Daily Brief: The Deals Just Keep Coming, And A $3.8 Trillion Cash Pile Might Have Something To Do With It

Daily Brief: The Deals Just Keep Coming, And A $3.8 Trillion Cash Pile Might Have Something To Do With It

over 2 years ago3 mins

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Deutsche Telekom agreed to increase its stake in T-Mobile US on Tuesday, presumably after the German telecoms firm waited through two hours of gratingly low-quality Muzak.

What does this mean?

Deutsche Telekom agreed to buy a 5% stake in T-Mobile US from Japanese tech conglomerate SoftBank, which will bring its total ownership to almost 50%. In return, SoftBank’s set to receive shares in Deutsche that’ll give it 4.5% ownership of the German operator.

Deutsche hasn’t ruled out increasing its stake to more than 50% either, which would give the company control over what T-Mobile US can and can’t do. That might be the next stage in Deutsche’s master plan of conquering the States, which it certainly seems serious about doing: the company just agreed to sell its Dutch business to keep funding its adventures in America.

Why should I care?

For markets: Mixed fortunes.

Investors were pretty lukewarm about Deutsche’s announcement, probably because they’re waiting to see how its dalliance with the US market actually pans out. But they were happy with SoftBank’s side of the deal, and they sent the conglomerate’s shares up 10% – the biggest jump since last December. SoftBank has a habit of buying back its own shares and pushing up their price, after all, and investors might be expecting it to use the cash from the sale to do exactly that.

Softbank stock
Softbank stock | CNBC

Zooming out: We’re gonna need a bigger mattress.

Deutsche’s agreement isn’t unique: there’s been a boom in deals of all kinds in the last year, which has had a lot to do with rock-bottom interest rates and record-high stock prices. And it doesn’t look like that boom’s about to fizzle out in Europe anytime soon: data out on Tuesday showed that the region’s companies are sitting on $3.8 trillion in cash – their biggest stash on record and a one that’s just begging to be spent on mergers and acquisitions.

Cash Kings
Source: Bloomberg

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Chinese Exports Just Hit A New Record High

China image

What’s Going On Here?

Chinese exports hit an all-time high in August, making all the highs and lows of the last couple of seasons totally worth it.

What does this mean?

A couple of things might be behind this surge in export demand, which grew 26% last month versus the same time in 2020. For one thing, the US and EU have had to bring forward their orders for the Christmas period to make sure they get everything in time, what with all the recent holdups in the shipping industry (we haven’t forgotten, Ever Given). And for another, China’s approach to controlling the virus has mostly kept its businesses operating, putting them in prime position to nab orders from countries that haven’t been doing so well. Heck, even outbreak-driven disruptions at China’s second-biggest port last month couldn’t stop the People’s Republic from delivering…

China exports
Source: Bloomberg

Why should I care?

For markets: China, your nerves are showing.

The strength of China’s exports has given its slowing economy some much-needed relief, but it mightn’t last. Chinese officials have warned that the rest of the year is seriously uncertain, with rival countries likely to steal back business and the coronavirus likely to return for a new wave. China might be hoping, then, that the financial support it’s just announced for small businesses – including lower-cost borrowing and subsidies for firms hit hardest by the pandemic – will be enough to get things back on track.

The bigger picture: A strange bedfellow.

It’s not just China at risk of an economic slowdown, with Goldman Sachs having lowered its US growth forecast on Monday. As for why the investment bank is concerned, take your pick: the relentless spread of the Delta variant, the chances that US government support will dry up, or the drop-off in the services sector’s recovery. Chin up, though: Goldman is expecting the country’s growth to pick back up in 2022.

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