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Zuma takes in fresh capital to convert your next apartment tenant lead into a contract

Given its product market fit in real estate, Zuma now aims to implement its business model into other industries with sales teams, like healthcare, automotive, insurance, education and fashion.

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Looking for a new apartment is either a leisurely thing to do or something that has to take place quite quickly. When you don’t reach anyone in the leasing office, you often move on to the next one on the list, even if it was one you would have considered.

Zuma wants to ensure that any reach out for information is answered in minutes versus days. Today, the company, which adds artificial intelligence to sales engagement, exited its beta phase with $6.7 million in seed funding led by Andreessen Horowitz.

The company was co-founded by CEO Shiv Gettu, a former real estate consultant, and president Kendrick Bradley, a former Boeing and SpaceX engineer who left his job in 2018 to work at a property management company. They both saw the pain points for real estate sales teams and together built a tech-driven Airbnb-like hospitality property company that grew to $2 million in revenue in nine months.

When the global pandemic hit, they had long-term lease commitments, but with business and leisure travel halted, they pivoted their company into a virtual leasing office using AI to automate the conversion process, which became Zuma, Gettu said in an interview.

He noted statistics that showed a majority of real estate leads tend to come in at night and on weekends, when leasing agents aren’t usually on property, and that response gap of waiting until the next business day can account for a decrease of 100 times after half an hour.

Zuma app. Image Credits: Zuma

Zuma’s AI-powered agent, Kelsey, answers complex questions about a property as they come in, and via text message, to encourage any hot lead to become a booking customer, even outside of normal business hours. It also brings in a human-in-the-loop aspect, if the questions are outside the scope of Kelsey’s ability, to respond.

“We understood the value of leads and the importance of nurturing them,” Bradley told TechCrunch. “Text messages engage with prospects immediately. If you’re interested in an apartment, you might not hear back for 48 hours, but Zuma integrates with property management tools and when a lead inquires, Kelsey gives them information on the property and the policies with the idea of them then coming in to view the property and sign a lease.”

Since January, the company has grown revenue by 10 times and is working with customers like Bungalow.com, which see an average conversion rate increase of 2.1 times in 30 days and 35 times return on investment, while saving an average of 50% on sales staffing costs.

Joining Andreessen Horowitz in the investment were Y Combinator, Range Ventures, Liquid 2, Day One Ventures, Soma Capital and a group of individual investors, including Apartment List co-founder Chris Erikson, former Y Combinator COO Qasar Younis and Lambda School founder Austen Allred. The latest funding round gives Zuma a total of $7.2 million raised to date.

Gettu says the company has hit a good rhythm with its initial product, so the new capital will go into new features, hiring and expanding sales to capture the market. Zuma is also looking to implement its business model into other industries with sales teams, like healthcare, automotive, insurance, education and fashion.

“Zuma’s blend between human support and AI creates a magical conversation experience for prospective customers that drastically increases conversion,” Connie Chan, general partner at Andreessen Horowitz, shared in a statement. “The Zuma team has proven their impact for property management teams, and the sky’s the limit as this platform grows to serve and help scale any industry that has leads that require nurturing.”

 

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Spread & Containment

What Is Liquidity? And Why Is It Important?

What Is Financial Liquidity?In physics, liquidity refers to a substance’s ability to flow, which is a description that also works well in the stock market. Financial liquidity has everything to do with an asset’s ability to be transformed into another…

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Just like the scientific term, liquidity in finance has everything to do with "flow"

Aleksandr Slobodianyk from Pexels; Canva

What Is Financial Liquidity?

In physics, liquidity refers to a substance’s ability to flow, which is a description that also works well in the stock market. Financial liquidity has everything to do with an asset’s ability to be transformed into another asset while maintaining its intrinsic value. Assets that are more difficult to sell are considered less liquid, or illiquid. The asset that is the most liquid, and thus the most easily transferrable, is cash. In fact, the fundamental meaning of “liquidate” is to convert something into cash.

One way to understand liquidity is to examine the level of difficulty at which a transaction can be completed. The easiest transactions, which are cash transactions, are also very liquid.

Take, for another example, selling tangible items on an online marketplace, like eBay. A t-shirt will most likely sell faster than a vintage bicycle, or a new car, or even a house, because those transactions are more complex—and more expensive. You wouldn’t pay for a car using t-shirts, would you? That transaction would be quite difficult to process. Instead, you would want to use cash.

A few examples of assets on the spectrum of liquidity. Cash is the most liquid while tangible assets, like real estate, are considered illiquid.

What Is Liquidity in the Stock Market?

Now let’s apply these concepts to the stock market. A stock is considered liquid when its shares can be bought—and sold—quickly with minimal impact to its market price. Large-cap companies traded on the major exchanges are considered to be liquid: They are traded in high volumes, and so the price per share a buyer makes (which is known as the bid) is very close to the price a seller will accept (known as the ask).

Smaller-cap companies, which are traded on smaller exchanges more infrequently than larger-cap companies, usually have higher liquidity risk. That means that the price per share a buyer offers could be very different than the price a seller will accept. This is known as a greater spread. When these kinds of stocks witness a surge in demand, they can also experience a lot of volatility.

