>>> Europe : Brokers Upgrades & Downgrades - 21st of April 2023

>>> Up
* Arjo Raised to Hold at Pareto Securities; PT 42 kronor
* IMI Raised to Buy at HSBC; PT 1,960 pence
* Nokia Raised to Buy at Inderes; PT 4.80 euros

>>> Down
* DNB Bank Cut to Neutral at Citi; PT 213 kroner
* GenSight Biologics Cut to Neutral at Chardan Capital Markets
* Seagate Cut to Equal-Weight at Morgan Stanley; PT $60

>>> Initiation
* Adyen Rated New Outperform at CICC; PT 1,770.35 euros
* XXL Reinstated Sell at Nordea; PT 1.80 kroner

>>> Call
* Swedbank Gets Positive Catalyst Watch at Citi, DNB Downgraded

>>> What to look at today - 21st of April 2023

Asian equities followed losses on Wall Street after US data showed a softening in manufacturing and the labor market. The dollar and yen strengthened on concern of rising tensions between America and China. Shares in China, Australia and Japan all fell. South Korea’s tech-reliant Kospi Index pulled back after getting close to a bull market, tracking Thursday’s decline in the Nasdaq 100. Futures for US equity benchmarks were little changed.  The dollar advanced against most of its Group-of-10 peers, with a gauge of its strength set for its first weekly gain in six weeks. The yen outperformed as rising geopolitical tension spurred traders to buy the haven currency before the weekend.  US President Joe Biden aims to sign an executive order in the coming weeks that will limit investment in key parts of China’s economy by US businesses, people familiar with the internal deliberations said.  Recurring claims for US unemployment benefits jumped to the highest level since November 2021, adding to signs the labor market is beginning to cool. Sales of previously-owned homes fell in March by more than economists forecast, underscoring a housing market that’s still on shaky footing despite some signs of stabilizing. US mortgage rates rose for the first time since early March. The data led traders to pare bets on more Federal Reserve rate hikes. The policy-sensitive two-year Treasury yield dropped one basis point to 4.13% after sliding 10 basis points on Thursday. In China, Contemporary Amperex Technology Co. shares rallied after the battery maker’s revenues surged in the first quarter. oil extended declines after dropping by the most in more than a month on Thursday, wiping out almost all of the gains stemming from OPEC+’s output cut on signs of a global economic slowdown. Gold was little changed around a $2,000 an ounce.  US After Hours VMI +3.4%, CSX +2.4% higher on earnings; CNXN -6.3% lower on guidance.

Nikkei -0.32% Hang Seng -0.64% CSI -1.04% Shanghai -1.11% Shenzen -1.71%

Eur$ 1.0960 CNH 6.8940 CNY 6.8877 JPY 133.89 GBP 1.2430 CHF 0.8935 RUB 81.5938 TRY 19.4040 WTI$ 77.34 Gold 2,000 -0.24% BTC 28,235 +0.10% ETH 1,939 +0.07%

S&P -0.01% Nasdaq +0.08% EuroStoxx +0.14% FTSE +0.06% Dax +0.01% SMI +0.04%

Macro :
- Fed Officials Back Another Hike While Watching Banking Fallout
- UK Confidence Jumps to Highest Since War Triggered Price Surge
- Taiwan Quietly Urges US to Calm Rhetoric on China Chip Risk

