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Bull of the Day: Dollar Tree, Inc. (DLTR)

Discount retail standout Dollar Tree, Inc. (DLTR) has grown during an array of economic environments and it's poised to thrive as more Americans tighten their purse strings. Dollar Tree posted solid first quarter growth in late May and upped its guidance... Consumer sentiment is tumbling as people stare at sky-high gas prices and grocery bills. Inflation remains at 40-year highs and many consumers are already cutting back on major expenses and looking for savings anywhere they can.Discount retail standout Dollar Tree, Inc. DLTR has grown during an array of economic environments and it’s poised to thrive as more Americans tighten their purse strings. Dollar Tree posted solid first quarter growth in late May and upped its guidance in the face of all of the broader economic headwinds.DLTR Basics Dollar Tree is a discount retailer that operates over 15,500 stores across much of the U.S. and Canada, including its namesake locations, Family Dollar, and newer combo stores. The retailer’s dollar-focused name until recently showed up exactly in its price points, with everything at Dollar Tree stores priced at $1.Dollar Tree announced last November that it was raising its prices for the first time in company history. Dollar Tree slowly began to implement its new $1.25 price points. DLTR said in March that it completed its new price-point rollout at all U.S. Dollar Tree stores a full two months ahead of schedule.Image Source: Zacks Investment ResearchMany on Wall Street initially speculated that Dollar Tree’s new higher prices were made in response to inflation. However, the company’s executive team said the move was made after roughly 35 years at the $1 price point in order to expand its offerings and sell a far wider range of merchandise to customers.Meanwhile, its Family Dollar stores sell many items at the $1 price point, along with a broader array of offerings under $10. Dollar Tree also said in March that it saw strong performances in other newer areas, including the expansion of its “$3 and $5 Plus assortment in Dollar Tree stores, as well as our Combo Stores and H2 Renovations at Family Dollar.”Dollar Tree operates smaller format stores compared to the likes of Target TGT and Walmart WMT and it has been aggressively expanding its brick-and-mortar footprint. DLTR opened 112 new stores during its first quarter ended on April 30, while also completing numerous renovations and rolling out its multi-price “Plus” offering into an additional 790 Dollar Tree stores. Image Source: Zacks Investment ResearchRecent Growth and OutlookDollar Tree has grown its revenue rather steadily for decades and its sales soared after it purchased Family Dollar in 2015. DLTR’s sales climbed 3% last year and 8% in FY20, while its adjusted earnings popped 2.7% in fiscal 2021. Most recently, DLTR topped our Q1 FY22 EPS and sales estimates on May 26 and raised its guidance.The company’s new higher prices appear to be showing up on both the bottom and top lines, with Dollar Tree’s adjusted Q1 EPS up 48% YoY. Meanwhile, its revenue climbed 6.5% to $6.9 billion, with same-store Dollar Tree sales up +11.2%.Dollar Tree has now topped our quarterly EPS estimates by an average of 13% in the trailing four periods, and its FY22 consensus estimate is up 3% since its release, with FY23 5.5% higher. These positive bottom-line revisions came in the face of slowing overall consumer sentiment, rising inflation, and lower guidance from many companies across an array of industries.Zacks estimates call for Dollar Tree’s revenue to climb 6.7% in 2022 and another 6% in 2023 to reach $29.76 billion. At the bottom end, its adjusted earnings are projected to surge 41% this year and 14.4% next year.Image Source: Zacks Investment ResearchBottom LineDollar Tree shares have soared 970% in the past 15 years to crush its discount retail industry’s 500% and blow away the broader retail-wholesale market’s 207%. The company has also been a standout since last fall, with DLTR up 53% in the last 12 months vs. its sector’s 34% downturn. This run includes an 11% jump in 2022, which is rather impressive with the market down over 20%.Investors should note that DLTR stock tumbled after Target’s brutal guidance in mid-May, only to skyrocket back after its own quarterly results and guidance showcased strength amid changing shopping patterns. Dollar Tree closed regular trading Wednesday at $155 per share or roughly 12% below its records.In terms of valuation, Dollar Tree trades at a 16% discount to its industry at 18.2X forward 12-month earnings and 23% below its own highs over the past 10 years. Dollar Tree also boasts a solid balance sheet, and it’s committed to long-term expansion within a segment of the retail sector that’s never going out of style.Dollar Tree’s strong earnings revisions activity helps it land a Zacks Rank #1 (Strong Buy) right now. And investors might want to consider the firm for its ability to expand during an inflationary environment as people look to save money wherever they can. Plus, its new $1.25 price point is set to boost its earnings and revenue growth over the long haul. Zacks' Top Picks to Cash in on Electric Vehicles Big money has already been made in the Electric Vehicle (EV) industry. But, the EV revolution has not hit full throttle yet. There is a lot of money to be made as the next push for future technologies ramps up. Zacks’ Special Report reveals 5 picks investorsSee 5 EV Stocks With Extreme Upside Potential >>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 Target Corporation (TGT): Free Stock Analysis Report Walmart Inc. (WMT): Free Stock Analysis Report Dollar Tree, Inc. (DLTR): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJun 23rd, 2022

Stocks, Cryptos Tumble To Close Out Catastrophic First-Half

Stocks, Cryptos Tumble To Close Out Catastrophic First-Half It was supposed to be a 7% ramp into month-end on billions in pension fund residual buying. Instead, it ended up being more or less the opposite, with crypto-led liquidations dragging futures and global markets lower, and extending Wednesday losses after central bankers issued warnings on inflation and fueled concern that aggressive policy will end with a hard-landing recession, which increasingly more now see as being 2022 business, an outcome that now appears assured especially after yesterday's disastrous guidance cut from RH, the second in three weeks! Recession fears and inflation woes may be prolonged by today's PCE deflator report. The consumer price gauge favored by the Fed may have picked up to 6.4% last month from 6.3%. Personal income growth probably edged up but Bloomberg Economics highlights an anticipated decline in real personal spending as a major worry. Meanwhile, China’s economy showed further signs of improvement in June with a strong pickup in services and construction, even if the latest Chinese PMI print came slightly below expectations. Also overnight, Russia said it withdrew troops from Ukraine’s Snake Island in the Black Sea after Ukraine said its forces drove Russian troops from the area. In any case, with zero demand from pensions so far (even though the continued selling in stocks and buying in bonds will only make the imabalnce bigger), overnight Nasdaq 100 contracts dropped 1.8% while S&P 500 futures declined 1.3%, and cryptos crumbled, with bitcoin dragged back below $19000 and Ether on the verge of sliding below $1000. The tech-heavy gauge managed to end Wednesday’s trading slightly higher, while the S&P 500 fell for a third straight day. In Europe, the Stoxx Europe 600 Index slid 1.9%. Treasuries gained, the dollar was steady and gold declined and crude oil futures edged lower again. Which brings us to the last trading day of a quarter for the history books: the S&P 500 is set for its biggest 1H decline since 1970 and the Nasdaq 100 since 2002, the height of the dot.com bust. The Stoxx 600 is set for the worst 1H since 2008, the height of the GFC.  Traders have ramped up bets that the global economy will buckle under central bank tightening campaigns -- and that policy makers will eventually backpedal. The bond market shifted to price in a half-point rate cut in the Federal Reserve’s benchmark rate at some point in 2023. On Wednesday, during the annual ECB annual forum, Fed Chair Jerome Powell and his counterparts in Europe and the UK warned inflation is going to be longer lasting. A view that central banks need to act fast on rates because they misjudged inflation has roiled markets this year, with global stocks about to close out their worst quarter since the three months ended March 2020. “Markets are worried about growth as central bankers continue to emphasize that bringing down inflation is their overriding objective, and that it may take time to bring inflation down,” said Esty Dwek, chief investment officer at Flowbank SA. “We still haven’t seen total capitulation in markets, so further downside is possible.” Meanwhile, the cost of insuring European junk bonds against default crossed 600 basis points for the first time in two years on Thursday. And speaking of Europe, stocks are also down over 2% in early trading, with all sectors in the red. DAX and CAC underperform at the margin with autos, consumer discretionary and banking sectors the weakest within the Stoxx 600.  Here are some of the biggest European movers today: Uniper shares slump as much as 23% after the German utility withdrew its outlook and said it was discussing a possible bailout from the German government following Russia’s move to curb natural gas deliveries. SAP sinks as much as 6.5% after Exane BNP Paribas downgraded stock to neutral from outperform, saying it sees risks on demand side in the near term as software spending decisions come under increased scrutiny. Sanofi shares decline as much as 4.5% after the French drugmaker said the FDA placed late-stage clinical trials of tolebrutinib on partial hold in US because of concerns about liver injuries. European semiconductor stocks fell, following peers in the US and Asia lower amid growing concerns that the industry might face a downturn soon as chip stockpiles build. ASML drops as much as 3.4%, Infineon -4.1%, STMicro -3.1% Norsk Hydro shares slide as much as 6% amid metals decline and as DNB cuts the stock to sell from hold, citing concerns about rising aluminum supply. Stainless steel stocks in Europe fall, with Morgan Stanley saying the settlement on the latest ferrochrome benchmark missed its expectations. Outokumpu shares down as much as 6.6%, Aperam -7.2%, Acerinox -4% Saab shares jump as much as 8.4%, after getting an order worth SEK7.3b from the Swedish Defence Materiel Administration for GlobalEye Airborne Early Warning and Control aircraft. Orsted shares rise as much as 2.5%, before paring some of the gains. HSBC raises to buy from hold, saying any further downside for the wind farm operator looks limited. Bunzl shares rise as much as 2.6% after the specialist distribution company said it now expects very good revenue growth in 2022. Grifols shares rise as much as 7.8% after slumping on Wednesday, as the company says that the board isn’t analyzing any capital increase “for the time being.” Earlier in the session, Asian stocks fell for a second day as tech-heavy indexes in Taiwan and South Korea continued to get pummeled amid concerns over the potential for aggressive monetary tightening in the US to rein in inflation.  The MSCI Asia Pacific Index declined as much as 1.2%, dragged down by technology shares including TSMC, Alibaba and Tencent. Taiwan slid more than 2%, while gauges in Japan, South Korea, Australia dropped more than 1%.  Stocks in mainland China rose more than 1% after the economy showed further signs of improvement in June with a strong pickup in services and construction as Covid outbreaks and restrictions were gradually eased. Traders are also watching Chinese President Xi Jinping’s trip to Hong Kong, his first time outside of the mainland since 2020.  Asian stocks are struggling to recover from a May low as the threat of higher US rates outweighs China’s emergence from strict Covid lockdowns and its pledge of stimulus measures. While mainland Chinese stocks led gains globally this month, the rest of the markets in the region -- especially those heavy with technology stocks and exporters -- saw hefty outflows of foreign funds.  “Investors continue to assess recession and also inflation risks,” Marcella Chow, JPMorgan Asset Management’s global market strategist, said in an interview with Bloomberg TV. “This tightening path has actually increased the chance of a slower economic growth going forward and probably has brought forward the recession risks.” Asian stocks are set to post a more than 12% loss this quarter, the worst since the one ended March 2020 during the pandemic-induced global market rout. Japanese stocks declined after the release of China’s data on manufacturing and non-manufacturing PMIs that showed slower than expected improvements.  The Topix Index fell 1.2% to 1,870.82 as of market close Tokyo time, while the Nikkei declined 1.5% to 26,393.04. Sony Group contributed the most to the Topix Index decline, falling 3.4%. Out of 2,170 shares in the index, 531 rose and 1,574 fell, while 65 were unchanged. “Although China is recovering from a lockdown, business sentiment in the manufacturing industry is deteriorating around the world,” said Tomo Kinoshita, global market strategist at Invesco Asset Management China’s Economy Shows Signs of Improvement as Covid Eases. Indian stock indexes posted their biggest quarterly loss since March 2020 as the global equity market stays rattled by high inflation and a weakening outlook for economic growth.  The S&P BSE Sensex ended little changed at 53,018.94 in Mumbai on Thursday, while the NSE Nifty 50 Index dropped 0.1%. The gauges shed more than 9% each in the June quarter, their biggest drop since the outbreak of pandemic shook the global markets in March 2020. The main indexes have fallen for all but one month this year as surging cost pressures forced India’s central bank to raise rates twice and tighten liquidity conditions. The selloff is also partly driven by record foreign outflows of more than $28b this year.  Despite the turmoil in global markets, Indian stocks have underperformed most Asian peers, partly helped by inflows from local institutions, which made net purchases of more than $30b of local stocks. “Investors worry that the latest show of central bank determination to tame inflation will slow economies rapidly,” HDFC Securities analyst Deepak Jasani wrote in a note.  Fourteen of the 19 sector sub-gauges compiled by BSE Ltd. fell Thursday, with metal stocks leading the plunge. The expiry of monthly derivative contracts also weighed on markets. For the June quarter, metal stocks were the worst performers, dropping 31% while information technology gauge fell 22%. Automakers led the three advancing sectors with 11.3% gain. Australian stocks also tumbled, with the S&P/ASX 200 index falling 2% to close at 6,568.10, weighed down by losses in mining, utilities and energy stocks.  In New Zealand, the S&P/NZX 50 index fell 0.8% to 10,868.70 In rates, treasuries advanced, led by the belly of the curve. German bonds surged, led by the short-end and outperforming Treasuries. US yields richer by as much as 5.4bp across front-end and belly of the curve which outperforms, steepening 2s10s, 5s30s by 2bp and 2.8bp; wider bull-steepening move in progress for German curve with yields richer by up to 13.5bp across front-end with 2s10s wider by 3.5bp on the day. US 10-year yields around 3.055%, richer by 3.5bp. Money markets aggressively trimmed ECB tightening bets on relief that French June inflation didn’t come in above the median estimate. Bonds also benefitted from haven buying as stocks slide. Month-end extension flows may continue to support long-end of the Treasuries curve. bunds outperform by 7bp in the sector. IG issuance slate empty so far; Celanese Corp. pushed back plans to issue in euros and dollars, most likely to next week, after deals struggled earlier this week. Focal points of US session include PCE deflator and MNI Chicago PMI.  In FX, the Bloomberg Dollar Spot Index was steady as the greenback traded mixed against its Group-of-10 peers. The yen advanced and Antipodean currencies were steady against the greenback. French inflation quickened to the fastest since the euro was introduced. Steeper increases in energy and food costs drove consumer-price growth to 6.5% in June from 5.8% in May . Sweden’s krona swung to a loss. It briefly advanced earlier after the Riksbank raised its policy rate by 50bps, as expected, signaled faster rate hikes and a quicker trimming of the balance sheet. The pound rose, snapping three days of losses against the dollar. UK household incomes are on their longest downward trend on record, as the nation’s cost of living crisis saps the spending power of British households. Separate figures showed that the current-account deficit widened sharply to £51.7 billion ($63 billion) in the first quarter. The yen rose and the Japan’s bonds inched up. The BOJ kept the amount and frequencies of planned bond purchases unchanged in the July-September period. The Australian dollar reversed a loss after data showed China’s official manufacturing purchasing managers index rose above 50 for the first time since February in a sign of improvement in the world’s second largest economy. Bitcoin is on track for its worst quarter in more than a decade, as more hawkish central banks and a string of high-profile crypto blowups hammer sentiment. The 58% drawdown in the biggest cryptocurrency is the largest since the third quarter of 2011, when Bitcoin was still in its infancy, data compiled by Bloomberg show. In commodities, WTI trades a narrow range, holding below $110. Brent trades either side of $116. Most base metals trade in the red; LME zinc falls 3.1%, underperforming peers. Spot gold falls roughly $3 to trade near $1,814/oz. Bitcoin slumps over 6% before finding support near $19,000. Looking to the day ahead now, data releases include German retail sales for May and unemployment for June, French CPI for June, the Euro Area unemployment rate for May, Canadian GDP for April, whilst the US has personal income and personal spending for May, the weekly initial jobless claims, and the MNI Chicago PMI for June. Market Snapshot S&P 500 futures down 1.2% to 3,775.75 STOXX Europe 600 down 1.8% to 406.18 MXAP down 1.0% to 158.01 MXAPJ down 1.1% to 524.78 Nikkei down 1.5% to 26,393.04 Topix down 1.2% to 1,870.82 Hang Seng Index down 0.6% to 21,859.79 Shanghai Composite up 1.1% to 3,398.62 Sensex up 0.2% to 53,136.59 Australia S&P/ASX 200 down 2.0% to 6,568.06 Kospi down 1.9% to 2,332.64 Gold spot down 0.2% to $1,814.91 US Dollar Index little changed at 105.04 German 10Y yield little changed at 1.42% Euro little changed at $1.0443 Brent Futures down 0.4% to $115.85/bbl Top Overnight News from Bloomberg The surge in the dollar has set Asian currencies on course for their worst quarter since the 1997 financial crisis and created a dilemma for central bankers French Finance Minister Bruno Le Maire said the EU can deliver the global minimum corporate tax with or without the support of Hungary, circumventing Budapest’s veto earlier this month just as the bloc was on the brink of a agreement German unemployment unexpectedly rose, snapping 15 straight months of decline as refugees from the war in Ukraine were included in those searching for work The SNB bought foreign exchange worth 5.7 billion francs ($5.96 billion) in the first quarter of 2022 as the franc sharply appreciated against the euro and briefly touched parity in March The ECB plans to ask the region’s lenders to factor in the economic hit of a potential cut off of Russian gas when considering payouts to shareholders European stocks were poised for their biggest drop in any half-year period since 2008, as investors focused on the prospects for economic slowdown and stubbornly high inflation in the region New Zealand will enter a recession next year that could be deeper than expected, Bank of New Zealand economists said after a survey showed business sentiment continues to slump A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were varied at month-end amid a slew of data releases including mixed Chinese PMIs. ASX 200 was dragged lower by weakness in energy, miners and the top-weighted financials sector. Nikkei 225 declined after disappointing Industrial Production data and with Tokyo raising its virus infection level. Hang Seng and Shanghai Comp. were somewhat mixed with Hong Kong indecisive and the mainland underpinned after the latest Chinese PMI data in which Manufacturing PMI printed below estimates but Non-Manufacturing PMI firmly surpassed forecasts and along with Composite PMI, all returned to expansion territory. Top Asian News NATO Secretary General Stoltenberg said China's growing assertiveness has consequences for the security of allies, while he added China is not our adversary, but we must be clear-eyed about the serious challenges it presents. US blacklisted 5 Chinese firms for allegedly helping Russia in which Connec Electronic, King Pai Technology, Sinno Electronics, Winnine Electronic and World Jetta Logistics were added to the entity list which restricts access to US technology, according to WSJ. Japan's government cut its assessment of industrial production and noted that production is weakening, while it stated that Japan's motor vehicle production declined 8% M/M and that industrial production likely saw the largest impact of Shanghai's COVID-19 lockdown in May, according to Reuters. Tokyo metropolitan government will reportedly increase COVID infections level to the second-highest, according to FNN. It’s been a downbeat session for global equities thus far as sentiment deteriorates further. European bourses are lower across the board, with losses extending during early European hours. European sectors are all in the red but portray a clear defensive bias. Stateside, US equity futures have succumbed to the glum mood, with the NQ narrowly underperforming. Top European News Riksbank hiked its Rate by 50bps to 0.75% as expected, and said the rate will be raised further and it will be close to 2% at the start of 2023. Bank said the balance sheet its to shrink faster than previously flagged, and suggested that policy rate will increase faster if needed. Click here for details. Riksbank's Ingves said inflation over forecast probably not enough for Riksbank to hold extra policy meeting in summer. Ingves added that if the situation requires a 75bps hike, then Riksbank will carry out a 75bps hike. Orsted Gains as HSBC Upgrades With Shares Seen ‘Good Value’ Aston Martin Extends Losses as Carmaker Reportedly Seeking Funds Climate Litigants Look Beyond Big Oil for Their Day in Court Ukraine Latest: Putin Warns NATO on Moving Military to Nordics FX DXY extends on gains above 105.00, but could see more upside on safe haven demand and residual rebalancing flows over fixes - EUR/USD inches towards 1.0400 to the downside. Yen regroups as yields drop and risk sentiment deteriorates to compound corrective price action. Franc unwinds some of its recent outperformance and Loonie lose traction from oil ahead of Canadian GDP. Swedish Crown unable to take advantage of hawkish Riksbank hike in face of risk aversion - Eur/Sek stuck in a rut close to 10.7000. Pound finds some underlying bids into 1.2100 and Kiwi at 0.6200, while Aussie holds above 0.6850 with encouragement from China’s services PMI that also propped the Yuan. Fixed Income Bonds on bull run into month, quarter and half year end - Bunds top 148.00 at best, Gilts approach 113.50 and 10 year T-note just a tick away from 118-00. Debt in demand on safe haven grounds rather than duration as curves steepen on less hawkish/more dovish market pricing. Italian supply comfortably covered to keep BTP futures propped ahead of US PCE data and yet another speech from ECB President Lagarde. Commodities WTI and Brent front-month futures are resilient to the broader risk downturn, and firmer Dollar as OPEC+ member members gear up for what is expected to be a smooth meeting. Spot gold is uneventful but dipped under yesterday's low, with potential support at the 15th June low at USD 1,806.59/oz. Base metals are softer across the board amid the broader risk profile. Dalian and Singapore iron ore futures were on track for quarterly losses. Ship with 7,000 tonnes of grain leaves Ukraine port, according to pro-Russia officials cited by AFP. US Event Calendar 08:30: June Initial Jobless Claims, est. 229,000, prior 229,000 08:30: June Continuing Claims, est. 1.32m, prior 1.32m 08:30: May Personal Income, est. 0.5%, prior 0.4% 08:30: May Personal Spending, est. 0.4%, prior 0.9% 08:30: May Real Personal Spending, est. -0.3%, prior 0.7% 08:30: May PCE Deflator MoM, est. 0.7%, prior 0.2% 08:30: May PCE Deflator YoY, est. 6.4%, prior 6.3% 08:30: May PCE Core Deflator YoY, est. 4.8%, prior 4.9% 08:30: May PCE Core Deflator MoM, est. 0.4%, prior 0.3% 09:45: June MNI Chicago PMI, est. 58.0, prior 60.3 DB's Jim Reid concludes the overnight wrap We’ve just released the results of our monthly EMR survey that we conducted at the start of the week. It makes for some interesting reading, and we’re now at the point where 90% of respondents are expecting a US recession by end-2023, which is up from just 35% in our December survey. That echoes our own economists’ view that we’re going to get a recession in H2 2023, and just shows how sentiment has shifted since the start of the year as central banks have begun hiking rates. When it comes to people’s views on where markets are headed next, most are expecting many of the themes from H1 to continue, with a 72% majority thinking that the S&P 500 is more likely to fall to 3,300 rather than rally to 4,500 from current levels, whilst 60% think that Treasury yields will hit 5% first rather than 1%. Click here to see the full results. When it comes to negative sentiment we’ll have to see what today brings us as we round out the first half of the year, but if everything remains unchanged today we’re currently set to end H1 with the S&P 500 off to its worst H1 since 1970 in total return terms. And there’s been little respite from bonds either, with US Treasuries now down by -9.79% since the start of the year, so it’s been bad news for traditional 60/40 type portfolios. Ultimately, a large reason for that has been investors’ fears that ongoing rate hikes to deal with inflation will end up leading to a recession, and yesterday saw a continuation of that theme, with Fed Chair Powell, ECB President Lagarde and BoE Governor Bailey all reiterating their intentions in a panel at the ECB’s Forum to return inflation back to target. In terms of that panel, there weren’t any major headlines on policy we weren’t already aware of, although there was a collective acknowledgement of the risk that inflation could become entrenched over time and the need to deal with that. Fed Chair Powell described the US economy as in “strong shape”, but one that ultimately requires much tighter financial conditions to bring inflation back to target. Year-end fed funds expectations remained steady in response, down just -0.7bps to 3.45%. However, further out the curve the simmering slower growth narrative continued to grip markets and sent 10yr Treasury yields -8.2bps lower to 3.09%, and the 2s10s another -1.1bps flatter to 4.7bps. In line with a tighter Fed policy path and slower growth, 10yr breakevens drove the move in nominal yields, falling -8.2bps to 2.39%, their lowest levels since January, having entirely erased the gains seen after Russia’s invasion of Ukraine, when it peaked above 3% at one point in April. Along with 2s10s flattening, the Fed’s preferred measure of the near-term risk of recession, the forward spread (the 18m3m – 3m), similarly flattened by -5.7bps, hitting its lowest level in nearly four months at 154bps. And thismorning there’s only been a partial reversal of these trends, with 10yr Treasury yields (+1.3bps) edging back up to 3.10% as we go to press. Over in equities, the S&P 500 bounced around but finished off of its intraday lows with just a -0.07% decline, again with the macro view likely skewed by quarter-end rebalancing of portfolios. The NASDAQ was similarly little changed on the day, falling a mere -0.03%. In terms of the ECB, President Lagarde said on that same panel that she didn’t think “we are going back to that environment of low inflation” that was present before the pandemic. But when it came to the actual data yesterday there was a pretty divergent picture. On the one hand, Spain’s CPI for June surprised significantly on the upside, with the annual inflation rising to +10.0% (vs. +8.7% expected) on the EU’s harmonised measure. But on the other, the report from Germany then surprised some way beneath expectations, coming in at +8.2% on the EU-harmonised measure (vs. +8.8% expected). So mixed messages ahead of the flash CPI print for the entire Euro Area tomorrow. As in the US, there was a significant rally in European sovereign bonds, with yields on 10yr bunds (-10.7bps), OATs (-10.7bps) and BTPs (-16.0bps) all moving lower on the day. Equities also lost significant ground amidst the risk-off tone, and the STOXX 600 shed -0.67% as it caught up with the US losses from the previous session. That risk-off tone was witnessed in credit as well, where iTraxx Crossover widened +21.5bps to a post-pandemic high. At the same time, there were further concerns in Europe on the energy side, with natural gas futures up by +8.06% to a three-month high of €139 per megawatt-hour, which follows a reduction in capacity yesterday at Norway’s Martin Linge field because of a compressor failure. Whilst monetary policy has been the main focus for markets lately, we did get some headlines on the fiscal side yesterday too, with a report from Bloomberg that Senate Democrats were working on an economic package that had smaller tax increases in order to reach a deal with moderate Democratic senator Joe Manchin. For reference, the Democrats only have a majority in the split 50-50 senate thanks to Vice President Harris’ tie-breaking vote, so they need every Democrat Senator on board in order to pass legislation. According to the report, the plan would be worth around $1 trillion, with half allocated to new spending, and the other half cutting the deficit by $500bn over the next decade. Overnight in Asia we’ve seen a mixed market performance overnight. Most indices are trading lower, including the Nikkei (-1.45%) and the Kospi (-0.81%), but Chinese equities have put in a stronger performance after an improvement in China’s PMIs in June, and the CSI 300 (+1.62%) and the Shanghai Comp (+1.31%) have both risen. That came as manufacturing activity expanded for the first time in four months, with the PMI up to 50.2 in June (vs. 50.5 expected) from 49.6 in May. At the same time, the non-manufacturing climbed to 54.7 points in June, up from 47.8 in May, which also marked the first time it’d been above the 50 mark since February. Nevertheless, that positivity among Chinese equities are proving the exception, with equity futures in the US and Europe pointing lower, with those on the S&P 500 (-0.28%) looking forward to a 4th consecutive daily decline as concerns about a recession persist. When it came to other data yesterday, the third estimate of US GDP for Q1 saw growth revised down to an annualised contraction of -1.6% (vs. -1.5% second estimate). Separately, the Euro Area’s M3 money supply grew by +5.6% year-on-year in May (vs. +5.8% expected), which is the slowest pace since February 2020. To the day ahead now, data releases include German retail sales for May and unemployment for June, French CPI for June, the Euro Area unemployment rate for May, Canadian GDP for April, whilst the US has personal income and personal spending for May, the weekly initial jobless claims, and the MNI Chicago PMI for June. Tyler Durden Thu, 06/30/2022 - 07:58.....»»

Category: blogSource: zerohedge10 hr. 31 min. ago

Futures Slide Amid Renewed Recession Fears After China Doubles Down On "Covid Zero"

