- Infineon (IFX TH) +1.6%
- Watch Apple Suppliers After Report of iPhone 11 Output Boost
-
BP (BPE5 TH) +1.4%
- BP CEO Dudley to Retire; Bernard Looney Succeeds (1)
-
Evotec SE (EVT TH) +1.3%
- Evotec Reaches Milestone in Partnership With Aeovian
-
LVMH (MOH TH) +1.2%
- Louis Vuitton Commits to French Supply Chain With New Factory
- Equinor (DNQ TH) +1%
- Tomra (TMR TH) +1%
-
Wirecard (WDI TH) +1%
- Statement: Wirecard and Libra Internet Bank team up with Rakuten Viber in eastern Europe
- Dialog Semi (DLG TH) +0.9%
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Axa (AXA TH) +0.8%
- Axa boss predicts competitive threat from Faangs
- Covestro (1COV TH) +0.8%
- MorphoSys (MOR TH) -0.4%
- EON (EOAN TH) -0.4%
-
Unilever (UNVB TH) -0.4%
- Romania Insider: Unilever buys 75% of Romanian ready-to-eat food producer FruFru
- TAG Immobilien (TEG TH) -0.4%
- Deutsche Bank (DBK TH) -0.4%
- Renault (RNL TH) -0.4%
- Knorr-Bremse (KBX TH) -0.5%
- Nemetschek (NEM TH) -0.7%
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Carl Zeiss Meditec (AFX TH) -1.1%
- Carl Zeiss Meditec Cut to Hold at Hauck & Aufhaeuser
- Osram (OSR TH) -1.3%
DAX:
- Infineon (IFX TH) +2%
- Watch Apple Suppliers After Report of iPhone 11 Output Boost
- Bayer (BAYN TH) +0.9%
- Wirecard (WDI TH) +0.8%
- Lufthansa (LHA TH) +0.7%
- BASF (BAS TH) +0.5%
- Brazil ANP Says 13 Companies Enabled to Take Part in Oil Auction
- Siemens (SIE TH) +0.3%
- Siemens, Wabtec Settle Legal Feud on Train Crash-Halting Tech
- Deutsche Bank (DBK TH) +0.3%
- EON (EOAN TH) +0.3%
- RWE (RWE TH) +0.2%
- VW (VOW3 TH) +0.2%
- Volkswagen in Talks to Share Porsche, Audi Electric Know-How
MDAX:
- Airbus (AIR TH) +4.8%
- Evotec SE (EVT TH) +2%
- Evotec Reaches Milestone in Partnership With Aeovian
- Telefonica Deutschland (O2D TH) +1.5%
- German Telecoms Network Decision Could Lead to Re-Rating: UBS (Thursday)
- Evonik (EVK TH) +1.4%
- K+S (SDF TH) +1.4%
- Commerzbank (CBK TH) +0.7%
- Carl Zeiss Meditec (AFX TH) +0.3%
- 1&1 Drillisch (DRI TH) -0.2%
- Nemetschek (NEM TH) -0.4%
- Osram (OSR TH) -1.1%
SDAX:
- HelloFresh (HFG TH) +2.2%
- Varta (VAR1 TH) +1.9%
- RIB Software (RIB TH) +1.7%
- Aixtron (AIXA TH) +1.4%
- Borussia Dortmund (BVB TH) +1.2%
- Steinhoff (SNH TH) +0.6%
- Deutz (DEZ TH) +0.6%
- Isra Vision (ISR TH) -0.1%
- Encavis (CAP TH) -0.2%
- Salzgitter (SZG TH) -1%
Axa boss predicts competitive threat from Faangs
Tesla insurance launch is harbinger of big tech’s creep into sector, Buberl says
The chief executive of France’s Axa believes that the insurance industry’s “competitors of tomorrow” will be the huge data-driven tech companies such as Facebook.
“If your endgame is to be an orchestrator of a community of the insured, with the aim of helping each other and leveraging the collective wisdom, which is the business model that you see in today’s market that is closest to that?” asked Thomas Buberl, who has run Axa, the second-largest insurer in the world by assets, since 2016.
The answer is “Facebook, Google, or Apple . . . I believe those are our competitors of tomorrow, and not Lemonade or other small insurance companies,” he said, referring to the largest of the “insurtech” start-ups, which was valued at a reported $2bn in its latest funding round.
Under Mr Buberl, Axa acquired the Bermuda-listed insurer XL in March last year, and then listed Axa Equitable, the group’s US life insurance company, shifting the company’s portfolio from market-dependant life and investment products to underwriting-dependent property casualty and health products.