Keep an eye on :
- ALMA FH : Alma Media 1Q Adjusted Operating Profit Meets Estimates
- BAMI IM : Banco BPM Not Planning to Pursue M&A: CEO Castagna to Sole
- BVI FP : Bureau Veritas 1Q Organic Revenue Beats Estimates
- CARM FP : Carmila 1Q Net Rental Income EU86.4M Vs. EU81.9M Y/y
- ACA FP : Credit Agricole Reached Settlement to Sidestep ‘Cum-Cum’ Probe
- CTT PL : CTT Says Shareholders Reappoint CEO Bento for 2023-2025 Term
- EDPR PL : EDPR Secures 109 Mwac Long Term PPA for Italy Solar Portfolio
- EFGN SW : EFG 1Q Profit Exceeds CHF90m vs CHF202m in Full Year of 2022
- ENGI FP : Engie, EDP Give Go-Ahead for £2 Billion UK Offshore Wind Farm
- EL FP : EssilorLuxottica 1Q Revenue Beats Estimates
- FLOW NA : Flow Traders 1Q Normalized Net Trading Income EU110.4M
- FNAC FP : Fnac Darty 1Q Like-for-Like Sales -0.1%
- GFC FP : Gecina 1Q Like-for-Like Rental +7.3%
- GMAB DC : Genmab: Tribunal Dismissed Claims vs Janssen Over Daratumumab
- GTT FP : GTT 1Q Revenue EU79.9M Vs. EU68.2M Y/y
- HEN3 GY : Henkel Divests Business Activities in Russia
- HOLN SW : Holcim Lifts Full-Year Outlook After Surprisingly Strong Quarter
- IPS FP : Ipsos 1Q Organic Revenue -2.8%
- MBG GY : Mercedes-Benz 1Q Prelim Results Exceed Expectations
- MERY FP : Mercialys 1Q Rental Rev. EU43.6M
- MTRS SS : Munters 1Q Ebit Beats Estimates
- NETW LN : Brookfield Said to Explore Counterbid for Network International
- META US : Meta Plans to Cut More Than 10% of UK Workforce: FT
- NHY NO : Norsk Hydro: Shipping of Products to Customers Will Be Resumed
- 1913 HK : Prada Looks to Buy Italian Suppliers to Shorten Supply Chain
- SFER IM : Salvatore Ferragamo 1Q Revenue Misses Estimates
- SAP GY : SAP 1Q Non-IFRS Revenue Beats Estimates
- GLE FP : SocGen’s ALD Delays EGM to May 22 Pending EC Remedy Decision
- S30 FP : Solutions 30 FY Adjusted Ebitda Misses Estimates
- SUR LN : Sureserve to Disclose £200m Takeover Bid by Cap10: Sky
- TKTT FP : Tarkett 1Q Net Sales EU698.4M Vs. EU684.7M Y/y
- TEL2B SS : Tele2 1Q Adjusted Ebitda After Leases Misses Estimates
- TKO FP : Tikehau 1Q Group AUM Reach €39.7 Billion, Up 12% YoY
- URW NA : Hammerson, Unibail in Talks on Croydon Project Stake Sale: Sky
- VONN SW : Vontobel Assets Under Management CHF211.7B Vs. CHF204.4B Q/Q
- VOW GY : Volkswagen Gets $10 Billion Pledge From Canada for Battery Plant
- WHA NA : Wereldhave 1Q EPS EU0.46 Vs. EU0.39 Y/y
- YIT FH : YIT Sees FY Adj. Oper Profit at Least EU50M, Saw Below EU110M

WSJ : Credit Suisse Investors Challenge Switzerland’s $17 Billion Bond Write-Dow

Credit Suisse Investors Challenge Switzerland’s $17 Billion Bond Write-Down
A group of creditors have filed legal action against the country’s financial regulator, arguing it violated Swiss law when it wrote down around $17 billion of bank bonds

Credit Suisse Group AG bondholders have launched a legal challenge in Switzerland against regulators’ decision to write down $17 billion in securities as part of UBS Group AG’s rescue of the troubled bank last month.

Bondholders holding about 4.5 billion Swiss francs ($5 billion) of Credit Suisse’s canceled debt want the decision to write down their bonds revoked or amended, according to an outline of their appeal made in a Swiss administrative court and reviewed by The Wall Street Journal. The bondholders are alleging the total write-down was disproportionately punitive to them and violated their property rights, according to the summary of the legal filing.

The legal action opens a new front in sorting out the financial wreckage from Credit Suisse’s abrupt rescue last month, which has done considerable damage to Switzerland’s reputation for safeguarding wealth.

Markets were stunned when Swiss authorities wiped out the $17 billion in Additional Tier 1 bonds as part of UBS’s $3.25 billion purchase of Credit Suisse in March. Typically, shares in a bank would have to be written down entirely before creditors would have to take losses or be bailed in.

But Switzerland’s financial regulator, Finma, determined the $17 billion Additional Tier 1 debt contractually could be written down in the rescue because the government backstopped the $3 billion purchase of Credit Suisse by UBS in March. Additionally, Swiss lawmakers gave Finma emergency authority to write down the AT1 bonds on March 19, the same day that UBS took over the bank. Shareholders of Credit Suisse are to receive more than $3 billion in UBS shares for their stock in the bank, however.

