Ares, Blue Owl Finance Massive Acquisition, Jobs Report Dazzles, Tesla Deliveries Disappoint, and Commodities Surge
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By: Alex Nahigian , Ryen Fitzwater , & Cameron Morgan
In this week's rundown, we analyze major events from this past week, including taking a deeper look into one of the largest private credit financings on record, an impressive March jobs report, Tesla's additional struggles, and record-high commodity prices.
What You Should Know Going Into Your Week
*indicates topic will be discussed further
Private Lenders Finance Huge Pharma Deal
Private credit continues to cement its case as the hottest asset class right now. On Friday, Ares Management Corp. and Blue Owl Capital Inc. led a private lending initiative providing $4.8 billion of debt financing for the acquisition of pharmaceuticals manufacturer Catalent Inc. in one of the biggest private credit financings on record.
The deal will help fund the $16.5 billion acquisition of Catalent by Novo Holdings, the controlling shareholder of weight loss drugmaker Novo Nordisk A/S. The debt package consists of a $4.2 billion term loan and a $575 million revolving line. The financing is the largest of this year and is a huge win for Ares and Blue Owl as they have faced increased competition from banks financing large acquisitions and buyouts in recent months.
Apollo, Blackstone, Oaktree, HPS Investment Partners, Golub Capital, Antares, and Goldman Sachs also financed the package but representatives declined to comment on the deal. The acquisition will help Novo’s mission to meet surging demand for their weight loss drug and compete with Eli Lilly’s obesity shot. The healthcare industry has been catching a lot of attention recently as more state-of-the-art solutions are being developed and deployed to help numerous people worldwide.?
Payrolls Added 303,000 Jobs, Unemployment Falls
Nonfarm payrolls increased by 303,000 in March, crushing the Dow Jones expectations for a rise of 200,000 which is another indication of a strong and resilient labor market. The unemployment rate edged lower to 3.8%, as expected, even though the labor force participation rate moved higher to 62.7%, a gain of 0.2 percentage points from February.?
Per CNBC, growth came from many of the usual sectors that have powered gains in recent months. Health care led with 72,000, followed by government (71,000), leisure and hospitality (49,000), and construction (39,000). Retail trade contributed 18,000, while the “other services” category added 16,000.
The positive news is that February’s jobs report was only revised by 5,000 from 275,000 to 270,000, which is a very encouraging sign that jobs created are actually matching the data following hefty monthly revisions. January’s whopping 353,000 increase in nonfarm payrolls was revised down by over 35% to 229,000, and a similar case in December when we saw the 330,000 jobs added trimmed to 290,000, which was 167,000 fewer jobs than we thought between the two months. The February revision boosts confidence that March’s numbers may stick, which is a very optimistic sign.
Investors have been keeping a close eye on the employment data, particularly as the Federal Reserve weighs its next moves on monetary policy. Markets have also accounted for the robust labor market, as stocks have tumbled this week amid concerns that a strong labor market and resilient economy could keep the central bank on hold for longer than expected.
Tesla Deliveries Decline 8.5% From Last Year
Tesla reported first-quarter vehicle deliveries of 368,810, a drop of 8.5% from the same quarter last year and 88,190 less than expected. This marks their first year-over-year decline in deliveries since the global pandemic hit in 2020. Shares have now dropped by about 29% this quarter, per CNBC.
The decline comes as a result of numerous challenges Tesla has faced in the first quarter of the fiscal year. Tesla’s component supplier temporarily suspended production after Houthi militias attacked shippers in the Red Sea. Tesla has also faced heavy competition from domestic EV makers, causing them to reduce production of their Model 3 and Model Y.
In addition, Elon Musk has been at the center of attention as recently he has been active in elucidating his own thoughts; sharing, liking, and promoting political accounts and content on his platform X which has yielded mixed results among investors. Despite the challenges and drops, Musk is optimistic customers and shareholders will stay loyal to the brand and believes they will continue to follow his lead.?
Gold, Crude Oil at Record Prices
Gold has surged past the significant milestone of $2,300, prompting a wave of optimism among analysts who foresee a bullish trajectory ahead. Renowned Chief Investment Officer, Juerg Kiener, has gone so far as to predict a potential ascent to $2,600 within the next year. Kiener attributes this momentum to a multitude of factors: geopolitical dynamics, government monetary policies, robust demand in Asia, stagnated expectations for rate cuts, and near-record buying by central banks.
The alignment of these factors, along with bullish forecasts from industry experts like Kiener, has propelled the recent surge in gold prices. Among these factors, heightened geopolitical tensions and concerns over government monetary policies have propelled investors towards gold, a traditional safe-haven asset. Uncertainties surrounding global conflicts and political instability, along with fears of inflation and currency devaluation due to extensive money-printing initiatives as well as robust demand in Asia, continue to support its price. With expectations for rate cuts stagnated recently and near-record buying by central banks, investors are further enticed to enter the gold market.
Furthermore, crude oil has also been on the rise, surging beyond the $85 threshold and reaching its highest level since October. The main catalyst: escalating geopolitical tensions. Brent futures, which have predominantly hovered within a narrow range of $75 to $85 per barrel since the beginning of the year, have seen an upward shift due to these tensions and robust economic data, appearing to have prompted a move higher.
PVM's Varga has also cautioned that the prospect of Iranian intervention in the Israel-Hamas conflict could escalate into a broader regional confrontation, potentially affecting oil supply across the region. With tensions in the Middle East and Russian-Ukrainian war continuing to rise, many analysts forecast a rise above $100 a barrel in the near term.
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Weathering Wall Street references CNBC and Bloomberg for research.