Early premarket gappers
- Gapping up:
- SNOW +17.4%, ADSK +8.7%, NTAP +6%, GDRX +5%, CM +5%, AMWL +4.5%, TDOC +4.2%, ZTO +3.8%, FLXS +3.1%, WSM +2.6%, NXPI +2.5%, SBSW +2.3%, FRO +2.3%, ELY +2.1%, GFI +1.8%, GME +1.5%, BMRN +1.5%, AMZN +1.2%, DOOO +1%, ABBV +0.7%, LGND +0.6%, RIDE +0.5%
- Gapping down:
- SPLK -10.8%, VSCO -8.6%, CRM -6.3%, ZUO -5.7%, NVDA -3.7%, GES -1.2%, BOX -1.2%, CRGE -1%, PDSB -1%, SKIN -0.5%
Lars Windhorst pledges to repay €550mn to H2O in ‘weeks’
Controversial financier tells FT he will make large payment to troubled asset manager
Lars Windhorst has pledged to hand over more than €500mn to H2O Asset Management in a matter of weeks, which would clear a significant chunk of the controversial financier’s debts with the troubled investment firm.
Windhorst, a German entrepreneur with a chequered business record, is late repaying more than €1bn to H2O, an erstwhile star of the European asset management industry that is being probed by multiple regulators over its entanglements with the financier.
Windhorst told the Financial Times that his investment firm Tennor will soon repay hundreds of millions of euros after an upswing in the fortunes of its eclectic portfolio of businesses, which range from a lossmaking lingerie maker to an African farming company.
“Our diverse set of businesses across sectors and geographies have performed strongly in the first half 2022 and, as a result of that, we managed to increase liquid assets to over €500mn across the various group entities,” he said. “As the reduction of debt remains a priority, we will make payments of not less than €550mn in cash to H2O Asset Management in the coming weeks.”
If the repayment clears on schedule, it would pave the way for H2O to provide a first distribution to those with money trapped in its funds, which range from retail investors in France to South Korean asset managers.
Once a well-respected money manager that oversaw €30bn of assets, H2O has lurched from crisis to crisis since the FT exposed the scale of its outsized bet on Windhorst in 2019. The following year, the investment firm was forced to temporarily halt redemptions on its core funds after the French markets regulator raised concerns about its links to the financier. Two years later, investors’ money is still stuck in the so-called side pockets H2O set up to house €1.6bn of these hard-to-sell assets.
In a letter to investors last month, H2O revealed that Tennor had missed a January deadline to repay more than €1.1bn.
In lieu of any cash, H2O also disclosed that Windhorst handed over $106mn worth of convertible bonds linked to Gett, a taxi app start-up that was due to list via a special purpose acquisition company. The planned listing fell apart shortly afterwards due to the company’s substantial exposure to Russia, meaning H2O’s investors have so far received nothing from the arrangement.
Despite the setbacks, H2O told investors that it was “committed to enabling” their first reimbursements this year. When asked by the FT why it thought this was the case, it said: “We have understood loud and clear that it is of the utmost importance to our investors to secure repayment on some of the assets held in the side pockets in 2022.”
“This is not a guarantee but a strong and active commitment from H2O,” the asset manager added.
It is not the first time Windhorst has publicly pledged swift repayment.
One year ago, he told the FT that he expected to “pay down a major part of the H2O debt” by the end of 2021. Instead, H2O ended up writing down the value of its Windhorst-linked investments after a Dutch court briefly deemed Tennor to be insolvent.
Earlier, at the height of the coronavirus pandemic, the financier struck a deal to buy back these hard-to-sell assets from H2O at a discount. But the agreement fell apart amid regulatory scrutiny, which led to Germany’s financial watchdog BaFin filing a criminal complaint. Windhorst later claimed that the matter had been settled.
H2O is under investigation from France’s market regulator and the UK’s Financial Conduct Authority. In recently filed 2021 accounts, the firm revealed that it last year booked an £890,000 provision in relation to one of its regulatory probes.
The firm’s auditor Mazars warned that there was “material uncertainty” surrounding the size of the charge, however, while H2O also disclosed that it has not yet booked a provision in relation to an FCA probe for “alleged non-compliance” with several of the regulator’s principles.
