Chainlink’s LINK Soars, Outperforming Other Crypto Majors

Futures Rebound After Yellen Torches Markets After 76 year old treasury secretary Janet Yellen blew up the market yesterday with her post-FOMC comments that regulators aren’t looking to provide “blanket” deposit insurance to stabilize the US banking system, stock futures have rebounded modestly on Thursday, while paring some earlier gains. S&P 500 futures were up 0.5% at 3990 at 7:45 a.m. ET while Nasdaq 100 futures rose 0.9%. Both underlying indexes fell the most in two weeks yesterday. The tech-heavy Nasdaq index flirted with a bull market yesterday after briefly rising 20% from its December low. US government bond yields have edged up after falling sharply on Wednesday when the Fed raised rates 25bps but also opened the door to a pause, while WTI crude futures are down 0.6% in early US session. The Stoxx Europe 600 Index slid 0.8%, falling for the first time this week before a rates decision from the Bank of England. In premarket trading, banking stocks were again the biggest laggards, following weakness in their US peers and as Citigroup Inc. slashed its outlook for the sector. Coinbase slumped after the largest US crypto exchange said it received a notice from the SEC formally declaring the securities regulator’s plans to bring an enforcement action against it. Analysts say the notice might be a precursor to the agency ultimately suing the company. Here are some other notable premarket movers: First Republic Bank shares rose on Thursday along with banking peers, set for a tentative rebound from yesterday’s losses following disappointment over comments from Treasury Secretary Janet Yellen over bank deposits. Cryptocurrency-exposed stocks rise as Bitcoin rebounds after snapping a six-session gaining streak on Wednesday. US equity futures also climbed, signaling a recovery following a tumultuous day of losses on Wall Street. Marathon Digital (MARA US) +5.1%, Riot Platforms (RIOT US) +4.7%. Chewy falls as much as 6.6% in US premarket trade after the online pet supplies retailer issued softer-than-expected FY23 guidance, with plans for international expansion likely to pressure margins. The company’s 4Q results also showed declining customer numbers, which Barclays says raises questions given that headwinds should have been abating. Phreesia Inc. shares dropped 3.3% in postmarket trading, after the application software company reported fourth-quarter results that beat expectations but gave a revenue outlook that KeyBanc sees as light. Caution reigned in markets on Thursday following the Fed’s decision to proceed with a quarter-point rate hike, combined with Treasury Secretary Janet Yellen’s remarks on the health of the banking sector. While Fed Chair Jerome Powell assured that regulators’ actions demonstrated “all depositors’ savings are safe” as he raised rates by an expected quarter point,  Yellen effectively contradicted him and sent stocks whipsawing, when she said regulators aren’t looking to provide “blanket” deposit insurance. “Yellen’s comments were clearly the more important factor yesterday,” said Manish Kabra, US equity strategist at Société Générale. “Not securing all deposits risks more deposit runs, which means large banks’ outperformance versus regional banks is likely to continue. Overall, the US banks rally will continue to fade, at least until the yield curve is firmly positive.” “It is well possible that the post-FOMC equity selloff quickly reverses, as falling yields are supportive of equity valuations — if financial stress is contained and economic data is not too bad,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.   UBS strategists led by Mark Haefele believe that any rally would be unlikely to endure just yet however, noting that turning points usually rely on investors anticipating interest-rate cuts alongside a trough in economic activity and corporate earnings. “The Fed’s actions and analysis of the economy suggest these conditions are not yet fully in place,” they said in a note. Separately, Goldman Sachs Group Inc. strategists say they expect US households to be net sellers of $750 billion worth of stocks in 2023 amid rising bond yields and declining personal savings. The team led by Cormac Conners says higher 10-year yields and lower savings rates tend to be associated with decreased net equity demand from households. As a result of the ongoing bank crisis, the swap market shows investors are split on the chances that Fed officials will add another 25 basis points to their benchmark in May. Despite Powell’s guidance, expectations for cuts have deepened, with the market suggesting that the effective fed funds rate will drop to around 4.1% in December.  “I would not expect the market to take these rate cuts out in the near term and could very well price in more cuts if the data deteriorates from here,” Matthew Hornbach, global head of macro strategy at Morgan Stanley, told Bloomberg Television. Powell himself, though, said in response to questioning that officials “just don’t” see cuts this year and that they will raise higher than expected if that is needed. “Rate cuts are not in our base case,” he said. He also didn't see the bank crisis as recently as three weeks ago when he swore to Congress he would hike rates 50bps only to trigger the worst banking crisis since Lehman. European stocks are on course to snap a three-day winning streak as banks underperform after US Treasury Secretary Janet Yellen warned they aren’t considering widespread insurance for bank deposits. The Stoxx 600 is down 1.0% while the Stoxx 600 Banks Index falls 2.5%.  Here are some of the biggest European movers: HSBC shares drop as much as 3.3%, ING slides as much as 2.5% and ABN Amro tumbles as much as 3.7% after US peers fell on remarks that US lawmakers aren’t planning on widespread insurance for bank deposits Jeronimo Martins falls as much as 4.1%, curbing the stock’s rally since the start of the month, after 4Q earnings showed a further drop in the Portuguese retailer’s margins Rallye SA slumps as much as 10% after the company said the latest earnings from its French supermarket business make it difficult to finish debt restructuring Gym Group drops as much as 5.1% after Barclays downgrades the fitness operator to equal-weight from overweight, citing a “bleak” profit outlook Sanofi gains as much as 5.3%, the most since December, after releasing positive data from a phase 3 trial for its key drug Dupixent Scout24 climbs as much as 4.4%, reaching highest since mid-November, after the online classified advertising company announced a buyback Inwit rises as much as 4.8% to a record after Reuters reported that private equity firm Ardian is in the early stage of exploring a bid for the Italian tower operator Domino’s Pizza Group jumps as much as 4.3% after Barclays upgrades the pizza delivery chain to overweight from equal-weight, highlighting the increase in app usage Meyer Burger gains as much as 15% after the Swiss solar equipment manufacturer’s Ebitda and profitability beat expectations Nemetschek shares rise as much as 13% to their highest level since September. The German firm’s outlook for 2024 and 2025 was seen as solid The BOE is likely to continue the quickest series of interest-rate increases in three decades, with its focus on combating inflation outweighing calls for a pause given recent turmoil in the banking system. The Swiss and Norwegian central banks both raised rates Thursday, as forecast, and flagged more hikes to come in their campaigns to tame rising consumer prices. For the BOE, February UK CPI data have “removed any flexibility they may have thought they had and now markets are pricing in a higher terminal rate of around 4.5% as a result,” said Craig Erlam, a senior market analyst at Oanda Ltd. “This makes the language that accompanies the decision key,” he said, expecting policymakers to highlight an uncertain outlook and the need to be data-dependent. Earlier in the session, Asian stocks rose as the region’s currencies strengthened against the dollar despite the Federal Reserve’s decision to raise US interest rates on Wednesday.  The MSCI Asia Pacific Index climbed as much as 1.5%, rising for a third day, as most Asian currencies, including South Korea’s won and Thailand’s baht, gained. Hong Kong’s equity benchmarks were among the top performers, boosted by gains in Tencent after the firm reported better-than-expected revenue. Stock gauges in Japan and India underperformed. “Dollar reaction to the Fed hike looks to be muted, which can ease pressure on Asian currencies and fund flows,” said Marvin Chen, an analyst at Bloomberg Intelligence. “Focus should be on the dollar impact as peak Fed rates near.” The dollar slid as market expectations for rate cuts by the Fed deepened despite the central bank hiking its benchmark rate by a quarter-point and signaling that it expects more tightening after that. A weaker greenback tends to be beneficial for Asian shares if it signals higher risk appetite and is seen as a positive for growth in the region’s emerging economies, many of which rely on imports priced in dollars. An index of Asian financial stocks headed for a three-day gain as a key technical indicator suggested the sector’s loss of more than 3% this month may have been excessive. US shares slumped Wednesday after comments from Treasury Secretary Janet Yellen rattled US bank shares and Fed Chairman Jerome Powell dashed hopes on rate cuts this year. Given expected slower US growth and the stresses in its banking system, it makes more sense to lean into the stronger growth recovery in China as well as Hong Kong and Thailand, said Sunil Koul, Asia Pacific equity strategist at Goldman Sachs, in a Bloomberg TV interview Japanese equities fell, following US peers lower, after comments from Treasury Secretary Janet Yellen rattled US bank shares and Federal Reserve chief Jerome Powell said he was prepared to keep raising rates. The Topix Index fell 0.3% to 1,957.32 as of market close Tokyo time, while the Nikkei declined 0.2% to 27,419.61. Sony Group Corp. contributed the most to the Topix Index decline, decreasing 1.3%. Out of 2,159 stocks in the index, 1,256 rose and 781 fell, while 122 were unchanged. Yellen told US lawmakers that the government wasn’t considering “blanket” deposit insurance to stabilize the banking system while Powell said he was ready to keep raising rates until inflation shows signs of cooling. Japanese shares are falling after the comments, said Rina Oshimo, a senior strategist at Okasan Securities. Australian stocks joined the selloff: the S&P/ASX 200 index fell 0.7% to close at 6,968.60, in a broad decline weighed by losses in mining shares and banks. The drop followed a slump on Wall Street as the Federal Reserve pushed back against bets for interest rate cuts this year. In New Zealand, the S&P/NZX 50 index was little changed at 11,594.94 Lastly, stocks in India were among the worst performers in Asia amid a mixed trend seen across global markets as investors remained concerned over the future course of central banks’ policy actions.  The S&P BSE Sensex fell 0.5% to 57,925.28 in Mumbai, while the NSE Nifty 50 Index declined 0.4%. The gauge is now little changed this week after dropping for two out of the last four sessions. The benchmarks have slipped more than 4.5% each for the year.  The underperformance in local equities compared with Asian and emerging market peers is a result of surging interest rates in the US - the Fed raised its main lending rate by another 25 bps on Wednesday to 5% - impacting flows from overseas investors. Index-heavy software exporters and banks came under pressure on increasing worries over global economic growth.  Foreign investors have sold $2.8b of local shares this year through March 20 following inflows of about $11b over the preceding two quarters. Domestic investors have however remained buyers to the tune of $9b in 2023.  Reliance Industries contributed the most to the Sensex’s decline, decreasing 1.3%. Out of 30 shares in the Sensex index, 13 rose, while 17 fell. In FX, weakness in the dollar extended to a sixth day, with a gauge of the greenback falling to the lowest in more than a month as traders boosted bets for US interest-rate cuts, even after the Fed said more tightening may be needed.  It has since rebounded fractionally from session lows. The Norwegian krone gained 1% versus the dollar after a hawkish 25bps hike from the Norges Bank. While there were expectations that Norges Bank would stand pat after hiking today, the central bank explicitly signaled another increase in May The pound and euro advanced, with the former climbing on leveraged demand amid expectations for the Bank of England to deliver a hawkish quarter-point rate increase on Thursday, according to a trader “With the banking sector concerns still fresh, the Fed was more dovish than just a while ago and that is dragging down bond yields and the dollar,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp. “I still think the Fed will raise the rate to tame inflation, which seems to remain stubborn” The Swiss franc struggled to hold gains after the SNB opted for a 50bps increase. The Dollar Index is little changed. In rates, treasuries were cheaper across the curve, although futures remain near top of Wednesday’s range, a bull-steepening rally following Fed’s rate decision. US two-year yields are up ~2bps while UK two-year borrowing costs fall 9bps ahead of the Bank of England rate decision later today.  Thursday’s losses are belly-led, cheapening 2s5s30s fly by ~3bp on the day. Bank of England rate decision at 8am New York time is expected to be a quarter-point rate increase. US yields cheaper by 3bp-5bp across the curve with 10-year around 3.48%, near low end of Wednesday’s 3.427%-3.642% range; on the curve, 2s10s spread is wider by ~1.5bp on the day, near Wednesday’s steepest levels, while 5s30s spread tightens ~1.5bp.  Fed-dated OIS contracts price in around 13bp of rate hike premium for the May policy decision and then ~75bp of cuts by year-end. Crude futures decline with WTI falling 1.2% to trade near $70.05. Spot gold adds 0.5% to around $1,980. Bitcoin rises 1.2%. Looking to the day ahead now, monetary policy decisions will include the Bank of England, the Swiss National Bank and the Norges Bank. Data releases include the US weekly initial jobless claims, February’s new home sales, the Kansas City Fed manufacturing activity for March, and the Q4 current account balance. Finally, EU leaders will gather in Brussels for a summit. Market Snapshot S&P 500 futures up 0.5% to 3,989.00 MXAP up 1.3% to 160.31 MXAPJ up 1.5% to 517.51 Nikkei down 0.2% to 27,419.61 Topix down 0.3% to 1,957.32 Hang Seng Index up 2.3% to 20,049.64 Shanghai Composite up 0.6% to 3,286.65 Sensex little changed at 58,181.18 Australia S&P/ASX 200 down 0.7% to 6,968.61 Kospi up 0.3% to 2,424.48 STOXX Europe 600 down 0.4% to 445.25 German 10Y yield little changed at 2.28% Euro up 0.4% to $1.0897 Brent Futures down 0.2% to $76.52/bbl Gold spot up 0.4% to $1,977.01 U.S. Dollar Index down 0.18% to 102.16 Top Overnight News from Bloomberg Hong Kong’s CPI for Feb falls short of expectations, coming in at +1.7% (down from +2.4% in Jan and below the St’s +2.4% forecast). Singapore’s inflation also comes in a bit below plan at +6.3% headline for Feb (down from +6.6% in Jan and below the St’s +6.4% forecast). BBG Blinken’s planned trip to China may be in the process of getting back on track after being derailed by the Chinese balloon incident. Blinken said China will be capable of invading Taiwan by 2027. SCMP The ECB will probably need to raise borrowing costs more, though the bulk of tightening is already done, according to Governing Council member Madis Muller. BBG Ukrainian troops, on the defensive for four months, will launch a long-awaited counterassault "very soon" now that Russia's huge winter offensive is losing steam without taking Bakhmut, Ukraine's top ground forces commander said on Thursday. RTRS Swiss financial regulator Finma has defended its decision to wipe out a huge swath of risky subordinated bonds as part of the CS rescue deal. In its first statement on the deal since the weekend, Finma said that all the contractual and legal obligations had been met for it to act unilaterally given the urgency of the situation. “On Sunday, a solution was found to protect clients, the financial centr and the markets,” said Finma’s chief executive Urban Angehrn. “In this context, it is important that Credit Suisse’s banking business continues to function smoothly and without interruption.” FT Following the Fed, the BOE will probably continue its quickest series of rate increases in three decades with a 25-bp hike to 4.25%. The SNB raised rates by 50 bps and signaled more to come as it resumed its inflation fight just days after the downfall of Credit Suisse. Norges Bank raised by 25 bps to 3%, as expected, and said it will tighten further in May. BBG Freight companies are dialing back expectations that demand will recover strongly in the second half of the year amid growing economic uncertainty and signs retailers are growing more guarded about placing big orders in 2023. WSJ OPEC+ is unlikely to take action on production despite the recent slump in prices as they attribute most of the volatility to financial speculation, not fundamentals. RTRS The SEC has told Coinbase that it plans to take enforcement action against the company, escalating its crackdown on digital-currency firms by targeting the biggest U.S. crypto exchange, Coinbase said Wednesday. WSJ The Swiss National Bank raised its interest rate by 50 basis points and signaled more to come as it resumed its inflation fight just days after the downfall of the country’s second- biggest bank became the epicenter of global financial turmoil: BBG Norway’s central bank raised its key interest rate to the highest level since 2009 and signaled further tightening after higher price pressure from a weaker-than-forecast krone outweighed concerns about global banking turbulence: BBG Wall Street banks and European rivals are undoing de facto hiring freezes after Credit Suisse’s emergency rescue by UBS, unable to resist the lure of top talent available at a discount: BBG A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mixed with price action choppy as markets digested the FOMC where the Fed delivered a widely expected 25bps rate hike and maintained its terminal rate view but dropped its reference regarding expectations that ‘ongoing’ rate hikes will be appropriate. ASX 200 declined amid the uninspired mood across most industries with underperformance in tech and mining. Nikkei 225 was contained by weakness in financials and after Japan maintained the overall assessment of the economy but cut the assessment on corporate profits and production for the first time since April 2020. Hang Seng and Shanghai Comp. swung between gains and losses with optimism in Hong Kong following earnings releases from Orient Overseas International and Tencent whereby the advances in the latter inspired its tech peers, although participants also digested a rate hike by the HKMA which moved in lockstep with the Fed. Top Asian News HKMA raised its base rate by 25bps to 5.25%, as expected, which is in lockstep with the Fed. RBNZ Chief Economist Conway said inflation is high and widespread because strong demand outstripped supply, while he added that they are incredibly determined to get inflation and inflation expectations back to the target. Furthermore, Conway expects monetary policy tightening to cause the New Zealand economy to enter a mild recession later this year as demand slows, as well as noted that the OCR is now comfortably above neutral and having the desired contractionary effect, according to Reuters. European bourses began the session mixed/flat, but have since dipped more convincingly into negative territory with newsflow focused on hawkish Central Bank action post-Fed thus far. Once again, the FTSE 100 is lagging its peers as focus remains firmly on the upcoming BoE announcement, FTSE 100 -1.0%. Stateside, futures are firmer though remain shy of Wednesday's best levels and have most recently eased off the sessions peak given the above action, ES +0.4%. Citi cuts their Stoxx 600 end-2023 forecast to 445 (prev. 475); FTSE 100 cut to 7600 (prev. 8000); downgrades Banks to Neutral (prev. Overweight). Top European News ECB's Muller says inflation is a bigger problem than the increase in borrowing costs. Lions share of hikes are behind us; ECB is likely to increase rates by a little. ECB's Stournaras says should not commit to any rates in advance. Italy is reportedly preparing a new package of measures worth some EUR 5bln to aid firms and families cope with energy bills, and could be unveiled next week, according to Reuters sources. Central bank decisions SNB hikes by 50bps to 1.50% vs exp. 1.50% (prev. 1.00%); does not rule out further hikes; reiterates language around price stability and FX intervention. Further increased its inflation forecasts, with CPI now not seen dropping back into the 0-2% target band until Q2-2023 (prev. Q4-2023). Click here for full details, reaction & analysis. Norges Bank hikes by 25bps to 3.00% vs exp. 3.00% (prev. 2.75%); the policy rate will be raised further in May; decision unanimous. Rate path now implies an end-2023 rate of 3.60% (prev. 3.08%). Click here for full details, reaction & analysis. Brazilian Central Bank maintained the Selic rate at 13.75%, as expected, while it will remain vigilant and will assess if the strategy of maintaining the Selic rate for a sufficiently long period of time will be enough to ensure the convergence of inflation. BCB added that inflation expectations have shown additional deterioration, especially at longer horizons and they will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected. FX The USD remains on the back-foot after Wednesday's FOMC, though the DXY is back towards a 102.44 high after briefly printing a fresh March low of 101.91. Action which supports peers across the board and features antipodeans outperforming after recent pressure, NZD leading and cognisant of RBNZ's Conway emphasising that inflation remains high and widespread; NZD/USD and AUD/USD testing 0.63 and 0.6750 respectively. GBP is next best ahead of the BoE, Cable at a fresh March peak of 1.2343 with 25bp fully priced and a peak of around 4.45% (current 4.00%) implied. The single currency, EUR, is underpinned by the USD but with EUR/GBP pressure preventing any further appreciation; EUR/USD holding sub-1.09 while EUR/GBP near the 0.8832 low. Finally, CHF benefitted from the SNB's hawkish-hike while the NOK is back to pre-release levels as expectations for a 50bp hike unwind while the hawkish repo path adjustments are factored in. Fixed Income EGBs are underpinned with yields softer across the curve post-Fed while Gilts are closer to the unchanged mark pre-BoE, though the morning's hawkish action has sparked a pullback from best levels. Bunds hold around 136.00 and the 10yr yield now back above 2.25% after dipping to a 2.22% low; modest upside was seen in Bunds following Germany leaving its Q2 issuance calendar unrevised vs the prelim. FY release. Stateside, USTs continue to derive support from Wednesday's announcements; though, the yield curve has lifted marginally from the mid-week trough, but does remain lower overall with action most pronounced in the belly. German Q2 issuance calendar sees no changes vs the prelim. annual release. Commodities Commodities are mixed, with the crude benchmarks attempting to pare back some of their overnight losses while metals glean support from the USD's downside. Specifically, WTI and Brent are towards the lower-end of USD 69.91-70.79/bbl and USD 75.76-76.66/bbl parameters, though the benchmarks are holding above USD 70 and USD 76 respectively. Both precious and base metals are benefitting from the softer dollar; spot gold towards the upper-end of USD 1964-1983/oz parameters, just shy of Wednesday's USD 1985/oz best with base metals supported but off best given the broader risk tone. Iran's Finance Minister said Iran achieved its highest level of oil exports for at least two years last month, according to FT. Goldman Sachs said gold remains the best safe-haven asset for financial risks and raised its gold target to USD 2050/oz from 1950/oz, while it added that Chinese demand continues to surge across the commodity complex with oil demand topping 16mln bpd and it remains very positive on commodity prices with 12-month forecasted returns of 27.9% for S&P GSCI. Geopolitics China's military said it monitored and drove away a US destroyer which entered the South China Sea Paracel Islands, although the US Navy later said that the Chinese military's statement is false regarding a US destroyer being expelled from the South China Sea. Taiwan's Foreign Minister said President Tsai's meeting with the US House Speaker is still being arranged, according to Reuters. Saudi Arabia and Iran's Foreign Ministers agreed to meet soon to pave the way for the reopening of embassies, according to the Saudi state news agency. Russian Foreign Ministry Lavrov is to hold discussions with Iran's top diplomat on March 29th in Moscow, according to Tass. US mulls opening Pacific defense pact with Britain and Australia to more countries, according to Semafor. US reportedly plans to send aging A-10 attack planes to the Middle East while shifting newer jets to Asia and Europe, according to US officials cited by WSJ. US Event Calendar 08:30: March Initial Jobless Claims, est. 197,000, prior 192,000 March Continuing Claims, est. 1.69m, prior 1.68m 08:30: Feb. Chicago Fed Nat Activity Index, est. 0.10, prior 0.23 08:30: 4Q Current Account Balance, est. -$213.7b, prior -$217.1b 10:00: Feb. New Home Sales, est. 650,000, prior 670,000 Feb. New Home Sales MoM, est. -3.1%, prior 7.2% 11:00: March Kansas City Fed Manf. Activity, est. -2, prior 0 DB's Jim Ried concludes the overnight wrap In an FOMC meeting that went to script but perhaps leaned dovish, Mr Powell’s press conference was overshadowed by his predecessor’s (Yellen) simultaneous comments that a blanket guarantee of deposits had not been discussed or considered. It seems highly unlikely the US would let depositors take losses but maybe such a move won't be done pre-emptively and would require future stress first. The reaction to her comments also highlighted the nervousness and fragility underpinning a big 2-day rally. The remarks led to a late slump in equities (S&P 500 -1.65% - all post Yellen) and big rally in bonds (2yr -23bps - more than half after Yellen) and distracted from a relative uneventful FOMC, even if there were nuances worth discussing. Let’s look at the Fed first. They hiked interest rates a further 25bps to put the policy rate in a target range of 4.75-5.00%, while saying in the statement that “additional policy firming may be appropriate”. This replaced "ongoing increases in the target rate will be appropriate". So a softening in language. The pace and asset makeup of QT was unchanged as expected. The median dot plot projection showed fed funds ending 2023 at 5.1%, unchanged from December, and up by roughly one hike to 4.3% at the end of 2024. Despite the median remaining unchanged, there was some upward migration in the dot plot for 2023. In terms of economic projections, the Fed had Core PCE inflation up modestly both this year (3.6% from 3.5% in Jan) and next (2.6% from 2.5% in Jan), but saw risks as “broadly balanced” rather than “weighted to the upside” as we had seen last meeting. On the banking stress, the Fed’s statement noted that it is “likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation.” At the press conference, Chair Powell opened with a statement on the banking sector first by saying that the US banking system is sound and that the Fed programs are “effectively meeting” liquidity needs while policymakers are closely monitoring the situation. He also noted that the events of the past week are likely to weigh on lending standards and slow the economy, which may in fact necessitate fewer rate hikes than thought before. Chair Powell noted that some officials considered a pause in the days leading up to the meeting, however in the end it was a unanimous vote to hike rates. The "pause" word sparked a front-end rally. Our US economists have maintained their terminal rate view of 5.1% following another 25bp rate hike in May. They note there is elevated uncertainty around this modal outcome. Financial and credit conditions along with inflation data will be important to watch in the weeks ahead. See their FOMC review note here for more. The S&P 500 went into the FOMC announcement about flat on the day (-0.04%), having traded in a 0.60% range through much of the US trading session. The initial statement saw a pop in sentiment, before stocks whipsawed through the Chair’s opening statement and peaked up around +0.9% on the day as he noted “disinflation is intact.” However, comments on credit conditions tightening further and rate cuts in 2023 not being the FOMC’s “baseline expectation” saw risk sentiment fall. Roughly an hour prior to the close Chair Powell also acknowledged that the Fed was still open to further rate hikes if the data proves them necessary. At the same time, his predecessor, Treasury Secretary Yellen said to a Senate subcommittee hearing that, “I have not considered or discussed anything having to do with blanket insurance or guarantees of deposits.” She also noted that it was not yet the time to discuss changing the FDIC insurance cap. Risk sold off harder after this with the S&P falling over -1.5% over the last hour of trading to finish at the lows of the day at -1.65%. 493 of the index’s constituents were lower yesterday with Banks leading the late move lower. The KBW index closed down -4.70% on the back of significant regional bank losses once again led by First Republic (-15.5%), while the majors held up relatively better with JPM (-2.6%), C (-3.0%), and BAC (-3.3%) outperforming. Fixed income markets saw more one way traffic with 10yr US Treasury yields -17.53bps lower on the day to 3.43% after being roughly unchanged around the European close and rallying though the FOMC statement and the risk-off move that followed. US 2yr yields were actually higher in the US morning before being unchanged just prior to the meeting and then rallying through the US afternoon to finish the day -23.0bps lower at 3.937% - just off the lows of the day. Following the meeting, fed futures are pricing in a 46% chance of a hike at the next meeting in May, and then roughly 70bps of cut by year-end despite the comments from Chair Powell. This morning in Asia, we are seeing a further steepening in the curve with 2yrs -6bps but 10yrs +1bps. 2s10s is now -44bps after being in the low -60s before the FOMC statement. See our rates strategists' call and rationale for steepeners here for more on the forces around this trade. So the mood completely changed in the last hour or so. Ahead of the Fed, European markets had actually continued to normalise following last week’s volatility. For instance, equities put in another steady performance, with the STOXX 600 (+0.15%) posting a third consecutive advance. Sovereign bond yields also moved higher, with those on 10yr bunds (+3.6bps) at a one-week high of 2.328% as investors priced out the chances of an imminent pause in rate hikes from the ECB. In part, that was supported by a Bloomberg article later in the session, which reported that ECB officials were growing in confidence that they had withstood the current turmoil, whilst concern remained that inflation still needed tackling. When it came to banks however, the rally at the start of the week showed signs of petering out, with the STOXX Banks index coming down -0.69%, and UBS falling -3.71%. Looking forward, central banks will remain in the spotlight today, with the Bank of England’s decision coming up at midday London time. Up until yesterday, market pricing had been more in the balance on whether they’d keep hiking or pause. But just after we went to press yesterday, there was a big upside surprise in the February CPI print. That showed an unexpected increase in the year-on-year measure to +10.4% (vs. +9.9% expected), and core CPI also rose to +6.2% (vs. +5.7% expected). Furthermore, that was faster than the BoE’s own staff projections too, with last month’s Monetary Policy Report predicting a +9.9% reading like the consensus. On the back of that print, investors ratcheted up the probability of a 25bp hike today, with overnight index swaps currently placing a 91% probability on such a move. That echoes the view of our UK economist, who is also expecting a 25bp increase in the Bank Rate that would take it up to a post-2008 high of 4.25%. In his preview (link here), he sees a 6-3 vote split in favour of the 25bp hike, but the big question now will be what they indicate in the forward guidance, and whether they echo the Bank of Canada’s move in making a “conditional pause” more explicit. Asian equity markets are mixed this morning despite an overnight slump on Wall Street. US stock futures being notably higher is helping, with contracts tied to the S&P 500 (+0.43%) and NASDAQ 100 (+0.45%) seeing mild gains. As I type, the Nikkei (-0.30%) as well as the KOSPI (-0.11%) are edging lower but the Hang Seng (+0.78%) is trading in the green after technology heavyweight Tencent yesterday reported better than expected quarterly revenues. Meanwhile, the CSI (+0.36%) is trading higher with the Shanghai Composite (-0.01%) swinging between gains and losses. In FX, the US dollar (as measured by the DXY index) remains under pressure, trading near a seven-week low of 102.105 on the prospect of less Fed tightening ahead. In other news yesterday, UK MPs voted overwhelmingly in favour of the Windsor Framework, which is the recently agreed adjustment to the Brexit deal’s arrangements for Northern Ireland. In the end the vote was 515-29 in favour, although the opponents included former PMs Boris Johnson and Liz Truss. To the day ahead now, and monetary policy decisions will include the Bank of England, the Swiss National Bank and the Norges Bank. Data releases include the US weekly initial jobless claims, February’s new home sales, the Kansas City Fed manufacturing activity for March, and the Q4 current account balance. In the Euro Area, we’ll also get the preliminary consumer confidence reading for March. Finally, EU leaders will gather in Brussels for a summit. Tyler Durden Thu, 03/23/2023 - 07:58.....»»

Futures Rise Ahead Of Jobs Data, Oil Rebounds US stock-index futures were steady on Thursday, recovering from earlier losses as investors brushed off mostly hawkish commentary from the latest Fed minutes amid further signs of reopening and stimulus in China. Contracts on the S&P 500 and the Nasdaq 100 were both up 0.2% as of 7:15 a.m. ET following a positive session in Asia, driven by a rally in Chinese mainland and Hong Kong equity gauges on news the border with China will gradually reopen. Cautious Fed minutes on Wednesday evening failed to stem optimism, while investors await a private US jobs report later today. Europe's Stoxx Index was also positive, erasing earlier losses, with retailers leading gains after Next Plc raised its profit forecast. Oil snapped a two-day drop, while the dollar was flat and 10Y TSY yields erased earlier gains. In premarket trading, Amazon rose after the company announced it is laying off a record 18,000 employees, its biggest corporate workforce reduction ever. Exxon also rose after posting modest gains and analysts noted a positive outlook for its refining business, even as the oil giant forecast that lower oil and natural gas prices will hurt fourth-quarter earnings. Here are some other notable premarket movers: US Foods rises 2.7% as Barclays raises the food service group to overweight, noting compelling valuations and signs it had overcome last year’s troubles. Western Digital climbs 6% after Bloomberg reported that the data storage maker had restarted merger talks with Japan’s Kioxia. Geron drops 11% after announcing an offering of $175m shares. Stock closed 33% higher on Wednesday’s regular trading session after a late-stage trial met its primary and key secondary endpoints. US-listed Chinese stocks fall in premarket trading, after the Nasdaq Golden Dragon China Index scored its best start to a year on record. Alibaba shares decline 1.4% after a 13% surge on Wednesday; Baidu drops 1.1%, JD.com -2.8% Gap falls as much as 4.8% and Victoria’s Secret drops 3.5% after UBS downgrades both retailers to sell, analyst says that the market “underestimates the pressure on industry sales from an expected recession and overestimates the margin benefit from supply chain costs easing.” Comcast shares rise as much as 1.4% after Truist upgrades the cable company to buy from hold. Charter Communications also gains 1.4% after being upgraded to buy, with the broker saying that 2022’s “mad rush” to exit the stocks has resulted in oversold conditions. Geron shares drop as much as 14% after announcing an offering of $175m shares via Goldman Sachs, Stifel, Wedbush, Baird, B. Riley, Needham. Shares closed 33% higher in Wednesday’s regular trading session after a late-stage trial met its main goals. Shares in US Foods rise 2.7% as Barclays raises the food service group to overweight, noting compelling valuations and signs it had overcome last year’s troubles. Silvergate Capital sinks much as 35% after the crypto bank announced it is reducing headcount by approximately 200 employees, or 40%, and estimates the costs associated will be about $8 million. Vyant Bio soars 170% after the company said it had engaged LifeSci Capital as its financial adviser to help in exploring strategic options. Western Digital climbs as much as 7.4% after Bloomberg reported that the data storage maker had restarted merger talks with Japan’s Kioxia. Analysts said any deal between the two would create a company with notable scale in the NAND flash memory market. Yesterday the S&P 500 closed firmly in positive territory, despite minutes from the December FOMC meeting showing officials committed to bring down inflation, while cautioning against an “unwarranted” loosening of financial conditions that would hurt their efforts to achieve price stability, and vowing there would be no rate cuts in 2023.Meanwhile, as Bloomberg notes, mega caps continue to drag US stocks, with just a few stocks responsible for most of the underperformance of the S&P 500 over the past six months. An equally-weighted S&P 500 has outperformed the market-cap weighted index by 5% percentage points since the end of September. “The underlying bullish sentiment is seen as still alive and as long as the momentum remains, a rebound over the new short-term floors established this week will stay as the most likely scenario,” said Pierre Veyret, technical analyst at ActivTrades. “However, market operators are also likely to become increasingly cautious for the end of the week, waiting for today’s major data.” Investors are looking to today's ADP Private Payrolls report and nonfarm payrolls on Friday for clues on the labor market and its implications for monetary policy, after Fed minutes showed officials cautioned against underestimating their will to keep interest rates high for some time. While US stocks pared gains after the minutes, traders are still pricing in rate cuts by end-2023. “Pricing in the market still shows that investors continue to bet that the Fed will start cutting rates before the end of this year,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “Yes, there are some data pointing at slowing economic activity in the US, but the jobs market – which is closely watched by the Fed - remains surprisingly tight.” In Europe, the Stoxx 600 erased earlier losses, spurred by retail, mining and travel shares. The benchmark has risen 3.6% this week in local currency, outperforming the S&P 500’s 0.3% gain. Here are the biggest equity movers: Next shares jump as much as 9.3% after the fashion retailer’s profit guidance beat expectations. Analysts note the company’s strong trading during the Christmas period. Next’s positive release also buoys the wider retail sector, making it the best- performing subgroup on Europe’s Stoxx 600 Ryanair rises as much as 5.3% in Dublin, after the airline operator boosted its full- year profit forecast following stronger-than-expected demand during the Christmas travel period Sonova shares climb as much as 1.7% after launching a new earbud product for patients with slight hearing loss, that Vontobel says will help broaden the company’s portfolio Electrolux gains as much as 5% after Bank of America upgrades the stock to buy from underperform, noting that margin pressure is likely to come to an end in 2023 B&M shares rise as much as 2.7% after reporting third-quarter sales. Analysts said the like-for-like sales during the period were strong, but highlighted the lowered Ebitda guidance Pearson falls as much as 5%, the most since December 1, after Bank of America downgraded the firm to underperform in a note on the European media and internet sector Outokumpu fall as much as 9.3% after Danske Bank cut its recommendation for the Finnish steelmaker to sell from hold, also trimming its target price to EU4 from EU4.70 Modern Times Group shares fall as much as 10%, the most since July, after Citi opened a negative catalyst watch on the media group ahead of its FY results Societe Generale falls as much as 2.1% after KBW cut its recommendation to market perform from outperform in a note on the European investment banking sector Close Brothers Group fell as much as 2.3% after Investec cut the British bank to sell from hold, citing slowing loan growth and “pretty ordinary” returns Earlier in the session, Asian stocks were on track for a fifth-straight daily gain, as investors continued to buy shares in China and Hong Kong on positive policy momentum and after news the border with China will gradually reopen. The MSCI Asia Pacific Index gained as much as 1.1%, before paring much of that advance. Internet giants Alibaba and Meituan were among the biggest boosts to the index, helped by China’s moves to ease its tech crackdown as well as support property firms and smooth geopolitical relations. “Approval for Ant Group to expand its consumer finance business marked another positive step in easing regulatory risks,” Jun Rong Yeap, market strategist at IG wrote in a note. Benchmarks in Singapore, Taiwan and Malaysia also climbed, as investors look beyond the cautious stance of Federal Reserve officials in the minutes of their December meeting. Indonesia’s benchmark fell the most since May 12 as investors look to increase allocations to cheaper northern markets. Better prospects for China’s reopening and economic growth have boosted Asian stocks in recent sessions, driving the MSCI regional gauge up 18% from an October low. The measure lost more than 19% last year amid worries about a slowdown in the West and China’s bumpy path to reopening Japanese stocks edged higher after US stocks advanced following signs of a slowing American economy and mixed Federal Reserve commentary from its latest meeting. The Topix closed less than a point higher at 1,868.90, while the Nikkei advanced 0.4% to 25,820.80. Out of 2,162 stocks in the Topix, 731 rose and 1,336 fell, while 95 were unchanged. The rose slightly after weakening 1.2% against the dollar on Wednesday. In minutes from the latest Fed meeting, many officials highlighted the need to curb inflation without slowing the economy too much. Meanwhile, US data released Wednesday showed manufacturing activity contracted for a second month in December. US Manufacturing Contracts for a Second Month, Prices Ease “Japanese stocks rose as the FOMC announcements passed without incident, with US stocks bought back,” said Takeru Ogihara, chief strategist at Asset Management One. He also noted that the yen’s strengthening had eased a bit. Key stocks gauges in India bucked the generally bullish trend and fell for a second straight session as selloff in banks and financial companies extended amid emerging worries over loan growth. The S&P BSE Sensex fell 0.5% to 60,353.27 in Mumbai, while the NSE Nifty 50 Index declined 0.3%, sending the measures to their lowest close in two weeks. The gauges are now more than 4% down from their record highs seen on December 1. Fourteen of BSE Ltd.’s 20 sector indexes advanced, led by oil and gas companies, which rallied after India announced $2.4 billion of federal aid to expand hydrogen production. Financial companies were the worst performers on the index, with top shadow lender Bajaj Finance plunging 7.2% — its biggest single-day drop since April — after its quarterly loan and asset size growth failed to impress analysts. “Investors are steadily booking profit to trim their positions due to the challenging and uncertain global environment,” according to Kotak Securities analyst Shrikant Chouhan. “Investors are guarded in their equity exposure, as rising interest-rate regime and geo-political tensions are key hurdles that could trigger a major sell-off.”              In rates, treasuries were slightly cheaper vs Wednesday’s close with losses led by front end of the curve, continuing to pressure 2s10s spread lower. The 10-year TSY yield are higher on the day by less than 1bp at 3.69%, flattening 2s10s by 2.4bp; across long end, 20-year sector continues to outperform, tightening 10s20s30s fly by 1bp. A wider flattening move was seen in German yields where 2-year notes are cheaper by 4bp on the day while long-end trades richer. Flattening move across core rates continues in aftermath of Wednesday’s FOMC minutes, which pushed back against potential for rate cuts soon. Despite the hawkish tone of Fed minutes, hedge funds have recently flipped to a record net long SOFR futures position in a sharp u-turn from elevated net short in September. In FX, the Bloomberg Dollar Spot Index was little changed as the greenback traded mixed versus its Group-of-10 peers, though moves were confined to narrow ranges. Treasuries inched lower. The euro rose to a day high of 1.0631, before paring. Bunds and Italian bonds fell, underperforming Treasuries and snapping three-day gains. Money markets added to ECB tightening wagers after the Fed pushed back against easing bets in its December minutes The pound slipped and gilts inched lower. The Bank of England said business leaders see inflation accelerating in the years ahead and wage growth strengthening, adding to concerns about upward pressures on prices The Australian dollar fell while bonds gained as data showed China’s services activity contracted in December amid surging Covid infections The Egyptian pound extended its decline, adding to a 6.2% drop from Wednesday, as the north African nation grapples with its worst foreign- exchange crunch in half a decade In commodities, WTI trades within Wednesday’s range, adding 2.6% to near $74.71. Most base metals trade in the green. Spot gold falls roughly $5 to trade near $1,849/oz. Bitcoin is essentially unchanged on the session, in-fitting with the USD and US equity performance ahead of data/Fed speak. Looking to the day ahead, data releases include Italian CPI for December and Euro Area PPI for November, whilst in the US there’s the ADP’s report of private payrolls for December, the weekly initial jobless claims, the November trade balance, and the final services and composite PMIs for December from both the US and the UK. Otherwise, central bank speakers include the Fed’s Harker, Bostic and Bullard. Market Snapshot S&P 500 futures down 0.2% to 3,866.25 MXAP up 0.4% to 158.25 MXAPJ up 0.7% to 521.05 Nikkei up 0.4% to 25,820.80 Topix little changed at 1,868.90 Hang Seng Index up 1.2% to 21,052.17 Shanghai Composite up 1.0% to 3,155.22 Sensex down 0.5% to 60,346.44 Australia S&P/ASX 200 little changed at 7,063.63 Kospi up 0.4% to 2,264.65 STOXX Europe 600 down 0.2% to 439.31 German 10Y yield little changed at 2.31% Euro up 0.2% to $1.0625 Brent Futures up 2.4% to $79.68/bbl Gold spot down 0.3% to $1,849.12 U.S. Dollar Index little changed at 104.18 Top Overnight News from Bloomberg European bond traders face greater volatility in early 2023 as governments look set to sell record volumes of debt to a market no longer propped up by central bank purchases Inflation numbers are the most important data drivers lately, yet Friday’s US nonfarm payrolls data could be the catalyst for a new round of volatility in the market following the minutes of the Fed’s December meeting German Chancellor Olaf Scholz is coming under renewed pressure from political allies and opponents in Germany to supply additional heavy weapons to help Ukraine fight off Russia’s military invasion The world’s pile of negative-yielding debt has vanished, as Japanese bonds finally joined global peers in offering zero or positive income Southeast Asian yield curves flattened last year as central banks rushed to hike interest rates. In 2023, things are likely to go the other way Europe is set for the warmest January in years, easing an energy crunch that has hammered the region for months. Mild conditions are likely to persist across the region until the end of the month, with a strong weather front blocking out cold polar air, according to forecaster Maxar Technologies Inc Chinese officials this week extended trading hours for the onshore yuan as part of its attempt to increase international use of the currency. Admittedly, it’s a small step, but it follows a push to boost its use in transactions with major energy and commodity exporters and data showing rapid growth in yuan trading activity The border between mainland China and Hong Kong will gradually reopen from Sunday, paving the way for a restoration of economic and social ties that have been disrupted for three years A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded positively throughout most of the session but bourses later drifted off best levels. ASX 200 was initially buoyed by gold miners, but the index briefly dipped into the red as the yellow metal waned. Nikkei 225 faded the bulk of its gains after approaching levels close to 26,000, whilst most of the support emanated from its Banking sector. Hang Seng and Shanghai Comp were firmer from the open and Hong Kong initially outperformed with Tech leading the gains, whilst China said it will gradually reopen the border between Hong Kong and the Mainland on January 8th and will increase flights between the Mainland, Hong Kong, and Macau. PBoC loosens mortgage rates for cities with home price declines, according to local reports. Top Asian News China Weighs Cap on Property Agent Commissions to Bolster Sales Xi and Marcos Agree to Resume Oil and Gas Talks, Expand Ties Hong Kong Reopening With China Comes With 60,000-Person Cap Ambani Focuses on $75 Billion Green Bet as Scions Step Up Jokowi’s Revised Job Creation Law Challenged as Unconstitutional European bourses are mixed but with a slight negative bias, Euro Stoxx 50 -0.2%, following a similar APAC handover ahead of US data. Sectors are mostly in the red, but with Retail outperforming after updates from the likes of Next while Travel & Leisure names are similarly lifted by Ryanair's upside. Stateside, futures are close to the unchanged mark and are yet to convincingly break from the morning's initial ranges ahead of data and Fed speak. Foxconn (2317 TT) December Sales TWD 629bln, -12.3% YY. FY22 sales +10.5% YY; Q1 is expected to be roughly in line with market consensus. UK CMA reportedly will not publish its final report on the Activision Blizzard (ATVI)-Microsoft (MSFT) acquisition until April 26th (at the latest), a delay from the previously planned March 1st. Top European News Next Raises Forecast as Christmas Sales Defy Retail Gloom BMW Takes Cues From Apple With Radical Interior Overhaul Scholz Faces Renewed Heat in Germany to Supply Tanks to Ukraine EU Urges Covid Travel Screening for Passengers From China Worst Day of Train Strikes Threatens to Bring UK to a Halt FX Dollar mixed awaiting busy pm agenda on the eve of NFP and after choppy moves post-FOMC minutes, DXY in tighter 104.420-103.980 band vs 104.730-103.800 yesterday. Euro still keeping close tabs on 1.0600 vs Greenback and adjacent to 10 and 21 DMAs. Aussie unwinding some underperformance against Buck in consolidative price action between 0.6845-00. PBoC set USD/CNY mid-point at 6.8926 vs exp. 6.8955 (prev. 6.9131); strongest since September 2nd 2022. Fixed Income Core benchmarks have managed to lift from initial lows, with the initial move lower seemingly occurring without driver at the time, though in the wake of FOMC minutes, and the move perhaps just being the benchmarks running out of steam from recent action. Currently, Bund, USTs and Gilts are within touching distance of the unchanged mark, with yields diverging slightly between EGBs and USTs. On the supply front, French issuance passed without marked move while Gilts await a 2027 sale shortly. Commodities WTI and Brent are firmer on the session, though the upside stalled on approach to the USD 75/bbl and USD 80/bbl handles respectively with the benchmarks still lower by over USD 5/bbl WTD. Colonial Pipeline said Line 3 is currently down for unscheduled maintenance, and downstream schedules will be impacted by the downtime, Line 3 is expected to restart on January 7th; the remainder of the system will operate as normal, according to Reuters. US Private Inventory Data (bbls): Crude +3.3mln (exp. +1.2mln), Cushing +0.7mln, Gasoline +1.2mln (exp. -0.5mln), Distillates -2.4mln (exp. -0.4mln) Occidental (OXY) said Q4 output was impacted by a combined 10mln BOEPD by North American winter storm Elliott, according to Reuters. Marathon (MPC) reports an unplanned flaring event at its Carson, LA refinery (363k BPD) German Miro Refinery says it has taken one of its three crude oil distillation facilities out of service on December 25th due to a technical defect; expects the facility to be down for around four weeks. Spot gold is little changed and remains in close proximity to the USD 1850/oz mark, having pulled back slightly from Wednesday’s USUD 1864/oz peak, which was the highest price point since June 13th at USD 1877/oz. Base metals are bid having recovered from APAC pressure as China’s accelerated reopening is marred by COVID concerns. Geopolitical An oil tanker chartered by Chevron (CVX) was reportedly loading Venezuelan crude oil for delivery to the United States. "This is the first such transfer in four years amid sanctions. It is part of a debt settlement program", according to TankerTrackers. Turkish President Erdogan spoke via the phone with Russian President Putin, discussed energy and grains corridor, via Turkish Presidency. Called on Putin to declare a ceasefire against Ukraine. US Event Calendar 07:30: Dec. Challenger Job Cuts YoY, prior 416.5% 08:15: Dec. ADP Employment Change, est. 150,000, prior 127,000 08:30: Dec. Initial Jobless Claims, est. 225,000, prior 225,000 Continuing Claims, est. 1.73m, prior 1.71m 08:30: Nov. Trade Balance, est. -$63b, prior -$78.2b 09:45: Dec. S&P Global US Services PMI, est. 44.4, prior 44.4 Central Bank speakers 07:30: Fed’s Harker Discusses the Economic Outlook 09:20: Fed’s Bostic Makes Welcoming Remarks at Markets Conference 13:20: Fed’s Bullard Discusses the Economy and Monetary Policy DB's Jim Reid concludes the overnight wrap Staying in advertising mode this is the first January for three years where normal service has resumed in terms of research outlooks around various parts of the world. For those fed up with Zoom, I’ll be joining Mark Wall, Matt Luzzetti and George Saravelos in the Nordic Outlook seminars next week (Weds-Thurs 11/12th Jan). That feels like an Oceans 11 type DB research cast list! I won’t say who I think is Clooney or Pitt. We will be presenting in Helsinki, Stockholm, Copenhagen and Oslo. We have around 600 people already signed up which is great but if you haven’t yet done so please see the link here. For those interested in Euro HY, our European leveraged finance research team will be holding an event at DB in London next Wednesday going through their top trade recommendations and market outlook. You can register via the link here Markets continued their positive start to the year yesterday, with investors latching onto fresh signs of easing inflation that would allow central banks to ease up on their rate hikes. Indeed, yesterday saw an unexpected decline in French inflation, a further round of energy price declines, and the prices paid component of the ISM manufacturing print came in at its lowest level since April 2020. All those factors triggered a sizeable rally for equities and bonds (particularly in Europe), even as other data pointed to a tight US labour market that could force the Fed to hike even further. Indeed the Fed minutes late in the session confirmed that the Fed are concerned about financial conditions loosening too much. In terms of those various drivers, the tone for the day was set from the outset by that French CPI release, which showed that inflation unexpectedly fell in December to +6.7% on the EU-harmonised measure (vs. +7.3% expected). So that’s further good news on the heels of the downside surprises from Spain and Germany, and bodes well for the full Euro Area release tomorrow. In response, investors moved to dial down the amount of rate hikes they expect from the ECB this year, with the rate priced in by the December meeting coming down by nearly 15bps on the day. In speaking to DB’s Mark Wall though he says that for the ECB their hiking profile will be about “peak versus persistence”. While its very welcome that European headline inflation is past the peak, Mark suggests the resilience of core inflation in December is more important than these downside surprises. The immediate European growth outlook is better than feared a few months back which might make the labour market tighter than was expected. See here for the latest on Mark’s 3.25% terminal ECB call from December. For now though these signs of downward pressure on headline inflation were given further momentum by the latest moves in energy prices. In particular, European natural gas futures fell nearly -10% to a one-year low of €65.00 per megawatt-hour, which comes amidst unusually warm weather in Europe for this time of year that’s helping to cut energy demand. Furthermore, oil prices saw substantial declines of their own, with Brent crude down by -5.19% yesterday to $77.84/bbl, whilst WTI fell -5.32% to $72.84/bbl. That’s adding to the good news for central banks and consumers on the inflation side, and also means that the cost of government subsidies could prove to be much less than feared. Amidst these positive signs on the inflation front, sovereign bond yields saw further declines on both sides of the Atlantic. In Europe, yields on 10yr bunds (-11.7bps), OATs (-13.8bps) and BTPs (-22.2bps) all fell for a 3rd consecutive session, which continued their very strong start to the year. Meanwhile in the US, the declines were more muted, but yields on 10yr Treasuries still fell -5.6bps on the day to 3.683%. This morning in Asia, they are back up around +3.2bps as we go to print. The main interruption to the buoyancy in markets yesterday (although not enough to throw it off course) came from the US JOLTS report for November and the FOMC minutes. This former is closely followed by the Fed, and yesterday’s release showed that the labour market remained incredibly tight towards the end of last year, thus pointing to further inflationary pressures ahead. For instance, the number of job openings came in at 10.458m (vs. 10.050m expected), and the previous month’s figure was also revised higher. That means that the number of job openings per unemployed individual ticked up to 1.74 in November, which is still way above its pre-pandemic levels of around 1.2. In addition, the quits rate of those voluntarily leaving their job (which is strongly correlated with wage growth) ticked back up to 2.7% in November. So there’s still plenty of ammunition for the hawks even as inflation looks to have passed its peak now. Speaking of hawkish voices, one person we did hear from yesterday was Minneapolis Fed President Kashkari. He’s a voting member on the FOMC this year, and said that “it will be appropriate to continue to raise rates at least at the next few meetings until we are confident inflation has peaked”. He said he had the Fed pausing at 5.4%, but that “any sign of slow progress that keeps inflation elevated for longer will warrant, in my view, taking the policy rate potentially much higher.” Later in the session, we also got the latest FOMC minutes from the December meeting. Almost exactly a year after the 2021 December Fed meeting minutes that marked the hawkish turn in Fed policy, yesterday saw Fed officials reaffirm their conviction to keeping interest rates restrictive as long as it takes to quell inflation. The committee is clearly concerned with financial conditions easing as a response to the Fed slowing interest rate hikes. Officials cited that “an unwarranted easing in financial conditions, especially if driven by a misperception by the public of the committee’s reaction function, would complicate the committee’s effort to restore price stability.” There was no explicit discussion hinting at a further slowdown of rate hikes to 25bps in February, as “most participants emphasized the need to retain flexibility and optionality when moving policy to a more restrictive stance." However that does not mean that a further slowing is off the table. The market pricing on the February meeting was unchanged with 33bps priced in, and 52bps priced in through the March FOMC meeting. Against this backdrop, equities finished solidly higher after a volatile US afternoon. The S&P 500 was up roughly +1.0% just ahead of the FOMC minutes, before whipsawing about 30pts in both directions before the close. In the last 15 minutes of the US trading session the index rallied +0.67% to finish up +0.75% overall on the day. The gains were led by the more cyclical industries, and the NASDAQ also advanced +0.69%. The best performing industry in the S&P 500 was autos (+4.42%), led by Tesla (+5.12%) but Ford (+2.8%) and GM (+2.6%) also saw solid gains as well. The one industry that dragged and caused the NASDAQ to underperform was Software (-1.03%). The solid gains also came in spite of a further deterioration in the ISM manufacturing print, which fell to 48.4 in December (vs. 48.5 expected). That it’s lowest level since May 2020, although to be fair we did get some more positive news in that the prices paid component fell for a 9th consecutive month to 39.4, which marks its longest run of consecutive declines since 1974-5. Back in Europe, the equity advances were larger yesterday as markets closed before the FOMC minutes, with the STOXX 600 (+1.38%) bringing its YTD gains to +3.60% after just three sessions. Asian equity markets are trading higher this morning following a higher close on Wall Street overnight. Also, risk appetite across the region is seeing a further boost on the China reopening trade as well as the PBOC’s pledges for more targeted economic measures. As I type, Chinese stocks are topping gains with the CSI (+1.71%) and the Shanghai Composite (+0.95%) both trading in positive territory while the Hang Seng (+1.01%) is further extending its previous session gains amid a broad rally in Chinese tech stocks. Elsewhere, the Nikkei (+0.43%) and the KOSPI (+0.34%) are also higher. Outside of Asia, US stock futures are pointing to a slightly negative start with those on the S&P 500 (-0.09%) and the NASDAQ 100 (-0.17%) edging lower. Coming back to China, the Caixin services PMI for December came in at 48.0 (v/s 46.8 expected), rising from a 6-month low of 46.7 in November. Back in the US, there’s no sign of a resolution yet in terms of who’ll be the next Speaker of the House of Representatives. In terms of the latest, House Republican leader Kevin McCarthy failed to win a majority of House members in an additional three ballots yesterday. Republicans hold a very slim majority of seats in the lower chamber and McCarthy can only afford to lose 4 GOP votes, but he has consistently lost around 20 votes on multiple ballots now. While this is not yet a market moving story, it does portend the kind of fight that Congress can see around the upcoming debt ceiling negotiations. When it comes to yesterday’s other data, UK mortgage approvals fell by more than expected to 46.1k in November (vs. 53.0k expected), which is their lowest level in over a decade if you exclude the pandemic months of April-June 2020. Separately, the final Euro Area composite PMI for December was revised up half a point from the flash reading to 49.3 (vs. flash 48.8). To the day ahead now, and data releases include Italian CPI for December and Euro Area PPI for November, whilst in the US there’s the ADP’s report of private payrolls for December, the weekly initial jobless claims, the November trade balance, and the final services and composite PMIs for December from both the US and the UK. Otherwise, central bank speakers include the Fed’s Harker, Bostic and Bullard. Tyler Durden Thu, 01/05/2023 - 08:09.....»»

