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Asian stocks were steady Friday after U.S. shares reached an all-time high amid optimism that the economic recovery will shrug off the outbreak of the omicron virus strain.
Japan’s market fluctuated and China dipped. But casino firms rallied in Hong Kong on favorable results from Macau license-renewal hearings. Volumes have thinned and many markets are closed or operating with reduced hours on Christmas Eve. Sentiment has been helped by economic data that painted a picture of solid U.S. growth, and a U.K. study suggesting omicron infections are less likely to lead to hospitalization. But the research cautioned the fast-spreading variant may still produce a significant number of serious cases. Treasuries and a dollargauge slipped in U.S. hours, while crude oil pushed up toward $74 a barrel. Bitcoin was trading around $51,000 and at one point touched the highest in more than two weeks. There is no cash trading of Treasuries on Friday.
Former Treasury Secretary Lawrence Summers warned of a testing period for the U.S. economy in coming years, with the risk of recession followed by stagnation. Summers said the Fed had been late to spot the dangers of inflation.
Omicron “will create some slowdowns in the economy, perhaps some slowdowns of production which could add to inflation pressures in the short term,” Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, said on Bloomberg Television.
Nikkei -0.05% Hang Seng +0.13% CSI -0.60% Shanghai -0.68% Shenzen -1.32%
Eur$ 1.1330 CNH 6.3746 CNY 6.3696 JPY 114.39 GBP 1.3408 CHF 0.9172 RUB 73.1801 TRY 11.4041 WTI$ 73.76 -0.04% Gold 1,809.75 BTC 50,950 +0.30% ETH 4,090 -0.55%
S&P +0.63% Nasdaq +0.80% EuroStoxx Close FTSE -0.27% Dax Close SMI Close
Macro :
- South Africa to Stop Quarantines as 80% Have Past Infection
- South Africa to Stop Quarantines as 80% Have Past Infection
- Bitcoin Climbs to $51,000, Hits Highest in More Than Two Weeks
- Zinc, Aluminum Decline on China Demand Hit, 2022 Supply Outlook
Keep an eye on :
Keep an eye on :
- AIR FP : Spain Orders 36 H135 Helicopters from Airbus
- BBVA SM : BNP, State Street Among Bidders of BBVA’s Custody Unit: Reuters
- BBVA SM : BNP, State Street Among Bidders of BBVA’s Custody Unit: Reuters
- ENEL IM : Enel, Intesa Sanpaolo to Buy Mooney at Enterprise Value EU1.385b
- EL FP : EssilorLuxottica to Sell Stores Related to GrandVision Purchase
- GETIB SS : Getinge Buys U.S. Software Firm Talis Clinical for SEK596m
- GSK LN : GSK’s Cancer Treatment Jemperli Approved in Canada
- ICAD FP : Icade Acquires Four Private Hospitals in Portugal for EU213M
- NOG LN : Nostrum Oil & Gas, Holders Agree to Restructures Notes
- SON PL : Sonae to Sell Its 50% Stake in MDS to Ardonagh for EU100m
- VLA FP : Valneva, Scottish Enterprise in Talks on Grants for Livingstone
- VOW GY : VW May Produce 570k Cars in Wolfsburg in 2022: Wolfsburger Z.
Asian stocks were steady Friday after U.S. shares reached an all-time high amid optimism that the economic recovery will shrug off the outbreak of the omicron virus strain.
Japan’s market fluctuated and China dipped. But casino firms rallied in Hong Kong on favorable results from Macau license-renewal hearings. Volumes have thinned and many markets are closed or operating with reduced hours on Christmas Eve. Sentiment has been helped by economic data that painted a picture of solid U.S. growth, and a U.K. study suggesting omicron infections are less likely to lead to hospitalization. But the research cautioned the fast-spreading variant may still produce a significant number of serious cases. Treasuries and a dollargauge slipped in U.S. hours, while crude oil pushed up toward $74 a barrel. Bitcoin was trading around $51,000 and at one point touched the highest in more than two weeks. There is no cash trading of Treasuries on Friday.
Former Treasury Secretary Lawrence Summers warned of a testing period for the U.S. economy in coming years, with the risk of recession followed by stagnation. Summers said the Fed had been late to spot the dangers of inflation.
Omicron “will create some slowdowns in the economy, perhaps some slowdowns of production which could add to inflation pressures in the short term,” Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, said on Bloomberg Television.
