>>> Weekly Market Update

Weekly Market Update: Early 2024 unwinds some of the prior year’s optimism

The New Year’s trade opened with a modest unwind of the trading flows that prevailed over the last two months. Treasury yields moved up along with a strong US dollar, while stock indices lost their underlying bid. Defensive groups like energy, utilities and healthcare saw rotation in, while the ‘Magnificent 7’ and other high flying tech names experienced selling pressure. Global economic data turned a bit more hawkish with re-acceleration seen in Eurozone inflation and US payrolls. FOMC minutes underscored the gulf that exists between market expectations and the sense of urgency from the FOMC to begin cutting rates aggressively. The US 10-year yield tracked back to 4% and the VIX volatility index edged a bit higher off of recent cycle lows. For the week, the S&P lost 1.5%, the DJIA was off 0.6%, and the Nasdaq fell 3.3%.

Geopolitics drifted to the forefront of investors’ minds, potentially weighing on sentiment to some degree. The Gaza war dragged on and concerns about a wider conflict resurfaced after a key Hamas leader was killed by a drone strike in a key Hezbollah stronghold in Lebanon. Shipping attacks in the Red Sea continued while the US and allies issued an ultimatum to Iranian-backed Houthis to cease and desist or otherwise face "consequences." Finally, Iran vowed a quick and forceful response to a significant terrorist attack near the grave of the late General Soleimani which resulted in more than 100 deaths. Early in the week, WTI crude tested below $70/bbl, but prices rebounded amid the ongoing uncertainty emanating out of the Middle East.

In corporate news this week, signals for the economy were more weighted towards a slowdown scenario. McDonald’s CEO sent his stock lower with a New Year’s update that mentioned a 'meaningful business impact' from the Middle East war. Walgreens reported some unfavorable US retail trends impacting its Q2, and said it would evaluate strategic options, while slashing its bloated dividend almost in half. Xerox shares dropped after announcing a restructuring that will eliminate 15% of its workforce by the end of the quarter. Automakers reported solid Q4 unit sales, highlighted by Tesla beating production estimates with nearly a half millions cars produced in the quarter. But that success was tempered by an earnings warning from EV sensor supplier Mobileye, suggesting there may be an excess of parts inventory at its customers.

Supply chain issues continued to reemerge as instrument manufacturer Mettler Toledo cut guidance based on delays at a European logistics provider. Global shipping giant Maersk announced it will be diverting all of its containerships away from the Red Sea route, telling customer to prepare for some disruptions. M&A continues to brew in the background, as reports on Friday said that both Ansys and Southwestern Energy are near deals to be acquired by rival firms. Meanwhile the DOJ was said to be wrapping up preparations for an antitrust suit against Apple over its use of market position to protect its core business from competition.


WEEKEND
(CN) CHINA DEC MANUFACTURING PMI (GOVT OFFICIAL): 49.0 V 49.6E (3rd month of contraction and 6-month low)

MON 1/1
(JP) 7.6 magnitude earthquake reported off west coast of Japan; Japan dropped its highest-level tsunami alert hours after; all tsunami warnings were later lifted
(IL) Israeli military official: Thousands of Israeli soldiers are being shifted out of the Gaza Strip [**Note: the first significant drawdown of troops since the war began]
ASML.NL Chinese shipment license partially revoked by the Netherlands government; Reiterates will not impact financial outlook
005930.KR Said to guide 2024 chip unit Op KRW11.5T; notes rebound in DRAM prices, AI-related demand - South Korea press
(SG) Singapore Q4 Advance GDP Q/Q: 1.7% v 0.7%e [fastest growth since Q3 2022]; Y/Y: 2.8% v 1.8%e
(HK) Macau Dec Casino Rev Y/Y: +433.3% v +402.0%e
(CN) CHINA DEC CAIXIN PMI MANUFACTURING: 50.8 V 50.3E [2nd month of expansion; highest since Aug]
YY Baidu terminates previously proposed $3.6B deal to acquire Joyy

TUES 1/2
PNM Avangrid terminates merger agreement; Affirms long-term 5% earnings growth target
(IT) ITALY DEC PMI MANUFACTURING: 45.3 V 44.2E (9th month of contraction) (highest since Sept 23')
TSLA Reports Q4 deliveries 484.5K v 483Ke v 435.1K q/q, production 495.0K vehicles v 482.4Ke
(CA) Canada Dec PMI Manufacturing: 45.4 v 47.7 prior (8th month of contraction and lowest since pandemic)
(FR) France's CMA-CGM, 3rd largest container shipping firm in the world, raises container shipping rates from Asia to the Mediterranean region by 100%; Effective Jan 15
(US) Atlanta Fed GDPNow: Cuts Q4 GDP from 2.3% to 2.0%
(US) NY Fed takes $704.9B in RRP program 5.30%; 78 participating and accepted counterparties (lowest dollar amount since Dec 15th)

