Day After Martin Luther King
After Martin Luther King day there is a lot of catching up to do, because world markets were open yesterday. News and guidance did not halt because of the holiday.
Today bitcoin lost about 20% of its value with other crypto-currencies also down. Meanwhile the US dollar picked itself up from a 3 year low against other major currencies. Brazil's index hit a new high and the Dow moved over 26,000. There was a l
The big shock explaining the rush into greenbacks and reais was a supposed dividend aristocrat, Carillion, a UK government contractor which upped its dividend for 16 years in a row, filing for bankruptcy. This was the result of its debt to its own pension fund and off balance sheet liabilities coming in at about £900 mn it does not have.. Its largest clients were parts of the UK public sector where it bid aggressively for contracts which lost money.
The company, formerly called Tarmac, issued upbeat forecasts of its results until the middle of last summer. Until last year, its stock was steadily backed by the British analyst “consensus” as it sank deeper and deeper into debt, according to today's Financial Times.
Inevitably, one of our non-British companies was among those left unpaid. We have news from Spain, Canada, Britain, Israel, Brazil, Netherlands, Switzerland, Australia, Ireland, China, Hong Kong, Germany, India, Australia, South Africa, Zambia, Kenya, Japan, China, South Korea, Brunei (a first), Senegal, Iraq, and Argentina. One of my stock tips was picked up by Wall Street's Best Investments today.
Banking
*One victim of Carillion was Banco Santander, a heavy-hitter in Britain, which took provisions for bad debt of £47 mn for the first 9 months of 2017 vs only £21 mn for the prior year 9 mos. SAN rose despite this.
*Among the 9 banks the Colorado Fire & Pension Association is suing for conspiracy to fix Canadian interbank offer rates between 2007 and 2014 is Bank of Nova Scotia, BNS. It was tipped by Morgan Stanley as neutral with a C$95 target price. BNS was the stock I picked for Wall Street's Best editor Nancy Zambell because it gains whether ADRs do well or not, being a creator of hedges.
*Vodafone sold back to the founders its Vouchercloud and Giftcloud phone apps which it has controlled since 2012. The former seller and now buyer, who paid an unknown amount, was Invitation Digital Ltd. VOD is up.
Drugs and Heatlh
*Teva revealed that Israeli authorities are fining it $22 mn for bribery to get sales in Mexico, Russia, and Ukraine, a lowball penalty because of the national concern about keeping the company Israeli. Teva was rated neutral by Morgan Stanley with a $20 target price. It won US FDA approval for its Trisenor arsenic trioxide plus tretinoin (Trisinox) injection for treating newly diagnosed patients with polymyelotic leukemia with a translocation gene. This sounds like a horrible drug. Earlier the FDA approved it for refractory or relapsed myelotic leukemia with the gene marker. TEVA shares are down 3.45% today.
*Société générale slashed its rating for Roche from hold to sell, two notches. RHHBY is Swiss. It is expected to be hurt by a new Merck lung cancer drug. However its new colorectal cancer diagnosis Ventana panel is not being taken into account by sellers.
*Benitec warrants rose 12.85% today for no discernable reason/
*Shire got EU approval for its hemophilia injection Adynovi. Its stock is suffering because the spin-off of its neurological arm (mostly ADHD nostrums) has lost traction and it may have to spin it out to shareholders. Thomson-Reuters analysts raised SHPG from hold to buy.
*Mazor Robotics is down 2.3%. MZOR makes software to help surgeons do brain and spinal operations.
*CAE with the Ameerican Heart Association luanched a training partnership to deal with cardiovascular disease andand stroke in Brunei.
Energy and Industry
*BP plc topped up its Deepwater Horizon fine fund by £1.23 bn (~$1.7 bn) to $65 bn, with its last provision for the disaster. BP's share fell 1.3% in London in reaction to the pst-tax non-opearing charge taken to meet the Court Supervised Settlement Program in the US hitting $3 bn vs an earlier figure of $2 bn.
