>>> What to look at today - 15th of March 2023

Asian equities advanced Wednesday as investors wagered that the worst of the global fallout from the American banking sector has passed.  Financials were among the biggest gainers in Tokyo and Hong Kong, where the Hang Seng Index rose more than 1%. US stocks rallied into the close Tuesday, helping set the scene for the shift in sentiment in Asia. Futures for the S&P 500 edged higher.  Traders were digesting a slew of economic data from China, where retail sales rose as much as estimated while factory output was fractionally lower than projected. The People’s Bank of China added more liquidity than expected while holding a key lending rate unchanged. Rising housing sales provided one clearly positive signal, reflected in a rally in a mainland property index.   A gauge of dollar strength fell slightly, extending its run of declines to a fifth day. The two-year Treasury yield rose five basis points following a 27 basis point recovery in the rate on Tuesday. It still remains well below levels of mid last week after its biggest three-day slump in decades.  Japan’s 10-year yield inched up while the 20-year rate surged 16 basis points after the central bank offered to buy fewer longer-dated bonds than planned in Wednesday’s operations.  Swaps pricing is back to positioning for the Federal Reserve to lift rates by a quarter percentage point next week after the odds of an increase had slipped to nearly 50-50 on Monday. The closely-watched core consumer price index increased 0.5% in February, slightly ahead of the median estimate of 0.4% and enough to keep pressure on policy makers to hike rates.  Moody’s Investors Service cut its outlook on the sector on the heels of the trio of banking collapses over the past few days. First Republic Bank triggered a volatility halt after S&P Global Ratings placed the company on watch negative. oil rose from its lowest close in three months as traders took stock of the outlook for demand. Gold held a drop that took some of the shine off a three-day surge of more than 5%. US After Hours SMAR +11.5% higher on earnings; GES -7.1% lower on earnings; FRPT -11.2% falls on convertible offering.

Nikkei -0,12% Hang Seng +1,09% CSI +0,26% Shanghai +0,64% Shenzen +0,36%

Eur$ 1,0738 CNH 6,8855 CNY 6,8849 JPY 134,47 GBP 1,2157 CHF 0,9140 RUB 75,75 TRY 18,9875 WTI$ 72,12 +1% Gold 1901,21 BTC 24,838 +0,10% ETH 1,707

S&P +0,08% Nasdaq +0,10% EuroStoxx +0,12% FTSE +0,07% Dax +0,12% SMI

Macro :
- Banks and Hedge Funds Hold a Lot of Risky MBS
- Goldman’s Rubner ‘Shocked’ by Big Market Moves, Blames Liquidity
- UAE Spy Chief’s Firm Buys Into ByteDance at $220 Billion Value

Keep an eye on :
- AC FP : Accor CEO Says China Leisure Travel May Top 2019 Level This Year
- BMW GY : BMW Sees 2023 Automotive Ebit Margin 8% to 10%, Est. 8.67%
- BMW GY : BMW Says EVs, High-End Models to Drive Steady Profit in 2023
- BOL FP : Bollore FY Revenue Misses Estimates
- BOL FP : Bolloré Offers to Buy Up to 9.78% of Capital at €5.75/Share
- CARLB DC : Carlsberg Agreed to Sell Russia Units to Anadolu Efes: Vedomosti
- CAV1V FH : Triton’s Crayfish Supplements Caverion Tender Offer
- ACA FP : Credit Agricole Immobilier to Buy Sudeco From Casino Immobilier
- DFDS DC : DFDS Shares Jump After Betaville ‘Uncooked Alert’
- DSV DC : Flying Tiger Seeks DKK500 Million From DSV in Court, Finans Says
- EOAN GY : EON Targets Adjusted Ebitda of About €9B Until 2027
- EOAN GY : EON Names Erich Clementi as New Chairman of Supervisory Board
- EOAN GY : Germany’s EON Sees Steady 2023 Earnings Amid Exit From Nuclear
- FALG FP : Fermentalg Finalizes €6.3M Convertible Bond Issue
- GN DC : GN Store Nord Board Withdraws DKK7b Capital Raise Proposal
- HEX NO : Hexagon Purus Signs Long-Term Pact With Hino for Trucks in US
- HOLN SW : Caterpillar CEO Says US Construction Shows No Signs of Slowdown
- ILMN US : Icahn Says Illumina Should ‘Get Rid Of’ Grail in Tax-Free Spin
- IMCD NA : IMCD Nominates Valerie Daile-Braun as New CEO
- ITX SM : Inditex FY Ebit Meets Estimates
- ICOS IM : Intercos FY Revenue EU835.6M Vs. EU673.7M Y/y
- LXS GY : Lanxess 1Q Adjusted Ebitda Forecast Misses Estimates
- NEL NO : Nel Signed ~EU34M Contract With HH2E for 120 MW of Equipment
- NTEL NO : Nortel to Start Strategic Review After Getting Buyer Interest
- NOVOB DC : Novo Nordisk Slashes Insulin Cost by 75%: Health Wrap
- PRU LN : Prudential FY New Business Profit Misses Estimates
- PRU LN : Prudential Exposure to SVB, US Small Banks Insignificant: CFO
- SRAIL SW : Stadler Rail FY Ebit Misses Estimates
- TLX GY : Talanx 2023 Net Income Forecast Beats Estimates
- TIT IM : Italy’s Open Fiber Accelerates Fiber Push Targeting Rural Areas
- TikTok IPO : TikTok US Listing or Deal Could Be Around $40-$50 Billion: React
- UNVR US : Apollo to Buy Univar in $8.1 Billion Deal, Including Debt
- WAL US : Ken Griffin’s Citadel Reports 5.3% Stake in Western Alliance

