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: Facing the biggest inflation surge in 30 years, shoppers expect to spend a lot more this holiday season

Quick-moving shoppers are acting now to avoid slim pickings later, with 70% saying they want to avoid out-of-stock notices......»»

Category: topSource: marketwatchNov 25th, 2021

This Is How They Intend To Get Us To "You Will Own Nothing And Be Happy"

This Is How They Intend To Get Us To "You Will Own Nothing And Be Happy" Authored by Michael Snyder via The Economic Collapse blog, The pieces of the puzzle may fit together in ways that you do not expect.  For years, the global elite have been openly telling us that one day we will all own nothing, we will have no privacy, and we will be extremely happy with our new socialist utopia.  But exactly how do they intend to transition to such a society?  Are they going to come and take all of your stuff?  Needless to say, there are millions upon millions of very angry people out there that aren’t just going to hand over their stuff to a bunch of socialists.  So how are they going to overcome that obstacle? Well, the truth is that they don’t need to take your stuff to implement their goals. All they need to do is to destroy the value of your money. If your money becomes worthless, you will start descending into poverty and it won’t be too long before you become totally dependent on the government. And as the stuff that you have right now wears out, you won’t be able to replace it with the worthless money that you are now holding. Eventually, you will own virtually nothing, but you probably won’t be very happy about it. So high inflation is actually a tool that the global elite can use to further their goals. The good news is that I do not believe that the global elite will ever be able to achieve their utopia. The bad news is that they won’t be able to achieve their utopia because western society is going to completely and utterly collapse during the times that are ahead. But for now, inflation is going to be one of the hottest political issues as we head into 2022.  On Friday, Vice-President Kamala Harris acknowledged that higher prices are having a huge impact on American families… “Prices have gone up and families and individuals are dealing with the realities of the bread costs more, the gas costs more, and have to understand what that means,” she said. “That’s about the cost of living going up. That’s about having to stress and stretch limited resources.” Harris said that is a “source of stress for families” that is “not only economic, but is, on a daily level, something that is a heavy weight to carry.” Of course her “solution” is to get Joe Biden’s agenda through Congress, and she knows that all of that spending will inevitably create even more inflation. The socialists over at NBC News are trying to help the Biden administration by putting a positive spin on the inflation crisis.  In fact, NBC’s Stephanie Ruhle is trying really hard to convince everyone that inflation is not a problem because we all have more money to spend these days. But as I demonstrated last week, the truth is that inflation is rising much faster than our paychecks are, and that means that our standard of living is going down. And inflation is one of the big reasons why the University of Michigan Consumer Sentiment Index just hit the lowest level since 2011… At the same time, the University of Michigan Consumer Sentiment Index tumbled to 66.8 for November, according to a preliminary reading Friday. That was the lowest since November 2011 and well below the Dow Jones estimate of 72.5. October’s reading was 71.7, meaning that the November level represented a 6.8% drop. If you are among those that think that things are bad now, just wait, because they will soon get even worse. At this point, even Neel Kashkari is publicly admitting that inflation is going to continue to rise in the months ahead… Minneapolis Fed Chair Neel Kashkari on Sunday said inflation in the U.S. will likely see “higher readings” before numbers taper off, as Americans grapple with rising prices nationwide. “The math suggests we’re probably going to see somewhat higher readings over the next few months before they likely start to taper off,” Kashkari said during an appearance on CBS’s “Face the Nation.” The Federal Reserve has lost control, and 2022 is going to be a very “interesting” year from an economic standpoint. On Sunday, we learned that the average price of a gallon of gasoline in California has almost reached five dollars… California gas prices hit an average of $4.676 Sunday, beating its previous record average price of $4.671 for regular gasoline set in October 2012, according to AAA. Gasoline prices are going to continue to move higher, and that is really bad news. Just about everything that we buy has to be transported, and so higher gasoline prices are going to fuel even more inflation. Sadly, those that are on the bottom of the economic food chain are the ones that are being hurt the most.  At this point, many food banks are really struggling to purchase enough food because price hikes have become so severe… America’s largest food bank struggles to feed people amid a perfect storm of surging food prices and supply chain woes. Katie Fitzgerald, COO of Feeding America, a nonprofit organization that operates more than 200 food banks across the country, told AP News that her network of food banks is already stretched thin due to the unprecedented demand spurred by the virus pandemic downturn in the economy last year. She warned that it has become more difficult for her organization to absorb food inflation, resulting in fewer families being fed this holiday season. Used farm equipment is another area where inflation is hitting really hard. According to one index, the price of used farm equipment was up 22 percent during the first nine months of 2021… The index is up 22% in the first nine months of the year and poised to make its biggest gains yet in the fourth quarter, a boom that’s turning a normally quiet corner of the farming market into Exhibit A of the inflation surge coursing through the U.S. economy. The market has all the ingredients fueling inflation in industries like cars and TVs — soaring demand from cash-flush buyers, the semiconductor shortage, congested ports and rails — with the added irritant of the labor stoppage at the world’s largest farm-machine maker. The match “is now lit,” Peterson says, “and it’s lit while there’s a John Deere strike.” So many problems have converged all at once. Some have used the term “a perfect storm” to describe what we are facing, and I think that is definitely quite appropriate. If you are waiting for life to “get back to normal”, you are going to be waiting for a very long time.  As MN Gordon has noted, pre-2020 prices are now gone forever… Pre-2020 prices, much like pre-1965 prices, are gone forever. Deficits of $5.9 trillion over the 24 months ending September 30, 2021, and a Fed balance sheet expansion of nearly $5 trillion over the same period, have irrevocably damaged the entire pricing structure of the financial system and the economy. Price inflation is on the move. Reality can no longer be covered up with Washington’s lies. We expect this episode of inflation will be one for the history books. I wish that I had better news for you. I really do. But sooner or later, this is what socialist regimes always do. They tell us to study hard, get a good job and work as hard as we can. And then they give our money to people that haven’t done any of those things. Eventually they run out of other people’s money, and so then they just start wildly creating more. Unfortunately, every time that this has been tried throughout history it has always ended in disaster, and now it is our turn. *  *  * It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon. Tyler Durden Tue, 11/16/2021 - 06:30.....»»

Category: dealsSource: nytNov 16th, 2021

Futures Trade Near All Time High As Traders Shrug At Inflation, Covid Concerns

Futures Trade Near All Time High As Traders Shrug At Inflation, Covid Concerns US equity futures and European markets started the Thanksgiving week on an upbeat note as investors set aside fear of surging inflation and focused on a pickup in M&A activity while China signaled possible easing measures. The euphoria which lifted S&P futures up some 0.5% overnight and just shy of all time highs ended abruptly and futures reversed after German Chancellor Angela Merkel said the Covid situation in the country is worse than anything so far and tighter curbs are needed. At 730 a.m. ET, Dow e-minis were up 95 points, or 0.26%. S&P 500 e-minis were up 12.25 points, or 0.26% and Nasdaq 100 e-minis were up 58.75 points, or 0.357%. U.S. stocks trade near record levels, outpacing the rest of the world, as investors see few alternatives amid rising inflation and a persistent pandemic that undermines global recovery. Concerns about high valuations and the potential for the economy to run too hot on the back of loose monetary and fiscal policies have interrupted, but not stopped the rally. In other words, as Bloomberg puts it "bears are winning the argument, bulls are winning in the market" while Nasdaq futures hit another record high as demand for technology stocks remained strong. “Based on historical data, the Thanksgiving week is a strong week for U.S. equities,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note. “Black Friday sales will be closely watched. The good news is, people still have money to spend, even though they get less goods and services in exchange of what’s spent.” In premarket moves, heavyweights, including most FAANG majors, rose in premarket trade. Vonage Holdings Corp. jumped 26% in premarket trading after Ericsson agreed to buy it. Telecom Italia SpA jumped as much as 30% in Europe after KKR offered to buy it for $12 billion. Energy stocks recovered slightly from last week's losses, although anticipation of several economic readings this week kept gains in check. Bank stocks rose in premarket trading as the U.S. 10-year Treasury yield climbed for the first time in three sessions to about 1.58%. S&P 500 futures gain as much as 0.5% on Monday morning. Tesla gained 2.8% after Chief Executive Elon Musk tweeted that Model S Plaid will "probably" be coming to China around March. Activision Blizzard (ATVI.O) slipped 1.1% after a media report that the video game publisher's top boss, Bobby Kotick, would consider leaving if he cannot quickly fix culture problems. Travel and energy stocks, which were among the worst performers last week, also marked small gains before the open. Here is a list of the other notable premarket movers: Astra Space (ASTR US) shares surge 33% in premarket trading after the company said its rocket reached orbit. Aurora Innovation (AUR US) falls 8% in premarket, after soaring 71% last week amid a surge in popularity for self-driving technology companies among retail traders. Chinese electric-carmaker Xpeng (XPEV US) rises as much as 2.8% premarket after co. unveils a large sports-utility vehicle pitted more directly against Tesla’s Model Y and Nio’s ES series. Stocks of other EV makers are mixed. Monster Beverage (MNST US)., the maker of energy drinks, is exploring a combination with Corona brewer Constellation Brands (STZ US), according to people familiar with the matter. CASI Pharma (CASI US) jumped 17% in postmarket trading after CEO Wei-Wu He disclosed the purchase of 400,000 shares in a regulatory filing. Along with an eye on the Fed's plans for tightening policy, investors are also watching for an announcement from Joe Biden on his pick for the next Fed chair. Powell was supposed to make his decision by the weekend but has since delayed it repeatedly. Investors expect current chair Jerome Powell to stay on for another term, although Fed Governor Lael Brainard is also seen as a candidate for the position. “Bringing the most dovish of the doves wouldn’t guarantee a longer period of zero rates,” Ozkardeskaya wrote. “If the decisions are based on economic fundamentals, the economy is calling for a rate hike. And it’s calling for it quite soon.” The Stoxx 600 trimmed gains after German Chancellor Angela Merkel called for tighter Covid-19 restrictions. European telecom shares surged after KKR’s offer to buy Telecom Italia for about $12 billion, which boosted sentiment about M&A in the sector. The Stoxx 600 Telecommunications Index gained as much as 1.6%, the best-performing sector gauge for the region: Telefonica +4.8%, Infrastrutture Wireless Italiane +4%, KPN +2.7%. Meanwhile, telecom equipment stock Ericsson underperforms the rest of the SXKP index, falling as much as 4.9% after a deal to buy U.S. cloud communication provider Vonage; Danske Bank says the price is “quite steep”. Earlier in the session, Asian stocks fell as Covid-19 resurgences in Europe triggered risk-off sentiment across markets amid weaker oil prices, a strong U.S. dollar and higher bond yields. The MSCI Asia Pacific Index declined 0.3%, with India’s Sensex measure slumping the most since April as Paytm’s IPO weighed on sentiment. The country’s oil giant Reliance dragged down the Asian index after scrapping a deal with Saudi Aramco, and energy and financials were the biggest sector losers in the region. Asian markets have turned softer after capping their first weekly retreat this month, following lackluster moves from economically sensitive sectors in the U.S., while investors continue to monitor earnings reports of big Chinese technology firms this week. “Some impact from the regulatory risks and dull macroeconomic conditions have shown up in several Chinese big-tech earnings and that may put investors on the sidelines as earnings season continues,” Jun Rong Yeap, a market strategist at IG Asia Pte., wrote in a note. China’s equity gauge posted a second straight day of gains after the central bank’s quarterly report indicated a shift toward easing measures to bolster the economic recovery. South Korea led gains in the region, with the Kospi adding more than 1%, helped by chipmakers Samsung Electronics and SK Hynix. Asia’s chip-related shares rose after comments from Micron Technology CEO Sanjay Mehrotra added to optimism the global shortage of semiconductors is easing. Reports of Japan earmarking $6.8 billion to bolster domestic chipmaking and Samsung planning to announce the location of its new chip plant in the U.S. also aided sentiment. Japanese stocks fluctuated after U.S. shares retreated on Friday following hawkish remarks from Federal Reserve officials. The Topix index was virtually unchanged at 2,044.16 as of 2:21 p.m. Tokyo time, while the Nikkei 225 advanced 0.1% to 29,783.92. Out of 2,180 shares in the index, 1,107 rose and 948 fell, while 125 were unchanged. “There are uncertainties surrounding the direction of U.S. monetary policy,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Institute Co. “The latest comments from FRB members are spurring talk that steps to taper could accelerate.” Australian stocks sunk as banks tumbled to almost a 4-month low. The S&P/ASX 200 index fell 0.6% to close at 7,353.10, weighed down by banks and technology stocks as the measure for financial shares finished at the lowest level since July 30.  Nickel Mines was the top performer after agreeing to expand its strategic partnership with Shanghai Decent. Flight Centre fell for a second session, ending at its lowest close since Sept. 20, as the Covid-19 situation worsens in Europe. In New Zealand, the S&P/NZX 50 index fell 1% to 12,607.64. In FX, the Bloomberg dollar index holds Asia’s narrow range, trading little changed on the day. AUD outperforms G-10 peers, extending Asia’s modest gains. SEK and JPY are the weakest. RUB lags in EMFX, dropping as much as 1% versus the dollar with USD/RUB on a 74-handle. According to Bloomberg, hedge funds’ bullishness toward the dollar is starting to evaporate amid speculation the U.S. currency has risen too much given the Federal Reserve remains adamant it’s in no rush to raise interest rates. Meanwhile, the euro pared modest Asia session losses to trade below $1.13, while European bond yields edged higher, led by bunds and gilts. The pound dipped after comments from Bank of England policy makers raised questions about the certainty of an interest-rate increase in December. Governor Andrew Bailey said that the risks to the U.K. economy are “two-sided” in a weekend interview. Australian dollar advanced against the kiwi on position tweaking ahead of Wednesday’s RBNZ’s rate decision, and after China’s central bank removed sticking with “normal monetary policy” from its policy outlook. Yen declines as speculation China will steer toward more accommodative policy damps the currency’s haven appeal. Hungary’s forint tumbled to a record low against the euro as back-to-back interest rate increases failed to shield it during a rapidly deteriorating pandemic and a flight to safer assets. In commodities, crude futures drifted higher. WTI rises 0.3% near $76.20, Brent regains at $79-handle. Spot gold has a quiet session trading near $1,844/oz. Base metal are mixed: LME copper, tin and zinc post small losses; lead and nickel are in the green Looking at today's calendar, we get the October Chicago Fed national activity index, existing home sales data, and the Euro Area advance November consumer confidence. Zoom is among the companies reporting earnings. Market Snapshot S&P 500 futures up 0.3% to 4,710.75 STOXX Europe 600 up 0.3% to 487.45 German 10Y yield little changed at -0.34% Euro little changed at $1.1283 MXAP down 0.2% to 198.88 MXAPJ down 0.2% to 647.20 Nikkei little changed at 29,774.11 Topix little changed at 2,042.82 Hang Seng Index down 0.4% to 24,951.34 Shanghai Composite up 0.6% to 3,582.08 Sensex down 2.0% to 58,450.84 Australia S&P/ASX 200 down 0.6% to 7,353.08 Kospi up 1.4% to 3,013.25 Brent Futures up 0.4% to $79.22/bbl Gold spot little changed at $1,846.10 U.S. Dollar Index also little changed at 96.08 Top Overnight News from Bloomberg Negotiators hammering out details of a transformative new global corporate tax regime are shaping the deal to maximize its chance of winning acceptance in the U.S., whose companies face the biggest impact from the overhaul The U.S. has shared intelligence including maps with European allies that shows a buildup of Russian troops and artillery to prepare for a rapid, large-scale push into Ukraine from multiple locations if President Vladimir Putin decided to invade, according to people familiar with the conversations. The ruble slid to the weakest since August and the hryvnia fell With investors ramping up expectations for the Federal Reserve and other developed-market central banks to tighten policy, the likes of the Brazilian real and Hungarian forint have been weighed down by inflation and political concerns even as local officials pushed up borrowing costs. The Chinese yuan, Taiwanese dollar and Russian ruble have been among the few to stand their ground An organization formed by key participants in China’s currency market urged banks to limit speculative foreign-exchange trading after the yuan climbed to a six-year high versus peers The Avalanche cryptocurrency has surged in the past several days, taking it briefly into the top 10 by market value and surpassing Dogecoin and Shiba Inu, after a deal related to improvement of U.S. disaster-relief funding A more detailed breakdown of overnight news courtesy of Newsquawk Asia-Pac stocks traded mixed following last Friday's mostly negative performance stateside, where risk appetite was dampened by concerns of a fourth COVID wave in Europe and recent hawkish Fed rhetoric. Weekend newsflow was light and the mood was tentative heading into this week's risk events including FOMC minutes and US GDP data before the Thanksgiving holiday. The ASX 200 (-0.6%) was subdued with declines led by weakness in gold miners and the energy sector. The Nikkei 225 (+0.1%) was lacklustre after last week’s inflows into the JPY but with downside eventually reversed as the currency faded some of the gains and following the recent cabinet approval of the stimulus spending. The KOSPI (+1.4%) outperformed and reclaimed the 3k level with shares in index heavyweight Samsung Electronics rallying as its de facto leader tours the US which spurred hopes the Co. could deploy its USD 100bln cash pile. The Hang Seng (-0.4%) and Shanghai Comp. (+0.6%) diverged with the mainland kept afloat after the PBoC conducted a mild liquidity injection and maintained its Loan Prime Rate for a 19th consecutive month as expected, although Hong Kong was pressured by losses in energy and cautiousness among developers, as well as the recent announcement of increased constituents in the local benchmark. Finally, 10yr JGBs eked marginal gains amid the cautious risk tone in Asia and following firmer demand at the enhanced liquidity auction for 2yr-20yr JGBs, but with upside capped as T-note futures continued to fade Friday’s early gains that were fuelled by the COVID-19 concerns in Europe before the advances were later halted by hawkish Fed rhetoric calling for a discussion on speeding up the tapering at next month’s meeting. Top Asian News China Blocks Peng Shuai News as It Seeks to Reassure World China FX Panel Urges Banks to Cap Speculation as Yuan Surges Paytm Founder Compares Himself to Musk After Historic IPO Flop China Tech Stocks Are Nearing Inflection Point, UBS GWM Says European cash bourses kicked off the new trading week with mild gains (Euro Stoxx 50 +0.3%; Stoxx 600 +0.3%) following a mixed APAC handover. Some have been attributing the mild gains across Europe in the context of the different approaches of the Fed and ECB, with the latter expected to remain dovish as the former moves tighter, while COVID lockdowns will restrict economic activity. News flow in the European morning has however been sparse, as participants look ahead to FOMC Minutes, Flash PMIs and US GDP ahead of the Thanksgiving holiday (full Newsquawk Desk Schedule on the headline feed) alongside the Fed Chair update from President Biden and a speech from him on the economy. US equity futures see modestly more pronounced gains, with the more cyclically-exposed RTY (+0.6%) performing better than then NQ (+0.4%), ES (+0.4%) and YM (+0.4%). Since the European cash open, the initial mildly positive momentum has somewhat waned across European cash and futures, with the region now conforming to a more mixed picture. Spain's IBEX (+0.7%) is the clear regional outperforming, aided by index heavyweight Telefonica (+5.0%), which benefits from the sectorial boost received by a couple of major M&A updates. Firstly, Telecom Italia (+22%) gapped higher at the open after KKR presented a EUR 0.505/shr offer for Telecom Italia. The offer presents a ~45% premium on Friday's close. Second, Ericsson (-3.5%) made a bid to acquire American publicly held business cloud communications provider Vonage in a deal worth USD 6.2bln. As things stand, the Telecom sector is the clear outperformer, closely followed by banks amid a revival in yields. The other end of the spectrum sees Travel & Leisure back at the foot of the bunch as COVID fears in Europe mount. In terms of individual movers, Vestas Wind Systems (-2.0%) was hit as a cyber incident that impacted parts of its internal IT structure and data has been compromised. Looking ahead, it’s worth noting that volume will likely be more muted towards the latter half of the week on account of the Thanksgiving holiday. Top European News Scholz Closer to German Chancellery as Cabinet Takes Shape Austria Back in Lockdown Ahead of Mandatory Vaccine Policy Energy Crunch Drives Carbon to Record as Europe Burns More Coal BP Goes on Hydrogen Hiring Spree in Bid for 10% Market Share In FX, the Antipodean Dollars are outperforming at the start of the new week on specific supportive factors, like a bounce in the price of iron ore and a further re-opening from pandemic restrictions in both Australia and New Zealand, while the REINZ shadow board is ‘overwhelmingly’ behind another RBNZ rate hike this week. Aud/Usd is holding around 0.7250 and Nzd/Usd is hovering circa 0.7000 as the Aud/Nzd cross pivots 1.0350 in the run up to flash Aussie PMIs and NZ retail sales. DXY - Aussie and Kiwi strength aside, the Greenback retains a solid underlying bid on safe haven and increasingly hawkish Fed grounds after a run of recent much better than expected US data. In index terms, a base just above 96.000 provides a platform to retest last week’s peaks at 96.245 and 96.266 vs 96.223 so far, but Monday’s agenda may not give bulls much in the way of encouragement via data with only existing home sales scheduled. Instead, the Buck could derive more impetus from Treasuries given front-loaded supply ahead of Thanksgiving in the form of Usd 58 bn 2 year and Usd 59 bn 5 year notes. CHF/CAD/EUR/GBP/JPY - All narrowly mixed against their US rival, as the Franc keeps its head above 0.9300 and meanders between 1.0485-61 vs the Euro amidst some signs of official intervention from a rise in weekly Swiss sight deposits at domestic banks. Meanwhile, the Loonie has some leverage from a mild rebound in crude prices to pare declines from sub-1.2650 and should glean support into 1.2700 from 1 bn option expiries at 1.2685 on any further risk aversion or fallout in WTI. Conversely, 1 bn option expiry interest from 1.1300-05 could scupper Euro recoveries from Friday’s new y-t-d low around 1.1250 against the backdrop of ongoing COVID-19 contagion and pre-ECB speakers plus preliminary Eurozone consumer confidence. Elsewhere, the Pound is weighing up BoE tightening prospects and the impact of no breakthrough between the UK and EU on NI Protocol as Cable and Eur/Gbp straddle the 1.3435-40 zone and 0.8400 respectively, while the Yen has unwound more of its safe haven premium within a 114.27-113.91 range eyeing UST yields in relation to JGBs alongside overall risk sentiment. SCANDI/EM - The Nok is deriving some traction from Brent back over Usd 79/brl, but geopolitical concerns are preventing the Rub from benefiting and the Mxn is also on a weaker footing along with most EM currencies. However, the Try is striving to draw a line in the sand irrespective of a marked deterioration in Turkish consumer sentiment and the Cnh/Cny are holding up well regardless of a softer PBoC fix for the onshore unit as LPRs were unchanged yet again and China’s FX regulator told banks to limit Yuan spec trades. In CEE, the Pln has plunged on diplomatic strains between Poland and the EU, the Huf has depreciated to all time lows on virus fears and the Czk has been hampered by CNB’s Holub downplaying the chances of more big tightening surprises such as the aggressive hike last time. In commodities, WTI and Brent front month futures see some consolidation following Friday’s slide in prices. In terms of the fundamentals, the demand side of the equations continues to be threatened by the fourth wave of COVID, namely in the European nations that have not had a successful vaccine rollout. As a reminder, Austria is in a 20-day nationwide lockdown as of today, whilst Germany, Belgium and the Netherlands see tighter restrictions, with the latter two also experiencing COVID-related social unrest over the weekend. The European Commission will on Wednesday issue a set of new recommendations to its member states on non-essential travel, a senior EU diplomat said, which will be watched for activity and jet fuel demand. Over to the supply side, There were weekend reports that Japan and the US are planning a joint announcement regarding the SPR release, although a key Japanese official later noted there was no fixed plan yet on releasing reserves. Japanese PM Kishida confirmed that they are considering releasing oil reserves to curb prices. Meanwhile, Iranian nuclear talks are regaining focus as negotiations are poised to resume on the 29th of November – it is likely we’ll see officials telegraph their stances heading into the meeting. Eyes will be on whether the US offers an olive branch as Tehran stands firm. Elsewhere, the next OPEC+ meeting is also looming, but against the backdrop of lower prices, COVID risk and SPR releases, it is difficult to see a scenario where OPEC+ will be more hawkish than dovish. WTI and Brent Jan trade on either side of USD 76/bbl and USD 79/bbl respectively and within relatively narrow bands. Spot gold and silver meanwhile see a mild divergence, with the yellow metal constrained by resistance in the USD 1,850/oz area, whilst spot silver rebounded off support at USD 24.50/oz. Finally, base metals are relatively mixed with no standout performers to point out. LME copper is flat but holds onto USD 9,500+/t status. US Event Calendar 8:30am: Oct. Chicago Fed Nat Activity Index, est. 0.10, prior -0.13 10am: Oct. Existing Home Sales MoM, est. -1.8%, prior 7.0% 10am: Oct. Home Resales with Condos, est. 6.18m, prior 6.29m DB's Jim Reid concludes the overnight wrap This morning we’ve just published our 2022 credit strategy outlook. 2021 has been one of the lowest vol years for credit on record but we think this is unlikely to last and spreads will sell-off at some point in H1 when markets reappraise how far behind the curve the Fed is. Even with covid restrictions mounting again in Europe as we go to print, we think it’s more likely that we’ll be in a “growthflationary” environment for 2022 and think overheating risks are more acute than the stagflation risk, especially in the US. Strong growth and high liquidity should mean that full year 2022 is a reasonable year for credit overall but if we’re correct there’ll be regular pockets of inflationary/interest rate concerns in the market, which we think is more likely to happen in H1. At the H1 wides, we could see spreads widen as much as 30-40bps in IG and 120-160bps in HY which is consistent with typical mid-cycle ranges through history. We do expect this to mostly retrace in H2 as markets recover from the shock and growth remains decent and liquidity still high. However, with the potential for a shift in the narrative to potential late-cycle dynamics, we think spreads will close 2022 slightly wider than they are today. We will be watching the yield curve closely through the year for clues as to how the cycle will evolve into 2023. This has the ability to move our YE 22 forecasts in both directions as the year progresses. This week will be heavily compressed given Thanksgiving on Thursday. The highlight though will be a likely choice of Fed governor before this, assuming the timetable doesn’t slip again. Overnight it’s been announced that Biden will give a speech to the American people tomorrow on the economy and prices. It’s possible the Fed Chair gets announced here and perhaps plans to release oil from the strategic reserve. We will see. Following that, Wednesday is especially busy as a pre-holiday US data dump descends upon us. We’ll see the minutes of the November 3rd FOMC meeting and earlier that day the core PCE deflator (the Fed's preferred inflation metric), Durable Goods, the UoM sentiment index (including latest inflation expectations), new home sales and jobless claims amongst a few other releases. More internationally, covid will be focus, especially in Europe as Austria enters lockdown today after the shock announcement on Friday. Germany is probably the swing factor here for sentiment in Europe so case numbers will be watched closely. Staying with Germany, there’s anticipation that a coalition agreement could be reached in Germany between the SPD, Greens and the FDP, almost two months after their federal election. Otherwise, the flash PMIs for November will be in focus, with the ECB following the Fed and releasing the minutes from their recent meeting on Thursday. As discussed at the top the most important market event this week is likely to be on the future leadership of the Federal Reserve, as it’s been widely reported that President Biden is expected to announce his choice on who’ll be the next Fed Chair by Thanksgiving on Thursday. Previous deadlines have slipped on this announcement, but time is becoming increasingly limited given the need for Senate confirmation ahead of Chair Powell’s current four-year term expiring in early February. The two names that are quite obviously in the frame are incumbent Chair Powell and Governor Brainard, but there are also a number of other positions to fill at the Fed in the coming months, with Vice Chair Clarida’s term as an FOMC governor expiring in January, Randal Quarles set to leave the Board by the end of this year, and another vacant post still unfilled. So a significant opportunity for the Biden administration to reshape the top positions at the Fed. In spite of all the speculation over the position of the Fed Chair, our US economists write in their latest Fed update (link here), that the decision is unlikely to have a material impact on the broad policy trajectory. Inflation in 2022 is likely to remain at levels that make most Fed officials uncomfortable, whilst the regional Fed presidents rotating as voters lean more hawkish next year, so there’ll be constraints to how policy could shift in a dovish direction, even if an incoming chair wanted to move things that way. Another unconfirmed but much anticipated announcement this week could come from Germany, where there’s hope that the centre-left SPD, the Greens and the liberal FDP will finally reach a coalition agreement. The general secretaries of all three parties have recently said that they hope next week will be when a deal is reached, and a deal would pave the way for the SPD’s Olaf Scholz to become chancellor at the head of a 3-party coalition. Nevertheless, there are still some hurdles to clear before then, since an agreement would mark the start of internal party approval processes. The FDP and the SPD are set to hold a party convention, whilst the Greens have announced that their members will vote on the agreement. On the virus, there is no doubt things are getting worse in Europe but it’s worth putting some of the vaccine numbers in some context. Austria (64% of total population) has a double vaccination rate that is somewhat lower than the likes of Spain (79%), Italy (74%), France (69%), the UK (69%) and Germany (68%). The UK for all its pandemic fighting faults is probably as well placed as any due to it being more advanced on the booster campaign due to an earlier vaccine start date and also due to higher natural infections. It was also a conscious decision back in the summer in the UK to flatten the peak to take load off the winter wave. So this is an area where scientists and the government may have made a calculated decision that pays off. Europe is a bit behind on boosters versus the UK but perhaps these will accelerate as more people get 6 months from their second jab, albeit a bit too late to stop some kind of winter wave. There may also be notable divergence within Europe. Countries like Italy and Spain (and to a slightly lesser extent France) that were hit hard in the initial waves have a high vaccination rate so it seems less likely they will suffer the dramatic escalation that Austria has seen. Germany is in the balance as they have had lower infection rates which unfortunately may have encouraged slightly lower vaccination rates. The irony here is that there is some correlation between early success/lower infections and lower subsequent vaccination rates. The opposite is also true - i.e. early bad outcomes but high vaccination rates. The US is another contradiction as it’s vaccination rate of 58% is very low in the developed world but it has had high levels of natural infections and has a higher intolerance for lockdowns. So tough to model all the above. Overall given that last winter we had no vaccines and this year we have very high levels of protection it seems unfathomable that we’ll have an outcome anywhere near as bad. Yes there will be selected countries where the virus will have a more severe impact but most developed countries will likely get by without lockdowns in my opinion even if the headlines aren’t always going to be pleasant. Famous last words but those are my thoughts. In light of the rising caseloads, the November flash PMIs should provide some context for how the global economy has performed into the month. We’ve already seen a deceleration in the composite PMIs for the Euro Area since the summer, so it’ll be interesting to see if that’s maintained. If anything the US data has reaccelerated in Q4 with the Atlanta Fed GDPNow series at 8.2% for the quarter after what will likely be a revised 2.2% print on Wednesday for Q3. Time will tell if Covid temporarily dampens this again. Elsewhere datawise, we’ll also get the Ifo’s latest business climate indicator for Germany on Wednesday, which has experienced a similar deceleration to other European data since the summer. The rest of the week ahead appears as usual in the day-by-day calendar at the end. Overnight in Asia stocks are mixed with the KOSPI (+1.31%) leading the pack followed by the Shanghai Composite (+0.65%) and CSI (+0.53%), while the Nikkei (-0.18%) and Hang Seng (-0.35%) are lower. Stocks in China are being boosted by optimism that the PBOC would be easing its policy stance after its quarterly monetary policy report on Friday dropped a few hints to that effect. Futures are pointing towards a positive start in the US and Europe with S&P 500 futures (+0.31%) and DAX futures (+0.14%) both in the green. Turning to last week now, rising Covid cases prompted renewed lockdown measures to varying degrees and hit risk sentiment. Countries across Europe implemented new lockdown measures and vaccine requirements to combat the latest rise in Covid cases. The standouts included Austria and Germany. Austria will start a nationwide lockdown starting today and will implement a compulsory Covid vaccine mandate from February. Germany will restrict leisure activities and access to public transportation for unvaccinated citizens and announced a plan to improve vaccination efforts. DM ten-year yields decreased following the headline. Treasury, bund, and gilt yields declined -3.8bps, -6.7bps, and -4.6bps on Friday, respectively, bringing the weekly totals to -1.3bps, -8.3bps, and -3.5bps, respectively. The broad dollar appreciated +0.54% Friday, and +0.98% over the week. Brent and WTI futures declined -2.89% and -3.68% on Friday following global demand fears, after drifting -4.27% and -5.79% lower throughout the week as headlines circulated that the US and allies were weighing whether to release strategic reserves. European equity indices declined late in the week as the renewed lockdown measures were publicized. The Stoxx 600, DAX, and CAC 40 declined -0.33%, -0.38%, and -0.42%, respectively on Friday, bringing their weekly totals to -0.14%, +0.41%, and +0.29%. The S&P 500 index was also hit ending the week +0.32% higher after declining -0.14% Friday, though weekly gains were concentrated in big technology and consumer discretionary stocks. U.S. risk markets were likely supported by the U.S. House of Representatives passing the Biden Administration’s climate and social spending bill. The bill will proceed to the Senate, where its fate lays with a few key moderate Democrats. This follows President Biden signing a physical infrastructure bill into law on Monday. On the Fed, communications from officials took a decidedly more hawkish turn on inflation dynamics, especially from dovish members. Whether the Fed decides to accelerate its asset purchase taper at the December FOMC will likely be the key focus in markets heading into the meeting. Ending the weekly wrap up with some positive Covid news: the U.S. Food and Drug Administration cleared Pfizer and Moderna booster shots for all adults. Additionally, the US will order 10 million doses of Pfizer’s Covid pill. Tyler Durden Mon, 11/22/2021 - 07:49.....»»

Category: blogSource: zerohedgeNov 22nd, 2021

Macy"s, Kohl"s Soar On Blowout Earnings, Guidance As Americans Flood Department Stores

Macy's, Kohl's Soar On Blowout Earnings, Guidance As Americans Flood Department Stores A year and a half after the big box retailers were left for dead, they can't stop printing money, and this morning Kohl's and Macy's are soaring, the former up 9%... ... the latter up 13% at the start of trading... ... with Americans poised to splurge on steroids this crucial holiday season, an encouraging sign for department store chains that need a win after almost two years of coronavirus pandemic pain. The reason behind the surge in the stock price: blowout results. Macy’s posted stronger-than-expected results for the third quarter and raised its full-year earnings guidance, showing that consumer demand remains robust as the department-store chain enters the holidays. For Q3, M reported EPS of $1.23, trouncing expectations of 0.35 on revenue of $5.44BN, also above the $5.33BN expected. More importantly, gross margin rose from 35.6% to 41%, beating expectations of 39.8% and easing margin concerns raised by the likes of Target and Walmart earlier this week. Meanwhile, comparable sales at stores owned by the company soared 37.2%, also far above the 34.5% consensus estimate. Finally, the company boosted its year sales forecast by more than the 3Q beat! The company now sees sales in a range of $24.1 billion to $24.3 billion for the year, and earnings of $4.57 to $4.76 a share. Previously it forecast a wider range of $23.55 billion to $23.95 billion, and $3.41 to $3.75 a share in profit. Evercore ISI analyst Omar Saad said that “sales and margin inflection in 2Q clearly wasn’t a fluke, and accelerated further in 3Q." He expects share momentum “to build” with stock “only up 12% on a 30% guidance raise.' Sure enough, Macy’s CEO Jeff Gennette said in a statement that the company is continuing to “invest in positioning our company for long-term sustainable and profitable growth.” Meanwhile, Kohl’s which was also up double digits, posted sales that beat Wall Street’s expectations. It reported Adj. EPS 1.65, also smashing expectations of 0.69, with revenue rising to 4.37bln, and beating consensus forecasts of 4.28bln as gross margin of 39.9% also beat expectations of 37.5%; Like Macy's, Kohls also raised its FY21 financial outlook: executives now expect net sales to increase in a mid-20s percentage range as opposed to the previous projection of a low-20s range. It also increased its expected operating margin to as much as 8.5% this year, compared with the previous outlook of 7.6%. The stellar earnings cemented the companies' impressive outperformance in 2021: Macy's has nearly tripled in value this year through Wednesday’s close and is at roughly double its pre-pandemic level. Kohl’s, up 39% this year through Wednesday, rose as much as 11% in premarket trading. As Bloomberg notes, in addition to performing well despite supply-chain disruptions as flush consumers flock back to physical stores, Macy’s may be seeing a lift as it implements digital strategies that investors have sought for years. The company said it plans to launch a digital marketplace in the second half of next year, aiming to expand its product assortment and highlight third-party merchants. That’s part of the company’s goal to generate $10 billion in sales by 2023, Macy’s said. Activist investor Jana Partners, which recently bought 1.5% of Macy’s outstanding stock, has said the department-store chain could boost its valuation by spinning off its e-commerce business. Of course, none of this would be possible without a consumer who is spending far more than at any point in history, still flush with saved stimmies: and with consumer spending for the holidays seen reaching a record this year, the party is set to continue with department stores expecting to receive a decent chunk of it. The earnings reports are further confirmation, after similar figures this week from Walmart, Target and more, that shoppers are willing to spend at traditional stores this holiday season as they are no longer hindered by covid. Still, these retailers aren’t out of the woods yet, because they must still contend with supply-chain logjams, consumers’ concerns about rising inflation, out-of-stock inventory and staffing shortages. “Macy’s is bouncing back from a terrible 2020 and is, like many other retailers, taking advantage of very elevated levels of spending in the consumer economy,” Neil Saunders, managing director of GlobalData, said in a note. “None of this takes away from the positive numbers, but it places an important context around the reasons for recent success.” Earlier this month, Macy’s said it would raise its hourly wage to $15 an hour and offer new education options. The Washington Post reported Wednesday that the company is asking corporate employees to volunteer for shifts in its stores. Tyler Durden Thu, 11/18/2021 - 10:05.....»»

