2 ETFs to Watch for Outsized Volume on Regional Banks & Large-Cap Value

IAT and PRF two ETFs traded with an outsized volume yesterday. In the last trading session, Wall Street was extremely downbeat. Among the top ETFs, SPY declined 0.84%, DIA retreated about 0.4% while QQQ moved 1.23% lower on the day.Two more specialized ETFs are worth noting as both saw trading volume that was far outside of normal. In fact, both these funds experienced volume levels that were more than double their average for the most-recent trading session. This could make these ETFs the ones to watch out for in the days ahead to see if this trend of extra-interest continues.IAT: Volume 5.17 Times AverageThis regional banks ETF was under the microscope as about 538,475 shares moved hands. This compares with an average trading volume of roughly 133,480 million shares and came as IAT lost about 2.6% in the last trading session. IAT is down 7.1% in a month’s time.PRF: Volume 4.24Times AverageThis regional banks ETF was under the microscope as about 538,475 shares moved hands. This compares with an average trading volume of roughly 133,480 million shares and came as IAT lost about 2.6% in the last trading session. IAT is down 7.1% in a month’s time. Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Invesco QQQ (QQQ): ETF Research Reports SPDR S&P 500 ETF (SPY): ETF Research Reports SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports iShares U.S. Regional Banks ETF (IAT): ETF Research Reports Invesco FTSE RAFI US 1000 ETF (PRF): ETF Research Reports To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 23rd, 2022

Futures Surge, Dollar Crumbles Ahead Of Pivotal CPI Print

Futures Surge, Dollar Crumbles Ahead Of Pivotal CPI Print US futures extended their gains for fifth consecutive day - their longest winning streak since July - rising ahead of today's "pivotal" CPI data. Futures on the S&P 500 and Nasdaq 100 gained 0.7% at 7:45 a.m. in New York ahead of the data that’s due at 8:30 a.m. The underlying gauges advanced Monday for a fourth straight day amid hopes that inflation will show further signs of cooling with the headline print actually declining for the first time in two years, before the Fed’s decision on interest rates next week. Treasury yields dipped while the Bloomberg dollar index extended its recent decline, sliding 0.3% to a two week low as traders bet that US inflation is near peaking, therefore challenging the dollar-dominance narrative, in the process pushing oil and bitcoin higher. In premarket trading, tech giants including Apple and Microsoft climbed. Satellite-imaging company Planet Labs shares gained as much as 12% in US premarket session after raising full year forecasts for both revenue and adjusted gross margin. Oracle shares rose 1.9% as analysts are positive on the company’s 1Q top-line growth amid accelerating cloud revenue expansion. More bearish commentators, however, highlight a drop in operating margin as the integration of health records provider Cerner pushes up costs. Here are some other notable premarket movers: Rent the Runway (RENT US) shares slump 23% in premarket trading after reporting a drop in subscribers in the second-quarter and announcing a restructuring of the company. Dow (DOW US) shares declined 0.7% in premarket trading as Jefferies downgraded the stock to hold, saying that it is likely to be range-bound in the near term, with downside risk as rising interest rates further hit customer confidence. Peloton (PTON US) shares may be in focus as Citi analysts say that the departure of the company’s founders, including Executive Chairman John Foley, completes the organizational changes at Peloton and should improve its free cash flow picture. Keep an eye on Innovid (CTV US) shares as Morgan Stanley initiates coverage with an underweight rating, saying that the company has good positioning in connected TV, but the stock appears to be “more than fully valued”. Previewing the CPI (our full preview here), UBS chief economist Paul Donovan writes that while US August consumer price inflation is due "Consumer prices do not measure the cost of living. Fantasy numbers in US CPI calculation further divorce this price measure from the cost of living. However, the Fed’s June policy error elevated the importance of consumer price inflation. Disinflation and deflation in durable goods, the longest period of gasoline price deflation for years, and some evidence of squeezing profit margins all suggest a lower reading." “It’s way to early to expect the Fed to react to the fact that we’re past peak inflation,” Nannette Hechler-Fayd’Herbe, chief investment officer at Credit Suisse International Wealth Management, told Bloomberg TV. “When you look at S&P 500 we have seen very big support levels from a technical point of view, so I can very well envisage that volatility takes us down to these levels once the market finally realizes the Fed will not cut rates as early as 2023.” The government’s report is expected to show that consumer inflation increased 8.1% in August from the same month last year, down from 8.5% in July yet still historically elevated. The figures aren’t likely to sway the Fed’s September decision, with traders almost fully expecting another 75-basis-point increase next week, taking their cue from officials supporting that view. Still, solid signs of peaking inflation can affect the US central bank’s policy in later meetings. “With a lot of US policymakers calling for a front-loading approach, the odds appear to favor a 75 basis-point move if markets are to be convinced the US central bank is serious about driving inflation lower on a ‘sustainable basis'," said Michael Hewson, chief market analyst at CMC Markets UK. That “means today’s inflation numbers may not be terribly instructive.” Meanwhile, JPMorgan permabullish strategists Marko Kolanovic and Nikolaos Panigirtzoglou said a soft landing is becoming the more likely scenario for the global economy, which will continue to provide tailwinds for risky assets. As a reminder, Marko has said to buy the dip pretty much every single week in 2022. Recent data pointing to moderating inflation and wage pressures, rebounding growth and stabilizing consumer confidence suggest the world will avoid a recession, they said. Not confirming their optimism,  a Bank of America survey showed investors are fleeing equities en masse amid the specter of a recession, with allocations to stocks at record lows and cash exposure at all-time highs. “The fact is that two consecutive reports showing a sharp deceleration combined with last month’s goldilocks jobs report will be a really encouraging sign and could trigger a broader risk rebound in the markets,” said Craig Erlam, a senior market analyst at Oanda Europe Ltd. “It may not be enough to tip the Fed balance in favor of a more modest 50 basis point rate hike next week but it may slow the pace of tightening thereafter.” In Europe, corporate news helped buoy the Stoxx Europe 600 index, with UBS Group AG rising after raising its dividend and share-buyback target, and Bayer AG jumping more than 2% after starting the search for a new chief executive. Retailers and grocers pared some of their recent rally after Ocado Group Plc said inflation and energy costs will weigh on profit. The FTSE MIB outperformed peers, adding 0.3%. Utilities, consumer products and miners are the strongest performing sectors.  Earlier in the session, Asian stocks extended their recent rally as several markets returned from holidays, and as traders awaited a key US inflation data release due later Tuesday. The MSCI Asia Pacific Index rose as much as 0.7%, poised for a fourth-straight day of gains, driven by technology shares. South Korean stocks led advances among regional benchmarks in a catch-up rally following a four-day weekend. The US CPI report is expected to show a mixed picture, hinting that inflation may have peaked but remained elevated. This could provide more clues to the Federal Reserve’s rate decision next week, with traders currently expecting another 75-basis-point increase. “Further pushback from the Fed could be likely but for now, with the Fed blackout period in place, market bulls may be hoping to see underperformance in the upcoming inflation data,” Jun Rong Yeap, a market strategist at IG Asia Pte, wrote in a note. How to trade dollar, bonds or equities ahead of the Fed decision? This week’s MLIV Pulse survey asks about the best trades going into the FOMC meeting. Please click here to share your views anonymously. Chinese equities edged higher as traders returned from a holiday. President Xi Jinping plans to travel to Central Asia this week in what would be his first trip abroad since the Covid pandemic began. Shares in Hong Kong fell. Japanese equities rose for a fourth day, driven by optimism that inflation is close to the peak as investors await US CPI data to be announced late Tuesday.  The Topix Index rose 0.3% to 1,986.57 as of market close Tokyo time, while the Nikkei advanced 0.3% to 28,614.63. Nintendo Co. contributed the most to the Topix Index gain, increasing 5.5%. Out of 2,169 stocks in the index, 1,126 rose and 903 fell, while 140 were unchanged. “Consumer surveys released by the New York Fed show that inflation expectations have receded, supporting stock prices to some extent,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. In Australia, the S&P/ASX 200 index rose 0.7% to close at 7,009.70, boosted by gains in banks and mining shares. The benchmark reached the highest level since Aug. 26.  Ramsay Health Care tumbled more than 10% after a consortium led by KKR & Co. indicated it won’t improve the terms of a takeover proposal, indicating the end of a A$20.1 billion ($14 billion) pursuit. In New Zealand, the S&P/NZX 50 index fell 0.4% to 11,762.15 Key equity gauges in India advanced for fourth consecutive session to edge closer to peaks seen in October as shares in the heavily weighted finance sector rebound following the resumption of inflows from foreigners. The S&P BSE Sensex gained 0.8% to 60,571.08 in Mumbai, while the NSE Nifty 50 Index rose by a similar measure. Both gauges are less than 3% short of their record highs after climbing more than 14% since the end of June. The rally in stocks comes despite surging consumer prices in the country. Retail inflation accelerated to 7% in August, slightly above the consensus estimate, data released Monday evening showed. Foreign investors have net bought more than $8 billion of local equities since end of June, with a large proportion going into shares of financial firms.  “The current market buoyancy globally, including in India, is based on the expectation that inflation has peaked along with softening crude prices,” said Naveen Kulkarni, chief investment officer of Axis Securities’ PMS business. With the onset of winter, investors should watch energy prices in Europe and the US, which can re-ignite inflation, he added.  HDFC Bank Ltd contributed the most to the Sensex’s gain, increasing 1.3%. Out of 30 shares in the benchmark index, 24 rose and 6 fell. In FX, the Bloomberg Dollar Spot Index extended its recent losses, and after hitting an all time high at the start of the month, fell to a two-week low as the greenback weakened against all of its Group-of-10 peers apart from the Norwegian krone. CAD and NZD were the weakest performers in G-10 FX, SEK and JPY outperform. The euro rose a third day, to touch a day high of 1.0155 versus the greenback. European bonds traded mostly lower. German yields rose up to 4bps as they underperformed Italian bonds and with both countries tapping the market today The Norwegian krone posted a small drop versus the euro after a key survey of business sentiment by Norges Bank showed that the economy faces worsening prospects amid a “sharp” rise in prices. The yen reversed an Asia-session loss while the Australian and New Zealand dollars swung between modest gains and losses In fixed income, Treasuries held gains into early US session, having pared most of Monday afternoon’s slide that followed weak 10-year note auction. US yields are richer by 4bp-5bp across the curve; the long-end lags, steepening 5s30s by about 1bp. The 10-year yield eased 4bps to near 3.31%. Bunds 10-year yield is up 1bp to around 1.66% and gilts 10-year yield is little changed. Treasuries outperform bunds and gilts as stock futures reach highest levels this month. The US auction cycle concludes with $18b 30-year bond reopening at 1pm. WI 30-year yield around 3.475% is above auction stops since 2014 and ~37bp cheaper than August’s, which tailed by 1.1bp. IG dollar issuance slate empty so far; Monday saw eight borrowers price $11.7b; activity expected to be lighter Tuesday with focus on August inflation data. Focal points of US session include CPI inflation and 30-year bond auction; Monday’s 3-year sale also tailed.   In commodities, WTI and Brent are firmer intraday as a function of the receding Dollar, but traders are wary of short-term upward moves as China continues with strings of lockdowns. WTI trades within Monday’s range, adding 1.1% to near $88.71. Spot gold trades on either side of the flat mark in the run-up to US CPI, under its 50 and 21 DMAs at 1,740.82/oz and USD 1,731.05/oz respectively. Base metals are mostly firmer amid the weaker Buck and upside across stocks. Bitcoin trades on either side of USD 22,500, whilst Ethereum pulled back after reaching levels close to 1,800. Looking to the day ahead, along with August CPI in the US, American data will include NFIB Small Business optimism (came in at 91.8, higher than the 90.8 expeected) and average hourly earnings, German and Eurozone ZEW survey results, UK August jobless claims, July average weekly earnings, and unemployment rate, Japanese August PPI, and Italian 2Q unemployment rate. Market Snapshot S&P 500 futures up 0.5% to 4,129.25 STOXX Europe 600 up 0.3% to 429.10 MXAP up 0.5% to 156.38 MXAPJ up 0.6% to 513.28 Nikkei up 0.3% to 28,614.63 Topix up 0.3% to 1,986.57 Hang Seng Index down 0.2% to 19,326.86 Shanghai Composite little changed at 3,263.80 Sensex up 0.8% to 60,577.61 Australia S&P/ASX 200 up 0.6% to 7,009.69 Kospi up 2.7% to 2,449.54 Gold spot down 0.1% to $1,723.41 U.S. Dollar Index down 0.22% to 108.09 German 10Y yield little changed at 1.67% Euro up 0.2% to $1.0140 Top Overnight News from Bloomberg Pacific Investment Management Co. is advocating a radical solution to fix the liquidity woes plaguing the world of bonds: The entire $23.7 trillion Treasury market should move to a model where investors can transact directly with each other -- reducing their unhealthy dependence on balance-sheet-constrained banks The euro is up by almost 3% from two-decade lows hit a week ago against the dollar, and option markets suggest the rally has more room to run. The bet is that US consumer price data due later Tuesday will show inflation is near peaking, therefore challenging the dollar-dominance narrative. That view is behind the greenback’s recent retreat versus its major peers Germany is set to use a fund created to help companies cope with the economic hit from the pandemic to provide loan guarantees for struggling energy firms, according to a person familiar with the plan. The volume of loan guarantees available would be around 67 billion euros ($68 billion) China’s Premier Li Keqiang called for more policies to drive up consumption in the economy as latest figures show a further plunge in travel and spending over a three-day public holiday amid tight Covid controls For the better part of a decade, a US hedge-fund manager who has never even set foot in China has been patiently betting that the yuan will stage a massive collapse, one so deep that its value could be cut in half It’s not a common sight for euro overnight volatility to trade above 20% on non-central bank decision days. Yet this is what investors face this morning as everyone is on the lookout for the release of the US inflation report Britain’s unemployment rate fell to the lowest since 1974 as more people dropped out of the workforce, fanning upward pressure on wages. The government said 3.6% of adults were out of work and looking for jobs in the three months through July, lower than the 3.8% pace in the previous months. Economists had expected no change Secretary of State Antony Blinken said it was ‘unlikely’ the US and Iran would reach a new nuclear deal anytime soon, adding to Western officials’ downbeat assessment over the prospects for reviving an accord that President Donald Trump abandoned in 2018 Japan has more firepower in its foreign exchange reserves than it did the last time it intervened in markets to support its currency, though a unilateral move is seen as unlikely to succeed without US support A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded positive after the advances in global peers including on Wall St. where sentiment was helped by slowing inflation expectations, although gains were capped ahead of US CPI data and amid further China COVID woes. ASX 200 reclaimed the 7,000 level with advances led by the commodity-related sectors and with the risk tone also helped by an improvement in business and consumer sentiment data. Nikkei 225 marginally gained amid hopes of further supportive measures with Japan to potentially implement a nationwide travel incentive this month. Hang Seng and Shanghai Comp were slightly firmer but with upside contained after fresh COVID restrictions including in Sanhe near Beijing and with Shijiazhuang city in Hebei also locking down a district due to coronavirus. Top Asian News Emmys for Netflix’s Squid Game Boost ‘K-Drama’ Stocks in Seoul Fosun Chief Says Many Overseas Units Resilient Amid Pandemic Holders of Fosun’s 2b Yuan Bond Request Early Repayment in Full Netflix’s Megahit ‘Squid Game’ Wins Top Emmy Awards Woodford Administrator Faces Possible £306 Million Hit, UK Says European bourses tread water with modest gains following a relatively mixed APAC lead. European sectors are mostly higher with no overarching theme or bias. Stateside, futures are edging higher in early European trade with a broad-based performance seen across the ES, NQ, YM, and RTY. Top European News UK Chancellor Kwarteng told Treasury officials to adapt to a new approach focused on boosting GDP to 2.5%, the long-term average pre-GFC, ahead of the mini-Budget announcement next week which includes tax cuts and increased borrowing, according to FT. UK and EU are reportedly seeking to avoid a September 15th legal deadline over ‘grace periods’ becoming a flashpoint in talks, according to officials from both sides cited by the FT. The EU is delaying plans to cut the use of pesticides amid food production fears and subsequent price increases as a result, according to the FT. UK's Felixstowe port has received notice from union of further strike action from 27th Sept to 5th Oct; collective bargaining process has been exhausted - no prospect of an agreement being reached with union. EU Commission President is to call another energy meeting by end-September, according to the Spanish Energy Minister, according Reuters. German Economy Ministry report says early indicators and polls point to a rising number of insolvencies in H2, but there is no 'insolvency wave' in sight, via Reuters. EU is reportedly mulling a EUR 180-200 price cap from lower-cost sources (vs guided EUR 200); eyes taking 33% of extra profits from fossil fuel companies, according to Bloomberg sources. Ocado Plummets as Shoppers Cut Back and Energy Costs Bite Mercedes-Benz Wins Dismissal of German Climate Lawsuit Some 17 Million in Europe Got Long Covid in First Pandemic Years FX DXY is softer and trades on either side of 108.00, ahead of yesterday's 107.80 low and the 50 DMA at 107.52. EUR/USD faded at 1.0160 with decent option expiry interest between 1.0170-80 (1.21bn). The JPY continued its correction to almost 142.00 against the Greenback, irrespective of mixed Japanese PPI prints. Fixed Income Choppy and divergent price action in debt futures as EZ bonds digest decent auction results from Germany and Italy. Gilts regroup after underperformance on the back of better than expected UK data. Bunds are holding above 144.00 having fallen to a marginal new Eurex low at 143.86 US Treasuries are firmer across the board pre-US CPI, irrespective of Monday’s poorly received 3 and 10 year offerings. Commodities WTI and Brent are firmer intraday as a function of the receding Dollar, but traders are wary of short-term upward moves as China continues with strings of lockdowns. Spot gold trades on either side of the flat mark in the run-up to US CPI, under its 50 and 21 DMAs at 1,740.82/oz and USD 1,731.05/oz respectively Base metals are mostly firmer amid the weaker Buck and upside across stocks. Crypto Bitcoin trades on either side of USD 22,500, whilst Ethereum pulled back after reaching levels close to 1,800. US Event Calendar 06:00: Aug. SMALL BUSINESS OPTIMISM, 91.8, est. 90.8, prior 89.9 08:30: Aug. Real Avg Hourly Earning YoY, prior -3.0% 08:30: Aug. CPI Ex Food and Energy MoM, est. 0.3%, prior 0.3% 08:30: Aug. CPI Core Index SA, est. 296.250, prior 295.275 08:30: Aug. CPI Index NSA, est. 295.588, prior 296.276 08:30: Aug. CPI Ex Food and Energy YoY, est. 6.1%, prior 5.9% 08:30: Aug. CPI YoY, est. 8.1%, prior 8.5% 08:30: Aug. Real Avg Weekly Earnings YoY, prior -3.6% 08:30: Aug. CPI MoM, est. -0.1%, prior 0% 14:00: Aug. Monthly Budget Statement, est. -$217b, prior -$170.6b DB's Jim Reid concludes the overnight wrap It’s that time again. US CPI will clearly be the major focus today and could shape next week’s FOMC and the rest of the month’s trading. Or, of course, it could be a damp squib but I’m sure they’ll be something in it to move markets. Our economists are expecting a slight decline in the headline number, (-0.09% MoM) but for core to pick up (+0.30%). On a YoY basis, headline CPI should fall five-tenths to 8.0% while core should increase a tenth to 6.0%. With the market pricing a near certainty of a 75bp move next week (now at 73.4bps), that profile above won’t be enough to meaningfully reduce chances of a 75bp hike, and markets will turn to this Friday’s inflation expectations data as the last hurdle to clear before the Fed delivers (barring any late breaking news stories to the contrary). On that front, the New York Fed’s 3-year inflation expectations measure fell to its lowest level in 2 years yesterday, clocking in at 2.8% in August from 3.2% in July. For context, it’s retreated from a high of 4.2% in October of last year. Uncertainty remains near record highs, though, which will continue to give policymakers pause even as the 75th and 25th percentile of survey responses have also fallen. Ahead of CPI, the S&P 500 rallied (+1.06% and a 5-day rally for the first time since late-January/early-February) alongside the global risk complex, led by energy and big tech stocks, with the NASDAQ outperforming, up +1.27%. Apple (+3.85%) led the way in the first full trading day since their new iPhone went on sale on Friday. Orders have been strong so far. I upgrade every year but this time I decided not to.... until one minute before the virtual shop opened for the new products. As with every year I got seduced. While European sovereign curves rallied and flattened, the Treasury curve steepened, and yields climbed ahead of today’s inflation data. 2yr yields climbed +1.5bps while 10yr yields were +4.8bps higher, but some +9.8bps higher than their lunchtime lows. Much of that was after the Europe close as 10yr Bunds and BTP rallied -4.4bps and -5.7bps, respectively. One theory for the US yield sell-off was the fact that yesterday brought the first batch of US Treasury coupon auctions since the Fed doubled the size of their monthly QT runoff, with yields marching higher after both the 3yr and 10yr auction, as the market has to absorb additional collateral. There’s been a partial pullback in Asia this morning with yields on 10yr USTs down -2.12bps to 3.34%. The initial risk appetite yesterday was led by Europe, as most of the early focus was on the news we discussed 24 hours ago, namely Ukraine’s successful counter-offensive operation over the weekend. Risk sentiment enjoyed a boost, with the Euro also having its best day against the US dollar in a month, appreciating +0.80%. The wider implications of this success are still up for debate though. In particular, it seems like this pushes out the timeline on any potential peace talks, as Ukraine will be emboldened to double down on their red lines. In that vein, the Kremlin said yesterday there were no prospects for talks at the moment. On the downside, this potentially raises the spectre of escalation as well, whether it’s on the battlefield via unconventional weapons or a mass mobilisation from Russia, or on the economic front with Russia applying more pressure through natural gas markets through the remaining pipeline to Europe. European natural gas futures were trading in line with the broader risk sentiment yesterday though, rather than on potential tail risk scenarios, falling another -8.0%, closing below EUR 200 for the first time in a month. We peaked at EUR 342 eleven days ago, so down -44.23% since then. As hinted, European equities rallied strongly, with the STOXX 600 climbing +1.76%, the DAX +2.40% higher, and the CAC increasing +1.95%. Sticking with the theme of the war and energy, a draft EU proposal, to be officially unveiled this week, included mandatory power cut targets, bringing the bloc closer to rationing. The draft also includes a levy on extra profits at energy producers used to fund relief to consumers. These are still merely draft proposals, which would ultimately need member state buy-in to be implemented, so the negotiation process may wind up watering down the proposal. Nevertheless, as mentioned, natural gas futures fell on the news, with German and French power prices also falling -8.10% and -3.60%, respectively. The UK’s own energy support plan that we’ve recently covered is due to take effect come October. Whilst US CPI out later today will gain the lion’s share of attention over the near term, the UK has its own CPI print out tomorrow, as well. Our economists are expecting headline inflation to stay put at 10.1% yoy and core to increase to 6.4% yoy. With the new Energy Price Guarantee program in place, they’re lowering their peak forecast for CPI from 14% to 10.5%. Asian equity markets are firmly in the green while extending a global rally this morning on optimism that inflation is peaking. Across the region, the Kospi (+2.56%) is leading gains with the CSI (+0.70%), the Shanghai Composite (+0.33%) and the Hang Seng (+0.44%) catching up after reopening following a public holiday. Elsewhere, the Nikkei (+0.16%) is trading in positive territory in early trade. In overnight trading, US stock futures are pointing to slightly higher with the S&P 500 (+0.11%) and NASDAQ 100 (+0.10%). Early morning data indicated that pipeline prices in Japan appear to have stabilised as factory gate inflation (+9.0% y/y) in August remained unchanged (vs +9.4% in June), albeit a tenth above expectations. Looking at the data, the decline in global oil prices seems to have led the way despite the weakening in the Japanese yen. Oil prices are slightly lower in early Asian trade with Brent crude futures -0.18% at $93.83/bbl as China’s harsh zero-Covid policy continues to negatively impact the demand from the world’s top oil importer. To the day ahead, along with August CPI in the US, American data will include NFIB Small Business optimism and average hourly earnings, German and Eurozone ZEW survey results, UK August jobless claims, July average weekly earnings, and unemployment rate, Japanese August PPI, and Italian 2Q unemployment rate. Tyler Durden Tue, 09/13/2022 - 07:58.....»»

Category: blogSource: zerohedgeSep 13th, 2022

Futures Jump After China Cuts Main Lending Rate By Most On Record But $1.9 Trillion Op-Ex Looms...

Futures Jump After China Cuts Main Lending Rate By Most On Record But $1.9 Trillion Op-Ex Looms... After months of endless jawboning and almost no action, overnight China finally cut its main mortgage interest rate by the most on record since the rate was introduced in 2019, as it tries to reduce the economic impact of Covid lockdowns and a property sector slowdown. The five-year loan prime rate was lowered from 4.6% to 4.45% on Friday (even as the 1 Year LPR was unchanged at 3.70%) . The reduction in the rate, which is set by a committee of banks and published by the People’s Bank of China, will directly reduce the borrowing costs on outstanding mortgages across the country (the move wasn’t much of a shock as the central bank had kept the 1-Year MLF Rate unchanged earlier in the week and effectively cut interest rates for first-time homebuyers by 20bps on Sunday). The rate cut was long overdue for China's property market which has experienced 8 straight months of home-price reductions with developers under extreme pressure. There was more bad news for China's embattled tech sector as Canada banned Huawei Technologies and ZTE equipment from use in its 5G network. The good news is that China's easing helped push Asian stocks higher, while European markets and US stock index futures also rose on Friday as buyers returned after a selloff fueled by recession fears saw the underlying S&P 500 lose more than $1 trillion in market value this week. Contracts on the S&P 500 advanced 1.1% as of 7:15a.m. in New York suggesting the index may be able to avoid entering a bear market (which would be triggered by spoos sliding below 3,855) at least for now, although today's $1.9 trillion Option Expiration will likely lead to substantial volatility, potentially to the downside.  Even with a solid jump today, should it not reverse as most ramps in recent days, the index - which is down almost 19% from its January record - is on track for a seventh week of losses, the longest such streak since March 2001. Futures on the Nasdaq 100 and Dow Jones indexes also gained. 10Y TSY yields rebounded from yesterday's tumble while the dollar was modestly lower. Gold and bitcoin were flat. In premarket trading, shares of gigacap tech giants rose, poised to recover some of the losses they incurred this week. Nasdaq 100 futures advanced 1.7%. The tech heavy benchmark has wiped out about $1.3 trillion in market value this month. Apple (AAPL US) is up 1.3% in premarket trading on Friday, Tesla (TSLA US) +2.6%.Palo Alto Networks jumped after topping estimates. Continuing the retail rout, Ross Stores cratered after the discount retailer cut its full-year outlook and first quarter results fell short of expectations. Here are some other notable premarket movers: Chinese stocks in US look set to extend this week’s gains on Friday after Chinese banks cut the five-year loan prime rate by a record amount, an effort to boost mortgage and loan demand in an economy hampered by Covid lockdowns. Alibaba (BABA US) +2.6%, Baidu (BIDU US) +1.1%, (JD US) +2.6%. Palo Alto Networks (PANW US) rises 11% in premarket trading on Friday after forecasting adjusted earnings per share for the fourth quarter that exceeded the average of analysts’ estimates. Applied Materials (AMAT US) falls 2.1% in premarket trading after its second-quarter results missed expectations as persistent chip shortages weighed on the outlook. However, Cowen analyst Krish Sankar notes that “while the macro/consumer data points have weakened, semicap demand is still healthy.” Ross Stores Inc. (ROST US) shares sank 28% in US premarket trade on Friday after the discount retailer cut its full-year outlook and 1Q results fell short of expectations, prompting analysts to slash their price targets. Foghorn Therapeutics (FHTX US) shares plunged 26% in postmarket trading after the company said the FDA has placed the phase 1 dose escalation study of FHD-286 in relapsed and/or refractory acute myelogenous leukemia and myelodysplastic syndrome on a partial clinical hold. (WIX US) cut to equal-weight from overweight at Morgan Stanley as investors are unlikely to “give credit to a show-me story” in the current context which limits upside catalysts in the near term, according to note. Deckers Outdoor (DECK US) jumped 13% in US postmarket trading on Thursday after providing a year sales outlook range with a midpoint that beat the average consensus estimate. VF Corp’s (VFC US) reported mixed results, with analysts noting the positive performance of the company’s North Face brand, though revenues did miss estimates amid a tricky macro backdrop. The outdoor retailer’s shares rose 2.2% in US postmarket trading on Thursday. “The ‘risk-on’ trading mood has registered a solid rebound during the last couple of hours as traders cheered the significantly dovish monetary decision from China after the PBoC cut one of the key interest rates by a record amount,” said Pierre Veyret, a technical analyst at ActivTrades. “This will provide a fresh boost to the economy, helping small businesses and mitigate the negative impacts of lockdowns in the world’s second-largest economy.” Still, the broader market will have to fend off potential risks from options expiration, which is notorious for stirring up volatility. Traders will close old positions for an estimated $1.9 trillion of derivatives while rolling out new exposures on Friday. This time round, $460 billion of derivatives across single stocks is scheduled to expire, and $855 billion of S&P 500-linked contracts will expire according to Goldman. Rebounds in risk sentiment have tended to fizzle this year. Investors continue to grapple with concerns about an economic downturn, in part as the Federal Reserve hikes interest rates to quell price pressures. Global shares are on course for an historic seventh week of declines. “The risk-on trading mood has registered a solid rebound during the last couple of hours as traders cheered the significantly dovish monetary decision from China,” said Pierre Veyret, an analyst at ActivTrades. “This move significantly contrasts with the lingering inflation and recession risks in Western economies, where an increasing number of market operators and analysts are questioning the policies of central banks.” In Europe, the Stoxx Europe 600 index added 1.5%, erasing the week’s losses. The French CAC 40 lags, rising 0.9%. Autos, travel and miners are the strongest-performing sectors, rebounding after two days of declines. Basic resources outperformed as industrial metals rallied. Consumer products was the only sector in the red as Richemont slumped after the Swiss watch and jewelry maker reported operating profit for the full year that missed the average analyst estimate and its Chairman Johann Rupert said China is going to take an economic blow and warned the Chinese economy will suffer for longer than people think. The miss sent luxury stocks plunging: Richemont -11%, Swatch -3.8%, Hermes -3.2%, LVMH -1.9%, Kering -1.7%, Hugo Boss -1.7%, etc. These are the biggest European movers: Rockwool rises as much as 10% as the market continued to digest the company’s latest earnings report, which triggered a surge in the shares, with SocGen and BNP Paribas upgrading the stock. Valeo and other European auto stocks outperformed, rebounding after two days of losses. Citi says Valeo management confirmed that auto production troughed in April and activity is improving. Sinch gained as much as 5.4% after Berenberg said peer’s quarterly results confirmed the cloud communications company’s strong positioning in a fast-growing market. Lonza shares gain as much as 4.1% after the pharmaceutical ingredients maker was raised to outperform at RBC, with the broker bullish on the long-term demand dynamics for the firm. THG shares surge as much as 32% as British entrepreneur Nick Candy considers an offer to acquire the UK online retailer, while the company separately announced it rejected a rival bid. Maersk shares rise as much as 4.6%, snapping two days of declines, as global container rates advance according to Fearnley Securities which says 2H “looks increasingly promising.” PostNL shares jump as much as 8.2% after the announcement that Vesa will acquire sole control of the Dutch postal operator. Analysts say reaction in the shares is overdone. Dermapharm shares gain as much as 6.1%, the most since March 22, with Stifel saying the pharmaceuticals maker is “significantly undervalued” and have solid growth drivers. Richemont shares tumble as much as 14%, the most in more than two years, after the luxury retailer’s FY Ebit was a “clear miss,” with cost increases in operating expenses. Luxury peers were pulled lower alongside Richemont after the company’s disappointing earnings report, in which its CEO also flagged the Chinese market will lag for longer than people assume. Instone Real Estate shares drop as much as 12% as the stock is downgraded to hold from buy at Deutsche Bank, with the broker cutting its earnings estimates for the property developer Earlier in the session, Asia-Pac stocks picked themselves up from recent losses as risk sentiment improved from the choppy US mood. ASX 200 gained with outperformance in tech and mining stocks leading the broad gains across industries. Hang Seng and Shanghai Comp strengthened with a rebound in tech setting the pace in Hong Kong and with the mainland also lifted following the PBoC’s Loan Prime Rate announcement in which it defied the consensus by maintaining the 1-Year LPR at 3.70% but cut the 5-Year LPR by 15bps to 4.45%, which is the reference for mortgages. Nonetheless, this wasn’t much of a shock as the central bank had kept the 1-Year MLF Rate unchanged earlier in the week and effectively cut interest rates for first-time homebuyers by 20bps on Sunday. Japanese stocks regain footing in the wake of Thursday’s selloff, after Chinese banks cut a key interest rate for long-term loans by a record amount. The Topix rose 0.9% to 1,877.37 at the 3 p.m. close in Tokyo, while the Nikkei 225 advanced 1.3% to 26,739.03. Toyota Motor Corp. contributed the most to the Topix’s gain, increasing 2.1%. Out of 2,171 shares in the index, 1,511 rose and 567 fell, while 93 were unchanged. In Australia, the S&P/ASX 200 index rose 1.2% to close at 7,145.60 on the eve of Australia’s national election. Technology shares and miners led sector gains. Chalice Mining climbed after getting approvals for further exploration drilling at the Hartog-Dampier targets within its Julimar project. Novonix advanced with other lithium-related shares after IGO announced its first and consistent production of battery grade lithium hydroxide from Kwinana. In New Zealand, the S&P/NZX 50 index rose 0.5% to 11,267.39 India’s benchmark stocks index rebounded from a 10-month low and completed its first weekly gain in six, boosted by an advance in Reliance Industries.  The S&P BSE Sensex jumped 2.9% to 54,326.39 in Mumbai. The NSE Nifty 50 Index also rose by a similar magnitude on Friday. Stocks across Asia advanced after Chinese banks lowered a key interest rates for long-term loans.   Reliance Industries climbed 5.8%, the largest advance since Nov. 25, and gave the biggest boost to the Sensex, which had all 30 member stocks trading higher. All 19 sector indexes compiled by BSE Ltd. advanced, led by a gauge of realty stocks.  “Stocks in Asia and US futures pushed higher today amid a bout of relative calm in markets, though worries about a darkening economic outlook and China’s Covid struggles could yet stoke more volatility,” according to a note from SMC Global Securities Ltd.  In earnings, of the 36 Nifty 50 firms that have announced results so far, 21 have either met or exceeded analyst estimates, while 15 have missed forecasts. In FX, the Bloomberg Dollar Spot Index inched higher as the greenback traded mixed against its Group-of-10 peers. Treasuries fell modestly, with yields rising 1-2bps. The euro weakened after failing to hold on to yesterday’s gains that pushed it above $1.06 for the first time in more than two weeks. Inversion returns for the term structures in the yen and the pound, yet for the euro it’s all about the next meetings by the European Central Bank and the Federal Reserve. The pound rose to a session high at the London open, coinciding with data showing UK retail sales rose more than forecast in April. Retail sales was up 1.4% m/m in April, vs est. -0.3%. Other showed a plunge in consumer confidence to the lowest in at least 48 years. The Swiss franc halted a three-day advance that had taken it to the strongest level against the greenback this month. Australia’s sovereign bonds held opening gains before a federal election Saturday amid fears of a hung parliament, which could stifle infrastructure spending. The Australian and New Zealand dollar reversed earlier losses. The offshore yuan and South Korean won paced gains in emerging Asian currencies as a rally in regional equities bolstered risk appetite. In rates, Treasuries were slightly cheaper as S&P 500 futures advanced. Yields were higher by 2bp-3bp across the Treasuries curve with 10- year around 2.865%, outperforming bunds and gilts by 1.7bp and 3.5bp on the day; curves spreads remain within 1bp of Thursday’s closing levels. Bunds and Italian bonds fell, underperforming Treasuries, as haven trades were unwound. US session has no Fed speakers or economic data slated. UK gilts 2s10s resume bear-flattening, underperforming Treasuries, after BOE’s Pill said tightening has more to run. Gilts 10y yields regain 1.90%. Bund yield curve-bear steepens. long end trades heavy with 30y yield ~6bps cheaper. Peripheral spreads widen to core with 5y Italy underperforming. Semi-core spreads tighten a touch. In commodities, WTI trades within Thursday’s range, falling 0.5% to around $111. Most base metals trade in the green; LME lead rises 2.6%, outperforming peers. LME nickel lags, dropping 1.5%. Spot gold is little changed at $1,844/oz. KEY HEADLINES: Looking at the day ahead, there is no macro news in the US. Central bank speakers include the ECB’s Müller, Kazāks, Šimkus, Centeno and De Cos, along with the BoE’s Pill. Finally, earnings releases include Deere & Company. Market Snapshot S&P 500 futures up 1.1% to 3,940.00 STOXX Europe 600 up 1.2% to 433.00 MXAP up 1.6% to 164.68 MXAPJ up 2.1% to 539.85 Nikkei up 1.3% to 26,739.03 Topix up 0.9% to 1,877.37 Hang Seng Index up 3.0% to 20,717.24 Shanghai Composite up 1.6% to 3,146.57 Sensex up 2.5% to 54,115.12 Australia S&P/ASX 200 up 1.1% to 7,145.64 Kospi up 1.8% to 2,639.29 German 10Y yield little changed at 0.97% Euro down 0.2% to $1.0567 Gold spot up 0.2% to $1,845.64 U.S. Dollar Index up 0.25% to 102.98 Brent Futures down 0.4% to $111.55/bbl Top Overnight News from Bloomberg BOE Chief Economist Huw Pill said monetary tightening has further to run in the UK because the balance of risks is tilted toward inflation surprising on the upside ECB Governing Council Member Visco says a June hike is ‘certainly’ out of the question while July is ‘perhaps’ the time to start rate hikes China’s plans to bolster growth as Covid outbreaks and lockdowns crush activity will see a whopping $5.3 trillion pumped into its economy this year Chinese banks cut a key interest rate for long- term loans by a record amount, a move that would reduce mortgage costs and may help counter weak loan demand caused by a property slump and Covid lockdowns China’s almost-trillion dollar hedge fund industry risks worsening the turmoil in its stock market as deepening portfolio losses trigger forced selling by some managers. About 2,350 stock-related hedge funds last month dropped below a threshold that typically activates clauses requiring them to slash exposures, with many headed toward a level that mandates liquidation Investors fled every major asset class in the past week, with US equities and Treasuries a rare exception to massive redemptions Ukraine’s central bank is considering a return to regular monetary policy decisions as soon as next month in a sign the country is getting its financial system back on its feet after a shock from Russia’s invasion The Group of Seven industrialized nations will agree on more than 18 billion euros ($19 billion) in aid for Ukraine to guarantee the short-term finances of the government in Kyiv, according to German Finance Minister Christian Lindner The best may already be over for the almighty dollar as growing fears of a US recession bring down Treasury yields A more detailed look at global markets courtesy of Newsquqawk Asia-Pac stocks picked themselves up from recent losses as risk sentiment improved from the choppy US mood.  ASX 200 gained with outperformance in tech and mining stocks leading the broad gains across industries. Nikkei 225 was underpinned following the BoJ’s ETF purchases yesterday and despite multi-year high inflation. Hang Seng and Shanghai Comp strengthened with a rebound in tech setting the pace in Hong Kong and with the mainland also lifted following the PBoC’s Loan Prime Rate announcement in which it defied the consensus by maintaining the 1-Year LPR at 3.70% but cut the 5-Year LPR by 15bps to 4.45%, which is the reference for mortgages. Nonetheless, this wasn’t much of a shock as the central bank had kept the 1-Year MLF Rate unchanged earlier in the week and effectively cut interest rates for first-time homebuyers by 20bps on Sunday. Top Asian News Chinese Premier Li vows efforts to aid the resumption of production, via Xinhua; will continue to build itself into a large global market and a hot spot for foreign investment, via Reuters. US and Japanese leaders are to urge China to reduce its nuclear arsenal, according to Yomiuri. It was also reported that Japanese PM Kishida is expected to announce a defence budget increase during the summit with US President Biden, according to TV Asahi. Offshore Yuan Halts Selloff With Biggest Weekly Gain Since 2017 Hong Kong Dollar Traders Brace for Rate Spike Amid Intervention Shanghai Factory Output Fell 20 Times Faster Than Rest of China Japan’s Inflation Tops 2%, Complicating BOJ Stimulus Message European indices have started the week's last trading day positively and have extended on gains in early trade. Swiss SMI (+0.5%) sees its upside capped by losses in Richemont which provided a downbeat China outlook. European sectors are almost wholly in the green with a clear pro-cyclical bias/anti-defensive bias - Healthcare, Personal & Consumer Goods, Telecoms, Food & Beverages all reside at the bottom of the chart, whilst Autos & Parts, Travel & Leisure and Retail lead the charge on the upside. US equity futures have also been trending higher since the reopening of futures trading overnight Top European News Holcim, HeidelbergCement Said to Compete for Sika US Unit Prosus Looking to Sell $6 Billion Russian Ads Business Avito European Autos Outperform in Rebound, Driven by Valeo, Faurecia Volkswagen Pitted Against Organic Farmer in Climate Court Clash FX DXY bound tightly to 103.000, but only really firm relative to Yen on renewed risk appetite. Yuan back to early May peaks after PBoC easing of 5 year LPR boosts risk sentiment - Usd/Cny and Usd/Cnh both sub-6.7000. Kiwi outperforms ahead of anticipated 50 bp RBNZ hike next week and with tailwind from Aussie cross pre-close call election result. Euro and Pound capped by resistance at round number levels irrespective of hawkish ECB commentary and surprisingly strong UK consumption data. Lira lurching after Turkish President Erdogan rejection of Swedish and Finnish NATO entry bids. Japanese PM Kishida says rapid FX moves are undesirable, via Nikkei interview; keeping close ties with overseas currency authorities, via Nikkei. Fixed Income Debt futures reverse course amidst pre-weekend risk revival, partly prompted by PBoC LPR cut. Bunds hovering above 153.00, Gilts sub-119.50 and T-note just over 119-16. UK debt also taking on board surprisingly strong retail sales metrics and EZ bonds acknowledging more hawkish ECB rhetoric. Commodities WTI and Brent July futures consolidate in early European trade in what has been another volatile week for the crude complex. Spot gold has been moving in tandem with the Buck and rose back above its 200 DMA Base metals are mostly firmer, with LME copper re-eyeing USD 9,500/t to the upside as the red metal is poised for its first weekly gain in seven weeks Russia's Gazprom continues gas shipments to Europe via Ukraine, with Friday volume at 62.4mln cubic metres (prev. 63.3mbm) Central Banks BoE Chief Economist Pill says inflation is the largest challenge faced by the MPC over the past 25 years. The MPC sees an upside skew in the risks around the inflation baseline in the latter part of the forecast period. Pill said further work needs to be done. "In my view, it would be preferable to have any such gilt sales running ‘in the background’, rather than being responsive to month-to-month data news.", via the BoE. ECB's Kazaks hopes the first ECB hike will happen in July, according to Bloomberg. ECB's Muller says focus needs to be on fighting high inflation, according to Bloomberg. ECB's Visco says the ECB can move out of negative rate territory; a June hike is "certainly" out of the question but July is perhaps the time to start Chinese Loan Prime Rate 1Y (May) 3.70% vs. Exp. 3.65% (Prev. 3.70%); Chinese Loan Prime Rate 5Y (May) 4.45% vs. Exp. 4.60% (Prev. 4.60%) Fed's Kashkari (2023 voter) said they are removing accommodation even faster than they added it at the start of COVID and have done quite a bit to remove support for the economy through forward guidance. Kashkari stated that he does not know how high rates need to go to bring inflation down and does not know the odds of pulling off a soft-landing, while he is seeing some evidence they are in a longer-term high inflation regime and if so, the Fed may need to be more aggressive, according to Reuters US Event Calendar Nothing major scheduled DB's Jim Reid concludes the overnight wrap The good thing about having all these injuries in recent years is that when it comes down to any father's football matches or sport day races I now know that no amount of competitive juices make getting involved a good idea. However my wife has not had to learn her lesson yet and tomorrow plays her first netball match for 37 years in a parents vs schoolgirls match. The mums had a practise session on Tuesday and within 3 minutes one of them had snapped their ACL. I'll be nervously watching from the sidelines. Markets were also very nervous yesterday after a torrid day for risk sentiment on Tuesday. Although equities fell again yesterday it was all fairly orderly. This morning Asia is bouncing though on fresh China stimulus, something we discussed in yesterday's CoTD here. More on that below but working through things chronologically, earlier the Stoxx 600 closed -1.37% lower, having missed a large portion of the previous day’s US selloff, but generally continues to out-perform. US equities bounced around, with the S&P 500 staging a recovery from near intraday lows after the European close, moving between red and green all day (perhaps today's option expiry is creating some additional vol) before closing down -0.58%. This sent the index to a fresh one year low and puts the week to date loss at -3.06%, having declined -18.68% since its January peak. Barring a major reversal today, the index is now on track to close lower for a 7th consecutive week for the first time since 2001. In terms of the sectoral breakdown, it was another broad-based decline yesterday, but consumer discretionary stocks (+0.13%) recovered somewhat following their significant -6.60% decline the previous day. Consumer staples, meanwhile, continued their poor run, falling -1.98%, while tech (-1.07%) was not far behind. Those losses occurred against the backdrop of a fresh round of US data releases that came in beneath expectations, which also helped the dollar index weaken -0.93% to mark its worst daily performance since March. First, there were the weekly initial jobless claims for the week through May 14, which is one of the timeliest indicators we get on the state of the economy. That rose to 218k (vs. 200k) expected, which is its highest level since January. Then there was the Philadelphia Fed’s manufacturing business outlook survey for May, which fell to a two-year low of 2.6 (vs. 15.0 expected). And finally, the number of existing home sales in April fell to its lowest level since June 2020, coming in at an annualised rate of 5.61m (vs. 5.64m expected). The broader risk-off move that created meant that sovereign bonds rallied on both sides of the Atlantic. Yields on 10yr Treasuries were down -4.7bps to 2.84%, which follows their -10.2bps decline in the previous session. We didn’t get much in the way of Fed speakers yesterday, but Kansas City Fed President George nodded to recent equity market volatility, saying that it was “not surprising”, and that whilst policy wasn’t aimed at equity markets, “it is one of the avenues through which tighter financial conditions will emerge”. So no sign yet of the Fed being unhappy about tighter financial conditions so far, and markets are continuing to fully price in two further 50bp moves from the Fed in June and July. Nobody said getting inflation back to target from such lofty levels would be easy. So if you’re looking for a Fed put, it may take a while. Later on, Minneapolis Fed President Kashkari drove that point home, saying he was not sure how high rates ultimately needed to go, but said the Fed must ensure inflation does not get embedded in expectations. Over in Europe debt moves were more significant yesterday, having not taken part in the late US rally on Wednesday. Yiields on 10yr bunds (-8.0bps), OATs (-7.4bps) and BTPs (-6.2bps) all saw a reasonable decline on the day. Over in credit as well, iTraxx Crossover widened +10.2bps to 478bps, which surpasses its recent high earlier this month and takes it to levels not seen since May 2020. We also got the account from the April ECB meeting, although there wasn’t much there in the way of fresh headlines, with hawks believing that it was “important to act without undue delay in order to demonstrate the Governing Council’s determination to achieve price stability in the medium term.” That group also said that the monetary policy stance “was no longer consistent with the inflation outlook”. But then the doves also argued that moving policy “too aggressively could prove counterproductive” since monetary policy couldn’t tackle “the immediate causes of high inflation.” Asian equity markets are trading higher this morning after the People’s Bank of China (PBOC) lowered key interest rates amid the faltering economy. They cut the 5-year loan prime rate (LPR) – which is the reference rate for home mortgages for the second time this year from 4.6% to 4.45%, the largest cut on record, as Beijing seeks to revive the ailing housing sector to prop up the economy. Meanwhile, it left the 1-year LPR unchanged at 3.7%. Across the region, the Hang Seng (+1.83%) is leading gains in early trade with the Shanghai Composite (+1.11%) and CSI (+1.41%) also trading up. Elsewhere, the Nikkei (+1.08%) and Kospi (+1.75%) are trading in positive territory. Outside of Asia, equity futures in DMs indicate a positive start with contracts on the S&P 500 (+0.75%), NASDAQ 100 (+1.01%) and DAX (+1.13%) all notably higher. In other news, Japan’s national CPI rose +2.5% y/y in April, the highest for the headline rate since October 2014 and compared to the previous month’s +1.2% increase. Oil prices are lower with Brent futures -0.77% down to $111.18/bbl, as I type. To the day ahead now, and data releases include UK retail sales and German PPI for April, as well as the advance Euro Area consumer confidence reading for May. Central bank speakers include the ECB’s Müller, Kazāks, Šimkus, Centeno and De Cos, along with the BoE’s Pill. Finally, earnings releases include Deere & Company. Tyler Durden Fri, 05/20/2022 - 08:02.....»»

