FT : China is turning Japanese

China is turning Japanese
At least that’s what the bond market is whispering

The “Japanification” of China continues to be a big theme, with a lot of eerie parallels right down to stimulus proving wanting. Here’s the latest symptom:


Yep, the 30-year government bond yields of China and Japan are on the cusp of crossing paths for the first time (ever, we think, but LSEG data for both 30-year benchmarks doesn’t go further back than 2009).

At pixel time there’s still a 8.7 basis point spread between the two long-term bond yields, with the Chinese 30-year yielding 2.245 and the Japanese 30s trading at 2.158 per cent. But it looks like that won’t last long. Shorting Chinese government bonds really has been the new widow-maker trade.

The fading yield curve differential is another stark manifestation of China’s growing economic and demographic malaise, and Japan’s (for now) success in finally winning a three-decade battle against deflation. As Barclays economists said in a big report on whether China can escape a similar fate:

China’s accelerated economic development was reminiscent of Japan’s postwar economic miracle. Moreover, China was in certain quarters once expected to overtake the US as the world’s largest economy by 2035.

However, after decades of rapidly narrowing the gap to the US, since 2022 China has started losing ground. Surpassing the US economy now appears a distant hope; its weakening labour market, declining firm profitability, slumping housing activity, and adverse debt-deflation dynamics have raised concerns about China’s longer-term growth outlook.

. . . We think China’s deleveraging journey has only just started, and it is unlikely to be completed before 2030, which implies the structural headwinds to consumption and investment will persist.

It should be noted that there’s still a decent-sized if narrowing gap between China and Japan on the 10-year part of the curve. But on the even longer end of the curve, yields have already crossed, with the Japanese government bond maturing in March 2064 currently yielding 2.472 per cent, and China’s November 2064 bond trading at 2.275 per cent.

The parallels between Japan in the early 1990s and China today are myriad, Barclays noted in its report. FT Alphaville’s emphasis below:

The economic circumstances facing China have parallels with Japan’s experience after its asset bubble burst in the early 1990s. This created the term ‘Japanification’, which is typically defined as a combination of slow growth, low inflation, and a low policy rate, accompanied by deteriorating demographic trends.

To measure this phenomena, a Japanese economist, Takatoshi Ito, introduced a Japanification Index, which measured the sum of the inflation rate, nominal policy rate, and GDP gap. To apply to China’s economy, we have adjusted this index, replacing the GDP gap with working-age population growth, as the estimation methods of GDP gaps differ across nations and working-age population is by far the most fundamental determinant for long-term growth. Our amended index shows that China’s economy has become more ‘Japanised’ than Japan’s recently, albeit marginally.

This not a surprise to us. A demographic drag, the emergence and collapse of asset bubbles, debt overhang, zombie companies, deflationary pressures from excess capacity/high debt, and high youth unemployment, to name a few, are some of the notable similarities between the economies of China and Japan post their bubbles.

And here’s that index.

>>> What to look at today - 17th of October 2024

European stocks look set for a tepid start as traders await a European Central Bank monetary policy decision. A Chinese share rally fizzled after a press briefing on the property market failed to deliver major stimulus.      Euro Stoxx 50 futures were little changed while US equity contracts fell in Asian trading. China’s CSI 300 erased a rally of as much as 1.3% after officials said the government will expand a program to support “white list” projects to 4 trillion yuan ($562 billion) from about 2.23 trillion yuan already deployed. The negative market reaction shows investors have set an increasingly high bar for stimulus optimism. The ECB is forecast to lower interest rates for a second straight meeting Thursday after data showed slowing inflation is being accompanied by a worsening economy. Nestle SA, Nordea Bank Abp and Nokia Oyj are among companies that have announced earnings Thursday.  The challenge for China investors “right now is that we don’t have a big enough package to get people excited,” Jun Bei Liu, a fund manager at Tribeca Investment Partners, said on Bloomberg Television. “The Chinese economy is sitting at the bottom, but to reignite the growth, they really need to reignite confidence.” Elsewhere in Asia, stock benchmarks declined in Japan and South Korea, and rose in Australia. Taiwan Semiconductor Manufacturing Co. reported net income for the third quarter that beat the average analyst estimate. The data eased concerns over the chip sector after ASML Holding NV offered surprisingly dour order numbers and cut its 2025 revenue forecast earlier this week. In European earnings, Nestle guided for a lower-than-expected organic revenue growth of 2% for the full-year, while Nordea Bank met estimate for its net interest income. Nokia Oyj sales failed to meet analysts’ estimates in the third quarter, as a recovery takes shape slower than previously expected. Chinese data due Friday will show the world’s second-biggest economy expanded 4.5% in the third quarter from a year ago, according to economists surveyed by Bloomberg. That would mark its weakest pace in six quarters.  Chinese President Xi Jinping has called on government officials to make every effort to help the country meet its annual growth target of around 5%. However, after a series of press conferences this month in which policymakers offered no details of fresh stimulus, fears are now mounting that efforts may not be enough to revive growth. China’s fading rally coupled with a selloff in technology companies is souring the outlook for Asian markets. The region’s MSCI equity index is still on course for its best year since 2020, but with traders expecting the Federal Reserve to set back interest-rate cuts and earnings slowing in markets such as India and Korea, risk sentiment needs fresh triggers to sustain momentum. The Treasury 10-year yield climbed two basis points in Asian trade to 4.03%, and the Bloomberg dollar index was little changed. Australia’s dollar gained after the country’s unemployment rate was 4.1% in September, lower than the forecast of 4.2% in a Bloomberg survey.  Gains for US small-caps on Wednesday indicated investors are shifting out of the world’s largest tech companies that have soared on the back of the artificial intelligence boom and into other stocks that benefit in benign economic conditions. Oil climbed, after four days of declines, as traders weighed potential risks to production from the Middle East against concerns over a global glut. Bitcoin fell after rising 1.7% Wednesday to touch the highest level since July. Iron ore tumbled to a three-week low, a sign that investors doubt whether China’s latest moves to shore up the property market will do enough to boost construction activity and steel demand. US After Hours AA +8.8%, SNV +3.1%, STLD +2.8% higher on earnings; EFX -4.6%, CSX -4.3%, KMI -2.6%, DFS -1.2% lower on earnings; GEVO +45.8% and CLMT +18.6% higher on Dept of Energy awards.

