Gapping up
News:
- RFP +65.7% (entered into an agreement under which Domtar will acquire all of the outstanding common shares of Resolute stock for $20.50 per share and one Contingent Value Right)
- AMTI +2.9% (to report top-line Phase 2 results from MARKET combination Trial of Oral AMT-101)
- PRIM +2.1% (awarded a $170 mln project by Texas DOT)
- BIIB +2.1% (Biogen and Eisai receives BLA acceptance and Priority Review from FDA for Lecanemab)
- EPM +2% (CEO to step down)
- MO +2% (FDA administratively stayed the marketing denial order; determined that there are scientific issues unique to the JUUL application that warrant additional review)
- BOC +1.8% (acquires the internet service assets of Strawberry Comms)
- FTI +1.6% (to conduct iFEED study for Equinor)
- LSI +1.6% (increases dividend)
- VORB +1.5% (entered into a securities purchase agreement pursuant to which the Company sold and issued convertible debenture on June 29, 2022 in the principal amount of $50.0 mln)
- CMBM +1.5% (delivers initial order of Microwave Line-of-Sight radios to Advanced Technology Systems Company)
- JKS +1.1% (authorizes the Company to repurchase up to $200 million of its ordinary shares represented by ADSs during an 18-month period)
- SRPT +1% (to share new clinical data and analysis for SRP-9001)
- ISEE +1% (IVERIC bio and DelSiTech enter exclusive agreement for development of sustained release Zimura)
- VERU +1% (New England Journal of Medicine Evidence Publication of Phase 3 Clinical Trial Results Demonstrating that Sabizabulin Treatment Significantly Reduced Deaths in High-Risk Hospitalized COVID-19 Patients)
Analyst comments:
- CDEV +3.5% (upgraded to Outperform from Sector Perform at RBC Capital Mkts)
- AOS +1.2% (upgraded to Buy from Neutral at Longbow)
Early premarket gappers
- Gapping up:
- AMTI +7.1%, RKLB +3%, MO +2.6%, PRIM +2.1%, BOC +1.8%, HIVE +1.8%, BIIB +1.8%, FTI +1.6%, LSI +1.6%, ISEE +1%, SRPT +0.7%, EPM +0.6%, ESTE +0.5%
- Gapping down:
- KRNT -23.9%, RADA -10.5%, FSP -5.5%, VORB -3.2%, OIS -2.4%, UMC -2.3%, STAG -2%, VMW -1.8%, DNMR -1%, AVGO -0.6%
>>> Up
* Continental Raised to Equal-Weight at Barclays; PT 70 euros
* Dechra Pharma Raised to Add at Numis; PT 4,000 pence
* DNB Bank Raised to Buy at Norne Securities; PT 220 kroner (+)
* Dometic Raised to Buy at Nordea; PT 90 kronor (+)
* Hunting Raised to Buy at Canaccord; PT 300 pence (+)
* Ion Beam Raised to Hold at ING; PT 18 euros
* Michelin Raised to Overweight at Barclays; PT 35 euros
* Rosenbauer Raised to Buy at Baader Helvea; PT 42 euros
* Sage Raised to Equal-Weight at Barclays; PT 720 pence
* Sainsbury Raised to Market Perform at Bernstein; PT 210 pence
* Trainline Raised to Overweight at JPMorgan; PT 354 pence (+)
>>> Down
* Aalberts Cut to Neutral at Oddo BHF; PT 40 euros
* Amadeus Cut to Neutral at BofA; PT 65 euros (+)
* Ashmore PT Cut to 170 pence from 200 pence at Berenberg
* Faurecia SE Cut to Underweight at Barclays; PT 15 euros
* HeidelbergCement Cut to Underperform at Oddo BHF; PT 45 euros
* Intertek Cut to Hold at Jefferies; PT 4,700 pence
* Nordex Cut to Hold at Stifel; PT 9 euros
* Profoto Holding Cut to Hold at Handelsbanken
* SAP Cut to Equal-Weight at Barclays; PT 102 euros
* SAP ADRs Cut to Equal-Weight at Barclays; PT $108
* Software AG Cut to Underweight at Barclays; PT 30 euros
* Swatch Cut to Hold at Stifel; PT 250 Swiss francs
