>>> What to look at today - 28th of November 2023

The dollar extended its losing streak and Treasuries steadied after a rally on further bets the Federal Reserve is almost done with its rate-hiking cycle.  The greenback fell for a fourth day and is headed for its worst month since last November as traders turned more optimistic about the likelihood of Fed rate cuts. The South Korean won and Thai baht led the gains in Asia, with the won jumping the most in nearly two weeks.  Treasuries were little changed after a rally in the previous session, when the yield on the two-year note, which is sensitive to the Fed’s rate path, fell to the lowest in a week. Benchmark 10-year yields had also dropped eight basis points to around 4.4% Monday.  Wall Street forecasters have turned more upbeat about the outlook for next year as investor sentiment improves and expectations of a recession are dialed back. Bets that US policymakers are done with rate hikes have also fueled a rally in the S&P 500 this month, sinking short-term volatility expectations. The July rate hike was probably the Fed’s last, according to Liz Ann Sonders, chief investment strategist at Charles Schwab. The Bloomberg US Treasury Index recently shifted to a positive return for the year as signs of slowing inflation and measured jobs growth unleashed a rally that sent yields tumbling from their highest in more than a decade. Swaps data shows investors are pricing in around 95 basis points of Fed rate cuts from the January meeting into the end of next year.   Stocks in Asia rose, with benchmarks in Korea, Taiwan and Australia gaining. Japanese equities declined as the yen extended its advance following Treasuries rally, while Hong Kong shares also fell. Contracts for European and US equities were little changed.  Australia and New Zealand bonds tracked Monday’s rally in Treasuries. Elsewhere, Japan’s auction of 40-year government bonds saw the bid-to-cover ratio drop to a 20-month low, suggesting weak demand. More than 60% of respondents in the latest MLIV Pulse survey expect stocks to provide better returns than bonds over the next month. That’s the highest level of excitement about equities that the survey registered since the question about the two assets was first asked in August 2022. Traders will be closely watching another batch of economic data this week, including the Fed’s preferred measure of underlying inflation. US sales of new houses fell in October after a downward revision to the prior month as decades-high mortgage rates weighed on demand. The Fed Bank of Dallas manufacturing index for November came in softer than expected. Investors may continue to see “fairly favorable” data from the US inflation numbers, according to Shane Oliver, head of investment strategy at AMP.  In earnings, Crowdstrike Holdings Inc. will underscore how businesses are prioritizing cybersecurity after recent high-profile corporate hacks, while Salesforce Inc. and Dell Technologies Inc. are expected to post slower sales growth when they report this week, as overall corporate expenditure tightens. Government debt sales in the US on Monday were met with mixed reactions, with a $55 billion auction of five-year bonds seeing strong demand while a $54 billion sale of two-year notes was soft.  Elsewhere, gold was little changed, hovering near the highest level since May, supported by a slump in Treasury yields and bets that the Fed will start cutting interest rates. Oil extended its decline after a string of losses as the market weighed the possibility of deeper output cuts from OPEC+ against signs supply is running ahead of demand. US After Hours CG +6.2%, WPC +3.7%, ICUI +2.7%, CWEN +2.7%, WOR +0.5% all up on index change news; ZS -6.9% slipping following OctQ results

Nikkei -0.12% Hang Seng -0.79% CSI +0.17% Shanghai +0.25% Shenzen +0.59%

Eur$ 1.0947 CNH 7.1584 CNY 7.1528 JPY 148.38 GBP 1.2624 CHF 0.8804 RUB 88.7826 TRY 28.9317 WTI$ 75.04 +0.24% Gold 2,016 BTC 37,070 +0.10% ETH 2,010 -0.27%

S&P +0.03% Nasdaq +0.05% EuroStoxx -0.21% FTSE -0.09% Dax -0.26% SMI -0.17%

Macro :
- Italy Approves €27.4 Billion Investment in Green Energy Shift
- Saudis Seek OPEC+ Quota Cuts While Some Members Resist
- Blackstone’s Schwarzman Eyeing Real Estate Deals in Europe

