Early premarket gappers
- Gapping up:
- AGYS +7.5%, CHX +7%, UHS +6.5%, FCF +6.2%, ENPH +6.2%, WIRE +5.7%, WFRD +5.7%, JNPR +4.8%, OLMA +4.5%, EQC +4.2%, ATRA +4.1%, TNET +3.2%, AZN +3%, FE +3%, NCR +3%, CC +2.8%, TENB +2.4%, HIW +2.2%, CSGP +2.1%, TMO +2%, EXEL +1.7%, WTRG +1.5%, MXL +1.4%, TER +1.3%, V +1.3%, UMC +1.3%, EQR +1.2%, MDLZ +1%, ET +1%, CNI +0.9%, PCVX +0.8%, BYD +0.8%, TRMK +0.8%, MTDR +0.7%, BG +0.6%
- Gapping down:
- TSHA -14.8%, SKX -13.7%, NEX -10.6%, LRN -8.1%, GOOG -6.2%, MSFT -6%, MAT -5.9%, AIZ -5.7%, SPOT -5.3%, TXN -4.9%, NAVI -4.2%, VICR -4.1%, HA -3%, CANO -2.4%, POR -2.4%, GTY -2.1%, VBTX -1.7%, DB -1.6%, KRC -1.5%, FFIV -0.9%, VRT -0.9%, HLT -0.8%, AGR -0.7%, BCS -0.7%, OTIS -0.7%, BMY -0.5%
>>> Up
* Bechtle Raised to Buy at Deutsche Bank; PT 52 euros
* HSBC Raised to Neutral at Exane; PT 600 pence
* Imerys Raised to Buy at AlphaValue/Baader
>>> Down
* Billerud Cut to Hold at Handelsbanken
* Fresenius Medical Cut to Sell at Deutsche Bank; PT 24 euros
* Gestamp Cut to Equal-Weight at Barclays; PT 4 euros
* Neoen PT Cut to 31.90 euros from 37 euros at Citi
* Renta Corp Real Estate Cut to Neutral at JB Capital Markets (+)
* SSAB Cut to Hold at Handelsbanken
* Viaplay Cut to Hold at SEB Equities; PT 248 kronor
>>> Initiation
* Fresenius SE Reinstated Equal-Weight at Morgan Stanley
>>> Call
* Adidas Fighting ‘Too Many Fires;’ RBC Cuts to Sector Perform
* Barclays’ Cau Sees Opportunity in UK Assets Post ‘Record’ Exodus (+)
* BioMerieux 3Q a Beat, Shares May Get Modest Boost: Jefferies
* Covestro Double-Upgraded at Citi With More Bad News Unlikely
* Deutsche Bank Reports Good Set of Operational Results: KBW (+)
* Goldman Sachs Says US Equity Bottom Conditions Are Not There Yet
* Michelin 3Q Sales Beat; Guidance May Weigh on the Shares: RBC
* Porsche Among Potential Replacements for Linde in DAX: JPM (+)
* Puma Results ‘Fairly Robust’ on 3Q Beat, Outlook Reassures: RBC (+)
* Santander 3Q Profit Beat Driven by Net Interest Income, RBC Says
* SBB Downgraded as Citi Sees Tougher Property Market Correction
* Skanska 3Q Is a Big Beat on Profitability, Morgan Stanley Says (+)
* SocGen Strategists Say European Earnings Are Resilient So Far (+)
* Thales Delivers Strong Quarter on Both Orders, Sales, Citi Says (+)
* Uniper’s Loss May Mean Bigger Capital Increase Needed: Citi (+)
DAX:
- Deutsche Bank (DBK TH) +4%
- Deutsche Bank Lifts Revenue Outlook as Rising Rates Fuel Trading
- Puma (PUM TH) +3.6%
- Puma Maintains FY Ebit Forecast
- Symrise (SY1 TH) +2.9%
- Symrise Boosts FY Organic Revenue Forecast
- Mercedes (MBG TH) +2.5%
- Mercedes Hikes Profit Goal With Demand Outstripping Supply (1)
- Covestro (1COV TH) +1.3%
- Covestro Double-Upgraded at Citi With More Bad News Unlikely
- Fresenius SE (FRE TH) -0.5%
- Fresenius Will Factor in Elliott’s Strategy Ideas, CEO Tells FAZ
- Infineon (IFX TH) -1%
- Ivy Science & Tech Adds KLA Corp, Exits GlobalFoundries
- Fresenius Medical (FME TH) -2.3%
- Fresenius Medical Cut to Sell at Deutsche Bank; PT 24 euros
MDAX:
- Bechtle (BC8 TH) +2.1%
- Bechtle Raised to Buy at Deutsche Bank; PT 52 euros
- Commerzbank (CBK TH) +1%
- Commerzbank Unit Sweetens Deals for Franc Borrowers in Poland
- Evotec SE (EVT TH) +0.8%
