“An army marches on its stomach”, Napoleon reputedly said. Nearly 160 years later the French government is using a similar argument to protect its largest grocer Carrefour from a possible 16 billion euro takeover by Canada’s Alimentation Couche-Tard. Yet while concerns over jobs and supply chains have been given new prominence by the pandemic, a foreign owner is unlikely to threaten either.
France has form in wrapping food purveyors in the tricolor. In 2005 the government vowed to protect “the interests of France” when American soft drink giant PepsiCo was sniffing around dairy group Danone. Finance Minister Bruno Le Maire echoed that sentiment on Wednesday when he said jobs and food sovereignty were key concerns in the possible takeover of Carrefour by the Canadian giant. Speaking during the Reuters Next conference on Thursday he added that such a deal would “be a major difficulty for all of us”.
It’s far from clear that a sale would threaten French jobs, though. Couche-Tard’s mostly North American convenience stores and petrol stations have no overlap with Carrefour’s supermarkets. Unlike a manufacturer, the Canadian group could hardly move thousands of cashiers abroad. Indeed, supermarkets have hired more staff to keep shelves stocked during the pandemic. A change of ownership will make little difference.
Concerns about security of food supply are more understandable. Bare shelves and global shortages of baby formula and toilet paper in March and April last year highlighted the importance of supermarkets and how they source essential goods. Buying food and other goods from local producers also supports the domestic economy.
Yet France does not need to block a takeover to protect local suppliers. Emmanuel Macron’s government could require Couche-Tard to sign an agreement that a certain percentage of suppliers must be French. Even better, it could pass a law requiring all the country’s supermarkets, including Carrefour rival Casino, to buy a proportion of their products locally.
Le Maire’s concern about domestic ownership is also at odds with Carrefour’s global footprint. France accounted for less than half of Carrefour’s 81 billion euros of revenue in 2019; the company is the largest cash and carry operator in Brazil. An upcoming election and the pressure of the pandemic mean Le Maire is right to worry about food supplies. But his defence is focused on the wrong enemy.
Oil Demand Recovery Expected to Fall Short of Pre-Pandemic Levels This Year
OPEC says rising infection rates and government restrictions continue to stifle demand
Global appetite for oil will remain subdued in the first quarter of 2021 due to coronavirus lockdown measures and rising infection rates, the Organization of the Petroleum Exporting Countries said Thursday.
In its monthly report, OPEC maintained its forecast that world oil demand in 2021 won’t recover to the levels seen before the pandemic. Global demand took a 10% hit last year and the cartel expects it to rebound to 95.9 million barrels a day this year, but remain 4% below 2019 levels.
Despite the beginning of vaccination programs in recent weeks, rising infection rates in wealthy Western nations are continuing to stymie an economic recovery, OPEC said. In Europe, government restrictions are forecast to significantly hurt growth again in the first quarter of 2021, it added.
While the economic impact of the virus is continuing in richer Organization for Economic Cooperation and Development countries, demand in large non-OECD nations such as China and India has recovered strongly. OPEC expects demand in non-OECD countries to increase by 3.3 million barrels a day in 2021.
Oil prices and equities have risen sharply in recent weeks, buoyed by vaccinations and Saudi Arabia’s announcement last week that it would unilaterally cut an additional one million barrels of daily oil production next month on top of the reductions already agreed on between OPEC and its allies.
Brent crude oil, the global benchmark, fell 1.2% on Thursday to $55.40 a barrel. West Texas Intermediate futures, the U.S. gauge, were up 0.9% at $52.45 a barrel, despite weekly Energy Information Administration data late Wednesday showing a drop in U.S. crude inventories.
Both benchmarks have jumped more than 7% in the first two weeks of the year, while shares in BP PLC and Exxon Mobil Corp. have climbed more than 17% in the same period.
The decision of the OPEC-Plus alliance to maintain production curbs for another month helped prices reach levels not seen since last March, with U.S. crude prices breaking through the $50-a-barrel mark, the break-even price for many shale producers, according to Eugen Weinberg, head of commodities research at Commerzbank. Still, he added, U.S. producers haven’t yet reacted to that price move.
While OPEC left its non-cartel supply forecast for the year unchanged in its January report, it expects stronger production forecasts for the U.S. this year to be counterbalanced by weaker output from Russia, resulting in non-OPEC production growth of 800,000 barrels a day in 2021.
Alzheimer’s drugs: trials and tribulations
Failure rate has been dauntingly high but success would be hugely profitable
An effective drug against Alzheimer’s disease would be a blessing for millions. It would also be hugely profitable for the company that invented it. Hence the excitement over promising trial results from Eli Lilly. The US pharma group’s share price has jumped 12 per cent since the announcement on Monday, adding almost $18bn to its market value.
This was just a mid-stage trial involving a mere 272 patients. But the reaction reflects the potential importance of Alzheimer’s treatments. US sales for all of these could be as much as $50bn a year, increasing the overall pharmaceuticals market by a tenth, says Bernstein.
Eli Lilly’s drug donanemab is an antibody designed to remove clumps of the protein beta-amyloid from the brain. The trial results may increase the chances of success for other anti-amyloid drugs such as Roche’s gantenerumab and Biogen’s aducanumab. The latter’s shares jumped 6 per cent on Monday. The Massachusetts-based biotech expects a decision from US regulators on its drug within the next two months, though sceptics think a lot more evidence is needed to justify an approval.
