China economy: the fallout from the Evergrande crisis
The crackdown on real estate ordered by Xi Jinping is putting growing pressure on local governments and many companies
- Rio Tinto (RIO1 TH) +0.5%
- Watch European Miners as Iron Ore Rises on Demand Expectations
- Airbus (AIR TH) -2.6%
- HelloFresh (HFG TH) -2.7%
- ArcelorMittal (ARRD TH) -2.9%
- Stellantis (8TI TH) -2.9%
- Thyssenkrupp (TKA TH) -3%
- Scout24 SE (G24 TH) -3.2%
- TUI (TUI1 TH) -3.4%
- Rolls-Royce (RRU TH) -3.7%
- Lufthansa (LHA TH) -3.8%
- Italgas (I10 TH) -4.3%
- Italgas Cut to Sell at Citi; PT 5.70 euros
DAX:
- Vonovia (VNA TH) -1%
- Symrise (SY1 TH) -1.9%
- HelloFresh (HFG TH) -1.9%
- Infineon (IFX TH) -1.9%
- European Tech Stocks May Be Active After Declines in Asia, U.S.
- Delivery Hero (DHER TH) -2.1%
- Airbus (AIR TH) -2.3%
MDAX:
- Commerzbank (CBK TH) -1.8%
- Nemetschek (NEM TH) -2.2%
- K+S (SDF TH) -2.4%
- Thyssenkrupp (TKA TH) -3%
- Lufthansa (LHA TH) -3.6%
SDAX:
- Nordex (NDX1 TH) -2.4%
- Deutz (DEZ TH) -2.4%
- Global Fashion Group (GFG TH) -2.6%
- Hamborner REIT (HABA TH) -2.7%
- Jenoptik (JEN TH) -2.9%
US start-ups raise record $330bn as venture investors vie for stakes
Sum nearly doubles from 2020 in a financing rush one fund manager deems ‘not rational’
Investors poured a record $330bn into private start-ups in the US last year, nearly doubling the total from 2020 in a flurry of dealmaking that rapidly inflated company valuations.
Venture capitalists vied with other deep-pocketed investors to win deals, giving leverage to the founders of attractive start-ups. Investors gained confidence from a wave of public listings that have delivered large returns to their backers, such as foundations and endowments.
Private venture-backed companies in the US raised a total of $329.8bn last year compared to $166.6bn in 2020, the previous record, according to PitchBook data. Investors put about four times as much money into start-ups than they did five years ago.
More than half of last year’s total, or $190.8bn, came from financing rounds of greater than $100m, as investors showed a willingness to plough large sums into relatively young companies.
Venture capitalists paid steep prices for stakes in promising start-ups which sometimes had scant revenues, attracted by strong demand for business software, ecommerce providers and other winners in the pandemic economy.
Stytch, a two-year-old authentication software start-up, had less than $1m in annual recurring revenues when Coatue Management and other investors valued the company at $1bn in November, according to the company.
Publicly listed business software companies trade at about 16.4 times revenues, according to the BVP Nasdaq Emerging Cloud Index.
Cryptocurrency start-ups have also attracted feverish activity. OpenSea, a marketplace for non-fungible tokens, announced on Monday it raised $300m of funding led by the investment firm Paradigm and Coatue, catapulting the company’s valuation from $1.5bn in July to $13.3bn.
Globally, private start-ups raised a total of $671bn last year, according to PitchBook data, an increase of more than 90 per cent from the previous year.
Some investors have begun to raise doubts that the boom can sustain itself. The tech-heavy Nasdaq Composite index has whipsawed in the past two months and slid 3.3 per cent on Wednesday, with traders exiting software companies that have soared during the pandemic.
US venture capital groups raised a record $128bn last year, including $41.3bn for first-time fund managers, suggesting that large amounts of unspent capital could keep the boom alive.
Greg Bohlen, co-founder of Union Grove Venture Partners, which mainly invests in venture funds, said the firm has “taken pauses” on some managers that had recently looked to quickly raise new capital.
