: Planet Fitness downgraded to neutral from overweight at J.P. Morgan

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Futures Drift Lower Ahead Of CPI Report S&P 500, Nasdaq 100 futures drifted lower overnight, and were last down modestly ahead of the US CPI release (previewed here), as European markets tumbled across the board on signs the region is quickly sliding into stagflation. As of 7:40am, S&P and Nasdaq 100 futures traded down 0.1% as Apple looked set for a second day of declines after China flagged security problems with iPhones, while saying it isn’t barring purchases. . The dollar remains steady ahead of the US CPI release due later Wednesday, while European stocks and German bunds slipped as markets boost bets on ECB policy tightening. Gold is down slightly and oil is up 0.68% rising to a new 2023 high after deficit warnings from the International Energy Agency. In premarket trading, electric-vehicle makers including XPeng and Nio lead a drop in US-listed Chinese stocks after the European Union launched an investigation into Chinese subsidies for EVs. Apple fell 0.5%, erasing earlier gains, as China flagged security problems with iPhones. Here are some other notable premarket movers: Ford gains 1.6% after UBS double-upgrades its rating to buy from sell, citing greater-than-expected earnings resilience driven by the automaker’s Ford Pro segment. Grab fell 6.3% as some investors took money out for investing in IPO of Ryde, a smaller ride-hailing rival based in Singapore, according to Aletheia Capital. Rocket Pharmaceuticals shares jump 18% after the gene-therapy developer said it’s in alignment with the US Food and Drug Administration on the global Phase 2 trial of RP-A501 for Danon disease, which is a fatal inherited cardiomyopathy. Workhorse rose 18% after saying it received IRS approval as a qualified manufacturer for the Commercial Clean Vehicle Credit.  Arm Holdings Plc’s long-anticipated initial public offering is set to price Wednesday in the largest listing of the year. Arm is now looking to price the IP0 shares a dollar or more above the $47 to $51 target range, Bloomberg News reported. Traders are bracing for the US CPI data (full preview here) on Wednesday and a faster-than-forecast print would likely rattle markets given the economic concerns in Europe. Economists at Bloomberg Economics say a third month of subdued core inflation would bolster the case for the Federal Reserve to cease rate increases, although the recent surge in oil prices means that headline inflation is about to jump the most since Since 2022. Here is a bank by bank summary of CPI forecasts: 3.7% - Barclays 3.7% - Citigroup 3.7% - HSBC 3.7% - UBS 3.6% - Bank of America 3.6% - Goldman Sachs 3.6% - JP Morgan Chase 3.6% - Morgan Stanley 3.6% - Wells Fargo “Markets appear on edge ahead of US inflation and the ECB’s rate decision,” Citigroup Inc. strategists including Luis Costa and Alexander Rozhetskin wrote in a note. “With oil edging above $90, fears of stickier inflation are increasing, while some reports indicate that the ECB’s latest staff projection might prompt a more hawkish stance.” The US data are expected to send a mixed message on the US economy, according to Bloomberg Economics. Monthly headline inflation is seen at 0.6%, while annualized core inflation will stay near the Fed’s 2% target for a third straight month. “Given stocks are currently quite directionless a faster-than-expected CPI reading can raise investors nerves and refocus their minds on the risks of high energy price volatility,” said Janet Mui, head of market analysis at RBC Brewin Dolphin. “If both headline and core surprised up then it could trigger a negative market reaction.” In Europe, the Stoxx 600 Index retreated 0.9% and the Stoxx 50 fell 0.7%. FTSE 100 outperforms peers, dropping 0.2%, IBEX lags, dropping 1.2%. Here are the most notable European movers: European auto shares rise, sending the Stoxx 600 Automobiles & Parts Index to its biggest intraday gain since July 27, after the EU began an investigation into Chinese subsidies for electric vehicles. HHLA shares jump as much as 48%, the most intraday on record, after a unit of MSC offered to buy part of the Hamburg port services provider for €16.75 per A-share. On The Beach shares gain as much as 15% after the online seller of packaged vacations forecast full-year adjusted pretax profit at the top end of market expectations. Aroundtown shares rise as much as 5.8% after Goldman Sachs raises PT on the stock by 15% to €1.50, saying the German real estate firm has “sufficient headroom” on debt leverage. Redrow shares gain as much as 4.1% after the UK homebuilder delivers an earnings statement which Goodbody says is “comforting.” TeamViewer shares rise as much as 3.4% in Frankfurt, the most in a month, after the German software maker said it will cut back on its sponsorship deal with Manchester United from the start of the 2024 to 2025 season to boost profits. AB Foods shares drop as much as 1.1% after Deutsche Bank cut its recommendation on the British conglomerate to hold from buy, citing limited scope for further earnings upside. Unieuro shares fall as much as 9.8% in Milan as Banca Akros downgraded the Italian consumer electronics chain to reduce from neutral. Knorr-Bremse, Alstom shares fall as Barclays rates the companies underweight, citing high valuations and headwinds. Kingspan shares decline as much as 3% after JPMorgan downgraded the stock to neutral from overweight, saying catalysts have largely played out for the company, while stocks in the construction sector could be vulnerable for the rest of the year. Markets in Europe were looking past the US data to the ECB’s meeting on Thursday. After reports that the central bank’s new economic estimates will show an inflation forecast for 2024 above 3%, traders upped wagers on policy makers raising rates at the meeting to a 70% chance, compared with a 20% probability earlier this month. The German two-year yield — among the most sensitive to monetary policy — rose five basis points to 3.18%, the highest level since mid-August. In the UK, the pound sank as much as 0.4% against the greenback, before paring losses. Data showed the economy shrank at the fastest pace in seven months in July as strikes and wet weather hit activity harder than expected. That may prompt a pause when policy makers decide next week whether to raise interest rates again. Earlier in the session, Asian stocks slipped, with tech stocks in Japan and China leading the drop as traders geared up for the release of US inflation figures. The MSCI Asia Pacific Index fell as much as 0.4% as tech names including Alibaba, Hitachi and Tencent headlined the losses. All equity benchmark gauges in the region were in the red as caution reigned ahead of the US inflation print which is likely to help shape the outlook for Federal Reserve policy. There’s “a heightened risk” that the data may come in above consensus expectations, which will push up Treasury yields and “put a ceiling on the bulls” for the Asian equity benchmark, according to Kelvin Wong, senior market analyst at Oanda. A gauge of Chinese tech firms listed in Hong Kong headed for its longest run of declines since April, while a tech-heavy small-cap index in South Korea dropped more than 1%. Japan's Nikkei 225 swung between gains and losses with early advances seen following mixed PPI data and the improvement in BSI large industry surveys, although the index eventually slipped with money markets now pricing the BoJ to exit negative rates in January compared to a previous pricing of an exit in September next year. Australia's ASX 200 declined as tech stocks mirrored the underperformance seen in US counterparts and with nearly all sectors on the retreat aside from energy and utilities after further upside in oil prices. India’s Sensex index closed higher for the ninth straight session, its longest winning run since April, and outperformed regional peers as banks and energy companies rallied. The S&P BSE Sensex rose 0.4% to 67,466.99 in Mumbai, while the NSE Nifty 50 Index advanced by the same magnitude to close above the 20,000-mark for the first time ever. In FX, the Bloomberg Dollar Spot Index edged up 0.2%, recovering from a 0.7% slide on Monday. All G-10 FX traded lower versus the dollar; NZD and CAD are the strongest performers in G-10 FX, SEK and AUD underperform. Sterling at ~$1.24 after UK GDP data. The pound tested a three-month low and the euro weakened. Traders ramped up bets price pressures will force the European Central Bank to hike rates at its meeting on Thursday even as the German government was said to predict a contraction for this year and the UK economy shrank at the quickest pace in seven months. EUR/USD falls 0.4% as investors wait to see whether the European Central Bank will hold off from raising interest rates at its meeting on Thursday GBP/USD slides 0.4%, approaching its lowest in three months after data showed that the UK labour market was showing signs of cooling USD/JPY climbs 0.8% to 147.42 Data dependence remains “the law of the land” when it comes to the dollar’s path, TD Securities strategists including Mark McCormick wrote in a note. “While our signals are currently biased in favor of the USD, we’re suspicious about the durability of the King’s return” In rates, Treasuries traded near session lows reached during London morning amid bigger losses in bunds after Reuters reported that the European Central Bank expects inflation to hold above 3% next year. US yields are cheaper by 1bp-2bp across the curve led by long-end, steepening 2s10s, 5s30s spreads by ~1bp; US 10-year around 4.30% is 2bp cheaper on the day, bunds by an additional 2bp in the sector. Two-year TSY yields, which are more sensitive to Fed policy than longer maturities, stayed above 5%, while their 10-year peers held at 4. Short-dated European yields edged up, while UK gilts were little changed; European money markets shifted to price in a 25bp of rate hikes from the ECB this year, with 17bp of hike premium priced in for Thursday’s policy decision after the Reuters report dropped late Tuesday.  Dollar IG issuance slate empty overnight and expected to be muted because of CPI; eleven names priced $19 billion Tuesday, taking weekly volume to $30 billion, and one elected to stand down. Treasury auction cycle concludes with $20 billion 30-year reopening; Tuesday’s 10-year stopped on the screws as it drew highest yield since 2007; WI 30-year yield at 4.380% is above auction stops since 2011 and ~19bp cheaper than last month’s. Focal points of US session are August CPI data and 30-year bond sale, following decent demand for Tuesday’s 10-year note auction.   In commodities, Crude gained after the IEA warned supply cuts by Saudi Arabia and Russia will drive volatility. West Texas Intermediate climbed for a second day and Brent extended gains above $92 per barrel as the IEA said production cuts will create a “significant supply shortfall.” Spot gold falls roughly $3 to trade near $1,911/oz. To the day ahead now, and data releases include the US CPI print for August, along with UK GDP for July and Euro Area industrial production for July. Market Snapshot S&P 500 futures little changed at 4,462.25 MXAP down 0.2% to 161.48 MXAPJ down 0.2% to 502.29 Nikkei down 0.2% to 32,706.52 Topix little changed at 2,378.64 Hang Seng Index little changed at 18,009.22 Shanghai Composite down 0.4% to 3,123.07 Sensex up 0.5% to 67,530.25 Australia S&P/ASX 200 down 0.7% to 7,153.91 Kospi little changed at 2,534.70 STOXX Europe 600 down 0.5% to 452.95 German 10Y yield little changed at 2.66% Euro down 0.1% to $1.0740 Brent Futures up 0.8% to $92.78/bbl Gold spot down 0.1% to $1,912.42 U.S. Dollar Index little changed at 104.70 Top Overnight News from Bloomberg Tech stocks were in retreat as Oracle Corp. posted slowing cloud sales, while the euro and pound weakened on concern the Europe faces a growing threat of stagflation. The European Central Bank’s decision is a cliffhanger for investors, but even participants in the meeting have no inkling of the likely outcome, according to people familiar with the matter. The new Cold War is a business opportunity, and Mexico looks better placed than almost any other country to seize it. The global economy is shifting toward a higher-for-longer period for interest rates, making the coming flurry of monetary decisions across the developed world pivotal in mapping out that plateau. Apple Inc.’s biggest day of the year has arrived, and the company is set to unveil updated versions of its iPhone, smartwatch and AirPods. Arm Holdings Ltd.’s initial public offering is already oversubscribed by 10 times and bankers plan to stop taking orders by Tuesday afternoon, according to people familiar with the matter. The luxury armored train carrying North Korean leader Kim Jong Un crossed into Russia ahead of a summit with President Vladimir Putin that the US said would focus on supplying weapons for Moscow’s war on Ukraine. A more detailed look at global markets courtesy of Newsquawk APAC stocks were pressured following the tech-led declines on Wall St owing to the post-Apple event disappointment and with participants cautious ahead of the upcoming US CPI data. ASX 200 declined as tech stocks mirrored the underperformance seen in US counterparts and with nearly all sectors on the retreat aside from energy and utilities after further upside in oil prices. Nikkei 225 swung between gains and losses with early advances seen following mixed PPI data and the improvement in BSI large industry surveys, although the index eventually slipped with money markets now pricing the BoJ to exit negative rates in January compared to a previous pricing of an exit in September next year. Hang Seng and Shanghai Comp were initially kept afloat amid strength in the energy names and with developers underpinned as some cities further loosened restrictions for the sector, but then conformed to the soured mood. Top Asian News China will extend tariff exemptions for imports of some US products until April 30th, 2024. Japanese Finance Minister Suzuki said PM Kishida asked him to stay on in the current job in the cabinet reshuffle, while he added that they need to respond appropriately to market moves and will decide on the size and content of the new economic package from now on, according to Reuters. PBoC will support prices to rise moderately, and will pay close attention to the effect of financial policies, via Central Bank Publication. Will strengthen the guidance of expectations. European bourses are in the red, Euro Stoxx 50 -0.8%, following on from risk-off sentiment seen in the Asian markets overnight. Within Europe, sectors are primarily in the red featuring underperformance in Retail and Consumer Discretionary following earnings from Inditex while Auto names saw marked upside after von der Leyen's announcement on Chinese EVs, though much of this has since pared. Stateside, futures are marginally weaker with the general tone a tentative one ahead of the US CPI report, ES -0.1%; NQ & RTY in-fitting. As a reminder, Asia-Pacific stocks were pressured following the tech-led declines on Wall St owing to the post-Apple event disappointment and with participants cautious ahead of the upcoming US CPI data Top European News Hamburg Port Surges on MSC Bid as Billionaire Kühne Circles ECB Says Italy Bank Tax May Create Problems of Legal Uncertainty Sharp Decline in UK Economy in July Revives Recession Risk Tullow Shares Slump 11% After 1H Miss, Oil Guidance Narrowed Kingspan Says Deal Discussions With Carlisle Have Ended Saudi Oil Cuts Threaten Surge in Price Volatility, IEA Warns FX The DXY is on a modestly firmer footing overall, but caged to a tight range above 104.50 in the run-up to the US CPI metrics later today. EUR and GBP are modestly softer against the Buck whilst the GBP is modestly softer against the EUR following soft UK GDP data and hawkish ECB sources. The antipodeans trade on either side of the spectrum, with the NZD resilient against the Buck following yesterday’s notable losses, whilst the AUD remains subdued by the woes in China alongside the broader cautious mood ahead of the US inflation metrics. Substantial strength was seen in the Polish Zloty after the Polish PM's Adviser said the PLN has weakened beyond the optimal level for Poland and added the optimal level for EUR/PLN is between 4.40-4.60 range. Polish PM Adviser says the PLN has weakened beyond the optimal level for Poland; says optimal level for EUR/PLN is between 4.40-4.60 range; have the tools to ensure the PLN is at an optimal level. PBoC set USD/CNY mid-point at 7.1894 vs exp. 7.2783 (prev. 7.1986) Fixed Income EGBs are under modest pressure with participants skewing their expectations hawkishly following Tuesday’s late-doors ECB sources piece; BTP-Bund yield spread has hit multi-month highs as a result, though remains markedly shy of the YTD peak. Gilts are firmer in contrast following particularly soft GDP data which has prompted a number of desks to trim their UK 2023 growth view, though a 25bp hike in September continues to be the base case from a market pricing perspective. Stateside, USTs are a touch softer taking cues from the above EGB move with US participants entirely focused on the upcoming CPI release. Commodities Crude benchmarks are modestly firmer following the rally seen yesterday, which resulted in the contracts settling higher by around USD 1.50/bbl apiece. The weekly Private Inventory data proved to be bearish, with builds seen in headline crude stocks; following on from bullishly-received OPEC OMR and subsequent Brent oil price forecast upgrade via the EIA. Spot gold is subdued amid the firmer Dollar, but the yellow metal’s prices remain north of USD 1,900/oz and in a tight range in the run-up to the US CPI report, with the 21 DMA to the upside at USD 1,916.44/oz while downside levels include yesterday’s low of USD 1,907.62/oz. Base metals meanwhile now trade relatively mixed and with the breadth of the market narrow as markets await the US CPI data, 3M LME copper is back towards the session highs above USD 8,400/t after finding a floor near USD 8,350/t overnight. US Energy Inventory Data (bbls): Crude +1.2mln (exp. -1.9mln), Gasoline +4.2mln (exp. +0.2mln), Distillate +2.6mln (exp. +1.3mln), Cushing -2.4mln. All Libyan eastern oil ports have reopened following a shutdown on September 9th due to a storm, via the port agent. Hungarian Farm Minister Nagy says they have agreed on a unilateral extension of the import ban on Ukrainian grains beyond September 15th, agreement with Romania, Slovakia and Bulgaria. Ban will be imposed on a broader range of products. IEA OMR: Maintains 2023 and 2024 global oil demand growth forecast steady; says extension of oil-output cuts by Saudi and Russia will lock in a substantial market deficit through Q4 2023; OPEC+ cuts tempered by sharply higher Iranian oil flows. Geopolitics Russian-installed Governor of Sevastopol said Ukraine launched an air attack on Sevastopol in Crimea, while the air attack sparked a fire at Sevastapol's shipyard and 24 people were injured, according to Reuters. Russian President Putin and North Korean leader Kim met at the Vosotchny Cosmodrome for talks. Russian President Putin responded that it is why they have come to the Vostochny Cosmodrome when asked if Russia will help North Korea build satellites, while he added that they will discuss all issues and that North Korean Leader Kim is showing a big interest in Russian rocket equipment. Romanian Defence Ministry says elements of possible drone found on Romanian territory (NATO). North Korea fired projectiles believed to be ballistic missiles which landed outside of Japan's exclusive economic zone, according to NHK citing the Japanese Coast Guard. Taiwan's Defence Ministry said 28 Chinese military aircraft entered Taiwan's air defence zone on Wednesday morning and some Chinese aircraft crossed the Bashi channel to carry out drills with Chinese carrier Shandong, while it also showed a picture of a Taiwanese warship shadowing the Shandong. US Event Calendar 07:00: Sept. MBA Mortgage Applications -0.8%, prior -2.9% 08:30: Aug. CPI YoY, est. 3.6%, prior 3.2% 08:30: Aug. CPI MoM, est. 0.6%, prior 0.2% 08:30: Aug. CPI Ex Food and Energy YoY, est. 4.3%, prior 4.7% 08:30: Aug. CPI Ex Food and Energy MoM, est. 0.2%, prior 0.2% 08:30: Aug. Real Avg Weekly Earnings YoY, prior 0.2% 08:30: Aug. Real Avg Hourly Earning YoY, prior 1.1% 14:00: Aug. Monthly Budget Statement, est. -$230b, prior -$219.6b DB's Jim Reid concludes the overnight wrap Welcome to what is likely to be the most inflationary monthly US CPI day since June 2022 when the headline YoY rate was 9.1%. This will be followed by a knife-edge ECB’s policy decision tomorrow where market pricing is now pointing to a 53% chance of a hike. So it doesn’t get much more finely balanced than that. For the US CPI print today, our economists are expecting monthly headline CPI to come in at +0.61%, which as discussed would be the fastest pace of monthly inflation since June 2022 thanks to the impact of higher gasoline prices. That’s in line with the consensus for a +0.6% print, as well as inflation swaps that are pricing in a +0.64% print so broadly speaking that’s the level markets will be benchmarking against. Assuming we get a monthly 0.6% print, then that would push up the year-on-year CPI print by four-tenths to +3.7%. But since higher gasoline prices won’t affect the core CPI number, they see that coming in at just +0.22% on a monthly basis, which would take the year-on-year core CPI print down four-tenths to 4.3%. See their full preview here for further details. Whilst energy prices are expected to push up the CPI print today, there was little sign of further relief in the pipeline ahead, since Brent Crude oil prices closed above $92/bbl for the first time since November. That came as data from OPEC showed that oil markets faced a 3.3 million barrel per day shortfall in Q4, which is creating a very tight market. It’s also led to a notable uptick in inflation expectations, with the 2yr US breakeven (+4.4bps) now at 2.24%, which is its highest level since late April. This drove the 2yr Treasury yield back above 5% and to its highest level in over two weeks (+3.0bps to 5.02%) but a decline in real rates meant that the 10yr yield still ended the day -0.9bps lower at 4.28%. With fresh signs of inflationary pressures, investors also moved to price in a growing chance that the ECB would in fact go ahead with another hike tomorrow. In fact, overnight index swaps are now pricing a better-than-even chance of a 25bp hike at 53%, up from 41% on Monday and 24% a week earlier. So this is something markets have been taking increasingly seriously. Then late yesterday evening we saw a Reuters story saying the updated ECB forecasts will see 2024 inflation at above 3%, bolstering the case for another hike on Thursday, according to “a source with direct knowledge of the discussion”. While a 2024 inflation forecast a touch above 3% would not be a major surprise, such a story shortly before the meeting is rather unusual for the ECB. The euro initially rallied by around +0.30% against the dollar following the report but has given half back in Asia. Against that backdrop, but before the Reuters report, sovereign bond yields moved modestly higher across Europe on Tuesday, with those on 10yr bunds (+0.4bps), OATs (+0.8bps) and BTPs (+0.7bps) all rising. And there were larger moves at the front-end, with yields on 2yr German debt up +3.1bps. It was a different story in the UK, where yields on 10yr gilts fell by -5.6bps yesterday. That followed some weaker-than-expected employment data, with the number of payrolled employees falling -1k in August (vs. +30k expected). Furthermore, the unemployment rate over the three months to July rose from 4.2% to 4.3%, which is its highest level since September 2021. In response, investors moved to lower the odds of another hike from the BoE next week to 77.5%, which is the smallest chance of a September hike since early June. Equities generally saw a weak performance yesterday, with the S&P 500 down by -0.57%, whilst Europe’s STOXX 600 also fell -0.18%. Tech stocks led the moves lower in the US, with the NASDAQ (-1.04%) and the "Magnificent Seven" (-1.52%) posting larger declines. That included Apple, which fell -1.71% after the company unveiled their new iPhone. The stock did partially recover late in the US session having traded -2.5% lower intra-day, and was actually a mid-ranking performer amid the "Magnificent Seven" by the end of the day (with Tesla the weakest at -2.23%). Staying with tech, Oracle (c.$300bn market cap) fell -13.5%, its’ worst day since 2002 after a cloud sales disappointment. On the other hand, energy stocks in the S&P 500 (+2.31%) were the biggest sectoral outperformer thanks to the latest rise in commodity prices. The Dow Jones index (-0.05%) and small cap Russell 2000 (+0.01%) were near flat. Asian equity markets are softer this morning due to a sell-off in tech stocks. As I type, the Nikkei (-0.31%), Hang Seng (-0.14%), CSI (-0.66%), Shanghai Composite (-0.18%) and KOSPI (-0.12%) are edging lower. S&P 500 (-0.17%) and NASDAQ 100 (-0.13%) futures are also trading in the red. In terms of data, producer prices in Japan rose +3.2% y/y in August (+3.3% expected), slowing from a revised +3.4% increase in the prior month. Elsewhere, South Korea’s unemployment rate on a seasonally adjusted basis unexpectedly dropped to a record low of 2.4% in August from a level of +2.8% in July, thus putting pressure on the Bank of Korea to retain a hawkish bias. There were a few other data releases out yesterday. One was the ZEW survey from Germany, where the current situation reading fell to a 3-year low of -79.4 (vs. -75.5 expected), but the expectations indicator ticked up to -11.4 (vs. -15.0 expected). Separately in the US, the NFIB’s small business optimism index fell to 91.3 in August (vs. 91.5 expected), ending a run of three consecutive increases in the measure. To the day ahead now, and data releases include the US CPI print for August, along with UK GDP for July and Euro Area industrial production for July. Tyler Durden Wed, 09/13/2023 - 08:07.....»»

This is a Real-time headline. These are breaking news, delivered the minute it happens, delivered ticker-tape style. Visit www.marketwatch.com or the quote page for more information about this breaking news......»»

This is a Real-time headline. These are breaking news, delivered the minute it happens, delivered ticker-tape style. Visit www.marketwatch.com or the quote page for more information about this breaking news......»»

