Daily Brief: It’s Starting To Feel Like The World’s Economies Are Following A Template

Daily Brief: It’s Starting To Feel Like The World’s Economies Are Following A Template

over 2 years ago3 mins

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Data out on Friday showed inflation in Europe surged to a 13-year-high last month, and we can probably just go ahead and copy/paste at this stage, right?

What does this mean?

Europe’s story is much the same as everyone else’s: the same supply chain disruptions have been forcing the region’s companies to pass higher costs onto customers, and the same energy shortages sent gas prices to record highs on Friday. That drove consumer prices up 3.4% in September versus the year before. And even if you strip out unstable costs like food and energy, prices still rose by 1.9% – the biggest jump in the metric since 2008. This isn’t going away either: energy prices alone are set to climb even higher after China said last week that it was willing to go to whatever lengths necessary to secure supplies for the winter.

Eurozone inflation
Source: The Wall Street Journal, Eurostat

Why should I care?

Zooming in: Do you even, like, need a salary?

Germany is in particularly deep schnitzel: inflation in Europe’s biggest economy hit its highest level for nearly three decades, with prices up 4.1% on the year before. So, uh, you’d think German workers might’ve given a little more thought to macroeconomic trends before going on strike to demand fair pay. Economists are worried that if wage increases spread across the region, it’ll push up prices even more and magnify the problem.

Europe jobs

The bigger picture: A shortage here, a shortage there.

Another day, another shortage – this time silicon, which has fallen victim to yet another production cut in China as it tries to curb power consumption. That’s caused the price of the second-most abundant material in the world to skyrocket 300% in the last two months. And given that silicon is used in everything from microchips to concrete, that could prove costly for companies and consumers alike.

Silicon

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Investment Banks Have Posted Record Fees This Year

Deal image

Investment banks have been raking in record fees this year, as they do whatever they can to find each and every company its perfect match.

What does this mean?

Investment banks make their money in all sorts of ways, but one of the biggest is by advising on mergers and acquisitions (M&A). And what a year for dealmaking it’s been, with a record-breaking $4.3 trillion worth of deals struck in the first nine months of the year – twice what it was this time last year. That’s not especially surprising: rock-bottom interest rates have made borrowing cheap and sky-high stock prices have made raising funds easy, all while firms scramble to find new ways to one-up the competition. It’s certainly paid off for investment banks: they’ve made 46% more in M&A fees than they did last year.

Fees

Why should I care?

For markets: Private equity isn’t so private after all.

Investment banks make big money from initial public offerings too, which might be why they’re currently sniffing around the private equity (PE) industry. PE firms – which buy businesses and spruce them up before selling them for profit – have been responsible for 30% of deals this year, and retail investors are keen to get a slice of the potential profits. Investment banks, then, have been trying to persuade those PE firms to debut on the stock market – with their help, of course.

The bigger picture: Five9 hangs up on Zoom.

Zoom’s been striking deals of its own: it’s been trying to expand its product offering now that no one’s relying on digital coffees any more. The pandemic favorite announced in July that it’d be buying cloud-based software provider Five9, and that it’d pay for it using shares rather than cash. But investors have sent its stock down 28% since the deal was first struck, and Five9 – whose payday suddenly looked a whole lot less lucrative – called the whole thing off late last week.

Zoom
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