Investors choose hope when confronted with mixed picture on trade
Posted November 27, 2019 7:04 a.m. EST
CNN — Happy Wednesday. A version of this story first appeared in CNN Business' Before the Bell newsletter. Not a subscriber? You can sign up right here.
Amid signals of progress in trade talks, fixating on China's economic data is so passé. At least, that's what markets signaled Wednesday as investors brushed aside an indicator of ongoing trouble for the country's factories.
Industrial profits in China fell 9.9% in October compared to last year. But traders don't seem particularly worried.
The scene: Asian stocks were mixed, but US stock futures point higher after the S&P 500, Dow and Nasdaq finished Tuesday at fresh record highs. In Europe, the STOXX 600 index is at its highest level in more than four years. Britain's FTSE 250 index of mid-size companies has reached its highest level since July 2018.
What gives? Well, namely this Tuesday remark from US President Donald Trump on trade: "We're in the final throes of a very important deal."
"Markets are likely to dismiss the steep fall in China's October industrial profits as it is backward-looking," Morgan Stanley analysts told clients. "Meanwhile, news on US-China trade talks — which is a key determinant of the data trajectory going forward — continues to keep optimism in place."
But Han Tan, market analyst at FXTM, a currency broker, thinks the music can't keep playing indefinitely.
"The upward momentum for riskier assets is in danger of petering out, with investors perhaps needing clear signs of progress beyond mere snippets of positive spin regarding the potential US-China trade truce," he said. "Markets can only ignore the dismal economic data for so long."
Remember: World trade shrank 1.3% in September, according to the latest data from the CPB World Trade Monitor.
Private equity's Silver Lake makes a soccer play
US private equity giant Silver Lake is investing $500 million in the owner of Manchester City, a deal that values the soccer group at nearly $5 billion — and signals a clear move by the veteran tech investors into sports, my CNN Business colleague Charles Riley reports.
Under the agreement announced Wednesday, Silver Lake will buy just over 10% of City Football Group, which is controlled by United Arab Emirates royal Sheikh Mansour bin Zayed Al Nahyan. The soccer group also owns teams in the United States, Australia, China, Japan, Spain and Uruguay.
The context: The $4.8 billion valuation is huge for a sports franchise. Alibaba co-founder Joe Tsai took sole ownership of Brooklyn Nets earlier this year, a deal that reportedly valued the basketball team at $2.35 billion, a US record. Man City's listed cross town rival, Manchester United, has a market cap of $2.75 billion.
Who's Silver Lake? The firm has over $43 billion in assets under management, and is best known for its investments in tech companies including Alibaba, Tesla and Dell. But the firm has turned its attention to entertainment and live events in recent years, picking up stakes in The Madison Square Garden Company and mixed martial arts league UFC.
The investment in Man City vaults Silver Lake into a new league when it comes to sports. But it's not without risks. Human rights groups have attacked Man City's owners, describing the UAE royal family's purchase of the club as an attempt to "sportswash" its image and distract from the country's human rights record.
Supermarkets add boutique gyms and yoga classes
Supermarkets are trying to entice shoppers with more than just food, my CNN Business colleague Nathaniel Meyersohn reports.
Hy-Vee is teaming up with high-intensity training gym OrangeTheory to build studios attached to two of its stores. ShopRite opened a store with a fitness studio that offers yoga and Zumba classes for its shoppers with loyalty cards. And Whole Foods' flagship store in Austin, Texas, partners with barre, spinning and yoga studios in the area for classes on its rooftop plaza.
The thinking: As competition in the grocery industry stiffens, these stores hope to attract time-strapped shoppers by creating convenient experiences they can't replicate online, Nathaniel explains.
Why it's an opportunity: Grocery stores see an opening in the surging fitness industry. Over the past four years, boutique studio memberships in the United States have increased by 70%, according to IHRSA, an industry trade group. Those pilates classes aren't cheap — but they sure are popular.
US personal income and spending data for October arrives at 8:30 a.m. ET. The PCE Price Index, a measure of inflation, and durable goods orders for October post at the same time.
Coming tomorrow: US markets are closed for Thanksgiving, so we'll return to your inbox on Friday. In the meantime, I hope you have a wonderful holiday.