Futures Drop On Oracle Weakness Ahead Of iPhone 15 Reveal As CPI Looms US futures are slightly lower, but holding on to much of yesterday's tech-driven gains, with European bourses and Asian markets mixed ahead of tomorrow's CPI print. At 7:30am ET, both emini S&P500 and Nasdaq 100 futures slipped 0.3%, reversing yesterday's rally. Tech stocks retreated as Oracle dropped 10% after posting slowing cloud sales, while the euro and pound weakened on concern the Europe faces a growing threat of stagflation. Tech will also be the center of attention on Tuesday, with Apple set to unveil a new product lineup including the new iPhone 15, and SoftBank-owned chip designer Arm gearing is set to price the biggest IPO of the year. US Treasuries edged lower, commodities are higher led by base metals with oil trading near its highest level this year before the OPEC monthly report. Gold fell while bitcoin redovered much of yesterday's losses. In premarket trading, Oracle tumbled 10% after it reported slowing cloud sales growth in the quarter. Analysts said the report failed to live up to high expectations, although they remain positive on the company’s long-term prospects; Morgan Stanley analysts said the results raise questions about the timing of generative AI demand turning into revenue across the broader business. Apple is up 0.20% ahead of the new iPhone 15 reveal. Here are some other notable premarket movers: Acelyrin shares sink 58% after the biopharmaceutical company’s lead product, izokibep, did not meet the primary endpoint of a clinical trial of patients with hidradenitis suppurativa, a chronic inflammatory skin condition. Analysts found the miss to be disappointing, with Piper Sandler highlighting the “puzzling” dropout rates. RTX shares dip 1.11% as Barclays and RBC Capital Markets downgraded their recommendations on the stock after the aerospace and defense company cut its full-year sales forecast. Meanwhile, Citi reduces its price target on the stock. Sight Sciences shares slumped 34% after the glaucoma surgery device maker reduced its revenue outlook as uncertainty about the future of Medicare coverage for its products hurts demand. After today's Apple event, all eyes will turn to the US CPI report due Wednesday at 830am ET, and the ECB decision on Thursday.  The consumer-price index report Wednesday will provide the latest insight into how much further the Fed may need to go to pull inflation back toward its target. Monthly inflation is expected to surge accelerate to 0.6% in August from 0.2% in July, even as core CPI is seen stable at 0.2%, according to economists’ estimates. “Markets are gearing up to this week’s main events,” wrote ING Group NV strategists including Benjamin Schroeder. “It is not just about this Thursday’s ECB meeting, but also about crucial data in the US and UK ahead of next week’s respective central bank meetings.” US consumers’ inflation expectations were mostly stable in August, but households grew more concerned about their finances and more pessimistic about the job market, according to a Fed Bank of New York survey which showed the highest 5-year inflation expectations since the start of 2022. “If we do see potentially a more sticky inflation number than the 0.6% expected by economists or 0.2% on core, I would expect to see the bond market start to potentially price in another rate hike before the end of the year, potentially as early as November,” Anthony Doyle, head of investment strategy at Firetrail Investments Pty Ltd, said on Bloomberg Television. In Europe, the Stoxx 50 fell 0.4% with the FTSE 100 outperforming peers, adding 0.4%, DAX lags, dropping 0.5%. Packaging company Smurfit Kappa Group plunged 13% after it announced a deal to combine with WestRock. Here are the most notable European movers: AB Foods gain as much as 5.4% after the Primark owner reported fourth-quarter comparable sales growth of 8% for the clothing-retail business. Morgan Stanley analysts said the results show top-line resilience for Primark, while Shore Capital plans to increase its estimates. HelloFresh shares climb as much as 8.3% after JPMorgan placed the meal-kit maker on positive catalyst watch following meetings with company management, saying it is “ready to beat.” Jet2 shares rise as much as 4.9% after Morgan Stanley adds to the clean sweep of positive ratings on the company, starting coverage at overweight based on a continued supportive package holiday market outlook. Smurfit Kappa shares fall as much as 13% after the packaging firm agreed on the terms of a merger with WestRock, just a week after disclosing talks to combine. Analysts note the premium paid for WestRock is higher than investors anticipated. Campari shares fall as much as 6.1% in Milan after the company said Bob Kunze-Concewitz has decided to retire as CEO, effective as of April 2024, according to a statement. PolyPeptide slumps as much as 8.3% after the Swiss biotechnology company gets downgraded to sell from neutral at Citigroup, which cited operational issues as a drag on profitability. Dowlais shares fall as much as 6.3%, the most since July 11, after the co. reported 1H23 earnings that revealed uncertainty around possible US strikes affecting its 2H23 demand and kept its FY outlook unchanged. Fevertree shares decline as much as 7.1% after the high-end tonic maker reported first-half sales and earnings that missed estimates and lowered Ebitda guidance for the year. Analysts were encouraged by the 2024 margin outlook, though the miss to profit expectations weighed. Pepco shares drop as much as 5.2% after discount retailer reported sudden departure of CEO Trevor Masters and cut its Ebitda guidance due to weaker sales, even after previously signaling consumer recovery in its key markets in East Europe. Keywords Studios shares fall as much as 6.4%, dropping to the lowest intraday level since April 2020, after the video-game industry services firm reported first-half adjusted pretax profit that missed estimates. Jefferies and Shore Capital noted that writer and actor strikes in the US were a headwind. Stocks in Asia fluctuated and Chinese shares were back in the red. The MSCI Asia Pacific Index rose as much as 0.3%, with Toyota and TSMC the biggest boosts. Hong Kong shares erased losses following a report that distressed developer Country Garden got approval to extend repayment on its yuan bonds. Chinese gains triggered by news on Country Garden Holdings, which secured payment extension approval from its bondholders, were not enough to keep the positive sentiment going for long.  With Chinese equities still struggling even after a slew of recent market-support measures, regional investors await retail sales and factory data due Friday for signs of recovery in the economy. China’s underperformance has held the MSCI Asia gauge to a gain of 4% this year while the S&P 500 Index has climbed 17%. “In the near term, we need to see more policy actions and data turning more positive” in order to see more reallocations to Chinese equities, Nupur Gupta, a portfolio manager at Eastspring Investments, said in an interview with Bloomberg TV. Australia's ASX 200 was lacklustre amid weakness in energy, tech and financials, with trade also contained after a somewhat mixed business survey and weaker consumer sentiment data. Japan's Nikkei 225 gained amid strength in automakers and with SoftBank among the early leaders after its Arm unit IPO was oversubscribed by 10 times although price action was choppy and the index nearly pared all of its gains before revisiting session highs. Indian stocks opened higher, while South Korean shares fell amid losses in chip and EV battery names. In FX, the Bloomberg Dollar Spot Index edged up 0.2%, recovering from a 0.7% slide - the biggest in two months - while the yen resumed its fall. The yuan was little changed after China’s central bank set its daily fixing rate at below 7.20 versus the dollar, another sign that it won’t tolerate excessive yuan weakness. The euro and the pound both traded around 0.3% lower against the dollar. UK wage growth held at a record high in the three months through July, a sign of persistent inflation that will keep pressure on the Bank of England to raise interest rates again. Investor confidence in Germany’s economy improved for a second month, while lingering at a level that will do little to dispel intensifying concerns over the country’s status as Europe’s growth laggard. In rates, US Treasury yields remained within 1bp of Monday’s closing levels, with 10-year yields at 4.285% ahead of $35 billion reopening auction at 1pm New York time, as the front-end underperforms, slightly flattening 2s10s. . Demand was soft for Monday’s 3-year sale. Gilts outperformed after UK labor market data showed signs of cooling, while bunds trade marginally cheaper vs Treasuries. Dollar IG issuance slate contains a handful of names, including Slovenia 10Y benchmark, and another busy day is expected ahead of CPI and PPI due Wednesday and Thursday; eleven names priced almost $11b Monday, with at least one borrower electing to stand down. Today's 10-year note auction is poised to draw the highest yield since 2007, as did the 3-year, which tailed by around 1bp; cycle concludes with $20b 30-year reopening Wednesday In commodities, WTI trades within Monday’s range, adding 0.9% to trade near $88. Most base metals trade in the red; LME nickel falls 2.2%, underperforming peers. Spot gold falls roughly $3 to trade near $1,920/oz. Bitcoin has rebounded from Monday's weakness, rising back over $26L after tumbling to a $24.9k low rumors of forced FTX liquidations. Looking to the quiet day ahead, data releases include UK employment data for July, the German ZEW survey for September, and in the US we also get the NFIB small business optimism index for August, which came in at 91.3, just below the 91.5 expected and down from 91.9. The SEC's Gensler testifies at Senate Banking Committee at 10.00 a.m. New York time. Apple is expected to launch an India-assembled iPhone 15 with a USB-C port at 1.00 p.m. Arm bankers plan to stop taking orders for the IPO by Tuesday afternoon. The Google antitrust trial begins in Washington D.C. On Wednesday, US inflation data for August is out at 1.30 p.m. time along with mortgage applications data at noon. Market Snapshot S&P 500 futures down 0.3% to 4,478.25 MXAP up 0.1% to 162.00 MXAPJ down 0.1% to 503.65 Nikkei up 1.0% to 32,776.37 Topix up 0.8% to 2,379.91 Hang Seng Index down 0.4% to 18,025.89 Shanghai Composite down 0.2% to 3,137.06 Sensex little changed at 67,162.91 Australia S&P/ASX 200 up 0.2% to 7,206.85 Kospi down 0.8% to 2,536.58 STOXX Europe 600 little changed at 456.50 German 10Y yield little changed at 2.62% Euro down 0.3% to $1.0721 Brent Futures up 0.5% to $91.06/bbl Gold spot down 0.1% to $1,921.00 U.S. Dollar Index up 0.17% to 104.75 Top Overnight News Tech stocks were in retreat as Oracle Corp. posted slowing cloud sales, while the euro and pound weakened on concern the Europe faces a growing threat of stagflation. The European Central Bank’s decision is a cliffhanger for investors, but even participants in the meeting have no inkling of the likely outcome, according to people familiar with the matter. The new Cold War is a business opportunity, and Mexico looks better placed than almost any other country to seize it. The global economy is shifting toward a higher-for-longer period for interest rates, making the coming flurry of monetary decisions across the developed world pivotal in mapping out that plateau. Apple Inc.’s biggest day of the year has arrived, and the company is set to unveil updated versions of its iPhone, smartwatch and AirPods. Arm Holdings Ltd.’s initial public offering is already oversubscribed by 10 times and bankers plan to stop taking orders by Tuesday afternoon, according to people familiar with the matter. The luxury armored train carrying North Korean leader Kim Jong Un crossed into Russia ahead of a summit with President Vladimir Putin that the US said would focus on supplying weapons for Moscow’s war on Ukraine. A more detailed look at global markets courtesy of Newsquawk APAC stocks were mixed with the region tentative in the absence of any fresh macro catalysts and with participants bracing for the US CPI data due midweek. ASX 200 was lacklustre amid weakness in energy, tech and financials, with trade also contained after a somewhat mixed business survey and weaker consumer sentiment data. Nikkei 225 gained amid strength in automakers and with SoftBank among the early leaders after its Arm unit IPO was oversubscribed by 10 times although price action was choppy and the index nearly pared all of its gains before revisiti ng session highs. Hang Seng and Shanghai Comp traded ultimately flat with early downside cushioned following the PBoC's liquidity effort and after Country Garden Holdings received approval to extend 6 onshore bond repayments by 3 years. Top Asian News Country Garden Holdings (2007 HK) received approval to extend 6 onshore bond repayments by 3 years and it delayed the voting deadline on two bond payment extensions to Tuesday evening. New Zealand pre-election economic and fiscal update sees 2023/24 operating balance before gains and losses at NZD -11.4B (Budget forecast NZD -7.6bln), while it sees net at 43.6% of GDP (Budget forecast 43.1%) and expects to return to an OBEGAL surplus in 2026/2027 (Budget forecast of 2025/26). Several Chinese banks have reportedly said that regulators as of this year no longer require them to report the proportion of property loans/mortgages in total loans, via Xinhua; indicating a relaxation of restrictions on property financing. European bourses are diverging slightly and generally struggling for direction with newsflow light ahead of the week's risk events, Euro Stoxx 50 -0.3%. The breakdown has the DAX 40 lagging following after-market earnings from ORCL -9.1% in pre-market trade which in turn is weighing on heavyweight SAP -2.7%. As such, Tech is the laggard among European sectors while Telecom and Retail names see some relative outperformance. Stateside, futures are incrementally lower across the board with tech in focus given Oracle and as we await the AAPL, +0.2% pre-market, event; ES -0.2%, NQ -0.3% Top European News BoE's Breeden agrees with the MPC that the risks to inflation around the August forecasts are to the upside; expects inflation to be around the 2% target in two years. Sees balances risks to growth an unemployment in both directions. UK economic activity is weak. Breeden replaces Cunliffe on the MPC from November 1st. German Ifo residential construction survey (Aug): Crisis intensified in August, number of Co's reporting cancelled projects at a new high. Click here for more detail. Germany's ZEW says experts are even more pessimistic about the current economic situation in Germany vs August. More positive economic expectations for Germany are accompanied by significantly optimistic outlook for development on the international stock market, in part due to stable interest rates in EZ and US. Experts expect a further easing of interest rate policy in China. FX Buck finds its feet after a rocky start to the week, DXY towards the top of 104.820-430 range. Sterling stumbles on weak UK labour market metrics alongside strong headline average earnings, Cable retreats from 1.2530 towards 1.2460 Euro shrugs off mixed German ZEW survey as VDMA and Ifo deliver bleak outlook updates, EUR/USD closer to base of 1.0713-68 parameters Kiwi undermined by downgrades to NZ fiscal projections, NZD/USD heavy on 0.5900 handle Yen keeps afloat of 147.00 vs Greenback as a Fib supplements psychological support PBoC set USD/CNY mid-point at 7.1986 vs exp. 7.2859 (prev. 7.2148) Fixed Income Bonds bid, but off peaks after solid bounces from Monday lows. Bunds topped out at 130.99 within a range down to 130.60. Gilts reached 94.97 from 94.27 and outperformed on the back of weak components in the UK jobs report. T-note straddled parity between 109-28/23 confines awaiting US CPI tomorrow DMO's 2051 linker and Germany's Schatz tap both well received ahead of USD 35bln 10 year US refunding leg Commodities WTI and Brent futures are somewhat choppy within tight ranges amid quiet newsflow this European morning and ahead of key risk events including US CPI on Wednesday, the ECB decision on Thursday, and Chinese activity data on Friday. Dutch TTF remains supported with modest intraday gains as the Australian LNG strike and the extended maintenance at Norwegian fields keep prices underpinned. Spot gold is softer intraday amid the firmer Dollar, but the yellow metal remains within yesterday’s ranges and trades on either side of its 200 DMA (USD 1,920.03/oz today) after finding support at the 21 DMA (USD 1,916.41/oz today) yesterday. Base metals see modest softness amid the broader Dollar strength and cautious trade across stocks, although Singapore iron ore futures hit over five-month highs with analysts citing better-than-expected Chinese loans data and pre-holiday stocking ahead of the Chinese mid-Autumn festival at the end of the month. The Australia union said it is to oppose Chevron's (CVX) intractable bargaining application and it wants industrial action to continue until it secures a union-negotiated deal at Australian LNG facilities, according to Reuters. Western Australia State Government says they have no current plans to engage with the Fair Work Commission in the Chevron (CVX) dispute, at this stage there has been no disruption to Western Australia's domestic gas supply. Kazakhstan's Karachaganak gas condensate field is undergoing maintenance on September 11-15th, output will be reduced by 27k tonnes, according to the Energy Minister. China is looking to buy LNG again in latest risk to the global gas market's delicate balance, according to Bloomberg sources; Unipec released a tender to purchase more than a dozen shipments for this winter, in addition to deliveries through the end-2024. India imposed anti-dumping duty on some Chinese steel for five years. Geopolitics US President Biden's administration is close to approving long-range missiles including ATACMS or GMLRS both armed with cluster bombs for Ukraine, while these missiles would give Kyiv the ability to cause significant damage deeper within Russia-occupied territory, according to Reuters citing four US officials. US Secretary of State Blinken confirmed they exercised a waiver to allow the transfer of USD 6bln from South Korea to Qatar as part of a US-Iran prisoner swap, according to Reuters. North Korean leader Kim left Pyongyang on Sunday to visit Russia and his train arrived at Khasan Station in Russia's far east, while the White House urged North Korea not to provide weapons to Russia. Kremlin spokesman said Russian President Putin and North Korean leader Kim will discuss bilateral ties and seek to build good, mutually beneficial relations, while a spokesman also stated that Russia is not interested in Washington's warnings on Moscow's contact with North Korea. No separate meeting between Russian and North Korea defence ministers planned, via Ifax citing Russia's Peskov; Russian President Putin and North Korean Leader Kim to meet in the "coming days". Russian President Putin says FSB captured Ukrainian saboteurs who sought to damage our nuclear power station; Saboteurs were instructed by British services; that is worrying and consequences could be serious. Taiwan's Ministry of Defence 2023 National Defence Report stated that China's military intimidation and intrusions are a new normal and China is using grey-zone tactics to change the status quo. US Event Calendar 06:00: Aug. Small Business Optimism 91.3, est. 91.5, prior 91.9 10:00: Income, Poverty and Health Insurance report: 2022 DB's Jim Reid concludes the overnight wrap Welcome to my annual day of being seduced into buying a new iPhone that I don't really need but desperately want. Apple launch their new product suite today which actually is a potential macro mover. It goes alongside the annual "buy a new golf driver I don't really need" day usually in the Spring. However, I'm nearly 50 and I've only ever owned two cars, so allow me these extravagances. As I type this on a dull old iPhone 14, markets are mostly awaiting tomorrow’s all-important US CPI print. As we wait, the most interesting moves over the last 24 hours have been the dollar putting in one of its worst daily performances in the past two months and Tesla climbing over 10% to be up +122% YTD but actually almost -10% YoY. Timing is everything. There was also a fresh sell-off for bonds as speculation about rate hikes and inflation gathered pace. But, on the other hand, risk assets did quite well, with the S&P 500 (+0.67%) recovering from last week’s declines, helped by tech and Tesla. The bond sell-off carried on from the overnight moves before Monday's Western market open after BoJ Governor Ueda’s comments over the weekend (that we discussed yesterday along with our revised BoJ call - link here) that then spread globally. In Japan, yields on 10yr JGBs had already closed at a post-2014 high of 0.70% (0.713% this morning) but we then saw yields on 10yr Treasuries up +2.5bps to 4.29%, which was their highest closing level in nearly 3 weeks. It was a similar story in Europe too, with yields on 10yr bunds (+2.9bps), OATs (+3.2bps) and BTPs (+4.8bps) all rising. Interestingly, markets are continuing to price in a growing likelihood that the ECB will deliver a hike on Thursday, with overnight index swaps now giving it a 41% probability, up from a low of 23% on 1 September, the day after the August euro area inflation print. The last time there was as much doubt about an ECB decision was back in March after SVB’s collapse, although back then the question was more between 25bps vs 50bps rather than no hike at all. When it came to the bond sell-off, 10yr gilts (+4.9bps) saw the largest increase in yields, which followed comments from the BoE’s Mann, the most hawkish member of the MPC. She said that her preference was to tighten further, and that to “pause or to hold the policy rate lower for longer risks inflation becoming more deeply embedded”. And she added further that “holding rates constant at the current level risks enabling further inflation persistence”. For now, markets continue to price in a 79% likelihood of another BoE hike next week, which would take the policy rate up to 5.5%. As an aside, our rates strategist Francis Yared wrote a piece here suggesting that central banks should be erring on the side of doing too much rather than too little. It’s worth a read after the recent Table Mountain talk. Those movements in the bond market occurred alongside some interesting shifts in the FX space. In particular, the Japanese Yen surged +0.93% against the US Dollar, which came as investors priced in a growing likelihood of a policy shift from the BoJ. This morning the Yen (-0.03%) is slightly lower. And there was also a significant appreciation in the Chinese Yuan (+0.74%), which followed comments from the People’s Bank of China, which said in a statement that FX market participants should “resolutely avoid behaviors that disturb market orders such as conducting speculative trades.”. The dollar index had been on course for its worst performance in nearly two months yesterday, though it ended the day a smidgen shy of this mark, down -0.50% (which marked its first decline in eight sessions). It is fairly flat this morning. There wasn’t much data to speak of yesterday, but the New York Fed’s latest Survey of Consumer Expectations offered some interesting findings that added to signs of a weakening economy. For instance, the mean probability of losing one’s job over the next 12 months rose to 13.8% in August, which was the highest since April 2021. There were also signs of tightening credit availability, since the share saying that credit was “much harder” or “somewhat harder” to obtain credit than a year ago rose to 59.8%, which is the highest since the series began over a decade ago. In the meantime, the inflation expectations series were broadly steady, with 1yr inflation expectations ticking up a tenth to 3.6%. On the topic of risks to the US economy, our economists yesterday published a note updating their recession probability models. See here for more. Despite the broader moves in markets, equities managed to put in a resilient performance yesterday, with the S&P 500 advancing +0.67%. That was supported by a large gain for Tesla (+10.09%), which was the top performer in the entire S&P yesterday on the back of a big broker upgrade. This helped drive the outperformance from the NASDAQ (+1.14%) and the FANG+ Index (+2.07%). To narrow down the tech rally even further we are going to start quoting the “Magnificent Seven” performance regularly in the EMR. They rose +2.71% yesterday buoyed by Tesla with only Nvidia down (-0.86%). Talking of tech, last week, Bloomberg reported that Huawei and China’s top chipmaker, SMIC, have surprised the market by building an advanced 7nm (N+2) chip and installing it in the latest Huawei smartphone. This is the most recent development in what has become known as the US-China high tech decoupling. In their latest chartbook, my team members Marion Laboure and Cassidy Ainsworth-Grace explore how this tech decoupling began, the cost of a full global technological decoupling, and break down the ten technologies most at risk of decoupling. See here for more. Back in Europe, the STOXX 600 (+0.34%), the DAX (+0.36%) and the FTSE 100 (+0.25%) all rose. Unlike the US, European tech stocks underperformed on a broadly positive day that saw 69% of the STOXX 600 constituents post a gain. Asian equity markets are relatively quiet overnight. As I check my screens, the Nikkei (+0.61%) is outperforming the region with the CSI (+0.03%) and the Shanghai Composite (+0.04%) trading a tad higher while the KOSPI (-0.52%) is trading in negative territory. The Hang Seng (-0.01%) is flat but has come back from over -1% down near the open. Country Garden got creditor approval to extend the duration of 6 onshore bonds which has helped lift its shares by 10% and turn the property sector from around -2% to nearly +3%. S&P 500 (-0.12%) and NASDAQ 100 (-0.09%) futures are inching lower. There wasn’t much other data of note yesterday, but the European Commission downgraded its growth forecast for the Euro Area in 2023 and 2024 by three-tenths in both years. That now leaves its forecasts at +0.8% this year and +1.3% in 2024. For inflation, it sees a slightly lower figure this year at +5.6%, down two-tenths, but the 2024 projection has been raised a tenth to +2.9%. Elsewhere, Italian industrial production fell by a larger-than-expected -0.7% in July (vs. -0.3% expected). To the day ahead now, and data releases include UK employment data for July, the German ZEW survey for September, and in the US there’s the NFIB’s small business optimism index for August. Tyler Durden Tue, 09/12/2023 - 08:08.....»»

Futures Rise As Dollar Slumps, JGB Yields Jump, Tesla Soars US futures and global stocks were broadly higher to start the week, helped by the biggest drop in the US dollar in two weeks following hawkish commentary from the BOJ, with trader sentiment also lifted amid improving Chinese data (the latest monthly credit data solidly beat estimates) and comments from Treasury Secretary Janet Yellen suggesting a soft landing is likely (this coming from the person who 6 years ago said no financial crisis in her lifetime). As of 7:45am ET, S&P 500 futures which rolled to the Sept contract, were higher by 0.4%, while Nasdaq 100 futures rose 0.7% boosted by a surge in Tesla which got a major upgrade by Morgan Stanley. US gains were paced by Estoxx 50 where real estate sector leads gains day while Asian stocks were mixed. The dollar’s record 8-week hot streak was under threat as the yen and yuan rose about 1% after comments from the Bank of Japan and the People’s Bank of China boosted those currencies, respectively. Bank of Japan Governor Kazuo Ueda aired the possibility of ending the developed world’s last key negative interest rate. US Treasury yields climbed, gold was up 0.48%, the most in two weeks, and oil dipped. In premarket trading, Tesla rallied as much as 6.1% after an upgrade from Morgan Stanley (available to pro subs in the usual place) forecast that the Dojo supercomputer may add as much as $500 billion to the company’s market value through faster adoption of robotaxis and network services.  Twinkie maker Hostess Brands soared over 9% after the Wall Street Journal reported that JM Smucker is nearing a deal to buy Twinkie owner, and the company subsequently confirmed. Here are the other notable premarket movers: Block gains 1.2% after Baird analyst David Koning said the stock’s oversold after last week’s slump on a systems outage issue and named it a bullish fresh pick. Canopy Growth shares jump 12%, putting the marijuana company on track to extend advance for a second session. The stock soared on Friday amid a run of gains on renewed hopes that the SAFE Act on cannabis banking will move forward in Congress soon. Crinetics Pharma rose as much as 33% after the pharmaceutical company said its oral, once-daily investigational compound Paltusotine achieved positive results by meeting the primary endpoint and all secondary endpoints of the Phase 3 study. CymaBay Therapeutics shares are down 5.5% after the company said it has started an underwritten public offering of about $150 million of its common stock and pre-funded warrants. Microsoft is up 0.8% after Citi opened a positive catalyst watch on the stock, seeing “a rich catalyst path ahead” for the software giant. Taking a closer look at the MS upgrade of TSLA, Adam Jonas predicted that Tesla's Dojo supercomputer may add as much as $500 billion to the company’s market value through faster adoption of robotaxis and network services, according to Morgan Stanley. Dojo can open up “new addressable markets,” just like AWS did for Amazon.com Inc., the MS analysts wrote, upgrading the stock to overweight from equal-weight and raising its 12-month price target to a Street-high $400 per share from $250. The supercomputer, designed to handle massive amounts of data in training driving systems, may put Tesla at “an asymmetric advantage” in a market potentially worth $10 trillion, said Jonas, and could make software and services the biggest value driver for Tesla from here onward. TSLA shares of Tesla rose as much as 6.1% in US premarket trading Monday. The stock was on track to add about $46 billion in market value. Morgan Stanley is one of Musk’s key advisory firms, including on the $44 billion takeover of Twitter. Elsewhere, Reuters reported that Arm Holdings was considering raising the price range of its initial public offering after meeting investors for what would be the world’s largest listing this year, according to people familiar with the matter. The SoftBank Group Corp.-owned chip designer’s share sale is about six times subscribed, said the people, who asked not to be identified as the information is private. The big driver of risk overnight was the sharp drop in the USD, which tumbled the most in two weeks and is in jeopardy of ending its record stretch of 8 weeks of gains. The yen had the biggest move against the dollar, surging more than 1% after Bank of Japan Governor Kazuo Ueda aired the possibility of ending the developed world’s last key negative interest rate. "This dollar weakness is definitely a bull case for markets,” Beata Manthey, global equity strategist at Citigroup Inc. said in an interview on Bloomberg Television. “Let’s see what the week brings in terms of monetary policy decisions.” Also over the weekend, Janet Yellen said she’s increasingly confident the US will be able to contain inflation without major damage to the job market (which of course is terrible news from the person who 6 years ago predicted "no new crisis in her lifetime"). She also played down any risk from China’s efforts to increase the sway from the BRICS grouping of major emerging nations. “Every measure of inflation is on the road down,” Yellen said. In China, there are hints that the economy may be stabilizing after a sharp downturn. Strong credit data published Monday showed recent steps to bolster the real estate market may be starting to lift household demand for mortgages, while corporate loans also picked up. The yuan rebounded from a 16-year low after the People’s Bank of China delivered a strong verbal warning to speculators. Policymakers also set a daily fixing that was stronger-than-expected. The benchmark CSI 300 Index rose 0.7% on Monday, snapping a four-session losing streak. “If the soft-landing scenarios overtake, it could be time to be overweight on emerging markets,” Citi’s Manthey said. “For now being overweights parts of commodity space is enough.” Europe’s Stoxx 600 rose 0.3%, with the FTSE MIB outperforming peers, adding 0.6%, FTSE 100 lags, adding 0.3%. Italian banks led gains among European lenders after a report that the government is weighing changes to a controversial tax on banks’ windfall profits. Here are the most notable European movers: Covestro shares rise as much as 4.2% after saying it has decided to enter open-ended discussions over a potential takeover by Abu Dhabi National Oil Co. Italian bank shares climbed, leading gains among European lenders, after Corriere della Sera newspaper reported that the government is weighing changes to the controversial tax on banks’ windfall profits it unveiled last month. Vistry shares rise as much as 18%, the most since April 2020, after co. says it plans to focus solely on building homes for affordable housing providers and rental landlords, exiting private homebuilding in the UK. JCDecauxshares gain as much as 10%, the biggest jump since November, after a rating upgrade from Oddo BHF on its solid growth trend despite the sluggish Chinese market. Restaurant Group shares rise as much as 7.2% to the highest in almost four months after the UK hospitality company said it plans to sell its leisure business to the Big Table Group. The move sharpens the firm’s strategic focus to pubs, concessions and its Wagamama chain, according to Jefferies. GSK shares gain as much 2.7% to their highest level since late June, after Barclays highlighted a strong launch for the pharmaceutical firm’s key adult RSV vaccine Arexvy which suggests is taking a lion’s share of the market compared with Pfizer’s competing offering. European mining shares rallied in Europe, lifted by a strong run in copper, iron ore and other metals boosted by Chinese credit data and dollar weakness. Alfa Laval shares decline as much as 4.1%, the most since March, after Citi analysts cut their recommendation for the Swedish industrial group to neutral, saying they expect slower order growth in the near-term. Electrolux shares jump as much as 2.9%, the biggest intraday gain since June 27, after the home appliance manufacturer was upgraded to neutral from sell at Citi. Meanwhile, Legrand and Alfa Laval are downgraded to sell and neutral, respectively. Siemens shares fall as much as 1.4% after the stock was rated underweight by Barclays, which resumed coverage of company, and HSBC downgraded the German industrial giant to hold from buy. Gimv shares drop as much as 3.2% after the Flemish government approves selling the region’s stake in the investment firm, Belgian financial daily De Tijd reports, citing Flemish Finance Minister Matthias Diependaele. Earlier in the session, Asian stocks were mixed as equities in Hong Kong slumped upon trading resumption, while financial shares in Japan rallied amid higher yields. The MSCI Asia Pacific Index was little changed after opening higher. MUFG and other Japanese financial stocks lent the biggest support as comments from the Bank of Japan’s governor pushed up yields, which in turn boosted lenders. Japan’s broader equity benchmarks remained under pressure as the yen strengthened. Stocks in Hong Kong fell the most as the market reopened after Friday trading was canceled due to a heavy rainstorm. Alibaba was a major drag on key gauges after its former CEO Daniel Zhang stepped down from the cloud business. Chinese stocks climbed to snap a four-day loss following a spate of positive news including easing deflationary pressure and the regulator pledging more measures to support capital markets. Conversely, the mainland was kept afloat following somewhat mixed inflation data from China which showed headline CPI Y/Y was softer than expected but no longer in deflationary territory and the latest loans and financing data topped forecasts, while China’s National Administration of Financial Regulation also eased rules for insurers to buy stocks. Australia's ASX 200 was rangebound with gains in the top-weighted financial industry making up for the underperformance in the tech and healthcare sectors. Over the weekend, in a series of rambling, disjointed speeches, Joe Biden said China’s recent downturn has left President Xi Jinping with “his hands full,” and that could diminish any inclination by Beijing to invade Taiwan. Biden was speaking in Vietnam, where he traveled after the G20 summit, where he met with Chinese Premier Li Qiang. Pressed on why he hasn’t met with Chinese President Xi Jinping in 10 months, Biden said Xi “has his hands full right now.” The Chinese president opted not to attend the G-20, giving no explanation. “China has a difficult economic problem right now for a whole range of reasons that relate to international growth and lack thereof, and the policies that China has followed,” said Biden during a press conference in Hanoi, adding, “I don’t think it’s going to cause China to invade Taiwan, matter of fact the opposite, probably doesn’t have the same capacity as it had before.” In FX, the Bloomberg Dollar Spot Index fell as much as 0.6% after rising a eighth straight week last week, its longest streak in data going back to 2005; the Aussie dollar and yen led gains. The PBOC warned speculators to steer clear of the yuan within hours of forceful guidance with its daily reference rate. BOJ governor Kazuo Ueda said ending the negative-interest-rate policy was an option if wages and prices keep going up, sending the yen soaring. “Policymakers in Japan and China are putting up more resistance to further weakness in their currencies,” said David Forrester, a senior strategist at Credit Agricole CIB in Singapore. “A strong CNY fixing and some hawkish comments by BoJ Governor Kazuo Ueda set the tone for a weaker USD across the board.” Most emerging-market currencies advanced and a gauge of developing-nation stocks jumped by the most in a week, led by Chinese shares. In rates, US treasuries dropped following the selloff in JGBs with long-end yields near cheapest levels of the session following comments from BOJ Governor Ueda, and curve spreads steeper. 10-year yields around 4.30% are cheaper by ~4bp vs Friday close; gilts lag by ~2bp while bunds broadly keep pace; front-end outperformance in US steepens 2s10s by ~3bp. Dollar IG issuance slate includes five names; syndicate desks are looking for around $30 billion in sales this week, with a bulk of the volume anticipated ahead of Wednesday’s inflation data. European yields also edged up, led by the long end, with UK gilts underperforming. Comments from BoJ Governor Ueda which lifted the 10yr JGB yield to above 0.70% for the first time since 2014 although further downside in the index was stemmed as banks were lifted on the exit-related talk and with Japan aiming to take drastic economic stimulus measures. The US Treasury auction cycle begins with $44b 3-year note offering at 1pm New York time, followed by 10- and 30-year sales Tuesday and Wednesday. US economic data includes August NY Fed 1-year inflation expectations at 11am; CPI, PPI, retail sales and industrial production are ahead this week. Focal points of US session include 3-year note auction and potential for another heavy corporate new-issue slate; Fed officials are in self-imposed quiet period ahead of Sept. 20 policy decision.   In commodity markets, copper, iron ore and other metals also got a boost from the weakness in the greenback, while improved Chinese data aided sentiment. Bitcoin is a touch softer on the session, holding just below the USD 26k mark. Action comes despite a softer USD but continues the recent sessions performance for Bitcoin where the bias has been for incrementally lower trade. It's a busy week with a raft of news that could shape the direction of markets. On Thursday, the European Central Bank is expected to announce its policy decision. A Bloomberg survey showed an almost even split between economists anticipating a 10th consecutive hike and those anticipating a “hawkish pause.” U.S. inflation data is also due on Wednesday, which may be pivotal before the Federal Reserve meets on Sept. 19. Market Snapshot S&P 500 futures up 0.4% to 4,479.50 MXAP up 0.5% to 161.74 MXAPJ up 0.3% to 504.12 Nikkei down 0.4% to 32,467.76 Topix little changed at 2,360.48 Hang Seng Index down 0.6% to 18,096.45 Shanghai Composite up 0.8% to 3,142.78 Sensex up 0.5% to 66,959.35 Australia S&P/ASX 200 up 0.5% to 7,192.32 Kospi up 0.4% to 2,556.88 STOXX Europe 600 up 0.6% to 457.26 German 10Y yield little changed at 2.62% Euro up 0.3% to $1.0729 Brent Futures down 0.4% to $90.31/bbl Gold spot up 0.4% to $1,926.31 U.S. Dollar Index down 0.43% to 104.64 Top Overnight News China escalated its defense of the yuan by delivering a strong verbal warning after forceful guidance with its daily reference rate, moves that pushed the managed currency away from a 16-year low. The Bank of Japan turned to its loans-for-bonds program to curb rising yields after the governor’s comments on the negative interest rate policy sparked a rout in the nation’s debt market. China said that Premier Li Qiang used a meeting with President Joe Biden at the recent Group of 20 summit to urge the US to see the possibilities that his nation’s advances offer. The European Central Bank will remove a capital surcharge on some lenders after they addressed shortcomings in their leveraged finance businesses. The European Commission cut its outlook for the euro-area economy, predicting it will be dragged down this year by a contraction in Germany. UBS Group AG is cutting hundreds of wealth jobs in Asia just months after completing its takeover of rival Credit Suisse as the bank responds to muted client activity and China’s slowing economy. A more detailed look at global markets courtesy of Newsquawk APAC stocks traded mixed as yields climbed following comments from BoJ Governor Ueda who said that the BoJ cannot rule out that they might have sufficient data by year-end to determine whether they can end negative rates and that his focus is on a quiet exit. ASX 200 was rangebound with gains in the top-weighted financial industry making up for the underperformance in the tech and healthcare sectors. Nikkei 225 was subdued after the comments from BoJ Governor Ueda which lifted the 10yr JGB yield to above 0.70% for the first time since 2014 although further downside in the index was stemmed as banks were lifted on the exit-related talk and with Japan aiming to take drastic economic stimulus measures. Hang Seng and Shanghai Comp were varied with the Hong Kong benchmark pressured as last Friday’s losses caught up to the index following the black rainstorm closure and with declines led by weakness in the property sector, while Alibaba shares also suffered after its former CEO Daniel Zhang stepped down from the cloud business. Conversely, the mainland was kept afloat following somewhat mixed inflation data from China which showed headline CPI Y/Y was softer than expected but no longer in deflationary territory and the latest loans and financing data topped forecasts, while China’s National Administration of Financial Regulation also eased rules for insurers to buy stocks. Top Asian News BoJ Governor Ueda said they cannot rule out that they might have sufficient data by year-end to determine whether they can end negative rates and that his focus is on a quiet exit, while he noted they will end negative rates if they judge that achieving the price target becomes possible and that they will keep ultra-easy policy for now. Furthermore, he stated that there are various options they can take if economic growth and inflation overshoot expectations, as well as noted that the BoJ will work with the government to assess the impact on the economy and prices regarding recent yen declines, according to an interview with Yomiuri. Japanese PM Kishida confirmed he plans to reshuffle the cabinet and to conduct personnel change at the party leadership, while he added that they aim to take drastic economic stimulus measures, according to Reuters. Japanese PM Kishida and South Korean President Yoon agreed to work on the resumption of a three-way summit with China, according to Reuters. Chinese Premier Li said G20 countries should step up macro-economic policy coordination and China will resolutely deepen reforms and opening up. Furthermore, Premier Li said China and Europe should unite and provide stability amid global uncertainties. China’s National Administration of Financial Regulation will make it easier for insurers to buy stocks with the risk weighting of insurance companies’ investment in component stocks of the CSI 300 index and stocks listed on the STAR Market to be lowered, according to Bloomberg citing a statement. White House official said it is incumbent on China to explain why its leader was not present at the G-20 Summit and it is unfortunate if China was not committed to the bloc’s success. European Council President Michel met with Chinese Premier Li and confirmed a shared interest in holding an EU-China summit by year-end, according to Reuters. Italian PM Meloni told Chinese Premier Li about Italy’s plan to quit the Belt and Road Initiative, according to Italian media cited by Reuters. UK PM Sunak said he raised strong concerns over any interference in Britain’s parliament with Chinese Premier Li and said any interference would be unacceptable. UK and Singapore signed a new strategic partnership to boost economic growth and strengthen security, according to a UK government statement. Japanese Chief Cabinet Secretary Matsuno says monetary policy specifics are up to the BoJ to decide; expects the BoJ to closely communicate with the government and conduct policy appropriately. Top European News UK PM Sunak faces a new Cabinet rift after he hinted at curbing benefit increases next year and cast doubt on the pensions triple lock, according to The Sun. British Chambers of Commerce survey showed that small and medium-sized enterprises in the UK are completely unprepared for an impending ‘avalanche’ of fresh EU regulations and taxes such as next month’s EU green tax and obligations related to the EU’s VAT regime that kick in from 2025, according to FT. UK trade unions are to challenge anti-strike laws at the UN watchdog, according to FT. Italy reportedly could amend the 40% tax on banks’ windfall profits which was unveiled last month. ECB to remove leveraged loan capital add-ons for some banks as they have dealt with shortcomings in their leveraged finance units, via Bloomberg citing ECB's Enria. S&P affirmed Portugal at BBB+; Outlook Revised to Positive from Stable. Greece has been upgraded to BBB at DBRS Morningstar; i.e. to investment grade from junk. EU Commission sees EZ GDP growth at 0.8% in 2023 (prev. 1.1%), 1.3% 2024 (prev. 1.6%); Sees EZ inflation in 2023 at 5.6% (prev. 5.8%), 2024 inflation 2.9% (prev. 2.8%) FX Dollar under pressure from Yen and Yuan as BoJ Governor hints at potential end of NIRP and PBoC sets most skewed midpoint fix ever. DXY sub-105.000 within 104.890-520 range, USD/JPY slips to 145.92 from 147.27. USD/CNY and USD/CNH retreat towards 7.2700 and 7.2900 respectively from 7.3250+ and 7.3660; modest further Yuan upside seen on the most recent Reuters source reports. Aussie and Kiwi latch on to Yuan rebound and reclaim 0.6400/0.5900 handles vs Buck. Sterling, Loonie, Euro and Franc all firmer against Greenback around 1.2500, 1.3600, 1.0700+ and circa 0.8900. PBoC set USD/CNY mid-point at 7.2148 vs exp. 7.3437 (prev. 7.2150) PBoC held an FX mechanism meeting in Beijing and said it is confident to maintain the stability of the yuan, while it noted that China's FX self-regulatory body stated the yuan exchange rate has a solid basis to stay at reasonable and balanced levels. Furthermore, the body pledged to take actions when needed to correct one-sided and pro-cyclical activities and said it will resolutely fend off currency overshooting risks. PBoC will scrutinise bulk dollar buying of USD 50mln and above; purchase of USD 50mln and above will need approval from PBoC, via Reuters citing sources. Fixed Income Debt futures remain depressed, but off worst levels as JGBs regroup from BoJ-inspired lows. Bunds circa 25 ticks adrift, Gilts around 50 ticks below par and T-note -5/32 within 130.92-66, 94.62-28 and 109-29/20 respective ranges. UK DMO plans a sale via tender of the 0.125% 2073 Gilt, to take place on September 27th; moves 0.125% 2051 I/L to November 8th (prev. 25th) due to the budget. Commodities WTI and Brent are in the red as the pullback during the latter half of last week continues, despite broader sentiment being generally constructive. Base metals are bolstered by the latest data from China and strong performance in associated trade while precious peers are also firmer as the USD wanes Iraq set October Basrah medium crude OSP to Asia at a premium of USD 1.80/bbl vs Oman/Dubai average and set OSP to Europe at a discount of USD 2.55/bbl vs dated Brent, while it set OSP to North and South America at a discount of USD 0.35/bbl vs ASCI. The Iraqi Oil Minister said no agreement was reached with Turkey to immediately resume Iraq’s northern oil exports,** while he also said that average daily oil production is at 4.23mln bpd with exports averaging 3.35mln bpd. Libya’s Ras Lanuf, Zueitina, Brega and Es Sider oil ports were closed on Saturday evening for three days due to an expected hurricane, according to Reuters citing oil engineers. India and Saudi Arabia are likely to sign an energy cooperation MOU on Monday, while Saudi Crown Prince MBS announced the signing of an MOU for an economic corridor between India, the Middle East and Europe which will include pipelines for electricity and hydrogen. US and Saudi Arabia are in talks to secure metals for EVs, according to WSJ. Geopolitics Ukrainian President Zelensky said Ukrainian troops had advanced on the southern front in the past week and there was also movement in the east near Bakhmut, according to Reuters. US is reportedly nearing a decision on sending long-range missile ATACMS to Ukraine for the first time, according to officials cited by ABC News. Russian Foreign Minister Lavrov said there are ideas for other regional organisations to join the G20 and said that the de-dollarisation process has already started including with India, while Lavrov also said that they regret the decision by Armenia regarding plans for military drills with the US, according to Reuters. European Council President Michel criticised Russia for its cynicism in pulling out of the Black Sea grain deal and said Russia’s offer of a million tons of grain to African countries was a parody of generosity. Turkish President Erdogan said they discussed the issue of the Black Sea grain deal in great detail and any initiative that isolates Russia is bound to fail. Erdogan also stated that Russian President Putin is ready to send grain to poor countries and Qatar also agreed, while he noted it is not hopeless regarding reimplementing the grain deal and the process can start again. Romanian Defence Ministry said pieces of a drone similar to those used by the Russian army were found in Romanian territory on Saturday. Azerbaijan’s Defence Ministry said Armenian forces fired on Azerbaijani army positions and the Azerbaijani army took retaliatory measures. In relevant news, Nagorno-Karabakh separatist authorities said a deal was reached with Azerbaijan to restore transport on the Lachin corridor by Russian peacekeepers and Red Cross. However, an Azerbaijani presidential adviser denied a deal to reopen the Lachin corridor but said the road to Azerbaijan will open for aid shipments regardless, according to Reuters. US Navy said US and Canadian warships sailed through the Taiwan Strait on Saturday, according to Reuters. Taiwan's Defence Ministry said 10 Chinese air force planes crossed the Taiwan Strait Median Line during the past 24 hours, while it noted a Chinese aircraft carrier group is to Taiwan's southeast and heading to the western Pacific. North Korean leader Kim and the Chinese delegation to North Korea shared views on intensifying multi-faceted cooperation. Russian President Putin sent a letter to North Korean leader Kim and stated that the two countries’ relations will expand in all aspects on common efforts, according to KCNA. N. Korean Leader Kim and Russian President Putin could hold a summit on September 13th, via YTN citing a S. Korean source. DB's Jim Reid concludes the overnight wrap If last week was a bit light on important data, you can't say the same about this week's high-impact extravaganza that will occur in a Fed blackout period as next week's FOMC lurks in the wings. US CPI (Wednesday) will be the obvious standout but US PPI and retail sales (Thursday) are nearly as important given how some of the PPI subcomponents feed into the Fed's preferred core PCE, and for retail sales, we’ll see how much momentum has been lost after a phenomenally strong July print. If that's not enough, the ECB see their first "in the balance" meeting of this cycle on Thursday with markets now pricing in a 38% likelihood of a hike this morning. Elsewhere, the UK sees employment data (tomorrow) and monthly GDP (Wednesday) while Friday is a busy day as we get China's monthly suite of activity data, its latest 1-yr MLF fixing rate and US industrial production and the University of Michigan survey. So a busy week. There's no other place to start than US CPI. Our US economists have a preview piece here but to summarise, since gas prices have risen nearly 7% in August, headline CPI (+0.61% DB forecast vs. +0.17% previously) will see its largest monthly increase since June 2022. However, core (+0.22% vs. +0.16% last month) is likely to remain relatively becalmed. On these estimates, the year-on-year number for core CPI inflation should fall 0.4pp to 4.3%, whereas headline would rise 0.4pp to 3.7%, the highest for three months. With core inflation still relatively subdued, our economists think the positive momentum should continue, with the three-month annualised rate falling by about 90bps to 2.2%, while the six-month annualised rate should fall by 50bps to 3.6%. In both cases that would be the lowest since early 2021. So for now the strong headline print should be offset by the positive news on core. However, the risk is always that the longer headline edges up, the more risk of second-round effects down the road. See the fuller preview of what to look for in all the components in the preview link above. Talking of components, Thursday's PPI will be nearly as important, as many categories feed into the Fed’s favoured core PCE deflator. Health care is the main one and our economists are a little concerned that wage growth in the sector could push this higher in the months ahead after recent falls. Airlines are another one to watch. They’ve surprisingly slumped in CPI recently, but risen in the PPI. So this will be an interesting one to get resolved. As our economists highlight, airfares are one reason why the “core services excluding housing” PCE inflation has been significantly stronger than that of the CPI core services excluding rent and medical care services. The Fed pays far closer attention to the PCE core services ex-housing series because this accounts for a little over half of core PCE inflation. On Thursday, August’s retail sales will be a very important release after the strong July reading, so it’ll give us a much better idea of consumption trends and the direction of travel for Q3 GDP and beyond. Our economists expect some payback across headline (-0.3% vs. +0.7% in July), sales excluding autos (+0.1% vs. +1.0%) and retail control (-0.2% vs. +1.0%). So don't underestimate how much a strong reading could impact the likelihood of another hike, or a bad reading impact the probabilities of a recession. The final highlight for the US will be the inflation expectations in the UoM sentiment survey. Will it edge up a bit with the recent rise in gas prices? Over in Europe all eyes are on the ECB’s decision on Thursday. Our economists have nervously held their 3.75% terminal deposit rate call for many months now, and as such they think the ECB will stay on hold. However, even if they don't hike this week, don't expect any sign that the council are confident that this is the last hike. A lot of uncertainty remains over European inflation, whilst GDP has been in near-stagnation since last autumn. See our economists' preview note here. Elsewhere in Europe, we have the ZEW survey due for Germany tomorrow, as well as Eurozone-level industrial production on Wednesday. Speaking of central banks, DB Research has just changed our call on the Bank of Japan’s monetary policy outlook (link here). Our economist now expects yield curve control to be removed in October (previously April 2024), and for negative interest rate policy to end in January 2024 (previously December 2024). In part, that follows the interview that BoJ Governor Ueda gave with the Yomiuri newspaper, where he said an end to negative interest rates was possible if they were confident that wages and prices were rising sustainably, and that they could have enough information on the wage outlook by the end of the year. That’s already had a significant effect in markets, with the Japanese Yen jumping by +1.08% against the US Dollar this morning, whilst the TOPIX Banks index has surged by +4.22%. There’s also been a fresh rise in government bond yields, with the 10yr yield up +5.2bps to 0.70%, which is its highest level since 2014. And that’s also gone hand-in-hand with higher yields elsewhere, with the 10yr US Treasury yield up +3.0bps this morning to 4.29%. Whilst bank stocks in Japan have done well, equities more broadly have struggled, with the Nikkei down -0.45% this morning. Elsewhere in Asia, the performance has been more mixed, with the Hang Seng (-1.68%) seeing a notable decline, whereas the CSI 300 (+0.31%), the Shanghai Comp (+0.57%), and the KOSPI (+0.26%) have posted advances. That also follows the news over the weekend that China’s CPI inflation was now positive again year-on-year, with a +0.1% reading in August, although producer prices were still down -3.0%. Looking forward, equity futures are also pointing higher in the US and Europe, with those on the S&P 500 up +0.16%. Now recapping last week, it was a quiet week for data, but markets were slightly on the negative side. As an example, the S&P 500 index fell back -1.29% , whilst 10yr Treasuries sold off as yields rose +8.7bps. With a slight bias towards better US data, the probability of a Fed hike priced in for November climbed by 10pp to 48%. Markets also moved to price 17.5bps fewer Fed cuts by end-24, with the 2yr Treasury yield rising by +11.2bps week-on-week as a result (+4.3bps on Friday). 10yr Treasury yields followed suit, gaining +8.7bps (+2.0bps on Friday). Back in Europe, even as economic data proved weaker than expected last week, ECB commentary kept the prospect of another hike firmly on the table, leaving markets leaning in a hawkish direction. Pricing for a 25bps hike in September rose to 38% on Friday, up from 23% a week before (and 35% on Thursday). Against this backdrop, 10yr and 2yr bund yields rose +6.2bps and +9.1bps in weekly terms, respectively, (both down -0.3bps Friday). For the latter, this was the largest weekly rise since mid-June. In the FX space, the bullish dollar narrative continued, with the dollar index registering its 8th weekly gain in a row, up +0.79%. Turning to commodities, oil moved higher again following further announcements of cuts to oil supply by OPEC+ earlier last week. WTI crude secured its second consecutive week of gains after gaining +2.29% week-on-week (and +0.74% on Friday) to $87.51/bbl. Brent was similarly up +2.13% (and +0.58% on Friday) to $90.44/bbl. Both reached their highest weekly close since November last year. Off the back of this, US energy stocks outperformed, up +0.97% on Friday and +1.39% week-on-week, while the S&P 500 retreated -1.29% in weekly terms amidst the broader risk-off tone (+0.14% Friday). Tech was the main underperformer last week, with the NASDAQ down -1.93% in weekly terms (+0.09% on Friday). Apple was the main driver of this underperformance, falling -5.95% week-on-week despite a slight +0.35% recovery on Friday, following new stipulations on iPhone use by Chinese government workers. Over in Europe, even as data releases were worrisome, the STOXX 600’s weekly decline was smaller than in the US, down -0.76% (+0.22% on Friday). Tyler Durden Mon, 09/11/2023 - 08:17.....»»

