>>> Europe : Brokers Upgrades & Downgrades - 6th of January 2021

>>> Up
* Hannover Re Raised to Buy at Deutsche Bank
* LVMH PT Raised to 590 euros from 455 euros at Jefferies
* Siemens Healthineers Raised to Buy at Stifel; PT 51 euros
* Tesla PT Raised to $810 from $540 at Morgan Stanley
* Vodafone Raised to Buy at Berenberg; PT 155 pence
* WPP PT Raised to 1,300 pence from 1,050 pence at Citi

>>> Down
* ASR Nederland Cut to Hold at Deutsche Bank
* LPKF Cut to Hold at HSBC; PT 32 euros
* Maersk Drilling Cut to Neutral at JPMorgan; PT 224 kroner
* NN Cut to Hold at Deutsche Bank

>>> Initiation
* Acacia Pharma Rated New Buy at Jefferies; PT 7.50 euros
* Nanobiotix SA ADRs Rated New Outperform at Evercore ISI
* Sensorion Rated New Buy at Jefferies; PT 2.30 euros
* S4 Capital Rated New Buy at Peel Hunt; PT 630 pence
* Swiss Life Rated New Buy at Citi; PT 474 Swiss francs

>>> Call
* Tesla Gets Street-High Target at Morgan Stanley on Strong Sales
* Vodafone Simplifying Can Drive Re-Rating, Up to Buy: Berenberg

>>> US After Hours Summary: CALM +4.6% higher on strong earnings; SGH -0.2% basi

After Hours Summary: CALM +4.6% higher on strong earnings; SGH -0.2% basically flat on earnings; NEO -4.8% falls on offering

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: CALM +4.6%, ACMR +3.3%, PROF +0.9%

Companies trading higher in after hours in reaction to news: GRBK +2.3% (closes on purchase of 2,400 homesites), WFC +0.2% (Office of the Comptroller of the Currency terminates AML-Related Consent Order), HMC +0.2% (provides December sales data), MYGN +0.1% (to pursue strategic alternatives for autoimmune unit, realigns international operations), PLAN +0.1% (names Bill Schuh as Chief Revenue Officer), FIX +0.1% (to acquire Tennessee Electric Co), CLNC +0.1% (new CFO), CWK +0.1% (new CFO), ASB +0.1% (to sell wealth management unit), KAMN +0.1% (gets certification for sale of its K-MAX helicopter in Brazil)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: SGH -0.2%

Companies trading lower in after hours in reaction to news: TMDI -15.4% (announces "bought deal" offering at $1.55 per unit), NEO -4.8% (stock offering and convertible notes offering), CHL -2.8% (NYSE said to weigh reverting to original decision to delist CHL, CHA, CHU, according to Bloomberg), CHU -2.4% (NYSE said to weigh reverting to original decision to delist CHL, CHA, CHU, according to Bloomberg), RGNX -2% (provides update on RGX-314 ; announces new gene therapy program for DMD), CHA -1.6% (NYSE said to weigh reverting to original decision to delist CHL, CHA, CHU, according to Bloomberg), NKTR -1% (Chief Medical Officer to step down), WLL -0.3% (announces 2021 capital, operating costs and production guidance), MGLN -0.2% (S&P 'BB+' ratings remain on CreditWatch Positive after acquisition announcement), Y -0.1% (divests from Stranded Oil Resources investment), PRMW -0.1% (Florida site achieves certification), GPS -0.1% (Athleta segment introduces first-ever sleep collection)

>>> US Close Dow +0.55% S&P +0.71% Nasdaq +0.95% RUssell +1.71%

Closing Stock Market Summary

The S&P 500 advanced 0.7% on Tuesday in a relatively broad-based advance led by energy sector (+4.5%). The Russell 2000 (+1.7%) outperformed, followed by the Nasdaq Composite (+1.0%) and Dow Jones Industrial Average (+0.6%).

The price action today signaled a continuation of the buy-the-dip mindset from yesterday afternoon, as investors latched onto the so-called recovery theme that benefits small-caps, cyclical sectors, and commodities (at the expense of the dollar). The better-than-expected ISM Manufacturing Index for December was cited as a positive catalyst. 

Briefly, the manufacturing index rose to 60.7% in December (Briefing.com consensus 56.4%) from 57.5% in November for its seventh straight expansionary reading (50.0% or greater). 