Stock Liquidity Indicators

The simple rule of supply and demand helps to determine a stock’s liquidity. Stocks that are liquid have enough demand and supply of shares, which means that buy and sell transactions can happen smoothly.

Investors should take into consideration the stock’s bid-ask spread, which is the difference between the quoted price and its immediate purchase price. This is a fee paid by the buyer, and it represents an important part of the overall transaction cost.

Just how much will an investor need to pay? There is no “average” bid-ask spread, but it’s good to note that there is a bias toward larger-cap stocks, which tend to have lower spreads than smaller cap stocks. Conceptually speaking, if your investment strategy included 100% turnover a year, meaning that you sold 100% of the stocks in your portfolio and replaced them with 100% new ones, if you incurred bid-ask spreads of just 50 basis points, that would mean you would have to pay 1% in trading costs alone! So be careful.

Volume is another indicator of liquidity. Higher trading volume means there is greater market interest for a particular stock, which makes for higher liquidity.

What Is Accounting Liquidity?

When characterizing liquidity, analysts aren’t merely examining what happens on the trading floors; rather, they are taking a deep look inside a company’s accounting practices, down to its balance sheet, so they can see how readily it can pay off its debts and other financial obligations—usually those that come due within a one-year timeframe—as well as seeing how much cash it has on hand. This is known as cash flow

There are three ratios analysts use to measure a company’s liquidity.

  1. Current Ratio: this is calculated by taking the number of current assets and dividing it by the number of current liabilities. The total should be greater than 1, which signifies that the company’s assets are greater than its liabilities.
  2. Quick Ratio: this calculation is the sum of cash, accounts receivable, and equities divided by liabilities. It includes everything except inventories, because they are the most difficult to liquidate.
  3. Operating Cash Flow Ratio: this calculation is a measure of short-term liquidity and takes into consideration cash divided by liabilities. A high number here is better, as it signifies greater financial health (i.e., the company can cover its liabilities several times over). 

Is Market Liquidity Good or Bad?

There’s only upside to market liquidity. In fact, the financial markets need liquidity to ensure that traders can open and close their positions efficiently and enjoy tighter bid-ask spreads. To put it simply, market liquidity actually lowers the cost of investing. 

What Is the Illiquidity Premium?

As great as liquidity can be for the markets, there are some, particularly long-term, investment vehicles that benefit from a lack of liquidity. Pension plans and insurance companies look to capitalize on the risk premiums associated with illiquid assets like real estate, farmland, etc. that sport long-range maturations as well as offer incentives (i.e., interest) for their increased risk. This is known as an illiquidity premium.

What Are Some Real-Life Examples of Market Liquidity?

Banks play an important role in both accounting and market liquidity, for two main reasons:

  1. Banks lend cash to companies while holding their assets (as collateral), and
  2. They own both short- and long-term assets that can be converted into cash.

Liquidity is a process that banks must manage daily, and they are subject to requirements from the government that are intended to prevent a liquidity crisis. In fact, after the 2008 Financial Crisis, the Federal Deposit Insurance Corporation (FDIC) created a rule that required large banks to maintain a minimum level of short-term funding and thus reduce liquidity risk.

How Does the Fed Contribute to Market Liquidity? 

In response to the COVID-19 crisis, in March 2020, the Federal Reserve began a series of fiscal stimuli by buying back trillions of dollars of U.S. Treasuries in an effort to increase market liquidity and avoid recession. This was known as quantitative easing. As inflation rose in 2021, the Fed announced that it would begin tapering its buybacks in 2022, and most likely increase interest rates. The entire world is waiting to see what will happen next. 

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Stocks Soar On Optimism Omicron Is A Dud As Traders Focus On Growing China Stimulus

Stocks Soar On Optimism Omicron Is A Dud As Traders Focus On Growing China Stimulus

U.S. index futures rallied, led by gains for Nasdaq 100 contracts, amid waning omicron worries and a booster shot of Chinese stimulus lifted world stock marke

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Stocks Soar On Optimism Omicron Is A Dud As Traders Focus On Growing China Stimulus

U.S. index futures rallied, led by gains for Nasdaq 100 contracts, amid waning omicron worries and a booster shot of Chinese stimulus lifted world stock markets and oil on Tuesday and left traders offloading safe-haven currencies and bonds for the second day in a row. Emini S&P futures were up 61 point to 4,650.75 or about 120 points higher then where Gartman said "stocks are headed lower" some 24 hours ago. Nasdaq futures were up 1.8% and Dow futures rose 1% in premarket trading. In fact, futures are now just 50 points away from where they were below the Black Friday Omicron panic plunge.

The FTSEurofirst 300 index was on track for its first back-to-back run of plus 1% gains since February while Asia saw record bounces from some of China's biggest firms such as Alibaba which soared by the most since its 2019 listing in Hong Kong, leading a rebound in Chinese tech stocks, as bargain hunters piled in amid improved sentiment following Beijing’s move to bolster the economy. The MSCI Asia Pacific Index climbed 1.7% while Japan’s Topix index closed 2.2% higher. The VIX dropped for a second day, sliding below 24, but remained above this year’s average.

