Advertisements


7 Earnings Reports to Watch the Week of January 17

InvestorPlace - Stock Market News, Stock Advice & Trading Tips A positive earnings season will help to keep the stock market buoyant even in the face of looming interest rate hikes. Over the coming week, the remaining U.S. banks will announce their Q4 numbers before ending the week with the start of big tech and airline earnings. The post 7 Earnings Reports to Watch the Week of January 17 appeared first on InvestorPlace. More From InvestorPlace Stock Prodigy Who Found NIO at $2… Says Buy THIS Now Man Who Called Black Monday: “Prepare Now.” #1 EV Stock Still Flying Under the Radar Interested in Crypto? Read This First........»»

Category: topSource: investorplaceJan 14th, 2022

Permian Basin Drillers Add Crude Oil Rigs in 17 of 19 Weeks

In its weekly release, Baker Hughes Company (BKR) reports that U.S. rig count was higher than the prior week. In its weekly release, Baker Hughes Company BKR reported an increase in the U.S. rig count from the prior week. The rotary rig count, issued by Baker Hughes, usually gets published in major newspapers and trade publications.Baker Hughes’ data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry. The number of active rigs and its comparison with the prior-week tally indicates the trajectory of demand for Baker Hughes’oilfield services from exploration and production companies.DetailsTotal US Rig Count Rises: The count of rigs engaged in the exploration and production of oil and natural gas in the United States was 579 for the week through Dec 17, higher thanthe prior-week count of 576. Thus, the tally has increased for two straight weeks, keeping the count at the highest mark since April 2020. The current national rig count is higher than the year-ago level of 346.The number of onshore rigs for the week ended Dec 17 totaled 563, higher than the prior-week count of 560. In offshore resources, 15 rigs were operating, higher than the prior-week count of 14.US Oil Rig Count Rises: Oil rig count was 475 for the week ended Dec 17, higher than the prior-week count of 471. The current tally of oil rigs — far from the peak of 1,609 attained in October 2014 — is higher than the year-ago figure of 263.Natural Gas Rig Count Declines in US: Natural gas rig count of 104 was lower than the prior-week count of 105. The count of rigs exploring the commodity was, however, higher than the prior-year week’s 81. Per the latest report, the number of natural gas-directed rigs is roughly 94% below the all-time high of 1,606 recorded in 2008.Rig Count by Type: The number of vertical drilling rigs totaled 26 units, higher than the prior-week count of 24. Horizontal/directional rig count (encompassing new drilling technology with the ability to drill and extract gas from dense rock formations, also known as shale formations) of 553 compared favorably with the prior-week level of 552.Gulf of Mexico (GoM) Rig Count Increases: GoM rig count was 15 units, of which all were oil-directed. The count was higher than the prior-week number of 14.Rig Count in the Most Prolific BasinPermian — the most prolific basin in the United States — recorded a weekly oil rig tally of 288, higher than the prior-week count of 286. The basin's oil drilling rigs increased in 17 of the last 19 weeks.OutlookWest Texas Intermediate crude price is trading above $68 per barrel, significantly higher than the pandemic-hit April last year when oil was in the negative territory. With coronavirus vaccines being rolled out on a massive scale, the demand for fuel will possibly improve further. This has paved the way for further rig additions, although drilling activities have slowed down as upstream players are mainly focusing on stockholder returns rather than boosting output.Meanwhile, investors may watch energy stocks like Whiting Petroleum Corporation WLL and Continental Resources, Inc. CLR. Both the companies are expected to benefit if oil price stays healthy.Whiting Petroleum is a leading upstream energy company and is the top producer of crude oil in North Dakota. With oil prices improving at a healthy pace, Whiting Petroleum is expected to continue generating handsome cash flows while maintaining a healthy balance sheet.Headquartered in Denver, CO, Whiting Petroleum has witnessed upward earnings estimate revisions for 2021 in the past 30 days. Looking at the price chart, WLL has gained 150.4% year to date, outpacing the 95.2% improvement of the composite stocks belonging to the industry. WLL currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Continental Resources is also a leading upstream energy company with proven reserves in North Dakota and Oklahoma. The oil inventories of Continental Resources are among the best in the industry.Headquartered in Oklahoma City, Continental Resources has witnessed upward earnings estimate revisions for 2021 in the past 30 days. Considering the price chart, CLR has gained 163.9% so far this year, outpacing the 95.2% improvement of the composite stocks belonging to the industry. Continental Resources currently carries a Zacks Rank #2 (Buy). 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>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 Continental Resources, Inc. (CLR): Free Stock Analysis Report Baker Hughes Company (BKR): Free Stock Analysis Report Whiting Petroleum Corporation (WLL): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksDec 20th, 2021

Permian Basin Drillers Add Crude Oil Rigs in 16 of 18 Weeks

In its weekly release, Baker Hughes Company (BKR) reports that U.S. rig count was higher than the prior week. In its weekly release, Baker Hughes Company BKR reported an increase in the U.S. rig count from the prior week. The rotary rig count, issued by Baker Hughes, usually gets published in major newspapers and trade publications.Baker Hughes’ data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry. The number of active rigs and its comparison with the prior-week tally indicates the trajectory of demand for Baker Hughes’oilfield services from exploration and production companies.DetailsTotal US Rig Count Rises: The count of rigs engaged in the exploration and production of oil and natural gas in the United States was 576 for the week through Dec 10, higher thanthe prior-week count of 569. Thus, the tally has increased in six of the past seven weeks, keeping the count at the highest mark since April 2020. The current national rig count is higher than the year-ago level of 338.The number of onshore rigs for the week ended Dec 10 totaled 560, higher than the prior-week count of 554. In offshore resources, 14 rigs were operating, higher than the prior-week count of 13.US Oil Rig Count Rises: Oil rig count was 471 for the week ended Dec 10, higher than the prior-week count of 467. The current tally of oil rigs — far from the peak of 1,609 attained in October 2014 — is higher than the year-ago figure of 258.Natural Gas Rig Count Rises in US: Natural gas rig count of 105 was higher than the prior-week count of 102. The count of rigs exploring the commodity was higher than the prior-year week’s 79. Per the latest report, the number of natural gas-directed rigs is roughly 94% below the all-time high of 1,606 recorded in 2008.Rig Count by Type: The number of vertical drilling rigs totaled 24 units, lower than the prior-week count of 25. Horizontal/directional rig count (encompassing new drilling technology with the ability to drill and extract gas from dense rock formations, also known as shale formations) of 552 compared favorably with the prior-week level of 544.Gulf of Mexico (GoM) Rig Count Increases: GoM rig count was 14 units, of which all were oil-directed. The count was higher than the prior-week number of 13.Rig Count in the Most Prolific BasinPermian — the most prolific basin in the United States — recorded a weekly oil rig tally of 286, higher than the prior-week count of 283. The basin's oil drilling rigs increased in 16 of the last 18 weeks.OutlookWest Texas Intermediate crude price is trading above $72 per barrel, significantly higher than the pandemic-hit April last year when oil was in the negative territory. With coronavirus vaccines being rolled out on a massive scale, the demand for fuel will possibly improve further. This has paved the way for further rig additions, although drilling activities have slowed down as upstream players are mainly focusing on stockholder returns rather than boosting output.Meanwhile, investors may watch energy stocks like Whiting Petroleum Corporation WLL and Continental Resources, Inc. CLR. Both the companies are expected to benefit if oil price stays healthy.Whiting Petroleum is a leading upstream energy company and is the top producer of crude oil in North Dakota. With oil prices improving at a healthy pace, Whiting Petroleum is expected to continue generating handsome cash flows while maintaining a healthy balance sheet.Headquartered in Denver, CO, Whiting Petroleum has witnessed upward earnings estimate revisions for 2021 in the past 30 days. Looking at the price chart, WLL has gained 173.2% year to date, outpacing the 105.9% improvement of the composite stocks belonging to the industry. WLL currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Continental Resources is also a leading upstream energy company with proven reserves in North Dakota and Oklahoma. The oil inventories of Continental Resources are among the best in the industry.Headquartered in Oklahoma City, Continental Resources has witnessed upward earnings estimate revisions for 2021 in the past 30 days. Considering the price chart, CLR has gained 181.7% so far this year, outpacing the 105.8% improvement of the composite stocks belonging to the industry. Continental Resources currently carries a Zacks Rank #2 (Buy). Investor Alert: Legal Marijuana Looking for big gains? Now is the time to get in on a young industry primed to skyrocket from $13.5 billion in 2021 to an expected $70.6 billion by 2028. After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could kick start an even greater bonanza for investors. Zacks Investment Research has recently closed pot stocks that have shot up as high as +147.0%. You’re invited to immediately check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.Today, Download Marijuana Moneymakers 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 Continental Resources, Inc. (CLR): Free Stock Analysis Report Baker Hughes Company (BKR): Free Stock Analysis Report Whiting Petroleum Corporation (WLL): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksDec 13th, 2021

Futures Ramp On China Stimulus Hopes Ahead Of Central Bank Barrage

Futures Ramp On China Stimulus Hopes Ahead Of Central Bank Barrage U.S. futures rose again, starting the Santa rally predicted over the weekend by Goldman, after the underlying index surged to a record on Friday with risk appetite returning ahead of this week’s barrage of central bank meetings including the Fed on Wednesday, followed by the Bank of England and ECB. Nasdaq 100 futures climbed 0.4% as major technology and internet stocks rose in premarket trading with Apple inching closer to a $3 trillion market valuation; S&P 500 futures rose 11 points or 0.2%; with Dow Jones futures also rising 0.2%. Chinese developers’ bonds and shares experienced a wave of selling after the sudden plunge in Shimao Group's notes restarted concern over the health of the sector 10-year Treasury yields inched lower to 1.4684% and the dollar pushed higher. Bitcoin extended losses toward $48,000 as Binance bailed on plans for a Singapore exchange. Traders pared bets that the BOE will raise rates next year as concerns over fresh Covid restrictions outweighed inflation fears. Risk sentiment got a boost from predictions China will start adding fiscal stimulus in early 2022, said Ipek Ozkardeskaya, a senior analyst at Swissquote. “The chances of a massive hawkish surprise are limited, and the actual expectation doesn’t interfere with equity investors’ craving for a Santa rally to close a record-breaking year with one last record,” she wrote. Indeed, as we have been expecting for much of the past 6 months, China’s top decision makers last week signaled policies may become more supportive of growth next year. Economists predict China will start adding fiscal stimulus in early 2022. US stocks close Friday at a new record after in-line inflation data did not surprise to the upside for the first time in months and spurred bets that the Federal Reserve won’t have to accelerate plans to tighten monetary policy. That came amid a backdrop of uncertainty from the omicron coronavirus variant, a factor that traders are likely to also monitor closely as the week starts. Volatility should remain high as several central banks will decide on interest rates this week, Pierre Veyret, a technical analyst at ActivTrades, said in written comments. The “policies should set the trading tone, providing investors with more clues on next year’s investing environment.” The Federal Reserve on Wednesday is expected to speed up stimulus withdrawal and perhaps open the door to earlier interest-rate hikes in 2022 if price pressures stay near a four-decade peak. After repeated jawboning, it would be a major surprise if the bank doesn't announce a faster tapering, and the bond market will have to adapt to the new approach. “Global equities had a solid run last week and we’ll see if the goodwill lasts into what is a behemoth when it comes to event risk,” Chris Weston, head of research with Pepperstone Financial Pty Ltd., wrote in a note. Omicron and the Fed should dictate sentiment, he added. Meanwhile, in the world of covid, at least 30 U.S. states have reported omicron cases, with Anthony Fauci of course stepping up calls for boosters to increase protection and making pharma CEOs even richer. That said, all cases for which there's available information were asymptomatic or mild, European health chiefs said. That did not stop Boris Johnson from warning that the U.K. faces a tidal wave of infections and set a year-end deadline for its booster program. South Africa's Cyril Ramaphosa tested positive. Here are some of the biggest U.S. movers today: Arena Pharmaceuticals soars after Pfizer agrees to buy it for $100/Shr in Cash Apple shares rose 1%, leaving the stock close to hitting $3t market capitalization if the move holds. Airbnb, Lucid, Zscaler and Datadog shares all rise in U.S. premarket trading with the companies set to be added to the Nasdaq 100 index later this month. Peloton Interactive shares gain after the home-exercise firm put out an advert responding to a scene in the TV show “And Just Like That...” where a character dies using its product. The stock closed 5.4% lower on Friday, the day after the episode aired. TherapeuticsMD fell 25% in premarket trading after the FDA said it couldn’t approve revisions to some manufacturing testing limits for the Annovera birth-control ring requested by the company through a supplemental new drug application. European stocks also advanced, led by technology and mining stocks. The Euro Stoxx 50 rose as much as 1%, DAX outperforming at the margin.  In the U.K., traders are paring back bets on Bank of England rate hikes over the next year as concerns over fresh Covid restrictions outweigh inflation fears. Asian stocks erased an early advance as deepening losses in shares of Chinese property developers and persistent concerns over the omicron coronavirus variant soured sentiment. The MSCI Asia Pacific Index was down 0.2% after having climbed as much as 0.8%. Equity benchmarks in India and South Korea led regional declines. While stocks in China and Hong Kong rallied in morning trade on signals policies may become more pro-growth next year, the Hang Seng Index erased a gain of as much as 1.6%. That was owing to a selloff in real estate names after a plunge in the bonds and shares of Shimao Group sparked renewed concern over the health of the sector. Monday’s trading in Asia also highlighted investor caution as markets confront potential economic risks from omicron’s spread and a series of central bank meetings this week, including the Federal Reserve. The Fed on Wednesday is expected to speed up stimulus withdrawal and perhaps open the door to earlier interest-rate hikes in 2022 if price pressures stay near a four-decade peak. “We are in the last three weeks of the year -- no investor is going to place new bets and are more likely to be taking profits off the table,” said Justin Tang, head of Asian research at United First Partners. “Any negative news will be taken as a reason to press the sell button.” Meanwhile, China’s stocks climbed for the fourth day in five after the nation’s annual economic conference ended Friday with a vow to ensure “stability” and “front load” policies. Foreign investors on Monday added to record purchases of mainland shares last week. Focus now shifts to data due later in the week, including industrial production, retail sales and fixed-asset investment. India’s benchmark stock index dropped, with a fall in Reliance Industries Ltd. weighing on the market. The S&P BSE Sensex slipped 0.9% to close at 58,283.42 in Mumbai, reversing gains of as much as 0.7%. The index had posted its best weekly performance since mid-October on Friday. The NSE Nifty 50 Index also fell 0.8% on Monday. Still, a measure of small-cap companies gained 0.2%. Reliance, the nation’s most valuable company, dropped 2%. Out of 30 shares in the Sensex, 23 fell and seven rose. All but one of the 19 sector sub-indexes compiled by BSE Ltd. declined, led by a gauge of energy companies. “Selling is more evident in benchmark indices as overseas investors are booking at least a part of their profits ahead of the U.S. Fed’s rate-setting meeting that is likely to speed up the policy normalization process,” Abhay Agarwal, founder of Mumbai-based Piper Serica Advisors Pvt., an investment management company with assets of 5 billion rupees under management, said by phone.  The Fed.’s policy announcement is due Wednesday, where it is expected to speed up stimulus withdrawal and perhaps open the door to earlier interest-rate hikes in 2022. “Post-event, we expect to see a reallocation, though at a slower pace as FPIs will factor in the possible hike in interest rates, apart from the tapering of stimulus,” Agarwal said. Locally, the government will release its consumer inflation print for the month of November later on Monday. Inflation likely rose to 5.1% year-on-year in November from 4.5% in the previous month, according to a Bloomberg survey. Fixed income drifts higher with bund and UST curves bull flattening. Treasury yields were lower as the U.S. trading day begins, with the 10Y sliding to 1.46% and short-term little changed, prolonging the curve-flattening trend. With no U.S. economic data slated and Fed speakers silent ahead of Wednesday’s policy meeting, supply is a focal point, and Fed is slated to buy long-end sectors with no coupon supply until next week’s 20-year reopening. 10- to 30-year yields lower by about 1bp-2bp, 10-year by 1.5b at ~1.468%; 2- to 5-year yields little changed, narrowing 2s10s and 5s30s by 1bp-2bp.Peripheral spreads tighten slightly with short-dated BTPs leading a cautious move higher. Gilts bull steepen, trading ~2.5bps richer across the short end as money markets continue to price out hikes in light of the latest Covid restrictions. In FX, Bloomberg Dollar index drifts 0.3% higher, erasing Friday’s decline and rallying against all its peers with the focus on Wednesday’s Federal Reserve meeting amid speculation officials might accelerate the pace of policy normalization. Flows in the spot market are running at 70% of the recent average, a Europe-based trader told Bloomberg. Volatility term structures in the major currencies remain inverted as the market awaits forward guidance that could shape trading for the better part of 2022 U.S. inflation data in line with expectations on Friday “almost certainly won’t change the balance-of-risk assessment for the Fed, and the communications of late expressing concern over inflation risks remain valid,” says MUFG’s Derek Halpenny. “The week starts quietly in terms of data today but it remains likely that the dollar will remain supported into the FOMC on Wednesday with anticipation high of some hawkish rhetoric to accompany the decision to speed up QE tapering.” GBP/USD fell 0.2% to 1.3244 after gaining 0.5% over the previous two sessions. The Bank of England is set to opt for caution over Covid rather than worries about inflation, pushing back its first rate increase since the pandemic into 2022, according to economists. U.K. Health Secretary Sajid Javid said there’s no certainty the government will be able to keep schools in England open, as it battles to contain the spread of the omicron Covid-19 variant.  “This week is interesting for GBP as markets scrutinize labor-market report tomorrow ahead of BOE,” said Christopher Wong, senior foreign-exchange strategist at Malayan Banking Bhd. in Singapore. “There are concerns unemployment will spike if workers are made redundant or if people cannot find jobs, and this labor report will provide the first assessment.” The Yen outperformed amid broad dollar strength; USD/JPY still up 0.2% at 113.69. AUD and NOK are the weakest in G-10.  Turkish lira crashed again, plunging to a new record low in early London trade with USD/TRY initially rallying over 6% to highs of 14.7590, before fading some of the move after another intervention from the Turkish central bank. In commodities, crude futures give back Asia’s gains; WTI is little changed near $71.78, Brent dips below $75.50. Spot gold holds a narrow range near $1,785/oz. Most base metals are in the green with LME aluminum outperforming.  Bitcoin once again failed to rise above $50,000, extending losses toward $48,000 as Binance bailed on plans for a Singapore exchange There are no major economic developments on today's calendar, but it's a busy week with about 20 central banks making monetary policy announcements, including the Fed, the BOE and ECB, and the divergence of their paths will be evident. Jerome Powell may turn more hawkish as he fights rising inflation, while the ECB joins China in leaning dovish and playing down soaring prices. Market Snapshot S&P 500 futures up 0.4% to 4,728.00 STOXX Europe 600 up 0.7% to 478.82 MXAP down 0.2% to 193.62 MXAPJ down 0.3% to 630.93 Nikkei up 0.7% to 28,640.49 Topix up 0.1% to 1,978.13 Hang Seng Index down 0.2% to 23,954.58 Shanghai Composite up 0.4% to 3,681.08 Sensex down 0.9% to 58,278.65 Australia S&P/ASX 200 up 0.4% to 7,379.26 Kospi down 0.3% to 3,001.66 Brent Futures up 0.8% to $75.74/bbl Gold spot up 0.1% to $1,784.20 U.S. Dollar Index up 0.34% to 96.42 German 10Y yield little changed at -0.36% Euro down 0.4% to $1.1265 Top Overnight News from Bloomberg Almost 20 central banks meet this week, including the world’s biggest. No surprise that volatility term structures in the major currencies remain inverted as the market awaits forward guidance that could shape trading for the better part of 2022 The Bank of Japan offered to buy 2 trillion yen ($17.6 billion) of government bonds under repurchase agreements after repo rates jumped to a two-year high Turkey’s central bank intervened in the market by selling FX after the lira tumbled past 14 to the dollar for the first time, piling pressure on a central bank that’s forecast to keep cutting interest rates this week despite rising inflation. The decline came after S&P Global Ratings lowered the outlook on the nation’s sovereign credit rating to negative on Friday, citing risks from the “extreme currency volatility” The ECB’s biggest decision this week is to decide if it can still call the current inflation spike “transitory.” The answer will have a huge bearing on the euro-area economy, which is already dealing with resurgent coronavirus infections, new restrictions and lockdowns, and uncertainty about the omicron variant ECB Vice President Luis de Guindos is self-isolating after testing positive for Covid-19 on Saturday, the ECB said in a statement posted on its website. Guindos hasn’t been in close contact with ECB President Christine Lagarde over the past week, according to the statement. The Spaniard, who is double- vaccinated and has very mild symptoms, will work from home until further notice Two doses of the Pfizer Inc. and AstraZeneca Plc. vaccines induced lower levels of antibodies against the omicron variant, increasing the risk of Covid infection, according to researchers from the University of Oxford. A more detailed breakdown of overnight news from Newsquawk Asia-Pac equity markets took their cues from last Friday’s gains on Wall Street where the S&P 500 notched a fresh record close and its best weekly performance since February, with markets now bracing for a risk-packed week including a busy schedule of central bank meetings. The ASX 200 (+0.4%) traded higher with risk appetite supported by the reopening of Australia’s borders to international students and skilled workers from Wednesday, while the government will also partially underwrite up to AUD 7bln in new loans for small businesses impacted by lockdowns. The Nikkei 225 (+0.7%) benefitted from the mild outflows from the JPY, with the index unphased by mixed Tankan and Machinery Orders data in which the Tankan Large Manufacturers Index and Outlook missed expectations but sentiment among Large Non-Manufacturers and Small Manufacturers improved for the sixth consecutive quarter. The Hang Seng (-0.2%) and Shanghai Comp. (+0.4%) predominantly conformed to the upbeat mood amid economists' expectations for China to add fiscal stimulus from early next year following last week’s conclusion to the Central Economic Work Conference, which noted that China's economy faces shrinking demand, supply shock, and weakening expectations but added that economic operations are to be kept within a reasonable range. Alibaba shares were among the biggest gainers in Hong Kong as it extended its rebound from YTD lows. Finally, 10yr JGBs were rangebound with March futures contained by resistance at the key 152.00 level and amid the positive mood across riskier assets, although JGBs were off the lows seen late last week where there were source reports that the BoJ is likely to scale back its pandemic relief programs in March with a potential announcement as early as this week’s meeting. Top Asian News Shriram Units Merge to Form Largest India Retail Financier Intel to Spend $7 Billion on Big Malaysia Chipmaking Expansion Shimao Group Appoints Xie Kun as Executive Director Daimler Reveals Chinese Partner BAIC Raised Stake to Almost 10% Stocks in Europe have continued to gain since the cash open (Euro Stoxx 50 +1.0%; Stoxx 600 +0.5%) as the APAC sentiment reverberates through the region following a fleeting blip lower in early European trade. US equity futures are also firmer but to a lesser magnitude – with the RTY (+0.3%) narrowly outpacing the ES (+0.%), NQ (+0.4%) and YM (+0.2%). Focus this week will be on the slew of central bank updates which kicks off with the FOMC on Wednesday, followed by the BoE and ECB on Thursday - with Flash PMIs, Christmas liquidity and Quad Witching also part of this week’s concoction. Add to that the potential tail-risk from geopolitics and headline risk from COVID. Nonetheless, European cash markets at the moment seem unfazed by what’s ahead. Sectors are pro-cyclical with Basic Resources and Autos topping the charts, whilst the defensive Healthcare, Telecoms and Personal & Household goods reside at the bottom. A recent Citi note suggests that rising earnings should keep European stocks moving higher and offset expansive valuations and tightening monetary policy in the US. Citi targets some 9% upside for the Stoxx 600 next year, with a target of 520 (vs current c.477), whilst 12% upside is targeted in the FTSE 100 to 8,200 (vs current c. 7,303). Citi leans in favour of cyclicals vs defensives - with overweights in Banks, Insurance, Basic Resources, Industrials, Media, Luxury Goods and Chemicals. Citi is underweight Utilities, Telecoms, Food & Beverages, Personal Care, Travel, Autos and Financial Services. The bank has also added to its focus list: AstraZeneca (+0.1%), Aviva (+0.7%), Capgemini (+1.2%), Faurecia (+0.9%), Iberdrola (-0.3%), Lloyds (-0.7%), Prosus (+1.5%), Royal Mail (+1.6%), Sanofi (Unch), Tesco (+0.4%), UBS (+0.2%), Vodafone (Unch), Volvo (+1.1%). Separately, Goldman Sachs sees muted returns for global stocks next year amid negative real rates coupled with high equity risk premia and in the absence of a growth shock. GS suggests that risks are growing in the US on a relative basis and sees a maximum drawdown of between -5 to -10% over the next 12 months. Top European News European Gas, Power Prices Surge on Nord Stream 2 Worries U.K. Says Can’t Rule Out Shutting Schools as Omicron Spreads UBS Global Wealth Management Discontinues USDTRY Coverage Vivendi Has ‘Never Been a Threat’ to Lagardere: Arnaud Lagardere In FX, the Greenback has clawed back all and a bit more of its post-US inflation data losses, partly on reflection perhaps that the CPI prints were broadly in line, and actually a tad above consensus in terms of the m/m headline rate, so highly unlikely to derail the Fed from upping the pace of QE tapering this week and probably won’t deter the more hawkish FOMC members from pencilling in a steeper lift-off. Hence, having ended Friday’s session fractionally below a Fib retracement level (96.098), the index subsequently eclipsed the intraday peak (96.429) to turn what was a bearish technical close into a constructive start to the new week within a 96.080-450 range and a ‘close’ above 96.500 would be deemed positive, if not bullish. CHF/EUR/AUD - Very little traction from latest signs of building inflation pressure in the Eurozone via German wholesale prices reaching a record high 16.6% y/y in November, but the Euro has held above 1.0400 against the Franc in wake of latest weekly Swiss sight deposits showing a rise in domestic bank balances. Meanwhile, the single currency has absorbed some stops triggered on a breach of 1.1265 vs the Buck and could derive underlying support from decent option expiry interest at 1.1250 (1.5 bn) at the base of a band extending to 1.1320 (2 bn) through 1.1270-1.1300 (1.1 bn), and Usd/Chf is hovering around 0.9250 at the upper end of a 0.9257-00 band ahead of producer/import prices on Tuesday. Elsewhere, the Aussie has not been able to benefit from good news in the form of Australia opening its borders to international students and skilled workers from Wednesday, Government plans to partially underwrite up to Aud 7 bn new loans for small businesses impacted by lockdowns, or buoyant risk appetite, as it straddles 0.7150 against its US counterpart. JPY/NZD/CAD/GBP - Also conceding ground to their US peer, with the Yen back below 113.50 and hardly helped by mixed Japanese macro releases including December’s Tankan survey and October machinery orders, while the Kiwi is back under 0.6800 even though NZ PM Ardern said the COVID-19 alert level for Auckland is to be eased on December 30 and the next review is scheduled for January 17. The Loonie is slipping alongside WTI between 1.2753-06 parameters and Cable has tested Fib support into 1.3200 at 1.3200 amidst ongoing UK political furore over Conservative Party transgressions during lockdown last year and heightened Omicron restrictions to prevent a tidal wave of infections. In commodities, WTI and Brent front-month futures have been drifting lower since the European morning after the former tested USD 73/bbl to the upside and the latter briefly topped USD 76/bbl. Newsflow for the complex has been light but there have been further positive omens regarding the Iranian nuclear talks - Iran’s top nuclear negotiator said good progress was made in nuclear talks and can quickly pave the way for serious negotiations, whilst Russia's Deputy Foreign Minister said they have reason to anticipate some progress. That being said, we are yet to hear from some of the western nations. Meanwhile, on the OPEC front, Iraq’s Oil Minister said he expects OPEC to maintain its current policy of gradual monthly increases of 400k BPD at the next meeting – slated for early January. On the COVID front, the UK opted not to further tighten restrictions over the weekend but instead boosted the booster programme, whilst reports surrounding the Omicron variant have all highlighted a mild illness. The geopolitical space may require some more attention as tensions remain high on the Ukraine/Russia and Taiwan/China front, with the US involved in both. Russian Deputy Foreign Minister, according to reports this morning, said if the US and NATO do not provide them with guarantees around security, it may lead to confrontation – and emphasised that the lack of progress on this would lead to a military response. Further, there were reports that Saudi Arabia and Iran held security talks. Ahead, the monthly OPEC oil market report is due to be released, but focus this week will likely remain on the slew of central bank meetings. Elsewhere, spot gold and silver are constrained to recent ranges ahead of a risk-packed week, with the former still in a purgatory zone below its 50 DMA (1,789/oz), 200 DMA (1,793/oz) and 100 DMA (1,795/oz). Meanwhile, LME copper is firmer on the mild market optimism but has receded south of the USD 9,500/t mark. US Event Calendar Nothing major scheduled DB's Jim Reid concludes the overnight wrap We had our first Xmas lunch yesterday with my golf club hosting Santa (arriving on a golf buggy up the 18th fairway) and welcoming kids to the dinning room. I spent the whole lunch worrying their behaviour would get me black balled and banned from golf. Before we went my wife and I took lateral flow tests and Maisie asked if this was to stop Santa getting the virus? She then asked who would deliver all the presents if he had to self isolate. I must admit that I thought this was a very good question, especially as she’s starting to slowly question his existence. I said it was likely ok as Santa had just got his booster as he is over 50. I remember when the third week of December was one long string of Xmas client lunches that you desperately tried the leave as early as you could politely do so even if that was 8pm. This week they’ll be no time for lunches and we’ll be glued to our screens with just the eight G20 central banks deciding on monetary policy. The Fed’s decision on Wednesday will be key of course, with anticipation that they might accelerate the tapering of their asset purchases, but there’s also the ECB and Bank of England meetings to watch out for as well. All of them are very much “live” meetings. Elsewhere the flash PMIs for December (Thursday) could give us an initial indication as to how increased restrictions have begun to affect economic activity. US retail sales and UK CPI (both Wednesday) might be other interesting data points. Reviewing the main highlights in more details now. The Fed’s decision on Wednesday will be the focal point of the week. In terms of what to expect, our US economists write in their preview (link here) that they anticipate a doubling in the pace of tapering, which would bring the monthly drawdown of Treasury and MBS to $20bn and $10bn per month respectively. That would see the process of tapering conclude in March, giving them greater optionality for an earlier liftoff. Bear in mind that this meeting will also see the release of the latest dot plot, as well as the projections for inflation, growth and unemployment. On that, our economists see the median dot in 2022 likely showing two rate hikes, with risks of more, up from September when only half the dots saw any hikes by the end of 2022. The ECB’s decision will then follow on Thursday. In our European economists’ preview (link here) they write that until the arrival of the Omicron variant, the ECB appeared on track to initiate a transition to a monetary policy stance based more on policy rates and rates guidance and less on liquidity provision. They were also set to create a policy framework with more optionality to better respond to inflation uncertainties. The Omicron variant reinforces the need for optionality, but until there’s greater clarity on what it means for the pandemic and the recovery, the ECB may stall the expected decisions in part or in whole until early 2022. As with the Fed, it’ll be interesting to see the December staff forecasts on inflation, which could influence the market view on lift-off timing. The Bank of England’s decision will then take place on Thursday, and our UK economist expects the MPC will raise Bank Rate by +15bps to 0.25%. In the preview (link here) it argues that news of the Omicron variant has changed little on the medium-term economic outlook, with the labour market remaining as tight as it has been in recent memory, and inflation continuing to outpace staff forecasts. Nevertheless, the risks to this view are finely balanced, and risk management considerations may lead them to delay a rate hike, as they instead opt to find out more information on Omicron’s impact. Finally on the central bank front, the Bank of Japan will be holding their final monetary policy meeting of the year on Friday. In our economist’s preview (link here), it says that although there had been an expectation that the bank would revise their special pandemic corporate financing support program at this meeting, the emergence of the Omicron variant has changed the situation. Given the next meeting is only a month later, the view is now that they’ll maintain a wait-and-see stance in this meeting and adjust the policy in January, although a revision remains possible this week if more positive evidence is found on the new variant. Moving on to the data, the main highlight will be the flash PMIs for December from around the world on Thursday which will offer an initial indication as to whether there’s been any economic reaction yet to rise in restrictions and the emergence of the Omicron variant. There’ll also be an increasing amount of hard data out of the US for November, including retail sales (Wednesday), industrial production, housing starts and building permits (all Thursday). In China, Wednesday will see the release of their own retail sales and industrial production data for November, and in Germany on Friday there’s the Ifo’s business climate indicator for December. Finally on the inflation side, releases will include the US PPI data for November tomorrow, along with the UK and Canadian CPI readings for November on Wednesday. Late on Friday the UK released a paper looking at vaccine effectiveness against the Omicron variant. The good news is it suggested those who’d been boosted at least a couple of weeks ago still had decent protection, with 3 doses of Pfizer offering 75.5% effectiveness against symptomatic disease, and those who’d had two doses of AstraZeneca followed by a Pfizer booster had 71.4% effectiveness. Those are both lower than the 90+% effectiveness against delta with a booster, but is still much better than some of the worst outcomes had feared. Furthermore, if the past variants are anything to go by, then the protection against severe disease and hospitalisation could be even higher. However, the bad news is it indicated those who’ve been double-jabbed for some months now have significantly waning protection against this new variant from a purely symptomatic basis without a booster, so this will only encourage governments to ramp up their booster campaigns. The UK last night accelerated their plans to get all over 18s offered a booster. It’s now by the end of the year which will be a Herculean task. This follows PM Johnson last night telling the nation that there’s a tidal wave of Omicron cases coming. The government expects it to become the dominant strain very soon in what will be an incredibly short space of time. Overnight in Asia, markets are trading notably higher with the CSI (+1.31%), Hang Seng (+1.01%), Shanghai Composite (+1.00%), the Nikkei (+0.89%) and KOSPI (+0.28%) all strong after China's policymakers' hinted at more stimulus at the end of annual Central Economic Work Conference on Friday. Indeed our economists suggest that this is the decisive policy shift that markets have been waiting for and believe it’s a big deal. See their report on it here. This optimism is being reflected in the near 6% jump in Iron Ore trading overnight. DM futures are indicating a positive start to markets in the US and Europe with S&P 500 (+0.37%) and DAX (+0.44%) futures both in the green. Looking back at last week now and the focus remained squarely on Omicron, where the lack of any concrete bad news lent a more optimistic tone. This modestly improved risk sentiment sent equities and yields higher, and pushed volatility lower with the VIX ending the week -11.88 ppts lower at 18.79. The S&P 500 and Stoxx 600 gained +3.82% and +2.76% over the week (+0.95% and -0.30% Friday respectively). Cyclical sectors and tech stocks led the gains in the US. The small cap Russell 2000 advanced +2.43% (-0.38% Friday) while the Nasdaq climbed +3.61% (+0.73% Friday). The optimism also pushed yields higher and yield curves slightly steeper, with the 10yr treasury gaining +14.1bps this week after a poor close the previous week (-1.5bps Friday) and 10yr bunds climbing +5.1bps (+0.7bps Friday). The 2s10s treasury curve steepened +7.2bps (+1.6bps Friday). Ahead of the Fed’s meeting this week, the market is pricing the first full Fed rate hike by June. In the world of central banking, the Bank of Canada kept policy on hold and reinforced expectations for their inflation target to be sustainably achieved in the middle of 2022, enabling policy rate hikes. Like most DM central banks, they are focused on persistently elevated inflation, which they ascribe to supply constraints that will take time to alleviate. The Reserve Bank of Australia also left its benchmark interest rate unchanged while cautioning that price pressures remain subdued, in contrast to the rest of the DM space. In China, the PBoC cut the required reserve ratio by -50bps to support the economy, while FX reserve ratio was lifted +2.0% to lean against an appreciating renminbi. Property developers Evergrande and Kaisa defaulted on dollar debt. Chinese officials asserted the defaults would be dealt with “in a market-oriented way”. Geopolitical rumblings out of Europe also garnered focus. Presidents Biden and Putin held a phone call to discuss tensions following the build-up of Russian forces on the Ukrainian border. The readouts following the call offered few details but signalled both sides would follow up. President Biden has cautioned severe economic sanctions would be levied should Russia invade Ukraine, including sanctions on Putin’s inner circle, energy companies, and banks. The US would also consider severing Russian access to the US-run international payments system, SWIFT. On Friday, US CPI increased 0.8% and core US CPI increased 0.5% month-over-month in November, with the headline reading a tenth ahead of expectations. Commensurate year-over-year readings were 6.8% and 4.9%, the highest readings since 1982 and 1991, respectively. Measures of underlying and trend inflation continued to move higher, suggesting the Fed’s recent hawkish pivot will continue to be embraced by policymakers. Tyler Durden Mon, 12/13/2021 - 07:56.....»»

