Gapping up
In reaction to strong earnings/guidance:
- DOYU +12.3%, HIBB +9.4%, AZO +3.6%, AMWD +2.4%, NPTN +2.4% (reaffirms second quarter 2020 guidance following recent U.S. Department of Commerce announcements) BAH +2.2%
Select ETFs showing strength:
- IWM +2.9%, XLF +2.6%, XLE +2.5%, SMH +2.3%, DIA +2%, XLK +1.9%, SPY +1.8%, QQQ +1.6%, .
Other news:
- EVFM +38.5% (announces that the FDA has approved Phexxi, a vaginal gel for the prevention of pregnancy) ARGX +29.9% (reports positive topline results from Phase 3 ADAPT trial of Efgartigimod)
- NVAX +19.7% (initiates Phase 1/2 clinical trial of COVID-19 Vaccine)
- CERC +13.4% (Cerecor and Myriad (MYGN) announce that levels of novel cytokine, LIGHT, were highly correlated with disease severity and mortality in a COVID-19 acute respiratory distress syndrome biomarker study)
- ZEAL +12.9% (announces FDA acceptance of NDA for dasiglucagon HypoPal Rescue Pen as treatment for severe hypoglycemia)
- ZYNE +9.6% (announces presentation of phase 2 BELIEVE safety, efficacy and quality of life data in developmental and epileptic encephalopathies)
- RMTI +8% (files New Drug Submission with Health Canada for Triferic AVNU)
- MESO +7.6% (reports clinical outcomes using RYONCIL)
- TAK +4.6% (FDA approval of ALUNBRIG)
- CODX +4.5% (COVID-19 test successfully used to identify coronavirus in cancer tissue)
- KAR +3.8% (announces $550 million strategic investment led by funds advised by Apax Partners)
- MRK +3.2% (announces multiple scientific efforts to combat COVID-19; to collaborate with IAVI to develop vaccine against COVID-19)
- TEVA +2% (presents new data for AJOVY)
- MANU +1.7% (currently anticipates a return to play during the month of June 2020)
- TSN +1.3% (announces results of facility-wide testing for COVID-19 at Virginia poultry facility)
Analyst comments:
- CREE +6.1% (upgraded to Mkt Outperform from Mkt Perform at JMP Securities)
- ACLS +4.3% (upgraded to Buy from Neutral at B. Riley FBR)
- IRBT +4.3% (upgraded to Neutral from Underweight at JP Morgan)
- ARR +4.2% (upgraded to Neutral from Underperform at Credit Suisse)
- ROK +2.8% (upgraded to Buy from Neutral at BofA/Merrill)
- JBHT +2.1% (upgraded to Outperform from Neutral at Robert W. Baird)
- HPE +1.3% (upgraded to Neutral from Underweight at JP Morgan)
Early premarket gappers
- Gapping up:
- EVFM +45.7%, ARGX +26.8%, NVAX +18.7%, DOYU +14.6%, ZEAL +12.3%, IWM +3%, XLF +2.7%, CODX +2.5%, TEVA +2.3%, DIA +2.2%, XLK +2.2%, TAP +2.2%, XLE +2.1%, SPY +2%, QQQ +1.9%, MANU +1.7%, TAK +1.5%, BNS +1.5%, TSN +1.4%, MESO +1.2%, AMWD +0.8%
- Gapping down:
- LTM -39.9%, HTZ -35.9%, VXX -4.8%, REGN -3.2%, SMH -0.8%, GLD -0.6%, GDX -0.5%, BXP -0.5%, HIBB -0.5%
Hertz: collateral damage
The US car rental company’s demise has ramifications for the broader auto industry
It isn’t until the tide goes out, investor Warren Buffett once quipped, that you see who was swimming naked. Hertz is the latest name in corporate America caught skinny dipping. The US car rental company filed for Chapter 11 bankruptcy late on Friday night after the coronavirus pandemic crippled global travel and with it, demand for Hertz vehicles.
It would be easy to dismiss Hertz as just another victim of the pandemic. That is only part of the story. The company, which also owns the Dollar and Thrifty brands, was struggling long before Covid-19.
Last year Hertz made a net loss of $58m despite raking in nearly $10bn in revenue. Rivals Enterprise and Avis Budget have been hard hit by the pandemic too. But Hertz — hobbled by $24.4bn of borrowings — was the most vulnerable. Its collapse is the culmination of years of crushing debt and strategic mis-steps.
