>>> What to look at today - 3rd of January 2024

sian equities slipped, tracking a drop in US stocks and Treasuries as Wall Street’s risk-on mood faded with declines in big tech. The dollar held on to its gains.  Benchmarks in South Korea and Australia fell more than 1% after closing at their highest levels since at least mid-2022 in the previous session. Shares in mainland China were mixed. Japanese markets remain closed for a holiday. The new year has started on a somber note, after huge bets on a Federal Reserve pivot spurred a worldwide rally in both stocks and bonds in the fourth quarter. Contracts for US shares were little changed after the Nasdaq 100 dropped the most in more than two months on Tuesday as tech sector giants dubbed the Magnificent Seven fell.      Treasury futures advanced modestly in Asian hours Wednesday, but trading of cash Treasuries is still closed due to the Japanese holiday. Bonds slumped in US trading, partly reflecting doubts that policymakers will deliver the extent of monetary easing that’s priced by money markets, with central banks reluctant to give up the fight against inflation too soon.  The dollar traded in narrow range against its Group-of-10 peers after notching its biggest daily gain since March.  China tech stocks are in focus after a report that Beijing removed a top official who oversaw the nation’s gaming industry, which suggests the government is trying to tamp down a backlash against harsh new regulations that triggered an $80 billion rout across the sector. Tencent Holdings Ltd. and smaller rival NetEase Inc. reversed earlier losses. Traders are now waiting for the release of the latest Fed minutes Wednesday. The tone is expected to be hawkish, according to BMO Capital Markets’ Ian Lyngen. Wednesday’s job openings data and Friday’s nonfarm payrolls will also be scanned for signs of weakness in the labor market.  Bitcoin hovered around $45,000 after climbing above that level for the first time in almost two years Tuesday on anticipation around the expected US approval for an exchange-traded fund investing directly in the biggest token. Oil held a drop as broad risk-off sentiment undercut concerns about escalating conflict in the Red Sea. US After Hours PSTG +4.5% up on index change; BLMN +3.4% edging higher following Starboard Value pact.

Nikkei Closed Hang Seng -1.25% CSI -0.51% Shanghai -0.17% Shenzen -0.97%

Eur$ CNH CNY JPY GBP CHF RUB TRY WTI$ Gold BTC ETH

S&P -0.04% Nasdaq -0.09% EuroStoxx -0.31% FTSE -0.14% Dax -0.28% SMI

Macro :
- Goldman Tops M&A Advisory Ranking as Rivals Maneuver
- Citi Says Short Squeeze on Horizon if S&P 500 Resumes Rally
- Italy Dec. New Car Sales Rise 5.88% Y/y

Keep an eye on :
- AIR FP : Airbus Working on Up to €1.8b Offer for Atos Cyber Unit: FT
- AGR US : Avangrid to Avoid Takeovers After Abandoning $4.3 Billion Deal
- ATO FP : Airbus Working on Up to €1.8b Offer for Atos Cyber Unit: FT
- BA US : Boeing Reached Annual 737 Delivery Target With Year-End Flurry
- IBE SM : Iberdrola Ends $4.3 Billion Deal to Buy US Power Firm PNM
- LIAB SS : Lindab Buys US Manufacturer of Ventilation Duct Machinery
- MAERSKB DC : Maersk Decides the Red Sea Is Too Unsafe for Its Ships for Now
- PSH NA : Pershing Square Holdings Dec. Net Performance +9.3%
- REN PL : Portuguese Electricity Demand Rose 6.9% in December, REN Says
- RWE GY : Germany to Accelerate Write-Offs for Gas Pipelines: HB
- STLAM IM : Italian New Car Sales Jump 19% in 2023 Compared With Prior Year
- TPR US : Tapestry Rises as JPMorgan Hikes PT on Coach Strength (1)