Futures Slide Amid Renewed Recession Fears After China Doubles Down On "Covid Zero" One day after futures ramped overnight (if only to crater during the regular session) on hopes China was easing its highly politicized  Zero Covid policy after it cut the time of quarantine lockdowns, this morning futures slumped early on after China's President Xi Jinping made clear that Covid Zero isn't going anywhere and remains the most “economic and effective” policy for China during a symbolic visit to the virus ground zero in Wuhan, in which he cast the strategy as proof of the superiority of the country’s political system. That coupled with renewed recession worries (market is again pricing in a rate cut in Q1 2023) even as monetary policy tightens in much of the world to fight supply-side inflation, sent US futures and global markets lower. S&P futures dropped 0.2% and Nasdaq 100 futures were down 0.4% after the underlying index slumped on 3.1% on Tuesday. The dollar was steady after rising the most in over a week while WTI crude climbed above $112 a barrel, set for a fourth session of gains. In cryptocurrencies, Bitcoin dipped below the closely watched $20,000 level on news crypto hedge fund 3 Arrows Capital was ordered to liquidate. The Nasdaq's Tuesday’s slump added to what was already one of the worst years in terms of big daily selloffs in US stocks. The S&P 500 Index has fallen 2% or more on 14 occasions, putting 2022 in the top 10 list, according to Bloomberg data. Not helping the tech sector, on Wednesday morning JPMorgan cut its earnings estimates across the sector, especially for companies exposed to online advertising, citing macroeconomic pressures, forex and company-specific dynamics. One of the chief drivers for overnight weakness, China's Xi said during a trip Tuesday to Wuhan where the virus first emerged in late 2019 that relaxing Covid controls would risk too many lives in the world’s most populous country. China would rather endure some temporary impact on economic development than let the virus hurt people’s safety and health, he said, in remarks reported Wednesday by state media. As a result, China’s CSI 300 Index extended loss to 1.4% after the headline, while the yuan drops as much as 0.2% to trade 6.7132 against the dollar in the offshore market. Among key premarket movers, Tesla slipped in US premarket trading. The electric-vehicle maker laid off hundreds of workers on its Autopilot team as it shuttered a California facility, according to people familiar with the matter. Carnival slumped as Morgan Stanley analysts warned that the London and New York-listed cruise vacation company’s shares could lose all their value in the event of another demand shock. Pinterest gained 3.7% as the company’s co- founder and CEO Ben Silbermann quit and handed the reins to Google and PayPal veteran Bill Ready in a sign the social-media company will focus more on e-commerce. Also, despite the pervasive weakness, the Energy Select Sector SPDR Fund ETF (XLE) rebounded off key support (50% Fibonacci) relative to the SPDR S&P 500 ETF (SPY). That said, energy was alone and most other notable movers were down in the premarket: Carnival (CCL US) shares fall 8% premarket as Morgan Stanley analysts warned that the cruise vacation firm’s shares could lose all their value in the event of another demand shock. Nio (NIO US) shares drop 8.2% after short-seller Grizzly Research published a report on Tuesday alleging that the electric carmaker used battery sales to a related party to inflate revenue and boost net income margins. The company rejected the claims. Upstart Holdings (UPST US) shares slump about 9% after Morgan Stanley downgraded the consumer finance company to underweight from equal-weight amid rising cyclical headwinds. Ormat Technologies (ORA US) rallies as much as 5% after the renewable energy company is set to be included in the S&P Midcap 400 Index. 2U (TWOU US) shares rise 16% premarket. Indian online-education provider Byju’s has offered to buy the company in a cash deal that values the US-listed edtech firm at more than $1 billion, a person familiar with the matter said. Watch Amazon (AMZN US) shares as Redburn initiated coverage of the stock with a buy recommendation and set a Street-high price target, saying “there is a clear path toward a $3 trillion value for AWS alone.” Shares in data center REITs could be active later in the trading session after short-seller Jim Chanos said in an FT interview that he’s betting against “legacy” data centers. Watch Digital Realty (DLR US) and Equinix (EQIX US), as well as data center operators Cyxtera Technologies (CYXT US) and Iron Mountain (IRM US) Investors are growing increasingly skeptical that the Fed can avoid a bruising economic downturn amid sharp interest-rate hikes. Evaporating consumer confidence is feeding into concerns that the US might tip into a recession. Naturally, Fed officials sought to play down recession risk. New York Fed President John Williams and San Francisco’s Mary Daly both acknowledged they had to cool inflation, but insisted that a soft landing was still possible. “It seems the market is in this tug of war between on the one hand the hope that we are close to the peak in inflation and rates, and on the other hand the challenge of a slowing economy and potential recession,” Emmanuel Cau, head of European equity strategy at Barclays Bank Plc, said in an interview with Bloomberg TV. “Central banks are walking a very tight line and to a certain extent dictate the mood in the markets.” European equities snapped three days of gains, trading poorly but off worst levels with sentiment also hurt by China remaining committed to its zero-Covid approach. Spanish inflation unexpectedly surged to a record, dashing hopes that inflation in the euro zone’s fourth-biggest economy had peaked, and emboldening European Central Bank policy makers pushing for big increases in interest rates. The ECB should consider raising interest rates by twice the planned amount next month if the inflation outlook deteriorates, according to Governing Council member Gediminas Simkus, as calls not to exclude an outsized initial move grow. German benchmark bonds rose, while 10-year Treasury yields slipped to 3.16%. DAX lags, dropping as much as 1.8%. Real estate, autos and miners are the worst performing sectors. In notable moves in European stocks, Hennes & Mauritz (H&M) gained after the Swedish low-cost retailer’s earnings beat analyst estimates. Just Eat Takeaway.com NV tumbled to a record low after Berenberg analysts rated the stock sell, saying the food delivery firm’s UK business will remain under pressure. Here are some of the biggest European movers today: Just Eat Takeaway shares plunge as much as 21% after Berenberg initiated coverage with a sell rating, saying the firm’s UK business will remain under pressure and a sale of its Grubhub unit is unlikely to satisfy the bulls. Carnival stocks slumped over 12% in London as Morgan Stanley analysts warned that the cruise vacation firm’s shares could lose all their value in the event of another demand shock. Pearson drops as much as 6.1% after the education company was cut to sell at UBS, which reduced forecasts to reflect a weak outlook for 2022 college enrollments. Grifols shares plunge as much as 13% on a media report the Spanish plasma firm is weighing a capital raise of as much as EU2b to cut its debt. Diageo shares fall after downgrades for the spirits group from Deutsche Bank and Kepler Cheuvreux, while Pernod Ricard also dips on a rating cut from the latter. Diageo declines as much as 4.2%, Pernod Ricard -3.7% Fluidra shares fall as much as 8.4% after Santander cut its rating on the Spanish swimming pools company. The bank’s analyst Alejandro Conde cut the recommendation to neutral from outperform. H&M shares rise as much as 6.8% after the Swedish apparel retailer reported 2Q earnings that beat estimates. Jefferies said the margin beat in particular was reassuring, while Morgan Stanley said it was a “positive surprise” overall. Ipsen shares rise as much as 3.1% after UBS analyst Michael Leuchten said that accepting palovarotene refiling priority review should be a net present value and confidence boost. Asian stocks fell, halting a four-day gain, as renewed angst over the outlook for global economic growth and inflation help drive a selloff across most of the region’s equity markets. The MSCI Asia Pacific Index dropped as much as 1.5%, led by consumer discretionary and information sectors. Chinese equities in particular took a hit, as the CSI 300 Index fell 1.5% Wednesday after Xi Jinping reiterated his firm stance on Covid zero. Tech-heavy indexes in markets such as South Korea and Taiwan took the brunt of Wednesday’s drop amid lingering concerns that monetary tightening in much of the world to fight inflation will cause an economic slowdown. While Federal Reserve members have played down the risk of a US recession, gloomy data such as US consumer confidence have damped investor sentiment. “Volatility is going to be the enduring feature of the market, I suspect, for the next couple of quarters at least until we get a firm sense that peak inflation has passed,” John Woods, Credit Suisse Group AG’s Asia-Pacific chief investment officer, said in an interview with Bloomberg TV. “Markets, I think, have aggressively priced in quite a serious or steep recession.”  China’s four-day winning streak came to a halt, putting its advance toward a bull market on hold.  “We will continue to see a risk of targeted lockdowns, and that spoils the initial euphoria seen in the markets from the announcement on relaxation of quarantine requirements,” said Charu Chanana, market strategist at Saxo Capital Markets. “Still, economic growth will likely be prioritized as this is a politically important year for China.”  Japanese equities decline as investors digested data that showed a drop in US consumer confidence over inflation worries and increased concerns of an economic downturn.  The Topix Index fell 0.7% to 1,893.57 in Tokyo on Wednesday, while the Nikkei declined 0.9% to 26,804.60. Toyota Motor Corp. contributed the most to the Topix’s decline, decreasing 1.8%. Out of 2,170 shares in the index, 1,114 fell, 984 rose and 72 were unchanged. “There are concerns about stagflation,” said Hideyuki Suzuki a general manager at SBI Securities. “The consumer sentiment from the University of Michigan, which provides one of the fastest data points, has already shown poor figures.” Stocks in India tracked their Asian peers lower as brent rose to the highest level in two weeks, while high inflation and slowing global growth continued to dampen risk-appetite for global equities. The S&P BSE Sensex fell 0.3% to 53,026.97 in Mumbai, while the NSE Nifty 50 Index declined by an equal measure. Both gauges have lost more than 4% in June and are set for their third consecutive month of declines. The main indexes have dropped for all but one month this year. Twelve of the 19 sub-sector gauges compiled by BSE Ltd. eased, led by banking companies while power producers were the top performers.   Investors will also be watching the expiry of monthly derivative contracts on Thursday, which may lead to some volatility in the markets.  Hindustan Unilever was the biggest contributor to the Sensex’s decline, decreasing 3.5%. Out of 30 shares in the Sensex, 10 rose and 20 fell. The Bloomberg Dollar Spot Index inched up modestly as the greenback traded mixed against its Group-of-10 peers; the Swiss franc led gains while Antipodean currencies were the worst performers and the euro traded in a narrow range around $1.05. The relative cost to own optionality in the euro heading into the July meetings of the ECB and the Federal Reserve was too low for investors to ignore and has become less and less underpriced. The yen strengthened and US and Japanese bond yields fell. In rates, fixed income has a choppy start. Bund futures initially surged just shy of 200 ticks on a soft regional German CPI print before fading the entire move over the course of the morning as Spanish data hit the tape, delivering a surprise record 10% reading for June and more hawkish ECB comments crossed the wires. Treasuries and gilts followed with curves eventually fading a bull-steepening move. Long-end gilts underperform, cheapening ~4bps near 2.75%. Peripheral spreads are tighter to core.  Treasuries are slightly higher as US trading day begins, off the session lows reached as bund futures jumped after the first monthly drop since November in a German regional CPI gauge. Yields are lower across the curve, by 1bp-2bp for tenors out to the 10-year with long-end yields little changed; 10-year declined as much as 5.3bp vs as much as 8.2bp for German 10- year, which remains lower by ~3bp. Focal points for the US session include a final revision of 1Q GDP, comments by Fed Chair Powell, and anticipation of quarter-end flows favoring bonds. Quarter-end is anticipated to cause rebalancing flows into bonds; Wells Fargo estimated that $5b will be added to bonds, with most of the flows occurring Wednesday and Thursday. In commodities, crude futures advance. WTI drifts 0.3% higher to trade near $112.13. Base metals are mixed; LME tin falls 5.6% while LME zinc gains 0.4%. Spot gold falls roughly $5 to trade near $1,815/oz Looking ahead, the highlight will be the panel at the ECB Forum that includes Fed Chair Powell, ECB President Lagarde and BoE Governor Bailey. We’ll also be hearing from ECB Vice President de Guindos, the ECB’s Schnabel, the Fed’s Mester and Bullard, and the BoE’s Dhingra. On the data side, releases include German CPI for June, Euro Area money supply for May, and the final Euro Area consumer confidence reading for June. From the US, we’ll also get the third reading of Q1 GDP. Market Snapshot S&P 500 futures little changed at 3,829.00 STOXX Europe 600 down 0.8% to 412.69 MXAP down 1.3% to 159.96 MXAPJ down 1.6% to 531.04 Nikkei down 0.9% to 26,804.60 Topix down 0.7% to 1,893.57 Hang Seng Index down 1.9% to 21,996.89 Shanghai Composite down 1.4% to 3,361.52 Sensex little changed at 53,204.17 Australia S&P/ASX 200 down 0.9% to 6,700.23 Kospi down 1.8% to 2,377.99 German 10Y yield little changed at 1.59% Euro little changed at $1.0510 Brent Futures down 0.4% to $117.46/bbl Gold spot down 0.2% to $1,816.09 U.S. Dollar Index little changed at 104.55 Top Overnight News from Bloomberg The Fed’s Loretta Mester said she wants to see the benchmark lending rate reach 3% to 3.5% this year and “a little bit above 4% next year” to rein in price pressures even if that tips the economy into a recession The ECB should consider raising interest rates by twice the planned amount next month if the inflation outlook deteriorates, according to Governing Council member Gediminas Simkus, as calls not to exclude an outsized initial move grow ECB has “ample room” to hike in 25bps-50bps steps to “whatever rate we think, we consider reasonable,” Governing Council member Robert Holzmann said in interview with CNBC Swedish consumers are gloomier than they have been since the mid-1990s, as prices surge on everything from fuel to food and furniture China’s President Xi Jinping declared Covid Zero the most “economic and effective” policy for the nation, during a symbolic visit to Wuhan in which he cast the strategy as proof of the superiority of the country’s political system NATO moved one step closer to bolstering its eastern front with Russia after Turkey dropped its opposition to Swedish and Finnish bids to join the military alliance A more detailed look at markets courtesy of Newsquawk Asia-Pac stocks were pressured amid headwinds from the US where disappointing Consumer Confidence data added to the growth concerns. ASX 200 failed to benefit from better than expected Retail Sales and was dragged lower by weakness in miners and tech. Nikkei 225 fell beneath the 27,000 level as industries remained pressured by the ongoing power crunch. Hang Seng and Shanghai Comp. conformed to the negative picture in the region although losses in the mainland were initially stemmed after China cut its quarantine requirements which the National Health Commission caveated was not a relaxation but an optimization to make it more scientific and precise. Top Asian News Chinese President Xi said China's COVID prevention control and strategy is correct and effective and must stick with it, via state media. Shanghai will gradually reopen museums and scenic sports from July 1st, state media reports. US Deputy Commerce Secretary Graves said the US will take a balanced approach on Chinese tariffs and that a clear response on China tariffs is coming soon, according to Bloomberg. China State Council's Taiwan Affairs Office said it firmly opposes the US signing any agreement that has sovereign connotations with Taiwan, according to Global Times. BoJ Governor Kuroda said Japanese Core CPI reached 2.1% in April and May which is almost fully due to international energy prices and Japan's economy has not been affected much by the global inflationary trend so monetary policy will stay accommodative, according to Reuters. Japanese govt to issue power supply shortage warning for a fourth consecutive day on Thursday, according to a statement. European bourses are on the backfoot as the region plays catch-up to the losses on Wall Street yesterday. Sectors are mostly lower (ex-Energy) with a defensive tilt as Healthcare, Consumer Products, Food & Beverages, and Utilities are more cushioned than their cyclical peers. Stateside, US equity futures trade on either side of the unchanged mark with no stand-out performers thus far, with the contracts awaiting the next catalyst. Top European News UK expects defence spending to reach 2.3% of GDP and said PM Johnson will announce new military commitments to NATO, according to Reuters. UK Weighs Capping Maximum Stake in Online Casinos at £5 Europe Is the Only Region Where Earnings Estimates Are Rising European Gas Prices Rise as Supply Risks Add to Storage Concerns Gold Steady as Traders Weigh Fed Comments on US Recession Risks Choppy Start for Euro-Area Bonds on Mixed Inflation FX Dollar mostly bid otherwise as rebalancing demand underpins - DXY pivots 104.500 within 104.700-350 confines. Franc outperforms on rate and risk considerations - Usd/Chf breaches 0.9550 and Eur/Chf approaches parity. Euro erratic in line with conflicting inflation data - Eur/Usd rotates around 1.0500. Aussie and Kiwi undermined by downturn in sentiment - Aud/Usd loses 0.6900+ status, Nzd/Usd wanes from just over 0.6250. Yen rangy following firmer than forecast Japanese retail sales and BoJ Governor Kuroda reaffirming intent to remain accommodative - Usd/Jpy straddles 136.00. Nokkie welcomes oil worker wage agreement with unions to avert strike action, but Sekkie hampered by softer Swedish macro releases pre-Riksbank policy call tomorrow - Eur/Nok probes 10.3000, Eur/Sek hovers around 10.6800. Rand rattled by decline in Gold and ongoing SA power supply problems, but Rouble rallies irrespective of CBR and Russian Economy Ministry divergence over deflation. Central Banks ECB's Lane said there are two-way inflation risks: "on the one side, there could be forces that keep inflation higher than expected for longer. On the other side, we do have the risk of a slowdown in the economy, which would reduce inflationary pressure", via ECB. ECB's Holzmann said "We will have to make an assessment where the economic development is going and where inflation stands and afterwards there’s ample room to hike in 0.25 and 0.5 levels to whatever rate we think, we consider reasonable" via CNBC. ECB's Simkus said if data worsens, then he wants a 50bps July hike as an option, 50bps hike is very likely in September; ECB's fragmentation tool should serve as a deterrent, via Bloomberg. ECB's Herodotou said EZ inflation will peak this year, via CNBC. ECB's Wunsch said government aid may spell more rate hikes, via Bloomberg; 150bps of hikes by March 2023 is reasonable ECB is said to be weighting whether or not they should announce the size and duration of their upcoming bond-buying scheme, according to Reuters sources. Fed's Mester (2022, 2024 voter) said on a path towards restrictive interest rates; July debate between 50bps and 75bps hike, via CNBC. Mester said if inflation expectations become unanchored, monetary policy would have to act more forcefully; current inflation situation is a very challenging one, via Reuters. SARB Governor said a 50bps hike is "not off the table", Via Bloomberg CBR Governor said she does not see risks of deflation; sees room to cut rates; sticking to policy of floating RUB exchange rate. PBoC will step up implementation of prudent monetary policy, will keep liquidity reasonably ample. Fixed Income Bunds unwind all and a bit more of their hefty post-NRW CPI gains as other German states show smaller inflation slowdowns and Spanish HICP soars. Gilts suffer more pronounced fall from grace in relative terms and US Treasuries slip from overnight peaks in sympathy. UK debt and STIRs also await testimony from MPC member elect to see if newbie leans dovish, hawkish or middle of the road 10 year benchmarks settle off worst levels within 147.37-145.14, 112.66-11.85 and 117-12+/116-27 respective ranges awaiting comments from ECB, Fed and BoE heads at Sintra Forum. Commodities WTI and Brent front-month futures traded with no firm direction in early European hours before picking up modestly in recent trade. US Private Inventory (bbls): Crude -3.8mln (exp. -0.6mln), Cushing -0.7mln, Distillate +2.6mln (exp. -0.2mln) and Gasoline +2.9mln (exp. -0.1mln). Norway's Industri Energi and SAFE labour unions agreed a wage deal for oil drilling workers and will not go on strike, according to Reuters. OPEC to start today at 12:00BST/07:00EDT; JMMC on Thursday at 12:00BST/07:00EDT followed by OPEC+ at 12:30BST/07:30EDT, via EnergyIntel. Libya's NOC suspends oil exports from Es Sider port. Spot gold is under some mild pressure as the Buck and Bond yields picked up, with the yellow metal back to near-two-week lows Base metals are mixed but off best levels after President Xi reaffirmed China's COVID stance – LME copper fell back under USD 8,500/t US Event Calendar 07:00: June MBA Mortgage Applications, prior 4.2% 08:30: 1Q PCE Core QoQ, est. 5.1%, prior 5.1% 08:30: 1Q GDP Price Index, est. 8.1%, prior 8.1% 08:30: 1Q Personal Consumption, est. 3.1%, prior 3.1% 08:30: 1Q GDP Annualized QoQ, est. -1.5%, prior -1.5% Central Banks 09:00: Powell Takes Part in Panel Discussion at ECB Forum in Sintra 09:00: Lagarde, Powell, Bailey, Carstens Speak in Sintra 11:30: Fed’s Mester Speaks on Panel at ECB Forum in Sintra 13:05: Fed’s Bullard Makes Introductory Remarks DB's Jim Reid concludes the overnight wrap I'm finishing this off in a taxi on the way to the Eurostar this morning and I made the mistake of telling the driver I was slightly pressed for time. He seems to be taking the racing line everywhere and my motion sickness is kicking in. A little like this car journey, it's been another volatile 24 hours in markets, with a succession of weak data releases raising further questions about how close the US and Europe might be to a recession. That saw equities give up their initial gains to post a decent decline on the day, whilst there was little respite from central bankers either, with sovereign bonds selling off further as multiple speakers doubled down on their hawkish rhetoric. That comes ahead of another eventful day ahead on the calendar, with investors primarily focused on a panel featuring Fed Chair Powell, ECB President Lagarde and BoE Governor Bailey, as well as the flash German CPI print for June, who are the first G7 economy to release their inflation print for the month, which will provide some further clues on how fast central banks will need to move on rate hikes. Just as we go to print the NRW region of Germany has seen CPI print at 7.5% YoY, way below last month's 8.1%. This region is around a quarter of GDP so it could imply the national numbers will be notably softer when we get them later. The energy tax cuts were always going to come through in June so some respite was always possible but at first glance this seems materially below what might have been expected. This comes after a significant sovereign bond selloff in Europe once again yesterday as President Lagarde reiterated the central bank’s determination to bring down inflation, and described inflation pressures that were “broadening and intensifying”. And although Lagarde stuck to the existing script about the ECB raising rates by 25bps at the next meeting, we also heard from Latvia’s Kazaks who said that “front-loading the increase would be a reasonable choice” in the event that the situation with inflation or inflation expectations deteriorates. Lagarde did nod to this in part, saying that if the ECB was “to see higher inflation threatening to de-anchor inflation expectations, or signs of a more permanent loss of economic potential that limits resources availability, we would need to withdraw accommodation more promptly to stamp out the risk of a self-fulfilling spiral.” Separately on fragmentation, Lagarde said that they could “use flexibility in reinvesting redemptions” from PEPP starting July 1 in order to deal with the issue. For now, overnight index swaps are only pricing in a +31.3bps move in July from the ECB, so still closer to 25 than 50 for the time being. Meanwhile the rate priced in by year-end rose also by +7.9bps as investors interpreted the comments in a hawkish light. That supported a further rise in yields, with those on 10yr bunds up another +8.1bps yesterday, following on from their +10.7bps move in the previous session. That’s now almost reversed the -21.9ps move over the previous week, which itself was the third-largest weekly decline in bund yields for a decade, and brought the 10yr yield back up to 1.63%, so not far off its multi-year high of 1.77% seen last week. A similar pattern was seen elsewhere, with 10yr yields on 10yr OATs (+9.6bps), BTPs (+4.2bps) and gilts (+7.2bps) all moving higher too. Things turned near the European close with some poor US data releases piling on to some lacklustre confidence figures in Europe. Earlier in the day the GfK consumer confidence reading from Germany fell to -27.4 (vs. -27.3 expected), taking it to another record low. Separately in France, consumer confidence fell to 82 on the INSEE’s measure (vs. 84 expected), which we haven’t seen since 2013. Then in the US, the Conference Board’s measure fell to 98.7 (vs. 100.0 expected), which is the lowest since February 2021. The Conference Board’s one-year ahead inflation expectations hit a record high of 8.0%, surpassing the June 2008 record of 7.7%, adding to the pessimism. Along with waning confidence, the Richmond Fed’s Manufacturing Index registered a -19, its lowest since the peak onset of the pandemic, versus expectations of -7 and a prior of -9, showing that production data has weakened as well. This put a serious damper on risk sentiment which drove Treasury yields and equities lower intraday during the New York session. 10yr Treasury yields ended down -2.8bps after trading as much as +5.5bps higher during the European session. They are down another -4bps this morning. Concerningly as well, there was a fresh flattening in the Fed’s preferred yield curve indicator (which is 18m3m – 3m), which came down another -9.1bps to 165bps, which is the flattest its been since early March. With that succession of bad news helping to dampen risk appetite, US equities gave up their opening gains to leave the S&P 500 down -2.01% on the day. Tech stocks saw the worst losses, with the NASDAQ (-2.98%) and the FANG+ (-3.74%) seeing even larger declines. And whilst there was a stronger performance in Europe, the STOXX 600 ended the day up just +0.27%, having been as high as +0.95% in the couple of hours before the close. We didn’t hear so much from the Fed ahead of Chair Powell’s appearance today, although New York Fed President Williams said that at the upcoming July meeting “I think 50 to 75 is clearly going to be the debate”. Markets are continuing to price something in between the two, although since the last Fed meeting futures have been consistently closer to 75 than 50, with 69.0 bps right now. Those sharp losses in US equities are echoing across Asia this morning. The Hang Seng (-1.86%) is leading the losses followed by the Kospi (-1.82%), the Nikkei (-1.07%) and the ASX 200 (-1.06%). Over in mainland China, the Shanghai Composite (-0.77%) and the CSI (-0.80%) are slightly out-performing after yesterday’s surprise move by China to slash the quarantine period for inbound travellers (more on this below). Looking ahead, US stock index futures point to a positive opening with contracts on the S&P 500 (+0.18%) and NASDAQ 100 (+0.19%) mildly higher. Earlier today, data released showed that Japan’s retail sales advanced for the third consecutive month in May (+3.6% y/y) but lower than the consensus of +4.0%, but with the previous month's data revised up to +3.1% (vs +2.9% preliminary). Meanwhile, South Korea’s consumer sentiment index (CSI) fell sharply to 96.4 in June (vs 102.6 in May), sliding below the long-term average of 100 for the first time since Feb 2021. Separately, Australia’s retail sales put in another strong performance as it climbed +0.9% m/m in May, surpassing analyst estimates of a +0.4% increase. Oil has fallen back slightly overnight after three sessions of gains with Brent futures down -0.84% at $116.99 and WTI futures (-0.64%) at $111.04/bbl as I type. Just after we went to press yesterday, it was also announced that China would be shortening the required quarantine period for inbound travellers to one week from two. So although China is still very-much committed to a Covid-zero strategy for the time being, this step towards loosening rather than tightening restrictions is an interesting development that helped support Chinese equities in yesterday’s session towards the close which filtered through into early northern hemisphere risk performance. In terms of other data yesterday, there were signs that US house price growth might finally be slowing somewhat, with the S&P CoreLogic Case-Shiller index up by +20.4% in April, which is down slightly from the +20.6% gain in March. So still a long way from an absolute decline, but that marks a reversal in the trend after the previous 4 months of rises in the year-on-year measure. To the day ahead now, and the highlight will likely be the panel at the ECB Forum that includes Fed Chair Powell, ECB President Lagarde and BoE Governor Bailey. We’ll also be hearing from ECB Vice President de Guindos, the ECB’s Schnabel, the Fed’s Mester and Bullard, and the BoE’s Dhingra. On the data side, releases include German CPI for June, Euro Area money supply for May, and the final Euro Area consumer confidence reading for June. From the US, we’ll also get the third reading of Q1 GDP. Tyler Durden Wed, 06/29/2022 - 08:00.....»»

Category: smallbizSource: nytJun 29th, 2022

Economic Winter Has Arrived

Economic Winter Has Arrived Authored by Doug French via The Mises Institute, The average card-carrying Austrian would say that the Federal Reserve is creating money by the bale, with evidence being Consumer Price Index prints of 8.6 percent per the Bureau of Labor Statistics or over 15 percent per John Williams’s shadowstats.com computation based on the way the government calculated CPI back in 1980. Surely, at best, the US dollar is only the cleanest dirty shirt in the currency laundry basket. But Uncle Sam’s dollar continues to strengthen (vis-à-vis other government fiat), with the result being market crashes in … everything. “People have started to realize that when the dollar goes up, it’s not good for anybody,” Alhambra Investments’ Jeff Snider told Maggie Lake on Real Vision. Snider’s “anybody” doesn’t just mean stock, bond, and crypto punters, but Joe and Jane Lunch Bucket as well. A strong dollar “really tells you that there’s something really amiss in the global financial system, global economy, and global monetary system,” Snider said, covering all the bases. So what gives? The dollar’s value is a symptom, and when it goes up, “what that tells you is that there’s tightening in the global monetary system for a variety of reasons, usually self-reinforcing reasons,” Snider explained. Money is tight, markets are risk averse, and a recession is coming forthwith. With Jerome Powell and company pushing up rates, albeit in the market’s dust, and instituting quantitative tightening, it would seem the Fed is doing the wrong thing at the wrong time, unless the Eccles Building crowd wants to bring the recession to Americans as soon as possible, hoping the downdraft will cleanse the malinvestments that have built up since the post-2008 zero interest rate period and especially the papering over of the covid crash with monetary and fiscal handouts.  Or, as David Rosenberg told Alex Gurevich: We had several very repeated large scale fiscal stimulus packages. The last one in March of last year, clearly unnecessary untargeted stimulus checks and endless jobless benefits, … really created distortions in the labor market to this day. There have been inversions along various points of the yield curve “telling us that something is just not right there,” Snider claims. All of this “tells you that the chances of something negative happening have been rising.” And more quickly during the past month. So, while employment numbers have been robust, employees’ 401(K)s, as a recent cartoon depicted, are down to just a K. Despite what we’re led to believe, the Fed is as political as, well, the Supreme Court, it turns out. Powell’s army of PhD economists only has one gear to play with: the ability to create money at different speeds or hit the monetary brake. Chair Powell can do nothing about supply shocks, like straightening the supply chain, making the unwilling go back to work, or changing China’s covid policy. Monetary magic won’t make this price inflation vanish.  GDP (gross domestic product), for what it’s worth, was negative in this year’s first quarter, but Snider pointed out that last year's third and fourth quarters were also weak: “Three straight quarters of really low, almost zero numbers.” The ISM Purchasing Managers' Index has also been nose-diving. Snider pointed out that the ISM level is the same as in 2019 and headed in the same downward direction. Three years ago, the Fed was cutting rates, yet this time they are hiking rates.  According to Snider, the marketplace believes Powell is playing politics, feeling consumers’ pain and “raising rates for reasons that are their own.” And with that, “there’s that risk of rates continuing to go higher.” To that end, “if the name of the game is to kill this sort of pernicious supply-side inflation, a recession is the only way we’re going to be able to do it,” Rosenberg told Real Vision. Consumers already feel the pain. “The University of Michigan's closely watched Surveys of Consumers consumer sentiment index slumped to 50.2 in the preliminary June survey, marking the lowest level recorded by the survey, which dates back to the mid-'70s,” reports Yahoo. Murray Rothbard explained in Economic Controversies: For without the anodyne of continuing inflation of money, the distortions and misallocations of production, the overinvestment in uneconomic capital projects and the excessively high prices and wages in those capital goods industries become evident and obvious. It is then that the inevitable recession sets in, the recession being the reaction by which the market economy readjusts itself, liquidates unsound investments, and realigns prices and outputs of the economy so as to eliminate the unsound consequences of the boom. The recovery arrives when the readjustment has been completed. “There's been 14 Fed rate hiking cycles in the post–World War II experience, 14,” Rosenberg emphasized. “Eleven landed the economy in a recession. I pose the question back to you, is that just a coincidence? Or is it really a pattern? The Fed has had its thumb prints on every expansion, on every bull market, on every recession, and every bear market, the Fed has had its thumb print.” Chairman Powell is doing his part, so say goodbye to unsound investments.  Tyler Durden Tue, 06/28/2022 - 15:05.....»»

