The Bank of America has identified 11 US stocks to be taken over in 2022, including Disney.
Wall St was battered by Omicron fears overnight as the world entered a minor panic over more lockdowns.
And, as ASX SPI 200 futures traded 0.1% higher at 7,201 early in the morning after falling 0.4%, ASX should follow the lead on Wall Street.
Omicron is definitely making an impact.
According to Joseph Palmer & Sons Director Alex Moffatt, âThe growing spread of the Omicron variant of the coronavirus is disrupting investors in relatively tight markets as the holiday season approaches.
“I suspect it is not so much the spread of the virus but rather the fact that governments and central banks are withdrawing their financial support while the virus is still raging.”
Maybe Moderna has a solution.
The US vaccine maker expressed confidence yesterday that its recall could fight Omicron.
“We can count on this vaccine to deal with the short-term wave of Omicron cases,” Stephen Hoge, president of Moderna, said on a conference call.
Hoge, however, said tests after just two doses showed protection against Omicron to be “substantially weaker” than against the original COVID-19 strain.
Data suggests that a 100 microgram dose of Moderna jab as the first and second dose for protection against COVID-19, followed by a 50 microgram booster has a positive effect.
âWe are cautiously optimistic given the data presented hereâ¦ that the permitted booster dose of 50 micrograms should hopefully provide good protection against the Omicron variant. We expect there will be a need for a seasonal stimulus in the future, âHoge said.
Here is what we saw:
- The Australian dollar rose from low near 70.82 cents US to highs near 71.27 cents US and was near 71.10 US cents at the US close.
- Global oil prices have fallen as soaring Omicron cases in Europe and the United States have fueled investor fears that further restrictions will hurt demand for fuel.
- The price of Brent crude fell US $ 2.00 or 2.7% to US $ 71.52 per barrel.
- The price of US Nymex crude fell US $ 2.63 or 3.7% to US $ 68.23 per barrel.
- Base metal prices were generally lower, with economic risks posed by the Omicron variant outweighing the positives, including signs of easing bank credit conditions in China.
- Aluminum fell 2.3%.
- Nickel fell 1.7%.
- The copper was flat.
- The gold futures price fell US $ 10.30 or 0.6% to US $ 1,794.60 an ounce.
- Spot gold was trading near US $ 1,788 an ounce at the US close.
- Iron ore reversed the trend, rising US $ 4.95 or 4.2% to US $ 123.20 per tonne as Chinese banks stepped up support for the economy and steel mills increased production until the end of the year.
Magellan on the back
Yesterday, Magellan’s biggest investor, Britain’s St James’s Place, withdrew its $ 18 billion mandate, the news of which caused Magellan stock to fall by about 30%.
Today, Magellan is the main topic of discussion.
Magellan’s shares peaked at $ 74.91 in February of last year and closed yesterday at $ 19.70.
It’s a big drop and as Magellan calls for calm, investors are clamoring for blood.
Investors focus on the economy as well as corporate fundamentals and Magellan is fundamentally collapsing.
Magellan is a fund manager led by Hamish Douglass who manages their key fund and has benefited from a sterling run in stock picking lately.
However, Douglass appears to have lost his mojo, with his choices getting out of hand, causing the fund to perform poorly and investors to flee.
UBS has now reiterated its sell rating.
UBS analyst Sreyas Patel reiterates that he reduced his price target by 42% to $ 17.
Patel says investors are taking into account a wider contagion from institutional capital outflows and thinks it will amount to $ 23 billion over the next few years.
Magellan’s high fund fees are also having an impact on investors, as individual cash outflows are expected to accelerate.
âWe see short-term biased downside operating risks,â Patel said.
“A single year of investment underperformance has canceled out its 10-year alpha and that underperformance will need to be held for many years until it subsides.”
Macquarie analysts also downgraded their rating.
“Although the attractiveness of valuations has emerged (9.7x P / E, 49% below 5-year average), we see limited revaluation margin given the outlook for pricing flows and risks. “Macquarie said in a note to customers.
As with UBS, Macquarie says capital outflows will persist.
“Despite the risk of appraisal appeals remain high,” he said.
âWe estimate that the SJP mandate contributed approximately $ 86 million to the group’s revenue / EBITDA.
âAt the current tax rate of about 23%, that would imply a reduction of about $ 66.5 million from the NPAT, resulting in drops of about 15% in profits (half over the year 22; full impact in year 23).
âAssuming an average institutional margin of around 38 basis points, the SJP mandate was around AU $ 23 billion and was MFG’s largest. The second-largest mandate generating around 3.5% of total revenue management fees as of June 30.
âWhen combined, MFG’s remaining 4 largest institutional mandates were similar in size to the SJP mandate at around 10% of management fee income. “
The target price was also lowered to $ 20.00 from $ 38.50 at the lower end of Macquarie’s PE Rel / DCF valuation range (previously the midpoint).