Category: smallbizSource: nytMay 20th, 2022

5 Top-Ranked ETFs to Buy At Bargain Prices

With the easing of Omicron fears, Wall Street jumped to start a new week after a broad market sell-off in the past couple of weeks. With the easing of Omicron fears, Wall Street jumped to start a new week after a broad market sell-off in the past couple of weeks. Growth concerns and Fed’s speedy taper talks have made many ETFs attractive at the current levels.As such, the beaten down prices have charged up investors to snap up ETFs on the cheap. Investors could definitely look to these products for outsized gains over the longer term. Some of these are Invesco S&P MidCap Value with Momentum ETF XMVM, Vanguard Financials ETF VFH, SPDR S&P Retail ETF XRT, SPDR S&P Biotech ETF XBI and Invesco S&P 500 Enhanced Value ETF SPVU.Market TrendsThe tech-heavy Nasdaq Composite Index rose 0.9% while the S&P 500 and Dow Jones gained 1.2% and 1.9%, respectively. The Russell 2000 Index outperformed, climbing 2.1%.Bets that the new COVID-19 variant Omicron may cause milder illness than previously feared, renewed confidence in consumer and travel demand. Dr. Anthony Fauci, the White House's chief medical adviser, said that early indications of Omicron suggest that it may be less dangerous than the Delta variant.Additionally, the wider reach of vaccinations and COVID-19 boosters should help to reduce infections caused by the new variant of COVID-19. Consumer confidence is stronger than expected, hiring has picked up and wages are rising. While inflation is rising at the fastest pace in 30 years, retail sales remain robust. Further, the U.S. service sector activity gauge hit a record high in November as businesses expedited hiring (read: 4 ETF Areas to Play Upbeat Manufacturing Data).How to Find Bargain ETFs?Using our database, first we have selected ETFs with a Zacks Rank #1 (Strong Buy) or 2 (Buy). This is because these ranks suggest strengthening fundamentals and superior weighting methodologies that could allow them to move higher than their cousins in a booming market. Then, we narrowed down the list to funds having a lower P/E ratio than 27.10 for the broad market fund SPY. Further, these ETFs have a lower expense ratio of below 0.50% and are among the popular options with AUM of at least $1 billion.We have detailed the above-mentioned ETFs that are currently undervalued and could generate solid returns in a rising stock market.Invesco S&P MidCap Value with Momentum ETF (XMVM) – P/E Ratio: 10.77Invesco S&P MidCap Value with Momentum ETF follows the S&P MidCap 400 High Momentum Value Index, which is composed of 80 securities in the S&P MidCap 400 Index having both the highest value scores and momentum scores. It holds 81 stocks in its basket with key holdings in financials, consumer discretionary and industrials.Invesco S&P MidCap Value with Momentum ETF has accumulated $195.1 million in its asset base while trades in volume of 25,000 shares per day on average. The fund charges 39 bps in annual fees and has a Zacks ETF Rank #2 (read: Here's Why Mid-Cap ETFs Are the Right Bets Now).Vanguard Financials ETF (VFH) – P/E Ratio: 11.20With AUM of $11.5 billion, Vanguard Financials ETF targets the broad financial sector. It provides exposure to a basket of 394 stocks by tracking the MSCI US Investable Market Financials 25/50 Index. Diversified banks account for 24.1% of the portfolio, followed by regional banks (14.5%), asset management & custody banks (10.3%) and investment banking & brokerage (8.9%).Vanguard Financials ETF charges 10 bps in annual fees and trades in an average daily volume of 586,000 shares. It has a Zacks ETF Rank #1SPDR S&P Retail ETF (XRT) – P/E Ratio: 11.87SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large, mid-and small-cap retail stocks. It holds well-diversified 107 stocks in its basket with none making up for more than 1.6% share. Additionally, SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in apparel retail, Internet & direct marketing retail, automotive retail and specialty stores.SPDR S&P Retail ETF is the largest and most popular in the retail space with AUM of $824 million and an average trading volume of 3.3 million shares. It charges 35 bps in annual fees. SPDR S&P Retail ETF has a Zacks ETF Rank #1.SPDR S&P Biotech ETF (XBI) – P/E Ratio: 12.07SPDR S&P Biotech ETF offers equal-weight exposure across 186 biotechnology stocks. It follows the S&P Biotechnology Select Industry Index, charging investors 35 bps in annual fees (read: 5 Top-Ranked ETFs to Invest in December).SPDR S&P Biotech ETF has AUM of $6.6 billion and trades in an average daily volume of 5.8 million shares. XBI has a Zacks ETF Rank #2.Invesco S&P 500 Enhanced Value ETF (SPVU) – P/E Ratio: 12.07Invesco S&P 500 Enhanced Value ETF follows the S&P 500 Enhanced Value Index, which measures the performance of stocks in the S&P 500 Index that have the highest "value score." The product holds holding 99 stocks in its basket with key holdings in financials, healthcare and consumer discretionary.Invesco S&P 500 Enhanced Value ETF has accumulated $128.8 million in AUM while trades in a light average daily volume of 15,000 shares. The product charges 13 bps in annual fees and has a Zacks ETF Rank #1. Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SPDR S&P 500 ETF (SPY): ETF Research Reports SPDR S&P Retail ETF (XRT): ETF Research Reports SPDR S&P Biotech ETF (XBI): ETF Research Reports Vanguard Financials ETF (VFH): ETF Research Reports Invesco S&P 500 Enhanced Value ETF (SPVU): ETF Research Reports Invesco S&P MidCap Value with Momentum ETF (XMVM): ETF Research Reports To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksDec 7th, 2021

El-Erian Warns Investors "Stop Worrying About Return On Capital, Start Worrying About Return Of Capital"

El-Erian Warns Investors "Stop Worrying About Return On Capital, Start Worrying About Return Of Capital" Mohamed A. El-Erian, President of Queens’ College, Cambridge University, and Chief Economic Advisor at Allianz, the corporate parent of PIMCO, where he previously served as CEO and co-CIO, argues in the following interview with Goldman Sachs' Allison Nathan that the Fed could be heading towards an historic monetary policy mistake by reacting too slowly to rising inflationary pressures. Allison Nathan: At its latest meeting, the Fed watered down concerns about inflation, citing its transitory nature. Are you concerned Fed officials are too relaxed about the inflation outlook? Mohamed El-Erian: Yes. While the data has forced the Fed to take a small step away from its narrative of transitory inflation, it continues to downplay the risk to the economy and the need for monetary policy changes. It seems to wish to hold on to a narrative of—take your pick—“extended transitory”, “persistently transitory” or “rolling transitory” inflation. I take issue with these characterizations because the whole point of transitory inflation is that it wouldn't last long enough to change behaviors on the ground. Yet wage-setting and price-setting behavior is already changing. Allison Nathan: But aren't most of the underlying inflationary pressures, such as supply chain bottlenecks due to pandemic disruptions and labor shortages owing to extended unemployment benefits, likely to recede soon? Mohamed El-Erian: The underlying cause of the current surge in inflationary pressure is deficient aggregate supply relative to aggregate demand. Part of that will likely prove transitory as the pandemic continues to recede and factories in Asia ramp up production. But part of it will likely prove more persistent due to longer-term structural changes in the economy. Company after company is rewiring their supply chain to prioritize resilience over efficiency. US labor force participation is stuck at a low 61.6% even as unemployment benefits have expired, suggesting that people’s propensity to work may have changed. So, there are longer-term structural and secular elements to the rise in inflation. And I’m concerned that if the Fed doesn’t do enough to respond to these secular inflation trends, it risks deanchoring inflation expectations and causing unnecessary economic and social damage that would hit the most vulnerable segments of our society particularly hard. Allison Nathan: Inflation expectations so far seem to be fairly well anchored, so how much of a risk is that really? Mohamed El-Erian: Survey-based inflation expectations are not well anchored; both short and long-term expectations compiled by the New York Federal Reserve have already risen above 4%. Companies are warning about inflationary pressures well into next year and potentially beyond. Market-based expectations remain better anchored for now, but the information content of fixed income markets has become highly distorted by the presence of a large non-commercial buyer—the Fed—that has incredible willingness to buy regardless of valuation. I think of this in the same way that I think about one of my favorite board games—Risk. When everybody on the board is playing according to the rules of the game, you can assess the probabilities of other players’ actions under certain conditions and fairly accurately predict their behavior. But when one very big player plays according to different rules, you’d adapt your behavior or you’d lose. That’s what’s happening in fixed income markets; market participants understand and respect that they will be steamrolled—as they have been time and time again— by taking the other side of massive Fed asset purchases, even when they’re convinced of a fundamental mispricing. So, I would be careful in relying on the usual market measures to gauge inflation expectations, as we don’t know how much to adjust for the distortions that the Fed has introduced. Allison Nathan: Given the above, you believe that the Fed could be heading for an historic policy mistake. What should the Fed be doing versus what they are most likely to do? Mohamed El-Erian: Simply put, the Fed faces a choice between easing off the accelerator now or slamming on the brakes down the road. It should’ve starting easing its foot off the monetary stimulus accelerator months ago. I’ve argued for some time that it had a big window of opportunity to start tapering asset purchases in the spring, when growth was very strong and the collateral damage from maintaining emergency levels of liquidity in a non-emergency world was becoming apparent. But, inertia, inflation miscalculations and a new policy framework that was designed for a world of deficient aggregate demand rather than today’s world of deficient aggregate supply led them to wait until earlier this month to announce the start of tapering. In doing so, the Fed has fallen behind the reality of inflationary pressures on the ground that are being picked up by the regional Feds. While it is now starting to act, it’s moving too slowly, as evidenced by the growing gap between its policy action and the rise in inflation expectations. So the Fed’s delayed and slow reaction to inflationary pressures has unfortunately increased the probability that it will have to slam on the brakes by raising rates very quickly after tapering and at a more aggressive pace than it would have if it had started to tighten policy earlier. Such a scenario would constitute an historic policy mistake because, after a bout of inflation that most hurts the poor, the economy would risk an undue blow to growth from a sharper tightening relative to what the economy can absorb. Allison Nathan: But isn’t the Fed right to wait to act given that demand is expected to slow significantly next year as fiscal stimulus winds down? Wouldn’t it be harmful to put  contractionary monetary policy in place at the same time as contractionary fiscal policy? Mohamed El-Erian: That’s exactly the wrong policy framing, especially given that we're starting from emergency-level loose monetary policy. By waiting to act, the Fed will end up tightening at the same time as fiscal policy is tightening and household savings are drawing down. Financial conditions could also tighten and business investment decline simultaneously too. That’s precisely why the Fed should have moved earlier, so that relatively tighter monetary policy doesn’t run headlong into multiple other sources of tightening, which risks pushing the economy into a recession. While I don’t expect a recession in my baseline scenario, the Fed’s slow pace of policy normalization could mean that growth will be lower than it would’ve otherwise been had the Fed started tightening earlier. Allison Nathan: But won’t the significant contraction in fiscal policy slow inflation even without monetary policy normalization? Mohamed El-Erian: If initial conditions were near an equilibrium, I would say yes. But they’re not—monetary policy is still being run in emergency mode even as the emergency has passed. Even though the Fed is beginning to taper, it’s still buying tens of billions of dollars of securities every month, about a third of which are mortgage-backed securities. I don’t know a single person who believes the US housing market needs such broad-based policy stimulus. On the contrary, the housing market is so hot that an increasing number of Americans are being priced out of it. And the longer the emergency policy stance continues without an actual emergency, the greater the risk that the Fed does end up having to slam on the brakes and, in doing so, create unnecessary damage—i.e., a new recession. Allison Nathan: How effective would rate hikes even be in dampening the current inflationary pressures, which stem in part from supply shortages? Mohamed El-Erian: I am sorry, but the framing of the question is misleading. Instead, we should be asking, “is the current mix of large monthly asset purchases, floored at zero interest rates, and monetary policy in emergency mode going to resolve the supply-side issues?” The answer is, no. We should then ask, “so why should the Fed still be running policy in emergency mode?” The answer is, it shouldn’t be. And, finally, we should ask “what’s the cost of continuing to do so?” The answer is: One, there’s very little evidence that the current stance of monetary policy is helping on the demand side, and even if it were, demand is not the problem. So, by trying to help, the Fed is actually hurting, while also worsening wealth inequality. Two, the significant amount of liquidity the Fed has pumped into the system is increasing the probability of a market accident by forcing investors to take more risk in search of returns. Near accidents have occurred already this year—think of GameStop/hedge funds and Archegos—which we’re lucky didn’t have systemic effects. And three, the Fed's unnecessarily accommodative policy is encouraging massive resource misallocation. Just think of all the zombie companies that are surviving only because they’ve been able to refinance themselves at very low rates. The longer this continues, the  greater the drag on longer-term productivity and the more damage there will be when rates eventually rise. Allison Nathan: What do you make of the recent sharp moves in G10 front-end rates, and how would you advise fixed income investors to navigate these moves? Mohamed El-Erian: I’m really glad I’m no longer managing fixed income bond funds because technicals rather than macro fundamentals are ruling the fixed income markets right now, leading to these outsized moves. And, unless you are a trader that actually sees these flows, the environment is extremely difficult to navigate. I will say that the violent repricing following the Bank of England’s (BoE) recent decision to keep rates on hold was an instance of the market getting ahead of itself on pricing in rate hikes. It’s true that the BoE had signaled an intention to raise rates in coming months. But in the context of hawkish commentary and moves from central banks in Canada, Australia, and New Zealand, markets mistakenly lumped the UK together with these small, open economies that have no choice but to move ahead of the much larger, less open economies of the US and EU in raising rates. And, in fact, the UK has some very peculiar characteristics that have to be taken into account, like the furlough scheme and Brexit-related labor issues, which clearly distinguish it from these other cases. Allison Nathan: In the midst of the current inflationary pressures and associated policy actions, equity markets, especially in the US, have been hitting new highs. What’s behind that, and do you see a risk of a correction given your concerns about the economic outlook? Mohamed El-Erian: What’s happening in the equity market was recently captured perfectly by the legendary investor Leon Cooperman, who, when asked how he was positioned, responded that he's a “fully invested bear”. He's bearish on the fundamentals—with the view that valuations are too high—but he's fully invested in terms of technicals, and liquidity technicals in particular. The equity market is in a rational bubble; investors are fully aware asset prices are quite high, but they’re in a relative valuation paradigm in which it makes sense to be invested in equities rather than in other assets. The fixed income market is distorted and one-sided in terms of risk-return, dominated by technicals, and an unreliable diversifier in the current environment where its long-standing correlation with other financial assets has broken down. Many investors can’t invest in private credit, venture capital, or private equity, and are hesitant to delve into crypto. That leaves the equity market as the “cleanest dirty shirt” for investors. That works very well as long as the paradigm is a relative valuation one rather than an absolute valuation one, and markets will likely remain in this paradigm for a while. But investors need to respect that they’re riding a huge liquidity wave thanks to the Fed, and that wave will eventually break as monetary stimulus winds down. So investors should keep an eye on the risk of an abrupt shift from a relative valuation market mindset to an absolute valuation one, or an environment in which you stop worrying about the return on your capital and start worrying about the return of your capital. That’s a risk to watch because not only would it mean higher volatility, but also, and most critically, an undue hit to the real economy. Tyler Durden Thu, 11/18/2021 - 14:45.....»»

Category: worldSource: nytNov 18th, 2021

BTFD Arrives: Futures Rebound, Europe Surges While Asia Slumps On Evergrande Fears

BTFD Arrives: Futures Rebound, Europe Surges While Asia Slumps On Evergrande Fears Even though China was closed for a second day, and even though the Evergrande drama is nowhere closer to a resolution with a bond default imminent and with Beijing mute on how it will resolve the potential "Lehman moment" even as rating agency S&P chimed in saying a default is likely and it does not expect China’s government “to provide any direct support” to the privately owned developer, overnight the BTFD crew emerged in full force, and ramped futures amid growing speculation that Beijing will rescue the troubled developer... Algos about to go on a rampage — zerohedge (@zerohedge) September 21, 2021 ... pushing spoos almost 100 points higher from their Monday lows, and European stock were solidly in the green - despite Asian stocks hitting a one-month low - as investors tried to shake off fears of contagion from a potential collapse of China’s Evergrande, although gains were capped by concerns the Federal Reserve could set out a timeline to taper its stimulus at its meeting tomorrow. The dollar dropped from a one-month high, Treasury yields rose and cryptos rebounded from yesterday's rout. To be sure, the "this is not a Lehman moment" crowed was out in full force, as indicated by this note from Mizuho analysts who wrote that “while street wisdom is that Evergrande is not a ‘Lehman risk’, it is by no stretch of the imagination any meaningful comfort. It could end up being China’s proverbial house of cards ... with cross-sector headwinds already felt in materials/commodities.” At 7:00 a.m. ET, S&P 500 e-minis were up 34.00 points, or 0.79% and Nasdaq 100 e-minis 110.25 points, or 0.73%, while futures tracking the Dow  jumped 0.97%, a day after the index tumbled 1.8% in its worst day since late-July,  suggesting a rebound in sentiment after concerns about contagion from China Evergrande Group’s upcoming default woes roiled markets Monday. Dip-buyers in the last hour of trading Monday helped the S&P 500 pare some losses, though the index still posted the biggest drop since May. The bounce also came after the S&P 500 dropped substantially below its 50-day moving average - which had served as a resilient floor for the index this year - on Monday, its first major breach in more than six months. Freeport-McMoRan mining stocks higher with a 3% jump, following a 3.2% plunge in the S&P mining index a day earlier as copper prices hit a one-month low. Interest rate-sensitive banking stocks also bounced, tracking a rise in Treasury yields. Here are some of the biggest U.S. movers today: U.S.-listed Chinese stocks start to recover from Monday’s slump in premarket trading as the global selloff moderates. Alibaba (BABA US), Baidu (BIDU US), Nio (NIO US), Tencent Music (TME US)and Bilibili (BILI US) are among the gainers Verrica Pharma (VRCA US) plunges 30% in premarket trading after failing to get FDA approval for VP-102 for the treatment of molluscum contagiosum ReWalk Robotics (RWLK US) shares jump 43% in U.S. premarket trading amid a spike in volume in the stock. Being discussed on StockTwits Aprea Therapeutics gains 21% in U.S. premarket trading after the company reported complete remission in a bladder cancer patient in Phase 1/2 clinical trial of eprenetapopt in combination with pembrolizumab Lennar (LEN US) shares fell 3% in Monday postmarket trading after the homebuilder forecast 4Q new orders below analysts’ consensus hurt by unprecedented supply chain challenges ConocoPhillips (COP US) ticks higher in U.S. premarket trading after it agreed to buy Shell’s  Permian Basin assets for $9.5 billion in cash, accelerating the consolidation of the largest U.S. oil patch SmileDirect (SDC US) slightly higher in premarket trading after it said on Monday that it plans to enter France with an initial location in Paris KAR Global (KAR US) shares fell 4.6% in post-market trading on Monday after the company withdrew is full-year financial outlook citing disruption caused by chip shortage Sportradar (SRAD US) shares jumped 4.5% in Monday postmarket trading, after the company said basketball legend Michael Jordan will serve as a special adviser to its board and also increase his investment in the sports betting and entertainment services provider, effective immediately Orbital Energy Group (OEG US) gained 6% postmarket Monday after a unit won a contract  to construct 1,910 miles of rural broadband network in Virginia. Terms were not disclosed “So much of this information is already known that we don’t think it will necessary set off a wave of problems,” John Bilton, head of global multi-asset strategy at JPMorgan Asset Management, said on Bloomberg TV. “I’m more concerned about knock-on sentiment at a time when investor sentiment is a bit fragile. But when we look at the fundamentals -- the general growth, and direction in the wider economy -- we still feel reasonably confident that the situation will right itself.” Aside from worries over Evergrande’s ability to make good on $300 billion of liabilities, investors are also positioning for the two-day Fed meeting starting Tuesday, where policy makers are expected to start laying the groundwork for paring stimulus.  Europe's Stoxx 600 index climbed more than 1%, rebounding from the biggest slump in two months, with energy companies leading the advance and all industry sectors in the green. Royal Dutch Shell rose after the company offered shareholders a payout from the sale of shale oil fields. Universal Music Group BV shares soared in their stock market debut after being spun off from Vivendi SE. European airlines other travel-related stocks rise for a second day following the U.S. decision to soon allow entry to most foreign air travelers as long as they’re fully vaccinated against Covid-19; British Airways parent IAG soars as much as 6.9%, extending Monday’s 11% jump. Here are some of the biggest European movers today: Stagecoach shares jump as much as 24% after the company confirmed it is in takeover talks with peer National Express. Shell climbs as much as 4.4% after selling its Permian Basin assets to ConocoPhillips for $9.5 billion. Bechtle gains as much as 4.3% after UBS initiated coverage at buy. Husqvarna tumbles as much as 9% after the company said it is suing Briggs & Stratton in the U.S. for failing to deliver sufficient lawn mower engines for the 2022 season. Kingfisher slides as much as 6.4% after the DIY retailer posted 1H results and forecast higher profits this fiscal year. The mood was decidedly more sour earlier in the session, when Asian stocks fell for a second day amid continued concerns over China’s property sector, with Japan leading regional declines as the market reopened after a holiday. The MSCI Asia Pacific Index was down 0.5%, headed for its lowest close since Aug. 30, with Alibaba and SoftBank the biggest drags. China Evergrande Group slid deeper in equity and credit markets Tuesday after S&P said the developer is on the brink of default. Markets in China, Taiwan and South Korea were closed for holidays. Worries over contagion risk from the Chinese developer’s debt problems and Beijing’s ongoing crackdowns, combined with concern over Federal Reserve tapering, sent global stocks tumbling Monday. The MSCI All-Country World Index fell 1.6%, the most since July 19. Japan’s stocks joined the selloff Tuesday as investor concerns grew over China’s real-estate sector as well as Federal Reserve tapering, with the Nikkei 225 sliding 2.2% - its biggest drop in three months, catching up with losses in global peers after a holiday - after a four-week rally boosted by expectations for favorable economic policies from a new government. Electronics makers were the biggest drag on the Topix, which declined 1.7%. SoftBank Group and Fast Retailing were the largest contributors to a 2.2% loss in the Nikkei 225. Japanese stocks with high China exposure including Toto and Nippon Paint also dropped. “The outsized reaction in global markets may be a function of having too many uncertainties bunched into this period,” Eugene Leow, a macro strategist at DBS Bank Ltd., wrote in a note. “It probably does not help that risk taking (especially in equities) has gone on for an extended period and may be vulnerable to a correction.” “The proportion of Japan’s exports to China is greater than those to the U.S. or Europe, making it sensitive to any slowdown worries in the Chinese economy,” said Hideyuki Ishiguro, a senior strategist at Nomura Asset Management in Tokyo. “The stock market has yet to fully price in the possibility of a bankruptcy by Evergrande Group.” The Nikkei 225 has been the best-performing major stock gauge in the world this month, up 6.2%, buoyed by expectations for favorable policies from a new government and an inflow of foreign cash. The Topix is up 5.3% so far in September. In FX, the Bloomberg Dollar Spot Index inched lower and the greenback fell versus most of its Group-of-10 peers as a selloff in global stocks over the past two sessions abated; the euro hovered while commodity currencies led by the Norwegian krone were the best performers amid an advance in crude oil prices. Sweden’s krona was little changed after the Riksbank steered clear of signaling any post-pandemic tightening, as it remains unconvinced that a recent surge in inflation will last. The pound bucked a three-day losing streak as global risk appetite revived, while investors look to Thursday’s Bank of England meeting for policy clues. The yen erased earlier gains as signs that risk appetite is stabilizing damped demand for haven assets. At the same time, losses were capped due to uncertainty over China’s handling of the Evergrande debt crisis. In rates, Treasuries were lower, although off worst levels of the day as U.S. stock futures recover around half of Monday’s losses while European equities trade with a strong bid tone. Yields are cheaper by up to 2.5bp across long-end of the curve, steepening 5s30s spread by 1.2bp; 10-year yields around 1.3226%, cheaper by 1.5bp on the day, lagging bunds and gilts by 1bp-2bp. The long-end of the curve lags ahead of $24b 20-year bond reopening. Treasury will auction $24b 20-year bonds in first reopening at 1pm ET; WI yield ~1.82% is below auction stops since January and ~3bp richer than last month’s new-issue result In commodities, crude futures rose, with the front month WTI up 1.5% near $71.50. Brent stalls near $75. Spot gold trades a narrow range near $1,765/oz. Base metals are mostly in the green with LME aluminum the best performer Looking at the day ahead now, and data releases include US housing starts and building permits for August, along with the UK public finances for September. From central banks, we’ll hear from ECB Vice President de Guindos. Otherwise, the General Debate will begin at the UN General Assembly, and the OECD publishes their Interim Economic Outlook. Market Snapshot S&P 500 futures up 1.0% to 4,392.75 STOXX Europe 600 up 1.1% to 459.10 MXAP down 0.5% to 200.25 MXAPJ up 0.2% to 640.31 Nikkei down 2.2% to 29,839.71 Topix down 1.7% to 2,064.55 Hang Seng Index up 0.5% to 24,221.54 Shanghai Composite up 0.2% to 3,613.97 Sensex up 0.4% to 58,751.30 Australia S&P/ASX 200 up 0.4% to 7,273.83 Kospi up 0.3% to 3,140.51 Brent Futures up 1.6% to $75.13/bbl Gold spot down 0.1% to $1,761.68 U.S. Dollar Index little changed at 93.19 German 10Y yield fell 5.0 bps to -0.304% Euro little changed at $1.1729 Top Overnight News from Bloomberg Lael Brainard is a leading candidate to be the Federal Reserve’s banking watchdog and is also being discussed for more prominent Biden administration appointments, including to replace Fed chairman Jerome Powell and, potentially, for Treasury secretary if Janet Yellen leaves Federal Reserve Chair Jerome Powell will this week face the challenge of convincing investors that plans to scale back asset purchases aren’t a runway to raising interest rates for the first time since 2018 ECB Vice President Luis de Guindos says there is “good news” with respect to the euro-area recovery after a strong development in the second and third quarter The ECB is likely to continue purchasing junk-rated Greek sovereign debt even after the pandemic crisis has passed, according to Governing Council member and Greek central bank chief Yannis Stournaras U.K. government borrowing was well below official forecasts in the first five months of the fiscal year, providing a fillip for Chancellor of the Exchequer Rishi Sunak as he prepares for a review of tax and spending next month U.K. Business Secretary Kwasi Kwarteng warned the next few days will be challenging as the energy crisis deepens, and meat producers struggle with a crunch in carbon dioxide supplies The U.K.’s green bond debut broke demand records for the nation’s debt as investors leaped on the long-anticipated sterling asset. The nation is offering a green bond maturing in 2033 via banks on Tuesday at 7.5 basis points over the June 2032 gilt. It has not given an exact size target for the sale, which has attracted a record of more than 90 billion pounds ($123 billion) in orders Germany cut planned debt sales in the fourth quarter by 4 billion euros ($4.7 billion), suggesting the surge in borrowing triggered by the coronavirus pandemic is receding Contagion from China Evergrande Group has started to engulf even safer debt in Asia, sparking the worst sustained selloff of the securities since April. Premiums on Asian investment-grade dollar bonds widened 2-3 basis points Tuesday, according to credit traders, after a jump of 3.4 basis points on Monday Swiss National Bank policy makers watching the effects of negative interest rates on the economy are worrying about the real-estate bubble that their policy is helping to foster Global central banks need to set out clear strategies for coping with inflation risks as the world economy experiences faster-than-expected cost increases amid an uneven recovery from the pandemic, the OECD said A quick look at global markets courtesy of Newsquawk Asian equities traded cautiously following the recent downbeat global risk appetite due to Evergrande contagion concerns which resulted in the worst day for Wall Street since May, with the region also contending with holiday-thinned conditions due to the ongoing closures in China, South Korea and Taiwan. ASX 200 (+0.2%) was indecisive with a rebound in the mining-related sectors counterbalanced by underperformance in utilities, financials and tech, while there were also reports that the Byron Bay area in New South Wales will be subject to a seven-day lockdown from this evening. Nikkei 225 (-1.8%) was heavily pressured and relinquished the 30k status as it played catch up to the contagion downturn on return from the extended weekend with recent detrimental currency inflows also contributing to the losses for exporters. Hang Seng (-0.3%) was choppy amid the continued absence of mainland participants with markets second-guessing whether Chinese authorities will intervene in the event of an Evergrande collapse, while shares in the world’s most indebted developer fluctuated and wiped out an early rebound, although affiliate Evergrande Property Services and other property names fared better after Sun Hung Kai disputed reports of China pressuring Hong Kong developers and with Guangzhou R&F Properties boosted by reports major shareholders pledged funds in the Co. which is also selling key assets to Country Garden. Finally, 10yr JGBs were higher amid the underperformance in Japanese stocks and with the Japan Securities Dealers Association recently noting that global funds purchased the most ultra-long Japanese bonds since 2014, although upside was limited amid softer demand at the enhanced liquidity auction for 2yr-20yr maturities and with the BoJ kickstarting its two-day policy meeting. Top Asian News Richest Banker Says Evergrande Is China’s ‘Lehman Moment’ Hong Kong Tycoons, Casino Giants Find Respite in Stock Rebound Taliban Add More Male Ministers, Say Will Include Women Later Asian Stocks Drop to Lowest Level This Month; Japan Leads Losses European equities (Stoxx 600 +1.1%) trade on a firmer footing attempting to recoup some of yesterday’s losses with not much in the way of incremental newsflow driving the upside. Despite the attempt to claw back some of the prior session’s lost ground, the Stoxx 600 is still lower by around 1.6% on the week. The Asia-Pac session was one characterised by caution and regional market closures with China remaining away from market. Focus remains on whether Evergrande will meet USD 83mln in interest payments due on Thursday and what actions Chinese authorities could take to limit the contagion from the company in the event of further troubles. Stateside, futures are also on a firmer footing with some slight outperformance in the RTY (+1.2%) vs. peers (ES +0.8%). Again, there is not much in the way of fresh positivity driving the upside and instead gains are likely more a by-product of dip-buying; attention for the US is set to become increasingly geared towards tomorrow’s FOMC policy announcement. Sectors in Europe are firmer across the board with outperformance in Oil & Gas names amid a recovery in the crude complex and gains in Shell (+4.4%) after news that the Co. is to sell its Permian Basin assets to ConocoPhillips (COP) for USD 9.5bln in cash. Other outperforming sectors include Tech, Insurance and Basic Resources. IAG (+4.1%) and Deutsche Lufthansa (+3.8%) both sit at the top of the Stoxx 600 as the Co.’s continue to enjoy the fallout from yesterday’s decision by the US to allow travel from vaccinated EU and UK passengers. Swatch (-0.7%) is lagging in the luxury space following a downgrade at RBC, whilst data showed Swiss watch exports were +11.5% Y/Y in August (prev. 29.1%). Finally, National Express (+7.7%) is reportedly considering a takeover of Stagecoach (+21.4%), which is valued at around GBP 370mln. Top European News U.K. Warns of Challenging Few Days as Energy Crisis Deepens Germany Trims Planned Debt Sales as Pandemic Impact Recedes U.K.’s Green Bond Debut Draws Record Demand of $123 Billion Goldman Plans $1.5 Billion Petershill Partners IPO in London In FX, all the signs are constructive for a classic turnaround Tuesday when it comes to Loonie fortunes as broad risk sentiment improves markedly, WTI consolidates within a firm range around Usd 71/brl compared to yesterday’s sub-Usd 70 low and incoming results from Canada’s general election indicate victory for the incumbent Liberal party that will secure a 3rd term for PM Trudeau. Hence, it’s better the devil you know as such and Usd/Cad retreated further from its stop-induced spike to just pips short of 1.2900 to probe 1.2750 at one stage before bouncing ahead of new house price data for August. Conversely, the Swedish Krona seems somewhat reluctant to get carried away with the much better market mood after the latest Riksbank policy meeting only acknowledged significantly stronger than expected inflation data in passing, and the repo rate path remained rooted to zero percent for the full forecast horizon as a consequence. However, Eur/Sek has slipped back to test 10.1600 bids/support following an initial upturn to almost 10.1800, irrespective of a rise in unemployment. NOK/AUD/NZD - No such qualms for the Norwegian Crown as Brent hovers near the top of a Usd 75.18-74.20/brl band and the Norges Bank is widely, if not universally tipped to become the first major Central Bank to shift into tightening mode on Thursday, with Eur/Nok hugging the base of a 10.1700-10.2430 range. Elsewhere, the Aussie and Kiwi look relieved rather than rejuvenated in their own right given dovish RBA minutes, a deterioration in Westpac’s NZ consumer sentiment and near reversal in credit card spending from 6.9% y/y in July to -6.3% last month. Instead, Aud/Usd and Nzd/Usd have rebounded amidst the recovery in risk appetite that has undermined their US rival to top 0.7380 and 0.7050 respectively at best. GBP/CHF/EUR/JPY/DXY - Sterling is latching on to the ongoing Dollar retracement and more supportive backdrop elsewhere to pare losses under 1.3700, while the Franc continues its revival to 0.9250 or so and almost 1.0850 against the Euro even though the SNB is bound to check its stride at the upcoming policy review, and the single currency is also forming a firmer base above 1.1700 vs the Buck. Indeed, the collective reprieve in all components of the Greenback basket, bar the Yen on diminished safe-haven demand, has pushed the index down to 93.116 from 93.277 at the earlier apex, and Monday’s elevated 93.455 perch, while Usd/Jpy is straddling 109.50 and flanked by decent option expiry interest either side. On that note, 1.4 bn resides at the 109.00 strike and 1.1 bn between 109.60-70, while there is 1.6 bn in Usd/Cad bang on 1.2800. EM - Some respite across the board in wake of yesterday’s mauling at the hands of risk-off positioning in favour of the Usd, while the Czk has also been underpinned by more hawkish CNB commentary as Holub echoes the Governor by advocating a 50 bp hike at the end of September and a further 25-50 bp in November. In commodities, WTI and Brent are firmer in the European morning post gains in excess of 1.0%, though the benchmarks are off highs after an early foray saw Brent Nov’21 eclipse USD 75.00/bbl, for instance. While there has been newsflow for the complex, mainly from various energy ministers, there hasn’t been much explicitly for crude to change the dial; thus, the benchmarks are seemingly moving in tandem with broader risk sentiment (see equities). In terms of the energy commentary, the Qatar minister said they are not thinking of re-joining OPEC+ while the UAE minister spoke on the gas situation. On this, reports in Russian press suggests that Russia might allow Rosneft to supply 10bcm of gas to Europe per year under an agency agreement with Gazprom “as an experiment”, developments to this will be closely eyed for any indication that it could serve to ease the current gas situation. Looking ahead, we have the weekly private inventory report which is expected to post a headline draw of 2.4mln and draws, albeit of a smaller magnitude, are expected for distillate and gasoline as well. Moving to metals, spot gold is marginally firmer while silver outperforms with base-metals picking up across the board from the poor performance seen yesterday that, for instance, saw LME copper below the USD 9k mark. Note, the action is more of a steadying from yesterday’s downside performance than any notable upside, with the likes of copper well within Monday’s parameters. US Event Calendar 8:30am: Aug. Building Permits MoM, est. -1.8%, prior 2.6%, revised 2.3% 8:30am: Aug. Housing Starts MoM, est. 1.0%, prior -7.0% 8:30am: Aug. Building Permits, est. 1.6m, prior 1.64m, revised 1.63m 8:30am: Aug. Housing Starts, est. 1.55m, prior 1.53m 8:30am: 2Q Current Account Balance, est. -$190.8b, prior -$195.7b DB's Jim Reid concludes the overnight wrap Global markets slumped across the board yesterday in what was one of the worst days of the year as an array of concerns about the outlook gathered pace. The crisis at Evergrande and in the Chinese real estate sector was the catalyst most people were talking about, but truth be told, the market rout we’re seeing is reflecting a wider set of risks than just Chinese property, and comes after increasing questions have been asked about whether current valuations could still be justified, with talk of a potential correction picking up. Remember that 68% of respondents to my survey last week (link here) thought they’d be at least a 5% correction in equity markets before year end. So this has been front and centre of people’s mind even if the catalyst hasn’t been clear. We’ve all known about Evergrande’s woes and how big it was for a while but it wasn’t until Friday’s story of the Chinese regulatory crackdown extending into property that crystallised the story into having wider implications. As I noted in my chart of the day yesterday link here Chinese USD HY had been widening aggressively over the last couple of months but IG has been pretty rock solid. There were still no domestic signs of contagion by close of business Friday. However as it stands, there will likely be by the reopening post holidays tomorrow which reflects how quickly the story has evolved even without much new news. Before we get to the latest on this, note that we’ve still got a bumper couple of weeks on the calendar to get through, including the Fed decision tomorrow, which comes just as a potential government shutdown and debt ceiling fight are coming into view, alongside big debates on how much spending the Democrats will actually manage to pass. There has been some respite overnight with S&P 500 futures +0.58% higher and 10y UST yields up +1.5bps to 1.327%. Crude oil prices are also up c. 1%. On Evergrande, S&P Global Ratings has said that the company is on the brink of default and that it’s failure is unlikely to result in a scenario where China will be compelled to step in. The report added that they see China stepping in only if “there is a far-reaching contagion causing multiple major developers to fail and posing systemic risks to the economy.” The Hang Seng (-0.32%) is lower but the Hang Seng Properties index is up (+1.59%) and bouncing off the 5 plus year lows it hit yesterday. Elsewhere the ASX (+0.30%) and India’s Nifty (+0.35%) have also advanced. Chinese and South Korean markets are closed for a holiday but the Nikkei has reopened and is -1.80% and catching down to yesterday’s global move. Looking at yesterday’s moves in more depth, the gathering storm clouds saw the S&P 500 shed -1.70% in its worst day since May 12, with cyclical industries leading the declines and with just 10% of S&P 500 index members gaining. There was a late rally at the end of the US trading session that saw equity indices bounce off their lows, with the S&P 500 (-2.87%) and NASDAQ (-3.42%) both looking like they were going to register their worst days since October 2020 and late-February 2021 respectively. However, yesterday was still the 5th worst day for the S&P 500 in 2021. Reflecting the risk-off tone, small caps suffered in particular with the Russell 2000 falling -2.44%, whilst tech stocks were another underperformer as the NASDAQ lost -2.19% and the FANG+ index of 10 megacap tech firms saw an even bigger -3.16% decline. For Europe it was much the same story, with the STOXX 600 (-1.67%) and other bourses including the DAX (-2.31%) seeing significant losses amidst the cyclical underperformance. It was the STOXX 600’s worst performance since mid-July and the 6th worst day of the year overall. Unsurprisingly, there was also a significant spike in volatility, with the VIX index climbing +4.9pts to 25.7 – its highest closing level since mid-May – after trading above 28.0pts midday. In line with the broader risk-off move, especially sovereign bonds rallied strongly as investors downgraded their assessment of the economic outlook and moved to price out the chances of near-term rate hikes. By the close of trade, yields on 10yr Treasuries had fallen -5.1bps to 1.311%, with lower inflation breakevens (-4.1bps) leading the bulk of the declines. Meanwhile in Europe, yields on 10yr bunds (-4.0bps), OATs (-2.6bps) and BTPs (-0.9bps) similarly fell back, although there was a widening in spreads between core and periphery as investors turned more cautious. Elsewhere, commodities took a hit as concerns grew about the economic outlook, with Bloomberg’s Commodity Spot Index (-1.53%) losing ground for a third consecutive session. That said, European natural gas prices (+15.69%) were the massive exception once again, with the latest surge taking them above the peak from last Wednesday, and thus bringing the price gains since the start of August to +84.80%. Here in the UK, Business Secretary Kwarteng said that he didn’t expect an emergency regarding the energy supply, but also said that the government wouldn’t bail out failed companies. Meanwhile, EU transport and energy ministers are set to meet from tomorrow for an informal meeting, at which the massive spike in prices are likely to be discussed. Overnight, we have the first projections of the Canadian federal election with CBC News projecting that the Liberals will win enough seats to form a government for the third time albeit likely a minority government. With the counting still underway, Liberals are currently projected to win 156 seats while Conservatives are projected to win 120 seats. Both the parties are currently projected to win a seat less than last time. The Canadian dollar is up +0.44% overnight as the results remove some election uncertainty. Turning to the pandemic, the main news yesterday was that the US is set to relax its travel rules for foreign arrivals. President Biden announced the move yesterday, mandating that all adult visitors show proof of vaccination before entering the country. Airline stocks outperformed strongly in response, with the S&P 500 airlines (+1.55%) being one of the few industry groups that actually advanced yesterday. Otherwise, we heard from Pfizer and BioNTech that their vaccine trials on 5-11 year olds had successfully produced an antibody response among that age group. The dose was just a third of that used in those aged 12 and above, and they said they planned to share the data with regulators “as soon as possible”. Furthermore, they said that trials for the younger cohorts (2-5 and 6m-2) are expected as soon as Q4. In Germany, there are just 5 days left until the election now, and the last Insa poll before the vote showed a slight tightening in the race, with the centre-left SPD down a point to 25%, whilst the CDU/CSU bloc were up 1.5 points to 22%. Noticeably, that would also put the race back within the +/- 2.5% margin of error. The Greens were unchanged in third place on 15%. Staying with politics and shifting back to the US, there was news last night that Congressional Democratic leaders are looking to tie the suspension of the US debt ceiling vote to the spending bill that is due by the end of this month. If the spending bill is not enacted it would trigger a government shutdown, and if the debt ceiling is not raised it would cause defaults on federal payments as soon as October. Senate Majority Leader Schumer said the House will pass a spending bill that will fund the government through December 3rd and that the “legislation to avoid a government shutdown will also include a suspension of the debt limit through December 2022.” Republicans may balk at the second measure, given that it would take the issue off the table until after the 2022 midterm elections in November of that year. There wasn’t a great deal of data out yesterday, though German producer price inflation rose to +12.0% in August (vs. +11.1% expected), marking the fastest pace since December 1974. Separately in the US, the NAHB’s housing market index unexpectedly rose to 76 in September (vs. 75 expected), the first monthly increase since April. To the day ahead now, and data releases include US housing starts and building permits for August, along with the UK public finances for September. From central banks, we’ll hear from ECB Vice President de Guindos. Otherwise, the General Debate will begin at the UN General Assembly, and the OECD will be publishing their Interim Economic Outlook. Tyler Durden Tue, 09/21/2021 - 07:45.....»»