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Futures Slide, Dollar Surges As China Services Unexpectedly Slump Futures are lower, tracking European bourses and Asian markets, but well off session lows as a brief burst of China-linked optimism promptly following a Monday surge in property stocks and hopes of a Chine recovery turned to bust, as China reported the slowest service sector monthly growth so far this according to the August PMI survey, adding to a series of disappointing data. As of 7:50am ET, S&P futures were down 0.1% to 4,517 reversing the 0.2% gain during the Monday Labor Day holiday session; Nasdaq 100 futures dropped 0.4%. The US currency gained as much as 0.5% against its Group-of-10 peers, touching the highest level since March, sending commodities, gold and bitcoin lower. 10Y Yields are up to 4.22% and once again approaching the key resistance level of 4.25%, pressured not just by oil trading near 2023 highs but also in anticipation of a surge in corporate bond sales this week. Also, UK and euro-zone yields rose Monday and are extending that move. Today’s macro data focus is Durable Goods/Cap Goods plus Factory Orders. Later in the week we receive ISM-Srvcs and Jobless Claims. In premarket trading, NextGen Healthcare jumped 8% after Bloomberg News reported that Thoma Bravo is in advanced talks to buy the health-records software company. US-listed Chinese stocks dropped following their best weekly performance since July, as August data pointed to a slowdown in China’s services sector. Alibaba -1%, Baidu -1.7%. Blackstone and Airbnb rose after the S&P Dow Jones Indices said the stocks will join the S&P 500 index prior to the opening of trading on Sept. 18. Manchester United fell as much as 9.2% amid ongoing speculation over a possible deal for the Premier League team. Here are some other notable premarket movers: Associated Banc-Corp (ASB US) shares rise as much as 0.6% after Baird upgraded the Midwest bank to outperform from neutral, saying that the shares offer attractive risk-reward following recent underperformance. Oracle (ORCL US) gains 1.5% after Barclays upgrades to overweight from equal-weight in note, calling the infrastructure software company a “multi-year growth story.” General Mills Inc. (GIS) slips 0.4% after BNP Paribas Exane analyst Max Gumport cut the recommendation on the packaged-foods company to neutral from outperform, citing a slowdown in premium dog-food demand. Lowe’s (LOW) recommendation was raised to outperform from market perform at Bernstein, with the broker noting that there are multiple positive catalysts including: margin expansion and improving return on invested capital. Stock edges higher, up 1%. NetApp Inc. shares are up 1.8% after Susquehanna Financial upgraded the data storage company to positive from neutral. Olin Corp is upgraded to overweight from sector weight at KeyBanc Capital Markets, which says the stock’s valuation appears attractive after shares tumbled following news that CEO Scott Sutton will step down. Shares in the manufacturer of chemical products and ammunition rise 2%. Oracle gains 1.7% after Barclays upgrades to overweight from equal-weight in note, calling the infrastructure software company a “multi-year growth story.” Viatris gains 2% after the firm said the US FDA has tentatively approved a drug cocktail for children with HIV-1. Overnight, China’s services sector saw the slowest growth this year in August, an industry survey showed, adding to evidence the economic recovery is losing traction and damping earlier optimism over government stimulus. Similarly in Europe, the composite purchasing managers’ index undershot expectations, posting a contraction for a third straight month. As we enter Sept, JPM's market intel team writes that there is much discussion on seasonality; while Sept’s average return is negative, its median return is ~0%. When SPX is update double-digits into Sept, then Sept tends to be positive, too. We may also see a surge of capital markets activity over the next couple weeks. The European Central Bank, which meets next week, faces a quandary over interest rates, given recession fears and above-target inflation. "There is real concern for the euro-area picture, with survey data suggesting the economy is sliding into recession," said Sarah Hewin, head of Europe and Americas research at Standard Chartered. “It raises questions over how aggressive the ECB can be going forward.” By contrast, recent data shows the US economy is holding up well and rate cuts may not come any time soon, even though many economists say the Federal Reserve has come to the end of its 18-month long policy-tightening campaign. Goldman Sachs now sees just a 15% probability of a US recession in the coming year, down five percentage points from their previous estimate. Europe’s Stoxx 600 traded flat, after paring a drop of as much as 0.8% with luxury goods among the worst performers. Here are the most notable European movers: Partners Group rises as much as 8.4% and is the biggest gainer in the Stoxx 600 after the Swiss investment manager delivered performance fees that analysts describe as a material beat BKW climbs as much as 4.4% after the Swiss energy company reported operating profit for the first half-year that beat estimates, with analysts highlighting positive momentum in the energy division Johnson Service Group rises as much as 5.5% in 7th straight day of gains, hitting highest since March 22, as RBC highlights good first-half momentum for the UK textile rental and laundry firm Alten rises as much as 2.8% after Stifel initiates coverage with a buy rating, saying the engineering and technology consulting firm is set for long-term earnings growth European food retail stocks fall after JPMorgan downgrades the sector, citing an “unattractive risk reward” given the current sentiment as well as valuations Commerzbank drops as much as 5.2%, the most in a month, after Barclays downgrades to underweight from equal-weight based on “significant” downside risk to estimates Roche falls as much as 2.2%, slipping to its lowest since January 2019, after Berenberg cut its recommendation for the Swiss pharma giant to hold on a lack of share-price catalysts Credit Agricole falls as much as 3.8% after Goldman Sachs downgraded the stock to sell from neutral as it turned “more cautious” on the French lender’s earnings expectations Sectra falls as much as 14% after the Swedish medical imaging and cybersecurity firm reported first-quarter earnings which included a year-on-year fall for operating margins and profit EnQuest shares drop as much as 17% in their worst day since April 2020, after the oil producer swung to a 1H loss from a profit a year earlier due to the impact of the UK energy windfall tax Earlier in the session, Asian stocks fell, with the key regional benchmark on track to snap a six-day winning streak, as a property-led rally in Chinese equities fizzled amid disappointing economic data. The MSCI Asia Pacific Index fell as much as 0.8%, dragged by weakness in the financial sector. China equities declined, retreating after Monday’s strong gains as a gauge of services activity printed well below estimates. China led the rally in Asian stocks on Monday after authorities rolled out more stimulus for the embattled property sector. The decline on Tuesday shows investor sentiment toward Chinese shares remains fragile, casting a pall on the outlook for regional equities. Even after its latest rally, the Asian benchmark is trailing key gauges of peers in the US and Europe this year. Hang Seng and Shanghai Comp were pressured after Chinese Caixin Services PMI data missed forecasts and with the property sector dampened by default fears with about a third of 50 major private builders said to face around $1.5bln dollars of payments this month, while Country Garden narrowly averted a default and paid USD-denominated coupons hours before the end of the grace period. South Korea stocks traded lower, where inflation accelerated much faster than estimated in August, keeping the door open to a rate hike. Shares also dropped in Australia, where the central bank is expected to keep rates unchanged for a third-straight month in a meeting later Tuesday. Vietnamese equities were the only notable gainers following a national holiday. Australia's ASX 200 was lower amid underperformance in the commodity-related sectors and as participants braced for the conclusion of RBA Governor Lowe’s final policy meeting in which the central bank kept rates unchanged as expected. Nikkei 225 stalled on its approach to the 33,000 level and with headwinds from disappointing household spending data which suffered its worst drop since February 2021. “It’s the typical post-party reality check that’s cooling down China’s rally today, as the services PMI notably missed expectations, suggesting further economic downtrend ahead,” said Hebe Chen, an analyst at IG Markets Ltd. “Meanwhile, investors are cautiously awaiting the RBA’s meeting decision, which is poised to raise the curtain for a new round of central bank talks.” In FX, the US dollar rose to the strongest since July against the euro and the pound. Against the yen, it’s approaching the highest since November, and BOJ intervention is looking increasingly inevitable. The Bloomberg Dollar Index jumped 0.4% to 1250.81, its highest since mid-March as China data pointed to sputtering economic recovery. The US currency posted the biggest gains against the Australian dollar, down 1.3%. Australia’s central bank kept its key interest rate unchanged and maintained a tightening bias. “With RBA already acknowledging that the economy is already experiencing below-trend growth, surely any further tightening should crimp on growth momentum further down the road,” said Fiona Lim, senior FX strategist at Malayan Banking Bhd. in Singapore. “AUD could still remain under pressure." EUR/USD fell 0.5% to $1.0747 as data showed consumer inflation expectations rose in July even as demand for services cooled In rates, treasuries were lower with US 10-year yields rising 4bps to 4.22%. US yields are higher by 3bp-54bp across the curve led by intermediate tenors, leaving curve spreads narrowly mixed, and extending a slide that began Friday in anticipation of a surge in corporate bond sales this week. At least six US high-grade corporate bond issuers have slated offerings for Tuesday; sales are expected to total about $120b this month, a seasonally heavy month that normally sees issuance concentrated in the week or so after US Labor Day. Treasury coupon supply is on hiatus until Sept. 11, when cycle including new 3-year and 10- and 30-year reopenings is slated to begin. Also, UK and euro-zone yields rose Monday and are extending that move. Bunds are also in the red with little reaction shown to a downward revision to euro-area service PMI. In commodities, crude futures decline, with WTI falling 0.2%. Spot gold drops 0.6%. Bitcoin is under modest pressure, -0.2%, as the USD continues to climb higher and the overall tone remains a subdued one after the APAC handover. Currently, BTC resides at the mid-point of USD 25.55-25.83k parameters. To the day ahead now, and data releases include the global services and composite PMIs for August, along with Euro Area PPI for July and US factory orders for July. From central banks, we’ll get the ECB’s Consumer Expectations Survey, and hear from the ECB’s Schnabel and Visco. Market Snapshot S&P 500 futures down 0.1% to 4,515 MXAP down 0.8% to 163.12 MXAPJ down 1.1% to 509.51 Nikkei up 0.3% to 33,036.76 Topix up 0.2% to 2,377.85 Hang Seng Index down 2.1% to 18,456.91 Shanghai Composite down 0.7% to 3,154.37 Sensex little changed at 65,687.26 Australia S&P/ASX 200 little changed at 7,314.28 Kospi little changed at 2,582.18 STOXX Europe 600 down 0.6% to 455.24 German 10Y yield little changed at 2.59% Euro down 0.5% to $1.0746 Brent Futures down 0.8% to $88.30/bbl Gold spot down 0.5% to $1,933.17 U.S. Dollar Index up 0.35% to 104.61 Top overnight news from Bloomberg Home sales in two of China’s biggest cities soared in the past two days following mortgage relaxations, an early sign that government efforts to cushion a record housing slowdown are helping. Existing-home sales for Beijing and Shanghai doubled over the weekend from the previous one, according to CGS-CIMB Securities. “We were surprised by the strong pick up in Beijing and Shanghai, despite the challenging economy,” said Raymond Cheng, head of China property at CIMB. BBG Chinese property developer Country Garden made payments on two dollar bonds within their grace periods on Tuesday, ending a month-long saga that had become the focal point of global investors’ concerns about China’s struggling property sector. FT China’s Caixin services PMI for Aug was very soft, coming in at 51.8, down from 54.1 in Jul and below the Street’s 53.5 forecast. RTRS North Korean leader Kim Jong-un plans to travel to Russia this month for a meeting with Putin at which the two will discuss Pyongyang ramping its weapons supplies to Moscow. NYT Ukraine president Zelensky said he was replacing the minister of defense, confirming recent media speculation, in what is the biggest shakeup since Russia launched its invasion. NYT The world’s most powerful financial watchdog has warned of “further challenges and shocks” in the months ahead, as high interest rates undermine economic recoveries and threaten key sectors including real estate. In his regular update to G20 leaders ahead of their summit in New Delhi this week, Klaas Knot, chair of the Basel-based Financial Stability Board, said: “The global economic recovery is losing momentum and the effects of the rise in interest rates in major economies are increasingly being felt.” FT The US deficit is climbing, but not for reasons that are inflationary - things like higher interest expense, reduced Fed earnings, and lower non-withheld tax revenue (due to smaller capital gains) are pushing deficits higher. WSJ Trump’s lead grows more dominant – he’s now the choice of ~60% of GOP primary voters, up 11 points from the prior survey in April. Biden’s age a growing political liability – 73% of voters think Biden is too old for a second term vs. 47% who feel the same about Trump (and Trump has an 11-point advantage on record of accomplishments as president)  WSJ Private equity giant Blackstone Inc. is the latest addition to the S&P 500 Index, the first alternative asset manager to join the equity gauge. Airbnb Inc. is added as well. The New York-based Blackstone and Airbnb will replace Lincoln National Corp. and Newell Brands Inc. prior to the start of trading on Sept. 18, S&P Dow Jones Indices said. BBG The continued positive inflation and labor market news has led GIR to cut our estimated 12-month US recession probability further to 15%, down 5pp from our prior estimate and equal to the unconditional average recession probability of 15% calculated from the fact that a recession has occurred roughly once every seven years since WW2 A more detailed look at global markets courtesy of Newsquawk APAC stocks were mostly subdued after the holiday lull stateside and as the region digested disappointing data releases including the weaker-than-expected Chinese Caixin Services PMI. ASX 200 was lower amid underperformance in the commodity-related sectors and as participants braced for the conclusion of RBA Governor Lowe’s final policy meeting in which the central bank kept rates unchanged as expected. Nikkei 225 stalled on its approach to the 33,000 level and with headwinds from disappointing household spending data which suffered its worst drop since February 2021. Hang Seng and Shanghai Comp were pressured after Chinese Caixin Services PMI data missed forecasts and with the property sector dampened by default fears with about a third of 50 major private builders said to face around USD 1.5bln dollars of payments this month, while Country Garden narrowly averted a default and paid USD-denominated coupons hours before the end of the grace period. Top Asian News China's MIIT released a plan to develop the electronics industry and will guide capital to the industry, while it will support qualified enterprises to make good use of financing tools such as domestic and overseas listings and bond issuances, according to Bloomberg and Reuters. China's Foreign Minister Wang said following the recent meeting with his Italian counterpart that China and Italy should adhere to the right way of getting along in terms of mutual respect, trust, openness and cooperation, while he added that both countries should strive for bilateral relations to be at the forefront of China-EU relations. Furthermore, Wang said they should jointly safeguard a free and open multilateral trading system, maintain a stable global supply chain and provide a fair business environment for each other's enterprises. A debt crisis reportedly threatens to engulf Chinese developers with about two-thirds of 50 major private builders defaulters and with the 16 survivors facing USD 1.5bln of bond payments this month, according to Bloomberg. Country Garden Holdings (2007 HK) paid USD-denominated coupons that were due last month before the end of the grace period which was set to expire by September 6th, according to Bloomberg and Reuters. RBA kept the Cash Rate Target unchanged at 4.10%, as expected, while it reiterated that some further tightening of monetary policy may be required and the Board remains resolute in its determination to return inflation to the target.. RBA higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so but noted inflation is still too high and will remain so for some time yet. Furthermore, the RBA said the pause will provide further time to assess the impact of the increase in interest rates to date and the economic outlook but noted increased uncertainty around the outlook for the Chinese economy due to ongoing stresses in the property market and that the outlook for household consumption also remains uncertain China is reportedly to launch a new state-backed fund that aims to raise USD 40bln in order to boost the chip industry, via Reuters citing sources. The new fund will focus on areas incl. equipment for chip manufacturing. Fund has received approval from Chinese authorities in recent months. Finance Ministry intends to contribute CNY 60bln to it. European bourses are in the red, Euro Stoxx 50 -0.2%, but have been gradually making their way higher after a subdued open given the downbeat APAC handover. A handover that was negatively affected by soft Chinese Caixin PMI data. Since action has been influenced by Final PMIs though the metrics provided little to lift the overall tone with the recovery off lows occurring gradually and without a specific fundamental driver. Sectors are mixed after beginning the morning firmly in the red. Personal Care, Drug & Household names alongside Consumer Products/Services continue to lag given broker activity and data while Financial Services, Energy, Insurance and Banking are now modestly firmer on the session; the latter components perhaps benefitting from yield support. Stateside, futures have been directionally in-fitting with the above though magnitudes have been more contained thus far. ES -0.2% has lifted off of lows with the NQ -0.3% following suit but to a slightly lesser extend given yield upside. Action which comes ahead of Final PMIs and a handful of other data points. Top European News ECB's Lane (conducted on August 31st): I would underline the fact that there has been some easing in goods inflation and services inflation, which is a welcome development. "expect to see this famous core inflation come down throughout the autumn."; "... it would be a mistake to extrapolate the high inflation we’ve seen into a longer-term projection.". Click here for the full release. Spanish Catalan Leader Puigdemont says all judicial cases that are targeting Catalan separatism must be dropped as a condition for discussions on the PMs investiture FX A firm start to the session for the Dollar index, fuelled by risk aversion and an overnight uptick in yields, and with US cash yields back online following its long Labor Day weekend. The Yen is one of the focal points in today’s session as it approaches YTD lows against the Dollar, while the overnight session saw a particularly weak 10-year JGB auction. The Antipodeans sit as G10 underperformers as the fallout from the softer Chinese Services PMI takes its toll, while the RBA’s policy decision saw no fireworks. The European majors succumb to the Dollar but to a lesser extent than their Antipodean counterparts. The morning saw the final PMIs in the EZ downgraded, with the broader theme being slower growth and rising input prices. PBoC set USD/CNY mid-point at 7.1783 vs exp. 7.2703 (prev. 7.1786) World Bank is reportedly in talks to double its Turkey exposure to USD 35bln, according to Bloomberg sources; the World Bank is reportedly working on USD 18bln in new funding over the next three years which will focus mostly on the private sector. Fixed Income Core benchmarks are under modest pressure with action occurring around the EZ/regional and UK PMIs but for the most part this has been shortlived as we await the return of US players from the long weekend. Bunds are softer to the tune of 15 ticks and reside towards the mid-point of 131.61-131.98 boundaries. A high which printed in proximity to the morning’s Spanish Services PMI while the low was re-tested on the Final EZ figure. Gilts have been slightly more contained given their more outsized action on Monday while USTs are broadly in-line with EGBs ahead of data points. As it stands, yields are firmer across the curve with action slightly more pronounced at the long end and the curve incrementally bear-steepening as a result. Commodities WTI and Brent front-month futures are softer intraday amid the broader risk aversion emanating from the Chinese Services PMIs overnight. Dutch TTF kicked off the session firmer but then fell into losses, with news overnight suggesting Offshore Alliance members at Chevron’s Gorgon Facility, Wheatstone Platform and Wheatstone Downstream gas processing facilities in northwest Western Australia have notified the company that they intend to stop work for 2 weeks commencing September 14. Metals are seeing broader pressure from the firmer Dollar whilst industrial metals see deeper losses vs precious metals amid the demand dent emanating from China. Australia's Offshore Alliance served Chevron (CVX) with further notice of protected industrial action which will commence after the first 7 days of the protected industrial action kicks off on September 7th, while the Australian union said it plans a full strike at Chevron's Wheatstone and Gorgon LNG facilities in Australia for two weeks from September 14th if its demands are not met, according to Reuters. Goldman Sachs said it still sees a potentially more aggressive OPEC+ price target as a key moderately bullish risk to its 12-month ahead Brent crude forecast of USD 93/bbl and it no longer expects Saudi to announce a partial unwind of its 1mln bpd production cut, according to Reuters. Ukraine does not expect its grain export situation to change after the talks between Russian President Putin and Turkish President Erdogan, according to Reuters sources. Chevron (CVX), on industrial action, says it has continuity plans and plans to be a reliable supplier. Elsewhere, says if the winter is a normal one, then it could be a difficult time for some European nations. Geopolitics The Russian Defence Ministry said it shot down a drone over Russia's Kaluga region,** according to Reuters. North Korean leader Kim plans to travel to Russia this month and meet Russian President Putin to discuss the possibility of supplying weapons for the war in Ukraine, according to NYT citing US and allied sources. In response, the Russian Kremlin says it has "nothing to say". US Event Calendar 10:00: July Factory Orders, est. -2.5%, prior 2.3% July Factory Orders Ex Trans, est. 0.1%, prior 0.2% 10:00: July Durable Goods Orders, prior -5.2% Durables-Less Transportation, prior 0.5% Cap Goods Orders Nondef Ex Air, prior 0.1% Cap Goods Ship Nondef Ex Air, prior -0.2% DB's Jim Reid concludes the overnight wrap The last 24 hours have been fairly quiet for markets given the US holiday, but the overall tone was slightly negative after what was earlier a very good handover from a strong China market on Monday. However this faded as the day progressed with losses for bonds and equities in Europe, just as oil prices hit a new high for 2023. The recent run-up in oil prices is already setting us up for some hotter August CPI prints, so any further gains there are going to be a fresh hurdle for central banks in their quest to get inflation back to target. That concern was evident among sovereign bonds, which sold off mainly thanks to higher inflation expectations. For instance, the 10yr bund yield was up +3.1bps on the day to 2.57%, of which +2.5bps was a result of higher inflation expectations. Yields moved higher in other countries as well, with those on 10yr OATs (+2.8bps), BTPs (+5.4bps) and gilts (+3.5bps) all rising. Unsurprisingly, that rise in inflation expectations led to a bit more speculation about whether the ECB might deliver another hike next week. Currently, overnight index swaps still consider that an unlikely prospect and are pricing in a 25.7% chance, but that’s up from 23% the previous day, so clearly investors aren’t entirely discounting the prospects of another move. When it comes to that meeting, ECB President Lagarde provided no clues on what the ECB might do in a speech yesterday. That focused on communication and monetary policy, although Lagarde did say “actions speak louder than words” and referenced the 425bps of hikes that the ECB had already delivered. If they were to pause, that would end a run of 9 consecutive rate hikes, so it could be a big moment. However, markets think there’s also a decent probability they might do a “skip” like the Fed did in June, since they’re also pricing in a 50% chance of a hike by the time of the December meeting. This backdrop saw European equities lose ground throughout the session, despite a fairly strong performance at the open. Indeed, the STOXX 600 was initially up +0.88%, with China related stocks in the ascendency. These gains were pared back with the index ending the day -0.04% lower. It was a similar story across the continent, with modest losses for the FTSE 100 (-0.16%), the CAC 40 (-0.24%) and the DAX (-0.10%) as well. US markets were closed yesterday, but S&P 500 (-0.17%) and NASDAQ 100 (-0.11%) futures have edged lower overnight. 10yr USTs yields (+3.15bps) have edged up trading at 4.21% as trading has resumed. The other big development yesterday came from oil prices, which hit a new closing high for 2023. The latest moves saw Brent crude up +0.51% yesterday to $89.0/bbl, whilst WTI is up +0.47% this morning trading at $85.95/bbl as we go to press. The last time Brent traded above $90/bbl was last November, and even a temporary uplift could prove challenging for policymakers and markets, since inflation is still running above target. So any pivot away from restrictive policy is going to be hard so long as it remains there, and it's going to heighten the dilemmas they might face if we do end up with a noticeable downturn in growth. Asian equity markets are lower this morning reversing some of yesterday's gains. Chinese equities are leading losses with the Hang Seng (-1.55%) the biggest underperformer followed by the Shanghai composite (-0.63%) and the CSI (-0.57%). The Nikkei (-0.21%) and the KOSPI (-0.12%) are also slightly lower as I type. Coming back to China, services sector activity expanded at the slowest pace in eight months as the Caixin/S&P Global services PMI dropped to 51.8 in August (v/s 53.5 expected) from 54.1 in July, bringing it more in line with the official services PMI. In company news, China’s former largest builder Country Garden managed to avoid default by paying $22.5 million of US bond interest due on August 07, just within a 30-day grace period ending. It's also looking to extend the principal of 8 Yuan bonds by 3 years. So they are obviously doing what they can to avoid default. In monetary policy action, the Reserve Bank of Australia (RBA) decided to keep its benchmark policy rate unchanged at 4.1% for the third straight month with the statement seemingly very similar to last month. It is the last meeting chaired by RBA governor Philip Lowe, whose seven-year term ends next week. Elsewhere, household spending in Japan (-5.0% y/y) posted its biggest decline in nearly 2.5 years in July, sliding for the fifth consecutive month and worse than market expectations of -2.5% and against the prior month’s -4.2%. South Korea CPI reaccelerated in August after six months of cooling, coming in at +3.4% y/y in August (v/s +2.9% expected; +2.3% in July) on the back of upside surprises coming from fresh food and energy. To the day ahead now, and data releases include the global services and composite PMIs for August, along with Euro Area PPI for July and US factory orders for July. From central banks, we’ll get the ECB’s Consumer Expectations Survey, and hear from the ECB’s Schnabel and Visco. Tyler Durden Tue, 09/05/2023 - 08:13.....»»