Category: worldSource: nytJun 28th, 2022

Futures, Commodities Jump After China Cuts Quarantine

Futures, Commodities Jump After China Cuts Quarantine US stock futures rebounded from Monday's modest losses and traded near session highs after China reduced quarantine times for inbound travelers by half - to seven days of centralized quarantine and three days of health monitoring at home -  the biggest shift yet in a Covid-19 policy that has left the world’s second-largest economy isolated as it continues to try and eliminate the virus. The move, which fueled optimism about stronger economic growth and boosted appetite for both commodities and risk assets, sent S&P 500 futures and Nasdaq 100 contracts higher by 0.6% each at 7:15 a.m. in New York, setting up heavyweight technology stocks for a rebound. Mining and energy shares led gains in Europe’s Stoxx 600 and an Asian equity index erased losses to climb for a fourth session. 10Y TSY yields extended their move higher rising to 3.25% or about +5bps on the session, while the dollar and bitcoin were flat, and oil and commodity-linked currencies strengthened. In premarket trading, the biggest mover was Kezar Life Sciences which soared 85% after reporting positive results for its lupus drug. On the other end, Robinhood shares fell 3.2%, paring a rally yesterday sparked by news that FTX is exploring whether to buy the company. In a statement, FTX head Sam Bankman-Fried said he is excited about the firm’s business prospects, but “there are no active M&A conversations with Robinhood." Here are some of the other most notable premarket movers" Playtika (PLTK US) shares rallied 11% in premarket trading after a report that private equity firm Joffre Capital agreed to acquire a majority stake in the gaming company from a Chinese investment group for $21 a share. Nike (NKE US) shares fell 2.3% in US premarket trading, with analysts reducing their price targets after the company gave a downbeat forecast for gross margin and said it was being cautious in its outlook for the China market. Spirit Airlines (SAVE US) shares rise as much as 5% in US premarket trading after JetBlue boosted its all-cash bid in response to an increased offer by rival suitor Frontier in the days before a crucial shareholder vote. Snowflake (SNOW US) rises 3.3% in US premarket trading after Jefferies upgraded the stock to buy from hold, saying its valuation is now “back to reality” and offers a good entry point given the software firm’s long-term targets. Sutro Biopharma (STRO US) shares rise 34% in US premarket trading after the company and Astellas said they will collaborate to advance development of immunostimulatory antibody-drug conjugates, which are a modality for treating tumors and designed to boost anti-cancer activity. State Street (STT US) shares could be in focus after Deutsche Bank downgraded the stock to hold, while lowering EPS estimates and price targets across interest rate sensitive coverage of trust banks and online brokers. US bank stocks may be volatile during Tuesday’s trading session after the lenders announced a wave of dividend increases following last week’s successful stress test results. Stock rallies have proved fleeting this year as higher borrowing costs to fight inflation restrain economic activity in a range of nations. European Central Bank President Christine Lagarde affirmed plans for an initial quarter-point increase in interest rates in July, but said policy makers are ready to step up action to tackle record inflation if warranted. Some analysts also argue still-bullish earnings estimates are too optimistic. Earnings revisions are a risk with the US economy set to slow next year, though China emerging from Covid strictures could act as a global buffer, according to Lorraine Tan, Morningstar director of equity research. “You got a US slowdown in 2023 in terms of growth, but you have China hopefully coming out of its lockdowns,” Tan said on Bloomberg Radio. In Europe, stocks are well bid with most European indexes up over 1%. Euro Stoxx 50 rose as much as 1.2% before drifting off the highs. Miners, energy and auto names outperform. The Stoxx 600 Basic Resources sub-index rises as much as 3.5% led by heavyweights Rio Tinto and Anglo American, as well as Polish copper producer KGHM and Finnish forestry companies Stora Enso and UPM- Kymmene. Iron ore and copper reversed losses after China eased its quarantine rules for new arrivals, while oil gained for a third session amid risks of supply disruptions. Iron ore in Singapore rose more than 4% after being firmly lower earlier in the session, while copper and other base metals also turned higher. Here are the biggest European movers: Luxury stocks climb boosted by an easing of Covid-19 quarantine rules in the key market of China. LVMH shares rise as much as 2.5%, Richemont +3.1%, Kering +3%, Moncler +3% Energy and mining stocks are the best-performing groups in the rising Stoxx Europe 600 index amid commodity gains. Shell shares rise as much as 3.8%, TotalEnergies +2.7%, BP +3.4%, Rio Tinto +4.6%, Glencore +3.9% Banco Santander shares rise as much as 1.8% after a report that the Spanish bank has hired Credit Suisse and Goldman Sachs for its bid to buy Mexico’s Banamex. GN Store Nord shares gain as much as 4.2% after Nordea resumes coverage on the hearing devices company with a buy rating. Swedish Match shares rise as much as 4% as Philip Morris International’s offer document regarding its bid for the company has been approved and registered by the Swedish FSA. Wise shares decline as much as 15%, erasing earlier gains after the fintech firm reported full- year earnings. Citi said the results were “mixed,” with strong revenue growth being offset by lower profitability. UK water stocks decline as JPMorgan says it is turning cautious on the sector on the view that future regulated returns could surprise to the downside, in a note cutting Severn Trent to underweight. Severn Trent shares fall as much as 6%, Pennon -7.7%, United Utilities -2.3% Akzo Nobel falls as much as 4.5% in Amsterdam trading after the paint maker announced the appointment of former Sulzer leader Greg Poux-Guillaumeas chief executive officer, succeeding Thierry Vanlancker. Danske Bank shares fall as much as 4%, as JPMorgan cut its rating on the stock to underweight, saying in a note that risks related to Swedish property will likely create some “speed bumps” for Nordic banks though should be manageable. In the Bavarian Alps, limiting Russia’s profits from rising energy prices that fuel its war in Ukraine have been among the main topics of discussion at a Group of Seven summit. G-7 leaders agreed that they want ministers to urgently discuss and evaluate how the prices of Russian oil and gas can be curbed. Earlier in the session, Asian stocks erased earlier losses as China’s move to ease quarantine rules for inbound travelers bolstered sentiment. The MSCI Asia Pacific Index rose as much as 0.6% after falling by a similar magnitude. The benchmark is set for a fourth day of gains, led by the energy and utilities sectors. BHP and Toyota contributed the most to the gauge’s advance, while China’s technology firms were among the biggest losers as a plan by Tencent’s major backer to further cut its stake fueled concern of more profit-taking following a strong rally.   A move by Beijing to cut quarantine times for inbound travelers by half is helping cement gains which have made Chinese shares the world’s best-performing major equity market this month. The nation’s stocks are approaching a bull market even as their recent rise pushes them to overbought levels. Still, the threat of a sharp slowdown in the world’s largest economy may pose a threat to the outlook. “US recession risk is still there and I think that’ll obviously have impact on global sectors,” Lorraine Tan, director of equity research at Morningstar, said on Bloomberg TV. “Even if we do get some China recovery in 2023, which could be a buffer for this region, it’s not going to offset the US or global recession.”  Most stock benchmarks in the region finished higher following China’s move to ease its travel rules. Main equity measures in Japan, Hong Kong, South Korea and Australia rose while those in Taiwan and India fell. Overall, Asian stocks are on course to complete a monthly decline of about 4%.    Meanwhile, the People’s Bank of China pledged to keep monetary policy supportive to help the nation’s economy. It signaled that stimulus would likely focus on boosting credit rather than lowering interest rates. Japanese stocks gained as investors adjusted positions heading into the end of the quarter.  The Topix Index rose 1.1% to 1,907.38 as of the market close in Tokyo, while the Nikkei 225 advanced 0.7% to 27,049.47. Toyota Motor contributed most to the Topix’s gain, increasing 2.2%. Out of 2,170 shares in the index, 1,736 rose and 374 fell, while 60 were unchanged. “As the end of the April-June quarter approaches, there is a tendency for institutional investors to rebalance,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley. “It will be easier to buy into cheap stocks, which is a factor that will support the market in terms of supply and demand.” India’s benchmark stock gauge ended flat after trading lower for most of the session as investors booked some profits after a three-day rally.  The S&P BSE Sensex closed little changed at 53,177.45 in Mumbai, while the NSE Nifty 50 Index gained 0.1%.  Six of the the 19 sector sub-gauges compiled by BSE Ltd. dropped, led by consumer durables companies, while oil & gas firms were top performers.  ICICI Bank was among the prominent decliners on the Sensex, falling 1%. Out of 30 shares in the Sensex index, 17 rose and 13 fell. In rates, fixed income sold off as treasuries remained under pressure with the 10Y yield rising as high as 3.26%, following steeper declines for euro-zone and UK bond markets for second straight day and after two ugly US auctions on Monday. Yields across the curve are higher by 2bp-5bp led by the 7-year ahead of the $40 billion auction. In Europe, several 10-year yields are 10bp higher on the day after comments by an ECB official spurred money markets to price in more policy tightening. WI 7Y yield at around 3.32% exceeds 7-year auction stops since March 2010 and compares with 2.777% last month. Monday’s 5-year auction drew a yield more than 3bp higher than its yield in pre-auction trading just before the bidding deadline, a sign dealers underestimated demand. Traders attributed the poor results to factors including short base eroded by last week’s rally, recently elevated market volatility discouraging market-making, and sub-par participation during what is a popular vacation week in the US. Focal points for US session include 7-year note auction at 1pm ET; a 5-year auction Monday produced notably weak demand metrics. The belly of the German curve underperformed as markets focus  on hawkish comments from ECB officials: 5y bobl yields rose 10 bps near 1.46%, red pack euribors dropped 10-13 ticks and ECB-dated OIS rates priced in 163 basis points of tightening by year end. In FX, Bloomberg dollar spot index is near flat as the greenback reversed earlier losses versus all of its Group-of-10 peers apart from the yen while commodity currencies were the best performers. The euro rose above $1.06 before paring gains after ECB Governing Council member Martins Kazaks said the central bank should consider a first rate hike of more than a quarter-point if there are signs that high inflation readings are feeding expectations. Money markets ECB raised tightening wagers after his remarks. ECB President Lagarde later affirmed plans for an initial quarter-point increase in interest rates in July but said policy makers are ready to step up action to tackle record inflation if warranted. The ECB is likely to drain cash from the banking system to offset any bond purchases made to restrain borrowing costs for indebted euro-area members, Reuters reported, citing two sources it didn’t identify. Elsewhere, the pound drifted against the dollar and euro after underperforming Monday, with focus on quarter-end flows, lingering Brexit risks and the UK economic outlook. Scottish First Minister Nicola Sturgeon due to speak later on how she plans to hold a second referendum on Scottish independence by the end of next year. The yen gave up an Asia session gain versus the dollar as US equity futures reversed losses. The Australian dollar rose after China cut its mandatory quarantine period to 10 days from three weeks for inbound visitors in its latest Covid-19 guidance. JPY was the weakest in G-10, drifting below 136 to the USD. In commodities, oil rose for a third day with global output threats compounding already red-hot markets for physical supplies and as broader financial sentiment improved. Brent crude breached $117 a barrel on Tuesday, but some of the most notable moves in recent days have been in more specialist market gauges. A contract known as the Dated-to-Frontline swap -- an indicator of the strength in the key North Sea market underpinning much of the world’s crude pricing -- hit a record of more than $5 a barrel. The rally comes amid growing supply outages in Libya and Ecuador, exacerbating ongoing market tightness. Oil prices also rose Tuesday as broader sentiment was boosted by China’s move to cut in half the time new arrivals must spend in isolation, the biggest shift yet in its pandemic policy. Meanwhile, the G-7 tasked ministers to urgently discuss an oil price cap on Russia.  Finally, the prospect of additional supply from two of OPEC’s key producers also looks limited. On Monday Reuters reported that French President Emmanuel Macron told his US counterpart Joe Biden that the United Arab Emirates and Saudi Arabia are already pumping almost as much as they can. In the battered metals space, LME nickel rose 2.7%, outperforming peers and leading broad-based gains in the base-metals complex. Spot gold rises roughly $3 to trade near $1,826/oz Looking to the day ahead now, data releases include the FHFA house price index for April, the advance goods trade balance and preliminary wholesale inventories for May, as well as the Conference Board’s consumer confidence for June and the Richmond Fed’s manufacturing index. From central banks, we’ll hear from ECB President Lagarde, the ECB’s Lane, Elderson and Panetta, the Fed’s Daly, and BoE Deputy Governor Cunliffe. Finally, NATO leaders will be meeting in Madrid. Market Snapshot S&P 500 futures up 0.5% to 3,922.50 STOXX Europe 600 up 0.6% to 417.65 MXAP up 0.4% to 162.36 MXAPJ up 0.4% to 539.85 Nikkei up 0.7% to 27,049.47 Topix up 1.1% to 1,907.38 Hang Seng Index up 0.9% to 22,418.97 Shanghai Composite up 0.9% to 3,409.21 Sensex down 0.3% to 52,990.39 Australia S&P/ASX 200 up 0.9% to 6,763.64 Kospi up 0.8% to 2,422.09 German 10Y yield little changed at 1.62% Euro little changed at $1.0587 Brent Futures up 1.4% to $116.65/bbl Gold spot up 0.3% to $1,828.78 U.S. Dollar Index little changed at 103.89 Top Overnight News from Bloomberg In Tokyo’s financial circles, the trade is known as the widow- maker. The bet is simple: that the Bank of Japan, under growing pressure to stabilize the yen as it sinks to a 24-year low, will have to abandon its 0.25% cap on benchmark bond yields and let them soar, just as they already have in the US, Canada, Europe and across much of the developing world Bank of Italy Governor Ignazio Visco may leave his post in October, paving the way for the appointment of a high profile executive close to Premier Mario Draghi, daily Il Foglio reported NATO is set to label China a “systemic challenge” when it outlines its new policy guidelines this week, while also highlighting Beijing’s deepening partnership with Russia, according to people familiar with the matter The PBOC pledged to keep monetary policy supportive to aid the economy’s recovery, while signaling that stimulus would likely focus on boosting credit rather than lowering interest rates A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mixed with the region partially shrugging off the lacklustre handover from the US. ASX 200 was kept afloat with energy leading the gains amongst the commodity-related sectors. Nikkei 225 swung between gains and losses with upside capped by resistance above the 27K level. Hang Seng and Shanghai Comp. were pressured amid weakness in tech and lingering default concerns as Sunac plans discussions on extending a CNY bond and with Evergrande facing a wind-up petition. Top Asian News China is to cut quarantine time for international travellers, according to state media cited by Reuters. Shanghai Disneyland (DIS) will reopen on June 30th, according to Reuters. PBoC injected CNY 110bln via 7-day reverse repos with the rate at 2.10% for a CNY 100bln net daily injection. China's state planner official said China faces new challenges in stabilising jobs and prices due to COVID and risks from the Ukraine crisis, while the NDRC added they will not resort to flood-like stimulus but will roll out tools in its policy reserve in a timely way to cope with challenges, according to Reuters. China's state planner NDRC says China is to cut gasoline and diesel retail prices by CNY 320/tonne and CNY 310/tonne respectively from June 29th. BoJ may have been saddled with as much as JPY 600bln in unrealised losses on its JGB holdings earlier this month, as a widening gap between domestic and overseas monetary policy pushed yields higher and prices lower, according to Nikkei. European bourses are firmer as sentiment picked up heading into the cash open amid encouraging Chinese COVID headlines. Sectors are mostly in the green with no clear theme. Base metals and Energy reside as the current winners and commodities feel a boost from China’s COVID updates. Stateside, US equity futures saw a leg higher in tandem with global counterparts, with the RTY narrowly outperforming. Twitter (TWTR) in recent weeks provided Tesla (TSLA) CEO Musk with historical tweet data and access to its so-called fire hose of tweets, according to WSJ sources. Top European News UK lawmakers voted 295-221 to support the Northern Ireland Protocol bill in the first of many parliamentary tests it will face during the months ahead, according to Reuters. Scotland's First Minister Sturgeon will set out a plan today for holding a second Scottish Independence Referendum, according to BBC News. ECB’s Kazaks Says Worth Looking at Larger Rate Hike in July G-7 Latest: Leaders Want Urgent Evaluation of Energy Price Caps Ex- UBS Staffer Wants Payout for Exposing $10 Billion Swiss Stash SocGen Blames Clifford Chance in $483 Million Gold Suit GSK’s £40 Billion Consumer Arm Picks Citi, UBS as Brokers Russian Industry Faces Code Crisis as Critical Software Pulled ECB ECB's Lagarde said inflation in the euro area is undesirably high and it is projected to stay that way for some time to comeFragmentation tool, via the ECB. ECB's Kazaks said 25bps in July and 50bps in September is the base case, via Bloomberg TV. Kazaks said it is worth looking at a 50bps hike in July and front-loading hikes might be reasonable. Fragmentation risks should not stand in the way of monetary policy normalisation. If necessary, the ECB will come up with tools to address fragmentation. ECB's Wunsch said he is comfortable with a 50bps hike in September; adds that 200bps of hikes are needed relatively fast, and anti-fragmentation tool should have no limits if market moves are unwarranted, via Reuters. Bank of Italy said Governor Visco's resignation is not on the table, according to a spokesperson cited by Reuters. Fixed Income Bond reversal continues amidst buoyant risk sentiment, hawkish ECB commentary and supply. Bunds lose two more big figures between 146.80 peak and 144.85 trough, Gilts down to 112.06 from 112.86 at best and 10 year T-note retreats within 117-01/116-14 range FX DXY regroups on spot month end as yields rally and rebalancing factors offer support - index within 103.750-104.020 range vs Monday's 103.660 low. Euro continues to encounter resistance above 1.0600 via 55 DMA (1.0614 today); Yen undermined by latest bond retreat and renewed risk appetite - Usd/Jpy eyes 136.00 from low 135.00 area and close to 134.50 yesterday. Aussie breaches technical and psychological resistance with encouragement from China lifting or easing more Covid restrictions - Aud/Usd through 10 DMA at 0.6954. Loonie and Norwegian Krona boosted by firm rebound in oil as France fans supply concerns due to limited Saudi and UAE production capacity - Usd/Cad sub-1.2850 and Eur/Nok under 10.3500. Yuan receives another PBoC liquidity boost to compliment positive developments on the pandemic front, but Rand hampered by latest power cut warning issued by SA’s Eskom Commodities WTI and Brent futures were bolstered in early European hours amid encouragement seen from China's loosening of COVID restrictions. Spot gold is uneventful, around USD 1,825/oz in what has been a sideways session for the bullion since the reopening overnight. Base metals are posting broad gains across the complex - with LME copper back above USD 8,500/t amid China-related optimism. US Event Calendar 08:30: May Advance Goods Trade Balance, est. -$105b, prior -$105.9b, revised -$106.7b 08:30: May Wholesale Inventories MoM, est. 2.1%, prior 2.2% May Retail Inventories MoM, est. 1.6%, prior 0.7% 09:00: April S&P CS Composite-20 YoY, est. 21.15%, prior 21.17% 09:00: April S&P/CS 20 City MoM SA, est. 1.95%, prior 2.42% 09:00: April FHFA House Price Index MoM, est. 1.4%, prior 1.5% 10:00: June Conf. Board Consumer Confidenc, est. 100.0, prior 106.4 Conf. Board Expectations, prior 77.5; Present Situation, prior 149.6 10:00: June Richmond Fed Index, est. -5, prior -9 DB's Jim Reid concludes the overnight wrap It's been a landmark night in our household as last night was the first time the 4-year-old twins slept without night nappies. So my task this morning after I send this to the publishers is to leave for the office before they all wake up so that any accidents are not my responsibility. Its hopefully the end of a near 7-year stretch of nappies being constantly around in their many different guises and states of unpleasantness. Maybe give it another 30-40 years and they'll be back. Talking of unpleasantness, as we near the end of what’s generally been an awful H1 for markets, yesterday saw the relief rally from last week stall out, with another bond selloff and an equity performance that fluctuated between gains and losses before the S&P 500 (-0.30%) ended in negative territory. In terms of the specific moves, sovereign bonds lost ground on both sides of the Atlantic, with yields on 10yr Treasuries up by +7.0bps following their -9.6bps decline from the previous week. That advance was led by real rates (+9.6bps), which look to have been supported by some decent second-tier data releases from the US during May yesterday. The preliminary reading for US durable goods orders surprised on the upside with a +0.7% gain (vs. +0.1% expected). Core capital goods orders also surprised on the upside with a +0.8% advance (vs. +0.2% expected). And pending home sales were unexpectedly up by +0.7% (vs. -4.0% expected). Collectively that gave investors a bit more confidence that growth was still in decent shape last month, which is something that will also offer the Fed more space to continue their campaign of rate hikes into H2. This morning 10yr USTs yields have eased -2.45 bps to 3.17% while 2yr yields (-4 bps) have also moved lower to 3.08%, as we go to press. Staying at the front end, when it comes to those rate hikes, if you look at Fed funds futures they show that investors are still only expecting them to continue for another 9 months, with the peak rate in March or April 2023 before markets are pricing in at least a full 25bps rate cut by end-2023 from that point. I pointed out in my chart of the day yesterday (link here) that the median time historically from the last hike of the cycle to the first cut was only 4 months, and last time it was only 7 months between the final hike in December 2018 and the next cut in July 2019. So it wouldn’t be historically unusual if Fed funds did follow that pattern whether that fits my view or not. Over in Europe yesterday there was an even more aggressive rise in yields, with those on 10yr bunds (+10.9bps), OATs (+11.0bps) and BTPs (+9.1bps) all rising on the day as they bounced back from their even larger declines over the previous week. That came as investors pared back their bets on a more dovish ECB that they’d made following the more negative tone last week, and the rate priced in by the December ECB meeting rose by +8.5bps on the day. For equities, the major indices generally fluctuated between gains and losses through the day. The S&P 500 followed that pattern and ultimately fell -0.30%, which follows its best daily performance in over 2 years on Friday Quarter-end rebalancing flows seem set to drive markets back-and-forth price this week. Even with the decline yesterday, the index is +6.36% higher since its closing low less than a couple of weeks ago. And over in Europe, the STOXX 600 (+0.52%) posted a decent advance, although that masked regional divergences, including losses for the CAC 40 (-0.43%) and the FTSE MIB (-0.86%). Energy stocks strongly outperformed in the index, supported by a further rise in oil prices that left both Brent crude (+1.74%) and WTI (+1.81%) higher on the day. G7 ministers reportedly agreed to explore a cap on Russian gas and oil exports, with the official mandate expected to be announced today, but it would take time for any mechanism to be developed. The impact on global oil supply is not clear: if Russia retaliates supply could go down, if this enables other third parties to import more Russian oil supply could go up. Elsewhere, political unrest in Libya and Ecuador could simultaneously hit oil supply. In early Asian trading, oil prices continue to move higher, with Brent futures up +1.13% at $116.39/bbl and WTI futures gaining +1% to just above the $110/bbl level. Asian equity markets are struggling a bit this morning. The Hang Seng (-1.00%) is the largest underperformer amid a weakening in Chinese tech stocks whilst the Nikkei (-0.15%), Shanghai Composite (-0.15%) and CSI (-0.19%) are trading in negative territory in early trade. Elsewhere, the Kospi (-0.05%) is just below the flatline. US stock futures are slipping with contracts on the S&P 500 (-0.12%) and NASDAQ 100 (-0.18%) both slightly lower. In central bank news, the People’s Bank of China (PBOC) Governor Yi Gang pledged to provide additional monetary support to the economy to recover from Covid outbreaks and lockdowns and other stresses. In a rare interview conducted in English, the central bank chief did caution though that the real interest rate is low thereby indicating limited room for large-scale monetary easing. Turning to geopolitical developments, the G7 summit continued in Germany yesterday, and in a statement it said they would “further intensify our economic measures against Russia”. Separately, NATO announced that it will increase the number of high readiness forces to over 300,000, with the alliance’s leaders set to gather in Madrid from today. And we’re also expecting a new round of nuclear talks with Iran to take place at some point this week, something Henry mentioned in his latest Mapping Markets out yesterday (link here), which if successful could in time pave the way for Iranian oil to return to the global market. Finally, whilst there were some decent May data releases from the US, the Dallas Fed’s manufacturing activity index for June fell to a 2-year low of -17.7 (vs. -6.5 expected). To the day ahead now, and data releases include Germany’s GfK consumer confidence for July, French consumer confidence for June, whilst in the US there’s the FHFA house price index for April, the advance goods trade balance and preliminary wholesale inventories for May, as well as the Conference Board’s consumer confidence for June and the Richmond Fed’s manufacturing index. From central banks, we’ll hear from ECB President Lagarde, the ECB’s Lane, Elderson and Panetta, the Fed’s Daly, and BoE Deputy Governor Cunliffe. Finally, NATO leaders will be meeting in Madrid. Tyler Durden Tue, 06/28/2022 - 08:00.....»»

Category: blogSource: zerohedgeJun 28th, 2022

Futures, Global Markets Rally, Bonds Slide As Traders Turn More Bullish

Futures, Global Markets Rally, Bonds Slide As Traders Turn More Bullish Following the best week for stocks in one month, global stocks extended gains on Monday on continued easing of fears for a hawkish Fed; US futures rose, with the Nasdaq 100 advancing 0.5% as by tech giants Amazon, Apple and Microsoft all rose in premarket trading. Tech shares also boosted indexes in Europe and Asia. Treasuries slipped, pushing the rate on the US 10-year note to 3.17%. Yields have retreated from June highs on growth worries, but whether that marks the end of the Treasury bear market is a live debate. The dollar fluctuated while oil and bitcoin rose. In the US premarket, major US technology and internet stocks were higher, poised to extend gains. The tech-heavy Nasdaq 100 closed up 7.5% last week, its best week since March. Among notable movers: Apple +0.6%, Microsoft +0.6%, Amazon.com +1%, Meta +0.8%, Nvidia +1.6% in premarket trading. Other notable premarket movers include: JD.com (JD US) is among the top performers in US-listed Chinese stocks, rising 5% in premarket trading, after tech investor Prosus disposed of its stake in JD.com for about $3.67 billion. Coinbase (COIN US) shares fall 4% in premarket trading as the stock was downgraded to sell from neutral, with a joint Street-low price target of $45 at Goldman Sachs, which cited the “continued downdraft” in crypto prices and drop in industry activity levels. Robinhood (HOOD US) shares rise 3.9% in premarket trading as Goldman Sachs analyst William Nance raised the recommendation on the stock to neutral from sell Epizyme (EPZM US) jumps 64% to $1.56 in US premarket trading after Ipsen announced the acquisition of the US biotech firm for $1.45/share in cash plus a contingent value right of $1/share. Selective Insurance Group (SIGI US) shares may be in focus after Morgan Stanley initiated an overweight rating on the stock, citing a favorable business model that will help the company’s margin to outperform peers. Keep an eye on WEC Energy Group (WEC US) as KeyBanc Capital Markets raised the recommendation on the stock to overweight from sector weight, citing “valuation dislocations” triggered by the recent industry volatility. As Goldman traders speculated over the weekend, Friday's massive Russell rebalance may have helped flush out any leftover liquidation trades, while the upcoming month- and quarter-end portfolio rebalancing by pensions could boost stocks by as much as 7% this week according to JPM's Marko Kolanovic. Further boosting bullish sentiment - if only temporarily - one of Wall Street’s biggest bears sees the rally in US stocks extending, prior to the selloff recommencing. Morgan Stanley's Michael Wilson say the S&P 500 Index may climb another 5% to 7%, before resuming losses. Meanwhile, investors are also parsing incoming data to work out if the highest inflation in a generation is close to topping out as that will give the Fed latitude to ease up on sharp interest-rate hikes, something the market last week aggressively repriced. A more troubling scenario is of lasting price pressures and tighter policy even as the global economy falters. “There’s a feeling that things aren’t as bad as we thought they were going to be,” Carol Pepper, founder of Pepper International, said on Bloomberg Radio. She added “there’s a hope that perhaps we’ve oversold, perhaps there’s not going to be a recession.” Traders are also monitoring a summit of the Group of Seven leaders, who plan to commit to indefinite support for Ukraine in its defense against Russia’s invasion. The G-7 in addition is weighing a price cap on Russian oil. As reported yesterday, the US, UK, Japan and Canada also plan to announce a ban on new gold imports from Russia during the G-7 summit. Prices for the precious metal naturally rose. European equities trade off session highs as an earlier rally in Asian tech stocks buoys sentiment. Miners, tech and autos are the strongest performing sectors in Europe. Euro Stoxx 50 rallies 1%. DAX outperforms peers, adding 1.2%, FTSE MIB lags, dropping 0.2%.  Among notable European stock moves, Prosus NV soared on plans to sell more of its $134 billion stake in Chinese internet giant Tencent Holdings Ltd. to finance a buyback program. Mediobanca SpA fell after the death of Italian entrepreneur Leonardo Del Vecchio, the single largest investor in the bank.  Here are some of the biggest European movers today: Prosus shares surge as much as 17% in Amsterdam after the tech investor said it will sell down its holding in Tencent to finance an open-ended share buyback program, which could help close the gap between the firm’s market value and the value of the Tencent stake, according to analysts. Mining stocks lead gains in the Stoxx 600 Index on Monday as iron ore and base metals recover ground amid signs of improvement in China’s economy. Rio Tinto shares rise as much as 4.4%, Anglo American +4.6%, Glencore +4.2% Nordex shares jump as much as 12% after the firm announced a EU139.2m cash injection from Acciona in a bid to increase liquidity and strengthen its balance sheet to shield itself against the risks of short term headwinds in the industry. Kion shares rise as much as 7.7% after Morgan Stanley upgraded the stock to overweight from underweight, saying that the structural case for warehouse and forklift companies remains intact even amid a de-rating for the stocks. Lundbeck soars as much as 15% after the Danish pharmaceutical company reported positive data in a clinical study of agitation in patients with Alzheimer’s dementia. Ocado shares fall as much as 3.1% after the stock was cut to neutral from outperform and PT slashed to 960p from 1,600p at Credit Suisse, with the broker saying new disclosures from the online grocer indicate that its prior assumptions were “too optimistic.” Ipsen shares drop as much as 5.1% after the pharmaceutical company announced the acquisition of US biotech Epizyme for $1.45/share in cash plus a contingent value right of $1/share. Analyst had mixed reactions to the deal. Mediobanca shares fall as much as 4.4% in Milan after news that Italian entrepreneur Leonardo Del Vecchio, the single largest investor in the bank with a stake of about 19.4%, has died. Wise shares drop as much as 5.3% after the money transfer firm said its CEO is facing a probe by UK regulators. Tecnicas Reunidas shares tumble as much as 17% after the company said it began arbitrage to recover excess costs in a dispute with the Sonatrach-Neptune Energy consortium over a contract for the Touat Gaz Plant in Algeria. Elsewhere, Russia defaulted on its foreign-currency sovereign debt for the first time in a century, the culmination of ever-tougher Western sanctions that shut down payment routes. Earlier in the session, Asian stocks advanced after battered technology shares rebounded as easing recession fears underpinned investor sentiment.  The MSCI Asia Pacific Index rose as much as 2.1%, its biggest intraday gain this month, as chip and internet companies including TSMC and Alibaba climbed. Tech-heavy markets such as Taiwan and South Korea extended gains made Friday, while an index of Asian tech stocks rallied for a second straight session after dropping to the lowest since September 2020.  Asian equities are bouncing back from a two-year low, as US Treasury yields retreat. Almost all markets in the region rose, with Hong Kong’s Hang Seng Index leading gains and China’s benchmark coming closer to a bull market as Shanghai’s leader declared victory in defending the financial hub against Covid. A Chinese tech index in Hong Kong advanced 4.7%. Still, the rally in technology shares may be short-lived, as global demand for consumer electronics remains fragile.  “Korea and Taiwan have high leverage to tech products, and we’ve seen a lot of that come under pressure so the end demand has slowed down,” Ray Sharma-Ong, investment director at Abrdn Asia, said in an interview with Bloomberg TV. “We expect continued outflows post this relief rally.” Japanese equities climbed as the latest comments from Federal Reserve officials buoyed sentiment on the economy and a reading on US inflation expectations eased.  The Topix Index rose 1.1% to 1,887.42 as of market close Tokyo time, while the Nikkei advanced 1.4% to 26,871.27. Sony Group Corp. contributed the most to the Topix’s gain, increasing 2.3%. Out of 2,170 shares in the index, 1,490 rose and 568 fell, while 112 were unchanged. Australia's S&P/ASX 200 index rose 1.9% to close at 6,706, the benchmark’s biggest daily gain since Jan. 28, as investors in Asia assessed whether inflation is bottoming and recession can be averted. The index’s biggest gains were seen in the financial, energy and tech sectors. In New Zealand, the S&P/NZX 50 index closed 1.7% higher at 10,997.92, the benchmark’s best day since March 1 Emerging-market stocks climbed to the highest in more than a week as China’s recovery from its virus-induced slump propels the Asian nation’s equities toward a bull market. Technology stocks led emerging-market equity gains, with China’s economy showing some improvement in June amid a further easing of pandemic curbs in Shanghai. Chinese shares look to be the best home for fresh money in Asia amid a tough investment environment, according to abrdn plc’s regional chairman Hugh Young. China plans to extend the yuan’s trading hours as it seeks to increase global investor participation in onshore currency trading as part of its internationalization push. In FX, the Bloomberg dollar spot index fell 0.2% as the greenback weakened against all of its Group-of-10 peers apart from the Australian dollar.  AUD and CHF are the weakest performers in G-10 FX, SEK and GBP outperform. The volatility term structures for the Group-of-4 currencies focus on the upcoming central bank meetings as there is little demand for long gamma in the front-end. The euro advanced, nearing $1.06 and European bonds fell broadly, with the exeption of Greece and Sweden, as focus turns to ECB President Christine Lagarde’s speech. Sterling rose for a second day, supported by a rally in global stocks that is limiting demand for the dollar. Gilts extended their slide across the curve, while money markets raised BOE tightening bets as haven- buying was unwound amid equity advances. In rates, Treasuries are weaker amid a selloff in core European rates, which extended losses after EU’s sale of EU2.5b four-year bonds. US yields are cheaper by nearly 4bp at long end, steepening 2s10s by ~2.4bp, 5s30s by ~1bp on the day; 10-year is up 3.6bp at ~3.17% with bunds and gilts lagging by additional 8bp and 5bp in the sector.  As Bloomberg notes, the broad risk-asset rally puts added cheapening pressure on Treasury yields with S&P 500 futures and Estoxx50 rising led by big gains for Asia stocks. Two coupon auctions slated for Monday may also weigh: Monday’s auctions include $46b 2- year at 11:30am ET and $47b 5-year notes at 1pm. The WI 2-year yield near 3.07% (vs 2.519% last month) is above auction stops since 2007; WI 5Y near 3.22% (vs 2.736% in May) exceeds results since 2008. IG dollar issuance expectations for the week are around $15b, although remain highly dependent on market conditions. The long- end of the curve may benefit this week from anticipated month- end demand; Bloomberg Indices estimated a 0.07yr Treasury index duration extension for July 1, slightly below 12-month average. In Europe, Gilts underperform Treasuries and bunds, cheaper by about 5-6bps at the long end. In commodities, industrial metals rebounded, while oil rose. Copper steadied and most other base metals rebounded after their worst week in a year as China’s economy showed signs of recovering and Goldman Sachs said global supplies were still constrained. Oil fluctuated near $107 a barrel in New York as investors monitored developments from the gathering of Group of Seven leaders; G7 leaders met to decide on a Russian oil price cap ahead of Iranian nuclear talks and on the week of the OPEC+ meeting. French CGT unions will participate in strikes at LNG terminals and gas storage facilities this week; strike in the energy sector on June 28th. Most base metals trade in the green; LME tin rises 6.8%, outperforming peers. LME zinc lags, dropping 0.9%. Spot gold maintains gains, adding ~$13 to trade near $1,840/oz. as some G-7 nations plan to announce ban on new gold imports from Russia Looking at today's US calendar, we get the May durable goods orders, capital goods orders, pending home sales, and June Dallas Fed manufacturing index. Market Snapshot S&P 500 futures up 0.7% to 3,944.50 STOXX Europe 600 up 1.2% to 417.68 MXAP up 1.6% to 161.83 MXAPJ up 1.8% to 538.51 Nikkei up 1.4% to 26,871.27 Topix up 1.1% to 1,887.42 Hang Seng Index up 2.4% to 22,229.52 Shanghai Composite up 0.9% to 3,379.19 Sensex up 1.2% to 53,368.36 Australia S&P/ASX 200 up 1.9% to 6,705.95 Kospi up 1.5% to 2,401.92 Brent Futures up 0.2% to $113.31/bbl Gold spot up 0.7% to $1,840.40 U.S. Dollar Index down 0.29% to 103.88 German 10Y yield little changed at 1.49% Euro up 0.3% to $1.0580 Top Overnight News from Bloomberg ECB policy makers gather on a Portuguese hillside on Monday with the sinking feeling that their rush to tackle the inflation shock they failed to forecast risks both a recession and echoes of the euro area’s sovereign debt crisis It was while sitting apparently alone in a London hotel basement that Christine Lagarde engineered a fix to the euro zone’s most alarming debt turmoil since the pandemic struck The ECB is pushing back its policy decisions and the timing of the subsequent press conferences by 30 minutes as of July The US, UK, Japan and Canada plan to announce a ban on new gold imports from Russia during a summit of Group of Seven leaders that’s getting underway Sunday. Prices of the precious metal climbed Monday President Joe Biden rebooted his effort to counter China’s flagship trade-and- infrastructure initiative after an earlier campaign faltered, enlisting the support of Group of Seven leaders at their summit in Germany China’s economy showed some improvement in June as Covid restrictions were gradually eased, although the recovery remains muted China plans to extend the yuan’s trading hours as it seeks to increase global investor participation in onshore currency trading as part of its internationalization push Russia defaulted on its foreign-currency sovereign debt for the first time in a century, the culmination of ever-tougher Western sanctions that shut down payment routes to overseas creditors The world economy risks entering a new era of high inflation which central banks need to keep in check, the Bank for International Settlements said Signs of distress flashing in bond markets suggest the world’s poorest nations are set to see a wave of debt restructurings. But a growing cohort of investors say that’s a buying opportunity A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were higher across the board as the region took impetus from last Friday's firm gains on Wall St heading closer into month-end. ASX 200 enjoyed broad gains across its sectors although gold miners lagged as Evolution Mining shares dropped by more than 20% due to a cut in its FY output guidance. Nikkei 225 was lifted after the BoJ’s Summary of Opinions reiterated that they must maintain easy policy and with Tepco among the biggest gainers on tight electricity supply amid the hot weather. Hang Seng and Shanghai Comp. conformed to the upbeat mood as Hong Kong benefitted from a rampant tech sector and with the mainland encouraged by further easing of restrictions in Shanghai and Beijing, while the PBoC also upped its liquidity efforts with a CNY 100bln injection. Top Asian News Beijing will permit schools to resume in-class teaching as soon as Monday, ending one of the last major curbs in the capital, according to Bloomberg. Shanghai is to gradually resume dining-in at restaurants from June 29th, according to an official cited by Reuters. PBoC injected CNY 100bln via 7-day reverse repos with the rate at 2.10% for a CNY 90bln net injection, according to Reuters. China requested that banks make preparations for longer trading hours for the CNY, with trading in the onshore CNY potentially to extend until 03:00 local time the following day (20:00BST/15:00CDT), according to Bloomberg. BoJ Summary of Opinions from the June meeting stated the BoJ must maintain easy policy and keep a close eye out on the market and FX impact on the economy and prices. It also noted the number of goods seeing prices rise is increasing due to higher raw material costs and a weak yen but it is appropriate to keep easy policy as inflation is not driven by a positive economic cycle. Furthermore, it said maintaining ultra-easy policy is effective in sustaining a rise in wages and that a sharp fall in Yen would hurt the economy and heighten uncertainty. Japanese government issued power shortage warnings for Tuesday, for a second straight day, according to Reuters. Japan has proposed removing reference to the goal of 50% zero-emission vehicles by 2030; wants less concrete target, according to a draft cited by Reuters. BoJ's holding of JGBs has reportedly topped 50% of its total, according to Nikkei. European bourses are kicking off the week on the front-foot as global equities see tailwinds from Wall Street’s bounce on Friday. Sectors in Europe are mostly positive – but Utilities and Insurance are subdued, with the overall picture being a cyclical one. Stateside, US equity futures track sentiment higher – with the NQ the current outperformer vs the ES, YM, and RTY. Top European News ECB says as of the July meeting, the policy decisions will be released at 14:15CET and presser at 14:45CET, according to Reuters. ECB’s Pivot Toward Rate Hikes Feeds Fears of New Bond Crisis; ECB to Announce Rate Decisions 30 Minutes Later From July EU Confronts Low Gas Storage Risk in Test of Unity on Russia Gas Jumps as Europe Struggles to Fill Russian Gap UK’s Battered Economy Is Sliding Toward a Breaking Point FX Greenback continues to gravitate as risk sentiment improves, but could get a month end boost given models indicating broad rebalancing requirement - DXY pivots 104.000 within 104.120-103.790 range just shy of last week's low. Yen benefits from all round fix buying ahead of final trading day of June and Q2 on Thursday - Usd/Jpy not far from 134.50 at one stage overnight alongside declined in Yen crosses. Pound perks up as IMM spec accounts trim short positions again and Euro tests technical resistance ahead of 1.0600 vs Buck amidst firmer rebound in EGB yields - Cable probes 1.2300 at best, Eur/Usd touches 21 DMA at 1.0591. Aussie lags on Aud/Nzd headwinds, but Loonie pares losses in tandem with oil - Aud/Usd sub-0.6950, cross under 1.1000, Nzd/Usd hovering over 0.6300 and Usd/Cad back below 1.2900. Yuan underpinned by net PBoC liquidity injection and easing of Covid restrictions in China - Usd/Cnh and Usd/Cny both beneath 6.6900. Lira knee jerks higher after Turkey cuts credit to firms with more than Try 15 mn FX cash assets - Usd/Try down to 16.1040 or so before rebound towards 16.8900. Fixed Income Debt futures unwind more recovery gains with EGBs leading the way. Bunds retreat towards 146.50 vs 149.00 at one stage last Friday. Gilts closer to 113.00 than 114.00 and 10 year T-note near the base of 116-31/117-13 overnight range. US durable goods data ahead and a double dose of issuance comprising Usd 46 bn 2 year and Usd 47 bn 5 year auctions. Commodities WTI and Brent futures consolidate with modest intraday losses as G7 leaders meet to decide on a Russian oil price cap ahead of Iranian nuclear talks and on the week of the OPEC+ meeting. French CGT unions will participate in strikes at LNG terminals and gas storage facilities this week; strike in the energy sector on June 28th. Spot gold piggy-backs off the softer Dollar – with the yellow metal currently eyeing its 21 DMA (1,841.60/oz) and 200 DMA (1,845.20/oz) to the upside Base metals are largely rebounding following the recent rout – also aided by the Buck. US Event Calendar 08:30: May Durable Goods Orders, est. 0.2%, prior 0.5%; -Less Transportation, est. 0.3%, prior 0.4% 08:30: May Cap Goods Orders Nondef Ex Air, est. 0.1%, prior 0.4% 08:30: May Cap Goods Ship Nondef Ex Air, est. 0.2%, prior 0.8% 10:00: May Pending Home Sales YoY, prior -11.5% 10:00: May Pending Home Sales (MoM), est. -3.9%, prior -3.9% 10:30: June Dallas Fed Manf. Activity, est. -6.5, prior -7.3 DB's Jim Reid concludes the overnight wrap This morning we are launching our monthly survey which hopefully comes at an opportune time to assess what you all think about recession risk, whether the next big move in markets will be up or down, whether the BoJ will be able to hold the line on YCC, whether your market view includes the risk of Russian gas being cut off from Europe, and whether you think negative rates will be seen again in the next decade after the ECB likely moves away from it by September. There are a couple of other repeat questions to answer. It should take 2-3 minutes, is all anonymous, with answers likely Thursday morning. The link is here and all help gratefully received. A reminder that my chart book was out last week with lots of charts on one of the worst H1s in history, recession risks and lots more. See here for more. Without having a blockbuster event to look forward to this week there are plenty of things to keep us occupied in what are highly uncertain times. Perhaps the ECB's Forum on Central Banking in Sintra will be the key event to watch, with a policy panel on Wednesday which will bring together Chair Powell, President Lagarde and Governor Bailey together the likely highlight. Staying in Europe, all eyes will be on the June CPI numbers released for Germany (Wednesday), France (Thursday) and Italy and the Eurozone on Friday. Consensus expectations don’t suggest we’re yet at peak headline inflation with CPI expected to pick up a few tenths YoY this week. With commodity prices fading sharply in June the hope is that we will be near the top soon. In fact, our US economists put out an inflationary chart book last week that suggested that the peak will be in September (9.1% headline and 6.3% core). The problem is that even if headline dips because of energy, core won’t necessarily fall as quickly with wages and second round effects in full force. We had a small indicator of that last week as our economists also pointed out that the recent acceleration in US hospital workers’ wage growth from around 2.5% to almost 5% should serve to add an additional 50bps to core PCE inflation next year (link here). On Thursday, we’ll get the latest reading of the US core PCE deflator within the personal income and spending data. Core PCE is the Fed's preferred inflation measure so this and the healthcare news is important. Staying with US data, we have a fair amount to look forward to with the all important ISM on Friday (53.2 expected vs 56.1 last month). We'll also see the Chicago PMI on Thursday and regional Fed's manufacturing indices throughout the week. Durable goods orders (today) and wholesale and retail inventories (tomorrow) will be key to assessing inventory pressures flagged by several firms in recent weeks as well as corporate behaviour amid some easing in supply-chain backlogs. How the consumer is faring under rising rates and stubborn inflation will be another key theme, with the Conference Board’s June consumer confidence index out tomorrow (99.9 expected vs 106.4 last month). Elsewhere, China's industrial data and PMIs (Thursday), as well as key economic indicators from Japan, will be in focus. Even though we at the very back end of Q2 earnings, this week will see some bellwether consumer spending companies such as Nike (Monday), H&M and General Mills (Wednesday) report. Other corporates releasing results will include Prosus (Monday), Micron and Walgreens Boots Alliance (Thursday). Overnight in Asia, equity markets are continuing last week’s rally with the Hang Seng (+2.72%) leading gains thanks to a strong performance in Chinese tech firms. The Kospi (+2.08%), Nikkei (+1.04%), Shanghai Composite (+0.89%) and CSI (+1.24%) are all also up. Outside of Asia, DM equity futures point to further gains with contracts on the S&P 500 (+0.19%), NASDAQ 100 (+0.44%) and DAX (+0.79%) moving higher. Bitcoin is above $21,000 after falling to as low as $17,600 last week for the first time since December 2020, while 10yr US yields are up around +2.5bps. Earlier today, data released showed that China’s industrial profits (-6.5% y/y) contracted at a slower pace in May following a big fall of -8.5% in April as companies resumed their activity in major manufacturing hubs amid easing Covid restrictions. In other overnight news, Russia has defaulted on its foreign-currency sovereign debt ($100 million) for the first time in more than 100 years, after the grace period for the payment deadline expired on Sunday. Recapping last week now, markets grew increasingly concerned about a recession as the week went on, thanks to weak economic data, hawkish central bank rhetoric, and the threat of a Russian gas cut-off in Europe. That led to a significant rally in sovereign bonds as investors sought out safe havens and cast doubt on whether central banks could keep hiking into a downturn. Indeed, yields on 10yr bunds came down by -21.9bps over the week as a whole (+1.0bps Friday), which is their 3rd biggest weekly decline in the last decade. Yields on 10yr Treasuries also saw a similar, albeit less marked decline, with yields down -9.6bps (+4.3bps Friday). That decline in yields came in spite of continued hawkish central bank commentary, and on Friday we saw San Francisco Fed President Daly say that a 75bps hike in July was “where I’m starting”, thus joining a growing number of officials who’ve openly backed a 75bps move again. Bear in mind if the Fed did move by 75bps in July, that would mean the hiking cycle since March would now be at 225bps, which matches the entire hiking cycle we saw in 3 years between 2015 and 2018. Nevertheless, when it came to monetary policy expectations, the growing fears of a recession led investors to take out the probability of more aggressive tightening, with the fed funds rate priced in by December’s meeting down by -16.0bps over the week (-5.0bps Friday). And looking at the entire profile of meetings ahead, futures are now expecting the peak Federal funds rate to come as soon as March 2023, before pricing in cuts after that. With investors expecting somewhat more dovish central banks, global equities rallied strongly last week as they recovered from their worst weekly performance since the pandemic began. The S&P 500 gained +6.45% on the week, and its Friday advance of +3.06% was the best daily performance for the index since May 2020. Europe’s STOXX 600 put in a weaker +2.40% advance (+2.62% Friday), but matters weren’t helped by German equities, with the DAX losing -0.06% (+1.59% Friday) as concerns grew about a potential cut-off in Russian gas. That’s sent natural gas futures in Europe to a 3-month high, with last week seeing a further +9.14% gain (-3.63% Friday). Lastly, after the poor mid-week data including the flash PMIs for June, Friday’s releases did bring some modest respite. First, the final reading of the University of Michigan’s long-term inflation expectations was revised down to 3.1% (vs. 3.3% previously). The unexpected jump in that measure before the Fed’s meeting was said to be a factor in their move to 75bps, as they’re very concerned about the prospect that longer-term inflation expectations could become unanchored, making inflation much harder to control. Furthermore, new home sales for the US in May rose to an annualised rate of 696k (vs. 590k expected), whilst the previous month also saw upward revisions. To be fair though, it wasn’t all positive on Friday, and Germany’s Ifo business climate indicator fell to 92.3 in June (vs. 92.8 expected), which marks an end to two successive monthly increases in April and May. Tyler Durden Mon, 06/27/2022 - 08:06.....»»