Bondholders bringing claims against the Swiss government allege the bond write-down didn’t serve the purpose of restoring Credit Suisse to financial health and damaged international investors’ trust in Switzerland.

“Tuesday’s filing was the first in a series of steps we will be taking to seek redress for our clients who have been unlawfully deprived of their property rights,” said Richard East, a London-based partner with Quinn Emanuel Urquhart & Sullivan LLP, the law firm that filed the Swiss complaint.

The Swiss regulator said last month that the design of the AT1 bonds meant they could be written down before stock was wiped out. If the regulator had put the bank into resolution and recapitalized it, the bank’s equity likely would have been entirely written down before bailing in bonds, according to earlier statements made by the Swiss regulator about its procedures.

Regulators created the class of AT1 bonds after the 2008 financial crisis as a type of bank capital, meant to help financial institutions absorb losses in a downturn. AT1 bonds can be converted into common equity or written off in cases of extreme stress, depending on their terms.

Sometimes called contingent convertible bonds, or Cocos, the securities surged in popularity in Europe over the past decade as a regulator-approved way to build buffers that could protect banks in times of trouble without having to tap taxpayer funds. For investors, AT1 bonds offered high yields during a decade of low and sometimes negative interest rates, recently paying annual percentage interest rates of mid-to-high single digits.

The write-down by Swiss regulators has curbed market demand for AT1 securities across Europe and Asia, even though other national regulators have said they would respect traditional creditor hierarchies ranking bonds ahead of stocks. Banks across Europe and Asia meet their capital requirements with AT1 bonds, which have gotten more expensive for borrowers as investors fear they too could be forced to swallow losses.

However, the market is showing signs of reviving. Japan’s Sumitomo Mitsui Financial Group issued $1 billion of AT1 bonds this week, the first major bank to issue this type of bond since the write-down of Credit Suisse’s bonds.

The cost of borrowing for banks has started to decrease “on the perception that Credit Suisse was an idiosyncratic case, but the market remains skittish,” wrote CreditSights analysts in a research note this month. “We see more volatility in the short term but a gradual improvement over the long term.”

>>> US After Hours Summary: VMI +3.4%, CSX +2.4% higher on earnings; CNXN -6.3%

After Hours Summary: VMI +3.4%, CSX +2.4% higher on earnings; CNXN -6.3% lower on guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: VMI +3.4% (also $400 mln share repurchase reauthorization and a 9% dividend increase), FFBC +3%, CSX +2.4%, HTH +1.8%, PPG +0.6%, OZK +0.5%, KNX +0.1%

Companies trading higher in after hours in reaction to news: WISH +29.4% (authorizes new $50 mln share repurchase program), TMUS +2.5% (Mint Mobile acquisition faces DOJ scrutiny, according to NY Post), ASPN +1.4% (suing Korean supplier for patent infringement), GOOG +0.7% (updates specific reporting topics), PKE +0.2% (enters into cooperation agreement with activist firm), AMZN +0.1% (Whole Foods to cut several hundred corporate jobs as it reorganizes structure, according to WSJ)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: CNXN -6.3%, OCFC -3.1%, WRB -3%, GBCI -2%

Companies trading lower in after hours in reaction to news: UNP -2% (in sympathy with CSX earnings), PFG -1.5% (reports March AUM), SPRY -1.5% (stock offering byselling shareholders), BAM -0.8% (exploring possible counterbid for Network Intl, according to WSJ), AXTA -0.3% (in sympathy with PPG earnings), UAL -0.2% (UAL discusses BA delays in 10-Q filing)

>>> US Close Dow -0,33% S&P -0,60% Nasdaq-0,80%

Closing Stock Market Summary

The stock market had a mostly negative disposition today, digesting a slate of weak economic data and disappointing earnings results from Tesla (TSLA 162.99, -17.60, -9.8%). Bank stocks were also a big drag on the broader market today following several earnings misses from regional banks.

Despite Tesla's sizable decline and other headwinds, index level performance was fairly resilient until mid-afternoon. Some relative strength from other mega cap names helped spur a rebound effort from openeing declines for the major indices, which traded right around their flat lines before selling picked up around 2:00 p.m. ET. The afternoon pullback looked technical in nature after the S&P 500 failed to break above the 4,150 level, hitting 4,148 at its high of the day. 