The risk-on mood also helped the dollar climb against safe haven currencies such as the Japanese yen, , which had lost 0.6% overnight, as the confidence-sensitive Australian dollar also found buyers. Safe-haven government bonds went the other way with yields  up 2.5% on Germany's benchmark 10-year Bund after falling to a three-month low on Monday.

Reports in South Africa said Omicron cases there had only shown mild symptoms and the top U.S. infectious disease official, Anthony Fauci, told CNN "it does not look like there's a great degree of severity" so far. "Good news relating to the severity of Omicron should be taken with a pinch of salt. Faster transmission could offset the benefits of milder symptoms," researchers at ING said in a note. "More broadly, it is still early days, even if markets are starting to display Omicron fatigue."

"While epidemiologists have rightly warned against premature conclusions on Omicron, markets arguably surmised that last week's brutal sell-off ought to have been milder," Vishnu Varathan, head of economics and strategy at Mizuho Bank, said in a note. "After all, early assessments of Omicron cases have been declared mild, spurring half-full relief."

There are signs of “a fragile improvement in market mood,” said Ipek Ozkardeskaya, senior analyst at Swissquote. Still, “no headline addresses the major concern of the week: the rising U.S. inflation, which is a big threat to the investor mood, as the U.S. CPI data is due Friday, and the expectation is an advance to a strong 6.7%,” Ozkardeskaya wrote in a report. “We could see wild mood swings into the second half of the week.”

The gains also came after China's central bank on Monday injected its second shot of stimulus since July by cutting the RRR - or the amount of cash that banks must hold in reserve. Then on Tuesday, the PBOC said that the Interest rate for relending to support rural sector and smaller firms will be cut by 0.25 percentage point, effective from today, with 3-mo, 6-mo and 1-yr relending rates will be cut to 1.7%1.9% and 2%.

After pretending it would let the economy falter for months, Beijing is finally firmly in pro-growth mode with the Politburo stating that stability is the top priority ahead of next year’s Communist Party congress. Premier Li Keqiang also said China has room for a variety of monetary policy tools after yesterday’s reserve ratio cut. As a result, the beaten down financial and property stocks were the biggest winners amid the change in tone from policy makers. In Hong Kong, Alibaba Group Holding Ltd. soared by the most since its 2019 listing. Global markets are also getting a lift from the easing policy pivot in world’s second-largest economy which we first flagged more than a weeks ago.

* * *

In the premarket, Intel shares rose 7.7% in premarket trading after the chipmaker confirmed a WSJ report that it plans to float a minority stake in its Mobileye self-driving car business by the middle of next year. Alibaba jumped as much as 5.4% in U.S. premarket trading Tuesday, adding to a 10% rally on Monday as with Chinese tech stocks rebound. Alibaba’s climb in the U.S. comes after its shares posted their biggest gain since June 2017 on Monday.

Cruise operators and airline stocks are trading higher for a second session as investors assess the severity of the omicron virus variant. American Airlines was among the notable outperformers after naming President Robert Isom to replace retiring CEO Doug Parker. AAL rose 3% in premarket trading, while UAL climbs 2.6% and JBLU jumps 2.7%; other gainers include: ALK +2.6%, DAL+2.3%, LUV +2.4%, Royal Caribbean and Norwegian Cruise added 3.3%, while Carnival increased 3.1% in premarket trading. Casino operators also rebounded, led by Las Vegas Sands +3.5%, Wynn Resorts +2.7%, MGM Resorts +2.3% after Hong Kong’s Carrie Lam said the city will prioritize quarantine-free travel for business people when its border with mainland China reopens.

In Europe every industry sector rose, led by tech and mining companies, to push the Stoxx 600 Index to a 2% gain led by technology, mining and consumer companies. AstraZeneca was an outliker, falling 2% in London after the company agreed to pay Ionis Pharmaceuticals as much as $3.6 billion to gain rights to a promising medicine for a rare disease. European e-commerce stocks that benefited from increased demand during pandemic-related lockdowns rose in Europe on Tuesday, with many outperforming the benchmark Stoxx 600’s biggest gain since March. Among the names were Allegro +6.3%, Moonpig +5.3%, Global Fashion Group +5.3%, Asos +5.1%, Zalando +4.6%, THG +3.7%, Boozt +3.3%, Ocado +2.4%, Boohoo +1.9%. “As concerns grow over rising case numbers, we expect some people will prefer to shop online again to limit their visits to stores,” Fraser McKevitt, head of retail and consumer insight at Kantar, says in emailed comments.

Asian equities advanced, on track for their best day in more than three months, following China’s latest moves to bolster growth in the world’s second-largest economy.  The MSCI Asia Pacific Index rose as much as 1.8%, poised for its biggest gain since Aug. 24. Consumer-discretionary firms contributed most to the market’s climb, led by Alibaba as bargain hunters snapped up recently rattled Chinese tech stocks. Benchmarks in Hong Kong and Japan led broad gains around the region.  China’s central bank said it will cut the amount of cash most banks must keep in reserve from Dec. 15, providing a liquidity boost. Meanwhile the Communist Party’s Politburo signaled an easing of curbs on the battered real-estate sector. “Anxiety over the Chinese economy is abating thanks to the cut in the banks’ reserve ratio and a partial easing of real-estate regulations,” said Hiroshi Namioka, chief strategist at T&D Asset Management Co. Plus, “an overall risk-on mood is being created as people turn increasingly optimistic about any impact from the omicron, leading to higher U.S. equities and long-term yields.”  Financials and industrials also boosted the region’s key equity gauge Tuesday as investors looked toward reopening prospects. The day’s rebound marks a sharp turnaround following weeks of declines since mid-November. U.S. equities overnight rebounded from Friday’s selloff after reports that cases of the omicron variant have been relatively mild.