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This is a Real-time headline. These are breaking news, delivered the minute it happens, delivered ticker-tape style. Visit www.marketwatch.com or the quote page for more information about this breaking news......»»

Futures Climb Tentatively Ahead Of Powell's J-Hole Speech Futures are slightly higher ahead of today's Jackson Hole main event, with tech flat following yesterday’s violent Nvidia "sell the news" dump even as yields ticked modestly higher again. At 8:00 am, S&P futures were higher by 0.3% on the day, trading just around 4,400 and paring a portion of Thursday’s session losses while Nasdaq 100 futures are flat after the index sank more than 2% yesterday. Europe's Stoxx 50 rises 0.6%, extending its first weekly advance in four as commodity shares led gains as oil and iron ore prices climbed; Asian equities slumped Friday, paring their first weekly gain since July, as Chinese stocks slid and technology shares were sold off. Quality is leading, Growth is lagging; Cyclicals flat vs. Defensives. Powell kicks off 10:05 am ET and this year’s theme “structural changes in the global economy” appears to have roiled bond markets with some thinking >5% Fed Funds is the new normal or perhaps a higher inflation target. The bond market reaction may result in lower yields as we turn the page to Sept as JPM does not think Powell tips his hand on future policy at this event. Treasury yields ticked higher, with two-year notes holding above 5%. The dollar was little changed; commodities are mixed with Energy leading and metals lagging. In premarket trading, Digital World Acquisition Corp. the special-purpose acquisition company that’s seeking to take Donald Trump’s media company public, falls  4.4% after the former President posted his own mug shot in a return to Elon Musk’s X. Affirm Holdings jumped 7.5% after fourth-quarter revenue at the financial technology company beat expectations, helped by an increase in transactions on its platforms. Here are some other notable premarket movers: Ardelyx rises 2.8% after the biotech was upgraded to overweight from neutral at Cantor Fitzgerald, saying that the Street is underappreciating the peak sales potential of Xphozah, Ardelyx’s flagship drug. Clarivate Plc dips 1.8% after RBC Capital Markets downgraded the information services company to sector perform from outperform. Domo (DOMO) tumbles 33% after the application software company cut its full-year forecast. Cowen cut its rating on the firm in the wake of the report, citing the significantly lower guidance. Hawaiian Electric (HE) sinks 21% as the utility’s woes deepened following the wildfires in Maui, suspending its dividend while S&P cut its credit rating. Marvell Technology (MRVL) falls 3.1% after the semiconductor company gave a forecast for the current quarter that was largely line with Wall Street estimates. Analysts noted that its AI business was continuing to grow while KeyBanc said its networking and consumer segments were still weak. Olaplex (OLPX) drops 5.0% as Piper Sandler cuts its recommendation on the hair-care company to underweight from neutral, citing margin pressures. Equities have struggled for direction this week, gaining strongly one day only to wipe out the advance the next, as the focus swung from Nvidia earnings to the trajectory of interest rates.  As previewed yesterday, Powell, who is scheduled to deliver a speech at 10:05 a.m. Washington time, will likely outline how officials will assess whether rates should go higher and determine when it’s time to start cutting them. “There could be another phase of uncertainty and a broad-based selloff is possible depending on the magnitude of the hawkishness” at Jackson Hole, said Carlos von Hardenberg, portfolio manager at Mobius Capital Partners. “But the market is differentiating relatively radically between companies that are in the pole position to show very strong earnings growth in the near and medium term.” The effects of higher-for-longer interest rates will overshadow the buzz around artificial intelligence, spelling trouble for tech stocks, according to Bank of America Corp. strategists. On Thursday, even a blowout sales forecast from Nvidia wasn’t enough to stem the Nasdaq 100’s slump amid a rise in bond yields. Elsewhere, China eased its mortgage policies further in a push to support its economy, although the boost to stocks on the mainland from the news proved to last just a few minutes. Europe's Stoxx 600 is up 0.3% and set to log its first weekly rise in four. Mining, retail and energy stocks are leading gains while health care creates a drag. Here are the biggest European movers: Tesco shares gain as much as 1.9%, among the top performers in the FTSE 100 Index, after Barclays lifted its price target on the UK grocer and said there’s scope for a guidance boost. JCDecaux shares gain as much as 4.5%, the most since May, after Deutsche Bank raises the advertising company to buy from hold, saying risks related to the firm’s China exposure may have been priced in. Aston Martin shares rise as much as 5.7% after Jefferies raised its recommendation on the luxury sports carmaker to buy from hold, saying it sees scope for the company to build on the re-positioning begun by Chairman Lawrence Stroll. European tech stocks miss out on any artificial intelligence buzz generated by Nvidia’s blowout sales forecasts, as they languish on the fringes of the global AI race. Watches of Switzerland plunges as much as 29%, the most on record, after Rolex said it plans to buy luxury retailer Bucherer. CMC Markets shares drop as much as 20% at the open to their lowest level in nearly four years after the online trading platform said in a trading update that its annual net operating income would be lower than last year due to “subdued” market conditions. Earlier in the session, Asian equities slumped paring their first weekly gain since July, as Chinese stocks slid and  technology shares were sold off on risk aversion ahead of a speech from Federal Reserve Chair Jerome Powell. The MSCI Asia Pacific Index declined as much as 1.2%, trimming its advance for the week to 0.6%, with chipmakers TSMC and Samsung among the biggest drags. A gauge off Chinese technology stocks in Hong Kong slumped more than 2% after Meituan warned of slower orders, while NetEase dropped on a revenue miss as the widespread tech selling clouded over their earnings results, while losses in the mainland were limited following a firm liquidity injection by the PBoC and after the securities regulator met with financial industry firms and urged longer-term funds to help steady the stock market. Japan's Nikkei 225 fell by as much as 2% after it gapped below 32,000 with tech stocks hit by the broad sector recoil. ASX 200 was pressured by heavy losses in tech and the commodity sectors, while consumer stocks showed some resilience after stronger earnings from Wesfarmers. Indian markets closed at their lowest level since June 30 on Friday, marking their fifth straight week of losses, on broad risk aversion ahead of Federal Reserve Chair Jerome Powell’s speech. The S&P BSE Sensex fell 0.6% to 64,886.51 in Mumbai, while the NSE Nifty 50 Index declined by the same magnitude. Risk appetite in Asia remains fragile amid concerns on China’s economy and expectations of higher-for-longer US interest rates. After a tech-led rally Thursday on Nvidia’s strong results, investor attention has shifted to the Jackson Hole Symposium where Powell’s speech may provide clues on the Fed’s policy path. In FX, the greenback is supported with the Dollar Index rising 0.2% to its highest since the start of June. The euro extends recent losses and heads for its sixth weekly decline. EUR/USD drops as much as 0.4% to 1.0766, breaches 200-DMA support on an intraday basis; technically, there is little support until 1.0635, the May lows USD/JPY pares a 0.3% advance to trade 0.1% higher on the day at 146.04; the pair heads for its fourth weekly advance for the first time since Feb. GBP/USD down 0.3% to 1.2560, lowest since June 13; the pound was sold for dollars by momentum funds as concerns of a hawkish Powell spurred broad greenback strength, according to traders In rates, treasuries were slightly cheaper across the curve, following losses seen in core European rates over the early London session. 10-year TSY yields are around 4.245%, cheaper by 1bp on the day with bunds and gilts lagging by additional 3bp and 1.5bp in the sector; belly slightly lags on the Treasuries curve, flattening 5s30s spread by 1.2bp vs. Thursday close. Treasury futures are near lows of the day, adding to losses seen Thursday although price action broadly remains within Wednesday’s session range. US session focus is on Jackson Hole economic policy symposium, where Fed Chair Powell is expected to speak at 10:05am New York. Investors will be focused on Fed speakers at Jackson Hole and the FOMC’s view on the long-term neutral interest rate, which has been in focus extensively this week In commodities, iron ore was set for its biggest weekly gain since June ahead of China’s traditional peak season for construction activity from next month. Oil trimmed a weekly loss. Bitcoin is contained in narrow parameters with specific catalysts light as we await Central Bank impetus from the ECB and Fed. JPM sees limited downside for crypto markets in the near term, via CoinDesk. To the day ahead now, and there are several central bank speakers today, including Fed Chair Powell, the Fed’s Harker, Mester and Goolsbee, along with ECB President Lagarde. Data releases include the Germany’s Ifo business climate indicator for August, and in the US we’ll get the University of Michigan’s final consumer sentiment index for August. Market Snapshot S&P 500 futures up 0.2% to 4,396.25 STOXX Europe 600 up 0.3% to 452.93 German 10Y yield little changed at 2.55% Euro down 0.3% to $1.0782 MXAP down 1.3% to 158.38 MXAPJ down 1.2% to 498.03 Nikkei down 2.1% to 31,624.28 Topix down 0.9% to 2,266.40 Hang Seng Index down 1.4% to 17,956.38 Shanghai Composite down 0.6% to 3,064.08 Sensex down 0.4% to 64,978.04 Australia S&P/ASX 200 down 0.9% to 7,115.18 Kospi down 0.7% to 2,519.14 Brent Futures up 1.1% to $84.27/bbl Gold spot down 0.2% to $1,913.99 U.S. Dollar Index up 0.20% to 104.20 Top Overnight News from Bloomberg An abstract interest-rate metric is dominating discussions across trading desks ahead of the Jackson Hole symposium, with investors wondering if Federal Reserve Chair Jerome Powell will weigh in, and bracing for further declines in US Treasuries if he does. European Central Bank Governing Council member Joachim Nagel said that he’s not convinced inflation is under control enough for a halt in interest rate hikes, with his decision hinging on additional data in the coming weeks. Business confidence in Germany took another hit in August, despite the economy just exiting a recession in the second quarter. The yen has eclipsed bond market liquidity as a potential catalyst for a further adjustment to the Bank of Japan’s monetary policy. American politicians are keener than ever to juice the economy with government cash, a shift that’s already helping to drive up borrowing costs and looks likely to keep them high long after the inflation emergency is over. A more detailed look at global markets courtesy of Newsquawk APAC stocks traded lower following the weak handover from global counterparts after the Nvidia-related euphoria wore off and with markets bracing for Fed Chair Powell's speech at Jackson Hole. ASX 200 was pressured by heavy losses in tech and the commodity sectors, while consumer stocks showed some resilience after stronger earnings from Wesfarmers. Nikkei 225 fell by as much as 2% after it gapped below 32,000 with tech stocks hit by the broad sector recoil. Hang Seng and Shanghai Comp declined with NetEase and Meituan among the worst performers in Hong Kong as the widespread tech selling clouded over their earnings results, while losses in the mainland were limited following a firm liquidity injection by the PBoC and after the securities regulator met with financial industry firms and urged longer-term funds to help steady the stock market. Top Asian News PBoC was said to ask some banks to limit southbound bond connect investments with the guidance said to be aimed at outflows and limiting yuan offshore supply, according to Reuters sources. China reportedly plans to cut stamp duty on domestic stock trading by up to 50%, via Reuters citing sources; could be announced as soon as Friday. China is issuing nationwide guidance on the easing of mortgage rules; issuing detailed rules for conditions to qualify for first-home mortgage rates. Reuters polls shows 55% of economists say the BoJ will not start unwinding ultra-easy policy until at least July 2024, while 73% of economists think BoJ will end YCC control in 2024 (prev. 50%) and 41% expect BoJ to end NIRP in 2024 (prev. 54%) European bourses are modestly firmer, Euro Stoxx 50 +0.4%, with the overall tone a tentative one ahead of Jackson Hole. Limited equity reaction was seen to German Ifo, GDP revisions or an ECB sources piece that had a dovish headline message. Sectors are primarily in the green with outperformance in Energy and Basic Resources while Health Care languishes in the red. Stateside, futures are more contained than their above peers but retain a similar positive skew, ES +0.2% as attention turns to Chair Powell. Top European News ECB's Nagel it is much too early to think about a rate-hike pause, while he stated they have to be stubborn on policy and more stubborn than inflation, according to an interview with Bloomberg TV. ECB's Vujcic said the Eurozone economy is basically stagnating and inflation has most likely peaked, while he added that it is to be seen whether rates are restrictive enough, according to an interview on Bloomberg TV. Momentum is growing for a pause in ECB rate hikes as recession fears increase, debate still open, via Reuters citing sources; Policymakers agree that any decision to pause would need to make clear the job is not done and future hikes could still be needed. Several of the sources said they saw chances evenly split between hike/pause, smaller number saw a pause as more likely. Re. August Flash PMIs, several policymakers cautioned against reading too much into such surveys as there is a growing gap between hard data and sentiment readings. All sources agreed that even in the scenario of a pause, ECB would need to make clear its job was not done and more policy tightening could still be needed. Those arguing for tightening want solid evidence that inflation is heading back to target without the risk of getting stuck above 2%, say a meaningful decline in underlying inflation would be needed for a pause. UK Ofgem Energy Price Cap (GBP): 1923 (prev. 2074), -7.3% for dual-fuel households, for the October-December. The first time the average energy bill has gone below 2k since April 2022. FX Greenback elevated before Fed Chair Powell emerges from Jackson Hole with the DXY holding above 104.000. Euro lags after losing 200 DMA and 1.0800+ status vs Dollar even before dovish-leaning ECB sources and downbeat German Ifo survey. Yen back below 146.00 as yields remain lofty and Tokyo CPI metrics come in mostly softer than expected. Kiwi faces stronger AUD/NZD headwinds as Aussie derives support from base metals. NZD/USD towards the bottom of the 0.5928-0.5895 range and AUD/USD vice-versa between 0.6427-03 parameters. Pound flounders sub-1.2600 against Buck irrespective of improvement in UK consumer confidence per GfK. PBoC set USD/CNY mid-point at 7.1883 vs exp. 7.2923 (prev. 7.1886) Fixed Income Deeper retreat in debt before Fed Chair Powell and ECB President Lagarde deliver remarks at the JH symposium. Bunds back down towards 132.20 low from 132.57 peak set post-ECB sources and Ifo survey. Gilts and T-note both depressed within 94.48-24 and 109-20/12+ respective ranges. BTPs remain under par and sub-115.00 in the wake of a mixed 2-year Italian auction. Commodities Crude benchmarks are trending higher despite the modest USD upside and tentative tone overall, action which comes in relatively limited specific fundamentals as we await developments around Australian LNG. Currently, the benchmarks are towards session highs with WTI Oct'23 above USD 80.00/bbl and Brent Oct'23 around USD 84.50/bbl. Spot gold is little changed given the incrementally firmer USD and tentative tone overall while spot silver has resumed its advance with technicals assisting. Base metals benefit from the latest support measures out of China, targeting the property sector. Offshore Alliance members at Woodside Energy (WDS AT) endorsed the in-principle agreement. Chevron (CVX) says it has not received any notice of intent to strike from Australian LNG unions. China's Industry Ministry said it aims to increase the output of 10 non-ferrous metals by 5% in 2023-2024 and will promote companies cooperating in overseas iron ore exploration, especially in neighbouring countries. Trader sources cited by Reuters suggest rising prices of a popular Russian crude sold in China are set to peak soon as independent refiners are likely to switch to cheaper Iranian crude as Iran boosts exports to four-and-a-half-year highs. Geopolitics White House said US President Biden and Ukrainian President Zelensky discussed the start of training Ukrainian fighter pilots and the expedited approval of other nations to transfer their F-16s, according to Reuters. Russian military said it intercepted a Ukrainian S-200 missile over Russian territory, while the Russian Defence Ministry said a Ukrainian attack on Crimea involving 42 drones was thwarted, according to Reuters and AFP. Taiwan Defence Ministry said 13 Chinese military aircraft entered Taiwan's 'response zone' and 5 Chinese naval ships engaged in combat readiness patrols on Friday morning, according to Reuters. US Event Calendar 10:00: Aug. U. of Mich. Sentiment, est. 71.2, prior 71.2 Current Conditions, prior 77.4 Expectations, prior 67.3 1 Yr Inflation, est. 3.3%, prior 3.3% 5-10 Yr Inflation, est. 2.9%, prior 2.9% 11:00: Aug. Kansas City Fed Services Activ, prior -1 Central Banks 10:05: Fed’s Powell Speaks at Jackson Hole Economic Policy Symposium 11:00: Fed’s Harker Interview With Bloomberg TV 11:30: Fed’s Mester Speaks on CNBC 11:30: Fed’s Harker Interview With Yahoo Finance Live 12:30: Fed’s Goolsbee Speaks on CNBC 14:00: Fed’s Goolsbee Speaks on Bloomberg TV 14:30: Fed’s Mester Speaks on Bloomberg TV DB's Henry Allen concludes the overnight wrap Markets lost significant ground over the last 24 hours, with equities and bonds paring back Wednesday’s gains after strong data and comments from central bankers saw investors price in more rate hikes. That left the S&P 500 down -1.35%, whilst the NASDAQ fell by an even-larger -1.87%, despite the positive earnings release from Nvidia after the previous day’s close. One of the main catalysts for this were the US weekly jobless claims, which fell to 230k (vs. 240k expected) in the week ending August 19. That was beneath every economist’s expectation on Bloomberg, and the fact it hit a 3-week low created some optimism that the economy might not be as weak as the flash PMIs had suggested earlier in the week. With the data still pointing in different directions, all attention today will now be on the gathering of central bankers at Jackson Hole for the annual economic symposium. This year’s theme is focusing on “Structural Shifts in the Global Economy”, and the big highlight today will be Fed Chair Powell’s speech at 15:05 London time, where we simply have the title “Economic Outlook”. Recent years have seen Chair Powell use the conference to address important themes. Last year we had a fairly short and direct message on the importance of price stability, which left little doubt about the Fed’s resolve to get inflation back down. And back in 2021, there was a much more dovish message that leaned into the view that above-target inflation would prove temporary. According to our US economists, they don’t expect Powell to send strong signals this year about the near-term policy path. Their view is that the data dependence message at the last FOMC meeting was clear, and it’s too early to abandon that approach. But it’ll be interesting to see if we get any more insight into Powell’s inflation views, and whether he sticks to the view that getting inflation back to target will require economic weakness, including via a higher unemployment rate. Ahead of Powell’s speech, there were some interesting developments in market pricing yesterday. In particular, futures now suggest that another Fed rate hike to the 5.5-5.75% range is more likely than not for the first time since SVB’s collapse, with the chance of another hike by the November meeting at 53% by the close, and up again to 55% this morning. Clearly we’ve got another jobs report and CPI print ahead of the next meeting, but the moves suggest that markets are coming round to the Fed’s most recent dot plot from June, which suggested there’d still be one more rate hike from here. The prospect of another hike meant that Treasuries sold off again, and the 3m T-bill yield (+2.8bps) hit a fresh post-2001 high of 5.464%. There was also an increase in yields further out the curve, with the 2yr yield up +5.6bps to 5.02%, and the 10yr yield up +4.5bps to 4.24%. Not all officials seemed to agree with that, with Philadelphia Fed President Harker (a voter this year) saying that “I think that we’ve probably done enough”, and that “I’m in the camp of, let the restrictive stance work for a while, let’s just let this play out for a while, and that should bring inflation down”. On other hand, Boston Fed President Collins sounded more open to further hikes, commenting that “We may need additional increments, and we may be very near a place where we can hold for a substantial amount of time”. That fresh rise in bond yields meant that the initial equity rally quickly petered out yesterday, and the S&P 500 was down -1.35% by the close, marking its worst day in over 3 weeks. Tech stocks led the moves lower, as the FANG+ Index fell by -3.04%. Nvidia had traded as much as +6.7% higher at the open after reporting very strong results after the previous day’s close, but gave up these gains to close up by a mere +0.10%. Earlier in the day, European equities saw more moderate losses, and the STOXX 600 (-0.41%) fell back after a run of 3 successive gains. Speaking of Europe, market attention will also be on Jackson Hole this evening, since ECB President Lagarde is due to give a speech there at 20:00 London time. Since the flash PMIs on Wednesday, investors have become more sceptical that the ECB will keep hiking rates, with just a 32.5% chance of a September hike currently priced. The PMIs pointed to growing economic weakness, with the composite PMI for the Euro Area at its lowest level since November 2020, but Euro Area inflation still remains at more than double the ECB’s target, so there’s lots of points for all sides of the debate. Similar to Powell in the US, our European economists do not expect Lagarde to give any strong near term signal, but are watchful of hints on how the ECB’s reaction function may evolve as it finds itself at or close to the terminal rate but seeks to avoid an easing in financial conditions. Ahead of Lagarde’s speech today, we heard from Centeno, one of the ECB doves, who said that “we have to be cautious (at the September meeting) because downside risks… have materialized”. This is one of the most dovish ECB comments of the summer though he added that “it was probably too soon to call it a done deal” when it comes to a September pause. On the other hand, Bundesbank President Nagel said that for him it was “much too early to think about a pause” European sovereign bonds were mostly steady yesterday, with yields on 10yr bunds (-0.5bps), OATs (-0.3bps) and BTPs (+0.7bps) seeing little movement in either direction. Overnight in Asia, the equity declines have continued across the entire region. The Nikkei (-1.84%) is leading the moves, bringing an end to its run of 4 consecutive gains, while the Hang Seng (-1.03%), the KOSPI (-0.72%), the CSI (-0.49%) and Shanghai Composite (-0.45%) have also lost ground. Looking forward, US equity futures have stabilised overnight, with those on the S&P 500 (+0.06%) marginally higher after the previous day’s losses. Otherwise, the US Dollar has continued to strengthen ahead of Chair Powell’s speech, and the dollar index is now on track to close at its highest level since May 31, having risen for 6 consecutive weeks now. To the day ahead now, and there are several central bank speakers today, including Fed Chair Powell, the Fed’s Harker, Mester and Goolsbee, along with ECB President Lagarde. Data releases include the Germany’s Ifo business climate indicator for August, and in the US we’ll get the University of Michigan’s final consumer sentiment index for August. Tyler Durden Fri, 08/25/2023 - 08:12.....»»

