>>> What to look at today - 22nd of December 2022

Stocks rallied in Asia Thursday, putting a gauge of the region’s equities on course to snap five days of declines after US shares climbed on improved consumer confidence and better-than-expected earnings. The biggest moves were in Hong Kong, where the benchmark index rose more than 2%. Technology and property companies led the charge after a slew of comments from regulators on supporting the broader economy and real estate developers. Shares also jumped in Japan, South Korea and Australia. US and European futures were higher following a surge of 1.5% in both the S&P 500 and the Nasdaq 100 on Wednesday. Treasuries rose slightly in Asia after a mixed US session as the immediate fallout from the Bank of Japan’s surprise policy shift began to ebb.  The 10-year Japanese government bond yield targeted by the BOJ fell to 0.4%, compared with the central bank’s new upper limit of 0.5%. Government bond yields were up in Australia and down in New Zealand.  The yen resumed its advance after a small loss Wednesday. It rallied the most since 1998 on Tuesday. The dollar fell versus its Group-of-10 counterparts. FedEx Corp. and Nike Inc.’s earnings exceeding Wall Street’s estimates provided a reprieve for US stocks that had been pummeled since the Federal Reserve’s hawkish turn last week. Appetite for risk taking was also supported by US consumer confidence rising by more than forecast to the highest since April as inflation eased.  Bolstering the tone in Asia, China’s central bank said it would guide financial institutions to support mergers and acquisitions in the nation’s property sector, and help defuse risks and improve financial conditions of top-tier developers. oil price gains extended into a fourth day after data showed a decline in US inventories and traders tracked the fallout from Group of Seven sanctions targeting Russia’s crude exports and revenues. Gold inched higher as investors digested an improvement in consumer confidence while awaiting further US data.  US After Hours MU -2.4% falls on earnings and headcount reduction; MLKN +5.1% higher on earnings; MRTX +4.1% higher on positive FDA news; LXRX -8.4% falls on phase 2 study results

Nikkei +0.46% Hang Seng +2.30% CSI +0.04% Shanghai -0.50% Shenzen -0.70%

Eur$ 1.0646 CNH 6.9863 CNY 6.9832 JPY 131.82 GBP 1.2124 CHF 0.9235 RUB 70.9705 TRY 18.6659 WTI$ 78.51 +0.28% Gold 1,815 +0.03% BTC 16,814 +0.12% ETH 1,211 -0.03%

S&P +0.25% Nasdaq +0.27% EuroStoxx +0.39% FTSE +0.29% Dax +0.23% SMI

Macro :
- Mr. Yen Says BOJ May Surprise Again by Tightening in January
- China’s Abrupt Covid Shift Hits Supply Chains From Solar to Coal
- Hong Kong Property Giant Buys Land for Price at Eight-Year Low
- *ECB'S GUINDOS: HALF-POINT HIKES MAY BECOME NEAR-TERM NORM

