Norwegian Air Fires Ceo in ‘Surprise’ Move After Restructuring

By Nora Buli and Victoria Klesty

The board voted on June 20 to end Schram’s 18-month tenure but the airline said he would support the carrier on a full-time basis during his notice period up to March 31.

“The board’s decision to fire me came as a big surprise,” Schram told Reuters.

His replacement, Karlsen, has been chief financial officer since 2018. For six months in 2019, he was acting CEO for the carrier, which is recovering from bankruptcy protection after the COVID-19 pandemic plunged the heavily indebted airline into a financial crisis.

“It’ll be very exciting to see whether we can make this company profitable,” Karlsen told Reuters. “We have a unique opportunity now with Norwegian to create the company I have wanted for a long time.”

The survival plan ended Norwegian’s long-haul business, leaving a slimmed-down carrier with Nordic and European routes.

The company declined to elaborate on Schram’s departure but said his replacement was the right person for the job.

“Karlsen has successfully led the financial reconstruction of Norwegian and has the competencies, focus, trust and dedication that makes him the best choice as CEO of Norwegian,” said Svein Harald Oeygard, the chair of Norwegian’s board.

Karlsen’s annual base salary will be 4.5 million Norwegian crowns ($521,000), unchanged from his CFO’s wage, but he will also receive a performance based bonus and share options. The fixed salary was less than Schram’s pay of 7.0 million crowns.

The board tussled with Schram over his severance package, which gives him the right to 15 months pay on top of the nine-month notice period, or 14 million crowns over 24 months.

“An effort has been made by the board to bring the severance payments to a level reflecting the challenges of the industry, but no agreement could be reached,” Norwegian said.

Schram said he had been willing to make concessions to adjust his pay, but also said no agreement had been reached.

Bankruptcy courts in Oslo and Dublin last month gave their approval for Norwegian to sharply cut its debt by converting it to stock and to raise new capital.

The chair, Oeygard, was appointed in early June after those proceedings were completed and new equity capital was secured.

The search for a new CFO commences immediately.

($1 = 8.6455 Norwegian crowns)

(Editing by Terje Solsvik and Edmund Blair)

German Competition Watchdog Launches Apple Investigation

The Bonn-based watchdog said it will examine whether Apple has “paramount significance across markets” that thwarts competition.

“A key focus of the investigation will be the operation of the App Store, as in many cases it empowers Apple to influence the operations of third parties,” said Andreas Mundt, president of the Federal Cartel Office (FCO).

The watchdog has made use of enhanced powers gained under recent reforms to Germany’s competition laws to open investigations into Alphabet’s Google, Facebook and Amazon over their data practices.

Further proceedings against Apple are also being considered with regard to complaints received about potentially anti-competitive practices, the watchdog said.

These include a complaint that Apple gives itself preferential treatment by pre-installing its own applications, the watchdog said.

An Apple spokesperson said the company’s App Store has given German developers of all sizes the same opportunity.

“We look forward to discussing our approach with the FCO and having an open dialogue about any of their concerns,” the spokesperson added.

(Reporting by Riham Alkousaa and Supantha MukherjeeWriting by Caroline CopleyEditing by Edmund Blair and David Goodman)

EU Antitrust Regulators to Decide on AerCap’s $30 Billion Ge Deal by July 26

The world’s two largest aircraft leasing companies are seeking to create a new financing giant which would be the largest buyer of jetliners built by planemakers Airbus and Boeing.

The deal will reshape a global air finance industry that has attracted a flood of capital in recent years as investors look for higher returns.

AerCap requested EU approval on Friday.

The EU competition enforcer can approve the deal with or without concessions or it can open a four-month investigation if it has serious concerns.

Analysts said the scale of the combined entity, controlling about three times the number of aircraft as its nearest competitor, Dublin-based Avolon, could force AerCap to offload aircraft to meet antitrust demands.

(Reporting by Foo Yun Chee; Editing by Edmund Blair)

Stocks Rebound At The Start Of The Week

Traders Buy Stocks After Sell-Off

S&P 500 futures are gaining ground in premarket trading as traders rush to buy stocks after the recent sell-off.

The yield of 10-year Treasuries has recently made an attempt to settle below 1.36% but lost momentum and rebounded towards 1.44%. It looks that traders rushed to buy U.S. government bonds to increase exposure to safe-haven assets, but optimism prevailed, and yields moved higher.

Meanwhile, the U.S. dollar is losing ground against a broad basket of currencies after the recent rally. Weaker dollar provided some support to precious metals so gold and silver are moving higher at the start of the week.

Cryptocurrencies Dive Amid Crackdown In China

China continued to put pressure on crypto mining and banned mining in Sichuan province. This move triggered a major sell-off in crypto markets. Bitcoin declined towards the support at $32,000 while Ethereum fell below the $2,000 level. Dogecoin was the biggest loser among major cryptocurrencies. Currently, it is trying to settle below the support at $0.2250.

It looks that the recent flight to safety in global markets served as an important catalyst for the current downside move, and traders preferred “safer” alternatives to cryptocurrencies.

It remains to be seen whether the current sell-off in crypto markets will have any notable impact on the stock market, but crypto-related stocks like MicroStrategy are under significant pressure in premarket trading.

WTI Oil Moves Higher After Hardline Candidate Wins Iran Election

WTI oil made an attempt to settle back above the $72 level after judge Ebrahim Raisi, who is under U.S. sanctions, won presidential election in Iran.