“The high uncertainty surrounding earnings will cause MFG to trade lower than its peers (vs. a 5-year average premium of around 23%).”
Morgan Stanley (NYSE: MS) lowered its price target on Magellan by 40% to $ 17.50, also citing cash outflows.
“The risk on flows remains given the lack of diversity,” analysts at Morgan Stanley (NYSE: MS) said in a note to clients.
“Our new price target of AU $ 17.50 is similar to our previous bearish scenario. We only see a slight downside for MFG from here, but we remain UW (underweight).”
CSL opens $ 750 million PSP
CSL opened its Share Purchase Plan (SPP) to support its $ 16.4 billion acquisition of Vifor Pharma.
CSL sells new shares to existing shareholders at the placement price of $ 273 and a 2% discount from the 5-day volume weighted average price of CSL shares up to and including the closing date of the SPP , which should be February 7.
Eligible shareholders can request up to $ 30,000 in new shares without incurring brokerage or transaction fees.
The PSP follows CSL’s $ 6.3 billion investment.
Meanwhile, Vifor settled a patent dispute with a US partner over its iron deficiency treatment product.
âWe are delighted to have resolved all patent litigation relating to Injectafer,â said Oliver Kronenberg, General Counsel of the Vifor Group.
“With these agreements in place, we can continue to focus on addressing the significant unmet medical need to appropriately diagnose and treat iron deficiency anemia to improve the lives of patients in the United States, together with our partner American Regent. “
U.S. stock markets fell sharply yesterday as coronavirus cases in the United States increased.
The market took another blow when US Democratic Senator Joe Manchin said on Sunday that he would not back US President Joe Biden’s US $ 1.75 trillion spending plan, “Build Back Better.”
Shares of enterprise software maker Oracle fell 5.2% after announcing plans to acquire electronic medical records company Cerner for $ 28.3 billion. Cerna was up 0.8% on the news.
It was a bad day overall, with travel stocks taking a hit.
Travelers fell 3%, Boeing fell 2.2%, Goldman Sachs (NYSE: GS) fell 2.7%, American Express fell 2.6%) and Caterpillar fell 2.9 %.
All indices were down and traders reported that lower volumes before the Christmas holidays exacerbated market movements.
âTypically what’s going on in Europe is a bit of a snapshot of what we’re seeing in the United States. So if we see a lot more infections in the United States, it could stress hospitals, make people less reluctant to go out, spend, and participate in the economy. It is certainly a cause for concern, âsaid Chris Zaccarelli, Investment Director of the Independent Advisor Alliance.
The Dow Jones Industrial Average closed down 1.2%, the S&P 500 was down 1.1% and the Nasdaq was down 1.2%.
Actions to watch
In more interesting news, the Bank of America (NYSE: BAC) has identified 11 U.S. stocks for recovery in 2022.
“These stocks have an implicit increase of 23%, on average, over our analysts’ price targets (as of December 16, 2021), plus an average dividend yield of 2.2% (vs. 1.7% for the 11 sectors on average), âthe bank said. analysts write.
“These stocks are mostly overlooked by active funds and benefit more from inflation, higher GDP, higher interest rates, higher oil prices and wage growth than a portfolio of 11 equally weighted sectors, which we believe will happen in 2022. “
The stocks are Disney, BorgWarner (NYSE: BWA), Mondelez (NASDAQ: MDLZ), ExxonMobil, Wells Fargo, CVS, Welltower, Eaton, F5, Eastman Chemical Company (NYSE: EMN) and NRG Energy (NYSE: NRG).
European equity markets were also down.
The rapid spread of the Omicron is having a global impact with tighter government restrictions across the continent.
The Netherlands entered lockdown on Sunday.
The pan-European STOXX 600 was dragged down by mining and auto stocks, both down 2.5%. The Stoxx Europe 600 fell by%
In London trading, Rio Tinto shares fell 2.4% and BHP shares lost 1.5%.
Altaf Kassam of State Street Global Advisors said Omicron is likely to have a bigger effect on European stocks than on US stocks.
“We believe that in the medium to long term it still makes sense to move risky assets from the United States to Europe as Europe begins to experience a bit more recovery,” Kassam told Bloomberg.
“Europe’s service-oriented economy needs the uncertainty over the omicron variant to be lifted for it to really take off.”
There is optimism for next year.
“We remain optimistic for 2022, but the winter months are expected to be difficult due to rising inflation, persistent energy shortages and the need for additional measures in Europe and the UK,” said Joachim Klement, Head of Strategy, Accounting and Sustainability at Liberum Capital.
“All of this should dampen growth expectations in the coming months, but we remain weak buyers as we expect growth to remain strong overall in 2022 and inflation to decline.”