Gapping up
In reaction to earnings/guidance:
- LFST +22.4%, MAXN +15.9%, ARLO +11.8%, VERX +9.7%, ZYME +9.4%, MCG +8.5%, CRWD +5.8%, REVG +5%, LTH +4.3%, WTI +2.6%, KFY +2.5%, NVEI +2.4%, ABM +2.2%, CPB +2.1%, BASE +1.2%, CASY +0.9%, GSAT +0.8% (guidance)
Other news:
- KBAL +68.4% (HNI Corporation (HNI) to acquire Kimball International in a cash and stock transaction valued at approximately $485 mln)
- DSEY +38% (to be acquired by Solenis for $4.6 bln or $8.40/share)
- MESO +14.9% (receives FDA acceptance of resubmission of BLA for Remestemcel-L )
- WE +7.9% (to restructure $3 bln in debt according to NYT)
- DBVT +6.6% first patient screened in VITESSE Phase 3 trial)
- OXY +2.7% (Berkshire Hathaway (BRK.A / BRK.B) bought another 5801791 shares worth ~$354.5 mln (3/3-3/7 transaction dates))
- VRNA +1.9% (files mixed shelf)
- CDTX +1.8% (presents preclinical data)
- VLRS +1.1% (reports February traffic)
- BBIO +1.1% (prices offering of 8823530 shares of its common stock at a public offering price of $17.00 per share)
Analyst comments:
- AY +1.6% (upgraded to Buy from Neutral at BofA Securities)
- AGNC +1.3% (upgraded to Overweight from Neutral at JP Morgan)
- CMS +1.2% (upgraded to Buy from Neutral at BofA Securities)
Hedge funds build macro firepower to capitalise on volatile markets
Sector has recorded best returns since financial crisis with the return of high inflation and steep interest rate rises
Hedge funds are building their firepower in global macro trading as they seek to capitalise on the most lucrative environment since the financial crisis.
Macro trading, a decades-old strategy made famous by the likes of George Soros and Louis Bacon, involves betting on moves in global bond, currency and other assets.
After years of dull returns in markets dominated by central bank stimulus, the sector has been turbocharged by sharp cuts in interest rates during the coronavirus pandemic and then the return of high inflation and steep rate rises as economies opened up.
US-based Schonfeld, Graham Capital and ExodusPoint are among firms hiring in this space. Managers are preparing for an expected influx of capital from investors searching for ways to protect their portfolios in an environment of choppy markets and diminishing support from central banks.
“There’s been a paradigm shift in interest in macro from the previous decade to now, due in large part to central bank activity,” said Kenneth Tropin, chair of $17.5bn-in-assets Graham Capital, which he founded in 1994.
“Macro markets have been moving like crazy, last year was particularly good and the opportunity set is fantastic looking ahead,” he added. The Connecticut-based firm has recently hired an economist and a macro fund manager and is looking to add more investment professionals.
In February the Financial Times revealed that multi-strategy hedge fund Schonfeld was hiring Bahamas-based macro manager Ben Melkman, a former star trader at Brevan Howard who until last year was running Light Sky Macro. Schonfeld — which about two years ago began building its presence in discretionary, or human-led, macro trading — plans to hire aggressively in this space, as it diversifies further into the area.
Last month ExodusPoint Capital, which manages $13bn in assets, hired London-based Patrik Olsson, former chief investment officer at Nektar Asset Management, to run a macro strategy. New York-based MKP Capital has been expanding staff numbers as it tries to capitalise on what it believes is a “structural shift” in markets. And London-based Trium Capital launched a macro fund late last year, with the ending of quantitative easing heralding “a rich era for global macro”, according to co-chief executive Donald Pepper.
Demand for macro traders is “exceptionally high, both in quant and discretionary”, said one hedge fund recruiter.
One of the oldest hedge fund strategies, macro hedge funds struggled for years as trillions of dollars of central bank stimulus suppressed market volatility and pushed interest rates to near zero, limiting their ability to profit.
But they have largely enjoyed a revival since the start of the pandemic, with many such as Caxton Associates and Brevan Howard profiting handsomely as interest rates were slashed in 2020 in a bid to revive economic growth.
And while some funds, notably Rokos Capital and Odey, were hard hit by major bond market upheaval in autumn of 2021, last year was the strongest for macro funds since the onset of the financial crisis in 2007.