H2O told the FT that while it was “not in a position at this stage to predict the investigations’ consequences”, it expects to continue as a going concern “based on current cash balance and reserves, the business forecast and the capital resources adequacy forecast”.
The asset manager has this year reaped gains from swashbuckling bets on the direction of government bonds and currencies. While outsized exposure to the Russian rouble badly knocked its €1.7bn flagship fund when the country’s president Vladimir Putin ordered an invasion of Ukraine in February, the currency’s rebound has seen it come back to a more than 12 per cent return year to date.
Hedge funds build biggest bet against Italian debt since 2008
Investors are worried about the fraught political situation and rising economic challenges
Hedge funds have lined up the biggest bet against Italian government bonds since the global financial crisis on rising concerns over political turmoil in Rome and the country’s dependence on Russian gas imports.
The total value of Italy’s bonds borrowed by investors to wager on a fall in prices hit its highest level since January 2008 this month, at more than €39bn, according to data from S&P Global Market Intelligence.
The rush by investors to wager against Italy comes as the country faces rising economic headwinds from the surge in European natural gas prices prompted by Russia’s supply cuts and a fraught political climate with elections looming in September.
“It’s the most exposed [country] in terms of what happens to gas prices, and the politics is challenging,” said Mark Dowding, chief investment officer at BlueBay Asset Management, which runs about $106bn in assets. He is shorting Italian 10-year bonds using derivatives known as futures.
The IMF warned last month that a Russian gas embargo would lead to an economic contraction of more than 5 per cent in Italy and three other countries, unless other nations shared their own supplies.
Italy is also considered by investors to be among the most vulnerable countries to the European Central Bank’s decision to unwind its stimulus programmes by raising interest rates and halting the bond purchases that have propped up the country’s vast debt market.
A period of relative political calm ushered in by Mario Draghi’s appointment as prime minister in February 2021 was shattered in July this year when the former ECB chief resigned and his national unity coalition administration unravelled.
Early elections are now set for September, with nationalist leader Giorgia Meloni considered the frontrunner to become the next prime minister. On Wednesday, Draghi called on parties competing in the elections to make good on Italy’s financial reform commitments.
Eurosceptic parties within the rightwing coalition, which could secure up to half of the vote on September 25, according to polls, have signalled that they could review the details of Italy’s €200bn EU-funded recovery plan and the other reforms such as a new competition law associated with it.
“Domestic credibility goes hand in hand with international credibility,” Draghi said.
Italian bonds have already sold off in recent weeks as investors respond to the rising uncertainty. The yield on Italy’s 10-year debt has risen to 3.7 per cent, pushing the gap, or “spread”, with Germany’s debt — a key risk barometer — to 2.3 percentage points from 1.37 percentage points at the start of the year.
One large investor in hedge funds said “Italy seems like it’s going to be the most vulnerable” country to worsening economic conditions, adding that such bets were now “widespread”, with many managers playing the spread between German and Italian bonds.
Michael Hintze, founder of hedge fund CQS, has been among those profiting from bets against Italy’s bonds earlier this year, according to documents seen by the Financial Times. CQS declined to comment.
Betting against Italian debt has previously been a highly lucrative trade for hedge funds because of long-running political uncertainty and fears over the €2.3tn in government bonds that the country has outstanding.
In 2018, as markets fretted about whether a coalition government would add to debt levels and loosen ties with the EU, hedge funds ramped up their bets to the highest level since the financial crisis, with Brevan Howard co-founder Alan Howard among those profiting. However, hedge funds’ bets, both in absolute terms and as a proportion of the total bond issuance, have now overtaken 2018 levels in a sign of where investors believe yields could go from here.
Some managers remain wary of the trade, saying that the ECB’s recently announced transmission protection instrument will limit upside to yields. The new tool was designed to keep borrowing costs in highly indebted eurozone countries from rising too far above core nations such as Germany.
“It seems to me [it’s] like playing a game of chicken with the ECB,” said Decio Nascimento, chief investment officer at hedge fund Norbury Partners, who is avoiding the trade.
However, BlueBay’s Dowding argues that the TPI is little deterrent to placing a bearish bet.
“[The ECB] can’t just buy Italy,” he said, adding that such a move would act as a signal that the central bank would provide support to countries lacking fiscal restraint.
