Gapping up
In reaction to earnings/guidance:
- CXM +3.6%
Other news:
- MOR +7.9% (entered into equity participation and license agreements for felzartamab and MOR210)
- DAWN +7.4% (prices offering of 10 mln shares of common stock at $15.00 per share)
- HTZ +6.1% (authorizes new $2.0 bln share repurchase program)
- EVCM +3.6% (announces $50 million share repurchase program)
- ZEN +3.1% (entered into settlement talks with Jana Partners according to WSJ)
- SMFR +2.7% (announced departure of CFO Isaac Ro)
- TUSK +1.8% (announced first appeal response from FEMA related to Project Worksheet 251)
- FIVE +1.6% (approves stock repurchase program for up to $100 mln of common stock; also adds Bernard Kim to board of directors who current serves as CEO of Match Group)
- BP +1.1% (to lead and operate one of the world's largest renewables and green hydrogen energy hubs based in western Australia; to take a 40.5% stake and operatorship of the AREH project in the Pilbara Western Australia)
- WIX +1.1% (received court approval of its repurchase program pursuant to which up to $500 million of the Company's ordinary shares and/or convertible notes may be repurchased effective until December 31 2022)
- MRNA +0.8% (FDA advisory committee voted to recommend two-dose COVID-19 for children aged 6-17 years)
Analyst comments:
- SNOW +4.3% (upgraded to Buy from Hold at Canaccord Genuity)
- SPOT +3.4% (upgraded to Equal Weight from Underweight at Wells Fargo)
- SKX +1.8% (upgraded to Buy from Hold at Argus)
- TPR +1.7% (upgraded to Buy from Hold at Jefferies)
- AWI +1.4% (upgraded to Buy from Hold at Loop Capital)
Early premarket gappers
- Gapping up:
- MOR +8.3%, CXM +3.6%, SMFR +2.7%, DAWN +2.7%, ZEN +2.4%, FIVE +1.6%, BP +1.4%, MRNA +0.9%, VGII +0.7%, T +0.7%, TRQ +0.6%, PFE +0.5%
- Gapping down:
- MEI -10%, PL -8.9%, MEG -5%, TUSK -2.7%, RTX -1.3%, SPTN -0.9%
US equity futures edged up Wednesday and Asian stocks struggled for traction ahead of a Federal Reserve meeting that’s expected to deliver a hefty interest-rate hike to fight inflation. An Asia-Pacific share gauge wavered, with Chinese technology stocksamong the gainers but Japan in the red. S&P 500 and Nasdaq 100 contracts rose less than 1%. Wall Street Tuesday cemented its longest losing streak since January.
Chinese bourses pushed higher in the wake of better-than-expected activity data, though the figures still highlighted challenges from Beijing’s preference for tackling Covid with lockdowns. Industrial output climbed, while retail sales succumbed to a smaller-than-anticipated contraction. Treasuries steadied following a rout: two-year yields retreated after hitting a level last seen in 2007 and the 10-year yield pulled back from near 3.5%. Traders anticipate a 75-basis-point hike from the Fed on Wednesday, the biggest since 1994. Parts of the US yield curve remain inverted, signaling concerns that restrictive monetary policy will lead to an economic downturn. The dollar slipped and the Japanese yen climbed from a 24-year low. The offshore yuan advanced after China’s central bank refrained from cutting a key policy rate. Bitcoin stabilized around $22,000. Oilheld under $120 a barrel. Fears of stagflation have driven stocks into a bear market and triggered a stunning selloff in bonds in recent days. Uncertainty is elevated heading into the Fed decision: increments of 50 basis points, 75 basis points and even 100 basis points have all been chewed over by commentators. US After Hours CXM +3% rises while PL -11% lags on earnings/guidance