Energy stocks followed oil prices higher ($49.91/bbl, +2.32, +4.9%), which settled close to $50 per barrel. Most of the oil gains were notched before an OPEC+ decision to keep production levels steady in February, although Saudi Arabia later said it will cut an additional 1 million barrels/day in February and March.

The materials (+2.3%) and industrials (+1.0%) sectors were other cyclical outperformers, while the utilities (-0.1%) sector was the lone holdout. 

Individual standouts included Apple (AAPL 131.01, +1.60, +1.2%), which had its price target raised to $150 from $145 at Canaccord Genuity, and Micron (MU 77.26, +3.21, +4.3%), which was upgraded to Buy from Sell at Citigroup.

Separately, broader conviction might have been restrained by a preference to wait for the outcome of the two Senate election runoffs in Georgia today, which will determine which party has majority control of the Senate. There was hope the results would be known by tomorrow morning. 

Longer-dated Treasury yields rose amid increased selling interest as part of the recovery-minded trade today. The 2-yr yield finished flat at 0.12%, while the 10-yr yield increased four basis points to 0.96%. The U.S. Dollar Index decreased 0.4% to 89.51. 

Reviewing Tuesday's economic data:

  • The ISM Manufacturing Index rose to 60.7% in December (consensus 56.4%) from 57.5% in November. The dividing line between expansion and contraction is 50.0%, so the December reading reflects an acceleration in manufacturing activity.
    • The key takeaway from the report is that the December increase puts the overall series just ten basis points below its high from 2018 (60.8%). The Employment Index (51.5%) returned into expansion after falling below 50.0% in October.

Looking ahead, investors will receive the ADP Employment Change Report for December, Factory Orders for November, the IHS Markit Services PMI for December, and the weekly MBA Mortgage Applications Index on Wednesday.

  • Russell 2000 +0.2% YTD
  • Nasdaq Composite -0.5% YTD
  • Dow Jones Industrial Average -0.7% YTD
  • S&P 500 -0.8% YTD

FT : Jefferies: the compromised canary

Jefferies: the compromised canary
Midsized investment bank’s earnings may be a misleading bellwether

Jefferies, which usually kicks off the earnings season for US banks, is often seen as providing a preview. On that basis, another big quarter of trading and investment banking profits lies ahead. In some other respects, this midsized, standalone investment bank is a misleading bellwether.

Jefferies, set up as a West Coast-based block trader in the 1960s, reported record fourth-quarter revenue as the pandemic fuelled a surge in trading and underwriting.

Its investment bankers pulled in a combined $915m in revenue for the three months through November, a 232 per cent rise year-on-year. Traders saw more modest gains compared with earlier quarters. Revenues from their unit still rose 62 per cent to $590m. Together, the two divisions helped push overall group revenue two-thirds higher to $1.86bn.

Jefferies’ underwriting activity benefited disproportionately from the boom in so-called blank cheque companies. These raised a record $82bn in 2020 as it emerged as a fashionable alternative to a traditional initial public offering. Jefferies was one of the top five underwriters, according to Refinitiv.

This bodes well for Goldman Sachs. Morgan Stanley should also do well thanks to a broader bounce back in M&A in the fourth quarter. But results at JPMorgan, Citigroup and Bank of America will be tempered by their exposure to main street lending. 

Another area where Jefferies may give false hope is near-term shareholder returns. The firm is not subject to dividend or stock buyback curbs. It therefore has boosted its quarterly cash dividend by a third and increased share buybacks by $193m to $250m. 

While the Fed has given the green light for the big Wall Street banks to resume stock repurchases, this does not mean the flood gates are open. Dividends will remain unchanged through March, capped at the levels set during the second quarter of 2020.

Moreover, dividends and buybacks together cannot exceed banks’ average quarterly income over the previous four quarters. Jefferies’ own analysts have calculated — without too much gloating, one hopes — that, on average, banks will be able to repurchase roughly 1 per cent of their market worth. Big lenders will remain constrained and awash with excess capital.

