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Cracker Barrel Old Country Store Q4 Preview: Another EPS Beat Inbound?

Just in its latest quarter, the restaurant retailer penciled in a 6.6% EPS beat. The Zacks Retail and Wholesale Sector has struggled more than the broader market in 2022, down nearly 25%.Image Source: Zacks Investment ResearchA highly-popular stock in the sector with a unique business approach, Cracker Barrel Old Country Store CBRL, is slated to unveil Q4 earnings on September 27th before market open.Cracker Barrel Old Country Store is engaged in the ownership and operation of full-service restaurants with a restaurant and a retail store in the same unit.Currently, the company carries a favorable Zacks Rank #2 (Buy) paired with an overall VGM Score of a C.How does Cracker Barrel shape up heading into its print? Let’s take a closer look.Share Performance & ValuationYear-to-date, CBRL shares have displayed a fair amount of relative strength, declining roughly 17% vs. the S&P 500’s 20% decline.Image Source: Zacks Investment ResearchOver the last month, Cracker Barrel shares have continued on their market-beating trajectory, declining 5%.Image Source: Zacks Investment ResearchThe favorable price action that shares have enjoyed tells us that buyers have defended the stock at a higher level than most, undoubtedly a positive.In addition, CBRL shares could be considered undervalued – the company’s 17.6X forward earnings multiple represents a steep 26% discount relative to its Zacks Retail and Wholesale Sector.Cracker Barrel Old Country Store carries a Style Score of a B for Value.Image Source: Zacks Investment ResearchQuarterly EstimatesA singular analyst has upped their quarterly earnings outlook over the last 60 days. Still, the Zacks Consensus EPS Estimate of $1.41 pencils in a 37% drop-off in earnings Y/Y.Image Source: Zacks Investment ResearchHowever, the company’s top line looks to remain supercharged, with the Zacks Consensus Sales estimate of $844 million suggesting Y/Y revenue growth of a robust 7.6%.Quarterly Performance & Market Reactions CBRL has primarily reported bottom line results above expectations, exceeding the Zacks Consensus EPS Estimate in six of its last ten prints. Just in its latest quarter, the restaurant retailer penciled in a 6.6% EPS beat.Revenue results have been primarily mixed; CBRL has registered five top-line beats over its last ten quarters. Below is a chart illustrating the company’s revenue on a quarterly basis.Image Source: Zacks Investment ResearchFurther, it’s worth noting that shares have moved downwards following each of its last three quarterly prints.Bottom LineCBRL shares have displayed relative strength across several timeframes, indicating that buyers have defended the stock higher than most.The company rocks a Style Score of a B for Value, and its forward earnings multiple resides nicely below its Zacks Sector average.Earnings are forecasted to take a hit, but revenue looks to register solid Y/Y growth, most likely reflecting rising costs eating into margins.Further, the company has primarily exceeded EPS estimates, but revenue results have been mixed over its last ten.Heading into the release, Cracker Barrel Old Country Store CBRL currently carries a Zacks Rank #2 (Buy). Just Released: Free Report Reveals Little-Known Strategies to Help Profit from the  $30 Trillion Metaverse Boom It's undeniable. The metaverse is gaining steam every day. Just follow the money. Google. Microsoft. Adobe. Nike. Facebook even rebranded itself as Meta because Mark Zuckerberg believes the metaverse is the next iteration of the internet. The inevitable result? Many investors will get rich as the metaverse evolves. What do they know that you don't? They’re aware of the companies best poised to grow as the metaverse does. And in a new FREE report, Zacks is revealing those stocks to you. This week, you can download, The Metaverse - What is it? And How to Profit with These 5 Pioneering Stocks. It reveals specific stocks set to skyrocket as this emerging technology develops and expands. Don't miss your chance to access it for free with no obligation.>>Show me how I could profit from the metaverse!Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cracker Barrel Old Country Store, Inc. (CBRL): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 22nd, 2022

Futures Slide As Hawkish Rikshock Sends Dollar, Yields Higher Again Ahead Of Fed

Futures Slide As Hawkish Rikshock Sends Dollar, Yields Higher Again Ahead Of Fed Market sentiment was quite cheerful heading into the overnight session, with futures hitting a third-day high of 3,936 thanks to yesterday' late day delta squeeze (plunge in VIX as both calls and especially puts were sold) but then it quickly soured after first German PPI came in at a mindblowing 45.8% (vs expectations of 37.1%) the highest on record since World War II... ...but what really spooked futures was the record hike by the Swedish central bank, the Riksbank, which pushed the repo rate higher by a more than expected 100bps to 1.75%, and even though the central bank eased back on terminal rate expectations, the market still saw the Riksbank surprise as potentially indicative of what the BOE and Fed may do in the coming hours. As such, European stocks fell with US equity futures, giving up early gains, as traders braced for another supersized US rate hike amid rising anxiety the Federal Reserve could overtighten and raise the odds of a hard landing. Europe' Stoxx 600 Index dropped 0.8%, paced by losses on real estate and miners as US equity futures also stumbled those the tech-heavy and rate-sensitive Nasdaq 100 underperforming S&P 500 peers. As of 730am, S&P futures were down 0.4% and Nasdaq contracts were down 0.5%. 10Y yields hit a fresh 11 year high as the dollar surged and gold resumed its slide. In premarket trading, Ford shares dropped 5.2% after the carmaker said 3Q supply costs were running $1b above expectations and warned that EBIT could be in the $1.4b -$1.7b range, below what was previously foreseen. General Motors stock also slid 2.3% in premarket trading. Here are some other notable premarket movers: Change Healthcare shares rise 7.1% in premarket trading after winning court approval for the $7.8b acquisition by UnitedHealth, defeating a Justice Department lawsuit that had sought to block the deal US- listed Macau casino stocks rise in premarket trading, on the possibility that Hong Kong would ease Covid restrictions such as mandatory hotel quarantine. Las Vegas Sands and Wynn Resorts gain about 3% in US premarket trading; Keep an eye on Melco (MLCO US) and MGM Resorts (MGM US) when trading volume picks up Western Digital shares slid 1.7% in premarket trading as Deutsche Bank cut the recommendation on the stock to hold from buy, saying it’s difficult to see meaningful upside in the next six to nine months as oversupply in the flash memory market persists Watch Cognex shares after the company boosted its revenue guidance for the third quarter; and the guidance beat the average analyst estimate The Fed kicks off its meeting today and is expected to again hike rates by 75 basis points Wednesday - now that Timiraos has taken off 100bps off the table - signal rates are heading above 4% and will then pause. Market participants have dialed back expectations of an even larger increase and only two of 96 economists in a Bloomberg survey now predict a full-point move. “The Federal Reserve is likely tightening policy straight into the teeth of a recession,” Danielle DiMartino Booth, CEO and chief strategist of Quill Intelligence, wrote in an email.  “The stock market’s addiction to Fed easing when stocks decline may be what Jerome Powell is aiming to quash by aggressively hiking rates, in addition to inflation.” Meanwhile in rates, Treasury 10-year yields topped 3.5% rising to a fresh 11.5 year high, while yields on the more policy-sensitive two-year rate hit the highest since 2007 and are poised to crack above 4%, reflecting hard-landing fears. In a worrying trend for stocks, real rates - Treasury yields adjusted for inflation - rose to the highest level since 2011. When they were pinned in negative territory during a decade of easy-money policies, real rates had been a key driver of risk-asset rallies. Markets have fairly priced in yield on the two-year Treasury inching closer to 4% and “it might scratch a bit higher, but not an awful lot at this point,” Peter Kinsella, head of foreign exchange strategy at Union Bancaire Privee Ubp SA, said on Bloomberg Television. It would still be reasonable for the 10-year Treasury yield to go towards 3.5% or 3.7%, “but there’s probably not a lot more juice in that trade,” he said. In Europe the Stoxx 50 fell 0.5%, reversing earlier gains with the UK's FTSE 100 flat but outperforms peers, IBEX lags, dropping 0.8%. Real estate, retailers and miners are the worst-performing sectors. Earlier in the session, Asian stocks advanced, on track to snap a five-day losing streak, amid signals that Hong Kong will move toward easing Covid restrictions.  The MSCI Asia-Pacific Index gained as much as 1% as Tencent, Alibaba and TSMC provided the most support. Benchmarks across the region rose.  Indexes in Hong Kong gained at least 1.2%, with one key gauge climbing from the edge of a bear market. Hong Kong’s chief executive said the city wants to relax Covid travel curbs after nearly three years of restrictions. The Hang Seng Tech Index added 2%.  Australia’s main gauge rose more than 1%, led by the materials sector. Japan’s stock market advanced despite high inflation data, after being closed Monday. “China’s reopening has helped revive sentiment in Asia this week,” said Charu Chanana, a senior strategist at Saxo Capital Markets. “There’s some level of positioning there ahead of a slew of central bank meetings this week, but volatility will likely remain elevated.” Despite Tuesday’s rally, Asia’s benchmark is still close to its lowest level since the middle of 2020 amid concerns over higher US interest rates and the dollar’s strength.  Investors are betting that the Federal Reserve will hike interest rates by 75-basis-point at a policy meeting on Wednesday. Investors are also awaiting other central bank decisions this week from nations including the Philippines, Indonesia, Taiwan and Japan Some more details: Japanese stocks advanced, tracking a rebound in US shares, as investors continued to weigh the market impact of further interest rate hikes from the Federal Reserve. Tokyo’s stock market was closed Monday for a holiday.  The Topix Index rose 0.5% to 1,947.27 as of market close Tokyo time, while the Nikkei advanced 0.4% to 27,688.42. Keyence Corp. contributed the most to the Topix Index gain, increasing 2.2%. Out of 2,169 stocks in the index, 1,481 rose and 582 fell, while 106 were unchanged. “Assuming it is 75bps, the thing to consider is where it will go from there, as I think that the rate hike will remain hawkish as far as the Jackson Hole and economic indicators are concerned,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. “A comment that accelerates the rate hike would be negative, while a comment that takes the economy into consideration would be positive for the stocks.”  Traders are betting the Fed will hike by 75 basis points Wednesday.  India stock indexes rose for the second day, driven by a continuing rally in consumer goods makers and a surge in healthcare stocks. The S&P BSE Sensex gained 1% to 59,719.74 in Mumbai, while the NSE Nifty 50 Index rose 1.1%. The main indexes rose as much as 1.6% and 1.7%, respectively but failed to hold the advance.  “Intraday volatility could be the ongoing theme for markets as investors world over are bracing for a stiff interest rate hike by the US Federal Reserve to weigh on rising inflation,” said Prashanth Tapse, an analyst with Mehta Securities.   All of the 19 sector sub-indexes traded higher, led by a gauge of healthcare companies. Banking and consumer goods stocks continued their climb on expectations of a demand surge during the upcoming festive season. ICICI Bank contributed the most to the Sensex’s gain, increasing 2%. Out of 30 shares in the Sensex index, 26 rose and 4 fell. In rates, the Treasury curve bear-flattened and yields rose by 4-5bps as Treasuries extend Monday’s session slide. Supply pressure in the form of 20-year bond auction awaits for Tuesday’s session, before Fed meeting Wednesday where OIS has eased slightly, pricing in 78bp of hikes for the meeting, following WSJ report that a three-quarter point move is expected. Core European rates underperform, led by gilts catching up from Monday UK’s holiday.  Bunds fell, led by the belly of the curve, with yields rising up to 10bps as money markets continued to add to ECB tightening. UK bonds lead the wider market lower, headed by the short end and belly of the curve, and underperforming bunds and USTs as they catch up after Monday’s holiday. Curves bear-flatten as money markets up their ECB and BOE rate-hike bets. Swedish front-end bond yields rose more than their German peers, in response to the front-loaded rate increase. Australia’s dollar and bond yields declined after minutes from the RBA’s September meeting showed the central bank is getting closer to “normal settings.” In FX, the Bloomberg Dollar Spot Index reversed a modest Asia session loss as the greenback advanced versus all of its Group-of-10 peers, with GBP and DKK the strongest performers in G-10 FX, NZD and NOK underperform. and yet as Bloomberg notes, options bets in the dollar are the least bullish they have been this year before the Federal Reserve was expected to announce an interest-rate increase. Some more details: The euro gave up gains to touch parity against the dollar, despite a record German PPI print (the highest since WWII) Sweden’s krona erased gains after initially rallying on the Riksbank’s surprise jumbo hike, as the market had priced in a more aggressive profile for the rate path, with a peak at around 3.5%. The pound was supported by growing speculation that the Bank of England may raise interest rates by 75 basis points later this week. Markets were also anticipating a speech by the UK’s finance minister, who is expected to outline details for a big spending plan to help households through an energy crisis in coming months Gilts dropped, catching up with Monday’s bond tumble when UK markets were closed for a holiday In commodities, WTI drifts 0.5% higher to trade near $86.19. Spot gold falls roughly $8 to trade near $1,668/oz. Spot silver loses 1.3% near $19. European natural gas benchmark futures drop much as 6.8% for a fourth session of declines, the longest run since July. Elsewhere, Bitcoin struggled to return to the $20,000 level. Oil slipped below $86 per barrel and gold fell. To the day ahead now. In data we have US August housing starts, building permits, Germany August PPI, Italy July current account balance, July ECB current account, Canada August CPI, while the ECB’s Muller will give remarks. Market Snapshot S&P 500 futures fell 0.2% to 3,911.50 STOXX Europe 600 fell 0.5% to 405.78 MXAP up 0.7% to 150.68 MXAPJ up 1.0% to 493.17 Nikkei up 0.4% to 27,688.42 Topix up 0.4% to 1,947.27 Hang Seng Index up 1.2% to 18,781.42 Shanghai Composite up 0.2% to 3,122.41 Sensex up 1.5% to 60,021.83 Australia S&P/ASX 200 up 1.3% to 6,806.43 Kospi up 0.5% to 2,367.85 German 10Y yield little changed at 1.86% Euro down 0.2% to $1.0007 Gold spot down 0.4% to $1,669.80 U.S. Dollar Index little changed at 109.80 Top Overnight News from Bloomberg Treasury two-year yields are poised to crack above 4% for the first time since 2007 as the Federal Reserve’s steepest tightening cycle in a generation drives them higher ECB Governing Council member Madis Muller said interest rates remain far from levels that would restrict economic expansion in the euro zone The German government released another 2.5 billion euros ($2.5 billion) of credit lines to secure gas supplies, as it writes off Russia as a reliable energy supplier Hungary said it was prepared to meet EU demands that it take action to curb fraud and corruption after the bloc threatened to freeze 7.5 billion euros ($7.5 billion) of funds that have been earmarked for the country A more detailed look at global markets courtesy of Newsquawk Asian stocks followed suit to the improved risk appetite stateside but with the advances capped ahead of this week’s risk events. ASX 200 was led higher by strength in the commodity-related sectors and with resilience in nearly all industries aside from healthcare, while the RBA minutes provided little in the way of new information but continued to point to a future slowdown in the hiking cycle. Nikkei 225 gained on return from the extended weekend but was off its highs after the mostly firmer-than-expected Japanese inflation data. Hang Seng and Shanghai Comp conformed to the upbeat mood with Hong Kong boosted by outperformance in tech stocks and as authorities consider adjusting COVID restrictions, while the advances in the mainland were contained after the PBoC maintained its 1-Year and 5-Year Loan Prime Rates as expected. "Investors should not be pessimistic about the (Chinese) stock market, as multiple signs emerge that bode well for equities", according to the Securities Daily cited by SCMP. Top Asian News China's Shanghai unvels RMB 1.8trln (around USD 257bln) worth of inftrastructure investments, has launched eight of them. Hong Kong Chief Executive Lee said they are exploring further adjustments to COVID policy and aim to make an announcement soon with the details to be announced in one go. Lee added they would like to facilitate events for Hong Kong and bring back activities to the city, while they would want to stay connected with the world and allow an orderly opening up. Japan's Ministry of Finance said the government is to spend JPY 3.48tln in budget reserves to manage price hikes and COVID-19, while Finance Minister Suzuki said they will create an additional budget in addition to the reserve fund and for the time being, reserve money will be used for essential output. There were also comments from LDP Secretary-General Motegi that a stimulus package of at least JPY 15tln is needed to fill the output gap. Bourses across Europe have been dipping from best levels, with sentiment somewhat sullied by a marked and unexpected acceleration in German PPI, coupled with a larger-than-forecast Riksbank rate hike to kick off the myriad of G10 central banks this week. The bias across sectors has titled more towards the defensive side, with Food & Beverages, Personal Goods, and Healthcare making their way up the ranks. US equity futures have slipped into negative territory, but the breadth of the market remains shallow as the clock ticks down to the FOMC tomorrow. German Gov't draft law re. gas levy says Co's receiving it may not see any notable profits, manager slaries must be limited. Restriction on profits to those with a market share above 1.0%, via Reuters sources. Top European News Traders Wager BOE Will Join Fed With Two Jumbo Hikes by Year- End Germany to Spend Another $2.5 Billion on LNG to Ease Crisis UBS’s Khan ‘Confident’ on Asset Target Despite Market Rout Russia to Flood Asia With Fuel as Europe Ramps Up Sanctions Riksbank Kicks Off Global Hiking With 100 Basis-Point Move Central Banks WSJ's Timiraos writes "Fed’s Third Straight 0.75-Point Interest-Rate Rise Is Anticipated" and signaling intentions to raise and hold the benchmark above 4.0% in the months ahead, via WSJ. Riksbank hikes its Rate by 100bps to 1.75% (exp. 75bps hike to 1.50%); Forecast indicates rate will be raised further in the coming six months. Full details, reaction & newsquawk analysis available here. ECB's Muller says rates are far from the level that would slow the economy; rates are still low in the historical context. PBoC set USD/CNY mid-point at 6.9468 vs exp. 6.9483 (prev. 6.9396). PBoC 1-Year Loan Prime Rate (Sep) 3.65% vs. Exp. 3.65% (Prev. 3.65%) PBoC 5-Year Loan Prime Rate (Sep) 4.30% vs. Exp. 4.30% (Prev. 4.30%) RBA September meeting minutes stated members saw the case for a slower pace of rate increase as becoming stronger as the level of the Cash Rate increases, while the board expects to increase rates further over months ahead but is not on a pre-set path. RBA Board is committed to doing what is necessary to ensure inflation returns to target over time and members noted that inflation in Australia was at its highest level in several decades which was expected to increase further over the months ahead with inflation expected to peak later this year and then decline back towards the 2-3% target range. Furthermore, the Board acknowledged that monetary policy operates with a lag and interest rates had been increased quite quickly and were getting closer to normal settings. FX DXY remains towards the top of today's intraday parameter but under the 110.00 mark. SEK was flagging near recent lows against the Euro and Dollar before the Riksbank delivered a hawkish surprise by raising rates a bigger than expected 100 bp (vs +75 bp consensus). NZD remained under pressure and extended its decline against the Greenback to the low 0.5900 zone, while sliding through 1.1300 vs the Aussie. JPY failed to glean much impetus from firmer than Japanese inflation metrics on the premise that the BoJ is unlikely to budge from its accommodative stance this week. Fixed Income Debt futures continue to plunge amidst fleeting bouts of consolidation and lame rebounds - the latest catalyst came via Sweden's Riksbank. Bunds have been down to 141.08 for a 154 tick loss on the day, Gilts to 104.33, 91 ticks below par. US 10-year T-note fell to 114-01+, with corresponding yields soaring towards 3.55%. Commodities WTI and Brent front-month futures hold onto modest gains, but the upside remains capped by the cautious risk tone in early European trade. Overnight, the complex was relatively uneventful as it took a breather from the recent volatility. Russia's government wants to collect about RUB 1.4tln from raw material exporters next year to cover the budget deficit and proposed to raise the export duty on gas to 50% among other measures, according to Kommersant. Gazprom says it will halt power of Siberia gas pipeline to China on Sept 22-29, citing maintenance, via Reuters. Aramco CEO says the response to the global energy crisis thus far shows a deep misunderstanding of how we got there, increases in oil/gas investment are "too little too late" in the short term; when the global economy recovers, can expect demand to rebound further - eliminating the little spare oil production capacity available. Spot gold is subdued by the Dollar but in recent ranges after hitting multi-year lows last week as the yellow metals look ahead to the Fed. LME futures resumed trade following the long weekend, with 3M copper flat at the time of writing under the USD 7,800/t, mimicking the risk tone and awaiting the next catalyst. US Event Calendar 08:30: Aug. Building Permits MoM, est. -4.8%, prior -1.3%, revised -0.6% 08:30: Aug. Housing Starts MoM, est. 0.3%, prior -9.6% 08:30: Aug. Building Permits, est. 1.6m, prior 1.67m, revised 1.69m 08:30: Aug. Housing Starts, est. 1.45m, prior 1.45m DB's Jim Reid concludes the overnight wrap It was an extraordinary day here in the UK yesterday for the Queen's funeral. The vast majority of the world's leaders and dignitaries were present, hundreds of thousands lined the streets of London, and it was broadcast to an estimated global TV audience of four billion. It was hard not to get swept up in the emotion, pageantry, and enormity of the event. It's also hard to imagine that the world will see a similar type of event again in our lifetime. With all this going on, markets started the week on a quiet note, with the UK closed, Japan on holiday, and the data docket light. Yields took another leg higher though and curves flattened on the prospect of another round of global central bank tightening this week. Meanwhile, global equity markets were looking for direction, with European equities slightly lower, and US equities tracking flat for most of the day until a strong late rally (S&P +0.69%) changed the complexion of the day a bit. The central bank focus remains the main game in town. With Fed pricing for Wednesday (79.8bps of hikes implied by the close, our US economics full preview here) still incorporating some premium of a 100 basis point hike, markets were watching for any blackout period communications from the Fed. A prominent Fed watcher from the WSJ did have a piece that garnered attention, but it was focused more on the previously-recognised pivot from Chair Powell to focus more on fighting inflation rather than providing a strong signal about Wednesday’s potential policy action one way or another. In turn, implied policy pricing for Wednesday was perfectly flat on the day. Farther out the curve, however, rates markets priced in tighter Fed policy for longer, with the entire Treasury curve selling off, driving a bear flattening. 2yr Treasury yields increased +6.9bps to 3.94%, their highest levels since 2007, while 10yrs were +4.1bps higher to 3.49%, the highest since 2011, leaving the yield curve at -45.0bps and just short of its most inverted levels reached this summer (-49.6bps). Yields have pulled back a touch in Asia though, with 10yr USTs (-1.95 bps) at 3.47% and 2yr yield trading -1bps lower at 3.93% as we go to press. In line with the tighter expected policy path, real yields are bearing the brunt of the recent selloff, with 10yr real yields increasing +6.5bps to 1.14%, their highest since 2018. The selloff and curve move was replicated in bunds, where 2yrs increased +8.8bps to 1.59% and 10yrs climbed +4.7bps to 1.80%, its highest since early 2014. 10yr OATs were in line with bunds, increasing +4.6bps, while BTPs marginally underperformed, increasing +5.8bps. The STOXX 600 was as much as -1.0% lower intraday, but climbed through the afternoon to finish just in the red at -.09%, while the CAC marginally underperformed, falling -0.26% whilst the DAX managed to eke out a +0.49% gain. Elsewhere out of Germany, regulators reported that German gas storage levels were at 89.67% as of yesterday, something to keep an eye on as we head into winter. The gas build has been very impressive but with the strong possibility of there being no more Russian gas flowing this winter, unless temperatures are mild, it's likely that rationing, in some shape or form, is likely. US equities, opened nearly -1.0% lower, but quickly rallied to flat where it oscillated around most of the day before the late rally send it up +0.69%. 9 out of 11 S&P sectors ended in the green, with sectoral dispersion pointing toward a cyclical over defensives day – materials (+1.63%), discretionary (+1.34%) and industrials (+1.33%) led while health care (-0.54%) and real estate lagged (-0.22%). The NASDAQ was slightly stronger, increasing +0.76%, but very much followed the same intraday price action as the S&P. In terms of data, the NAHB Housing Market Index declined to 46 (vs. 47 expectations and 49 prior), but didn’t necessarily tell us anything we didn’t already know: housing market sentiment is bad. It remains one of the sectors where the impacts of Fed tightening has already been acutely felt. Asian equity markets are broadly higher this morning following the late rally on Wall Street overnight. As I type, the Hang Seng (+1.44%) is leading gains across the region, rebounding from two consecutive sessions of losses while Chinese shares are also higher with the Shanghai Composite (+0.46%) and CSI (+0.33%) both up in early trade after the lifting of Covid-19 lockdowns in both Chengdu and Dalian yesterday. Elsewhere, the Nikkei (+0.42%) as well as the Kospi (+0.33%) have held on to their gains. DMs stock futures are pointing to a positive start with contracts on the S&P 500 (+0.20%), NASDAQ 100 (+0.23%) and DAX (+0.53%) are edging higher. Early morning data showed that Japan’s core consumer inflation quickened to +2.8% y/y in August (v/s +2.7% expected), notching its fastest annual pace in nearly eight years as pressures from higher raw material costs and a weak yen broadened. Markets were expecting a +2.7% gain compared to July’s +2.4% rise. Meanwhile, headline inflation hit 3.0% y/y in August, the highest since 1991. The data will be slightly uncomfortable for the BoJ as they meet on Thursday but they are not expected to change direction yet from their increasingly outlier zero rates policy stance on the global stage. Elsewhere, the People’s Bank of China (PBOC) kept its main lending rates unchanged leaving the 1-year loan prime rate (LPR) intact at 3.65% and the 5-year rate, a reference for mortgages, at 4.3% after a 15bps cut in August. The latest minutes from the Reserve Bank of Australia (RBA) indicate that the board members “saw the case for a slower pace of increase in interest rates as becoming stronger” over the months ahead but reiterated that the policy is not on a pre-set path considering the uncertainties surrounding the outlook for inflation and growth. Actually our economists have upgraded their RBA call to a 50bps hike in October (from 25bps) in line with the global direction of travel. They don't think the RBA will step down to 25bps hikes until November and December. To the day ahead now. In data we have US August housing starts, building permits, Germany August PPI, Italy July current account balance, July ECB current account, Canada August CPI, while the ECB’s Muller will give remarks. Tyler Durden Tue, 09/20/2022 - 07:44.....»»

