DAX:
- Continental (CON TH) -1%
- RWE (RWE TH) -1%
- Europe Faces Winter Gas Crunch If Russia Cuts Flows: BNEF Chart
- Mercedes (MBG TH) -2.3%
- BMW (BMW TH) -2.3%
- Infineon (IFX TH) -2.5%
- HelloFresh (HFG TH) -2.5%
- Siemens Healthineers (SHL TH) -2.6%
MDAX:
- K+S (SDF TH) -2.5%
- Evotec SE (EVT TH) -2.7%
- Kion (KGX TH) -2.8%
- Hugo Boss (BOSS TH) -2.8%
- Aixtron (AIXA TH) -2.8%
SDAX:
- Suedzucker (SZU TH) +0.8%
- VERBIO Vereinigte (VBK TH) -2.4%
- Nordex (NDX1 TH) -2.6%
- Synlab (SYAB TH) -2.7%
- SMA Solar (S92 TH) -3.2%
- Heidelberger Druck (HDD TH) -3.5%
- Norsk Hydro (NOH1 TH) +1.3%
- Watch European Commodities Stocks as War Drives Prices Higher
- Glencore (8GC TH) +1%
- Rio Tinto (RIO1 TH) +0.9%
- K+S (SDF TH) -2.9%
- K+S Non-Deal Roadshow Set By Stifel, Nicolaus & Co for March 11
- Fortum (FOT TH) -3%
- Russia’s Ukraine Invasion May Upend European Utilities’ Recovery
- Siemens Healthineers (SHL TH) -3.1%
- Puma (PUM TH) -3.1%
- Bakkafrost (6BF TH) -3.2%
- Hugo Boss (BOSS TH) -3.4%
- Vestas (VWSB TH) -3.6%
- Erste (EBO TH) -3.6%
- SES (SES TH) -3.9%
- HelloFresh (HFG TH) -4.3%
China investors drive frenzy for ‘Sino-Russian trade’ stocks
Investors bet Beijing will boost trade with Russia to soften blow from sanctions
Amateur investors in China are driving a rally in so-called “Sino-Russian trade concept stocks” as they bet that Beijing will boost trade with Russia to soften the blow of sanctions, pushing little-known logistics companies to valuations typically reserved for global tech groups.
More than a dozen Chinese stocks in trade-related industries have posted searing gains since Vladimir Putin launched his invasion of Ukraine, with some rising by the maximum 10 per cent for six straight days.
“The premise is that all of these would be massive gainers as a consequence of increased trade,” said the head of Asia equity strategy at one European bank, describing the rally as a “frenzy” driven by retail investor speculation.
Among the top performers is Jinzhou Port, a port operator in the north-eastern province of Liaoning whose shares have risen 80 per cent since the invasion began, compared to a 3.5 per cent fall for China’s benchmark CSI 300 index.
On Wednesday, Jinzhou Port published the latest in a series of investor warnings to the Shanghai Stock Exchange, reiterating there had been no material developments in its business and reminding investors its profits had fallen almost 10 per cent from a year ago in the third quarter.
It also cautioned its price-to-earnings ratio, a common metric of valuation, was “much higher than the average” for its listed peers.
Nonetheless, the company’s shares again posted the maximum allowable gain of 10 per cent on both Thursday and Friday. That pushed its PE ratio to about 59, blowing past the likes of Netflix (34) and drawing closer to Amazon (63).
The gains for this clutch of stocks come despite Beijing’s reluctance to offer financial and economic relief for Moscow, after sanctions imposed by western countries delivered a punishing blow to Russia’s economy and cut off many of its largest financial institutions from the rest of the world. China has also suggested it is willing to play a role in finding a ceasefire.
But in the months leading up to the invasion, domestic media was suffused with pro-Russia rhetoric, highlighting what Chinese officials have characterised as a “no-limits” partnership.
The two countries pledged to boost bilateral trade to $250bn a year while Putin visited Beijing for the Winter Olympics in February. The Russian president also unveiled new oil and gas deals with China worth almost $120bn.
Traders have also latched on to announcements that suggest official support for Moscow, such as a recent statement from Chinese customs ending restrictions on Russian wheat imports. Financial news sites have pointed to the move as helping drive demand for issuers now popularly referred to as “Sino-Russian trade concept stocks”.
Analysts said a substantial rise in bilateral trade was unlikely to seriously boost returns for most of the companies in focus, including Jinzhou Port.