The way to win in the latter businesses is to provide services to customers that helps them reduce risk, rather than simply paying claims when risks bite, Mr Buberl told the Financial Times in a recent interview. “My conviction is that in the long term an insurance company will not be [primarily] a claims payment company any more.”
Tech companies are already creeping into insurance: Tesla’s announced last month that it would begin selling insurance directly to Tesla drivers, underwritten by its partner Markel, and said it had plans to become a fully fledged insurer in time.
“You don’t have a classic case of a car any more,” Mr Buberl said, but “a rolling tech stack” that provides a wealth of information about future maintenance costs and risk. Using data gathered from customers to help those same customers cut risk will be at the heart of the insurance businesses in the future, Mr Buberl argued.
Industry insiders agree that the data amassed by big tech has competitive implications.
“The life insurance industry is a capital intensive, long-term oriented business” that tech companies might hesitate to enter, said Joel Albarella, who runs New York Life Ventures, the venture capital arm of New York Life. “That said, better tech will theoretically originate better risk assets,” he said, arguing that the Tesla case shows the potential in property and casualty.
Axa’s strategy for dealing with competition from big-tech companies is to become their partner of choice. “I don’t think [big tech] will always go into the business [directly],” Mr Buberl argues. “The question is who partners with whom? Facebook and Google will probably only have one partner . . . and these partners [will] need to be global because those companies do not want to talk to 163 different insurers.”
He cited Axa’s partnership with Uber — the insurer provides disability and maternity/paternity protection for drivers — as a step in that direction. He thinks there could be potential for the data collected by Uber drivers’ smartphones to help underwrite property risks, too.
Mr Buberl has pushed significant changes since taking the helm at Axa, based on his view that low interest rates, changing demographics and the threat of disintermediation will pose structural challenges to the life insurance business for years to come.
He is not dismissive of insurtech start-ups but sees them as more opportunity than threat. He noted that Axa serves as a reinsurer for not only Lemonade (renters’ insurance) but also the start-ups Pure (property protection for wealthy families) and Oscar (health).
These relationships help AXA learn about new business models, he said. “We believe what they are doing is very smart.”
Strain on WeWork intensifies as CEOs race to secure new financial backstop
The financial strain on WeWork has only become more apparent in the days since the lossmaking group pulled its initial public offering, jettisoned co-founder Adam Neumann from the chief executive role and failed to secure a $6bn loan from Wall Street.
The latest sign of trouble this week came from the rating agency Fitch, which projected the company’s cash pile had fallen to $1.5bn at the end of September from $2.5bn a quarter earlier. Fitch swiftly slashed WeWork’s debt rating deeper into junk territory and warned of “material” cash charges as the company readies for sweeping cuts to its 12,500-plus workforce.
The company’s debt has been in a near freefall since the IPO collapsed, and was trading hands at less than 85 cents on the dollar this week. That pushed the spread on the bonds above 1,000 basis points over comparably maturing US Treasuries. It is a metric worth noting; investors in the $9.5tn US corporate bond market now judge WeWork to be in distress.
Short sellers have piled in, and the debt has become among the most expensive corporate bonds to short, according to IHS Markit. More than 10 per cent of WeWork’s debt was now on loan, a proxy for how intense short interest in the company’s debt is, DD’s Eric Platt and the FT’s Joe Rennison were first to report. That was a record level.
The pressure is now on for new WeWork CEOs Artie Minson and Sebastian Gunningham to find a financial lifeline. The company is in talks with JPMorgan Chase and Goldman Sachs, as well as several other banks, for some lending package. Expect it to be far, far smaller than the $6bn financing it had earlier agreed, sources tell DD.
DD has already told you that SoftBank considered pumping extra money into WeWork, given it has billions of dollars riding on the property group’s success. The company is also in talks to sell off a handful of companies that it has recently acquired, including Managed by Q, Meetup, Conductor, SpaceIQ and Teem, as well as its stake in The Wing.
Even then, the heat on Minson and Gunningham will not abate (and we’re not talking about from the thousands of WeWork employees who saw their stock options plunge in value). Rival IWG is looking to double its growth rate and ramp up its expansion as WeWork struggles. IWG, it’s worth mentioning, is profitable.
IWG boss Mark Dixon (pictured below) sat down with the FT and laid out one of the key problems with WeWork’s business model, which includes free beer and kombucha on tap.
“Essentially, the space is a break-even business and the profit comes from the services,” he said. “It’s like running a hotel and giving away the room service and having a free bar. You will have a very popular hotel but you won’t make any money.”
