Earnings drive markets | Calamatta Cuschieri

Markets perform off the line, Nestle teams up with Starbucks & Comcast sneaks in on Fox-Disney deal

Swiss-based Nestle, will pay Starbucks Corp $7.15 billion in cash for exclusive rights to sell the U.S. chain’s packaged coffees and teas around the world
Swiss-based Nestle, will pay Starbucks Corp $7.15 billion in cash for exclusive rights to sell the U.S. chain’s packaged coffees and teas around the world

U.S. stock benchmarks finished higher on Monday, but well off the peak of the day, as energy shares pulled back following a late-afternoon tweet from President Donald Trump indicated that a decision was imminent on whether the U.S. would decertify a 2015 Iran nuclear pact. The Dow Jones Industrial Average finished 94.81 points, or 0.4%, higher at 24,357.32. The S&P 500 index added 9.21 points to 2,672.63, or 0.4% with the Nasdaq Composite Index rising 55.60 points, or 0.8%, to 7,265.21.

European markets meanwhile also closed higher, boosted by a round of well-received earnings reports and an advance for heavyweight Nestlé after the consumer goods giant announced a deal to sell Starbucks products world-wide. The Stoxx Europe 600 rose 0.6% to end at 389.50 while the German DAX 30 index added 1% to 12,948.14, with France’s CAC 40 index rising 0.3% to 5,531.42. Trading was light across the board with UK markets closed for a bank holiday.

Nestle-Starbucks alliance

Swiss-based Nestle, the world’s largest food and beverage company, will pay Starbucks Corp $7.15 billion in cash for exclusive rights to sell the U.S. chain’s packaged coffees and teas around the world, tying a premium brand to Nestle’s global distribution muscle. The agreement also includes Starbucks-branded capsules for Nestle’s Nespresso and Dolce Gusto single-serve brewers, which should help Nestle curb sales of alternatives from other providers.

The alliance, which amounts to a licensing arrangement, frees Seattle-based Starbucks to focus on improving its mainstay U.S. cafe business, where traffic growth has stalled amid competition from fast-food chains and upscale coffee houses, while rapidly adding shops in China. Nestle CEO Mark Schneider has made coffee a strategic priority as he tries to convince uneasy shareholders, including activist Third Point, that he can boost the sprawling group’s performance. Nestle expects the alliance to add to its earnings by 2019. It did not alter share buyback plans.

Comcast-Fox bid

U.S. cable operator Comcast Corp is asking investment banks to increase a bridge financing facility by as much as $60 billion so it can make an all-cash offer for the media assets that Twenty-First Century Fox Inc has agreed to sell to Walt Disney Co for $52 billion, three people familiar with the matter said on Monday.

The exact value of Comcast’s new bid for the Fox assets is not yet clear, although the $60 billion in new financing indicates it is seeking significant firepower to outbid Disney. Comcast already has a $30 billion bridge loan to finance its Sky offer. Fox shares rose 5.13 percent to $39.99 on the news in after-hours trading in New York on Monday. Comcast shares were down 1.5 percent to $31.90, while Disney shares were down 0.5 percent to $102.00.

Disclaimer:

This article was issued by Peter Petrov, Junior Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

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