FT : Carmakers to suffer chip shortages until at least end of 2023

Carmakers to suffer chip shortages until at least end of 2023
Auto industry and semiconductor manufacturers warn of supply crunch amid ‘unstoppable’ switch to electric vehicles

The global car industry will suffer semiconductor shortages next year as the switch to electric vehicles accelerates, leading auto groups and chip manufacturers have warned.

Hassane El-Khoury, chief executive of US-based chipmaker Onsemi, said it had already “sold out” of silicon carbide chips (SiC), advanced power semiconductors largely used in electric cars, at least to the end of 2023 because of strong demand.

“There’s nothing you can do now to change 2023,” the boss of one of the world’s leading auto chipmakers said. “We will be adding capacity every quarter, every month in 2023 to meet our customer demand.” 

Jochen Hanebeck, chief executive of auto chip producer Infineon, made a similar warning about supplies at an event in Munich recently. “I do expect quite a longtime shortage,” he said.

Carmakers are also bracing themselves for problems. Carlos Tavares, chief executive of Stellantis, the world’s fourth-largest automaker by sales, has said chip constraints will continue to haunt the auto industry next year.

The demand for auto chips has boosted manufacturers such as Onsemi and Infineon as well as STMicroelectronics, NXP Semiconductors and Nexperia.

Infineon last month raised its forecast for revenue growth from 9 per cent to more than 10 per cent in the coming years, without giving a specific timeframe.

The German chipmaker also announced its biggest single investment of €5bn to build a factory in Dresden to produce analogue, mixed-signal and power semiconductors, used in cars and other industries.

El-Khoury said Onsemi was expanding production at plants in Rožnov in Czech Republic, Busan in South Korea and New Hampshire in the US, which the company estimates will increase capacity by 30 per cent next year.

“We have a lot of customers under the so-called long-term supply agreements and we are building the capacity to support those first,” he added.

The demand for auto chips has been fuelled mainly by the more connected functions of fuel vehicles and the switch to electric cars, which is likely to accelerate further as combustion engines are gradually phased out.

Gregg Lowe, chief executive of Wolfspeed, a leading SiC substrate materials supplier, used to make SiC chips, said the switch from combustion engines towards electric vehicles was “unstoppable”. 

“What we’re anticipating is through the end of this decade, power semiconductors — specifically silicon carbide power semiconductors — could see a 14 per cent compounded annual growth rate, which means all of us will be running as fast as we can, trying to catch up with the demand.”

The upbeat outlook for auto chips contrasts with other parts of the sector, which supplies semiconductors for smartphones and personal computers.

These groups, which include Taiwan Semiconductor Manufacturing Company (TSMC), Intel and Samsung, have suffered a drop in demand.

TSMC, the world’s biggest contract chipmaker that supplies companies such as Apple, Google and Amazon, has slashed its planned capital expenditure by about 10 per cent to $36bn this year.

FT : Genesis failure would land owner with $350mn payout to financier Todd Boehl

Genesis failure would land owner with $350mn payout to financier Todd Boehly
Digital Currency Group would be on the hook for outstanding loan if crypto lender goes bankrupt, say insiders

Crypto conglomerate Digital Currency Group is attempting to raise capital and avoid the bankruptcy of its Genesis broking subsidiary in part to avert the immediate repayment of a loan to US financier Todd Boehly’s investment house.

Boehly, who recently bought Chelsea Football Club, led a debt raise for DCG through his investment group Eldridge in November last year, comprising of a $600mn loan from Eldridge and a group of other investors.

Genesis has already suspended withdrawals at its lending unit, which allowed customers to loan out their digital tokens for high yields, and hired investment bank Moelis to review its options after crypto exchange FTX’s failure last month sent shockwaves across the industry.

Now, people with direct knowledge of DCG’s finances have said that if this wholly owned subsidiary were to fail, $350mn still outstanding from this loan would immediately fall due. The senior secured term loan ranks higher than other debt and has certain preference rights, meaning it would have to be repaid first in any situation, one of the people said.