Category: blogSource: zerohedgeSep 20th, 2022

Futures Flat After Hawkish Fed Comments, Dollar Ascent Resumes

Futures Flat After Hawkish Fed Comments, Dollar Ascent Resumes The downbeat market mood continued for a fourth day, with US stock futures turning red and erasing earlier gains after a three-day drop saw the S&P 500 lose $1.4 trillion in market capitalization amid renewed concerns about a hawkish Fed and a potential J-Pow bomb during Friday's J-Hole symposium (that said, with expectations so bearish, there is almost no way Powell can sound hawkish). S&P 500 futures dropped 0.1% at 7:00am ET after falling as much as 0.5%. Nasdaq 100 futures were also modestly red as the yield on the 10-year Treasury hit 3.05%. The US dollar reversed yesterday's sharp drop and extended its recent surge as the EURUSD resumed its plunge trading ever farther from parity, and at 0.992 last. Oil meanwhile has continued its ascent, pushing Brent above $100, and leading to the first Diesel price increase at the Pump since mid-June. “Globally we haven’t seen a deceleration like this that has been so synchronized in many decades,” Frances Stacy, director of strategy at Optimal Capital Advisors LLC, said on Bloomberg Television. “I don’t want to be directional” in picking trades, she added. The latest data showed economic activity weakening from the US to Europe and Asia, underlining the dire dilemma the Fed faces in hiking interest rates to bring down high inflation without sparking a recession. Still, Minneapolis Fed President Neel Kashkari said inflation is very high and the central bank must act to bring it back down to 2% and it is "very clear" they need to tighten monetary policy. Kashkari also stated that half to two-thirds of US high inflation is driven by supply-side shocks and help is needed on the supply side to get inflation down, with the more help they get from the supply side, the less the Fed has to do and will be better able to avoid a hard landing. Furthermore, he said there is currently no trade-off between employment and inflation mandates and they can only relax on rate hikes when they see compelling evidence inflation is heading toward 2%. In US pre-market trading, Nordstrom plunged as much as 14% and was set for its biggest drop in nine months, after an outlook cut prompted analyst worries that the need to clear inventory and discounting could hurt margins in the second half. Brokers said that the higher-end department store owner’s results have been more volatile than expected and show that the company is “not immune” to a difficult macroeconomic backdrop. Bed Bath & Beyond shares rose as much as 18% in premarket trading following a WSJ report that the home goods retailer told prospective lenders that it has selected a lender for a loan after a marketing by JPMorgan Chase. Other notable premarket movers: Urban Outfitters (URBN US) delivered quarterly results that look broadly in line with other apparel retailers, with a slowdown in lower-end brands and pressure on margins from markdowns, analysts say. Frontier GroupHoldings (ULCC US) is resumed with an overweight rating at Morgan Stanley, with broker saying that the company is “the quintessential ultra-low-cost carrier” and has attractive margins. Starbox (STBX US) shares jump as much as 30% in US premarket trading, with the Malaysian digital payments firm set for another day of gains after soaring in Tuesday’s Nasdaq Stock Market debut. Stock futures were rangebound in muted volumes, as traders assessed the fact that directors at two of the Fed’s 12 regional branches favored a 100 basis-point increase in the discount rate in July. One of them, Minneapolis President Neel Kashkari, said US inflation is very high and the central bank must act to bring it back under control. All eyes remain on Fed officials as they head to Jackson Hole, Wyoming, this week for an annual conference, where Chair Jerome Powell will have a chance to reset investor expectations when he speaks on the economic outlook at 10am on Friday. “We’ve been getting mixed signals from the Fed, highlighting risks of over-tightening but also concerns over still elevated inflation,” Madison Faller, global strategist at JPMorgan Private Bank, told Bloomberg Television. “It’s going to take more than one reading, we are going to have to see inflation fall over several months before we can really get a sense of whether a Fed pivot is on the way.” According to an analysis of 13F reports by Goldman, last quarter hedge funds ramped up bets on megacap US tech stocks and whittled down overall holdings to concentrate on favored names, with conviction growing to levels last seen before the pandemic. The funds boosted tech and consumer discretionary holdings, while cutting energy and materials wagers, a trade which once again backfired spectacularly as tech crashed and energy soared. Since then however, the story has changed as Nasdaq 100 valuations rose well above the average for the past decade as the index soared from its June lows. The gauge remains under pressure, however, as higher rates weigh on the present value of future profits, hurting growth sectors like tech. In Europe, the Stoxx 600 index edged lower, heading for a fourth straight day of declines, with retailers under pressure after US peer Nordstrom trimmed its full-year outlook. Luxury-goods giant Richemont surged after selling a stake in its online business. European natural gas prices increased, with outages at plants in the US and Norway adding to supply curbs from Russia. Here are some of the biggest European movers today: Richemont shares rise as much as 3.3% after the luxury retailer announced the sale of its YNAP stake to US online retailer Farfetch, which was up 9.4% in US premarket trading Tenaris gains as much as 3.3%, extending Tuesday’s 8.8% jump, with Banca Akros upgrading the company to buy from accumulate noting its outlook remains positive ASR Nederland shares jump as much as 4.1% after the insurer reported interim results. KBC says the company delivered solid results despite headwinds from Non-Life segment Lookers shares gain as much as 8%. The motor vehicle dealer’s pretax profit beat last year’s “exceptional performance” and was “comfortably ahead” of expectations, Peel Hunt (buy) says CTS Eventim shares gain as much as 4% after the ticket seller’s 2Q results, with Jefferies pointing to a significant beat driven by ticketing Norwegian fish farming stocks drop, led by Mowi, Leroy and Austevoll after the trio reported their respective quarterly results, with DNB expecting cuts to Mowi consensus estimates Vimian shares sink as much as 14% to a record low after the animal health company reported 2Q results that saw only slight organic growth and a lower Ebita margin Sydbank shares slide as much as 6.1% after the Danish lender’s latest results included a miss on net income, while saying its 2022 net profit will likely be in upper end of the previously reported range Agfa-Gevaert shares decline as much as 11%, the most intraday since May 2021, despite a 2Q revenue beat as ING questioned the quality of the earnings Earlier in the session, Asian stocks headed for a fifth day of declines, weighed down by losses in China, with investors trimming risky bets as they await clarity on the Federal Reserve’s policy path at the Jackson Hole meeting. The MSCI Asia Pacific Index dropped as much as 0.7%, set for its longest losing streak in two months. The consumer discretionary sector was the biggest drag. China’s CSI 300 Index slumped 1.9%, the most among regional benchmarks, with electric-vehicle linked shares leading the declines after CATL reported weaker battery margins. Fed Minneapolis President Neel Kashkari said US inflation is very high and the central bank must act to bring it under control, in the latest run of hawkish remarks by US officials. That, coupled with weak US business activity data overnight, renewed concerns about global growth as central bankers gather for an annual symposium in Jackson Hole.  “We could see more short-term pressure on equities, starting in the US. This could also spill over to Asia given that corporate earnings in APAC are relatively sensitive to the region’s export performance,” said Tai Hui, APAC chief global market strategist at JP Morgan Asset Management. “We expect market sentiment to remain cautious as we approach the Jackson Hole meeting.”   In addition to a flurry of earnings this week from the region’s heavyweights, investors are also closely watching the impact of a drought in China that has led to shutdown of factories.  Japanese equities ended lower, erasing earlier gains, as investors assess the potential for further tightening by the Federal Reserve to fight inflation.  The Topix Index fell 0.2% to 1,967.18 as of market close Tokyo time, while the Nikkei declined 0.5% to 28,313.47. Sony Group Corp. contributed the most to the Topix Index decline, decreasing 1.4%. Out of 2,170 stocks in the index, 1,165 rose and 861 fell, while 144 were unchanged. “The key point to watch on the Jackson Hole is whether Powell will be hawkish, or a little less hawkish,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank. India’s benchmark equities index closed slightly higher, after seesawing between gains and losses several times throughout the day, helped by an advance in lenders.  The S&P BSE Sensex rose 0.1% to close at 59,085.43 in Mumbai, after falling as much as 0.5% earlier in the session. The NSE Nifty 50 Index added 0.2%.   ICICI Bank Ltd. provided the biggest boost to the Sensex, which saw 16 of the 30 member stocks ending higher. Fourteen of 19 sectoral sub-indexes compiled by BSE Ltd. rose, led by a gauge of realty companies.  Investors will focus on Fed Chair Jerome Powell’s speech at the Jackson Hole symposium on Friday for a sense of how aggressive the US central bank will be in the face of weak economic trends.  “Market strategists blamed the three-day losing streak in U.S. stocks on a number of factors, including nerves ahead of Federal Reserve Chairman Jerome Powell’s speech on Friday, combined with a drumbeat of downbeat economic news, along with anxieties about rising Treasury yields and a stronger U.S. dollar,” Deepak Jasani, head of retail research at HDFC Securities Ltd., wrote in a note.  In FX, the Bloomberg Dollar Spot Index was little changed and the greenback advanced against most of its Group-of-10 peers. Treasuries advanced, outperforming European peers, amid some paring of Fed rate hike bets. The euro traded in a narrow range around $0.950. Germany’s 10-year yield climbed to the highest since July 1 as money markets added to ECB rate-hike wagers before paring most of that rise. The pound slipped against the dollar and was steady versus the euro. Gilts underperformed with UK 2-, 5 and 30-year yields extending their advance to the highest since 2008, 2011 and 2014 respectively, before paring; the 10-year yield rose to the highest in two months. In rates, Treasuries were mixed with 20-year sector outperforming, and broader market faring better than UK and euro-zone bond markets, where a full point of ECB hikes by October is priced in for the first time with energy seen adding to inflationary pressures. The 10Y TSY yield rose modestly to 3.05% after trading north of 3.00% all session. The New 2-year is ~1bp richer on the day with UK 2-year cheaper by ~15bp, German 2-year by ~6bp; 20-year Treasuries are richer by ~1bp outright and ~2bp on the 10s20s30s fly. The US Treasury auction cycle resumes with $45b 5-year at 1pm ET, concludes with $37b seven-year Thursday; Tuesday’s 2-year sale tailed by 1.4bp. In commodities, WTI crude drifted above $94 a barrel, bolstered by shrinking US stockpiles and possible OPEC+ output cuts. Bitcoin is incrementally softer but resides towards the mid-point of relatively contained parameters and remains comfortably above the USD 21k mark. Looking at the day ahead now, and data releases from the US include the preliminary durable goods orders and core capital goods orders for July, along with pending home sales for that month too. Otherwise, earnings releases include Nvidia, Salesforce and Royal Bank of Canada. Market Snapshot S&P 500 futures little changed at 4,133.25 STOXX Europe 600 little changed at 431.26 MXAP down 0.5% to 157.88 MXAPJ down 0.6% to 512.64 Nikkei down 0.5% to 28,313.47 Topix down 0.2% to 1,967.18 Hang Seng Index down 1.2% to 19,268.74 Shanghai Composite down 1.9% to 3,215.20 Sensex little changed at 58,991.22 Australia S&P/ASX 200 up 0.5% to 6,998.12 Kospi up 0.5% to 2,447.45 German 10Y yield little changed at 1.32% Euro down 0.2% to $0.9949 Gold spot up 0.1% to $1,750.10 U.S. Dollar Index little changed at 108.65 Top Overnight News from Bloomberg Federal Reserve Bank of Minneapolis President Neel Kashkari said US inflation is very high and the central bank must act to bring it back under control The head of macro and FICC research at Sweden’s biggest lender, SEB AB, has urged the Riksbank to stop selling off its own currency because it risks hurting the economy The latest round of euro weakness has resulted in a series of bearish options structures for hedge funds and macro accounts. First stop for the common currency could be the $0.98 handle The world’s largest pension fund said its equity investments based on environmental, social and governance criteria have outperformed as global stocks slump on concerns over inflation and monetary tightening Oil rose for a second day as an industry report signaled another drawdown in US crude inventories, adding to a tightening supply outlook after Saudi Arabia flagged possible cuts to production The UK imported no fuel from Russia for the first time on record in June as the government achieved its ambition to phase out all purchases of natural gas and oil in the wake of the invasion of Ukraine A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks were mixed and only partially shrugged off the lacklustre lead from global counterparts. ASX 200 reclaimed the 7,000 level and was led by the tech and commodity-related sectors although gains were capped amid another busy day of earnings releases. Nikkei 225 failed to sustain opening advances following reports that Japan is considering lowering the COVID employment subsidy. Hang Seng and Shanghai Comp declined with property names pressured by several bearish factors including weak developer earnings and a default warning by Guangzhou R&F Properties, while China is also reportedly probing real estate executives for possible law violations. Top Asian News China Securities Times noted that moderate CNY depreciation is positive for export competitiveness and that the widening US-China interest rate spread has a limited impact on CNY. Hong Kong is considering a storm level 8 from 18:00 local time 11:00BST/06:00EDT which could result in a market closure on Thursday, according to Bloomberg. Japanese PM Kishida announced to relax border rules on COVID and will waive tests for vaccinated passenger arrivals from September 7th, but added there was no decision yet on raising the number of daily arrivals, according to Reuters. Cautious price action in European hours with fresh drivers limited and the docket sparse ahead of Jackson Hole commencing on Thursday (Powell Friday), Euro Stoxx 50 -0.1% Stateside, futures are in-fitting both directionally and in terms of magnitude, ES -0.1%. In Europe, the FTSE 100 is the marginal laggard with metals (ex-aluminium) under broad pressure as the USD gains momentum. Top European News Scottish Power CEO proposed to UK Business Secretary Kwarteng capping household energy bills at around GBP 2000/year which would need funding of over GBP 100bln over two years, according to FT citing sources. ECB's Rehn says the investigation phase for the digital EUR is expected to conclude in October 2023, will then determine whether to embark on actually building a digital EUR. Ukraine Latest: US to Mark Kyiv’s Independence With New Arms BNP Hires Zink Secher as Head of ESG Ratings Advisory for EMEA Cineworld Short Seller Argonaut Says Shareholders to Get Nothing Euro Traders Bet on Move Below $0.98 as Bold Wagers Also in Play FX DXY attempted to claw back some of Tuesday’s losses overnight but lost momentum at a current session peak of 108.81. EUR is subdued as the bearish bias persists, GBP/USD is under similar mild pressure around (and marginally below) 1.1800. Non US-dollars are all softer against the USD whilst havens JPY and CHF outperform. Fixed Income Initial pronounced EGB pressure briefly abated and brought benchmarks into positive territory; though, this failed to cement itself. Gilts are leading the downside though are circa. 20 ticks off worst levels, complex cognisant of the upcoming Ofgem announcement and inflation/rate implications. USTs are bucking the trend once more and are incrementally positive with 5yr issuance due and the curve incrementally steeper. Commodities WTI and Brent October futures have been grinding higher since the European entrance following an APAC session of consolidation. Spot gold has been drifting higher after mounting the USD 1,750/oz mark. Base metals are mixed with 3M LME copper lower but still north of USD 8,000/t, whilst aluminium outperforms. US Private Inventory report (bbls): Crude -5.6mln (exp. -0.9mln), Cushing +0.7mln, Gasoline +0.3mln (exp. -1.5mln), Distillates +1.1mln (exp. +0.6mln). Canada and Germany signed a hydrogen alliance deal to accelerate exports of Canadian hydrogen to Germany by 2025, according to Reuters. Russia's Sakhalin has scrapped a gas shipment to a buyer due to a payment issue, via Bloomberg. Major oil traders and some producers have ceased direct sales of crude to India's Nayara energy amid concerns regarding Russian sanctions, according to Reuters sources. American Automobile Association says that US diesel pump prices have climbed for the first time since mid-June. Indonesia extends the palm oil export levy waiver until October 31st, according to the Trade Minister. US Event Calendar 07:00: Aug. MBA Mortgage Applications, prior -2.3% 08:30: July Durable Goods Orders, est. 0.8%, prior 2.0%; Durables-Less Transportation, est. 0.2%, prior 0.4% July Cap Goods Orders Nondef Ex Air, est. 0.3%, prior 0.7% July Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 0.7% 10:00: July Pending Home Sales (MoM), est. -2.6%, prior -8.6%; YoY, est. -21.4%, prior -19.8% DB's Tim Wessel concludes the overnight wrap Despite the best efforts of data releases, US rates markets just do not want to fundamentally re-price the outlook until Chair Powell’s remarks this Friday at Jackson Hole (and, to an extent, the next round of employment and inflation data before the September FOMC). Our US economists have published a preview for his remarks (link here), with the one-line takeaway being they are looking for the Chair to fill in reaction function details. These being my last hours on the clock before the Chair’s remarks (as we here at EMR HQ navigate the summer holiday minefield that my inbox stuffed with automatic out-of-office replies suggest is ubiquitous across the financial sector) I can’t help but leave you, dear reader, with my final thoughts. The retracement of every rally following downside data surprises, along with the build up in short policy futures positions, suggests that the market is looking for a very hawkish tone from the Chair. That a priori expectations are for such hawkish messaging, the bar to clear for rates to selloff further is that much higher. It does not seem like the Chair can deliver the sort of shock necessary to drive a material re-pricing of policy, especially with inflation and employment data still due before the September FOMC, but time will tell. The case that a hawkish shock is to come is that the Chair most frequently has to speak publicly on behalf of the Committee, and this is his opportunity to slant his remarks towards his own personal bias. The Chair may well personally weigh the balance of risks toward worse inflation outcomes, but let’s see if his lean is strong enough to satiate the market’s appetite. The latest example of rates markets retracing back to their starting point came yesterday, when PMIs, the Richmond Fed Manufacturing Index, and New Home Sales all missed to the downside in quick succession. In particular, the Services PMI (44.1 v 49.8 expected) fell to its lowest on record outside of the pandemic, with the survey showing weakness across new sales, new orders, and employment elements, along with abating price pressures. Nevertheless, respondents were optimistic about the path ahead, not making it any easier for market participants to disentangle signal from noise. Rounding out the other morning data, Manufacturing PMI fared better than Services, printing at 51.3 vs. 51.8 expected, still leaving the Composite at 45.0, its worst reading since February 2021. The Richmond Fed Manufacturing index was -8 vs. -2 expectations, while there were 511k new home sales in July vs. 575k expectations, another print on the downbeat for US housing markets. Following the lackluster data, 2yr Treasury yields fell -11.8bps peak-to-trough, only, as intimated, to stage a retracement to end the day a mere -1.0bp lower. Similarly, 10yr Treasury yields were -9.3bps lower, peak-to-trough, but retraced with more vigor, nearly returning to intraday highs, ultimately closing +3.2bps higher at 3.05%. The S&P 500 followed a similar cadence, staging an initial bad-news-is-good-news rally following the data, increasing +0.53%, reverting to a narrow range just in the red the rest of the day, finishing down -0.22%. The NASDAQ danced to the same tune, but was even more reluctant to re-evaluate the outlook, closing perfectly flat, day-over-day. Futures are currently lower as we go to press, with the S&P 500 (-0.37%), NASDAQ 100 (-0.46%) and DAX (-0.65%) all in the red. Most European assets were similarly subdued, with 10yr bunds (+1.2bps), OATs (+2.0bps), and BTPs (+1.8bps) trading near the prior day’s levels. The bund curve also twist steepened, with 2yr yields falling -3.8bps. Risk fared a touch worse; the STOXX 600 fell -0.42% and the DAX was -0.27% lower. Eurozone PMIs were a bit stronger than US counterparts, across Manufacturing (49.7 vs. 49.0), Services (50.2 vs. 50.5), and the Composite (49.2 vs. 49.0). Meanwhile, consumer confidence bounced back from record lows set in July, printing at -24.9 (vs. -28.0). Sentiment in Europe was boosted by a slight retrenchment in energy prices; German power fell -1.92%, the first daily decline in more than two weeks, while natural gas futures were -2.78% lower. The euro was able to temporarily break through parity versus the US dollar after the weak US data, but finished the day below the mark at $0.997. Gilt yields increased more than other core sovereign bonds, with 2yr yields +9.8bps higher and 10yr benchmarks +6.1bps higher. UK Manufacturing PMI registered a poor 46.0 (vs. 51.0), though Services (52.5 vs. 51.6) and the Composite (50.9 vs. 51.0) fared better. However, the fear that UK inflation will continue to present a large problem is forcing gilts to underperform. On top of that, the threat of looming labour strife only intensifies the risks ahead. The FTSE 100 underperformed, falling -0.61%. Following headlines from the Saudi energy minister yesterday, Brent crude oil rallied +3.39% closing above $100/bbl for the first time since late July. While progress on the Iranian nuclear deal still seemed positive, up to nine OPEC+ members confirmed they would support production cuts if Iranian supply came back online or if the global economy entered a recession, fueling the rally. Overnight, Asian equity markets are again slipping into the red this morning amid growth fears. The Hang Seng (-1.49%) is leading losses with the Shanghai Composite (-1.38%), the CSI (-0.63%) and the Nikkei (-0.40%) all trading in negative territory. Elsewhere, the Kospi (+0.02%) is oscillating between gains and losses after opening higher. Moving on to FX news, the Chinese Yuan (-0.42%) fell to its weakest level in almost two years against the US dollar, trading at 6.86 per dollar, as the PBOC looks to ease policy to support the economy while property sector troubles remain top of mind. Minneapolis Fed President Kashkari in an overnight speech reiterated the need for more aggressive rate hikes to control inflation and sees another two full percentage points by the end of next year. Kashkari downplayed the two-sided risk of Fed tightening that has permeated recent discourse, noting that if inflation were at 4%, he would be willing to consider a more gradual path to avoid the risk of overdoing tightening. Alas, it is not. To the day ahead now, and data releases from the US include the preliminary durable goods orders and core capital goods orders for July, along with pending home sales for that month too. Otherwise, earnings releases include Nvidia, Salesforce and Royal Bank of Canada. Tyler Durden Wed, 08/24/2022 - 07:33.....»»

Category: blogSource: zerohedgeAug 24th, 2022

Futures Jump As Traders Scale Back Fed Hike Expectations As Economy Slumps

Futures Jump As Traders Scale Back Fed Hike Expectations As Economy Slumps US equity futures and global markets stormed higher, as the dollar extended its slide from a record high as investors scaled back bets on how aggressively the Federal Reserve will tighten policy in response to growing recession fears which Bloomberg paradoxocially interpreted as "easing recession fears." In other words, rising risk of a recession lowers the risk of a Fed-induced recession. Lovely. In any case, Nasdaq 100 futures rose 1.2% and contracts on the S&P 500 added 1%, with spoos trading back over 3,900 and more than 5% above June’s closing low following Friday’s strong rally on renewed hopes that the Fed will end its rate hikes and soon start cutting rates as well as end QT. West Texas Intermediate crude oil also stormed higher, undoing all recent losses and traded near $100 a barrel while the Bloomberg Dollar Spot Index slipped 0.5%, extending a retreat from a record high. The benchmark Treasury yield rose back toward 3%. As Q2 earnings season rolls out, Goldman Sachs shares surged as much as 4% in premarket trading after the  bank reported second-quarter results that were better than expected in nearly every area. Bank of America Corp.’s results were more mixed. Here are some other notable premarket movers: Lilium (LILM US) shares rise as much as 10% in US premarket trading on Monday after Bristow (VTOL US) secured the option to purchase 50 Lilium Jets in addition to providing maintenance services for the aircraft’s launch network in Florida, and other future U.S and European markets. ITHAX Acquisition (ITHX US) shares rise 32% in US premarket trading, extending gains after its holders approved the previously proposed business combination with Mondee at the EGM held on July 15, 2022. Cryptocurrency-exposed stocks are gaining in premarket trading after Bitcoin rose as much as 7.3% to trade above $22,000 for the first time in more than a month. Marathon Digital (MARA US) +8.8%, MicroStrategy (MSTR US) +5.1%, Coinbase (COIN US) +6.2%, Riot Blockchain (RIOT US) +7.3%, Ebang (EBON US) +2.3% Watch JPMorgan (JPM US) shares as Berenberg raises recommendation to hold, saying the investment bank’s shares are trading at a 20% discount to their long-run average and given the temporary nature of headwinds, downside risks to the stock “are now more limited.” Policy makers pushed back against even bigger hikes in interest rates and fresh data showed a greater decline in US consumers’ long-term inflation expectations. That boosted odds for a 75 basis points July Fed rate hike, squashing talk of a 100 basis-point move after last week flirting with the prospect of a 100 basis-points move after data showed no let-up in stubbornly high price pressures. Yet the bullish market reaction prompted some such as Goldman to ask if the worst is now behind us. Still, the outlook remains troubling for many investors. Gains in stock markets may prove to be short-lived as inflation pressures remain high and a recession seems increasingly likely, according to strategists at Morgan Stanley and Goldman Sachs Group Inc. "Risk-reward at these levels has certainly improved but because we have not yet fully priced in a recession, it’s hard to say that the markets are screaming cheap," said Anastasia Amoroso, the chief investment strategist at iCapital. In Europe, stocks surged to the highest level in more than a month, with the Stoxx 50 jumping 1.3%, and with FTSE MIB outperforming peers, adding 1.4%, while IBEX lags, adding 0.6%. Miners, energy and banks are the strongest-performing Stoxx 600 sectors. Energy and basic resources sectors lead gains in the Stoxx 600 as oil rises after Saudi Arabia refrained from pledges to increase crude supplies, while metals rebound amid reports of China’s steps to help developers. Shell rose as much as 3.8%, TotalEnergies +2.7%, BP +3.7%, Rio Tinto +4.3%, Antofagasta +5.1%, KGHM +6.4%. Here are some of the other notable European movers today: GTT jumps as much as 7.5% as Societe Generale raises its price target on the LNG containment systems firm and reiterates a buy rating, as it sees the firm on the brink of its “strongest and longest period of growth” ever. Solvay rises as much as 5.3% after reporting preliminary results. Citi said the chemicals company reported a solid beat, driven by both volumes and prices contribution from all three segments. Luxury stocks including Cartier owner Richemont and UK trench-coat maker Burberry rebound after declines on Friday, with Deutsche Bank noting that there’s no underlying slowdown in consumer demand for luxury. Richemont shares rise as much as 5%, Burberry +3.8%, LVMH +1.7% BASF gains as much as 4.2% as Bank of America double upgrades the stock to buy from underperform, arguing that the market is overlooking the partial hedge of its oil & gas assets in Wintershall. Nel jumps as much as 16% after the electrolyzer firm announced a 200MW alkaline electrolyzer equipment order. Citi says the order is likely to be taken well by the market as it supports Nel’s medium-term growth outlook and is a positive sign for the trajectory of industry demand. Direct Line falls as much as 15% following profit guidance that was “even worse” than feared amid cost inflation, according to Jefferies, which had cut the stock to hold from buy prior to the statement Monday. Verbund declines as much as 7.8% after Austrian government officials suggested they’re considering a partial cap on household power bills. Asian stocks climbed as investors dial back expectations of aggressive tightening by the Federal Reserve while weighing China’s policy support for the ailing property sector. The MSCI Asia Pacific Index rose as much as 1.4% Monday, poised for the first gain in three days, led by financial and technology shares. Hong Kong and South Korean equities were among the top gainers in the region, while the Japanese market was closed for a holiday. Chinese shares gained after central bank Governor Yi Gang said the monetary authority will step up efforts to provide stronger economic support amid the pandemic and external headwinds. Regulators also urged banks to support developers to help stabilize the real estate market, according to another report. Asian markets took a breather as comments from two Fed officials, as well as a drop in US consumers’ long-term inflation expectations, eased fears about a super-sized interest rate hike this month. Still, ongoing Covid outbreaks in China and woes in the nation’s property sector are clouding the region’s outlook. The Asian stock benchmark is hovering near a two-year low. The Chinese central bank “doesn’t want the economy to overheat in the short term” but more policy initiatives are needed, Vikas Pershad, a fund manager at M&G Investments, said in a Bloomberg TV interview. “The slowdown in the property market is not just a small subset of mortgage payments being held back. It’s the ripple effects that go throughout the economy. And that carries through many different sectors.” Australia's S&P/ASX 200 index rose 1.2% to close at 6,687.10, boosted by gains across miners, banks and energy shares.  A group of materials stocks rebounded as iron ore shook off losses. Whitehaven’s earnings outlook also drove optimism against the backdrop of a tightening market.  In New Zealand, the S&P/NZX 50 index rose 0.4% to 11,163.63. In FX, the Bloomberg Dollar Spot Index fell as much as 0.5%, underperforming other Group-of-10 peers; JPY and NZD are the weakest performers in G-10 FX, while GBP and SEK outperform. MXN (+0.9%) and LB (+0.8%) lead gains in EMFX. The British pound led gains.The euro rose to the highest level in a week against the dollar. The weekly fear-greed indicator hit the most bearish levels since the Greek crisis in early 2015 on Friday. The New Zealand dollar rose as much as 0.6% to $0.6201 before paring the move, after inflation accelerated more than expected in the second quarter to a fresh 32-year high, fueling bets on further aggressive tightening by the central bank, In rates, Treasuries fell across the curve along with German bonds. US yields were cheaper by 2.5bp to 4bp across a slightly steeper curve with 2s10s, 5s30s spreads wider by 1bp and 0.5bp on the day; 10-year yields around 2.96%, cheaper by 4bp on the day while bunds underperform by additional 4bp. Italian benchmark 10-year yields surged as much as 12 basis points to 3.39%, with little sign of reconciliation among Italy’s governing coalition over the weekend. The spread between Italian and German 10-year yields rose to 223 basis points, the widest in a month, before retracing some of the move. Peripheral spreads are mixed to Germany; Italy tightens, Spain widens and Portugal widens. Commodities were broadly stronger after Joe Biden’s trip to the Middle East ended being a total dud and without a firm commitment from Saudi Arabia to boost crude supplies. Wheat climbed after a five-day slump and copper rallied. Crude futures advanced. as WTI drifts 1.9% higher to trade near $99.49. Brent rises 2.2% near $103.34. Most base metals trade in the green; LME nickel rises 3.3%, outperforming peers. Spot gold rises roughly $13 to trade near $1,721/oz. Spot silver gains 1.2% near $19. US nat gas futures extended gains above the $7 level as scorching temperatures across the country boost air-conditioning demand. A heat wave in the UK and France pushed up European natural gas prices, exacerbating the region’s worst energy crunch in decades. Separately, traders are also closely watching whether the Nord Stream pipeline from Russia will fully return to service later this week, when it ends scheduled maintenance. Moscow has already curbed supplies to the continent amid tensions related to its invasion of Ukraine: “The possibility that Russia stops, or severely reduces, their gas exports to Europe should keep markets on edge in the near-term,” Mizuho International Plc strategists Peter McCallum and Evelyne Gomez-Liechti wrote in a note to clients. Bitcoin is bid and lifting above the $22k mark after rising above the $20K support that it has been pivoting, generally speaking, recently. It's a quiet start to an otherwise very busy week (with both the ECB and BOJ on deck), and we only get the NAHB Housing Market Index and the May TIC data later today. We also conclude bank earnings with BofA and Goldman reporting results premarket. Market Snapshot S&P 500 futures up 1.1% to 3,907.00 STOXX Europe 600 up 1.4% to 419.76 MXAP up 1.4% to 156.28 MXAPJ up 1.8% to 516.33 Nikkei up 0.5% to 26,788.47 Topix little changed at 1,892.50 Hang Seng Index up 2.7% to 20,846.18 Shanghai Composite up 1.6% to 3,278.10 Sensex up 1.1% to 54,359.13 Australia S&P/ASX 200 up 1.2% to 6,687.14 Kospi up 1.9% to 2,375.25 German 10Y yield little changed at 1.17% Euro up 0.5% to $1.0134 Gold spot up 0.7% to $1,719.39 US Dollar Index down 0.52% to 107.50 Top Overnight News from Bloomberg After drawing foreign capital into China’s markets for years, President Xi Jinping is now facing the risk of a nasty period of financial de-globalization. Investors point to one main reason why: Xi’s own policies China may allow homeowners to temporarily halt mortgage payments on stalled property projects without incurring penalties, people familiar with the matter said, as authorities race to prevent a crisis of confidence in the housing market from upending the world’s second-largest economy. Prime Minister Mario Draghi is under mounting pressure to reverse his pledge to resign as soon as this week and avoid throwing Italy into chaos as economic warning signs are building Russian Defense Minister Sergei Shoigu ordered part of his forces to focus on destroying Ukraine’s long-range missile and artillery systems during a visit to troops in occupied territory A more detailed look at global markets courtesy of Newsquawk APAC stocks gained with risk appetite spurred after last Friday's firm gains on Wall St. and renewed China support pledges helped markets shrug off China's COVID woes. ASX 200 was underpinned amid M&A activity and with Australia reinstating quarantined-support payments. Nikkei 225 was closed as Japan observed the Marine Day holiday. Hang Seng and Shanghai Comp. outperformed regional counterparts after PBoC Governor Yi pledged to increase the implementation of prudent monetary policy to provide stronger support for the real economy and with the property sector underpinned after the CBIRC asked lenders to provide credit to eligible developers so they can complete unfinished residential properties. Top Asian News China reported 580 local cases on Saturday which was the highest since May 23rd. It was also reported that Shanghai said that the situation in the city remained severe. It was also reported that Shanghai is planning to conduct district-wide testing in 9 COVID-impacted districts and other smaller scope areas from Wednesday-Friday, while China's Tianjin is also planning massive COVID tests, according to Bloomberg and Reuters. China is considering a mortgage grace period for home projects that have stalled, according to Bloomberg sources. Macau will extend its lockdown of businesses and casino closures to July 22nd, according to Reuters; subsequently, a health officials said some social activites could resume in the next week if cases drop. Beijing government official says no cases have been found so far in COVID tests of nearby neighborhoods, according to a media briefing. Chinese cyberspace regulator is to launch a two-month clean-up campaign which will focus on minors use of livestreaming, games and e-commerce platforms, according to State meida. US State Department approved a possible USD 108mln military sale to Taiwan, according to Reuters. Japanese daily COVID infection cases surpassed 110k on Saturday which was a record high, according to Jiji news agency. Japanese Finance Minister Suzuki reiterated sharp volatility is seen in the FX market and that they must watch moves with a strong sense of urgency, while he also noted that G20 affirmed their agreement on FX and that many countries including Japan, strongly condemned Russia’s invasion of Ukraine, according to Reuters. South Korean Finance Minister Choo said they are to exempt taxes on income from Korean treasury bonds to attract foreign investment, according to Reuters. European bourses are firmer across the board in a continuation of and extension on the overnight risk tone, Euro Stoxx 50 +1.4%. Sectors are firmer across the board with the upside spearheaded by Basic Resources, Energy, and Banks – due to price action in underlying commodity prices, alongside yields. US futures are similarly bid, as we await further earnings with key names including Goldman Sachs on the docket. Delta (DAL) to buy 100 737 Max 10 Boeing (BA) craft, option for 30 additional craft. US chip firms are said to be mulling whether to oppose the CHIPS Act as it may disproportionately benefit Intel (INTC), according to Reuters sources   Top European News UK PM Johnson’s allies are stepping up their attacks against former Chancellor Sunak and accused him of going soft on Northern Ireland’s post-Brexit trade regime, according to FT. UK Foreign Secretary Truss signalled she would tighten ministerial scrutiny of the BoE if she becomes the next PM and accused the Bank of failing to tackle inflation, according to FT. A poll by JL Partners of more than 4,400 people found that 48% that backed the Tories in 2019 considered former Chancellor Sunak would be a good PM, while 39% thought the same of Foreign Secretary Truss and 33% thought the same of Trade Secretary Mordaunt, according to The Telegraph. ConservativeHome survey suggested Trade Secretary Mordaunt would lose in a head-to-head against former Chancellor Sunak (41% vs 43%) and against Foreign Secretary Truss (41% vs 48%), according to The Telegraph. UK Foreign Secretary Truss confirms she will not be attending Tuesday's (July 19th) Sky News leadership debate, via Huffington Post's Schofield; additionally, reports that former-Chancellor Sunak is pulling out of the debate. Italy’s League and Forza Italia parties said they can no longer govern with the 5-Star Movement which brings the government closer to collapsing ahead of a potential confidence vote on Wednesday, according to Politico. European Investment Bank said it will reduce road and infrastructure funding in line with its climate objectives, according to FT. Central Banks Fed officials signalled they are likely to increase rates by 75bps at the July meeting and noted that although policymakers left the door open for a 100bps increase, some have simultaneously poured cold water on the idea in recent interviews and comments, according to WSJ. RBNZ announced a new standing repurchase facility which will permit eligible counterparties to lend NZD through the standing repurchase facility from July 20th and will be remunerated at the OCR -15bps, while the RBNZ will deliver to counterparty nominal New Zealand government bonds as collateral in exchange for depositing NZD, according to Reuters. PBoC Governor Yi said China’s economy faces downward pressure due to COVID and external shocks, while he added that the central bank will increase the implementation of prudent monetary policy to provide stronger support for the real economy, according to a PBoC statement cited by Reuters. HKMA said they need to regulate decentralised finance platforms sooner rather than later, while RBA Governor Lowe commented that it is likely better for retail digital currency tokens to be issued by regulated private sector companies than central banks, according to Reuters. SNB intends to increase rates by at least 50bp (from the current -0.25%) at the September gathering, in the scenaro of further inflation upside a 75bp move could occur, according to sources via Schweiz am Wochenende. BoE's Saunders says he will not announce today how he will vote at the August meeting; believes that the tightening cycle has "some way to go", the cost of not tightening promptly enough would be relatively high at present. Czech central bank’s Dedek said it is appropriate today to use FX intervention to prevent the crown from weakening and the aim is not to strengthen the currency, while he added that they are far from the point they would start to feel reserves are getting dangerously low, according to Lidove Noviny. FX Sterling takes advantage of Buck’s demise even before hawkish commentary from BoE’s Saunders, Cable closer to 1.2000 than 1.1850, DXY nearer 107.000 than 108.00. Aussie underpinned by rebound in iron ore ahead of RBA minutes, AUD/USD approaching 0.6850 from sub-0.6800 overnight low. Euro probes 1.0150 vs Greenback ahead of Thursday’s ECB meeting and expected 25 bp hike. Loonie supported by recovery in WTI and BoC Governor Macklem flagging Canadian CPI on 8% handle next week, USD/CAD below 1.3000. Kiwi capped after stronger than forecast NZ inflation data as RBNZ announces standing repo for loans 15 bp below OCR to start on July 20th, NZD/USD hovering under 0.6200 and AUD/NZD cross above 1.1050. Franc lags irrespective of reporting suggesting SNB to hike at least half point again in September as weekly Swiss sight deposits at domestic bank increase, USD/CHF pivots 0.9750. Lira lurches further in wake of Turkish budget balance turning from surplus to deficit, USD/TRY testing 17.5000 offers and semi-psychological resistance. Commodities WTI and Brent have been moving higher with the broader risk tone and after the Biden-Saudi meeting with attention, for the complex, looking to the next OPEC+ gathering. Saudi Arabia’s Crown Prince MBS said adopting unrealistic policies toward energy sources will lead to inflation and he called on Iran to cooperate with the region, according to Reuters. Saudi's Crown Prince also said that they have an immediate capacity to increase production to 12mln bpd and with investments, production can go to 13mln bpd after which the kingdom will not have any additional capacity to increase production. Saudi Foreign Minister said that they listen to their partners and friends across the world especially consumer countries but added that at the end of the day, OPEC+ follows the market situation and will supply energy as needed, according to Bloomberg. US senior envoy for energy security Hochstein said he expects gas prices to decline further towards USD 4/gallon and is confident there will be a few more steps in the coming weeks from OPEC in terms of oil supply, according to Reuters. Energy Intel’s Bakr stated that we are in a situation where capacity is limited which is why the UAE and Saudi Arabia want to remain cautious about how and when it is used. Top German energy regulator said natgas inventories are nearly 65% full but not enough to get through the winter without Russian gas, according to Bild am Sonntag. Libya’s Oil Minister said Libya has resumed oil exports, according to Al Jazeera. It was also reported that the NOC said its board will not cooperate with any illegal dismissal decisions made by an outgoing administration. South Africa’s largest fuel producer Sasol declared a force majeure on the supply of petroleum products due to delays in deliveries of crude to the Natref refinery, while the outage means all refineries in the country are shut, according to Bloomberg. Iran set August Iranian light crude price to Asia at Oman/Dubai + USD 8.90/bbl, according to Reuters sources. Spot gold is bid as the USD pulls-bacl but is yet to breach USD 1725/oz in relatively limited European newsflow. Base metals bid after strong overnight performance. US Event Calendar 10:00: July NAHB Housing Market Index, est. 65, prior 67 16:00: May Total Net TIC Flows, prior $1.3b DB's Jim Reid concludes the overnight wrap It could be a record week here in the UK with temperatures possibly hitting 40 degrees for the first time ever today or tomorrow! While the warm weather has been pleasant of late, I can't wait until Wednesday when it cools down a bit. The coolest I was this weekend was going to a cinema on Saturday night with aircon to see Top Gun Maverick. However that was an incredibly stressful film. I'm not really a fan of action movies but that was edge of the seat stuff and very well done. Looking forward to the third part of the trilogy in 2058. Back to 2022, and with the Fed now on their FOMC blackout period and a lighter US week for data (ex-housing), Q2 US earnings and all things European will be at the forefront of market attention this week with the highlight being the ECB’s likely first rate hike since 2011 on Thursday. Gas flows from Russia after maintenance on the Nord Stream pipeline ends the same day will also be a big focus with the EU expected to detail energy contingency plans the day before. We’ll also get a decision from the BoJ on Thursday too. Global preliminary July PMIs for the US, Japan and key European economies will come out on Friday. Going through some of these themes in more detail now. The ECB meeting on Thursday will likely deliver a +25bps hike, the first rate increase since 2011. Our European economists preview the upcoming meeting here. Their updated call retains the 2% terminal rate forecast but the hiking cycle is expected to be split. The first phase has hikes of +25bp, +50bp, +50bp and +25bp in July, September, October and December. By end-2022, the deposit rate will be 1%, helping to balance inflation and growth risks before the anticipated recession forces a pause. The second phase in H1 2024 is now expected to have four +25bp hikes and push rates into moderately above neutral territory. The ECB’s decision comes as Europe is grappling with significant concerns about the energy supply, a euro that has reached parity against the dollar for the first time since 2002, and inflation at an all-time high of 8.6%. If that’s not enough, it also comes alongside a recent widening in peripheral sovereign bond spreads and an Italian government possibly on the brink of collapse. We should know more on Wednesday when Draghi addresses lawmakers in Rome, however things are escalating quickly. The Five Star Movement (the second largest in the coalition) effectively abstained in a confidence motion in the Senate, triggering the current crisis. This weekend the party have met and don’t seem to be dialling down the rhetoric with leader Conte blaming Draghi for the impasse. Meanwhile the centre-right block are saying the coalition pact has been broken and that they won't now rule in a coalition with Five Star. Probabilities of a snap election are certainly going up. With this unfolding, the details of the anti-fragmentation tool will be highly sought after at the ECB meeting and our economics team reviews the key features of the new tool - size, target, conditionality and sterilisation method - in the same preview note mentioned above. The ECB will also release its Euro area bank lending survey tomorrow and the Survey of Professional Forecasters on Friday. Another event that will keep investors on edge that day is the end of the Nord Stream pipeline’s scheduled maintenance period. Fears that Russia will keep the taps closed have roiled markets in recent weeks and the EU is expected to detail contingency plans on Wednesday. Although the NS1 maintenance period ends on Thursday, it’s possible that there will be ambiguity on supply for a while. Whatever Russia’s plans for supply through the autumn and winter, we may not fully see it in the next few days and weeks. Part of that might be politics and part of it may be operational as the turbine repair may take a while to be fully integrated, or at least that could be the claim. So we may get a few clues from Friday but it is unlikely we’ll know all the answers. See my one-sided devil’s advocate view in Thursday's CoTD here on why it’s not in Putin’s interest to completely cut off the supply of gas. Also on Thursday, the next policy decision from the BoJ will be due. Our chief Japan economist previews the meeting here. While he expects no change in the current monetary stance and forward guidance on policy rates, the BoJ's Outlook Report is expected to show a downgrade in its growth forecast for FY2022 and an increase in its inflation forecast. The national CPI print will be due the next day and our economist expects core inflation (ex. fresh food) to climb to 2.2% YoY (+2.1% in May) and core-core inflation (ex. fresh food and energy) to 0.9% (+0.8% in May). Small fry in a western context but relatively strong for Japan. Back to the data and US housing market indicators will be in focus this week, after the June CPI report showed the fastest monthly gains since 1986 for primary rents and 1990 for owners’ equivalent rent. In terms of data, we have July’s NAHB Housing Market Index (today), followed by June housing starts, building permits (tomorrow) and existing home sales (Wednesday). In European data, the UK will be in focus with June CPI, RPI, PPI and May’s house price index due on Wednesday, preceded by labour market data tomorrow. Also released tomorrow will be July’s consumer confidence for the Eurozone, followed by a similar gauge and June retail sales for the UK on Friday. In terms of earnings, after key US banks started reporting last week, we will get more insight into the state of the economy and consumer spending from Goldman Sachs, Bank of America (today) and American Express (Friday). Amid a mixed-bag performance for commodities in recent weeks, results from Halliburton (tomorrow), Baker Hughes (Wednesday), Schlumberger and NextEra (Friday) will be in focus. Earnings of consumer-oriented companies will be highly anticipated as well, including Johnson & Johnson (tomorrow), United Airlines, Tesla (Wednesday) and American Airlines (Thursday). In tech, key reporting corporates will include IBM (today), Netflix (tomorrow), ASML (Wednesday), SAP (Thursday) and Twitter (Friday). Other corporate earnings reports will feature Lockheed Martin (tomorrow), AT&T, Blackstone (Thursday) and Verizon (Friday). Asian equity markets are higher at start of the week after gains on Wall Street on Friday. As I type, the Hang Seng (+2.45%) is leading the way followed by the Kospi (+1.80%), Shanghai Composite (+1.49%) and the CSI (+1.00%). Elsewhere, markets in Japan are closed today for the Marine Day Holiday. Outside of Asia, stock futures in the DMs are pointing to additional gains with contracts on the S&P 500 (+0.43%), NASDAQ 100 (+0.75%) and DAX (+0.37%) all climbing. Early morning data showed that New Zealand’s consumer price index (+7.3% y/y) climbed to a 32-year high in the June 2022 quarter (v/s +7.1% expected) and speeding up from a +6.9% gain in the first quarter, mainly due to rising prices for construction and rentals for housing. Looking back on another wild week in markets now. The highlight was inflation. The US CPI report came out on Wednesday, where headline yoy inflation bumped up to 9.1%, its highest since 1981. Indeed, each of the headline/core/MoM/YoY measures surpassed expectations. The following day showed producers were also feeling the heat, with final demand PPI measures beating expectations, with the crucial health care component portending an increase in upcoming PCE prints, the Fed’s preferred inflation measure. The prints drove speculation the Fed would deliver a super-charged 100bp hike at the July meeting, but Fed officials threw water on that pricing at the end of the week, signaling a preference for a second consecutive 75bp hike. Nevertheless, the yield curve moved to its most inverted of the cycle, ending the week at -21.3bps, as expected Fed tightening was brought forward, and the resulting landing was expected to get that much harder. All told, 2yr yields increased +1.5bps (-1.2bps Friday) and 10yr yields fell -16.5bps (-4.4bps Friday). While stocks experienced a bump on the easier policy expectations (75 not 100) from Fed speakers at the end of the week, the S&P 500 climbing +1.92% Friday, the index fell the other four days and ended the week -0.93% lower. Tech underperformed with the NASDAQ falling -1.57%, staging a +1.79% recovery of its own on Friday. US earnings season kicked off, with major US financials disappointing, as major money center banks signaled they would likely need to optimise their balance sheets to increase capital ratios over the near-term. A realisation that had JPMorgan temporarily suspending share buybacks. Along with their own inflationary worries, Europe is also facing down political and energy crises. The attempted resignation of Prime Minister Draghi, and subsequent rejection by President Mattarella, injected yet more turmoil into European asset pricing. 10yr BTPs widened 19.4bps versus bunds (+6.5bps Friday), to 212bps, their widest levels since the ECB has floated a new anti-fragmentation tool. Heading into this week’s ECB meeting, pricing currently is at +29.0bps, a smidge higher than the week prior, so some chance the ECB will kick off the hiking cycle with a 50bp hike. 10yr bunds were 21.2bps lower (-4.5bps Friday), giving swirling risk on the continent. Speaking of European natural gas, prices managed to fall -8.23% (-8.84% Friday) following news that Canada would deliver the necessary turbine to restore gas flows from Russia back to the continent, but prices traded in a more than 20% range over the week, showing the anxiety that still dominates the situation. Elsewhere, brent crude fell below $100/bbl intraweek for the first time since mid-April, ultimately falling -5.50% on the week (+2.08% Friday) to $101.16/bbl as global growth fears grip markets. Tyler Durden Mon, 07/18/2022 - 08:24.....»»