Nikkei -0.12% Hang Seng +0.36% CSI -0.07% Shanghai -0.05% Shenzen +0.55%

Eur$ 1.0854 CNH 7.1346 CNY 7.1213 JPY 149.52 GBP 1.2987 CHF 0.8662 RUB 97.5023 TRY 34.1860 WTI$ 70.57 +0.26% Gold 2,684 +0.37% BTC 67,324 -0.44% ETH 2,626.6 +0.33%

S&P -0.10% Nasdaq -0.04% EuroStoxx +0.04% FTSE +0.24% Dax +0.04% SMI -0.39%


Macro :
- Trump Gets 50% Nationally, Harris Gets 48%: Fox News Poll
- Bitcoin Pulls Ahead in Markets in Sign of Bets on Trump Victory
- Druckenmiller Says Market Is ‘Very Convinced’ Trump Will Win
- Goldman’s Trading Desk Sees S&P 500 Reaching 6,270 by Year-End
- US AIRLINES INDEX POSTS BEST DAY SINCE OCTOBER 2022, UP 6.5%
- McKinsey to Pay at Least $500 Million in DOJ Opioid Probe (1)
- Buy DAX Strangles to Play SAP Earnings, JPMorgan Strategists Say
- JPMorgan Wraps Up $1 Billion Debt-Swap Deal for El Salvador
- Switzerland Sept. Watch Exports Fell 12.4% Y/Y