Category: blogSource: zerohedgeDec 13th, 2021

Futures Rebound Ahead Of Critical CPI Print

Futures Rebound Ahead Of Critical CPI Print US futures rebounded on Friday from Thursday's selloff as traders waited with bated breath for an inflation report that could strengthen the case for an aggressive policy tightening by the Federal Reserve, while Oracle Corp jumped on an upbeat third-quarter outlook. At 730 a.m. ET, Dow e-minis were up 109 points, or 0.30%, S&P 500 e-minis were up 16.25 points, or 0.35%, and Nasdaq 100 e-minis were up 53.50 points, or 0.4%. Europe’s Stoxx 600 Index pared an earlier decline, while a Bloomberg gauge of Asian airlines fell. In China, Evergrande chairman Hui Ka Yan sold just over a 2% stake in the company, in the same week the property developer was officially labeled a defaulter for the first time. The dollar, Treasury yields and oil advanced. Shares of Oracle gained 11.2% in premarket trading after posting forecast-beating results for the second quarter, helped by higher technology spending from businesses looking to support hybrid work.  Broadcom Inc rose 7.0% as the semiconductor firm sees first-quarter revenue above Wall Street expectations and announced a $10 billion share buyback plan. So far this week, the Nasdaq and the S&P advanced over 2.8% each and the Dow rallied 3.4%. The S&P is now down 1.6% from its all-time peak. The S&P 500 dropped 5.2% from a record high hit on Nov. 22 as investors digested Jerome Powell's renomination as the Fed's chair, his hawkish commentary to tackle. Meanwhile, the U.S. Senate on Thursday passed and sent to President Joe Biden the first of two bills needed to raise the federal government's $28.9 trillion debt limit and avert an unprecedented default. In other news, the U.S. government moved a step closer to prosecuting Julian Assange on espionage charges, after London judges accepted that the WikiLeaks chief can be safely sent to America. With headline CPI expected to print at 6.8% Y/Y this morning - in what would be its highest level since 1982 - with whisper numbers are high as the low 8% after Biden said that this month's number won't show the drop in gasoline prices (which is certainly transitory now that oil price are on track for the biggest weekly gain since August), it is very likely that the CPI number will miss and we will see a major relief rally. On the other hand, any upside surprise on the reading will likely bolster the case for a faster tapering of bond purchases and bring forward expectations for interest rate hikes ahead of the U.S. central bank's policy meeting next week. “Various FOMC participants, including Chair Powell, have signaled a hawkish shift in their policy stance, catalyzed by increasing discomfort with elevated inflation against a backdrop of robust growth and ongoing strengthening in labor markets conditions,” Morgan Stanley economists and strategists including Ellen Zentner, wrote in a note Thursday. “We revise our Fed call and now expect the FOMC to begin raising rates in Sept. 2022 -- two quarters earlier than our prior forecast.” Discussing today's key event, the CPI print, DB's Jim Reid writes that "our US economists are anticipating that headline CPI will rise to +6.9%, which would be the fastest annual pace since 1982. And they see core inflation heading up to +5.1%, which would be the highest since 1990. Bear in mind as well that this is the last big release ahead of next Wednesday’s Federal Reserve decision, where our economists are expecting they’ll double the pace of tapering. Chair Powell himself reinforced those expectations in recent testimony, stopping just shy of unilaterally announcing the faster taper. Crucially, he noted this CPI print and the evolution of the virus were potential roadblocks to a faster taper next week. That said, the bar is extremely high for today’s data print to alter their course, especially with the Covid outlook having not deteriorated markedly since his testimony. By the close last night, Fed funds futures were fully pricing in a rate hike by the June meeting, alongside more than 70% chance of one by the May meeting." A reminder that last month saw another bumper print, with the monthly price gain actually at its fastest pace since July 2008, which sent the annual gain up to its highest since 1990, at +6.2%. It also marked the 6th time in the last 8 months that the monthly headline print had been above the consensus estimate on Bloomberg, and in another blow for team transitory, the drivers of inflation were increasingly broad-based, rather than just in a few categories affected by the pandemic. It may have been the death knell for team transitory, with Chair Powell taking pains to retire the term in the aforementioned testimony before Congress. In Europe, stocks fell slightly as a rise in coronavirus infections, with the Stoxx 600 dropping 0.3%, weighed down the most by tech, health care and utilities. DAX -0.2%, and FTSE 100 little changed, both off worst levels. Meanwhile, an epidemiologist has said that the omicron strain may be spreading faster in England than in South Africa, with U.K. cases possibly exceeding 60,000 a day by Christmas. Banks in the U.K. have already started telling staff to work from home in response to the government’s guidance.  Daimler AG’s trucks division gained in its first trading day as the storied German manufacturer completed a historic spinoff to better face sweeping changes in the auto industry. Polish retailer LPP rose to a record. Asian stocks fell on worries over the global spread of the omicron virus strain and after China Evergrande and Kaisa Group officially defaulted on their dollar debt. The MSCI Asia Pacific Index lost as much as 0.9%, with healthcare, technology and consumer discretionary sectors being the worst performers. Benchmarks slid in China and Hong Kong after Fitch Ratings cut Evergrande and Kaisa to “restricted default,” with the Hang Seng Index being the region’s biggest loser. Investors remain concerned that the omicron virus strain may crimp the economic rebound. South Korea brought forward the timing for Covid-19 booster shots to just three months after the second dose, as one of Asia’s most-vaccinated countries grapples with its worst ever virus surge. The Kospi snapped a seven-day winning run. Meanwhile, the U.S. appears to be headed for a holiday crisis as virus cases and hospital admissions climb, while London firms started telling thousands of staff to work from home. “In Europe, restrictions are being put in place, not just in the U.K. but also in other countries, due to the spread of the omicron variant, spurring worry over the impact on the economy,” said Nobuhiko Kuramochi, a market strategist at Mizuho Securities. “If work-from-home practices are prolonged, consumption will become lackluster, delaying any recovery.” Still, the Asian benchmark is up 1.2% from Dec. 3, poised for its best weekly advance in about two months. That’s owing to gains earlier in the week after China’s move to boost liquidity helped restore investor confidence. Traders are now turning focus to U.S. inflation data due later in the day for clues on the pace of anticipated tapering. China’s central bank took further steps to limit the yuan’s strength -- setting the weakest reference rate relative to estimates compiled by Bloomberg since 2018 -- a day after policy makers raised the foreign currency reserve requirement ratio for banks a second time this year. In rates, the Treasury curve bear flattened with 5s30s printing sub-60bps ahead of today’s November CPI data. Bunds and gilts are quiet; Italy leads a broader tightening of peripheral spreads. In FX, the Bloomberg Dollar Spot Index rises 0.2%, building on modest strength during the Asian session. AUD leads G-10 peers; NZD and SEK are weakest, although ranges are narrow. Demand for euro downside exposure waned this week as investors now focus on the upcoming decisions by the Federal Reserve and the European Central Bank. China’s central bank took further steps to limit the yuan’s strength In commodities, brent crude is slightly higher on the day, hovering around the $74-level, while WTI climbs 0.6% to $71-a-barrel. Base metals are mixed. LME aluminum and copper rise, while zinc and lead declines. Spot gold drops $4 to $1,771/oz. Looking at the day ahead now, and the main data highlight will be the aforementioned US CPI reading for November. In addition, there’s the University of Michigan’s preliminary consumer sentiment index for December, UK GDP for October and Italian industrial production for October. Central bank speakers include ECB President Lagarde, along with the ECB’s Weidmann, Villeroy, Panetta and Elderson. Market Snapshot S&P 500 futures up 0.2% to 4,677.75 STOXX Europe 600 down 0.4% to 474.88 MXAP down 0.8% to 193.90 MXAPJ down 0.8% to 632.63 Nikkei down 1.0% to 28,437.77 Topix down 0.8% to 1,975.48 Hang Seng Index down 1.1% to 23,995.72 Shanghai Composite down 0.2% to 3,666.35 Sensex little changed at 58,799.05 Australia S&P/ASX 200 down 0.4% to 7,353.51 Kospi down 0.6% to 3,010.23 Brent Futures up 0.4% to $74.69/bbl Gold spot down 0.3% to $1,770.81 U.S. Dollar Index little changed at 96.32 German 10Y yield little changed at -0.34% Euro down 0.1% to $1.1281 Top Overnight News from Bloomberg Already fighting economic fires on a number of fronts, China is rushing to clamp down on speculation in its strengthening currency before it gets out of control The arrival of the omicron variant has triggered a global rush for booster shots, but questions remain over whether it is the right strategy against omicron The Biden administration aims to sign what could prove a “very powerful” economic framework agreement with Asian nations -- focusing on areas including coordination on supply chains, export controls and standards for artificial intelligence -- next year, Commerce Secretary Gina Raimondo said A mouse bite is at the center of an investigation into a possible new Covid-19 outbreak in Taiwan, after a worker at a high-security laboratory was confirmed as the island’s first local case in more than a month A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were on the back foot as the region took its cue from the weak performance in the US, where the major indices reversed recent upside in the run-up to today’s US CPI metric. The ASX 200 (-0.4%) was led lower by the underperformance in energy and tech after a retreat in oil prices and similar weakness of their counterpart sectors in US. The Nikkei 225 (-1.0%) remained lacklustre as it succumbed to the recent inflows into the currency, although the downside was stemmed as participants digested a record increase in wholesale prices. The Hang Seng (-1.0%) and Shanghai Comp. (-0.2%) were hindered by several headwinds including lower-than-expected lending and aggregate financing data, as well as China’s latest internet crackdown in which it removed 106 apps from app stores. However, losses were contained by a softer currency after China’s efforts to curb RMB strength including the PBoC’s 200bps FX RRR hike yesterday and its overnight weakening of the reference rate by the widest margin against estimates on record. Finally, 10yr JGBs were quiet after the mixed performance in US fixed income markets and with the risk-averse mood counterbalanced by the lack of BoJ purchases in the market today, although later saw a bout of selling on a breakdown of support at the key 152.00 level. Top Asian News Evergrande’s Hui Forced to Sell Part of Stake in Defaulted Firm Hui Has 277.8m Evergrande Shares Sold Under Enforced Disposal Asia Stocks Fall on Renewed Concerns Over Evergrande and Omicron Gold Heads for Worst Weekly Run Since 2019 Before Inflation Data Cash bourses in Europe kicked off the session with modest losses across the board, but the region has been clambering off worst levels since (Euro Stoxx 50 -0.3%; Stoxx 600 -0.3%) as traders gear up for the US CPI release (full preview available on the Newsquawk headline feed). US equity futures meanwhile post modest broad-based gains across the ES (+0.3%), NQ (+0.3%), RTY (+0.4) and YM (+0.2%). Back to Europe, cash markets see broad but contained downside. Sectors are mixed with no overarching theme or bias. Tech resides at the foot of the bunch with heavyweight SAP (-0.2%) failing to garner impetus from Oracle’s (+11% pre-market) blockbuster earnings after beating expectations on the top and bottom lines and announcing a new USD 10bln stock-repurchase authorisation. The upside meanwhile sees some of the more inflation-related sectors, including Oil & Gas, auto, Goods, Foods, and Beverages. In terms of individual movers, Bayer (+1.8%) is firmer after the Co. won a second consecutive trial in California regarding its Roundup weed killer. Daimler (-15%) sits at the foot of the Stoxx 600 after spinning off its Daimler Trucks unit (+4%) - considered to be a market listing rather than a full initial public offering. Top European News Heathrow Offers Bleak Outlook as Omicron Halts Long-Haul Rebound HSBC, JPMorgan, Deutsche Bank Tell London Staff to Stay Home SocGen CEO Takes Over Compliance After $2.6 Billion Fines Santander AM Names Utrera as Head of Equities as Montero Exits In FX, not a lot of deviation from recent ranges, but the Greenback is grinding higher ahead of US inflation data and Treasuries are bear-steepening to suggest hedging or positioning for an upside surprise following pointers from President Biden and NEC Director Deese to that effect (both advising that recent declines in prices, including energy, will not be reflected in November’s metrics). The index is back above the 96.000 level that has been very pivotal so far this week and hovering near the upper end of a 96.429-157 range, while the benchmark 10 year T-note yield is holding above 1.50% after a so-so long bond auction to wrap up the latest refunding remit. NZD/JPY/GBP - It’s marginal, but the Kiwi, Yen and Pound are lagging behind in the G10 stakes, with Nzd/Usd back below 0.6800 and perhaps taking note of a marked slowdown in the manufacturing PMI to 50.6 in November from 54.3, while Usd/Jpy is straddling 113.50 and eyeing DMAs either side of the half round number and Cable remains choppy around 1.3200 in wake of UK GDP, ip and output all missing consensus. AUD/CAD/EUR/CHF - All a tad more narrowly divergent vs the Buck, and the Aussie managing to keep tabs on 0.7150 after outperformance post-RBA on mainly external and technical impulses. Elsewhere, the Loonie has limited losses through 1.2700 with some assistance from hawkish sounding commentary from BoC Deputy Governor Gravelle rather than choppy crude prices as WTI swings around Usd 71/brl. To recap, he said that concerns over inflation are heightened on the upside much more than usual and the BoC is likely to react a little bit more readily to the upside risk given that inflation is already above the control range. Elsewhere, the Euro continues to fade on advances beyond 1.1300 and hit resistance at or near the 21 DMA and the Franc is more attuned to yields than risk sentiment at present, like the Yen, though is outpacing the Euro, as Eur/Chf veers towards 1.0400 again and Usd/Chf sits closer to 0.9250 vs 0.9200. In commodities, WTI and Brent front-month futures have been edging higher in early European trade following a choppy APAC session and in the run-up today’s main event, the US inflation data. Currently, WTI Jan trades just under USD 71.50/bbl (vs low USD 70.32/bbl) while Brent Feb resides north of USD 74.50/bbl (vs low USD 73.80/bbl), with news flow also on the lighter side ahead of the tier 1 data. In terms of other macro events, sources suggested Iran is willing to work from the basis of texts created in June on nuclear discussions, which will now be put to the test in upcoming days, via a European diplomatic source. This would mark somewhat of a shift from reports last week which suggested that Iran took a tougher stance than it had back in June. Western diplomats last week suggested that Tehran ramped up their conditions, which resulted in talks stalling last Friday. Aside from that, relevant news flow has been light for the complex. Elsewhere, spot gold and silver are drifting lower in tandem gains in the Dollar – spot gold has dipped under USD 1,770/oz, with the current YTD low at 1,676/oz. LME copper holds its head above USD 9,500/t but within a tight range amid the overall indecisive mood across the markets. US Event Calendar 8:30am: Nov. CPI YoY, est. 6.8%, prior 6.2%; MoM, est. 0.7%, prior 0.9% 8:30am: Nov. CPI Ex Food and Energy YoY, est. 4.9%, prior 4.6%; MoM, est. 0.5%, prior 0.6% 8:30am: Nov. Real Avg Hourly Earning YoY, prior -1.2%, revised -1.3% Real Avg Weekly Earnings YoY, prior -1.6% 10am: Dec. U. of Mich. 1 Yr Inflation, est. 5.0%, prior 4.9%; 5-10 Yr Inflation, prior 3.0% Sentiment, est. 68.0, prior 67.4 Expectations, est. 62.5, prior 63.5 Current Conditions, est. 73.5, prior 73.6 DB's Jim Reid concludes the overnight wrap I’m sure if anyone had said to you at the start of 2021 that US CPI would end the year around 7% YoY then there may have been some sleepless nights about how to position your portfolio. The reality is that as inflation has risen, the market has managed to go through denial, transitory, elongated transitory, and now the retirement of transitory, all without much fuss. I’ve said this before but I doubt there is anyone in the world that predicted we’d end the year at near 7% whilst at the same time having 10yr UST yields still at around 1.5%. Today our US economists are anticipating that headline CPI will rise to +6.9%, which would be the fastest annual pace since 1982. And they see core inflation heading up to +5.1%, which would be the highest since 1990. Bear in mind as well that this is the last big release ahead of next Wednesday’s Federal Reserve decision, where our economists are expecting they’ll double the pace of tapering. Chair Powell himself reinforced those expectations in recent testimony, stopping just shy of unilaterally announcing the faster taper. Crucially, he noted this CPI print and the evolution of the virus were potential roadblocks to a faster taper next week. That said, the bar is extremely high for today’s data print to alter their course, especially with the Covid outlook having not deteriorated markedly since his testimony. By the close last night, Fed funds futures were fully pricing in a rate hike by the June meeting, alongside more than 70% chance of one by the May meeting. A reminder that last month saw another bumper print, with the monthly price gain actually at its fastest pace since July 2008, which sent the annual gain up to its highest since 1990, at +6.2%. It also marked the 6th time in the last 8 months that the monthly headline print had been above the consensus estimate on Bloomberg, and in another blow for team transitory, the drivers of inflation were increasingly broad-based, rather than just in a few categories affected by the pandemic. It may have been the death knell for team transitory, with Chair Powell taking pains to retire the term in the aforementioned testimony before Congress. Ahead of this, markets were in slightly subdued mood yesterday as the reality of the new Omicron restrictions in various places soured the mood. Even as the news on Omicron’s severity has remained positive, concern is still elevated that this good news on severity could be outweighed by a rise in transmissibility, which ultimately would lead to a higher absolute number of both infections and hospitalisations. Even if it doesn’t, it seems restrictions are mounting while we wait and see. In response, US equities and oil prices fell back for the first time this week, as did 10yr Treasury yields. The S&P 500 (-0.72%) and the STOXX 600 (-0.08%) fell, whilst the VIX index of volatility ticked back up +1.73pts to move above the 20 mark again. Tech stocks underperformed in a reversal of the previous session, with the NASDAQ down -1.71%, and the small-cap Russell 2000 seeing a hefty -2.27% decline, as it moved lower throughout the day. Other risk assets saw similar declines too, with Brent crude (-1.85%) and WTI (-1.96%) oil prices both paring back their gains of the week so far. The move out of risk benefited safe havens, with sovereign bond yields moving lower across the curve, with those on 10yr Treasuries down -2.2bps to 1.50%. Those moves were echoed in Europe, where yields on 10yr bunds (-4.3bps), OATs (-4.5bps) and BTPs (-2.9bps) fell back as well. That came against the backdrop of a Reuters report saying ECB governors would discuss a temporary increase in the Asset Purchase Programme at their meeting next week, albeit one that would still leave bond purchases significantly beneath their current levels once the Pandemic Emergency Purchase Programme ends in March. Bitcoin fell -5.21% to $47,997 and is now more than -29% below its all-time highs reached a month ago. Marion Laboure from my team published a piece analysing the interaction between Bitcoin and the environment given its huge energy consumption. You can find the piece here. Ahead of today’s US CPI, there was another round of robust labour market data, with the US weekly initial jobless claims down to 184k (vs. 220k expected) in the week through December 4, marking their lowest level since 1969. The 4-week moving average was also down to a fresh post-pandemic low of 218.75k, having fallen for 9 consecutive weeks now. So with the labour market becoming increasingly tight and price pressures continuing to remain strong, it’s no surprise that markets have moved over the last year from pricing no hikes at all in 2022 to almost 3. Overnight in Asia, equities are all trading in the red with the Shanghai Composite (-0.32%), Hang Seng (-0.50%), Nikkei (-0.58%), CSI (-0.62%) and KOSPI (-0.67%) tracking the weaker US close last night after a three day rally. This comes after Chinese real-estate firms Evergrande Group and Kaisa Group were downgraded to restricted default by Fitch Ratings. Elsewhere in Japan, November's PPI reading came in at the highest level since 1980 at +9.0% year-on-year against +8.5% consensus due largely to rising energy prices. Our Japan economist expects CPI rising above 1% next year to be one of the ten key events to watch in 2022. You can read more here. Staying on Japan, the ruling party today will unveil a set of tax policy measures aimed at incentivising businesses to raise wages as Prime Minister Fumio Kishida aims to deliver on campaigning promises. Futures are pointing to a slightly more positive start in the US with S&P 500 futures (+0.10%) trading higher but with DAX futures (-0.24%) catching down to the weaker US close. Out of DC, the Senate approved a one-time procedural measure that will allow them to raise the debt ceiling with a simple majority vote, ostensibly in the coming days, and hopefully for a longer period than the last six-week suspension. Yields on potentially at-risk Treasury bills are at similar levels to neighboring maturities. In terms of the latest on the pandemic, yesterday didn’t see any news of major significance, with the indicators mainly confirming what we already knew. In particular, the EU’s ECDC continued to say that among the 402 confirmed Omicron cases in the EU/EEA, all the cases with known severity were either asymptomatic or mild, with no deaths reported. So positive news for now, although it’ll be very important to keep an eye with what happens with hospitalisations in South Africa, which are continuing to rise, and the country also reported another 22,391 cases yesterday, which is once again the highest number since the Omicron variant was first reported. Separately, the US FDA moved yesterday to expand the eligibility of the Pfizer-BioNTech booster to 16 and 17 year olds. To the day ahead now, and the main data highlight will be the aforementioned US CPI reading for November. In addition, there’s the University of Michigan’s preliminary consumer sentiment index for December, UK GDP for October and Italian industrial production for October. Central bank speakers include ECB President Lagarde, along with the ECB’s Weidmann, Villeroy, Panetta and Elderson. Tyler Durden Fri, 12/10/2021 - 07:50.....»»