Macro :
- South Africa to Stop Quarantines as 80% Have Past Infection
- Bitcoin Climbs to $51,000, Hits Highest in More Than Two Weeks
- Zinc, Aluminum Decline on China Demand Hit, 2022 Supply Outlook
Keep an eye on :
Keep an eye on :
- AIR FP : Spain Orders 36 H135 Helicopters from Airbus
- BBVA SM : BNP, State Street Among Bidders of BBVA’s Custody Unit: Reuters
- BBVA SM : BNP, State Street Among Bidders of BBVA’s Custody Unit: Reuters
- ENEL IM : Enel, Intesa Sanpaolo to Buy Mooney at Enterprise Value EU1.385b
- EL FP : EssilorLuxottica to Sell Stores Related to GrandVision Purchase
- GETIB SS : Getinge Buys U.S. Software Firm Talis Clinical for SEK596m
- GSK LN : GSK’s Cancer Treatment Jemperli Approved in Canada
- ICAD FP : Icade Acquires Four Private Hospitals in Portugal for EU213M
- NOG LN : Nostrum Oil & Gas, Holders Agree to Restructures Notes
- SON PL : Sonae to Sell Its 50% Stake in MDS to Ardonagh for EU100m
- VLA FP : Valneva, Scottish Enterprise in Talks on Grants for Livingstone
- VOW GY : VW May Produce 570k Cars in Wolfsburg in 2022: Wolfsburger Z.
Facebook to build metaverse with start-up that had US military contracts
Synthetic data company AI. Reverie will work within group’s Reality Labs division
An artificial intelligence company contracted to develop military intelligence and navigational capabilities for the US Department of Defence will now be used by Facebook to build the metaverse.
Facebook, which recently rebranded as Meta, acquired synthetic data start-up AI. Reverie in August, and consolidated it into its Reality Labs division dedicated to constructing a shared virtual world.
In January, the start-up signed a three-year contract to provide services worth up to $950m to the US Air Force, to develop an advanced battle management system and enhance its command-and-control systems using AI. The contract was terminated in August when the company was acquired by Meta.
Meta said the partnership would accelerate the company’s synthetic data capabilities — simulated versions of real-world data needed to train advanced machine learning algorithms — that it will use to build the metaverse.
AI. Reverie’s former chief executive Daeil Kim, who is now an engineering manager at Meta, described the company as creating a “virtually endless supply of annotated images and videos to accelerate computer vision and machine learning by lowering the cost of training”.
Earlier this year, the start-up said it licensed its synthetic data generation platform to customers in defence, retail, industry and agriculture and tripled its customer base in 2020.
Alongside the most recent US Air Force contract, it received a contract in May last year to enhance intelligence-gathering for the defence department, including the army and air force, and in July 2020 it was awarded another contract from the USAF to improve navigation capabilities in difficult terrains using synthetic training data.
According to AI. Reverie, its artificial intelligence product would support the 7th Bomb Wing, part of a major command unit in the US Air Force that conducts nuclear deterrence and global strike operations.
The $950m-ceiling US Air Force contract was “terminate[d] for convenience” in early August, which a Meta spokesperson confirmed was a few weeks prior to its acquisition of AI. Reverie. The company also said Meta would not be involved with any future defence or military AI development.
When Meta rebranded from Facebook in October, chief executive Mark Zuckerberg told tech newsletter Stratechery that virtual reality will start to be better than laptops and computers for “almost every use case” by 2030, “or even by the middle of the decade”. The infrastructure of the metaverse, however, is still nascent.
Companies including Meta, Microsoft, Apple, Nvidia and others are competing to develop the underpinnings of these hyper-realistic worlds, which require millions of users to have persistent and simultaneous experiences in both real and virtual environments.
In November, Nvidia announced a new synthetic data engine to generate realistic autonomous vehicles and robots that can be trained in its own virtual worlds, before being released in the real world.
Closing Stock Market SummaryThe S&P 500 rose 0.6% on Thursday, wrapping up the Christmas week at a closing record high amid buy-the-dip momentum. The Dow Jones Industrial Average also gained 0.6% while the Nasdaq Composite (+0.9%) and Russell 2000 (+0.9%) both gained 0.9%.
