After Hours Summary: FFIV +8.4%, NXPI +1.1%, PKG +1% up on earnings; TBI -12.5%, CDNS -4.1%, MEDP -3.9%, WHR -1.1% tracking lower following earnings; SOUN -17.1% plunges on mixed shelf filing; AMC -11.5% down big potentially on court filingAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: FFIV +8.4%, NXGN +4.6%, IPAR +3.9% (guidance), RGP +1.4%, ARE +1.1%, NXPI +1.1%, PKG +1%, CADE +0.7%, HSTM +0.2%
Companies trading higher in after hours in reaction to news: APE +5.8% (moving higher potentially due to court filing), MCFT +3% (authorizes $50 mln repurchase program), NIO +0.6% (CYVN Investments disclosed 7.7% stake), K +0.6% (files Form 10 related to business separation), ABCL +0.2% (appeal board denied rehearing request), BAC +0.1% (had among biggest revisions to uninsured deposit figures, according to WSJ), HESM +0.1% (increases quarterly distribution), HII +0.1% (awarded U.S. Navy contract)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: TBI -12.5%, CDNS -4.1%, MEDP -3.9%, CHX -3%, CCK -2.5%, HXL -2.2%, IBTX -2%, AGYS -1.2%, WHR -1.1%, RLI -1.1%, NUE -1%, BRO -1%, SIGI -0.9% (guidance), RRC -0.7%, CLF -0.6%, AGNC -0.3%, SSD -0.2%
Companies trading lower in after hours in reaction to news: SOUN -17.1% (files $400 mln mixed shelf), AMC -11.5% (moving lower potentially due to court filing), CCI -1.3% (to restructure, reduce headcount ~15%), DLR -0.1% (expands data center JV in India)
Early premarket gappers
- Gapping up:
- AMC +47.7%, BDX +7.2%, ALNY +5.2%, EXEL +4.5%, VOD +3.8%, YELL +2.8%, AUR +1.8%, CNK +1.6%, MAT +1.5%, APE +0.8%, JNJ +0.6%, CVX +0.5%
- Gapping down:
- KOD -48.7%, VRCA -11.5%, PHG -4.8%, DPZ -4.5%, GILD -2.2%, CASA -1.7%, HZNP -1.2%, KALV -1%
UK economic activity slows as rising interest rates hit spending
Downturn in manufacturing deepens, survey shows
UK economic activity slowed sharply in July as rising interest rates hit consumer spending and a manufacturing downturn deepened, a closely watched survey has shown.
The flash UK PMI services output index, a measure of activity in the sector, fell to a six-month low of 51.3, according to new data released on Monday.
Meanwhile the manufacturing output index hit a seven-month low of 46.5, indicating that a majority of businesses were reporting a contraction. This brought the composite index, which combines the two sectors, to a seven-month low of 50.7, down from 52.8 in June.
Chris Williamson, chief business economist at S&P Global Market Intelligence, which publishes the index with the Chartered Institute for Procurement and Supply (Cips), said the data showed the UK economy had “come close to stalling”.
“Rising interest rates and the higher cost of living appear to be taking an increased toll on households . . . Meanwhile, manufacturers are cutting production in response to a worryingly severe downturn in orders, both from domestic and export markets,” he said.
The survey was conducted against a backdrop of sharply rising UK mortgage rates, after stubbornly high readings for inflation and wage growth led the Bank of England to raise its benchmark rate to a 15-year high of 5 per cent in June.
The survey did not fully reflect more encouraging data on inflation published last week, which has led some investors to scale back their expectations for the peak in interest rates.
But John Glen, chief economist at Cips, said: “Higher borrowing costs are here to stay and the private sector knows it,” adding that the rise in interest rates was affecting both new orders and spending plans “long into the future”.
Thomas Pugh, economist at RSM UK, said the data suggested that “the economy is starting to buckle under the weight of the surge in interest rates and exceptionally high inflation”.
“The increase in interest rates delivered to date appears to be increasingly slowing the economy,” said Samuel Tombs, at the consultancy Pantheon Macroeconomics.
He added that the data bolstered the case for the BoE to stop raising interest rates soon, and to deliver only a 0.25 percentage point increase, rather than a 0.5 percentage point rise, next month.
Service sector companies responding to the survey said a weakening property market was hitting activity, and both businesses and consumers were cutting back on discretionary spending.
Manufacturers said a downturn in European markets was hitting demand for new orders. They bolstered their output partly by running down backlogs of work as previous blockages in supply chains eased and it became easier to hire staff who were previously in short supply.
