Before the bell: Strong Recovery

U.S. stock markets gain 2%, but Tesla does even better with a nearly 12% jump.

It was a good day on Wall Street. Both the S&P 500 (+1.8%) and the Nasdaq (+2.3%) posted strong gains. Tesla closed 11.9% higher. That brings the share price of Elon Musk’s company back to 278 dollar. Fund manager Cathie Wood predicts that in five years, the same share could be worth as much as 2,600 dollar. It’s not the first bold claim from the tech-focused investor. BYD (+5.4%) was rewarded for excellent earnings. Nvidia (+3.2%), Amazon (+3.6%), and Home Depot (+3.6%) also outperformed the broader market. European markets ended in the red, though the losses averaged only a fraction of a percent. ASML (+2.1%) moved higher, as did Renault (+4.4%). Bayer (-6.9%) took a hit after a verdict in a U.S. court case.

In Japan, the Topix is up 0.4% this morning. In Hong Kong, the index lost 2.1%. This afternoon, we’ll get U.S. data on home prices and consumer confidence. Moury Construct will publish its results after the market closes.

Making a Splash

AkzoNobel is planning to issue a 500 million euro bond. The debt instrument has a maturity of 10 years, and bondholders can expect a 4% coupon. That seems like a high yield. For comparison, the Dutch government currently offers 2.99% on a 10-year sovereign bond. The paint and coatings company is paying 101 basis points more—before taxes. There’s good reason for that: AkzoNobel’s credit rating is under pressure due to the economic cycle and its high debt levels. Both Moody’s and Standard & Poor’s currently rate the company just barely within investment grade territory, and both agencies note that the outlook is negative. A downgrade is a real possibility. AkzoNobel may consider selling its publicly traded Indian subsidiary. That transaction would generate cash that could be used to reduce its debt burden.

Activist Investor on Board

RWE has a new shareholder. U.S. fund manager Elliott announced yesterday that it has built a 5% stake in the German electricity producer. Elliott is known as an activist investor—buying into companies it believes could be better run. In this case, Elliott wants RWE to cut back on green energy investments and instead return more money to shareholders—possibly via an expanded share buyback program. RWE currently has a 1.5 billion euro buyback in place, but Elliott thinks that’s not enough. Last week, RWE’s management said it would reduce investments by one-fifth over the next five years, freeing up 10 billion euro. By early next year, the company expects to have more clarity on its investment plans in Germany and the U.S. It remains to be seen whether Elliott is willing to wait that long.

Did you know…

that RWE shares were worth 92 euro at the end of 2007? By September 2015, you could have become a shareholder for just 9.7 euro. In November 2022, the stock was back up to 42 euro. Yesterday’s closing price was 32.58 euro.

This article was translated from Dutch and was originally published on Spaarvarkens.be.