WSJ : Crude Collapse Hands Payday to Oil Trader Pierre Andurand

Crude Collapse Hands Payday to Oil Trader Pierre Andurand
Trading firm among a clutch of commodities hedge funds to cash in on the market mayhem sparked by the coronavirus pandemic

The collapse in oil prices triggered by the coronavirus pandemic handed a big payday to Pierre Andurand, one of the few hedge-fund managers to have survived years of disappointing returns in commodity markets.

Best known for bullish wagers on crude that led to banner returns during the oil-price boom ending in 2008, Mr. Andurand began to bet against oil when parts of China closed to contain Covid-19 in early 2020. The virus soon hammered demand for oil and other fuels globally, prompting a market rout. U.S. crude futures eventually tumbled below $0 a barrel for the first time in history.

The wager propelled Mr. Andurand’s flagship fund, part of London-based investment firm Andurand Capital Management LLP, to return 69% for the year as a whole, according to a person familiar with the matter. That snapped two years of losses for the fund, which was burned when oil prices dropped in late 2018. The gains in 2020 marked its biggest advance since its inception in 2013.


A second fund that gives Mr. Andurand more leeway to take risk gained 154%, the person familiar with the matter said. That placed it among the best-performing hedge funds globally in 2020, according to a weekly report on fund performance by HSBC Holdings PLC.

Mr. Andurand is one of the most prominent survivors of a troubled decade for hedge funds that specialize in raw materials like oil, coffee and cocoa. Hampered by choppy and often falling markets, firms including Astenbeck Capital Management, Armajaro Asset Management and Brevan Howard have all closed commodities funds.

For traders who lasted the course, gyrations in the price of oil, metals and agricultural commodities sparked by the pandemic provided a chance to make up lost ground. After sinking in the spring, U.S. crude-oil prices recovered somewhat and on Tuesday rose above $50 a barrel for the first time since February last year.

Copper prices have also surged to their highest level in more than seven years, fueled by the rebound in China’s economy. A slide in government-bond yields and the scramble to safe-haven assets sent gold prices to their highest level on record in the summer, before the precious metal fell back.

Doug King’s $170 million Cayman Islands-based Merchant Commodity Fund, up around 20% for 2020, was another to cash in on the crash in oil. Early last year, Mr. King bet that oil prices would slide and that the price of gasoline would fall relative to that of crude. This gap in prices, known as the crack spread, sank to historic lows when lockdowns kept cars off the road.

“It was hugely unprecedented and will never be repeated, I would argue,” Mr. King said of negative oil prices in a December interview.

Switzerland-based GZC Investment Management AG returned around 20%, according to a person familiar with the matter, benefiting from bearish options-based trades that profited when U.S. crude futures turned negative. A fund run by Delbrook Capital Advisors Inc., which invests in mining and energy stocks, more than doubled for the year as a whole, said Canada-based managing director Matthew Zabloski.

Hedge funds weren’t the only ones to make money. Physical trading companies that shift raw materials around the world also benefited from the oil-market mayhem. Trafigura Group Pte. Ltd., one of the biggest independent traders, posted a record profit for the fiscal year ended in September.

Some money managers are hopeful that commodities will attract renewed interest from pension funds and other institutional investors looking for alternatives to pricey stocks and bonds.

WSJ : Pence Faces Dilemma Over Biden Election Confirmation, as Trump Digs In

Pence Faces Dilemma Over Biden Election Confirmation, as Trump Digs In
Vice president seeks to balance his constitutional role in ratifying the Nov. 3 results with the president’s concerns

DALTON, Ga.—Rallying voters in Georgia ahead of Tuesday’s Senate runoff elections, President Trump delivered a political message to an entirely different audience: his vice president.

“I hope that Mike Pence comes through for us,” Mr. Trump said to cheers. “He’s a great guy. Of course if he doesn’t come through, I won’t like him quite as much.”

The pressure play Monday night came two days before Mr. Pence is set to take on perhaps his most politically challenging task in four years as a loyal second-in-command. On Wednesday he will oversee a joint session of Congress that is expected to ratify Democrat President-elect Joe Biden’s Electoral College win, even as Mr. Trump continues to reject the results and some Capitol Hill allies plan to contest some state results.

On Tuesday, Mr. Trump added further pressure by tweeting, “The Vice President has the power to reject fraudulently chosen electors.”

The states have already certified their results from their electors, and the vice president doesn’t have the power to alter them.

While Mr. Pence’s role as president of the Senate is largely ceremonial, some of the president’s most devoted supporters demand more aggressive action.