Japanese equities rose by the most in over a month, as investors were cheered by reports of Chinese policy makers moving to support the nation’s economy and that global omicron virus cases have been relatively mild. Electronics makers and telecoms were the biggest boosts to the Topix, which gained 2.2%, the most since Nov. 1. SoftBank Group and Tokyo Electron were the largest contributors to a 1.9% rise in the Nikkei 225. The yen extended its loss against the dollar after weakening 0.6% overnight. U.S. stocks climbed Monday after news from South Africa that showed hospitals haven’t been overwhelmed by the latest wave of Covid cases. Meanwhile, China President Xi Jinping oversaw a meeting of the Communist Party’s Politburo on Monday that concluded with a signal of an easing in curbs on real estate. “Cyclical stocks, China-linked names and automakers that had been sold on a stronger yen will likely be bought up following China’s change in policy stance,” said Hideyuki Ishiguro, a strategist at Nomura Asset Management in Tokyo. “This will alleviate worry over a slowdown in the Chinese economy.”

India’s benchmark equity index bounced back from a three-month low on optimism that the global economic recovery may be able to withstand risks associated with the omicron virus variant.  The S&P BSE Sensex climbed 1.6% to 57,633.65, in Mumbai, while the NSE Nifty 50 Index also advanced by a similar magnitude. ICICI Bank Ltd. provided the biggest boost to both the gauges with a 3.5% gain. Out of the 30 shares in the Sensex, 29 rose and one fell. All 19 industry sub-indexes compiled by BSE Ltd. gained, led by a measure of metals companies. The uncertainty from the omicron variant, along with expectations of rapid tapering by the U.S. Federal Reserve have tested the risk appetite of investors in the previous two sessions in India. However, markets across Asia advanced Tuesday after China pledged measures to support slowing economic growth. “Indian markets mirrored the sharp buoyancy in global indices on the back of short-covering by market participants. The rally was backed by a sharp upsurge in banking and metal stocks, which had taken a severe hammering in recent sessions,” Shrikant Chouhan, head of equity research at Kotak Securities Ltd. wrote in a note.  Australia’s central bank -- at its monetary policy meeting Tuesday -- left its key interest rate unchanged and said that while the strain is a source of uncertainty, it’s not expected to derail the recovery. Reserve Bank of India will announce its rate decision on Wednesday. 

In FX, the Dollar Spot Index inched lower as commodity currencies led gains among Group-of-10 peers. The volatility skew for the Bloomberg Dollar Spot Index shows bullish bets on the greenback over the one-month tenor stand near their lowest since August. This may change as soon as next week after Friday's CPI report. The euro reversed an Asia session gain to touch a December low of $1.1254 in early European hours. Bunds and Italian bonds slumped, led by the belly after ECB’s Holzmann yesterday said rate hikes are possible while still buying debt. Money markets continue to price the first 10bps rate hike in December 2022 but October pricing jumps to 7.5bps from 6bps on Monday.

The pound was steady against the dollar, trailing other risk-sensitive currencies, with focus on next week’s Bank of England meeting and how officials will assess the threat of the omicron strain. The Norwegian krone and the Canadian dollar advanced amid rising oil prices and before the Bank of Canada meeting Wednesday. Australian bond yields extended gains and the Aussie dollar advanced versus all of its G-10 peers as central bank optimism that omicron won’t disrupt the economic recovery underscored bets on sooner-than-expected rate hikes. Australia’s central bank left monetary settings unchanged, citing uncertainties from omicron, while highlighting positive signs in the labor market and broader economy. Finally, the yen fell a second day after easing concern over the coronavirus omicron variant

In rates, Treasuries were narrowly mixed with the front-end lagging ahead of today's 3-year auction. Treasury 2-year yields were cheaper by 2.2bp on the day, flattening 2s10s spread by 1.8bp and unwinding portion of Monday’s steepening move; 10-year yields around 1.436%, slightly cheaper on the day. Bunds lag by 1.3bp after ECB’s Holzmann says rate hikes are possible while still buying debt -- BTP’s cheapen 2.5bp vs. Treasuries in 10-year sector. U.S. TSY auctions resume with $54b 3-year note sale at 1pm ET, before $36b 10- and $22b 30-year Wednesday and Thursday; the WI 3-year around 0.973% is above auction stops since Feb. 2020 and ~22bp cheaper than November’s sale, which tailed the WI by 1bp.

In commodities, oil prices jumped another 2% to $74.60 a barrel, adding to a near 5% rebound the day before as concerns about the impact of Omicron on global fuel demand eased; WTI rose about 3% near $71.50. Copper prices also ticked higher while gold was steady at $1,778.5 per ounce on expectations U.S. consumer price data due later this week will show inflation quickening. European natural gas futures rose on talk of fresh Russian sanctions. Spot gold is choppy near $1,780/oz. Base metals are well bid given the broader risk-on tone: most of the complex rises over 1% with LME zinc outperforming. 

