Inflation Slows in April

MARKET MOVERS

• U.S. inflation rate slows to 8.3%. The main reason the inflation rate slowed last month was because of what economists call “base effects”: A 0.6% CPI reading from April 2021 fell out of the 12-month average and was replaced by the 0.3% increase last month. Base effects alone could bring down the rate of inflation over the summer by several percentage points, economists say. Consumers got a temporary break but prices are rising again. Read more here.
  
  
• Natural gas prices in Europe jump after Ukraine blocks Russian flows. Gas TSO of Ukraine (GTSOU) on Tuesday announced force majeure – unforeseeable circumstances that prevent the fulfillment of a contract – the first declaration of its kind since the Russian invasion. From Wednesday, it will not accept through its Sokhranivka entry point, which delivers Russian gas to Europe.
  
  
• Liz Ann Sonders on Twitter says, “In an investment environment dominated by rising inflation & interest rates, it is no shock that defensive, value & dividend-based factors are dominating MTD & YTD leaderboards for LC U.S. equity factors; high beta & growth are notable laggards.”
  
  
• Turnkey homes are in demand. The trend is taking root in places like Hawaii and California and in many second-home resort communities. In Hawaii, fully furnished residences will sell within days at or above the asking price. Meanwhile, California is embracing the luxury “move in now” mentality that more buyers appear to be exploring. Turnkey homes offer instant enjoyment while avoiding construction costs and labor force issues.
  
  
• Foreclosure activity ticks down in April. A total of 30,674 U.S. properties filed for foreclosure default notices, scheduled auctions, or bank repossessions during April, according to a report from Attom Data Solutions. That figure is down 8% from March. Record levels of homeowner equity should provide financially distressed homeowners the opportunity to sell their homes prior to a foreclosure auction. Read more here.

• Homebuyers are putting down twice as much cash for a down payment. They are putting twice as much as they did just two years ago in their quest to have their offer accepted. The down payments grew from 10.9% of the purchase price of a buyer’s primary home in the first quarter of 2020 to 13.1% in the first quarter of 2022. The average down payment grows to 14.5% of sale prices when factoring in vacation homes and investment properties.
  

WHAT TO WATCH

• Swedish Match agrees to a $16 billion take over by Philip Morris. Under the proposal, investors in the Stockholm-based company will receive 106 Swedish Krona in cash for each share held. The price represents a 39% premium to the company’s share price of 76.50 Swedish Krona last Friday. Demand in the U.S. is growing for next-generation tobacco alternatives. Philip Morris has been expanding alternatives. Read more here.
  
  
• Prologis offers to buy Duke Realty in a nearly $24 billion deal. Prologis, the world’s largest owner of warehouse space controls a 1 billion square foot global network of warehouses and distribution centers, including facilities used by Amazon.com Inc., Home Depot Inc., and FedEx Corp. The deal with Duke Realty is a vote of confidence in the e-commerce business and industrial real estate.
  
  
• DigitalBridge to buy data-center firm Switch for $8.4 billion. DigitalBridge and Australian infrastructure manager IFM Investors Pty are offering $34.25 per share in cash for Las Vegas-based Switch, the companies said in a statement. Mergers and acquisitions of data-center companies have proliferated, in part due to the sector’s fragmented nature and relatively strong growth dynamics. Read more here.
  
  
• Morgan Stanley sees stocks lower from here one year out and recommends staying defensive. Morgan Stanley believes that volatility is not leaving Wall Street anytime soon amid economic and earnings uncertainties. Add in the elevated geopolitical uncertainty that has arisen over the past several months amid the Russia/Ukraine conflict and the table is set for volatility to persist. The firm remains overweight in health care, utilities, and real estate. Read more here.
  
  
• Apollo plans $1 billion financing for Musk’s Twitter bid. Apollo Global Management Inc. is in talks to lead preferred financing for Elon Musk’s proposed buyout of Twitter Inc., according to people with knowledge of the deal. The funding, arranged by Morgan Stanley, will exceed US$1 billion and may include Sixth Street Partners, among other firms.
  
  
• VW is looking to bring back the Scout brand as an EV. VW would invest roughly 100 million euros ($105.49 million) in the new brand, adding that it would potentially look for external funding through investors or an IPO to expand its production capabilities. By the year 2040, the company said almost 100% of its new vehicles in major markets should be zero-emission. Read more here.

• Housing inventory turnaround is on the horizon. The number of active listings recently posted the smallest annual decline since December 2019, a possible sign that a turnaround is taking root. The inventory of active listings fell 12.2% in April year over year. That marks an improvement over March, when active listings were down 18.9%, realtor.com®’s data shows.