Keep an eye on :
- ABBN SW : ABB Sees FY Op. Ebita Margin Above 18%, Saw About 18%, Est. 18%
- ADP FP : ADP Sept. Passenger Traffic +5.5%
- AA US : Alcoa Shares Rise as Adjusted Ebitda Beats Street Estimates
- AAL LN : BHP Chief Met With South Africa Officials, PIC Last Week: FT
- MT NA : Alcoa Shares Rise as Adjusted Ebitda Beats Street Estimates
- APAM NA : Aperam to Buy Universal Stainless for $45/Share in All-Cash Deal
- AAPL US : Apple Secretly Worked With China’s BYD on Long-Range EV Battery
- ARJOB SS : Arjo 3Q Net Sales Misses Estimates
- ASML NA : ASML Questioned by Dutch Regulator After Results Release Mistake
- BIOAB SS : BioArctic Drops After Australia’s TGA Turns Down Leqembi Drug
- BA US : Boeing Close on Plan to Raise $15B Via Stock, Hybrid Bonds: Rtrs
- CHEMM DC : ChemoMetec Jumps on Revenue Forecast Boost, Ovizio Binding Offer
- ROO LN : Deliveroo 3Q Gross Transaction Value Misses Estimates
- ENTRA NO : Entra 3Q Net Operating Income Meets Estimates
- EQT SS : EQT 3Q Total Investments EU6B Vs. EU2B Y/y
- EQT SS : Temasek to Buy 17%-18% Stake in VFS Global for $950m: Mint
- EXPE US : Uber Has Explored Possible Bid for Expedia: FT
- GFC FP : Gecina FY Recurrent Net per Share Forecast Beats Estimates
- GET FP : Getlink 3Q Revenue Beats Estimates
- GEVO US : Gevo Secures Conditional Commitment from U.S. Department of Energy Loan Programs Office for its Net-Zero 1 Sustainable Aviation +15% in after Hours
- GS US : Goldman Sachs Unit in Talks to Join Northvolt Rescue Effort
- HNSA SS : Hansa Biopharma 3Q Net Loss SEK103.8M, Est. Loss SEK262.5M
- KINDSDB SS : Kindred Prelim 3Q Gross Winnings Revenue GBP283.1M
- EMG LN : Man Group 3Q Net Outflows $5.5B Vs. Inflows $700M Y/y
- MRK GY : Merck KGaA Trims Health Care And Life Sciences Targets, Eyes M&A
- META US : Meta criticised for calling its AI models ‘open-source’
- NA9 GY : Nagarro Confirms It’s in Talks on Potential Take-Private
- NESN SW : Nestle FY Organic Revenue Forecast Misses Estimates (1)
- NESN SW : Nestlé announces changes to its organization and its Executive Board
- NKE US : NIKE ticks lower following report it's ready for a global push for its outdoor business, All Conditions Gear, according to Bloomberg
- NOKIA FH : Nokia Sales Miss Estimates as Turnaround Fails to Materialize
- NDA FH : Nordea Raises 2024 Outlook and Unveils More Share Buybacks
- NVDA US : DRUCKENMILLER: SELLING ALL MY NVIDIA STOCK WAS 'A BIG MISTAKE'
- NVAX US : Novavax Shares Slump After FDA Hold on Covid-Flu Shot Candidates
- OKLO US : Google Says Nuclear Is Key to Around-the-Clock Clean Power
- RI FP : Pernod Ricard 1Q Organic Sales Misses Estimates
- PST IM : Poste Italiane Placing Postponed to November: Sole
- PCELL SS : PowerCell 3Q Sales SEK71.9M Vs. SEK69.9M Y/y
- PUB FP : Publicis 3Q Organic Revenue Beats Estimates
- RBI AV : UniCredit, Raiffeisen See Fading Options to Get Out of Russia
- RTO LN : Rentokil 3Q North America Revenue Beats Estimates
- SAN FP : Sanofi Invests €300M for 16% in New Entity Under Orano Med Brand
- DIM FP : Sartorius Stedim 9M Underlying Ebitda EU564.7M Vs. EU594.0M Y/y
- SRT GY : Sartorius 9M Adjusted Ebitda EU686.5M Vs. EU733.4M Y/y
- SU FP : Schneider Electric to Buy 75% of Motivair for $850M:M&A Snapshot
- SCHP SW : Schindler 3Q Ebit Beats Estimates
- SCHP SW : Schindler Plans Up to CHF500M Share Buyback Program
- SES IM : Sesa Drops as CEO of Partner Firm Digital Value Investigated
- ENR GY : Siemens Energy: Kaeser seeks second term as Chairman of the Supervisory Board : Handelsblatt
- SIP BB : Sipef 9M Palm Oil Output 266,502 Metric Tons Vs. 292,880 Y/y
- SLIGR NA : Sligro 3Q Sales EU730M Vs. EU705M Y/y
- STERV FH : Stora Enso CEO Says Efforts on Cash Flow Went ‘Too Far’: DI
- TLGO SM : Talgo Receives Takeover Interest From Sidenor Group
- TIETO FH : TietoEVRY Sees FY Organic Revenue -2%, Saw 0% to +3%
- 2330 TT : TSMC’s Profit Beats Estimates During an AI Chip Boom (1)
- UBER US : Uber Has Explored Possible Bid for Expedia: FT
- UCG IM : UniCredit, Raiffeisen See Fading Options to Get Out of Russia
- UCG IM !: UniCredit Agrees to 1,000 Voluntary Layoffs, 500 Hires: Union
- USAP US : Aperam to Buy Universal Stainless for $45/Share in All-Cash Deal
- VACN SW : VAT 9M Net Sales CHF659.0M Vs. CHF663.5M Y/y

F

European stocks look set for a tepid start as traders await a European Central Bank monetary policy decision. A Chinese share rally fizzled after a press briefing on the property market failed to deliver major stimulus.      Euro Stoxx 50 futures were little changed while US equity contracts fell in Asian trading. China’s CSI 300 erased a rally of as much as 1.3% after officials said the government will expand a program to support “white list” projects to 4 trillion yuan ($562 billion) from about 2.23 trillion yuan already deployed. The negative market reaction shows investors have set an increasingly high bar for stimulus optimism. The ECB is forecast to lower interest rates for a second straight meeting Thursday after data showed slowing inflation is being accompanied by a worsening economy. Nestle SA, Nordea Bank Abp and Nokia Oyj are among companies that have announced earnings Thursday.  The challenge for China investors “right now is that we don’t have a big enough package to get people excited,” Jun Bei Liu, a fund manager at Tribeca Investment Partners, said on Bloomberg Television. “The Chinese economy is sitting at the bottom, but to reignite the growth, they really need to reignite confidence.” Elsewhere in Asia, stock benchmarks declined in Japan and South Korea, and rose in Australia. Taiwan Semiconductor Manufacturing Co. reported net income for the third quarter that beat the average analyst estimate. The data eased concerns over the chip sector after ASML Holding NV offered surprisingly dour order numbers and cut its 2025 revenue forecast earlier this week. In European earnings, Nestle guided for a lower-than-expected organic revenue growth of 2% for the full-year, while Nordea Bank met estimate for its net interest income. Nokia Oyj sales failed to meet analysts’ estimates in the third quarter, as a recovery takes shape slower than previously expected. Chinese data due Friday will show the world’s second-biggest economy expanded 4.5% in the third quarter from a year ago, according to economists surveyed by Bloomberg. That would mark its weakest pace in six quarters.  Chinese President Xi Jinping has called on government officials to make every effort to help the country meet its annual growth target of around 5%. However, after a series of press conferences this month in which policymakers offered no details of fresh stimulus, fears are now mounting that efforts may not be enough to revive growth. China’s fading rally coupled with a selloff in technology companies is souring the outlook for Asian markets. The region’s MSCI equity index is still on course for its best year since 2020, but with traders expecting the Federal Reserve to set back interest-rate cuts and earnings slowing in markets such as India and Korea, risk sentiment needs fresh triggers to sustain momentum. The Treasury 10-year yield climbed two basis points in Asian trade to 4.03%, and the Bloomberg dollar index was little changed. Australia’s dollar gained after the country’s unemployment rate was 4.1% in September, lower than the forecast of 4.2% in a Bloomberg survey.  Gains for US small-caps on Wednesday indicated investors are shifting out of the world’s largest tech companies that have soared on the back of the artificial intelligence boom and into other stocks that benefit in benign economic conditions. Oil climbed, after four days of declines, as traders weighed potential risks to production from the Middle East against concerns over a global glut. Bitcoin fell after rising 1.7% Wednesday to touch the highest level since July. Iron ore tumbled to a three-week low, a sign that investors doubt whether China’s latest moves to shore up the property market will do enough to boost construction activity and steel demand. US After Hours AA +8.8%, SNV +3.1%, STLD +2.8% higher on earnings; EFX -4.6%, CSX -4.3%, KMI -2.6%, DFS -1.2% lower on earnings; GEVO +45.8% and CLMT +18.6% higher on Dept of Energy awards.

