In this briefing:
- Sprint/T-Mobile: Markets Building in a 60% Probability Deal Is Rejected
- Weekly Oil Views: Devoid of Fear or Cheer Premium, Brent Balances Around $65
Sprint shares now trade at a 43% discount to the implied value based on the original merger terms, down from <10% last July when the DoJ approved the deal and from 27% when we last wrote about this in November. Based on our range of outcomes, that appears to imply a 60%+ probability that the TMUS merger will not pass muster in the courts. That ruling should be out in February and whilst we do not have any special insight (nor does anyone which is why deal odds are priced like this) we did think it worthwhile to look at the state of play. TMUS should trade steadily no matter the result whilst Sprint is almost assuredly mis-priced as markets give meaningful weight to both sides of a binary outcome.
The US and China signed their phase-one trade deal on January 15 but it barely boosted crude beyond a mild bump. Our readers will not have been surprised – because this was exactly the anticipation we had been conveying for some time.
It remains to be seen if the deal – which leaves majority of US tariffs on Chinese goods intact – will move the needle on global economic momentum. As for the oil market, it will need time to decide if the prospects for demand growth need recalibrating.
In the absence of a “cheer premium” from the trade deal and a firm retreat of the fear premium that the escalating US-Iran tensions had introduced at the start of this month, crude prices are now in a holding pattern.
In the meantime, China’s commitment to boost purchases of US energy commodities may mean increased competition among Asian countries that had stepped up their imports of US crude over the past 18 to 24 months.
Plus: The danger of long-term destabilisation that has reared its head in at least two major oil producers amid an uneasy calm in the Middle East.
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