Credit Suisse’s path to profit gets steeper, First Abu Dhabi Bank is pressing ahead with a potential offer for Standard Chartered and a big short in stocks is almost over — David Goodman
Unprecedented outflows
Credit Suisse shares sank after the Swiss lender reported a fifth-straight quarterly loss and unprecedented client outflows, while also warning of a substantial loss in 2023. This exacerbates the difficulty for Chief Executive Officer Ulrich Koerner in returning to profitability by next year.
Koerner’s pledge to stem the decline hinges on a massive client outreach program to woo nervous clients and their cash back to the bank, while carving out the volatile investment bank and slashing costs. The CEO described the results as “unacceptable,” reiterating that the bank should be profitable by 2024
In play
First Abu Dhabi Bank is pressing ahead with a potential offer for Standard Chartered, keeping its ambitions to become a global financial powerhouse alive.
Under the code name Silver-Foxtrot, officials at the bank are working under the radar on a possible bid once a cooling-off period required by UK takeover rules elapses, according to people familiar with the matter.
Big short fades
Money managers have cut $300 billion of bearish bets, robbing the market of pent-up demand just as the Federal Reserve warns its inflation-fighting battle is far from over.
The shift in positioning has taken a broad array of investors from underweight to holding equities closer to the average of the past decade. Investors are now the closest to neutral positioning than they have been since the second quarter of last year, when the Fed began ramping up interest rates, according to data from JPMorgan Chase and Deutsche Bank.
That sentiment shift suggests stocks may have trouble pushing higher unless the funds turn outright bullish. Separately, Morgan Stanley Wealth Management’s Lisa Shalett warned of “massive disconnects” in stocks that threaten market stability.
Futures rise
European stocks advanced with US equity futures after some positive earnings updates from heavyweights Siemens and AstraZeneca. The dollar slid, Treasuries edged higher after a strong rally yesterday and an index of commodities rose.
To catch up on the trading day in the UK and Europe, check out today’s edition of Markets Today.
Coming up…
The main event today comes when the US will report jobless claims data at 8:30 a.m. New York time. There’s no repeat of yesterday’s suite of Fed speakers, with no officials due to talk today.
Meanwhile, in company news, Pepsi and S&P Global are among firms reporting earnings today.
What we’ve been reading
Here’s what caught our eye over the past 24 hours:
- NYC’s wealth exodus drives a billionaire’s bet on South Florida
- Bed Bath & Beyond’s 30,000 workers were key to averting a bankruptcy
- Trump, DeSantis trade barbs as Republican presidential race heats up
- Biden hits back at Republican hecklers at State of the Union
- Meta asks managers to get back to making things — or leave
- Hermès wins lawsuit over `MetaBirkin’ NFTs
- Why every Fortune 500 company needs a chief AI officer
And finally, here’s what Joe’s interested in this morning
Something I’ve been wondering about is whether the workers who are getting laid off from big tech companies will go back to working at tech companies, or whether they will migrate to other industries that need tech talent.
Will some of them go to work for the public sector, or oil companies, or airlines, or consumer packaged goods companies?
From a macro perspective, it might be a good thing if we had fewer of these ultra-profitable juggernauts that can bid up and absorb all of the top talent. A greater distribution of engineering talent across industries might result in productivity gains.
Anyway, this is all just evidence-free conjecture.
That being said, I was looking at the Hertz earnings call from earlier in the week, to see what they had to say about car prices and consumer demand, and came across this little nugget in the prepared remarks from CEO Stephen Scherr:
In terms of operating expenses, we have made progress, as I have noted, but we are not done. We continue to replace third-party employees with Hertz badged employees at lower cost, including project engineers where we are seeing a broader pool of talent at more affordable price points, aided by current dynamics, at large technology firms.
So there’s two interesting closely related things in here. One is that yes, the the layoffs at large tech companies are creating a less competitive market for talent, allowing a company like Hertz to compete for more project engineers. And then beyond that, it also means bringing more tech knowledge in house, rather than having outside third-party employees to manage the company’s tech operations.
Throughout the call, the company goes on to talk about the investments it’s making in its internal technology infrastructure.
I haven’t seen this dynamic mentioned explicitly anywhere else, but it would be weird if it were just a car rental company spotting this opportunity. So it’s definitely something to watch to see how things evolve.