Category: blogSource: zerohedgeNov 18th, 2021

Futures Flat Ahead Of Historic Taper Announcement, China Warns Of "Downward Pressure" On Economy

Futures Flat Ahead Of Historic Taper Announcement, China Warns Of "Downward Pressure" On Economy US stock futures were flat ahead of today's Fed meeting, where the central bank is widely expected to announce the reduction of asset purchases with a majority of analysts expecting the Fed reducing its monthly purchases of Treasuries by $10 billion and mortgage- backed securities by $5 billion. Nasdaq 100 futures climbed 0.1% while S&P 500 and Dow Jones futures were little changed. Oil fell as the U.S. ramped up pressure on OPEC+ to boost supplies (which will bear zero results). The two-year Treasury yield was steady, while the 30-year rate shed two basis points. European stocks struggled for direction and the dollar fell less than 0.1%.   Despite turmoil in the bond market which sent the MOVE (or bond VIX) index to post-covid highs... ... stocks remain complacent and are likely not under stress “because we all think we know what will come out from today’s meeting: a gradual start of the tapering of the bond purchases program,” said Ipek Ozkardeskaya, senior analyst at Swissquote. A "taper announcement will likely be seamless, what may be less seamless is the rate discussion," she wrote in a note.  In recent weeks, policy makers have come under pressure to reassess their assessment of inflation being transitory, with bond and currency markets pricing in faster-than-expected rate hikes. “The big question will be whether they will signal anything about when the rate hikes will start,” Jeanette Garretty, chief economist at Robertson Stephens Wealth Management, said on Bloomberg Television. “I think they are going to try and avoid that.” Wall Street has also largely shrugged off concerns around rising price pressures and mixed economic growth, boosted by a stellar third-quarter earnings season and an upbeat commentary about growth going forward. In fact, there is absolutely nothing that can dent the ongoing market meltup which according to Morgan Stanley will continue until just around Thanksgiving. "Anything suggesting that the Fed is confident to keep withdrawing monetary policy support following a start today may allow equity investors to buy more," said Charalambos Pissouros, head of research at JFD group. "After all, they may have already digested the idea that interest rates will start rising at some point soon." Meanwhile, Chinese equities drifted lower after what Bloomberg called was a "dour warning" from Premier Li who cautioned about “downward pressure” for the economy. Hang Seng falls as much as 1.2% after tech shares resume slide. Here are some of the most notable premarket moves: Lyft rose after its third-quarter results showed a continued improvement in key metrics for the ride-sharing company. Zillow dropped as the decision to shut its home-flipping business raised questions about its ability to deliver growth. Shale oil producer Devon Energy rose 4.8% in premarket trading on topping earnings estimates as oil prices hit multi-year highs. Mondelez International added 1.9% after the Oreo maker raised its annual sales forecast, helped by price increases and strong demand from emerging markets. T-Mobile gained 3.4% after the U.S. wireless carrier beat third-quarter estimates for adding monthly bill paying phone subscribers. Activision Blizzard tumbled 12.0% after the videogame publisher delayed the launch of two much-awaited titles, as its co-leader Jen Oneal decided to step down from her role On the economic data front, October readings on ADP private payrolls, IHS Markit composite PMI and ISM non-manufacturing activity is due later in the day. Meanwhile, European stocks were flat as losses in energy stocks offset gains in basic resources shares.  Italy's FTSE MIB outperforms, rising as much as 0.3% while Spain's IBEX underperforms. Oil & gas, retail and utilities are the weakest Stoxx 600 sectors; miners and autos outperform. Asia’s equity benchmark was little changed as traders await the outcome of the U.S. Federal Reserve’s policy meeting, with an announcement expected on tapering amid concerns about elevated inflation. The MSCI Asia Pacific Index traded in a narrow range, with Alibaba Group, AIA Group and Samsung Electronics the biggest drags and Tencent among the winners. South Korea’s Kospi tumbled 1.3% on mounting selling by foreign funds. Hong Kong’s benchmark Hang Seng Index declined for a seventh day, extending its longest losing streak since July. The earnings season has failed to boost Asian shares, with the regional benchmark down more than 10% from a February peak as supply-chain and inflation worries persist. Traders will focus on the Fed’s policy move on Wednesday for cues at a time volatility in the bond market has heightened. “U.S. monetary policy has a very direct impact on the Asian market, especially with their plethora of dirty U.S. dollar pegs,” Jeffrey Halley, senior market analyst at Oanda, wrote in a note. Philippine stocks were among the top gainers, advancing for a second day after local Covid-19 cases fell to fewest since March. Stocks in Australia also rose after the country’s central bank scrapped a bond-yield target on Tuesday and said there’s still some time to go for rate hikes. Iron ore’s rebound on Wednesday also bolstered the mining sector. Japan’s equity market was closed for a holiday. Chinese stocks dripped after Premier Li Keqiang said China’s economy faces new downward pressures and has to cut taxes and fees to address the problems faced by small and medium-sized companies. Li did not specify the extent of the new “downward pressure” or its cause, but the phrase is generally used by Chinese officials to refer to a slowing economy. He has used the phrase before, including several times in 2019. The economy needs “cross-cyclical adjustments” to continue in a proper range, Li said during a visit to China’s top market regulator, state broadcaster CCTV reported. That phrase is associated with a more conservative fiscal and monetary approach that focuses more on the long-term outlook instead of immediate economic performance. “There are no obvious growth drivers now, so the government is looking for one,” said Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong Ltd. “Small businesses’ investment can provide a source of healthier, longer-term growth, compared with government or property investment.” In rates, 10-year Treasury note futures are at the top of Tuesday’s range, gaining over Asia session while eurodollar futures are up 1-2 ticks in red and green packs as shares declined in China and Hong Kong ahead of today’s FOMC decision and after Premier Li’s warning of downward pressures to the economy. Treasury 10-year yields richer by 1.8bp on the day, flattening 2s10s spread with front-end yields unchanged -- bunds and gilts trade slightly cheaper vs. Treasuries. Cash Treasuries resumed trading in London after being closed in Tokyo for a Japanese holiday --curve has flattened with long-end yields richer by as much as 2bp. Focus on U.S. session includes ADP employment and durable goods data, refunding announcement before 2pm ET Fed rate decision. In Europe, Bunds bull flattened, helped in part by dovish comments from ECB’s Lagarde and Muller while peripheral spreads tightened with 10y Bund/BTP narrowing 3bps near 120bps. In FX, the Bloomberg Dollar Spot Index inched lower as the dollar fell versus most of its Group-of-10 peers and Treasury yields fell by up to 3 basis points, led by the long end of the curve. The euro gradually climbed toward the $1.16 handle while European government bonds yields fell and curves flattened. New Zealand’s dollar was among the top G-10 performers, and rose from a two- week low after the unemployment rate dropped more than economists predicted; the Kiwi and Aussie were also boosted by leveraged short covering. The pound inched up from a three-week low against the dollar before a speech by Bank of England Governor Andrew Bailey. Hedging the pound on an overnight basis is the costliest since March as traders focus on the upcoming meetings by the Federal Reserve and the BOE. In commodities, crude futures extend Asia’s softness; WTI drops over 2%, stalling near $82, Brent drops a similar magnitude to trade near $83. Spot gold drifts around Asia’s worst levels near $1,783/oz. Most base metals are up over 1% with LME aluminum and tin outperforming Looking at the day ahead the highlight will be the aforementioned Fed's policy decision along with Chair Powell’s subsequent press conference. Other central bank speakers include ECB President Lagarde, alongside the ECB’s Elderson, Centeno, de Cos and Villeroy. Data releases include the final October services and composite PMIs from the UK and the US, and other US data includes the ISM services index for October, the ADP’s report of private payrolls for October and factory orders for September. Finally, earnings today include Qualcomm, Booking Holdings, Fox Corp and Marriott International. Market Snapshot S&P 500 futures little changed at 4,622.00 STOXX Europe 600 little changed at 479.79 MXAP little changed at 197.87 MXAPJ little changed at 645.10 Nikkei down 0.4% to 29,520.90 Topix down 0.6% to 2,031.67 Hang Seng Index down 0.3% to 25,024.75 Shanghai Composite down 0.2% to 3,498.54 Sensex little changed at 59,993.78 Australia S&P/ASX 200 up 0.9% to 7,392.73 Kospi down 1.3% to 2,975.71 German 10Y yield little changed at -0.18% Euro little changed at $1.1587 Brent Futures down 1.8% to $83.23/bbl Gold spot down 0.3% to $1,782.83 U.S. Dollar Index little changed at 94.05 Top Overnight News from Bloomberg The Federal Reserve is widely expected to announce the reduction of asset purchases at the conclusion of its policy meeting Wednesday, which Chair Jerome Powell will likely say is not a step toward raising interest rates any time soon Traders have had a mixed view for most of this year about when emerging-Asia central banks will begin to normalize policy. Suddenly though, they are rushing to price in rate-hike bets across the region. The hawkish shift is most evident in South Korea and India, where markets are now anticipating at least a quarter-point increase in the next three months, while they are also building in Malaysia and Thailand over a two-year horizon China’s economy faces new downward pressures and has to cut taxes and fees to address the problems faced by small and medium-sized companies, according to the country’s Premier Li Keqiang More provinces in China are fighting Covid-19 than at any time since the deadly pathogen first emerged in Wuhan in 2019 The likelihood that elevated inflation will become entrenched is increasing, according to European Central Bank Governing Council member Bostjan Vasle A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mixed despite another encouraging handover from Wall Street where all major indices notched fresh record closing highs for the third consecutive day, and the DJIA breached the 36k level amid a slew of earnings and absence of any significant catalysts to derail the recent uptrend. Gains in APAC were also capped by holiday-thinned conditions with Japan away for Culture Day and as the FOMC announcement draws closer (full Newsquawk preview available in the Research Suite). The ASX 200 (+0.9%) outperformed amid a resurgence in the top-weighted financials sector as AMP shares were boosted after it announced to divest a 19.1% stake in Resolution Life Australasia for AUD 524mln and with CBA also higher as Australia’s largest bank is to offer customers the ability to conduct crypto transactions via its app. Conversely, the KOSPI (-1.3%) lagged after its automakers posted weak October sales stateside and following comments from South Korean PM Lee that they cannot afford additional cash handouts right now, while there was also attention on Kakao Pay which more than doubled from the IPO price on its debut. The Hang Seng (-0.3%) and Shanghai Comp. (-0.2%) were lacklustre and failed to benefit from the improvement in Chinese Caixin Services and Composite PMI data, amid ongoing concerns related to the energy crunch and with tech subdued after Yahoo pulled out of China due to a challenging business and legal environment. Furthermore, reports also noted that the Chinese version of Fortnite will close in mid-November, while a slightly firmer PBoC liquidity operation failed to spur Chinese markets as its efforts still resulted in a substantial net drain. Aussie yields continued to soften after the RBA affirmed its dovish tone at yesterday’s meeting and with the central bank also present in the market today for AUD 800mln in semi-government bonds which is in line with its regular weekly purchases, while a softer b/c at the 10yr Australian bond auction failed to unnerve domestic bonds and T-notes futures were steady overnight amid the looming FOMC. Top Asian News State Bank of India Profit Tops Estimates on Lower Provisions Chinese Copper Smelters Boost Exports to Ease Historic Squeeze China’s PBOC Says Digital Yuan Users Have Surged to 140 Million Malaysia Holds Rates on Recovery, ‘Benign’ Inflation Outlook European majors have adopted a similarly mixed performance (Euro Stoxx 50 -0.1%; Stoxx 600 Unch) as seen during the APAC session, as markets and participants count down to the FOMC policy decision, with the BoE and NFPs also on the docket for the rest of the week. US equity futures are also mixed but have been drifting mildly higher in European trade thus far, vs a flat overnight session. Back to Europe, there isn’t anything major to report in terms of under/outperformers among European majors, although Spain’s IBEX (-0.7%) lags in the periphery amidst losses in sector heavyweights. Sectors in Europe are mixed with no overarching theme. Basic Resources top the charts in a slight reversal of yesterday’s underperformance and amid a bounce in base metal prices. Travel & Leisure is propped up by Deutsche Lufthansa (+5.0%) post-earnings. Oil & Gas names are pressured by the decline across the crude complex in the run-up to tomorrow’s OPEC+ confab, whilst Banks are lacklustre as yields lose ground. In terms of individual movers, Vestas Wind System (-9.0%) is at the bottom of the Stoxx 600 after cutting guidance. BMW (+0.4%) is choppy after-earnings which saw EBIT top forecasts and targets confirmed, although the group noted that the rise in raw material prices have also had an impact on earnings, but they do not expect short-term magnesium shortage to affect production. Finally, Pandora (+0.8%) reported improvements on their metrics but warned that APAC performance, including China, remains weak and heavily impacted by COVID-19, with China expected to remain a drag on performance for the remainder of the year. Top European News BMW Muscles Through Chip Shortage With Profit Jump Nexans Drops as Morgan Stanley Says 3Q Results Were Weak Russia’s Biggest Alcohol Retailer Seeks $1.3 Billion in IPO LSE Boss Expects London Will Keep EU Clearing Role Post-Brexit In FX, far from all change, but the Kiwi has reclaimed 0.7100+ status against the Greenback and a firmer grasp of the handle in wake of significantly stronger than expected NZ labour market metrics via Q3’s HLFS update overnight, including jobs growth coming in five times higher than forecast and the unemployment rate falling sharply irrespective of a rise in participation. Nzd/Usd is hovering around 0.7135 and the Aud/Nzd cross is under 1.0450 even though the Aussie has regained some composure after its post-RBA relapse to retest 0.7450, albeit with assistance from the Buck’s broad pull-back rather than mixed PMIs and much weaker than anticipated building approvals. Indeed, the Franc has also rebounded from circa 0.9150 with no independent incentive and cognisant that the SNB will be monitoring moves as Eur/Chf meanders within its 1.0604-1.0548 w-t-d range. DXY/JPY/EUR/GBP/CAD - The Dollar index has drifted back down from a fractional new high compared to Tuesday’s best between 94.144-93.970 parameters vs a 94.136-93.818 range yesterday, and for little apparent reason aside from pre-FOMC tinkering and fine-tuning of positions it seems. Nevertheless, DXY components are mostly taking advantage of the situation, albeit in typically tight ranges seen on a Fed day, with the Yen holding above 114.00 on Japanese Culture Day, the Euro just under 1.1600 and amidst more decent option expiry interest (1.1 bn from 1.1585 to the round number), Sterling still trying to retain 1.3600+ status and also close to a fairly big option expiry (821 mn at the 1.3615 strike) and the Loonie striving to contain declines beneath 1.2400 against the backdrop of retreating oil prices. Note, some upside in the Pound via upgrades to UK services and composite PMIs, but limited and Eur/Gbp remains over 0.8500 in advance of the showdown between Britain and France on fishing tomorrow when the BoE also delivers its eagerly anticipated November policy verdict. SCANDI/EM - Not much adverse reaction to a slowdown in Sweden’s services PMI for the Sek, while the Nok is taking the latest downturn in Brent crude largely in stride on the eve of the Norges Bank meeting that is widely seen cementing rate hike guidance for next month. However, scant respite or solace for the Try from sub-consensus Turkish CPI as the near 20% y/y print means more divergence relative to the CBRT’s 1 week repo, and PPI accelerated again to heighten the build up of pipeline price pressures. Conversely, the Cnh and Cny are nudging back above 6.4000 after an encouraging Chinese Caixin services PMI and the Zar is on a firm footing awaiting results of SA local elections. RBNZ said the financial system is well placed to support economic recovery despite uncertainty and risks, while the more recent Delta outbreak is creating stress for some industries and regions, particularly in Auckland. RBNZ also noted that with the risk of global inflation heightened, already stretched asset prices are facing headwinds from rising global interest rates and that supply chain bottlenecks and inflation are adding to stresses in some sectors. Furthermore, they intend to increase the minimum CFR requirement to its previous level of 75% on 1st January 2022, subject to no significant worsening in economic condition, while capital requirements for banks are to progressively increase from 1st July 2022 and it is encouraging to see them increasing ahead of these requirements. (Newswires) In commodities, WTI and Brent front month futures are softer and in proximity to USD 82/bbl and USD 83/bbl respectively with losses today also potentially a function of the downbeat China COVID updates seen overnight. As a reminder, China's most recent COVID-19 outbreak is reportedly the most widespread since Wuhan with infection in 19 of 31 provinces, according to a major newswires article. It was also reported that around half the flights to and from Beijing city’s two airports were cancelled Tuesday, according to aviation industry data site VariFlight. Further, yesterday’s Private Inventory data was also bearish, printing a larger-than-expected build of 3.6mln bbl vs exp. +2.2mln, ahead of today’s DoEs which will take place 1hr earlier for those in Europe. Looking ahead to tomorrow’s OPEC+, markets expect a continuation of the current plan to ease output curbs by 400k BPD/m. Outside calls have been getting louder for the producers to open the taps more than planned amid inflationary feed-through to consumers and company margins, although ministers, including de-factor heads Saudi and Russia, have been putting weight behind current plans, with no pushback seen from members within OPEC+ thus far. Further, the COVID situation in China is deteriorating, hence ministers will likely express a cautious approach. Elsewhere, spot gold and silver are flat within overnight ranges, as is usually the case before FOMC. Base metals are staging a recovery with LME copper back above USD 9,500/t, whilst Chinese thermal coal futures rose some 10% following 10 days of declines US Event Calendar 8:15am: Oct. ADP Employment Change, est. 400,000, prior 568,000 9:45am: Oct. Markit US Services PMI, est. 58.2, prior 58.2 Oct. Markit US Composite PMI, prior 57.3 10am: Sept. Durable Goods Orders, est. -0.4%, prior -0.4% Sept. -Less Transportation, est. 0.4%, prior 0.4% Sept. Cap Goods Orders Nondef Ex Air, prior 0.8% Sept. Cap Goods Ship Nondef Ex Air, prior 1.4% 10am: Sept. Factory Orders, est. 0.1%, prior 1.2% Sept. Factory Orders Ex Trans, est. 0%, prior 0.5% 10am: Oct. ISM Services Index, est. 62.0, prior 61.9 2pm: FOMC Rate Decision DB's Jim Reid concludes the overnight wrap So after much anticipation we’ve finally arrived at the Fed’s decision day, where it’s widely anticipated (including by DB’s US economists) that they’ll announce a tapering in their asset purchases. Such a move has been increasingly anticipated over recent months, not least with the repeated upgrades to inflation forecasts over the course of 2021, and the FOMC themselves flagged this at their September meeting, where their statement said that “if progress continues broadly as expected … a moderation in the pace of asset purchases may soon be warranted.” In terms of what our economists are expecting, their view is that the Fed will announce monthly reductions of $10bn and $5bn in the pace of Treasury and MBS purchases respectively, with the first cut to purchases coming in mid-November. They see this bringing the latest round of QE to an end in June 2022, though this would also offer some flexibility to respond to any changes in the economic environment over the coming eight months should they arise. On the question of rate hikes, they think lift-off won’t take place until December 2022, but don’t see Chair Powell actively pushing back on current market pricing (a full hike nearly priced in by mid-year 22) given the elevated uncertainty about the outlook, particularly on inflation. You can see more details in their preview here. Of course since the Fed’s last meeting, many inflationary pressures have only grown, particularly given the fresh surge in energy prices that’s taken WTI oil up to $83/bbl, having been at just $72/bbl at the time of their September meeting. In turn, this has taken market expectations of future inflation up as well, with the 10yr breakeven now standing at 2.52%, up from 2.28% following Powell’s September press conference. And market pricing has also shifted significantly since the last meeting, with investors having gone from expecting less than one full hike by the December 2022 meeting to more than two. Ahead of all that, global risk assets continued to perform strongly and a number of major indices climbed to fresh all-time highs yesterday. The S&P 500 (+0.37%), the NASDAQ (+0.34%), the Dow Jones (+0.39%) and Europe’s STOXX 600 (+0.14%) all hit new records, whilst France’s CAC 40 (+049%) exceeded its previous closing peak made all the way back in 2000. Positive earnings news helped bolster those indices, with 27 of 29 S&P 500 reporters beating earnings estimates during trading, and 16 of 20 after-hours reporters beating earnings estimates. This included Pfizer during the day, which raised its full-year forecasts on the back of strong vaccine demand and noted it had the capacity to produce as much as 4 billion shots next year. However, the big winner yesterday (the biggest in the small-cap Russell 2000 yesterday) was Avis Budget Group (+108.31%) even if its performance actually marked a fall from its intraday high when the share price had more than tripled. Those moves occurred after Avis posted strong earnings driven by better-than-expected demand. Their CEO said they’d add more electric cars, whilst the stock also got attention on the WallStreetBets forum on Reddit, which readers may recall was behind some big moves at the start of the year in various "meme stocks” like GameStop. The banner day added $8.5bn to its market cap, which helped it leap frog fellow meme stock AMC to become the second biggest company in the Russell 2000 from third slot yesterday. In other such popular retail stocks, Tesla retreated -3.03% after Elon Musk cast some doubt the previous evening over the recently announced deal to sell 100,000 cars to rental car company Hertz. That said, the automaker has still added over $300 billion in market cap over the last month. Sovereign bonds were another asset class that put in a decent performance ahead of the Fed, with yields falling throughout the curve across a range of countries following the relatively dovish tone vs heightened expectations from the RBA yesterday morning. By the close, those on 10yr Treasuries were down -1.4bps to 1.54%, whilst their counterparts in Europe saw even steeper declines, including those on 10yr bunds (-6.3bps), OATs (-8.5bps) and BTPs (-14.1bps). BTPs were the biggest story and the move seemed to coincide with a reappraisal of ECB hike expectations, as pricing through December 2022 declined -6.5 bps, down from c.20 bps of expected tightening priced as of Monday. So a big decline. In Asia, the Shanghai Composite (-0.57%), the Hang Seng (-0.93%) and the KOSPI (-1.23%) are all trading lower. Japan’s markets are closed due to the Culture Day, meaning also that cash treasuries are not trading in the region. In data releases, the Caixin Services PMI for China rose to 53.8 versus 53.1 expected. However, Premier Li’s remarks about new “downward pressure” on China’s economy and latest COVID outbreak, which is now the most widespread since the first emergence of the virus, are weighing down on the sentiment. Meanwhile, China and Hong Kong are discussing reopening of the shared border. The S&P 500 futures (-0.01%) is pretty flat this morning. Aussie yields are again lower especially at the front end with the infamous April 24 bond around -7bps as we type. As we go to print the Associated Press have called the Virginia as a victory for the GOP Youngkin with New Jersey equivalent also looking likely to go to the GOP. So a big blow to the Democrats. Of those, Virginia was being more closely watched. As recently as the Obama years it was a fiercely contested battleground, but it’s trended Democratic over the last few cycles, with Biden’s 10 point margin of victory last year well exceeding his 4.4 point margin nationally. So this will not be good news for the Dems ahead of next year’s mid-terms. It will also increase the odds of legislative and fiscal gridlock after that - although the latter has been increasingly expected. Staying with US Politics, President Biden indicated in a news conference that he was getting closer to announcing whether or not he would re-nominate Fed Chair Powell for another term as head of the central bank, or if he would appoint a new Chair. He said an announcement will come “fairly quickly”. In terms of the latest on the pandemic, the US CDC’s advisory committee on immunization practices met and backed the Pfizer vaccine for 5-11 year olds, joining the FDA who gave the vaccine the green light for the same age group. There wasn’t much in the way of data releases yesterday, though we did get the final manufacturing PMIs from Europe, where the Euro Area PMI for October was revised down two-tenths from the flash estimate to 58.3. Germany also saw a downward revision to 57.8 (vs. flash 58.2), but Italy outperformed expectations with a 61.1 reading (vs. 59.6 expected). To the day ahead now, and the highlight will be the aforementioned policy decision from the Fed, along with Chair Powell’s subsequent press conference. Other central bank speakers include ECB President Lagarde, alongside the ECB’s Elderson, Centeno, de Cos and Villeroy. Data releases include the final October services and composite PMIs from the UK and the US, and other US data includes the ISM services index for October, the ADP’s report of private payrolls for October and factory orders for September. Finally, earnings today include Qualcomm, Booking Holdings, Fox Corp and Marriott International. Tyler Durden Wed, 11/03/2021 - 08:13.....»»

Category: blogSource: zerohedgeNov 3rd, 2021

3 Cheap Stocks to Buy Now for Big Upside in November

With this backdrop, investors might want to consider buying strong stocks that have yet to return to their previous highs. Today, we also focused on stocks trading for around $30 or less... The Nasdaq broke records Thursday amid strong quarterly showings from technology companies with outsized sway over the market. Wall Street looked beyond slower third quarter GDP growth to focus on positive signs as the economy heads into the heart of the holiday spending season.U.S. GDP grew by 2% last quarter, as the Delta variant dragged down spending and crushed global supply chains. The third quarter represented a substantial slowdown from Q2’s 6.7% growth and Q1’s 6.3%, driven by the massive economic reopening and continued government stimulus. The forward-facing markets have moved way beyond Q3 GDP setbacks, shifting the focus to the improving earnings picture and the solid outlook for S&P 500 margins going forward.On top of that, the U.S. economy is bouncing back in the early weeks of the fourth quarter. Fresh data showed that hotel occupancy hit its highest levels since mid-August in the middle of the month. Plus, reservations site OpenTable figures showed that the number of diners seated at restaurants was down only 5% for the week ended Oct. 27 compared to the same period prior to the pandemic in 2019.Persistent supply chain bottlenecks and rising prices remain. Despite the economic headwinds, U.S. consumer confidence increased in October, after three months of declines. American consumers are shaking off fears and still plan on spending big this season despite rising prices. “While short-term inflation concerns rose to a 13-year high, the impact on confidence was muted,” Senior Director of Economic Indicators at The Conference Board Lynn Franco said in prepared remarks.“The proportion of consumers planning to purchase homes, automobiles, and major appliances all increased in October. Likewise, nearly half of respondents (47.6%) said they intend to take a vacation within the next six months—the highest level since February 2020, a reflection of the ongoing resurgence in consumers’ willingness to travel and spend on in-person services.”The bulls have taken the helm once again, with all three major U.S. indexes breaking fresh records during the final week of October. Everyone from banking giants to tech firms have posted stronger-than-projected financial results, with many market-movers, including Microsoft MSFT, jumping to new highs after their releases (also read: A Very Strong and Improving Earnings Picture).On top of that, the overall S&P 500 earnings outlook for Q3 has surged in the last several weeks. Plus, interest rates will favor stocks for the foreseeable future, even when the Fed starts to lift its core rate. With this backdrop, investors might want to consider buying strong stocks that have yet to return to their previous highs. Today, we also focused on stocks that are trading for around $30 or less…Levi Strauss & Co. LEVI Levi returned to the public markets in 2019 and investors began to take notice of the iconic denim firm’s growth potential last year. The company’s core business remains jeans for men, women, and kids, and in the cyclical fashion world, denim could be on the cusp of a comeback to fight back against the athleisure wave.The economic reopening has already increased demand for jeans. The company’s Q3 results, which it reported in early October, showcased rebounding denim. Quarterly sales climbed 41% compared to the year-ago period and 3% vs. FY19, while its adjusted earnings surged to easily beat our EPS estimate—digital represented roughly 20% of revenue.Levi executives said on its earnings call that it’s in the midst of a resurgent denim cycle. Nonetheless, the company is diversifying far beyond jeans. CEO Chip Bergh has projected that half of Levi’s sales will come outside of denim bottoms over the next decade, up from just 11% in 2015 and 21% in 2020. Levi is selling clothing to help it compete against Lululemon LULU and other athleisure firms. And it bolstered its non-denim business with its late-September acquisition of Beyond Yoga.Image Source: Zacks Investment ResearchZacks estimates call for Levi’s revenue to climb over 29% this year to reach its pre-pandemic total of $5.76 billion and then jump another 11% in FY22 to $6.39 billion. Its adjusted EPS are projected to soar 585% to $1.44 a share this year, with FY22 set to pop 5% higher. And analysts have raised their bottom-line estimates to help the stock grab a Zacks Rank #2 (Buy) right now.Levi is part of the Retail-Apparel and Shoes space that’s in the top 25% of over 250 Zacks industries. This is a good sign heading into the holiday shopping season. Wall Street is high on the stock, with five of the six brokerage recommendations Zacks has sitting at “Strong Buys” with the other at a “Buy.” The company also boosted its buyback efforts and lifted its dividend payment to its pre-pandemic levels.Levi shares are up 60% in the last year to outpace its industry and the S&P 500’s 40%. The stock has pulled back from its May records and it currently trades 15% below its highs at around $26 a share, even as the market breaks new ground. Levi bounced above some key technical levels recently and it trades at a 30% discount to where it was six months at 17.1X forward earnings. Plus, the Zacks consensus price target of $34.60 a share marks 33% upside to Thursday’s closing price.Sonos SONOSonos is a home audio firm that specializes in wireless and multi-room sound systems. The company competes against Bose and others in the higher-end home speaker market. It sells a range of sleek, connected speakers, subwoofers, soundbars for TVs, and more. Its baseline speaker starts at $179 and packages cost up to $1,900. Earlier this year, Sonos entered the popular portable smart speaker space with its new $169 mass-market Roam speaker.The company has benefited from the larger shift to modern, connected devices and it’s poised to gain as more people spend on home-based upgrades. The firm is also expanding its non-speaker business, with an ad-free streaming tier of its music service dubbed Sonos Radio HD, which costs $7.99 a month and competes against Spotify SPOT, Apple Music AAPL, and various other music platforms.Sonos revenue climbed 11% in FY19 and 5% last year. Zacks estimates call for its 2021 (year ended October 2) sales to surge 29% to $1.71 billion, with FY22 projected to climb 11% higher. And it’s expected to swing from an adjusted loss of -$0.18 a share last year all the way to +$1.11 in FY21, with FY22 set to climb another 6% higher.Image Source: Zacks Investment ResearchThe firm’s strong management team helped it rip off four-straight huge quarterly earnings beats and its positive FY21 and FY22 EPS revisions help it land a Zacks Rank #1 (Strong Buy) right now. Sonos grabs an “A” grade for Growth in our Style Scores system and its Audio Video Production space ranks in the top 10% of our 250 Zacks industries.Sonos struggled after its 2018 IPO, but it soared off the coronavirus lows, with its shares now up 110% in the last 12 months alone. It has cooled off a ton in the last six months to help set up a more enticing entry point. Sonos closed regular hours Thursday down around 25% from its April records at $32.01 a share. And its current Zacks consensus price target marks similar upside potential.Sonos does sit below both its 50-day and 200-day moving averages. Luckily, some recent positivity helped it jump above oversold RSI levels (30 or under) to hover below neutral within this often-tracked technical range. Its valuation also appears far more attractive to help provide solid runway. Investors might want to take a chance on the high-end modern speaker firm at its current levels. Though, it is worth pointing out that it’s set to release its Q4 results on November 17.Callaway Golf Company ELYCallaway manufactures and sells high-end golf equipment and apparel. The firm that went public back in the early 1990s has expanded through acquisitions. Its portfolio now features multiple brands, including its namesake, Odyssey, upstart power TravisMathew, and others. Callaway’s biggest move was stepping outside of gear and apparel into the entertainment business when it closed its merger with fast-growing, high-tech driving range company Topgolf in March.The Topgolf purchase could prove to be a hit since the upscale driving range chain attracts tons of “non-golfers.” This is vital for a sport that struggles to grow its consumer base. Still, Callaway posted strong double-digit revenue growth in FY17-FY19, including 36% top-line expansion before the pandemic—FY20 sales did slip around 6%.Image Source: Zacks Investment ResearchZacks estimates call for Callaway's FY21 revenue to soar 94% from $1.6 billion to $3.1 billion, driven by Topgolf’s inclusion. ELY is then projected to follow up this expansion with another 18% growth in FY22. Its adjusted earnings are projected to slip this year and bounce back slightly in 2022. And its bottom-line outlook has continually improved recently to help it grab a Zacks Rank #2 (Buy) right now.  Similar to its peers on this list, Callaway is part of a highly-ranked industry, with the Leisure and Recreation Products industry in the top 11% of over 250 Zacks industries. And Wall Street is even more bullish on the stock recently, with eight of the 10 brokerage recommendations Zacks has at “Strong Buys.”Despite the positives, Callaway closed regular trading Thursday 27% below its May highs at $26.93 a share. The current downturn began when it climbed above overbought RSI levels in late May. Investors still haven’t jumped back into the stock and they showed their displeasure for its secondary stock offering that was priced at $29.25 a share and closed on September 20.Callaway shares are still up 75% in the last year and now might be time to consider buying the beaten-down stock with its Q3 earnings in sight. The opportunity is even more appealing given that ELY’s current Zacks consensus price target of $39.10 marks 45% upside to where it trades at the moment. Tech IPOs With Massive Profit Potential: Last years top IPOs surged as much as 299% within the first two months. With record amounts of cash flooding into IPOs and a record-setting stock market, this year could be even more lucrative. See Zacks’ Hottest Tech IPOs Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Apple Inc. (AAPL): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report lululemon athletica inc. (LULU): Free Stock Analysis Report Sonos, Inc. (SONO): Free Stock Analysis Report Callaway Golf Company (ELY): Free Stock Analysis Report Spotify Technology (SPOT): Free Stock Analysis Report Levi Strauss & Co. (LEVI): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksOct 29th, 2021