- Aroundtown (AT1 TH) +0.7%
- K+S (SDF TH) +0.5%
- Lufthansa (LHA TH) -0.6%
- Delivery Hero (DHER TH) -0.6%
- Varta (VAR1 TH) -0.8%
- Deutsche Wohnen (DWNI TH) -1%
- Aixtron (AIXA TH) -1.1%
SDAX:
- Ceconomy (CEC TH) +2.6%
- Ceconomy 4Q Sales Beats Estimates
- Heidelberger Druck (HDD TH) +0.9%
- SMA Solar (S92 TH) +0.6%
- Instone Real Estate (INS TH) +0.5%
- Instone Real Estate to Boost Share Buyback Program
- Hamborner REIT (HABA TH) +0.3%
- Deutsche PBB (PBB TH) Flat
- Nordex (NDX1 TH) -0.3%
- Uniper (UN01 TH) -3.1%
- Watch European Utilities as Uniper Warns of €3.2 Billion Loss
- Deutsche Bank (DBK TH) +3.7%
- Deutsche Bank Lifts Revenue Outlook as Rising Rates Fuel Trading
- Symrise (SY1 TH) +2.7%
- Symrise Boosts FY Organic Revenue Forecast
- Puma (PUM TH) +2.5%
- Telefonica (TNE5 TH) +2.4%
- Telefonica To Record €1.3 Billion Spanish Tax Refund in 4Q (1)
- Dassault Systemes (DSYA TH) +2.4%
- Dassault Systemes 3Q Non-IFRS Operating Margin Misses Estimates
- Mercedes (MBG TH) +2.1%
- Mercedes Hikes Profit Goal With Demand Outstripping Supply (1)
- Bechtle (BC8 TH) +2.1%
- UniCredit (CRIN TH) +2%
- UniCredit Boosts Targets a Second Straight Quarter on Rates (1)
- Santander (BSD2 TH) +1.8%
- Santander Profit Beats Estimates on Tailwind From Rate Hikes (1)
- Covestro (1COV TH) +1.3%
- Covestro Double-Upgraded at Citi With More Bad News Unlikely
- Aixtron (AIXA TH) -1.1%
- Carl Zeiss Meditec (AFX TH) -1.1%
- Hexagon (HXG TH) -1.2%
- Glencore (8GC TH) -1.3%
- UMG (0VD TH) -1.5%
- Infineon (IFX TH) -1.8%
- Heineken (HNK1 TH) -2.1%
- *HEINEKEN 3Q ORG. BEER VOLUME +8.9%, EST. +11.8%
- Fresenius Medical (FME TH) -2.6%
- ASML (ASME TH) -3.2%
- Watch European Tech Stocks as Microsoft, Google, TI Disappoint
>>> Up
* Bechtle Raised to Buy at Deutsche Bank; PT 52 euros
* HSBC Raised to Neutral at Exane; PT 600 pence
* Imerys Raised to Buy at AlphaValue/Baader
>>> Down
* Billerud Cut to Hold at Handelsbanken
* Fresenius Medical Cut to Sell at Deutsche Bank; PT 24 euros
* Gestamp Cut to Equal-Weight at Barclays; PT 4 euros
* Neoen PT Cut to 31.90 euros from 37 euros at Citi
* SSAB Cut to Hold at Handelsbanken
* Viaplay Cut to Hold at SEB Equities; PT 248 kronor
>>> Initiation
* Fresenius SE Reinstated Equal-Weight at Morgan Stanley
>>> Call
* Adidas Fighting ‘Too Many Fires;’ RBC Cuts to Sector Perform
* BioMerieux 3Q a Beat, Shares May Get Modest Boost: Jefferies
* Covestro Double-Upgraded at Citi With More Bad News Unlikely
* Goldman Sachs Says US Equity Bottom Conditions Are Not There Yet
* Michelin 3Q Sales Beat; Guidance May Weigh on the Shares: RBC
* SBB Downgraded as Citi Sees Tougher Property Market Correction
Stocks were mixed as major Asian indexes rose and US futures fell after post-market slumps in Google parent Alphabet Inc. and Microsoft Corp. marred a three-day rally on Wall Street. Equities rose in China, Japan and South Korea while contracts for the Nasdaq 100 slid. Alphabet dropped as much as 7% in after-market trading on revenue that came in below expectations and Microsoft lost 8% following a disappointing revenue forecast. Positive signs for Asia included China’s central bank and foreign-exchange regulator indicating they would maintain