“It’s mostly a domestic port,” said Darin Friedrichs, co-founder of agricultural research group Sitonia Consulting. “The fact that it’s geographically close to Russia is irrelevant.”
The Asia equity strategist noted that even if trade with Russia doubled, it would amount to only about 4 per cent of China’s annual total. Even then, he added, “many of these companies are engaged purely in domestic transportation”.
“Such frenzied trades without any strong fundamental support always end in pain,” he said.
Stocks fell Friday along with European and U.S. equity futures while havens including sovereign bonds rose after Ukrainian officials said Russian troops shelled a major nuclear power plant, briefly igniting a fire. European contracts slid about 2% and those for the U.S. shed around 0.5%, off earlier nadirs as an initial spasm of worry eased. An Asian equity index declined to the lowest since 2020, weighed down by Japan and Hong Kong.
Emergency services said the blaze was contained and that there was no immediate risk to nuclear power facilities. Ukraine told the International Atomic Energy Agency there had been no change reported in radiation levels.
metal and grain costs have soared as traders shun Russia’s oil and other resources. Russia’s military action and sanctions imposed by the U.S. and its allies are creating a range of risks. They include high raw material costs, damage to confidence that can sap investment and the potential for credit stress to ripple through markets.
The Russian stock market will be closed to trading for a fifth straight day, marking a record in the country’s modern history, in a continuing bid to stave off the impact of global sanctions for domestic investors.
Nikkei -2,23% Hang Seng 62,64% CSI -1,21% Shanghai -0,96% Shenzen -1,28%
Eur$ 1,1012 CNH 6,3235 CNY 6,3204 JPY 115,49 GBP 1,3325 CHF 0,9189 RUB 109,79 TRY 14,18 WTI$109,29 Golds 1938 BTC 41,200 ETH 2720
S&P -0,50% Nasdaq -0,69% EuroStoxx -2,14% FTSE -0,70% Dax -2,30% SMI -0,85%
Macro :
- France's Macron Confirms He's Running for a Second Term
Keep an eye on :
Macro :
- France's Macron Confirms He's Running for a Second Term
Keep an eye on :
- AMGO LN : Amigo Holdings to Cancel Incentive Award of 9.5m Shares to CEO
- BEI GY : *BEIERSDORF, SIEMENS ENERGY TO LEAVE DAX
- BONAVA SS : Bonava to Close Operations in Russia
- CGG FP : CGG 4Q Segment Ebitdas Beats Estimates
- CLNX SM : U.K.’s CMA Accepts Cellnex’s Remedies in Competition Probe
- COTN SW : Comet FY Sales Meets Estimates
- DBV FP : DBV Tech FY Net Loss $98.1M Vs. Loss $159.7M Y/y
- DTG GY : Daimler Truck, Hannover Rueck to Join DAX
- DEMANT DC : Demant Buys 20% Stake in China’s Shengwang, Seeks to Buy Rest
- EMMI SW : Emmi Sees 2022 Ebit CHF290M to CHF305M, Est. CHF300.2M
- ENOG LN : Energean Holder Offers Shares: Terms
- EVR LN : Evraz Says James Rutherford Stepping Down as Non-Exec Director
- GAZP RM : Sky News: The metals empire headed by Sanjeev Gupta is seeking to unwind its commercial ties to Gazprom
- G IM : Generali Winds Down Russia’s Europ Assistance Business
- HNR1 GY : Daimler Truck, Hannover Rueck to Join DAX
- INGA NA : ING Says Russia-related Exposure Total is EU6.7b as of Feb. 28
- LHA GY : Lufthansa May Get 20% Stake in ITA Airways: Sole
- NOS PL : NOS FY Net Income Beats Estimates
- NOS PL : NOS FY Net Income Beats Estimates
- PIRC IM : Pirelli Does Not Expect to Halt Production in Any Factory
- SWTQ SW : Schweiter FY Ebitda Beats Estimates
- SFSN SW : SFS FY Ebit Meets Estimates
- TIT IM : Telecom Italia: Ardian Offer for Stake in Inwit About EU1.3B
- HEAR US : *CITRON SAYS BUYING TURTLE BEACH IS A 'WIN WIN'
- UMG NA : UMG FY Revenue Beats Estimates
- VOD LN : *VODAFONE NEW ZEALAND SAID TO SEEK $1 BLN PHONE TOWERS SALE
- VOW3 GY : Porsche 911, Macan BEV Can Drive IPO to Electrify Family Values