Traders bet that Iran nuclear deal negotiations may get more challenging after Raisi’s victory.  However, traders may be using political developments in Iran as an excuse to buy oil at higher levels, while the strongest drivers behind the recent rally are the robust rebound of oil demand and the successful implementation of OPEC+ deal.

For a look at all of today’s economic events, check out our economic calendar.

Amazon.com Nears Major Breakout

Amazon.com Inc. (AMZN) has been treading water since topping out above 3,500 in September 2020 but is nearing completion of a major breakout pattern, just in time for this year’s Prime Day. While the two events aren’t really connected, the convergence signals better times for shareholders of the e-commerce juggernaut because the pattern projects a strong uptrend that could eventually top 5,000.

New Revenue Sources

The stock posted a phenomenal 76% return in 2020, underpinned by pandemic lockdowns that forced smaller competitors to close their doors or rush to upgrade online sales portals. The rally ran out of steam in September, giving way to a broad rectangular pattern that’s now carved the outline of an inverse head and shoulder breakout pattern. Taken together with price action since 2018, the current uptick could signal the start of the final leg of an Elliot 5-wave advance.

Amazon initiatives unrelated to online sales could generate substantial income in coming years. For starters, it just signed contracts with multiple companies to provide telehealth services through Amazon Care, which will dovetail nicely with the new Amazon Pharmacy online prescription fulfillment service. It’s also working with the U.S. Postal Service to deliver cargo and could soon compete directly with FedEx Corp. (FDX) and United Parcel Service Inc. (UPS).

Wall Street and Technical Outlook

Wall Street consensus hasn’t budged in the last three months, with a ‘Buy’ rating based upon 42 ‘Buy’, 6 ‘Overweight’, and 1 ‘Hold” recommendation. No analysts are recommending that shareholders close positions, despite last year’s outsized share gains. Price targets currently range from a low of $3,775 to a Street-high $5,500 while the stock is set to open Monday’s session more than $275 below the low target. This is a perfect placement for a rapid escalation to the upside.

Amazon broke out above the 2018 high near 2,000 in April 2020 and took off in a strong uptrend that posted an all-time high at 3,552.25 in September. The stock then entered a lateral consolidation, holding two tests at support near 2,850. It returned to resistance in April and pulled back, carving the last leg of an inverse head and shoulders pattern, and is now trading just 60 points below resistance. Taken together with emerging buy cycles, this price action greatly raises odds for a breakout.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

GameStop Names CEO Matt Furlong to Board

Furlong was named GameStop‘s CEO earlier this month, succeeding George Sherman who, the company said, also retired from the board.

Furlong oversaw a small but growing part of Amazon’s business as the country head for Australia, a role his LinkedIn profile said he assumed in May 2019.

GameStop has become one of the hottest and most visible “meme stocks” followed on social media after its meteoric rise in a Reddit-driven retail short squeeze that caught Wall Street off guard in January.

Top shareholder Ryan Cohen, who was made Gamestop’s chief technology office earlier in March, is driving the company’s transition into e-commerce and has been responsible for the shakeup in its top management.

(Reporting by Eva Mathews in Bengaluru; Editing by Anil D’Silva)

Europe’s Wizz Air Expects to Fully Recover From Pandemic Next Year

(Fixes typo in headline, no other changes)

Speaking at the virtual Paris Air Forum, Jozsef Varadi repeated recent comments that the Hungary-based airline would fly more seats this summer than it was flying two years ago before the pandemic struck.

“From my perspective, 2022 should be a fairly robust year in terms of delivering not just the volume of traffic but also the financial performance attached to it,” he said.

“I’m looking at 2022 as a year of full recovery for Wizz Air.”

Speaking alongside Varadi, Air France-KLM CEO Ben Smith said he had been pleasantly surprised at the demand among travelers visiting friends and family.

“We are hoping to run about 60-65% of capacity this summer.”

(Reporting by Laurence Frost and Alexander Cornwell, editing by Louise Heavens)

What a Welcome US Equity Market Pullback! Fading Emotion

It was no secret that rates could not remain near-zero forever. It also is no secret that inflation has been real in the US . If you live in the US, you already know this from your day-to-day life. So, why the big fuss? Did you need someone to tell you?

I know it is painful when long positions move against a trader quickly. Nobody expected the Fed to come out with the language that appeared this week, at least not anybody that I know. I also realize that it may seem logical to sell equities as a result. But, since when does the obviously logical approach win?

So, the overnight Fed Fund rate is scheduled to begin increasing in 2023 (potentially late 2022 if you listened to Bullard on Friday). This news must mean that the Ten-year note yield had to go up, right? Nope. Down she went on Thursday and Friday; after catching a bid on Wednesday off the news.

Figure 1 – $TNX Ten-year note treasury yield February 10, 2021 – June 18, 2021, Daily Source stockcharts.com

Perhaps taking a trade like that is just too obvious; too logical. Now, will $TNX increase over time? Most likely it will, but 2023 is a long time from now. We have to wait and see how the new information is digested by the market and go from there.

Can we look to apply similar logic to the S&P 500? For that question, I would like to refer back to the May 12th publication where we discussed $SPX pullbacks to the 50-day simple moving average.

From May 12th:

  • $SPX found support around the 50-day moving average on 2 of its last 3 attempts.
  • When $SPX broke the 50-day on 1 of the last 3 attempts, it traded below it for 2 sessions.
  • When $SPX broke the 50-day in September 2020 & October 2020, it closed below it between 7 – 9 sessions.

Let’s keep in mind that the $SPX traded to the 50-day SMA on May 12th and May 19th, and is now below the 50-day SMA as I write this.

