>>> What to look at today - 23rd of November 2023

Shares in Asia struggled for traction on Thursday, with US and Japanese markets shut for holiday. Oil fell for a second day.
Equities slid in Australia, while those in Hong Kong and China fluctuated and South Korean shares gave up earlier gains. Oil extended losses in Asia after falling close to 1% in the previous session on news that the OPEC+ group of oil producing countries would delay a meeting, reducing the likelihood of an imminent production cut to buoy prices.  Country Garden Holdings surged in Hong Kong, following news that Beijing included the company and other distressed developers in a draft list of builders eligible for financial support, the latest move to plug an estimated $446 billion shortfall needed to ease a housing crisis. A gauge of Chinese property stocks rallied 7%, set for its best week since early September. The S&P 500 rose 0.4% Wednesday ahead of the Thanksgiving holiday, resuming a November rally that has lifted the index around 8%, on track for its best month since July last year. US futures were little changed in Asian trading. Treasuries fell Wednesday, weighing on Australian and New Zealand government bond yields in Asian trading. There’s on cash trading on Thursday with holidays in Japan and the US. Wednesday selling in Treasuries pushed the two-year and five-year yields three basis points higher. The increase in yields reflected fresh data showing Americans expect inflation to climb at an annual rate of 4.5% over the next year, up from the 4.4% expected earlier in the month, according the University of Michigan. Rising US yields helped the dollar, which rose against major currencies Wednesday, staunching a decline from earlier in the week. Asian currencies were muted Thursday with the yen steady at above 149 per dollar after weakening in the prior session. In Asia, Indonesia’s central bank is expected to keep its benchmark interest rate steady. Data set for release include Taiwan industrial production and Singapore consumer prices. Elsewhere, reports showed some market participants are wary of reconnect with the Industrial & Commercial Bank of China Ltd. following a cyberattack that affected trading. The lender’s shares slipped early Thursday. Origin Energy Ltd. will ask investors to vote on a revised A$19.1 billion ($12.5 billion) offer from a Brookfield Asset Management Ltd.-led group next month, postponing a planned meeting after proxy results showed the existing proposal would fail. US After Hours Quiet after hours session; TGT -0.1% on mixed securities shelf offering.

Nikkei +0.29% Hang Seng +0.48% CSI +0.44% Shanghai +0.58% Shenzen +0.75%

Eur$ 1.0910 CNH 7.1466 CNY 7.1403 JPY 149 GBP 1.2512 CHF 0.8827 RUB 88.4932 TRY 28.8432 WTI$ 76.23 -1.14% Gold 1,996 +0.31% BTC 37,332 -0.79% ETH 2,064 -0.87%

S&P +0.05% Nasdaq +0.12% EuroStoxx -0.03% FTSE +0.19% Dax -0.06% SMI -0.22%

Macro :
- Deutsche Boerse Says DAX Capping to Be Adjusted to 15% From 10%
- Israel’s Truce and Hostage Deal With Hamas Faces Delays

Keep an eye on :
- ACKB BB : Ackermans 3Q Net Cash EU524.7M
- BATS LN : Next-Gen Tobacco Product Sales May Stall Under Tighter EU Rules
- 2007 HK : China Puts Country Garden on Draft List of Builders to Support --> +15%
- DB1 GY : Deutsche Boerse Says DAX Capping to Be Adjusted to 15% From 10%
- ELE SM : Endesa Sees Ebitda Rising as Much as 47.5% in 2026 From 2023
- ELE SM : Endesa to Pay Interim Dividend of €0.5/Share on 2023 Profit
- EL FP : EssilorLuxottica, Moncler Sign Exclusive Eyewear Licensing Deal
- FCT IM : Fincantieri in 10-Yr Contract With Egypt Valued at EU260m
- GIMB BB : Gimv 1H Net Income EU158.2M Vs. Loss EU75.1M Y/y
- HBR LN : Billionaire Slim’s Family Trust Holds 4% in Harbour Energy
- IMB LN : Next-Gen Tobacco Product Sales May Stall Under Tighter EU Rules
- JET2 LN : Jet2 1H Revenue GBP4.41B Vs. GBP3.57B Y/y
- MAERSKB DC : Maersk Signs Supply Chain Management Deal With Kumho Tire
- MFEB IM : MFE 9M Ebit EU98.3M Vs. EU97.6M Y/y
- MONC IM : EssilorLuxottica, Moncler Sign Exclusive Eyewear Licensing Deal
- NOVOB DC ; MACRON TO ANNOUNCE €2.1B NOVO NORDISK INVESTMENT IN FRANCE
- POLY LN : Polymetal Offers to Exchange Shares Affected by Asset Freeze
- Tennet : Goldman Lures Hedge Funds to Bet on €22 Billion German Grid Deal
- UBSG SW : UBS CEO Ermotti Says the Bank Has Ability to Absorb Losses
- UQA AV : Uniqa 9M Pretax Profit EU304.9M
- VLTSA FP : Voltalia, Co-Op Sign 15-Yr Corporate PPA for UK Solar Farm
- VOW GY : VW Confirms 11% Raise for Chattanooga Production Workers