There was also evidence of inflationary pressures easing. Companies answering the survey said both costs and selling prices were still rising, but at the slowest pace since early in 2021.
However, service sector companies were still managing to pass higher wage costs on to customers, a trend that will reinforce the BoE’s fears of a tight labour market fuelling persistent inflation.
Chinese property stocks fall despite Dalian Wanda avoiding default
Last-minute repayment of $400mn bond fails to boost sector
Mainland Chinese property stocks fell sharply on Monday after a last-ditch bond repayment by conglomerate Dalian Wanda failed to allay investor concerns about the sector.
The group raised $320mn through the partial sale of a subsidiary over the weekend and repaid a $400mn bond that had been due on Sunday, according to two direct investors, who asked to remain anonymous.
However, shares fell in other prominent property businesses, including China’s largest homebuilder Country Garden, in a sign of the continuing pessimism over a sector that has weighed on the Chinese economy after a wave of earlier defaults. The Hang Seng Mainland Properties index fell 6.3 per cent on Monday.
Hong Kong-listed media company China Ruyi Holdings said in a stock exchange filing that Dalian Wanda had agreed to sell a 49 per cent stake in its entertainment unit Beijing Wanda Cultural Industry for Rmb2.26bn ($315mn). Dalian Wanda did not immediately respond to a request for comment.
The company’s lack of communication over its debt problems has added to market volatility, echoing the defaults of Evergrande and its peers in late 2021 when there was also a lack of official announcements from the debtors.
Asian high-yield bond markets were shaken in recent days over concerns that Dalian Wanda, the only property-related group to successfully issue dollar-denominated debt this year, would join a host of other property businesses, including Evergrande and Kaisa, in failing to make an international repayment deadline.
The company initiated a 10-day grace period for a missed interest payment on the bond last Thursday, while another of its notes maturing in 2025 is trading well below par at 80 cents on the dollar.
Fears of a default, especially given Dalian Wanda’s status as a well-known enterprise with an international footprint, added to concerns about wider contagion stemming from China’s property woes, with many developers locked in protracted restructuring processes.
“Distressed Chinese property developers’ bond restructurings can buy them some room to normalise operations, but most will continue to face repayment difficulties if home sales do not recover for a sustained period,” Fitch Ratings wrote on Monday.
Activity in China’s property sector remains depressed nearly two years after Evergrande, the world’s most indebted developer, defaulted on its borrowings and a wave of subsequent failures weighed on construction and economic activity. Beijing has offered supportive measures but has stopped short of major stimulus.
Evergrande attended a court hearing in Hong Kong on Monday to ascertain whether it could hold a vote on an offshore plan that would see international creditors exchange their holdings for notes linked to Hong Kong-listed subsidiaries.
Any meeting for a vote should shed further light on the future of the company and its vast $340bn in liabilities. Last week, it disclosed losses of $81bn over 2021 and 2022.
>>> Up
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Oppenheimer’s Forgotten Biographer
Nuel Pharr Davis was my English professor. I didn’t appreciate his journalistic skills.
The new movie “Oppenheimer” is based on the biography “American Prometheus” by Kai Bird and Martin Sherwin.
But it has me thinking of my English professor Nuel Pharr Davis, an earlier biographer of J. Robert Oppenheimer.
Davis was a faculty member at the University of Illinois. He spent most of the 1960s researching “Lawrence and Oppenheimer,” published in 1968, a year after Oppenheimer died. It was a prodigious work—involving interviews with 100 people who worked with both Oppenheimer and Ernest Lawrence, the Nobel Prize-winning experimental physicist.
The book was a National Book Award nonfiction finalist.
I wonder if it might have been made into a film had Davis been a savvier promoter. He rarely mentioned it to his students, casually referencing on a few occasions “my book about making the bomb.”
I took several of his classes at Illinois in the 1970s and we became friends. Davis influenced my thinking about life in the classroom and in private conversations in his office. I met my wife of 45 years in one of his creative writing seminars. At the time I didn’t appreciate his journalism skills—his seven years of reviewing a plethora of government documents and tracking down people to interview.
Davis brought remarkable clarity and masterful technical description to a story complicated by its cast of characters—the physicists who with Oppenheimer, Lawrence, Enrico Fermi and other scientists and military personnel introduced the nuclear age with world-changing shock and awe.