Nikkei -0.12% Hang Seng +0.36% CSI -0.07% Shanghai -0.05% Shenzen +0.55%

Eur$ 1.0854 CNH 7.1346 CNY 7.1213 JPY 149.52 GBP 1.2987 CHF 0.8662 RUB 97.5023 TRY 34.1860 WTI$ 70.57 +0.26% Gold 2,684 +0.37% BTC 67,324 -0.44% ETH 2,626.6 +0.33%

S&P -0.10% Nasdaq -0.04% EuroStoxx +0.04% FTSE +0.24% Dax +0.04% SMI -0.39%


Macro :
- Trump Gets 50% Nationally, Harris Gets 48%: Fox News Poll
- Bitcoin Pulls Ahead in Markets in Sign of Bets on Trump Victory
- Druckenmiller Says Market Is ‘Very Convinced’ Trump Will Win
- Goldman’s Trading Desk Sees S&P 500 Reaching 6,270 by Year-End
- US AIRLINES INDEX POSTS BEST DAY SINCE OCTOBER 2022, UP 6.5%
- McKinsey to Pay at Least $500 Million in DOJ Opioid Probe (1)
- Buy DAX Strangles to Play SAP Earnings, JPMorgan Strategists Say
- JPMorgan Wraps Up $1 Billion Debt-Swap Deal for El Salvador
- Switzerland Sept. Watch Exports Fell 12.4% Y/Y