- Aroundtown (AT1 TH) +2%
- Aroundtown 1H FFO I EU185.6M Vs. EU172.0M Y/y
- Vodafone (VODI TH) +1.7%
- Rio Tinto (RIO1 TH) +1.7%
- Equinor (DNQ TH) +1.1%
- BP (BPE5 TH) +1.1%
- Nemetschek (NEM TH) +1%
- TUI (TUI1 TH) +0.8%
- BNP Paribas (BNP TH) +0.8%
- Siemens Healthineers (SHL TH) +0.8%
- E.On (EOAN TH) +0.8%
- Uniper (UN01 TH) -2.4%
- Uniper Cut to Sell at Citi on Dilutive Stabilization Package
DAX:
- HelloFresh (HFG TH) +1.9%
MDAX:
- Aroundtown (AT1 TH) +2.9%
- Aroundtown 1H FFO I EU185.6M Vs. EU172.0M Y/y
- Nemetschek (NEM TH) +1%
- Encavis (ECV TH) +1%
- Uniper (UN01 TH) -2.4%
- KfW Discusses Increase in Uniper’s Credit Line: Reuters
SDAX:
- Deutsche PBB (PBB TH) +2%
- Deutz (DEZ TH) +1.8%
- SMA Solar (S92 TH) +1.1%
- ADTRAN Holdings Inc (QH9 TH) -2%
An Asian stock index rose on Thursday as China’s latest steps to shore up its economy steadied nerves in the anxious wait for a key speech by Federal Reserve Chair Jerome Powell at the Jackson Hole symposium. The regional gauge added about 0.5%, helped by gains in Japan. Morning trading in Hong Kong was scrapped due to a storm. US futures pushed higher in the wake of positive closes for the S&P 500 and Nasdaq 100. China stepped up stimulus with a further 1 trillion yuan ($146 billion) of measures for an economy stricken by property-sector oes, Covid-linked mobility curbs and some power shortages. Mainland shares made only modest progress, reflecting uncertainty about whether the efforts are sufficient. The worries ahead of Powell’s comments due Friday are centered on whether he will rebut expectations that slowing growth will temper US monetary tightening in the next phase of the campaign against high inflation. Treasuries trimmed a slide but the two-year yield remained in sight of 3.40%. A dollar gauge dipped. Crude oil added to a rally that could feed into renewed jitters about whether price pressures have peaked. Fed officials in the run-up to Jackson Hole have been clear they see more monetary tightening ahead, a message that’s eroded a bounce in stocks and bonds from mid-June troughs. The tension in markets is whether those assets will continue to head back toward the lows of the year. South Korea’s central bank raised borrowing costs and projected faster inflation. The won and bond yields advanced. The currency led an Asian baskettracked by Bloomberg. In Europe, natural gas prices have surged to fresh highs, intensifying an energy crisis that threatens the euro-area economy and hence the global outlook. US After Hours Summary: SNOW +18%, ADSK +6.5%, NTAP +6.4% higher on earnings; SPLK -9.9%, VSCO -7.6%, CRM -7.2%, NVDA -4.8% lower on earnings; TDOC +2.7% higher on WaPo report that AMZN plans to exit telehealth; ELY +4.6% to change its name
Nikkei +0,76% Hang Seng +1,50% CSI +0,16% Shanghai +0,39% Shenzen -0,61%
Eur$ 0,9994 CNH 6,8571 CNY 6.8512 JPY 136.68 GBP 1.1831 CHF 0.9641 RUB 60.2833 TRY 18.1558 WTI$ 95.18 +0.32% Gold 1,756.40 +0.30% BTC 21,585 -0.50% ETH 1,680.35 -0.18%
S&P +0.39% Nasdaq +0.38% EuroStoxx +0.19% FTSE +0.27% Dax +0.29% SMI
Macro :
- Hedge Fund Founder Och Sues Sculptor Over Compensation Fight
- UK Should Cut Energy Demand 10% to Soften Crisis, Charity Says
- Buying Puts Hasn’t Worked as Hedge. So Goldman Has a Better Idea
Keep an eye on :
- ACKB BB : Ackermans & Van Haaren to Get 7.7% Shareholding in AstriVax
- ALFEN NA : Alfen Boosts FY Revenue Forecast, Beats Estimates
- ALO FP : Alstom Says 55% of Rights Exercised in Favor of Div. in Shares
- AT1 GY : Aroundtown 1H FFO I EU185.6M Vs. EU172.0M Y/y
- BANB SW : Bachem 1H Ebitda Misses Estimates
- BALN SW : Baloise 1H Profit CHF287.1M Vs. CHF302.3M Y/y
- CAI AV : CA Immo Sees FY FFO I Above EU125M
- CLN SW : Clariant Places Green Bond in Amount of CHF175M
- DTE GY : T-Mobile Jumps as SpaceX Says ‘Increase Connectivity’ Coming