* Thyssenkrupp Cut to Hold at DZ Bank; PT 5.80 euros (+)
* Titan Cement Cut to Neutral at Oddo BHF; PT 12 euros
* Valeo Cut to Equal-Weight at Barclays; PT 20 euros
* Voxel Cut to Hold at Dom Maklerski BOSSA; PT 46.40 zloty (+)
* Wienerberger Cut to Underperform at Oddo BHF; PT 20 euros
>>> Initiation
* Ambea Rated New Buy at Berenberg; PT 75 kronor
>>> Call
* Ambea New Buy at Berenberg, Demographic Trends to Spur Demand
* Ashmore PT Cut to Street-Low at Berenberg as Problems Persist
* Alcohol Spending Patterns to Change, Citi Is Cautious on Diageo (+)
* Intertek Cut on China Exposure, Prefer Bureau Veritas: Jefferies
* Sainsbury Upgraded at Bernstein With Bad News Now Priced In
* SEB a ‘Bulletproof Growth Story,’ Initiated Buy at Berenberg
* Swatch Cut at Stifel, Which Recommends Switch to LVMH, Richemont (+)
* Trainline Estimates Raised at Morgan Stanley on Guidance Uplift (+)
Amazon Strikes Partnership Deal with Grubhub That Could Include Small Equity Stake
E-commerce giant adds restaurant delivery to its Prime membership; Grubhub parent Just Eat Takeaway.com continues to explore possible sale of the U.S. food-ordering company
Amazon.com Inc. AMZN 3.60%▲ agreed to add Grubhub to its suite of Prime services in the U.S., in a deal that also gives the e-commerce giant the option to acquire a small stake, the parent of the food-ordering company said.
Grubhub’s parent, Netherlands-based Just Eat Takeaway.com NV, TKWY -2.65%▼ said Amazon has an initial option to take a 2% stake in U.S.-based Grubhub, and U.S. Prime members can have their delivery fees waived from select restaurants. Amazon could bump up its total stake to 15% of Grubhub based on performance terms focused on adding new customers, Just Eat said.
Just Eat will still own Grubhub and will continue exploring a full or partial sale of Grubhub, it said. The deal will renew annually unless either Amazon or Just Eat terminates it and it is expected to materially add to Grubhub’s business next year, Just Eat said.
The deal brings Amazon further into food-related services through its Prime membership program. The online commerce giant has provided grocery benefits to Prime members under its Whole Foods Market division as a way to make its annual subscription program more valuable.
Amazon last year said that millions of Prime members in the U.K. and Ireland would get discounts through U.K. food delivery firm Deliveroo, in which Amazon invested in 2019.
Amazon will offer Prime members a subscription to Grubhub’s membership program for a year, which includes free delivery from a network of restaurants, as well as other discounts.
Grubhub CEO Adam DeWitt said the deal will introduce new customers to the company’s membership program and bring more business to restaurants and drivers that work with Grubhub.
Just Eat said it expects the agreement to expand membership to Grubhub’s subscription program and have a neutral impact on the division’s earnings and cash flow this year, while adding to earnings next year.
Netherlands-based Just Eat said in April that it would consider a full sale of Grubhub after acquiring Grubhub in a $7.3 billion deal that closed last year. Activist investor Cat Rock Capital Management LP, Just Eat’s third-largest shareholder according to FactSet, has pressed the company to focus on its European markets, and sell Grubhub.
