FT : Most German banks are imposing negative rates on corporate clients

Most German banks are imposing negative rates on corporate clients
Practice proves controversial in country where ECB has been accused of penalising savers

Almost 60 per cent of German banks are charging negative interest rates on the deposits of corporate clients and more than 20 per cent are doing the same for retail customers, according to new data published on Monday.

The figures, revealed in a survey by the German central bank, give one of the clearest indications of how many lenders are charging customers to deposit money since the European Central Bank cut interest rates deeper into negative territory in mid-September.

The Bundesbank surveyed 220 lenders at the end of September — two weeks after the ECB’s cut its deposit rate from minus 0.4 to a record low of minus 0.5 per cent. In response, 58 per cent of the banks said they were levying negative rates on some corporate deposits and 23 per cent said they were doing the same for retail depositors.

While most of the lenders are passing on negative rates only to institutions, companies or individuals with large deposits, the practice has proved particularly controversial in Germany, where the ECB has been attacked for penalising prudent savers.

Germany’s Bild tabloid depicted Mario Draghi, the recently retired ECB president, as “Count Draghila”, a vampire sucking dry the accounts of savers.

James von Moltke, Deutsche Bank’s chief financial officer, last month told analysts that Germany’s largest lender had stepped up its attempts to pass on negative interest rates to clients after concluding it could do so for about a fifth of all its retail deposits.

“This is more difficult in the private bank business than in corporate or institutional deposits and we don’t see an ability to adjust legal terms and conditions of our accounts on a broad-based basis,” said Mr von Moltke, adding that Deutsche was instead approaching retail clients with large deposits on an individual basis.

Stephan Engels, Commerzbank’s chief financial officer, said this month that Germany’s second-largest listed lender had started to approach wealthy retail customers holding deposits of more than €1m.

In one of the most aggressive moves in the sector, Berliner Volksbank said last month that it would start applying a minus 0.5 per cent rate on any deposits above €100,000 at the country’s biggest co-operative lender.

Negative interest rates were first introduced in the eurozone in June 2014 to boost a flagging economy by nudging banks into lending more money, rather than leaving excess liquidity languishing at the central bank.

But the knock-on effect has been to further dent the already strained earnings of Europe’s banks, which hold a combined €1.9tn of reserves at the ECB to satisfy post-crisis liquidity regulations.

According to Biallo.de, a German price comparison website, 140 lenders in Germany have already started to charge negative interest rates.

State-owned German development bank KfW is preparing to pass on negative interest rates to its borrowers — paying them to borrow money. KfW is legally obliged to pass on its own funding terms to clients and it can already refinance itself at negative rates. “We don’t know if and when we might offer loans at negative interest rates, but from a technical point of view, we want to be ready to do so,” it said.

To give banks some relief from the cost of negative rates, the ECB introduced a “tiering” system that exempts part of their deposits with the central bank from the charges.

Luis de Guindos, vice-president of the ECB, said in a speech on Monday that the profitability of European banks had been “persistently low” and their aggregate return on equity dipped below 6 per cent in the year to June. But he said negative interest rates were not the main cause, blaming a lack of consolidation and bloated costs compared with US and Nordic rivals.

FT : US extends licence for companies doing business with Huawei

US extends licence for companies doing business with Huawei
New 90-day extension comes as US prepares rules on telcos that pose national security risks

The Trump administration has granted an extension for US companies to do business with blacklisted Chinese telecoms group Huawei as regulators continue to hammer out rules on companies that pose national security risks and negotiators strive for progress in trade talks.

The Commerce Department and Bureau of Industry and Security announced on Monday they issued a new 90-day extension allowing US companies “specific, limited engagements” with Huawei and its non-US affiliates.

The Trump administration in May put the Chinese company on an economic blacklist, citing worries the group poses a national security risk. This barred it from buying inputs crucial to the manufacture of its telecommunications equipment, including purchasing semiconductors from US companies, such as Qualcomm, and from using Google’s Android operating system in its smartphones.

Huawei’s addition to the so-called entity list means American companies needed to obtain a licence from the US government to sell technology to the Chinese group. Today’s announcement is the latest in a series of 90-day extensions the Commerce Department has issued since May allowing Huawei to purchase some US-made goods in order to minimise disruption for its customers.

“The Temporary General License extension will allow carriers to continue to service customers in some of the most remote areas of the United States who would otherwise be left in the dark,” commerce secretary Wilbur Ross said in the statement on Monday.

“The Department will continue to rigorously monitor sensitive technology exports to ensure that our innovations are not harnessed by those who would threaten our national security,” he added.