Category: blogSource: zerohedgeDec 10th, 2021

Here"s How Costco (COST) is Placed Ahead of Q1 Earnings

Costco's (COST) first-quarter results are likely to reflect better price management, decent membership trends and increasing penetration of e-commerce business. Costco Wholesale Corporation COST is likely to register an increase in the bottom line when it reports first-quarter fiscal 2022 numbers on Dec 9, after the closing bell. We note that the Zacks Consensus Estimate for first-quarter earnings per share has been stable at $2.59 over the past 30 days. The figure suggests growth of roughly 13.1% from the year-ago period.This Issaquah, WA-based company has a trailing four-quarter earnings surprise of 7.7%, on average. In the last reported quarter, the company’s bottom line surpassed the Zacks Consensus Estimate by a margin of 9.9%.Meanwhile, the Zacks Consensus Estimate for revenues is pegged at $49,746 million, indicating an improvement of 15.1% from the prior-year reported figure.Key Factors to NoteCostco’s growth strategies, better price management, decent membership trends and increasing penetration of e-commerce business have been contributing to its upbeat performance. In fact, the company’s strategy to sell products at discounted prices has helped draw customers, who have been seeking both value and convenience amid the ongoing crisis. Cumulatively, these factors have been aiding this operator of membership warehouses in registering an impressive sales run.For the 12-week first quarter ended Nov 21, 2021, Costco registered net sales of $49.42 billion. This reflected an increase of 16.7% from $42.35 billion reported in the year-ago period. Comparable sales during the said period climbed 15% on improvements of 14.9%, 17.2% and 13.4% in the United States, Canada and Other International locations, respectively.The company has been rapidly adopting the omni-channel mantra to provide a seamless shopping experience, whether online or in stores. We note that e-commerce comparable sales increased 14.3% during the aforementioned period.While abovementioned factors raise optimism about the outcome, margins still remain an area to watch. Any deleverage in SG&A rate, higher labor and occupancy costs, and increased marketing and other store-related expenses might have weighed on margins. The impact of incremental wages and sanitation costs due to the coronavirus outbreak cannot be ignored as well.Costco Wholesale Corporation Price, Consensus and EPS Surprise Costco Wholesale Corporation price-consensus-eps-surprise-chart | Costco Wholesale Corporation QuoteWhat the Zacks Model UnveilsOur proven model predicts an earnings beat for Costco this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.Costco has a Zacks Rank #3 and an Earnings ESP of +1.18%.3 More Stocks With Favorable CombinationHere are some other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:lululemon athletica LULU currently has an Earnings ESP of +1.37% and a Zacks Rank of 2. The company is expected to register top and bottom line growth when it reports third-quarter fiscal 2021 numbers. The Zacks Consensus Estimate for LULU’s quarterly revenues is pegged at $1.43 billion, which suggests growth of 28.1% from the prior-year quarter.The Zacks Consensus Estimate for lululemon’s quarterly earnings moved up by a penny in the last 30 days to $1.39 per share, suggesting a 19.8% increase from the year-ago reported number. LULU has a trailing four-quarter earnings surprise of 25.2%, on average.Vail Resorts MTN currently has an Earnings ESP of +5.46% and a Zacks Rank #3. MTN is anticipated to register top-line growth when it reports first-quarter fiscal 2022 results. The Zacks Consensus Estimate for the company's quarterly revenues is pegged at $195.1 million, indicating an improvement of 48.1% from the figure reported in the prior-year quarter.The Zacks Consensus Estimate for Vail Resorts' bottom line has improved to a loss of $3.66 per share from a loss of $3.70, 30 days ago. MTN has a trailing four-quarter earnings surprise of 17.3%, on average.Academy Sports and Outdoors ASO currently has an Earnings ESP of +49.78% and a Zacks Rank #3. The company is expected to register bottom-line growth when it reports third-quarter fiscal 2021 results. The Zacks Consensus Estimate for quarterly earnings of $1.16 per share suggests growth of 27.5% from the year-ago quarter’s reported figure.Academy Sports and Outdoors’s top line is anticipated to rise year over year. The consensus mark for revenues stands at $1.50 billion, indicating an increase of 11.4% from the figure reported in the year-ago quarter. ASO has a trailing four-quarter earnings surprise of 91%, on average. 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>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 Costco Wholesale Corporation (COST): Free Stock Analysis Report lululemon athletica inc. (LULU): Free Stock Analysis Report Vail Resorts, Inc. (MTN): Free Stock Analysis Report Academy Sports and Outdoors, Inc. (ASO): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksDec 7th, 2021

Permian Basin Drillers Add Crude Oil Rigs in 15 of 17 Weeks

In its weekly release, Baker Hughes Company (BKR) reports that U.S. rig count was in line with the prior week. In its weekly release, Baker Hughes Company BKR reported that U.S. rig count was in line with the prior week. The rotary rig count, issued by Baker Hughes, usually gets published in major newspapers and trade publications.Baker Hughes’ data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry. The number of active rigs and its comparison with the prior-week tally indicates the trajectory of demand for Baker Hughes’oilfield services from exploration and production companies.DetailsTotal US Rig Count In line: The count of rigs engaged in the exploration and production of oil and natural gas in the United States was 569 for the week through Dec 3, in line withthe prior-week count. Thus, the tally has increased in five of the past six weeks, keeping the count at the highest mark since April 2020. The current national rig count is higher than the year-ago level of 323.The number of onshore rigs for the week ended Dec 3 totaled 554, higher than the prior-week count of 552. In offshore resources, 13 rigs were operating, lower than the prior-week count of 15.US Oil Rig Count Flat: Oil rig count was 467 for the week ended Dec 3, flat with the prior-week count. The current tally of oil rigs — far from the peak of 1,609 attained in October 2014 — is higher than the year-ago figure of 246.Natural Gas Rig Count Flat in US: Natural gas rig count of 102 was in line with the prior-week count. The count of rigs exploring the commodity was higher than the prior-year week’s 75. Per the latest report, the number of natural gas-directed rigs is roughly 94% below the all-time high of 1,606 recorded in 2008.Rig Count by Type: The number of vertical drilling rigs totaled 25 units, higher than the prior-week count of 22. Horizontal/directional rig count (encompassing new drilling technology with the ability to drill and extract gas from dense rock formations, also known as shale formations) of 544 compared unfavorably with the prior-week level of 547.Gulf of Mexico (GoM) Rig Count Declines: GoM rig count was 13 units, of which all were oil-directed. The count was lower than the prior-week number of 15.Rig Count in the Most Prolific BasinPermian — the most prolific basin in the United States — recorded a weekly oil rig tally of 283, higher than the prior-week count of 280. The basin's oil drilling rigs increased in 15 of the last 17 weeks.OutlookWest Texas Intermediate crude price is trading above $67 per barrel, significantly higher than the pandemic-hit April last year when oil was in the negative territory. With coronavirus vaccines being rolled out on a massive scale, the demand for fuel will possibly improve further. This has paved the way for further rig additions, although drilling activities have slowed down as upstream players are mainly focusing on stockholder returns rather than boosting output.Meanwhile, investors may watch energy stocks like Whiting Petroleum Corporation WLL and Continental Resources, Inc. CLR. Both the companies are expected to benefit if oil price stays healthy.Whiting Petroleum is a leading upstream energy company and is the top producer of crude oil in North Dakota. With oil prices improving at a healthy pace, Whiting Petroleum is expected to continue generating handsome cash flows while maintaining a healthy balance sheet.Headquartered in Denver, CO, Whiting Petroleum has witnessed upward earnings estimate revisions for 2021 in the past 30 days. Looking at the price chart, WLL has gained 151.7% year to date, outpacing the 94.4% improvement of the composite stocks belonging to the industry. WLL currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Continental Resources is also a leading upstream energy company with proven reserves in North Dakota and Oklahoma. The oil inventories of Continental Resources are among the best in the industry.Headquartered in Oklahoma City, Continental Resources has witnessed upward earnings estimate revisions for 2021 in the past 30 days. Considering the price chart, CLR has gained 163.9% so far this year, outpacing the 94.3% improvement of the composite stocks belonging to the industry. Continental Resources currently carries a Zacks Rank #2 (Buy). Investor Alert: Legal Marijuana Looking for big gains? Now is the time to get in on a young industry primed to skyrocket from $13.5 billion in 2021 to an expected $70.6 billion by 2028. After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could kick start an even greater bonanza for investors. Zacks Investment Research has recently closed pot stocks that have shot up as high as +147.0%. You’re invited to immediately check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.Today, Download Marijuana Moneymakers 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 Continental Resources, Inc. (CLR): Free Stock Analysis Report Baker Hughes Company (BKR): Free Stock Analysis Report Whiting Petroleum Corporation (WLL): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksDec 6th, 2021

Futures Rebound Fizzles On Slowing iPhone Demand, Omicron Fears

Futures Rebound Fizzles On Slowing iPhone Demand, Omicron Fears U.S. index futures regained some ground alongside Asian markets while European stocks slumped to session lows in a delayed response to yesterday's late Omicron-driven US selloff, as markets remained volatile following the biggest two-day plunge in more than a year, spurred by concern about the omicron coronavirus variant and Federal Reserve tightening. Investors await data for unemployment claims, as well as earnings from companies including Dollar General and Kroger. Tech is the weakest sector, dropping in sympathy after Apple warned its suppliers of slowing iPhone demand. Nasdaq futures pared earlier gains of up to 0.8% to trade down 0.1% while S&P futures are only 0.2% higher after rising as much as 0.9%. While the knee-jerk reaction of stock investors may “continue to be to take profits before the end of the year,” there is “plenty of liquidity available to drive stock prices higher as dip-buyers enter the market,” Ed Yardeni wrote in a note. The U.S. economy grew at a modest to moderate pace through mid-November, while price hikes were widespread amid supply-chain disruptions and labor shortages, the Federal Reserve said in its Beige Book survey Tuesday. Cruise-ship operator Carnival jumped 3.8% in premarket trading, while Pfizer and Moderna fell as the World Health Organization said that existing vaccines will likely protect against severe cases of the variant. Boeing contracts gained 3.4% after a report that the flagship 737 Max aircraft has regained airworthiness approval in China. With lots of uncertainty surrounding the pandemic and Fed policy, the size of potential market swings is still considerable.  Here are some other notable premarket movers today: Apple (AAPL US) shares fell 1.8% in premarket trading after the iPhone maker was said to tell suppliers that demand for its flagship product has slowed. Wall Street analysts, however, remained bullish. U.S. stocks tied to former President Donald Trump rise in premarket trading following a report his media group is in talks to raise new financing. Digital World Acquisition (DWAC US) +24%, Phunware (PHUN US) +38%. Katapult (KPLT US) shares sink 14% in premarket after the financial technology firm said its gross originations over a two-month period were lower than 2020 levels. Vir (VIR US) shares jump 8.1% in premarket trading after its Covid-19 antibody treatment, co-developed with Glaxo, looked to be effective against the new omicron variant in early testing. Snowflake (SNOW US) is up 17% premarket following quarterly results that impressed analysts, though some raise questions over the data software company’s valuation. CrowdStrike (CRWD US) shares jumped 5.1% in premarket after it boosted its revenue forecast for the full year. Square’s (SQ US) shares are 0.4% higher premarket. Corporate name change to Block Inc. indicates “a symbolic rebirth,” according to Barclays as it shows a broader set of possibilities than those of a pure payments company. Okta’s (OKTA US) shares advanced in postmarket trading. 3Q results show the cybersecurity company is well- positioned to deliver growth, even if some analysts say its guidance looks conservative and that its growth was not as strong as in prior quarters. The Omicron variant also hurt risk appetite, making the safe-haven bonds more attractive to investors, pushing yields down - although yields picked up again in early European trading. Volatility in equity markets as measured by the Vix hit its highest since February on Wednesday, before easing on Thursday, but remained well above this year’s average and almost twice as high as a month ago. Investors are braced for volatility to continue through December, stirred by tightening central-bank policies to fight inflation just as the omicron variant complicates the outlook for the pandemic recovery. The recent market turmoil may offer investors a chance to position for a trend reversal in reopening and commodity trades, according to JPMorgan Chase & Co. "Investors will need to maintain their calm during a period of uncertainty until the scientific data give a clearer picture of which scenario we face," said Mark Haefele, chief investment officer at UBS Global Wealth Management in Zurich. “This, in turn, will help shape the reaction of central bankers." Also weighing on stock markets, and flattening the U.S. yield curve, were remarks by Federal Reserve Chair Jerome Powell, who said that he would consider a faster end to the Fed's bond-buying programme, which could open the door to earlier interest rate hikes. In his second day of testimony in Congress on Wednesday, Powell reiterated that the U.S. central bank needs to be ready to respond to the possibility that inflation does not recede in the second half of next year. read more "In this past what we’ve seen is central banks using COVID as an excuse to remain dovish, and what we're seeing is central banks turn hawkish despite rising concerns around COVID, so it is a bit of a shift in communication," said Mohammed Kazmi, portfolio manager at UBP.  That said, the market is now so oversold, this is where we usually see aggressive dip-buying. In Europe, tech companies were the worst performers after Apple warned its component suppliers of slowing demand for its iPhone 13, the news dragged index heavyweight ASML Holding NV more than 4%. Meanwhile, travel shares were among the worst performers as the omicron variant continued to pop upin countries around the world, including the U.S., Norway, Ireland and South Korea. The Euro Stoxx 50 dropped as much as 1.7% while the Stoxx 600 Index fell 1.5%, extending declines to trade at a session low, with all sectors in the red and led lower by technology and travel stocks. The Stoxx 600 Technology Index slumped as much as 3.9%, the most in two months. Vifor Pharma surged by a record 18% following a report that Australia’s CSL is in advanced talks to acquire Swiss drugmaker. Here are some of the biggest European movers today: Vifor Pharma shares rise as much as 18% on a report that Australia’s CSL is in advanced talks to acquire the Swiss-based drug maker and developer while working with BofA on a A$4 billion funding package. Argenx jumps as much as 9.5% after Kepler Cheuvreux upgrades the stock to buy, saying the biotech company is on the brink of launching its first commercial product. Duerr gains as much as 7.2%, most since Aug. 10, after Deutsche Bank upgrades to buy and sets aa Street-high PT of EU60 for the German engineering company, citing the digitalization of the industry. Daily Mail & General Trust rises as much as 3.9% after Rothermere Continuation raised its bid for all DMGT’s Class A shares by 5.9% to 270p a share in cash. Klarabo surges as much as 54% as shares start trading on Nasdaq Stockholm after the Swedish property company raised SEK750m in an IPO. Eurofins Scientific declines for a fourth session, falling as much as 3.2%, as Goldman Sachs downgrades the company to neutral from buy “following strong outperformance YTD.” Deliveroo drops as much as 6.4% after an offering of 17.6m shares by CEO Will Shu and CFO Adam Miller at a price of 278p a share, representing a 4.2% discount to the last close. M&S falls as much as 3.4% after UBS cut its rating to neutral from buy, citing limited upside to its new price target as well as “little room for meaningful upgrades.” Earlier in the session, Asian stocks erased an earlier loss to trade slightly up, as traders continued to assess the potential impact of the omicron virus strain and the Federal Reserve’s efforts to keep inflation in check.  The MSCI Asia Pacific Index rose 0.2% after falling 0.4% in the morning. South Korea led regional gains, helped by large-cap chipmakers, while Japan was among the worst performers after the government dropped a plan for a blanket halt to all new incoming flight reservations. Asia’s equity benchmark is still down about 4% so far this year after rebounding in the past two sessions from a one-year low reached earlier this week. Despite the region’s underperformance against the U.S. and Europe, cheap valuations and foreign-investor positioning have prompted brokerages including Credit Suisse Group AG and Nomura Securities Co. Ltd. to turn bullish on Asia’s prospects next year. “Equity markets continue to play omicron tennis and traders looking for short-term direction should just wait for the next virus headline and then act accordingly,” said Jeffrey Halley, a senior market analyst at Oanda Corp. “Volatility, and not market direction, will be the winner this week.” Chinese technology shares including Alibaba Group Holding slid after Beijing was said to be planning to close a loophole used by the sector to go public abroad, fueling concern over existing overseas listings. Japanese equities declined, following U.S. peers lower after the first American case of the omicron coronavirus variant was confirmed. Electronics makers and telecoms were the biggest drags on the Topix, which fell 0.5%. SoftBank Group and TDK were the largest contributors to a 0.7% loss in the Nikkei 225.  The S&P 500 posted its worst two-day selloff since October 2020 after the first U.S. case of the new strain was reported. Federal Reserve Chair Jerome Powell reiterated that officials should consider a quicker reduction of monetary stimulus amid elevated inflation. “Truth is, there’s probably a lot of people who are wanting to buy stocks at some point,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. “But, with omicron still an unknown, people are responding sensitively to news development, and that’s keeping them from buying.” India’s benchmark equity index climbed for a second day, led by software exporters, on an improving economic outlook and as investors grabbed some beaten-down stocks after recent declines. The S&P BSE Sensex Index rose 1.4% to close at 58,461.29 in Mumbai, the biggest advance since Nov. 1. Its two-day gains increased to 2.5%, the most since Aug. 31. The NSE Nifty 50 Index also surged by a similar magnitude. All of the 19 sector sub-indexes compiled by BSE Ltd. were up, led by a gauge of utilities companies. “India underperformed the global markets in recent weeks. Investors are now going for value buying in stocks at lower levels,” said A. K. Prabhakar, head of research at IDBI Capital Market Services. The Sensex gained in three of the past four sessions after plunging 2.9% on Friday, the biggest drop since April. The rally, however, is in contrast to most global peers which are witnessing volatility on worries over the spread of the omicron variant. High frequency indicators in India, such as tax collection and manufacturing activities, have shown robust growth in recent months, while the country’s economy expanded 8.4% in the quarter ended in September, according to an official data release on Tuesday. Mortgage lender HDFC contributed the most to the Sensex’s gain, increasing 3.9%. Out of 30 shares in the index, 27 rose and three fell. In rates, trading has been relatively quiet as bunds and gilts bull steepen a touch with risk offered, while cash TSYs bear flatten, cheapening ~5bps across the curve.Treasuries retraced part of yesterday’s rally that sent the benchmark 30-year rate to the lowest since early January. A large buyer of 5-year U.S. Treasury options targets the yield dropping around 17bps. 5s10s, 5s30s spreads flattened by ~1bp and ~2bp to multimonth lows; 10-year yields around 1.43%, cheaper by more than 3bp on the day while bunds and gilt yields are richer by ~1bp. Front-end and belly of the curve underperform vs long-end, while bunds and gilts outperform Treasuries. With little economic data slated, speeches by several Fed officials are main focal points. Peripheral spreads tighten with 10y Spain outperforming after well received auctions, albeit with a small size on offer. U.S. economic data slate includes November Challenger job cuts (7:30am) and initial jobless claims (8:30am) In FX, the Bloomberg Dollar Spot Index fell to a day low in the European session and the greenback traded mixed versus its Group-of-10 peers as most crosses consolidated in recent ranges. Two-week implied volatility in the major currencies trades in the green Thursday as it now captures the next policy decisions by the world’s major central banks. Euro- dollar on the tenor rises by as much as 138 basis points to touch 8.22%, highest in a year; the relative premium, however, remains below parity as realized has risen to levels unseen since August 2020. The pound rose along with some other risk- sensitive currencies following the British currency’s three-day slump against the dollar. Long-end gilts underperformed, leading to some steepening of the curve. The yen fell for the first day in three while the Swiss franc fell a second day. The Hungarian forint rose to almost a three-week high after the central bank in Budapest raised the one-week deposit rate by 20 basis points to 3.10%. Economists in a Bloomberg survey were evenly split in predicting a 10 or 20 basis point increase. The Turkish lira resumed its slump after President Recep Tayyip Erdogan abruptly replaced his finance minister amid deepening rifts in the administration over aggressive interest-rate cuts that have undermined the currency and fueled inflation. Poland’s central bank Governor Adam Glapinski sent the zloty to a three-week high against the euro on Thursday with his changed rhetoric on inflation, which he no longer sees as transitory after prices surged at the fastest pace in more than two decades. Currency market volatility also rose, with euro-dollar one-month volatility gauges below Monday's one-year peak but still at elevate levels . "Liquidity in some areas of the market is still quite poor as people grapple with this news and as we head towards year-end, a lot of it is really liquidity driven, which is leading to some volatility," said UBP's Kazmi. "Even in the most liquid market of the U.S. treasury market we've seen some fairly large moves on very little newsflow at times." In commodities, crude futures extend Asia’s gains. WTI adds 2.2% near $67, Brent near $70.50 ahead of today’s OPEC+ meeting. Spot gold finds support near Tuesday’s, recovering somewhat to trade near $1,774/oz. Base metals are mixed: LME aluminum drops as much as 1.1%, nickel, zinc and tin hold in the green Looking at the day ahead now, and central bank speakers include the Fed’s Quarles, Bostic, Daly and Barkin, as well as the ECB’s Panetta. Data releases include the Euro Area unemployment rate and PPI inflation for October, while there’s also the weekly initial jobless claims. Lastly, the OPEC+ group will be meeting. Market Snapshot S&P 500 futures up 0.7% to 4,540.25 STOXX Europe 600 down 1.0% to 466.37 MXAP up 0.2% to 192.07 MXAPJ up 0.7% to 629.36 Nikkei down 0.7% to 27,753.37 Topix down 0.5% to 1,926.37 Hang Seng Index up 0.5% to 23,788.93 Shanghai Composite little changed at 3,573.84 Sensex up 1.3% to 58,436.52 Australia S&P/ASX 200 down 0.1% to 7,225.18 Kospi up 1.6% to 2,945.27 Brent Futures up 2.4% to $70.53/bbl Gold spot down 0.6% to $1,771.73 U.S. Dollar Index little changed at 96.03 German 10Y yield little changed at -0.35% Euro little changed at $1.1320 Top Overnight News from Bloomberg Federal Reserve Bank of Cleveland President Loretta Mester said she’s “very open” to scaling back the Fed’s asset purchases at a faster pace so it can raise interest rates a couple of times next year if needed A United Nations gauge of global food prices rose 1.2% last month, threatening to make it more expensive for households to put a meal on the table. It’s more evidence of inflation soaring in the world’s largest economies and may make it even harder for the poorest nations to import food, worsening a hunger crisis Germany is poised to clamp down on people who aren’t vaccinated against Covid-19 and drastically curtail social contacts to ease pressure on increasingly stretched hospitals Some investors buffeted by concerns about tighter monetary policy are turning their sights to China’s battered junk bonds, given they offer some of the biggest yield buffers anywhere in global credit markets Pfizer Inc. says data on how well its Covid-19 vaccine protects against the omicron variant should be available within two to three weeks, an executive said GlaxoSmithKline Plc said its Covid-19 antibody treatment looks to be effective against the new omicron variant in early testing A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded tentatively following the declines on Wall St where all major indices extended on losses and selling was exacerbated on confirmation of the first Omicron case in the US, while the Asia-Pac region also contended with its own pandemic concerns. ASX 200 (-0.2%) was subdued amid heavy losses in the tech sector and with a surge of infections in Victoria state, although downside in the index was cushioned amid inline Retail Sales and Trade Balance, as well as M&A optimism after Woolworths made a non-binding indicative proposal for Australian Pharmaceutical Industries. Nikkei 225 (-0.7%) weakened after the government instructed airlines to halt inbound flight bookings for a month due to fears of the new variant and with auto names also pressured by declines in monthly sales amid the chip supply crunch. KOSPI (+1.6%) showed resilience amid expectations for lawmakers to pass a record budget today and recouped opening losses despite the record increase in daily infections and confirmation of its first Omicron cases, while the index also shrugged off the highest CPI reading in a decade which effectively supports the case for further rate increases by the BoK. Hang Seng (+0.6%) and Shanghai Comp. (-0.1%) were choppy following another liquidity drain by the PBoC and with tech pressured in Hong Kong as Alibaba shares extended on declines after recently slipping to a 4-year low in its US listing. Beijing regulatory tightening also provided a headwind as initial reports suggested China is to crack down on loopholes used by tech firms for foreign IPOs, although this was later refuted by China, and the CBIRC is planning stricter regulations on major shareholders of banks and insurance companies, as well as confirmed it will better regulate connected transactions of banks. Finally, 10yr JGBs were higher as prices tracked gains in global counterparts and amid the risk aversion in Japan, although prices are off intraday highs after hitting resistance during a brief incursion to the 152.00 level and despite the marginally improved metrics from 10yr JGB auction. Top Asian News Asia Stocks Swing as Investors Weigh Omicron Impact, Fed Views Apple Tells Suppliers IPhone Demand Slowing as Holidays Near Moody’s Cuts China Property Sales View on Financing Difficulties Faith in Singapore Leaders Hit by Record Covid Wave, Poll Shows Bourses across Europe have held onto losses seen at the cash open (Euro Stoxx 50 -1.4%; Stoxx -1.2%), as the region plays catchup to the downside seen on Wall Street – seemingly sparked by a concoction of hawkish Fed rhetoric and the discovery of the Omicron variant in the US. Nonetheless, US equity futures are firmer across the board but to varying degrees – with the cyclical RTY (+1.1%) and the NQ (+0.3%) the current laggard. European futures ahead of the cash open saw some mild fleeting impetus on reports GlaxoSmithKline's (-0.3%) COVID treatment Sotrovimab retains its activity against Omicron variant, and the UK MHRA simultaneously approved the use of Sotrovimab – but caveated that it is too early to know whether Omicron has any impact on effectiveness. Conversely, brief risk-off crept into the market following commentary from a South African Scientist who warned the country is seeing an exponential rise in new COVID cases with a predominance of Omicron variant across the country – with the variant causing the fastest ever community transmission - but expects fewer active cases and hospitalisations this wave. Back to Europe, Euro indices see broad-based losses whilst the downside in the FTSE 100 (-0.7%) is less severe amid support from its heavyweight Oil & Gas sector – the outperforming sector in the region. Delving deeper, sectors see no overarching theme nor bias – Food & Beverages, Autos and Banks are towards the top of the bunch, whilst Tech, Telecoms, and Travel &Leisure. Tech is predominantly weighed on by reports that Apple (-2% pre-market) reportedly told iPhone component suppliers that demand slowed down. As such ASML (-5.0%), STMicroelectronics (-4.4%) and Infineon (-3.6%) reside among the biggest losers in the Stoxx 600. Deliveroo (-5.3%) is softer following an offering of almost 18mln at a discount to yesterday's close. In terms of market commentary, Morgan Stanley believes that inflation will remain high over the next few months, in turn supporting commodities, financials and some cyclical sectors. The bank identifies beneficiaries including EDF (-1.5%), Engie (-1.2%), SSE (-0.2%), Legrand (-1.3%), Tesco (-0.5%), BT (-0.8%), Michelin (-1.6%) and Sika (-0.9%). Top European News Shell Kicks Off First Wave of Buybacks From Permian Sale Omicron Threatens to Prolong Pain in Bid to Vaccinate the World Apple, Suppliers Drop Premarket After Report Demand Slowed Valeo, Gestamp Gain After Barclays Raises to Overweight In FX, currency markets are still in a state of flux, or limbo bar a few exceptions, and the Greenback is gyrating against major peers awaiting the next major event that could provide clearer direction and a more decisive range break. Thursday’s agenda offers some scope on that front via US initial jobless claims and a host of Fed speakers, but in truth NFP tomorrow is probably more likely to be influential even though chair Powell has effectively given the green light to fast-track tapering from December. In the interim, the index continues to keep a relatively short leash around 96.000, and is holding within 96.138-95.895 confines so far today. JPY/CHF - Although risk considerations look supportive for the Yen, on paper, UST-JGB/Fed-BoJ differentials coupled with technical impulses are keeping Usd/Jpy buoyant on the 113.00 handle, with additional demand said to have come from Japanese exporters overnight. However, the headline pair may run into offers/resistance circa 113.50 and any breach could be capped by decent option expiry interest spanning 113.60-75 (1.5 bn). Similarly, the Franc has slipped back below 0.9200 on yield and Swiss/US Central Bank policy stances plus near term outlooks, and hardly helped by a slowdown in retail sales. GBP/CAD/NZD - All firmer vs their US counterpart, though again well within recent admittedly wide ranges, and the Pound perhaps more attuned to Eur/Gbp fluctuations as the cross retreats to retest 0.8500 and Cable rebounds to have another look at 1.3300 where a fairly big option expiry resides (850 mn). Indeed, Sterling has largely shrugged off the latest BoE Monthly Decision Maker Panel release that in truth did not deliver any clues on what is set to be another knife-edge MPC gathering in December. Elsewhere, the Loonie is straddling 1.2800 with eyes on WTI crude ahead of Canadian jobs data on Friday and the Kiwi is hovering above 0.6800 after weaker NZ Q3 terms of trade were offset to some extent by favourable Aud/Nzd headwinds. AUD/EUR - Both narrowly mixed against US Dollar, with the Aussie pivoting 0.7100 in wake of roughly in line trade and retail sales data overnight, but wary about the latest virus outbreak in the state of Victoria, while the Euro is sitting somewhat uncomfortably on the 1.1300 handle amidst softer EGB yields and heightened uncertainty about what the ECB might or might not do in December on the QE guidance front. In commodities, WTI and Brent front-month futures are firmer intraday as traders gear up for the JMMC and OPEC+ confabs at 12:00GMT and 13:00GMT, respectively. The jury is still split on what the final decision could be, but the case for OPEC+ to pause the planned monthly relaxation of output curbs by 400k BPD has been strengthening against the backdrop of Omicron coupled with the coordinated SPR releases (an updating Rolling Headline is available on the Newsquawk headline feed). As expected, OPEC sources have been testing the waters in the run-up, whilst yesterday's JTC/OPEC meetings largely surrounded the successor to the Secretary-General position. Oil market price action will likely be centred around OPEC+ today in the absence of any macro shocks. WTI Jan resides around USD 66.50/bbl (vs low USD 65.41/bbl) whilst Brent Feb briefly topped USD 70/bbl (vs low USD 68.73/bbl). Elsewhere, spot gold has eased further from the USD 1,800/oz after failing to sustain a break above the 50, 100 and 200 DMAs which have all converged to USD 1,791/oz today. LME copper is on the backfoot amid the cautious risk sentiment, with the red metal back under USD 9,500/t but off overnight lows. US Event Calendar 7:30am: Nov. Challenger Job Cuts -77.0% YoY, prior -71.7% 8:30am: Nov. Initial Jobless Claims, est. 240,000, prior 199,000; 8:30am: Nov. Continuing Claims, est. 2m, prior 2.05m 9:45am: Nov. Langer Consumer Comfort, prior 52.2 DB's Jim Reid concludes the overnight wrap With investors remaining on tenterhooks to find out some definitive information on the Omicron variant, yesterday saw markets continue to see-saw for a 4th day running. Following one of the biggest sell-offs of the year on Friday, we then had a partial bounceback on Monday, another bout of fears on Tuesday (not helped by the prospect of faster tapering), and yesterday saw another rally back before risk sentiment turned sharply later in the day as an initial case of the Omicron variant was discovered in the US. You can get some idea of this by the fact that Europe’s STOXX 600 (+1.71%) posted its best daily performance since May, whereas the S&P 500 moved from an intraday high where it had been up +1.88%, before shedding all those gains and more to close -1.18% lower. In fact, that decline means the S&P has now lost over -3% in the last two sessions, marking its worst 2-day performance in over a year, and this heightened volatility saw the VIX index close back above 30 for the first time since early February. In terms of developments about Omicron, we’re still in a waiting game for some concrete stats, but there was positive news early on from the World Health Organization’s chief scientist, who said that they think vaccines “will still protect against severe disease as they have against the other variants”. On the other hand, there was further negative news out of South Africa, as the country reported 8,561 infections over the previous day, with a positivity rate of 16.5%. That’s up from 4,373 cases the day before, and 2,273 the day before that, so all eyes will be on whether this trend continues, and also on what that means for hospitalisation and death rates over the days ahead. Against this backdrop, calls for fresh restrictions mounted across a range of countries, particularly on the travel side. In the US, it’s been reported already by the Washington Post that President Biden could today announce stricter testing requirements for arriving travellers. Meanwhile, France is moving to require non-EU arrivals to show a negative test before arrival, irrespective of their vaccination status. The EU Commission further said that member states should conduct daily reviews of essential travel restrictions, and Commission President von der Leyen also said that the EU should discuss the topic of mandatory vaccinations. There was also a Bloomberg report that German Chancellor Merkel would recommend mandatory vaccinations from February 2022, according to a Chancellery paper that they’d obtained. That came as Slovakia sought to incentivise vaccination uptake among older citizens, with the cabinet backing a €500 hospitality voucher for residents over 60 who’ve been vaccinated. As on Tuesday, the other main headlines yesterday were provided by Fed Chair Powell, who re-emphasised his more hawkish rhetoric around inflation before the House Financial Services Committee. Notably he said that “We’ve seen inflation be more persistent. We’ve seen the factors that are causing higher inflation to be more persistent”, though yields on 2yr Treasuries (-1.4bps) already had the shift in stance priced in. New York Fed President Williams echoed that view in an interview, noting it would be germane to discuss and decide whether it was appropriate to accelerate the pace of tapering at the December FOMC. 10yr yields (-4.1bps) continued their decline, predominantly driven by the turn in sentiment following the negative Omicron headlines. That latest round of curve flattening left the 2s10s slope at its flattest level since early January around the time of the Georgia Senate race that ushered in the prospect of much larger fiscal stimulus. In terms of markets elsewhere, strong data releases helped to support risk appetite earlier in yesterday’s session, with investors also looking forward to tomorrow’s US jobs report for November that will be an important one ahead of the Fed’s decision in less than a couple of weeks’ time. The ISM manufacturing release for November saw the headline number come in roughly as expected at 61.1 (vs. 61.2 expected), and also included a rise in both the new orders (61.5) and the employment (53.3) components relative to last month. Separately, the ADP’s report of private payrolls for November likewise came in around expectations, with a +534k gain (vs. +526k expected). Staying on the US, one thing to keep an eye out over the next 24 hours will be any news on a government shutdown, with funding currently set to run out by the weekend as it stands. The headlines yesterday weren’t promising for those hoping for an uneventful, tidy resolution, as Politico indicated that some Congressional Republicans would not agree to an expedited process to fund the government should certain vaccine mandates remain in place. An expedited process is necessary to avoid a government shutdown at the end of the week, so one to watch. After the incredibly divergent equity performances in the US and Europe, we’ve seen a much more mixed performance in Asia overnight, with the KOSPI (+1.09%), Hang Seng (+0.23%), and CSI (+0.23%) all advancing, whereas the Shanghai Composite (-0.05%) and the Nikkei (-0.60%) are trading lower. In terms of the latest on Omicron, authorities in South Korea confirmed five cases, which came as the country also reported that CPI in November rose to its fastest since December 2011, at +3.7% (vs +3.1% expected). Separately in China, 53 local Covid-19 cases were reported in Inner Mongolia, whilst Harbin province reported 3 local cases. Looking forward, futures are indicating a positive start in the US with those on the S&P 500 (+0.64%) pointing higher. Back in Europe, sovereign bonds lost ground yesterday, and yields on 10yr bunds (+0.5bps), OATs (+1.1bps) and BTPs (+4.2bps) continued to move higher. Interestingly, there was a continued widening in peripheral spreads, with the gap between both Italian and Spanish 10yr yields over bunds reaching their biggest level in over a year, at 135bps and 77bps, respectively. Another factor to keep an eye on in Europe is another round of increases in natural gas prices, with futures up +3.42% to their highest level since mid-October yesterday. Lastly on the data front, the main other story was the release of the manufacturing PMIs from around the world. We’d already had the flash readings from a number of the key economies, so they weren’t too surprising, but the Euro Area came in at 58.4 (vs. flash 58.6), Germany came in at 57.4 (vs. flash 57.6), and the UK came in at 58.1 (vs. flash 58.2). One country that saw a decent upward revision was France, with the final number at 55.9 (vs. flash 54.6), which marks an end to 5 successive monthly declines in the French manufacturing PMI. One other release were German retail sales for October, which unexpectedly fell -0.3% (vs. +0.9% expected). To the day ahead now, and central bank speakers include the Fed’s Quarles, Bostic, Daly and Barkin, as well as the ECB’s Panetta. Data releases include the Euro Area unemployment rate and PPI inflation for October, while there’s also the weekly initial jobless claims. Lastly, the OPEC+ group will be meeting. Tyler Durden Thu, 12/02/2021 - 07:57.....»»

