Report: Invesco to merge with State Street, Manchester United shares lower on earnings loss, U.S. Steel announces new steel mill

Yahoo Finance's Brian Sozzi and Julie Hyman break down the morning's top stock movers, including Invesco, Manchester United, and U.S. Steel

Video transcript

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JULIE HYMAN: Well, as we prepare for the opening bell on this Friday morning, let's take a look at some movers that we are watching. There is a potential-- a potential deal in the asset management business, Brian Sozzi. And I emphasize the potential part, because this comes to us from a "Wall Street Journal" report. And the "Journal" report cautions that the deal may not happen.

Now, there's usually this caveat in these kinds of stories. This one, though, feels a little bit stronger. I don't know if it does to you. But here's the deal that we're talking about potentially. Invesco could be merging with State Street's asset management business. And we're talking about a powerhouse that would be created from this because of the size of these two companies.

The asset management unit from State Street manages about $4 trillion in assets, Invesco $1 and 1/2 trillion in assets. So obviously that would be a lot if it came together. We've seen some other consolidation within the asset management business here, some of it by Invesco itself, some of it by State Street itself. So how are you reading this potential deal?

BRIAN SOZZI: Yeah, well, it wouldn't be-- really it would be a string in what has been lots of deals over the past year and a half in the asset management industry, a lot of consolidation. Of course, the headline being Morgan Stanley buying out Eaton Vance last year. That was a massive deal.

But a good note by the folks at Deutsche Bank I'm actually making my way through right now-- I just got it-- Deutsche Bank analyst Brian Bedell looking at the merits of a potential Invesco and State Street deal. He's coming out very positive on this deal potentially happening for a number of reasons.

First, a merger would create a $5.5 trillion asset manager. And the theme with all these deals that we've seen so far in the space, Julie, scale is bigger as fee compression has continued. So you're going to have to get bigger and hopefully push through some price increases on various services that you are offering as an asset manager.

Number two, Bedell is saying, it would substantially scale Invesco's ETF franchise. That's always a good thing. Third, State Street has a heavy passive investing focus, about 93% of its assets under management. That complements Invesco's more active investing approach. About 70% of Invesco's assets under management are related to more active investing strategies.

And then last but not least, Julie, of course, cost synergies. Any time you combine two companies of this size, chances are you're looking at a good deal of cost synergies as people come together, and they pick the best people to run certain parts of their divisions.

JULIE HYMAN: Yeah, we'll see if it actually happens. And one more note on all of this, there is an activist angle as well. Trian Fund Management, Nelson Peltz's firm, has a stake in Invesco. It also has a stake in Janus Henderson, another asset management company. Trian in the past had a stake in State Street also, incidentally. So it's got seats on the board for Invesco. So we'll see if there's some kind of role that they are playing in all of this as well.

Another mover I want to talk about this morning is US Steel. Now, it's interesting here. The shares were pulling back a little bit earlier. Now they are not back quite as much. But the company is talking about plans for a new mill. It's a so-called mini mill that combines two electric arc furnaces. So they use steel scrap instead of making steel from scratch. And they're more energy efficient. So that's something that investors are considering here.

At the same time, the company forecast record third quarter profits. So it's a little bit confounding, Brian, that the shares are trading down by 1.7% this morning.

BRIAN SOZZI: Yeah, you know, I think it is probably the natural street reaction. Anytime you see a steelmaker try-- now, eventually coming back and opening up a new steel mill, I mean, the whole industry has been just eviscerated over the past decade because of steel coming from China, or lower cost steel coming from China. But I can't say that I'm not-- I'm too surprised by this action by US Steel.

Several months ago we talked to US Steel CEO David Burritt. And he told us there is a supercycle coming in the economy, in large part because of various forms of stimulus, whether that's infrastructure. The Fed will still likely remain in play, even if it does start tapering its bond program. So this could be Burritt's way of really planting seeds in the ground ahead of any supercycle driven by stimulus.