Category: personnelSource: nytJul 18th, 2022

Futures Grind Higher With All Eyes On Red-Hot CPI

Futures Grind Higher With All Eyes On Red-Hot CPI After yesterday's last hour stock market puke prompted by a fake CPI "leak" that showed inflation rising more than double digits in June which sent spoos just over 3,800, US index futures advanced ahead of a report that will show inflation hitting a fresh four-decade high according to Bloomberg consensus which expects headline inflation to print 8.8%, ensuring another 75bps rate hike. Contracts on the S&P 500 rose 0.3% by 7:15 a.m. ET after the underlying gauge declined over the past three days. Nasdaq 100 futures were up 0.4% after the tech-heavy index shed 3% this week, reversing most of last week's gains. The dollar dropped from a 2 year high, bitcoin rose but held below $20,000 and WTI crude oil stabilized at about $96 a barrel after a tumble. Among notable pre-market movers, Twitter rose 1% after suing Elon Musk over his abandoned $44 billion takeover bid, accusing the billionaire of having buyer’s remorse after his fortune declined. Meanwhile, Atara Biotherapeutics tumbled 36% after the biotech firm gave an update on its multiple sclerosis therapy with Cowen strategists saying that the interim analysis of the ATA188 Phase 2 study was “inconclusive.” Here are other notable premarket movers: Stitch Fix (SFIX US) jumps 9.3% in premarket trading after J William Gurley, a board member and general partner at venture capital firm Benchmark, bought $5.43 million of shares in the company. Gurley’s purchase comes as the online personal-styling platform’s stock has fallen 73% this year. Atara Biotherapeutics (ATRA US) shares drop 41% in US premarket trading, after the biotech company gave an update on its multiple sclerosis therapy, with Cowen saying that the interim analysis of the Phase 2 study was “inconclusive” and Roth flagging potential “additional risks.” Humanigen (HGEN US) shares plummet as much as 76% in US premarket trading, after the biotech firm said that its Covid-19 drug trial didn’t achieve statistical significance on the primary endpoint, with Cantor Fitzgerald cutting its rating on Humanigen to neutral from overweight. Keep an eye on Apple (AAPL US) shares as Citi lowers its estimates for the company given cooling consumer spending trends amid macro woes and continued supply chain bottlenecks. Hannon Armstrong (HASI US) stocks could be active as analysts defended the climate-change investment firm after its shares slumped 19% on Tuesday. The losses followed a report from short seller Carson Block’s Muddy Waters Capital that criticized its accounting practices. Watch Alphabet (GOOGL US) stocks as Cowen trims 2022 Google Search and YouTube ad estimates, following checks that suggested that Search is seeing healthy demand but the business is decelerating, largely in line with expectations. US inflation is projected to have continued to heat up in June, hitting a fresh pandemic peak. The consumer price index probably increased 8.8% from a year earlier, marking the largest jump since 1981, as discussed some banks expected a slightly softer print although others sees headline CPI rising as much as 9.0%. The consumer-price reading will be a major decisive factor for the Fed in its upcoming meeting as it decides how much further it should tighten policy to tame soaring inflation. Its hawkish policy already stoked fears the economy is heading for a recession this year. “This is widely expected to be a really strong print,” Lauren Goodwin, economist and portfolio strategist at New York Life Investments, said on Bloomberg Television. “Even if it is not, I don’t think that changes the Fed’s perspective in a couple of weeks. We won’t have enough evidence that inflation is convincingly turning over.” Meanwhile, the International Monetary Fund cut its growth projections for the US economy and warned that a broad-based surge in inflation poses “systemic risks” to both the country and the global economy. Traders are also on tenterhooks for the latest corporate earnings getting underway this week and monitoring for a brewing energy crisis in Europe if Russia cuts off gas supplies in the fallout from its invasion of Ukraine. After today's CPI, investor focus will turn to the start of the earnings season, which kicks off tomorrow with major Wall Street banks. Meanwhile in Europe, the region’s benchmark Stoxx 600 Index fell 0.5% while the Euro Stoxx 50 slumped as much as 1.2% before roughly halving losses, amid deteriorating economic outlook. Shares of insurance companies and automakers led the drop.. FTSE 100 and FTSE MIB lag on the recovery. Autos, insurance and travel are the worst-performing sectors. Here are the biggest movers: Saipem shares tumble as much as 45%, extending Tuesday’s 49% slump, after only 70% of its EU2 billion rights offering was taken up by investors, signaling low confidence in the engineering company’s turnaround plan. Svenska Cellulosa falls as much as 4.1% and DS Smith declines 2.7% as Exane BNP downgrades its ratings on both, saying it anticipates a robust 2Q for packaging, but a correction in pulp prices. Bayer drops as much as 3% after a US appeals court reinstated a lawsuit by a Roundup herbicide user who claims the company failed to warn him of cancer risks. Galp Energia falls as much as 2.8% following its second-quarter production update, with analysts saying volumes were softer than anticipated. Vontobel declines as much as 6%, and EFG falls as much as 5.2% after Citi cut both to sell and kept a buy rating on Julius Baer, saying that it still sees good value in Swiss banks and prefers larger players to independents. Evonik falls as much as 3.9% after Barclays cut its rating to equal-weight, saying that it sees opportunities in Brenntag and Lanxess among European chemicals stocks. Orion gains as much as 7.9% after the pharmaceutical company raised its FY outlook after announcing it plans to work with MSD on developing and commercializing ODM-208, a drug for prostate cancer. Outokumpu gains as much as 6.5% after the stainless steel producer sold the majority of its Long Products business, a transaction which Jefferies and Morgan Stanley describe as positive. Hugo Boss rises as much as 3.1% as Jefferies says the company appears to be outperforming its luxury peers, and that expectations of continued growth, “comfortable” guidance and a successful rebrand are starting to move the market. Verallia gains as much as 3.3% after being initiated with a buy rating at Jefferies, which says the glass-packaging maker’s discount to peers is “unjustified.” Earlier in the session, Asian stocks advanced, led by the region’s technology shares. The MSCI Asia Pacific Index gained as much as 0.6%, halting a two-day slide that dragged the benchmark to the lowest level in two years on Tuesday. Tech names such as TSMC, JD.com and Meituan contributed the most to the rally. Information technology was the region’s best-performing sector as the Hang Seng Tech Index bounced back after its recent drops sent the measure into a technical correction.  Taiwan’s benchmark jumped nearly 3% as the government vowed to support the stock market for the first time since the early days of the pandemic. Equities posted moderate gains in South Korea and New Zealand after their central banks hiked interest rates by 50 basis points as expected. Thailand’s stock market was closed for a holiday.  “Central bankers, policy makers all over the world are gonna have to pick their spots on how much inflation they’re prepared to tolerate versus how much a growth downdraft they wanna create,” Ben Powell, chief APAC investment strategist at BlackRock Investment Institute, said in a Bloomberg TV interview. In addition to today's data on consumer prices to assess what the Federal Reserve will do next, traders are also monitoring corporate earnings results in Asia for signs of any impact from China’s lockdowns during the second quarter. Japanese stocks advanced as investors await US data that may show inflation hit a fresh four-decade high. The Topix index rose 0.3% to 1,888.85 at the 3pm close in Tokyo, while the Nikkei 225 advanced 0.5% to 26,478.77. Recruit Holdings Co. contributed the most to the Topix’s gain, increasing 2.9%. Out of 2,170 shares in the index, 1,400 rose and 633 fell, while 137 were unchanged. “Japanese stocks will have a hard time finding a sense of direction before the US CPI announcement,” said Mitsushige Akino a senior executive officer at Ichiyoshi Asset Management.  In FX, the Bloomberg Dollar Spot Index held near its highest level in more than two years and the greenback traded mixed against its Group-of-10 peers as traders awaited US inflation data later on Wednesday for clues on the Federal Reserve’s rate trajectory. JPY and SEK are the weakest performers in G-10 FX, CHF and AUD outperform. EUR/USD stalls again, declining 6 pips shy of parity before recovering slightly.  Money markets raised bets on the pace of BOE rate hikes after the UK economy grew faster than the median estimate in May to ease fears of a recession. UK GDP rose by a surprisingly robust 0.5% amid a surge in visits to doctors and holiday bookings, after an 0.2% decline in April, a figure that was revised higher. New Zealand’s dollar initially fell and then erased losses after the central bank raised interest rates by 50 basis points as economists forecast. The yen underperformed all its Group-of-10 peers amid expectations US CPI will be strong enough to keep wagers high for a continued aggressive rate-hike cycle by the Federal Reserve. Super-long sectors led drop in government bond yields after purchases by the Bank of Japan. In rates, the 10-year Treasury yield was little changed at 2.97% after falling two basis points on Tuesday. Cash TSYs are comparatively quiet ahead of today’s CPI release. German and UK curves bear-flatten, underperforming Treasuries. Peripheral spreads widen to Germany with 10y BTP/Bund back near 200bps.  Gilts and Bunds fell, underperforming Treasuries. Money markets raised bets on the pace of BOE rate hikes after the UK economy grew faster than the median estimate in May to ease fears of a recession. In commodities, crude futures advance. WTI drifts 1.1% higher to trade near $96.90. Most base metals trade in the green; LME lead rises 1.1%, outperforming peers. LME zinc lags, dropping 0.2%. Spot gold is little changed at $1,726/oz To the day ahead now, and data releases include the US CPI release for June, as well as UK monthly GDP for May and Euro Area industrial production for May. Otherwise from central banks, the Bank of Canada will be making their latest policy decision, and the Federal Reserve will release their Beige Book. Market Snapshot S&P 500 futures up 0.2% to 3,830.50 STOXX Europe 600 down 0.8% to 413.52 MXAP up 0.3% to 155.40 MXAPJ up 0.5% to 511.37 Nikkei up 0.5% to 26,478.77 Topix up 0.3% to 1,888.85 Hang Seng Index down 0.2% to 20,797.95 Shanghai Composite little changed at 3,284.29 Sensex down 0.5% to 53,636.37 Australia S&P/ASX 200 up 0.2% to 6,621.56 Kospi up 0.5% to 2,328.61 German 10Y yield little changed at 1.16% Euro little changed at $1.0038 Brent Futures up 1.1% to $100.63/bbl Gold spot up 0.0% to $1,726.85 U.S. Dollar Index little changed at 108.15 Top Overnight News from Bloomberg The planned reopening of a key Russian gas pipeline next week may be a bigger deal for the euro than the first interest-rate hike in a decade by the ECB. Both are set for July 21. While the ECB’s plans to start lifting rates have been well flagged and hence priced in by markets, there’s more doubt over whether Russia will actually restore gas flows to Europe after maintenance on the Nord Stream 1 pipeline is completed China will take advantage of the market-based adjustment mechanism of deposit rates and guide financial institutions to transmit the effect of falling deposit rates to their borrowers as part of efforts to lower real lending rates, Zou Lan, head of PBOC’s monetary policy department, says at a briefing The ECB is watching the euro-dollar exchange rate as recent lows can further stoke already record inflation, according to Governing Council member Francois Villeroy De Galhau A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mostly positive as the region shrugged off the weak lead from Wall St but with upside capped amid central bank rate hikes and ahead of upcoming key risk events including Chinese trade and US CPI data. ASX 200 traded indecisively as strength in tech was offset by losses in energy after the recent slump in oil prices. Nikkei 225 was underpinned by a weaker currency but with gains limited after a ramp-up in Tokyo COVID cases. Hang Seng and Shanghai Comp. gained but with the mainland choppy ahead of Chinese trade data, while Hong Kong tech stocks were bolstered after China approved 67 domestic games in July. Top Asian News China's Customs said foreign trade is expected to achieve stable growth and that trade growth in May and June reversed the declining trend, but noted that foreign trade faces instabilities and uncertain factors, according to Reuters. "Lanzhou in NW China's Gansu Province has sealed off its 4 districts for 7 days to curb the latest COVID19 flare-up which started from last Friday and has led to 143 infections as of 10 am on Wed", according to Global Times. European bourses are pressured and towards the mid-point of the morning's parameters as we await US inflation data, Euro Stoxx 50 -0.6%.  Sectors, are predominently in the red with defensively-inclined names lagging though Energy outperforms and is green amid benchmark action. Stateside, futures are modestly firmer but have been choppy with pre-CPI positioning underway; ES +0.2%. Alphabet (GOOGL) said, on July 12th, that due to the hiring progress already attained, will slow the hiring process for remainder of year, via Reuters; like all Cos, not immune to economic headwinds. Kroger (KR) is launching an annual membership, provides unlimited free deliveries on orders over USD 35 and fuel discounts of up-to USD 1/gallon alongside other savings. Top European News UK lawmakers are to push ahead with legislation to tear up the post-Brexit trade deal today, according to FT. Network Rail offered workers at two unions pay hikes in a bid to avert further crippling strikes, according to FT. Italy's Salvini says the League Party is not willing to remain in the government if the 5-Star Party quits, adding that if 5-Star does not back a Thursday confidence vote, Italy should call snap elections. Subsequently, Democratic Party is unwilling to form new governments without the 5-Star Party, according to a party source cited by Reuters. Geopolitical China's military said it monitored and drove away a US destroyer which entered the South China Sea Paracel Islands, while it added that the actions of the US military seriously violated China's sovereignty and security. Furthermore, the US military stated that USS Benfold asserted navigational rights and freedoms near the Paracel Islands consistent with international law, according to Reuters. US Navy says the Ronald Reagan Carrier Strike Group is operating in the South China Sea. Venezuela detained at least three Americans earlier this year accused of attempting to enter the country illegally, according to sources cited by Reuters. Iran Foreign Ministry spokesperson says results of the negotiations with Saudi Arabia have been promising, sides have an interest to continue talks. Subsequently, Iran President Raisi says it will not retreat from its 'rightful' stance in talks to revive the 2015 JCPOA, state TV reported. Central Banks RBNZ hiked the OCR by 50bps to 2.50%, as expected, and said it remains appropriate to continue to tighten policy, while it will tighten conditions at a pace to maintain price stability and support maximum sustainable employment. RBNZ added the Committee is resolute in its commitment to ensuring price inflation returns to the 1%-3% target range and it agreed to lift the OCR to a level where it is confident consumer price inflation will settle within the target range but added that once aggregate supply and demand are more balanced, the OCR can return to a lower and more neutral level. Furthermore, the Committee agreed to maintain the approach of briskly lifting the OCR and remained comfortable with the projected path of the OCR it outlined in May, as well as noted that there are near-term upside risks to consumer prices and also medium-term downside risks to economic activity. BoK raised its Base Rate by 50bps to 2.25%, as expected, with the decision made unanimously. BoK stated that South Korea's 2022 growth will moderate further from an earlier projection and inflation will remain high for some time, as well as noted that inflation will surpass the May forecast for the entire of 2022 and that core inflation is to be higher than 4% for a considerable period. Furthermore, BoK Governor Rhee said more policy tightening of 25bps looks appropriate going forward should current inflation continue for the time being and that it is reasonable to expect rates at 2.75%-3.00% by year-end. ECB's Villeroy says it is not the EUR that is weak but the USD that is strong. FX Greenback grinds higher ahead of US inflation data, but remains restrained, DXY back above 108.000 within 108.020-390 range. Aussie regroups alongside base metals and awaits labour report for further impetus; AUD/USD approaching 0.6800 vs sub-0.6750 low. Franc forges safe-haven gains vs Dollar and Euro, USD/CHF below 0.9800 and EUR/CHF under 0.9850. Kiwi somewhat deflated after RBNZ maintained half-point tightening pace, guidance and OCR path, NZD/USD capped into 0.6150. Sterling underpinned by above-forecast UK data and remarks from BoE Governor Bailey leaning towards bigger than 25bp hike, Cable straddling 1.1900 and EUR/GBP pivoting 100 and 200 DMAs. Loonie looking for a BoC boost via 75bp rate increase and hawkish guidance, USD/CAD towards the low end of 1.3050-00 band with 1.57bln option expiries rolling off at the round number. Yen undermined by firmer US Treasury yields pre-CPI and post-weak 10-year note the auction, USD/JPY rebounds through 137.00 again. Yuan pares some losses after China’s trade surplus tops consensus and PBoC pledges to up support for real economy; USD/CNH and USD/CNY testing bids and support on either side of 6.7200. Fixed Income Debt fades from early EU highs irrespective of risk-off sentiment as clock ticks down to key US CPI data. Bunds pull up just ahead of 153.00, Gilts into 116.00 and T-note shy of 119-00. Italian and German supply relatively well received, but impending long bond refunding comes hot on the heels of tepid demand for 10 year issuance. Commodities Crude benchmarks are bid after a concerted pick-up in the European morning that occurred without any obvious fresh fundamental driver. US Private Inventory Data (bbls): Crude +4.7mln (exp. -0.2mln), Gasoline +2.9mln (exp. -0.4mln), Distillates +3.2mln (exp. +1.6mln), Cushing +0.3mln. Libya's Government of National Unity decided to replace the NOC chairman and board, according to a government source. NOC later announced the lifting of the force majeure on exports from the Brega and Zueitina oil terminals, while it added that negotiations were conducted to allow exports from Es Sider port and resume output at the Al Waha and Mellita fields, according to Reuters. Eni (ENI IM) Chair says Italy will be able to replace 50% of Russian gas flows with other sources this winter, and 80% next winter, via Reuters citing a paper. Hungary Foreign Minister says it could purchase up to 700 MCM of gas on the market ahead of the heating season, in addition to long-term supply deal with Russia. IEA OMR: 2023 demand 101.3mln BPD, +2.1mln BPD; led by strong growth in non-OECD countries. 2022 demand cut by 200k BPD, seeing a rise of 1.7mln to 99.2mln BPD Spot gold is modestly firmer managing to capitalise on the session’s bout of USD easing, LME Copper has benefited from the generally constructive APAC tone though participants will remain cognisant of and cautious around the China-COVID situation. US Event Calendar 07:00: July MBA Mortgage Applications -1.7%, prior -5.4% 08:30: June CPI YoY, est. 8.8%, prior 8.6%; MoM, est. 1.1%, prior 1.0% 08:30: June CPI Ex Food and Energy YoY, est. 5.7%, prior 6.0%; MoM, est. 0.5%, prior 0.6% 08:30: June Real Avg Hourly Earning YoY, prior -3.0%, revised -2.9% 08:30: June Real Avg Weekly Earnings YoY, prior -3.9%, revised -4.0% 14:00: U.S. Federal Reserve Releases Beige Book 14:00: June Monthly Budget Statement, est. -$75b, prior -$174.2b DB's Jim Reid concludes the overnight wrap I’m supposed to be off for the next three days with the family but given how busy things are I’m delaying two of the days until August. However I can’t escape a Theme Park outing tomorrow so I’m still doing that. I hate Theme Parks and rollercoasters with a passion. Readers might remember the last time I went I had an argument with someone who pushed in with his whole family in the queue ahead of me. I was most disgruntled at the end of a long day and vowed never to return. However my kids love them. If it were up to me my preferences would dominate and we wouldn’t go but unfortunately my selfless wife puts our kids first. Probably a good thing!! I’ll be here now for the all important US CPI today but I’ll miss the ceremonial start of earnings season tomorrow with this week seeing a small selection of major US financials and consumer packaged goods companies reporting. My colleague Binky has just released his full preview, available here. He expects earnings to beat in the low single digits percentage region, below the long-run historical average of 5%. Earnings are likely to be 3.1% qoq along with downward revisions to forward estimates. Heading into earnings season, estimates have been revised lower for every sector but energy, which has experienced upgrades. Using a bottom-up approach, yoy EPS growth will come in at 5.7%. Heading into CPI and earnings, after markets had climbed a wall of worry since mid-June, they seem to be losing a bit of footing again over the last few days as fears of a recession dominate again, alongside fears of aggressive rate hikes by central banks, rising Covid cases in China and the prospect of Russia cutting off Europe’s gas. This gloomy backdrop saw the S&P 500 (-0.92%) lose ground for a 3rd day running, whilst those fears of weakening demand sent Brent crude oil prices back beneath $100/bbl and also led to day two of a new fresh sizeable rally in sovereign bonds. Oil is little changed in Asia trade with Brent and WTI futures almost flat at $99.76/bbl and $95.99/bbl respectively as we go to press. However, today’s main focus will almost certainly be on the US CPI release for June, which will set the stage for the Fed’s next decision in just two weeks’ time. Remember that it was last month’s much stronger-than-expected report that sparked a tumultuous market reaction that culminated in the Fed moving by 75bps at a single meeting for the first time since 1994, having previously only signalled a 50bps move. So any further surprises today could have a big impact. In terms of what to expect, our US economists are looking for an above-consensus monthly reading for both headline CPI (+1.3%) and core CPI (+0.6%), which in turn would take the year-on-year headline CPI up to its highest level since 1981, at +9.0%. Although we’re expecting another strong inflation print today, ahead of that release there were actually growing signs of respite on the inflation front thanks to further losses amongst a number of key commodities. Brent Crude (-7.11%) and WTI (-7.93%) oil prices saw substantial losses, copper prices (-4.10%) hit a 19-month low and gold (-0.46%) hit a 9-month low. Indeed, the only major exception to that pattern was the usual suspect of European natural gas (+4.92%) which just about reversed the previous day’s decline following cuts to Norwegian capacity. Our research colleagues in Frankfurt published a detailed note yesterday on the gas supply issue (link here), where they run through 3 scenarios of how things might evolve, including what happens if Russia completely turns off the gas taps to Germany after the maintenance period that would involve gas being rationed during the winter months. Although many will welcome the decline in those commodities mentioned above, the bad news is that the reason they’re declining is because of recession fears, and yesterday saw a number of additional recessionary indicators flash with growing alarm. One in particular is the 2s10s curve, which has inverted before every one of the last 10 US recessions, and remains near its most inverted of this cycle so far at -8.5bps after dipping below -12bps intraday. We would stress that while we are the yield curve’s biggest fan, it usually takes a minimum of three quarters from inversion to recession so we still think it may take a bit of time from the first inversion in March to confirm the almost inevitable recession. For the 1s10s and the 2s5s curve, it was much the same story of being the most inverted so far this cycle, and the 3m10s curve reached its flattest since November 2020. And whilst the Fed have told us to focus on their preferred near-term forward spread (18m3m minus 3m), even that closed beneath 100bps for the first time so far this year at 94bps (from a peak of 270bps in early April), so these measures are all trending in the wrong direction from a recessionary standpoint. In terms of the absolute yield moves, the risk-off tone saw them move lower on both sides of the Atlantic. 10yr Treasury yields fell -2.4bps to 2.97% albeit having being as much as -9.6bps lower intraday. There was a discrete bounce in longer-dated Treasury yields following the 2bp tail in the 10yr auction. Yields are fairly stable in Asian trading. Meanwhile in Europe, those on 10yr bunds (-11.3bps), OATs (-12.8bps) and BTPs (-9.8bps) all fell back too, as concerns about the economic situation led investors to price in a less aggressive pace of monetary tightening over the coming months, particularly from the ECB. That also meant that the Euro itself moved ever closer to parity against the US Dollar yesterday, and you had to look to 5 decimal places to see that it just avoided that milestone, with an intraday low of $1.00003 during the European morning, ending the day just a hair lower versus the dollar, down -0.03% at $1.0037. European equities staged a modest comeback from Monday’s selloff, while US equities ended lower after flirting with gains all day. The STOXX 600 gained +0.49%, with the DAX performing a touch better at +0.57%, bringing the STOXX 600 to just under flat for the week, while the DAX is still -0.84% lower on the week. The S&P 500 fell -0.92%, after trading near unchanged most of the day. Theories abounded for the late turnaround. Underlying market technicals pointed to potential algorithmic selling programs, whilst rumours spread in some circles that the CPI report was leaked and revealed a +10% print. Officials disabused us of the latter, but it nevertheless speaks to the heightened anxiety markets are trading with around inflationary data. In terms of the breakdown, energy shares (-2.03%) were the clear underperformer, but a wide-breadth of shares took a dip lower in the afternoon, sending the NASDAQ (-0.95%), FANG+ (-1.01%), and Russell 2000 (-0.22%) all lower on the day. So no clear macro driver for equities yesterday, but again, today’s CPI will be instructive about the near-term path. Overnight in Asia equity markets are trading higher after recent losses. As I type, the Hang Seng (+0.81%) is leading gains across the region with the Kospi (+0.71%), Shanghai Composite (+0.36%), CSI (+0.26%), and the Nikkei (+0.33%) all trading up. Looking ahead, equity futures in the US point to a steady start with contracts on the S&P 500 (+0.14%) and NASDAQ 100 (+0.21%) moving higher. Moving on to monetary policy action, the Bank of Korea (BOK) increased rates by 50bps, bringing the benchmark rate to 2.25% in order to help pullback inflation from a 24-yr high of 6%. The unprecedented rate hike size comes even as the central bank forecasts the country’s growth rate to lag “below the May forecast of 2.7%. Elsewhere, the Reserve Bank of New Zealand (RBNZ) in an expected move also increased its official cash rate (OCR) by 50bps for a third straight meeting to 2.5%. Staying in Asia, another risk that’s been in a few headlines again is Covid. Partly this is because of the ongoing situation in China, where a steady stream of cases have been reported over recent days. But in addition to that, the US is considering whether to expand the recommendation of the second booster to all adults in light of the BA.5 omicron variant’s spread, and White House coronavirus coordinator Ashish Jha said that these discussions “have been going on for a while”. Of particular concern to officials, the BA.5 seems to evade immunity provided from prior infections. Here in the UK, it’ll be another eventful day on the political scene as the first ballot of MPs takes place in the Conservative leadership election, which will also decide the next Prime Minister. 8 candidates will be on today’s ballot, and former Chancellor of the Exchequer Rishi Sunak is currently leading when it comes to MP’s endorsements, with yesterday seeing him gain that of Deputy PM Dominic Raab, among others. Candidates will need the support of at least 30 MPs today to progress onto the next ballot that takes place tomorrow. There wasn’t much data yesterday, but the releases we did get only added to negative sentiment. First the German ZEW survey saw the expectations reading fall to its lowest level since the sovereign debt crisis at -53.8 (vs. -40.5 expected), whilst the current situation reading fell to -45.8 (vs. -34.5 expected). Separately, the NFIB’s small business optimism index from the US fell to 89.5 (vs. 92.5 expected). To the day ahead now, and data releases include the US CPI release for June, as well as UK monthly GDP for May and Euro Area industrial production for May. Otherwise from central banks, the Bank of Canada will be making their latest policy decision, and the Federal Reserve will release their Beige Book. Tyler Durden Wed, 07/13/2022 - 07:57.....»»