>>> Europe : Brokers Upgrades & Downgrades - 3rd of January 2024

>>> Up
* Amgen PT Raised to $345 from $310 at Jefferies
* GSK Raised to Buy at Jefferies; PT 1,900 pence
* GSK ADRs Raised to Buy at Jefferies; PT $48
* Maersk Raised to Neutral at Goldman
* Nexstim Raised to Accumulate at Inderes; PT 3 euros
* State Street Raised to Buy at Goldman; PT $92
* Teva ADRs Raised to Neutral at Piper Sandler; PT $12
* Topdanmark Raised to Hold at Jefferies; PT 300 kroner
* Verizon Raised to Overweight at KeyBanc; PT $45
* Viaplay Raised to Hold at Jefferies; PT 6 kronor

>>> Down
* Ashmore Cut to Sell at Numis; PT 170 pence
* AstraZeneca Cut to Hold at Jefferies; PT 11,000 pence
* AstraZeneca ADRs Cut to Hold at Jefferies; PT $70
* Blackstone Cut to Neutral at Goldman; PT $128
* CME Group Cut to Sell at Goldman; PT $195
* Jazz Pharma PT Cut to $171 from $194 at Piper Sandler
* Raymond James Cut to Neutral at Goldman; PT $116
* Schwab Cut to Neutral at Goldman; PT $71
* Tecan Cut to Add at Baader Helvea; PT 400 Swiss francs

>>> Initiation
* Nvidia Rated New Neutral at DA Davidson; PT $410
* Trifork Holding Rated New Buy at SEB Equities; PT 148 kroner

>>> Call

FT : Airbus works on offer worth up to €1.8bn for Atos cyber security unit

Airbus works on offer worth up to €1.8bn for Atos cyber security unit
French IT services group seeks to restructure and cut its debt load

Airbus is working on an offer worth up to €1.8bn for Atos’s prized big data and cyber security unit, as the French IT services company seeks to restructure and cut its debt load.

Airbus and Atos are set to announce on Wednesday that the aerospace and defence company will enter due diligence on its planned offer that would place an enterprise value of between €1.5bn and €1.8bn on the French group’s unit called BDS, according to people with knowledge of the situation. 

Atos’s negotiations to sell BDS mark a change in strategic direction under recently appointed chair Jean Pierre Mustier, as he works to find a solution to how the company deals with €2.25bn in debt that matures in 2025.  

Atos’s market value has slumped by more than 90 per cent in the past three years to €782mn, while Standard & Poor’s downgraded the company’s credit rating in November citing increased liquidity risks.

Airbus has made no secret of its ambitions to expand its cyber activities. Guillaume Faury, Airbus chief executive, told the Financial Times in November the Toulouse-based company wanted to “grow in cyber”. 

The talks between Atos and Airbus over BDS are not exclusive, so other bidders may still enter the frame, people familiar with the matter said. 

French defence electronics group Thales, which has jet-fighter maker Dassault Aviation as its biggest shareholder, has been interested in BDS in the past as part of efforts to expand its cyber security business.

Thales has been considering its options in recent weeks, one person briefed on the situation said. 

Airbus declined to comment. Atos and Thales did not respond to a request for comment. 

Airbus had been in talks last year to buy a minority stake in the Atos division called Eviden, which contains BDS and the French company’s cloud computing business. However, it pulled out after Chris Hohn, the hedge fund manager and a large shareholder, objected to the plan.

At the time, people close to Airbus said it withdrew because it decided that buying a roughly 30 per cent stake would have been costly while not giving it much say over how Eviden was run.

Mustier’s predecessor as Atos chair, Bertrand Meunier, had resisted selling off parts of Atos to pay down debt, instead prioritising a plan to split the company into two.

He reached an agreement on selling Atos’s lossmaking legacy IT services business Tech Foundations to Czech billionaire Daniel Křetínský.

The rest of Atos, using the name Eviden, would remain listed, with Křetínský anchoring a €900mn capital raise that would give him a 7.5 per cent stake. 

However, many shareholders opposed the terms of the deal with Křetínský, arguing he was paying too little for Tech Foundations. Some politicians also objected to the idea of having a foreign shareholder own part of Eviden, which has technology that is used for France’s nuclear weapons arsenal. 

Under Mustier’s leadership, Atos is now renegotiating the terms of the agreement with Křetínský, with support from the company’s new lead shareholder Onepoint, which has built an 11 per cent stake.