FT : China’s consumer spending rebounds after end of Covid curbs

China’s consumer spending rebounds after end of Covid curbs
Officials warn uneven economic recovery threatened by falling export demand and property crisis

China’s consumer spending returned to growth in the first two months of 2023, in an early sign of an economic recovery that the government warned remains fragile after years of pandemic restrictions.

Retail sales grew 3.5 per cent year on year in the first two months of 2023, compared with declines in each of the previous three months. Activity in the debt-stricken property sector also pointed to a positive trajectory.

The data, part of the first comprehensive overview of activity since Beijing ended its sweeping pandemic restrictions, pointed to a mixed economic picture, with the recovery momentum threatened by falling global demand for Chinese exports and a lingering property sector slowdown.

China’s National Bureau of Statistics warned in a statement that the economic recovery’s foundation was “not yet solid” and said the government would take measures to boost domestic consumption.

Chinese policymakers last week set an economic growth target of 5 per cent for 2023, an unambitious figure that analysts suggest could have been designed to avoid missing expectations. China’s economy expanded just 3 per cent in 2022.

Meeting the target would still “not be an easy task”, new premier Li Qiang warned on Monday at the closing of China’s annual rubber-stamp parliament, as the country emerges from the economic malaise of the pandemic.


The retail sales data, which was in line with expectations, was closely watched given the impact on consumption of China’s zero-Covid system of lockdowns and mass-testing. Retail sales declined over the whole of both 2020 and 2022 — the first annual falls since the late 1960s.

“We always felt that the recovery would be consumer-led, and I think we’re beginning to see the start of that,” said Louise Loo, lead China economist at Oxford Economics, adding that while momentum had picked up, it was still relatively weak.

“The recovery has begun in earnest, but it hasn’t really been the booming reopening boost that people have been expecting,” she said.

China’s reopening started in December last year and has taken place gradually against a backdrop of nationwide outbreaks, with the government ending inbound quarantine rules in January and only this week permitting foreign tourists to enter the country again.


Other data for the first two months of the year were varied. Fixed-asset investment rose 5.5 per cent against a year earlier, outperforming expectations. Industrial output, a growth driver in the early stages of the pandemic, added 2.4 per cent year on year. Urban unemployment was slightly higher at 5.6 per cent.

“Compared to other countries post-pandemic, the recovery in China is relatively weak,” said Ting Lu, chief China economist at Nomura.

Metrics across the property sector, which has been gripped by a liquidity crisis since late 2021, with a wave of developers defaulting on their debts, generally showed improvement compared with the end of 2022.

The statistics bureau said overall property investment declined 5.7 per cent year on year in January and February — a slower pace than the 12.2 per cent decline in December. Property sales by floor area fell 3.6 per cent year on year, stronger than a 31.5 per cent contraction in December, while new construction starts by floor area contracted 9.4 per cent, up from 44.3 per cent.

Manufacturing and infrastructure investment grew 8.1 and 9 per cent, respectively.


Even within the positive retail sales data, various components indicated an uneven recovery. Lu pointed to a 9.4 per cent year-on-year contraction in car sales in January and February, compared with growth of 4.6 per cent in December.

China reports economic data for January and February together to account for disruptions during the lunar new year holiday.

Lu said further weakness would weigh on the recovery, but forecast better overall retail sales figures in March due to the disruption that China’s Covid exit wave of infections had to January data.