The failure rate for drugs targeting the amyloid protein has been dauntingly high and not everyone is convinced by the argument that earlier treatments were given too late to prevent damage. Even if they work, improvements may be modest and side effects severe. Some experts draw a comparison with gruelling early chemotherapy treatments.
Other approaches are being explored. A Chinese drug oligomannate suppresses gut bacteria that may be linked to the disease. Eli Lilly, Biogen and AbbVie are developing drugs that aim to stop the build-up of a protein called tau in the brain.
But much rides on the theory that the amyloid protein plays a central role in the disease. This hypothesis has dominated Alzheimer’s research over the past 25 years. The prospects for drugs based on it, such as donanemab, are reaching a critical juncture. The next couple of years will be make-or-break.
Gapping down
In reaction to earnings/guidance:
- JWN -3.7% (reports holiday sales), PROG -2.3% (guides FY21 revenue in-line), FRPT -1.8% (guides Q4 revs below consensus, citing supply constraints), IART -1% (guidance)
M&A news:
- NAV -2.3% (to sell its Melrose Park, IL facility)
Other news:
- NNDM -10.8% (prices offering of 35 mln ADSs at $9.50 per ADS)
- LMND -5% (prices offering of 3.3 mln shares of common stock at $165.00 per share)
- HRZN -1.8% (provides Q4 portfolio update)
Analyst comments:
- FCEL -5.5% (downgraded to Underweight from Neutral at JP Morgan)
- URBN -3.4% (downgraded to Underweight from Neutral at JP Morgan)
- OLLI -3% (downgraded to Underperform from Buy at BofA Securities)
- PENN -2% (downgraded to Sell from Hold at Loop Capital)
- DD -1.8% (downgraded to Neutral from Overweight at JP Morgan and removed from Analyst Focus List)
- GMLP -1.2% (downgraded to Hold from Buy at Stifel)
- ROCK -0.8% (downgraded to Sector Weight from Overweight at KeyBanc Capital Markets)
Gapping up
In reaction to earnings/guidance:
- ORGO +31.5% (guides Q4 revs well above consensus), APYX +24.7% (guides Q4 revs above consensus), ETH +9.4% (guides DecQ EPS above consensus), CAJ +4.4%, APHA +4.3%, SIG +2.5%, TSM +2.3%, FRC +1.4%, DAL +1.4%, BLK +1.3%
M&A news:
- AVAV +6.7% (to acquire Arcturus UAV for $405 mln)
Select semiconductor related names showing strength following TSM earnings/CAPEX outlook:
- AMAT +3.5%, KLAC +3.4%, LRCX +2.7%, TER +2.5%, MKSI +0.9%, SMH +0.8%
Other news:
- NK +32.7% (reports positive interim data on survival rates in metastatic pancreatic cancer trials)
- ORGO +32.2% (enrolls first patient in pivotal phase 3 clinical trial of RMAT-designated ReNu for knee osteoarthritis)
- PFSW +29.2% (reports Q4 orders fulfilled increased 88%)
- BCYC +10.8% (Bicycle Toxin Conjugates targeting oncological indications, as well as its novel, fully synthetic Bicycle tumor-targeted immune cell agonists)
- CEMI +10.2% (announces the CE mark for the DPP SARS-CoV-2 Antigen and IgM/IgG test systems, providing regulatory approval to register and market both test systems in the European Union and other geographies that accept the CE mark)
- ORTX +8.5% (FDA has granted RMAT designation to OTL-200 for the treatment of early-onset metachromatic leukodystrophy)
- ALDX +5.2% (prices offering of 6,842,106 shares of its common stock at $9.50 per share)
- PGEN +5.1% (presents pipeline updates)
- APA +3.9% (Apache and Total (TOT) announced an oil discovery at the Keskesi East-1 exploration well in Block 58 offshore Suriname)
- SIGA +3.6% (Canada to purchase $33 mln of oral TPOXX)
- XL +3.5% (files for offering of common stock and warrants )
- NVTA +3.2% (announces the launch of a new project with Bristol Myers Squibb (BMY), Janssen Research & Development (JNJ), Novartis (NVS) and Genentech, a member of the Roche (RHHBY) Group, to develop a standardized panel for MRD detection in patients with AML)
- TMST +3.1% (to increase SBQ prices by $40/ton)
- PRVB +2.7% (prices offering of 6.25 mln shares of common stock at $16.00 per share)
- VRNA +2.5% (completes enrollment in pilot study of pMDI Ensifentrine in U.S. patients hospitalized with COVID-19)
- KLDO +2% (announces positive interim results of controlled study of KB109 in patients with mild-to-moderate COVID-19)
- JNJ +1.7% (says single-dose COVID-19 vaccine provided immune response that lasted for at least 71 days)
- NEM +1.2% (approved a share repurchase program for up to $1.0 billion of common equity, to be completed over the next 18 months)
Analyst comments:
- SITC +3.3% (upgraded to Overweight from Neutral at Piper Sandler)
- INTC +2.4% (upgraded to Overweight from Equal-Weight at Morgan Stanley, among others)
- CMG +1.4% (upgraded to Outperform from Sector Perform at RBC Capital Mkts)
- ODFL +1.4% (upgraded to Neutral from Sell at Goldman)
- HHR +1.2% (upgraded to Neutral from Underperform at BofA Securities)
- PPG +1% (upgraded to Buy from Hold at Berenberg)