Category: dealsSource: nytDec 2nd, 2021

BTFDers Unleashed: Futures, Yields, Oil Jump As Omicron Panic Eases

BTFDers Unleashed: Futures, Yields, Oil Jump As Omicron Panic Eases As expected over the weekend, and as we first noted shortly after electronic markets reopened for trading on Sunday, S&P futures have maintained their overnight gains and have rebounded 0.7% while Nasdaq contracts jumped as much as 1.3% after risk sentiment stabilized following Friday’s carnage and as investors settled in for a few weeks of uncertainty on whether the Omicron variant would derail economic recoveries and the tightening plans of some central banks. Japan led declines in the Asian equity session (which was catching down to Friday's US losses) after the government shut borders to visitors. The region’s reopening stocks such as restaurants, department stores, train operators and travel shares also suffered some losses.  Oil prices bounced $3 a barrel to recoup some of Friday's rout, while the safe haven yen, Swiss franc and 10Y Treasury took a breather after its run higher. Moderna shares jumped as much as 12% in pre-market trading after Chief Medical Officer Paul Burton said he suspects the new omicron coronavirus variant may elude current vaccines, and if so, a reformulated shot could be available early in the new year. Which he would obviously say as his company makes money from making vaccines, even if they are not very efficient. Here are some of the other notable premarket movers today: BioNTech (BNTX US) advanced 5% after it said it’s starting with the first steps of developing a new adapted vaccine, according to statement sent by text. Merck & Co. (MRK US) declined 1.6% after it was downgraded to neutral from buy at Citi, which also opens a negative catalyst watch, with “high probability” the drugmaker will abandon development of its HIV treatment. A selection of small biotechs rise again in U.S. premarket trading amid discussion of the companies in StockTwits and after these names outperformed during Friday’s market rout. Palatin Tech (PTN US) +37%, Biofrontera (BFRI US) +22%, 180 Life Sciences (ATNF US) +19%. Bonds gave back some of their gains, with Treasury futures were down 11 ticks. Like other safe havens, the market had rallied sharply as investors priced in the risk of a slower start to rate hikes from the U.S. Federal Reserve, and less tightening by some other central banks. Needless to say, Omicron is all anyone can talk about: on one hand, authorities have already orchestrated a lot of global panic: Britain called an urgent meeting of G7 health ministers on Monday to discuss developments on the virus, even though the South African doctor who discovered the strain and treated cases said symptoms of Omicron were so far mild. The new variant of concern was found as far afield as Canada and Australia as more countries such as Japan imposed travel restriction to try to seal themselves off. Summarizing the fearmongering dynamic observed, overnight South African health experts - including those who discovered the Omicron variant, said it appears to cause mild symptoms, while the Chinese lapdog organization, WHO, said the variant’s risk is “extremely high”. Investors are trying to work out if the omicron flareup will a relatively brief scare that markets rebound from, or a bigger blow to the global economic recovery. Much remains unanswered about the new strain: South African scientists suggested it’s presenting with mild symptoms so far, though it appears to be more transmissible, but the World Health Organization warned it could fuel future surges of Covid-19 with severe consequences. "There is a lot we don't know about Omicron, but markets have been forced to reassess the global growth outlook until we know more," said Rodrigo Catril, a market strategist at NAB. "Pfizer expects to know within two weeks if Omicron is resistant to its current vaccine, others suggest it may take several weeks. Until then markets are likely to remain jittery." "Despite the irresistible pull of buying-the-dip on tenuous early information on omicron, we are just one negative omicron headline away from going back to where we started,” Jeffrey Halley, a senior market analyst at Oanda, wrote in a note. “Expect plenty of headline-driven whipsaw price action this week.” The emergence of the omicron strain is also complicating monetary policy. Traders have already pushed back the expected timing of a first 25-basis-point rate hike by the Federal Reserve to July from June. Fed Bank of Atlanta President Raphael Bostic played down economic risks from a new variant, saying he’s open to a quicker paring of asset purchases to curb inflation. Fed Chair Jerome Powell and Treasury Secretary Janet Yellen speak before Congress on Tuesday and Wednesday. “We know that central banks can quickly switch to dovish if they need to,” Mahjabeen Zaman, Citigroup senior investment specialist, said on Bloomberg Television. “The liquidity playbook that we have in play right now will continue to support the market.” European stocks rallied their worst drop in more than a year on Friday, with travel and energy stocks leading the advance. The Stoxx 600 rose 0.9% while FTSE 100 futures gain more than 1%, aided by a report that Reliance may bid for BT Group which jumped as much as 9.5% following a report that India’s Reliance Industries may offer to buy U.K. phone company, though it pared the gain after Reliance denied it’s considering a bid. European Central Bank President Christine Lagarde put a brave face on the latest virus scare, saying the euro zone was better equipped to face the economic impact of a new wave of COVID-19 infections or the Omicron variant Japanese shares lead Asian indexes lower after Premier Kishida announces entry ban of all new foreign visitors. Hong Kong’s benchmark Hang Seng Index closed down 0.9% at the lowest level since October 2020, led by Galaxy Entertainment and Meituan. The index followed regional peers lower amid worries about the new Covid variant Omicron. Amid the big movers, Galaxy Entertainment was down 5.4% after police arrested Macau’s junket king, while Meituan falls 7.1% after reporting earnings. In FX, currency markets are stabilizing as the week kicks off yet investors are betting on the possibility of further volatility. The South African rand climbed against the greenback though most emerging-market peers declined along with developing-nation stocks. Turkey’s lira slumped more than 2% after a report at the weekend that President Recep Tayyip Erdogan ordered a probe into foreign currency trades. The Swiss franc, euro and yen retreat while loonie and Aussie top G-10 leaderboard after WTI crude futures rally more than 4%. The Bloomberg Dollar Spot Index hovered after Friday’s drop, and the greenback traded mixed against its Group-of-10 peers; commodity currencies led gains. The euro slipped back below $1.13 and Bunds sold off, yet outperformed Treasuries. The pound was steady against the dollar and rallied against the euro. Australian sovereign bonds pared an opening jump as Treasuries trimmed Friday’s spike amid continuing uncertainty over the fallout from the omicron variant. The Aussie rallied with oil and iron ore. The yen erased an earlier decline as a government announcement on planned border closures starting Tuesday spurred a drop in local equities. The rand strengthens as South African health experts call omicron variant “mild.” In rates, Treasuries were cheaper by 4bp-7bp across the curve in belly-led losses, reversing a portion of Friday’s sharp safe-haven rally as potential economic impact of omicron coronavirus strain continues to be assessed. The Treasury curve bear- steepened and the benchmark 10-year Treasury yield jumped as much as 7 basis points to 1.54%; that unwound some of Friday’s 16 basis-point plunge -- the steepest since March 2020.  Focal points include month-end on Tuesday, November jobs report Friday, and Fed Chair Powell is scheduled to speak Monday afternoon. Treasuries broadly steady since yields gapped higher when Asia session began, leaving 10-year around 1.54%, cheaper by almost 7bp on the day; front-end outperformance steepens 2s10s by ~3bp. Long-end may draw support from potential for month-end buying; Bloomberg Treasury index rebalancing was projected to extend duration by 0.11yr as of Nov. 22 In commodities, oil prices bounced after suffering their largest one-day drop since April 2020 on Friday. "The move all but guarantees the OPEC+ alliance will suspend its scheduled increase for January at its meeting on 2 December," wrote analyst at ANZ in a note. "Such headwinds are the reason it's been only gradually raising output in recent months, despite demand rebounding strongly." Brent rebounded 3.9% to $75.57 a barrel, while U.S. crude rose 4.5% to $71.24. Gold has so far found little in the way of safe haven demand, leaving it stuck at $1,791 an ounce . SGX iron ore rises almost 8% to recoup Friday’s losses. Bitcoin rallied after falling below $54,000 on Friday. Looking at today's calendar, we get October pending home sales, and November Dallas Fed manufacturing activity. We also get a bunch of Fed speakers including Williams, Powell making remarks at the New York Fed innovation event, Fed’s Hassan moderating a panel and Fed’s Bowman discussing central bank and indigenous economies. Market Snapshot S&P 500 futures up 0.6% to 4,625.00 MXAP down 0.9% to 191.79 MXAPJ down 0.4% to 625.06 Nikkei down 1.6% to 28,283.92 Topix down 1.8% to 1,948.48 Hang Seng Index down 0.9% to 23,852.24 Shanghai Composite little changed at 3,562.70 Sensex up 0.4% to 57,307.46 Australia S&P/ASX 200 down 0.5% to 7,239.82 Kospi down 0.9% to 2,909.32 STOXX Europe 600 up 0.7% to 467.47 German 10Y yield little changed at -0.31% Euro down 0.3% to $1.1283 Brent Futures up 3.8% to $75.49/bbl Gold spot up 0.3% to $1,797.11 U.S. Dollar Index up 0.13% to 96.22 Top Overnight News from Bloomberg The omicron variant of Covid-19, first identified in South Africa, has been detected in locations from Australia to the U.K. and Canada, showing the difficulties of curtailing new strains While health experts in South Africa, where omicron was first detected, said it appeared to cause only mild symptoms, the Geneva-based WHO assessed the variant’s risk as “extremely high” and called on member states to test widely. Understanding the new strain will take several days or weeks, the agency said All travelers arriving in the U.K. starting at 4 a.m. on Nov. 30 must take a PCR coronavirus test on or before the second day of their stay and isolate until they receive a negative result. Face coverings will again be mandatory in shops and other indoor settings and on public transport. Booster shots may also be approved for more age groups within days, according to Health Secretary Sajid Javid The economic effects of the successive waves of the Covid pandemic have been less and less damaging, Bank of France Governor Francois Villeroy de Galhau says Italian bonds advance for a third day, as investors shrug off new coronavirus developments over the weekend and stock futures advance, while bunds are little changed ahead of German inflation numbers and a raft of ECB speakers including President Christine Lagarde A European Commission sentiment index fell to 117.5 in November from 118.6 the previous month, data released Monday showed Spanish inflation accelerated to the fastest in nearly three decades in November on rising food prices, underscoring the lingering consequences of supply-chain bottlenecks across Europe. Consumer prices jumped 5.6% Energy prices in Europe surged on Monday after weather forecasts showed colder temperatures for the next two weeks that will lift demand for heating ECB Executive Board member Isabel Schnabel took to the airwaves to reassure her fellow Germans that inflation will slow again, hours before data set to show the fastest pace of price increases since the early 1990s Russia’s ambassador to Washington said more than 50 diplomats and their family members will have to leave the U.S. by mid-2022, in the latest sign of tensions between the former Cold War enemies China sent the biggest sortie of warplanes toward Taiwan in more than seven weeks after a U.S. lawmaker defied a Chinese demand that she abandon a trip to the island A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded cautiously and US equity futures rebounded from Friday’s hefty selling (S&P 500 -2.3%) as all focus remained on the Omicron variant after several countries announced restrictions and their first cases of the new variant, although markets took solace from reports that all cases so far from South Africa have been mild. Furthermore, NIH Director Collins was optimistic that current vaccines are likely to protect against the Omicron variant but also noted it was too early to know the answers, while Goldman Sachs doesn’t think the new variant is a sufficient reason to adjust its portfolio citing comments from South Africa’s NICD that the mutation is unlikely to be more malicious and existing vaccines will most likely remain effective at preventing hospitalizations and deaths. ASX 200 (-0.5%) is subdued after Australia registered its first cases of the Omicron variant which involved two people that arrived in Sydney from southern Africa and with the government reviewing its border reopening plans. Nikkei 225 (-1.6%) whipsawed whereby it initially slumped at the open due to the virus fears and currency-related headwinds but then recouped its losses and briefly returned flat as the mood gradually improved, before succumbing to a bout of late selling, and with mixed Retail Sales data adding to the indecision. Hang Seng (-1.0%) and Shanghai Comp. (Unch) weakened with Meituan the worst performer in Hong Kong after posting a quarterly loss and with casino names pressured by a crackdown in which police detained Suncity Group CEO and others after admitting to accusations including illegal cross border gambling. However, the losses in the mainland were cushioned after firm Industrial Profits data over the weekend and with local press noting expectations for China to adopt a more proactive macro policy next year. Finally, 10yr JGBs shrugged off the pullback seen in T-note and Bund futures, with price action kept afloat amid the cautious mood in stocks and the BoJ’s presence in the market for over JPY 900bln of JGBs mostly concentrated in 3yr-10yr maturities. Top Asian News Hong Kong Stocks Slide to 13-Month Low on Fresh Virus Woes Li Auto Loss Narrows as EV Maker Rides Out Supply-Chain Snarls Singapore Adds to Its Gold Pile for the First Time in Decades China Growth Stocks Look Like Havens as Markets Confront Omicron Bourses in Europe are experiencing a mild broad-based rebound (Euro Stoxx 50 +1.0%; Stoxx 600 +0.9%) following Friday's hefty COVID-induced losses. Desks over the weekend have been framing Friday's losses as somewhat overstretched in holiday-thinned liquidity, given how little is known about the Omicron variant itself. The strain will likely remain the market theme as scientists and policymakers factor in this new variant, whilst data from this point forth – including Friday's US labour market report - will likely be passed off as somewhat stale, and headline risk will likely be abundant. Thus far, symptoms from Omicron are seemingly milder than some of its predecessors, although governments and central banks will likely continue to express caution in this period of uncertainty. Back to price action, the momentum of the rebound has lost steam; US equity futures have also been drifting lower since the European cash open – with the RTY (+0.9%) was the laggard in early European trade vs the ES (+0.8%), NQ (+1.0%) and YM (+0.7%). European cash bourses have also been waning off best levels but remain in positive territory. Sectors are mostly in the green, but the breadth of the market has narrowed since the cash open. Travel & Leisure retains the top spot in what seems to be more a reversal of Friday's exaggerated underperformance as opposed to a fundamentally driven rebound – with more nations announcing travel restrictions to stem the spread of the variant. Oil & Gas has also trimmed some of Friday's losses as oil prices see a modest rebound relative to Friday's slump. On the other end of the spectrum, Healthcare sees mild losses as COVID-related names take a mild breather, although Moderna (+9.1% pre-market) gains ahead of the US open after its Chief Medical Officer suggested a new vaccine for the variant could be ready early next year. Meanwhile, Autos & Parts reside as the current laggard amid several bearish updates, including a Y/Y drop in German car exports - due to the chip shortage and supply bottlenecks – factors which the Daimler Truck CEO suggested will lead to billions of Euros in losses. Furthermore, auto supbt.aplier provider Faurecia (-5.9%) trades at the foot of the Stoxx 600 after slashing guidance – again a function of the chip shortage. In terms of Monday M&A, BT (+4.7%) shares opened higher by almost 10% following source reports in Indian press suggesting Reliance Industries is gearing up for a takeover approach of BT – reports that were subsequently rebuffed. Top European News U.K. Mortgage Approvals Fall to 67,199 in Oct. Vs. Est. 70,000 Johnson Matthey Rises on Report of Battery Talks With Tata Gazprom Reports Record Third-Quarter Profit Amid Gas Surge Omicron’s Spread Fuels Search for Answers as WHO Sounds Warning In FX, the Buck has bounced from Friday’s pullback lows on a mixture of short covering, consolidation and a somewhat more hopeful prognosis of SA’s new coronavirus strand compared to very early perceptions prompted by reports that the latest mutation would be even worse than the Delta variant. In DXY terms, a base above 96.000 is forming within a 93.366-144 band amidst a rebound in US Treasury yields and re-steepening along the curve following comments from Fed’s Bostic indicating a willingness to back faster QE tapering. Ahead, pending home sales and Dallas Fed business manufacturing along with more Fed rhetoric from Williams and chair Powell on the eve of month end. AUD/CAD/NZD - No surprise to see the high beta and risk sensitive currencies take advantage of the somewhat calmer conditions plus a recovery in crude and other commodities that were decimated by the prospect of depressed demand due to the aforementioned Omicron outbreak. The Aussie is back over 0.7150 vs its US counterpart, the Loonie has pared back losses from sub-1.2750 with assistance from WTI’s recovery to top Usd 72/brl vs a Usd 67.40 trough on November 26 and the Kiwi is hovering above 0.6800 even though RBNZ chief economist Ha has warned that a pause in OCR tightening could occur if the fresh COVID-19 wave proves to be a ‘game-changer’. JPY/EUR - The major laggards as sentiment stabilses, with the Yen midway between 112.99-113.88 parameters and hardly helped by mixed Japanese retail sales data, while the Euro has retreated below 1.1300 where 1.7 bn option expiry interest resides and a key Fib level just under the round number irrespective of strong German state inflation reports and encouraging pan Eurozone sentiment indicators, as more nations batten down the hatches to stem the spread of SA’s virus that has shown up in parts of the bloc. GBP/CHF - Both narrowly divergent vs the Dollar, as Cable retains 1.3300+ status against the backdrop of retreating Gilt and Short Sterling futures even though UK consumer credit, mortgage lending and approvals are rather conflicting, while the Franc pivots 0.9250 and meanders from 1.0426 to 1.0453 against the Euro after the latest weekly update on Swiss bank sight deposits showing no sign of official intervention. However, Usd/Chf may veer towards 1.1 bn option expiries at the 0.9275 strike if risk appetite continues to improve ahead of KoF on Tuesday and monthly reserves data. SCANDI/EM - Although Brent has bounced to the benefit of the Nok, Sek outperformance has ensued in wake of an upgrade to final Swedish Q3 GDP, while the Cnh and Cny are deriving support via a rise in Chinese industrial profits on a y/y basis and the Zar is breathing a sigh of relief on the aforementioned ‘better’ virus updates/assessments from SA on balance. Conversely, the Try is back under pressure post-a deterioration in Turkish economic sentiment vs smaller trade deficit as investors look forward to CPI at the end of the week. Meanwhile, Turkish President Erdogan provides no reprieve for the Lira as he once again defending his unorthodox view that higher interest rates lead to higher inflation. In commodities, WTI and Brent front-month futures consolidate following an overnight rebound – with WTI Jan back on a USD 71/bbl handle and Brent Feb just under USD 75/bbl – albeit still some way off from Friday's best levels which saw the former's high above USD 78/bbl and the latter's best north of USD 81/bbl. The week is packed with risks to the oil complex, including the resumption of Iranian nuclear talks (slated at 13:00GMT/08:00EST today) and the OPEC+ monthly confab. In terms of the former, little is expected in terms of progress unless the US agrees to adhere to Tehran's demand – which at this point seems unlikely. Tehran continues to seek the removal of US sanctions alongside assurances that the US will not withdraw from the deal. "The assertion that the US must 'change its approach if it wants progress' sets a challenging tone", Citi's analysts said, and the bank also expects parties to demand full access to Iranian nuclear facilities for verification of compliance. Further, the IAEA Chief met with Iranian officials last week; although concrete progress was sparse, the overall tone of the meeting was one of progress. "We remain of the opinion that additional Iranian supplies are unlikely to reach the market before the second half of 2022 at the earliest," Citi said. Meanwhile, reports suggested the US and allies have been debating a "Plan B" if talks were to collapse. NBC News – citing European diplomats, former US officials and experts – suggested that options included: 1) a skinny nuclear deal, 2) ramp up sanctions, 3) Launching operations to sabotage Iranian nuclear advances, 4) Military strikes, 5) persuading China to halt Iranian oil imports, albeit Iran and China recently signed a 25yr deal. Over to OPEC+, a rescheduling (in light of the Omicron variant) sees the OPEC and JTC meeting now on the 1st December, followed by the JMMC and OPEC+ on the 2nd. Sources on Friday suggested that members are leaning towards a pause in the planned monthly output, although Russian Deputy PM Novak hit the wires today and suggested there is no need for urgent measures in the oil market. Markets will likely be tested, and expectations massaged with several sources heading into the meeting later this week. Elsewhere, spot gold trades sideways just under the USD 1,800/oz and above a cluster of DMAs, including the 50 (1,790.60/oz), 200 (1,791.30/oz) and 100 (1,792.80/oz) awaiting the next catalyst. Over to base metals, LME copper recoups some of Friday's lost ground, with traders also citing the underlying demand emanating from the EV revolution. US Event Calendar 10am: Oct. Pending Home Sales YoY, prior -7.2% 10am: Oct. Pending Home Sales (MoM), est. 0.8%, prior -2.3% 10:30am: Nov. Dallas Fed Manf. Activity, est. 17.0, prior 14.6 Central Bank speakers: 3pm: Fed’s Williams gives opening remarks at NY Innovation Center 3:05pm: Powell Makes Opening Remarks at New York Fed Innovation Event 3:15pm: Fed’s Hassan moderates panel introducing NY Innovation Center 5:05pm: Fed’s Bowman Discusses Central bank and Indigenous Economies DB's Jim Reid concludes the overnight wrap Last night Henry in my team put out a Q&A looking at what we know about Omicron (link here) as many risk assets put in their worst performance of the year on Friday after it exploded into view. The main reason for the widespread concern is the incredibly high number of mutations, with 32 on the spike protein specifically, which is the part of the virus that allows it to enter human cells. That’s much more than we’ve seen for previous variants, and raises the prospect it could be a more transmissible version of the virus, although scientists are still assessing this. South Africa is clearly where it has been discovered (not necessarily originated from) and where it has been spreading most. The fact that’s it’s become the dominant strain there in just two weeks hints at its higher level of contagiousness. However the read through to elsewhere is tough as the country has only fully vaccinated 24% of its population, relative to at least 68% in most of the larger developed countries bar the US which languishes at 58%. It could still prove less deadly (as virus variants over time mostly are) but if it is more contagious that could offset this and it could still cause similar healthcare issues, especially if vaccines are less protective. On the other hand the South African doctor who first alerted authorities to the unusual symptoms that have now been found to have been caused by Omicron, was on numerous media platforms over the weekend suggesting that the patients she has seen with it were exhausted but generally had mild symptoms. However she also said her patients were from a healthy cohort so we can’t relax too much on this. However as South African cases rise we will get a lot of clues from hospitalisation data even if only 6% of the country is over 65s. My personal view is that we’ll get a lot of information quite quickly around how bad this variant is. The reports over the weekend that numerous cases of Omicron have already been discovered around the world, suggests it’s probably more widespread than people think already. So we will likely soon learn whether these patients present with more severe illness and we’ll also learn of their vaccination status before any official study is out. The only caveat would be that until elderly patients have been exposed in enough scale we won’t be able to rule out the more negative scenarios. Before all that the level of restrictions have been significantly ramped up over the weekend in many countries. Henry discusses this in his note but one very significant one is that ALL travellers coming into (or back to) the UK will have to self isolate until they get a negative PCR test. This sort of thing will dramatically reduce travel, especially short business trips. Overnight Japan have effectively banned ALL foreign visitors. I appreciate its dangerous to be positive on covid at the moment but you only have to look at the UK for signs that boosters are doing a great job. Cases in the elderly population continue to collapse as the roll out progresses well and overall deaths have dropped nearly 20% over the last week to 121 (7-day average) - a tenth of where they were at the peak even though cases have recently been 80-90% of their peak levels. If Europe are just lagging the UK on boosters rather than anything more structural, most countries should be able to control the current wave all things being equal. However Omicron could make things less equal but it would be a huge surprise if vaccines made no impact. Stocks in Asia are trading cautiously but remember that the US and Europe sold off more aggressively after Asia closed on Friday. So the lack of major damage is insightful. The Nikkei (-0.02%), Shanghai Composite (-0.14%), CSI (-0.22%), KOSPI (-0.47%) and Hang Seng (-0.68%) are only slightly lower. Treasury yields, oil, and equity futures are all rising in Asia. US treasury yields are up 4-6bps across the curve, Oil is c.+4.5% higher, while the ZAR is +1.31%. Equity futures are trading higher with the S&P 500 (+0.71%) and DAX (+0.84%) futures in the green. In terms of looking ahead, we may be heading into December this week but there’s still an incredibly eventful period ahead on the market calendar even outside of Omicron. We have payrolls on Friday which could still have a big impact on what the Fed do at their important December 15 FOMC and especially on whether they accelerate the taper. Wednesday (Manufacturing) and Friday (Services) see the latest global PMIs which will as ever be closely watched even if people will suggest that the latest virus surge and now Omicron variant may make it backward looking. Elsewhere in the Euro Area, we’ll get the flash CPI estimate for November tomorrow (France and Italy on the same day with Germany today), and we’ll hear from Fed Chair Powell as he testifies (with Mrs Yellen) before congressional committees tomorrow and Wednesday. There’s lots of other Fed speakers this week (ahead of their blackout from this coming weekend) and last week there was a definite shift towards a faster taper bias, even amongst the doves on the committee with Daly being the most important potential convert. Fed speakers this week might though have to balance the emergence of the new variant with the obvious point that without it the Fed is a fair bit behind the curve. Importantly but lurking in the background, Friday is also the US funding deadline before another government shutdown. History would suggest a tense last minute deal but it’s tough to predict. Recapping last week now and the emergence of the new variant reshaped the whole week even if ahead of this, continued case growth across Europe prompted renewed lockdown measures and travel bans across the continent. Risk sentiment clearly plummeted on Friday. The S&P 500 fell -2.27%, the biggest drop since October 2020, while the Stoxx 600 fell -3.67%, the biggest one-day decline since the original Covid-induced risk off in March 2020. The S&P 500 was -2.20% lower last week, while the Stoxx 600 was down -4.53% on the week. 10yr treasury, bund, and gilt yields declined -16.1bps, -8.7bps, and -14.5bps, undoing the inflation and policy response-driven selloff from earlier in the week. The drop in 10yr treasury and gilt yields were the biggest one-day declines since the original Covid-driven rally in March 2020, while the drop in bund yields was the largest since April 2020. 10yr treasury, bund, and gilt yields ended the week -7.3bps lower, +0.7bps higher, and -5.4bps lower, respectively. Measures of inflation compensation declined due to the anticipated hit to global demand, with 10yr breakevens in the US and Germany -6.8bps and -8.8bps lower Friday, along with Brent and WTI futures declining -11.55% and -13.06%, respectively. Investors pushed back the anticipated timing of rate hikes. As it stands, the first full Fed hike is just about priced for July, and 2 hikes are priced for 2022. This follows a hawkish tone from even the most dovish FOMC members and the November FOMC minutes last week. The prevailing sentiment was the FOMC was preparing to accelerate their asset purchase taper at the December meeting to enable inflation-fighting rate hikes earlier in 2022. Understanding the impact of the new variant will be crucial for interpreting the Fed’s reaction function, though. The impact may not be so obvious; while a new variant would certainly hurt global demand and portend more policy accommodation, it will also likely prompt more virus-avoiding behaviour in the labour market, preventing workers from returning to pre-Covid levels. Whether the Fed decides to accommodate these sidelined workers for longer, or to re-think what constitutes full employment in a Covid world should inform your view on whether they accelerate tapering in December. It feels like a lifetime ago but last week also saw President Biden nominate Chair Powell to head the Fed for another term, and for Governor Brainard to serve as Vice Chair. The announcement led to a selloff in rates as the more dovish Brainard did not land the head job. In Germany, the center-left SPD, Greens, and liberal FDP agreed to a full coalition deal. The traffic-light coalition agreed to restore the debt break in 2023, after being suspended during the pandemic, and to raise the minimum wage to €12 per hour. The SPD’s Olaf Scholz will assume the Chancellorship. The US, China, India, Japan, South Korea, and UK announced releases of strategic petroleum reserves. Oil prices were higher following the announcement, in part because releases were smaller than anticipated but, as mentioned, prices dropped precipitously on Friday on the global demand impact of the new Covid variant. The ECB released the minutes of the October Governing Council meeting, where officials stressed the need to maintain optionality in their policy setting. They acknowledged growing upside risks to inflation but stressed the importance of not overreacting in setting policy as they see how inflation scenarios might unfold. Tyler Durden Mon, 11/29/2021 - 08:01.....»»