Category: blogSource: zerohedgeSep 21st, 2021

Guide to Interest Rates Hike and ETFs

The central bank raised interest rates by another three-quarters of a percentage point. The Federal Reserve has been on an aggressive tightening policy to fight skyrocketing inflation, which is running near its highest levels since the early 1980s. Fed Chair Jerome Powell raised interest rates by another three-quarters of a percentage point in the meeting concluded yesterday. This marks the third consecutive interest-rate hike of 0.75%.Against this backdrop, investors should be well prepared to protect themselves from higher rates. While there are number of ways that could prove extremely beneficial in a rising-rate environment, ETFs like SPDR S&P Insurance ETF KIE, SPDR S&P Regional Banking ETF KRE, Vanguard Value ETF VTV, JPMorgan Ultra-Short Income ETF JPST and iShares Floating Rate Bond ETF FLOT from different corners of the market seem compelling picks.The rate hike brings the benchmark interest rate, the federal funds rate, to a 3.0-3.25%, the highest level since 2008, from 2.25-2.5%. The increase in interest rates will make borrowing expensive, driving up the cost of buying a new car or house, or increase the cost of carrying credit card debt and thus slow down economic growth.The central bank also signaled that additional large rate hikes were likely at the upcoming meetings as it combats inflation that remains near a 40-year high. Fed officials now expect the federal funds rate at a range of 4.25% to 4.5%, a full percentage point above 3.25% to 3.5% to end 2022, projected in June. This suggests the central bank could approve another three-quarter point hike at its November meeting and then a half-point rate rise in December.Any Reason to Worry?Higher rates would attract more capital to the country, thereby boosting the U.S. dollar against the basket of other currencies. However, since a strong dollar should have a huge impact on commodity-linked investments, a rising-rate environment will also hurt a number of segments (read: Floating Rate ETFs to Manage Higher Rates).In particular, high dividend paying sectors such as utilities and real estate would be the worst hit given their higher sensitivity to rising interest rates. Additionally, securities in capital-intensive sectors like telecom would also be impacted by higher rates. Further, the increase in interest rates will make borrowing expensive, driving up the cost of buying a new car or house, or carrying credit card debt and thus curtail economic growth.InsuranceInsurance stocks are one of the prime beneficiaries of a rate hike, as these are able to earn higher returns on their investment portfolio of longer-duration bonds. But at the same time, these firms incur loss as the value of longer-duration bonds goes down with rising interest rates. Nevertheless, since insurance companies have long-term investment horizons, they can hold investments until maturity and hence, no actual losses will be realized.SPDR S&P Insurance ETF follows the S&P Insurance Select Industry Index, holding 51 stocks in its basket, with each firm accounting for no more than 2.3% share. About 44.8% of the portfolio is allocated to property and casualty insurance, while life & health insurance and insurance brokers round off the next two spots with double-digit exposure. SPDR S&P Insurance ETF has managed $413.8 million in its asset base and trades in a good average daily volume of about 874,000 shares. The product has an expense ratio of 0.35% and a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.BanksAs banks seek to borrow money at short-term rates and lend at long-term rates, the rise in interest rates will help them earn more on lending and pay less on deposits, leading to a wider spread. This will expand net margins and increase banks’ profits.SPDR S&P Regional Banking ETF provides exposure to the regional banks’ segment by tracking the S&P Regional Banks Select Industry Index. It holds 144 stocks in its basket, with each accounting for no more than 2.1% of the assets. SPDR S&P Regional Banking ETF has AUM of $3.2 billion and charges 35 bps in annual fees. It trades in an average daily volume of 5.6 million shares and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook (read: Bet on Bank ETFs on Fed Rate Hike).ValueHigher yields indicate optimism in the economy backed by increased consumer confidence, rising wages and higher spending. This combination of factors will result in increased industrial activity and a pickup in consumer demand, thereby lifting value stocks.Vanguard Value ETF targets the value segment of the broad U.S. stock market and follows the CRSP US Large Cap Value Index. It holds 344 stocks in its basket, with each accounting for less than 3% of assets. Vanguard Value ETF has AUM of $98.2 billion and charges 4 bps in annual fees. The product trades in a volume of 2.2 million shares per day on average and has a Zacks ETF Rank #1 with a Medium risk outlook.Short-Duration BondHigher rates have been cruel to bond investors, especially the longer-term ones, as an increase in rates has led to rising yields and lower bond prices. This is because price and yields are inversely related to each other and might lead to huge losses for investors who do not hold bonds until maturity. As a result, short-duration bonds are less vulnerable and a better hedge to rising rates (read: Time to Buy Cash-Like ETFs?).JPMorgan Ultra-Short Income ETF invests primarily in a diversified portfolio of short-term, investment grade fixed-and floating-rate corporate and structured debt while actively managing credit and duration exposure. It holds 620 bonds in its basket with an average duration of 0.29 years. JPMorgan Ultra-Short Income ETF has accumulated $21.8 billion in its asset base while trading in a good volume of around 4 million shares a day. It charges 18 bps in annual fees.Floating Rate BondsFloating rate bonds are investment grade and do not pay a fixed rate to investors but have variable coupon rates that are often tied to an underlying index (such as LIBOR) plus a variable spread depending on the credit risk of issuers. Since the coupons of these bonds are adjusted periodically, these are less sensitive to an increase in rates compared to the traditional bonds. Unlike fixed coupon bonds, these do not lose value when the rates go up, making the bonds ideal for protecting investors against capital erosion in a rising-rate environment.iShares Floating Rate Bond ETF follows the Bloomberg Barclays US Floating Rate Note < 5 Years Index and holds 399 securities in its basket. The fund has an average maturity of 1.70 years and an effective duration of 0.08 years. iShares Floating Rate Bond ETF has amassed $9.3 billion in its asset base while trading in a volume of 1.3 million shares per day on average. It charges 15 bps in annual fees. Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SPDR S&P Regional Banking ETF (KRE): ETF Research Reports Vanguard Value ETF (VTV): ETF Research Reports SPDR S&P Insurance ETF (KIE): ETF Research Reports iShares Floating Rate Bond ETF (FLOT): ETF Research Reports JPMorgan UltraShort Income ETF (JPST): ETF Research Reports To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 22nd, 2022

2 ETFs to Watch for Outsized Volume on Short-Term Treasury & Large-Cap Dividend

SHY and DLN two ETFs traded with an outsized volume in the last trading session. In the last trading session, Wall Street was extremely downbeat. Among the top ETFs, SPY declined 1.2%, DIA retreated about 1% while QQQ moved 0.8% lower on the day.Two more specialized ETFs are worth noting as both saw trading volume that was far outside of normal. In fact, both these funds experienced volume levels that were more than double their average for the most-recent trading session. This could make these ETFs the ones to watch out for in the days ahead to see if this trend of extra-interest continues.SHY: Volume 2.57 Times AverageThis short-term U.S. treasury bond ETF was under the microscope as about 15.97 million shares moved hands. This compares with an average trading volume of roughly 6.21 million shares and came as SHY lost about 0.1% in the last trading session. SHY is down 1.2% in a month’s time.DLN: Volume 3.88 Times AverageThis large-cap dividend ETF was in the spotlight as around 837,507 shares moved hands compared with an average of 216,000 shares a day. We also saw some price movement as DLN lost 1.1% in the last session. DLN has slumped 7.2% over the past month.  Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report iShares 13 Year Treasury Bond ETF (SHY): ETF Research Reports WisdomTree U.S. LargeCap Dividend ETF (DLN): ETF Research Reports To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 21st, 2022

Neurotic Markets Swing Ahead Of Fed Decision, Eyeing Ukraine War Escalation

Neurotic Markets Swing Ahead Of Fed Decision, Eyeing Ukraine War Escalation With traders nervously doing nothing ahead of today's FOMC meeting, where Powell will announce a 75bps rate hike but all attention will be on whether the 2023 median dot (which as we previewed will unleash havoc if it comes above 4.5% which is where market expectations top out for this hiking cycle), today market got an extra jolt of volatility just before the European open when shortly after 2am ET Vladimir Putin delivered his postponed message to announce a "partial mobilization" over the Ukraine war. The news slammed stocks, yields, and the euro while sending oil and commodities sharply higher. And while the initial spike lower has reversed and futures are modestly in the green now, there is zero liquidity right now and the smallest sell program could topples risk assets. As of 7:15am ET, US futures pointed to a recovery from Tuesday’s tumble on anxiety policy makers are hoping to spark a recession in their zeal to subdue price pressures. S&P futures were up 0.2% after trading down 0.6% earlier, with Nasdaq futures 0.1% in the green. 10Y yields dipped 3bps to 3.54% even though the USD was higher and bitcoin fluctuated between losses and gains.  In premarket trading, the MIC won again with US defense stocks rising amid after Russian President Vladimir Putin declared a “partial mobilization” with the Kremlin also moving to annex occupied regions of Ukraine. Northrop Grumman +1.9%, Lockheed Martin +2.8% and Raytheon +2.5%. Oil and gas shares also rose in US premarket trading, benefiting from a surge in crude prices after Putin ordered a partial mobilization to hold on to disputed territories in Ukraine. Exxon  +1.2%, Devon Energy  +2%, Marathon Oil +1.8%, Occidental Petroleum +1.9%, Schlumberger +1.5%. Other notable premarket movers: Stitch Fix (SFIX US) shares are down 10% in premarket trading after the personal styling company issued a weaker-than-expected 4Q update and disappointed analysts with its FY23 outlook. At least two analysts cut their PT on the stock Keep an eye on Oxford Industries (OXM US) as Citi upgrades it to neutral in note, citing the apparel company’s continued momentum and “attractive” acquisition of the Johnny Was brand Watch Coty (COTY US) as the company raised its outlook for the current quarter because of stronger-than-expected sales of more expensive fragrances and personal-care products, showing demand for higher-end items remains robust despite rising living costs The escalation of the Russian war is likely to reverberate across markets, deepening the energy and food crisis, according to Ales Koutny, portfolio manager at Janus Henderson Investors. Putin’s land grab and military escalation comes after a Ukrainian counteroffensive in the last few weeks dealt his troops their worst defeats since the early months of the conflict, retaking more than 10% of the territory that Russia held. “This will continue to put risk assets under pressure, with sentiment playing a significant part for both equities and credit,” Koutny said. “We believe the USD will continue to benefit as the US is isolated from a geographic perspective and more resilient due to the make-up of its economy.” Turning to today's main event, Powell is widely expected to boost rates by 75 basis points for the third time in a row, according to the vast majority of analysts surveyed by Bloomberg. Only two project a 100 basis points move. “There’s been so much speculation about the Fed’s next step that finally having a decision should provide some much needed relief for investors,” said Danni Hewson, an analyst at AJ Bell Plc. “If it sticks to script and delivers another 75 basis point hike markets are likely to rally somewhat, partly because the specter of a full percentage point rise didn’t come to pass.” European equities also swung higher after posting early losses in the run-up to the Fed meeting; the Stoxx 50 was little changed. FTSE MIB outperforms peers, adding 0.8%, DAX lags, dropping 0.1%. UK stocks climbed and the pound slid after the British government unveiled a £40 billion bailout to help companies with their energy bills this winter amid soaring prices that threaten to put many out of business. Travel, autos and tech are the worst-performing sectors. European defense stocks and energy stocks gain after President Vladimir Putin declared a “partial mobilization” and vowed to use all means necessary to defend Russian territory as the Kremlin moved to annex parts of Ukraine that it’s occupied, threatening to escalate the conflict further. Rheinmetall rises as much as +11%, Thales +6.1%. Energy stocks outperform as oil rallies, with Shell up as much as +3.3% TotalEnergies +3.0%. Here are some other notable premarket movers: UK homebuilders gain, bucking a broader market decline, following a Times of London report saying Prime Minister Liz Truss will outline a plan to cut stamp duty during Friday’s mini budget Persimmon gains 6.2%, Bellway +4.3%, Barratt Developments +4.9% Fortum shares rise as much as 20%, the biggest jump ever, after Germany said it will buy all of the Finnish company’s stock in Uniper at a better-than-expected price of EU1.70 a share. Meanwhile, Uniper slides as much as 39% on the news, its biggest drop ever. Vodafone shares gain as much as 2.4% after French billionaire Xavier Niel’s 2.5% stake in the telecom company adds to the pressure for the telecom giant to accelerate its M&A push, according to New Street Research Renault shares drop as much as 4.0% after Bernstein says it remains cautious about the carmaker’s earnings prospects for 2023 following the stock’s recovery from the Russia crisis earlier this year Autoliv drops as much as 4.7% in Stockholm, to the lowest since mid July, following SEB downgrade in Sept. 20 note citing a “more uncertain” outlook for 2023 Games Workshop shares fall as much as 16%, the most since Jan. 11, after the maker of the Warhammer series of games said pretax profit in the three-month period to Aug. 28 slid to ~£39m from £45m a year earlier Earlier in the session, Asian stocks declined ahead of an expected interest-rate hike by the Federal Reserve and as Russia’s escalation of war sapped investors’ appetite for risk.  The MSCI Asia Pacific Index fell as much as 1.5%, driven by losses in technology shares. The benchmark held the loss as Russia said it was mobilizing more troops for its war against Ukraine.  Hong Kong’s Hang Seng Index led declines among regional measures, with notable drops also in Japan, South Korea, Australia and the Philippines. The main gauge of Hong Kong-listed Chinese firms sank into a technical bear market. With a third 75-basis-point rate hike by the Federal Open Market Committee widely expected, some investors have moved to price in an even larger increase. Fed Chair Jerome Powell’s comments on efforts to fight inflation will be closely parsed for clues on the future rate path.  “Asian markets are still uncertain about size of rate hikes in upcoming FOMC meetings including today’s meeting,” said Banny Lam, head of research at CEB International Investment Corp. “Also, recent depreciation of Asian currencies, especially RMB, enlarges the weakness of equity markets.” The dollar’s strength has pushed a gauge of Asian currencies to a 19-year low, prompting global investors to withdraw funds from the region’s emerging stock markets. Central bank decisions are also due this week from Japan, Taiwan, Indonesia and the Philippines. The Asian Development Bank cut its economic growth forecast for China and also lowered its outlook for developing Asia amid rising interest rates, a prolonged war in Ukraine and Beijing’s Covid-Zero policy. Japanese equities fell as investors await decisions from central banks including the Federal Reserve and the BOJ. The Topix Index fell 1.4% to 1,920.80 as of market close Tokyo time, while the Nikkei declined 1.4% to 27,313.13. Toyota Motor Corp. contributed the most to the Topix Index decline, decreasing 2.4%. Out of 2,169 stocks in the index, 345 rose and 1,734 fell, while 90 were unchanged. “The focus is on the FRB terminal rate and how far the monetary tightening will go,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Limited. “They have a strong stance of controlling inflation no matter what happens to the economy and it’s questionable whether they can really do that.” In Australia, the S&P/ASX 200 index fell 1.6% to close at 6,700.20, with miners and banks weighing the most on the benchmark, as investors positioned for a hefty interest rate hike from a hawkish Federal Reserve. All sectors except communication services declined. In New Zealand, the S&P/NZX 50 index fell 0.6% to 11,498.95 In FX, the dollar headed for a fresh record, rising for a second day as the greenback traded steady to higher against all of its Group-of-10 peers. CHF and JPY are the strongest performers in G-10 FX in haven play, SEK and EUR underperform. Sweden’s krona suffered the steepest loss among G-10 peers to trade at around 11 per dollar, and is set for its longest slump since June, one day after the . The euro plunged as much as 0.9% to $0.9885, a two-week low, after Vladimir Putin threatened to step up his war in Ukraine. Bunds and Italian bonds advanced, outperforming Treasuries on haven buying and snapping two-day declining streaks. The pound dropped to a fresh 37-year low against a broadly stronger US dollar. Data showing a rise in UK government borrowing also weighed on sterling. The offshore yuan fell to the lowest against the greenback since mid 2020, even after the People’s Bank of China set the daily reference rate for the currency stronger-than-expected for a 20th day. In rates, Treasuries advanced, with yields falling up to 4bps, led by the belly of the curve trailing bigger gains for most European bond markets after Russia’s Putin mobilized more troops for Ukraine invasion and referenced nuclear capabilities. US 10-year yields around 3.55%, richer by ~2bp on the day and trailing comparable bunds by ~1bp in the sector; gilts lag by ~3bp; 2s10s curve is flatter by ~2bp, 5s30s by ~1bp. Euro-area bonds advanced, with the German 10-year yield dropping three basis points to 1.89%. Gilts 10-year yield down 2bps to 3.27%. In commodities, WTI drifts 2.7% higher to trade near $86.17. Spot gold rises roughly $9 to trade near $1,674/oz.  Crypto markets saw a leg lower following the Putin-induced risk aversion, with Bitcoin still under the $19,000 mark. In terms of the day ahead, the highlight will be the Fed’s policy decision and Chair Powell’s press conference. We’ll also hear from ECB Vice President de Guindos, and on the data side we’ll get US existing home sales for August. Market Snapshot S&P 500 futures little changed at 3,874.75 STOXX Europe 600 up 0.3% to 404.48 MXAP down 1.4% to 148.38 MXAPJ down 1.4% to 485.75 Nikkei down 1.4% to 27,313.13 Topix down 1.4% to 1,920.80 Hang Seng Index down 1.8% to 18,444.62 Shanghai Composite down 0.2% to 3,117.18 Sensex down 0.2% to 59,574.87 Australia S&P/ASX 200 down 1.6% to 6,700.22 Kospi down 0.9% to 2,347.21 German 10Y yield little changed at 1.85% Euro down 0.7% to $0.9901 Brent Futures up 2.6% to $93.00/bbl Gold spot up 0.4% to $1,670.80 U.S. Dollar Index up 0.51% to 110.77 Top Overnight News from Bloomberg The US dollar’s rally is at risk of a reversal if the Federal Reserve sets its interest-rate outlook at a lower level than traders are betting on after market-implied expectations for the so-called dot plot jumped this month Currency traders are girding for the biggest price swings in months in the build up to this week’s crucial Federal Reserve and Bank of Japan policy decisions Some investors have a message for anyone looking to bet big before one of the most pivotal Federal Reserve policy meetings of this year: don’t, or risk getting burned The ECB faces a delicate balancing act as it seeks to address record euro-zone inflation while the economy weakens, according to European Central Bank Vice President Luis de Guindos The British government unveiled a multibillion-pound bailout to help companies with their energy bills this winter amid soaring prices that threaten to put many out of business Prime Minister Liz Truss will cut the rates of stamp duty for UK home purchases as the government attempts to stimulate growth, The Times of London reported. Shares of UK homebuilders climbed China’s current interest rates are “reasonable” and provide room for future policy action, the People’s Bank of China said, adding to expectations it may resume lowering rates in coming months A right-wing coalition is widely expected to win Italy’s election on Sunday. Such an outcome may raise doubts over the path of reforms that are a condition for the country to receive EU funds to hasten its post-pandemic recovery A more detailed look at global markets courtesy of Newsquawk APAC stocks traded lower as the region followed suit to the global risk aversion heading into today’s FOMC policy announcement and amid heightened geopolitical concerns surrounding Ukraine as several separatist regions plan to hold a referendum to join Russia, while Russian President Putin is to address the nation in which many expect him to call for a mobilisation. ASX 200 declined with the commodity-related sectors and tech leading the downturn seen across all industries. Nikkei 225 was subdued ahead of central bank announcements including the BoJ which began its 2-day meeting. Hang Seng and Shanghai Comp were also negative with underperformance in Hong Kong amid tech weakness and with sentiment not helped by the US FCC adding more companies to its national security threat list. Top Asian News Asian Development Bank cut its Developing Asia growth forecast for 2022 to 4.3% from 5.2% and for 2023 to 4.9% from 5.3%, while it cut its China growth forecast for 2022 to 3.35 from 5.0% and for 2023 to 4.5% from 4.8%. FCC added China Unicom (762 HK) to its national security threats list. North Korean leader Kim sent a message to Chinese President Xi and said that ties with China are to reach a new high stage, according to state media. RBA Deputy Governor Bullock said policy is not restrictive as yet and is looking at opportunities to slow hikes at some point, while she noted concerns about the health of China's economy, zero-COVID policy and property market. RBA announced its review of the pandemic bond-buying program (BPP) in which it found that it should only be used in extreme circumstances and said it recorded large mark to market losses on BPP bonds in 2021/22, while it plans to hold BPP bonds to maturity and receive face value to offset accounting losses, according to Reuters. Stocks in Europe have clambered off worst levels with the region now trading mixed on the eve of the FOMC following initial Russian-induced downside. Overall sectors are now more mixed, and the earlier defensive bias has somewhat dissipated. Stateside, after the dust settled and earlier moves have been trimmed, with US equity futures now trading on either side of the unchanged mark. Top European News UK PM Truss is to tell the UN General Assembly that she will lead a new Britain for a new era and will call on democracies to harness the power of cooperation seen since Russia's invasion of Ukraine "to constrain authoritarianism", according to Downing Street. Furthermore, PM Truss is to tell the UN that Britain will no longer be dependent on those who seek to weaponise the global economy and will argue that the free world must prioritise economic growth and security, according to Reuters and Sky News. Furthermore, PM Truss is to launch a new defence review and call on Russian reparations, according to FT. UK PM Truss is to announce plans to cut stamp duty in the mini-budget this week in an effort to drive economic growth, according to The Times. ECB SSM member McCaul said the ECB is particularly concerned about banks that are heavily exposed to highly vulnerable corporates with a weak debt servicing capacity. ECB's de Guindos said FX rate is one of the most important variables that need to be looked at carefully. FX USD bid on risk-aversion pre-FOMC, though the DXY has since eased from the fresh YTD high at 110.87. Amidst this, the EUR slipped below 0.99 and away from hefty OpEx with G10 peers broadly softer amid the above USD move. However, petro-fx bucks the trend given the pronounced crude rally and has seen the CAD and NOK derive modest upside. PBoC set USD/CNY mid-point at 6.9536 vs exp. 6.9539 (prev. 6.9468). BoC's Beaudry said the bank will continue to do whatever is necessary to restore price stability and maintain confidence it can meet the 2% target, while Beaudry thinks August inflation data is still too high but added that the data shows we are headed in the right direction. Beaudry also stated that to avoid de-anchoring and to bring inflation sustainably back to target, some suggested a substantial slowdown or even a recession be engineered. Fixed Income A concerted initial bid for core benchmarks driven by broad risk-aversion, lifting Bund to a unsuccessful test of 142.00 briefly. Though, as action settles post-Putin and pre-Fed EGBs have backed away from best levels though retain a positive foothold. Note, it is worth caveating that today's upside is well within existing parameters for the week - given the pronounced hawkish action on Tuesday. 10 year T-note is hovering on the 114-00 handle within a 114-07+/113-27+ band and awaiting the Fed & Chair Powell. Commodities The crude complex has been propped up by the escalation in rhetoric from Russia. US Private Inventory Data (bbls): Crude +1.0mln (exp. +2.2mln), Cushing +0.5mln, Gasoline +3.2mln (exp. -0.4mln), Distillates +1.5mln (exp. +0.4mln). Spot gold caught a bid despite the firmer Dollar on the back of post-Putin haven demand. LME copper has given up its earlier gains as the Dollar gained and sentiment soured. US Event Calendar 07:00: Sept. MBA Mortgage Applications +3.8%, prior -1.2% 10:00: Aug. Existing Home Sales MoM, est. -2.3%, prior -5.9% 10:00: Aug. Home Resales with Condos, est. 4.7m, prior 4.81m 14:00: Sept. FOMC Rate Decision (Lower Boun, est. 3.00%, prior 2.25% DB's Jim Reid concludes the overnight wrap Markets are often in a holding pattern when we arrive at Fed decision days, with investors waiting for the policy announcement before the big moves take place. But the last 24 hours have been a very different story, with the selloff accelerating thanks to concerns that the Fed and other central banks still have plenty of hawkish medicine left to deliver. See my CoTD here yesterday for the 500bps of hikes from major central banks expected between yesterday and lunchtime tomorrow. As I also showed the ratio of global hikes to cuts now stand at 25:1, this hasn't got above 5:1 in the 25 years I have comprehensive global data. Email if you want to be on the daily CoTD list. Those rate hike jitters were present from early in the session yesterday after Sweden’s Riksbank unexpectedly announced a bumper 100bps hike, which came shortly after a stronger-than-expected print on German producer prices for August. In the meantime, the latest on the Ukraine situation didn’t help sentiment either, as it was announced that referendums would be held later this week in the Russian-occupied regions on whether they should be part of Russia. By the close of trade, this had led to a very challenging day across the major asset classes, with little respite for investors anywhere. In particular, there were some big moves on the rates side as Treasury yields hit their highest levels in years, with the 10yr Treasury yield up +7.3bps to a post-2011 high of 3.56% after trading as much as +10bps higher, intraday. The 2yr followed a similar pattern, increasing as much as +5.2bps intraday before ending the day +3.1bps higher at 3.97%, not quite breaching the 4% mark in trading, which would have been for the first time since 2007. This morning in Asia, yields on 10yr USTs (-0.59 bps) are fairly stable. To counter higher bond yields, the Bank of Japan (BOJ) in an unscheduled government bond buying operation this morning, announced that it would purchase 150 billion yen ($1.04 billion) of debt with a remaining life of five to 10 years, and 100 billion yen of securities maturing in 10 to 25 years. The fresh buying would be in addition to the central bank’s already existing daily offer of buying unlimited quantities of 10yr JGBs at 0.25%. However, the response was muted as the Japanese yen was trading flat at about 143.8 against the US dollar, still in the vicinity of a 24-year historical low as we go to print. Debate around the BoJ's defence off its YCC policy will only intensify as global yields are under pressure. One to watch again. Yesterday's bond losses come against the backdrop of the Fed’s decision today at 19:00 London time, where futures are fully pricing in a third consecutive 75bps hike. That’s quite the turnaround since the last meeting in July, when markets initially latched on to a dovish interpretation after Chair Powell said “it likely will become appropriate to slow the pace of increases”, which led to an easing of financial conditions following the meeting and well into August. However, no such slowdown is in sight following last week’s CPI print, which shut down any lingering questions about a slower pace of hikes for the time being. In fact, any doubts over today’s decision are all about whether the Fed might go even faster and hike by 100bps, with futures currently pricing in a 18% chance of such a move. So clearly not dismissing the possibility, although the absence of "well informed" journalist articles preparing the ground for 100bps speaks volumes Our US economists’ expectations (link here) are in line with market pricing today, and they expect a 75bps move that’ll be followed up with another 75bps hike in November. One thing to keep an eye out for will be the latest Summary of Economic Projections, which they expect will signal more pain in the labour market in order to tame inflationary pressures, with an upgrade to their unemployment forecasts. We’ll also get a first look at the 2025 dot plot, which they think will show the Fed funds rate at 3.4%, so still above their long-run estimate for the nominal fed funds rate, and they think the tone in Chair Powell’s press conference will sound more like the hawkish messaging out of Jackson Hole rather than the dovish signals from July. Those hawkish expectations meant that risk assets continued to struggle alongside sovereign bonds, with the S&P 500 (-1.13%) very nearly ending up back in bear market territory. It was much the same story in Europe, where the STOXX 600 (-1.09%) lost ground for a 6th consecutive session for the first time since the June slump, and is within 1% of the YTD lows. Germany’s DAX (-1.03%) is now down by more than -20% on a YTD basis again. Interestingly, European equities had initially opened higher on the day, with the STOXX 600 up +0.96% at its peak. However, sentiment turned around the time we heard of the Riksbank’s policy decision, as they unexpectedly hiked by 100bps, rather than the 75bps expected by the consensus, whilst also signalling further rate hikes ahead. In turn, that fuelled speculation that the Fed might also pull off a surprise move, even if that’s still far from the market’s base case. Staying on Europe, it’s worth noting that the rise in sovereign bond yields there were more dramatic than those seen in the United States. For instance, yields on 10yr bunds (+12.1bps) rose to a post-2014 high of 1.92%, whilst those on BTPs (+10.1bps) hit a post-2013 high of 4.18%. Following the end of European bond trading, ECB President Lagarde noted that inflation was much higher and persistent than anticipated, which has driven the front-loading of ECB rate hikes we’ve seen to date. She reiterated the ECB plans to raise rates over the next few meetings, and will size those hikes on a meeting-by-meeting basis. Like some Fed speakers, she noted the ECB cannot take anchored inflation expectations for granted, but drew contrast to the situation in the United States by spending a lot of her speech outlining why European inflation was not as demand-driven, but a result of supply shocks. I personally would say that’s up for debate with unemployment at the lowest since the Euro came into being and wage growth high. Gilts were the biggest underperformer ahead of tomorrow’s Bank of England decision, with 10yr yields up +15.4bps to a post-2011 high of 3.29%. In terms of market pricing for that decision tomorrow, overnight index swaps are pricing in 65.2bps worth of hikes, so nearly equidistant between 50bps and 75bps. Whilst central banks are in focus this week, there was significant news from Ukraine as four Russian-controlled regions will be holding referendums this week on whether they should be a part of Russia. They’re set to happen from September 23-27, and will take place in the regions of Donetsk and Luhansk, as well as in Kherson and Zaporizhzhia. Further, as reported in Bloomberg, the concern is that Russia is moving toward a more full mobilisation, which would only lead to a further entrenchment of the war. All this news doesn't suggest that the peaceful end of the war is imminent and that the counter offensive successes by Ukraine 10 days ago might have escalated tensions as was feared at the time. We expect to hear public remarks from President Putin later this morning, so more to come on what already promises to be a big macro day for markets. Asian equity markets are continuing with their downward trend this morning. Among the major indices, the Hang Seng (-1.66%) is the biggest laggard in early trade, reversing the previous session’s recovery. Elsewhere, the Nikkei (-1.37%), Shanghai Composite (-0.58%), the CSI (-0.98%) and the Kospi (-0.95%) are all trading in the red. US stock futures are fluctuating with contracts on the S&P 500 (+0.09%) and NASDAQ 100 (+0.07%) just above flat but with DAX futures (-0.29%) lower. In terms of yesterday’s data releases, US housing starts rose by more than expected in August, reaching an annualised rate of 1.575m (vs. 1.45m expected), while the prior month was revised down to 1.404m from 1.446m. Meanwhile, building permits continued to fall, down to an annualised 1.517m (vs. 1.604m expected), which is their lowest level since June 2020. The net impact of the housing data had the Atlanta Fed’s GDPNow model revise down third quarter growth to 0.3% from 0.5% after downgrading residential investment growth to -24.5% from -20.8%. So, we’re a surprise or two away from a third straight quarter of negative headline GDP growth, and yet more equivocation about why the US currently is or is not in a recession. Otherwise, German producer prices were up by +45.8% in August on a year-on-year basis (vs. +36.8% expected). That said, there was some weaker-than-expected inflation from Canada, where CPI fell to +7.0% year-on-year (vs. +7.3% expected). In terms of the day ahead, the highlight will be the Fed’s policy decision and Chair Powell’s press conference. We’ll also hear from ECB Vice President de Guindos, and on the data side we’ll get US existing home sales for August. Tyler Durden Wed, 09/21/2022 - 07:45.....»»