Most of the gains were registered shortly after the open, and the major indices slowly drifted slowly higher the rest of the session. There was a slight hiccup into the close, which might have been a byproduct of reduced trading volume at the NYSE and efforts to take some money off the table in front of a three-day weekend.
Nine of the 11 S&P 500 sectors closed higher with consumer discretionary (+1.2%), industrials (+1.2%), and materials (+1.0%) each rising at least 1.0%. The real estate (-0.4%) and utilities (-0.03%) sectors closed slightly lower.
Today's economic data was decent: weekly initial claims, new home sales for November, durable goods orders for November, and the final December reading for the University of Michigan Index of Consumer Sentiment were each better than expected. Personal income and spending for November increased modestly.
One of the wrinkles in the data was a hotter-than-expected core PCE Price Index, which increased 0.5% m/m in November (Briefing.com consensus 0.4%) and was up 4.7% yr/yr. The PCE Price Index increased 0.6% m/m, leaving it up 5.7% yr/yr.
In COVID news, the FDA issued an emergency use authorization for Merck's (MRK 75.73, -0.43, -0.6%) oral antiviral for the treatment of mild-to-moderate coronavirus disease for adults 18 and older. Research continued to suggest that the Omicron variant is milder than the Delta variant despite being more contagious.
The Treasury market softened up, driving yields higher, which was in-line with typical trading behavior when equities rally and the economic data leans positive. The 2-yr yield increased three basis points to 0.69%, and the 10-yr yield increased four basis points to 1.49%.
The U.S. Dollar Index decreased 0.1% to 96.03. WTI crude futures rose 1.2%, or $0.85, to $73.62/bbl.
Reviewing Thursday's economic data:
- Personal income increased 0.4% month-over-month in November ( consensus 0.5%) and personal spending increased 0.6% (consensus 0.6%). The PCE Price Index was up 0.6% month-over-month and the core PCE Price Index, which excludes food and energy, was up 0.5% (consensus 0.4%). On a year-over-year basis, the PCE Price Index was up 5.7%, versus 5.1% in October, and the core PCE Price Index was up 4.7%, versus 4.2% in November.
- The key takeaway from the report is that the bad inflation data should keep the Fed focused on gearing its monetary policy toward battling inflation as opposed to the slowdown effect of the Omicron variant.
- Initial jobless claims for the week ending December 18 were unchanged at 205,000 ( consensus 206,000). Continuing claims for the week ending December 11 decreased by 8,000 to 1.859 million.
- The key takeaway from the report is that it covers the week in which the survey for the December Employment Situation Report is conducted. With the low level of initial claims, economists should be predicting some relatively strong gains in December nonfarm payrolls.
- New home sales increased 12.4% month-over-month in November to a seasonally adjusted annual rate of 744,000 units (consensus 770,000) from a downwardly revised 662,000 (from 745,000) in October. On a year-over-year basis, new home sales were down 14.0%.
- The key takeaway from the report is that the growth in new home sales is concentrated in higher-priced homes, as inflation pressures, exacerbated by supply constraints and labor shortages, are curtailing the building of lower-priced homes and pinching affordability for lower-income buyers.
- The final December reading for the University of Michigan Index of Consumer Sentiment came in at 70.6 ( consensus 70.4) versus the preliminary reading of 70.4. The final reading for November was 67.4.
- The key takeaway from the report is that the improvement was driven by higher income expectations among households in the bottom third of the income distribution, which has been sparked by higher wages for younger workers and a 5.9% increase in Social Security payments for 2022.
- Durable goods orders increased 2.5% month-over-month in November (Briefing.com consensus 1.5%). Excluding transportation, durable goods orders rose 0.8% (Briefing.com consensus 0.6%).
- The key takeaway from the report is that there was some slowing in business spending in November, evidenced by the 0.1% decline in orders for nondefense capital goods excluding aircraft. It is worth pointing out, however, that this small decline comes on the heels of steady increases in orders for these goods, so it can still be viewed as a natural slowing after a strong period of gains as opposed to anything more severe in meaning.
There is no economic data scheduled for Monday, whish is when the market reopens from holiday.
- S&P 500 +25.8% YTD
- Nasdaq Composite +21.5% YTD
- Dow Jones Industrial Average +17.5% YTD
- Russell 2000 +13.5% YTD
Third Point fund chair quits after ‘personal threats’ in escalating activist spat
Dan Loeb says ‘juvenile antics’ by rebel shareholders ‘smack of desperation and inexperience’
The chair of Third Point Investors Ltd, a London-based investment fund connected to Dan Loeb’s activist group, has stepped down after he received “personal threats” amid an escalating fight with rebel investors.