Futures Rise Ahead Of Deluge Of Big Tech Earnings

Futures Rise Ahead Of Deluge Of Big Tech Earnings One day after Goldman doubled down on its call for a market meltup into year-end, futures on the Nasdaq 100 edged higher, while contracts on the S&P 500 were modestly higher on Monday, approaching record highs again as investors braced for a flood of earnings (164 of 500 S&P companies report this week) while weighing rising inflation concerns, Covid-19 risks and China’s deteriorating outlook (Goldman slashed China's 2022 GDP to 5.2% from 5.6% overnight). The FOMC enters quiet period ahead of next week's FOMC meeting, which means no Fed speakers as attention shifts to economic data and corporate earnings. At 745 a.m. ET, Dow e-minis were up 3 points, or 0.01%, S&P 500 e-minis were up 4.25 points, or 0.1%, and Nasdaq 100 e-minis were up 36.25 points, or 0.25%. Bitcoin bounced back over $63,000 after sliding below $60,000 over the weekend, the 10-year US Treasury yield rose and the dollar also rose after Federal Reserve Chair Jerome Powell flagged that inflation could stay higher for longer, fueling investor concern that sticky price increases may force policy makers to raise borrowing costs. Global markets have remained resilient despite risks from price pressures stoked by supply-chain bottlenecks and higher energy costs. On Sunday, Janet Yellen was among those counseling the inflation situation reflects temporary pain that will ease in the second half of 2022 even as Twitter CEO Jack Dorsey warned hyperinflation is coming. Investors are wary that tighter monetary policy to keep inflation in check will stir volatility “Inflation concerns will continue to dominate markets this year as the price of crude oil remains elevated,” while “the pandemic remains a central concern,” said Siobhan Redford, an analyst at FirstRand Bank Ltd. in Johannesburg. “This will add further complexity to the already difficult decisions facing policy makers around the world.” All of FAAMG - Facebook, Microsoft, Apple, Alphabet and Amazon.com - are set to report their results later this week. The companies shares, which collectively account for over 22% of the weighting in the S&P 500, were mixed in trading before the bell. Facebook shares fell in premarket trading, extending six weeks of declines, after Bloomberg reported that the social-media company is struggling to attract younger users and that employees are concerned over the spread of misinformation and hate speech on its platform. The company is scheduled to report quarterly results after the market closes. “After Snap got an Apple caught in its throat, markets will have an itchy trigger finger over the sell button if the social network says the same,” said Jeffrey Halley, senior market analyst, Asia Pacific at OANDA. “Additionally, this week, it is a FAANG-sters paradise ... that decides whether the U.S. earnings season party continues, before the FOMC (Federal Open Market Committee) reasserts its dominance next week.” PayPal jumped 6.4% as the company said it wasn’t currently pursuing an acquisition of Pinterest, ending days of speculation over a potential $45 billion deal. Shares of Pinterest plunged 12.5%. Tesla gained 2.2% in premarket trading after Morgan Stanley raised its price target for the stock by a third, citing “extraordinary” sales growth. The stock then surged to new all time highs after Bloomberg reported that Hertz placed an order for 100,000 Teslas in the first step of an ambitious plan to electrify its rental-car fleet. Oil firms including Chevron Corp and Exxon Mobil rose about 0.5% each, tracking Brent crude prices to three-year high. Cryptocurrency-exposed stocks gain in premarket trading as Bitcoin climbs back above the $63,000 per token level after slipping from its record high last week. Crypto-linked stocks that are climbing in premarket include Bakkt +6.6%, Hive Blockchain +3.9%, Hut 8 Mining +2.8%, Riot Blockchain +2.2%, MicroStrategy +2.3%, Marathon Digital +2.8%, Coinbase +1.9%, Silvergate +1.8%, Bit Digital +1.2% and Mogo +0.8% Strong earnings reports helped lift the S&P 500 and the Dow to record highs last week, with the benchmark index rising 5.5% so far in October to recoup all of the losses suffered last month.  However, market participants are looking beyond the impressive earnings numbers with a focus on how companies mitigate supply chain bottlenecks, labor shortages and inflationary pressures to sustain growth. Analysts expect S&P 500 earnings to grow 34.8% year-on-year for the third quarter, according to data from Refinitiv. On the economic data front, readings on U.S. third-quarter GDP - the Federal Reserve’s favored inflation gauge, the core PCE price index and consumer confidence data will be released later this week. In Europe, mining companies and banks gained but the telecommunications and industrial goods and services sectors declined, leaving the Stoxx 600 index little changed. Banks rose on HSBC’s bright outlook. Spain’s Banco de Sabadell SA jumped more than 5% after rejecting an offer for its U.K. unit. Telecoms and industrials were the biggest losers. Volvo Car slashed its initial public offering by a fifth, making it the latest in a string of European companies to pull back from equity markets roiled by soaring energy costs and persistent supply chain delay. Here are some of the biggest European movers today: Banca Monte dei Paschi slides as much as 9.5% after the Italian government and UniCredit ended talks over the sale of the lender. Exor shares gain as much as 5.6% in Milan trading to the highest level on record after a report that the Agnelli family’s holding co. revived talks with Covea for the sale of Exor’s reinsurance unit PartnerRe. Banco Sabadell jumps as much as 5.6% after it said it rejected an offer for its TSB Bank unit in the U.K. from Co-operative Bank. SSAB rises as much as 5.2% after the Swedish steelmaker posted 3Q earnings well above analysts expectations. Handelsbanken analyst Gustaf Schwerin said the figures were “very strong.” Weir Group rises as much as 3.7% after Exane BNP Paribas raised the stock to outperform. Analyst Bruno Gjani says the stock’s underperformance YTD provides a “compelling entry opportunity.” Darktrace drops as much as 26% after Peel Hunt initiated coverage of the cybersecurity firm with a sell rating and 473p price target that implies about 50% downside to Friday’s close. Nordic Semiconductor declines as much as 8.8% after ABG Sundal Collier downgraded to hold. German business morale deteriorated for the fourth month running in October as supply bottlenecks in manufacturing, a spike in energy prices and rising COVID-19 infections are slowing the pace of recovery in Europe’s largest economy from the pandemic. The Ifo institute said on Monday that its business climate index fell to 97.7 from an upwardly revised 98.9 in September. This was the lowest reading since April and undershot the 97.9 consensus forecast in a Reuters poll. “Supply problems are giving businesses headaches,” Ifo President Clemens Fuest said, adding that capacity utilisation in manufacturing was falling. “Sand in the wheels of the German economy is hampering recovery.” The weaker-than-expected business sentiment survey was followed by a grim outlook from Germany’s central bank, which said in its monthly report that economic growth was likely to slow sharply in the fourth quarter. The Bundesbank added that full-year growth was now likely to be “significantly” below its 3.7% prediction made in June. Earlier in Asia, stocks dipped in Japan and were mixed in China, where the central bank boosted a daily liquidity injection and officials expanded a property-tax trial. Signs that it would take at least five years before authorities impose any nationwide property tax bolstered some industrial metals.  Asia-Pac equities kicked off the week with a downside bias as the region adopted a similar lead from Friday’s Wall Street session, although sentiment marginally improved. The ASX 200 (+0.3%) was kept afloat by its energy sector as oil prices drifted higher, whilst index heavyweight Telstra was boosted after partnering with the Australian government to acquire Digicel Pacific in USD 1.6bln deal - for which Telstra contributed only USD 270mln. The Nikkei 225 (-0.7%) opened lower by around 1% with Softbank and Fast Retailing the biggest losers, although the index initially trimmed losses as the JPY remained on the backfoot. The Hang Seng (+0.1%) and Shanghai Comp (+0.8%) were mixed at the open, with the latter supported by a net PBoC injection of CNY 190bln, while the Hang Seng Mainland Properties Index (-2.9%) was pressured by reports China's State Council is to expand the property-tax reform trials to more areas. On the flip side, China Evergrande and Evergrande New Energy Vehicle opened higher after the chairman said the group is to complete its transition to the NEV industry from real estate within 10 years. Finally, 10yr JGBs trade subdued and in contrast to its US and German counterparts. In FX, the Bloomberg Dollar Spot Index was little changed after earlier inching lower to touch the weakest level since Sept. 27; the greenback was mixed against its Group-of-10 peers with commodity currencies performing best, led by the Australian dollar and Norwegian krone. The euro hovered around $1.1650 even as German business confidence took another hit in October as global supply logjams damp momentum in the manufacturing-heavy economy. Ifo business confidence fell to 97.7 in October, from 98.9 in the prior month. The pound inched up, rising alongside other risk- sensitive Group-of-10 currencies, having trailed all its peers on Friday after Brexit risks reared their head late in the London session. A quiet week for U.K. data turns focus to the upcoming government budget. The Australian dollar rose against all its Group-of-10 peers, tracking commodity gains, with market sentiment also boosted by the People’s Bank of China’s move to inject additional cash into the banking system. The yen declined after rising for three consecutive days; Economists expect the BoJ to keep its policy rate unchanged Thursday. Turkey’s lira fell to a record low as the country’s latest diplomatic spat gave traders another reason to sell the struggling currency. Day traders in Japan have started trimming their bullish wagers on the Turkish lira, with forced liquidation a growing threat as the currency tumbles. In rates, Treasuries were under pressure again, with the yield curve steeper as US trading begins Monday. They’re retracing a portion of Friday’s swift flattening, which occurred after Fed Chair Powell said rising inflation rates would draw a response from the central bank. 5s30s curve is back to ~89bp vs Friday’s low 85bp, within half a basis point of the lowest level in more than a year. Long-end yields are higher by as much as 3bp, 10-year by 2.7bp at 1.66%, widening vs most developed-market yields; yields across the curve remain inside Friday’s ranges, which included higher 2- and 5-year yields since 1Q 2020. Curve-steepening advanced after an apparent wager via futures blocks. In commodities, Brent oil rallied above $86 a barrel after Saudi Arabia urged caution in boosting supply. Gold rose for a fifth day, the longest run of gains since July, as risks around higher-for-longer inflation bolstered the metal’s appeal. Facebook will report its third quarter results after the market today, followed by Alphabet, Microsoft, Apple and Amazon later in the week.  On the economic data front, readings on U.S. third-quarter GDP - the Federal Reserve’s favored inflation gauge, the core PCE price index and consumer confidence data will be released later this week. Top Overnight News from Bloomberg S&P 500 futures up 0.1% to 4,542.25 STOXX Europe 600 little changed at 472.03 MXAP little changed at 200.13 MXAPJ up 0.1% to 661.46 Nikkei down 0.7% to 28,600.41 Topix down 0.3% to 1,995.42 Hang Seng Index little changed at 26,132.03 Shanghai Composite up 0.8% to 3,609.86 Sensex up 0.4% to 61,038.76 Australia S&P/ASX 200 up 0.3% to 7,441.00 Kospi up 0.5% to 3,020.54 Brent Futures up 0.7% to $86.14/bbl Gold spot up 0.4% to $1,800.45 U.S. Dollar Index down 0.10% to 93.55 Euro up 0.1% to $1.1655 Top Overnight News from Bloomberg U.S. Treasury Secretary Janet Yellen defended Federal Reserve Chair Jerome Powell’s record on regulating the financial system, which has been a target of criticism from progressive Democrats arguing he shouldn’t get a new term. Yellen said she expects price increases to remain high through the first half of 2022, but rejected criticism that the U.S. risks losing control of inflation. Speaker Nancy Pelosi opened the door to Democrats using a special budget tool to raise the U.S. debt ceiling without the support of Senate Republicans, whose votes would otherwise be needed to end a filibuster on the increase. President Joe Biden and fellow Democrats are racing to reach agreement on a scaled-back version of his economic agenda, with a self-imposed deadline and his departure later this week for summits in Europe intensifying pressure on negotiations. Bundesbank chief Jens Weidmann’s surprise announcement last week that he will leave on Dec. 31 has hit Berlin at a sensitive time, with Chancellor Angela Merkel currently running only a caretaker administration in the aftermath of an election whose outcome is likely to remove her CDU party from power. Some holders of an Evergrande bond on which the embattled developer had missed a coupon deadline last month received the interest before the end of a grace period Saturday, according to people familiar with the matter. A more detailed look at global markets courtesy of Newsquawk Asia-Pac equities kicked off the week with a downside bias as the region adopted a similar lead from Friday’s Wall Street session, although sentiment marginally improved with the region now mixed heading into the European open. US equity futures overnight opened trade with a mild negative tilt before drifting higher, with a broad-based performance experienced across the Stateside contracts, whilst European equity contracts are marginally firmer. Back to APAC, the ASX 200 (+0.3%) was kept afloat by its energy sector as oil prices drifted higher, whilst index heavyweight Telstra was boosted after partnering with the Australian government to acquire Digicel Pacific in USD 1.6bln deal - for which Telstra contributed only USD 270mln. The Nikkei 225 (-0.7%) opened lower by around 1% with Softbank and Fast Retailing the biggest losers, although the index initially trimmed losses as the JPY remained on the backfoot. The Hang Seng (+0.1%) and Shanghai Comp (+0.8%) were mixed at the open, with the latter supported by a net PBoC injection of CNY 190bln, whilst the Hang Seng Mainland Properties Index (-2.9%) was pressured by reports China's State Council is to expand the property-tax reform trials to more areas. On the flip side, China Evergrande and Evergrande New Energy Vehicle opened higher after the chairman said the group is to complete its transition to the NEV industry from real estate within 10 years. Finally, 10yr JGBs trade subdued and in contrast to its US and German counterparts. Top Asian News Xi Takes Veiled Swipe at U.S. as China Marks 50 Years at UN Hong Kong Convicts Second Person Under National Security Law Gold Extends Gain as Inflation Risks and Virus Concerns Persist Amnesty to Quit Hong Kong Citing Fears Under Security Law A tentative start to the week for European equities (Stoxx 600 U/C) as stocks struggle to find direction. On the macro front, the latest IFO report from Germany was mixed, with commentary from IFO downbeat, noting that Germany's economy faces an uncomfortable autumn as supply chain problems were causing trouble for companies, and production capacities were falling. The overnight session was a mixed bag with the Shanghai Composite (+0.8%) supported by a liquidity injection from the PBoC whilst the Hang Seng Mainland Properties Index (-2.9%) was pressured by reports China's State Council is to expand the property-tax reform trials to more areas. Stateside, US futures are marginally firmer with newsflow in the US in part, focused on events on Capitol Hill with CNN reporting that the goal among Democratic leaders is to have a vote Wednesday or Thursday on the infrastructure package. Note, the Fed is currently observing its blackout period ahead of the November meeting. From an earnings perspective, large-cap tech earnings dominate the slate for the week with the likes of Facebook (FB), Apple (AAPL), Microsoft (MSFT) and Amazon (AMZN) all due to report. Back to Europe, sectors are somewhat mixed as Basic Resources is the marked outperformer amid upside in underlying commodity prices. It’s been a busy morning for the Banking sector as HSBC (+1%) reported a 74% increase in Q3 earnings, whilst Credit Suisse (+0.7%) is reportedly mulling the sale of its asset management unit. Less encouragingly for the sector, UniCredit (-0.5%) and BMPS (-3.2%) shares are lower after negations on a rescue plan for BMPS have ended without an agreement. Finally, Airbus (-1.2%) and Safran (-2.3%) sit at the foot of the CAC after reports suggesting that the CEO's of Avolon and AerCap have, in recent weeks, written to the Airbus CEO expressing their concerns that the market will not support Airbus' aggressive plans to increase the pace of production; subsequently, Airbus has rejected their proposal, according to sources. Top European News The Man Behind Erdogan’s Worst Spat With the West: QuickTake Weidmann Succession Suspense May Last for Weeks on Berlin Talks Cat Rock Capital Urges Just Eat Takeaway to Sell GrubHub European Gas Jumps Most in a Week as Russian Supplies Slump In FX, the Dollar is somewhat mixed vs major counterparts and the index is jobbing around 93.500 as a result in rather aimless fashion at the start of a typically quiet start to the new week awaiting fresh impetus or clearer direction that is highly unlikely to come from September’s national activity index or October’s Dallas Fed business survey. Instead, the Greenback appears to be reliant on overall risk sentiment, US Treasury yields on an outright and relative basis along with moves elsewhere and technical impulses as the DXY roams within a 93.775-483 range. TRY - Lira losses continue to stack up, and the latest swoon to circa 9.8545 against the Buck came on the back of Turkish President Erdogan’s decision to declare 10 ambassadors persona non grata status due to their countries’ support for a jailed activist, including diplomats from the US, France and Germany. However, Usd/Try has actually pared some gains irrespective of a deterioration in manufacturing confidence and this may be partly psychological given that 10.0000 is looming with little in the way of chart resistance ahead of the big round number. AUD/NZD - Iron ore prices are helping the Aussie overcome rather mixed news on the COVID-19 front, as the state of Victoria is on course to open up further from Friday, but new cases in NSW rose by almost 300 for the second consecutive day on Sunday. Nevertheless, Aud/Usd has had another look at offers around 0.7500 and Aud/Nzd is approaching 1.0500 even though Westpac sees near term downside prospects for the cross while maintaining its 1.0600 year end projection, as Nzd/Usd continues to encounter resistance and supply into 0.7200. GBP/CAD - Sterling has regrouped after losing some of its hawkish BoE momentum and perhaps the Pound is benefiting from the latest rebound in Brent prices towards Usd 86.50/br on top of reports that the first round of talks between the UK and EU on NI Protocol were constructive, while the Loonie is up alongside WTI that has been adobe Usd 84.50 and awaiting the BoC on Wednesday. Cable is around 1.3750 after fading into 1.3800, Eur/Gbp is hovering above 0.8450 and Usd/Cad is pivoting 1.2350. EUR/JPY/CHF - The Euro has bounced from the lower half of 1.1600-1.1700 parameters and looks enshrined by a key Fib just beyond the current high (1.1670 represents a 38.2% retracement of the reversal from September peak to October trough) and decent option expiry interest under the low (1 bn between 1.1615-00), with little fundamental direction coming from a very inconclusive German Ifo survey - see 9.00BST post on the Headline Feed for the main metrics and accompanying comments from the institute. Elsewhere, the Yen is hedging bets prior to the BoJ within a 113.83-42 band against the Dollar and the Franc seems to have taken heed of another rise in weekly Swiss sight deposits at domestic banks as Usd/Chf climbs from circa 0.9150 towards 0.9200 and Eur/Chf trades nearer the top of a 1.0692-65 corridor. SCANDI/EM/PM - Firm oil prices are also underpinning the Nok, Rub and Mxn to various extents, while the Zar looks content with Gold’s advance on Usd 1800/oz and the Cnh/Cny have derived traction via a firmer onshore PBoC midpoint fix, a net Yuan 190 bn 7 day liquidity injection and the fact that China’s Evergrande has restarted work on more than 10 projects having made more interest payments on bonds in time to meet 30 day grace period deadlines. In commodities, a modestly firmer start to the week for the crude complex though action has been contained and rangebound throughout the European session after a modest grinding bid was seen in APAC hours. Currently, the benchmarks post upside of circa USD 0.30/bbl amid relatively minimal newsflow. The most pertinent update to watch stems from China, where the National Health Commission spokesperson said China's current COVID outbreak covers 11 provinces and expects the number of new cases to keep rising; additionally, the number of affected provinces could increase. Separately, but on COVID, they are some reports that the UK Government is paving the wat for ‘plan B’ measures in England, while this are primarily ‘softer’ restrictions a return of work-from-home guidance could hamper the demand-side of the equation. Note, further reports indicate this is not on the cards for this week and there are some indications that we could see, if necessary, such an announcement after the COP26 summit in Scotland ends on November 12th. Elsewhere, and commentary to keep an eye on for alterations given the above factors, Goldman Sachs writes that the persistence of the global oil demand recovery being on course to hit pre-COVID levels would present an upside risk to its end-2021 USD 90/bbl Brent price target. Moving to metals, spot gold and silver are firmer but reside within tight ranges of just over USD 10/oz in gold, for instance. In a similar vein to crude, newsflow explicitly for metals has been minimal but it is of course attentive to the COVID-19 situation while coal futures were hampered overnight as China’s State Planner announced it is to increase credit supervision in the area. US Event Calendar 8:30am: Sept. Chicago Fed Nat Activity Index, est. 0.20, prior 0.29 10:30am: Oct. Dallas Fed Manf. Activity, est. 6.2, prior 4.6 DB's Jim Reid concludes the overnight wrap Well I saw Frozen twice this weekend. Once in the flesh up in London in the musical version and once on TV on Sunday at the heart of Manchester United’s defence which was breached 5 (five) times by Liverpool without reply. Regular readers can guess which I enjoyed the most. Anyway I’ll let it go for now and prepare myself for a bumper week ahead for markets. This week we have decisions from the ECB and the Bank of Japan (both Thursday) even if the Fed will be on mute as they hit their blackout period ahead of the likely taper decision next week. Inflation will obviously remain in the spotlight too as we get the October flash estimate for the Euro Area (Friday) with some regional numbers like German (Thursday) before. In addition, the Q3 earnings season will ramp up further, with 165 companies in the S&P 500 reporting, including Facebook (today), Microsoft, and Alphabet (both tomorrow), and Apple and Amazon (Thursday). Elsewhere, the UK government will be announcing their latest budget and spending review (Wednesday), Covid will remain in the headlines in light of the growing number of cases in many countries, and we’ll get the first look at Q3 GDP growth in the US (Thursday) and the Euro Area (Friday). Starting with those central bank meetings, we’re about to enter a couple of important weeks with the ECB and BoJ meeting this week, before the Fed and the BoE follow the week after. Market anticipation is much higher for the latter two though. So by comparison, the ECB and the BoJ are likely to be somewhat quieter, and our European economists write in their preview (link here) that this Governing Council meeting is likely to be a staging ground ahead of wide-ranging policy decisions in December, and will therefore be about tone and expectations management. One thing to keep an eye on in particular will be what is said about the recent surge in natural gas prices, as well as if ECB President Lagarde challenges the market pricing on liftoff as inconsistent with their inflation forecasts and new rates guidance. 5yr5yr Euro inflation swaps hit 2% for the first time on Friday so if the market is to be believed the ECB has achieved long-term success in hitting its mandate. With regards to the meeting, we think there’ll be more action in December where our economists’ baseline is that there’ll be confirmation that PEPP purchases will end in March 2022. See the BoJ preview here. Inflation will remain heavily in focus for markets over the week ahead, with recent days having seen investor expectations of future inflation rise to fresh multi-year highs. See the week in review at the end for more details. This week one of the main highlights will be the flash Euro Area CPI reading for October, which is out on Friday. Last month, CPI rose to 3.4%, which is the highest inflation has been since 2008, and this time around our economists are expecting a further increase in the measure to 3.8%. However, their latest forecast update (link here) expects that we’ll see the peak of 3.9% in November, before inflation starts to head back down again. The other main data highlight will come from the Q3 GDP figures, with releases for both the US and the Euro Area. For the US on Thursday the Atlanta Fed tracker has now hit a low of only +0.53%. DB is at 2.3% with consensus at 2.8%. Earnings season really ramps up this week, with the highlights including some of the megacap tech firms, and a total of 165 companies in the S&P 500 will be reporting. Among the firms to watch out for include Facebook and HSBC today. Then tomorrow, we’ll hear from Microsoft, Alphabet, Visa, Eli Lilly, Novartis, Texas Instruments, UPS, General Electric, UBS and Twitter. On Wednesday, releases will include Thermo Fisher Scientific, Coca-Cola, McDonald’s, Boeing, General Motors, Santander and Ford. Thursday then sees reports from Apple, Amazon, Mastercard, Comcast, Merck, Royal Dutch Shell, Linde, Volkswagen, Starbucks, Sanofi, Caterpillar, Lloyds Banking Group and Samsung. Finally on Friday, we’ll hear from ExxonMobil, Chevron, AbbVie, Charter Communications, Daimler, BNP Paribas, Aon and NatWest Group. Here in the UK, the main highlight next week will be the government’s Autumn Budget on Wednesday, with the Office for Budget Responsibility also set to release their latest Economic and Fiscal Outlook alongside that. In addition to the budget, the government will also be outlining the latest Spending Review, which will cover public spending priorities over the next 3 years. Our UK economists have released a preview of the event (link here), where they write that 2021-22 borrowing is expected to be revised down by £60bn, and they expect day-to-day spending will follow the path set out at the Spring Budget. They’re also expecting Chancellor Sunak will outline new fiscal rules. Finally, the pandemic is gaining increasing attention from investors again, with a number of countries having moved to toughen up restrictions in light of rising cases. This week, something to look out for will be the US FDA’s advisory committee meeting tomorrow, where they’ll be discussing Pfizer’s request for an emergency use authorization for its vaccine on 5-11 year olds. The CDC’s advisory committee is then holding a meeting on November 2 and 3 the following week, and the White House have said that if it’s authorised then the vaccine would be made available at over 25,000 paediatricians’ offices and other primary care sites, as well as in pharmacies, and school and community-based clinics. The full day by day calendar is at the end as usual. Asian markets are mixed this morning so far, as the Shanghai Composite (+0.38%), Hang Seng (+0.09%) and the KOSPI (+0.30%) are edging higher, while the Nikkei (-0.85%) is down. The rise in Chinese markets comes despite the news of 38 new COVID-19 cases as well as an announcement of a lockdown affecting around 35,700 residents of a county in Inner Mongolia. As China is one of the last countries in the world to still adhere to strict containment measures, a major outbreak can deal a fresh blow to the domestic economy and further reinforce global supply chain issues. Elsewhere the Turkish Lira hit fresh record lows, and is down around -1.5% as we type after last week’s surprise interest rate cut and Saturday’s news that ambassadors from 10 countries, including the US, Germany and France, were no longer welcome in the country. S&P 500 futures (+0.06%) are around unchanged and 10yr US Treasury yields are back up c.1bp. Looking back on an eventful week now, and there was a marked increase in inflation expectations, which manifested itself in global breakevens hitting multi-year, if not all-time, highs. Starting with the all-time highs, US 5-year breakevens increased +14.9bps (-1.0bps Friday) to 2.90%, the highest level since 5-year TIPS have started trading, while 10-year breakevens increased +7.5bps (-0.7bps Friday) to 2.64%, their highest readings since 2005. 10-year breakevens in Germany increased +9.5 bps (+3.6bps Friday) to 1.91%, their highest since 2011, while in the UK 10-year breakevens increased +17.1 bps (+4.0bps Friday) to 4.19%, the highest level since 1996. Remarkable as these levels are, 5-year 5-year inflation swaps in the US, UK, and Euro Area finished the week at 2.63%, 4.00%, and 2.00%, multi-year highs for all of these measures. If you never thought you’d see the day that long term inflation expectations in Europe would hit 2% then this is a nice/nasty surprise. Overall, this suggests investors are pricing in the potential for inflation far into the future to be higher, in addition to responding to near-term stimulus and Covid reopening impacts. Crude oil prices also climbed to their highest levels since 2014, with Brent climbing +1.07% (+1.37% Friday) and WTI gaining +2.07% (+1.79% Friday). One area where there was some reprieve was in industrial metals. Copper decreased -4.81% (-1.24% Friday), but at $449.80, remains +10.10% higher month-to-date. Bitcoin also joined the all-time high club intraweek, and finished the week +2.28% higher (-3.08% Friday). It marked a seminal week for the crypto asset, which saw ETFs and options on said ETFs begin trading in the US. The inflationary sentiment coincided with market pricing of central bank rate hikes shifting earlier. 2-year yields in the US, UK, and Germany increased +5.9 bps (+0.1bps Friday), +8.0 bps (-4.7 bps Friday), and +4.0 bps (+0.9bps Friday) respectively. In fact, money markets are now placing slightly-better-than even odds that the MPC will raise Bank Rate as early as next week. Fed and ECB officials offered some push back against the aggressive policy path repricing, but BoE speakers seemed to confirm a hike next week was a legitimate possibility. Rounding out sovereign bonds, nominal 10-year yields increased +6.2 bps (-6.9bps Friday) in the US, +4.0 bps (-5.6bps Friday) in the UK, +6.2 bps (-0.3 bps Friday) in Germany, +6.0 bps (-0.1bpFriday) in France, and +8.1 bps (+0.8bps Friday) in Italy. Inflation expectations didn’t fall with the big rally in the US and U.K. but real rates rallied hard. The S&P 500 increased +1.64% over the week, but ended its 7-day winning streak after retreating on -0.11% Friday. On earnings, 117 S&P 500 companies have now reported third quarter earnings. Roughly 85% of companies have beat earnings expectations compared to the five-year average of 76%, while 74% of reporting companies have beat sales estimates. The aggregate earnings surprise is +13.05%, topping the 5-year average of +8.4%, while the sales surprise is +2.06%. Although a seemingly strong performance on the surface, our equity team, after taking a look under the hood in this note here, points out that a large part of the beats so far is due to loan-loss reserve releases by banks. Excluding those, the aggregate S&P 500 beat is running much closer to historical average, suggesting the headline beats have not been as broad based as they look at first glance. Congressional Democrats spent the week negotiating the next fiscal package, which is set to spend more than $1 trillion on social priorities key to the Biden administration. On Sunday, House Speaker Nancy Pelosi noted that 90% of the bill is agreed to and would be voted on before October was out. One of the key sticking points has been what offsetting revenue raising measures should be included in the final bill. As those details emerge, it should give us a better picture as to the ultimate additional fiscal impulse the new bill will provide. Finally, global services PMIs out last Friday expanded while manufacturing PMIs lagged. Readings across jurisdictions were consistent with supply chain issues continuing to impact activity. Tyler Durden Mon, 10/25/2021 - 08:09.....»»

Category: blogSource: zerohedgeOct 25th, 2021

Deep Discounts Are Harder To Find This Black Friday Amid Snarled Supply Chains 

Deep Discounts Are Harder To Find This Black Friday Amid Snarled Supply Chains  Black Friday, the busiest in-store shopping day of the year, will not have those deep discounts consumers are used to this year. Companies suffer from snarled supply chains and rising costs that have crushed margins. This means companies aren't serving up deep discounts as they were pre-COVID. On top of this, households have depleted savings and negative real wage growth, though they continue to use credit cards.  So deal or no deal? We cited a report from Statista's Martin Armstrong that notes when looking for large percentage deals today -- don't expect any.  For further insight into Black Friday and Cyber Week deals, along with spending trends, we turn our attention to a series of updates from Bloomberg's Jeannette Neumann and Irina Anghel.  Salesforce Flags Lack of Big Discounts This Year (10:01 a.m.) Consumers are finding some of the least-generous Black Friday and Cyber Week deals on record because of inflation, robust demand and diminished product availability. "These are some of the lowest average discount rates that we've seen in recent history," said Rob Garf, vice president of retail at Salesforce.com Inc. Globally, the average discount on products purchased during the past couple of days is 24%. That's lower than last year and below the average in recent years, too. "If consumers see 25% off, they should feel really good about that," Garf said in an interview. In previous years, shoppers could often snag a deeper discount if they waited to buy items after Cyber Monday, he said. "This year, I'm cautioning and I'm encouraging consumers to not play the game of discount chicken," Garf said. If consumers see a product that has a discount of as much as 50%, that's probably because it's only available in less popular colors or sizes, he said. U.K. Spending Rebounds From Last Year (9:50 a.m.) The volume of payments in the U.K. on Black Friday has jumped 23% from last year and 4% from 2019, according to Barclaycard Payments. "Encouragingly, Black Friday this year is off to a strong start despite a challenging macroeconomic backdrop," Rob Cameron, chief executive officer of Barclaycard Payments, said in a statement. He said that spending declined last year amid pandemic restrictions. Retailers' sale volumes have recovered to pre-pandemic levels, he added. However, consumers may not be getting many discounts -- a recent survey from the British Independent Retailers Association showed that 85% of its members won't be cutting prices because of rising costs and supply-chain disruptions. Thanksgiving Spending Comes in at Low End of Estimate (9:42 a.m.)  The numbers are in for Thanksgiving online spending -- and the total is the low end of expectations. Shoppers spent $5.1 billion on Thursday, according to the Adobe Digital Economy Index. Adobe's initial prediction was for spending to be in a range of $5.1 billion to $5.9 billion, which was later lowered to $5.1 billion to $5.4 billion. But Adobe reiterated its prediction that online spending from Nov. 1 through Dec. 31 will rise 10% to $207 billion, a record. On Thanksgiving, the prevalence of out-of-stock messages fell to the lowest since June, Adobe said. That reflected efforts by retailers to focus their marketing efforts on in- stock merchandise amid global supply-chain hurdles. PlayStation 5 Draws Crowds Amid Resale Frenzy (9:08 a.m.)  GameStop Corp. used the lure of Sony's PlayStation 5 to generate buzz and foot traffic on Thanksgiving. The video-game retailer alerted shoppers early Thursday on Twitter that a limited supply of PS5s would be available at select stores. That came after the chain hinted earlier in the week that it might have some PS5s for sale at select locations. A year after its release, the console is still hard to find because production has been slowed by a lack of microchips and supply- chain disruptions. On resale sites, the hardware is being offered at twice the retail price or more. One father said on Twitter that he waited 30 hours in line at his local GameStop to nab a PS5 for his son. Now, many hopeful consumers are waiting to see if other stores like Best Buy or Target release in stores as well. Doorbusters Still Haven't Come Back (8:45 a.m.)  The thinking last year was that the lack of doorbuster deals would be a one-time thing. So much for that. With Covid-19 still lingering -- and a new variant emerging -- retailers have largely eschewed offers that would require customers to pack into stores to get them. But that doesn't mean Black Friday sales have completely disappeared, noted Poonam Goyal, Bloomberg Intelligence retail analyst. "What we don't have again is doorbusters," she said. "All the deals that are available in store are largely available online, which seems that you can go out if you want to enjoy the experience of Black Friday shopping but alternatively you can find everything still online from your home without stepping outside. I think online shopping will be a much bigger deal." Wall Street Worries About Black Friday Prospects (7:51 a.m.)  Investors seem awfully pessimistic heading into Black Friday. Retail stocks are down pretty much across the board in premarket trading as U.S. chains start opening their doors to shoppers. Adobe may have spooked Wall Street after saying late Thursday that online sales on Thanksgiving likely came in lower than expected, while the rise of a new Covid-19 variant is also hurting stocks. Retailers have already been grappling with rising costs, stock shortages and a tight labor supply, so a decline in consumer demand would add to their woes. Among the major names trending lower, Gap Inc. slipped 3.5% as of 7:51 a.m. in New York, Kohl's Corp. fell 4.4%, Macy's tumbled 5% and Bed Bath & Beyond Inc. was down 2.4%. Target Corp., Walmart Inc., Home Depot Inc. and Lowe's Cos. were each down 1% or more. Mall-based chains similarly struggled, with Abercrombie & Fitch Co., American Eagle Outfitters Inc. and Tapestry Inc. also declining. Adobe Lowers Spending Estimate for Thanksgiving (12:01 a.m.) E-commerce spending by U.S. consumers on Thanksgiving Day will probably climb to a record -- but sales may not be as strong as initially expected. Consumers were on track to spend $5.1 billion to $5.4 billion online Thursday, according to an estimate from the Adobe Digital Economy Index. The top end of the estimate was lowered from a previous estimate of as much as $5.9 billion. "What we've seen this afternoon is that we're on a trajectory in which the Thanksgiving Day total will be closer to the lower half of our originally proposed range," Taylor Schreiner, director at Adobe Digital Insights, said in a statement. "This can be attributed to consumers spreading out their spending across November, which has shown up in more $3 billion online shopping days thus far." Small Businesses Face Staffing Hurdles (12:01 a.m.) Small businesses are feeling "pretty optimistic" about the holiday season, said John Waldmann, chief executive officer of Homebase, a software company that helps small businesses manage their teams. But challenges still loom, particularly in regards to staffing, he said in a recent interview. About 35% of small business owners said they are looking to hire at least one seasonal team member. This means that some companies will be understaffed, some will be short on experience, and some will suffer from both problems, Waldmann said. He said that more than 60% of small businesses reported they'll be paying workers more this year, compared with 2020. Staffing shortages could mean a less-pleasant experience for shoppers. "Consumers, be patient and be kind," he said. Homebase recently surveyed 400 small business owners and 2,000 employees about their outlook for the holidays. Macy's CEO Talks Store Traffic, Staffing (12:01 a.m.) Macy's Inc. CEO Jeff Gennette said he doesn't see Black Friday foot traffic bouncing back to pre-pandemic levels this year, adding that traffic at stores remains below what it was in 2019. More of those who go in are actually making a purchase, however. Like the rest of the industry, staffing has been a challenge. "We've got some stores in great shape and some stores that are really lean," Gennette said in an interview last week. The department-store chain said earlier this month it would raise the minimum wage to $15 an hour by May. Because of seasonal challenges, that pay boost has already gone into effect in more than 100 stores for the Christmas hiring season. Hiring has improved, "but we still have some gaps and open jobs," he said. "We're mitigating that by offering spot bonuses or premium pay for weekends. We're offering our colleagues opportunity for overtime and working six days." Without doorbuster sales, stay home this Black Friday and find something online if you have to impulse shop. Or save your money and go outside and enjoy nature (it's free).  Tyler Durden Fri, 11/26/2021 - 13:50.....»»