After Hours Summary: SGH -9%, COST -1.6% following earnings/guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to news: AVYA +17.6% (RingCentral and Avaya enter strategic partnership; also authorized $500 mln share repurchase program and plans to pay down $250 mln of the principal debt under its Term Loan B), MEIP +10% (provides updated data from ongoing Phase 1b study of investigational ME-401 in patients with indolent B-cell malignancie), RNG +7% (RingCentral announces strategic partnership with Avaya - to be exclusive provider of Unified Communications as a Service solutions to Avaya), ETSY +0.9% (light volume; initiated with a Buy at Nomura Instinet; tgt $70)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: SGH -9.3%, COST -1.6%
Companies trading lower in after hours in reaction to news: OVID -13.8% (proposes concurrent public offerings of common stock and preferred stock), HRTX -7.6% (intends to offer and sell shares of its common stock in a public offering), RRC -3.3% (downgraded to Neutral from Outperform at Credit Suisse), WLL -2.5% (downgraded to Underperform from Neutral at Credit Suisse), TERP -1.5% (announces public offering of Class A common stock and concurrent private placement; also files mixed securities shelf offering)
Hong Kong stocks fell before a briefing by the city’s senior officials, where they are expected to invoke emergency laws to ban mask wearing.
The MSCI Hong Kong Index dropped 2.1% at 2:16 p.m. Property developers were the biggest losers, with Sun Hung Kai Properties Ltd. poised for the biggest drop in two months. The Hang Seng Index slid 1.9% below the key 26,000 point level. Hong Kong’s markets are closed Monday for a holiday.
Chief Executive Carrie Lam and her government officials will meet the press at 3 p.m. according to an official statement, which gave no reason for the briefing. Traders speculated measures other than the mask ban will be announced given the list of attendees includes eight senior ministers.
US After Hours SGH -9%, COST -1.6% following earnings/guidance
Nikkei +0.32% Hang Seng -1.33% CSI -0.99% Shanghai -0.92% Shenzen -1.06%
Eur4 1.0974 CNH 7.1253 CNY 7.1483 JPY 106.82 GBP 1.2349 RUB 65.0422 CHF 0.9991 WTI 52.62 +0.34%
S&P -0.08% EuroStoxx +0.35% Dax +0.22% SMI +0.17%
Macro :
- SoftBank’s Vision Fund 2 Struggling to Raise Money: Reuters
- Fed to Finalize Rule Easing Burden for All but Wall Street Banks
Keep an eye on :
- ALV GY : Allianz to Buy EU1.1b Japan Residential Assets From Blackstone
- AAPL US : Apple’s Cook Expects New Growth Cycle for Smartphones: Echos
- ARYN SW : Aryzta to Sell Majority of Picard Stake for EU156m (1)
- AZN LN : AstraZeneca’s Fasenra Self-Administration Approved in the U.S.
- BMPS IM : Italy in Talks With EU Over Monte Dei Paschi Loan Spin Off: Rtrs
- BP/ LN : BP CEO Dudley to Retire; Bernard Looney Succeeds
- EVT GY : Evotec Reaches Milestone in Partnership With Aeovian
- HUH1V FH : Huhtamaki EPS Set to Improve, Gets New Buy Rating at Berenberg
- IMPN SW : Implenia Gets Investor Request: European Industrials Pre-Market
- LSE LN : Some LSE Investors Tell HKEX to Raise Bid, Offer More Cash: Rtrs
- MC FP : Louis Vuitton Commits to French Supply Chain With New Factory
- NOKIA FH : Nokia, NEC Win U.S. Trade Case Over Xtera Subsea Cables
- PEN NO : Panoro, BW Energy Make Oil Discovery in Hibiscus Well in Gabon
- PGS NO : PGS Says It Will Operatate All 8 Active Vessels in Winter Season
- SALM NO : Salmar Says 3Q Harvest Was 35,800 Metric Tons, -0.8% Y/Y
- VIV FP : Vivendi Files Claims Against Mediaset, Fininvest Over EGM
>>> Up
* Arjo Upgraded to Buy at SEB Equities; PT 40 Kronor
* H&M Upgraded to Buy at HSBC; PT 225 Kronor
>>> Down
* Atlas Copco Downgraded to Sell at DNB Markets; PT 275 Kronor
* Boku Rated New Buy at Stifel; PT 1.40 Pounds
* Carl Zeiss Meditec Cut to Hold at Hauck & Aufhaeuser
* Hexagon Downgraded to Sell at Goldman; PT 415 Kronor
* Marks & Spencer Downgraded to Reduce at HSBC; PT 1.50 Pounds
* Siemens Gamesa Downgraded to Add at AlphaValue
* Verbund Downgraded to Reduce at Oddo BHF; PT 45 Euros
>>> Initiation
* Adidas Reinstated at Exane With Neutral; PT 285 Euros
* Altia Rated New Hold at SEB Equities; PT 8.20 Euros
* JD Sports Rated New Outperform at Exane; PT 8.30 Pounds
>>> Call
* Aryzta Could Bounce Even Though Picard Price Is Low: Vontobel
* Casino PT Cut on Probable 3Q Slowdown, Bid Doubt: Deutsche Bank
Closing Stock Market SummaryThe S&P 500 dropped as much as 1.1% on Thursday after the ISM Non-Manufacturing Index for September came in weaker than expected, but the market quickly bounced back while rate-cut expectations increased. The benchmark index ended the day up 0.8%, finishing near session highs to recoup some losses from a two-day drop.