Keep an eye on :
- AC FP : Schroders Pays €260m for Two Hoxton Hotels, Times Says
- AWDR NO : Awilco Drilling Offering of 3.92m Shares Prices at NOK20/Share
- BATS LN : BAT ESG Focus Must Be Managing Reduced-Risk Product Transition
- BOL FP : MSC Completes $6b Acquisition of Bollore’s African Logistics Arm
- ALCAR FP : Carmat Names Alexandre Conroy as Chairman of Board
- ACA FP : Credit Agricole Says ECB Pillar 2 Capital Requirement Unchanged
- ETL FP : Eutelsat Sees €15M-€20M Hit From Russia/Iran Broadcast Limits
- HKY NO : Havila Kystruten Offering of 25m Shares Prices at NOK12/Share
- HBH GY : Hornbach Holding 3Q Adjusted Ebit EU48.9M Vs. EU55.9M Y/y
- LHA GY : Italy Paves Way for Lufthansa to Take Stake in ITA
- MARS LN : Marston’s Confirms Co. Has Secured Financial Covenant Amendments
- B4B GY : Metro to Sell India Unit to Reliance Retail Ventures: Snapshot
- MTO LN : Eurostar Strike Called Off After 29% Offer for Lowest Paid
- NANEXA SS : Nanexa Signs Pact With Novo Nordisk for PharmaShell
- NEOEN FP : TDF Signs Power Purchase Pact With Neoen for 62 MW Solar Energy
- ORP FP : Orpea Raises View of Pre-Tax Asset Impairments to EU5b-EU5.4b
- ORP FP : Orpea Files Complaint Against Former CEO Yves Le Masne
- RHM GY : Rheinmetall, KMW Aim to Repair Puma Vehicles in 2-3 Weeks
- ROG SW : FDA Approves Genentech’s Actemra for the Treatment of COVID-19 in Hospitalized Adults
- SAN FP : Sanofi Gains in US Trading as a California Zantac Case Settles
- SEAF SS : Seafire Offering of 13.2m Shares Prices at SEK19/Share
- F3C GY : SFC Energy to Replace Uniper SE in SDAX Index
- SHEL LN : Shell Temporarily Shuts Prelude LNG Plant Production After Fire
- DWON SW : SoftwareONE in Total Return Swap Deal Related to Crayon Stake
- SOL SM : Soltec Signs Brazil Solar Trackers Contract With Canadian Solar
- SONG LN : Justin Bieber Nears Roughly $200 Million Deal to Sell Music Rights -- WSJ
- SNC PL : Sonae Offers to Buy Rest of Sonaecom for €2.50/Share in Cash
- STM FP : Watch European Chip Stocks as Micron Gives Weak Sales Forecast
- TNET BB : Telenet acquires Eltrona's activities in Luxembourg - 21/12/2022
- TKO FP : Tikehau Capital: TCA to Raise Stake in Fakarava Capital to 100%
- TTE FP : TotalEnergies Poised to Offer Regasification Capacity in France
- UCG IM : UniCredit Reshuffles Client Risk Division Top Management
- UN01 GY : Uniper Resolves Capital Increase of ~€5.54b
- UN01 GY : SFC Energy to Replace Uniper SE in SDAX Index
- VLK NA : Van Lanschot Kempen Buys 30% Stake in Mercier Vanderlinden
- XXL NO : XXL Offering of 135.1m Shares Prices at NOK3.70/Share

FT : Porsche and the decline of the German stock market

Porsche and the decline of the German stock market
Carmaker’s €75bn IPO was rare hurrah for Frankfurt exchange short on dynamism and innovation

When German sports car maker Porsche listed on Frankfurt Stock Exchange in a €75bn initial public offering in September, Deutsche Börse chief executive Theo Weimer raved about a “historic day”. Weimer was right — but in a different sense than he had in his mind.

Europe’s largest-ever listing by market capitalisation will go down as a rare hurrah amid the decline of the German stock market in recent years.

Less than a month after the Porsche IPO, largest Dax member by value Linde announced in October that it will delist from the Frankfurt stock exchange. Linde will instead focus on the New York Stock Exchange, arguing that its German listing had been a drag on its valuation.

Germany’s most striking corporate success story, Mainz-based biotech group BioNTech, didn’t even bother to list in Frankfurt. The inventor of one of the two leading Covid vaccines chose Nasdaq for its 2019 listing. The decision was highly rational as US companies trade on significantly higher valuation multiples.

One of Germany’s big hopes from the technology sector — Wirecard — collapsed in 2020 in one of Europe’s biggest postwar accounting frauds, with its former chief executive Markus Braun currently facing trial in Munich.

Such blows have left a German stock market long on historic corporate names, shorter on dynamism and innovation. Of the 40 blue-chip companies listed in the country’s leading Dax index, 23 can trace their corporate roots back to the 1800s or before. Only two Dax companies — real estate group Vonovia and online retailer Zalando — were founded this century.

While the enlargement of the Dax from 30 to 40 companies in the wake of the Wirecard scandal suggests greater variety, the index is actually still dominated by a few large industrial conglomerates and their spin-offs: Siemens (four companies), Volkswagen/Porsche (three), Mercedes (two), Fresenius (two) and Bayer (two).

The Dax’s long history of underperforming global equities markets started long before the German industry lost its access to cheap Russian gas this year. Over the past five years, the Dax has risen 6 per cent while the MSCI World index has gained 18 per cent in the same period. In the US, the S&P 500 index is up 42 per cent over the same period. Another telling benchmark is that at €1.6tn, the combined market cap of Germany’s 40 largest listed corporations is a fifth below that of Apple, which is valued at $2.1tn.