- DGI9 LN : Digital 9 Expects Premium Segment Admission on August 30
- ELK NO : Elkem Says Strike in Norway Called Off, Affected Plants Resuming
- ENI IM : ENI CEO Confirms to NOC Chairman Full Commitment in Libya
- ERYP FP : Erytech Won’t Seek Approval For Graspa in Hypersensitive ALL
- GOGL NO : Golden Ocean 2Q Net Income Beats Estimates
- IIA AV : Immofinanz 1H FFO I EU78.7M, Sees About EU120M in 2022
- KUD SW : Kudelski Sees FY Ebitda $55M to $75M, Est. $67.8M
- MC FP : Sephora Settles With California Over Sales of Customer Data
- NAS NO : Norwegian Air 2Q Operating Revenue Meets Estimates
- NOVN SW : Novartis to Spin Off Generic Unit Sandoz in Standalone Company
- REV US : Revlon Judge Rejects Shareholder Plea for Equity Committee
- SALM NO : Salmar 2Q Operating Revenue Beats Estimates
- SCST SS : Scandi Standard 2Q Operating Profit SEK42M Vs. SEK75M Y/y
- STG DC : Scandinavian Tobacco Says Supply Chain Challenges Are Temporary
- SWON SW : SoftwareONE 1H Adjusted Ebitda Beats Estimates
- SPSN SW : Swiss Prime 1H Ebit Beats Estimates
- URW NA : Unibail-Rodamco Sells Westfield Santa Anita for $537.5M
- UN01 GY : KfW Discusses Increase in Uniper’s Credit Line: Reuters
>>> Up
* Medistim Raised to Buy at DNB Markets; PT 290 kroner
>>> Down
* Biffa Cut to Hold at Berenberg; PT 415 pence
* Uniper Cut to Sell at Citi; PT 3.30 euros
>>> Initiation
* Open Orphan Rated New Buy at Liberum; PT 21.60 pence
* TechnipFMC Rated New Buy at Benchmark; PT $12
>>> Call
* Kosmos Energy Has ‘Lots of Levers to Pull,’ Berenberg Upgrades
* Uniper Cut to Sell at Citi on Dilutive Stabilization Package
After Hours Summary: SNOW +18%, ADSK +6.5%, NTAP +6.4% higher on earnings; SPLK -9.9%, VSCO -7.6%, CRM -7.2%, NVDA -4.8% lower on earnings; TDOC +2.7% higher on WaPo report that AMZN plans to exit telehealth; ELY +4.6% to change its nameAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: SNOW +18%, ADSK +6.5%, NTAP +6.4%, WSM +0.3%
Companies trading higher in after hours in reaction to news: AMWL +5.9% (AMZN to shut down its telehealth offering, according to WaPo), ELY +4.6% (to change name to Topgolf Callaway Brands), PDSB +4.4% (files for $150 mln mixed securities shelf offering), GDRX +3.9% (AMZN to shut down its telehealth offering, according to WaPo), BMRN +3.1% (first gene therapy for adults with severe hemophilia approved in Europe), TDOC +2.7% (AMZN to shut down its telehealth offering, according to WaPo), CRGE +1.4% (stock offering by selling shareholders), ET +1.3% (enters into 20-year LNG Sale and Purchase Agreement with Shell), NXPI +0.4% (sees expanded customer engagements for its S32 platform), OLN +0.1% (to permanently shut down 225,000 ECU tons of alkali capacity), AMZN +0.1% (to shut down its telehealth offering, according to WaPo)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: SPLK -9.9%, VSCO -7.6%, CRM -7.2% (also authorizes new $10 bln share repurchase program), ZUO -5.6% (also to acquire Zephr), NVDA -4.8%, GES -3.6%
Companies trading lower in after hours in reaction to news: RIDE -1% (files for $500 mln mixed securities shelf offering), SKIN -0.7% (stock offering by selling shareholders), GME -0.4% (boosting compensation for some store employees, according to WSJ), EHTH -0.3% (files for $300 mln mixed securities shelf offering), ONEM -0.2% (AMZN to shut down its telehealth offering, according to WaPo), AVLR -0.1% (new partnership with Xero)
Closing Stock Market SummaryToday's trade had a positive bias that left the major indices with modest gains, snapping a three-session losing streak. The market was stuck in a narrow range as participants await Fed Chair Powell's speech at the Jackson Hole symposium on Friday. Rising Treasury yields and oil prices acted as a limiting factor.