Bank stocks were a notable pocket of weakness for the entire session. This followed relatively disappointing earnings reports from several regional banks, such as Zions Bancorporation (ZION 31.12, -1.60, -4.9%) and Truist Financial (TFC 33.48, -1.31, -3.8%). The SPDR Regional Bank ETF (KRE) fell 1.9% and the SPDR Bank ETF (KBE) decline 1.7%.

Dow component American Express (AXP 163.28, -1.67, -1.0%) was another notable loser following a large Q1 earnings miss. AXP, however, did reiterate its full year outlook. Fellow Dow component IBM (IBM 126.36, +0.04, +0.03%) finished the day little changed after its earnings report.

There were some big outperformers today, however. Chief among them were the homebuilders following a positive response to D.R. Horton's (DHI 107.60, +5.74, +5.6%) impressive quarterly results and outlook. This fueled buying interest in other homebuilders as evidenced by the 1.7% gain in the iShares U.S. Home Construction ETF (ITB) and a 0.7% gain in the SPDR S&P Homebuilder ETF (XHB). 

Treasuries saw gains across the curve, reflecting slowdown concerns following some weak economic data this morning that featured the highest continuing jobless claims level since November 27, 2021, the weakest reading for the Philadelphia Fed Index (-31.3) since May 2020, the weakest level for the U.S. Leading Economic Index since November 2020, and a 22% year-over-year decline in existing home sales in March. The 2-yr note yield fell nine basis points to 4.17% and the 10-yr note yield fell six basis points to 3.55%. 

The Treasury market overlooked a Wall Street Journal report that New York Fed President Williams (FOMC voter) signaled support for another rate hike at the May FOMC meeting and Cleveland Fed President Mester's view, according to CNBC, that policy needs to move somewhat further into tightening territory with the fed funds rate above 5.00%.

  • Nasdaq Composite: +15.2% YTD
  • S&P 500: +7.6% YTD
  • S&P Midcap 400: +2.9% YTD
  • Dow Jones Industrial Average: +1.9% YTD
  • Russell 2000: +1.6% YTD

Reviewing today's economic data:

  • Initial jobless claims for the week ending April 15 increased by 5,000 to 245,000 (consensus 242,000) while continuing jobless claims for the week ending April 8 increased by 61,000 to 1.865 million.
    • The key takeaway from the report is that continuing jobless claims are at their highest level since November 27, 2021, suggesting it is becoming more challenging to find new employment after a layoff.
  • The April Philadelphia Fed Index slumped to -31.3 (consensus -20.0) from -23.2 in March. That is the eighth straight reading in negative territory for this manufacturing survey and the lowest reading since May 2020. The dividing line between expansion and contraction for this report is 0.0.
    • With the diffusion index for general activity running at -1.5 (versus -8.0 in March), the key takeaway from the report is that respondents' expectations for growth over the next six months remain subdued.
  • Existing home sales declined 2.4% month-over-month in March to a seasonally adjusted annual rate of 4.44 million (Briefing.com consensus 4.50 million) versus a downwardly revised 4.55 million (from 4.58 million) in February. Sales were down 22.0% from the same period a year ago.
    • The key takeaway from the report is the recognition that the inventory of existing homes for sale remains extremely tight, which is due in part to the strength of the labor market (and ability to work remotely) and the jump in mortgage rates that is deterring existing home owners' interest in moving.
  • The Leading Index was down 1.2% in March (consensus -0.4%) after falling a revised 0.5% (from -0.3%) in February.
  • Weekly natural gas inventories increased by 75 bcf after increasing by 25 bcf a week ago.

Ahead of tomorrow's open, Procter & Gamble (PG), Freeport-McMoRan (FCX), and SLB (SLB) are among the more notable companies reporting earnings. 

Looking ahead to Friday, market participants will receive the following economic data:

  • 9:45 ET: Preliminary April IHS Markit Manufacturing PMI (prior 49.2) and preliminary IHS Markit Services PMI (prior 52.6)

WSJ : Europe’s Air-Traffic Agency Under Attack From Pro-Russian Hackers

Europe’s Air-Traffic Agency Under Attack From Pro-Russian Hackers
Air traffic isn’t at risk but the attack is ongoing, Eurocontrol said, amid fears about the safety of Europe’s critical infrastructure

Europe’s air-traffic control agency said Thursday that it was under attack from pro-Russian hackers amid fears that Moscow could interfere with the region’s critical infrastructure as its confrontation with the West escalates.