Nikkei -0,73% Hang Seng +1,44% CSI +1,84% Shanghai +1,41% Shenzen +1,15%
Eur$ 1,0444 CNH 6,7286 CNY 6,7198 JPY 135,05 GBP 1,2024 CHF 0,9994 RUB 58,0617 TRY 17,2559 WTI$ 118,89 Gold 1,815,81 BTC 21,624 ETH 1,182
S&P +0,44% Nasdaq +0,66% EuroStoxx +0,40% FTSE +0,17% Dax +0,48% SMI
Macro :
- Ackman Says Aggressive Fed Action Would Help Restore Confidence
- ‘Self-Sanctioning’ of Russia Sparks Worries About Ripple Effects
- Hedge Fund Selling Was Never More Furious Than in Last Two Days
Keep an eye on :
Keep an eye on :
- AIR FP : Boeing Gains Amid Report 787 Deliveries May Resume in Weeks
- AAPL US : Apple to Stream Major League Soccer as Sports Ambitions Grow
- AAPL US : Apple to Stream Major League Soccer as Sports Ambitions Grow
- BAYN GY : Bayer, Planet Labs To Expand Agriculture Data Partnership
- BP/ LN : BP Recruits Ex-RWE Renewables Director to Head UK Offshore Wind
- CO FP : Ardian Said to Join Bidding for EU1.5b Casino Unit GreenYellow
- BP/ LN : BP Recruits Ex-RWE Renewables Director to Head UK Offshore Wind
- CO FP : Ardian Said to Join Bidding for EU1.5b Casino Unit GreenYellow
- CLN SW : Clariant: Earnings Day Ahead
- COLR BB : Colruyt FY EPS Misses Estimates
- GXI GY : Germany’s Gerresheimer Is Said to Reject Bain Takeover Approach
- GSF NO : Grieg Seafood Maintains FY Harvest Forecast
- MOR GY : MorphoSys Soars on HIBio Stake for Antibody Treatment Rights --> +21% in after Hours
- ORSTED DC : Orsted Gets Taiwan Approval to Invest NT$87.2b in Wind Power
- OVS IM : OVS 1Q Adjusted Net Sales EU299.9M Vs. EU229.6M Y/y- ROTH FP : Top Private Equity Banker Laurent Haziza Said to Exit Rothschild
- WBD US : *WARNER BROS TO CUT UP TO 30% OF ADS SALES FORCE: INFORMATION
- XXL NO : XXL Warns That 2Q Revenue Will Decline From Previous Year
>>> Up
* Cranswick Raised to Buy at Jefferies; PT 3,650 pence
* Datagroup Raised to Add at Baader Helvea; PT 69 euros
* Datagroup Raised to Add at Baader Helvea; PT 69 euros
* Kering Raised to Buy at Jefferies; PT 605 euros
* Wulff-Group Raised to Buy at Inderes; PT 5.20 euros
>>> Down
* Neste Cut to Neutral at Goldman; PT 52 euros
* Prada Downgraded at Goldman on Less Visibility in Luxury Sector
>>> Down
* Neste Cut to Neutral at Goldman; PT 52 euros
* Prada Downgraded at Goldman on Less Visibility in Luxury Sector
* Voltalia Cut to Neutral at Oddo BHF; PT 22 euros
* XXL Cut to Hold at Arctic Securities; PT 9 kroner
* XXL Cut to Sell at SpareBank; PT 5 kroner
>>> Initiation
* Roche Reinstated Buy at Mirabaud Securities
>>> Call
>>> Initiation
* Roche Reinstated Buy at Mirabaud Securities
>>> Call
Metaverse Spending to Total $5 Trillion in 2030, McKinsey Predicts
Seventy-nine percent of survey respondents said they have already made a purchase in the metaverse
Businesses’ and consumers’ annual global spending related to the metaverse could reach $5 trillion by 2030, according to a new report from consulting firm McKinsey & Co.
E-commerce in the metaverse will comprise some $2 trillion to $2.6 trillion of the total, while virtual advertising endeavors will make up another $144 billion to $206 billion, McKinsey said.