- Just Eat Takeaway (T5W TH) +6.3%
- Just Eat Takeaway, Amazon Enter Into Commercial Agreement in US
- Michelin (MCHA TH) +2.5%
- Michelin Raised to Overweight at Barclays; PT 35 euros
- ArcelorMittal (ARRD TH) +2%
- Fortum (FOT TH) +1.9%
- Philips (PHI1 TH) +1.9%
- Veolia (VVD TH) +1.7%
- Anglo American (NGLB TH) +1.7%
- STMicroelectronics (SGM TH) +1.6%
- Watch ASML, Chip Stocks as US Pushes for More Industry Curbs
- Renault (RNL TH) +1.6%
- Rio Tinto (RIO1 TH) -0.8%
- Glencore (8GC TH) -0.9%
- Watch European Mining Stocks as Iron Ore and Base Metals Decline
- Bechtle (BC8 TH) -0.9%
- Telefonica (TNE5 TH) -0.9%
- SCA (SCA TH) -1.4%
- Maersk (DP4B TH) -1.5%
- Faurecia SE (FAU TH) -2.3%
- Faurecia SE Cut to Underweight at Barclays; PT 15 euros
DAX:
- Zalando (ZAL TH) +1.7%
- Deutsche Bank (DBK TH) +1.7%
- Daimler Truck (DTG TH) +1.5%
- Porsche SE (PAH3 TH) +1.5%
- MTU Aero (MTX TH) +1.5%
- Linde (LIN TH) +0.5%
- HeidelbergCement (HEI TH) +0.1%
- HeidelbergCement Cut to Underperform at Oddo BHF; PT 45 euros
- SAP (SAP TH) -0.5%
- SAP Cut to Equal-Weight at Barclays; PT 102 euros
MDAX:
- Thyssenkrupp (TKA TH) +1.9%
- Uniper (UN01 TH) +1.6%
- German Energy Giant Uniper Put on Negative Credit Watch by S&P
- ProSieben (PSM TH) +1.5%
- Commerzbank (CBK TH) +1.5%
- Fraport (FRA TH) +1.5%
- RTL (RRTL TH) -0.5%
- Bechtle (BC8 TH) -0.5%
SDAX:
- PVA TePla (TPE TH) +3.2%
- Ceconomy (CEC TH) +2.8%
- Heidelberger Druck (HDD TH) +2.7%
- AUTO1 (AG1 TH) +2.5%
- SAF-Holland SE (SFQ TH) +1.8%
- Suedzucker (SZU TH) -1.7%
Supreme Court EPA ruling puts regulators in handcuffs
Conservatives are rejoicing now but, if scandals result, the backlash could be severe
At first glance, the principle behind last week’s US Supreme Court decision preventing the Environmental Protection Agency from regulating carbon emissions seems perfectly sensible.
While federal agencies are empowered to regulate specific sectors, the court said, unelected bureaucrats cannot rush into new areas and pump out whatever costly rules they want. On “major questions”, Chief Justice John Roberts wrote in West Virginia vs. EPA, “the agency must point to ‘clear congressional authorisation’ for the power it claims.”
It all sounds as American as apple pie, or the separation of powers, and it might have made sense in earlier times. But the country’s angrily divided politics have changed the equation. For decades, Congress has been unable to write new laws except in the most serious situations. Think about how many school shootings it took to shame legislators into passing even modest gun restrictions.
Requiring legislative authorisation for regulation that addresses “major questions” is tantamount to shelving it. That means the US government’s ability to address novel policy issues has been badly hamstrung.
Even worse, the decision is likely to become a club to beat back ordinary rulemaking at a swath of federal agencies. Conservative politicians and business groups including the US Chamber of Commerce have been trying for years to get the courts to reduce the power of what they call the “administrative state”. They have already seized on the “major questions” language as a way to challenge the administration’s efforts to impose almost any new regulation.
The Securities and Exchange Commission is specifically empowered to supervise markets and corporate filings, but that will not head off lawsuits trying to prevent it from regulating cryptocurrencies and disclosures related to climate change. Similarly, efforts by the Federal Trade Commission to strengthen antitrust rules are likely to be attacked on the grounds that they lack Congressional approval.
Even if the new regulations survive, the lawsuits could delay their implementation by several years. “This new doctrine really adds uncertainty. What are the courts going to consider a major question? It creates an opening for lots of challenges and inconsistent judicial decision-making,” says Gillian Metzger, a Columbia University expert on constitutional and administrative law.
Though fossil fuel companies and conservative business groups have hailed the EPA decision as a victory, they should be careful of celebrating too much. Uncertainty makes it hard for businesses to plan and regulators who are blocked from making new rules often try to change practices by bringing enforcement cases instead.
This method is harder to predict and gives industry less chance to influence policy. Last December’s $200mn fine of JPMorgan Chase for failing to properly control staff use of personal devices has set all of Wall Street scrambling to review their employees’ texting and write new policies even without formal SEC rulemaking.