Steve Bates, a former US equity analyst and JPMorgan executive who had been chair since 2019, decided that “circumstances have rendered his continued service as a director of the company untenable”, a statement from the board said on Thursday.
The decision follows meetings between TPIL and activist investors Asset Value Investors and Staude Capital. AVI owns about 10 per cent of the listed vehicle and is the largest shareholder behind Loeb.
Bates’s exit marks the latest twist in a spat that has pitted Loeb, one of the world’s toughest activists, against a group of dissenting shareholders. On Thursday, Loeb called the activists a “stain on institutional investors” and said that their “juvenile antics smack of desperation and inexperience”.
Tom Treanor, director at AVI, said in a statement to the Financial Times that it was “unfortunate” that Bates had resigned but it was “not at all surprising”. He pointed to Bates being “under pressure from the manager” and what he considered to be “misleading narratives being put out under the board’s name”.
TPIL is a £650m closed-ended fund that is listed on the London Stock Exchange and invests directly into Third Point’s flagship hedge fund, which manages about $20bn in assets. A spat has been rumbling for some time over a valuation discount between the main fund and the London-listed feeder fund.
Loeb is known for the tough tactics he has taken in activist fights with public companies where he has invested, most recently Royal Dutch Shell. Third Point has built a large stake in the oil supermajor and called for it to break itself up.
But at his UK-listed investment vehicle, Loeb is facing a taste of his own medicine. Since May, the £1.2bn London-based AVI has publicly criticised TPIL’s performance, governance and measures to close the discount with the flagship hedge fund.
Loeb scored a victory this month when he won a crucial shareholder vote that defeated a motion, backed by AVI and another investor Staude Capital, to remove Third Point general counsel Josh Targoff from TPIL’s board. Shareholders also voted in favour of an exchange mechanism which is designed to help reduce the discount.
AVI’s Treanor said claims that shareholders had rejected its motion as an activist intervention “is a gross distortion of reality”. It was only defeated, he said, by “votes controlled by the ‘VoteCo’ entity which owns no economic stake in the company”, he said. “This raises serious questions around governance at the company.”
Since the vote, TPIL has engaged privately with representatives of AVI and Staude Capital, it said on Thursday. From the company’s side, these in-person meetings were attended by Bates and an adviser.
An activist during one of these meetings made “personal threats” against Bates, saying that should he refuse to “accede to their proposals, they would attack him in other business areas”, the TPIL statement said. “This naturally raised a business conflict for Mr Bates.”
TPIL director Rupert Dorey said: “The board is appalled that Steve has been put in a position where he has decided to leave the board, but understands his reason for doing so.”
Bates said: “I very much regret having to leave the board but have recently been put in a position where it is impossible for me to continue as a director of TPIL.”
Loeb criticised the tactics of his adversaries. He said in a statement on Thursday: “The behaviour by these so-called ‘activists’ is a stain on institutional investors who attempt to engage constructively with boards and management teams. Being a successful activist requires moving on when shareholders reject your plans rather than resorting to underhanded tactics. These juvenile antics smack of desperation and inexperience.”
Gapping down
In reaction to earnings/guidance:
- AVO -9.2%
Other news:
- INNV -35.6% (receives CMS audit sanctions; withdraws guidance)
- SCPL -17.7% (SGMS withdraws all-stock offer to acquire remaining 19% interest in SCPL)
- QDEL -9.2% (Ortho Clinical Diagnostics to be acquired by Quidel Corporation (QDEL) for $24.68/share)
- JD -8% (Tencent reduces stake in JD.com)
- DKL -3.3% (DK announces partial sale program of units in DKL)
- RKLB -2.4% (to redeem all outstanding public warrants)
- ROIV -2.1% (stock offering)
- KREF -1.7% (files mixed securities shelf offering; also files for 17.75 mln share offering by selling shareholders)
- CROX -1.5% (acquires HEYDUDE for $2.5 bln)
- AEM -1.4% (provides update related to COVID-19 cases at Nunvaut operations)
- WEN -1% (files mixed securities shelf offering)
Analyst comments:
- STNE -0.9% (downgraded to Neutral from Outperform at Credit Suisse)