FT : Businessman Mohamed Al Fayed dies aged 94

Businessman Mohamed Al Fayed dies aged 94
Egypt-born former owner of Harrods became controversial figure in Britain

Egypt-born businessman Mohamed Al Fayed, who owned a string of prominent British companies, has died aged 94.

His death was confirmed on Friday evening in a statement from Fulham football club, of which he was owner and chair from 1997 until 2013.

Al Fayed was born in Alexandria, Egypt, in 1929. As well as owning Fulham, Al Fayed, who moved to London in the 1960s, for several decades owned Harrods department store in Knightsbridge, west London, and the Ritz hotel in Paris.

His son, Dodi, then the companion of Diana, Princess of Wales, died alongside her in a car crash in Paris on August 31 1997. Al Fayed blamed the royal family for the crash.

A series of investigations instead blamed the car’s driver.

After the deaths Harrods was stripped of the royal warrant, a sign of the British royal family’s patronage, that it had held for nearly a century. Al Fayed later sold the shop to Qatar Holding, a vehicle for the emirate’s royal family.

Shahid Khan, who bought the Fulham club from Al Fayed, said in a statement that he sent his “sincere condolence” to Al Fayed’s family and friends.

“I always enjoyed my time with Mr Al Fayed, who was wise, colourful and committed to Fulham, and I am forever grateful for his trust in me to succeed him as chairman in 2013,” Khan said.

Al Fayed was also caught up in controversies over payments he made to two Conservative members of parliament to ensure they placed parliamentary questions on his behalf.

The affair led to rule changes to outlaw such practices.

His purchase in 1985 of House of Fraser, then owner of Harrods, led to an inquiry by the then Department of Trade and Industry that branded him “unreliable, untrue and bogus”.

The investigation concluded that, during a takeover battle with the Lonrho conglomerate, Al Fayed and his brother consistently misrepresented their wealth and background.

Although he consistently sought British citizenship, he was never granted it.

FT : SoftBank-backed Arm targets $50bn-$55bn valuation range as it pitches IPO

SoftBank-backed Arm targets $50bn-$55bn valuation range as it pitches IPO
Nvidia and Apple among the companies expected to take part in chip designer’s listing

Chip designer Arm is targeting a valuation range of $50bn-$55bn in its initial public offering, below the $64bn given by its owner SoftBank in a transaction less than a month ago, according to people familiar with the plans.

Arm plans to start its IPO roadshow next week, and several of its largest customers in the technology sector have agreed to take part in the listing, including Apple, Samsung, Intel and Nvidia, according to one of the people. It has also discussed potential investments with some of its customers in the car industry, according to a second person close to the matter.

SoftBank last month agreed to pay $16bn for the 25 per cent stake in Arm that it did not directly control from the Vision Fund, an investment fund that it manages. The Japanese conglomerate has previously tried to convince investors that Arm should be valued closer to $80bn.

One person familiar with Arm’s plans stressed, however, that SoftBank was still optimistic that the final valuation would be higher than the initial range. The latest target valuation range was first reported by The Wall Street Journal.

A person involved in the deal said preliminary meetings “testing the waters” with investors had gone well, and said it was a common tactic for dealmakers on large tech listings to start roadshows with a conservative price range to help build momentum.

Nvidia declined to comment. Apple, Intel and Samsung did not immediately return a request for comment.

SoftBank is planning to sell about 10 per cent of Arm in the IPO, with the strategic investors providing a relatively small portion of the more than $5bn that will be raised.

Arm is set to be the most valuable US IPO since November 2021, when carmaker Rivian listed with an initial valuation of $70bn.

The deal is being closely watched as a test of investor appetite for large listings after one of the most severe dealmaking downturns in decades.

Barrons : Can the Stock Market’s Rally Keep Going? Strategists on What’s Ahead.

Can the Stock Market’s Rally Keep Going? Strategists on What’s Ahead.
Inflation will fall further, interest rates could slip, and the recession has been postponed. How to invest in a "moderating" market.

So far, 2023 has confounded economists, humbled forecasters, and rewarded investors. Despite a rapid rise in interest rates, the U.S. economy continues to grow. Inflation has fallen—if not quite to desired levels—and stocks have entered a bull market, with the S&P 500 gaining 17% year to date and the Nasdaq Composite up more than 30%.

Neither the economy’s resilience nor the market’s strength seemed obvious, or even likely, at the end of 2022, a year that saw the Federal Reserve raise interest rates by more than four percentage points to combat soaring inflation, and the S&P 500 fall by 19%. Yet, the skies have been mostly sunny this year over Wall Street and Main Street alike, and the forecast for fall is more of the same, although with a bit more haze.

Wall Street’s top strategists are divided on the near-term outlook for stocks, which depends in large part on the economy’s future course—and the Fed. The most bullish case for financial markets is the Goldilocks case, or “just right” conditions, including an orderly retreat in inflation and a steady economy that keeps consumers spending and enables corporate profit growth.

For the optimists, a recession this year is no longer in the cards. “Everything has been pushed out from a macroeconomic perspective,” says Anders Persson, chief investment officer of global fixed income at Nuveen. “The economy is holding up better than expected. The consumer is stronger than expected.”

If inflation continues to slow, as it did in the past year, that would mean the Federal Reserve’s job is nearly done. A likely end to rising interest rates would be good news for stocks, paving the way for this year’s narrow, tech-focused rally to broaden. It would also allow bond prices to appreciate some. (Bond prices move inversely to yields.)

“We’re going to have a pretty good economy going into next year,” says Ed Yardeni, president of Yardeni Research. “The stock market is already looking into 2024 and discounting a better year, with less hysteria over an imminent recession.”

With continued disinflation, “the Fed’s next move [for interest rates] might very well be lower,” he says.

The bearish case also rests on a good economy—too good, that is. Recent data suggest that economic growth is accelerating, which implies stickier inflation than many had hoped. As a consequence, the Fed might need to tighten monetary policy further to restore price stability, rather than loosening it next year, the pessimists say.

“My guess—and I emphasize the word ‘guess’—is that the economy will be stronger than people think,” says Richard Bernstein, CEO and chief investment officer of Richard Bernstein Advisors. “That will force the Fed to continue to raise rates.”

Another worry is that the central bank will go overboard in attempting to vanquish inflation, raising interest rates to a level that pushes the economy into a recession. In that case, bond yields would rise, profit growth would diminish, and equity valuations would fall. Excessive tightening is “our No. 1 concern right now,” Persson says.