FT : Bayer drug setback adds to new CEO’s problems

Bayer drug setback adds to new CEO’s problems  
Halted trial of prospective blockbuster treatment follows latest US legal blow over weedkiller Roundup

Bayer shocked investors this week when it halted a trial of its most promising new drug after discovering it did not work as well as planned.

But for the German group’s recently installed chief executive Bill Anderson, who has more than two decades of experience in the pharmaceuticals industry, such disappointments are just part of the game.

While he told investors that he “deeply regrets” the 18 per cent collapse in the company’s share price after the move, he pointed out that the industry “comes with really high stakes and a high risk profile”. Setbacks like this were “unavoidable” in the quest for medical breakthroughs, he said. “We keep going!”

The abandoned late-stage trial of blood-thinner asundexian highlights the steep challenges facing Anderson, who joined the 160-year-old creator of Aspirin and maker of weedkiller Roundup this year after running Roche’s pharma unit.

Saddled with €39bn in debt and suffering from poor cash generation, Bayer is facing shareholder calls for a break-up. Days before the asundexian revelation, the group was hit by a huge litigation loss in the US, where a Missouri jury ordered the company to pay more than $1.5bn to plaintiffs who blame Roundup, which joined Bayer’s portfolio through the German group’s 2016 acquisition of Monsanto, for their cancer.

The new chief executive arrived with a promise to slash red tape in a push to turn Bayer into a nimble and fast-moving organisation where employees act like entrepreneurs.

Last month he blasted Bayer’s performance as “unacceptable” and stressed that “all options” were on the table, including splitting the pharma unit from the crop science division. However, he also tested investors’ patience with his insistence that he needed until early 2024 to scrutinise options.

Analysts expect a sale of the consumer health unit, which makes over-the-counter drugs and is estimated to be worth about €18bn, is the most likely scenario.

“Anderson really has no time to lose any more,” said Thomas Schweppe, a Frankfurt-based shareholder adviser, adding that management needed to tackle the issues swiftly to prevent making matters worse. “Bayer is running out of options strategically as well as financially.”

Anderson disputes that view, according to people familiar with his thinking who said he was in frequent contact with large shareholders who are telling him to “take your time and get this right”.

The pharma unit, which generates almost half the group’s revenue, is facing the loss of exclusivity over its two best-selling drugs by 2026 as patents for blood-thinner xarelto and eye treatment eylea run out. Their €7.7bn in combined sales last year accounted for 40 per cent of the division’s total.

“The company needs money to invest in pharma, which is subscale and has a pipeline issue,” said Marco Taricco, a partner at Bayer shareholder Bluebell Capital Partners who this week renewed his calls for a “decisive portfolio restructuring”.

After the dashed hopes over asundexian, which Bayer had hoped would eventually generate up to €5bn in annual sales, the company is left with three prospective blockbuster drugs: nubeqa, a new treatment for prostate cancer; kerendia for chronic kidney disease; and elinzanetant for menopause symptoms.

Bayer hopes nubequa and kerendia, which have already been introduced to the market and last year generated €600mn in combined sales, can each eventually generate up to €3bn in annual sales. Elinzanetant could be launched by 2025 and the company believes it may generate peak sales of more than €1bn a year.

Stefan Oelrich, head of pharma, has embarked on an M&A spree over the past few years to offset the patent cliff, forking out billions of euros on companies that specialise in cell and gene therapy. However, it will take years until the acquisitions can replace the group’s ageing blockbuster drugs.

Anderson is also facing new concerns over the Roundup litigation, one of the biggest product liability cases in corporate history.