WW International, Inc. (NASDAQ:WW) Q2 2023 Earnings Call Transcript August 3, 2023 WW International, Inc. beats earnings expectations. Reported EPS is $0.65, expectations were $0.08. Operator: Good afternoon and welcome to the WW International Second Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being […] WW International, Inc. (NASDAQ:WW) Q2 2023 Earnings Call Transcript August 3, 2023 WW International, Inc. beats earnings expectations. Reported EPS is $0.65, expectations were $0.08. Operator: Good afternoon and welcome to the WW International Second Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Corey Kinger of Investor Relations. Please go ahead. Corey Kinger: Thank you everyone for joining us today for WW International’s second quarter 2023 conference call. At about 04:05 P.M. Eastern Time today, we issued a press release reporting our second quarter 2023 results. The purpose of this call is to provide investors with some further details regarding the company’s financial results, as well as to provide a general update on the company’s progress. The press release is available on the company’s corporate website located at corporate.ww.com. Supplemental investor materials are also available on the company’s corporate website in the Investors section under Presentations and Events. Reconciliations of non-GAAP measures disclosed on this conference call to the most directly comparable GAAP financial measures are also available as part of the press release. Khosro/Shutterstock.com Before we begin, let me remind everyone that this call will contain forward-looking statements. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in the company’s filings with the Securities and Exchange Commission. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. All forward-looking statements are made as of today, and except as required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Joining today’s call are Sima Sistani, CEO; and Heather Stark, CFO. I will now turn the call over to Sima. Sima Sistani: Thanks Corey. Good afternoon everyone and thank you for joining us today. 2023 continues to be a pivotal and transformative year for Weight Watchers, a year where we return our core business to subscriber growth and catalyze our entry into the nascent, but clinical category. Our second quarter results only give me further confidence that we are on the right trajectory. We are focused on executing a narrow list of priorities that will deliver great impact across not our business, but also global health outcomes. To reiterate, across the organization, we are focused on four key areas; one, reinvigorating our core business and hitting our raised end of period subscriber targets for the year, including continuing year-over-year sign up growth in the second half of the year. Two, compounding our head start in the clinical space by continuing to drive efficient member acquisition to Sequence, increasing brand awareness, and expanding member retention. Three, being the partner of choice for health providers, payers, and employers by leveraging our expertise, relationships, and a step program engagement model that delivers cost effective end to end behavioral and clinical weight management solutions, setting a new standard-of-care in this space. And four, building community experiences, both in real life and digital that will broaden our reach and increase engagement and satisfaction for both behavioral and clinical pathways. We are also committed to doing our part to increase education and access to the weight health spectrum for communities in need. Now, turning to our Q2 results. We ended Q2 with 4.1 million subscribers, including approximately 37,000 clinical subscribers. Notably, in our Weight Watchers business, we ended Q2 with more subscribers than we did in Q1 with clinical only adding further to our subscriber base. This is the first time in our company’s reporting history that we have achieved an in year quarter-over-quarter total subscribers step up. Q2 sign ups or growth subscriber additions for our Weight Watchers business, excluding clinical, were both above our expectations and up year-over-year for the first year-over-year increase since Q4 of 2020, delivering our return to sign up growth one quarter earlier than our previously forecast. Notably, we achieved this without increasing our marketing spend year-over-year. While as anticipated, revenue was down year-over-year due to headwinds from 2022’s ending subscriber base, our actions to optimize our real estate footprint and organizational structure drove a record high adjusted gross margin. Additionally, our activation rate, a metric defined by a member’s engagement and progress during their first 30 days on the program, continue to increase and trend in the right direction with Q2 up approximately 10% year-over-year compared to Q1, which was approximately 6% year-over-year. As a reminder, activation rate matters because activated members attrition rate is roughly half of a non-activated member and are more successful on Weight Watchers over the long-term. Similarly, our engagement rate, which is measured across our entire membership base beyond those in the first 30 days also continued to trend positively with Q2 of approximately 12% year-over-year. These results are further evidence that we are reinvigorating our core business and that our evergreen approach to innovation along with our data informed approach to product improvements and performance marketing are taking hold, setting us up for a return to profitable growth. Let’s take a step back for a moment as I want to share more on our mission as a global leader in weight health. As you will recall from our last earnings, we introduced this term to reframe the conversation around weight management in order to destigmatize obesity and make evidence-based solutions achievable and accessible to those in need. The scientific community’s understanding of obesity is advancing rapidly. Weight health is a spectrum and there is a large and growing population that due to genetic, environmental, and biological factors cannot lose or maintain weight loss through diet and exercise alone. This is a watershed moment in the treatment of obesity, and we’re prepared to challenge long health misperceptions of weight. And more importantly, we’re prepared to help our members understand their options so they can get the treatment they need. But let me be clear, this does not discount the importance of lifestyle intervention. The advancements in clinical medications on the market to-date do not replace lifestyle change. They help it become more possible for people living with obesity to adhere to lifestyle change. And that’s where our solution sets us apart. Weight Watchers is the gold standard for lifestyle change and Sequence provides much more than a prescription. Weight Watchers has been ranked as the number one best diet for weight loss on US News and World Report for the last 13 years. We are the number one doctor-recommended program. We have a clinically proven diabetes tailored program and we have over 60 years of experience and over 150 peer review studies including more than 35 randomized trials. With Sequence, members are supported by a team of Board-certified clinicians, registered dietitians, fitness coaches, and a care team, plus access to Weight Watchers’ behavior change program. Today, we are posting a brief presentation about the Sequence experience on our Investor website to help investors better understand our clinical offering. We now have a portfolio of science-backed solutions that improve weight health. The Weight Watchers Lifestyle program, Sequence, our virtual clinic, and our B2B program for health providers, payers, and employers; WW Health Solutions. We are uniquely positioned to pair with the evolving clinical solutions to cover the entire weight health spectrum. Our work will be at the forefront of the emerging science of overweight and obesity and the leading voice in Weight Health. Turning to our digital-first product roadmap focused on the three pillars of coaching, accountability, and community. As discussed previously, we are in beta testing of our new member chat feature and improved peer-to-peer user experience for connection and support. From the beginning, the community and social experience of Weight Watchers is what makes our program work. We believe chat will be foundational for enriching our digital community, allowing members to create relationships, thereby driving engagement, which then increases retention and LTV. We recently launched our coach platform in North America, a dashboard for our coaches to improve engagement and precision with members, both digitally and in real life. Coaches are the touch point to our members, providing an important source of motivation and support, and this platform will help them manage relationships at scale. We also completed the integration with Abbott’s FreeStyle Libre Continuous Glucose Monitor. Now, in one place, members living with diabetes can learn how food activity directly impacts our glucose levels. We remain on track to deliver more feature improvements on our roadmap later in and in Q4 with a wet to eat tab to support eating decisions and progress and trends to more easily track and monitor a member’s weight health journey. All of which are expected to drive the continued improvement in our member’s success with the program, which ultimately leads to better engagement, retention and LTV. We continue to look into the most effective ways to bring the in person human connection found in our workshops to new life. We are not walking away from workshops, quite the opposite. We know that connecting our members to be an impactful part of the Weight Watchers experience and that we have an opportunity to bring more of that impact to our entire community members. We believe the combination of a digital experience with an in-person one is a powerful differentiated and highly effective solution for those on a weight loss journey. Rather, we’re adjusting to the realities of a primarily digital-first community by optimizing our workshop real estate footprint. We are exploring avenues to reinvent what in person experiences could look like in the years ahead. I’m confident in our ability to unlock more ways where our members can come together in real life as well as digitally to create lasting community. Shifting to our clinical business. We’re learning rapidly and are pleased with Q2 results, which ended the quarter with 37,000 subscribers, up nearly 40% since the closing of the acquisition on April 10th. We have started to see that the incredible demand for these medications has outpaced supply with shortages reported for [Indiscernible]. While they supply issues will have a revenue impact which you will hear more from Heather about, please keep in mind that access to these medications is still at a very early stage. But we expect it will grow exponentially in the years ahead. Of course, as with any new industry, there are fits and starts such as we are seeing with the current supply capacity of all GLP-1 medications. Our clinicians and care team are helping members navigate the current environment by being transparent on the situation and when appropriately, prescribing alternatives across the formulary. We see this time as an opportunity where we can utilize this window to scale up operations and increase readiness ahead of the return of supply as well as ahead of our peak season. In short, this is a near-term speed bump and we remain bullish on the long-term potential for our clinical offering. Additionally, during this time we are focused on three things: one, clarifying misinformation and driving awareness and education about clinical pathways. Two, introducing a dedicated lifestyle program for members on medications. There are different needs for someone on a clinical pathway. Medications do not replace the benefits of behavior change, but instead allow those benefits to be possible. We are using our expertise to develop a tailored lifestyle program that addresses those needs, such as prioritizing a nutrient-dense diet and protecting lean muscle mass. We expect a rollout to the market, including to our Sequence subscribers to occur prior to our upcoming peak season. And three, integrating the Sequence and Weight Watchers platforms for holistic solutions as members go through different phases of their weight loss journeys. Weight Watchers and Sequence are highly complementary to one another, and we now have a portfolio of solutions to meet the broad and evolving needs of members. In addition to direct-to-consumer with Sequence, there is also our B2B business. Given our robust portfolio of solutions, I believe WW Health Solutions will be the partner of choice for health providers, payers, and employers alike. The emergence of this new class of chronic weight management medications while highly effective are posing challenges for payers. We are hearing from employers that they want to enable access, especially as their employees advocate for coverage, but they are looking for guidance as to how to manage costs. In addition, consistent feedback from employers is that their coming to us because they need their solution to be science-back with a track record and proven results all of which Weight Watchers delivers. WW Health Solutions has over 500 clients and an experienced service model and infrastructure to meet enterprise needs. And now it also has a best-in-class program to provide cost effective pathways to clinicians and medication, along with necessary behavior change support, while managing costs and delivering value based care to their employee population. In summary, I’m encouraged by our results halfway through 2023, which only reinforces my view that we are focusing on the right areas and confident about the future. I will now turn the call over to Heather to discuss our Q2 financial results and outlook. Heather Stark: Thanks Sima. Turning to our second quarter results. As previously announced, we closed the acquisition of Sequence on April 10th, and results are now reflected in our financials as well as certain metrics are included in the clinical line of business. We ended Q2 with 4.1 million subscribers, including approximately 37,000 clinical subscribers, with both sign ups and canceled outperforming our forecast in the quarter. As Sima mentioned, this is the first time in our history of reporting subscribers that Q2 ended with a higher subscriber base than Q1. This is an additional proof point that the actions we are taking to stabilize and grow the business are working. Revenue totaled $227 million, which was 16% year-over-year, both on a reported and constant currency basis, primarily due to the lower subscriber base entering the year, coupled with the planned reductions in our consumer products business as we rationalized product skews in North America and continued the wind down of this line of business. In our international markets. Clinical contributed $8 million in revenue as a partial offset. Adjusted gross margin of 63.4% for the quarter was a record high and up 150 basis points from the prior year, primarily due to actions to reduce our fixed cost base with our workshop real estate restructuring. Marketing expenses of $51 million were down 1% year-over-year and were below our planned spend with our improved performance marketing capabilities and nimbleness adjusting to trends, we were able to increase efficiency and achieve both sign ups and GLTV above plan. Adjusted G&A of $59 million was up 4% year-over-year. Restructuring savings and expense controls were offset by the inclusion of $4.5 million in clinical G&A expenses, including approximately $2 million in intangible amortization from purchase price accounting consideration patients. Adjusted operating income was $34 million. Restructuring charges totaled $3 million in the quarter. We continued to further streamline and centralized our organizational structure and rationalize certain non-strategic business lines. We largely completed the rebalancing of our studio real estate portfolio by reducing our fixed lease studio count and shifting workshop delivery to flexible third-party or studio at locations, which helped drive our record high adjusted gross margins in Q2. And we are on track to deliver $30 million of anticipated 2023 savings from our actions. Related to the accounting for the Sequence transaction, we incurred approximately $5 million of non-recurring acquisition transaction costs for Sequence employee stock-based compensation attributable to post combination vesting and other transaction costs. These charges are not included within adjusted operating income are non-cash and do not impact our net debt to adjusted EBITDA leverage ratio. Income tax was a benefit of $48 million in the quarter, which consistent with last quarter, reflects the impact of an unusually high negative annual effective tax rate, driven by evaluation allowance and small pre-tax loss reflected in the company’s full year fiscal 2023 guidance. GAAP EPS was $0.65, which incorporates the net positive impact of $0.69 of items impacting comparability including the valuation allowance, net restructuring charges, and the $5 million of acquisition transaction costs mentioned earlier. Turning to Sequence and our clinical line of business. We are pleased with the early performance and ongoing integration efforts of Sequence. Q2 end of period subscribers were approximately 37,000 members, which is up from 27,000 at closing on April 10th. Q2 gross margins were north of 40% and after excluding acquisition-related expenses, we expect to generate modest operating income and cash flow in 2023. As Sima mentioned, while there are shorter term supply constraints due to overwhelming demand, we strongly believe the multi-year growth opportunity is significant and are utilizing this time to increase our scaling readiness. Shifting to our outlook, we are encouraged by the subscriber trends we are seeing in our core Weight Watchers business and expect them to continue for the balance of the year as we execute on our data-in-front approach to member acquisition, benefit from the increased operating efficiency, and deliver an enhanced member experience with our product roadmap. We expect to end the year with total subscribers of 3.7 million, up from our prior guidance of approaching 3.6 million. Within this, we expect Weight Watchers subscribers excluding clinical to be above 3.6 million at the end of the year, up from 3.5 million at the end of 2022. For the clinical business, as Sima mentioned, we are assuming near-term medication supply challenges continue, thereby lowering our clinical subscriber expectations for the remainder of 2023. As a reminder, the seasonality trends in our business mean that Q1 is traditionally our annual peak and end of period subscribers sloping to a Q4 trough. Our outlook of ending the year at 3.7 million subscribers would represent one of the best seasonal slopes seen since we’ve been reporting total subscribers. With the near-term supply constraints in our clinical business, coupled with a subscriber mix shift, we expect full year revenue to be in the range of $890 million to $910 million compared to prior guidance of $910 million to $930 million. We expect clinical revenues to be $30 million for Q2 to Q4 in aggregate, down from our previous guidance of $45 million, reflecting lower subscriber expectations due to medication shortages. While we have reduced our 2023 revenue expectations, given our anticipated increasing subscriber levels year-over-year and including the addition of clinical, for the first time since entering 2020, we expect we will have a modest subscription revenue tailwind into next year. Shifting to consumer products and other. As we prioritize the actions and initiatives that matter most to member success and will drive our return to growth, we have made the decision to sunset our e commerce and consumer products offerings. As we’ve previously communicated, we began scaling back on the business, but an exit in the US will allow us to further streamline our operations and better allocate resources. Products will be sold until quantities run out with a planned completion by the end of 2023. While we expect consumer products and other revenues to be in line with prior guidance and contribute roughly $65 million in revenues during 2023, approximately $50 million will not recur and will be a revenue headwind into 2024. Importantly, however, we expect this to be roughly neutral operating income. We still plan to continue our high margin licensing business. Adjusted gross margin is expected to be in the range of 62% to 63% for the full year, up from 61% to 62% previously. As we are seeing a higher mix shift to our digital business and we will have continued read through of the benefit of having reduced our fixed cost base by optimizing our real estate footprint. We continue to expect full year marketing spending to be flat for 2022 at approximately $245 million. As highlighted in prior calls, we continue to focus on high value member acquisition, and plan to redeploy our first half marketing savings, primarily into Q3, where we can maximize LTV to CAC efficiency. We are confident these actions will drive a second consecutive quarter of year-over-year sign up growth in Q3. Adjusted G&A expense is expected to be approximately $235 million for the year, lower than the previous guide of $245 million due to incremental restructuring and organizational savings. Despite the back half revenue impact from clinical supply shortages previously mentioned and mix shift in our Weight Watchers business, we expect adjusted operating income to be towards the high end of the previously provided guidance range of $80 million to $85 million as we benefit from improved margins and expense control. As mentioned earlier, we incurred acquisition transaction costs that are now excluded from adjusted operating income including approximately $4 million of costs previously included in Q1 adjusted operating income. However, equally offsetting this change in presentation is the inclusion of $4 million of intangible amortization from purchase price accounting considerations, which do not impact EBITDA or net debt to adjusted EBITDA leverage. We estimate that remaining charges related to the 2023 restructuring plan will be up to $10 million. For the full year, excluding the impact of restructuring and acquisition transaction costs, we expect income tax expense to be approximately $15 million to $20 million, largely driven by the full impact of the valuation allowance discussed earlier. As we highlighted last quarter, given the seasonal nature of our business, the outside Q1 income tax expense was largely expected to reverse. In the remaining quarters of fiscal 2023 when we expect to pre-tax income, which started to happen in Q2, as mentioned earlier. Excluding the impact of the valuation allowance, we expect an income tax benefit of up to $5 million for the full year, consistent with our expectation from last quarter. As a reminder, given the small pre-tax loss reflected in the company’s full year fiscal 2023 guidance, any updates to the expected pre-tax loss or income tax expense can result in significant impacts in quarterly income tax results. Turning to our capital structure and cash flows. We ended Q2 with approximately $91 million of cash after paying $40 million in cash for the purchase of Sequence completed earlier in Q2, plus an undrawn revolver. With our cash position plus our revolving credit facility, we have more than sufficient liquidity for our working capital needs, including in near cash outlays related to our restructuring actions and servicing our debt. We continue to expect that cash from operations will be a modest use of cash for the full year due to the approximately $40 million in expected restructuring cash payments. At quarter end, our net debt to adjusted EBITDA leverage ratio was 7.7 times. We expect our trailing 12 month leverage ratio to further increase in 2023 due to lower EBITDA levels through most of this transformative year. We are committed to improving our leverage ratio as we return the business to profitable growth. We still expect full year interest expense to be approximately $95 million. As a reminder, we have a $500 million hedged through Q1 2024 to protect against rising interest rates on our variable rate term loan of $945 million and our $500 million notes are fixed rate. Therefore, only 31% of our total debt is floating. We are currently exploring options for forward starting swaps for when the current hedges expire. Of note, effective June 30th, we transitioned the reference rate for our debt instruments and swaps away from LIBOR. Our new reference rate is one month term SOFR plus a credit spread adjustment to largely remove any direct economic impact from the transition. As such, there is a limited impact on our interest expense. CapEx, which is primarily due to capitalized software is expected to be in the $45 million range. Depreciation and amortization is expected to be in the $50 million range, slightly higher than prior guidance of $45 million, to reflect the intangible amortization from the Sequence acquisition mentioned above. In summary, we are executing well against our strategy and meeting, and in some cases, exceeding our 2023 objectives. Encouraging subscriber trends, record gross margins, and improved cost structure position us well for profitable growth. I will now return the call back to Sima. Sima Sistani: Thanks Heather. Our team’s hard work and innovative thinking are paying off. We are turning the corner and getting Weight Watchers back on a subscriber growth trajectory while setting the foundation for our next chapter with a portfolio of solutions to serve the full spectrum of weight health. To reiterate, our Weight Watchers business has returned to sign-up growth without increasing our marketing budget, fueling our return to subscriber growth in the back half and driving a subscription revenue tailwind going into next year. We drove a nearly 40% increase in clinical subscribers, primarily for positive word of mouth since the close of the acquisition and are scaling up our operations, increasing readiness and developing a dedicated lifestyle program for members on medications. We have increased our activation and engagement rates by advancing our digital first product roadmap, focused on coaching, accountability, and community. We are managing the business prudently, reducing our cost structure, and driving record high adjusted gross margins. And we are focused on returning the company to profitable growth, and are committed to reducing our leverage. Before we turn to Q&A, I would like to highlight the three new members of our Board of Directors since our last earnings call. Tracy Brown, EVP and President of Retail and U.S. Chief Customer Officer at Walgreens and the former CEO of the American Diabetes Association. Tara Kamat, former Chief Executive Officer and current board member of Tomorrow Life Sciences, and a board member of Strava, the leading subscription platform for Connected Fitness. Dr. William Schrenk, venture partner, Bio and Health at Endres and Horowitz, and a former Chief Medical officer at Humana. With these additions, we are further extending our thought leadership to cover the entire weight health spectrum, something completely aligned with our vision as the global leader in weight health. Thank you for joining us. We are now happy to take your questions. See also 15 Cheapest and Safest Countries to Retire In and 15 States That Produce the Most Corn. Q&A Session Follow Ww International Inc. (NASDAQ:WW) Follow Ww International Inc. (NASDAQ:WW) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: We will now begin the question and answer session. [Operator Instructions] The first question will come from Jason English of Goldman Sachs. Please go ahead. Jason English: Hey, folks. Thanks for slotting me in, I appreciate it. Congrats on the uptick in base business subscribers, it’s a welcome surprise. I’m a little surprised though that you’re cutting the revenue forecast. Like I get the $15 million trim on new clinical because the capacity constraints on drugs, but still with the uptick on subs and the cut being more than just the $15 million, it suggests a decent drop in revenue per subscriber. What is driving that? Sima Sistani: Hi, Jason. Thanks for the question. Yes, as you know, the majority of the revenue adjustment that we are making is driven by the external factors of medication supply on clinical. The balance of it really is about the mixed shift that we’re seeing between clinical core and workshop. So we’re seeing more folks signing up for the digital business versus the workshop business, which is a higher margin business as well. So we’re seeing that shift impact total revenue and also driving some of our improvement in gross margin. Heather Stark : And I should like to add there too, hey Jason, is that part of that is consistent with the broader economic story. So we’re seeing some of our labs workshop members who are coming back in Q2 and choosing digital. And so that feels in line with what we’re seeing from a macro perspective. But, NPS has remained really stable versus February of 23 earlier this year, and in fact is up 22 points year over year. So we feel really good that people are staying connected to the brand and still seeing it as a must have and just choosing the digital option as their way of staying connected to the program. Jason English: Understood. And one more follow up for me on the clinical side. I think, and sorry I was distracted, I think I heard you say you’re going to launch this more aggressively later this year before the New Year’s resolution sort of uptick or enrollment cycle, correct me if I’m wrong on that. But if so, what gives you confidence that the drug supply will be adequate enough? And secondly, where do you stand on clinician capacity? Because I understand I’ve always viewed this as a twin potential bottleneck. One is the clinicians. Do you have enough of them to operate the telehealth side? And the other is, do you have enough drugs to actually prescribe? So updates on both of those and the timing would be really helpful. Thank you. Sima Sistani: Yes, no. So just to clarify what we had said there was that we are scaling up to be ready for when supply comes back and on the lifestyle program itself, the one that is specific for people on the GLP-1 journey, that that is going to be available ahead of peak season. And yes, I think this is a real opportunity. Look, we’re already 4X the number of clinicians since the Sequence acquisition, and we even have a wait list of onboarding on additional clinicians. And so this, the shortage is obviously, we don’t like this for our members and their experience and their needs, but in the meantime, what it’s allowing us to do is scaling up to be ready for when the supply comes back on. Jason English: Got it. Thank you. Out of respect to my others, I’ll stop there and pass it on. Operator: The next question comes from Lauren Schenk of Morgan Stanley. Please go ahead. Nathan Feather: Hey, everyone. It’s Nathan Feather on for Lauren. Congrats on the strong core performance. I want to dig in a little bit on the lower expected Sequence revenue for the year and just the mechanics behind that. I mean, what’s the kind of key driver between the lower revenue? Is it lower gross ad demand, higher churn if people can get access to supply, or is there kind of a revenue per subscriber dynamic? And would you potentially not charge subscribers, or would they pause if they can’t find supply, just trying to think through dynamics and how it impacts your sub-base as we enter the year? Sima Sistani: Thanks, Nathan. Yes, so, look, it’s really early days, and certainly we didn’t acquire Sequence for 2023, and we’re confident that supply issues are not going to be a barrier to our long-term outlook. Obviously, there are more medications within the pipeline and lots of investments being made by manufacturers to get this right. As you can imagine, we’re in touch with them and doing top-to-tops and understanding when and how we can expect that supply to come back on. What ends up happening, understandably, is this is a month-to-month program, and if we are unable to get somebody the medication, then that does impact churn. But more importantly, we’re just not going out – let me take a step back and say we offer a wide formulary, so in a lot of cases, we’re able to mitigate that by finding the, through our customer, through our care portal, finding the pharmacy that does have supply and or getting people started on a different medication while they’re waiting for one of their other dosages or bran. In the meantime though, what it really means is we’re not pushing our top of funnel activity as you even noticed in your recent report, you haven’t seen us do much cross-selling and that is purposeful. We don’t want to impact NPS by driving a lot of people into the funnel who then have a poor experience because of supply issues. So, this ends up being, as I mentioned, an opportunity for us to spend this time thinking through scaling, making sure the current members are having a really great experience, and increasing our readiness overall. Nathan Feather: Great. That’s really helpful. Thank you. Operator: The next question comes from Linda Bolton-Weiser of D.A. Davidson. Please go ahead......»»