the healthy development of stock and bond markets, while reiterating that the yuan would be “basically stable.” A near 5% rebound in a gauge of US-listed Chinese stocks on Tuesday helped claw back some of the record loss suffered in the wake of President Xi Jinping breaking with China’s collective leadership. Hong Kong’s tech gauge made strong gains for a second day but was still short of recouping Monday’s near 10% slide. A gauge of the dollar was unchanged while the pound fell on a report that UK Prime Minister Rishi Sunak was considering a delay to next week’s planned fiscal statement. The yen weakened to around 148 per dollar ahead of the Bank of Japan’s policy decision Friday, when monetary settings are expected to be kept unchanged. Meanwhile, the central bank boosted purchases of longer-dated government bonds as rising yields threatened to loosen its grip on the yield curve. Treasuries held to gains, with the 10-year yield falling below 4.10% after data for US home prices and consumer confidence underscored concern over the economic outlook. US After Hours Big tech names lower on earnings: GOOG -6.7%, TXN -5.7%, SPOT -5%, FFIV -3.6%, MSFT -3.1%; CMG -1.8% also lower; JNPR +3.9%, V +2.5% higher on earnings
Nikkei +0.86% Hang Seng +1.25% CSI +1.10% Shanghai +0.95% Shenzen +1.90%
Eur$ 0.9965 CNH 7.2870 CNY 7.2759 JPY 148.06 GBP 1.1466 CHF 0.9938 RUB 61.5375 TRY 18.6048 WTI$ 84.59 -0.87% Gold 1,660 +0.42% BTC 20,180 -0.05% ETH 1,482.40 +0.57%
S&P -1.08% Nasdaq -2.00% EuroStoxx -0.38% FTSE -0.24% Dax -0.15% SMI -0.09%
Macro :
- Deutsche Bank’s von Moltke Sees 2% Germany Recession Next Year
- BofA Says Client Flows Into Single Stocks Near Historic Extremes
- Hedge Funds Are Slashing Leverage to Weather Market Slump
- Goldman Sachs Says US Equity Bottom Conditions Are Not There Yet
- Italian bank fundraising attracts ‘state aid’ scrutiny in Brussels
Keep an eye on :
- AC FP : Saudi Fund Invests in Hotel Chain Habitas (Correct)
- ADS GY : Adidas Cuts Ties With Ye, Absorbing €250 Million Hit to Profit
- AKRBP NO : Aker BP 3Q Net Income Meets Estimates
- ASM NA : ASMI 3Q Net Sales Beats Estimates
- ATO FP : Atos 3Q Revenue Beats Estimates
- ATO FP : Atos Sales Rise With €2.7 Billion Secured to Finance Split
- AZA SS : Avanza Survey Shows Swedish Savers Less Pessimistic on Stocks
- BARC LN : Barclays 3Q CIB Revenue Misses Estimates
- BAS GY : BASF 3Q Adjusted Ebit Beats Estimates
- BAYN GY : Chemours Cuts FY Adjusted EPS Forecast, Misses Estimates --> CC +3% In after Hours
- BETSB SS : Betsson 3Q Operating Profit Meets Estimates
- BIM FP : BioMerieux 3Q Sales Beats Estimates
- ALCAR FP : Carmat Gets Approvals to Resume Eficas Clinical Study in France
- CEC GY : Ceconomy 4Q Sales Beats Estimates
- DSY FP : Dassault Systemes 3Q Non-IFRS Operating Margin Misses Estimates
- DWS GY : DWS 3Q Net Inflows Misses Estimates
- ELK NO : Elkem 3Q Ebitda Beats Estimates
- FORTUM FH : Fortum: No Impact From Further Losses of Uniper During 2022
- GLEN LN : Peru Espinar Community to Protest Glencore’s Copper Mine
- HOFI SS : Hoist Finance 3Q Operating Income SEK595M Vs. SEK488M Y/y
- HYQ GY : Hypoport Prelim 9M Ebit EU31M
- ITX GY : Zara’s Owner Agrees to Sell Russian Operations to Daher Group