“Rationality always returns to a marketplace left to itself,” Bohlen said. “What we’ve been seeing is not rational.”
After Hours Summary: BLI -25% and HEAR -3.8% fall on weak guidance; SLGC +9.3% jumps on collaboration news; CDC panel reportedly recommends booster for 12-15 year oldsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: RGP +4.4%
Companies trading higher in after hours in reaction to news: SLGC +9.3% (SLGC and ILMN announce collaboration relating to genomics and proteomics platforms), DDOG +3.8% (announces partnership with AWS for observability and security), ROIV +3.5% (announces license agreement with ESALY for RVT-2001), CRSR +0.3% (acquires 51% stake in Taiwan-based company iDisplay Technology), ILMN +0.2% (SLGC and ILMN announce collaboration relating to genomics and proteomics platforms), IIPR +0.2% (provides Q4 operating update), PFE +0.1% (CDC panel recommends its booster for 12-15 year olds, according to news reports)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: BLI -25% (guides FY21 and FY22 revs below consensus, also CEO to step down), HEAR -3.8% (sees FY21 revs at low end of prior guidance)
Companies trading lower in after hours in reaction to news: STRO -11.1% (announces interim data from dose-expansion cohort of STRO-002 Phase 1 study), CRCT -1.6% (CFO to retire, names new CFO), RIOT -0.5% (produced 425 Bitcoin in December, up 334% yr/yr), HAS -0.3% (promotes Chris Cocks to CEO; names Eric Nyman as COO), COST -0.3% (reports Dec adjusted comps of +11.5%), FIX -0.2% (announces three acquisitions), BKH -0.2% (nat gas utility subsidiaries in three states receive approvals for rate review settlements), ZYME -0.1% (appoints Kenneth Galbraith as Chair and CEO), GOL -0.1% (reports traffic figures for December), TDS -0.1% (board member resigns, disagrees with strategic direction)
>>> Up
* Allianz Raised to Outperform at Exane; PT 250 euros
* Darktrace Raised to Overweight at Piper Sandler; PT 600 pence
* Ipsen Raised to Buy at SocGen; PT 94.30 euros
* Ipsen Raised to Buy at SocGen; PT 94.30 euros
* Julius Baer Raised to Market Perform at KBW; PT 66 Swiss francs
* Restaurant Group Raised to Buy at Berenberg; PT 125 pence
* UBS Group Raised to Outperform at KBW; PT 19 Swiss francs
* WH Smith Raised to Buy at Berenberg; PT 1,900 pence
>>> Down
>>> Down
* Banco Santander Cut to Sector Perform at RBC; PT 3.40 euros
* Cellectis ADRs Cut to Equal-Weight at Wells Fargo; PT $16
* Credit Suisse Cut to Underperform at KBW; PT 9.80 Swiss francs
* Generali Cut to Neutral at Exane; PT 21 euros
* Italgas Cut to Sell at Citi; PT 5.70 euros
* Johnson Matthey Cut to Market Perform at Bernstein
* Lundin Energy Cut to Hold at Jefferies; PT 358 kronor
* Lundin Energy Cut to Hold at Jefferies; PT 358 kronor
* On The Beach Cut to Hold at Berenberg; PT 320 pence
* RELX Cut to Neutral at Citi; PT 2,450 pence
* Terna Cut to Neutral at Citi
* Vifor Pharma Cut to Hold at Stifel; PT 164 Swiss francs
>>> Initiation
>>> Initiation
* Alfen Rated New Buy at Bryan Garnier; PT 105 euros
* Azelio Rated New Neutral at Bryan Garnier; PT 23.40 kronor
* Hydrogene de France SACA Rated New Neutral at Bryan Garnier
* Hydrogene de France SACA Rated New Neutral at Bryan Garnier
* Stellantis Rated New Sector Perform at RBC; PT $19.26
* Swedish Stirling Rated New Buy at Bryan Garnier; PT 22 kronor
>>> Call
>>> Call
* Goldman Strategists Say Rising Rates May Favor European Equities
* Berenberg Shuffles U.K. Leisure Coverage, Pandemic Recovery Key
* Berenberg Shuffles U.K. Leisure Coverage, Pandemic Recovery Key
* Italgas, Terna Cut, Snam Remains Sell on Full Valuations: Citi