- ZUGN SW : Zug Estates FY Ebit CHF93.2M Vs. CHF43.7M Y/y
>>> Up
* Assura Raised to Overweight at JPMorgan; PT 79 pence
* Assura Raised to Overweight at JPMorgan; PT 79 pence
* Lufthansa Raised to Hold at HSBC; PT 6.50 euros
* Rightmove Raised to Neutral at Citi on ‘Fairly Clear’ Visibility
* Stalprodukt Raised to Buy at Erste Group; PT 411.70 zloty
>>> Down
>>> Down
* dotdigital Cut to Hold at Numis; PT 80 pence
* Expert.ai SpA Cut to Hold at Stifel; PT 2.20 euros
* Fortum Cut to Hold at SEB Equities; PT 17 euros
* Global Fashion Group Cut to Hold at HSBC; PT 2.50 euros
* H&M Cut to Hold at HSBC; PT 157 kronor
* ITV Cut to Equal-Weight at Barclays; PT 95 pence
* Korian Cut to Add at AlphaValue/Baader
* MMK Group GDRs Cut to Neutral at JPMorgan; PT $14
* Polymetal Cut to Neutral at JPMorgan; PT 1,400 pence
* Polymetal Cut to Neutral at JPMorgan; PT 1,400 pence
* Shop Apotheke Cut to Sell at Bankhaus Metzler; PT 72 euros
* SoftwareONE Cut to Hold at Deutsche Bank; PT 12 Swiss francs
* SoftwareONE Cut to Neutral at JPMorgan; PT 16 Swiss francs
* Totens Sparebank Cut to Neutral at SpareBank; PT 245 kroner
* Zalando Cut to Hold at HSBC; PT 52 euros
>>> Initiation
>>> Initiation
* BBVA Resumed Buy at Citi; PT 6.55 euros
* Beazley Reinstated Outperform at RBC; PT 600 pence
* Coca-Cola HBC Says Resumed Operations in Parts of Ukraine
* Conduit Rated New Sector Perform at RBC; PT 425 pence
* Helium One Global Rated New Buy at Liberum; PT 19 pence
* Hiscox Reinstated Sector Perform at RBC; PT 1,000 pence
* Lancashire Reinstated Outperform at RBC; PT 575 pence
* LEG Immobilien Rated New Hold at Stifel; PT 117 euros
* LEG Immobilien Rated New Hold at Stifel; PT 117 euros
* Made Tech Group Reinstated Buy at Berenberg; PT 75 pence
* TAG Immobilien Rated New Buy at Stifel; PT 26.50 euros
>>> Call
* Compass, Sodexo Key Buys in Contract Caterers, Citi Cuts Elior
>>> Call
* Compass, Sodexo Key Buys in Contract Caterers, Citi Cuts Elior
* Saint-Gobain Has Platform for Growth, Upgraded at Morgan Stanley
Closing Stock Market SummaryThe S&P 500 lost 0.5% on Thursday in a defensive session, which saw the benchmark index up 0.7% shortly after the open. The Nasdaq Composite (-1.6%) and Russell 2000 (-1.3%) declined more than 1.0% while the Dow Jones Industrial Average declined just 0.3%.
The positive start was attributed to a $10 retracement in WTI crude futures (to $106/bbl from $116/bbl) amid speculation that a nuclear deal with Iran could be signed within the next few days. WTI crude futures settled lower by 2.9%, or $3.23, to $107.81/bbl.
Stocks turned negative shortly thereafter on no specific catalyst, but the decline did coincide with a relatively disappointing ISM Non-Manufacturing Index for February and tough-minded rhetoric from President Putin to French President Macron regarding Russia's invasion of Ukraine.
On a related note, the second round of ceasefire talks between Russia and Ukraine ended with an understanding that there should be humanitarian corridors to safely evacuate civilians. That wasn't exactly the outcome the market or Ukraine were hoping for, but both sides reportedly scheduled a third round of talks.
Investors assumed a defensive mindset, evident by the leadership positions of the S&P 500 utilities (+1.7%), real estate (+1.1%), consumer staples (+0.7%), and health care (+0.5%) sectors. Kroger (KR 55.10, +5.73, +11.6%) provided an added boost for the consumer staples sector following its earnings report.
Conversely, the consumer discretionary (-2.3%), information technology (-1.2%), and communication services (-0.8%) sectors underperformed amid weakness in the mega-caps. The Vanguard Mega Cap Growth ETF (MGK 222.19, -3.33) fell 1.5%, versus a 0.2% decline in the Invesco S&P 500 Equal Weight ETF (RSP 154.51, -0.32).