- INS GY : Instone Real Estate to Boost Share Buyback Program
- INTC US : Intel’s Mobileye Raises $861 Million to Top Goal for IPO
- KCR FH : Konecranes 3Q Adjusted Ebita Beats Estimates
- KAMBI SS : Kambi 3Q Ebit Misses Estimates
- KPN NA : KPN 3Q Adjusted Ebitda After Leases Meets Estimates
- LIN GY : Linde’s Frankfurt Exit Is Testimony to DAX Index’s Struggles
- MELE BB : Melexis 3Q Ebit Beats Estimates
- MBG GY : Mercedes Boosts FY Cars Adjusted Return on Sales Forecast
- MBG GY : Mercedes Hikes Profit Goal With Demand Outstripping Supply
- ML FP : Michelin Postpones Capital Markets Day Amid ‘Hyperinflation’
- MMT FP : M6 3Q Revenue Meets Estimates
- NVG PL : Navigator Co 9M Net Income EU270.5M Vs. EU114.2M Y/y
- NEX FP : Nexans Boosts FY Ebitda Forecast, Beats Estimates
- NAS NO : Norwegian Air 3Q Ebit Matches Estimates
- ORP FP : Orpea Forced to Renegotiate Debt After ‘Gravediggers’ Scandal
- OVH FP : OVH FY Revenue EU788M Vs. EU663M Y/y
- RKTLN : Reckitt 3Q Like-for-Like Sales Beats Estimates
- RED SM : Red Electrica 3Q Net Income Beats Estimates
- RIO LN : Rio Tinto Reiterates Commitment to Oyu Tolgoi
- SAN SM : Santander Profit Beats Estimates on Central Bank Rate Tailwind
- SGO FP : Saint-Gobain Signs 10 Year PPA With TotalEnergies in N. America
- SEBA SS : SEB Ends Second Share Buyback Program, Starts New For SEK1.25b
- SKAB SS : Skanska 3Q Operating Profit Beats Estimates
- SMCP FP : SMCP 3Q Organic Sales +9.4%
- SNAP US : Snap’s Evan Spiegel Slams the Metaverse, Touts Own AR Vision
- SF SS : Stillfront 3Q Ebit Misses Estimates
- SW FP : Sodexo FY Organic Revenue Beats Estimates
- SUN SW : Sulzer 3Q Orders CHF852M
- SY1 GY : Symrise Boosts FY Organic Revenue Forecast
- TKTT FP : Tarkett 3Q Net Sales EU1.01B Vs. EU809.4M Y/y
- TEF SM : Telefonica to Receive €1.3 Billion in Tax Refund
- TEF SM : Telefonica, Liberty Said to Weigh Sale of Stake in UK Towers Arm
- TEL NO : Telenor 3Q Ebitda Beats Estimates
- HO FP : Thales Boosts FY Sales Forecast
- TOD IM : Founder Della Valle’s Bid on Tod’s Will Not Be Completed
- TTE FP : Saint-Gobain Signs 10 Year PPA With TotalEnergies in N. America
- TRELB SS : Trelleborg 3Q Adjusted Ebit Misses Estimates (1)
- UCG IM : UniCredit Sees FY Net Income Above EU4.8B, Saw About EU4B
- UN01 GY : Uniper Warns of €3.2 Billion-Loss as Higher Gas Prices Bite
- DG FP : Vinci 9M Like-for-Like Sales +12%
- DG FP : Vinci’s Results Should Help Alleviate Any Concerns: Street Wrap
- WPP LN : WPP 3Q Comparable Organic Sales Misses Estimates
ECB to start talks on shrinking balance sheet amid bond market turmoil
The eurozone’s central bankers will begin discussions this week, as well as raising rate by a likely 75 basis points
The European Central Bank is expected to start the delicate process of shrinking its balance sheet this week after eight years of bond purchases and generous lending more than quadrupled its total assets to €8.8tn.
The shift would mark an intensification of the ECB’s efforts to remove monetary stimulus and cool inflation, which in September reached an all-time high of 9.9 per cent in the 19 countries that share Europe’s single currency, almost five times its 2 per cent target.