Hertz flaunts a full set of self-inflicted injuries. First comes the ill-fated $2.3bn acquisition of budget rival Dollar Thrifty in 2012. Second, Hertz was slow to respond to the rise of ride-hailing companies such as Uber and Lyft. Third, management upheaval — four chief executives in six years — has plagued the business.
Fourth, and most importantly, Hertz opted to own a large portion of its fleet outright rather than through “buyback” agreements with carmakers. This was its undoing.
In normal times, Hertz would simply sell off excessive vehicles when demand dropped in order to drum up cash and pay creditors. But prices for used cars have slumped as car dealerships and other rental car companies rushed to sell their inventory. Since Hertz financed most of its fleet with asset-backed debt, the drop in value of the asset means lenders can force it to stump up more cash as collateral.
Hertz’s demise has ramifications for the broader auto industry. The company has already cancelled most new car orders. It risks pouring yet more supply into the moribund used car market. There is a chance that demand for automobiles will rally thanks to prolonged social distancing. If so, it will come too late to help Hertz.
Asset-backed debt: everybody Hertz
see attached
Endgame of U.S.-China rivalry is ‘lose-lose,’ says Harvard professor
- U.S.-China relations look set to worsen, and the endgame is a “lose-lose” situation for both sides, said Graham Allison, a political science professor from Harvard University.
- The rivalry could result in the collapse of the so-called phase one trade deal and a continuation of the blame game over the origins of the coronavirus, said Allison, Harvard’s Douglas Dillon Professor of Government.
- Even though relations between the U.S. and China have deteriorated much faster than expected, neither is prepared for a Cold War, said Cheng Li from Brookings Institution.
That comes as leaders from the two countries — U.S. President Donald Trump and Chinese President Xi Jinping — seek to maintain control domestically as the coronavirus pandemic ravages both economies, said Graham Allison, Harvard’s Douglas Dillon professor of government.
“The endgame will probably be lose-lose,” he told CNBC’s “Squawk Box Asia” on Tuesday.
“I think this will be worsening across the board and I hope that they don’t do any permanent damage,” added Allison, who was assistant secretary of Defense under President Bill Clinton and special advisor to the secretary of Defense under President Ronald Reagan.
The rivalry between the two economic giants could result in the collapse of the so-called phase one trade deal and a continuation of the blame game over the origins of the coronavirus, the professor explained.
In addition to Allison, other experts have warned, before the coronavirus outbreak, that Beijing would face difficulties fulfilling its commitment in the phase one trade deal — which requires China to buy an additional $200 billion in U.S. goods and services by 2021 on top of 2017 levels. The pandemic has made that even more difficult, experts said.
Some have also warned that rising U.S.-China tensions could lead to a Cold War. But Cheng Li, a researcher from Brookings Institution, said neither country is ready for that even though relations have deteriorated much faster than expected.
“I don’t think policymakers (on) both sides are really ready for such a war,” Li, director of the John L. Thornton China Center and a senior fellow in the foreign policy program at Brookings, told CNBC’s “Street Signs Asia” on Tuesday.
“I think the war will be devastating, there will be no winner,” he added. “I think this war should and can and must be prevented.”