Worse, fiscal and monetary policy both could be hampered in ways that might prolong a potential downturn. “The Fed can’t really cut rates as aggressively as it has historically, given the inflation problem,” says Mike Wilson, CIO and chief U.S. equity strategist at Morgan Stanley. “On the fiscal side, it is already unprecedented to have a federal deficit of 8% [of GDP] when the unemployment rate is at 3.5%.”

The economy and the markets also could chart a middle course as 2023 segues into ’24, wherein the economy stagnates but doesn’t crash; inflation diminishes but remains above the Fed’s 2% target; and markets trade sideways for a while, as they have done for much of the summer. This seems the most likely course to Gargi Chaudhuri, head of iShares investment strategy for the Americas at BlackRock, and she isn’t alone.

“Moderation is the key word for the fall, both for the economy and inflation,” says Chaudhuri. “There are data points that suggest the potential for extreme moves on either side—an extreme recession or a sudden jump in growth—but I expect things will simply continue to moderate.”

As has been the case for the past few years, the Fed’s actions—or lack thereof—will heavily influence investors’ behavior. Fed Chair Jerome Powell is loath to repeat the monetary-policy mistakes of the 1970s, when Fed officials gave up their inflation fight too quickly, allowing price growth to reaccelerate. That necessitated another, even more aggressive tightening cycle, which took the federal-funds rate up to 20% in 1980.

Today’s fed-funds target range of 5.25% to 5.50% is far below that historic peak. But it is far above the near-zero rates that prevailed through much of the Covid pandemic. In Wall Street parlance, rates are likely to stay “higher for longer” as the Fed maintains its vigilance.

Most of the market strategists and chief investment officers whom Barron’s canvassed don’t expect the Fed to lift rates again in the current cycle, while a few are penciling in just one more quarter-percentage-point increase by year end.

Pricing in the futures market assigns roughly 50/50 odds to another rate hike before year end, according to the CME FedWatch Tool.

That’s the “higher” part. How much “longer” the benchmark rate will remain at today’s level is an open question, as Powell strongly suggested in his Jackson Hole speech on Aug. 25.

Much will depend on the course of inflation. If price growth continues to trend lower, monetary policy will tighten without the Fed’s further intervention, as the real rate of interest—the nominal rate minus the inflation rate—will rise. Even in the absence of a recession, the central bank might choose to cut interest rates in a falling-inflation scenario to maintain its policy stance at a consistently restrictive level, as laid out by New York Fed president John Williams in recent remarks.

Bond yields could decline modestly by year end, should investors see continued progress in taming inflation—and should the Fed indicate it has finished raising rates. Persson expects the 10-year U.S. Treasury note yield to finish 2023 with a yield between 3.75% and 4.00%, down by as much as half a percentage point from recent levels.

A harder economic landing in 2024, with more rate cuts, could result in an even bigger rally in Treasury prices, although a recession would hamper stocks.

Persson notes that bond prices historically have risen during the first three months after the Fed has finished raising rates in a cycle. In the meantime, he’s more excited about the fat yields on offer these days. “The vast majority of fixed-income returns come from the income generation,” he says. “Not very much ultimately comes from capital appreciation, [which requires] timing the market.”

Less-risky securities such as U.S. Treasuries represent good value today, with attractive yields that investors can clip while the bonds mature. Persson stresses the importance of diversification across different categories of fixed income, given the uncertain rate outlook. Nuveen Strategic Income (ticker: FCBYX) holds corporate bonds, government debt, mortgage-backed securities, and more, he notes. The fund has an effective duration of 5.3 years, an average credit rating of triple-B-minus, and a yield of 5.9%.

Bernstein’s firm has a neutral-duration allocation to Treasuries, with holdings in both short- and long-term securities.

Chaudhuri prefers the belly of the Treasury yield curve, the focus of iShares 3-7 Year Treasury Bond exchange-traded fund (IEI). It has an effective duration of 4.4 years and yields 4.3%.

Ten-year Treasury inflation-protected securities, or TIPS, sport their highest payout in 15 years: a 2% real yield. TIPS will outperform nominal bonds if inflation reignites. “I like to call them Totally Irreplaceable Portfolio Solutions,” Chaudhuri says. “Owning a 2% real rate in your portfolio is an incredible opportunity for investors.”

Falling inflation might be good for bond prices and stock market multiples, but it is a potential headwind to earnings growth, Morgan Stanley’s Wilson says. It will mean less pricing power and tighter profit margins for more companies. That’s just what Wilson forecasts; he expects S&P 500 companies to earn $185 this year, well below industry analysts’ consensus estimate of $220.

Wilson recommends overweight positions in healthcare and utilities. Healthcare stocks are “quality defensives,” he says, with relatively cheap valuations. The companies have decent growth and balance sheets, and little cyclical exposure. Utilities are defensive, as well, and tend to be the last sector to stumble in a market downturn. The Health Care Select Sector SPDR ETF (XLV) and the Utilities Select Sector SPDR ETF (XLU) are investment plays on these sectors.

Wilson is bearish on pricey technology and consumer discretionary stocks, and expects the S&P 500 to decline this fall, given the stocks’ large combined weighting in the index. He has a year-end target of 3900, implying a drop of more than 10% from recent levels.

Christopher Harvey, Wells Fargo’s head of equity strategy, thinks stocks may hit a rough patch in the near term. Bond yields could rise more in the coming weeks as Fed expectations continue to shift, he says. Plus, September historically has been a seasonally weaker period for the stock market.

Later this year, however, he expects bond yields to fall again and stocks to rebound, led by the biggest companies on the market. Harvey looks for the S&P 500 to trade in a range of 4200 to 4600 for the rest of the year, and end 2023 at 4420.

Harvey expects to see growing concern about the economic outlook for 2024 as the fall progresses. That’s a negative for cyclical stocks’ earnings but could prompt the market to price in Fed cuts next year, bringing down bond yields and helping growth stocks. The result might be a buy-what-you-know rush back into the market’s biggest, most successful, and theoretically most stable companies.

“For the top 50 companies in the Russell 1000, you’re paying only a 10% premium [over the rest of the index] for better earnings, stable growth, relatively low risk, and stronger balance sheets—and with an artificial-intelligence kicker,” Harvey says. “For an extra 10%, that’s an attractive list of things to have.”

The market’s largest tech stocks have rallied this year on growing investor enthusiasm for AI technology and applications.

Yardeni has a year-end target of 4600 for the S&P 500, and likewise expects megacap stocks to lead. “It’s pretty hard to knock those stocks down,” he says. “Every time they take a dive, it turns out to be a buying opportunity. People are consistently willing to pay a high multiple for those stocks.”