WED 1/3
(TW) Taiwan Vice-President William Lai (ruling DPP) and Taiwan opposition party Kuomintang (KMT) Hou Yu-ih [seen as more China-friendly] have 33% and 30% of votes, respectively, according to final TVBS poll, ahead of Jan 13th's elections
(UK) Kantar announces 12 week grocery market share and sales: UK grocery inflation slows to 6.7% v 9.4% prior (the fastest month on month drop on record)
(DE) GERMANY DEC NET UNEMPLOYMENT CHANGE: +5.0K V +20.0KE; UNEMPLOYMENT CLAIMS RATE: 5.9% V 5.9%E
(CN) Chinese Communist Party mouthpiece newspaper urges China regulators to end their erratic moves against Big Tech firms - SCMP
(US) Robert F. Kennedy Jr. reportedly collected enough signatures to appear on the 2024 presidential ballot in Utah [**Note: the first state where the independent candidate has qualified]
(IR) Several explosions heard in central Iran near the grave of General Soleimani, with several people wounded; Iranian official says the incident is considered a terror attack - press
XRX Announced new operating model and organizational structure for company reinvention; Targets 15% workforce reduction in Q1 2024
*US 10-YEAR YIELD TESTS 4.00% FOR THE 1ST TIME SINCE MID-DEC AMID BROAD RISK AVERSE FLOWS
(US) NOV JOLTS JOB OPENINGS: 8.79M V 8.82ME
(US) Atlanta Fed GDPNow: Raises Q4 GDP from 2.0% to 2.5%
(IL) US, UK, Australia, Canada, and others issue joint statement giving Houthi rebels a final warning to cease attacks in the Red Sea or face "consequences"

THRS 1/4
(DE) GERMANY DEC CPI NORTH RHINE WESTPHALIA M/M: -0.1% V -0.3% PRIOR; Y/Y: 3.5% V 3.0% PRIOR (highest Y/Y pace since Sept, but 3rd straight M/M drop, 1st time since 2015)
NXT.UK Q4 Trading Update: Raises again PBT outlook citing sales in Christmas period better than expected; Difficulties with access to the Suez Canal, if they continue, are likely to cause some delays to stock deliveries in the early part of the year
NXT.UK *TTN Research Alert: Next becomes the first major retailer to mention potential impact from Red Sea and Suez Canal disruptions; CEO expects a material impact from shipping delays
(IT) ITALY DEC PMI SERVICES: 49.8 V 49.9E (5th month of contraction)
(EU) EURO ZONE DEC FINAL PMI SERVICES: 48.8 V 48.1E (confirms 5th month of contraction, but highest since July)
(US) BOFA INSTITUTE: WEEK-TO-DEC 30TH TOTAL CARD SPENDING +1.0% Y/Y V +0.5% AVG IN NOV
(US) Top House GOP lawmakers push Senate and the Biden administration to insert restrictive border policies into any government funding bills heading into the Jan 19th and Feb 2nd deadlines - Punchbowl
(CN) China regulators to leave solar wafer technology off its revised list of items restricted from export - press
BELA.GR Exec: Shoplifting exceeded its annual profits last year; The shoplifters were increasing prices for others - FT
MBLY Guides Q1 Rev $458M v $598Me, -50% y/y; Guides FY24 sharply below consensus; Aware of excess inventory at its customers, which expected to be mostly cleared during Q1 and to be at normal levels by end-2024
CAG Reports Q2 $0.71 v $0.68e, Rev $3.21B v $3.24Be; Cuts outlook citing slower expected volume recovery; -0.5% impact on Organic Rev from price/mix v +6.3% q/q; Notes domestic retail business improved substantially q/q
LLY Launches End-to-End digital healthcare experience through LillyDirect, including digital pharmacy for select Lilly medicines with home delivery; Medicines fulfilled by pharmacy service providers through LillyDirect Pharmacy Solutions ship free of charge
(DE) GERMANY DEC PRELIMINARY CPI M/M: 0.1% V 0.2%E; Y/Y: 3.7% V 3.7%
Redfin: U.S. pending home sales dropped 3.3% y/y (prior week -4.0%) during the four weeks ending Dec 31st, the smallest decline since Jan 2022; New listings +9.5% y/y v +12.2% prior
(IL) Israel Defense Min Gallant: Window for Lebanon diplomatic understanding is short
WBA *Notes unfavorable U.S. retail trends impacting Q2, intensifying headwinds from macro-driven consumer pressures; Guides Q2 $1.16 v $0.94e; Holding share in slower market trends in pharmacy script volumes - earnings slides
(US) DOE CRUDE: -5.5M V -3.5ME; GASOLINE: +10.9M V -0.5ME; DISTILLATE: 10.1M V +0.5ME
MCD CEO: Middle East war is causing 'meaningful business impact' to brands like McDonald’s
(US) NY Fed takes $664.9B in RRP program 5.30%; 78 participating and accepted counterparties (lowest dollar amount since June 2021)
COST Reports Dec Total SSS +8.1%** y/y (ex-gas and FX); US SSS +7.4%** (ex-gas and FX)
MTD Cuts guidance: Q4 sales and Adj EPS 'will be below previously-issued guidance', citing delays at a new European logistics provider
US Vice Admiral Copper: There is no sign that Houthis' irresponsible behavior in the Red Sea is abating
(KR) South Korea orders evacuation of YeonPyeong island near North Korean border following North Korea fired artillery shells near the island - Korea press