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"The Market Is Looking For Excuses To Take Profits": Futures Slide As US Downgrade Shakes Sentiment US futures slumped as part of a global risk-off tone (but were well off their lows, which were down as much as 1%), after the US was stripped of its AAA top-tier credit rating by Fitch (which joined S&P in doing so back in 2011), due to growing fiscal deficits and an “erosion of governance" even as Treasuries yields and the Dollar were steady. And in a complete coincidence, at the exact same time, Donald Trump was indicted for a record third time on federal charges over his efforts to overturn the 2020 presidential election, and has a court date set for Thursday. As of 7:45am, emini S&P futures were down 0.5%, while Nasdaq 100 futures slid 0.8%, signaling a pullback later Wednesday for a market that has surged 44% in 2023. Broad losses in Europe dragged all industry groups in the benchmark regional index into the red. Asian and European stocks slumped, while the Treasury curve steepened with two-year TSY yields falling 4bps to 4.86%; the Bloomberg Dollar Spot Index was barely changed, up 0.1%. In premarket trading, AMD rose as much as 1.2% in premarket trading on Wednesday, after the chipmaker reported better-than-expected second-quarter results and said it was making further inroads in artificial-intelligence computing. Analysts noted that there are indications that the PC business was recovering and they were also optimistic about the company’s AI potential. Starbucks dropped as its quarterly sales fell short of analysts’ estimates, a sign that momentum may be slowing for the coffee giant amid higher prices and tighter pocketbooks. Pinterest slid after the social networking company failed to meet heightened expectations. Apple and Amazon.com are among companies scheduled to report this week, with investors on the lookout for clues on how high interest rates are affecting the economy. Here are some other notable premarket movers: Cardlytics shares jumped as much as 19% and are set to reach their highest level since last Sept., after the company, which makes software to analyze customer purchases, reported results that beat expectations, helping to ease worries over a tough backdrop for the advertising industry. JPMorgan raised its price target on the stock, positive on the progress seen with new products and initiatives. KeyCorp upgraded to neutral at JPMorgan, with analysts noting that the risks of a dividend cut at the financial services company had waned after US regulators gave it more time to comply with new capital rules. Shares fell as much as 1.8%, however, after Fitch’s downgrade of the US sovereign credit grade hit sentiment across risky assets. Lumen Technologies shares fall 8.4% in US premarket after the wireline telecommunications company posted what analysts saw as a mixed set of 2Q results with free cash flow weaker than expected. Oatly Group fell 2.0% after JPMorgan downgraded the oat-milk producer to neutral from overweight due to the “increasingly opaque” growth story. Pinterest shares fall as much as 5% in premarket trading on Wednesday, after the social networking company reported its second-quarter results and provided an outlook. Citi said the report failed to meet heightened expectations. Rover Group rises as much as 27% in premarket trading after the online pet care platform boosted its year revenue and adjusted Ebitda forecast. International growth remains solid, with strong lifetime value metrics and product improvements driving tailwinds for top and bottom-line results, says William Blair. SolarEdge Technologies shares slid as much as 14% in US premarket trading after the solar-equipment maker’s third-quarter revenue forecast disappointed as elevated levels of inventory among its customers weighed on demand. Other solar stocks fell in US premarket trading after the report. Starbucks shares fall 1.3% after the coffee- chain operator’s third-quarter comparable sales missed estimates. Overall, analysts were disappointed in the print, flagging lower-than-expected comparable sales in North America as well as the weaker-than-anticipated outlook for the metric in China. Virgin Galactic fell as much as 8.9% after the company’s revenue fell short of analysts’ expectations, even as the space-tourism company gears up for monthly commercial flights. Analysts note that while the firm will continue to burn cash, it does have enough on its balance sheet to fund near-term investments. There was disagreement over the consequences of the Fitch downgrade: some said it serves up an extra dose of jeopardy for equity investors already concerned over the risks of recession and whether this year’s run-up in stocks is sustainable; others looked at the complete lack of reaction in Treasuries and claims it is a complete non-event, and that it will be forgotten by the market in a few hours. And indeed, Treasuries were steady, in keeping with Janet Yellen’s assertion that they remain “the world’s preeminent safe and liquid asset" for now. “One can have the feeling that the market is looking for excuses to take some profits,” said Alexandre Baradez, chief market analyst at IG Markets in Paris. “But rather than the Fitch downgrade, I suspect that what’s currently being priced is the growing risk of an economic slowdown. The downward trend started to emerge yesterday on the back of disappointing Chinese and US data, which suggests it’s not really about the rating downgrade, but rather the risk of a slowdown.” Indeed, the consequences of the latest downgrade seem positively tame by comparison: the last time the US sovereign credit rating was downgraded, the S&P plunged 6.7% with all stocks in the red for the first time since at least 1996, and briefly dropped into a bear market (the benchmark eventually erased those losses five trading days later and is up 282% since). Also, yields tumbled, gold exploded and the SNB was forced to devalue the franc. The 2011 US downgrade sparked a brief bear market, sent yields crashing, gold to record highs and forced the SNB to devalue the Franc. This time, not a rat's ass is given — zerohedge (@zerohedge) August 2, 2023 European stocks also slumped with the Stoxx 600 down 1.3% and on course for its largest fall in almost four-weeks. Ferrari slumped more than 4% after the Italian supercar maker issued disappointing guidance. Siemens Healthineers AG fell after the German medical technology company missed estimates. Hugo Boss AG dropped after the fashion retailer’s margin fell short of expectations and inventories rose. Here are the biggest European movers: BAE Systems shares rose as much as 6.6% after the defense and aerospace company upgraded its 2023 guidance and approved a further buyback of as much as £1.5 billion Taylor Wimpey shares rose as much as 4.7% after the residential housing developer’s results for the first-half exceeded expectations. Analysts said that the company raising the bottom end of its guidance range for UK completions for the year was a positive sign in a tough market Melexis shares rise as much as 6.5% after the chipmaker raised margin guidance and boosted revenue outlook to top end of its prior range, a sign that strong demand for automotive chips continues to benefit the Belgian company Virgin Money gains as much as 3.3%, outperforming a broader market decline, after the UK lender announced a share buyback. It also reported steady net interest margins ConvaTec shares gain as much as 7.8%, the biggest intraday gain since November 2022, after the wound care and ostomy products provider reported first-half revenue that beat estimates and boosted its full-year organic revenue forecast. Citi said it was particularly impressed by growth in wound care as well as the strong gross margin Iveco shares advance as much as 5.5%, the most since mid-March, after the truckmaker delivered another boost to full-year guidance that analysts say will prompt a significant increase in consensus expectations Siemens Healthineers falls as much as 8%, the most since May, after the German medical technology firm’s Varian unit weighed on its latest quarterly earnings, with margins a particular concern, analysts say JDE Peet’s falls as much as 4.4%, after the Dutch coffee company cut its adjusted Ebit guidance on uncertainty over the transition from international brands to local brands in Russia Hugo Boss shares declined as much as 5% at the open on Wednesday but then pared losses to 0.7% by 9:36 am in Frankfurt. While the German fashion group raised its guidance for 2023 and second-quarter earnings beat most expectations Schaeffler drops as much as 5.2% as Citi writes that the German automotive and industrial supplier’s second- quarter results were overshadowed by “concerning” organic growth underperformance in auto-tech Man Group shares drop as much as 3.7%, adding to Tuesday’s 5.5% decline, following results which reflected a lower-margin long-only shift from clients. The recent stock price weakness is an “over-reaction,” according to UBS Auto1 shares fall as much as 14%, the most since January, after the used-car trading platform reported second-quarter revenue and units sold below estimates Earlier in the session, Asian stocks posted the biggest decline in more than four months as technology names dropped. Japanese stocks slumped the most this year as gains in the yen dented the outlook for corporate profit; the Nikkei 225 underperformed and dipped below the 33,000 level as the focus shifted to corporate earnings and despite comments from BoJ’s Deputy Governor Uchida who stuck to a dovish tone. The MSCI Asia Pacific Index fell 1.5%, with all sectors and major markets in the red. Benchmarks dropped more than 1% in Japan, South Korea and Taiwan, and about 2% in Hong Kong, as investors booked profits on chip and electric-vehicle stocks that have surged on artificial intelligence and net-zero emissions trades. “It’s buyers’ fatigue,” said Derek Tay, head of investments at Kamet Capital Partners. US stock futures declined after Fitch stripped the US of its top-tier credit grade, though few market participants saw that as having a major impact on Asian equities. Some investors rather appeared to be taking bets off the table ahead of US employment data later this week, which may influence the Federal Reserve’s next policy decision. “We’ve had an extraordinary run in risk markets and we are starting to get some steepening in the yield curve,” said Matthew Haupt, portfolio manager at Wilson Asset Management in Sydney. “We might get some squeeze on that big rate-cut trade,” he added. The MSCI Asian benchmark earlier this week flirted with its highest close since last April after a rally fueled by hopes for Chinese efforts to boost its economic recovery and a peak-out in US interest rates. The gauge is still up about 6% since the start of June. Australia's ASX 200 declined with utilities, real estate and financials leading the broad-based retreat and with weaker AIG Manufacturing and Construction data adding to the glum mood. In FX, the Bloomberg dollar index erased losses as investors bought into the dip that followed Fitch Ratings’ US sovereign credit-rating downgrade. Leveraged short covering of the yen and Australian dollar was short-lived with the latter breaching support below 0.6600 as an Asia Pacific equity gauge headed for the biggest decline in almost a month. New Zealand’s dollar was sold for the greenback and Aussie as a jump in the nation’s jobless rate fueled bets that rates had peaked. In rates, the front-end of the Treasury curve led gains, extending Tuesday’s steepening move and leaving 2-year notes richer by around 4bp in early US trading. Longer Treasuries broadly shrugged off the US downgrade news. US 10-year yields are little changed on the day, sitting around 4.02% and offering muted reaction to the Fitch downgrade; bunds outperform by around 4bp in the sector while gilts trade slightly cheaper. Front-end gains on the day steepen 2s10s, 5s30s spreads by 3.8bp and 3bp, with both remaining near session highs. For the first time since November 2020, the quarterly unveiling of auction amounts is expected to feature across-the- board increases to the Treasury’s seven main offerings of notes and bonds. German two-year yields fall 6bps to a two-week low of 3.01%. Dollar IG issuance slate empty so far; Tuesday session was inactive for new deals, while August volume projection is around $85 billion. A focus of the day is the quarterly refunding announcement at 8:30am New York time. “US Treasuries are the world’s largest and most liquid sovereign bond market,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets in Singapore. “It’s unthinkable large global bond investors will decide to entirely exclude US Treasuries from their holdings. If they do, what USD-denominated bonds will they hold?” In commodities, oil extended its rally with Brent crude up 0.8%, after API pointed to a huge, in fact a record 15 million drawdown in US inventories, adding to signals the market is tightening. Spot gold adds 0.3%. Bitcoin gains 0.9% After a data heavy day yesterday, we have only the US July ADP report as the major data release to look forward to today. But watch out for the refunding announcement. Key company earnings include semiconductor firm Qualcomm, as well as Teva, Shopify, PayPal, Occidental Petroleum, Equinix, Kraft Heinz, DoorDash, Albemarle, MGM Resorts, Zillow, and Etsy. Market Snapshot S&P 500 futures down 1.0% to 4,554.25 MXAP down 1.7% to 167.30 MXAPJ down 2.1% to 528.37 Nikkei down 2.3% to 32,707.69 Topix down 1.5% to 2,301.76 Hang Seng Index down 2.5% to 19,517.38 Shanghai Composite down 0.9% to 3,261.69 Sensex down 1.4% to 65,517.16 Australia S&P/ASX 200 down 1.3% to 7,354.60 Kospi down 1.9% to 2,616.47 STOXX Europe 600 down 1.8% to 458.96 German 10Y yield little changed at 2.52% Euro little changed at $1.0986 Brent Futures up 0.4% to $85.25/bbl Gold spot up 0.4% to $1,951.76 U.S. Dollar Index down 0.16% to 102.14 Top Overnight News BOJ deputy governor pushes back on speculation the central bank is planning an early exit from a policy of extreme accommodation (the recent YCC tweak was aimed at making it more sustainable). RTRS South Korea’s CPI undershoots the Street (+2.3% vs. the Street +2.4% and down from +2.7% in June) and falls to a 25-month low. RTRS SoftBank's Arm is targeting an IPO at a valuation of between $60 billion and $70 billion as soon as September, people familiar said. Arm execs may still be gunning for $80 billion, but the odds of achieving that are uncertain. BBG China will curb the amount of time kids can spend on their smartphones, dealing a potential blow to Tencent, ByteDance and other social media leaders. Minors will be banned from accessing the internet from 10:00 pm to 6:00 am and mobile usage will be cut to two hours for those aged 16 to 18. BBG Binance, the world’s largest crypto exchange, was supposed to leave China behind when the country made cryptocurrency trading illegal in 2021. Almost two years later, users traded $90 billion of cryptocurrency-related assets in China in a single month, according to internal figures viewed by The Wall Street Journal and current and former employees. The transactions made China Binance’s biggest market by far, accounting for 20% of volume worldwide, excluding trades made by a subset of very large traders. WSJ Fitch cut the US credit rating from AAA to AA (it warned back in May that a downgrade was possible). Fitch’s move follows a similar cut by S&P about 12 years ago. Moody’s continues to rate the US AAA. Fitch says its downgrade “reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to 'AA' and 'AAA' rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions”. Fitch The major entertainment studios and thousands of striking writers have agreed to meet to restart talks after a three-month standoff, according to the writers guild. NYT US prosecutors have charged Donald Trump in connection with his attempts to overturn the results of the 2020 election, the second federal indictment brought against the former president in as many months. Trump was charged with four criminal counts including conspiracy to defraud the US, to obstruct an official proceeding and to threaten individual rights, according to an indictment filed in federal court in Washington on Tuesday. FT US crude stockpiles saw a jumbo drawdown last week as inventories plunged 15.4 million barrels, the API is said to have reported. That would be the biggest in data going back to 1982 if confirmed by the EIA. BBG Foreign buying of U.S. homes fell for a sixth straight year, sinking to the lowest level on record, though some signs of turnaround are starting to emerge. WSJ A more detailed look at global markets courtesy of Newsquawk APAC stocks traded lower following the mostly negative lead from Wall St where sentiment was dampened by higher yields and weak data, while participants also digested Fitch's credit rating downgrade for the US from AAA to AA+. ASX 200 declined with utilities, real estate and financials leading the broad-based retreat and with weaker AIG Manufacturing and Construction data adding to the glum mood. Nikkei 225 underperformed and dipped below the 33,000 level as the focus shifted to corporate earnings and despite comments from BoJ’s Deputy Governor Uchida who stuck to a dovish tone. Hang Seng and Shanghai Comp conformed to the risk aversion albeit with the downside in the mainland initially cushioned by further policy support and jawboning by Chinese agencies. Top Asian News China's Finance Ministry said it cut value-added tax for small taxpayers, according to Reuters. China's cyberspace regulator drafts guidelines to strengthen the limit around minors' use of apps, smart terminals and app stores, according to Reuters. China said reports that it obstructed G20 discussions in reducing fossil fuels use are inconsistent with facts, while China regrets a failure to reach an agreement and blames geopolitical issues brought up by other countries, according to Reuters. BoJ Deputy Governor Uchida said at present, the risk of losing the chance to hit the price target with a premature shift from easy policy is bigger than the risk of being too late in tightening and Japan is now at a phase where it is important to patiently maintain easy policy. Furthermore, Uchida said last week's decision was a pre-emptive step at continuing monetary easing without disruptions and the BoJ must fine-tune YCC at times and make the policy more flexible. Adds, depending on the speed of the moves, BoJ will step in before the 10yr yield hits 1%. BoJ minutes from the June 15th-16th meeting noted members agreed BoJ must maintain current monetary easing to stably and sustainably achieve the price target, while many members said it was appropriate to sustain monetary easing to support changes seen in corporate wages and price-setting behaviour. Furthermore, a few members said a premature policy shift could mean the BoJ will lose the opportunity to achieve the price target. Australian Trade Minister says they are hopeful that in the next few days, there will be a positive decision from China re. barley tariffs, if not will restart the WTO process. European bourses are in the red, Euro Stoxx 50 -1.4%, as sentiment continues to deteriorate from a downbeat Wall St./APAC handover. Sectors are similarly in the red with earnings dominating stock specifics while the Energy sector is the relative outperformer, but still lower, given benchmark action. Stateside, futures are lower as the risk-off trade continues with sizeable attention on Fitch's action, ES -0.8%; ADP and Quarterly Refunding dominate the calendar ahead intersected by numerous earnings. Top European News The Times' Shadow MPC voted 8-1 in favour of a 25bps rate hike this month. All members agreed that the Bank should not provide financial markets with guidance about the future path of interest rates due to economic uncertainty. ECB's de Guindos says "Policymakers should focus on preserving bank resilience to strengthen macroprudential stability at a time of economic uncertainty. This would ensure that sufficient capital buffers are available should widespread losses arise". Overall, the stress test confirms European banks could withstand a severe economic downturn. FX The broader Dollar and index are firmer in the European morning, propped up by the risk aversion seen across the market after Fitch downgraded US, upside levels include the 100 DMA (102.35), yesterday’s high (102.43), then the 50 DMA (102.45). The JPY is the current G10 outperformer following three consecutive sessions of losses in the aftermath of the BoJ’s decision last Friday, with potential tailwinds seen from the broader risk-off sentiment across markets. Antipodeans are once again the marked laggards amid the broader risk tone, hangover from the RBA hold, and overall bearish Kiwi jobs data overnight, while EUR and GBP are resilient to the Dollar’s strength despite a lack of headlines, data, and broader risk aversion. PBoC set USD/CNY mid-point at 7.1368 vs exp. 7.1664 (prev. 7.1283) Fixed Income EGBs are firmer and currently benefiting from traditional haven allure as the broader risk tone continues to deteriorate despite an absence of fresh catalysts. Gilts are the sole core benchmark in the red as we near Thursday’s BoE announcement where another 25bp hike is expected though there is around a 35% chance of 50bp priced and 75bp of total tightening implied by February 2023. USTs are faring relatively well and giving up some of the marked concession which was built in on Tuesday's session both before and after the afternoon's data docket, concession which comes ahead of today's quarterly refunding announcement; Though, we are above Tuesday’s 110.26+ low by circa. 10 ticks as it stands. Commodities WTI and Brent futures are off best levels but remain modestly firmer intraday, with the downside from risk aversion (after US’ rating downgrade by Fitch) cushioned by the mammoth drawdown in Private Inventories yesterday. Over to metals, the risk-off picture is clear. Spot gold and silver are firmer amid heaven flow and despite the stronger Dollar as the former initially battled overnight resistance at USD 1,950/oz but meanders around the level in European hours. Base metals are softer across the board as risk aversion and the Greenback hit the industrial metals, 3M LME copper declined from a USD 8,669/t high but maintains status above USD 8,500/t. Operations suspended at Ukraine's Izmail port on Danube, according to Reuters citing sources. US Energy Inventory Data (bbls): Crude -15.4mln (exp. -1.4mln), Gasoline -1.7mln (exp. -1.3mln), Distillate -0.5mln (exp. +0.1mln), Cushing -1.8mln US Energy Department spokesperson announced the US pulled its offer to buy 6mln bbls of oil for the SPR due to market conditions, while a Bloomberg reporter noted that the Biden administration delayed the replenishment of the SPR after deciding the offers it received were too expensive. OPEC+ is unlikely to tweak its current output policy when it meets on Friday, according to multiple OPEC sources cited by Reuters. UK Government suspends anti-dumping duty on hot-rolled flat iron, non-alloy or other alloy steel with goods originating in Iran or Russia in some cases. Geopolitics Explosions were reported in Ukraine's capital of Kyiv and anti-aircraft units were in operation, according to Reuters citing Mayor Klitschko and military officials. Russian drones reportedly attacked port and grain storage facilities in Ukraine's Odesa region which set some of them on fire, according to the regional governor. Poland's Defence Ministry said it is deploying additional troops along the border with Belarus after 2 helicopters violated airspace, according to BNO News. Taiwan's Presidential Office said Vice President Lai will transit in New York and San Francisco, while it noted reports that VP Lai is planning to transit through Washington DC are false. Furthermore, it stated the transit arrangement is based on comfort and safety and should not be an excuse for conflict. US and Mongolia reportedly prepare to sign an "open skies" deal which would grant airlines from both countries the right to operate in each other's countries, according to Reuters sources. Russian Kremlin says a call between President Putin and Turkish President Erdogan is taking place now. Russia's Defence Ministry says Russian forces start navy drills in the Baltic sea, according to Ria. Crypto Binance Japan launched crypto services with 34 virtual currencies, according to Nikkei. Binance CEO Zhao attempted to shut down the crypto exchange’s US offshoot earlier this year to protect the much larger global exchange amid mounting regulatory scrutiny, according to sources cited by The Information. US Event Calendar 07:00: July MBA Mortgage Applications, prior -1.8% 08:15: July ADP Employment Change, est. 190,000, prior 497,000 DB's Jim Reid concludes the overnight wrap Just when you thought it was safe to unwind into your holidays, after Europe went to bed last last night, Fitch Ratings downgraded the US from AAA to AA+ in a surprise move reminiscent of S&P's back in August 2011. The rating agency had initially put the US on ratings watch back in May during the debt ceiling fight. In a corresponding statement, Fitch cited that tax cuts and new spending initiatives coincided with multiple economic shocks to rapidly grow the government’s debt burden. The rating reflects the political brinkmanship reflected in the debt ceiling fights, but also takes into account the forecast debt-to-GDP ratio which Fitch estimates will reach 118% by 2025, with the median AAA rated ratio being 39%. See our rates strategists' immediate reaction to the decision here with one of the takeaways being that it should continue to help reprice term premium going forward. Obviously S&P being the first to downgrade 12 years ago was far bigger news and has allowed investors to adjust for the most important bond market in the world not being a pure AAA anymore but it's still a big decision. Treasury yields sold off aggressively yesterday before the announcement due to concerns about the upcoming funding announcement as we’ll see below but have been a bit confused since the announcement as they initially rallied on a global risk-off move and then sold off to be c.1bps higher in Asia. S&P 500 (-0.46%) and NASDAQ 100 (-0.56%) futures are lower as a result with Asian markets weak. The Hang Seng (-1.97%) is emerging as the biggest underperformer followed by the Nikkei (-1.84%), the KOSPI (-1.40%), the Shanghai Composite (-0.84%) and the CSI (-0.70%). The downgrade follows an interesting story that has been bubbling under the surface around the US deficit and what that means for issuance and yields. 10yr Treasuries rose +6.4bps yesterday, before the Fitch news, to the highest level since the first half of July and 2s10s steepened +3.9bps in what seemed to be a delayed reaction, in thin markets, to Monday's surprise announcement from the Treasury of a larger than expected borrowing estimate for the rest of the year. 30yr yields rose +8.2bps to 4.092% and are now at their highest levels since November. Today sees the subsequent refunding announcement at 8:30am EST where we’ll know more about the issuance pattern in the next few months. See our rates strategists' preview here where they say their expectations have been boosted by Treasury borrowing over the next 5 months that is $500bn more than they originally expected. I did a CoTD last Monday on the US deficit as it has unexpectedly surged this year. The piece (link here) references US economist Brett Ryan’s piece explaining that most of the deficit increase should be temporary due to delays in tax receipts. Much of California got an extension in filing their tax receipts until October 16th because of severe winter storms. So until we see that we wont really know whether the fiscal impulse has indeed turned notably positive or if, as is our current expectation, its just a timing issue. I am however getting more clients ask me if the US is increasing fiscal spending by stealth. At the moment I don’t think this is the case over and above our forecast from the start of the year, which is for a deficit not that different to last year, albeit still large. A big one to watch. In terms of data, the lead stories yesterday were the ISM and JOLTS data for July and June respectively, which didn’t dent the soft-landing narrative for the US economy but still hinted at only a gradual reduction in labour market tightness. The headline ISM manufacturing result did slip in July, with the ISM manufacturing index disappointing at 46.4 (vs 46.9 expected). However, there were encouraging snippets of inflation-related data, including the ISM prices paid which rose less than expected to 42.6 (vs 44.0 expected). Resilience in new orders were likewise evident, rising from 45.6 in June to 47.3, although remaining in contractionary territory. The employment component fell from 48.1 in June to 44.4 though, pushing the index further into contractionary territory. Additionally, the slight downside surprise in the JOLTS job opening at +9582k (vs +9600k expected) similarly spoke of a more tepid labour market after falling to its lowest level since April 2021. Job openings are still historically high though. Lastly, the quits rate dropped down two-tenths to 2.4%, after a shock increase to 2.6% in the May release. The closely followed private quits rate also fell two tenths to 2.7% again reversing a surprise increase the month before. Another suite of labour market data is due today, with the release of ADP private-sector jobs for July ahead of payrolls on Friday. However, with a lot of data between now and November, and Fedspeak emphasising data dependency, markets didn’t move much at the front end after the numbers with the long end buffeted instead by the supply outlook. Investors are pricing a nearly 1 in 5 chance of a 25bp rate hike at either of the next two Fed meetings. Yesterday, the balance shifted slightly to put slightly more weight on November, with the expected terminal rate at the end of the meeting expected to be 5.414%. Across the Atlantic, the German labour market also remained tight, with the July unemployment rate falling to 5.6% from 5.7% in June (vs 5.7% expected), and unemployment claims decreasing -4k (vs +20k expected). The overall Eurozone unemployment rate fell from 6.5% to 6.4% (vs 6.5 expected). The better-than-expected results spoke to a still robust labour market, and with the ECB now data dependent, European overnight index swaps priced in nearly a 62% chance of another 25bps hike by year-end, up slightly from the previous session. Against this backdrop, 10yr bunds sold off, as yields rose +6.5bps. Over the channel in the UK, gilts underperformed, as 10yr yields rose +9.0bps ahead of the BoE meeting on Thursday notwithstanding weak economic data including the UK Lloyds business barometer, which fell from 37 to 31. Basically it was a day of rising western global bond yields. Turning our attention away from fixed income to equities, the S&P 500 broke its two-day streak of gains to finish down -0.27% following mixed company earnings and possibly the weaker ISM. At the industry level, autos (-1.9%), telecoms (-1.4%), utilities (-1.3%) and consumer discretionary (-1.0%) all lagged. The latter was impacted by Uber (-5.68%) missing on Q2 revenue expectations. On the flipside, capital goods outperformed, up +0.6% following strong Q2 earnings by lead American construction company Caterpillar (+8.85%). The NASDAQ underperformed, falling back -0.43%. After the US close semiconductor producer AMD (up +2.7% in after-market trading) beat earnings expectations and described the PC chip market as having mostly recovered with customers having worked through excess inventory. The company expects to hit their initial full year guidance on surging AI demand. In Europe, the STOXX 600 earlier slipped, down -0.89%, after negative Q2 updates and cautious forward outlooks from top European firms such as BMW (-5.39%), DHL Group (-4.87%) and Daimler (-2.40%). In terms of other notable data releases, we had the Dallas Fed Services Activity, which posted at -4.2, an increase from -8.2 in June. The final US manufacturing PMI result for July was unchanged from the flash result, at 49.0, increasing from 46.3 prior. Finally, the final euro area PMI manufacturing result for July was unchanged at 42.7. Early morning data today showed that South Korea’s consumer price growth slowed for the sixth consecutive month, rising +2.3% y/y in July (v/s +2.4% expected) on the back of lower oil prices. It followed a +2.7% increase in June, and marks the lowest advance since June 2021. After a data heavy day yesterday, we have only the US July ADP report as the major data release to look forward to today. But watch out for the refunding announcement. Key company earnings include semiconductor firm Qualcomm, as well as Teva, Shopify, PayPal, Occidental Petroleum, Equinix, Kraft Heinz, DoorDash, Albemarle, MGM Resorts, Zillow, and Etsy. Tyler Durden Wed, 08/02/2023 - 08:08.....»»

