Stock futures higher on global growth bets; Morgan Stanley leads bank gains after dividend boost; Nike slides as margin pressures offset Q4 earnings beat; Playtika shares surge on report of Joffre Capital interest and Occidental shares jump as Buffett adds more to stake
Here are five things you must know for Tuesday, June 28:
1. — Stock Futures Higher On Global Growth Bets
U.S. equity futures traded higher Tuesday, while the dollar slipped lower against its currency market peers and oil prices jumped, as investors reacted to some rare positive news on Covid from China in hopes of finding a spark that could ignite global growth prospects into the second half of the year.
With central banks around the world essentially standing shoulder-to-shoulder in their inflation flight, vowing to lift interest rates and withdraw liquidity in order to blunt demand and tame consumer price increases, growth metrics have slowed and recession bets have increased.
China’s move last night, however, to halve the amount of time inbound visitors must spend in quarantine, to seven days, suggests the world’s second-largest economy may be finally prepared to awaken from its months-long slumber.
Set against data showing no new infections in both Shanghai and Beijing on Tuesday — the first time that’s happened since February — and investors were more than happy to move out of risk-free assets such as Treasury bonds and the dollar in overnight trading.
The dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.1% lower at $103.84 while benchmark 10-year note yields edged higher, to 3.22%, in early European trading.
Global stocks got a boost, with the Asia region MSCI ex-Japan benchmark rising 0.42% and Japan’s Nikkei 225 gaining 0.66%. European stocks were also off to a solid start, with the Stoxx 600 rising 0.57% in early Frankfurt trading.
On Wall Street, where the S&P 500 remains on pace for its worst first half start since 1970, stock futures were looking solid, with contracts tied to the benchmark indicating an 18 point opening bell advance.
Those tied to the Dow Jones Industrial Average were priced for a 165 point gain while futures linked to the tech-focused Nasdaq were indicating a 45 point advance.
2. — Morgan Stanley Leads Bank Gains After Dividend Boost
Morgan Stanley (MS) – Get Morgan Stanley Report shares leaped higher in pre-market trading, pacing gains for Wall Street rivals such as Goldman Sachs (GS) – Get Goldman Sachs Group Inc. (The) Report, Wells Fargo (WFC) – Get Wells Fargo & Company Report and Bank of America (BAC) – Get Bank of America Corporation Report, as the country’s biggest lenders unveiled dividend hikes in the wake of the Federal Reserve’s annual bank stress tests.
Morgan Stanley increased its quarterly dividend by 11%, to 77.5 cents per share, following last week’s Fed tests, while authorizing a $20 billion share buyback. Goldman boosted its payout by 25%, to $2.50 per share while Wells Fargo said it plays to 20% hike, to 30 cents per share.
“The strength and stability of our franchise and our capital cushion provide us the flexibility to continue to invest for future growth while also returning capital to shareholders,” said Morgan Stanley CEO James Gorman.
All 33 U.S.-based banks, with more than $100 billion in collective assets, passed the Fed’s annual ‘stress test’ last week, a report card put in place in the wake of the global financial crisis that probes a bank’s ability to keep enough capital on hand to absorb losses — and protect depositors — in the event of a severe recession.
Under the Fed’s toughened conditions, which included a surge in the headline unemployment rate, to 10%, paired with a severe economic downturn, a 40% collapse in commercial real estate and a 55% decline in domestic stock prices, the Fed said, banks would take around $612 billion in total losses, but still maintain healthy capital buffers that would allow for improved shareholder payouts.
Morgan Stanley shares were marked 3.2% higher in pre-market trading at $79.94 each, while Wells Fargo and Bank of America gained 0.6%. Goldman Sachs was marked 1.05% higher at $303.95 each.
3. — Nike Shares Slide As Margin Pressures Offset Q4 Earnings Beat
Nike (NKE) – Get Nike Inc. Report shares moved lower in pre-market trading after the world’s biggest sports apparel group cautioned the surging transport costs, as well as a strong U.S. dollar, would eat into profit margins over its coming financial year.
Nike posted stronger-than-expected fourth quarter earnings of 91 cents per share late Monday. with revenues of $12.24 billion, as solid gains in its direct-to-consumer business offset a Covid-linked sales slump in China.
Shares in the group slumped lower, however, after it forecast fiscal 2023 revenues would grow by ‘low single digits’ when compared to 2022 levels, thanks in part to the headwinds of a stronger U.S. dollar, with profit margins falling as much as 50 basis points.
“When we look at our brand strength and momentum, our product pipeline against some of the biggest growth opportunities that we have, we think we’re well positioned for growth in fiscal year ’23,” CFO Matthew Friend told investors on a conference call late Monday.
“Having said that, we did take a cautious approach to Greater China, and we’re doing that because as we look at what disrupted our performance in the fourth quarter and focusing on what we can control, we felt strongly that prioritizing a healthy pull marketplace is the right action for us to take given the ongoing risk that we see in that marketplace.”
Nike shares were marked 2.7% lower in pre-market trading to indicate an opening bell price of $107.50 each, a move that would extend the stock’s year-to-date decline to around 35.5%.
4. — Playtika Shares Surge On Report of Joffre Capital Interest
Playtika Holding (PLTK) – Get Playtika Holding Corp. Report shares surged higher in pre-market trading following a report that suggested that Joffre Capital is looking to buy the online casino gaming group.
Axios reported Monday that Joffre, a tech-focused buyout group, is looking to pay $21 a share to buy a majority stake in Israel-based Playtika from a group of Chinese investors.
Playtika, which saw first quarter revenues rise 6% from last year to $677 million and expects to record adjusted full year profits of around $940 million, unveiled plans in February to “evaluate potential strategic alternatives … which could include a sale of the company or other possible transactions.”
Playtika shares were marked 11.2% higher in pre-market trading to indicate an opening bell price of $16.00 each.
5. — Occidental Shares Jump As Buffett Adds To Stake
Occidental Petroleum (OXY) – Get Occidental Petroleum Corporation Report shares jumped higher in pre-market trading as Warren Buffett yet another portion to his stake in the oil major, making the billionaire investor the group’s single-largest shareholder.
Buffett’s Berkshire Hathaway (BRK.A) – Get Berkshire Hathaway Inc. Report investment group said late Monday that it purchased another 794,389 shares of Occidental, taking its overall stake to just under 16.4%. Last week, it bought around $530 million in Occidental shares, according to Securities and Exchange Commission filings.
Buffett first began adding to his Occidental in March, following Carl Icahn’s exit following three years of investment in the energy group, and bumped his stake again later that month.
Occidental is seen as attractive given its foothold in the shale-rich Permian Basin of West Texas and New Mexico as U.S. drillers focus on domestic assets and international rivals exit Russian joint ventures with the state-backed energy giant Rosneft.
U.S. drillers added 13 new oil and gas rigs to their operations last week, according to data from energy group Baker Hughes, extending a record of 23 consecutive months of additions that take the overall total to 753 installations – a 60% increase from the samer period last year.
Occidental shares were marked 3% higher in pre-market trading to indicate an opening bell price of $60.67 each, a move that would extend the stock’s year-to-date gain to around 110% and value Buffett’s stake at around $9.33 billion.