Category: worldSource: nytJul 13th, 2022

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

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

Category: smallbizSource: nytJun 29th, 2022

Futures Drift Lower After Kremlin Dashes Ukraine Peace Hopes; Curve Inversion Persists

Futures Drift Lower After Kremlin Dashes Ukraine Peace Hopes; Curve Inversion Persists After yesterday's explosive session, which saw stocks trade in violent kneejerk response to conflicting headlines out of Ukraine at first, only to post the biggest ever post FOMC reversal, as markets realized that the Fed's overly hawkish ambitions are too great and doom the rapidly slowing economy to an accelerated recession, overnight trading has been positively subdued with emini S&P futs trading in a tight 20 point range between 4,340 and 4,360 until 6 am ET, when European stocks turned negative and US equity futures suddenly dropped as much as 0.5%, after the Kremlin said reports of major progress in Ukraine talks are "wrong" and Kremlin spokesman Dmitry Peskov dismissed reports that the warring parties are moving toward a settlement, blaming Kyiv for slowing the negotiations, crippling any hope for a quick ceasefire deal and adding to worries about the outlook for economic growth as the Federal Reserve’s campaign against inflation gets underway. Futures were already wavering as the bond market flagged a growing risk that the Fed’s efforts to rein in prices could trigger an economic downturn with the 5s10s curve inverting. Ominously, Brent jumped more than $5/bbl after tumbling below $100 yesterday. Contracts on the Nasdaq 100 dipped 0.4% by 7:30 a.m. in New York, while S&P 500 futures were 0.34% lower. The benchmark S&P 500 on Wednesday posted its best two-day rally since April 2020 as the Fed hiked interest rates by a quarter point and Chair Jerome Powell signaled the economy could weather tighter monetary policy. Gold and 10Y yields dropped to session lows, and bitcoin was modestly lower on the session. Europe was slightly green while Asia stocks closed higher, led by the Hang Seng which rose 7% On Wednesday, the Fed raised borrowing costs by a quarter percentage point and signaled hikes at all six remaining meetings in 2022, while projecting an "above-normal" policy rate at 2.8% by the end of 2023. Chair Jerome Powell said the U.S. economy is “very strong” and can handle monetary tightening. Treasuries advanced, while a portion of the bond curve - the gap between 5- and 10-year yields - inverted for the first time since March 2020, a sign investors expect recession. The Fed also said it would begin shrinking its $8.9 trillion balance sheet at a “coming meeting,” without elaborating as Biden breathes down Powell's neck to get inflation under control. Meanwhile, the commodity shock from Russia’s war in Ukraine is continuing to aggravate price pressures and economic risks, portending more market volatility. “It won’t be easy -- rarely has the Fed safely landed the U.S. economy from such inflation heights without triggering an economic crash,” Seema Shah, chief strategist at Principal Global Investors, said in emailed comments. “Furthermore, the Russia-Ukraine conflict, of course, has the potential to disrupt the Fed’s path. But for now, the Fed’s priority has to be price stability.” “This type of normalization policy does not always end well,” said Nicolas Forest, global head of fixed income at Candriam Belgium SA. “While the Fed began its tightening cycle later than usual, at a time when inflation has never been so high, financial conditions could also harden, making the 2.80% target ambitious in our view. In this context, it is easy to understand why the U.S. curve has flattened.” In the latest Ukraine war developments, Russia continued to “hammer” cities like Kharkiv and Cherniyiv with bombardments and rocket systems and isn’t acting like it wants to settle, Pentagon spokesman John Kirby said in an interview with Bloomberg TV. Meanwhile, Russia’s Finance Ministry said a $117 million interest payment due on two dollar bonds had been made to Citibank in London amid mounting speculation that the country is heading for a default. Russia had until the end of business Wednesday to honor the coupons on the two notes. The ruble gained for a sixth day in Moscow trading, while the country’s stock market remains shut. Here are some more headlines courtesy of Newsquawk: Ukrainian President Zelensky said talks with Russia are challenging but are still ongoing. He added that Russia has the advantage in the air and already crossed all red lines, while he hopes for assistance from allies. Russian Foreign Minister says that discussions with Ukraine are continuing via video link with the sides discussing humanitarian and political issues. Ukrainian Defense Minister says so far there is nothing to satisfy us in negotiations with Russia; a peaceful solution can be reached with Russia, but "on our terms". Russian Kremlin says their delegation is putting colossal energy into Ukraine peace talks, conditions are absolutely clear. Agreement with Ukraine with clear parameters could very fast stop what is going on; on the recent FT report re. peace talk progress said this is not right, elements are correct but the entire peace is not true. A rebound in China stocks listed on U.S. exchanges also cooled a day after they soared the most since at least 2001 on a pledge from Beijing to keep its stock market stable. American depository receipts of Alibaba were down 2% in premarket trading following their biggest gain since their trading debut in September 2014, while Baidu dropped 5.7%. Here are some other notable premarket movers: Shares in Marrone Bio (MBII US) jumped 20% premarket after announcing a merger pact with Bioceres Crop Solutions (BIOX US), which falls 5.9%. Williams-Sonoma (WSM US) gained 6.2% in extended trading Wednesday after the home-goods retailer reported adjusted fourth-quarter earnings that beat the average analyst estimate. The company also raised its dividend and announced a share buyback authorization. In Europe, the Stoxx 600 index gained, nearly erasing losses that were sparked by Russia’s invasion of Ukraine. The index then dipped on the abovementioned news out of the Kremlin which said reports of major progress in Ukraine talks are “wrong”, only to bounce back into the green. DAX and FTSE MIB lag, slipping ~1%. Banks, autos and personal care are the worst performing sectors. Energy, real estate and tech outperform.  Here are some of the biggest European movers today: Deliveroo shares rise as much as 9.8% after reporting full-year results, with Barclays (equal-weight) saying the food-delivery company’s mid-term margin commentary was “helpful.” Grenke shares jump 16%, the most since May, after the company reported dividend per share that beat the average analyst estimate. EQT shares rise as much as 9.5%, extending Wednesday’s 12% gain following the acquisition of Baring Private Equity Asia for $7.5 billion in what is the biggest takeover of a private equity firm by another in the sector. Atos shares jump as much as 7.4% after BFM Business reported that Airbus has been mulling a possible takeover of the French IT firm’s cybersecurity unit. Atos reiterated that its BDS cybersecurity business is not for sale. DiaSorin shares soar as much as 9.7%, their best day in nearly one year as analysts upgraded the Italian diagnostics company following results, with the firm reporting net income for the full year that beat the average analyst estimate. Verbund shares rise as much as 7.7% after 2021 profit beats estimates and Austria’s biggest utility forecasts higher profit next year. Thyssenkrupp shares fall as much as 11% after the company suspended its full-year forecast for free cash flow. The move is a disappointment, given the FCF focus in the steel company’s equity story after years of cash burn, Deutsche Bank says. Asian stocks extended their rebound through a second day after Chinese shares rallied again on a vow of state support and the Federal Reserve expressed confidence in the U.S. economy.  The MSCI Asia Pacific Index rallied as much as 3.6%, lifted by technology and consumer-discretionary shares. Japan and Hong Kong benchmarks led the way, with the Hang Seng Index surging 17% over two days, its biggest back-to-back advance since the Asian financial crisis in 1998, and the Topix jumping 2.5%.  A combination of China’s pledge to stabilize markets, Fed comments on the U.S. economy’s strength after the expected quarter-point interest rate hike by the central bank, and hopes for progress on Russia-Ukraine talks have put Asian stocks on track to end four consecutive weekly losses. “Following recent corrections, markets have reached a point that prices in, or presumes, a fair amount of rate hikes and economic stress,” said Ellen Gaske, lead economist for G-10 economies at PGIM Fixed Income. “It would not be surprising to see investors begin to inch back into the market in search of yield.” Japanese equities rose for a fourth day, as investors were cheered by comments from the Federal Reserve on U.S. economic growth and China’s moves to support its market. Electronics and machinery makers were the biggest boosts to the Topix, which rose 2.5%, to the highest level since Feb. 21. All 33 industry groups advanced. Fast Retailing and Tokyo Electron were the biggest contributors to a 3.5% rise in the Nikkei 225. The yen extended its losses against the dollar after weakening 3.4% over the previous eight sessions. The Fed raised interest rates by a quarter percentage point and signaled hikes at all six remaining meetings this year, while saying “the American economy is very strong” and able to handle tighter policy. Global stocks got a lift Wednesday after Beijing vowed to keep its stock market stable. “The FOMC dot plot clearly shows that the number of interest rate hikes will be reasonable, and the stock market is pleased that the risk of accelerating long-term interest rates rising due to monetary policy following has decreased,” said Kazuharu Konishi, head of equities at Mitsubishi UFJ Kokusai Asset Management. In domestic news, a magnitude-7.3 earthquake struck near Fukushima prefecture late Wednesday, killing four and injuring dozens of people, as well as derailing a bullet train and disrupting power India’s benchmark stocks index rose, tracking regional peers, as lenders drove gains. The S&P BSE Sensex climbed 1.8% to 57,863.93, in Mumbai. The measure added 4.2% this week, and with local markets closed for a holiday Friday, it is the biggest weekly advance for the index since February 2021. With today’s gains, it completely recovered all losses that followed Russia’s invasion of Ukraine.   Mortgage lender Housing Development Finance Corp. rose 5.4%, its biggest jump in over a year and was the best performer on the Sensex, which saw all but two of 30 shares advance. Seventeen of 19 sectoral sub-indexes compiled by BSE Ltd. gained, led by a gauge of realty companies. The NSE Nifty 50 Index added 1.8% to 17,287.05 on Thursday. China’s pledge to support its markets, the prospect of progress on Russia-Ukraine cease-fire talks and the U.S. Federal Reserve’s comments on America’s economic strength boosted sentiment. Brent crude, a major import for India, down to $100 a barrel from $127.98 last week, also eased concerns. The Fed announcement was on expected lines for the market and they rallied in relief, Nishit Master, portfolio manager at Axis Securities wrote in a note.  “Despite the recent rally, the markets will continue to remain volatile in the near future on the back of tightening of liquidity conditions globally. One should use this volatility to increase equity allocation for the long term.” In rates, the post-Fed flattening move has extended as investors continue to digest expectations on latest policy path, with some strategists calling for a top in yields. 10-year yields around 2.12%, richer by ~6bp on the day and outperforming bunds and gilts by  4.5bp and 3bp; 2s10s spread is flatter by ~4bp on the day.  US TSY yields are richer by as much as 7bp across long-end of the curve, flattening 5s30s by a further 2.4bp with the spread dropping as low as 24.2bp;  the 5s10s was again inverted, trading fractionally in the red after first inverting yesterday during Powell's FOMC presser. In FX, the Bloomberg Dollar Spot Index pared a loss and the greenback traded mixed after earlier sliding against all of its Group- of-10 peers apart from the Swedish krona, as risk aversion gave rise to a haven bid. The euro snapped a three- day advance after the news out of Kremlin dampened sentiment; short-dated European benchmark bond yields were little changed while they contracted longer out on the curve. The pound advanced and gilts rose, led by the long end before the Bank of England looks all but certain to take interest rates back to their pre- Covid level. The Australian dollar still outperformed G-10 peers after the nation’s February unemployment rate falls to the lowest since 2008, boosting bets of earlier interest-rate hikes. The yen inched up amid risk aversion, but still held near its lowest level in six years as Bank of Japan Governor Haruhiko Kuroda vowed to continue with monetary stimulus even after the Federal Reserve kicked of its rate hike cycle Wednesday. In commodities, WTI crude futures climb near $99.50 while Brent rallies through $102; spot gold adds ~$16 to trade around $1,944. Base metals are mixed; LME nickel falls 8% to maximum limit while LME aluminum gains 1.8%. Bitcoin is modestly softer but remains well within yesterday's parameters and retains a USD 40k handle. Looking at the day ahead now and housing starts, building permits, initial jobless claims and industrial production are due. We will also hear from ECB's Lagarde, Lane, Knot, Schnabel and Visco. Earnings releases include Accenture, Enel, FedEx, Dollar General and Verbund. Market Snapshot S&P 500 futures down 0.3% at 4,337.00 STOXX Europe 600 up 0.4% to 450.44 MXAP up 3.5% to 178.08 MXAPJ up 4.0% to 582.21 Nikkei up 3.5% to 26,652.89 Topix up 2.5% to 1,899.01 Hang Seng Index up 7.0% to 21,501.23 Shanghai Composite up 1.4% to 3,215.04 Sensex up 2.1% to 58,014.18 Australia S&P/ASX 200 up 1.1% to 7,250.80 Kospi up 1.3% to 2,694.51 German 10Y yield little changed at 0.38% Euro up 0.2% to $1.1057 Brent Futures up 3.0% to $100.97/bbl Gold spot up 0.7% to $1,940.77 U.S. Dollar Index down 0.42% to 98.21 Top Overnight News Russia’s Finance Ministry said a $117 million interest payment due on two dollar bonds had been made to Citibank in London amid mounting speculation that the country is heading for a default Rates and currency markets are skeptical of the Bank of England’s ability to tame inflation without triggering an economic slowdown. Policymakers may undo tightening as soon as next year, swaps contracts suggest After the Federal Reserve raised interest rates and signaled hikes at all six remaining meetings this year, a section of the Treasury curve -- the gap between five- and 10-year yields -- inverted for the first time since March 2020. Meanwhile the flattening trend between two- and 10-year yields continued Hungary’s central bank kept the effective interest rate unchanged after a rally in the forint eased pressure on policy makers to further hike the European Union’s highest key rate Commodities trader Pierre Andurand sees a path for crude oil to get to $200 by the end of the year as historically tight markets struggle to ramp up production and replace lost supply from Russia A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks gained post-FOMC while Chinese tech remained euphoric on support pledges. ASX 200 was led higher again by outperformance in tech and following strong jobs data. Nikkei 225 rallied after recent currency weakness and despite the deadly earthquake in Fukushima. Hang Seng and Shanghai Comp. continued to benefit from China’s recent policy support pledges which  lifted the NASDAQ Golden Dragon China Index by 33% and with the PBoC boosting its liquidity efforts. Significant gains were also seen amongst developers after reports that China is not planning to expand its pilot property tax reform this year. Top Asian News China Affirms Friendship With Ukraine, Promise to ‘Never Attack’ Indonesia Holds Rates While Monitoring Inflation, War Risks War in Ukraine Triggers Slew of Shelved IPOs in Japan: ECM Watch Strong Quake Hits Japan, Killing Two and Halting Factories European bourses are predominantly negative, Euro Stoxx 50 -0.4%, after a relatively constructive open post Wall St./APAC handover. Initial upside faded as updates on Russia/Ukraine are downbeat overall and push back further on some of Wednesday's more constructive updates. US futures are lower across the board, ES -0.4%, after yesterday's upbeat close post a hawkish-FOMC. Top European News Raiffeisen CEO Says Bank is Considering Exit From Russia UBS, Mitsubishi Sell Japan Realty Unit to KKR for $2 Billion Russia’s Ruined Gameplan for Ukraine Is Visible in the South Diageo Rises; JPMorgan Lifts to Overweight on U.S. Position In FX, the dollar flips after hawkish Fed hike and more aggressive dot plot before unwinding all and more upside in buy rumor, sell fact reaction; DXY almost 100 ticks down from pre-FOMC peak and just off 98.000. Aussie outperforms following upbeat labour data and Kiwi lags on the back of sub-forecast GDP, AUD/USD eyeing Fib ahead of 0.7350, AUD/NZD back up over 1.0700 and NZD/USD capped into 0.6850. Sterling firm awaiting confirmation of 25 bp hike from the BoE and vote split plus MPC minutes for further guidance; Cable close to 1.3200 at best and EUR/GBP sub-0.8400. Euro clears 1.1000 again, while Yen extends decline to cross 119.00 line. Lira looks ahead to CBRT with high bar for any direct support in contrast to Real that got a full point hike from BCB and signal of more to come. Brazilian Central Bank raised the Selic rate by 100bps to 11.75%, as expected, while the decision was unanimous and it considered it appropriate to advance monetary tightening significantly into even more restrictive territory. In commodities, crude futures continue to nurse recent wounds, with Brent May back around USD 102.50/bbl while WTI April inches toward USD 100/bbl. Upside occurred, picking up from initial choppy action, amid the most recent geopolitical developments from the Kremlin and Ukrainian Defence Ministry. India may purchase up to 15mln bbls of oil from Russia with state-run oil firms preparing to  purchase heavy volumes of Russian crude that's going at a deep discount to help ease the margin pressure oil refiners. China is to increase gasoline prices by CNY 750/ton and diesel by CNY 7220/ton as of March 18th, according to the NDRC via CCTV. Italy is considering blocking the export of raw materials, according to the Deputy Industry Minister. Spot gold/silver are firmer given geopolitical-premia., while LME Nickle hit the new adj. limit down of 8% after the reopen. In fixed income, debt derives impetus from downturn in risk sentiment as Russia and Ukraine deny major strides towards ceasefire deal. Bond curves remain flatter following Fed's hawkish dot plots. Bonos and OATs soak up Spanish and French supply. US Event Calendar 8:30am: March Initial Jobless Claims, est. 220,000, prior 227,000; March Continuing Claims, est. 1.48m, prior 1.49m 8:30am: Feb. Building Permits, est. 1.85m, prior 1.9m; Building Permits MoM, est. -2.4%, prior 0.7%, revised 0.5% 8:30am: Feb. Housing Starts, est. 1.7m, prior 1.64m; Housing Starts MoM, est. 3.8%, prior -4.1% 8:30am: March Philadelphia Fed Business Outl, est. 14.8, prior 16.0 9:15am: Feb. Industrial Production MoM, est. 0.5%, prior 1.4% Capacity Utilization, est. 77.9%, prior 77.6% Manufacturing (SIC) Production, est. 1.0%, prior 0.2% DB's Jim Reid concludes the overnight wrap After I press send today I’ll be venturing back on a plane for the first time in two years this morning. I'm off to give a speech at a conference in Cannes just at the time when all the tabloid papers here say that London is going to be hotter than Greece and the Costa Brava in a rare March warm spell here in the UK. Rarer than a warm spell in the UK in March, we now have the start of only the fourth Fed hiking cycle in 27 years. We saw a wild ride in markets after the decision as initially the hawkish dot plot led to a big sell off in rates, and an S&P 500 that fell nearly -1.5% from pre announcement levels and into negative territory for the session. However markets completely turned on Powell’s comments in the press conference that the probability of recession was "not particularly elevated" and that the "economy is very strong" and can handle tighter policy. The S&P closed +2.24%, completing its biggest 2-day move in 23 months, while the Nasdaq climbed +3.77%. The big winners were mega cap tech stocks, with the FANG+ index putting in its best day on record, climbing +10.19%. The latter were almost certainly helped by earlier news that China would “actively introduce policies that benefit markets” and take steps to ease the most spartan lockdown measures. The FANG index includes Baidu and Alibaba that were up nearly +40% yesterday. To be fair the Fed meeting and the surrounding price action makes sense. Although I think the risks of a US recession by late 2023 / early 2024 are increasingly elevated I'm not convinced that the risks are particularly high in 2022. The start of the hiking cycle isn't historically the problem point for the economy or for that matter equities. Further to this, in my CoTD yesterday (link here) I showed that on average it takes around three years from the first Fed hike to recession. However the bad news is that all but one of the recessions inside 37 months (essentially three years) occurred when the 2s10s curve inverted before the hiking cycle ended. With all the recessions that started later than that, none of them had an inverted curve when the hiking cycle ended. In fact, hiking cycles that ended with the curve still in positive territory saw the next recession hit 53 months on average after the first rate hike, whereas the next recession for hiking cycles that ended with an inverted curve started on average in 23 months, so just under two years. As a reminder, none of the US recessions in the last 70 years have occurred until the 2s10s has inverted. On average it takes 12-18 months from inversion to recession. The problem is that all but one of the hiking cycles in the last 70 years have seen a flatter 2s10s curve in the first year of hikes. The exception saw a very small steepening. So these are the risks. Indeed the yield curve flattened after the Fed with 2s10s moving from just under +31bps to +21bps an hour later. It closed at +23bps. 10yr yields rose 6bps after the announcement but reversed most of this into the close and ended +4.1bps on the day at 2.18%. We are at 2.137% this morning. The rise in 2 years was more durable at +8.9bps on the day with a -2.4bps reversal this morning to 1.912%. At one point yesterday this was +15bps on the day and at a hair's breadth below 2%. The tighter policy path meant that breakevens declined and real rates increased; 10yr Treasury breakevens fell -5.5bps to 2.80%. Digging into the meeting itself. Two years to the day after cutting rates to the zero lower bound, the Fed raised rates by 25 basis points yesterday, and communicated a much tighter path of policy to come (our US econ team’s full recap here). Yesterday’s meeting came with an updated Summary of Economic Projections, and the dots were much more hawkish. The median dot showed expectations for 7 hikes in 2022, including yesterday and in line with what our US economics team is expecting, and which would represent a hike at every meeting for the rest of the year. The median dot reaches 2.75% next year, above the Fed’s long-run estimate for the fed funds rate, signaling policy will need to get to a restrictive stance. Indeed, the dots actually showed the long-run neutral fed funds rate fell, so a restrictive stance will come even sooner. These were just the medians. There was considerable variance in the dots, and Chair Powell noted the risks to inflation were to the upside, suggesting rates could be even higher than what the hawkish medians are suggesting. On the balance sheet, the Fed noted that QT would start at a coming meeting. Chair Powell signaled it could start as early as May, noting the Committee made excellent progress on the parameters of balance sheet runoff, even if they did not provide more details yesterday. Chair Powell noted the minutes from this meeting would have more details around runoff parameters. Elsewhere in the press conference, the Chair noted that every meeting was live, and that the Fed would move more quickly if appropriate, which ostensibly means +50bp hikes are on the table, but also said the Fed’s expected QT program will equate to approximately one more hike, which is in line with our team’s expectations for QT this year. Indeed, each of the next few meetings is pricing a meaningful chance of a +50bp hike. He noted the Fed would be evaluating month-over-month inflation readings when determining the pace of policy tightening and that financial conditions needed to be tighter. In all, a hawkish meeting, which was expected, with little for doves to cling to. After yesterday’s Fed hike, it is the Bank of England turn to raise rates with the decision scheduled for 12pm London time. A preview from our UK economist is available here. Our team expects a +25bps hike to bring the key rate to its pre-pandemic level of 0.75%. They also added a +25bps June hike to their projections for the path of the monetary policy in 2022, which would bring the benchmark rate to 1.5% by the end of this year. Beyond 2022, they see another hike in February 2023 that would bring the key rate to 1.75%, their projected terminal rate. More on their economic outlook for the UK can be found in the UK Macro Handbook here. As of this morning, the market is pricing in slightly less than 70bps of hikes by the end of 2022. Turning to geopolitics, net net, more positive news flow came out of Russia-Ukraine talks, as a neutrality model that would allow Ukraine to preserve its army seems to be among options on the negotiations table. While comments were otherwise scarce, the head of Russian delegation Vladimir Medinsky said that the talks were going slowly and strenuously. Meanwhile, Russia was officially excluded from Council of Europe yesterday. Putin’s address on Russian TV was pretty hawkish but he was talking to a domestic audience. An FT report that suggested significant progress in the talks contributed to the optimism that fuelled European shares higher as the STOXX 600 gained +3.06%, although an earlier catalyst for the rally was China’s announcement of economic support. Country-level stock markets like Germany’s DAX (+3.76%) and France’s CAC 40 (+3.68%) have notched even stronger gains. The former is now just 1.30% below its pre-invasion close on February 23rd. On that China story, the news was that Shanghai would not implement a strict lockdown in response to the recent outbreak but would instead encourage working from home helped support risk sentiment. Arguably more impactful for markets, top economic ministers noted that the government would introduce policies to benefit markets after the recent volatility, which was a boon to equities. Following on from this, Asian stock markets have surged higher for a second day. The regional sentiment remains buoyant as a rally led by the Hang Seng (+5.79%), CSI (+3.19%) and Shanghai Composite (+2.59%) came after a blistering surge in tech stocks over the last 24 hours as a top Chinese official in his comments yesterday stated that the administration will introduce market friendly policies. Elsewhere, the Nikkei (+3.14%) is sharply higher this morning, extending the gains in the previous two sessions while the Kospi (+1.77%) is also surging. US stock futures are fairly flat. Prior to the Fed’s decision, European yields rallied after Sweden’s Riksbank governor did not rule out a possibility of a hike as early as this year – a significant shift from its previous 2024 projections. Swedish yields marched higher across the curve in response, with 10y rising by +7.2bps and hitting the highest level since January 2019 and the 2s10s curve steepening (+1.3bps), while the krona rose by +1.73% against the dollar in what was an overall down day for the greenback as the Bloomberg USD index declined by -0.35%. The British pound (+0.48%) rose as well ahead of the BoE decision and the yield on gilts (+5.3bps) reached the highest level since November 2018. Together with aforementioned geopolitical developments, these news fuelled risk appetite and bond yields rose across most of the Eurozone before we even got to the Fed. Moves in bunds (+6.0bps), OATs (+4.2bps) and BTPs (-0.3bps) were accompanied by sizeable declines in underlying breakevens, with those on bunds (-5.1bps) and BTPs (-5.1bps) edging lower. Inflation expectations were partially muted by a rather calm day for major commodities. Both Brent (-1.89%) and WTI (-1.45%) dipped although this has been reversed so far this morning. There were more fun and games in nickel after a week of no trading due to last week’s massive spike. This time trading was suspended as prices dropped below the new daily threshold and a technical glitch occurred. Despite relative calm in oil markets, other Russia-related commodities continued to slide, especially so in Europe. The Dutch TTF futures for April delivery fell by -10.73% yesterday and around -70% since their intra-day peak on March 7th. Meanwhile, E.ON, German energy supplier, announced it will stop new purchases of gas from Russian companies, although the firm has no long-term contracts. Soft commodities like corn (-3.69%) and wheat (-7.36%), export of which was recently sanctioned by Russia, also declined. In yesterday’s data releases, US retail sales came in at +0.3%, below +0.4% expected, with gasoline spending (+5.3%) driving the advance. The NAHB index also disappointed (79 vs 81 expected), dropping to a six month low. To the day ahead now and housing starts, building permits, initial jobless claims and industrial production are due from the US. We will also hear from ECB's Lagarde, Lane, Knot, Schnabel and Visco. Earnings releases include Accenture, Enel, FedEx, Dollar General and Verbund. Tyler Durden Thu, 03/17/2022 - 07:58.....»»