Stock Rally Fizzles Following Return Of Hawkish Fed Comments The rally in US index futures paused after Wall Street stocks posted their best week in several months, following comments from a Federal Reserve official that the fight against inflation has further to run. Contracts on the S&P 500 were down 0.3% at 7:30 a.m. ET... ... while Nasdaq 100 futures fell 0.7%, after Fed Governor Christopher Waller said on Sunday that policymakers had “a ways to go” before ending interest-rate hikes. His comments also lifted 10-year Treasury yields by 9 basis points. Waller: The FOMC statement in November was designed to signal a potential step down to 50 basis points. "We knew the markets were going to jump for joy." So the Fed used Powell's press conference to "drive the point home" that it's the ultimate level for rates that matters. — Nick Timiraos (@NickTimiraos) November 13, 2022 In premarket trading, beside the surge of Chinese stocks listed in the US following China's announcement of a "rescue package", Advanced Micro Devices shares also rose after brokers UBS and Baird upgraded the chipmaker to buy and outperform, respectively. Biogen (BIIB US) shares rise as much as 5% in premarket trading, after Roche’s Alzheimer’s drug, a potential competitor to Biogen’s, failed a pair of large studies. On Monday, the dollar traded near its best levels of the day, pressuring all of its Group-of-10 counterparts. Treasury yields rose across the curve, led by 10-year rates that climbed for the first time in a week.  Oil fell with gold, while Bitcoin gains exceeded 2% after earlier sliding more than 3%; the drop in crypto was halted after Binance CEO Changpeng Zhao said the world’s largest digital-asset exchange plans to set up an industry recovery fund. Last week, a big miss across the board in CPI data fueled bets that the US central bank would temper its hawkish narrative. The Dow Jones Industrial Average ended the week 2.1% short of recording a 20% gain off its Sept. 30 low -- the technical definition of a bull market. The S&P 500 chalked up its biggest weekly rise since June, while the tech-heavy Nasdaq 100 climbed 1.9% for its best two-day gain since 2008. “The burst of euphoria which erupted over US markets and spread more widely at the end of last week is ebbing away after fresh warnings that the fight against inflation is still a hard slog yet to be won,” said Susannah Streeter, senior investment and markets analyst Hargreaves Lansdown. That comes after a tumultuous weekend for rival FTX, which was once seen as among the best-run exchanges but has filed for Chapter 11 bankruptcy. Worrying details that have emerged include the fact that just before filing for bankruptcy, FTX Trading International held just $900 million in liquid assets against $9 billion of liabilities, according to sources familiar with the matter. Chinese stocks listed in the US also were also higher, and were set to extend their rally to a third day, after Beijing issued a 16-point plan to boost the real-estate market on Friday, the strongest sign yet that President Xi Jinping is turning his attention toward shoring up the world’s second-largest economy. The move pushed Chinese stocks into a bull market, even as the Hang Seng China gauge holds on to a loss of more than 25% this year. After a dismal earnings season, which saw mega-cap tech stocks underperform while earnings growth waned, some are skeptical about the earnings outlook. “Investor euphoria over the prospect of a ‘Fed pivot’ contrasts with the deteriorating profit margins and darkening business outlook expressed by many S&P 500 firms,” Goldman Sachs Group Inc. strategists led by David Kostin said in a note. In Europe, stocks are steady, holding on to early session gains as personal care, telecoms and media outperform while travel and real estate lag. The Stoxx 600 rose 0.1%; Roche dropped after the news on its much-awaited experimental Alzheimer’s drug. Here are the most notable market movers: Informa shares jump as much as 8.8%, the most in two years, after the company raised full-year revenue and operating-profit guidance, despite assuming zero revenue from live and on-demand events in China in November and December German pharmaceuticals giant Merck KGaA rises as much as 6.4% after Bank of America upgraded to buy from neutral, flagging Phase III data for multiple sclerosis drug Evobrutinib which it says could be a “game-changer” for the company’s “perceived lackluster pharma business.” Pepco Group soars as much as 19% in Warsaw after the discount retailer was added to MSCI’s global standard indexes in a semi-annual review published after markets closed on Nov. 10. Teleperformance rises as much as 5.6%, clawing back more ground following the slump it suffered last week sparked by a report involving its Content Moderation unit in Colombia. Rheinmetall climbs as much as 5.2%, touching the highest since Aug. 18, following the German defense company’s acquisition of Spanish ammunition maker Expal in a deal that Warburg says looks like a “good strategic fit.” Close Brothers falls as much as 6.5% as the UK financial services firm is cut to sell from hold at Investec, which says the shares now look “a little too expensive.” Tremor falls as much as 27%, the most since Aug. 16, after a “challenging 3Q market” led to reported revenue missing analyst estimates. Ferrexpo slumps as much as 9.7%, the most since Oct. 24, after Credit Suisse downgrades the stock to neutral from outperform, citing a deteriorating operating environment in Ukraine. Roche falls as much as 5.7%, the most since May, after the Swiss pharmaceutical company said its long-awaited Alzheimer’s treatment failed its phase 3 trial, with its research partner MorphoSys plunging as much as 33%, the most in two decades. In Asia, Chinese stocks extended recent gains on hints of shifting Covid policy along with more support heading toward the property sector. US chipmakers could be in focus, with President Joe Biden and Chinese leader Xi Jinping meeting in Bali, Indonesia, on the sidelines of the Group of 20 summit. Asian stocks were steady as weakness in markets such as Japan countered gains in China, where authorities issued a sweeping rescue package to bail out the property sector. The MSCI Asia Pacific Index pared an earlier gain of as much as 0.8% to trade flat. While gauges in China pared a bulk of their early gains, the Hang Seng China Enterprises Index closed up nearly 2%, taking its surge this month to 21%. Vietnam’s benchmark was the worst performer in the region, while Japanese shares also slipped. SoftBank Group’s plunge weighed the most on the regional benchmark. China’s property stocks surged as financial regulators issued a 16-point plan to boost the real estate market. Along with Friday’s easing of some Covid controls, the measures gave traders confidence that China is finally taking concrete steps to tackle the two biggest sore points for its economy and markets -- Covid Zero and the property crisis. READ: Chinese Stocks Storm Into Bull Market on Covid, Property Shifts The MSCI Asia index is up about 11% so far in November, heading for its first monthly gain since July. It is still down more than 21% this year. Traders will be closely watching any further progress on China’s reopening and whether the downshift in US inflation paves the way for a moderation in future Fed interest rate hikes. “We see next year as a much better one for Asia/EM equities, following the longest bear market in history,” Morgan Stanley strategists including Jonathan Garner wrote in a note. The softer-than-expected US inflation will allow the Fed to finish hiking in January, while growth in the region will likely pick up from the second quarter of 2023 helped by China’s reopening, they added Japanese equities ended lower as investors worried over the strengthening yen and possible cryptocurrency contagion risk amid FTX’s deepening woes.  The two factors overpowered the initial optimism over China’s moves to support eventual reopening and beleaguered property sector. The Topix Index fell 1.1% to 1,956.90 as of market close Tokyo time, while the Nikkei declined by a similar magnitude to 27,963.47.  SoftBank Group Corp. contributed the most to the Topix Index decline as it plunged 13%, the most since March 2020 after disappointing second quarter results. Out of 2,165 Topix members, 575 rose and 1,524 fell, while 66 were unchanged. “The Nikkei Stock Average last week rose sharply and recovered to the 28,000 yen level, and stocks are being sold off for profit-taking,” said Hitoshi Asaoka, strategist at Asset Management One. The strengthening of the yen is also playing into today’s move, he added.  Key stocks gauges in India fell after benchmark Sensex surged to a record high on Friday, weighed by fast-moving consumer-goods companies while the country’s earnings season nears completion. The S&P BSE Sensex fell 0.3% to 61,624.15 in Mumbai, while the NSE Nifty 50 Index dropped 0.1%. The 50-stock Nifty index is still less than 1% short of its record level seen in October last year.  Volatility in local stocks surged 3%, the most since Oct. 11, while the benchmark Sensex is trading at 14-day RSI of 66, close to levels that traders consider as overbought. Of 49 Nifty companies, which have so far reported earnings, 32 have reported profit in-line or above consensus estimates while 14 have missed. Oil & Natural Gas Corp will be releasing its number later today. ICICI Bank contributed the most to the Sensex’s decline, decreasing 1.3%. FMCG firms ITC and Hindustan Unilever were also among prominent decliners In FX, the Bloomberg dollar resumed its ascent after crashing last week, rising 0.5% as the greenback gained versus all of its Group-of-10 peers. CAD and EUR are the strongest performers in G-10 FX, JPY underperforms, breaking above 140.40/USD. The euro fell to trade around $1.03 after earlier rising to $1.0367, the highest level since Aug. 10. Yields on Bunds and Italian bonds fell. ECB’s Guindos, Centeno and Nagel speak later. The new Italian government will likely miss its fiscal targets amid headwinds to growth, Moody’s said in a statement last week; Fitch reviews Italy, Moody’s reviews Portugal and S&P reviews Ireland on Friday The pound pulled back from a 2 1/2-month high versus the greenback. The gilt curve bull-flattened ahead of the UK government’s Autumn Statement due later in the week The Office for Budget Responsibility expects government borrowing to rise to nearly £100b in 2026-27, Financial Times reported on Sunday, citing an “ally” of UK Chancellor Jeremy Hunt Australian and New Zealand sovereign bonds fall across the curve on the hawkish Fed comments. The Aussie and kiwi both weakened on the back of broad-based US dollar strength The yen was the worst G-10 performer and fell below 140 per dollar. Bank of Japan Governor Haruhiko Kuroda said it’s “very good” that rapid weakening of the yen has halted for now after one-sided moves In rates, the Treasury yield curve steepened after the hawkish Fed comments and Friday’s moves in Bunds. The 10-year yield rose 6 bps after earlier adding 9bps to touch 3.90%, erasing a portion of Thursday’s historic gains sparked by softer-than-expected October CPI data. Treasury futures had erased a portion of the gains on Friday when the cash bond market was closed for US Veterans Day. Yields are higher by 5bp-8bp Monday, little changed from where they began the Asia session, after Fed Governor Waller, speaking during US evening hours on Nov. 13, said the central bank still has “a ways to go” before it stops raising interest rates, and that the market got “way out in front” after the inflation data. The 5-year TSY, higher by 7bp at 4%, is back in line with its 50-DMA after falling below it Thursday for the first time since Aug. 19. Interest-rate strategists at Goldman Sachs were among those saying the market reaction to October CPI was excessive; the yield declines are “likely overdone,” as risks remain skewed toward an extended Fed tightening cycle, they wrote. Gilts lead latest push, 10-year yields outperform bunds by about a basis point; USTs 10-year yields lag, rising 7bps as they catch up after being closed on Friday. In commodities, WTI crude futures fall below $88 as initial upside on the USD’s pullback dissipated with the DXY now back above 107.00. Benchmarks are near session lows on the above action and also amid a further strengthening of COVID measures within Beijing after the city reports the highest number of cases in a year. Janet Yellen said India can buy Russian oil at any price if it does not use Western insurance or maritime services, according to a Reuters interview, and said the existence of a G7 oil price cap will give India and other developing countries leverage in bargaining with Russia on oil. Yellen said they are happy for India, China, and Africa to get a "bargain" on Russian oil, inside or outside the price cap. An Indian government official said they do not believe India will follow the price cap mechanism and have communicated that to the countries. OPEC+ "may discuss adjustments to members' oil production baselines in early December as many of them struggle to meet their agreed quotas", according to Energy Intel. "Delegates said it is too early to predict what might happen in Vienna in terms of any potential changes to the alliance's production policy or baseline adjustments. " There is nothing on today's economic calendar; we get earnings from Tyson Foods; Fed's Williams and Brainard speak, ECB's Panetta, Centeno and Guindos speak Market snapshot S&P 500 futures down 0.5% to 3,981.25 STOXX Europe 600 up 0.2% to 433.04 MXAP down 0.1% to 151.66 MXAPJ up 0.7% to 490.04 Nikkei down 1.1% to 27,963.47 Topix down 1.1% to 1,956.90 Hang Seng Index up 1.7% to 17,619.71 Shanghai Composite down 0.1% to 3,083.40 Sensex down 0.1% to 61,714.09 Australia S&P/ASX 200 down 0.2% to 7,146.35 Kospi down 0.3% to 2,474.65 German 10Y yield down 0.9% to 2.14% Euro down 0.2% to $1.0323 Brent Futures down 0.6% to $95.38/bbl Gold spot down 0.7% to $1,759.48 U.S. Dollar Index up 0.51% to 106.84 Top Overnight News from Bloomberg Further interest rate hikes are expected to ensure inflation’s return to our medium-term target of 2%, ECB’s governing council member Constantinos Herodotou says in an interview with Greece’s Naftemporiki website Germany’s biggest labor union is locked in talks with employers over a pay deal for about 3.9 million workers, in one of the most significant domestic showdowns of Europe’s energy crisis so far The ECB will probably receive several hundreds of billions of euros in early repayments of long-term loans this year after officials toughened the terms of the program to aid their fight against inflation China issued sweeping directives to rescue its property sector, adding to a major recalibration of its pandemic response in the strongest signs yet that President Xi Jinping is turning his attention toward shoring up the world’s second-largest economy The EU is “ready to go” with an effort to impose a price cap on Russian oil, Ursula von der Leyen, the president of its executive arm, said Mondayd A more detailed look at global markets courtesy of Newqsuawk APAC stocks eventually traded mostly lower despite the positive lead from Wall Street on Friday.     ASX 200 was contained on either side of the flat mark with losses in Industrials, Telecoms and Healthcare offsetting the gains from the Metals, Mining, and Materials sectors. Nikkei 225 saw its losses lead by Softbank shares tumbling over 12% following its earnings on Friday, which saw the Co’s Vision Fund post a quarterly net loss. KOSPI eventually faded earlier gains following the trilateral meeting between the US, Japan, and South Korea over the weekend, in which White House National Security Adviser Sullivan said the US, Japan, and South Korea have a coordinated response if North Korea carries out its 7th nuclear test. Hang Seng and Shanghai Comp traded in the green for most of the session, with Hong Kong outperforming following source reports that the PBoC and China's Banking and Insurance Regulator told financial institutions to extend support for property firms, with the Hang Seng Property index surging over 15% in early trade, but traders remain cognizant of the Biden-Xi meeting poised to take place on Monday at 09:30GMT/04:30EST. Top Asian News eijing authorities stated on Monday to further strengthen COVID prevention and control measures and reminded residents not to go out unless necessary. The measures are seen as a response to the mounting pressure of soaring cases in the city, according to Global Times. China reported 1,794 new confirmed COVID cases in the Mainland on Nov 13th (vs 1,711 on Nov 12). Beijing reported the highest number of local COVID cases in over a year, reporting 404 cases on Sunday, according to Bloomberg. The PBoC and China's Banking and Insurance Regulator told financial institutions to extend support for property firms, according to Reuters sources. Bloomberg reported that China's real estate rescue package consists of a 16-point playbook for finance officials across the country, according to sources. China's Securities Journal noted that China is expected to inject liquidity via a new MFL (unverified). PBoC injected CNY 5bln via 7-day reverse repos with the rate at 2.00% for a CNY 3bln net drain. PBoC issues a notice to further support the extension of loan repayments for small firms. BoJ Governor Kuroda said the Japanese economy is picking up; now is the stage to continue monetary easing to support the economy, according to Reuters. Kuroda said they are closely watching the impact of raw material inflation and currency moves on firms and households. Kuroda said the BoJ and the government are closely monitoring the impact of FX, and market moves on the economy and prices; and said abnormally one-sided sharp JPY weakening appears to have paused, partly thanks to the government's FX intervention. Earthquake shakes buildings in Tokyo, Japan, via Reuters; prelim. magnitude of 6.1 via NIED. Magnitude 5.6 earthquake near the S. Coast of Honshu, Japan, via EMSC European bourses are posting mild gains, Euro Stoxx 50 +0.2%, with participants awaiting the conclusion of the Biden-Xi meeting. Sectors were predominantly in the green, though performance has turned more mixed as the session progresses. Stateside, futures are pressured as the recent rally seemingly runs out of steam and also following Fed's Waller pushing back on the post-CPI reaction, ES -0.4%. Top European News UK Chancellor Hunt said he will set out a long-term plan for energy, and said we do have to increase taxes and cut spending. He said he wants to make sure a recession is as short and shallow as possible if the UK falls into one. He added that he will be talking about constraints on the labour force in the budget plan, via Reuters. UK Chancellor Hunt said the OBR forecasts will likely present a similar picture to recent BoE forecasts of a recession. Hunt plans to commit around GBP 20bln to extend the energy price guarantee scheme by six months from April and is eyeing a multi-billion-pound package to shield pensioners and benefit claimants from the increases in power bills, according to The Times. UK Treasury discussing raising energy price cap from April; department considers making policy announcement in the autumn statement rather than waiting until spring, according to Guardian sources. It is understood that continuing some universal level of support, possibly in the form of a higher energy cap, is also on the table. Germany's IG Metall union has called for further strike action on Monday. Strikes will take place at targeted locations in the states of Hesse, Thuringia and Rhineland-Palatinate, according to the union cited by Reuters. ECB's Panetta says monetary policy needs to tighten so that inflation does not become entrenched, the consequences of possible errors may not be perceptible today, but they would become evident over time. It may then be too late to fully reverse them. FX DXY spent much of the morning attempting to reclaim the 107.00 mark, with peers deriving modest upside as such though this was mixed with EUR and GBP a touch softer, for instance. However, the index has since surpassed the 107.00 handle and lifted to a 107.19 peak to the detriment of peers across the board, though EUR and GBP haven't slipped much further and reside around 1.03 and 1.1750 respectively. Traditional havens CHF and JPY are the current laggards, with the JPY particularly impaired and USD/JPY above 140.50 as such and was perhaps spurred by Governor Kuroda reminding that they are to continue with monetary easing. Yuan drew much of the focus overnight after the PBoC set its strongest fix since late-September and amid two-way newsflow for the region regarding property support and COVID controls; CNY concluded the domestic session at 7.0378. PBoC set USD/CNY mid-point at 7.0899 vs exp. 7.0896 (prev. 7.1907); strongest fix since Sep 27th RBI Governor Das said India has a major challenge with regard to inflation. He added that the RBI's FX interventions are impacted by day-to-day developments, and the objective is to prevent excessive volatility. Das added that the RBI's reserves are very comfortable, via Reuters. Fixed Income Core benchmarks were relatively rangebound in the European morning, with the benchmarks struggling to derive any lasting traction from brief forays some 30/40 ticks either side of the unchanged mark. However, a concerted bid has been seen most recently in EGBs and Gilts; perhaps spurred by ECB's Panetta who placed emphasis on the risk of policy errors. Stateside, USTs are a touch softer and are playing catchup to the Veteran’s Day holiday on Friday and also conscious of remarks from Fed’s Waller who has pushed-back on the post-CPI pricing. As such, USTs are lower by a handful of ticks towards the mid-point of 111.27+ to 112.06+ parameters with yields elevated though the 10yr is sub-4.00% and significantly shy of last week’s 4.24% peak. In commodities Crude benchmarks have been slipping throughout the European morning as initial upside on the USD’s pullback dissipated with the DXY now back above 107.00. Benchmarks are near session lows on the above action and also amid a further strengthening of COVID measures within Beijing after the city reports the highest number of cases in a year. US Treasury Secretary Yellen said India can buy Russian oil at any price if it does not use Western insurance or maritime services, according to a Reuters interview, and said the existence of a G7 oil price cap will give India and other developing countries leverage in bargaining with Russia on oil. Yellen said they are happy for India, China, and Africa to get a "bargain" on Russian oil, inside or outside the price cap. An Indian government official said they do not believe India will follow the price cap mechanism and have communicated that to the countries. OPEC+ "may discuss adjustments to members' oil production baselines in early December as many of them struggle to meet their agreed quotas", according to Energy Intel. "Delegates said it is too early to predict what might happen in Vienna in terms of any potential changes to the alliance's production policy or baseline adjustments. " Iraq's Prime Minister said Iraq is keen to commit to OPEC policies and decisions but the OPEC production quota should be reconsidered by OPEC members. Iraqi PM added that Iraq needs to raise its oil production to generate more revenues and is keen to maintain stable oil prices of "not above USD 100/bbl". Iraq said it will have a discussion with OPEC members to increase its production quota, via Reuters. ExxonMobil (XOM) announced the first LNG cargo from the Coral South FLNG project in Mozambique, the floating production vessel is expected to produce up to 3.4mln metric tons of LNG per annum, via Reuters. JPMorgan expects Brent to re-test USD 100/bbl in Q4-2022 and average USD 98/bbl in 2023, via Reuters. Earthquake magnitude 6.4 hit around 20km North-west of Lebu, Chile, according to EMSC. Both precious and base metals have succumbed to the USD’s relative resurgence with additional headwinds from the mentioned COVID controls. Specifically, spot gold has slipped back towards the USD 1750/oz mark. Crypto FTX was subject to a hack with "mysterious" outflows totalling over USD 600mln, according to CoinDesk. FTX said it has been hacked and instructed users not to install new updates and to delete all FTX apps. FTX CEO John Ray said unauthorised access to certain assets has occurred. FTX is in the process of removing trading and withdrawal function to a new cold wallet custodian, via Reuters. Hedge fund Galois Capital said that close to half of its capital is stuck on the FTX Exchange, according to FT. Hong Kong's AAX Exchange is suspending withdrawals for up to 10 days, as the failure of FTX reverberates through crypto markets, according to CoinDesk. Crypto lender BlockFi has paused withdrawals and limited platform activity amid FTX collapse, according to Bloomberg Crypto Exchange Huobi says it will continue to take all appropriate steps to withdraw crypto assets from FTX as soon as possible; the incident does not currently affect normal business operations of the group, according to Reuters. Visa (V) has terminated its global debit card agreement with FTX, according to a Visa spokesperson via Reuters. Binance CEO, on crypto exchanges, said there are still quite a lot of players that cut corners, via Reuters. Subsequently, says they are forming an industry recovery fund, to assist projects which are otherwise strong but are in a liquidity crisis. Geopolitics Ukrainian Foreign Minister said Russian counterpart Lavrov has not asked for a meeting, according to Reuters. Ukrainian President Zelensky said Kyiv's forces have taken control of over 60 settlements in the Kherson region. He added that Ukrainian forces are holding firm as brutal battles take place every day in the Donetsk region, via Reuters. US President Biden and Russian Foreign Minister Lavrov arrived in Indonesia for the G20 Summit, according to Reuters. US Treasury Secretary Yellen said some Russian sanctions could be extended beyond the end of the war in Ukraine, according to WSJ. US Treasury Secretary Yellen said they will determine the price level for the Russian oil price cap in the coming weeks, via Reuters. US-China latest US President Biden says US and China can manage differences and stop competition from turning into conflict, expects US and China to play a role in address climate and food shortages. Chinese President Xi says has stayed in touch with US President Biden via video but it is no replacement for in-person meetings, both nations need to chart their course and find the right direction for the relationship and elevate it. Prepared to have a candid and in-depth exchange of views on the US-China relationship. The White House said further engagement after the Biden-Xi meeting could include face-to-face meetings, according to Reuters. Stated prior to the meeting US President Biden will make it clear in the meeting with Chinese President Xi that the US does not seek competition or conflict, and the meeting could last "a couple of hours", according to Reuters citing the White House National Security Adviser Sullivan. Stated prior to the meeting US President Biden underscored that freedom of navigation and overflight must be respected in the East China Sea and the South China Sea, via Reuters. US President Biden will raise the issue of North Korea with Chinese President Xi at the G20 Summit, according to the White House. Biden will tell Xi that if North Korea continues, there will be more enhanced US military presence in the region. Blackrock (BLK) has shelved its China bond ETF amid growing tensions between the US and China alongside a reversal in the China-US yield differential, according to FT. US Treasury Secretary Yellen will ask for clarity on China's plans to ease COVID restrictions alongside issues in the Chinese property market, in a meeting with the PBoC Governor, according to Treasury officials cited by Reuters. US Treasury Secretary Yellen said the US will likely discuss export controls with Chinese officials, according to Bloomberg. US Event Calendar Nothing scheduled Central Bank Speakers 11:30: Fed’s Brainard Discusses the Economic Outlook 18:30: Fed’s Williams Moderates Panel at the Economic Club of New York DB's Jim Reid concludes the overnight wrap It’s feels to me we’re in a race against time for markets and the global economy over the next 12 months. Can inflation slow quickly enough for central banks to be able to slow down their hiking cycles enough to avoid systemic accidents? Last week was a great mini case study of the race to come as the bankruptcy of crypto exchange FTX battled it out with a big downward surprise in US inflation. Ultimately the latter won out handsomely, but you can’t help thinking that the rate hiking cycle has claimed another victim with regards to FTX even if other things might also be at play with this company. In a world of free liquidity seen over the prior decade, lots of money has flowed into things that on the surface make little sense but have been transformed into multi-billion or even multi-trillion industries. Most people I speak to don’t think the current crypto implosion is systemic and this could very well be correct. However, what’s next to unwind/unravel in a hiking cycle that’s not over yet even with slower US inflation last week? The way I like to think about it is that it’s much easier for things not to be systemic when US payrolls are still averaging +289k as they have been over the last 3 months. They averaged +444k in H1. Fast forward 6-9 months when they’re likely to be negative and things that break in the financial system could easily turn more systemic. In the near-term the technicals and fundamentals continue to be more supportive. Impressive levels of European gas storage due to the weather, very short positioning in US equities, mid-terms being out the way, positive seasonals, less event risk in the Russian/Ukraine war, and now softer US inflation than expected are all helping. However, it’s completely feasible to see a year-end rally and still think risk markets will ultimately be a lot lower in 12 months' time. Indeed, this morning my new Credit Strategy team have just updated a tactical bullish piece (link here) we put out at the end of October (link to that piece here) suggesting that spreads have room to rally through year-end and early Q1'23, especially with investors bearishly positioned into a period of bullish seasonals. We prefer cash credit over synthetic with banks the favoured sector. Our bearish YE 2023 targets haven't changed since early April but we'll be updating this in our 2023 outlook next week. The most interesting thing about Friday was that European yields, which rallied hard with the US on Thursday, reversed their entire gains on Friday with 10yr Bunds -15bps and then +15bps. The China 20-point Covid restriction easing plan released earlier that day seemed to help. As the US bond market was closed on Friday it’s only responded this morning and 2 and 10yr yields are both around 8bps higher, trading at 4.41% and 3.89%, respectively, as we go to press. Helping that move, this morning in Sydney, Fed Governor Christopher Waller stated that policy makers still had “a ways to go” before stopping interest-rate hikes despite inflation softening in October. He added that the Fed would like to see a similar run of soft CPI readings to take a foot off the brake. He also seemed worried that the market reaction last week was similar to that seen in July where financial conditions loosened more than the Fed wanted. We'll see how the other Fed speakers react to last week's CPI later this week. Elsewhere in the overnight session, not content with a 20-point Covid plan, China also released a 16-point plan to support the fragile domestic property sector. This came public over the weekend. So it seems that the passing of the party congress has led to a loosening of both restrictions and policies. With the new composition of the ruling party it wasn't clear that this was going to be the case, so this is welcome news for anything China growth related, though the news need to be factored in against the increasing number of Covid cases recorded across the country. Asian equity markets are mixed this morning, but with China risk leading the way. The Hang Seng (+2.92%) is leading gains with mainland Chinese equities also rallying with the Shanghai Composite (+0.75%) and the CSI (+1.16%) both edging higher. Elsewhere, the Nikkei (-0.82%) is trading in negative territory as heavyweight SoftBank plunged more than -10% after its Vision Fund posted further losses while failing to announce a widely expected share buyback. Meanwhile, the KOSPI (-0.02%) is struggling to find direction. Looking forward, US equity futures are pointing to a negative start today, with contracts tied to the S&P 500 (-0.29%) and the NASDAQ 100 (-0.49%) edging lower. Crypto has remained under pressure as Bitcoin fell as low as $15,846, recording its lowest levels in around two years amid FTX’s deepening woes. It was over $20,000 early last week. Looking forward and it’s not a blockbuster week for data but there are still some important potential highlights. The US consumer will be in focus, with retail sales (Wednesday) and major retailers' earnings including Walmart and Home Depot (tomorrow) due amongst others. Other major US data releases will include housing market indicators and the PPI (tomorrow). In geopolitics, the G20 summit will run from Tuesday to Wednesday and the COP27 will end on Friday. The G20 will be watched closely for signs of how aligned the members are on the continued war in Ukraine and also for any headlines around Presidents Biden and President Xi's side meeting. China macro and micro will also be in focus with industrial production and retail sales data (both tomorrow), as well as earnings from major tech firms like Tencent and Alibaba. Japan's GDP and inflation will also be due. In Europe, the UK will release inflation (Wednesday) and employment (tomorrow) data with the government's autumn statement is taking place on Thursday. The latter is less important now that policy credibility has been restored but will still give us a lot of info about the direction for travel in UK policy. In more detail on some of the main events now. The US PPI tomorrow deserves some decent attention as it will give some insight into the upcoming core PCE which clearly remains the Fed’s preferred inflation measure. October’s headline (+0.4% forecast vs. +0.4% previously) and core PPI (+0.3% vs. +0.3%) are expected to show similar gains to the prior month but the real focus will be on health care services series, which is a direct input into the core PCE deflator. This series has been very volatile of late but has shown signs of easing. So all eyes on this. Heath care was a huge downside surprise in last week’s CPI. Speaking of inflation, housing data will also be in focus after this week's CPI print showed some moderation in rental price pressures and also with mortgage rates having recently been at 22-year highs. Among indicators released will be housing starts and permits on Thursday and existing home sales on Friday. In terms of corporate earnings, there won't be many major American companies reporting aside from the aforementioned retailers with over 90% of the S&P 500 members having already released results. In tech, we will get NVIDIA and Cisco on Wednesday and Applied Materials and Palo Alto Networks on Thursday. Over in Europe, notable companies reporting include Vodafone and Infineon on Tuesday and Siemens on Thursday. The day-by-day calendar is at the end as usual and as you’ll see it also includes numerous ECB and Fed speakers throughout the week, including President Lagarde (Wednesday and Friday). Recapping last week now and it was yet another wild week that saw a US election, major battleground advances for Ukrainian forces, a major crypto blowup, and a below expectations CPI report that gave the market signs of a potential Fed pivot that it has been desperately hoping for. All in four days on a holiday shortened week for fixed income markets in the US. Starting with bonds, Treasury yields rallied big this week following the below expectations October CPI report. That saw 10yr yields down -34.6bps and 2yr yields -32.6bps lower, the largest weekly decline in both tenors since the initial Covid onset in March 2020, as pricing for the December meeting finished the week just shy of 50bps at 49.8bps, while terminal pricing ended the week at 4.89% for next spring, its first close below 4.9% in two weeks. 10yr yields also fell in Europe, but lagged the US move, where bunds fell -13.5bps (+15.1bps Friday) and gilts were -17.9bps lower (+6.6bps Friday). European yields sold off Friday when Treasury trading was closed, following reports that China was easing more of their Covid restrictions and with University of Michigan inflation expectations over the next 5 years hitting their highest level in 5 months at 3%. The S&P 500 gained +5.90% (+0.92% Friday) while the Nasdaq +8.1% (1.88% Friday) outperformed with the index being comfortably lower for the week before Thursday’s CPI. European shares also climbed, with the STOXX +3.66% higher (+0.09% Friday) and the Dax up +5.68% (+0.56% Friday). Finally, reports that FTX, the second-largest crypto exchange was going under, drove a route in crypto assets, that saw Bitcoin fall -20.72% over the week and -5.95% on Friday. Tyler Durden Mon, 11/14/2022 - 08:06.....»»