*Orocobre (OROCF) reported an 84% sequential rise in lithium production in the Dec. quarter on which revenues came in at $40 mn, up 67%.It forecast price recovery in H2 of its June FY now in process. The market was unconvinced given that money didn't follow volume, and moreover worries about over-supply under the newly-announced jv expansion of Olaroz under an A$271 mn funding by part owner Toyota Tsusho of Japan 10p% financed by Japanese banks.The plan is not only to boost output but also cut costs, so it may not be as bad as the market reaction predicts. During the funding round institutional investing will be curtailed and the common stock will not be traded outside Australia until Feb. 7, which caused a bit of panic among US and Canadian owners. It doesn't look like we will get rights to subscribe the new shares.
*Deutsche Bank downrated Vale to neutral from buy over concern about its dollar debt yesterday as Brazil hit a new all-time index high. Today VALE fell 2.5%. Writing in seekingalpha.com, Leo Nelissen predicted that Vale stock will double this year because it is “the most amazing metal company on the market.” I am unconvinced but think Vale is relatively cheap. Vale fell 2.5% yesterday in a generalized Lat Am selloff.
*Schlumberger Ltd (SLB) was criticized by an anonymous writer on seekingalpha.com today for “being priced for perfection.” The Dutch Antilles drilling services firm reports Friday. It it suing before the US Supreme Court Ion Geophysical to recuperate the costs of patent violations by ION which cost it $93 mn outside the US where the patents were filed because US patents enforcement doesn't currently provide for non-US business losses.
*Nutrien, on behalf of Potash of Saskatchewan, is selling to institutional investors its 13.8% stake in Israeli Chemicals, operator of the Dead Sea works, for $700 mn on Jan. 23, a ~10% discount to the prior market valuation. Crédit Suisse is negative on fertilizeer stocks asaying there is too much plant food being sold.The news took down Soquimich of Chile which is also on the bloc to satisfy trust-busters in India and China who otherwise would prevent the merger with Agrium. SQM is down a tempting 6.4% because Rio Tinto is not bidding for itand because of fear of Asian oversupply of lithium.
*EON of Germany is up over 2% on sale of its 46% stake in Uniper to Fortum of Finland, in time for the deadline this week.
*Sterling strength has boosted the price of Greencore by 5.5% today to $12.5/sh. GNCGY is British listed but Irish homed.
*Nokia will run Optus network infrastructure for the next 5 years under a contract whose terms were not revealed, doing all field maintenance. NOK is Finnish.
*However worries about China debt and US pressures over its trade surplus took down China Eastern Airlines over 5%. CEA is one of the rare Chinese red chips traded on the Big Board.
*Naspers is up 2% while Tencent is up a fraction on news it will be working with Lego on creating on-line kiddy games with the Danish firm. Meanwhile Nestle is selling its candy for babies business. The Lego deal involves social networking and video for kids, not just blocks.
*Indian IT companies surged today on bullish Morgan Stanley turnaround talk. Infosys is up 5.9% despite its having sacked its founder-ex-CEO Nandian Nilekani as its board chairman yesterday. I am selling half my remaining shares.
Funds
*First Trust LP owns 18.25% of Aberdeen Global Income Fund, FCO.
*Saba Capital (Boaz Weinstein) has increased its stake in Templeton Emerging Income Fund to 11.1% ($1.7 bn). Its largest stakes are in Zambia, Kenya, Senegal, Iraq, Argentina, and South Africa, all of which Pres. Trump has dissed. Its gain is lower than the Templeton Emerging Markets Fund, the stock version. EMF beats TEI today but not I suspect for the rest of the year, if Weinstein is right.
*Korea Fund is up on Olympic peace-making boosting Seoul's market.
*Despite heavy purchases by the Herzfeld father and son, Herzfeld Caribbean Fund,CUBA, is down.
Disclosure: None.