>>> Up
* AIB Group Raised to Equal-Weight at Barclays; PT 1.50 euros
* Acciona Raised to Hold at Grupo Santander; PT 95 euros
* Iberdrola Raised to Buy at Goldman; PT 10 euros
* Inficon Raised to Buy at Berenberg; PT 840 Swiss francs
* Kone Oyj Raised to Overweight at JPMorgan; PT 63 euros
* Siemens Healthineers PT Raised to 52 euros at Berenberg
* Siltronic Raised to Buy at Bankhaus Metzler; PT 103 euros (+)
* SKF Raised to Hold at Handelsbanken; PT 165 kronor
* VAT Raised to Buy at Berenberg; PT 195 Swiss francs
>>> Down
* Adyen Cut to Hold at KBC Securities; PT 900 euros (+)
* Ascential Cut to Neutral at Goldman; PT 289 pence
* Akasol Cut to Hold at Deutsche Bank; PT 45 euros
* Bank of Ireland Cut to Equal-Weight at Barclays; PT 2.40 euros
* BMW Cut to Sell at Citi; PT 45 euros
* Carl Zeiss Meditec Cut to Reduce at Commerzbank; PT 75 euros (+)
* DiaSorin Cut to Underperform at Jefferies; PT 120 euros
* Equinor Cut to Sector Perform at RBC; PT 150 kroner
* Hurricane Energy Cut to Speculative Buy at Canaccord (+)
* Kone Oyj Cut to Hold at Liberum; PT 58 euros (+)
* Maersk Cut to Hold at Jefferies; PT 7,500 kroner
* Rockwool Cut to Hold at Handelsbanken; PT 1,850 kroner
* Salmar Cut to Hold at Berenberg
* Sika Cut to Hold at MainFirst; PT 185 Swiss francs
* Telefonica Cut to Equal-Weight at Barclays; PT 5 euros
* UniCredit Cut to Neutral at JPMorgan; PT 9 euros
* Zooplus Cut to Hold at Berenberg; PT 150 euros
>>> Initiation
* Inventiva Rated New Neutral at Chardan Capital Markets
* Nobia Rated New Buy at Pareto Securities; PT 57 kronor (+)
* Team17 Rated New Sell at Investec; PT 505 pence (+)
* Viscofan Rated New Neutral at JB Capital Markets; PT 60 euros (+)
>>> Call
* Aryzta North America Performance Surprises Positively: Vontobel (+)
* BMW’s Leasing Risks Being Overlooked, Downgrade to Sell: Citi
* Coro Energy Reports ‘Significant’ Resource Upgrade at Mako Field (+)
* DiaSorin Downgraded, Valuation Can’t Be Justified: Jefferies
* Berenberg Bullish on Eurofins Outlook, Says Testing Co. Stronger (+)
* Maersk Faces Oversupplied Container Market, Jefferies Says
* Norsk Hydro May Face Hard Capital-Allocation Decisions: MS
* Salmar Cut to Hold by Berenberg After Strong Rebound (+)
* Sika Facing Negative Lockdown Effects on FX, Autos: Mainfirst (+)
* SKF Structural Measures Are Having an Effect, Handelsbanken Says (+)
* Zooplus 1Q Flattered by One-Time Effects, Cut to Hold: Berenberg
EU-Japan tryst is a sign of shifting geopolitical times
Summit on Tuesday comes as both powers seek solace in the face of tensions with China and the US
EU leaders will hold on Tuesday their first bilateral summit since the coronavirus pandemic began — and their partner’s identity highlights a changing world order.
European Council president Charles Michel and his European Commission counterpart Ursula von der Leyen will log on with Shinzo Abe, Japan’s prime minister, to buttress an alliance made more crucial by tensions with both China and the US.
The online parley is part of EU efforts to work with like-minded powers in support of the multilateral system in the face of an increasingly forceful Beijing and a nativist Washington. It will kick off an intense few days of geopolitics for the European bloc, as foreign ministers prepare to meet on Friday with China and its crackdown in Hong Kong likely to be high on the agenda.
“We need a more robust strategy for China, which also requires better relations with the rest of democratic Asia,” Josep Borrell, the EU’s foreign policy chief, told an annual conference of German ambassadors in Berlin on Monday. “That’s why we must invest more in working with India, Japan, South Korea, et cetera.”
The EU-Japan call on Tuesday will focus on the international response to the pandemic and the strategic partnership between the two powers. EU officials are keen to promote the co-operation as substantial and growing, with bilateral trade rising 5.8 per cent last year after the signing of a trade agreement. The EU and Japan co-operated last week to push a resolution endorsed by World Health Organization members that calls for global access to a coronavirus vaccine and for a probe into the pathogen’s origins.
The EU and Japan also signed an ambitious deal in September to build infrastructure and set development standards in joint projects around the world, in a riposte to China’s contentious Belt and Road Initiative. Mr Abe has called the growing co-operation between Brussels and Tokyo a “resounding declaration” at a time when “the values and principles we have held dear could waver or drift”.
The question is where the relationship goes from here. It is likely to be some time before the initiative unveiled in September will yield big results, especially given the disruption caused by the pandemic.
Tuesday’s talks are only scheduled to last an hour and are unlikely to delve deeply into geopolitical developments or more contentious points in the EU-Japan relationship, such as investment. The commission’s website page on Japan notes obliquely that “doing business or investing can be challenging for European companies due to the features of Japanese society and Japan’s economy”.
Progress on such matters will probably have to wait for a face-to-face summit in Tokyo when such events are possible again. Until then, a show of telesolidarity would provide both sides with at least brief respite from the turmoil of dealing with Beijing and Washington.