The action against Huawei in May came amid a tense time in trade negotiations between the world’s two largest economies. A move by the US to put tariffs on about $300bn in Chinese imports not already subject to levies was met at the time with retaliatory action from China.

Earlier this year, President Donald Trump said he wanted the US to win the race for ultra-high speed telecommunications, known as 5G, through competition and “not by blocking out currently more advanced technologies”. That was widely seen as referring to Huawei.

The US’s national security establishment had pushed other countries to bar Huawei from 5G networks. Australia and Japan have joined the US in barring Huawei from involvement in 5G, while New Zealand’s intelligence services have expressed concern. The UK and Germany had indicated they will allow Huawei to provide equipment for their 5G networks.

FT : SIX/BME: a Spanish acquisition

SIX/BME: a Spanish acquisition
It is the Swiss financial group that holds all the winning cards here

Swiss financial group SIX does not expect an inquisition. On Monday it announced an all-cash bid for Bolsas y Mercados Españoles valuing the Spanish stock exchange operator at €2.8bn (€34 a share), a healthy 35 per cent premium to Friday’s close. SIX will believe that BME shareholders find that tough to refuse.

Whatever confidence SIX has, French exchanges group Euronext has also confirmed it is in talks with BME. Its shares remained higher than SIX’s offer price throughout Monday.

Shareholders have already got a good price. At almost 15 times next year’s ebitda SIX’s bid puts BME at a record valuation. Indeed, that exceeds Euronext’s shares at 14 times. As it already has net debt nearly twice its ebitda, a higher counter bid could well include shares. BME shareholders would want to consider Euronext’s prospects carefully.

BME shareholders would want to throw themselves at any suitor. Until Monday, BME shares were worth just four-fifths of the level of five years ago. Annual revenues have shrunk by about €50m over the same period alongside dwindling cash equities. Compare that with Euronext, where shares have risen more than threefold as the exchange expanded and diversified into derivatives and data sales.

Yet Euronext’s sums might not quite work. It would bolt on BME to its existing collection of European exchanges, using the added scale to drive down costs. Justifying the premium by excising costs is tough. BME’s overheads last year stood at €78m. On a taxed and capitalised basis the premium offered by SIX requires annual reductions of nearly double that. Euronext is unlikely to get its shareholders to agree to a higher bid.

On the other hand, SIX has not mentioned any cost-cutting — one reason perhaps why the BME board likes the offer. It instead justifies the sticker price with assumed benefits from cross-border trading and greater diversification of revenues. As a private company, SIX faces minimal pressure from its shareholders and its only currency is cash. It is SIX that holds all the winning cards here. No question.

>>> MOR GY - Tafasitamab B-MIND DLBCL study successfully passed futility analysi

Tafasitamab B-MIND DLBCL study successfully passed futility analysis
- Ongoing tafasitamab phase 3 B-MIND study has successfully passed the pre-planned, event-driven interim analysis for futility. An independent data monitoring committee (IDMC) reviewed the data and recommended to increase the number of patients from currently 330 to 450. B-MIND compares the efficacy of the CD19 antibody tafasitamab plus bendamustine with rituximab plus bendamustine in patients with relapsed or refractory diffuse large B cell lymphoma (r/r DLBCL).
- Within the interim analysis for futility, data were assessed by the IDMC for the probability of a positive study at primary completion. The IDMC assessed efficacy data in both the overall patient population as well as in the biomarker-positive subpopulation. The biomarker, described as patients with a low natural killer cell count at baseline, was implemented as a co-primary endpoint in an amendment of B-MIND in the first quarter 2019. The recommendation to enroll more patients aims to increase statistical power of the study in the biomarker-described patient subpopulation as well as the overall patient population. Data of the analysis were not shared with MorphoSys.
- As a continuation of the B-MIND study protocol, enrollment will proceed according to the original inclusion and exclusion criteria to allow for ongoing comparison of the efficacy in the overall and biomarker positive patient population. Top line results are expected to be available in Q1 2022.

Barrons :The Stock Market Can Keep on Rising. JPMorgan Explains Why.

The Stock Market Can Keep on Rising. JPMorgan Explains Why.

When it comes to views on U.S. stock markets these days, either the sky is about to fall or it’s nothing but blue skies. For J.P. Morgan strategists, the sun seems to be shining pretty brightly on U.S. equities.

The Dow industrials pushed past 28,000 for the first time on Friday, while the S&P 500 notched its fourth straight record close. Provided nothing gets derailed over trade, few see equities getting skewered anytime soon.

