Why Citi is upgrading these two retailers + Binance backs out of buying FTX

The Morning Wrap

Livewire Markets

Welcome to Charts and Caffeine - Livewire's pre-market open news and analysis wrap. We'll get you across the overnight session and share our best insights to get you better set for the investing day ahead.

Note: Due to the change in clocks stateside, US markets now close at 8am AEDT.

MARKETS WRAP

Source: Investing.com

S&P 500 TECHNICALS

Source: Yahoo Finance

MIDTERM ELECTIONS DATA WRAP

Source: Associated Press, as of Thursday 10th November at 8:30am

THE BIG STORY

48 hours ago, A tweet from Binance czar Changpeng Zhao sent shock waves through global crypto markets when he revealed FTX CEO Sam Bankman-Fried asked for his help due to major technical issues and what he called a "liquidity crunch". 

It was thought that Binance could soon acquire FTX - but this morning, that story changed dramatically after documents seen by the Wall Street Journal said Binance had walked away from a deal to buy Bankman-Fried's crypto empire. Binance said it chose to not go ahead after reviewing FTX's finances.

It's a case of how the mighty fall for Bankman-Fried. This time last year, he thought FTX could go public or that the company could buy out finance giants Goldman Sachs or CME Group. 

Now, Bitcoin is at a two-year low and reporting from Coindesk suggests some US$700 million in long-crypto trades were essentially wiped out following the news.

THE CHARTS

In case you needed any confirmation of the value stock comeback, then here it is. S&P 500 "value" oriented stocks have notched up their best returns in 20 years - and it's closing in on the early 1990s record as well.

But this is a US chart - and the Australian experience is quite different to the US. On a year-to-date basis, the S&P/ASX 200 value index is actually flat while the equivalent growth index is down in excess of 12%. But that could all change again as more earnings revisions continue to trickle through to the market - as this Macquarie chart shows:

Source: Macquarie

STOCKS TO WATCH

Yesterday, we talked about two ASX retail stocks that were getting the downgrade treatment from Macquarie. Today, it's two ASX retail stocks getting the upgrade treatment from Citi! See, two views make a market!

Even in spite of the slowing consumer, Citi is still a big fan of City Chic Collective (ASX: CCX). For its part, the company believes it can gain an even greater market share in the plus-size clothing market. The rating is upgraded to buy from neutral.

And... Citi is also upgrading Charter Hall Retail REIT (ASX: CQR). The move is in line with a general preference for defensive convenience retail exposures over discretionary retail at this stage in the consumer cycle. After all, even if consumers slow down, shops still have to pay their rent right? Of course, rising interest rates will crimp REIT valuations just as they boost banking valuations. Now buy-rated as well, with a price target of $4.30.

Hans Lee wrote today's report.

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The Morning Wrap
Markets Wrap
Livewire Markets

Australia's most comprehensive markets wrap is back for 2023, with a fresh look and a new emphasis on getting you and your money ahead of the curve. Available each weekday morning at 8:30am AEDT. Written by Chris Conway, Kerry Sun, and Hans Lee.

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