Category: blogSource: zerohedgeMar 17th, 2022

US Futures Ignore China Implosion, Reverse Overnight Losses as Oil Tumbles

US Futures Ignore China Implosion, Reverse Overnight Losses as Oil Tumbles Welcome to another rollercoaster session where US equity futures first tumbled alongside the second consecutive day of stocks plunging in China, which also dragged Europe lower, only to hit a U-turn around 5am at which point sentiment reversed higher, ahead of tomorrow’s expected Federal Reserve rate hike and amid mounting risks from the war in Ukraine and a Chinese equity rout. Nasdaq 100 contracts trade 0.5% higher at 7:15 a.m. after earlier slumping as much as 0.8% following the first bear-market close for the first time since March 2020. S&P 500 futures also turned 0.3% green, as did Dow futures. Much of the reversal in sentiment has been attributed to the latest drop in oil which tumbled over $8/bbl or 5.5%, sliding as low as $98 after hitting $139 one week ago. WTI crude oil also fell below $100 a barrel a barrel as traders reassessed the potential impact of disruptions in Russian oil supplies and a decline in demand from China. Iron ore futures fell for a sixth day, the longest streak since September. In other words, commodities are not sliding because of hopes for Russia peace, but because of fears about a global recession, but try explaining it all to algos. Treasuries gained, though the 10-year yield remains near the highest level since 2019. Yields across the euro region also declined. The dollar slipped, while the euro pushed higher and bitcoin dropped again. Earlier in the session, a selloff across Chinese equities deepened as concerns about ties with Russia, a growing covid crisis, and persistent regulatory pressure sent a key index to its lowest level since 2008. The Hang Seng China Enterprises Index, which tracks Chinese shares listed in Hong Kong, sank 6.6%, following a plunge in the previous session that was the biggest since the global financial crisis. The Hang Seng index tumbled Tech giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd. led the decline. Hong Kong’s benchmark Hang Seng Index slumped 5.7%, its biggest fall since July 2015. China’s equities are looking increasingly risky on concerns that Beijing’s ties with Russia could spark new U.S. sanctions. That’s adding to worries from regulatory developments including a possible delisting from the U.S. exchanges. While upbeat economic data was a rare bright spot in the market, growing lockdowns in major Chinese cities are dimming the outlook. "The selloff is overdone, but so is everything else,” said Andy Maynard, head of equities at China Renaissance Securities. "The market is crazy -- there’s no fundamentals anymore. This might be worse than the 2008 financial crisis." “Risk-off sentiment stemming from both the Russia-Ukraine war and the current wave of Covid-19 in China has driven equity markets sharply weaker this morning,” Siobhan Redford, an analyst at Rand Merchant Bank in Johannesburg, said in a client note.  “This has been compounded by falling commodity prices as the intersection between limited supply -- given sanctions on Russia and the war in Ukraine -- and a weaker demand trajectory -- given further waves of the pandemic -- create a perfect storm of sorts.” With zero liquidity, and trigger happy traders looking to sell any rally, swings in S&P 500 and Nasdaq 100 futures signaled another volatile day ahead for U.S. stocks. U.S.-listed Chinese stocks sank again on Tuesday, following a brutal rout in Asia, amid concerns that China’s ties with Russia may bring sanctions to Beijing, while persistent regulatory pressures also weighed. Alibaba (BABA US) fell 6.5% in premarket trading, while rival JD.com (JD US) declined 4.5%. Apple Inc. inched lower, heading toward a bear market -- defined as a 20% drop from recent highs -- on worries that lockdowns in China to contain a surge in Covid-19 cases could worsen supply-chain constraints. Other notable premarket movers: Shares in big U.S. energy companies slide in premarket trading as crude price fall, declining after last week’s rally as worries over growing coronavirus cases in top crude importer China weigh. Exxon Mobil (XOM US) -3.1% and Chevron (CVX US) -3.7%. Coupa Software (COUP US) slides 30% in postmarket trading after the company’s revenue forecast for the first quarter misses the average analyst estimate. Gitlab (GTLB US) shares rose 12% in extended trading on Monday, after the software company reported fourth-quarter revenue that beat expectations and gave a full-year forecast that is stronger than the analyst consensus. U.S. technology stocks have been particularly hard hit in the past week with the Federal Reserve expected to begin a rate-hike cycle on Wednesday, another negative for growth stocks valued on future profits. Investors are also looking for cues from the central bank about how aggressively it plans to continue tightening monetary policy as Russia’s invasion of Ukraine sent commodity prices soaring when inflation was already running high. A reading on the producer price index is due on Tuesday. “If we are entering a world of above-target inflation for several years to come, investors should ditch the easy answers,” said Sahil Mahtani, strategist at Ninety One. “Conventional 60-40 type portfolios are likely to struggle. Investors should reflect about what specifically is driving the inflationary process and invest in equities that have pricing power but are not at frothy valuations.” The Stoxx Europe 600 index fell more than 1.5%, with basic resources, consumer and technology stocks leading a broad-based decline.  All sectors are in the red. Euro Stoxx 50 slumps 2.4%. IBEX outperforms peers but still trades off ~1.5%. Here are some of the biggest European movers today: Ahold Delhaize shares gain as much as 3.2%, the best performer in the Stoxx 600’s personal care, drug and grocery stores subgroup, after being upgraded to buy from neutral at UBS, which says the stock is at an “attractive entry point.” S&T rallied in Frankfurt, climbing as much as 18%, after the Austrian company said a forensic audit by Deloitte found allegations by short seller Viceroy Research were almost completely inaccurate. Sensirion shares spike as much as 13%, the most since June 2020, after the Swiss sensor manufacturer reported full- year sales and gave a revenue forecast that blew past analysts’ estimates. Stifel says the company’s growth is driven by all end markets and the performance of new environmental sensors looks “impressive.” Wacker Chemie shares gain as much as 6.9%, as Baader sees dividend proposal 56% above and midpoint ‘22 Ebitda guidance 3% ahead of consensus. Tecan falls as much as 16% after reporting sales for the full year that missed the average analyst estimate, and as the outlook disappointed. Dr. Martens shares tumble as much as 11% to the lowest since listing in January 2021 after RBC cut its price target to a Street-low, citing the bootmaker’s growth outlook. Swedish Match drops as much as 8.4%, the most intraday since February 2021, after the company suspended the spinoff of its U.S. cigar business. The move highlights regulatory risk, according to JPMorgan. Meanwhile, Russia has started the payment process of two bond coupons due this week. Investors are waiting to see if the nation defaults after the U.S. and its allies froze Russia’s foreign-currency reserves. The ruble gained in Moscow trading. Asian stocks plunged, on track for a third-straight daily loss, as the selloff in Chinese technology stocks continued after Monday’s plunge, while traders tried to gauge the impact of an imminent interest-rate hike by the Federal Reserve. The MSCI Asia Pacific Index fell as much as 1.9%, heading for its lowest close since August 2020. Tencent and Alibaba Group were among the biggest drags on the regional index, along with TSMC. The sustained selling pressure came as investors mulled the potential consequences of China’s assistance for Russia’s war in Ukraine and delisting risk for Chinese stocks traded in the U.S. Hong Kong’s benchmark Hang Seng Index tumbled 5.7%, its biggest fall since July 2015, while the Hang Seng Tech Index lost 8.1% following a wild intraday swing. Read: Relentless Selling in China Stocks Evokes Memories of 2008 Crash China’s CSI 300 Index slumped 4.6% as the nation’s strong set of economic data failed to lift sentiment amid market jitters on the rising case numbers of Covid-19. Japanese stocks rose for a second day as a weaker yen boosted the outlook for the nation’s exporters. “There are plenty of storms blowing through China right now,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific. “Fears continue to dog stock markets, that lockdowns could spread, which would severely impact China’s growth.” The risk of tighter monetary policies globally remained on investors’ minds as the Fed this week is expected to announce its first interest rate hike in three years in a bid to curb rising inflation amid surging commodity prices. Markets are now pricing in as many as seven quarter-point hikes for the full year. Lockdowns in major Chinese cities are dimming the outlook for economic growth and posing risks for energy and raw-materials demand, just as concerns about the country’s relationship with Russia stoke a relentless stock selloff.  The virus is also making a comeback in Europe: Germany on Tuesday set a fresh record for infection rates for the four straight day. Austria has also reached new highs, while cases in the Netherlands have doubled since lifting curbs on Feb. 25. Japanese equities rose, extending their rebound to a second day, supported by gains in exporters on a weaker yen. Auto and chemical makers were the biggest boosts to the Topix, which climbed 0.8%. KDDI and Recruit were the biggest contributors to a 0.2% rise in the Nikkei 225, while Fast Retailing fell. The Japanese currency extended its loss against the dollar to a seventh-straight session, weakening more than 3% in that span. Despite its “haven” status,” the yen has dropped as Russia’s war in Ukraine has driven up prices of oil and other raw materials which Japan imports. “The market has already factored in a lot of bad news” regarding Russia and Ukraine, said Hajime Sakai, chief fund manager at Mito Securities. “The weakening of the yen is positive for exporting, but looking further on we need to think of the negative effect from import costs.” In rates, Treasuries unwound a portion of Monday’s sharp selloff with yields richer by up to 4.5bp across front-end of the curve into early U.S. session. U.S. 10-year yield near 2.12% is down ~2bp vs Monday’s close, outperforming bunds and gilts in the sector by ~1bp; 2-year yield drop back to ~1.83% after topping near 1.89% during Asia session. Gilts and bund curves bull-flatten while Treasuries bull-steepen; short-dated USTs outperform bunds and gilts by roughly 2bps. In FX, the Bloomberg Dollar Spot Index fell 0.1% after rising to its highest level since July 2020 in early Asian trade. Treasury yields fell by up to 4bps led by the front-end after rising in early Asian session, when the 10-year yield climbed to 2.17%, the highest since June 2019. Antipodean currencies as well as the Canadian dollar and Norwegian krone were steady to lower as commodities extended losses. The euro extended an Asia session gain, to touch $1.1020 before paring. European benchmark bond yields also fell, yet underperforming Treasuries. Sweden’s krona advanced after inflation expectations rose considerably for the coming two years. Australia’s dollar pares reased an intraday loss, in part on short covering seen after Chinese economic data beat estimates. Reserve Bank said Russia’s invasion of Ukraine has the potential to prolong a period of elevated consumer-price growth and is clouding the economic outlook, minutes of its March 1 policy meeting showed. The yen whipsawed in the spot market as stocks and oil turned south, but options wagers suggest fresh lows versus the dollar may be in store. Whether the greenback can extend its recent rally and maintain its bullish momentum for long depends on options pricing changing course. In commodities, crude futures decline. WTI drifts 5.3% lower to trade around $97.50. Brent falls 5.3% but holds above $101. Most base metals trade in the red; LME aluminum falls 2.3%, underperforming peers. LME tin outperforms, adding 0.4%. Spot gold falls roughly $17 to trade near $1,934/oz. Elsewhere, nickel trading will resume on the London Metal Exchange on Wednesday, over a week after being suspended amid a historic short squeeze. Looking to the day ahead now, markets have PPI for February in the US. In Europe, Germany’s ZEW survey expectations, UK jobless claims change, ILO unemployment rate 3 months, Eurozone ZEW survey expectations and industrial production are all due. Elsewhere, housing starts and manufacturing sales in Canada will be released. Earnings include Volkswagen, RWE and Generali. Market Snapshot S&P 500 futures down 0.4% to 4,154.75 STOXX Europe 600 down 1.7% to 429.03 MXAP down 1.7% to 165.53 MXAPJ down 2.9% to 531.41 Nikkei up 0.2% to 25,346.48 Topix up 0.8% to 1,826.63 Hang Seng Index down 5.7% to 18,415.08 Shanghai Composite down 5.0% to 3,063.97 Sensex down 1.4% to 55,702.16 Australia S&P/ASX 200 down 0.7% to 7,097.45 Kospi down 0.9% to 2,621.53 Brent Futures down 5.7% to $100.79/bbl Gold spot down 0.9% to $1,934.19 U.S. Dollar Index down 0.21% to 98.79 German 10Y yield little changed at 0.33% Euro up 0.5% to $1.0995 Top Overnight News from Bloomberg Germany is preparing to boost the supply of a scarce bond entangled in Russian sanctions, a move that will likely ease pockets of tension in European repo markets. The nation is looking to sell on Tuesday an additional 5.5 billion euros ($6.1 billion) of the notes maturing 2024, which the German government believed became difficult to source after sanctions were imposed against some bondholders Chinese stocks suffered another deep selloff on Tuesday as concerns about the country’s ties with Russia and persistent regulatory pressure sent shares on a downward spiral. The Hang Seng China Enterprises Index, which tracks Chinese shares listed in Hong Kong, sank 6.6%, following a plunge in the previous session that was the biggest since the global financial crisis Fund managers are leery of buying Chinese stocks as the country’s close ties to Russia, extreme Covid-19 curbs and lack of clarity on the end of regulatory crackdowns overwhelm the dip buying opportunity presented by the 75% plunge from their peak China wants to avoid being impacted by U.S. sanctions over Russia’s war, Foreign Minister Wang Yi said, in one of Beijing’s most explicit statements yet on American penalties that are contributing to a historic market selloff The global economy is bracing for greater disruption as China scrambles to contain its worst outbreak of Covid-19 since the pandemic began Russia’s economy is fraying, its currency has collapsed, and its debt is junk. Next up is a potential default that could cost investors billions and shut the country out of most funding markets The dollar has powered ahead of every major currency over the past nine months due to the prospect of Federal Reserve interest-rate hikes but the end of its rally may be in sight, if history is any guide. The U.S. currency has weakened by an average of 4.1% during the Federal Open Market Committee’s four previous tightening cycles Traders are ramping up their bets on the amount of Federal Reserve rate hikes in 2022 but are still toying with the possibility of a rate cut as soon as next year U.K. unemployment dropped below its pre- pandemic level for the first time as companies generated more jobs and granted higher wages than expected. The jobless rate fell to 3.9% in the three months through January, the lowest since the start of 2020 US Event Calendar 8:30am: Feb. PPI Final Demand YoY, est. 10.0%, prior 9.7%; MoM, est. 0.9%, prior 1.0% 8:30am: Feb. PPI Ex Food and Energy YoY, est. 8.7%, prior 8.3%; MoM, est. 0.6%, prior 0.8% 8:30am: March Empire Manufacturing, est. 6.1, prior 3.1 4pm: Jan. Total Net TIC Flows, prior -$52.4b DB's Jim Reid concludes the overnight wrap Some hints of positive diplomatic developments in the Ukraine crisis that materialised on Sunday night helped contribute to another major sell-off in bonds and a mild risk on move in European equities yesterday. While in the States, the reality of the impending Fed tightening cycle pushed yields higher and drove equities lower. Bonds are in a strange situation at the moment as we seem to have reached a point where higher energy prices are deemed to be signalling recessionary risks and encourage flight to quality flows that push nominal yields lower, outweighing the potentially savage inflationary impact. Conversely, the collapse in the likes of oil and gas since early last week has led to a huge rise in yields as it appears policy tightening is back on the central bank menu. Brent is around -25% from its intra-day highs last Tuesday and 10yr bunds are +46.6bps higher since hitting -0.10% last Monday morning. Meanwhile, 1-month futures on Dutch Gas have fallen from a high of 335 last Monday morning to 110.50 at the close last night. Remarkable moves. On the conflict, Russia and Ukraine finished a fourth day of negotiations yesterday and decided to take a pause to assess outcomes. Still, it seems that negotiations are making some progress. Meanwhile, President Zelensky is set to address the US Congress tomorrow, while there were reports that President Biden was considering a trip to Europe to express the US’s steadfast support for NATO allies. Overnight in Asia, most equity markets are down with Hong Kong and Chinese stocks leading regional losses. The Hang Seng (-3.56%) opened sharply lower, slipping more than 4% before recovering slightly as a resurgence of Covid-19 in Hong Kong and China and potential delisting of Chinese stocks from US exchanges weighed on sentiment. The Shanghai Composite (-2.18%) and CSI (-1.75%) are also down even if losses were pared following the release of stronger-than-anticipated economic data. A fresh lockdown in China’s Jilin province of 24 million people is offsetting this. Elsewhere, the Nikkei (+0.33%) is advancing while the Kospi (-0.56%) is lagging. Moving forward, equity futures on the S&P 500 (+0.17%) and Nasdaq (+0.47%) are higher while DAX contracts (-0.45%) are weak. On that China data, industrial output rose a more-than-expected +7.5% y/y in January and February, (vs market estimates of +4.0%) and against a +9.6% gain in December while retail sales grew +6.7% y/y in the same period compared with analyst estimates of a +3.0% increase amid rising demand during the Lunar New Year holidays and the Winter Olympic Games. Meanwhile, fixed asset investment also beat, up by +12.2% y/y YTD in February and well above the forecast for a +5.0% increase. Separately, the People’s Bank of China (PBOC) unexpectedly kept the one-year medium-term lending facility rate (MLF) at 2.85%, resulting in a net injection of 100 billion yuan in fresh funds. The central banks’ action dashed hopes of a rate cut as the policymakers may want to avoid widening policy divergence with the US ahead of their expected hike tomorrow. Oil prices have extended their recent declines this morning with Brent futures sliding -4.0% to trade at $102.64/bbl and with WTI futures -4.2%, breaking below $100/bbl. It saw a similar fall yesterday after opening the week above $109/bbl. Elsewhere, the yield on the 10-year US Treasury note is roughly flat at 2.138%. As discussed at the top, the calm in yields overnight followed a rout yesterday. 10yr bunds eventually rose +11.9bps yesterday as risk premium eased, and to the highest level since November 2018. With a modest +2.2bps uptick in breakevens, most of the move was in real yields. Note that page 24 of the “Dislocations” chart book shows that 10yr real bund yields last week hit all-time low levels. Since those lows last week we’ve backed up +48.8bps. The move in other European sovereign yields was remarkably similar to bunds yesterday with BTPs (+11.3bps), Spanish (+11.0bps) and even Greek (+11.8bps) bonds seeing hardly any change in spreads. US Treasury yields sold even more (10yr +14.1bps) and unlike in Europe, higher yields were met with falling breakevens (-2.3bps) with real yields +16.4bps putting in their biggest daily move since February 2021. No small feat given the considerable sell-off in real rates that marked the beginning of this year. The 2s10s (+2.8bps) curve steepened a little which might be welcomed by the Fed. Yields across the US curve notched fresh cycle highs, with those on 2y (+11.3bps) and 10y reaching the highest levels since summer 2019. Notably, US futures moved to fully price in 7 Fed hikes in 2022 for the first time this cycle, in line with our US econ team’s view. While there were reports of incoming corporate issuance and hedging flows driving the Treasury rate sell-off, it appears markets are waking up to the magnitude of tightening the Fed is about to embark on, starting this week. If the war wasn’t enough to get the ECB to strike a dovish tone, the Fed will be all the more emboldened given fewer direct linkages to growth shocks from the conflict and the higher starting point for inflation. Indeed, in a new periodical we launched yesterday, Questions for the Chair, link here, DB Research personnel offer the questions they would ask Chair Powell at his FOMC press conference. A common question was wouldn’t policy rates need to be higher than current forecasts given the inflationary outlook. It seems markets are coming around to that view. That line of thinking passed through to US equities, where the S&P 500 slid -0.74%. The tech-heavy NASDAQ, which is more exposed to rising rates, underperformed, falling -2.04%. Sector-wise, amid plummeting oil prices energy stocks (-2.93%) performed the worst after a sustained run of outperformance, while financials (+1.23%) were the top performers in the S&P 500 amid a steeper yield curve. European stocks outperformed their American counterparts, with the positive geopolitical noise outweighing a tighter monetary policy path to push major indices into positive territory. The STOXX 600 rallied +1.20%, but gains in country-level benchmarks like the German DAX (+2.21%) and the French CAC 40 (+1.75%) were even more startling amid recent sharp underperformance relative to their US counterparts. The same positive risk sentiment pushed commodity prices lower. We've already mentioned the slump in Oil but European gas prices also fell, with front month Dutch TTF contracts losing -17.29%. Oil prices fell despite no additional supply via Iran, US, Venezuela, or OPEC appearing likely. Instead, it seems as though Russian supply may make its way to buyers such as China and India with fewer frictions than were previously feared. As a secondary consideration, reports of Covid-19 lockdowns in China may have pushed prices lower due to potential lower demand needs. Industrial metals lost steam as well, with aluminium and copper falling -4.69% and -2.24%, respectively, while gold lost -1.89% as markets revised geopolitical risks downwards. One developing story with unclear implications so far is Russia’s request for Chinese support of its invasion. There have been conflicting reports about the veracity of the original claims. We do know that the US National Security Advisor met with his Chinese counterpart yesterday to try and dissuade China from offering any such support. One to keep a very close eye on. To the day ahead now. In today’s data releases, markets have PPI for February in the US. In Europe, Germany’s ZEW survey expectations, UK jobless claims change, ILO unemployment rate 3 months, Eurozone ZEW survey expectations and industrial production are all due. Elsewhere, housing starts and manufacturing sales in Canada will be released. Earnings include Volkswagen, RWE and Generali. Tyler Durden Tue, 03/15/2022 - 07:53.....»»