By comparison, spending around artificial intelligence totaled $93 billion last year, McKinsey said.
McKinsey released its new estimates for the metaverse in a study on the subject that also included the results of a survey of 3,104 consumers in 11 countries and a poll of C-level executives at 448 companies in 15 industries and 10 countries.
Some notions of the metaverse envision not only immersive digital platforms where visitors can interact, shop and play but interoperability between those worlds, meaning consumers can bring their avatars more or less intact from one platform to another.
For the purposes of its study, however, McKinsey defined the metaverse as primarily online platforms and experiences that don’t solely occur in virtual reality or require interoperability between virtual worlds.
The metaverse will encompass five types of daily activities, McKinsey’s report predicts: gaming, socializing, fitness, commerce and remote learning. “People are signaling that connection is probably their number one interest,” said Lareina Yee, senior partner at McKinsey.
Seventy-nine percent of respondents said they have already made a purchase in the metaverse as it exists today, with 47% of those people saying they had made in-game purchases, 37% reporting buying virtual cosmetic items and 33% saying they purchased real-world items that were offered through virtual platforms.
Brands’ experiments in virtual worlds so far offer signals about how marketing and advertising to consumers in the metaverse might look down the road, McKinsey researchers said.
“There is a need for very different marketing skills, which are much closer to videogames and movies, TV series and so on,” said Eric Hazan, senior partner at McKinsey.
Chipotle Mexican Grill Inc. has run two metaverse campaigns in collaboration with Roblox, the online gaming platform popular with children, including a 2021 Halloween-themed project called Boorito in which users who visited a virtual store received a code for a free real-world burrito, and an April event that let consumers roll virtual burritos to earn in-game currency that could also be traded for real food.
Chipotle Chief Marketing Officer Chris Brandt said the potential benefits of exploring the metaverse outweigh the risks.
“The metaverse is confusing. It gets a lot of publicity, but there aren’t a lot of people there,” Mr. Brandt said. “But many of our consumers have kids on Roblox. Hey, we’re taking a risk. Let’s not jump in and spend $5 million on this burrito [game]; let’s spend $100,000 and see what happens.”
The two games attracted six million unique users, many of whom also signed up for Chipotle’s rewards program, and “Boorito” daily sales totals surpassed those associated with past years’ Halloween campaigns in the physical world, he said.
Chipotle has been encouraged enough to begin allocating a small portion of its marketing budget to the metaverse, Mr. Brandt said, noting that he expects a larger commitment in the years to come.
Ninety-five percent of executives in McKinsey’s study said they believe the metaverse will have a positive impact on their respective industries in five to 10 years, and 25% said they expect it to drive 15% of their organization’s total margin growth in five years.
Authentic Brands Group LLC’S Forever 21 has leaned into the idea of “twinning,” a concept that entails people wearing the same clothes as their digital avatars. Forever 21 sold a black beanie in its store after it became popular on Roblox, for example, the company said.
“The metaverse is all about self-expression, so being able to wear identical outfits in the physical and virtual worlds is a trend that we believe will continue to grow,” said Jacob Hawkins, chief omni, marketing and commerce officer at Forever 21.
Some executives remain skeptical, however, with 31% uncertain about the return on investment of metaverse experiences, according to McKinsey.
Brands should temper expectations and investments in the metaverse, as it will take time before mass consumer adoption happens, said Mike Proulx, vice president and research director at Forrester Research Inc.
“The linchpin in this entire metaverse calculus has to be about convincing everyday people how the metaverse will complement their daily lives,” he added. “And until that happens, the user base of immersive media will continue to be niche.”
