Market Overview
Before the Fed’s 75 bp rate cut on March 18th, concerns about inflation were at the forefront of American consumers’ minds. Ninety-one percent of respondents to a national CNN/Opinion Research Corp. poll said they were somewhat or very concerned about the rising rate of inflation, with 65% saying they were "very concerned" about inflation, and 26% saying they were "somewhat concerned."
While the Fed’s move has provided a temporary reprieve to an embattled Wall Street this week, inflation remains a concern for the Fed as well. February inflation at the wholesale level was up 0.3 percent in February, with core inflation rising 0.5 percent, higher than an anticipated 0.2 percent increase. The Fed’s recently released statement included comments about increased uncertainty in the inflation outlook and the need to carefully monitor coming developments.
Rising commodity prices took a brief pause after the Fed announced its rate reduction, which fell short of the hoped for 100 bp cut and helped spark a broad sell-off of commodities. Gold futures dropped $59, the largest one-day percentage decrease since June 2006, and oil for April delivery was off $4.94, the largest one-day decrease since 1991.
Deal Overview
Trading exchanges continue to see ongoing consolidation, despite the turmoil currently taking place in the markets. The parent company of the Chicago Mercantile Exchange and the Chicago Board of Trade recently announced it was buying the New York Mercantile Exchange in a $9.4 billion cash-and-stock deal that combines the nation's two largest futures exchanges. The deal consists of $3.4 billion in cash and $6.0 billion in stock, valuing NYMEX shares at $100.30, a five percent premium over the closing price before the deal was announced. CME has been actively consolidating the futures exchange market, as the company acquired futures exchanges CBOT and purchased a 10 percent stake in Brazilian Mercantile & Futures Exchange within the past nine months.
Reed Elsevier also continues to reinvent itself through acquisitions and divestitures, announcing late in February that it had agreed to acquire risk management company Choicepoint, Inc. for $4.1 billion and that it would be putting its Reed Business Information arm on the block. Reed Business Information did approximately $1.8 billion in sales last year and includes brands such as Variety and Publisher’s Weekly. This announcement comes six months after the company sold its international education and testing businesses to Pearson and its US education business to Houghton Mifflin for a combined amount close to $5 billion.