Category: blogSource: zerohedgeNov 26th, 2021

What Americans Say About Rising Prices This Thanksgiving

What Americans Say About Rising Prices This Thanksgiving By Cara Ding, Steven Kovac, Jackson Elliott, Michael Sakal, Allan Stein and Jannis Falkenstern of Epoch Times On the verge of celebrating Thanksgiving with her family, Melissa Ngo wasn’t happy after her grocery shopping trip. The high price of gasoline has cut into her family’s budget for everything, she said. She’s now having to shop at three different grocery stores—Giant Eagle, Marc’s, and Aldi—to find the lowest prices. “It’s everything,” said Ngo, a resident of Lakewood, Ohio, whose husband works as a dye-maker in Cleveland. “Everything has gone up, not just gas. The main thing I’ve noticed at the grocery store that has gone up in price [is] U.S. meat. It’s about double from last year. “We’re a one-worker family, and we’re always having to juggle. Now, we’re juggling more.” She blames the situation Americans have been facing for more than a year on such things as the CCP (Chinese Communist Party) virus pandemic, supply chain issues, and even the president she voted for.  Melissa Ngo, of Lakewood, Ohio, loads groceries into her car at the Giant Eagle grocery store in Lakewood on Nov. 23, 2021. Ngo said she’s paying nearly double for everything compared to 2020, especially meat. She and her husband are on a much tighter budget and “always juggling” to make things work on the home front. (Michael Sakal/The Epoch Times) As a resident of the west Cleveland suburb and Democratic stronghold, Ngo is quick to admit that she’s sorry she voted for President Joe Biden in the 2020 election. She usually votes Democrat. She said she may not vote in the next election. For Allen van Houten and Kathy Ellison of Lakewood, things have always been tight. Going into the 2021 holiday season, their budget is tighter still. Kathy Ellison and Allen Van Houten of Lakewood load up their car with groceries at the Giant Eagle grocery store in Lakewood on Nov. 23, 2021. (Michael Sakal/The Epoch Times) Van Houten, an Army and Navy veteran on disability, and Ellison, who works as a cook at a local restaurant, had just finished shopping at the Giant Eagle. Because of the skyrocketing price of gasoline and the higher food prices, they hardly go “anywhere” anymore, they said. They’re doing without as they prepare to spend Thanksgiving together. “We’re penny-pinching a lot more from last year,” Ellison said. “Now, we’re always penny-pinching. “Working a 40-hour workweek doesn’t keep your head above water anymore. Everything has gotten higher in price—food, gas, and utilities. And it’s not getting any better.” Van Houten noted that the couple have been depending on each other to get through such a difficult time. “If we didn’t have each other, we couldn’t survive,” he said. In addition to purchasing a smaller turkey this year, they’ve eliminated deviled eggs and potatoes from their Thanksgiving meal. “We’re going to three different grocery stores because we’re having trouble finding stuff,” Ellison told The Epoch Times. “We’re looking at pies at Giant Eagle that used to be on sale for $3.99. Now, they’re $5.99. We’d like to get a Dutch Apple pie, but those are $13.99. Sometimes, the supplier takes advantage of these situations, too.” The couple blames the situation on the high prices of gas and food, the workforce shortage, and the government. Van Houten and Ellison said they don’t vote. “The government is going to do whatever they want anyway,” Van Houten said. Kathy, also of Lakewood, who didn’t want to give her last name, was more sympathetic toward those facing hard times going into Thanksgiving. She had just loaded a cart full of groceries into her car outside of the Giant Eagle. Although she has seen at least a 20-percent increase in her grocery bill from 2020, she said her family won’t have to cut back. “We’ve been lucky. We’ve been blessed and have been able to work and stay comfortable through all of this,” Kathy told The Epoch Times. Although she said she’s happy with Biden, since she “didn’t like Donald Trump,” she noted that she feels as though the president could be doing more to help ease the situation. “I’m not happy with everything Joe Biden has done,” Kathy said. “The U.S. is not tapping into its resources, and we’re having to rely on foreign countries too much for certain goods. “I don’t want to have to pay more for everything. Our salaries are not commensurate with inflation. With all the high prices, it does make me and my husband want to give more to charity to help others who are struggling.”  Click on image to enlarge. (Illustration by The Epoch Times) In Florida, two large grocery chains—Publix and Winn-Dixie—are limiting certain holiday foods during Thanksgiving week. Publix Director of Communications Maria Brous released a statement saying that “caps” are being placed on certain food items because of “supply chain issues” and increased demand. Last week, the Lakeland company, which has 1,280 stores across the southeastern United States, placed the restrictions in anticipation of the demand and supply chain crisis, according to Brous. Another grocery outlet, Winn-Dixie, has placed a cap of one turkey per customer. Southeastern Grocers, a Jacksonville, Florida, company, owns Winn-Dixie, as well as Fresco y Mas and Harveys Supermarket. Florida Gov. Ron DeSantis weighed in on the rising cost of food and said he’s concerned about “inflationary pressures,” for which he blames the Biden administration. “Inflation that you’re seeing—the White House said it wasn’t real. It’s real,” DeSantis said on Nov. 22. “This is going to be the most expensive Thanksgiving we’ve seen in quite some time. Prices have increased by 20 percent from last year.” Since 1986, the American Farm Bureau Federation (AFBF) has conducted a Thanksgiving meal survey. The 2021 survey found that a meal for 10 people was expected to cost $53.31–up 14 percent from the 2020 average. The federation checked prices between Oct. 26 and Nov. 8 and noted that stores began selling whole frozen turkeys at a lower price two weeks later. As the meat protein most associated with Thanksgiving, the turkey is going to cost consumers 24 percent more than it did in 2020. The AFBF estimates that a 16-pound turkey will cost $23.99, or roughly $1.50 per pound more than 2020. The survey also found that the costs of other holiday goods were up as well, including dinner rolls—a 15 percent increase—while a 30-ounce can of pumpkin pie mix is up by 7 percent. “Several factors contributed to the increase in average cost of this year’s Thanksgiving dinner,” senior economist Veronica Nigh said in a statement on the AFBF website. “These include dramatic disruptions to the U.S. economy and supply chains over the last 20 months; inflationary pressure throughout the economy; difficulty in predicting demand during the COVID-19 pandemic and high global demand for food, particularly meat.  “The trend of consumers cooking and eating at home more often, due to the pandemic, led to increased supermarket demand and higher retail food prices in 2020 and 2021, compared to pre-pandemic prices in 2019.” Outside of the Winn-Dixie in Punta Gorda, Florida, Diane Crowi said food prices are definitely going up. “Our kids are all grown up, and they live out of the area, so we don’t celebrate like we used to. But, yes, things are more expensive this year than last year,” Crowi said. “We’re retired—I mean, we have Thanksgiving, just on a smaller scale. You just have to absorb the costs.” Along with increasing food costs, the price of gasoline has significantly risen as well, she said. “Gas prices are ridiculous,” Crowi said. “We just have to shift things around to afford what we have on our fixed income. We just cut down on our trips. We don’t drive as much to save fuel. “If I have to blame anyone, it would be our president—but I’m a Trump fan, so …” Winn-Dixie shopper Crystal Hunsicker of Punta Gorda said Thanksgiving is “definitely more expensive this year than last year.” Crystal Hunsicker of Punta Gorda, Fla. loads groceries into her car on Nov. 23, 2021. (Jann Falkenstern/The Epoch Times) “It affects us, but what are you going to do?” Hunsicker said. “You just deal with it. “Yes, gas is expensive, and we were energy independent before Biden took office. It takes $100 just to fill up my tank. There’s nothing I can do to save any money on fuel. I have to work, so I have to have gas.” Hunsicker said she voted for Trump in 2020 and identifies as a Republican. “I blame Biden for all of this. Trump’s policies were working, and [Biden] gets into office and destroys everything Trump put into place.” Charnita West, a single mom, looked cold in the parking lot of the Food City grocery store in Rossville, Georgia, on Nov. 23. In 2021, feeding her three children a Thanksgiving dinner has been more expensive than usual, she said. Crystal Hunsicker of Punta Gorda, Fla. loads groceries into her car on Nov. 23, 2021. (Jann Falkenstern/The Epoch Times) Her shopping wasn’t over with, either. The previous night, she had spent three hours at Walmart looking for some items, but couldn’t find everything that she needed. “I can’t even find ham. It took a lot of digging to find ham,” West told The Epoch Times. For West, spending $80 on groceries is a lot, and rising gas and food prices have hurt her family, she said. West said she’s heard that food inflation was caused by the Biden administration, but she admitted that she knows little about politics. She’s currently working on getting her high school diploma. “I don’t pay much attention to presidential stuff,” she said. “I’m just trying to do better or get my daughters a better life.” Another Thanksgiving shopper, Don Weathers, said that prices on everything have risen. Don Weathers shops for Thanksgiving dinner at the Food City grocery store in Rossville, Ga., on Nov. 23, 2021. (Jackson Elliott-The Epoch Times) “I don’t know what it is,” he said. “The beef has gone up. Turkeys and ham, pork, and everything else.” Weathers said the situation has affected his family little because his children are adults, but he feels concerned about others. “I fear for the other people,” he told The Epoch Times. “They’ve got children and are trying to raise them.” Weathers, a Republican who voted for Trump in 2020, said he didn’t want to say whether Trump or Biden was responsible for the inflation. Once a Democrat, he said he left the party because it offered handouts in an irresponsible way. “The Democratic Party is not what it was 20 years ago,” he said. Political independent Edward Garrett agreed with Weathers and West about the rising prices that were changing his budget. “Everything impacts the budget,” he said. “You just got to make it happen. You got to do what you got to do. Just squeeze and tighten what you can.” Edward Garrett searches for groceries for Thanksgiving dinner at the Food City grocery store in Rossville, Ga., on Nov. 23, 2021. (Jackson Elliott-The Epoch Times) Garrett blamed the Trump administration for the inflation issues. He said the effects of a president’s policies usually hit months after the person leaves office. “It is what it is,” he told The Epoch Times. “You’ve got to take the bitter with the sweet.” Long-time grocer Jeff Durecka, who owns a couple of supermarkets known as Jeff’s Marketplace in the “Thumb Area” of Michigan, said the supply chain issues aren’t affecting him much. “If we are short on a certain brand, we have substitutes,” Durecka, a Democrat and a strong supporter of Joe Biden in 2020. “It’s not affecting us much. As you can see, we are pretty well stocked for Thanksgiving. “Wholesale prices are going up because of the cost of fuel. It takes fuel to get product to the warehouses and then to the stores. There’s really nothing we can do about it.” Durecka speculated that the rise in food and fuel prices may have something to do with the different administration in Washington. Shopper Dean Rydock of Port Sanilac, Michigan, had no doubt that Biden was to blame. Dean Rydock of Port Sanilac, Michigan goes shopping at Jeff’s Marketplace in Lexington, Mich., on Nov 23, 2021.(Steven Kovac/The Epoch Times) “Everything Trump did made our living easier and better,” he said. “Biden is acting like Trump’s policies are the cause of all this and is doing whatever he can to counteract them. Food and gas prices are way up. It looks to me like decisions are being made to deliberately bring our economy down, so we will all eventually look to the government for help.” Rydock, a conservative Republican, “most definitely voted for the non-politician Trump and his pro-American agenda.” “I’m driving 100 miles to have Thanksgiving with my daughter,” he said. “The high price of gasoline is starting to pinch. And we really have to mind our heating expenses with propane going up. I’m starting to burn wood, and even that is getting costly.” Shopper Susie Lentz, a retired resident living in the village of Lexington, Michigan, is a regular customer at Jeff’s. Susie Lentz of Lexington, Michigan had no trouble getting everything she needed for Thanksgiving dinner at Jeff’s Marketplace in Lexington on Nov. 23, 2021. (Steven Kovac/The Epoch Times) “Food is definitely more expensive than last year,” she said. “I suppose the pandemic has a lot to do with it. Less stuff being shipped. But I am finding everything I want for Thanksgiving.” Lentz, a self-described independent voter, said that if she were still working and having to drive more, the high gas prices would be “putting a dent” in her budget. “I think the current political policies are affecting the economy in a negative way,” she told The Epoch Times. When asked whether Jeff’s Marketplace had enough meat and turkeys for the Thanksgiving holiday, butcher Jed Matthews said: “The only thing that has been hard to get is turkey gizzards sold separately. People love to add them to their stuffing.” Manager Jed Matthews says the only thing short in his department this Thanksgiving was “turkey gizzards sold separately” at Jeff’s Marketplace in Lexington, Mich., on Nov. 23, 2021. (Steven Kovac/The Epoch Times) The Epoch Times also spoke with a number of shoppers at Local Market in the South Shore neighborhood on the South Side of Chicago. The neighborhood is predominately African American and has a median household income that is almost half of the city average. Ruth Shannon said that she used to help local nonprofit New Life Center give away turkeys during the Thanksgiving holiday every year, but not this time. The center decided to cancel the giveaway in 2021 because of the high prices, she said. Shannon said she used to spend less than $100 on gas every month. Now, as prices rise, she spends around $200. “I know where I go. I’m more strategic with how I travel for sure,” she told The Epoch Times. Shannon said she thinks that inflation is the unintended consequence of massive government spending during the pandemic. “It was a lot of money over a fairly short period of time. They could have stretched it out,” she said. “Lawmakers have to be more intentional about the policies they create.” A lot of people in her neighborhood received stimulus checks during the pandemic, but they didn’t know how to spend the money in the right way, according to Shannon. Ruth Shannon of Chicago says prices for Thanksgiving day dinner ingredients are up this year as she stands outside of the Local Market in Chicago on Nov. 23. (Cara Ding/The Epoch Times) “It is one thing to have money. It’s a whole other thing to know what to do with it,” she said. “Everybody was happy when they got the stimulus checks. Now, the money’s gone and prices are up. What do they do?” Shannon hasn’t voted for most of her life. Her community has remained the same whether a Democrat or Republican was in office, she said. “I do whatever I can to volunteer in the community,” she said. “That is my voting.” Beverly, who declined to give her last name, was another shopper at Local Market. She said the rising food prices have further limited her grocery shopping because she lives on fixed government aid. She lost her daycare job at the start of the pandemic. She has since gone on food stamps and unemployment aid. Because the gas prices are much higher in Illinois, she drives to Indiana whenever she needs to fill up. A few other shoppers told The Epoch Times that they, too, drive to Indiana for gas. And across the United States, gas and diesel prices continue to be on the rise. According to the Energy Information Administration, the cost of a gallon of regular gasoline on the East Coast was $3.39 on Nov. 22—up by about $1.29 from the same time in 2020. In the Midwest, the average cost of gas at the pumps was $3.19, an increase of $1.28. On the West Coast, however, gas is currently at $4.19, an increase of $1.42 compared to 2020. Tyler Durden Thu, 11/25/2021 - 18:09.....»»

Category: blogSource: zerohedgeNov 25th, 2021

Here"s how the supply-chain crisis could impact your holiday turkeys, toys, travel plans, and more

The shipping crisis and labor shortage is leading to higher prices, shortages, and a heightened risk of travel cancellations. Betsie Van Der Meer/ Getty Images The supply chain has been in chaos since the pandemic started, causing shortages and price hikes. Holiday shopping demand is set to worsen the shipping crisis. This holiday season Americans can expect soaring prices, shortages, and travel cancellations. Everywhere you look, there seems to be a new shortage popping up. Major supply-chain disruptions have coincided with a boom in consumer demand, which has caused mass shortages and price hikes. Experts warn this holiday shopping season will look different than any other, as retailers struggle to stock goods in time for the holiday season and travel companies combat a labor shortage.From shortages of popular holiday gifts to travel cancellations, here are some of the biggest supply-chain snags you should factor into your holiday plans this year.Christmas treesA Christmas tree harvest at a tree farm in Salem, Oregon.Nathan Howard/Getty ImagesSuppliers have warned there will be a national shortage of Christmas trees this year. Natural and artificial trees alike are expected to be in short supply.A nationwide drought and scorching temperatures across the Pacific Northwest caused Christmas tree acreage in key states like Oregon to drop by 24% this year, according to the US Department of Agriculture. Supply snags have also impacted the available supply of artificial trees. National Tree Company CEO Chris Butler told Fox Business that shoppers should get their trees as soon as possible, as he expects supplies will not last past Thanksgiving — the peak week for buying Christmas trees.Thanksgiving turkeysMphillips007/Getty ImagesAmerican meat producers say it might be difficult to find turkeys ahead of Thanksgiving.In particular, meat suppliers say turkeys that weigh less than 16 pounds will be in short supply due to their popularity. One of the largest turkey suppliers in the US, Shady Brook Farms, told The New York Post that the industry is struggling with production issues, as well as a lack of workers.Turkeys that are available will be pricey. The average wholesale price for an eight to 16 pound frozen turkey climbed 21% in mid-November, according to the US Department of Agriculture. The American Farm Bureau said on Monday that Thanksgiving food costs have soared over the past month and estimated a complete meal will cost about 14% more than the previous year.CarsA car dealership lot with Ram pickup trucks.David Zalubowski/APBig-ticket holiday gifts will be more expensive and difficult to find this year.New and used car prices have surged this year. Automakers were forced to slash production goals due to the global shortage of computer chips.Used cars became nearly $6,500 more expensive this year, while new cars tacked on about $5,000 to the price tag as compared to the previous year, Insider's Tim Levin reported in October. ElectronicsApple StoreSean Gallup/Getty ImagesPopular electronics like smartphones, laptops, TVs, and video game consoles will be in short supply.The global semiconductor shortage has wreaked havoc on the tech industry. Even Apple will likely be forced to cut production goals for its iPhone 13 as a result of the shortage. Earlier this month, Digitimes reported that iPhone 13 supplies will not catch up with demand until February of next year.Top companies, including Sony and Samsung, have warned investors their electronics — which have already been in short supply — will be even more difficult to find during the holiday shopping season.ToysCourtesy of Montessori in Real LifeSince the summer, toy makers have said parents should prepare for a shortage of popular toys.On Tuesday, CBS Los Angeles reported the shipping crisis has created a shortage of donated toys for programs designed to distribute goods to families in need.More than 85% of US toys were made over seas, according to the Toy Association. The CEO of a mid-sized toy company, Basic Fun, told Bloomberg last month that his company has about $8 million worth of goods — which could fill 140 shipping containers —  waiting to ship out on the 75-day trip from China to their final destination.MGA Entertainment CEO Isaac Larian said parents might have to pivot toward buying less popular items due to product availability. ClothingClodagh Kilcoyne/ReutersIf you're planning on buying apparel this holiday season, expect to pay more.An analysis from Adobe Digital Insights found that clothing had the highest forecast out-of-stock levels of any other shopping category this holiday season.Shipping delays, as well as near-decade-high cotton prices, are impacting the availability and cost of anything from T-shirts to jeans and jackets.Rental carsUsed cars are displayed on the sales lot at Marin Acura on July 13, 2021 in Corte Madera, California.Justin Sullivan/Getty ImagesRental cars will be pricey this holiday season.The cost of rental cars has been on the rise all year, peaking at $700 per day. While prices show some signs of easing as demand drops from summer highs, analysts told Insider's Brittany Chang the market will maintain elevated prices through the holiday season.Airplane ticketsA person boards an airplane.MesquitaFMS/Getty ImagesAirplane ticket prices and availability could become a major hurdle.In the week leading up to Thanksgiving, American Airlines and Southwest Airlines cancelled hundreds of flights across the country, citing weather issues.Last month, United Airlines CEO Scott Kirby said ticket prices are on the rise due to soaring jet fuel costs. The Airline said it is expecting this December to be the busiest air travel month the industry has seen in almost two years, but staff shortages have caused long wait times and lines at airports.In October, Southwest Airline's massive meltdown during Columbus Day weekend hinted at how holiday travel might look different this year. A ripple effect of poor weather and "air traffic control issues" caused over 360 flights to be cancelled and even more to be delayed.GasA woman holds a pump nozzle in her hand at a gas station and refuels a car.Sven Hoppe/picture alliance via Getty ImagesGas prices could be an added wrinkle in plans to visit family over the holidays.Fuel prices have climbed over 60% in the past year. On Wednesday, the average price in the US was about $3.40 per gallon, up from about $2.11 this time last year.Nearly 4 million more people than last year are expected to hit the roads over Thanksgiving, according to the American Automobile Association. AAA predicts fuel prices will continue to rise throughout the winter, as cold weather puts more pressure on oil prices.HotelsGettyIf you're planning to spend your holiday away from home this year, it's going to cost you.In September, CNBC reported that major hotel chains, including Hilton and Marriot, were already seeing a huge spike in early holiday bookings. Milepro.com, a travel booking website, noted that multiple hotels that have been fully booked for the holiday season already.Data from the US Bureau of Labor and Statistics shows hotel prices have surged 18% from this time last year.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 24th, 2021

Futures Slide As Dollar Jumps, Yields Rebound Ahead Of Massive Data Dump

Futures Slide As Dollar Jumps, Yields Rebound Ahead Of Massive Data Dump For the third day in a row, US equity futures have been weighed down by rising (real) rates even as traders moderated their expectations for monetary-policy tightening after New Zealand’s measured approach to rate hikes where the central banks hiked rates but not as much as some had expected. Traders also braced for an epic data dump in the US, which includes is an epic data dump which includes an update to Q3 GDP, advance trade balance, initial jobless claims, wholesale and retail inventories, durable goods, personal income and spending, UMich consumer sentiment, new home sales, and the FOMC Minutes The two-year U.S. yield shed two basis points. The dollar extended its rising streak against a basket of peers to a fourth day. At 730am, S&P 500 e-mini futures dropped 0.3%, just off session lows, while Nasdaq futures dropping 0.34%. In premarket trading, Nordstrom sank 27% after the Seattle-based retailer posted third-quarter results featuring what Citi called a big earnings per share miss. The company reported higher labor and fulfillment costs in the third quarter while sales remained stubbornly below pre-pandemic levels and profit missed analyst estimates. Telecom Italia SpA surged in Europe on enhanced takeover interest. Oil prices fluctuated as producers and major consuming nations headed for a confrontation. Other notable premarket movers: Gap (GPS US) sank 20% premarket after the clothing retailer reported quarterly results that missed estimates and cut its net sales forecast for the full year. Analysts lowered their price targets. Nordstrom (JWN US) tumbles 27% in premarket after the Seattle-based retailer posted third-quarter results featuring what Citi called a big earnings per share miss. Jefferies, meanwhile, downgrades the stock to hold from buy as transformation costs are rising. Guess (GES US) posted quarterly results which analysts say included impressive sales and margins, and showed the company navigating supply-chain issues successfully. The shares closed 9.2% higher in U.S. postmarket trading. HP (HPQ US) shares are up 8.4% in premarket after quarterly results. Analysts note strong demand and pricing in the personal computer market. Meme stocks were mixed in premarket after tumbling the most since June on Tuesday as investors bailed out of riskier assets. Anaplan (PLAN US) slides 18% in premarket as a narrower-than-expected quarterly loss wasn’t enough to stem a downward trend. Analysts slashed price targets. Autodesk (ADSK US) shares slump 14% in premarket after the building software maker narrowed its full-year outlook. Analysts are concerned that issues with supply chains and the pandemic could impact its targets for 2023. GoHealth (GOCO US) gained 8.4% in postmarket trading after the insurer’s CEO and chief strategy officer added to their holdings. As Bloomberg notes, investors are on the edge as they face a wall of worry from a resurgence of Covid-19 in Europe to signs of persistent consumer-price growth. Damping inflation is now center-stage for policy makers, with ultra-loose, pandemic-era stimulus set to be wound down. The slew of U.S. data as well as Federal Reserve minutes due today may provide the next catalysts for market moves. In Europe, the Stoxx 600 Index erased earlier gains of up to 0.4% to trade down -0.1%, with tech and travel and leisure leading declines. Miners gained 0.8%, tracking higher copper prices on easing concerns over Chinese demand, while travel stocks slid over 1% on prospects of harsher travel curbs: Italy and France are debating new measures to cope with Covid’s resurgence while Germany isn’t ruling out fresh curbs. Oil stocks rose 1.2%, set for their biggest jump in over a month, with crude prices inching higher as investors remained sceptical about the effectiveness of a U.S.-led release of oil from strategic reserves. Here are some of the most notable European equity movers: Mulberry shares surge as much as 24%, the most since March 12, after the U.K. luxury company swung to a 1H profit from a year earlier and reported an increase in sales. Telecom Italia shares rise as much as 10% following a Bloomberg report that KKR is considering to raise its offer for the company after top investor Vivendi said the bid was too low. However, the stock is still trading below the initial non-binding offer from KKR. Golden Ocean gains as much as 9.6%, most since Feb., after earnings. DNB says “Golden Ocean delivered solid Q3 results” and adds “Furthermore, guidance for Q4 should lift consensus estimates and solidify further dividend potential in our view.” Intertek shares gain as much as 6.7%, the most since May 2020, after the company issued a trading update. UBS says the company’s accelerating momentum and reiterated targets are “reassuring.” Aegon shares rise as much as 5.5% after Credit Suisse upgraded its recommendation to outperform from neutral and raised the PT to EU5.30 from EU4.00. IQE shares slump as much as 21% for the biggest intraday drop since March 2020, falling to their lowest level since June 2020 after the semiconductor company said it sees softening demand in 4Q. Genus shares fall as much 15% after the animal genetics firm lowered its FY22 earnings guidance, leading Peel Hunt and Liberum to cut estimates. European stocks are on course for weekly losses, as the return of COVID-19 curbs, rate hike and inflation concerns sparked fears of a weaker economic growth outlook. "There's a two-way pull between macro concerns and what's happening bottoms-up in terms of corporate profits," said Nick Nelson, head of European equity strategy at UBS, adding that while the third quarter has been one of the decade's best reporting seasons for Europe, macro concerns such as a rise in U.S. bond yields and COVID-19 cases have been holding stocks back. Earlier in the session, Asian equities declined, on track for a third-straight session of losses, as higher U.S. Treasury yields continued to weigh on technology stocks in the region. The MSCI Asia Pacific Index slid as much as 0.6%, with Japan stocks leading losses as traders returned from a holiday to access the prospect of tighter U.S. monetary policy to curb inflation. TSMC and Tencent were among the biggest drags on the regional gauge. READ: Samsung Plans $17 Billion Texas Chip Plant, Creating 2,000 Jobs The renomination of Jerome Powell as Federal Reserve chair earlier this week has sent U.S. 10-year Treasury yields to about levels near 1.65%, implying higher borrowing costs. That’s adding to concerns about weak earnings growth in Asia as well as ongoing supply-chain constraints. Investors will now turn their attention to U.S. gross domestic product data and FOMC minutes due out after Asian markets close Wednesday.  “A cautious tone may still seem to prevail for now,” Jun Rong Yeap, a market strategist at IG Asia, said in a note. “Markets continue to shift their expectations towards a tighter Fed monetary policy.” New Zealand’s stock gauge added 0.6% after the central bank raised interest rates by 25 basis points, less than the 50 points that some economists had predicted. Singapore authorities, meanwhile, expect gross domestic product to expand 3% to 5% next year, a slower pace than this year as the country rebounds from the pandemic. Indian stocks fell ahead of the November monthly expiry on Thursday, led by technology companies. The S&P BSE Sensex slipped 0.6% to 58,340.99 in Mumbai to close at its lowest level in two months. The gauge gained 0.3% on Tuesday, snapping four sessions of selloff.   The NSE Nifty 50 Index declined 0.5% on Wednesday, reversing intraday gains of as much as 0.6%. Software exporter Infosys Ltd. was the biggest drag on both gauges and slipped more than 2%. Of the 30 shares in the Sensex, 21 dropped and nine rose.  Investors roll over positions ahead of the expiry of derivatives contracts on the last Thursday of every month. Fourteen of 19 sub-indexes compiled by BSE Ltd. fell, led by a measure of IT companies. “The scheduled monthly expiry would keep the traders busy on Thursday,” Ajit Mishra, vice president research at Religare Broking Ltd. wrote in a note. “We suggest continuing with negative bias on the index while keeping a check on leveraged positions.” In Fx, the most notable movers was the drop in the kiwi: New Zealand’s currency ironically slid to the weakest in nearly two months and the nation’s bond rallied as the central bank’s 25 basis-point rate hike disappointed traders betting on a bigger increase. The central bank projected 2% benchmark borrowing costs by the end of 2022. The Bloomberg Dollar Spot Index advanced a fourth consecutive day as the greenback gained versus all Group-of-10 peers apart from the yen, which reversed its losses after falling to the lowest since March 2017. The euro underperformed, nearing the $1.12 handle amid broad dollar strength even before data showing German business confidence took another hit in November and amid renewed fears that Germany may be considering a full lockdown and mandatory vaccines. RBNZ Governor Adrian Orr said policy makers considered a 50bps move before deciding on 25bps, and he sees the OCR climbing to around 2.5% by end-2023.  Elsewhere, Turkey’s lira stabilized after Tuesday’s plunge. MSCI’s gauge of emerging-market stocks edged lower for a sixth session.   In rates, Treasuries were richer by 1bp to 2bp across the curve, paced by European bonds ahead of a raft of U.S. data preceding Thursday’s market close. 10-year Treasury yields were richer by ~1bp on the day at around 1.655%, slightly trailing bunds; most curve spreads are within a basis point of Tuesday’s close with comparable shifts across tenors. During Asia session, Treasuries were supported by wider gains across Kiwi bonds after RBNZ hiked policy rates, but still erred on the dovish side. Bunds remain supported during European morning as haven demand stems from prospect of a nationwide German lockdown. Italian bonds snapped a two-day decline. In commodities, oil futures in New York swung between gains and losses following an announcement by the U.S. and other nations of a coordinated release of strategic reserves. Focus now turns to OPEC+ on how the group will respond to the moves. The alliance has already said that such releases were unjustified by market conditions and it may reconsider plans to add more supply at a meeting next week. Base metals are well bid with LME nickel adding over 2% to outperform peers. LME copper rises over 1% to best levels for the week. Crude futures fade a modest push higher fading after a brief push through Tuesday’s best levels. WTI trades flat, having briefly printed above $79; Brent prints highs of $83 before fading. Spot gold holds a narrow range close to $1,790/oz To the day ahead now, and there’s a significant amount of US data ahead of tomorrow’s Thanksgiving holiday. That includes the weekly initial jobless claims, the second estimate of Q3 GDP, October’s personal income and personal spending, new home sales, and the preliminary October readings for durable goods orders and core capital goods orders. Over in Germany, there’s also the Ifo’s business climate indicator for November. Finally on the central bank side, there’s the release of the FOMC’s November meeting minutes, and speakers include the ECB’s Panetta and Schnabel, and the BoE’s Tenreyro. Market Snapshot S&P 500 futures down 0.1% to 4,683.50 STOXX Europe 600 up 0.3% to 480.66 MXAP down 0.5% to 196.76 MXAPJ down 0.1% to 643.18 Nikkei down 1.6% to 29,302.66 Topix down 1.2% to 2,019.12 Hang Seng Index up 0.1% to 24,685.50 Shanghai Composite up 0.1% to 3,592.70 Sensex down 0.3% to 58,499.84 Australia S&P/ASX 200 down 0.2% to 7,399.44 Kospi down 0.1% to 2,994.29 Brent Futures up 0.4% to $82.63/bbl Gold spot up 0.1% to $1,791.37 U.S. Dollar Index little changed at 96.57 German 10Y yield little changed at -0.22% Euro down 0.2% to $1.1231 Top Overnight News from Bloomberg Olaf Scholz is set to succeed Angela Merkel as German chancellor after forging an unprecedented alliance that aims to revamp Europe’s largest economy by tackling climate change and promoting digital technologies The European Commission is set to announce the recommendations for the entire EU as soon as Thursday, Politico’s Playbook newsletter reported, citing three unidentified officials and diplomats Italy’s government is debating tough new measures to stem an increase in coronavirus cases, which could include restrictions on unvaccinated people and be approved as soon as Wednesday The ECB’s pandemic purchasing program may enter a “waiting room” rather than be abolished completely once net purchases are set to end in March, Governing Council member Robert Holzmann said at briefing in Vienna The U.K.’s biggest business lobby group has urged Prime Minister Boris Johnson to back down in its dispute with the European Union over Northern Ireland and not follow through with threats to suspend parts of the Brexit divorce deal Polish central bank Governor Adam Glapinski said further weakening of the zloty wouldn’t be consistent with the country’s economic fundamentals, helping lift the embattled currency from 12-year lows The supply crunch that’s helped drive inflation to multi- decade highs shows some signs of easing in the U.S. -- but it’s still getting worse in Europe. That’s the takeaway from the latest readings on Bloomberg Economics’ new set of supply indicators The unraveling of the Turkish lira threatens to erode Recep Tayyip Erdogan’s grasp on the economy and is already emboldening his political opponents. Small protests erupted in Istanbul and Ankara overnight, calling for an end to economic mismanagement that’s unleashed rapid inflation and triggered the currency’s longest losing streak in two decades A more detailed breakdown of global news courtesy of newsquawk Asia-Pac equity indices were mixed following the choppy performance of their US counterparts where energy rallied despite the SPR announcement and tech lagged as yields continued to gain, with the latest RBNZ rate hike, as well as looming FOMC Minutes and US data releases adding to the tentative mood. ASX 200 (-0.2%) was rangebound with the index subdued by losses in tech and gold miners which suffered from the rising yield environment, but with downside cushioned by strength in the largest weighted financials sector and with outperformance in energy after oil prices rallied in the aftermath of the widely anticipated SPR announcement. The strength in oil was attributed to several reasons including a “sell the rumour/buy the news” play and expectations of a response from OPEC+, while an administration official kept the prospect of an oil export ban on the table which is seen as bullish as it would remove US supply from the global market. Nikkei 225 (-1.6%) was the laggard on return from holiday amid flows into the local currency and with reports also suggesting the BoJ is considering tweaking its pandemic relief program. Hang Seng (+0.1%) and Shanghai Comp. (+0.1%) swung between gains and losses with early indecision due to the broad tech weakness tech which was not helped by reports that Chinese cyberspace regulators and police summoned Alibaba (9988 HK) and Baidu’s (9888 HK) cloud unit for telecoms network fraud, although the losses for Chinese bourses were eventually reversed amid gains in the energy heavyweights and after a mild PBoC liquidity injection. Finally, 10yr JGBs opened lower on spillover selling from global peers but gradually pared some of the losses after rebounding from support at 151.50 and with the BoJ in the market for nearly JPY 1.5tln of JGBs with up to 10yr maturities. Top Asian News Shinsei Drops Poison Pill Against SBI in Japan Takeover Saga Morgan Stanley to Repay Hong Kong Staff $5,100 for Quarantine KKR, Equinix Among Suitors for $11 Billion Global Switch Japan to Issue $192 Billion in Debt for Stimulus: Nikkei European equities attempted to claw back some of the week’s losses (Euro Stoxx 50 -0.2%; Stoxx 600 -0.2%) at the open with Monday and Tuesday’s session dominated by ongoing COVID angst in the region. Lockdown measures were enough to see investors shrug off yesterday’s better-than-expected PMI metrics for the Eurozone with today’s slightly softer than hoped for German Ifo report having little sway on price action. Despite the upside seen at the open, optimism has faded throughout the session as speculation mounts over whether the announcement of the German coalition deal (set to be unveiled at 14:00GMT) could prompt further lockdown measures for the nation. Furthermore, reports note that the Italian government is debating potential restrictions on the unvaccinated; measures could be approved as soon as today. On a more positive footing French Finance Minister Le Maire says at the moment he does not see any need for further COVID-related restrictions in France. However, it remains to be seen how long this viewpoint can be sustained. Stateside, futures are a touch softer with losses across the majors of a relatively equal magnitude (ES -0.1%) in the final full session of the week ahead of the Thanksgiving Holiday. Given the shortened week, today sees a deluge of data from the US with releases including key personal income, spending and PCE data for October, a second look at Q3 GDP, final Michigan consumer sentiment data, as well as weekly jobless claims and energy inventory data. All of which is followed by the FOMC minutes from the November meeting. In a recent note, BNP Paribas stated it is of the view that equities will go on to provide the highest returns across asset classes in 2022 with the French bank targeting 5100 (currently 4690) for the S&P 500 by the end of next year. From a European perspective, BNP expects the Euro Stoxx 50 to close 2022 out at 4500 (currently 4300) with the market “too pessimistic” on margins; albeit the Bank concedes that the resurgence of COVID presents a risk to its view. Sectors in Europe are mostly constructive with Oil & Gas and Basic Resources underpinned by gains in the underlying commodities with the former continuing to garner support post-yesterday’s SPR announcement. The Travel & Leisure sector lags peers with the Travel element of the group hampered by reports that the European Commission is preparing new COVID travel recommendations for the whole of the EU. For Leisure names, Entain (-5.0%) and Flutter Entertainment (-3.0%) have been hit by news that over 160 UK MPs and peers are said to be demanding that online gambling limits are lowered. Finally, Telecom Italia (+9.7%) is the best performer in the Stoxx 600 after source reports suggesting that KKR is considering a higher bid for the Co. in an attempt to win over support from Vivendi.   Top European News Scholz Seals Coalition Deal to Become Next German Chancellor Italy Readies Curbs on the Unvaccinated as Covid Cases Rise Booking Agrees to Buy CVC’s Etraveli for About EU1.63b Orange CEO Convicted in $453 Million Arbitration Fraud Case In FX, the Dollar index has gained traction and continued its gains above 96.500+ status in early European hours before eclipsing resistance at 96.700 to a fresh YTD peak at 96.758, with US players also preparing to wind down for the long weekend. Before that, the Buck will be facing a plethora of Tier 1 US data, including Prelim GDP (Q3), weekly Jobless Claims, and monthly PCE in the run-up to the FOMC Minutes – which will be eyed for clues on what could warrant an adjustment of the pace of tapering (Full preview available in the Newsquawk Research Suite). On the downside, immediate support will likely be at yesterday’s 96.308 low before this week’s current 96.035 trough. In terms of early month-end FX flows (on account of the holiday-shortened week), Morgan Stanley’s model points towards USD weakness against most G10 peers. EUR, GBP - The single currency dipped a 16-month low just before the release of the German Ifo survey, which unsurprisingly voiced cautiousness against the backdrop of COVID and supply chain issues – with Ifo forecasting a growth stagnation this current quarter, whilst ING believe that today’s Ifo signals that “The risk of stagnation or even recession in the German economy at the turn of the year has clearly increased.” The currency came under further pressure in what coincided with reports that Germany is mulling a full COVID lockdown and mandatory vaccinations, although the piece failed to cite any sources nor officials and seemed to be more an extrapolation of recent remarks from the German Health Minister. EUR/USD fell through pivotal support at 1.1210 to a current low at 1.1206 ahead of 1.1200. Traders should also be cognizant of several chunky OpEx clips including EUR 1.3bln between 1.1195-1.1200. Ahead, the SPD, Greens and FDP set to unveil their coalition deal at 14:00GMT. ECB speak today include from the likes Schnabel after Panetta and Holzmann failed to spur action across EU assets. Elsewhere, the GBP/USD is flat intraday and saw little reaction to BoE Governor Bailey yesterday, suggesting he does not think the MPC will go back to a hard form of guidance and stated that it is not off the table that they give no guidance at all on rates. Bailey also stated that decisions are made meeting by meeting and that they have a very tight labour market. From a political standpoint, European Commission VP Sefcovic said EU-UK talks on Northern Ireland trade rules will probably drag into 2022. Cable remains within a 1.3353-89 range whilst EUR/GBP trades on either side of 0.8400. Looking ahead, BoE’s Tenreyro speaking at the Oxford Economics Society – with early-Nov commentary from the MPC member suggesting that monetary policy will have to bite if there are signs of second-round inflation effects, but policy cannot fix energy price spikes. NZD, AUD - The Kiwi stands as the G10 laggard following a dovish 25bps hike by the RBNZ, with the board citing optionality. Desks suggest that FX was clearly gearing for a hawkish surprise from the central bank, with markets pricing some 35% of a 50bps hike heading into the meeting given the inflation survey earlier this month. Money markets were also disappointed, with participants flagging that the 2yr swap fell over 15bps despite the RBNZ upping its 2023 OCR forecast to 2.3% (prev. 1.7%). NZD/USD fell further beneath the 0.7000 mark to a current 0.6957 low. AUD meanwhile sees its losses cushioned from another day of firm gains in iron ore, whilst cross-currency flows help the AUD/NZD test 1.0450 to the upside. Nonetheless, the cautious market mood keeps AUD/USD around the flat mark after the pair found support at 0.7200. JPY - The traditional haven outperforms as risk aversion creeps into the market. USD/JPY pivots the 115.00 market after hitting an overnight high of 115.23. Some desks suggest that offers are seen from 115.30 on Wednesday, with more around the 115.50 area, according to IFR citing Tokyo sources. In terms of notable OpEx, USD/JPY sees USD 1.7bln between 115.00-10. In commodities, WTI and Brent Jan futures consolidate following yesterday’s gains post-SPR announcement. The release disappointed the oil bears given the widely telegraphed nature of the announcement coupled with relatively small contributions from members. Desks have also highlighted that the reserves will need to be replenished at some time in the future, and thus, analysts have passed the effects from the SPR release as temporary; although, cautioning that if the desired impact is not achieved, then further action can be taken – with a temporary export ban still on the table. Meanwhile, on the demand side, futures dipped after CNBC reported that Germany could head into a full lockdown, but the piece did not make a mention of officials nor sources but seemed to be more an extrapolation of recent comments from the Germany Health Minister, with an announcement on this matter potentially to come today. Further, tomorrow could see revised travel guidance for the whole of the EU, according to Politico sources, although "The biggest overall change will be a move away from a country-based approach and to a person-based one, which takes into account a citizen’s individual COVID status." Despite this month’s European COVID developments, JPMorgan sees global oil demand growing by another 3.5mln BPD next year to reach 99.8mln BPD (280k BPD above 2019 level); 2023 demand is expected to average around 101.5mln BPD (1.9mln BPD above pre-COVID levels) and suggested that global oil demand is on track to exceed 2019 levels by March 2022 and strengthen further. As a reminder, next week also sees the OPEC+ meeting whereby the group is expected to continue with plans of monthly output increases of 400k BPD, with a risk of a more dovish decision and/or commentary. WTI Jan trades around USD 78.50/bbl (vs high 79.23/bbl) and Brent Jan around USD 82.25/bbl (vs high 83.00/bbl). Elsewhere, spot gold is interestingly unfazed by the rampant Dollar as prices remain caged within a cluster of DMAs (100 around 1,793, 200 around 1,791 and 50 around 1,788). Copper prices are again on the grind higher with LME around USD 9,800/t at the time of writing – with participants citing underlying demand, particularly from China. US Event Calendar 8:30am: 3Q GDP Annualized QoQ, est. 2.2%, prior 2.0% 8:30am: 3Q GDP Price Index, est. 5.7%, prior 5.7% 8:30am: 3Q PCE Core QoQ, est. 4.5%, prior 4.5% 8:30am: 3Q Personal Consumption, est. 1.6%, prior 1.6% 8:30am: Oct. Durable Goods Orders, est. 0.2%, prior -0.3% 8:30am: Oct. Cap Goods Orders Nondef Ex Air, est. 0.5%, prior 0.8%; - Less Transportation, est. 0.5%, prior 0.5% 8:30am: Oct. Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 1.4% 8:30am: Oct. Retail Inventories MoM, est. 0.3%, prior -0.2%; Wholesale Inventories MoM, est. 1.0%, prior 1.4% 8:30am: Oct. Advance Goods Trade Balance, est. - $95b, prior -$96.3b 8:30am: Nov. Initial Jobless Claims, est. 260,000, prior 268,000; Continuing Claims, est. 2.03m, prior 2.08m 9:45am: Nov. Langer Consumer Comfort, prior 50.7 10am: Oct. Personal Income, est. 0.2%, prior -1.0%; 10am: Oct. Personal Spending, est. 1.0%, prior 0.6% 10am: Oct. Real Personal Spending, est. 0.6%, prior 0.3% 10am: Oct. New Home Sales, est. 800,000, prior 800,000 10am: Oct. New Home Sales MoM, est. 0%, prior 14.0% 10am: Oct. PCE Deflator MoM, est. 0.7%, prior 0.3% 10am: Oct. PCE Core Deflator MoM, est. 0.4%, prior 0.2% 10am: Oct. PCE Deflator YoY, est. 5.1%, prior 4.4% 10am: Oct. PCE Core Deflator YoY, est. 4.1%, prior 3.6% 10am: Nov. U. of Mich. Sentiment, est. 67.0, prior 66.8 10am: Nov. U. of Mich. 5-10 Yr Inflation, prior 2.9% 10am: Nov. U. of Mich. 1 Yr Inflation, prior 4.9% 10am: Nov. U. of Mich. Current Conditions, prior 73.2 10am: Nov. U. of Mich. Expectations, prior 62.8 2pm: Nov. FOMC Meeting Minutes DB's Jim Reid concludes the overnight wrap We’ve had a number of requests to bring back our Covid tables in the EMR. At the moment I’m resisting as they take a considerable amount of time. While we work out an efficient form of articulating the current wave on a daily basis, in today’s EMR we show graphs of the daily rolling 7-day cases and fatalities per million in the population for the G7. We’ve also included Austria, given how topical that is, and also The Netherlands, given mounting problems there. These act as a useful reference point for some of the more stressed countries. The cases chart should be in the text below and the fatalities one visible when you click “view report”. Germany is probably the main one to watch in the G7 at the moment and overnight reported 66,884 new cases (a record) compared with 45,362 the day before. A reminder that yesterday we published our 2022 credit strategy outlook. See here for the full report. Craig has also put out a more detailed HY 2022 strategy document here and Karthik a more detailed IG equivalent here. Basically we think spreads will widen as much as 30-40bps in IG and 120-160bps in HY due to a response to a more dramatic appreciation of the Fed being well behind the curve. This sort of move is consistent with typical mid-cycle ranges through history. We do expect this to mostly retrace in H2 as markets recover from the shock and growth remains decent and liquidity still high. We also published the results of our ESG issuer and investor survey where around 530 responded. Please see the results here. As we hit Thanksgiving Eve and a US data dump of a day given the holiday tomorrow, the big story over the last 2-3 business days has been real rates in the US. As recently as Friday, after the Austria lockdown news, 10yr real rates hit -1.2%. Yesterday they traded above -0.95% before closing at -0.97%, +4.0bps higher than the previous close. Our view in the 2022 credit strategy document is that credit is more tied to real rates than nominal rates and if the market attacks the Fed as we expect, then they should go up. However, note that I’ve also said I suspect they’ll stay negative for the rest of my career so while higher real yields are likely, I suspect that this is a trade rather than a structural long-term journey given likely long-term financial repression. Anyway, rising real yields, a fresh covid wave and belief over a less dovish Fed post the Powell reappointment saw a tough day for equities, especially in Europe, before the US managed to eke out a gain into the close. The S&P 500 (+0.17%) was up for the first time in 3 days, whilst Europe’s STOXX 600 (-1.28%) posted its worst daily performance in nearly 2 months. On a sector level, it was the same story in the US, where energy (+3.04%) shares benefitted from climbing oil prices and financials (+1.55%) gained on steeper and higher yields. Larger tech firms retreated on the higher discount rates, with the Nasdaq declining -0.50%. Meanwhile the VIX index of volatility was back above the 20-mark for the first time in over a month, coinciding with a broader tightening of financial conditions. However, we dipped back below 20 into the stronger close. Honing in on bonds now and there was a major selloff yesterday that hit a number of European countries in particular. By the close of trade, yields on 10yr bunds were up +8.1bps, which is their single-biggest daily increase in over a year, actually since the day we found out that the Pfizer/BioNTech vaccine had proven successful in trials and was set to be rolled out. The move came about entirely due to higher real rates, with Germany 10yr inflation breakevens actually down -2.0bps on the day. Similar moves were seen elsewhere on the continent, with yields on 10yr OATs (+8.6bps) and BTPs (+10.5bps) seeing sharp rises of their own, which occurred in part on the back of stronger than expected flash PMI data raising the prospect of a quicker drawdown in monetary stimulus, not least with inflation still running some way ahead of the ECB’s target. For US Treasuries, yields were a touch more subdued, and the yield curve twist steepened. 2yr yields declined -1.8bp whilst every other maturity increased, and all tenors out to 7 years are at post-pandemic highs. The 5yr nominal yield increased +2.2bps to 1.34%. The 10yr was up +4.1bps to 1.67% due, as we discussed above, to real yields. 10yr breakevens were flat (+0.2bp) at 2.63%. The 10 year is 7.5bps off of 2021 closing highs and in the 430 plus business days since the pandemic started there have only been 14 days with a higher close than last nights. Elsewhere yesterday, we had an important piece of news on the energy front, as the US announced that it would be releasing 50m barrels of oil from the Strategic Petroleum Reserve, with the move occurring alongside similar decisions in China, India, Japan, South Korea and the UK. 32m of those 50m will be an exchange, whereby oil is released over the next few months that is then returned over the coming years, while another 18m are coming from an acceleration of an oil sale that Congress had already authorised. Oil prices rose following the release however, with Brent crude (+3.27%) and WTI (+2.28%) both seeing decent advances, in part because the contribution from other nations was smaller than many had anticipated, but also because the potential release from the SPR had been widely reported in advance, thus sending prices lower from their peak around a month ago. Even with the news, there’s no sign that inflationary pressures will be going away just yet, since much of what happens next will depend on the reaction of the OPEC+ group. If they move to cancel plans to increase production, then that could put upward pressure on prices again and help counter the impact of the move from the various energy consumers. And as we’ve been discussing, inflationary pressures have been widening for some time now, stretching beyond specific categories like energy and used cars to an array of other areas. Overnight in Asia stocks are trading mostly in the red with the CSI (-0.03%), Hang Seng (-0.06%), Shanghai Composite (-0.10%), KOSPI (-0.48%) and the Nikkei (-1.35%) all lower. The Reserve Bank of New Zealand has raised interest rates for the second consecutive month and lifted the official cash rate 25bps to 0.75%. There was some who expected 50bps so bonds are rallying with 2yr and 10yrs -5.5bps and -7.5bps lower, respectively. The central bank were pretty hawkish in their comments though. US Treasuries are 2-4bps lower across the curve overnight as well. Staying on New Zealand, the country eased its travel restrictions by allowing fully vaccinated travellers (and other eligible travellers) from Australia without any isolation from Jan 17 and those from the rest of the world from February 14. Elsewhere, South Korea reported its highest ever daily new cases of 4,115 with 586 critical cases with the PM announcing the situation is "more serious than expected". Futures are indicating a slightly weaker start in the US and Europe with the S&P 500 (-0.24%) and DAX (-0.09%) lower. Over in Europe, there’s no sign of the pandemic letting up just yet, with French health minister Veran saying in parliament that “we are sadly well and truly in a fifth wave of the epidemic” as France announced 30,454 new cases yesterday. Austria has been the main country in the headlines recently as it moved into a nationwide lockdown, but the reality is that the trend lines have been moving higher across the continent, raising the prospect of fresh restrictions. In terms of yesterday’s developments, the Netherlands announced that social distancing would be reintroduced on a mandatory basis, and that people should stay 1.5m apart, and Poland saw the biggest daily increase in hospitalisations since April. Elsewhere, Slovakia’s PM said that he was considering following the steps adopted in Austria, and the outgoing Czech PM said that mandatory vaccines for the over-60s were being considered. In spite of the growing Covid wave across Europe, the flash PMIs released yesterday actually proved better than the consensus was expecting, and even saw something of an uptick from the October readings. The Euro Area composite PMI ended a run of 3 successive declines as it rose to 55.8 (vs. 53.0 expected), with both manufacturing (58.6) and services (56.6) rising relative to a month ago. And both the German (52.8) and the French (56.3) composite PMIs were also better than expected. On the other hand, the US had somewhat underwhelming readings, with the flash services PMI down to 57.0 (vs. 59.0 expected), as the composite PMI fell to 56.5. To the day ahead now, and there’s a significant amount of US data ahead of tomorrow’s Thanksgiving holiday. That includes the weekly initial jobless claims, the second estimate of Q3 GDP, October’s personal income and personal spending, new home sales, and the preliminary October readings for durable goods orders and core capital goods orders. Over in Germany, there’s also the Ifo’s business climate indicator for November. Finally on the central bank side, there’s the release of the FOMC’s November meeting minutes, and speakers include the ECB’s Panetta and Schnabel, and the BoE’s Tenreyro. Tyler Durden Wed, 11/24/2021 - 08:07.....»»