WSJ : Generative AI Brings Cost of Creation Close to Zero, Andreessen Horowitz’s

Generative AI Brings Cost of Creation Close to Zero, Andreessen Horowitz’s Martin Casado Says
‘I think it’s going to creep into our lives in ways we least expect it,’ Mr. Casado said at the WSJ CIO Network Summit

The value of ChatGPT-like technology comes from bringing the cost of producing images, text and other creative projects close to zero, according to Andreessen Horowitz General Partner Martin Casado.

With only a few prompts, generative AI technology—such as the giant language models underlying the viral ChatGPT chatbot—can enable companies to create sales and marketing materials from scratch quickly for a fraction of the price of using current software tools, and paying designers, photographers and copywriters, among other expenses, Mr. Casado said.

“That’s very rare in my 20 years of experience in doing just frontier tech, to have four or five orders of magnitude of improvement on something people care about,” Mr. Casado said Tuesday at The Wall Street Journal’s CIO Network Summit in Palo Alto, Calif.

On Tuesday, ChatGPT maker OpenAI released GPT-4, the startup’s latest AI language model trained on massive amounts of data, as well as human feedback, to generate natural language response to user prompts. The technology can also write computer code.

OpenAI said the tool is designed to be capable of advanced reasoning, leveraging “broader knowledge across a range of domains,” according to a statement. It also features more advanced capabilities to generate, edit and collaborate with users on creative projects, the company said.

Microsoft Corp. , which is investing billions of dollars in OpenAI, and other large enterprise-technology firms say they plan to add ChatGPT-like tools to their business-software products and services.

Yet many corporate technology chiefs have taken a wait-and-see approach to the technology, which has developed a reputation for producing false, misleading and unintelligible results—dubbed AI ‘hallucinations’.

Though ChatGPT, which is available free online, is considered a consumer app, OpenAI has encouraged companies and startups to build apps on top of its language models—in part by providing access to the underlying computer code for a fee.

For businesses, Mr. Casado said, there are “certain spaces where it’s clearly directly applicable,” such as summarizing documents or responding to customer queries. Many startups are racing to apply the technology to a wider set of enterprise use cases, he said.

But Mr. Casado said GPT-4 and other generative AI tools are less likely to be successful when retrofitted to an existing business model. Instead, he expects the technology to spark entirely new businesses and organizations.

“I think it’s going to creep into our lives in ways we least expect it,” Mr. Casado said.

FT : Brussels warns Germany against electricity subsidy for industry

Brussels warns Germany against electricity subsidy for industry
EU commissioner urges Berlin to back use of long-term contracts to reduce volatility in electricity market

The EU’s energy commissioner has warned Germany that a cap on electricity costs for industry would harm Europe’s single market, as she urged Berlin to back fairer reforms to ease power prices.

Kadri Simson, a commissioner from Estonia, challenged Germany’s idea of an “industry price” for electricity as she advocated the European Commission’s alternative proposals to stabilise the market through the use of long term contracts.

“A lot of member states have different budgetary possibilities to subsidise their industry,” Simson told the Financial Times, referring to Germany’s nascent proposals. “We have to take into account that there has to be fair competition in the EU.”

Simson added that the commission’s plans, announced on Tuesday, would instead allow German industry to “step up in the electricity market” and opt for “long-term five- to 10-year predictable pricing schemes” rather than taxpayer support.

Robert Habeck, Germany’s economy minister, said last week that Berlin was progressing with plans for an “industrial price for electricity”, saying businesses should be able to benefit from the low cost of renewable energy through “power purchase agreements” with wind and solar developers.

“Production costs are at about 5-9 cents per kilowatt hour, and that’s where the corridor lies,” he told reporters. However, he implied such a scheme would only work once there were plentiful supplies of cheap renewable power available. “The renewables must first be built, of course.”

Simson said the idea of lower tariffs for industry would have to be considered by the commission’s state aid officials.

Germany has come under fire repeatedly during the energy crisis for using government funds to support its own industry at the expense of fair competition within the bloc. Part of the reason for gas prices reaching record highs of €300 per kilowatt hour last August was because of a sudden rush by Berlin to buy non-Russian gas supplies ahead of the winter.

The reforms proposed by Brussels are aimed at avoiding similar price jumps recurring in the electricity market by promoting long-term contracts for renewable energy and giving consumers more transparency and choice. But the measures stop short of a full overhaul of the market.

The German economy ministry said it was examining the commission’s proposal “in detail” and that it supported efforts to increase hedging in the power market to ensure that the “advantages of renewable energies . . . reach the consumer even better”.

Several EU diplomats from southern European countries argue the reforms do not go far enough to stop gas prices contaminating the electricity market, as happened last year. “Right now [the proposal] doesn’t seem to address the problems,” said one senior EU diplomat.

