EU CONSUMER STAPLES: Carlsberg: FV (x5)
It's hard to be excited by the sector as it continues to face weak volume trends. Pricing has fallen away from post-covid peaks leaving lacklustre revenue trends. Little to no volume growth is not new for the sector but the concerns are if it will reverse into negatives; ageing demographics works against it, younger individuals are abstaining at higher rates and in the US substituting into marijuana at high rates. As said above, Carlsberg is more shielded given it has diversified 30% of its exposure into soft drinks and for credit these are still low levered global co's with ample FCF (though with equities not performing dividends/buybacks may struggle to head lower). Brewer co's will point to India filling the consumption gap (again benefits CARLB) and premiumisation (including growth in zero-alcohol).
Carlsberg will likely price (~5y levels);
- -30 inside retailers - looks fair
- -15 inside consumer services - services looks better (and has been performing YTD)
- -10 inside major grocers Carrefour & Tesco - looks fair to CARLB looking better
- mixed vs. equal rated staple Food; flat to Mondelez/General Mills +10 wide of MCD/Danone. MDLZ may screen relative value, MCD/Danone look fair (Danone is our F&B sector darling).
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US TSYS: Modestly Cheaper To Start Inauguration Day
- Cash Treasuries are closed today for Martin Luther King Day whilst futures markets are set for an early close at 1300ET.
- Focus is firmly on Trump’s inauguration, due to be sworn in at 1200ET and with eyes on executive orders that may follow. See our political risk team’s schedule for the day: https://media.marketnews.com/MNIPOLRISK_Inauguration_Day_Schedule_07a11994f9.pdf
- TYH5 pushed through Friday’s low overnight with 108-10 (currently 108-12+, -05) but still carries some of the impact from a dovish Waller on Thu and all of Wednesday’s CPI impact. Cumulative volumes are unsurprisingly extremely thin, at 165k.
- Gains are considered corrective against a medium-term bearish trend condition. Resistance is seen at 108-27+ (Jan 17 high) whilst support is seen at 108-00 (Jan 13 low).
- Fed Funds futures meanwhile price a cumulative 7.5bp of cuts for Mar, 13bp for May, 23bp for Jun, 26bp for Jul and 38bp for 2025 (the latter vs 32bp pre-CPI).
EURIBOR OPTIONS: Large Call Condor is bought for more
Large Condor in Euribor is still trading, multiple clips:
- ERM5 98.125/98.25/98.375/98.50c condor, bought for half in ~40k.
OUTLOOK: Price Signal Summary - Resistance In Gold Remains Exposed
- On the commodity front, the recent climb in Gold appears corrective - for now. However, the yellow metal continues to hold on to its latest gains and scope is seen for a continuation higher near-term. The stronger recovery exposes $2726.2, the Dec 12 high and an important resistance. Clearance of this level would be a bullish development. On the downside, a reversal lower would expose $2583.6, the Dec 19 low. Initial support is at $2649.0, the 50-day EMA.
- In the oil space, the trend structure in WTI futures remains bullish and the Jan 15 rally reinforces current conditions. The recent strong impulsive climb has resulted in a breach of $75.91, the Oct 8 high. Attention is on $79.48, the Apr 12 ‘24 high. A clear break of this hurdle would strengthen the bullish theme and open 80.63, a Fibonacci projection. On the downside, a reversal lower would expose the 20-day EMA, at $73.89, a key short-term support.