Bernstein takes the opposite view, noting that stocks such as Nvidia (NVDA), Meta Platforms (META), Tesla (TSLA), and Amazon.com (AMZN) each are up at least 60% year to date. Just seven stocks have contributed about 70% of the S&P 500’s rise in 2023.

Bernstein expects investors to pare their megacap holdings and redeploy the proceeds into other corners of the market this fall. “I don’t believe that there are seven growth stories in the entire world,” he says. “That is such a bearish view of the U.S. economy [and] the global economy. It does, however, make me excited about all the other overlooked opportunities out there.”

Specifically, he has been increasing his firm’s exposure to small-cap stocks, as he expects inflation to stay above 2% on an annualized basis, providing a tailwind to earnings growth. Small-cap indexes have a greater weighting than large-cap indexes in economically cyclical companies, and cheaper valuations than large-caps, characteristics that will give them the upper hand, he says.

Harvey likes mid-cap growth stocks, which also sport relatively cheap valuations and solid growth prospects and are positioned positively from a technical perspective. The risk/reward ratio is in the group’s favor, he says, with the potential for price/earnings multiples to expand and fundamentals to improve. More merger-and-acquisition activity would also favor midsize growth stocks, he says. The Vanguard Mid-Cap Growth ETF (VOT) provides exposure to the group.

BlackRock’s Chaudhuri assesses stocks through a factor lens, stressing quality characteristics that include strong balance sheets and stable earnings growth. Quality stocks, thus defined, could win in multiple macro and market environments, if not lead the market, she says. Chaudhuri recommends the iShares MSCI USA Quality Factor ETF (QUAL), which counts Nvidia, Apple (AAPL), Visa (V), Nike (NKE), and ConocoPhillips (COP) among its top holdings. The fund has returned 22% this year.

The S&P 500 isn’t grossly overvalued today, at 19 times estimated earnings for the coming year, but nor is it pricing in an adverse economic outcome. It is expensive relative to bonds: Yields on U.S. Treasuries are above their October 2022 highs, back when the index was around 3600 points.

“Typically, this is the way it is when we’re late in the cycle,” Wilson says. “In the absence of hard evidence, people’s views are dictated by price action. The fact that [stocks have] rallied so much has emboldened the view that a soft landing is more likely.”

Recent price action suggests that stocks will preserve most of their gains for the year, although the market might not trade much higher. Next year will bring fresh challenges—it’s an election year, after all—and the bill may come due for the economy after nearly two years of rate hikes.

Stick with quality stocks and a diversified bond portfolio, and look for bargains in cheaper parts of the market. Enjoy what’s left of the sunshine, while it lasts.

Barrons : On Sneakers Are Hot, But the Stock Has Taken a Dip. Here’s Why It’s a

On Sneakers Are Hot, But the Stock Has Taken a Dip. Here’s Why It’s a Buy.

The shoes are easy to spot. Nearly all of On Holding ONON +1.39% ’s models sport perforated soles, uncluttered designs, and a stacked-letter logo that sets them apart from Nike NKE +0.98% , Adidas ADDYY –0.37% , and other sneaker maker offerings. The company’s patented CloudTec cushioning quickly attracted celebrities like Roger Federer and Gisele Bündchen. Then, On’s stock became red hot, too, jumping 70% just since the start of the year, to about 29.

Fleet-footed investors can still get in on the trend, thanks to a recent pullback in the shares (ticker: ONON). Concerns about inventories, high marketing expenses, and lackluster guidance overshadowed an earnings beat and a guidance raise. Shares fell 14% on Aug. 15.

On closer review, it’s unclear what the shares were being punished for. There was nothing particularly concerning about earnings—certainly not the inventory, which reflects its attempts to meet demand, nor marketing expenses, which should ensure that demand stays strong. In fact, this is all typical for On, which fell nearly 10% after reporting first-quarter earnings. That proved to be a buying opportunity, and this drop probably will, too.

“This is a shoe people love, and they’re willing to pay full price for it,” says Lance Cannon, analyst and portfolio manager at Hood River Capital Management, which initiated a position in the stock during the second quarter and bought more shares following August’s postearnings dip. “That was a complete misunderstanding by the market.”

On reported sales of 444.3 million Swiss francs ($507 million) during the second quarter, up 52% from the previous year and ahead of analyst expectations of $475.4 million. Profit margins expanded to 59.5% from 55.1%, helped by easing freight costs. Earnings took a rare dip, but are expected to resume growth in the quarters ahead.

“It’s hard to be disappointed with any of the second-quarter income statement numbers,” says Lamar Villere, partner and portfolio manager at Lamar Villere, which has more than 3.5% of its portfolio in On.

But investors were particularly focused on On’s inventory, which more than doubled from the same quarter in 2022, raising concerns that shoppers might be tiring of the sneakers. Thoughts of Nike (NKE), which has been marking down its shoes to work off surplus, were probably at the forefront of investors’ minds.

But On is no Nike. Inventory, which includes highly anticipated new sneakers and gear, still fell 6% quarter over quarter, while On’s direct-to-consumer business surged nearly 55% in the quarter. Even wholesale partners like Nordstrom JWN –0.92% (JWN) have noted that shoppers have been clamoring for On products. Discounts, even for previous-year models, remain slim.

“Inventory was the one thing that kept [the stock] from taking off,” says Villere. “Of course, the inventory piece would be easy to solve if they discounted heavily, but they’re not doing that. They don’t have to.”

Growth should continue—and not just because of ads featuring Federer and top-ranked tennis player Iga Swiatek. On shoes, which account for some 95% of its business, are growing in popularity with serious athletes as well as weekend warriors, along with its new apparel and accessories lines. And while North America accounts for 60% of its business, On has been expanding its presence in markets like Asia, where sales have nearly doubled.

“Encouragingly, the brand remains exceptionally strong across channels and geographies,” says Telsey Advisory Group analyst Cristina Fernández, who kept a $40 price target on the shares following the second-quarter report. “Looking further out, On has meaningful growth opportunities through further expansion into global markets.”

On’s continued growth wouldn’t be unprecedented. The enduring success of peers, from Crocs (CROX) to Deckers Outdoor ’s (DECK) Ugg brand, demonstrates that comfortable shoes are enjoying their own supercycle, which hasn’t shown any signs of slowing down even as the world re-emerges from the pandemic. There’s also ample room for On to grow its shoe portfolio, for other applications like hiking and everyday lifestyle, as well as gear and apparel.