People close to Křetínský have said talks will focus on getting him out of the Eviden leg of the deal.

“This is a discussion we are happy to have and all the players are all more or less aligned on that,” said a person close to the Czech businessman. 

>>> After Hours Summary: PSTG +4.5% up on index change; BLMN +3.4% edging higher

After Hours Summary: PSTG +4.5% up on index change; BLMN +3.4% edging higher following Starboard Value pact
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: None
Companies trading higher in after hours in reaction to news: ASTS +5.8% (interim update on fundraising), LBPH +4.8% (commences $150 mln stock offering), GLYC +4.8% (project agreement with Patheon Manufacturing Services), PSTG +4.5% (joining S&P MidCap 400), PGTI +4.3% (unsolicited proposal from Miter Brands), BLMN +3.4% (cooperating agreement with Starboard Value), PDCO +2.2% (joining S&P SmallCap 600), MOD +2.1% (invests in liquid immersion cooling), CMPS +0.7% (Citadel Advisors disclose passive stake), BROS +0.6% (appoints new CEO), CIVI +0.6% (stock offering), AMC +0.4% (discloses series of exchange agreements), CHS +0.1% (replaced in S&P SmallCap 600)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: None
Companies trading lower in after hours in reaction to news: SLNO -2.5% (files mixed shelf) DYN -2.4% (to host event tomorrow)

>>> US Close Dow +0.07% S&P -0.57% Nasdaq -1.63% Russell -0.70%

Closing Stock Market Summary
The stock market entered 2024 on a mixed note. Profit-taking activity in the mega cap stocks, and other stocks that outperformed last year, weighed over the broader market following nine-straight weeks of gains to close out 2023.

Apple (AAPL 185.64, -6.89, -3.6%) was an influential loser, dropping more than 3.0% today after a Barclays downgrade to Underweight from Equal Weight. The Vanguard Mega Cap Growth ETF (MGK) declined 1.8%.

Still, the major indices held up okay due to some underlying strength in areas of the market that were either left out of the last year's gains or saw less robust gains compared to mega cap stocks. The market-cap weighted S&P 500 fell 0.6% today while the Invesco S&P 500 Equal Weight ETF (RSP) closed just above Friday's closing level. The Russell 3000 Value Index rose 0.3% today while the Russell 3000 Growth Index declined 1.5%.

The only three S&P 500 sectors to register a decline in 2023 saw some of the largest gains today. The utilities sector, which fell 10.2% last year, logged a 1.4% gain today. The energy sector, which declined 4.8% in 2023, climbed 1.2% today.

The consumer staples sector, which fell 2.2% last year, closed with a 1.2% gain today.

The health care sector was another top performer today, registered a 1.8% gain.

It was also among the worst performing sectors last year, eking out a 0.3% gain.

On the flip side, weakness in their mega cap constituents weighed on the heavily-weighted information technology (-2.6%), consumer discretionary (-0.9%), and communication services (-0.9%) sectors. The industrial sector was another laggard, dropping 1.0% today.

The Treasury market is experiencing some selling despite increased geopolitical worries in the Red Sea after Iran sent a warship there in response to the U.S.
destroying three Houthi boats. The 2-yr note yield rose eight basis points to 4.33% and the 10-yr note yield rose seven basis points to 3.95%.
  • Dow Jones industrial Average: +0.1%
  • Nasdaq Composite: -1.6%
  • S&P 500: -0.6%
  • Russell 2000: -0.7%
  • S&P Midcap 400: -0.3%

Reviewing today's economic data:
  • December S&P Global US Manufacturing PMI - Final 47.9; Prior 49.4
  • November Construction Spending 0.4% (consensus 0.6%); Prior was revised to 1.2% from 0.6%
    • The key takeaway from the report is the strength seen in new single-family construction, which is badly needed as the supply of existing homes on the market remains severely constrained.