The cascading demands for cash illustrate how the implosion of FTX continues to threaten the broader crypto industry, where a few large players such as DCG play a core role in a market that purports to be decentralised.

DCG is one of the industry’s largest and earliest investors in crypto projects and coins. The group, founded in 2015 by billionaire investor Barry Silbert, owns assets such as Genesis and investment manager Grayscale. The companies are linked by a web of intra company loans and investments, the FT has previously revealed.

Silbert told investors that $350mn of the Eldridge loan was outstanding after Genesis curtailed its operations last month. DCG has $1.6bn in debts due to Genesis but its loan from Eldridge — made alongside investors including Californian asset manager Capital Group, private equity firm Francisco Partners and investment manager Davidson Kempner Capital Management — bears preferential terms. Last month, Genesis said it had “no plans to file bankruptcy imminently”.

DCG said its relationship with Eldridge “is entirely separate from Genesis’ restructuring strategy and has no bearing on any outcome at Genesis”. Genesis is wholly owned by DCG. Eldridge declined to comment.

Boehly’s involvement with DCG marks one of several digital asset investments by the US billionaire. In March, Eldridge invested in fintech and crypto infrastructure company Cross River and last year it backed crypto exchange and wallet provider Blockchain.com.

Eldridge holds the view that Genesis’s suspension of withdrawals means it cannot repay debts and therefore is in default, people familiar with the matter said. However those people added that Eldridge was keen to avoid losing its investment and was working with DCG to help it raise capital and pay Genesis’s investors, clients and customers.

That includes customers of the Winklevoss twins’ crypto exchange Gemini, which is owed $900mn, and Dutch exchange Bitvavo, which is owed €280mn. Bitvavo said on Friday that it was able to pre-fund any locked assets at DCG and its subsidiaries and its customers “are not exposed to DCG liquidity issues”.

The creditors have formed a committee as they seek to regain their funds.

DCG was valued at $10bn last year and is backed by investors, including SoftBank, Ribbit Capital and Alphabet’s venture arm CapitalG.

Since the crypto crisis erupted, it has been racing to raise capital and is seek cash before potentially having to sell any of its portfolio companies, the people said.

Even before the collapse in crypto confidence this November, investors in DCG’s debt had marked down their holdings, according to securities filings. In September, Capital Group marked down a $1.26mn holding of DCG debt by 17 per cent.

DCG owes Genesis $575mn worth of loans due in May 2023, money that was used to fund investments in another of its subsidiaries, asset manager Grayscale, as well as share buybacks. It also has a $1.1bn promissory note due in 2032, which arose when DCG assumed the liabilities of Genesis following the collapse of digital asset hedge fund Three Arrows Capital over the summer.

FT : Russia seizes oligarch’s hotel

A Russian court has ordered the seizure of a luxury hotel complex owned by billionaire Oleg Deripaska, one of the few oligarchs to have criticised President Vladimir Putin’s war in Ukraine, a sign of the pressure facing the country’s tycoons since the invasion.

The legal dispute, following an initial claim brought by a science and educational hub under Putin’s patronage, predates the invasion and is not ostensibly linked to Deripaska’s guarded criticism of the war, which he has called “madness”.

But the court order to seize the $1bn Imeretinskiy hotel complex and marina in Sochi came after the Kremlin asked Deripaska to stop criticising the war, according to two people familiar with the matter.

Deripaska has been under US sanctions since 2018 over his links to the Kremlin. The metals tycoon is the most prominent of the small number of Russian business leaders who have spoken out since February’s invasion. “We need peace as soon as possible, as we have already passed the point of no return,” he wrote on Twitter in March.

Many oligarchs privately oppose the war, though few have made public comments. Several have told the Financial Times that they are afraid to disagree publicly with the Kremlin, citing fears of repercussions for them and their businesses.

Yet in June, Deripaska warned that “destroying Ukraine would be a colossal mistake”, even as he shied away from criticising Putin personally.