Keep an eye on :
- ABBN SW : ABB Sees FY Op. Ebita Margin Above 18%, Saw About 18%, Est. 18%
- ADP FP : ADP Sept. Passenger Traffic +5.5%
- AA US : Alcoa Shares Rise as Adjusted Ebitda Beats Street Estimates
- AAL LN : BHP Chief Met With South Africa Officials, PIC Last Week: FT
- MT NA : Alcoa Shares Rise as Adjusted Ebitda Beats Street Estimates
- APAM NA : Aperam to Buy Universal Stainless for $45/Share in All-Cash Deal
- AAPL US : Apple Secretly Worked With China’s BYD on Long-Range EV Battery
- ARJOB SS : Arjo 3Q Net Sales Misses Estimates
- ASML NA : ASML Questioned by Dutch Regulator After Results Release Mistake
- BIOAB SS : BioArctic Drops After Australia’s TGA Turns Down Leqembi Drug
- BA US : Boeing Close on Plan to Raise $15B Via Stock, Hybrid Bonds: Rtrs
- CHEMM DC : ChemoMetec Jumps on Revenue Forecast Boost, Ovizio Binding Offer
- ROO LN : Deliveroo 3Q Gross Transaction Value Misses Estimates
- ENTRA NO : Entra 3Q Net Operating Income Meets Estimates
- EQT SS : EQT 3Q Total Investments EU6B Vs. EU2B Y/y
- EQT SS : Temasek to Buy 17%-18% Stake in VFS Global for $950m: Mint
- EXPE US : Uber Has Explored Possible Bid for Expedia: FT
- GFC FP : Gecina FY Recurrent Net per Share Forecast Beats Estimates
- GET FP : Getlink 3Q Revenue Beats Estimates
- GEVO US : Gevo Secures Conditional Commitment from U.S. Department of Energy Loan Programs Office for its Net-Zero 1 Sustainable Aviation +15% in after Hours
- GS US : Goldman Sachs Unit in Talks to Join Northvolt Rescue Effort
- HNSA SS : Hansa Biopharma 3Q Net Loss SEK103.8M, Est. Loss SEK262.5M
- KINDSDB SS : Kindred Prelim 3Q Gross Winnings Revenue GBP283.1M
- EMG LN : Man Group 3Q Net Outflows $5.5B Vs. Inflows $700M Y/y
- MRK GY : Merck KGaA Trims Health Care And Life Sciences Targets, Eyes M&A
- META US : Meta criticised for calling its AI models ‘open-source’
- NA9 GY : Nagarro Confirms It’s in Talks on Potential Take-Private
- NESN SW : Nestle FY Organic Revenue Forecast Misses Estimates (1)
- NESN SW : Nestlé announces changes to its organization and its Executive Board
- NKE US : NIKE ticks lower following report it's ready for a global push for its outdoor business, All Conditions Gear, according to Bloomberg
- NOKIA FH : Nokia Sales Miss Estimates as Turnaround Fails to Materialize
- NDA FH : Nordea Raises 2024 Outlook and Unveils More Share Buybacks
- NVDA US : DRUCKENMILLER: SELLING ALL MY NVIDIA STOCK WAS 'A BIG MISTAKE'
- NVAX US : Novavax Shares Slump After FDA Hold on Covid-Flu Shot Candidates
- OKLO US : Google Says Nuclear Is Key to Around-the-Clock Clean Power
- RI FP : Pernod Ricard 1Q Organic Sales Misses Estimates
- PST IM : Poste Italiane Placing Postponed to November: Sole
- PCELL SS : PowerCell 3Q Sales SEK71.9M Vs. SEK69.9M Y/y
- PUB FP : Publicis 3Q Organic Revenue Beats Estimates
- RBI AV : UniCredit, Raiffeisen See Fading Options to Get Out of Russia
- RTO LN : Rentokil 3Q North America Revenue Beats Estimates
- SAN FP : Sanofi Invests €300M for 16% in New Entity Under Orano Med Brand
- DIM FP : Sartorius Stedim 9M Underlying Ebitda EU564.7M Vs. EU594.0M Y/y
- SRT GY : Sartorius 9M Adjusted Ebitda EU686.5M Vs. EU733.4M Y/y
- SU FP : Schneider Electric to Buy 75% of Motivair for $850M:M&A Snapshot
- SCHP SW : Schindler 3Q Ebit Beats Estimates
- SCHP SW : Schindler Plans Up to CHF500M Share Buyback Program
- SES IM : Sesa Drops as CEO of Partner Firm Digital Value Investigated
- ENR GY : Siemens Energy: Kaeser seeks second term as Chairman of the Supervisory Board : Handelsblatt
- SIP BB : Sipef 9M Palm Oil Output 266,502 Metric Tons Vs. 292,880 Y/y
- SLIGR NA : Sligro 3Q Sales EU730M Vs. EU705M Y/y
- STERV FH : Stora Enso CEO Says Efforts on Cash Flow Went ‘Too Far’: DI
- TLGO SM : Talgo Receives Takeover Interest From Sidenor Group
- TIETO FH : TietoEVRY Sees FY Organic Revenue -2%, Saw 0% to +3%
- 2330 TT : TSMC’s Profit Beats Estimates During an AI Chip Boom (1)
- UBER US : Uber Has Explored Possible Bid for Expedia: FT
- UCG IM : UniCredit, Raiffeisen See Fading Options to Get Out of Russia
- UCG IM !: UniCredit Agrees to 1,000 Voluntary Layoffs, 500 Hires: Union
- USAP US : Aperam to Buy Universal Stainless for $45/Share in All-Cash Deal
- VACN SW : VAT 9M Net Sales CHF659.0M Vs. CHF663.5M Y/y

>>> Europe : Brokers Upgrades & Downgrades - 17th of October 2024

>>> Up
* Aker Solutions Raised to Overweight at JPMorgan; PT 61 kroner
* Arcadium Lithium Raised to Neutral at Piper Sandler; PT $5.85
* Beijer REF Raised to Buy at ABG; PT 190 kronor
* DiaSorin SpA Raised to Outperform at Mediobanca SpA
* INVISIO AB Raised to Buy at SEB Equities; PT 295 kronor
* Lithium Americas Raised to Outperform at National Bank
* Lufthansa Raised to Hold at Stifel; PT 6.50 euros
* Ontex Raised to Hold at Kepler Cheuvreux

>>> Down
* Aena Cut to Neutral at JB Capital Markets; PT 226 euros
* ASML Cut to Hold at DZ Bank; PT 650 euros
* DiaSorin SpA Cut to Hold at HSBC; PT 105 euros
* Eramet Cut to Sell at Stifel; PT 45 euros
* Givaudan Cut to Neutral at Citi; PT 4,650 Swiss francs
* Jenoptik Cut to Hold at Stifel; PT 26 euros
* Nel Cut to Hold at HSBC; PT 4.30 kroner
* Novavax PT Cut to $25 from $31 at Jefferies
* Orkla Cut to Hold at Nordea
* Qiagen Cut to Hold at HSBC; PT 45 euros
* Subsea 7 Cut to Neutral at JPMorgan; PT 200 kroner
* Uber Cut to Neutral at Daiwa; PT $84

>>> Initiation
* AbbVie Rated New Market Perform at Bernstein; PT $203
* Amgen Rated New Outperform at Bernstein; PT $380
* Bristol Myers Rated New Market Perform at Bernstein; PT $56
* Constellation Energy Rated New Overweight at JPMorgan; PT $342
* Eli Lilly Rated New Outperform at Bernstein; PT $1,100
* Gilead Rated New Outperform at Bernstein; PT $105
* Lonza Rated New Buy at Kepler Cheuvreux; PT 630 Swiss francs
* Merck & Co Rated New Market Perform at Bernstein; PT $115
* Moderna Rated New Market Perform at Bernstein; PT $55
* Pfizer Rated New Market Perform at Bernstein; PT $32
* Ventura Offshore Holding Rated New Buy at ABG; PT 45 kroner