Today, for the SPY ETF traders out there, let’s take a fresh look at recent pullbacks.

Figure 2 – SPDR S&P 500 ETF December 04, 2020 – June 18, 2021, Daily Candles Source stockcharts.com

Can the previous price action near the 50-day SMA give us any clues about what could happen this time? Well, we have the 50-day SMA, and we also have the 414.15 50% Fibonacci retracement level and the 411.79 key 61.8% retracement level. We have been waiting for such a pullback and I don’t think the recent Fedspeak is any reason to negate consideration of buying pullbacks. I know it seems somewhat illogical; that’s why I like it even more.

Keep in mind that such pullbacks to certain price levels could take place in the overnight futures sessions. In that case, ETF traders may not get the exact price they are looking for if markets reverse to the upside during NY trading hours. At least this gives us some levels to consider.

Why I Welcome this Pullback So Much

If you have been following along and are a premium subscriber, you know that I have been waiting for pullback opportunities across many markets. In fact, out of the eight markets that I am covering, I have been waiting for pullback opportunities in six of them . The current price action and additional downside momentum could give us the opportunities that we have been patiently waiting for in several ETFs.

Now, for our premium subscribers, we have a lot to cover. As we approach potentially key levels that we have been waiting for with patience and discipline, a plan is required. There are buy idea levels that could be triggered soon and were very close to triggering on Friday. Not a Premium subscriber yet? Go Premium and receive my Stock Trading Alerts that include the full analysis and key price levels.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Rafael Zorabedian
Stock Trading Strategist

Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits’ employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.

 

Daily Gold News: Monday, June 21 – Gold’s Rebound Following Last Week’s Sell-Off

The gold futures contract lost 0.33% on Friday, as it slightly extended its $100 decline following the FOMC Statement release. On June 1 gold price was the highest since early January. In April the market has bounced from the support level marked by March 8 local low of $1,663.30. Since then it has been advancing. This morning gold is retracing some of the recent decline, as we can see on the daily chart (the chart includes today’s intraday data):

Today gold is 1.1% higher. What about the other precious metals? Silver is 0.8% higher, platinum is 0.2% higher and palladium is 1.0% higher today. So precious metals are higher this morning.

Today we won’t get any new important economic data announcements. The markets will be waiting for tomorrow’s Fed Chief Powell’s Testimony and Wednesday’s important PMI numbers releases.

Where would the price of gold go following last Wednesday’s FOMC Statement? We’ve compiled the data since January of 2017, a 51-month-long period of time that contains of thirty five FOMC releases. The following chart shows average gold price path before and after the FOMC releases for the past 35 releases. The market was usually declining ahead of the FOMC day. Then it was going up for a week-long period. We can see that on average, gold price was 0.64% higher 10 days after the FOMC Statement announcement.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for the next two trading days:

Monday, June 21

  • 10:15 a.m. Eurozone – ECB President Lagarde Speech
  • 3:00 p.m. U.S. – FOMC Member Williams Speech

Tuesday, June 22

  • 10:00 a.m. U.S. – Existing Home Sales, Richmond Manufacturing Index
  • 11:00 a.m. U.S. – FOMC Member Daly Speech
  • 2:00 p.m. U.S. – Fed Chair Powell Testimony

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Morrisons Leaps After $7.6 Billion Private Equity Offer Rejected

By James Davey

Morrisons, Britain’s fourth-largest grocer by sales behind market leader Tesco, Sainsbury’s and Asda, said on Saturday that it had rejected a proposed 5.52 billion pounds ($7.62 billion) cash offer from CD&R.

The approach underlines private equity’s growing appetite for supermarkets in Britain, attracted by their steady cash generation and freehold real estate assets.

Morrisons said CD&R’s offer of 230 pence per share, a 29% premium to Friday’s closing price, “significantly undervalued” the group and its prospects. Including net debt of 3.17 billion pounds, CD&R’s offer price gives Morrisons an enterprise value of 8.7 billion pounds.

Shares in Morrisons were up 56.7 pence to 235.2 pence at 1059 GMT, as some analysts said they expected CD&R to assess investor reaction before deciding on its next move.

Under British takeover rules CD&R, which has former Tesco boss Terry Leahy as a senior adviser, has until July 17 to announce a firm intention to make an offer or walk away.

Shares in rivals Tesco, Sainsbury’s and Marks & Spencer rose as much as 3.2%, 5.7% and 4.1% respectively on hopes that the whole sector could be in play, analysts said, adding that some short sellers were also closing out positions.

Silchester and Columbia Threadneedle, Morrisons’ two largest investors, which Refinitiv data showed having stakes of 15% and 7.4% respectively, both declined to comment.

In addition to the possibility of other private equity players entering the fray there has long been speculation that online shopping giant Amazon, which has a partnership agreement with Morrisons, could emerge as a possible bidder.

Morrisons, unique among British supermarket groups in making over half of the fresh food it sells, trades from about 500 stores and has 118,000 staff, making it one of the country’s biggest private sector employers.

Britain’s opposition Labour Party warned on Sunday that a private equity acquisition of Morrisons could put jobs at risk.

Shopworkers union Usdaw, which represents Morrisons staff, had no immediate comment.

SECTOR IN FOCUS

Industry executives and some sector analysts believe the stock market has failed to recognise the inherent value in Britain’s listed supermarket groups.

They argue that if equity markets do not value them appropriately, acquirers will.