In a note to clients from J.P. Morgan Cazenove, the U.K. stockbroking arm of the bank, Mislav Matejka, head of global and European equity strategy, pushed back against an argument he’s clearly been hearing a lot of lately: With the S&P 500 up more than 23% for the year to date, a lot of good news is already priced in.

Matejka came up with three reasons for investors not to get cold feet. Number one is that while U.S. equities have outperformed this year, $225 billion has flowed out of that asset class since January 2018. That has fully unwound inflows between 2016 and 2017, while $465 billion has poured into bonds this year.

And while retail money has recently started to flow back into equities, Matejka said it would take “more than a few weeks” to compensate for 18 months of outflows. He added that “rolling losses” from fixed income may also drive some upside for stocks.

His second point is that investors may just be willing to pay more for stocks in future. “The latest global equity forward P/E [price to earnings ratio] is 16x, which is pretty much the average of the past 30 years. In contrast, global bond yields are almost 300 [basis points] below their averages,” he said.

Number three on his list? The negative earnings per share revisions we’ve seen all year should start to moderate, especially if purchasing managers index surveys start to brighten up. For developed markets at least, October seemed to bring some stability on the PMI front, though some would urge avoiding too much heady optimism.

“If investors gain confidence that EPS momentum is stabilizing, and that earnings will grow next year, even if it is less than consensus is currently projecting, we think that will be good enough to deliver further upside,” Matejka said.

BArrons : Amarin Stock Has Soared. Citi Thinks It’s Gone Far Enough.

After the biotech firm Amarin’s blockbuster week last week, in which the stock jumped 37% on news around the company’s cardiovascular drug Vascepa, analysts at Citi Research are downgrading the firm. They believe the medication’s promise is now priced in.

Citi Research analyst Joel Beatty downgraded Amarin to Neutral/High Risk from Buy/High Risk. He increased his price target on the stock to $27 from $23. Shares of Amarin (ticker: AMRN) closed Friday at $24.02.

“We believe Vascepa is an effective drug and anticipate sales accelerating significantly over the next year, however, we believe this is now already priced into the stock,” Beatty wrote.

The stock jump also reflects an expectation that the company could be acquired, he wrote.

Amarin didn’t immediately respond to a request for comment about the downgrade.

The back story. Shares of Amarin have soared 76.5% so far this year. The company sells a fish-based drug called Vascepa that currently is approved by the Food and Drug Administration to reduce triglyceride levels in certain patients. Last week, an FDA advisory committee voted unanimously to recommend that the FDA approve Vascepa to reduce the risk of cardiovascular events, including heart attack and stroke. The stock climbed on the news, though questions remain about how broad the label expansion will be.

What’s new. In Beatty’s note on Monday, the analyst wrote that his model assumes $3.2 billion in annual Vascepa sales by 2024, and that the drug “will reach multi-$B in peak sales.”

“We’re now modeling sales of $3.2B in 2024 (up from $2.7B previously), reflecting increased confidence in a label that will allow broad use and cost effectiveness that supports taking modest price increases in future years,” Beatty wrote.

But he said the sales expectations are already factored into the stock price.

“We see sales accelerating substantially over the next 12 months, however, we believe this is already priced into the stock,” Beatty wrote.

Beatty said he rates the company High Risk because of the nature of the biotech sector.

Looking forward. Investors, so far, don’t seem to be heeding Beatty’s warning. Shares of Amarin were up 3.7% in premarket trading on Monday.

FT : Titian’s greatest mythological works to be reunited in London

Titian’s greatest mythological works to be reunited in London
Move made possible by Wallace Collection’s decision to lend works for the first time


A series of Titian’s greatest mythological paintings will be brought together for the first time in 400 years at the National Gallery in London next March.

The show has been made possible by the inclusion of Titian’s “Perseus and Andromeda” — one of the six large-scale works in the cycle now scattered across the globe — which is the first work of art ever loaned out by the Wallace Collection.

The National Gallery’s temporary show will bring together paintings now held by galleries in the London, Edinburgh, Boston and Madrid. Borrowing the final piece from the Wallace Collection had been out of the question under the gallery’s old rules — set by its bequest to the nation in 1897 — which stated that the collection should “be kept together unmixed with other objects of art”.

In September, however, the Wallace Collection announced it had decided to scrap this longstanding stipulation after agreeing the reform with the Charity Commission and the government, which directly provides part of its annual funding.

Inspired by the classical figures in the Roman poet Ovid’s epic poem “Metamorphoses” and regarded by Titian as his visual equivalent of poetry, the so-called “poesie” represent one of the artistic high points of the late Italian Renaissance.