Looking at today's calendar, we have trade balance data for October at 8:30 a.m, while the EIA short-term energy outlook is published at 12:00 p.m. The US sells $54 billion of 3-year notes at 1:00 p.m. Biden and Putin talk from 10:00 a.m. Jeffrey Gundlach hosts his Total Return webcast from 4:15 p.m. Autozone Inc. and Toll Brothers Inc. report results.

Market Snapshot

  • S&P 500 futures up 1.3% to 4,650
  • STOXX Europe 600 up 1.7% to 476.71
  • MXAP up 1.7% to 193.18
  • MXAPJ up 1.7% to 627.71
  • Nikkei up 1.9% to 28,455.60
  • Topix up 2.2% to 1,989.85
  • Hang Seng Index up 2.7% to 23,983.66
  • Shanghai Composite up 0.2% to 3,595.09
  • Sensex up 1.6% to 57,657.07
  • Australia S&P/ASX 200 up 0.9% to 7,313.90
  • Kospi up 0.6% to 2,991.72
  • Brent Futures up 2.3% to $74.73/bbl
  • Gold spot up 0.0% to $1,778.95
  • U.S. Dollar Index little changed at 96.36
  • German 10Y yield little changed at -0.36%
  • Euro down 0.2% to $1.1268

Top Overnight News from Bloomberg

  • The ECB said its supervision arm will focus its scrutiny in the coming three years on risks that lenders face from a potential spike in bad loans and their search for higher returns
  • Hungary’s central bank is nowhere close to stopping a monetary tightening campaign that will make the country’s real interest rates the highest in central Europe, Deputy Governor Barnabas Virag said
  • The U.S. and European allies are weighing sanctions targeting Russia’s biggest banks and the country’s ability to convert rubles for dollars and other foreign currencies should President Vladimir Putin invade Ukraine, according to people familiar with the matter
  • China’s exports and imports grew faster than expected in November, with both hitting records as external demand surged ahead of the year-end holidays and domestic production rebounded on an easing power crunch.
  • Some China Evergrande Group bondholders have not received overdue coupon payments after the end of a month-long grace period, putting the world’s most indebted property developer on the brink of its first default on offshore notes
  • U.K. house prices hit a record in November, with values over the past three months rising at their fastest pace for 15 years, according to mortgage lender Halifax

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks traded mostly positive following the heightened risk appetite among global peers, including in the US, where the DJIA posted its best performance since March and all sectors in the S&P 500 finished positive. Omicron concerns abated throughout the session and resulted in notable outperformance across travel and leisure stocks, while the region also took its opportunity to digest the PBoC's recent RRR cut announcement and mostly better than expected Chinese trade data. The ASX 200 (+1.0%) was positive with broad gains across its sectors aside from utilities and with momentum helped after a lack of surprises at the RBA policy decision - which refrained from any policy tweaks. Nikkei 225 (+1.9%) outperformed and regained a firm footing above the 28k level as exporters benefitted from a weaker currency, and with the advances led by SoftBank which atoned for the recent declines in its portfolio companies. The Hang Seng (+2.7%) and Shanghai Comp. (+0.2%) were both initially lifted in early trade after the announcement of the PBoC’s RRR cut, which is said to likely calm markets amid increasing developer risks, although the mainland bourse then gave back its gains after the PBoC continued to drain liquidity in its daily open market operations. Furthermore, reports that the PBoC lowered its relending rate by 25bps for agricultural and small companies also failed to boost the mainland as this is viewed as a more targeted supportive measure. Finally, 10yr JGBs declined and re-approached the key psychological 152.00 level on spillover selling from USTs as stocks gained and Omicron fears abated. The results of the latest 30yr JGB auction were mixed with higher accepted prices and lower yield offset by a weaker b/c and wider tail in price.

Top Asian News

  • Asian Stocks Set for Best Day in 3 Months as China Tech Rebounds
  • Alibaba Jumps Most Since H.K. Listing as China Tech Rebounds
  • Malaysia Court Dismisses Najib’s Plea, SRC Verdict Due Wednesday
  • LG Energy Seeks Up to 12.75t Won IPO, Biggest in Korea