Stock Rally Fizzles As Red Wave Downgraded To Red Ripple Futures and yields are flat, both recovering from a dip earlier in the session, as investors kept an eye on midterm election results ahead of key inflation data later in the week. To the disappointment of bulls, a Red Wave failed to emerge in Congress as voters delivered a mixed verdict in elections shaped by inflation and split around social issues, with Republicans headed toward control of the US House, but by smaller margins than forecast, while the Senate majority remains a toss-up. In the House, official results have Republicans on 196 and Democrats on 168. Projections from the New York Times (seats either already won by a party or projected to win) put the Republicans on 219 and Democrats on 207 with 9 seats viewed as "tossups". In the Senate, official results have Republicans on 47 and Democrats on 48. Democrats won in PA (where a brain-damaged Fetterman managed to flip a critical seat which even liberal pollsters said was set to go to republican Challenger Dr. Oz ) and NH; GOP is leading in NV and WI; Democrats leading in AZ and GA. Three key battleground states which are yet to be called are Arizona, Nevada and Georgia. The Georgia seat could end up having to be decided via an election run-off which would be held on December 6th. As such, the outcome of the election might not be known for weeks. “It is clear that any Republican majority is likely to be extremely narrow. From a market perspective, that would certainly be attractive,” said DWS Global Chief Investment Officer Bjoern Jesch. “On the one hand, this would remove corporate tax increases or other spending packages that would have threatened both houses if the Democrats marched through. On the other hand, the Republicans would probably be too divided to set their own strong accents in legislation.” Back to markets, where Nasdaq 100 futures were down -0.5%, while S&P 500 futs slipped 0.4% at 7:30 am ET after fluctuating between gains and losses one day after stocks capped a three-day rally. In premarket trading, News Corp. and Disney both tumbled at least 8% after posting disappointing results. A selloff in cryptocurrencies deepened, sending Bitcoin toward the biggest four-day slump since June. Oil slid on the now daily sluggish demand outlook from China. The dollar rose while yields were flat.  Affirm Holdings shares tumbled 16% as analysts said the buy-now-pay-later firm’s guidance cut and ongoing credit deterioration overshadowed a solid quarter. Meta Platforms Inc. gained after confirming job cuts of about 13% and let more than 11,000 of employees go. Here are some of the biggest US movers today: Amyris shares slump 22% in US premarket trading after the chemical products distributor reported third-quarter revenue that missed the average analyst estimate. Piper Sandler said more clarity was given on the outlook, but thought there was still some uncertainty. Axon Enterprise reported strong quarterly results and the outlook for the taser and body cameras maker remains strong, analysts say. Axon shares rose 7.7% in extended trading following the results. CarGurus shares drop 22% in premarket trading after the car retailer reported weak 3Q results and gave disappointing guidance, with analysts unsure how long it will take the firm to fix the challenges it faces. Keep an eye on News Corp (NWSA US) after the company reported first-quarter revenue that came ahead of Guggenheim’s estimates, though the broker notes management’s comments on headwinds stemming from factors such as exchange rates persisting into the next quarter. Kroger stock gains 1.3% in premarket trading as Evercore ISI upgraded it to outperform, saying that risk/reward appears favorable with food inflation likely to stay higher for longer. Shares in cryptocurrency- exposed companies dropped in US premarket trading as digital currencies extended their losses, with Binance’s potential takeover of troubled rival exchange FTX stoking worries over the fragility of the industry.Riot Blockchain (RIOT US) -3.8%, Marathon Digital (MARA US) -5%, MicroStrategy (MSTR US) -7%, Coinbase (COIN US) -5% Tesla shares rise as much as 1.9% in US premarket trading following three days of losses and lowest level since June 2021; CEO Elon Musk sold $3.95 billion of shares in the electric-vehicle maker. Upstart slumps about 26% in US premarket trading and is set to hit the lowest level since its IPO in 2020. The AI lending platform’s 3Q results are well below expectations as it deals with significant pressure on its core business from a weakening macro backdrop, analysts say. Investors had hoped for a Republican "Red Wave" in Congress, with the best outcome seen as GOP control of both the House of Representatives and Senate. Optimism for shares has been helped by a history of robust performance following midterm results. Stocks have tended to flourish during times when government is constrained and polls suggest Republicans could make gains, placing a check on Democratic policies. But voters - and the USPS - delivered a mixed verdict, with Republicans heading for control of the House by smaller margins than forecast and the race for Senate still wide open. The final outcome may not be known for days or even weeks if the results are as close as polls have suggested and if losers challenge results. “The Republican aim of controlling both houses hangs by a thread,” Chris Beauchamp, the chief markets analyst at IG Group in London, wrote in a note. “A divided House might mean the partisan battles over spending and the debt ceiling are not quite as dramatic or vitriolic, but this is unlikely to brighten the policy outlook markedly. Instead, the focus will likely return to the Federal Reserve and the US economy.” That left Thursday’s inflation report the next catalyst for markets. Economists are expecting the figures to show consumer prices cooled slightly compared with the previous month. The data could provide crucial clues on how the Federal Reserve is likely to proceed with tightening monetary policy. “Tension is high and investors won’t want to be burnt by jumping the wrong way ahead of that inflation data, because in the past expectation has proved a little off the mark,” said Danni Hewson, a financial analyst at AJ Bell. In Europe, the equity benchmark fell for the first time in four days, dragged by tech, real estate, travel- and automotive-industry shares. Euro Stoxx 50 falls 0.7%. IBEX is flat but outperforms peers, DAX lags, dropping 0.8%.  Here are some of the biggest European movers today: Vantage Towers shares jump as much as 11% after Vodafone said in a statement that it will deconsolidate its 81.7% interest in the tower business by creating a joint venture with KKR and Global Infrastructure Partners to hold the stake. Smiths Group rises as much as 5.4%, hitting the highest since Feb. 2020, with analysts saying the industrial group delivered a strong start to its fiscal year. Recordati shares rise as much as 4.8%, hitting the highest since Sept. 19 and extending gains after its results in the prior session, as Banca Akros upgrades its rating on the drugmaker. Scor shares reversed earlier declines on the back of its third quarterly loss in a row and climbed as much as 4.5%, as analysts focused on their deep value and noted that a cost- cutting plan marked a pivotal moment for the French reinsurer. Commerzbank shares decline despite the German lender delivering a beat on its quarterly earnings, with Deutsche Bank flagging what looks like conservative guidance for 2024. Shares fall as much as 7.6%. Evotec falls as much as 12%, the most in three months, after analysts said the German biotech missed quarterly estimates, with investments in the Just-Evotec Biologics arm hurting profits. ITV shares drop as much as 6.6% after the broadcaster said rising costs will be an issue in 2023. Barclays notes this is the first time ITV has mentioned that inflation may hit its costs and earnings. While 3Q results largely met expectations, analysts say the 4Q advertising outlook fell short amid growing economic uncertainty. Marks & Spencer falls as much as 7%, the most since Sep. 29, after the UK retailer’s trading update is seen as offering little reassurance in the face of demand headwinds and cost inflation. Earlier in the session, Asian shares were little changed after three straight gains of more than 1%, as a rally in tech stocks offset losses in Chinese shares and investor worries about US midterm election results. The MSCI Asia Pacific Index was up 0.01% as of 6:04 p.m. in Singapore, with chipmakers TSMC and Samsung Electronics among the biggest boosters, while Chinese internet names fell amid concerns over Singles Day sales.   With Republicans headed toward control over the US House of Representatives -- albeit by a smaller margin than forecast --some investors say it portends difficulty in passing legislation during a trying economic period, while others see political gridlock as preserving status quo. “This could be a dysfunctional political situation at a time of economic crisis,” said Gary Dugan, chief executive officer at the Global CIO Office. However, there may be some positive impact on Asia stocks if the dollar tops out, he added. Meanwhile, tech shares extended a rebound on cheaper valuations, boosting benchmarks in Taiwan and South Korea. Key gauges in China and Hong Kong, however, dropped for a second straight day after a recent rebound. The decliners were influenced as Chinese producer prices fell into deflation for the first time in nearly two years amid lockdowns and new Covid cases in Beijing jumped. While Asia’s benchmark index has rebounded more than 7% from a recent trough, all eyes are on US consumer price inflation data due Thursday for a sense of the Federal Reserve’s next policy step. Growing lockdowns in China are also weighing on sentiment. “We don’t think the worst is over for Asian equities even though the markets have bounced back about 7% from the late October bottom and flows have picked up,” said Manishi Raychaudhuri, a strategist at BNP Paribas. “The Fed’s hawkish stance on inflation shall sustain till there are clear signs of core inflation peaking out.” Japanese stocks fells: the Topix dropped 0.4% to 1,949.49 at the 3 p.m. close in Tokyo, while the Nikkei 225 declined 0.6% to 27,716.43. Nintendo contributed the most to the Topix’s loss, decreasing 7.1%. Out of 2,165 stocks in the index, 1,020 rose and 1,022 fell, while 123 were unchanged. In India, stocks fell from their near-record levels as investors booked profits in recent outperformers such as ICICI Bank and Hindustan Unilever. Stocks across Asia were mixed as investors await midterm poll results in the US.  The S&P BSE Sensex fell 0.3% to 61,033.55 in Mumbai, while the NSE Nifty 50 Index eased by an equal margin. Both indexes still trade about 1% short of their record levels seen in October last year.  Fifteen of BSE Ltd.’s 19 sector sub-gauges dropped, led by consumer durable companies as trading resumed after a holiday on Tuesday. Tata Motors, the owner of Jaguar Land Rover, reported smaller-than-expected loss for September quarter, adding to Indian companies’ stronger show for the earnings season. Of the 44 Nifty firms that have announced results so far, 31 have met or beaten analysts’ estimates, while 10 missed. ICICI Bank contributed the most to the Sensex’s decline, decreasing 0.6%. Out of 30 shares in the index, 8 rose and 22 fell. Australian stocks rallied for a 4th day: the S&P/ASX 200 index rose 0.6% to close at 6,999.30, boosted by gains in mining and real estate shares. A gauge of mining shares hit the highest since Aug. 26 after metal prices increased. Shares of gold miners, including St Barbara, were the benchmark’s best performers after the metal advanced on a slide in the US dollar.  In New Zealand, the S&P/NZX 50 index was little changed at 11,143.48. In FX, the Bloomberg Dollar Index rebounded and the greenback rose versus all of its Group-of-10 peers as risk assets turned lower. One-day hedging costs rallied across the major currencies, modestly higher than what the roll suggested, as focus shifts to Thursday’s US inflation report. Risk sensitive currencies, such as the kiwi and pound fell by around 1% against the greenback. The euro fell, but remained above parity. The pound plunged by as much as 1.1% after three days of gains, while gilts twist flattened. Bank of England monetary policy committee members Jon Cunliffe and Jonathan Haskel are due to speak later, a day after Chief Economist Huw Pill suggested that the stimulus program through the pandemic was a mistake and contributed to inflation Australian sovereign bonds extended opening gains after data showed that China’s producer prices fell into deflation for the first time in nearly two years. The producer price index declined 1.3% in October from a year earlier after gaining 0.9% the previous month Japanese government bonds rose after a solid sale of 30-year bonds alleviated concerns about demand for super-long debt. The yen was steady In rates, Treasuries were mixed with the curve flatter, pivoting around a little-changed 10-year sector. Bunds outperform, bull-flattening sharply, while stocks hover near top of Tuesday’s range. US yields richer by nearly 2bp across long-end of the curve and cheaper by ~1bp across front-end, leaving 2s10s, 5s30s spreads flatter by 1bp and 2bp on the day, while 10-year at around 4.125% is little changed from Tuesday’s close. Bunds outperform by 4.5bp in the 10-year sector, gilts by 1.2bp. Focal points of US session focus include 10-year note auction and a couple of Fed speakers ahead of Thursday’s inflation data: the US auction cycle resumes with $35b 10-year at 1pm, followed by $21b 30-year Thursday; Tuesday’s 3-year note sale was strong, drawing a yield 1.2bp below the WI at the bidding deadline.  Two-year German and Italian government bond yields inched up while falling further out. One trader has placed a large bet using options on German 10-year futures, targeting the yield to fall to 1.55% for maximum profit, down from about 2.25% currently In commodities, WTI drifts lower to trade near $88. WTI and Brent futures are softer intraday as the Dollar claws back some recently lost ground and sentiment remain tilted to the downside, while China’s COVID situation remains an overhang for the complex. Spot gold fell roughly $7 to trade near $1,705/oz, swayed from gains to losses after testing resistance at its 100 DMA (1,715/oz) in early European hours, before a turn in risk sentiment spurred the Dollar and hit the yellow metal. Base metals are pressured by the downbeat risk tone and the firmer Dollar, but 3M LME copper holds onto a USD 8,000/t handle after testing USD 8,100/t to the upside overnight. Cryptocurrencies slipped further as Binance’s potential takeover of embattled rival exchange FTX.com highlighted how strains in the digital-asset industry are buffeting some of its top players. Bitcoin traded as much as 7.7% lower. To the day ahead now, and although investors will be digesting the midterm results, there are a few central bank speakers to look out for as well, including the Fed’s Williams and Barkin, the ECB’s Elderson, and the BoE’s Haskel and Cunliffe. Market Snapshot S&P 500 futures down 0.4% to 3,820.50 STOXX Europe 600 down 0.8% to 418.34 MXAP up 0.2% to 144.17 MXAPJ up 0.5% to 464.43 Nikkei down 0.6% to 27,716.43 Topix down 0.4% to 1,949.49 Hang Seng Index down 1.2% to 16,358.52 Shanghai Composite down 0.5% to 3,048.17 Sensex down 0.2% to 61,067.52 Australia S&P/ASX 200 up 0.6% to 6,999.30 Kospi up 1.1% to 2,424.41 German 10Y yield down 0.9% to 2.26% Euro down 0.2% tp $1.0051 Brent Futures down 0.7% to $94.71/bbl Gold spot down 0.3% to $1,707.98 U.S. Dollar Index up 0.1% to 109.79 Top Overnight News from Bloomberg US voters delivered a mixed verdict in elections shaped by inflation and splits around social issues, with Republicans headed toward control of the US House, but by smaller margins than forecast Consumers’ expectations for inflation over the next 12 months rose to 5.1% in September from 5% in August, European Central Bank says in statement summarizing the results of its monthly survey Euro-area wage growth has jumped, with most occupations seeing raises of at least 3%, according to an analysis of job ads that also suggests the pace of increases may be flattening Two key indicators of Chinese interbank borrowing costs have hit a three-month high, as the nation’s central bank faces a crucial decision on what to do with a massive amount of policy loans due next week Hungary’s annual price growth increased by a full percentage point in October to 21.1%, data published Wednesday showed. The nation is closing in on the three Baltic states that have the fastest inflation in the EU A more detailed summary of global markets courtesy of Newsquawk Asia-Pac stocks traded cautiously and US equity futures were indecisive as attention focused on the trickling results from the US Midterm Elections where a red wave has so far not yet materialised although Republicans are in a strong position to take control of the House, while the Senate race is still widely viewed as a toss-up. ASX 200 was led higher by strength in the mining-related sectors although upside was capped as financials are subdued following results from National Australia Bank which posted an increase in FY profit but warned of a significant slowdown in lending growth for the current fiscal year. Nikkei 225 faded its initial gains with price action lacklustre amid a slew of earnings and despite Japan’s Cabinet approving a JPY 29.1tln extra budget to fund the stimulus package. Hang Seng and Shanghai Comp swung between gains and losses with early strength in property names after China’s state planner asked large banks to step up lending for manufacturing infrastructure and developers, with China to provide initial support of around CNY 250bln in bond financing to private firms, although COVID-related headwinds persisted following a further increase in China’s daily infections and participants also reflected on the mixed-to-soft inflation data. Chinese developers jumped the most in eight months as a regulator expanded financing support for the sector. Top Asian News China's Guangzhou reportedly locked down a second district due to coronavirus. However, it was separately reported that China lifted the lockdown in the area around Foxconn's Apple (AAPL) iPhone plant as planned, according to Bloomberg. China's Guangzhou locks down another district amid COVID, according to Bloomberg. China reported 1,346 (prev. 890) new coronavirus cases in the mainland for November 8th, 1,294 (prev. 843) new local cases and 6,989 (prev. 6,801) new asymptomatic cases, according to Reuters. US President Biden will highlight a commitment to rules-based international order in the South China Sea during the ASEAN summit and will talk about the need for peace and stability throughout the Indo-Pacific region and across the Taiwan Strait, according to a senior administration official cited by Reuters. RBA's Bullock reiterated that further rate hikes will be needed. Wage growth is a bit stronger than thought three months ago. Good reason to think approaching peak of the inflation cycle, via Reuters. In Europe, major bourses hold a downside bias after seeing some choppiness at the cash open and following a somewhat mixed APAC handover. Sectors are all in the red with a clear defensive bias as Telecoms, Utilities, Healthcare, Food & Beverages post the shallowest losses, whilst Tech, Travel & Leisure, Real Estate and Retail reside at the other end of the spectrum. US equity futures traded sideways on either side of breakeven overnight and in early European hours but have since drifted under the overnight lows. Top European News UK PM Sunak could raise the top rate of income tax, according to The Telegraph. Options being discussed include raising the 45% top rate, or lowering the GBP 150k annual income threshold at which it kicks in. UK Chancellor Hunt is set to scrap former PM Truss' plan for investment zones, according to FT. EU is mulling Eurobonds for Ukraine fund, Politico reported - will propose a new EU instrument to finance EUR 18bln. ECB Says 12-Month Consumer Inflation Expectations Rose Slightly Adidas Cuts Margin Forecast After Ending Yeezy Partnership M&S Falls Amid Concerns Over Demand, Cost Inflation For Retail Top Sunak Ally Williamson Resigns Amid Bullying Allegations Commerzbank’s New Targets Disappoint Investors as Charges Mount FX DXY attempted to stop the rot and nurse some losses awaiting the remaining and potentially game-changing Midterm Election results, with the index now on either side of 110.00. The NZD and GBP underperform and more ground than other majors as the Buck bounced, with nothing obvious in terms of negative NZ or UK factors. Traditional havens JPY and CHF are off best levels, but retained a safety premium as the rout in crypto currencies raged on and the ripples reverberated across to stocks. Fixed Income US Treasuries are braced for the long bond sale that wraps up this week’s rather mixed Quarterly Refunding. Gilts remain in the green having digested an average Green offering. Bunds saw a lack of positive reaction despite a very well received 2032 German auction. Commodities WTI and Brent futures are softer intraday as the Dollar claws back some recently lost ground and sentiment remain tilted to the downside, whilst China’s COVID situation remains an overhang for the complex. US Energy Inventory Data (bbls): Crude +5.6mln (exp. +1.4mln), Cushing -1.8mln, Gasoline +2.6mln (exp. -1.1mln), and Distillate -1.8mln (exp. -0.9mln). IEA's Birol said OPEC+ might need to rethink its output cut decision, according to Bloomberg Spot gold swayed from gains to losses after testing resistance at its 100 DMA (1,715/oz) in early European hours, before a turn in risk sentiment spurred the Dollar and hit the yellow metal Base metals are pressured by the downbeat risk tone and the firmer Dollar, but 3M LME copper holds onto a USD 8,000/t handle after testing USD 8,100/t to the upside overnight. Geopolitics North Korea fired a missile, according to South Korean military; could be a ballistic missile, according to Japanese Coast Guard; projectile has fallen outside of Japan's EEZ. German cabinet has agreed to block the prospective Chinese takeover of Elmos chip factory and ERS electronics, according to government sources cited by Reuters. US Event Calendar 07:00: Nov. MBA Mortgage Applications, prior -0.5% 10:00: Sept. Wholesale Trade Sales MoM, est. 0.5%, prior 0.1% 10:00: Sept. Wholesale Inventories MoM, est. 0.8%, prior 0.8% Central Banks 03:00: Fed’s Williams Discuss Risk and Uncertainty at Event in Zurich 11:00: Fed’s Barkin Discusses the Economic Outlook 20:00: Fed’s Kashkari Discusses Inflation and the Economy DB's Jim Reid concludes the overnight wrap As has been anticipated, it will take a few days to unpack the full results of the US midterms. What is clear at this hour though is that neither major party is running away with the election in a ‘wave’ and it appears that Republicans are still on track to achieve a majority in the House of Representatives, a combo that should put a pin in any new fiscal stimulus for the next few years. The New York Times model is currently showing that the Senate will likely finish with 50 seats each. So overall maybe Democrats slightly outperforming but it's not too far away from expectations. The mix also seems to not be surprising markets too much, as S&P 500 futures (-0.07%) are oscillating between gains and losses as we go to press. Our US team will be hosting a webinar later today to unpack the implications with the link to register here. As we awaited the results of the midterm elections, risk assets continued to put in a decent performance yesterday, with the S&P 500 (+0.56%) advancing for a 3rd consecutive session. A reminder that if history’s any guide that could prove to be just the start however, since in all 19 post-war midterm elections, the S&P 500 has closed above its levels on the day of the election after a year. We highlighted this a couple of months ago and in yesterday's CoTD we showed how the 3 quarters from midterms have been the top 3 quarters for the S&P 500 since 1949 across the 4 year presidential cycle. However as I've eluded for a while, although I've thought midterms would be a short-term positive catalyst I suspect we won't see this record spell stretch into a 20th successive positive outcome 12 months on. I'm going to take a stab at why we should ignore history today in my CoTD. Back to yesterday and gains were pretty broad-based for a relatively modest index-level increase, with over 70% of the index moving higher on the day, and only the consumer discretionary sector in the red (-0.30%) on the day thanks to Tesla’s (-2.93%) decline. The Nasdaq flitted around zero, trading as much as +1.70% higher and -0.87% lower before splitting the difference to finish up +0.49%. After the close, Mark Zuckerberg confirmed that layoffs would start at Meta tomorrow, which won’t help tech sentiment. The sentiment wasn’t any better following Disney’s after-hours earnings, which came in below consensus and had the company ready to find “meaningful efficiencies” in light of rising costs. Disney’s shares were -6.83% lower after the close. The S&P 500 had a bit of a wild swing after Europe went home moving from +1.35% to -0.55% in the space of an hour before closing higher (+0.56%) as Bitcoin (long time no mention) plunged to $17,187 having been as high as $20,655 as European equity markets closed. It bounced back into the close and is at similar levels as we type this morning at $18,430. Crypto exchange FTX.com had been suffering from a liquidity crunch before rival Binance agreed to buy it yesterday and the associated story created a fair amount of noise, some of it creeping into equities. This morning in Asia there are a few concerns the deal isn't binding so one to keep an eye on. Before the late US vol, the STOXX 600 (+0.78%) hit its highest level in nearly two months, whilst the DAX (+1.15%) hit its highest level in nearly three months. For sovereign bonds, the main focus is still on tomorrow’s US CPI report, but there was a decent rally ahead of that as investors modestly dialled back their expectations of future central bank rate hikes. For instance, the futures-implied rate for the Fed in December 2023 came down -6.1bps to 4.80%, having traded as high as 4.88% earlier in the European morning. In turn, that prompted a rally in Treasuries across the curve, with the 10yr yield down -9.0bps on the day to 4.12%, with roughly half of the decline in real yields, which fell -5.2bps. In the meantime, the 2s10s yield curve flattened -1.7bps to -53.1bps, remaining just above its post-1982 closing low of -57.3bps from last week. Meanwhile, in Asia, 2 and 10yr yields are back up a basis point. Over in Europe, there was a similar sovereign bond rally, with yields on 10yr bunds (-6.3bps), OATs (-6.6bps) and gilts (-9.0bps) all lower on the day. At the front end however, UK gilts underperformed, with the 2yr yield up +5.3bps after BoE chief economist Pill said that “there is more to come” on rates following their 75bp hike last week. Overnight index swaps are currently pricing a nearly even split between a 50bps or 75bps hike at the next meeting in December. This morning in Asia, equities are mostly trading lower led by the Hang Seng (-1.52%) with the CSI (-0.75%), the Shanghai Composite (-0.35%) and the Nikkei (-0.54%) all trading in negative territory. Elsewhere, the KOSPI (+1.00%) is bucking the trend. We've had softer price data coming out of China as the nation’s producer price index (-1.3% y/y) in October fell for the first time in two years, down from +0.9% growth in September as strict Covid restrictions coupled with a sluggish property sector amid global recession risks dented the economy. Meanwhile, consumer inflation in October (+2.1% y/y) moderated from September’s 29-month high of +2.8% (v/s +2.4% expected) pointing towards underlying domestic price pressures remaining modest. Staying on China, the Chinese yuan extended its decline for a third day, weakening past the 7.25 level against the dollar after the data. The subdued inflation figures suggests that the PBOC policy divergence against its global peers will continue. There wasn’t much in the way of data releases yesterday, with Euro Area retail sales growing by +0.4% in September, in line with expectations. That said, there was a positive revision to August which showed that retail sales were unchanged, as opposed to the -0.3% contraction previously released. Otherwise in the US, the NFIB’s small business optimism index for October fell for the first time since June, coming in at 91.3 (vs. 91.4 expected). To the day ahead now, and although investors will be digesting the midterm results, there are a few central bank speakers to look out for as well, including the Fed’s Williams and Barkin, the ECB’s Elderson, and the BoE’s Haskel and Cunliffe. Tyler Durden Wed, 11/09/2022 - 07:52.....»»

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.....»»

Futures Dead Cat Bounced As BTFDers Emerge On Turnaround Tuesday The relentless rout that erased $3.4 trillion from the Nasdaq 100 in the past month paused on Turnaround Tuesday as battered tech valuations attracted scattered dip buyers, but nothing like the full-throttled BTFD buying parade observed in months gone by. Futures on the tech-heavy gauge advanced as much 1.4% as bargain hunters returned after the Nasdaq 100 slumped to the lowest since November 2020 on Monday, capping three days of major losses. S&P 500 futures were 0.7% higher to 4,016 after rising as much as 1.2% earlier but also after plunging to as low as 3,961. After rising as high as 3.20% on Monday, 10-year Treasury yields dropped for a second day, sliding below 3.0% and providing further relief to technology shares. The dollar erased a loss and Treasuries edged higher, signaling the return of some haven demand amid nervousness over the path of Federal Reserve policy. European bonds rallied. The Nasdaq’s 14-day relative-strength index (RSI) closed at 33 on Monday, getting closer to the level of 30, which to some analysts indicates a security is oversold and is poised to rise. Another sharp selloff “seems unlikely without an external trigger,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “Nevertheless, as long as the problems persist, we do not expect a big recovery and have used the relief rally to move our equity exposure to neutral.” Indeed, traders have been caught between stubbornly high inflation that erodes asset values and central-bank tightening that threatens to slow economic growth, or even push some nations into recession. Recent U.S. data suggesting the Federal Reserve will stay on an aggressive rate-hike path have sparked the latest bout of risk-off trades. Fresh outbreaks of Covid in China, and the nation’s stringent measures to control them, have worsened sentiment. “For now, investors need to be prepared for continued volatility,” Solita Marcelli, Americas chief investment officer at UBS Global Wealth Management, wrote in a note. She added “sentiment is bearish” but not capitulating. In premarket trading, electric vehicle makers are up, with Tesla, Rivian and Lucid set to rebound after losing $188 billion in three days. AMC Entertainment is 6.4% higher after reporting better-than-expected quarterly results as hits like “Spider-Man: No Way Home” lured people back to movie theaters. Bank stocks edge higher in premarket trading amid a broader rebound for equity markets after Monday’s rout. S&P 500 futures are up about 0.8% this morning, while the U.S. 10-year yield retreats for a second day to sit at roughly 3%. In corporate news, BlackRock said it won’t support efforts by shareholders who try to micromanage companies on climate change. Meanwhile, Bitcoin rebounded back above $30,000 after briefly sinking below the closely watched level. Here are some of the biggest U.S. movers today: Most large cap U.S. technology and internet stocks rose in premarket trading, on course to recoup some of the heavy losses they suffered in a steep selloff over the last three sessions. Apple (AAPL US) is up 1.2%, Microsoft (MSFT US) +1.2% and Meta (FB US) +2.8%. AMC Entertainment (AMC US) is up 3.8% in premarket trading after reporting better-than-expected quarterly results as hits like “Spider-Man: No Way Home” lured people back to movie theaters. Electric vehicle makers Tesla (TSLA US), Rivian (RIVN US) and Lucid (LCID US) are rebounding after losing $188 billion in three days of heavy selling in technology and growth stocks. Shockwave Medical (SWAV US) may move after it raised its revenue guidance for the full year, with analysts saying that the company’s performance was boosted by its coronary business. Shares rose 11% in extended trading on Monday. Upstart Holdings (UPST US) shares plunge 48% in premarket trading after the cloud-based artificial intelligence lending platform cut full- year revenue guidance on macro uncertainties. Piper Sandler cut the stock to neutral. Novavax (NVAX US) is down 21% premarket, with analysts saying that the biotech firm’s revenue for the first quarter missed expectations. Plug Power (PLUG US) shares are 5.6% lower premarket after the fuel cell company reported net revenue for the first quarter that missed the average analyst estimate, with KeyBanc noting pressure on margins and higher costs. Video game stocks may move after Sony’s earnings fell short of estimates amid supply constraints and component shortages. Watch shares in Activision Blizzard (ATVI US), Electronic Arts (EA US) and Take-Two Interactive (TTWO US). U.S. stocks and particularly the Nasdaq 100 have been crushed this year (amid a tireless tirade from JPM's Marko Kolanovic to buy each and every dip) as investors fret over recession risks from the Federal Reserve embarking on aggressive monetary tightening amid surging inflation. Higher interest rates mean a bigger discount for the present value of future profits, hurting growth and in particular tech stocks with the highest valuations.  European stocks trade well, with most cash indexes gaining over 1% to recover roughly half of Monday’s losses when the index slumped to its lowest level in two months. Euro Stoxx 50 rose as much as 1.75%, FTSE MIB outperforms slightly, FTSE 100 lags but still adds 1%. Construction, banks and autos lead broad-based Stoxx 600 sectoral gains. The Stoxx 600 energy sub-index edges lower, being one of the worst-performing sectors in a rising broader market for European stocks, as oil keeps falling. Shell declines as much as 1.5%, TotalEnergies SE -1.6%, Equinor -4.5%. Here are some of the biggest European movers today: Luxury stocks such as Kering (+0.5%) and Watches of Switzerland (+4.2%) rebounded after the declines of the previous sessions, with investors hopeful that the Covid-19 situation in the key market of China may be slightly improving. Hermes rises as much as +1.6%, LVMH +2.4% Airbus gains as much as 3.7% in Paris trading after being raised to buy from hold at Societe Generale, with the broker highlighting the planned production ramp-up of the “highly profitable” A320 family. Swedish Match rises as much as 28% after Philip Morris International said it’s in talks to buy the company. While a deal would make strategic sense, a counter-bid can’t be ruled out, analysts said. Centrica climbs as much as 6.5%, the most since Feb. 25, after the company guided adjusted earnings per share to be at the top end of the consensus range. Euroapi soars as much as 9.5% after the Sanofi spinoff is initiated with a buy recommendation and EU20 price target at Deutsche Bank, which sees “good value” and an attractive business. E-commerce stocks rise in Europe, with many outperforming the benchmark Stoxx 600 Index, buoyed by dip buyers returning to growth and technology shares that have been battered this year. Zalando up as much as 4.9%, Home24 +12%, Moonpig +3.6% Earlier in the session, Asian stocks extended their decline to a seventh day as the specter of rapid credit tightening in the U.S. and protracted lockdowns in Chinese cities prompted some investors around the region to reduce holdings of riskier assets.  The MSCI Asia Pacific Index fell as much as 2.1% to its lowest level since July 2020, weighed down tech shares after a three-day selloff in the Nasdaq 100. Hong Kong’s Hang Seng Index ended 1.8% lower as the market reopened after a holiday, though benchmarks in mainland China rebounded from early-trading lows on hopes for easier monetary conditions. MSCI Asia Pacific Index down 0.7% Japan’s Topix index down 0.9%; Nikkei 225 down 0.6% Hong Kong’s Hang Seng Index down 1.8%; Hang Seng China Enterprises down 2.2%; Shanghai Composite up 1.1%; CSI 300 up 1.1% Taiwan’s Taiex index up 0.1% South Korea’s Kospi index down 0.5%; Kospi 200 down 0.5% Australia’s S&P/ASX 200 down 1%; New Zealand’s S&P/NZX 50 down 1.3% India’s S&P BSE Sensex Index down 0.2%; NSE Nifty 50 down 0.4% “There’s nowhere to escape so it’s pretty tough,” said Yuya Fukue, a trader at Rheos Capital Works. “Economic data appears to be deteriorating of late, though that has seemed to have gone little noticed while the markets were so focused on the Fed’s policy. It feels as if the game is changing.” Among Chinese tech giants, Alibaba tumbled 4.8% in Hong Kong, while Tencent dropped 2.3%. Regional declines were broad, with investors dumping even this year’s star energy shares as oil prices eased.  Singapore’s Straits Times Index and Australia’s S&P/ASX 200 both dropped about 1%. The Philippine benchmark ended 0.6% lower, recovering after skidding more than 3%, after Ferdinand Marcos Jr. won a landslide victory in the country’s presidential election. Mainland Chinese shares closed higher after the People’s Bank of China repeated a pledge to proactively address mounting economic pressure and highlighted a drop in deposit rates, which could spur banks to lower the cost of borrowing for the first time in months. “The market was a bit oversold. In addition, PBOC is also mentioning a drop in deposit rates, raising expectations of more room for banks to increase lending,” said Aw Hsi Lien, a strategist at Tokai Tokyo Research. India’s benchmark equity index slipped to a two-month low amid a weaker trend in Asia as surging oil prices and inflationary pressures weighed on investor sentiment. The S&P BSE Sensex fell 0.2% to 54,364.85 in Mumbai, after swinging between gains and losses several times during the session. The NSE Nifty 50 Index slipped 0.4% to 16,240.05. This is the third consecutive session of declines for the key indexes.  Sixteen of the 19 sector sub-indexes compiled by BSE Ltd. dropped, led by metal stocks. Reliance Industries Ltd. slipped 1.7% to a seven-week low and was the biggest drag on the Sensex, which saw 18 out of its 30 member-stocks trading lower.   In earnings, among the 27 Nifty 50 companies that have announced results so far, 10 have missed estimates while 17 either exceeded or met forecasts.  In FX, the Bloomberg Dollar Spot Index fell 0.1% after climbing to a two-year high on Monday, and the greenback was steady or weaker against all of its Group-of-10 peers. The euro consolidated and the region’s yields fell as Italian bonds led an advance. The pound was steady against both the dollar and euro while gilts outperformed peers. Domestic focus is on the Queen’s speech laying out the government’s agenda for the next parliamentary session and Brexit risks after reports the U.K. is preparing to scrap parts of the Northern Ireland protocol. U.K. retail sales are falling on an annual basis for the first time since the start of last year as the cost of living crisis crushes consumer confidence and puts the brakes on spending. Scandinavian currencies led gains among G-10 pairs after both currencies fell to the weakest level in around two years versus the dollar on Monday. The Australian and New Zealand dollars also bounced off two-year lows as stock indexes trimmed an intraday decline. Aussie’s gains were tempered as iron ore fell for a third day to bring the three-day slide to about 15%. The yen edged lower as Treasury yields recovered from a sharp overnight drop. Bonds pared earlier gain after the 10-year debt sale. Bank of Japan Executive Director Shinichi Uchida says that widening the central bank’s yield target band would be equivalent to a rate hike and wouldn’t be favorable for Japan’s economy In rates, Treasuries rose in early U.S. trading with belly leading gains and the curve flattening modestly after Monday’s bull-steepening. Yields are richer by ~4bp across in belly of the curve, steepening 5s30s spread by ~3bp as long-end yields lag; 10-year trading just around 3%, richer by ~3bp on the day, trailing gilts by ~7bp in the sector. Core European rates outperform led by gilts while stocks and U.S. futures recover a portion of Monday’s steep losses. Bunds bull-flatten, while peripheral spreads tightened to Germany with short-dated BTPs outperforming. Treasury auction cycle begins with 3-year note sale, and several Fed speakers are slated. U.S. new-issue auction cycle consists of $45b 3-year note, followed by 10- and 30-year sales Wednesday and Thursday. WI 3-year yield ~2.800% is higher than auction stops since 2018 and ~6bp cheaper than last month’s, which stopped through by 0.1bp. Three-month dollar Libor +0.13bp at 1.39986% In commodities, crude futures are choppy, WTI dips back into the red having stalled near $104. Spot gold rises ~$9 near $1,863/oz. Much of the base metals complex trades poorly. LME copper outperforms, holding in the green but off best levels after a test of $9,400/MT. Bitcoin reclaimed the $31K handle, but is yet to make a concerted move higher. Looking ahead, we get the April NFIB Small Business Optimism print (93.2, Exp. 92.9), Chinese M2, Speeches from Fed's Williams, Waller, Bostic, Barkin, Kashkari, Mester, ECB's de Guindos & BoE's Saunders, Supply from the US. Earnings from Norwegian Cruise Line & Warner Music. Biden speaks on soaring inflation at 11am EDT. Biden will also meet with Italian Prime Minister Draghi at the White House, and the UK state opening of Parliament is taking place, where the government outlines its legislative programme for the year ahead. Of course, the big event is tomorrow morning when the US CPI print comes. Market Snapshot S&P 500 futures up 1.1% to 4,031.75 STOXX Europe 600 up 1.2% to 422.32 MXAP down 0.8% to 159.98 MXAPJ down 0.8% to 523.71 Nikkei down 0.6% to 26,167.10 Topix down 0.9% to 1,862.38 Hang Seng Index down 1.8% to 19,633.69 Shanghai Composite up 1.1% to 3,035.84 Sensex up 0.4% to 54,674.30 Australia S&P/ASX 200 down 1.0% to 7,051.16 Kospi down 0.5% to 2,596.56 German 10Y yield little changed at 1.07% Euro little changed at $1.0564 Brent Futures up 0.8% to $106.83/bbl Gold spot up 0.5% to $1,862.69 U.S. Dollar Index little changed at 103.65 Top Overnight News from Bloomberg The EU is considering the issuance of joint debt to finance Ukraine’s long-term reconstruction, which may end up costing hundreds of billions of euros, according to an EU official familiar with the plan China’s provinces are set to sell a historic amount of new special bonds by the end of June as part of an infrastructure investment push intended to rescue an economy stymied by Covid outbreaks and lockdowns Hungarian Prime Minister Viktor Orban’s talks with the head of the EU about proposed sanctions on Russian oil imports made progress, but failed to reach a breakthrough, according to both sides Investor confidence in Germany’s pandemic rebound improved, but remained deeply negative as the war in Ukraine darkens the outlook for Europe’s largest economy. The ZEW institute’s gauge of expectations rose to -34.3 in May from -41 the previous month, defying expectations for a third straight deterioration. An index of current conditions worsened Saudi Arabia’s oil minister warned that spare capacity is decreasing in all sectors of the energy market, as prices of products from crude to diesel and natural gas trade at or near multi-year highs in the wake of Russia’s invasion of Ukraine A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mostly negative after the resumed sell-off on Wall St where the S&P 500 slipped beneath the 4,000 level for the first time since March 2021. ASX 200 briefly gave up the 7,000 status with notable underperformance in the energy and mining-related sectors. Nikkei 225 slumped from the open although moved off its lows as participants digested stronger than expected Household Spending data and after BoJ's Uchida dismissed the prospects of a tweak to the BoJ’s 50bps yield target band. Hang Seng and Shanghai Comp both initially joined in on the selling with heavy losses in the tech sector contributing to the underperformance in Hong Kong on return from the extended weekend, although the downside in the mainland was later reversed after the recent policy support efforts by China’s MIIT and CBIRC. Top Asian News China Tech Stocks Slide as Growth Woes, Global Rout Grip Traders Investor’s Guide to the 2022 Philippine Presidential Election ArcelorMittal Evaluating Bidding for ACC, Ambuja: ET Now Philippine Stocks Fall as Traders Weigh Marcos Win, Global Rout European equities feel some reprieve following the prior session’s selloff; Euro Stoxx 50 +1.2%. Relatively broad-based gains are seen across the majors with some mild underperformance in the FTSE 100. Sectors show some of the more defensive sectors at the bottom of the bunch – alongside energy – whilst Construction, Autos, Banks, and Industrial Goods reside as the current winners. US equity futures are firmer across the board, ES +1.0%, with the NQ narrowly outpacing peers after underperforming yesterday. Top European News Russian Gas Flows to Europe Remain Steady on Key Links Highest Inflation in Three Decades Boosts Czech Rate Hike Case BPER Banca Soars After Earnings Beat, With Fees as Highlight Russia’s Economy Facing Worst Contraction Since 1994 FX The Dollar retains a firm underlying bid ahead of another slew of Fed speakers; risk sentiment remains fluid and fragile. The Swiss Franc has hit a fresh 2022 peak vs the Greenback; USD/JPY is consolidating around 130.00. EUR/USD was unfazed by mixed German ZEW data but later lost ground under 1.0550. Cable rotates either side of 1.2350 awaiting Brexit/N. Ireland news, further political fallout and more comments from BoE hawk Saunders. Crude and commodity FX have gleaned a degree of traction from partial recoveries or stabilisation in underlying prices. CBRT and regulator have asked banks to undertake FX transactions with corporate clients between 10:00-16:00, when the market is liquid, via Reuters citing bankers. Fixed Income Core benchmarks bounce further after a brief breather early on, with little in way of fresh fundamentals behind the upside. Initial highs were faded pre-UK/German issuance; once this cleared, Bunds and Gilts lifted to 152.50+ and 119.00+ peaks. Stateside, USTs are bolstered but far from best, with the curve re-flattening into today's 3yr sale and yet more Fed speak. Commodities Crude futures have come under renewed pressure in recent trade after seeing some gains in the European morning.   The initial downside coincided with the mixed Germany ZEW reports alongside the downbeat commentary from Hungary regarding an imminent oil ban; albeit, benchmarks are off overnight USD 100.44/bbl and USD 103.19/bbl respective lows. Saudi Energy Minister says it is "mind-boggling" why focus is on high oil prices and not on gasoline, diesel or others. World needs to wake up to an existing reality that it is running out of energy capacity at all levels, via Reuters. UAE Energy Minister says oil prices could double or triple in "chaotic" market. US officials reportedly asked Brazil's Petrobras in March to boost output, but it the oil Co. said it could not, according to Reuters sources. China's Shenghong Petrochemical has started a trial operation at its (320k BPD) greenfield refining complex in east China, according to Reuters sources. Germany is said to be shifting away from plans for a strategic national coal reserve, according sources cited by Reuters. Spot gold holds onto mild gains as DXY pulled back from the fresh YTD highs set yesterday. LME futures post mild gains following yesterday’s downside with the market still looking somewhat fragile. DB's Jim Reid concludes the overnight wrap It's school photo day today. After discussing it with my kids last night I said to them that I'd dig out my old school photos so they could see me at school. Without hesitation and with a straight face Maisie said, "Are they in black and white Daddy?". I was half amused and half depressed. Markets are pretty black at the moment with little white on show. Actually the only bright colour is a sea of red. Indeed after a rocky few weeks in markets, there’s been a further rout over the last 24 hours as investor jitters about the global growth outlook have continued to escalate. There has been some respite in Asia but markets remain very shaky. There wasn’t really a single catalyst to yesterday’s steep declines, but ultimately there’s been a growing scepticism in markets as to whether the Fed and other central banks will actually be able to achieve a soft landing without a recession as they seek to bring down inflation. One interesting development though was that rates rallied as the equity slump intensified, rather than both selling off as has been the norm in recent weeks. Although the day lacked a single catalyst, the bond market moves seem to turn around the same time as Atlanta Fed President Bostic spoke. He picked up where Chair Powell left things after last week’s press conference. Bostic signaled that +50bp hikes were part of his core view, placing low odds on anything larger, stating +50bp hikes were “already a pretty aggressive move.” Like other Fed speakers, he signaled a desire to get policy to neutral and then assess. While he isn’t a voter this year, his voice does carry weight at the hawkish end of the committee so the price action likely reflected the market believing that a consensus continues to build for 50bps, and not 75bps, even among the hawks. Sovereign bonds were actually seeing a strong sell-off before his comments but rallied fairly fiercely from around the same time. 10yr Treasury yields hit an intraday high of 3.20% during the European morning (+7.5bps on the day) but ended up closing -9.3bps lower at 3.03%, showing that wide intraday ranges and volatility continue to grip the market. With the Fed continuing to put a perceived ceiling on the near-term pace of hikes, 2yr yields rallied -13.7bps on the day with the curve steepening another +5.3bps. The amount of Fed hikes priced in by the December meeting down by -15.5bps. As I type, 10yr US yields are fairly flat in Asia. The move echoed in Europe, where 10yr bunds rallied -3.5bps to 1.09%. The broader risk-off move meant that there was a further widening in spreads yesterday, with the gap between Italian 10yr BTPs over bunds widening by +4.9bps to 205bps, which is the widest they’ve been since May 2020. And that widening was seen on the credit side as well, where iTraxx Main moved above 100bps for the first time since April 2020 in trading, before falling back somewhat to settle at 98bps (+1.4bps). Against this backdrop, the S&P 500 fell by a sizeable -3.20% that takes the index to its lowest level in over a year. That comes on the backs of 5 consecutive weekly losses, which is already the longest run in over a decade, and given the performance yesterday it would take a strong comeback over the remaining four days this week to avoid that run extending to 6 weeks. See my Chart of the Day yesterday (link here) for more on how rare it has been to see an 11 year run without a 5 successive weekly decline. Energy was the worst performing US sector, falling an astonishing -8.30%, in its worst one-day performance since June 2020, after the fall in oil (more below). The sector is still by far the best performing S&P sector YTD, up +36.79%, with every other sector in the red. Despite the rate rally, it was a bad day for mega-cap and other growth tech stocks. Indeed, the NASDAQ fell a further -4.29% to its lowest level since November 2020, whilst the FANG+ index of 10 megacap tech stocks fell an even larger -5.48%. For reference, that now takes the FANG+ index’s decline since its all-time high in November to a massive -38.22%. Even a high quality component like Amazon is now down -35.75% since March 29th and is pretty much back to pre-covid levels. Over the other side of the pond, Europe saw some sizeable declines as well, with the STOXX 600 down -2.90% to leave the index not far away from its recent lows in early March. With the Fed set to continue their hiking cycle, just as the ECB are still pondering on when to even start hikes and China’s growth prospects are fading, the US dollar has continued to benefit. Yesterday, the Japanese Yen (+0.21% vs USD) was the top-performing G10 currency, in line with its traditional status as a safe haven, but Bitcoin continued to lose ground, falling to its lowest level since July last year, after falling to $31,562. It briefly fell below 30k this morning. It's been interesting that Bitcoin is not getting much mention with all the inflationary issues seen in recent months. It seems to be suffering from a higher dollar, higher real yields and a tech related sell-off. Markets continue to fall in Asia but US futures are up. Hang Seng (-3.06%) is the largest underperformer, but is paring its losses after falling more than -4% as the market returned after a holiday with the Chinese listed tech firms among the worst hit. Elsewhere, the Nikkei (-0.93%) and Kospi (-0.95%) are down. Meanwhile, mainland Chinese stocks are trading in positive territory with the Shanghai Composite (+0.17%) and CSI (+0.15%) somewhat recovering from opening losses. Looking ahead, S&P 500 (+0.56%), NASDAQ 100 (+0.92%) and DAX (+0.25%) futures are moving higher. Early morning data showed that Japan’s household spending declined -2.3% y/y in March, its first drop in three months albeit the fall was less than -3.3% estimated by Bloomberg and followed +1.1% growth in February. Back to inflation and one potentially problematic indicator came from the New York Fed’s latest consumer survey, which found that median inflation expectations for 3 years ahead rose to +3.9%, which is the highest since December, and up from +3.5% back in January. It’s still not as high as the +4.2% readings back in September and October, but will obviously be unwelcome news to the Fed whose path to a soft landing is in part reliant on inflation expectations remaining well anchored around target. Turning to the situation in Ukraine, a key risk event yesterday had been Russia’s Victory Day parade, where it was speculated that President Putin would move towards a general mobilisation. However, in reality it finished with surprisingly little news, and whilst not showing a path towards de-escalation, didn’t move to escalate things further. Separately, it was reported by Bloomberg that the EU would soften its proposed sanctions package on Russian oil exports, with an article saying that they would drop the proposal to ban EU-owned vessels transporting Russian oil to third countries. The sanctions package has already come under criticism from some member states, and the article said that Hungary and Slovakia had been offered a longer time period lasting until end-2024 to comply with the proposals to ban Russian oil imports, with Hungary in particular saying more talks were needed to support oil-related sanctions. So with no further escalation and a softening in sanctions, oil prices fell back significantly amidst weak risk appetite more generally. Brent crude was down -5.74%, whilst WTI fell -6.09%, which follows 2 consecutive weekly gains for both. This morning oil prices are again lower with Brent and WTI futures -1.74% and -1.68% lower respectively. To the day ahead now, and central bank speakers include the Fed’s Williams, Barkin, Waller, Kashkari and Mester, along with ECB Vice President de Guindos and Bundesbank President Nagel. Data releases include Italy’s industrial production for March and Germany’s ZEW survey for May. Finally on the political side, President Biden will meet with Italian Prime Minister Draghi at the White House, and the UK state opening of Parliament is taking place, where the government outlines its legislative programme for the year ahead. Tyler Durden Tue, 05/10/2022 - 07:57.....»»

