>>> What to look at today - 19th of October 2022

Stocks were mixed in Asia and US equity futures climbed as traders assessed prospects for earnings growth against a backdrop of rising interest rates. An Asia Pacific share gauge fluctuated, with stocks rising in Japan and South Korea but falling in Hong Kong. US equity futures signaled further gains after several positive results Tuesday, including from Netflix Inc. which reported a surge in subscribers. Treasury yields held near multi-year highs before the publication of US housing data for September and the Fed’s Beige Book. The yield on the 10-year hit 4.02%. The dollar was steady, while the pound rose against most Group-of-10 peers ahead of the first inflation data to print in wake of the UK government’s fiscal fiasco and as the nation backs a new Chancellor. In Japan, the authorities continued their jawboning of the yen, with Finance Minister Shunichi Suzuki saying he is increasing the frequency of monitoring foreign-exchange markets. The currency hovered at around 149 per dollar. Upbeat company results, cheaper valuations and UK policy reversals have helped buoy risk appetite. The sentiment on stocks and global growth among fund managers surveyed by Bank of America Corp. shows full capitulation, opening the way for equities to bottom in the first half of 2023. Upbeat company results, cheaper valuations and UK policy reversals have helped buoy risk appetite. The sentiment on stocks and global growth among fund managers surveyed by Bank of America Corp. shows full capitulation, opening the way for equities to bottom in the first half of 2023. US After Hours  NFLX +14.4% on strong Q3 earnings and Q4 net adds guidance; ISRG +11% on earnings; UAL +7.2% on earnings, ADBE +3.6% on guidance; OLPX -39.3% on weak guidance

Nikkei +0.43% Hang Seng -1.73% CSI -1.52% Shanghai -1.15% Shenzen -1.10%

Eur$ 0.9845 CNH 7.2300 CNY 7.2164 JPY 149.19 GBP 1.1336 CHF 0.9949 RUB 61.6212 TRY 18.5814 WTI$ 83.73 +1.10% Gold 1,649.2 -0.18% BTC 19,302 -0.33% ETH 1,305.12 -0.70%

S&P +0.63% Nasdaq +0.91% EuroStoxx +0.69% FTSE +0.43% Dax +0.55% SMI -0.09%

Macro :
- Spain Edges Forward With Framework Rules for Green Hydrogen Hub
- OPEC+ Says Growing Risk of Global Recession Justifies Oil Cuts
- Citi Says US Stocks Pricing Recession More Than Any Other Asset
- Goldman Overweights Defensives and Shuns Cyclicals in US Stocks

Keep an eye on :
- ABDN LN : Property Funds Start Selling Assets to Help Stricken UK Pensions
- AFKS RM : Sistema Buying Stake in Melon Fashion Group for 15.8b Rubles
- ALO FP : Alstom Wins ~€300M Train Services Deal in UK
- ASML NA : ASML to Update on Business Plan, Buybacks on Nov. 11
- ASML NA : ASML Sales Forecast May Beat Estimates as Chip Demand Picks Up
- AZN LN : AstraZeneca’s Evusheld Gets Canada Approval for Covid Treatment
- BAR BB : Barco 3Q Revenue Beats Estimates
- BG AV : Bawag Turns to 3Q Net Loss on Linz Swaps, Lifts Revenue Goal (1)
- BMW GY : BMW to Invest 10b Yuan to Expand China Battery Plant: GT
- IAG LN : BA Set to Avoid Pilots’ Strike After Union Agrees on Deal: FT
- CO FP : Casino Group: EU600m Proceeds From Disposal of GreenYellow
- COPN SW : Cosmo Granted FDA Orphan Drug Status for Rifamycin
- ELISA FH : Elisa 3Q Comparable EPS Beats Estimates
- ENTRA NO : Entra 3Q Rental Income Meets Estimates
- FINGB SS : Fingerprint Cards 3Q Oper Loss SEK59.8M Vs. Profit SEK10.8M Y/y
- FTK GY : flatexDEGIRO 3Q Revenue Beats Estimates
- FDR SM : Fluidra Cuts FY Sales Forecast, Misses Estimates
- GTT FP : GTT Gets 2 Orders for Tank Design of 3 New LNG Carriers
- SHBA SS : Sweden’s Handelsbanken Posts Record Profit on Interest Income
- HOLN SW : Holcim's Reputation Unlikely to See Major Dent From Fines: React
- DLEKG IT : Ithaca Energy to Help Challenged London IPO Market: ECM Watch
- TKWY NA : Just Eat Takeaway 3Q Orders Misses Estimates
- EGL PL : Mota-Engil CEO Sees Order Book Reaching EU13b-EU14b in 2022
- NESN SW : Nestle FY Organic Revenue Forecast Misses Estimates
- NESN SW : Starbucks to Sell Seattle’s Best Coffee Brand to Nestlé
- NFLX US : *NETFLIX JUMPS 10% AFTER 3Q SUBSCRIBERS BEAT EXPECTATIONS
- RNO FP : Nissan Rises As Automaker Nears Deal for Renault to Cut Stake
- RBRZEW DC : Royal Unibrew Margin Tested as Clients Want Cheap Drinks: React
- RWE GY : RWE Reactor Will Halt in January to be Able to Run Until Spring
- SAN SM : Santander, Domestic Peer €19 Billion Loan-Loss Split a 3Q Focus
- SRT GY : Sartorius 3Q Sales Matches Estimates
- DIM FP : Sartorius Stedim Biotech Sees FY Revenue Low End of +15% to +19%
- TKA AV : Telekom Austria 3Q Revenue Beats Estimates
- TIT IM : Vivendi Is Said to Favor Ousting Telecom Italia Chairman Rossi
- UN01 GY : Germany Removes Plans for Nuclear-Plant Operator Incentive Pay
- VIRP FP : Virbac 3Q Revenue Beats Estimates
- VIV FP : *VIVENDI SAID TO FAVOR OUSTING TELECOM ITALIA CHAIRMAN ROSSI
- VGM NO : Vow Green Metals, Elkem to Cooperate on Biocarbon Development
- XBRANE SS :r Xbrane Biopharma Offers SEK150 million Shares