Spain circulated a paper in January advocating more radical reforms that would widely introduce contracts for difference, which allow governments to recoup profits from a power generator if generation costs fall below a certain “strike” price.

Brussels has instead proposed that contracts for difference should be used for public investments in new renewable or low-carbon technologies. Simson said the inclusion of low-carbon power was a nod to France and other member states that wanted to direct funding towards nuclear.

“The commission has a responsibility to be technologically neutral,” she said.

FT : Disney debates future of Hulu and ESPN

Disney debates future of Hulu and ESPN
Selling off streaming service or sports network would sharpen focus on superbrands such as Marvel and Star Wars

Since Bob Iger’s second term as Disney chief executive started in November, some of America’s most prominent media executives have offered him advice on how to turn the world’s largest entertainment group round.

One topic has dominated the conversations: what to do with Hulu, the popular but complicated streaming service in which Disney owns a majority stake.

The executives have counselled selling the platform, according to people familiar with the conversations, with some also suggesting Iger spin off ESPN, a profitable but declining piece of the Disney kingdom.

Rumours surrounding the streaming service and the sports network, assets potentially worth $40bn, get to the heart of a larger question: as Hollywood enters a more mature phase of the streaming era, what kind of company should Disney be?

Iger — who stepped down as chief executive in 2020 weeks before the coronavirus pandemic struck the US — has returned to a bleaker era in Hollywood. Rising interest rates have had a sobering effect on the streaming boom. Ambitious investment has been tempered by a renewed focus on profitability and cost control.

Now speculation is rife about whether Iger, who defined modern Disney through dealmaking, will seek another big transaction to cement his legacy. Selling off Hulu, ESPN or both would slim Disney down, placing a sharper focus on its family-friendly superbrands such as Marvel and Star Wars.

Rich Greenfield, partner at research group LightShed, said the signs pointed to “a retrenching of Disney back to its roots” and that “it feels like something is about to happen”.

Hulu’s ownership structure has set a timer on the decision. Disney owns two-thirds of the business with rival Comcast holding the remainder, and the companies in 2019 agreed that either side could force a transaction starting in January of 2024. Comcast can “put” the stake to Disney, or Disney can “call” the stake from Comcast.

With that date only 10 months away, Iger told investors on Thursday he was “studying” Hulu “very, very carefully”. 

“The environment is very, very tricky right now. And before we make any big decisions about our level of investment, our commitment to that business, we want to understand where it could go,” Iger said at a conference.

Bob Chapek — who succeeded Iger in 2020 but was ousted in November — tried to aggressively expand Disney Plus, aiming to hit a target of 260mn subscribers by 2024, almost 100mn more than today.

Iger has shifted away from that strategy, instead speaking of the need for more focus. “Because the streaming platforms require so much volume, one has to question whether that’s the right direction to go, or can you be more curated,” he said last week.

With the “easy money” era over, big media companies face a painful dilemma: how to navigate the collapse of once-lucrative cable television businesses while waiting for their streaming units to become profitable.

“Iger is stuck,” said the chief executive of one large entertainment rival, noting Disney’s $48bn in debt. “[Hulu]is a great service but it’s domestic only and the US is a very crowded market.” 

Disney’s main traditional TV asset is ESPN, which continues to generate annual revenue of more than $10bn. But subscribers are shrinking as people cancel their cable TV packages.

ESPN’s cable subscribers have dwindled from 98mn in 2013 to less than 74mn last year, according to estimates from S&P Global Market Intelligence. The ESPN Plus streaming service, which launched alongside Disney Plus in 2019, has reached 25mn subscribers but they pay a fraction of what ESPN earns from cable TV subscribers.

Towards the end of 2021, Disney executives met Michael Rubin, chair of sports company Fanatics, to discuss options for ESPN, including a potential investment or sale, according to three people familiar with the matter. While the talks did not advance beyond the meeting, they speak to the uncertainty surrounding the sports network’s future.

While Iger has announced he is open to different scenarios regarding Hulu, he has been less vague about ESPN, which he views as a “differentiated” asset.

“It is going through some obviously challenging times,” Iger said last month, pointing to the decline of traditional TV. “We just have to figure out how to monetise it in a disrupting world . . . we’re not engaged in any conversations right now or considering a spin-off of ESPN.”

Chapek, too, had been leaning towards holding on to ESPN, according to a person close to him. “But ESPN is a declining asset, and Disney has a tough balance sheet. Can you invest in [ESPN], and can you also buy the third of Hulu you don’t have?” the person questioned. “Can you do all these things? At a time when the market is saying: ‘Hey, I don’t want you losing money’?”