Category: blogSource: zerohedgeNov 24th, 2021

Futures Under Water As Tech Selloff Spreads, Yields Spike, Lira Implodes

Futures Under Water As Tech Selloff Spreads, Yields Spike, Lira Implodes US equity futures continued their selloff for the second day as Treasury yields spiked to 1.66%, up almost 4bps on the day, and as the selloff in tech shares spread as traders trimmed bets for a dovish-for-longer Federal Reserve after the renomination of Jerome Powell as its chair. At 8:00am ET, S&P futures were down 2.75 points or -0.05%, with Dow futures flat and Nasdaq futures extended their selloff but were off worst levels, down 41.25 points or 0.25%, after Monday’s last-hour furious rout in technology stocks. As repeatedly covered here in recent weeks, the Turkish currency crisis deepened with the lira weakening past 13 per USD, a drop of more than 10% in one day.  Oil rebounded - as expected - after a panicking Joe Biden, terrified about what soaring gas prices mean for Dems midterm changes, announced that the US, together with several other countries such as China, India and Japan, would tap up to 50 million barrels in strategic reserves, a move which was fully priced in and will now serve to bottom tick the price of oil. In premarket trading, Zoom lost 9% in premarket trading on slowing growth. For some unknown reason, investors have been reducing expectations for a deeper dovish stance by the Fed after Powell was selected for a second term (as if Powell - the man who started purchases of corporate bonds - is somehow hawkish). The chair himself sought to strike a balance in his policy approach saying the central bank would use tools at its disposal to support the economy as well as to prevent inflation from becoming entrenched. “While investors no longer have to wonder about who will be leading the Federal Reserve for the next few years, the next big dilemma the central bank faces is how to normalize monetary policy without upsetting markets,” wrote Robert Schein, chief investment officer at Blanke Schein Wealth Management. Following Powell’s renomination, “the market has unwound hedges against a more ‘dovish’ personnel shift,” Chris Weston, head of research with Pepperstone Financial Pty Ltd., wrote in a note. Not helping was Atlanta Fed President Raphael Bostic who said Monday that the Fed may need to speed up the removal of monetary stimulus and allow for an earlier-than-planned increase in interest rates European stocks dropped with market focusing on potential Covid lockdowns and policy tightening over solid PMI data. Euro Stoxx 50 shed as much as 1.7% with tech, financial services and industrial names the hardest hit. Better-than-forecast PMI numbers out of Europe’s major economies prompted money markets to resume bets that the ECB will hike the deposit rate 10 basis points as soon as December 2022, versus 2023 on Monday. As Goldman notes, the Euro area composite flash PMI increased by 1.6pt to 55.8 in November — strongly ahead of consensus expectations — in a first gain since the post-July moderation. The area-wide gain was broad-based across countries, and sectors. Supply-side issues continued to be widely reported, with input and output price pressures climbing to all-time highs. In the UK, the November flash composite PMI came in broadly as expected, and while input costs rose to a new all-time high, pass-through into output prices appears lower than usual. Forward-looking expectations remain comfortably above historical averages across Europe, although today's data are unlikely to fully reflect the covid containment measures taken in a number of European countries over recent days. Key numbers (the responses were collected between 10 and 19 November (except in the UK, where the survey response window spanned 12-19 November). Euro Area Composite PMI (Nov, Flash): 55.8, GS 53.6, consensus 53.0, last 54.2. Euro Area Manufacturing PMI (Nov, Flash): 58.6, GS 57.7, consensus 57.4, last 58.3. Euro Area Services PMI (Nov, Flash): 56.6, GS 53.9, consensus 53.5, last 54.6. Germany Composite PMI (Nov, Flash): 52.8, GS 52.1, consensus 51.0, last 52.0. France Composite PMI (Nov, Flash): 56.3, GS 54.4, consensus 53.9, last 54.7. UK Composite PMI (Nov, Flash): 57.7, GS 57.7, consensus 57.5, last 57.8. And visually: Earlier in the session, Asian stocks fell toward a three-week low as Jerome Powell’s renomination to head the Federal Reserve boosted U.S. yields, putting downward pressure on the region’s technology shares. The MSCI Asia Pacific Index declined as much as 0.5%, as the reappointment sent Treasury yields higher and buoyed the dollar amid concerns monetary stimulus will be withdrawn faster. Consumer discretionary and communication shares were the biggest drags on Asia’s benchmark, with Tencent and Alibaba slipping on worries over tighter regulations in China. “Powell’s renomination was generally expected by the market,” said Chetan Seth, an Asia-Pacific equity strategist at Nomura. The market’s reaction may be short-lived as traders turn their attention to the Fed’s meeting in December and Covid’s resurgence in Europe, he added. Asia shares have struggled to break higher as the jump in yields weighed on sentiment already damped by a lackluster earnings season and the risk of accelerating inflation. The region’s stock benchmark is down about 1% this year compared with a 16% advance in the MSCI AC World Index. Hong Kong and Taiwan were among the biggest decliners, while Australian and Indian shares bucked the downtrend, helped by miners and energy stocks. India’s benchmark stock index rose, snapping four sessions of declines, boosted by gains in Reliance Industries Ltd.   The S&P BSE Sensex climbed 0.3% to close at 58,664.33 in Mumbai, recovering after falling as much as 1.3% earlier in the session. The NSE Nifty 50 Index gained 0.5%. Of the 30 shares on the Sensex, 21 rose and 9 fell. All but one of the 19 sector sub-indexes compiled by BSE Ltd. advanced, led by a gauge of metal stocks.  Reliance Industries Ltd. gained 0.9%, after dropping the most in nearly 10 months on Monday following its decision to scrap a plan to sell a 20% stake in its oil-to-chemicals unit to Saudi Arabian Oil Co. Shares of One 97 Communications Ltd., the parent company for digital payments firm Paytm, climbed 9.9% after two days of relentless selling since its trading debut. In rates, Treasuries dropped, with the two-year rate jumping five basis points, helping to flatten the yield curve. Bunds and Treasuries bear steepened with German 10y yields ~5bps cheaper. Gilts bear flatten, cheapening 1.5bps across the short end. 10Y TSY yields rose as high as 1.67% before reversing some of the move. In FX, the Bloomberg Dollar Spot Index was little changed after earlier advancing to the highest level since September 2020 as markets moved to price in a full quarter-point rate hike by the June Fed meeting, with a good chance of two more by year-end; Treasury yields inched up across the curve apart from the front end. The Japanese yen briefly fell past 115 per dollar for the first time since 2017. The euro advanced after better-than-forecast PMI numbers out of Europe’s major economies prompted money markets to resume bets that the ECB will hike the deposit rate 10 basis points as soon as December 2022, versus 2023 on Monday. Sterling declined versus the dollar and the euro; traders are taking an increasingly negative view on the pound, betting that the decline that’s already left the currency near its lowest this year has further to run New Zealand’s dollar under-performed all G-10 peers as leveraged longs backing a 50 basis-point hike from the central bank were flushed out of the market; sales were mainly seen against the greenback and Aussie. The yuan approached its strongest level against trade partners’ currencies in a sign that traders see a low likelihood of aggressive official intervention. The Turkish lira (see above) crashed to a record low on Tuesday, soaring more than 10% and just shy of 14 vs the USD, a day after President Recep Tayyip Erdogan defended his pursuit of lower interest rates to boost economic growth and job creation. In commodities, crude futures rebounded sharply after Biden announced a coordinated, global SPR release which would see the US exchange up to 32mm barrels, or a negligible amount. Brent spiked back over $80 on the news after trading in the mid-$78s. Spot gold drops ~$8, pushing back below $1,800/oz. Base metals are well supported with LME nickel outperforming. Looking at the day ahead, the main data highlight will be the flash PMIs for November from around the world, and there’s also the Richmond Fed manufacturing index for November. Finally from central banks, we’ll hear from BoE Governor Bailey, Deputy Governor Cunliffe and the BoE’s Haskel, as well as ECB Vice President de Guindos and the ECB’s Makhlouf. Market Snapshot S&P 500 futures down 0.3% to 4,667.75 Brent Futures down 0.9% to $78.95/bbl Gold spot down 0.4% to $1,796.86 U.S. Dollar Index down 0.17% to 96.39     Top Overnight News from Bloomberg The volatility term structures in the major currencies show that next month’s meetings by monetary policy authorities are what matters most. Data galore out of the U.S. by Wednesday’s New York cut off means demand for one-day structures remains intact, yet it’s not enough to bring about term structure inversion as one-week implieds stay below recent cycle highs Lael Brainard, picked to be vice chair of the Federal Reserve, is expected to be a critical defender of its commitment to maximum employment across demographic groups at a time when other U.S. central bankers are more worried by inflation ECB Executive Board member Isabel Schnabel said there’s an increasing threat of inflation taking hold, as she played down the danger that resurgent coronavirus infections might impede the euro zone’s recovery Regarding latest pandemic restrictions, “when it comes to the impact, I would say that while it will surely have a moderating impact on economic activity, the impact on inflation will actually be more ambiguous because it might also reinforce some of the concerns we have around supply bottlenecks,” ECB Governing Council member Klaas Knot says in Bloomberg Television interview with Francine Lacqua European Union countries are pushing for an agreement on how long Covid-19 vaccinations protect people and how to manage booster shots as they try to counter the pandemic’s fourth wave and safeguard free travel Germany’s top health official reiterated a warning that the government can’t exclude any measures, including another lockdown, as it tries to check the latest wave of Covid-19 infections The State Council, China’s cabinet, released three documents in the past several days, outlining measures to help small and medium-sized enterprises weather the downturn: from encouraging local governments to roll out discounts for power usage to organizing internet companies to provide cloud and digital services to SMEs A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mixed following a similar performance in the US where participants digested President Biden’s decision to nominate Fed Chair Powell for a second term and Fed’s Brainard for the Vice Chair role. This resulted in bear flattening for the US curve and underpinned the greenback, while the major indices were choppy but with late selling heading into the close in which the S&P 500 slipped beneath the 4,700 level and the Nasdaq underperformed as tech suffered the brunt of the higher yields. ASX 200 (+0.8%) was positive with sentiment encouraged after stronger PMI data and M&A developments including BHP’s signing of a binding agreement to merge its oil and gas portfolio with Woodside Petroleum to create a global top 10 independent energy company and the largest listed energy company in Australia, which spurred outperformance for the mining and energy related sectors. KOSPI (-0.5%) was lacklustre and retreated below the 3k level amid broad weakness in tech which was not helped by concerns that South Korea could take another aim at large tech through a platform bill and with the government said to be mulling strengthening social distancing measures. Hang Seng (-1.2%) and Shanghai Comp. (+0.2%) continued to diverge amid a neutral liquidity effort by the PBoC and with the Hong Kong benchmark conforming to the tech woes, while the mainland was kept afloat after the State Council pledged to strengthen assistance to smaller firms and with Global Times noting that China will likely adopt another RRR cut before year-end to cope with an economic slowdown. Finally, Japanese participants were absent from the market as they observed Labor Thanksgiving Day, while yields in Australia were higher as they tracked global counterparts and following a Treasury Indexed bond offering in the long-end. Top Asian News Tiger Global Leads $210 Million Round by India Proptech Unicorn China’s Slowdown Tests Central Bank Amid Debate Over Easing Kuaishou Defies China Crackdown as Revenue Climbs 33% Evergrande Shares Jump in Afternoon Trading as Group Units Rally Major bourses in Europe are lower across the board, but off worst levels (Euro Stoxx 50 -1.1%; Stoxx 600 -1.3%) following on from the mixed APAC performance, but with pandemic restrictions casting a shower over the region. US equity futures are mostly lower but to a lesser extent than European peers, with the YM (+0.1%) the relative outperformer vs the ES (-0.1%), NQ (-0.3%) and RTY (-0.8%). Back to Europe, the morning saw the release of Flash PMIs which failed to spur much action across market given the somewhat stale nature against the backdrop of a worsening COVID situation in Europe. Losses in the UK’s FTSE 100 (-0.1%) are more cushioned vs European counterparts, with heavyweight miners doing the heavy lifting, and as the basic resources sector outpaces and resides as the only sector in the green at the time of writing amid a surge in iron ore prices overnight. Sticking with sectors, there is no clear or overarching theme/bias. Tech resides at the foot of the pile, unaided by the intraday rise in yields. Travel and Leisure also reside towards the bottom of the bunch, but more a function of the “leisure” sub-sector as opposed to the “travel” component, with Evolution Gaming (-3.7%) and Flutter (-3.5%) on the back foot. In terms of individual movers, Thyssenkrupp (-7.0%) tumbles after the Co. announced a secondary offer by Cevian of 43mln shares. Meanwhile, Telecom Italia (-3%) is softer following yesterday’s run, whilst Vivendi (-0.5%) said the current KKR (KKR) offer does not reflect Telecom Italia's value and it has no intention of offloading its 24% stake. Top European News U.K. PMIs Show Record Inflation and ‘Green Light’ for BOE Hike Kremlin Says New U.S. Sanctions on Nord Stream 2 Are ‘Illegal’ ECB’s Knot Says New Lockdowns Won’t Delay Wind-Down of Stimulus Telefonica Drops, Berenberg Cuts on Spain Margin Problems In FX, the Buck had already eased off best levels to relieve some pressure from its rivals, but the Euro also derived encouragement from the fact that a key long term Fib held (just) at 1.1225 before getting a rather unexpected fundamental fillip in the form of stronger than forecast flash Eurozone PMIs plus hawkish-sounding comments from ECB’s Schnabel. Eur/Usd duly rebounded to 1.1275 and the Dollar index retreated to 96.308 from a fresh y-t-d peak of 96.603, while the Yen and Franc also took advantage to varying degrees against the backdrop of deteriorating risk sentiment and in thinner trading volumes for the former due to Japan’s Labor Day Thanksgiving holiday. Usd/Jpy recoiled from 115.15 to 114.49 at one stage and Usd/Chf to 0.9301 from 0.9335 before both pairs bounced with the Greenback and a rebound in US Treasury yields ahead of Markit’s preliminary PMIs and Usd 59 bn 7 year note supply. TRY - Simply no respite for the Lira via another marked pull-back in oil prices on heightened prospects of SPR taps, the aforementioned Buck breather or even a decent correction as Usd/Try extended its meteoric rise beyond 11.5000 and 12.0000 towards 12.5000 irrespective of an ally of Turkish President Erdogan urging a debate on CBRT independence. Instead, the run and capital flight continues as talks with the IMF make no progress and an EU court condemns the country for detaining 400+ judges after the coup, while the President rules out a snap election after recent calls for an earlier vote than the scheduled one in 2023 by the main opposition party. NZD/CAD/GBP/AUD - It remains to be seen whether the RBNZ maintains a 25 bp pace of OCR normalisation overnight, but weak NZ retail activity in Q3 may be a telling factor and is applying more downside pressure on the Kiwi across the board, as Nzd/Usd hovers under 0.6950 and the Aud/Nzd cross tests 1.0425 on relative Aussie strength or resilience gleaned from another spike in iron ore that is helping to keep Aud/Usd above 0.7200. Conversely, the latest downturn in crude is undermining the Loonie and the Pound hardly derived any traction from better than anticipated UK PMIs even though they should provide the BoE more justification to hike rates next month. Usd/Cad has now breached 1.2700 and only stopped a few pips short of 1.2750 before fading ahead of comments from BoC’s Beaudry, while Cable topped out just over 1.3400 awaiting BoE Governor Bailey, whilst Haskel reaffirmed his stance in the transitory inflation camp, although suggested that if the labour market remains tight the Bank Rate will have to rise. SCANDI/EM - Hardly a shock that Brent’s reversal has hit the Nok alongside broader risk-aversion that is also keeping the Sek defensive in advance of the Riksbank, but the Zar is coping well considering Gold’s loss of Usd 1800+/oz status and test of chart support at the 100 DMA only a couple of Bucks off the 200. Similarly, the Cnh and Cny are still resisting general Usd strength and other negatives, with help from China’s State Council pledging to strengthen assistance to smaller firms perhaps. In commodities, WTI and Brent Jan'22 futures remain under pressure with the former back under USD 76/bbl (vs USD 76.59/bbl high) and the latter around USD 79/bbl (vs USD 79.63/bbl high). The WTI contract is also narrowly lagging Brent by some USD 0.30/bbl at the time of writing. Participants are keeping their eyes peeled for reserve releases from the US, potentially in coordination with other nations including China, Japan, and India – with inflation concerns being the common denominator. The move also comes in reaction to OPEC+ flouting calls by large oil consumers, particularly the US, to further open the taps beyond the group’s planned 400k BPD/m hikes. A source cited by Politico caveated that a final decision is yet to be made, and US officials are hoping that the threat of an SPR release would persuade OPEC+ to double their quotas at the Dec 2nd meeting. As it stands, Energy Intel journalist Bakr noted that she has not heard anything from OPEC+ officials about changing production plans, but delegates yesterday suggested that plans may be tweaked. Click here for the full Newsquawk analysis piece. Aside from this, US President Biden is also poised to give a speech on the economy, whilst the weekly Private Inventories will also be released today. Elsewhere, spot gold and have been drifting lower in what is seemingly a function of technical, with the yellow metal dipping under USD 1,800/oz from a USD 1,812/oz current high, with a cluster of DMAs present to the downside including the 100 DMA (around USD 1,793/oz), 200 DMA (around USD 1,791/oz) and 50 DMA (around USD 1,789/oz). Turning to base metals, LME copper holds a positive bias with prices on either side of USD 9,750/t, whilst Dalian iron ore surged overnight - with reports suggesting that steel de-stockpiling accelerated last week, and analysts suggesting that the market is betting on steelmakers in December. US Event Calendar 9:45am: Nov. Markit US Composite PMI, prior 57.6 9:45am: Nov. Markit US Services PMI, est. 59.0, prior 58.7 9:45am: Nov. Markit US Manufacturing PMI, est. 59.1, prior 58.4 10am: Nov. Richmond Fed Index, est. 11, prior 12 DB's Jim Reid concludes the overnight wrap A reminder that yesterday we published our 2022 credit strategy outlook. See here for the full report. Craig has also put out a more detailed HY 2022 strategy document here and Karthik a more detail IG equivalent here. Basically we think spreads will widen as much as 30-40bps in IG and 120-160bps in HY due to a response to a more dramatic appreciation of the Fed being well behind the curve. This sort of move is consistent with typical mid-cycle ranges through history. We do expect this to mostly retrace in H2 as markets recover from the shock and growth remains decent and liquidity still high. We also published the results of our ESG issuer and investor survey where around 530 responded. Please see the results here. Today is the start of a new adventure as I’m doing my first overseas business trip in 20 months. It took me a stressful 2 hours last night to find and fill in various forms, download various apps and figure out how on earth I travel in this new world. Hopefully I’ve got it all correct or I’ll be turned back at the Eurostar gates! The interesting thing about not travelling is that I’ve filled the time doing other work stuff so productivity will suffer. So if I can do a CoTD today it’ll be done on an iPhone whilst racing through the French countryside. Actually finishing this off very early in a long taxi ride on the way to the train reminds me of how car sick I get working on my iPhone! The delights of travel are all coming flooding back. After much anticipation over recent weeks, we finally heard yesterday that President Biden would be nominating Fed Chair Powell for another four-year term at the helm of the central bank. In some ways the decision had been widely expected, and Powell was the favourite in prediction markets all along over recent months. But the Fed’s staff trading issues and reports that Governor Brainard was also being considered had led many to downgrade Powell’s chances, so there was an element of uncertainty going into the decision, even if any policy differences between the two were fairly marginal. In the end however, Biden opted for continuity at the top, with Brainard tapped to become Vice Chair instead. Powell’s nomination will require senate confirmation once again, but this isn’t expected to be an issue, not least with Powell having been confirmed in an 84-13 vote last time around. Further, Senate Banking Committee Chair Brown, viewed as a progressive himself, noted last week there should be no issue confirming Powell despite rumblings from progressive lawmakers. More important to watch out for will be who Biden selects for the remaining positions on the Fed Board of Governors, where there are still 3 vacant seats left to fill, including the position of Vice Chair for Supervision. In a statement released by the White House, it said that Biden intended to make those “beginning in early December”, so even with Powell staying on, there’s actually a reasonable amount of scope for Biden to re-shape the Fed’s leadership. A potential hint about who may be considered, President Biden noted his next appointments will “bring new diversity to the Fed.” President Biden, flanked by Powell and Brainard, held a press conference following the announcement. He noted maintaining the Fed’s independence and leadership stability informed his decision, and that Chair Powell assured the President he would focus on fighting inflation. He was apparently also assured that the Chair would work to combat climate change, perhaps an olive branch to those in his party that wanted a more progressive nominee. Powell and Brainard both followed up with remarks of their own, but didn’t stray from the recent Fed party line. In response to the decision, investors moved to bring forward their timing of the initial rate hike from the Fed, with one now just about priced by the time of their June 2022 meeting, whilst the dollar index (+0.54%) strengthened to a fresh one-year high. This reflects the perception among many investors that Brainard was someone who’d have taken the Fed on a more dovish trajectory. Inflation breakevens fell across the curve as well in response. Indeed the 4-year breakeven, which roughly coincides with the term of the next Fed chair, was down -3.8bps after yesterday’s session, with the bulk of that dive coming immediately after the confirmation of Powell’s nomination. Nevertheless, that decline in breakevens was more than outweighed by a shift higher in real rates that sent nominal yields noticeably higher. By the close, yields on 2yr (+7.8bps) and 5yr (+9.5bps) Treasuries were at their highest levels since the pandemic began, and those on 10yr Treasuries were also up +7.7bps, ending the session at 1.62%. 2yr yields were a full 14.1bps higher than the intra-day lows on Friday after the Austria lockdown news. We had similar bond moves in Europe too, with yields on 10yr bunds (+4.0bps) moving higher throughout the session thanks to a shift in real rates. Another noticeable feature in the US was the latest round of curve flattening, with the 5s30s (-4.4bps) reaching its flattest level (+64.1bps) since the initial market panic over Covid-19 back in March 2020. The S&P 500 took a sharp turn heading into the New York close after trading in positive territory for most of the day, ultimately closing down -0.32%. Sector performance was mixed, energy (+1.81%) and financials (+1.43%) were notable outperformers on climbing oil prices and yields, while big tech companies across different sectors were hit by higher discount rates. The NASDAQ (-1.26%) ended the day lower, having pared back its initial gains that earlier put it on track to reach a record of its own. The other main piece of news yesterday came on the energy front, where it’s been reported that we could have an announcement as soon as today about a release of oil from the US Strategic Petroleum Reserve, potentially as part of a joint announcement with other nations. Oil prices were fairly resilient to the news, with Brent crude (+1.03%) and WTI (+0.85%) still moving higher, although both are down from their recent peaks as speculation of such a move has mounted. This could help put some downward pressure on inflation, but as recent releases have shown, price gains have been broadening out over the last couple of months to a wider swathe of categories, so it remains to be seen how helpful this will prove, and will obviously depend on how much is released along with how the OPEC+ group react. For their part, OPEC+ members noted that the moves from the US and its allies would force them to reconsider their production plans at their meeting next week. Looking ahead now, one of the main highlights today will come from the release of the flash PMIs for November, which will give us an initial indication of how the global economy has fared into the month. As mentioned yesterday, the Euro Area PMIs have been decelerating since the summer, so keep an eye out for how they’re being affected by the latest Covid wave. It’ll also be worth noting what’s happening to price pressures, particularly with inflation running at more than double the ECB’s target right now. Overnight in Asia stocks are trading mixed with Shanghai Composite (+0.43%), CSI (+0.20%), KOSPI (-0.44%) and Hang Seng (-1.01%) diverging, while the Nikkei is closed for Labor Thanksgiving. The flash manufacturing PMI release from Australia (58.5 vs 58.2 previous) came in close to last month while both the composite (55 vs 52.1 previous) and services (55 vs 51.8 previous) accelerated. In Japan the Yen slid past an important level of 115 against the Dollar for the first time in four years after Powell was confirmed. This marks an overall slide of 10% this year making it the worst performer amongst advanced economy currencies. S&P 500 (-0.01%) and DAX futures (-0.31%) are flat to down with Europe seemingly catching up with the weak U.S. close. Before this, in Europe yesterday, equities continued to be subdued, with the STOXX 600 down -0.13% after trading in a tight range, as the continent reacted to another surge in Covid-19 cases. The move by Austria back into lockdown has raised questions as to where might be next, and Bloomberg reported that Chancellor Merkel told CDU officials yesterday that the recent surge was worse than anything seen so far, and that additional restrictions would be required. So the direction of travel all appears to be one way for the time being in terms of European restrictions, and even a number of less-affected countries are still seeing cases move in an upward direction, including France, Italy and the UK. So a key one to watch that’ll have big implications for economies and markets too. Staying on Germany, there was some interesting news on a potential coalition yesterday, with Bloomberg obtaining a preliminary list of cabinet positions that said that FDP leader Christian Lindner would become finance minister, and Green co-leader Robert Habeck would become a “super minister” with responsibility for the economy, climate protection and the energy transition. The report also said that both would become Vice Chancellors, whilst the Greens’ Annalena Baerbock would become foreign minister. It’s worth noting that’s still a preliminary list, and the coalition agreement is yet to be finalised, but it has been widely suggested that the parties are looking to reach a conclusion to the talks this week, so we could hear some more info on this relatively soon. There wasn’t much in the way of data yesterday, though the European Commission’s advance November consumer confidence reading for the Euro Area fell back by more than expected to -6.8 (vs. -5.5 expected), which is the lowest it’s been since April. Over in the US, there was October data that was somewhat more positive however, with existing home sales rising to an annualised rate of 6.34m (vs. 6.20m expected), their highest level in 9 months. Furthermore, the Chicago Fed’s national activity index was up to 0.76 (vs. 0.10 expected). To the day ahead now, and the main data highlight will be the aforementioned flash PMIs for November from around the world, and there’s also the Richmond Fed manufacturing index for November. Finally from central banks, we’ll hear from BoE Governor Bailey, Deputy Governor Cunliffe and the BoE’s Haskel, as well as ECB Vice President de Guindos and the ECB’s Makhlouf. d Tyler Durden Tue, 11/23/2021 - 08:31.....»»