>>> Europe : Brokers Upgrades & Downgrades - 19th of October 202

>>> Up
* Close Brothers Raised to Outperform at KBW; PT 1,150 pence
* Continental Resources Raised to Equal-Weight at Morgan Stanley
* Covestro Raised to Buy at Baader Helvea; PT 41 euros
* Efecte Raised to Buy at Inderes; PT 10 euros
* Fuchs Petrolub Raised to Buy at Baader Helvea; PT 37 euros
* Gofore Raised to Accumulate at Inderes; PT 25 euros
* ISS Raised to Neutral at Goldman; PT 147 kroner
* K+S Raised to Buy at Baader Helvea; PT 27 euros
* Lockheed Raised to Outperform at Baird; PT $513
* Marston's Raised to Hold at HSBC; PT 40 pence
* Netflix Raised to Outperform at KGI Securities; PT $330
* Veolia Raised to Overweight at Morgan Stanley
* Vow ASA Raised to Buy at DNB Markets; PT 21 kroner

>>> Down
* Almirall Cut to Equal-Weight at Morgan Stanley; PT 12.50 euros
* Atlantic Sapphire ASA Cut to Hold at Arctic Securities
* CPH Chemie & Papier Cut to Add at Baader Helvea
* EMS-Chemie Cut to Reduce at Baader Helvea; PT 575 Swiss francs
* Flutter Cut to Equal-Weight at Barclays; PT 11,000 pence
* H&R Cut to Reduce at Baader Helvea; PT 5 euros
* NatWest Cut to Market Perform at KBW; PT 280 pence
* Provident Cut to Underperform at KBW; PT 145 pence
* Royal Unibrew Cut to Hold at Nordea
* Sotkamo Silver Cut to Sell at Inderes; PT 0.55 kronor
* TF Bank Cut to Hold at ABG; PT 175 kronor

>>> Initiation
* Allgeier Reinstated Outperform at Oddo BHF; PT 40 euros
* Ence Rated New Hold at Jefferies; PT 3.75 euros
* Fresenius Medical Reinstated Equal-Weight at Morgan Stanley

>>> Call
* Almirall Cut at Morgan Stanley, Thesis Needs Time to Play Out
* Citi Says US Stocks Pricing Recession More Than Any Other Asset
* Frasers Group Upgraded at RBC on Resilience During a Downturn
* Goldman Overweights Defensives and Shuns Cyclicals in US Stocks
* Veolia Risks More Than Priced In, Morgan Stanley Upgrades

WSJ : Goldman Shuffle Aims to Reduce Reliance on M&A

Goldman Shuffle Aims to Reduce Reliance on M&A
Overhaul is meant to make firm less dependent on boom-and-bust Wall Street businesses; investment-banking revenue fell 57%

Goldman Sachs Group Inc. GS 2.33% is so dependent on its investment bank that a slump in deal making sent third-quarter profit down 43%—by far the steepest slide among its big-bank peers.

A broad restructuring announced Tuesday is meant to change that: Goldman will fold investment banking and trading into one unit and merge asset and wealth management into another—giving it a higher profile at the same time.

For years, Goldman has wrestled with what it should be, and how it should buffer itself against the sort of volatility that cropped up in the third quarter, keeping deal makers on the sidelines and drying up the market for initial public offerings.

The restructuring, reported late Sunday by The Wall Street Journal, reflects Chief Executive David Solomon’s broader effort to shift Goldman’s focus away from the high-risk, high-reward Wall Street units that have long defined it and toward businesses that generate steady fees no matter the environment.

Mr. Solomon said that the new structure would strengthen the bank’s core businesses, diversify its products and services and allow it to “operate more efficiently as we drive higher, more durable returns.”

Investment banking and trading have long been Goldman’s power centers, and those units generate huge profits in times when markets reward risk-taking. But the businesses are prone to big swings in choppy markets. Goldman’s investment-banking revenue fell 57% in the third quarter; trading revenue rose 11%.

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Building out the firm’s wealth- and asset-management offerings is key to Mr. Solomon’s strategy to smooth out the bumps. Managing wealthy people’s money and overseeing funds for pensions and other deep-pocketed institutions is more profitable than other financial services, and it usually doesn’t put the firm’s balance sheet at risk.

Asset-management revenue fell 20% to $1.82 billion in the third quarter. Wealth-management revenue was flat at $1.63 billion.

The bank tapped Marc Nachmann, the firm’s co-head of trading, to run the combined business.

Mr. Nachmann joined Goldman’s investment-banking division in 1994. He later served as co-head of the financing group and then co-head of the whole division—the two posts Mr. Solomon held before his ascent to president. Mr. Solomon appointed him to help run the bank’s trading business in 2019.