Category: blogSource: zerohedgeJun 27th, 2022

How to Pick Great Value Stocks Like Warren Buffett

The "Oracle of Omaha" is diving into the market right now, signaling that this is a great time to be a value investor. Tracey Ryniec highlights three secrets that can help you pick great value stocks just like Buffett. Warren Buffett is one of the legends of stock investing.We all know his story.He started investing in stocks when he was just 11.  By the time he was 29 years old, he was already a millionaire stock investor. In his 60s, he became a billionaire stock investor.Often, the biggest question people ask about Buffett is: how does he do it?And: could I do it too?Buffett has become rich by buying cheap, or out of favor stocks, and holding them for years.Sounds easy, right?If it was, everyone would be able to do what Buffett has done.However, Buffett does have some secrets that us mere mortal investors can deploy to help us pick great value stocks.3 Secrets to Picking Great Value Stocks Like Buffett 1) Buy What You Know Even investing legends have favorite products. Over the years, Berkshire Hathaway has collected a big roster of well-known companies including Dairy Queen, See’s Candy, and Burlington Northern railroad.How many of these acquisitions were influenced by Buffett’s own preferences for the products?In Berkshire’s stock portfolio, one of its longest owned stock positions is in Coca-Cola, which Buffett first began buying in 1988.Is it a coincidence that Coke is one of Warren Buffett’s favorite drinks? Over the last decade, Buffett has disclosed in interviews to both Fortune and the Financial Times that he drinks 5 cans of Coke a day, usually Diet Coke or Cherry Coke.Clearly, he’s a fan.But you have to do more than just liking a product, to buy the stock.Buffett has always been an avid researcher and used to order the Annual Reports from companies, when they would send them to you in the mail, to check the financials. He used to have stacks of the reports piled in his garage.What’s your favorite product or brand?We often have our fingers on the pulse of everyday products and activities, or even of something that is used in our jobs, that might get overlooked by others.It’s a great way to find value stocks.2) Buy Stocks on Sale This sounds so simple, right?For years, Buffett has been on the sidelines, waiting for a chance to buy stocks when they went on sale. But in March 2020, when the coronavirus pandemic hit, and the S&P 500 plunged over 20% within just 3 weeks, Buffett did not buy.Over the last 2 years, he was heavily criticized for not buying that dip.But now, 2 years later, with stocks having their worst start to a year in decades, and the S&P 500 again in a bear market, Buffett has been buying again.Keep Reading . . .------------------------------------------------------------------------------------------------------Get Private Picks from Zacks’ Long-Term PortfoliosThrough good markets and bad, one unique stock-picking method has more than doubled the market’s average gain with an incredible +24.8% per year.To help you take advantage of rare opportunities in today’s market, we’re opening the vault to reveal all our long-term recommendations. You’ll see stocks priced under $10… high-paying dividend stocks… Buffett-style value stocks and more. All for just $1. Special opportunity ends at midnight Sunday, June 26. See Zacks' latest value recommendations >>------------------------------------------------------------------------------------------------------Buffett believes in buying cheap, well-known companies with stellar earnings growth and solid free cash flows.In 2022, Buffett has stepped in with his biggest stock purchases in a decade, adding over $50 billion worth of Chevron and Occidental Petroleum to the Berkshire portfolio.The energy companies fit the bill perfectly as they have single digit P/E ratios, as earnings are on the rise, and record free cash flows.And he keeps diving in for more, with news that he was dollar-cost averaging on Occidental Petroleum this summer as the shares have pulled back off recent highs. He now owns nearly 17% of Occidental.Buying stocks on sale is the easiest way to invest like Buffett. Any investor can search for value stocks by the classic fundamentals like P/E, PEG or Price-to-Sales ratios.If you had done so to start 2022, you would have seen buying opportunities in Chevron and Occidental Petroleum, like Buffett did.It doesn’t get any easier than that.3) Learn to Pivot and Change Course  Remember when Berkshire Hathaway owned IBM?Neither do I, but for 7 years, until 2018, Berkshire had a large position in the technology giant.Originally bought in 2011, Berkshire spent $10.7 billion, buying at the average price of $170 per share, to take a significant stake in the company.This was going to be Buffett’s big play into technology, an area he had famously avoided for decades.But it never really worked out. In 2016, shares fell as low as $125.Buffett decided to sell, and exit the position, notwithstanding one of his most famous pieces of advice, “our favorite holding period is forever.”Buffett shrugged off the defeat in interviews saying the company never lived up to expectations so he was changing course.What did he buy instead?Apple. In 2016, Apple was cheap with a forward P/E of around 10 and the Street was mostly ignoring it.That investment has more than made up for the mistake of buying IBM and is now one of the key pillars of Berkshire Hathaway’s business.You will make investing mistakes, but the secret is to know when to pivot.Buffet does it, and you can do it too.Buffett’s Final Key Ingredient: Discipline  Buffett has one skill as an investor that’s hard to come by: discipline.He will wait, sometimes years, in order to buy a stock, or a company, at a low price.His discipline paid off in the 2008-2009 financial crisis when he was able to step in and offer financial assistance to struggling banks, offering a $5 billion bailout to Goldman Sachs, for instance, when others were on sinking ships.He had what his mentor Benjamin Graham, famously called, a “margin of safety."This can be achieved by being prepared for pullbacks, corrections or even bear markets.Many investors, including Buffett, missed out on a buying opportunity in the 2020 coronavirus sell-off.But even if you missed that buying opportunity, another one is always coming.And here we are in 2022 with another bear market.  And now Buffett is diving in.2022 has been a great year for value investors.Are you ready for all the stock deals?Profiting from Buffett’s Strategy in Today’s Market The Oracle of Omaha has raked in hundreds of billions of dollars – and he has revealed his secret in plain English. As he puts it, "whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down.”There’s no shortage of “marked down” stocks with rock-solid fundamentals these days. Investors who get into great stocks at today’s prices are positioning themselves for spectacular gains over the longer-term. Warren Buffett clearly believes this is the case.But which are the best stocks to buy right now?Today, I'm offering you a chance to see which stocks we believe have the most promising upside for the months and years ahead. In Zacks Investor Collection, you get unrestricted access to all the real-time buys and sells from our long-term portfolios for just $1, including:• Value Investor, focused on Buffett-style selections and strategy• Income Investor, with solid stocks paying healthy dividends• Stocks Under $10, which is scooping up low-priced stocks poised to surge higher• Plus, ETF Investor, Home Run Investor, Zacks Confidential, and Zacks Top 10 Stocks for 2022.Last year alone, these private long-term investing services closed 68 double and triple-digit wins. There have already been 21 more in 2022. Gains have reached as high as +188.3%, +348.7% and even +995.2%.¹You’ll also get access to Zacks Premium with powerful research, tools and analysis, including the Zacks #1 Rank List, Equity Research Reports, Zacks Earnings ESP Filter, Premium Screener and more.When you look into Zacks Investor Collection, you’re invited to download the latest edition of our 5 Stocks Set to Double special report. Five Zacks experts each pick their single favorite stock to gain +100% or more in the next 12 months.This unique arrangement enables you to find quality stocks at prices we believe Warren Buffett would approve of – and extra resources to help find your own winners.Don’t miss out. This opportunity will end on Sunday, June 26.Start Zacks Investor Collection and see our 5 Stocks Set to Double now >>Good investing,Tracy RyniecTracey Ryniec, Zacks' insider and value strategist, is editor in charge of the Value Investor portfolio. ¹ The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position. 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 To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJun 24th, 2022

Will $30BN In Month-End Pension Buying Send The S&P Above 4,000: Kolanovic Thinks So

Will $30BN In Month-End Pension Buying Send The S&P Above 4,000: Kolanovic Thinks So Earlier today we laid out two traders views, one bull and one bear, both of which agreed that the next leg in stocks will be higher, and laid out their reasons. Now a third potential catalyst for a major month-end rally has emerged: according to Goldman trading desk estimates, there is a net $30 billion of US equities to buy from US pensions given the moves in equities and bonds over the month and quarter. How does this stack up vs history?  This ranks in the 72nd percentile amongst all buy and sell estimates in absolute dollar value over the past three years and in the 92nd percentile going back to Jan 2000. Additionally, the buying imbalance also ranks in the 94th percentile amongst all estimates on a net basis (-$70bn to +$150bn scale) over the past three years and in the 96th percentile going back to Jan 2000. JPMorgan's Marko Kolanovic - Wall Street's biggest permabull bar none and nothing: he has told clients to the dip every single week this year, prompting many to ask just how much money to lose do JPM's clients have - naturally agreed with this bullish take and in a Friday note co-written with Bram Kaplan writes that the month- and quarter-end rebalance could push stocks 7% higher, driving the S&P well above 4,000 in the process. Some excerpts from the note: This year the impact of rebalances have been significant due to large market moves and low liquidity. For instance, near the end of the first quarter, the market was down ~10%, and experienced a significant ~7% rally in the last week going into quarter-end. On the most recent monthly rebalance, near the end of May, the market was down 10%, and experienced a significant rally of ~7% going into month end. Let’s look at the current rebalance setup. Broad equities are down 21% for the year (9% vs bonds), 16% for the quarter (11% vs bonds), and 9% for the month (7% vs bonds). In summary, Kolanovic finds that "rebalances across all 3 lookback windows would reinforce and, based on historical regression, would imply a ~7% move up  in equities next week"  Of course, having been wrong in 2022 with his relentless calls to BTFD, Kolanovic hedges somewhat and says that this assessment "takes into account the current market liquidity, as measured by futures market depth, which is ~5 times lower than the historical average." The Croat also hedges that rebalances are not the only drivers and the estimated move is assuming ‘all else equal’ (which of course never is). At the same time, bonds would feel moderate downward pressure from rebalances and the increase of yields could further result in rotation towards cyclical equities (and away from defensives). Or it could just lead to another bout of broad-based selling. Naturally, pension buying of stocks means pension selling of bonds, and a note from Deutsche Bank's Steve Zeng (also available to pro subs) predicts just that.  Writing  that given a current snapshot of a 19% dive in the S&P 500 and mere 6% “slide” in the aggregate bond index, DB's static-weight model estimates $85bn of selling in fixed income by public and private pensions this quarter. How accurate is DB's pension reallocation model? Pretty accurate, as it turns out: as Zeng explains, "In Q1, our model had estimated $88bn of fixed income buying by the pension community. Actual inflows were $53bn, with $47bn of those coming from public pensions. (Private pensions met $6.5bn of the $38bn predicted for them.)" The DB strategist also notes that pension rebalancing flows could contribute further weakness to long-end rates, which has already been battered by bad inflation reports and a hawkish Fed. As such "a short-term tactical steepener in 5s/30s could make sense, especially if one holds the view that data over the next two weeks might land on the soft side. Fed officials may also try to sound a more dovish tone after this week's hawkish central bank surprises. 5s/30s (and 10s/30s) generally move in the opposite direction of rates." Bottom line: pensions are clearly set to lift stock offers into month-end (and beyond), and odds are that we will see further technical and positional bullish moves in the coming days. More in the full notes available to pro subs. Tyler Durden Fri, 06/24/2022 - 13:24.....»»

Category: personnelSource: nytJun 24th, 2022

Futures Rebound As Hopes Of Imminent Recession Spark "Bad News Is Good News" Reversal

Futures Rebound As Hopes Of Imminent Recession Spark "Bad News Is Good News" Reversal In a world where bad news is good news, and where the looming recession means an end to rate hikes and a start to easing, it didn't take algos long to bid stocks up as treasury yields tumbled after comments by Jerome Powell and dismal PMI data in Europe justified fears that a global downturn is now just a matter of when, not if. After initially sliding more than 1% late on Wednesday, futures rebounded and recovered all losses and were last trading near Wednesday's session highs, up 0.7% or 27 point to 3,790, while Nasdaq futs were up 0.9% at 11,375 as of 715am ET. 10Y yield initially dumped below 3.10% - near a two week low, after trading at 3.50% one week ago -  before bouncing modestly, while the Dollar pushed higher as the euro tumbled after after a series of very poor European PMI prints confirmed that Europe's runaway inflation is pushing the continent into a stagflationary recession, which in turn sent the yield on German 10-year bonds slumping as much as 21 basis points, poised for the biggest two-day decline since November 2011. US 10-year rates traded near a two-week low. In premarket trading, US-listed Chinese stocks climbed  as bullish sentiment around the group continues to grow amid calls from strategists and fund managers that Beijing’s regulatory crackdowns are easing. JPMorgan Asset Management became the latest to voice its support for Chinese tech shares, saying “the worst is over” when it comes to regulatory crackdowns. Here are some other notable premarket movers: KB Home (KBH US) shares climb 4.7% in premarket trading after the homebuilder reported earnings per share and revenue for the second quarter that beat the average analyst estimate. US-listed shares of Chinese electric-vehicle makers rallied in premarket trading after Chinese state television reported that the government may extend tax exemptions on electric-car purchases. Li Auto (LI US) +6%, Xpeng (XPEV US) +5.3% and Nio (NIO US) +2.6% in premarket trading. Cryptocurrency-exposed stocks rebounded in premarket trading as Bitcoin recovered to remain over the closely watched $20,000 level. Coinbase (COIN US) +3%, Riot Blockchain (RIOT US) +3.7%, Marathon Digital (MARA US) +4.4%, Block (SQ US) +0.7%. EBay (EBAY US) shares decline 2.1% in premarket trading as Morgan Stanley assumed coverage of the stock with a recommendation of underweight and a price target of $36, the lowest on Wall Street. Energy companies slide in US premarket trading as oil eases anew amid concerns of slowing global growth. Exxon Mobil (XOM US) -1%, Chevron (CVX US) -1.1%, Imperial Petroleum (IMPP US) -3.1%, Camber Energy (CEI US) -2.4%. Westinghouse Air Brake (WAB US) and AGCO (AGCO US) shares may be in focus as Morgan Stanley cuts them to equal-weight and resumes coverage of Cummins (CMI US) at equal-weight in a note trimming its PTs across most of its machinery and construction coverage.   On Wednesday, in the first day of his Congressional testimony, Powell accepted that steep rate increases could trigger a US recession, and said the task of engineering a soft economic landing is “very challenging” (day two follows). Policy makers are taking drastic steps to cool inflation at a four-decade high and the Fed chair repeated his resolve to get consumer price growth back down to the 2% target. “Market optimism couldn’t survive Jerome Powell’s testimony yesterday, but most of the negative pricing is certainly done by now,” said Ipek Ozkardeskaya, a senior analyst at Swissquote. “The reaffirmation of the Fed’s commitment to bringing inflation down and that recession is a risk are adding to growth worries, which is the dominant fear again,” said Esty Dwek, chief investment officer at Flowbank. Traders are now debating how far the Fed will stretch its rate cycle in the face of an economic downturn. Money markets indicate diminished odds the central bank will raise rates beyond year-end, and rising odds of a rate cut from May 2023. The Federal Reserve “is well served by keeping some hawkishness there,” Steven Major, global head of fixed income research at HSBC Holdings Plc, said in an interview with Bloomberg Television. “Because if they appear that they’ve reached the peak, then financial conditions will loosen and the policy won’t work. So they need a couple more months of this.” European equities traded flat having erased earlier losses of more than 1%. Real estate, autos and banks are the weakest Stoxx 600 sectors; travel is a rare bright spot. European energy stocks slipped for a second session with crude prices under pressure as concerns over a global economic slowdown intensified. The Stoxx 600 Energy index falls as much as 1.9%; TotalEnergies and Shell the biggest drags on the index on Thursday, with wind- turbine firm Vestas and Italy’s Eni also slipping.  Here are some of the biggest European movers today: Aroundtown stock drops as much as 11% after being cut to underweight from neutral at JPMorgan, which also lowered its PT to EU3.6 from EU6 due to excessive downside exposure for the German landlord. Vantage Towers falls as much as 7.6% after Morgan Stanley cut the stock to equal-weight from overweight, saying the shares have outperformed despite challenges in its outlook. Saipem trims losses after declining as much as 21% following the announcement of a EU2b capital increase on Wednesday; Italy’s Consob warns of volatility in the stock when the rights issue starts. Rheinmetall falls as much as 6.3% after HSBC downgraded the German automotive and defense group to hold from buy due to it being temporarily held back by its automotive division Naked Wines slumps as much as 40% after the online wine merchant forecast fiscal 2023 sales of £345m-£375m. The midpoint of the guidance is ~10% lower than what Jefferies analysts had been expecting. Intertek falls as much as 4.1% after Deutsche Bank cuts the stock to sell, saying many structural trends that underpinned growth for testing and inspection companies are reversing. Eurofins gains as much as 4.2% on an upgrade to hold. Atos gains as much as 11% after a report that Thales has the support of the French state in its effort to buy French tech company’s cybersecurity business. Ubisoft rises as much as 2.5% before paring gains, as Deutsche Bank initiates coverage with a buy rating, saying there’s “good scope” to beat revenue and margins expectations for fiscal 2024 and 2025. As noted above, the latest let of European PMIs were dismal, dropping across the board and all (except the UK) missing expectations: Euro Area Composite PMI (June, Flash): 51.9, consensus 54.0, last 54.8. Euro Area Manufacturing PMI (June, Flash): 52.0,  consensus 53.8, last 54.6. Euro Area Services PMI (June, Flash): 52.8, consensus 55.5, last 56.1. Germany Composite PMI (June, Flash): 51.3, consensus 53.0, last 53.7. France Composite PMI (June, Flash): 52.8, consensus 55.9, last 57.0. UK Composite PMI (June, Flash): 53.1, consensus 52.4, last 53.1. Earlier in the session, Asian stocks edged higher, with an improving outlook in China offering support even as the prospect of a global downturn weighed on some export-reliant markets. The MSCI Asia Pacific Index was up 0.2% with China’s internet giants and automakers contributing to the gains. South Korea and Taiwan, the two tech-heavy markets that have seen foreigners flee amid rising global rates, fell more than 1%. Traders digested Federal Reserve Chair Jerome Powell’s Wednesday comments that steep rate increases could trigger a US recession. China stocks were the region’s best performers, extending a recent trend, as President Xi Jinping pledged to meet economic targets for the year.  Hong Kong stocks gained after a report that the city’s incoming leader is working on a strategy to reopen its borders. Japanese stocks were little changed. “We’re sort of in a bottoming out phase here in Asia, where China is going to eventually support us again,” Robeco Asia-Pacific Chief Investment Officer Arnout van Rijn said in a Bloomberg TV interview. “The rest of Asia, with its better macroeconomic policies and lower interest rates, should at least outperform a weaker global market.” The Fed’s recent rate hike and comments have been especially hard on growth shares, with a gauge of Asia’s tech stocks falling to its lowest level since September 2020. China’s stocks have outperformed the broader region amid hopes for continued fiscal and monetary support. Japanese equities struggled for direction as investors worried over Federal Reserve Chair Jerome Powell’s comments on the risks of a recession. The Topix closed down les than 0.1% at 1,851.74, while the Nikkei advanced 0.1% to 26,171.25. Out of 2,170 shares in the index, 1,295 rose and 775 fell, while 100 were unchanged. “We’re in a very difficult phase,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. “The market is still focused on what will happen to prices in the US and whether the economy can cope with a larger interest rate hike.”  Indian shares rose to mark their third day of gains in four after a retreat in crude oil prices eased concerns about vehicle demand in Asia’s third-biggest economy. Maruti Suzuki India Ltd. and Mahindra & Mahindra Ltd. were among the top gainers on the S&P BSE Sensex, which climbed 0.9% to close at 52,265.72 in Mumbai. The NSE Nifty 50 Index rose by an equal measure. Both indexes have risen for three of four sessions this week. All but two of the 19 sub-sector gauges compiled by BSE Ltd. advanced, led by auto companies.  Regional peers were mixed after Federal Reserve Chair Jerome Powell acknowledged the risk of a recession. West Texas Intermediate sank toward $104 a barrel after closing at a six-week low on Wednesday. Tata Consultancy contributed the most to the Sensex’s gains, increasing 2.7%. Out of 30 shares in the index, 27 rose and 3 fell. In rates, Treasury futures traded above Wednesday’s highs after tracking steeper gains for bunds sparked by weaker-than-expected euro-zone growth data, before fading much of the move. US yields richer by 3bp-5bp across the curve led by belly, richening the 2s5s10s fly by 3.5bp on the day; 10-year richer by ~3bp at 3.125% vs 16bp slide for German 10-year, widening spread ot ~165bp. Elevated recession risk put German 10-year yields on track for their biggest decline in more than three months. US auctions include $18b 5-year TIPS reopening at 1pm ET; ahead of the sale 5-year breakeven inflation is ~2.75%, near lowest level since January. Focal points of US session include Fed Chair Powell’s second day of congressional testimony and manufacturing survey data. Bunds futures rally, trading over a 300 tick range in high volumes before stalling close to 148.00. Yield curves bull steepen aggressively. German 2y yields crater over 20bps near 0.82%, trading 10bps richer to gilts and ~15bps richer to USTs. Peripheral spreads widen with short-end Portugal underperforming. In FX, Bloomberg dollar spot index rose 0.3% as the EUR tumbled on poor PMI data. The yen extended its rise as comments from an ex-policy official spurred bets that the Bank of Japan may intervene to halt the currency’s slide. Japan’s currency gained as much as 0.8% after Takehiko Nakao, the former head of foreign exchange policy at the finance ministry, said the possibility of the authorities intervening directly in foreign-exchange markets can’t be ruled out. Sterling eased against a broadly stronger dollar as a slide in global share prices prompted investors to sell riskier assets. Markets await UK PMI data, which is expected to show a drop in manufacturing and services sectors, adding to signs of a slowing economy. In commodities, oil dipped initially in early trading before paring the entire loss, Brent crude back above $111 a barrel. Most base metals are trade lower: LME copper drops ~2%, LME tin underperforms declining over 8%. Spot gold drifts lower near $1,830/oz. Bitcoin is firmer overall but continues to pivot the USD 20k mark and has struggled to gain any real traction during brief forays either side. Looking to the day ahead now, and the main data highlight will be the rest of the flash PMIs for June, along with the US weekly initial jobless claims, the Q1 current account balance, and the Kansas City Fed’s manufacturing activity for June. From central banks, Fed Chair Powell will be speaking before the House Financial Services Committee, the ECB will publish their Economic Bulletin, and we’ll hear from the ECB’s Nagel and Villeroy. Finally, EU leaders will be meeting in Brussels. Market Snapshot S&P 500 futures down 0.2% to 3,755.75 STOXX Europe 600 down 1.2% to 401.04 MXAP up 0.1% to 156.60 MXAPJ up 0.2% to 519.03 Nikkei little changed at 26,171.25 Topix little changed at 1,851.74 Hang Seng Index up 1.3% to 21,273.87 Shanghai Composite up 1.6% to 3,320.15 Sensex up 0.7% to 52,208.76 Australia S&P/ASX 200 up 0.3% to 6,528.45 Kospi down 1.2% to 2,314.32 German 10Y yield little changed at 1.47% Euro down 0.6% to $1.0503 Brent Futures down 1.7% to $109.80/bbl Gold spot down 0.2% to $1,834.49 U.S. Dollar Index up 0.46% to 104.67 Top Overnight News from Bloomberg Germany elevated the risk level in its national gas emergency plan to the second-highest “alarm” phase, following steep cuts in supplies from Russia. India’s central bank appears to have ramped up intervention in the forwards market to slow the rupee’s decline and preserve its hard-earned reserves. Russia faces yet another bond payment test this week, with just days remaining before it potentially slides into its first foreign default in a century. India’s central bank appears to have ramped up intervention in the forwards market to slow the rupee’s decline and preserve its hard-earned reserves. A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mostly positive after risk appetite slightly improved from the uninspiring lead from Wall St where stocks were choppy as tailwinds from lower oil prices and softer yields were offset by recession fears. ASX 200 was led higher by strength in real estate and consumer stocks, while Manufacturing PMI data remained in a firm expansion. Nikkei 225 swung between gains and losses with the index hampered by currency inflows. Hang Seng and Shanghai Comp. were kept afloat with auto manufacturers lifted after China’s cabinet pledged to boost the auto industry, while markets also shrugged off initial cautiousness brought on by COVID concerns after Shenzhen required PCR tests for anyone entering a public venue. Top Asian News China's Shenzhen is to require PCR tests for anyone entering a public venue, according to Bloomberg. US State Department warned about reconsidering travel to China due to COVID lockdown risks, according to Reuters. Former Japanese FX chief Nakao said continuing with YCC has many negative effects and that it is clear monetary policy is playing a role in the weak JPY, according to Bloomberg. European bourses are pressured overall, but well off lows going into the US session, Euro Stoxx 50 -0.2%; pressure was seen post-PMIs which missed expectations and featured pessimistic internal commentary. The sectoral breakdown is mixed as such while individual movers are affected by numerous broker moves. Stateside, futures are now firmer on the session, ES +0.4%, having shrugged off the French/German/EZ flash-PMI induced risk move ahead of Powell's second day of testimony. Top European News Majority of economists expect the ECB to hike the deposit rate by 25bps in July and 50bps in September, while the Deposit Rate is seen at 0.75% at year-end (prev. 0.25%) and there is a median 34% (prev. 30%) chance of a recession in 12 months, according to a Reuters poll. Bulgarian Turmoil Deepens as Premier Loses Confidence Vote Norway Steps Up Action With First Half-Point Hike Since 2002 Hedge Fund Trader Shah Struck Cum-Ex Trades With DekaBank UK June Flash Services PMI 53.4; Est 52.9 FX Poor preliminary Eurozone PMIs pull rug from under Euro; EUR/USD sub-1.0500 at worst, EUR/JPY under 142.00 vs almost 144.00 peak and EUR/GBP probes 0.8600 from circa 0.8641. Buck benefits indirectly alongside Yen as risk aversion intensifies on heightened recession anxiety; DXY towards top end of 104.780-050 range, USD/JPY vice-versa between 136.25-135.12 parameters. Pound pares some declines with assistance of solid UK services PMI, Cable keeps tabs on 1.2200 handle. Franc makes way for rebounding Dollar, Loonie, Aussie and Kiwi bear brunt of ongoing losses in underlying commodities; USD/CHF back above 0.9650 from sub-0.9600, USD/CAD hovering under 1.3000, AUD/USD capped into 0.6900 and NZD/USD around 0.6250. Norwegian Crown underpinned by bigger than expected 50bp Norges Bank hike and loftier rate path with caveats, EUR/NOK pivots 10.4800 vs near 10.5300 peak and 10.4400 trough. Central Banks Norges Bank Key Policy Rate (June-MPR): 1.25% vs. Exp. 1.00% (Prev. 0.75%); points to a 25bps hike in August (interim meeting). Click here for full details, reaction and newsquawk analysis. Norges Bank Governor Bache says cannot rule out increasing rates by more than 25bps in future meetings.   NBH keeps its one-week deposit rate unchanged at 7.25% Fixed Income Bunds and OATs front-run latest broad and big bond bounce as PMI miss consensus by some distance. Gilts and US Treasuries tag along with a lag post-solid UK services PMI and pre-US jobless claims, PMIs and Fed Chair Powell part 2. Bunds reach 147.89 from 144.81 low, Gilts 113.36 vs 111.93 and 10 year T-note 117-16 compared to 116-25+. Italy raises EUR 9.45bln with the BTP Italia bond, via Reuters. Commodities Crude complex remains pressured with specific newsflow limited and focused on known themes, WTI/Brent -0.5% having benefitted from the recent pick up in broader sentiment; note, the EIA release has been delayed. Private US Energy Inventory Data (bbls): Crude +5.7mln (exp. -0.6mln), Gasoline +1.2mln (exp. -0.5mln), Distillates -1.7mln (exp. +0.3mln), Cushing -0.4mln. US EIA said product releases scheduled this week will be delayed due to system issues, while it added the nat gas storage report will be released as scheduled on June 23rd but all other releases will be delayed, according to Reuters. Germany reportedly fears that a planned 'maintenance' shutdown of the Nordstream 1 pipeline could be used by Russia to shut off gas supplies completely to Germany which would threaten its efforts to build stores ahead of winter, according to FT. Germany declares Phase Two of Emergency Gas Plan due to supply cuts from Russia and high prices. Spot gold is back below the DMAs it briefly surmounted yesterday, downside in wake of post-PMI USD upside. US event Calendar 08:30: June Initial Jobless Claims, est. 226,000, prior 229,000 08:30: June Continuing Claims, est. 1.32m, prior 1.31m 08:30: 1Q Current Account Balance, est. -$275b, prior -$217.9b 09:45: June S&P Global US Services PMI, est. 53.2, prior 53.4 09:45: June S&P Global US Manufacturing PM, est. 56.0, prior 57.0 11:00: June Kansas City Fed Manf. Activity, est. 12, prior 23 Central Bank Speakers 10:00: Powell Testifies Before House Financial Services Panel DB's Jim Reid concludes the overnight wrap It’s been another eventful 24 hours in markets, with recession fears making a prominent return after Fed Chair Powell made some of his most pessimistic comments to date on whether the Fed would be able to successfully engineer a soft landing. Appearing before the Senate Banking Committee as part of the Fed’s semiannual Monetary Policy Report to Congress, Powell said that a recession was “a possibility”, whilst the soft landing the Fed is seeking will be “very challenging”, which is a long way from what the Fed were saying at the start of the year. Similarly, Powell said that the Fed “know we need to have restrictive policy, and that’s where we’re headed”, which is in line with what the Report itself said last week, in that the FOMC’s price stability commitment was “unconditional”. So a further reiteration that the Fed are prepared to keep hiking rates to bring down inflation, and an acknowledgement that there could well be a bumpy ride as they do so. However, even as Powell emphasised the Fed’s willingness to deal with inflation, those growing fears of a recession meant that Fed funds futures became more doubtful on the Fed’s ability to take policy into restrictive territory. For instance, the rate priced in by the December meeting actually came down -10.5bps yesterday, and since early last week we’ve seen nearly a full 25bp hike taken out of market pricing. The expected terminal rate also came down, with futures only seeing a peak of 3.61% in April 2023 before subsequent cuts. With investors becoming increasingly sceptical about the Fed taking policy far into restrictive territory, sovereign bonds rallied strongly yesterday, with yields on 10yr Treasuries down -11.9bps to 3.16%. That was driven by a decline in both real rates and inflation breakevens, and interestingly, the 10yr breakeven fell to its lowest level since Russia’s invasion of Ukraine began in late February yesterday, closing at 2.54%. In terms of the curve’s slope, the 2s10s steepened +2.2bps to 9.4bps, so still pretty close to inversion territory that has traditionally been a leading indicator of a recession. Meanwhile, if you look at the Fed’s preferred yield curve indicator that Powell has cited of the near-term forward spread (which looks at the 18m forward 3m yield minus the current 3m yield), that came down by -18.9bps yesterday to 176bps, which is the lowest it’s been in over 3 months, even if it still remains some way out of inversion territory. Equities put in a mixed performance against this backdrop, with the S&P 500 oscillating between gains and losses before ending the day down -0.13%. Energy stocks were a major laggard after oil prices fell to a one-month low, with Brent crude down -2.54% over yesterday’s session to close at $111.74/bbl. And this morning those losses have accelerated further, with Brent crude down -2.52% to trade at $108.92/bbl, which is now -13% beneath its intraday peak above $125/bbl seen last week. Over in Europe the tone was even more negative, with the major indices including the STOXX 600 (-0.70%) and the DAX (-1.11%) all seeing noticeable declines. That coincided with growing fears on the energy side, and Germany’s economy minister Habeck said yesterday that “we must assume that Putin is ready to reduce the gas flow further”. Natural gas futures in Europe (+1.28%) hit a 3-month high against that backdrop, and this is only set to become more of an issue as we move closer towards the colder months of the year. Staying on Europe, there was a similar rally in sovereign bonds to the US, with yields on 10yr bunds (-13.6bps) coming down from their post-2014 high on Tuesday. That was echoed elsewhere, whilst a fresh narrowing in peripheral spreads saw the gap between Italian 10yr yields over bunds reach their tightest in nearly a month, with a -2.0bps move to 191bps. Over in credit though, growing fears of a recession led to a widening in spreads, and iTraxx Crossover widened +15.4bps after 3 consecutive moves tighter. Overnight in Asia, equities are similarly struggling to gain traction in light of those warnings about a US recession. Both the Nikkei (-0.33%) and the Kospi (-0.84%) have moved lower for a second consecutive session, although Chinese equities have put in a stronger performance, with the Shanghai Composite (+0.58%) and the CSI (+0.49%) both trading in positive territory with the Hang Seng (+0.96%) maintaining its morning gains. Outside of Asia, US equity futures have continued to move between gains and losses, but contracts on the S&P 500 (-0.23%) and NASDAQ 100 (-0.25%) are both pointing lower this morning. Moving on to economic data, it’s an eventful day ahead as we get the flash PMIs for June. But we’ve already had the numbers out of Japan, where the services PMI hit its highest since October 2013 at 54.2, whilst the composite reading also accelerated to 53.2, which is the highest since November. The numbers from Australia showed a modest decline in June however, with the flash composite PMI down three-tenths on May’s reading to a 5-month low of 52.6. Here in the UK, the main news yesterday came from the May CPI reading, where annual inflation rose to +9.1% in line with expectations. That’s the highest rate since March 1982, although core CPI did fall a bit more than expected to 5.9% (vs. 6.0% expected). Staying on the UK, there’s a couple of important political contests taking place in the form of two by-elections to the House of Commons as well. Both are in seats that had been won by the Conservatives at the last election, but where opposition parties are making a challenge, and represent an important test for Prime Minister Johnson’s authority, not least since he saw 41% of his party’s MPs vote no confidence in him at the start of the month. The one in Wakefield will be of particular interest, since that is a so-called “Red Wall” seat that Labour held for the entire post-war period before Johnson’s Conservatives gained it at the 2019 election. So an important bellwether as we move closer to the next election. Looking at yesterday’s other data, the European Commission’s preliminary consumer confidence indicator for the Euro Area in June unexpectedly fell to -23.6 (vs. -20.5 expected), which is its lowest level since April 2020 at the height of the initial wave of the Covid pandemic. Separately, we saw Canadian CPI surprise on the upside, with the annual number coming in at +7.7% in May (vs. +7.3% expected), which is the fastest since 1983. To the day ahead now, and the main data highlight will be the rest of the flash PMIs for June, along with the US weekly initial jobless claims, the Q1 current account balance, and the Kansas City Fed’s manufacturing activity for June. From central banks, Fed Chair Powell will be speaking before the House Financial Services Committee, the ECB will publish their Economic Bulletin, and we’ll hear from the ECB’s Nagel and Villeroy. Finally, EU leaders will be meeting in Brussels. Tyler Durden Thu, 06/23/2022 - 07:50.....»»