“Investors want a very binary story about knuckling down, keeping capex to a minimum and just becoming a cash machine,” one senior supermarket executive told Reuters.

Zuber and Mohsin Issa in February joined forces with private equity firm TDR Capital to buy a majority stake in Asda from Walmart in a deal valuing the group at 6.8 billion pounds.

And in April, Czech billionaire Daniel Kretinsky raised his stake in Sainsbury’s to almost 10%, fuelling bid speculation.

Shares in both Morrisons and Tesco closed below their pre-coronavirus pandemic levels on Friday.

While sales have soared at all British supermarket groups during the coronavirus crisis, their profits have fallen sharply because of the huge extra costs incurred.

($1 = 0.7243 pounds)

(Reporting by James DaveyAdditional reporting by Simon Jessop and Thyagaraju Adinarayan; Editing by David Goodman and Alexander Smith)

GSK to Boost Spending Power of Pharma Business Post Break-up

By Ludwig Burger

New GSK, the pharma business to be separated from its consumer product operations next year, will cut dividend payouts and shift some debt to the consumer unit, leaving scope for investments to revive its sluggish stock market performance.

GSK’s share price has fallen 14% over the past 12 months versus a 5% rise in the STOXX Europe 600 Health Care index, hit by a lack of fast-growing products and as patients deferred treatments due to the coronavirus pandemic.

The company is the world’s largest vaccine maker by sales, but has fallen behind rivals such as AstraZeneca in the race to develop a shot against the coronavirus.

Luke Miels, chief commercial officer at GSK, told Reuters that the market was underestimating the company’s value “both in terms of our growth prospects with the products that we have in the market now, and also our (drug development) pipeline”.

The company said in April it was looking at partnerships and deals with drug and vaccine developers, particularly in immunology and genetics.

Miels said key trial read-outs are due over the next two years, though it will take longer to see results from a more fundamental upgrade of research and development (R&D), gunning for therapy breakthroughs rather than incremental improvement.

“I think what we need to do is to give (investors) more confidence on commercial execution and give them more confidence on the quality of the assets in the pipeline,” said Miels.

GSK’s track record this year has been sobering. In oncology, compounds bintrafusp alfa and feladilimab, previously touted as potential billion-sellers, fell through in trials.

The loss of patent exclusivity on HIV drug dolutegravir looms at the end of 2027, with about 3 billion pounds in annual sales expected to vanish.

“Given the recent failures in the mid-stage pipeline… supplementing the internal R&D pipeline via additional collaborations or acquisitions makes strategic sense,” Berenberg analysts wrote in a note.

ONE BECOMES TWO

Expectation around the investor day has grown since a report in April that activist investor Elliott Management has taken a large stake in GSK. There has also been speculation about the future of Emma Walmsley, chief executive since 2017 and former head of the consumer products division.

GSK, whose consumer products include brands such as Sensodyne toothpaste, Advil pain killers and Nicorette gum, has a market valuation of more than 70 billion pounds ($97 billion), and a separately listed pharma business would be expected to be one of Britain’s bigger companies in its own right.

Analysts say the separation of the consumer products division, a joint venture with U.S. pharmaceuticals group Pfizer, could take the form of an initial public offering, with proceeds going to the innovative pharma business.

GSK has said the consumer products business will take on net debt worth 3.5 to 4 times its annual adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA). That is up from 2 times for all of GSK currently.

The pharma business in turn will have lower debt.

“Post-separation, the balance sheet will be in a stronger position to execute on larger transactions should the opportunity or need arise,” said Louise Pearson, an analyst at brokerage Redburn.

To give itself even more financial wiggle room, GSK has flagged dividends will be cut from next year, with analysts projecting a reduction to about 40% of earnings, down from more than 80% this year.

“Continued investment in the pipeline ahead of (the 2022 split) is anticipated as management must convince the market that the Pharmaceuticals business can live without Consumer Healthcare,” Berenberg said.

Much will ride on trial results expected this year and next, including for a combination therapy with cancer drug Blenrep, for experimental anaemia treatment daprodustat to ease chronic kidney disease, and for novel antibiotic gepotidacin against urinary tract infections.

“Hopefully over the next couple of years the changes in R&D will be more visible and reflected in the share price,” said Miels.

($1 = 0.7231 pounds)

(Reporting by Ludwig Burger; Editing by Keith Weir and Jan Harvey)

China Is Clamping Down Hard On Crypto Trading And Mining Activities

The cryptocurrency market in China has come under heavy pressure in recent weeks, and the government is now working harder to crack down on crypto trading and mining activities in the country.

China’s PBOC Ask Banks Not To Involve In Crypto Operations

The People’s Bank of China (PBOC) has reportedly summoned banks and other payment institutions in the country. In the meeting, the PBOC asked the banks and other payment institutions such as AliPay not to be involved in cryptocurrency operations.

In a tweet by Walter Bloomberg, the central bank had told banks and payment companies to cut payment channels for cryptocurrency trading. This implies that individuals and institutions engaging in cryptocurrency operations would see their accounts disabled by the banks and other payment institutions.

Some banks have already begun taking the recommendation. In a Reuters report earlier today, Agriculture Bank of China (AgBank), China’s third-largest lender by assets, said it would follow the guidelines from the PBOC and clamp down on crypto trading and mining activities. This makes AgBank the first major bank to come out and make a public statement regarding cryptocurrencies.

AgBank said it would intensify efforts to eliminate illegal activities involving cryptocurrency mining and transactions. The bank warned that any client found to be involved in crypto mining or trading operations would have their accounts shut down immediately, and all relationships would be severed.