FRI 1/5
(JP) Head of Rengo [largest trade union in Japan] Yoshino: Japan’s corporations need to boost wages enough in the coming fiscal year that the increases exceed the previous period’s gains for a second year; Vital that wages outpace inflation for 2 years
005930.KR Reportedly Samsung cut its Q1 wafer foundry price quotes by 5-15% to attract customers and fill production; Taiwanese firms such as UMC, VIS and PSMC also said to implement price cuts of 15-20% for some customers in Q1 2024 (biggest price cuts since the pandemic) - Taiwanese press
9983.JP Reports Dec Domestic Uniqlo SSS -15.4% y/y (biggest drop since Aug 2021)
(US) Biden administration officials are drawing up plans for the US to respond to a potentially wider, protracted regional conflict in Middle East - Politico
TTN Research Alert: Fed's Overnight Reverse Repo Program (O/N RRP) facility dropped below $670B yesterday for the first time since June 2021; Most recent New York Fed survey of Wall Street’s biggest banks sees ~$625B level as potential trigger for Fed's QT program
(DE) GERMANY NOV RETAIL SALES M/M: -2.5% V -0.5%E; Y/Y: -2.0% V -0.5%E
(UK) DEC HALIFAX HOUSE PRICE INDEX M/M: 1.1% V 0.5% PRIOR; Y/Y: +1.7% V -1.0% PRIOR (3rd straight monthly rise and first positive Y/Y pace since Apr)
2317.TW Reports Dec (NT$) Rev 460.1B -26.9% y/y v 650B m/m; 2023 Rev -7% y/y; Q1 Rev expected to decrease y/y
(CN) China reportedly to start anti-dumping probe into some EU liquor products, including brandy - press
(UK) DEC CONSTRUCTION PMI: 46.8 V 46.1E (4th straight contraction but highest since Aug)
(CN) China troubled shadow bank Zhongzhi formally files for bankruptcy - press
EU) EURO ZONE DEC ADVANCE CPI ESTIMATE Y/Y: 2.9% V 3.0%E; CPI CORE Y/Y: 3.4% V 3.4%E (Core CPI pace lowest since spring 2022)
(IT) ITALY DEC PRELIMINARY CPI M/M: 0.2% V 0.3%E; Y/Y: 0.6% V 0.7%E (lowest annual pace since spring 2021)
(US) More press reports Pres Biden reportedly preparing to keep many of ex-Pres Trump tariffs on $300B of China imports, but still considering lower duties on some consumer goods from China; Biden hasn't made a final decision, but announcement expected in the coming weeks - Axios
(IN) India Govt Official: Current import inventory cushion under threat if Red Sea conflict is prolonged
MAERSKB.DK *Confirms risk with Red Sea and Gulf of Aden continues to be at a significantly elevated level, to divert ALL ships from Red Sea transit
SIMO Reports prelim Q4 Rev growth q/q to slightly exceed the high-end of its original guidance range of 10-15%
(US) US FDA said to allow Florida state to import medications, including for Medicaid, from Canada, where prices are lower - NYT [**Note: would make Florida the first US state to do so]
(US) DEC CHANGE IN NONFARM PAYROLLS: +216K V +175KE (highest print since Sept); Prior month prints saw lower revisions
(US) DEC AVERAGE HOURLY EARNINGS M/M: 0.4% V 0.3%E; Y/Y: 4.1% V 3.9%E
(US) DEC UNEMPLOYMENT RATE: 3.7% V 3.8%E
(US) NOV FACTORY ORDERS: 2.6% V 2.4%E
(US) OCT FINAL DURABLE GOODS ORDERS: 5.4% V 5.4%E; DURABLES (EX-TRANSPORTATION): 0.4% V 0.5%E
(US) Weekly Baker Hughes Rig Count: 621 v 622 prior (~flat w/w)
ANSS Reportedly Synopsis discussing cash-and-stock deal at around $400/shr, which would value ANSS at around $35B; Talks are exclusive and deal could be announced next week - press
AAPL Reportedly DOJ is in late stages of antitrust probe with focus on how Apple used its range of products and services to block threats to its core business - NYT
SWN Reportedly Chesapeake nearing deal to acquire Southwestern Energy; Combination would create a natural gas firm with an enterprise value of $17B - WSJ