Funds on average gained 9 per cent last year, helped by soaring bond yields and a strengthening dollar, compared with a 17.7 per cent fall in the S&P 500 in total return terms and large losses suffered by many equity managers.
Among the biggest macro winners were Ken Griffin’s Citadel, which made 32.6 per cent in its fixed-income and macro fund, its best ever annual return, and Caxton Associates, whose Macro fund run by chief executive Andrew Law gained 35 per cent.
And Rokos, which gained more than 50 per cent and is up a further 6.5 per cent already this year, has opened up to new money and is looking to grow its $15.5bn in assets by approximately $3bn as it aims to capitalise on the attractive trading opportunities.
The large shifts in bond and currency markets have also provided a lucrative environment for computer-driven funds betting on such trends in global markets. Man Group, one of the world’s biggest hedge fund firms, reported last week that most of its $779mn of 2022 performance fees were earned on its systematic macro funds.
“Macro dispersion is coming from central banks and governments, which creates opportunities for [quant trading arm] AHL,” chief executive Luke Ellis said, referring to large moves in global markets.
US investment firm Dynamic Beta’s DBMF fund gained 23.5 per cent last year and the firm’s assets more than tripled to about $2.2bn. Markets are no longer constrained by central banks, meaning the trends that such funds thrive on are likely to be around for years, said Paul Britton, chief executive of $8.6bn-in-assets Capstone, which has made hires in trend-following and currency trading.
Despite the strong returns, macro funds have suffered four straight years of investor outflows, according to data group eVestment. That is likely to have been driven by investors trimming their allocations in response to years of lacklustre returns, while last year some investors trimmed macro allocations that had grown too large in their portfolios relative to stocks and bonds, both of which fell sharply in price.
However, many believe that macro is likely to continue to be the big winner in the current market environment.
“We see a need for macro in all of our portfolios,” said John Sedlack III, senior investment manager, alternatives at Abrdn. “Higher interest rates correspond with better returns for macro.”
And in a recent survey of investors managing $1.4tn in assets, BNP Paribas found that macro was the best performing strategy last year, and is now one of the most popular to allocate to.
“Investors are particularly focused on the paradigm shift and what’s happening in rates and inflation,” said Marlin Naidoo, global head of capital introduction at the bank. “Macro is very well positioned to take advantage of that.”
- Kion (KGX TH) +1.1%
- Kion Raised to Buy at Bankhaus Metzler; PT 43 euros
- Andritz (AZ2 TH) +0.5%
- Andritz FY Div. Beats Est., Sees Higher 2023 Revenue, Profit
- ASML (ASME TH) +0.3%
- ASML chief warns of IP theft risks amid chip sanctions
- Philips (PHI1 TH) +0.3%
- Siemens’ Improving Leverage May Open Door for €10 Billion of M&A
- HelloFresh (HFG TH) -0.8%
- Saint-Gobain (GOB TH) -0.8%
- Sticky Inflation, Buybacks, Prices to Drive Building Materials
- BMW (BMW TH) -0.8%
- BMW Underpinned by China With a Top-of-Range Margin: 4Q Preview
- Stellantis (8TI TH) -0.8%
- Covestro (1COV TH) -0.9%
- Zalando (ZAL TH) -0.9%
- Fuchs Petrolub (FPE3 TH) -2%
- Fuchs Petrolub Sees 2023 Revenue About EU3.6B, Est. EU3.45B
- Adyen (1N8 TH) -2.4%
- Adyen Cut to Neutral at Exane; PT 1,450 euros
- Symrise (SY1 TH) -2.6%
- Symrise Sees 2023 Ebitda Margin About 20%
- Swiss Regulator Probes Possible Collusions in Fragrance Market
- Adidas (ADS TH) -3%
- Adidas Slashes Dividend, Sidesteps Question on Yeezy Gear
DAX:
- Symrise (SY1 TH) -1.9%
- Swiss Regulator Probes Possible Collusions in Fragrance Market
