EU FINANCIALS: Financials - Week in Review
Jan-31 12:21
Another strong week for financials, with the sector 4bps tighter, amidst broadly better than expected results. US banks continued to do well following their strong results earlier in January.
- Aareal bank was the standout performer, on little news other than a WSJ article about an uptick in US CRE activity https://mni.marketnews.com/3Cz37vd. Their recently issued AT1 however continued to struggle after being issued at quite at what we believed was an aggressive valuation point https://mni.marketnews.com/42jsrzY . The AT1 will now screen more attractive following underperformance of the AT1 and performance of the Snr.
- Deutsche Bank's results were decent but disappointed at the margins, with some niggles around legal expenses most prominent. The improving trend and wider spreads than similarly rated credits make it an interesting name. https://mni.marketnews.com/3PWiUai The banks expected 2025 issuance will be reasonably high. https://mni.marketnews.com/40Hu2Ng
- SEB Group’s results were reasonable, but highlighted some issues that may be relevant for several banks in this earnings season. Lower rates put pressure on NII and CET1 declined sharply amidst the announcement of shareholder rewards. Expenses also were meaningfully higher https://mni.marketnews.com/412KTMd
- BBVA's results were strong, helped by its EM regions and strong growth in fee income - https://mni.marketnews.com/3ElHdft - their offer for Caixabank is reportedly only weeks away from clearing regulatory hurdles. For their part Caixabank Q4's saw sharply lower NII, as expected but capital generation remained positive https://mni.marketnews.com/42CkpCf
- Generali’s investor day struck a bullish tone and was well received by market. M&A budget remains €1-1.5bn irrespective of Natixis tie up. https://mni.marketnews.com/40U8RZN
- Some of the newly issued bonds in January have struggled to keep up with rallies in secondary. We highlighted BFCM's new T2 in particular https://mni.marketnews.com/4hjyWra
- New Issues slowed around the ECB & Fed meetings. BayernLB issued a Sr Non-Pref and SEB and BAWAG came on Friday with a Sr Pref and a Tier 2 respectively.
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US TSYS: Tsy Curves Look To Finish 2024 at June'22 Highs
Dec-31 19:18
- Treasuries look to finish the last trading session of 2024 lower after reversing Tuesday morning support. Markets closed Wednesday for New Years day, resume full trade Thursday.
- The Mar'25 10Y contract trades 108-25.5 (-5.5) late in the day, 10Y yield near session high of 4.5871%. Curves bounced off flatter levels, 2s10s climbing to 34.344 -- the highest level since June 2022.
- Short end support, in turn, helped projected rate cuts into early 2025 gain momentum vs. late Monday levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -14.6bp (-13.6bp), May'25 -20.6bp (-19.5bp), Jun'25 -29.8bp (-28.8bp).
- No substantive reaction to this morning's housing and regional Dallas Fed services activity data. Looking ahead to Thursday data (prior, est): Initial Jobless (219k, 221k) and Continuing Claims (1.910M, 1.890M) at 0830ET; S&P Global US Manufacturing PMI (48.3, 48.3) at 0945ET; Construction Spending MoM (0.4%, 0.3%) at 1000ET.
- Treasury supply: $85B 4- & $80B 8W bill auctions at 1130ET, $64B 17W bill auction at 1300ET.
COMMODITIES: WTI Futures, Gold Holding Higher
Dec-31 18:47
WTI futures are trading higher today as the contract extends recent gains. A stronger reversal to the upside would refocus attention on key short-term resistance at $76.41, the Oct 8 high. Initial firm resistance is unchanged at $71.97. A bear threat in Gold remains present. The yellow metal traded sharply lower on Dec 18 and the move undermines a recent bull theme. A resumption of weakness would open key support at $2536.9, the Nov 14 low.
- WTI Crude up $0.9 or +1.27% at $71.88
- Natural Gas down $0.32 or -8.13% at $3.618
- Gold spot up $19.24 or +0.74% at $2625.86
- Copper down $6.95 or -1.7% at $402.3
- Silver down $0.1 or -0.34% at $28.8383
- Platinum up $3.96 or +0.44% at $908.02
US STOCKS: Late Equity Roundup: Tech & Interactive Media Sectors Underperforming
Dec-31 18:36
- Stocks are trading near session lows after reversing early session gains. Though off this year's record highs (SPX Eminis 6178.75, DJIA 45,073.63, Nasdaq 20,204.58) major averages will finish the year with double digit gains: SPX Eminis +19.5%, DJIA +13.1%, while the Nasdaq gained 29.9%!
- Currently, the DJIA trades down 92.19 points (-0.22%) at 42474.46, S&P E-Minis down 28 points (-0.47%) at 5929.75, Nasdaq down 147 points (-0.8%) at 19337.13.
- Information Technology and Communication Services shares underperformed continued to underperform late Tuesday, shares of software and semiconductor makers weighing on the tech sector: Nvidia -1.61%, Advanced Micro Devices -1.36%, Crowdstrike Holdings -1.28%.
- Interactive media and entertainment shares weighed on the Communication Services sector: Alphabet -0.9%, Live Nation -0.76%, Netflix -0.60%, Meta -0.41%.
- On the positive side, Energy and Materials sectors outperformed in the second half, oil & gas stocks buoyed the Energy sector as crude prices continued to rise (WTI +1.0 at 71.99): APA Corp +3.59%, Marathon Petroleum +2.46%, Occidental Petroleum +2.15%.
- Meanwhile, shares of chemical & fertilizer makers supported the Materials sector: Mosaic +2.44%, Celanese +1.42%, Dow +1.37%.
- Looking ahead, the next round of quarterly earnings kicks off mid-January with Blackrock, Bank of NY Melon, Wells Fargo, JP Morgan, Goldman Sachs, Citigroup, US Bancorp, M&T Bank and PNC all reporting between January 13-16.