“We know this thing was stolen, and we hope and pray the vice president steps up and stands up for President Trump,” said Perry Hooper Jr. , a prominent Alabama Republican.

Despite Mr. Trump’s claims, he and his supporters have failed to present evidence of widespread voter fraud and have been rebuked in dozens of legal rulings.

Conscious of his own political future, Mr. Pence, 61 years old, must balance the concerns of Mr. Trump’s sizable base and the constitutional requirements of his position. He has been thrust into a growing Republican divide over the president’s relentless push.

“He is in a very complicated and difficult position,” said Republican pollster Dave Winston. “He needs to come off as being fair and balanced, focused on what the Senate needs to do, what the Senate represents in a very contentious situation.”

Mr. Trump concluded his comments Monday by saying that with Mr. Pence, “you’re going to get a straight shot.”

During the 1 p.m. Wednesday session, Mr. Pence will open up all the certificates reflecting the vote tallies sent by the states. He will hand them to “tellers,” who are people appointed from the House and the Senate to read the ballots and verify the results. The tellers will then read the states’ certificates in alphabetical order. None of the efforts to contest the results are expected to succeed.

Mr. Pence has been reviewing the law and consulting experts, including speaking with the Senate parliamentarian. A senior administration official said that Mr. Pence “will follow the law and uphold the constitution.”

Since November, the vice president—who allies stress has been loyal to Mr. Trump—has walked a careful line as the president has steadily amplified his claims of a rigged election. Mr. Pence has told Republicans that legal votes must be counted and illegal ones thrown out.

A Republican congressman’s long shot effort to give Mr. Pence more power over the proceedings was rejected by a federal judge. The House of Representatives asked for the case to be dismissed and the Justice Department, acting on behalf of Mr. Pence, also weighed in against the suit.

Mr. Trump was surprised about the Justice filing, said a person familiar with his thinking.

At his own rally earlier Monday in Georgia, Mr. Pence responded to voters shouting “stop the steal,” saying: “We all got our doubts about the last election. And I want to assure you, I share the concerns of millions of Americans about voting irregularities. And I promise you, come this Wednesday, we’ll have our day in Congress.”

Mr. Pence’s team had already sought to manage the tricky situation. Chief of staff Marc Short issued a statement Saturday after a group of Senate Republicans said they planned to raise challenges to some of the states’ results. He said the vice president welcomed the efforts of Congressional members to “use the authority they have under the law to raise objections and bring forward evidence.”

The statement was well received by the president, said a person familiar with his thinking. Mr. Trump huddled with Mr. Pence, Mr. Short and others in the Oval Office late Monday. Mr. Short declined to discuss private conversations between the president and vice president.

Mr. Trump’s personal attorney Rudy Giuliani said during a podcast interview with conservative Charlie Kirk posted Monday that the president and vice president were reviewing research and would likely not make a decision until Tuesday on what Mr. Pence should do on Wednesday. He said the president “will make this decision, based on his judgment and the advice that he gets on what the constitution demands.”

Some Trump advisers are promoting the idea that the vice president could have a more expansive role. On Fox News over the weekend, Trump adviser Peter Navarro incorrectly argued that Mr. Pence had the authority to delay the process and grant a 10-day audit of the results.

“Peter Navarro is many things,“ Mr. Short said of that claim. “He is not a constitutional scholar.”

Aides to Mr. Pence are frustrated, a person close to the situation said, describing an “impossible position where he can’t please anybody.” But one person close to the White House argued that Mr. Pence is “always in that balancing act.”

A cautious presence in Mr. Trump’s frequently chaotic administration, Mr. Pence is consistently deferential to the president and takes care to never reveal White House ambitions of his own.

Using more diplomatic language and soothing tones, he calmly flanked Mr. Trump during the investigations into Russian interference in the 2016 election, the impeachment of the president by the U.S. House and the tumultuous response to the coronavirus pandemic.

Should Mr. Trump opt out of a 2024 presidential bid, Mr. Pence is one of a number of Republicans likely to jockey for the nomination. Former Michigan GOP chairman Saul Anuzis said Mr. Pence could be a strong presidential prospect.

“He’s not the most dynamic and exciting type of candidate,” Mr. Anuzis said. “But America might be ready for calm.”