Viewed internally as one of the firm’s most-skilled operating executives and a favorite of Mr. Solomon’s, Mr. Nachmann will now bring his talents to a third major business.

His new role will pose different challenges than his last two.

Goldman’s asset- and wealth-management businesses haven't been viewed as the firm’s core strengths, and have grown in recent years in part through a string of acquisitions. The firm’s senior executives have signaled they are open to more deals, bringing an element of complexity and operational risk.

At the same time, the firm is still working to translate its successes in investing its own balance sheet in private markets to investment funds that appeal to pensions and other outside clients. Earlier this year, Goldman said it aimed to bring in more than $10 billion in management fees by 2024, with at least $2 billion coming from so-called alternative investments such as private equity and credit.

The reshuffling marks a major shift for Marcus, Goldman’s consumer business. Goldman created Marcus several years ago, offering savings accounts and loans to the masses. Uptake has been slow: The unit’s revenue rose 95% in the third quarter to $744 million, but it accounted for just 6% of the bank’s total revenue and has yet to turn a profit.

The consumer business will be parceled out, with much of it folded into the new asset- and wealth-management unit. Under Mr. Nachmann’s direction, Goldman is planning to find new ways to deliver banking services to individuals through the firm’s wealth advisers and its workplace platform, which manages corporate employees’ investing and stock-planning services.

Some pieces of Marcus, such as its card partnerships with Apple Inc. AAPL 0.94% and General Motors Co. , will go into a third new unit called Platform Solutions. That unit will also house Goldman’s financial-technology platforms and specialty lender GreenSky. Stephanie Cohen, who is the current co-head of consumer and wealth management, will run the business.

Dan Dees and Jim Esposito, the current co-heads of investment banking, will run the new banking and trading operation alongside Ashok Varadhan, who currently is co-head of the trading business. Julian Salisbury, the co-head of asset management, will serve as the unit’s chief investment officer. Rich Friedman will continue to be the asset-management division’s chairman.

They will all report to Goldman President John Waldron.

Goldman’s new structure will more closely resemble that of big-bank peers such as JPMorgan Chase & Co. and Morgan Stanley, which have combined trading and investment-banking businesses.

Profit decreased at all of the big U.S. banks this quarter. While revenue fell at both Goldman and Morgan Stanley, it rose at JPMorgan, Citigroup, Bank of America and Wells Fargo & Co., all of which have closer ties to Main Street.

The majority of the banks—including Goldman—topped analysts’ expectations for both earnings and revenue. And while executives sounded a warning about where the economy could be headed, their results confirmed that, for now, individuals and businesses are still borrowing at a healthy rate.

Consumers increased their spending on credit cards, including on more discretionary items such as travel and leisure, though big-ticket loans such as mortgages and auto loans fell off a cliff.

Like everyone, the bank CEOs are parsing competing data about where the economy is headed next.

Mr. Solomon told analysts that the firm’s client companies would like to see more economic certainty before committing to longer-term plans.

“The world is fragile at the moment,” he said, citing high inflation and energy-price shocks. “It’s uncertain, and we’re operating through that lens.”

FT :New European Super League boss eyes kick-off in 3 years with different forma

New European Super League boss eyes kick-off in 3 years with different format
Contentious breakaway football competition plans relaunch after collapse of original project

The new boss of the failed European Super League expects it to relaunch within three years and has promised to consider all options for its format after the original project collapsed in the face of widespread anger among fans, clubs and existing leagues.

Despite falling apart within days of launch in April last year, the league has continued to operate as a corporate entity backed by three remaining member clubs: Real Madrid, Barcelona and Juventus.

A22 Sports Management, a company representing the Super League clubs, is planning to revive the competition and has appointed Bernd Reichart, a German media executive, as its new chief executive. His first job will be to open an “active and extended dialogue” across the game, the company said, with the aim of creating a new “sustainable sporting model” for European football.

“We want to reach out to stakeholders in the European football community and broaden this vision. Even fans will have a lot of sympathy for the idea,” Reichart told the FT. “It is a blank slate. Format will never be an obstacle.” 

Under the ESL’s original template, 12 elite clubs announced a breakaway competition to rival Uefa’s Champions League. The closed structure — with members guaranteed involvement regardless of their domestic league performance — drew sharp criticism from across football and helped precipitate its rapid unravelling.

The architects of the plan have long complained that European club competitions are badly run, with too many matches that fail to engage audiences. Their original aim was to increase the number of games between top clubs but they now acknowledge that the model must change if the ESL is to succeed.

“There is a reassessment. There is a clearly stated move towards an open format and that permanent membership is off the table”, Reichart told the FT. “We want to see whether or not there is broader consensus about the problems facing European football.”

But resistance to the idea seems as entrenched as ever with Uefa, the domestic leagues and governing bodies, and the European Club Association — a lobby group of elite clubs — all firmly opposed.

Reichart, a former chief executive of RTL Deutschland, said he was optimistic that the barriers to a new contest would be overcome and that a launch in 2024-25 was a “reasonable” expectation.

The three ESL clubs are involved in legal action against Uefa that accuses European football’s governing body of operating a monopoly. The case is currently with the European Court of Justice. An initial recommendation is due in December and a formal ruling expected in the spring.

“If fundamental change is to come, we want to be prepared,” said Reichart.