>>> Call
* Endesa a Hold at Jefferies, Regulatory Upside Mainly Priced In
* Givaudan’s Earnings Growth Limited in 2025, Citi Downgrades
* Goldman’s Trading Desk Sees S&P 500 Reaching 6,270 by Year-End
* Buy DAX Strangles to Play SAP Earnings, JPMorgan Strategists Say
* Novonesis Cut at Citi, Growth Expectations Difficult to Achieve

>>> US After Hours Summary: AA +8.8%, SNV +3.1%, STLD +2.8% higher on earnings;

After Hours Summary: AA +8.8%, SNV +3.1%, STLD +2.8% higher on earnings; EFX -4.6%, CSX -4.3%, KMI -2.6%, DFS -1.2% lower on earnings; GEVO +45.8% and CLMT +18.6% higher on Dept of Energy awards

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: AA +8.8% (also Alcoa and IGNIS Equity progressing toward cooperation agreement), SNV +3.1%, STLD +2.8%, HOMB +1.8%, FR +0.7%

Companies trading higher in after hours in reaction to news: GEVO +45.8% (Dept of Energy awards $1.46 bln commitment for its Net-Zero 1 project), CLMT +18.6% (Dept of Energy awards $1.44 bln commitment to Montana Renewables), CODI +1.6% (authorizes new $100 mln share repurchase program), ACAD +0.7% (Health Canada grants marketing authorization of DAYBUE), RKLB +0.4% (adds Electron launch to its launch manifest for a commercial mission), CAAP +0.3% (Sept traffic), REAX +0.2% (files for $100 mln share offering by the co and 45 mln share offering by the selling shareholders)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: PAL -9.3%, EFX -4.6%, CSX -4.3%, LBRT -3.6%, SLG -2.9%, KMI -2.6%, CNS -2.3%, DFS -1.2%, PPG -0.9%, CCI -0.6%, TFIN -0.5%, REXR -0.2%

Companies trading lower in after hours in reaction to news: LCID -11.6% (files mixed shelf securities offering ; also offering of 262,446,931 shares and corresponding investment by an affiliate of PIF), CMTL -11.1% (to delay 10-K filing), CAPR -9.1% (stock offering), CERS -5.6% (provides updates on INTERCEPT red blood cell programs), HCSG -2.2% (identifies a cybersecurity incident), ERO -1.7% (full power has been restored at Tucuma), LXRX -1% (licensing agreement for Sotagliflozin), PSX -0.4% (to cease ops at its Los Angeles-area refinery in 4Q25), AMBC -0.2% (approve sale of Legacy Financial Guarantee Business), CTO -0.1% (files $500 mln mixed shelf securities offering)

FT : Uber explored possible bid for Expedia in ‘super app’ growth push

Uber explored possible bid for Expedia in ‘super app’ growth push
Buying the travel website would be the ride-hailing group’s biggest deal as it looks to diversify

Uber has explored a possible bid for Expedia, the nearly $20bn US travel booking website, in what would be by far the ride-hailing company’s largest acquisition as it looks to diversify further and find new avenues for growth.

Uber approached advisers in recent months after the idea of an Expedia acquisition was broached by a third party to examine whether such a deal would be possible and how it could be structured, according to three people familiar with the process. 

A focus of Uber’s discussions was the role of Uber chief Dara Khosrowshahi, who served as Expedia’s CEO from 2005 to 2017 and remains a non-executive director on its board. That makes it likely that any approach would be friendly and that he would recuse himself from deal discussions.

The people briefed on the matter cautioned that Uber’s interest was at a very early stage and it was possible that a deal would not transpire. No formal approach has been made to Expedia and there are no current discussions, one person said. 

Khosrowshahi is a protégé of Barry Diller, the serial dealmaker who serves as Expedia’s executive chair. The Uber chief worked at Diller’s internet and media group IAC for seven years and has described him as a “great mentor of mine”.

Uber, Expedia and Diller declined to comment. Following the Financial Times report, Expedia shares jumped 7.6 per cent in after-hours trading, while Uber fell nearly 2.7 per cent.

In recent years, Uber has expanded from its ride-hailing roots into train and flight bookings, food delivery, corporate logistics and advertising as it seeks to transform itself into a “super app” akin to the multipurpose platforms built by Chinese tech groups such as WeChat.

Khosrowshahi told the Financial Times this week, “Anywhere you want to go in your city and anything that you want to get, we want to empower you to do so.”

Adding Expedia and its booking technology would turbocharge those ambitions. The fourth-largest online travel company generated $12.8bn in revenue for 2023 amid a post-pandemic tourism boom but it cautioned this summer that it faced a slowdown in travel demand.

Uber’s M&A firepower has been strengthened by an 85 per cent surge in its stock over the past year, giving it a market capitalisation of $173bn. In February, the San Francisco-based company reported its first year of operating profitability, driven by resurgent demand for ride-hailing alongside its food delivery, logistics and fast-growing advertising arm.


Chief financial officer Prashanth Mahendra-Rajah said in August that Uber’s “top priority” for deploying capital was investing in growth, including via acquisitions.