Hulu was created in 2007 as a joint venture among media companies who wanted to combat online piracy with a legitimate digital home for their programming.

Home to critically acclaimed shows such as The Handmaid’s Tale, The Bear and Only Murders In The Building, it has 48mn subscribers — roughly equal to HBO but behind Netflix, which has 74mn in the US and Canada.

Despite this success, Hulu has been handicapped throughout its history by its complex ownership structure and the reluctance of old media companies to disrupt their traditional TV units — highlighting the messy nature of Hollywood’s transition to streaming.

More than a decade ago Jason Kilar, Hulu’s then chief executive, tried to expand the service globally but met resistance among its old media owners. As Netflix has raced into countries around the world, signing up hundreds of millions of people, Hulu remains restricted to the US. 

Towards the end of 2019, executives at Hulu pitched for a $6bn investment to launch the service globally. Iger was initially receptive, saying he would present the idea at Disney’s January 2020 board meeting, according to people familiar with the matter. But he changed his mind, concluding such a move was premature, the people said, and a month later he announced he was stepping down.

One former senior Disney executive said that when the pandemic struck, pummelling Disney’s theme park and cinema businesses, any lingering notion of a big Hulu international expansion died. “Without expanding globally, it’s not worth it,” said the executive. “So just get rid of it now”. 


In the US, Hulu continues to operate as a separate service to Disney and is the home to edgier programming, such as R-rated films. Outside the US, Disney has created a general entertainment service via its Star brand.

Iger told CNBC last month that “everything is on the table” regarding Hulu’s future, noting that he was “concerned” about “undifferentiated” content.

His comments did not go down well internally at Hulu, according to employees. “It was an affront,” one executive said. “The takeaway was: He’s selling it.”

A former Hulu employee said that Hulu got “absorbed inside the Disney blunt-force object”, with many of its original staff leaving after Disney took over. “It’s hard to fathom that you don’t need a profitable 50mn subscription service in today’s world,” the person said.

Until recently, the assumption across Hollywood and Wall Street was that Disney would buy out Comcast’s Hulu stake next year. But recent comments made by the companies suggest it could be the other way round.


Comcast chief executive Brian Roberts said in September he would be interested in buying all of Hulu, calling it a “phenomenal business”.

“If it was for sale, Comcast would be interested — and I think others would also want to get into that opportunity,” Roberts said.

Comcast has its own streaming service, Peacock, which has about 20mn paying subscribers. Buying Hulu could catapult Comcast from a bit part to a leader in the streaming wars.

But it would come at a heavy cost, as the two sides had previously agreed a guaranteed minimum valuation for Hulu of $27.5bn, making for a big cheque for either company to write in today’s environment.

“We have to get much more judicious in terms of not just how much we’re spending, but what we’re spending it on,” Iger said last week. “It’s just a tricky period of time.”

WSJ : Silicon Valley Bank Creditors Form Group in Advance of Possible Bankruptcy

Silicon Valley Bank Creditors Form Group in Advance of Possible Bankruptcy
Centerbridge Partners, Davidson Kempner and Pimco among investors who have hired PJT Partners in anticipation of possible bankruptcy, asset sales

Creditors of Silicon Valley Bank’s parent company have formed a group in anticipation of a potential bankruptcy filing, through which they hope to profit from a sale of the collapsed firm’s private-wealth and other units, according to people familiar with the matter.

The investor group, which is being advised by PJT Partners Inc., PJT 2.18% includes Centerbridge Partners LP, Davidson Kempner Capital Management LP and Pacific Investment Management Co., or Pimco, the people said. Most members bought parent SVB Financial Group’s SIVB -60.41% bonds coming into the weekend as they traded down to around 30 cents on the dollar, the people said. The group now holds a sizable chunk of SVB Financial’s $3.4 billion face value of bonds.

It wants the parent company to file for bankruptcy and then auction off its nonbank businesses through a court-supervised sale process, the people said. SVB Financial Group said on Monday that its board had appointed a restructuring committee to explore strategic alternatives. It hasn’t said whether it plans to file for bankruptcy.

If SVB Financial’s assets fetch a high enough valuation in any such auction, the bondholder group could profit. When a company’s assets are sold through bankruptcy, the proceeds often flow to its creditors.

The trading desk of Goldman Sachs Group Inc. GS 2.10% helped facilitate around $700 million of bond trades into distressed-debt investors’ accounts over the weekend, according to people familiar with the matter. Over $1.5 billion of the parent company’s debt has traded hands since Friday, when Silicon Valley Bank was put into receivership.

