This turbulent environment triggered a cooling off in trading on the heels of a record year for mergers and acquisitions and initial public offerings.
Refinitiv data released Friday shows the number of global M&A deals plummeted 19% in the first quarter compared to 2021, falling from about 14,700 to nearly 12,000.
IPOs have also dried up, even though there is a long list of companies that have expressed interest in going public.
The global IPO market saw just 321 deals that raised $54.4 billion in the first quarter, according to consultancy EY. The amount of money raised fell 51% year over year. In the Americas, earnings fell 95% to just $2.4 billion.
The year had started strong. January produced the strongest opening month for global IPOs in 21 years for revenue, EY said. In early February, Chinese video app Kuaishou raised $5.3 billion through its Hong Kong debut.
“Increased volatility in the markets and uncertainties around geopolitical crises, oil prices, inflation and supply chain disruption could negatively impact companies’ earnings and growth trajectory,” I said. said Rachel Gerring, EY Americas IPO Leader. “As a result, we are seeing a lull as companies navigate these conditions.”
Gerring believes the suspension of deals is likely to be temporary and the mood could change if Wall Street becomes more confident about the future.
“When geopolitical crises stabilize, we expect market volatility to subside,” Gerring said. “As valuations improve, some of the largest and most anticipated deals will come to market. If these deals are listed and traded well, both issuers and investors will gain confidence and have a greater appetite for risk.”
“It is not ruled out” that this moment could come at the end of the second quarter, he added.
Meanwhile, mergers should get a boost from the slew of special purpose acquisition companies, or SPACs, running out of time to find takeover targets. These “blank check” firms, which raise money from investors and then seek out business, typically have two years to execute their strategy.
“Merger activity is expected to pick up as the year progresses as more than a quarter of the more than 600 active SPACs will expire,” Gerring said.
The next phase of the US jobs recovery has begun.
The US job market has come a long way since the worst days of the pandemic, when more than 20 million Americans were thrown out of work.
But the economy continues to add new roles at a rapid pace, easing fears that high inflation and a pullback in Federal Reserve support could trigger a recession.
The Latest: March employment figures arrive on Friday. Economists surveyed by Refinitiv expect to learn that 490,000 jobs were added last month, reports my CNN Business colleague Anneken Tappe.
If that prediction comes true, the nation will have recovered more than 90% of all jobs lost during the pandemic. It would also push the unemployment rate to 3.7%, a new pandemic-era low.
Monthly job earnings averaged more than half a million in the last 12 months, a staggering pace compared to the pre-coronavirus era. In 2019, the monthly average was 164,000 jobs.
The increases are expected to taper off as the recovery continues. Meanwhile, the data is welcome news in a sea of uncertainty.
It also gives the Federal Reserve more room to maneuver as it begins to raise interest rates.
“Currently, a very strong labor market is providing cover for the Fed to become more aggressive while writing off near-term growth risks as low,” Citi economists Veronica Clark and Andrew Hollenhorst said in a note to clients this week. .
Corporate profits last year were the highest on record
In 2021, inflation spiked and companies scrambled to get the parts and workers they needed to meet surging post-lockdown demand.
But US companies still made more money than ever, according to data released this week.
But investors are nervous that the companies’ winning streak could fizzle as energy prices soar, leading to higher costs and encouraging consumers to be more conservative.
UBS Global Wealth Management said it now expects “only a modest gain for shares” this year, citing earnings uncertainty as a key factor. Mark Haefele, the unit’s chief investment officer, said he now expects global earnings growth of 8% this year instead of 10%.
In 2021, S&P 500 companies reported earnings growth of nearly 48%, according to FactSet.
Until next time
The US jobs report for March arrives at 8:30 am ET.
Next week: Russia has a big bond payment due. Will Moscow fulfill its obligations in the face of international pressure?