By Swissquote Analysts
Freight Transport Groups in North America Face $25bn Merger
Topic of the day
A major merger in rail transport is about to take place on the North American continent: The railway company Canadian Pacific Railway Ltd. is buying the railway holding company Kansas City Southern, creating for the first time a freight rail network linking Mexico, the USA and Canada. The transaction is valued at around 25 billion US dollars. The merger reflects a long-term perspective on an interconnected North American economy. The three countries are recovering at different rates from the impact of the Covid 19 pandemic on supply chains and global trade. Rail traffic, which plummeted last year, has rebounded, even as backups at California ports have delayed imports from Asia and brought some US factories to a halt. The two companies announced on Sunday that their boards had agreed on a deal that values Kansas City at $275 per share. Kansas City investors will receive 0.489 shares of Canadian Pacific stock and $90 in cash for each Kansas City common share. Kansas City is the smallest of the major rail freight operators in the US, but plays a key role in trade between the US and Mexico: its route network runs mainly along the Mexican border through Texas to Kansas City.
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The Swiss stock market closed with slight discounts on Friday. The large decline on the futures exchanges caused volatility in part. Renewed increases in bond yields in the USA put pressure on share prices. It was said in trading that it was only a question of time before rising market interest rates would trigger a correction on the stock markets as a whole. The market was also somewhat burdened by new lockdowns in France and parts of Germany. The fact that Astrazeneca's vaccine could now be used again in Europe at least provided some support. The SMI lost 0.1 per cent to 10,967 points. Among the 20 SMI stocks, there were 16 price losers and four price winners. 127.77 (previously: 55.32) million shares were traded. The defensive heavyweights Nestle (+1.2%), Roche (+0.6%) and Novartis (+0.4%) rose noticeably and were more a sign of a cautious attitude among investors. ABB rose 0.9 per cent. Shareholder Capital Group had added to the technology group. Credit Suisse (-1.3%) and UBS (-1.7%) suffered from profit-taking after the previous day's gains.Among the second-line stocks, Interroll rose 4.3 per cent. The logistics company posted record profits and cash flow and also surprised positively with its dividend.
European stock markets fell on Friday, weighed down by weak oil prices and renewed fears about the health crisis. The Stoxx Europe 600 index fell 0.8% to 423.4 points. In Paris, the CAC 40 and the SBF 120 lost 1.1% and 1%, respectively. In Frankfurt, the DAX 30 was down 0.9%, while London's FTSE 100 gave up 1.1%. Airlines and aircraft equipment manufacturers were among the day's biggest decliners on continued uncertainty over the reopening of borders in Europe. Airbus dropped 3.7%, Safran 3.5%, Britain's Rolls-Royce 4.9% and Germany's MTU Engines Aero 4.6%. The automotive sector also fell due to production disruptions caused by the global shortage of semiconductors. Automotive suppliers Valeo and Plastic Omnium lost 3.8% and 3.6%, respectively, while Renault and Stellantis dropped 3.2% and 3.6%. Alstom (-0.8%) announced on Thursday evening a contract worth around €650 million to supply 200 multi-level suburban train cars to Chicago-based Metra. In London, the British government announced that it had sold 590.7 million NatWest shares to the banking group, whose shares rose by 0.7%.
The New York Stock Exchange closed mostly in the red on Friday, the day after a sharp decline, as investors remained concerned about rising rates in the bond market. The Dow Jones Industrial Average (DJIA) gave up 0.7 percent to 32,627.97 points, held back by a decline in Visa shares, and the broader S&P 500 index fell less than 0.1 percent to 3,913.10 points. The Nasdaq Composite was up 0.8% at 13,215.24 points. The DJIA lost 0.5% this week, while the S&P 500 and Nasdaq are down 0.8% over the last five sessions. Banking stocks lost ground in the wake of the Fed's announcement. Citigroup and Goldman Sachs lost 1.1%. JPMorgan (-1.6%) also reached an agreement to acquire a 10% stake in the wealth management division of Chinese bank China Merchants Bank for 2.67 billion yuan, or about $410 million. Visa (-6.2%) is under investigation by the US Department of Justice (DoJ) to determine whether it sought to reduce competition in the payment card market, people close to the matter told The Wall Street Journal. FedEx gained 6.1%. Nike lost 4%.
The East Asian stock markets show a mixed trend at the beginning of the week. The Nikkei-225 is down sharply by 1.8 per cent. On the other hand, the Chinese stock markets are on the rise, with the Shanghai Composite climbing 1.0 per cent after being under heavy pressure on Friday. The Hang Seng Index in Hong Kong gives back interim slight gains and is down 0.1 per cent. The Kospi in Seoul loses 0.2 per cent. Shares from the aviation and chemical sectors are under particular pressure.
After its sharp rise in recent weeks, the 10-year Treasury bond rate gained nearly 2 basis points again on Friday, to 1.727%. On Friday, the Fed announced that it would not extend beyond 31 March the permission for banks to exclude US Treasury bonds from the calculation of their supplementary leverage ratio (SLR).
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