China’s Authorities Are Serious About Crypto Ban

China has been a tough ground for cryptocurrencies in recent years. The government began by banning crypto exchanges from operating in the country and initial coin offerings (ICOs). This forced exchanges like Binance, OKEx and Huobi to relocate to crypto-friendly countries.

In this latest banning season, the Chinese authorities are targeting cryptocurrency trading and mining activities. Several provinces, most recently, the Sichuan province, have banned mining activities.

The Sichuan province cut electricity supply to 26 Bitcoin mining farms and other smaller crypto miners last week. This has resulted in Bitcoin’s hashrate dropping by 17% over the past 48 hours. It has also affected Bitcoin’s price, with the leading cryptocurrency now trading just above the $32,000 mark on various crypto exchanges.

BTC/USD chart. Source: FXEMPIRE

With the latest wave of FUD from China, Bitcoin risks losing more value, and its price could drop to the $30k region in the coming days.

Goldman Sachs Expands Transaction Bank to Britain

The bank is to offer companies in Britain cash management services such as payment processing and payroll as it continues to grow in the country having launched its retail brand Marcus there in 2018.

Goldman Sachs said its transaction banking business in the United States has attracted more than 250 clients since June last year, taking in more than $35 billion in deposits and processing trillions of dollars through its systems

“The growth of this business has exceeded our estimates and we are very excited to bring transaction banking to the UK to expand our client reach and streamline banking for multinational corporations with a presence in the US and the UK,” said Hari Moorthy, Goldman’s transaction banking global head.

Goldman is trying to compete with rivals such as Citigroup and JPMorgan which offer a wider set of services to corporate clients. The bank is hoping its digital cash management platform will attract clients currently using older systems at competing banks.

Britain is proving a popular place for U.S. banks to expand, with JPMorgan gearing up to launch a digital bank in the country. Last week it bought British roboadvisor Nutmeg which will form the basis of its retail digital wealth management offering internationally.

(Reporting by Rachel Armstrong; Editing by Simon Cameron-Moore)

Accenture Could Hit New All-Time High on Strong Q3 Earnings; Target Price $309

Accenture, a global IT Services company that leverages a global workforce to provide consulting and outsourcing services to companies worldwide, is expected to report its fiscal third-quarter earnings of $2.24 per share, which represents year-over-year growth of about 18% from $1.90 per share seen in the same period a year ago.

The U.S-based IT giant would post year-over-year revenue growth of over 16% to $12.79 billion. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of about 4%.

According to Jefferies, revenue and earnings have the potential to grow at a high single-digit pace in the next few years amidst favorable secular trends. The company is on pace to generate $50 billion in revenues in calendar 2021, up 14% year-on-year.

Accenture’s better-than-expected results, which will be announced on June 24, would help the stock hit new all-time highs. Accenture shares rose over 7% so far this year.

Analyst Comments

“We expect strong outperformance & broadly positive tone on demand and its ability to manage tight talent to drive shares higher. Accenture (ACN) is the biggest boat in a rising tide as a robust Services spend recovery has materialized. Valuation remains premium, yet shares have underperformed in recent weeks. We raise estimates to the high end of guides & increase price target to $305,” noted Bryan C. Bergin, equity analyst at Cowen.

Accenture Stock Price Forecast

Eight analysts who offered stock ratings for Accenture in the last three months forecast the average price in 12 months of $309.00 with a high forecast of $329.00 and a low forecast of $288.00.

The average price target represents 9.87% from the last price of $281.25. Of those eight analysts, seven rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $305 with a high of $400 under a bull scenario and $200 under the worst-case scenario. The firm gave an “Overweight” rating on the IT Services company’s stock.

“Industry-wide supply headwinds are hard to ignore, but demand checks remain robust this quarter and project travel looks to be returning. While attrition likely moves higher in the quarter, ACN is among the best-equipped to manage through potential challenges,” noted James E Faucette, equity analyst at Morgan Stanley.

“With demand checks pointing to continued strength, we are moving our 3Q21 revenue estimate ahead of consensus, with our revised 3Q21 revenue / EPS now $12.828bn / $2.26 vs. consensus expectations of $12.783bn / $2.24. Our 4Q21 estimates, which contemplate some resumption of client-related travel, remain unchanged at $12.741bn / $2.08 vs. consensus expectations of $12.483bn / $2.04. This moves our FY21 revenue / EPS estimates to $49.42bn / $8.54 (vs. $49.344 / $8.53 prior), ahead of the Street’s $49.071bn / $8.53.”

Several other analysts have also updated their stock outlook on Friday. Jefferies initiated with a hold rating and a $309 target price. Cowen and company raised the price objective to $305 from $290. BMO lifted the target price to $302 from $292. RBC upped the price target to $301 from $278.

Check out FX Empire’s earnings calendar

Steep Drop in Japan’s Nikkei 225 Drags Major Asia-Pacific Stock Indexes Lower

Most of the major Asia-Pacific stock indexes are down sharply following a plunge in Japanese shares. China stocks, however, are bucking the trend with a slight gain.

Japanese stocks slumped on Monday, tracking Wall Street’s sharp decline over the weekend, after Federal Reserve official James Bullard surprised markets by signaling that the U.S. central bank might raise interest rates sooner.

Heavy selling across the board at the Tokyo Stock Exchange dragged down the other regional indexes.