Category: blogSource: zerohedgeJun 23rd, 2022

Long/Short ETFs to Consider Amid Market Turmoil

Long/Short ETFs provide hedging facilities that protect the portfolio from huge losses in turbulent times. The U.S. stock market is shaping up for the worst year in decades due to increased fears that the economy will plunge into a recession. This is especially true against the backdrop of persistent rising inflation and tightening monetary policies. Russia’s invasion of Ukraine and its impact on the global economy has also been weighing on investors’ sentiment.In such a scenario, investors continue to look for the best possible ways to protect their portfolios from the potential downside while still investing in growing equities. One such great strategy in the space is long/short, which offers ways to seek profits and protection simultaneously (read: Did Safe Haven ETFs Protect Your Portfolio from Market Turmoil?).The most popular ETFs in this space are S&P 500 Covered Call ETF XYLD, First Trust Long/Short Equity ETF FTLS, ProShares Large Cap Core Plus CSM, AGFiQ US Market Neutral Anti-Beta Fund BTAL and Leatherback Long/Short Alternative Yield ETF LBAY.What Are Long/Short ETFs?The long/short ETFs take the best of both bull and bear prediction by involving buying and short selling of equities at the same time. This strategy is primarily used by hedge funds and involves taking long positions (buy) in stocks that are expected to increase in value while short positions (short sell) in stocks that are expected to decrease in value.This unique investment vehicle utilizes leverage, derivatives, futures or index options in order to maximize total returns irrespective of market conditions as well as hedge out the market risk in case of elevated risk. Despite the high level of due diligence, the strategy often comes with low fees, reduced risks and no lock-in period. These are extremely flexible and provide high levels of diversification benefits. The long/short strategy is highly uncorrelated to the traditional asset classes (see: all the Long/Short ETFs here).The long/short include various types of strategies such as market neutral, hedging, option-writing, and 130/30 strategies (130% exposure to long positions and 30% exposure to short positions). While there are a number of ETFs in this space that could ride out ups and downs of the market scenario, we have highlighted five products that could be compelling choices to play the current trends:Market TrendsWhile the tech sector is bearing most of the brunt, energy is outperforming on rising oil prices. Oil resumed its strength in recent weeks due to supply disruptions and unprecedented demand. The geopolitical tensions between Russia and Ukraine and in the Middle East heightened concerns over tight energy supply amid increasing demand.The sell-off aggravated when the Fed raised interest rates by 75 bps in its latest FOMC meeting — the biggest interest-rate increase since 1994 — and signaled continued tightening ahead, which could further weigh on stocks. Fed Chair Jerome Powell said another hike of 50 or 75 bps at the next meeting in July is likely.The S&P 500 is now down 21% so far this year. If the year ends with this loss, the S&P 500 would register its worst annual decline since 2008 and its second-worst annual decline since 1974. On a total return basis, the index lost 37% in 2008 and 26.5% in 1974.S&P 500 Covered Call ETF (XYLD)S&P 500 Covered Call ETF seeks to generate income through covered call writing, which historically produces higher yields in periods of volatility. It follows a “covered call” or “buy-write” strategy, in which the fund buys the stocks in the S&P 500 Index and “writes” or “sells” corresponding call options on the same index by tracking the Cboe S&P 500 BuyWrite Index (read: Which Stocks & ETFs Do Best When Inflation Spikes?).S&P 500 Covered Call ETF has $1.6 billion in AUM and an expense ratio of 0.60%. It trades in an average daily volume of 586,000 shares.First Trust Long/Short Equity ETF (FTLS)First Trust Long/Short Equity ETF is actively managed and intends to pursue its investment objective by establishing long and short positions in a portfolio of equity securities. The overall portfolio, under normal market conditions, will be 80 to 100% invested in long positions and 0% to 50% invested in short positions.First Trust Long/Short Equity ETF has amassed $462.1 million in its asset base while charges 1.36% in annual fees. It trades in an average daily volume of 62,000 shares.ProShares Large Cap Core Plus (CSM)ProShares Large Cap Core Plus tracks the Credit Suisse 130/30 Large Cap Index, which provides long/short positions in some of the largest 500 companies by applying a rules-based ranking and weighting methodology. It optimizes the portfolio, using the scores to overweight stocks with the most favorable outlooks and underweight or take short positions in stocks with less-favorable prospects.ProShares Large Cap Core Plus has AUM of $411.8 million and an expense ratio of 0.45%. It trades in volume of 26,000 shares a day on average.AGFiQ US Market Neutral Anti-Beta Fund (BTAL)AGFiQ US Market Neutral Anti-Beta Fund has the potential to generate positive returns regardless of the direction of the stock market as long as low-beta stocks outperform high-beta stocks. It invests primarily in long positions in low-beta U.S. equities and short positions in high-beta U.S. equities on a dollar-neutral basis within sectors (read: 5 Safe ETFs to Play Amid Recession Fears).AGFiQ US Market Neutral Anti-Beta Fund has AUM of $175.4 million and an expense ratio of 2.53%. It trades in an average daily volume of 209,000 shares.Leatherback Long/Short Alternative Yield ETF (LBAY)Leatherback Long/Short Alternative Yield ETF is an actively managed exchange-traded fund that seeks income generation and capital appreciation through shareholder-yielding equities and income-producing securities. Leatherback establishes long positions in securities it believes will provide sustainable shareholder yield and takes short positions in securities it believes will decline in price.Leatherback Long/Short Alternative Yield ETF has accumulated $51.2 million in its asset base since its inception and trades in an average daily volume of 37,000 shares a day. The ETF charges 1.43% in annual fees.Bottom LineInvestors should note that these ETFs are less volatile, less risky and relatively stable when compared to the market-cap counterparts. In addition, these products provide hedging facilities that protect the portfolio from huge losses in turbulent times.  Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report First Trust LongShort Equity ETF (FTLS): ETF Research Reports AGFiQ US Market Neutral AntiBeta ETF (BTAL): ETF Research Reports ProShares Large Cap Core Plus (CSM): ETF Research Reports Global X S&P 500 Covered Call ETF (XYLD): ETF Research Reports Leatherback LongShort Alternative Yield ETF (LBAY): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJun 22nd, 2022

Futures, Oil Tumble As Attention Turns To Coming Recession, Powell Senate Testimony

Futures, Oil Tumble As Attention Turns To Coming Recession, Powell Senate Testimony Tuesday's euphoric market mood has U-turned into sheer despair with most of yesterday's gains gone overnight as attention turns to the coming US recession (now made official by Bill "The Fed Should Crush Donald Trump" Dudley who just published an Op-Ed "The US Economy Is Headed for a Hard Landing") and as traders await Jerome Powell before Senate testimony. S&P 500 futures declined 1.2%, down 45 points to 3,722 while Nasdaq 100 futures were down 1.5% by 715 a.m. in New York, indicating more declines for heavyweight technology stocks, which have already been hammered by rising rates.  Treasury yields and oil both slumped while the broader commodity sector tipped back toward pre-war levels, as traders increasingly price in a recession. Optimism evaporated that policy makers can achieve a soft landing as they navigate a course of aggressive monetary tightening to tame inflation. Fed Chair Jerome Powell is expected to reinforce the commitment to fighting price pressures when he speaks in front of US lawmakers Wednesday even as a growing number of banks warn that the Fed chair is pushing Biden's economy into a recession. Previewing Powell's appearance before the Senate Banking Committee as part of the Fed’s semiannual Monetary Policy Report, DB economists write that they expect him to reiterate the same themes he gave at his post-meeting press conference last week, where he signaled that they’d likely be deciding between 50bps and 75bps at the July meeting. Fed funds futures are currently implying that another 75bps move is more likely, with +71.8bps currently priced in, but don’t forget that there’s still plenty yet to happen ahead of that meeting in just over a month, including the subsequent CPI release and jobs report for June, and as we found out at the last meeting, it’s not implausible that unexpected data releases throw the previous guidance off course. “Overall, we have a very cautious outlook for equity markets and we would be sellers of all rallies,” said Marija Veitmane, senior strategist at State Street Global Markets. “We continue to see strong inflation and central banks determined to crush it, even if the price for that is economic slowdown.” Meanwhile, fears about the economy spread to commodities, putting oil in line for a monthly loss: “Markets are flip-flopping between recession fears and inflation fears,” UBS Wealth Mgmt chief economist Paul Donovan said in a note. “Today it is recession fears.” In premarket trading, major US technology and internet stocks were lower in premarket trading, poised to snap the two-session rising streak amid mounting concerns of a global recession. Stocks related to cryptocurrencies fell as the price of Bitcoin briefly slipped below $20,000 after rebounding strongly on Tuesday. Alibaba and other US-listed Chinese stocks pare losses in premarket trading after a Bloomberg News report that Jack Ma’s Ant may apply to become a financial holding company as soon as this month. Other notable premarket movers: La-Z-Boy’s (LZB US) shares jumped as much as 8.9% with KeyBanc saying that the furniture maker’s sales and EPS remain strong. The company reported adjusted earnings per share for the fourth quarter that beat the average analyst estimate. Precision BioSciences (DTIL US) shares jump as much as 40% in US premarket trading amid a collaboration and license agreement with Novartis effective June 15. Ormat Technologies (ORA US) shares fell 4.6% in postmarket trading on Tuesday after the company said it will offer $350 million aggregate principal amount of Green Convertible Senior Notes due 2027 in a private offering to institutional buyers. Equity Residential (EQR US) stock may be in focus as it was raised to outperform from sector perform at RBC on the view that the apartment owner is well placed to weather a downturn. Keep an eye on Cigna (CI US) shares as Morgan Stanley upgraded the stock to overweight from equal-weight. The brokerage also downgraded Anthem to equal-weight from overweight. Watch Scotts Miracle-Gro (SMG US) shares as they were downgraded to equal-weight from overweight at Wells Fargo, which said there’s “just not much to get excited about” for the stock in the second half of the year. US equities have been roiled in the past few months amid worries that aggressive monetary tightening by the Fed would spark an economic recession. The S&P 500 is in a bear market after a rout that erased almost $2 trillion from the benchmark last week, and is tracking declines of nearly 9% in June alone. Fed Bank of Richmond President Thomas Barkin said the central bank should raise rates as fast as it can without causing undue harm to financial markets or the economy.  Elsewhere, Joe Biden plans call on Congress to enact a gasoline tax holiday to cool soaring pump prices and alleviate the pressure on consumers. The move is expected to do nothing at all for gas prices. In Europe, the Stoxx 600 Index was down 1.6% after rallying for three days in a row; the Euro Stoxx 50 dropped as much as 2.3%, Italy’s FTSE MIB underperforms.  The FTSE 100 outperformed as the pound weakened after UK inflation rose to a fresh four-decade high in May after broad increases in the cost of everything from fuel and electricity to food and beverages. Risk assets slumped with most European cash equity indexes erasing the week’s gains as recession fears, hot inflation data and energy concerns weigh on sentiment. Miners, energy and autos lead broad losses across all Stoxx 600 sectors. Here are the biggest European movers: European mining stocks sink as a selloff in iron ore worsened amid signs of weakening global demand, while steel shares were pressured by downgrades from JPMorgan. Rio Tinto dropped as much as 3.6%, Glencore -6.1%, Salzgitter -15%, ArcelorMittal -8.2%, Voestalpine -11% Umicore shares plunged as much as 17% after the materials technology company announced plans to spend EU5b by 2026, “meaningfully” higher capital expenditure than Jefferies had expected. Saipem shares tumble as much as 19% after the company set terms for a EU2b capital hike, offering about 2 billion new shares at EU1.013. The subscription period will run from June 27 through July 11, with the final results to be announced on July 15, according to terms seen by Bloomberg. Samhallsbyggnadsbolaget i Norden and Swedish real estate peers added to months of declines as European equities resumed their selloff, with fresh concerns about the possibility of recession. SBB falls as much as 13%, Sagax -6%, Fabege -4%, Castellum -3.7% Kone shares drop as much as 7.5% after the Finnish elevator manufacturer was downgraded at Goldman Sachs and Berenberg, which both cited headwinds from China and the impact of slowing economic growth. Energy stocks are among the worst-performing sectors as oil slumps amid concerns about the US economy, while the Biden administration is set to step up its fight against higher gasoline prices. Shell declines as much as 4.6%, TotalEnergies -4.6%, Repsol -5.1% Accor shares drop as much as 3.8% after the hospitality company said it entered into exclusive negotiations to sell a 10.8% stake in Ennismore for EU185m. JD Sports shares gain as much as 5.2%. The company reported FY results that are in line overall with consensus expectations, and the market should be reassured that the sneaker seller’s recent performance is still on track, according to RBC. NatWest shares gain as much as 4% after the stock was raised to buy from hold at Jefferies, which said its re-rating potential is now more obvious. The UK government also extended its plan to sell more of its stake in the group by a year. Earlier in the session, Asian stocks resumed their slide Wednesday as renewed fears of a crackdown hit Chinese technology shares. The MSCI Asia Pacific Index slipped as much as 1.7%, cutting short a rebound in the previous session. TSMC, Alibaba and Tencent were the biggest drags, with a gauge of Chinese tech firms in Hong Kong falling more than 4%. Shares of online drug sellers slumped on a report that Beijing may ban third-party platforms from offering medicines over the internet. Elsewhere, a sub-gauge on the region’s information tech companies headed for the lowest close since September 2020 amid growing worries over a global recession. South Korea’s benchmark slumped 2.7% as the tech-heavy market continued to face selling pressure amid foreign outflows. The Asian stock benchmark is hovering near a two-year low as the prospect of a slowdown in the US driven by aggressive interest-rate hikes unsettle investors. Tesla Inc. Chief Executive Officer Elon Musk said Tuesday that a recession in the US looks likely in the near future, adding to the growing drumbeat of warnings. “Markets are still looking for the catalyst for a more sustained rebound as headwinds surrounding tightening financial conditions,” said Jun Rong Yeap, a market strategist at IG Asia Pte, adding that gains from any technical rebound may be capped by some wait-and-see sentiments. After falling more than 18% this year, a technical indicator is suggesting the MSCI’s Asian benchmark has reached oversold levels and may be poised for a reprieve. Investors will now shift their focus to Federal Reserve Chair Jerome Powell’s testimony on monetary policy to Congress later Wednesday, which may provide further clues on inflation and rates outlook.  Indian markets snapped a two-day advance as growing concerns of slowing global growth potentially leading to a recession dragged down world equity markets.  The S&P BSE Sensex dropped 1.4% to 51,822.53 in Mumbai, while NSE Nifty 50 Index fell by an equal measure. Reliance Industries, a major drag on both the key gauges, declined 3%, its biggest plunge since May 9.  All of the 19 sectoral indexes compiled by BSE Ltd. slipped, led by a measure of metal companies. All but four of 30 companies in the Sensex declined.  All major stock markets, including Asia, traded lower as investors fear that aggressive monetary tightening moves by global central banks could lead to an economic downturn. “Traders are advised to keep a hedge position, while investors should focus on stock selection,” according to Religare Broking analyst Ajit Mishra. The monsoon’s progress, a correction in oil prices and currency movements will be important factors to watch for the Indian stock market’s outlook, he said.  In rates, havens were re underpinned with major yield curves bull-steepening. A Treasury rally was led by the front-end of the curve, following wider gains across gilts after UK May inflation matches median estimates, trimming expectations for more aggressive BOE rate hikes. US yields richer by 10bp-6bp across the curve with front-end-led advance steepening 2s10s by ~2bp, 5s30s by ~4bp; 10-year yields around 3.20%, richer by nearly 8bp on the day, while gilts outperform by additional 6bp in the sector. Short-dated gilts outperform, richening ~13bps in 2s after another hot inflation print. Gilts lead bunds, Treasuries higher, with traders pulling back from wagers on three 50 basis-points hikes by year end after UK inflation accelerated in line with estimates in May. MPC-dated OIS rates pare back some of the more aggressive pricing seen in recent days. German 10y yields fall 10bps to near 1.67%, Treasury 10-year yield eases ~6bps to near 3.22% ahead of Fed Chair Powell’s semi-annual testimony on monetary policy. Peripheral spreads widen, with long-dated BTPs underperforming.  In FX, early in the session we saw a push toward the dollar, which subsequently was partly faded, but in any case it snapped two days of losses to rise by around 0.2% and the greenback advanced versus all of its Group-of-10 peers apart from the yen. JPY and CHF were the strongest performers in G-10 FX, NZD and AUD underperform. Antipodean currencies and the Norwegian krone were the worst performers and each of them fell by more than 1% against the greenback. The euro traded near $1.05 after dropping to a day low of 1.0469 in early European trading. The yen rebounded after making a fresh multi-decade low versus the greenback. The yen not only held the lead in short-term realized volatility, but traders also bet that it won’t lose its crown any time soon. Demand for low-delta exposure in the Japanese currency is by far the highest among the Group-of-10 peers, with Antipodean and Scandinavian currencies trailing. In commodities, West Texas Intermediate tumbled to $104 a barrel, with prices falling alongside other raw materials including copper. WTI sunk as much as 5.7% before recovering back above $104. Base metals trade poorly; LME tin falls 4.9%, underperforming peers. Spot gold falls roughly $8 to trade near $1,825/oz. Concerns about a broad economic slowdown are eclipsing the fallout from the war in Ukraine and signs of still-tight supply.  Bitcoin is pressured and briefly dipped again below the USD 20k mark, to a trough of USD 19.95k. Though, it remains someway from last week's USD 17.5k low. Looking at the day ahead now, and the main highlight will be Fed Chair Powell’s testimony before the Senate Banking Committee. Other central bank speakers include the Fed’s Barkin, Evans and Harker, as well as BoE Deputy Governor Cunliffe. Otherwise, data releases include UK and Canadian CPI for May, as well as the European Commission’s preliminary consumer confidence indicator for the Euro Area in June. Market Snapshot S&P 500 futures down 1.7% to 3,702.50 STOXX Europe 600 down 1.6% to 401.86 MXAP down 1.7% to 156.08 MXAPJ down 2.3% to 517.35 Nikkei down 0.4% to 26,149.55 Topix down 0.2% to 1,852.65 Hang Seng Index down 2.6% to 21,008.34 Shanghai Composite down 1.2% to 3,267.20 Sensex down 1.2% to 51,918.86 Australia S&P/ASX 200 down 0.2% to 6,508.54 Kospi down 2.7% to 2,342.81 German 10Y yield little changed at 1.69% Euro down 0.2% to $1.0509 Brent Futures down 3.8% to $110.24/bbl Brent Futures down 3.9% to $110.18/bbl Gold spot down 0.4% to $1,825.23 U.S. Dollar Index up 0.23% to 104.67 Top Overnight News from Bloomberg   A more detailed summary of Global Markets courtesy of Newsquawk Asia-Pac stocks were subdued after the risk-on mood from Wall Street waned overnight amid pressure in commodities and with global markets lacking any fresh macro catalysts. ASX 200 pared early gains as resilience in energy and defensives was offset by losses in tech and financials. Nikkei 225 was indecisive after the Japanese currency bounced off its weakest level since 1998. Hang Seng and Shanghai Comp. were subdued amid ongoing COVID woes as Macau closed most public services through to Friday and with the Chinese city of Zhuhai also shutting entertainment venues in some areas, while there was some encouragement for the property sector with Chinese property developers planning to meet with banks regarding relief measures in July. Top Asian News Chinese property developers are planning to meet with banks regarding relief measures in July, according to Shanghai Securities News. Chinese Premier Li Keqiang’s struggle to revive China’s economy under the zero-Covid policy championed by President Xi Jinping has spurred rumours of rifts between the country’s top two leaders and considerable speculation over succession plans, according to SGH Macro Advisors. BoJ April meeting minutes stated board members agreed on no change in the BoJ's stance of taking additional easing steps as needed and a member noted that rising raw material costs would hurt the economy so they must keep powerful monetary easing. Furthermore, it was stated that Japan's monetary policy challenge is to address too-low inflation, unlike in western economies, while a member said it is inappropriate to change the monetary policy stance as Russia's invasion of Ukraine added to the downside risks for Japan's economy. European bourses are subdued, Euro Stoxx 50 -1.9%, as Tuesday's positivity waned in the APAC session as commodities slipped in relatively limited newsflow. Unsurprisingly given this dynamic, the Basic Resources and Energy sectors are the European laggards, amid broader cyclical pressure. Stateside, futures are in-fitting with the above action, ES -1.4%, where participants are awaiting the first session of testimony from Chair Powell, newsquawk primer available here. Ant Group is reportedly to apply, as soon as this month, for a key financial license, via Bloomberg citing sources. Toyota (7203 JT) expects global vehicle production in July to be around 800k. China's CPCA says domestic car rales rose 39% in the week to June 13th Y/Y, +55% M/M, via Reuters. Top European News UK PM Johnson is of the view that the government must win its battle with the rail unions and is prepared for the stand-off to last months, according to The Times. Italy is reportedly preparing EUR 3bln of aid to curb energy bills, according to la Repubblica Italian Foreign Minister Di Maio quit the 5-Star Movement (5SM) to set up a new group, according to Reuters. FX Dollar regains bullish momentum on risk dynamics ahead of Fed testimony; DXY on a firmer footing, but capped ahead of 105.000 within 104.950-430 range. Yen also in demand as a safe haven as sentiment sours, USD/JPY reverses course from around 136.71 to sub-136.00 at one stage. Kiwi and Aussie undermined by risk-off mood, with latter also hampered by heavy decline in iron ore; NZD/USD hovers above 0.6250 and well below 1bln option expiries at 0.6300, AUD/USD capped around 0.6900. Loonie, Nokkie and Peso ruffled by collapse in WTI and Brent crude, USD/CAD rebounds towards 1.3000, EUR/NOK tests 10.5000 and USD/MXN straddles 20.1800. Euro holds around 1.0500 and 10 DMA close by amidst hawkish ECB vibe, Pound pivots 1.2200 after somewhat mixed UK inflation data. Central Banks ECB's de Guindos says he expects inflation to ease after the summer but stay near current levels in the coming months; Governing Council is yet to discuss details of the anti-fragmentation tool. New tool should be different from the prior OMT tool as the circumstances are different, will also differ from APP and PEPP. Norwegian Gov't names Paal Longva as Deputy Norges Bank chief. Fixed Income Bonds bounce firmly as risk sentiment turns bearish again on global inflation and recession concerns. Bunds up to 144.87 before fading after a reasonable 2038 German auction. Gilts top out at 111.89 and largely ignored mixed UK inflation metrics vs consensus. 10 year T-note hovers closer to 116-19 overnight peak than 115-28+ trough pre-Fed chair Powell and 20 year supply plus other Fed speakers. Commodities WTI and Brent are, alongside broader commodities, pressured with fresh catalysts somewhat thin and focused on known themes. Currently, they are lower by over 4% on the session and ahead of Biden's announcement on gas prices; though, if implemented, such measures could serve to push demand and ultimately prices higher. US President Biden will deliver remarks on gas prices at around 14:00EDT/19:00BST on Wednesday and will call on Congress to implement a suspension to the federal fuel tax. Subsequently, multiple Democratic sources said that the effort to to suspend the federal gas tax for three months stands almost no chance of passing, according to Politico. IEA warns Europe to prepare for a complete shutdown of Russian gas exports and that governments should keep ageing nuclear plants open and take other contingency measures, according to FT. World Steel says global steel output -3.5% Y/Y in May at 162.7mln tonnes (prev. -5.1% Y/Y in April); China crude steel output -3.5% Y/Y to 96.6mln tonnes (prev. -5.2% Y/Y in April). Spot gold is softer in-line with other metals, though the magnitude is more contained given its haven allure; broader action that sees LME Copper clipped despite the expected commencement of Chile strike action. US Event Calendar 07:00: June MBA Mortgage Applications, prior 6.6% Central Bank Speakers 09:00: Fed’s Barkin Speaks to West Virginia Chamber of Commerce 09:30: Powell Delivers Semi-Annual Testimony Before Senate Panel 12:00: Fed’s Barkin Speaks to the Federal City Council 12:50: Fed’s Evans Discusses Economic Outlook 13:30: Fed’s Harker and Barkin Discuss the Economic Outlook DB's Jim Reid concludes the overnight wrap Whilst the question of whether we’re about to face a recession is still dominating markets, risk assets posted a sharp rebound yesterday as the US got back from holiday. In fact by the close of trade, the S&P 500 (+2.45%) had put in its strongest daily performance in nearly a month, with every sector higher on the day and energy (+5.13%) doing most of the legwork. Even though the chart book showed that before yesterday the S&P was on course for the worst H1 since 1932 we did show in the CoTD (link here) that the top 5 H1 declines over the last 90 years were all followed by strong H2 performance. Before you think it's safe to come out from behind the sofa, S&P futures are around -1% lower this morning as the recession narrative makes a bit of a comeback. European futures are indicating that yesterday's gains (STOXX 600 +0.35%) will be eradicated which could end a three day winning streak. Oil prices are lower overnight with Brent Crude futures weakening -3.23% to $110.95/bbl while WTI futures are down -4.69% at $105.46/bbl amid a push by US President Joe Biden to bring down soaring fuel costs by calling for a temporary suspension of the 18.4-cents a gallon federal tax on gasoline. The demand destruction narrative is making a comeback in Asia as well. Today's big event is Fed Chair Powell's appearance before the Senate Banking Committee as part of the Fed’s semiannual Monetary Policy Report that they deliver to Congress. According to our US economists, they expect him to reiterate the same themes he gave at his post-meeting press conference last week, where he signalled that they’d likely be deciding between 50bps and 75bps at the July meeting. Fed funds futures are currently implying that another 75bps move is more likely, with +71.8bps currently priced in, but don’t forget that there’s still plenty yet to happen ahead of that meeting in just over a month, including the subsequent CPI release and jobs report for June, and as we found out at the last meeting, it’s not implausible that unexpected data releases throw the previous guidance off course. With all that to look forward to, Treasuries built on their selloff from last week, with the 10yr yield up +4.9bps to 3.27% as it echoed the higher yields we’d seen in Europe the previous day. In Asia, US 10yr yields (-1.89 bps) have dipped back down to 3.25%. They haven't had much in the way of Fedspeak to go off over the last 24 hours, although Richmond Fed President Barkin (a non-voter this year) said he “didn’t have a problem” with Powell’s guidance for the decision next month, and that he was in favour of the 75bps hike they did. Those moves in Treasuries also led to a steepening in the curve, with the 2s10s slope up +3.4bps to 7.2bps as they edged slightly further away from the inversion territory that they’ve briefly fallen into twice this year now. In Europe there was more of a divergence between core and peripheral yields however, and those on 10yr bunds (+2.2bps) closing at a post-2014 high, just as those on BTPs fell by -1.2bps. Some of the most significant news over the last 24 hours has been on the FX front, where the Japanese Yen fell to a fresh low for the 21st century of 136.71 per US Dollar this morning before bouncing back to 136.20 as I type. You’ve got to go all the way back to 1998 for the last time the currency was trading at a weaker level though. Prime Minister Fumio Kishida did not seem too concerned about BoJ monetary policy divergence and the impact on weakening the yen, saying in a debate policy needed to remain easy, perhaps lending more political support to the BoJ’s policies. Stocks across Asian markets are trading lower this morning, with the Kospi (-1.89%) the largest underperformer followed by the Hang Seng (-1.26%) after a two-day winning streak earlier this week. Markets in mainland China are also sliding with the Shanghai Composite (-0.33%) and CSI (-0.62%) both weak. Elsewhere, the Nikkei (+0.04%) gave up its early gains, hovering just above the flatline as I type. Bitcoin is at $20,332 in Asian trading. Here in the UK, gilts underperformed their counterparts elsewhere in Europe following remarks from BoE Chief Economist Pill that they would act “more aggressively” if required. In response, 10yr gilt yields rose +5.0bps to reach a fresh post-2014 high of 2.65%. Overnight index swaps are continuing to price in 50bp moves by the BoE at the next 3 meetings, with a path that would leave Bank Rate above 3% by year-end. There were also reports that former Italian Prime Minister Giuseppe Conte was considering leaving Mario Draghi’s coalition. While Draghi’s party would still likely retain a majority in both chambers of Parliament, it would leave a very narrow path to push through legislation to fix the economy or to resist dissent from coalition members – a theme all too familiar to Senate Democrats in the US. There wasn’t much in the way of data yesterday, although US existing home sales fell broadly as expected to an annualised rate of 5.41m in May (vs. 5.40m expected), which is their lowest level since June 2020 as the numbers were recovering after the initial wave of the pandemic. To the day ahead now, and the main highlight will be Fed Chair Powell’s testimony before the Senate Banking Committee. Other central bank speakers include the Fed’s Barkin, Evans and Harker, as well as BoE Deputy Governor Cunliffe. Otherwise, data releases include UK and Canadian CPI for May, as well as the European Commission’s preliminary consumer confidence indicator for the Euro Area in June. Tyler Durden Wed, 06/22/2022 - 07:52.....»»