On’s valuation—it trades at 40.8 times 12-month forward earnings— isn’t cheap. Yet the recent selloff puts it near its record-low valuation of 39.2 times, and well below the nearly 250 times it has averaged since going public in September 2021. “It’s a high-growth name with a high multiple, but it isn’t outlandish compared with something like Nike or Lululemon Athletica (LULU) when they were in their high-growth phases and really getting traction,” says Hood River’s Cannon. “I wouldn’t be overly concerned with valuation.”

The biggest concern might be the strength of the Swiss franc. Because On is based in Switzerland, sales in the U.S. and Europe translate into future francs, hurting the final numbers. That caused On to guide to second-half sales growth of 30%, but up 44% adjusted for constant currency values—a reflection of uncontrollable market fluctuations, not underlying demand.

Ultimately, it comes down to the shoes themselves and whether shoppers will continue to pay $100-plus for them. Cannon, who owns two pairs, isn’t concerned. “I was skeptical, but there’s a noticeable difference in how they feel,” he says. “And every single consumer I talked to, from avid runners to retirees, said the same thing: My foot doesn’t hurt at the end of the day...my feet are happy.”

Don’t be surprised if On serves up smiles for investors again soon, too.

>>> US Closing Stock Market Summary

Closing Stock Market Summary
Stocks closed out this first day of September on a mixed note. The three main indices closed with only modest gains or losses while the Russell 2000 (+1.1%) outperformed. The S&P 500 maintained a position above 4,500 today, reaching 4,501 at its low.

A jump in market rates, a view from Cleveland Fed President Mester (2024 FOMC voter) that inflation remains too high, and a sharp increase in oil prices ($85.55/bbl, +1.92, +2.3%) acted as headwinds for the stock market.

Treasuries saw some improvement immediately after the release of the August Employment Situation Report, which showed a softening in nonfarm payrolls after accounting for revisions, a jump in the unemployment rate to 3.8% from 3.5%, and a moderation in average hourly earnings growth to 4.3% year-over-year from 4.4%. Separately, the ISM Manufacturing Index for August was stronger than expected at 47.6% (Briefing.com consensus 46.7%), but remained below 50.0%, which is the dividing line between expansion and contraction, for the tenth consecutive month.

The 2-yr note yield fell to 4.78% and the 10-yr note yield hit 4.05% after the jobs report before an increase in selling activity took yields higher. To be fair, yields had already dropped sharply this week in the wake of some other soft data, so today's weakness was partly driven by a sell-the-news response.

The 2-yr note yield rose two basis points today, and fell 17 basis points this week, to 4.88%. The 10-yr note yield rose eight basis points today, and fell seven this week, to 4.17%.

Mega caps and growth stocks were relatively soft, reacting to the bump in rates and cooling off from a stronger showing earlier in the week. The Vanguard Mega Cap Growth closed flat while the Invesco S&P 500 Equal Weight ETF (RSP) logged a 0.4% gain and the market-cap weighted S&P 500 rose 0.2%. The Russell 3000 Value Index rose 0.6% versus a 0.1% gain in the Russell 3000 Growth Index.

On the earnings front, Elastic (ESTC 74.27, +12.39, +20.0%), MongoDB (MDB 392.88, +11.58, +3.0%), lululemon athletica (LULU 404.19, +22.93, +6.0%), and Dell (DELL 68.19, +11.95, +21.3%) were winning standouts following some pleasing earnings results and/or outlooks. Broadcom (AVGO 872.52, -50.37, -5.5%), meanwhile, sold off after its earnings report.

Roughly half of the 11 S&P 500 sectors closed in the green. The energy sector (+2.1%) saw the largest gain, rising alongside oil prices, while the consumer staples sector (-0.8%) registered the biggest decline.

As a reminder, equity and bond markets will be closed on Monday for Labor Day.
  • Nasdaq Composite: +34.1% YTD
  • S&P 500: +17.6% YTD
  • S&P Midcap 400: +9.9% YTD
  • Russell 2000: +9.1% YTD
  • Dow Jones Industrial Average: +5.1% YTD
Reviewing today's economic data:
  • August Nonfarm Payrolls 187K vs Briefing.com consensus of 175K; July was revised to 157K from 187K
  • August Nonfarm Private Payrolls 179K vs consensus of 160K; July was revised to 155K from 172K
  • August Avg. Hourly Earnings 0.2% vs consensus of 0.3%; July was 0.4%
  • August Unemployment Rate 3.8% vs consensus of 3.6%; July was 3.5%
  • August Average Workweek 34.4 vs consensus of 34.3; July was 34.3
    • Altogether the key takeaway from the report is that it was a Goldilocks report as it pertains to the market's thinking that the Fed won't be raising rates again.
  • August S&P Global US Manufacturing PMI - Final 47.9 (July was 47.0).
  • July Construction Spending 0.7% vs Briefing.com consensus of 0.6%; June was revised to 0.6% from 0.5% "
    • The key takeaway from the report is that residential spending continues to be powered by new single family construction to meet demand that cannot be satisfied through the existing home market.
  • August ISM Manufacturing Index 47.6% vs consensus of 46.7%; July was 46.4%"
    • The key takeaway from the report is that manufacturing demand remains soft, yet conditions in the manufacturing sector, slow they may be, appear to be stabilizing.

>>> US This week's biggest % gainers/losers

This week's biggest % gainers/losers
The following are this week's top percentage gainers and losers, categorized by sectors (over $300 mln market cap and 100K average daily volume).

This week's top % gainers
  • Healthcare: TLRY (2.98 +27.35%)
  • Consumer Discretionary: PDD (103.13 +29.06%), GCO (33.68 +25.05%), CVNA (50.87 +23.47%), CAL (29.63 +22.32%)
  • Information Technology: UPLD (3.72 +47.04%), ESTC (74.74 +24.5%), DELL (68.07 +21.1%), NANO (136.74 +20.37%), SHOP (66.63 +19.97%)
  • Financials: LX (2.65 +35.2%)
  • Energy: MMLP (3.11 +30.13%)
  • Utilities: HE (15.07 +55.99%)
This week's top % losers
  • Healthcare: NVCR (22.27 -25.2%), FGEN (1.05 -13.64%), CARA (2.42 -13.13%), PDCO (30.19 -10.27%), LXRX (1.67 -8.74%), GH (34.96 -8.7%)
  • Materials: OLN (51.98 -10.45%)
  • Consumer Discretionary: DG (130.42 -15.85%), MCFT (22.71 -11.22%), GRPN (11.78 -9.31%)
  • Information Technology: BOX (26.59 -12.84%), AMBA (63.86 -8.88%)
  • Financials: RA (12.68 -24.66%), SQQQ (17.83 -10.07%)
  • Consumer Staples: HAIN (10.44 -11.97%)

>>> S&P issues quarterly rebalance of several indices; Blackstone (BX) and Airbn

S&P issues quarterly rebalance of several indices; Blackstone (BX) and Airbnb (ABNB) will join S&P 500
Full press release attached
S&P Dow Jones Indices announces many changes to the S&P 500, S&P 100, S&P MidCap 400 and S&P SmallCap 600 indices effective prior to the open of trading on Monday, September 18, to coincide with the quarterly rebalance.