There are many reasons for the relative decline. One is a shortfall of innovation despite Germany’s engineering and manufacturing strengths. In the World Intellectual Property Organization’s 2022 ranking on innovation, Europe’s largest economy is ranked eighth, behind countries such as Switzerland, Sweden, the US and the UK.

It is not hard to wonder if an instinctive reliance on defending old business models might have stymied the development of many a fresh idea. Take Germany’s automotive industry, which accounts for a fifth of all the Dax’s stock market value. These companies were slow to react to the shift to electric vehicles and lobbied against tighter emission rules. VW — and allegedly Mercedes too — even rigged emissions data as they struggled to meet regulatory limits.

Another problem is Germany’s two-tier corporate governance system — a management board that runs operations and a supervisory board that oversees the executives. Half of supervisory board members under German law are workers’ representatives. This can lead to a more consensus-driven approach to decision making in areas that might affect employment. In many companies, the chair of the supervisory board also is a former chief executive, who might be loyal to existing corporate strategies rather than new approaches.

And in general, CEOs who underperform can resist shareholder pressure to quit or change strategy. Take Bayer, which was able to embark on its ill-fated $63bn acquisition of Monsanto in 2016 despite fierce shareholder opposition, and without putting the deal to a vote at its annual meeting. In 2019, Bayer chief executive Werner Baumann kept his job despite 55 per cent of the shareholders voting against ratifying the actions of management. He is still there despite shares in the company falling 43 per cent since the deal was announced. The €48bn market value of Bayer is still far less than what was paid for Monsanto.

A lot more thinking needs to be done to rectify the German market’s decline but improving corporate governance and shareholder rights would be a good place to start. 

>>> US After Hours Summary: MU -2.4% falls on earnings and headcount reduction;

After Hours Summary: MU -2.4% falls on earnings and headcount reduction; MLKN +5.1% higher on earnings; MRTX +4.1% higher on positive FDA news; LXRX -8.4% falls on phase 2 study results

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: MLKN +5.1%, BHR +2.4%

Companies trading higher in after hours in reaction to news: MRTX +4.1% (Adagrasib (KRAZATI) receives breakthrough therapy designation from FDA), TSP +2.1% (announces restructuring; to trim 25% of workforce, will focus on autonomous trucking tech), RAMP +2.1% (increases share repurchase program by $100 mln), GNL +1.4% (provides outlook on acquisitions), RTX +0.6% (awarded $413 mln U.S. Air Force contract), SMCI +0.2% (announces new ARM-based series of servers), PARR +0.1% (guides for 2023 CapEx; expects no material turnaround outlays during 2023)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: MU -2.4% (also to reduce headcount by 10% in CY23)

Companies trading lower in after hours in reaction to news: BLI -11.7% (to acquire IsoPlexis), LXRX -8.4% (topline results from Phase 2 study of LX9211), MTZ -1.2% (CFO to retire, names new CFO), UAA -1.1% (names new CEO), MDGL -1% (announces $300+ mln in financing events), MGI -0.4% (nearing completion of previously announced merger with Madison Dearborn, expects to close in Q1), REGN -0.2% (Dupixent Phase 3 results published in the NEJM)

>>> US Close Dow +1,60% S&P +1,49% Nasdaq +1,54% Russell +1,65%

Closing Stock Market Summary

The stock market found some upside momentum today after logging big losses recently. Some speculative buying interest on the notion that the market was oversold on a short-term basis aided the rebound effort, along with the well-received earnings reports from Dow component Nike (NKE 115.78, +12.57, +12.2%) and leading transport company FedEx (FDX 169.99, +5.64, +3.4%). Today's trade has triggered some renewed hope that the stock market could see a Santa Claus rally after all to end the year.

Nike led the Dow (+1.6%) to first place among the three main indices thanks to signs of strong demand and a contention that the worst of its inventory problems are behind it. FedEx, meanwhile, said demand trends softened further in its fiscal Q2, but pleased investors nonetheless with additional cost-cutting actions aimed at preserving profit margins.

