After The Drop, Wait And See
After the Drop, Wait and See
After the huge global selloff yesterday, markets around the world are in wait-and-see mode overall, but reacting to real news when it hits. Wall Street indicators slumped again and many of the shares falling were reporting better-than-expected earnings. We have some results in the banking sector.
Finance
*Banco Santander in Q3 returned to profits and also said it will earn more in 2020 than its prior forecasts. SAN stock gained 5% in Madrid while the other market leader there, Telefonica, fell over concerns that it will no longer be regulated by the EU after Brexit. TEF sellers bought SAN.
Chair Ana Patricia Botin stressed that next year's results depend on how the pandemic goes, “our strategy and business model position us well to continue supporting customers and delivering results for shareholders.” She also said SAN will chop another euros 1 bn in costs by the end of this year ($1.2 bn) and further boost provisions for loan losses. YTD they already amount to euros 9.56 bn, of which euros 2.54 bn was taken in Q3
A key indicator is that the cost of credit has fallen to ~1.3% now vs 1.4-1.5% earlier.
Net profit in Q3 hit euros 1.75 bn vs a prior year quarterly level of euros 501 mn (hit by UK charges) and a consensus forecast of net profit of euros 971.5 mn so this was a dramatic gain. Revenues were down 11% y/y to euros 11.09 bn. It expects to earn euros 5 bn profits for the full year.
SAN also boosted its tier 1 ratio to 11.98% at the end of Sept from 11.84% at the end of June. SAN also predicted that its full-year tier 1 ratio would be at the top of the 11-12% range, not too unlikely given where it closed Sept.
SAN stock is down 1.94% but that is purely symbolic.
*HSBC Q3 results were good, with losses of $785 mn vs consensus prediction of $2 bn. Its profits fell 36% to $4.3 bn, easily beating the forecast of $2.7 bn probably helped by Hang Seng Bank, it is Hong Kongsub which we own outright. HSNGF did not trade today. Honkers and Shankers will also cut costs and unlike SAN also suggested it might resume dividends, which SAN is not allowed to do under European Union rules. HSBC stock is up 3.4% here.
*CBOE, Chicago Board Options Exchange Global Markets, my options play (on the market where puts and calls trade) rose a dollar at today's opening before falling back 0.35% More on options below.
*Hong Kong insurance firm AIA Group Asia (AAIGF) is back in the doghouse. It moves depending on how bad relations with China get, a quick road to Asia when Hong Kong goes down. It lost over 6% today after former parent AIG announced it would split its life insurance and retirement lines.
*Fund manager-insurer Standard Life Aberdeen (SLFPF) is up 4.84% today, our best performer.
*Swedish conglomerate Investor A/B (IVSBF) is down despite good results because it is a major owner of the US Nasdaq market and is planning to buy privately held US Advanced Instruments which makes scientific analysis systems in this quarter. Both positions will be at risk if Trump wins. My Thermo Electron shares are up in sympathy, by 0.8%. It is a US bonus stock.
Drugs
*Dr Reddy's is one of the foreign shares which rose smartly before the US opening in London, up 2.74% to $68.73 because it had been oversold. RDY was picked by Abhimanyu Sisodia in India.
*UK Glaxo (GSK) stock rose 0.9% today after sales became overdone.
*Roche continues to outperform. RHHBY gained another 0.63% today to hit $41.50.
*Israeli high-flyer Compugen (CGEN) is back flying, up 2.1% to $14.17.
*Beigene gained 1.7% to hit $307.46 and remained in the 300's later. BGNE is a Chinese
*However Astra-Zeneca (AZN), a rare winner Monday after news about the impact on older patients of the Oxford trials boosted its price, today was lower by 3¢.
*Danish Novo Nordisk lost 1.3%. NVO is a diabetes specialist breaking into other sectors like obesity and genetic disorders.
*Japanese drug play Eisai is up 1.1% today. ESALY works on Alzheimer's for the country's aged.
*Canadian Zymeworks (ZYME) which makers bifurcated cancer-treating checkpoints, is up 1%. It was picked by Martin Ferrera.
*Perennial loser Teva (TEVA) fell below $9 again today to $8.93-4 after opening down 2.3%.