Commissioned by Philip II of Spain, Titian painted the series between 1551 and 1562. He intended the six paintings to hang together, but when he was working on them the Spanish palaces were being redecorated. Royal inventories made no mention of them until the following century, when they were hanging in the king’s summer apartment in the Alcázar castle in Madrid. Some of the paintings then passed into French hands in the 17th century and were sold off in the aftermath of the French revolution.

For its part, the Wallace Collection will benefit from a reciprocal deal with the National Gallery in which two landscape masterpieces by Peter Paul Rubens, held in his private collection and intended to be displayed together, will be reunited for the first time in 200 years. Separated in the early 19th century, “A View of Het Steen in the Early Morning” from the National Gallery collection and the Wallace’s “Rainbow Landscape” will be shown at the Wallace Collection from May to September 2020.

Announcing the swap deal on Monday, Xavier Bray, director of the Wallace Collection, said: “This is an unprecedented moment in art history, made possible by the Wallace Collection’s decision to lend works for the first time.” Gabriele Finaldi, director of the National Gallery, said: “The beneficiary is the general public.”

Curators around the world are likely to be eyeing other possibilities opened up by the Wallace Collection’s pivotal reform.

Based at Hertford House in Manchester Square, its collection was amassed over the course of a century by four generations of the Marquesses of Hertford and Sir Richard Wallace. After the death of Sir Richard, his widow Lady Wallace bequeathed the collection and Hertford House to the nation.

It contains internationally renowned works such as “The Laughing Cavalier” by Frans Hals, “The Lady with a Fan” by Diego Velázquez and treasures from French painters of the 18th century including Boucher, Fragonard and Watteau.

WSJ : Value Stocks Are Back in Vogue

Value Stocks Are Back in Vogue, for Now
Money managers and individual investors step up buying of banks, manufacturers and other value stocks

Wall Street says the art of buying cheap stocks is making a comeback—for real this time.

Money managers and individual investors this month stepped up their buying of shares of banks, manufacturers and other value stocks—often defined as companies whose shares trade at a low multiple of their book value, or net worth.

The renewed interest has pushed the S&P 500 Value index up 12% over the past three months, more than double the increase of its growth counterpart. The spurt of gains has lifted the value index ahead of the S&P 500 Growth index for 2019 and put it on pace for its strongest year since 2013.

Shares of Bank of America Corp. , Citigroup Inc., Caterpillar Inc. and United Technologies Corp. have been among the biggest beneficiaries, all climbing more than 20% in the past three months.

A growing number of investors say the rebound, which started in September and accelerated recently, has the potential to carry on and close the chapter on a decadelong stretch of dismal performance.

This is by no means the first time investors have heralded a bounceback in value investing, only to quickly see the trade fizzle out. Value stocks have lagged behind shares of fast-growing companies throughout much of the decadelong bull rally. The S&P 500 value index has risen 136% over the past 10 years versus 220% for large growth companies. (The S&P 500 has climbed 178% over that period).

Some investors and analysts argue this time is different.

Measures of investment sentiment have improved as fears of a recession have abated, corporate profits are expected to rebound, and trade tensions between the U.S. and China have shown signs of improving.

More important, value stocks are trading at some of their most attractive prices in years, analysts say.

Brian Belski, chief investment strategist at BMO Capital Markets, said the valuation gap between value and growth stocks hit an extreme level in mid-2018 and has grown further since then, helping make value stocks appear inexpensive again.

Analysts at Bank of America add that value stocks are trading at one of their cheapest levels relative to momentum stocks, which investors purchase because they have been rising. The only other times the discount was this steep was in 2003 and 2008, the bank said. Value stocks then outpaced momentum stocks by 22 percentage points and 69 points, respectively, over the next 12 months.

Price-to-earnings ratios, a measure of how expensive a stock is, for value- and growth-oriented sectors back up the disconnect. Financial stocks trade at 12.6 times their expected earnings over the next 12 months, around their five-year average, while industrial stocks trade at 16.9 times. That is below technology stocks and the broader index, which trade at 20.6 times and 17.6 times, respectively.

“Growth has crushed value over the past five years,” said Ronald Temple, head of U.S. equities at Lazard Asset Management. “But we reached a point where the valuation divergence between growth and value got extraordinarily high.”

Mr. Temple isn’t the only one who believes value is due for a comeback.

A recent Bank of America survey found more than a third of the 230 fund managers they polled said they expect value stocks to post better returns than growth stocks over the next 12 months. That is an increase of 21% from the October survey and the third-biggest month-over-month swing since 2007, the bank said.

