Good morning and welcome back from the long weekend. As the new week begins, there are several key developments shaping the Americas’ financial landscape. Here are the top five things you need to know:
Credit card merger: Capital One Financial and Discover Financial Services have announced a landmark merger deal worth $35 billion. This agreement, the largest in the credit card industry this year, aims to create the largest credit card company by loan volume. The news has caused shares in Discover Financial to surge by approximately 18% in premarket trading, while Capital One’s stock has experienced a slight decline of about 4%. Notably, this merger will enable Capital One to issue its own credit cards, a significant shift from its previous reliance on Visa and Mastercard. The deal involves Capital One paying a premium of nearly 27% over Discover’s last closing price in an all-stock transaction.
Wall of cash: Despite previous speculation about the demise of money market funds, investors have poured a staggering $128 billion into these funds in the US since the beginning of 2024. This influx of cash suggests that the asset class still holds appeal for investors. Corporate treasurers are also holding onto cash reserves, and the market is absorbing a surplus of Treasury issues.
Seeking catalysts: S&P 500 futures indicate a lower opening on Wall Street, with tech stocks experiencing losses, as Nasdaq 100 contracts are down approximately 0.6%. Although US tech shares saw a decline last week, the S&P 500 index remains close to its record high reached in early February. Goldman Sachs strategists have raised their 2024 target for the S&P 500 to 5,200 points, citing increased profit estimates. Market sentiment is currently focused on waiting for upcoming catalysts, including Nvidia earnings and the release of the Fed’s January meeting minutes.
Latin American yields: A UK-based bond investor is increasing its investments in Latin American debt while avoiding exposure to China. Colchester Global Investors achieved remarkable success last year, outperforming 99% of its peers. The firm favors Latin American bonds offering higher inflation-adjusted yields and plans to add bonds from Brazil, Colombia, and Mexico to its portfolio. These countries were among the top performers in emerging market bonds last year. Additionally, venture investors in Latin America are sitting on nearly $4 billion, ready to make new investments.