US Futures Rise, Chinese Stocks Soar As Politburo Vows Support, FOMC Meeting Begins US futures are higher with bond yields also rising higher in quiet, cautious trade ahead of a barrage of earnings including MSFT and GOOGL later today, as well as central bank announcements tomorrow (the FOMC meeting begins today) and Thursday from the ECB and BOJ. S&P futures were fractionally higher, rising 0.1%, as a surge in Chinese stocks spilled over; Nasdaq 100 futures rose as much as 0.4%, after a weak session Monday, with Microsoft Corp. and Alphabet Inc. due to report their first earnings since artificial-intelligence fever broke out. Shares in both companies were about 0.5% higher in New York pre-market trading as investors waited to see if the results justify the companies’ hefty year-to-date share gains. Treasury yields climbed across the curve, while the dollar and oil both reversed earlier losses; iron ore prices climbed while gold reversed modest gains. Today focus will be on MSFT and GOOGL earnings after the close. On macro, we get Case Shiller, Consumer Confidence and Richmond Fed at 10am ET. In premarket trading, megacap  stocks again lead higher. Shares in General Motors and General Electric gained in premarket trading as both companies raised their earnings guidance, while NXP Semiconductors NV advanced as its results beat expectations. China stock traded in the US rallied after China’s Politburo was far more dovish than expected: HSI and CSI added 4.1% and 2.9% today; FXI closed with a 2.1% gain yesterday. Here are the most notable premarket movers: Goldman Sachs Group shares slipped as Citi cut its rating on the stock to neutral from buy, saying that the company’s targets are achievable, but it will take time and a better investment banking environment to attain them. Walmart rises 1.2% in premarket trading after being upgraded to overweight from neutral at Piper Sandler, which said the retailer has a chance to further extend market share gains as grocery inflation subsides. The broker also raises its price target on Walmart to a Street high. Rackspace Technology falls as much as 4.3% in premarket trading on Tuesday as Citigroup downgrades the infrastructure software company’s stock to sell from neutral, saying the valuation does not reflect the estimated downside potential. US-listed Chinese stocks extend their rally in premarket trading Tuesday, after Beijing’s pledge to support the economy spurred fresh bets that more stimulus measures could be on the way. Alibaba (BABA US) +1.6%, Baidu +1.8%. Zevia is downgraded to neutral from buy at Goldman Sachs after the beverage producer reported preliminary 2Q revenue that missed estimates due to supply chain interruptions. The broker said it now sees a balanced risk/reward ratio, and therefore moves to the sidelines. AMC drops as much as 15% in premarket trading — narrowing the spread between its common and preferred shares — after a Delaware court judge sent a new letter to the company and its shareholders about the movie-theater chain’s stock-conversion plan. Some 48% of the S&P by market cap, or companies with a market value of $16.3 trillion, are reporting earnings this week.  Despite stocks trading near 2023 highs, investors seem unwilling to place big bets, given uncertainty over what signals Federal Reserve and European Central Bank policymakers might send, with the Fed’s potential policy path, especially, crucial for global markets.   “Investors are unlikely to feel safe enough to get into the equities water before such an eventful week,” Mizuho International Plc strategists Evelyne Gomez-Liechti and Helen Rodriguez wrote in a note. Despite the listless mood, hopes have grown that the US economy will be able to escape a sharp recession. That’s lifted the Dow Jones Industrial Average 5% so far this month, as investors price a better outlook for companies making industrial equipment and heavy machinery. That’s put the Dow index in the midst of its longest winning streak in more than six years. European shares also edged higher, lifted by resources firms such as Anglo American Plc and Rio Tinto Plc that benefited after China's Politburo signaled more support. The Stoxx 600 is up 0.2% after the Hang Seng finished with gains of 4.1%. Mining stocks have outperformed while Adidas and Bayer are all higher post-earnings.  Among individual movers, consumer-goods giant Unilever Plc stood out, gaining as much as 5.7% after beating sales estimates, while spirits group Remy Cointreau SA surged after Chinese sales helped it surpass forecasts.  European market sentiment was dampened by a euro-area bank lending survey which showed a record plunge in loan demand from the bloc’s companies. Alongside a dismal business outlook reading from Germany, the data raise questions over the ECB’s capacity to hike interest rates much beyond the 25 basis points priced for this Thursday’s meeting. Here are some of the most notable European movers: Unilever shares rise about 5.7% after the consumer-staples company reported better-than-expected second-quarter sales. The beat showed continued volume resilience, according to Morgan Stanley Adidas shares gained as much as 6.6% in Frankfurt trading after the sale of the sportswear retailer’s inventory of Yeezy sneakers from a canceled partnership with the rapper Kanye West Randstad rises as much as 4.2%, reversing a decline in early trading, as investors digested a set of results showing second- quarter underlying Ebita beat estimates while the Dutch staffing firm missed on revenue and gross profits Bayer gained 1.8%, reversing an initial drop of as much as 3.2%, as investors look beyond an expected cut to 2023 guidance following a slew of warnings from chemical companies Logitech shares gain as much as 6.3% in Zurich after the Swiss maker of computer peripherals boosted its outlook for the first half of fiscal 2024. Sales for gaming and pointing devices beat estimates Compass shares fall as much as 4.7%  after the catering company reported 3Q earnings. Tuesday’s update is “fine,” but “investors may have been looking for slightly more,” according to Barclays DSV shares decline as much as 6.3%. While the transport and logistics company’s second-quarter Ebit before significant items came in ahead of expectations, the Air & Sea segment missed estimates Dassault Systemes shares fall as much as 6.1%, their biggest drop since April, after the software firm reported slower growth in key areas from its cloud-based design platform Elior sinks as much as 10%, biggest intraday drop since May 17, after the French catering company cuts its FY profit margin forecast for the second time this year, citing higher costs due to inflation and new contracts Thales shares fall as much as 2.7% after the French defense group reached an agreement with Thoma Bravo for the acquisition of 100% of Imperva based on an enterprise value of $3.6 billion Babcock shares drop as much as 3.9% on Tuesday, snapping an 11-day winning run, as Liberum restarts coverage with a hold rating and says last week’s results were “not as good as they looked” Idorsia shares tumble as much as 17%, touching an all-time low, after the Swiss pharmaceuticals producer reported an operating loss for 2Q and suspended its 2025 profitability target Attention is now turning to LVMH, Europe’s biggest company on what it says about Chinese consumer trends in its report later in the day. Earlier in the session, Asian stocks advanced, lifted by Chinese shares after the country’s top leadership signaled fresh support for the ailing economy, while investors braced for key central bank meetings this week. The MSCI Asia Pacific Index rose as much as 1%, led by material and communication services shares. Most regional markets rallied, with technology and property shares propelling mainland Chinese and Hong Kong benchmarks. Chinese stocks drive Asian equity gains following an ADR rally in New York on Politburo’s pro-growth message. Hang Seng Tech index surges as much as 5.3% and H shares jump more than 4%. The CSI 300 rallied 2.6% - poised for its best day in five months - as developer shares soar the most in seven months. China’s top leaders on Monday pledged to boost consumption and offer more support for the troubled property sector to help revive a slowing economy. The statement from the Politburo meeting was taken positively by investors, who say the outcome was better than expected. “The Politburo met earlier and was more dovish than expected, promising housing easing, local debt resolution, and a boost to capital markets. It could be a defining moment, akin to October 2018,” Morgan Stanley economists including Robin Xing wrote in a note. “We expect a meaningful growth rebound in 4Q, keeping full-year growth at the government’s target of 5%.” Other Asian markets are narrowly mixed: Japanese stocks traded in a narrow range as investors awaited policy decisions from the Federal Reserve and the Bank of Japan. The Fed is expected to further raise interest rates, while the BOJ is projected to stand pat as it waits for sustainable inflation. Kospi nudged higher while the ASX 200 was positive with the index led by gains in the mining and energy sectors amid recent strength in underlying commodity prices owing to the Chinese stimulus hopes. Key stock gauges in India closed flat on Tuesday while small and mid-sized companies continued their rally to new peaks as ongoing earnings season unfolds.  The S&P BSE Sensex was little changed at 66,355.71 in Mumbai, while the NSE Nifty 50 Index was also flat at 19,680.60. BSE Ltd.’s small- and mid-cap stocks rallied more than 0.3% each.  In FX, the Bloomberg’s Dollar Spot Index traded in the red, on track to snap five sessions of gains, while the euro touched a two-week high against the greenback after China signaled renewed support for its struggling economy. The offshore yuan jumped to its strongest level in more than a week after the People’s Bank of China continued its support for the currency. The euro dropped and German bonds briefly recovered losses after a bank lending survey released by the European Central Bank showed a bigger-than-expected fall in demand for loans due to higher interest rates. A soft reading for the German business outlook also weighed on the currency. EUR/GBP declined as much as 0.3% to 0.8603, lowest in a week: The pound rose, on course to end its longest losing streak since March 2020 against the US dollar; GBP/USD rose as much as 0.3% to $1.2865 The Australian dollar led the advance among the Group-of-10 currencies, gaining 0.5% as optimism on China spurred exporters to get some hedging on board before Wednesday’s local inflation data, according to Asia-based FX traders In rates, treasury yields are higher by 2bp-3bp across the curve as the Bloomberg Dollar Spot Index falls 0.1%; 2s10s curve is optically steeper after switch to new 2-year note sold at auction Monday. The new 2-year trades around 4.87% after drawing 4.823% in the auction, highest yield for an auction of the tenor since 2007. Still, vs the 10-year at 3.89% its 98bp spread is tighter than the old 2-year note’s; the higher-yielding old 2-year traded nearly 106bp cheap to the 10- year Monday. Bunds are in the red although they briefly pared declines after German IFO missed expectations. German 10-year yields are up 2bps. Auction cycle continues with $43b 5-year. Apart from new 2-year, benchmark yields are highest since July 12 as wagers that the Fed will raise rates again this year after an expected quarter-point hike at the meeting that concludes Wednesday have increased somewhat. Ahead of auction at 1pm New York time, WI 5-year yield at around 4.15% is higher than 5-year auction stops since October; last month’s drew 4.019%. Commodity prices were mostly on the rise after Chinese leaders used this week’s Politburo meeting to flag more aid to the economy. Oil prices held near three-month highs, with brent futures trading near $83 while copper and steel-making staple iron ore both rose, given their importance for China’s property sector. US-listed Chinese stocks also extended their rally in premarket trading. In Crypto, Binance and CEO Zhao are planning to seek a dismissal of the CFTC complaint, according to Bloomberg.    Crypto exchange Kraken says it is investigating reports that some clients are experiencing funding delays. UK Information Commission will examine Worldcoin (WDC), a project by OpenAI CEO Sam Altman, according to a spokesperson cited by CoinDesk. Looking ahead, the US economic calendar includes July Philadelphia Fed non- manufacturing activity at 8:30am, May FHFA house price index and S&P CoreLogic home prices at 9am, and July Conference Board consumer confidence and Richmond Fed manufacturing at 10am; Fed speakers are in self-imposed quiet period ahead of Wednesday’s rate decision Market Snapshot S&P 500 futures up 0.2% to 4,591.50 MXAP up 1.3% to 168.30 MXAPJ up 1.9% to 532.87 Nikkei little changed at 32,682.51 Topix up 0.2% to 2,285.38 Hang Seng Index up 4.1% to 19,434.40 Shanghai Composite up 2.1% to 3,231.52 Sensex little changed at 66,334.14 Australia S&P/ASX 200 up 0.5% to 7,339.67 Kospi up 0.3% to 2,636.46 STOXX Europe 600 up 0.2% to 466.57 German 10Y yield little changed at 2.45% Euro little changed at $1.1063 Brent Futures down 0.3% to $82.46/bbl Gold spot up 0.3% to $1,960.69 U.S. Dollar Index little changed at 101.33 Top Overnight News US national security officials are scrutinizing an Abu Dhabi sovereign wealth fund’s planned $3bn takeover of New York-based Fortress Investment Group amid concerns in Washington over the United Arab Emirates’ ties to China. FT Unilever reported higher than expected underlying sales growth in the first half of the year driven by continued price rises, but sales volumes were flat as the cost of living crisis squeezed consumers. The company said “we have passed peak inflation”, adding that it had moderated its price rises. Prices rose 9.4 per cent in the first half, compared to 13.3 per cent in the fourth quarter of 2022. FT The slow pace of Ukraine’s counteroffensive against entrenched Russian invaders is dimming hopes that negotiations for an end to the fighting could come this year and raising the specter of an open-ended conflict, according to Western officials. WSJ Corporate loan demand in the euro area fell the most on record in the second quarter as rate hikes started to bite, an ECB survey showed. Demand for mortgages and other consumer borrowing declined, and lenders expect more tightening to come. Germany is probably still stuck in a recession, Ifo's head said, as its business outlook worsened in July. BBG Chipmakers warned that shortages of technicians, engineers and computer scientists are threatening US plans for rapid expansion of the sector. About 115,000 new jobs are expected by 2030 but current graduation rates imply more than half may remain unfilled, an industry body said. BBG McCarthy says House probes into the foreign business activities of the Biden family rose to the level of an impeachment inquiry. The Hill DeSantis is no longer Trump’s main rival as the Florida governor’s campaign continues to falter. London Times The FDIC hit out at some US banks for incorrectly reporting the amount of their uninsured deposits, after dozens of lenders restated their figures downward earlier this year. The regulator said banks were wrong to exclude deposits that were collateralized by pledged assets. The level of uninsured deposits at banks came into focus after the collapse of SVB and Signature Bank. BBG General Motors has raised its guidance for the second time this year, citing strong customer demand. The Detroit carmaker predicted it will earn between $12bn and $14bn this year, having raised the bar in April when it said it would bring in $12.5bn at most. FT US data surprises have been positive in the last couple of months, while European and China data have undershot... A more detailed look at global markets courtesy of Newsquawk APAC stocks traded mostly higher amid a rally in Chinese stocks after the Politburo’s support pledges, although gains for the rest of the region were capped after soft global PMIs and with some cautiousness heading into risk events. ASX 200 was positive with the index led by gains in the mining and energy sectors amid recent strength in underlying commodity prices owing to the Chinese stimulus hopes. Nikkei 225 lagged as speculation remained rife regarding this week’s BoJ meeting with source reports noting the central bank is to consider a large increase in its 2023 inflation outlook and could raise its forecast to around 2.5%. Hang Seng and Shanghai Comp were boosted with gains led by a surge in property and tech stocks after the Politburo’s support pledges which lifted the Hang Seng Tech Index by around 5%, while the Hang Seng Mainland Properties Index rose by a double-digit percentage from early on as the Politburo’s statement omitted the language that homes are not for speculation. Top Asian News China's NDRC held a meeting with private firms including ANTA (2020 HK), NIO (9866 HK) and TCL where it listened to the companies' opinions and suggestions on the current economic situation, according to Reuters. European bourses are managing to eke out marginal gains, Euro Stoxx 50 +0.1%, with macro drivers downbeat since the APAC upside seen on Chinese stimulus. Mining names outperform given Politburo stimulus while Unilever +5.0% is supporting the FTSE 100 and AEX post-earnings; on that point, European heavyweight LVMH reports after the Paris close. Stateside, futures are in the green but only modestly so with specific drivers somewhat light ahead of tomorrow's FOMC and with numerous large-cap earnings due in- and after-hours today; ES +0.1%. Top European News ECB Euro area bank lending survey: net 14% of EZ banks tightened credit standards in Q2 vs. 27% in Q1. Banks expect more moderate net tightening on loans to firms in Q3. The cumulated net tightening since the beginning of 2022 has been substantial. Firms’ net demand for loans fell strongly in the second quarter of 2023, dropping to an all-time low since the start of the survey in 2003. EU ministers have given the final approval to the EU chips, according to the European Council. UK pensions regulator warned that pension fund trustees must consider widening the range of their investments including in start-ups and other illiquid assets or face "robust intervention", according to FT. 5.7 magnitude earthquake occurred in central Turkey, via EMSC. FX DXY slips within 101.430-180 range before another boost from the Euro after weak German Ifo. EUR/USD tests Fib support at 1.1055 from 1.1086 peak near 1bln option expiry interest. Aussie rebounds alongside Yuan ahead of CPI data, AUD/USD probes 0.6770 expiries from 0.6726 base, USD/CNY and USD/CNH both sub-7.1400 from 7.1600+ and 7.1900 respective highs. Yen retains recovery momentum vs Dollar between 141.62-21 bounds amidst demand at the overnight Tokyo fix. Pound holds onto the 1.2800 handle against Buck amidst supportive EUR/GBP tailwinds within 0.8637-03 range. PBoC set USD/CNY mid-point at 7.1406 vs exp. 7.2044 (prev. 7.1451) China's major state-owned banks were seen selling dollars in the offshore and onshore spot FX markets in early Asian trades, according to sources cited by Reuters. Fixed Income Bond bears back in the driving seat as post-EU PMI momentum wanes and EGBs only bounce partially after dire German Ifo survey. Bunds back below par within 133.77-14 range, Gilts remain soft between 96.78-38 parameters irrespective of decent demand for 2038 DMO issuance and T-note nearer 111-23+ trough than 112-01+ peak ahead of US data, consumer confidence and 5 year supply. BTPs also on the back foot following mixed Italian auctions. Commodities WTI and Brent are now mostly softer intraday as the complex came off the best levels seen overnight with added pressure from the German Ifo Survey which, in fitting with yesterday’s PMIs, underscored a worsening economic situation in Germany. Spot gold continues to oscillate on either side of its 100 DMA (1,962.91/oz) ahead of a triple-threat of central banks including the likes of the FOMC tomorrow, ECB on Thursday, and BoJ on Friday. Base metals have been underpinned this week by the Chinese Politburo meeting which reignited some optimism in industrials via the hint of further stimulus, albeit the upside is currently capped by the German economic woes telegraphed by the Ifo data. Agriculture remains a theme as supply risks grow with Chicago Wheat rallying some 10% overnight at one point, whilst corn prices were also supported. Kremlin says it is impossible to return to lapsed Black Sea Grain deal. Russian Finance Ministry plans to cut the discount it uses to set taxes on the country's crude oil exports to USD 20/bbl from USD 25/bbl currently, according to Finance Minister Siluanov cited by Reuters. Kazakh Energy Minister said there are no issues with shipping Kazakh crude via Russia amid Black Sea tensions. Kazakhstan's Tengizchevroil has reduced daily output by 12-13k/T due to unscheduled maintenance, via Deputy Energy Minister. China's H1 gold output rose 2.2% Y/Y to 178.6 metric tons and gold consumption rose 16.4% Y/Y to 554.9 metric tons, according to Reuters citing state media. Geopolitics White House said the US does not support attacks inside of Russia when asked about the drone strikes in Moscow. Japan launched a protest against North Korea over its missile launch, while it noted that North Korea's missile launch is unacceptable and threatens not only Japan but also the regional and international society's peace and stability. China's government said a delegation led by Politburo member Li Hongzhong is to visit North Korea from July 26th. Subsequently, a Russian delegation is to visit North Korea this week, led by the Russian Minister of Defence, via KCNA. Additionally, the Russian Defence Ministry says Defence Minister Shoigu 's visit to North Korea will contribute to strengthening military relations between the two countries, via Al Arabiya. Russian authorities have announced the suspension of navigation within the Gulf of Sevastopol, via Al Arabiya. China's Foreign Ministry said a senior official of the Japanese defense ministry has grossly interfered in China’s internal affairs, and China is firmly opposed to this and has lodged stern representations with Japan, via Global Times. Japan and Italy to hold joint fighter jet drills at Komatsu Base Aug 2-10; Japan and Australia to hold joint fighter jet drills at the Base Aug 23-September 15. US event calendar 08:30: July Philadelphia Fed Non-Manufactu, prior -16.6 09:00: May S&P CS Composite-20 YoY, est. -2.35%, prior -1.70% 09:00: May S&P/Case-Shiller US HPI YoY, prior -0.24% 09:00: May S&P/CS 20 City MoM SA, est. 0.70%, prior 0.91% 10:00: July Conf. Board Consumer Confidenc, est. 112.0, prior 109.7 July Conf. Board Present Situation, prior 155.3 July Conf. Board Expectations, prior 79.3 10:00: July Richmond Fed Business Conditio, prior -12 July Richmond Fed Index, est. -10, prior -7 DB's Jim reid concludes the overnight wrap Sentiment has been a bit more negative than markets over the last 24 hours, as weak data from the flash PMIs for July was a bit worrying. However, DM equities just about shrugged it off and US bonds sold off after a weak 2yr Treasury auction, and traded in completely the opposite direction to the way European bonds did after the weak PMIs. The Chinese stimulus announcement yesterday has turned momentum overnight in their bourses, with Chinese real estate stocks up c.+7%, reducing YTD losses to c.-13.7%, so there’s some interesting global push/pull factors going on at the moment. Markets are now awaiting this week’s round of central bank decisions, multiple data releases, and a raft of earnings over the rest of the week. As you'll see in the day ahead, there's lots to look forward to today including earnings from Microsoft and Alphabet after the bell; however, the one I'm most intrigued about is the latest quarterly ECB bank lending survey. The last survey, conducted in the weeks after the March banking stress, saw our aggregate indicator of BLS credit conditions decline to its weakest since the GFC amid a sharp fall in demand for loans and tightening credit standards. Banks did expect a partial rebound in credit conditions in Q2 so we'll see if that materialised. It's tough to disentangle recent shocks (energy spike and regional bank/Credit Suisse crisis) and their recovery, from the cyclical (400bps of hikes in a year). As well as a steer on Europe it might also give us clues as to the all important Fed SLOOS next week. Back to those flash PMI numbers, it became clear things were surprising on the downside from the get-go in the European session. For instance, the French composite PMI hit a 32-month low of 46.6 (vs. 47.7 expected), whilst the manufacturing PMI hit a 38-month low of 44.5 (vs. 46.0 expected). Then in Germany, the composite PMI fell to an 8-month low of 48.3 (vs. 49.8 expected), with the manufacturing PMI diving deeper into contractionary territory, falling to a 38-month low of 38.8 (vs. 41.0 expected). That was then followed up by the Euro Area-wide numbers, where the composite PMI also hit an 8-month low of 48.9 (vs. 49.6 expected). Outside of the Euro Area the picture was a bit brighter, but to be frank it still wasn’t great. In the US, the composite PMI fell to a 5-month low of 52.0 (vs. 53.0 expected), which added to the signs from other indicators that the economy is decelerating. Likewise in the UK, the composite PMI hit a 6-month low of 50.7 (vs. 52.3 expected). So in both cases the composite PMI was still above the 50-mark that separates expansion from contraction, but the numbers were weaker than expected. Those prints led to a decent sovereign bond rally across Europe, with yields on 10yr bunds (-4.9bps), OATs (-4.7bps) and BTPs (-4.6bps) all moving lower. In part, that was because of growing doubts that the ECB would deliver another hike in September after their move this week. For example, expectations of a second hike by September were down from 65% on Friday to 58% by the close yesterday, so it’s becoming increasingly balanced in terms of market pricing. For US Treasuries however, it was a somewhat different story ahead of the Fed’s decision tomorrow. 2yr yields were up an impressive +7.7bps to 4.92% given the global data. The sell-off accelerated after the European close as we saw a $42bn auction of 2-year notes issued at 4.823%, the highest interest rate since 2007. The move in the 10yr was more moderate, with a +3.5bps sell-off to 3.87%. Higher inflation breakevens drove things, with the 10yr breakeven up +4.7bps to 2.40%, marking its highest level since SVB’s collapse in early March. The bond sell-off came as investors raised their Fed funds expectations, with the December 2024 pricing up +11.0bps on Monday to 4.145%. That shift in inflation expectations came against the backdrop of significant commodity price moves yesterday. For instance, wheat (+8.60%) hit a 5-month high, following a Russian attack in Ukrainian ports of Reni and Izmail on the Danube river, which have been used for grain exports. Other agricultural goods have also been affected, with corn (+5.97%) and soybeans (+1.62%) both rising in trading yesterday. Energy prices also moved higher, with Brent crude oil prices (+2.06%) at a 3-month high of $82.74/bbl, while WTI oil prices (+2.17% to $78.74/bbl) outperformed following news of a refinery outage in the US. In aggregate, it’s clear that we’re experiencing one of the strongest commodity advances of the last year now. Those commodity price moves were helpful for energy stocks, which lifted a broader rally across several equity indices. Among others, the S&P 500 rose +0.40% to close just shy of its 15-month high last week. And there was a particular milestone for the Dow Jones (+0.52%), which rose for an 11th consecutive session for the first time since February 2017. That run of advances in 2017 lasted for 12 consecutive sessions, so another positive day today would match that. And if there were a 13th gain tomorrow, that would match a record last set in January 1987. Meanwhile in Europe, the STOXX 600 (+0.06%) still posted a very modest gain despite the disappointing PMI data. In other economic news on Monday, we got a readout from a key economic policy meeting of China’s Politburo, which showed an increased focus on the “new difficulties and challenges” facing the economy. The meeting did not offer immediate stimulus measures but our China economists see the meeting as setting an encouraging tone for stronger policy easing down the road. See their reaction note here for more details. Asian equity markets are mostly higher this morning as a result. The Hang Seng (+3.17%) is leading gains buoyed by locally-listed Chinese stocks while the CSI (+2.49%) and the Shanghai Composite (+1.87%) are also trading sharply higher with property leading the gains. Elsewhere, the KOSPI (+0.09%) is swinging between gains and losses with the Nikkei (-0.43%) bucking the regional trend. US stock futures are fairly flat. Early morning data showed that South Korea’s seasonally adjusted GDP expanded +0.6% in April-June on a quarterly basis (v/s +0.5% expected) following a +0.3% increase in the preceding three months, despite a decline in exports. To the day ahead now, and data releases from the US include the Conference Board’s consumer confidence measure and the Richmond Fed’s manufacturing index for July. Alongside that, there’s the FHFA house price index for May. Over in Germany, there’s the Ifo business climate indicator for July. From central banks, we’ll get the Euro Area bank lending survey. Finally, today’s earnings releases include Microsoft, Alphabet, Visa, General Motors, General Electric and Spotify Tyler Durden Tue, 07/25/2023 - 08:16.....»»

Shares of Cinemark Holdings Inc. CNK fell 3.2% in premarket trades Wednesday after J.P. Morgan downgraded the stock to neutral from overweight, citing the impact of the actors’ strike. J.P. Morgan also established a December 2024 price target of $18 for the movie theater operator, down from its December 2023 price target of $21. In a note, J.P. Morgan analyst David Karnovsky warned of the strike’s impact on film supply and box office, with production already shut down on several movies slated for release in the second half of 2024. “Absent a resolution, we expect the strike will remain an overhang to CNK shares and limit upside regardless of whether the box office outperforms near term (e.g., Barbie and Oppenheimer) or the company posts better than expected results,” he wrote.Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news......»»

Futures Flat As Q2 Earnings Seasons Kicks Off The week's powerful rally which sent US stocks to a new 52-week high has faded, with futs down small after a quiet overnight session on the day JPM officially ushers in Q2 earnings season as the post-CPI market rally pauses for breath as investors contemplate how recent US inflation data will impact upcoming Fed policy decisions. As of 6:45am ET S&P futures are flat at 4,542 while Nasdaq futures are down 0.1%. Bond yields are 3-5bp higher, and the USD has reversed higher after dropping the lowest level in more than a year. Commodities are mixed with energy lagging and base metals such as iron ore extending gains from yesterday. Yesterday’s dovish PPI and lower-than-expected initial claims supports the soft-landing narrative. Key focus today will be banks earnings; JPM, C and WFC report pre-market. Keep an eye on banks’ commentary on consumer health, credit trends and loan growth. We will also get the latest UMichsentiment data (consensus sees 65.5 vs. 64.4 prior); 1yr inflation expectation is estimated to fell to its lowest in two years In premarket trading, mega-cap tech stocks are mixed; Banks are mostly higher. Microsoft rose 1.6% in premarket trading as UBS raised the recommendation on the software giant’s stock to buy from neutral, saying cloud infrastructure spending is starting to stabilize after a significant deceleration over the past year.  UnitedHealth Group Inc. gained after an earnings beat. Nikola soared as much as 25% set to extend Thursday’s 61% rally, after BayoTech agreed to buy up to 50 of its hydrogen-fuel-cell EVs over the next five years. If the gains hold until close, it will be the biggest weekly gain on record for the stock. Here are some other notable premarket movers: Acadia Pharmaceuticals (ACAD US) shares surged 20% in premarket trading after the biotech firm said it had expanded its licensing agreement with Neuren Pharmaceuticals to acquire the ex-North American rights for Daybue (trofinetide), which is used to treat Rett syndrome. Leslie’s (LESL US) shares drop 30% in premarket trading after the pool-supplies retailer cut its full-year adjusted earnings per share guidance. Analysts highlighted the sales weakness in the third quarter, with Piper Sandler downgrading their recommendation on the stock to neutral from overweight. Roivant Sciences (ROIV US) rose as much as 12% in premarket trading after a Wall Street Journal report the company is in talks to sell its treatment for inflammatory bowel disease to Roche Holding. Intuitive Machines (LUNR US) climbed as much as 32% in premarket trading, after the company said it successfully completed a spacecraft test run of its Nova-C lunar lander at the Houston Spaceport. As Bloomberg notes, it’s been a week when almost everything rallied — from emerging markets to global bonds and the S&P 500 — all buoyed by faith that the Federal Reserve is finally winning the fight against inflation. While trading was subdued on Friday, investors are finishing the week with blockbuster gains across asset classes. MSCI’s global stock benchmark has leapt 3.5% in the past five days, the biggest advance since November. “The market has been partying like it’s 1999 this week,” said DB's Jim Reid. “It’s hard to stand in the way of that narrative at the moment regardless of what eventually happens.” Bonds climbed too over the week with the US two-year rate, the most sensitive to short-term policy moves, dropping as much as 30 basis points. The bullish trades reflect hope that the US is heading toward a “Goldilocks scenario” with inflation quickly easing while the economy avoids a recession. To be sure, the Fed is still likely to lift its benchmark rate later this month and central bankers continue to warn that more than one rate increase may still be necessary after that.  The earnings season also kicks off in the US today with lenders JPMorgan Chase, Wells Fargo and Citigroup reporting. “The Fed has already won the battle against inflation,” Raffaele Bertoni, head of debt capital markets at Gulf Investment Corp., said on Bloomberg Television. “If they want to be serious in maintaining inflation under control, the focus should be more on the reduction of the balance sheet or the quantitative tightening rather than increasing rates further.” Fed Bank of San Francisco President Mary Daly, however, told CNBC Thursday that it’s too soon for policymakers to say they have done enough to return US inflation to their target. Fed Governor Christopher Waller also said he expects the US central bank will need to raise rates twice more this year to bring inflation down to its target. Traders are now looking to earnings reports to reignite the rally. The focus is going to be mostly on the corporate outlooks given that beating profit expectations seems to be a low hurdle, even as some estimates have started to rise slowly. “Given that consensus expectations appear reasonable and valuations are already rich (not only in tech), only strong beats are likely to result in substantial price gains, while even small misses may lead to sharper drops,” said Wolf von Rotberg, an equity strategist at Bank J Safra Sarasin. European stocks are also little changed with the Stoxx 600 coming off a five-session winning streak. Among individual stock movers in Europe, Nokia Oyj slumped more than 8% after the Finnish vendor of 5G equipment lowered its guidance. Ericsson dropped almost 8% as analysts pointed to a weak margin outlook for the Swedish telecom equipment maker. Swiss money manager Partners Group Holding AG gained more than 7% after assets under management rose in the first half. Here are the most notable European movers: Partners Group shares gain as much as 7.8%, most since May, after it posted a “positive” update on its assets under management, helping offset negative expectations for the firm ahead of the results Heineken rises as much as 2.7% after being raised to buy at Goldman Sachs as the broker expects the world’s second-largest brewer to “fully benefit” from raw material cost deflation Axfood shares rise as much as 8.2% to a two-month high after the Swedish food retailer’s second-quarter operating profit beat estimates, with analysts pointing to strength in its discount chain Brunello Cucinelli shares gain as much as 2.1% after the luxury clothier reported what analysts called a strong sales update, and increased full-year guidance Vallourec shares climb as much as 7.3%, the most since May, after French tube maker sees 2Q exceeding prior expectations, with Jefferies saying deleveraging plans are working Nokia falls as much as 10%, the most since January 2021, after an unscheduled profit warning and outlook cut, hinting an expected recovery in the sector is further away than earlier projected Ericsson shares dropped as much as 9.2%, as analysts pointed to a weak margin outlook for the Swedish telecom equipment maker in the third quarter and worries of poor US demand Brenntag shares dropped as much as 4.1% after the chemicals distributor was downgraded to underweight from neutral at JPMorgan, saying it struggles with “significant demand weakness” Ashmore shares fell as much as 8.3%, the most since November, after the emerging markets-focused asset manager’s AUM disappointed, with Nubis saying investment performance remains “poor” EMS-Chemie falls as much as 3.3%, the most since April. While the company’s first-half figures were in line with low expectations its full-year outlook was reduced further, ZKB notes Sixt slides as much as 6.7% in Frankfurt trading after being downgraded to hold from buy at Deutsche Bank, expecting the car-rental firm’s profit to drop in 2023 Earlier in the session, Asian stocks were on course for their best week since Nov. 2022, with Chinese equities rallying and peak-rate bets on the Federal Reserve boosting risk sentiment. The MSCI Asia Pacific Index rises as much as 0.8%, with gains for the week nearing 5%. Stocks in Korea, Taiwan and New Zealand led the advance on Friday. Chinese equities have been at the center of the risk rally in Asia, as traders increasingly see an end to years of regulatory crackdowns on technology firms. Other than gains in tech bellwethers such as Alibaba Group Holding Ltd., the broader market also advanced on hopes of more policy stimulus. An index of Chinese companies in Hong Kong is set for the biggest weekly gains since the first week of 2023. Risk appetite was also boosted as the US dollar and Treasury yields fell with softer inflation data in the US. Traders are now pricing in just one more rate hike this year from the Fed. Chinese tech stocks were volatile Friday, with Xiaomi and Meituan falling, after the Hang Seng Tech Index rose for four days in its longest rising streak since mid-June. The Hang Seng Tech Index erases losses of as much as 0.9% in the morning to trade 0.1% higher. Meituan, which was among the best performing stocks on the gauge in the past four days, drops as much as 1.4% on Friday; Xiaomi -1.4%. EV makers Nio down as much as 4.7% and XPeng -7.7%. Stocks fluctuated in Japan as the yen headed for a seven-day winning streak, which would mark its best performance since 2018. “Risk on in emerging markets, especially, in China makes sense,” David Chao, global market strategist for Asia Pacific at Invesco Asset Management told Bloomberg television in an interview. Chao sees Chinese equities emerging among the best performers in second half of 2023. Stocks in Thailand rose even as a leading candidate for the prime ministerial post failed to win endorsement from the Parliament. In FX, the Bloomberg Dollar Spot Index is flat although still on course for its largest weekly decline since November. USD/JPY climbed 0.2% to 138 in a reversal of the yen’s longest bull streak since 2018. GBP/USD held ground above 1.31, while EUR/USD wavered around 1.12. The offshore yuan ticked higher. China has ample foreign exchange reserves and will “resolutely” prevent wild swings in the yuan exchange rate, People’s Bank of China Deputy Governor Liu Guoqiang said at a briefing Friday. The currency’s short-term movement cannot be predicted accurately, but it hasn’t deviated from its fundamentals, Liu added. In rates, treasuries fell, trimming their biggest two-day gain since early May as two-year and 10-year yields hover around their lowest levels in one month/ Two-year yields rose four basis points to 4.67% and 10- year yields climbed three basis points to 3.79% In commodities, oil headed for a third weekly gain as supply disruptions in Africa and a reduction in shipments from Russia tightened the market; crude futures are flat with WTI trading near $76.85. Spot gold falls 0.2%. Gold was set for the best week since April. Bitcoin is under modest pressure despite the USD continuing to languish with drivers thin and the docket ahead relatively spares aside from crucial banking updates. To the day ahead now, and earnings season will step up a gear as we hear from JPMorgan, Citigroup Wells Fargo and BlackRock. Otherwise, data releases include the University of Michigan’s preliminary consumer sentiment index for July. Market Snapshot S&P 500 futures little changed at 4,542.00 MXAP up 0.6% to 168.93 MXAPJ up 0.9% to 535.06 Nikkei little changed at 32,391.26 Topix down 0.2% to 2,239.10 Hang Seng Index up 0.3% to 19,413.78 Shanghai Composite little changed at 3,237.70 Sensex up 0.5% to 65,888.13 Australia S&P/ASX 200 up 0.8% to 7,303.08 Kospi up 1.4% to 2,628.30 STOXX Europe 600 little changed at 461.66 German 10Y yield little changed at 2.50% Euro little changed at $1.1231 Brent Futures little changed at $81.33/bbl Gold spot down 0.2% to $1,957.38 U.S. Dollar Index little changed at 99.76 Top Overnight News The PBOC signaled more targeted support may be on the cards for the property market as it sought to assure investors that the risks banks face from the sector are controllable. BBG The US has launched a round of diplomacy with China to help soften the blow from new tech export restrictions that are expected to be announced soon. SCMP China loses its title as the top exporter of goods to the US for the first time in 15 years, falling behind Mexico and Canada. Nikkei BOJ is having internal discussions about tweaking the YCC policy as soon as this month, although no final decision has been made (any change would likely be very minor). RTRS Australia will promote deputy governor Michele Bullock to take over the RBA, deciding against giving Philip Lowe another term. FT Europe asks its metals suppliers to make semiconductor materials amid worries about China restrictions, but this may require state aid. FT Odds are growing that the Fed’s 25bp rate hike later this month will be the final one of the cycle, but officials want to see more evidence of disinflation before declaring victory. WSJ DeSantis is considering a course correction as his campaign struggles to gain traction. ABC News AMZN has created a new internal organization aimed at helping customers utilize generative AI tools on AWS. Insider   A more detailed look at global markets courtesy of Newsquawk APAC stocks traded mostly higher after the positive lead from Wall St where yields continued to decline as PPI data followed suit to the softer consumer inflation and supported the case for just one more Fed rate hike. ASX 200 was firmer with gains in the index led by the tech sector after similar outperformance of US counterparts amid a decline in yields, while the announcement that RBA Deputy Governor Bullock will take over from Governor Lowe in September had little effect on markets and was largely seen as policy continuation. Nikkei 225 swung between gains and losses with headwinds from JPY strength and speculation that the BoJ could raise its inflation forecast above the 2% target at its meeting this month, which could pave the way for policy normalisation, while former BoJ Director Hayakawa expects the  BoJ to tweak yield curve control at the upcoming meeting by potentially raising the 10yr yield ceiling to 1.0%. Hang Seng and Shanghai Comp were positive albeit with gains capped despite the renewed support pledges by the PBoC to keep credit growth appropriate, as well as step up counter-cyclical adjustments and support for key sectors. Top Asian News PBoC Deputy Governor Liu said China's overall liquidity is ample and its credit structure improved in H1, while he also noted that financing costs stabilised and dropped in H1. Liu said the PBoC has ample policy tools and will step up counter-cyclical adjustments, as well as improve financial services for tech companies, guide banks to boost lending for tech companies and will increase support for SMEs and the green sector, according to Reuters. PBoC official said they will keep credit growth appropriate and step up support for key sectors, while the central bank will deepen interest rate reforms and will guide banks to increase lending to small firms and private firms. Furthermore, the official said there is ample room and various policy tools to cope with challenges, while they will use policy tools such as RRR and MLF, as well as innovate new policy tools if needed, according to Reuters. China's top diplomat Wang Yi said US and China need to take practical actions to bring back ties onto the right track and that the US should adopt a rational and pragmatic attitude and meet China halfway. Wang also said the US must refrain from interfering in China's internal affairs and stop suppressing China's economy, trade, and technology, while the US must lift illegal and unreasonable sanctions against China, according to Xinhua. Australia named Deputy Governor Bullock as the next RBA Governor from September 18th, while Bullock said she is committed to ensuring that the Reserve Bank delivers on its policy and operational objectives. Chinese regulators are reportedly to meet with global investors in order to shore up economic confidence, via Reuters citing sources; focused on the current conditions of USD-denominated investment firms and the main challenges they face. Meeting will take place on Friday 21st July. Investors will be invited to provide suggestions on how to combat the challenges they are facing and to give their views on the Chinese economy. European bourses are contained but remain on track to close the week out with marked gains, Stoxx 600 set for +3% WTD upside. Sectors are somewhat mixed with defensive names outperforming on the tentative tone while Telecom. lags after Nokia and Ericsson's respective updates. Stateside, futures are near the unchanged mark as we await the final scheduled Fed speak before blackout commences alongside the formal commencement of Q2 earnings season. UnitedHealth Group Inc (UNH) Q2 2023 (USD): EPS 6.14 (exp. 6.01), Revenue 92.9bln (exp. 91.bln); FY23 adj. Net guidance 24.70-25.00/shr (exp. 24.76). +2.1% in pre-market trade. Nokia (NOKIA FH) - Q2 (EUR): Revenue 5.7bln (exp. 6.03bln), adj. EBIT Margin 11%. Cuts FY23 sales outlook to EUR 23.2-24.6bln (exp. 25.57bln, prev. 24.6-26.2bln). Weaker demand outlook in H2 is due to both the macro-economic environment and customers inventory digestion. UK CMA considers there is insufficient time remaining within the statutory period for a full and proper consideration of Microsoft's (MSFT) submission re. the proposed Activision (ATVI) deal; revised period to end on 29th August 2023. Top European News Nordic Mobile Equipment Makers Fall as Nokia Cuts Guidance Vallourec Jumps as Tube Maker Predicts Better-Than- Forecast 2 Heineken Gains as Goldman Upgrades to Buy on Margin Outlook Sixt Drops; Deutsche Bank Downgrades on Weak Profit Momentum London Gatwick Airport Workers to Strike Over Pay, Union Says Nordic Banks Tested as Property Slumps: EMEA Earnings Week Ahead FX DXY finds a base just above 99.500 after another heavy decline and approaching end of bleak week that started with the index peaking around 102.500. Aussie and Kiwi make way for Buck bounce as AUD/USD fades ahead of 0.6900 and NZD/USD from 0.6400+ at best. Yen retreats from 137.26 towards 138.50 as JGB-UST spreads re-widen. Euro and Pound pull up shy of 1.3150 and 1.1250 vs Dollar respectively, but EUR/USD evades 1bln option expiries at 1.1200, for now. BoJ to host the first long-term policy review workshop in December, to discuss monetary policy and financial systems. Second workshop in May 2024. To discuss analyses comprehensively until that point. PBoC set USD/CNY mid-point at 7.1318 vs exp. 7.1453 (prev. 7.1527) Fixed Income Debt diverges towards the end of a hectic and mainly corrective bull-steepening week Bunds and Gilts above par between 133.18-132.69 and 95.02-94.53 respective bands, but T-note underwater within 113-01+/112-21 overnight range awaiting US import/export prices Fed's Goolsbee and UoM sentiment with inflation expectation. JGBs volatile amidst contrasting BoJ vibes Commodities A contained and catalyst-thin session thus far to conclude a busy week of macro developments before the Fed blackout begins and attention turns to the next round of Central Bank announcements. WTI Aug’23 and Brent Sep’23 are on track to conclude the week with gains of circa. USD 2.50/bbl and are currently at the upper-end of the week’s USD 72.67-77.33/bbl and USD 77.36-81.75/bbl respective parameters. Spot gold is a touch softer but holds above the USD 1950/oz handle around the USD 1954/oz 50-DMA; base metals more mixed as it stands. Qatar set September-loading Al-Shaheen crude term prices at USD 1.68/bbl above Dubai quotes. Geopolitics Russian President Putin said new weapons supplies will further escalate the conflict in Ukraine and worsen the situation. It was separately reported that Putin also said he proposed to Wagner fighters at a meeting this month to continue serving in the military, while he added that Russia's government and parliament must discuss the legal framework for private armies and said without a legal framework, 'Wagner does not exist', according to Kommersant. US Event Calendar 08:30: June Import Price Index MoM, est. -0.1%, prior -0.6%; YoY, est. -6.1%, prior -5.9% June Export Price Index MoM, est. -0.1%, prior -1.9%; YoY, est. -11.0%, prior -10.1% 10:00: July U. of Mich. Sentiment, est. 65.5, prior 64.4 U. of Mich. Expectations, est. 62.0, prior 61.5 U. of Mich. Current Conditions, est. 70.5, prior 69.0 U. of Mich. 1 Yr Inflation, est. 3.1%, prior 3.3% U. of Mich. 5-10 Yr Inflation, est. 3.0%, prior 3.0% DB's Jim Reid concludes the overnight wrap After a hectic week, I'm playing a gig at a good friend's 50th birthday party tomorrow night. I haven't done any practise so I'm relying on a set list that worked 20 years ago. Given the nature of the event I'm assuming the audience won't have heard much new music in that period so we should all be ok. If it all goes well I'll be digging out research from 20 years ago as well to see if I can pull off the same trick. The market has been partying like it's 1999 this week, with the rally showing no sign of letting up over the last 24 hours, with bonds and equities surging thanks to growing hopes of a soft landing. It’s hard to stand in the way of that narrative at the moment regardless of what eventually happens. Much of that was propelled by the previous day’s CPI release, but investors then got a further dose of optimism from a weaker-than-expected PPI print, as well as the weekly jobless claims that were below consensus. That supported a fresh multi-asset advance, with the S&P 500 (+0.85%) and NASDAQ (+1.58%) closing at 15-month highs, yields on 10yr Treasuries falling -9.4bps to 3.77%, and Brent Crude oil prices closing at a 2-month high of $81.36/bbl. And that’s all before we start Q2 US earnings season today. These moves over the last week have been part of an astonishing turnaround in the market narrative. After all, it was only on Thursday of last week that the bumper ADP report sent the 2yr Treasury yield up to 5.12% intraday, which is its highest level since 2007. But since then, we’ve had the smallest monthly jobs growth (+209k) since December 2020, along with the weakest core CPI (+0.16%) since February 2021, and investors are pricing in a growing chance of multiple rate cuts next year. When it came to those developments yesterday, the main story was that monthly PPI came in at just +0.1%, and the previous month was revised down a tenth to -0.4%. So more positive news on the inflation side. In turn, that took the year-on-year PPI close to deflationary territory at +0.1% (vs. +0.4% expected), which is the lowest it’s been since August 2020. In addition, the core PPI measure excluding food and energy was at a monthly +0.1% (vs. +0.2% expected), with the year-on-year measure down to +2.4% (vs. +2.6% expected). That downside surprise helped cement the message from the previous day’s CPI report. In particular, it meant investors became increasingly confident that the next meeting would mark the final rate hike of the current cycle, despite the Fed’s signal in their recent dot plot for two more. For example, the terminal rate priced in for November came down -1.5bps to 5.37%. And looking further out into 2024, the year-end rate came down a further -18.7bps to 3.725%. Bear in mind that after the ADP report, futures were briefly pricing in a 4.51% rate for December 2024, so the recent newsflow has led markets to price around three more 25bp rate cuts compared to a week ago. The prospect of more rate cuts meant that sovereign bonds got a lift on both sides of the Atlantic. Yields on 10yr Treasuries were down -9.4bps to 3.77%, and those on 2yr Treasuries fell -11.2bps to 4.64%. In Europe it was a similar story, with yields on 10yr bunds (-8.9bps), OATs (-8.8bps) and BTPs (-12.1bps) all coming down as well. The US rates move came in spite of comments from San Francisco Fed President Daly, who said it was “really too early to say that we’ve declared victory on inflation”. Later in the day, the generally hawkish Federal Reserve Governor Waller noted that he still saw two more hikes this year as necessary, though he added that if the next two inflation prints “look like the last two, the data would suggest maybe stopping” by September. So it seems that many FOMC members are still sceptical of the slowing inflation data but keeping an open mind. We won’t hear from many more Fed speakers now, since today is the last day before their blackout period ahead of the next meeting. In other Fed news yesterday, we heard that St Louis Fed President Bullard, another of the most hawkish FOMC members, was stepping down from this role. He wasn’t a voter this year, but his views held sway. For equities, these hopes of a soft landing meant that the US indices hit fresh landmarks, with both the S&P 500 (+0.85%) and the NASDAQ (+1.58%) at a 15-month high. Tech stocks led the advance, with the FANG+ index (+2.70%) reaching a new all-time high, passing its previous peak from November 2021, having now risen by +80.86% on a YTD basis. Meanwhile in Europe, the STOXX 600 (+0.61%) advanced for a 5th consecutive session for the first time since April. There were some positive earnings releases as well, with PepsiCo (+2.38%) raising its outlook. Today will see further reports from the major US financials as well, including JPMorgan, Citigroup, Wells Fargo and BlackRock. All this optimism over the economic outlook was bolstered again by the weekly jobless claims. They showed the initial claims down to 237k in the week ending July 8 (vs. 250k expected), which took the 4-week moving average down to a one-month low of 246.75k. Continuing claims did edge up from 1720k to 1729k but was largely brushed aside. There was also some better-than-expected data out of the UK, since monthly GDP in May only contracted by -0.1% (vs. -0.3% expected), despite the impact from the coronation bank holiday. Asian equity markets are largely extending the global rally and are on course for their best week this year. The KOSPI (+1.14%) is leading gains with the Hang Seng (+0.44%), the Nikkei (+0.23%), the Shanghai Composite (+0.016%) and the CSI (+0.07%) also trading higher. Outside of Asia, US stock futures are pausing for breath with those on the S&P 500 (-0.06%) just below flat while those on the NASDAQ 100 (+0.08%) slightly higher ahead of the big bank earnings today. US treasuries are back up around a basis point across the curve after the huge rally this week. In FX, the dollar index (which measures it against six major peers) is hovering around at a 15-month low of 99.59. Meanwhile, the Japanese yen is rallying for the seventh day, trading below 138 per dollar, its strongest level since May as we go to print. On commodities, there was some interesting news as Bloomberg reported that India were considering banning exports of all non-Basmati rice, citing “people familiar with the matter.” That comes against the backdrop of significant rises in rice prices, following concerns that El Nino conditions will lead to a drought. Speaking of the El Nino, we also had the latest monthly update from the US’ Climate Prediction Center yesterday. Their forecasts are broadly similar to before, but they slightly downgraded the chances that the current El Nino would develop into a strong one, with the probability down to 52% at the peak (vs. 56% last month). To the day ahead now, and earnings season will step up a gear as we hear from JPMorgan, Citigroup Wells Fargo and BlackRock. Otherwise, data releases include the University of Michigan’s preliminary consumer sentiment index for July. Tyler Durden Fri, 07/14/2023 - 07:11.....»»