Keep an eye on :
- ADJ GY : Adler Group Maintains FY Net Rental Income Forecast
- AIR FP : Airbus Seeks More Vietnam Suppliers: Nguoi Lao Dong
- ARGX BB : Argenx ADVANCE-SC Study Didn’t Meet Primary Endpoint
- BARC LN : Barclays Mulls Dropping Over 2,500 Investment Bank Clients: FT
- BP/ LN : Mauritania Oil Ministry Gives BP Deadline Over Gas Development
- BRNL NA : Brunel to Give Update on ‘24-’27 Targets at Capital Markets Day
- ACA FP : Banks' €1.6 Trillion 'Doom Loop' Takes a Break, But Is a Worry
- ESLT IT : Elbit Wins $500m US Navy Contract for Night Vision Systems
- ERA FP : France Eyes Deal to Save Struggling New Caledonia Nickel Plants
- INPST NA : InPost’s Founder and CEO Acquires 187.2k Shares in Company
- IPN FP : Ipsen's MSCI ESG Rating Raised to A from BBB
- Linxens : Funds Circling French Unit of China Chip Giant Unigroup: Echos
- META US : Judge Denies Meta Bid to Force FTC Into Court Over Privacy Deal
- NOVN SW : Novartis Upgrades Mid-Term Sales Guidance to 5% CAGR
- SCYR SM : Sacyr's MSCI ESG Rating Raised to A from BBB
- SRS IM : Saras's MSCI ESG Rating Raised to A from BBB
- SDRL NO : Seadrill Boosts FY Adjusted Ebitda Forecast
- SPIE FP : SPIE to Buy Germany’s ROBUR Industry Service Group
- TEF SM : Telefonica Working on Large Job Cuts Plan, Unions Says
- UBI FP : Ubisoft Launches Offer on ~€500M of Convertible Bonds
- VOD LN : Vodafone April $10 Calls Snapped Up in Possible Start of Roll

>>> Europe : Brokers Upgrades & Downgrades - 28th of November 2023

>>> Up
* Ashmore Raised to Buy at Jefferies; PT 220 pence
* B&M European Raised to Buy at Citi; PT 640 pence
* BBVA Raised to Overweight at JPMorgan; PT 10.40 euros
* Boeing Raised to Outperform at RBC; PT $275
* DWS Raised to Overweight at Morgan Stanley; PT 38.10 euros
* Euronext Raised to Overweight at Morgan Stanley; PT 91.70 euros
* Infineon Raised to Buy at Jefferies; PT 46 euros
* Merlin Properties Raised to Buy at Goldman; PT 10.20 euros
* Smith & Nephew Raised to Equal-Weight at Barclays

>>> Down
* ABN Amro GDRs Cut to Hold at Deutsche Bank; PT 15 euros
* Hensoldt PT Cut to 24 euros from 25 euros at Morgan Stanley
* Julius Baer Cut to Underweight at Morgan Stanley
* Man Group Cut to Equal-Weight at Morgan Stanley; PT 266 pence
* Morgan Stanley Cut to Hold at SocGen; PT $80
* Nordnet Cut to Underweight at Morgan Stanley; PT 154 kronor
* Sonova Cut to Neutral at Redburn; PT 260 Swiss francs

>>> Initiation
* Benchmark Holdings Rated New Buy at Arctic Securities
* Estee Lauder Rated New Buy at HSBC; PT $180
* Frasers Group Rated New Overweight at Barclays; PT 1,060 pence
* Glencore Reinstated Outperform at RBC; PT 490 pence

>>> Call
* DWS, EQT, Euronext Raised at Morgan Stanley, Nordnet Downgraded
* Frasers Group New Overweight at Barclays on European Upside

>>> US After Hours Summary: CG +6.2%, WPC +3.7%, ICUI +2.7%, CWEN +2.7%, WOR +0.