Policymakers must proceed with caution or risk a UK-style bond market sell-off that would add to the economic problems facing the region. “It is going to be a challenging six months for the ECB, in which many of the potential trade-offs between inflation, growth and financial stability could become more intense and tricky to manage,” said Silvia Ardagna, senior European economist at Barclays.
Thursday’s meeting of the ECB governing council in Frankfurt is set to agree on raising interest rates, almost certainly by 0.75 percentage points for the second consecutive time. That would lift its deposit rate to 1.5 per cent — the highest it has been since January 2009.
Several members of the council, headed by ECB president Christine Lagarde, have said they also plan to discuss ways to start shrinking the balance sheet, which has ballooned over the past decade from around €2tn to a figure that equates with 70 per cent of eurozone gross domestic product.
Markets have grown accustomed to generous support from the ECB. Removing this stimulus when the eurozone is being dragged into recession by an energy crisis and investors are nervous about the high debt levels of southern European countries could be a recipe for financial market turbulence. Giorgia Meloni said in her first parliamentary speech as Italy’s prime minister that tighter monetary policy was “considered by many to be a rash choice” that “creates further difficulties” for heavily indebted member states such as Italy.
A key decision awaiting the ECB this week is how to reduce the attractiveness of €2.1tn in ultra-cheap loans that it provided to commercial lenders after the pandemic hit, known as targeted longer term refinancing operations (TLTRO).
This scheme kept banks lending during the pandemic. But now the ECB is raising rates above zero, it will allow lenders to make €28bn of risk-free profits by simply placing money they borrowed back on deposit with it, according to estimates by US bank Morgan Stanley.
Such a taxpayer-funded boost for banks is politically unpalatable when households and businesses are struggling with rising borrowing costs. An ECB poll of lenders published on Tuesday showed eurozone banks were becoming much pickier in granting loans, pulling back from supplying mortgages at the fastest rate since the 2008 financial crisis.
One option is to change the terms of the loans retrospectively, but banks have warned this could trigger legal challenges and increase risk premia in some countries. Another is to change the rules for remunerating reserves, paying zero interest on TLTRO borrowing. Analysts expect any change to result in early repayment of about €1tn of TLTRO loans in December. The ECB declined to comment.
The central bank could also signal it is preparing to shrink the €5tn portfolio of bonds it has amassed over the past decade.
Reducing the amount of maturing securities it replaces from early next year — a process known as quantitative tightening — would move the ECB closer in line with the US Federal Reserve and the Bank of England. But economists warn shrinking the bond stockpile runs the risk of heightened turmoil.
A sell-off in UK bond markets forced the BoE to intervene last month by restarting its bond purchases temporarily only weeks before it planned to begin selling the large portfolio of gilts it already owns.
Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, said the UK sell-off was “a useful reminder that any aggressive withdrawal of liquidity risks being highly disruptive for the bond market and the transmission of monetary policy”.
Given the scars left by the eurozone sovereign debt crisis a decade ago, when spiralling borrowing costs for governments in southern Europe brought the eurozone to the brink of collapse, the ECB intends to tread carefully.
France’s central bank governor François Villeroy de Galhau advocated a careful approach when he told the Financial Times last week: “Balance sheet normalisation shouldn’t be completely on automatic pilot: let us start clearly but cautiously, and then accelerate gradually.”
The ECB bought over €2tn of bonds over the past two years, hoovering up more than all the extra debt issued by eurozone governments in that period. It only stopped enlarging its bond portfolio in July and it continues to buy about €50bn of securities a month to replace those that mature.
Villeroy said he envisaged the ECB would decide on plans to stop reinvestments in its largest pool of bonds — the €3.26tn asset purchase portfolio — as soon as December, with a view to implementing the change during the first half of next year.
The central bank is expected to continue reinvesting a separate €1.7tn pandemic emergency purchase portfolio (PEPP) until 2025 at the earliest. The ECB can focus PEPP reinvestments on certain countries, providing a first line of defence against any severe sell-off in the bond markets of heavily indebted countries.
By building up such a large portfolio of government bonds, the ECB has created a scarcity of highly rated securities, such as German Bunds, which brings down risk-free rates at a time when the ECB is trying to raise them.
Konstantin Veit, portfolio manager at Pimco, said: “As there are limited safe options out there to invest in, this leads to collateral scarcity and drives a large part of the money market to trade well below the ECB’s deposit rate.”
Germany’s debt agency this month sought to address this problem by creating more bonds that it can lend out to investors via repo markets.