Wednesday's economic calendar features:
  • 7:00 ET: Weekly MBA Mortgage Index (prior -1.5%)
  • 10:00 ET: December ISM Manufacturing Index (consensus 47.1%; prior 46.7%) and November job openings (prior 8.733 mln)
  • 14:00 ET: December FOMC Minutes

>>> PGT Inc. receives an unsolicited proposal from Miter Brands to acquire all o

PGT Inc. receives an unsolicited proposal from Miter Brands to acquire all outstanding shares for $41.50/share in cash; prior Masonite (DOOR) offer was for $41/share (PGTI shares halted) (40.23 -0.47)
  • PGT Innovations, Inc. (PGTI) has received an unsolicited proposal from Miter Brands to acquire all outstanding shares of PGT Innovations' common stock for $41.50 per share in cash.
  • As announced on December 18, 2023, PGT Innovations entered into a definitive agreement to be acquired by Masonite Int'l (DOOR) for $41.00 per share in cash and Masonite stock (based on the closing trading price of Masonite common stock as of December 15, 2023), representing a premium of approximately 56.5% over the closing price per share of PGTI common stock of $26.20 on October 9, 2023 (the last trading day prior to the public disclosure of a proposal for the acquisition of PGT Innovations).

>>> Longboard Pharmaceuticals announces positive topline data from the PACIFIC S

Longboard Pharmaceuticals announces positive topline data from the PACIFIC Study, a Phase 1b/2a Clinical Trial, for Bexicaserin (LP352) in participants with developmental and epileptic encephalopathies; webcast to be held today at 8:30 a.m. ET (6.03)
  • Bexicaserin achieved a median seizure reduction of 53.3% in countable motor seizures compared to 20.8% in the placebo group across the DEE study population
  • A median seizure reduction of 72.1% in Dravet Syndrome (DS), 48.1% in Lennox-Gastaut Syndrome (LGS) and 61.2% in DEE Other was achieved
  • Favorable safety and tolerability results
  • Longboard is rapidly moving forward with preparations for its global Phase 3 program
  • Longboard Pharmaceuticals +315% remains strong into the close
  • Longboard Pharmaceuticals announces commencement of $150 mln public offering of common stock

FT : Iberdrola calls off $8.3bn acquisition of US power utility PNM Resources

Iberdrola calls off $8.3bn acquisition of US power utility PNM Resources
Decision sparked by New Mexico regulator’s opposition to the deal forces a rethink of Spanish group’s US expansion

Spanish renewables group Iberdrola has called off its planned $8bn acquisition of PNM Resources, cancelling a deal that would have transformed its Avangrid subsidiary into one of the biggest companies in the US utilities sector.

Avangrid said on Tuesday that it was exercising a right to terminate the deal because it had been rejected by one regulator in New Mexico in 2021 and the company was bogged down in appealing against the decision in the courts.

Scrapping the agreement will force a rethink of Iberdrola’s plans in the US, where the transaction would have made Avangrid the third-biggest renewable energy company in the country. The Spanish group has a presence in more than a dozen countries but has made the US its principal investment target.

Two years ago New Mexico’s Public Regulation Commission rejected the $8.3bn deal, which includes $4bn in PNM debt, partly because of concerns over “quality of service issues” at Avangrid.

It also cited the fact that Ignacio Galán, Iberdrola’s chair, had been under criminal investigation as part of a probe into ties between Spanish companies and a former police officer involved in a series of high-profile scandals. A Spanish court closed the investigation into Galán in June 2022 and the company has denied any wrongdoing.

The PNM deal had been approved by five federal agencies and Texas’s public utility commission, the other regulators with a say on the transaction.

Avangrid had appealed against the New Mexico decision, but on Tuesday the company said: “With the close of 2023 there is still no clear timing on the resolution of the court review of the New Mexico regulator’s denial of the merger nor any subsequent regulatory actions.”

It said the terms of the deal allowed both parties to terminate the transaction “if the merger had not yet been consummated” by December 31 2023.

Abe Silverman, who previously worked at the Federal Energy Regulatory Commission, said that utility commissions were “increasingly prioritising local control over their utilities over merger benefits”.