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

Futures Rise, Yields Dip Ahead Of August Jobs Data Futures and global markets are higher ahead of the NFP today at 8:30am ET (full preview here). At 7:40am ET, S&P futures rose 0.3% to 4,531 with Nasdaq futures up 0.2%. Major global markets are also higher, led by the UK (UKX +0.5%, SX5E +0.4%, SXXP +0.4%, DAX +0.1%), with the final Eurozone Mfg PMI is revised lower to 43.5 from 43.7, further boosting odds the ECB is done. On September ECB, Greg Fuzesi thinks that the July minutes and Isabel Schnabel’s comments yesterday (“growth had “moderated visibly”) both consistent with a pause in September ECB. He expects the final hike to happen in October after a pause in September. China reduced banks’ reserve requirement of foreign currency deposits, boosting the yuan, while China's Caixin Mfg PMIsurprised to the upside: 51.0 vs. 49.0 survey vs. 49.2 prior. Bond yields are lower and the Bloomberg dollar index is flat. Commodities are mostly stronger led by oil. Key macro focus will be the labor data release today (NFP, Unemployment Rate, Avg. Hourly Earnings, Labor Force Participation) at 8.30am ET and the Mfg ISM at 10am ET. In premarket trading, Broadcom dropped as much as 4.6% after its revenue forecast disappointed, signaling that demand for electronic components remains sluggish. Dell Technologies jumped 10% after it reported better-than-expected second-quarter revenue, driven by personal computers and data center hardware sales.  US-listed Chinese stocks advanced in premarket trading after Beijing and Shanghai both eased housing rules, a sign of further government support toward the economy. Here are some other notable premarket movers: 23andMe jumps 19% after it received FDA 510(k) clearance to report an additional 41 genetic variants in the BRCA1 and BRCA2 genes that increase risk for breast, ovarian, prostate and pancreatic cancer. Elastic rises 17% after its first-quarter results beat expectations and full-year forecast was raised. Eos Energy Enterprises soars 50% after announcing that the Department of Energy’s Loan Programs Office has issued an up to $398.6 million conditional commitment to the battery startup. Lululemon gains 3% as analysts lift their price targets on the the athleisure firm that boosted its net revenue guidance after the close on Thursday. MongoDB rallies 6.4% after a 55% boost to full-year EPS guidance at mid-point of the outlook range, prompting analysts to raise price targets. Nutanix jumps 18% as guidance beat expectations. Analysts noted a strong performance in renewals and a share buyback worth $350 million. SentinelOne gains 2% after estimate-beating results and raised guidance eased investor fears over competition. Shares in marijuana companies advanced as the Drug Enforcement Agency said Wednesday it would review its classification of cannabis. Canopy Growth gains 12%, Tilray Brands (TLRY) rises 3%, Aurora Cannabis (ACB) is up 2.5%. Tingo Group falls 14% as short seller Hindenburg Research posted a message about the agri-fintech firm on X. Friday’s payrolls report (previewed here) should provide further evidence of cooling in the still-tight US labor market. The question is whether that will be enough to stall the Federal Reserve’s tightening cycle or even lead to early rate cuts. Meanwhile, a rapidly weakening economy is likely to tilt the European Central Bank in favor of a pause this month, with no further hikes beyond the current rate of 3.75%, according to Morgan Stanley economists. Consensus expects a 170K NFP print with unemployment unchanged at 3.5%, and average hourly earnings dropping to 4.3% YoY from 4.4%. Here is a breakdown of payrolls forecasts by bank: 215,000 - Societe Generale 200,000 - Barclays 200,000 - UBS 175,000 - HSBC 170,000 - Credit Suisse 160,000 - Wells Fargo 155,000 - Morgan Stanley 150,000 - Deutsche Bank 149,000 - Goldman Sachs 130,000 - Citigroup 125,000 - JP Morgan Chase “I’m personally more inclined toward the soft landing scenario given the resilience of the labor market and inflation slowing down, so I’m not expecting any catastrophic numbers this afternoon,” said Harry Wolhandler, head of equities at Meeschaert Asset Management in Paris. “In any event, should there be bad surprises, the Fed now has room for maneuver to lower rates.” The Stoxx Europe 600 index rose 0.3%, trimming a bigger gain earlier in the session, with energy majors outperforming as crude oil headed for the biggest weekly advance since April. Miners jumped as China’s latest stimulus measures boosted prices of some industrial metals. Car makers declined, with Renault SA and Volkswagen AG falling more than 3% each after being downgraded to sell by UBS Group AG on increasing competition from Asia. Aurubis AG slumped as much as 18% after Europe’s top copper producer said it faces large losses due to a massive metal theft. Here are the other notable European movers: Johnson Matthey jumps as much as 14% after Standard Investments, the investment arm of US company Standard Industries, doubles its stake in the British chemicals maker Vestas gains as much as 3.8% after the wind-turbine manufacturer announced it is close to landing a large order to deliver turbines for a US wind park, a potential respite for the beleaguered industry European energy stocks outperform after the sector is double-upgraded to overweight at Morgan Stanley, predicting an extended period of strong free cash flow, buybacks and dividend growth WH Smith gains as much as 4.3% after Goodbody upgraded its recommendation on the UK newsagent and bookstore chain to buy, citing “encouraging momentum” going into the new fiscal year Boohoo shares rise as much as 10% on Friday, on track for their biggest weekly advance since Nov. 11, after Frasers increases its stake in the online fast fashion retailer Fielmann Group rises as much as 6.3% after the eyewear company raised its full-year guidance after its recent acquisition of SVS Vision amid what AlsterResearch sees as an attractive market. AmRest Holdings rise as much as 3.5% after the Polish restaurant operator reported better-than-expected 2Q earnings and gave positive outlook on current trading Aurubis slumps as much as 18% after Europe’s top copper producer releases an update identifying a large metal theft. Salzgitter, which has a 30% stake in Aurubis, drops 7.3% as it suspends guidance Renault and Volkswagen decline after both carmakers were cut to sell and given Street-low price targets by UBS, which cites the impact from factors including the rise of Chinese automakers BioMerieux falls as much as 7.7% after the French diagnostics firm’s second-quarter Ebit slightly missed estimates due to negative currency and M&A effects, overshadowing a beat on overall sales Earlier in the session, Asian stocks advanced and headed for their second weekly gain, as Chinese equities climbed following more stimulus measures from Beijing. Japan’s benchmark also rose, eyeing an historic milestone. The MSCI Asia Pacific Index rose as much as 0.5%, led higher by Samsung and several Japanese firms. China shares traded higher and metals looked set to extend this week’s advances after China's government allowed the nation’s largest cities to cut down payments for home buyers and encouraged lenders to lower rates on existing mortgages as well as on deposits. Meanwhile, Shanghai and Beijing eased home-buying mortgage rules for residents. Hong Kong’s market was shut as the city braced for what may be the strongest storm to hit in at least five years. The yuan also strengthened after China’s central bank reduced the foreign exchange reserve requirement ratio for financial institutions in a bid to support the currency. The currency has since pared its gains. Sentiment was further buoyed by an unexpected rise in manufacturing data that advanced to 51 in August, the highest reading since February, according to a Caixin survey. Japan’s Topix benchmark gained nearly 1%, boosted by Sony, putting it on course for its highest close since 1990. The index posted its eighth consecutive month of increase in August — the longest winning streak since 2013 — and the gauge was now set for the best weekly advance since October. Data earlier showed companies’ profits rose 11.6% on an annual basis in the second quarter. Australia's ASX 200 declined further under 7,300 and was weighted by its metals names as Fortescue Metals slumped after its CFO left three days after the CEO's departure. Korea's KOSPI was underpinned by the South Korean trade data which printed better than feared. Indian stocks posted their biggest advance in two months on Friday as metals and utilities led the rally across sectors after strong economic data boosted investor sentiment. The S&P BSE Sensex Index rose 0.9% to 65,387.16 in Mumbai, while the NSE Nifty 50 Index advanced by a similar measure as both gauges surged the most since June 30. The sharp move pushed the benchmarks by at least 0.7% higher for the week, snapping their retreat for preceding five weeks. Stocks in India have been receiving a chunk of foreign flows coming to emerging markets. For August, foreigners bought $1.6 billion of local shares while selling Taiwan, South Korea and Indonesia, and extending a selloff in China. In FX, the Bloomberg Dollar Spot Index was little changed on Friday but down 0.2% this week, set to halt six straight weeks of gains after data showed the Federal Reserve’s preferred measure of underlying inflation posted the smallest back-to-back increases since late 2020. Focus now is on US payrolls data later on Friday, which is expected to show the US labor market likely cooled in August Further dollar declines could be limited. “The path to more pronounced dollar depreciation — further moderation in the US economic data, including nonfarm payrolls report, combined with less negativity abroad — has been narrowing lately,” wrote Goldman Sachs strategist Karen Fishman, and since Goldman's sellside desk is always wrong, it means the dollar is about to crater. EUR/USD recouped some lost ground ahead of the key US data. The common currency fell yesterday after bearish comments from European Central Bank officials fueled concern the euro region may be heading for stagflation. USD/JPY little changed at 145.49. The pair recovered from an intraday low of 145.24 after Japanese Finance Minister Shunichi Suzuki said sudden moves in the foreign currency market aren’t desirable, and he will closely watch movements A 0.3% rise in the Aussie dollar on China’s FX RRR cut was reversed in part by leveraged selling shortly after by weak domestic home loan data. Move extended under weight of early London names selling to partially fill in option and exporter related bids under 0.6450 strikes, according to traders In rates, treasuries were mixed in early US trading ahead of the August employment report, with the curve steeper. With Fed swaps pricing in about 50% odds of another rate hike this year, report is anticipated to show 170k nonfarm payrolls increase, smallest in more than two years; crowd-sourced whisper number is 155k. Yields remain within 2bp of Thursday’s closing levels; Thursday’s ranges included weekly lows for 10-year to 30-year tenors. 2s10s and 5s30s spreads are wider by 2bp-3bp, paced by curve-steepening in most euro-zone bond markets. The economic calendar also includes August final S&P Global US Manufacturing PMI at 9:45am, July construction spending and August ISM manufacturing at 10am and August vehicle sales throughout the day. In commodities, oil is set for a weekly gain after Russia signaled that it would extend export curbs and US inventories dropped further. Gold headed for the second weekly advance. Looking to the day ahead now, and the main highlight will be the US jobs report for August. Otherwise, we’ll get the global manufacturing PMIs for August and the ISM manufacturing reading from the US. From central banks, we’ll hear from the Fed’s Bostic and Mester. Market Snapshot S&P 500 futures up 0.2% to 4,526.00 MXAP up 0.4% to 162.78 MXAPJ up 0.3% to 508.53 Nikkei up 0.3% to 32,710.62 Topix up 0.8% to 2,349.75 Hang Seng Index down 0.5% to 18,382.06 Shanghai Composite up 0.4% to 3,133.25 Sensex up 0.8% to 65,348.50 Australia S&P/ASX 200 down 0.4% to 7,278.30 Kospi up 0.3% to 2,563.71 STOXX Europe 600 up 0.2% to 459.33 German 10Y yield little changed at 2.49% Euro little changed at $1.0852 Brent Futures up 0.3% to $87.13/bbl Gold spot up 0.1% to $1,942.47 US Dollar Index little changed at 103.57 Top Overnight News from Bloomberg Markets settled into a holding pattern ahead of Friday’s key US jobs data, with European stocks and American equity-index futures edging higher, Treasury yields flat and a gauge of the dollar steady. China intensified efforts to stimulate the economy and support its currency, as investor concerns over the growth outlook persist. The central bank will trim the amount of foreign currency deposits banks are required to hold as reserves for the first time this year, the People’s Bank of China said Friday. Dollar General Corp., already on track for its first annual share decline, fell again after cutting its profit forecast for the second straight quarter amid rising labor costs and “softer sales trends.” US and other Group of Seven nations increasingly see evidence of deep-seated structural problems in China that ultimately will strengthen the West’s hand against a weakening geopolitical competitor. The view emerging from officials in Washington, Rome, Tokyo and other capitals, who spoke with Bloomberg News mostly on condition of anonymity in recent days, is that the dominant economic narrative that has guided the flows of capital around the globe for decades is flipping fast. A more detailed look at global markets courtesy of Newsquawk APAC stocks traded mixed following a similar lead from Wall Street, whilst Hong Kong markets were closed due to Typhoon Saola. ASX 200 declined further under 7,300 and was weighted by its metals names as Fortescue Metals slumped after its CFO left three days after the CEO's departure. Nikkei 225 opened in the red but quickly trimmed losses with the rebound spearheaded by the energy sector. KOSPI was underpinned by the South Korean trade data which printed better than feared. Shanghai Comp opened firmer after large Chinese banks cut their deposit rates, while the PBoC also lowered down payment for first and second-time home buyers and announced a cut to the FX RRR. Modest upticks were seen after the Caixin PMI Finals were surprisingly revised into expansion territory. Top Asian News PBoC is to cut FX RRR by 2ppts to 4% (prev. 6%) from September 15th, according to the central bank. China's Global Times, on the PBoC FX RRR cut, said "This move aims to enhance the ability of financial institutions to utilize foreign exchange capital." Several major Chinese banks lowered their deposit rates, including ICBC, China Construction Bank, Bank of Communications, and Bank of China. China's Shenzhen City will suspend work, businesses, transportation, and markets from Friday afternoon amid Typhoon Saola, according to the Shenzhen Government. PBoC sold CNY 101bln via 7-day reverse repos with the rate at 1.80% for a CNY 120bln net injection. China to take additional action to revive the property sector, via Reuters citing sources; incl. relaxing home purchase curbs and removing caps on new homes. Softbank's (9984 JT) Arm Holdings is expected to set a price range for its IPO next week, with plans to price its shares on September 13th and trading to start the following day, according to Reuters sources. Japanese Finance Minister Suzuki said FX moves should be set by the market and should reflect fundamentals; sudden FX moves are undesirable, according to Reuters. European bourses are in the green, Euro Stoxx 50 +0.3%, as modest upside creeps in following a tentative/slightly subdued open with fundamentals light ahead of key US data. Sectors are primarily positive, Energy the clear outperformer after an MS upgrade and broader benchmark action while Autos lag following a negative Volkswagen broker move and as Tesla cuts prices in China for some models. Stateside, futures are in-fitting with Europe and are slightly firmer, ES +0.2%. with the tone equally as tentative before NFP & ISM Manufacturing. Top European News ECB's de Guindos said the latest data from July and August point towards economic deceleration in Q3 and probably in Q4, and the ECB needs to keep working to bring inflation back to the 2% target. He said the latest data from inflation in August has been very similar to July, and the rate decision in September is still up for debate. He said data in the next few days is key to the September ECB decision, according to Reuters. ECB's Villeroy says after overall inflation peaked and underlying inflation has also peaked since April and appears to have begun its decline. This encouraging sign is still far from sufficient. Options are open at the next and upcoming meetings. Very close to a peak in rates, far from the point where we could consider cuts. Keeping rates high for long enough matters more than the level. Will slightly revise up France's 2023 GDP forecast. ECB's Vujcic says inflation data in August was in-line with expectations, economic activity is slowing faster than forecast. Will not know in September, October or November where the terminal is. Inflation will ease in the coming months but there is a risk that disinflation will stall above the target. BoE's Pill says BoE needs to be particularly wary about letting an inflation persistence dynamic to set in; we have not yet seen a downturn in core inflation which would reassure us. FX Buck bounces from overnight lows, but is contained overall ahead of US payrolls, DXY sits within 103.480-770 range. Franc a tad firmer in line with Swiss YY CPI vs consensus, USD/CHF towards base of 0.8813-46 parameters. Euro, Pound, Yen and Loonie all rangy pre-NFP and Canadian GDP, EUR/USD around 1.0850 and surrounded by hefty expiries, Cable hovering below 1.2700, USD/JPY pivoting 145.00 and USD/CAD straddling 1.3500. Yuan underpinned by multiple factors including 200 bp RRR cut and surprise upgrade to Caixin Chinese manufacturing PMI to growth from contraction, USD/CNY close to 7.2450 and USD/CNH sub-7.2400 at one stage. PBoC set USD/CNY mid-point at 7.1788 vs exp. 7.2967 (prev. 7.1811) Fixed Income Debt succumbs to some consolidation as the turn of the month comes with key US macro releases via NFP and the manufacturing ISM. Bunds, Gilts and T-note all in negative territory after Thursday's rallies and within 133.13-132.76, 95.49-14 and 110-31+/27 respective ranges. Commodities Crude benchmarks are in the green but only modestly so and taking impetus from the USD rather than any specific crude driver with the overall tone tentative pre-NFP. Dutch TTF has pared back to near the unchanged mark after initial gains as Chevron workers rejected the first mediation package ahead of potential strikes on September 7th. Spot gold is at the top-end of parameters but as above this is relatively modest with specifics light while base metals have returned firmly to the green as China unveils further stimulus. Crude futures were on a slightly firmer footing and extended on the prior session’s gains, with Brent testing 87/bbl to the upside as it takes aim at the August high of USD 87.37/bbl. Spot gold saw an uptick as the DXY pulled back but price action remains within yesterday’s range and under USD 1,950/oz ahead of NFPs. Copper futures were lifted on the aforementioned China announcement, with 3M LME copper briefly topping USD 8,500/t to the upside. Chevron's (CVX) Australia LNG workers reject the Co's bargaining offer, according to unions; less than 1% of the Wheatstone and Gorgon downstream workforce voted in support of the offer, according to Reuters. Subsequently, sources report that CVX and unions will meet for talks next week. Russia introduced a 7% export duty on a number of fertilisers from September 1st, according to Interfax. Geopolitics Japan imposed additional sanctions against North Korea, according to Reuters. US Event Calendar 08:30: Aug. Change in Nonfarm Payrolls, est. 170,000, prior 187,000 Change in Private Payrolls, est. 148,000, prior 172,000 Change in Manufact. Payrolls, est. zero, prior -2,000 08:30: Aug. Average Hourly Earnings MoM, est. 0.3%, prior 0.4% Average Hourly Earnings YoY, est. 4.3%, prior 4.4% Average Weekly Hours All Emplo, est. 34.3, prior 34.3 08:30: Aug. Unemployment Rate, est. 3.5%, prior 3.5% Underemployment Rate, prior 6.7% Labor Force Participation Rate, est. 62.6%, prior 62.6% 09:45: Aug. S&P Global US Manufacturing PM, est. 47.0, prior 47.0 10:00: July Construction Spending MoM, est. 0.5%, prior 0.5% 10:00: Aug. ISM Manufacturing, est. 47.0, prior 46.4 Central Bank Speakers   06:00: FEd’s Bostic Speaks on US Monetary Policy 09:45: Fed’s Mester Speaks on Inflation DB's Jim Reid concludes the overnight wrap Welcome to September and to an early month payrolls Friday. Spare a thought for me this weekend as I’ll be refereeing 40 plus over excited 6 year olds playing Laser Quest as our twins have their birthday party on Sunday. My advice to all the graduates just joining the industry and reading this is to have your kids young while you have lots of energy. Then when you get to my age you can have easy paced relaxing weekends rather than the ones I have. I'm going to be especially exhausted by Monday. Since it’s the start of the month, we’ll shortly be releasing our monthly performance review for August, which has been a pretty challenging one for financial markets albeit one where markets had a much better last week or so. In the month we had a further softening in the economic data, particularly in Europe and China, which has led to growing concern about the near-term outlook. At the same time, there’s been rising speculation that interest rates are set to remain higher for longer, and earlier in the month we even saw the 10yr Treasury yield hit a post-GFC high after both a US government debt downgrade and a much higher Treasury issuance profile announced than expected. So a lot going on in a holiday heavy month. See the full report in your inboxes shortly. August might not have been a great month overall, but since Jackson Hole last week, we’ve actually had a decent market rally though one that lost a little momentum in the last 24 hours. Yesterday saw the S&P 500 (-0.16%) end a four-day winning streak after a sell off late in the US session, whilst the 10yr Treasury yield (-0.7bps) retreated for a 5th day running. Fresh China stimulus overnight (more below) has restored a little momentum as we start September. For much of the final day of the month yesterday, markets were supported by the data alongside several central bank speakers who sounded cautious about further rate hikes. For instance in the US, the weekly initial jobless claims fell back to 228k over the week ending August 26 (vs. 235k expected), which is their third consecutive decline. Furthermore, the PCE inflation numbers for July were also in decent shape, and that’s the number the Fed officially targets. The important takeaway was that the year-on-year number for core PCE only rose a tenth to 4.2%, which is beneath the 4.3% estimate that Chair Powell cited in his speech last week. So things are running a bit better than the Fed was expecting even a week ago. Slightly concerningly, the supercore services measure often referred to by the Fed was up a strong +0.45% on the month. But more encouragingly, our US economists noted that the 1-month annualised rate of trimmed mean PCE was only +2.4%, its lowest since spring 2021. So take your pick. In conjunction with the inflation data, we had several remarks from central bank officials that added to hopes they might be done with their rate hikes. That included Atlanta Fed President Bostic, who said that “I feel policy is appropriately restrictive”, and that “we should be cautious and patient and let the restrictive policy continue to influence the economy, lest we risk tightening too much and inflicting unnecessary economic pain.” Meanwhile at the ECB, Isabel Schnabel of the Executive Board said that recent developments “point to growth prospects being weaker than foreseen in the baseline scenario” in the June projections. She also said that whilst further rate hikes could be warranted, there was also an acknowledgement that “should our assessment of the transmission of monetary policy suggest that the pace of disinflation is proceeding as desired, we may afford to wait until our next meeting”. We also got the accounts of the ECB’s July meeting, which showed a moderation of the ECB’s hawkish bias. See our European economists’ reaction note here. When it comes to the ECB’s decision in a couple of weeks, yesterday brought another piece of the jigsaw with the flash CPI print for August. That showed headline inflation remaining at +5.3%, whilst core inflation fell back two-tenths to +5.3%. While the core print was in line with consensus, our economists note that the underlying momentum was more encouraging, with services inflation easing slightly despite upside in volatile package holidays. The global trend, the inflation data, and the Schnabel remarks helped dial back the chances of a rate hike in September, with market pricing moving from a 55% chance at the previous close, down to 40% immediately prior to the CPI print (after Schnabel’s comments) and to 24% by the close. That’s the lowest chance the market has given a September hike since May, so as it stands we’re getting to the point where it would actively be a surprise if the ECB didn’t pause. In turn, those expectations of a pause led to a significant rally among European sovereign bonds, with yields on 10yr bunds (-8.1bps), OATs (-8.3bps) and BTPs (-7.7bps) seeing big declines. Looking forward, we’ve got a couple of important releases today that might give us extra clues on the hard vs soft landing debate. The most important will be the US jobs report for August, which is out at 13:30 London time. Our US economists expect nonfarm payrolls growth to slow to +150k (consensus at +170k). That would be the slowest print since December 2020, and they see that causing the unemployment rate to move up a tenth to 3.6%. The other release of note will be the ISM manufacturing, which has now been in contractionary territory for 9 months in a row. With another round of data to look forward to, US equities were in something of a holding pattern. Having started the day up by nearly +0.4% in the morning, the S&P 500 ended up closing -0.16% down after a late sell-off. Healthcare services (-2.65%) and banks (-0.73%) were among the underperformers. Meanwhile, tech stocks outperformed, with the NASDAQ (+0.11%) hitting a 4-week high as it eked out a fifth consecutive gain. Over in Europe, equities saw a subdued performance, with the STOXX 600 down -0.20%. Asian equity markets are trading higher this morning as China ramped up its efforts to support the economy after the People’s Bank of China (PBOC) reduced the amount of foreign exchange that financial institutions must hold as reserves for the first time this year. Starting from September 15, the central bank will lower the forex reserve ratio to 4% from the current level of 6%, a move aimed at reining in yuan weakness. The offshore yuan did spike +0.5% on the news but has settled only +0.1% higher as we type. Additionally, China’s Caixin manufacturing PMI rose to 51.0 in August, the highest reading since February compared to a level of 49.2 in July. In terms of equity market moves, the Nikkei (+0.53%) is leading gains overnight, while the CSI (+0.51%), the Shanghai Composite (+0.25%), and the KOSPI (+0.17%) are also trading in positive territory. Elsewhere, trading in Hong Kong has been suspended for today as the city is bracing itself for super Typhoon Saola. S&P 500 (+0.10%) and NASDAQ 100 (+0.07%) futures are trading slightly higher. Looking back at yesterday’s other data, there was a decent +0.8% jump in US personal spending in July (vs. +0.7% expected) supporting the evidence of strong start to the quarter. However, the savings rate fell back to an 8-month low of 3.5% and incomes were a tenth below expectations at +0.2%. Otherwise, the MNI Chicago PMI for August rose to a one-year high of 48.7 (vs. 44.2 expected) and 42.8 last month. Earlier in the day, German retail sales for July disappointed (-0.8% vs +0.3% expected) in a latest sign of growth struggles for Europe’s largest economy. To the day ahead now, and the main highlight will be the US jobs report for August. Otherwise, we’ll get the global manufacturing PMIs for August and the ISM manufacturing reading from the US. From central banks, we’ll hear from the Fed’s Bostic and Mester. Tyler Durden Fri, 09/01/2023 - 08:09.....»»

Bonds, Bitcoin, Big-Tech, & Bullion Soar As 'Bad News' Is Good News Again It's been an ugly couple of days for micro- and macro- data in the US (and globally) as retailers signal a far more-stressed American consumer than the market would like to believe, and global PMIs scream stagflation with 'sticky' prices rebounding as new orders tumble and the false optimism of the Services sectors' rebounds evaporates in a red mist of reality. This week has seen the biggest set of 'bad news' since April... Source: Bloomberg And that bad news prompted a very aggressive bid for global bonds with USTs tumbling 8-12bps on the day, leaving the long-end down 9bps on the week (but 2Y +2bps still) Source: Bloomberg And in true US equity market fashion, that 'bad news' bid for bonds is 'good news' for long-duration stocks and we saw Nasdaq dramatically outperforming on the day (although all the majors were green today ahead of NVDA's earnings). Some late-day profit-taking wiped some of the lipstick off with The Dow lagging... The bad news prompted a dovish drop in the market's Fed rate expectations, erasing the week's hawkish drift... Source: Bloomberg And for those hoping for a hawkish Powell deja vu all over again, we note that financial conditions have actually been tightening in recent weeks both mechanically... Source: Bloomberg ...and anecdotally with SLOOS showing tighter credit conditions, home mortgage applications collapsing to 1995 lows, Dallas Fed banking conditions significantly tighter, and Macy's et al. commenting on surging credit card delinquencies. The dollar dived on the dovish 'bad news' bias (after surging in the European session on weaker Euro)... Source: Bloomberg ...which sent gold spiking back above $1900 (Spot)... Source: Bloomberg ..and helped support crypto with Bitcoin bouncing back above $26,000... Source: Bloomberg The yield curve (2s30s) inverted deeper today, flattening back to last week's lows... Source: Bloomberg ...as the 2Y Yield tried to get back above 5.00% but failed notably... Source: Bloomberg Oil slipped lower on the PMIs signaling demand fears - although WTI did bounce off one-month lows... Peloton was puked hard to a record low as Americans prefer the Ozempic shortcut to fat loss... Foot Locker stunk - suffering its worst day ever as the stock fell to its lowest since 2010 (and along wioth it all of Cramer's club members capital)... Nike down for the 10th day in a row - its longest losing streak ever - falling to its lowest since Nov 2022... Finally, NVDA bounced back to Monday's lows - teetering on the brink ahead of earnings tonight... 0-DTE call-buyers provided the floor for NVDA today Let's hope this analogy finally snaps... Because Nasdaq's Advance/Decline line just hit a record low... Go Jensen. Tyler Durden Wed, 08/23/2023 - 16:00.....»»

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

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

S&P Futures Hit 4,300 After Entering Bull Market After the S&P closed in a bull market from its October 2022 lows yesterday, futs were again paralyzed, their 4th consecutive session with virtually no changes in the overnight session. As of 8:00am ET, S&P futures were up 1 point or less than 0.05% to 4,300 while Nasdaq futures were also modestly in the green; bond yields are 2-4bp higher this morning, most markedly at the short end. The Bloomberg dollar index is strengthening while oil prices are edging higher after yesterday’s drop. Gold prices are little changed, while iron ore continues its weekly ascent. In premarket trading, Tesla shares jumped 4.5%, up more than 130% from its January lows, and was on track to rise for an 11th straight session as General Motors Co. announced it’s joining the company’s charging network. GM advanced 3.5%. Target Corp. shares retreated 1.3% after Citigroup Inc. analysts cut their rating, citing slower foot traffic and tough competition. Carvana rose as much as 7.6% in premarket trading, following a record 56% surge on Thursday after the extremely shorted used-car retailer said its operations were improving in the second quarter. Here are some other notable premarket movers: Adobe shares rise 2.5% in premarket trading after Wells Fargo upgrades the stock to overweight and lifts its price target to a Street-high, citing greater confidence in tailwinds from artificial intelligence. Braze shares gained as much as 14% in premarket trading on Friday, after the infrastructure software company raised its forecast for the year. Oppenheimer analysts said Braze is executing well in a challenging operating environment. DocuSign shares rose as much as 9% in premarket trading on Friday, after the e- signature software company reported first-quarter results that beat expectations and raised its full-year forecast. Analysts said the results were impressive and the outlook for next quarter seems conservative. Planet Labs fell 18% postmarket after the satellite imaging company cut its revenue forecast for the full year and sees a wider adjusted Ebitda loss. Yesterday, jobless claims surprised to the upside, which pushed yields lower and sent stocks higher after expectations of a June rate hikes were doused; in equities, we also saw some reversion to the recent RTY v. NDX outperformance. SPX closed at 4293, implying 20% gains since the October low; entering a bull market. Overall, today’s macro calendar remains quiet as investors are waiting for CPI, Fed, ECB, and BOJ next week, and may explain why investors are reluctant to take big positions ahead of next week’s looming interest-rate decisions. Unexpected hikes from two central banks this week have raised speculation that policymakers may have to keep interest rates higher for longer. Meanwhile, US data pointing to a cooling labor market has supported the consensus view that the Fed is likely to pause.   “The backdrop of late has been one of heightened macro uncertainty, but with inflation still running uncomfortably high,” ING rates strategists led by Benjamin Schroeder wrote in a note. “Our house view is that the Fed is already at its peak policy rate, though with the caveat that a higher CPI reading could still eke out a hike next week. In any case, the Fed is likely to leave the door open to more.” “If you look at where the market sits now in absolute terms, it’s not too hard to make a case that it’s justified at current levels,” said Matt Britzman, equity analyst at Hargreaves Lansdown. “The worry is how fast it’s risen and the concentration within a select few names. A pullback at the top wouldn’t be too much of a surprise as markets take a breather.” European stocks erased early gains on Friday and headed for a weekly decline as investors monitored a deteriorating economic outlook, while chemicals makers slumped following a glum forecast from Croda International Plc. The Stoxx 600 Index was down 0.4%; chemicals dropped 2%, with Croda International Plc set for its worst day since 2000 after saying it expects customer destocking in consumer and industrial end-markets to persist into the second half of the year. Utilities and real estate shares gained. Here are the most notable European movers: Orsted rises as much as 4.5% following the Danish wind-farm operator’s capital markets day. Oddo upgrades to neutral and says worst-case scenarios are now “off the radar screen” Ceconomy shares rise as much as 5.7% after BNP Paribas Exane upgraded the German consumer electronics retailer to outperform from neutral, saying that the company now has the right set-up Norsk Hydro shares rise as much as 2.1% after Morgan Stanley said the Norwegian aluminum company’s offer for Warsaw-listed Alumetal is still attractive, despite the higher price ALK-Abello rises as much as 2.6% after Danske Bank raised its recommendation to buy, saying Thursday’s positive data release from the allergy drugmaker’s dust mite allergy tablet is a relief Network International shares rise as much as 6%, to 385p, after Brookfield Asset Management offered to buy the company for 400p per share in a deal recommended by the company’s directors Croda shares drop as much as 16% in early London trading to the lowest since July 2020 after the ingredients maker’s pretax profit forecast fell well short of the consensus analyst estimate; Shares in chemicals makers see wide drops following the downbeat trading update from Croda, with fragrance and flavor maker Givaudan as much as -3.2%, Symrise -4.1%, BASF -2.6%, Bayer -2% Boohoo shares drop as much as 4.9% to the lowest since Jan. 3 after Numis Securities cut its rating on the online fast fashion retailer to reduce from hold, citing risks ahead Earlier in the session, Asian stocks rose, with the regional benchmark heading for a second week of gains amid a rally in technology shares in Japan, South Korea and Taiwan. The MSCI Asia Pacific Index rose as much as 0.8%, driven by gains info technology shares. Samsung, TSMC and Sony were among the biggest boosts. Chinese equities underperformed as data showed the nation’s inflation remained close to zero in May as the economy’s recovery weakened, Hang Seng stocks were modestly firmer after early tech gains evaporate. Still, overseas investors are increasingly optimistic about A shares, as evidenced by growing inflows, according to a report in the Financial News, which is backed by the People’s Bank of China. Japan’s Nikkei 225 rose nearly 2%, set to cap its ninth-straight week of gains - the longest stretch of gains since 2017 - ahead of the Bank of Japan’s policy decision next week and annual general meetings later this month. The Topix jumped 1.3% as Japanese shares resume gains after two-day slide. Heavy foreign buying amid easy-money policy, company reforms and signs of stable inflation have helped drive the world’s best rally so far this year among major markets. “In addition to relative advantages for earnings and macro climate, the Japanese market has many catalysts,” MBC Nikko strategist Hikaru Yasuda wrote in a note. “This should mean overseas investors are unlikely to pull out soon, so we look for buying interest to spill over from large-cap exporters to domestic-demand stocks.”  Kospi, Taiex and ASX 200 indexes were also in the green.  In FX, the Turkish lira extended its decline to an all-time low against the dollar, taking its weekly drop to 11%, after Erdogan appointed a former First Republic Bank CEO as his new central bank head. The yuan weakened after Chinese producer prices fall the most since 2016, adding to PBOC easing speculation. The Bloomberg Dollar Spot Index rose 0.1% but was poised to end the week 0.5% lower, marking its second week of losses on expectations the Federal Reserve is nearing the end of this hiking cycle. The USDJPY is up 0.4%, boosted by short covering in the dollar during Asian trade; EURUSD down 0.2%. In rates, treasury yields ticked higher on Friday, with the 10-year rate at 3.75% and with yields cheaper by 2bp to 5bp across the curve near session highs after yesterday post-initial claims jump. Yields were cheaper by ~5bp across front-end of the curve with 2s10s, 5s30s spreads flatter by 1bp and 2bp on the day; 10-year yields around 3.75%, cheaper by 3.5bp vs Thursday close with bunds and gilts outperforming by 1.5bp and 3.5bp in the sector. The yield on the two-year Treasury yield rose 4bps to 4.55%; traders are betting on a roughly 30% possibility that the Fed will raise interest rates at its meeting on Wednesday, while the possibility of a hike at its July meeting stands around 90%. Front-end-led losses flatten spreads ahead of next week’s Fed meeting, where around 8bp of rate-hike premium remains priced into Fed-dated swaps. Supply concession may emerge ahead of Monday’s heavy auction schedule, including 3- and 10-year note sales. No significant events are scheduled for Friday’s US session. Elsewhere, Australian yields about 4-5bps weaker across the curve. JGB futures remain rangebound. In commodities, WTI crude rose to $71.50; gold quiet at $1,964. Saudi Crown Prince MBS reportedly threatened major economic pain on the US economy last fall amid the oil feud, according to Washington Post. Russian Ambassador to Turkey says they continue consultations, but there are no grounds which exist for a grain deal renewal, via Ria. Oh, and confirming yesterday's big fake news, Iran's IRNA confirmed there is not a temporary deal to replace the JCPOA on the agenda. It's a quiet day ahead with nothing major scheduled in the US, data releases include Italian industrial production for April, and the Canadian employment report for May. Otherwise from central banks, we’ll hear from ECB Vice President de Guindos, along with the ECB’s de Cos and Centeno. Market Snapshot S&P 500 futures down 0.2% to 4,290.50 MXAP up 0.8% to 164.96 MXAPJ up 0.6% to 520.42 Nikkei up 2.0% to 32,265.17 Topix up 1.5% to 2,224.32 Hang Seng Index up 0.5% to 19,389.95 Shanghai Composite up 0.6% to 3,231.41 Sensex down 0.3% to 62,682.10 Australia S&P/ASX 200 up 0.3% to 7,122.51 Kospi up 1.2% to 2,641.16 STOXX Europe 600 little changed at 460.34 German 10Y yield little changed at 2.43% Euro down 0.2% to $1.0764 Brent Futures down 0.3% to $75.70/bbl Gold spot down 0.2% to $1,961.64 U.S. Dollar Index up 0.18% to 103.53 Top Overnight News from Bloomberg US stock futures indicated a pause after the S&P 500’s rally to a bull market, while the dollar headed for its biggest weekly loss in a month on bets that the Federal Reserve is nearing the end of its hiking cycle. Most economists expect the Federal Reserve to pause interest-rate increases next week for the first time in 15 months and leave policy on hold through December, even as it confronts a resilient US economy and persistent inflation. The S&P 500’s journey to a bull market is unprecedented in many ways, not least of which is that it was completed amid growing warnings about a global recession. UBS Group AG sealed an agreement with the Swiss government to cover 9 billion francs ($9.9 billion) of losses it could incur from the rescue of Credit Suisse Group AG, clearing a major hurdle to closing the historic takeover. China’s inflation remained close to zero in May, giving the central bank scope to ease monetary policy as calls grow louder for more interest rate cuts to spur the economy’s recovery. Bank of Japan officials see little need to adjust its yield curve control program at a policy meeting next week given improvement in the functioning of the bond market and the smooth shape of the yield curve, according to people familiar with the matter. A clutch of Russia’s top tycoons are reaping billions of dollars worth of dividends, getting payouts from their companies even in the face of sanctions over the war in Ukraine. A more detailed look at global markets courtesy of Newsquawk APAC stocks traded mostly higher following the gains on Wall St where the S&P 500 entered a bull market and tech outperformed as yields declined due to labour market concerns after Initial Jobless Claims spiked to the highest level since October 2021. ASX 200 was led by strength in the tech and the mining industries but with upside capped by pressure in the energy sector after oil prices dropped on reports that Iran and US were near an interim deal on nuclear enrichment and oil exports which was later refuted by the White House. Nikkei 225 spearheaded the advances amongst the major indices with the index back above the 32,000 milestone. Hang Seng and Shanghai Comp. were indecisive after weaker-than-expected Chinese inflation data continued to point to an uneven economic rebound, although there were some hopes of a thawing in US-China relations with Secretary of State Blinken’s delayed trip to Beijing said to be in planning for next week. Top Asian News US Secretary of State Blinken's long-delayed Beijing trip is now in planning for next week, according to Politico. BoJ Governor Ueda said they will patiently maintain current monetary easing and noted that by supporting the economy, they can create a positive economic cycle where wages rise on a nominal and real basis. Ueda also stated that retaining BoJ's ETF holdings is among the options, but added that what they will do with their holdings in the event of an exit is something that must be discussed at the BoJ's policy meeting at the time. BoJ reportedly said to still see a need to continue monetary stimulus, via Bloomberg citing sources; hitting price goal as out of sight, little need to tweak YCC in June. Reportedly sees inflation as stronger than expected. PBoC Governor says Q2 GDP YY growth is expected to be high, primarily due to base effects, CPI expected to gradually increase in H2, will be above 1.0% YY by December. European bourses are contained as the complex once again struggles for direction amid a lack of fresh/scheduled catalysts, Euro Stoxx 50 -0.2%. Sectors are mixed with Basic Resources outperforming amid broader metals action while Chemicals lag after a Croda profit warning. Stateside, futures are slightly in the red with action very much contained given the mentioned lack of fresh drivers thus far and scheduled, ES -0.1%. Top European News UK is to introduce a floor for oil and gas windfall tax with Chancellor Hunt expected to confirm plans to introduce a floor on the 35% levy so that it will only apply if oil and gas prices are above a certain level, according to FT. FX Yen bulls out-doved by BoJ sources as USD/JPY rebounds further from sub-139.00 lows towards 140.00. DXY boosted by Yen retreat and index back over 103.500 from 103.310 at one stage. Norwegian Krona boosted by hotter than forecast inflation data, with EUR/NOK towards base of 11.6500-11.7700 range. Yuan back under pressure on the back of soft Chinese CPI and PPI metrics, as USD/CNY and USD/CNH eye 7.1300 and 7.1400 respectively. Loonie underpinned around 1.3350 vs Greenback pre-Canadian labour market report and post-BoC surprise hike. PBoC set USD/CNY mid-point at 7.1115 vs exp. 7.1122 (prev. 7.1280) Turkish President Erdogan appointed Hafize Gaye Erkan as the Central Bank Governor and appoints former Governor Kavcioglu as head of the banking watchdog, according to Reuters. Fixed Income Bonds out of lock-step approaching end of the week and awaiting big risk events including Fed, ECB and US CPI data. Bunds meander within 133.85-51 range, Gilts outperform between 95.99-96.58 bounds and T-note lags near 113-13 trough vs 113-23 peak. JGBs underpinned after BoJ sources report chiming with guidance signalling no YCT tweak in June. Commodities Crude benchmarks are posting upside of circa. USD 0.20/bbl on the day and reside towards the upper-end of exceptionally narrow sub USD 1.00/bbl parameters. Price action which is well within the bounds of recent sessions, nonetheless the complex is set to see the week out with downside of just over USD 3.00/bbl, with the bulk of this occurring on Monday post-OPEC+. Spot gold is essentially unchanged and has been gradually drifting off Thursday’s WTD best of USD 1970/oz, where the 21-DMA also resides, as the USD continues to firm up. Base metals are generally contained and are proving to be a touch more resilient vs their precious counterparts against the USD’s strength and are perhaps gleaning support from the increasing calls for official Chinese support. Saudi Crown Prince MBS reportedly threatened major economic pain on the US economy last fall amid the oil feud, according to Washington Post. Russian Ambassador to Turkey says they continue consultations, but there are no grounds which exist for a grain deal renewal, via Ria. Crypto US SEC Chair Gensler commented that the crypto market is full of Ponzi schemes and frauds which can only be cleaned up with securities regulations, according to Cointelegraph. Binance US said it is suspending US currency deposits in the aftermath of the SEC lawsuit and its banking partners are preparing to pause fiat USD withdrawal channels as soon as June 13th, according to Reuters Geopolitics US President Biden said the US will have funding for Ukraine for as long as it takes, according to FT. It was also reported that the US Pentagon is readying a new USD 2bln Ukraine air defence package, according to Reuters. Two reportedly injured in a drone strike in Voronezh, Russia, via Reuters citing regional governor. Russian General Staff Chair Gerasimov invites his Chinese counterpart to visit Russia, adding relations are at the highest level, joint army training between China and Russia is important, should be ongoing. There is reportedly not a temporary deal to replace the JCPOA on the agenda, via IRNA. US Event Calendar Nothing major scheduled DB's Jim Reid concludes the overnight wrap I got a lot of responses but no workable solution to my plea for help on Wednesday given that my free time was starting to be totally eliminated by kids sports, clubs and activities. Let me give you tomorrow's itinerary as an example of the relentlessness. 9am: The 3 kids have a group golf lesson that I take them too while my wife sets up a parents vs teachers vs pupils mini netball tournament at the kids' school. 11am: I rush to take Maisie for her swimming lesson and swim with the twins while she does that. 1145am: After getting all dried and changed we go to the school to watch the netball tournament where my wife has her annual match. 1pm: I leave for a football tournament with the twins that starts at 2pm and goes on until 5pm. I then stuff food down them and we rush to see Maisie perform in her artistic swimming summer performance at 530pm. She has two shows. The second one starts at 730pm and after she finishes her second run I take the twins home to bed and my wife and Maisie get home at 930. Maisie then has to have her artistic swimming hair gel showered/hosed off and at 10pm my wife and I collapse on the sofa with a glass of wine and some TV. 10:15pm I nod off on the sofa and my wife pokes me and says she's not telling me what I missed. If you're still awake yourself after that download, yesterday was one of those days where although markets were hit by a succession of bad news, the S&P 500 (+0.62%) shrugged these off and entered bull market territory at the close, with a +20.04% gain from its October 2022 low. To show the extreme forces helping us along, the NYFANG+ index is up +65.6% from that point and up +79.7% from it November lows just before the launch of ChatGPT. In terms of the bad news, in the US, the weekly jobless claims were at their highest since October 2021. In the Euro Area, data revisions showed the economy did in fact experience a winter technical recession after all. And even when it came to the weather, we got confirmation that an El Nino event was now underway, with predictions still pointing to a strong one developing as we move deeper into the year. The weaker data did drive a bond rally though, with yields on 10yr Treasuries coming down -7.7bps to 3.72%. The main catalyst for the bond moves were those US jobless claims, which saw a big jump to 261k over the week ending June 3. That was well above the 235k reading expected by the consensus, and it takes claims up to their highest level since late-2021, back when Covid was still a significant factor affecting the economy. Another worrying feature was the size of the jump, where the +28k increase on the previous week was the largest since July 2021, so these are not your typical moves we see each week. The big question now is whether this release is just a blip, or whether it might foreshadow a broader softening in the labour market that culminates in wider job losses. Our economists suggested that two states made up 86% of the increase in non seasonally adjusted claims with Minnesota up +97.5% w/w and Ohio up +61.2% w/w. So for now this might suggest caution when reading too much into the data, a bit like with the Massachusetts fraudulent filings a few weeks ago. That didn't prevent a big rally in Treasuries though, in part since investors grew more confident that the Fed would finally hit the pause button on its rate hikes after 10 successive increases. Indeed, futures pricing for a June hike came down to 28%, having been at 35% on Wednesday after the Bank of Canada’s surprise hike. In turn, that meant yields fell back across most of the curve, with the 2yr yield down -4.2bps to 4.515%, and the 10yr yield down -7.7bps to 3.72%. Yields really are in a bit of a yo-yo mood at the moment albeit within a relatively constrained range. This morning in Asia, Treasuries have slightly lost ground again with 10yr yields +1.3bps higher as we go to print. With investors pricing in a rate pause, that helped equities to recover some ground, and tech stocks led the gains, helping the NASDAQ (+1.02%) and the FANG+ Index (+2.04%) outperform again. The tech performance led the S&P 500 to again outperform its equal weight equivalent (+0.04%). In stark contrast, the small-cap Russell 2000 (-0.41%) lost ground, whilst S&P energy stocks (-0.44%) struggled after Brent crude oil prices (-1.29%) closed at a one-week low of $75.96/bbl. In the meantime, European equities were stuck in the middle, with the STOXX 600 posting a very modest -0.02% decline. Speaking of Europe, the big news was revised data showing that the Euro Area had in fact experienced a winter recession after all. That was confirmed by the latest Q1 GDP reading, which unexpectedly showed a -0.1% contraction, having initially been a +0.1% expansion in the flash estimate. Coming off the back of another -0.1% contraction in Q4, that meant the Euro Area has contracted for two consecutive quarters and met the common technical definition of a recession, even if it was the mildest possible. For markets, there was little direct relevance given the news was backward looking, and the ECB is still widely expected to proceed with a 25bp rate hike at their meeting next Thursday. In fact, the main driver for European sovereign bonds were the US jobless claims, with yields reversing on the print with 10yr bunds (-5.4bps), OATs (-5.9bps) and BTPs (-9.9bps) yield all closing notably lower. Most Asian equity markets are struggling to gain traction this morning. As I type, Chinese stocks are mixed with the Hang Seng (+0.05%) swinging between gains and losses while the CSI (-0.11%) is slightly lower and the Shanghai Composite (+0.02%) flat after the release of inflation data (more on this below). Elsewhere, the Nikkei (+1.61%) is strong, reversing some of its losses in the previous two sessions with the KOSPI (+0.92%) also climbing higher. Outside of Asia, US stock futures tied to the S&P 500 (-0.08%) are marginally down after the S&P 500 notched its highest close for 2023. Coming back to China, producer deflation continued in May for the eighth consecutive month with the producer price index (PPI) declining -4.6% y/y in May (v/s -4.3% expected), the steepest drop since June 2016 as weakening demand is weighing on the fragile economic recovery. It followed a further decline from -3.6% in April. Meanwhile, the consumer price index (CPI) rose in line with market expectations, up +0.2% y/y in May after a +0.1% rise the previous month. One thing that could influence inflation later in the year is the El Niño. The US’ Climate Prediction Center confirmed that El Niño conditions had emerged in May, with the latest weekly indices above the threshold for an El Niño event. The question now is how severe this episode may be, and their forecasts are seeing a 56% chance of a strong El Niño later in the year (up from 54% last month). As a recap, an El Niño event is where unusually warm sea surface temperatures in the eastern Pacific cause the jet stream to move south. That creates changes in weather patterns and ecosystems, but is unfortunately correlated with a higher frequency of natural disasters like flooding. So historically they’ve had negative effects on the harvest and food supply, and risk putting renewed upward pressure on food prices and inflation. Definitely one to keep an eye on as we move through the year. With all this negative news piling up, one area that really benefited was gold (+1.31%), where the weak claims data led to its best daily performance in over a month. And similarly, silver (+3.50%) experienced its best day in over two months. And with commodities taking on heightened importance, our colleague Michael Hsueh has just published a timely handbook (link here) that takes a deep analytical dive into the various precious metals. He expects them to remain front and centre of global markets in the coming years. To the day ahead now, and data releases include Italian industrial production for April, and the Canadian employment report for May. Otherwise from central banks, we’ll hear from ECB Vice President de Guindos, along with the ECB’s de Cos and Centeno. Tyler Durden Fri, 06/09/2023 - 08:12.....»»

