Good morning. Another tanker is targeted off Oman, Roche has a big new investor and a new study makes the delta variant look even tougher. Here’s what’s moving markets.
Fading Protection
Vaccines targeting the highly transmissible delta variant may now be needed, given its ability to infect people with fading immunity and potentially increased severity, researchers leading a large English study of Covid shots said. A third wave of English cases has been driven by the delta strain among both unvaccinated people -- especially those aged 12 to 24 -- as well as some people who had received Covid shots. The effectiveness of vaccines at stopping infection during the study period fell to 49%, the researchers estimated, down from 64% a month earlier. Still, the Covid shots are extremely good, though not perfect, at protecting against hospitalization and death.
Roche Bet
SoftBank has quietly built a $5 billion stake in Roche, placing a bet on the pharmaceutical company’s strategy of using data to develop drugs, according to people familiar with the matter. This makes Softbank one of the largest investors in the Swiss health-care giant, which has experienced a boost by offering Covid-19 test kits. SoftBank believes Roche’s Genentech division, which focuses on data-based drug discovery and development, is highly undervalued, one of the people said. Earlier, this year, Bloomberg reported that Softbank plans to expand its investments in the biotech and health-care sector, opening up a new front in its growing asset management strategy.
Another One
Less than a week after an Israeli-linked tanker was targeted in a suspected drone attack that Israel, the U.S. and the U.K. have blamed on Iran, British maritime officials announced a potential hijack situation, also in the Gulf of Oman. Sky News has since reported that a group of eight or nine armed individuals, backed by Iran, are believed to have boarded the Panama-flagged tanker Asphalt Princess. Iran’s Revolutionary Guards denied that its forces or allies were involved in any incident, claiming the allegations were a pretext for "hostile action" against Tehran, state television said on its website.
Megadeal at Risk
The U.K. is considering blocking the $40 billion takeover of SoftBank’s Arm Ltd. by Nvidia due to potential risks to national security, according to people familiar with the discussions. Cambridge-based Arm owns the most widely-used set of standards and designs in the $400-billion chip industry. It is unclear how Arm’s change from Japanese to American ownership will affect U.K. national security. However, since SoftBank’s 2016 acquisition of Arm, semiconductor technology has become a new focus for politicians.
Coming Up…
European stocks are headed higher following another record overnight for the S&P 500. In Asia, equities were also in the green as Chinese media tempered their surprise attack on the videogame industry, though sneaker makers were among the beneficiaries as the government advocated exercise as an alternative. Today, earnings season continues in high gear with Intesa Sanpaolo, Commerzbank, Ferrexpo, Hugo Boss, Legal & General, SES and Wolters Kluwer among the reports in Europe. Sony reports in Japan, following on Toyota’s heels. In the U.S., CVS, GM, Roku, Uber, Kraft Heinz and Electronic Arts are among the biggest firms to provide updates.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
And finally, here's what Cormac Mullen is interested in this morning
As Europe's strong earnings season rolls on, analysts have finally pushed forward estimates back above pre-pandemic levels. As my colleague Michael Msika noted this week, the 12-month forward earnings-per-share forecast for the Stoxx 600 Index has crept about 1% higher than where it was in mid-February 2020. Over 63% of index members have reported quarterly earnings above expectations, with 69% beating on sales, according to data compiled by Bloomberg. Still, the average share price reaction on results day has been a modest decline of 0.3% indicating much of that good news was priced in. Anecdotally, many investors are still reluctant to go all in on the recovery trade, preferring a barbell strategy of holding both economically-sensitive and defensive names. That approach also makes sense from an earnings standpoint. The defensive technology sector made the biggest contribution to 2021 global earnings revisions last month, which climbed by about 5%, according to SocGen. But it was closely followed by the cyclical banks, basic resources and energy sectors, strategists at the French bank said.
Cormac Mullen is a cross-asset reporter and editor for Bloomberg News in Tokyo.
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— With assistance by Cormac Mullen, and Gearoid Reidy
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