In addition to these reports, market participants digested some better-than-expected consumer confidence data for December, which was another support factor for the broader market. That report overshadowed a weaker than expected existing home sales report for November that was released at the same time.

The broad-based rally effort saw the S&P 500, which breached 3,800 yesterday, push past its 50-day moving average (3,877). The main indices clung to a fairly narrow trading range around that key technical level starting about 11:00 a.m. ET. Ultimately, the S&P 500 managed to close one point above its 50-day moving average. 

All 11 S&P 500 sectors registered gains today. Consumer staples (+0.8%) and materials (+0.8%) showed the slimmest gain while the energy sector (+1.9%) sat atop the leaderboard. The heavily weighted information technology (+1.7%) and consumer discretionary (+1.6%) sectors were among the top performers also. 

The mega cap stocks were a pocket of strength today, except Tesla (TSLA 137.57, -0.23, -0.2%), which continues to struggle. This comes after CEO Elon Musk said "I will resign as CEO (of Twitter) as soon as I find someone foolish enough to take the job! After that, I will just run the software & servers teams" and a report indicating that the company is aiming to implement a hiring freeze and announce layoffs, according to Electrek.

The Vanguard Mega Cap Growth ETF (MGK) closed up 1.6% and the S&P 500 gained 1.5%. 

  • Dow Jones Industrial Average: -8.2% YTD
  • S&P Midcap 400: -14.0% YTD
  • S&P 500: -18.6% YTD
  • Russell 2000: -20.9% YTD
  • Nasdaq Composite: -31.6% YTD

Reviewing today's economic data:

  • The weekly MBA Mortgage Applications Index rose 0.9% with refinancing applications jumping 6.0% while purchase applications fell 0.1%.
  • Current Account Balance fell to -$217.1 billion in Q3 ( consensus -$224.0 billion) from a revised -$238.7 billion in Q2 (from -$251.1 billion).
  • Existing home sales decreased 7.7% month-over-month in November to a seasonally adjusted annual rate of 4.09 million ( consensus 4.20 million) versus an unrevised 4.43 million in October. That is the tenth straight month that existing home sales have fallen. Total sales in November were down 35.4% from a year ago.
    • The key takeaway from the report is that median price growth has slowed appreciably as higher mortgage rates, and affordability pressures, are crimping interest from prospective buyers.
  • The Conference Board's Consumer Confidence Index took a surprising turn for the better in December, jumping to 108.3 (consensus 101.0) from an upwardly revised 101.4 (from 100.2) in November.
    • The key takeaway from the report is that there were upticks in both the Present Situation and Expectations Indexes driven by improved views of the economy and jobs, and declining gas prices that contributed to the lowest level for year-ahead inflation expectations since September 2021.
  • Weekly EIA Crude Oil Inventories showed a draw of 5.894 million barrels following last week's build of 10.23 million barrels. 

Market participants will receive the following economic data on Thursday:

  • 8:30 a.m. ET: Q3 GDP Third Estimate (consensus 2.9%; prior 2.9%) and GDP Deflator Third Estimate (consensus 4.3%; prior 4.3%)
  • 8:30 a.m. ET: Weekly initial jobless claims ( consensus 225K; prior 211K) and continuing claims (prior 1671K)
  • 10:00 a.m. ET: November Leading Economic Index (consensus -0.4%; prior -0.8%)
  • 10:30 a.m. ET: Weekly EIA Natural Gas Inventories (prior -50 bcf)

WSJ : Tesla Bears Are Sitting on $15 Billion in Gains This Year

Tesla Bears Are Sitting on $15 Billion in Gains This Year
Reversal of fortunes for Elon Musk’s company has been music to the ears of the stock’s many detractors

The Tesla Inc. TSLA -8.05% bears are finally feeling somewhat vindicated.

After years of wrong-way bets, investors shorting the shares of Elon Musk ‘s electric-vehicle maker are sitting on collective gains of $15 billion in 2022, according to data from S3 Partners.

Short sellers borrow shares and sell them with the hope of profiting by buying the stock back at a lower price later.

Tesla shares have fallen 61% in 2022, including Tuesday’s 8.1% drop, dinged by the higher interest-rate environment that has sent speculative stocks tumbling back to earth. Investors have also grown increasingly concerned that Mr. Musk’s attention is divided following his takeover of Twitter Inc.

