Author: fortraders

Investors are keeping a close eye on European markets as they open Thursday, with German growth and consumer sentiment data in focus as well as the ongoing U.S. debt ceiling negotiations. Data released Wednesday showed that Germany’s business outlook deteriorated for the first time since October, with an expectations gauge by the Ifo institute slipping to 88.6 in May from 91.7 the previous month. Ratings agency Fitch flagged the possibility of a downgrade to the United States’ ‘AAA’ rating late Wednesday, saying while it still expected lawmakers to reach a deal before the early-June deadline, the ongoing uncertainty had brought up risks of a potential U.S. default.

Corporate earnings are scheduled from the likes of food giant Tate & Lyle, specialty chemicals company Johnson Matthey and water supply firm United Utilities, while the chipmaking sector is likely to be in focus after a robust outlook from Nvidia. Oil prices edged lower Thursday, retreating from three-week highs amid growing pressure from a strong dollar as uncertainty surrounding the U.S. debt ceiling negotiations mounted. Gold futures also fell 0.5% to $1,955.60/oz, while EUR/USD traded 0.2% lower at 1.0732.

Shares of major Asian Nvidia Corp (NASDAQ:NVDA) suppliers rose sharply on Thursday, tracking an overnight rally in the graphics card maker on strong first-quarter results and a positive outlook on chip demand. Japan’s Advantest Corp (TYO:6857) and Taiwan Semiconductor Manufacturing Corp (TW:2330) both jumped over 3%, while South Korea’s SK Hynix Inc (KS:000660) surged nearly 5%. Optimism over Nvidia spilled over into other Asian chipmaking stocks, helping the benchmark Nikkei 225 rise back towards 33-year highs.

Nvidia logged a better-than-expected first-quarter profit and posited a stronger-than-expected second-quarter revenue forecast, citing increased demand from AI development. The firm is seeing increased demand for its data center chips, which play a key role in powering the AI technology that saw a significant jump in popularity this year. Increasing demand from AI offers a respite to chipmakers, which were otherwise facing a slowdown in demand this year amid worsening global economic conditions.

Shareholders of Japan’s Seven & i Holdings Co Ltd have voted down all four of the board candidates nominated by ValueAct Capital, a U.S. investment firm. ValueAct, which owns 4.4% of the company, had called for President Ryuichi Isaka to be among those replaced with its candidates. However, Isaka and other candidates backed by the company were all elected at the annual shareholders meeting.

ValueAct had urged the company to undertake a strategic review and consider spinning off its 7-Eleven chain or selling the entire company. The company in response elected to close additional supermarket stores in Japan and fully exit its apparel business. ValueAct fund has built its image as a constructive activist following successful engagement at medical equipment maker Olympus Corp and chip materials maker JSR Corp.

The focus now shifts to details of the vote, which are expected to be available later on Thursday. A large portion – about 10% – of the company is still owned by the founding family and the presence of activist investors is small. As such, support of more than 30% for ValueAct candidates would be significant, investors say.

The U.S. dollar has long been the world’s dominant currency, but recent events have put its status under scrutiny. Rivalry with China, fallout from Russia’s war in Ukraine and wrangling in Washington over the U.S. debt ceiling have all contributed to speculation that non-U.S. allies would diversify away from dollars.

The dollar share of official FX reserves fell to a 20-year low of 58% in the fourth quarter of 2022, according to International Monetary Fund data. This shift was more pronounced when adjusted for exchange rate.

The almighty dollar has had a lock on commodity trading, allowing Washington to hinder market access for producer nations from Russia to Venezuela and Iran. But trade is shifting, with India purchasing Russian oil in UAE dirham and roubles, and China switching to the yuan to buy some $88 billion worth of Russian oil, coal and metals.

De-dollarisation would require a vast and complex network of exporters, importers, currency traders, debt issuers and lenders to independently decide to use other currencies. This is unlikely, as the dollar is on one side of almost 90% of global forex transactions, representing about $6.6 trillion in 2022.

The dollar’s status is underpinned by the $23 trillion U.S. Treasury market, viewed as a safe haven for money. International holdings of Treasuries are vast and there’s no credible alternative yet.

While there may not be a single dollar successor, mushrooming alternatives could create a multipolar world. Global central banks are looking at a wider variety of assets, including corporate debt, tangible assets such as real estate, and other currencies.

The U.S. dollar is still the world’s dominant currency, but its status is being challenged as nations look to diversify away from it.

Taiwan is expecting the delivery of 66 advanced F-16V fighter jets from the United States by 2026. The software development process for the jets has been delayed due to supply chain disruptions, but Defence Minister Chiu Kuo-cheng said on Thursday that they are working to address this with the United States. The jets have advanced avionics, weapons and radar systems to better face down the Chinese air force, including its J-20 stealth fighter. Taiwan has since last year complained of delays to U.S. weapons deliveries, but Congressman Michael McCaul said during a visit to Taipei last month that he was doing everything possible to speed up arms deliveries.

Private equity firms Boyu Capital, Hillhouse Capital and BPEA EQT are among bidders vying for Longreach Group’s Hong Kong-based medical device maker Quasar. Longreach is targeting a valuation of as much as $600 million or more for the entire company.

The bidding process, which is being run by Goldman Sachs, has entered the second round. Private equity firm General Atlantic and a number of strategic buyers are also in the fray.

Established in 1988 in Israel, Quasar is a global contract development and manufacturing organization (CDMO) of advanced medical devices and counts Johnson & Johnson and Medtronic PLC as clients. It has two manufacturing facilities in China and one in Thailand.

Longreach acquired a controlling stake in the company in 2019 for an undisclosed amount. Quasar’s earnings before interest, taxes, depreciation and amortization was about $30 million in 2022.

The sale process comes at a time where medical services companies are gaining favour, as investors bet on the healthcare sector’s ability to weather the challenging global economic environment. Final bids are due by end of June.

Most Asian stocks fell on Thursday as fears of a U.S. debt default persisted amid little progress towards raising the debt ceiling. Chipmaking stocks, however, outperformed tracking a robust outlook from Nvidia. Japan’s Nikkei 225 index rose 0.6%, supported chiefly by a 16% jump in semiconductor testing equipment maker Advantest Corp. Gains in other chipmaking stocks, such as wafer maker SUMCO Corp.