>>> Europe : Brokers Upgrades & Downgrades - 20th of December 2022

>>> Up
* Beneteau PT Raised to 21 euros from 19 euros at Berenberg
* Rana Gruber Raised to Buy at SpareBank; PT 55 kroner

>>> Down
* Aroundtown Cut to Hold at Berenberg
* Credit Agricole Cut to Add at AlphaValue/Baader

>>> Initiation
* Credit Suisse Resumed Buy at Citi; PT 3.70 Swiss francs
* Credit Suisse Reinstated Sector Perform at RBC
* Prudential Reinstated Outperform at Daiwa; PT 1,200 pence

>>> Call
* Citi, RBC Seek Credit Suisse Visibility as They Resume Coverage

>>> What to look at today - 20th of December 2022

The yen rallied while stocks and bonds slumped in the wake of the Bank of Japan’s unexpected adjustment to its yield-curve control policy.  A day that began with listless, mildly downbeat trading in Asia was thrown into turmoil when the BOJ increased the upper limit of its tolerance band on 10-year government bonds to 0.5% from 0.25%. The Japanese currency, which had been appreciating since late October, surged almost 3% versus the dollar to the strongest level since mid-August. US and European equity futures slumped and Asian stocks extended declines, with a gauge of regional shares headed for a fourth straight drop. Japan’s 10-year yield, which had moved at a glacial pace in recent years under the weight of the BOJ’s YCC regime, surged more than 20 basis points, to the highest since 2015.
Similar-maturity yields in Australia were up by around the same amount while the 10-year Treasury yield leaped 10 basis points for a second day. A gauge of the dollar dropped as the yen rallied. Then yen also showed notable gains against currencies including the euro and the Australian dollar.  Equities were already on the back foot given broader investor concern on the global inflation outlook.  Underscoring the poor global sentiment, former New York Fed President and Bloomberg Opinion columnist William Dudley told Bloomberg Television on Monday that optimistic markets could only make the central bank tighten even more.  In commodities, iron ore was among the key industrial materials to climb after a pledge of growth support from Beijing authorities. Oil steadied, with West Texas Intermediate above $75 a barrel, and gold rose. US After Hours STLD +0.7% as it will join S&P 500; TRDA -32.1% falls as FDA places clinical hold; CPRX +3.6% to acquire US rights for FYCOMPA.

Nikkei -2,46% Hang Seng -1,72% CSI -1,52% Shanghai -0.98% Shenzen -1,05%

Eur$ 1,0597 CNH 6,9836 CNY 6,9836 JPY 133,35 GBP 1,2127 CHF 0,9297 RUB 67,2155 TRY 18,6465 WTI$ 75,51 +0,43% Gold 1,792 +0,26% BTC 16,800 +1,29% ETH 1,210 +2,91%

S&P -0,70% Nasdaq -0,86% EuroStoxx -1,31% FTSE -0,72% Dax -1,34% SMI -0.50%

Macro :
- Kuroda Doesn't Expect Further Widening of Yield Band
- EU Sets Gas-Price Cap at €180 in Effort to Stem Crisis
- China Covid Death Reports Spread Amid Virus Data Black Box