The reversal of Tesla’s fortunes has been music to the ears of the stock’s many detractors who watched in astonishment when it kicked off a monster run in early 2020, with little regard for fundamentals.

Tesla traded around $30, on a split-adjusted basis, at the start of that year and eventually peaked above $400 in November 2021. Its valuation swelled to more than $1.2 trillion, making it one of the largest companies in the U.S. by market value. The stock closed Tuesday at $137.80, a two-year low.

“It has not been an easy road being a Tesla bear,” said Andrew Left, the founder of Citron Research who is known for betting against stocks. “It’s been a pain-in-the-ass trade.”

Of course, many Tesla bears didn’t stick around. Some were forced to call off their bets and close their positions at a loss during the precipitous rise in the company’s shares. Collective mark-to-market losses on the trade were a whopping $51 billion over the course of 2020 and 2021, according to S3.

Tesla has long been among the most shorted U.S. stocks. The rapid increase in the shares during the pandemic was exacerbated in part by the many short sellers who were forced to buy back shares to close their losing positions.
Short interest in Tesla peaked at more than $51 billion in January 2021, but has fallen to average $19.3 billion in 2022, according to S3. Roughly 3% of the stock’s free float is currently sold short, down from an average of 10% in 2020.

Mr. Left, who was previously burned by his short position, says he promised himself at one point that he would never trade Tesla again. This summer, though, he says he began to get “FOMO,” or a fear of missing out, and he jumped back in. Mr. Left said he closed his position Thursday at a profit but sees room for the shares to fall further.

“It’s still an expensive stock,” he said. “By no means is this over. As most stock traders will tell you, things don’t go from expensive to fairly priced. Things normally go from expensive to cheap.”

Tesla shares are trading at 46.7 times their earnings over the past 12 months, a far cry from their peak multiple of 1,196 from April 2021, according to FactSet. The S&P 500, in contrast, trades at 18.1 times earnings.

“People are starting to pay attention to some of the facts that they didn’t want to pay attention to before. Competition. Saturation. There’s a lot of factors involved that people were sweeping under the table,” Mr. Left added.

Also hurting the stock of late are Mr. Musk’s own share sales. The Tesla chief executive has sold more than $39 billion in stock since November 2021, in part to help finance his Twitter acquisition. His most recent sale was last week.

Mr. Musk tweeted late Tuesday that he would step down as Twitter’s chief executive as soon as he finds a replacement.

Tesla didn’t immediately respond to a request for comment. Mr. Musk has previously tweeted that short sellers were “value destroyers” and that short sales should be illegal.

Lately, the stock has been the target of everyone from hedge-fund managers to Microsoft Corp. co-founder Bill Gates.

In a series of tweets earlier this year, Mr. Musk accused Mr. Gates of shorting $500 million in Tesla shares. Mr. Gates didn’t directly answer questions about whether he was personally shorting the stock at The Wall Street Journal’s CEO Council Summit in May. A representative for the Gates Foundation didn’t immediately respond to a request for comment.

Danny Moses, the investor famous for bets against the housing market who was portrayed in the 2015 movie “The Big Short,” said on CNBC Thursday that he is currently short Tesla and expects it to fall further.

“It’s still a $500 billion company and I don’t think that the fundamentals justify that valuation,” Mr. Moses said on “Fast Money.” “I think a lot of the stock price has been about his brand, and we’ve seen that now get hit a little bit. His attention span is being compromised.”

One group has refused to abandon Tesla despite this year’s sharp share-price declines: the retail crowd. Tesla has been the most-purchased stock among U.S. retail, or nonprofessional, investors this year—dethroning Apple Inc., according to data from Vanda Research. The $15.2 billion of retail purchases is a record for Tesla.

“While purchasing across the market has softened, retail investors have continued to religiously buy into Tesla,” said Lucas Mantle, a data science analyst at Vanda Research.

If there’s one thing strategists agree on, it’s the difficulty of valuing Tesla given the retail interest and Mr. Musk’s cultlike following.

Australian hedge-fund manager John Hempton, founder of Bronte Capital, said his firm has a small short position in Tesla but struggles to apply its traditional criteria in evaluating the stock.

“Elon breaks our model,” Mr. Hempton said.