“The perceived trade off is that utility commissions lose control when large multinational utilities take over the local utility and that their ability to address things like service quality decreases. For years, utility commissions regularly signed off on mergers so long as there were customer savings. But increasingly, there’s a sense that those mergers exacted a toll on local consumers that goes beyond dollars and cents,” Silverman said.

“[Iberdrola’s cancellation] is certainly going to cause potential foreign investors to sit up and more seriously evaluate state regulatory requirements,” he added.

Goldman Sachs analysts said Iberdrola’s decision was a “strategic positive” for the company, partly owing to questions about whether it was paying too much given that interest rates had soared since late 2020 when the deal was announced.

Although the transaction was agreed during depressed market conditions amid the pandemic, the $8.3bn price tag equated to 17 times PNM’s forecast 2024 earnings, a relatively high valuation by sector standards.

Goldman analysts said that terminating the merger would prevent a €9bn increase in Iberdrola’s net debt, which would have taken the total to about €55bn had the deal been completed.

In Iberdrola’s 2023-25 strategic plan, the US was due to receive 47 per cent of the company’s global investments in both power grids and renewable energy production, including the cost of the PNM acquisition and €2bn it planned to invest in the business.

Despite the cancellation, Avangrid said it remained “steadfast” in its commitment to New Mexico and the US as a whole and would continue to work on a series of other multibillion-dollar investments.

These include a $2bn investment in clean energy transmission in New York, upgrading more than $5bn of existing wind power assets using incentives in the US Inflation Reduction Act, and new projects including Vineyard Wind, the country’s first large-scale offshore wind project.

Iberdrola shares were flat in afternoon trading at €11.87.

FT : Chevron warns ‘harsh’ California policies harm earnings and investment

Chevron warns ‘harsh’ California policies harm earnings and investment
Oil major takes $3.5bn-$4bn impairment charge amid deepening rift with state lawmakers

Chevron on Tuesday said a deepening rift with lawmakers over energy policy in the state of California would dent its earnings in the fourth quarter and further reduce its investment plans for its home state.

“Continuing regulatory challenges” in California will contribute to a non-cash charge of $3.5bn to $4bn, the oil company said, reflecting a write down in the value of its US upstream oil and gas assets, primarily in the state.

The charge will also include a loss related to decommissioning obligations linked to assets it previously owned in the Gulf of Mexico.

The disclosures follow moves by California regulators to implement a bill signed into law last year by the state’s Democratic governor, Gavin Newsom, which aims to penalise oil companies for allegedly “price gouging” consumers. The so-called margin penalty law seeks to limit the profits local refiners can make in the state, where motorists pay among the highest petrol prices in the US.

Chevron, which is headquartered in San Ramon, California, is lobbying furiously against the new law. In a filing to California regulators the company said it was part of an “increasingly harsh regulatory environment” in the state that has resulted in higher petrol prices for consumers, reduced production and decreasing investment.

“Setting a margin penalty would absolutely discourage investments here,” Andy Walz, president of Americas products at Chevron, wrote in a letter to the California Energy Commission dated December 12.

“Further, these arbitrary attacks on a disfavoured industry do more than this — they signal to every industry, entrepreneur, manufacturer, and employer that California is closed for business,” he wrote.

Chevron said it had slashed investment in California by hundreds of millions of dollars since 2022 and rejected capital projects because the state’s energy policies have “made it a difficult place to invest”. The state’s local crude oil production has declined 28 per cent to 305,000 barrels per day over the past four years, according to EIA data.

Chevron has clashed repeatedly with the administration of Newsom, who has introduced some of the nation’s toughest climate policies, including plans to phase out sales of petrol cars by 2035.

In September the state sued several of the world’s biggest oil companies, including Chevron, alleging they deceived the public for decades about how the burning of fossil fuels is destroying the planet.

Mike Wirth, Chevron’s chief executive, rejected the lawsuit’s claims in an interview with the Financial Times, saying: “We have never deceived anybody”.

Last month Wall Street analysts revised lower their estimates for Chevron’s fourth-quarter earnings, citing operational setbacks in Kazakhstan and other locations. Shares in Chevron have fallen 13 per cent over the past 12 months.