Silicon Valley Bank, the technology-focused lender that was SVB Financial’s core business, was taken over by federal regulators Friday after it was crippled by a dash for the exits by depositors. Over the weekend, regulators tried unsuccessfully to sell the business, and they were planning to take another crack at auctioning it this week, The Wall Street Journal reported.

Even though government officials have warned that SVB Financial Group’s stock is worthless—it hasn’t traded since Thursday—the parent company owns other assets that could have significant value.

They include SVB Capital, an investment manager that oversees $9.5 billion of funds on behalf of third-party investors, as well as an investment bank, SVB Securities, and a wealth- management company, SVB Private, according to securities filings.

In a research note published Monday, Stifel Financial Corp. SF 7.04% estimated that if creditors were able to recover all of the parent company’s nonbank assets, including its cash and securities, they could get close to $4.75 billion in the event of a liquidation, with much of that coming from SVB Private. SVB Financial’s market capitalization was approximately $17 billion as of Jan. 31. It had cash and securities worth $2.6 billion at the end of last year, separate from $200 billion of assets held at the lending arm, according to Stifel.

Depending on the scale of losses at Silicon Valley Bank, which regulators haven’t yet disclosed, its parent company may need to help cover them, and that could reduce any recovery for the bondholders.

Bankruptcy laws state that companies under court protection are required to honor commitments to banking regulators “to maintain the capital of an insured depository institution.” That means the Federal Deposit Insurance Corp., as the receiver for Silicon Valley Bank, could argue that funds or assets at the parent level should be used to fill any hole in the bank’s balance sheet before bondholders can be paid a penny.

Other bankrupt financial companies successfully auctioned off their most valuable assets through bankruptcy, including Lehman Brothers in 2008.

Lehman’s U.S. investment banking arm was sold to Barclays BCS 2.21% PLC, while Nomura Holdings Inc. NMR -1.31% purchased the defunct firm’s Asia-Pacific and Europe franchises. Barclays paid around $2 billion and reported a paper gain on the deal of more than $4 billion two years later.

FT : Germany’s military upgrade to take ‘half a century’ at current pace, says r

Germany’s military upgrade to take ‘half a century’ at current pace, says report
Parliamentary commissioner for armed forces says sluggish procurement is hindering improvements

Germany’s armed forces upgrade will take 50 years to complete if it continues at its current sluggish pace, according to an annual report on the state of the Bundeswehr.

Eva Högl, the parliamentary commissioner for the armed forces, singled out the country’s slow defence procurement hampering the Bundeswehr’s much-needed upgrade. In her 170-page report submitted to parliament on Tuesday, she welcomed the announcement last year by chancellor Olaf Scholz that included a special €100bn fund for military refurbishments and praised decisions to buy F-35 fighter jets, transport helicopters and armed drones.

But Högl said that even if some new equipment was on its way, in 2022 “not a cent had arrived from the special fund”.

She added: “If we stayed at the current pace and the existing framework conditions, it would take about half a century before just the current infrastructure of the Bundeswehr was completely renovated.”

Germany’s defence ministry did not immediately respond to a request for comment, but last month it said €30bn had been “contractually committed”, adding: “And as soon as the goods come in . . . we can pay that.”

Högl said Russia’s invasion of Ukraine had exacerbated the deep problems with equipment for the armed forces because “the sensible and correct” decision by Berlin to send an array of weapons to Kyiv had created gaps that had proved difficult to fill. She urged officials to ensure that the equipment was “replaced quickly in order not to permanently damage the operational readiness of the Bundeswehr”.

She repeated a previous call for the special fund to be tripled to €300bn, arguing that the existing figure would not be enough to make up for the serious shortfalls in the armed forces.

Billions more, she added, would be required to replenish depleted stocks of ammunition, which are not covered by the €100bn fund, at a time when Europe is trying to keep pace with Ukraine’s consumption of artillery shells.

Högl’s report underlined the challenges faced by Germany’s new defence minister, Boris Pistorius, who was appointed in January after the resignation of his gaffe-prone predecessor Christine Lambrecht.

Though Pistorius has won praise even from sceptics of Scholz’s government and its response to the war in Ukraine, analysts warn he must confront the enormous task of overhauling the ministry and speeding up the procurement system.

Pistorius has been arguing for an extra €10bn a year in negotiations over the 2024 budget to take annual defence spending to €60bn. But the Social Democrat defence minister has struggled to persuade the hawkish ministry of finance to approve the top-up.

Even that figure would fall short of the amount Germany needed to fulfil its Nato obligation to spend 2 per cent of gross domestic product on defence. Berlin spent just 1.44 per cent of GDP on defence last year, according to provisional Nato figures.