Category: worldSource: nytMar 15th, 2022

2021 Greatest Hits: The Most Popular Articles Of The Past Year And A Look Ahead

2021 Greatest Hits: The Most Popular Articles Of The Past Year And A Look Ahead One year ago, when looking at the 20 most popular stories of 2020, we said that the year would be a very tough act to follow as there "could not have been more regime shifts, volatility moments, and memes than 2020." And yet despite the exceedingly high bar for 2021, the year did not disappoint and proved to be a successful contender, and if judging by the sheer breadth of narratives, stories, surprises, plot twists and unexpected developments, 2021 was even more memorable and event-filled than 2020. Where does one start? While covid was the story of 2020, the pandemic that emerged out of a (Fauci-funded) genetic lab team in Wuhan, China dominated newsflow, politics and capital markets for the second year in a row. And while the biggest plot twist of 2020 was Biden's victory over Trump in the presidential election (it took the pandemic lockdowns and mail-in ballots to hand the outcome to Biden), largely thanks to Covid, Biden failed to hold to his biggest presidential promise of defeating covid, and not only did he admit in late 2021 that there is "no Federal solution" to covid waving a white flag of surrender less than a year into his presidency, but following the recent emergence of the Xi, pardon Omicron variant, the number of covid cases in the US has just shattered all records. The silver lining is not only that deaths and hospitalizations have failed to follow the number of cases, but that the scaremongering narrative itself is starting to melt in response to growing grassroots discontent with vaccine after vaccine and booster after booster, which by now it is clear, do nothing to contain the pandemic. And now that it is clear that omicron is about as mild as a moderate case of the flu, the hope has finally emerged that this latest strain will finally kill off the pandemic as it becomes the dominant, rapidly-spreading variant, leading to worldwide herd immunity thanks to the immune system's natural response. Yes, it may mean billions less in revenue for Pfizer and Moderna, but it will be a colossal victory for the entire world. The second biggest story of 2021 was undoubtedly the scourge of soaring inflation, which contrary to macrotourist predictions that it would prove "transitory", refused to do so and kept rising, and rising, and rising, until it hit levels not seen since the Volcker galloping inflation days of the 1980s. The only difference of course is that back then, the Fed Funds rate hit 20%. Now it is at 0%, and any attempts to hike aggressively will lead to a horrific market crash, something the Fed knows very well. Whether this was due to supply-chain blockages and a lack of goods and services pushing prices higher, or due to massive stimulus pushing demand for goods - and also prices - higher, or simply the result of a record injection of central bank liquidity into the system, is irrelevant but what does matter is that it got so bad that even Biden, facing a mauling for his Democratic party in next year's midterm elections, freaked out about soaring prices and pushed hard to lower the price of gasoline, ordering releases from the US Strategic Petroleum Reserve and vowing to punish energy companies that dare to make a profit, while ordering Powell to contain the surge in prices even if means the market is hit. Unfortunately for Biden, the market will be hit even as inflation still remain red hot for much of the coming year. And speaking of markets, while 2022 may be a year when the piper finally gets paid, 2021 was yet another blockbuster year for risk assets, largely on the back of the continued global response to the 2020 covid pandemic, when as we wrote last year, we saw "the official arrival of global Helicopter Money, tens of trillions in fiscal and monetary stimulus, an overhaul of the global economy punctuated by an unprecedented explosion in world debt, an Orwellian crackdown on civil liberties by governments everywhere, and ultimately set the scene for what even the World Economic Forum called simply "The Great Reset." Yes, the staggering liquidity injections that started in 2020, continued throughout 2021 and the final tally is that after $3 trillion in emergency liquidity injections in the immediate aftermath of the pandemic to stabilize the world, the Fed injected almost $2 trillion in the subsequent period, of which $1.5 trillion in 2021, a year where economists were "puzzled" why inflation was soaring. This, of course, excludes the tens of trillions of monetary stimulus injected by other central banks as well as the boundless fiscal stimulus that was greenlighted with the launch of helicopter money (i.e., MMT) in 2020. It's also why with inflation running red hot and real rates the lowest they have ever been, everyone was forced to rush into the "safety" of stocks (or stonks as they came to be known among GenZ), and why after last year's torrid stock market returns, the S&P rose another 27% in 2021 and up a staggering 114% from the March 2020 lows, in the process trouncing all previous mega-rallies (including those in 1929, 1938, 1974 and 2009)... ... making this the third consecutive year of double-digit returns. This reminds us of something we said last year: "it's almost as if the world's richest asset owners requested the covid pandemic." A year later, we got confirmation for this rhetorical statement, when we calculated that in the 18 months since the covid pandemic, the richest 1% of US society have seen their net worth increase by over $30 trillion. As a result, the US is now officially a banana republic where the middle 60% of US households by income - a measure economists use as a definition of the middle class - saw their combined assets drop from 26.7% to 26.6% of national wealth as of June, the lowest in Federal Reserve data, while for the first time the super rich had a bigger share, at 27%. Yes, the 1% now own more wealth than the entire US middle class, a definition traditionally reserve for kleptocracies and despotic African banana republics. It wasn't just the rich, however: politicians the world over would benefit from the transition from QE to outright helicopter money and MMT which made the over monetization of deficits widely accepted in the blink of an eye. The common theme here is simple: no matter what happens, capital markets can never again be allowed to drop, regardless of the cost or how much more debt has to be incurred. Indeed, as we look back at the news barrage over the past year, and past decade for that matter, the one thing that becomes especially clear amid the constant din of markets, of politics, of social upheaval and geopolitical strife - and now pandemics -  in fact a world that is so flooded with constant conflicting newsflow and changing storylines that many now say it has become virtually impossible to even try to predict the future, is that despite the people's desire for change, for something original and untried, the world's established forces will not allow it and will fight to preserve the broken status quo at any price - even global coordinated shutdowns - which is perhaps why it always boils down to one thing - capital markets, that bedrock of Western capitalism and the "modern way of life", where control, even if it means central planning the likes of which have not been seen since the days of the USSR, and an upward trajectory must be preserved at all costs, as the alternative is a global, socio-economic collapse. And since it is the daily gyrations of stocks that sway popular moods the interplay between capital markets and politics has never been more profound or more consequential. The more powerful message here is the implicit realization and admission by politicians, not just Trump who had a penchant of tweeting about the S&P every time it rose, but also his peers on both sides of the aisle, that the stock market is now seen as the consummate barometer of one's political achievements and approval. Which is also why capital markets are now, more than ever, a political tool whose purpose is no longer to distribute capital efficiently and discount the future, but to manipulate voter sentiments far more efficiently than any fake Russian election interference attempt ever could. Which brings us back to 2021 and the past decade, which was best summarized by a recent Bill Blain article who said that "the last 10-years has been a story of massive central banking distortion to address the 2008 crisis. Now central banks face the consequences and are trapped. The distortion can’t go uncorrected indefinitely." He is right: the distortion will eventually collapse especially if the Fed follows through with its attempt rate hikes some time in mid-2020, but so far the establishment and the "top 1%" have been successful - perhaps the correct word is lucky - in preserving the value of risk assets: on the back of the Fed's firehose of liquidity the S&P500 returned an impressive 27% in 2021, following a 15.5% return in 2020 and 28.50% in 2019. It did so by staging the greatest rally off all time from the March lows, surpassing all of the 4 greatest rallies off the lows of the past century (1929,1938, 1974, and 2009). Yet this continued can-kicking by the establishment - all of which was made possible by the covid pandemic and lockdowns which served as an all too convenient scapegoat for the unprecedented response that served to propel risk assets (and fiat alternatives such as gold and bitcoin) to all time highs - has come with a price... and an increasingly higher price in fact. As even Bank of America CIO Michael Hartnett admits, Fed's response to the the pandemic "worsened inequality" as the value of financial assets - Wall Street -  relative to economy - Main Street - hit all-time high of 6.3x. And while the Fed was the dynamo that has propelled markets higher ever since the Lehman collapse, last year certainly had its share of breakout moments. Here is a sampling. Gamestop and the emergence of meme stonks and the daytrading apes: In January markets were hypnotized by the massive trading volumes, rolling short squeezes and surging share prices of unremarkable established companies such as consoles retailer GameStop and cinema chain AMC and various other micro and midcap names. What began as a discussion on untapped value at GameStop on Reddit months earlier by Keith Gill, better known as Roaring Kitty, morphed into a hedge fund-orchestrated, crowdsourced effort to squeeze out the short position held by a hedge fund, Melvin Capital. The momentum flooded through the retail market, where daytraders shunned stocks and bought massive out of the money calls, sparking rampant "gamma squeezes" in the process forcing some brokers to curb trading. Robinhood, a popular broker for day traders and Citadel's most lucrative "subsidiary", required a cash injection to withstand the demands placed on it by its clearing house. The company IPOed later in the year only to see its shares collapse as it emerged its business model was disappointing hollow absent constant retail euphoria. Ultimately, the market received a crash course in the power of retail investors on a mission. Ultimately, "retail favorite" stocks ended the year on a subdued note as the trading frenzy from earlier in the year petered out, but despite underperforming the S&P500, retail traders still outperformed hedge funds by more than 100%. Failed seven-year Treasury auction:  Whereas auctions of seven-year US government debt generally spark interest only among specialists, on on February 25 2021, one such typically boring event sparked shockwaves across financial markets, as the weakest demand on record hit prices across the whole spectrum of Treasury bonds. The five-, seven- and 10-year notes all fell sharply in price. Researchers at the Federal Reserve called it a “flash event”; we called it a "catastrophic, tailing" auction, the closest thing the US has had to a failed Trasury auction. The flare-up, as the FT put it, reflects one of the most pressing investor concerns of the year: inflation. At the time, fund managers were just starting to realize that consumer price rises were back with a vengeance — a huge threat to the bond market which still remembers the dire days of the Volcker Fed when inflation was about as high as it is today but the 30Y was trading around 15%. The February auaction also illustrated that the world’s most important market was far less liquid and not as structurally robust as investors had hoped. It was an extreme example of a long-running issue: since the financial crisis the traditional providers of liquidity, a group of 24 Wall Street banks, have pulled back because of higher costs associated with post-2008 capital requirements, while leaving liquidity provision to the Fed. Those banks, in their reduced role, as well as the hedge funds and high-frequency traders that have stepped into their place, have tended to withdraw in moments of market volatility. Needless to say, with the Fed now tapering its record QE, we expect many more such "flash" episodes in the bond market in the year ahead. The arch ego of Archegos: In March 2021 several banks received a brutal reminder that some of family offices, which manage some $6 trillion in wealth of successful billionaires and entrepreneurs and which have minimal reporting requirements, take risks that would make the most serrated hedge fund manager wince, when Bill Hwang’s Archegos Capital Management imploded in spectacular style. As we learned in late March when several high-flying stocks suddenly collapsed, Hwang - a former protege of fabled hedge fund group Tiger Management - had built up a vast pile of leverage using opaque Total Return Swaps with a handful of banks to boost bets on a small number of stocks (the same banks were quite happy to help despite Hwang’s having been barred from US markets in 2013 over allegations of an insider-trading scheme, as he paid generously for the privilege of borrowing the banks' balance sheet). When one of Archegos more recent bets, ViacomCBS, suddenly tumbled it set off a liquidation cascade that left banks including Credit Suisse and Nomura with billions of dollars in losses. Conveniently, as the FT noted, the damage was contained to the banks rather than leaking across financial markets, but the episode sparked a rethink among banks over how to treat these clients and how much leverage to extend. The second coming of cryptos: After hitting an all time high in late 2017 and subsequently slumping into a "crypto winter", cryptocurrencies enjoyed a huge rebound in early 2021 which sent their prices soaring amid fears of galloping inflation (as shown below, and contrary to some financial speculation, the crypto space has traditionally been a hedge either to too much liquidity or a hedge to too much inflation). As a result, Bitcoin rose to a series of new record highs that culminated at just below $62,000, nearly three times higher than their previous all time high. But the smooth ride came to a halt in May when China’s crackdown on the cryptocurrency and its production, or “mining”, sparked the first serious crash of 2021. The price of bitcoin then collapsed as much as 30% on May 19, hitting a low of $30,000 amid a liquidation of levered positions in chaotic trading conditions following a warning from Chinese authorities of tighter curbs ahead. A public acceptance by Tesla chief and crypto cheerleader Elon Musk of the industry’s environmental impact added to the declines. However, as with all previous crypto crashes, this one too proved transitory, and prices resumed their upward trajectory in late September when investors started to price in the launch of futures-based bitcoin exchange traded funds in the US. The launch of these contracts subsequently pushed bitcoin to a new all-time high in early November before prices stumbled again in early December, this time due to a rise in institutional ownership when an overall drop in the market dragged down cryptos as well. That demonstrated the growing linkage between Wall Street and cryptocurrencies, due to the growing sway of large investors in digital markets. China's common prosperity crash: China’s education and tech sectors were one of the perennial Wall Street darlings. Companies such as New Oriental, TAL Education as well as Alibaba and Didi had come to be worth billions of dollars after highly publicized US stock market flotations. So when Beijing effectively outlawed swaths of the country’s for-profit education industry in July 2021, followed by draconian anti-trust regulations on the country's fintech names (where Xi Jinping also meant to teach the country's billionaire class a lesson who is truly in charge), the short-term market impact was brutal. Beijing’s initial measures emerged as part of a wider effort to make education more affordable as part of president Xi Jinping’s drive for "common prosperity" but that quickly raised questions over whether growth prospects across corporate China are countered by the capacity of the government to overhaul entire business models overnight. Sure enough, volatility stemming from the education sector was soon overshadowed by another set of government reforms related to common prosperity, a crackdown on leverage across the real estate sector where the biggest casualty was Evergrande, the world’s most indebted developer. The company, whose boss was not long ago China's 2nd richest man, was engulfed by a liquidity crisis in the summer that eventually resulted in a default in early December. Still, as the FT notes, China continues to draw in huge amounts of foreign capital, pushing the Chinese yuan to end 2021 at the strongest level since May 2018, a major hurdle to China's attempts to kickstart its slowing economy, and surely a precursor to even more monetary easing. Natgas hyperinflation: Natural gas supplanted crude oil as the world’s most important commodity in October and December as prices exploded to unprecedented levels and the world scrambled for scarce supplies amid the developed world's catastrophic transition to "green" energy. The crunch was particularly acute in Europe, which has become increasingly reliant on imports. Futures linked to TTF, the region’s wholesale gas price, hit a record €137 per megawatt hour in early October, rising more than 75%. In Asia, spot liquefied natural gas prices briefly passed the equivalent of more than $320 a barrel of oil in October. (At the time, Brent crude was trading at $80). A number of factors contributed, including rising demand as pandemic restrictions eased, supply disruptions in the LNG market and weather-induced shortfalls in renewable energy. In Europe, this was aggravated by plunging export volumes from Gazprom, Russia’s state-backed monopoly pipeline supplier, amid a bitter political fight over the launch of the Nordstream 2 pipeline. And with delays to the Nord Stream 2 gas pipeline from Russia to Germany, analysts say the European gas market - where storage is only 66% full - a cold snap or supply disruption away from another price spike Turkey's (latest) currency crisis:  As the FT's Jonathan Wheatley writes, Recep Tayyip Erdogan was once a source of strength for the Turkish lira, and in his first five years in power from 2003, the currency rallied from TL1.6 per US dollar to near parity at TL1.2. But those days are long gone, as Erdogan's bizarre fascination with unorthodox economics, namely the theory that lower rates lead to lower inflation also known as "Erdoganomics", has sparked a historic collapse in the: having traded at about TL7 to the dollar in February, it has since fallen beyond TL17, making it the worst performing currency of 2021. The lira’s defining moment in 2021 came on November 18 when the central bank, in spite of soaring inflation, cut its policy rate for the third time since September, at Erdogan’s behest (any central banker in Turkey who disagrees with "Erdoganomics" is promptly fired and replaced with an ideological puppet). The lira recovered some of its losses in late December when Erdogan came up with the "brilliant" idea of erecting the infamous "doom loop" which ties Turkey's balance sheet to its currency. It has worked for now (the lira surged from TL18 against the dollar to TL12, but this particular band aid solution will only last so long). The lira’s problems are not only Erdogan’s doing. A strengthening dollar, rising oil prices, the relentless covid pandemic and weak growth in developing economies have been bad for other emerging market currencies, too, but as long as Erdogan is in charge, shorting the lira remains the best trade entering 2022. While these, and many more, stories provided a diversion from the boring existence of centrally-planned markets, we are confident that the trends observed in recent years will continue: coming years will be marked by even bigger government (because only more government can "fix" problems created by government), higher stock prices and dollar debasement (because only more Fed intervention can "fix" the problems created by the Fed), and a policy flip from monetary and QE to fiscal & MMT, all of which will keep inflation at scorching levels, much to the persistent confusion of economists everywhere. Of course, we said much of this last year as well, but while we got most trends right, we were wrong about one thing: we were confident that China's aggressive roll out of the digital yuan would be a bang - or as we put it "it is very likely that while 2020 was an insane year, it may prove to be just an appetizer to the shockwaves that will be unleashed in 2021 when we see the first stage of the most historic overhaul of the fiat payment system in history" - however it turned out to be a whimper. A big reason for that was that the initial reception of the "revolutionary" currency was nothing short of disastrous, with Chinese admitting they were "not at all excited" about the prospect of yet one more surveillance mechanism for Beijing, because that's really what digital currencies are: a way for central banks everywhere to micromanage and scrutinize every single transaction, allowing the powers that be to demonetize any one person - or whole groups - with the flick of a switch. Then again, while digital money may not have made its triumphant arrival in 2021, we are confident that the launch date has merely been pushed back to 2022 when the rollout of the next monetary revolution is expected to begin in earnest. Here we should again note one thing: in a world undergoing historic transformations, any free press must be throttled and controlled, and over the past year we have seen unprecedented efforts by legacy media and its corporate owners, as well as the new "social media" overlords do everything in their power to stifle independent thought. For us it had been especially "personal" on more than one occasions. Last January, Twitter suspended our account because we dared to challenge the conventional narrative about the source of the Wuhan virus. It was only six months later that Twitter apologized, and set us free, admitting it had made a mistake. Yet barely had twitter readmitted us, when something even more unprecedented happened: for the first time ever (to our knowledge) Google - the world's largest online ad provider and monopoly - demonetized our website not because of any complaints about our writing but because of the contents of our comment section. It then held us hostage until we agreed to implement some prerequisite screening and moderation of the comments section. Google's action was followed by the likes of PayPal, Amazon, and many other financial and ad platforms, who rushed to demonetize and suspend us simply because they disagreed with what we had to say. This was a stark lesson in how quickly an ad-funded business can disintegrate in this world which resembles the dystopia of 1984 more and more each day, and we have since taken measures. One year ago, for the first time in our 13 year history, we launched a paid version of our website, which is entirely ad and moderation free, and offers readers a variety of premium content. It wasn't our intention to make this transformation but unfortunately we know which way the wind is blowing and it is only a matter of time before the gatekeepers of online ad spending block us again. As such, if we are to have any hope in continuing it will come directly from you, our readers. We will keep the free website running for as long as possible, but we are certain that it is only a matter of time before the hammer falls as the censorship bandwagon rolls out much more aggressively in the coming year. That said, whether the story of 2022, and the next decade for that matter, is one of helicopter or digital money, of (hyper)inflation or deflation: what is key, and what we learned in the past decade, is that the status quo will throw anything at the problem to kick the can, it will certainly not let any crisis go to waste... even the deadliest pandemic in over a century. And while many already knew that, the events of 2021 made it clear to a fault that not even a modest market correction can be tolerated going forward. After all, if central banks aim to punish all selling, then the logical outcome is to buy everything, and investors, traders and speculators did just that armed with the clearest backstop guarantee from the Fed, which in the deapths of the covid crash crossed the Rubicon when it formally nationalized the bond market as it started buying both investment grade bonds and junk bond ETFs in the open market. As such it is no longer even a debatable issue if the Fed will buy stocks after the next crash - the only question is when. Meanwhile, for all those lamenting the relentless coverage of politics in a financial blog, why finance appears to have taken a secondary role, and why the political "narrative" has taken a dominant role for financial analysts, the past year showed vividly why that is the case: in a world where markets gyrated, and "rotated" from value stocks to growth and vice versa, purely on speculation of how big the next stimulus out of Washington will be, the narrative over Biden's trillions proved to be one of the biggest market moving events for much of the year. And with the Biden stimulus plan off the table for now, the Fed will find it very difficult to tighten financial conditions, especially if it does so just as the economy is slowing. Here we like to remind readers of one of our favorite charts: every financial crisis is the result of Fed tightening. As for predictions about the future, as the past two years so vividly showed, when it comes to actual surprises and all true "black swans", it won't be what anyone had expected. And so while many themes, both in the political and financial realm, did get some accelerated closure courtesy of China's covid pandemic, dramatic changes in 2021 persisted, and will continue to manifest themselves in often violent and unexpected ways - from the ongoing record polarization in the US political arena, to "populist" upheavals around the developed world, to the gradual transition to a global Universal Basic (i.e., socialized) Income regime, to China's ongoing fight with preserving stability in its gargantuan financial system which is now two and a half times the size of the US. As always, we thank all of our readers for making this website - which has never seen one dollar of outside funding (and despite amusing recurring allegations, has certainly never seen a ruble from the KGB either, although now that the entire Russian hysteria episode is over, those allegations have finally quieted down), and has never spent one dollar on marketing - a small (or not so small) part of your daily routine. Which also brings us to another critical topic: that of fake news, and something we - and others who do not comply with the established narrative - have been accused of. While we find the narrative of fake news laughable, after all every single article in this website is backed by facts and links to outside sources, it is clearly a dangerous development, and a very slippery slope that the entire developed world is pushing for what is, when stripped of fancy jargon, internet censorship under the guise of protecting the average person from "dangerous, fake information." It's also why we are preparing for the next onslaught against independent thought and why we had no choice but to roll out a premium version of this website. In addition to the other themes noted above, we expect the crackdown on free speech to accelerate in the coming year when key midterm elections will be held, especially as the following list of Top 20 articles for 2021 reveals, many of the most popular articles in the past year were precisely those which the conventional media would not touch out of fear of repercussions, which in turn allowed the alternative media to continue to flourish in an orchestrated information vacuum and take significant market share from the established outlets by covering topics which the public relations arm of established media outlets refused to do, in the process earning itself the derogatory "fake news" condemnation. We are grateful that our readers - who hit a new record high in 2021 - have realized it is incumbent upon them to decide what is, and isn't "fake news." * * * And so, before we get into the details of what has now become an annual tradition for the last day of the year, those who wish to jog down memory lane, can refresh our most popular articles for every year during our no longer that brief, almost 11-year existence, starting with 2009 and continuing with 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019 and 2020. So without further ado, here are the articles that you, our readers, found to be the most engaging, interesting and popular based on the number of hits, during the past year. In 20th spot with 600,000 reads, was an article that touched on one of the most defining features of the market: the reflation theme the sparked a massive rally at the start of the year courtesy of the surprise outcome in the Georgia Senate race, where Democrats ended up wining both seats up for grabs, effectively giving the Dems a majority in both the House and the Senate, where despite the even, 50-seat split, Kamala Harris would cast the winning tie-breaker vote to pursue a historic fiscal stimulus. And sure enough, as we described in "Bitcoin Surges To Record High, Stocks & Bonds Battered As Dems Look Set To Take Both Georgia Senate Seats", with trillions in "stimmies" flooding both the economy and the market, not only did retail traders enjoy unprecedented returns when trading meme "stonks" and forcing short squeezes that crippled numerous hedge funds, but expectations of sharply higher inflation also helped push bitcoin and the entire crypto sector to new all time highs, which in turn legitimized the product across institutional investors and helped it reach a market cap north of $3 trillion.  In 19th spot, over 613,000 readers were thrilled to read at the start of September that "Biden Unveils Most Severe COVID Actions Yet: Mandates Vax For All Federal Workers, Contractors, & Large Private Companies." Of course, just a few weeks later much of Biden's mandate would be struck down in courts, where it is now headed to a decision by SCOTUS, while the constantly shifting "scientific" goal posts mean that just a few months later the latest set of CDC regulations have seen regulators and officials reverse the constant drone of fearmongering and are now even seeking to cut back on the duration of quarantine and other lockdown measures amid a public mood that is growing increasingly hostile to the government response. One of the defining political events of 2021 was the so-called "Jan 6 Insurrection", which the for America's conservatives was blown wildly out of proportion yet which the leftist media and Democrats in Congress have been periodically trying to push to the front pages in hopes of distracting from the growing list of failures of the Obama admin. Yet as we asked back in January, "Why Was Founder Of Far-Left BLM Group Filming Inside Capitol As Police Shot Protester?" No less than 614,000 readers found this question worthy of a response. Since then many more questions have emerged surrounding this event, many of which focus on what role the FBI had in organizing and encouraging this event, including the use of various informants and instigators. For now, a response will have to wait at least until the mid-term elections of 2022 when Republicans are expected to sweep one if not both chambers. Linked to the above, the 17th most read article of 2021 with 617,000 views, was an article we published on the very same day, which detailed that "Armed Protesters Begin To Arrive At State Capitols Around The Nation." At the end of the day, it was much ado about nothing and all protests concluded peacefully and without incident: perhaps the FBI was simply spread too thin? 2021 was a year defined by various waves of the covid pandemic which hammered poor Americans forced to hunker down at home and missing on pay, and crippled countless small mom and pop businesses. And yet, it was also a bonanza for a handful of pharma companies such as Pfizer and Moderna which made billions from the sale of "vaccines" which we now know do little if anything to halt the spread of the virus, and are instead now being pitched as palliatives, preventing a far worse clinical outcome. The same pharma companies also benefited from an unconditional indemnity, which surely would come in useful when the full side-effects of their mRNA-based therapies became apparent. One such condition to emerge was myocarditis among a subset of the vaxxed. And while the vaccines continue to be broadly rolled out across most developed nations, one place that said enough was Sweden. As over 620,000 readers found out in "Sweden Suspends Moderna Shot Indefinitely After Vaxxed Patients Develop Crippling Heart Condition", not every country was willing to use its citizens as experimental guniea pigs. This was enough to make the article the 16th most read on these pages, but perhaps in light of the (lack of) debate over the pros and cons of the covid vaccines, this should have been the most read article this year? Moving on to the 15th most popular article, 628,000 readers were shocked to learn that "Chase Bank Cancels General Mike Flynn's Credit Cards." The action, which was taken by the largest US bank due to "reputational risk" echoed a broad push by tech giants to deplatform and silence dissenting voices by literally freezing them out of the financial system. In the end, following widespread blowback from millions of Americans, JPMorgan reversed, and reactivated Flynn's cards saying the action was made in error, but unfortunately this is just one example of how those in power can lock out any dissenters with the flick of a switch. And while democrats cheer such deplatforming today, the political winds are fickle, and we doubt they will be as excited once they find themselves on the receiving end of such actions. And speaking of censorship and media blackouts, few terms sparked greater response from those in power than the term Ivermectin. Viewed by millions as a cheap, effective alternative to offerings from the pharmaceutical complex, social networks did everything in their power to silence any mention of a drug which the Journal of Antibiotics said in 2017 was an "enigmatic multifaceted ‘wonder’ drug which continues to surprise and exceed expectations." Nowhere was this more obvious than in the discussion of how widespread use of Ivermectin beat Covid in India, the topic of the 14th most popular article of 2021 "India's Ivermectin Blackout" which was read by over 653,000 readers. Unfortunately, while vaccines continue to fail upward and now some countries are now pushing with a 4th, 5th and even 6th vaccine, Ivermectin remains a dirty word. There was more covid coverage in the 13th most popular article of 2021, "Surprise Surprise - Fauci Lied Again": Rand Paul Reacts To Wuhan Bombshell" which was viewed no less than 725,000 times. Paul's reaction came following a report which revealed that Anthony Fauci's NIAID and its parent, the NIH, funded Gain-of-Function research in Wuhan, China, strongly hinting that the emergence of covid was the result of illicit US funding. Not that long ago, Fauci had called Paul a 'liar' for accusing him of funding the risky research, in which viruses are genetically modified or otherwise altered to make them more transmissible to humans. And while we could say that Paul got the last laugh, Fauci still remains Biden's top covid advisor, which may explain why one year after Biden vowed he would shut down the pandemic, the number of new cases just hit a new all time high. One hope we have for 2022 is that people will finally open their eyes... 2021 was not just about covid - soaring prices and relentless inflation were one of the most poignant topics. It got so bad that Biden's approval rating - and that of Democrats in general - tumbled toward the end of the year, putting their mid-term ambitions in jeopardy, as the public mood soured dramatically in response to the explosion in prices. And while one can debate whether it was due to supply-issues, such as the collapse in trans-pacific supply chains and the chronic lack of labor to grow the US infrastructure, or due to roaring demand sparked by trillions in fiscal stimulus, but when the "Big Short" Michael Burry warned that hyperinflation is coming, the people listened, and with over 731,000 reads, the 12th most popular article of 2021 was "Michael Burry Warns Weimar Hyperinflation Is Coming."  Of course, Burry did not say anything we haven't warned about for the past 12 years, but at least he got the people's attention, and even mainstream names such as Twitter founder Jack Dorsey agreed with him, predicting that bitcoin will be what is left after the dollar has collapsed. While hyperinflation may will be the endgame, the question remains: when. For the 11th most read article of 2021, we go back to a topic touched upon moments ago when we addressed the full-blown media campaign seeking to discredit Ivermectin, in this case via the D-grade liberal tabloid Rolling Stone (whose modern incarnation is sadly a pale shadow of the legend that house Hunter S. Thompson's unforgettable dispatches) which published the very definition of fake news when it called Ivermectin a "horse dewormer" and claimed that, according to a hospital employee, people were overdosing on it. Just a few hours later, the article was retracted as we explained in "Rolling Stone Issues 'Update' After Horse Dewormer Hit-Piece Debunked" and over 812,000 readers found out that pretty much everything had been a fabrication. But of course, by then it was too late, and the reputation of Ivermectin as a potential covid cure had been further tarnished, much to the relief of the pharma giants who had a carte blanche to sell their experimental wares. The 10th most popular article of 2021 brings us to another issue that had split America down the middle, namely the story surrounding Kyle Rittenhouse and the full-blown media campaign that declared the teenager guilty, even when eventually proven innocent. Just days before the dramatic acquittal, we learned that "FBI Sat On Bombshell Footage From Kyle Rittenhouse Shooting", which was read by over 822,000 readers. It was unfortunate to learn that once again the scandal-plagued FBI stood at the center of yet another attempt at mass misinformation, and we can only hope that one day this "deep state" agency will be overhauled from its core, or better yet, shut down completely. As for Kyle, he will have the last laugh: according to unconfirmed rumors, his numerous legal settlements with various media outlets will be in the tens if not hundreds of millions of dollars.  And from the great US social schism, we again go back to Covid for the 9th most popular article of 2021, which described the terrifying details of one of the most draconian responses to covid in the entire world: that of Australia. Over 900,000 readers were stunned to read that the "Australian Army Begins Transferring COVID-Positive Cases, Contacts To Quarantine Camps." Alas, the latest surge in Australian cases to nosebleed, record highs merely confirms that this unprecedented government lockdown - including masks and vaccines - is nothing more than an exercise in how far government can treat its population as a herd of sheep without provoking a violent response.  The 8th most popular article of 2021 looks at the market insanity of early 2021 when, at the end of January, we saw some of the most-shorted, "meme" stocks explode higher as the Reddit daytrading horde fixed their sights on a handful of hedge funds and spent billions in stimmies in an attempt to force unprecedented ramps. That was the case with "GME Soars 75% After-Hours, Erases Losses After Liquidity-Constrained Robinhood Lifts Trading Ban", which profiled the daytrading craze that gave an entire generation the feeling that it too could win in these manipulated capital markets. Then again, judging by the waning retail interest, it is possible that the excitement of the daytrading army is fading as rapidly as it first emerged, and that absent more "stimmies" markets will remain the playground of the rich and central banks. Kyle Rittenhouse may soon be a very rich man after the ordeal he went through, but the media's mission of further polarizing US society succeeded, and millions of Americans will never accept that the teenager was innocent. It's also why with just over 1 million reads, the 7th most read article on Zero Hedge this year was that "Portland Rittenhouse Protest Escalates Into Riot." Luckily, this is not a mid-term election year and there were no moneyed interests seeking to prolong this particular riot, unlike what happened in the summer of 2020... and what we are very much afraid will again happen next year when very critical elections are on deck.  With just over 1.03 million views, the 6th most popular post focused on a viral Twitter thread on Friday from Dr Robert Laone, which laid out a disturbing trend; the most-vaccinated countries in the world are experiencing  a surge in COVID-19 cases, while the least-vaccinated countries were not. As we originally discussed in ""This Is Worrying Me Quite A Bit": mRNA Vaccine Inventor Shares Viral Thread Showing COVID Surge In Most-Vaxxed Countries", this trend has only accelerated in recent weeks with the emergence of the Omicron strain. Unfortunately, instead of engaging in a constructive discussion to see why the science keeps failing again and again, Twitter's response was chilling: with just days left in 2021, it suspended the account of Dr. Malone, one of the inventors of mRNA technology. Which brings to mind something Aaron Rogers said: "If science can't be questioned it's not science anymore it's propaganda & that's the truth." In a year that was marked a flurry of domestic fiascoes by the Biden administration, it is easy to forget that the aged president was also responsible for the biggest US foreign policy disaster since Vietnam, when the botched evacuation of Afghanistan made the US laughing stock of the world after 12 US servicemembers were killed. So it's probably not surprising that over 1.1 million readers were stunned to watch what happened next, which we profiled in the 5th most popular post of 2021, where in response to the Afghan trajedy, "Biden Delivers Surreal Press Conference, Vows To Hunt Down Isis, Blames Trump." One person watching the Biden presser was Xi Jinping, who may have once harbored doubts about reclaiming Taiwan but certainly does not any more. The 4th most popular article of 2021 again has to do with with covid, and specifically the increasingly bizarre clinical response to the disease. As we detailed in "Something Really Strange Is Happening At Hospitals All Over America" while emergency rooms were overflowing, it certainly wasn't from covid cases. Even more curiously, one of the primary ailments leading to an onslaught on ERs across the nation was heart-related issues, whether arrhytmia, cardiac incidents or general heart conditions. We hope that one day there will be a candid discussion on this topic, but until then it remains one of the topics seen as taboo by the mainstream media and the deplatforming overlords, so we'll just leave it at that. We previously discussed the anti-Ivermectin narrative that dominated the mainstream press throughout 2021 and the 3rd most popular article of the year may hold clues as to why: in late September, pharma giant Pfizer and one of the two companies to peddle an mRNA based vaccine, announced that it's launching an accelerated Phase 2/3 trial for a COVID prophylactic pill designed to ward off COVID in those may have come in contact with the disease. And, as we described in "Pfizer Launches Final Study For COVID Drug That's Suspiciously Similar To 'Horse Paste'," 1.75 million readers learned that Pfizer's drug shared at least one mechanism of action as Ivermectin - an anti-parasitic used in humans for decades, which functions as a protease inhibitor against Covid-19, which researchers speculate "could be the biophysical basis behind its antiviral efficiency." Surely, this too was just another huge coincidence. In the second most popular article of 2021, almost 2 million readers discovered (to their "shock") that Fauci and the rest of Biden's COVID advisors were proven wrong about "the science" of COVID vaccines yet again. After telling Americans that vaccines offer better protection than natural infection, a new study out of Israel suggested the opposite is true: natural infection offers a much better shield against the delta variant than vaccines, something we profiled in "This Ends The Debate' - Israeli Study Shows Natural Immunity 13x More Effective Than Vaccines At Stopping Delta." We were right about one thing: anyone who dared to suggest that natural immunity was indeed more effective than vaccines was promptly canceled and censored, and all debate almost instantly ended. Since then we have had tens of millions of "breakout" cases where vaccinated people catch covid again, while any discussion why those with natural immunity do much better remains under lock and key. It may come as a surprise to many that the most read article of 2021 was not about covid, or Biden, or inflation, or China, or even the extremely polarized US congress (and/or society), but was about one of the most long-suffering topics on these pages: precious metals and their prices. Yes, back in February the retail mania briefly targeted silver and as millions of reddit daytraders piled in in hopes of squeezing the precious metal higher, the price of silver surged higher only to tumble just as quickly as it has risen as the seller(s) once again proved more powerful than the buyers. We described this in "Silver Futures Soar 8%, Rise Above $29 As Reddit Hordes Pile In", an article which some 2.4 million gold and silver bugs read with hope, only to see their favorite precious metals slump for much of the rest of the year. And yes, the fact that both gold and silver ended the year sharply lower than where they started even though inflation hit the highest level in 40 years, remains one of the great mysteries of 2021. With all that behind us, and as we wave goodbye to another bizarre, exciting, surreal year, what lies in store for 2022, and the next decade? We don't know: as frequent and not so frequent readers are aware, we do not pretend to be able to predict the future and we don't try despite endless allegations that we constantly predict the collapse of civilization: we leave the predicting to the "smartest people in the room" who year after year have been consistently wrong about everything, and never more so than in 2021 (even the Fed admitted it is clueless when Powell said it was time to retire the term "transitory"), which destroyed the reputation of central banks, of economists, of conventional media and the professional "polling" and "strategist" class forever, not to mention all those "scientists" who made a mockery of the "expertise class" with their bungled response to the covid pandemic. We merely observe, find what is unexpected, entertaining, amusing, surprising or grotesque in an increasingly bizarre, sad, and increasingly crazy world, and then just write about it. We do know, however, that after a record $30 trillion in stimulus was conjured out of thin air by the world's central banks and politicians in the past two years, the attempt to reverse this monetary and fiscal firehose in a world addicted to trillions in newly created liquidity now that central banks are freaking out after finally getting ot the inflation they were hoping to create for so long, will end in tears. We are confident, however, that in the end it will be the very final backstoppers of the status quo regime, the central banking emperors of the New Normal, who will eventually be revealed as fully naked. When that happens and what happens after is anyone's guess. But, as we have promised - and delivered - every year for the past 13, we will be there to document every aspect of it. Finally, and as always, we wish all our readers the best of luck in 2022, with much success in trading and every other avenue of life. We bid farewell to 2021 with our traditional and unwavering year-end promise: Zero Hedge will be there each and every day - usually with a cynical smile - helping readers expose, unravel and comprehend the fallacy, fiction, fraud and farce that defines every aspect of our increasingly broken system. Tyler Durden Sun, 01/02/2022 - 03:44.....»»