Value stocks’ losses over the past two years have been “irrational,” Clifford Asness, co-founder of money-management firm AQR Capital Management LLC, said in a recent note to clients. Fundamentals didn’t worsen, but prices did, he said, as investors continued to focus on growth and momentum stocks. He added that value stocks’ slog in the first eight years of the rally was more justified.

The divergence grew wide enough that Mr. Asness said his resistance to adding more value stocks lessened.

“Unlike a few years ago, it is indeed time to ‘sin a little’ and up the value weight somewhat,” Mr. Asness said.

But value stocks can’t rally on price appeal alone, analysts and investors warned. Improving sentiment on the economy, trade and corporate profits helped nudge investors back into buying riskier assets in recent weeks. Those factors need to remain in place for a sustained rotation into value stocks.

“We were in a period of extreme economic uncertainty,” said Adam Agress, a portfolio manager who helps oversee Goldman Sachs ’ midcap value fund. “As people have gotten more comfortable with the outlook, they’ve rotated capital out of those defensive and growth sectors,” with investors more willing to load up on riskier assets, he said.

He added his fund recently bought shares of some transportation, semiconductor and gaming companies and sold utility, real estate and consumer-staple stocks.

“These are all industries that benefit from the economic outlook improving, but were priced for a high probability of a recession just a few weeks ago,” he said.

Fund managers broadly increased allocations to bank stocks this month, notching the biggest month-over-month change in exposure in more than a year, Bank of America said.

The recent turn of events has caught the attention of growth managers who are willing to blend the lines between the two investing styles. Lew Piantedosi, who manages Eaton Vance’s growth fund, holds big stakes in Amazon.com Inc., Google parent Alphabet Inc. and other growth stalwarts. But the fund also has stakes in JPMorgan and Bank of America.

“For a tactical growth manager, large U.S. banks are probably the best way to play the market if you don’t feel a recession is coming in the next 18 months,” Mr. Piantedosi said. “They’re the cheapest stocks around.”

WSJ : Kylie Jenner Sells $600 Million Stake in Beauty Business

Kylie Jenner Sells $600 Million Stake in Beauty Business
Coty to buy controlling stake in celebrity’s startup as it chases after younger customers

Coty Inc. is paying $600 million for a controlling stake in Kylie Jenner’s cosmetics startup, wagering that the celebrity’s brand can revive a struggling beauty business based on CoverGirl and MaxFactor.

The fragrance and cosmetics company said it plans to buy 51% of Kylie Cosmetics, valuing it at $1.2 billion. Ms. Jenner, the youngest of the five Kardashian-Jenner sisters, founded the brand in 2015. She will remain the public face of the brand, which will be renamed Kylie Beauty.

Known for nude lip liners and lipsticks, Kylie Cosmetics this spring added a skin-care line. Ulta Beauty Inc. last year started carrying the makeup at its more than 1,100 stores. It is on track for roughly $200 million in sales this year, Coty said.

It is part of a wave of fledgling cosmetics lines capitalizing on celebrity founders and social media-driven marketing. As sales of mass-market mainstays such as CoverGirl has floundered in recent years, upstarts such as Kylie and Glossier, a skin-care and makeup line developed by the founder of a popular beauty blog, are growing fast.

Coty, which is controlled by European investment firm JAB Ltd., has struggled with weak sales and executive turnover. The company is restructuring its operations and looking to sell its hair-care and professional beauty businesses, a collection of brands that account for nearly a third of its annual revenue. Last year, Coty’s annual sales were $8.6 billion.

The maker of CoverGirl, Clairol hair dye and OPI nail polish has floundered since acquiring dozens of beauty brands from Procter & Gamble Co. in 2016. Coty stock has lost half its value since the deal, and the company this year took $4 billion in write-downs on the P&G business as it struggled to digest the brands.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:

  • QD -9.1%

M&A news:

  • EL -1.6% (to acquire remaining stake in Have & Be Co)
  • HPQ -1.1% (HP unanimously rejects unsolicited proposal from Xerox (XRX), says open to exploring whether there is value to be created through a potential combination)

Select metals/mining stocks trading lower:

  • GFI -1.7%, BTG -1.1%, GDX -1.1%, SBGL -0.9%, SLV -0.9%, GOLD -0.9%, NEM -0.9%, AEM -0.9%, GLD -0.7%

Other news:

  • DAC -4.7% (to offer $55 mln of its common stock)
  • MGI -3.4% (provides restructuring update)
  • LN -1.7% (confirms agreement to form capital alliance with Z Holdings)
  • HEXO -1.1% (provides additional information about licensing at its facility in Niagara, Ontario)

Analyst comments:

  • N/A.