Tens of thousands of US citizens blame glyphosate, the herbicide’s active ingredient, for their cancer. A $10.9bn settlement in 2020 failed to resolve the problem and the company is still facing new claims. Having lost four court cases since summer, investors are fretting that the $6.4bn Bayer has provisioned may not be enough.

It is standing its ground in the courts, taking on an army of US trial attorneys in a test of cash and nerves.

Its key argument is that there is a scientific consensus that glyphosate does not cause cancer. The European Commission last week renewed glyphosate for use, saying “there is currently no evidence” to classify it as carcinogenic.

Wolfgang Nickl, chief financial officer, told journalists this month the company never expected to win every case and that it would stick to its strategy, while pointing to recent court wins in California and Hawaii. 

“We have no appetite to write humongous checks in a time where we have little free cash flow,” he said, particularly given “our product is safe when used as directed”.

The battle between Bayer and the glyphosate plaintiffs has become a war of attrition. While the claimants try to push the company towards generous settlements, Bayer hopes courtroom losses may discourage future claims as litigation lawyers see potential payouts dwindle.

While the plaintiff in one of the four cases Bayer recently lost was awarded $175mn, the amount granted in another was just €1.25mn. “That’s not going to be a strong incentive to keep going,” Nickl told analysts on a recent call, arguing the sum did not come close to covering trial attorneys’ legal costs.

Trial lawyers spent $1.2mn on US advertisements in September to solicit people allegedly affected by Roundup, according to X Ante, a firm that tracks litigation advert spending. The spending remained the same from August, but the number of ads dropped by 42 per cent.

Markus Manns, a portfolio manager at Germany’s third-largest asset manager Union Investment, which holds a 0.6 per cent stake in Bayer, said the recent string of courtroom losses could suggest the company had not been selective enough in picking the right cases for litigation.

“I think it would make sense to adjust the legal strategy to try to settle those cases which Bayer is at risk of losing in court,” he told the FT, adding that “every lost court case will further damage investor sentiment”.

But while Bayer’s share price has fallen to a level last seen in 2009, some investors have not lost their optimism.

“We still think the business is such an asset-rich company with such great potential,” said McCoy Penninger, a partner at McGinn Penninger Investment Management, whose small stake in Bayer represents 3 per cent of the US firm’s portfolio. Some “bold decisions at the corporate level” could unlock that potential, he said, adding that the current slump could very well be a buying opportunity.

WSJ : Colt Makes $1.74 Billion Offer for Vista Outdoor, Gate-crashing Rival Deal

Colt Makes $1.74 Billion Offer for Vista Outdoor, Gate-crashing Rival Deal
The unsolicited offer comes after Vista and the Czechoslovak Group, or CSG, announced their own deal in October

Firearms manufacturer Colt CZ Group has made an unsolicited offer to acquire U.S. -based Vista Outdoor VSTO -0.12%decrease; red down pointing triangle that values its equity at $1.74 billion, seeking to block the latter’s proposed merger with a Czech industrial technology company.

Colt has proposed a cash-and-stock merger with the sporting and outdoor-goods company that would value its shares at $30.00 each, Vista said late Wednesday.

Colt is a well-known maker of pistols, revolvers and rifles.

The unsolicited offer comes after Vista and the Czechoslovak Group, or CSG, announced their own deal in October. The companies had agreed to merge Vista’s sporting-products business with CSG in an all-cash deal valuing it at $1.9 billion on an enterprise value basis, which includes debt. The business includes brands like Remington and other ammo and firearms marques.

Vista said late Wednesday that its board of directors hasn’t made a decision on Colt’s offer, “nor has it changed its recommendation in support of the acquisition of its Sporting Products business by CSG.”

The company said that its board will carefully review Colt’s offer and remains committed to acting in the best interest of its shareholders.

In a separate statement, Colt said its offer was superior and would recapture the value that Vista has lost over the 18 months since the company said it planned to spin off its outdoor-products segment.

“It is apparent to Colt CZ that, with the separation of the sporting products segment, the remaining outdoor products segment will be subscale as a stand-alone public company with substantial risks,” the firearms maker said.

FT : Far-right leader set to come first in Dutch elections, exit polls say

Far-right leader set to come first in Dutch elections, exit polls say
Geert Wilders’ Freedom party may be unable to form a coalition as big parties oppose him as prime minister

Dutch far-right leader Geert Wilders is on course to win the most votes in parliamentary elections on Wednesday that were dominated by debate around rising immigration in the Netherlands.