Keep an eye on :
- AIR FP : Congress to Extend Boeing 737 Max Cockpit Alerts Deadline: RTRS
- ALBERT SS : EEducation Albert Offers SEK70 million Shares via SEB
- BNP FP : BNP Paribas Appoints Stephanie Maarek as Head of Compliance
- BNP FP : BNP Paribas Appoints Bury to Replace Verstraeten as UK Head
- COM GY : Compleo Charging to File for Insolvency
- DBG FP : Elior to Buy Derichebourg Unit Via New Elior Stock
- DGE LN : UK Government Extends Freeze on Alcohol Duty by Six Months
- ELIOR FP : Elior to Buy Derichebourg Unit Via New Elior Stock
- ELUXB SS : Electrolux Says Divestment of Memphis Factory Postponed
- HMB SS : Justin Bieber Denounces His Own Merchandise Being Sold at H&M
- IDIA SW : Idorsia Submits New Drug Application to FDA for Aprocitentan
- IIA AV : Immofinanz Gets S Immo Majority Stake in Deal With Parent CPIPG
- KCO GY : Klöckner to Buy National Material of Mexico for $340m
- MDGL US : Madrigal Announces Positive Topline Results from the Pivotal Phase 3 MAESTRO-NASH Clinical Trial (+268%)
- NOVOB DC : Novo Nordisk Seeks to Increase Production of Wegovy, Borsen Says
- OMV AV : Austria Targets Gas-Purchase Oversight Body by Summer Months
- ORSTED DC : Orsted Assumes Full Ownership of the E-Methanol Project
- PFV GY : Pfeiffer Vacuum FY Sales EU900M
- SCR FP : Scor Renews €300M Contingent Capital Facility
- SIGN SW : SIG Group CFO Frank Herzog Resigns for ‘Personal Reasons’
- SIKA SW : Sika Opens New Plant in Southwestern China
- GLE FP : Societe Generale Completes €914 Million Share Buyback Program
- STLA US : Stellantis CEO Sees Slowing Car Demand in Europe on Inflation
- TW/ LN : Watch UK Homebuilders as Mortgage Guarantee Program Extended
- URW NA : It Could Get Ugly for European REITs Before Interest Rates Crest
- UPONOR FH : Uponor Issues Guidance After Cyber Attack, Sees Sales Flat Y/Y
- DG FP : Vinci to Invest $820m to Renovate Mexico’s Monterrey Airport

>>> US After Hours Summary: STLD +0.7% as it will join S&P 500; TRDA -32.1% fall

After Hours Summary: STLD +0.7% as it will join S&P 500; TRDA -32.1% falls as FDA places clinical hold; CPRX +3.6% to acquire US rights for FYCOMPA

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: HEI +1.4%, SCS +0.9%

Companies trading higher in after hours in reaction to news: BCOR +17.5% (completes sale of TaxAct for $720 mln; authorizes repurchase up to $250 mln through modified Dutch Auction; authorizes repurchase up to $200 mln), SMCI +5.9% (to join S&P MidCap 400), LCID +4% (completes previously announced ATM offering), NETI +3.7% (signs contract to transport and install turbines for a 1H25 project), CPRX +3.6% (to acquire US rights for FYCOMPA from Eisai), TITN +3.5% (to acquire the Idaho dealership assets of Pioneer Farm), LAZY +2.6% (authorizes new $50 mln share repurchase program), GLOP +2.1% (US Treasury and IRS regulations will not affect unitholders), NDAQ +1.6% (CEO also named as Chair), NUVB +1.5% (doses first patient in Phase 1B combination study of NUV-868), SFBS +1.5% (increases dividend), ACGL +1.2% (increases its share repurchase authorization to $1 bln), FUBO +0.9% (multi-year distribution partnership with Scripps Networks), STLD +0.7% (to join S&P 500), IBP +0.1% (acquires ABS Insulating), BANC +0.1% (names new COO)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: SCHN -0.4%

Companies trading lower in after hours in reaction to news: TRDA -32.1% (FDA places clinical hold on IND for ENTR-601-44), RCUS -21.4% (announces results from fourth interim analysis of ARC-7 study), TERN -5.6% (stock offering), GILD -2.8% (announces results from fourth interim analysis of ARC-7 study), TECK -2.3% (to sell Quintette steelmaking coal mine assets for $120 mln), AIR -1.6% (extends its distribution relationship with Leach Intl), ESPR -0.3% (CLEAR Outcomes accepted as clinical trial at industry conf), NUE -0.3% (to build galvanizing line in Fontana, CA), RMAX -0.2% (announces exclusive partnership with Buffini & Co), VICI -0.1% (enters into lease agreement with Hard Rock related to the Mirage), ENFN -0.1% (names new CFO)

>>> US Close Dow -0,49% S&P -0,90% Nasdaq -1,49% Russell -1,41%

Closing Stock Market Summary

Any expectations for a rebound today coming off last week's losses were dashed shortly after today's open. The major indices were soon backsliding, pressured by ongoing earnings concerns, weakness in the mega-cap stocks, and a Bloomberg report highlighting a rebalancing disposition that will presumably favor bonds in the last few weeks of the year.

