year to end on a high. Both the S&P 500 and the Nasdaq Composite are close to all-time highs too.

As compared to stock market indices around the world, many have outperformed the United States by a wide margin. Among the global winners is Argentina’s Mervel index which is up 77%, followed by the main Turkish index which has surged 46% in 2017.

U.S. Oil Price Hit the Highest on Last Trading Day

With an unexpected fall in American output and a fall in commercial crude inventories that stoked buying, U.S. oil prices hit their highest since mid-2015 on the final trading day of the year. U.S. West Texas Intermediate (WTI) crude futures traded at $60.21 a barrel (up 37 cents or plus 0.6% from their last close) after hitting a June 2015 high of $60.32 earlier in the day.

The international benchmark, Brent crude futures, was also up, rising 45 cents or 0.7% to $66.61 a barrel. Brent broke the $67 mark earlier in the week for the first time since May 2015. In international markets, Brent crude oil futures also rose, supported by ongoing supply cuts by top producers OPEC and Russia as well as strong demand from China.

Since the start of 2017, Brent and WTI have risen by 17% and 12%, respectively, although the price increases from mid-2017 are much stronger, at nearly 50%.

Global M & A Reach $3.54 Trillion

Global Mergers & Acquisitions in 2017 reached $3.54 trillion with unsolicited takeover approaches helping drive the deal-making activities. Although M & A in the U.S. dropped by 16% to $1.4 trillion year-on-year, it was offset on a global basis by a same 16% rise in M&A in Europe to $856 billion and an 11% rise in Asia-Pacific M&A to $912 billion.

The last three years was actually a favorable deal making environment due to the availability of cheap debt financing and high CEO confidence. The highest peak since 2008 was recorded in 2015 when M&A totaled $4.22 trillion. The data was provided by Thomson Reuters.

For deals that were completed, it was noted that 80% of them were initiated by the buyer approaching the seller as opposed to companies who decided to sell. The Goldman Sachs Group Inc. validated this interesting fact.

Consumer Confidence at Still High Despite December Dip

The spirits of Americans remained high overall during the holiday shopping season despite being less confident about the economy in December than they were last month. In a report released by the Conference Board last Wednesday,  U.S. consumer confidence index dipped to 122.1 this month from a revised 128.6 in November.

Conference Board economist Lynn Franco said that notwithstanding the dip, consumers’ expectations remain at historically strong levels, suggesting economic growth will continue well into 2018. The view of the business research group regarding today’s conditions rose to the highest level since June 2001. But their expectations were the lowest since November 2016.

Uber Sell Large Shares to SoftBank

Uber’s new Chief Dara Khosrowshahi scored a major victory after a consortium led by SoftBank Group Corp. has agreed to buy a large number of shares of the ride-services firm in a deal worth $48 billion. The price tender is a 30% discount to Uber Technologies Inc.’s most recent valuation of $68 billion.

Major changes are expected in the way the board will oversee the company. Uber is dealing with federal criminal probes, a high-stakes lawsuit and an overhaul of its workplace culture.

The rest of the SoftBank-led consortium includes Dragoneer Investment Group and will own approximately 17.5% of Uber. That stake contains a share purchase, through a tender offer, from earlier investors and employees at the $48 billion valuation, as well as a $1.25 billion investment of fresh funding at the $68 billion level.

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