Futures Drift Amid Global Risk-Off Sentiment US equity futures are flat, bond yields are lower, the dollar is higher, and commodities (ex-Ags) are weaker as the excitement over the Saudi 1mmb/d production cut fizzles and as hedge fund shorts once again take the upper hand. Ags are higher led by wheat on headlines from Ukraine, where a dam was damaged in an explosion. As of 7:45am ET, S&P futures were unchanged with the Nasdaq fractionally in the red as well, with Apple down 0.4% in premarket trading on concern the ludicrous price ($3500) of its much-anticipated mixed-reality headset will crater demand. European semiconductor firms slid after Taiwan Semiconductor — the main chipmaker to Apple — said capital spending will be at the lower end of its guidance range. Overall, there appears to be a mild risk-off tone pre-market,  With the S&P 500 on the edge of a new bull market, there’s a sense among traders that markets have run up too fast on the hype for artificial intelligence. The balance of the week is light on macro data points so markets may trade in a tight range into CPI/Fed next week. In premarket trading, tech Mega caps were mixed pre-mkt as investors digest AAPL’s developer day. AAPL is down 0.7% in early trading after the iPhone maker launched its much- anticipated mixed-reality headset at an eye-popping price of $3,499. While analysts were optimistic about the product and technology, they acknowledged that the price point was high and that it would limit the number of shipments in the near- term. Chevron fell 1%, while declines in Shell and BP weighed on Europe’s main stock benchmark after crude gave up all its gains spurred by news of Saudi Arabia’s supply cut. Other notable premarket movers: Mobileye shares declined 5.2% in premarket trading after chipmaker Intel said it will sell part of its holdings in the Israeli automated driving technology maker. Unity Software shares jump as much as 5.7% in premarket trading, extending Monday’s 17% gain after Apple said it’s working with the video-game engine maker for its new Vision Pro headset. Blue Bird dropped 8.5% in postmarket trading Monday after holders Coliseum Capital and American Securities offered 5 million shares in the school-bus maker via BofA Securities, Barclays, Jefferies, BMO Capital Markets and Piper Sandler. HealthEquity Inc. (HQY US) gained 6% postmarket after the healthcare savings account provider boosted its year profit and revenue forecast. First quarter profit and sales topped estimates. “Our stance towards equities is a cautious one,” said Steven Bell, chief economist for EMEA at Columbia Threadneedle Investments, noting the asset class doesn’t look cheap and earnings growth forecasts look too optimistic. “We don’t expect a dramatic decline, but bonds look more attractive on a relative basis.” European stocks slipped into the session as energy, telecom and autos underperform. Euro Stoxx 50 falls 0.4%. Stoxx 600 drops 0.1%, FTSE MIB lags regionals, sliding 0.6%. Meanwhile, the euro weakened and German bonds gained Tuesday after the European Central Bank said euro-area consumer inflation expectations eased significantly in April. Here are the most notable premarket movers: Idorsia shares soared as much as 21%, the most on record, before paring the gain. The Swiss biotech started exclusive negotiations with an undisclosed party regarding its Asia Pacific businesses. Banca Monte dei Paschi gained as much as 3.6% after la Repubblica reported that BPER Banca could be a possible suitor for the lender, citing unidentified sources. BAT shares fluctuated before trading up 0.3% after the company reaffirmed its full-year revenue forecast in constant currency. The unchanged outlook is “broadly reassuring” given the disappointing US performance, according to Investec. Chemring shares rose as much as 10.6% after the defense company reported half-year results and kept its forecasts for 2023 unchanged. Jefferies said that the update was strong and shows more organic revenue growth potential. ASML shares slumped as much as 1.8% after TSMC said its capex budget this year will be near the lower end of its guidance range, denting hopes that a recent boom in demand for artificial intelligence computing chips would encourage chipmakers to boost capacity. Other European semiconductor equipment makers also fell. Boohoo shares dropped as much as 2.7% after the online fast-fashion retailer was downgraded to neutral from outperform at Davy. The broker said Boohoo is better placed to “survive” Shein than Asos, but now has a smaller comparative advantage. Shares of Swiss utility BKW fell as much as 12%, the most on record, after UBS cut its recommendation to sell from buy, citing falling energy prices and the stock’s recent rally. Deutsche Pfandbriefbank fell as much as 5.5% after Citi downgraded the stock to sell and moved its price target to a Street-low of €6.1, based on the German lender’s real estate exposure. Earlier in the session, Asian stocks rose to a three-month high, helped by a rally in Chinese developers. There are signs that Beijing is taking steps to bolster the economy, with authorities asking some of the biggest banks to lower their deposit rates. Elsewhere, stocks traded mixed with price action rangebound following on from the subdued performance stateside where participants 'sold the news' following Apple's headset announcement and with sentiment clouded by weak data releases. Hang Seng and Shanghai Comp. were somewhat varied with the former boosted by strength in property names, although the mainland was less decisive and lagged amid mixed US-China rhetoric. Nikkei 225 was initially pressured after disappointing Household Spending and Labour Earnings data which briefly dragged the index beneath the psychological 32,000 level where it then found support and staged a recovery amid dip buying. Australia's ASX 200 was led lower by underperformance in the consumer-related sectors and top-weighted financial industry, with losses later exacerbated after the RBA delivered a surprise 25bps rate hike to lift the Cash Rate Target to 4.10% and it also kept the door open for further policy tightening. Indian stocks ended little changed on Tuesday, while gauges of small- and mid-sized companies extended their record runs as investors looked to rotate allocations following the end of the earnings season.  The S&P BSE Sensex Index was little changed as was the NSE Nifty 50 Index. BSE’s small and midcap indexes rallied for the 12th consecutive session and scaled new records despite momentum being overbought based on the 14-day RSI.  The key gauges traded lower for a large part of the session on Tuesday before erasing losses in the final 30 minutes of trade, helped by a recovery in banking stocks. The benchmark Sensex has traded close to its previous peak over the last few sessions but so far has failed to climb to a new record.  The Sensex and Nifty have risen about 3.2% and 2.7% this year but trail the 8% rally in small and mid-cap gauges. Elsewhere, Australia unexpectedly hiked on Tuesday and kept the door open to further increases, sparking a rally in the country’s currency. In FX, the Bloomberg Dollar Spot Index was up near session highs, recovering from early weakness; AUD and JPY are the strongest performers in G-10 FX, NOK and GBP underperform. The EUR/USD dropped -0.2% after after the latest ECB survey shows consumers’ inflation expectations fell significantly in April. AUD/USD leads gains, rallying as much as 1% after the RBA increased its cash rate by a quarter percentage point and said further tightening may be needed. Only 10 of 30 economists surveyed by Bloomberg predicted the rate hike In rates, German bonds outperform Treasuries and gilts across the curve as yields drop, led by short-end bunds.  Treasuries are slightly richer across the curve, following wider gains in bunds after an ECB survey shows consumers’ inflation expectations fell significantly in April.  Yields are richer by 1bp-2bp across the curve with intermediates outperforming slightly, steepening 5s30s by 1bp on the day; 10- year yields around 3.66%, richer by 2bp vs Monday’s close with bunds outperforming by 3.5bp in the sector.  The two-year Treasury yield slips 1bps to 4.45%, 10-year yield down 2bps to 3.66%, slightly steepening the 2-year/10-year curve. German curve sharply bull-steepens over early London session following consumer inflation expectations data — Germany 2-year yields remain richer by 8bp on the day with 2s10s spread steeper by 2.5bp, 5s30s by 4bp. Dollar IG issuance slate includes NAB 2Y/5Y and ADB 2Y/10Y; twelve companies priced $20.1b Monday, surpassing weekly volume projection in a single day; desks project around $80b for the month of June. In commodity markets, wheat surged after Ukraine said Russian forces blew up a giant dam in the country’s south, unleashing a torrent of floodwater that threatens thousands of people and poses a potential threat to Black Sea grain supplies. Meanwhile, crude drifted  2.2% lower to trade near $70.58. Most base metals trade in the green; LME nickel rises 1.4%, outperforming peers. LME aluminum lags, dropping 1.1%. Spot gold is little changed at $1,962/oz Looking ahead, the US session has no economic data releases or Fed speakers scheduled, amid quiet period ahead of June FOMC meeting.     Market Snapshot S&P 500 futures little changed at 4,277.50 MXAP up 0.3% to 164.13 MXAPJ down 0.2% to 514.04 Nikkei up 0.9% to 32,506.78 Topix up 0.7% to 2,236.28 Hang Seng Index little changed at 19,099.28 Shanghai Composite down 1.1% to 3,195.34 Sensex down 0.3% to 62,586.79 Australia S&P/ASX 200 down 1.2% to 7,129.64 Kospi up 0.5% to 2,615.41 STOXX Europe 600 little changed at 459.93 German 10Y yield little changed at 2.34% Euro down 0.1% to $1.0702 Brent Futures down 2.1% to $75.12/bbl Gold spot down 0.2% to $1,958.11 U.S. Dollar Index little changed at 104.02 Top Overnight News Australia's central bank surprised the mkt and raised interest rates by a quarter-point to an 11-year high, and warned that further tightening may be required to ensure that inflation returns to target. RTRS Chinese authorities asked the nation’s biggest banks to lower their deposit rates for at least the second time in less than a year, according to people familiar with the matter, marking an escalated effort to boost the world’s second-largest economy. BBG China will likely further cut banks' reserve ratio and interest rates in the second half of this year to support the economy, the China Securities Journal reported on Tuesday, citing policy advisors and economists. RTRS Underlying price pressures in the euro zone may prove more difficult to tame but monetary policy is showing signs of effectiveness and further rate hikes must be done step by step, Dutch central bank chief Klaas Knot said on Tuesday. RTRS Eurozone inflation expectations decreased significantly according to the latest ECB survey, reversing most of the increases seen in the previous month. ECB Something unusual has happened to the price of butter in Germany this year — it has fallen sharply even as the cost of many other foods kept rising at double-digit rates. Following a dip in energy prices, surging food costs have become the main source of inflation for the eurozone consumers. They are up 20% since the start of last year, causing alarm among politicians and central bankers. But economists and industry executives increasingly believe the factors behind a fall in the price of German butter — down almost 30% since in December as dairy producers’ costs have fallen — will soon begin to have a broader impact. FT A major dam and power station in a Russian-occupied part of Ukraine were destroyed Tuesday, with both sides accusing each other of being responsible for an incident that has caused serious flooding, put thousands of homes at risk and potentially threatened the safety of Europe’s largest nuclear power plant. WSJ Eight years after he first announced he was running for president, Chris Christie is readying for a return to the national stage. The brash former governor of New Jersey is expected to launch his second presidential run on Tuesday with a town hall-style event in Manchester, New Hampshire, some 300 miles north of his home state. FT Citadel brought back retired portfolio manager Drew Gillanders to expand the fund's equities trading in Europe. The 51-year-old, who worked at Citadel between 2019 and 2022, will report to co-CIO Pablo Salame. BBG Recession risk has receded as the debt ceiling crisis fades and the banking sector stabilizes. Although labor market rebalancing and inflation progress have been encouraging, a firmer growth outlook will likely prompt the Fed to hike again in July (and push several other DM central banks in a more hawkish direction too). GIR A more detailed summary of global markets courtesy of Newsquawk APAC stocks traded mixed with price action mostly rangebound following on from the subdued performance stateside where participants 'sold the news' following Apple's headset announcement and with sentiment clouded by weak data releases. ASX 200 was led lower by underperformance in the consumer-related sectors and top-weighted financial industry, with losses later exacerbated after the RBA delivered a surprise 25bps rate hike to lift the Cash Rate Target to 4.10% and it also kept the door open for further policy tightening. Nikkei 225 was initially pressured after disappointing Household Spending and Labour Earnings data which briefly dragged the index beneath the psychological 32,000 level where it then found support and staged a recovery amid dip buying. Hang Seng and Shanghai Comp. were somewhat varied with the former boosted by strength in property names, although the mainland was less decisive and lagged amid mixed US-China rhetoric. Top Asian News RBA surprisingly raised the Cash Rate Target by 25bps to 4.10% (exp. 3.85%), while it reiterated that the Board remains resolute in its determination to return inflation to the target and some further tightening of monetary policy may be required. It also repeated that inflation in Australia has passed its peak, but at 7% is still too high and it will be some time yet before it is back in the target range. RBA stated that this further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe, as well as noted that recent data indicates that the upside risks to the inflation outlook have increased and the Board has responded to this. China has reportedly asked the largest banks to cut deposit rates to boost the economy, according to Bloomberg sources. State-owned lenders including Bank of China, ICBC, and Bank of Communications were advised to cut rates on a range of products, including demand deposits by 5bps and 3yr and 5yr time deposits by at least 10bps. Former ByteDance executive claimed the Chinese Communist Party accessed TikTok's Hong Kong user data, according to WSJ. It was separately reported that Vietnam's ministry found TikTok violations during its inspection. BoJ Governor Ueda said BoJ is to continue QQE until the inflation target is achieved, and added inflation and inflation expectations are heightening, according to Reuters. European equities trade with little in the way of firm direction as incremental catalysts for the region remain light. Equity sectors in Europe are mixed with Health Care top of the leaderboard whilst Energy lags to the downside with WTI and Brent both below Friday’s closing levels despite efforts by OPEC+. US equity futures are hugging the unchanged mark with the ES around 20 points shy of the 4300 mark after venturing as high as 4305.75 yesterday. Top European News ECB's Knot said inflation is still way too high but the worst is behind us; underlying pressures will prove more difficult to bring down. He said they are seeing first signs that monetary policy tightening is being transmitted to the real economy, and will keep tightening policy until we see inflation return to 2% target, but this will be done step by step. ECB Consumer Expectations Survey (Apr): Inflation Expectations: 4.1% 12-months ahead (Mar 5.0%), 3yr ahead 2.5% (Mar 2.9%). Nominal Income: 1.1% over the next 12-months (Mar 1.3%). Nominal Spending: 3.8% over the next 12-months (Mar 4.1%) Barclaycard said UK May consumer spending rose 3.6% Y/Y and noted that higher food prices limited discretionary spending, according to Reuters. FX DXY edged higher throughout the European morning and currently resides near session highs above 104.00. JPY is continues to claw back losses at the expense of its US counterpart as yields softened. Aussie remains the clear G10 outperformer in wake of another largely unexpected 25 bp rate rise from the RBA overnight. Euro eased back from circa 1.0732 against the Dollar to sub-1.0700 and the base of 1bln option expiries between the round number and 1.0695. PBoC set USD/CNY mid-point at 7.1075 vs exp. 7.1080 (prev. 7.0904) Fixed Income Debt futures have racked up bigger and longer-lasting gains on a combination of bullish or supportive factors ranging from geopolitical developments, disinflationary vibes and a deeper reversal in oil that should have dovish implications for price pressures ahead. Bunds have been up to 135.57 for a 100+ tick flip from Eurex trough to peak. Gilts probed 97.00 within a 97.06-96.35 range in wake of a well received 2053 DMO tap US Treasuries are above 114-00 between 114-06+/113-24 overnight parameters. UK sells GBP 2.5bln 3.75% 2053 Gilt: b/c 2.58x (Prev. 2.50x), average yield 4.478% (Prev. 4.083%) & tail 0.5bps (Prev. 0.2bps) Commodities WTI and Brent futures continue trundling lower as the post-OPEC pop faded, with prices now back at levels seen in the run-up to last weekend's confab. Asian refiners are likely to take less oil from Saudi Arabia for July and buy more spot cargoes such as those from the UAE after the surprise price hike and output cut, according to Reuters citing traders. Kazakhstan Energy Minister said the country will go ahead with the USD 16.5bln claim against international oil giants over costs, no plans for out-of-court settlement, according to Reuters. Spot gold is relatively steady around the USD 1,950/oz mark and within recent ranges, with some potential haven support underpinning prices. Base are mostly softer with LME copper still hovering above USD 8,250/t following the recent gains as China looks to bolster its property sector. On that note, iron ore continued to benefit from these tailwinds and printed higher levels in around seven weeks. Shanghai futures exchange says trading of alumina futures will begin on June 9th. Geopolitics RUSSIA-UKRAINE Russia's Federal Security Service (FSB) says Ukraine planning a "dirty bomb" attack in Russia, via RIA. Twitter sources reported that the Nova Kakhovka Dam was blown up in southern Ukraine, while Ukraine's south military command later confirmed that the dam was blown up by Russian forces. Furthermore, a Moscow-backed official said there was no critical danger to the Zaporizhzhia nuclear plant yet from the destruction of the dam, according to Reuters. Russia's Defence Ministry said they destroyed 8 leopard tanks in the Donetsk region and that Ukraine continues with its offensive in Donetsk, while it also noted huge losses were inflicted on Ukrainian forces in Donetsk and that Ukrainian forces are deploying fresh troops in the eastern combat zone, according to Reuters. Ukraine's State Atomic Agency said the destruction of the Kakhova dam poses a risk to the Zaporizhzhia nuclear power plant, but the situation is under control, according to Reuters. Ukraine's Foreign Minister said Ukraine will "probably" only be able to join NATO after the end of the war and said Ukraine has enough weapons to begin its counter-offensive, according to Reuters. OTHER White House said the US is seeing an increasing level of aggressiveness by China's military and the US is prepared to address growing aggressiveness. White House stated the US wants to see Beijing justify what it is doing with increased military and said both recent Chinese intercepts occurred in international space, while it added that it won't be long before someone gets hurt and that unsafe intercepts can lead to miscalculations. South Korea has scrambled air force jets after Russian and Chinese military planes entered its air defence zone, according to joint chiefs; did not violate South Korean air space. US Event Calendar Nothing scheduled DB's Jim Reid concludes the overnight wrap DB Research has just released our latest World Outlook featuring our updated views on economics and markets. We’ve called this edition “The Waiting Game…” because we maintain our call for a US recession in Q4 as the lags from tighter monetary policy really start to hit. As we've felt for a while, you have to respect the lag and be patient. Markets on the other hand are anything but and want instant gratification. That's what makes it an interesting time now and for the next few months ahead. To recap we think this hard landing is the logical next step in a succession of all-too foreseeable events since the pandemic: the biggest increase in the money supply in decades, followed by the highest inflation in decades, and then the most aggressive series of rate hikes in decades. A hard landing is just the next phase of this. If you're looking for hope we are optimistic about the prospects of AI changing the nature of our economies in the years ahead. We desperately need a new source of growth given weak productivity and poor demographics. And although AI is unlikely to help us out of this cycle, its promise is a hope we cling onto as we move deeper into the 2020s after a very challenging start to the decade. Finally in terms of adverts, Steve Caprio on my credit team has an update to our view this morning (link here). He posits that while the consensus view among clients is for a summer squeeze, we see little reason to chase the market and so we retain our defensive positioning across ratings and tenors. Markets certainly stopped chasing and squeezing yesterday, in part thanks to a weak ISM services print that helped to ramp up fears about a recession. Earlier in the day it had looked rather different, and at one point the S&P 500 was even on track to close in bull market territory, having risen by over 20% since its closing low last October. But the negative data surprise ultimately dominated, and that led to a decent risk-off move that meant the index fell short of that milestone by the close. In terms of the release, the ISM services for May came in at 50.3 (vs. 52.4 expected), so just above the 50-mark that separates expansion from contraction and the second lowest since the pandemic, only beating a strange out of the blue plunge in December. The sub-components didn’t look too promising either, with new orders down to 52.9, whilst employment at 49.2 was in contractionary territory for the first time since December. Other releases out yesterday were a bit weaker-than-expected too, with April’s factory orders only up by +0.4% (vs. +0.8% expected), alongside downward revisions to the previous month. Treasuries rallied on the back of the ISM, and the 10yr yield gave up its initial rise to fall by almost -8bps intraday straight after the release, before closing -0.1bps down on the day at 3.683%. Another contributing factor was that the weak data led to growing expectations that the Fed would pause their rate hikes at their meeting next week, with only a 24.5% chance of a hike now priced in down from 30.5% at the end of last week. Ultimately, markets are increasingly coalescing around the idea that the Fed will skip a meeting in June before delivering another hike in July, which is in line with the updated call from our US economists in the World Outlook. This morning in Asia, yields on 10yr USTs (+1.73 bps) are slightly higher again as we go to print. Sovereign bonds in Europe lost ground more consistently yesterday after ECB President Lagarde continued to signal more rate hikes ahead at the European Parliament. Among others, Lagarde said that the ECB’s “future decisions will ensure that the policy rates will be brought to levels sufficiently restrictive”. And in turn, that helped to cement investors in their conviction that the ECB would proceed with another 25bp hike next week. As a result, yields on 10yr bunds (+6.9bps), OATs (+6.3bps) and BTPs (+6.8bps) all moved higher on the day. For equities, it was an up-and-down day, and in the end the S&P 500 (-0.20%) closed lower, after being +0.40% at the day’s highs. In addition to the weaker US data, specific factors appeared to weigh during the day. Oil majors reversed their initial gains from the OPEC+ news over the weekend, while Apple closed -0.76% lower, after being up over 2% intra-day at one point. This comes as the world’s largest technology company unveiled their new “mixed reality” headset with a sticker price of $3499. With tech stocks slipping, the NASDAQ (-0.09%) was largely flat on the day, though its YTD gains still stand at +26.40%. Back in Europe, the more negative tone continued to take hold, with the STOXX 600 (-0.48%) getting the week off to a rough start. In part, that reflected a surge in European natural gas prices (+24.9%) following their recent declines. And that occurred alongside a broader spike in energy prices, following the decision from Saudi Arabia to cut its oil output by 1 million barrels per day. However a late drop in risk sentiment near the US close meant Brent crude (+0.76%) ended the day at $76.71/bbl, whilst WTI (+0.57%) closed at $71.89/bbl with both contracts trading comfortably off their intraday highs. Overnight, the Reserve Bank of Australia (RBA) lifted its official interest rate by +25bps to 4.1%, a level not seen since early 2012 amid concerns inflation is taking too long to come down. Markets overall had anticipated no change for this month but a number of economists (including DB's) had made a late call for a hike in recent days so it wasn’t a total surprise. Markets have repriced terminal 20bps higher in the few minutes between the hike and us going to press. Looking ahead, speeches from the RBA Governor Philip Lowe and Deputy Governor Michele Bullock scheduled for tomorrow will be the key to gaining any hints for future rate hikes from the central bank. DB still think they have two more hikes in the pipeline in August and then September. Asian equity markets are extending their recent gains this morning even with the western world risk off yesterday. As I type, the Hang Seng (+0.43%) and the Nikkei (+0.41%) are edging higher while the CSI (+0.09%) and the Shanghai Composite (+0.05%) are just above flat. Meanwhile, markets in South Korea are closed for a holiday. US stock futures are flat to down with those tied to the S&P 500 (-0.02%) and NASDAQ 100 (-0.03%) struggling to gain traction. Early morning data showed that Japanese household spending remained weak, dropping -4.4% y/y in April (v/s -2.4% expected) and recording its sharpest decline since July 2021, underlining a patchy economic recovery. It followed a -1.9% contraction in the preceding month. Other data showed that cash earnings/nominal wages, grew +1.0% y/y in April (v/s +1.8% expected), smaller than expected and an upwardly revised +1.3% rise logged in March. Meanwhile, real wages fell -3.0% y/y in April (v/s -2.0% expected; -2.3% in March), marking the 13th straight month of year-on-year declines, as persistently high inflation is outstripping nominal pay growth. In the political sphere, the 2024 US presidential field is continuing to take shape, and yesterday saw former Vice President Mike Pence jump in on the Republican side. According to the FiveThirtyEight average, Pence is currently polling in third place for the primary on 5.4%, but is still well behind former President Trump on 53.9%, and Florida Governor Ron DeSantis on 21.1%. Separately, former New Jersey Governor and 2016 candidate Chris Christie is expected to announce his candidacy today as well. Finally, when it came to yesterday’s other data, the final Euro Area PMIs were a bit weaker than expected. For instance, the Euro Area composite PMI for May came in at 52.8 (vs. flash 53.3), and the services PMI was revised down to 55.1 (vs. flash 55.9), adding to a trend of negative European data surprises since late April. In the meantime, data showed that PPI inflation in the Euro Area fell to just +1.0% in April (vs. +1.7% expected), which is its lowest level since January 2021, and down from a peak of +43.4% back in August. To the day ahead now, and data releases include German factory orders and Euro Area retail sales for April, along with the German and UK construction PMIs for May. Otherwise, the ECB will be releasing their Consumer Expectations Survey, with our own European dbDIG survey suggesting that the ECB survey should show an easing of inflation expectations. Tyler Durden Tue, 06/06/2023 - 08:03.....»»

Futures Rise As Luxury Blowout Lifts European Markets; Dollar, Yields Higher US equity futures advanced to end the week as traders remained fixated on the path of monetary policy while assessing stronger than expected corporate earnings as the season nears its end. Contracts on the S&P 500 rose 0.3% at 8:00 a.m. ET while those on the Nasdaq 100 advanced 0.2%. Swiss luxury-goods maker Richemont soared 7.8% to a record on "spectacular sales growth", fueling a broad rally across European luxury stocks. Risk-on sentiment pushed Treasury yields higher. The Bloomberg dollar index was poised for its biggest weekly gain since March while oil prices declined again, set for their fourth weekly loss. Meanwhile, gold is also on course to end the week lower. Iron ore futures are falling sharply for a second day, but still on track for a weekly gain. In premarket trading, Tesla rose 2% after the electric-car maker raised prices of its Model X and Model S cars in the US, the third change in less than a month, while Musk announced that Twitter would have a new CEO in 6 weeks. Amylyx Pharmaceuticals shares gain 7.5% after the drugmaker’s sales of its amyotrophic lateral sclerosis drug topped analyst estimates. ARS Pharmaceuticals surges 65% after saying an FDA panel voted to  to support a favorable benefit-risk assessment for Neffy to treat severe allergic reaction. Blue Bird Corp. soars 31% after the company boosted its revenue and adjusted Ebitda forecast for the full year. Cidara Therapeutics rises 11% as Cantor Fitzgerald flagged multiple catalysts. Fox Corp. falls 1.8% as Wells Fargo cut the recommendation on the media company’s stock to equal-weight, saying there’s some strategic uncertainty ahead. IonQ drops 10% after the software company posted first-quarter results. Sarepta Therapeutics stock is halted for pending news, while the company’s drug candidate for Duchenne muscular dystrophy is set to face an FDA advisory committee meeting on Friday. SiriusPoint Ltd. falls 15% after Dan Loeb said he’s no longer exploring an acquisition of the company. CuriosityStream shares advanced in extended trading on Thursday, after the entertainment company reported its first-quarter results and gave an outlook. S&P 500 futures traded higher after President Joe Biden and House Speaker Kevin McCarthy postponed a meeting on the debt ceiling that was planned for Friday. The delay reflects headway in staff-level discussions, Bloomberg reported citing people familiar with the talks, however a more realistic take came from Punchbowl which said that "the two sides haven’t narrowed down the policies they might want to include in a debt-limit or spending-cut package." “We believe that they will find a deal — we need to remember negotiations have only just started,” said Marie Jacot-Cardoen, chief executive officer of Edmond de Rothschild Asset Management France, on Bloomberg Television. “It is likely political antagonism will increase before deal is reached, but we believe a compromise will be found.” US equities have been mainly trading in a very tight range all month after climbing over the past two amid concerns of a recession and uncertainty surrounding the path of interest rates. Earnings have been better than expected but did little to lift the S&P 500 after they rallied ahead of the season. Investors are also worried about the US debt-ceiling and stability of the banking industry, though efforts to repair ties between Washington and Beijing have been supportive. “The breadth of the US equity market has fallen to multi-decade lows, masking the weaker performance and lower investor conviction in smaller constituents,” said Mark Haefele, chief investment officer of UBS Global Wealth Management. “This suggests crowding and vulnerability, as narrow equity market breadth historically happens in the later stages of a bull market.” Meanwhile, BofA's Michael Hartnett said a prolonged period of economic decline in the US will roil technology stocks at a time when they are attracting a weight of investor money. They expect a recession “to crack credit and tech” just as it did in 2008. Elsewhere, investors remained focused on what major central banks will do next in their rate-hiking campaigns to quell inflation. US data Thursday showed initial jobless claims reached the highest since October 2021 while producer prices rose less than economists expected, suggesting Federal Reserve policy tightening may finally be having an effect. “There’s a chink of light — inflation is beginning to show some signs of easing, boosting hopes the Fed’s rate hiking cycle is near an end and this means companies can start prioritizing growth, rather than servicing debt,” said Angeline Ong, a financial analyst at IG Group. Luxury goods maker Richemont gained 7.8% to a record, fueling a broad rally across European luxury stocks. Europeans stocks are ahead and on course to finish the week in the green as investors welcome signs of easing strains between the US and China and tentative progress in the debt-ceiling negotiations. The Stoxx 600 is up 0.6% with consumer products, financial services and retailers the strongest-performing sectors while retail and autos fall. Here are the most notable European movers: Richemont shares rise as much as 5.6%, hitting a record high, after reporting forecast-beating sales growth and operating profit. Its jewelery division showed “spectacular sales growth,” driving significant improvement in profitability, Vontobel said. Other luxury stocks also gained, with LVMH rising 1.5% Scor shares rose as much as 11% after a strong set of results, with a significant net income beat driven by better performance in both L&H and P&C GSK shares rise as much as 1.7% after the UK pharma group £804 million sells a stake in Haleon, the consumer health- care division it spun off as a separate company last year. It also welcomed Zantac class action dismissal in British Columbia. Beazley shares rise as much as 6.5%, hitting the highest since March 31, after the British insurer’s quarterly results topped expectations for premium growth, while investment income also increased. THG shares drop as much as 23%, after the UK online retailer ended talks with Apollo about an indicative takeover proposal. Soitec shares tumble as much as 9.8%, after JPMorgan downgraded the stock to underweight from neutral and almost halved its price target, noting the wafer maker’s fiscal 2024 outlook was at risk of a slow recovery in demand for chips used in smartphones. Accor falls as much as 3.2% in Paris after an offering of 7m shares priced at €31.81 apiece by holder Qatar Holding via BofA Securities, according to terms seen by Bloomberg. Nordex shares drop as much as 5.6% after the German wind turbine maker reported results that analysts said were disappointing, noting a larger-than-expected loss driven by liquidated damages and extra catch-up costs from the delays in the winter. Earlier in the session, Asian stocks headed for a fourth day of decline, as Chinese shares pulled back further after the nation’s weak inflation and borrowing data showed the economic recovery is waning, adding to growth concerns globally. The MSCI Asia Pacific dropped as much as 0.3% Friday, led lower by material and energy shares. Chinese and Hong Kong benchmarks led declines in the region as traders fret over the slew of worse-than-expected economic data, which underscores ongoing problems in the housing market and sluggish domestic demand after Covid reopening. Chinese tech stocks bucked the broader market’s trend after e-commerce firm JD.com reported better-than-expected results, and geopolitical concerns eased on the news of a meeting between Biden and Xi. US National Security Adviser Jake Sullivan also met with China’s top diplomat Wang Yi. Meanwhile, Japanese shares outperformed the region as investors welcomed another wave of quarterly results from domestic companies. Companies including Honda and KDDI that announced buybacks along with earnings were among the biggest boosts. The Topix rose 0.6% to close at 2,096.39, while the Nikkei advanced 0.9% to 29,388.30.  Keyence Corp. contributed the most to the Topix gain, increasing 2.7%. Out of 2,159 stocks in the index, 1,197 rose and 867 fell, while 95 were unchanged. In addition to the decline in U.S. long-term Treasury yields overnight, “the Japanese market is also benefiting from the sense of undervaluation of Japanese stocks,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank The Asian stock benchmark was poised for a weekly drop amid weaker global growth and a resurgence of banking sector worries. Still, a cooling US job market and softening producer prices added confidence that the Federal Reserve may soon end its tightening campaign.  “The Fed is easily positioned to hold rates at the June meeting and if we see further softening of labor conditions, that will continue to drive this market into pricing in easing before the end of the year,” said Ed Moya, senior market analyst at Oanda Indian stocks closed the week as one of Asia’s best performers, aided by strong buying from overseas investors. Foreign investors bought net $1.1 billion of local equities this week through Thursday, NSDL data showed. The buying comes amid economic resilience and signs that the central bank will stay on hold as inflation moderates. For the week, the BSE-Sensex climbed 1.6% compared to MSCI Asia-Pacific index’s 0.4% loss. Sensex outperformed markets in China, Japan, Australia during the week. On Friday, the S&P BSE Sensex rose 0.2% to 62,027.90 in Mumbai, while the NSE Nifty 50 Index advanced 0.1% to 18,314.80. Australian stocks edged higher sending the S&P/ASX 200 index up 0.1% to close at 7,256.70, boosted by banks and health shares. The benchmark gained 0.5% for the week, snapping three weeks of declines. Asian stocks were mixed and Treasuries held gains as investors weighed signs of cooling in the American jobs market and efforts to repair ties between Washington and Beijing. Treasuries are lower with the US 10-year yield rising 2bps to 3.41% Bunds and Gilts have also declined with 10-year borrowing costs in Germany and the UK rising by 1bps and 2bps respectively. In FX, the Bloomberg Dollar Spot Index is up 0.1% and was set to rise 0.5% this week, the most since the week ended March 10 even as traders weigh the likelihood of a Federal Reserve policy pivot following a soft US inflation report. The Kiwi dollar is the clear underperformer, falling 1% versus the greenback after New Zealand inflation expectations fell. “For the dollar, we are not quite at the tipping point where markets can plausibly expect that the Fed will weigh up steady versus rate cut,” said Sean Callow, senior currency strategist at Westpac Banking Corp. “That probably means ranges on BBDXY hold for now, even if we prefer selling rallies than buying dips” EUR/USD slips 0.1% to 1.0907; it is set to lose 1% this week, its worst performance in nearly two months after a broad rally in the dollar on Thursday knocked most G10 currencies and boosted the dollar GBP/USD edges up 0.2% to 1.2532; the pound brushes off a weaker-than-expected reading of UK GDP USD/JPY rises 0.2% to 134.76 NZD/USD fell 1.1% to 0.6232, extending losses after the nation’s two-year inflation expectations eased to within the Reserve Bank’s target band AUD/USD dropped 0.2% to 0.6688, weighed in part by kiwi sales In rates, treasuries drifted lower during the London session, after Fed’s Bowman said more hikes will be needed if inflation stays too high. Treasuries cheaper by up to 4bp across long-end of the curve with 2s10s spread steeper by ~2bp on the day; 10-year yields around 3.42%. Stronger S&P 500 futures also added to cheapening pressure on Treasury yields. Bunds were also lower after European Central Bank policymaker Luis de Guindos said more hikes may be possible.  IG issuance slate empty so far; two names priced deals Thursday while at least three issuers were said to have stood down due to market conditions. In commodities, crude futures decline with WTI falling 0.6% to trade near $70.45. Spot gold drops 0.4% to around $2,006. Bitcoin is softer on the session and nearing the USD 26k mark with newsflow generally light after a busy macro week ahead of a relatively busy US session. Action which keeps Bitcoin just above the earlier WTD trough. To the day ahead now, and data releases include the UK GDP reading for Q1, along with the University of Michigan’s preliminary consumer sentiment index for May. Otherwise, central bank speakers include ECB Vice President de Guindos, BoE Chief Economist Pill and the Fed’s Daly, Bullard and Jefferson. Market Snapshot S&P 500 futures up 0.4% to 4,160.00 MXAP down 0.2% to 161.24 MXAPJ down 0.6% to 511.37 Nikkei up 0.9% to 29,388.30 Topix up 0.6% to 2,096.39 Hang Seng Index down 0.6% to 19,627.24 Shanghai Composite down 1.1% to 3,272.36 Sensex up 0.3% to 62,098.69 Australia S&P/ASX 200 little changed at 7,256.65 Kospi down 0.6% to 2,475.42 STOXX Europe 600 up 0.6% to 466.41 German 10Y yield little changed at 2.24% Euro little changed at $1.0911 Brent Futures down 0.3% to $74.76/bbl Gold spot down 0.4% to $2,007.55 U.S. Dollar Index little changed at 102.08 Top Overnight News from Bloomberg China will send a special envoy on a trip to Ukraine, Russia, Poland, France, and Germany as of Mon as the gov’t works to help foster a peace agreement. SCMP Turkish presidential candidate Ince drops out of the race, raising the odds of Erdogan being voted out of office this Sunday . FT The European Central Bank may have to continue raising borrowing costs beyond the summer, according to Governing Council member Joachim Nagel. BBG UK economic data for March is mixed, with soft GDP but better-than-anticipated industrial and manufacturing production. RTRS Janet Yellen reiterated the only good outcome in the debt standoff is for Congress to raise the ceiling. Global markets and US households and businesses need to see "we have a Congress that is committed to paying the bills. . . . That we're not a deadbeat country," she told Bloomberg at a G-7 meeting in Japan. BBG Fed’s Bowman warns the central bank should be prepared to continue hiking rates as employment and inflation are still too hot. WSJ If the U.S. defaults on its debt and is unable to pay all its bills this summer, the pain will fall squarely on the defense industry. National security is by far the largest category of discretionary federal spending, with budgets rising over the past two years to counter China’s military expansion and tackle the conflict in Ukraine. WSJ NBCUniversal’s head of advertising, Linda Yaccarino, is in talks to become the new CEO of Twitter, according to people familiar with the situation. WSJ Tesla raised prices of its vehicles in the US, the third change in less than a month, adding $1,000 to Model X and Model S base and plaid cars. It also recalled some 1.1 million cars in China — almost every EV it's ever sold there — over a defect with their acceleration systems. BBG A more detailed look at global markets courtesy of Newsquawk APAC stocks were mostly lower amid a busy slate of earnings releases and after the subdued performance stateside where regional bank fears resurfaced and initial jobless claims disappointed. ASX 200 was lacklustre with the index constrained by weakness in the energy and mining-related sectors after the recent pressure in underlying commodity prices. Nikkei 225 outperformed and rose to its highest since November 2021 with price action largely driven by earnings results including various blue-chip stocks. Hang Seng and Shanghai Comp. were indecisive as talks between US National Security Adviser Sullivan and China's top diplomat Wang Yi provided some encouragement towards a potential Biden-Xi call, although participants also digested weaker-than-expected Chinese loans and financing data. Top Asian News Chinese Foreign Minister Qin Gang is to visit Australia in July for a reciprocal visit as ties between Australia and China ease, according to SCMP. EU Economic Commissioner Gentiloni said we cannot be too dependent on foreign powers and noted that decoupling would be a dangerous risk for the global economy, while he added that he is not talking about closing the trade with China but is instead talking about making supply chains more secure. European bourses are firmer across the board, Euro Stoxx 50 +0.5%, with the Stoxx 600 set to end the week roughly where it commenced it. Sectors are primarily in the green with Consumer Products/Services outperforming post-Richemont's (+5.0%) FY update while Real Estate/Autos lag. The APAC handover was a mixed one with sentiment inching higher since though with no clear driver/firm narrative behind this. Stateside, ES +0.2%, futures are bid but only modestly so as we await data and more Fed speak after Bowman's early-doors commentary while Yellen provided familiar lines on the debt ceiling. Tesla (TSLA) to recall a total of 1,104,622 of imported Model S, Model X, Model 3 and domestic Model 3 and Model Y, according to Chinese market regulator. Elsewhere, WSJ said NBCUniversal's head of advertising Linda Yaccarino was the candidate in talks to become the new CEO of Twitter. Top European News Riksbank's Thedeen says he is surprised as their rate increases have not "bitten" as he expected, the impact on the economy has not been that great, via SvD Näringsliv. "every time we have presented a new interest rate forecast; we have later revised it upwards... It is a sign that monetary policy may not have the desired effect as we have thought." One explanation for why household consumption continues to be above expectations is their belief that rates will soon decrease rapidly. On QE, says he is somewhat "more sceptical" than perhaps some others have been, should be a "relatively high" threshold for implementing it. Northvolt investment within Germany reportedly to be circa. EUR 3-5bln with hundreds of millions expected in subsidies, via Reuters citing sources. *Follows earlier source reports in the FT and commentary from German officials who suggested that no details have been decided on yet. FX Buck broadly underpinned as DXY fastens grip on 102.000 handle and Fed's Bowman says recent CPI and NFP reports do not provide persistent evidence of disinflation. Kiwi undermined by much cooler NZ inflation expectations, NZD/USD sub-0.6250 from just above 0.6300, AUD/NZD cross tops 1.0700 vs 1.0640 low. Yen and Loonie soft against Greenback, but eyeing decent option expiry interest at 135.00 and 1.3500 for support. Pound retains 1.2500+ status despite monthly UK GDP contraction pre-BoE's Pill and Euro treading water near 1.0900 irrespective of more hawkish ECB commentary. PBoC set USD/CNY mid-point at 6.9481 vs exp. 6.9472 (prev. 6.9101) Fixed Income Bonds chop and churn after extending recovery gains to new w-t-d highs on Thursday. Bunds pivot 136.50 and 2.25% yield, Gilt veer towards base of 101.14-68 range and T-note hovers just under 116-00 within 116-07/115-28 confines ahead of more Central Bank speakers, US import/export prices and UoM sentiment Commodities Crude benchmarks are flat after spending the morning slightly softer and only picking up incrementally most recently with no fresh driver behind the move at the time and action overall in familiar ranges. Iraqi oil minister says Iraq didn't get a reply from Turkish Botas on the request to resume oil flow, expects Northern Oil exports to restart on Saturday with pumping of 500,000 barrels per day. Spot gold resides around this week’s lows, and just above the USD 2,000/oz level following yesterday's advances in the Dollar index, whilst fresh macro new flows remain light; base metals mixed, overall. Turkish Defence Minister says parties to the Black Sea grain deal are approaching an agreement on an extension. Subsequently, Russian Kremlin says nothing new to report, for now, after Black Sea grain deal talks in Istanbul; potential conversation with Turkey's Erdogan and Russia's Putin won't help achieve a deal. Geopolitics China's foreign ministry says China representative of Eurasian affairs to visit Ukraine, Poland, France, Germany and Russia from May 15th to promote peace. Israeli PM Netanyahu will hold a security consultation session shortly with senior security chiefs, according to Al Jazeera. From the EU-China strategy paper, WSJ's Norman highlights that "EU-China relations will not develop if China does not push Russia to withdraw from Ukraine..." US Event Calendar 08:30: April Import Price Index YoY, est. -4.8%, prior -4.6%; MoM, est. 0.3%, prior -0.6% April Export Price Index YoY, est. -5.5%, prior -4.8%; MoM, est. 0.2%, prior -0.3% 10:00: May U. of Mich. Expectations, est. 60.8, prior 60.5 May U. of Mich. Sentiment, est. 63.0, prior 63.5 May U. of Mich. Current Conditions, est. 67.5, prior 68.2 May U. of Mich. 1 Yr Inflation, est. 4.4%, prior 4.6% May U. of Mich. 5-10 Yr Inflation, est. 2.9%, prior 3.0% 14:20: Fed’s Daly Gives Commencement Speech 19:45: Fed’s Bullard and Jefferson Take Part in Panel Discussion DB's Jim Reid concludes the overnight wrap Today is an important one, since at lunchtime I have a slot to purchase tickets for the Paris Olympics in 2024. I honestly don't know what will still be available by the time I'm allowed to log on, but last night my wife and I held a strategy meeting to decide what to aim for. First choice is the 100m final, followed by other nights of athletics. Other events were then suggested, but if they're also taken we're then into the danger zone where I've been instructed to use 'common sense' among the alternatives. I can only hope we're still on speaking terms by this evening. Check back with me this time next year to find out my new favorite sport. Markets failed to race away yesterday, as renewed fears of a slowdown led to a decent risk-off move, with investors growing concerned about weak data releases, the US debt ceiling, as well as the ongoing situation with regional banks. That meant the S&P 500 (-0.17%) lost ground, whilst sovereign bonds benefited from the flight to safety as speculation mounted about central bank rate cuts in response. These moves were evident across several asset classes, and the jitters also saw the US Dollar Index (+0.58%) record its best daily performance in six weeks. Starting with the data, there was disappointment in the US from the weekly initial jobless claims, which came in at 264k (vs. 245k expected) in the week ending May 6. That’s their highest level since October 2021, and whilst we should add the usual caveats about not over-interpreting a single data point, it’s worth noting that claims have been on a broadly upward trend since late January. So that adds to the signs that the labour market has been softening in recent months, such as the decline in the number of job openings as well as the quits rate. Alongside jobless claims, yesterday also saw the release of the US PPI release for April. That came in slightly beneath expectations, with headline PPI only up by a monthly +0.2% (vs. +0.3% expected), which took the annual measure down to +2.3% (vs. +2.5% expected). That added to the sense from the previous day’s CPI release that inflation might durably be heading lower, which could support a pivot towards rate cuts later in the year. Those data releases supported a sovereign bond rally yesterday, with yields on 10yr Treasuries down -5.8bps to 3.375%. The 1m T-bill yield was just lower than unchanged at -0.08bps at 5.450%, but intraday the rate rose as high as 5.48% at one point and continues to see a good deal of intraday volatility. That maturity is exposed to potential debt ceiling default risk, which demonstrates how investors are positioning in case there are issues ahead. In terms of the latest on the debt ceiling, last night it was announced that President Biden and congressional leaders had postponed their planned meeting today until early next week. According to a Bloomberg report last night, the delay was due to conversations on government spending and energy permit reform gaining traction, so at first glance it signals that progress is being made. Our credit team put out a note yesterday (link here) that outlines the potential impact the debt ceiling can have on credit market and our spread forecast. For equities, the generally downbeat newsflow meant that the major indices lost ground, with the S&P 500 ending the session -0.17% lower. The main outperformer were the megacap tech stocks, which benefited from the prospect of lower interest rates. In fact, the FANG+ index advanced another +0.90% to a fresh one-year high, which brings its YTD gains to a sizeable +44.52% already. On the other hand, banks continued to struggle and the KBW Banks Index fell a further -1.25%, closing less than 2% above its low from last week. Here in the UK, the focus was on the Bank of England yesterday, who announced another 25bp hike that took Bank Rate up to a post-2008 high of 4.5%. Seven of the nine committee members voted for the move, and the minutes said that for those members, “there had been repeated surprises about the resilience of demand, while the labour market had remained tight.” There were also significant upward revisions to the BoE’s growth projections, and unlike in February they are no longer forecasting a recession. Nevertheless, growth was still expected to be weak by historic standards, at just ¼% in 2023, and then ¾% in 2024 and 2025. Looking forward, our UK economist writes in his recap note (link here) that another hike in June is more likely than not. That’s in line with current market expectations, and this morning investors are pricing in a 78% chance of a 25bp hike in June. Staying on central banks, there was an interesting release yesterday as the ECB published their Consumer Expectations Survey for March. That showed inflation expectations were moving higher again after their recent decline, with the 1yr expectation up to +5.0%, and the 3yr expectation up to +2.9%. We also heard from Bundesbank President Nagel, who held the door open to the prospect that the ECB might still be hiking in September, by saying that “there’s nothing off the table” for that meeting. And President Lagarde herself reiterated that the ECB’s fight against inflation “is not over”. Despite of the hawkish tones from ECB officials however, European markets traded in line with the US for the most part, with yields on 10yr bunds (-6.3bps) coming down, and the STOXX 600 closing unchanged. See our German economists’ latest chartbook as well yesterday for more on the economic situation there (link here). Overnight in Asia, equities have put in a mixed performance this morning amidst competing signals on the state of the global economy. On the one hand, the CSI (-0.59%), the Shanghai Composite (-0.39%), the KOSPI (-0.32%) and the Hang Seng (-0.13%) are trading lower. However, the Nikkei (+0.86%) has posted a decent advance that’s taken the index to its highest level since November 2021. One factor helping to support sentiment has been the meeting between US National Security Adviser Jake Sullivan and China’s top diplomat Wang Yi in Vienna. That was seen as a positive sign that the two sides were trying to ease tensions, and US-listed Chinese stocks on the NASDAQ Golden Dragon China Index (+3.82%) saw their biggest advance in three months yesterday. Looking forward, US equity futures are also in positive territory, with those on the S&P 500 (+0.20%) and NASDAQ 100 (+0.30%) pointing higher. Since this is the last edition before the weekend, one thing to keep an eye on will be the Turkish election that’s taking place on Sunday. Our EM strategists have published a comprehensive preview of the election (link here), where they examine the process, along with what it could mean for the economy, markets, monetary policy and geopolitics. Yesterday saw some further developments in the contest, with presidential candidate Muharrem İnce withdrawing from the election. Finally, another thing we’ve been watching out for is the prospect of an El Niño this year, which is a warming of sea surface temperatures in the eastern pacific, and is unfortunately correlated with a higher frequency of natural disasters like flooding. Yesterday saw the latest monthly update in the US National Weather Service’s forecast, which now sees a more than 90% chance of an El Niño occurring this winter, as well as a 54% chance of that it will be a strong El Niño (up from 41% last month). If there is an El Niño, then that could have important effects on food prices, as well as many emerging-market economies that would be most impacted by potential changes in weather patterns. To the day ahead now, and data releases include the UK GDP reading for Q1, along with the University of Michigan’s preliminary consumer sentiment index for May. Otherwise, central bank speakers include ECB Vice President de Guindos, BoE Chief Economist Pill and the Fed’s Daly, Bullard and Jefferson. Tyler Durden Fri, 05/12/2023 - 08:15.....»»

CPI Slip Sparks Panic Bid In Stocks, Bonds, Gold, & Crypto; Dollar Dumps A slightly cooler than expected CPI print - but still far above The Fed's mandate - was enough to prompt panic bids in the 'QE trade' with the dollar monkeyhammered lower while gold, bonds, stocks, and crypto all rally... Small Caps (short squeeze) are outperforming but all the US majors are spiking for now... Gold is soaring with futs back above $2050... Bitcoin is back above $28000... Bond yields are tumbling... ...with 2Y back well below 4.00% The dollar is getting clubbed like a baby seal... As rate-hike odds for June are tumbling from 20% to below 10%... Let's see if this can hold for the rest of the day? Tyler Durden Wed, 05/10/2023 - 09:05.....»»