Expedia’s stock has risen more than 50 per cent in the past year, but it is only a tenth of its potential suitor’s size, with a market valuation of just below $20bn.

Uber has made few large deals since it went public in 2019. It expanded into food and beverage delivery via the acquisitions of Postmates for $2.65bn and Drizly for $1.1bn, entered the freight and logistics business through the $2.25bn purchase of Transplace and struck a $3.1bn deal for Careem, a Middle Eastern ride-hailing business. 

The company also owns stakes in self-driving car company Aurora and Chinese ride-hailing group DiDi, and recently struck partnerships with Google’s Waymo autonomous taxi service and GM’s Cruise.

In August, Uber secured its first investment-grade credit rating. Executives were keen to ensure that any bid for Expedia would not result in a downgrade back to junk, two people briefed on its interest said.

At Expedia, Khosrowshahi became one of America’s best-paid executives. Uber compensated him for the $160mn in options he gave up on leaving Expedia with options tied to him boosting his new employer’s valuation to $120bn and staying for five years. 

Uber’s stock fell immediately after its listing but has since surged, lifting the value of Khosrowshahi’s options to about $136mn by the end of February. The shares have since risen by another 23 per cent.

FT : Weight-loss drugs show promise in tackling opioid and alcohol abuse

Weight-loss drugs show promise in tackling opioid and alcohol abuse
Observational study points to the potential of blockbuster drugs such as Ozempic beyond tackling obesity and diabetes

Ozempic and similar products cut opioid and alcohol abuse by up to half, according to research that adds to evidence of the hugely popular blockbuster drugs’ broad potential beyond tackling obesity and diabetes.

An analysis of more than 500,000 people with a history of opioid-use disorder showed that more than 8,000 participants who were separately prescribed so-called GLP-1 drugs, such as Ozempic, had a 40 per cent lower rate of opioid overdose than those who did not.

In the more than 5,000 participants suffering from alcohol abuse and using a GLP-1 drug, there was a 50 per cent lower rate of intoxication than for those without a prescription.

The study, published in the journal Addiction on Thursday, is the latest effort to find medicinal ways to combat addiction. It will provide further understanding of the ever-growing potential uses of GLP-1s and boost hopes of tackling the US opioid epidemic.

The findings “provide significant initial evidence that GLP-1 receptor agonists such as semaglutide are associated with reduced rates of overdose and intoxication in patients with opioid and alcohol use disorders”, said Fares Qeadan, associate professor of biostatistics at Loyala University and a lead researcher for the paper.

Matt Field, a professor of psychology at the UK’s Sheffield university who was not involved in the study, said the study addressed “very extreme instances of substance intoxication” rather than whether users stopped taking the substance altogether — an outcome often tested by researchers studying treatments for addiction.

Field added that while Ozempic “may prevent people from taking so much alcohol or heroin that they overdose and end up in hospital, it may not actually help them to reduce their substance use, or to abstain altogether”.

The results were based on analysis of electronic health records, and randomised controlled trials would be needed to establish a causal link, he added.

The study was published as the US continues to be ravaged by an epidemic linked to overprescription of opioids in the 1990s and the subsequent abuse of heroin and synthetic drugs such as fentanyl. There were more than 81,000 deaths involving opioids in the US in 2023, a drop of 3.7 per cent on the year earlier.

Researchers have already made progress in improving the effectiveness of naloxone, a widely used overdose treatment, as well as developing non-opioid based treatments to treat addiction. Qeadan said GLP-1s could potentially become a new treatment option, particularly for those who do not fully respond to existing drugs.

The GLP-1 receptors that Ozempic activated to stimulate insulin production and slow food passing through the stomach were also present in the brain’s reward system and were linked to cravings, Qeadan added. Researchers are also exploring GLP-1 effects on nicotine addiction and alcoholism in clinical trials.

However, there are challenges to expanding the use of GLP-1s. Their effectiveness has led to high demand and sustained supply shortages of Ozempic, Wegovy and other blockbuster drugs in the class of medications. Known side-effects such as nausea and vomiting lead many users to stop using the drugs within a year.

Ozempic manufacturer Novo Nordisk is conducting a study into how a new experimental GLP-1 combining semaglutide with another compound, cagrilintide, could be used to treat alcohol use in patients with liver disease. The Danish company is also exploring whether semaglutide can tackle degenerative conditions, such as Alzheimer’s, in a sign of the wide-ranging potential drugmakers believe the drugs have.

Beyond semaglutide, participants in the latest study were using drugs including Eli Lilly’s weight loss and diabetes drug tirzepatide, the active ingredient in Mounjaro, and Novo Nordisk’s liraglutide, which is sold under the brand names Victoza and Saxenda to treat both diabetes and obesity.

FT : China to boost lending to finish stalled property projects to $560bn

China to boost lending to finish stalled property projects to $560bn
Beijing is trying to restore confidence in economy amid prolonged real estate slowdown

China plans to almost double credit support for a selected group of housing projects to Rmb4tn ($562bn) as part of official efforts to reinvigorate its property sector and turn around the economy.

The so-called whitelist was introduced in January and includes projects and developers eligible to receive further financing from local and state-owned banks to help them complete unfinished projects.