Category: smallbizSource: nytSep 21st, 2022

Futures Crater As Fedex Ushers In The Global Recession On $3.2 Trillion Triple Witch Day

Futures Crater As Fedex Ushers In The Global Recession On $3.2 Trillion Triple Witch Day Another day, another selloff, this time one driven by a catastrophic repricing by Fedex, which has plunged by the most ever this morning, down 20% and losing over $11BN in market cap... ... after pulling guidance and effectively warning that the entire world - and especially China - is in a recession. The fact that it is a $3.2 trillion opex today which guarantees even more volatility in the coming weeks... ... or that buyback blackout period begins today probably isn't helping, and sure enough, we end the week in a mirror image to how we started it, with equities extending declines with an index of global stocks on track for the worst week since June, while the dollar continued its relentless ascent, trading back to all time highs. S&P futures were down 0.8% at 730am, dropping to the lowest level in 2 months, while Nasdaq 100 lost more than 1%, as Europe  headed for a fourth day of losses, and Asian was a sea of red led by China. In premarket trading, besides the implosion in Fedex, Uber shares slid 5.3% in US premarket trading after the ride-hailing company said it has shut down internal Slack messaging as it investigates a cybersecurity breach. Bank stocks are also lower alongside S&P 500 futures, while the US 10-year Treasury yield advances. In corporate news, Credit Suisse’s securitized products group has drawn interest from Apollo Global Management and BNP Paribas, according to people with knowledge of the matter. Here are some other big premarket movers: FedEx (FDX US) shares plunged 20% in US premarket trading after the package delivery giant pulled its fiscal 2023 earnings forecast, triggering a raft of downgrades from analysts, including at KeyBanc and JPMorgan. Amazon (AMZN US) and UPS (UPS US) also fell. Adobe (ADBE US) shares fall another 2.3% in premarket trading, one day after its market value shrunk by $29.5 billion on an announcement to buy software design startup Figma. More analysts slashed ratings and price targets. Cryptocurrency- exposed stocks are likely to be active on Friday with Bitcoin dropping below $19,800 after SEC Chair Gary Gensler signaled that a feature of the network’s software could lead to tokens being considered securities by the commission. In the US premarket trading hours, Marathon Digital (MARA US) -3.2%, Coinbase (COIN US) -2.0%, Riot Blockchain (RIOT US) -3.4% Watch Alcoa (AA US) as Morgan Stanley upgrades the stock and several peers, noting that value begins to show within Americas metals and mining shares, but cautioning that uncertainty remains. International Paper (IP US) slides 5.6% in US premarket trading after Jefferies downgraded the stock as well as shares in Packaging Corp of America (PKG US) to underperform in reflection of the “massive inventory glut in containerboard.” The broker stays at hold for Westrock (WRK US), noting that valuation is already depressed. Policy-sensitive two-year Treasury yields extended a rise to the highest since 2007, deepening the curve inversion that’s seen as a recession signal. The latest US economic data painted a mixed picture for the economy that backed the view for hawkish monetary policy. Swaps traders are pricing in a 75 basis-point hike when the Federal Reserve meets next week, with some wagers appearing for a full-point move. “Everything points to another 75 basis-point rate hike by the Fed when it meets next week. The likelihood that it will have to go ‘big’ again in November is elevated, too,” said Raphael Olszyna-Marzys, an economist at Bank J Safra Sarasin. “What’s more, its new projections should indicate that the fight against inflation will be more painful than previously acknowledged.” Market participants will face additional volatility on Friday from the quarterly expiry event known as triple witching, with contracts for stock index futures, stock index options and stock options all expiring, while re-balancing of major equity indexes also takes place. In Europe, the Stoxx 50 slumped 1.4%, headed for a 4th day of losses. The FTSE 100 is flat but outperforms peers, DAX lags, dropping 1.7%. Industrials, construction and autos are the worst-performing sectors as are mining stocks which as iron ore slid amid concerns over demand in China, while aluminum fell on the back of record Chinese output.  European mail and parcel delivery companies took a hit in the aftermath of the Fedex warning, led by Deutsche Post AG, down as much as 7.6%. The UK’s benchmark outperformed as the British pound sank to its weakest level against the dollar since 1985. All industry groups are in the red. Here are the biggest European movers: Jupiter Fund Management jumps as much as 4.2% after being upgraded to neutral at UBS. Separately, the FT reported that the new CEO will restructure the company after an operational review Krones rises as much as 1.6% on Friday, with Baader Helvea saying the company showed “huge confidence” during recent capital markets day at the Drinktec trade fair in Munich Ariston shares soar as much as 11%, the most intraday since March 14, after the company agreed to buy 100% of Centrotec Climate Systems for EU703m in cash and ~41.42m Ariston shares Capita shares rise as much as 9.3% amid a contract extension with Barnet Council and the sale of subsidiary Pay360 for GBP150 million to Access PaySuite UK and EU real estate shares slip after both Goldman Sachs and JPMorgan published bearish reviews of the sector. Land Securities falls as much as 5.1% in London after being cut to sell at Goldman European mail and parcel delivery companies take a hit, led by Deutsche Post, down to July 2020 lows, after US peer FedEx withdrew its earnings forecast on worsening business conditions Mining stocks are among the biggest underperformers in Europe on Friday as iron ore slid amid concerns over demand in China, while aluminum fell on the back of record Chinese output Telecom Italia shares drop to a record low after Barclays cut the carrier to underweight from equal-weight, citing a more complex investment case amid political uncertainties in Italy Uniper plunges to its lowest level on record, with shares down as much as 16%, after people familiar with the matter said Germany is in advanced talks to take it over Virbac falls as much as 10% after the French veterinary-products company reported 1H results that showed inflation is weighing on profit margins Earlier in the session, Asian stocks headed for a fifth-straight weekly decline as markets remained volatile ahead of the Federal Reserve’s interest-rate decision next week, with the Xi-Putin meeting adding renewed geopolitical concerns. Stocks slumped in Japan, Hong Kong and mainland China, with little impact on sentiment from Chinese industrial-production and retail-sales data that beat expectations. The MSCI Asia Pacific Index fell as much as 1.3% on Friday, following weakness in US shares, led by technology and consumer discretionary stocks. China’s CSI 300 Index slumped the most in more than four months as the yuan weakened past 7 per dollar, offsetting upbeat August economic data, with the government ramping up stimulus to counter a slowdown.  Russia’s President Vladimir Putin met with Chinese leader Xi Jinping for the first time since the war in Ukraine began, underscoring increasing risks as Beijing continues to show support for Moscow. The Covid-Zero policy in China, a property crisis and the outcome of a US audit inspection will “keep the market in a relatively volatile state,” Laura Wang, chief China equity strategist at Morgan Stanley, said in a Bloomberg TV interview. The brokerage expects earnings growth for mainland companies “to decline to around mid-single digit” from Covid resurgence and lockdowns. India and Australia were among the region’s worst performers. Losses accelerated in afternoon trading as the dollar strengthened. Asian equities suffered a tumultuous week, falling more than 2% as risk assets took a hit from faster-than-expected US inflation, which fueled expectations for more aggressive monetary tightening by the Fed. A strong dollar and higher Treasury yields added to the headwinds. The regional stock benchmark is edging toward its lowest close since May 2020. Japanese stocks declined as concerns of a potential global economic slowdown and higher US interest rates damped demand for risk.  The Topix fell 0.6% to 1,938.56 as of the market close in Tokyo, while the Nikkei 225 declined 1.1% to 27,567.65. Keyence Corp. contributed the most to the Topix’s loss, decreasing 3.8%. Out of 2,169 stocks in the index, 589 rose and 1,501 fell, while 79 were unchanged. “The US interest rate hike will probably be 0.75 point, but there is still a strong sense of uncertainty about future hikes,” said Takeru Ogihara, a chief strategist at Asset Management One.  Summers Expects Fed to Raise Rates Above 4.3% to Curb Inflation The index for developing-nation equities fell to its lowest level in more than two years on Friday. A three-day slide has shaved $422 billion off MSCI’s EM stock index. The gauge fell as much as 1.5%, led by health care stocks. The EM equity gauge is down 5.5% this quarter, on track for a fifth consecutive drop, a record since Bloomberg began monitoring the data. In FX, the Bloomberg Dollar Spot Index rose as the greenback strengthened against all of its Group-of-10 peers apart from the yen which is marginally up, trading at the 143/USD level. Pound at 1.13/USD, the lowest since 1985, underperforming G-10 peers. The euro fell a first day in three, trading once again below parity against the dollar. Bunds, Italian bonds slid, putting their 10-year yields on course to climb for a seventh week as traders continued to amp up ECB tightening bets, pricing as much as 200bps of rate hikes by July.  The euro volatility skew shifts higher this week and especially on longer tenors, suggesting that bearish sentiment wanes. This seems to be down to demand for topside strikes and not unwinding of shorts given move in the tails The pound was the worst G-10 performer and fell below $1.14 for the first time since 1985. UK retail sales fell at the sharpest pace in eight months in August as a worsening cost-of-living crisis and plunging confidence forced consumers to cut back on spending. The 1.6% drop was more than three times the decline predicted by economists. Monday is a national bank holiday in the UK The Australian dollar tumbled to the lowest level since the early days of the Covid pandemic as risk aversion swept across markets. Three-year yield touched as high as 3.44% after National Bank of Australia raised its forecast to a 50bps hike in October. Reserve Bank of Australia Governor Philip Lowe said a few hikes would be needed to tame inflation, though the case for outsized interest-rate increases has “diminished” now that the cash rate is approaching “more normal settings” Japan’s longer-maturity bonds extended declines after Thursday’s weak 20-year auction. Japanese markets will be shut Monday and Friday next week for national holidays Meanwhile, the offshore yuan remained on the weaker side of 7 to the dollar, even as the People’s Bank of China set the reference rate for the currency stronger-than-forecast for a 17th straight day. “While China activity showed some improvement this morning, equity investors really want to see substantial easing in China’s policies related to Covid to turn a bit more constructive,” said Chetan Seth, Asia-Pacific equity strategist at Nomura Holdings Inc. in Singapore. “That has not happened.” In rates, the 10Y Treasury yield up 3bps to around 3.47%, gilts 10-year yield is flat at 3.16%, while bunds 10-year is also up 0.2bps at 1.79%. Treasuries remained lower after a bund-led selloff during European morning, with losses led by front-end of the curve as 2-year yields exceed Thursday’s highs, peaking near 3.92%. Further out, 5s30s breached Thursday’s low (reaching -21.1bp) to reach most inverted level since 2000. Yields are cheaper by more than 3bp across front-end of the curve with 2s10s spread flatter by ~2bp on the day; 10-year yields around 3.47%, trading broadly in line with bunds while gilts outperform by 2.5bp in the sector. US curve flattening persists as Fed rate expectations continue to grind higher; OIS markets price in a peak policy rate of around 4.5% for March 2023 In commodities, WTI and Brent are oscillating around the unchanged mark with the complex initially under pressure from the overall risk aversion. Kazakhstan energy ministry expects to stick to its oil production plans of 85.5mln tonnes this year; says Kashagan oilfield will resume output "in October at best." Spot gold is flat after the yellow metal took out the 2021 low (USD 1,676/oz) yesterday with clean air seen below until the COVID low of USD 1,450/oz. Bitcoin is flat around USD 19,750 whilst Ethereum remains pressured under USD 1,500. To the day ahead now, and data releases from the US include the University of Michigan’s preliminary consumer sentiment index for September, as well as UK retail sales for August. Meanwhile from central banks, we’ll hear from ECB’s President Lagarde, as well as the ECB’s Rehn and Villeroy. Market Snapshot S&P 500 futures down 1.0% to 3,863.75 STOXX Europe 600 down 1.2% to 409.92 MXAP down 1.3% to 150.15 MXAPJ down 1.6% to 490.96 Nikkei down 1.1% to 27,567.65 Topix down 0.6% to 1,938.56 Hang Seng Index down 0.9% to 18,761.69 Shanghai Composite down 2.3% to 3,126.40 Sensex down 1.8% to 58,881.76 Australia S&P/ASX 200 down 1.5% to 6,739.08 Kospi down 0.8% to 2,382.78 German 10Y yield little changed at 1.78% Euro down 0.4% to $0.9961 Gold spot down 0.5% to $1,656.63 U.S. Dollar Index up 0.34% to 110.11 Top Overnight News from Bloomberg A surging dollar is now the only possible hedge for what’s turning into the biggest destruction of shareholder value since the global financial crisis “The growing risk of recession in the euro area and the steadily increasing labor participation rate might also be factors that have kept wages in check,” European Central Bank Governing Council member Olli Rehn said in Helsinki “The slowdown of the economy is not going to ‘take care’ of inflation on its own,” European Central Bank Vice President Luis de Guindos tells Expresso newspaper in an interview. “We need to continue the normalization of monetary policy” The French inflation rate will peak between now and the beginning of next year near the current level, “around 6% or a little more,” Bank of France Governor Francois Villeroy de Galhau said A shortage of high-quality assets in the euro area is keeping a lid on short- term borrowing costs, a development that could endanger the ECB’s effort to tighten financial conditions Global equity funds saw inflows driven by US stocks in the week to Sept. 14, according to a Bank of America note, citing EPFR Global data China has ample monetary policy room and abundant policy tools, PBOC’s monetary policy department writes in an article that reviews the country’s monetary policies in the past five years China’s economy showed signs of recovery in August. Industrial production, retail sales and fixed-asset investment all grew faster than economists expected last month. The urban jobless rate slid to 5.3%, while the youth unemployment rate fell from a record high Japan’s increasingly incongruous policy stance aimed at securing both stable growth and inflation is adding to the likelihood of further yen losses, even as officials warn of possible intervention India’s sovereign bonds are defying a worldwide rout, as banks and foreign funds rushed to buy the high-yielding debt in anticipation that they will be included in global indexes Germany is taking control of Russian oil major Rosneft PJSC’s German oil refineries and is nearing a decision to take over Uniper SE and two other large gas importers as it tries to avoid a collapse of its energy industry A more detailed look at global markets courtesy of Newsquawk Asia stocks fell despite better-than-expected Chinese activity data as the region took its cue from the losses in the US after mixed data and as markets continued to adjust to a more aggressive Fed rate path. ASX 200 was pressured as energy and miners led the broad retreat after recent losses in commodity prices. Nikkei 225 suffered from the downbeat mood and with the 10yr JGB yield stuck at the top of the BoJ’s target. Hang Seng and Shanghai Comp conformed to the risk aversion with the latest Industrial Production and Retail Sales data failing to spur risk appetite despite both surpassing estimates. Top Asian News Chinese NBS said China is to coordinate economic development and COVID control, while it added that the economy continued a recovery trend in August and some factors exceeded expectations but also noted that the recovery in domestic demand still lags behind the recovery in production and that the property market faces downward pressure despite some positive changes. China's stats bureau also commented that the economy was affected by COVID flare-ups in August but the flare-ups impact was limited and that policies to stabilise growth are gaining traction although noted that China's economy faces more difficulties this year than in 2020. Chinese President Xi says China's economy remains resilient and full of potential Japanese Finance Minister Suzuki reiterated it is important for FX to move stably reflecting economic fundamentals and that sharp FX moves are undesirable, while he is concerned about sharp, one-sided JPY weakening and they will take necessary action without ruling out any options if sharp yen moves persist. Japan is to use JPY 3.5tln in reserve funds for economic measures, according to Kyodo News RBA Governor Lowe said the RBA is committed to returning inflation to the 2-3% target range over time and is seeking to do this in a way that keeps the economy on an even keel, while the Board expects further increases will be required to bring inflation back to target but they are not on a pre-set path. Lowe stated that with inflation as high as it is, they need to make sure that inflation returns to target in a reasonable time and will do what is necessary to make sure that higher inflation does not become entrenched. Furthermore, Lowe said at some point will not need to hike by 50bps and they are getting closer to that point, while they will consider hiking by 25bps or 50bps at the next meeting but also stated that rates are still too low right now. South Korean President Yoon and US President Biden are expected to discuss currency swap during a summit, according to Yonhap. South Korean Parliament Speaker Kim says need to promptly advance South Korean and Chinese trade negotiations Euro-bourses see the deepest losses whilst the FTSE 100 is cushioned by the slide in the Pound. European sectors are all lower and portray a clear defensive bias, with Healthcare at the top of the bunch. Stateside, US equity futures have been trundling lower with the NQ underperforming vs the ES, YM and RTY. Top European News No Movies. No McDonald’s. Britain Shuts for Queen’s Funeral WHO Panel Advises Against GSK, Regeneron Drugs for Covid AstraZeneca Gets Nod From EU for Evusheld and Respiratory Drug Telecom Italia Falls to Record Low Amid Barclays Downgrade Uniper Plunges to Lowest Level Ever on Nationalization Reports Cold War Relic Threatens Plans to Ditch Russian Oil FX GBP extended losses in wake of significantly weaker than forecast ONS retail sales data, with Cable sliding to the lowest level since 1985. DXY reclaimed 110.00-status as Sterling continued sliding, and now oscillates around the round figure. JPY stands as the outperformer, as USD/JPY hold within yesterday’s extremes amid the risk aversion and recent verbal jawboning. Chinese FX regulator says it is hard to predict short-term volatility in exchange rate, and urges companies not to bet on the exchange rate, according to state media South Korean Authorities are reportedly suspected of "smoothing operations" in USD/KRW trading, according to Reuters citing South Korean FX dealers. Fixed Income Bunds have staved off pressure on 142.00 within a 142.15-143.04 range. Gilts traded above par briefly between 104.93-105.50 extremes (+17 ticks at one stage). 10yr T-note is almost flat ahead of preliminary Michigan sentiment which will be watched closely for inflation expectations. Commodities WTI and Brent are oscillating around the unchanged mark with the complex initially under pressure from the overall risk aversion. Kazakhstan energy ministry expects to stick to its oil production plans of 85.5mln tonnes this year; says Kashagan oilfield will resume output "in October at best" Spot gold is flat after the yellow metal took out the 2021 low (USD 1,676/oz) yesterday with clean air seen below until the COVID low of USD 1,450/oz. Base metals meanwhile are softer across the board as the Dollar remains firm, but LME nickel bucks the trend with reports via Bloomberg also suggesting LME is being sued by hedge funds, including AQR, in the London High Court US Event Calendar 10:00: Sept. U. of Mich. Sentiment, est. 60.0, prior 58.2 10:00: Sept. U. of Mich. Current Conditions, est. 59.4, prior 58.6 10:00: Sept. U. of Mich. Expectations, est. 59.0, prior 58.0 10:00: Sept. U. of Mich. 1 Yr Inflation, est. 4.6%, prior 4.8% 10:00: Sept. U. of Mich. 5-10 Yr Inflation, est. 2.8%, prior 2.9% 16:00: July Total Net TIC Flows, prior $22.1b 16:00: July Net Foreign Security Purchases, prior $121.8b DB's Jim Reid concludes the overnight wrap Two weeks after coping with a manic birthday party for two manic 5 year old twins, we repeat the whole thing this weekend as my daughter Maisie turns 7 today and has a OTT Harry Potter themed party tomorrow at our house. I have a costume which I'm hoping will be cooler than the 10ft giant inflatable diplodocus outfit I had for the twins’ party. If you don’t believe me photos are available. Many people have kindly asked how Maisie is after being diagnosed with a rare hip disease called Perthes over 12 months ago. The answer is she is coping well but still needs to be in a wheelchair until the doctors see any sign that the hip ball is regrowing. We’re crossing our fingers that there might be signs at the next scan in December. At the moment it’s still slowly disintegrating. She’s had great news this week as she’s got accepted at a very young age into a prestigious artistic swimming club. Because of her regular rehab in the pool, and a natural talent even before her condition became apparent, she is phenomenal in the water. She is a stage 7 swimmer which on average is for around 10/11 year olds and used to love gymnastics before her incapacitation. So for a sport that I’ve perhaps always previously seen as one of my least favourite, I’m now a synchronised swimming convert ahead of her first session this Sunday. I suspect I'll stick to golf for myself though and won't be buying the nose peg. It was another synchronised sell off for both bonds and equities yesterday as investors moved to price in yet more rate hikes from central banks, raising market fears about a hard landing ahead. Those moves were prompted by a decent batch of US employment data, which added to the sense that the Fed could afford to keep hiking rates for the time being. But the prospect of more aggressive rate hikes proved bad news for equities, with the S&P 500 (-1.13%), its lowest level since July, more than reversing the previous day’s partial rebound that followed its worst daily performance for two years on Tuesday. In the meantime, sovereign bonds embarked on a further selloff and multiple recessionary indicators were flashing with increasing alarm, including the 2s30s Treasury yield curve that by the close was more inverted than at any time since 2000. Before we get onto the details however, we should point out that DB’s US economists, led by Matt Luzzetti, have also revised their expectations for the Fed funds rate following the latest inflation data, and now see the terminal rate some way beyond market pricing at 4.9% in Q1 2023 (link here). Matt has been consistently the highest on the street for economists in recent months and this upgrade is now closer to the 5-6% range that David Folkerts-Landau, Peter Hooper and I said was necessary to tame inflation in our “What’s in the tails?” note (link here) back in April. Today’s UoM inflation expectations series is going to be the last important release before next week’s FOMC, especially after this week’s messy CPI data. Year-ahead inflation expectations have been edging down of late but the upside surprise in June a few hours after a blockbuster CPI beat cemented the last minute 75bps hike. With +80.5bps priced in next week, it will be interesting to see if the expectations data move pricing any closer to 75 or 100bps, and if not, whether the Fed tries to influence pricing with a leak so the meeting isn't as “live”, or if they feel comfortable heading into the meeting with some split probability priced. While we're on the revision path, a reminder that our 10yr Bund forecast was upgraded to 2.25% late on Wednesday. See here for more. Against this rates higher backdrop, markets were revising their expectations in a hawkish direction following strong labour market data. In particular, the US weekly initial jobless claims for the week ending September 10 fell for a 5th consecutive week to 213k (vs. 227k expected), and the previous week was also revised down by -4k. The release added to the sense that the recent economic resilience over the late summer was proving to be more than just one data point, and it’s worth noting that the 213k reading was the lowest since May. Piling on, retail sales MoM increased 0.3% versus -0.1% expectations. As with most things macro related lately, there is a flipside, however. The core retail sales figure fell -0.3% versus expectations it would be flat, while the control group, which has outsize influence in GDP consumption tabulations, was flat MoM, versus expectations of a 0.5% expansion. Indeed, the Atlanta Fed’s GDPNow tracker downgraded 3Q GDP estimates to 0.5% from 1.3% following the print. Recession talk will only bubble up with more with revisions like that. But overall a messy set of data yesterday. The recent inflation surprises has proven bad news for risk assets since it’s seen as giving the Fed the green light for faster rate hikes. In response, the terminal rate priced in for March 2023 rose +7.8bps yesterday to 4.46%, and that in turn led to another selloff for Treasuries. By the close, the 2yr yield was up +7.7bps to its highest level since the GFC, whilst the 10yr yield rose +4.5bps to 3.45%. In Asia the 2yr yield is up another couple of bps, with 10yr yields flat, further inverting the 2s10s curve to -44.5 bps as we go to press. Higher real yields were behind the latest moves, with the 10yr real yield crossing 1.0%, hitting a post-2018 high. And in Europe it was much the same story, with yields on 10yr bunds (+5.3bps), OATs (+3.6bps) and BTPs (+5.7bps) all moving higher as well. Yesterday’s losses were spread across multiple asset classes, and equities took a tumble given those fears about faster rate hikes. The S&P 500 shed -1.13% as part of a broad-based decline, and the impact of higher interest rates was evident from the sectoral breakdowns, as tech stocks including the NASDAQ (-1.43%) struggled, whereas the banks in the S&P 500 advanced +1.54%. Europe experienced a similar pattern, with the STOXX 600 (-0.56%) losing ground for a third day running, in contrast to the STOXX Banks index (+1.98%) which hit a three-month high. One more positive piece of news on the inflation side was that a deal was reached to avert an upcoming US rail strike, which would have had a significant impact on supply chains had that gone ahead. A sign of its potential impact was that even the White House was involved, with President Biden joining the meeting virtually on Wednesday evening. The news helped a number of key commodities to fall back in price, including US natural gas futures which ended the day -8.67% lower, whilst WTI oil was also down -3.82% at $85.10/bbl. Asian equity markets are weaker again this morning, heading for a fifth consecutive weekly drop amid further weakness in US equities overnight. As I type, the CSI (-1.13%) and the Shanghai Composite (-0.97%) are trading in negative territory with stronger than expected economic data failing to boost risk sentiment. Elsewhere, the Nikkei (-1.08%), Kospi (-1.03%) and the Hang Seng (-0.55%) are also sliding. Looking ahead, stock futures in the DM world are pointing to additional losses with contracts on the S&P 500 (-0.71%), NASDAQ 100 (-0.88%) and DAX (-0.70%) all moving lower. We have early morning data from China with retail sales standing out as it jumped +5.4% y/y in August (v/s +3.3% expected), up from +2.7% in July. The uptick in retail sales was primarily visible in the restaurant/catering sectors, an industry typically sensitive to lockdowns. Other activity series showed that industrial production grew +4.2% y/y in August, which is an improvement from July’s +3.8% increase. Also, fixed asset investment for the first eight months of the year rose by +5.8%, above the +5.5% increase forecast. However, there were some disappointing signs elsewhere as new home prices slid for the 12th consecutive month, falling -0.29% m/m in August against a -0.11% decline previously, indicating that the recently rolled-out measures failed to revive demand. Staying on China, the People’s Bank of China (PBOC) continued its currency defense after the yuan weakened past the key level of 7 per US dollar for the first time in two years amid the relentless dollar rally. The central bank for the 17th straight day intervened while fixing the yuan 456 pips stronger than the average Bloomberg estimate to help prevent the currency’s slide. Back to wrapping up the rest of yesterday’s data, US industrial production was down -0.2% in August (vs. unch expected), and the Philadelphia Fed’s business outlook for September fell to -9.9 (vs. 2.3 expected). However, the Empire State manufacturing survey for September rose to -1.5 (vs. -12.9 expected), rebounding from its worst month since the Covid pandemic. To the day ahead now, and data releases from the US include the University of Michigan’s preliminary consumer sentiment index for September, as well as UK retail sales for August. Meanwhile from central banks, we’ll hear from ECB’s President Lagarde, as well as the ECB’s Rehn and Villeroy. Tyler Durden Fri, 09/16/2022 - 08:03.....»»

Category: blogSource: zerohedgeSep 16th, 2022

4 Top-Ranked ETFs Set to Explode as Rate Rises

Investors should focus on areas/sectors that will benefit the most from the Fed's tightening policy. The hotter-than-expected inflation has put focus on Fed’s upcoming action in the meeting next week. Though the central bank is expected to hike rates by 75 bps, the latest data raised the bets for a longer-than-expected aggressive rate hike policy.Given this, investors should focus on areas/sectors that will benefit the most from the Fed’s tightening policy. ETFs like SPDR S&P Regional Banking ETF KRE, Vanguard Consumer Discretionary ETF VCR, iShares US Technology ETF IYW and iShares Core S&P U.S. Value ETF IUSV from different corners of the market seem compelling picks.The Federal Reserve has been on a tightening spree since the start of this year. Fed Chair Jerome Powell raised interest rates for the fourth consecutive time this year, taking the benchmark rate in the range of 2.25% and 2.5% to fight inflation. Powell recently said that the Fed would need to keep interest rates high enough to slow the economy “for some time” to curb high inflation.According to the latest CME Group’s FedWatch Tool data, investors are pricing an 82% chance of a 75-bps rate hike next week and an 18% chance of a full-percentage-point hike. While the tight monetary policy "for some time" will bring down inflation from its 40-year high, it means slower growth, a weaker job market and "some pain" for households and businesses (read: 4 ETFs to Gain From Hotter-Than-Expected Inflation).The initial phase of the rate increase will be good for stocks as it will reflect an improving economy, thereby benefiting cyclical sectors like financial, technology, industrials and consumer discretionary. Banks are in the most advantageous position as they seek to borrow money at short-term rates and lend at long-term rates. If interest rates rise, banks would earn more on lending and pay less on deposits. This would expand net margins and bolster banks’ profits. Also, insurance companies will be able to earn higher returns on their investment portfolio of longer-duration bonds.Higher interest rates usually indicate a healthy economy, leading to greater consumer power and increased IT spending. This combination of factors will result in increased industrial activity and a pickup in consumer demand, thereby lifting value stocks.An improving economy coupled with higher consumer confidence will also make the consumer discretionary sector tempting to investors amid higher yields. Further, technology seems one of the safest sectors in a tight policy era as most companies are sitting on a huge cash pile. The cash reserves will ensure that these companies are not plagued by any financial trouble, even in a rising interest rate environment.ETFs to WinSPDR S&P Regional Banking ETF (KRE)SPDR S&P Regional Banking ETF provides exposure to the regional banks’ segment by tracking the S&P Regional Banks Select Industry Index. It holds 144 stocks in its basket, with each accounting for no more than 2% of the assets (read: Higher Yields to Fuel Rally in These ETFs).SPDR S&P Regional Banking ETF has AUM of $3.4 billion and charges 35 bps in annual fees. It trades in an average daily volume of 5.6 million shares and has a Zacks ETF Rank #1 (Strong Buy) with a High-risk outlook.   Vanguard Consumer Discretionary ETF (VCR)Vanguard Consumer Discretionary ETF follows the MSCI U.S. Investable Market Consumer Discretionary 25/50 Index and holds 312 stocks in its basket. In terms of industrial exposure, Internet & direct marketing retail and automobile manufacturers occupy the top spots with double-digit exposure each.Vanguard Consumer Discretionary ETF is the low-cost choice in the space, charging investors only 10 bps in annual fees while volume is good at nearly 83,000 shares a day. The fund has managed $4.9 billion in its asset base so far. Vanguard Consumer Discretionary ETF has a Zacks ETF Rank #1 with a Medium risk outlook.iShares US Technology ETF (IYW)iShares Dow Jones US Technology ETF tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, giving investors exposure to 147 U.S. electronics, computer software and hardware, and informational technology companies.iShares Dow Jones US Technology ETF has AUM of $6.8 billion and charges 39 bps in fees and expenses. Volume is good as it exchanges nearly 354,000 shares a day. IYW has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.iShares Core S&P U.S. Value ETF (IUSV)iShares Core S&P U.S. Value ETF offers exposure to large- and mid-cap U.S. equities that exhibit value characteristics by tracking the S&P 900 Value Index. It holds 741 stocks in its basket, with each accounting for no more than a 3% share. iShares Core S&P U.S. Value ETF is widely spread across sectors with health care, financials, industrials, consumer staples and information technology occupying double-digit exposure each (read: 5 Solid ETFs Under $20 for Your Portfolio).iShares Core S&P U.S. Value ETF has AUM of $12.2 billion and trades in an average daily volume of 608,000 shares. It charges 4 bps in annual fees and has a Zacks ETF Rank #1 with a Medium risk outlook. Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SPDR S&P Regional Banking ETF (KRE): ETF Research Reports Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports iShares U.S. Technology ETF (IYW): ETF Research Reports iShares Core S&P U.S. Value ETF (IUSV): ETF Research Reports To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 15th, 2022