* Johnson Matthey Downgraded at Bernstein on Lack of Catalysts
* RELX Cut to Neutral at Citi, Should Consider Sale of Exhibitions
Stocks in Asia and U.S. and European futures extended a global selloff Thursday as the rout in technology shares accelerated after the Federal Reserve signaled interest-rate hikes may be more aggressive than many had expected. Treasuries held losses. An MSCI Inc. index of the region’s equities retreated for the third day in four with a gauge of tech shares among the worst performing. The Nasdaq 100 tumbled the most since March Wednesday as rising Treasury yields added to concerns over growth and profitability. The S&P 500 retreated as traders increased bets U.S. rates will rise at least three times this year. The yield on the U.S. 10-year note held at the highest since April. Overnight swaps markets moved to price in an 80% chance of a 25 basis-point hike at the Fed’s meeting in March. The dollar was little changed, while the yen climbed. A selloff in Chinese tech companies continued on concerns firms will pare holdings amid Beijing’s regulatory crackdown on the sector. The Hang Seng Tech Index fell for a fourth day.
Investors fear tightening monetary policy will choke global growth and crimp company profits just as the omicron Covid variant leads to fresh curbs. Fed officials said a strengthening economy and higher inflation could lead to earlier and faster rate increases than expected, with some also favoring moves to shrink the balance sheet soon after.
Meanwhile, restrictions are coming back in some places in the face of omicron. Hong Kong reimposed social curbs and halted flights from eight countries. Tokyo raised the alert level after reporting almost 400 new cases in one day. China brought in new restrictions for people traveling from the U.S. as cases there climb.
More geopolitical ructions emerged. Russia and its allies said they would send troops to back Kazakhstan’s president amid protests. Russia is already at the heart of a simmering conflict regarding Ukraine.
Nikkei -2.88% Hang Seng -0.39% CSI -1.02% Shanghai -0.23% Shenzen -0.10%
Eur$ 1.1310 CNH 6.3821 CNY 6.3762 JPY 115.91 GBP 1.3532 CHF 0.9179 RUB 77.0420 TRY 13.7050 WTI$ 76.78 -1.37% Gold 1,806.77 -0.21% BTC 43,150-1% ETH 3,470 -2045%
S&P -0.25% Nasdaq -0.41% EuroStoxx -1.70% FTSE -1.38% Dax -1.34% SMI -1%
Macro :
- The Fed Minutes That Shook the World: John Authers
Keep an eye on :
- ABN NA : ABN's 4.7 Billion-Euro Cost Goal, 64% Efficiency Set for Revamp
- ATL IM : Atlantia Says It Made a Binding Offer for Siemens Unit
- ATL IM : Atlantia Says It Made a Binding Offer for Siemens Unit
- BALN SW : Baloise CEO Gert de Winter to Reduce Schedule Due to Cancer
- BG AV : Bawag Share Sale by GoldenTree Order Book Is Covered, Offering by Holder Prices at EU52.50/Share: Terms
- COFA FP : Coface Holder Natixis Offers 15.1m Shares: Terms --> SELLS 15M SHARES IN COFACE FOR EU11.55/SHR
- CSGN SW : Credit Suisse Names Carrasco Head of Wealth Management in Iberia
- DOCS LN : Dr. Martens Holder Permira Advisers Offers ~65m Shares: Terms
- FAST NA : Fastned Wins Tenders for Three New Charging Stations in France
- FTK GY : FlatexDegiro Sees Growth to 2.7m-2.9m Customer Accounts in 2022
- GALP PL : Galp Says Board Member Carlos Costa Pina Has Resigned
- IPR PL : Impresa Says Its Taking Steps to Restore Access to News Content
- NEL NO : Nel Appoints Hakon Volldal as Company’s New CEO, Replacing Lokke
- PHARM NA : Pharming’s PIP for Leniolisib Gets Positive Opinion in the EU
- GLE FP : SocGen’s ALD to Buy LeasePlan for $5.5 Billion in Cash, Stock