Meanwhile, Chinese shares were underpinned after the country announced that the one-year Loan Prime Rate (LPR) was kept unchanged at 3.85% while the five-year LPR was also held steady at 4.65%. That was in line with expectations of majority of analysts in a snap Reuters poll, who had predicted no change to the one-year Loan Prime Rate as well as the five-year LPR.

Cash Market Performance

In the cash market on Monday, Japan’s Nikkei 225 Index it trading at 27980.87, down 983.21 or -3.39%. Hong Kong’s Hang Seng Index is at 28533.51, down 267.76 or -0.93% and South Korean’s KOSPI Index is trading at 3228.30, down 39.63 or -1.21%.

In China, the benchmark Shanghai Index is trading 3529.05, up 3.95% or +0.11% and in Australia, the S&P/ASX 200 Index is at 7237.40, down 131.50.

Nikkei Plunges to 1-Month Low

Heavy selling was seen across almost all sectors, with the Tokyo Stock Exchange’s 33 industry sub-indexes trading lower, while just one stock climbed in the benchmark Nikkei. The Nikkei share average fell below 28,000 for the first time since May 20.

“The Japanese market is reacting too much. First of all, rate hikes are signs of an economic recovery,” Shuji Hosoi, senior strategist at Daiwa Securities, said. “But Japan needs to find its own consistent reason for a market rebound as Japanese companies are already speeding up vaccine rollouts for their employees. A steady vaccine rollout could be a major reason for an economic recovery.”

South Korea Stocks Track Wall Street Losses on Hawkish Fed

South Korean shares fell on Monday, catching the tailwind from a retreat on Wall Street, as investors remained wary of a more hawkish stance from the U.S. Federal Reserve.

Among heavyweights, chip giants Samsung Electronics and SK Hynix fell 0.75% and 1.61%, respectively, while battery maker LG Chem and internet giant Naver slid 0.12% and 0.38%, respectively.

Australian Shares Drop as Fed Official’s Hawkish View Spooks Investors

Australian shares on Monday were set for their steepest fall in nearly five weeks, as they tracked a sell-off on Wall Street in the previous session on comments from a Federal Reserve official on sooner-than-expected rate hikes.

In the domestic market, financials declined the most, shedding more than 3%. The so-called “Big Four” banks fell between 2.1% and 4.4%.

Commodities also continued to lose ground. Gold stocks lost nearly 2%, with sector heavyweight Newcrest Mining dipping 1.3%. Energy stocks were down 1.8%, with Viva Energy slipping 1.1%.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: A Quiet Economic Calendar Leaves Central Bank Chatter in Focus

Economic Calendar

Monday, 21st June

ECB President Lagarde Speaks

Tuesday, 22nd June

Eurozone Consumer Confidence (Flash)

Wednesday, 23rd June

French Manufacturing PMI (Jun) Prelim

French Services PMI (Jun) Prelim

German Manufacturing PMI (Jun) Prelim

German Services PMI (Jun) Prelim

Eurozone Manufacturing PMI (Jun) Prelim

Eurozone Markit Composite PMI (Jun) Prelim

Eurozone Services PMI (Jun) Prelim

Thursday, 24th June

Spanish GDP (QoQ) (Q1)

German Ifo Business Climate Index (Jun)

ECB Economic Bulletin

Friday, 25th June

GfK German Consumer Climate (Jul)

The Majors

It was particularly bearish end to the week for the European majors on Friday.

The DAX30 slid by 1.78%, with the CAC40 and the EuroStoxx600 falling by 1.46% and by 1.58% respectively.

Market reaction to the more hawkish than expected FOMC interest rate projections continued to weigh on the majors.

A sharp pickup in German wholesale inflationary pressures added to the negative mood at the end of the week.

With no major stats from the U.S to consider, hawkish FOMC member chatter and talk of a rate cut as early as late 2022 also weighed.

The Stats

It was a quiet day on the economic calendar, with stats limited to wholesale inflation figures from Germany.

In May, Germany’s annual wholesale rate of inflation accelerated from 5.2% to 7.2%, coming in ahead of a forecasted 6.4%. Month-on-month, the producer price index jumped by 1.5%, following a 0.8% rise in April. Economists had forecast a more modest 0.7% increase.

From the U.S

There were no material stats from the U.S to provide the majors with direction.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Friday. Daimler and Volkswagen slid by 2.66% and by 2.62% respectively, with BMW ending the day down by 2.40%. Continental fell by a more modest 1.22% on the day.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank slid by 2.80% and by 2.86% respectively.

From the CAC, it was a particularly bearish day for the banks. BNP Paribas and Credit Agricole slid by 4.56% and by 4.08% respectively. Soc Gen fell by 3.40%.

It was a bearish day for the French auto sector. Stellantis NV and Renault ended the day with losses of 2.91% and 3.99% respectively.

Air France-KLM slipped by 0.96%, with Airbus SE falling by 1.64%.

On the VIX Index

It was a back into the green for the VIX on Friday, marking a 4th day in the green for the week.

Reversing a 2.20% fall from Thursday, the VIX jumped by 16.62% to end the day at 20.70.

The NASDAQ fell by 0.92%, with the Dow and the S&P500 ending the day down by 1.58% and by 1.31% respectively.

VIX 210621 Daily Chart

The Day Ahead

It’s a particularly quiet day ahead on the European economic data front.

There are no major stats due out of the Eurozone to provide the majors with direction. From the U.S, there are also no major stats, leaving the majors to take their cues from the U.S markets late in the day.

On the monetary policy front, ECB President Lagarde is scheduled to speak later in the day. Further assurances from the ECB president of unwavering support would provide the markets with comfort.

