- Asian Stocks Fall as Yen in Range After Japan CPI: Markets Wrap
(Bloomberg) — Asian stocks dropped after US shares and Treasuries extended this month’s selloff following solid economic readings and hawkish Federal Reserve commentary. Equities in Australia, Japan and South Korea all fell, as did equity futures in Hong Kong. Contracts for US shares were lower after the S&P 500 slipped for a fifth day Thursday. - Oil Rises on Concerns of Escalating Conflict in the Middle East
(Bloomberg) — Oil jumped on intensifying concerns about conflict in the Middle East, with Brent rising above $88 a barrel in a sudden move higher. The global crude benchmark reversed an early drop after unverified media reports of explosions in Iran, Syria and Iraq. - Treasuries Gain With Dollar as Middle East Risk Fans Haven Bid
(Bloomberg) — Treasuries gain with the dollar as concern over heightened tensions in the Middle East fuels demand for haven assets.US bond yields fall across the curve, with 10-year yield down 6bps at 4.57%. Japan’s 10-year bond yield drops 3.5bps to 0.830%. Bloomberg Dollar Spot Index gains 0.2% - Japan’s Inflation Cools Ahead of BOJ Policy Board Meeting
(Bloomberg) — Japan’s consumer inflation eased more than expected while staying above the Bank of Japan’s target as board members get ready to revise their price forecasts next week. Consumer prices excluding fresh food rose 2.6% in March from a year ago, cooling from February’s 2.8% gain, the internal affairs ministry reported Friday. - Sony Is Said in Talks With Apollo on a Joint Paramount Bid
(Bloomberg) — Sony Group Corp. and Apollo Global Management Inc. are considering teaming up in a bid for the film and TV giant Paramount Global, according to a person familiar with the matter. The two companies haven’t submitted an official offer, said the person, who asked to not be identified discussing private conversations. - Private Credit Funds Get Moody’s Warning on Problem Loans
(Bloomberg) — Moody’s Ratings this week gave private credit investors greater reason for concern about credit quality in the flourishing $1.7 trillion industry. The ratings company on Monday reduced its outlook for direct lending funds managed respectively by BlackRock Inc., KKR & Co. - IMF Latest: Brazil’s Haddad Sees Global Market Repricing on Fed
(Bloomberg) — Brazilian Finance Minister Fernando Haddad said he anticipates the Federal Reserve’s delay in lowering interest rates will trigger a repricing across global markets, while the nation’s central bank chief expressed confidence in Brazil’s external accounts. - Hedge Funds Cry Foul Over Chinese Education Firm’s Default
(Bloomberg) — Hedge funds and other international investors are sounding alarms after a profitable education company from China defaulted on its convertible bonds in March. A group of bondholders, which includes some of Asia’s most prominent hedge funds, have alleged in public statements that the company chose not to pay its offshore debt even though its business is healthy and growing. - S&P Downgrades Israel Rating on Heightened Geopolitical Risk
(Bloomberg) — Israel received its first-ever sovereign downgrade as S&P Global Ratings lowered its credit rating to A+ from AA- on heightened geopolitical risks for the region. The nation was cut by one notch to the fifth-highest score and on a par with Bermuda and China. The outlook remains negative. - Kashkari Says Fed Could ‘Potentially’ Hold Rates Steady All Year
(Bloomberg) — The Federal Reserve needs to achieve more confidence that inflation is declining before cutting interest rates and could possibly delay such a move until after 2024, said Minneapolis Fed President Neel Kashkari. - Goldman’s Waldron Sounds Alarm Over LDI-Like Jolt to US Markets
(Bloomberg) — Goldman Sachs Group Inc. President John Waldron warned that out-of-control spending could expose the US to serious risk in the event of a political crisis. “The thing that I worry about is the confluence of a political crisis and a lot of leverage in the Treasury system,” Waldron said at an event organized by Semafor. - Blackstone Credit and Retail Lines Drive Narrow Profit Beat
(Bloomberg) — Blackstone Inc. collected more fees from big retail funds and credit strategies during the first quarter, compensating for the slower pace of deal exits. Distributable earnings increased 1% from a year earlier to $1.27 billion, or 98 cents a share, the world’s biggest alternative-asset manager said Thursday in a statement. - Walmart-Backed Ibotta Rises 17% After $577 Million IPO
(Bloomberg) — Ibotta Inc. climbed 17% in its trading debut after the digital marketing software firm and a group of shareholders raised about $577.3 million in an initial public offering priced above a marketed range. Shares in the company, which helps brands deliver mobile promotions through rewards and rebates, and counts Walmart Inc. - Nordstrom Says Founding Family Is Weighing Going Private
(Bloomberg) — Nordstrom Inc.’s founding family has notified the board of its interest in taking the company private. The department-store chain formed a special committee to evaluate any proposal from Chief Executive Officer Erik Nordstrom and Pete Nordstrom, the company’s president, the retailer said in a statement Thursday. The shares rose 2% in extended trading. - National Grid has said a change in the way it reports earnings will boost EPS over the current financial year, resulting in shares rising as much as 3% this morning. Jefferies and Morgan Stanley see this as an upgrade, although Citi says it is largely cosmetic.
Jefferies (Ahmed Farman, buy, PT 1,330p): National Grid has upgraded its FY24 EPS guidance from a moderate year-on-year drop to in-line with FY23; This has been adjusted for foreign exchange, but analyst believes, excluding FX, the update implies a 3% like-for-like upgrade, driven by an improved performance across its regulated businesses; Notes National Grid has changed the way it reports underlying EPS, which will also boost FY24 results; “Overall, we see this an an incremental positive for National Grid”. - Netflix shares are down 3.6% in extended trading after the streaming-video company reported its first-quarter results. While the results were better than expected, with customer additions especially strong, its second-quarter revenue forecast was slightly weaker than expected.