The presidents of the three ESL clubs have embarked on an outreach campaign, striking a conciliatory tone in a bid to build support for the fight with Uefa. Florentino Perez, president of Real Madrid, said in a recent speech that football was “sick” and “losing its position as the world’s leading global sport”. 

Uefa has previously described the ESL project as a “danger to European football”.

FT : Giorgia Meloni faces economic storm as she prepares to take helm in Italy

Giorgia Meloni faces economic storm as she prepares to take helm in Italy
Likely new prime minister poised to take power as recession looms and high energy prices hit businesses and households

Until midsummer, Italian ceramics company Saxa Gres was on a high. It had record first-half sales of €50mn — up from €43mn for all of 2021 — as demand for its cobblestones and faux stone paving slabs surged in the wake of the post-coronavirus construction recovery.

But in July, Francesco Borgomeo, the company’s president, shut down its three kilns and furloughed 500 employees as soaring gas prices made production economically unviable. “I had no other option,” he said. “I had to protect the company. It is impossible to produce like this. I am waiting for the storm to pass and then we will reopen.”

Saxa Gres’s woes are symptomatic of the deepening distress among Italian manufacturers in energy-intensive industries such as ceramics, paper, glass and metal, many of which have also slowed or suspended production. Their woes highlight the daunting task confronting Italy’s prime minister in waiting Giorgia Meloni as she prepares to lead the country’s most rightwing government since the second world war.

The former teenage neo-fascist activist is poised to replace incumbent prime minister Mario Draghi, a former European Central Bank president, after her rightwing bloc emerged victorious in last month’s elections.

President Sergio Mattarella is expected to formally ask her to take the job, and form a government in the coming days, as Italy faces a looming recession, with skyrocketing energy prices eroding corporate profits and squeezing household incomes.

Meloni, and whomever she recruits as finance minister, will have the challenge of maintaining the stability of Italy’s public finances and keeping public debt — currently 150 per cent of GDP, the highest of any major eurozone economy — on a downward trajectory, even as Italians clamour for relief from spiralling costs.

“The new government gets in at a bad time,” said Lucrezia Reichlin, an economics professor at London Business School. “There are lots of clouds on the horizon and not a lot to be optimistic about.”

The IMF warned last week that Italy is heading for recession, projecting that its economy would contract 0.2 per cent next year. The Bank of Italy has forecast marginal growth in 2023 of 0.3 per cent with inflation of 6 per cent, but warned of a potential contraction of 1.5 per cent and inflation of 9 per cent if Russia cut all energy supplies to Europe.

Even under current conditions, some banks are already forecasting a more severe recession for Italy, which depends on gas for around 50 per cent of its electricity generation.

“It’s going to be extremely tough,” said Lorenzo Codogno, former director-general of the Italian treasury department. “The country is going through a substantial slowdown — probably recession — and there is a massive squeeze in incomes due to the cost of living crisis.”

Meloni’s Brothers of Italy party, which until now has been in opposition since its formation a decade ago, has few obvious finance minister candidates to steer Italy though the turbulence.

 Instead she had been seeking a respected technocrat to reassure markets — and the ECB — that Italy’s public finances will be in competent hands. But so far those Meloni has tried to recruit, such as ECB director Fabio Panetta, have been reluctant.

Speculation is mounting that she will turn instead to Giancarlo Giorgetti, a senior member of Matteo Salvini’s populist League who served as economic development minister in Draghi’s government and is seen as one of the party’s more moderate, pro-Europe figures.

Meloni said last week she considered Giorgetti an “excellent” person for the job and he has indicated a willingness to take it if tapped. Whoever gets the portfolio will be in for a tough time. “It’s a very hot potato,” Codogno said.

Prior to September’s election, Meloni — who once slammed “big financial speculators” that she said wanted to turn Italians into “slaves”, repeatedly emphasised the importance of fiscal prudence as she sought to signal her reliability to Italian bond investors

Since her electoral victory, though, she has acknowledged the need to offer “concrete help” to families and businesses struggling with rising costs — among Italians’ top concerns, according to opinion polls.

Ludovico Sapio, European economist at Barclays, said the new government would have to “strike a balance between prioritising growth and prioritising fiscal prudence” as it weighed up whether to extend measures adopted by the Draghi government to shield consumers from rising energy prices or to fulfil election campaign promises of tax cuts.

“Given the circumstances, an extension of . . . the energy-mitigating measures would be welcome, but it doesn’t seem that Italy can afford a package of the size that we are seeing in the UK and Germany,” Sapio said. “They will have to make a political choice not to include measures that could be seen as controversial or fiscally irresponsible.”

Italy’s options are complicated by the efforts of central banks across the world to combat inflation.

“Monetary policy has made markets hypersensitive to the fiscal space and debt sustainability concerns,” Sapio said. “It’s natural for markets to get concerned about the sustainability profile, or credit risk, for countries with high debt.”

Codogno said raising money for any substantial economic support for struggling households and enterprises will prove challenging unless the EU is willing to fund such measures with common borrowing, similar to its Covid-recovery fund, of which Italy is due to be the largest recipient.

Ceramics company chief Borgomeo is also looking to Brussels for relief, hopeful the EU will finally agree a price cap on natural gas. Without joint EU action, he warned, Italy would come to a standstill.

“If they don’t cap gas prices, especially in Italy, every activity will stop,” he said. “There will be a lockdown for energy. It will be social and economic disaster.”