The Nasdaq Composite (+1.1%) advanced the most, followed by 0.5% gains in the Dow Jones Industrial Average (+0.5%) and Russell 2000 (+0.5%). All were also down more than 1.0% today.
Stocks opened the day struggling to find direction in front of that non-manufacturing index, which declined to 52.6% (Briefing.com consensus 55.4%) from 56.4% in August. The consumer-oriented services sector remained in expansion mode, but the slower growth fed into concerns that the manufacturing weakness was trickling over to the U.S. consumer.
At its intraday low, the S&P 500 was down 4.1% from Monday's close, which is to say the market may have fallen too far, too fast. An opportunistic mindset took fold, which likely contributed to some short-covering activity, to help the broader market bounce from a short-term oversold condition.
All 11 S&P 500 sectors rallied off their lows and finished in the green. The energy (+1.3%), information technology (+1.2%), and real estate (+1.2%) sectors outperformed, as did the Philadelphia Semiconductor Index (+1.7%). The financials sector (+0.2%) squeezed out a last-minute gain, even as Treasury yields continued to decline.
The 2-yr yield dropped ten basis points to 1.38%, and the 10-yr yield dropped seven basis points to 1.53%. The U.S. Dollar Index declined 0.1% to 98.90. WTI crude lost 0.5%, or $0.20, to $52.4/bbl.
The yield on the fed-funds sensitive 2-yr note fell to its lowest level since September 2017, as expectations for additional rate cuts continued to increase. According to the CME FedWatch Tool, the probability for a 25-basis points cut at the October FOMC meeting is about 90%, and a further quarter-point cut in December is over 50%. Both are up considerably from last week.
Corporate news included Facebook (FB 179.38, +4.78, +2.7%) announcing a camera-first messaging app, named Threads, for its Instagram platform. Shares of Snap (SNAP 14.30, -0.50) fell 3.4% in response. PepsiCo (PEP 137.93, +3.99, +3.0%) reported positive earnings results. Constellation Brands (STZ 194.26, -12.53, -6.1%) did, too, but shares still declined. Tesla (TSLA 233.03, -10.10, -4.2%) reported record Q3 deliveries but missed estimates.
Reviewing Thursday's economic data, which included ISM Non-Manufacturing Index for September, the weekly Initial and Continuing Claims report, and Factory Orders for August:
- The ISM Non-Manufacturing Index for September fell to 52.6% (consensus 55.4%) from 56.4% in August. The dividing line between expansion and contraction is 50.0%, so the September number connotes a services sector that is expanding, but at a slower pace.
- The key takeaway from the report is that it shows a slowdown in non-manufacturing growth. Accordingly, it is fanning concerns that the manufacturing recession, and trade uncertainty, are having a broader effect on the consumer-oriented services sector.
- Initial claims for the week ending September 28 increased by 4,000 to 219,000 (consensus 215,000) while continuing claims for the week ending September 21 decreased by 5,000 to 1,651,000.
- The key takeaway from the report is that there weren't any noticeable deviations in underlying claims trends, which have been encouraging for some time.
- Factory Orders for August declined 0.1% (consensus 0.0%) following an unrevised 1.4% increase in July. Shipments were also down 0.1% after declining 0.3% in July.
- The key takeaway from the report is that business spending was relatively weak again in August.
Looking ahead, investors will receive the Employment Situation Report for September and the Trade Balance report for August on Friday.
- Nasdaq Composite +18.6% YTD
- S&P 500 +16.1% YTD
- Dow Jones Industrial Average +12.3% YTD
- Russell 2000 +10.2% YTD