FT : Lottomatica IPO: listing will boost gambling group’s acquisition pot

Lottomatica IPO: listing will boost gambling group’s acquisition pot
Italian group needs to sell shares to reduce leverage and to use as a currency for future acquisitions

Fancy a flutter on the Italian gaming market? Private equity group Apollo is seeking to list Lottomatica, the country’s leading operator, for a reported €5bn. As a proven consolidator of the fragmented Italian gaming sector, Lottomatica has a buzzy equity story to tell. But, with the world’s stock markets throwing a collective wobble, Lady Luck is not on Apollo’s side.

Lottomatica — which has just over a quarter of the Italian gaming market — wants to continue to snap up minnows and gain scale. That is sensible, given the savings available as gambling moves online. But it needs to sell shares to reduce leverage and to use as a currency for future acquisitions.

The group had €1.7bn of net debt at the end of 2022 — equivalent to 3.3 times 2022 ebitda of €520mn, adjusted to include future cost savings. That means Lottomatica probably needs to raise €400mn of equity in order to reach its target leverage of 2.5 times ebitda. Apollo would then sell its own holdings down to bring the free float to the minimum 25 per cent listing threshold.


How much might Lottomatica be worth? The group has three main businesses — none of which, despite its name, is the National Lottery. Online betting will account for about half of this year’s estimated €560mn of ebitda. If it were valued at 12 times ebitda — a discount to UK-listed Entain and highly rated Flutter — it might be worth €3.3bn.

Moving to the realm of the bookies, sports betting made €100mn of ebitda last year and might be worth €800mn-€900mn. The bigger but less exciting slot machine business might come in at a similar amount. That would yield a total valuation in the region of €5bn. A blended multiple of about 9 times ebitda is in line with peers.

The question, then, is about what sort of discount Apollo might have to offer to get the shares out of the door. That will, to some extent, depend on markets. But Lottomatica — with plenty of growth and a well-regarded management team — looks an attractive long-term wager for punters who can quell ethical qualms concerning the gambling industry.

>>> US After Hours Summary: SMAR +11.5% higher on earnings; GES -7.1% lower on e

After Hours Summary: SMAR +11.5% higher on earnings; GES -7.1% lower on earnings; FRPT -11.2% falls on convertible offering

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: SMAR +11.5% (also names new board chair), STNE +3.5%, LEN +3.1%, S +1%

Companies trading higher in after hours in reaction to news: BNL +3.3% (authorizes new $150 mln share repurchase program), AAWW +3.1% (all regulatory conditions met for merger; deal to close on Mar 17), ABCL +1.5% (announces two presentations on T-Cell Engager Discovery), BNTX +0.3% (FDA authorizes bivalent Pfizer-BioNTech COVID-19 vaccine as booster for children six mos to 4 yrs old), O +0.2% (increases dividend), NLY +0.2% (decreases dividend), PFE +0.2% (FDA authorizes bivalent Pfizer-BioNTech COVID-19 vaccine as booster for children six mos to 4 yrs old), ACA +0.1% (receives wind tower orders of $750 mln), LLY +0.1% (announces details of presentations at AACR meeting), GD +0.1% (awarded $1.48 bln U.S. Army contract modification)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: GES -7.1%, WEST -1.3%

Companies trading lower in after hours in reaction to news: FRPT -11.2% (to offer $350 mln in convertible notes in a private offering), ORA -6.7% (launches 3.6 mln share offering), PRTA -2.8% (to highlight treatments for Alzheimer's and Parkinson's), DXC -2.4% (charged by SEC with making misleading disclosures about its non-GAAP financials), WMG -1.4% (planning for the succession of CFO), ADV -1.1% (names new CFO), WFC -1% (files $9.5 bln mixed securities shelf offering), FLR -0.3% (sells its AMECO South America business to STRACON Group)

>>> US Close Dow +1,06% S&P +1,65% Nasdaq +2,14%

Closing Stock Market Summary

Stocks were on a rebound-minded track to start today's session, bolstered by strength in the bank stocks and a small measure of relief that the February Consumer Price Index (CPI) wasn't much worse than feared.

Just about everything rose with the rebound tide, as there was some opportunistic trading moves in the wake of a short-term oversold market that saw the SPDR S&P Bank ETF (KBE) and SPDR S&P Regional Banking ETF (KRE) increase as much as 8.6% and 11.2%, respectively. The S&P 500 would climb as much as 2.1% to 3,937 before running out gas on the underside test of its 200-day moving average (3,939).