From the U.S, the markets will need to monitor any FOMC member chatter on the day.

Ahead of the European open, the PBoC is also in action. Any increases to the loan prime rates could spook the markets.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 5 points.

For a look at all of today’s economic events, check out our economic calendar.

After Bumpy End to Week, Investors Look Ahead to Monday

Investors are licking their wounds after the Dow Jones Industrial Average suffered its worst declines in eight months, with all 30 member stocks closing in the red. The Dow shed 533 points last week, losing close to 2% of its value after the Federal Reserve revealed its intentions to tighten monetary policy in the medium-term, which is sooner than the markets were hoping for and spooked investors.

The S&P 500 and Nasdaq similarly ended Friday on a sour note even after reaching record highs earlier in the week. The S&P 500 lost almost 2% last week while the Nasdaq was only down fractionally.

More Selling to Come, Says Economist

Mark Zandi, an economist at Moody’s, has an ominous warning, forecasting that stocks could have further to fall. He is predicting that the Fed’s hawkish tone will result in a stock market decline of between 10-20%. In addition to the Fed, Zandi blames lofty valuations. Worse, he doesn’t foresee an end to the pain anytime soon, suggesting that a market recovery could be as long as a year away.

Even meme stocks, which have been the champions of the stock market, couldn’t escape the selling pressure on Friday.

  • AMC Entertainment traded close to USD 65 per share on Friday only to finish the session down 2.4% to below the USD 60 level.
  • GameStop, another meme-stock darling, closed down a steeper 4.3%.
  • BlackBerry shed 4.5%. The company plans to release its Q1 fiscal 2022 earnings results on Thursday.

Other companies on deck for earnings include Nike, Darden Restaurants and FedEx, which are also expected to report their results on Thursday. As of Sunday evening, stock futures are continuing with Friday’s theme and are trading in the red.

Look Ahead

While Monday is quiet on the economic data front, the week will have more in store. On Tuesday, existing home sales for May will be released. While there is robust demand for property, the supply pipeline has failed to keep pace amid a slowdown in construction due to a shortage of workers and materials, according to a Wells Fargo report. There has also been a lingering effect from the pandemic affecting resales, as homeowners have shown a reluctance to sell their homes during the health crisis.

While Jerome Powell has already spoken, this week will be filled with commentary from other Fed speakers, who also have the ability to move the markets. On Monday, the speakers include:

  • St. Louis Fed President Bullard
  • Dallas Fed President Kaplan
  • New York Fed President John Williams

All eyes will also be on personal income and spending, the data for which will be released on Friday.

FedEx Struggling to Hold Long-Term Uptrend

FedEx Corp. (FDX) reports fiscal Q4 2021 results after Thursday’s closing bell, with analysts looking for a profit of $4.96 per-share on $21.49 billion in revenue. If met, earnings-per-share (EPS) will mark a 96% profit increase compared to the same quarter in 2020 when the world shut down due to the pandemic. The stock took off in a strong advance in March after beating Q3 top and bottom line estimates by wide margins, posting an all-time high near 320 in May.

Amazon Looms Large

The shipping giant has lost ground since that time, caught in the rotation out of economic recovery plays triggered by the slow rollout of vaccines in Europe and parts of Asia. It also topped out just six days after announcing a rate increase, which traditionally triggers higher stock prices in expectations of bigger profits. Rival UPS Inc. (UPS) has impacted buying interest as well, posting modest long-term financial targets that triggered an aggressive sell-the-news reaction.

However, the return of Amazon.com Inc. (AMZN) as a major competitor could mark the biggest hurdle for FedEx in coming quarters. The e-commerce juggernaut abandoned plans to bring deliveries in-house in April 2020 to focus on rapidly increasing market share. However, the company has started to ship cargo for the U.S. Postal Service, raising fears it will move aggressively to take loyal customers from other traditional shippers.

Wall Street and Technical Outlook

Wall Street consensus has improved in the last three months, now standing at an ‘Overweight’ rating based upon 20 ‘Buy’, 3 ‘Overweight’, 6 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $265 to a Street-high $383 while the stock closed Friday’s session just $20 above the low target. This depressed placement suggests that Main Street is more skeptical about FedEx’s long-term outlook than professional analysts.

FedEx ended a strong uptrend at 275 in January 2018 and entered a steep decline that posted a 7-year low in March 2020. The subsequent uptick unfolded in a vertical trajectory, reaching the prior high in October. A breakout into December failed but the stock mounted that peak in May 2021, added a few points, and failed the rally once again at month’s end. It’s now trading just 10 points above the 2018 high, caught in a distribution wave that highlights shareholder frustration.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Airlines, Holiday Companies Ramp Up Pressure on Britain to Ease Travel Rules

Travel companies, whose finances have been stretched to breaking point during the pandemic, are desperate to avoid another summer lost to COVID-19. But with Britain’s strict quarantine requirements still in place that now looks likely.

As the clock ticks down to July, Europe’s biggest airline Ryanair and Manchester Airports Group on Thursday launched legal action to try to get the government to ease the rules before the industry’s most profitable season starts.

On Wednesday, June 23, pilots, cabin crew and travel agents will gather in Westminster, central London, and at airports across Britain to try to drum up support.

Britain’s aviation industry has been harder hit by the pandemic than its European peers, according to data published by pilots trade union BALPA on Sunday.

That showed daily arrivals and departures into the United Kingdom were down 73% on an average day earlier this month compared to before the pandemic, the biggest drop in Europe. Spain, Greece and France were down less than 60%.

