Daily Agenda: Markets Start Week on Cautious Note

After the long Easter weekend, thin market volume remains the order of the day; NTT buys Dell business services unit; Avon comes to terms with Barington.


Michael Nagle

As the last week of the quarter gets underway, the mood among investors in the U.S. remains cautious among investors as a rally off the lows of February for large-cap equities has yet to translate to seasonally normal trading volumes. According to analysis by the quantitative-research group at Jefferies, global mutual fund and exchange-traded fund investors stayed on the sidelines during the week ending on March 23 after three prior weeks of net-buying with a net outflow of $1.3 billion. Unsurprisingly, given recent dovish signals by Federal Reserve policymakers, U.S. money markets were the biggest loser over the period, with net outflows of more than $20 billion.

NTT to acquire Dell Systems. In a deal valued at more than $3 billion, Japan’s Nippon Telegraph & Telephone Corp. today announced that it had entered into an agreement to purchase Round Rock, Texas-based Dell’s business services division. The move provides NTT with a greater presence in enterprise markets in the U.S. and other non-Japanese markets while allowing Dell to streamline operations as it merges with Hopkinton, Massachusetts-based storage giant EMC Corp. Dell Systems traces its roots in part to Perot Services, a firm acquired by the computer maker in 2009.

Avon buries hatchet with activists — for now. New York–based cosmetics company Avon Products today announced that it has reached an agreement with shareholder Barington Capital Group that provides the activist investor with approval over the appointment of an independent board member at the cosmetics company. Although Barington will have a voice in the selection process, executives at Avon and its largest shareholder Cerberus Capital will initially vet candidates under the agreement. Barington was a leading voice among investors seeking to restructure Avon’s core business in recent quarters.

Profit rebound for China’s industrial operators. Yesterday China’s National Bureau of Statistics released data for the first two months of the year indicating that profits rebounded in the industrial sector, with an estimated aggregate $120 billion represented a nearly 5 percent gain over the same period in 2015. The improvement ends a period of seven consecutive contractions on a year-over-year basis. Refiners and food producers were among the subsectors that saw significant margin improvements. NBS analysts warn that returns for factory operators in China remain depressed.

U.S. activist targets Japanese nepotism. On Sunday, a letter was issued by Daniel Loeb, the founder of activist shareholder hedge fund firm Third Point Management, in which he raised concerns over the possibility that Japanese retail company Seven & I Holdings would elevate the son of the current CEO as a successor. Third Point has made a string of investment in Japanese equities in recent years. In his letter, Loeb argued that the next leader for the company should be selected purely on merit and identified the current president of Seven-Eleven Japan, the primary business unit of Seven & i, as a qualified candidate.