Category: dealsSource: nytNov 29th, 2021

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

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

Category: blogSource: zerohedgeNov 24th, 2021

An Amazon Flex delivery driver in his 60s making $120 a day shares what it"s like to work independently for the retail giant

"It's hard to take a day off when you know there's money out there, but I don't let myself get too burnt out," a Flex driver from Connecticut said. "I understand people don't want to work 12 hours a day, but if you've got weekends off, this is a good way to spend your time," an Amazon Flex driver (not pictured) said.Brendan McDermid TPX Images of the Day/Reuters An Amazon Flex driver from Connecticut who's retired from the military shared his experience. He likes Flex and recommends it to others — he usually makes $120 a day, he said. "I will continue to drive Flex for as long as it makes sense for me," he added. It's no secret that Amazon needs a lot of drivers.A quick internet search will turn up numerous driving jobs at Amazon Delivery Service Partners. Amazon Flex, a program where drivers use their own cars for deliveries, is recruiting in over 80 cities. (Editor's note: The writer of this article drove for Amazon Flex from August to October.)That may have some job seekers wondering whether they should be looking for extra income through the Flex program.In this program, drivers use their own cars, pay for their own gas, and accept whichever shifts they want delivering Amazon packages or Whole Foods orders.Drivers must pass a background check, sign up with an Amazon account, watch a couple of short videos to learn the process, provide some information for taxes and payment, and select a delivery service area. Drivers can accept work in blocks of a few hours instead of having to commit to a full day of work. Flex drivers can also accept or decline Whole Foods "instant offers," which can involve one or multiple deliveries."Launched in September 2015, Amazon Flex gives individuals the opportunity to set their own schedule, be their own boss, and earn great pay while delivering packages for Amazon. Amazon Flex delivery partners across the US have competitive earnings that exceed $26 per scheduled hour on average," Amazon Spokesperson Maria Boschetti told Insider."I get instant offers that I reject on a regular basis. I choose offers only when it seems worth it to me," one Amazon Flex driver from Connecticut told Insider, adding that he considers how much money the offer is for, how many deliveries it contains, and how far from home it will take him.The driver, who's retired from the military and in his 60s, said he signed up for Flex because he was looking to make some extra money to travel and pay off debts. He asked to remain anonymous for privacy reasons.Amazon Flex has been worth it for him, he said."Flex has been a godsend for me, and it's a way to get out of the house. It's not a side gig for me — it's all I do," the driver said. "I certainly can't speak for everybody. A lot of us out there are retirees who are just trying to bring in extra money who have other sources of income but a lot of free time."I don't feel exploited like some drivers do because I can stop anytime I want," he added. "If I felt like Amazon wasn't being fair with me, and in some ways they're not being fair, I would just stop driving."One thing the driver said was unfair was how Amazon handled delivery problems.For example, if a customer claims that a package wasn't delivered, even though drivers must submit proof of delivery, Amazon will side with the customer, the driver said."You can write emails to Flex support until you're blue in the face, and the chances of you actually getting a human to read them is pretty slim," the driver said.This happened to the driver on two occasions, he said, adding that both times he received an email several weeks later saying an unnamed customer had reported a missing delivery.He sent an email to Amazon Flex support on the first occasion but was told that details would not be disclosed in order to protect customer privacy, he said.Those delivery problems can have some financial consequences for the drivers, he said: Undelivered or late packages can affect a driver's ability to move into a higher rewards level, and higher rewards levels come with more cash back on fuel purchases with the Amazon Flex debit card, preferred scheduling to help drivers get better delivery blocks, and discounts on tires and vehicle maintenance. Amazon's Boschetti said that if a customer reports a package has not arrived it doesn't go on a delivery partner's record as an undelivered package.Another negative the driver mentioned is that some routes can take drivers far from their homes, and time spent driving back home is not included in the rate paid to drivers.For example, if you pick up your delivery from a Whole Foods and two hours later finish the delivery 45 minutes from the Whole Foods, that 45-minute drive back is not accounted for in the base rate that Amazon pays, the driver said.A lot of the money that drivers get from Whole Foods deliveries are tips. That's been good for him, he said, as he typically delivers to affluent customers. Whole Foods recently added a $9.95 delivery fee, which went into effect on October 25. The driver said that his tips had been consistent since then but that Whole Foods instant offers hadn't been as consistent for him in recent months as they used to be.Normally, he expects to make about $120 in a day with two accepted Whole Foods instant offers, he said. The base rate is $54 per regularly scheduled three-hour shift, though that can increase if Amazon needs more drivers.He doesn't usually work seven days a week, though he doesn't take a ton of time away from Flex, he said."It's hard to take a day off when you know there's money out there, but I don't let myself get too burnt out," he said.It's important for drivers to carefully track their mileage and expenses for their taxes, the driver said.He said that since buying a car in January he'd put 25,000 miles on it, most of them Flex miles. He added that he'd fixed his brakes twice this year already, to the tune of $800, and changes his oil every two months.But the standard IRS mileage rate of $0.56 per mile in deductible costs makes the strain on your vehicle worth it, he said."I'm in a particular circumstance where the problems a lot of people have with Flex don't really apply to me. I have nothing but free time, I enjoy getting out of the house, and I don't really think it's hard work. Obviously, there are problems that crop up all the time … but I will continue to drive Flex for as long as it makes sense for me, and it does make sense," he said."I understand people don't want to work 12 hours a day, but if you've got weekends off, this is a good way to spend your time," he added.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 24th, 2021

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

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

Category: blogSource: zerohedgeNov 23rd, 2021

Futures Rise To 4,700 "Max Gamma" As Oil Slide Accelerates

Futures Rise To 4,700 "Max Gamma" As Oil Slide Accelerates U.S. index futures rose again, trading on top of the massive 4700 "max gamma" level despite downbeat data out of Chinese tech names, as investors awaited the latest batch of unemployment data and taking comfort from signals that central banks will stay far behind the curve and keep pledges to overlook faster inflation rather than rush into rate hikes. European stocks were steady and Asian equities fell as Chinese tech stocks tumbled after poor results from Baidu and Bilibili. Treasury yields edged higher, the dollar was little changed and gold declined. Bitcoin retreated for a fifth straight day. Oil prices skidded to a six-week low on concern about a supply overhang and the prospect of China, Japan and the United States dipping in to their fuel reserves, with Brent futures last at $79.77, more than 8% off last month's three-year high. Nasdaq futures rose 86.25 points or 0.53% outperforming S&P 500 futs which were up 11.50 points or 0.25% to 4697.75, after chip giant Nvidia jumped 7% after a sales forecast by the world’s largest chipmaker. Elsewhere in premarket trading, Cisco dropped 6.6% after the computer networking equipment group’s growth and earnings forecast fell short of expectations while Alibaba slid after reporting sales that missed analyst estimates for a second straight quarter. Some other notable premarket movers: EV makers are mixed in U.S. premarket trading, with Rivian Automotive (RIVN US), Lucid (LCID US) and Canoo (GOEV US) all declining and newly-listed Sono (SEV US) extending its bounce Nvidia (NVDA US) shares gain 7% in U.S. premarket trading, with analysts saying the chipmaker delivered a strong enough quarter to justify its punchy valuation Amtech (ASYS US) fell 22% in post-market trading after reporting fourth quarter revenue that missed estimates from two analysts. The semiconductor stock has risen 139% this year through Wednesday’s trading. Kraft Heinz (KHC US) fell 1.6% in postmarket trading on Wednesday after announcing one of its top holders was selling a portion of its stake. Victoria’s Secret (VSCO US) shares gain 13% in U.S. premarket trading as analysts highlight “better-than- feared” 3Q results for the lingerie retailer. JD.com (JD US) shares advanced 2.2% premarket after it reported net revenue for the third quarter that beat the average analyst estimate. “While companies are managing to report solid third-quarter numbers, the ability to do so is being tempered by concerns about slimmer margins,” said Michael Hewson, chief market analyst at CMC Markets in London. “One positive thing, aside from the concern over rising inflation, has been the resilience of labor markets, on both sides of the Atlantic.” The Stoxx Europe 600 Index was little changed with most cash indexes giving back early gains or losses to trade flat as travel and consumer companies gained while the energy and minings industries retreated. FTSE 100 underperformed slightly. Oil & gas was the weakest sector followed by mining stocks. European metals and mining stocks fall 0.8%, the second worst performing sub-index on the benchmark Stoxx 600, amid sinking iron ore futures and copper prices. Iron ore retreated as investors weighed a top producer’s forecasts of a balanced market next year and the impact on miners amid a price collapse in recent months. Diversified miners drop, Glencore -0.8%, Anglo American -1%, BHP -0.7%, Rio Tinto -1.1%; the four stocks account for more than 60% of the SXPP. Earlier in the session, Asian stocks fell, on track for a second day of losses, as Baidu helped lead a slump in Chinese technology giants.  The MSCI Asia Pacific Index dropped as much as 0.4%, extending its two-day slide to about 0.9%. The Hang Seng Tech Index lost about 3%, as search engine giant Baidu tumbled on worries over the advertising outlook and video-streaming firm Bilibili dropped after posting a larger-than-expected loss. Hong Kong’s Hang Seng Index and China’s CSI 300 benchmark were the worst performing national benchmarks Thursday, while Taiwan’s Taiex managed a small gain. Alibaba also fell, ahead of its highly awaited earnings report later today that may show the impact of Beijing’s regulatory curbs. Japan's Nikkei was down 0.6% in early trade. "We do seem to have stalled somewhat as we head into the year end," said Jun Bei Liu, a portfolio manager at Tribeca Investment Partners in Sydney. "Investors perhaps are just taking a bit of pause," she said, in the wake of a strong U.S. results season, but as inflation and China's slowdown loom as macroeconomic headwinds. “With a bout of earnings having been released and put behind the market, we’re in an environment where investors are inclined to take profits,” said Takashi Ito, an equity market strategist at Nomura Securities in Tokyo. “Investors are likely to cherry pick stocks that have high earnings and ROE and have strong momentum for growth.”  The region’s equities are now poised for a weekly drop after wiping out gains from earlier this week. Anxiety over global inflation has weighed on sentiment as investors search for clues on when central banks will start raising interest rates. Indonesia and the Philippines kept borrowing costs unchanged, as expected, to aid two economies that bore the brunt of Covid-19 outbreaks in Southeast Asia this year. In rates, treasuries were slightly cheaper across long-end of the curve after S&P 500 and Nasdaq 100 futures breached Wednesday’s highs. Yields are higher by ~1bp in 30-year sector, with 2s10s steeper by ~1bp, 5s30s by ~0.5bp; 10-year is ~1.60%, trailing bunds by ~2bp as traders push back on ECB rate-hike pricing. Focal points Thursday include several Fed speakers and a potentially historic 10-year TIPS auction at 1pm ET - at $14BN, the 10Y TIPS reopening is poised to draw a record low yield near -1.14%; breakeven inflation rate at ~2.71% is within 7bp of Monday’s YTD high. Elsewhere, Gilts outperformed richening ~2.5bps across the curve. Peripheral spreads tighten, semi-core widens marginally. In FX, the U.S. dollar erased an earlier modest loss and was flat, with majors mostly range-bound. Treasury yields stabilized from overnight declines; the greenback traded mixed versus its Group-of-10 peers, though most were confined to tight ranges, New Zealand’s dollar led G-10 gains after two-year ahead inflation expectations rose to 2.96% in the fourth quarter from 2.27% in the third, according to survey of businesses published by the Reserve Bank of New Zealand. Support in euro- Swiss franc at 1.0500 holds for now and consolidation for risk reversals this week suggests that a breach of the key level may not see a big follow through. The pound inched up and is on its longest winning streak in nearly seven months after this week’s jobs and inflation data fueled confidence that the Bank of England will hike rates. The Turkish lira plunged to a new all time low, with the USDTRY rising to 10.93 after the central bank cut rates by 100bps. Currency traders are also assessing a sharp downdraft in the Aussie/yen cross, often a barometer of market sentiment. It fell through its 200-day moving average on Tuesday and has lost almost 4% in a dozen sessions . "You've got the perfect storm there for bears," said Matt Simpson, senior analyst at brokerage City Index. "Fundamentally and technically Aussie/yen looks pretty good with lower oil prices." In commodities, crude futures remained in the red but bounce off worst levels as the potential for SPR releases remains center stage. WTI finds support near $77, recovering toward $78; Brent regains a $80-handle. Spot gold gives back Asia’s small gains, dropping ~$7 to trade near $1,860/oz. Base metals trade poorly, LME zinc and lead underperform. Looking at the day ahead now, and data releases from the US include the weekly initial jobless claims, the Philadelphia Fed’s business outlook for November, the Kansas City Fed’s manufacturing index for November, and the Conference Board’s leading index for October. Central bank speakers include PBoC Governor Yi Gang, the ECB’s Centeno, Panetta and Lane, and the Fed’s Bostic, Williams, Evans and Daly. There’ll also be a number of decisions from EM central banks, including Bank Indonesia, the Central Bank of Turkey and the South African Reserve Bank. Finally, earnings releases include Intuit, Applied Materials and TJX. Market Snapshot S&P 500 futures up 0.4% to 4,703.25 STOXX Europe 600 up 0.1% to 490.50 MXAP down 0.3% to 199.31 MXAPJ down 0.6% to 650.79 Nikkei down 0.3% to 29,598.66 Topix down 0.1% to 2,035.52 Hang Seng Index down 1.3% to 25,319.72 Shanghai Composite down 0.5% to 3,520.71 Sensex down 0.4% to 59,755.91 Australia S&P/ASX 200 up 0.1% to 7,379.20 Kospi down 0.5% to 2,947.38 Brent Futures down 0.1% to $80.18/bbl Gold spot down 0.2% to $1,863.45 U.S. Dollar Index little changed at 95.75 German 10Y yield little changed at -0.26% Euro little changed at $1.1327 Top Overnight News from Bloomberg More Wall Street banks are wagering that the Federal Reserve will hike rates at a faster-than-expected pace, with Citigroup Inc. joining Morgan Stanley in backing trades that will profit if the central bank does just that China is releasing some oil from its strategic reserves days after the U.S. invited it to participate in a joint sale, suggesting the world’s two biggest oil consumers are willing to work together to keep a lid on energy costs European countries are increasingly forcing reluctant companies to let employees work from home in an effort to break the rapidly spreading fourth wave of the coronavirus pandemic A more in depth look at global markets courtesy of Newsqauwk Asia-Pac stocks traded mostly negative with sentiment in the region subdued amid a lack of significant macro drivers and following the uninspired lead from the US - where the major indices finished a choppy session in the red and the DJIA gave up the 36k status. Nonetheless, the ASX 200 (+0.1%) remained afloat with notable strength in gold miners, as well as some consumer stocks, although advances in the index were limited by losses in the financial and energy sectors after similar underperformance stateside amid a decline in yields and oil prices. The Nikkei 225 (-0.3%) was initially dragged lower by unfavourable currency inflows which overshadowed reports that Japan wants to enhance tax breaks for corporations that raise wages, while shares in Eisai were hit after EU regulators placed doubts regarding the approval of Co. and Biogen’s co-developed Alzheimer’s drug and SoftBank also declined after the US regulator raised concerns regarding Nvidia’s acquisition of Arm. However, the index then briefly returned flat in late trade on reports that the Japanese stimulus package is to require JPY 55.7tln of fiscal spending which is higher than the previously speculated of around JPY 40tln. The Hang Seng (-1.3%) and Shanghai Comp. (-0.5%) weakened after another liquidity drain by the PBoC and with the declines in Hong Kong exacerbated by tech selling, while the losses in the mainland were to a lesser extent with China said to be mulling additional industrial policies aimed to support growth and SGH Macro sources suggested the US and China agreed there would be some substantial progress on trade such as the removal of some punitive tariffs by the US and increased purchases of US products by China, although the report highlighted that it was unclear if this would be from a high-profile announcement or a discrete relaxing of tariffs. Finally, 10yr JGBs were initially flat as prices failed to benefit from the subdued risk appetite in Japan and rebound in global peers, while firmer metrics at the 20yr JGB bond auction provided a mild tailwind in late trade although the support was only brief and prices were then pressured on news of the potentially larger than anticipated fiscal spending in PM Kishida's stimulus package. Top Asian News China Property Stocks Sink, $4.2 Billion Rush: Evergrande Update Japan’s Kishida Eyes Record Fiscal Firepower to Boost Recovery China Property Firm Shinsun’s Shares and Bonds Slump JD.com Sales Beat Estimates as Investments Start to Pay Off Major bourses in Europe are choppy, although sentiment picked up following a subdued APAC session but despite a distinct lack of fresh catalysts. US equity futures have also been grinding higher in early European hours, with the NQ (+0.6%) outpacing the ES (+0.3%), RTY (+0.2%) and YM (+0.2%). Back to European cash – broad-based gains are seen across the Euro bourses – which lifted the CAC, DAX and SMI to notch record intraday highs, whilst upside in the UK's FTSE 100 (-0.2%) has been hampered by hefty losses in today's lagging sectors– the Energy and Basic Resources - amid price action in the respective markets. Tech names also see a strong performance thus far as chip names cheer NVIDIA (+6% pre-market) earnings yesterday. Overall, sectors have maintained a similarly mixed picture vs the cash open, with no overarching theme. In terms of individual movers, Swatch (+2.8%) and Richemont (+0.6) piggyback on the increase in Swiss Watch Exports vs 2020 and 2019. Metro Bank (-20%) plumbed the depths after terminating takeover talks with Carlyle. Top European News Royal Mail Hands Investors $540 Million Amid Parcel Surge German Coalition Plans Stricter Rent Increase Regulation: Bild HSBC Sees ECB Sticking With Easy Stance Despite Record Inflation Astra Covid Antibody Data Shows Long-Lasting Protection In FX, the Kiwi has extended its recovery on heightened RBNZ tightening expectations prompted by significant increases in Q4 inflation projections, with some pundits now assigning a greater probability to the OCR rising 50 bp compared to the 25 bp more generally forecast and factored in. Nzd/Usd is eyeing 0.7050 and the 50 DMA just above (at 0.7054 today) having breached the 100 DMA (0.7026), while the Aud/Nzd cross is probing further below 1.0350 even though the Aussie has found some support into 0.7250 against its US rival and will be encouraged by news that COVID-19 restrictions in the state of Victoria are on the verge of being completely lifted. GBP/EUR/DXY - Notwithstanding Kiwi outperformance, the Dollar has lost a bit more of its bullish momentum to the benefit of most rivals, and several of those that compose the basket. Indeed, Cable has popped above 1.3500, while the Euro is looking more comfortable on the 1.1300 handle as the index retreats further from Wednesday’s new y-t-d peak and away from the psychological 96.000 level into a 95.840-642 range. Ahead, IJC and Philly Fed are due amidst another decent slate of Fed speakers, while Eur/Usd will also be eyeing the latest ECB orators for some direction and Eur/Gbp is back around 0.8400 where decent option expiry interest resides (1.1 bn), but perhaps more focused on latest talks between the UK and EU on the NI dispute. CHF/CAD/JPY - The Franc has pared more declines vs the Buck from sub-0.9300 and remains firm against the Euro near 1.0500 in wake of Swiss trade data showing a wider surplus and pick-up in key watch exports, but the Loonie looks a bit hampered by a more pronounced fall in the price of oil as the US calls on other countries for a concerted SPR tap and China is said to be working on the release of some crude stocks. Usd/Cad is tethered to 1.2600 and highly unlikely to threaten 1.1 bn option expiries at the 1.2500 strike in contrast to the Yen that stalled above 114.00 and could be restrained by 1.4 bn between 113.90 and the round number or 1.3 bn from 114.20-25, if not reports that Japan’s stimulus package may require Jpy 55.7 tn of fiscal spending compared to Jpy 40 tn previously speculated. In commodities, WTI and Brent front-month futures are off worst levels but still under pressure amid the prospect of looming crude reserves releases, with reports suggesting China is gearing up for its own release. There were also prior source reports that the US was said to have asked other countries to coordinate a release of strategic oil reserves and raised the oil reserve release request with Japan and China. Furthermore, the US tapping of the SPR could be either in the form of a sale and/or loan from the reserve, and the release from the reserve needs to be more than 20mln-30mln bbls to get the message to OPEC, while a source added that the US asked India, South Korea and large oil-consuming countries, but not European countries, to consider oil reserve releases after pleas to OPEC failed. This concoction of headlines guided Brent and WTI futures under USD 80/bbl and USD 78/bbl respectively with early selling also experienced as European players entered the fray. On the geopolitical front, US National security adviser Jake Sullivan raised with his Israeli counterpart the idea of an interim agreement with Iran to buy more time for nuclear negotiations, according to sources. However, two American sources familiar with the call said the officials were just "brainstorming" and that Sullivan passed along an idea put forward by a European ally. Next, participants should continue to expect jawboning from the larger economies that advocated OPEC+ to release more oil. OPEC+ is unlikely to react to prices ahead of next month's meeting (barring any shocks). Elsewhere, spot gold and silver have been choppy within a tight range. Spot gold trades under USD 1,875/oz - with technicians flagging a Fib around USD 1,876/oz. Spot silver trades on either side of USD 25/oz. Base metals are on a softer footing amid the broader performance across industrial commodities – LME copper remains subdued under the USD 9,500/t level, whilst some reports suggest companies are attempting to arbitrage the copper spread between Shanghai and London. US Event Calendar 8:30am: Nov. Initial Jobless Claims, est. 260,000, prior 267,000; Continuing Claims, est. 2.12m, prior 2.16m 8:30am: Nov. Philadelphia Fed Business Outl, est. 24.0, prior 23.8 9:45am: Nov. Langer Consumer Comfort, prior 50.3, revised 50.3 10am: Oct. Leading Index, est. 0.8%, prior 0.2% 11am: Nov. Kansas City Fed Manf. Activity, est. 28, prior 31 Central banks 8am: Fed’s Bostic Discusses Regional Outlook 9:30am: Fed’s Williams speaks on Transatlantic responses to pandemic 2pm: Fed’s Evans Takes Part in Moderated Q&A 3:30pm: Fed’s Daly takes part in Fed Listens event DB's Jim Reid concludes the overnight wrap After 9 weeks since surgery, yesterday I got the green light to play golf again from my consultant. Yippee. However he said that he’ll likely see me in 3-5 years to do a procedure called distal femoral osteotomy where he’ll break my femur and realign the leg over the good part of the knee. Basically I have a knee that is very good on the inside half and very bad on the outer lateral side. He’s patched the bad side up but it’s unlikely to last more than a few years before the arthritis becomes too painful. This operation would be aimed at delaying knee replacement for as long as possible! Sounds painful and a bit crazy! Meanwhile I also have a painful slipped disc in my back at the moment that I’m going to have an injection for to hopefully avoid surgery after years of managing it. As you might imagine from reading my posts last week I don’t get much sympathy at home at the moment for my various ailments. In terms of operations and golf I’m turning into a very very poor man’s Tiger Woods! Markets have been limping a bit over the last 24 hours too as the inflation realities seemed to be a bit more in focus. Those worries were given additional fuel from the UK CPI release for October, which followed the US and the Euro Area in delivering another upside surprise, just as a number of key agricultural prices continued to show significant strength. Oil was down notably though as we’ll discuss below. To add to the mix, the latest global Covid-19 wave has shown no sign of abating yet, even if some countries are better equipped for it than others. Starting with inflation, one of the main pieces of news arrived yesterday morning, when the UK reported that CPI came in at +4.2% year-on-year in October. That was above every economist’s estimate on Bloomberg, surpassing the +3.9% consensus expectation that was also the BoE’s staff projection in their November Monetary Policy Report. That’s the fastest UK inflation since 2011, and core inflation also surprised on the upside with a +3.4% reading (vs. +3.1% expected). In response to this, our UK economist (link here) is now expecting that CPI will peak at +5.4% in April, with the 2022 annual average CPI still at +4.2%, which is more than double the BoE’s 2% target. The release was also seen as strengthening the case for a December rate hike by the BoE, and sterling was the second best performing G10 currency after being top the day before in response, strengthening +0.45% against the US dollar. Even as inflation risks mounted however, the major equity indices demonstrated an impressive resilience, with the STOXX 600 (+0.14%) rising for the 17th time in the last 19 sessions. This is the best such streak since June this year, when the index managed to increase 18 of 20 days. We’ll see if that mark is matched today That was a better performance than the S&P 500 (-0.26%). 342 stocks were in the red today, the most in three weeks. Energy (-1.74%) and financials (-1.11%) each declined more than a percent, on lower oil prices and yields, respectively. Real estate (+0.65%) and consumer discretionary (+0.59%) led the way, driven by a +3.25% increase in Tesla. In line with the broad-based retreat, small-caps continued to put in a much weaker performance, with the Russell 2000 shedding -1.16% as it underperformed the S&P for a 4th consecutive session. Sovereign bonds also managed to advance yesterday, with yields on 10yr Treasuries (-4.5bps) posting their biggest decline in over a week, taking them to 1.59%. Declining inflation expectations drove that move, with the 10yr breakeven down -3.2bps to 2.71%, which was its biggest decline in over two weeks. For Europe it was a different story however, with yields on 10yr bunds only down -0.3bps, just as those on 10yr OATs (+0.1bps) and BTPs (+0.5bps) both moved higher. Most of the Treasury rally was after Europe closed though. Those moves came against the backdrop of a fairly divergent performance among commodities. On the one hand oil prices fell back, with WTI (-2.97%) closing beneath $80/bbl for only the second time in the last month as speculation continued that the US would tap its strategic reserves. On the other hand, there was no sign of any relenting in European natural gas prices, which rose a further +0.79% yesterday to bring their gains over the last 7 days to +31.57%. That follows the German regulator’s decision to temporarily suspend certification for Nord Stream 2, which has added to fears that Europe will face major supply issues over the winter. And while we’re discussing the factors fuelling inflation, there were some fresh moves higher in agricultural prices as well yesterday, with wheat futures (+1.48%) hitting an 8-year high, and coffee futures (+4.75%) climbing to their highest level in almost a decade. Central banks will be watching these trends closely. There’s still no word on who’s going to lead the Fed over the next 4 years, but yesterday’s news was that President Biden will make his pick by Thanksgiving. For those keeping track at home, on Tuesday the guidance was within the next four days. So, while it appears momentum toward an announcement is growing, take signaling of any particular day with a grain of salt. On the topic of the Fed, our US economists released their updated Fed outlook yesterday (link here) in which they brought forward their view of the expected liftoff to July 2022, with another rate increase following in Q4 2022. And although it’s not their base case, they acknowledge that incoming data could even push the Fed to speed up their taper and raise rates before June. They don’t see the choice of the next Fed Chair as having much impact on the broad policy trajectory, since inflation next year is likely to still be at high levels that makes most officials uncomfortable, plus the annual rotation of regional Fed presidents with an FOMC vote leans more hawkish next year. So that will constrain the extent to which a new chair could shift matters in a dovish direction, even if they wanted to. Overnight in Asia stocks are trading mostly in the red outside of a flat KOSPI (+0.01%). The Shanghai Composite (-0.13%), CSI (-0.64%), Nikkei (-0.77%) and Hang Seng (-1.35%) are being dragged down by tech after a bout of Chinese IT companies missed earnings continuing a theme of this earnings season. Elsewhere in Japan, the Nikkei reported that the new economic stimulus package could be around YEN 78.9 tn ($691 bn). Prime Minister Fumio Kishida will announce the package on Friday. Elsewhere S&P 500 (+0.08%) and DAX futures (+0.01%) both fairly flat. The House of Representatives is slated to begin debate on the Biden social and climate spending ‘build back better’ bill. Word from Congress suggested it could be tabled for a vote as soon as today, though the House has been as profligate missing self-imposed deadlines to vote on the bill as President Biden has been with the announcement of Fed Chair. In addition to the Build Back Better package, there’ll still be plenty of action in Congress over the next month, with another government shutdown looming on December 3, and then a debt ceiling deadline estimated on December 15. The House Budget Chair echoed Treasury Secretary Yellen’s exhortation, and urged Congress to raise the debt ceiling to avoid a government default. Treasury bills are pricing increasing debt ceiling uncertainty during December; yields on bills maturing from mid- to late-December are around double the yields of bills maturing in November and January. Turning to the pandemic, cases have continued to rise at the global level over recent days, as alarm grows in a number of countries about the potential extent of the winter wave. In Germany, Chancellor Merkel and Vice Chancellor Scholz are taking part in a video conference with state leaders today on the pandemic amidst a major surge in cases. And Sweden’s government said that they planned to bring in a requirement for vaccine passports at indoor events with more than 100 people. In better news however, the UK’s 7-day average of reported cases moved lower for the first time in a week yesterday. Moderna also joined Pfizer in seeking emergency use authorization from the FDA for booster jabs of its Covid vaccines for all adults. Looking at yesterday’s other data, US housing starts fell in October to an annualised rate of 1.520m (vs. 1.579m expected), whilst the previous months’ reading was also revised lower. Building permits rose by more than expected however, up to an annualised rate of 1.650m (vs. 1.630m expected). Finally, Canada’s CPI inflation reading rose to +4.7% in October as expected, marking the largest annual rise since February 2003. To the day ahead now, and data releases from the US include the weekly initial jobless claims, the Philadelphia Fed’s business outlook for November, the Kansas City Fed’s manufacturing index for November, and the Conference Board’s leading index for October. Central bank speakers include PBoC Governor Yi Gang, the ECB’s Centeno, Panetta and Lane, and the Fed’s Bostic, Williams, Evans and Daly. There’ll also be a number of decisions from EM central banks, including Bank Indonesia, the Central Bank of Turkey and the South African Reserve Bank. Finally, earnings releases include Intuit, Applied Materials and TJX. Tyler Durden Thu, 11/18/2021 - 08:05.....»»