Notwithstanding the modest gains, buying interest was relatively broad-based. Advancers lead decliners by a 5-to-3 margin at the NYSE and a 14-to-9 margin at the Nasdaq.
All 11 S&P 500 sectors closed in the green with gains ranging from +0.04% (information technology) to 1.2% (energy).
The mega caps stocks edged ahead of the broader market with the broader market and growth stocks edged ahead of value stocks. The Vanguard Mega Cap Growth ETF (MGK) closed up 0.4% versus a 0.3% gain in the S&P 500. The Russell 3000 Growth Index was up 0.5% and the Russell 3000 Value Index was up 0.3%.
Small cap and mid cap stocks stood out as the Russell 2000 (+0.8%) and S&P Mid Cap 400 (+0.5%) closed ahead of their peers.
On an individual basis, Nordstrom (JWN 18.57, -4.63, -19.96%) and Intuit (INTU 465.77, +16.21, +3.6%) were notable standouts after the companies reported quarterly results. Both names beat top line estimates but the former cut its full-year guidance while the latter issued pleasing full-year guidance.
WTI crude oil futures had a volatile session and settled up 1.1% at $94.83/bbl. This propelled the energy sector (+1.2%) to first place on the day. Natural gas futures rose 0.1% to $9.26/mmbtu.
Separately, President Biden announced a plan to forgive up to $10,000 in federal student loan debt for borrowers earning less than $125,000 per year (or less than $250,000 per year for married couples filing jointly).
Hawkish Fed speak drove Treasury yields higher today. Minneapolis Fed President Neel Kashkari (2023 FOMC voter) said he thinks the Fed needs to remain vigilant with tightening efforts, lest it run a risk of inflation expectations becoming unanchored, according to The Wall Street Journal. The 2-yr note yield rose nine basis points to 3.37% while the 10-yr note yield rose five basis points to 3.11%.
Ahead of Thursday's open Abercrombie & Fitch (ANF), Dollar General (DG), Dollar Tree (DLTR), and Peloton (PTON) all report earnings.
Looking ahead to Thursday, market participants will receive the Q2 GDP second estimate (Briefing.com consensus -0.9%; prior -0.9%), Q2 GDP Deflator second estimate (Briefing.com consensus 8.7%; prior 8.7%), weekly Initial Claims (Briefing.com consensus 253,000; prior 250,000), and Continuing Claims (prior 1.437 mln) at 8:30 am. ET. Weekly natural gas inventories (prior +18 bcf) are out at 10:30 a.m. ET.
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index -1.2%; Prior -2.3%
- July Durable Orders 0.0% (consensus 0.6%); Prior was revised to 2.2% from 1.9%; July Durable Orders, Ex-Transportation 0.3% (consensus 0.1%); Prior 0.3%
- The key takeaway from the report is that business spending continued to increase, evidenced by the 0.4% increase in nondefense capital goods orders excluding aircraft, which followed increases of 0.9% in June and 0.5% in May.
- July Pending Home Sales -1.0% (Briefing.com consensus -3.0%); Prior was revised to -8.9% from -8.6%
Dow Jones Industrial Average: -9.3% YTD
S&P 400: -10.2% YTD
S&P 500: -13.1% YTD
Russell 2000: -13.8% YTD
Nasdaq Composite: -20.5% YTD