All companies being added to the S&P MidCap 400 are more representative of the mid-cap market space, and all companies being added to the S&P SmallCap 600 are more representative of the small-cap market space. The companies being removed from the S&P SmallCap 600 are no longer representative of the small-cap market space.

  • Blackstone (BX) and Airbnb (ABNB) will replace Lincoln National (LNC) and Newell Brands (NWL) in the S&P 500 respectively, and Lincoln National and Newell Brands will replace UNIQURE (QURE) and Universal Insurance (UVE) respectively in the S&P SmallCap 600.

  • S&P 500 constituent Deere (DE) will replace Walgreens Boots Alliance (WBA) in the S&P 100. Walgreens Boots Alliance is no longer representative of the mega-cap market space. Walgreens Boots Alliance will remain in the S&P 500.

  • Permian Resources (PR), Gaming and Leisure Properties (GLPI), GoDaddy (GDDY), Morningstar (MORN), Ally Financial (ALLY), Vistra (VST), Vail Resorts (MTN), Sensata Technologies (ST), Weatherford (WFRD) and Fidelity National (FNF) will replace Omnicell (OMCL), Papa John's (PZZA), Sensient Tech (SXT), Cathay General Bancorp (CATY), Energizer (ENR), Xerox (XRX), Highwoods Properties (HIW), Tripadvisor (TRIP), JetBlue Airways (JBLU), and Foot Locker (FL) respectively in the S&P MidCap 400.
    • The constituents being removed from the S&P MidCap 400 will be added to the S&P SmallCap 600 replacing Trinseo plc (TSE), Aaron's (AAN), NETGEAR (NTGR), Coherus Biosciences (CHRS), 8X8 (EGHT), Office Properties Income Trust (OPI), AngioDynamics (ANGO), Vanda Pharma (VNDA), Orion Office REIT (ONL), and Enanta Pharmaceuticals (ENTA) respectively.
  • Hannon Armstrong Sustainable (HASI), Blackstone Mortgage (BXMT), Liberty Energy (LBRT), Premier (PINC) and Apple Hospitality REIT (APLE) will replace FutureFuel (FF), RE/MAX (RMAX), Zynex (ZYXI), Anika Therapeutics (ANIK) and Computer Programs (CPSI) respectively in the S&P SmallCap 600.

  • RBC Bearings (RBC) will replace Hawaiian Electric (HE) in the S&P MidCap 400. Hawaiian Electric Industries is no longer representative of the mid-cap market space.

>>> Weekly Market Update

Weekly Market Update: Softening data bodes well for soft landing scenarios

The final week of August saw investors thankfully put a rough start to the month further into the rear view mirror. Trading volumes were some the lowest of the year which belied a week that offered a litany of key economic readings and developments, along with swath of influential tech and consumer related earnings reports. Animal spirits initially served as a tailwind when Monday saw several modest M&A announcements. None was more important than the news the FTC opened the door for the $28B Horizon Therapeutics/Amgen deal to be able to close as early as this fall. China stimulus headlines continued to serve as a buoy to underlying sentiment, culminating in confirmed changes to China’s mortgage market, and the PBOC’s 200 basis point cut to the forex reserve requirement ratio. The Yuan continued to creep up off of recent multi-month lows, while copper and crude prices remained on firmer footing.

Clearly the overarching narrative to trade this week was the softening economic data, and the implications for global central banks. Eurozone PMI figures remained well into contraction territory causing some ECB officials to dial back rhetoric, and along with that expectations they will raise rates in September. Importantly, Tuesday the US July JOLTS data sent both stock and bond prices sharply higher. The headline data fell to its lowest level in roughly 2-years, nearly 700K openings below estimates. It served as a precursor to Friday’s August US employment report. The unemployment and labor force participation rates both jumped more than expected, while wage growth decelerated. Payrolls remained robust and weekly hours ticked up, but regardless, the Fed is likely to cheer the signs of normalization seen filtering through labor market. The jobs readings were sandwiched around July PCE data which further supported the belief the Fed can look to hold rates here and see how their restrictive stance plays out before deciding if rates need to go any higher. Nevertheless risks remain for Fed officials, probably none more so than oil prices, which appear to breaking out to the upside. Saudi crude output continued to dwindle in August even as Aramco is said contemplating an historic $50B share offering. De-inverting along the US yield curve was prevalent throughout the week as traders’ focus moved away from whether the Fed will hike the funds rate again, towards betting on a soft landing and if and when they will start to consider cutting rates next year. For the week, the S&P gained 2.5%, the DJIA rose 1.4%, and the Nasdaq recouped 3.2%.

Corporate news this week continued to highlight the struggle to get a clear picture of what is happening in retail. Dollar General, a discount chain that usually fares well when consumers are strapped, reported a stinker of a quarter and cut its outlook, laying much of the blame on ‘shrink.’ Walgreens Boots cuts its fiscal year forecast as it announced its CEO will step down. Costco reported another month of lukewarm same store sales growth in the low single digits. Meanwhile, Best Buy beat earnings expectations handily and affirmed its forecast that tech product demand should bottom out this year and stabilize in 2024. High tech names were also a mixed bag. Salesforce reported a good EPS beat and raised guidance and Dell blew out estimates, sending its shares up more than 20% on Friday. Broadcom was a different case, providing mostly in-line results and guidance, and noting that it would not have made its numbers if not for strong AI-related spending from customers.