Category: worldSource: nytJun 22nd, 2022

The Fed’s Hawkish Bite Left Its Mark on the S&P 500 Stocks

By raising interest rates, the Fed poured cold water on the red-hot markets and finally chilled investors’ enthusiasm. What’s next for asset prices? Work in Progress With the Fed’s hawkish hammer pounding the financial markets, the selling pressure coincided with events unseen since 2008. Moreover, with the work in progress to reduce inflation poised to […] By raising interest rates, the Fed poured cold water on the red-hot markets and finally chilled investors’ enthusiasm. What’s next for asset prices? Work in Progress With the Fed’s hawkish hammer pounding the financial markets, the selling pressure coincided with events unseen since 2008. Moreover, with the work in progress to reduce inflation poised to push asset prices even lower, I’ve long warned that we’re likely far from a medium-term bottom. For example, I wrote on May 31: .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Ray Dalio Series in PDF Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more With recession fears decelerating and optimism returning to Wall Street, the bulls are brimming with confidence. Please see below: Source: Investing.com (…) [However], while U.S. stock indices rallied sharply last week, guess what else participated in the festivities? Source: Investing.com To explain, the table above tallies the performance of commodities over various time periods. If you analyze the vertical red rectangle, notice how most commodities rallied alongside equities. As a result, the thesis was on full display.  When economic optimism elicits rallies on Wall Street, that same optimism uplifts commodities. Therefore, if the Fed tries to appease investors and passively attack inflation, it will only spur more inflation.  As such, the idea of a “positive feedback loop” where ‘stocks rally, inflation cools [and] Fed tightening expectations abate” is extremely unrealistic. In fact, it’s the exact opposite. The only bullish outcome is if economically-sensitive commodities collapse on their own. Then, input inflation would subside and eventually cool output inflation, and the Fed could turn dovish. However, the central bank has been awaiting this outcome for two years. Thus, my comments from Apr. 6 remain critical. If investors continue to bid up stock prices, the follow-through from commodities will only intensify the pricing pressures in the coming months. Therefore, investors are flying blind once again. To that point, the S&P 500 reversed sharply over the last several days, and the S&P Goldman Sachs Commodity Index (S&P GSCI) followed suit. For context, the S&P GSCI contains 24 commodities from all sectors: six energy products, five industrial metals, eight agricultural products, three livestock products, and two precious metals. However, energy accounts for roughly 54% of the index’s movement. Please see below: To explain, the green line above tracks the S&P GSCI, while the black line above tracks the S&P 500. As you can see, hawkish rhetoric and a 75 basis point rate hike had their desired effect. Furthermore, I warned on Apr. 6 that higher asset prices are antithetical to the Fed’s 2% inflation goal. In a nutshell: the more the bull gores, the more inflation bites. I wrote: Please remember that the Fed needs to slow the U.S. economy to calm inflation, and rising asset prices are mutually exclusive to this goal. Therefore, officials should keep hammering the financial markets until investors finally get the message. Moreover, with the Fed in inflation-fighting mode and reformed doves warning that the U.S. economy “could teeter” as the drama unfolds, the reality is that there is no easy solution to the Fed’s problem. To calm inflation, it has to kill demand. As that occurs, investors should suffer a severe crisis of confidence. Speaking of which, the fundamental thesis continues to unfold as expected. For example, Fed Chairman Jerome Powell said on Jun. 17: “The Federal Reserve’s strong commitment to our price stability mandate contributes to the widespread confidence in the dollar as a store of value.” Moreover, “The Fed’s commitment to both our dual mandate and financial stability encourages the international community to hold and use dollars.” As a result, while I’ve long warned that unanchored inflation would elicit a hawkish response from the Fed and uplift the USD Index, the man at the top remains focused on the task at hand. Please see below: Source: Reuters Likewise, Fed Governor Christopher Waller said on Jun. 18: “This week, the FOMC took another significant step toward achieving our inflation objective by raising the Federal Funds rate target by 75 basis points. In my view, and I speak only for myself, if the data comes in as I expect I will support a similar-sized move at our July meeting.” Please see below: Source: Bloomberg Thus, while I’ve been warning for months that the Fed isn’t bluffing, investors are suffering the consequences of their short-sighted expectations. For context, I wrote on Dec. 23, 2021: Please note that when the Fed called inflation “transitory,” I wrote for months that officials were misreading the data. As a result, I don’t have a horse in this race. However, now, they likely have it right. Thus, if investors assume that the Fed won’t tighten, their bets will likely go bust in 2022.   Continuing the theme, Atlanta Fed President Raphael Bostic said on Jun. 17: "We're attacking inflation and we're going to do all that we can to get it back down to a more normal level, which for us has got to be 2%. We'll do whatever it takes to make that happen." As a result, the more investors bid up stock and commodity prices, the more "muscular" the Fed's policies become. Please see below: Source: Reuters Thus, while Fed officials continue to press down on the hawkish accelerator, the plight of many financial assets highlights the ferocity of central bankers’ war against inflation. Moreover, with all bouts of unanchored inflation ending in recessions over the last ~70 years, more fireworks should erupt in the months ahead. Short Squeeze 2.0 It’s important to remember that financial assets don’t move in a straight line. Therefore, while the fundamental outlook continues to deteriorate, the algorithms may spot bullish short-term trends that let the scalpers profit in the interim. For example, I noted on Jun. 15 that one-sided positioning could (and eventually did) spark a relief rally. I wrote: The liquidation frenzy (margin calls) that erupted recently coincided with hedge funds going on the largest two-day selling spree on record. If you analyze the chart below, you can see that Goldman Sachs’ prime brokerage data shows the z-score of combined net dollars sold on Jun. 10 and Jun. 13 exceeded the sell-off following the collapse of Lehman Brothers in 2008. Thus, while it’s far from a sure thing, it’s prudent to note how these variables may impact the short-term price action. Source: Goldman Sachs To that point, last week's sell-off has too many market participants on one side of the boat. As a result, don't confuse a short squeeze with bullish price action. Please see below: Source: Goldman Sachs To explain, the blue bars above track the short-selling and short-covering activity of Goldman Sachs' hedge fund clients. If you analyze the red line at the bottom, you can see that the z-score of hedge funds' weekly short sales was the highest since April 2008. In a nutshell: hedge funds shorted more stocks as the S&P 500 declined, leaving them highly exposed to a short squeeze. As a result, if the markets rally, consider the price action within the context of the above data. Likewise, oversold conditions are also present. To explain, the green line above tracks the percentage of S&P 500 stocks above their 50-day moving average. If you analyze the right side of the chart, you can see that only 2% of S&P 500 constituents hold the key level, and the reading is abnormally low. For context, it’s a contrarian indicator, meaning that too much pessimism often elicits a short-term reversion. Moreover, with the dot-com bubble, the global financial crisis (GFC), the 2011 growth scare, the COVID-19 crash, and the 2018 sell-off the only periods with lower readings, it may take a shock-and-awe event to move the metric lower in the short term. Also noteworthy, Bloomberg’s SMART Money Flow Index diverged from the Dow Jones Industrial Average (DJIA) late last week. For context, the indicator gauges the behavior of ‘smart’ investors that trade during the final hour of the day. Please see below: Source: Bloomberg/Zero Hedge To explain, the green line above tracks the DJIA, while the red line above tracks Bloomberg’s SMART Money Flow Index. If you analyze the right side of the chart, you can see that the smart money expects some selling reprieve. Finally, Bank of America’s Bull & Bear Indicator is at its lowest possible level. Again, this uses contrarian methodology, emphasizing how bearish over-positioning can spark sentiment shifts. Source: Bank of America The Bottom Line There have been several fits and starts along the GDXJ ETF’s path to lower prices, and the medium-term fundamentals remain profoundly bearish. However, rallies can increase investors’ anxiety if they’re unsure of why the optimism has manifested. As a result, while the contrarian bullish stock data may uplift the PMs in the short term, a potential sentiment reversion doesn’t impact their medium-term outlooks. Moreover, with the Fed hawked up and the developments bullish for the USD Index and U.S. real yields, the S&P 500 and the PMs should confront lower lows in the months ahead. In conclusion, the PMs declined on Jun. 17, as volatility has asset prices gyrating sharply by the day. However, the frantic buying/selling activity is bearish and highlights the fragility of the financial markets. Therefore, more bouts of panic should erupt in the coming months, even if the selling pressure subsides in the near term. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFA Founder, Editor-in-chief Sunshine Profits: Effective Investment through Diligence & Care All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Updated on Jun 21, 2022, 3:00 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkJun 22nd, 2022

Futures, Cryptos Surge As Dip Buying Turns Into "Nasty Squeeze"

Futures, Cryptos Surge As Dip Buying Turns Into "Nasty Squeeze" Following a relentless rout that erased nearly $2 trillion in market value from the S&P 500 last week, US equity futures have surged, extending their Monday holiday gains just as predicted on Sunday when we said that a "Nasty Squeeze" was on Deck following last week's "Second Largest Ever" shorting by hedge funds. Nasdaq 100 futures rose as much as 2.2% before trading 1.7% higher as major US tech and internet stocks advanced, poised to extend Friday’s gains; shares of Tesla and Twitter also rose following billionaire Elon Musk’s comments at the Qatar Economic Forum; S&P 500 futures gained 1.8%; the cash market was closed on Monday for a holiday. Asian and European stocks also advanced as did bitcoin which jumped above $21K after sliding below $18K briefly on Saturday. Meanwhile Treasuries and the US Dollar retreated. US stocks came under renewed pressure last week, with the S&P plunged into bear market territory amid surging inflation and fears that aggressive rate hikes by the Federal Reserve will push the economy into a recession. The S&P 500 is set for an 11% drop in June, poised for the worst month since March 2020, which marked the lows of the pandemic selloff. Sentiment was somewhat boosted by Biden’s Monday comments on the economy in which he said that a recession isn't "inevitable" (what else will he say) but strategists have warned of more volatility ahead. “Even if the mid-term investing landscape remains blurry to most market operators at the beginning of this summer season, some investors looking for opportunities to buy shares at a discounted price have been reassured,” said Pierre Veyret, a technical analyst at ActivTrades. “The fact central banks are moving quickly towards a super hawkish stance in order to tame inflation is also perceived as good news by some.” In premarket trading, bank stocks also pushed higher amid a broader rebound in risk assets. In corporate news, HSBC has lost two senior investment bankers in Asia as global banks compete for financial technology talent and dealmaking slows. Meanwhile, the UK’s Payment Systems Regulator will focus a pair of market reviews on the rising card fees charged by Visa and Mastercard. Tech names were also solidly higher; notable movers included Apple +2.4%, Microsoft +2%, Amazon.com +2.6%, Alphabet +2.6%, Meta Platforms +2.1%, Nvidia +3.1% premarket; all six stocks closed higher on Friday, while US markets were closed for a holiday on Monday. Stocks related to cryptocurrencies were also indicating a rally as the price of Bitcoin continues to hold above $20,000 amid a tentative recovery and hopes that prices have bottomed. Meanwhile, Revlon surged as much as 27% in premarket trading, extending Friday’s rally after the cosmetics firm filed for Chapter 11 bankruptcy. Here are some other notable premarket movers: Tesla (TSLA US) and Twitter (TWTR US) shares rose in premarket trading on Tuesday after billionaire Elon Musk said the CEO label at the social media firm was less important than driving the product and that Tesla will cut its salaried workforce by about 10% over  the next three months. Tesla rose 3.1% and Twitter was up 1.2% in premarket trading Revlon shares surge as much as 27% in US premarket trading, extending Friday’s rally after the cosmetics firm filed for bankruptcy. Major US technology and internet stocks advanced in premarket trading on Tuesday, poised to extend Friday’s gains. Apple (AAPL US) +2.4%, Microsoft (MSFT US) +2%, Amazon.com (AMZN US) +2.6%, Alphabet (GOOGL US) +2.6% Spirit (SAVE US) shares jump 13% in US premarket trading, to $24, after JetBlue (JBLU US) raised its offer to $33.50 per share from $31.50 on June 6, the latest move in a multi-billion dollar takeover contest with rival Frontier (ULCC US). Arrival shares jump 8.6% in US premarket trading after the electric- vehicle maker announced that its zero-emission van has achieved EU certification and received European Whole Vehicle Type Approval. US-listed Chinese stocks are mostly higher in premarket trading, tracking a two-day 2.3% rise in the Hang Seng Tech Index. Alibaba (BABA US) +4.6%, Baidu (BIDU US) +3.5%, Pinduoduo (PDD US)+3.3% Stocks related to cryptocurrencies rise on Tuesday in US premarket trading as the price of Bitcoin continues to hold above $20,000 amid a tentative recovery and hopes that prices have bottomed. Riot Blockchain (RIOT US) +5.6%, Coinbase (COIN US) +4.7%, MicroStrategy (MSTR US) +5% Citi cuts ratings on International Paper Co. and WestRock to neutral from buy, citing increasing questions about demand as supply additions loom. International Paper falls 1.1% in premarket trading, WestRock -1.5% Keep an eye on Maxar shares as Wells Fargo said the stock is its top pick in the burgeoning space sector, initiating it at overweight, Rocket Lab at equal-weight and Virgin Galactic at underweight. Adobe (ADBE US) shares may be in focus today as the stock was downgraded to equal-weight and given Street-low $362 target from $591 by Morgan Stanley, on expectation of a slowing structural growth profile for the computer software company. After unexpectedly accelerating to a fresh 40-year high in May, US consumer price growth is seen slowing, with a Bloomberg survey of economists predicting 6.5% by the fourth quarter and to 3.5% by the middle of next year. Yet fears are rampant that Federal Reserve policy makers intent on cooling price pressures will go too far and trigger an economic slowdown. Strategists at Morgan Stanley and Goldman Sachs Group Inc. warned equities may have further to fall to fully price in the risk of recession, reflecting wider skepticism about Tuesday’s rebound. “We think equities will struggle to rebound sustainably until earnings expectations reset lower and/or central banks turn more dovish, which seems unlikely for now,” said Emmanuel Cau, head of European equity strategy at Barclays Plc. European stocks also extended their recent recovery, with the region’s benchmark Stoxx 600 Index rising 1%, led by gains in basic resources and chemical companies’ shares. Consumer discretionary, chemicals and autos also trade well. CAC 40 outperforms. Leonardo jumps as much as 9.7% in Milan trading after its DRS unit agreed to buy Israeli radar-maker RADA Electronic in an all-stock transaction. Valneva rises as much as 23% after CEO Franck Grimaud said the company’s Lyme disease vaccine has the potential of becoming a “blockbuster” with sales of more than 1 billion euros. K+S and OCI shares gain after JPMorgan said valuations are “compelling” and fundamentals remain positive. European fertilizer shares had dropped recently because of rising gas prices. OCI rises as much as 4.6%; K+S +6.3% Air Liquide climbs as much as 3.9%, after the French industrial gas company signed a long-term power purchase agreement with Vattenfall. Mithra rises as much as 21% after the pharmaceutical company said it received subscription commitments for 3.87m new shares at an issue price of EU6.07 apiece, representing a 5% discount to last close. Richemont and Swatch advance after Swiss watch exports for the month of May showed strong demand versus the year-earlier period in the US and Japan as well as in European countries such as France and the UK. Luxury peers also trading higher in a wider rebound. Richemont gains as much as 2.8%, Swatch +2.8%, Hermes +3.3%, LVMH +3.7% European apparel retail shares drop after JPMorgan downgrades Asos, About You, Boohoo and Primark owner AB Foods to neutral from overweight, citing the cost of living crisis with cracks emerging in discretionary spending. Asos declines as much as 5.1%, Boohoo -4.8%, About You -4.3%, AB Foods -3.2% Proximus and Telenet slide after a statement by the Belgian telecom regulator showed that new entrant Citymesh partnered with Romanian carrier Digi Communications and acquired spectrum across various bands. Proximus shares fall as much as 7.8%, Telenet -3.9% Earlier in the session, MSCI’s Asia-Pacific index snapped an eight-day slide to add more than 1% as Asian equities headed for their biggest gain this month. The MSCI Asia Pacific Index climbed as much as 1.8%, set to snap an eight-day losing streak, with financial and tech stocks among the biggest contributors to its advance. The US president spoke overnight after a conversation with former Treasury Secretary Lawrence Summers, as the White House and congressional Democrats are in talks on legislation that aims to fight inflation. Benchmarks in Taiwan, Japan and Hong Kong led gains in the region. Australia’s index advanced for the first time in days after central bank chief Philip Lowe signaled he will only raise interest rates by 25-to-50 basis points at the July meeting. Chinese shares edged lower after recent gains.  “It’s a respite, not a rebound,” said Charu Chanana, a market strategist at Saxo Capital Markets. “We are still in a bear market that is facing a double whammy of Fed tightening and building recession fears, and the second-quarter earnings season is likely to be particularly painful for the markets” due to cost pressures, she added.  Valuations for the MSCI Asia gauge have continued to slide toward pandemic lows, with the index down 18% this year. Still, it’s outperforming a measure of global shares, supported by a rally in Chinese equities this month as the country emerges from Covid-triggered lockdowns. Japanese stocks advanced as investors weighed the impact of the yen’s weakness and the extent of the recent selloff. The Topix Index rose 2% to 1,856.20 as of market close Tokyo time, while the Nikkei advanced 1.8% to 26,246.31. Sony Group Corp. contributed the most to the Topix Index gain, increasing 4%. Out of 2,170 shares in the index, 2,023 rose and 108 fell, while 39 were unchanged. “Stocks that are expected to have an upward revision from the weak yen may be firm,” said Mitsushige Akino, a senior executive officer at Ichiyoshi Asset Management. In Australia, the S&P/ASX 200 index rose 1.4% to close at 6,523.80, snapping a seven day losing steak. The benchmark was led by gains in banks and miners, with the financials sub-gauge rising the most since March 10.  In early trade, Australia’s central bank Governor Philip Lowe said he didn’t see a recession on the horizon for the nation.  In New Zealand, the S&P/NZX 50 index rose 1.1% to 10,701.59 India’s benchmark share index posted its biggest two-day advance since May 30, boosted by a recovery in information technology stocks and as investors looked for bargains after a sharp selloff last week.  The S&P BSE Sensex rose 1.8% to close at 52,532.07 in Mumbai, taking its two-day advance to 2.3%. The NSE Nifty 50 Index advanced 1.9%. All of the 19 sectoral indexes compiled by BSE Ltd. gained, led by a measure of oil & gas companies. “Crude prices have corrected by almost 10% from its recent peak, providing some breather to the Indian market,” Motilal Oswal Financial analyst Siddhartha Khemka wrote in a note.   Reliance Industries contributed the most to the Sensex’s gain, increasing 1.6%. All but one of 30 shares in the Sensex index rose. Of the top ten performers on the measure, half were information technology companies, led by Tata Consultancy Services Ltd. that clocked its biggest advance this month.  In rates, treasuries were cheaper across the curve as trading resumed after Monday’s US holiday; cash USTs bear steepened, but trim losses after cheapening ~5bps at the Asia reopen.  Long-end leads losses with stock futures rising after last week’s rout. US yields are ere cheaper by as much as 6bp at long end, steepening 2s10s by nearly 3bp, 5s30s by nearly 4bp; 10-year, higher by ~5bp at 3.27% lags bund and gilts by 3bp and 4.5bp while Italian bonds outperform Treasuries by 12bp in the sector. Bunds and gilts outperform Treasuries, while Italian bonds extend recent gains after ECB’s Olli Rehn reiterated determination to combat unwarranted spikes in borrowing costs for some of the region’s most vulnerable economies.  That said the ECB has yet to disclose said measures, a move which most agree will lead to selling the news. Gilts bull flatten, 10y yields drop 4bps after stalling near 2.6%. Bunds are comparatively quiet. Shorter-maturity Australian bonds rallied after central bank chief Philip Lowe said interest rates are likely to rise by 50 basis points at most in July. Money markets subsequently scrapped bets he would track the Federal Reserve with a 75 basis-point move. Japanese government bonds were mixed after a five-year note sale that drew the weakest demand in more than two years in the aftermath of wild price swings in futures that have made some traders uneasy about their exposure to cash bonds. In FX, Bloomberg dollar spot index fell 0.3% as the greenback weakened against all of its Group-of-10 peers apart from the yen. JPY is the weakest in G-10, plunging to a fresh 24 year low of 136. NOK and SEK outperform. The euro advanced and European bonds rallied, led by the front end even as ECB Governing Council Member Peter Kazimir said negative rates must be history by September. Governing Council member Olli Rehn separetely said that “there has been good reason to expedite the normalization of monetary policy”. The pound extended gains amid broad dollar weakness while UK government bonds inched up. BOE Chief Economist Huw Pill said policy makers would sacrifice growth in order to bring down inflation, saying there’s a risk of prices developing a “self-sustaining momentum. In commodities, WTI drifted 2.3% higher to trade near $112. Most base metals trade in the green; LME zinc rises 2.8%, outperforming peers. LME aluminum lags, dropping 0.3%. Spot gold is little changed at $1,838/oz. Bitcoin is bid and above the USD 21k mark, after last week's slip to a sub-USD 18k low. Elon Musk says he intends to personally support Dogecoin, via BBG TV. Coinbase (COIN) says connectivity issues across Coinbase and Coinbase Pro could cause failed trades and delayed transactions; issue was subsequently resolved. To the day ahead now, and data releases include US existing home sale for May, as well as the Chicago Fed’s national activity index for the same month. Otherwise, central bank speakers include the Fed’s Barkin and Mester, the ECB’s Rehn and the BoE’s Pill. Market Snapshot S&P 500 futures up 1.9% to 3,744.50 STOXX Europe 600 up 1.0% to 411.06 MXAP up 1.5% to 158.77 MXAPJ up 1.5% to 528.18 Nikkei up 1.8% to 26,246.31 Topix up 2.0% to 1,856.20 Hang Seng Index up 1.9% to 21,559.59 Shanghai Composite down 0.3% to 3,306.72 Sensex up 2.2% to 52,741.19 Australia S&P/ASX 200 up 1.4% to 6,523.81 Kospi up 0.7% to 2,408.93 German 10Y yield little changed at 1.76% Euro up 0.5% to $1.0567 Brent Futures up 1.2% to $115.53/bbl Brent Futures up 1.2% to $115.52/bbl Gold spot down 0.2% to $1,835.31 U.S. Dollar Index down 0.61% to 104.06 Top Overnight News from Bloomberg UK rail workers began Britain’s biggest rail strike in three decades after unions rejected a last-minute offer from train companies, bringing services nationwide to a near standstill. Britain’s local authorities say they can’t afford to pay a mandated increase in the legal minimum wage over the next year without a £400 million cash injection from the national government A majority of European businesses are worried about their ability to meet employee demands for higher wages amid the current spike in inflation, according to a regional survey by Intrum AB Companies in Germany, the UK, France, Spain and Italy are the most distressed since August 2020, according to the Weil European Distress Index. The study aggregates data from more than 3,750 listed European firms A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks gained across amid a broad constructive global risk tone despite a lack of fresh macro drivers and the recent holiday closure in the US, with Bitcoin and Chinese commodity prices also stabilising after the recent tumultuous price action. ASX 200 was led higher by the energy sector and after RBA's Lowe effectively ruled out a 75bps hike next month. Nikkei 225 outperformed and reclaimed the 26,000 level amid a predominantly weaker currency. Hang Seng and Shanghai Comp. were positive with sentiment in Hong Kong underpinned by news the SAR is to propose a quarantine-free business travel corridor with mainland China, while mainland bourses lagged with the US ban on imports from Xinjiang taking effect from today. Japan's PM Kishida says rapid JPY weakening is a source of concern, must closely watch FX moves and consider monetary policy and FX measures separately. Top Asian News Chinese Developer Accepts Wheat, Garlic as Payment to Woo Buyers China Junk Bond Selloff in New Phase With Record Fosun Rout Gold Steady as Traders Weigh Central Bank Plans to Hike Rates Australian Tesla-Supplier Eyes First Lithium Exports Over- Optimism Among China Steel-Makers Behind Iron Ore’s Plunge European bourses are firmer and building on Monday's upside, Euro Stoxx 50 +1.1%; thus far, newsflow has largely focused on familiar themes. Additionally, participants are awaiting the return of the US after Monday's market holiday. Currently, ES +1.7% with the region incrementally outperforming European peers. Elon Musk says there a still a few unresolved matters with Twitter (TWTR) including the number of spam users, via BBG TV; still awaiting a resolution, very significant. Adds, they are reducing the salaried workforce of Tesla (TSLA) by circa. 10% over the next three-months. Top European News French President Macron will invite all parties able to form a group in the new parliament for talks on Tuesday and Wednesday, according to Reuters. BDI revises down 2022 German GDP forecasts: 1.5% (prev. 3.5%); return to pre-COVID level expected at end-2022 at the earliest Central Banks ECB’s Lane said very high inflation means there is a risk inflation psychology could take hold and said the larger increment for rate increase in September does not represent a red alert assessment of inflation. Lane also commented that he doesn’t see a situation where they would need to revisit the plan for a July decision and there is no preview beyond September of what will be the appropriate pace of tightening, according to Reuters. ECB’s Villeroy said the new instrument should be available as much as necessary to make the no-limit commitment to protect the Euro very clear and the more credible such an instrument is, the less it may have to be used in practice. Villeroy added the new instrument will have rules but there will be elements of judgement also and said they would not necessarily need to hold purchases of government or private sector securities to maturity, according to Reuters. ECB's Rehn says EZ inflation pressured are broader and stronger; very likely the September move is more than 25bp in magnitude. BoE's Pill says if there is evidence of persistent price pressures, the MPC is certainly prepared to act, expects further tightening in the coming months, need to consider the exchange rate when assessing inflationary pressures. Worries that using monetary policy to stabilise the FX rate in the short-term would be a distraction from the BoE's goals. HKMA purchases HKD 9.6bln from the market, as the HKD hits the weak-end of the trading range. FX Euro firm as risk revival continues and ECB’s Rehn says 50bp hike in September is highly probable, EUR/USD eyeing 1.0600 after breaching 1.0550, but could be capped by 1bln option expiry interest between 1.0575-85. Sterling rebounds ahead of CBI industrial trends and after BoE chief economist Pill underlines willingness to act if price pressures prove persistent; Pound probes 1.2300 vs Dollar as DXY slips further from recent peaks through 104.000. Loonie and Nokkie boosted by firmer crude prices, as former awaits Canadian retail sales data; USD/CAD close to 1.2900 vs circa 1.3078 double top, EUR/NOK sub-10.4000 within 104.4200+/10.3400 range. Kiwi and Aussie underpinned by improvement in risk appetite, but hampered as NZ consumer sentiment slides to record low and RBA Governor Lowe pushes back on the amount of 2022 tightening priced in at present; NZD/USD hovers above 0.6350 and AUD/USD shy of 0.7000. Franc and Yen remain divergent with SNB and BoJ policy paths, latter largely ignoring latest verbal intervention; USD/CHF pivots 0.9650 and USD/JPY back above 135.00. Israel PM Bennett and Foreign Minister Lapid agreed on dissolving the Knesset and going for an early election, while the vote will take place next week and Lapid will become PM once the vote passes, according to Walla News. Fixed Income Debt divergent and erratic awaiting the return of US cash markets from long holiday weekend. Bunds hold within 143.05-144.01 range and Gilts between 111.11-68 parameters. Treasury futures retreat and curve flits from marginal flattening to steepening ahead of US existing home sales and more Fed speak via Mester and Barkin Commodities WTI and Brent are bid amid broader risk sentiment with newsflow focusing on familiar themes primarily around the reduction in Russia's gas supply to Europe. Thus far, Brent has tested but failed to connivingly breach the USD 116.00/bbl mark ahead of touted USD 116.37/bbl resistance. US Treasury Secretary Yellen said she does not see resuming the Keystone XL oil pipeline as a short-term measure that can address high oil prices, while she added it would take years to have an impact. Yellen also commented that evidence is mixed on the level of pass-through from a gasoline tax holiday to lower prices and said that an exception or ban on insurance for certain Russian oil shipments would effectively provide a price cap on oil, according to Reuters. Brazilian Economy Minister Guedes said Brazil is part of the western energy security, particularly for Europe, while he added that privatising and moving Petrobras to Novo Mercado would increase its market cap from BRL 450bln to BRL 750bln. Guedes added that they will conduct new measures again if the war in Ukraine is escalating, according to Reuters. PetroEcuador may have to stop exports if protests continue and it declared a force majeure to avoid contract penalties, according to Reuters. Vitol CEO says markets are faced with underinvestment and falling production capacity for crude and there is a relatively tight refining situation, via Reuters; if China exports some more products, the tightness felt today won't be felt. Denmark's energy agency declared an 'early warning' stage of gas supply preparedness, according to Reuters. German regulator says they are not in a hurry to declare the highest gas emergency level yet, via Reuters citing BR; however, Sweden declares an "early warning" stage of gas supply preparedness for Western and Southern parts of the nation. Codelco's union presidents ratified the start of a national strike beginning on Wednesday, according to Reuters; an update which, alongside broader risk, is supporting LME Copper. US Event Calendar 08:30: May Chicago Fed Nat Activity Index, est. 0.47, prior 0.47 10:00: May Existing Home Sales MoM, est. -3.7%, prior -2.4% 10:00: May Home Resales with Condos, est. 5.4m, prior 5.61m Central Banks 11:00: Fed’s Barkin Interviewed During NABE Event 12:00: Fed’s Mester Speaks at Women in Leadership Event 15:30: Fed’s Barkin Speaks in Richmond DB's Jim Reid concludes the overnight wrap I’ll be publishing my latest monthly chartbook later today so keep an eye out for it. It will include the slides for last week’s webinar on the default study “The end of the ultra-low default world”. See here for the webinar replay and here for the original default study. Welcome to the longest day of the year although most in markets will already say we've had numerous of those already so far this year. Actually if you're outside of London, trying to get in it could be a very, very long day as the UK is today gripped by the first of three alternate day rail strikes. There is a tube strike today thrown in for good measure. It does seem industrial relations with the government are on a knife edge across the UK as at least 3 million workers across different professions are considering industrial action at the moment over pay and working conditions. So this could become a much bigger story if tensions are not eased. With inflation this high it's not easy to see how they can be without big pay rises being offered. However on this day of wall to wall sun (sorry to the Southern Hemisphere readers), there has been a little more light than dark in markets over the last 24 hours after what was the worst week for global equities since March 2020. The next major event(s) to look forward to are Fed Chair Powell’s congressional testimonies from tomorrow. To be honest though, its been a fairly quiet start to the week given the US holiday yesterday, with the biggest news instead being a fresh rise in European sovereign bond yields after President Lagarde reiterated the ECB’s intentions to start hiking next month, and also shone a bit more light on their plans to deal with any potential fragmentation. We’ll start with those remarks from Lagarde, who appeared in a hearing at the European Parliament yesterday and spoke strongly against any potential fragmentation in the Euro Area. Indeed, she said that “we need to be absolutely certain” that monetary policy was being transmitted to the different Euro Area countries and went as far to say that it was “right at the core of the mandate”, whilst adding “anybody who doubts that determination will be making a big mistake”. So not quite “whatever it takes” but along the same lines. Given the ECB has promised to deal with any fragmentation, that should make life easier for them when it comes to raising rates, and European sovereign bond yields responded accordingly yesterday. Looking at the specific moves, yields on 10yr bunds (+9.0bps), OATs (+11.8bps) and BTPs (+12.3bps) all moved noticeably higher, although by the standards of last week that seemed quite modest given that 10yr bund yields had seen absolute moves of 11bps in either direction on 3 out of 5 days last week. When it came to bonds though, it was UK gilts who were one of the biggest underperformers yesterday after we heard from one of the more hawkish members of the Bank of England’s MPC. Catherine Mann (who was in the minority that favoured of a 50bps move last week) said in a speech that “the incoming data on inflation show increasingly domestic embeddedness, persistence, and momentum”. Furthermore, she also warned about the risk of embedded domestic inflation being “further boosted by inflation imported via a Sterling depreciation”. Against that backdrop, 10yr gilt yields rose by +10.6bps to close above 2.6% for the first time since 2014, whilst overnight index swaps are continuing to price in a more aggressive response from the BoE after the next meeting, with 50bp moves priced in for each of the next 3 meetings, which would be the fastest pace of hikes since they gained operational independence in 1997. In spite of the sovereign bond selloff, equities put in a much better performance yesterday, with the STOXX 600 (+0.91%) seeing a broad-based advance that was supported by all the main sector groups. Other indices on the continent also moved higher, including the FTSE 100 (+1.50%), the DAX (+1.06%) and the FTSE MIB (+0.99%). The worst performer on a relative basis was France’s CAC 40 (+0.64%), which struggled following the news that President Macron had lost his parliamentary majority, which will make passing his agenda much more difficult in the coming years. See our economists’ piece on the topic here. With the US holiday we only had futures to look at, but those on the S&P 500 had moved around +1% higher by the time of the European close. They are +1.62% higher this morning with the NASDAQ 100 futures (+1.71%) also meaningfully higher. Meanwhile, Fed funds futures were again moving in the direction of pricing in a more aggressive path of rate hikes, with the implied rate by the December meeting up +7.18bps to 3.625%, albeit still beneath their closing peak of 3.72% just before the Fed meeting, which meant that Treasury futures were also pointing to fresh declines yesterday as well. Asian equity markets are relatively buoyant this morning with the Nikkei (+1.76%) leading the pack followed by the Hang Seng (+1.42%). In mainland China, the Shanghai Composite (+0.18%) and CSI (+0.12%) are also trading in positive territory whilst the Kospi (+1.03%) is sharply higher in early trade. Elsewhere, the meeting minutes from the Reserve Bank of Australia (RBA) released this morning indicated that the central bank is leaning towards more monetary policy tightening over the coming months. The minutes also revealed that inflation was expected to increase to 7% by the end of the year due to pandemic-related supply chain disruptions, before coming back towards the 2-3% inflation range in 2023. Meanwhile, the RBA Governor Philip highlighted that interest rates were still "very low" but watered-down expectations of 75bps rate hikes thus signaling a 25 or 50bps move at the July meeting. On the FX side, the Aussie Dollar did witness a sharp dip during the RBA Governor’s Q&A session but is reversing losses, trading +0.35% at 0.697 per US dollar, as I type. Elsewhere the Japanese yen has remained under pressure at 135.03 per dollar, not far off a 24-year low of 135.58 hit early last week. Separately, oil prices are higher this morning with Brent futures (+1.04%) at $115.32/bbl and WTI futures increasing +1.79% to $111.52/bbl. To the day ahead now, and data releases include US existing home sale for May, as well as the Chicago Fed’s national activity index for the same month. Otherwise, central bank speakers include the Fed’s Barkin and Mester, the ECB’s Rehn and the BoE’s Pill. Tyler Durden Tue, 06/21/2022 - 08:02.....»»