- Adidas (ADS TH) -2.9%
- *ADIDAS PROPOSES 2022 DIVIDEND PER SHARE OF €0.70, EST. €1.64
MDAX:
- Kion (KGX TH) +1.4%
- Kion Raised to Buy at Bankhaus Metzler; PT 43 euros
- TeamViewer (TMV TH) +1%
- Fuchs Petrolub (FPE3 TH) -1.6%
- Fuchs Petrolub Sees 2023 Revenue About EU3.6B, Est. EU3.45B
SDAX:
- Hensoldt (HAG TH) -1%
- Deutsche Beteiligungs AG (DBAN TH) -1.2%
- KWS Saat (KWS TH) -1.5%
- Deutz (DEZ TH) -1.5%
Asian equities tumbled, Treasury yields pushed higher and the dollar extended gains as hawkish rhetoric from Federal Reserve Chair Jerome Powell hurt global appetite for risk taking. A gauge of the region’s shares slipped more than 1%, with a benchmark of emerging markets falling more as investors adjusted for the prospect of higher borrowing costs. Some of the heaviest losses were in Hong Kong, where the Hang Seng Index dropped more than 2% amid signs that derivatives and structured products were amplifying the fall. Shares of Asian energy companies and miners dropped as a combination of the Fed outlook and China’s economic growth target weighed on commodities. A measure of greenback strength extended its recent rally to near the highest level this year. The yen extended its decline, the yuan traded just below the key level of 7 versus the dollar and the currencies of Australia and New Zealand held large losses from the previous session. Powell, who will appear in Congress again later in the day, signaled during Senate testimony on Tuesday that officials were ready to speed up the pace of tightening and take rates to higher levels if inflation remains hot. That’s sent short-end yields skyrocketing and prompted a shift higher in rate-hike bets. In the swaps market, traders boosted wagers for the Fed’s March 22 meeting, with an increase in bets for a half-point hike and a peak above 5.6% by September. The Fed raised its policy rate by a quarter point to a range of 4.5% to 4.75% in February. US policymakers will have a chance to review the February jobs data and an update on consumer prices before they meet again. US payroll growth has topped estimates for 10 straight months in the longest streak in decades, a trend that, if extended, will boost pressure on the Fed to keep raising interest rates. oil held most of a deep loss from Tuesday as the outlook for rate hikes raised concerns over a drag on demand. Gold was steady after falling to the lowest in a week in response to Powell. Iron ore dipped as investors weighed data that suggests China’s steel consumption remains slow. US After Hours ARLO +11.5%, CRWD +6.1%, BASE +3.7%, WTI +3.4%, CASY +1.6% up on earnings; SOUN -9%, YEXT -5.3%, AGTI -2%, SFIX -2% down on earnings.
Nikkei +0.51% Hang Seng -2.65% CSI -0.86% Shanghai -0.58% Shenzen -0.21%
Eur$ 1.0536 CNH 6.9771 CNY 6.9662 JPY 137.68 GBP 1.1826 CHF 0.9431 RUB 75.6614 TRY 18.9229 WTI$ 77.47 -0.10% Gold 1,813 -0.04% BTC 21,991 -0.29% ETH 1,553 +0.15%
S&P +0.00% Nasdaq -0.07% EuroStoxx -0.28% FTSE -0.21% Dax -0.26% SMI -0.77%
Macro :
- Morgan Stanley’s Wilson Sees 20% Downside for Tech Stocks
- Pentagon’s Budget to Seek Big Increases for Weapons Buying, R&D
Keep an eye on :
Keep an eye on :
- ABBN SW : Impala to Sell Neoen Subscription Rights for 4.09m Shares: Terms
- ADS GY : Adidas FY Dividend per Share Misses Estimates
- AGFB BB : Agfa-Gevaert 4Q Revenue Misses Estimates
- BAKK LN : Bakkavor FY Adjusted Operating Profit Beats Estimates
- BIM FP : BioMerieux FY Adjusted Operating Profit Meets Estimates
- BNP FP : BNP Paribas Plans to Move Most Hong Kong Staff Out of Central
- BNR GY : Brenntag Sees 2023 Oper Ebitda EU1.60B to EU1.80B, Est. EU1.66B
- BNR GY : Brenntag to Launch Share Buyback Program of Up to EUR 750m
- CO FP : Groupe Casino Studying Potential Sale of Stake in Assai
- CLSB SS : Clas Ohlson Feb. Online Sales -5%
- CSGN SW : Credit Suisse Gets China Nod to Launch Wealth Business: Reuters