Transcript: Lynn Martin

   The transcript from this week’s, MiB: Lynn Martin, President of the NYSE, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ BARRY RITHOLTZ, HOST, MASTERS IN… Read More The post Transcript: Lynn Martin appeared first on The Big Picture.    The transcript from this week’s, MiB: Lynn Martin, President of the NYSE, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Lynn Martin. She is the president of the New York Stock Exchange, the world’s largest, with over 2,400 listed companies for a combined market cap of about $36 trillion. She is also chair of the fixed income and data services at ICE, Intercontinental Exchange. She began her career at IBM in Global Services and came to them with a BS in Computer Science and a master’s degree in Stats from Columbia. Lynn Martin, welcome to Bloomberg. LYNN MARTIN, 68TH PRESIDENT OF NYSE GROUP: Thanks so much for having me. RITHOLTZ: Thanks so much for joining us. I have so many things to ask you about, but I have to start out with you were at IBM pretty much in its heyday. Tell us what that experience was like. MARTIN: It was great. I’m going to date myself a little bit. RITHOLTZ: Yeah. MARTIN: But I was there through the Y2K crisis — RITHOLTZ: Right. MARTIN: — when global services was relied upon by customers around the globe to get them through that crisis. RITHOLTZ: Or near crisis, or almost crisis. Was it a crisis? MARTIN: Almost crisis. It wasn’t. That’s fair. It wasn’t a crisis, and that I remember waking up on New Year’s Eve 1999, I’m going to work in a call center because that’s what you do in your 20s, working at IBM. And we were watching the Australia open, the clocks hitting in Australia and everything was fine. RITHOLTZ: Right. MARTIN: And we sort of knew that once Australia opened okay, we were going to be okay. RITHOLTZ: So was this like a near miss, or was this, hey, a lot was made about something that turned out to be less of a — MARTIN: I think the industry became very well prepared. I don’t know that it was a near miss, but I think we got ahead of a potential challenge. There was a technical challenge and that computers only understood years in two digits as opposed to four digits. So 2000 could have been 1900, and that could have caused challenges. I don’t know if those challenges would have been as extreme as was forecasted or not, but I’m really glad we didn’t find out. RITHOLTZ: Yeah. To say the very least. So IBM, I’m sort of jumping ahead in the story, you began your career in Computer Science is coding on a Commodore 64. Would you like to explain that for the youth who don’t know what a Commodore 64 is? MARTIN: So I remember when I came home from elementary school one day, and my dad who was an electrical engineer, he used to design fuel gauges on airplanes, came home with this huge box. And it was a Commodore 64. I said, “What’s that?” He said, “The first home computer.” And I said, “What’s that?” And I was a kid, I had no idea. And he also brought home a stack of floppy discs, which were quite large for the youth that don’t remember. RITHOLTZ: They were literally floppy. They’re not like — MARTIN: They were floppy. You could bend them, twist them, whatever the case may be. RITHOLTZ: Right. Though you shouldn’t. MARTIN: Though you shouldn’t because your program would not work if you did that. And I just became hooked on it. And as any good kid does, you become hooked on video games first. So that’s really what got me into the Commodore 64. RITHOLTZ: So is that what led to a focus on data service and computer science, the simple C64? MARTIN: Well, what really led me in the path of studying for my undergrad was my dad giving me really good advice, which was way ahead of its time in the early ‘90s when I was applying to college, where he suggested I not go into the traditional engineering discipline, but instead go into computer science mainly because not only was I good at math and good at sciences, but he said there were always be opportunities for women in computer science. RITHOLTZ: That’s interesting. MARTIN: And it’s something that was just way ahead of its time and it sounded good to a 17-year-old filling out a bunch of college essays at the kitchen table. So I ticked off computer science despite, you know, not having a tremendous amount of experience with a computer aside from playing with video games and fiddling around more as a hobby than anything. RITHOLTZ: And now, you oversee a system that is a combination of advanced data systems, lots of hardware and software plumbing. You have to keep 2,400 listed companies up and running, trading as much as a billion shares a day. MARTIN: Yeah. RITHOLTZ: How do you go from the Commodore 64 to that? MARTIN: Fortunately, technology has been significantly advanced. And I think that’s what’s contributing to the volumes of liquidity that you actually see in the markets, but also the amount of incoming order messages that we see every day. RITHOLTZ: So when you say technology, it’s the technology at the New York Stock Exchange, as well as the technology at all the companies that are trading? MARTIN: Absolutely. Absolutely. And just macro technology, I remember the first classes I took in my CompSci major, I learned assembly language. I was coding on a mainframe. I was moving from register 1 to register 2, and that’s like the most basic form. And now, mainframes have become really thin machines. They’ve really moved into thin servers. They have moved into storage capacity like the cloud. So the advancement of technology, since I finished my degree in the late ‘90s to where it is today has really exploded into something that allows for more performant, more real-time type of interactions. RITHOLTZ: There’s a quote of yours I really like which probably explains your career, which is, quote, “The amount of satisfaction I would get when I compiled the program and the program did exactly what I wanted it to was beyond anything I had experienced previously.” Explain that. MARTIN: Absolutely. So I tend to view computer coding not that dissimilar to communicating in a foreign language. A lot of times you’re learning your French, Spanish to communicate with someone in a different country. When you’re learning computer coding, you’re just learning how to communicate with a machine. And a lot of times when you’re communicating with that machine, you think you’re telling them something really good and something really positive, and what comes out is something really not positive. So very frequently, maybe because I wasn’t the best coder, I would, you know, come back with errors or stuff stuck in what is known as an infinite loop, where the machine just keeps going and going and going. So those — RITHOLTZ: Rinse, lather, repeat is a great example. MARTIN: Exactly. It kept doing that. So on the days when I would put, you know, encode and the machine would do exactly what I told it to, I was like, “Oh, wow, that’s great.” RITHOLTZ: So you used the metaphor of a foreign language — MARTIN: Yeah. RITHOLTZ: — verb tense, syntax, punctuation, all these things really matter when you’re coding. MARTIN: It sure does. Syntax absolutely matters, efficiency also absolutely matters. The way I think of efficiency around computer coding is not that different to communicating with a local in a foreign country. They’ve got their — you’ve got your typical language, you know, the stuff that you would learn in textbooks, but then you’ve got, you know, the more shorthand types of communication. I kind of view efficient computer coding in the same fashion. RITHOLTZ: Really quite interesting. Let’s talk a little bit about the IPO process, how does this work when a company decides they want to go public? MARTIN: So a company will decide they want to go public. Typically, they will interview the variety of exchanges. That could be domestic U.S. exchanges. It could be — if they’re a foreign company, they will look at their home markets as well. Ultimately, they have a certain objective in mind. Do they want to raise capital? Do they not want to raise capital? If they want to raise capital, what investor base are they really targeting? (COMMERCIAL BREAK) MARTIN: More often than not, a company will select the U.S. markets because we have the most diverse, deepest pools of liquidity, the biggest access to investors, the biggest opportunity for a company to gain a global following. So typically they will select a U.S. exchange. RITHOLTZ: So you guys obviously have to prep when a company comes to you and says, “Hey, we’re considering you and some of your competitors.” What is your process like to prepare for — I don’t know if we still use the phrase beauty contest, but that was the old investment banking phrase. How do you gear up to say here’s why you should list with the NYSE and not our competitor? MARTIN: So my philosophy is very focused on how can we be a good partner to our listed companies, and what is that listed company seeking to achieve. And it’s not just about IPO day. IPO day I kind of equate to a wedding day. You’re going to have a great day. But — RITHOLTZ: Hopefully. MARTIN: Hopefully. But what I tend to think about is what happens a month after you go public, what happens six months after you go public. And how could we be a good partner to that firm in their public company journey? RITHOLTZ: I love the visual of this as a wedding day. So now, I’m thinking you have mother of the bride, father of the bride. Who are you working more closely with? Is it the investment bank? Is it management of the company? Who shepherds this along? MARTIN: You’re working with both. RITHOLTZ: Everybody, the caterers, the flowers. MARTIN: Yeah, exactly. Exactly. RITHOLTZ: The whole thing. MARTIN: You’re working with the banks who are underwriting the deal, the mother and father of the bride. RITHOLTZ: Right. MARTIN: I got to use your analogy. You’re also working very closely with the company, because the company has a vision. The company has been successful, and that they’ve gotten to the point where they’re graduating to the public markets, which is something that should be celebrated. But the company also has a two-year, three-year, five-year strategy of what they are really seeking to achieve, not just raising capital to fund operations, or to fund research and development. They have — may have M&A targets. They may want to expand their business through leveraging a community that the listings market, particularly the NYSE brings to the table. They may have specific concerns about certain areas of the market. One topic that CEOs are very focused on at the moment is ESG, environmental, social and governance, and how they are bringing sustainable practices to the market. So they want to tell that story. So everyone has got a different objective. So we spend a lot of time with CEO, CFO, IRO, the whole team, CMO, chief marketing officer, because they’re the ones that are, you know, orchestrating the story a bit. RITHOLTZ: Right. So let’s talk about the story a little. I just finished watching Apple iTunes’ WeCrashed. And what was so interesting was as they’re marching towards an IPO, it has nothing to do with the exchange. It has nothing to do with raising capital. The narrative just seemed to have taken over from your perch. You must see these things go by all the time, maybe not so much this year, which is a lighter IPO year. But last year, 2020, how do you look at these breaking new stories and all the buzz and mania around an IPO for both good and bad? How does that affect your job? MARTIN: Our job is ultimately to ensure that when a company comes to the market, they get the best experience possible when that stock opens and when that stock closes first week, first day, whatever the case may be. And that they’re happy with the experience. Ultimately, if there is news around the company, it may influence their decision to go public at a certain time. Ultimately the, the company that you are referencing did decide to go public. It just was at a different time. RITHOLTZ: Right. A little later. MARTIN: Yeah. RITHOLTZ: And there have been stories where that doesn’t necessarily work out well, or a company like Facebook goes public. The initial rollout is a little dicey. They announce something about mobile and suddenly the stock takes off. So when you talk about the month or the year after the wedding, these stories really very much change. It’s not just about the IPO day, is it? MARTIN: It’s not just about the IPO day, but that’s about the CEO articulating their strategy and executing on that strategy. And that’s what’s going to give the CEO and the public company, the next group of investors. They’re going to get a group of investors on IPO day. They’re going to do their road show right before the IPOs. They’re going to garner the initial set of interest. And a lot of times, companies will start that process even in a soft manner, even before they’re on the road for the IPO. But post-IPO day, it’s about execution. And when they have really exciting news to share, the market tends to reward it. You know, more people come into the stock. RITHOLTZ: Let’s talk about some other ways some people take their companies public. We’ve watched SPAC, super popular last year. They all seem to have blown up and done fairly poorly this year. How does the NYSE look at a product like a SPAC as an alternative method for a private company going public? MARTIN: Ultimately, we think SPACs are still a viable form for companies to go public. What you saw was a flood of SPACs coming to the market at the same time. So that may have contributed to some of the challenges that have now happened, given the time horizon that is associated with SPACs. But ultimately we see it as a very viable form for companies to continue to come to market. SPACs had been around for probably 15 to 20 years and that’s what — RITHOLTZ: Yeah, since the early 2000, people forget that. MARTIN: Yeah. And that’s what most people forget is that this was a form that companies were using to go public way before the last two years. They just became much more popular in the last couple of years, which is why you saw the flood. RITHOLTZ: To say the very least. There’s been a little bit of agitation towards direct listings, where there seems to be a decent amount of controversy on both sides. How do you guys look at direct listings as opposed to the IPO process? Well, we pioneered the direct listing. We pioneered it, I believe, three or four years ago. And we are quite proud of that innovation. It’s just another innovation allowing for private companies, in this case that didn’t want to raise capital, that didn’t need to raise capital, to become public companies, to have that public currency, to be able to fund their operations and/or to do M&A, and/or all the other great things that come along with being a public company, including providing investors, the opportunity to participate in the upside associated with the company. RITHOLTZ: What about the circumstances where investors can participate in the upside, specifically a lot of these venture-backed companies have stayed private for much longer. They kept doing rounds and have grown to sizes that we previously would think of as, hey, they should have gone public years ago. How do you guys look at that? Is this something that you pay attention to? Where do you think this goes? MARTIN: Yeah. I mean, we believe in the power of public markets. We believe in the upside that comes along with being a public company. Transparency, good governance you get. You’re able to reward your employees. You’re able to reward shareholders, allow a diverse group of shareholders to participate in the upside. And based on the feedback that we hear from companies who are private, the public currency is still very strong. Despite the fact that there’s volatility in the market, there is still demand for companies to go public. They’re just trying to figure out what time makes sense for them. RITHOLTZ: Interesting. My extra special guests this week is Lynn Martin. She is the president of the world’s largest stock exchange, the NYSE. They host 2,400 listed companies, with a market cap somewhere in the neighborhood of $36 trillion, doing more than a billion shares on a good day. That sounds like a pretty complex situation just to begin with. What’s it like managing something with so many moving parts? MARTIN: There are a lot of moving parts. But because I’m a technologist, I feel really good about the service that we provide. You know, one of the first things when I hopped into this role in January, unsurprisingly that I focused on was system capacity, and thinking about, you know, what’s our average response times? What sort of capacity do we have in the system to handle peak days? I’m glad I did that because a couple weeks after that, we had tremendous volatility. The week of January 24th, 25th, around then, the volatility — RITHOLTZ: Which is pretty funny because the prior year was almost no volatility. It was the quietest year in a long time. MARTIN: We started to see it a bit in December. So we saw the signs in December that volatility was starting to creep into the market. But we hadn’t seen that to your point, you know, really since the pandemic. The way we look at capacity is incoming order messages. For those listening and coming order messages is buy is coming into the system, sell is coming into the system, trades happening in the system. And very quickly, we started to see days that were in excess of 20% above pandemic levels from a messaging standpoint, and it equated to half a trillion messages being processed by our systems every day. So — RITHOLTZ: Half a trillion? MARTIN: Yes. RITHOLTZ: And by messages, it’s buy, sell and — MARTIN: Buy, sell, trade. Buy, sell, trade, that is it, incoming order messages, which is tremendous. And the fact that we were processing those with average response times in the stocks of about 30 microseconds was — RITHOLTZ: Micro? MARTIN: Yes. Yeah, micro. RITHOLTZ: Not milli, micro. MARTIN: Micro. RITHOLTZ: That’s incredibly critical. MARTIN: Incredible. Yeah. And you know, that really has continued. It’s been something I’ve had my eye on throughout the year. But our technologists have done a great job. We’ve recently upgraded our systems to our next generation matching engine technology. And our systems have, touch wood, held up beautifully from a response time standpoint. RITHOLTZ: So when all these things go right, we never hear about it. MARTIN: Exactly. RITHOLTZ: But when there’s a little snafu, it’s front page of the Wall Street Journal. Let’s talk about some of those. Let’s talk about what took place on the flash crash back in 2010. Do we really know whatever happened to that, or did just — and I’m going to give you guys credit. These are all old data systems. MARTIN: Yeah. RITHOLTZ: Everything that existed then have more or less been replaced, upgraded. MARTIN: Well, I think in a situation like that, you have seen a market structure evolve too to the point where there have been systems safeguards from a market structure standpoint, put in place around volatility halts, for example. RITHOLTZ: Before you go there, let me just back up a little bit. MARTIN: Yeah. RITHOLTZ: So this used to be a fairly manual system — MARTIN: Absolutely. RITHOLTZ: — with individual specialists, human beings — MARTIN: Yeah. RITHOLTZ: — at different posts on the floor for each individual stock. I kind of forget — having grown up with that, I kind of forget a lot of people are wholly unfamiliar with that. And there was a transition process where a lot of the manual processes were replaced with electronics and automated computers. There’s still humans involved but much less than they once were. Was that part of the impact in the flash crash? And how has that transition happened? A lot of which took place long before you got there. MARTIN: Yeah. It wasn’t necessarily as a result of any one particular area, other than just an evolution of the market. What I like to say is the most technologically advanced companies employ humans, and employ human interaction. Humans are there to make sense of what’s going on in the market, apply human judgment, remove noise from the system. It goes back to what we were talking about very early on, during our conversation today, which is when you’re writing code, frequently, what’s going to come back is an error, because that is just the computer reacting automatically to something. If you don’t have the human who can go in and fix the error, you’re going to remain in an error state. So the human’s job is really to remove the noise from the system, is to remove the volatility from the system. It’s something that I employed in my previous role, where we value $2.8 million securities on the fixed income opaque side of the market, using a lot of great systems, a lot of great mathematical mouth, and also couple hundred humans. And the reason why we have the best data set out there is because I have those humans who are all former bond traders and former muni specialists who can make noise of what’s coming into the system. I think the floor model is the exact same thing during really volatile days. You saw the human element really come into play. We saw two times less volatility on NYSE issued stocks at the open, three times less volatility on NYSE issued stocks at the close. And that is a 100% because of the job of the floor. RITHOLTZ: Really interesting. So let’s talk about — so you have stocks that are listed, and some of this is NYSE and some of this is Intercontinental Exchange. MARTIN: Yeah. RITHOLTZ: So they do stocks. They do bonds. They do options. They do derivatives. What else — and I don’t know if I left anything out, futures. What else is traded at either NYSE or ICE’s family of exchanges? MARTIN: We also have six clearing houses globally that clear the bulk of the credit default swaps market. In addition — RITHOLTZ: Where are those six located? MARTIN: Around the globe. Around the globe. Our largest — RITHOLTZ: Like London, Hong Kong? MARTIN: Yeah. Our largest clearing house is based in Europe. It is U.K. FCA registered. We’ve got a clearing house based in the U.S. We have a clearing house based in Singapore, as well as one in EMEA, one in Canada. So we’ve got them sprinkled throughout the globe. RITHOLTZ: And some of this is regional and some of this is redundancy and backup. MARTIN: Absolutely. RITHOLTZ: It makes a whole lot of sense. So I’ve been talking — I keep talking about the NYSE like it’s just the exchange. Let’s talk about the NYSE Group. MARTIN: Yeah. RITHOLTZ: That’s four electronic exchanges; NYSE Arca, which is the leader in ETFs; NYSE American Exchange; Chicago Exchange, National Exchange, plus two options exchanges, the American Options and Arca Options, which I think one is in New York, one is in San Francisco. Is that right? MARTIN: The floor is in San Francisco for Arca. RITHOLTZ: So how do all — I just mentioned four electronic exchanges, two option exchanges. How do all of these integrate with the NYSE’s operation? MARTIN: So common technology is really what pulls all of the exchanges together. The different medallions are really there to try different market models, different matching algorithms on the options side of the business, different market models from the equity side of the business. It gives us more flexibility to have — to be responsive to our customers. RITHOLTZ: Quite fascinating. So I mentioned 2021 was sort of aberrational. MARTIN: Yeah. RITHOLTZ: At no point in the year was the market less than 5% from all-time highs, that led to very, very little volatility in the year. How does a lack of volatility affect your daily work, or really the right way to ask that is when volatility spikes like we saw this year, does that make your job harder? MARTIN: It makes your job different. It makes your job focused more — (COMMERCIAL BREAK) MARTIN: — on thinking about things like system capacity, response times, you know, looking at that super closely because you always want to have a very responsive matching engine. You spend a little bit less time, though, welcoming IPOs to the market because many companies are not going to want to go out in a very volatile environment. RITHOLTZ: So this raises an interesting question. What can you guys do to — I don’t know if you can end volatility, but what can you do to tame it or make it more manageable? Is there anything in your trading process that can facilitate taking some of the spikes and volatility out of the market? MARTIN: Well, that’s where — that’s where our market maker model really resonates. And it’s really resonating with those companies who still believe in the public market currency, which there’s many of them, when they’re thinking about coming to the market because you can’t predict volatility. RITHOLTZ: Right. MARTIN: No one can control volatility. No one can predict volatility. But we can do things because of our market model to help the companies that are listed on us, have a less volatile experience. So our market model requires a designated market maker whose job is to trade that stock from the floor and they — RITHOLTZ: Create an orderly market? MARTIN: Correct. Correct, correct. And they smooth out volatility, not just intraday, but also at the open and the close. The open and the close are incredibly important moments in time for a company, particularly if you think of a company having quarter-end, or they’re having the share repurchases, or whatever the case may be. So that’s actually meaningful dollars, even post an IPO, in a CFO’s mind, when they’re doing share buybacks, things of that nature. So that’s where our market model really resonates, particularly in times like this, when you see the volatility in the market, when you see the VIX over 20, but you know that companies still want to go out in the public market. RITHOLTZ: You know, I think the public is probably less aware of some of the institutional order flow, like buy on open or sell on close, which it doesn’t hurt to have a professional overseeing that process so it doesn’t get too out of hand. MARTIN: Yeah. And also smoothen any imbalances because you’re not necessarily going to have a balanced book at the end of the day. RITHOLTZ: Which means they’re literally taking positions — MARTIN: They are. RITHOLTZ: — long or short in order to satisfy those orders. MARTIN: Absolutely. RITHOLTZ: So let’s talk about some imbalances, and I’m thinking about the sort of meme stock mania that began in 2020, when everybody was stuck at home during the pandemic, and just exploded in 2021. It was really a very unexpectedly wild ride, especially the companies involved. What was that experience like for you watching this? You weren’t yet president of the NYSE in 2020 or 2021, but you were still there. Tell us what that experience was like. MARTIN: I mean, it was incredibly interesting to watch the new retail interest in certain stocks and why they had picked certain stocks. And I think it’s just still something that is fascinating intellectually more than anything. I can’t really comment on any of their decisions, but it’s been interesting to watch how social media has really emboldened a new class of trader. RITHOLTZ: My favorite moment of that was the young — pretty handsome young couple. And the way we subsidize our lifestyle is we buy stocks. We only buy the stocks that are going up. And when they go up, we sell them. And we just do that over and over again from home. And I’m like, oh, I had no idea it was that easy. You could get rich trading stocks. Why didn’t someone tell me that 30 years ago? MARTIN: I tend to take the view that having a very balanced portfolio and knowing what you invest in, and investing for the long term is probably 9 times out of 10 the — maybe 9.5 times out of 10, the right philosophy to have. RITHOLTZ: I think Warren Buffett wouldn’t find anything to disagree with that. And yet we see people piling to companies of questionable potential. My favorite example was — was it Hertz that was bankrupt and everybody decided to buy Hertz since then? So as you’re observing this, is part of your brain saying we have to do X and Y and Z to stop this, or is it, well, that’s going to be an interesting end when that all — when that train stops? MARTIN: So our job is to make sure the markets are open and are available to the most diverse set of investors. RITHOLTZ: No paternalism. You just — MARTIN: Exactly. RITHOLTZ: Here’s the platform and make sure it runs. MARTIN: Ultimately, if there is questionable behavior, we police that. Our reg group who is a separate group, polices that and works closely with the regulator. RITHOLTZ: So let’s talk a little bit about that. You see behavior that sometimes it’s just — that looks pretty stupid. And sometimes it’s like, hey, this is looking a little suspicious, something doesn’t smell right here. What happens when your systems start flashing little alerts? Hey, look at this stock, something seems to be unkosher here. MARTIN: So that would be the job of reg to look at various trademarks. RITHOLTZ: Internally, the NYSE regulations. MARTIN: Yeah. They are a separate organization from the business, but they are an internal organization. And then, you know, they would either take enforcement action if it was suspicious activity, not stupid, not stupid. It’s not our job again to take views on whether or not a stock is worth something. That’s for the market to decide. And then if appropriate, refer it to the regulators. RITHOLTZ: So I would assume the NYSE has a fairly close relationship with the SEC and there’s probably a lot of back and forth on a regular basis. Tell us a little bit about that. How does the — MARTIN: Well, they are a regulator. We’re an SRO. So we do have a very close working relationship with them. We are — RITHOLTZ: So you’re a self-regulating organization. MARTIN: Yeah. RITHOLTZ: But you also have a, a relationship with the government regulator. MARTIN: Absolutely. Absolutely. RITHOLTZ: And I would imagine that’s a fairly productive relationship. MARTIN: It is. It is. Obviously, we have a very strong rule book. Anytime we make a change from a market structure standpoint from an order type standpoint, that has to be fully approved by the Commission. So we spend a lot of time with the SEC going through various rule changes. We want to introduce a new order type. We want to introduce a new — a different fee. There’s a variety of reasons why we need to do for filings. RITHOLTZ: So let’s use an example. I’m always — again, now I’m going to show my age. The circuit breakers from the ‘80s and ‘90s were pretty modest and things really had to go off the rails before they kicked in. Circuit breakers have very much been brought up to speed both on the broad market and individual companies. Tell us about the circuit breaker, is that coming from the NYSE? Is that coming from the SEC? MARTIN: So that is something in the wake of the volatility that has occurred at various points, various instances of stress in the market, whatever the case may be. RITHOLTZ: I mean, this goes back to ‘87, right? MARTIN: Absolutely. Pandemic. The market has really — the positive of every time there has been a challenge, the market has developed system safeguards, for lack of a better description. So — and they apply to all of the exchanges. So volatility halts, for example, we have volatility halts for securities, individual securities. But then we also have system halts when the entirety of the market has a certain drop. For example, you saw the market wide circuit breakers kick in, I believe, four times during the pandemic, really during the height of the pandemic and that’s — RITHOLTZ: March 2020. Yeah. MARTIN: Yeah. And the way that works is if the S&P is trading 7% below its opening level, it will automatically halt. RITHOLTZ: Opening level or previous close, how do you categorize that? MARTIN: Previous close. Previous close. Yeah. RITHOLTZ: So we close at 3000 and we open 210 points below that, there’s a halt right there? MARTIN: Yes. Yeah. RITHOLTZ: Makes sense. And individual companies, what are those circuit breakers like? MARTIN: It’s, I believe, 5% up or down. It will be at 10 halt. RITHOLTZ: So that’s a 10. And the first halt is — MARTIN: And actually, to be fair, it depends on the liquidity in the stock. It could be 5%. It could be wider, depending on the overall liquidity in market cap of the stock. RITHOLTZ: But when we — when we see a liquid stock take a 5%, or an 8%, or a 10% haircut, they tend to keep trading. MARTIN: You’ll have a very short halt, and then it will — RITHOLTZ: Just to let the book sort of rejigger? MARTIN: Correct. RITHOLTZ: So the first halt is how many minutes? Five minutes? MARTIN: I think it’s 10. RITHOLTZ: 10 minutes? MARTIN: Yeah. RITHOLTZ: All right. And then the second halt is longer. MARTIN: Yeah. And then if this continues to be a mess, it’s halted for the day. So the first, second, third strike, they’re out. We haven’t seen that in quite a while. What happens the next day when we reopen? How is that priced? Is it just the messages and orders, or is there a specialist trying to facilitate that? MARTIN: There is a specialist. That’s where the open — that’s where our market model shines. You have the opening auction and the closing auction, which again performed that function I mentioned earlier of smoothing out any imbalances, whatever the case may be to make for a smoother open and/or a smoother close. And that’s why when I mentioned earlier that we’ve seen two times less volatility at the open and three times less volatility at the close this year, that’s what I’m talking about. It’s the opening and the closing auctions. RITHOLTZ: Because a person is essentially — MARTIN: Because a person is trying to make sense of what’s going on. RITHOLTZ: Right. Smoothing that out and making it a little more balanced than it might have been. MARTIN: Correct. RITHOLTZ: And that means they’re also going at risk and taking positions to facilitate that. MARTIN: That’s right. RITHOLTZ: So you mentioned a couple of things I didn’t get to, I want to follow up on. One is the dual listing. So when a company is listed here and overseas, or is that the only reason to be a dual listing? How often — what are the other reasons to be — besides geographic, to be dual listed? MARTIN: A lot of times, it’s geographic. Very infrequently, there are some securities that are dual listed on us and our closest competitor in the U.S., but that’s very infrequent. So it’s typically to get access to a different group of investors. A lot of times you’ll also see a primary listing and then something called an ADR being listed in the U.S. where we’ll do the primary. And that’s more foreign issuers that want to have their primary listing on the home market, but then tap the liquidity in the U.S. market. So they’ll issue an ADR. RITHOLTZ: And then what about additions and subtractions? I know we occasionally see companies that were once smaller companies listed at what used to be considered regional exchanges — MARTIN: Yeah. RITHOLTZ: — graduate to the NYSE. And then every now and then, somebody, you know, is past their sell/buy date and they get de-listed. Tell us a little bit about what that process is like. MARTIN: Yeah. I mean, the de-listing process, you know, there’s a lot of things that go into the de-listing decision. RITHOLTZ: But it’s pretty mathematical, right? MARTIN: Yeah, it is. It is. RITHOLTZ: You know, check these boxes or — MARTIN: We’ve got — the reg has a variety of requirements to maintain your listing. It could be certain financial wherewithal. It could be the amount of shareholders, individual shareholders that are participating in your stock. So there is a formula that gets followed. RITHOLTZ: And what about the opposite? What about somebody graduating, for lack of a better phrase, to the NYSE? MARTIN: Yeah. And we’ve seen actually quite a few companies graduate to the NYSE this year alone. We’ve actually seen quite a few companies transfer to the NYSE this year. I think we’ve had 14 so far to date — RITHOLTZ: That’s a lot. MARTIN: — which is our best year on record. But we’ve seen — we have a smaller listings venue called NYSE American, which is for the smaller cap companies. And you know, we’re really happy when we see them graduate to the big board, for lack of a better description, because it means they’re having success. They’re having a tremendous amount of success in the public markets. RITHOLTZ: All right. Let me throw you a little bit of a curve ball. I’m going to ask you a question you can’t possibly answer, but I feel compelled to ask it. MARTIN: Awesome. RITHOLTZ: So I remember getting a tour of the floor of the exchange a million years ago, and it was giant room after room, after room down on Wall Street and Broad, and literally where physical chairs were being traded, traded physically person to person. That has slowly been computerized. That’s slowly been morphed into the modern market structure. But I have very fond memories of that massive building that takes up like two city blocks. Is there always going to be a physical exchange? This is the question that I don’t know if anybody can answer. But is there always going to be a physical exchange on Wall Street? At what point does that just, you know, become a venue for aftermarket IPO parties and things like that? MARTIN: There is always going to be the New York Stock Exchange at the corner of Wall and Broad. We’ve been here for 230 years, counting us being here for the next 230 years. We have survived many war, pandemic, volatility, crisis — RITHOLTZ: Explosions. MARTIN: — all sorts of — all sorts of unfortunate events. So there will always be an exchange at the corner of Wall and Broad. RITHOLTZ: That’s really good to hear. I have very fond memories of that. And not too far from there, the tour of the Federal Reserve gold. MARTIN: Federal Reserve, the vaults. Yeah. RITHOLTZ: Right. So those were — I think — I’m trying to remember if that was a high school teacher or a college teacher. It was ways ago. All right. So I know I only have you for a few minutes more. Let me jump to all my favorite questions we ask all of our guests, starting with what did you do to keep yourself entertained during the pandemic? What were you watching or listening to? (COMMERCIAL BREAK) MARTIN: Well, during the pandemic, I had the unique privilege of homeschooling two children in addition to doing my day job, which was focused on keeping the fixed income markets moving forward. So that was — that was a challenge. But I have to say I look back on it with fond memories, not just because our fixed income business provided a lot of transparency in a really opaque market, but also I got to spend some time — a lot of time with my kids. RITHOLTZ: That sounds like fun. Let’s talk about your mentors who helped to shape your career. MARTIN: I would say that I’ve had the opportunity to have mentors that have been bosses all throughout my career. It really started with my first project executive who was helping guide me through IBM, who taught me a lot of really important lessons that I still stay true to, one of which is you can never overcommunicate. But throughout my career, I’ve been lucky, fortunate that my bosses have always given me stretch jobs, where they give me an opportunity to do a job that maybe I didn’t have the background for, or I didn’t think I had the background for, but they thought I was the right person for that job. RITHOLTZ: Sounds interesting. What are some of your favorite books? What are you reading right now? MARTIN: Books are a challenge mainly because I have a finite amount of time in my day. Right now, you know, continuing to read a couple of interesting business books like, you know, I always go back to the Michael Lewis books because they’re just a good read — RITHOLTZ: Can’t beat them. MARTIN: — on top of anything. They’re a unique mix of storytelling and business, so it kind of scratches both itches, for lack of a better description. RITHOLTZ: Sure. I just reread Liar’s Poker — MARTIN: Yeah. RITHOLTZ: — on its 30th anniversary. It holds up surprisingly well. MARTIN: Yeah. RITHOLTZ: And you could see the outlines of, oh, it’s not quite a full Michael Lewis book, but there are hints of the writer he’s about to become. MARTIN: Yeah. RITHOLTZ: Really quite interesting. MARTIN: I also like Moneyball. Moneyball is one of my favorites. I mean, like that’s — RITHOLTZ: Hard to beat. MARTIN: You’re in baseball season. I’m a baseball fan. So therefore I’m going to, you know, focus on. RITHOLTZ: We may see the Mets go pretty deep into the playoffs this year. MARTIN: That I’m not going to — I’m going to hold my breath. We’re entering September and you know what usually happens to our boys from flashing in September, right? RITHOLTZ: They seem to be a little different team this year under another market participant, Stevie Cohen. MARTIN: You got to believe, right? RITHOLTZ: Listen, I grew up with, you know, the Lenny Dykstra era of you’re on the line and it’s so easy to get to Shea Stadium. MARTIN: Absolutely. RITHOLTZ: We used to go to games all the time and frequently to be disappointed, but so far — MARTIN: Well, I remember my first games were ‘85 and ‘86. RITHOLTZ: Oh, well, ’86 is — MARTIN: So I mean — and that’s when I just fell in love with them. RITHOLTZ: Bucky Dent and the little dribbler through the legs. That was it. MARTIN: Exactly. Like Bill Buckner and his name will go down in infamy I assume in Boston. But, man, I felt good in New York, right? RITHOLTZ: Yeah. MARTIN: So — and watching that team was a lot of fun with Strawberry and — RITHOLTZ: That’s right. MARTIN: — Ron Darling, who I think is a great broadcaster. By the way, he’s turned into a great broadcaster. RITHOLTZ: You know, they were always an interesting team, even if they didn’t bring home as many championships as the Yankees did. MARTIN: They were. They were. They were. I remember going to the Subway Series between them and the Yankees in the World Series in 2000, I think that was. And — RITHOLTZ: Is that a playoff or — MARTIN: No. They were in the World Series together. RITHOLTZ: Really? 2000 is kind of a blur to me. MARTIN: There you go. RITHOLTZ: That was like ’08, ’09, that year was a little bit of a blur. Our last two questions, what sort of advice would you give to a recent college grad who was interested in a career involving data services, listed stocks, any sort of trading or exchange-based work? MARTIN: The advice that I would give is to, in some respects, expect the unexpected. And what I mean by that is your traditional degrees aren’t necessarily going to be what’s going to make you successful. So be intellectually curious about the things, not just involved in finance. Be intellectually curious about the technology under that underpins the systems. And clearly, never be afraid to speak up if you want an opportunity, or take on an additional project that may not be in your day to day, but maybe something that is just an area that interests you. RITHOLTZ: Interesting. And our final question, what do you know about the world of data services, exchanges, market trading and public companies today you wish you knew 20 or so years ago? MARTIN: That is a great question. RITHOLTZ: We save it for last for a reason. MARTIN: I guess I wish I knew how important — I wish I knew how important the role of the programmer was going to become in financial markets. I understood then that, effectively, fair value was determined by a variety of mathematical — a bunch of math, for lack of a better description. Those mathematical models became much more sophisticated over time. But I don’t know that I fully appreciated that the guy or girl who is writing the code was going to be the one that was interacting with the systems 20 something years ago, and the importance of efficient interaction. RITHOLTZ: Quite fascinating. We have been speaking with Lynn Martin. She is president of the New York Stock Exchange. Thank you, Lynn, for being so generous with your time. If you enjoy this conversation, be sure and check out all of our previous 400 or so podcasts we’ve done over the past eight years. You can find those at iTunes or Spotify, or wherever you get your favorite podcast from. We love your comments, feedback, and suggestions. Write to us at Sign up for my daily reading list at Follow me on Twitter @ritholtz. I would be remiss if I did not thank the crack team who helps put these conversations together each week. Bob Bragg is my audio engineer. Paris Wald is my producer. Atika Valbrun is our project manager. Sean Russo is my head of Research. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio. END   ~~~     The post Transcript: Lynn Martin appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureSep 7th, 2022

Futures Jump As China Adds Fresh 1 Trillion Yuan Stimulus; J-Hole Forum Begins

Futures Jump As China Adds Fresh 1 Trillion Yuan Stimulus; J-Hole Forum Begins Futures jumped overnight after China revealed its latest massive stimulus (which however is still woefully insufficient to prop up the country's crashing housing sector) steadied nerves in the anxious wait for Jerome Powell's key speech at 8am tomorrow, where the only question is will it be even more hawkish than the market expects, or will it meet expectations, and send dollar and yields tumbling and stocks soaring. Shortly after 2am ET, China stepped up its economic stimulus with a further 1 trillion yuan ($146 billion) of funding largely focused on infrastructure spending, support that analysts quickly agreed won’t go far enough to counter the damage from repeated Covid lockdowns and a property market slump.  The State Council, China’s Cabinet, outlined a 19-point policy package on Wednesday, including another 300 billion yuan that state policy banks can invest in infrastructure projects, on top of 300 billion yuan already announced at the end of June. Local governments will be allocated 500 billion yuan of special bonds from previously unused quotas. However, as has been the case for the past 2 years with Beijing's drip-drip stimulus, economists were downbeat on the measures, while financial markets were muted. The yield on 10-year government bonds rose 2 basis points to 2.65%. China’s CSI 300 Index of stocks rose as much as 0.6% before paring gains to trade up 0.3% as of 2:28 p.m. local time. A similar reaction was observed in US futures which initially spiked by nearly 30 points, reaching a high of 4187.5 before fading most of the gains; emini futures traded +0.6%, or 25 points higher, at 7:30am  ET, while Nasdaq futures were up 0.85%.  Emerging-market stocks also rallied the most in two weeks on the Chinese stimulus news, only to see gains fade. Treasury yields and a dollar gauge dipped, while the crypto space rose on China's stimulus. The Chinese-inspired gains failed to stick as traders expect markets to remain volatile as they look to Powell’s comments due Friday at the Jackson Hole meeting for clues on the pace of US monetary tightening. Fed officials in the run-up to Jackson Hole have been clear they see more monetary tightening ahead, a message that’s eroded a bounce in stocks and bonds from mid-June troughs. The tension in markets is whether those assets will continue to head back toward the lows of the year. “Powell is likely to push back on premature expectations of a dovish pivot, reiterating the focus on the fight against high inflation,” said Silvia Dall’Angelo, a senior economist at Federated Hermes Ltd. “Whether markets take him seriously amid an increasingly gloomy outlook for the global economy is yet to be seen.” In premarket trading, Chinese stocks in the US rallied amid recent positivity over Beijing boosting stimulus with a further 1 trillion yuan of funding, and as the country takes measures to shore up its currency. Tesla shares rose 2% as the electric-vehicle maker’s 3-for-1 stock split takes effect, confirming US markets remain dominated by idiots. Snowflake shares soared ~17% in premarket trading after the infrastructure software company reported second-quarter revenue that beat expectations and raised its full-year forecast for product revenue. On the other end, Nvidia shares slide ~4% in premarket trading after the chipmaker, which preannounced a month ago and gave a dire forecast, did it again and gave a third- quarter revenue forecast that was below expectations as demand for chips used in gaming computers slipped. Other notable premarket movers: Salesforce (CRM US) shares are down 6.6% in premarket trading after the application- software company reported second-quarter results that beat expectations but lowered its full-year forecast. Analysts note that the company’s forecast is being hit by FX headwinds and delays in closing large deals. Teladoc Health (TDOC US) shares climb 5% in premarket trading after Amazon says it will close its primary care and telehealth service by the end of the year. Bed Bath & Beyond (BBBY US) shares rose as much as 6% in US premarket trading before turning lower. The fluctuation follows a report that the home furnishings retailer is nearing a $375 million loan deal with Sixth Street Partners. Kinetik (KNTK US) initiated with an equal-weight recommendation and Street-high price target at Morgan Stanley, which says the midstream services company offers an “attractively positioned set of Permian midstream assets run by a growth-oriented management team.” NetApp (NTAP US) shares were up ~4% in extended trading after the computer hardware company reported first-quarter results that beat expectations and affirmed its forecast. Analysts note the company continues to see broad-based demand strength, despite supply challenges and FX headwinds. In Europe, the Stoxx 50 rose 0.3%, paring an earlier advance amid mixed economic data from the region’s biggest economy. Energy and basic resources stocks were the biggest gainers, with retailers underperforming. Sovereign bonds across Europe gained led by short-end bonds. IBEX outperforms, adding 0.6%, FTSE MIB lags, adding 0.1%. In fixed income, short-end bonds lead the move. Here are some of the biggest European movers today: Harbour Energy shares jump as much as 13%, the most since November 2020, as analysts applaud an increased buyback and strong cash flows. Jefferies says 1H results “beat on all metrics” Ambu rises as much as 11% on its latest earnings, which were in-line with figures released on Aug. 3. Handelsbanken sees a “no drama” report and DNB highlights a positive free cash flow Rentokil gains as much as 2.7% after JPMorgan put the pest control company on a positive catalyst watch as the closing date for the Terminix acquisition nears Hunting rises as much as 19% after the company posted better-than-expected profitability, while the outlook for the rest of 2022 and 2023 is positive Yara gains as much as 2.8% as Citi flags rising demand for fertilizers. Yara earlier said it would cut production, citing record gas prices Tessenderlo climbs as much as 8.1% to a level last seen in April after the Belgian chemicals company raised annual guidance again and said it sees adjusted Ebitda for the year rising 15% to 20% Komax rises as much as 5% after Credit Suisse raises the wire processing machines maker to outperform, seeing its recent merger with Schleuniger as highly- accretive Elekta falls as much as 11%  after the firm presented its latest earnings. Jefferies noted a “disappointing” drop in order intake, while Handelsbanken flags a soft outlook Baloise drops as much as 7.6%, hitting the lowest since March, after the Swiss financial services firm reported solid, “yet unspectacular” results, according to Vontobel Daetwyler falls as much as 6.3%, the most since May, as Credit Suisse cut its price target on the rubber components and seals maker following its results in the prior session Grafton declines as much as 5.4% after reporting 1H profit that missed expectations. The company said the weakness was due to hot weather in the UK and less construction activity Earlier in the session, Asian stocks rebounded strongly after a five-day loss to head for their biggest advance since the end of May, boosted by a late surge in Hong Kong shares. The MSCI Asia Pacific Index climbed as much as 1.6% late in the Asian day, with Hong Kong-listed Chinese tech stocks like Alibaba and Tencent being the biggest contributors to its gain. The gauge’s increase earlier in the session was driven by export-heavy markets like Korea and Taiwan as the dollar weakened. The Hang Seng Index surged 3.6%, the most since April 29, leading the late regional rebound that some traders attributed to short-covering ahead of a key speech by Federal Reserve Chair Jerome Powell at the Jackson Hole conference. The morning trading session in Hong Kong was suspended due to a tropical storm warning. The amount of bearish bets against Hong Kong stocks rose to levels that could trigger a surge in share prices as traders rush to close out their positions, according to quantitative analysts at Morgan Stanley. A gauge of Chinese tech names listed in the financial hub soared 6%. It is still down about 25% this year. Markets have been edgy ahead of Powell’s speech, with the MSCI Asia gauge losing 3.1% in the last five sessions. Thursday’s move looks like “pre-positioning,” said Justin Tang, the head of Asian research at United First Partners. “Investors are taking positions on expectations” of a less hawkish commentary from Powell, he said. Chinese stocks on the mainland also rose as the nation stepped up measures to bolster growth with a further 1 trillion yuan ($146 billion) of stimulus. South Korean shares gained on foreign buying even after the nation’s central bank raised its key interest rate by 25 basis points, while Taiwanese stocks also climbed. “It may be a combination of risk-on sentiment across the region heading into Jackson Hole and the China support measures,” said Marvin Chen, a strategist with Bloomberg Intelligence. “Growth, tech and offshore-listed China stocks are leading gains suggesting that Fed meeting may be playing a bigger role in the late-day move.” Japanese equities advanced, with the Nikkei 225 posting its first gain in six sessions, as the market looked ahead to remarks Friday from Fed Chair Jerome Powell at the Jackson Hole meeting. The Nikkei rose 0.6% to close at 28,479.01, while the Topix added 0.5% to 1,976.60. Daiichi Sankyo Co. contributed the most to the Topix gain, increasing 4.6%. Out of 2,170 shares in the index, 1,445 rose and 597 fell, while 128 were unchanged. “Investors will continue to take a wait-and-see stance until after the speech by Chairman Powell scheduled for the 26th,” said Takashi Ito, a senior strategist at Nomura Securities. “After a round of buying, there is a possibility that there will be a small drop.”  Australia,'s S&P/ASX 200 index rose 0.7% to close at 7,048.10, driven by gains in banks and mining shares. The materials sub-gauge rallied to its highest level since June 16, amid advances in iron ore prices.  Uranium company Paladin was the top performer, surging after Japan said it is planning a dramatic shift back to nuclear power more than a decade on from the Fukushima disaster. City Chic was the biggest decliner after it flagged an uncertain outlook.  In New Zealand, the S&P/NZX 50 index fell 0.2% to 11,627.14 In FX, the Bloomberg Dollar Spot Index fell as the greenback weakened against all of its Group-of-10 peers. The Aussie led G-10 gains, jumping as much as 1.1% against the greenback as traders turned more optimistic after China announced fresh economic stimulus with a further $146 billion of funding largely focused on infrastructure spending. Australia’s dollar outperformed the kiwi after New Zealand reported disappointing retail sales data. The euro rose to briefly trade above parity against the dollar. Germany’s economy proved more resilient than initially thought in the second quarter, growing 0.1% despite surging inflation and the war in Ukraine; the initial reading was 0%. Separately, German Aug. Ifo business confidence came in at 88.5 vs est. 86.8. The gauge of business expectations for the next six months inched down to 80.3 from 80.4, but better than forecast 79.0. Yen rose on flows-driven trade amid a decline in US yields and general dollar weakness during Asian hours In rates, Treasury futures were off session highs into the early US session, although yields remained richer by 1bp-2bp across the curve, following wider gains across UK gilts where 10s rally as much as 7bp on the day. US 10-year yields around 3.09%, richer by ~1bp on the day with bunds and gilts outperforming by 2bp and 5bp in the sector; curves steady with gains seen across maturities. US auctions conclude with 7-year note sale at 1pm New York time. European bonds advanced in a rally that was led by Italian bonds. Gilts outperform USTs and bunds; gilts 2-year yields drop ~10bps to 2.81%. USTs push higher, led by the belly.  Bunds 2-year yield down about 5.5bps to 0.85%. Peripheral spreads tighten to Germany with 10y BTP/Bund narrowing 5.1bps to 225.7bps.  Benchmark 10-year JGB yield climbed to its highest in more than a month. The yield on China’s 10-year government bonds rises the most since June 27 after the State Council outlined a 19-point policy package to stimulate the economy. The 10-year yield advanced 3bps to 2.66% while the 30-year note yield gained 3bps to 3.14%. Bitcoin is essentially unchanged but closer to the top-end of circa. USD 500 parameters that reside well within the USD 21k area. WTI jerked drifts 0.4% higher to around $95 after the WSJ reported that the OPEC president is open to cutting oil production. Most base metals trade in the green; LME copper rises 1.4%, outperforming peers. Spot gold rises roughly $13 to trade near $1,764/oz.  Natural gas has surged to fresh highs, intensifying an energy crisis that threatens the euro-area economy and hence the global outlook. Looking at the day ahead, data releases from the US include the weekly initial jobless claims, the second estimate of Q2 GDP and the Kansas City Fed’s manufacturing activity in index. In Germany there’s also the Ifo Institute’s business climate indicator for August. Otherwise from central banks, we’ll get the account of the ECB’s July meeting. Market Snapshot S&P 500 futures up 0.9% to 4,179.50 STOXX Europe 600 up 0.7% to 435.05 MXAP up 1.6% to 160.34 MXAPJ up 2.0% to 523.18 Nikkei up 0.6% to 28,479.01 Topix up 0.5% to 1,976.60 Hang Seng Index up 3.6% to 19,968.38 Shanghai Composite up 1.0% to 3,246.25 Sensex up 0.5% to 59,385.35 Australia S&P/ASX 200 up 0.7% to 7,048.13 Kospi up 1.2% to 2,477.26 German 10Y yield little changed at 1.35% Euro up 0.4% to $1.0004 Gold spot up 0.8% to $1,765.17 U.S. Dollar Index down 0.45% to 108.18 Top overnight news from Bloomberg China stepped up its economic stimulus with a further 1 trillion yuan ($146 billion) of funding largely focused on infrastructure spending, support that likely won’t go far enough to counter the damage from repeated Covid lockdowns and a property market slump As the countdown to the Jackson Hole symposium begins, an abrupt shift has taken place in the options market. When trading got underway in Asia on Thursday, investors had to pay more for options which benefit when dollar-yen rises. Just a few hours later, the premium had shifted in favor of options that benefit when the currency pair falls European natural gas extended its blistering rally as the worst supply crunch in decades boosts pressure on politicians to do more to rescue industries and households. Benchmark futures jumped as much as 8.1%, after closing at a record on Wednesday The good news is that Ukraine’s crucial grain is leaving its ports again. The bad news is that farmland lost to the war and weak local prices are threatening its next wheat harvest Climate change is having a “clear impact” on inflation in the euro area, ECB President Christine Lagarde said in an interview The current state of the economy and prices doesn’t allow the Bank of Japan’s easing bias to be shifted to neutral, board member Toyoaki Nakamura tells reporters A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks took impetus from the positive handover from Wall St but with gains capped as attention remained on the looming Jackson Hole Symposium. ASX 200 was led higher by commodity stocks after the recent upside in energy and precious metals. Nikkei 225 was underpinned as the government mulled a further loosening of COVID rules and is expected to extend local travel incentives through next month. Shanghai Comp was initially choppy amid the absence of Stock Connect flows after morning trade in Hong Kong was cancelled, although the mood gradually improved with Hong Kong opening for the afternoon session after the storm signal 8 was dropped and following the recent support pledges by China. Top Asian News Chinese Industry Ministry says will accelerate research and development of new types of batteries including sodium-ion batters and hydrogen energy storage batteries; will improve supply capabilities of key resources including lithium, nickel, cobalt and platinum. Some of China's sate-backed financial firms are said to be pushing back on calls to support the Chinese property sector amid the exposure risk on their balance sheets, according to sources cited by Reuters. BoK hiked its base rate by 25bps to 2.50%, as expected, with the decision unanimous. BoK said inflation will remain high for the time being and export growth is to slow, while Governor Rhee said strong inflation could last longer than previously seen. Furthermore, Rhee noted that policies will continue to be inflation-focused for a while and said there will be no change in the 25bps rate increase stance for the foreseeable future. China Human Resources Ministry official said they will focus on expanding jobs and will promote fiscal, monetary and industrial policies to support job market stabilisation, according to Reuters. European bourses are essentially unchanged, Euro Stoxx 50 -0.1%, as an initial pronounced foray higher around the cash open that occurred without driver has dissipated since. Fresh drivers have been slim with the German Ifo release sparking a brief extension on initial gains of circa. 50 points in Euro Stoxx 50, for instance. Stateside, futures remain modestly firmer but are similarly off best levels, ES +0.5%, ahead of Jackson Hole beginning today (Powell on Friday). Top European News ECB's Lagarde says "we can no longer rely exclusively on the projections provided by our models – they have repeatedly had to be revised upwards over these past two years.". Private Jet Shortage Hits English Football’s Pre-Match Prep Veolia Must Sell 3 Businesses to Complete Suez Deal, UK Says Germany Aug. IFO Business Confidence Index 88.5; Est. 86.8 London’s Stock Market Misery Grows as Delistings Add to IPO Woes Commodities WTI and Brent October contracts consolidated in the early hours following a session of gains yesterday. Spot gold is edging higher in tandem with the decline in the Dollar, with the yellow metal approaching its 50 and 21 DMAs. Base metal futures are mostly firmer amid the softer Dollar, with 3M LME copper making its way further above USD 8,000/t. Caspian Pipeline Consortium says the SPM-3 inspection has completed, mooring point is fine to work, via Reuters. Italian government to update emergency plan for gas next week; will not announce gas rationing plan for now, according to Reuters citing government sources; to include tougher measures in case of further cut or stop of Russian gas flows. German Network Regulator VP says is on right track with gas storage but more must be done; will reach 85% storage by October 1st Fixed Income Core benchmarks have derived a pronounced upward bias, despite pronounced pressure alongside initial equity strength and post-Ifo. Pressure which has dissipated and given way to modest across the board strength with Bunds eyeing 151.00, Gilts above 111.00 and USTs firmer by 4 ticks. Yield dynamics are mixed and are modestly off earlier WTD peaks given the above action, US 7yr due, Central Banks ECB's Lagarde says "we can no longer rely exclusively on the projections provided by our models – they have repeatedly had to be revised upwards over these past two years.". BoJ Board Member Nakamura says JPY has weakened significantly so far this year, high volatility has had big impact on Japan's economy; premature to tweak the BoJ's dovish guidance now, there are pros and cons to soft JPY, therefore will watch carefully but there is not much the BoJ can do as moves are driven by changes in US economy. South Korean Presidential Office says closely monitoring forex markets, will take timely measures to stabilise the market. Fed's Bostic (2024 Voter) says he has not decided whether a 50bp or 75bp increase is appropriate in September, at this point it is a coin toss, via WSJ. Key employment and inflation reports are due prior to the meeting, if data remains strong and inflation clearly doesn't soften then it may make the case for another 75bp move. Too soon to say the inflation surge has peaked, some hopeful signs. Cautioned that expectations the Fed could reverse course in short-order and reduce rates fairly soon is misguided. Upbeat on the economic outlook. US Event Calendar 08:30: 2Q GDP Annualized QoQ, est. -0.7%, prior -0.9% Personal Consumption, est. 1.5%, prior 1.0% GDP Price Index, est. 8.7%, prior 8.7% PCE Core QoQ, est. 4.4%, prior 4.4% 08:30: Aug. Initial Jobless Claims, est. 252,000, prior 250,000 Continuing Claims, est. 1.44m, prior 1.44m 11:00: Aug. Kansas City Fed Manf. Activity, est. 10, prior 13 DB's Jim Reid concludes the overnight wrap It’s been an eventful 24 hours for markets, with sovereign bonds selling off again as investors keep ratcheting up their expectations for central bank rate hikes over the months ahead. Fed Chair Powell’s speech at Jackson Hole tomorrow could throw some more light on how far they’ll go, but the rise in yields has shown no sign of relenting ahead of that, not least since the energy situation in Europe keeps getting worse. In turn, that’s adding to fears that “peak inflation” might not actually have arrived yet for some countries, whilst policymakers are about to face some unenviable choices as they grapple with the worst stagflation we’ve seen in decades. In terms of the specific moves yesterday, European natural gas futures (+8.59%) settled at another record high of €292 per megawatt-hour amidst growing supply concerns as we head towards the winter months. That wasn’t helped by the news after the European close the previous day, as Freeport LNG said that their natural gas terminal in Texas wouldn’t restart until early to mid-November, having previously been aiming for October. In addition, there’s also the usual Russian supply issues of late to contend with, and there are serious worries that flows through the Nord Stream pipeline might not resume at all following maintenance for three days from August 31. There wasn’t much respite to be found elsewhere either, as German power prices for next year hit a fresh record of their own at €643 per megawatt-hour. With these supply shocks continuing to fester, investors moved to price in an increasingly aggressive response from central banks. In fact for the ECB, the hikes now priced in for 2022 are the most rapid we’ve seen to date, with an additional +133bps priced by year-end on top of the +50bps we already had in July. And looking further out, overnight index swaps are pricing in +194bps of hikes by June 2023 relative to today, which is up by +9.1bps on the day before. So it was little surprise that sovereign bonds lost ground across the continent, with yields on 10yr bunds (+5.2bps), OATs (+6.8bps) and BTPs (+3.5bps) all moving higher. Here in the UK those moves were even more pronounced, with gilts underperforming European sovereigns for a 7th consecutive session. That continues a pattern we’ve seen since the release of the stronger-than-expected UK CPI print last week, as investors have also moved to price in faster rate hikes from the Bank of England. Unlike their continental counterparts however, gilt yields are now at multi-year highs once again, with the 10yr gilt yield (+12.2bps) closing at its highest level since 2014, at 2.69%. Furthermore, the 2s10s curve in the UK flattened a further -9.7bps, leaving it deeper in inversion territory than at any time since 2008. Over in the US, all attention is on what Fed Chair Powell might say tomorrow at the Jackson Hole symposium in Wyoming. Nevertheless, the performance for Treasuries echoed what happened in Europe, with 10yr yields up +5.8bps on the day to 3.10%, which is their highest level since late June. They’ve remained fairly stable around those levels overnight too, coming down just -0.9bps. Given the US faces a more favourable situation on the energy side, the moves in central bank pricing weren’t as pronounced as in Europe yesterday. But the peak rate priced in by Fed funds futures for March 2023 still rose +3.5bps on the day as investors continued to adjust their policy expectations closer towards the more hawkish rhetoric from FOMC officials. Equities weren’t too affected by those developments on the rates side yesterday, with the S&P 500 (+0.29%) paring back its initial losses to end a run of 3 consecutive declines. Tech stocks were a big outperformer, with the FANG+ index (+0.96%) of megacap tech stocks seeing sizeable gains, while the NASDAQ (+0.41%) also put in a decent performance. A number of European indices did lose ground on the day however, including the UK’s FTSE 100 (-0.22%) and Spain’s IBEX 35 (-0.35%), although the broader STOXX 600 did manage to advance +0.16%. That trend from the US has continued in Asian markets overnight, where equities are broadly trading higher. One supportive factor has been a further package of measures from China’s State Council that includes 1 trillion yuan focused largely on infrastructure spending. That’s bolstered the Shanghai Composite (+0.41%) and the CSI (+0.13%), although both are lagging the Nikkei (+0.56%) and the Kospi (+0.89%). The latter has seen strong gains after the Bank of Korea only hiked rates by 25bps overnight, marking a step down from the 50bps hike at the July meeting, yet the South Korean Won has still strengthened +0.43% against the US Dollar this morning. The Bank of Korea also moved their forecasts in a stagflationary direction, raising their inflation projection for this year to 5.2%, and cutting their growth forecast to 2.6%. Looking forward, US and European equity futures are pointing towards additional gains today, with those on the S&P 500 up +0.35%. Back on the energy scene, another notable trend over the last week has been a decent recovery in oil prices, with Brent Crude (+1.0%) closing at its highest level so far this month, at $101.22/bbl. And this morning it’s seen further gains as well, up +0.56% to $101.79/bbl. Bear in mind that early last week it had closed at $92.34/bbl, so that’s a recovery of just over +10% since that point. That echoes the recovery we’ve seen in commodities more broadly over recent weeks as well, with Bloomberg’s Commodity Spot Index (+0.67%) closing at a 2-month high yesterday. Separately, we heard from President Biden yesterday, who announced student debt relief of up to $10,000 for those with an individual income of less than $125,000. For Pell Grant recipients, the relief would be up to $20,000. Furthermore, the current pause on federal student loan repayments is being extended again through the rest of 2022, taking that beyond the mid-term elections in November. Speaking of the midterms, there are signs that the Democrats’ political fortunes are continuing to rise after they won the special election for New York’s 19th congressional district, which had been a closely watched swing race. In addition, FiveThirtyEight’s forecast for the Senate now gives the Democrats a 64% chance of retaining control, their highest number to date. For the House, their model puts them at a 22% chance of retaining control. On the data side yesterday we had a mixed set of releases from the US. On the positive side, the preliminary reading for core capital goods orders in July showed a +0.4% gain (vs. +0.3% expected), and the previous month also saw an upward revision of two-tenths to +0.9%. Durable goods orders were unchanged (vs. +0.8% expected), although excluding transportation they were up +0.3% (vs. +0.2% expected). Finally, pending home sales fell -1.0% to their lowest level since April 2020. That was better than the -2.6% decline expected, but if you exclude April 2020 during the lockdowns then you’ve got to go back to September 2011 to find a lower reading for that index, which echoes the decline in various housing indicators we’ve seen recently. To the day ahead now, and data releases from the US include the weekly initial jobless claims, the second estimate of Q2 GDP and the Kansas City Fed’s manufacturing activity in index. In Germany there’s also the Ifo Institute’s business climate indicator for August. Otherwise from central banks, we’ll get the account of the ECB’s July meeting. Tyler Durden Thu, 08/25/2022 - 08:04.....»»

