Before the bell: Chance of a trade war is fading

Investors will likely react positively today as Trump softens his stance in the trade dispute with China. All eyes are now on the start of earnings season tomorrow.

After China threatened to impose export controls on rare minerals, Trump responded over the weekend with a threat of 100% tariffs on Chinese exports to the U.S. The result: the S&P 500 (-2.7%) and the Nasdaq (-3.6%) both tumbled on Friday amid renewed geopolitical fears. The Euro Stoxx 50 also lost 1.7%, though a partial rebound now looks possible. On social media, Trump hinted that he does not actually want a trade war, easing fears of an escalation. In Europe, ArcelorMittal (-5.8%) and Stellantis (-7.3%) were among the biggest losers due to these concerns. Qualcomm (-7.3%) dropped after reports of a Chinese antitrust investigation linked to its acquisition of Israel’s Autotalks. U.S.-listed Chinese tech stocks also plunged: Alibaba (-8.5%) and Baidu (-8.1%) fell on worries about potential U.S. tariffs and Chinese retaliation. On the Hong Kong market, both stocks are down another 4–5% this morning.

The Hang Seng Index is currently 3.5% lower, showing that Asian investors remain nervous about the outcome. Meanwhile, UCB published promising trial results in Neurology for an experimental treatment for TK2d, a rare muscle disease. The therapy reduced mortality risk by 95% and improved patient mobility. Logistics developer VGP announced the purchase of a large factory site in Dortmund. There’s little on today’s earnings calendar, but tomorrow marks the start of the U.S. reporting season, with BlackRock, JPMorgan Chase, Goldman Sachs, and Wells Fargo kicking things off.

Be careful when speculating on takeovers

Want to know how likely a takeover really is? Look at the gap between the bid price and the current share price. For a month now, rumors have swirled that Paramount is preparing a 20 dollar per share bid for rival Warner Bros. Discovery. The fact that the current price trades 17% below that offer is not an automatic buying opportunity. Quite the opposite — the market is signaling serious doubts about the deal’s success. Those odds worsened over the weekend after reports that Warner Bros. Discovery rejected Paramount’s proposal. The two sides can’t agree on price. Paramount now faces three choices: raise its bid, go directly to shareholders with a hostile offer, or abandon the plan altogether. If the last option happens, speculators will face heavy losses. Before the rumors broke, the stock was trading at 12 dollar; it’s now around 17.10 dollar. So be cautious — betting blindly on takeovers can backfire. The upside potential isn’t always worth the downside risk.

Looking for new fast-food opportunities

Since arriving in the Philippines, I’ve been scouting new investment ideas for Spaarvarkens readers. I often start by observing what’s popular on the streets. One name stands out everywhere: Jollibee, the fast-food chain with the smiling red bee mascot — more popular here than McDonald’s. The menu features mostly chicken dishes, and lately tea and coffee too. Asians tend to prefer poultry over beef in fast food, though the mix of fried chicken and coffee feels unusual. After some research, I’m not yet convinced. Jollibee has a dominant domestic market, but struggles to expand profitably abroad. Too much capital is tied up in its international division, where margins have hovered around zero for years — not great capital allocation. With a forward P/E of 24, the stock looks expensive compared with the Philippine market average of around 10. Personally, I prefer Yum China Holdings, which owns KFC in China. That’s a profitable market with strong growth potential, a more attractive valuation (P/E 17), and rapid earnings growth supported by new store openings and aggressive buybacks. Still, the Philippines remains intriguing — I’ll keep looking for more opportunities for you.

Did you know…

that the U.S. bond market is closed today for Columbus Day — commemorating the Italian explorer’s arrival in the Americas. The U.S. stock exchanges, however, remain open.

This article was translated from Dutch and was originally published on Spaarvarkens.be.