Wilders’ Freedom party is projected to win 35 seats, doubling its total, followed by a left-wing alliance led by the EU’s former climate chief Frans Timmermans with 26, and then the Liberal VVD with 23, according to an exit poll.

The poll by Ipsos for broadcaster NPO has proved to be a reliable guide in past elections to the final results, which are expected on Thursday morning.

Wilders’ victory, if confirmed, will send shockwaves through the EU, which has been struggling to absorb a fresh wave of migrants from Africa and Asia.


He also wants a referendum on leaving the EU.

But Wilders, an anti-Islam campaigner who has vowed to ban the Koran and mosques, will struggle to find coalition partners to form a government that can amass a majority in the 150-seat lower house of parliament.

Dilan Yeşilgöz-Zegerius, the leader of the VVD, said she would not support Wilders as prime minister. She arrived in the Netherlands as a child from Turkey, has pledged to cut immigration and crime, and to boost economic growth.

Centre-right newcomer Pieter Omtzigt, a former Christian Democrat who formed his New Social Contract party only in August, has also ruled out serving in a cabinet with Wilders. NSC is forecast to win 20 seats.

There were 26 parties contesting elections and the NPO poll found 16 would enter parliament. Analysts say whoever wins will require at least three other parties to govern — a prospect that could extend talks to form a government for months, with Prime Minister Mark Rutte staying in a caretaker capacity.

His ruling coalition collapsed in July over plans to try to limit immigration by making it harder for asylum seekers to be joined by family members.

The election campaign was dominated by migration, a housing crisis squeezing out young people and lower-income families, and environmental restrictions on farming in the densely packed country of 18mn.

Yeşilgöz-Zegerius said the country could not cope with the volume of arrivals. Net migration hit more than 220,000 in 2022, a tenfold increase in 20 years.

Omtzigt has suggested cutting annual numbers to 50,000, including those from the EU who have a right to work anywhere in the bloc. Wilders takes an even tougher line but has dropped his anti-Islam rhetoric in recent days.

Wilders still lives in a safe house and is guarded round the clock because of death threats.

A late surge for Wilders prompted a similar rise for Timmermans as leftwing voters turned out to try to thwart a rightwing government. The former EU commissioner leads a combined Labour and Green party, which increased its presence by nine seats, according to the poll.

However, he would also find it hard to form a government, as his closest ally, the progressive, liberal D66 group, is set to win only 10 seats.

The Dutch system has no minimum threshold to enter parliament, so there is a rich array of factions, from the Party for the Animals to 50 Plus, representing pensioners.

>>> US Close Dow +0.53% S&P +0.41% Nasdaq +0.46% Russell +0.69%

Closing Stock Market Summary
The stock market went into Thursday's Thanksgiving Day holiday giving investors more for which to be thankful. Fortified by yet another impressive earnings report from NVIDIA (NVDA 487.16, -12.28, -2.5%), which fell prone to a sell-the-news response, an encouraging initial jobless claims report, Israel and Hamas agreeing to a four day pause in fighting as part of a hostage release deal, and the lingering fear of missing out on further gains, the major indices padded their gains for the month.

The gains were modest but ultimately underpinned by broad-based buying interest and a general lack of selling interest at the index level. Advancers led decliners by a workmanlike 9-to-5 margin at the NYSE and by a 13-to-8 margin at the Nasdaq. The Invesco S&P 500 Equal-Weight ETF (RSP) gained 0.5%, as did the Vanguard Mega-Cap Growth ETF (MGK).

Deere (DE 370.74, -11.91, -3.1%), Guess? (GES 20.81, -2.91, -12.3%), Urban Outfitters (URBN 31.82, -4.49, -12.4%), Nordstrom (JWN 14.21, -0.69, -4.6%), and Autodesk (ADSK 202.66, -15.01, -6.9%) were some individual laggards of note following their earnings reports. Tesla (TSLA 234.21, -6.99, -2.9%), meanwhile, broke down below its 50-day moving average (237.99).