Category: blogSource: zerohedgeNov 18th, 2021

5 Retail Stocks With Q3 Earnings To Watch This Week

The week of Nov. 15 is a big one for the retail sector with some of the largest retail companies reporting quarterly financial results. The list includes the largest physical retailer in the U.S., two home improvement retailers and more. Here are five retail stocks to watch with earnings this week, as highlighted by Benzinga’s top earnings to watch tweet put out each week. Walmart: Walmart Inc (NYSE: WMT) reported quarterly earnings of $1.45 per share, which beat the consensus estimate of $1.40. This is an 8.2% increase over earnings of $1.34 per share from the same period last year. The company reported quarterly sales of $140.53 billion, which beat the consensus estimate of $135.60 billion. Shares trade at $146.93 versus a 52-week range of $126.28 to $153.65. Lowe’s Companies: Home improvement retailer Lowe’s Companies Inc (NYSE: LOW) reports third-quarter financial results before market open Wednesday. Analysts are expecting revenue of $22 billion. The company ...Full story available on Benzinga.com.....»»

Category: earningsSource: benzingaNov 16th, 2021

Futures Rebound From Post-CPI Rout As China Property Stocks Soar

Futures Rebound From Post-CPI Rout As China Property Stocks Soar US futures rose and European bourses once again rebounded from overnight lows, this time after concerns that scorching US and Chinese CPI and PPI prints will prompt central banks to tighten much sooner than expected. The bounce was aided by a surge in Chinese property developers which booked their best two-day gain in six years, joined by a jump in technology stocks, as investors speculated Beijing may soften regulatory crackdowns on the two industries. At 730am S&P futures were up 16.75 ot 0.36 to 4,658.50, Dow Jones futs were up 40 points or 0.11% and Nasdaq futures were up 97.50 or 0.61%. The dollar index rose and cash Treasurys are closed today for Veterans day. Wednesday’s stronger-than-forecast data on U.S. consumer prices finally crushed the argument that inflation is transitory and weighed on the tech sector in particular as Treasury yields spiked. Tesla shares rose 5% in premarket trading following filings that showed Chief Executive Officer Elon Musk sold $5 billion in stock in the electric-vehicle maker a few days after the shares hit a record high. Disney dropped 4.8% in premarket trading to lead declines among Dow components after reporting the smallest rise in Disney+ subscriptions since the service's launch and posted downbeat profit at its theme park division. SoFi rose as much as 16% in premarket after Jefferies said the fintech’s third-quarter results were a “strong” beat. Amazon-backed electric-vehicle maker Rivian Automotive jumped 4.9%, adding to the nearly 30% gain on its blockbuster trading debut. Chinese tech stocks got some comfort from a report that ride-hailing company Didi Global Inc. is getting ready to relaunch its apps in China by the end of the year as an investigation wraps up. Here are some of the biggest U.S. movers today: Beyond Meat (BYND US) shares plunged 20% in premarket after the maker of plant-based meats released a disappointing sales projection for 4Q. Fossil (FOSL US) jumped 33% premarket after the accessory maker boosted its net sales forecast for the full year. Bumble (BMBL US) the dating app that lets women make the first move, reported earnings in the third quarter that missed analysts’ estimates. The shares fell 7% premarket. Disney (DIS US) shares fall as much as 5.3% in premarket, with analysts flagging softness in its Disney+ subscribers and net income in its fiscal fourth quarter. Rivian (RIVN US) jumps 8% in premarket after the electric truck maker soared in its trading debut on Wednesday. Didi (DIDI US) gains 4% in premarket after Reuters reported that the company is preparing to reintroduce its apps in China by the end of the year as regulators wrap up their investigations into the ride- hailing giant. Marqeta (MQ US) gains 17% premarket, with analysts saying the payments platform delivered a strong beat-and-raise report for 3Q. SoFi Technologies (SOFI US) rises 15% premarket with Jefferies saying the fintech’s 3Q results are a “strong” beat. Figs (FIGS US) shares sank 14% in postmarket trading on Wednesday, after the seller of scrubs for health-care workers reported a third-quarter profit in line with analysts’ estimates. Oscar Health (OSCR US) fell 10% postmarket Wednesday after the upstart health insurer projected a deeper adjusted Ebitda loss for the full year. Payoneer Global (PAYO US), the payment solutions company, gained 8% premarket after its full- year revenue forecast beat the average analyst estimate. Wish (WISH US) fell 2% after the e-commerce services company posted an Ebitda loss for the fourth quarter Despite today's mini relief rally, investors are bracing for tighter monetary policy sooner rather than later, after Wednesday’s stronger-than-forecast data on U.S. consumer prices dealt a blow to the argument that inflation is transitory. Meanwhile, Bloomberg reported that the European Central Bank could stop buying bonds as early as next September if inflation looks to have sustainably returned to the official target, Governing Council member Robert Holzmann said. “This is the perfect time to gravitate toward defensive plays, to take profit and to be in the sectors that are strategically positioned toward this volatile market that presents a lot of challenges,” Katerina Simonetti, senior vice president at Morgan Stanley Private Wealth Management, said on Bloomberg Television. Market participants were also watching developments around the nomination of the Federal Reserve Chair, with President Joe Biden still weighing whether to keep Jerome Powell for a second term or elevate Fed Governor Lael Brainard to the post In Europe, equities pushed into the green after a muted start, with the Stoxx 600 Index up 0.1% while the Euro Stoxx 50 is little changed as France's CAC outperformed and the U.K.’s exporter-heavy FTSE 100 Index rose as the pound held near an 11-month low after better-than-expected economic growth data. Basic resources, construction and banking names are the strongest sectors; travel and oil & gas the notable laggards. The Stoxx Europe 600 basic resources sub-index rose as much as 2.9%, the most in about a month, as iron ore rebounds and other metals rise. Anglo American, Rio Tinto, BHP, Glencore and Norsk Hydro among those leading gains by index points.ArcelorMittal also rallied after 3Q results. Miners are outperforming gains on the Stoxx Europe 600, which is up 0.2%. Iron ore’s rout halted as expectations build for an easing of the real-estate turmoil in China that’s battered demand, while aluminum jumped as supplies of the metal tighten. And speaking of Europe, ECB-dated OIS rates now price ~20bps of hikes by end-2022 as STIRs globally wrestle with the latest hot inflation prints. Here are some of the biggest European movers this morning: Auto Trader jumped as much as 15% to a record high, with Jefferies saying its new guidance should drive mid-single-digit upgrades to consensus estimates for the online car listings platform. Sika shares surge as much as 12% following the acquisition of construction chemicals peer MBCC, with Baader, Vontobel and Morgan Stanley all positive on the deal. ArcelorMittal shares rise as much as 4.4% after the steelmaker’s results, with Citi saying the update has a positive tone despite the numbers missing estimates. Siemens shares rise as much as 2.8% with analysts saying the German industrial group’s update was encouraging, with its dividend among the main positives. Johnson Matthey shares plummet as much as 20% after the company warned on its current trading and said it will exit its battery business. Burberry shares slump as much as 10% after the luxury goods company’s comparable store sales missed market expectations, with analysts saying consensus estimates are likely to remain unchanged, and the focus will be on the upcoming management change. Earlier in the session, Asia’s regional benchmark declined, on track for a third day of losses, after monthly U.S. consumer prices rose at the fastest annual pace since 1990, raising concerns over costs and monetary policy moves. The MSCI Asia Pacific Index slid as much as 0.6%, before paring most of the losses, with several tech hardware stocks weighing on the benchmark and Tencent the biggest drag after its 3Q revenue missed analyst estimates. Still, the Hang Seng Tech Index ended the day higher after Reuters reported that Didi Global is getting ready to relaunch apps in China by the end of the year. Investors have been cautiously eyeing inflation data as the next market catalyst amid the ongoing pandemic. China helped lead Asian stocks lower Wednesday after reporting a spike in producer prices. “The inflation number spoke to scope for greater and longer-lasting tightening, which understandably hurt the tech sector,” said Ilya Spivak, head of Greater Asia at DailyFX. “The vulnerability there is to longer-term financing, because near-term is pretty well locked in for the most part,” he said. India, Taiwan and the Philippines posted the steepest declines Thursday, while Australian equities slid after unemployment unexpectedly jumped in October. China was the top performer as property developers rallied, while Japan’s benchmarks posted their first rise in five sessions as the yen weakened.  Japanese equities rose, rebounding after after a four-day loss, as electronics and auto makers climbed while the yen weakened. Trading houses and machinery makers were also among the biggest boosts to the Topix, which rose 0.3%. Fanuc and SoftBank Group were the biggest contributors to a 0.6% gain in the Nikkei 225. The yen slightly extended its 0.9% overnight loss against the dollar. Tokyo shares fluctuated in early trading after U.S. stocks fell by the most in a month and Treasury yields spiked. Labor Department data showed consumer prices rose last month at the fastest annual pace since 1990, putting pressure on the Federal Reserve to end near-zero interest rates sooner than expected “Investors had been selling value stocks and buying up growth stocks, but now that’s being reversed,” said Mamoru Shimode, chief strategist at Resona Asset Management. Going forward “the environment will be a favorable one for Japanese equities,” he said, noting the local market’s underperformance against global peers. In rates, Treasury futures are mixed with a curve-flattening bent, remaining near low end of Wednesday’s range, when above-estimate CPI and poor 30-year bond auction caused a selloff across the curve. As noted above, the Cash Treasuries market is closed Thursday for Veteran’s Day. Treasury 10-year yields closed Wednesday at 1.549%, nearly 10bp higher on the day; EGBs and gilts are slightly richer on the day out to the 10-year sector, while curves are mildly steeper. Wednesday’s price action in the U.S. sent ripples through European markets, which now price 20bps of ECB rate hikes in December 2022 for the first time since the start of the month.  Euribor futures add 4-6 ticks in red and green packs. Bunds and gilts bear steepen gently. Peripheral spreads widen at the margin. Short end Italy underperforms despite a decent reception at today’s auctions. In FX, the Bloomberg Dollar Spot Index reached its strongest level in a year and the greenback advanced against all of its Group-of-10 peers, with the biggest losses seen among some commodity currencies. Cable inched lower to trade below $1.34 for the first time since December 2020. The U.K. economy grew more strongly than expected in September after a surge in service industries and construction. GDP rose 0.6% from August, the Office for National Statistics said Thursday. That was quicker than the 0.4% pace anticipated by economists. The Australian and New Zealand dollars were the worst G-10 performers; Aussie fell and Australian sovereign yields trimmed an opening spike after the nation’s jobless rate jumped to 5.2%. The initial move was in line with Treasuries, which plunged after U.S. inflation came in at the hottest since 1990. In commodities, crude futures fade a pop higher after quiet Asian trade; WTI is little changed near $81.20, Brent stalls below $83. Spot gold rises back toward Wednesday’s best levels, trading near $1,860/oz. Base metals are in the green with LME aluminum outperforming To the day ahead now, and the main data highlight will be the UK’s preliminary Q3 GDP reading. From central banks, the ECB will be publishing their Economic Bulletin, and speakers include the ECB’s Makhlouf, Schnabel and Hernandez de Cos, along with the BoE’s Mann. Otherwise, the European Commission will be releasing their latest economic forecasts, and it’s the Veterans’ Day Holiday in the United States. Market Snapshot S&P 500 futures up 0.4% to 4,658.25 STOXX Europe 600 up 0.1% to 484.44 MXAP little changed at 197.72 MXAPJ down 0.2% to 647.07 Nikkei up 0.6% to 29,277.86 Topix up 0.3% to 2,014.30 Hang Seng Index up 1.0% to 25,247.99 Shanghai Composite up 1.2% to 3,532.79 Sensex down 0.8% to 59,898.81 Australia S&P/ASX 200 down 0.6% to 7,381.95 Kospi down 0.2% to 2,924.92 Gold spot up 0.7% to $1,862.18 U.S. Dollar Index up 0.19% to 95.03 German 10Y yield little changed at -0.24% Euro down 0.2% to $1.1461 Brent Futures up 0.7% to $83.18/bbl Top Overnight News from Bloomberg The European Central Bank could stop buying bonds as early as next September if inflation looks to have sustainably returned to the official target, Governing Council member Robert Holzmann said China’s efforts to limit fallout from China Evergrande Group’s crisis are gathering steam. A series of articles published in state media in the past few days signal support measures are on the way to help developers tap debt markets, potentially easing a liquidity crunch that began with Evergrande’s meltdown five months ago Customers of international clearing firm Clearstream received overdue interest payments on three dollar bonds issued by Evergrande, a spokesperson for Clearstream said A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mixed as positive Chinese developer headlines including news of Evergrande payments, helped the region partially shrug off the losses seen stateside where duration sensitive stocks underperformed as yields surged following a hot CPI print and a soft 30yr auction. ASX 200 (-0.6%) declined with the index led lower by tech and energy which followed suit to the heavy losses in their US counterparts and with disappointing jobs data adding to the headwinds. Nikkei 225 (+0.6%) coat-tailed on the advances in USD/JPY which briefly climbed above the 114.00 level and with a slew of earnings releases providing a catalyst for individual stock prices. Hang Seng (+1.0%) and Shanghai Comp. (+1.2%) were varied with notable strength in property names after Evergrande was reported to have paid the overdue interest on three bonds to avoid a default and with China said to be considering moderating property curbs to help troubled developers unload assets. In addition, the PBoC continued with its mild liquidity efforts and it was also reported that the Biden-Xi virtual meeting is tentatively scheduled for next Monday, although weakness in tech capped upside in the Hong Kong benchmark with shares in index heavyweight Tencent pressured post-earnings as the Beijing crackdown decelerated revenue growth to the slowest pace since the Co. listed in 2004. Finally, 10yr JGBs suffered spillover selling from global peers including T-notes which declined by a point to below 131.00 and with prices also hampered after a weak 30yr auction, while focus in Japan shifted to the enhanced liquidity auction for longer dated government bonds which printed a lower b/c although the highest accepted spread returned positive. Top Asian News Indonesian Stocks Close at Record High on Economic Rebound Signs of Easing as Delayed Bond Coupons Paid: Evergrande Update Asia Stocks Slip After U.S. Inflation Spike, Weak Tencent Sales Kaisa Tells Investors It May Not Make Coupon Payments: REDD European equities (Eurostoxx 50 -0.1%) broadly trade mixed following on from this week’s firm inflation reports from the US and China. The handover from APAC was also mixed with focus on China amid notable strength in property names after Evergrande was reported to have paid the overdue interest on three bonds to avoid a default. Furthermore, the PBoC continued with its mild liquidity efforts and it was also reported that the Biden-Xi virtual meeting is tentatively scheduled for next Monday. Stateside, futures are a touch firmer (ES +0.2%) in the wake of yesterday’s cash market losses which saw duration sensitive stocks underperform as yields surged. From a macro perspective, Axios reported overnight that inflation concerns could see US Senator Manchin “punt” President Biden's Build Back Better agenda into next year. Eyes on the Wall St. open will be on Tesla after CEO Musk offloaded USD 5bln of stock in the Co. Back to Europe, Goldman Sachs outlook for 2022 sees a price target for the Stoxx 600 of 530 (vs. current 483) which would deliver a total return of around 13% and mark a continuation of the current bull market, albeit at a slower pace. Sectors in Europe are somewhat mixed with Basic Resources a clear outperformer amid broad strength in mining names and following earnings from ArcelorMittal (+2.9%) which sent the Co.’s shares to the top of the CAC. Banking names are also on a firmer footing amid the favourable yield environment post-CPI with Lloyds (+1.3%) and Commerzbank (+3.0%) supported by broker upgrades at Keefe Bruyette and Morgan Stanley respectively. To the downside, Oil & Gas names are softer as the crude complex struggles to recoup recent losses. Retail names have been weighed on by Burberry (-6.2%) post-earnings with the Co. noting that performance in Europe remains under pressure. Renault (-3.1%) sits at the foot of the CAC after Daimler opted to sell its stake in the Co. for USD 364mln. Finally, Johnson Matthey (-16.3%) is the clear laggard in the region after its CEO announced his decision to step down and the Co. announced it is to exit the battery materials business. Top European News U.K. Growth Data Leave December BOE Rate Rise in the Balance Scholz Aims to ‘Winter Proof’ Germany Against New Covid Wave Kering Says Creative Head Daniel Lee to Leave Bottega Veneta Gas Crunch Fuels RWE Profits as Energy Giant Burns Coal In FX, the Dollar took some time out for reflection and a rest after extending yesterday’s post-US CPI gains with the additional thrust of a supply-related ramp up in Treasury yields following a poor new long bond auction. However, the index could not quite muster enough bullish momentum to touch 95.000 until APAC buyers got a chance to respond to the strength of the inflation data and bear-steepening reaction in debt markets that evolved after initial bear-flattening. The DXY subsequently reset, refuelled and cleared the psychological barrier more convincingly, at 95.101 before fading again as several basket components found underlying bids and technical support around key levels, but still seems bid and upwardly mobile in thinner trading volumes due to Veteran’s Day. NZD/AUD - Perhaps perversely given overnight macro fundamentals, the Kiwi is lagging down under with Aud/Nzd cross elevated near 1.0400, though this could be in recognition of a sharp retreat in NZ food prices and mitigating factors leading to Aussie labour metrics missing consensus by some distance right across the board. Whatever the rationale, Nzd/Usd is lower than Aud/Usd in absolute terms even though the former is holding above 0.7100 and latter has now lost 0.7300+ status. CAD - Weaker WTI crude (in relative terms rather than on the day per se) is not helping the Loonie’s cause after it managed to contain losses on Wednesday, as Usd/Cad hovers near the top of a 1.2535-1.2473 range awaiting the BoC’s Q3 Senior Loan Officer Survey tomorrow for further direction from a Canadian perspective. CHF/EUR/JPY/GBP - All giving up more ground to the Greenback, but to varying degrees with the Franc trying to keep sight of 0.9200, the Euro defend 1.1450 having closed below 1.1500 and a key Fib retracement just shy of the round number, the Yen stay within touching distance of 114.00 and Sterling stop the rot after letting go of the 1.3400 handle again. On that note, a late December 2020 low in Cable at 1.3361 remains intact ahead of 1.3350 for semi-sentimental reasons and then a deep channel trendline from 1.3330-20, while Usd/Jpy has scope to be drawn to decent option expiry interest at 113.70 (1.6 bn) if not similar size spanning 113.60-00. In commodities, WTI and Brent have been choppy this morning with catalysts limited and conditions thinner than normal on account of Veteran’s Day. Price action thus far has seen the benchmarks print a range in excess of USD 1.00/bbl in a narrow timespan, note, that these parameters remain comfortably within yesterday’s levels; currently, both WTI and Brent are at the lower-end of this band as any initial attempt at a recovery has fizzled out with the USD likely a factor. While newsflow directly for the complex has been sparse attention remains on the monthly oil surveys, COVID-19 and geopolitics. Firstly, the OPEC MOMR is scheduled for release today and as a reminder the EIA STEO, under greater focus given US crude/SPR watch, raised 2021 world oil demand growth forecast by +60k BPD to 5.11mln BPD Y/Y increase this week, but cut its 2022 forecast by 130k BPD to 3.35mln BPD Y/Y increase. On COVID, the demand-side is attentive to increasing cases in areas such as Germany with the effective Chancellor-in-waiting Scholz saying further measures will be needed through Winter; additionally, the Netherlands outbreak team are recommending a short lockdown and Beijing has implemented various local measures. Finally, geopolitics is attentive to the situation in Belarus after Lukashenko said they will respond to any sanctions and has suggested closing gas and goods transit through the area. Moving to metals, spot gold and silver remain towards the top-end of yesterday’s parameters, but are only modestly firmer on the session, as newsflow has been slim and the USD’s more gradual upside and lack-of cash UST action is providing a respite from yesterday’s upside. Action that saw spot gold supported by almost USD 40/oz from opening levels. Elsewhere, ArcelorMittal’s earnings update featured a forecast for global steel demand to increase between 12-13% this year excluding China given a softening of real demand. US Event Calendar 9:45am: Nov. Langer Consumer Comfort, prior 49.2 Central Banks Nothing major scheduled DB's Jim Reid concludes the overnight wrap Yesterday was one of those days to just go “wow” at. The headline YoY US CPI rate of 6.2% was the highest since the 6.3% in 1990, which means that unless you’re at least 50 this will be the highest US inflation print of your career. In fact, apart from 2 months in 1990 at 6.3%, you’d have to go back to 1982 to find a higher print. So you’d have to probably be at least 60 to remember anything like this in your work life, other than that brief spike in 1990. In more detail, for the 6th time in the last 8 months, the headline print came in above the consensus estimate on Bloomberg, with prices up by +0.9% on a month-on-month basis (vs. +0.6% expected). If you look at the reading to two decimal places, it was actually the strongest monthly inflation since July 2008, so hardly a sign that those pressures have been dimming as we move towards year end. We’ll go through some of the moves in more depth below, but markets didn’t react well to the prospect of a more inflationary future, with both bonds and equities moving lower as investors moved to price in earlier and a more rapid pace of future rate hikes by the Fed. A horrible 30 year auction 4.5 hours later cemented a big rise in yields on the day. Note US bond markets are closed today for Veterans Day. Equities remain open but trading will be thin. Just completing the inflation picture, the October price rise was a fairly broad-based one that included upward pressure across all the main categories, including components that are tied to more persistent inflation. Admittedly, a big driver was energy inflation (+4.8% on a monthly basis), but even if you stripped out the more volatile factors, core inflation was still up +0.6% (vs. +0.4% expected), sending the annual core inflation measure up to its highest since 1991, at +4.6% (vs. +4.3% expected). There were also further signs of pressure from the housing categories, with owners’ equivalent rent (+0.44%) seeing its largest monthly increase since June 2006. This housing inflation is coming in bang on script (see page 19 of my 1970s chart book here). Medical care services (+0.49%) was also a big contributor to the upside surprise. The broad-based price gains drove trimmed mean and median CPI, measures of underlying trend inflation, to their highest levels since 1983. There’ll understandably be questions for the Fed off the back of this release, and markets responded by bringing forward their pricing of the first rate hike to the July 2022 meeting. In fact, by the close of trade, roughly an extra 13bps of hikes were priced in by end-2022 relative to the previous day. It’s also worth noting that the latest CPI release means that the real fed funds rate in October was beneath -6%, which is lower than at any point in the 1970s, where the bottom was -5% (see page 3 in the same 1970s chart book and draw the line down another few tenths of a basis point). So by this measure, monetary policy is even more accommodative now than it was back then, in a decade that saw inflation get progressively out of control. For more on those 1970s comparisons, take a look at our full note from last month (link here.) Treasuries understandably sold off, led by the front end and belly of the curve, as investors brought forward the likely timing of future rate hikes. 5yr Treasuries increased +13.5bps (the biggest one-day increase since February), and 10yrs +11.4bps (largest increase since September). The yield curve flattened, with 5s30s down -4.9bps to 68.5bps, the flattest since March 2020. Longer-dated yields were drifting higher through the New York session but accelerated after a 5.2bp tail in the 30yr Treasury auction. The tail was the highest since 2011, and primary dealer takedown was almost 2 standard deviations above average over the last year. Unlike after less-than-stellar auctions earlier this year, bonds stabilised for the rest of the day, with the 30yr +8.6 bps higher, only +1.7bps above pre-auction trading. After all, 30yr yields have rallied 26.0bps since early October, inclusive of today’s poor auction, as there has been some long-end duration demand. Indeed, even with the policy rate repricing, 5y5y rates, one proxy for long-run or terminal policy rates, remain below 2%, after increasing just +6.2bps. This is also manifest in record low real yields through the curve. 10yr real yields initially sunk to an all-time low intraday at -1.253% after the CPI print before ultimately increasing +3.0bps on the day to -1.17%. Likewise, 5yr real yields touched -1.97% in the aftermath of the CPI print, and closed the day +2.5bps higher than Tuesday’s close at -1.88%. With nominal yields outpacing real yields, inflation compensation increased across the curve: 5yr breakevens increased +11.1bps to 3.10%, an all-time high, whilst 10yr breakevens increased +6.4bps to a post-2006 high of 2.71%. Gold (+0.97%), and other precious metals, including silver (+1.37%) and platinum (+0.75%) gained, as did Bitcoin, which clipped another all-time high, $68,992, intraday. The dollar (+0.90%) also benefitted. The continued prevalence of high inflation is having increasing political ramifications, and President Biden put out a statement following the release, commenting on the inflation data (as well as the more positive weekly jobless claims). He said that reversing the trend in inflation was “a top priority for me” and laid a decent chunk of the blame at rising energy costs. He said that he’d directed the National Economic Council to look at further ways of reducing energy costs, and that he’d also “asked the Federal Trade Commission to strike back at any market manipulation or price gouging in this sector”. However, we also heard from moderate Democratic senator Joe Manchin of West Virginia, who tweeted that “the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse. … DC can no longer ignore the economic pain Americans feel every day.” Manchin is a key swing vote on Biden’s Build Back Better Plan, and he has already influenced cutting the bill from the $3.5tn initially envisaged to a framework half that size, due in part to the potential inflationary impact of additional spending. From the Fed however, the only signal we got came from San Francisco Fed President Daly (one of the most dovish FOMC members), who gave an interview with Bloomberg TV shortly following the CPI print. She notably referred to inflation as “eye-popping”, but demurred when asked about changing the course of Fed policy, asserting that it would be premature to “start changing our calculations about raising rates” or to accelerate the pace of tapering. Higher inflation and pricing of aggressive Fed tightening was not a good combination for US risk. The S&P 500 fell -0.82% in its second consecutive decline (which feels like its own record after the recent run), and was down more than a percent intraday. Energy (-2.97%) led the declines (more below) but, tech (-1.68%) and communication services (-1.25%) each declined more than a percent due to the increase in discount rates. Commensurate with the big rate selloff, the Nasdaq (-1.66%) also underperformed. Meanwhile, European equities outperformed, with the STOXX 600 up +0.22% to reach an all-time high, just as the DAX (+0.17%) and the CAC 40 (+0.03%) also hit new records. To be fair, US equities were only slightly down on the day when European bourses closed. Sovereign bonds echoed the US moves however, and a selloff across the continent saw yields on 10yr bunds (+4.9bps), OATs (+6.8bps) and BTPs (+9.5bps) all move higher. Stocks in Asia are trading mixed overnight with CSI (+0.89%) leading the pack, followed by the Shanghai Composite (+0.59%), and the Nikkei (+0.56%) in the green while the Hang Seng (-0.16%) and KOSPI (-0.59%) have lost ground. Staying on inflation, Japan’s PPI for October came out at 8.0% year-on-year (7.0% consensus and 6.3% previous), the highest since 1981. Elsewhere, in Australia the unemployment rate for October saw a big surprise, jumping to 5.2% (4.9% consensus, 4.6% previous) as many people re-entered the labour force after lockdowns. The participation rate rose to 64.7% from 64.5% in September. Futures are indicating a muted start to the day in the US & Europe with S&P 500 futures (+0.08%) up but DAX futures (-0.28%) catching down with the late US sell-off. One solace on the inflation front was a decline in energy prices yesterday, with both Brent crude (-2.52%) and WTI (-3.34%) losing ground. That followed 3 consecutive gains and came after the US EIA reported that crude oil inventories had risen by +1.00m barrels last week. There was also another decline in natural gas prices, with US futures falling -1.99% in their 4th consecutive decline, whilst European futures were down -4.06%. Looking at yesterday’s other data, the weekly initial jobless claims for the US over the week through November 6 fell to 267k (vs. 260k expected). That’s their 6th successive weekly decline and takes the measure to a post-pandemic low. To the day ahead now, and the main data highlight will be the UK’s preliminary Q3 GDP reading. From central banks, the ECB will be publishing their Economic Bulletin, and speakers include the ECB’s Makhlouf, Schnabel and Hernandez de Cos, along with the BoE’s Mann. Otherwise, the European Commission will be releasing their latest economic forecasts, and it’s the Veterans’ Day Holiday in the United States. Tyler Durden Thu, 11/11/2021 - 07:48.....»»