FT : Rupert Murdoch faces dubious investors in bid to reunite empire

Rupert Murdoch faces dubious investors in bid to reunite empire
Merger of Fox and News Corp would build scale but ‘raises more questions than answers’

Rupert Murdoch, at age 91, appears to finally be putting the pieces in place for his succession. The billionaire has asked the boards of News Corp and Fox to consider combining forces after nearly a decade apart, stitching back together the remains of his empire.

But investors are sceptical of the strategic rationale behind reuniting the companies, with some shareholders deriding the move as “family drama” and longtime Murdoch-watchers scratching their heads over the wider agenda.

Several News Corp shareholders told the Financial Times they are unconvinced that a merger is the best option, or even a positive one, and would vote against the deal unless it assigned a substantial premium to the company’s share price.

Four of these investors pointed to reputational and legal risks of being under the same roof as Fox News, the cable channel that faces two multibillion-dollar lawsuits over its anchors’ claims that the 2020 US election was rigged.

“People don’t really want to own the Fox News business, even though it’s a fantastic asset in terms of cash flow. So that limits the ability to fold [Fox] into a bigger organisation,” said a shareholder with 2 per cent stakes in Fox and News Corp. “We would definitely prefer to have these conglomerates break apart and simplify, [rather] than be put together.”

Another News Corp investor put it more plainly: “Fox News is kind of toxic and that asset should be ring fenced.”

Bank of America analyst Jessica Reif Ehrlich said the proposed merger “raises more questions than answers”.

The Murdoch camp’s pitch to investors is simple: in today’s cut-throat media landscape, bigger is better for these companies which, after a round of consolidation, are tiny compared to the conglomerates that dominate the entertainment industry.

But the chief motivation for the merger is consolidating power under Lachlan Murdoch, Rupert’s elder son and the Fox chief executive, as Rupert’s successor, according to four people close to the situation.

“You should watch Succession. I’m not joking. But I’m kind of joking”, said one longtime adviser to the Murdochs, referring to the HBO television show about a fictional media empire. “There’s nothing strategically, from an industry perspective, where I’m like, ‘Oh my gosh, these companies come together, it’s now going to be a much better company.’ It’s really about the family, this is what works for them. The scale is irrelevant.”

If the deal goes through, Lachlan Murdoch would most likely lead the new entity as chair, said people familiar with the matter, after a decades-long succession battle among Rupert’s children. Two people with direct knowledge of the talks, which have gone on for months, said that Lachlan is involved in the negotiations, including holding conference calls from Australia with advisers in New York.

Robert Thomson, chief executive of News Corp, is “like a son” to Rupert, and would likely continue running the news operation, they said.

James Murdoch, Rupert’s younger son who was previously viewed as a contender to take over the empire, declined to comment, as did a representative for Rupert and Lachlan Murdoch. Thomson had no comment beyond News Corp’s announcement that it was exploring a merger with Fox.

“The goal is to hand over everything to Lachlan in an orderly way,” said one person familiar with the matter. “Rupert is 91, time is of the essence. They need to get this sorted now.”

But while Murdoch and his family trust control roughly 40 per cent of voting shares, they need a majority of independent shareholders to vote in favour of the proposal, said people familiar with the matter. “It’s not at all a slam dunk to get the voter base to go along with this,” said a top-10 shareholder in News Corp.

Arm wrestling
Murdoch has proposed combining the company in an all-stock deal. Shareholders of Fox and News Corp want the “exchange ratio” of their shares to be given a premium above their current stock prices.

Mario Gabelli, a billionaire portfolio manager and Fox shareholder, expects “arm wrestling” between the sides over the next few months, but says that ultimately “the burden will be on the Murdochs to point out that [the deal] will add significant value to the combined company”.

Investors in Fox and News Corp view their stock market prices as chronically undervalued. They speak of the so-called Murdoch discount to shares due to the outsized influence of the family and its whims.

Pointing to the company’s spending on corporate expenses and the confusion around its hodgepodge of assets, one shareholder argues that News Corp is “basically run like the Murdoch’s family toy”.

“The Murdoch discount is very real in this case,” the person said, noting that stock analysts struggle to cover the company because it straddles such different businesses. “Most investors have said, ‘Yeah, these are good assets, but why deal with the headache?’”

News Corp shareholders believe that the sum of News Corp’s parts — which includes Dow Jones, book publisher HarperCollins and a majority stake in the Australian property listings group REA — is worth less on the stock market than the individual assets. Some shareholders want News Corp to split REA from the publishing side.

They also argue that getting involved with Fox News, America’s most watched and most controversial television channel, is not something they signed up for. “I know a number of people who won’t own Fox stock,” said a shareholder of Fox. “That is potentially challenging if you’re a News Corp shareholder, now you’re exposed to that issue through Fox.”

Despite these concerns, multiple investors and analysts say that the Murdochs have a strong record of delivering returns and making shrewd acquisitions, pointing to the transformative sale of most of Fox’s assets for $71bn to Disney, a top-of-the-market deal.

That history “provides increased credibility”, said Bank of America’s Ehrlich, who estimates that the Fox-News Corp deal could generate more than $500mn in savings.

But since emerging from the Disney-Fox deal as a much slimmer entity, Fox’s value has shrunk by a third. MoffettNathanson analysts argue there is a “wide valuation discount” as Fox’s stock trades at a multiple of less than four times its earnings before interest, tax, depreciation and amortisation and after making certain adjustments.