Futures Hit Fresh 52 Week High, Dollar Sinks In Global Post-CPI Rally For the second day in a row, US equity futures are higher as part of a global risk-on move one which has sent spoos to fresh 52 weeks highs, and fast approaching the Jan 2022 all time high. Tech is again outperforming led by the "magnificent 7" megacaps following the unexpectedly soft CPI print which sparked expectations that after the July hike the Fed is done, and has accelerated the dollar tumble. As of 7:45am ET, S&P futures were 0.3% higher to 4,522 while Nasdaq futures rose 0.6%. Bond yields and the USD continue their move lower, with steepening in the belly of the curve. The DXY has made a 52-wk low today. The plunge in the dollar means that commodities are bid with strength across all 3 segments; keep an eye on Ags as India may move to restrict rice exports and the Black Sea Grain Initiative expires next week. Today’s macro data focus is on PPI, which will boost confidence that yesterday’s CPI print was not a fluke. Keep an eye on PPI in the future as China’s negative PPI and the lack of money supply growth may put accelerating downward pressure on input costs. Bank earnings kick off tomorrow. In premarket trading, airline stocks rose after Delta Air Lines increased its adjusted earnings per share outlook for the year and reported stronger-than-expected second-quarter results; Delta shares jumped as much as 4.2% premarket. Walt Disney shares rose 1.3% in premarket trading after the entertainment company extended the contract of Chief Executive Officer Bob Iger for another two years. US-listed Chinese stocks also rose as Beijing urged Washington to immediately end unilateral sanctions on Chinese companies to help bilateral economic and trade cooperation. Alibaba (BABA) +1.4%, Baidu (BIDU) +2.5%, JD.com (JD) +2.8%, Bilibili (BILI) +3.0%. Here are some other notable premarket movers: SoFi Technologies Inc. drops 4.5% after the US online lender was cut to underweight from equal-weight at Morgan Stanley. Viasat Inc. plunges 22% as the company said an unexpected event occurred during reflector deployment that may materially impact the performance of the ViaSat-3 Americas satellite. Trade Desk shares rise 3.8% in premarket trading, after Nasdaq said the stock would replace Activision Blizzard in the Nasdaq 100. Ess Tech and MillerKnoll Inc. are among the most active industrials stocks in early premarket trading, gaining 8.6% and falling 5.9% respectively Delta Air Lines is up 4.4% after increasing its adjusted earnings per share outlook for the year and reporting stronger- than-expected second-quarter results. Axonics gains 0.9% after shares were initiated with an overweight rating at KeyBanc Capital Markets, which sees opportunity for improved investor sentiment as the medtech company addresses some near-term pressures. BioCryst Pharmaceuticals rises 7% after BofA Global Research raised the recommendation to buy from neutral. Carvana falls 5.8% as JPMorgan cut its recommendation on the used-car retailer to underweight from neutral, saying shares have again disconnected from fundamentals. Coinbase fell as much as 2.1% as Barclays cut its recommendation on the biggest US crypto exchange to underweight from equal-weight, saying the regulatory overhang on the stock is likely to last for some time. Cryoport shares plummet 29% after the cryogenic storage firm reported preliminary second-quarter revenue that missed estimates. Analysts saw the update as disappointing, with Stephens noting that it raised a “variety of questions.” Intercept Pharmaceuticals gains 9.6% after HC Wainwright & Co. double-upgraded the company’s recommendation to buy from sell saying that strong interim results from a mid-stage trial “look to breathe new, longer life to the franchise.” LL Flooring tumbles 4.9% as Loop Capital downgrades to sell from hold, writing that the company faces a tough macroeconomic environment, with declining home sales and interest rates likely to rise. Meta Platforms rises 1.4% as Cowen upgrades its rating to outperform from market perform, citing factors including Threads monetization optionality. Meanwhile, Morgan Stanley boosts its price target. Snowflake Inc. shares are up 2% after Scotiabank upgrades the software company to sector outperform from sector perform. In case it wasn't clear yet, investors are piling back into equities as concerns over higher interest rates and a potential recession ease. Data Wednesday showed the US inflation rate slid to a two-year low, while today's PPI report is expected to show a decline from a year ago. “The question now is whether the market continues to trade off the easing inflation narrative,” ING Bank NV strategists led by Antoine Bouvet wrote in a note. “There is an excuse to do so as today’s PPI report is also expected to be friendly.” One driver for the surge in risk assets is a rout in the dollar; some top money managers said the dollar is poised for further losses as US exceptionalism wanes. Hedge funds turned net sellers of the dollar for the first time since March, according to data from the CFTC. “The recent USD underperformance reflects a qualitative shift in market comfort with being short USD as the terminal Fed policy rate looks increasingly capped,” Steven Englander, head of global G-10 FX research and North America strategy for Standard Chartered Bank, wrote in a note. Back to stocks, European shares extended Wednesday’s rally, which saw the Stoxx 600 Index surge 1.5%. The European benchmark is in the midst of its longest rising streak since mid-April and has almost erased its second-half losses. Swatch Group AG, the maker of Omega and Longines watches, jumped more than 6% as China’s reopening fueled a rise in profits. Watches of Switzerland Group Plc, the biggest retailer of Rolex watches in the UK, soared 10%. US equity futures rose after solid gains on Wall Street. Here are some of the more notable European movers: Swatch shares jump as much as 6.9% after the Swiss watchmaker reported earnings that beat estimates. Watches of Switzerland soars as much as 12%, the most since January 2022, after the UK retailer of Rolex watches reported results and kept its guidance unchanged for the year Aker BP climbs as much as 2.3% after Norway’s second-biggest oil and gas producer increased its production guidance for the year Valeo gains as much as 4% after Stifel raised the French automotive supplier to buy from hold Experian shares rise as much as 0.9% after the consumer credit reporting company reaffirmed its full-year organic revenue forecast Barratt Developments drops as much as 5.4%, after the UK homebuilder noted a “significant deterioration” in demand during the second quarter. Peers also fell Schneider Electric falls as much as 3.7%, the most since May, after BofA double downgraded the French maker of electrical products to underperform from buy BASF shares decline as much as 2.3%, before paring the drop, as its new lower Ebit guidance for the full year implies a cut to consensus at the mid-point of about 14% Bufab drops as much as 13%, the most since March 2020, after the Swedish bolt and fastener maker reported 2Q results which DNB said fell short of expectations in terms of revenue and organic growth Barry Callebaut shares dip as much as 2% after reporting volume growth that Vontobel said is lower than expected, partly as a result of inflationary conditions Orpea shares fall as much as 1.7% after the French retirement-home operator cut its FY23 EbitdaR outlook, citing low occupancy rates in France, an “adverse reputational context” and high staff costs Earlier in the session, the MSCI Asia Pacific Index headed for the highest close in more than three weeks, with stocks in Hong Kong recording some of the biggest gains. Chinese Premier Li Qiang met with senior executives from firms including Alibaba Group Holding Ltd. and ByteDance Ltd., a sign that the government is ending its crackdown on the technology industry.     In FX, the Bloomberg Dollar Index fell 0.3%, taking losses this week to 1.8% and a fresh 52-week low after Wednesday’s CPI print gave momentum to the bearish greenback trend. NZD/USD and AUD/USD led gains, both climbing around 1%, while the British pound extended its rally to a sixth day, staying above the $1.30 level that it hit Thursday for the first time since April 2022, after data showed the UK economy shrank less than expected in May. “A further decline in PPI and a rise in claims could see dollar losses extend,” wrote Chris Turner head of FX strategy at ING, who sees the selloff potentially marking the start of the dollar’s long-awaited cyclical decline. “DXY should press big psychological support at 100.00, the next target would be 99.00 on a breakout” In rates, yields were broadly lower as investors unwound bets that the Fed would raise rates again following an expected hike this month; treasuries continued their bull-steepening streak as yields on the two-year slumped as much as 12 basis points to 4.63%, the lowest level in four weeks; as odds of another Federal Reserve hike after July are receding. The 5s30s spread is wider by ~5bp; 10-year around 3.82%, lower by 3bp on the day, with bunds and gilts outperforming by 6bp and 2bp in the sector. European bonds also rallied, led by Italy; traders are no long fully pricing another 50 basis points of hikes for the European Central Bank and erased bets on the Bank of England taking the key rate to 6.5%, seeing a peak of 6.25% instead. Germany’s 10-year yield dropped eight basis points to 2.49%. Yields are richer across the curve with front-end outperforming.  The week’s auction cycle concludes with $18 billion 30-year reopening at 1pm New York time, which follows strong demand for 3- and 10- year sales that drew minimal market reaction. The WI 30-year yield at ~3.935% is ~3bp cheaper than last month’s, which stopped 1.1bp through. As investors globally continue to digest Wednesday’s benign US CPI data, Thursday brings PPI and 30-year bond auction, adding to steepening pressure on the curve. In commodities, crude oil was steady even after the International Energy Agency said cut its forecast for demand growth. Iron ore rose as hopes increased that Beijing will deliver more economic aid for the beleaguered property sector and as investors shrugged off disappointing Chinese trade data. Bitcoin is comfortably above the USD 30k mark but yet to make much traction above the USD 30.5k figure with catalysts light and price action broadly still a function of Wednesday's inflation update. Looking to the day ahead now, and data releases include the US PPI reading for June, the weekly initial jobless claims, as well as UK GDP and Euro Area industrial production for May. From central banks, we’ll hear from the Fed’s Daly and Waller, whilst the ECB will be publishing the accounts of their June meeting. Lastly, earnings releases include PepsiCo and Delta Air Lines. Market Snapshot S&P 500 futures up 0.3% to 4,522.25 MXAP up 1.7% to 167.86 MXAPJ up 1.9% to 529.98 Nikkei up 1.5% to 32,419.33 Topix up 1.0% to 2,242.99 Hang Seng Index up 2.6% to 19,350.62 Shanghai Composite up 1.3% to 3,236.48 Sensex up 0.6% to 65,806.88 Australia S&P/ASX 200 up 1.6% to 7,246.91 Kospi up 0.6% to 2,591.23 STOXX Europe 600 up 0.4% to 460.49 German 10Y yield little changed at 2.49% Euro up 0.3% to $1.1164 Brent Futures up 0.5% to $80.52/bbl Gold spot up 0.2% to $1,961.03 U.S. Dollar Index down 0.24% to 100.28 Top Overnight News China’s trade data for June undershoots the Street, with exports -12.4% Y/Y (vs. the Street -10%) and imports -6.8% (vs. the Street -4.1%). BBG Washington-Beijing relationship will be tested (again) as the White House proceeds with plans to impose restrictions on American investment in China (the US Treasury has sought to narrow the scope of the restrictions). NYT   China is sending its strongest signal yet that it supports the development of platform companies, putting an end to years of probes into tech firms at a time when Beijing is going all-out to prevent economic growth from sputtering. SCMP Global energy demand forecast is trimmed by 220K BPD by the IEA given mounting economic headwinds (although demand overall will hit a fresh record this year). IEA Russia offered a deal to extend the grain export agreement in exchange for the country’s agricultural bank could see a subsidiary connected to the SWIFT int’l payment system. RTRS Junk market shrinks by nearly ~$200B since its peak in 2021, helping to prop up prices despite a softer growth backdrop. FT The Federal Trade Commission has opened an expansive investigation into OpenAI, probing whether the maker of the popular ChatGPT bot has run afoul of consumer protection laws by putting personal reputations and data at risk. WaPo PEP kicked off earnings season on an upbeat note, posting organic revenue growth of +13% (the Street was modeling +9.8%) with EPS of 2.09 (more than 10c ahead of the Street’s 1.96 forecast). The EPS beat was driven by better revenue, GMs, and op. margins (and the tax rate was actually a bit higher than anticipated, which means underlying earnings power was even stronger than it seems). RTRS DAL reported strong Q2 earnings, with EPS of 2.68 (vs. the Street’s 2.41), and they raise guidance for the year. They now see EPS of $6-7 for 2023 (vs. previously pointing to the high-end of $5-6) with Q3 EPS targeted at 2.20-2.50 (vs. the Street’s 2.06 forecast). RTRS Remote work risks wiping $800 billion from the value of office buildings in major cities by 2030, McKinsey said. That would represent a 26% drop compared to levels in 2019, and an even worse decline of 42% is possible. The trend is set to continue as employers downsize space as soon as long-term leases come to an end. Only 37% of people are back at the office every day. (BBG) A more detailed look at global markets courtesy of Newsquawk APAC stocks traded higher as the region reacted to the softer-than-expected US inflation data which underpinned the global risk appetite, while weaker-than-expected Chinese trade data failed to dampen the spirit. ASX 200 was firmer with all sectors lifted by the constructive mood and as yields continued to decline. Nikkei 225 reclaimed the 32,000 level at the open after the US CPI data provided a rising tide for stocks. Hang Seng and Shanghai Comp were positive with outperformance in the Hong Kong benchmark due to tech strength after Chinese Premier Li met with several HK-listed tech giants, endorsed the platform economy and pledged more support for the sector, while gains in the mainland were somewhat capped alongside the latest Chinese trade data which missed forecasts. Credit Suisse upgrades Chinese equities to Overweight. Top Asian News China's Customs said the nation's exports showed strong resilience in H1 but also noted that sluggish global economic growth, slowing global trade and investment, geopolitical risks and weakening external demand continue to impact China's trade. Furthermore, it stated that China's trade growth faces relatively big pressure but China is confident it can consolidate its market share in global trade this year, while a Customs official noted feelings of pressure and optimism for China trade in H2, according to Reuters. US Secretary of State Blinken will meet with China's top diplomat Wang Yi at the ASEAN meetings. Chinese hackers reportedly breached the email of US Commerce Secretary Raimondo and State Department officials, according to WSJ. Bank of Korea kept its base rate unchanged at 3.50%, as expected, with the rate decision made unanimously and 6 members wanted to keep the door open for one more rate hike. BoK said domestic economic growth is expected to recover gradually, while GDP growth and consumer price inflation this year are expected to be consistent with forecasts. Furthermore, BoK Governor Rhee said several board members expressed concern about the rise in household debt, while he added that inflation will rebound to around 3% by year-end and fall again to the 2% level next year. Fast Retailing (9983 JT) 9-month(JPY): PBT 359bln, +2.8%; Operating Profit 330.6bln, +21.9%; Net Profit 238bln, +0.3%. CFO says Chinese consumption appears to be recovering strongly. Japan Top FX Diplomat Kanda says closely watching FX market moves; there is a view that speculative Yen short positions are unwinding rapidly; there is a view that deflationary norm may be changing. European bourses are modestly firmer across the board in a continuation of the post US CPI trade, Euro Stoxx 50 +0.6%. Sectors are primarily in the green with Retail names outperforming after Fast Retailing while Homebuilders lag following Barratt Developments earnings commentary. Stateside, futures are also firmer ahead of IJC and Fed speak ES +0.3%; NQ +0.6% outperforms as yields continue to pullback. PepsiCo Inc (PEP) Q2 2023 (USD): Core EPS 2.09 (exp. 1.96), Revenue 22.32bln (exp. 21.73bln); raises annual revenue and profit forecasts after price hikes and steady demand. FY EPS view 7.47 (exp. 7.32). +3.1% in pre-market trade. US FTC investigating whether ChatGPT harms consumers, WaPo reports. Top European News UK PM Sunak is set to be presented a plan on Thursday to give a million public sector workers a pay rise of around 6%, according to The Telegraph. ECB's Visco says we are not very far from a peak in interest rates, somewhat disagrees with the preference for tightening. ECB's Stournaras says we said a July hike was likely, but data since has become weaker, via Econostream; September hike is not a given, particularly since data points to a Q3 stagnation. Emphasises data-dependence. FX DXY extends post-CPI decline towards 100.000 as Treasury yields retreat further and markets position for less aggressive Fed. Kiwi and Aussie outperform due to high beta properties, with NZD/USD probing 0.6350 and AUD/USD touching 0.6850. Pound encouraged by less weak than feared UK GDP data and Euro gains at the expense of soft Dollar, as Cable tops 1.3050 and EUR/USD approaches 1.11-75-85 resistance zone. Yen lags after stalling near 138.00 and takes note of verbal intervention from Japan's top currency diplomat Kanda. PBoC set USD/CNY mid-point at 7.1527 vs exp. 7.1623 (prev. 7.1765) Fixed Income Bonds bounce further in follow-on reaction to soft US inflation data. Bunds breach several resistance levels and trip stops on the way to 133.13 from 131.92. Gilts more contained within 94.91-33 range post-better than forecast UK GDP and OBR warning on Government's debt recovery strategy. T-note nearer 112-24+ peak than 112-07 trough after big block trade in 5 year futures that looked like a buy given price action at the time. Commodities Crude benchmarks are incrementally firmer but well within earlier ranges as Brent loses a little bit of its upward momentum after surpassing USD 80/bbl. Meanwhile, spot gold is inching higher as the USD remains downbeat but with upside once again capped by the broader tone; base metals firmer, given the aforementioned factors are both supportive. Russian Urals oil price has moved USD 2-3/bbl above the price cap on Thursday, via Reuters' calculations. IEA Monthly Oil Market Report: oil demand is set to increase by 2.2mln BPD in 2023 to reach a record 102.1mln BPD (vs. June view of 102.3mln BPD). China is to account for 70% of global oil demand gains. China’s widely anticipated reopening has so far failed to extend beyond travel and services. EU's VP Sefcovic says the EU has gathered 16BCM of demand in the second round of joint gas purchases, results which exceed expectations. Geopolitics North Korea said it test-launched a Hwasong-18 ICBM on Wednesday and leader Kim guided the missile test, while Kim said they will continue military offensive measures until the US abandons its hostile policy against Pyongyang. UN Security Council is to meet publicly on Thursday regarding North Korea's missile launch, according to Reuters. US Event Calendar 08:30: June PPI Final Demand MoM, est. 0.2%, prior -0.3% 08:30: June PPI Final Demand YoY, est. 0.4%, prior 1.1% 08:30: June PPI Ex Food and Energy MoM, est. 0.2%, prior 0.2% 08:30: June PPI Ex Food and Energy YoY, est. 2.6%, prior 2.8% 08:30: July Initial Jobless Claims, est. 250,000, prior 248,000 08:30: July Continuing Claims, est. 1.72m, prior 1.72m 14:00: June Monthly Budget Statement, est. -$184b, prior -$88.8b DB's Jim Reid concludes the overnight wrap Markets have put in a very strong performance over the last 24 hours, thanks to a promising US CPI report that boosted hopes of a soft landing in the markets' eyes. There were several details that investors liked, but a key one was that it marked the first time in 29 months that the monthly core inflation print had been beneath 2% on an annualised basis. So the Fed would be very happy if we got some more reports like yesterday’s, and markets moved to price in more rate cuts for next year as a result. In turn, that led to a significant rally, with the S&P 500 (+0.74%) closing at a 15-month high, whilst yields on 10yr Treasuries came down -11.2bps to 3.86%. What the financial world and the Fed will have to weigh up is whether the improvement in inflation is coming just in time or too late to change the direction of travel. Monetary policy operates with a lag and we still have several hundred basis points of hikes to fully work through the system. Ironically, if inflation is falling back to trend but the Fed takes some time to move to an easing bias, then policy will become more restrictive in real terms. However, it's fair to say that this print gives them the ability to move to an easing bias earlier. So you can see why markets would get excited. When it came to the specifics of the CPI release, the main news was that inflation continued to soften, with monthly headline CPI at just +0.18% in June. That was beneath the consensus expectation for a +0.3% reading, and it took the year-on-year measure down to just +3.0%, which is the lowest it’s been since March 2021. On core CPI there was even better news, as the monthly print came in at +0.16%, which is the weakest since February 2021 before the current inflation spike really got going. Similarly, that took the year-on-year core CPI print down to +4.8%. To be honest, it was difficult to find any negative spin from yesterday’s release. At worst, you could highlight the outsized contribution of airfares (-8.1%) to the core CPI slowdown and say some of the stickier factors were a bit stronger, but even those were still coming down from their levels over recent months. For instance, the Atlanta Fed breaks down the CPI into a sticky and flexible CPI series, and their sticky CPI print hit a 24-month low of +0.24% in June. On top of that, it was clear the declines were broad-based, as the Cleveland Fed’s trimmed mean that excludes the biggest outliers in either direction came in at +0.22%, which is the lowest since February 2021. Although the CPI report was a downside surprise, it doesn’t look like it’d be enough to dissuade the Fed from hiking in a couple of weeks’ time. They’ve been consistent that they want to see a succession of lower numbers before they ease policy, particularly after summer 2021 when some weaker numbers led to false hope that inflation would prove transitory. This cautious message was supported by comments from Richmond Fed President Barkin, who said that backing off too soon would require the Fed to do even more. Market pricing has been reflective of that too, with expectations for a July hike unchanged yesterday at 89%. But even as a July hike looks almost-locked in, the CPI print led investors to lower the rate path further out. For example, terminal rate pricing for November came down by -4.8bps to 5.38%. And when it comes to next year, pricing for the December 2024 came down by -18.6bps on the day to 3.91%, and is down another -5.3bps overnight to 3.86%. With investors pricing in more rate cuts, sovereign bonds rallied strongly across the world. The 10yr US Treasury yield was down -11.2bps to 3.86%, whilst the 2yr yield was down by an even larger -12.9bps to 4.75%. Bear in mind it was less than a week ago after the bumper ADP print that the 2yr yield went as high as 5.12%, so we’ve seen a pretty big turnaround since then. The rates rally was led by real yields, with 10yr real Treasury yield down -15.5bps on the day, its sharpest daily decline since March. Treasury yields have extended their decline overnight, with 2yr yields down another -4.4bps to 4.70%, whilst the 10yr yield has also fallen another -0.8bps to 3.85%. In Europe yesterday it was much the same story, with yields on 10yr gilts (-14.9bps), OATs (-11.6bps) and BTPs (-15.8bps) all plummeting. The CPI report also led to some pretty seismic movements in FX markets, with the dollar index (-1.19%) posting its worst day in 8 months and falling to a 14-month low. That led to several milestones elsewhere, with the euro closing above $1.11 for the first time since March 2022 and this morning it’s up further to another 2023 high of $1.115. In the meantime, the pound surpassed the $1.30 mark for the first time since April 2022. This backdrop was favourable for equities, and both the S&P 500 (+0.74%) and the NASDAQ (+1.15%) closed at 15-month highs. Over in Europe there were even larger advances, with the STOXX 600 (+1.51%) surging, and the DAX (+1.47%) posting its strongest daily performance since the financial turmoil in March. Elsewhere yesterday, the Bank of Canada delivered a 25bp hike as expected, taking their overnight rate to a 22-year high of 5%. There were hawkish elements to the decision as well, as their latest Monetary Policy Report is now projecting a slower return to the 2% target relative to April, with a return to 2% in the middle of 2025. The statement said that the Governing Council “remains concerned that progress towards the 2% target could stall, jeopardizing the return to price stability.” Looking forward, overnight index swaps are currently pricing 7.9bps of hikes at the September meeting, so a roughly one-in-three likelihood of another 25bp hike. Asian equity markets have followed up with further gains overnight, with a strong rally amidst the prospect of the Fed moving less aggressively. That’s led to major gains across the board, with the Hang Seng (+2.49%), the Nikkei (+1.67%), the CSI 300 (+1.12%), the Shanghai Composite (+0.86%) and the KOSPI (+0.82%) all advancing. US equity futures are similarly pointing to a positive start later, with those on the S&P 500 up +0.26%, whilst NASDAQ 100 futures are up +0.44%. Lastly overnight, the Bank of Korea left its key interest rate unchanged at 3.5% as expected. That’s the 4th consecutive meeting that rates have been on hold now, but the statement said that the Board would “maintain a restrictive policy stance for a considerable time with an emphasis on ensuring price stability.” To the day ahead now, and data releases include the US PPI reading for June, the weekly initial jobless claims, as well as UK GDP and Euro Area industrial production for May. From central banks, we’ll hear from the Fed’s Daly and Waller, whilst the ECB will be publishing the accounts of their June meeting. Lastly, earnings releases include PepsiCo and Delta Air Lines. Tyler Durden Thu, 07/13/2023 - 08:12.....»»

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