After Hours Summary: CXM +3% rises while PL -11% lags on earnings/guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: CXM +2.6%
Companies trading higher in after hours in reaction to news: MOR +15.1% (entered into equity participation and license agreements for felzartamab and MOR210), ZEN +4.1% (entered into settlement talks with Jana Partners, according to WSJ), SMFR +2% (announced departure of CFO Isaac Ro), MRNA +1.5% (FDA advisory committee voted to recommend two-dose COVID-19 for children aged 6-17 years), VTNR +1.4% (disclosed resignation of COO)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: PL -10.5% (also announced expansion of strategic relationship with Bayer [BAYRY])
Companies trading lower in after hours in reaction to news: MEG -5% (disclosed recent ransomware attack), OLN -2.1% (provided operations update and announced temporary curtailment of production of certain products)
Apple scores deal for Major League Soccer streaming rights worth $2.5bn
Tech group teams up with North American football league amid race to secure sports content for digital platform
Apple and Major League Soccer have agreed to a broadcasting rights package worth $2.5bn over 10 years, according to people familiar with the matter, a big investment in live sports by the tech group that will put the North American football league’s matches on its streaming service.
Beginning next year, all live fixtures will air on a dedicated MLS streaming service available on the Apple TV app. The price of the subscription for consumers was not immediately available.
MLS commissioner Don Garber declined to comment on the dollar value of the agreement. He said it was structured as a “minimum guarantee” with Apple to form a streaming service, with the potential for additional revenue sharing and sale of some traditional television rights.
Moving the league’s live broadcasts to streaming will allow MLS to expand its appeal overseas as opposed to “being the North American version of the global game”, Garber said.
The deal between Apple and MLS is the second live sports rights deal for the tech group and its first comprehensive rights package with a league. Earlier this year, it struck an agreement with Major League Baseball to broadcast Friday night games, joining Silicon Valley peers like Amazon in taking on traditional broadcasters for the rights to live sports.
“Sports clearly represents the next battleground for ownership of the living room among the big tech companies”, said Paolo Pescatore, tech and media analyst for PP Foresight. “This is a statement of intent by Apple. While it’s late to the party, it must now be considered a serious player for sports rights in key markets for its products.”
Eddy Cue, Apple’s senior vice-president of services, said centralising all MLS matches on its platform would eliminate friction for fans who typically have to toggle between different networks or platforms to watch. Each of the big North American professional leagues, including MLS, split their broadcast rights among a variety of networks, a process that help owners extract the highest price but produces confusion for fans and occasionally results in viewing blackouts.
“No fragmentation, no frustration — just the flexibility to sign up for one convenient service that gives you everything MLS,” he said.
The Apple and MLS deal follows another blockbuster media rights package for the Indian Premier League, which this week parcelled out broadcast and streaming privileges to Disney and Viacom18, respectively, for nearly $6bn.
The IPL and MLS media deals amount to a mixed verdict for incumbent Disney, which holds streaming rights for both leagues under their current terms.
Figures released by ESPN in 2021 showed viewership for MLS matches on ABC and ESPN rose 39 per cent from 2019, its last pre-pandemic season, to an average of 384,000 viewers.
A person familiar with the matter described the negotiations for the next round of MLS rights as “a competitive process” but that ESPN, Disney’s sports platform, feels comfortable with its other football offerings, including Germany’s Bundesliga, Spain’s La Liga and England’s FA Cup.
A spokesman for ESPN said “we continue to have a great relationship with MLS and are proud of the role we’ve played in helping grow the league and the sport in the US”.
ECB has ‘no limits’ in defence of euro from debt turmoil, says executive
Schnabel stresses bank’s commitment to countering any ‘disorderly’ jump in borrowing costs
The European Central Bank has “no limits” in its commitment to defend the euro, board member Isabel Schnabel said on Tuesday, stressing its willingness to launch a new instrument to counter any “disorderly” jump in the borrowing costs of weaker eurozone economies.
The comments by Schnabel in a speech to students of the Panthéon-Sorbonne University in Paris were designed to reassure investors that the ECB is determined to prevent a recent sell-off in the bonds of certain countries from triggering another debt crisis in the region.