Category: blogSource: zerohedgeAug 25th, 2022

Financials ETFs: Can the Rebound Continue?

Bank stocks had taken a beating earlier this year due to recession fears Financials stocks had unperformed the broader indexes earlier this year due to concerns that the Fed’s aggressive tightening campaign to tame inflation would push the economy into a recession.Results reported by six biggest US banks suggested that the economy could manage a “soft landing” while the Fed raises rates. Investors closely watch bank earnings since they are a good indicator of the health of the broader economy, consumers, and businesses.Bank stocks have rebounded since mid-June as some investors believe that much of the bad news is already priced in and valuations look attractive at current levels.The Financial Select Sector SPDR Fund XLF is the most popular and one of the cheapest products in the space. It holds S&P 500 financial stocks. Berkshire Hathaway (BRK.B), JPMorgan Chase & Co. JPM and Bank of America BAC and are its top holdings.The SPDR S&P Regional Banking ETF KRE tracks an equal-weighted index of regional banks. The Invesco KBW Bank ETF KBWB holds large money centers, regional banks & thrift institutions.To learn more about these ETFs, please watch the short video above.  Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bank of America Corporation (BAC): Free Stock Analysis Report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis Report Financial Select Sector SPDR ETF (XLF): ETF Research Reports SPDR S&P Regional Banking ETF (KRE): ETF Research Reports Invesco KBW Bank ETF (KBWB): ETF Research Reports To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksAug 23rd, 2022

Much More Demand Destruction Needed: Why Goldman Sees Oil Prices Surging By Year-End

Much More Demand Destruction Needed: Why Goldman Sees Oil Prices Surging By Year-End The recent plunge in the price of oil, which has dropped by more than 25% from its post-Ukraine war highs, may be delighting the Biden administration (since presidential approval ratings tend to be inversely correlated to gas prices), but has stumped investors and energy market watchers alike. And not just because the growing chasm between the physical market – which remains extremely tight and allows Aramco to demand Asia pay ever higher prices for its products – and the futures market has been likened to the relationship between Dr Jekyll and Mr Hyde. Market watchers have been further perplexed by the White House eagerness to take credit for the collapse in oil prices even though most attribute the ongoing commodity bear market to the upcoming (or current) recession, for which the Biden administration is responsible. In fact, some have gone so far as to accuse the administration of indirectly (or directly) influencing the EIA to make gasoline demand appear lower than it actually is to further hammer oil prices. To be sure, it’s not just fears of an economic recession: oil prices have also been driven by low trading liquidity and a mounting wall of worries including China’s zero-Covid policy and real estate sector, the US SPR release, and Russian production recovering well above expectations. Yet through it all, commodity analysts at the most influential US bank, Goldman Sachs, have remained steadfastly bullish and in a lengthy note published over the weekend titled “Down but not out” (available to professional subscribers), Goldman strategist Damien Courvalin writes that “that the case for higher oil prices remains strong, even assuming all these negative shocks play out, with the market remaining in a larger deficit than we expected in recent months.” That said, Goldman acknowledges that reiterating the bank’s bullish view requires addressing the divergence between Brent prices, which have averaged $110/bbl in June-July and are trading below $100 in early August, and the $160/bbl Brent-equivalent global retail fuel price. Courvalin draws three takeaways from this disconnect. The good: until the recent collapse, retail prices - while not tradable -came in close to Goldman’s forecasts despite all the current macro uncertainties. The bad: the disconnect between retail and Brent financial prices was much wider than the bank expected, keeping Brent futures well its $130 June-July forecast. The ugly: Goldman’s retail price forecast did not result in enough demand destruction to end the deficit. The last point is key and is why as it updates its supply and demand forecasts, Goldman believes that the oil market will remain in unsustainable deficits at current prices, and is why the bank forecasts that the oil market still requires oil demand destruction on top of the ongoing economic slowdown. This, the bank warns, requires a sharp rebound in retail fuel prices - the binding constraint to balancing the oil market - back to $150/bbl Brent equivalent prices, equivalent to US retail gasoline and diesel prices reaching $4.35 and $5.45/gal by 4Q22. * * * Before we dig deeper into the Goldman analysis, let’s take a quick detour into the key question of the abovementioned oil price disconnect: what is the right oil price? As Goldman explains, at the conceptual level two prices matter for modeling the oil market: (1) the retail price of fuels paid by consumers as it drives demand elasticity and (2) the crude price received by producers as it drives supply elasticity. Up until 2021, retail prices followed a stable relationship to Brent prices, leading the bank and its peers to use Brent prices as a common input for both sides of their fundamental modeling. This is however no longer the case, due to significant distortions to each of the steps required to transform crude oil coming out of the ground into fuels consumed by producers. Understanding this disconnect is all the more important since Goldman’s key tradable forecast is for Brent futures while its current framework is based on the view that retail prices are the key balancing mechanism for the oil market given record low inventories and the lack of supply elasticity. This leaves the bank solving for retail prices in its fundamental modeling, the level at which demand elasticity is achieved, and subsequently deriving its Brent futures price forecast. As such, the bank expresses retail fuel prices as a “consumer” facing Brent price, the Brent price it estimates consumers, and the global economy, actually pay for. Looking back, Goldman’s Brent price forecasts for June and July were $125 and $140/bbl - this was the bank’s expectation for the average level of the front-month contract on the ICE exchange. Furthermore, Goldman’s mapping into retail prices had it expecting a Brent consumer price of $150-160/bbl. Brent futures have instead averaged $117 and $105/bbl - below Goldman’s forecasts - while the Brent consumer price has been $150-170 - slightly above its forecast. Quite a disconnect. What’s behind this disconnect? According to Goldman, the much wider than expected gap between Brent physical prices (i.e. Dated Brent, not ICE Brent futures) and global retail fuel prices in Brent-equivalent terms (c.$45/bbl on average in June-July) can be linked to the Russian energy and EU gas crises, where three of the five moving parts the bank has identified have had an outsized impact: clean freight, EU natural gas prices and the USD, all due to the ongoing Russian energy sanctions. This was only slightly offset by weaker refining margins in July (which we had expected) and continued efforts by governments to suppress retail prices through tax reliefs and subsidies. The disconnect between retail fuel prices and Brent financial prices (traded on ICE) was even larger, due to a record wide premium of physical over financial barrels. According to Goldman, the growing lack of financial participation in the commodity futures market helps explain this record wide premium as well as the recent new collapse in Brent prices as well as the current extreme level of crude backwardation. The catalyst for this break was initially fundamental but is now financially self-reinforcing, as we recently discussed. The Covid shock and sanctions on Russia were two unprecedented fundamental disruptions, with initial fears for even greater shocks. This drove price volatility sharply higher, a move quickly exacerbated by extreme inventory levels. Importantly, this volatility forced investors away from commodities, further supporting volatility. A key driver for this self-reinforcing mechanism is the use of value at risk (VaR), the dollar notional measure of at risk capital in a portfolio. When prices and volatility rise, so does the VaR associated with a given volume of commodities, forcing commodity market risk managers to reduce the size of their trades, leaving shrinking positions in barrel terms even if the size of the physical market hasn’t changed. A similar argument holds for banks and dealers, which significantly reduces the ability for producers to hedge, further limiting their ability to invest in future production as reinvestment rates need to be reduced to match higher volatility in oil prices. Why does this matter, especially since Goldman has previously argued that commodities are real assets, pricing today’s supply and demand imbalances and unable to borrow from future supply? Well, the key is that investors’ trading of commodity futures helps translate expected shifts in supply and demand into immediate price signals. In essence, investors’ participation helps smooth out fundamental shocks, incentivizing supply and demand elasticities to prevent stock-out outcomes. For example, Goldman’s modeling shows that oil forward curves are typically most responsive to three-month forward changes in inventories, with the corn vs. onion price volatility chasm the classic example as only the former - much less volatile - is tradable by investors. Which is not to say that the formation of physical commodity prices is broken (at least not yet), especially since retail prices still accurately reflect a very tight physical market in recent months. Instead, it is the pass-through to financial commodity futures that is currently distorted due to the conflict in Russia. First, the significant uncertainty that occurred as sanctions were applied on Russia kickstarted the volatility trap that has pushed investors out of commodities, creating a gap between financial crude and physical crude prices and driving the latest price fall. Second, the gas shortage in Europe is the primary cause for the unprecedented value gap between physical crude and retail fuel prices as it causes (1)historically elevated refining margins (on higher natural gas input prices and lost Russian refining capacity), and (2) the strength in the USD (which reduces the need for USD crude rally), (3) the unprecedented strength in gas-to-oil substitution for power generation which will exacerbate the tightness in diesel. *** Having covered the disconnect between retail fuel prices and Brent prices, Goldman next explains why Brent financial oil prices still have to rise due to four key drivers: (1) the bank’s updated fundamental supply and demand expectations, (2) the level of retail fuel prices needed to balance the oil market through demand elasticity (the only buffer left in the face of record low inventories and inelastic supply), (3) the expected gap between these retail fuel prices and Brent physical prices, and finally (4) how the recent investor exodus from commodity futures markets will evolve, driving the wedge between Brent physical and Brent financial prices. Goldman’s response to these four key drivers is laid out in the following 6 bullet points: Goldman’s updated fundamental forecasts point to continued disappointments in supply, with demand instead supported by the still ongoing Covid reopening and gas-to-oil substitution. This will leave markets in open-ended deficits at current spot prices. This is the key to the bank’s still bullish view as commodity markets need to balance and inventories can’t go to zero. This requires demand destruction on top of the ongoing economic slowdown, requiring high retail fuel prices to end the market deficit. Even cautiously assuming weaker economic growth than our economists, this leaves the bank forecasting that consumer Brent prices will need to average $150/bbl in 4Q22 and in 2023. Updating the bank’s EU gas, refining margin and USD assumptions, it now expects the differential of Brent-equivalent consumer prices to Brent physical prices to average a more modest $27/bbl in 4Q22 vs. the exceptionally wide $45/bbl seen in June/July and the $15/bbl that the bank had expected previously over 2H22. With refinery runs surprising to the upside this summer - the primary reason for the compression in refinery margins recently – Goldman expects refining margins to average $10 vs. $14/10/bbl previously for 2H22/2023. Forecasting how the lack of financial participation in Brent futures will evolve is much harder, however, leaving Goldman – which itself is one of the biggest financial mediators - having to assume that the basis between Brent physical and financial prices narrows modestly from historically wide levels to $5/bbl through 2023. This leaves the bank forecasting Brent financial prices of $125/bbl in 4Q22and 2023 vs. $130 and $125 previously, both far higher than the current Brent prices below triple digits. This lack of investor participation is likely to weigh most on near-term prices, forcing Goldman to make the largest downgrade to its forecast in 3Q22, now at $110/bbl vs.$140/bbl previously. This revision reflects (1) a consumer Brent-price equivalent of$140/bbl vs. $160/bbl previously, reflecting higher Russian supply and a faster than expected rate of SPR release (all offset in 4Q22), (2) a $30/bbl discount of Brent to retail prices vs. $20/bbl previously, reflecting a stronger dollar and sticky high physical premium (i.e. lack of investor participation in the face of still high recession concerns). Based on the above, Goldman is also introducing - for the first time - a forecast for US retail gasoline and diesel prices, which the bank expects to rebound to $4.35 and$5.50/gal by 4Q22, with average levels of $4.40 and $5.25/gal in 2023. This forecast reflects the bank’s expectations for US refining and marketing margins as well as assumes flat state and federal taxes. In other words, Goldman forecasts that US retail fuel prices will rally into year-end then decline from 2Q 23 onward as refining and marketing margins start to normalize. Summarizing the above, Goldman’s bullish view is supported by three drivers: (1) oil markets remain undersupplied - with record retail fuel prices unable to stop the market deficit in June and July, and with prices now much lower and helping support demand; (2) higher Brent financial prices are required, even assuming a historical large gap discount to retail fuel prices; (3) oil remains the cheapest source of energy that is logistically substitutable against gas. In conclusion, Goldman says that its preferred short-term implementation of its bullish view is to be long distillate prices outright to benefit from fall maintenance. Much more in the full report available to ZH pro subs. Tyler Durden Tue, 08/09/2022 - 08:35.....»»

Category: worldSource: nytAug 9th, 2022

38 thoughtful and appropriate gift ideas for your boss

From cute desk accessories to delicious food and snacks, these gifts will make your boss feel appreciated. When you buy through our links, Insider may earn an affiliate commission. Learn more.From cute desk accessories to delicious food and snacks, these gifts will make your boss feel appreciated.MugsAndPins/Etsy/Otherland Show a great boss your appreciation with a thoughtful (but office-friendly) gift.  Below, we rounded up some of our favorite work-appropriate gifts, from tech to coloring books. Looking for more gifts from Insider Reviews? Shop gift ideas for everyone in your life here. Whether virtually or in person, you likely spend the majority of your day with your coworkers. If you like them enough, you might even get them a thank-you gift for all the good times in and out of the office. Giving a gift to a great boss — someone who makes a big difference in how you approach daily work activities and helps you grow professionally — can feel trickier. Since they're your manager, it's important that your gift maintains professionalism, but still gets the message across that you appreciate their hard work and know what they like, whether they're fans of "The Office" or really love candy.Below, we've rounded up 38 great gifts for your boss, from useful desk accessories to beautiful notebooks. Plus, since you'd never want your boss to know if you were late to the game, we have plenty of digital and same-day delivery options included.The 38 best affordable, work-appropriate gifts for your boss:Their very own "The Office" mugMugsAndPins/Etsy"The Office" Mug, from $20.50, available at EtsyRemember when Kelly threw a party in "The Office," gave out mugs like these as party favors, and quietly exacted revenge against Dwight and Jim for missing it? Well, if your boss is a fan of "The Office," they'll appreciate having their very own version of one.Custom stationery designed by independent artistsMintedCustom Stationery, $66, available at MintedBeautiful, unique stationery is great for thank you cards or random "thinking of you" messages sent to loved ones. But few of us think to buy it ahead of the moment in which we need it. This gift is thoughtful, appropriate, and functional. A personalized video message from their favorite celebrityCameoCameo video, from $1, available on CameoIf your workplace is less formal, you could get them a personalized message from their favorite celebrity. Whether they love a certain musician, reality TV star, comedian, or actor in a show you've both bonded over, there's a good chance you can find them on Cameo. The price will depend on the star, but there are plenty of options. You can read our full review of the service here.A custom leather luggage tagLeatherologyDeluxe Luggage Tag, $40, available at LeatherologyThese leather luggage tags are available in a variety of colors and come gift-wrapped. You can add a monogram for $10 or handpainted personalization for $40. A sweet surprise delivered right to their inboxSugarwishSugarwish Treat Boxes, from $23, available at SugarwishSugarwish's business model is simple: You pick the number of treats they receive, the recipient gets an email inviting them to select their favorite treats, and their selected treats are shipped directly to them. It's a practically foolproof gift for a boss because everyone loves candy, and you don't have to go through the awkwardness of figuring out their address. A beautiful planner they can start later in the yearAmazonRifle Paper Co. 2023 17-Month Hard Cover Spiral Planner, $40, available at AmazonThe hard thing about gifting planners is finding ones that work mid-way through the year. The 17-month Rifle Paper Co. planner starts from August 2022 and goes through December 2023, so your boss can mark down important dates, set to-do lists, and jot down any other notes for a long time after they get this awesome gift from you.An audiobook subscriptionAmazonAudible Subscription, from $7.95 per month, available at AudibleWhether they're commuting to the office again or not, audiobooks are a useful way to pass the time no matter what they do. As a bonus, it's a gift that can be delivered to them day-of.Read our full review of Audible here. A subscription that delivers the best teas or coffees to their doorAtlas Tea ClubAtlas Tea Club, Three-Month Subscription, from $55, available at Atlas Tea ClubAtlas Coffee Club, Three-Month Subscription, from $60, available at Atlas Coffee ClubThis subscription sends them delicious, unique single-origin teas or coffees from the best regions in the world for three months. It'll make each day just a little more pleasant.The best socks they'll ever wearBombasWomen's Solids Ankle Sock 4-Pack, from $49.40, available at BombasMen's Solids Ankle 4-Pack, from $49.40, available at BombasBombas makes the best socks in our closets. We've been vocal supporters of the brand for years thanks to its durability, comfort, and superior materials.Another part of Bombas' appeal is that the company donates a specifically designed pair of socks to a homeless shelter for every pair purchased. If you're not sold on those, we also like these $20 tube socks from the Parks Project — which helps fund projects in national parks. A handmade, plantable cardEtsyPlantable Seed Cards With Envelopes, $20, available at EtsySometimes the most thoughtful and appropriate gift is a handwritten card that they know you didn't just pick up in a rush. These beautiful handmade cards on Etsy support a small business and are made of seed paper, so they can plant their card and watch wildflowers grow.If you want to add something extra to show your appreciation, a Starbucks gift card is as safe as it gets. A towel designed like their favorite city or hometownWest ElmClaudia Pearson City Tea Towels, $20, available at West ElmIf they're a big fan of their current home or the town they grew up in, you can pay homage to that aspect of them with a cool, functional, and sentimental tea towel illustrated with city maps. A sweet succulent in a cute planterThe SillEcheveria Lola, $48, available at The SillSucculents make for great desk plants since they require little more than direct sunlight and occasional watering. This one also comes in a sleek pastel planter, making it look like a more upscale gift.A beautiful frame for their deskFramebridgeThe Little Gift, available at Framebridge, from $49Whether it adorns their desk in the office or their WFH station, a small frame filled with an image of their favorite memory, place, people, or pets is always appreciated. If you'd rather let them personalize it and choose their own photo, go with a gift card.Trendy olive oil that elevates any mealBrightlandAlive Olive Oil, $37, available at BrightlandIf they spend a lot of time in the kitchen, they probably already know the merits of high-quality olive oil. A drizzle of Alive from Brightland adds a vibrant, zesty flavor to any dish. Plus, the beautiful bottle will look great on display in their kitchen.A relaxing adult coloring bookAmazonThe Art of Mandala, $3.99, available at AmazonStudies focused on the benefits of adult coloring books often reveal mandalas are the most effective designs for relaxation and induction of a meditative state. Their complex geometric patterns can be traced back to both ancient Buddhist and Hindu traditions.This affordable book contains 50 mandalas that vary in complexity and detail, so they can slowly work their way up to the most challenging patterns or work on a simple design when time is limited. A fun desk toySpeksSpeks Magnet Balls, $34.95, available at SpeksThe makers of our favorite magnetic desk toy have a new way to reduce stress and keep your boss entertained. These tiny magnetic balls make for a good mental break as well as help us concentrate in meetings. A virtual helperWalmartGoogle Nest Mini, from $29.99, available at TargetThe Google Nest Mini offers a compact, affordable smart speaker with Google Assistant built-in. They'll love being able to dim lights, control the volume on their TV, check the weather, and more, all with just the sound of their voice. Read our full review of the Google nest Mini here.This option is best for people who prefer Google's tech ecosystem. You may also want to consider the Amazon Echo Dot for Amazon users.Comfortable house slippersEverlaneThe ReNew Slipper, $19, available at EverlaneMost of us are spending a lot more time at home these days. And it's more enjoyable to do that when you're wearing some of the most comfortable slippers on the planet. We are big fans of the ReNew Slippers from Everlane — and they're relatively inexpensive.The best pens for their officeAmazonMuji Gel Ink Ball Point Pens, $5.80, available at AmazonMuji's fine 0.38mm tip pen is a cult favorite — including among our teammates. According to the company, the water-based ink enables smooth writing, minimal bleeding, and a mechanism that helps keep the ink from drying out. If they write handwritten notes for work, they may have an outsized appreciation for this small but impactful upgrade. They're sold out on Muji, but you can still find them on Amazon.A custom book embosserEtsyCustom Stamp, from $18.81, available at EtsyThis unique, thoughtful gift embosses books with "from the library of [their name]" by pressing down on it like a hole-puncher — it's the kind of thing most people would never buy themselves but will genuinely cherish if they receive it as a gift. They can use it on book pages as well as envelopes. Three months of great hardcover books delivered to their doorBook of the MonthA Book of the Month subscription, from $49.99, available at Book of the MonthBook of the Month has been around for more than 90 years — and it's credited with hand-selecting and helping popularize books that range from Ernest Hemingway's "The Sun Also Rises" to J.D. Salinger's "Catcher in the Rye." With your gift, your boss will get to choose between five new hardcover options the book club suggests every month.Their favorite food from across the USGoldbellyA meal from Goldbelly, prices varyNo matter where they've spent the year, you can send them their favorite foods from across the US by using Goldbelly — the company will deliver everything from Junior's cheesecake to Lou Malnati pizza to their doorstep. Or, give them a gift card so they can pick out a treat for themselves.A kit built for the work-from-home lifestyleMacy'sPinch Provisions Work From Home Survival Kit, $14, available at The Paper StoreIf they're getting tired of their office being in their living room, they'll appreciate this kit that takes a bit of the strain out of working from home. A conference call bingo card, desk yoga guide, and fidget cube are just a few of the quirky (yet useful) items they'll find in this set.A desk sign with a hint of humorUncommon GoodsDesk Name Plates, from $14.99, available at EtsyIf you and your boss have a humorous rapport going, they could get a kick out of this witty take on the everyday office signage. Plus, the sleek wooden and gold design let the sign speak for itself without appearing overly kitschy. A leather business card holderLeatherologyBusiness Card Case, $50, available at LeatherologyFirst impressions matter, which is why they should be pulling out business cards from a handsome leather case. It has a no-fuss, invisible magnetic closure and can hold up to 20 cards. Choose from pebbled or smooth leathers in a variety of colors, or upgrade to premium leather. You can also add a monogram for an additional $10. A soft throw to fight freezing office temperaturesAmazonEddie Bauer Sherpa Throw, $34.99 available at Kohl'sOwners of this large, cozy throw only have good things to say about it. It's plush and warm, with one side made of micro-fleece and the other made of sherpa fleece.A lightweight portable keyboardBest BuyLogitech K480 Bluetooth Multidevice Keyboard, $34.99, available at Best BuyIf you notice your boss complaining about lugging their laptop everywhere, this might be a fix they didn't realize existed. With a slim Bluetooth keyboard, your boss can leave the laptop at home and still get work done while traveling. We like this one because it's quiet and comfortable to type on. Their new favorite way to make delicious cold brewBlue BottleHario Cold Brew Bottle, $37, available at Blue BottleIf there's anything that can power them through a long workday, it's cold brew. Just combine water and ground coffee (not included), and stick the bottle in the fridge for a refreshing caffeinated treat. A box of Korean sheet masksFacetory/InstagramSeven Lux 1 Month Gift Subscription, $19.90, available at FaceToryThe Korean sheet masks in this box are sure to bring some much-needed relief to any stressed-out boss. The brands, which often use out-of-the-ordinary ingredients, are usually difficult to find outside of Korea, but FaceTory makes them both accessible and affordable. A key cable they can bring anywhereAmazonNative Union Key Cable, from $29.99, available at AmazonIf your boss is always forgetting their charger at home and borrowing yours, this small portable cable charges up Apple devices quickly and claims to be six times stronger than the standard lightning cable, boasting a 10,000-bend lifespan. The knotted cable also looks great and makes it easy to fish out the charger from their bag. A versatile toiletry bag to bring on their travelsDagne DoverSmall Hunter Toiletry Bag, $40, available at Dagne DoverDagne Dover's durable and quick-drying neoprene is most notably featured in the brand's popular backpacks and gym bags, but it's also well-suited for this small bag that organizes your boss's life on the go. It includes a removable air mesh pouch and is available in a range of dusky colors and camo patterns. A beautiful vaseWest ElmBarro Vases, available at West Elm, from $33.60A vase is a pretty foolproof gift — it's just as good for the recently engaged (or recently promoted) person as it is for someone who would always prefer a practical gift over a knick-knack. If you're looking for something more minimalist, we recommend this version. Desk cable clips that keep cords neat and organizedAmazonShintop 6-Piece Cable Clips Set, $5.88, available on AmazonThis small but practical gift will sort out their jumble of cords for good. If you're worried that the set doesn't look significant enough, you can pair a few of these cable clips with a nice card and some candy. An insulated tumblerAmazonHydro Flask 32-Ounce Travel Tumbler Cup, $22.72, available at Hydro FlaskThe ergonomic comfort of a classic tall cup plus Hydro Flask's signature double-wall vacuum insulation makes this a coffee or tea vessel they'll always keep on hand. It keeps their beverage hot for up to six hours and includes a press-in lid to prevent spills. A luxurious candleOtherlandOtherland Candles, $36, available at OtherlandWith its beautiful packaging, unique scents, and special matchbox messages, Otherland turns the otherwise ordinary candle into a cherished gift. Take advantage of its limited-edition scents while they last, or find a suitable match in its diverse Core Collection. A way to celebrate the end of the quarterHarry & DavidMoose Munch Premium Popcorn Classic Tin, $54.99, available at Harry & DavidSend them this assortment of sweet and savory popcorn to get the new quarter started. This particular edition contains four decadent flavors of Moose Munch: classic caramel, milk chocolate, dark chocolate, and milk chocolate s'mores. A protective cover for their AirPods caseAmazonPodSkinz AirPods Case Protective Silicone Cover, $4.95, available at AmazonApple AirPods: incredibly convenient, but also incredibly easy to lose and scratch up. A silicone cover is a cheap and attractive way to protect the case protecting their beloved earbuds. The newest smart home deviceAmazonEcho Dot (4th Gen), $19.99, available at TargetAmazon's bestselling smart speaker has an improved sound and look. Whether they want to coordinate a smooth-sailing smart home experience or enjoy music out loud, the Echo Dot can keep up. Read the original article on Business Insider.....»»

