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FirstFT: Global deal making is in sharp decline

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Global deal making suffered a record low During the second half of this year, as rising interest rates and economic uncertainty brought a period of frantic activity to an abrupt close.

Mergers and acquisitions $1.4 trillion was reported in the six months through December, according to data provider Refinitiv, down from the $2.2 trillion agreed in the first half of 2022. That was the biggest swing, from one six-month period to the next month, since records began. in 1980.

The total volume of deals struck globally in 2022 was down 38 percent from 2021, the largest year-on-year decline since 2001. It was, however, at high levels by historical standards, higher than the global totals seen in 2016 and 2017.

The slowdown was due to a sharp rise in interest rates, in the wake of rising inflation The war in UkraineDamages confidence in global markets and increases the cost of financing. Junk bond markets are almost frozen, complicating private equity firms’ ability to fund deals.

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Marc Sorrell, co-head of global mergers and acquisitions at Goldman Sachs, called 2022 a “tale of two halves” as a lack of cheap financing stalled the M&A market after the summer.

The number of mega deals worth more than $10 billion fell sharply during the year, with 25 deals signed in the first half and just 11 in the second. “M&A financing is there, but it’s a lot [higher] cost and is not available to all exporters,” Sorrell said.

Thank you for reading FirstFT Europe/Africa. Please note that the newsletter will take a break on January 2nd, and will return to normal on January 3rd. Meanwhile, we take this opportunity to wish you a Happy New Year! – Gary

1. US green subsidies may push European companies closer to China America’s massive green subsidy plan risks backfiring by making Beijing’s “initiatives and proposals” more interesting and Push European companies to move closer to ChinaYesterday warned Valdis Dombrovskis, European Trade Commissioner.

2. Wealth managers are having the worst years of their lives in a century Wealth managers are grappling with one of their worst years after soaring inflation and a The sale of stocks and bonds generated returns. “This year is one of the most significant wealth-destroying years in nearly 100 years,” said Renaud de Planta, who heads the 217-year-old Swiss Partnership Pictet.

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3. He urged Sunak to stick to the plan for quick reform of EU laws British Prime Minister Rishi Sunak is under pressure from right-wing Tory MPs to stick to the 2023 deadline Revision or repeal of EU era laws in the UK Statute Book, warning that Labor would take advantage of any delay in the next election.

4. Ukraine has been rocked by massive Russian missiles dozens of Russians Missiles were fired at Kyiv and other Ukrainian cities on Monday in what officials described as one of the biggest daily attacks in a months-long campaign targeting the country’s energy infrastructure.

How good are you keeping up with the news this year? Take the FirstFT Quiz 2022 to find out.

What else do we read?

Millennials are breaking the oldest rule in politics People tend to become more conservative as they get older. From the “Silent Generation,” who were born between 1928 and 1945, to the “Generation X,” who came between 1965 and 1980, this pattern has remained consistent—until now. While millennials, those born between 1981 and 1996, started out on the same path, something has changed. Surprising implications for UK Conservatives and US Republicans.

Graph shows that millennial voters in the UK and US do not follow the usual pattern of becoming more conservative as they age

An Irish drug lord is running out of options as the legal noose tightens This could be the year the network finally locks in on Daniel Kinahan, one of the best players in the world Most Wanted Drug Lords. Europol accuses Kinahan of creating a “supercartel” that controls a third of Europe’s cocaine trade, with Irish police estimating his empire to be worth a billion euros.

Pele passed away at the age of 82 after a stellar football career for Brazil Football fans around the world Mourning PeleThe man celebrated as the greatest player in the history of the sport died at the age of 82. Our eyes remember life One of the most famous and recognizable athletes of the twentieth century.

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War, Inflation, and Falling Markets: The Year in 11 Charts It was a year dominated by unexpected events with dramatic consequences and few precedents in recent history. Over the course of a tumultuous 12 months, visual and data journalism have given readers a deeper understanding of the news stories that have dominated 2022. Here are the highlights.

The most famous story of the weekend in the Financial Times: Inside Putin’s Circle – Russia’s Real Elite

As the year draws to a close, we’re sharing some of the most-read stories across different sections of the Financial Times. Today we highlight our most read story of the weekend.

While the West focuses on the oligarchy, a much smaller group holds real power in Moscow. These men are known in Russia as “siloviki” – “men of power”. Who are the siloviki, and what motivates them?