Approved loans for whitelisted projects so far this year total Rmb2.2tn, according to housing minister Ni Hong, who announced the move at a press conference in Beijing on Thursday. The new funds should be deployed by the end of the year, he said, enabling developers to finish construction. “We can definitely win this battle to ensure the delivery of housing,” Ni said.

The expansion of the credit support follows a recent push from Beijing to restore confidence in the Chinese economy, where a prolonged property slowdown has combined with weak consumer demand to raise calls for more fiscal stimulus.

Authorities in September unveiled measures to support the sector, including cutting borrowing costs and easing rules for purchases of second homes. These plans, which came alongside measures to boost the stock market, buoyed hopes of a major intervention.

Xi Jinping’s government, which initially intervened to reduce leverage in the property sector in 2020, has so far held back on announcing any direct stimulus, preferring instead to encourage China’s state-owned banking sector to provide more credit.

Previous policies include a November 2022 unveiling of bank credit lines and a May plan that aimed to mobilise state-owned enterprise purchases of unsold housing. The extent of bank participation has been unclear.

In a sign that the increased support fell short of investor expectations, Chinese property developers listed in Hong Kong declined on Thursday. The Hang Seng Mainland Properties index fell 3.4 per cent, with online listings platform KE Holdings and developer Longfor Group leading losses.

Zerlina Zeng, head of Asia credit strategy at CreditSights, said banks “might be reluctant to extend additional funding to incomplete home projects as they still need to bear the credit risk”. She added that a large amount of the money lent up to August through the whitelist programme was for refinancing existing debt.

Jeff Zhang, an analyst at Morningstar, said he expected an “acceleration in execution, with more distressed developers receiving funds for home completions, which would help shore up homebuyers’ confidence”.

China’s housing market is still dominated by newly constructed homes that are bought before completion, though purchases have this year shifted to existing properties amid concerns over developer health. 

On Thursday, the housing minister said that since the end of September, the number of viewings and purchases of new homes had shown a “clear increase” and that transaction volume in the secondary market “continued to rise”.

New home prices in August fell at their fastest pace in nine years, with a 5.3 per cent drop across major cities, according to Reuters calculations.

>>> US Close Dow +0.79% S&P +0.47% Nasdaq +0.28% Russell +1.64%

Closing Stock Market Summary
The stock market had a solid showing today. The Russell 2000 continued its recent outperformance, jumping 1.6%, bringing its weekly gain to 2.5%. The S&P 500 (+0.5%), Nasdaq Composite (+0.3%), and Dow Jones Industrial Average (+0.8%) settled with solid gains near their highs of the day.

The influential financial sector (+1.2%) played a leadership role today after earnings news from the space received positive responses. Morgan Stanley (MS 119.51, +7.29, +6.5%), First Horizon (FHN 17.39, +0.68, +4.1%), and Synchrony Financial (SYF 56.52, +3.23, +6.1%) are among the standouts in that respect.

Rebound action in some semiconductor-related names after yesterday's sharp selling also contributed to the upside bias today, along with buy-the-dip interest in other areas of the market. NVIDIA (NVDA 135.72, +4.12, +3.1%) and Broadcom (AVGO 176.82, +0.84, +0.5%) were top performers from the PHLX Semiconductor Index (SOX), which settled 0.2% higher.

Many stocks participated in today's advance. Advancers led decliners by a 4-to-1 margin at the NYSE and by a nearly 3-to-1 margin at the Nasdaq. The equal-weighted S&P 500 settled 0.7% higher.

The 10-yr yield settled two basis points lower to 4.02% and the 2-yr yield dropped one basis point to 3.94%.
  • Nasdaq Composite: +22.4% YTD
  • S&P 500: +22.5% YTD
  • S&P Midcap 400: +14.8% YTD
  • Dow Jones Industrial Average: +14.3% YTD
  • Russell 2000: +12.8% YTD

Reviewing today's economic data:
  • Weekly MBA Mortgage Applications Index -17.0%; Prior -5.1%
  • September Import Prices -0.4%; Prior was revised to -0.2% from 0.8%
  • September Import Prices ex-oil 0.1%; Prior was revised to 0.1% from -0.1%
  • September Export Prices -0.7%; Prior was revised to -0.9% from -0.7%
  • September Export Prices ex-ag. -0.9%; Prior was revised to -0.7% from -0.6%

There's a lot of economic releases to get through tomorrow, including:
  • 08:30 ET: Initial Jobless Claims (consensus 270K; prior 258K) and Continuing Jobless Claims (Prior 1861K); September Retail Sales (consensus 0.2%; prior 0.1%) and Retail Sales Ex-Auto (Briefing.com consensus 0.1%; prior 0.1%); October Philadelphia Fed Index (consensus 4.0; prior 1.7)
  • 09:15 ET: September Industrial Production (consensus -0.1%; prior 0.8%) and Capacity Utilization (Briefing.com consensus 77.9%; prior 78.0%)
  • 10:00 ET: August Business Inventories (consensus 0.3%; prior 0.4%); October NAHB Housing Market Index ( consensus 43; prior 41)
  • 10:30 ET: EIA Natural Gas Inventories (Prior +82 bcf)
  • 11:00 ET: EIA Crude Oil Inventories (Prior +5.81M)
  • 16:00 ET: August Net Long-Term TIC Flows (Prior $135.4B)