WSJ : Citadel, Other Big Hedge-Fund Winners in 2022 to Return Some Profits to Cl

Citadel, Other Big Hedge-Fund Winners in 2022 to Return Some Profits to Clients
Gains mark sharp divergence with growth-oriented funds that have stumbled badly

Citadel expects to return about $7 billion in profits to its clients on the back of what is expected to be its most profitable year ever, said people familiar with the firm, highlighting the banner year some hedge funds have had even as others nurse deep wounds.

Citadel’s flagship fund gained about 32% for the year through November, benefiting from bets across the firm’s strategies, the people said. The firm plans to return some profits from all four of its funds in early January but still expects to start 2023 with more than $50 billion in assets under management, one of the people said.

Others up significantly this year, including Two Sigma, Brevan Howard Asset Management and D.E. Shaw, also have told clients in certain funds they plan to return some profits, people familiar with the firms said. Bloomberg News earlier reported D.E. Shaw was returning some profits to clients and raising fees.

The war in Ukraine and the parade of Federal Reserve interest-rate hikes have helped create what investors are calling a regime change in markets, benefiting trading-oriented hedge-fund strategies that thrive on volatility and punishing those that make leveraged bets on fast-growing companies. While Tiger Global Management and other growth-focused hedge funds have issued mea culpas and had years of huge gains erased practically overnight, funds that bet on global macroeconomic shifts and those built on a multimanager-platform model, like Citadel, have flourished in one of the widest divergences industry veterans can recall.

The gains Citadel and the others have notched are all the more noteworthy in a year in which the S&P 500 is down a total of 18.6% through Monday and a traditional portfolio made up of 60% global stocks and 40% U.S. bonds, including dividends, has lost about 14%.

Some managers are pressing their hot hand to win more advantageous terms from their clients. Macro firm Caxton Associates has told clients it is raising performance fees for certain share classes of its flagship fund, Caxton Global, from 22.5% to 25% starting March 1, according to people familiar with the firm. The fund gained nearly 15% this year through November. D.E. Shaw is raising performance fees on its three biggest funds to as high as 40%.

It isn’t unusual for funds to return cash in good years; some academic data suggests the best returns come from smaller funds. Clients typically have mixed feelings about it, saying they hand money to their managers to invest and that returns of profits require them to make that decision again. They also say it removes money from parts of their portfolio that are working, whereas they might prefer to exit at least partially from those that aren’t doing well.

This year, some investors are welcoming the cash because the liquid parts of their portfolios have sold off as stocks and bonds suffer double-digit losses, leaving few places for them to turn to for gains they can harvest to meet capital calls or invest tactically.

Billionaire Kenneth Griffin’s Citadel has myriad portfolio managers running their own books of investments within risk limits the firm sets and monitors. Miami-based Citadel has returned some profits most years in the recent past but rarely this much; in the five prior years, it returned more than $11 billion to clients in total.

This year continues a strong run of performance for Citadel, which LCH Investments last year estimated is the second-most-profitable hedge-fund manager of all time, after Bridgewater Associates. LCH started in 1969 and bills itself as the oldest fund-of-hedge-funds in the world.

New York-based Two Sigma expects to return 15% of clients’ money in its Spectrum fund, a quantitative-equities vehicle that gained 8% for the year through November, by the end of December, said people familiar with the firm. Two Sigma managed $61 billion as of Dec. 1.

The $30 billion macro firm Brevan Howard is returning some money to clients in its two flagship funds, the Brevan Howard Master Fund and the Brevan Howard Alpha Strategies Master Fund.

Clients in the most liquid share class of the Master fund are slated to get back profits from 2022, plus 15% of their remaining money in the fund. Those wishing to reinvest in the hedge fund would have to do so via the only share class due to accept inflows in the first quarter, one that charges pass-through fees to clients, including traders’ compensation. Such structures typically result in higher fees for clients. Several clients said the changes appeared aimed, at least in part, at reducing the amount of money in share classes with more investor-friendly terms.

A person familiar with Brevan Howard said such fee structures have become the norm among platform-style funds using multiple portfolio managers. The $10.5 billion Master fund gained around 18% for the year through Dec. 2, while the $12.2 billion Alpha Strategies fund was up 26.7%.