SUN 8/27
BP.UK CEO: BP needs rapid and 'just' energy transition; To invest up to 50% of its capital in energy transition by end of the decade - financial press
(CN) China Securities Regulator (CSRC): To slow pace of IPO's at the current stage; Exchanges to lower margin requirements - financial press
3333.HK Reports H1 FY23 (CNY) Attributable Net -33.0B v -64.2B y/y, Op -17.4B, Rev 128.2B v 89.3B y/y; Warns that ability to continue as a going concern still depends on (i) whether it can successfully complete the Proposed Offshore Debts Restructuring, (ii) whether it can successfully negotiate with the remaining lenders on extensions or deferrals

MON 8/28
(CN) China Foreign Ministry: From Aug 30th, inbound travelers to China will no longer need pre-departure antigen test for COVID
(US) US and China agree to launch 'Export Control Enforcement Exchange'; Both countries agree to communicate regularly - US press after US Commerce Sec Raimondo meeting with China Commerce Min Wan
1211.HK Reports H1 (CNY) Net 10.95B v 3.60B y/y, Rev 206.1B v 150.6B y/y
(US) AUG DALLAS FED MANUFACTURING ACTIVITY: -17.2 V -19E
(JP) Japan govt annual economic white paper: Notes Japan may be at an inflection point in its 25-year battle with deflation as price and wage rises show signs of broadening - press
7203.JP Confirms to halt all 14 plants in Japan on Tues night following systems failure; Does not believe it was a cyberattack

TUES 8/29
(CN) CHINA BIGGEST STATE-OWNED BANKS CONSIDER FURTHER DEPOSIT RATE CUTS FOR A THIRD TIME IN A YEAR IN ORDER TO BOOST GROWTH - PRESS
7203.JP Reportedly likely to gradually resume vehicle production at domestic factories in Japan from tomorrow, Aug 29th; Continues to investigate cause of malfunction - press
PDD Reports Q2 (CNY) 10.47* v 7.13e, Rev 52.3B v 31.4B y/y; Saw a positive shift in consumer sentiment, leading to a rise in demand across various product sectors
(US) White House announce first 10 prescription drugs selected for Medicare price negotiations as part of Inflation Reduction Act (as expected); New prices will be announced Sept 1, 2024 and go into effect Jan 1, 2026
(CN) US Commerce Sec Raimondo: China asked US to reduce export controls but US rejected it; Hope export control dialogue with China to boost compliance; Will wait and see if there is action from China - comments from China
MMM Confirms Combat Arms settlement; To contribute a total of $6.0B between 2023-2029, including $5.0B in cash and $1.0B in 3M common stock; Notes agreement is not an admission of liability
BBY Reports Q2 $1.22 v $1.06e, Rev $9.58B v $9.52Be; Continue to expect that this year will be the low point in tech demand after two years of sales declines, but consumer electronics industry should see stabilization in 2024
BBY Guides Q4 SSS -3% to slightly positive; Holiday shopping to return to near pre pandemic patterns; Comp sales -6% y/y first four weeks of Aug - conf call
(US) AUG CONSUMER CONFIDENCE: 106.1 V 116.0E
(US) JULY JOLTS JOB OPENINGS: 8.83M V 9.50ME (lowest since May 2021)
GBTC US federal appeals court rules SEC was wrong to reject Grayscale application for a spot bitcoin ETF
HPQ Reports Q3 $0.86 v $0.86e, Rev $13.2B v $13.4Be; Cuts FY guidance
(US) Weekly API Crude Oil Inventories: -11.5M v -2.4M prior
3382.JP Sogo & Seibu union to go on strike on Aug 31st (first such strike in Japan since 1950s) - Japanese press

WED 8/30
(ES) SPAIN AUG PRELIMINARY CPI M/M: 0.5% V 0.5%E; Y/Y: 2.6% V 2.5%E (2nd month above target and highest annual pace since May)
(UK) JULY MORTGAGE APPROVALS: 49.4K V 51.0KE
(CN) US Commerce Sec Raimondo: Did NOT get resolution of specific issues during China trip; Had productive, candid and constructive meetings in China; Raised the tough issues with Chinese govt; US policy not decoupling - comments from China
(US) NHC on Idalia: Now a major hurricane at Category 4; Still has a few hours left to intensify before it makes landfall near Wakulla/Jefferson County line in Florida; Expected to keep the system near hurricane strength for longer over southeastern Georgia and South Carolina
(US) NHC on Major Hurricane Idalia: Downgraded back from Category 4 to Category 3 ahead of landfall; After landfall, Idalia is forecast to turn toward the northeast and east-northeast, moving near or along the coasts of Georgia, South Carolina, and North Carolina late today and Thursday
000002.CN Reports H1 (CNY) Net 9.87B v 12.2B y/y, Rev 201B v 207B y/y
MCFT Reports Q4 $1.30 v $1.08e, Rev $166.6M v $162Me; Guides FY24 very weak citing significant uncertainty which is limiting retail demand visibility
(DE) GERMANY AUG PRELIMINARY CPI M/M: 0.3% V 0.3%E; Y/Y: 6.1% V 6.0%E
(US) Q2 PRELIMINARY GDP ANNUALIZED Q/Q: 2.1% V 2.4%E; PERSONAL CONSUMPTION: 1.7% V 1.8%E
(US) Q2 PRELIMINARY GDP PRICE INDEX: 2.0% V 2.2%E; CORE PCE Q/Q: 3.7% V 3.8%E
(US) Nevada reports July casino gaming Rev $1.32B, +6.7% y/y, Las Vegas strip Rev $773.4M, +8.0% y/y
(US) JULY PENDING HOME SALES M/M: 0.9% V -1.0%E; Y/Y: -13.8% V -15.7%E
(US) DOE CRUDE: -10.6M V -2ME; GASOLINE: -0.2M V -1.5ME; DISTILLATE: +1.2M V -0.5ME
2007.HK Reports H1 (CNY) Net -48.9B v +612M y/y, Rev 226.3B v 162.4B y/y; Declares no interim dividend; Will continue to actively adjust sales and pre-sale activities to respond to market changes and capture demand
CRM Reports Q2 $2.12 v $1.90e, Rev $8.60B v $8.52Be; Raises FY24 guidance
CRWD Reports Q2 $0.74 v $0.56e, Rev $732M v $726Me; Raises FY24 outlook
V Reports Aug US payment volume +7%, credit +6% y/y; Global processed transactions +10% y/y - filing
COST Reports Aug Total SSS +4.1% y/y (ex-gas and FX); US SSS +3.2% (ex-gas and FX) v +4.5% prior