‘Domino effect’
Bankers advising on the deal point to opportunities for each company’s news operations to collaborate, and ways to delve deeper into sports betting, an area that excites Lachlan Murdoch. Banding together could also help keep costs down as the US faces a potential recession next year.

But investors, analysts and even people close to the Murdochs suspect — or perhaps hope — there is more to the transaction than simply “cost synergies” or subscription bundling opportunities.

“There is usually a domino effect when KRM [Keith Rupert Murdoch] does something,” said a longtime friend to the family. “You just have to work out what the first domino is.”

“Can the Murdochs be using this announcement to seek outside bids for specific assets? We sure hope so,” analysts at MoffettNathanson said. “Our initial reaction to this combination leaves us scratching our head.”

As long as Rupert Murdoch is alive, he effectively controls the family trust due to its voting structure. But when the next generation takes over, the power to determine the trust’s position is divided equally between Murdoch’s four eldest children, while his youngest two daughters — Grace, 21, and Chloe, 19 — are also beneficiaries.

For any decision to be taken, at least two or three elder siblings will need to agree. Alliances among the siblings have shifted dramatically over the years, and since the Disney deal James has broken away from the family business. He resigned from the News Corp board in 2020, citing disagreements over “certain editorial content”, notably denial of climate change in some Australian outlets.

People close to the family say that James Murdoch may still try to influence the future direction of the companies, although his options are limited while Rupert still controls the trust.

The Fox-News Corp situation draws an obvious parallel to that of rivals Viacom and CBS. They are both storied media empires which were split apart, only to be brought back together many years later. Viacom and CBS merged via an all-stock deal in 2019, forming a combined group that was renamed Paramount.

If Paramount offers any instruction to the future, shareholders are correct to worry. The combined group is worth $13bn today, less than half of the value of the separate groups before the deal.

FT : The ‘Merge’ did not fix Ethereum

The ‘Merge’ did not fix Ethereum
Switch in the way the blockchain works is leading to increasing centralisation of the network

The Ethereum blockchain that facilitates much of the crypto world last month finally accomplished the long-promised and oft-delayed “Merge”, a technical switch in the way it works.

The Ethereum blockchain is one of the world’s most widely used digital ledgers, and is the main platform for Web3, non-fungible tokens, and decentralised finance. While the Merge is unequivocally good news for the environment, it brings the Ethereum blockchain’s other problems into even starker relief.

Rather than relying on centralised intermediaries such as a bank to approve transactions, blockchains rely on what is known as a “consensus mechanism”.

Before the Merge, Ethereum used the “proof-of-work” consensus mechanism. This involves so-called “miners” using enormous amounts of electricity to power computers to make repeated guesses of the number that will allow them to add a block of transactions to the blockchain. The winning miners are then compensated with cryptocurrency for their work.

The bitcoin blockchain still does it this way. Verification of bitcoin transactions uses more energy than entire countries like Norway; in areas where lots of bitcoin mining occurs, local populations have suffered from rising energy costs and noise pollution.

Ethereum’s shift to a “proof-of-stake” system avoids these environmental costs. Ethereum now uses an algorithm that randomly selects someone to create a new block to add to the blockchain. The party is chosen from those who have staked their ether (the Ethereum blockchain’s native coin) for the chance to do the work and be compensated for it. The more ether someone stakes, the more likely they are to be chosen to create the new block.

This creates incentives to acquire even more ether, and it seems reasonable to predict that any blockchain that relies on proof-of-stake will start to concentrate the ability to process transactions in just a few hands. Staking is already a highly centralised business involving some of the industry’s largest companies, such as Coinbase, according to data provider Nansen. More centralisation seems inevitable.

Remember that the whole point of having a blockchain with a consensus mechanism is to avoid having to rely on centralised intermediaries to verify transactions. Without meaningful decentralisation, one has to wonder if all the other problems associated with Ethereum are worth it.

For example, the Ethereum blockchain is notorious for congestion at peak times, which manifests in slower transaction processing times and fluctuating transaction fees (which are known as “gas fees”). At peak times, gas fees can be prohibitive for users trying to complete smaller transactions (in May 2022, average daily gas fees reached nearly $200), but the Merge has not changed the way gas fees are calculated or charged.

Such congestion adds to another problem. Users can pay validators higher fees to have their order executed first within a block of transactions. This is a cost on users which benefits the bigger validators which will be chosen to create more blocks of transactions, and will therefore have more opportunities to pocket higher fees. A validator may even insert their own transaction ahead of others in order to profit from market movements, a practice known as MEV or “maximal extractable value”.

The Merge will also not make the blockchain more secure. Ethereum’s claims that it will do this assume that the Merge will increase decentralisation. But if the reverse is true, there are risks. A report commissioned by the US Defense Advanced Research Projects Agency found proof-of-stake blockchains can be successfully manipulated if the number of validators is too small.

The shift to proof-of-stake also increases the legal uncertainty around the status of ether. Prior to the Merge, US Senator Debbie Stabenow proposed a bill that lists ether as an example of a “digital commodity” falling outside of the Securities and Exchange Commission’s jurisdiction (in the US, securities are regulated by the SEC, whereas the Commodity Futures Trading Commission has oversight over the commodities markets).

However, now that stakers pool their ether together in the hope of being compensated from the Ethereum blockchain’s gas fees, a stronger case can be made that ether are securities and not commodities. The SEC might have something to say about Ethereum’s claims about its decentralisation and its benefits.