European stocks have conformed to the risk appetite seen across global peers (Euro Stoxx 50 +2.5%; Stoxx 600 +2.0%), which initially emanated from Wall Street, before seeping into APAC and reverberating in Europe. There is no clear catalyst behind the gains, although desks have been attributing the optimism to receding fears regarding the Omicron variant – with no recorded deaths thus far. That being said, some of the key tail risks to markets have not subsided, with liquidity also expected to be more anemic in the run-up to next week’s risk-packed docket before year end. Nonetheless, US equity futures are grinding higher with the NQ (+1.9%) in the lead, closely followed by the RTY (+1.7%), whilst the ES (+1.3%) and YM (+1.0%) see slightly less pronounced gains. Back in Europe, Euro-bourses see broad-based upside but the UK’s FTSE 100 (+1.1%) and the Swiss SMI (+0.7%) are capped by underperformance in the defensive sectors – with Healthcare and Food & Beverages towards the bottom of the bunch. Sectors are overall in the green with a clear and firm pro-cyclical bias. Tech leads the gains following its recent underperformance, with Basic Resources also among the winners as base metals post decent gains. In terms of individual movers GSK (+0.5%) remains supported after pre-clinical data demonstrate the potential for monoclonal antibody Sotrovimab to be effective against the latest variant, Omicron, plus all other variants of concern defined to date by the WHO. As a reminder, the co. last week said its COVID treatment Sotrovimab retains its activity against the Omicron variant. British American Tobacco (+2.1%) is firmer followed by a positive trading update alongside Babcock (+5.2%) and Ferguson (+4.0%). On the downside, AstraZeneca (-1.7%) resides towards the foot of the Stoxx 600 amid a downgrade at Jefferies, alongside the broader anti-defensive narrative. Looking at analysts’ commentary, Barclays suggests that the Fed is unlikely to over-deliver on the rate hikes that are already priced in, with the bank unphased by the recent Powell pivot and Omicron resurgence. Barclays maintains its positive view on 2022 equities and upgraded its European small caps to overweight on improving fundamentals but oversold performance, and downgraded Momentum to market-weight.

Top European News

  • U.K. House Prices Post Strongest Quarterly Increase Since 2006
  • Republicans’ Pecresse Ties With Le Pen in French Poll
  • Ferguson 1Q U.S. Organic Revenue Beats Estimates
  • EU Aims to Unveil Green Rules for Gas, Nuclear Projects Dec. 22

In FX, although the Buck remains bid on bullish US fundamentals and the index is finding plenty of underlying buying interest/support into 96.000, the overall market mood is constructive enough to help riskier currencies outperform, and shrug off another dovish RBA policy meeting in the case of the Aussie. Instead, Aud/Usd and Aud/Nzd are gaining more ground on the coattails of iron ore prices and favourable tradewinds, as Chinese imports surged beyond expectations and outpaced exports that also beat consensus to leave the surplus somewhat short of the mark. The headline pair reached 0.7101 before running into resistance and 1.2 bn option expiry interest at the 0.7100 strike, while the cross has breached 1.0450 convincingly to expose 1.0500 ahead of NZ Q3 manufacturing sales on Wednesday and following RBNZ Assistant Governor Hawkseby sticking to a considered line on further rate normalisation overnight. He also said the Kiwi is in a broad range of where it is expected to be and that a higher currency in the short-term will help us achieve objectives more quickly. Nzd/Usd is still rotating around 0.6750, while the Loonie is latching on to the latest leg up in WTI over Usd 71/brl to test offers protecting 1.2700 vs its US rival in advance of Canadian and US trade data, Ivey PMIs and tomorrow’s BoC, with the DXY fading following a fleeting breach of Monday’s peak within 96.447-168 confines, Note also, 1.1 bn option expiries reside between 1.2750-55 in Usd/Cad and could cap recovery rallies. Elsewhere, the Scandinavian Crowns continue to rebound from recent lows against the Euro, and Brent’s bounce to the brink of Usd 75/brl is helping the Nok probe 10.2000 rather than a somewhat mixed Norges Bank regional network survey, while the Sek is lagging circa 10.2400 amidst Riksbank concerns over the lack of liquidity and transparency in Sweden’s corporate bond market that needs to be addressed.

  • CHF/GBP/EUR/JPY - The G10 laggards to varying degrees, with the Franc trying to pare losses from sub-0.9250 vs the Dollar and more successfully against the Euro from almost 1.0450 towards 1.0400, while the Pound is holding mostly above 1.3250 in Cable terms and Eur/Gbp is pivoting 0.8500 as the single currency remains under the psychological 1.1300 level vs the Greenback irrespective of supportive Eurozone macro impulses via better than forecast German industrial output and ZEW economic sentiment over bleak current conditions. Similarly, the Yen remains weak on risk and rate/yield dynamics and Usd/Jpy is now firmer within a loftier 113.40-74 range before a raft of Japanese releases including Q3 GDP revisions and October’s current account balance.
  • EM - More easing in China, but resilience or even ongoing strength in the Cny and Cnh in wake of the PBoC shaving 25 bp off the relending rate for agricultural and small companies, according to sources in the Securities Times that also suggests in tune with the China Daily that an LPR cut may be in the offing. Conversely, weakness in the Rub awaiting the call between Putin and Biden and the Zar on the back of SA GDP missing already low-key expectations, but the Try is nursing some declines in what could be reasonably described as intervention fashion.