Category: personnelSource: nytJan 2nd, 2022

Futures Drift Higher In Quiet, Holiday Session

Futures Drift Higher In Quiet, Holiday Session US equity futures rose (ahead of a cash session that is closed for Thanksgiving holiday), European stocks were mixed and Asian snapped a three-day losing streak on Thursday, hurt by the U.S. dollar which continued to march higher as investors bet on interest rates rising more quickly in the United States than in other major economies such as Japan and the euro zone. Overnight Goldman (which only a few weeks ago brought forward its liftoff forecast by one year to July 2002) said that it now expects the Fed "to announce at its December meeting that it is doubling the pace of tapering to $30bn per month starting in January." That forecast, however, has not spooked futures with S&P 500 and Nasdaq eminis rising by 7 points (0.14%) and 28 points (0.17%) respectively, in a listless session - trading volumes on the MSCI’s gauge of world equities slid 18% from its 30-day average. The dollar rose again, hitting a fresh 16-month high. Remy Cointreau SA jumped 11% in Europe on an earnings beat. Base metals rallied, with nickel near the highest level in seven years. Unlike recent sharp drawdowns, on Wednesday U.S. stocks proved resilient to a slew of strong economic data and Fed minutes on Wednesday that hinted at stagflationary concerns and supported expectations for a quicker removal of stimulus by the Fed. And while inflation concerns deepened, and traders appeared in no mood to miss a year-end calendar meltup, rising bets not only for a quicker taper, but also an earlier liftoff of interest rates, suggest caution may return after Thanksgiving. “The market mood is rather OK-ish after the minutes,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note. “At this point, it makes sense to expect an earlier, and maybe a steeper rate normalization from the Fed.” European stocks traded off opening highs with Euro Stoxx 50 up as much as 0.7% before stalling and trading up 0.25% last. Utilities, tech and financial services are the strongest performers; travel remains under pressure as Covid measures are still in focus. MSCI’s global equity benchmark headed for the biggest advance since Nov. 16 as European traders shrugged off a worsening Covid-19 situation in the continent. The Stoxx 600 gauge was boosted by utilities and real estate companies. Remy Cointreau soared to a record high after the French distiller reported first-half results that Citigroup Inc. called “truly exceptional.” Earlier in the session, Asian equities were poised to snap a three-day losing streak, as traders continued to weigh the prospects of higher inflation and faster-than-expected tapering by the U.S. Federal Reserve. The MSCI Asia Pacific Index rose as much as 0.3% Thursday, with Japanese stocks among the leaders as the dollar held a three-day advance against the yen. In Hong Kong, shares of Kaisa Group Holdings Ltd's (1638.HK) rose as much as 24% on their return to trading, after the embattled Chinese developer said it was offering bondholders an option to exchange existing bonds with new bonds having an extended maturity, to improve financial stability. In India, Reliance shares returned to a price level reached prior to the scrapping of the Indian conglomerate’s deal with Saudi Aramco.  Asian stocks are hovering near a six-week low as a strong dollar remains a headwind for emerging-market equities, while higher U.S. Treasury yields have dragged down technology and other growth stocks around the region. The latest Fed minutes suggested it will accelerate the pace of tapering and rate hikes if inflation persistently stays above the targeted rate and maintains its uptrend, said Banny Lam, head of research at CEB International Investment. “Strong dollar concerns remain intact on earlier-than-expected rate hikes, intensifying the inflation of emerging markets.” South Korean stocks were among the biggest decliners after the nation’s central bank hiked its key interest rate by 25 basis points to 1%, as expected, citing faster inflation. In broad terms, "when it comes to regional equities allocation, we're watching the U.S. dollar which is making new highs and that is a headwind for emerging market equities," said Fook-Hien Yap, senior investment strategist at Standard Chartered Bank wealth management. "The market is now pricing in more than two hikes next year, but we think that is overly aggressive. We are only looking for about one hike next year," said Yap. These expectations have pushed U.S. treasury yields higher, albeit inconsistently, with benchmark 10 year notes last yielding 1.6427% having risen as high as 1.6930% on Wednesday. U.S. Treasuries will not trade on Thursday because of the Thanksgiving holiday. U.S. stock markets will also be closed and will have a shortened session on Friday. Sure enough, fixed income markets are quiet. Bund and gilt curves bull flatten a touch, cash Treasuries remain closed for Thanksgiving. In other central bank news, the Bank of Korea raised its policy interest rate by 25 basis points on Thursday, as widely expected, as concern about rising household debt and inflation offset uncertainty around a resurgence in COVID-19 cases. In FX, the Bloomberg dollar index recovered Asia’s small weakness to trade flat. SEK is the best performer in G-10 with EUR/SEK down 0.4% after the Riksbank tweaked inflation forecasts slightly and signaled that they see a case for a higher benchmark rate in 2024. NZD and AUD lag with most majors trading a narrow range. The dollar is trading near its highest in almost five years versus the Japanese currency at 115.3 yen, and nearly 18 months to the euro which was at $1.1206. In commodities, oil prices were mixed after a turbulent few days in which the United States said it would release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and Britain to try to cool oil prices after calls to OPEC+ to pump more went unheeded. However, investors laughed at the programme's effectiveness, leading to price gains. Brent crude was last at $82.14 a barrel, down 0.1%. Action continued to heat up in the base metals market. Nickel rose in London toward the highest level since May 2014 on a closing basis as shrinking inventories pointed to tight supply. Aluminum and copper extended their two-day increase to at least 2% each. Looking at the day ahead, it's a fairly quiet calendar given the Thanksgiving holiday in the US. On the central bank side however, we’ll hear from ECB President Lagarde, and the ECB’s Villeroy, Elderson and Schnabel, along with BoE Governor Bailey and the BoE’s Haskel. On top of that, the ECB will release the account of their October meeting, and data releases include the German GfK consumer confidence reading for December. A more detailed look at global markets courtesy of Newsquawk Asian equities traded mixed following on from the tentative mood in US where the major indices headed into the Thanksgiving holiday with a slight positive bias although upside was capped as participants digested a deluge of mixed data releases and hawkish leaning FOMC Minutes which suggested an increased likelihood of a taper adjustment. ASX 200 (+0.1%) was choppy as outperformance in tech and miners was counterbalanced by losses in consumer stocks, energy and the top-weighted financials sector, while mixed capex data which showed a larger than expected contraction for Q3 further added to the headwinds. Nikkei 225 (+0.7%) outperformed and reclaimed the 29,500 level after the recent favourable currency flows and stimulus optimism with Japan considering offering a JPY 5k inbound travel subsidy and is planning a JPY 22.1tln government bond sale as part of economic stimulus and extra budget. KOSPI (-0.4%) softened amid a widely expected 25bps rate hike by the BoK and with BoK Governor Lee suggesting the potential for another hike in Q1 next year. Hang Seng (+0.1%) and Shanghai Comp. (-0.1%) lacked direction amid ongoing frictions including issues related to Taiwan and after the US Commerce Department placed 12 Chinese companies/entities on its entity list due to national security concerns, while EU ambassadors approved to renew sanctions on four Chinese officials and one Chinese entity for human rights abuses. However, the downside for Chinese bourses was limited after another tepid PBoC liquidity effort and with a local press report noting that China is to use more fiscal policy to support growth. There were also reports that Chengdu city launched measures to help developers with cash problems in obtaining funds, while Kaisa Group shares saw a double-digit percentage jump on reopen from a three-week trading halt after it offered to exchange bonds for new bonds with an extended maturity in an effort to improve financial stability and remain afloat. Finally, 10yr JGBs were rangebound after the sideways price action seen in global counterparts and cautious risk tone in Asia, while the results of the latest 40yr JGB auction were also inconclusive with a weaker b/c offset by an increase in the low price. European cash equities (Euro Stoxx 50 +0.3%; Stoxx 600 +0.2%) trade on a modestly in the green but off best levels as bourses’ attempt to reclaim some of the lost ground seen throughout the week somewhat lost momentum, with the Stoxx 600 down 1.3% WTD. Macro drivers for the region remain a combination of this week’s (slightly stale) survey metrics, ECB speak and COVID angst with the latter providing a bulk of the direction for European assets this week. The handover from the APAC region was a somewhat mixed one as the Nikkei 225 (+0.6%) continued to benefit from favourable currency flows and ongoing stimulus hopes whilst Chinese stocks (Shanghai Comp -0.2%) digested a combination of US-China tensions over Taiwan, EU sanctions on China and expectations of domestic fiscal measures to support growth. Futures in the US (ahead of the early close) are currently on a mildly firmer footing (ES +0.3%) however, traders will likely not pay much credence to these moves given that the cash markets are closed today. The latest BofA flow show noted that stocks saw just their second week of outflows for the year, albeit equities have posted USD 839bln of inflows in 2021 which is more than the USD 785bln seen in the past 19 years combined. Elsewhere, SocGen is of the view that the bull market is not over for European equities and the cycle has further room to run into next year as inflation peaks and Fed-ECB policy diverges. SocGen’s end-2022 target of 520 implies a 9% upside from current levels. Sectors in Europe are mostly firmer with the Food & Beverage sector a top performer amid gains in Remy Cointreau (+11%) who sit at the top of the Stoxx 600 post-earnings which saw the Co. raise its profit outlook. In sympathy, Pernod Ricard (+2.0%), Campari (+1.1%) and Diageo (+0.8%) are all seen higher. To the downside, Travel & Leisure names lag amid ongoing losses in sector-heavyweight Evolution (-5.6%) with the latest update for the Co. noting it has contacted New Jersey regulators and launched an internal probe following accusations the company is conducting business in US blacklisted countries. Also of note for the sector, reports suggest that the EU is set to endorse a 9-month limit on COVID-19 vaccine validity in travel. Finally, Vivo Energy (+20%) is seen higher on the session after Vitol reached an agreement to purchase the Co. for USD 1.85/shr. In FX, the index sees a mild pullback in early European trade on Thanksgiving Day Holiday, after notching a fresh YTD peak yesterday at 96.938 with traders also weighing end-of-month flows. Yesterday's FOMC Minutes had little impact on the Buck, but the release stated the Fed should be prepared to adjust the pace of asset purchases and raise the target range for FFR sooner if inflation continued to run higher than levels consistent with the Fed objective. Some participants preferred a somewhat faster pace of reductions. DXY trades within a narrow 96.649-832 range. Ahead, the calendar is empty from a US standpoint. EUR, GBP - The single currency stands are the current G10 winner, albeit within narrow ranges in holiday-thinned trade. Desks suggest that light short-covering may warrant given the recent COVID-led downside. On the COVID front, reports suggested the EU is to endorse a 9-month limit on COVID-19 vaccine validity in travel. Sources earlier in the week suggested that updated EU travel guidance will likely be released today, whilst France is also today poised to provide more colour on COVID-related restrictions. EUR/USD has reclaimed a 1.1200 handle but trades within yesterday's 1.1184-1.1250 range. GBP/USD meanwhile is relatively flat within a 20-pip parameter, with not much to report aside from overnight commentary highlighting the 'substantial distance' between the UK and EU on the Northern Ireland protocol. Ahead, participants will be on the lookout for commentary from BoE governor Bailey and Haskel. Note, some participants also highlight chunky OpEx tomorrow in GBP/USD comprising of some GBP 1.3bln around 1.3400-10. AUD, NZD - Antipodeans are on the back foot, with the NZD continuing to lag post-RBNZ and following a narrower NZ trade deficit as the AUD/NZD cross inches closer towards 1.0500 after confirming support around the 1.0450 region. AUD/USD was unfazed by lower-than-expected Q3 Aussie Capex. Desks highlight support at 0.7170 (Sept 29th low) ahead of the YTD low at 0.7106. Technicians may also be cognizant of the 21 DMA (0.7346) set to cross through the 100 DMA (0.7346) and 50 DMA (0.7344). JPY - The JPY is relatively flat on the day within a 115.30-45 band, with desks suggesting bids are eye towards 115.00 and offers above 115.50. OpEx is interesting; USD/JPY sees USD 1.2bln between 115.10 and around USD 800mln at strike 115.50. SEK, HUF - The Riksbank maintained its Rate at 0.00% and asset holdings unchanged as expected and said the repo rate will be raised in the latter part of 2024 – with the Q4 2024 rate path seen averaging at 0.19%. Overall, the decision was in-line with expectations. The SEK saw some modest upside heading into the announcement, but on the largely as-expected release, EUR/SEK remained in proximity to the pre-announcement level of 10.20. Meanwhile, the Hungarian Central Bank announced a 40bps hike to its 1-week Repo Rate in an expected but unscheduled move. EUR/HUF moved from 367.25 to 365.40 on the hike. In commodities, WTI and Brent futures are choppy following the earlier softness at the start of the session, which was seemingly a function of a mild deterioration across equity markets, also coinciding with Ifax reports that the US is trying to persuade Russia to lift oil output. Sticking with OPEC+, the morning also saw commentary out of Kuwait and the UAE, who both signalled open-mindedness heading into next week’s meeting, although WSJ sources yesterday suggested the UAE does not see the need to pause current plans. WTI Jan has dipped back under USD 78/bbl (vs high USD 76.65/bbl) while Brent Feb resides just north of USD 80.50/bbl (vs high 81.40/bbl). Ahead, participants will be balancing OPEC+ sources and commentary to get a more solid idea on which route the group will likely take next week. Elsewhere, spot gold remains caged within a cluster of DMAs including the 100 (1,793), 200 (1,791) and 50 (1,789). Base metals are once again firmer with traders citing bullish commentary on Chinese infrastructure. LME copper inches closer towards USD 10k/t whilst Dalian iron ore futures overnight stretched their rally to a fifth consecutive session, spot prices topped USD 100/t. DB's Jim Reid concludes the overnight wrap A reminder that this week we published our 2022 credit strategy outlook. See here for the full report. Craig has also put out a more detailed HY 2022 strategy document here and Karthik a more detailed IG equivalent here. Basically we think spreads will widen as much as 30-40bps in IG and 120-160bps in HY due to a response to a more dramatic appreciation of the Fed being well behind the curve. This sort of move is consistent with typical mid-cycle ranges through history. We do expect this to mostly retrace in H2 as markets recover from the shock and growth remains decent and liquidity still high. Today will likely prove a quieter one in markets given the Thanksgiving holiday in the US. But ahead of that, risk assets eventually climbed a wall of worry yesterday as investors moved to dial up their hawkish bets on the Fed’s policy trajectory, just as the latest Covid wave in Europe further contributed to investor concerns. Nevertheless, after trading in the red most of the day, global equity markets just managed to finish the day in positive territory, with the S&P 500 gaining +0.23% and the STOXX 600 advancing +0.09%. First, on the hawkish Fed policy trajectory, our US economics team updated their calls to expect just that. In a note yesterday (link here), they outlined expectations for the Fed to double the pace of tapering at the December FOMC meeting following better-than-expected inflation and employment data since the November FOMC. This would bring monthly reductions in Treasury purchases to $20bn and MBS purchases to $10bn, which would bring the end of taper forward to March. In line, they’re bringing their call for liftoff forward a month to June 2022. Our econ team weren’t the only ones to adjust their outlook. San Francisco Fed President Daly, one of the biggest doves on the FOMC and a voter in December, said in an interview that, “if (strong inflation and jobs data continue) then those are the things that would say, looks like we need faster tapering”. Furthermore, she also said that “I am very open and, in fact, leaning towards that we’ll want to raise rates from the zero lower bound at the end of next year”. So if one of the Fed’s biggest doves is feeling this way, then that showcases the shift in thinking that could be taking place more broadly on the committee. Front-end US rates sold off following the comment and yesterday’s data releases, which did nothing to change the recent hawkish turn from Fed officials. In fact, by the close of trade investors were fully pricing in a hike by June, and pricing about two-thirds probability of a May hike. They are still projecting three full hikes in the next calendar year. You’ll know from the credit outlook that we continue to think the Fed is way behind the curve and that catch-up will likely cause some volatility in H1 with notably wider credit spreads. See the link at the top for more on our view. Those moves were given some fresh impetus by stronger-than-expected US data, of which plenty arrived in advance of the holiday today. First, the weekly initial jobless claims for the week through November 20 fell to 199k (vs. 260k expected), which is their lowest level since 1969 and the first time we’ve seen a reading comfortably around or beneath their levels immediately before the pandemic. Claims are always a bit all over the place around Thanksgiving due to seasonal adjustments so we may need a couple of weeks before the trend can be confirmed. Secondly, we then had the second estimate of Q3 GDP in the US, which was revised up a tenth to show an annualised growth rate of +2.1%. Third, the personal income and spending data came in above expectations in October, with personal income up +0.5%, and personal spending up +1.3%, which in both cases was three-tenths higher than expected. And finally, although the University of Michigan’s final consumer sentiment index was still at a decade low, the final measure came in at 67.4, above the preliminary reading of 66.8. Long-term inflation expectations edged back up a tenth to 3.0%, where it was in September and May this year, the joint highest readings since 2013. All that created additional momentum in front-end US rates, with the 2yr yield (+2.6bps) and the 5yr yield (+0.3bps) both rising to fresh post-pandemic highs as the prospect of faster tapering and earlier rate hikes came into view. That put further upward pressure on the dollar as well, with the index strengthening by +0.33% yesterday to hit a 16-month high, having now risen by over +6% since its low in late May just 6 months ago. Of course the flip side was that a number of currencies shifted lower vis-à-vis the dollar, and the euro dipped below the $1.12 mark at the end of the day for the first time since June 2020. Amidst the moves higher in front-end Treasury yields, another round of curve flattening saw longer-dated ones fall back yesterday, with the 10yr yield down -3.1bps to 1.63%. That flattening took the 5s30s curve down -6.9bps to its lowest level since the initial market turmoil at the start of the pandemic back in March 2020, having fallen by over 100bps since its intraday high back in February. 2s10s twisted -5.7bps flatter as well, as investors priced in near-term Fed policy action that could engender a hard landing that hurts longer term growth. It was a different picture in Europe however, where curves steepened for the most part and the moves lower in long-end rates were much more subdued. By the close, yields on 10yr bunds (-0.8bps), OATs (+0.0bps) and BTPs (+1.3bps) had seen relatively little movement, as investors continue to expect that the ECB will take a much more cautious approach to raising rates relative to the Fed. Overnight in Asia markets are again mixed but being led by the Nikkei (+0.68%) and the Hang Seng (+0.14%), while the Shanghai Composite (-0.10%), CSI (-0.31%) and KOSPI (-0.34%) are losing ground. In a widely expected move the Bank of Korea raised rates for a second time since August, taking the policy rate to 1.0%. The BOK revised its inflation outlook to 2.3% for 2021 and 2% for 2022 which was expected. Futures markets are higher with the S&P 500 (+0.28%) and DAX (+0.35%) trading in the green. Treasuries are closed. Back to yesterday, and one of the main pieces of news came from Germany, where there was finally confirmation that the centre-left SPD, the Greens and the liberal FDP had agreed a full coalition deal. In terms of the economic measures, the notable ones include a restoration of the debt brake from 2023, which has been suspended during the pandemic, as well as an increase in the minimum wage to €12 per hour. We’ll wait to see if dealing with the climate emergency is carved out to some degree from the debt brake. I suspect it will be in some form. Assuming the deal is agreed by each of the parties, who will put the agreement to internal party approval processes, that could see the SPD’s Olaf Scholz become Chancellor in the week commencing December 6, bringing an end to Chancellor Merkel’s 16-year tenure. That new coalition will be coming into office at a difficult time in light of the latest covid wave across Europe, and in his remarks yesterday, Scholz said that they would consider targeted vaccination mandates for those working with vulnerable groups. That came as the Bild newspaper reported that Chancellor Merkel asked the members of the new coalition to impose a 2-week nationwide lockdown, but this was rejected in a meeting on Tuesday evening. Overnight Germany reported 75,961 new cases, up from 66,884 on Tuesday. Other countries are also moving to ramp up restrictions across the continent, with French health minister Veran expected to announce fresh measures at a news conference today, whilst Italy approved new curbs on the unvaccinated, including entry restrictions to enter restaurants and cinemas. Elsewhere, Slovakia announced a new lockdown that will see residents only permitted to leave home for work, education, or essential activities, with the closure of restaurants and non-essential shops for two weeks. A reminder that we are adding a daily G7 plus important country new cases chart every day in this email blast and a fatalities chart in the full pdf under “view report”. The day ahead has a fairly quiet calendar given the Thanksgiving holiday in the US. On the central bank side however, we’ll hear from ECB President Lagarde, and the ECB’s Villeroy, Elderson and Schnabel, along with BoE Governor Bailey and the BoE’s Haskel. On top of that, the ECB will release the account of their October meeting, and data releases include the German GfK consumer confidence reading for December. Tyler Durden Thu, 11/25/2021 - 08:40.....»»

Category: blogSource: zerohedgeNov 25th, 2021

Futures Meltup To New All Time High As November Begins With A Bang

Futures Meltup To New All Time High As November Begins With A Bang US futures and European stocks rose to a new record high to start the historically stellar month of November... ... and Asian markets jumped amid positive earnings surprises and as concerns of a global stagflation and central bank policy error faded for a few hours (they will return shortly). TSLA melted up by another $35BN in market cap "because gamma." S&P 500 futures climbed 0.4% after the cash index posted the biggest monthly gain since last November. Treasury Secretary Janet Yellen expressed confidence in the continuing recovery from the pandemic, helping spur gains in equity markets. Health-care shares rallied in Europe. The dollar and Treasury yields advanced as investors awaited this week’s Federal Reserve meeting to announce the start of tapering (which will then lead to rate hikes next July according to Goldman). Oil rebounded on fresh supply concerns. In addition to the now absolutely batshit insane meltup in Tesla, which won't end until the SEC cracks down on gamma squeeze manipulation, other mega-cap technology stocks such as Google, Meta, Microsoft, Amazon.and Apple, aka oddly enough GAMMA, traded mixed. Exxon and Chevron added about 0.7% each as JP Morgan raised its price target on the oil majors following their strong quarterly results last week. Major Wall Street banks gained between 0.2% and 0.8%. The broader S&P 500 financials sector slipped last week, breaking a three-week winning streak. Lucid Group Inc. rose 4.8% in premarket, extending its advance from last week, after the new U.S. tax plan included a proposal to make EV tax credits more widely available. Harley-Davidson Inc jumped 8.2% after the European Union removed retaliatory tariffs on U.S. products including whiskey, power boats and company’s motorcycles. Here are the most notable pre-market movers: Tesla shares rise 2.3% in U.S. premarket trading after their biggest monthly gain in almost a year in October ABVC BioPharma jumps more than 700% as thelittle known biotechnology company garners attention from retail traders on social media Ocugen and Zosano (ZSAN US) are some other top gainers among retail trader stocks in premarket A largely upbeat earnings season has helped investors look past a mixed-macro economic picture, with the benchmark S&P 500 and the tech-heavy Nasdaq recording their best monthly performance since November 2020 in October. Of the 279 S&P 500 companies that have reported quarterly results, 87% have met or exceeded estimates. Among members of Europe’s Stoxx 600 index, 68% surpassed expectations. On the economic data front, readings on October factory activity data from IHS Markit and ISM are due after market open, followed by non-farm payrolls on Friday. Focus is now on the Fed’s two-day policy meeting which concludes at 2pm on Nov 3, where the central bank will announce the tapering of its $120 billion monthly bond buying program by $15 billion. With recent U.S. data showing inflation pressures building, the market has also started pricing in rate hikes next year. November and December tend to be among the strongest months for stocks and any hawkish tilt in the Fed’s message could catch equities by surprise.  Meanwhile, Biden’s economic agenda seemed to be on track as Democratic lawmakers worked to overcome their differences on a $1.75 trillion social-spending plan. “Depending on where you are looking, you are getting very different stories on the outlook for global markets,” Kerry Craig, global market strategist at JPMorgan Asset Management, said on Bloomberg Television. “If you look at equities and the rally you are seeing, you think everything is OK. If you look at the bond market and how yields are moving, there’s obviously a lot more concern around inflation and policy normalization.” European stocks hit the afterburner out of the gate with the Euro Stoxx 50 adding as much as 1% before drifting off best levels. FTSE MIB and IBEX outperform, FTSE 100 lags slightly. Banks, construction and travel are the strongest sectors; tech the sole Stoxx 600 sector in the red. Barclays Plc fell 1.5%. Chief Executive Officer Jes Staley stepped down amid a U.K. regulatory probe into how he characterized his ties to the financier and sex offender Jeffrey Epstein. Asian stocks were poised to snap a three-day decline thanks to a rally in Japanese equities, which got a boost from an election victory for the country’s ruling party and Prime Minister Fumio Kishida.  The MSCI Asia Pacific Index advanced as much as 0.6%, while Japan’s benchmark Topix and the blue-chip Nikkei 225 Stock Average each added more than 2%. Sony Group, Toyota Motor and Tokyo Electron were among the single-largest contributors to the regional measure’s rise. By sector, industrials and information-technology companies provided the biggest boosts.  Japan’s ruling Liberal Democratic Party defied worst-case scenarios to secure a majority by itself in a closely-watched election Sunday. Analysts said the outcome signals political stability, paving the way for economic stimulus to be executed as anticipated (see Street Wrap).  “Indicators of market activity show that there will be a positive market impact to the election, as although it was not greatly different than expectations, the LDP clearly surpassed some of the more dire polls of last week and there will not likely be any party shake-up in the intermediate-term,” John Vail, Tokyo-based chief global strategist at Nikko Asset Management wrote in a note.  The market is also “reacting positively” to Friday’s share-price gains in the U.S., Vail said. Futures on the S&P 500 rose during Asian trading hours after the underlying gauge added 0.2%.  Asia’s regional benchmark capped a weekly drop of 1.5%, its worst such performance since early October, as disappointing results weighed on big technology stocks. More than half of the companies on the MSCI Asia Pacific Index have reported results for the latest quarter with about 37% posting a positive surprise, according to data compiled by Bloomberg. Australia's S&P/ASX 200 index rose 0.6% to 7,370.80, recouping some losses after Friday’s 1.4% plunge. Health and consumer discretionary stocks contributed the most to the benchmark’s gain. WiseTech was among the top performers, snapping a four-day losing streak. Westpac was the worst performer after the bank delivered a smaller share buyback than some had expected. In New Zealand, the S&P/NZX 50 index fell 0.5% to 13,030.31. In rates, fixed income trades heavy with gilts leading the long end weakness. Treasuries were slightly cheaper on the long-end of the curve as S&P 500 futures exceed last week’s record highs. Yields are cheaper by 2bp to 2.5bp from belly out to long-end, with front-end slightly outperforming and steepening 2s10s spread by 1.7bp; 10-year yields around 1.58% with gilts underperforming by 1.1bp, Italian bonds by 3.5bp. Gilts and Italian bonds lag, with Bank of England rate decision due Thursday. In the U.S., weekly highlights include refunding announcement and FOMC Wednesday and Friday’s October jobs report. Bund and gilt curves bear steepen with gilts ~1bps cheaper to bunds. Peripheral spreads swing an early tightening to a broad widening to core with Italy the weakest performer. Overnight futures and options flows included block seller in 5-year note futures (3,900 at 3:09am ET) and a buyer of TY Week 1 129.00 puts at 3 on 10,000, says London trader. In FX, the Bloomberg dollar index held a narrow range. SEK and CHF top the G-10 score board, GBP lags with cable snapping below 1.3650. TRY outperforms EMFX peers. The BBDXY inched up and the greenback traded mixed against its Group-of-10 peers, with many of the risk-sensitive currencies leading gains The pound retraced some losses against the dollar, after dipping earlier in the European session. The yield on 2-year gilts hit the highest since May 2019. Financial markets are almost fully pricing in a 15-basis point increase in the Bank of England’s benchmark lending rate on Nov. 4, while economists increasingly share that view, even as they see the decision as a far closer call. A record share of U.K. businesses are expecting to increase prices, adding to the inflationary pressures confronting Bank of England policy makers ahead of their meeting on Thursday Australian bonds extended opening gains as traders positioned for the Reserve Bank’s policy decision Tuesday. The Aussie fell, tracking losses in iron ore prices following a weak China PMI, which showed signs of further weakness in October The yen fell for a second day after the ruling Liberal Democratic Party retained its outright majority in a lower-house election, reinforcing bets for fiscal stimulus and reforms. Hedge funds boosted net short positions on the yen to the most since January 2019, raising the risk of a squeeze should risk appetite deteriorate suddenly and demand for havens rise The Turkish lira edged higher after Turkish President Recep Tayyip Erdogan said he had “positive” talks with U.S. President Joe Biden In commodities, crude futures drift higher. WTI adds 40c to trade near $84; Brent rises ~1% near $84.50. Spot gold is quiet near $1,786/oz. Base metals are mixed: LME nickel and tin outperform, zinc lags. Looking at today's calendar, earnings continue on Monday with PG&E and ON Semiconductor reporting pre-market, and NXP Semiconductors post-market. We also get the latest Mfg PMI print and the October Mfg ISM print. Market Snapshot S&P 500 futures up 0.3% to 4,612.25 STOXX Europe 600 up 0.8% to 479.40 MXAP up 0.4% to 198.04 MXAPJ down 0.3% to 645.49 Nikkei up 2.6% to 29,647.08 Topix up 2.2% to 2,044.72 Hang Seng Index down 0.9% to 25,154.32 Shanghai Composite little changed at 3,544.48 Sensex up 1.3% to 60,079.40 Australia S&P/ASX 200 up 0.6% to 7,370.78 Kospi up 0.3% to 2,978.94 Brent Futures up 0.3% to $83.95/bbl Gold spot down 0.0% to $1,783.20 U.S. Dollar Index little changed at 94.14 German 10Y yield little changed at -0.091% Euro up 0.1% to $1.1571 Top Overnight News from Bloomberg House Democratic leaders are pushing hard to get Biden’s package finalized, with votes on both that bill and a smaller infrastructure plan this week -- the latest in a string of self- imposed deadlines. The Senate, which already approved the public-works bill, is likely to vote on the larger package later in the month Leaders of the Group of 20 countries agreed on a climate deal that fell well short of what some nations were pushing for, leaving it to negotiators at the COP26 summit in Glasgow this week to try to achieve a breakthrough The U.K. said it will trigger legal action against France within 48 hours unless a dispute over post-Brexit fishing rights is resolved, as the growing spat threatens to overshadow the United Nations’ climate summit Treasury Secretary Janet Yellen said she believes Federal Reserve Chair Jerome Powell has taken “significant action” in the wake of revelations over the personal investments of U.S. central-bank policy makers; Yellen dismissed recent moves in the bond market that have signaled concern about monetary policy makers squelching economic growth, and expressed confidence in the continuing recovery from the Covid-19 pandemic The U.S. and the European Union have reached a trade truce on steel and aluminum that will allow the allies to remove tariffs on more than $10 billion of their exports each year Asia-Pac bourses traded mostly higher amid tailwinds from last Friday's fresh record highs in the US where Wall St. topped off its best monthly performance YTD, but with some of the advances in the region capped as participants digested mixed Chinese PMI data and ahead of this week’s slew of key risk events including crucial central bank policy announcements from the RBA, BOE and FOMC, as well as the latest NFP jobs data. ASX 200 (+0.8%) was led higher by the consumer-related sectors amid a reopening play after Australia permitted fully vaccinated citizens to travel internationally again and with several M&A related headlines adding to the optimism including the Brookfield-led consortium acquisition of AusNet Services and Seven West Media’s takeover of Prime Media. Conversely, the largest weighted financials sector failed to join in on the spoils with Westpac shares heavily pressured following its FY results which fell short of analyst estimates despite more than doubling on its cash earnings. Nikkei 225 (+2.5%) was the biggest gainer with the index underpinned by favourable currency flows and following the general election in which the ruling LDP maintained a majority in the lower house although won fewer seats than previously for its slimmest majority since 2012, while the KOSPI (+0.4%) was kept afloat but with upside limited by slightly softer than expected trade data. Hang Seng (-1.5%) and Shanghai Comp. (+0.1%) were subdued amid a slew of earnings releases and following mixed Chinese PMI data in which the official Manufacturing and Non-Manufacturing PMIs disappointed analysts’ forecasts with the former at a second consecutive contraction, although Caixin Manufacturing PMI was more encouraging and topped market consensus. Finally, 10yr JGBs initially declined amid gains in stocks and recent pressure in T-notes due to rate hike bets with analysts at Goldman Sachs bringing forward their Fed rate hike calls to July 2022 from summer 2023 citing inflation concerns, although 10yr JGBS then recovered despite the mixed results from the 10yr JGB auction which showed a higher b/c amid lower accepted prices and wider tail in price. Top Asian News Japan’s Kishida Mulls Motegi for LDP Secretary General: Kyodo Home Sales Slump; Another Bond Deadline Looms: Evergrande Update Two Thirds of China’s Top Developers Breach a ‘Red Line’ on Debt Hedge Fund Quad Sells Memory Stocks Citing Demand Uncertainty European equities (Stoxx 600 +0.6%) have kicked the week off on the front-foot with the Stoxx 600 printing a fresh all-time-high. The handover from the APAC session was a largely constructive one with the Nikkei 225 (+2.6%) the best in class for the region amid favourable currency flows and the fallout from the Japanese general election which saw the ruling LDP party maintain a majority in the lower house. Elsewhere, performance for the Shanghai Composite (-0.1%) and Hang Seng (-0.9%) was less impressive amid a slew of earnings releases and mixed Chinese PMI data in which the official Manufacturing and Non-Manufacturing PMIs disappointed analysts’ forecasts. US equity index futures are trading on a firmer footing (ES +0.5%) ahead of Wednesday’s FOMC announcement and Friday’s NFP data. The latest reports from Washington suggest that House Democrats are hoping to pass the social spending and bipartisan infrastructure bills as soon as Tuesday. Back to Europe, a recent note from JPM stated that Q3 European earnings “are coming in well ahead of expectations in aggregate”, adding that results are healthy when considering the “trickier operating backdrop”. Sectors in the region are higher across the board with Auto names top of the leaderboard. Renault (+3.3%) sits at the top of the CAC 40 with the name potentially gaining some reprieve from agreement to resolve the US-EU steel and aluminium trade dispute (something which the Co. has previously noted as a negative). Also following the resolution, Thyssenkrupp (+2.8%) and Salzgitter (+4.5%) are both trading notably higher. Barclays (-2.0%) shares are seen lower after news that CEO Staley is to step down with immediate effect following the investigation into his relationship with sex offender Jeffrey Epstein; Barclays' Global Head of Markets, Venkatakrishnan is to take over. UK homebuilders (Persimmon -2.1%, Taylor Wimpey -1.9%, Barratt Developments -1.9%, Berkeley Group -1.7%) are softer on the session amid concerns that the sector could fall victim to higher mortgage rates given the shape of the UK yield curve. Ryanair (+1%) shares are higher post-earnings which saw the Co. continue its recovery from the pandemic, albeit still expects a loss for the year. Furthermore, the board is considering the merits of retaining its standard listing on the LSE. Finally, BT (+4.2%) is the best performer in the Stoxx 600 ahead of earnings on Thursday with press reports suggesting that the Co. could announce that its GBP 1bln cost savings target will be met a year earlier than the guided March 2023. Top European News SIG Proposed Offering for EU300m Senior Secured Notes Due 2026 Delivery Hero’s Turkey Unit CEO Nevzat Aydin to Step Down Goldman Sachs Says ‘Lost Decade’ Is Looming for 60/40 Portfolios URW Sells Stake in Paris Triangle Tower Project to AXA IM Alts In FX, the Greenback is holding above 94.000 in index terms and gradually ground higher after pausing for breath and taking some time out following its rapid resurgence last Friday to eclipse the 94.302 month end best at 94.313 before waning again. Hawkish vibes going into the FOMC are underpinning the Dollar and helping to offset external factors that are less supportive, including ongoing strength in global stock markets on solid if not stellar Q3 earnings and economic recovery from COVID-19 lockdown or restricted levels. Hence, the DXY is keeping its head above the round number and outperforming most major peers within and beyond the basket, awaiting Markit’s final manufacturing PMI, the equivalent ISM and construction spending ahead of the Fed on Wednesday and NFP on Friday. JPY/AUD - Little sign of relief for the Yen from victory by Japan’s ruling LDP part at the weekend elections as the 261 seat majority secured is down from the previous 276 and the tightest winning margin since 2012. Moreover, Security General Amari lost his constituency and new PM Kishida concedes that this reflects the public’s adverse feelings towards the Government over the last 4 years. Usd/Jpy is eyeing 114.50 as a result and the Aussie is looking precarious around 0.7500 against the backdrop of weakness in commodity prices even though perceptions for the upcoming RBA have turned markedly towards the potential for YCT to be withdrawn following firm core inflation readings and no defence of the 0.1% April 2024 bond target. NZD/EUR/CHF/CAD/GBP - All narrowly mixed vs their US counterpart, and with the Kiwi also taking advantage of the aforementioned apprehension in the Aud via the cross, while the Euro has pared declines from just under 1.1550, but still looks top-heavy into 1.1600. Elsewhere, the Franc is pivoting 0.9160 and 1.0600 against the Euro with more attention on a rise in Swiss sight deposits at domestic banks as evidence of intervention than a fractionally softer than expected manufacturing PMI, the Loonie is keeping afloat of 1.2400 ahead of Markit’s Canadian manufacturing PMI and Sterling is striving to stay above 1.3600, but underperforming vs the Euro circa 0.8470 amidst the ongoing tiff between the UK and France over fishing rights. SCANDI/EM - Robust Swedish and Norwegian manufacturing PMIs plus broad risk appetite is underpinning the Sek and Nok, in contrast to the Cnh and Cny following disappointing official Chinese PMIs vs a more respectable Caixin print, but the EM laggard is the Zar in knock-on reaction to Gold’s fall from grace on Friday, increasingly bearish technical impulses and SA energy supply issues compounded by Eskom’s load-shedding. Conversely, the Try has pared some declines irrespective of a slowdown in Turkey’s manufacturing PMI as the CBRT conducted a second repo op for Lira 27 bn funds maturing on November 11 at 16%. In commodities, WTI and Brent are firmer this morning with gains of between USD 0.50-1.00/bbl, this upside is in-spite of a lack of fundamental newsflow explicitly for the complex and is seemingly derived from broader risk sentiment, as mentioned above. Nonetheless, Energy Ministers are beginning to give commentary ahead of Thursday’s OPEC+ event and so far Angola, Kuwait and Iraq officials have voiced their support for the planned 400k BPD hike to production in December. This reiteration of existing plans is in opposition from calls from non-OPEC members such as the US and Japan that the group should look to increase production quicker than planned, in a bid to quell rising prices. Separately, Saudi Aramco reported Q3 earnings over the weekend in which its net profit doubled given strong crude prices and sales volumes improving by 12% QQ; subsequently, some analysts have highlighted the possibility for a end-2021 special dividend. Elsewhere, base metals are mixed and fairly contained in-spite of the EU and US announcing an agreement to resolve the ongoing aluminium and steel trade dispute. While spot gold and silver are modestly firmer this morning as the yellow metal remains contained after its slip from the USD 1800/oz mark in the tail-end of last week. Currently, spot gold is pivoting its 100-DMA at USD 1786 with the 50- and 200-DMAs residing either side at USD 1780/oz and USD 1791/oz respectively. US Event Calendar 9:45am: Oct. Markit US Manufacturing PMI, est. 59.2, prior 59.2 10am: Oct. ISM Manufacturing, est. 60.5, prior 61.1 10am: Sept. Construction Spending MoM, est. 0.4%, prior 0% DB's Jim Reid concludes the overnight wrap Welcome to November. I had three halloween parties over the weekend which is probably more than the entire number I went to before I had kids. I still have some spooky make up on this morning that I just couldn’t get off from last night. So there’s a reason alone to zoom into the call at 3pm today. As it’s the 1st of November Henry is about to publish our monthly performance review. It was a hectic month of higher inflation expectations and commodities, and also the best S&P 500 month of the year. Bonds underperformed across the board but these small negatives masked great volatility and stress under the surface, especially in the last week. See the report that should be out in the next 30-60mins. With all due respect to our readers in Australia, I’m going to open the market section this morning with a line I don’t think I’ve written in 27 years of market commentary and probably won’t again. And it’s not about England thrashing Australia at cricket on Saturday. Yes the most important event of the week could be the RBA meeting tomorrow. 2 year yields last week rose from 0.15% on Wednesday morning to 0.775% at the close on Friday as the RBA were conspicuous by their absence in defending the 0.1% target on the April 24 bond. I’ve absolutely zero idea what they are going to do tomorrow which should help you all tremendously but their absence again this morning gives a decent indication. I was taught economics in an era where central banks liked to keep an element of mystery and surprise. As such I’ve always disliked the forward guidance era as it encourages markets to pile on to much riskier, one way positions that a normally functioning market should naturally allow. But to go from forward guidance to silence (that rhymes) is a recipe for huge market turmoil if the facts change. It's unclear if the full implications of last week’s carnage at the global front end has yet been cleared out. There is lots of speculation about large unwinds, big stop losses etc. Liquidity was also awful last week. Much might depend on central banks this week. Make no mistake though there is considerable pain out there. The latest this morning in Aussie rates is that the 2y yield is down around -7bps while the 10y yield is down -19.0bps. So we wait with baited breath for tomorrow. Elsewhere in Asia, the Nikkei 225 (+2.42%) is charging ahead this morning as Japan’s Liberal Democratic Party kept its majority after lower house elections, thus boosting optimism about a potential fiscal stimulus. Elsewhere, the KOSPI (+0.43%) and the Shanghai composite (+0.07%) are outperforming the Hang Seng (-1.10%). In terms of data, China’s official manufacturing PMI fell from 49.6 to 49.2 (49.7 expected), not helped by commodities price rises and electricity shortages. The non-manufacturing PMI also fell to 52.4 from 53.2 (consensus 53). The Caixin manufacturing PMI did beat at 50.6 this morning (consensus 50). In terms of virus developments in the region, Shanghai Disneyland is closed amid recent COVID outbreaks, while Singapore is adding ICU beds in response to high levels of serious cases. The S&P 500 mini futures is up +0.23% this morning, the US 10y Treasury is at 1.56% (+1.2bps). It’s strange to have a likely Fed taper announcement on Wednesday be third billing for the week but the BoE on Thursday might be the next most important meeting as it’s still a finely judged call as to whether they hike this week or not. DB (preview here) think they will raise rates by 15bps with two 25bps hikes in February and May. They’ll also end QE a month earlier than planned. So over to the third billing, namely the Fed. They will announce a well flagged taper on Wednesday. In line with recent guidance, DB expect that the Fed will announce monthly reductions of $10bn and $5bn of Treasury and MBS purchases, respectively. With the first cut to purchases coming mid-November, this will bring the latest round of QE to a conclusion in June 2022. The Fed has some flexibility with this timetable but it will be interesting to hear how much Powell pushes back on markets that price in two hikes in 2022, including one almost fully priced for before the taper ends. If markets attacked the Fed in the same way they have the RBA the global financial system would have a lot of issues so it’s a fine balance for the Fed. They won’t want to push back too aggressively on market pricing given the uncertainty but they won’t want an outright attack on forward guidance. Moving on, a lowly fourth billing will be reserved for US payrolls on Friday. DB expect the headline gain (+400k forecast, consensus +425k vs. +194k previously) to modestly outperform that of private payrolls (+350k vs. +317k) and for the unemployment rate to fall by a tenth to 4.7% and average hourly earnings to post another strong gain (+0.4% vs. +0.6%) amidst still-elevated hours worked (34.8hrs vs. 34.8hrs). Outside of all this excitement, we have the COP26 which will dominate all your news outlets. The other main data highlight are the global PMIs (today and Wednesday mostly) which will give insight into how the economic recovery has progressed in the first month of Q4 with the surveys shedding light onto how inflation is affecting suppliers. There is lots more in store for us this week but see the day by day calendar at the end for the full run down The market also enters the second half of the 3Q earnings season. There are 168 S&P 500 and 85 Stoxx 600 companies reporting this week with 52% of the S&P 500 and 48% of the STOXX 600 having already reported. DB’s Binky Chadha published an update on earnings season over the weekend (link here). In the US, the size of the earnings beat has declined over the course of the season and is on track to hit 7%, well below the record 14-20% range post pandemic. Excluding the lumpy loan-loss reserve releases by banks, the beat is even lower at 5%, bringing it back in line with the historical norm. Quarterly earnings are on track to be down sequentially from Q2 to Q3 by -1.1% (qoq seasonally adjusted), the first drop since Q2 2020. The flat to down read of earnings is broad based across sector groups. Forward consensus estimates have fallen outside of the Energy sector. The S&P 500 nevertheless has seen one of the strongest earning season rallies on record. See much more in Binky’s piece. This week’s highlights include NXP Semiconductors, Zoom, and Tata Motors today before Pfizer, T-Mobile, Estee Lauder, BP, Mondelez, Activision Blizzard, and AP Moller-Maersk tomorrow. Then on Wednesday we’ll hear from Novo Nordisk, Qualcomm, CVS, Marriott, Albemarle, and MGM resorts. Thursday sees reports from Toyota, Moderna, Square, Airbnb, Uber, and Deutsche Post and then a busy Friday with Alibaba Group, Dominion Energy, Honda, and Mitsubishi. Looking back now and reviewing last week in numbers, it was a week of heightened intraday volatility within rates, as markets brought forward the expected timing of central bank policy actions across advanced economies while revising down growth expectations. Position stop outs almost certainly played a role as the magnitude of the moves were out of sync with macro developments while FX and equity markets were not nearly as volatile. Global front end rates started moving in earnest on Wednesday, following the Bank of Canada’s surprise decision to end net asset purchases, while bringing forward the timing of liftoff, which sent 2yr Canadian bonds more than +20bps higher. In the following days, the RBA opted not to defend their yield curve control target, and ECB President Lagarde did not use her press conference to provide much of a forceful pushback on recent repricing. All told, almost every DM economy saw their 2 yr bond selloff, including the US (+4.4 bps, +0.8 bps Friday), UK (+4.9 bps, +5.9 bps Friday), Germany (+5.2 bps, +3.2 bps Friday), Canada (+23bps) and Australia (+65bps). The long end went the other direction in the core countries, with many curves twist flattening over the week as negative growth sentiment weighed on the back end. Nominal 10yr yields declined -6.2 bps (-2.8 bps Friday) in the US, -11.1 bps (+2.5 bps Friday) in the UK, and were flat in Germany (+3.0 bps Friday). Unlike the rest of October, the decline in nominal yields coincided with declining inflation breakevens (albeit from historically high levels), with 10yr breakevens declining -5.2 bps (-0.6 bps Friday) in the US, -25.4 bps (-8.5 bps Friday) in the UK, and -16.3 bps (-11.5 bps Friday) in Germany. Note that outside the core there were some bond markets that moved higher in yield with 10yr bonds in Canada (+7bps), Australia (+30bps) and Italy (+19bps) all higher for different reasons. Some of the bond moves above don’t do the intra-day volatility any justice though. Elsewhere Crude oil prices dipped to close out what was otherwise another very good month, with Brent and WTI -1.34% (+0.07% Friday) and -0.23% (+0.92% Friday) lower. Meanwhile, equity markets marched to the beat of a different drum. The S&P 500 (+1.33%, +0.19% Friday), Nasdaq (+2.71%, +0.33% Friday), and DJIA (+0.40%, +.25% Friday) all set new all-time highs, while the STOXX 600 increased +0.77% (+0.07% Friday), cents below the all-time high set in August. Generally strong earnings relative to a worried market prior to the season again supported equity markets. Calls were replete with mentions of supply chain woes and labour shortages though, but companies sounded an optimistic note on end-user demand. Many big tech stocks reported, to more mixed results than the broader index. Alphabet and Microsoft beat on both revenue and earnings, Facebook and Apple missed analyst revenue estimates, while Amazon and Twitter missed revenue and earnings estimates. Ford and Caterpillar, two bellwethers particularly exposed to current supply chain and labour maladies, fared especially well. So far this season 279 companies have reported, with 206 beating on revenue and 237 beating on earnings Out of D.C., after prolonged negotiations within the Democratic Party, US President Biden unveiled a new social and climate spending framework, containing $1.75 trillion in spending measures as well as revenue-raising offsets. Once the text is finalized, it should enable a vote on the social spending package as well as the separately-negotiated bi-partisan infrastructure bill. More is likely to come this week. Tyler Durden Mon, 11/01/2021 - 07:59.....»»