In Davis’s telling, Oppenheimer was viewed by colleagues as an eclectic genius, a human computer, an encyclopedia of modern physics and related sciences. He became a postwar folk hero only to be severely discredited in the mid-1950s on allegations that he was a threat to national security.
Davis’s book portrayed Oppenheimer as a dedicated public servant who ultimately brought precision and management to the Los Alamos laboratory. Davis captured Oppenheimer’s self-absorption, saying he was most comfortable alone at a blackboard working on a theoretical physics problem. One of my favorite parts in Davis’s book is about a young Oppenheimer accidentally driving his car off the road more than once because he was preoccupied with solving an equation in his head.
Like Oppenheimer, Davis was a unique character. His literature classes were high entertainment. He might illustrate a point by creating his own sound effects with his voice or a squeaky chair. He wouldn’t hesitate to ask someone to sing a song to the rest of the class or do something embarrassingly theatrical. He could make stories by dead writers relevant, triggering mind-expanding introspection and empathy in his students.
Davis looked old beyond his years (late 50s) when I was a student. Like Oppenheimer, he was a heavy smoker. Sometimes I saw him walking to his campus office building with hunched shoulders, as if still carrying on his back the burden of producing a significant book. His death in 2001 at 85 was noted only by a three-sentence obituary in the local paper. But I’ll remember him when I see “Oppenheimer.”
Why We’re Updating the Government’s Merger Guidelines
The Justice Department and FTC aim to promote competition and make antitrust law easy to understand.
When markets are competitive and companies jostle to win business, everyone benefits. Consumers pay lower prices and get better service. Workers have more options to earn higher wages and get better working conditions. And we all benefit from the breakthrough innovations and diverse views that flourish when markets are open and the best ideas win.
More than a century ago, Congress set out to protect free and fair competition by passing antitrust laws. These laws prohibit mergers that may harm competition, while permitting those that don’t. As federal antitrust enforcers, we want our approach to be clear and predictable. Since 1968, our agencies have issued guidelines to explain how we assess whether mergers might hurt competition.
The Justice Department and Federal Trade Commission have updated the merger guidelines to reflect an evolving economy several times, under Presidents Reagan, George H.W. Bush, Clinton, Obama and Trump. We are continuing that tradition. Our proposed guidelines are faithful to the legal principles that have guided our enforcement efforts for generations. They recognize that firms can compete in a variety of ways and lay out the different ways that mergers may threaten competition.
The guidelines are written to be understood by businesses, consumers, entrepreneurs, workers and the broader public. We focused on three goals while drafting them.
First, as federal antitrust enforcers, we are bound by the antitrust laws as written by Congress and interpreted by the Supreme Court.
The Clayton Act of 1914 prohibits any merger that may substantially reduce competition or tend to create a monopoly.
Time and again since then—from expanding the Clayton Act to address a broader range of transactions to requiring that companies notify the government in advance of large mergers—Congress has closed loopholes and offered antitrust enforcers and private citizens more tools to stop anticompetitive mergers.
Recognizing Congress’s clear commands, more than a century of Supreme Court and appellate precedent makes clear that the antitrust laws protect the public from mergers that let dominant firms further control a market or create choke points in the economy. To ensure that our approach to merger review is faithful to the law, the proposed guidelines include—for the first time—legal citations to Supreme Court cases.
Second, enduring antitrust legal principles must be applied to today’s markets, reflecting how companies operate, compete and grow in the 21st century. To make sure we understand these changes, our proposed merger guidelines encompass the insights of modern analytical tools, taking into account market realities.
Third, we have written the draft guidelines with the broader public, not only antitrust experts, in mind. This makes it easier for businesses and individuals to understand the risk that a merger or acquisition may lead to an antitrust investigation and, where warranted, a lawsuit. But the proposed merger guidelines don’t create rights or responsibilities, nor are they substitutes for the law itself.
The proposed merger guidelines are the result of a public request for information issued in January 2022. We received more than 5,000 comments—from businesses, individuals, farmers, nurses, pharmacists, consumer advocates, worker organizations, antitrust practitioners, academics and trade associations. During four listening sessions, we heard about the effects of mergers and acquisitions on different sectors, which helped us understand how mergers can undermine open markets.
Our work isn’t done. We encourage the public to read the proposed merger guidelines and share its views at regulations.gov. The deadline to comment is Sept. 18. Our agencies will read and reflect on these comments before issuing final merger guidelines.
Congress tasked us with faithfully enforcing the antitrust laws to promote open, resilient markets. By updating the merger guidelines we hope to propel American ingenuity and ensure that the best ideas win.
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