In commodities, WTI and Brent front-month futures are firmer on the session, buoyed by the risk appetite across the markets. From a fundamental standpoint, the benchmarks remain underpinned by the lack of progress in Iranian nuclear talks coupled with the OSP hike seen by Saudi Aramco over the weekend for Asia and US customers – typically a reflection of firmer demand. The morning also saw some reports suggesting Yemen Houthis fired several ballistic missiles and 25 armed drones on Saudi Arabia, including Aramco facilities in Jeddah, but details remain light. Aside from that, the morning’s newsflow has been on the quiet side, with the macro environment currently dictating price action. WTI Jan is back on a USD 71/bbl handle (vs low 69.50/bbl) while Brent Feb topped USD 75.00/bbl (vs low USD 73.20/bbl). In terms of bank forecasts, Citi sees a dramatic fall in energy prices from Q4 2021 to Q4 2022 averages – with Brent seen at USD 62/bbl (from USD 79/bbl) and WTI seen at USD 59/bbl (from USD 75/bbl). Over to metals, spot gold and silver move in tandem with the Buck featuring the former around USD 1,780/oz and caged below that cluster of DMAs which today sees the 50, 100 and 200 at USD 1,793/oz, USD 1,790/oz and USD 1,791/oz respectively. Elsewhere LME copper takes impetus from the broader risk appetite, with prices back north of USD 9,500/t and extending on gains, with the Chinese trade data also supportive for the base metal complex. Overnight, Dalian iron ore futures gained focus as prices were bolstered by the recent liquidity action taken by the PBoC coupled with more sanguine commentary surrounding the Chinese housing market, according to some analysts.

US Event Calendar

  • 8:30am: 3Q Unit Labor Costs, est. 8.3%, prior 8.3%
  • 8:30am: 3Q Nonfarm Productivity, est. -4.9%, prior -5.0%
  • 8:30am: Oct. Trade Balance, est. -$66.8b, prior -$80.9b
  • 3pm: Oct. Consumer Credit, est. $25b, prior $29.9b

DB's Jim Reid concludes the overnight wrap

It’s with much trepidation that I take an hour off work this morning to visit my 4-year old twins’ nativity play. They are by far the youngest in their Reception year and given they were premature, in reality there are technically older kids in the nursery year. As such my expectations were always well managed when the parts were being doled out that they wouldn’t be competing for the blockbuster roles such as Joseph! These expectations were met as they have been cast as “presents”. So I think they have to sit there with a bow around them and try to remember some of the words in the songs they have been given to sing. Success would be for them not to have a fight mid-performance as they do most evenings when I see them. Only when you have identical twins can you witness such love and hatred displayed within the space of a few seconds.

Markets have been swinging between love and hate over the last 10 days with the former winning out yesterday as investors’ concerns eased around the Omicron variant. Obviously we’re still awaiting definitive data on a number of points, but more generally the suggestions that it could be less likely to cause severe disease has injected some optimism back into markets after the recent selloffs. As a result, we saw a decent bounceback among the major equity indices on both sides of the Atlantic, an advance for oil prices following 6 successive weekly declines, and investors even moved to marginally bring forward the likely timing of central bank rate hikes.

We’ll start with equities, where risk appetite only increased as the day went on, with the S&P 500 (+1.17%) posting a broad-based advance that saw over 85% of the index’s members advancing. Europe also put in a strong performance, with the STOXX 600 up +1.3%, whilst many indices saw their biggest advances in months. That included the UK’s FTSE 100 (+1.5%), Spain’s IBEX 35 (+2.4%), and Italy’s FTSE MIB (+2.2%), which, outside of last Wednesday, were the best daily performances since July. European tech shares lagged the broader rally, with the STOXX Technology index down -0.33%, though US tech shares gained steam after the European close, with the Nasdaq up +0.93%, trailing the S&P by a more modest amount.

Greater optimism about the new variant proved supportive for oil prices too, with Brent crude (+4.58%) and WTI (+4.87%) posting gains after a run of 6 consecutive weekly declines, having also been supported by Saudi Arabia’s move to raise oil prices to Asia and the US in January. Oil prices are up another 1% this morning. However, there was a big decline in US natural gas futures (-11.50%) yesterday, the worst daily performance since January 2019, as the mild weather outlook has served to dampen demand.

Over in sovereign bond markets there was a fresh selloff in US Treasuries, and a steepening of the yield curve, as the optimism about Omicron led investors to bring forward their expectations of future rate hikes. Yields moved higher across the curve, with those on 10yr yields up +9.1bps to 1.43%, as both real yields and inflation breakevens moved higher on the day, whilst the 2s10s curve managed to steepen +4.7bps to 79.9bps. 10yr yields are up another +1.4bps this morning. Near-term, the first Fed rate hike is again fully priced by the June FOMC meeting. Over in Europe, yields were lower, with those on 10yr bunds (-0.1bps), OATs (-0.4bps) and BTPs (-3.8bps) all declining, though the greater risk appetite was reflected in the narrowing of peripheral spreads, with the gap between Italian and Spanish yields over bunds both tightening by the close.

Overnight in Asia stocks are all trading up with the Nikkei (+2.09%), Hang Seng (+1.62%), CSI (+0.51%), KOSPI (+0.47%) and Shanghai Composite (+0.12%) all stronger. China’s RRR cut yesterday is certainly helping sentiment. On the data front, China's trade balance for November came in at $71.72 bn (consensus $83.60 bn and $84.54 bn previously), lower than expected as imports grew at +31.7% year-on-year against +21.5% consensus. Exports (+22%) were slightly higher than expected.

Elsewhere the Reserve Bank of Australia held its benchmark interest rate unchanged while cautioning that price pressures remain subdued in Australia compared with other economies as the RBA expects it to reach 2.5% by 2023. Our economists put out a note suggesting that if you squint, the RBA commentary was slightly hawkish though. See more here if you’d like their review. Elsewhere futures are pointing to a positive start in the US and Europe with the S&P 500 (+0.34%) and DAX (+0.38%) contracts trading in the green.