JULIE HYMAN: Well, and the steel-- domestic steel prices have just been going crazy over the past year, we should mention as well. So it makes sense that he wants to take advantage of that, and take advantage of demand.

US Steel shares themselves, as we've been looking at the charts here, up 51% year to date. So maybe not surprising given that that we are seeing a little bit of a pullback. Still, that's a pretty incredible gain here after, as you said, there's been a lot of challenges over the past few years for domestic steelmakers in particular. That seems to be abating to some extent. You know, we've talked to a lot of other companies that use steel in their products. And there is certainly a lot of demand for it.

Well, we're now getting a little bit closer to the opening bell here. We've not been seeing a lot of action here in the futures this morning. Although, as we mentioned, it is a witching day. I believe it is triple witching today. And that means we could see some volatility as we see those expiration of futures and options contracts.

The volatility's not there right now, though. We are just seeing a very, very small move in the futures, even as NASDAQ futures flip into the green just about a minute before the open of cash trading here this morning.

Now, a company that's going to be ringing the opening bell is called Ginkgo Bioworks. And that company is listing today. And we've seen quite a lot of action, Brian, recently in small biotech companies. I've been noticing them a lot. I mean, they're sort of perennial appearers on our Trending Tickers page. But there's definitely been some news flow with those as of late as well.

Oh, and look, always love to see kids on the podium. That's always fun.

BRIAN SOZZI: Yeah, that's great. They sell vitamins, right, Ginkgo? Vitamins? Ginkgo vitamins?

JULIE HYMAN: I don't know.

BRIAN SOZZI: Oh, just curious. Going for the Ginkgo joke here, Julie. It's Friday. You know, I mean, vitamins, you know, Ginkgo, ginseng.

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JULIE HYMAN: Oh, yes, sure. Sure. I don't know. I don't take Ginkgo. But yes, that is a vitamin. But I don't know if that's what they do. Or not. I think not. I think biotechy stuff.

All right, let's talk about football, shall we? Not the American kind, but rather the rest of the world kind. Man United-- Manchester United, which is also a publicly traded company in addition to being a big football club in the UK, reported a loss. Full year loss widening.

Not surprising here. There have been lockdowns. That has really crimped the revenue of these types of companies. They're are also still not setting financial targets for the full year.

You know, and as we know, Brian, the lockdowns in the UK were even more stringent than here in the United States. Man U. shares, though, opening up little changed, but to the upside. They have been falling a little bit in pre-market trading, again, perhaps because this is not a big shocker, right, that these numbers are not terribly strong.

BRIAN SOZZI: Well, you know how my brain is working right now, Julie, on Friday. I saw this quarter. My first thought is, one, maybe when I see disappointing quarters from beer makers like a Budweiser, obviously those beers are sold a lot at sporting venues.

Also Coca-Cola. Keep in mind, a large percentage of Coca-Cola's business are related to fountain sales at sports stadiums. So if Man U. is offering a disappointing quarter because of everything going on with the delta variant, perhaps investors should be connecting the dots and bracing for potential warnings from liquor and soda makers.

But Julie, what about American football? I mean, the Giants, they lost by a point yesterday. I mean, I lost in my survivor pool, which I really don't want to be in to begin with because of the Giants. I mean, that is just an embarrassing loss. Continued mistakes by the New York team, just embarrassing.

JULIE HYMAN: As you know, I have zero to say about American football. But I do have something to add about what you were just saying about potential liquor sales. Remember, Ronaldo, who was just signed by Man United, lured away from Juventus-- remember, he doesn't drink Coca-Cola, if you recall.

BRIAN SOZZI: Ah, yes, yes.

JULIE HYMAN: It was put in front of him at that press conference. He said, no thank you to the Drake style. No thank you. And in addition to that, I don't know how much Budweiser they're selling at Man U. games. Something tells me they're probably more on a European tip.

I'm going to have to look into that. I'm going to have to do some research and find out what the preferred beer is by Man U. club supporters.