Weekly Market Insight

Latest Economic & Market Update 27th October 2020

27th October 2020

Good afternoon, it is October 27th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • Retired community company share price rises 39.5% after US private equity bid
  • Record virus cases hit US equities for worst day in a month

McCarthy & Stone, a UK retirement home developer and manager, received a £650m offer from US private equity firm Lone Star on Friday. The target company share price soared 39.5% as a result. The FT reports that McCarthy & Stone directors are unanimously recommending that shareholders vote in favour of the bid. The motive behind Lone Star’s bid is what BlackBee foresees in the Irish long term care market. Lone Star Europe President Donald Quintin stated the target company “represents an attractive opportunity in a market underpinned by clear fundamentals: a rapidly ageing population and a structural undersupply of suitable housing options for older people.” According to the CSO, by 2040, the population of over 65s in Ireland will double to c.1.2 million people. Similar to the current housing shortage, more living space will be needed for Ireland’s elderly population in both the near and long term. CBRE estimates that an additional 7,500 beds are required in the Irish nursing home system by 2026 while only 1,150 are currently in construction. Ireland has seen M&A activity this year from Orpea Groupe, a French nursing home operator with a market cap of €5.724 billion. (Source: Bloomberg, FT)
The twin hit of record Covid-19 case numbers and a lack of US stimulus deal was felt by US equities yesterday. The S&P 500 retreated 1.86% while the Nasdaq Composite closed 1.64% lower. It was the worst-performing day for US stocks in four weeks. According to Reuters, the number of US tests performed increased by 5.5% last week. However, the number of new Covid 19 cases in the US rose by 24%. These numbers point flaws in the “more tests, more cases” argument, at least in a US context. At a WHO press conference yesterday, executive director Dr Michael Ryan said that “we are well behind this virus in Europe so getting ahead of it is going to take some serious acceleration in what we do and maybe much more comprehensive nature of measures that are going to be needed.” The death toll in Europe passed the 250,000 mark over the weekend. Vaccine developments are encouraging with AstraZeneca and Pfizer the current front runners. US infectious disease specialist Dr. Anthony Fauci believes that we will know “whether a vaccine is safe and effective by the end of November, the beginning of December”. (Source: RTE, Reuters)

Best & Worst Performers of Large Cap US Stocks on Monday
Click image to enlarge

Global Market Update
(as at close of markets 26/10/2020)