Over the long term, unbridled deregulation tends to be followed by scandals that send the pendulum swinging back the other way. A 1990s effort to speed up the approval of new prescription medicines left US patients dangerously vulnerable when drugs such as the painkiller Vioxx turned out to have major side effects. The SEC’s hands off approach in the late 1990s was followed by financial scandals that prompted the Sarbanes-Oxley accountability law. Bank deregulation helped fuel the 2008 financial crisis, spurring the Dodd-Frank reform law, which further empowered the agencies conservatives detest.
Markets are already enduring a painful downturn. If the EPA prevents regulators from addressing abuses such as dodgy special purpose acquisition vehicles and deceptive cryptocurrencies, the political backlash could be significant. Do financial services companies really want to poke that bear?
The Supreme Court decision also puts big investors in the hot seat on climate change. Reducing carbon emissions is vital but expensive. Many companies, focused on quarterly earnings, simply will not do it unless someone holds their feet to the fire. The results could be catastrophic both for long-term profits and the planet as a whole.
Big US asset managers have been walking a fine line. While encouraging companies to go green, they also insist that they do not want to become “the environmental police”. But with Congress divided and the EPA and SEC hobbled, there may be no one else to do it.
Finance’s big tech problem
A growing dependency on cloud computing could spell danger, warns BIS
The Bank of International Settlements thinks Big Tech has become too big to fail.
In a paper published on Tuesday, the central banker’s central bank argues that a growing reliance among financial institutions on cloud computing software supplied by a handful of companies could have “systemic implications for the financial system”.
The market for cloud computing software walks and quacks like an oligopoly, with Amazon Web Services, Microsoft Azure, Google Cloud and Alibaba Cloud accounting for around 70 per cent of global revenues.
Around eight in ten financial institutions worldwide now use some form of public cloud, whether to boost computing capacity, better detect fraud or scale up security.
Results are far from guaranteed, however. A hacker who gained access to a Shanghai police database with personal data on 1bn people said, per the FT’s report on Tuesday, that the information had been retrieved from a private cloud service provided by Alibaba.
Reiterating previous warnings from the Bank of England and others, BIS says that finance’s growing dependency on cloud computing “is forming single points of failure, and hence creating new forms of concentration risk at the technology services level.”
The BIS paper draws from a separate study by the European Securities and Markets Authority released in May, in which authors Carolina Asensio, Antoine Bouveret and Alexander Harris explain:
Given the limited number of [cloud service providers] that can meet the high standards of resiliency requirements that financial institutions demand, it is plausible that a sufficiently large number of them become dependent on a small number of CSPs. This implies that operational incidents may become more correlated among those financial institutions that outsource critical or important functions to a common CSP. Even though cloud computing may yield increased data security and operational resilience at firm level, it could also increase the risk of simultaneous incidents among several firms and lead to potential negative outcomes for financial stability (Danielsson and Macrae, 2019; FSB, 2019). Concentration risk in this context is thus a form of systemic risk
What would happen, for example, if a leading CSP suddenly went bankrupt?
Cyber attacks, too, pose an obvious threat. The 2020 SolarWinds hack on Microsoft’s cloud service is a case in point. Simply inserting “a few benign-looking lines of code” into Microsoft’s operating system allowed hackers to “operate unfettered” across compromised networks, the company admitted at the time.
The Federal Reserve Bank of New York said last year that a cyber attack impairing a bank’s ability to send payments would quickly ripple through the wider system (emphasis our own):
“If a number of small or midsize banks are connected through a shared vulnerability, such as a significant service provider, this could result in the transmission of a shock throughout the network. Similarly, banks with a relatively small amount of assets but large payment flows also have the potential to impair the system”
To protect against such intrusions, the European Securities and Markets Authority recommends that financial institutions use multiple CSPs for each service they provide. Multi-cloud solutions “may significantly reduce systemic risk,” it says. But . . .
. . . . this will only happen, however, if the different CSPs or groups of resources have low common vulnerabilities (i.e. can reasonably be treated as independent) and if the services in question are rapidly portable between them. In reality, the first of these assumptions (independence of CSP outages) may not hold in certain circumstances, especially within a single cloud provider, while the second assumption (back-up portability) may not hold especially for back-up strategies that use different providers.
Policymakers intent on outsourcing highly sensitive data to whichever CSP offers most should take note.