WWD : Louis Vuitton’s Giant Dragons Land in Beijing, Shanghai and Chengdu

Louis Vuitton’s Giant Dragons Land in Beijing, Shanghai and Chengdu
The installations and pop-ups are part of a localized activation plan for Pharrell William's first men's collection.

Louis Vuitton's 2024 Lunar New Year Dragon installation at Chengdu's The Hall.

In honor of the Year of the Dragon, Louis Vuitton has unveiled five larger-than-life dragon installations at pop-ups and flagships in Beijing, Shanghai and Chengdu.

The dragons, crafted by artisans in China, incorporate key design elements from Pharrell Williams’ first men’s collection for Louis Vuitton, such as pearls, gilded surfaces, and the classic Damier check.

In Shanghai, Louis Vuitton took over a three-story building — which originally housed the local multi-brand store Looknow — with a dedicated pop-up for the men’s spring 2024 collection and an illuminated dragon installation.

Louis Vuitton’s Shanghai dragon installation at Looknow.
A second Shanghai dragon landed at Louis Vuitton’s Qiantan Taikoo Li store. This time, the green dragon, sporting bedazzled fangs, resembles the embroidered version seen on the back of Williams’ souvenir jacket that he had worn during his whirlwind China tour last month.

In Chengdu, Vuitton also installed two green dragons; one at the Louis Vuitton Maison at Chengdu Taikoo Li and another at the adjacent The Hall restaurant.
Louis Vuitton’s dragon installation at The Hall.
The dragon installation at Louis Vuitton Maison in Chengdu.

In Beijing, Louis Vuitton’s dragon comes drenched in gold and can be seen at a temporary space in Sanlitun‘s north district, adjacent to a soon-to-be-unveiled flagship.
Louis Vuitton’s Sanlitun dragon in Beijing.

The dragon installations and pop-ups reflect a distinctively localized activation plan for William’s first collection as well as a festive initiative to win over the hearts and wallets of Lunar New Year shoppers.

Vuitton unveiled dedicated store concepts simultaneously in more 50 locations worldwide, including a pop-up and 16 windows at Selfridges department store in London and a makeover of its permanent pop-up space in Seoul. The installations will remain in place for a period of one to three months, depending on the location.

In tandem, the brand plans in-store happenings, DJ residencies and food concepts, reflecting Vuitton’s self-described positioning as a “cultural” brand with broad reach across segments including sports, gaming, music and art.

FT : Signa’s administrator seeks €350mn to avert fire sale of assets

Signa’s administrator seeks €350mn to avert fire sale of assets
Erhard Grossnigg wants cash to avoid selling incomplete projects at knockdown prices

Administrators at René Benko’s collapsed European property empire are seeking €350mn from investors to forestall a painful fire sale of assets in the coming weeks.

Signa Prime and Signa Development, the two holding companies that own the bulk of the wider Signa Group’s property assets, wrote to shareholders just days before Christmas urging them to stump up fresh capital, according to a copy of the letter seen by the Financial Times.

Erhard Grossnigg, the companies’ administrator, said hundreds of millions of euros were needed “quickly” to tide the companies over until April and avoid writedowns.

Signa confirmed the figure but declined to comment further on the content of the letter. A spokesperson for Grossnigg declined to comment.

Without the money, the two businesses will have no option but to try to sell their assets in an already troubled commercial property market.