THRS 8/31
UBSG.CH Reports Q2 Pretax $29.2B* v $2.62B y/y, Rev $9.54B v $8.92B y/y; Aim to achieve gross exit-rate cost saving >$10B by end-2026; Credit Suisse (Schweiz) AG to be fully integrated
(CN) China reportedly exploring ways to make its own AI memory chips despite US sanctions; May take some China firms up to four years to deliver its own high-bandwidth memory (HBM) chips - SCMP
AAL 99.47% of flight attendants at American Airlines voted to authorize union leaders to call for a possible strike if contracts talks fail
(DE) ECB’s Schnabel (Germany): Underlying price pressures remain stubbornly high; Cannot predict where peak rate is going to be; EU growth prospects are more dire than officials predicted in June
(CN) China Defense Ministry: Rumours that PLA Type 093 submarine had accident near Taiwan strait are completely false
(DE) GERMANY AUG NET UNEMPLOYMENT CHANGE: +18K V +10.0KE; UNEMPLOYMENT CLAIMS RATE: 5.7% V 5.7%E
(EU) EURO ZONE AUG ADVANCE CPI ESTIMATE Y/Y: 5.3% V 5.1%E; CPI CORE Y/Y: 5.3% V 5.3%E
(IT) ITALY AUG PRELIMINARY CPI M/M: 0.4% V 0.4%E; Y/Y: 5.5% V 5.4%E
(CN) China govt raises deduction in personal income tax collection - press
(AT) ECB’s Holzmann (Austria, hawk): Aug inflation is a conundrum for ECB; Another hike or two are possible
(IN) India Aug monsoon rains was the lowest amount in over a century, 36% below long-term average - India Meteorological Department (IMD)
GCO Reports Q2 -$2.79 v $0.59 y/y, Rev $523M v $535.2M y/y; Notes during Q3-to-date, sales trends for the Back-to-School season improved a little further
DG Reports Q2 $2.13 v $2.49e, Rev $9.80B v $9.94Be; Cuts FY23 outloook
(CN) CHINA PBOC CUTS RATES ON SOME EXISTING MORTGAGES, EFFECTIVE SEPT 25TH (as speculated)
(US) JULY PERSONAL INCOME: 0.2% V 0.3%E; PERSONAL SPENDING: 0.8% V 0.7%E
(US) JULY PCE DEFLATOR M/M: 0.2% V 0.2%E; Y/Y: 3.3% V 3.3%E
(US) INITIAL JOBLESS CLAIMS: 228K V 235KE; CONTINUING CLAIMS: 1.73M V 1.71ME (highest continuing claims since July 20th)
(US) AUG CHICAGO PURCHASE MANAGER’S INDEX (PMI): 48.7 V 44.2E
(RU) Russia Dep PM Novak: Russia and OPEC+ have agreed on further action and will announce new main parameters and further steps next week
(US) Atlanta Fed GDPNow: Cuts Q3 GDP forecast from 5.9% to 5.6%
(EU) ECB's de Guindos (Spain): Latest data from July and Aug point towards economic deceleration in Q3 and probably in Q4; Rate decision in Sept is still up for debate
(US) July Dallas Fed Trimmed Mean PCE (m/m) +2.4% v +2.6% prior
NDA.DE Identifies serious indications of shortfall in metals; believes it has been target of further criminal activity; Damages potentially in 3-digit million euro range; Will not achieve prior FY guidance
INTC CEO Gelsinger: Q3 is above mid-point of guidance (guided EPS $0.20 v $0.21e, Rev $12.9-13.9B v $13.5Be) - DB conf comments
UPS Seeks to reduce pilot headcount by offering voluntary separation for 'eligible' pilots amid drop in air freight volumes - press
OXM Reports Q2 $3.45 v $3.46e, Rev $420M v $428Me; Cuts FY23 outlook and guides Q3 weak noting recently seen consumers become a bit more cautious
DELL Reports Q2 $1.74 v $1.13e, Rev $22.9B v $20.8Be
DELL Raises FY24 EPS $6.10-6.50 v $5.56e (prior $5.25-5.75); Guides Q3 $1.35-1.55 v $1.36e, Rev $22.5-23.5B v $21.4Be; Encouraged with some of the signs we are seeing in the macro environment as we move into H2 - earnings call comments
AVGO Reports Q3 $10.54 v $10.42e, Rev $8.88B v $8.86Be
AVGO CEO: All of growth comes from AI-related spending; Without AI, chip unit would have been flat y/y; Believe will get approval for VMware deal by Oct 30th - conf call comments
(US) ILWU says union members voted 75% in favor of approving the new 6-year agreement for West Coast port workers
(US) UAW President Fain: We are far apart in talks; Filed unfair labor practice complaint against GM and Stellantis in the agreement talks, says the companies refuse to bargain in good faith; Did NOT file a complaint against Ford Motor, as the company responded to the UAW’s demands with a counterproposal he heavily criticized
F Said to have made UAW contract offer, said to include 'significant' pay increases; Offered a 9% wage increase through 2027 v the 46% wage hike being sought by the UAW union - press
(CN) CHINA AUG CAIXIN PMI MANUFACTURING: 51.0 V 49.0E (moves back into expansion, highest since Feb)
TSLA Tesla US cuts Model X prices by ~19% from ~$98.5K to ~$80.0K, now qualifies for US tax credit; Tesla China also cuts price of existing stocks of Model S and Model X by up to 21% following official introducing of new refreshed Tesla Model 3 - press