S&P Futures Rise Above 4,100 Propelled By Tech Earnings, Rate Hike Doubts US index futures gained on Thursday halting a two-day drop, led by the tech stocks, after Meta’s better-than-expected results helped mitigate investor concerns about the F(ailing)irst Republic Bank, economic outlook, inflation and monetary policy. S&P 500 futures traded just above 4,100, rising 0.7% as of 8:00 a.m. ET, while Nasdaq 100 futures rose 0.9%, extending Wednesday’s gains as the tech-heavy benchmark continues its outperformance of the broader market this year. According to JPM, "this week’s Equity performance highlights the divergence due to low market breadth" something we discussed yesterday. European stocks gained and were set to snap a three-day losing streak as Barclays, AstraZeneca and Unilever all rise after their respective updates. Asian markets were also green after a rebound in Chinese stocks. USD is weaker, longer-dated yields are higher, and commodities are mixed before US GDP and jobless claims to gauge the strength of the US economy. Yields on five-year notes dropped the most in a month on Tuesday, spurred by a wave of quant investors. The Federal Reserve’s preferred inflation gauge, the core PCE deflator, is due Friday. In premarket trading, Meta jumped as much as 11%, helping fuel gains in Snap and Amazon, both of which report after the close. First Republic Bank rose 2.8% after tumbling 64% in the previous two sessions. Cryptocurrency-exposed stocks also rose in premarket as Bitcoin gained for a third consecutive day, inching toward the closely watched $30,000 mark. Here are all the notable pre-market movers: EBay rose as much as 3.1% after the e-commerce company forecast better-than-expected net revenue for the second quarter. Analysts noted that the company’s focus categories, which include refurbished products and collectibles, outperformed the rest of the marketplace. Eli Lilly & Co. shares are up 4% after the pharmaceutical company reported first-quarter revenue that beat expectations, with sales for its Mounjaro antidiabetic medication notably above the consensus estimate. It also raised its forecast. Electronic Arts shares dip 0.5% after BMO Capital Markets downgrades the video- game company to market perform from outperform. Analysts led by Gerrick Johnson say the UK Competition and Markets Authority’s decision to block Microsoft’s acquisition of Activision could have wider implications for consolidation in the video-game industry, a key component to their buy-rated thesis for Electronic Arts. Enovix falls 5.3% as analysts say the silicon-battery company is signaling a slower-than-expected ramp at its Fab-2 manufacturing facility. Impinj shares are down ~25% in premarket trading on Thursday, after the maker of radio- frequency identification chips gave a second-quarter forecast that is weaker than expected. Jefferies gains 9% after SMBC Group announced plans to raise its economic ownership in the US firm to up to 15% on an as converted and fully diluted basis. Meta Platforms rose as much as ~12% on Thursday, after the Facebook parent forecast second-quarter revenue that beat expectations. Mobileye fell as much as 18% on Thursday — poised for its worst session ever since its debut last year if those declines hold — after the software and hardware maker for cars cut its revenue guidance for the full year. Seres Therapeutics shares surge, set for their biggest gain in six months, after the developer of biological drugs received FDA approval for its therapeutics Vowst to prevent the recurrence of C. difficile Infection (CDI) in adults. Southwest Air shares are down ~4% after the company’s first-quarter results missed analysts’ estimates. Vornado Realty shares dropped as much as 13% after the owner of offices delayed its dividend and authorized up to $200 million in buybacks, a move which surprised analysts and prompted a downgrade from Piper Sandler. Wolfspeed shares drop as much as ~15% after the maker of semiconductors gave a revenue forecast for the fourth quarter that fell short of estimates. Analysts cut price targets amid the company’s challenges in ramping its Mohawk Valley manufacturing facility Cryptocurrency-exposed stocks rise as Bitcoin climbs for a third consecutive session, again inching toward the closely watched $30,000 mark. Hut 8 Mining +7.4%, Marathon Digital +5.7% Coming on the heels of strong earnings from Microsoft, Meta’s results buoyed sentiment as investors weigh risks from banking-sector turmoil and the likelihood of a US recession. GDP and jobless claims data later on Thursday, as well as the core PCE deflator due on Friday, could provide further clues about the Federal Reserve’s likely interest-rate path. “Tech seems to be acting as somewhat of a haven trade,” said Michael Hewson, chief analyst at CMC Markets in London. The potential for a tightening of credit conditions linked to the banking turmoil may prompt the Fed to adjust the pace of its interest-rate increases, Evercore ISI’s head of central bank strategy Krishna Guha wrote in a note, citing issues at First Republic Bank. The US regional lender faces potential curbs on borrowing from the Fed. “We cannot rule out the possibility developments around First Republic could unfold in a manner that would lead the FOMC to skip May, while signaling a hike in June,” Guha said. Europe's Stoxx 600 is up 0.2% and looking to snap a three-day losing streak as Barclays, AstraZeneca and Unilever all rise after their respective updates. Sanofi’s profit topped stimates as the French drugmaker’s blockbuster therapy Dupixent gained market share. AstraZeneca’s profit also rose in the first quarter, helped by sales of its blockbuster oncology treatments. Deutsche Bank AG dropped after trading revenue disappointed.  Here are the biggest movers Thursday: SimCorp shares jump 39% to match the DKK735 price offered by Deutsche Börse to acquire the Danish financial software maker. Nel shares rally as much as 18%, most since July after posting 1Q results that Citi says are broadly supportive, noting that the Norwegian hydrogen equipment maker’s revenue beat consensus GN Store Nord jumps as much as 11% after the Danish hearing-aid and audio-equipment maker reported a strong set of earnings, with Handelsbanken highlighting a strong product launch in 4Q Unilever shares jump as much as 2% after the consumer-goods company reported underlying sales that beat estimates. Analysts said the results were good, highlighting better-than-expected volumes HelloFresh rises as much as 9.1% as the meal-kit company’s profitability beats estimates. Analysts say the firm is relying on a recovery in 2H as the toughest comparison of the year has now passed Barclays shares rise as much as 5.1% in early trading after the UK lender’s investment banking arm drove a first-quarter profit beat, which however was partially offset by a miss for costs Schneider Electric rises as much as 1.7% after the French maker of electrical products posted strong 1Q sales, as well as FY targets that RBC says imply higher consensus estimates STMicro shares fall by as much as 8.2% following second-quarter earnings. The strong results didn’t surprise after peer Infineon confirmed still-resilient demand for semiconductors earlier Tenaris shares fall as much as 6% in Milan after it flagged a sequential decline in sales and profit margins throughout 2023 which eclipsed positives from record 1Q sales and an earnings beat BASF shares slide as much as 4.6% after warning of a subdued demand outlook for its chemicals, though the firm reaffirmed its adjusted Ebit forecast for the year Universal Music Group drops as much as 6.9% with analysts saying a first-quarter beat was driven by less- predictable physical music sales, rather than the more recurring streaming line Deutsche Boerse shares fall as much as 7.5% as the German exchange operator announced the acquisition of Danish financial software firm SimCorp and reported an unimpressive 1Q beat Pharmaceuticals are well-positioned to weather recession, according to Janet Mui, the head of market analysis at RBC Brewin Dolphin, who recommends shifting to defensives. “There has been some weakening in credit data which suggests it’s getting more difficult to get a loan,” Mui told Bloomberg TV. “This raises a chance of recession by the end of the year.” Earlier in the session, Asian stocks rebounded as China markets extended gains, with investors digesting a slew of corporate earnings for clues on the recovery’s strength. The MSCI Asia Pacific Index erased losses to advance as much as 0.2%, set to snap a four-day losing streak. Ping An Insurance was among the biggest boosts after reporting a surge in its first-quarter profit as China’s rebound helped demand and investment returns. Financials hauled up mainland China and Hong Kong indexes in afternoon trading.   Markets in the region were mixed, with stocks also advancing in South Korea, Japan and Taiwan while indexes in Thailand and Singapore posted declines. Investors were focused on results including those from tech heavyweight Samsung Electronics, which reported worse-than-expected earnings but gave an upbeat outlook. Investors also parsed earnings from Chinese lenders following the recent pullback in mainland equities that at one point wiped out $446 billion in market value in April. China Merchants Bank fell in Hong Kong after reporting a softer set of first-quarter results than analysts had expected. The recent rout may offer “a good opportunity for long-term investors” in reopening bets, according to Pruksa Iamthongthong, senior investment director of Asian equities at abrdn. “The market itself had moved very much ahead in terms of expectations so the pullback that we have seen in first quarter results is actually a good thing. Japanese stocks closed slightly higher as investors continue to digest earnings from key corporates amid resurfaced concerns over US regional banks. The Topix rose 0.4% to close at 2,032.51, while the Nikkei advanced 0.1% to 28,457.68. Sony contributed the most to the Topix gain, rising 3.5% after UK regulators decided to block Microsoft’s purchase of Activision Blizzard. Out of 2,158 stocks in the Topix, 1,149 rose and 905 fell, while 104 were unchanged. “While Japanese stocks started the day lower on the back of weaker US market, earnings results from major tech companies were good,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities. The market is in a “wait-and-see mood” ahead of the BOJ meeting tomorrow, where the focus will be on inflation outlook, he said. Australian stocks declined for a 5th straigh session, with the S&P/ASX 200 index falling 0.3% to close at 7,292.70. Banks and health shares contributed most to the benchmark’s decline. The drop comes after US shares fell for a second day as concern over American regional banks outweighed better-than-expected technology earnings. In New Zealand, the S&P/NZX 50 index fell 0.1% to 11,918.22 Stocks in India surged for sixth consecutive session as investors remain optimistic of earnings recovery after initial disappointment from top technology names. The S&P BSE Sensex Index rose 0.6% to 60,649.38 in Mumbai, while the NSE Nifty 50 Index advanced by a similar measure. The gauges have risen more than 1% this week as earnings season rolls out. Software makers Wipro and Tech Mahindra will be reporting earnings for the March quarter later on Thursday. Hindustan Unilever disappointed with lower than expected profit on account of weaker margins as the FMCG major struggles to increase sales volumes. Infosys contributed the most to the Sensex’s gain, increasing 1.5%. Out of 30 stocks in the index, 23 rose and seven fell. In FX, the Bloomberg Dollar Spot Index slipped 0.1% while the Treasury two-year yield fell one basis point to 3.94% ahead of key US jobless claims and GDP data. Risk-sensitive currencies including the New Zealand dollar and Scandinavian currencies outperformed other Group-of-10 peers amid improving risk appetite. “With the Federal Reserve nearing the end of its rate-hiking cycle, we continue to expect the global macro outlook to translate into an unwinding of previous USD overvaluation over the medium term,” Bank of American strategists wrote in a note The Yen was little changed at 133.69 per dollar after former Bank of Japan Governor Masazumi Wakatabe said there is a possibility that the central bank will change the wording of its forward guidance without adjusting its easing bias at the end of its policy meeting Friday. “There’s thin trading ahead of the BOJ decision tomorrow, and likely some technical pullbacks on the dollar which allows currencies like the kiwi to gain,” said Mingze Wu, an FX trader at StoneX Group EUR/USD little changed around 1.1047 after rising to 1.1095, highest for more than a year, on Wednesday. Recent rally was “testament to how markets seem to favour the euro among other currencies in instances when the dollar falls on the back of Fed dovish repricing and US banking concerns,” according to ING Bank strategist Francesco Pesole. A break above $1.1100 could trigger another substantial rally in the pair, he added GBP/USD fell 0.2% to 1.2442 in quiet trade, holding close to its highest level in nearly two weeks. The pound could see a slow move higher given that a less downbeat view of the UK economy has boosted speculative flows into the currency, according to HSBC. “Encouraging activity data, higher rates from the BoE, and a market which is not stretched in terms of positioning should offer further upside,” its strategists wrote in a note USD/CHF rose 0.3% NZD/USD climbed 0.4% to 0.6142; AUD/USD rose 0.1% to 0.6608 In rates, Treasuries were mixed, slightly cheaper at long-end of the curve where 20- and 30-year yields are up ~1bp vs Wednesday’s close following similar shift in German curve. US 10-year yields around 3.45%, little changed on the day, outperforming bunds slightly in the sector. German 10-year yields are up 3bps. The Treasury auction cycle concludes with $35b 7-year note sale; 2- and 5-year auctions produced good demand metrics. WI 7-year yield at 3.475% is ~15bp richer than last month’s, which tailed by 1.1bp. In commodities, Crude futures advance with WTI up 0.3% to trade near $74.50 after a Wednesday fall. Gold traded near the highest level in a week and Bitcoin resumed an advance. Hong Kong Securities and Futures Commission chief said will issue crypto exchange guidelines in May. Focal points of US session include weekly jobless claims and 1Q GDP estimate, followed by 7-year note auction at 1pm New York time. Economic data includes initial jobless claims and 1Q GDP estimate (8:30am), March pending home sales (10am) and April Kansas City Fed manufacturing activity (11am). Fed slate remains blank with members in communication blackout period ahead of May 3 policy announcement. On the earnings side, today’s releases include Amazon, Mastercard, Eli Lilly, and Intel. Market Snapshot S&P 500 futures up 0.5% to 4,096.00 MXAP up 0.2% to 160.08 MXAPJ up 0.2% to 511.87 Nikkei up 0.1% to 28,457.68 Topix up 0.4% to 2,032.51 Hang Seng Index up 0.4% to 19,840.28 Shanghai Composite up 0.7% to 3,285.89 Sensex up 0.4% to 60,556.84 Australia S&P/ASX 200 down 0.3% to 7,292.75 Kospi up 0.4% to 2,495.81 STOXX Europe 600 up 0.2% to 463.95 German 10Y yield little changed at 2.43% Euro up 0.1% to $1.1057 Brent Futures up 0.6% to $78.12/bbl Gold spot up 0.5% to $1,999.36 U.S. Dollar Index down 0.11% to 101.36 Top Overnight News China's industrial firms' profits shrank at a slightly slower pace in January-March but the decline remained in the double-digits as the economy struggled to fully recover despite the country's exit from its zero-COVID policy. In March alone, profits for the sector fell 19.2%, according to the data by the NBS which only occasionally discloses monthly figures. RTRS Former BOJ Deputy Governor Masazumi Wakatabe said there is a possibility that the central bank will change the wording of its forward guidance without adjusting its easing bias at the end of its policy meeting Friday. BBG Deutsche Bank and Barclays buoyed the market with solid results. The German firm posted its strongest top line since 2016, as a 35% jump in revenue at the corporate bank more than offset a 17% slide in fixed income trading. It laid out plans to cut about 800 senior back-office staff. DWS signaled recovery, with net inflows of €5.7 billion. Barclays beat as its trading helped offset a drop in dealmaking. Fixed income sales unexpectedly rose 9%, outweighing a slump in equities. BBG Russian Deputy Prime Alexander Novak said on Thursday the OPEC+ group of leading oil producers saw no need for further output cuts despite lower-than-expected Chinese demand, but that the organization can always adjust policy if necessary. RTRS Germany is in talks to limit the export of chemicals to China that are used to manufacture semiconductors, people familiar said. Such a step would limit German companies like Merck and BASF from selling some of their semiconductor chemicals to China. Merck's products or services are found in almost every single chip in the world, while BASF is a market leader in Europe and Asia. BBG UniCredit will exercise the option to redeem an AT1 bond early in the first major test for such calls since the wipeout of $17.3 billion of Credit Suisse notes. It'll repay the €1.25 billion note at face value June 3. Its price jumped 1.8 cents to around 100.2 cents on the euro, based on data compiled by Bloomberg. There's been doubt over whether banks would follow convention and exercise AT1 calls as the cost of issuing replacement bonds jumped after the writedown. BBG Opec accused the International Energy Agency on Thursday of stoking “volatility” in energy markets, in an intensifying war-of-words between oil producers and consumers. FT Florida Gov. Ron DeSantis is poised to jump into the presidential fray as soon as mid-May, four GOP operatives familiar with the conversations told NBC News. NBC News SMBC plans to triple its stake in Jefferies to as much as 15%. SMBC's $2.25 billion financing in 2021 and investments will, at current market prices, result in a financial commitment to Jefferies of about $3.4 billion. SMBC will be responsible for credit products and debt capital markets, while Jefferies will be responsible for M&A and equity capital markets in the expanded alliance. BBG A more detailed look at global markets courtesy of Newsquawk APAC stocks traded mixed with most of the major indices subdued amid the banking sector headwinds in the US and as participants digested a deluge of earnings releases and quarterly performance updates. ASX 200 declined with the index pressured in early trade by weakness in the mining-related industries after a recent decline in underlying commodity prices and with gold miners hit after lower output and sales by Newcrest Mining and Northern Star Resources. Nikkei 225 was cautious as headlines were dominated by earnings and as the BoJ began its 2-day meeting. KOSPI was indecisive after earnings from index heavyweight Samsung Electronics which topped the preliminary release but confirmed an over-95% drop in its operating profit. Hang Seng and Shanghai Comp were somewhat mixed during the session with the biggest movers in Hong Kong driven by earnings releases, while the mainland was mildly underpinned by support measures after China's State Council unveiled a plan to stabilise employment and will support financial institutions to offer loans to businesses for expanding and stabilising jobs. Top Asian News Chinese Vice Human Resources Minister said China's employment situation is under pressure and employment pressure of college graduates remains very large, while they will strive to achieve the job creation target this year, according to Reuters. China's borrowing costs are seen to remain low in Q2 and banks are expected to lower interest rates for loans and deposits, according to China Securities Journal. US President Biden said his desire to increase manufacturing jobs in America is not about China and his policy is designed to preserve US access to semiconductors, not to hurt China. European bourses are relatively contained but with an underlying positive skew, Euro Stoxx 50 +0.3%, with broader macro developments light and focus largely on earnings. On this, sectors are somewhat mixed with Autos/Parts outperforming after Michelin, Continental and Hella updates; Personal Care, Drug & Grocery is firmer following Unilever while Media names lag given poorly received UMG and WPP metrics. Stateside, futures are in the green with the NQ +0.9% once again leading after Meta's Q1 report with numerous heavyweights due on today's docket including AMZN. Meta (META) - Q1 2023 (USD): EPS 2.20 (exp. 2.03), Revenue 28.65bln (exp. 27.65bln). AI recommendations have increased time spent on Instagram by 24%, and added they are no longer behind in AI infrastructure. +11% in pre-market trade. Top European News Deutsche Boerse to Buy SimCorp in $4.3 Billion Software Push Advent Seeks New Investor for £4 Billion Repair Firm Rubix The Hard Part for Xi Starts Now After Finally Calling Zelenskiy SES Imagotag Shares Surge on New Contract With Walmart Glencore Bolsters Aluminum Position in $1.1 Billion Deal FX Greenback grinds higher ahead of US GDP and IJC, DXY on a firmer footing between 101.280-510 parameters after the 101.00 test yesterday. Kiwi and Aussie outperform as NZD/USD probes 0.6150 and AUD/USD defends 0.6600 again. Euro pivots 1.1050 amidst more decent option expiry interest, but capped ahead of the new 2023 high just shy of 1.1100. Yen and Franc undermined by higher UST yields as USD/JPY eyes 134.00 beyond 50 DMA and USD/CHF hovers above 0.8900. PBoC set USD/CNY mid-point at 6.9207 vs exp. 6.9197 (prev. 6.9237). Fixed Income EGBs bounce off deeper lows as BTPs breathe a sigh of relief after Italian auctions and Bunds take on board mostly weaker EZ sentiment indicators. 10 year benchmarks just shy of 114.00 and above 134.50 respectively vs 134.19 and 113.57 at worst. Gilts pare losses within 101.05-44 range amidst lengthy month-end duration. T-note nearer 115-06+ overnight low vs 115-17+ high ahead of US GDP, IJC and 7 year supply. Commodities WTI and Brent June futures consolidate following yesterday’s losses, with WTI on either side of USD 74.50/bbl and Brent oscillating around USD 78/bbl. Spot gold sees modest gains and largely mirrors Dollar action, but the yellow metal remains underpinned by banking woes. Base metals are mixed amid the overall cautious tone and a lack of catalysts in the European morning. Russian Deputy PM Novak says OPEC+ sees no need for further output reductions despite lower than expected Chinese demand. OPEC Secretary General says OPEC and OPEC+ are not targeting oil prices; IEA should be very careful about "further undermining" oil industry investments. China is to increase energy and agriculture imports, according to China's MOFCOM. Geopolitics Ukrainian President Zelensky said after the call with Chinese President Xi that there will be no peace at the expense of territorial compromises. US President Biden said the US and South Korea are standing against economic leverage being used in coercive ways and said that North Korean actions are a blatant violation of sanctions, while they will continue to seek diplomacy with North Korea to bolster stability in the region and warned that a North Korean nuclear attack would result in the end of whatever regime took such an action. Furthermore, South Korean President Yoon said the US and South Korea have agreed on an unprecedented expansion and strengthening of deterrence policy on North Korea. China's Defence Minister General Li Shangfu has landed in Delhi to attend the Shanghai Cooperation Organisation Defence Ministers' Meeting; a bilateral meeting is scheduled for today later in the evening, according to Print India. Military object found in Poland was likely not fired from another nation, and probably belongs to the Polish army, via RMF citing "unofficial information". Russian Kremlin says it would welcome a call between Chinese President Xi and Ukraine President Zelenskiy if it brought the end of conflict closer; still needs to achieve its aims in Ukraine. President Putin will hold a call with Turkish President Erdogan later today. US Event Calendar 08:30: 1Q GDP Annualized QoQ, est. 1.9%, prior 2.6% 08:30: 1Q Personal Consumption, est. 4.0%, prior 1.0% 08:30: 1Q GDP Price Index, est. 3.7%, prior 3.9% 08:30: 1Q PCE Core QoQ, est. 4.7%, prior 4.4% 08:30: April Initial Jobless Claims, est. 248,000, prior 245,000 08:30: April Continuing Claims, est. 1.87m, prior 1.87m 10:00: March Pending Home Sales YoY, est. -20.7%, prior -21.1% 10:00: March Pending Home Sales (MoM), est. 0.8%, prior 0.8% 11:00: April Kansas City Fed Manf. Activity, est. -2, prior 0 DB's Jim Reid concludes the overnight wrap There’s been a bit of a tug-of-war in markets over the last 36 hours between the dominance of US tech pulling aggressively on one side against the still shaky foundations of US regional banks on the other. The tech side dominated for most of yesterday but risk dipped through the latter part of the US session with the S&P 500 closing down -0.42%, whilst yields on 10yr Treasuries were up +4.9bps to 3.449%. Meta's positive after the bell earnings have helped again overnight but the battle is set to continue. Amazon, Intel and Mastercard headline earnings today. Q1 US GDP and initial claims are the data highlights with the latter still low historically but edging up slowly since February and now flirting with 18-month highs. So certainly one to watch over the next few weeks. With Q1 US GDP, DB’s preview link here suggests +1.9% real growth (down 0.3pp from our last estimate) but with most of the gains down to the consumer but likely slowing as the quarter progressed. Back to markets and First Republic (-29.88%) remained in the spotlight for a second-day running, and at one point intraday was even down as much as -41%. The latest moves took the share price down to an all-time low of $5.69, and at one point the bank’s market capitalisation fell beneath $1bn, down from an all-time high of $39.73bn. In terms of the latest developments, CNBC reported that advisers to First Republic were trying to persuade the big US banks to purchase bonds at above-market rates, similar to how the group of 11 larger firms agreed to deposit $30bn at First Republic at the height of the turmoil last month. According to the article, the rationale for those banks would be that the loss of a few billion would be less than the $30bn in FDIC fees if First Republic failed. The report also said that if they manage to persuade the larger banks of this plan, then they were confident others would help recapitalise the bank, with potential purchasers of new stock already lined up. Later in the session, there were additional reports that indicated that the FDIC was considering downgrading their rating of First Republic if they are not able to reach a private deal. The downgrade would limit the bank’s ability to fully utilise the Fed’s discount window and the emergency facility that the Fed started last month. This caused tremors throughout the market, causing a dip in risk sentiment more broadly as well. When it comes to the question of any government intervention, CNBC reported that the US weren’t willing to intervene at this stage. However, there’s still concern among market participants that the turmoil we saw last month could flare back up again. At the lows yesterday, there were growing questions being asked about whether the Fed would even be able to pursue another hike if the turmoil flared up again, and futures lowered the chances of a May hike beneath 75%. By the close that was back up to just under 80%, but the moves speak to the fact that any financial turmoil could stop the Fed in its tracks. With First Republic reverting to close nearer its lows for the day, the KBW Bank index (-1.03%) registered its 5th consecutive decline. That came alongside a broader drop among US equities, with the S&P 500 dropping -0.38%. 20 of the 24 GICS 2 industry groups were lower on the day with the exceptions being led by software (+4.17%) following the results from Microsoft (+7.24%). After the close, we then heard from Meta (+11.6% in after-market trading) who beat on revenues and profits while also seeing greater engagement and forecasting higher-than-expected profits this year. The day’s tech gains caused the NASDAQ (+0.47%) and the FANG+ (+1.97 %) to outperform. Back in Europe, there were bigger losses and the STOXX 600 fell -0.83%, but that reflected a catchup with the US selloff from the previous day. With investors reacting to better-than-expected earnings from big tech on the one hand, alongside the ongoing banking issues on the other, sovereign bonds oscillated throughout the session. Eventually there was a steeping in yield curves as yields on 10yr Treasuries were up +4.9bps to 3.449%, while 2yr yield saw a -0.3bps decrease to 3.951%. Over in Europe, those on 10yr bunds (+1.3bps) and OATs (+1.5bps) saw a modest increase too. When it comes to sovereign bond yields, investors are continuing to keep a close eye on debt ceiling developments as we move closer to the summer x-date. Notably, yesterday saw the 3m Treasury bill yield hit a post-2007 high of 5.108%. By contrast, the fact that 1m and 6m bill yields are still some way beneath their recent peaks speaks to the concern at the 3m horizon coinciding with the x-date and doubts around how and when investors will be paid. House Speaker McCarthy had made some small changes to his proposal in order to bring it to a vote overnight which passed with a 217-215 margin in the House but has no chance of getting through the Senate. President Biden told reporters ahead of that vote, that he was open to sitting down with McCarthy but “not on whether or not the debt limit gets extended.” Overnight in Asia, stocks are mixed but with US equity futures being buoyed by Meta’s earnings. However Samsung’s disappointing results this morning are weighing on tech sectors of key bourses in the region, with the Nikkei (-0.27%) among the key laggards. The Hang Seng TECH index is down -0.84% so far. Elsewhere, the picture is more mixed amid a rally in the Shanghai composite (+0.20%) and an almost flat Hang Seng (+0.08%) and Kospi (+0.00%). By contrast, the S&P 500 (+0.22%) and Nasdaq 100 (+0.50%) futures are higher again. On the data side yesterday, there weren’t a massive number of releases, although the preliminary reading of US durable goods orders for March surprised on the upside. That showed an increase of +3.2% (vs. +0.7% expected), and the ex-transportation reading was also up +0.3% (vs. -0.2% expected). That said, the reading for core capital goods orders surprised on the downside with a -0.4% decline (vs. -0.1% expected), and the previous month’s number was revised down six-tenths to show a larger -0.7% contraction. To the day ahead now, and data releases from the US include the Q1 GDP number, the weekly initial jobless claims, and pending home sales for March. From central banks, we’ll hear from the ECB’s Panetta. And on the earnings side, today’s releases include Amazon, Mastercard, Eli Lilly, and Intel. Tyler Durden Thu, 04/27/2023 - 08:13.....»»

Futures Slide Ahead Of Mega Tech Earnings US equity futures fell on Tuesday, as investors braced for the first earnings from the megatech giant "generals", which incidentally are mostly lower premarket; bond yields are 3-5bp higher and the USD is higher. Contracts on the S&P 500 and Nasdaq 100 both fell 0.5% in New York as of 7:45 a.m. after Wall Street benchmarks ended Monday’s session broadly unchanged.  Commodities are mixed with weaker oil after several days of gains. Yesterday, FRC reported after the bell with deposits declining 41% QoQ vs. -9% survey; stock is down 21% after close. Today, the focal point will be GOOGL and MSFT’s earnings after-market: investors will look for cost outlook and revenue growth. GOOGL closed +0.5% yday and +20.1% YTD; the implied move is 4.6%; MSFT closed -1.4% yday and up 17.5% YTD pre-market; the implied move is 3.3%. Further, keep an eye on the April Conference Board Consumer Confidence and Richmond Fed survey data. In premarket trading, Alphabet and Microsoft are slightly lower ahead of their results after the market close today.  Weighing on the sentiment were shares of US regional lenders, which dropped as much as 22% in premarket trading, after peer First Republic reported a slump in deposits that was worse than expected, sparking worries that the bank is still contending with challenges. Other US regional lenders fall too: PacWest Bancorp -2.2%, Western Alliance Bancorp -2.5%. Other results were mixed, with General Motors Co. and PepsiCo Inc. gaining after beats, while United Parcel Service Inc. sank as guidance disappointed. Here are some other premarket movers: Chinese stocks listed in the US fall, setting the Nasdaq Golden Dragon China Index up for its longest streak of losses in a year as geopolitical tensions dent risk appetite. Alibaba (BABA US) falls 1.4%, Baidu (BIDU US) -2.4%. Luminar Technologies rises as much as 5.9% as Jefferies initiated the company with a buy rating, saying it is best positioned to capture a dominant share of the nascent lidar market. The first tech giant results due today will move markets: so far in 2023 the Nasdaq 100 has strongly outperformed the broader US market, rising about 19%, while the S&P 500 and the Dow Jones have added only 7.8% and 2.2% respectively. The tech-heavy index has posted the best start of the year since 2012 as investors bet that softer economic growth will lead the Federal Reserve to soften its hawkish stance. Meanwhile, an earnings recession looms: profits for information technology companies in the S&P 500 are projected to fall 15% in the first quarter, which would be the biggest contraction year-over-year since 2009, according to data compiled by Bloomberg Intelligence. The largest tech-related companies have been the biggest contributors to the the S&P 500’s advance this year, by virtue of their size and outperformance. Apple, Microsoft and Nvidia alone account for nearly half of the index’s gains, according to data compiled by Bloomberg. “What will be crucial for the outlook in tech is the rate expectations, and currently the market is pricing in swift cuts by the Fed for the second half of this year, which we do not agree with,” Ann-Katrin Petersen, a senior investment strategist at BlackRock Investment Institute, said on Bloomberg TV. “This sector is very rate-sensitive, so it might have digest this potential for a reversal in Fed rate expectations for the second half of this year.” “Markets seem to be convincingly anticipating that there will be no recession, that inflation will fall and that at the same time, the Fed and the ECB could lower rates,” said Frederic Rollin, senior investment adviser at Pictet Asset Management. “We’re not saying it’s impossible but that would be the best outcome possible.”  In the run-up to the Fed’s May 3 decision, investors are looking to figures on economic growth and consumer spending that will help determine the pace of the Fed’s rate increases this year. Economists expect Thursday’s GDP data to show US economic output decelerated to 2% annual growth in the first three months of 2023 from 2.6% in the fourth quarter. Citigroup strategists led by Beata Manthey said that even if the European GDP outpaces that of the US, European equities and earnings will come under pressure as the region’s profits are more cyclical relative to American peers. Citi strategists prefer the US stock market over Europe as the US tends to perform more defensively than other markets during EPS slowdowns In Europe, bank stocks are leading the broader market lower after updates from UBS and Santander prompted sharp declines in their share prices. The Stoxx 600 is down 0.5% and on course for its largest one-day drop in a month. European banks dropped after Banco Santander and UBS reported 1Q earnings that failed to impress analysts, at the start of a busy week for the region’s banks. The Stoxx 600 Banks Index was 2% lower, second- worst performing sector in Europe, while the Financial Services Index, in which UBS trades, was 1.2% lower. Banco Santander declined 4% as analysts note earnings beat was driven by trading, while deposit outflows in Spain were steeper and interest income missed in a few regions. Here are the most notable European movers: Novartis gains as much as 2.7%, reaching a two-month high, after reporting 1Q results that Citi said were solid, with sales for new prostate cancer drug Pluvicto beating estimates ABB climb as much as 3.9% after it reported beats across the board according to Citi, as the Swiss engineering and automation company increased its revenue guidance for the year Vodafone shares rise as much as 2.7% after its biggest shareholder Emirates Telecom initiated discussions with the UK carrier around non-executive board composition Kuehne + Nagel rises as much as 6% after it posted a beat driven by sea logistics division, analysts said, who also flagged some economic challenges looming for the logistics giant Whitbread shares rise as much as 5%, climbing to the highest since November 2021, after the hotel and restaurant group reported full-year adjusted pretax profit that beat consensus Wartsila gains as much as 6.9% after the power plant services company reported first-quarter results, with analysts highlighting the good order intake as the main positive UBS falls as much as 5.4% after reporting earnings that disappointed analysts who pointed to the possibility of consensus cuts on the back of weak net interest income guidance Banco Santander slides as much as 4.6% as analysts say the Spanish lender’s first- quarter earnings beat was offset by steeper deposit outflows in Spain and a net interest income miss. The wider European banking sector is the worst-performing Stoxx 600 subindex after UBS and Santander’s 1Q misses kick off a busy week for the region’s banks Associated British Foods shares drop as much as 7% after the food processing and retailing company reported interim adjusted operating profit that missed estimates Earlier in the session, Asian stocks declined for a third day as investors continued to sell Chinese shares on economic and geopolitical risks. The MSCI Asia Pacific Index declined as much as 0.8% Tuesday, with Tencent and Alibaba among the biggest drags. Key indexes of Hong Kong-listed stocks fell by more than 1.7% as top leaders highlighted risks to China’s economy and as Beijing’s relations with the US remained strained. “Given geopolitical tensions, people are unsure about the long term and impatient to ‘buy and wait,’” Bank of America strategists including Winnie Wu wrote in a note dated Monday. “Investors discount the good data for ‘low base’ for being ‘unsustainable,’” as bottom-up corporate earnings and guidance remain soft, they added. Stocks also declined in South Korea and Taiwan, while equity benchmarks in Japan advanced. Australia, New Zealand and Indonesia were closed for holidays. The MSCI Asia gauge is down 1.4% so far in April, while its 90-day historical volatility has slumped to the lowest in more than one year.  This week will be the busiest of the current Asian earnings season, with more than 800 firms in the MSCI Asia gauge scheduled to report, giving investors fodder for portfolio picks as they await the next Federal Reserve policy decision in early May. Japanese stocks gained as better-than-expected earnings from major companies including Nidec boosted optimism. The Topix rose 0.2% to close at 2,042.15, while the Nikkei advanced 0.1% to 28,620.07. Mitsubishi Electric contributed the most to the Topix gain, increasing 3.3% on a plan to spin off its auto business. Out of 2,158 stocks in the index, 1,236 rose and 792 fell, while 130 were unchanged. “Nidec earnings were better than expected and associative buying is also taking place for other stocks” said Shingo Ide, chief equity strategist at NLI Research Institute Amid the risk-off mood, investors favored perceived safe-haven assets with Treasuries on the front foot and US 10-year yields down 5bps at 3.44%, while the Japanese yen and Swiss franc sit atop the G-10 intraday rankings. In rates, treasuries rise with gains led by belly of the curve, extending 5s30s spread through Monday’s range. Bid has support from risk-aversion as earnings reports roll in. US yields richer by 3bp-5.5bp across the curve with belly-led gains steepening 5s30s spread by ~1.5bp on the day; 10-year yields around 3.44%, richer by ~5bp vs Monday’s close with bunds slightly outperforming and gilts lagging by 1.5bp in the sector. Auction cycle comprises $42b 2-year note sale at 1pm and 5-year and 7-year sales Wednesday and Thursday. WI 2-year yield at 4.00% is ~4.5bp cheaper than March result, a 2.7bp tail. Focal points of US session include housing data, while final auction cycle of the February-April financing quarter begins with 2-year note sale. European bonds have also benefited, with 10-year borrowing costs falling by 6bps in Germany and 4bps in the UK.     Markets are now pricing the peak for US interest rates in June, and then a decline to end the year below 4.5%. The small shifts in Fed projections underscore the lack of direction at the start of a busy week for economic data and corporate earnings. Data published Monday showed US manufacturing data was weaker than economists forecast, while uncertainty over the debt ceiling persisted. Later this week, US GDP data is forecast to reveal slower growth, and the so-called core PCE deflator, the Fed’s preferred inflation gauge, is expected to show price growth cooled. “The data justifies a 25 basis-point hike,” said Erick Muller, head of product and investment strategy at Muzinich & Co. in London. “But it’s going to be difficult for central banks to raise rates and then quickly within a few months to start reversing that.” In FX, the Bloomberg Dollar Spot Index is up 0.2%; the Japanese yen and Swiss franc outperformed Group-of-10 peers. Large flows went through at the 8am London fix in EUR/JPY and EUR/CHF as European stocks fell at the open. The Australian dollar and Norway’s krone are the weakest. In commodities, crude futures edge lower with WTI falling 0.3% to trade near $78.50. Spot gold is flat around $1,990. Bitcoin is flat; Coinbase filed a petition to push the SEC to create new rules on crypto, according to Reuters. To the day ahead now, and data releases from the US include the Conference Board’s consumer confidence for April, new home sales for March, and the FHFA house price index for February. Otherwise, we’ll hear from BoE Deputy Governor Broadbent. Finally, earnings releases include Microsoft, Alphabet, Visa, General Electric, General Motors, Pepsi and McDonald’s. Market Snapshot S&P 500 futures down 0.5% to 4,140 STOXX Europe 600 down 0.5% to 466.76 MXAP down 0.6% to 159.78 MXAPJ down 1.2% to 510.13 Nikkei little changed at 28,620.07 Topix up 0.2% to 2,042.15 Hang Seng Index down 1.7% to 19,617.88 Shanghai Composite down 0.3% to 3,264.87 Sensex little changed at 60,097.44 Australia S&P/ASX 200 down 0.1% to 7,321.99 Kospi down 1.4% to 2,489.02 German 10Y yield little changed at 2.45% Euro down 0.2% to $1.1029 Brent Futures up 0.2% to $82.89/bbl Gold spot up 0.1% to $1,990.30 U.S. Dollar Index up 0.13% to 101.48 Top Overnight News from Bloomberg China’s upcoming politburo meeting likely to shift the focus away from COVID stimulus and toward policies to ensure the economic recovery can be sustained. BBG The world’s car industry will shrink to only 10 companies over the coming decade, a Chinese rival to Elon Musk’s Tesla has said, as intense competition in China’s electric vehicle market spills on to the global stage. Brian Gu, vice-chair of Guangzhou-headquartered Xpeng, said for Chinese companies to be among the last carmakers standing, they would need to have annual sales of at least 3mn vehicles, underpinned by global exports. The world’s largest carmaker Toyota sold 10.5mn cars in 2022, while Tesla sold 1.3mn. FT The EU and Japan have pushed back against a US proposal for G7 countries to ban all exports to Russia, as part of negotiations ahead of a summit of the world’s most advanced economies. FT The world's top central banks are cutting the frequency of their dollar liquidity operations with the U.S. Federal Reserve from May, sending the clearest signal yet that last month's financial market volatility is essentially over. Central banks of the euro zone, Japan, Britain and Switzerland will now revert to their usual weekly tenders, indicating that the extraordinary backstop is no longer needed as markets are functioning as intended. RTRS UBS pulled in $28 billion from rich clients in the first quarter. Net new money at the wealth unit included $7 billion in the 10 days after its takeover of Credit Suisse. Profit missed as UBS set aside $665 million for litigation tied to its role in selling mortgage securities before the GFC. The bank said geopolitics and liquidity concerns are depressing client activity and may affect new money in coming months. Shares fell. BBG House Republican leaders insist they won’t change their debt ceiling bill to win over holdouts, but they may not have the necessary votes without some tweaks. Politico The next big debt ceiling events will be whether McCarthy can pass his blueprint this week (reports suggest it will be VERY close, and there may need to be revisions) while the Treasury will publish a new timeline for the “X date” in the next 1-2 weeks. BBG Trump will learn his fate in Georgia over the summer (between Jul 11 and Sept 1) as that’s when the DA said she will decide whether to press charges. NYT President Biden formally launched his reelection campaign with a video announcement Tuesday, a long-awaited declaration that puts him on the path to a potential rematch with the man he beat in 2020—former President Donald Trump. WSJ A more detailed look at global markets courtesy of Newsquawk APAC stocks were mostly lower after the mixed performance in the US where sentiment was clouded by a disappointing Dallas Fed Manufacturing survey and the tech sector was among the laggards ahead of the upcoming big tech earnings, with the mood in the Asia-Pac region also contained amid the closures in Australia and New Zealand for ANZAC Day. Nikkei 225 was positive amid softer Services PPI data and after the government raised its view on imports for the first time since July last year, while BoJ Governor Ueda repeated that the BoJ sees it appropriate to maintain YCC and easy monetary policy given the current economic, price and financial developments. KOSPI failed to hold on to early gains after South Korean GDP printed mixed but still showed the economy averted a recession. Hang Seng and Shanghai Comp weakened with Hong Kong pressured by underperformance in tech and after the local benchmark slipped beneath the 20k level, although losses in the mainland were stemmed following another firm PBoC liquidity injection and reports that China urged banks to cut deposit rates. Top Asian News China's Politburo is likely to shift focus from stimulus to reforms when top leaders meet which could take place this week as China’s economic recovery is well on track, according to Bloomberg. China's Commerce Minister met with the European Commission EVP in Brussels and the sides exchanged views on topics including expanding trade and investment cooperation, according to MOFCOM. BoJ Governor Ueda said the BoJ sees it appropriate to maintain YCC and easy monetary policy given the current economic, price and financial developments, while he also said that Japan's bond yield curve is currently smooth as a whole. Ueda said tightening monetary policy now could push down inflation in the future which is already likely to slow on dissipating effect of import costs and noted that if they see the risk of runaway inflation, they must normalise monetary policy but added that they see the risk of inflation undershooting forecast as a bigger risk than overshooting which is why the BoJ must maintain easy policy for now. China's Foreign Ministry announced that airline companies will no longer check COVID-19 nucleic acid test results of passengers to China before boarding from April 29th, via Global Times. European bourses are under pressure, Euro Stoxx 50 -0.6%, continuing the downbeat APAC tone with drivers light ex-earnings; SMI +0.2% outperforms after heavyweights Nestle, Novartis and ABB. Sectors are similarly pressured with Banks hit by UBS and Santander. US futures are lower, ES -0.4%, with attention almost exclusively on earnings. Note, Biden has as expected kicked off his re-election campaign. First Republic Bank (FRC) Q1 2023 (USD): EPS 1.23 (exp. 0.72), Revenue 1.2bln (exp. 1.22bln); Deposits 104.47bln (exp. 136.67bln), down 1.7% from March 31st. Cutting workforce by about 20-25% in Q2. -19.5% in pre-market trade. Nestle (NESN SW) - Q1 (CHF): Revenue 23.47bln (exp. 23.82bln), Organic Revenue +9.3% (exp. +7.25%). Confirms FY outlook for organic growth of 6-8%. +1.3% in European trade Top European News BoE, BoJ, ECB and SNB in consultation with the Fed have decided to revert the frequency of their 7-day operations from daily to once per week, effective 1st May. Decision taken in view of the improvements in USD funding conditions and low demand at recent USD liquidity providing operations. ECB's Lane said current data suggests that they have to raise interest rates again at the upcoming meeting, while he added that beyond the May 4th meeting, further rate hikes will depend on data, according to Reuters. German Finance Minister Lindner said they need to strengthen EU fiscal rules, not dilute them, and they are in discussions on the future design of the common European fiscal framework, according to FT. EU tweaked patent rules to make it easier for patent holders to seek injunctions, according to the latest draft rules cited by Reuters. German Chancellor Scholz to meet with Chinese leadership in Berlin on 20th June. FX Initial cagey and contained trade has picked up slightly throughout the European morning, with the dollar index at the mid-point of 101.19-10151 parameters and dipping within this slightly as JPY advances. JPY is the relative outperformer irrespective of dovish Ueda commentary as UST yields dip and the US yield curve flattens, USD/JPY below 134.00 from initial 134.47 best. At the other end of the spectrum AUD has come under renewed pressure as base metals flounder further in holiday thinned conditions for ANZAC day, with further declines in AUD/NZD cross evidence of the Aussies recent underperformance and ahead of Q1 CPI. EUR and GBP continue to drift but remain above 1.10 and 1.245 respectively with specific drivers limited aside from Central Bank commentary that hasn't fundamentally altered the narrative. PBoC set USD/CNY mid-point at 6.8847 vs exp. 6.8853 (prev. 6.8835) Fixed Income Bonds remain bid after extending rebounds from Monday to 134.40, 101.40 and 115-15 for Bunds, Gilts and the T-note respectively. German 2 year supply reasonably well received in contrast to recent sales and ahead of the USD 42bln auction. USTs experienced a modest boost back towards earlier highs following a 10k five year block trade at 109.27+, with the US five year yield the incremental domestic laggard following this. UK DMO revises the 2023/24 Gilt issuance remit to GBP 237.8bln (prev. 241.1bln) Commodities WTI and Brent futures are choppy but have been ultimately horizontal above USD 78.50 and USD 82.50/bbl respectively since around the settlement yesterday before some modest downside in recent trade. Spot gold remains sub-USD 2,000/oz and attempted to top the level before the Chinese cash opened last night. Industrial metals are lower across the board as the greenback and soured risk tone pressure the complex China March YTD gold output rose 1.9% Y/Y to 84.97 tonnes and gold consumption rose 12.0% Y/Y to 291.58 tonnes. Russian Deputy Energy Minister says volatility and uncertainty on global energy markets will increase due to underinvestment, hope to share some results of the new energy strategy in the next few months. Geopolitics Russia may withdraw from the treaty banning intermediate and shorter-range nuclear missiles, according to a foreign ministry official cited by TASS. Russian Foreign Ministry's head of nuclear non-proliferation Yeramakov said the risks of a direct military confrontation between the two nuclear powers, Russia and the US, are increasing with Washington escalating the risks through its conduct, according to TASS. EU and Japan pushed back against a US proposal for the G7 to ban all exports to Russia, according to FT. UK Foreign Minister Cleverly is to call for constructive ties with China in his Mansion House speech on Tuesday, according to FT. However, The Telegraph reported that Cleverly is to also say that China must come clean on the ‘biggest military build-up in peacetime’ and is to warn of the danger of ‘tragic miscalculation’ if Beijing’s aggression continues. Egyptian Foreign Ministry announced the killing of the assistant administrative attaché at the Egyptian embassy in Khartoum, Sudan, according to Sky News Arabia. Deputy Chairman of the Russian Security Council, said "our competitors should not underestimate the possibility of our use of nuclear weapons", via Al Jazeera. US Event Calendar 09:00: Feb. S&P/Case-Shiller US HPI YoY, prior 3.79% 09:00: Feb. S&P/CS 20 City MoM SA, est. -0.35%, prior -0.43% 10:00: April Conf. Board Consumer Confidenc, est. 104.0, prior 104.2 10:00: April Conf. Board Expectations, prior 73.0 10:00: April Conf. Board Present Situation, prior 151.1 10:00: April Richmond Fed Business Conditio, prior -17 10:00: April Richmond Fed Index, est. -8, prior -5 10:00: March New Home Sales MoM, est. -1.2%, prior 1.1% 10:00: March New Home Sales, est. 632,000, prior 640,000 10:30: April Dallas Fed Services Activity, prior -18.0 DB's Jim Reid concludes the overnight wrap Whilst it might be an eventful week coming up ahead, so far it hasn’t got off to a particularly exciting start, with the last 24 hours seeing a broadly risk-off tone as investors looked forward to a raft of earnings releases that will start coming through today. That left yields on 10yr Treasuries down -8.2bps by the end of the session, and this morning they’ve shed a further -1.5bps, taking them down to 3.48%. Otherwise, the S&P 500 experienced a modest +0.09% gain, but elsewhere the picture has been more downbeat, with Chinese equities losing ground for a 5th consecutive session this morning, whilst the major European indices also experienced a modest pullback. One factor that’s spurred the latest moves have been continued concern among investors about a US recession. In part that was down to fresh data out yesterday, with the Dallas Fed’s manufacturing outlook survey ticking down to a 9-month low of -23.4 (vs. -12.0 expected). But another reason were fears about the upcoming debt ceiling deadline that’s likely to arrive in the summer. Indeed, at one point yesterday the gap between the 1m Treasury yield and the 3m Treasury yield was on track to close at its highest level in available data on Bloomberg back to 2001, although it then tightened and is currently at 151bps this morning. Even with the tightening though, those sort of levels are still far steeper than normal for the 1m3m curve, and it speaks to the concern in markets about a potential issue occurring between one and three months’ time, which coincides with potential debt ceiling deadlines. Speaking of the debt ceiling, DB’s US rates strategist Steven Zeng put out an update on the issue yesterday (link here). His view is that the most likely x-date remains in August in light of April’s tax receipts so far, but there are stressed scenarios that could bring the date forward to late-July. In terms of what to look out for next, Republican House Speaker McCarthy said after the US close that the House will vote on the Republican plan at some point this week. Bloomberg reported last night that he’s still short of the votes to pass it given the very slim Republican majority in the House, but the bill is expected to go to the Rules Committee later today which starts the process of bringing it to a vote. Even if it passed the House, the bill isn’t going to get through the Democratic-controlled Senate, but the idea is that McCarthy can demonstrate to Democrats what the Republicans are willing to get behind, as part of an opening move in any potential negotiation. With growing fears in markets about the debt ceiling, investors brought forward the likelihood of rate cuts from the Fed over the months ahead. Looking at Fed funds futures, the rate priced in by the December meeting came down by -9.2bps yesterday to 4.49%, which is its lowest expected level in just over a week. Even so, there’s still a high degree of confidence that the Fed will proceed with another hike at their next meeting a week tomorrow, with futures pricing in an 88% chance of a move this morning. The various shifts in expectations helped Treasury yields to move lower across the curve, with those on 2yr yields down -9.3bps to 4.09%, and those on 10yr yields down -8.2bps to 3.49%. On the topic of central banks, yesterday also saw growing speculation that the ECB might deliver another 50bps hike at their meeting that’s also taking place next week. That followed comments from Isabel Schnabel of the Executive Board, who said in an interview with Politico that “Data dependence means that 50 basis points are not off the table.” That spurred a modest selloff among European sovereign bonds late in the session, with yields on 10yr bunds (+2.7bps), OATs (+2.8bps) and BTPs (+2.8bps) all moving higher on the day. When it came to equities, the S&P 500 eventually closed +0.09% higher after previously spending much of the day in negative territory. The marginal gain was driven by energy (+1.54%) and defensives such as Food & Staples (+0.92%) and Utilities (+0.50%). By contrast, tech stocks saw a stronger decline, with the NASDAQ down -0.29% and the FANG+ index down -0.55%, which comes ahead of earnings releases from both Microsoft and Alphabet after the US close today. There wasn’t much in the way of earnings yesterday, although we did hear from Coca Cola (-0.16%), which underperformed the broader market slightly despite beating expectations. After the close, we also heard from First Republic (closed up +12.20%) who announced that customer deposits are down 41% or $105bn in Q1, worse than analysts’ estimates, and are planning on reducing 25% of the lender’s workforce. Outflows have slowed recently with deposits slipping just 1.7% this month through last Friday. Earlier, the bank was trading -22% in after-market trading. Back in Europe, markets similarly saw little intraday volatility with the STOXX 600 closing -0.01% after trading in a 0.5% range. Sentiment was supported by the latest Ifo business climate indicator from Germany, which came in at 93.6 in April (vs. 93.4 expected). That was a 6th consecutive monthly gain for the index, and takes it up to its highest level since February 2022, before the index saw a significant decline following Russia’s invasion of Ukraine. Overnight in Asia, the risk-off tone has gathered pace again, with major losses for several indices. That includes the CSI 300 (-0.52%) and the Shanghai Comp (-0.35%), both of which have declined for a 5th consecutive session. Otherwise, the Hang Seng (-1.62%) and the KOSPI (-2.00%) have experienced even larger losses, and that sentiment has spread elsewhere too, with futures on the S&P 500 currently down -0.32% The main exception to that pattern this morning have been among Japanese equities, with the Nikkei up +0.22%. That’s followed comments from new Bank of Japan Governor Ueda overnight, who said in questions to parliament that it was appropriate to continue with the yield curve control policy, and that tightening policy now could cause inflation to weaken further. Remember that his first decision as BoJ Governor is taking place this Friday, so markets will be paying close attention for any signs of a policy shift. Finally, on the topic of US politics again, several outlets including the Washington Post, AP and Politico have reported that President Biden could formally announce his re-election campaign for 2024 as soon as today. As it happens, it would mark 4 years exactly since his 2020 launch, and an official announcement would enable the campaign to begin fundraising and remove any uncertainty about whether Biden will run for re-election. However, the reports have suggested that any plans were not fully finalised, and it’s also possible that Biden could wait before making any formal decision, particularly since there’s no major candidate seeking to challenge him for the nomination on the Democratic side. To the day ahead now, and data releases from the US include the Conference Board’s consumer confidence for April, new home sales for March, and the FHFA house price index for February. Otherwise, we’ll hear from BoE Deputy Governor Broadbent. Finally, earnings releases include Microsoft, Alphabet, Visa, General Electric, General Motors, Pepsi and McDonald’s. Tyler Durden Tue, 04/25/2023 - 08:06.....»»