Simultaneously, Treasuries were selling off with some of the safety premium they had enjoyed in recent sessions being drained away. The 2-yr note yield scraped 3.82% in overnight action, but at one point in today's trade touched 4.40% before settling the session at 4.20%, up 18 basis points from yesterday. The 10-yr note yield, in turn, visited 3.47% overnight, but climbed back to 3.67% before settling the day at 3.64%, up 12 basis points from yesterday.

Treasuries were also influenced by the CPI data that showed consumer inflation sticking at higher levels, presumably leaving the Fed an option to raise the target range for the fed funds rate by 25 basis points at the March FOMC meeting. Total CPI was up 6.0% year-over, versus up 6.4% in January, and core CPI was up 5.5% year-over-year, versus up 5.6% in January. The Fed's inflation target is 2.00%.

The CME FedWatch Tool shows a 77.5% probability that the Fed will raise rates by 25 basis points, which is roughly what was expected ahead of the CPI release.

The stock market lost its rebound momentum after failing to break through its 200-day moving average. At its low in the afternoon trade, the S&P 500 hit 3,873. The fade from session highs was precipitated by a pullback in the bank stocks, which reacted negatively to a report that S&P had put First Republic Bank (FRC 39.63, +8.42, +27.0%) on creditwatch negative citing its funding profile risk. That news came on the back of a report earlier in the session that Moody's had downgraded the U.S. banking system to Negative from Stable.

The SPDR S&P Bank ETF (KBE) ended the day with a more modest 1.9% gain while the SPDR S&P Regional Banking ETF (KRE) pulled in with a 2.1% gain.

The afternoon retreat was also influenced by some geopolitical angst after it was reported by CNN that a U.S. Air Force drone was forced down by a Russian fighter jet over the Black Sea.

It was looking like it might be a very disappointing close for the stock market, but there was a renewed and concerted buying effort in the last 45 minutes among the mega-cap stocks that left the major indices finishing the session on an upbeat note, although still off their morning highs.

The Vanguard Mega-Cap Growth ETF (MGK) rose 2.3%, paced by a material gain in Meta Platforms (META 194.02, +13.12, +7.3%) after the company announced plans to cut 10,000 more jobs and close 5,000 open positions in a further cost-cutting action.

All 11 sectors closed the day in positive territory. The communications services sector (+2.8%) led the way followed by information technology (+2.3%), financials (+2.2%), and consumer discretionary (+1.7%). The consumer staples (+0.8%), real estate (+0.8%), energy (+0.9%), and health care (+0.9%) sectors brought up the rear.

Advancing stocks led declining stocks by a 3-to-1 margin at the NYSE and by a 2-to-1 margin at the Nasdaq in a heavily-traded session.

  • Nasdaq Composite: +9.2% YTD
  • S&P 500: +2.1% YTD
  • S&P Midcap 400: +0.9% YTD
  • Russell 2000: +0.9% YTD
  • Dow Jones Industrial Average: -2.9% YTD

Reviewing today's key economic data:

  • Total CPI was up 0.4% month-over-month in February, as expected, and up 6.0% year-over-year -- the smallest 12-month increase since September 2021 -- versus up 6.4% in January. Core CPI, which excludes food and energy, was up 0.5% month-over-month (consensus +0.4%) and up 5.5% year-over-year -- the smallest 12-month increase since December 2021 -- versus up 5.6% in January.
    • The key takeaway from the report is that it continues to show inflation running well above the Fed's 2.0% inflation target. While the banking problems have taken a 50 basis points rate increase off the table at the March FOMC meeting, this report should ensure that the Fed raises rates by 25 basis points, unless it wants to send a message that the banking problem is a bigger issue than people think by not raising rates only a few weeks after the Fed Chair teased the possibility of a 50 basis points rate hike at the March meeting.
  • The February NFIB Small Business Optimism Index checked in at 90.9 (prior 90.3)

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

  • 07:00 ET: MBA Mortgage Applications for the week of March 11 (prior 7.4%)
  • 08:30 ET: March Empire State Manufacturing ( consensus -8.0; prior -5.8)
  • 08:30 ET: February Retail Sales ( consensus 0.2%; prior 3.0%) and Retail Sales, Ex-Autos (Briefing.com consensus -0.1%; prior 2.3%)
  • 08:30 ET: February Producer Price Index ( consensus 0.3%; prior 0.7%) and core PPI (Briefing.com consensus 0.4%; prior 0.5%)
  • 10:00 ET: January Business Inventories (consensus 0.0%; prior 0.3%)
  • 10:00 ET: March NAHB Housing Market Index consensus 42; prior 42)
  • 10:30 ET: EIA Crude Oil Inventories for week of March 11 (prior -1.69M)
  • 16:00 ET: January Net Long-Term TIC Flows (prior $152.8 bln)