- ELIS FP : Elis FY Ebitda Matches Estimates
- RF FP : Eurazeo SE Assets Under Management EU34.1B Vs. EU30.9B Y/y
- FCT IM : Fincantieri FY Revenue Beats Estimates
- FPE GY : Fuchs Petrolub Sees 2023 Revenue About EU3.6B, Est. EU3.45B
- GIVN SW : EU Raids Fragrance Firms in Suspected Scents Supply Cartel
- HSHIP NO : Himalaya Shipping Files for US IPO
- LOGN SW : Logitech's 1H Margin Might Shrink 300 Bps on Soft Demand: React
- LSEG LN : LSE Group Shareholders to Sell 23m Shares: Terms
- LSEG LN : LSE Group Shareholders to Sell 23m Shares: Terms
- LUMI NO : Lumi Gruppen Offering of 16.7m Shares Prices
- MKS LN : TCS set to close new deals worth $1 billion with Marks & Spencer
- NORVA PL : Norva24 Group Offering by Holders Prices at SEK36.05/Share
- NOS PL : NOS FY Revenue Matches Estimates
- RENE PL : REN FY Ebitda Beats Estimates
- SIE GY : Siemens Mobility to Invest $220M in US Rail Facility
- SI US : Silvergate in Talks With FDIC Officials on Ways to Salvage Bank -->+15% After HOurs
- STORB SS : Storskogen CEO Says Will Fund Acquisitions With Cash Flow: DI
- STLN SW : Swiss Steel Group FY Ebitda EU188.8M Vs. EU200.0M Y/y
- SY1 GY : Symrise Sees 2023 Ebitda Margin About 20%
- HO FP : Thales FY Ebit Meets Estimates
- UPS US : UPS Maintains FY Revenue Forecast: Snapshot
- VNA GY : Vonovia Starts Kickbacks Probe Against Individuals After Raid
- VOW GY : VW prioritises US battery plant over Europe as it seeks €10bn from Biden administration
>>> Up
* Colruyt Raised to Equal-Weight at Morgan Stanley; PT 27 euros
* Kamux Raised to Buy at Inderes; PT 6 euros
* Kingspan Raised to Overweight at JPMorgan; PT 83 euros
* Kion Raised to Buy at Bankhaus Metzler; PT 43 euros
* Rolls-Royce Raised to Buy at UBS
* Rolls-Royce Raised to Buy at UBS
* Telekom Austria Raised to Buy at AlphaValue/Baader
* Tesco Raised to Buy at Shore Capital
* Tulikivi Raised to Accumulate at Inderes; PT 63 euro cents
>>> Down
>>> Down
* Casino Cut to Underweight at JPMorgan; PT 6.50 euros
* Standard Chartered Cut to Hold at DBS Bank; PT 815.74 pence
* Tesla Cut to Hold at Berenberg; PT $210
* Titanium Cut to Reduce at Inderes; PT 19 euros
* Titanium Cut to Reduce at Inderes; PT 19 euros
* Wood Cut to Hold at Jefferies; PT 237 pence
>>> Initiation
>>> Initiation
* Atlantic Lithium Rated New Outperform at Macquarie; PT 45 pence
* Kingfisher Reinstated Overweight at Barclays; PT 350 pence
* Kingfisher Reinstated Overweight at Barclays; PT 350 pence
* Piedmont Lithium Rated New Outperform at Macquarie; PT $140
>>> Call
* Colruyt Raised at MS; Challenging Fundamentals But Upside Risks
>>> Call
* Colruyt Raised at MS; Challenging Fundamentals But Upside Risks
Swiss banks say rich Chinese clients worried about sanction prospects
Bank executives highlight concerns about business fallout from country’s tough line on Russia since Ukraine invasion
Executives at Switzerland’s biggest banks say rich Chinese clients have become much more worried about parking money in the country because of its tough approach to applying sanctions since Russia invaded Ukraine.
“We were not just surprised but shocked that Switzerland abandoned its neutral status,” said one board director who oversees Asian operations at his bank. “I have statistical evidence that literally hundreds of clients that were looking to open accounts are now not.”
Although Chinese companies have been flocking to IPO in Switzerland, the Financial Times spoke to senior bankers from six of Switzerland’s 10 biggest banks about their experience with private clients and all of them told a similar story. Many said they were worried about the chilling effect on a lucrative line of business and crucial source of future growth.
“The question of sanctions has come up with clients,” one banker said. “It was definitely a topic of concern with clients late last year. They were asking whether their money would be safe with us.”