After Hours Summary: CG +6.2%, WPC +3.7%, ICUI +2.7%, CWEN +2.7%, WOR +0.5% all up on index change news; ZS -6.9% slipping following OctQ results
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: SDRL +3.2%
Companies trading higher in after hours in reaction to news: SNES +44.3% (launches Evolve Soft Bait), CG +6.2% (joining S&P MidCap 400), WPC +3.7% (joining S&P MidCap 400), ESLT +3.5% (awarded $500 mln U.S. Navy contract), BITF +2.8% (places order for miners), ICUI +2.7% (joining S&P SmallCap 600), CWEN +2.7% (joining S&P SmallCap 600), INTT +2.5% (authorizes $10 mln repurchase program), BUSE +2% (to acquire M&M Bank), OSK +1% (awarded $342 mln U.S. Army contract), ZIM +0.5% (to serve East Mediterranean and Israeli ports), OLED +0.5% (signs OLED supply agreement with BOE Technology), WOR +0.5% (joining S&P SmallCap 600), TENB +0.4% (authorizes $100 mln repurchase program), SYF +0.4% (selling Pets Best Insurance Services unit), KD +0.4% (signs collaboration agreement with AWS), SSRM +0.3% (repurchasing up to 10.2 mln shares), PACW +0.1% (replaced in the S&P SmallCap 600)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: ZS -6.9%
Companies trading lower in after hours in reaction to news: SLRN -5.9% (provides Izokibep update), ALDX -2.3% (receives complete response letter from FDA for Reproxalap), SRE -0.3% (appoints new CFO)

>>> Index Changes: Carlyle Group (CG) and WP Carey (WPC) to join S&P MidCap 400;

Index Changes: Carlyle Group (CG) and WP Carey (WPC) to join S&P MidCap 400; ICU Medical (ICUI), Worthington Industries (WOR), Clearway Energy (CWEN) to join S&P SmallCap 600
  • Carlyle Group (CG) will replace ICU Medical (ICUI) in the S&P MidCap 400. ICU Medical will replace PacWest Bancorp (PACW) in the S&P SmallCap 600.
    • Banc of California (BANC) is acquiring PacWest Bancorp in a deal expected to be completed soon, pending final closing conditions. Post-merger, Banc of California will remain in the S&P SmallCap 600.
    • ICU Medical is more representative of the small-cap market space.
  • WP Carey (WPC) will replace Worthington Industries (WOR) in the S&P MidCap 400. Worthington Industries will replace Avantax (AVTA) in the S&P SmallCap 600.
    • Aretec Group, Inc. is acquiring Avantax in a deal expected to be completed soon pending final closing conditions.
    • Worthington Industries is more appropriate for the S&P SmallCap 600 with an anticipated spin-off transaction expected to be completed in early December.
  • Clearway Energy (CWEN) will replace Veritiv Corporation (VRTV) in the S&P SmallCap 600.
    • Clayton, Dubilier & Rice, LLC is to acquire Veritiv Corporation in a deal expected to be completed soon, pending final closing conditions.

Changes effective prior to the open of trading on Thursday, November 30

FT : Volkswagen executives warn works council of job cuts

Volkswagen executives warn works council of job cuts
Head of German carmaker’s flagship brand tells unions not enough profit being made to finance EV transition

Executives at Volkswagen are warning of job cuts, as negotiations with the group’s powerful works council heat up while the German carmaker prepares the ground for a €10bn cost-cutting programme.

At a meeting with union representatives on Monday, the head of the Volkswagen brand Thomas Schäfer warned that the flagship business was not making “enough profit with our cars to independently finance the transition [to electric vehicles] and our own future”.

“Our administration is too expensive, our factories are not productive enough and our costs are significantly higher than the competition,” Schäfer said, according to an internal memo seen by the Financial Times.

The VW brand in June announced plans to cut €10bn in costs by 2026 in an effort to boost profit margins in an increasingly competitive market for electric vehicles, as Chinese carmakers such as BYD push into Europe. Schäfer said on Monday that incoming orders “especially for electric cars, are below our ambitious expectations”.

The group, a fifth of which is owned by the German state of Lower Saxony, also produces the Porsche, Audi and Škoda brands. It has a notoriously large workforce, which is closely protected by the country’s strong unions, and its own works council — a group of elected staff representatives who negotiate with management.