Take a break from the news

From historian Serhiy Bloki’s view of the war in Ukraine to a new view of the Cultural Revolution in China and the latest novels by Paul Auster and Salman Rushdie, Here is a preview of the books to read in 2023.

Thank you for reading and remembering that you can Add FirstFT to myFT. You can also choose to receive a FirstFT push notification every morning on the app. Send your recommendations and feedback to firstft@ft.com

asset Management – Discover the inside story on the movers and shakers behind a multi-billion dollar industry. Participation here

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next week Start each week by reviewing what’s on the agenda. Participation here


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Economic

We need to pay more attention to skewed economic signals

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The writer is chair of Queen’s College, Cambridge and advisor to Allianz and Gramercy

Inflation was the dominant economic and financial issue of 2022 for most countries around the world, especially for advanced economies that have a consequential impact on the global economy and markets.

The effects have been seen in declining living standards, increasing inequality, increasing borrowing costs, stock and bond market losses, and occasional financial mishaps (fortunately small and so far contained).

In this new year, recession, both actual and feared, has joined inflation in the driving seat of the global economy and is likely to replace it. It’s a development that makes the global economy and investment portfolios subject to a wide range of possible outcomes — something that a growing number of bond investors seem to be aware of more than their equity counterparts.

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International Monetary Fund iYou will likely review soon Her economic growth forecasts again, predicting that “a third of the world will be hit by recession this year”. What is particularly notable to me about these worsening global prospects is not only that the world’s three major economic regions – China, the European Union and the United States – are slowing down together, but also that this is happening for different reasons.

In China, a chaotic exit from the wrong Covid-19 policy is undermining demand and causing more supply disruptions. Such headwinds to domestic and global economic well-being will continue as long as China fails to improve the coverage and effectiveness of its vaccination efforts. The strength and sustainability of the subsequent recovery will also require that the country more vigorously renew a growth model that can no longer rely on greater globalization.

The European Union continues to deal with energy supply disruptions as the Russian invasion of Ukraine continues. Strengthening inventory management and reorientation of energy supplies is well advanced in many countries. However, it is not yet sufficient to lift immediate constraints on growth, let alone resolve long-term structural headwinds.

The United States has the least problematic view. The headwinds to growth are due to the Fed’s struggle to contain inflation after mischaracterizing rate increases as fleeting and then initially being too timid to adjust monetary policy.

The Fed’s shift to an aggressive front-load of interest rate hikes came too late to prevent the spread of inflation in the services sector and wages. As such, inflation is likely to remain stubborn at around 4 percent, be less sensitive to interest rate policies and expose the economy to greater risk for accidents from additional policy errors that undermine growth.

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The uncertainties facing each of these three economic areas suggest that analysts should be more careful in reassuring us that recessionary pressures will be “short and shallow”. They need to be open, if only to avoid repeating the mistake of prematurely dismissing inflation as transient.

This is especially important because these diverse drivers of recessionary risk make financial fragility more threatening and policy shifts more difficult, including potentially Japan. Get out of interest rate control Policy. The range of possible outcomes is extraordinarily large.

On the one hand, a better policy response, including improving the supply response and protecting the most vulnerable populations, can counteract the global economic slowdown and, in the case of the United States, avert a recession.

On the other hand, additional policy errors and market turmoil can lead to self-reinforcing vicious cycles with rising inflation and rising interest rates, weakening credit and compressed earnings, and stressing market performance.

Judging by market prices, more bond investors are better understanding this, including by refusing to follow the Fed’s interest rate guidance this year. Instead of a sustainable path to higher rates for 2023, they believe recessionary pressures will lead to cuts later this year. If true, government bonds would provide the yield and potential for badly missed portfolio risk mitigation in 2022.

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However, parts of the stock market is still weakly bearish pricing. Reconciling these different scenarios is more important than investors. Without better alignment within markets and with policy signals, the positive economic and financial outcomes we all desire will be no less likely. They will also be challenged by the risk of more unpleasant outcomes at a time of less economic and human resilience.

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Economic

Macro hedge funds end 2022 higher, investors say, while many others take big losses By Reuters

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© Reuters. FILE PHOTO: Traders work on the trading floor of the New York Stock Exchange (NYSE) in New York City, US, January 5, 2023. REUTERS/Andrew Kelly

By Svea Herbst Baylis

NEW YORK (Reuters) – Some hedge funds betting on macroeconomic trends have boasted of double and even triple-digit gains for 2022, while other high-profile companies that have long been on technology stocks have suffered heavy losses in volatile markets, investors said.