FIRST QUARTER RESULTS: Streaming paid net change +9.33 million vs. +1.75 million y/y, estimate +4.84 million (Bloomberg Consensus); UCAN streaming paid net change +2.53 million vs. +100,000 y/y, estimate +988,580; EMEA streaming paid net change +2.92 million vs. +640,000 y/y, estimate +1.58 million; LATAM streaming paid net change +1.72 million vs. -450,000 y/y, estimate +837,467; APAC streaming paid net change +2.16 million, +48% y/y, estimate +1.48 million; Revenue $9.37 billion, +15% y/y, estimate $9.26 billion; Streaming paid memberships 269.6 million, +16% y/y, estimate 264.52 million; EPS $5.28 vs. $2.88 y/y, estimate $4.52; Operating margin 28.1% vs. 21% y/y, estimate 25.7%; Operating income $2.63 billion, +54% y/y, estimate $2.43 billion; Free cash flow $2.14 billion, +0.9% y/y, estimate $1.87 billion. - Tesla shares drop as much as 4.3% on Thursday, touching the lowest intraday level since January 2023, as Deutsche Bank was the latest Wall Street analyst to sound a warning about the company ahead of its first-quarter earnings next week.
Analyst Emmanuel Rosner downgraded Tesla to hold on likelihood of the company delaying plans to produce its Model 2 mass market vehicle. Says that previous buy rating was based on Tesla bringing out a $25k next-gen vehicle late next year, which would have supported volumes, margins and free cash flow. However, decision to delay this will create “significant” earnings and FCF pressure on 2026+ estimates. Future of Tesla will instead be linked to “cracking the code on full driverless autonomy”. - Equifax shares fall as much as 10% on Thursday, the most intraday since July, after the credit-monitoring company forecast second-quarter adjusted EPS and revenue that fell short of the average analyst estimates.
Citi analyst Arthur Truslove (buy, PT $305): The company’s 2Q guidance is below consensus; However, expect benefits from decommissioning of datacenters “to provide earnings benefit in the second half of 2024”. SECOND QUARTER FORECAST: Sees adjusted EPS $1.65 to $1.75, estimate $1.86; Sees revenue $1.41 billion to $1.43 billion, estimate $1.44 billion. FIRST QUARTER RESULTS: Adjusted EPS $1.50 vs. $1.43 y/y, estimate $1.43 (Bloomberg Consensus); Operating revenue $1.39 billion, +6.7% y/y, estimate $1.41 billion. - Zhejiang Geely Holding Group plans to divest all of its Class B stock in Volvo AB worth 14.46 billion Swedish krona (US$1.32 billion). Geely is offering the 49.5 million shares at a guided price of SEK 285.9 a share.
On the other hand, Volvo reported a beat in 1Q24 operating profit by offsetting waning orders with higher prices and has reduced production levels to synchronise with normalised demand in a post-pandemic era. - Rentokil shares drop as much as 5.1%, the most in over five months, after the pest control company delivered in-line results in the first quarter. Analysts at Citi say investors remain cautious about the integration of the Terminix acquisition, while Peel Hunt flags the company is underperforming versus its biggest competitor, all of which is weighing on shares.
Citi (Marc Van’T Sant, buy, PT 675p): Citi, which opened a positive catalyst watch on the stock ahead of the update, says Rentokil managed to maintain FY24 guidance despite slightly slower progress in North America, where organic growth fell short of estimates; “We appreciate that investors remain wary about integration risk, but reiterate our buy rating and price target as its current discounted valuation seems inconsistent with growth prospects, margin potential and cash generation potential”. - CSX shares advance as much as 2.7%, the biggest intraday gain in nearly two months, after the freight transportation company reported first-quarter earnings that were mostly in line with expectations and are likely to be viewed positively by markets, according to analysts.
Additionally, headwinds from the collapse of the Francis Scott Key Bridge in Baltimore were mostly seen as short-term for the company, with the port expected to reopen in May. Jefferies, Stephanie Moore (hold, PT $38): Expects the Baltimore bridge collapse to dent 2Q revenue by 2-3%; Notes peer NSC highlighted a similar impact from the bridge collapse. Morgan Stanley, Ravi Shanker (equal-weight, PT $30): Sees possible relief rally on Thursday, though scale and duration remain uncertain; Expects Baltimore bridge collapse to be a drag on 2Q and early 3Q; Notes CSX stock will be range-bound due to a lack of any catalysts to “deliver quick, juicy returns to the market”. - Alaska Air rises as much as 5.3% on Thursday to reach its highest intraday since August after the carrier raised its earnings per share guidance for 2024.
Citi (buy, PT $53): Analyst Stephen Trent says ALK is well-positioned post-pandemic thanks to strong revenue diversification, including premium cabin offerings and robust co-branded card remuneration; “The carrier’s unit revenue trends appear to be driving strength into the second quarter, and the full year itself.” - ABB shares gain as much as 6.4%, most in two years, and hit another record high after posting an overall 1Q beat, according to analysts, driven primarily by its electrification unit performance. Boosted outlook is welcome and implies consensus for group Ebita is too low.
Jefferies’ Simon Toennessen (hold, PT CHF36) says strong electrification margins drive 4% Ebita beat; Says 1Q was solid with +3% orders and margins as price continues to offset costs supported by operational leverage in electrification unit; For FY24, ABB expects organic growth up 5% versus consensus of +5%, and now expects margins of around 18% implying consensus for group Ebita being ~5% too low; Notes order weakness in China; Adds robotics & discrete saw demand declining in all customer segments yoy, but the sequential pattern was encouraging.
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