*Eli Lilly's (LLY) antibody aids for covid-19 patients failed to help them and the US National Institute of Health has ended the trials. They already were halted 2 weeks ago because of safety issues. The fall affected our Spanish antibody stock Grifols (GRFS), which fell 1.4% here. It also means there will be no vaccine out before the election here.
Games
*Nintendo of Japan, tipped by Abhimanyu, is up 4.6%, our 2nd best non-US performer. NTDOY games and consoles are key to household happiness under corona-virus. It is up 60% YTD.
*We would have done even better buying Harley Davidson (HOG) shares, with a 27% gain today, games for grown-ups.
Oil and Energy
*The US Gulf of Mexico drillers and refiners have again shut-in operations as Hurricane Zeta moves in on the region, the 11th hurricane to hit this year. Some theorize that the huge number of early named storms is the result of global warming, but it is not certain. But if this is the case, the lock-downs on the Gulf coast are a natural.way to cut down on carbon contamination.
*Despite the side effects like higher oil prices, BP plc (BP) is down 1.6% today. Royal Dutch Shell (RDS-B) is down 1.9%. Schlumberger (SLB) is 2.31% lower, all 3 following the European market trends.
*This is a bulletin about a stock report that was not issued to the world until London closed today, so it did not make my blog. It is an important item which is why I am putting out a special bulletin:
- BP plc Q3 earnings cratered 96% as the COVID-19 pandemic reduced energy prices and demand. The UK oil company said Tuesday that profits, excluding one-time items and changes in the value of inventories, dropped to $86 mn from $2.25 bn last Q3. However, BP's key metric, replacement cost, improved sequentially from Q2's loss of $6.68 bn to a gain of $100 mn. Unlike us oil companies, BP aims to cut costs for its oil business while investing in renewable energy to halt global warming, which the company calls "Beyond Petroleum". It plans to cut or offer all its carbon emissions by 2050 but of course, was caught short by the Covid-19 outbreak. CEO Bernard Looney cited "a volatile and challenging trading environment' but did add that "there have been some early signs of global economic recovery."
Brent crude, the benchmark for international oil prices, averaged $42.94 a barrel in the third quarter, down nearly 31% from the same period last year. One reason is that nobody is taking airplanes and aviation fuel demand is down 60% y/y.
*Nio is a huge option play aiming to make self-driving chips for its electric vehicles, rated attractive by JP Morgan-Chase. NIO is hiring a separate team to run the hardware called SmartHW and will spend $150 mn to $1 bn on this which goosed up the outlook for the NYSE-listed Chinese firm to $135.5. NIO stock is up 5.6% today and is our best performer.
*Algonquin Power is a modest gainer. AQN generates electricity on both sides of the Canadian border.
*Alimentation Couche-Tard (ANCUF) from Canada, subject of my most recent special report, fell on the US market after rising at the opening. The global highway shops firm will report Q2s earnings on Nov. 24. Gas sales will be down but food shopping will compensate and I expect flat to slight rises overall.
*Chinese alternative play Canadian Solar (CSIQ), is down fractionally.
Miners
*While producers Tesla proposes to mine its own lithium, it is not going to build up in other metals. Hence the boost to Antofagasta, which also produces copper in Chile which is changing its constitution. ANFGF shares are up 3.23% as the market applauds the end of the Pinochet constitution in Chile. However Liberum Capital put a hold on ANFGF, down from a buy.
*Gold and gold miners are up despite the lack of a stimulus plan here, which in theory makes the buck stronger (and gold weaker): SPDR Gold, Kirkland Lake (GLD).
Latinas
*Banco Latino-Americano de Comercio Exterieur of Panama fell another 1.2% because the trade bank shareholders fear a Trump victory.
*Mexican REIT Fibra Uno (FBASF) is up 11.11% on low volume here, hitting 80¢. I
*Cemex (CX) is down 1.7%
*MercadoLibre (MELI) fell $6, or 0.5%.
Tech & Tel
*Today's winners are from this sector: Israeli-American Tower Semiconductor (TSEM) up 1.9%; Finnish Nokia up 0.25%; South African Naspers (NPSNY) up 2.6%; Prosus, (PROSY), its clone from Holland, up 3.7%;
*The Africa cell telco they spun off, MultiChoice (MCHOY), is up 1%.
*The sector also produced losers like Vodafone (VOD) off 3%; Ericsson (ERIC), off 1.34%; Nokia (NOK) off 0.25%.
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