Bonds, however, didn't fare much better today. They were also under selling pressure throughout today's trade, notwithstanding a weaker-than-expected NAHB Housing Market Index report for December. The 2-yr note yield jumped five basis points to 4.25% and the 10-yr note yield increased 10 basis points to 3.58%.

In the case of bonds, though, they were consolidating some of their monthly gains. For stocks, the losses simply continued to mount as fundamental concerns contributed to a further deterioration in the stock market's technical condition.

Including today's losses, the Nasdaq Composite is down 8.0% in December, the Russell 2000 is down 7.8%, the S&P Midcap 400 is down 7.3%, the S&P 500 is down 6.4%, and the Dow Jones Industrial Average is down 5.3%.

The S&P 500, which traded a whisker above 4,100 last Tuesday, fell to 3,800 at today's low in afternoon trading before rebounding some in the final hour. The trek there was paced by weakness in the mega-cap stocks, tax-loss selling interest, and a general sense of reluctance among participants to buy into the weakness.

Meta Platforms (META 114.48, -4.95, -4.1%) dropped on a report that the European Commission believes Meta breached its antitrust rules; Apple (AAPL 132.37, -2.14, -1.6%) fell on lingering supply/demand uncertainty as China grapples with rapidly spreading COVID cases; Tesla (TSLA 149.87, -0.36, -0.2%) traded down on dual concerns about weakening demand and Elon Musk's Twitter involvement; Microsoft (MSFT 240.45, -4.24, -1.7%) lost ground despite being named a Top Pick for 2023 by Morgan Stanley; and Alphabet (GOOG 89.15, -1.71, -1.9%) dropped in sympathy with the lot.

Losses in those particular stocks, which fed a 1.5% decline in the Vanguard Mega-Cap Growth ETF (MGK), also had a disproportionate impact on the communication services (-2.2%), consumer discretionary (-1.7%), and information technology (-1.4%) sectors, which were weighty influences on the broader market.

The materials (-1.3%) and real estate (-1.1%) sectors were also weak links. The only sector to eke out a gain today was energy (+0.1%), which benefited from a 1.6% gain in WTI crude futures to $75.47/bbl.

Market internals reflected today's losing battle. Declining issues outpaced advancing issues by a better than 2-to-1 margin at the NYSE and Nasdaq.

Economic data today was limited to the NAHB Housing Market Index, which fell to 31 in December (Briefing.com consensus 34) from 33 in November.

  • Dow Jones Industrial Average: -9.9% YTD
  • S&P Midcap 400: -15.9% YTD
  • S&P 500: -19.9% YTD
  • Russell 2000: -22.5% YTD
  • Nasdaq Composite: -32.6% YTD

Tuesday's session will include the November Housing Starts and Building Permits Report at 8:30 a.m. ET, as well as earnings results from General Mills (GIS) before the open, and Nike (NKE) and FedEx (FDX) after the close.

WSJ : Surprising Fatty Liver Results Could Put Madrigal in Big Pharma’s Sights

Surprising Fatty Liver Results Could Put Madrigal in Big Pharma’s Sights
Better-than-expected trial results for company’s NASH treatment could rekindle interest in this disease area

There have been so many disappointing trial results targeting the liver disease known as NASH, or nonalcoholic steatohepatitis, that investors were understandably cautious going into one small biotech’s late-stage results.

Yet the topline results released by Madrigal Pharmaceuticals MDGL +268.13% on Monday looked better than most analysts had expected, sending the stock soaring 220%. Ahead of the results, most analysts expected the study to achieve one of the two primary endpoints—a reduction in inflammation—but weren’t as confident it could also deliver on the reduction of liver scarring. The latter is an important measure because it can lead to complications such as cirrhosis.

