🇺🇸 The US sizzled

What’s going on here?

The US added more jobs than expected for the fourteenth-straight month – and at this stage, our graphic designer’s running out of ideas.

What does this mean?

Despite rising interest rates and recession chatter, the US job market has been flexing lately, powering spending and stoking inflation. A hefty 339,000 jobs were added last month – leaving April’s 294,000 and economists’ timid 190,000 forecast in the dust. But it wasn’t all job-market jazz hands: there were pockets of weakness starting to show too. After all, the unemployment rate leaped up to 3.7% – a jump not seen since 2020 – and 440,000 more people found themselves out of work in May (the most since the pandemic). Meanwhile, annual wage growth was catching its breath too, slowing to a robust but less-than-expected 4.3%.

Why should I care?

For markets: Potential to pause.

With companies still laying off workers, consumer confidence hitting a six-month low, and economists betting on a recession, the economy might be set for a bit of a cool-down. And that might just be the green light the Federal Reserve (the Fed) needs to pause interest rate hikes this month. That breather would give the last ten rate hikes more time to percolate through the economy, while keeping the door ajar for a potential restart in July, if needed. So while traders may be upping the odds of a hike this month, a pause still seems more likely.

Zooming out: A brush with debt.

Regardless of the Fed’s decision, there’s one fewer catastrophe threatening to bulldoze the economy now. In a rare show of unity, Democrats and Republicans have brokered a deal to suspend the US debt ceiling, successfully dodging what could have been a catastrophic default on US government debt and a full-blown financial crisis.

What’s going on here?

Friday was a furry good day for private equity firm EQT, which snapped up UK veterinary drugmaker Dechra.

What does this mean?

EQT’s been in talks to buy up Dechra since April, but the wooing process had its fair share of hairy moments. See, Dechra found itself in the doghouse when it issued a profit warning in the midst of negotiations. And that update – which certainly didn’t strengthen the drugmaker’s negotiating paw-sition – helped EQT bag a tidy 5% discount. Still, the deal ultimately came in at a cool $5.6 billion, a healthy 44% markup on Dechra’s value before the takeover whispers began. That pricey move will help expand EQT’s pet portfolio – which already includes everything from vet clinics to pet insurers and online retailers – putting the firm in a purr-fect position to capitalize on rising pet ownership rates.

Why should I care?

For markets: Low-cost London.

Private equity firms like EQT are always on the prowl for companies they can polish up and resell at a profit later, and this acquisition is a sign London-listed companies are maintaining their appeal. In fact, data shows that investment firms have splashed out almost $100 billion on UK public companies since 2018. That makes sense too: London-listed companies often trade at a discount compared to their US counterparts – and a lower entry price should make it easier to profit later on.

The bigger picture: Healthy sector.

Rising interest rates and jumpy stock markets meant that dealmaking hit a ten-year low (setting aside the pandemic dip) in the first five months of this year. But healthcare’s been a bright spot, growing to make up a juicy 15% of all deals in the same period. And after Friday’s Dechra news, there could be more of that to come: after all, demand for healthcare is typically as steady as a surgeon’s hand.