FRI 9/1
(HK) Macau Aug Casino Rev (MOP): 17.2B v 16.7B m/m; Y/Y: +686% v +678%e
(CN) Reportedly China’s Pres Xi is likely to skip the G20 Summit in India on Sept 9-10th - Indian press
(UK) AUG NATIONWIDE HOUSE PRICE INDEX M/M: -0.8% V -0.4%E; Y/Y: -5.3% V -4.9%E (weakest since July 2009)
(CN) CHINA REPORTEDLY SET TO TAKE MORE ACTION TO REVIVE PROPERTY SECTOR, INCLUDING LIFTING HOME-PURCHASING CURBS IMPOSED SINCE 2010 IN KEY CITIES - PRESS
(CH) SWISS AUG CPI M/M: 0.2% V 0.2%E; Y/Y: 1.6% V 1.5%E (3rd straight reading within SNB's target)
(EU) ECB’s Villeroy (France): Very close to peak rates; Options are open at next and upcoming rate meetings; After overall inflation peaked, underlying inflation has also peaked since April and appears to have begun its decline
(CH) Swiss Aug PMI Manufacturing: 39.9 v 40.5e (8th month of contraction, stays below pandemic lows for 2nd mont
(IT) ITALY AUG MANUFACTURING PMI: 45.4 V 45.7E (5th month of contraction but highest since May 2023)
(DE) GERMANY AUG FINAL MANUFACTURING PMI: 39.1 V 39.1E (confirms 14th straight contraction)
ABBN.CH CEO: China is not really developing as we hoped in the beginning of the year; ABB has been impacted by a softening in China’s property sector; It will be challenging for the rest of the year - CNBC
(SA) Reportedly Saudi crude oil exports dropped to 5.6Mbpd in Aug v 6.8Mbpd in June - press
WBA Sees FY23 adj EPS at or near the lower end of the guidance cut on June 27th ($4.00-4.05 v $4.00e); Rosalind Brewer to step down as CEO; Names Ginger Graham as Interim CEO; effective H1 2024
(HK) Hong Kong raises typhoon warning signal to 10 (maximum) for Super Typhoon Saola - press
(IN) India's 26 opposition parties partner to challenge PM Modi's Hindu nationalist party in May 2024 elections - press
(US) AUG UNEMPLOYMENT RATE: 3.8% V 3.5%E (highest since Feb 2022)
(US) AUG AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.3%E; Y/Y: 4.3% V 4.3%E
(US) AUG FINAL S&P MANUFACTURING PMI: 47.9 V 47.0E
ARAMCO.SA Reportedly considers selling $50B in shares; Would be the largest in capital markets history
(US) Weekly Baker Hughes Rig Count: 631 v 632 prior (-0.2% w/w)

FT : Gabon coup brings abrupt end to Bongos’ improbable 56-year dynasty

Gabon coup brings abrupt end to Bongos’ improbable 56-year dynasty
Veteran president removed this week inherited the huge wealth of the oil-rich country and the lavish tastes of his father

By the time Omar Bongo Ondimba died in 2009 after 41 uninterrupted years as president of Gabon he had fathered as many as 50 children. In that crowded field it was the French-educated Ali Bongo, one of seven “official sons” and a jazz-funk musician, who emerged as his successor.

Ali, now 64, was elected president a few months after his father’s death, a position he held until this week when he became the latest African head of state to be swept out of office in a coup. Thousands poured on to the streets of Libreville, the seaside capital, to celebrate the apparent demise of the Bongo dynasty.

“The army has decided to turn the page,” said Brice Oligui Nguema, a longtime confidante of both Bongos and head of the presidential guard, who led the coup. Nguema, a cousin of Ali, said the president, who had a stroke in 2018, was not competent to run the country and that the elections he had supposedly won — after an internet shutdown and a delay in counting — had not been transparent.

Ali, born Alain Bernard, struggled throughout his 14 years as president to shake off the impression that Gabon, a densely forested country of 2.4mn people, was little more than a family slush fund.

His father became president in 1967 when Ali was eight-years-old and the young boy was dispatched to Neuilly, a wealthy suburb of Paris, to be educated. Fluent in French and English, but not in the languages of Gabon, he later graduated in law from the Sorbonne.

“In life, children are going to be influenced by what their parents do,” he told the Financial Times in a 2012 interview, rejecting the idea that he should have refrained from following his father into office. “How many doctors’ sons become doctors? How many lawyer’s sons become a lawyer?” he asked.

Yet Omar Bongo, born into a peasant family in Gabon’s Bateke region, was no doctor or lawyer. After an improbable rise to the presidency, he lived like a king and renamed Lewai, the town of his birth, Bongoville.

As his country got rich on oil, producing about 230,000 barrels a day, he spent prodigiously on mansions, cars and, reputedly, on women.

Ivette Santa Maria, a 22-year-old Miss Peru, described how she had been flown to Libreville and propositioned by the then 67-year-old Gabonese leader. “He pressed a button and some sliding doors opened, revealing a large bed,” she told the Associated Press.

Bongo senior amassed a huge portfolio of property in France. A 2007 French police report said the Bongo clan had 39 properties in France, including some exclusive addresses. Prized possessions included a luxury Paris property acquired from the aristocratic Pozzo di Borgo family on Rue de l’Université and a fleet of luxury cars, including Ferraris and Mercedes.

Bongo senior was the personification of the close relations that persisted between African leaders and France, which came to be known as Francafrique. So close were the ties that, even after independence in 1960, postboxes in Libreville carried three headings: Gabon, France and Foreign Countries.

Omar, who was alleged to have funded the presidential campaign of French politicians, including Jacques Chirac and Nicolas Sarkozy, was quoted as saying of the symbiotic relations: “Gabon without France is like a car with no driver. France without Gabon is like a car with no fuel.”

After his father’s death, Ali, more diffident and earnest, worked hard to reshape his country’s image. He sought to widen Gabon’s ties by joining the Commonwealth last year. A committed environmentalist, he staked his reputation on protecting the abundant gorillas and elephants that inhabit the vast forests, which cover some 90 per cent of the country.

In 2010, he banned the export of unprocessed logs and encouraged investments to process wood into furniture and finished products. As oil reserves began to dry up he sought to turn the country into a “green superpower”, one that could potentially receive billions of dollars in carbon credits.

Gabon is one of the few countries to absorb more carbon than it emits. Last month it negotiated a $500mn debt-for-nature swap, arranged by Bank of America, that freed $163mn for marine protection.

Still, Bongo junior hobnobbed with celebrities from the UK’s King Charles III, with whom he shared an interest in conservation, and the likes of footballer Lionel Messi and Michael Jackson, the late singer, whom he entertained in Libreville. He often played jazz piano for visiting dignitaries.

Mark Pursey, chief executive of BTP Advisers, which advised Bongo’s recent election strategy, said the president had gone some way to changing perceptions of Gabon. “You go to a newspaper stand in Gabon and you’ll see opposition newspapers. This was not a Stalinist state,” he said. “In his father’s time that was simply not allowed.”

Pursey said Bongo had personally polled well, although his government’s performance was criticised, particularly in its ability to convert the country’s large, if declining, oil wealth into infrastructure, jobs and opportunity.

Bongo’s environmental policies played better abroad than at home, he said. Domestically, farmers blamed elephants for ruining their crops and people worried that protecting forests was incompatible with development.

Pursey said Bongo liked to give the impression that he had come to the presidency reluctantly. “Ali was quite shy and unassuming. He would have been very happy being a musician,” he said.

Nguema, the transitional leader, suggested in an interview with Le Monde this week that Bongo, now under house arrest, would finally get his wish. “He is retired and enjoys all his rights,” he said. “He is a normal Gabonese, like everyone else.”