Borrowing costs for heavily indebted countries such as Italy and Spain have shot to eight-year highs since the ECB last week signalled an end to its ultra-loose monetary policy of the past decade by announcing plans to stop buying more bonds and to start raising interest rates.
A lack of detail from the ECB over when or how it would intervene to tackle fragmentation in financial markets has worried investors and led to a sell-off in bond markets that hit the debt of more vulnerable southern European countries harder than their northern neighbours.
“Our commitment is stronger than any specific instrument,” said Schnabel, the ECB executive who oversees market operations and is one of the most influential voices on its board. “Our commitment to the euro is our anti-fragmentation tool. This commitment has no limits. And our track record of stepping in when needed backs up this commitment.”
Schnabel indicated the ECB was getting closer to the point where it would intervene in bond markets, saying “some borrowers have seen significantly larger changes in financing conditions than others since the start of the year”.
“Such changes in financing conditions may constitute an impairment in the transmission of monetary policy that requires close monitoring,” she said.
However, she gave little new detail on what the ECB was considering in response. “We will react to new emergencies with existing and potentially new tools,” she said. “These tools might again look different, with different conditions, duration and safeguards to remain firmly within our mandate.”
Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, wrote on Twitter that Schnabel had sent a “strong signal” and he guessed “a new ECB backstop is coming”. But Oliver Rakau, an economist at Oxford Economics, wrote on Twitter that a lack of detail in Schnabel’s speech meant “markets won’t care much”.
Even without a new scheme, analysts estimate the ECB already has an additional €200bn to spend on the purchasing of stressed government debt from bringing forward some reinvestments of maturing sovereign assets by up to a year. Schnabel reiterated that such reinvestments “can be adjusted flexibly across time, asset classes and jurisdictions”.
The gap between Italian and German borrowing costs — the so-called spread — has widened to 2.4 percentage points, double last year’s level and up from around 2 percentage points before last week’s ECB meeting.
Further “fragmentation” in member states’ borrowing costs would mark a return to the days before the ECB began buying bonds in 2014 — a time when the threat of a debt crisis in weaker economies risked triggering a break-up of the currency area.
But most ECB governing council members think there is no point announcing a new instrument to tackle this risk until it materialises, because it could be blocked by the ECB’s own lawyers for not being “proportionate” or attract a challenge in Germany’s constitutional court.
“How we ultimately react to risks of fragmentation will firmly depend on the situation we are facing,” Schnabel said, adding: “This commitment can be put into practice within a very short period of time if we conclude that policy transmission is at risk.”
However, she said the chances of another debt crisis had been reduced by governments extending the maturity of their bonds to lock in low rates.
The public finances of weaker countries have also been boosted by €800bn of grants and cheap loans under the EU’s recovery plan, she said, adding that the ECB expects the impact of high inflation on nominal growth to keep reducing debt as a proportion of gross domestic product for all eurozone countries.
Closing Stock Market SummaryThe stock market tossed and turned today, but it was really the interest rate markets that called the shots -- and those markets were more foe than friend.
The 2-yr note yield settled the session up 16 basis points at 3.43% and the 10-yr note yield settled the session up 12 basis points at 3.48%. Meanwhile, the fed funds futures market upped its rate-hike game, pricing in the probability of more aggressive policy moves by the FOMC at upcoming meetings, including the June meeting which will culminate with the release of a new policy directive and updated economic and interest rate projections on Wednesday.
Briefly, the CME's Fed Watch Tool shows a 96.6% probability of a 75-basis point rate hike on Wednesday (up from 3.9% a week ago), a 95.8% probability of another 75-basis point rate hike in July (up from 0.4% a week ago), and a 97.0% probability of another 50-basis point rate hike in September.
If this course is followed by the FOMC, the target range for the fed funds rate will be 2.75-3.00% after the September meeting. A week ago, the fed funds futures market assigned only a 0.2% probability to the target range being that high after the September meeting.