Both filed for insolvency on December 28, with debts of €5.6bn.

Their parent company, Signa Holding, was the first domino to fall in Benko’s sprawling property empire — a network of more than 1,000 different companies, foundations and trusts — when it entered insolvency in November. It owes a further €5bn. The total debts owed by the Signa Group are unknown but estimated by analysts to be in excess of €15bn.

The needs of Signa Prime are most pressing in the short term, with the group requiring €300mn, according to the letter. The company owns some of Benko’s most prized assets, which include the half-finished Elbtower in Hamburg, Germany’s third-largest skyscraper, as well as luxury department stores in the country’s biggest cities, and some of the most valuable real estate in Vienna.

The FT reported last month that Signa Prime had already taken a steep discount on its most prized property, as it struggled to stay afloat last year.

The company sold half of the KaDeWe building in Berlin — the city’s most famous department store — to Thailand’s Central Group, which already owns half of the KaDeWe operating company.

The building was valued by Signa Prime at more than €1.5bn. It has a €500mn mortgage against it. The 50 per cent equity stake was sold for €300mn, implying a 30 per cent discount to its most recent valuation.

In the letter to shareholders, Grossnigg noted that new money was particularly needed to try to complete some projects, which in total could be worth billions less than anticipated if they are sold as construction sites.

He also warned that banks had first claim on many individual assets of Signa Prime and Signa Development because of direct mortgages against the properties themselves, meaning that a fire sale could completely wipe out value for lenders and shareholders lower down the chain.

Investors in Signa have been coming to terms with the bewildering complexity of the company since its collapse late last year. The accounts of the Signa Group were never consolidated, and thanks to the way Benko ran the business — shifting around assets, cash and debts — some investors have been left unaware of what assets they have a claim on.

WSJ : Ecstasy-for-Medicine Advocate Raises $100 Million

Ecstasy-for-Medicine Advocate Raises $100 Million
Series A funding raises more than $100 million for MAPS amid a flurry of deals by competitors

The Multidisciplinary Association for Psychedelic Studies, a nonprofit leader in the pharmaceutical psychedelics industry, has raised more than $100 million in a Series A private stock sale.

MAPS needed the money to fund the final stages of its application for regulatory approval to sell MDMA, also known as Ecstasy, to treat post-traumatic stress disorder, the organization said in an announcement Friday.

The share sale, through MAPS Public Benefit Corporation, comes amid a flurry of financings by companies jockeying to come first to market with psychedelic treatments for mental illnesses that are hard to treat with conventional drugs. The Wall Street Journal previously reported that the MAPS deal was in the works.

Publicly listed Atai Life Sciences announced this week a $50 million investment in U.K.-based Beckley Psytech, a private company developing a rapid-acting psychedelic medicine for depression. Small Pharma, another U.K.-based manufacturer of fast-acting psychedelics, agreed in August to be acquired by Canadian company Cybin in an all-stock deal.

Compass Pathways disclosed in August an up-to-$285 million sale of stocks and warrants to hedge-fund managers including TCG Crossover Management and Ken Griffin’s Citadel Advisors. The capital will help Compass run clinical trials through late 2025 using psilocybin—the active ingredient in magic mushrooms—to treat depression, the company said. Compass is also partially owned by Atai.

Hopes are high that psychedelics could help millions of patients, but first developers must clear the expensive regulatory approval process. That is forcing many startups to sell stock at a time when biopharmaceutical valuations are low.

Investors in the MAPS Series A include Helena, an organization aimed at solving global problems; venture-capital firm Vine Ventures; a foundation funded by hedge-fund manager Joe Samberg; and a foundation funded by hedge-fund manager Steven Cohen and his wife, Alex Cohen.

The public-benefit corporation also dropped MAPS from its name and announced it would rebrand as Lykos Therapeutics. Rick Doblin, the founder of MAPS and a leader in the psychedelic legalization movement, will remain on the Lykos board of directors, and Amy Emerson, another MAPS veteran, will remain its chief executive.

MAPS reported in a September filing with the Securities and Exchange Commission that the deal would increase the value of its total shares issued to $215 million. That figure doesn’t include all of the stock sold in the Series A financing, a MAPS spokeswoman said.

MAPS has completed clinical trials for MDMA and submitted a new drug application to the U.S. Food and Drug Administration in December. The FDA is expected to determine in coming weeks whether to accept the application for review, a process that can take six to 10 months.

FDA approval would force the Drug Enforcement Administration “to reschedule MDMA making it available for prescription medical use,” MAPS said.