>>> Tuesday Evening Papers Summary

(US) Tuesday Evening Papers Summary

THE FINANCIAL TIMES
-President Joe Biden has ordered officials to prepare for more releases from the US Strategic Petroleum Reserve as he approved the sale of 15M barrels of oil in December and established a plan to replenish the dwindling emergency stockpile.
-Qatar’s energy minister has warned that while Europe should have sufficient gas for power and heating this winter, the tougher challenge will come in 2023 as reserves are depleted. Saad al-Kaabi said it would be “much worse next year” if there was a harsh winter, adding that the energy crisis could extend to the middle of the decade if President Vladimir Putin’s war in Ukraine continued and gas “does not start flowing back again” from Russia.
-Goldman Sachs said it was pulling back from its highly touted foray into retail banking to focus on its traditional strengths serving big corporations and wealthy investors as part of a sweeping reorganization under chief executive David Solomon.
-Pakistan will ask international lenders for billions of dollars’ worth of new loans to rebuild the country after calamitous floods uprooted 33M people and pushed its cash-strapped economy even closer to insolvency. Prime Minister Shehbaz Sharif said Islamabad was not trying to reschedule its external debt, worth about $130B, but it did need “huge sums of money” for “mega undertakings” such as rebuilding roads, bridges and other infrastructure damaged or washed away in a deluge scientists have linked to climate change.
-Amazon employees at a warehouse outside Albany, New York voted nearly two-to-one to reject the formation of a union, dashing hopes that a grassroots effort to organize workers would spread across the ecommerce giant’s facilities. Employees voted 406 to 206 against being represented by the worker-led Amazon Labour Union, labour officials said after tallying the votes on Tuesday.
-Netflix stemmed its subscriber losses in the third quarter, as popular programs including the fourth season of Stranger Things and Dahmer — Monster: The Jeffrey Dahmer Story helped it add 2.4M members. The result was more than double the number of subscribers Netflix had forecast, leaving it with 223M paying members at the end of the third quarter, up 2.6% from a year earlier. The company expects to reach 227M by the end of the current quarter, according to its earnings release on Tuesday.

INVESTOR’S BUSINESS DAILY
-The Federal Reserve won't pivot until the labor market shows signs of cracking. But once the job market appears to be rolling over, everything will change. As income growth fades, high inflation will be less likely to feed a wage-price spiral and more likely to cause consumers to retrench. The Federal Reserve's barrage of 75-basis-point rate hikes can only continue as long as monthly employment reports continue to show solid job gains. It's politically acceptable for the Fed to cool an overheated job market, but jumbo rate hikes won't fly when the job market has already lost steam.

USA TODAY
-President Joe Biden will announce Wednesday he’s releasing 15M barrels of oil from the nation’s emergency reserves, one of the few actions he can take before next month’s midterm elections to show voters he feels their pain at the pump. The move completes Biden’s March directive to release 180M barrels from the Strategic Petroleum Reserve, the largest sale in the reserve’s nearly 50-year history.
-More Americans are turning to buy now, pay later apps to afford everyday necessities, but an increasing share of consumers aren’t making payments on time, a trend likely to accelerate as the US economy inches closer to a recession. Traditional lenders, like banks and credit card companies, automatically dial back lending particularly to riskier borrowers when delinquencies inch up to limit future losses. But experts are divided on whether buy now, pay later firms will do the same based on whether they’re prioritizing user growth or profitability.

CAIXIN
-Chinese video game companies led by Tencent and NetEase are turning to global business expansion in search of fresh revenue sources as domestic growth plateaus and regulatory scrutiny tightens. They’re joining e-commerce platforms and online tutors as China’s internet businesses look beyond China for differing reasons. While weakening consumption at home is driving e-commerce platforms, video game developers are pushing out their business boundaries and creating more jobs abroad chiefly out of concerns over tightening domestic regulations.

THE NEW YORK POST
-Lee Zeldin has a shot at beating Kathy Hochul. Until recently, he was relatively unknown outside his Long Island congressional district, but he’s now on the cusp of playing David to Gov. Hochul’s Goliath. A series of surveys in recent weeks has showed the race tightening, and a big jolt came Tuesday when the Quinnipiac poll put him behind Gov. Hochul by just four points.
It’s a stunning development in a state where registered Democrats outnumber registered Republicans by 2-1 and no GOP candidate has won a statewide race in two decades. But independents favor Zeldin by 20 points, the poll finds, and it shows him getting 37% support in the city, double what recent GOP statewide candidates got. As a Republican, Zeldin has no chance of winning the state with less than 30% in the five boroughs. If the numbers in the Q poll are right, and if Zeldin can hold the city support and add to his leads in the suburbs and upstate, he will pull off a remarkable upset.
-The US housing market remains in “free fall” after a survey showed a “disastrous” decline in homebuilder confidence, a prominent economist warned on Tuesday. Homebuilder confidence plunged for the 10th consecutive month in October, falling to its lowest level since 2012, according to the National Association of Home Builders’ monthly survey. The latest downtick came as mortgage rates spiked to levels not seen since the Great Recession.

>>> US Close Dow +1,12% S&P +1,14% Nasdaq +0,90%


Closing Stock Market Summary

Today's trade was decidedly positive, building on yesterday's gains. The Dow, Nasdaq, and S&P 500 were up 2.2%, 2.8%, and 2.3%, respectively, at this morning's highs. The major averages took a sharp turn lower after the 10-yr Treasury note yield breached 4.00%. They recovered from session lows as selling eased up in the Treasury market and the S&P 500 found support at the 3,700 level.