Otherwise, the market had a predominately positive disposition, holding its line in the afternoon trade following the news that Rainbow Bridge at Niagara Falls had been closed after a vehicle traveling to the U.S. from Canada had exploded. A follow-up report from NBC News said law enforcement officials were not calling this an act of terrorism.
Every sector finished the session higher with the exception of the energy sector (-0.1%). Gains for the other sectors ranged from 0.1% to 0.9%.

The energy sector trailed all day amid a roller-coaster session for oil prices, which traded as low as $73.90 per barrel before settling the session at $77.05 per barrel, down just 0.7%. A report that OPEC+ is delaying its weekend meeting until November 30 triggered the initial sell-off as Bloomberg suggested the delay was due to Saudi Arabia's dissatisfaction with the oil production levels of other members.

The implication was that the other members have been overproducing. Prices likely rebounded on a sense that Saudi Arabia will aim to get that overproduction in check.

Today's trading volume was certainly held in check. It was light, which was no surprise ahead of the holiday. As a reminder, the stock market will be closed on Thursday and will end trading early at 1:00 p.m. ET on Friday.

Happy Thanksgiving!
  • Nasdaq Composite: +36.3% YTD
  • S&P 500: +18.7% YTD
  • Dow Jones Industrial Average: +6.4% YTD
  • S&P Midcap 400: +4.9% YTD
  • Russell 2000: +1.9% YTD

Reviewing today's economic data:
  • Initial jobless claims for the week ending November 18 decreased by 24,000 to 209,000 (consensus 227,000) while continuing jobless claims for the week ending November 11 decreased by 22,000 to 1.840 million.
    • The key takeaway from the report is that this report covers the period in which the survey for the November employment report is conducted, so the low level of initial jobless claims should support expectations for some decent growth -- certainly at this point in the Fed's tightening cycle -- for nonfarm payrolls.
  • Durable goods orders for October declined 5.4% month-over-month ( consensus -3.1%) following a downwardly revised 4.0% increase (from 4.7%) in September. Excluding transportation, durable goods orders were flat month-over-month (consensus 0.2%) following a downwardly revised 0.2% increase (from 0.5%) in September.
    • The key takeaway from the report rests in the recognition that nondefense capital goods orders, excluding aircraft -- a proxy for business spending -- dipped 0.1% month-over-month following a 0.2% decline in September. That isn't a major drop-off by any means, but it does fit with a softening environment in the manufacturing space.
  • The final reading for the University of Michigan Consumer Sentiment Index for November came in at 61.3 ( consensus 60.9), versus the preliminary reading of 60.4 and October's final reading of 63.8. In the same period a year ago, the index stood at 56.7. November marks the fourth straight month that consumer sentiment has declined.
    • The key takeaway from the report is the jump in inflation expectations, which is not what the Fed wants to see following 525 basis points worth of tightening already. It is the type of indication that will keep the Fed entertaining the thought that further tightening may still be necessary.
  • The MBA Mortgage Applications Index was up 3.0% week-over-week with refinance applications up 2% and purchase applications up 3%
Friday's economic calendar features:
  • 09:45 ET: Preliminary November S&P Global US Manufacturing PMI (Prior 50.0)
  • 09:45 ET: Preliminary November S&P Global US Services PMI (Prior 50.6)

>>> US After Hours Summary: Quiet after hours session; TGT -0.1% on mixed securi

After Hours Summary: Quiet after hours session; TGT -0.1% on mixed securities shelf offering

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: HOLI +2.9% (to hold special meeting in Jan; Special Committee continues sale process in expedited manner), TAC +0.1% (TAC and BHP announce commercial operation of hybrid renewables facility)

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: NAAS -0.4% (terminates proposed Charge Amps acquisition), MEOH -0.4% (methanol production facility impacted by an unplanned outage), OSK -0.3% (awarded a $341 mln US Army contract for medium equipment trailers), TGT -0.1% (files mixed securities shelf offering), VSTO -0.1% (Colt CZ Group proposes combination that values VSTO at $30/sh)

>>> Vista Outdoor: Colt CZ Group discloses 2.4% stake in 13D filing; proposes co

Vista Outdoor: Colt CZ Group discloses 2.4% stake in 13D filing; proposes combination that values VSTO at $30/sh
  • Colt CZ announces in filing that it sent a letter to the Board of Directors of VSTO proposing a strategic combination between Colt CZ and the Issuer that would value the Issuer at $30.00 per share and include a $900 million share repurchase to be executed following closing of the proposed transaction.