The mega-caps were excluded from the defensive shift, declining alongside high-beta growth stocks, which were pressured by weakness in Snowflake (SNOW 224.02, -40.67, -15.4%), Veeva Systems (VEEV 193.16, -37.46, -16.2%), and Okta (OKTA 167.98, -14.72, -8.1%) following their earnings reports.
Away from equities, the Treasury market was relatively well behaved in front of the February employment report tomorrow. The 10-yr yield decreased two basis points to 1.84%, further corroborating the defensive bias, while the 2-yr yield increased two basis points to 1.54%. The U.S. Dollar Index rose 0.4% to 97.74.
Reviewing Thursday's economic data:
- The ISM Non-Manufacturing Index for February decreased to 56.5% (consensus 61.0%) from 59.9% in January. The dividing line between expansion and contraction is 50.0%. The February reading marks the 21st straight month of growth for the services sector, albeit at a slower pace than what was seen in January.
- The key takeaway from the report is that business activity was held back in February by inflation pressures, supply constraints, logistical challenges, and labor shortages.
- Initial jobless claims for the week ending February 26 decreased by 18,000 to 215,000 ( consensus 226,000) and continuing claims for the week ending February 19 increased by 2,000 to 1.476 million.
- The key takeaway from the report is that initial claims are at a level that is consistent with a tight labor market.
- The revised Q4 nonfarm business sector labor productivity showed no change to the advance estimate of 6.6% ( consensus 6.7%), as output increased 9.1% and hours worked increased 2.4%. Unit labor costs, though, were revised up to 0.9% ( consensus 0.3%) from 0.3% as hourly compensation increased 7.5% versus the 6.6% increase in productivity.
- The key takeaway is that the healthy increase in productivity in Q4 helped keep unit labor costs in check, but it isn't necessarily resonating as a celebratory factor given the steady acknowledgment of rising labor costs heard from companies reporting Q4 earnings.
- Factory orders for manufactured goods increased 1.4% m/m in January (consensus 0.5%) following an upwardly revised 0.7% increase (from -0.4%) in December. Shipments of manufactured goods jumped 1.2% after increasing 0.7% in December.
- The key takeaway from the report is the uptick seen in order growth for nondefense capital goods, excluding aircraft -- a proxy for business spending.
- The final IHS Markit Services PMI for February decreased to 56.5 from 56.7 in the preliminary reading.
Looking ahead, investors will receive the Employment Situation report for February on Friday.
- Dow Jones Industrial Average -7.0% YTD
- S&P 500 -8.5% YTD
- Russell 2000 -9.5% YTD
- Nasdaq Composite -13.5% YTD
After Hours Summary: SG +19.2%, FNKO +17.1%, DUOL +12.1%, GPS +9.4%, AVGO +4.3% higher on earnings; SWBI -15.9%, AVAV -3.6%, COST -1.1% lower on earningsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: SG +19.2%, FNKO +17.1%, PBYI +13.3%, DUOL +12.1%, VERI +11.7%, ALHC +11.4%, CVT +10.1%, GPS +9.4%, GDYN +8.1%, EVC +5.4% (also approves $20 mln share repurchase program), AVGO +4.3%, SIGA +3.1%, MRVL +2.5%, ESTC +1.8%
Companies trading higher in after hours in reaction to news: RIOT +2.7% (produced 436 Bitcoin in February, up 189% yr/yr), ACMR +2.2% (approves 3-for-1 stock split), SFM +1.8% (authorizes new $600 mln share repurchase program), CGNX +1.3% (authorizes new $500 mln share repurchase plan), ASO +0.8% (initiates dividend), DIS +0.3% (weighing launch of ad-supported tier of Disney+ service in US, according to The Information), ENVX +0.2% (begins delivery of battery cells from its production line to customers), AGR +0.1% (names new CEO)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: SWBI -15.9% (says firearms market has cooled significantly), PAYO -4%, AVAV -3.6%, VZIO -3.3%, COST -1.1%, AQN -0.1%
Companies trading lower in after hours in reaction to news: RSX -1.7% (S&P: Russia ratings lowered To 'CCC-' and kept on CreditWatch Negative on increasing risk of default), SJR -1.7% (RCI and SJR continue to expect the transaction will close in 1H22), WOOF -0.8% (to purchase remaining stake in JV with Thrive Pet Healthcare), AFRM -0.8% (files for 22 mln share offering by selling shareholder; also files mixed securities shelf offering), AHT -0.3% (stock offering), IDT -0.1% (net2phone unit acquires Integra CCS)