- SW FP : Sodexo’s 1Q Rev. Beats Estimates; FY Guidance Maintained
- THG LN : THG Shares Rose Following Betaville Mention Before Paring Gains
- TKO FP : Tikehau Capital Raked in EU6.3B in Net New Money in 2021
- TLW LN : Tullow CEO Signals Oil’s Heady Days Over With Spending Clampdown
- VLA FP : Valneva Confirms Clinical Trial Timelines for Covid-19 Vaccine
Closing Stock Market SummaryA mixed market turned into a weak market on Wednesday after the FOMC Minutes highlighted a more aggressive stance on policy normalization. The Nasdaq Composite and Russell 2000 both dropped 3.3%, the S&P 500 dropped 1.9%, and the Dow Jones Industrial Average dropped 1.1% after setting an all-time high in early action.
Briefly, the Minutes from the December meeting showed that participants thought it would be appropriate to reduce the size of the Fed's balance sheet at a faster pace than during the previous normalization period. Cited reasons included the fact that the balance sheet is bigger this time around and that the economic outlook is stronger.
What's more, the participants judged that the commencement of a balance sheet runoff would likely be closer to after the first rate hike, versus waiting nearly two years after the first hike in the last normalization episode.
Growth stocks extended intraday losses, as the 10-yr yield topped 1.70% in the wake of the report, while value stocks gave up intraday gains. All 11 S&P 500 sectors closed lower, with real estate (-3.2%), information technology (-3.1%), and communication services (-2.9%) each falling about 3.0%.
The consumer staples (-0.03%), utilities (-0.1%), energy (-0.1%), and materials (-0.1%) sectors closed fractionally lower amid increased selling pressure into the close.
The market might have been caught off guard by the Fed's hawkish tone regarding the balance sheet, but the readiness to hike rates shouldn't come as a surprise. According to the CME FedWatch Tool, the probability for a rate hike in March increased to 67.8% today, versus 59.7% yesterday and 27.1% one month ago.
Rate-hike expectations firmed up today after the release of a stronger-than-expected December ADP Employment Change report, which estimated an addition of 807,000 jobs to private sector payrolls last month (consensus 425,000).
The 2-yr yield, which tracks expectations for the fed funds rate, rose seven basis points to 0.83%. The 10-yr yield settled the session four basis points higher at 1.71%, feeding into expectations for a run-up to 2.00%. The U.S. Dollar Index decreased 0.1% to 96.20. WTI crude futures rose 1.1%, or $0.82, to $77.82/bbl.
All in all, the balance-sheet commentary, coupled with higher interest rates, was presumably an excuse for investors to double down on the growth-stock selling and take profits in the value stocks.
Reviewing Wednesday's economic data:
- ADP estimated that 807,000 jobs were added to private sector payrolls in December (consensus 425,000), up from a downwardly revised 505,000 (from 534,000) in November.
- The preliminary IHS Markit Services PMI for December decreased to 57.6 from 58.0 in the final reading for November.
- The MBA Mortgage Applications Index decreased 5.6% on a weekly basis.
- Crude oil inventories had a weekly draw of 2.144 mln barrels, which was the EIA's sixth draw in six weeks.
Looking ahead, investors will receive the ISM Non-Manufacturing Index for December, the weekly Initial and Continuing Claims report, the Trade Balance for November, and Factory Orders for November on Thursday.
- Dow Jones Industrial Average +0.2% YTD
- S&P 500 -1.4% YTD
- Russell 2000 -2.3% YTD
- Nasdaq Composite -3.5% YTD