Market participants looked at the rapid pace of change in Treasury yields and fed funds futures with some trepidation, worrying that the higher rates will lead to a marked slowdown in economic growth -- or possibly a recession -- that will lead to a marked downturn in earnings growth.
Consequently, rebound efforts today lacked conviction. The major indices all hit new 52-week lows at one point today. The S&P 500 for its part flirted with a break of the 3700 mark. It stopped short at 3705.68 where it found some buying interest that repaired a small part of today's damage.
Things would have been worse if not for the outperformance of the information technology sector (+0.6%), which is the market's most heavily-weighted sector. It was helped by some pleasing earnings results and guidance from Oracle (ORCL 70.78, +6.73, +10.5%) and relative strength in the semiconductor stocks. The Philadelphia Semiconductor Index gained 0.6%.
The only other sector that eked out a win was the energy sector (+0.1%), but that was a hollow victory considering it was up as much as 3.2% earlier in the day.
The energy sector pulled back intraday along with oil prices ($118.50, -2.43, -2.0%), which had edged above $123.00/bbl earlier in the session. Meanwhile, natural gas futures ($7.29/mmbtu, -1.32, -15.3%) were down big all day, getting squeezed by excess supply concerns following a report from Freeport LNG that a fire last week at a Texas facility interrupted the transfer of LNG from storage tanks to dock facilities. Freeport LNG does not expect the plant to return to full operations until late 2022.
Separately, the Dow Jones Transportation Average (+2.1%) had a standout day, not so much because of the drop in oil prices, but because of a standout performance by FedEx (FDX 229.95, +28.97, +14.4%), which rallied after announcing three, new independent directors and a 53% increase in its quarterly dividend to $1.15 per common share.
The main laggards of note today were the utilities (-2.6%), consumer staples (-1.3%), health care (-1.1%), real estate (-1.0%), and financial (-0.9%) sectors. These sectors sport some of the highest dividend yields, but with yields rising as sharply as they have in risk-free Treasuries, they presumably saw some defections from income-oriented investors.
The May PPI report was released before the open. It was not as bad as feared, but it still wasn't good with total PPI up 10.8% year-over-year and core PPI, which excludes food and energy, up 8.3%.
Reviewing today's economic data:
- The May NFIB Small Business Optimism Index checked in at 93.1 versus 93.2 in April.
- The PPI for final demand increased 0.8% month-over-month in May (consensus 0.8%) following a downwardly revised 0.2% increase (from 0.5%) in April. The index for final demand, less foods and energy, rose 0.5% ( consensus 0.6%) following a downwardly revised 0.2% increase (from 0.4%) in April. On a year-over-year basis, the PPI for final demand was up 10.8%, versus 10.9% in April, and the index for final demand, less foods and energy, was up 8.3%, versus 8.6% in April.
- The key takeaway from the report is the year-over-year moderation seen for both PPI for final demand and the index for final demand, less foods and energy. That is supportive of the peak inflation narrative, although the shadow of the disappointing May CPI report, and the bump seen in energy costs this month, should mitigate some of the enthusiasm for today's report.
Looking ahead, market participants will receive the weekly mortgage applications report (7:00 a.m. ET), the May Retail Sales Report (8:30 ET), May Import-Export Price Index (8:30 a.m. ET), June Empire State Manufacturing Survey (8:30 a.m. ET), April Business Inventories (10:00 a.m. ET), June NAHB Housing Market Index (10:00 a.m. ET), FOMC Rate Decision (2:00 p.m. ET), and April Net Long-Term TIC Flows (4:00 p.m. ET) on Wednesday. In addition, Fed Chair Powell will hold his press conference at 2:30 p.m. ET.
- Dow Jones Industrial Average: -16.5% YTD
- S&P 400: -19.6% YTD
- S&P 500: -21.6% YTD
- Russell 2000: -23.9% YTD
- Nasdaq Composite: -30.8% YTD