Category: dealsSource: nytAug 4th, 2022

Futures Flat As Crushing 37bps Curve Inversion Screams Recession

Futures Flat As Crushing 37bps Curve Inversion Screams Recession US futures are mixed on Thursday, first trading in the red, then turning green before moving unchanged, as investors shrugged off growth warnings from the bond market while Taiwan war fears faded further despite drills launched by China overnight. Oil bounced back from the lowest level in almost six months. Contracts on the S&P 500 were flat while Nasdaq futures were modestly green, suggesting the tech-heavy Nasdaq will extend an advance of 19% from its June 16 low on the back of a massive CTA, buyback and retail-driven buying frenzy. In premarket trading, Alibaba gained 3.4% after reporting revenue for the first quarter that beat the average analyst estimate. Adjusted earnings per American depositary receipt also topped expectations. Altice USA shares jumped 5% after the cable television provider reported second-quarter results and announced it received inquiries for its Suddenlink assets. US-listed Chinese tech stocks including, Pinduoduo and Baidu rise in premarket trading Thursday as Alibaba shares jump 3.9% after reporting better-than-expected revenue in the first quarter. Here are some other notable premarket movers: AMTD Idea (AMTD) shares slump 11.5% putting the Hong-Kong based financial services firm on track to slump for a second straight day after a wild 237% jump earlier this week. Eli Lilly (LLY) falls 2% after the company cut its adjusted earnings per share forecast for the full year. Equinox Gold Corp. (EQX) slides 2.5% after reporting second quarter results that missed consensus analyst estimates for revenue and posted a loss per share, and announced a CEO change. Fastly Inc. (FSLY) shares are down 7% after the infrastructure software company reported second quarter revenue that beat expectations. Gannett Co. Inc. (GCI) shares plunge 5% after the company lowered its full-year revenue and Ebitda outlook, citing “current economic conditions.”. Kohl’s Corp. (KSS) was downgraded to market perform from outperform at Cowen, with analyst Oliver Chen saying a “weakening and inflationary consumer backdrop” could drive EPS downside. Shares decline 3%. Pacific Biosciences (PACB) 2Q results look broadly in line but guidance has been cut significantly, albeit this is not a major surprise, analysts say. Shares down 4% in US premarket trading. Revolve Group Inc. (RVLV) shares are down 13% after the e-commerce fashion company reported quarterly net sales and earnings per share that fell short of analysts’ expectations. Skillz (SKLZ) shares tumble 11.6% after the mobile games platform operator cut its full-year guidance for revenue, with Citi noting that revenue and user metrics disappointed. Under Armour (UAA) is downgraded to neutral from outperform at Baird, which says its view of the athletic-wear retailer’s near-term prospects has “deteriorated materially” over the past two quarters, and faces further pressure from an uncertain macroeconomic environment. The stock declines 0.5% in premarkettrading. Yellow Corp. (YELL) shares jump 37% after the logistics company reported earnings per share for the second quarter that beat the average analyst estimate. So far US stocks have proven resilient to heightened bond market anxiety and an inverted Treasury yield curve flashing warnings on economic risks, as the S&P 500 climbs back toward the highest level in two months ignoring the screaming recession warning from the 2s10s curve which is now 37bps inverted. But a global wave of monetary tightening risks upending those gains. The Bank of England unleashed its first half-point hike since 1995 in an effort to control inflation, joining some 70 other institutions around the world moving rates up in outsized steps. “There’s an intense tug-of-war happening in the economy and markets,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors. “On one side, you have a narrative that reasonable growth is going to support continued inflation pressure and keep the Fed hiking. The other narrative is that slowing growth is going to ease inflation and allow the Fed to stop hiking.” Meanwhile, US-China tension remains among the uncertainties clouding the outlook. Taiwan braced for the Chinese military to start firing in exercises being held around the island in response to US House Speaker Nancy Pelosi’s visit. Here are the latest headlines surrounding Taiwan/Pelosi: China's Taiwan Affairs Office said the Taiwan issue is not a regional issue but is a China internal affairs issue, while it added that punishment of pro-Taiwan independence diehards and external forces is reasonable and lawful. Taiwan's Defence Ministry said unidentified aircraft which were likely drones, flew above Kinmen Islands on Wednesday night, while the military fired flares to drive away the aircraft, according to Reuters. Taiwan's Defence Ministry said troops will continue to reinforce alertness level and are carrying out daily training as usual, while the military will react appropriately to an enemy situation and safeguard national security and sovereignty, according to Reuters. ASEAN Foreign Ministers are concerned about international and regional volatility and are concerned volatility could lead to a miscalculation, serious confrontation, open conflicts, and unpredictable consequences among major powers, according to Reuters. US House Speaker Pelosi plans to visit an inter-Korean border area jointly controlled by the American-led UN Command and North Korea, according to a South Korean official cited by Reuters. China's PLA has added an additional zone for its military exercise encircling Taiwan starting Thursday, exercises have been extended until Monday at 10:00, via dwnews' Yang citing Taiwan's port authority. Now seven zones around Taiwan. Gains in the Stoxx Europe 600 Index were led by retailers, leisure and technology firms, alongside an advance in shares of Chinese tech companies.  Among individual stock moves, Glencore Plc shares fell as much as 2% as its capital return plans overshadowed solid first-half results. Ubisoft shares surged as much as 21% after Tencent reached out to Ubisoft’s founding Guillemot family and expressed interest in increasing its stake, according to Reuters. Here are the most notable European movers: Rolls-Royce drops as much as 12% in London. Jefferies highlights that 1H adjusted Ebit came in 24% below consensus, is disappointed Civil margin “once stripped of a number of one-offs, remains well below breakeven.” SES shares drop as much as 10%, the most intraday since April 2020, as some analysts raised doubts about a potential combination with Intelsat after the FT reported deal talks between the two companies. Ambu falls as much as 16%, the most intraday since May 6, after the company slashed its organic revenue forecast for the full year and said it will cut about 200 jobs from its global workforce. Lufthansa gains as much as 7.4% after the airline forecast a “significant increase” in earnings in the third quarter compared to the second and provided a clearer outlook for full-year profit, predicting adjusted Ebit of more than EU500m. Next shares climb as much as 3.2% after the UK apparel retailer reported better-than-expected 2Q sales and raised its profit outlook for the year. Adidas shares gain as much as 4.4% after the German sportswear company reported 2Q results that were largely in line with expectations, following last week’s profit warning. Merck KGaA shares rise as much as 1.7% after the German pharmaceutical group’s 2Q report showed stable growth for its Life Science division despite abating Covid-19 tailwinds, with Jefferies saying it sends a “positive message” for the rest of 2022. Earlier in the session, Asian stocks rebounded as easing tensions over Taiwan and overnight gains on the Nasdaq fueled a rally in Chinese tech shares ahead of key earnings reports. The MSCI Asia Pacific Index climbed 0.5%, set for its first gain in three sessions. Alibaba, which is scheduled to release earnings later Thursday, and e-commerce peers Meituan and helped boost the Hang Seng Tech Index as much as 3.4%, most in more than a month. Other benchmarks in Hong Kong and South Korea’s tech-heavy Kosdaq were among the region’s outperformers.  “Hong Kong stock markets are getting re-rated after seeing the risk-off mood due to Taiwan tensions, as there were no military conflicts,” said Xuehua Cui, a China equity analyst at Meritz Securities in Seoul.  US House Speaker Nancy Pelosi left Taiwan after reaffirming US support for the democratically elected government in Taipei. China responded with trade curbs and military drills.  Elsewhere in Asia, the main Philippine index reached its highest since June 10 on foreign inflows. Asia’s key stock benchmark has rebounded from its July low, but its recent recovery has been lagging behind US peers amid a property crisis in China and heightened geopolitical risks. Japanese equities erased earlier gains and slipped as Toyota announced first-quarter earnings that missed estimates and as investors continue to evaluate corporate earnings both domestically and abroad.  The Topix Index was virtually unchanged at 1,930.73 with Toyota Motor leading declines as of market close Tokyo time, while the Nikkei advanced 0.7% to 27,932.20. Toyota Motor shares dropped during market hours as the automaker reported disappointing first quarter earnings and kept its conservative outlook for the current year. Out of 2,170 shares in the index, 1,198 rose and 849 fell, while 123 were unchanged. “Toyota Motor’s financial results confirmed that the impact of high raw material and fuel prices was strong enough to offset the effects of the weak yen,” said Shuji Hosoi, an analyst at Daiwa Securities. “The fact that the company didn’t change its full-year operating income forecast negatively impacted the markets, which had been expecting an upward revision.” India’s Sensex index snapped a six-session rally, dragged by Reliance Industries and leading lenders, on risk-aversion ahead of a monetary-policy announcement on Friday.  The S&P BSE Sensex fell 0.1% to 58,298.80, in Mumbai, after paring decline of as much as 1.3% in the session. The NSE Nifty 50 Index was flat. Both gauges posted early gains and appeared headed for their longest winning streaks since October 2021, but reversed course.  “The sudden drop in indexes is most likely led by ‘basket selling’ from foreign portfolio investors ahead of the central bank’s rate decision on Friday,” said Abhay Agarwal, a fund manager at Piper Serica Advisors. “Stocks have gained for six straight sessions and investors may want to reap gains ahead of a major policy event.” Reliance Industries fell 1.3%, while State Bank of India and Axis Bank led declines among lenders.  Economists expect the Reserve Bank of India to raise rates for a third consecutive time on Friday but remain divided on the level of the hike aimed at fighting inflation and supporting a weakening currency.  Of 30 shares in the Sensex index, 17 rose and 13 fell. Both of India’s equity benchmarks had gained least 5.5% in previous six sessions driven by $1.7 billion of net purchases by foreigners since the end of June amid signs that inflationary pressures are cooling.  Eight of the 19 sector sub-indexes compiled by BSE Ltd. declined on Thursday. A measure of telecom stocks was the worst performer among the sectoral measures. In FX,  the dollar consolidated as traders awaited US payrolls data due later in the day for clues on the pace of future Federal Reserve rate hikes. Sterling tumbled after the BOE delivered its biggest rate hike in 27 years, pushing rates up by 50bps, however it also warned of a devastating stagflation, hiking its inflation forecast to 13.3% in October even as it predicted a harrowing 5-quarter long recession. In rates, Treasuries were moderately cheaper across the curve - which continues to invert deeply with the 2s10s now -37bps, the biggest yield curve inversion since 2000 as traders increased wagers on Federal Reserve rate hikes ahead of Friday’s US jobs data - as US stock futures added to Wednesday’s gains.  The US 10-year yield dropping to 2.70% as Federal Reserve officials indicated they were resolute on aggressive hikes to cool inflation, dashing market hopes they were ready to embark on a shallower rate path. Treasuries offered little initial reaction to Bank of England decision to hike rates 50bp in an 8-1 vote while warning of a 5 quarter-long recession. Front-end yields cheaper by ~2bp on the day, flattening 2s10s and 5s30s spreads by ~1.5bp and ~0.5bp; 10-year yields around 2.71% trade cheaper by 5bp vs bunds.  European long-end bonds nudged higher. In the UK, focus is on the Bank of England’s rate decision, with a majority of economists anticipating a 50-basis-point hike. In commodities, oil drifted 0.2% lower to trade at the $90 level as investors weighed weaker US gasoline demand and rising inventories against a token supply increase from OPEC+. Spot gold rises roughly $20 to trade near $1,787/oz. Base metals are mixed; LME lead falls 1.1% while LME zinc gains 1.2%. Bitcoin slips back below the USD 23k mark but remains in relative proximity to the level in a tight range. Looking to the day ahead now and we have US June trade balance and Initial Jobless Claims, Germany June factory orders, July construction PMI, UK July new car registrations, construction PMI, Canada June building permits and international merchandise trade. Earnings will include Alibaba, Eli Lilly, Toyota, ICE, ConocoPhillips, Bayer, Glencore, Cigna, Rolls-Royce, adidas, Cheniere, DBS, Apollo, Lyft, Expedia, Deutsche Lufthansa, Warner Bros Discovery, Vertex Pharmaceuticals, DoorDash, Atlassian, Amgen, Block, EOG, Kellogg and AMC. Market Snapshot S&P 500 futures little changed at 4,153.75 STOXX Europe 600 up 0.2% to 439.32 MXAP up 0.4% to 159.68 MXAPJ up 0.6% to 521.36 Nikkei up 0.7% to 27,932.20 Topix little changed at 1,930.73 Hang Seng Index up 2.1% to 20,174.04 Shanghai Composite up 0.8% to 3,189.04 Sensex down 0.6% to 57,993.23 Australia S&P/ASX 200 little changed at 6,974.93 Kospi up 0.5% to 2,473.11 German 10Y yield little changed at 0.89% Euro up 0.1% to $1.0178 Brent Futures little changed at $96.78/bbl Brent Futures little changed at $96.75/bbl Gold spot up 0.4% to $1,773.19 U.S. Dollar Index down 0.13% to 106.37 Top Overnight News from Bloomberg China’s military fired missiles into the sea on Thursday in live-fire military exercises around the island in response to US House Speaker Nancy Pelosi’s visit, even as Taipei played down the impact on flights and shipping. The Bank of England on Thursday is expected to push through the biggest interest-rate increase in 27 years despite growing risks of a recession. European stocks edged higher on Thursday as investors continued to weigh the path of corporate earnings, while attention turned to the Bank of England’s policy decision later in the day. The dollar is close to a 20-year high, despite talk of its inevitable demise. While reluctant to add another article that ends up in traders’ trash cans, current pricing is extreme. Asia’s emerging economies are drawing on large foreign exchange reserves to help prop up their currencies rather than going all-out with interest-rate hikes. A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were firmer as the positive momentum rolled over from global peers. ASX 200 was kept afloat by tech after similar outperformance of the sector stateside. Nikkei 225 briefly reclaimed the 28k level amid recent JPY weakness and as the earnings deluge continued. Hang Seng and Shanghai Comp conformed to the heightened risk appetite with firm gains in tech including Alibaba ahead of its earnings and with Hong Kong set to provide HKD 2k in consumption vouchers from Sunday. Top Asian News   China’s Yiwu city will conduct mass testing and China's Sanya city is on lockdown amid a COVID flare-up, according to state media. China Cancels Japan Meeting Over G-7 Criticism of Taiwan Drills SoftBank Raises $22 Billion Through Alibaba Derivatives: FT China State-Backed Builder’s Dollar Bonds Slump as Worries Mount Tiger Global Fund Halves Stake in India Food Platform Zomato Additional Share Sales Break Asia’s Usual Summer Lull: ECM Watch Li Ka-shing’s CK to Sell AMTD Stake After Unit Soars 14,000% European bourses are firmer across the board, Euro Stoxx 50 +0.9%, with the general tone constructive though the FTSE 100 lags pre-BoE amid GBP strength. Stateside, US futures have lifted from initial rangebound action, ES +0.3%, with specific newsflow limited pre-data/Fed speak Top European News Next Raises Profit Outlook as Hot Spell Spurs Fashion Buying French Tech Startup Back Market Said to Start Early IPO Prep Goldman, Bernstein Strategists Say Stocks Rally Can Fizzle Out European Retailers Outperform, Fueled by Zalando Relief Rally Czech Finance Minister Attending Central Bank’s Rate Meeting Credit Agricole’s Investment Bank Drives Earnings Beat FX DXY remains subdued in early European trade following a relatively contained APAC session; fresh session lows are seen heading into the US entrance. GBP/USD and EUR/USD are currently buoyed, but seemingly more as a function of the Dollar with the former gearing up for the BoE. A mixed session thus far for the non-US Dollars, with the Antipodeans leading the charge whilst the Loonie remained suppressed by crude prices. JPY resides as the current G10 laggard with recent Fed rhetoric fuelling a retracement of last week’s USD/JPY downside. Fixed Income Core consolidation after recent rampant upward move, knife-edge BoE looms; Bund Sep'22 towards mid-point of a +100 tick range. USTs are following suit with the yield curve flattening modestly but generally quite contained ahead of Mester (2022 voter, Hawk) who has provided commentary recently. Pre-BoE Gilts are supported, but in narrower parameters than EGB peers, as participants look for clarity on the 25/50bp debate as pricing implies a 90% chance of 50bp and circa. 150bp total by end-2022. Commodities Crude consolidates and moves with broader sentiment post-OPEC & pre-JCPOA. Currently, benchmarks are firmer by circa. USD 1.00bbl and towards the top-end of relatively/comparably narrow ranges. Saudi Arabia OSPs (Sep) vs Oman/Dubai average: Arab Light to Asia at USD +9.80/bbl (exp. 9.80-11.10/bbl), according to Reuters sources. Spot gold is bid and benefitting from a USD pullback that has sent the yellow-metal above the 50-DMA at best; base metals somewhat mixed. US Event Calendar 07:30: July Challenger Job Cuts YoY, prior 58.8% 08:30: June Trade Balance, est. -$80b, prior -$85.5b 08:30: July Initial Jobless Claims, est. 260,000, prior 256,000; Continuing Claims, est. 1.38m, prior 1.36m DB's Jim Reid concludes the overnight wrap One thing we can say for sure is that August hasn’t been dull so far and we’ve only had three days. This is all before the biggest BoE hike for 27 years (50bps) likely today, and then US payrolls tomorrow. Indeed, there have been some remarkable ranges in treasuries so far in the three days of August. In just over 24 hours from mid-afternoon London time on Tuesday, 2yr US yields moved from 2.83% to 3.18%, 5yrs from 2.58% to 2.96% and 10yrs from 2.52% to 2.83%. These all marked the high points as the three closed at 3.07% (+1.4bps on the day), 2.83% (-2.4bps) and 2.71% (-4.5bps) respectively, 11bps to 13bps off their intra-day highs immediately after a strong US services ISM yesterday. This led to a big curve flattening as 2s10s closed c.6bps lower at -36bps. This morning in Asia, treasury yields are pretty much unchanged. If that wasn’t enough, the Nasdaq 100 (+2.73%) surged to finish the day at a level last seen on May 4th leaving a strong S&P 500 (+1.59%) slightly behind. The narratives at the moment are struggling to be consistent though as equities have recently rallied on weaker growth that has been seen as helping to limit how far the Fed can hike. However yesterday equities rallied on stronger economic data regardless of the potential Fed impact. Discretionary (+2.52%), IT (+2.69%) and communications stocks (+2.48%) were the major drivers of the S&P. The broad rally lifted 79% of benchmark’s members with energy (-2.97%) being the only sector to close in the red as oil plummeted. Speaking of which, although the OPEC+ agreed to increase its September output by 100k bpd, way below the July and August increases north of 600k, crude’s short-lived almost +3% gain unwound fairly quickly, with both WTI (-3.87%) and Brent (-3.60%) weaker on lower US gasoline demand as consumers seem to be driving less. Oil is very slightly higher in Asia. In terms of earnings, Moderna (+16%), PayPal (+9.25%) and CVS (+6.3%) were among top performers in the S&P 500 after a combination of upbeat results and perhaps more importantly buy back announcements. Another interesting snippet from this earnings season came when Bloomberg reported that Meta is looking for a potential debut in bond markets. News of debt sales by Apple and Intel already came through earlier this week as well, supporting narratives of resilience in corporate debt markets. Dissecting the data, just before the ISM services was released, we got a slight upward revision for the US services PMI (47.3 vs 47.0) but the real surprise was the ISM services index itself. The print showed an unexpected expansion from 55.3 in June to 56.7 last month, the highest since April, while the median Bloomberg estimate stood at 53.5. The employment index also improved to 49.1 from 47.4 and business activity and new orders indicators were the highest since January, while prices paid plunged from 80.1 to 72.3. Another strong reading came from June factory orders that increased +2.0% (vs +1.2% expected), up from May’s revised reading of +1.8% (from +1.6% previously). This data dovetailed with comments from a list of Fed speakers over the last 24 hours, including Bullard, Daly, Barkin and Kashkari, all saying that the central bank is not close to finishing its work and markets shouldn’t expect a quick reversal to cuts. This all supports our view that the US isn’t in recession yet. As we’ve said many times before we think it’s almost inevitable it does go into one within say 12 months but that we still might need the lagged impact of an aggressive (but necessary) series of rate hikes first to get us there. The risks to this view in terms of an earlier recession would probably be due to a sudden self fulfilling loss of confidence as everyone talks about imminent recession risk, or if financial conditions dramatically collapse. To be fair the latter was very worrying by mid-June but we’ve seen a tremendous loosening since. Over to Asia and the strong gains in US equities are echoing in Asia with all the key markets trading higher. As I type, the Hang Seng (+1.78%) is leading the way across the region helped by gains in Chinese technology companies with shares of Alibaba climbing around +5.0% ahead of its earnings results later today. Elsewhere, the Nikkei (+0.54%), and the Kospi (+0.36%) are trading higher in early trade. Over in Mainland China, the Shanghai Composite (+0.15%) and the CSI (+0.40%) are both trading in the green. Outside of Asia, stock futures in the US are pausing for breath with contracts on the S&P 500 (-0.10%) and NASDAQ 100 (-0.20%) moving slightly lower. Early morning data showed that Australia’s trade balance swelled to a record high of A$17.67bn in June (v/s A$14.0bn expected) from A$15.97bn in May driven by strong prices of key exports from grains to metals and gold. Elsewhere, although Pelosi left Taiwan yesterday without incident, remember that China will start 4 days of military drills today around the island. So be prepared for headlines to come through. Back to yesterday and European shares rallied but missed the main part of the US climb with the STOXX 600 closing with a +0.51% advance for the day after a steady march higher throughout the session. It was an across-the-board rally led by IT (+2.78%), financials (+1.60%) and discretionary (+1.52%) stocks. The few sectors in the red - utilities (-0.94%), healthcare (-0.92%) and communications (-0.35%) - were left behind by a risk-on mood. Speaking of European utilities, it is a sector that has faced challenges not only amid the Russian gas story but also the extreme heat in Europe. Our European economists cover implications of the drought-driven low water levels for the German economy here. As a reminder, it was an important topic back in 2018 but today’s situation with gas supplies reinforces its effect given coal plants’ reliance on waterways for supplies. Linked in, yesterday’s announcement by Uniper about potentially limiting output at a coal plant in Germany sent gas futures in New York up by almost +10%, with contracts holding on to a +7.71% gain by the close of US markets. Other companies depend on water traffic too and water-intensive industries are likely to get affected as well. Earlier this week EDF has warned about potential further nuclear power cuts as river water, used for plant cooling, becomes too warm. Expect this to be an increasingly pertinent and market-moving issue across industries. Diving back into market movements, the bullish sentiment in European stocks was strong enough to overpower surging yields. In Germany the belly of the curve surged, with 5y yields (+7.6bps) racing ahead of both the front end (+6.9bps) and the 10y (+5.6bps) that was mainly upheld by higher breakevens (+6.1bps). While a similar story was seen in France (OATs +3.4bps), Italy stood out with an across the curve decline in yields. 2s10s still flattened as the 2y yield (-1.5ps) fell by less than the 10y (-4.1bps). We should note that US yields rallied 7-8bps after Europe closed. Central banks and yields will be in focus today as well since today’s BoE’s meeting will likely be top of the list in terms of events for European markets and our UK economists expect the Bank to hike by +50bps (taking the Bank Rate to 1.75%). Their full preview is here. This hike would imply the largest single Bank Rate increase since 1995 and come amid the 9.4% CPI print for June, a 40-year high. They also updated their growth outlook for the country yesterday (link here) and now expect the economy to contract in Q4-22 and Q1-23 in a short and mild technical recession. Gilts behaved similar to other European bond markets yesterday, with the 2y yield (+7.1bps) rising by more than the 10y (+4.4bps) but both lagging the 5y (+9.0bps). Staying with Europe and briefly returning to yesterday’s other data releases, Germany’s exports accelerated to +4.5% in June, way ahead of the +1.0% median estimate on Bloomberg’s and May’s revised +1.3% (from -0.5% previously). Imports came in softer than expected, however, slowing to just +0.2% (+1.3% expected). Elsewhere, Eurozone’s retail sales contracted -3.7% yoy in June, missing estimates of -1.7%. The PPI accelerated to a monthly gain of +1.1% in June relative to the prior +0.5% (revised from +0.7%). To the day ahead now and we have US June trade balance, Germany June factory orders, July construction PMI, UK July new car registrations, construction PMI, Canada June building permits and international merchandise trade. Earnings will include Alibaba, Eli Lilly, Toyota, ICE, ConocoPhillips, Bayer, Glencore, Cigna, Rolls-Royce, adidas, Cheniere, DBS, Apollo, Lyft, Expedia, Deutsche Lufthansa, Warner Bros Discovery, Vertex Pharmaceuticals, DoorDash, Atlassian, Amgen, Block, EOG, Kellogg and AMC. Tyler Durden Thu, 08/04/2022 - 08:25.....»»

Category: smallbizSource: nytAug 4th, 2022

Furious Rally Pauses As Sentiment Turns Metaworse Amid Record Earnings Barrage

Furious Rally Pauses As Sentiment Turns Metaworse Amid Record Earnings Barrage One day after the Nasdaq 100 posted its biggest jump since November 2020 when the market exploded higher after it interpreted Powell's forward guidance purge and comment that it is "likely appropriate to slow rate increases at some point" as more dovish than expected, US stocks were set to pull back as downbeat earnings and a dire outlook from bad to Metaworse weighed on demand. Futures contracts on the technology-heavy Nasdaq 100 dropped 0.5% by 7:15 a.m. in New York, after the underlying gauge rallied 4.3% in the previous session. S&P 500 futures were down 0.2% after the benchmark index jumped to its highest level in seven weeks. Treasury yields were little changed and the dollar and bitcoin edged up. In premarket trading, Facebook parent Meta tumbled after it reported its first-ever quarterly sales decline as ad spend by businesses cooled, leading to a far worse than expected forecast. Qualcomm also slipped as it issued a lackluster forecast.  Renewable energy companies soared in Europe and premarket trading following a deal by Democrats and Senator Manchin to advance a bill that will spend hundreds of billions of dollars on energy security and climate change. Vestas Wind Systems A/S surged more than 14% as oil also rose.  Spirit Airlines Inc. rose in premarket on a deal with JetBlue Airways Corp. Among other individual movers, Best Buy dropped in premarket trading as analysts slashed their price targets on the retailer after it cut its profit and sales outlook. Ford Motor on the other hand, jumped after reporting better-than-expected adjusted earnings per share for the second quarter. Here are some other notable premarket movers: Qualcomm (QCOM US) shares fall 4.5% in premarket trading after the chipmaker issued a lackluster forecast for the current quarter as it expects weakening economy to weigh on consumer spending on mobile devices. Watch shares of US chipmakers and semiconductor capital equipment stocks, including Lam Research (LRCX US), Applied Materials (AMAT US), Nvidia (NVDA US), Advanced Micro Devices (AMD US), Intel (INTC US), after Samsung’s quarterly profit missed estimates and Qualcomm’s forecast. Meta Platforms (META US) shares are down 5.9% in premarket trading, after the Facebook parent reported its first- ever quarterly sales decline as ad spend by businesses cooled. Ford (F US) shares jumped as much as 7.7% in US premarket trading after the carmaker’s adjusted earnings per share for the second quarter beat the average analyst estimate. Solar energy and renewables stocks gain in US premarket trading after Senator Joe Manchin and Senate Majority Leader Chuck Schumer struck a deal on a tax and energy policy bill. First Solar (FSLR US) +10%, SunRun (RUN US) +12%, Enphase Energy (ENPH US) +3.6%, SolarEdge (SEDG US) +4.0% Etsy (ETSY US) rises 6.1% in premarket trading on Thursday after the company posted stronger-than-expected second- quarter results, with most analysts seeing the online retailer retaining its market-share gains made during the pandemic ServiceNow (NOW US) shares fall 7.5% in US premarket trading, after the software company cut its full-year revenue forecast due to a stronger dollar and a potential pull back in demand. Spirit Airlines (SAVE US) shares climb 4.5% in premarket trading as JetBlue Airways is said to be close to an agreement to buy the carrier. Best Buy (BBY US) shares drop 4.4% in US premarket trading as analysts slashed their price targets on the retailer after it cut its profit and sales outlook, with brokers blaming the macroeconomic backdrop. Teladoc Health (TDOC US) shares fall about 25% in premarket trading after the virtual- care company’s 3Q Ebitda guidance came in below expectations, with analysts saying the outlook for Teladoc is likely to be revised downward. Community Health Systems Inc. (CYH US) shares plummet 52% in premarket trading after the hospital company reported a surprise loss per share for the second quarter. US stocks have rallied in July, putting the S&P 500 Index on course for its biggest monthly gain since October 2021, as the market finally grasps what we have been saying since January, namely that the weaker macroeconomic will prompt the central bank to "pivot" to easier policy, coupled with bets that much of the bad news was now priced in. It could get even worse, er better, today when the US reports Q2 GDP which may confirm that the world's largest economy is in a technical recession further shortening the Fed tightening phase. To be sure, the knee-jerk relief in markets on possible crumbs of comfort from the Fed outlook echoes a pattern seen after earlier hikes. Those bouts of optimism stumbled on recession risks from a global wave of monetary tightening, Europe’s energy woes and China’s property sector and Covid challenges. “We do feel the hikes are going to slow from these levels,” Laura Fitzsimmons, JPMorgan Australia’s executive director of macro sales, said on Bloomberg Television. But financial-industry participants are skeptical about the pricing indicating Fed rate cuts in 2023, she added. “As the tug-of-war between inflation and recession fears plays out in the second half of the year, we expect to see highly volatile markets,” Richard Flynn, UK Managing Director at Charles Schwab, wrote in a note. All eyes have also been on corporate earnings for signs of resilience in profit margins to surging inflation and weaker sentiment. A record number of US and European firms worth more than $9.4 trillion will report their results on Thursday. Of these $6.8 trillion are 55 S&P500 companies if constituents of the Nasdaq 100 are included. That comes on the heels of the Fed raising rates by 75 basis points for a second month, saying such a move is possible but that the pace of hikes will slow at some point. Chair Jerome Powell said policy will be set meeting-by-meeting as he tries to control rising prices amid signs of an economic slowdown. Big Tech will be a particular focus again with results from Amazon, Apple and Intel. “We see the earning season as a mixed bag and it’s not necessarily very good news looking forward because we have an economic momentum that is this decelerating very fast and we also have central banks all around the world hiking interest rates,” Geraldine Sundstrom, portfolio manager for asset allocation strategies at Pimco, said on Bloomberg TV. “For financial markets, the risk of the Fed taking an overly aggressive stance has eased over the past week due to mixed growth and inflation data,” said Gurpreet Gill, macro strategist of fixed income and liquidity solutions at Goldman Sachs Asset Management. “Growing evidence of slowing demand has curbed the need for speed –- hence the Fed did not provide forward guidance on its policy path.” The dovish Fed euphoria also helped lift European stocks, which initially faded a strong opening bounce only to recover all gains. Euro Stoxx 600 rose 0.5%, with the FTSE MIB outperforming, adding 0.8%, IBEX lags, dropping 1.3%. Telecoms, food & beverages and utilities are the worst-performing sectors. The Stoxx 600 Basic Resources index rose as much as 3.6%, the top-performing sub-index in the benchmark, following well-received results and with metals prices gaining. ArcelorMittal jumped following a cash flow beat and new buyback in its results, while Anglo American gains as its earnings and dividend both topped expectations. Other steel stocks SSAB, Voestalpine higher after ArcelorMittal and after beat from Acerinox. Copper miners KGHM and Antofagasta the biggest gainers with copper price up for fifth day. Here are some of the most notable market movers: Shell rises as much as 2.2% after the company reported what RBC Capital Markets described as strong results and announced that it will repurchase a further $6 billion of shares in the third quarter. Renewable energy companies’ shares soared following a deal by US senators to advance a bill that will spend hundreds of billions of dollars on energy security and climate change. Vestas Wind Systems stock gained as much as 15%, Nordex +12%, Orsted +6.5%, SMA Solar +7.6%, Meyer Burger +9.3% Schneider Electric shares were up as much as 5.2% after it reported a strong set of results; analysts welcome the increased FY growth targets and the company’s ability to pass on inflation. Diageo rises as much as 2.7% after the British distiller’s FY22 organic sales beat estimates. The group reiterated its medium-term guidance even as it expects a challenging environment for FY23. Stellantis shares gain as much as 4.3%, after the carmaker reported 1H results that Jefferies called “impressive and clean.” TotalEnergies declines as much as 3.8%, after its plan to maintain the pace of buybacks disappointed some analysts amid expectations for accelerated share repurchases in the industry. Airbus shares fall as much as 6.6% in Paris after the aircraft maker cut its full-year delivery projections and pushed back ramping up the A320 build rate to 65 a month from summer 2023 until early 2024. Nestle shares drop as much as 2.2% after the company cut its margin outlook for the year. The results are “mixed,” given the sales beat and increased FY organic revenue forecast, but there are questions around margin, according to analysts. Fresenius Medical Care shares slide as much as 15% after the dialysis services firm issued a guidance downgrade that showed significant cost pressures on many fronts, Truist says in a note. Ironically, as Europe edges toward a full-blown energy crisis and recession, its manufacturing giants are raking in the cash. Luxury-car leader Mercedes-Benz joined Europe’s biggest chemicals maker BASF, Swiss building-materials producer Holcim, shipping company Hapag-Lloydand others to report a jump in profit and raise earnings forecasts for the year. The results offered a stark contrast to the wave of grim economic news sweeping across Europe. Confidence in the euro-area fell to the weakest in almost 1 1/2 years as fears of energy shortages haunt consumers and businesses, and the European Central Bank’s first interest-rate increase in a more than decade feeds concerns that a recession is nearing. Earlier in the session, Asian stocks also advanced after the Federal Reserve said it will slow the pace of interest-rate increases at some point. The MSCI Asia Pacific Index climbed as much as 1.1%, driven by gains in material and energy stocks. Equity benchmarks in the Philippines and New Zealand led gains in the region as a weakening dollar boosted risk appetite. “The stock markets may reverse their recent falls” following the Fed’s decision, said Heo Pil-Seok, chief executive officer at Midas International Asset Management in Seoul. “Starting today, we should see if there’s any changes in foreign fund flows, as outflows have somewhat eased recently,” he said, adding however that the stock rally may be short-lived as investors remain cautious on earnings. Gains in Asia were small relative to the rally in US stocks overnight, as investors monitored the latest local earnings along with China’s property crisis and the Covid situation. Asian tech bellwether Samsung Electronics provided a weak demand forecast Thursday, citing uncertainties following a rare earnings miss. Chinese benchmarks were flat amid the Politburo meeting and a possible call between Xi Jinping and Joe Biden. Elsewhere, traders are awaiting a phone call between President Joe Biden and China’s Xi Jinping, which could touch on US tariffs and other points of tension. Japanese equities climbed, following US peers higher on relief after the Federal Reserve raised interest rates by 75 basis points and indicated that monetary policy tightening will eventually slow down. The Topix rose 0.2% to 1,948.85 as of the market close in Tokyo, while the Nikkei 225 advanced 0.4% to 27,815.48 as the yen gained against the dollar, weighing on exporters such as Toyota. Recruit Holdings Co. contributed the most to the Topix’s gain, increasing 4.4%. Out of 2,169 shares in the index, 1,406 rose and 652 fell, while 111 were unchanged. “It does seem as if the market bottomed out at the end of June,” said Hitoshi Asaoka, a strategist at Asset Management One. “There is a sense that a rise in interest rates is receding worldwide and stocks are also calming down along with that.” Fed Hikes by 75 Basis Points as Powell Sees No US Recession Now In FX, the Bloomberg dollar spot index revered a drop of 0.6% to trade higher. SEK and DKK are the weakest performers in G-10 FX, JPY maintains outperformance, trading at 135.33/USD.  The yen was around 135.40 per dollar, after strengthening more than 1% to 135.11 in Asia, extending an overnight rise to hit a three-week high. It jumped by a similar amount against the euro and the Australian dollar. In rates, Treasury yields were little changed to 3bps lower in European trading after dropping on Wednesday. The Treasury curve extended Wednesday’s post-FOMC steepening move as short end leads recovery from losses during European morning. Declines followed a large downside options trade, while gilts and bunds have underperformed over the London session. Focal points of US session include first estimate of 2Q GDP and 7-year note auction.US long-end yields remain cheaper by ~2bp while front-end and belly yields are richer on the day, steepening 2s10s by ~2bp, 5s30s by ~3bp; 10-year yields around 2.79% are little changed with bunds cheaper by ~2bp, gilts by ~4bp. Bunds lag following German regional CPI data, with national gauge due at 8am ET. German curve steepens with two-year yields lower after some state inflation gauges slow, while rates at the longer end rise. US 10-year yields are steady at 2.79%. In commodities, WTI drifts 1.7% higher to trade below $99. Spot gold rises roughly $10 to trade near $1,745/oz. Most base metals trade in the green; LME zinc rises 3%, outperforming peers. Looking the day ahead, in addition to the US GDP we get core PCE, consumption, and jobless claims in the US. In Europe, German CPI and France PPI are due with the first German regional numbers out just after we press send this morning. Our economists expect MoM CPI at +0.8% in Germany, and +0.5% on the EU harmonized MoM measure. Market Snapshot S&P 500 futures down 0.3% to 4,011.25 STOXX Europe 600 up 0.2% to 428.98 MXAP up 1.0% to 160.34 MXAPJ up 0.8% to 524.61 Nikkei up 0.4% to 27,815.48 Topix up 0.2% to 1,948.85 Hang Seng Index down 0.2% to 20,622.68 Shanghai Composite up 0.2% to 3,282.58 Sensex up 1.7% to 56,792.04 Australia S&P/ASX 200 up 1.0% to 6,889.75 Kospi up 0.8% to 2,435.27 German 10Y yield little changed at 0.98% Euro little changed at $1.0206 Gold spot up 0.7% to $1,746.23 U.S. Dollar Index down 0.18% to 106.26 Top Overnight News from Bloomberg Chair Jerome Powell said the Federal Reserve will press on with the steepest tightening of monetary policy in a generation to curb surging inflation, while handing officials more flexibility on coming moves amid signs of a broadening economic slowdown. The yen catapulted higher against major peers on Thursday as lowered expectations for rate hikes caused hedge funds to cover short bets from one of the biggest global macro trades of the year. US Stocks Set to Dip After Biggest Tech Gain Since November 2020 Meta Disappoints With Forecast Miss, First-Ever Revenue Drop China Leaders Call for ‘Best’ Growth Outcome at Key Meeting US Offers Russia to Swap Jailed Basketball Star for Arms Deale US Aircraft Carrier Enters South China Sea Amid Taiwan Tensions US Offers Russia to Swap Griner and Whelan for Arms Dealer Bout Barclays Latest Bank to Make Provision for US WhatsApp Fine Yen Roars Back as Hedge Funds Cut and Run From Big Macro Short China-US Deal Needed Soon to Avoid Delistings, Gensler Says Alibaba’s Gains From Primary Listing Plan Wiped out in Two Days Samsung’s Profit Is Latest Tech Casualty to Recession Fears Senate Deal Includes EV Tax Credits Sought by Tesla, Toyota Manchin Backs $369 Billion Energy-Climate Plan, Rejects SALT A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks eventually traded higher across the board following the firm lead from Wall Street. ASX 200 saw firm gains across its Tech, Gold, and Mining sectors. Nikkei 225 gained in early trade and briefly topped the 28k mark before recoiling as the JPY saw a sudden bout of strength. KOSPI benefited from Samsung Electronics' rise post-earnings, although the firm echoed recent remarks from SK Hynix regarding weaker H2 memory demand. Hang Seng moved on either side of breakeven but later saw an upside bias as Hong Kong Finance Secretary said Hong Kong's H2 economic performance will be better than H1. Shanghai Comp eventually gained despite the recent cautious commentary from Chinese President Xi. Top Asian News Chinese Politburo says it will keep economic operations in a reasonable range. Australian Treasurer Chalmers said the final budget outcome for 2021/22 likely to show a dramatically better-than-expected outcome. Samsung Electronics (005930 KS) - Q2 2022 (KRW): Revenue 772tln (Co. exp. 77tln); operating profit 14.1tln (exp. 14tln). Net profit 11.1tln (exp. 10.3tln); Chip operating profit 9.98tln (exp. 11.08tln); expects weaker H2 phone/PC memory chip demand. South Korean President Yoon has ordered to take steps against illegal activities regarding stock short selling, via Yonhap. Hong Kong Finance Secretary said Hong Kong's H2 economic performance will be better than H1; property market fundamentals remain sound. Hong Kong Monetary Chief expects overnight and one-month interbank rate to continue to rise at a much faster pace; says HKD has been stable and has been operating in an orderly manner; public should be prepared for interbank rate to climb further, via Reuters. PBoC injected CNY 2bln via 7-day reverse repos with the maintained rate of 2.10% for a net drain of CNY 1bln. PBoC set USD/CNY mid-point at 6.7411 vs exp. 6.7425 (prev. 6.7731). Japanese government spokesperson says there is currently no plan to impose restrictions on people's movements following increasing COVID cases; Tokyo COVID cases reach 40,406 vs. previous record of 34,995. European bourses are modestly softer, Euro Stoxx 50 -0.10%, but relatively contained now after fading initial gains from the FOMC-inspired upside. Amid numerous earnings updates from Europe & in the US aftermarket. US futures are relatively stable but continue to post modest losses with the NQ -0.8% lagging amid pre-market downside in Meta post-earnings, -6.0%. Meta Platforms Inc (META) Q2 2022 (USD): EPS 2.46 (exp. 2.59), Revenue 28.82bln (exp. 28.95bln), Advertising revenue 28.15bln (exp. 28.53bln). Outlook reflects continuation of weak advertising demand environment it experienced throughout Q2. Guidance assumes FX will be about a 6% headwind to Y/Y total revenue growth in Q3. Co. said the economic downturn will have a broad impact on digital advertising business, says the situation seems worse than it did a quarter ago. -6.0% in the pre-market. Jack Ma intends to relinquish control of Ant Group, via WSJ sources; to transfer some voting power to executives, could push-back IPO timing by over a year. Top European News German consumer energy bill to increase by EUR 1k/year, following a cost shift, via Bloomberg; Effective from October 1st, via Reuters sources; levy will cover 90% of costs. Subsequently, German Economy Minister says the gas level would cost several hundred EURs per household. India to Restart Ukraine Sunflower Oil Imports as Trade Eases Wind, Solar Stocks Surge After US Energy Bill Agreement Vanguard Europe MD Says Climate Is Now ‘the Most Material Risk’ Schroders Up; Jefferies Says Results Show Resilience of Platform EDF Posts $1.3 Billion Loss as State Readies Nationalization Turkey Raises 2022 Inflation Forecast to 60.4% on Imports, Lira Central Banks BoJ Deputy Governor Amamiya said we must not loosen our grip in keeping monetary policy easy as there is no prospect yet of sustainably meeting the 2% inflation target. He added that consumer sentiment has been worsening due to rising energy and food prices. BoJ must be vigilant to financial and forex moves and their impact on economy and prices. ECB's Visco refrains from saying whether markets should expect a 25bps or 50bps hike in September; not prepared to say the ECB would go for 50bps in September in order to reach its target quicker. Adds, the ECB doesn't really know where its target is. BoK to strengthen monitoring of FX and capital flows following the FOMC hike, according to Bloomberg. HKMA raised its base rate by 75bps to 2.75%, as expected, following the earlier Fed rate hike. NBH hikes the one-week deposit rate to 10.75% (prev. 9.75%) at tender. CBRT Governor says the bank has enough FX reserves to meet high energy costs and reserves continue to increase. FX Fed leaves Dollar in limbo with no firm forward guidance and reliant on unfolding macro fundamentals, DXY depressed within 106.580-050 range vs pre-FOMC high of 107.430. Yen outperforms on prospect of less BoJ vs Fed policy divergence, USD/JPY sub-135.50 and key Fib level. Kiwi outpaces Aussie as NZ business outlook and activity turn less downbeat, while Australian retail sales miss consensus and slow to softest pace in 2022 so far; AUD/NZD retreats through 1.1150 as AUD/USD and NZD/USD hover just under 0.7000 and 0.6300 respectively. Pound extends gains against Euro through 0.8400 and chart trend line, but both fade from post-FOMC peaks vs Buck, Cable unable to reach 1.2200 and EUR/USD fails to hold above 1.0200. Lira and Forint flounder irrespective of supportive CBRT rhetoric and NBH raising 1-week deposit rate by 100bp, USD/TRY touches 17.9300 in wake of jump in year end Turkish CPI forecast and EUR/HUF approaches 408.00. Fixed Income Bonds remain volatile post-Fed, but curve steepening the clear trend as markets reset rate expectations to data rather than forward guidance. Bunds choppy within wide 154.75-155.87 extremes, Gilts between 116.70-117.19 parameters and T-note from 119-23+ to 120-08+. US Treasuries also conscious of looming 7 year supply after potentially pivotal Q2 GDP and jobless claims. Commodities WTI and Brent are firmer by over 1.5% on the session after spending much of the European morning relatively contained. European gas prices are significantly more contained when compared to price action earlier in the week but remain at elevated levels comfortably above EUR 200/MWh for TTF. Gazprom continues shipping gas to Europe via Ukraine, Thursday's volume is 42.1MCM (vs Monday's 42.2MCM). Shell (SHEL LN) has cut gas use at the Rotterdam Pernis (404k BPD) facility by 40% and at German sites by ~70%, due to the ongoing gas situation. India's gold demand in H2 is seen falling Y/Y due to lower disposable income; H1 gold demand rose 42% Y/Y, according to World Gold Council. Magnitude 6.3 earthquake hits Tocopilla in Chile, according to the EMS; 5.5 magnitude earthquake occurs near Nicaragua coast, via EMSC. Nornickel Q2 production: Nickel 48k tonnes, Palladium 709/koz, via Reuters. Spot gold is bid by just over USD 10/oz but, again, remains subject to USD action as while the index is bid it has dipped markedly. Amidst the USD’s relative weakness, base metals are similarly supported. US Event Calendar 08:30: 2Q GDP Annualized QoQ, est. 0.5%, prior -1.6% Personal Consumption, est. 1.2%, prior 1.8% PCE Core QoQ, est. 4.4%, prior 5.2% GDP Price Index, est. 8.0%, prior 8.2% 08:30: July Initial Jobless Claims, est. 250,000, prior 251,000 Continuing Claims, est. 1.39m, prior 1.38m 11:00: July Kansas City Fed Manf. Activity, est. 4, prior 12 DB's Jim Reid concludes the overnight wrap Just before the June FOMC, the surprise last minute leak that the Fed were about to hike rates by 75bps shocked yields much higher and equities much lower. However last night's routine 75bps July FOMC hike was cheered to the rafters by the equity market with yields also falling, especially at the front end. So how times change! Today we could see confirmation of the start of a technical recession in US with Q2 GDP out, and also German CPI which might show some signs of falling before we think it hits new highs again in the autumn. So a busy day. Back to the Fed and the expected 75bps hike brings the rate into territory that some Committee members may deem ‘neutral’ (Our full US econ review, here). The statement maintained guidance that the Committee sees further rate hikes, and thus moves into restrictive territory, as appropriate, even as the statement opened by acknowledging that some activity data had softened. Nothing in the statement came as a particular surprise, leaving equities and rates little changed upon release with the bulk of the rally after the press conference started. At the press conference, the Chair left open the possibility of another super-charged 75bp hike (or larger) in September, but demurred on providing forward guidance, saying that the Committee would be making policy decisions on a meeting-per-meeting basis. A tacit acceptance of what they have already been doing, to an extent. Nevertheless, the Chair did note that the SEP from June, that shows policy getting to between 3% and 3.5% by the end of year, and a terminal rate of 3.8% was probably still the best guide for the path of policy. Despite the continued insistence on more hikes being necessary, and inflation being much too high, markets instead latched onto the fact that the Committee was cognisant of the signs of slowing growth in the economy, and that the Fed would logically slow the path of tightening at some point. Upon this, markets priced in a shallower policy path, which saw 2yr Treasuries -5.5bps lower on the day, with 10yr yields down -2.2bps, and no more rate hikes in 2023 after hitting a terminal rate of 3.3%. What was left unsaid is that slowing growth has to translate to slowing inflation for the FOMC to pivot policy. That cuts are being priced in within six months when inflation is still climbing from lofty levels seems too optimistic. However this very much fits it with the current market narrative so this doesn't feel the time to fight it. That optimistic pricing path drove US equities through the roof after the FOMC, with the NASDAQ ending the day +4.06% higher, climbing around +1.58% after the FOMC events, it’s best daily return since April 2020, while the FANG+ was up +5.30%, its best day in two months. Tech stocks outperformed given the sensitivity of their valuations to rate policy, but the broad S&P 500 climbed +2.62% as well, with every sector in the green. After the FOMC, Meta missed analyst estimates, posting its first ever decline in sales over a quarter, and traded around -4.5% lower in after-hours trading. In the release the company also noted hiring has slowed this year much like its other mega cap brethren. This morning, S&P 500 futures are trading -0.14% lower, with Meta having taken some shine out of the post-FOMC glow. Elsewhere overnight, Senator Joe Manchin reportedly reached a deal with Senate Majority Leader Chuck Schumer on a tax and spending plan focused on climate spending, capping health care costs, while raising additional tax revenue. This will be a huge story out of Washington heading into the fall midterms, and the overall impact of the bill – which is being structured to pass through the reconciliation process and thus with a simple majority – will be assessed over coming days as more people get eyes on it. An announcement that came out of the blue after Senator Manchin shot down reconciliation efforts in light of growing inflation time and again. One we will surely be talking about more over the near-term. Ahead of the FOMC, equities were higher on both sides of the Atlantic on buoyant sentiment following optimistic forecasts from tech giants Microsoft and Alphabet the night before. European equities closed modestly higher across the board, with the STOXX 600 closing up +0.47%, the DAX +0.53% higher, and the CAC up +0.75%. The big focus in Europe remained on the gas situation. A German government spokesperson acknowledged there had been a reduction of gas supplies from Russia and noted there was no technical reason for Russia to cut supplies. European natural gas futures climbed another +2.54% on the day to €205. Core European and Treasury yield curves were flatter heading into the Fed, with 2yr bund yields climbing +8.7bps and 10yr bunds +2.0bps higher to 0.94%. The spread widening in BTPs continued, with 10yr BTPs +5.5bps wider to bunds at 236bps, just under 5bps from their widest levels reached in mid-June. Meanwhile, Treasury yields were lower across the curve, with the curve even more inverted. The data out before the Fed was never going to be the main driver of rates on the day, and they painted a mixed picture. Housing continued its torrid run, with pending home sales down -8.6% MoM versus expectations of -1.0%. Meanwhile, Durable Goods Orders expanded 1.9% versus -0.4% expectations, while inventories increased 1.9% as well versus 1.5% expectations. Those data helped some GDP trackers, with the Atlanta Fed’s nowcast for 2Q GDP increasing to -1.2% from -1.6% following the data. We get the first advance reading of US 2Q GDP today, but know today’s reading will be subject to many revisions before we have the final figure. 10yr TSY yields are little changed at 2.78% as we go to press this morning. Brent crude futures climbed +2.13% to $107/bbl, following EIA data that showed inventories fell by 4.52mln barrels, while demand for gasoline in the US looks more robust than some recent survey measures have suggested, putting more upward pressure on energy. Finally, a Biden aide said the Iran deal was not likely to return in the near future, effectively keeping potential additional supply from hitting the market for longer. Asian equity markets are trading higher this morning following the Fed. Stocks in mainland China are gaining with the Shanghai Composite (+0.89%) and the CSI (+0.95%) both up whilst the Nikkei (+0.32%), the Hang Seng (+0.20%) and the Kospi (+0.97%) all edging higher. Early morning data showed that retail sales in Australia rose +0.2% m/m in June, its slowest pace this year and down from May’s downwardly revised +0.7% pace of growth and falling short of markets expectations of a +0.5% increase. The soft data represents that soaring inflation and rising interest rates may be finally hampering consumer demand. To the day ahead, in addition to the US GDP we get core PCE, consumption, and jobless claims in the US. In Europe, German CPI and France PPI are due with the first German regional numbers out just after we press send this morning. Our economists expect MoM CPI at +0.8% in Germany, and +0.5% on the EU harmonized MoM measure. Tyler Durden Thu, 07/28/2022 - 08:04.....»»

