5 Things You Need to Know to Start Your Day: Americas

Good morning and welcome back from the long weekend. There’s a big merger in the US credit card space and the roaring stock market is lookin [View in browser]( [Bloomberg]( Good morning and welcome back from the long weekend. There’s a big merger in the US credit card space and the roaring stock market is looking for fresh catalysts. Meanwhile, investors still love cash. Here’s what people are talking about. — [Sofia Horta e Costa]( Credit card merger [Capital One Financial and Discover Financial Services are going to combine]( in the biggest deal of the year so far, a $35 billion agreement to create the largest credit card company by loan volume. The news sent shares in Discover Financial up by around 18% in premarket trading in New York, with Capital One falling by about 4%. Notably, the deal would allow Capital One to issue its own credit cards, having historically relied on Visa and Mastercard for that service. Capital One will pay an almost 27% premium to Discover’s last closing price in an all-stock deal. Wall of cash Investors have added [$128 billion into money market funds in the US]( since the start of 2024 — one indication there remains life in an asset class many market observers had all but left for dead heading into the year. One of the hottest questions only a few months ago was where investors were going to redeploy their cash holdings once the Federal Reserve entered a cycle of cutting interest rates. Instead, along with flows into money-market funds, corporate treasurers are hoarding cash and a glut of Treasury issues is being absorbed by markets. Seeking catalysts S&P 500 futures are pointing to a [lower start on Wall Street](, and even losses for tech, with contracts on the Nasdaq 100 down about 0.6%. US tech shares dropped last week for only their second weekly decline since the start of November, though the index remains close to a record reached in early February. Strategists at Goldman Sachs have boosted their 2024 target for the S&P 500 to 5,200 points [just months after setting it at 4,700](, saying increased profit estimates are behind the revision. Waiting-for-the-next-catalyst is the current market mantra and we could get a few in the shape of Nvidia earnings tomorrow, as well as the Fed’s January meeting minutes. US Treasuries are little changed at the moment ahead of an auction of 40-year notes, while the dollar is heading slightly lower. Latin American yields A UK-based bond investor is [beefing up its investment]( in Latin American debt and steering clear of China — a formula that helped it [beat 99% of its peers]( last year. Colchester Global Investors likes Latin American bonds that offer higher inflation-adjusted yields and is planning to add Brazilian, Colombian and Mexican bonds — countries that made up three of the top four performers in [emerging market bonds]( last year. Meanwhile, some of the largest venture investors in Latin America are sitting on nearly $4 billion and [ready to make fresh investments](. Coming up… The economic calendar is thin for Tuesday but there are results from two major consumer bellwethers to digest — [Walmart and Home Depot](. The pair should provide a crucial insight into the health of household finances and whether the resilience of consumers will continue and underpin strong economic growth. The biennial Singapore Airshow, Asia’s most influential aerospace and defense exhibition, will be held through Wednesday. What we’ve been reading This is what’s caught our eye over the past 24 hours. - Barclays bonuses [fell 43%]( for the median employee last year. - Chinese banks [slashed]( a key mortgage reference rate. - Flying got safer almost everywhere last year —  [except for in Russia](. - The crowded [India stocks trade]( is starting to raise questions. - Vladimir Putin has [gifted a new car]( to North Korea’s Kim Jong Un. - Demand for [Swiss watches]( is off to a weak start to the year. - The [mezcal industry is roaring]( but worried about agave shortages. And finally, here's what Tracy’s interested in this morning You might have heard of the Three Body Problem, the wildly popular science fiction trilogy by Liu Cixin. The books are famous in China in their own right, but have also occasionally been viewed within certain social circles as an [allegory]( for the US-China trade war. Threatened by an alien species, humanity (eventually) reorganizes itself and technological progress thrives. For a while, anyway. The sci-fi inspired real world suggestion was that the more the US threatened China by cutting off its access to sophisticated technology -- such as in advanced semiconductors -- the faster China would develop its own domestic capacity to offset the setback. In Liu's "dark forest" of technological arms races and limited resources, civilizations are always striving to one up each other scientifically, because they have no other choice for survival. And maybe, this particular brand of technological determinism has actually played out in real life, to an extent. Over the past few years, China has redirected huge chunks of capital towards growing its own chips industry and continues to make advancements in the space. But one interesting aspect of the past few years, is that the US seems to be accelerating its own technological progress too. I was reminded of it all in the [latest episode of Odd Lots](, in which Joe Weisenthal and I speak with Dr. Chris Burns, the founder and CEO of Novonix, which produces synthetic graphite and other materials used in lithium-ion batteries. The company has also received a [$100 million grant]( from the US Department of Energy loan programs office. (That sounds like a lot, but for context, the Biden administration announced a [$1.5 billion award to GlobalFoundries]( as part of the Chips Act earlier this week). The materials needed to build batteries have been the subject of anxiety for some time. China has historically dominated the processing of graphite and headlines about scarcity of crucial minerals and the clean energy transition have been written for a while. Then, in 2023, China [banned the export]( of rare earth technologies, and the US has been building out its own processing capabilities since. Of course, as we discuss in the episode, you can't just throw money at the challenge of building out such homegrown industries (although it certainly does help). You need access to physical resources, some confidence in future demand, and the skills and people to build a durable and efficient industry. All of that takes time. But the degree to which the US seems to have hastened its own attempts at building up domestic technological capacity is still kind of remarkable. You can listen to the full episode [here](. Tracy Alloway is the co-host of Bloomberg’s Odd Lots podcast. 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