Category: personnelSource: nytNov 11th, 2021

SCOTT GALLOWAY: My predictions for the retail IPOs from Rent the Runway, Allbirds, and Warby Parker

Rent the Runway is an impressive business, says Galloway, but it has a long way to go to on profitability and rebuilding its active subscriber base. Galloway says that Allbirds' should focus on branding more, since design and merchandising matter more than they used to . Spencer Platt/Getty Images Scott Galloway is a bestselling author and professor of marketing at NYU. The follow is a recent blog post, republished with permission, that originally ran on his blog, "No Mercy / No Malice." In it, Galloway talks about recent and upcoming retail IPOs and Rent The Runway's business model. Person of the yearI make predictions, which is a shitty business. If they come true, circumstances leading up to the event make the prediction seem less bold. If they don't, the Twitter troll army comes for you. On a risk-adjusted basis, bad idea.Like that's going to stop me.Time's 2021 Person of the Year, and likely recipient of the Nobel Peace Prize, will be Frances Haugen. Lawmakers, academics, journalists, philosophers, and Borat have all railed against the global menace that is Facebook. And for good reason. The KGB, CCP, and Iranian Ministry of Intelligence could not have dreamt of a more perfect weapon. An ordinance that spread death, disease, and disability across the US via an unnatural increase in vaccine hesitancy, catalyzed an insurrection at the Capitol by people fed a steady diet of misinformation, and contributed to a decline in the mental health of America's youth. And … we financed it.Many sounded the alarm. But all we've done is put on a masterclass re the difference between being right and being effective. Ms. Haugen's rollout (multichannel, branded, coordinated) is the first time it feels as if we're fighting Panzer tanks with tanks, versus on horseback.But that's not what this post is about. Let's sit back and watch "Breaking Bad," season 9, starring Ms. Haugen, and stay out of the way.What to talk about? I know: Dresses. Specifically Rent the Runway and some other recent retail IPOs. Scott Galloway Last week we filmed the pilot for our upcoming show on CNN+. I arrived, no joke, in the above outfit and nobody at CNN said a thing. I have found my people. The ensemble is the outline for this post - Warby Parker, Rent the Runway, Allbirds, and the Swiss shoe company On.Note: Search your emotions. After absorbing the above pic, you are disturbed … but compelled. Anyway, why do I dress in drag? A: Because it makes me happy.ShadeThere's a reason Warby Parker's direct listing was well received last month. Numbers. By every metric, this is a strong business. The glasses retailer has a Net Promoter Score of 83, 2 million+ active customers, and a gross margin of 60%. In 2020, Warby's customer acquisition cost was $40 on an average order of $184 … and 42% of the firm's customers made a repeat purchase. In addition, when the pandemic throttled its physical retail channel, Warby expanded its ecommerce business - the company started online, enabling consumers to try on glasses at home and return the ones they don't want. Scott Galloway The challenge - and opportunity - for Warby is the industry is concentrated. Luxottica, the Milan-based eyewear heavyweight, has been eating anything in its path. (Think: Ray-Ban, Oakley, Oliver Peoples, Persol, Ilori, and Sunglass Hut.) In 2018, Luxottica registered three-quarters of glasses sales in North America. But the Monster of Milan suffered a 17% sales drop and a 90% decline in profit due to the pandemic. Warby is a digital native, with direct consumer relationships, which has yielded an enduring advantage. Disruption is less a function of the innovator's skill than of how fat, happy, and lazy the incumbent is.Warby is positioned to disrupt, as Luxottica is the mother of all unearned margins. There are few businesses as big, or as dependent on brand equity, or that have worse distribution. Think about where you buy sunglasses. The only worse retail experience is a gas station. BTW, Tesla is a great car, but people miss the real consumer benefit: exiting the gas station ecosystem, where it feels as if you could pick up a rare form of cancer or get shot.My shoesTwo high-end sneaker companies are venturing into the public markets: On, which had a banner IPO in September, and Allbirds, which filed for an IPO in August. Both have similar strengths and face similar challenges, but On is the (much) better bet.There's not a lot to distinguish between the companies on paper. Allbirds has a stronger NPS score of 86, versus On's 66. But On's 59% gross margin tops Allbirds' 51%. On is growing faster: From 2019 to 2020 its net sales grew 59%. Allbirds registered 13% growth.That slowing growth is troubling, and it might be why Allbirds scores high on another measure: Yogababble. (Shiv's favorite business cat term, natch.) Allbirds' original prospectus was filed as an SPO - a "Sustainable" Public Equity Offering. This wasn't your standard IPO, the company claims. "Historically, businesses have primarily focused on maximizing stockholder value," but a sustainability framework meant Allbirds was an "exception to the rule." Until it wasn't: The company later amended its prospectus to include no mention of an SPO. Allbirds (and its lawyers) likely realized you go public on Wall Street, not Woke Street. Folks, you make shoes.And there's a hint of the squishy metrics - reminiscent of WeWork - that have become rife in the SPAC market. As Professor Daniel McCarthy highlighted in the Prof G Pod, Allbirds reports "contribution profit," which is gross profit less any variable costs associated with selling the product. This is a useful metric, especially for a company projecting strong growth, as it accounts for costs that are harder to minimize through scale. But the only thing Allbirds deducts from its gross profit to determine contribution profit is credit card processing fees. Something they don't deduct is store operating costs - but stores don't scale like software. To sell more shoes through stores, you need to operate more stores.Warby, by contrast, does deduct store opex when it reports its contribution profit. On doesn't highlight contribution profit at all. This doesn't make a huge difference - only 11% of Allbirds' sales came through its 27 retail stores in 2020 - but it's a red flag that speaks to a management team that's reaching.Like Warby, both shoe companies are entering a concentrated market, in this case, a 60%-player, Nike, and a strong No. 2, Adidas. But unlike Warby, neither built an innovative model to disrupt the incumbents. They're relying on brand strength and product innovation. Good luck.The companies diverge on branding. Both got off the ground with word-of-mouth, community-driven marketing, but Allbirds has transitioned to what it calls "full-funnel" marketing. That's Latin for "we raised a ton of cash, and we're now pouring it into television and print." In the first six months of 2021, Allbirds spent 22% of its revenue on marketing. On spent 13%, and its S-1 makes clear they're sticking with their strategy.Our view: Allbirds' organic growth is sputtering, and management is buying transitory growth to support the stock price … until management can sell. The era of premium margins for mediocre products with Don-Draper-like TV budgets is over. Design, merchandising, distribution, and supply matter more. Brands still matter, but branding is a new ballgame. On's voice holds together better.Red dressThere's a lot to love about Rent the Runway. It was cofounded by two impressive women, and the concept is powerful. One problem: It's a shitty business …Rent the Runway's active subscriber base was cut in half last year. As lockdowns have eased, it's begun climbing back, but it still has substantial ground to cover to return to where the firm was two years ago. Scott Galloway The company glossed over this in its financial summary by emphasizing the number of "total subscribers," but a footnote revealed that this number includes those who have "paused" their account. In other words, half the "total subscriber" base isn't paying.If "total subscribers" is the company's concealer, RtR's profitability metrics are its botox. First, it creatively adjusted its EBITDA, though even with those "adjustments," RtR's earnings are negative. Next, the company broke new ground in creative accounting. Companies including WeWork and Aspiration have concocted variations on EBITDA to smear lipstick on bad numbers. RtR has moved this tactic up the income statement to the gross profit line, reporting "gross profit excluding product depreciation." That means they're removing their primary cost of goods sold - the cost of the clothes they rent - from their, well, cost of goods sold. These are delicate goods subject to the vagaries of fashion, not factory equipment. In a section of the S-1 titled "Key Business and Financial Metrics," this novel measure improved RtR's gross margin from 27% to 51%. Those are healthy retail gross margins - except that another 24% of real economic cost is lurking down the income statement, plunging EBITDA to negative territory. Scott Galloway The company also boasts (in an enormous font) that 88% of its customers are acquired organically. Impressive if true, but this is difficult to believe, as its customer acquisition cost is $55. Consider the math: If 88% of your customers are acquired for $0 but your overall CAC is $55, then you're spending $458 for every customer acquired through paid channels. Something's off.But the real tell is the company's private financing history. Last fall, RtR struggled to raise $125 million of debt and equity at a $750 million valuation. That was a downgrade from 2019, when it achieved unicorn status. But 2021 is going down as the greatest bull market for private companies in history. There's an ocean of capital pouring into late-stage venture companies right now, and if RtR was anything other than a solid manifestation of greater fool theory, the firm's existing investors would have stuffed another $200 million to $300 million into it. (Warby and Allbirds both announced monster private rounds in 2020.) RtR's IPO is the last helicopter off the roof of the American embassy in Saigon. Investors left behind are going to experience a hostile market.RENT jumped 17% in its first two hours of trading, but the shares soon began a downward march that won't end until the equity reaches single digits. Between Wednesday's peak and close of business Thursday, the equity was down more than 20%. It's still overvalued. Thursday's close pegs the company at roughly $1.2 billion. But RtR has less than 100,000 active subscribers, so this valuation implies each subscriber is "worth" more than $12,000. That's an order of magnitude more than the market values subs at comparable businesses. (Even if you include "paused" subscribers, it more than doubles anyone else.) Scott Galloway Rent the Runway's business model distills to this: Deliver $200 worth of service but charge $100. It's a great service (and an inevitable downward slide should make RtR an acquisition target for Amazon, Shopify, or another player), but it doesn't add up to a viable standalone business - the firm incurs losses matching its revenue. In sum: Don't rent the runway. Sell it.Regression to the meanFall is the best time of year, except in Florida, of course. Dry, crisp, light, and there's a breeze that delivers a bite of winter. A season saying in hushed tones … I'm coming. But it feels as if a bomb cyclone may also be near. Metaverses … Shiba Inu coins … and a Trump SPAC worth billions. We'll see.Consumer IPOs, a 56-year-old in drag, and Frances Haugen. Something meaningful, something joyous, and someone profound, respectively.Life is so rich,Scott P.S. My final Brand Strategy Sprint of the year is open for registration. 94% of previous students said the course positively affected their career growth. Join us.Read the original article on Business Insider.....»»

Category: smallbizSource: nytOct 29th, 2021

Stock Market News for Oct 29, 2021

U.S. stocks ended higher on Thursday, with the S&P 500 and Nasdaq closing at record highs, as robust earnings from a string of big companies helped boost investor confidence. U.S. stocks ended higher on Thursday, with the S&P 500 and Nasdaq closing at record highs, as robust earnings from a string of big companies helped boost investor confidence. Also, indications that Democrats in Congress might soon reach a budget deal helped lift investors sentiment. All the three major indexes ended in positive territory.  How Did The Benchmarks Perform?The Dow Jones Industrial Average (DJI) climbed 0.7% or 239.79 points to finish at 35,730.48 points, missing its record close marginally. The S&P 500 rose 0.98% or 44.74 points to end at a new record high of 4,596.42 points. All the 11 sectors of the benchmark index ended in positive territory, with real estate and consumer discretionary being the best performers.  The Real Estate Select Sector SPDR (XLRE) gained 1.5%, while the Consumer Discretionary Select Sector SPDR (XLY) added 1.3%. The tech-heavy Nasdaq gained 1.4% or 212.28 points to end at 15,448.12 points to touch its own record set on Sep 7. Shares of Apple, Inc. AAPL and Amazon.com, Inc. AMZN gained 2.5% and 1.6%, respectively. Apple has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.The fear-gauge CBOE Volatility Index (VIX) was down 2.65% to 16.53. A total of 11.05 billion shares were traded on Thursday, higher than the last 20-session average of 10.34 billion. Advancers outnumbered decliners on the NYSE by a 2.15-to-1 ratio. On Nasdaq, a 2.46-to-1 ratio favored advancing issues.Robust Earnings Boost Investors’ Confidence It has been a great earnings season so far. Thursday was no different as investors’ confidence got a further boost following robust quarterly reports by a slew of companies. Ford Motor Company F led the rally, with its shares jumping 8.7% to record its best day this year. The automobile giant reported adjusted earnings of $0.51 per share for third-quarter 2021, surpassing the Zacks Consensus Estimate of $0.28 per share. The company also raised its full-year 2021 guidance for the second time this year, citing robust projections for the fourth quarter. Also shares of Apple and Amazon jumped ahead of the company’s announcement of quarterly results after the bell. Almost half of the total companies in the S&P 500 have reported their quarterly results, with 82% beating estimates. Strong results from companies have somewhat eased fears of a slowing economic recovery. Also, investors kept a close watch on developments in Washington where President Joe Biden said that he has managed to secure a new $1.75 trillion framework that is to be spent on economic development and climate change. Economic Data Strong third-quarter earnings somewhat overshadowed not-so-impressive economic data. The government said that the economy grew 2% in the third-quarter, following an initial reading of the gross domestic product. This is the slowest growth since the second quarter of 2020 and narrower than expectations of 2.8% and down from 6,7% recorded in the second quarter. The National Association of Realtors said that pending home sales declined 2.3% in September on a month-over-month basis, lower than expectations of a 1% rise. Initial jobless claims hit a fresh post-pandemic era low of 281,000 in the week ending Oct 23, declining 10,000 from a revised 291,000 in the prior week. This is the lowest level since Mar 14, 2020. The four-week moving average also fell to 299,250 a decline of 142,000 from the previous week’s revised average and the lowest since Mar 14.Besides, continuing claims declined by 237,000 to 2,243,000, yet another pandemic-era low. The previous week's numbers were revised downward by 1,000 from 2,481,000 to 2,480,000. The 4-week moving average came in at 2,513,250, a decline of 142,000 from the previous week's revised average. Tech IPOs With Massive Profit Potential: Last years top IPOs surged as much as 299% within the first two months. With record amounts of cash flooding into IPOs and a record-setting stock market, this year could be even more lucrative. See Zacks’ Hottest Tech IPOs Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Ford Motor Company (F): Free Stock Analysis Report Apple Inc. (AAPL): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksOct 29th, 2021