Category: blogSource: zerohedgeNov 23rd, 2021

Futures Rise Boosted By JNJ Split As Treasuries, Dollar Slide

Futures Rise Boosted By JNJ Split As Treasuries, Dollar Slide U.S. equity index futures were slightly up at the end of a volatile week, trading in a narrow 20 point range for the second day in a row, while Treasuries resumed declines in response to the recent shock inflation data from the world’s largest economies. Contracts on the three main U.S. gauges were higher, with Johnson & Johnson rising in premarket trading after saying it will split into two companies, while tech stocks again led gains at the end of a week scarred by deepening concerns over prolonged inflation. All the major U.S. indexes were set for a more than 1% weekly drop, their first since the week ended Oct. 1, as hot inflation numbers sapped investor sentiment and halted an earnings-driven streak of record closing highs. At 7:15 a.m. ET, Dow e-minis were up 106 points, or 0.3%, S&P 500 e-minis were up 8.5 points, or 0.18%, and Nasdaq 100 e-minis were up 40.25points, or 0.25%. The same bullish sentiment that lifted US futures pushed European shares up as luxury shares gained after Cartier owner Richemont posted better-than-forecast earnings, offsetting a drop in travel stocks. Asian shares also climbed, helped by a rally in Japan. At the same time, Treasuries resumed a selloff after a trading holiday Thursday, with this week’s shock US inflation figures still reverberating through the bond market. Five-year notes led losses on concern the price pressure will force the Federal Reserve to raise rates earlier than anticipated. A gauge of the yield curve flattened to the least since March 2020. While global stocks are set for their first weekly drop since early October, their swings have been muted compared with the gyrations in the bond market. Investor focus on a strong earnings season has tempered worries about higher inflation. “Inflation could remain elevated in the coming months, and each inflation release that comes in above expectations has the potential to cause volatility in rate and equity markets, but we still don’t expect inflation to derail the equity rally,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a note. In US premarket trading, Johnson & Johnson jumped 4.7% in premarket trading after the drugmaker said it is planning to break up into two companies focused on its consumer health division and the large pharmaceuticals unit. Shares of the GAMMA giga techs (fka as FAAMG) also inched up. Tesla’s boss Elon Musk sold even more shares of the electric car maker, regulatory filings showed, after offloading about $5 billion worth of stock following a poll he posted on Twitter. The sale news naturally pushed TSLA stock price higher.  A gauge of U.S.-listed Chinese stocks jumped more than 5%, helped by Alibaba’s blowout Singles’ Day shopping festival and a report that Didi is getting ready to relaunch its apps. Rivian shares gain as much as 5% in U.S. premarket trading, extending the surge for the EV maker seen since its IPO this week which has sent its market value over $100b. Rivian trading at $122.99 in at 5am in New York, compared to IPO price of $78 Rising price pressures across the globe have been a top concern for market participants, with focus now shifting towards how consumer spending would fare as the holiday shopping season approaches. “The risk-on trading stance remains,” said Pierre Veyret, a technical analyst at ActivTrades in London. “However, markets are likely to remain volatile as investors will need to have more clues on where both the economy and monetary policies are going.” In Europe, gains for consumer and retail stocks balanced out declines for mining and energy companies. The Stoxx Europe 600 Index fluctuated as Bank of America strategists predicted a fall of at least 10% for the continent’s equities by early next year. Here are some of the biggest European movers today: Richemont shares jump as much as 9.8% to a record high, with analysts seeing scope for earnings estimates to be upgraded after the company reported first-half results that Citigroup described as “stellar.” Peer Swatch also bounced. Renault shares gain as much as 4.6% after Morgan Stanley upgraded the French automaker to overweight, saying it should have a stronger 2022 if it can raise production levels from a currently low base. Deutsche Telekom rises as much as 3% with analysts highlighting a good revenue performance and upgraded earnings and cash flow guidance as key positives from its earnings. Intertrust shares surge as much as 40% after the trust and corporate-services firm entered talks to be acquired by private-equity firm CVC. AstraZeneca falls as much as 5.9% after the drugmaker’s 3Q results missed estimates, with analysts noting a big miss for cancer drug Tagrisso. Wise shares sink as much as 8.8% after the money-transfer company won’t be added to an MSCI index in the latest rejig as some investors had expected. JDE Peet’s, Atos and Investor AB also all moved after the MSCI review. Fortum shares decline as much as 3.6% after the Finnish utility’s 3Q sales missed estimates. Uniper, in which Fortum owns a 75% stake, also slid after Fortum said it stopped share purchases in the German group in July owing to high prices. Avon Protection plummet as much as 44% after it warned of testing failures for some body-armor plates ordered by the U.S. military. SimCorp shares drop as much as 7.1% after the financial software and services company’s 3Q earnings, with Handelsbanken calling the quarter “weak,” and saying it raises doubts for the 2022 outlook Earlier in the session, Asia’s regional benchmark advanced, on track for a second day of gains, after sales in the Singles’ Day shopping festival boosted optimism. The MSCI Asia Pacific Index rose as much as 0.9%, with materials and communication stocks driving the benchmark. Tencent climbed 1.6%, after it bought a Japanese game studio and sold HengTen Networks shares. JD.com gained 5.2% after it received record Singles’ Day orders. Adding to sentiment were the mandate for China’s President Xi Jinping to potentially rule for life, which may mean policy continuity and fewer regulatory surprises and Goldman Sachs’ upgrade of offshore China stocks. A report that Didi Global is getting ready to relaunch apps in China further fueled optimism. “Investors are hoping that greenshoots of a loosening of reforms are upon us,” said Justin Tang head of Asian research at United First Partners. It’s clear “tech shares got a little boost from Singles’ Day and the anointing of Xi as forever leader.” JD.com Shines in Muted Singles Day After Sales Beat: Street Wrap South Korea and Japan benchmarks posted the top gains in the region. Australia’s shares also advanced, boosted by mining stocks. Japanese equities also rose, following gains in U.S. peers, erasing virtually all of their losses from earlier in the week. Electronics makers and telecoms were the biggest boosts to the Topix, which gained 1.3%. All 33 industry groups were in the green except energy products. Tokyo Electron and SoftBank Group were the largest contributors to a 1.1% rise in the Nikkei 225. The yen has weakened more than 1% against the dollar since Tuesday. “It’s a favorable environment for risk-taking thanks to China,” said Shogo Maekawa, a strategist at JP Morgan Asset Management in Tokyo, referring to Evergrande’s latest interest payment. Rising U.S. yields and a weaker yen “may serve as a trigger for foreign investors to re-evaluate Japanese equities and shift their focus to stocks here.” Indian stocks also rose, snapping three sessions of declines, boosted by gains in software exporter Infosys. The S&P BSE Sensex climbed 1.3% to 60,686.69 to a two-week high and completed a second successive week of gains with a 1% advance. The NSE Nifty 50 Index increased 1.3% on Friday. All 19 sub-indexes compiled by BSE Ltd. rose, led by a measure of technology companies. In earnings, of the 45 Nifty 50 companies that have announced results so far, 29 have either met or exceeded consensus analyst expectations, 15 have missed estimates, while one couldn’t be compared. Oil & Natural Gas Corp. and Coal India are among those scheduled to announce results today.  Expectations of the U.S. Fed raising interest rates earlier than expected after a surge in inflation weighed on most emerging markets this week. In India, consumer prices probably quickened for the first time in five months in October, according to economists in a Bloomberg survey. The data will be released on Friday after market hours.   In FX, the Bloomberg Dollar Spot Index was little changed, even as the dollar added to gains versus most its Group-of-10 peers, and Treasury yields rose across the curve on concern that rising U.S. inflation would warrant earlier rate hikes. The euro hovered around a more than a one-year low of $1.1450. The pound extended an Asia session advance and was the best performer among G-10 peers; the currency still heads for a third week of losses, having touched its lowest level since Christmas and options suggest the move may have legs to follow. Australian and New Zealand dollars are headed for back-to-back weekly declines as rising Treasury yields stoke further demand for the greenback; A 60% drop in the price of iron ore signals a blow to the Australian government’s efforts to stabilize the fiscal position following massive spending to support the economy through the coronavirus pandemic.Meanwhile, the ruble extended its losses, tracking a decline in Brent crude, as tensions flared up between Russia and Western nations over energy supplies and migrants. The currency tumbled as much as 1.1% to 72.4375 per dollar after the U.S. sounded out its EU allies that Russia may invade Ukraine. That made the ruble the worst performing currency in emerging markets.  In rates, Treasuries were off session lows, but cheaper by 2bp-3bp across belly of the curve which underperforms as reopened cash market catches up with Thursday’s slide in futures. Treasury 10-year yields around 1.566%, cheaper by 2bp on the day, while 5-year topped at 1.262% in early Asia session; curve is flatter amid belly-led losses, with 5s30s spread tighter by ~1bp on the day after touching 63.7bp, lowest since March 2020. On the 2s5s30s fly, belly cheapened 3.5bp on the day, re-testing 2018 levels that were highest since 2008. Bunds advanced, led by the front end, while Italian bonds slid across the curve, pushing the 10-year yield above 1% for the first time since Nov. 4, as money markets held on to aggressive ECB rate-hike bets. The Asia session was relatively calm, while during the European morning, Italian bonds lagged as futures continue to price in aggressive ECB policy. Treasury options activity in U.S. session has included downside protection on 5-year sector, where yields reached YTD high.     In commodities, crude futures dip to lowest levels for the week: WTI drops 1.4% before finding support near $80, Brent dips 1% back onto a $81-handle. Spot gold drifts lower near $1,852/oz. Base metals are mixed: LME aluminum, nickel and tin post modest gains, copper and zinc lag. Looking at the day ahead, data releases from the US include the University of Michigan’s preliminary consumer sentiment index for November, as well as the JOLTS job openings for September. In the Euro Area, there’ll also be industrial production for September. From central banks, we’ll hear from New York Fed President Williams, ECB Chief Economist Lane, and the BoE’s Haskel. Market Snapshot S&P 500 futures little changed at 4,646.50 STOXX Europe 600 little changed at 485.18 MXAP up 0.8% to 199.85 MXAPJ up 0.6% to 653.35 Nikkei up 1.1% to 29,609.97 Topix up 1.3% to 2,040.60 Hang Seng Index up 0.3% to 25,327.97 Shanghai Composite up 0.2% to 3,539.10 Sensex up 1.3% to 60,697.82 Australia S&P/ASX 200 up 0.8% to 7,443.05 Kospi up 1.5% to 2,968.80 Brent Futures down 1.3% to $81.83/bbl Gold spot down 0.5% to $1,853.43 U.S. Dollar Index little changed at 95.20 German 10Y yield little changed at -0.23% Euro little changed at $1.1441 Top Overnight News From Bloomberg Inflation is soaring across the euro area, but it’s also diverging by the most in years in a further complication for the European Central Bank’s ongoing pandemic stimulus The White House is debating whether to act immediately to try to lower U.S. energy prices or hold off on dramatic measures in the hope markets settle, as President Joe Biden’s concern about inflation runs up against climate, trade and foreign policy considerations Reports U.S. is concerned that Russia may be planning to invade Ukraine are “empty and unfounded efforts to exacerbate tensions,” Kremlin spokesman Dmitry Peskov says on conference call Financial problems faced by institutions like China Evergrande Group are “controllable” and spillovers from the nation’s markets to the rest of the world are limited, a former central bank adviser said Hapag-Lloyd AG warned that a crunch in global container shipments could persist into next year, with labor negotiations, environmental pressures and disruptive weather combining to hamper goods flows Japan’s government plans to compile an economic stimulus package of more than 40 trillion yen ($350 billion) in fiscal spending, according to the Nikkei newspaper President Xi Jinping appeared more certain than ever to rule China well into the current decade, as senior Communist Party officials declared that the country had reached a new “historical starting point” under his leadership Italian President Sergio Mattarella tried to quash speculation that he could stay on for a second term, leaving Prime Minister Mario Draghi as the top contender for the role early next year A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mostly higher heading into the weekend as the region attempted to build on the somewhat mixed performance stateside, where price action was contained amid Veterans Day and with US equity futures also slightly picking up from the quasi-holiday conditions. ASX 200 (+0.8%) was lifted in which mining stocks and the tech industry spearheaded the broad gains across sectors aside from healthcare as Ramsay Health Care remained pressured after it recently announced a near-40% decline in Q1 net profit. Nikkei 225 (+1.1%) was underpinned with Japanese exporters benefitting from recent favourable currency flows and with the biggest stock movers influenced by a deluge of earnings. Hang Seng (+0.3%) and Shanghai Comp. (+0.2%) were indecisive with Hong Kong tech stocks encouraged after e-commerce retailers Alibaba and JD.com posted record Singles Day sales, despite a deceleration in revenue growth from the shopping festival to its slowest annual pace since its conception in 2009 amid a toned-down event due to Beijing’s tech crackdown and emphasis on common prosperity. Conversely, mainland bourses were indecisive following a neutral liquidity operation by the PBoC and after US President Biden recently signed the Secure Equipment Act which prevents companies deemed as security threats from receiving new equipment licences from US regulators, which comes ahead of Monday’s potential Biden-Xi virtual meeting. Finally, 10yr JGBs were lower due to a lack of momentum from US treasuries as cash bond markets were closed for the federal holiday, with demand for JGBs also hampered by the gains in stocks and lack of BoJ purchases in the government debt market. Top European News Macron and Draghi Have Plans to Fill the Void Left by Merkel Johnson Burns Through Political Capital Built Up With Tory MPs JPMorgan Hires Zahn as Head of DACH Equity Capital Markets Hapag-Lloyd CEO Says Global Shipping Crunch Could Extend in 2022 European equities (Stoxx 600 -0.1%) have seen a relatively directionless start to the session with the Stoxx 600 set to close the week out with modest gains of around 0.4%. Macro updates have been particularly sparse thus far with today’s data docket also relatively light (highlights include US JOLTS and Uni. of Michigan sentiment). The handover from the APAC region was a predominantly positive one as Japanese equities benefited from favourable currency dynamics and Chinese markets focused on the fallout from Singles Day which saw record sales for Alibaba and JD.com. Stateside, futures are also relatively directionless (ES -0.1%) ahead of aforementioned US data points and Fedspeak from NY Fed President Williams (voter), who will be speaking on heterogeneity in macroeconomics. The latest BofA Flow Show revealed USD 7.3bln of inflows for US equities, whilst tech stocks saw outflows of USD 1.6bln; the largest outflow since June. In Europe, equities saw their largest outflows in seven weeks with USD 1.7bln of selling. In a separate note, BofA projects 10+% of downside by early next year for European stocks amid weakening growth momentum and rising bond yields. Sectors in Europe are mixed with outperformance seen in Personal & Household Goods with Richemont (+8.6%) shares boosted following better-than-expected Q3 results. LVMH (+1.4%) also gained at the open following reports that the Co. could consider opening duty-free stores in China. Telecom names are firmer with Deutsche Telekom (+2.6%) one of the best performers in the DAX after posting solid results and raising guidance. To the downside, commodity-exposed names are lagging peers with Basic Resources and Oil & Gas names hampered by price action in their underlying markets. FTSE-100 heavyweight AstraZeneca (-4.4%) sits at the foot of the index after Q3 profits fell short of expectations. Finally, Renault (+4.3%) is the best performer in the CAC after being upgraded to overweight from equalweight at Morgan Stanley with MS expecting the Co. to have a better year next year. Top Asian News JPMorgan Japan Stocks Downgrade Shows Doubts Before Stimulus Japan Stimulus Package to Top 40 Trillion Yen, Nikkei Reports Hon Hai Warns Chip Shortage Will Outweigh IPhone Boost to Sales AirAsia X Gets Over 95% Support From Creditors for Revamp In FX, it would be far too premature to suggest that the Buck’s winning streak is over, but having rallied so far in relatively short order some consolidation is hardly surprising, especially on a Friday in between a semi US market holiday and the weekend. Hence, the index is hovering just above 95.000 within a 95.078-266 range after a minor extension from yesterday’s peak to set a new 2021 best, and the Dollar is on a more mixed footing vs basket components plus other G10 and EM counterparts, awaiting the return of those not in on Veteran’s Day, JOLTS, preliminary Michigan sentiment and Fed’s Williams for some fresh or additional impetus and direction. GBP/CAD - The Pound and Loonie are flanking the major ranks even though the latest retreat in Brent and WTI is pretty uniform from a change on the day in Usd terms perspective, so it seems like Sterling is getting a boost from a downturn in the Eur/Gbp cross ahead of the UK-EU showdown on Brexit and Article 16, while Usd/Cad remains bullish on technical impulses before the BoC’s Q3 Senior Loan Officer Survey. Cable has bounced from just over 1.3350 to retest 1.3400 with Eur/Gbp probing 0.8550 to the downside, but Usd/Cad is probing 1.2600 irrespective of the Greenback stalling. AUD/JPY - Both fractionally firmer as the Buck takes another breather, though the Aussie is also deriving some traction from favourable Aud/Nzd tailwinds again. Aud/Usd has pared losses sub-0.7300 as the cross hovers around 1.0400, while Usd/Jpy has retreated from around 114.30 towards 1.9 bn option expiries at the 114.00 strike amidst reports that the Japanese Government's economic stimulus package will increase to Yen 40+ tn in fiscal spending, according to the Nikkei citing sources. EUR/NZD/CHF - The Euro is still hanging in following its close below a key technical level for a second consecutive session and fall further from the psychological 1.1500 mark, especially as better than forecast Eurozone ip has not prompted any upside, However, option expiry interest at 1.1450 (1.2 bn) may keep Eur/Usd afloat if only until the NY cut. Similarly, the Kiwi has not gleaned anything via a decent pick-up in NZ’s manufacturing PMI as Nzd/Usd clings to 0.7000+ status and the Franc remains under 0.9200 regardless of an acceleration in Swiss import and producer prices. SCANDI/EM - More transitory inflation remarks from Riksbank Governor Ingves are not helping the Sek fend off another dip through 10.0000 vs the Eur. but the Nok is getting protection from weaker oil prices via unusually large option expiries spanning the same big figure given 1.2 bn at 9.7500, 1.7 bn on the round number and 1 bn at 10.2000. Conversely, the Rub is underperforming as tensions rise around the Russian/Ukraine border and the Kremlin aims blame at the feet of the US alongside NATO, while the Try only just survived the latest assault on 10.00000 against the Usd in wake of below forecast Turkish ip and CBRT survey-based CPI projections for year end rising again. Elsewhere, the Mxn is softer following confirmation of a 25 bp Banxico hike on the basis that the verdict was not unanimous and some were looking for +50 bp, but the Zar retains an underlying bid after Thursday’s supportive SA MTBS and with Eskom reporting no load shedding at present, while the Cnh and Cny are holding gains in advance of the virtual Chinese/US Presidential meeting scheduled for Monday. In commodities, WTI and Brent are pressured in the European morning, experiencing more pronounced downside after a gradual decline occurred in APAC hours. However, the magnitude of today’s performance is comparably minimal when placed against that seen earlier in the week and particularly on Wednesday; in-spite of the earlier pronounced movements, benchmarks are currently set to end the week with losses of less than USD 1.00/bbl – albeit the range is in excess of USD 5.00/bbl. Newsflow this morning has been minimal and thus yesterday’s themes remain in-focus where a firmer USD likely continues to factor but more specifically COVID-19 concerns, with Germany’s Spahn on the wires, and geopolitics via Russia drawing attention. On the latter, tensions are becoming increasingly inflamed as the US said they are concerned that Russia could attack Ukraine and in response Russia said they are not a threat to anyone, but, says US military activity is aggressive and a threat. Moving to metals, spot gold and silver are softer on the session, but remain notably firmer on the week given the CPI-induced move. On this, UBS highlights the risk of additional inflation strength next year which could stoke further gold demand. Elsewhere, base metals are, broadly speaking, marginally softer given tentative APAC performance and the aforementioned COVID concerns, particularly those pertinent for China. In terms of associated bank commentary, SocGen looks for copper to average USD 9.2k/T and USD 8.0k/T in 2021 and 2022 respectively. US Event Calendar 10am: Sept. JOLTs Job Openings, est. 10.3m, prior 10.4m 10am: Nov. U. of Mich. 1 Yr Inflation, est. 4.9%, prior 4.8%; 5-10 Yr Inflation, prior 2.9% 10am: Nov. U. of Mich. Sentiment, est. 72.5, prior 71.7; Current Conditions, est. 77.2, prior 77.7; Expectations, est. 68.8, prior 67.9 DB's Henry Allen concludes the overnight wrap there wasn’t much to speak of in markets yesterday as US bond markets were closed for Veterans Day and investors elsewhere continued to digest the bumper CPI print from the previous session. We did see a bit of residual concern at the prospect of a faster tightening in monetary policy, and implied rates on Eurodollar futures continued to climb, gaining between +4bps and +8bps on contracts maturing through 2023. However, on the whole equities were relatively unfazed on both sides of the Atlantic, and the S&P 500 (+0.06%) stabilised after 2 successive declines thanks to a bounceback among the more cyclical sectors. Looking at those moves in more depth, interest-sensitive tech stocks were a big outperformer yesterday as both the NASDSAQ (+0.52%) and the FANG+ index (+0.98%) of megacap tech stocks moved higher. Material stocks in the S&P (+0.85%) were another sectoral winner, and the VIX index of volatility (-1.07pts) ticked down from its 4-week high on Wednesday. In Europe, the advance was even more prominent, where the STOXX 600 (+0.32%), the DAX (+0.10%) and the CAC 40 (+0.20%) all reached fresh records. Indeed, for the STOXX 600, that now marks the 13th advance in the last 15 sessions, with the index having risen by over +6% in the space of a month. As mentioned, it was a quieter day for sovereign bond markets with the US not trading, but the sell-off continued in Europe as yields on 10yr bunds (+1.7bps), OATs (+1.4bps) and BTPs (+2.7bps) all moved higher. We didn’t get any fresh news on the Fed officials either given the US holiday, but a Washington Post article yesterday said that officials from the White House had stayed in touch with Governor Brainard since her meeting with President Biden last week, albeit still emphasising that no final decision had yet been made. Separately, Bloomberg reported that senior Biden advisors did not view the recent trading scandal at the Federal Reserve as disqualifying Chair Powell. US Treasury markets have reopened overnight, with 10yr yields following their European counterparts higher, moving up +1.4bps to 1.563%. That’s been driven by a +2.4bps rise in the real yield, though 10yr real yields still remain close to their all-time lows since TIPS started trading back in 1997. Otherwise in Asia, markets are mostly trading higher with the KOSPI (+1.48%), Nikkei (+1.07%) and Hang Seng (+0.22%) all advancing, though the Shanghai Composite (-0.01%) is basically unchanged whilst the CSI (-0.31%) is trading lower. Data showed further signs of inflationary pressures in the region, with South Korea’s import price index up +35.8% in October on a year-on-year basis, the highest since 2008. Elsewhere in India, Prime Minister Modi is expected to announce an opening up of the sovereign bond market to retail investors today, which comes amidst rising inflation concerns as well. Looking ahead, futures are indicating a positive start in the US and Europe with those on the S&P 500 (+0.16%) and the DAX (+0.15%) pointing higher. Turning to the geopolitical scene, it was reported by Bloomberg that US officials had briefed their counterparts in the EU about a potential Russian invasion of Ukraine. It follows a build-up in Russian forces near the Ukrainian border that have been reported more widely, and echoes a similar situation back in the spring. The Russian ruble weakened -0.57% against the US dollar yesterday in response, with the declines occurring after the report came out. This comes amidst a number of broader tensions in the region, and natural gas prices in Europe were up +6.66% yesterday after Belarus’ President Lukashenko threatened to cut the transit of gas if the EU placed additional sanctions on his regime. Meanwhile on Brexit, there were potential signs of compromise in the dispute over Northern Ireland, with the Telegraph reporting that the EU was prepared to improve its offer when it came to reducing customs checks. However, the report also said that this would be contingent on the UK ending its demands to remove the European Court of Justice’s role in overseeing the agreement. There has been growing speculation in recent days that the UK could be about to trigger Article 16 of the Northern Ireland Protocol, which allows either side to take unilateral safeguard measures if the deal was causing serious issues. This would risk EU retaliation that could in theory even led to a suspension of the entire trade deal agreed last year, which is an option that has been talked up in recent weeks. For those wanting further reading on the issue, DB’s FX strategist Shreyas Gopal put out a note on Tuesday (link here) looking at the issues surrounding Article 16 and its implications for sterling. Another important thing to keep an eye on over the coming weeks will be any further signs of deterioration in the Covid-19 situation. Cases have been ticking up at the global level for around 4 weeks now, and a number of European countries (including Germany) have seen a major surge over the last few days. In the Netherlands, they actually set a record for the entire pandemic yesterday, and Prime Minister Rutte is due to hold a press conference today where it’s been speculated he’ll announce fresh restrictions. Separately in Austria, Chancellor Schallenberg said that a lockdown for the unvaccinated was “probably unavoidable”, and said that “I don’t see why two-thirds should lose their freedom because one-third is dithering”. On the data front, the only major release was the UK’s Q3 GDP reading yesterday, which surprised on the downside with growth of +1.3% (vs. +1.5% expected), even though Covid-19 restrictions were much easier in Q3 relative to Q2. To be fair, the monthly reading for September did surprise on the upside, with growth of +0.6% (vs. +0.4% expected), but it came as July and August saw downward revisions. On a monthly basis, the September reading meant the UK economy was just -0.6% beneath its pre-pandemic size in February 2020. To the day ahead now, and data releases from the US include the University of Michigan’s preliminary consumer sentiment index for November, as well as the JOLTS job openings for September. In the Euro Area, there’ll also be industrial production for September. From central banks, we’ll hear from New York Fed President Williams, ECB Chief Economist Lane, and the BoE’s Haskel. Tyler Durden Fri, 11/12/2021 - 07:48.....»»

Category: blogSource: zerohedgeNov 12th, 2021

U.S. Inflation Is So High. When Could It Ease?

Economists warn higher prices will likely last well into next year, if not beyond (WASHINGTON) — Inflation is starting to look like that unexpected—and unwanted—houseguest who just won’t leave. For months, many economists had sounded a reassuring message that a spike in consumer prices, something that had been missing in action in the U.S. for a generation, wouldn’t stay long. It would prove “transitory,’’ in the soothing words of Federal Reserve Chair Jerome Powell and White House officials, as the economy shifted from virus-related chaos to something closer to normalcy. Yet as any American who has bought a carton of milk, a gallon of gas or a used car could tell you, inflation has settled in. And economists are now voicing a more discouraging message: Higher prices will likely last well into next year, if not beyond. [time-brightcove not-tgx=”true”] On Wednesday, the government said its consumer price index soared 6.2% from a year ago — the biggest 12-month jump since 1990. “It’s a large blow against the transitory narrative,’’ said Jason Furman, who served as the top economic adviser in the Obama administration. “Inflation is not slowing. It’s maintaining a red-hot pace.’’ And the sticker shock is hitting where families tend to feel it most. At the breakfast table, for instance: Bacon prices are up 20% over the past year, egg prices nearly 12%. Gasoline has surged 50%. Buying a washing machine or a dryer will set you back 15% more than it would have a year ago. Used cars? 26% more. Although pay is up sharply for many workers, it isn’t nearly enough to keep up with prices. Last month, average hourly wages in the United States, after accounting for inflation, actually fell 1.2% compared with October 2020. Read More: Young People Are Leaving Their Jobs in Record Numbers—And Not Going Back Economists at Wells Fargo joke grimly that the Labor Department’s CPI — the Consumer Price Index — should stand for “Consumer Pain Index.’’ Unfortunately for consumers, especially lower-wage households, it’s all coinciding with their higher spending needs right before the holiday season. The price squeeze is escalating pressure on the Fed to shift more quickly away from years of easy-money policies. And it poses a threat to President Joe Biden, congressional Democrats and their ambitious spending plans. What caused the price spikes? Much of it is the flipside of very good news. Slammed by COVID-19, the U.S. economy collapsed in the spring of 2020 as lockdowns took effect, businesses closed or cut hours and consumers stayed home as a health precaution. Employers slashed 22 million jobs. Economic output plunged at a record-shattering 31% annual rate in last year’s April-June quarter. Everyone braced for more misery. Companies cut investment. Restocking was put off. And a brutal recession ensued. Yet instead of sinking into a prolonged downturn, the economy staged an unexpectedly rousing recovery, fueled by massive government spending and a bevy of emergency moves by the Fed. By spring, the rollout of vaccines had emboldened consumers to return to restaurants, bars and shops. Suddenly, businesses had to scramble to meet demand. They couldn’t hire fast enough to plug job openings — a near record 10.4 million in August — or buy enough supplies to fill customer orders. As business roared back, ports and freight yards couldn’t handle the traffic. Global supply chains became snarled. Costs rose. And companies found that they could pass along those higher costs in the form of higher prices to consumers, many of whom had managed to sock away a ton of savings during the pandemic. “A sizeable chunk of the inflation we’re seeing is the inevitable result of coming out of the pandemic,’’ said Furman, now an economist at the Harvard Kennedy School. Furman suggested, though, that misguided policy played a role, too. Policymakers were so intent on staving off an economic collapse that they “systematically underestimated inflation,” he said. “They poured kerosene on the fire.’’ A flood of government spending — including President Joe Biden’s $1.9 trillion coronavirus relief package, with its $1,400 checks to most households in March — overstimulated the economy, Furman said. “Inflation is a lot higher in the United States than it is in Europe,’’ he noted. “Europe is going through the same supply shocks as the United States is, the same supply chain issues. But they didn’t do nearly as much stimulus.’’ In a statement Wednesday, Biden acknowledged that “inflation hurts Americans’ pocketbooks, and reversing this trend is a top priority for me.’’ But he said his $1 trillion infrastructure package, including spending on roads, bridges and ports, would help ease supply bottlenecks. How long will it last? Consumer price inflation will likely endure as long as companies struggle to keep up with consumers’ prodigious demand for goods and services. A resurgent job market — employers have added 5.8 million jobs this year — means that Americans can continue to splurge on everything from lawn furniture to new cars. And the supply chain bottlenecks show no sign of clearing. Read More: Why Literally Millions of Americans Are Quitting Their Jobs “The demand side of the U.S. economy will continue to be something to behold,’’ says Rick Rieder, chief investment officer for global fixed income at Blackrock, “and companies will continue to have the luxury of passing through prices.” Megan Greene, chief economist at the Kroll Institute, suggested that inflation and the overall economy will eventually return to something closer to normal. “I think it it will be ‘transitory’,’’ she said of inflation. “But economists have to be very honest about defining transitory, and I think this could last another year easily.’’ “We need a lot of humility talking about how long this lasts,” Furman said. “I think it’s with us for a while. The inflation rate is going to come down from this year’s blistering pace, but it’s still going to be very, very high compared to the historical norms we have been used to.’’ Will we suffer a return of 1970’S-style ‘stagflation’? The run-up in consumer prices has raised the specter of a return to the “stagflation’’ of the 1970s. That was when higher prices coincided with high unemployment in defiance of what conventional economists thought was possible. Yet today’s situation looks very different. Unemployment is relatively low, and households overall are in good shape financially. The Conference Board, a business research group, found that consumers’ inflation expectations last month were the highest they’d been since July 2008. But consumers didn’t seem all that worried: The board’s confidence index rose anyway, on optimism about the job market. “For the time being, at least, they feel that the benefits are outweighing the negatives,’’ said Lynn Franco, the Conference Board’s senior director of economic indicators. Economic growth, after slowing from July through September in response to the highly contagious delta variant, is thought to be bouncing back in the final quarter of 2021. “Most economists are expecting growth to accelerate in the fourth quarter,” Greene said. “So it doesn’t suggest that we’re facing both a tanking of growth and higher inflation. We’re just facing higher inflation.’’ What should policymakers do? The pressure is on the Fed, which is charged with keeping a lid on inflation, to control prices. “They need to stop telling us that inflation is transitory, start becoming more worried about inflation, then act in a manner consistent with being worried,’’ Furman said. “We’ve seen a little bit of that, but only a little bit.’’ Powell has announced that the Fed will start reducing the monthly bond purchases it began last year as an emergency measure to try to boost the economy. In September, Fed officials also forecast that they would raise the Fed’s benchmark interest rate from its record low near zero by the end of 2022 — much earlier than they had predicted a few months earlier. But sharply higher inflation, should it persist, might compel the Fed to accelerate that timetable; investors expect at least two Fed rate hikes next year. “We’ve been fighting non-existent inflation since the 1990s,’’ said Diane Swonk, chief economist at the accounting and consulting firm Grant Thornton, “and now we’re talking about fighting an inflation that is real.’’ — AP Economics Writer Christopher Rugaber contributed to this report......»»

Category: topSource: timeNov 11th, 2021

4 Mutual Funds to Pick as US Service Sector Hits Record High

Solid job additions are boosting the US economy and supporting the manufacturing and service sectors. The U.S. economy is gradually recovering from the coronavirus pandemic-induced slump. Solid job additions are boosting the economy and supporting the manufacturing and service sectors. In fact, growth in the American service sector has been higher than expected in October. Per the Institute for Supply Management’s (ISM) report on Nov 3, its services PMI climbed to 66.7 in October from 61.9 in the month before. ISM’s service PMI has now grown for the 17th consecutive month.Business activities in the service sector grew by 7.5 percentage points to 69.8%, while new orders are up 6.2 percentage points to 69.7% in October. Though supply-chain disruptions and shortage of labor and materials are constraining capacity and impacting overall business conditions, improvement in the labor market upholds the momentum.Record Employment a HeadwindOn Nov 5, the U.S. Bureau of Labor Statistics reported that companies added 531,000 in October, surpassing the consensus estimate of 442,000.  The report also stated that September’s figure was upwardly revised to 312,000 and August’s job additions were up from 366,000 to 483,000. Stronger-than-expected job additions in October helped the unemployment rate drop down to 4.6%.In total, the private sector added 604,000 new jobs last month, while there was a significant decline in jobs from the government. Additionally, average hourly earnings rose 0.4% in October and are now 4.9% higher over the last 12 months.The report supports that the biggest labor shortage in years is still holding back the U.S. economy from recovery and adding to the largest surge in inflation in three decades. However, there have been solid job additions in leisure and hospitality, professional and business services, manufacturing, and transportation and warehousing spaces.Rapid vaccination and reopening efforts are improving consumer confidence as they are gearing up for the holiday season. The heathy jobs market is also allowing them to indulge in spending despite the rising inflation. In such a scenario, investing in mutual funds with significant exposure to services-related companies may prove prudent.4 Funds to BuyWe have, thus, selected four service-related mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also the likely future success of the fund.The question here is: why should investors consider mutual funds? Reduced transaction costs and portfolio diversification without several commission charges associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).Fidelity Select Leisure Portfolio FDLSX fund invests a bulk of its assets in securities of companies engaged in the design, production or distribution of goods or services in the leisure and recreation industries. The fund seeks growth of capital and invests both in U.S. and non-U.S. companies.This Sector – Other product has a track of positive total returns for more than 10 years. Specifically, the fund has returned 16.6% and 17.1% over the past three and five years, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.FDLSX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.77%, which is below the category average of 0.79%.Fidelity Select Retailing Portfolio FSRPX fund aims for capital appreciation. This non-diversified fund invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.This Sector - Other product has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned 18.4% and 21.6% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.FSRPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%, which is below the category average of 0.79%.Fidelity Select Financial Services Portfolio FIDSX fund aims for capital appreciation. This non-diversified fund invests the majority of assets in the common stock of companies engaged in providing financial services to consumers and the industry.This Sector - Finance product has a history of positive total returns for over 10 years. Specifically, FIDSX has three and five-year return of 14.4% and 15.8%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.FIDSX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.77% versus the category average of 1.08%.Fidelity Select Consumer Discretionary Portfolio FSCPX fund aims for capital appreciation. This non-diversified fund invests the majority of its assets in common stocks of companies that manufacture and distribute consumer discretionary goods and services. FSCPX invests in both domestic and foreign stocks.This Zacks Sector-Other product has a history of positive total returns for more than 10 years. Specifically, the fund has three and five-year returns of 16.7% and 18%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.FSCPX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.73%, below the category average of 0.79%.Want key mutual fund info delivered straight to your inbox?Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >> Bitcoin, Like the Internet Itself, Could Change Everything Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities. Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly. See 3 crypto-related stocks now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Get Your Free (FSRPX): Fund Analysis Report Get Your Free (FDLSX): Fund Analysis Report Get Your Free (FIDSX): Fund Analysis Report Get Your Free (FSCPX): Fund Analysis Report To read this article on Zacks.com click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report.....»»

