Microsoft, TikTok, Big Tech, SPACs and Highlights From the Week

Microsoft talks a TikTok sale, Big Tech's big week, SPACs continue to boom and more highlights from the week.
Milan, Italy - November 18, 2004: Microsoft founder Bill Gates during the Futurshow convention. (By Paolo Bona)
Milan, Italy - November 18, 2004: Microsoft founder Bill Gates during the Futurshow convention. (By Paolo Bona)
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Hope it was a great week! Here are some tidbits to chew over the weekend.

Highlights from the Week

Swing the Gavel: It’s crazy to consider how much the TikTok situation has escalated in the last few weeks. The app has been under continual scrutiny from multiple countries over national security and data privacy concerns. President Trump had promised action against the ByteDance-owned app, but it was unclear what that would entail. On Friday, news broke that Trump plans to announce a decision to sign an executive order compelling ByteDance to divest its U.S. TikTok operations, according to Bloomberg. Directly after, Microsoft was confirmed to be in discussion to purchase the short-form video app. In a perfect world, ByteDance could watch TikTok grow and maximize its price. But a U.S.-based sale would be a win for the Chinese company as the alternative was being pushed out of the U.S. market. And for the U.S., it presumably quells any data concerns.

Update: “President Donald Trump said Friday night that he will ban the popular short-form video app TikTok from operating in the United States, rejecting a potential deal for Microsoft to buy the app from its Chinese-owned parent company,” CNN writes.

Showstopper: Big Tech stole headlines this week for two very different reasons. CEOs from four major tech companies – Amazon, Facebook, Apple and Alphabet — appeared for questioning in front of the House Antitrust Subcommittee Wednesday but reported healthy earnings a day later.

Year of the SPAC: This week reinforced that 2020 has quickly become the “year of the SPAC.” Blank-check companies are all the rage, and with 52 already in 2020, last year’s total of 59 will likely be eclipsed. Two significant bits this week were Rush Street Interactive agreeing to a $1.8 billion SPAC merger and the formation of RedBall Acquisition Corp., a collaboration between Oakland A’s executive Billy Beane and RedBird Capital’s Gerry Cardinale.

Institutional Research Roundup

The U.S. has been through a lot in its history – depressions, deflations, wars, restrictive gold standard regimes, market crashes and much more – but never has the country seen yields so low dating back to the Founding Fathers. Overnight 10-year government years have hit all-time, multi-century lows, dipping under their immediate pandemic risk-off level in March.

Even still, the S&P 500 is up over 18 percent at this point, and U.S. HY credit spreads are 150bp tighter. Amazon continues to trend up, with a price target of $4,000 (it closed around $3,200). The pace puts Amazon on course to be the second $2 trillion company in history, joining Aramco, unless another tech giant gets there first.

What to look for next week:

The U.S. Jobs Report for July

  • Payrolls are expected to grow for a third straight month, albeit at a slower rate than June.
  • Estimates include a 900,000 gain in nonfarm payrolls, below consensus estimates at 1.51 million.
  • It’s not quite last month’s blowout 4.8 million increase, but the unemployment rate is expected to fall from 11.1 percent to 10.5 percent.
  • This should provide a look at how the renewed spread of Covid-19 in the U.S. has affected the U.S. economy.

The final July PMI releases from around the world

  • The majority of manufacturing numbers come out Monday, before services and composite PMIs come out Wednesday.
  • The key here will be to see how differentiated PMIs are, given some governments around the world are easing restrictions and others need tightening.
  • From countries where there is a flash PMI reading, they generally show recovery has more momentum in Europe than the U.S. Many flash levels in Europe were the strongest in the last two years, while manufacturing and services PMIs in the U.S. missed expectations.

Central Banks

  • The monetary policy decision from the Bank of England and Governor Bailey’s ensuing press conference. The policy rate isn’t expected to change, but there is room for a “dovish surprise.” The focus may instead be on the central bank’s economic projections, the ongoing review of the effective lower bound and the path of the QE.
  • India and Brazil, the two countries with the highest Covid-19 caseloads outside of the U.S., are also releasing their policy decisions Wednesday and Thursday, respectively. They’re expected to lower interest rates as a result of the pandemic’s economic impact.

More earnings are coming this week with 133 reporting from the S&P 500 and another 95 from the STOXX 600.

  • Monday: HSBC, Heineken, Siemens, Berkshire Hathaway and Ferrari
  • Tuesday: Bayer, Diageo, Fidelity, BP, Walt Disney and Activision Blizzard
  • Wednesday: Deutsche Post, Allianz, Humana, Bayerische Motoren, Regeneron Pharmaceuticals, CVS Health, MetLife and Fiserv
  • Thursday: Merck, AXA, Siemens, Adidas, Bristol-Myers Squibb, Novo Nordisk, Becton Dickinson & Co, Zoetis, T-Mobile and Illumina
  • Friday: Standard Life Aberdeen, Norwegian Cruise Line, Royal Caribbean Cruises and Ventas

Everything Else

  • Monday: The final reading of Q1 Japan GDP, U.S. June construction spending and July’s auto sales.
  • Tuesday: Euro Area and Japan inflation data, Canada’s July manufacturing PMI and U.S. factory orders.
  • Wednesday: U.K. new car registrations and U.S. July ADP employment changes.
  • Thursday: Constructions PMIs from the U.K. and Germany, Industrial Production data out of Italy and the weekly U.S. initial jobless claims.
  • Friday: U.S. nonfarm payrolls and unemployment data, Japan spending and income data, trade balances for China, Germany and France, as well as Industrial Production data from France, German and Spain.
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