Looking ahead, one of the important events today will be the scheduled video call between US President Biden and Russian President Putin. The Biden administration, in concert with European allies, is reportedly weighing whether to bring economic tools to bear against Russia in response to the recent flare up on the Ukrainian border. Measures being considered included sanctions against President Putin’s inner circle, energy producers, and banks, as well as the more drastic option of denying Russian access to US-run international payments system, SWIFT. The Ruble depreciated -0.66% against the US dollar after having appreciated +0.50% in the morning before the headlines.

In terms of other developments on the pandemic, the global case count has been moving higher for 7 consecutive weeks now, and we got fresh news of tougher restrictions in New York City yesterday. They’re set to place a vaccine mandate on private sector workers from December 27, whilst indoor dining and entertainment will be requiring those aged 12 and over to be fully vaccinated, and those aged 5-11 to have one dose. Here in the UK, over 50k confirmed cases were reported yesterday once again, and the average number of cases over the last week now stands up +9% on the week before.

Turning to Germany, the main news yesterday was that the Greens became the final party of the incoming traffic-light coalition to approve the negotiated agreement, with 86% of members in favour. That follows similar moves by the SPD and the FDP, and today the parties are set to formally sign the deal, with Olaf Scholz set to become chancellor tomorrow in a Bundestag vote, which will also bring an end to Chancellor Merkel’s 16-year tenure. For a run down on what to expect from the new government, our research colleagues in Germany have put together a guide on the various policy areas (link here). Staying on Germany, data also showed yesterday that factory orders fell by a much larger-than-expected -6.9% in October (vs. -0.3% expected), with the decline driven by a -13.1% fall in foreign orders, contrary to domestic orders which actually expanded +3.4%.

To the day ahead now, and data highlights include German industrial production for October and the ZEW survey for December, along with the US trade balance for October. Otherwise, US President Biden and Russian President Putin will be holding a video call.

Tyler Durden Tue, 12/07/2021 - 07:59

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Taylor Wimpey on alert after activist investor Elliott Management starts to build stake in housebuilder

The board of Taylor Wimpey, one of the UK’s largest housebuilders, could be in…
The post Taylor Wimpey on alert after activist investor Elliott Management starts to build stake in housebuilder first appeared on Trading and Investment News.

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The board of Taylor Wimpey, one of the UK’s largest housebuilders, could be in for a rough ride in 2022 following reports today that Elliott Advisers, the UK affiliate of the U.S. hedge fund and renowned activist investor Elliott Investment Management, has started to build a stake in the business.

Elliott Management, founded and run by Paul Elliott Singer, has recently been pushing for board changes at the British pharmaceuticals giant GlaxoSmithKline after building a small stake in the company this year. If the rumours the investor has taken an interest in Taylor Wimpey are true, a similar story can be expected to unfold. Elliott is famous for the uncompromising stance it takes as an activist investor in attempting to push through reforms it believes would benefit shareholders.

taylor wimpey plc

Taylor Wimpey’s corporate structure is to operate regional businesses around the UK, of which it has 23, which locally build residential properties from blocks of flats to detached houses of up to six bedrooms. The company completed around 15,500 properties in 2019 and expects to deliver about 14,000 this year after the Covid-19 pandemic limited construction last year.

The Taylor Wimpey share price has, however, only gained a little over 3% over 2021 to-date despite booming sales prices and margins this year due to limited housing stock on the market and pent-up demand following the worst of the pandemic. This year’s operating profit is expected to come in at around £820 million. While that is a significant improvement on the £300.3 million banked last year it is still down on the profit of £850.5 million recorded in 2019.

While it’s not clear how much of a stake Elliott has built up in Taylor Wimpey so far it could currently be as little as 0.1%. The company has refused to comment on whether it has indeed acquired equity in Taylor Wimpey, if it plans to build a larger stake, and what its intentions might be.

The possible move was first reported in the Betaville Blog which reports corporate dealmaking. The blog also wrote that Elliott’s intentions are to encourage “corporate activity” which could include a takeover.

Taylor Wimpey’s mid-term prospects are considered good by City analysts. Last week Investec analysts described the housebuilder as

“back on track to generate a strong level of free cashflow to support its ordinary dividends and potential special dividends or share buybacks.”

The note to investors also said analysts at Investec anticipate the builder’s focus will be managing its land purchase to home sales cycle, improving margins and returning “significant” capital to shareholders. However, areas Elliott could push for change in could be the company’s business in Spain, which many investors consider a non-core distraction, as well as improving margins. There has also been criticism of the company’s recent raising of capital to invest in land, the need for which has been described as “questionable”.

Elliott Management have already shown a strong interest in the UK’s housebuilding sector through a deal made earlier this year to snap up Avant Homes Group, which builds around 2000 properties a year from the Midlands up to Scotland. The hedge fund teamed up with former Persimmon boss Jeff Fairburn on that move and may also be taking his advice on any possible stake-building plans in Taylor Wimpey.

The post Taylor Wimpey on alert after activist investor Elliott Management starts to build stake in housebuilder first appeared on Trading and Investment News.

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