How Long Until Supply Chains Finally Normalize: Three Things To Watch

How Long Until Supply Chains Finally Normalize: Three Things To Watch Earlier today, Morgan Stanley showed that more than inflation, more than concerns about the historic labor crisis, definitely more than covid, one thing has preoccupied the minds of most management teams this quarter: "supply chain issues", a topic which has seen an explosion of mentions on Q3 earnings calls. But while by now everyone is aware that the global supply-chain shock is truly historic and getting worse by the day, with used car prices rising sharply again and over 30 million tons of cargo waiting outside US ports ahead of the holiday season, few have considered what realistically could normalize these frayed supply chains. To address this topic, in a research report published overnight, Goldman's economists assessed the three key drivers of supply chain normalization and their most likely timing: improved chip supply driven by post-Delta factory restarts (4Q21) and eventually by expanded production capacity (2H22 and 2023); improved US labor supply (4Q21 and 1H22); and the wind-down of US port congestion (2H22). And speaking of used car prices, in the first 15 days of October, the Manheim used vehicle index surged 8.3% due to yet another global supply shock: this time due to Delta-variant factory shutdowns in Southeast Asia and elsewhere. Here, in a rare mea culpa, the Goldman economists admit that while previously they had expected improved microchip availability by 1H22 on the back of normalizing Japanese automotive shipments (post-factory fire) and a US supply response, with these catalysts now behind us — the Naka factory in Japan resumed normal shipments activity in July and US semiconductor plant hours jumped to 73 hours per week in the first half of the year vs. 46 in 2019 — Goldman now expects a "more extended timeline." So with that demonstration of how thoroughly unpredictable the non-linear cascading consequences of such s diffuse, global phenomenon as international production pathways and supply chains are, Goldman proceeds to assess the three key drivers of supply chain normalization listed above, their likely timing, and the key indicators to track progress. We start by reviewing one unique aspect of the global semiconductor industry that sets it apart from most other manufacturing and services industries of today’s economy: outside of Southeast Asian plant shutdowns, both output and capacity utilization have already returned to quite elevated levels. So while the supply of dress shirts and haircuts is likely to rise sharply if demand returns, higher utilization of existing semiconductor capacity is not a viable path toward resolving the chip shortage. Additionally, much needed moderation in US and global goods demand has alleviated (and will continue to alleviate) goods-sector imbalances. As shown in the left panel of the next chart, real retail spending has already normalized in major foreign economies. And while it picked back up domestically in August and September, US goods consumption has nonetheless declined by 5% since March. That said, from the perspective of the key bottlenecks contributing to inflation, demand for consumer electronics, business tech, and other semiconductor-intensive products has remained elevated—both globally and in the US (right chart above). Furthermore, one should hardly expect the increased digitization of society and consumer preferences to reverse post-pandemic: Goldman's equity analysts forecast demand for semiconductor-intensive consumer goods to remain strong in 2022 (smartphones +4% after +12% in 2021, autos +5% after +6%, PCs -12% after +28% cumulatively in 2020 and 2021). So returning to supply constraints, here is a summary of the three key resolution channels in turn (global chip production, US labor supply, reduced port congestion). Channel 1, Step 1: Improved Chip Supply from East Asia Reboot Goldman's expected timeline: 4Q21 Key indicators to watch: Effective Lockdown Indices (ELI) particularly in Malaysia, Vietnam, Mainland China, and Taiwan East Asian industrial production and exports of semiconductors, electrical components, and consumer electronics Automaker commentary on near-term chip availability China industrial policy, with respect to power cuts and the Delta variant Early- and mid-month trade reports (Japan, Taiwan, and Korea) As shown in the next chart, three supply shocks weighed heavily on auto production this year, starting in February with severe winter storms and power outages in the southern United States and followed by a March fire at the Renesas automotive chip factory in Naka, Japan. While the plant was fully rebuilt in Q2 and auto production was set to return to near-normal levels in Q3, the arrival of the Delta variant and “zero covid” policies in some East Asian economies combined to produce another sharp drop in US semiconductor supply. The red line in the same exhibit shows the mid-year stepdown in automotive semiconductor units imported from key East Asian suppliers (data derived from granular Census trade records that include unit counts). Looking ahead, there are several key drivers for optimism, starting with the vaccination-led drop in infection rates (chart below, left and center). As a result, lockdown severity is also now approaching pre-Delta levels in both Malaysia and Vietnam (right panel). Going forward, it's important to track the semiconductor output and trade statistics of these key suppliers, as well as closely watch Chinese output and export data to monitor possible disruptions to chip or consumer goods supplies, for example related to power cuts or covid restrictions. For example, imports of integrated circuits from Vietnam and semiconductor devices and diodes from Malaysia declined 34% year-on-year in August, but Chinese production has so far remained firm. These developments coupled with better near-term production commentary from General Motors and Toyota, would argue for some microchip relief in Q4, and Goldman estimates the removal of this supply bottleneck could return US auto production to or near the 10-11mn SAAR range achieved in late 2020 (vs. 7.8mn in September and 8.6mn in Q3). Increases beyond that pace would likely require additional supply improvements, in part because today’s smart cars utilize more and more automotive systems with microchips and in part because of the continued mix shift towards SUVs and electric vehicles (EVs), both of which are relatively chip-intensive. The next chart plots the ratio of global automotive semiconductor shipments to global vehicle production (both on a unit basis.) The secular increase in chip intensity continued in 2021 and suggests demand for automotive semiconductors will continue to rise even with flattish unit vehicle demand. Channel 1, Step 2: Improved Chip Supply from New Capacity Goldman's expected timeline: 2H22, with a more normal environment in 2023 Key indicators to watch: Global semiconductor shipments, particularly automotive: Microcontroller Units (MCUs), power semiconductor, analog devices GS equity research forecasts for semiconductor capacity growth 2022 auto production forecasts (GS equity research, IHS) US industrial production of computers, communication equipment, and semiconductors Foreign production and US imports of auto and consumer electronics A key step towards easing supply constraints and lowering core goods prices is the build out of global microchip production capacity. But despite the dramatic impact of the chip shortages on US economic output and consumer prices, automotive semiconductor capex only rose back above the 2019 pace in Q3 And with 2-3 quarter lags between equipment capex and chip production—and several-year lead times for new foundries—the rise in capex to above-normal levels in Q4 may not meaningfully boost chip supply until the second half of next year. Reasons for the slow and restrained capex response include the long lead times and high fixed costs of new foundries and the likelihood that downstream industries will shift production away from the semis currently in short supply—many of which are older generation products to begin with. High industry concentration is another factor contributing to restrained capital deployment in the face of very strong near-term demand. With Goldman analysts tracking capacity growth of just 5-10% per year in 2021-22 among the semiconductor industries that supply the auto and consumer electronics sectors, and with consumer demand for these products also likely growing at that horizon and given the rising semiconductor content of motor vehicles, Goldman expects chip supply to remain constrained through at least mid-2022. This reduces the scope for automakers to sustain above-normal production, and restock heavily depleted vehicle inventories. Accordingly, Goldman also expects auto dealer inventories to remain very low through mid-2022. Channel 2: Improved US Labor Supply Goldman's expected timeline: Q421 and 1H22 Key indicators to watch: Payrolls, particularly manufacturing and transportation JOLTS, particularly manufacturing and transportation Industrial production of consumer goods, excluding autos and high tech Supplier deliveries components of ISMs and regional Fed surveys Labor force participation rate Labor shortages are another important bottleneck, but labor supply constraints are expected to ease substantially in coming months for several reasons. First, the September expiration of unemployment insurance benefits will boost Q4 job growth by around 1.0 million according to Goldman economists. Second, workers who have left their jobs because of child care concerns to return to work now that schools have reopened. Third, virus concerns will continue to fade as vaccinations increase further and infection rates fall—this would encourage some of the 2-3 million individuals staying away from the workplace because of health concerns to return to the job market. Taken together, Goldman expects total employment to increase by about 4mn workers by end-2022, a 2.7% boost to non-farm payroll employment. As shown in Exhibit 11, labor demand in these industries is 5.1% and 0.9% above pre-pandemic levels in transportation and manufacturing, respectively. With job openings and wages at new highs for factory and transportation jobs, these labor shortages should ease gradually as the sectors draw workers from lower-paid services industries Channel 3: Unwind of Port Congestion Expected timeline: 1H22 Key indicators to watch: Transportation payrolls, particularly in the marine cargo handling, support activities for transportation, couriers and messengers, and warehousing and storage sectors Ships at anchor and inbound container traffic at US ports Shipments component of the Cass Freight Index US ex-auto manufacturing production US imports of cars and consumer goods Real retail inventories, excluding autos Shipping delays and port congestion are also important bottlenecks for seaborne consumer products like furniture and sporting goods—semiconductors and high-value electronics generally arrive via airfreight. Stranded cargo at the Port of Los Angeles has surged to record highs (left panel of Exhibit 12) due to elevated trade volume—container inflows into US ports are 25% above pre-pandemic levels (see right panel)—and ongoing shortages of transportation-sector labor. We don’t expect significant near-term capacity growth in the goods shipping sector because bottlenecks currently constrain multiple modes of transportation. For example, if ports increased their capacity but the truck-driver shortage is not resolved, total shipping times could remain little changed. Moreover, to the extent transportation companies view shipping demand as temporarily elevated, they are unlikely to boost capacity meaningfully in the near-term. We instead see two other drivers behind an expected easing in shipping and transportation constraints in the first half of 2022. First, demand is seasonally weaker in the fall and winter, bottoming out in February after the Chinese New Year when it is typically about 15-20% below August levels. If port throughput maintains the August not-seasonally-adjusted pace, the seasonal moderation in demand would help clear the backlog. Second, and as discussed in more detail here and in Exhibit 3, we expect US import volumes to normalize somewhat due to waning fiscal stimulus and a consumer rotation back toward services consumption. Inflation and Fed Implications As an aside, since any delays in supply chain normalization means higher prices, Goldman has once again boosted its sequential inflation assumptions for Q4 and early 2022 to reflect these continued upward price pressures, having done so already every month since April. The bank now forecasts year-on-year core PCE inflation of 4.3% at year-end, 3.0% in June 2022, and 2.15% in December 2022 (vs. 4.25%, 2.7% and 2.0% previously). This slower resolution of supply constraints means that year-on-year inflation will be higher in the immediate aftermath of tapering than we had previously expected. While we expect inflation to be on a sharp downward trajectory at that point and to continue falling through the end of the year, this higher-for-longer path increases the risk of an earlier hike in 2022. Tyler Durden Wed, 10/27/2021 - 15:27.....»»

Category: blogSource: zerohedgeOct 27th, 2021

An Ominous Trend Emerges Below The Surface Of A Blowout Q3 Earnings Season

An Ominous Trend Emerges Below The Surface Of A Blowout Q3 Earnings Season Heading into this week, some 117 S&P 500 companies comprising 33% of S&P earnings had reported results so far. Superficially, the report so far have come in better than expected tracking a 4% beat ($50.91), driven by Financials (+13%) and Energy (+7%) despite mounting concerns ahead of earnings about stagflation and shrinking profit margins. The proportion of beats also remained strong – 79%/72%/62% of companies beat on EPS/sales/both, well above the historical average of 63%/57%/43%, but slightly below last quarter’s 82%/82%/72%. And yet, despite the strong early showing in Q3 earnings season, storm clouds are starting to emerge. According to calculations from Bloomberg, with just under of 30% of the benchmark’s members having announced results, the S&P500 is currently on pace to see its profits grow by less than 1% from the second quarter. That would be the smallest quarterly increase since the height of the Covid-19 pandemic sent corporate earnings plummeting early last year.  (As an aside, stronger-than-expected results from both Microsoft and Alphabet could help widen that margin, Bloomberg's Matt Turner writes, noting that the tech pair’s combined profits are expected to account for about 12% of the S&P 500 remaining profits this quarter, despite having more than 350 other members on the gauge yet to report. Incidentally, analysts are expecting Google to deliver earnings growth of nearly 64% for the period. Meanwhile, forecasts for Microsoft are slightly less bullish, only calling for a jump of about 14% versus last year.) Digging deeper, we go to Morgan Stanley's Michael Wilson who as we noted earlier remains bearish, and pointed to not only the recent flattening out of estimates, but warned that fwd EPS has continued to rise at a slower rate. Perhaps most concerning is that earnings revisions breadth - a key leading indicator - is now falling rapidly for almost all sectors. And since revision breadth is a very good leading indicator for NTM EPS, it's only a matter of time before NTM EPS begin to decline for reasons including higher costs, supply issues and taxes to a payback in demand that should begin in 1Q. The biggest threat, however, remain supply chain constraints which pose a risk not only to 3Q earnings and but also forward-looking earnings revisions breadth. As the chart below shows, corporate transcript mentions of "supply chain issues" are at unprecedented levels, while ISM lead time indices across both manufacturing and services are also historically stretched. As excerpts from recent earnings calls (below) reveals, these issues are being discussed by companies in a wide range of industries. Responding to frequent client questions, where the most prevalent inquiry is "aren't these risks already in consensus estimates and multiples given these issues have been discussed all year" Wilson says that prior to his work over the past several weeks, he would have made the same assumption. However, 3Q EPS expectations remained extremely resilient into the quarter and as the next chart shows, 3Q EPS expectations for this year actually saw their largest upward revision on a YTD basis since 2002. This is a problem because as we showed on Friday when demonstrating the market's panicked selloff on earnings misses, bad news are hardly priced in. Wilson agrees and over the weekend he updated his analysis of EPS surprise, sales surprise and T+1 day price reaction of 3Q reporting companies that discuss supply chain risks on earnings calls. Confirming what we reported, Wilson writes that "relatively lackluster beat rates and outright negative price performance T+1 day continue to be the trend for these companies. As we move into the heart of earnings season over the next 2 weeks, we expect this to continue to be a dominant narrative, especially as we move past the bulk of Financials (where we're overweight) reporting and into the cohorts that are more sensitive to these risks." As the MS strategist further elaborates, "companies that have posted negative 3Q EPS surprises have seen historically poor price performance 3 days after reporting (Exhibit 8). This offers some further confirmation that bad news on the earnings front, isn't already in the price." On the other hand, companies that are beating on earnings have seen less of the positive price reaction above what they typically see (Exhibit 9). Indeed, as we said above, "a lot of good news is priced, while the bad is largely not." Which brings us back to the big question: will supply chain constraints and associated disappointing reports be enough to affect the price level of the overall index? That remains to be seen. At we touched upon earlier when discussing Wilson's broader bearish bias, the MS strategist is leaning more toward the idea that we would "need to see retail activity diminish and higher bond yields in concert with these earnings risks in order to lead to a more meaningful selloff in the index." That said, a key message from Wilson over the next several weeks is "to stay selective and to stay more defensive in terms of positioning." He continues to prefer "relatively reasonably priced" Software over Hardware and Semis in Tech, Services over Goods in Discretionary, Financials and Healthcare. Why? Because "these cohorts offer less direct risk to supply chain issues and in the case of Healthcare and Software (relative to broader Tech), offer a more defensive posture." Which brings us to some some select corporate quotes on supply chain issues from 3Q earnings season so far: SON: "At a high level, we experienced strong volume growth in many of our businesses, but our third quarter operational results continue to be impacted by significant cost inflation and supply chain challenges." FR: "There's so many issues in the supply chain right now and there's strong demand. So we hope that this level's off for our tenants' sake. But the reality is I don't think it will level off. I think it will – the supply chain issues will continue and the rent pressure will continue because the lack of space and increased demand." POOL: "Inflation this year will likely be in the 6% to 7% range, up from our previous estimate of 5% to 6%, and it looks like that will repeat again for next year given the global supply chain issues." GPC: "In our customer discussions, a recent common theme is the supply chain challenges that face all companies." UNP: "We expect international volumes to be constrained as ocean carriers have recently taken additional actions to speed up their container returns as challenges in labor, port capacity, warehouses and dredge persist. And on the domestic side, opportunities will face continued supply chain challenges with limited haul-away capacity and slower chassis turn times." SNAP: "We've been meeting with a lot of advertisers, and had a lot of meetings here, and we're hearing from partners across a wide variety of industries and geographies that they're facing headwinds in their business related to the disruptions in global supply chain as well as labor shortages and labor competition. So when they're talking about the product, putting marketing into the product when there's already low margin, for instance, can erode margin. And furthermore, they don't necessarily want to accelerate the sales of products that they are going to have a hard time getting into the hands of customers. And that is somewhat broad sweeping in terms of the supply chain issues." BKR: "Operating income for the quarter was $26 million, down 44% year-over-year, largely driven by headwinds from mix of volume, supply chain challenges, and higher R&D costs." DOV: "So let's get on the front foot here by providing some color on inflationary inputs, labor and supply chain challenges...Let me start by saying that we're particularly concerned that there have been no discernible policy changes, particularly in the US to deal with these headwinds, and in fact, many proposed policies run the risk of extending their duration." RPM: "Raw material shortages and inflation continue to be serious challenges. In order to protect our margins, we are continuing to implement price increases, where appropriate, across all our segments." Supply chain issues (and the duration of such production bottlenecks) aside, Wilson writes that "it's becoming increasing clear to us that 3Q EPS disappointment (which is largely being attributed to supply and cost issues), has the potential to affect forward looking EPS growth expectations as well." In contrast to the first week of reporting season when the banks posted standout results and revisions breadth ticked higher, last week saw a lot of companies discussing supply issues as a continued and more pervasive risk than initially thought. The result, as Morgan Stanley notes, is plunging earnings revisions breadth for many sectors and the S&P 500 overall. Indeed, bottoms-up analysts are beginning to think that these issues may persist beyond just a quarter or two. The chart below shows earnings revisions breadth for the S&P 500 (which is based on FY2 or 2022 numbers in this case). This series is starting to decelerate and is currently at its lowest level since last summer. This indicator is key because it has a strong positive correlation with index price so further deterioration here is critical to watch. The final chart shows this trend across industry groups and sectors. As Wilson notes, this deceleration is a fairly broad dynamic across these cohorts, which speaks to the reach of these supply chain and cost pressure issues. Tyler Durden Tue, 10/26/2021 - 15:32.....»»

Category: personnelSource: nytOct 26th, 2021

Key Events This Very Busy Week: Earnings Deluge, Central Banks, GDP And Much More

Key Events This Very Busy Week: Earnings Deluge, Central Banks, GDP And Much More While the FOMC enters its quiet period ahead of next week's taper announcement, it's still set to be a bumper week ahead for markets. Amid silence from FOMC speakers, we get decisions from the ECB and the Bank of Japan (both Thursday). As DB's Jim Reid notes, inflation will obviously remain in the spotlight too as we get the October flash estimate for the Euro Area (Friday) with some regional numbers like German (Thursday) before. In addition, the Q3 earnings season will ramp up further, with 165 companies in the S&P 500 reporting, including Facebook (today), Microsoft, and Alphabet (both tomorrow), and Apple and Amazon (Thursday). Elsewhere, the UK government will be announcing their latest budget and spending review (Wednesday), Covid will remain in the headlines in light of the growing number of cases in many countries, and we’ll get the first look at Q3 GDP growth in the US (Thursday) and the Euro Area (Friday). Starting with those central bank meetings, we’re about to enter a couple of important weeks with the ECB and BoJ meeting this week, before the Fed and the BoE follow the week after. Market anticipation is much higher for the latter two though. So by comparison, the ECB and the BoJ are likely to be somewhat quieter, and DB's European economists write in their preview that this Governing Council meeting is likely to be a staging ground ahead of wide-ranging policy decisions in December, and will therefore be about tone and expectations management. One thing to keep an eye on in particular will be what is said about the recent surge in natural gas prices, as well as if ECB President Lagarde challenges the market pricing on liftoff as inconsistent with their inflation forecasts and new rates guidance. 5yr5yr Euro inflation swaps hit 2% for the first time on Friday so if the market is to be believed the ECB has achieved long-term success in hitting its mandate. With regards to the meeting, there’ll be more action in December where economists’ baseline is that there’ll be confirmation that PEPP purchases will end in March 2022. Speaking of inflation, it will remain heavily in focus for markets over the week ahead, with recent days having seen investor expectations of future inflation rise to fresh multi-year highs. This week one of the main highlights will be the flash Euro Area CPI reading for October, which is out on Friday. Last month, CPI rose to 3.4%, which is the highest inflation has been since 2008, and this time economists are expecting a further increase in the measure to 3.8%. However, their latest forecast update expects that we’ll see the peak of 3.9% in November, before inflation starts to head back down again (it won't be the first time economists have been dead wrong about inflation being transitory). The other main data highlight will come from the Q3 GDP figures, with releases for both the US and the Euro Area. For the US on Thursday the Atlanta Fed tracker has now hit a low of only +0.53%. DB is at 2.3% with consensus at 2.8%. On to the main event this week, earnings season really ramps up in the next five days with the highlights including some of the megacap tech firms, and a total of 165 companies in the S&P 500 will be reporting. Among the firms to watch out for include Facebook today; tomorrow, we’ll hear from Microsoft, Alphabet, Visa, Eli Lilly, Novartis, Texas Instruments, UPS, General Electric, UBS and Twitter. On Wednesday, releases will include Thermo Fisher Scientific, Coca-Cola, McDonald’s, Boeing, General Motors, Santander and Ford. Thursday then sees reports from Apple, Amazon, Mastercard, Comcast, Merck, Royal Dutch Shell, Linde, Volkswagen, Starbucks, Sanofi, Caterpillar, Lloyds Banking Group and Samsung. Finally on Friday, we’ll hear from ExxonMobil, Chevron, AbbVie, Charter Communications, Daimler, BNP Paribas, Aon and NatWest Group. In the UK, the main highlight next week will be the government’s Autumn Budget on Wednesday, with the Office for Budget Responsibility also set to release their latest Economic and Fiscal Outlook alongside that. In addition to the budget, the government will also be outlining the latest Spending Review, which will cover public spending priorities over the next 3 years. DB's UK economists expect that 2021-22 borrowing is expected to be revised down by £60bn, and they expect day-to-day spending will follow the path set out at the Spring Budget. They’re also expecting Chancellor Sunak will outline new fiscal rules. Finally, the pandemic is gaining increasing attention from investors again, with a number of countries having moved to toughen up restrictions in light of rising cases. This week, something to look out for will be the US FDA’s advisory committee meeting tomorrow, where they’ll be discussing Pfizer’s request for an emergency use authorization for its vaccine on 5-11 year olds. The CDC’s advisory committee is then holding a meeting on November 2 and 3 the following week, and the White House have said that if it’s authorised then the vaccine would be made available at over 25,000 paediatricians’ offices and other primary care sites, as well as in pharmacies, and school and community-based clinics. The full day by day calendar is at the end as usual. Courtesy of Deutsche Bank, here is a day-by-day calendar of events Monday October 25 Data: Germany October Ifo business climate indicator, US September Chicago Fed national activity index, October Dallas Fed manufacturing activity Central Banks: BoE’s Tenreyro speaks Earnings: Facebook, HSBC Tuesday October 26 Data: US August FHFA house price index, September new home sales, October Conference Board consumer confidence, Richmond Fed manufacturing index Central Banks: ECB’s Villeroy speaks Earnings: Microsoft, Alphabet, Visa, Eli Lilly, Novartis, Texas Instruments, UPS, General Electric, UBS, Twitter Other: FDA Advisory Committee meeting to discuss emergency use authorization of Pfizer vaccine to 5-11 year olds Wednesday October 27 Data: Germany November GfK consumer confidence, France October consumer confidence, Euro Area September M3 money supply, US preliminary September wholesale inventories, durable goods orders, core capital goods orders Central Banks: Monetary policy decisions from the Bank of Canada and Central Bank of Brazil Earnings: Thermo Fisher Scientific, Coca-Cola, McDonald’s, Boeing, General Motors, Santander, Ford Politics: UK government announces Autumn Budget and Spending Review Thursday October 28 Data: Japan September retail sales, Germany October unemployment change, preliminary October CPI, Italy October consumer confidence, Euro Area final October consumer confidence, US weekly initial jobless claims, advance Q3 GDP, September pending home sales, October Kansas City Fed manufacturing activity Central Banks: Monetary policy decisions from the ECB and Bank of Japan Earnings: Apple, Amazon, Mastercard, Comcast, Merck, Royal Dutch Shell, Linde, Volkswagen, Starbucks, Sanofi, Caterpillar, Lloyds Banking Group, Samsung Friday October 29 Data: Japan September jobless rate, preliminary September industrial production, preliminary Q3 GDP from Euro Area, Germany, France and Italy, preliminary October CPI from Euro Area, France and Italy, UK September mortgage approvals, Canada August GDP, US September personal spending, personal income, October MNI Chicago PMI, final October University of Michigan consumer sentiment index Earnings: ExxonMobil, Chevron, AbbVie, Charter Communications, Daimler, BNP Paribas, Aon, NatWest Group Focusing on just the US, Goldman writes that the key economic data releases this week are the durable goods report on Wednesday, the Q3 GDP release on Thursday, and the core PCE report on Friday. There are no speaking engagements from Fed officials this week, reflecting the FOMC blackout period. Monday, October 25 10:30 AM Dallas Fed manufacturing index, October (consensus 6.2, last 4.6) Tuesday, October 26 09:00 AM FHFA house price index, August (consensus +1.5%, last +1.4%) 09:00 AM S&P/Case-Shiller 20-city home price index, August (GS +1.4%, consensus +1.5%, last +1.55%); We estimate the S&P/Case-Shiller 20-city home price index rose by 1.4% in August, following a 1.55% increase in July. 10:00 AM New home sales, September (GS +3.0%, consensus +2.2%, last +1.5%): We estimate that new home sales increased by 3.0% in September, reflecting an increase in mortgage applications. 10:00 AM Conference Board consumer confidence, October (GS 107.0, consensus 108.5, last 109.3): We estimate that the Conference Board consumer confidence index decreased by 2.3pt to 107.0 in October. Our forecast reflects weak signals from other consumer confidence measures. 10:00 AM Richmond Fed manufacturing index, October (consensus 5, last -3) Wednesday, October 27 08:30 AM Advance goods trade balance, September (GS -$88.0bn, consensus -$88.3bn, last -$88.2bn): We estimate that the goods trade deficit declined by $0.2bn to $88.0bn in September compared to the final August report, as shipping bottlenecks likely weighed on import volumes. 08:30 AM Wholesale inventories, September preliminary (consensus +1.0%, last +1.2%): Retail inventories, September (consensus +0.3%, last +0.1%) 8:30 AM Durable goods orders, September preliminary (GS -1.5%, consensus -1.0%, last +1.8%): Durable goods orders ex-transportation, September preliminary (GS +0.7%, consensus +0.4%, last +0.3%); Core capital goods orders, September preliminary (GS +0.7%, consensus +0.5%, last +0.6%); Core capital goods shipments, September preliminary (GS +0.7%, consensus +0.5%, last +0.8%): We estimate durable goods declined 1.5% in the preliminary September report, reflecting a pullback in commercial aircraft orders. We estimate firm gains in core capital goods orders (+0.7%) and core capital goods shipments (+0.7%), in part reflecting higher prices. Thursday, October 28 08:30 AM Initial jobless claims, week ended October 23 (GS 280k, consensus 290k, last 290k); Continuing jobless claims, week ended October 16 (consensus 2,410k, last 2,481k): We estimate initial jobless claims declined to 280k in the week ended October 23. 08:30 AM GDP, Q3 advance (GS +3.25%, consensus +2.8%, last +6.7%); Personal consumption, Q3 advance (GS +0.8%, consensus +0.8%, last +12.0%): We estimate GDP growth slowed to +3¼% annualized in the advance reading for Q3, following +6.7% in Q2. Our forecast reflects a sharp slowdown in consumption growth (to +0.8%) driven by the waning fiscal boost and a slower pace of reopening due to the Delta variant. We expect declines in business structures and equipment investment—the latter due to vehicle shortages—but expect a strong gain in the intellectual property category (+10%). We estimate a boost to GDP growth from inventories (+2.4pp qoq ar) but a drag from net trade (-0.6pp). 10:00 AM Pending home sales, September (GS -1.0%, consensus +0.5%, last +8.1%): We estimate that pending home sales declined 1.0% in September. 11:00 AM Kansas City Fed manufacturing index, October (consensus +19, last +22) Friday, October 31 08:30 AM Employment cost index, Q3 (GS +1.0%, consensus +0.9%, prior +0.7%): We estimate that the employment cost index rose 1.0% in Q3 (qoq sa), which would boost the year-on-year rate by five tenths to +3.4%. Labor shortages exerted upward pressure on wage growth in the third quarter, and the ECI measure is also running well below our composition-adjusted wage tracker (+3.7% in Q3). We also expect a pickup in ECI benefit growth after a soft sequential gain in Q2. Personal income, September (GS -0.5%, consensus -0.2%, last +0.2%); Personal spending, September (GS +0.4%, consensus +0.6%, last +0.8%); PCE price index, September (GS +0.25%, consensus +0.3%, last +0.40%); Core PCE price index, September (GS +0.13%, consensus +0.2%, last +0.32%); PCE price index (yoy), September (GS +4.36%, consensus +4.4%, last +4.26%); Core PCE price index (yoy), September (GS +3.62%, consensus +3.7%, last +3.62%): Based on details in the PPI, CPI, and import price reports, we forecast that the core PCE price index rose by 0.13% month-over-month in September, corresponding to a 3.62% increase from a year earlier. Additionally, we expect that the headline PCE price index increased by 0.25% in September, corresponding to a 4.36% increase from a year earlier. We expect a 0.5% decrease in personal income and a 0.4% increase in personal spending in September. 09:45 AM Chicago PMI, October (GS 62.0, consensus 64.0, last 64.7): We estimate that the Chicago PMI pulled back by 2.7 points to 62.0 in October. Our forecast reflects mixed global industrial data and a possible sentiment drag from China power cuts. 10:00 AM University of Michigan consumer sentiment, October final (GS 71.4, consensus 71.4, last 71.4): We expect the University of Michigan consumer sentiment index was unchanged at 71.4 in the final October reading. Source: Deutsche Bank, Goldman, Bank of America Tyler Durden Mon, 10/25/2021 - 09:26.....»»

Category: blogSource: zerohedgeOct 25th, 2021

Futures Rise Ahead Of Deluge Of Big Tech Earnings

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

Category: blogSource: zerohedgeOct 25th, 2021