S&P Futures Hit 6 Week High, Nasdaq Set For Best March Since 2010 Ahead Of Quarter-End Fireworks US futures extended gains for the 3rd straight day and are on pace to rise 6 of the past 7 days, led by the Nasdaq 100 which is set for its best March in more than a decade as investors bet on a softening in central-bank policy amid worries about a recession while the slowdown in new money market fund injections eased fears about the ongoing bank run. Contracts on the Nasdaq 100 were up 0.3% as of 7:45 a.m. in New York, while S&P 500 futures also rose 0.2% hitting the highest level in 6 weeks. For the month, the tech-heavy gauge is tracking an increase of about 7.7%, its biggest March advance since 2010. The benchmark S&P 500 is also set for a small monthly gain as the rates outlook overshadowed concerns about turmoil in the banking sector and a possible economic contraction. The dollar strengthened Friday, trimming some of its sharp declines this month. Treasury yields steadied at the end of a quarter of wild swings. Investors have struggled to adjust for banking collapses and the shifting outlook for interest rates amid high inflation and threats to economic growth. The two-year yield was around 4.13% Friday while the 10-year maturity was about 3.55%. Among notable premarket movers, Nikola Corp. dropped 8.6% after a $100 million share offering priced at a 20% discount to the stock’s last close. Digital World Acquisition Corp., the special-purpose acquisition company merging with Trump Media, rallied as much as 16% following former President Donald Trump’s indictment. Virgin Orbit shares slump a record 40% after the satellite launch provider said it’s ceasing operations indefinitely. Here are the other notable premarket movers: Digital World Acquisition, the blank-check firm taking Trump Media public, rallied 8% in premarket trading, advancing along with other stocks tied to Donald Trump after the indictment of the former president. Phunware , a software firm that worked on Trump’s reelection campaign, rose 2.5%, while video platform Rumble gained 14%. Advance Auto Parts upgraded to equal-weight at Barclays, which says that rather than a positive call it is based on significant year-to-date underperformance. The stock gains 1.1%. Alphabet Inc.’s price target is lowered to $117 from $120 at Piper Sandler, which cites concerns about competition in artificial intelligence technology. Blackberry shares drop 3.8% after the cybersecurity company’s fourth- quarter revenue missed analyst estimates, with brokers flagging the impact of some large government deals slipping, as well as needing more convincing that important metrics were recovering. Generac shares are down 3% after BofA Global Research downgrades the generator company to underperform from neutral. IonQ shares are up more than 4% after the quantum-computing company reported fourth-quarter results that beat expectations and gave a full-year revenue forecast that was ahead of the consensus estimate. US stocks have experienced a big sector rotation this month with technology stocks rallying amid bets of lower interest rates, while economically-linked cyclical sectors lagged behind following their outperformance at the start of the year. The Nasdaq 100 is up nearly 19% in the first quarter, its best January-March performance since 2012. That rotation prompted momentum-chasing penguins, pardon strategists at Citigroup to upgrade US stocks to overweight from underweight, saying they “perform more defensively than other markets” during earnings recessions. Michael Hewson, chief market analyst at CMC Markets UK, said US stock markets “have undergone a bit of a crisis of confidence with concern about the effects of much higher rates giving way to concern about the health of the US banking system.” On the outlook for rates, all eyes Friday are on the so-called PCE Core Deflator, which is expected to show a slight easing of price pressures in February, though it should still be well above target. A round of Fed speakers on Thursday suggested more monetary tightening was necessary to quell inflation, even after the collapse of three US banks this month. “The Fed’s preferred measure of inflation could generate some volatility within the fixed income markets if we see any surprises,” economists at Rand Merchant Bank in Johannesburg wrote in a note. “Risks are tilted to the upside, and if the data shows that inflation pressures remained strong in February, the inversion of the US yield could deepen even further.” Traders will also be on guard for any choppiness amid quarter-end rebalancing from pension funds and options hedging activity, especially the famous JPM collar which has a 4065 strike. And they continue to debate the extent to which policy makers may cut interest rates this year. Several strategists have said markets are wrong to expect easing by the Fed this this year as the labor market remains robust, though US unemployment claims ticked up for the first time in three weeks. European stocks are ahead with the Stoxx 600 up 0.3% and on course for a third day of gains. Personal care, retailers and consumer products are the strongest-performing sectors while miners and banks fall. Here are some notable premarket movers: Air France-KLM rises as much as 4.5%, IAG 3.2%, Lufthansa 3.3% and EasyJet 3.8% following bullish notes on the sector from Deutsche Bank and Barclays and a slew of upgrades Ocado gains as much as 7.9%, while AutoStore falls as much as 12% after a UK court invalidated the two remaining patent lawsuits the Norwegian firm had filed against Ocado SAF-Holland rises as much as 7.6%, extending gains following Thursday morning’s results, as Hauck & Aufhaeuser lifts its PT to a new Street high CD Projekt soars as much as 9.8% after posting the second-highest quarterly earnings fueled by stronger sales of Cyberpunk 2077 and Witcher 3 games Getin Holding soars as much as 27% after the company proposes a record dividend of 0.58 zloty per share, its first payout since 2013 Computacenter shares gain as much as 3.2% on Friday after the IT reseller posted better-than-expected results, saying demand from most of its largest customers remains solid Torm rises as much as 9.6% after holder OCM Njord Holdings Sarl terminated a planned secondary public offering of 5 million class A shares in the Danish tanker operator Marston’s shares rise as much as 5.3%, with analysts saying the pub operator’s amendment and extension of its debt facilities should provide some relief for investors Jungheinrich shares slide as much as 9.2% after the forklifts and stackers manufacturer’s cautious outlook for 2023 overshadowed a strong end to 2022 EMIS shares plunged as much as 24% after Britain’s competition regulator said it would investigate UnitedHealth’s deal to acquire the health-technology company Earlier in the session, Asian stocks headed for a fourth day of gains as data showed China’s economy gained momentum in March, while concerns about global banking turmoil and elevated interest rates eased. The MSCI Asia Pacific Index rose as much as 1.1%, set to cap a second-straight weekly gain, boosted by consumer discretionary and materials shares. Most regional markets gained, led by Japan, South Korea and Hong Kong. Indian shares jumped after returning from a holiday. Chinese stocks got a boost after a report that manufacturing continued to expand amid a strong pickup in services activity and construction. The report offered investors more confidence about an economic rebound after stringent Covid restrictions were dropped. Spinoff plans for JD.com and Alibaba units also lifted sentiment for tech shares. Read: China’s Strong PMIs Show Economic Recovery Gaining Traction  The latest data “confirms the early cycle economic recovery is on track, paving the way for earning revisions to stabilize and improve from 2Q,” analysts at UBS Global Wealth Management’s chief investment office wrote in a report. “We expect over 20% upside for MSCI China by year-end, with the recent consolidation presenting an attractive entry point.” Globally, concerns over the financial sector continued to cool and investors digested a round of Federal Reserve commentary. Bank of Boston President Susan Collins said the banking system is sound and more interest-rate increases are needed to bring down inflation. Japanese stocks rebounded, following US peers higher, as concerns over the financial sector continued to cool and investors digested a round of Fed commentary. The Topix Index rose 1% to 2,003.50 as of market close Tokyo time, while the Nikkei advanced 0.9% to 28,041.48. Mitsui & Co. contributed the most to the Topix Index gain, increasing 7.6%. Out of 2,160 stocks in the index, 1,471 rose and 588 fell, while 101 were unchanged. Meanwhile, Japanese semiconductor-related stocks pared earlier gains after Japan said it will tighten chip gear exports to help restrict tech shipments to China. Japan Trading Firms Gain on Reported Plans to Improve Returns “Besides the stabilizing overseas markets, expectations for firm corporate earnings outlooks are also boosting Japanese equities,” said Rina Oshimo, a senior strategist at Okasan Securities. “Japan’s macro economy this year is more resilient than overseas, mainly driven by reopening growth, and the government’s policy for childcare support is also positive material. Australian stocks also advanced: the S&P/ASX 200 index rose 0.8% to close at 7,177.80, boosted by mining and bank shares. Stocks across Asia advanced with US and European equity futures, underscoring investor optimism in the face of banking turmoil and elevated interest rates. The benchmark snapped seven weeks of losses, rising 3.2% for the week, the most since the week of Nov. 11. The index also posted a second straight quarter of gains.  The focus will now be on Australia’s central bank, which is set to make a rate decision Tuesday. The RBA is expected to keep borrowing costs unchanged at next week’s meeting, delivering its first pause since initiating a policy tightening cycle in May 2022. In New Zealand, the S&P/NZX 50 index fell 0.4% to 11,884.50. India stocks rallied the most in more than four months on Friday bouncing back from their oversold levels to trim losses for the quarter. The S&P BSE Sensex Index rose 1.8% to 58,991.52 in Mumbai, while the NSE Nifty 50 Index advanced 1.6% to 17,359.75. The gauges posted their biggest single-day rallies since Nov. 11, narrowing their losses for the quarter to 3% and 4%, respectively.  Even with the gains this week, the indices clocked their worst quarterly performance since June 2022 after scaling to their record peaks in December. Globally tightening monetary conditions and the impact of inflation have dampened the outlook for economic growth and shrunk the valuation gap that India enjoyed over its peers. Foreigners turned buyers of local shares in March after three straight months of outflows, purchasing a net of $1.4b of stocks through March 28, while domestic institutional investors remain supportive of equities.  Reliance Industries contributed the most to the Sensex’s advance, increasing 4.3% after the company firmed up its plan for separating its financial services business, a move that will potentially result into value creation for the country’s biggest listed firm. Out of 30 shares in the Sensex index, 26 rose and 4 fell In FX, the Bloomberg Dollar Spot Index rose 0.2%, boosted by gain versus the yen; the dollar is set to end the quarter 1.4% lower, its first consecutive quarterly loss in more than two years, amid easing concerns about the global banking sector and money market wagers on Federal Reserve interest-rate cuts. USD/JPY rallied as much as 0.8% as Japan’s fiscal year-end flows dominated and haven bids waned amid easing concerns about the global banking sector; International Monetary Fund said the nation’s central bank should avoid a premature exit from monetary easing. In rates, US 10-year yields are down 2 bps at 3.537% ahead of the core PCE data due later today. Treasury 2-year yields cheaper by ~2bp on the day with 2s10s flatter by 3bp to -61bp from a high of around -50bp Thursday. Bunds outperform little-changed US 10-year by 2bp while gilts lag by 3bp. Earlier, ECB rate-hike premium was unwound slightly after euro-area core inflation accelerated to 5.7% in March, matching the median forecast. IG dollar issuance slate empty so far; a couple of names priced $1.4b Thursday, leaving March total around $100b vs $150b that was expected.  Bund futures rallied as traders trimmed ECB rate bets after euro-area inflation slowed more than expected in March, although the core rate did accelerate. German 10-year yields are flat at 2.37% while the Euro is down 0.2% versus the greenback. US economic data slate includes February personal income/spending with PCE deflator (8:30am), March MNI Chicago PMI (9:45am) and March final University of Michigan sentiment (10am). In commodites, US crude futures are little changed with WTI at $74.35. Spot gold is also flat around $1,980 Looking to the day ahead. We have quite a busy day data wise, with the US PCE deflator data, the March MNI Chicago PMI and the February personal spending and income data. In Europe, we have the Eurozone March CPI data and the February unemployment. We will also see the release of the Italian March CPI and the January industrial index, the German march unemployment change, February retail sales and the import price index, and lastly the French March CPI. February CPI and consumer spending. Finally, we will hear from several central bankers, including the ECB’s Lagarde and Kazaks, as well as the Fed’s Williams, Waller and Cook. Market Snapshot S&P 500 futures little changed at 4,082.00 MXAP up 0.6% to 161.90 MXAPJ up 0.5% to 523.44 Nikkei up 0.9% to 28,041.48 Topix up 1.0% to 2,003.50 Hang Seng Index up 0.4% to 20,400.11 Shanghai Composite up 0.4% to 3,272.86 Sensex up 1.7% to 58,952.31 Australia S&P/ASX 200 up 0.8% to 7,177.75 Kospi up 1.0% to 2,476.86 STOXX Europe 600 up 0.2% to 455.58 German 10Y yield little changed at 2.39% Euro down 0.3% to $1.0876 Brent Futures down 0.9% to $78.54/bbl Gold spot down 0.3% to $1,975.10 US Dollar Index up 0.30% to 102.45 Top Overnight News Former President Donald Trump faces a set of legal requirements no American leader has had to confront after being indicted by a Manhattan grand jury on Thursday in a probe of hush money payments to a porn star during his 2016 campaign — a historic event in American law and politics that is certain to divide an already polarized society and electorate: BBG The BOJ expanded the range of its planned bond purchases next quarter, giving itself the option to dial back buying. It will buy ¥100 billion to ¥500 billion ($750 million to $3.8 billion) of 10-to-25-year bonds per operation, compared with a range of ¥200 billion to ¥400 billion in the first quarter. It also widened the range of purchase amounts for other maturities above one year. BBG The China Securities Regulatory Commission last month released long-awaited guidelines that require all mainland Chinese companies planning share sales outside the domestic A-share market to inform the regulator beforehand. That applies to jurisdictions that have been popular venues for Chinese listings, including Hong Kong and the U.S. Companies in some technology fields that haven’t yet generated revenue will be able to explore listings in Hong Kong, after the city’s stock exchange last week finalized a new set of rules known as Chapter 18C. WSJ China’s economic recovery gathered pace in March, with gauges for manufacturing, services and construction activity remaining strong, boosting the outlook for growth this year: BBG The U.S. and South Korea are both seeking to extradite captured crypto entrepreneur Do Kwon from Montenegro, authorities in the tiny European nation said this week, setting up competing bids to prosecute him over criminal charges tied to the collapse of his TerraUSD stablecoin. WSJ Eurozone inflation has fallen sharply to its lowest level for a year after a decline in energy costs. Harmonized consumer prices in the euro area rose by 6.9 per cent in the year to March, down from 8.5 per cent the previous month, to reach their lowest level since February 2022. The drop, due to a 0.9 per cent fall in energy prices, was steeper than a forecast by economists polled by Reuters, who had expected March eurozone inflation of 7.1%. FT Underlying inflation in the euro area hit a record in March, handing ammunition to European Central Bank officials who say interest-rate increases aren’t over yet: BBG Banks reduced their borrowings from two Fed backstop lending facilities in the most recent week, a sign that liquidity demand may be stabilizing. US institutions had a combined $152.6 billion in outstanding borrowings, compared with $163.9 billion the previous week. But US banks are facing a new problem as savers flee for higher deposit rates. BBG Finland has cleared the last significant hurdle in its bid to join Nato after Turkey’s parliament approved the Nordic country’s accession to the western military alliance. FT Investors are still flooding into cash, with $60.1 billion entering money markets funds in the week through Wednesday, according to EPFR data. That brings the quarterly flow into cash to about $508 billion, the most since the very start of the pandemic. BBG   A majority of Americans don’t think a college degree is worth the cost, according to a new Wall Street Journal-NORC poll, a new low in confidence in what has long been a hallmark of the American dream.  The survey, conducted with NORC at the University of Chicago, a nonpartisan research organization, found that 56% of Americans think earning a four-year degree is a bad bet compared with 42% who retain faith in the credential. WSJ A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mostly firmer at quarter-end as they took impetus from the tech-led gains on Wall Street and with participants digesting a slew of data releases including better-than-expected Chinese PMI figures.  ASX 200 was led by the mining and resources sectors after the strong data from Australia’s largest trading partner although the upside was capped ahead of next week’s RBA meeting with a recent Reuters poll showing near-even expectations amongst economists between a hike and a pause. Nikkei 225 gained heading into the end of the fiscal year and climbed back above the 28,000 level after encouraging Industrial Production and Retail Sales data but was off highs with chipmakers later pressured after Japan announced to impose new restrictions on chip-making gear. Hang Seng and Shanghai Comp. were positive after the strong Chinese PMI data in which Manufacturing PMI topped forecasts and Non-Manufacturing PMI rose to its highest since 2011, with the outperformance in Hong Kong led by tech as JD.com plans to spin off its industrials and property units. However, the gains in the mainland were limited amid a deluge of earnings releases including mixed results from China’s mega-banks and with the nation’s largest property developer Country Garden posting its first annual loss since its listing in 2007. Top Asian News Chinese Vice Finance Minister Zhu said China needs to step up fiscal policy adjustments to support the economy and that China will move steadily in implementing preferential tax and fee policies. Zhu also stated that China will effectively ease tax burdens of small firms and household businesses, while he noted that recently announced preferential tax and fee policies will reduce companies' burdens by CNY 480bln per year, according to Reuters. China's Ambassador to the EU warned the bloc of ‘peril’ in following the US on trade curbs, while he urged resistance to ‘unwarranted’ pressure and said that Beijing will not be ‘trampled’, according to FT. Japan is to impose new restrictions of chip-making gear, according to Bloomberg and Reuters. Japan said it will impose restrictions on 23 types of chip-making equipment from July. Japanese officials said the scope of restrictions went further than the US measures imposed in 2022. Chip-equipment exporters would need licenses for all regions. The measures will affect a broader range of companies than previously expected, according to FT. Agricultural Bank of China (1288 HK) says NIM for the banking sector will continue to shrink in Q1; Co. says its NIM faces downward pressure in 2023. Bank of China (3988 HK) CFO says they are to face a mild decline in NIM this year. Japan is to end current COVID border measures on May 8th, via TBS; replaced with random genomic surveillance at airports. European bourses are firmer, Euro Stoxx 50 +0.3%, continuing the positive APAC tone with incremental impetus from as-expected EZ Core HICP. Sectors are mixed with Banks lagging as yields retreat post-HICP while Personal Care/Drug names outperform. Stateside, futures are incrementally in the green with the tone more cautious ahead of PCE data and Fed speak, incl. Williams, thereafter. Top European News UK PM Sunak's office said Britain will join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership Trans-Pacific after the bloc's members reached an agreement on Britain joining the trade pact, while Japan's Economy Minister said they aim for an early signing of UK joining the CPTPP, according to Reuters. Sartorius to Buy French Biotech Polyplus for $2.6 Billion DSV Slips as JPMorgan Cuts Rating, Prefers Kuehne + Nagel Energy Cliff-Edge Threatens Thousands of British Businesses German Unemployment Rises More Than Expected on Sluggish Economy FX USD/JPY and Yen crosses still marching higher into month end as importer hedging and buy orders persist, headline pair popped above 133.50 before topping out and DXY holding 102.000+ status as a result. Aussie unable to keep hold of 0.6700 handle as AUD/NZD cross retreats through 1.0700 on divergent RBA/RBNZ rate expectations. Euro mixed after EZ inflation data showing a softer than forecast headline, but firmer than previous core, EUR/USD sub-1.0900, but EUR/CHF nearer parity than 0.9950. Cable unable to hold above 1.2400 irrespective of UK Q4 GDP upgrades as Buck bounces broadly pre-US PCE. Fixed Income EGBs experienced a marked bounce following the EZ inflation measure after dipping on the initial French reading; with the EZ figure showing a larger than expected cooling in the headline while the core measures are stick but were as-expected. Specifically, Bunds have been up to a 135.64 peak which saw the associated yield pullback from 2.40% best towards the 2.30% mark. USTs and Gilts have been moving in tandem with EGBs; though, USTs are somewhat more cautious ahead of upcoming events with yields slightly firmer as it stands. BoJ Q2 Bond Purchase plans; expands range for mid-to-superlong purchases for Q2. Click here for more detail. Commodities WTI and Brent are mixed/flat after settling higher by over USD 1.0bbl on Thursday with the overall tone tentative ahead of the US docket while crude specifically is cognisant of next week's JMMC. Specifically, benchmarks are near-unchanged but at the upper-end of USD 73.77-74.67/bbl and USD 78.54-79.18/bbl parameters. Metals hold a slight downward bias in otherwise tentative trade for the space with the USD's strength capping any potential upside from the somewhat cauutious tone. Geopolitics Japanese Finance Minister Suzuki said Japan is to extend the suspension of its most favoured nation treatment on tariffs for Russia, while it was also reported that Japan banned Russia-bound exports of steel, aluminium and aircraft from April 7th, according to the Ministry of Economy, Trade and Industry cited by Reuters. Turkish parliament approved a bill to clear the way for Finland's NATO accession, according to Reuters. Deputy Chairman of the Russian National Security Council says "our army will arrive in Kiev if necessary". Belarusian President Lukashenko warns that the West seeks to invade his country with the aim of "destroying" it; The war is not far from us and there are attempts to drag us into it; return of nuclear weapons is not blackmail but a safeguard. Says, talks to resolve the conflict in Ukraine need to commence now, a ceasefire without pre-conditions should be declared. Russia's Kremlin says Russian President Putin is to hold an "important" meeting of Security Council today; Foreign Ministry Lavrov to present a new concept of Russian foreign policy. Will talk to Belarussian President next week about Lukashenko's call for immediate peace talks, cContinuation of special military operation is the only way to achieve goals at the moment. US Event Calendar 08:30: Feb. Personal Income, est. 0.2%, prior 0.6% Personal Spending, est. 0.3%, prior 1.8% Real Personal Spending, est. -0.1%, prior 1.1% 08:30: Feb. PCE Deflator MoM, est. 0.3%, prior 0.6% Feb. PCE Core Deflator YoY, est. 4.7%, prior 4.7% Feb. PCE Deflator YoY, est. 5.1%, prior 5.4% Feb. PCE Core Deflator MoM, est. 0.4%, prior 0.6% 09:45: March MNI Chicago PMI, est. 43.0, prior 43.6 10:00: March U. of Mich. Sentiment, est. 63.2, prior 63.4 Current Conditions, est. 66.4, prior 66.4 Expectations, est. 61.4, prior 61.5 1 Yr Inflation, est. 3.8%, prior 3.8% 5-10 Yr Inflation, est. 2.8%, prior 2.8% Central Banks 15:05: Fed’s Williams Speaks at Housatonic Community College 17:45: Fed’s Cook Discusses US Economy and Monetary Policy 22:00: Fed’s Waller Discusses the Phillips Curve DB's Karthik Nagalingam completes the overnight wrap For a fourth straight day, market behaviour was rather benign with risk-sentiment remaining positive and volatility ebbing. Equity indices in both the US and Europe rose moderately, while longer-dated sovereign yields in the two regions diverged as inflation data is coming back to the foreground. Hotter-than-expected European inflation led to a selloff in bonds, and today we will get more inflation data from both sides of the pond. Given the calmer market narrative around the global banking system, focus today will be on the US PCE data. Fed members had an approximation of what PCE would look like given recent CPI and PPI prints when they rose rates 25bps last week but seeing how the underlying components are tracking may force market participants to refocus on pricing pressures. However, the market is likely to look through anything but an extraordinary print, given that the recent banking crisis will not be reflected in the data. Our US economists see a +0.36% advance for core PCE in February (+0.57% in January) and m/m declines for both income (-0.1% vs +0.6% in January) and consumption (-0.6% vs +1.8%). Ahead of the PCE print there was a bevy of Fed speakers yesterday, all of whom highlighted the fact that inflation remained too hot. Boston Fed President Collins (non-voter), while at a conference in Washington DC said, “Inflation remains too high, and recent indicators reinforce my view that there is more work to do.” Separately, Minneapolis Fed President Kashkari (voter) said that the stresses on the banking sector could last longer than expected, but also said that “the services part of the economy has not yet slowed down and … wage growth is still growing faster than what is consistent with our 2% inflation target.” Lastly, Richmond President Barkin (non-voter) said that “if inflation persists, we can react by raising rates further,” and pointed out that the committee was discussing a 50bp hike just a few weeks ago. He had no stated preference on the size of a future rate hike, but he said that continuing to fight inflation was the priority. These comments did little to change fed futures yesterday, as the market priced in just an extra +4.0bps for the rate following the December Fed meeting, increasing expectations to 4.387%. That was their highest closing level since March 10 - the day of the collapse of Silicon Valley Bank. The expectations around the May meeting rose marginally, with futures now pricing in a 55% chance of a 25bp hike, up from 47% the day before. While fed speakers don’t seem ready to talk about cutting rates, the market is still pricing in over two 25bps rate cuts by year-end after hitting a terminal rate in May. Against this backdrop, the more policy sensitive US 2yr yield was up +2.1bps to 4.12% – returning to roughly where they were before the most recent Fed rate hike on the 21 March. Meanwhile the US 10yr yield fell back -1.5bps after trading in a tight 6bp range all day, although yields have slightly pulled back (+1.51bps) overnight as we go to print. It was a different story in Europe, as 10yr bund yields rose +4.6bps to 2.37% and German 2yrs rose +9.5bps to 2.75%, their highest level since the third week of March. 10yr OATs (+5.2bps) and BTPs (+8.5bps) underperformed, while 10yr gilts yields rose by +4.6bps as well. As noted above, the selloff in European bonds began after the German inflation print showed an unexpected acceleration in price growth, with German CPI up to +0.8% (vs +0.7% expected) month-on-month, and +7.8% year-on-year (vs +7.5% expected) on the EU-harmonised measure. Eurozone CPI data for March later today will complete the picture, and our European economists expect euro-area EU-harmonised CPI to fall from 8.6% in February to 7.1% year-on-year, but with risks slightly to the upside following the German print. See their note here. Following the upside surprise on German CPI, the terminal ECB rate priced in by overnight index swaps for the December meeting climbed +10.7bps to 3.44%, pricing in barely any cuts (5bps) by the end of 2023 with the terminal rate expected for October at 3.49%. Turning to equities, the S&P 500 was up +0.57% with all but 3 of 24 industry groups gaining on the day. Semiconductors (+1.61%), consumer discretionary retail (+1.21%), and real estate (+1.19%) outperformed. The outperformance of technology continued, leading the NASDAQ (+0.73%) to maintain its trajectory for its best quarter since 2020. The only three S&P 500 industries down on the day were diversified financials (-0.13%), consumer durables (-0.21%) and banks (-1.00%). The underperformance in banks was primarily driven by the regionals with First Republic (-4.0%) the clear laggard, while Fifth Third (-2.6%), Zion (-2.4%), and M&T Bank (-2.3%) were in the next tier of underperformers. The larger banks outperformed with Citi (+0.3%) the only S&P bank constituent higher on the day, while JPM (-0.3%) and BofA (-1.3%) saw smaller losses. After markets closed, the Fed released their weekly H.4.1 balance sheet data showing how banks were using the Fed’s new bank lending facility and the discount window. Over the prior week, discount window borrowing was down from $110bn to $80bn, there was no further extension of credit to SVB or Signature, and the bank term funding program saw increased borrowing of $64bn from $54bn the week prior. The foreign repo facility, FIMA, saw use fall from $60bn to $55bn. Overall this shows modest improvement across the complex and should add to the narrative that the pain is mostly contained. In Europe, the STOXX 600 similarly gained on the day (+1.03%), with real estate (+3.74%) as well as information technology (+2.54%) driving performance. Food and Beverage (-0.47%) was the only industry group weaker off the back of the German CPI data, as the finer details of the release showed price inflation for food inched higher. Additionally, unlike in the US, European financials continued to rally back yesterday with as European banks climbed +1.84% and are now up +6.62% on the year. Looking into other bourses, the CAC and the DAX were up +1.06% and +1.26% respectively. This morning, Asian equity markets have carried over the overnight gains on Wall Street. Across the region, the Hang Seng (+1.46%) is leading gains with the KOSPI (+1.06%), Nikkei (+1.01%), CSI (+0.35%) and the Shanghai Composite (+0.33%) also rising. In overnight trading, US equity futures are pointing to further gains with those on the S&P 500 (+0.28%) and NASDAQ 100 (+0.34%) edging higher. China equities are outperforming following the official manufacturing PMI beating expectations at 51.9, and the non-manufacturing PMI rising to 58.2 in March. That is the non-manufacturing index’s highest level since May 2011. This data suggests that the economic recovery in the world’s second biggest economy remains on track even amid weaker global demand and a continued property market downturn. There was also a batch of economic data out of Japan indicating that inflation in Tokyo is still above trend after coming in at +3.3% y/y in March (vs +3.2% expected) compared to +3.4% recorded last month. At the same time, core Tokyo CPI rose +3.2% y/y (vs +3.1% expected) in March, following a peak of +4.3% back in December. So further improvement but not as much as the market was looking for. Labour market conditions loosened slightly as the unemployment rate unexpectedly rose to +2.6% in February from +2.4% in January, while the jobs to applicant ratio moved lower to +1.34 (vs +1.36 expected). Retail sales jumped +1.4% m/m in February, compared to January’s downwardly revised increase of +0.8%. Meanwhile, industrial production rebounded +4.5% m/m in February (vs +2.7% expected) on easing supply bottlenecks for carmakers. It was a big day for data release yesterday. Starting with the US, weekly jobless claims came in at 198,000 (vs 196,000 expected) suggesting a slight softening in an otherwise tight labour market. Continued claims was lower than expected (1,689k vs 1,700k expected), having remained in a tight range over the past few months now. The third revision to 4Q’22 US GDP saw annualised quarter-over-quarter GDP taken down to 2.6% (2.7% prior) on the back of lower personal consumption (1.0% vs 1.4% prior). 4Q’22 PCE was revised +0.1pp higher to 4.4%. In Europe, we had several confidence data points for March in the Eurozone demonstrating a slight weakening relative to February. Economic confidence was down to 99.3 (vs 100 expected), industrial confidence became negative at -0.2 (vs 0.5 expected) and services confidence fell a tenth to 9.4 (vs 10 expected). Consumer confidence remained steady at -19.2. This contrasted with the services-driven improvement in the PMIs for March. Looking on the individual country level, the Spanish CPI rose +1.1% month-on-month (vs +1.6% expected) and +3.1% year-on-year (vs +3.7% expected) year-on-year on the EU-harmonised measure. Italian February PPI came in at -1.3% month-on-month, and 10% year-on-year. Finally on commodities, oil rose sharply again yesterday for its third gain out of the last 4 days, as Bloomberg reported that it is highly unlikely that exports from Iraq will resume this week. Officials from the Kurdistan Regional Government are set to re-enter discussions with Iraqi officials early next week. WTI crude contracts were up +1.92% to $74.37/bbl whilst Brent crude hit $79.27/bbl after climbing +1.26%. Now to the day ahead. We have quite a busy day data wise, with the US PCE deflator data, the March MNI Chicago PMI and the February personal spending and income data. From the UK we have the March Lloyds business barometer and the Q4 current account balance. In Europe, we have the Eurozone March CPI data and the February unemployment. We will also see the release of the Italian March CPI and the January industrial index, the German march unemployment change, February retail sales and the import price index, and lastly the French March CPI. February CPI and consumer spending. Finally, we will hear from several central bankers, including the ECB’s Lagarde and Kazaks, as well as the Fed’s Williams, Waller and Cook. Tyler Durden Fri, 03/31/2023 - 08:17.....»»

Futures Flat As Attention Turns To Fed Rate Hikes US futures are flat with bond yields reversing an overnight drop, lifted by the belly of the curve; the USD weaker for 8 of the past 9 days, and commodities mostly higher as investors shift their focus back to concerns about inflation and potential further monetary tightening from the recent banking-industry chaos; after all, a bank hasn't failed in at least a few days.  WTI has soared 5.6% this week. S&P 500 contracts were little changed as of 7:45 a.m. ET, after earlier gaining as much as 0.4% and closing 0.2% higher on Monday. Nasdaq 100 futures slid 0.2% after the tech-heavy benchmark lost 0.7% on Monday following strong gains over the previous two weeks. European stocks advanced along with Asian equities and the dollar traded lower as fears of broader contagion from the banking turmoil eased. According to JPM, If bank contagion fears subside, we may see a resurgence in both bond yields and commodities as growth, before the banking crises, was stronger than expected led by the US and a reopened China. "However, banking crises typically have wide-ranging, and negative, impacts on growth and employment." Today’s macro data focus includes inventories, housing prices, regional mfg updates, and Consumer Confidence. Keep an eye on the confidence number as that can impact spending. In premarket trading, Alibaba shares soared 9% after the Chinese e-commerce company planned to split into six units that will individually explore IPOs. Shares in fellow Chinese ADRs also rallied. First Republic Bank gained 3.1% adding to a 12% jump on Monday after First Citizens BancShares’s agreement to buy Silicon Valley Bank reassured investors in regional lenders. PVH climbed 12% in premarket as the owner of Calvin Klein and Tommy Hilfiger issued stronger-than-expected earnings forecasts. Lyft rose as much as 5.2% after the ridesharing company appointed David Risher as CEO. Here are some other notable premarket movers: Array Technologies gains 3.7% after Truist Securities raises the solar equipment manufacturer to buy from hold, saying it has made significant progress addressing past challenges related to its product portfolio, execution and margin structure. Carnival Corp. is raised to equal-weight from underweight at Wells Fargo as the cruise operator has low near-term refinancing risk, its business in Europe is holding up well, and its annual Ebitda forecast is reasonable. Its shares gain 1.7% after dropping 4.8% on Monday following its earnings report. Ciena Corp. shares are up 3.2% in premarket trading after Raymond James upgraded the communications equipment company to strong buy from outperform. Occidental Petroleum advances as much as 2.2% after being upgraded to outperform from market perform at Cowen, with the broker saying the oil and gas company stands out for its “superior” exposure to oil pricing, share support, capital structure and differentiated catalyst rich profile. . PVH shares surge 12% after the parent company of Calvin Klein and Tommy Hilfiger issued stronger-than-expected forecasts for revenue growth and reported fourth-quarter earnings per share that beat estimates. Analysts found the company’s performance to be strong, flagging the beat to EPS as well as the strong outlook. . Viking Therapeutics said it plans to initiate a Phase 2 study of VK2735 in patients with obesity in mid-2023 based on Phase 1 trial results. Shares gain 50%. Virgin Orbit fell more than 9.5% after the launch provider placed workers on furlough as it seeks rescue financing or bankruptcy. "For now, it looks like the major stress around the banking crisis is calming down and markets can switch back to monitoring the inflation-recession dynamics," said Marija Veitmane, senior multi-asset strategist at State Street Global Markets in London. As jitters in the banking sector subside, investors are again turning their attention to economic fundamentals and the outlook for Federal Reserve policy. Swaps have meanwhile priced in a more than 50% probability of a rate hike at the next meeting; they continue to expect sharp easing later however, with pricing suggesting the policy rate will slide to around 4.3% in December, down from around 4.95% in May. Not all agree. “We see major central banks moving away from a ‘whatever it takes’ approach, stopping their hikes and entering a more nuanced phase that’s less about a relentless fight against inflation but still one where they can’t cut rates,” strategists at BlackRock Investment Institute, including Wei Li and Alex Brazier, wrote in a note. Hugh Gimber, global market strategist at JPMorgan Asset Management, also doesn’t foresee rate cuts anytime soon, even if hikes pause, and cautions against stock-market optimism on it. “I think the market is right to price a Fed pause,” he said in an interview on Bloomberg TV. “The question here is how big the feed through from a deterioration in lending standards is to really get inflation lower towards target, and I’m not that convinced we will see that very quickly. I think we would need a pretty significant economic shock to get there in 2H. Rate cuts are more of a 2024 story.” European stocks are in the green although they’ve pared gains since the open as investors remain cautious amid risks to the global financial system. The Stoxx 600 has trims gains to 0.2% while Deutsche Bank swings to a ~2% fall from from ~2% rise. Energy, miners and autos are the strongest-performing sectors. Here are the most notable European movers: GSK gains as much as 0.9% after it announced positive results from an endometrial cancer drug trial. Shore Capital describes the published data as “promising” Ocado shares rise as much as 5.7% after the online grocer’s retail joint venture with Marks & Spencer beat sales expectations in the first quarter Zalando shares rise as much as 3.2% as HSBC upgrades the online fashion retailer to buy from hold, saying its momentum is moving in the right direction Marks & Spencer shares gain as much as 3.1% as Credit Suisse hikes its price target, saying the UK retailer’s recovery momentum is building Eurocash jumps as much as 11% after the retailer posted record 4Q Ebitda of 308m zloty and cut debt ratios, seen by analysts as a soothing signal Telecom Italia shares rise as much as 3.4% after Bloomberg reported that Italian state-backed lender CDP plans to raise its offer for the carrier’s landline network Diageo shares slip as much as 0.9% after the British distiller said Ivan Menezes plans to retire as chief executive officer, which analysts say is a loss Embracer shares slump as much as 15%, after the video-game maker said licensing deals with several industry partners are unlikely to be completed before the month ends Norma shares fall as much as 15% as Baader highlights the tech hardware firm’s conservative FY23 margin outlook due to ongoing burdens from efforts to restructure CMC Markets falls as much as 6.3%, adding to a 21% drop Monday when the online trading company released a downbeat earnings update late in the session Schibsted shares drop as much as 9.6% as a weaker short-term guidance for the Norwegian media and classified advertising group offsets higher longer-term targets Synthomer shares drop as much as 19% with Morgan Stanley saying it sees further consensus downgrades ahead for the UK chemicals firm following its FY results Elsewhere in markets, Asian stocks gained as a lull in new developments in the banking sector gave investors a chance to adjust positions and assess whether the Federal Reserve will lower rates to buttress the US economy.  The MSCI Asia Pacific Index rose as much as 0.9%, halting a two-day losing streak. A sub-gauge of financial shares jumped more than 1% as they followed US peers higher. Australia, Japan and South Korea advanced. Hong Kong’s Hang Seng Index gained about 1%, while China’s mainland indexes fluctuated. “Asia still remains relatively well insulated from the latest round of US/European bank turmoil,” Citigroup analysts including Johanna Chua wrote in a note. “Direct exposure of Asia to the affected financial institutions is very limited.” Asia’s regional equity gauge has climbed more than 2% over the past week as US bank shares regained their footing after tumbling last week and fanning fears of a looming economic slowdown. Doubleline Capital’s Jeffrey Gundlach said on CNBC that he expects a US recession to start in a few months, and that the Federal Reserve will need to respond “very dramatically.” Japanese stocks rose for a second day as concerns around financial institutions cooled after First Citizens BancShares Inc. agreed to buy failed Silicon Valley Bank.  The Topix rose 0.2% to close at 1,966.67, while the Nikkei advanced 0.2% to 27,518.25. Sumitomo Mitsui Financial Group contributed the most to the Topix gain, increasing 2.7%. Out of 2,159 stocks in the index, 799 rose and 1,232 fell, while 128 were unchanged. “Overall risk tolerance has increased now that the Silicon Valley Bank situation appears to have calmed down,” said Ryuta Otsuka, strategist at Toyo Securities. “However, it is hard to expect large market moves in Japan as we are approaching the end of the fiscal year.” Australian stocks extended rose with the S&P/ASX 200 index rising 1% to close at 7,034.10, extending gains for a second session, boosted by mining shares and banks. Lithium miners, some of the benchmark’s most shorted names, rallied after Liontown rebuffed a takeover bid from Albemarle.  Equities across Asia climbed, US stock futures edged higher and the dollar declined as fears of broader contagion from the banking turmoil eased. Investors await Australia’s CPI print due Wednesday.  In New Zealand, the S&P/NZX 50 index rose 1.4% to 11,771.27 Stocks in India were mostly lower on Tuesday as key gauges headed for their fourth consecutive monthly decline amid tepid sentiment for global equities.  The S&P BSE Sensex fell 0.1% to 57,613.72 in Mumbai, while the NSE Nifty 50 Index declined 0.2%. The benchmark gauge has slipped about 2.1% this month and is on course for its longest losing monthly streak since Feb. 2016. Software major Infosys contributed the most to the Sensex’s decline, decreasing 0.8%. Out of 30 shares in the Sensex index, 11 rose, while 19 fell. All 10 companies related to the Adani Group fell, led by a 7% plunge in flagship firm Adani Enterprises after a newspaper report said the conglomerate will probably seek more time to repay a $4 billion loan it took out last year.  Foreign investors have been buyers of $1.3b of local shares this month through March 24, mainly on back of GQG Partners’ stake purchase in Adani companies. “Barring gains in select banking and metal stocks, other sectors witnessed profit-taking as caution prevailed ahead of the F&O expiry on Wednesday,” Kotak Securities analyst Shrikant Chouhan said. In FX, the Bloomberg Dollar Spot Index slipped 0.1%, marking its eighth day of declines in the past nine sessions, weighed by a jump in the yen on domestic demand ahead of the fiscal year-end in Japan.  Exporters in Japan and Australia added to the selling of the dollar as they increased hedging to cover prior long positions in the greenback, Asia- based FX traders said. The New Zealand dollar and Japanese yen are the best performers among the G-10s while the Swiss franc is the weakest. In rates, the five-year Treasury yield rises as much as 7 basis points to 3.67%, while the two-year yield climbs 4 basis points to 4.04% after sliding as low as 3.89% earlier in the session; a selloff in Treasuries since the start of the week has lifted most yields from six-month lows reached on Friday. 10-year yields around 3.55%, cheaper by 2bps on the day with bunds lagging by additional 5bp in the sector; 2-year yields cheaper by around 7bp on the day, remain above 4% level vs. Monday’s 3.954% auction stop. As BBG's Beth Stanton notes, Monday's poorly-bid 2Y auction is now under water vs its 3.954% stop with May rate hike back in favor. Auction cycle continues with $43b 5Y at 1pm. WI yield 3.65% is between last two 5Y stops. The US auction cycle resumes with $43b 5-year note sale at 1pm, follows Monday’s poor 2-year result; WI 5-year at 3.63% is ~48bp richer than February’s stop-out. German two-year borrowing costs are up 12bps. Traders are now betting on a roughly 50/50 chance that the Fed will deliver a final quarter-point hike in May, followed by a similar-sized cut in September; market pricing reflects a diminishing outlook for a series of cuts in the coming months, and a growing view that the Fed may keep rates on hold for longer. BlackRock sees the Fed continuing to raise interest rates despite traders betting otherwise as fears of a banking crisis convulse markets. “We don’t see rate cuts this year – that’s the old playbook when central banks would rush to rescue the economy as recession hit,” its strategists write in a note. “We see a new, more nuanced phase of curbing inflation ahead: less fighting but still no rate cuts.” In commodities, crude futures advance with WTI up 0.5% to trade near $73.15. Spot gold falls 0.3% to around $1,951. European and US gas benchmarks diverge slightly in European trade; Morgan Stanley writes that “prices likely still need to move lower to incentivize an adequate supply response, but we may be approaching the bottom”. Looking to the day ahead, we will have a number of data releases from the US including the Conference Board consumer confidence, the Richmond Fed manufacturing index and business conditions, the Dallas Fed services activity, the January FHFA house price index, and February’s wholesale and retail inventories and advance goods trade balance. We will also have Italy’s March manufacturing and consumer confidence as well as economic sentiment data, and from France the March manufacturing and consumer confidence data. The BoE’s Bailey will testify today on the Silicon Valley Bank crisis, and we will also hear from ECB’s Muller. Finally, we will have earnings releases from Micron, Walgreens Boots Alliance and Lululemon. Market Snapshot S&P 500 futures little changed at 4,009.00 STOXX Europe 600 up 0.3% to 446.06 MXAP up 0.6% to 159.53 MXAPJ up 0.6% to 512.94 Nikkei up 0.2% to 27,518.25 Topix up 0.2% to 1,966.67 Hang Seng Index up 1.1% to 19,784.65 Shanghai Composite down 0.2% to 3,245.38 Sensex little changed at 57,596.88 Australia S&P/ASX 200 up 1.0% to 7,034.09 Kospi up 1.1% to 2,434.94 German 10Y yield little changed at 2.30% Euro up 0.2% to $1.0818 Brent Futures up 0.5% to $78.49/bbl Gold spot down 0.2% to $1,952.30 US Dollar Index down 0.17% to 102.69 Top Overnight News Alibaba plans to split its $220 billion business into six main units encompassing e-commerce, media and the cloud, each of which will explore fundraising or IPOs when the time's right. Group CEO Daniel Zhang will head up the cloud intelligence division, a nod to the growing role AI will play in the e-commerce leader's portfolio in the long run. BBG Binance’s CEO Changpeng Zhao shot back at the CFTC, calling its lawsuit over alleged violations of derivatives regulations "unexpected and disappointing," given compliance efforts and cooperation with regulators. His firm doesn't trade for profit or manipulate the market, he said. The suit has "an incomplete recitation of facts." BBG China has significantly expanded its bailout lending as its Belt and Road Initiative blows up following a series of debt write-offs, scandal-ridden projects and allegations of corruption. A study published on Tuesday shows China granted $104bn worth of rescue loans to developing countries between 2019 and the end of 2021. The figure for these years is almost as large as the country’s bailout lending over the previous two decades. FT Semiconductor companies seeking federal grants under the Chips Act could face a tough decision: take Washington’s help to expand in the U.S., or preserve their ability to expand in China. The Biden administration last week proposed new rules detailing restrictions chip companies would face on operations in China and other countries of concern if the companies accept taxpayer funding. WSJ Balances at the Fed's RRP facility climbed, even as rates in the private market rose as much as 15 bps above the central bank's offering yield. Ninety-eight counterparties parked $2.22 trillion at the RRP, up $1.7 billion from Friday. BBG The Federal Reserve’s top official on banking supervision has blamed the collapse of Silicon Valley Bank on a “textbook case of mismanagement”, saying the board of the US central bank had been briefed on the troubles at the California lender in mid-February. FT The Treasury's top domestic policy official Nellie Liang will tell Congress regulators are ready to repeat steps taken after recent bank failures. She testifies today with the Fed's chief of banking supervision, Michael Barr, and FDIC head Martin Gruenberg. The ECB's top oversight official urged global scrutiny of the CDS market. And BOE boss Andrew Bailey said UK banks are strong. BBG Calm returned to Israeli cities Tuesday and protests against Israeli Prime Minister Benjamin Netanyahu’s judicial overhaul dispersed after the premier agreed to suspend the controversial plan and Israeli President Isaac Herzog offered to host compromise talks between the two sides. WSJ DIS has eliminated its next-generation storytelling and consumer experiences unit, the small division that was developing metaverse strategies, according to people familiar with the situation, as part of a broader restructuring that is expected to reduce head count by around 7,000 across the company over the next two months. WSJ In the battle for the biggest prize in China’s trillion-dollar pension market, BlackRock Inc. and other global firms have little chance of attracting clients like Judy Deng: BBG The Federal Deposit Insurance Corp. stuck to its guns and didn’t offer bailouts to keep two lenders from collapsing. Instead, it struck deals that included millions of dollars of sweeteners for the acquiring banks that sent their stocks soaring: BBG The US took its most forceful move yet on Monday to crack down on crypto exchange Binance Holdings Ltd. and its chief executive officer Changpeng Zhao: BBG A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mixed with a mild positive bias as global banking sector fears continued to dissipate and with early advances led by energy after the recent surge in oil prices although gains were capped in the region as North Korean nuclear rhetoric stoked geopolitical concerns. ASX 200 was boosted amid strength in the commodity-related sectors with outperformance in energy after oil prices notched the largest daily gain since October and financials were also lifted as Australia downplayed the risks to domestic banks from the recent global banking issues. Nikkei 225 was indecisive despite Japan reiterating plans for a JPY 2.2tln economic stimulus package with trade stuck in a narrow range near 27,500 after the nuclear rhetoric by North Korea which called for the scaling up of weapons-grade nuclear materials and included similar language used before its last nuclear test in 2017. Hang Seng and Shanghai Comp. were choppy ahead of key earnings results and after PBoC liquidity efforts. Top Asian News China's Foreign Ministry said Premier Li Qiang met with foreign representatives at the China Development Forum in Beijing on Monday and met with executives including Apple (AAPL) CEO Cook, while Li told executives China will unswervingly expand its opening up, according to Reuters. US and Japan reached a trade deal for critical EV battery minerals in which the deal prohibits enacting export restrictions on lithium, cobalt, nickel, manganese and graphite, according to US officials. Furthermore, the deal includes provisions to combat non-market practices, while access for Japanese automakers to the battery minerals portion of USD 7,500 in US EV tax credit depends on the tax guidance this week from the US Treasury. China is reportedly aiming to set up 30+ key auto chips standards by 2025, according to the Ministry of Industry and Information Technology. A magnitude 5.7-5.9 earthquake occurred offshore Eastern Aomori Prefecture, Japan; NHK says it has a prelim. magnitude of 6.1; no tsunami warning issued. European bourses were initially firmer across the board in a continuation of the APAC tone, though benchmarks have since eased from best and are flat/mixed. Sectors are mixed with Energy outperforming while Banking names were firmer but have eased off of best levels and incrementally into the red alongside the broader benchmarks throughout the morning. Stateside, futures are mixed/flat, though with the bias inching further into the red, as the region awaits todays Senate Banking Committee hearing on the recent banking turmoil with Fed' Barr in attendance. Meta Platforms Inc. (META) plans to lower some bonus payouts and will more frequently assess employee performance, according to an internal memo, part of a sweeping revamp of the social-media company that includes large head-count reductions, WSJ reports. Alibaba (BABA/9988 HK) business unit can reportedly pursue fundraising and IPOs when ready, according to Bloomberg; Alibaba to restructure into six main business divisions. Top European News Kantar UK Supermarket update (Mar): Grocery price inflation has climbed again to reach 17.5% over the four weeks to 19 March 2023, a new record based on our latest market data. ECB's Muller says inflation is slowing but it is too early to declare a victory. Banks ECB's Enria says current events confirm that strong, demanding supervision is needed more than ever. Adds, there have been some fast outflows of bank deposits in some cases. BoE's Bailey says does not think any of the features of recent banks issues are causing stress in the UK; Ramsden says will keep a close eye on bank funding costs. US Treasury official Liang said the US government will use tools to prevent banking contagion again if warranted and that the US financial system is significantly stronger now due to stronger capital and liquidity requirements, while she added the US must ensure that banking regulations and supervision are appropriate for today's risk and challenges, according to her prepared testimony, according to Reuters. French PNF Financial Prosecutors says searches are underway at five banking/financial firms located within Paris and the Paris La Defense district re. a tax probe, German prosecutors assisting. Societe General (GLE FP) confirms its offices are being searched. S&P says they are yet to see any meaningful contagion for APAC from the US regional banks/Credit Suisse (CSGN SW) turmoil. FX The USD has been incrementally softer throughout the morning within relatively narrow 102.52-102.76 parameters, most recently the DXY has attempted to pare initial downside. Action which comes to the mixed fortune of peers, with AUD, NZD and JPY outperforming given the risk tone and as the JPY attempts to recover from Monday's pressures; holding below 0.67, 0.625 and above 131.00 respectively. CHF resides as the laggard, with downside seemingly stemming from the risk tone rather than any fresh Swiss banking concern, EUR/CHF above 0.99 to a 0.99300 peak. In close proximity is the CAD which is unable to benefit from crude upside while GBP and EUR are contained around 1.08 and 1.23 respectively vs USD with Central Bank speak thus far not moving the dial. Citi month-end model: Prelim. estimate points to moderate USD selling vs all major currencies ex-EUR, via Reuters. Click here for more detail. PBoC set USD/CNY mid-point at 6.8749 vs exp. 6.8737 (prev. 6.8714) Fixed Income EGBs are under pressure in a continuation of the firmer risk tone from APAC trade; however, benchmarks are off worst levels as equities inch into the red. Specifically, Bunds are below 136.00 with the associated 10yr yield firmly above 2.30% though yet to breach 2.35%. Gilts and the EZ periphery are in-line with mentioned core counterparts and have been unaffected by numerous Central Bank officials where the focus has been on recent banking turmoil. Supply wise, the Italian and German sales passed without fanfare and were well-received overall though demand was slightly softer when compared to the prior outings. Commodities Crude benchmarks continue to climb aided by the softer dollar and the latest geopolitical tensions re. N. Korea; WTI and Brent holding above USD 73/bbl and USD 78/bbl respectively. European and US gas benchmarks diverge slightly in European trade; Morgan Stanley writes that “prices likely still need to move lower to incentivize an adequate supply response, but we may be approaching the bottom”. Spot gold is pressured by the risk tone and failing to benefit from the softer USD with the yellow metal below the USD 1959/oz 10-DMA and holding around USD 1950/oz currently, base metals conversely are modestly firmer. Russian Deputy PM Novak says the domestic fuel and energy complex is sustainable despite challenges, hopes to agree on key contract terms for the Power of Siberia 2 gas pipeline to China this year. Russia should look to produce at least 100mln/T of LNG per year by 2030. Geopoliitcs Russian Defence Ministry said it fired supersonic anti-ship missiles at a mock target in the Sea of Japan. North Korean leader Kim guided the nuclear weaponisation programme and inspected nuclear trigger technology during a recent simulation. Kim also called for constant efforts to improve nuclear capability and said the country should be fully ready to use nuclear weapons at any time, while he called for the scaling up of weapons-grade nuclear materials to exponentially increase nuclear weapons arsenal. North Korea also alleged that US and South Korea military drills involving an air carrier are aimed at pre-emptive nuclear strike and said that US anti-North Korean activities are intensifying to unacceptable levels, according to KCNA. North Korea is reportedly preparing to resume foreign diplomatic activity after three years of COVID isolation, according to FT; North Korean officials recently resumed travels to Russia and China. Belarus' Foreign Minister says they have been forced to take steps ensuring security in the face of NATO potentially increasing within neighbouring nations, via Tass. Crypto Binance CEO said the CFTC complaint appears to have an incomplete recitation of the facts and they do not agree with the issues alleged in the complaint. Binance CEO said they intend to respect and collaborate with US and other regulators around the world, while he added that Binance.com does not trade for profit or manipulate the market under any circumstances, according to Reuters. US Event Calendar 08:30: Feb. Advance Goods Trade Balance, est. -$90b, prior - $91.5b, revised -$91.1b 08:30: Feb. Retail Inventories MoM, est. 0.2%, prior 0.3% Wholesale Inventories MoM, est. -0.1%, prior -0.4%, revised -0.3% 09:00: Jan. FHFA House Price Index MoM, est. -0.2%, prior -0.1% 09:00: Jan. S&P Case Shiller Composite-20 YoY, est. 2.55%, prior 4.65% S&P/Case-Shiller US HPI YoY, prior 5.76% S&P/CS 20 City MoM SA, est. -0.50%, prior -0.51% 10:00: March Conf. Board Consumer Confidence, est. 101.0, prior 102.9 Expectations, prior 69.7 Present Situation, prior 152.8 10:00: March Richmond Fed Index, est. -10, prior -16 10:30: March Dallas Fed Services Activity, prior -9.3 Central Banks 10:00: Fed’s Barr Appears Before Senate Banking Panel DB's Jim Reid concludes the overnight wrap After a hectic 2 and a half weeks that has felt like a year, the week has started on a much calmer footing. I'm on holiday for a couple of weeks from Thursday so I'm hoping that I don't have to do zoom meetings from the ski slopes. My ski outfit and technique won't make that a pretty sight. As we highlighted in our CoTD yesterday (link here) we have to be careful not to fight the battle of the last war. Large banks in the US and Europe are completely different entities than they were going into the GFC. For large US banks for example, securities and loans/leases on their balance sheets as a % of deposits are lower than when our data starts in 1985 and at below 100% are massively down from their GFC peaks of over 150%. We don't have the same long term data for Europe but the declines since the GFC are of similar magnitudes. In contrast corporates are more levered now than during the GFC and this cycle could ultimately be more corporate default focused vs financials as per say 2001-2002 rather than 2008-09. See Steve Caprio's full note here for more on this and how corporate spreads are too tight to financials now. So no new news was good news yesterday and some risk premium was removed from the market. This was most evident in bonds with US 2yr and 10yr yields up +22.9 bps and +15.4bps respectively. The S&P 500 was up +0.80% in the first hour of trading but did retrace the entire move back to flat before rallying in the US afternoon to finish with a an overall modest gain of +0.17%, whilst the STOXX 600 climbed +1.05%. US banks led the US move higher, having traded off their lows from last week, with the S&P 500 banks index up +3.05%. European banks were earlier +1.69% higher. Narrowing in, First Citizens jumped 49% at the market open after its agreement to buy SVB Financial Group’s Silicon Valley Bank, ending the day up by +53.74%. First Republic Bank similarly jumped at the open by +27.45% after a Bloomberg report that US authorities were considering an expansion to their emergency lending facility, the Bank Term Funding Program, that had been created on March 12 with the collapse of SVB and Signature Bank. Against this backdrop, the gauge of regional US banks, the KBW index, closed up +2.54% yesterday, with the leaders including First Republic (+12.14%), Comerica (+5.40%) and KeyCorp (+5.31%). Improving risk sentiment saw investors pare back their expectations of Fed rate cuts, as the implied rate for the Fed’s May meeting gained +9.2bps, bringing it to 4.950%. In other words, fed futures are now pricing in a 53% chance of a +25bps hike in May. For December’s meeting, markets trimmed their expectations of rate cuts from over -94bps on Friday to nearly -74bps, as the implied rate rose +29.5bps to 4.206%. Back on this side of the pond, the German March Ifo business confidence index printed above expectations at 91.2 (vs 88.3 expected), and up from 88.5 for February. The other two individual components of the release also beat expectations, with business climate rising to 93.3 (vs 91 expected) and current assessment at 95.4 (vs 94.1 expected). Although the Ifo survey typically demonstrates less sensitivity to financial market uncertainty relative to other surveys coming from Germany such as the ZEW survey, the release is consistent with last Friday’s PMIs that suggested the Eurozone economy remains in, or at least was in decent shape, before the banking crisis hit. Consequently, the DAX outperformed relative to the broader STOXX 600 index, up +1.14%, whilst the STOXX 600 advanced by +1.05%. For the latter, all major sectors were in the green, with sector leaders including health care (+1.93%), utilities (+1.31%) and autos (+1.89%). The CAC also gained yesterday, up by +0.90%. Following from Friday’s jitters about European banking sector stability, ECB’s Simkus emphasised that ‘bank liquidity, capitalisation (are) high in euro area.’ ECB’s De Cos echoed this sentiment, stating ‘euro-zone banks (are) well-prepared for adverse scenarios’. We also heard from several other ECB’s speakers yesterday, as ECB’s Schnabel stated she had pushed for the ECB statement to say that more hikes were a possibility as opposed to the verbal assurance that had been made by President Lagarde. ECB’s Centeno’s comments were more dovish, as he stated that they “don’t see long-term inflation expectations de-anchoring”, with “no signs of second-round effects in wage-setting.” Markets moved to price in a modestly higher terminal rate as Eurozone overnight index swaps for July were up +7.5bps bringing the rate to 3.321%. The rate for year-end also increased, up +11.5bps to 3.226%, pricing in a 1 in 3 chance of a -25bps rate cut by December. Against this backdrop, yields across the German sovereign yield curve were up yesterday, with the 10yr bund yield climbing +9.8bps higher bringing the yield to 2.227%. The 2yr yield gained +12.8bps to 2.521% Asian equity markets are mostly higher overnight. As I type, the Hang Seng (+0.60%), the KOSPI (+0.44%) and the Nikkei (+0.07%) are higher but with stocks in mainland China mixed with the CSI (-0.16%) edging lower while the Shanghai Composite (+0.05%) is oscillating between gains and losses. US stock futures are a little higher with contracts tied to the S&P 500 (+0.16%) and NASDAQ 100 (+0.17%) printing mild gains. Meanwhile, yields on 10yr Treasuries (-1.89bps) are slightly lower, trading at 3.51% while 2Yr Treasuries (-3.5bps) are trading at 3.96% as we go to press. In early morning data, retail sales in Australia rose +0.2% m/m in February, in-line with market expectations, down from a revised +1.8% increase in January, signifying that households are reining in spending in response to higher interest rates. The subdued data adds to the case for a pause by the Reserve Bank of Australia (RBA) at its April 4th meeting. Meanwhile, the CPI data scheduled to be released tomorrow will be of note for the central bank. Turning to commodities, WTI crude futures performed strongly yesterday, rising +5.13% to over $72.81/bbl, whilst Brent crude gained +4.17% to $78.12/bbl. European natural gas futures also gained +3.49% yesterday. The rally in energy prices was due to both supply-side and demand-side pressures. On demand, the rally in bank stocks and purchase of SVB seemed to ease concerns of a wider financial crisis. Meanwhile, a legal dispute between the Iraqi semi-autonomous region of Kurdistan and Turkey has put about 400,000 bbl/day of exports in limbo. This come as French refineries are running at a fraction of normal capacity due to the ongoing protests in the country. A Bloomberg report had as much as 80% of the nation’s crude-processing capacity stalled. Finally, yesterday also saw the release of the Dallas Fed Manufacturing Activity for March which fell below expectations at -15.7 (vs -10 expected). This was a further decline from -13.5 last month as perceptions of broader business conditions deteriorated over the month. Now looking to the day ahead, we will have a number of data releases from the US including the Conference Board consumer confidence, the Richmond Fed manufacturing index and business conditions, the Dallas Fed services activity, the January FHFA house price index, and February’s wholesale and retail inventories and advance goods trade balance. We will also have Italy’s March manufacturing and consumer confidence as well as economic sentiment data, and from France the March manufacturing and consumer confidence data. The BoE’s Bailey will testify today on the Silicon Valley Bank crisis, and we will also hear from ECB’s Muller. Finally, we will have earnings releases from Micron, Walgreens Boots Alliance and Lululemon. Tyler Durden Tue, 03/28/2023 - 08:09.....»»