Category: dealsSource: nytJun 21st, 2022

A Look At The Last Five US Recessions

A Look At The Last Five US Recessions By Nicholas Colas of DataTrek Research The first job I had after graduating business school in 1991 was covering the US auto industry at the old First Boston, now Credit Suisse. This was just after the 1990 recession, and the Big Three were all on the ropes. Light vehicle demand was off +30 percent from its 1980s highs. The Japanese makers were all gaining share. Chrysler was essentially bankrupt, as were some of its major suppliers. Investors had left auto stocks for dead. Fast forward a year, and US automaker/supplier stocks were market leadership. Chrysler had doubled, albeit from $5/share to $10. Vehicle demand was starting to recover. Incremental margins on new vehicles – minivans and SUVS – were fantastic. Every quarter saw these companies beat estimates, often by a wide margin. The lesson here is that recessions, while painful, offer investors tremendous money-making opportunities. In fact, every recession and market crisis since 1973 tells the same story about US stocks generally, not just grimy cyclical names: 1973 – 1974: S&P 500 loses 37 percent 1975 – 1976: Index gains 70 percent 1981: S&P loses only 5 percent despite deep, Fed-induced recession 1982 - 1983: Index gains 48 percent 1990: S&P loses only 3 percent despite Gulf War I oil shock 1991 – 1992: Index gains 40 percent 2000 – 2002: S&P loses 37 percent 2003 – 2004: Index gains 42 percent 2008: S&P loses 37 percent 2009 – 2010: Index gains 45 percent On its face, this pattern makes no sense. Why should investors so dramatically reset their expectations for future cash flows just because of a recession? Granted, bull markets always see some speculative excess. Stock prices going into recessionary bear markets are always too high simply because of that. But recessions are not exactly a surprise. Their timing is uncertain, of course. But everyone knows they occur, and that the economy eventually recovers, and US corporate earnings go on to make new highs. The standard explanation is that markets cannot be sure of where earnings bottom or how long it will take for them to fully recover. Fair enough, as this data of S&P 500 earnings shows: 1990 Recession: 4-quarter trailing S&P operating earnings peaked in Q2 1989 at $25.53/share. Trough earnings were $19.30/share (-24 pct from peak) in Q4 1990, 6 quarters after their prior peak. S&P earnings finally made new highs in Q4 1993, 4 ½ years after their last peak, at $26.90/share. 2000 – 2002 (Recession, Dot Com Bubble Burst, 9-11 Attacks) S&P earnings peaked in Q3 2000 at $56.79/share. Trough earnings occurred 5 quarters later, in Q4 2001 at $38.85/share (-32 percent from peak). It took 3 ½ years for earnings to make a new high, in Q1 2004, at $58.08/share. 2008 (Great Recession) S&P earnings peaked in Q2 2007 at $91.47/share. Trough earnings were $39.61/share (-57 percent from peak) in Q3 2009, 9 quarters after the prior peak. It took 4 ¼ years for earnings to make fresh highs, at $94.64/share in Q3 2011. On average, therefore, it takes 3-4 years for S&P 500 earnings power to recover fully after a recession and in the interim aggregate EPS can drop by anywhere from 24 – 57 percent. The latter is a huge range and merits some further explanation: Every company has a different incremental margin – the profit it generates from its most recent dollar of revenue. When revenues are increasing, as during an economic expansion, incremental margins are higher than base margins. When revenues are decreasing, as during a recession, incremental margins are lower (often dramatically so) than base margins. The severity of an economic contraction determines how bad incremental margins eventually become. Analysts call this operating leverage, and I can tell you from decades of experience that it is ferociously hard to calculate through a recession and into a recovery. Here’s why: At the start of an economic downturn, incremental margins are very low or even negative. That is because companies tend to add to their cost structures at the top of a cycle. When the downturn comes, fixed costs are too high relative to declining demand. As the downturn drags on, companies cut costs to align their operating model to lower demand. As economic conditions improve, marginal revenues come through at higher levels of profitability. Pulling this discussion into the present day, all we know for sure is that equity markets don’t believe S&P 500 earnings will grow over the near term from their recent run rate of $54/share ($216/year). With the index’s close of 3,667 today, we are trading at 17.0x current earnings. That’s a fair multiple, spot on the 10-year average. This implies the market believes incremental revenues and margins (operating leverage) net to zero percent growth over the next year. The history of earnings during recessions can give us a sense of where US large caps might bottom. Here are 3 scenarios, each using the same 18x multiple, not the 17x long-run average, for trough earnings since markets will assume strong incremental earnings leverage off the bottom for the reasons described earlier. Modest earnings decline (15 percent): $184/share (down from $216/share currently) S&P: 3,312 Earnings go back to 2018 – 2019 levels: $162/share, -25 percent S&P: 2,916 Typical recessionary earnings decline (28 percent, average of 1990 and 2000 – 2002); $155/share S&P: 2,790 These levels are not supposed to scare you; I mean them as a reason for hope. As profoundly difficult as the current investment environment is, it will end. Yes, inflation is a problem and yes, Fed policy is aggressive as a result. Stocks are bearing the brunt of the uncertainties those issues create. A recession is likely; stock market volatility is very clear on that point, as were Fed Chair Powell’s comments yesterday. Companies will cut costs. Incremental margins will be awful for a quarter or two, but then improve dramatically. S&P earnings will recover and reach new highs in a few years’ time. This is how the pattern has worked across my +30-year career and I see no reason to think it will be different in the next cycle. Takeaway: traders have a saying that sounds a bit wishy-washy but actually has some wisdom to it – “It’s too late to sell and too early to buy”. There will be some great returns once stocks settle out. The job now is to wait for the right valuations and catalysts to catch that move. Tyler Durden Mon, 06/20/2022 - 10:00.....»»

Category: blogSource: zerohedgeJun 20th, 2022

European Stocks, US Futures, Cryptos All Rise With US Out On Holiday

European Stocks, US Futures, Cryptos All Rise With US Out On Holiday Asian stocks dipped, and European bourses gained alongside US equity futures and cryptos in subdued, choppy trading on Monday as fears over an imminent recession faded away briefly and investors bought the dip after last week's jarring selloff, and near record shorting... ... expecting markets to bounce amid speculation the rout had gone far enough to price in concerns about rising rates and slowing growth. S&P futures rose 0.7% or 25 points in muted trading, while Nasdaq 100 and Dow futures were up 0.8 and 0.5% respectively, however cash stocks are closed Monday for the Juneteenth market holiday.  Bitcoin gyrated around the key $20,000 mark, rebounding above the "nice, round number" after a weekend rout dragged bitcoin briefly below $18,000 amid widespread margin-call driven liquidations. A volatile crypto slump has become emblematic of the pressure on a range of assets from sharp Federal Reserve interest-rate hikes to tame high inflation. Volatility measures remained elevated as investors look for an entry point into equity markets roiled by soaring price pressures and worries that aggressive monetary tightening will tip major economies into recession. Like a broken record, JPMorgan strategists said pressure on stocks should ease in the second quarter as inflation moderates, which of course they say every other week, even as others - including Morgan Stanley - cautioned that more losses may be in store. “Both prolonged inflation and/or a sharp increase in rates from central banks will have a deep impact on growth perspectives,” said Jean-François Paren, global head of market research at Credit Agricole CIB. “If anything, current valuations are more the ‘exit point’ than the ‘entry point’.” European equities rebounded following the worst week for the gauge since March to trade near session highs with the Euro Stoxx 600 rising 0.5% with peripheral indexes faring slightly better. Banks, energy and autos are the best performing sectors.  Basic resources underperformed amid a slump in raw-material prices. Swedish engineering group ABB Ltd. declined after postponing a listing of its electric-car charging business, citing volatile market conditions. France’s equity benchmark lagged after President Emmanuel Macron lost his absolute majority in parliament, putting his reform agenda in peril. V2X drops back on to a 29-handle. Here are some of the most notable European movers: Renault shares rise as much as 7.6% after Jefferies upgraded the shares to buy, saying the carmaker offers a combination of strategic initiatives, capital release, near-zero core value and cost-driven earnings upside. Axfood gains as much as 7.7%, the most since March 23, as Handelsbanken upgrades the food retailer to buy as a “top-notch inflation hedge,” and sees strong earnings support ahead. Travel and Leisure stocks are among the best-performing subgroups on the wider Stoxx 600 after IATA predicted that the airline industry will return to profit next year. Among best performers on the SXTP are TUI, the world’s biggest tour operator, +5.6%; British Airways owner IAG +3.1%; Lufthansa +3.5%; Ryanair +2% Interparfums gains as much as 4.5% after Oddo BHF upgraded the stock to outperform from neutral, citing cheap valuation and good business levels. Varta jumps as much as 5% after Goldman Sachs initiates coverage with a buy rating, saying EV battery order announcements could be a major catalyst for a stock trading near an all-time low on enterprise value-to-Ebitda multiple basis. Euromoney rises as much as 29% after the information service business received an approach from Astorg Asset Management and Epiris regarding a possible cash offer. Kingspan plunges as much as 16% after its pre-close trading update, with the focus on declining orders that analysts say underline slowing demand, with peers such as Rockwool falling, too. Assa Abloy drops as much as 4.8%, the biggest laggard on Stockholm’s large-cap OMXS30 index, after Pareto Securities said it expects demand for the Swedish lock maker’s products to drop. EasyJet falls as much as 4.2% as analysts expect downgrades to consensus after the low-cost carrier cut 3Q and 4Q capacity outlook after cutting flights amid disruptions. Societe Generale and BNP Paribas retreat in Paris trading after President Emmanuel Macron and his allies failed to win an outright majority in the second round of French legislative elections. Earlier in the session, Asian stocks edged lower with MSCI’s index of Asian shares dropped for an eighth day, the longest stretch since February 2020, as investors worried about the odds of a global recession amid tighter monetary policies.  The MSCI Asia Pacific Index was down 0.3%, poised for an eighth session of declines that’s the longest since early 2020. Rate-sensitive technology shares dragged on the gauge. Materials stocks also fell as a dimming outlook for demand pushed prices of iron ore and some other commodities lower.  South Korean and Japanese equities led declines in the region. Chinese stocks stood out with gains as the nation’s banks kept key lending rates unchanged, in line with the People’s Bank of China’s measured easing stance. China has kept monetary policy loose even as global central banks embraced aggressive tightening, and that divergence has been giving the nation’s equities an advantage in recent weeks. Shares of China’s power producers rally after thermal coal futures fell 4.1%, the most since March 10. , amid a gloomy demand outlook. Iron ore and coking coal also tumbled. Iron ore is headed for its eighth straight day of losses, the longest falling streak since September. Chinese prices of coking coal used for steel-making have also slumped since the middle of last week, falling about 12%. The Asian stock benchmark is at a two-year low, tracking broader risk-off sentiment as concerns over global growth and inflation remain high. Monetary authorities’ focus on battling inflation is increasing worries that tightening may eventually push major economies into recessions.  Still, the MSCI regional gauge has performed better than its global peers this month, supported by China resilience.  While the recovery road may still be bumpy, “China this year could give the market a surprise,” Yifan Hu, regional chief investment officer and head of Asia Pacific macroeconomics for UBS Global Wealth Management, said in a Bloomberg TV interview. “Monetary policy is quite relaxed, and the economy is recovering. So I think as long as there’s no prolonged city-level lockdowns in the second half, we are positive for China’s market to continue to rally.” Japanese stocks fell amid growing concerns the US economy will enter a recession as the Federal Reserve tightens monetary policy.  The Topix fell 0.9% to 1,818.94 at market close in Tokyo, while the Nikkei 225 declined 0.7% to 25,771.22. Shin-Etsu Chemical contributed the most to the Topix’s decline, decreasing 6.4%. Out of 2,170 shares in the index, 423 rose and 1,679 fell, while 68 were unchanged. “Investors are concerned about holding stocks as an asset class with US recession fears exceeding 50%,” said Masafumi Oshiden, a fund manager at BNY Mellon Asset Management. In FX, US cash Treasuries are closed for holiday. As such, European fixed income was relatively quiet with Bunds bull-steepening and richening ~3bps across the short end with money markets slightly trimming the policy tightening priced by year end. Gilts bear-flatten, the 2y yield rising 3bps near 2.23%. T-note futures drift sideways, cash USTs remain closed for US holiday. Peripheral spreads are generally steady. French bonds drop, leading semi-core underperformance after President Macron failed to win an absolute majority in Sunday’s Parliamentary elections. In FX, the Bloomberg dollar index dropped 0.3% after rising last week to the highest since April 2020, while the Norwegian krone outperformed along with commodity currencies as broader market sentiment revived. The greenback weakened against all of its Group-of-10 peers as haven demand declined due to a lack of trading incentives stemming from the US holiday and caution ahead of testimony from Federal Reserve Governor Jerome Powell later this week. The Norwegian krone gained as much as 1.4% against the dollar, after USD/NOK reached the highest level since 2020 last week. “The broader macro backdrop is still characterized by elevated recession risks, plus uncertainties from the Russian/Ukraine war and the challenge of controlling Covid in China,” Goldman Sachs strategists wrote in a note on Monday. “In this high risk market environment we would expect the broad dollar to remain relatively strong against most crosses” EUR/USD gained 0.3% to 1.0533: President Emmanuel Macron became the first president in decades to fail to garner an absolute majority in parliament, meaning he will have a hard time passing legislation, putting much of his agenda in peril. “The news doesn’t seem to have bothered the euro, and being more of a longer-term risk to the eurozone outlook, it is not too surprising,” say ING strategists including Francesco Pesole. “EUR/USD has once again found some anchor around the 1.0500 level, something we expect to happen over the summer months despite volatility looking likely to remain elevated” AUD/USD advances 0.8% to 0.6989 after tumbling 1.6% on Friday: “AUD led a mild improvement in pro-growth G-10 pairs, but with the US out on holidays and hawkish Fed rhetoric over the weekend, AUD remains vulnerable in a still uncertain market,” says Rodrigo Catril, a foreign-exchange strategist at National Australia Bank. USD/JPY falls 0.1% to 134.88: Prime Minister Fumio Kishida said that BOJ Governor Haruhiko Kuroda expressed his concern over currency movements during a meeting, a comment that briefly strengthened the yen on Monday. In commodities, crude futures are quiet with WTI near $109.80. Most base metals trade in the red; LME tin falls 1.7%, underperforming peers. Spot gold is little changed at $1,841/oz. There is nothing on today's calendar since US markets are close for national holiday. Tyler Durden Mon, 06/20/2022 - 07:51.....»»

Category: blogSource: zerohedgeJun 20th, 2022

Futures Rebound, Yen Crashes To End Turbulent Week On $3.4 Trillion Quad-Witch Day

Futures Rebound, Yen Crashes To End Turbulent Week On $3.4 Trillion Quad-Witch Day Ending a rollercoaster - but mostly lower - week for risk assets around the globe which saw the Fed hike the most since 1994, a shock Swiss National Bank hike and the latest boost in UK borrowing costs, as well as a bevy of central banks surprising hawkishly, stocks in Europe finally rebounded after hitting an 18 month low earlier this week, while US equity futures were bid Friday after a rout triggered by fears of recession pushed the S&P into a bear market on Monday. S&P futures rose 1% and Nasdaq futures rebounded 1.2% signaling steadier sentiment compared with Thursday’s plunge in US shares to the lowest since late 2020, after the BOJ refused to change its Yield Curve Control conditions, sending the Yen plunging, and helping the dollar snap two days of losses as Treasury yields were flat with the 10Y around 3.21%. The Stoxx Europe 600 index jumped about 1.2% after hitting its lowest level in more than a year. Friday also brings an absolutely massive triple-witching, and although Bloomberg believes that the roughly $3.2 trillion in options expiry may lead to short covering, which could bring temporary relief for the stock market... ... we disagree, as the bulk of open interest is around 4,100 or several hundred points above spot, meaning moves today will have little impact on "derivative tails wagging the dog." In any case, absent a massive 5% rally today which sends stocks into the green, the S&P is looking at being down 10 of the past 11 weeks, a feat that has been repeated just once in history: 1970. Let's go Brandon! In premarket trading, Revlon surged after a report that Reliance Industries Ltd. is considering buying the company. Major technology and internet stocks were higher, rebounding from Thursday’s rout. Apple Inc., Microsoft Corp. and Meta Platforms Inc. were among those advancing. US-listed Chinese stocks also soared in the premarket, a day after the Nasdaq Golden Dragon China Index’s 4.4% slide, with e-commerce giant JD.com (JD US) leading the pack ahead of the closely watched 618 online shopping event. Additionally, Chinese tech giants such as Alibaba surges on a Reuters report that China’s central bank has accepted Ant Group’s application to set up a financial holding company. Alibaba shares surge 11% following the report. Among other large- cap Chinese internet stocks, JD.com +9.3%, Pinduoduo +7.5%, Baidu +5.6%. Here are some of the biggest U.S. movers today: Adobe (ADBE US) shares fall 4% in premarket trading on Friday after the software company cut its revenue forecast for the full year as it expects currency fluctuations, seasonal shifts in demand and the decision to end sales in Russia and Belarus to weigh on its business. Roku (ROKU US) shares climb 3.9% in premarket trading after the company and Walmart said they entered a pact to enable streamers to purchase featured products fulfilled by Walmart directly on Roku. US Steel (X US) shares rise 5.2% in US premarket trading after the metal giant’s 2Q22 guidance came in well above consensus estimates, according to Morgan Stanley analysts led by Carlos De Alba. Rhythm (RYTM US) shares are 13% lower in US premarket trading after the company’s Imcivree injection failed to win approval for one of the two supplemental indications it sought and the company announced a financing agreement with HealthCare Royalty Partners. Revlon (REV US) shares surge 65% in premarket trading after Reliance Industries is considering buying Revlon in the US, ET Now reports, citing people familiar with the matter. Markets are rounding off a turbulent week buffeted by interest-rate increases which are rapidly draining liquidity, sparking losses in a range of assets. Global stocks face one of their worst weeks since pandemic-induced turmoil of 2020. The question is how far assets have to sink before the tightening cycle is fully priced in. Bucking the global hawkish trend, Japan, retianed super-easy monetary policy and yield curve control, defying pressure to track the global trend toward tighter settings. As a result, the Japanese yen is on course for its biggest fall against the dollar since March 2020 while Japan’s 10-year bond yield retreated below the Bank of Japan’s cap of 0.25%, after earlier hitting 0.265%, the highest since 2016. The Swiss franc surged to its highest level against the yen since 1980. “Investors have to ask themselves how long the rate-hiking cycle will go and how deep the economic slowdown will be,” said Michael Strobaek, global chief investment officer at Credit Suisse Group AG, which is overweight equities and recently closed its underweight position in bonds. “Peak hawkishness, i.e. the peak in expectations repricing, might be close. Once we are there, it is not only possible but likely that we will see a rebound in both equities and bonds. However, this rebound will be very difficult to time.” Despite the ongoing slow-motion crash, US stocks attracted another $14.8 billion in the week to June 15, their sixth consecutive week of additions, according to EPFR Global data. In total, $16.6 billion flowed into equities globally in the period, while bonds had the largest redemptions since April 2020 and just over $50 billion exited cash, the data showed. European equities climbed after a choppy start. Euro Stoxx 600 rallied 1.4%. FTSE MIB outperforms peers, adding 1.7%. European real estate companies are among the best performers, rebounding after several days of losses following concerns higher interest rates will weigh on the sector’s financing abilities. Sweden’s Samhallsbyggnadsbolaget i Norden (SBB) rises as much as 10%, Aroundtown +6.5%, Wallenstam +5.9%, Vonovia +4.9%. Here are some of the biggest European movers: Nokian Renkaat shares gain as much as 11% after the Finnish tire manufacturer raised its net sales guidance for 2022 while also keeping its profit guidance intact. Italy’s FTSE MIB index rises as much as 2%, leading gains among major European stock markets; Italy-Germany 10-year bond yield spread falls to one- month low. Best performers on the index include Campari +5.4%, Pirelli +5.3%, DiaSorin +5.1%, Recordati +4% Ferrari gains as much as 2.4% in the wake of upgrades from Intesa Sanpaolo and Banca Akros after the luxury carmaker unveiled its electrification strategy on Thursday. Glencore climbs as much as 3.9% in London after the commodities group said its first-half trading profit will be bigger than it typically reports for an entire year. Playtech rises as much as 6.4% after the gambling operator announced the deadline for TTB to make a firm offer has been extended to next month. Lisi advances as much as 9.6% after Kepler Cheuvreux upgraded the Boeing supplier to buy, saying its post-Covid recovery isn’t yet priced in. Volvo Cars falls as much as 5.4% to the lowest since April after DNB cut its recommendation on the shares to sell due to falling demand, also noting risks related to the Polestar SPAC listing. Rexel drops as much as 3.9% as Kepler Cheuvreux analyst William Mackie cuts his recommendation to hold from buy, citing the “rapidly rising probability of a recession.” Italian bonds led a rally in European debt after European Central Bank President Christine Lagarde pledged that borrowing costs of more indebted nations in the euro-area won’t be allowed to spiral out of control. Italy’s 10-year yield fell 20 basis points and German equivalents dropped six basis points. Asian stocks tumbled to a two-year low as traders fear the global rush to hike interest rates may result in a steep economic downturn.  The MSCI Asia Pacific Index slumped as much as 1.5% Friday. The measure has fallen every session this week, and is on track to post its largest weekly drop since since the early days of the pandemic in March 2020. Asia stocks have fallen along with global peers as concerns over the potential for more jumbo rate hikes by the Federal Reserve, which raised its benchmark by 75 basis points on Wednesday, triggered a broad market rout. As the global campaign to rein in decades-high inflation continues, investors worry policy tightening may become overdone and throw major economies into recessions.  Japanese shares led Friday’s slump in Asia, with the decision by the Bank of Japan to keep its ultra-loose monetary settings unchanged providing limited fillip as volatility in the yen grows. Stocks in China and Hong Kong bucked the regional selloff, as Beijing’s pro-growth policy lends support to views that Chinese equities can keep outperforming.    Read: Yen Tumbles as BOJ Stands Pat, Makes Rare Reference to FX Market “In the immediate short term (next 2-3 months), we continue to expect Asian stocks to remain volatile,” Chetan Seth, Asia Pacific equity strategist at Nomura Holdings in Singapore, wrote in a note.“However, we do expect some stabilization into late 3Q as equity valuations reset and positive catalysts emerge.” The catalysts Nomura is looking for are the Fed turning less hawkish as US inflation shows signs of softening and China loosening its Covid-Zero stance. Equity benchmarks in Australia and Vietnam were the other big losers in Asia on Friday, with each dropping more than 1.5%. Japanese stocks trimmed losses as the yen weakened after the Bank of Japan’s decision to maintain its easy-money policy.  The Topix fell 1.7% to 1,835.90 as of market close, while the Nikkei declined 1.8% to 25,963.00. Both gauges had been down more than 2.6% earlier in the day. The yen was down 1.3% to around 134 per dollar. Toyota Motor Corp. contributed the most to the Topix Index decline, decreasing 3.6%. Out of 2,170 shares in the index, 423 rose and 1,689 fell, while 58 were unchanged. The Topix fell 5.5% this week, its worst since April 2020. BOJ Holds Firm to Deepen Outlier Status, Keep Pressure on Yen “If the yen further weakens, this will help the Nikkei 225 to remain firm to some extent,” said Makoto Furukawa, chief portfolio strategist at Mitsubishi UFJ Morgan Stanley. “The Japanese stock market is not so different from the global trend, and monetary policy that comes out from the US and Europe is much more important for Japanese equities.” Key stock gauges in India completed their worst weekly declines in more than two years as spiraling inflation and rate hikes by central banks dampened the outlook for business recovery.     The S&P BSE Sensex slipped 0.3% to 51,360.42 in Mumbai, bringing its weekly decline to 5.4%, the most since May 2020. The NSE Nifty 50 Index dropped 0.4% on Friday, taking its tumble to 5.6%. Tata Consultancy Services lost 1.7% and was the biggest drag on the Sensex, which had 22 of the 30 member stocks trade lower. Fifteen of 19 sectoral indexes compiled by BSE Ltd. declined, led by a gauge of oil and gas companies.  Among central bank monetary-policy measures this week, the US Federal Reserve made its biggest increase in policy rates since 1994. India’s markets “are largely taking cues from the global markets, in absence of any major domestic event,” Ajit Mishra, vice-president research at Religare Broking Ltd. wrote in a note. Foreign institutional investors have withdrawn $25.7 billion from Indian stocks this year through June 15, and the sell-off is headed for its ninth consecutive month. “We reiterate our negative view on markets and suggest continuing with the ‘sell on rise’ approach,” according to the note. In FX, Bloomberg dollar spot index rose by around 0.4% as the greenback advanced against all of its Group-of-10 peers apart from the Swiss franc. Treasury yields rose by up to 9 bps, led by the front end. The yen was the worst G-10 performer and slumped as much as 1.8% to 134.63 per dollar after the Bank of Japan kept policy on hold, defying speculation it would follow its global peers and move toward tightening. The BOJ made a rare reference to the currency market, saying it needed to watch its impact on the economy and markets. The euro fell below $1.05 before paring, after touching an almost one-week high yesterday. European bond yields fell and investors rushed back to Italian debt for a third day after ECB President Christine Lagarde pledged that borrowing costs of more indebted nations in the euro-area won’t be allowed to spiral out of control. Sterling eased against a broadly stronger dollar, giving up some of its sharp gains made the previous day, when the Bank of England’s pledge to take a more aggressive stance against inflation boosted the UK currency. Market awaits speeches by BOE policymakers Silvana Tenreyro and Huw Pill later in the day for possible clues into the outlook for inflation and monetary policy. In rates, Treasuries are cheaper across the curve with losses led by front-end following flurry of block trade in 2-year note futures over the European session. US yields cheaper by up to 5bp across front-end of the curve, flattening 2s10s spread by 2.5bp on the day; 10-year yields around 3.22%, cheaper by 2.5bp and underperforming bunds by 7bp Italian bonds outperform after ECB President Christine Lagarde’s pledge to support borrowing costs of indebted nations in the euro-area.  Bloomberg notes five block trades in 2-year note futures for combined 25k were posted between 3:25am ET and 4:36am ET appeared skewed toward sellers, helping front-end of the cash curve underperform. IG dollar issuance slate empty so far; at least six IG issuers are said to have stood down over the past couple of days, as investors wait for market calm before re-launching deals. The German cash curve bull steepens, trading richer by ~12bps in 5s. Gilts bull flatten, with 10y yields down 8bps around this week’s lows near 2.4%. US 2s10s narrow 3bps. Peripheral spreads tighten to Germany with 10y BTP/Bund narrowing ~14bps to a one-month low near 188bps. In commodities, crude futures advance. WTI drifts 1% higher to trade near $118.75. Base metals are mixed; LME tin falls 0.9% while LME nickel gains 1.1%. Spot gold falls roughly $7 to trade near $1,850/oz Bitcoin is currently modestly firmer, but the overall sessions range is in proximity to USD 20k with the current trough at USD 20.19k. Looking at the day ahead now, and data releases include US industrial production and capacity utilisation for May, along with the final Euro Area CPI reading for May. Central bankers include Fed Chair Powell, the ECB’s Simkus and the BoE’s Tenreyro and Pill. Of note, Jerome Powell gives welcome remarks before the Inaugural Conference on the International Roles of the U.S. Dollar at 845am ET. He is not expected to discuss monetary policy. Market Snapshot S&P 500 futures up 1.0% to 3,703.75 MXAP down 1.2% to 157.22 MXAPJ down 0.4% to 521.87 Nikkei down 1.8% to 25,963.00 Topix down 1.7% to 1,835.90 Hang Seng Index up 1.1% to 21,075.00 Shanghai Composite up 1.0% to 3,316.79 Sensex little changed at 51,457.72 Australia S&P/ASX 200 down 1.8% to 6,474.80 Kospi down 0.4% to 2,440.93 STOXX Europe 600 up 1.2% to 407.54 German 10Y yield little changed at 1.66% Euro down 0.4% to $1.0502 Brent Futures up 0.5% to $120.35/bbl Brent Futures up 0.5% to $120.39/bbl Gold spot down 0.4% to $1,849.84 U.S. Dollar Index up 0.75% to 104.41 Top Overnight News from Bloomberg A small tweak to the BOJ’s bond purchase plan this week blew up an arbitrage strategy popular with overseas investors known as the basis trade. It exacerbated a supply shortage of government bonds that has ramped up pressure on domestic financial institutions, leading them to turn to the BOJ for help to relieve the strain President Joe Biden said a US recession isn’t inevitable and acknowledged that aides warned him about the inflationary risk of his flagship relief bill, while insisting that he won’t soften his stance on Russia even if it costs him re-election The WTO clinched a historic package of accords including on vaccine production and fishery subsidies, ending the trade body’s seven-year negotiating drought China’s local governments are caught in an unexpectedly severe budget squeeze, creating a dilemma for officials over whether to boost debt or tolerate weaker economic growth A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks mostly suffered firm losses amid the global risk-aversion after the recent flurry of central bank rate increases and with weak data in the US stoking recession fears. ASX 200 was led lower by underperformance in tech and the commodity-related sectors, although gold miners have weathered the storm after the recent upside in the precious metal. Nikkei 225 was pressured and failed to benefit from the BoJ decision to keep policy settings unchanged. Hang Seng and Shanghai Comp. pared opening losses amid virus-related optimism after Beijing reported zero cases outside of quarantine and with US-China defence meetings showing signs of cooling tensions. Top Asian News China in Talks With Qatar for Gas Field Stakes, Reuters Says Kuroda Deepens BOJ’s Outlier Status, Keeping Pressure on Yen ByteDance Disbands Shanghai Games Studio in Expansion Setback BOJ Offers to Buy Cheapest-to-Deliver JGBs for Extended Time Gold Heads for Weekly Drop as Traders Weigh Rate Hikes, Growth European bourses are now firmer across the board, Euro Stoxx 50 +1.2%, as performance picks up following a mixed open amid comparably quiet newsflow. Stateside, US futures are performing similarly, ES +1.0%, though the complex is cognisant of commentary from Chair Powell later. Note, today is Quad Witching; recently, GS’ Rubner highlighted “literally massive” USD 3.2tln notional open interest of US listed options which expire on June 17th, writing that the passing of this may allow the market to move more freely. Top European News UK is to set out new data rules which diverge from the EU on Friday as it seeks to ease pressure on businesses, while it believes the new rules will maintain free flow of data from Europe and does not expect the EU to object to its data reforms, according to Reuters. German Finance Minister Lindner told ECB President Lagarde that the ECB's talk regarding fragmentation threatens to dent confidence, according to FT. Hungarian Chief of Staff Gulyas says the idea of a global minimum tax is not accepted by the Hungarian government. Central Banks BoJ kept policy settings unchanged as expected with rates at -0.10% and QQE with yield curve control maintained to target 10yr JGB yields at around 0% with the decision on YCC made via an 8-1 vote as Kataoka dissented. BoJ repeated its April guidance that it will offer to buy 10yr JGBs at 0.25% every business day unless it is highly likely that no bids will be submitted and it also reiterated guidance on policy bias that it will take additional easing steps without hesitation as needed with an eye on the pandemic's impact on the economy. Furthermore, the BoJ said the economy is picking up as a trend though some weakness has been seen and they must carefully watch the impact of FX moves on Japan's economy and prices. BoJ's Kuroda says upward pressure is being seen in bond yields, and it is important for FX to move stable reflecting fundamentals, no change to the concept that YCC strongly supports the economic recovery; does not see a limit in YCC. Recent rapid JPY weakness is a weakness for the economy.. Does not see a need for further policy easing now. Not thinking about raising the cap on the BoJ's long-term yield target above 0.25%, as it could result in higher yields and weaken the effect of monetary easing. BoJ purchases JPY 70.1bln in ETFs. BoJ offers to purchase the cheapest-to-deliver issuance for an extended time as of June 20th. ECB's Knot says that several 50bps rate increases are possible in the event that inflation worsens, via BNR; does not see hikes reaching 200bp before early-2023. BoE's Pill says markets will have to make their own judgement on whether the BoE is considering a 50bp hike, via Bloomberg TV; stresses the conditionality around the inclusion of "forcefully" in the statement, in the context of "if necessary". Trying to signal that we may need to act further, looking at the persistence of inflationary pressure. Price pressures becoming embedded would be a trigger for more aggressive BoE action. FX Yen recoils after racking up big risk averse gains as BoJ sticks rigidly to ultra accommodative stance with additional measures to maintain YCC, USD/JPY hovers just under 135.00 vs 131.49 low on Thursday. Buck benefits after extending post-FOMC retreat in wake of weak US data and pronounced bounce in Treasuries, DXY extends recovery to 104.540 from 103.410 low. Franc maintains SNB hike momentum to rally further across the board, USD/CHF around 0.9650 compared to par-plus peaks earlier in the week. Euro underpinned by decent option expiry interest and hawkish ECB commentary, but Aussie undermined as Government gives authorities power to stop coal exports; EUR/USD on the 1.0500 handle and above 1+ bln rolling off between 1.0500-1.0495, AUD/USD capped just under 0.7000. Kiwi gleans some traction from a rise in NZ manufacturing PMI and RBNZ rate hike calls; NZD/USD straddles 0.6350, AUD/NZD cross sub-1.1050. Lira lags following latest CBRT survey showing higher inflation forecasts and USD/TRY rate, latter at 18.8874 by year end vs 17.5682 previously and circa 17.3200 at present. Fixed Income Debt extends intraday ranges as volatility remains high on Friday. Bunds veer from 142.56 to 144.99, Gilts between 111.83 and 112.91 and the 10 year T-note within a 116-19/115.28+ range. Hawkish comments from ECB's Knot largely discounted as EZ periphery bonds outperform on anti-fragmentation dynamic, but BoE's Pill rattles Sonia strip. Commodities WTI and Brent are currently set to end the week with gains in excess of USD 1.00/bbl overall, though the benchmarks reside towards the mid-point of the over USD 11.00/bbl range for the week. Newsflow has been comparably limited but primarily focused on familiar themes. US Energy Secretary called an emergency meeting with oil refiners next week to discuss steps companies can take to increase refining capacity and output, according to Reuters citing a DoE spokesperson. White House is reportedly considering fuel export limits as pump prices surge and options such as waiving anti-smog rules are also being discussed, according to Bloomberg. Qatar Energy set August Al-Shaheen crude term price at a premium of USD 9.24/bbl above Dubai quotes which is the highest in 3 months, according to traders cited by Reuters. Brazil's Petrobras is to announce a fuel price increase today, according to Reuters citing local press. China's national oil majors are reportedly in advanced discussions with Qatar around investment in North Field East LNG and for long-term contractual purchases of LNG, according to Reuters sources. Australia has invoked measures to give authorities the power to prevent coal exports if needed in an attempt to avert the risk of blackouts, according to the FT. Spot gold is rangebound in European hours having successfully surpassed the cluster of DMAs between USD 1843-1848/oz during Thursday’s blockbuster session.   US Event Calendar 09:15: May Capacity Utilization, est. 79.2%, prior 79.0% 09:15: May Manufacturing (SIC) Production, est. 0.3%, prior 0.8% 09:15: May Industrial Production MoM, est. 0.4%, prior 1.1% 10:00: May Leading Index, est. -0.4%, prior -0.3% DB's Jim Reid concludes the overnight wrap The Bank of Japan (BOJ) continues to buck the global trend of monetary tightening, as this morning the central bank decided to maintain its purchases of government bonds and equities. The decision was widely anticipated but the BOJ indicated that it must “pay due attention” to foreign exchange markets, following the yen’s rapid weakening to its lowest level in 24 years earlier this week. The Yen has weakened around -1.3% to 134/USD as we type. Meanwhile, Japan’s benchmark 10yr bond yields hit a six-year high of 0.268% at one point, moving beyond the BOJ’s 0.25% cap ahead of the policy decision. However, yields retreated to the 0.25% after its daily unlimited fixed-rate purchasing operations. This just continues what has been a very expensive week for the BoJ in terms of JGB QE after having had to buy $9.6tn yen worth. As one of our Asian FX strategists Tim Baker highlighted this morning, that's US$72bn. Tim highlighted that this is almost what the Fed and ECB were doing in an entire month last year, for economies 5-3x larger than Japan's. Japan's QE this week has been running more than 20x the pace of the Fed's QE in 2021, adjusted for the size of the economy. Can they continue to hold this line? You wouldn't think they could but it depends on global yields and central banks, the Yen and Japanese inflation. See my CoTD (link here) on this earlier this week. Watch out for the BoJ press conference after this goes to print this morning for any hints as to how determined they are to continue their policy settings. The BoJ caps an array of central bank meetings over recent days, and markets have experienced another rout over the last 24 hours as multiple headlines added to investors fears about an imminent recession. It marked a big shift from just a day earlier, when the initial focus after Chair Powell’s press conference had been on his comment (when referring to +75bps) that he didn’t “expect moves of this size to be common”. But futures swiftly turned negative as growing doubts were cast on how firm that commitment really was, not least since we’ve all seen just how swiftly the Fed have shifted posture over the last week in response to worse-than-expected data. On top of that, the latest decisions by the SNB and the BoE (more on which below) only added to the hawkish drumbeat that much higher rates are in the offing, whilst weak US housing data served to aggravate those fears about an imminent growth slowdown. With all said and done, you were hard-pressed to find a major asset that didn’t lose ground yesterday. The major equity indices slumped heavily on both sides of the Atlantic, with the S&P 500 (-3.24%) losing more than -3% for the second time this week, as it also hit its lowest level since late 2020. Indeed, just 14 companies in the entire index moved higher on the day. Elsewhere, the NASDAQ saw an even larger decline, falling -4.08% to have now lost more than a third of its value since its all-time closing peak back in November. It’s lost -9.96% since Friday’s CPI and -6.12% this week. And it was a similar story in Europe too, as the STOXX 600 (-2.47%) fell to a one-year low of its own. Whilst equities were selling off, sovereign bonds continued to trade with elevated volatility, a function of continued central bank surprises, murky forward guidance, and heightened uncertainty around the near-to-medium-term outlook as economic data gets worse. In short it was a wild, wild ride yesterday. The sell-off initially accelerated after the SNB became the latest central bank to surprise. They hiked rates for the first time in 15 years, executing a 50bps move, combined with a change in FX policy, that our strategist Robin Winkler argues marks a once-in-a-decade policy regime shift (link here). In turn, that led to a massive reaction in the Swiss Franc, which strengthened by +2.91% against the US Dollar on the day in its biggest daily appreciation since 2015. Then we had the Bank of England, where they hiked rates by +25bps as widely expected, with 3 of the 9 committee members continuing to vote for a larger 50bp increment. Notably, their statement sent a stronger signal on inflation, saying that the Committee would be “particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response.” In turn, that saw investors reappraise the path of future rate hikes in a more hawkish direction, and are now expecting more than +150bps worth of hikes over the next 3 meetings, so equivalent to at least a 50bp move at each one. Our UK economist writes in his reaction note (link here) that he expects the BoE to hike by 50bps in August and September now, which for reference would be the largest single hikes since they gained operational independence in 1997. Against that backdrop, sovereign bond yields whipped around yet again. European yields were much higher on tighter policy and then Treasury yields moved higher in sympathy during European trading but gradually fell after another batch of underwhelming housing data lent new fears that growth was on unstable footing. Yields on 10yr Treasuries fell -8.9bps to 3.20%, but at their intraday peak they’d been up +20.7bps, so some sizeable moves in both directions. The move in nominal yields traced real yields, which were as high as +21.7bps intraday at the 10yr point, before finishing the day just +1.1bps higher. 10yr breakevens fell -10.4bps on the prospect of slower growth, which drove nominal yields lower on the day. In Asia, this morning, 10yr yields are witnessing a reversal with yields up +4.33bps to 3.24% while 2yr yields (+6bps) also moved higher to 3.15% as I type. Our US rates strategists have updated their views in the face of some large forces in both directions with the 10yr now expected to hit 3.85%. They also updated their year-end 2yr call to 3.85%, so a flat curve. See the full update here. Meanwhile in Europe, 10yr bunds gained +7.2bps (+28.3bps at the peak) in a very choppy session. However, there was a considerable tightening in peripheral spreads for a second day running, with the gap between Italian and German 10yr yields down -13.7bps to 202bps, which followed comments from Italian central bank governor Visco that the spread should be under 150bps based on economic fundamentals. The heightened uncertainty and wild swings in yields also translated to heightened currency volatility, where the Euro traded in its widest intraday range since March 2020, which was as low as -0.60% and as strong as +1.50% against the dollar before ultimately appreciating +1.01%. As mentioned, sentiment was further dampened by weak US housing data yesterday, with both housing starts and building permits in May falling by even more than expected. Housing starts were down to an annualised rate of 1.549m (vs. 1.693m expected), their lowest level in over a year, whilst building permits were down to an annualised rate of 1.695m (vs. 1.778m expected). We also got a sign of how tighter monetary policy was affecting the market, with Freddie Mac’s data showing that a 30-year fixed mortgage rate for the week ending yesterday rose to 5.78% (vs. 5.23% in the previous week). That’s the highest level since November 2008, as well as the largest weekly increase in the rate since 1987. And it just shows how the much more rapid pace of Fed hikes now expected by investors over the last week is already filtering its way through to the real economy. Those moves lower in the US and European equities have been echoed in Asian markets this morning. The Nikkei (-1.59%) is the largest underperformer with the Kospi (-1.08%) also trading sharply lower. Elsewhere, the Hang Seng (+0.78%) is recovering from earlier losses while mainland Chinese stocks also turning around with the Shanghai Composite (+0.15%) and CSI (+0.26%) both trading up. Outside of Asia, stock futures in the DMs are bouncing with contracts on the S&P 500 (+0.52%), NASDAQ 100 (+0.67%) and DAX (+0.31%) all heading higher. Looking forward, Russian President Putin will be giving a speech today at the St Petersburg Economic Forum, which his press secretary Peskov has tried to build anticipation for, and could offer a flavour of how combative the Kremlin plans to be in its international approach. That came as German Chancellor Scholz, French President Macron and Italian PM Draghi endorsed Ukraine’s EU candidacy in a visit to the country yesterday. Otherwise, European natural gas futures pared back their significant increases in the morning to close -1.94% lower, marking a change in direction after their massive increases over the previous 2 sessions. To the day ahead now, and data releases include US industrial production and capacity utilisation for May, along with the final Euro Area CPI reading for May. Central bankers include Fed Chair Powell, the ECB’s Simkus and the BoE’s Tenreyro and Pill. Tyler Durden Fri, 06/17/2022 - 08:12.....»»