Category: topSource: zacksNov 8th, 2021

Futures Melt Up To New Record High Ahead Of Payrolls

Futures Melt Up To New Record High Ahead Of Payrolls US index futures continued their relentless meltup on the last day of the week, before today's jobs report which is expected to bounce strongly from last month's disappointing print (exp. 450K, up from 194K), and could set the pace for the Fed's taper into 2022 if it is too much of an outlier in either direction. At 730am, e-mini S&P futures were up 8.25 or 0.18% to 4,681.5, a new all time high; Nasdaq futures rose 48 points or 0.29% and Dow futures were up 35 or 0.1%. 10Y yields were flat at 1.53% and the dollar index jumped, while Brent traded just above $80 after yesterday's rout. “Investors took comfort from the Federal Reserve’s slow and steady approach when announcing the time-line for its taper program,” said Michael Hewson, chief market analyst at CMC Markets in London. “Today’s payrolls report should confirm that the U.S. labor market is still improving.” After one of the busiest earnings days this season, it has been a furious session with Expedia to News jumping in premarket trading on better-than-expected results.  Airbnb jumped 7.7% after the travel website reported record sales and earnings that exceeded analyst estimates. Meanwhile, Peloton crashed 33% after the fitness company cut its annual revenue forecast by as much as $1 billion because of declining demand in the post-pandemic economy.  Here are some of the biggest U.S. movers today: Peloton (PTON US) shares tanked 32% in U.S. premarket trading after analysts said its results and reduced guidance implied weaker demand than expected, and that the home-fitness company’s business model may need a rethink Square (SQ US) shares drop 4.5% in U.S. premarket trading after its 3Q results fell short of the consensus estimate, but its outlook remains strong, analysts say. The weakness in its Cash App and Bitcoin revenue could have been predicted, they added. Airbnb (ABNB US) shares rose 8% in U.S. premarket after the vacation-rental giant reported record sales and earnings that beat analysts’ estimates. RBC and Barclays hiked their price targets, citing improving earnings and supply-demand dynamics in 2022 NRX Pharmaceuticals (NRXP US) and Relief Therapeutics (RLF SW), which are partners on a drug to treat Covid-19, tumbled after the U.S. Food and Drug Administration declined to issue an emergency use authorization for the medication. GoPro (GPRO US) shares soar 17.2% premarket Tuesday after the maker of mountable and wearable cameras reported third-quarter results that exceeded analyst estimates Expedia (EXPE US) shares rally in premarket trading, as the online travel agency reports third-quarter revenue and adjusted earnings that beat expectations. The company’s CEO also gave positive commentary about a recovery in the travel industry Novavax (NVAX US) climbs as much as 6% after the biotech company said it filed with the World Health Organization for emergency use listing for its Covid vaccine Pinterest (PINS US) rises 5% in premarket trading after the company reported stronger-than-expected profit and revenue that met analysts’ estimates Microchip (MCHP US) gains 2.5% in premarket trading after projecting revenue and adjusted EPS that exceeded the average analyst estimates Ontrak (OTRK US) jumped 24% postmarket after the tele-health company boosted its full-year guidance Grid Dynamics (GDYN US) jumped 18% in postmarket trading after the information-technology services company forecasts full-year revenue that beat the average analyst estimate Pfizer (PFE) surged more than 10% after the company announced it would seek approval for a new covid pill after strong trial data. Looking ahead now, we’ll cap off a very busy macro week today with the US jobs report for October As previewed earlier, consensus expects +450k increase in nonfarm payrolls, which in turn would send the unemployment rate down a tenth to a post-pandemic low of 4.7%. The last couple of jobs reports have seen some downside surprises, but if realized, that +450k number would be the strongest jobs growth in 3 months. We’ve had some fairly positive labor market data in advance of the jobs report too, with the ADP’s report of private payrolls exceeding expectations on Wednesday at 571k (vs. 400k expected), and yesterday the weekly initial jobless claims for the week through October 30 fell to a fresh post-pandemic low of 269k (vs. 275k expected). The Fed made it clear this week that labor market evolution after the delta variant will be a key determinant in the future path of monetary policy. In any case, risk euphoria was strong with Europe as well, where stocks scaled another record peak as consumer and tech companies led the Stoxx Europe 600 Index up 0.2% to an all-time high poised for the longest winning streak since mid-June. FTSE MIB and FTSE 100 outperformed at the margin. Technology stocks outperformed, while energy and travel and leisure stocks declined. Among the biggest movers, Allegro.eu SA soared 7.8% after Poland’s largest e-commerce bought a Czech peer in a $1 billion deal. Euronext NV fell 4.4% after the exchange operator’s third-quarter results undershot expectations. However, most travel stocks dropped as a fourth wave of the pandemic hits the continent, with Germany reporting record infections. European stocks extended October’s recovery to return to their all-time highs, as investors scooped up the region’s stocks thanks to a reassuring earnings season and as central banks signal they are in no hurry to raise interest rates just yet. “We’ve seen a fairly benign reaction to the earnings season, in some respects. Perhaps people were a little bit nervous going into it,” Alastair George, chief investment strategist at Edison Group, said by phone. “The market troughed in the early part of October and has bounced back since then, and if we look at earnings revisions, they’re not as robust as they were earlier on in the Covid recovery cycle, but we’re not seeing downgrades,” George added. Asian equities fell, as a slide in bond yields globally and a decline in Hong Kong-listed tech shares weighed on sentiment. The MSCI Asia Pacific Index slid as much as 0.5%, led lower by consumer discretionary and utility shares. Alibaba and Tencent were the biggest drags with analysts accessing earnings outlooks ahead of the companies’ quarterly results announcements. Hong Kong’s Hang Seng Tech Index fell 1.6%, while the benchmark Hang Seng Index dropped 1.4%. Traders are now awaiting the U.S. jobs report later Friday for further cues on monetary policy tightening. “Markets will be seeking confirmation on whether the job market recovery warrants a mid to late-2022 lift-off in rates as reflected in the Fed funds futures,” Jun Rong Yeap, market strategist at IG Asia, wrote in a note. The Asian stock benchmark is set for a weekly rise of less than 1% as the earnings season progresses. Supply-chain constraints and inflation worries are being cited as concerns by many of the largest companies in the region, with several seeing their shares tumble as the chip shortage prompts them to slash their annual profit forecasts. India’s stock market was closed for a holiday Friday. Japanese stocks fell as the yen held its strength against the dollar and investors assessed the potential supply response from the U.S. to a gradual hike in production from OPEC+. The Topix index dropped 0.7% to close at 2,041.42 in Tokyo, while the Nikkei 225 declined 0.6% to 29,611.57. Toyota Motor contributed the most to the Topix’s loss, decreasing 1.4%. Out of 2,181 shares in the index, 540 rose and 1,589 fell, while 52 were unchanged. Japan’s currency was little changed at 113.64 yen per dollar, after gaining 0.2% on Thursday Australia's S&P/ASX 200 index rose 0.4% to 7,456.90, its highest close since Sept. 16. The benchmark gained 1.8% for the week.  Eight of the 11 subgauges finished Friday trade higher, with miners and healthcare stocks driving the gains.  The Reserve Bank of Australia struck an upbeat note on the economy, while maintaining that faster wages growth and inflation will take some time and the first interest-rate increase is unlikely before 2024. Administration soared after receiving a conditional, non-binding indicative takeover proposal from investment fund Carlyle Asia Partners V. Clinuvel tumbled after it was cut to hold at Jefferies.  In New Zealand, the S&P/NZX 50 index rose 1% to 13,074.61. In FX, the Bloomberg Dollar Spot Index reached its strongest level in more than three weeks as the greenback was steady or higher versus all of its Group-of-10 peers. The euro traded near its cycle lows following strong U.S. data and renewed dovish commentary by European Central Bank officials and options now paint a similar outlook. The slowdown in inflation next year may not be as intense and quick as the European Central Bank had anticipated a few months ago, ECB Vice President Luis de Guindos says. The pound fell against all its Group-of-10 peers and gilts rallied, sending yields down by as many as 5 basis points. Money markets no longer fully price the Bank of England raising its key rate to 1% in Dec. 2022, pushing bets out to Feb. 2023. Labor market data is an important piece of the jigsaw for the BOE, Governor Andrew Bailey says in an interview with BBC Radio 4. Australia’s 10-year bonds had their first weekly gain in more than two months after the BOE joined the RBA and the Fed in pushing back against aggressive rate-hike bets; the Aussie and Kiwi weakened. The yen rose as traders unwound bearish bets on the currency before the release of key U.S. jobs data and repricing of the outlook for policy tightening. In rates, the 10Y yield was unchanged at 1.53%. Gilts extend Thursday’s post-BO shockE rally, richening ~5bps across the curve in a modest flattening move. Short sterling futures add 2.5-3 ticks in red and green packs as expectations for higher rates are pared back. MPC-dated OIS rates factor in only 11bps of hike by the December meeting and no longer fully price the Bank’s rate at 1% by end-2022. Bunds follow, cash USTs drift ahead of today’s payrolls release. In commodities, crude futures hold a narrow range after OPEC+ rebuffed U.S. demands for accelerated output.with WTI trading just below $80. Spot gold drifts higher, briefly testing $1,800/oz. Base metals are mixed: LME lead and tin rally, zinc drops over 1.5% with canceled warrants hitting the highest since August To the day ahead now, and the main data highlight will be the aforementioned US jobs report, but European data will also include September figures on Euro Area retail sales and German and French industrial production. Central bank speakers will include the ECB’s Vice President de Guindos, as well as the ECB’s Holzmann, Centeno and Panetta, in addition to the BoE’s Ramsden, Pill and Tenreyro. Market Snapshot S&P 500 futures little changed at 4,674.25 STOXX Europe 600 up 0.1% to 483.89 German 10Y yield little changed at -0.24% Euro little changed at $1.1558 MXAP down 0.4% to 198.36 MXAPJ down 0.3% to 645.66 Nikkei down 0.6% to 29,611.57 Topix down 0.7% to 2,041.42 Hang Seng Index down 1.4% to 24,870.51 Shanghai Composite down 1.0% to 3,491.57 Sensex up 0.5% to 60,067.62 Australia S&P/ASX 200 up 0.4% to 7,456.94 Kospi down 0.5% to 2,969.27 Brent Futures up 0.8% to $81.22/bbl Gold spot up 0.4% to $1,798.55 U.S. Dollar Index little changed at 94.35 Top Overnight News from Bloomberg Germany reported record Covid-19 infections for a second straight day, as a fourth wave of the pandemic hits Europe and threatens to overwhelm hospitals in some hot spots The increasingly influential expectations gap between bond traders and central bankers faces a fresh test Friday -- U.S. jobs data that could reignite or damp out the inflation concerns policy makers tried to downplay this week A shortage of homes for sale and a buoyant labor market are expected to underpin the U.K. housing market as consumers come under pressure from soaring inflation and higher interest rates, according to Halifax A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded cautiously following a somewhat mixed handover from the US where the S&P 500 and Nasdaq extended on fresh record highs with outperformance in rate-sensitive stocks alongside the rally in global bonds. However, the DJIA lagged but with only marginal losses as attention shifted to the upcoming NFP jobs data, while Chinese developer default concerns provided headwinds in Asia after reports Kaisa Group missed a payment on its wealth management product. ASX 200 (+0.4%) was underpinned by strength in the mining-related sectors as gold producers benefitted from the recent advances in the precious metal which approached just shy of the USD 1800/oz level and with sentiment also helped by the continued dovish tone by the RBA in its quarterly Statement on Monetary Policy, although advances were capped amid losses in tech and with energy names suffering due to lower oil prices. Nikkei 225 (-0.6%) weakness was a function of recent adverse currency flows but with downside stemmed as participants digest a slew of earnings releases and reports the government is considering cash handouts of JPY 100k to under-18s. Hang Seng (-1.4%) and Shanghai Comp. (-1.0%) were both subdued with Hong Kong pressured by losses in the blue chip financial, tech and energy stocks and with property names also constrained by the missed Kaisa Group payment which the Shenzhen-based developer plans to repay in instalments. It was also reported that China told certain smaller banks to limit wealth products, although the losses in the mainland were cushioned after the PBoC upped its liquidity effort despite still resulting in a net daily drain. Finally, 10yr JGBs were higher following on from the gains in global counterparts which were spurred by the surprise BoE hold on rates and with the weakness in Japanese stocks also helping keep bond prices afloat, with price action also unfazed by the lack of purchases from the BoJ which were instead seeking to buy corporate bonds with 1yr-3yr maturities for Nov. 10th. Top Asian News Japan Eases Many Covid-Era Border Restrictions as Cases Slump Developer in China Misses Payment on Loan Backed by Fantasia World’s Largest Pension Fund GPIF Posts $17 Billion Gain HSBC Requests All of Its Hong Kong Staff to Get Vaccinated European equities broadly trade on a marginally firmer footing (Euro Stoxx 50 +0.4%; Stoxx 600 +0.2%) with the Stoxx 600 set to close the week out with gains of around 1.6%. Macro commentary for the session has been relatively light thus far in the wake of yesterday’s BoE surprise. The handover from the APAC session was predominantly a negative one with Hang Seng (-1.4%) and Shanghai Comp. (-1%) both subdued as stocks in Hong Kong were pressured by losses in the blue-chip financial, tech and energy stocks and with property names also constrained by the missed Kaisa Group payment which the Shenzhen-based developer plans to repay in instalments. Stateside, futures have been inching higher ahead of the latest US jobs report with consensus looking for a 450k addition in nonfarm payrolls. Events in Washington are also worth keeping an eye on after CNN’s Raju reported yesterday that House Dems see Friday as the day they can finish the rule, USD 1.75tln Build Back Better bill and infrastructure bill. The Infrastructure bill would then go to Biden’s desk and the USD 1.75tln bill would go to the Senate for further negotiation with Manchin and other Senate Dems. Back to Europe, sectors are relatively mixed with Telecom names outperforming amid gains in BT (+1.8%) who sit at the top of the FTSE 100 as speculation continues to rumble on that billionaire investor Patrick Drahi could make a move for the Co. Deutsche Telekom is also providing support for the sector after confirming that IFM is to buy 50% in Co's Glasfaserplys GmbH for EUR 900mln. To the downside, Travel & Leisure names lag as opening gains for IAG (-2.1%) proved to be fleeting with the Co. warning of a potential EUR 3bln FY loss alongside Q3 earnings. Elsewhere, Oil & Gas names are trading lower alongside losses in the crude complex, with Basic Resources also near the foot of the leaderboard. Top European News Adler Pressure Builds With Idle Cranes and Angry Berlin Buyers Axa Jumps to More Than 3-Year High After Share Buyback Plan Europe Gas Prices Rebound as Traders Eye Russia’s Next Move ECB’s Guindos Says Inflation Will Slow in 2022 ‘Without a Doubt’ In FX, the Dollar index has gained some traction and has broken out of the 94.273-417 APAC range in the run-up to the US labour market report – with the headline NFP print forecast at 450k (full preview available in the Newsquawk Research Suite), although anything short of an extreme jobs reports this month will likely not sway the Fed's dials following the taper announcement earlier this week - which will commence later this month. On the fiscal front, the US House is to meet at 12:00GMT/08:00EDT to debate the procedural rule to put the social spending bill on the floor. Democrats hope to debate and vote on the social spending and infrastructure bills today, according to Fox. From a technical perspective, DXY eyes yesterday 94.475 high ahead of the YTD peak at 94.563. GBP, EUR - Sterling is the marked laggard thus far in what is seemingly a hangover on the day after the BoE coupled with Brexit risk, as the UK and EU's Brexit negotiators are set to meet in a bid to temper down cross-channel frictions. Governor Bailey made an appearance on UK radio this morning but failed to provide much in the way of additional colour regarding yesterday's policy decision – with markets currently assigning a 2/3 chance of a 15bps hike in December. On that note, BoE's new Chief Economist Pill, alongside MPC members Tenreyro and Ramsden, are all slated to speak throughout the session. Over to Brexit developments, RTE's Connelly recently reported that there is a "growing expectation" that the UK will trigger Article 16 - suggesting that "the view is that the EU's response could be much swifter and more 'radical' than expected.", although a special meeting of the bloc's leaders will likely be needed before any move. From a technical standpoint, EUR/GBP breached overnight resistance at 0.8565 before briefly topping the 200 DMA at 0.8584. In turn, GBP/USD declined from its 1.3508 high to a base sub-1.3450, with some traders suggesting the pair ran into sellers just ahead of a Fib level at 1.3511. EUR is supported by the EUR/GBP cross, with EUR/USD relatively flat on the day and still above yesterday's 1.1527 low. EUR/USD also looks ahead to some OpEx – with EUR 1.4bln between 1.5555-60 alongside some EUR 725mln at strike 1.1575. AUD, NZD, CAD - The high-beta non-US dollars all post modest intraday losses. The Aussie sits at the bottom of this bunch after the RBA's SoMP overnight reiterated a patient approach, with headwinds also felt by a decline in iron ore prices overnight whilst copper trades lacklustre. NZD is softer in sympathy whilst the Loonie bears the brunt of lower post-OPEC crude prices. AUD/USD has declined from a 0.7408 peak and dips under its 200 DMA (0.7379) ahead of the 50 DMA (0.7364). NZD/USD meanwhile loses ground under the 0.7100 mark – which also coincides with its 21 and 200 DMAs. USD/CAD eyes its 200 DMA at 1.2479 from a 1.2450 base in the run-up to the Canadian jobs report – with the pair also cognizant of USD 1.3bln in OpEx between 1.2500-05. In commodities, WTI and Brent front-month futures consolidate following yesterday's post-OPEC+ declines and heading into today's main event – the US labour market report. To recap the OPEC+ confab, ministers opted to continue the current plan to hike monthly output by 400k BPD (despite calls from the US to up output by 600-800k BPD), whilst reports also suggested that there will be no compensation for the underproduction seen from some nations. Traders are now on the lookout for a US response, with Washington yesterday reiterating the use of tools against oil prices. As a reminder, US Energy Secretary Granholm in an FT interview in October raised the prospect of an SPR release, whilst also refusing to rule out a ban on oil crude oil exports, suggesting “it is also a tool”. From the demand side, China’s economic slowdown has prompted JPM to downgrade the nation’s GDP growth forecast by 1ppt to 4.0%, citing the lingering impact of the power crunch and resurgence in COVID. It’s also worth noting that next week will see the Chinese inflation metrics, with oil prices expected to contribute to another Y/Y rise in PPI. WTI Dec trades just under USD 80/bbl (vs 78.96/bbl low) whilst Brent Jan trades on either side of USD 81/bbl (vs low 80.26/bbl). Turning to metals, spot gold and silver are uninteresting heading into the US jobs report whilst LME copper remains under USD 9,500/t. Overnight, Dalian iron ore futures fell once again to log a fourth consecutive week of losses amid China’s crackdown on the raw material. US Event Calendar 8:30am: Oct. Change in Nonfarm Payrolls, est. 450,000, prior 194,000 Change in Private Payrolls, est. 420,000, prior 317,000 Unemployment Rate, est. 4.7%, prior 4.8% Underemployment Rate, prior 8.5% Labor Force Participation Rate, est. 61.7%, prior 61.6% Average Hourly Earnings YoY, est. 4.9%, prior 4.6% Average Hourly Earnings MoM, est. 0.4%, prior 0.6% Average Weekly Hours All Emplo, est. 34.8, prior 34.8 3pm: Sept. Consumer Credit, est. $16b, prior $14.4b DB's Jim Reid concludes the overnight wrap Markets had another buoyant session yesterday as they received a dovish surprise from the Bank of England, just as they were digesting the Fed’s tapering decision from the previous evening. In response, markets shifted gear and pushed back pricing of future rate hikes, which in turn led to a sharp rally across the curve in sovereign bond markets in every major economy. And with investors lowering the odds of a near-term removal in monetary policy support, that helped equities take another leg higher, with the S&P 500 (+0.42%) advancing for the 15th time in the last 17 sessions to reach a fresh all-time high. We’ll start with the BoE as they generated the main headlines, and contrary to building expectations that a potential rate hike could be imminent, the MPC in fact voted by 7-2 to keep Bank Rate on hold at 0.1%, with only the most hawkish members favouring a 15bps increase. This came in spite of the fact that the BoE upgraded their inflation forecasts yet again, now seeing CPI peaking “at around 5% in April 2022”. The meeting summary did say that if the data was in line with their projections it would “be necessary over coming months to increase Bank Rate”, but overall it was a pretty dovish decision, with the MPC also voting by 6-3 to continue with its existing QE program. In their forecasts that were conditioned on the market-implied path for Bank Rate, they said “a margin of spare capacity is expected to emerge”, and that CPI would be beneath target at the end of the forecast period, so again pushing back against market pricing that had been looking for multiple hikes in 2022. In response, our UK economists have shifted their call for lift-off of 15bps to December, before seeing further 25bps hikes in May 2022 and February 2023. For more details, see their reaction note (link here). Markets reacted strongly to the decision as investors were surprised by the extent of the BoE’s dovishness. Gilts rallied sharply and outperformed sovereign bonds elsewhere, with 5yr yields (-20.0bps) seeing their biggest move lower in over 5 years, back in the immediate aftermath of the 2016 Brexit referendum. The 2yr yield was also down a massive -21.1 bps, marking its own biggest move lower since the initial market panic over Covid-19 back in March 2020. And sterling (-1.37%) had its worst performance against the dollar so far this year, which therefore left it as the worst performer among the G10 currencies too. The BoE meeting triggered a rally of global sovereign bonds, though whilst the gilt curve bull steepened, most other curves wound up flatter on the day. In the US, yields on 10yr Treasuries fell -7.7 bps to 1.53%, marking their biggest move lower since August, whilst the 2yr Treasury yield retreated -4.4bps. Real yields continue to drive the treasury curve, with the 10yr real yield down -8.6 bps to move back beneath -1% again. Elsewhere in Europe, yields on 10yr bunds (-5.6bps), OATs (-6.4bps) and BTPs (-11.4bps) all declined as well, with lower real yields the driver once again. This dramatic shift to price in greater monetary support for longer was good news for equities yesterday, with the major indices pressing on to fresh all-time highs. By the close of trade, the S&P 500 (+0.42%) had hit a new record, though in reality it was a fairly narrow-based advance, with fewer than half of the companies in the index actually moving higher on the day, whilst financials (-1.34%) underperformed against the backdrop of lower yields and a flatter curve. Interest-sensitive tech stocks did much better, with the NASDAQ (+0.81%) also at a record high as it achieved a 9th consecutive daily advance, its longest winning streak since 2019, whilst the FANG+ index of megacap tech stocks advanced +1.29% to reach a fresh high of its own. Over in Europe, the STOXX 600 (+0.41%) hit a record high too, even if the index was similarly hampered by financials (-0.86%), and records were also attained by Germany’s DAX (+0.44%) and France’s CAC 40 (+0.53%). That rally in equities hasn’t carried over into Asia this morning where indices including the Nikkei (-0.72%), the KOSPI (-0.65%), the Hang Seng (-0.96%) and the Shanghai Composite (-0.25%) are all trading lower. However, the surge in sovereign bonds has been echoed elsewhere, with yields on Australian 10yr debt down -4.0bps this morning, and bonds also advanced in China after the PBOC increased their short-term cash injections yet again. Speaking of Chinese debt, Kaisa Group Holdings Ltd, a developer, and its units listed in Hong Kong were suspended from trading after the company missed payments on wealth products and raised liquidity concerns. Meanwhile, the latest Covid-19 outbreak in China continued to spread, with a further 90 new cases reported on Friday, 22 of which were asymptomatic. Otherwise, S&P 500 futures (+0.01%) are almost unchanged this morning and yields on 10y Treasuries have moved up +1.2bps. Looking ahead now, we’ll cap off a very busy macro week today with the US jobs report for October, which is out at 12:30 London time. In terms of what to expect, our US economists are looking for a +400k increase in nonfarm payrolls, which in turn would send the unemployment rate down a tenth to a post-pandemic low of 4.7%. The last couple of jobs reports have seen some downside surprises, but if realised, that +400k number would be the strongest jobs growth in 3 months. We’ve had some fairly positive labour market data in advance of the jobs report too, with the ADP’s report of private payrolls exceeding expectations on Wednesday at 571k (vs. 400k expected), and yesterday the weekly initial jobless claims for the week through October 30 fell to a fresh post-pandemic low of 269k (vs. 275k expected). The Fed made it clear this week that labour market evolution after the delta variant will be a key determinant in the future path of monetary policy. Speaking of the Fed, it was reported by Dow Jones that Fed Chair Powell was seen visiting the White House yesterday. It comes with just 3 months left until the end of Powell’s current 4-year term, and follows President Biden saying on Tuesday that an announcement on the Fed position would come “fairly quickly”. For reference, the decision on who would be nominated as Fed Chair had already been announced at this point 4, 8 and 12 years ago. As well as the BoE, the other important meeting was that from the OPEC+ group, who rejected the demands from President Biden and others for a larger increase in oil production. They decided to increase output by +400k b/d in December, though afterwards oil actually gave up its surge earlier in the day to end the session lower, with WTI moving all the way from an intraday peak where it was up +3.17% to close down by -2.54%. A spokesperson for the US National Security Council said that the US would consider a range of tools to deal with oil prices, and Energy Secretary Granholm said last month that releasing crude oil from the strategic petroleum reserve was being considered. Lastly on the data front, the Euro Area composite PMI for October was revised down a tenth from the flash reading to 54.2, whilst the services PMI was also revised down a tenth to 54.6. Separately, the Euro Area PPI reading for September came in at +16.0% year-on-year (vs. +15.4% expected). Lastly, the preliminary Q3 reading of nonfarm productivity showed an annualised decline of -5.0% (vs. -3.1% expected), which was its largest quarterly decline since 1981. To the day ahead now, and the main data highlight will be the aforementioned US jobs report, but European data will also include September figures on Euro Area retail sales and German and French industrial production. Central bank speakers will include the ECB’s Vice President de Guindos, as well as the ECB’s Holzmann, Centeno and Panetta, in addition to the BoE’s Ramsden, Pill and Tenreyro. Tyler Durden Fri, 11/05/2021 - 08:12.....»»

Category: personnelSource: nytNov 5th, 2021

Payrolls Preview: This One Actually Matters

Payrolls Preview: This One Actually Matters October's NFP (consensus exp. +450k) prints tomorrow morning, two days after the FOMC taper announcement on Wednesday. And due to the flexible nature of the monthly tapering, employment reports (together with inflation prints) will now be far more critical as part of the broader evolution of data, which if too divergent could serve to accelerate/decelerate the pace of tapering, not to mention their importance in gauging the road to full employment, and as a result eventual rate lift-off. As Newsquawk notes in its NFP preview, labor proxies have largely been constructive, with the ADP report surprising to the upside, although everyone knows about the rocky correlation between the two. Initial Jobless Claims and Continued Jobless Claims continued to show a decline to successive post-pandemic lows after some prior bumps due to Hurricane Ida. ISM business surveys continued to signal growth, with the Manufacturing employment sub-index rising further into expansionary territory, but Services declining slightly with continued high rates of turnover, albeit still above 50.0. While Challenger Layoffs saw the second consecutive M/M rise to take the level to its highest since May, the firm reported vaccine mandates as the biggest factor for October layoffs. WIth that in mind, here is what consensus expects when the Bureau of Labor Statistics will release the October employment situation report at 08:30EDT on November 5th: Change in nonfarm Payrolls: exp. 450K, Last 194K China in private nonfarm payrolls: exp. 415K, Last 317K Unemployment rate: exp. 4.7%, Last 4.6% Underemployment rate: exp. Last 8.5% Labor force participation rate: exp. 61.8%, Last 61.6% Average hourly earnings M/M:  exp. 0.4%, Last 0.6% Average hourly earnings Y/Y:  exp. 4.9%, last 4.6% POLICY: The October jobs report comes two days after the Fed made its taper announcement. The FOMC statement said that the taper rate of USD 10bln/m and USD 5bln/m of Treasuries and MBS, respectively, could change if needed. Accordingly, an extreme jobs report in either direction could serve to be the trigger for taper adjustments. Meanwhile, Powell said he wants to see more progress on the employment rate before considering rate lift-off, but interestingly, said maximum employment could be met by the middle of next year (although Powell had no clue just what that means). PAYROLLS: The consensus looks for 450k nonfarm payrolls to be added to the US economy in October after 194k in September, which would be a cooler rate of growth than the three- and six-month average rates at 550k/month and 583k /month, respectively. Aggregating the nonfarm payrolls data since March 2020, 154mln Americans are employed as of September, still down by around 5mln from pre-pandemic levels. Goldman Sachs looks for +525k, above the consensus of +450k. As the bank writes, "after two weak months of job growth, tomorrow’s report reflects the first full month of hiring following the expiration of federal enhanced unemployment benefits. The bank's forecast reflects improving public health, strong labor demand,and a partial education rebound as schools gradually fill positions left open at the start of the school year. On the negative side, the seasonal factors may have evolved to fit the strong October 2020 data, raising the seasonal hurdle into morrow’s report. MEASURES OF SLACK: The Unemployment Rate is expected at 4.7% (prev. 4.8%); Labour Force Participation previously at 61.6% vs 63.2% pre-pandemic; U6 measure of underemployment was previously at 8.5% vs 7.0% prepandemic; Employment-population ratio was previously 58.7% vs 61.1% pre-pandemic. These measures of slack will again be used to provide more insight into how Fed officials are judging labor market progress, with many in recent months noting that they are closely watching the Underemployment Rate, Participation Rate, and the Employment-Population Ratio for a better handle on the level of slack that remains in the economy. Indeed, Powell on Wednesday reiterated his view that the unemployment rate understates the shortfall in employment with ground still to be made. EARNINGS: Average Hourly Earnings expected at +0.4% M/M (prev. +0.6%); Average Hourly Earnings expected at +4.9% Y/Y (prev. +4.6%); Average Workweek Hours expected at 34.8hrs (prev. 34.8hrs). ADP: The ADP National Employment Report was encouraging, showing 571k jobs added in October, beating the expected +400k and a better pace than the prior +523k (revised lower from +568k). The report highlighted “Leisure and hospitality remains one of the biggest beneficiaries to the recovery, yet hiring is still heavily impacted by the trajectory of the pandemic, especially for small firms. Current bottlenecks in hiring should fade as the health conditions tied to the COVID-19 variant continue to improve, setting the stage for solid job gains in the coming months". Note ADP's correlation to ADP lately has been far from perfect, thus should be taken with a pinch of salt when trying to determine the strength of the BLS' NFP. Analysts at Goldman Sachs suggest "The October ADP report is consistent with a strong pace of job gains following the end of the federal enhanced unemployment benefits, and we continue to expect nonfarm payroll growth to rebound in this Friday’s employment report". INITIAL JOBLESS CLAIMS: Initial jobless claims data for the week that coincides with the BLS jobs report survey window saw claims at 291k – down from the 351k for the September jobs data survey window – where analysts said claims had fallen at a faster rate than the bump up induced from Hurricane Ida; the corresponding continuing claims data has fallen to 2.480mln in the October survey period vs 2.802mln in the September survey period. In aggregate, the data continues to point to a declining trend, with the bump in prior months seemingly fading. BUSINESS SURVEYS: The Services and Manufacturing ISM reports showed divergent trends again in October, with the service sector employment sub-index easing to 51.6 from 53.0, signalling growth, but at a slower rate, while the manufacturing equivalent rose for a second month, printing 52.0 from 50.2. On the manufacturing sector, ISM said companies are still struggling to meet labour-management plans, but for a second month there were modest signs of progress: "An increasing percentage of comments noted improvements regarding employment, compared to less than 5 percent in September." It said, "an overwhelming majority of panellists indicate their companies are hiring or attempting to hire," where 90% of comments were about seeking additional staffing, while 28% of those expressed difficulty in filling positions down from "nearly half" in September. "The increasing frequency of comments on turnover rates and retirements continued a trend that began in August," ISM said. Meanwhile, in the services sector, employment activity remained in expansionary territory for a fourth straight month; respondents noted, "Staffing and turnover remain significant challenges" and "Continued difficulty filling positions, especially front-line." Also, "Drivers are in short supply; rate of turnover has increased." CHALLENGER LAYOFFS: Job cuts rose to 22.8k in October, the highest since May, from 17.9k in September, marking the second consecutive M/M rise from the Challenger report. 22% of those cuts were attributed to vaccine mandate refusals. Challenger writes, "Last month, the majority of cuts (5,796) were attributed to plant, store, and unit closing. Workers’ refusing to comply with vaccine mandates accounted for 5,071 cuts in October." It adds, "Since June, when vaccines were widely available to adults, 6,843 workers have been cut or left their jobs for this reason. It is currently the 10th highest reason for job cuts this year." On seasonal hiring, "Through October, Challenger has tracked 939,300 seasonal hiring plans from Retailers, Transportation, and Warehousing companies, up 11% from the 849,350 announced during the 2020 holiday season." Challenger concludes, "It is the most since the firm began tracking these direct announcements in 2012." ARGUING FOR A BETTER-THAN-EXPECTED REPORT End of federal enhanced unemployment benefits. The expiration of federal benefits in some states boosted job-finding rates over the summer, and all remaining such programs expired on September 5. As shown in Exhibit 1, the microdata indicated a cumulative 6pp boost to job-finding probabilities for workers losing $300 top-up payments and a 12pp boost for workers losing all benefits. 4.2mnindividuals stopped receiving unemployment compensation between early September and the October survey week, and we are assuming a boost to October job growth on the order of 250k-400k from this channel. Public health. The Delta wave coincided with a late-summer slowdown in job growth, with leisure and hospitality employment growth slowing sharply in August and September (see Exhibit 2). Covid infection rates peaked just before the September survey period and steadily declined over the following month, and restaurant seatings on Open Table have also rebounded (see same Exhibit). Leisure and hospitality job growth picked up from the +56k average pace of the last two reports to around 200-250k in October. This would still be well below the ~400k monthly pace of June and July. Relatedly, the number of workers on unpaid leave increased by 742k cumulatively in August and September (sa by GS), some of whom likely returned to work in time for the October survey period. Big Data. High-frequency data on the labor market were mixed but generally encouraging between the September and October survey weeks. Four of the five measures tracked indicate an above-consensus payroll gain (see Exhibit 3). However, the Homebase data that directionally flagged last month’s payroll miss indicates a smaller rise ADP. Private sector employment in the ADP report increased by 571k in October, above consensus expectations for a 400k gain and consistent with strong growth in the ADP panel. Employer surveys. The employment components of business surveys generally increased in October. The Goldman services survey employment tracker increased 0.2pt to 54.6 and the manufacturing survey employment tracker increased 1.4pt to 59.0. The Goldman Sachs Analyst Index (GSAI) increased 4.4pt to 72.9 in October, and the employment component rose 2.1pt to a record-high of 74.0. Job availability. The Conference Board labor differential—the difference between the percent of respondents saying jobs are plentiful and those saying jobs are hard to get—increased to 45.0, the highest level since 2000. JOLTS job openings decreased by 659k in August to 10.4mn but remain significantly higher than the pre-pandemic record. Jobless claims. Initial jobless claims fell during the October payroll month, averaging 320k per week vs. 339k in September. Continuing claims in regular state programs decreased 572k from survey week to survey week. ARGUING FOR A WEAKER THAN EXPECTED REPORT: Seasonality. The October seasonal factors may have evolved unfavorably due to the crisis—specifically by fitting to last October’s reopening-driven job surge (privatepayrolls +954k mom sa). Coupled with above-trend October growth in several of the years leading up to the crisis, the seasonal factors may evolve to offset some of the strength we forecast in the BLS employment panel in tomorrow’s report. Vaccine mandates. The vaccine mandates announced by the Biden administration non September 9 may have weighed on October job growth in healthcare and government. But while the mandates apply to roughly 25mn unvaccinated workers,the deadline for compliance is generally not until early January. Accordingly, any payroll growth drag is more likely to materialize in future reports. NEUTRAL/MIXED FACTORS: School reopening. Education payrolls declined 180k in September (public and private), despite all 100 of the largest school districts being open for in-person learning, as some janitors and support staff did not return for the fall school year,perhaps due to labor supply constraints. While schools will eventually fill these open positions, the start-of-year catalyst for a large rise in education jobs has passed, and Goldman assumes only around 50k of job creation in these industries in tomorrow’s report (mom sa). Job cuts. Announced layoffs reported by Challenger, Gray & Christmas rebounded 18% month-over-month in October after increasing by 12% in September (sa by GS).Nonetheless, layoffs remain near the three-decade low on this measure Tyler Durden Thu, 11/04/2021 - 22:25.....»»

Category: blogSource: zerohedgeNov 4th, 2021

Forget the supply chain ruining Christmas. Companies are prepping for a blowout holiday season.

The supply-chain crisis is still causing shortages and delays, but firms see something else. They plan to hire a record amount of holiday workers. A help wanted sign is posted outside of Dunkin Donuts in Downtown Crossing in Boston on June 14, 2021. Jessica Rinaldi/The Boston Globe/Getty Images Companies plan to hire 939,300 seasonal workers for the holidays, according to outplacement firm Challenger Gray & Christmas. That's a record. It would be 11% more than last year and the most in the dataset going back to 2012. The report suggests companies expect the supply-chain crisis to fade before holiday spending booms. The supply-chain crisis will ruin the holiday season, according to some really smart people. But companies are preparing for a completely different Thanksgiving-Christmas-Hanukkah gauntlet: a blowout shopping binge.US retailers, warehousing businesses, and transportation companies plan to hire 939,300 seasonal workers to handle holiday demand, outplacement and business coaching firm Challenger Gray & Christmas said in a report published Thursday. That would be a record. It's up 11% from last year's count and the most planned hires since the company began tracking the data in 2012.The report paints an encouraging picture for the ever-critical holiday season. Supply shortages and shipping bottlenecks continue to plague the US recovery. Online out-of-stock warnings are nearly triple the pre-crisis trend, and prices continue to climb at the fastest pace in more than a decade.The mix of high inflation and supply issues threatened to sap a key driver of the recovery. Consumer spending counts for roughly 70% of economic activity, and the holidays see Americans spend hundreds of billions of dollars. A spending surge would see the economy rebound faster and Americans return to pre-pandemic life sooner. The alternative is a malaise.Experts also expect the supply-chain pressures to ease soon. It's likely the US is "past the peak pinch," Jefferies economists led by Aneta Markowska said in a note published October 15, while one of the world's major warehousing CEOs just called a peak this week. Improvements likely began in mid-October and will continue into 2022, the Jefferies team added.The pace of holiday season hiring, though, is already behind the trends seen over the last two years, according to data from jobs website Indeed. The share of seasonal postings that are "hiring urgently" has also ballooned to 7.2%, as of November 1, from last year's reading of o.6%.As seen in the following chart with data provided by Indeed, the share of seasonal job postings per million as of November 1 is 29% below the share of seasonal job postings per million in 2020. It's also down 26% from 2019. !function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r.....»»