Rokos Capital, run by Chris Rokos and one of a handful of so-called global macro companies, gained 51% last year. Fund investors this week, who asked not to be identified, said Brevan Howard Asset Management, the company where Rokos once worked, posted a gain of 20.14% and Caxton Associates returned 16.73%.

Haider Capital Management’s Haider Jupiter Fund rose 193%, an investor said.

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Data from hedge fund research showed that many macro managers have avoided crumbling stock markets that have been rocked by rapid interest rate increases and geopolitical turmoil, including the war in Ukraine, to rank among the best performers in the hedge fund industry. The company’s macro index rose 14.2% while the general index of hedge funds fell 4.25%, its first loss since 2018.

Equity hedge funds, where the bulk of the industry’s roughly $3.7 trillion in assets are invested, fared worse with a loss of 10.4%, according to HFR data. And while that beat the broader stock market’s loss of 19.4%, some high-profile funds posted even bigger losses.

Tiger Global Management lost 56% while Whale Rock Capital Management ended the year with a 43% loss and Maverick Capital lost 23%. Coatue Management ended 2022 with a loss of 19%.

But not all companies that bet on technology stocks suffered. John Thaler JAT Capital finished the year with a 3.7% gain after fees after a 33% increase in 2021 and a 46% gain in 2020.

Sculptor Capital Management (NYSE::), where founder Dan Och is fighting the company’s current CEO in court over his salary increase, posted a 13% drop.

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David Einhorn’s Greenlight Capital, which bet that Elon Musk would be forced to buy Twitter, ended the year up 37% while Rick Sandler’s Eminence Capital rose 7%.

A number of so-called multi-manager companies where teams of portfolio managers bet on a variety of sectors also boast positive returns and have been able to deliver on their promise that hedge funds can deliver better returns in distressed markets.

Balyasny’s Atlas Fund (NYSE: Enhanced) gained 9.7%, while Point72 Asset Management gained 10%. Millennium Management gained 12% while Carlson Capital ended the year with a 7% gain.

Representatives for the companies either did not respond to requests for comment or declined to comment.

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German automakers point to easing supply chain problems

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Sales at BMW and Mercedes-Benz jumped in the final months of 2022 as the German premium auto brands indicated supply chain problems plaguing the industry were abating.

Automakers around the world have experienced parts shortages since the pandemic, especially semiconductors, leaving many of them with large fleets of incomplete vehicles that can’t be delivered to customers.

BMW and Mercedes each said their full-year vehicle deliveries fell last year by 4.8 percent and 1 percent, respectively, due to Suppliers Bottlenecks as well as lockdowns in China and the war in Ukraine.

But supply pressures eased in the last quarter of the year, as BMW recorded a 10.6 percent jump in sales, with 651,798 vehicles delivered, and Mercedes fulfilling 540,800 orders, up 17 percent from the same period in 2022.

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BMW He said the main effects of supply chain bottlenecks and continued lockdowns were felt in the first six months of the year, adding that “sales were steadily picking up in the second half.”

Mercedes boss Ula Kallenius told the Financial Times last week that the list of problems in the auto supply chain was declining, but added that long waits for cars would continue into 2023.

“One chip is enough to be vital [ . . .] Missing, and then you can’t finish the car, even if you have everything else.

Both brands recorded strong sales growth electric car. Mercedes, which last week announced a plan to build 10,000 charging docks, said EV shipments grew 124 percent to 117,800 last year compared with its predecessor.

Similarly, BMW reported strong growth in electric vehicle sales, with deliveries of fully electric vehicles doubling last year to 215,755.

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Analysts at Bank of America said that sales of electric vehicles, including hybrid cars, reached a historic peak last November, with 1.1 million units sold. They attributed this largely to the upcoming phase-out of customer subsidies in Germany.

Participate in Mercedes BMW and BMW prices held steady Tuesday morning as investors priced in an image of an improving showing.

Rolls-Royce, a subsidiary of BMW, announced Monday that sales have hit a 119-year record, driven by strong demand in the United States, its largest market.

The luxury brand has been largely unaffected by the semiconductor pressure, mainly because it makes relatively few compounds and therefore needs fewer chips.

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