Futures, Yields And Bank Stocks Storm Higher As Bank Crisis Fears Recede US equity index futures stormed higher to start the week as concerns about the bank crisis faded - if only for the time being -  amid stronger risk appetite boosted by bank sector M&A, higher bond yields, a weaker USD and the prospect for further support from US authorities for the troubled regional banking sector. The stock of Friday's bank freakout - Deutsche Bank - rose and its CDS tightened, while in the US First Citizens Bank agreed to buy Silicon Valley Bank amid news that US authorities are considering expanding an emergency lending facility for banks in ways that would give First Republic Bank more time to shore up its balance sheet, BBG reported. Still, fears of a US slowdown damped investor sentiment after Minneapolis Fed President Neel Kashkari said recent bank turmoil has increased the risk of a US recession. S&P 500 futures rose 0.7% to 4,030 at 7:45am ET while Nasdaq 100 futures gained 0.4%. The tech-heavy benchmark has rallied nearly 20% from its December lows as investors rotate into technology and shift out of banks, as expectations for rate cuts increase. The risk-on tone is evident elsewhere with bonds, gold and the Japanese yen all in the red.  Oil rose while Bitcoin rose for a second day in a row. In premarket trading, First Republic Bank led a rally across regional lenders in US premarket trading as sentiment improves following a Bloomberg report that US authorities are considering more support for banks. First Republic shares jump 27%, with peers Western Alliance +5.2%, PacWest Bancorp +9.1%. KeyCorp shares rise 7.4% after the lender is upgraded to buy from neutral at Citi along with peer M&T Bank (MTB US). Citi analysts stress-test regional banks following SVB’s demise, saying that the risk-reward for the pair looks “very appealing.” Here are some other notable movers: US-listed Chinese stocks fall in premarket trading, with Baidu shedding as much as 2.9% before paring decline as the search engine operator postponed a media briefing related to its closely watched AI chatbot. Shares of Alibaba erase an earlier loss of 1.8% to rise as much as 5.5% after Jack Ma visited Yungu School in China on Monday and talked with staff on topics including ChatGPT. It’s unclear how long Ma plans to stay in China, the rest of his agenda in the country or how long he had been planning the Hangzhou visit Corning stock gains 2.4% on low volumes after it was raised to buy from hold at Deutsche Bank, with the broker saying the telecoms and electronics equipment maker is “turning a corner.” Keep an eye on Frontier Communications (FYBR US) as the stock was cut to underweight from equal-weight at Morgan Stanley, which notes the telecommunication company’s premium valuation to peers and the risk to its fiber growth targets. Wingstop (WING US) is cut to underperform from hold at Jefferies, with the broker giving the chicken wing restaurant operator its only sell-equivalent rating on skepticism that the stock offers any further upside. Piper Sandler upgrades two US asset managers, Virtus Investment Partners (VRTS US) and Victory Capital Holdings (VCTR US), to overweight from neutral and underweight, respectively, with the broker saying the stocks are undervalued versus peers. Among the most recent developments for the banking sector, First Citizens BancShares agreed to buy Silicon Valley Bank which was seized by regulators following a run on the lender. Meanwhile, Bloomberg reported US authorities are considering expanding an emergency lending facility for banks in ways that would give First Republic Bank more time to shore up its balance sheet. Its shares soared over 25% in premarket trading. Investors continue to monitor turmoil among US regional banks, while growing increasingly concerned over the possibility of a recession. Even the Fed's reformed permahawk, Minneapolis Fed President Neel Kashkari, admitted that risk has increased due to a credit crunch from the bank crisis, but said that it was too soon to judge what it means for the economy and monetary policy. “We are in the camp that the economy is set to slow. We’ve been there since the start of the year and some of the pieces are falling into place,” said Manpreet Gill, Standard Chartered’s chief investment officer for Africa, the Middle East and Europe. “Clearly now is the tail end of what’s been a very rapid and sizable Fed hiking cycle, and naturally one would think that will lead to conditions that slow the economy,” he told Bloomberg Television. “Volatility still remains high amid banking sector stress and the implications for the Fed and dollar rates,” said Marvin Chen, a strategist at Bloomberg Intelligence. Meanwhile, Morgan Stanley’s undaunted permabear Michael Wilson said turmoil in the banking sector has left earnings guidance looking too high, putting sanguine stock markets at risk of sharp declines. The strategist said that’s partly due to the divergence in stock and bond market action this month. European stocks rebounded from Friday's rout, led by Deutsche Bank: the German lender is up 4% as credit defaults swaps retreat, while the Stoxx 600 gains 1.0%. While banks recoup some recent losses, healthcare stocks lead gains as Novartis releases positive new drug results. Here are some of the biggest movers on Monday: Deutsche Bank shares jump as much as 7.1%, rebounding from a selloff on Friday, as analysts reassure that the German lender’s financial health is sound Novartis gains as much as 5.9% after releasing positive results from its highly awaited Natalee breast cancer trial using the drug Kisqali Orange rises as much as 4.1% after being upgraded to overweight at Morgan Stanley on the “compelling” free cash flow growth and yields the French telecoms group offers BP rises as much as 2.9%, Shell 2.1%, and Harbour Energy 5.1% after reports that the UK government may offer oil-and-gas companies relief from a windfall tax Sanofi gains as much as 2.7% after Barclays upgraded the pharmaceuticals firm to overweight, citing its improving earnings trajectory Pharming Group rises as much as 38% after announcing Friday it received FDA approval of its Joenja drug for the treatment of a rare immunodeficiency disease TIM surges as much as 31% to highest since Aug. 2007, after Wurth Group offered a 34% premium in a tender offer for the Polish electrical equipment distributor DNO falls as much as 11.6%, Gulf Keystone 25% and Genel 16%, after an arbitration ruling in favor of Iraq against Turkey for transporting Kurdish oil without prior approval from Baghdad IDS shares fall as much as 5%, the most since January, as JPMorgan cuts its PT on the Royal Mail parent as a deal with unions to avoid further strike action proves elusive Earlier in the session, Asian stocks fell for a second day as traders continued to monitor the health of the global financial sector, while a slew of lackluster earnings dragged down Chinese technology firms. The MSCI Asia Pacific Index dropped as much as 0.6%, with Hong Kong leading the slump. A gauge of Chinese tech shares slid 2.8% after Meituan and Xiaomi’s earnings disappointed the market. Alibaba pared losses after founder Jack Ma returned to China. Onshore Chinese stocks also fell after official data showed profits at industrial firms plunged in the first two months of the year as factories had yet to fully recover from a Covid-induced slump. Shares in Japan and Australia rose. Investors took profits after Asia’s equity benchmark completed a 1.4% weekly advance amid US and European efforts to stabilize the banking sector. US authorities are considering expanding an emergency lending facility for banks in ways that would give First Republic Bank more time to shore up its balance sheet, according to people with knowledge of the situation. Still, fears of a US slowdown damped investor sentiment after Federal Reserve Bank of Minneapolis President Neel Kashkari said recent bank turmoil has increased the risk of a US recession. “Volatility still remains high amid banking sector stress and the implications for the Fed and dollar rates,” said Marvin Chen, a strategist at Bloomberg Intelligence. Japanese stocks rose as investors weighed the risk of a US recession and the impact that could have on interest rates. The Topix rose 0.3% to close at 1,961.84, while the Nikkei advanced 0.3% to 27,476.87. Hitachi contributed the most to the Topix gain, increasing 2.1%. Out of 2,159 stocks in the index, 1,462 rose and 590 fell, while 107 were unchanged. Federal Reserve Bank of Minneapolis President Neel Kashkari said recent bank turmoil has increased the risk of a US recession but that it was too soon to judge what it means for the economy and monetary policy. “The Japanese market has calmed down as the uncertainty surrounding US financial institutions receded,” said Hitoshi Asaoka, strategist at Asset Management One. “Some traders are buying for the dividends, but market movement is limited amid strong yen and lingering worries over financials.” Key stock gauges in India ended higher on Monday, outperforming most of their emerging market peers in Asia, as pharmaceutical and consumer goods companies advanced. The S&P BSE Sensex ended 0.2% higher to close at 57,653.86 in Mumbai, after rising as much as 0.9% following a strong open for European equities. The NSE Nifty 50 Index also advanced by a similar amount to finish at 16,985.70. The MSCI Asia-Pacific index fell 0.7%, while the MSCI Emerging Market Index declined 0.8%.  The Indian equity market surrendered early gains as lingering uncertainties around the global banking system, the outlook for interest rates in developed economies and the rising threat of a US recession weighed on risk appetite. Mid- and small-sized companies saw heavy losses, with the Nifty Midcap 100 and Nifty Smallcap 100 gauges ending a volatile Monday, falling 0.5% and 1.6% respectively. Reliance Industries contributed the most to the Sensex’s gains, increasing 1.5%. Out of 30 shares in the index, 16 rose, while 14 fell Australian stocks rose: the S&P/ASX 200 index edged 0.1% higher to close at 6,962.00, boosted by health care and real estate shares. Markets across Asia fluctuated in cautious trading as investors weighed the risk of recession and its impact on interest rates. Shares of Australian energy companies declined as the government is expected to win approval for its flagship climate policy after agreeing to rules that could limit development of new coal and gas projects. In New Zealand, the S&P/NZX 50 index rose 0.3% to 11,612.86. In FX, the dollar rose 0.5% versus the yen, while the Bloomberg Dollar Spot Index was little changed after falling 0.8% last week. Investors focus on speeches by several Fed officials this week, which could provide more clues on the US interest rate trajectory. “The resurgence in banking stress in Europe forces some softening of our bearish dollar view for the moment, at least until we can get more clarity on the stability of the EU banking sector,” ING strategists write, though they still see policy differencials between the Fed and the European Central Bank pointing to a higher EUR/USD. “We continue to see the Fed as mostly carrying downside risks for the greenback, as the lack of clear communication leaves the door open for dovish speculation as the US regional crisis remains unresolved and is keeping the monetary policy outlook in the US in stark contrast (for now) to that of most European central banks.” In rates, treasuries extended losses into early US session with front-end leading the move lower, leaving 2-year yields cheaper by 16bp on the day, pulling away from a six-month low around 3.55% hit on Friday and paced by bear-flattening in core European rates. US 10-year yield around 3.47%, cheaper by ~10bp vs Friday’s close, with bunds and gilts trading 1.5bp and 3bp cheaper in the sector; front-end-led losses flatten 2s10s, 5s30s spreads by 8bp and 7bp on the day. Treasury auction cycle beings with 2-year note sale at 1pm New York time and 5- and 7-year sales Tuesday and Wednesday. WI 2-year yield around 3.88% is ~80bp richer than February’s stop-out and below auction stops since August. In commodities, crude futures advance with WTI up 1.3% to trade back above $70. TotalEnergies said 33% of operational staff at its French refineries and depots were on strike on Sunday, according to a Co. spokesperson cited by Reuters. Spot gold is softer given the constructive European tone and as the USD retains an underlying bid with the DXY above 103.00, action which has pressured the yellow metal to a $1965/oz intraday low. It's a quiet start to the week, with just the March Dallas Fed manufacturing activity at 10:30am on Monday's calendar; the US will sell $57 billion of 13-week and $48 billion of 26-week bills at 11:30 a.m., and $42 billion of two-year notes at 1 p.m. Fed Governor Philip Jefferson is due to speak at 5 p.m.; This week we get consumer confidence, final 4Q GDP revision, personal income and spending (with PCE deflators) and University of Michigan sentiment. Market Snapshot S&P 500 futures up 0.8% to 4,031.00 STOXX Europe 600 up 0.9% to 444.19 MXAP down 0.5% to 158.85 MXAPJ down 0.8% to 510.29 Nikkei up 0.3% to 27,476.87 Topix up 0.3% to 1,961.84 Hang Seng Index down 1.7% to 19,567.69 Shanghai Composite down 0.4% to 3,251.40 Sensex up 0.6% to 57,847.93 Australia S&P/ASX 200 little changed at 6,961.98 Kospi down 0.2% to 2,409.22 German 10Y yield little changed at 2.19% Euro up 0.1% to $1.0771 Brent Futures up 0.5% to $75.33/bbl Gold spot down 0.4% to $1,970.07 US Dollar Index little changed at 103.03 Top Overnight News First Citizens snapped up SVB in a deal that includes about $72 billion of assets at a discount of $16.5 billion, the FDIC said. It'll absorb all SVB loans and deposits. The estimated cost of the collapse to the Deposit Insurance Fund is about $20 billion. The FDIC will receive equity appreciation rights in First Citizens worth as much as $500 million and hold on to about $90 billion in assets. BBG Jack Ma, Alibaba Group Holding Ltd.’s billionaire co-founder, has returned to mainland China after spending roughly a year overseas.  The whereabouts of Mr. Ma—who was known for his flamboyant style until late 2020 when he largely disappeared from the public eye following brushes with Chinese regulators—have been the subject of intense speculation. WSJ The ECB is determined to continue fighting inflation while also standing ready to respond to any potential stress in markets, according to Bundesbank President Joachim Nagel. The latest turmoil around banks has highlighted the importance of financial stability, Nagel said in a speech in Karlsruhe, Germany. He called Europe’s banking system strong, saying it can lean on the ECB and national central banks for support if needed. BBG The chair of Saudi National Bank, Ammar Alkhudairy, has resigned citing personal reasons after the kingdom’s largest lender was thrust into the limelight amid turmoil at Credit Suisse. The chief executive, Saeed Al Ghamdi, will replace Alkhudairy as chair, the bank said on Monday. Talal Al-Khereiji becomes acting chief executive. FT Israeli politics descended into turmoil, with Benjamin Netanyahu’s hardline government facing a spiraling backlash to its bitterly contested plans to overhaul the judiciary, and members of his coalition deeply divided on whether or not to back down. FT Federal Reserve Bank of Minneapolis President Neel Kashkari said recent bank turmoil has increased the risk of a US recession but that it was too soon to judge what it means for the economy and monetary policy. BBG First Republic led a premarket rally across regional lenders after US officials were said to consider more support for banks. Authorities would consider expanding an emergency lending facility that would give the bank more time to prop up its balance sheet, though watchdogs say it's stable. BBG Elon Musk offered Twitter employees new equity grants valuing the company at $20 billion, The Information reported, less than half the $44 billion Musk paid. The firm's proprietary source code were leaked online on GitHub until last week. It's now hunting for the perpetrator. BBG The New York grand jury hearing testimony about Donald Trump’s role in paying hush money to a porn star heads into a new week amid public anticipation about a potential indictment of the former president, who has escalated his rhetorical attacks on prosecutors. The panel is expected to reconvene Monday, according to people familiar with the matter, after it last heard testimony in the Trump investigation a week ago. WSJ The European Central Bank is determined to continue fighting inflation while also standing ready to respond to any potential stress in markets, according to Bundesbank President Joachim Nagel: BBG China’s central government is borrowing at the fastest pace on record to finance more spending and to ease the debt burden in provinces: BBG China’s economic recovery was mixed in March with business confidence and the housing market improving but the global outlook darkening amid heightened financial market turmoil: BBG A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mixed in mostly rangebound trade as markets took a breather from recent banking sector jitters and with risk appetite also restricted amid lingering geopolitical tensions and heading into quarter-end. ASX 200 eked slight gains with the index supported by strength in utilities and real estate although the upside was capped by weakness in the commodity-related sectors. Nikkei 225 reclaimed the 27,500 level but with further upside limited after firmer than expected Services PPI data from Japan and a fresh round of missile launches by North Korea. Hang Seng and Shanghai Comp. were pressured despite the PBoC's RRR cut taking effect today, as the attention turned to earnings releases with energy leading the downturn in Hong Kong following a decline in Sinopec’s profits and certain tech stocks also weakened after Xiaomi’s quarterly smartphone shipments fell 18.6% Q/Q, while the latest data showed that February YTD Industrial Profits declined by 22.9% Y/Y. Top Asian News Cinese Foreign Minister Qin Gang said China’s attitude towards developing a healthy, stable and constructive Sino-US relationship remains unchanged, while he hopes US and China can work together to promote bilateral relations to overcome difficulties and return to healthy and stable developments. Furthermore, he welcomes US companies to continue expanding investments in China and said China is willing to provide a better business environment for companies across the world including the US, according to Reuters. Chinese Vice Premier Ding Xuexiang said Premier Li will meet with key foreign guests attending the China Development Forum and that major economic indicators have improved following the smooth transition away from epidemic control. Ding said opening up to the outside world is an indispensable major national policy and China will actively expand imports of high-quality goods and services, while he added China will further reduce tariffs, continue to expand market access and attract foreign investment, according to Reuters. Chinese Finance Minister Liu Kun said will intensify the implementation of proactive fiscal policy and fiscal expenditure, while China will introduce increased tax reduction measures to support market entities and will improve residents’ income through multiple channels. Furthermore, China is to continue to give priority to scientific and technological innovation, as well as increase investment, according to Reuters. Chinese Commerce Minister said China’s import and export volumes are expected to continue on a growth trajectory and that they will focus on government procurement, intellectual property rights and serving foreign investors, according to Reuters. China NDRC head Zheng Shanjie said China’s economic development faces challenges and they are implementing effective solutions. Zheng said China’s economy is resilient and dynamic with long-term fundamentals unchanged, while they will strengthen coordination of fiscal, monetary, employment, industrial, consumption and other policies, according to Reuters. China Communist Party senior official Han Wenxiu said China is confident of reaching the annual economic growth target of around 5% and there is currently no apparent inflation nor deflation in China, while he added there is a relatively large room to manoeuvre monetary policy and China will respond strongly to negative population growth and population ageing, according to Reuters. IMF's Georgieva said risks to financial stability have increased and vigilance is still needed, while the IMF is paying close attention to vulnerable countries, especially low-income nations with high-debt growth. Georgieva also stated that China’s economy is seeing a strong rebound fuelled by private consumption and that reforms to boost productivity could lift China’s GDP by up to 2.5% by 2027 and by 18% by 2037. Honduras said it is breaking diplomatic relations with Taiwan and it established diplomatic ties with China, while China and Honduras agreed to develop relations on the basis of principles of mutual respect for sovereignty and territorial integrity, according to state media. Taiwan’s Foreign Minister confirmed the cutting of ties with Honduras and is withdrawing its embassy, while Taiwan’s Foreign Minister noted that Honduras demanded a larger amount of money and reiterated that China does not follow through on its promises, according to Reuters. US State Department said that while Honduras’s action to sever ties with Taiwan is a sovereign decision, it is important to note that China often makes promises that remain unfulfilled and the US strongly encourages all countries to expand engagement with Taiwan, according to Reuters. European bourses are in the green across the board, Euro Stoxx 50 +0.9%, with banking names outperforming initially after the concerns at the tail-end of last week. Specifically, SX7P +1.0% with Deutsche Bank among the best performers as the weekend was devoid of any significantly negative developments with updates generally limited. Stateside, futures are more tentative with the ES +0.4% firmer and back above 4k after it incrementally lost the figure in the European morning. FRC +24% is bolstered in the pre-market amid reports that the US is considering giving them more  time, with banks generally under consideration for additional support from the US. China Commerce Ministries Wentao met with Apple (AAPL) CEO Cook; exchanged views on Cos progress in the region, stabilisation of industry and supply chains. Salesforce (CRM) and Elliott Investment Management issue joint statement; Elliott will not proceed with director nominations. Top European News ECB’s de Guindos said the question now is how the events in the US banking system and Credit Suisse (CSGN SW) will impact the eurozone economy and need to assess whether they will give rise to an additional tightening of financing conditions which could perhaps feed through to the economy in terms of lower growth and lower inflation, according to Business Post. ECB's de Cos says that decisions must be prudent amid bank uncertainty; tensions in financial markets have generated a further tightening of financial conditions, affecting the outlook for economic activity and inflation. ECB's Simkus says that financial stability is an important factor, bank liquidity and capitalisation are high in the Euro Area. ECB's Nagel says QT should be accelerated from the summer and inflation is still too high. Adds, recent financial developments make it even more important that decisions are taken meeting-by-meeting. S&P affirmed Germany at AAA; Outlook Stable, while Fitch affirmed Malta at A+; Outlook Stable. FX DXY solid around 103.000 axis as firm rebound in US Treasury yields offset loss of safety premium. Franc outperforms amidst further relief rally from CS collapse as USD/CHF eyes 0.9150 and EUR/CHF trades mainly under 0.9900. Sterling firm on the 1.2200 handle vs Dollar ahead of latest comments from BoE Governor Bailey. Yen reverses through 131.00 from circa 130.50 at best as risk appetite improves and UST/JGB spreads widen. PBoC set USD/CNY mid-point at 6.8714 vs exp. 6.8703 (prev. 6.8374) Fixed Income   Core benchmarks are pressured given the modestly constructive risk tone in European trade, Bund dipping further below 137.00 Specifics have been slim with ECB speak and Ifo not markedly moving the dial with the risk tone dictating action instead; as such, EGBs are at the lower-end of circa. 150 tick parameters. Gilts are in-fitting and incrementally softer as they seemingly lead the latest move lower ahead of BoE's Bailey at the LSE. Stateside, USTs are in-fitting with focus still on the banking sector and officials response to it ahead of US 2yr supply and Fed's Jefferson. Japan's 10yr bond has not traded all day, for the first time in one month, via Bloomberg. Commodities Commodities are diverging modestly with overall action fairly tentative as the complex and markets more broadly await fresh catalysts, particularly on the banking front. WTI and Brent are firmer by circa. USD 0.30/bbl but reside towards the lower end of USD 1/bbl range parameters which are well within Friday’s and by extension recent ranges. Spot gold is softer given the constructive European tone and as the USD retains an underlying bid with the DXY above 103.00, action which has pressured the yellow metal to a USD 1965/oz intraday low. Saudi Aramco CEO affirmed the Co.’s support for China’s long-term energy security and it was separately reported that Aramco JV Hapco is to commence construction of a major refinery and petrochemical complex in China with construction to begin in Q2 and the complex is expected to be fully operational by 2026, according to Reuters. Iraq won an arbitration case against Turkey regarding Kurdish oil exports, while Turkey informed Iraq it will respect the arbitration ruling and halted Kurdish crude exports, according to officials cited by Reuters. TotalEnergies (TTE FP) said 33% of operational staff at its French refineries and depots were on strike on Sunday, according to a Co. spokesperson cited by Reuters. A major incident was declared due to an oil leak from the Wytch Farm Oil Field in Dorset. Geopolitics Israeli PM Netanyahu fired the defence minister for not supporting the judicial reform plan which prompted protests in Tel Aviv, while it was later reported that all universities across Israel will declare a strike from Monday and that Israeli police used a water cannon to push back protestors who broke barricades near PM Netanyahu’s house in Jerusalem. Furthermore, the IDF raised the alert level amid the unrest. Israeli broadcaster says that PM Netanyahu has told coalition heads that he will pause the judicial overhaul. *Following protest from coalition members on this and the announcement/commencement of widespread of Russian President Putin said Moscow will station tactical nuclear weapons in Belarus and has moved 10 aircraft to Belarus capable of carrying tactical nuclear weapons, while he noted that this does not violate nuclear non-proliferation agreements and that they are not transferring nuclear weapons to Belarus but will station them there as the US does in Europe, according to TASS. White House said it has seen the reports of Russia’s nuclear announcement but has not seen a reason to adjust the nuclear posture nor indications that Russia is preparing to use a nuclear weapon, while a US official said Russia and Belarus have talked about nuclear stationing for some time and the move could be political signalling on Belarus Independence Day, according to Reuters. NATO said Russia’s nuclear rhetoric is dangerous and irresponsible, while it is closely monitoring the situation but has not seen any changes in Russia’s nuclear posture that would lead to NATO adjusting its own, according to Reuters. EU’s Foreign Policy Chief Borrell said Belarus hosting Russian nuclear weapons would mean an irresponsible escalation and threat to European security, while he added that Belarus can still stop it and the EU stands ready to respond with further sanctions. Ukraine’s Foreign Ministry slammed Russian President Putin’s provocative nuclear plans and called for a UN Security Council session, while Lithuania’s Foreign Ministry said it will call for new sanctions in response to Russia’s plan to place tactical nuclear weapons in Belarus, according to Reuters. Ukraine’s Central Bank Governor said Ukraine will no longer resort to dangerous money printing to fund the war against Russia, according to FT. An explosion occurred that injured two people in a town in Russia’s Tula region and was caused by a Ukrainian drone packed with explosives, according to TASS. Russia’s Parliament Speaker Volodin proposed to ban the activities of the International Criminal Court in Russia, after the ICC issued an arrest warrant for Russian President Putin and accused him of war crimes, according to Reuters. Russian Kremlin denies reports in Turkish media that President Putin intends to visit Turkey. North Korea fired two suspected ballistic missiles towards the East Sea which landed outside of Japan’s exclusive economic zone, according to Reuters. Furthermore, South Korea's military said it strongly condemns North Korean missile launches as a grave act of provocation, while it will continue field exercises with the US as planned and maintain readiness to respond to any provocations. Japanese Chief Cabinet Secretary Matsuno says North Korea is likely to step up provocative activities including nuclear tests, according to Reuters. US Event Calendar 10:30: March Dallas Fed Manf. Activity, est. -10.0, prior -13.5 Central Banks 17:00: Fed’s Jefferson Discusses Monetary Policy DB's Jim Reid concludes the overnight wrap Obviously matters in the banking sector will continue to set the pace this week. In an age of social media, misinformation can spread like wildfire so you're never sure where the next incredulous story is going to come from alongside the genuine issues. Investors in financials have had their confidence knocked by recent events which has allowed those betting against the sector a free run. If anything some rampant misinformation and fear on Friday morning allowed for an examination of the facts and fundamentals of the large banks and buyers stepped back in with European banks well off the lows by the end of Friday's session with the US bank index turning positive (+0.42%) just before the US close. With the worst of the irrational scare stories around European banks seemingly running out of momentum over the weekend, some reappraisals of the facts should continue this week. Indeed Euro Stoxx futures are up +1.1% in Asia trading with S&P and Nasdaq futures up around +0.5%. One of our big themes of the last couple of weeks is that medium term corporates are more at risk than financials on the credit side as they are the more levered entities in this cycle. Indeed Steve Caprio in my team has just put out a piece (link here) where we overweight US banks against corporates. Today's $IG credit market is pricing substantial banking sector stress, with little negative spillover to leveraged corporates. On a relative value basis, $IG financials are trading at mid-2008 levels vs. $IG non-financials. The primary reason? Deposit outflows at small US banks. A secondary reason? Investor concerns over bank loan losses, particularly in commercial real estate. While these dual fears have merit, they may be lacking the nuance needed to appropriately position $IG portfolios in today's environment. And they don't take into account that while banks are trading at 2008 levels vs. corporates, it is corporate leverage that is substantially higher this cycle. So see the piece for more. Back to Asia, and Treasury yields are little changed with 10yr yields -0.7bps lower while 2yr yields (+1.4bps) are up a bit as we go to print. Asian equities are catching down with Friday's early DM losses with the Hang Seng (-1.25%), Shanghai Composite (-1.05%), the CSI (-0.96%) and KOSPI (-0.21%) trading in the red. Elsewhere, the Nikkei (+0.31%) is bucking the regional negative trend. Early morning data showed that China’s industrial profits contracted -22.9% in the first two months of 2023 compared to a year ago indicating that factories are yet to fully come out of the Covid-induced slump. Revenues couldn't keep up with costs as the reopening trade emerged. For the whole of 2022, industrial profits declined -4%. Looking forward, the banking sector will clearly set the scene this week as we approach month-end on Thursday. The data will be a bit secondary as it'll be too early to judge any impact from the mini crisis so far. However there are some important releases with the PCE in the US (Friday), CPIs for Germany (Thursday), the Eurozone and Tokyo (both Friday) keeping inflation data top of mind for investors this week. They’ll probably care a little less than they did before the banking crisis hit though. In addition, an array of consumer and business confidence indicators in the US and Europe are also due and China PMIs on Friday will be important. Perhaps more interesting with be hearing from a deluge of Fed officials as they were on blackout for the SVB crisis up until last week's FOMC. They are back in force this week and we'll therefore get a better idea of the deliberations around last week's 25bps hike and the future of this hiking cycle. See the day by day week ahead at the end for a list of the speaker and data highlights. We’ll expand on the main events below. We’ll have to wait until the end of the week for the most important datapoint and that’s the Fed's preferred inflation gauge, the PCE, on Friday. Our economists see a +0.36% advance for the core PCE in February (+0.57% in January) and MoM declines for both income (-0.1% vs +0.6% in January) and consumption (-0.6% vs +1.8%). Earlier in the week, a pulse check on the US consumer will come from Conference Board's consumer confidence measure on Wednesday (DB estimates 102.1 vs 102.9 in February). Over in Europe, all eyes will be on the preliminary inflation readings across the Eurozone. March data for Germany will be out on Thursday, followed by reports for the Eurozone and France on Friday, among others. In terms of forecasts, the team sees March headline at 7.1% (+1.1% MoM) and core at 5.8% (+1.4% MoM). As a reminder, the latest 5.6% core inflation reading is the highest on record. Our team don't expect it to peak until the 6.0% they expect in July. Apart from the inflation data, there will be an array of sentiment indicators across the bloc as well, with potential preliminary impact of the banking turmoil in focus. Among the gauges are the Ifo survey (today) and consumer confidence (Wednesday) in Germany, as well as manufacturing (tomorrow) and consumer confidence (Wednesday) in France. Turning to Asia, this week will be a busy one for Japan as well, with one of the key releases being the Tokyo CPI on Friday. Elsewhere in the region, markets will be closely following China's PMI releases on Friday to assess the speed and magnitude of economic recovery. Current median estimates on Bloomberg are pointing to a slight deceleration in both manufacturing (51.8 vs 52.6 in February) and non-manufacturing (54.3 vs 56.3) indicators. Looking back on last week now, US and European markets diverged on Friday as the US market continued normalising as sentiment improved in the latter half of the week. Meanwhile renewed jitters concerning the stability of the banking sector in Europe gripped markets on Friday. Friday also saw the release of the March flash PMIs for both the US and Europe. The US composite PMI beat expectations at 53.3 (vs 49.5 expected) to land well into expansionary territory, as both manufacturing (49.3 vs 47 expected) and services (53.8 vs 50.3 expected) surpassed forecasts. For the Euro Area, the March composite PMI likewise beat expectations at 54.1 (vs 52 expected). While manufacturing remained in contraction (47.1 vs 49 expected), services demonstrated strength (55.6 vs 52.5 expected) as the energy shock that developed through autumn last year continued to ease. Despite the strong beats implying latitude for further rate hikes, markets are more focused on the strains from the banking sector and what it might imply for overall economic health. Therefore fed futures ended last week just pricing in a 1 in 4 chance of a +25bps rate hike at the Fed’s May meeting, with the implied rate hike falling -3.9bps on Friday to 6.1bps. For the final Fed meeting of the year in December, the expected rate fell -9.4bps to 3.91% on Friday (+7.8bps on the week) as markets are pricing in over -88bps of rate cuts by year-end. Against this backdrop, US equity markets once again whipsawed between gains and losses last week, and continued to demonstrate a significant level of dispersion. The S&P 500 closed up +1.39% on the week overall, after ending Friday up +0.56%. Regional banks recovered on Friday led by recent laggards Western Alliance Bancorp (+5.7%), KeyCorp (+5.2%), and Zion Bancorp (+4.1%), while large-cap banks like JPMorgan (-1.5%) and Wells Fargo (-1.0%) fell. Embattled First Republic (-1.4% Friday) closed down -46% on the week, just off its Monday lows, and is now down nearly -90% MTD. Overall in weekly terms, the KBW bank index fell -0.52% (+0.42% on Friday). The testimony of TikTok CEO Shou Zi before the US Congress last week saw the US information technology sector outperform. For example, Meta moved up +5.32% (+0.85% on Friday) and Pinterest up +4.17% (-0.51% on Friday) in weekly terms. While US assets ended the week with a risk-on tone, European equity markets closed lower as weakness in European banks weighed on sentiment overall. The STOXX 600 was down -1.37% Friday (+0.87% on the week), with the retreat in the banking sector on concerns about financial stability, causing European banks to close down -4.61% (-1.08% in weekly terms). The CAC and DAX also fell back on Friday by -1.74% and -1.66%, but on the week finished up +1.30% and +1.28% respectively. Sovereign bonds on both sides of the Atlantic outperformed on Friday. 10yr Treasury yields fell -5.0bps on Friday, and down -5.2bps on the week, slipping to their lowest levels since January. Yields on US 2yrs were at their lowest levels since September after falling -7.1bps last week (-6.6bps on Friday). 10yr bund yields similarly retreated on Friday, having fallen -6.6bps, but were up modestly by +2.1bps in week-on-week terms. German 2yrs outperformed on Friday, as yields fell -13.3bps to 2.39% but closed the five days just higher than unchanged (+0.5bps). Turning to commodity markets, WTI Crude contracts were up +2.77% last week to $69.26/bbl (-1.00% on Friday) and Brent crude up +2.77% to $74.99/bbl (-1.21% on Friday). Copper also had a strong week, up +4.80% (-1.07% on Friday). Finally, the prevailing risk-aversion sentiment failed to penetrate crypto markets, as Bitcoin strongly outperformed, closing up +30.25% on the week (-2.52% on Friday). Tyler Durden Mon, 03/27/2023 - 08:05.....»»