Markets gauge impact of potential Israel-Iran escalation

Good morning. Here's what happened overnight and what you need to know today.

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1.

Middle East conflict: Financial markets across the globe are evaluating the impact that a potential retaliation from Israel on Iran could bear, as the Israeli War Cabinet debates its response to the weekend attack. Iran launched an unprecedented missile and drone attack on Israel on Saturday night, launching a barrage of over 300 projectiles into the country. Israel has said 99% of the projectiles were intercepted before landing on its territory. As the Israeli conflict widens to neighbouring countries in the region, observers are suggesting that oil could pass USD100 ($154.13) per barrel, while a flight to treasuries and safe haven assets could be in the pipeline. Should Israel pursue a counter-strike, setting off a potential counter-strike cycle, crude oil could become a gauge to guide investors on their next moves. While Iran stated that “the matter can be deemed concluded” after the strikes, and the Biden administration has reportedly told Israel that the US would not support a counterattack on Iran, ongoing discussions from the Israeli War Cabinet suggest that an armed response is still on the table. (Bloomberg)(CNN)

2.

Bondi Junction attack: Six people were killed in a stabbing spree at Bondi Junction’s Westfield shopping centre in Sydney on Saturday afternoon, when a man entered the Eastern Suburbs mall and began chasing down shoppers with a 30cm knife. The victims include: Ashlee Good, 38, Dawn Singleton, 25, Jade Young, 47, Faraz Ahmed Tahir, 30, Pikria Darchia, 55, and another woman who is still unnamed. The attacker has been identified as Joel Cauchi, who was known to police and reportedly has a history of mental illness. Police have stated that there is no evidence that the attack was terrorism-related, and that they are considering whether the motive for the attack was gender-based, given the disproportionate number of women killed. Prime Minister Anthony Albanese condemned the "horrific act of violence indiscriminately targeting innocent people” and commended the officer who confronted and shot the attacker. (ABC)

3.

PE IPO: Private equity giant CVC is preparing to launch its planned share sale in Amsterdam on Monday with a valuation target of USD16 billion, according to unnamed sources cited by the Wall Street Journal. CVC manages around USD198 billion in investments across private equity, credit and infrastructure. In 2021, alternative asset manager Blue Owl Capital bought a minority stake in CVC, valuing the company at USD15 billion. CVC previously attempted to IPO in November last year at a reported USD12 billion valuation, however, pulled its listing plans as conflict in the Middle East began to erupt. The Journal reports that provided the offering goes ahead as planned, CVC is seeking to raise more than €1 billion by selling stock from existing shareholders and issuing new shares. (Wall Street Journal)

4.

Steel negotiations: Shareholders of United States Steel have approved Nippon Steel’s USD14.1 billion takeover offer, during a highly anticipated vote held on Friday. US Steel investors are set to receive USD55 in cash per share in the proposed offer, which is more than double the company’s stock price in August 2023 when the company confirmed it was considering offers. US Steel’s press release on the vote states that over 98% of the stockholders voted to approve the proposed merger. Antitrust regulators are set to scrutinise the proposed deal, with the Department of Justice having already kicked off its own competition investigation. The Committee on Foreign Investment in the US has also launched a national security review into the merger. During a press conference with Japanese Prime Minister Fumio Kishida last week, President Joe Biden emphasised his support for US workers opposed to Nippon Steel’s bid to acquire US Steel Corp, but did not explicitly call for continued domestic ownership. (US Steel press release)(Capital Brief)

5.

Flights cancelled: German air carrier Lufthansa has suspended flights to and from Tel Aviv in Israel, Amman in Jordan, and Erbil in Iraqi Kurdistan until Tuesday, following Iran’s attacks on Israel over the weekend. The suspension extends on Lufthansa’s decision last week to halt flights to and from Beirut and Tehran until Thursday. The group said in a statement that it was continuously evaluating the security situation in the Middle East and in close contact with authorities, and that it would not use Iranian airspace during this time. While the decision currently only impacts Lufthansa flights, the carrier group also owns Swiss, Austrian Airlines, Brussels Airlines and Eurowings. (Reuters)

6.

India’s ‘IT’ listing: US investment firm Carlyle has reportedly selected JP Morgan and Kotak Mahindra Bank to arrange the IPO of Hexaware tech in Mumbai later this year. Carlyle plans to launch the Indian IT company’s IPO as early as Q4 this year, according to unnamed sources cited by Bloomberg. Additional banks are likely to be included in the USD1 billion offering which could value Hexaware at as much as USD6 billion. As the discussions at still at an early stage Carlyle may yet decide against the share sale, and both the size of the IPO and value of the company could change. Hexaware, which provides IT and business process outsourcing, cloud, data and AI services, delisted from the Indian bourses in late 2020. Less than one year later, Carlyle bought a 62% stake in the company from Baring Private Equity Asia for almost USD3 billion. Hexaware’s USD1 billion offering would be the country’s largest since Life Insurance Corp of India’s 2022 offering. (Bloomberg)

7.

Data sale: Salesforce is in advanced talks to acquire data-management software firm Informatica, according to sources cited by the Wall Street Journal. The price being discussed for the California-based Informatica is below its current share price of USD38.48. The price could prove to be a negotiation sticking point given Informatica’s now USD11 billion market capitalisation, as a result of traders pushing shares up 43% on expectations of an impending deal. The acquisition would be the largest made by Salesforce since its purchase of work messenger application Slack in 2021 for USD28 billion. Private equity firm Permira, and the Canadian Pension Plan Investment Board hold a controlling stake of over 75% in Informatica. (The Wall Street Journal)

8.

War on many fronts: Apple has denied violating a court order governing its App Store, and has urged a US federal judge to reject Epic Games’ request that Apple be held in contempt. The arguments were made in a California court filing on Friday by Apple, who criticised what it called an attempt by Epic to make Apple’s “tools and technologies available to developers for free,” and that Epic wants the court to “micromanage” Apple’s business operations in order to increase Epic’s bottom line. While Epic lost its 2020 lawsuit accusing Apple of violating antitrust law around its App Store rules, the California court ordered Apple to give developers greater freedom to guide app users to alternative payment methods for digital goods. Apple’s January appeal of the decision was rejected. A similar legal dispute is currently underway downunder, with the Fortnite maker suing Apple and Google for allegedly engaging in restrictive trading practices and misusing their market power via their respective app stores. (Reuters)(Capital Brief)

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