EU BASIC INDUSTRIES: BASIC INDUSTRIES: Celanese (Baa3*-/BBB-[N]/BBB-): 3Q24 Earnings Call
Nov-07 15:01
A few interesting points from reviewing the call:
- It sees $800-900mn as typical FCF, this year was affected by one-offs.
- Played down divestments somewhat, looking “opportunistically” i.e. valuation will be important. That doesn't bode well for ratings with some inorganic deleveraging likely needed.
- Reiterated intention several times to get to 3x leverage; it sounded like dividend will remain minimal until that’s achieved.
- Asked if a rights issue would be considered, it reiterated that dividend cut is the most effective policy for now, but didn’t rule it out either.
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EQUITIES: S&P Recovers Off Lows, Aided by Lower Geopolitical Risk Perception
Oct-08 14:56
Equities firm further headed into the London close, with the e-mini S&P touching new session highs at 5795.00 and narrowing the gap with 5808.00 in the process. Move coincides with a series of buy programmes evident in the NYSE TICK Index at 1543BST/1043ET - helping build the recovery off lows.
- Moves come despite still-high US yields - the 10y yield remains above the 4.025% mark - with calmer geopolitical risk perceptions potentially helping the move. Earlier headlines that a Hezbollah deputy leader had "expressed openness to a ceasefire with Israel" had weighed on oil prices - and the earlier Jerusalem Post piece "Israel is not expected to attack Iran's nuclear program but rather to focus on various kinds of military bases and intelligence sites" have added to the theme.
- Strength today means a bull cycle in S&P E-Minis remains intact and the latest shallow pullback still appears to be a correction. Moving average studies are in a bull-mode setup, highlighting a dominant uptrend and positive market sentiment.
STIR: BLOCK: Mar'25 SOFR Bear Curve Flattener
Oct-08 14:38
- total +16,500 0QH5/3QH5 96.00 put spds, 0.5 net conditional bear curve flattener from 1025-1028ET, both legs covered vs futures on a 0.18% delta
FRANCE: Economic Policy Uncertainty Off July Highs, But Still Elevated
Oct-08 14:36
While the appointment of Michel Barnier as French PM helped domestic Economic Policy Uncertainty (EPU) stay below YTD highs in September, scope for OAT/Bund spread narrowing remains limited with the index still above 2024 average levels.
- The EPU Index, which is published monthly, is constructed using the number of newspaper articles from Le Monde and Le Figaro that contain the terms “uncertain or uncertainty, economic or economy, and one or more policy-relevant terms” (see here).
- It unsurprisingly rose through May to July after the European elections, subsequent legislative election announcement, and election results.
- The OAT/Bund spread widened from ~47bps to almost 80bps in early June after President Macron called the election. Although the spread tightened to almost 60bps following the election results, the resulting political paralysis and heightened fiscal risks have seen a renewed widening back to the current range of 75-80bps.
- Although PM Barnier’s cabinet has survived long enough to put together its 2025 budget (the Government announced E60bln of fiscal tightening measures last week), it still needs to be approved by the National Assembly.
- This will set the scene for the upcoming run of sovereign credit ratings (Fitch on Oct 11, before Moody's on Oct 25 and S&P on Nov 29), which provide the next major source of event risk for the OAT/Bund spread.