Anke Reingren, analyst at RBC, highlighted what was at stake for the Swiss banking sector, which accounts for 10 per cent of the country’s gross domestic product.
“Asia has been a strong contributor to profitability for Swiss banks,” she said. “If you look at their share prices, they are very closely correlated to Asian indexes because such a large part of earnings has been coming from the region and historically a large part of the earnings growth in wealth management.”
Some Swiss banks said they were already “war gaming” how to handle the fallout if international relations with China worsen significantly, and how to protect and reassure their biggest Chinese clients.
Andreas Venditti, a Vontobel analyst who covers banks, said all Swiss wealth managers were having to weigh the impact of the country’s approach to sanctions. “It’s the topic high on the agenda at board and executive level,” he said. “They are all trying to prepare for what comes next.”
Since Russia’s invasion of Ukraine last year, the Swiss government has moved in lockstep with the EU in imposing sanctions against Russia and wealthy Russians close to Vladimir Putin.
In recent weeks, several incidents have brought the possibility of sanctions against China closer, including the spy-balloon spat and Beijing’s possible supply of weapons to Moscow.
A US diplomat based in Bern said officials in his office were “keeping a close eye” on Chinese wealth in Switzerland.
One of the bank executives who talked to the FT said he believed Switzerland had moved against Russian clients too quickly. “At some place, we must draw a line on what [Switzerland] will and won’t get involved in.”
The government maintains the country’s neutrality remains sacrosanct but said sanctions against Russia involved weighing the “credibility of Swiss neutrality” against the magnitude of Russia’s “violation of the fundamental norms of international law”.
Foreign minister Ignazio Cassis has nevertheless opened a domestic debate on what neutrality means and has publicly advocated a more “co-operative” approach with like-minded partners.
Switzerland is still the world’s number one centre of offshore wealth, responsible for a quarter of the global total.
About SFr7.5bn ($8bn) of Russian money is currently frozen by Swiss sanctions — a small proportion of the SFr46.1bn of Russian assets domiciled in the country by around 7,500 wealthy Russians, according to the Swiss State Secretariat for Economic Affairs.
Over the past decade, however, Asia has become a far more important source of revenues.
The Swiss government has not disclosed the scale of Chinese assets in the country, but a cache of files released in 2014 to the International Consortium of Investigative Journalists revealed Swiss banks had set up accounts for many of China’s ruling elite and their children, including the son of former premier Wen Jiabao.
Swiss bankers say the majority of their Chinese clients do not fit this profile. One said in his experience, most were successful, small-scale entrepreneurs, with fortunes in the SFr10mn-SFr50mn range.
Cutting those kind of people off from Switzerland’s banks would be a major blow to the industry, he said.
But another senior figure in the wealth management industry sounded more sanguine. “I’ve had conversations with Chinese clients who were wary about Switzerland adopting sanctions last year, but they are not staying away yet.
“There was $700bn of trade between China and the US last year — that’s not going to change any time soon.”
After Hours Summary: ARLO +11.5%, CRWD +6.1%, BASE +3.7%, WTI +3.4%, CASY +1.6% up on earnings; SOUN -9%, YEXT -5.3%, AGTI -2%, SFIX -2% down on earningsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: ARLO +11.5%, MAXN +8.8%, CRWD +6.1%, ZYME +5.3%, BASE +3.7%, WTI +3.4%, MBC +1.7%, GSAT +1.7% (guidance), CASY +1.6%
Companies trading higher in after hours in reaction to news: COCO +4.4% (appoints new CFO), CDTX +1.8% (presents preclinical data), WE +1.7% (to restructure $3 bln in debt, according to NYT), VLRS +0.1% (reports February traffic)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: SOUN -9%, YEXT -5.3%, AGTI -2%, SFIX -2%, CRCT -1.1%
Companies trading lower in after hours in reaction to news: SHLS -6.7% (stock offering), PTLO -4.5% (stock offering), ASLE -4.2% (stock offering), PR -3.3% (stock offering), SWX -2.7% (commences $215 mln public stock offering), SNCY -1.7% (appoints new Board Chair), MODN -1.5% (to offer $220 mln convertible notes), VRNA -0.9% (files mixed shelf), PYPL -0.3% (CFO stepping down), CHCT -0.1% (appoints new CEO), C -0.1% (files mixed shelf), BANC -0.1% (files mixed shelf)