The initial upside drive was partially fueled by better-than-expected earnings results from Dow components Goldman Sachs (GS 313.85, +7.14, +2.3%) and Johnson & Johnson (JNJ 166.01, -0.58, -0.4%), yet it was largely driven by a technically-oriented rebound effort that spurred short-covering activity and a fear of missing out on further gains. A BofA fund manager survey showing the largest cash holdings (6.3%) since April 2001 also helped fuel a contrarian trade.

The stock market lost some momentum and hit session lows as the 10-yr note yield reached 4.06% and the 2-yr note yield reached 4.48%. Stocks recovered as selling abated in the Treasury market and the 10-yr note yield ultimately settled at 4.00%. The 2-yr note yield settled at 4.44%. 

Equities took a second leg lower this afternoon as Apple (AAPL 143.75, +1.34, +0.9%) plunged following news it has lowered iPhone 14 Plus production, according to The Information. The major indices again recovered as Apple reclaimed some gains. 

The market showed impressive resilience today, maintaining a positive position even at session lows. 

A broad rally effort left all 11 S&P 500 sectors in positive territory. Industrials (+2.4%) held the top spot thanks to earnings-driven gains in Lockheed Martin (LMT 431.84, +34.53, +8.7%). Meanwhile, communication services (+0.5%) brought up the rear.

The advance-decline line favored advancers by a greater than 2-to-1 margin at the NYSE and roughly the same margin at the Nasdaq.

The PHLX Semiconductor Index (+0.4%) notably lagged the broader market today, held back in part by Intel (INTC 25.87, -0.55, -2.1%), which felt the pinch of a reduced valuation for the IPO of its Mobileye unit.

Energy complex futures made sizable downside moves this session. WTI crude oil futures fell 3.8% to $82.22/bbl and natural gas futures fell 4.3% to $5.73/mmbtu.

Ahead of Wednesday's open, Abbott Labs (ABT), Ally Financial (ALLY), ASML (ASML), Citizens Financial Group (CFG), Procter & Gamble (PG), Prologis (PLD), Travelers (TRV), Winnebago (WGO) headline the earnings reports.

Looking ahead to Wednesday, market participants will receive the following economic data:

  • 7:00 a.m. ET: Weekly MBA Mortgage Applications Index (prior -2.0%)
  • 8:30 a.m. ET: September Housing Starts (consensus 1.465 million; prior 1.575 million) and September Building Permits (consensus 1.550 million; prior 1.517 million)
  • 10:30 a.m. ET: Weekly EIA Crude Oil Inventories (prior +9.88 million)
  • 2:00 p.m. ET: October Fed Beige Book

Reviewing today's economic data:

  • Total industrial production increased 0.4% month-over-month in September (consensus 0.1%) following an upwardly revised 0.1% decline (from -0.2%) in August. The capacity utilization rate increased to 80.3% ( consensus 79.9%) from an upwardly revised 80.1% (from 80.0%) in August.
    • The key takeaway from the report is that the output of consumer goods decreased 0.6% at an annual rate in the third quarter, much slower than the rate of change of 3.1% in the second quarter.
  • October NAHB Housing Market Index came in at 38 (consensus 44) after a prior reading of 46

Dow Jones Industrial Average: -16.0% YTD
S&P Midcap 400: -17.6% YTD
S&P 500: -22.0% YTD
Russell 2000: -21.8% YTD
Nasdaq Composite: -31.1% YTD

>>> US After Hours Summary: NFLX +14.4% on strong Q3 earnings and Q4 net adds guidance; ISRG +11% on earnings; UAL +7.2% on earnings, ADBE +3.6% on guidance; OLPX -39.3% on weak guidance

After Hours Summary: NFLX +14.4% on strong Q3 earnings and Q4 net adds guidance; ISRG +11% on earnings; UAL +7.2% on earnings, ADBE +3.6% on guidance; OLPX -39.3% on weak guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: NFLX +14.4%, ISRG +11%, UAL +7.2%, ADBE +3.6% (guidance), JBHT +2.4%, OMC +1.6%, WTFC +0.8%, FHN +0.4%, HWC +0.1%

Companies trading higher in after hours in reaction to news: LBRT +4% (reinstates quarterly dividend), SPNE +3.8% (commercial launch of 7D FLASH), HP +2.3% (plans to return $100 mln through dividends; sets FY23 CapEx budget; provides Q4 guidance), COIN +1.7% (integration with Primer), BLNK +1.3% (expands capacity), VMEO +1% (reports September metrics), VICI +1% (partners with Canyon Ranch), GLPI +0.8% (appoints new COO and CFO), USO +0.2% (another 10-15 mln barrel release from Strategic Reserve), CHCO +0.2% (to acquire Citizen Commerce Bancshares)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: OLPX -39.3% (guidance), UCBI -3%, FNB -0.2%, TSE -0.1% (guidance and evaluation to reduce asset footprint)

Companies trading lower in after hours in reaction to news: PTCT -14.1% (updates on PIVOT-HD trial), DNLI -11.6% (to offer $250 mln of shares in public offering), BHVN -9.4% (commences public offering of 20.0 mln shares), LPI -4.8% (preliminary Q3 operating results), KAMN -0.1% (purchase agreement for a K-MAX helicopter)