The cyberattack on the agency’s website started on April 19, a spokeswoman for the European Organisation for the Safety of Air Navigation, also known as Eurocontrol, said, adding that it wasn’t affecting the agency’s air-traffic control activities.

“Since 19 April, the Eurocontrol website has been under attack by pro-Russian hackers. The attack is causing interruptions to the website and web availability,” the spokeswoman said. “There has been no impact on European aviation.”

A senior Eurocontrol official familiar with the situation said that the agency had ringfenced its operational systems and that air-traffic safety wasn’t at risk. But internal and external communication had been affected, the person added, forcing some of the roughly 2,000 employees to use WebEx and other commercial tools to communicate.

“It’s been a heavy cyber-battle and while operations are entirely safe, doing other things has been difficult,” the official said.

The agency’s website was intermittently unreachable on Thursday evening.

Eurocontrol is a critical part of air-traffic safety in Europe, managing cross-border traffic across airspaces covered by national air-traffic authorities. In addition, its office in Maastricht in the Netherlands provides direct air-traffic control in the upper airspace for that country as well as for Belgium, Luxembourg and northwest Germany for both civilian and military flights.

European authorities have grown concerned that Russia could attack parts of Europe’s transport, communications, and energy infrastructure since it attacked Ukraine in February last year, sparking its biggest confrontation with the West since the Cold War.

FT : Renault criticises Tesla for cutting electric-vehicle prices

Renault criticises Tesla for cutting electric-vehicle prices
French group says reducing price will ‘kill’ second-hand car values sending the market into a spiral

Renault has lambasted Tesla for cutting electric-vehicle prices, warning that the US group would “kill” second-hand values of cars and send itself into a “spiral”. 

The comments by the French carmaker’s finance boss Thierry Piéton came hours after Elon Musk vowed to keep reducing prices in order to drive sales higher.

Renault shares slumped as much as 7 per cent despite it posting higher first-quarter revenues on Thursday, with analysts citing worries about pricing pressures across the industry, and despite the French carmaker’s insistence that it would not slash its own price tags.

Renault said its main aim was to keep customer monthly lease payments as low as possible, something that required it to protect the “residual value” of a car.

Most new cars are bought on finance deals that see motorists finance the depreciation of a car over a lease period, rather than its overall value.

The more value a car is expected to lose over the three years, the higher monthly payments typically are. About 80 per cent of the French carmaker’s EVs are sold on finance.

“When you cut prices significantly, residual value takes a hit,” Piéton said.

“There is no big incentive to go cut the prices and kill the residuals and go into a spiral that some of the competition has done,” he said. “If it results short term in slightly lower volume, so be it.”

Piéton’s comments are a direct aim at Tesla, which has cut prices by up to a fifth since the start of the year, leading to fears of a price war across the industry.

Renault’s share tumble came in spite of its recent turnround efforts after steep losses during the coronavirus pandemic.

Philippe Houchois, an analyst at Jefferies, said the French carmaker was often seen as a “weak link” in the industry, with lower margins than many of its peers. “The market is worried about pricing coming off after Tesla,” Houchois said.

On Thursday, Renault posted a 30 per cent rise in first-quarter revenues from a year earlier to €11.5bn, slightly above analyst expectations, and maintained its target to improve operating margins to at least 6 per cent in 2023, from 5.6 per cent last year.

Despite the French carmaker’s comments, some analysts said the group may still have to reconsider its prices to remain competitive, and find savings elsewhere to keep margins growing.

“Renault may be forced to lower its prices and find new efficiencies via its new manufacturing plants in northern France,” Third Bridge analyst Orwa Mohamad said.

Renault’s comments came hours after Elon Musk on Wednesday evening indicated that Tesla would keep lowering prices to pursue its target of increasing market share.

The electric-car maker has an unofficial target of selling 20mn vehicles a year by 2030, which would make it larger than industry leaders Toyota and Volkswagen combined.

“This is a good time to increase our lead further, and we’ll continue to invest in growth as fast as possible,” Musk told investors.

Tesla has seen the residual value of its vehicles fall significantly since it started cutting prices earlier this year, the Financial Times reported last month, potentially making its cars more expensive to lease.