Works council chair Daniela Cavallo in July had argued that the cost cuts would come about without “shedding jobs” — a red line she reaffirmed on Monday, according to the memo, stating that she would make VW stand by an agreement to secure jobs until 2029.

Instead, she said better management of the company and collaboration between its different brands was the “most important area of action”.

Clashes with the works council were partially to blame for the abrupt resignation of former VW group chief executive Herbert Diess last summer after he claimed the company had at least 30,000 excess staff among its 230,000-strong workforce in Germany.

Gunnar Kilian, VW’s board member for human resources, on Monday said the company would take advantage of the “demographic curve” and reduce jobs by not replacing some retiring employees.

But he warned that VW would eventually “have to get on with fewer people in many corners [of the company]”.

“If we want to future-proof the VW brand, we also have to become more efficient in the use of personnel and openly discuss the issue of labour costs internally,” Kilian said, according to the internal memo.

FT : Deloitte and KPMG ask staff to use burner phones for Hong Kong trips

Deloitte and KPMG ask staff to use burner phones for Hong Kong trips
Policies come as Beijing increases control over international financial hub

Some of the world’s biggest audit and consulting firms are asking staff to use burner phones when they visit Hong Kong, a sign of the increasing difficulties global companies are facing in a city long known as an international business hub.

Deloitte and KPMG have advised some US-based executives not to use their usual work phones in the territory, according to multiple people with knowledge of the policies. Several McKinsey consultants have also taken separate phones when travelling to the territory, the people said.

Some senior staff are reluctant to visit Hong Kong as a result of the inconvenience of leaving devices behind, according to an executive at one global consultancy. The policy applies even to people not involved with sensitive projects, the person said, adding: “People are not prepared to come here.”

Some companies in industries such as aerospace and semiconductors have for years asked employees to take separate phones and laptops to mainland China over security concerns. The application of the same approach in Hong Kong — a city that hosts the Asia-Pacific headquarters of many global companies — by a broader spectrum of businesses comes as Beijing has increased its control over the territory and people return after the end of lockdown restrictions.

In 2020, Beijing imposed a wide-ranging national security law on Hong Kong, an unprecedented step to exert greater control over the previously semi-autonomous territory. The US subsequently revoked the territory’s special trade status, saying Hong Kong was no longer sufficiently autonomous to warrant being treated differently from the mainland, which this year also strengthened its data and anti-espionage laws.

“With much talk [about] national security issues, the general feeling is that it is important to be cautious in Hong Kong as well,” said James Zimmerman, a partner at Perkins Cole in Beijing.

While the companies have not always given staff an explicit reason for using separate phones, some executives said their organisations were concerned about the risk of hacks and, in particular, the chance that data about their clients could be accessed.

“We have been recommending for several years that clients treat the risk of being in Hong Kong as the same as mainland China,” said a senior executive at a cyber security firm that counts large consultancies among its clients. “I think what you’re seeing is that message sinking in now.”

The person said there was “a range of risks, up to and including the risk of infiltration by a state-backed hacker”.

One UK-based consultant at a Big Four firm said consultancies had in general become increasingly risk averse, in part because of fear of legal liability for a leak of client data.

Deloitte, KPMG and McKinsey declined to comment.

Not all Big Four firms have such rules on devices. A PwC spokesperson said it did not have such a policy. EY declined to comment but an executive at the firm said they were unaware of any such policy at the company.

Still, the requirement by some companies that staff take separate devices sits uneasily with Hong Kong’s recent attempts to burnish its credentials as a global financial centre.

Its de facto central bank, the Hong Kong Monetary Authority, this month hosted a finance conference attended by 300 senior financiers from global companies, including Goldman Sachs’s David Solomon and Morgan Stanley’s James Gorman.

Hong Kong’s chief executive John Lee said in a speech at the event that “what distinguishes and sustains Hong Kong is our ‘one country, two systems’ framework”, a reference to the special administrative region’s ability to operate under different rules from the mainland.

While the consultancies’ policies have in some cases been in place for a year or more, they have had relatively little impact until recently because Hong Kong’s strict Covid-19 rules meant few executives were travelling to the territory, the people said.