UK airports were also badly affected, with traffic in and out of London’s second busiest airport Gatwick down 92%, according to the data.

The government had to balance the risks of foreign holidays bringing new variants of the virus into Britain, justice minister Robert Buckland told the BBC. Public Health England official Susan Hopkins said people should predominantly holiday at home this summer while the population is vaccinated.

But time is running out for the industry, said the union.

“There is no time to hide behind task forces and reviews,” said BALPA general secretary Brian Strutton.

“BALPA is demanding that the UK Government gets its act together and opens the U.S. routes and European holiday travel destinations that it has blocked with no published evidence at all.”

Over 45,000 jobs have already been lost in UK aviation, with estimates suggesting that 860,000 aviation, travel and tourism jobs are being sustained only by government furlough schemes.

(Reporting by Sarah Young, additional reporting by William JamesEditing by Mark Potter and Louise Heavens)

Earnings to Watch Next Week: Darden Restaurants, Nike, FedEx and CarMax in Focus

Earnings Calendar For The Week Of June 21

Monday (June 21)

There are no major earnings scheduled.

Tuesday (June 22)

Ticker Company EPS Forecast
SMDS Ds Smith £12.65
KFY Korn Ferry International $0.98
AVAV AeroVironment $0.81
KWHIY Kawasaki Heavy Industries ADR -$0.16

Wednesday (June 23)

Ticker Company EPS Forecast
PDCO Patterson Companies $0.51
INFO IHS Markit Ltd $0.80
WGO Winnebago Industries $1.76
KBH Kb Home $1.33
FUL HB Fuller $0.92
OMVJF OMV $0.97

Thursday (June 24)

IN THE SPOTLIGHT: DARDEN RESTAURANTS, NIKE, FEDEX

DARDEN RESTAURANTS: The Orlando-based restaurant operator is expected to report its fiscal fourth-quarter earnings of $1.76 per share, which represents year-over-year growth of about 242%, up from a loss of -$1.24 per share seen in the same period a year ago.

The multi-brand restaurant operator would post year-over-year revenue growth of nearly 70% to $2.16 billion. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 270%.

“Best in class casual dining operator with strong brand portfolio. As the largest CDR operator, DRI has substantial scale advantages in shared services which can be levered in a post-COVID-19 environment by improving margins and gaining market share. Lead brand Olive Garden (~50% of sales) garners top consumer scores, its comp sales have historically outpaced the industry and recent cost savings have improved unit economics,” noted John Glass, equity analyst at Morgan Stanley.

“Acquisition of Cheddar’s has been more challenging than initially expected, though still provides longer-term growth potential. Strong position relative to peers, scale, operational leadership, unit growth and structurally higher margins drive our OW rating.”

NIKE: The world’s largest athletic footwear and apparel seller is expected to report its fiscal fourth-quarter earnings of $0.51 per share, which represents year-over-year growth of 200%, up from a loss of -$0.51 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would post year-over-year revenue growth of over 75% to $11.8 billion.

“There are many moving pieces in the Nike (NKE) model including an easy comparison from Q4:20 and shipment shifts into Q4:21 but our proprietary data on China through May 2021 is pointing to a continued deceleration in Tmall GMV, negative social media sentiment in China, and poor Baidu search trends. FY22 consensus EPS estimates appear too high. We are lowering our price target to $145,” noted John Kernan, equity analyst at Cowen.

FEDEX: The Memphis, Tennessee-based multinational delivery services company FedEx is expected to report its fiscal fourth-quarter earnings of $4.97 per share, which represents year-over-year growth of over 96% from $2.53 per share seen in the same period a year ago.

The delivery firm would post revenue growth of over 20% to $21.47 billion. In the last four quarters, on average, FedEx has beaten earnings estimates over 41%.

“We expect a beat for F4Q21 as many of the LTM trends we have seen will continue. However, more than ever, 4Q results are likely not as important as the FY22 guide, which will be the critical test of how much of the pandemic tailwinds mgmt. believes are sustainable (and deserves to be priced in),” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We see EBIT growth through YE of FY21 driven by both margin improvement and vol. driven rev. growth which is helped by limited Airfreight capacity and an eCommerce surge, though yields are mixed. We continue to see secular threats to Parcel and remain skeptical that these trends will be sustainable but believe that until there is evidence of a reversal in earnings momentum, the stock can trade at its historical multiple (14-15x PE) on current EPS.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JUNE 24

Ticker Company EPS Forecast
ACN Accenture $2.24
DRI Darden Restaurants $1.76
WOR Worthington Industries $1.68
NKE Nike $0.51
FDX FedEx $4.97
SNX SYNNEX $1.93
BBBY Bed Bath & Beyond Inc. $0.08

Friday (June 25)

IN THE SPOTLIGHT: CARMAX

The United States’ largest used-car retailer is expected to report its fiscal first-quarter earnings of $1.63 per share, which represents year-over-year growth of over 600% from $0.23 per share seen in the same period a year ago.

The Goochland County-based used car giant would post year-over-year revenue growth of about 92% to $6.19 billion.

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect CarMax (KMX) to successfully execute their Omnichannel strategy, providing both online and physical dealer options to consumer,” noted Adam Jonas, equity analyst at Morgan Stanley.

CarMax (KMX) has consistently generated profitability and has one of the strongest balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing KMX to achieve operating leverage, with upside from the omnichannel rollout.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JUNE 25

Ticker Company EPS Forecast
PAYX Paychex $0.67
KMX CarMax $1.63