Category: topSource: businessinsiderNov 4th, 2021

Futures Hit Fresh All-Time Highs, Treasuries Rise On Post-Fed Euphoria

Futures Hit Fresh All-Time Highs, Treasuries Rise On Post-Fed Euphoria US equity futures plowed on to record-er highs overnight, propped up by a slew of stellar earnings reports and as investors shrugged off the Federal Reserve's first steps to begin paring its pandemic-era support as Powell reiterated that the central bank can be patient on raising interest rates (even if rate hikes odds pricing in lliftoff in July were virtually unchanged after Powell's announcement). The Fed Chair announced Wednesday that the central bank will start reducing bond purchases, adding that officials won’t flinch from action if warranted by inflation. The U.S. dollar and Treasuries advanced. “There was no dramatic Hulk-like metamorphosis from the Fed last night as they kept close to expectation," DB's Jim Reid said in a note. At 730 a.m. ET, Dow e-minis were down 7 points, or 0.02%, S&P 500 e-minis were up 6.75 points, or 0.15%, having earlier tagged a record high 4,662.5, and Nasdaq 100 e-minis were up 61.25 points, or 0.39%. The U.S. dollar and Treasuries advanced. The S&P 500 and Nasdaq notched record all-time closes for their fifth straight sessions on Wednesday, while the Dow Jones Industrial Average posted a record close for the fourth session in a row. A cheery third quarter earnings season coupled with upbeat commentary about future growth from corporate America has helped Wall Street largely dismiss concerns around rising prices, supply chain snags and a mixed macro-economic picture. A widely expected move by the Fed on announcing its plan to start tapering its monthly bond purchases beginning this month, while sticking to the belief about the "transitory" nature of inflation and waiting for more job growth - before raising interest rates, also helped sentiment. Fed policy makers announced a stimulus-tapering plan as expected, but expressed no hurry to raise benchmark rates even though inflation may run hot for months. While that supported risk-taking in stock markets, a second-day reality check appeared to have emerged in the bond and currency markets. A tug-of-war looked set to continue between dovish central banks and markets pricing in quicker-than-expected rate hikes. Data due at 08:30 a.m. ET is expected to show the number of Americans filing new claims for unemployment benefits fell to a fresh 19-month low last week; It will be followed by a more comprehensive nonfarm payrolls report on Friday: "The risks are now skewed towards the (payrolls data) finally aligning with signals elsewhere in the U.S. economy, after a few months of disappointments," said Jeffrey Halley, senior market analyst, at OANDA. "A number north of 500K could cause equity markets to reconsider ignoring the implications of the Fed taper. Similarly, a low print will keep the lower-for-longer monetary party in equities going well into the night." Elsewhere, U.S. Representative Rick Larsen said on Wednesday his fellow House Democrats could complete votes on President Joe Biden's social spending and infrastructure bills as early as midday on Friday In premarket trading, shares of Qualcomm jumped 8.1% after the chipmaker forecast better-than-expected profit and revenue for its current quarter on soaring demand for chips used in phones, cars and other internet-connected devices. Tesla added 1.9% and was set for a record open, while mega-cap tech titans GAMMA (f/k/a FAAMG) edged higher. Oil firms including Exxon and Chevron rose 0.9% and 0.5%, respectively, tracking crude prices. Biotech darling Moderna imploded as much as 11% after it missed expectations and guided sharply lower. Here are some of the biggest U.S. movers today: Qualcomm (QCOM US) gains 8% premarket as results at the chip giant showed a robust performance against a backdrop of supply constraints, while strength in Android handsets is underpinning growth. Booking (BKNG US) gained 3.7% in post-market trading Wednesday after the company reported gross bookings that beat analysts’ forecasts, as an increase in Covid-19 vaccination rates helped spur a rebound. Roku (ROKU US) falls 7% in premarket after third-quarter results that missed expectations on key metrics for the maker of streaming equipment. Upland Software (UPLD US) slumps 22% in premarket after results, with Jefferies downgrading the stock as it’s the third quarter in a row the firm has not delivered a beat on the top line. Skilz (SKLZ US) drops as much as 13% in premarket after the mobile games platform operator reported a net loss for the third quarter. TDH (DOGZ US) surges as much as 173% in U.S. premarket trading after the pet food firm and meme-trader favorite announced a placement. Magnite (MGNI US) falls 10% in premarket after the advertising solutions firm reported adjusted revenue for the third quarter that lagged behind the average analyst estimate. Qorvo (QRVO US) falls 7% in premarket trading after a sales forecast for the communications systems-maker that fell short of the average analyst estimate. Fastly (FSLY US) jumped 11% in premarket after the infrastructure software maker reported quarterly revenue that surpassed the average analyst estimate after misses in the past two quarters. QuinStreet (QNST US) climbs 21% premarket as the online marketing company raises its full year outlook. European stocks popped higher on the open, then drifted off best levels. The Euro Stoxx 50 rose as much as 0.7% with real estate, oil & gas and healthcare the strongest sectors. Alstria Office REIT AG soared as much as 20% after Brookfield Asset Management Inc. made a bid to take it private. Earlier in the session, Asian stocks rose, headed for their first gain in three days, after the Federal Reserve moved to taper stimulus while saying it will be patient on raising interest rates.  The MSCI Asia Pacific Index climbed as much as 0.7%, driven by gains in technology shares including Tencent, Alibaba and Keyence. Japan and China led gains around the region, with stocks also climbing in Indonesia, Thailand and Hong Kong. The Fed indicated it was alert to inflation risks but still sees them as transitory due to pandemic-related supply and demand imbalances. The S&P 500 climbed to a fresh record high after the Fed comments, pushing its gain for 2021 to 24%, while the Asian benchmark is little changed on the year. “The Fed seems to create market expectations that the decoupling of asset purchases reduction and rate hikes remains intact,” said Banny Lam, head of research at CEB International Investment Corp. “Widening negative real interest rates also provide continued support to Asian equities.” Markets in Singapore, India and Malaysia are closed for holidays In Australia, the S&P/ASX 200 index rose 0.5% to close at 7,428.00, boosted by banks, real estate and technology shares. Eight of the 11 industry groups closed higher. Nib rose after the insurance provider reported premium revenue A$669.5 million, up 8.5% year on year. Domino’s Pizza plunged after the pizza chain operator outlined some inflationary risks for 2022 and flagged weaker sales in Japan. Australia’s bright trade picture was underpinned by strong commodities exports. September trade data revealed the surplus narrowing to A$12.2 billion, after an estimated A$12.4 billion. In New Zealand, the S&P/NZX 50 index fell 0.4% to 12,943.94 In FX, the Bloomberg Dollar Spot Index recovered Wednesday’s drop and advanced 0.3% versus all of its Group-of-10 peers apart from the yen amid speculation that a buoyant U.S. economy will support the currency. The Bloomberg Dollar index erased its losses this week, staying within a bullish technical range it has traded in since June. The Treasury curve bull-flattened with U.S. 10-year Treasury yields falling 3bps to 1.57%. “Dollar-yen looks to be finding some support” as it seems reasonable to expect Treasury yields to trend higher, said Sean Callow, senior currency strategist at Westpac. The Fed “may not be moving any more swiftly than expected to the exit from emergency levels of policy accommodation, but it is still exiting,” Ryan Wang, a U.S. economist at HSBC Holdings Plc, wrote in a note. “This should be enough to support the dollar against a number of currencies where central-bank guidance is more overtly dovish. The continued moderation in global activity is also likely to support the USD.” The euro fell to its weakest level this week and was the worst performer among G-10 currencies; European bond yields fell, led by the short end. The pound fell against a stronger dollar and gained against the euro as investors weighed up the Bank of England’s upcoming monetary policy announcement. The pound’s volatility skew versus the dollar has shifted modestly higher this week ahead of the Bank of England policy decision, yet remains deeply in favor of downside exposure. Norway’s krone extended losses against both the dollar and the euro, even as Norges Bank left its key rate unchanged at 0.25% as expected while reitirating that the policy rate will most likely be raised in December. In rates, curves flattened as 5-, 10- and 30-year bond yields fell at least two basis points each on Thursday, while the two-year rate was little changed. Treasuries were higher with the curve flatter, erasing a portion of Wednesday’s post-FOMC bear-steepening losses. The 10-year yield was richer by ~3bp at 1.57%, outperforming bunds by ~2bp, gilts by ~1bp; Bank of England rate decision priced into overnight swaps is a hike, while analysts favor no change. Treasuries outperformed European bond markets, with stock futures holding Wednesday’s record highs. Bank of England rate decision at 8am ET may deliver first increase since the pandemic. U.S. curves were flatter, unwinding some of Wednesday’s steepening, with 2s10s tighter by ~2bp. In commodities, crude futures rally, recouping over half of Wednesday’s losses. WTI rises 0.9% to regain a $81-handle, Brent adds over 1% before stalling near $83 ahead of OPEC+ gathering. Spot gold holds Asia’s narrow range near $1,775/oz. Base metals are mixed: LME copper and nickel are the best performers; tin and zinc are in the red. Looking at the day ahead now, and the highlight will be the aforementioned BoE meeting, while there’ll also be remarks from ECB President Lagarde, the ECB’s de Cos, Elderson and Schnabel, and BoE Deputy Governor Cunliffe. On the data side, releases include German factory orders for September, the Euro Area October services and composite PMIs and September PPI reading, whilst from the US there’s the September trade balance and the weekly initial jobless claims. Lastly, the OPEC+ group will be meeting to discuss output, and earnings releases today include Moderna, Square, Airbnb, Uber, Duke Energy and Regeneron. Market Snapshot S&P 500 futures up 0.1% to 4,659.50 STOXX Europe 600 up 0.5% to 483.53 MXAP up 0.6% to 199.02 MXAPJ up 0.4% to 647.67 Nikkei up 0.9% to 29,794.37 Topix up 1.2% to 2,055.56 Hang Seng Index up 0.8% to 25,225.19 Shanghai Composite up 0.8% to 3,526.87 Sensex down 0.4% to 59,771.92 Australia S&P/ASX 200 up 0.5% to 7,427.99 Kospi up 0.3% to 2,983.22 German 10Y yield little changed at -0.18% Euro down 0.5% to $1.1551 Brent Futures up 0.8% to $82.57/bbl Gold spot up 0.3% to $1,776.28 U.S. Dollar Index up 0.37% to 94.21 Top Overnight News from Bloomberg The Bank of England will decide Thursday whether to deliver its first interest-rate hike since the pandemic as a divided Monetary Policy Committee grapples with spiking inflation and slowing growth The U.S. is asking OPEC+ to increase output by as much as 800,000 barrels a day, said delegates and diplomats, but the organization is expected to stick to its planned gradual increase, according to a Bloomberg survey Investors are hoping the Federal Reserve can manage the path toward rate hikes as smoothly as its taper announcement, according to strategists, who are cautiously optimistic the coming months will see moderate advances for yields, the dollar and equities. Friday’s labor report is seen as the next flash point for markets, given rates traders remain relatively aggressive about the need for Chair Jerome Powell to avoid being overly patient about hiking borrowing costs Bank of Japan Governor Haruhiko Kuroda and Prime Minister Fumio Kishida helped further shore up the nation’s commitment to its 2% inflation goal and tamp down any lingering speculation of a rethink of the target or tapering plans Having abandoned its experimental bond-yield target two days ago, the Reserve Bank of Australia is now left with the trusty old tools of policy making -- facing traders who still reckon it’s behind the curve Here is a more detailed breakdown of global markets courtesy of Newsquawk Asia-Pac stocks traded higher amid tailwinds from the fresh record highs stateside in the aftermath of the FOMC where the Fed announced it is to begin tapering asset purchases but suggested it was in no rush to hike rates. ASX 200 (+0.5%) was kept afloat by advances in tech and financials but with gains in the index capped after weak Retail Sales data and rising COVID-19 cases for Australia’s most populous states, while the energy sector underperformed after oil prices tumbled 4.5% yesterday due to bearish inventory data and the announcement that Iran nuclear talks will resume on November 29th in Vienna. Nikkei 225 (+0.9%) was buoyed on return from holiday as it coat-tailed on the recent advances in USD/JPY and with Japan mulling easing border controls as soon as next Monday, with Toyota also holding on to gains after a jump in H1 profits and JPY 150bln buyback announcement, although the Nikkei finished well off intraday highs after stalling on approach to the 30k level. Hang Seng (+0.8%) and Shanghai Comp. (+0.8%) conformed to the broad upbeat mood but was slow to start after another substantial liquidity drain by the PBoC despite the suggestion by Chinese press that recent reverse repo action showed stabilisation efforts. In addition, COVID-19 concerns continued to linger with Beijing having suspended inbound trains from 23 regions to curb the spread of the virus, while there was also attention on the geopolitical front after the US Department of Defense warned that China’s nuclear stockpile is outpacing forecasts and with China conducting week-long live-fire drills in the East China Sea. Finally, 10yr JGBs were steady with only a slight pullback seen from yesterday’s advances and with prices largely ignoring the subdued picture in T-notes which were pressured heading into the Fed taper announcement, while JGBs were also kept afloat after the 10yr inflation-indexed auction from Japan which showed an increase in both the b/c and lowest accepted prices. Top Asian News From Pianos to Paint, the Chip Crunch Is Hurting Japan Earnings Toyota’s Swelling Profits Belie Global Auto Parts Shortages EU Lawmakers’ Call for High Level Taiwan Ties Defies China Shimao Halts Retail Investors’ Bids for Local Bonds After Plunge Stocks in Europe hold onto the positive bias (Euro Stoxx 50 +0.4%; Stoxx 600 +0.5%) - which originally emanated from the post-FOMC Wall Street session and later reverberated across APAC. US equity futures have been consolidating following yesterdays post-Powell ramp, with the NQ (+0.4%) outperforming the RTY (+0.2%), ES (+0.1%) and YM (Unch). Back to Europe, bourses are posting broad-based gains in what was a morning doused in European corporate updates, whilst the UK’s FTSE 100 (+0.4%) is on standby for the BoE policy decision (full preview available in the Newsquawk Research Suite). Sectors in Europe are mostly firmer with no real overarching bias. Oil & Gas lead the gains following yesterday’s underperformance and in the run-up to the JMMC/OPEC+ meetings later today. Healthcare meanwhile is boosted by pharma-behemoths Roche (+2.5%) and Novartis (+1.6%) after the firms agreed on a bilateral transaction for the sale of 53.3mln (approximately 33%) Roche bearer shares held by Novartis for a total consideration of USD 20.7bln. This in turn has pushed the SMI (+0.8%) to modestly outperform the region. The Telecoms sector is also buoyed by BT (+5.7%) amid constructive earnings, but gains for the sector are capped Telefonica (-1.6%), who hold a larger sector weighting, following their metrics. The morning has been busy in terms of bank earnings, although the sector is constrained by yield dynamics. Nonetheless, SocGen (+3.3%), ING (+1.1%), Commerzbank (+5.2%) and Credit Suisse (+0.7%) all reported today – with the latter also announcing the exit of its prime brokerage activities and will be shifting its focus on to its wealth management business in a bid to better manage risks. Over to the consumer sector, Sainsbury’s (-4.3%) trundles lower after flagging complications from supply chain issues. Finally, in terms of M&A, Alstria Office (+17.5%) soars after Brookfield offered to buy the Co. for EUR 19.50/shr in cash, a premium to yesterday’s EUR 16.62/shr closing price. Top European News Brookfield Enters German Real Estate Fray With Bid for Alstria Credit Suisse Flags Loss Next Quarter to Cap Year to Forget Novartis Unwinds Roche Ties With $20.7 Billion Stake Sale Aston Martin Counts on $3 Million Valkyrie as SUV Drives Rebound In FX, the Dollar has erased all and more of its initial or knee-jerk declines in wake of the FOMC policy meeting that confirmed the start of QE tapering in a few days' time at the pre-announced pace, but kept clear distance between the unwinding of asset purchase and rate lift-off. However, there was a subtle tweak to the language regarding inflation to indicate less of a transitory assessment and Fed chair Powell refrained from using the ‘t’ word in his press conference before responding to a question by saying that it is also used to convey the view that prices rises caused by bottlenecks and supply-demand imbalances will not leave a legacy of persistently higher inflation. In index terms, a marginally higher peak at 94.280 vs 94.217 at best on Wednesday follows a fractionally higher low of 93.818 vs 93.809 and brings Monday’s w-t-d apex (94.313) back into contention ahead of Challenger Lay-offs, jobless claims, trade data and Q3 labour costs that were highlighted by Powell as a key gauge of tightness in the labour market, which he expected to reach max employment levels by mid-2022. EUR - Mixed Eurozone services and composite PMIs have not afforded the Euro any protection from the aforementioned Greenback revival, while the yield backdrop is also weighing as EGB/UST spreads widen, but Eur/Usd might glean some support from option expiries as 1.1 bn resides at 1.1550 and 1.1525. Moreover, the headline pair has found underlying bids around the half round number and a recent trough comes in at 1.1535 (October 29) ahead of the double 2021 low of 1.1525. GBP - Sterling is also succumbing to the broad Buck bounce, but also treading cautiously into the BoE amidst a marked unwind of rate hike pricing via Short Sterling contracts alongside a recovery in UK debt. Cable is hovering around 1.3620 having pulled up just shy of 1.3700 and options are anticipating an 80 pip break-even for the live MPC event that is far from certain even though ‘markets’ are anticipating a 15 bp hike. Note also, implied volatility on the Eur/Gbp straddle suggests a 43 pip move either way, though the cross may also be prone to movement from the current 0.8491-65 range pending developments in France where Brexit Minister Frost is aiming to untangle crossed lines over fishing licences. NZD/AUD/CAD - The Kiwi, Aussie and Loonie are all weaker vs their US counterpart, with Nzd/Usd and Aud/Usd hovering in the low 0.7100s and 0.7400s respectively, and the latter not far off post-RBA reversal lows after downbeat Q3 retail sales and exports within the overall trade balance overnight. Meanwhile, only a tame rebound in crude prices appears to be capping Usd/Cad around a 1.2400 axis in advance of Canadian trade and the jobs face-off with the US on Friday. CHF/JPY - Relative outperformers, or at least holding up better than other majors in the face of the Dollar rebound, as the Franc meanders between 0.9144-11 irrespective of a deterioration in Swiss consumer sentiment and the Yen contains losses below 114.00 on the return of Japanese markets from Culture Day to a benign bond backdrop overall. Note, hefty option expiry interest may keep Usd/Jpy restrained as 2.1 bn sits at the round number and a further 1.8 bn at 114.30. In commodities, WTI and Brent front-month futures have firmer on the day as the benchmarks clamber off yesterday’s worst levels despite the rampant Dollar and in the run-up to the JMMC and OPEC+ meetings slated for 13:00GMT and 14:00GMT respectively (full preview available in the Newsquawk Research Suite). Markets expect a continuation of the current plan to ease output curbs by 400k BPD/m. Outside calls have been getting louder for the producers to open the taps more than planned amid inflationary feed-through to consumers and company margins, although ministers, including de-facto heads Saudi and Russia, have been putting weight behind current plans, with no pushback seen from members within OPEC+ thus far. Furthermore, the COVID situation in China is deteriorating, hence ministers will likely express a cautious approach. However, the US is asking OPEC+ to increase supply by 600-800k BPD, according to delegates. Note some journalists noted that there are three options the US has offered OPEC+, 1) a 600k BPD hike, 2) an 800k BPD hike and 3) 100% compliance on a 400k BPD hike. Nonetheless, sources suggested OPEC+ is likely to stick to plans to raise output by 400k BPD despite calls from the US for extra supply; adding that the US has plenty of capacity to raise output itself. The US-OPEC+ dynamics will be worth keeping on the radar following this meeting. As a reminder, the US threatened the release of its SPR whilst also refusing to rule out oil export bans – suggesting that all tools are being looked at in a bid to lower prices. It’s also worth being cognizant of the knock-on effect the OPEC+ decision will have on Iranian nuclear talks – scheduled to resume on November 29th – with higher oil prices and a lack of OPEC+ coordination, possibly providing more incentives for the US to offer more concessions. WTI Dec takes aim at USD 82/bbl (vs 79.74/bbl low) at the time of writing whilst Brent Jan extends above USD 83/bbl (vs 81.07/bbl low). Metals markets are less interesting this morning, spot gold and silver are consolidating and trade relatively flat, with the former around USD 1,775/oz and the latter just north of USD 23.50/oz. Meanwhile, LME copper is modestly firmer but trades on either side of USD 9,500/t. US Event Calendar 8:30am: Oct. Initial Jobless Claims, est. 275,000, prior 281,000; Continuing Claims, est. 2.15m, prior 2.24m 8:30am: 3Q Unit Labor Costs, est. 7.0%, prior 1.3%; Nonfarm Productivity, est. -3.1%, prior 2.1% 8:30am: Sept. Trade Balance, est. -$80.2b, prior -$73.3b DB's Jim Reid concludes the overnight wrap This morning I’m actually going to put a suit on for the first time in nearly 20 months. In a way I’ll be upset if it fits me as I’ve been doing my Bryson DeChambeau weights routine for much of this time between pockets of injuries and surgery. However, I suspect 30-40mins 3 or 4 times a week won’t leave my suit too vulnerable to an “Incredible Hulk” moment when I put it on. There was no dramatic Hulk-like metamorphosis from the Fed last night as they kept close to expectations and delivered the $15/bn a month taper that our US econ team and consensus expected (Their full review is here). They pre-announced the purchase pace for November and December, whilst remarking that a similar pace would likely prevail so long as the economy evolves as expected. The Fed maintained the pace of taper would change in step with any changes to the outlook. The statement slightly tweaked the characterisation of inflation, noting that it was expected to be transitory. Chair Powell explained this in the press conference, maintaining the institutional view that elevated inflation was not expected to remain persistent and would return to the Fed’s long-term goal as supply bottlenecks abated and Covid-19 moved to the rear-view mirror. He also admitted the change reflected the reality that inflation has been much higher than they had expected, and recognised the burdens that it created for everyday consumers. The press conference spent a lot of time focusing on the dichotomy between high near-term inflation and the Committee’s assessment of full employment, as the market moves to pricing when lift-off will take place. The Chair noted the Committee will need to be flexible when judging what constitutes full employment, as it is a moving target and has moved since before the pandemic. A key point he returned to multiple times is the Committee would need to judge how the labour market evolves once the Delta variant is well and truly behind us. While stressing patience in evaluating these incoming data, he maintained optionality by also noting the Fed would stand ready to raise rates if inflation were threating to move persistently above the Fed’s goal. This risk management consideration is why they’re maintaining flexibility over the pace of taper. STIR markets were still pricing lift-off to take place sometime in 3Q 2022, and for there to be 2 hikes next year, unchanged from before the meeting. Equities were mostly flat on the day before the announcement but progressively climbed higher during and after the presser, with the S&P 500, Nasdaq, and DJIA finishing the day +0.65%, +1.04%, and +0.29% higher, respectively. 2yr yields increased +1.8bps on the day but closed roughly where they were pre-announcement. 10yr yields were +5.3bps higher on the day though with around +4bps added post FOMC and around +9bps from the early lows when fixed income was rallying across the globe. Elsewhere, 10yr breakevens were wider, increasing +3.6bps to 2.56%. Meanwhile, ECB President Lagarde sounded in no hurry to follow the BoE (preview immediate below for today) and the Fed on rate hikes. In a speech yesterday, she said that their three conditions for raising rates “are very unlikely to be satisfied next year”, as “the outlook for inflation over the medium term remains subdued” in spite of the recent surge in inflation. She re-emphasised the point in an interview almost verbatim later in the day while the Fed presser was ongoing, stating a 2022 hike was very unlikely, offering more forceful pushback of market pricing than she opted for during last week’s Governing Council meeting. Central banks will remain in the spotlight again today thanks to the BoE’s policy decision, which is out at 12:00 London time. Our UK economists are expecting that they’ll deliver their first post-pandemic rate hike of 15bps, taking the Bank Rate up to 0.25%, as well as end their current QE program. Similarly to the US, this comes amidst inflation readings that have persistently surprised to the upside over recent months, with CPI at +3.1% in September, and our economists write that they see the BoE’s forecasts being upgraded to show peak CPI nearer to 5%, remaining above target for nearly all of next year, which is broadly in line with recent comments from Chief Economist Pill in a recent FT interview. For more details see their preview (link here). Against this backdrop of central bank action, we had some solid economic data out of the US yesterday that further supported risk appetite. First, there was the ISM services index for October, which rose to a record high of 66.7 (vs. 62.0 expected), so a very promising sign at the start of Q4, even if the prices paid measure rose to 82.9, which was the highest since 2005. Before that we also had the ADP’s report of private payrolls for October, which showed an increase of +571k (vs. +400k expected), which is the strongest growth since June. That comes ahead of tomorrow’s US jobs report, where our economists are looking for growth of +400k in the headline nonfarm payrolls number, with the unemployment rate ticking down to 4.7%. I’ve been trying to get my mantra of the US more likely travelling down a “growthflation” path (over “stagflation”) into the vernacular. However, I think I’ll need a better term if I want it to rival say “BRICs”! That backdrop of positive data supported European markets ahead of the Fed, where the STOXX 600 advanced +0.35% to hit another all-time high. Sovereign bonds advanced too, with yields on 10yr bunds (-0.3bps), OATs (-0.8bps) and BTPs (-2.4bps) all moving lower, though gilts (+3.6bps) were the exception ahead of the BoE later. The strong data also lifted us off the yield lows of the day as we started with a big bond rally. We also saw some significant movements in energy prices, with European natural gas futures surging back +13.23% yesterday amidst a recent decline in fuel shipments from Russia, whilst both Brent crude (-3.22%) and WTI (-3.63%) oil prices saw a major pullback ahead of today’s OPEC+ meeting. In Asia, most major indices are trading higher this morning, including the Nikkei 225 (+0.74%), the KOSPI (+0.30%), the Hang Seng (+0.27%) and the Shanghai Composite (+0.64%), amid gains in US equities yesterday. S&P 500 futures (+0.01%) are almost unchanged, while the 10y US Treasury is at 1.60% (-0.5bps). Meanwhile on the political scene, the US Democrats were reacting to a bad set of results in Tuesday’s election, after the Republicans won the Virginia governor’s race. However, the New Jersey governor’s race was won by Democrat Gov. Phil Murphy 50.2% vs 49%, but came in much closer than the polls had suggested before the election. Gov. Murphy is the first Democrat to win re-election as governor in the state since 1977. Overall though, since President Biden won those two states in 2020 by 10pts and 16pts, respectively, the results have obviously come as a shock to many Democrats. The situation has strong echoes of 2009, a year after President Obama’s election when the Democrats also had control of the presidency and both houses of Congress, when they were trying to push through Obamacare. That round of elections saw the Republicans win the gubernatorial elections in both Virginia and New Jersey (following Democratic victories on the previous occasion), before the Republicans went onto make sizeable gains in the 2010 midterm elections the following year. There’s still just over a year until President Biden’s first set of midterm elections, but the Democrats will be hoping this doesn’t presage a repeat of those 2010 losses. Lastly on the data front, US factory orders grew by +0.2% in September (vs. +0.1% expected). Separately, the UK’s composite PMI was revised up a point from the flash reading to 57.8, and the US composite PMI was also revised up three-tenths to 57.6. To the day ahead now, and the highlight will be the aforementioned BoE meeting, while there’ll also be remarks from ECB President Lagarde, the ECB’s de Cos, Elderson and Schnabel, and BoE Deputy Governor Cunliffe. On the data side, releases include German factory orders for September, the Euro Area October services and composite PMIs and September PPI reading, whilst from the US there’s the September trade balance and the weekly initial jobless claims. Lastly, the OPEC+ group will be meeting to discuss output, and earnings releases today include Moderna, Square, Airbnb, Uber, Duke Energy and Regeneron. Tyler Durden Thu, 11/04/2021 - 07:53.....»»

Category: blogSource: zerohedgeNov 4th, 2021

Janet Yellen Flip-Flops, Insists Biden"s "BBB" Plan Will Actually Help Suppress Inflation

Janet Yellen Flip-Flops, Insists Biden's 'BBB' Plan Will Actually Help Suppress Inflation Before jetting off to Rome for a weekend G-20 summit in Rome, President Biden on Thursday offered his most detailed outline yet of the Dems new $1.75 trillion social spending/climate changing package, a number that was too small for progressives, who proceeded to block a Thursday vote on the president's "bipartisan" infrastructure bill. Speaking to CNBC from Rome where Yellen is attending the G-20 conference of global leaders with President Biden, the Treasury Secretary delivered her latest pitch in support of the $1.75 trillion social spending-climate agenda, covering a critical area of concern that her boss did his best to avoid during his speech yesterday. That subject? Inflation, which Biden's aides probably felt might be too dangerous for him to discuss due to his cognitive decline. And so Treasury Secretary Yellen was left to pick up the slack with a 0500ET interview on CNBC's Worldwide Exchange. The broad takeaway from her remarks: President Biden's two-party social-spending-climate plan and his "bipartisan" infrastructure plan will actually help lower inflation by reducing costs for households for key services like child-care, health care and other issues. Ultimately, she expects these pressures to subside by the second half of next year. “I don’t think that these investments will drive up inflation at all,” she told CNBC’s Sara Eisen during a live “Worldwide Exchange” interview. Months ago, Yellen was one of the first to warn about the looming inflationary beast. But now she's in charge of taming it, so of course her rhetoric has changed. Biden claimed during his White House address yesterday that "17 Nobel winning economists" had signed off on his framework, claiming it wouldn't push up inflation because it would be - more or less - be fully paid for by tax hikes while creating new economic opportunities. Right now, the bigger driver of inflation is the supply-side shocks like those unveiled by Apple during last night's earnings. "I think supply chain issues are holding our economy back somewhat...it will take a while to boost supply." @SecYellen discusses the impact of the supply chain crunch on the American and global economy, and tells @SaraEisen when to expect some relief: pic.twitter.com/yyzrsOSlmL — Worldwide Exchange (@CNBCWEX) October 29, 2021 Yellen renewed her push for White House spending plans that are unpopular with several factions of Congress and have yet to be approved. But even as the headline CPI number hits its highest level in 30 years, Yellen insisted that Biden's program would be a net benefit for workers. "It will boost the economy’s potential to grow, the economy’s supply potential, which tends to push inflation down, not up," she said. "For many American families experiencing inflation, seeing the prices of gas and other things that they buy rise, what this package will do is lower some of the most important costs, what they pay for health care, for child care. It’s anti-inflationary in that sense as well." The only problem with Yellen's worldview right now is that, as the holiday's approach, GDP is slowing because more than 100 ships are being left floating in a massive logjam making it nearly impossible for companies to obtain the goods they need ahead of the holiday season. As we noted the other day, economists from the American farm bureau warned that the US is headed for its expensive Thanksgiving ever. In effect, the reality of our current economy reflects the exact opposite of what Yellen says is coming just around the corner. "Not only has inflation risen, but growth also has decelerated. Due in large part to supply issues that have left dozens of ships stranded at U.S. ports, the pace of gross domestic product growth slowed to 2% in the third quarter, the slowest rate since the pandemic-induced recession ended in April 2020. Part of the administration’s G-20 agenda will be addressing its pet economic concerns, including the implementation of a global minimum for corporate taxes, as well as addressing climate change and the supply chain issues that have hampered growth and threaten to cut into holiday spending patterns. Yellen said she expects the supply chain issues "will be addressed over the medium term." She called the White House’s Build Back Better program "transformational" in addressing the economy’s needs as the nation seeks to emerge from the Covid-19 pandemic. She insisted that the spending plans are "fully paid for" through tax proposals primarily aimed at higher earners and corporations. "I think it really helps us invest in physical capital. That’s public infrastructure that’s important to productivity growth," she said. "There’s investment in human capital, there’s investment in research and development, the support that families will receive that will help them participate in the labor market." As we quipped on twitter just a week ago, the nabobs running American fiscal and monetary policy have been slowly moving the goalposts vis-a-vis inflation since the start of the year, when Larry Summers first warned about the risks of rising inflation - prompting his fellow academics to response with a mix of derision and mockery. Big finance experts: Q1 2021: There is inflation, but it's transitory Q3 2021: Ok, inflation isn't transitory, but there is no stagflation Q1 2022: Ok, there is stagflation, but this time is different and we are definitely not in the 1970s — zerohedge (@zerohedge) October 22, 2021 Now, Treasury Secretary Janet Yellen has revised the narrative once again: President Biden's massive spending plan won't stoke even more inflation (like other recent COVID-related stmulus plans have) because the Biden plan will help stoke economic growth by allowing more women to participate in the workforce while investing in "public infrastructure." She called the White House’s Build Back Better program “transformational” in addressing the economy’s needs as the nation seeks to emerge from the Covid-19 pandemic. She insisted that the spending plans are “fully paid for” through tax proposals primarily aimed at higher earners and corporations. “I think it really helps us invest in physical capital. That’s public infrastructure that’s important to productivity growth,” she said. “There’s investment in human capital, there’s investment in research and development, the support that families will receive that will help them participate in the labor market.” In the end, she's hopeful that economic growth will accelerate and inflation will recede. But to claim that this is a certainty is magical thinking at best. Over the past few weeks, the debate surrounding the inherent "transitoriness of inflation" has become increasingly fierce, forcing Fed Chairman Jerome Powell to tacitly signale to other senior Fed officials that the word "transitory" shouldn't be used during public remarks, even as  America's current inflationary issues, as the accelerating price pressures have already risen more quickly than the Fed had anticipated (something billionaire PTJ warned is the "biggest threat to society). Yellen said she Friday she expects inflation to ebb over time and return to its longer-run average around 2%, which tracks with the Fed's latest economic projections. The fact that it hasn't subsided as quickly as the Fed had hoped is simply a reflection of the fact that humanity is still caught in an unprecedented pandemic in a globalized world. "I think it’s still fair to use [‘transitory’] in the sense that even if it doesn’t mean a month or two, it means a little bit longer than that. I think it conveys that the pressures that we’re seeing are related to a unique shock to the economy," she said. "As the United States recovers and as vaccinations proceed globally, and the global economic activity revives, that pricing pressure will ease." To be sure, not every business has been harmed or frustrated by inflation. Take hotels, for instance, which have the luxury of re-setting their prices every night.  "If you look at the $3 trillion of incremental savings during COVID, there’s a long way to go to spend it all. Thank you Federal Reserve and the U.S. Congress for fiscal and monetary stimulus," said CEO Christopher Nassetta. But what we would like to know is why Yellen and other top officials at the Fed and elsewhere seem so blithe to throw away their reputations as sober-minded observers of the American economy. There was - not all that long ago - a time when Yellen spoke honestly about the inflationary threat. But now that this threat has apparently surpassed the Fed and Treasury's worst-case scenarios, the Bide Admin and its top economic officials have decided to return to magical thinking while Biden weighs deploying the National Guard to drive trucks laden with goods off boatss. Tyler Durden Fri, 10/29/2021 - 19:05.....»»

Category: blogSource: zerohedgeOct 29th, 2021

UK Faces "Plan B" Peril: COVID Multiplies The Economic Threat

UK Faces 'Plan B' Peril: COVID Multiplies The Economic Threat Authored by Bill Blain via MorningPorridge.com, “T’was the best of times, t’was the worst of times …” The risks of Plan B and a further Covid Lockdown are multiplying. It will clearly impact markets, but the real economic effects of Covid combined with energy costs, supply chains and bleak company earnings forecasts may be pushing us towards stagflation anyway. "How to address the biggest economic shock in 300 years?” asked UK Chancellor Rishi Sunak while doing his pre-budget politicking last week. Whatever you believe or don’t believe about Covid, Sunak is quite right to consider it at the centre of the on-going economic crisis. Markets should factor that reality accordingly – which boils down to a very simple question: how much will Covid force Central Banks and Governments to act to stabilise the global economy? This week pay attention to the UK Budget on Wednesday on how Chancellor Sunak addresses the ongoing critical-care needs of the UK by stepping away from his previous “policy-mistake” sounding mention of austerity spending cuts and tax-rises to make noises about increased “levelling out” spending. Hanging over everything will be the question – how much more economic pain could Covid inflict? It’s a tough question.  A new lockdown would be economic suicide. The UK government plans to ride it out – but the history of the last 19 months says they won’t hesitate to make a U-Turn and institute Plan B if they think their credibility is on the line if the numbers of infections surge and the health service looks swamped. That’s a potential trade: should you sell UK stocks now on the likelihood the government will panic? (And buy-them back almost immediately as the Bank of England stops the noise about a rate cut and QE taper.) But… another question is how much will rising infection numbers cause the economy to contract anyway? How much has confidence already been dented? Here in Blighty, It’s a tale of two headlines: Daily Mirror: Fears of new lockdown Christmas as scientists warn tougher Covid measures needed NOW. Daily Telegraph: Coronavirus cases to slump this winter, say scientists. The papers looks like it boils down to a political split – which may reflect the UK’s national pride in our venerable National Health Service. How much we are prepared to sacrifice to protect the sacred cow of the NHS has become a badge. The left-leaning, Labour supporting Daily Mirror is peddling one set of scientific views, while the daily journal of the Conservative Party, the Torygraph, finds another set of white-coats to quote. What does the threat of Plan B or further lockdowns mean for the UK economy? A quick glance round the motorway service stations we stopped in yesterday shows many more people wearing masks, and I’ll be interested in how many people start working from again as the perceived threat level rises. I wonder how rationally people consider the pandemic. The vector for the rise in infections is schoolchildren being children – their interactions will diminish this week due to mid-term holidays. Back in September, a British Medical Journal report (How is vaccination affecting hospital admissions and deaths?) said 84% of hospital admissions before July had not been vaccinated, although rates of vaccinated infections were rising – their conclusion was simple: unvaccinated people are 3 times as likely to go to hospital and 3 times more likely to die. There is a broad consensus the efficacy of vaccines wanes after 5-6 months – hence booster shots. Maybe the best way to move forward is the Swedish solution of taking personal responsibility to rising infection numbers? However, research in the Guardian earlier this year suggests that strict-lockdown Denmark and easy-going Sweden experienced similar levels of economic dislocation, but Sweden suffered a death rate 5 times higher than Denmark! It’s down to behaviour – Sweden kept the schools, offices, shops and pubs open, but people got careful, stopped going out and kept the kids at home anyway. As the supply chain crisis continues, and energy prices go through the roof, we already know it’s going to be a tough holiday season – retailers warning of toy shortages and price hikes on scarce Turkeys. It impacts consumer behaviour – we all want to spend, but if we can’t because of rising prices and falling incomes, and it feels dangerous to do so – then what effect does that have on spending patterns? It’s got to be negative. We’re seeing the supply chain effects beginning to hit corporate results – an increasing number of firms have been giving lacklustre holiday earnings guidance. Intel took a spanking last week on the back of expectations of a downbeat outlook. Snap got pummelled on the back of a disappointing Q3 number. This week is big for Big Tech earnings – and names from Apple to Amazon could be pummelled by supply chain shortages and the problems these cause meeting holiday demand. Headlines about a downbeat Apple sales forecast have consequences – not just in making global consumers a little more depressed about the future. The very first thing junior economists learn about is multiplier effects – on consequences as lay-people call them. A company finds it can’t get it full allocation of Christmas units to sell so it cuts advertising, cuts stuff overtime and starts planning to cut investment in new plants, warehouses and future spending. Repeat over the whole economy, and with everyone with less in their pockets… as “transitory” inflation feels increasingly permanent, and you’ve got a perfect recipe for stagflation. I often get accused of being a misery-guts and far too negative about the state of the global economy. My own market mantras include the classic: “Things are never as bad as you fear, but never as good as you hope”. Think about that for a moment. Covid caused the greatest economic downspike in 300 years, but the actions of swift government interventions to prop up commerce and fuel consumer spending kept the global economy functional, but wobbly. The markets quickly began to anticipate recovery and upside – yet these remain vulnerable to the news and perceptions around this Coronavirus. Covid fears are multiplying again. Renewed Covid instability on the back of lockdown news from China, Europe, Australasia, wherever, will continue to roil markets. Supply chains remain fractured and the consequences of the virus effects on the global economy will continue. Get used to it… Tyler Durden Tue, 10/26/2021 - 03:30.....»»

Category: blogSource: zerohedgeOct 26th, 2021