Changing landscapes: from BREXIT to high yield via the sales.

Takeaways: Our world is changing rapidly and unpredictably. We’ve picked a few areas to highlight this week, starting with a startling BREXIT poll that could reflect a broader inward turn across Europe. The UK’s version of Black Friday will be a reflection of retail’s changing landscape – turned up to 11. Moves in high-yield markets are more subtle, but have fundamental undercurrents. The UK’s Autumn Statement will reshape the state.

The record level of deals we’ve seen in 2015 has been inspired by a delicate balance between rapid change and rising confidence. There has been enough challenge in the market to inspire M&A, but not so much that it topples investor confidence. Rising geopolitical uncertainties and growth risks could upset this delicate balance. Deals should only come to a halt in extremis – there is too much rationale to transact; but companies may need to work harder for financial and shareholder backing as we move into 2016 – especially for leveraged deals.  Continue reading

Tho’ much is taken, much abides

Recent terrorist attacks cast a long shadow across the world and our thoughts are with all those affected. It is impossible to sum up all we have lost and make instant assessments of how much will change – and we’re not going to attempt that here. This is obviously a fluid situation and there will be change and significant challenges ahead, but much will endure.   It seemed right to us in that vein that we stick to the topics we’d pencilled in for this week: the changing nature of work, construction challenges and the brightening outlook for India.

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Perplexing times – but we’re not calling time on M&A just yet

Takeaways: The 2015 rollercoaster continues. Markets raced back up in October for some good and some more speculative reasons. ‘Payroll Friday’ brought another twist and another lurch. Managing currency risk, raising capital and picking commodity prices will be tougher going in the rest of 2015.

These are perplexing times, but this shouldn’t stop smart deal making. Companies have shown their ability to see beyond the turmoil to the bigger picture and are still on track for record levels of M&A in 2015. News of this cycle’s death has been greatly exaggerated.

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Taking arms against a sea of troubles

Takeaways: Growth has slowed to something that looks solid, but unspectacular. The Fed has thrown another spanner in the works. Earnings estimates are falling. We know companies aren’t just resting on their laurels amidst the squall – capital and operational optimisation are top of the agenda and M&A activity is certainly maintaining its heady pace. But can private equity still teach companies a few tricks?

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From Brussels (and Shanghai) with liquidity

Takeaways: Surprise! China has lowered rates and Brussels has all-but promised more liquidity. So, that’s currency volatility back to the top of the agenda. Markets are treating these moves as good news – for now. In a few days, they could be read as an indication of the global economy’s dire straits – that’s just the kind of markets we’re in. Meanwhile, UK retail sales have thrown a spanner in the interest rate works – although we’d urge caution before leaping to conclusions. And bond liquidity is a hot topic again. Predictably, there are many camps – from the apocalyptic to the muddle through and the outcome is still tough to call. Either way, high-yield can’t take as much for granted any more – the trend is still for tighter markets here, even if they’re periodically loosened.

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Shifting narratives?

Takeaways: Despite – or perhaps because of – the disappointing US payroll numbers, markets have started Q4 in buoyant mood.  A confluence of events have contributed to the mild ‘melt-up’, including payroll inspired ‘looser for longer’ hopes, a ‘quiet’ China and suggestions of an oil price revival.

This calm augurs well for the IPO market, still subdued by the summer shudder. But, arguably there isn’t a new story here, just a more refined version of the narrative that investors finally adjusted to this summer – and which companies have had a handle on for some time. That is the mild-peril of challenged emerging markets and slower developed ones, which could develop into something riskier, but for now requires a considered, differentiated response. To use a hackneyed idiom: ‘Keep calm and nurture capital’!

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Disruption, deflation and default

Takeaways: Well that was quite a quarter. A litany of ‘worst since’ for many global benchmarks, M&A records, a will-they-won’t-they Fed saga  plus some spectacular share rollercoaster rides. We’re seeing rising confidence and investment in some areas, a maelstrom of concern in others. Perhaps the reason why we’re seeing such bifurcated views is because the traditional macro picture doesn’t tell the whole story. Time to get a little bit disruptive…

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