Hong Kong scrapped hotel quarantine rules for visitors arriving in the city in September last year and lifted other pandemic-era restrictions in December.

WSJ : Fast-Fashion Giant Shein Files to Go Public

Fast-Fashion Giant Shein Files to Go Public
The Chinese company was valued at $66 billion earlier this year

Shein, the China-founded online fashion company that won over hundreds of millions of shoppers around the world, has confidentially filed to go public in the U.S. in what could be one of biggest IPOs in years.

Goldman Sachs, JPMorgan Chase and Morgan Stanley have been hired as lead underwriters on the offering, which could happen in 2024, people familiar with the matter said.

Shein, now based in Singapore, was valued at around $66 billion in a fundraising round in May and is likely to aim for an even higher valuation in an initial public offering.

Shein has disrupted the clothing industry with its on-trend $5 skirts and $9 jeans in the past few years. The 11-year-old company is now one of the largest fashion brands in the world.

Chinese media earlier reported on Shein’s confidential filing.

>>> US Close Dow -0,16% S&P -0,20% Nasdaq -0,07% Russell -0,35%

Closing Stock Market Summary
It was tough watching the stock market today, not because of how poorly it did, but because of how little it did until there was some seesaw action in the last hour of trading. The major indices had a mixed disposition throughout today's trade as neither buyers nor sellers showed much conviction. The Invesco S&P 500 Equal-Weight ETF (RSP) declined 0.2%.

The Nasdaq Composite had a small performance edge, drawing added support from select mega-cap names like Amazon.com (AMZN 147.73, +0.99, +0.7%), NVIDIA (NVDA 482.42, +4.66, +1.0%), Tesla (TSLA 236.08, +0.63, +0.3%), and Microsoft (MSFT 378.61, +1.18, +0.3%). Those gains also helped keep the S&P 500 in a fairly steady position relative to Friday's closing level. In fact, the S&P 500 traded in just a 14-point range between its high and low today.

The deliberate move was reflected in the modest changes for the S&P 500 sectors. The biggest gainer was the real estate sector (+0.4%) and the biggest loser was the health care sector (-0.6%). Everything else fell somewhere in between.

Market breadth tilted in favor of declining issues by a 4-to-3 margin at the NYSE and by a roughly 7-to-4 margin at the Nasdaq.

Separately, Treasury yields took a lower turn to begin the week, aided by a weaker-than-expected October New Home Sales Report and a $55 billion 5-yr note auction that trumped some soft demand seen at the $54 billion 2-yr note auction. The 2-yr note yield fell eight basis points to 4.87% and the 10-yr note yield dropped eight basis points to 4.39%.

The drop in market rates did not excite the stock market like it has for the most of the month, but arguably it helped keep selling efforts in check on this Cyber Monday, which saw the retail stocks deliver a lackluster performance.

The SPDR S&P Retail ETF (XRT) declined 0.6%.
  • Nasdaq Composite: +36.1% YTD
  • S&P 500: +18.5% YTD
  • Dow Jones Industrial Average: +6.6% YTD
  • S&P Midcap 400: +5.2% YTD
  • Russell 2000: +2.3% YTD

Reviewing today's economic data:
  • New home sales decreased 5.6% month-over-month in October to a seasonally adjusted annual rate of 679,000 units ( consensus 720,000) from a downwardly revised 719,000 (from 759,000) in September. On a year-over-year basis, new home sales were up 17.7%.
    • The key takeaway from the report is that new home sales activity slumped noticeably in October despite a big drop in median and average selling prices. The latter had to do with a large decline in sales in the high-priced West region, but in general, high mortgage rates and generally high prices combined to create affordability pressures for prospective buyers.

Tuesday's economic calendar features:
  • 09:00 ET: September FHFA Housing Price index (Prior 0.6%)
  • 09:00 ET: September S&P Case-Shiller Home Price Index (consensus 4.1%; Prior 2.2%)
  • 10:00 ET: November Consumer Confidence (consensus 100.0; Prior 102.6