Category: blogSource: zerohedgeJun 17th, 2022

"Don"t Panic": Wall Street Reacts To Fed"s Biggest Rate Hike In 28 Years

"Don't Panic": Wall Street Reacts To Fed's Biggest Rate Hike In 28 Years The biggest rate hike since 1994, when the Fed's raised rates by 75bps sparking the Tequila Crisis and an IMF bailout of Mexico is now in the history books, and while it was widely telegraphed courtesy of the WSJ's mini -Hilsenrath, Nick Timiraous, it is still a momentous move. Below we have collected some of the early kneejerk reactions from Wall Street strategists, analysts and economists. Peter Boockvar, advisor at Bleakley Advisory Group: “So the Fed is embarking on the most aggressive hiking cycle in 40 years but they estimate barely any impact on the unemployment rate. As for their estimate for GDP, it went from 2.8% last time to 1.7% now and next year they also expect 1.7% growth. NO central banker will EVER estimate a recession, keep in mind.” Neil Dutta at Renaissance Macro: “Slower growth and a more aggressive Fed is a recipe for a recession. For political leaders that have been begging the Fed to answer their constituent calls on inflation, be careful what you wished for.” Mike Loewengart at Morgan Stanley: “Even two weeks ago we may have thought that a .75% increase was off the table, at least in the short term. But with inflation not letting up, it’s become pretty clear that the Fed needs to take a more aggressive approach. And as we entered bear territory this week, the market may have already priced in a higher-than-expected jump. That’s not to say the larger hike may spook some investors. Keep in mind that as we go through a changing monetary policy landscape, we’ll likely continue to see volatility as the market digests the new norm. Sticking to your investment strategy during waves of volatility is a solid course of action — aka don’t panic.” Dennis DeBusschere of 22V Research: “Combined with estimates of higher u-rate, it suggests commitment to slowing growth down QUICKLY.” Max Gokhman, CIO for AlphaTrAI: “First off, there’s clearly a crazy low-volume tug-of-war right now, but the bears are winning. I think the policy rate forecast going up to 3.4% from 1.9% at the last meeting is hawkish not just because of the move itself, but it shows how the Fed can now very quickly get even more hawkish if the data pushes it so -- i.e., we can see them hike it even further at future meetings.” Kathy Jones, Chief Fixed Income Officer at Schwab Center: “The expectation in the market is for another 75 basis points at the July meeting and perhaps slowing down a bit in September, but I think that while Powell may indicate that that’s the plan, I think he’ll also try to leave things somewhat open-ended.” Rich Miller, Fed-watcher at Bloomberg: Observes that this language from the May policy statement has been removed for today’s: “With appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2 percent objective and the labor market to remain strong.” Anna Wong, chief economist at Bloomberg:  "The FOMC’s supersized hike, coming even as the economy shows signs of cooling, reflects the Fed’s alarm over the recent rise in inflation expectations. Chair Jerome Powell is determined not to repeat the mistakes of Arthur Burns, who led the central bank during the wage-price spiral of the 1970s. With the largest rate move at a single meeting since 1994 -- and a signal of more tightening to come -- Bloomberg Economics believes the behind-the-curve Fed has put itself in position to catch up quickly.... The forecast in the latest SEP is more realistic than in the past few summaries, suggesting that officials have moved away from an ‘immaculate disinflation’ view of the world in which price pressures resolve themselves. Officials now appear to acknowledge that inflation is a real problem, and they are increasingly recognizing and accepting the costs that will come with tighter monetary policy." Jordan Jackson, global market strategist at JPMorgan asset management: “I’m sort of befuddled in the sense that they’ve ratcheted lower their GDP projections for this year and next year, they’ve increased their unemployment rate projections by four tenths of a percent over 2023, yet they’re massively increasingly how much they’re looking to lift rates.” Childe-Freeman, chief G-10 FX strategist for BI: “The Fed backdrop remains compellingly supportive for the dollar at this stage of the cycle, and this could extend for as long as rate increases are delivered in a positive growth context. At some point, though, recession concerns could become more of an FX driver and leave the dollar exposed. We’re just not there yet.” Mohamed El-Erian, advisor at Allianz: "The Fed has significantly moved higher its interest rate path while also front-loading it a lot.  Unusually, it simultaneously revised down its growth projections in a notable manner. Consistent with a stagflationary baseline, a fatter recession left tail, and a thinner right tail." Ira Jersey of Bloomberg Intelligence: "We still think the yield curve will invert more similar to the 1990s experience than during the last two cycles, when the 2-year/10-year curve only inverted modestly. A more aggressive Fed hiking cycle and slowing economic backdrop should keep a flattening bias in the market for now.... I think it’s more important to think about the terminal rate at this point and look past some of the intraday volatility. Even with a 75-bp move, the question now becomes ‘Will the policy rate peak where the market is pricing, or higher?’ If higher, the yield curve may flatten a lot more. If not, then bull-steepening could ensue, but I don’t think that’s likely yet.” Ajay Rajadhyaksha of Barclays, who first correctly called 75bps rate hike: “75bp is a strong move – a statement hike. The Fed made one. Given what we are seeing in the economy and in housing, we believe it will not need to make another. We think they it move to a 50bp hike in July." Scott Miner, CIO at Guggenheim: "Credit spreads will likely widen as the US faces a recession... We are currently well off our maximum allocations to credit right now. If my view of the world is correct, recession means you are going to have wider credit spreads. There are cracks appearing in the credit world, and the worst is probably not over there. All risk assets are just a no-go zone. You don’t want a lot of low-quality credit at this point, you don’t want stocks, you want to really stay in the higher-end credit spectrum, and especially Treasuries, agencies, things like this that don’t have credit risk. In a recession scenario which I think we are going into none of the risk assets do well. When you look at public companies, their numbers look pretty good with cash flow coverage and everything else. But the number of private equity firms where we don’t know what that cash flow coverage is are much much more extended." Scott Skyrm of Curvature Securities: "The Fed followed the market's advice and delivered a 75 basis point tightening. That puts the fed funds target range at 1.50%-1.75% and the RRP rate at 1.55%. Since the Fed maintained the RRP rate at 5 basis points above the bottom of the target range, there are no relative changes in overnight rates. We expect GC rates to stay soft - at least until more Balance Sheet Runoff hits the market. We expect GC within the  1.50%-1.45% for the next few weeks." Jan Hatzius, chief economist at Goldman Sachs:  "The median dot in the Summary of Economic Projections now shows a funds rate midpoint of 3.375% at end-2022—in line with our expectations and up from the 1.875% rate projected at the March meeting—which we expect will correspond to a 75bp hike at the July meeting, 50bp at September, 25bp at November, and 25bp at December. Sixteen out of eighteen participants projected a funds rate above the median longer-run dot in 2024, with the longer-run median edging back up to 2.5% (vs. 2.375% in March). Jerome Powell: “The labor market is extremely tight and inflation is much too high.” Tyler Durden Wed, 06/15/2022 - 15:01.....»»

Category: blogSource: zerohedgeJun 15th, 2022

Questions: Recessions & Bears, Crypto & Crashes

    Tomorrow is my first full day back at work after a week of leave with family; I am slowly easing myself into my regular routine. There are so many crosscurrents that I thought a few “food for thought” questions might help the process. These are meaty issues, some of which I hope to… Read More The post Questions: Recessions & Bears, Crypto & Crashes appeared first on The Big Picture.     Tomorrow is my first full day back at work after a week of leave with family; I am slowly easing myself into my regular routine. There are so many crosscurrents that I thought a few “food for thought” questions might help the process. These are meaty issues, some of which I hope to address in greater detail in the coming weeks. 1. Bear Market: Recessions usually see Bear markets accompany them, but not always. The New York Times chart above shows the history of the two. Our first question: Will this Bear bring on a recession? 2. Inflation: Are we near peak inflation? Will the bite on consumers slow consumption, and therefore prices? Does the worlds return to the Deflationary regime anytime soon? Does the FOMC believe inflation is monetarily based? Do they think rates are the driver? 3. Bonds: What are the ramifications of the bond bull market, which began in 1982, ending? 4. Recession: Will the economy suffer a growth slowdown? Can the Fed cool the economy just enough to curtail demand-driven inflation without creating a full-on contraction? Is a soft landing possible/probable? Is the plan simply to crimp demand just enough to allow supply chains to normalize? 5. Crypto: Does Crypto present a systemic risk? Is this an asset class that will spill over into the rest of the economy, e.g., Housing/Mortgages in the mid-2000s? Or, is this more like the collapse of a single 3 trillion-dollar company? 6. Cyclical versus Secular: Will this be a long and drawn-out secular bear market, e.g., 1966-82 or 2000-2013? Or will this be a cyclical bear within a secular bull, e.g., 1998, 2010, 2018, 2020? 7. Earnings: Profit growth has been healthy the past decade; can profits grow with higher — or much higher — rates? 8. Retail Sales: How does the consumer respond to inflation and a general slowing? How will they adjust to increased supply? What do higher rates do todemand? 9. Housing: Are enough homes being built to balance the demand? How long will a decade of undersupply affect the housing market? What do 6%+ mortgage rates do to the demand side of the equation? 10. War/Russian invasion of Ukraine: Will this war end anytime soon, or is this another Afghanistan that will run for years? Will it spill over into Europe? What does this mean for Russia as a nation? These are the questions I am asking myself. I don’t know the answers, but I will continue to explore all of them…       Previously: Capitulation Playbook (May 19, 2022) Secular vs. Cyclical Markets, 2022 (May 16, 2022) Panic Selling Quantified (March 24, 2022) Bull & Bear Markets   Source: What Happens When Stock Markets Become Bears By William P. Davis, Karl Russell and Stephen Gandel New York Times, June 13, 2022   The post Questions: Recessions & Bears, Crypto & Crashes appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureJun 15th, 2022

Crypto Layoffs Signal a Long Downturn Ahead with ‘No End In Sight,’ Experts Warn

Many companies weren't expecting the crypto downturn to happen this rapidly. Now, insiders are bracing for more than a year of doldrums. The startling crypto crash this week has many companies slashing their payrolls, while a small few are instead doubling down on investments. On June 14, Coinbase, the first crypto company to enter the Fortune 500, announced that it was laying off 18% of its workforce—that means shedding about 1,100 full-time roles. In a blog post, CEO Brian Armstrong wrote that the company was planning “for the worst,” including for the likelihood of a “crypto winter” that “could last for an extended period.” Elsewhere, Robinhood, Crypto.com, and many other companies have announced significant layoffs or hiring freezes. Some longtime experts say they’re getting flashbacks to 2018, when crypto startups laid off dozens of employees and the industry lay dormant for a couple of years. The current layoffs could foretell another extended crypto downturn and lead to fundamental shifts. A rebound could take years. [time-brightcove not-tgx=”true”] “You’re probably looking at a tough period of at least a year or two where there’s a lot of crypto space that will be in limbo,” says Edward Moya, a senior market analyst at Oanda. But other companies say that they’re sticking to their game plans of steady growth to prepare for the next bull period. “Because we hired carefully, we can keep growing regardless of market conditions,” FTX CEO Sam Bankman-Fried wrote on Twitter last week. “Sometimes, when others Zig, you Zag.” Here’s why both trends are happening, and what they say about crypto’s future. A rapid downfall Many industry analysts have warned of a coming downturn for months. Crypto has gone through several boom and bust cycles since its inception, and many argue that its recent bull run was characterized by overly rapid growth based heavily on speculation. Many companies took preventative measures to protect against a seemingly inevitable pullback, from building war chests to choosing safer investments. But even though many were expecting it, the speed of crypto’s collapse this week took many by surprise. Bitcoin lost a quarter of its value in three days, while Ethereum dropped by as much as 35%. “If you compare this to previous bear markets, this happened very fast,” says the macro-economist and Web 3 educator Tascha Che. She says that many in the crypto space believed the downturn this time around would be much milder than the previous one, in 2018, because there are now far more crypto investors and much more capital involved. But companies weren’t prepared for “the combination of shocks” that all happened at once, Che says. The Federal Reserve’s raising of interest rates caused investors to move their money out of riskier bets like crypto. Russia’s invasion of Ukraine exacerbated inflation and supply chain issues. Then, in May, the Terra ecosystem collapsed. And this week, the downturn got even worse. Crypto lender Celsius paused withdrawals as too many investors tried to cash out simultaneously, causing even more panic across the industry. “It was surprising just to see the domino effects of Luna, and now Celsius, collapsing so quickly,” says Ori Shimony, the co-creator of the Web 3 software development company dOrg. “There’s concern that anything could go next.” Read More: Here’s Why Bitcoin and Other Cryptocurrencies Keep Crashing Some of the most impacted companies seem to be the ones that grew the fastest. Coinbase, for example, went public last year and became the entry point to crypto for many newcomers. Even as recently as February, it intended to embark on a hiring spree of 2,000 employees. Now, its stock is worth 15% of what it was in November. “We grew too quickly,” CEO Brian Armstrong wrote in his blog post on Tuesday. “It is now clear to me that we over-hired.” The newly laid-off Coinbase staffers join the rapidly growing ranks of crypto’s recently unemployed. Last week, the CEO of Crypto.com, Kris Marszalek, announced layoffs of about 260 workers, or 5% of its workforce. (The company paid an estimated $700 million to rename the Staples Center in Los Angeles in November.) Gemini, an exchange led by the Winklevoss twins, laid off nearly 10% of its employees. And Bitso, the second-largest cryptocurrency exchange in Latin America, announced late last month that it was laying off 80 workers. “Everyone was ramping up staff in expectation that we would see steady growth across the space,” Moya says. “That hasn’t played out.” A murky future Some experts say that those hoping for a rapid recovery will be disappointed. The larger economic forecast remains dour, with fears of a recession growing. The economist Peter Schiff wrote on Twitter on Tuesday that “this is likely just the first round of layoffs, and a harbinger of many more to come throughout the crypto ecosystem and beyond.” Che agreed with his assessment. “We are in the middle of a bear market: there’s no end in sight right now,” she said. “We will probably see more layoffs coming.” Moya predicts that hiring freezes will set in, and that venture capital money flowing into the space will slow. “There’s this fear that crypto’s growth will be a slow grind and not some of the rapid appreciation we’ve seen recently,” he says. But not all hope is lost While the short-term forecast for crypto looks bleak, experts believe it would be a mistake to count crypto out entirely. For one, there’s still an immense amount of money circulating. Shimony says his company, dOrg, which builds software and tech for Web 3 companies, is still receiving a steady flow of assignments from “good projects still have millions, if not hundreds of millions, of stablecoins in their war chests. They’re going to keep us on their expenses for a while, as long as we’re useful to them.” Shimony says that many crypto companies are on steadier footing this time around because they are holding their money in stablecoins, which are supposed to hold their worth to a dollar, as opposed to Ethereum or Bitcoin, which can lose value rapidly as investors seek to sell of their holdings. In 2018, he says, “when people were selling their ETH, there was a death spiral, so you had a wave of projects failing. Now, the industry is way more mature.” Shimony hopes that crypto projects will learn from this volatility to shift away from get-rich-quick schemes and reprioritize slower growth and projects that have clearer value to consumers. “There was a lot of nonsense floating around: derivatives on derivatives, forks on forks, NFT madness: these circular models that don’t actually create new value, but just kind of shuffle it around,” he says. DOrg, Shimony says, was born in the bear market of 2018, giving the company “an awareness that times won’t always be good.” He says that in the last year, dOrg made the conscious decision to slow its hiring, avoid big expenditures, grow its treasury, and take part in more meaningful projects. Now, he hopes this crypto winter will serve to reorient the entire industry, just like he believes the last one did. “If crypto was 99% speculation and 1% utility in 2018, now maybe it’s 85% speculation and 15% utility,” he says. “We’re getting there.”.....»»

Category: topSource: timeJun 15th, 2022

El Salvador"s lost $56 million on its bitcoin bet after massive rout – but its crypto-bull president hints he may buy the dip

Since September, El Salvador has bought 2,301 bitcoins for an average of $45,908 per token and at a total cost of about $105.6 million. Salvadoran President Nayib Bukele.Emerson Flores/APHOTOGRAFIA/Getty Images El Salvador has lost $56 million on its bitcoin bullishness, according to calculations by Bloomberg.  On Tuesday, President Nayib Bukele hinted on Twitter that he may buy the dip. The Central American nation holds 2,301 bitcoins on its balance sheet after approving bitcoin as legal tender last year. The bitcoin crash that has seen over 65% of the token's value erased is hitting El Salvador in a big way after it approved the crypto as legal tender in September. The country has lost roughly $56 million by betting on bitcoin, according to calculations by Bloomberg, which tracked purchases using President Nayib Bukele's tweets.Since September, El Salvador has bought 2,301 bitcoins for an average of $45,908 per token and at a total cost of about $105.6 million. On Wednesday, bitcoin was down 3.8% at $21,339, marking the ninth consecutive drop and the longest losing streak since 2014. Despite the setback, Bukele suggested Tuesday in a tweet that he may be looking to buy the dip. —Nayib Bukele (@nayibbukele) June 14, 2022The Central American nation has an $800 million bond payment due in January, and the bitcoin slump has raised concerns for cash-strapped El Salvador. According to Bloomberg, El Salvador's dollar debt is the worst-performing in Latin America this year.On Monday, Finance Minister Alejandro Zelaya, expressed little concern about the bitcoin turmoil. "When they tell me that the fiscal risk for El Salvador because of Bitcoin is really high, the only thing I can do is smile," he said at a press conference, according to Reuters. "The fiscal risk is extremely minimal."Read the original article on Business Insider.....»»

Category: worldSource: nytJun 15th, 2022

The 26 best books about Greek mythology, from funny retellings to graphic novels based on classic myths

From classic epic poems like "The Odyssey" to new novels inspired by Greek gods and goddesses, here are the best Greek mythology books. Prices are accurate at the time of publication.When you buy through our links, Insider may earn an affiliate commission. Learn more.Some of the best books related to Greek mythology include "The Song of Achilles," "Lore," and "Circe."Amazon; Bookshop; Alyssa Powell/Insider Greek mythology is full of gods and goddesses whose stories have been passed down through time. We collected the best books to learn about Greek mythology or discover a fictional retelling. This list includes classic tales and legend-inspired new releases. Books can be inspired by absolutely anything from historical events to literal dreams. Recently, more and more exciting books have been published that are drawn from stories in Greek mythology, launching readers into an exploration of gods, goddesses, and mythological creatures that come to life in fun fantasies, dark romances, or educational reads. We've collected some of the best and most popular reads for readers to experience the greatest Greek myths in fictional or highly researched accounts. Whether you're looking for a book to help you learn about popular Greek myths or a fictional retelling of your favorite goddess, here are some of the best books about or featuring featuring Greek mythology: The 26 best Greek mythology-related books:Books to learn about Greek mythologyFiction based on Greek mythologyBooks to learn about Greek mythologyA staple of ancient Greek mythologyBookshop"The Odyssey" by Homer, available on Amazon and Bookshop, from $10.99"The Odyssey" is an ancient Greek poem about Odysseus' 10-year journey home after the Trojan War. Intertwined with Greek myths and interventions from the gods and goddesses, this epic poem tells of Odyeesus' tumultuous adventure back to his wife and son through intense battles, temptations of Sirens, and a detour to Hades. A classic of Greek mythology about the Trojan WarBookshop"The Iliad" by Homer, available on Amazon and Bookshop, from $12.99"The Iliad" dates back to the ninth century and tells the story of the Trojan War in its own epic poem, a companion to "The Odyssey" that outlines the events that occurred before Odysseus' journey. Full of emotion and violence, this classic traverses the 10-year war which, according to Homer, began when the prince of Troy ran off with a Spartan queen. A literary resource to learn about Greek mythologyAmazon"The Greek Myths" by Robert Graves, available on Amazon, from $19.99First published in 1955, Robert Graves' "The Greek Myths" has stood as a literary reference guide to Greek mythology. Carefully organized to lead readers through the complex histories of Greek myths, Robert Graves' poetic voice shines through and makes this collection a beautiful retelling of the major Greek myths. A go-to guide to learn about Greek mythologyBookshop"Heroes, Gods and Monsters of the Greek Myths" by Bernard Evslin, available on Amazon and Bookshop, from $6.79Bernard Evslin was an author and playwright who became most well-known for writings about Greek mythology, including "Heroes, Gods and Monsters of the Greek Myths," which is estimated to have sold over 10 million copies. In this book, Evslin brings the ancient myths to life in a series of stories to introduce readers to the gods in a captivating and exciting way. A classic Greek mythology anthologyBookshop"Mythology: Timeless Tales of Gods and Heroes" by Edith Hamilton, available on Amazon and Bookshop, from $9.30Edith Hamilton's "Mythology" is a classic collection of Greek myths that combines beautiful graphics and illustrations with easy-to-follow explanations, a favorite since its publication in 1942. Perfect for new or seasoned readers of Greek mythology, this book not only retells the myths but analyses how the legacies have a lasting impact on society today. A beautiful encyclopedia of Greek mythologyBookshop"Classical Mythology A to Z: An Encyclopedia of Gods & Goddesses, Heroes & Heroines, Nymphs, Spirits, Monsters, and Places" by Annette Giesecke and Jim Tierney, available on Amazon and Bookshop, from $26.72This Greek mythology encyclopedia is an all-encompassing reference guide to 700 major and minor characters of the Greek myths. Annette Giesecke, who has a Ph.D. in Classics, offers exciting details to the classic Greek tales — combined with Jim Tierney's incredible artwork — that brings the characters to life. An introduction to Greek mythology that is perfect for young readersBookshop"D'Aulaires' Book of Greek Myths" by Ingri d'Aulaire and Edgar Parin d'Aulaire, available on Amazon and Bookshop, from $17.99The d'Aulaires' introduction to Greek mythology is the perfect first read for young readers to experience the enchantment of gods and goddesses through simple stories and accompanying artwork. A well-loved retelling of the Greek myths, this book is a chronological collection of the ancient stories from the beginning of the Titans through the Trojan War. A hilarious retelling of the Greek mythsBookshop"Mythos" by Stephen Fry, available on Amazon and Bookshop, from $18.69"Mythos" is my personal favorite retelling of Greek mythology because Stephen Fry's voice animates each tale in a hilarious and engaging way. Beginning with Zeus and making his way through the gods' family tree, Fry brings his wit and comedy into this celebration of mythology, made even more entertaining in the audiobook version as he narrates the myths.  The third installment of an entertaining Greek mythology retellingBookshop"Troy" by Stephen Fry, available on Amazon and Bookshop, from $15.92"Troy" is the third installment of Stephen Fry's mythology collection, which tells of the rise and fall of Troy in "The Iliad" but with Fry's signature and entertaining wit. A detailed retelling based on significant research, Fry uncomplicates the complex ancient history of the Trojan War and the legends of the Greek gods that accompany it.  A classic retelling from the perspective of a Greek goddessBookshop"A Thousand Ships" by Natalie Haynes, available on Amazon and Bookshop, from $13.99This book is a retelling of the Trojan War that focuses on the roles of women through the eyes of Calliope, the goddess of eloquence and epic poetry. "A Thousand Ships" is a collection of womens' stories that offers a refreshing perspective of an ancient tale. Fiction based on Greek mythology"Lore Olympus" by Rachel SmytheAmazon"Lore Olympus" by Rachel Smythe, available on Amazon and Bookshop, from $11.40"Lore Olympus" is a stunning graphic novel about the love story between Hades and Persephone that begins when they meet at a party and feel an immediate spark. New to Olympus, Persephone must navigate this world's strange politics while finding her own place and spending more time with the charming and misunderstood ruler of the Underworld. An emotional story featuring a warrior from Greek mythologyBookshop"The Song of Achilles" by Madeline Miller, available on Amazon and Bookshop, from $10.35"The Song of Achilles" is a magical and emotional book about the friendship between Achilles, a Greek warrior, and Patroclus, a young and awkward prince. When Patroclus is exiled by his father after a misunderstanding, he meets Achilles by chance, forming a unique friendship that is quickly tested by the rise of the Trojan War.A fantastical tale about the Greek myth of CirceBookshop"Circe" by Madeline Miller, available on Amazon and Bookshop, from $11.10Circe is a daughter of the mighty Titans who possesses a much different skill than her powerful parents: The power of witchcraft. Banished to a desert island by Zeus, Circe hones her craft while encountering some of the most famous mythological figures, including Odysseus, until a terrifying danger arises and Circe must choose between the gods and the mortals. The first book in a young readers' Greek mythology seriesBookshop"The Lightning Thief" by Rick Riordan, available on Amazon and Bookshop, from $5.97One of the most well-known fictional series featuring Greek mythology is "Percy Jackson," a loveable and action-packed childrens' book series about a boy who learns he's a son of Poseidon. When Percy's mother sends him to Camp Half-Blood, a summer camp for demigods, he is thrust into an epic quest that leads him to the gates of the Underworld."Medusa" by Jessie Burton, Illustrated by Olivia Lomenech GillAmazon"Medusa" by Jessie Burton, Illustrated by Olivia Lomenech Gill, available on Amazon and Bookshop, from $15.68Medusa, a monstrous Gorgon with snakes for hair and a look that can turn people to stone, lives a lonely, exiled existence on a distant island until the hero Perseus arrives and unleashes a new destiny of love, desire, and betrayal. Accompanied by brilliant illustrations, "Medusa" is a vibrant and imaginative retelling of Medusa's story.  "Daughters of Sparta" by Claire HeywoodAmazon"Daughters of Sparta" by Claire Heywood, available on Amazon and Bookshop, from $11.59Helen of Troy has long been known as the "the face that launched a thousand ships" and as princesses of Sparta, sisters Helen and Klytemnestra were regarded as little more than beautiful, demure girls expected to birth the next heirs. "Daughters of Sparta" follows Helen and Klytemnestra  as they're separated and married off at young ages to cruel and powerful husbands, pushing against what is expected of them and offer a retelling of the Siege of Troy through their own perspectives. A dark fantasy novel intertwined with Greek mythologyBookshop"Lore" by Alexandra Bracken, available on Amazon and Bookshop, from $11.34"Lore" is an engrossing fantasy novel where nine Greek gods are forced to walk the earth as mortals during a hunt called "the Agon" that takes place every seven years. Humans hunt the gods for their power and immortality and, while Lore has avoided the brutality for years, two participants reach out to her for help and she must decide to whom she will bind her fate. "Olympus, Texas" by Stacey SwannAmazon"Olympus, Texas" by Stacey Swann, available on Amazon and Bookshop, from $12.10With each main character and storyline inspired by a different Greek myth, "Olympus, Texas" brings Greek mythology to the Briscoe family's tense dynamic as March returns home two years after he was caught having an affair with his brother's wife. Loved for its carefully woven plot and engrossing characters, this novel takes off when, within days of March's return, someone is dead, rivalries roar, and secrets are revealed that threaten the family ties with a destructive and powerful force. "Secret of the Broken King" by Eliza RaineAmazon"Secret of the Broken King" by Eliza Raine, available on Amazon, from 10.99Eliza Raine has written several Greek mythology-inspired fantasy romances but her latest, "Secret of the Broken King," is a slow-burn, enemies-to-lovers romance about Almi, Poseidon's secret bride who has been exiled to the human world. As her sister is slowly consumed by a sickness causing her to turn to stone, Almi must escape exile, return to Aquarius, and find a way to save her sister. A philosophical read orchestrated by two gods of Greek mythologyBookshop"Fifteen Dogs" by André Alexis, available on Amazon and Bookshop, from $13.39A fascinating experiment begins when a bet between Greek gods Hermes and Apollo leads them to grant human-like consciousness and language to a group of dogs staying overnight at a veterinary clinic. As the gods watch from above, the dogs struggle with their new complex understanding of themselves and the world, torn between the new and the old ways of thinking. A brilliant retelling of a monstrous Greek mythBookshop"Ariadne" by Jennifer Saint, available on Amazon and Bookshop, from $15.39In this retelling of the Greek myth of Theseus and the Minotaur, Ariadne is a princess of Crete whose brother is the Minotaur — a monster with the body of a man and the head of a bull. When Theseus, the Prince of Athens, comes to Crete to kill the Minotaur, Ariadne can't help but fall in love with him and finds herself torn between her lover and her family. A retelling of a classic Greek myth with a new voiceBookshop"The Penelopiad" by Margaret Atwood, available on Amazon and Bookshop, from $4.21"The Penelopiad" is a retelling of the story of Penelope and Odysseus, told with a modern voice and focusing on Penelope's story from "The Odyssey." This short read is a compassionate yet haunting version of events that highlights the formerly neglected perspectives of Penelope and her 12 maids. A new perspective of an ancient Greek mythological taleBookshop"The Silence of the Girls" by Pat Barker, available on Amazon and Bookshop, from $13.90This modern novel follows Briseis, who was once a queen in a kingdom neighboring Troy but is now a spoil of war and servant of Achilles during the Trojan War. Told from Briseis' point of view, this novel is a powerful dedication to the forgotten women from the ancient tale of "The Iliad" as Briseis gives a voice to the women who were captured and enslaved by the victors.A romance that entwines Greek mythology into a modern storyBookshop"Starcrossed" by Josephine Angelini, available on Amazon and Bookshop, from $10.99"Starcrossed" is an engrossing young adult romance that intertwines Greek mythology into a modern young adult story. Helen Hamilton has spent much of her life on Nantucket trying to hide her unique strength and intelligence — until a new family moves to the island. Helen finds herself entangled in both the secrets of her ancestry and an ancient, tragic play the Fates are determined to repeat. Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJun 14th, 2022