Category: blogSource: zerohedgeJul 28th, 2022

Futures Jump, Dollar Slides As Euro Surges On Hawkish ECB Report

Futures Jump, Dollar Slides As Euro Surges On Hawkish ECB Report After yesterday's sharp late-day swoon sparked by news that Apple is reining in hiring (which, of course, is expects as the US slides into recession, and is a necessary condition for the Fed to end its rate hikes), sentiment reversed overnight and US index futures climbed to session highs, rising as high as 1% just before 7am ET, as traders remained focused on the earnings season, with tech stocks set to rebound following Monday’s losses. Nasdaq 100 and S&P 500 contracts were 0.7% higher by 7:30am in New York. Both indexes declined Monday as investors worried over the strength of the economy after Apple joined a growing number of companies that are slowing hiring. Meanwhile, the euro soared more than 1% against the dollar after a Reuters report that the ECB may consider raising interest rates by 50 basis points because of the worsening inflation backdrop (even though this report was followed by the far more dovish Bloomberg news that "Lagarde Redoubles Push on New ECB Tool to Reach Deal This Week").  German bunds fell, while benchmark Treasuries traded little changed after paring gains following the report. Markets are pricing in about 38 basis points of tightening on Thursday, when the ECB is expected to raise rates for the first time in more than a decade. That reflects about a 50/50 chance of a 50-basis point increase. An outsized hike would put the ECB more in line with global peers moving up their policy rates at warp speed. Back to the US, and looking at premarket trading, cryptocurrency-related stocks gained for the second day as Bitcoin extended its rally but it was ether that stole the show, rising almost 50% in the past week. IBM dropped 5 after the IT services company cut its annual forecast for free cash flow due to the strong dollar and the loss of business in Russia.  Bank stocks climb in premarket trading Tuesday amid a broader push higher by risk assets. S&P 500 futures are also higher this morning, gaining as much as 1%, while the US 10-year yield holds steady at about 2.98%. In corporate news, Veritas Capital is in talks to buy NCR Corp., according to a Dow Jones report. Meanwhile, Jefferies said it plans to spin off its Vitesse Energy unit to shareholders and sell Idaho Timber as part of a strategy to shrink its merchant-banking portfolio. Here are the other notable US premarket movers: Exxon Mobil (XOM US) rises 1.7% in US premarket trading on Tuesday as Piper Sandler upgraded the stock to overweight from neutral, saying in a note that the setup for US energy stocks heading into 2Q earnings is looking increasingly attractive. US cryptocurrency-related stocks gain in premarket trading, as Bitcoin rallies for a second day in a row and comes closer to the breaking of a one-month-old range. Marathon Digital (MARA US) +7.2% after entering into a five-year pact with Applied Blockchain (APLD US), which jumps 33%. Riot Blockchain (RIOT US) +4.3%, Hut 8 Mining (HUT US) +2.9%, Coinbase (COIN US) +1.8% IBM (IBM US) shares were down 5.1% in premarket trading, after the IT services company cut its annual forecast for free cash flow due to the strong dollar and the loss of business in Russia. Piper Sandler says FX headwinds will likely hit other technology companies too. Cinemark (CNK US) shares gain 4.6% in US premarket trading as the stock was upgraded to overweight from equal- weight at Morgan Stanley, with the return of consumers to theaters seemingly not reflected in its shares. Marten Transport (MRTN US) shares rose as much as 4.5% in US postmarket trading on Monday after the firm reported earnings per share for the second quarter that beat the average analyst estimate, with KeyBanc saying results show that the trucking company has seen a “hot start.” Keep an eye on US solar stocks as Piper Sandler cut its ratings on SunRun (RUN US) and Sunnova (NOVA US) and upgraded FTC Solar (FTCI US), saying that the resilience of the sector to recession is likely to come into focus heading into 2Q earnings. Watch Apollo (APO US) and StepStone (STEP US) shares as Morgan Stanley strategists cut the stocks to equal-weight from overweight, taking a more cautious near-term view on alternative asset managers. Investor allocation to stocks plunged in the week through July 15 to levels last seen in October 2008, while exposure to cash surged to the highest since 2001, according to BofA's latest fund manager survey (more details shortly). High inflation is now seen as the biggest tail risk, followed by a global recession, hawkish central banks and systemic credit events.  Signs that high inflation and monetary tightening are squeezing consumers and employment could feed into worries that an equity revival since mid-June is merely brief. Corporate updates such as Apple’s are helping markets to calibrate the risk of recession. Netflix Inc., Johnson & Johnson and Lockheed Martin Corp. headline another busy day for earnings. “Inflation and its detrimental effect on consumers’ pockets and corporate margins is yet to be fully seen,” Mizuho strategists Peter McCallum and Evelyne Gomez-Liechti wrote in a note. “Until then, we don’t expect investors to feel properly comfortable buying on dips other than in the most defensive names.” In Europe, Euro Stoxx 50 reversed an earlier loss of as much as 0.6% and traded 0.2% higher, at session highs. Spain's IBEX outperformed peers, adding 0.8%. Tech, financial services and chemicals are the worst performing Stoxx 600 sectors. Here are some of the biggest European movers today: Electricite de France shares climb as much as 15% as trading resumes after the French government offered to pay about 9.7 billion euros to fully nationalize the utility in a move welcomed by analysts, which say the deal has a high chance of success. Wise shares jump as much as 16%. The money transfer firm’s fiscal 1Q update shows a 12% beat on revenue, Morgan Stanley (equal-weight) writes in a note, while Citi (sell) says update shows a “decent beat” on volumes and revenue, primarily driven by personal remittance business. Informa rises as much as 5% after reporting better-than-expected preliminary 1H results while announcing the acquisition of business news site Industry Dive for $389 million. Citi says the newsflow is encouraging “across the board.” Novartis shares gain as much as 1% after the company reported a “solid” 2Q with a surprise beat in its Sandoz generics unit, analysts say. ZKB notes that Cosentyx sales were weak, but this was offset by Sandoz and a solid performance for other drugs, such as Kesimpta. Deliveroo shares rise for a second day following its trading update, with Berenberg raising the stock to buy from hold on improved risk-reward. Shares rally as much as 5.5% after a 6.9% gain on Monday. Alstom shares were down as much as 6.7% after company reported 1Q earnings. Investor worries are around inflation, potential gas disruptions on production in Europe and chip shortages. Telenor shares dropped as much as 5.2% after Norway’s telecommunications company posted a 2.5 billion-krone ($250 million) impairment on its Pakistan operations due to a jump in funding costs and an adverse court ruling. SGS shares fall as much as 4.7% with analysts saying the testing and inspection firm delivered solid organic growth but with weaker margins. Getinge drops as much as 7.4%, with Handelsbanken analyst Rickard Anderkrans (buy) saying its 2Q results were a “mixed bag” across its divisions and adjusted Ebitda margin looked “fairly soft”. European stocks could slump another 10% if Russia cuts off gas to the region, triggering a recession, according to Citigroup Inc. strategists. A halt of Russian gas supplies could potentially reduce the euro area’s gross domestic product by about 1%, which would imply a 10% contraction in European earnings-per-share over the next 12 months, according to Citi. Earlier in the session, Asian stocks fluctuated as China’s policy efforts to resolve the mortgage boycott crisis failed to lift sentiment amid lingering woes in the sector and global growth concerns. The MSCI Asia Pacific Index erased a drop of as much as 0.4% to trade 0.1% higher as of 5 p.m. Hong Kong time. Technology shares were the biggest drags after a report on Apple Inc.’s plan to slow hiring highlighted growth risks. Industrial and financial shares gained. Hong Kong and Chinese equities were among the worst performers regionally, cutting short a rebound in the previous session. A gauge of developer shares fell despite a report that China may allow homeowners to temporarily halt mortgage payments on stalled projects, part of a broader policy push to stabilize the property market.  Asian equities have seen choppy trading recently as traders expect another large interest rate increase by the Federal Reserve this month. China’s Covid cases are also on the rise again, raising the risk of more lockdowns.  “It is not just the mortgages or the property, but also Covid that has gotten back a lot of attention. It will be quite challenging for the regional markets to overcome the overall bad risk sentiment that we have with the global headwinds,” Stefanie Holtze-Jen, Asia Pacific chief investment officer at Deutsche Bank International Private Bank, said in a Bloomberg TV interview.  Japanese shares edged higher on Tuesday after reopening from a holiday. Traders will look ahead to a policy decision from the Bank of Japan on Thursday Japanese stocks advanced as investors returned from a long weekend and await a policy decision from the Bank of Japan on July 21.  The Topix Index rose 0.5% to 1,902.79 at the market close in Tokyo, while the Nikkei advanced 0.6% to 26,961.68 on Tuesday. Sony Group Corp. contributed the most to the Topix Index gain, increasing 2.3%. Out of 2,170 shares in the index, 1,321 rose and 754 fell, while 95 were unchanged. In Australia, the S&P/ASX 200 index fell 0.6% to close at 6,649.60, as healthcare and technology shares tumbled. Technology shares had their worst day in a month, following regional and US peers lower after Bloomberg reported Apple plans to slow hiring in some divisions to cope with a potential economic downturn. Mining shares swung to a loss after posting early gains following BHP’s production output, as the mining giant joined rival Rio Tinto Group in signaling more turbulence.  Energy shares bucked the trend and edged higher after oil futures jumped above $100 a barrel on concerns about tighter supplies globally. In New Zealand, the S&P/NZX 50 index was little changed at 11,162.73 Stocks in India were mostly higher, with banks and property developers among the winners as signs pointed to improved sales. The S&P BSE Sensex rose 0.5% to 54,767.62 in Mumbai, while the NSE Nifty 50 Index gained 0.4%. Reliance Industries was the biggest contributor to the Sensex, rising 0.8%, followed by ICICI Bank, which rose 1.1%. Out of 30 shares in the Sensex, 19 rose and 11 fell. Among sectoral gauges, the realty index led with a 2.7% gain behind rallies by Sobha Ltd. and Oberoi Realty, the latter on demand outlook for a luxury project in Mumbai.  Consumer-goods producer Hindustan Unilever is scheduled to report quarterly earnings after trading hours, with analysts watching for its outlook to assess recovery in demand.  India’s rupee touched another record low, with one drag being the continued selling of equities by foreign investors. Net outflow of $29.7b of local shares as of July 15 was the most in Asia after China and Taiwan. The Bloomberg Dollar Spot Index fell 0.6%, dropping to its lowest level in two weeks, with Scandinavian currencies outperforming Group-of-10 peers against the greenback. The euro rose to a two-week high in the wake of the reports that the ECB were considering a larger initial move in their tightening cycle, gaining as much as 1.2% to 1.0269, eyeing the 21-DMA at 1.0307. German 2-year yields surged as much as 12 basis points to 0.64% as traders moved in to price at one point over 100 basis points of rate hikes from the ECB by September.Gilts rallied and traders trimmed bets on the pace of BOE interest-rate hikes after lower-than-forecast UK average earnings in May suggest inflation may slow. In rates, Treasuries were little change on the day with yields broadly within one basis point of Monday’s close despite weakness seen across European core rates after Reuters reported ECB officials are discussing a half-point hike on Thursday.  10-year TSY yields around 2.98%, slightly richer from Monday while bunds underperform 4bp in the sector; Treasuries curve is mildly steeper with spreads broadly within one basis point of Monday close also. Following Reuters report on ECB the euro jumped to two-week high while two-year German yields remain cheaper by 8.5bp on the day. US auctions this week include 20-year bond reopening Wednesday and 10-year TIPS on Thursday. German Bund curve bear-flattens with 2s10s narrowing 5.3bps. Peripheral spreads tighten to Germany with 10y BTP/Bund narrowing 0.8bps to 206.0bps. In commodities, oil slipped but held above $100 a barrel after posting the biggest one-day advance since May, aided by a tightening market and a cooling in dollar gains. WTI drifts 0.7% lower to trade near $101.88. Brent falls 0.8% near $105.42. Base metals are mixed; LME lead falls 2.4% while LME nickel gains 2.7%. Spot gold rises roughly $3 to trade near $1,713/oz. Bitcoin remains firmer on the session and have marginall eclipsed Monday's USD 22.75k best to a USD 22.95k high thus far. Looking to the day ahead now, and data releases include UK employment data for June, US housing starts and building permits for June, and the final CPI reading for June from the Euro Area. Central bank speakers include BoE Governor Bailey and the ECB’s Makhlouf. Earnings releases include Johnson & Johnson, Lockheed Martin and Netflix. And in politics, there’s another ballot of UK Conservative MPs as they select their next leader and the country’s next Prime Minister. Market Snapshot S&P 500 futures up 0.8% to 3,863.50 STOXX Europe 600 down 0.6% to 415.27 MXAP little changed at 156.43 MXAPJ down 0.3% to 515.24 Nikkei up 0.6% to 26,961.68 Topix up 0.5% to 1,902.79 Hang Seng Index down 0.9% to 20,661.06 Shanghai Composite little changed at 3,279.43 Sensex up 0.2% to 54,634.07 Australia S&P/ASX 200 down 0.6% to 6,649.60 Kospi down 0.2% to 2,370.97 Gold spot up 0.2% to $1,712.77 US Dollar Index down 0.69% to 106.62 German 10Y yield little changed at 1.26% Euro up 1.0% to $1.0242 Top Overnight News from Bloomberg The European Central Bank may consider raising interest rates on Thursday by double the quarter-point it outlined just last month because of the worsening inflation backdrop, according to people familiar with the situation. The French government offered a premium of more than 50% to minority investors in Electricite de France SA, seeking a swift nationalization of the troubled company that is the backbone of the country’s energy policy. The European Commission doesn’t expect Russia to restart a key natural gas pipeline this week, a senior official said, the clearest indication yet that the bloc is bracing for the worst Mining giant BHP Group has joined rival Rio Tinto Group in signaling more turbulence to come for commodities producers as costs balloon and demand for everything from iron ore to copper hits headwinds. A more detailed look at global markets courtesy of Newsquawk: Asia-Pac stocks mostly fell after reports of Apple slowing its hiring and European energy woes stoked growth fears.  ASX 200 was lacklustre amid weakness in tech and with miners choppy after a mixed quarterly update from BHP.  Nikkei 225 outperformed as it played catch up to the prior day's gains on return from the extended weekend. Hang Seng and Shanghai Comp. were pressured amid earnings updates and the COVID situation in China, but with the losses in the mainland stemmed after reports that China is considering a mortgage grace period. KKR does not plan to lead a bid for Toshiba (6502 JT); could still partake as an equity partner in a deal; waiting for more clarity for Japanese government and Co. management, according to Reuters sources. Top Asian News Searing Heat Tests China’s Ability to Keep Its Factories Running Some China High-Grade Builders’ Dollar Bonds Set for Record Lows China’s Covid Cases Near 700 as Shanghai Widens Testing Country Garden Dollar Bond Plunges, Joining China Junk Selloff India Said to Sell Dollars to Meet Gaps as Exchange-Rate Fair European bourses are under modest pressure continuing with the downbeat APAC handover, with pressure from AAPL, ECB sources and IBM impacting. US futures are modestly firmer having already reacted to the AAPL developments, though IBM (-5.0% in pre-market) is impacting. Within Europe, sectors are predominently in the red though Healthcare and Banking names are proving more resilient. French gov't intends to buy the 15.9% remaining EDF (EDF FP) shares and bonds, offering EUR 12.0/shr (12th July  close EUR 10.23/shr); represents an overall value of circa. EUR 9.7bln. Buyout will be followed by a delisting. Top European News UK government won a vote of confidence in the House of Commons (as expected) after five hours of debate with the vote count at 349 vs. 238, according to Sky News UK Chancellor Zahawi said they can and will get inflation back under control, while he added that they must deliver sound public finances and help households with inflation, not push up demand further. Zahawi stated that he will reform Solvency II rules to give insurers more flexibility to invest in infrastructure and aims to repeal hundreds of EU financial regulations and replace them with a UK version, according to Reuters. France Offers to Pay $9.9 Billion for EDF Nationalization UK Braces for Record-Breaking 40°C as Heat Wave Peaks China Disputes Report Xi Invited Europe Heads to Beijing Meeting Central Banks ECB policymakers are to discuss a rate hike worth 25bp or 50bp at Thursday's meeting, according to Reuters sources; hone in on a deal to make new bond purchases conditional on next-gen EU targets and fiscal rules. Some wanted the ESM involved, but this option has now likely been discarded. ECB may consider increasing rates on Thursday by 50bp, via Bloomberg citing sources; due to the worsening inflation situation. Source stressed that it is unclear if there will be sufficient support for a 50bp hike. RBA July Meeting Minutes stated that the Board remains committed to doing what is necessary to ensure inflation returns to the target over time and members agreed further steps would need to be taken to normalise monetary conditions in the months ahead, while it noted that two options for the size of the Cash Rate increase were considered which were raising the cash rate target by 25bps or by 50bps. RBA Deputy Governor Bullock said wages are starting to rise a little more, while she added that they need to get rates up to some sort of neutral and that neutral is a fair bit higher than where they currently are. HKMA intervenes; buys HKD 6.28bln from market as the HKD hits weak end of trading range. FX Antipodean Dollars take advantage of their US rival’s deeper reversal with the Aussie also acknowledging RBA minutes and rhetoric flagging further hikes, NZD/USD breaches 0.6200 and AUD/USD extends above 0.6850 to within a whisker of 0.6900. Euro boosted by sources suggesting ECB might raise rates by 50bp rather than the 25bp signalled for this week, EUR/USD through 1.0200 again and probes 1.0250. Franc rebounds amidst broad Buck retreat and in wake of Swiss trade data showing wider surplus, USD/CHF tests 0.9700 vs high close to 0.9800. Pound peers over 1.2000 vs Greenback again, but labours after mixed UK jobs and wage metrics. Yen firmer through 138.00, but could be hampered by option expiries at the round number (2.72 bn) and key Fib resistance (at 137.52). Loonie lags as WTI sags, USD/CAD straddles 1.2950 after dip below 1.2900 on Monday. Fixed Income EZ debt rattled by hawkish ECB source report with spill-over to German Bobl auction. Bunds recoil from 152.60 to 151.00 before paring some declines. Gilts hold in after mixed UK labour data and decent DMO 2039 sale with the 10 year benchmark between 115.76-03 parameters vs 115.01 prior Liffe close. 10 year T-note towards bottom of 118-05/118-15+ range ahead of US housing starts and building permits. Commodities Crude benchmarks are pressured and continuing to consolidate with fresh developments relatively light for the complex explicitly. White House Adviser Deese expects gasoline prices will continue to fall this month, according to MSNBC. TC Energy issued a force majeure for oil deliveries on Keystone Pipeline after a third-party power outage in South Dakota, while TC Energy said the Keystone Pipeline is operating at reduced rates with no timeline available for the restoration of full-service, according to Reuters. Saudi Foreign Minister says does not see a lack of oil in the market, there is a lack of refining capacity; adds, Russia is a integral part of OPEC+, via Reuters. EU is set to backlist CEO of Russia's zinc and copper giant UMMC, according to a draft document via Reuters. Spot gold is marginally firmer and comfortably above USD 1700/oz as the USD pulls-back while base metals are more mixed after recent upside in copper, for instance.   US Event Calendar 08:30: June Housing Starts, est. 1.58m, prior 1.55m; Housing Starts MoM, est. 2.0%, prior -14.4% 08:30: June Building Permits, est. 1.65m, prior 1.7m; Building Permits MoM, est. -2.6%, prior -7.0% DB's Jim Reid concludes the overnight wrap Well yesterday was the third hottest day on record here in the UK with today likely to be the hottest. My wife can't sleep with even the quietest fan on in our bedroom and I can't sleep without one. Anyone that can solve this riddle for us without resorting to seperate bedrooms please let me know. Although she might be happy with this solution. I’m too afraid to offer it up in case it’s accepted. I’ve actually slept with ice cubes on my back over the last couple of nights. Now there's an image for you all! Just when it looked like the market ice age was showing signs of thawing on hopes for less aggressive central banks and decent early week results, US sentiment turned late in the day following reports that tech giant Apple would be slowing hiring and spending next year, raising the stakes on the tech earnings out this week. So while European equities managed to post a strong gain, US stocks ended the day in the red (S&P 500 -0.84%). Meanwhile, easing fears of a more aggressive Fed hiking path helped Brent crude oil prices (+5.05%) rebound and the 2s10s Treasury curve (+1.8bps) steepen from its recent lows last week, with Brent crude oil prices (-0.41%) only down slightly overnight at $105.83/bbl. As the back-and-forth in sentiment yesterday showed, there are still plenty of obstacles for investors to navigate over the coming days. Not just recession risk but also the ongoing threat of a Russian gas shut-off at the end of the week. Yesterday saw Reuters report that Gazprom had declared force majeure on gas supplies to at least one major customer, with a letter saying that they couldn’t fulfil their supply obligations due to “extraordinary” circumstances. So a concerning sign amidst concerns that issues with the gas flow will go beyond the scheduled maintenance period on the Nord Stream pipeline. Separately, Germany’s Uniper, which is Europe’s largest buyer of Russian gas, applied to extend their €2bn credit line from the state-owned bank KfW, and Bloomberg also reported that a draft EU document warned that a Russian gas cutoff could cut EU GDP by 1.5% in a worst-case scenario, with even an average winter seeing a decline in EU-wide GDP between 0.6% and 1%. To be fair there have been more aggressive forecasts than this. In spite of the bad news there, European assets still put in a strong performance yesterday, with the STOXX 600 gaining +0.93% as the more cyclical sectors and energy led the way. That positive sentiment was also reflected in sovereign bond markets, where yields on 10yr bunds (+8.2bps) saw their largest daily increase in over a week, and the spread of Italian 10yr yields over bunds (-6.5bps) saw their largest daily decline in over a month as investors await the details of an anti-fragmentation tool from the ECB this week. While there was initial optimism in the US, it eventually soured and left the S&P 500 -0.84% lower at the close. The day started with more positive earnings than we had from financials last week, with Goldman Sachs (+2.51%) and Bank of America (+0.03%) posting better than expected results after last week’s lackluster showing from financials. They traded as much as +6% and +3.5% higher at the open, respectively, before fading later in the day. Tech stocks were a microcosm of the broader index performance on the day. The NASDAQ was as much as +1.5% higher while the FANG+ was more than +3% higher on the early morning optimism, only to turn following news that Apple would be slowing hiring and spending in 2023, stoking fears about the broader macro outlook. The NASDAQ and FANG+ eventually closed -0.81% and +0.06%, respectively. Netflix reports tonight so all eyes on that after two spectacularly bad earnings day equity performance so far this year. In the S&P 500, cyclical stocks still managed to outperform defensives; energy was the clear outperformer, up +1.96%, while discretionary and materials, up +0.22% each, were the only other sectors in the green, and heath care led declines (-2.15%). Treasury yields still managed to climb, and the curve managed to steepen as mentioned, though 10yr yields came off their intraday highs of +10.2bps to finish +7.0bps higher at 2.99%, and this morning they’ve shed a further -2.0bps to come down to 2.97%. With the Fed widely expected to raise rates by 75bps again next week, the latest round of housing data provided further evidence that their tightening cycle is beginning to have a significant impact, with the NAHB housing market index plummeting to 55 in July (vs. 65 expected). That’s the worst reading for the index since the initial wave of the Covid pandemic in May 2020, and if you exclude the pandemic plunge, you’ve got to go back to early 2015 for the last time that sentiment was worse. Furthermore, the 12-point decline relative to July was the largest one-month drop since the series began, with the exception of April 2020 as the world went into lockdowns, so a faster monthly drop even relative to what we saw during the GFC. Markets in Asia are struggling this morning following that overnight sell-off on Wall Street, with major indices trading in negative territory including the Hang Seng (-1.11%), CSI (-0.70%), Shanghai Composite (-0.30%) and the Kospi (-0.23%). The main exception to that is the Nikkei (+0.71%), which is catching up from yesterday’s holiday. As well as the more negative newsflow from the US, China also reported 699 Covid cases on Monday, which is the highest daily number since May 22. Separately, yields on 10yr Australian government bonds are up +7.0bps after minutes from the RBA’s recent meeting revealed that the board saw current interest rates as being “well below” the neutral rate, indicating that further rate hikes will be needed to return inflation to the target over time. Looking forward, there are signs that the selloff has stabilised for now, with S&P 500 futures (+0.12%) pointing slightly higher In terms of the Tory leadership race we are now down to four candidates after Tom Tugendhat was eliminated from contention yesterday. The next rounds of voting are today and tomorrow, by which point there’ll be just two candidates that’ll be voted on by the wider party membership over the coming weeks before a new leader/PM is announced in early September. The government also won a vote of confidence in the House of Commons yesterday, by 349 votes to 238. To the day ahead now, and data releases include UK employment data for June, US housing starts and building permits for June, and the final CPI reading for June from the Euro Area. Central bank speakers include BoE Governor Bailey and the ECB’s Makhlouf. Earnings releases include Johnson & Johnson, Lockheed Martin and Netflix. And in politics, there’s another ballot of UK Conservative MPs as they select their next leader and the country’s next Prime Minister. Tyler Durden Tue, 07/19/2022 - 07:59.....»»

Category: blogSource: zerohedgeJul 19th, 2022

5 Biggest Challenges Of Data Security In The Financial Service Industry

Collaboration and a proactive approach are essential in discovering new data security risks, regulations, and measures in the financial service industry. Given the fact that companies within the financial service industry use data for finding revenue streams, providing personalized experiences, and storing customer information, it’s essential to focus on data security. Data security is one […] Collaboration and a proactive approach are essential in discovering new data security risks, regulations, and measures in the financial service industry. Given the fact that companies within the financial service industry use data for finding revenue streams, providing personalized experiences, and storing customer information, it’s essential to focus on data security. Data security is one of the key business goals in this sector, as losing customer data can seriously harm an organization’s overall reputation and success. All banking businesses rapidly adopt different technologies, leading to various exposures and challenges. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2022 hedge fund letters, conferences and more This post will introduce the five most significant current challenges and ways to solve them. Data compliance challenges Managing data is undoubtedly one of the biggest challenges of data security today. The amount of data that financial companies are responsible for is often impossible even to imagine, and keeping all that data secure and private isn’t any easier. However, with numerous data privacy regulations popping up worldwide, keeping up with all data compliance challenges has never been more challenging. Organizations even lose approximately $4 million in revenue due to a single data non-compliance event. What is data compliance? Data compliance refers to following specific data-related regulations and standards that governments, corporate governance, or industry organizations set forth. These regulations protect the privacy and security of people’s personal and sensitive information by closely defining the rules and protocols for collecting, storing, managing, and using online data. These regulations can exist on a local, federal, or regional level. Therefore, you’ll come across data compliance guidelines and rules that affect only a particular area (e.g., California), the entire country (e.g., the US), or an even bigger entity (e.g., the EU). Keeping up with the latest laws With data compliance laws, customers worldwide can control how organizations use their personal and sensitive information. Although data compliance laws have been around for some time now, the two latest significant laws are the GDPR and the CCPA. The General Data Protection Regulation (GDPR) is a data compliance law by the European Union. It focuses on providing companies with guidelines on collecting and processing the personal information of people living within the EU boundaries. The California Consumer Privacy Act (CCPA) is a similar law to the GDPR, except it focuses on the citizens of California. Keeping up with the latest laws and regulations is a must for every company that plans to collect and interact with customer data. Companies need to be informed about the latest rules and regulations that could affect them. High compliance costs Becoming and staying data compliant is essential but expensive. Namely, every company that decides to collect, analyze, or store customer data must pay for data compliance. The total compliance costs can vary depending on the law and location. For instance, getting started with the GDPR costs a company approximately €900,000 (more than $1 million), although the maintenance costs vary. The CCPA compliance costs aren’t much cheaper. They can range from $50,000 for small businesses to $2 million for large enterprises. So, even if companies want to be data compliant, paying for all the expenses costs a lot. Technology compliance With technology playing a crucial role in how companies do business today, technological compliance is essential for organizations that want to maintain their financial health. Around 66% of small businesses struggle with financial issues, especially when paying for operational expenditures. Financial technology and apps could be the solution to alleviating these finance-related chores, but keeping up with the latest tech developments and innovations is also necessary for maintaining technology compliance in the long run. Data privacy Maintaining data privacy is rapidly becoming one of the biggest challenges for all companies worldwide, not just those in the financial service industry. Failing to keep data private can lead to unauthorized people accessing the data in question and exposing it, which automatically leads to the damaging of compliance protocols. Therefore, keeping data private, secure, and away from the prying eyes is critical, especially for banking and financial companies that store valuable and confidential information regarding their clients’ finances. Preventing cyberattacks Cyberattacks can damage data compliance by taking advantage of confidential client data. They have recently been on the rise, and preventing them has been a significant challenge. Moreover, various cybercriminal activities are becoming more and more common as online banking services evolve. Financial service companies have to incorporate high-quality systems to detect any suspicious activity and protect customer data at all costs to prevent cyberattacks from happening. Therefore, companies must always be one step ahead if they want to keep cybercriminals at bay and protect their customers by keeping their data secure. Evolving organizations and customer needs In today’s fast-paced world, customer needs develop and evolve rapidly. Organizations must transform to thrive and keep track of the latest developments and the latest customer requirements and requests. Since customer needs evolve so quickly, organizations sometimes need to transform how they function quickly. For instance, the increase of online banking users is only one of the examples of how changing customer needs influence financial companies to enter the digital world and launch their first online banking apps and services. New technologies create new liabilities. We live in a tech-driven world, so new technologies pop up daily. Although tech developments primarily serve to help us create more efficient and streamlined operations, reaching that point isn’t so simple. Implementing tech-driven changes and upgrading the existing systems are demanding processes that require plenty of time, skills, and resources. Therefore, it’s not uncommon for new technologies to create new problems for companies. Moreover, introducing new technologies usually comes with accepting new liabilities as well. That is a big responsibility, and companies are encouraged to carefully think about their duties once they implement a new piece of technology as part of their system. Teaching employees proper data management. The struggles don’t stop once the implementation of new technologies is complete. The most significant challenges begin since all employees need to learn how to navigate and use the newly-implemented systems. Teaching employees proper data management is a detailed and time-consuming process if you want to do it right. Data management practices associated with new technologies can go into great detail when using these technologies properly and utilizing all of their features. It’s vital to ensure every employee receives an in-depth guide on using the newly-acquired tools to prevent mishaps. Technology changes how companies operate. Because financial service companies are so reliant on technology, specific tools and systems can often dictate how these companies and organizations operate daily. Also, the impact of new technologies on operations is quite significant since they can affect data. For instance, the rising popularity of cloud data security influences many financial service companies worldwide to introduce these innovative solutions into their organizations. While cloud-based computing equips employees with more flexibility and freedom, transferring all client data from one place to another is a challenging process for experts. Creating a safe environment for data is a long process. Data safety means protecting all digital information from cyberattacks, including unauthorized access, data breach, corruption, and theft. Data safety has three goals – confidentiality, integrity, and availability. That means the ultimate purpose of it is to protect valuable digital information and data. With each technological change, companies need to adjust their goals of maintaining a safe environment for online data. With that said, that isn’t a one-time job – it is a long and ongoing process companies always need to come back to, revise, and upgrade. Cybersecurity threats A cyberattack is an umbrella term for any digital attempt to steal data, disable computers, use a system to launch further attacks, or cause harm to internet users in a different way. Cybercriminals use various methods to launch a cybercriminal attack. Financial service companies have been the main target for a while now. Namely, cybercriminals attack these institutions to drain bank accounts or transfer funds illegally. The most common methods cybercriminals use are spoofing, data manipulation, third-party services, malware, and data without encryption. Spoofing Spoofing is a cybercriminal method where a person or a program falsifies data and identifies as someone else. Essentially, it is impersonation. Spoofers do it to trick other people into giving them their confidential data, which provides them with an illegitimate advantage to use the received information and gain some benefit. As for the financial service industry, spoofers typically call clients and introduce themselves as bank representatives. They do it to get the credit card and account info from bank clients, after which they can use the obtained data to access the funds. Data manipulation Data manipulation refers to adding, removing, or modifying data in a database. As a cybercriminal activity, data manipulation explains the process of launching an attack to access networks, systems, documents, files, and even confidential data. Once the access has been granted, cybercriminals make small, unnoticeable changes to gain an advantage but still keep users in the dark. When it comes to banking and financial accounts, data manipulation refers to cybercriminals manipulating data by changing account owners and payment recipients or altering payment amounts and destinations. Third-party services Just because your company systems and networks have premium security features doesn’t mean the data you have in your company is entirely safe. It’s safe to say you are working with some third-party services and sharing at least a portion of your data with them. If one of those third-party services doesn’t have robust security systems like you do, they can easily get targeted by various cybersecurity attacks. That can also put your data and security in danger since the cybercriminals will get access to the information you shared with the compromised third-party service. If you think the odds of such activity are low, think again. A staggering 92% of US organizations have experienced similar situations with third-party services. Malware Malware is probably the most common type of cyberattack. Malware is also known as a computer virus. It includes installing malicious software on a system, which then executes unauthorized actions, such as disrupting the daily activities within a business, locking important files, ad spamming, and redirection to malicious websites. The malicious software types are numerous, but worms, viruses, trojans, ransomware, spyware, adware, and malvertising are the most frequently used. Data without encryption Recently, everyone’s been talking about the importance of data encryption. However, what happens if data isn’t encrypted? Maybe you’re lucky enough not to experience any consequences, but no financial service company should rely purely on luck. If the data isn’t encrypted, it’s left in a readable form. That means the data doesn’t have any protection, and anyone skilled enough to intercept the data during transmission can easily access the information. Therefore, working with unprotected data puts you at a significant security risk since basically anyone can obtain your and your client’s data. Third-party vendors A third-party vendor can be a person or company that offers specific services to other companies or customers. Since the financial sector is a highly interconnected sector due to the nature of its business, high interconnectivity with numerous third-party vendors is almost an obligatory feature of every company in this industry. Financial companies can receive all kinds of benefits when working with third-party vendors. Whether they partner up with customer service agencies, insurance brokers, or other banks, the possibilities are endless. Through these partnerships, financial companies can offer better deals to their clients and allow them to solve all banking and insurance tasks in one place. However, working with third-party vendors comes with a unique set of risks and challenges. Vendors can have security leaks. Choosing reliable and secure third-party vendors is essential to keep your data protected. However, you can never be sure if vendor is doing everything to maintain the highest level of privacy and security. So, third-party vendors act as a liability to their partners. The reality is that vendors often have security leaks. However, because financial companies share and exchange their data with these vendors, their security leaks easily translate as financial company leaks. That’s the primary reason banks and other financial institutions continually look for quality third-party vendors who put data privacy and security first. A potential security leak would break their trust with consumers, who would redirect their loyalty to their competitors. It’s crucial to align your practices. Partnering up and working together with someone isn’t as easy as it sounds. It’s a complex process that requires plenty of mutual understanding, effort, and communication. The same goes for financial companies working with third-party vendors. Working together on all aspects is crucial for ensuring data safety, not only for professional reasons but also for clients. We can’t stress the importance of aligning working practices enough. When businesses don’t align their practices, it’s easy to make errors that can cost both companies a lot. Financial companies and their third-party vendors will benefit from open communication and streamlined business processes, including dividing the work to setting future goals. Reporting and monitoring practices are essential. As you already know, communication and the alignment of practices are essential to make a partnership between financial companies and third-party vendors work. Reporting and monitoring are two crucial practices of this process. With reporting and monitoring practices, financial service companies can build a stronger partnership with their third-party vendors, which will allow them to streamline their processes. They’ll get an insight into valuable information that will enable them to make more informed decisions for the future. Nevertheless, reporting and monitoring come with some obstacles too. Namely, as partners, financial companies can’t get full access to the data available from third-party vendors. That means they can receive only a portion of data, significantly limiting their possibilities. Companies work with many vendors. Financial and banking companies partner up with numerous vendors. Of course, the exact number will vary from company to company, but, generally speaking, many third-party vendors are connected to a financial service company at all times. When a company works with so many different vendors, it’s challenging to manage data properly and ensure the highest levels of safety. Keeping track of data available on so many different locations and platforms can quickly become overwhelming, leading to errors in data security. Reducing the number of third-party partners could be one solution, but ensuring everyone implements robust security systems can be an excellent alternative. Data management Data management is the fifth and final challenge of data security in the financial service industry. Like data compliance, data management can significantly affect the level of security. For that reason, it’s crucial to manage data properly and avoid data management mishaps at all costs. What is data management? Data management is the process of collecting, storing, and utilizing data. However, the most critical feature of quality data management is doing it efficiently, securely, and cost-effectively. Good data management should help companies, organizations, and individuals locate valuable data, utilize it, and keep it safe. Once that’s done, companies can optimize the use of the gathered data and make actionable decisions by analyzing the information they receive. With more and more online threats popping up behind every corner, securing robust data management strategies is essential for protecting the business and its clients. Increased volume of data Companies worldwide have turned to digital management, and the amount of data available online has constantly been on the rise for years now. The volume of data usage keeps breaking previously-set records, and it doesn’t show any signs of slowing down. As a result, companies must analyze and manage increased volumes of data, which makes the whole process more complex and expensive. Data complexity is increasing. Technology keeps getting better, and tech tools are becoming more advanced. The tech advancement is breaking all expectations, but that also means the data used during these processes is becoming more complex and extensive. While you can expect that when dealing with demanding tasks and activities, even the most sensitive data is becoming complex today. So, financial service companies should dedicate more time to data collection and analysis if they wish to gather accurate and informative results. Adopting new technologies AI (Artificial Intelligence), ML (Machine Learning), robotics, cloud computing, and numerous other innovative technologies are available to financial companies and clients. Each of these technologies influences how financial companies operate and their data management requirements. Since some of these technologies have only recently become available to the broader public, companies are still trying to figure out ways to adopt these technologies into their existing systems. Most of them are demanding and difficult to master, which creates an additional challenge for all financial service companies trying to keep up with the latest tech advancements. Nevertheless, embracing this tech is vital to stay ahead of the competition, meet consumer demands, and safeguard business and customer data. Increased pressure on companies Finally, financial service companies belong to one of the most competitive industries. With that said, companies experience increased pressure to get as much available data as possible and do everything to analyze the gathered data effectively. Due to this industry’s highly competitive environment, companies are constantly under pressure to upgrade their technologies and introduce new elements that set them apart from the crowd. Failing to implement the latest tech could put them at risk of cyberattacks and other security threats that could harm their organization and customers. Conclusion To sum everything up, companies working in the financial service industry are experiencing numerous challenges regarding data security. From newly-published data compliance laws to the increased cybercriminal activity, it seems like an impossible task to keep track of everything going around and protect their business. However, addressing those challenges is paramount, no matter how complicated it seems. By singling out the five most significant challenges in data security, we hope to give you a sense of clarity and help you detect your weakest points. Once you’re aware of the challenges your company is struggling with, it will be much easier to develop an effective and clever solution. Article by Ben Herzberg, Due About the Author Ben is an experienced tech leader and book author with a background in endpoint security, analytics, and application & data security. Ben filled roles such as the CTO of Cynet, and Director of Threat Research at Imperva. Ben is the Chief Scientist for Satori, the DataSecOps platform. Updated on Jul 13, 2022, 4:18 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkJul 13th, 2022

2 ETFs to Watch for Outsized Volume on Large Caps and United Kingdom

Large caps and United Kingdom ETFs traded with an outsized volume on Friday. In the last trading session, Wall Street offered a mixed performance. Among the top ETFs, SPY lost 0.1% and DIA lost 0.2%, while QQQ moved 0.13% higher on the day.Two more specialized ETFs are worth noting as both saw trading volume that was far outside of normal. In fact, both these funds experienced volume levels that were more than double their average for the most-recent trading session. This could make these ETFs the ones to watch out for in the days ahead to see if this trend of extra-interest continues.CSM: Volume 11.68 Times AverageThis large-cap ETF was in the spotlight as around 269,149 shares moved hands compared with an average of 23,000 shares a day. We also saw some price movement as CSM lost 0.2% in the last session.EWU: Volume 3.11 Times AverageThis United Kingdom ETF was under the microscope as nearly 14.25 million shares moved hands. This compares with an average trading volume of roughly 4.58 million shares and came as EWU lost 0.4% in the last trading session.  Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Invesco QQQ (QQQ): ETF Research Reports SPDR S&P 500 ETF (SPY): ETF Research Reports SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports iShares MSCI United Kingdom ETF (EWU): ETF Research Reports ProShares Large Cap Core Plus (CSM): ETF Research Reports To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksJul 11th, 2022