But the 950 patient-study delivered improvement in both measures with no major safety scare. With these results in hand, Madrigal said on Monday it intends to file for accelerated Food and Drug Administration approval for the treatment of non-cirrhotic NASH, a severe form of fatty liver disease.

The full data, which the company will submit for publication in a peer-reviewed journal at a later date, will be closely reviewed by larger pharmaceutical companies. Companies from Pfizer to Novartis to Bristol-Myers Squibb could potentially be interested in either partnering with or acquiring Madrigal as a way to gain entry into what could be a sizable market. Even just a 5% share of this market could be worth over $8.5 billion assuming a $15,000 price, Liisa Bayko, an analyst at Evercore ISI, wrote in an October report previewing the results.

“It’s fair to say that anyone who has been interested in this space is going to feel more reassured by the data,” said Ms. Bayko.

Pfizer recently invested in Madrigal competitor Akero Therapeutics, which is up 80% for the year after reporting encouraging mid-stage results. Notably, though, the Madrigal release sent competitors such as Akero and another NASH-contender 89bio down more than 10% each on Monday. Those declines are somewhat puzzling given that Madrigal doesn’t seem destined to monopolize the NASH space.

If approved, Madrigal’s resmetirom will become the first approved drug for a chronic disease that has grown increasingly widespread due to the Western world’s obesity epidemic. It would mark a rare win in a painful quest for a treatment after dozens of companies from Gilead Sciences to Genfit and NGM Biopharmaceuticals have faced setbacks in this space over the years.

With solid data, the market will now get to test out whether there really is a big market for fatty liver disease. It is no doubt a major health problem, but one of the issues is fatty liver disease is underdiagnosed. It is sometimes called the silent killer because it doesn’t show symptoms until the liver is severely damaged.

Of course, the best way to tackle fatty liver disease, just like other illnesses generally caused by obesity, will always be to make lifestyle adjustments such as cutting down on unhealthy foods.

But with obesity sadly unlikely to go away anytime soon, treating its effects on the liver will continue to be important. Now there may finally be a treatment on the way, and big pharma isn’t likely to want to miss out on that.

(ZH) How We'll Know When A Recession Is About To Hit

How We'll Know When A Recession Is About To Hit

Watch the 3m30y and the 5y30y segments of the yield curve for early signs that a recession is coming into view. Extra caution will be required at this point as equities and equity earnings have yet to adequately price in a downturn.
The yield-curve’s utility as a recession indicator has been a hot topic in recent years. It has an almost unblemished record of forecasting recessions, with the 2s10s curve only giving one false positive in the postwar years. However, it is limited in its usefulness due to the variability between when the curve inverts and when the recession hits, which ranges between six months and two years.
Overall, the yield curve is a bit of red herring when it comes to recession prediction. A much broader suite of indicators is more effective in giving a more timely sign of an economic contraction, with one next year looking highly likely.
Nonetheless, it’s not the yield-curve inversion that’s the more imminent sign of a recession, but the subsequent re-steepening. Even then, not all parts of the yield curve are equal.
If history is a guide, when 3m30y curve meaningfully steepens and then the 5s30s un-inverts, that will be a sign an NBER recession is as little as two months away.
The chart below shows the set of the most liquid parts of the yield curve before and after recessions going back to 1969 (where certain yields maturities do not have enough history, I only include more recent recessions). The chart shows clearly that the 3m30y curve steepens first, about three months ahead of the recession. It also steepens by the most before and after the recession.
The 5s30s curve also tends to be one of the first to un-invert before a recession, about six-to-eight weeks prior.
At the moment, the 3m30y curve is still flattening and 5s30s is still inverted, suggesting a recession is at least a few months away.
But investors will need to remain vigilant. These trends can change quickly, and recessions always surprise by the rapidity of their onset.