Category: smallbizSource: nytNov 1st, 2021

Green Energy: A Bubble In Unrealistic Expectations

Green Energy: A Bubble In Unrealistic Expectations Authored by David Hay via Everegreen Gavekal blog, “You see what is happening in Europe. There is hysteria and some confusion in the markets. Why?…Some people are speculating on climate change issues, some people are underestimating some things, some are starting to cut back on investments in the extractive industries. There needs to be a smooth transition.” - Vladimir Putin (someone with whom this author rarely agrees) “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of its citizens.” – John Maynard Keynes (an interesting observation for all the modern day Keynesians to consider given their support of current inflationary US policies, including energy-related) Introduction This week’s EVA provides another sneak preview into David Hay’s book-in-process, “Bubble 3.0” discussing what he thinks is the crucial topic of “greenflation.”  This is a term he coined referring to the rising price for metals and minerals that are essential for solar and wind power, electric cars, and other renewable technologies. It also centers on the reality that as global policymakers have turned against the fossil fuel industry, energy producers are for the first time in history not responding to dramatically higher prices by increasing production.  Consequently, there is a difficult tradeoff that arises as the world pushes harder to combat climate change, driving up energy costs to painful levels, especially for lower income individuals.  What we are currently seeing in Europe is a vivid example of this dilemma.  While it may be the case that governments welcome higher oil and natural gas prices to discourage their use, energy consumers are likely to have a much different reaction. Summary BlackRock’s CEO recently admitted that, despite what many are opining, the green energy transition is nearly certain to be inflationary. Even though it’s early in the year, energy prices are already experiencing unprecedented spikes in Europe and Asia, but most Americans are unaware of the severity. To that point, many British residents being faced with the fact that they may need to ration heat and could be faced with the chilling reality that lives could be lost if this winter is as cold as forecasters are predicting. Because of the huge increase in energy prices, inflation in the eurozone recently hit a 13-year high, heavily driven by natural gas prices on the Continent that are the equivalent of $200 oil. It used to be that the cure for extreme prices was extreme prices, but these days I’m not so sure.  Oil and gas producers are very wary of making long-term investments to develop new resources given the hostility to their industry and shareholder pressure to minimize outlays. I expect global supply to peak sometime next year and a major supply deficit looks inevitable as global demand returns to normal. In Norway, almost 2/3 of all new vehicle sales are of the electric variety (EVs) – a huge increase in just over a decade. Meanwhile, in the US, it’s only about 2%. Still, given Norway’s penchant for the plug-in auto, the demand for oil has not declined. China, despite being the largest market by far for electric vehicles, is still projected to consume an enormous and rising amount of oil in the future. About 70% of China’s electricity is generated by coal, which has major environmental ramifications in regards to electric vehicles. Because of enormous energy demand in China this year, coal prices have experienced a massive boom. Its usage was up 15% in the first half of this year, and the Chinese government has instructed power providers to obtain all baseload energy sources, regardless of cost.  The massive migration to electric vehicles – and the fact that they use six times the amount of critical minerals as their gasoline-powered counterparts –means demand for these precious resources is expected to skyrocket. This extreme need for rare minerals, combined with rapid demand growth, is a recipe for a major spike in prices. Massively expanding the US electrical grid has several daunting challenges– chief among them the fact that the American public is extremely reluctant to have new transmission lines installed in their area. The state of California continues to blaze the trail for green energy in terms of both scope and speed. How the rest of the country responds to their aggressive take on renewables remains to be seen. It appears we are entering a very odd reality: governments are expending resources they do not have on weakly concentrated energy. And the result may be very detrimental for today’s modern economy. If the trend in energy continues, what looks nearly certain to be the Third Energy crisis of the last half-century may linger for years.  Green energy: A bubble in unrealistic expectations? As I have written in past EVAs, it amazes me how little of the intense inflation debate in 2021 centered on the inflationary implications of the Green Energy transition.  Perhaps it is because there is a built-in assumption that using more renewables should lower energy costs since the sun and the wind provide “free power”.  However, we will soon see that’s not the case, at least not anytime soon; in fact, it’s my contention that it will likely be the opposite for years to come and I’ve got some powerful company.  Larry Fink, CEO of BlackRock, a very pro-ESG* organization, is one of the few members of Wall Street’s elite who admitted this in the summer of 2021.  The story, however, received minimal press coverage and was quickly forgotten (though, obviously, not be me!).  This EVA will outline myriad reasons why I think Mr. Fink was telling it like it is…despite the political heat that could bring down upon him.  First, though, I will avoid any discussion of whether humanity is the leading cause of global warming.  For purposes of this analysis, let’s make the high-odds assumption that for now a high-speed green energy transition will continue to occur.  (For those who would like a well-researched and clearly articulated overview of the climate debate, I highly recommend the book “Unsettled”; it’s by a former top energy expert and scientist from the Obama administration, Dr. Steven Koonin.) The reason I italicized “for now” is that in my view it’s extremely probable that voters in many Western countries are going to become highly retaliatory toward energy policies that are already creating extreme hardship.  Even though it’s only early autumn as I write these words, energy prices are experiencing unprecedented increases in Europe.  Because it’s “over there”, most Americans are only vaguely aware of the severity of the situation.  But the facts are shocking…  Presently, natural gas is going for $29 per million British Thermal Units (BTUs) in Europe, a quadruple compared to the same time in 2020, versus “just” $5 in the US, which is a mere doubling.  As a consequence, wholesale energy cost in Great Britain rose an unheard of 60% even before summer ended.  Reportedly, nine UK energy companies are on the brink of failure at this time due to their inability to fully pass on the enormous cost increases.  As a result, the British government is reportedly on the verge of nationalizing some of these entities—supposedly, temporarily—to prevent them from collapsing.  (CNBC reported on Wednesday that UK natural gas prices are now up 800% this year; in the US, nat gas rose 20% on Tuesday alone, before giving back a bit more than half of that the next day.) Serious food shortages are expected after exorbitant natural gas costs forced most of England’s commercial production of CO2 to shut down.  (CO2 is used both for stunning animals prior to slaughter and also in food packaging.)  Additionally, ballistic natural gas prices have forced the closure of two big US fertilizer plants due to a potential shortfall of ammonium nitrate of which “nat gas” is a key feedstock.  *ESG stands for Environmental, Social, Governance; in 2021, Blackrock’s assets under management approximated $9 ½ trillion, about one-third of the total US federal debt. With the winter of 2021 approaching, British households are being told they may need to ration heat.  There are even growing concerns about the widespread loss of life if this winter turns out to be a cold one, as 2020 was in Europe.  Weather forecasters are indicating that’s a distinct possibility.   In Spain, consumers are paying 40% more for electricity compared to the prior year.  The Spanish government has begun resorting to price controls to soften the impact of these rapidly escalating costs. (The history of price controls is that they often exacerbate shortages.) Naturally, spiking power prices hit the poorest hardest, which is typical of inflation whether it is of the energy variety or of generalized price increases.  Due to these massive energy price increases, eurozone inflation recently hit a 13-year high, heavily driven by natural gas prices that are the equivalent of $200 per barrel oil.  This is consistent with what I warned about in several EVAs earlier this year and I think there is much more of this looming in the years to come. In Asia, which also had a brutally cold winter in 2020 – 2021, there are severe energy shortages being disclosed, as well.  China has instructed its power providers to secure all the coal they can in preparation for a repeat of frigid conditions and acute deficits even before winter arrives.  The government has also instructed its energy distributors to acquire all the liquified natural gas (LNG) they can, regardless of cost.  LNG recently hit $35 per million British Thermal Units in Asia, up sevenfold in the past year.  China is also rationing power to its heavy industries, further exacerbating the worldwide shortages of almost everything, with notable inflationary implications. In India, where burning coal provides about 70% of electricity generation (as it does in China), utilities are being urged to import coal even though that country has the world’s fourth largest coal reserves.  Several Indian power plants are close to exhausting their coal supplies as power usage rips higher. Normally, I’d say that the cure for such extreme prices, was extreme prices—to slightly paraphrase the old axiom.  But these days, I’m not so sure; in fact, I’m downright dubious.  After all, the enormously influential International Energy Agency has recommended no new fossil fuel development after 2021—“no new”, as in zero.  It’s because of pressure such as this that, even though US natural gas prices have done a Virgin Galactic to $5 this year, the natural gas drilling rig count has stayed flat.  The last time prices were this high there were three times as many working rigs.  It is the same story with oil production.  Most Americans don’t seem to realize it but the US has provided 90% of the planet’s petroleum output growth over the past decade.  In other words, without America’s extraordinary shale oil production boom—which raised total oil output from around 5 million barrels per day in 2008 to 13 million barrels per day in 2019—the world long ago would have had an acute shortage.  (Excluding the Covid-wracked year of 2020, oil demand grows every year—strictly as a function of the developing world, including China, by the way.) Unquestionably, US oil companies could substantially increase output, particularly in the Permian Basin, arguably (but not much) the most prolific oil-producing region in the world.  However, with the Fed being pressured by Congress to punish banks that lend to any fossil fuel operator, and the overall extreme hostility toward domestic energy producers, why would they?  There is also tremendous pressure from Wall Street on these companies to be ESG compliant.  This means reducing their carbon footprint.  That’s tough to do while expanding their volume of oil and gas.  Further, investors, whether on Wall Street or on London’s equivalent, Lombard Street, or in pretty much any Western financial center, are against US energy companies increasing production.  They would much rather see them buy back stock and pay out lush dividends.  The companies are embracing that message.  One leading oil and gas company CEO publicly mused to the effect that buying back his own shares at the prevailing extremely depressed valuations was a much better use of capital than drilling for oil—even at $75 a barrel. As reported by Morgan Stanley, in the summer of 2021, an US institutional broker conceded that of his 400 clients, only one would consider investing in an energy company!  Consequently, the fact that the industry is so detested means that its shares are stunningly undervalued.  How stunningly?  A myriad of US oil and gas producers are trading at free cash flow* yields of 10% to 15% and, in some cases, as high as 25%. In Europe, where the same pressures apply, one of its biggest energy companies is generating a 16% free cash flow yield.  Moreover, that is based up an estimate of $60 per barrel oil, not the prevailing price of $80 on the Continent. *Free cash flow is the excess of gross cash flow over and above the capital spending needed to sustain a business.  Many market professionals consider it more meaningful than earnings.  Therefore, due to the intense antipathy toward Western energy producers they aren’t very inclined to explore for new resources.  Another much overlooked fact about the ultra-critical US shale industry that, as noted, has been nearly the only source of worldwide output growth for the past 13 years, is its rapid decline nature.  Most oil wells see their production taper off at just 4% or 5% per year.  But with shale, that decline rate is 80% after only two years.  (Because of the collapse in exploration activities in 2020 due to Covid, there are far fewer new wells coming on-line; thus, the production base is made up of older wells with slower decline rates but it is still a much steeper cliff than with traditional wells.)  As a result, the US, the world’s most important swing producer, has to come up with about 1.5 million barrels per day (bpd) of new output just to stay even.  (This was formerly about a 3 million bpd number due to both the factor mentioned above and the 2 million bpd drop in total US oil production, from 13 million bpd to around 11 million bpd since 2019).  Please recall that total US oil production in 2008 was only around 5 million bpd.  Thus, 1.5 million barrels per day is a lot of oil and requires considerable drilling and exploration activities.  Again, this is merely to stay steady-state, much less grow.  The foregoing is why I wrote on multiple occasions in EVAs during 2020, when the futures price for oil went below zero*, that crude would have a spectacular price recovery later that year and, especially, in 2021.  In my view, to go out on my familiar creaky limb, you ain’t seen nothin’ yet!  With supply extremely challenged for the above reasons and demand marching back, I believe 2022 could see $100 crude, possibly even higher.  *Physical oil, or real vs paper traded, bottomed in the upper teens when the futures contract for delivery in April, 2020, went deeply negative.  Mike Rothman of Cornerstone Analytics has one of the best oil price forecasting records on Wall Street.  Like me, he was vehemently bullish on oil after the Covid crash in the spring of 2020 (admittedly, his well-reasoned optimism was a key factor in my up-beat outlook).  Here’s what he wrote late this summer:  “Our forecast for ’22 looks to see global oil production capacity exhausted late in the year and our balance suggests OPEC (and OPEC + participants) will face pressures to completely remove any quotas.”  My expectation is that global supply will likely max out sometime next year, barring a powerful negative growth shock (like a Covid variant even more vaccine resistant than Delta).  A significant supply deficit looks inevitable as global demand recovers and exceeds its pre-Covid level.  This is a view also shared by Goldman Sachs and Raymond James, among others; hence, my forecast of triple-digit prices next year.  Raymond James pointed out that in June the oil market was undersupplied by 2.5 mill bpd.  Meanwhile, global petroleum demand was rapidly rising with expectations of nearly pre-Covid consumption by year-end.  Mike Rothman ran this chart in a webcast on 9/10/2021 revealing how far below the seven-year average oil inventories had fallen.  This supply deficit is very likely to become more acute as the calendar flips to 2022. In fact, despite oil prices pushing toward $80, total US crude output now projected to actually decline this year.  This is an unprecedented development.  However, as the very pro-renewables Financial Times (the UK’s equivalent of the Wall Street Journal) explained in an August 11th, 2021, article:  “Energy companies are in a bind.  The old solution would be to invest more in raising gas production.  But with most developed countries adopting plans to be ‘net zero’ on carbon emissions by 2050 or earlier, the appetite for throwing billions at long-term gas projects is diminished.” The author, David Sheppard, went on to opine: “In the oil industry there are those who think a period of plus $100-a-barrel oil is on the horizon, as companies scale back investments in future supplies, while demand is expected to keep rising for most of this decade at a minimum.”  (Emphasis mine)  To which I say, precisely!  Thus, if he’s right about rising demand, as I believe he is, there is quite a collision looming between that reality and the high probability of long-term constrained supplies.  One of the most relevant and fascinating Wall Street research reports I read as I was researching the topic of what I have been referring to as “Greenflation” is from Morgan Stanley.  Its title asked the provocative question:  “With 64% of New Cars Now Electric, Why is Norway Still Using so Much Oil?”  While almost two-thirds of Norway’s new vehicle sales are EVs, a remarkable market share gain in just over a decade, the number in the US is an ultra-modest 2%.   Yet, per the Morgan Stanley piece, despite this extraordinary push into EVs, oil consumption in Norway has been stubbornly stable.  Coincidentally, that’s been the experience of the overall developed world over the past 10 years, as well; petroleum consumption has largely flatlined.  Where demand hasn’t gone horizontal is in the developing world which includes China.  As you can see from the following Cornerstone Analytics chart, China’s oil demand has vaulted by about 6 million barrels per day (bpd) since 2010 while its domestic crude output has, if anything, slightly contracted. Another coincidence is that this 6 million bpd surge in China’s appetite for oil, almost exactly matched the increase in US oil production.  Once again, think where oil prices would be today without America’s shale oil boom. This is unlikely to change over the next decade.  By 2031, there are an estimated one billion Asian consumers moving up into the middle class.  History is clear that more income means more energy consumption.  Unquestionably, renewables will provide much of that power but oil and natural gas are just as unquestionably going to play a critical role.  Underscoring that point, despite the exponential growth of renewables over the last 10 years, every fossil fuel category has seen increased usage.  Thus, even if China gets up to Norway’s 64% EV market share of new car sales over the next decade, its oil usage is likely to continue to swell.  Please be aware that China has become the world’s largest market for EVs—by far.  Despite that, the above chart vividly displays an immense increase in oil demand.  Here’s a similar factoid that I ran in our December 4th EVA, “Totally Toxic”, in which I made a strong bullish case for energy stocks (the main energy ETF is up 35% from then, by the way):  “(There was) a study by the UN and the US government based on the Model for the Assessment of Greenhouse Gasses Induced Climate Change (MAGICC).  The model predicted that ‘the complete elimination of all fossil fuels in the US immediately would only restrict any increase in world temperature by less than one tenth of one degree Celsius by 2050, and by less than one fifth of one degree Celsius by 2100.’  Say again?  If the world’s biggest carbon emitter on a per capita basis causes minimal improvement by going cold turkey on fossil fuels, are we making the right moves by allocating tens of trillions of dollars that we don’t have toward the currently in-vogue green energy solutions?” China's voracious power appetite increase has been true with all of its energy sources.  On the environmentally-friendly front, that includes renewables; on the environmentally-unfriendly side, it also includes coal.  In 2020, China added three times more coal-based power generation than all other countries combined.  This was the equivalent of an additional coal planet each week.  Globally, there was a reduction last year of 17 gigawatts in coal-fired power output; in China, the increase was 29.8 gigawatts, far more than offsetting the rest of the world’s progress in reducing the dirtiest energy source.  (A gigawatt can power a city with a population of roughly 700,000.) Overall, 70% of China’s electricity is coal-generated. This has significant environmental implications as far as electric vehicles (EVs) are concerned.  Because EVs are charged off a grid that is primarily coal- powered, carbon emissions actually rise as the number of such vehicles proliferate. As you can see in the following charts from Reuters’ energy expert John Kemp, Asia’s coal-fired generation has risen drastically in the last 20 years, even as it has receded in the rest of the world.  (The flattening recently is almost certainly due to Covid, with a sharp upward resumption nearly a given.) The worst part is that burning coal not only emits CO2—which is not a pollutant and is essential for life—it also releases vast quantities of nitrous oxide (N20), especially on the scale of coal usage seen in Asia today. N20 is unquestionably a pollutant and a greenhouse gas that is hundreds of times more potent than CO2.  (An interesting footnote is that over the last 550 million years, there have been very few times when the CO2 level has been as low, or lower, than it is today.)  Some scientists believe that one reason for the shrinkage of Arctic sea ice in recent decades is due to the prevailing winds blowing black carbon soot over from Asia.  This is a separate issue from N20 which is a colorless gas.  As the black soot covers the snow and ice fields in Northern Canada, they become more absorbent of the sun’s radiation, thus causing increased melting.  (Source:  “Weathering Climate Change” by Hugh Ross) Due to exploding energy needs in China this year, coal prices have experienced an unprecedented surge.  Despite this stunning rise, Chinese authorities have instructed its power providers to obtain coal, and other baseload energy sources, such as liquified natural gas (LNG), regardless of cost.  Notwithstanding how pricey coal has become, its usage in China was up 15% in the first half of this year vs the first half of 2019 (which was obviously not Covid impacted). Despite the polluting impact of heavy coal utilization, China is unlikely to turn away from it due to its high energy density (unlike renewables), its low cost (usually) and its abundance within its own borders (though its demand is so great that it still needs to import vast amounts).  Regarding oil, as we saw in last week’s final image, it is currently importing roughly 11 million barrels per day (bpd) to satisfy its 15 million bpd consumption (about 15% of total global demand).  In other words, crude imports amount to almost three-quarter of its needs.  At $80 oil, this totals $880 million per day or approximately $320 billion per year.  Imagine what China’s trade surplus would look like without its oil import bill! Ironically, given the current hostility between the world’s superpowers, China has an affinity for US oil because of its light and easy-to-refine nature.  China’s refineries tend to be low-grade and unable to efficiently process heavier grades of crude, unlike the US refining complex which is highly sophisticated and prefers heavy oil such as from Canada and Venezuela—back when the latter actually produced oil. Thus, China favors EVs because they can be de facto coal-powered, lessening its dangerous reliance on imported oil.  It also likes them due to the fact it controls 80% of the lithium ion battery supply and 60% of the planet’s rare earth minerals, both of which are essential to power EVs.     However, even for China, mining enough lithium, cobalt, nickel, copper, aluminum and the other essential minerals/metals to meet the ambitious goals of largely electrifying new vehicle volumes is going to be extremely daunting.  This is in addition to mass construction of wind farms and enormously expanded solar panel manufacturing. As one of the planet’s leading energy authorities Daniel Yergin writes: “With the move to electric cars, demand for critical minerals will skyrocket (lithium up 4300%, cobalt and nickel up 2500%), with an electric vehicle using 6 times more minerals than a conventional car and a wind turbine using 9 times more minerals than a gas-fueled power plant.  The resources needed for the ‘mineral-intensive energy system’ of the future are also highly concentrated in relatively few countries. Whereas the top 3 oil producers in the world are responsible for about 30 percent of total liquids production, the top 3 lithium producers control more than 80% of supply. China controls 60% of rare earths output needed for wind towers; the Democratic Republic of the Congo, 70% of the cobalt required for EV batteries.” As many have noted, the environmental impact of immensely ramping up the mining of these materials is undoubtedly going to be severe.  Michael Shellenberger, a life-long environmental activist, has been particularly vociferous in his condemnation of the dominant view that only renewables can solve the global energy needs.  He’s especially critical of how his fellow environmentalists resorted to repetitive deception, in his view, to undercut nuclear power in past decades.  By leaving nuke energy out of the solution set, he foresees a disastrous impact on the planet due to the massive scale (he’d opine, impossibly massive) of resource mining that needs to occur.  (His book, “Apocalypse Never”, is also one I highly recommend; like Dr. Koonin, he hails from the left end of the political spectrum.) Putting aside the environmental ravages of developing rare earth minerals, when you have such high and rapidly rising demand colliding with limited supply, prices are likely to go vertical.  This will be another inflationary “forcing”, a favorite term of climate scientists, caused by the Great Green Energy Transition. Moreover, EVs are very semiconductor intensive.  With semis already in seriously short supply, this is going to make a gnarly situation even gnarlier.  It’s logical to expect that there will be recurring shortages of chips over the next decade for this reason alone (not to mention the acute need for semis as the “internet of things” moves into primetime).  In several of the newsletters I’ve written in recent years, I’ve pointed out the present vulnerability of the US electric grid.  Yet, it will be essential not just to keep it from breaking down under its current load; it must be drastically enhanced, a Herculean task. For one thing, it is excruciatingly hard to install new power lines. As J.P. Morgan’s Michael Cembalest has written: “Grid expansion can be a hornet’s nest of cost, complexity and NIMBYism*, particularly in the US.”  The grid’s frailty, even under today’s demands (i.e., much less than what lies ahead as millions of EVs plug into it) is particularly obvious in California.  However, severe winter weather in 2021 exposed the grid weakness even in energy-rich Texas, which also has a generally welcoming attitude toward infrastructure upgrading and expansion. Yet it’s the Golden State, home to 40 million Americans and the fifth largest economy in the world, if it was its own country (which it occasionally acts like it wants to be), that is leading the charge to EVs and seeking to eliminate internal combustion engines (ICEs) as quickly as possible.  Even now, blackouts and brownouts are becoming increasingly common.  Seemingly convinced it must be a role model for the planet, it’s trying desperately to reduce its emissions, which are less than 1%, of the global total, at the expense of rendering its energy system more similar to a developing country.  In addition to very high electricity costs per kilowatt hour (its mild climate helps offset those), it also has gasoline prices that are 77% above the national average.  *NIMBY stands for Not In My Back Yard. While California has been a magnet for millions seeking a better life for 150 years, the cost of living is turning the tide the other way.  Unreliable and increasingly expensive energy is likely to intensify that trend.  Combined with home prices that are more than double the US median–$800,000!–California is no longer the land of milk and honey, unless, to slightly paraphrase Woody Guthrie about LA, even back in the 1940s, you’ve got a whole lot of scratch.  More and more people, seem to be scratching California off their list of livable venues.  Voters in the reliably blue state of California may become extremely restive, particularly as they look to Asia and see new coal plants being built at a fever pitch.  The data will become clear that as America keeps decarbonizing–as it has done for 30 years mostly due to the displacement of coal by gas in the US electrical system—Asia will continue to go the other way.  (By the way, electricity represents the largest share of CO2 emission at roughly 25%.)  California has always seemed to lead social trends in this country, as it is doing again with its green energy transition.  The objective is noble though, extremely ambitious, especially the timeline.  As it brings its power paradigm to the rest of America, especially its frail grid, it will be interesting to see how voters react in other states as the cost of power leaps higher and its dependability heads lower.  It’s reasonable to speculate we may be on the verge of witnessing the Californication of the US energy system.  Lest you think I’m being hyperbolic, please be aware the IEA (International Energy Agency) has estimated it will cost the planet $5 trillion per year to achieve Net Zero emissions.  This is compared to global GDP of roughly $85 trillion. According to BloombergNEF, the price tag over 30 years, could be as high as $173 trillion.  Frankly, based on the history of gigantic cost overruns on most government-sponsored major infrastructure projects, I’m inclined to take the over—way over—on these estimates. Moreover, energy consulting firm T2 and Associates, has guesstimated electrifying just the US to the extent necessary to eliminate the direct consumption of fuel (i.e., gasoline, natural gas, coal, etc.) would cost between $18 trillion and $29 trillion.  Again, taking into account how these ambitious efforts have played out in the past, I suspect $29 trillion is light.  Regardless, even $18 trillion is a stunner, despite the reality we have all gotten numb to numbers with trillions attached to them.  For perspective, the total, already terrifying, level of US federal debt is $28 trillion. Regardless, as noted last week, the probabilities of the Great Green Energy Transition happening are extremely high.  Relatedly, I believe the likelihood of the Great Greenflation is right up there with them.  As Gavekal’s Didier Darcet wrote in mid-August:  ““Nowadays, and this is a great first in history, governments will commit considerable financial resources they do not have in the extraction of very weakly concentrated energy.” ( i.e., less efficient)  “The bet is very risky, and if it fails, what next?  The modern economy would not withstand expensive energy, or worse, lack of energy.”  While I agree this an historical first, it’s definitely not great (with apologies for all the “greats”).  This is particularly not great for keeping inflation subdued, as well as for attempting to break out of the growth quagmire the Western world has been in for the last two decades.  What we are seeing in Europe right now is an extremely cautionary case study in just how disastrous the war on fossil fuels can be (shortly we will see who or what has been a behind-the-scenes participant in this conflict). Essentially, I believe, as I’ve written in past EVAs, we are entering the third energy crisis of the last 50 years.  If I’m right, it will be characterized by recurring bouts of triple-digit oil prices in the years to come.  Along with Richard Nixon taking the US off the gold standard in 1971, the high inflation of the 1970s was caused by the first two energy crises (the 1973 Arab Oil Embargo and the 1979 Iranian Revolution).  If I’m correct about this being the third, it’s coming at a most inopportune time with the US in hyper-MMT* mode. Frankly, I believe many in the corridors of power would like to see oil trade into the $100s, and natural gas into the teens, as it will help catalyze the shift to renewable energy.  But consumers are likely to have a much different reaction—potentially, a violently different reaction, as I noted last week.  The experience of the Yellow Vest protests in France (referring to the color of the vest protestors wore), are instructive in this regard.  France is a generally left-leaning country.  Despite that, a proposed fuel surtax in November 2018 to fund a renewable energy transition triggered such widespread civil unrest that French president Emmanuel Macron rescinded it the following month. *MMT stands for Modern Monetary Theory.  It holds that a government, like the US, which issues debt in its own currency can spend without concern about budgetary constraints.  If there are not enough buyers of its bonds at acceptable interest rates, that nation’s central bank (the Fed, in our case) simply acquires them with money it creates from its digital printing press.  This is what is happening today in the US.  Many economists consider this highly inflationary. The sharp and politically uncomfortable rise in US gas pump prices this summer caused the Biden administration to plead with OPEC to lift its volume quotas.  The ironic implication of that exhortation was glaringly obvious, as was the inefficiency and pollution consequences of shipping oil thousands of miles across the Atlantic.  (Oil tankers are a significant source of emissions.)  This is as opposed to utilizing domestic oil output, as well as crude from Canada (which is actually generally better suited to the US refining complex).  Beyond the pollution aspect, imported oil obviously worsens America’s massive trade deficit (which would be far more massive without the six million barrels per day of domestic oil volumes that the shale revolution has provided) and costs our nation high-paying jobs. Further, one of my other big fears is that the West is engaging in unilateral energy disarmament.  Russia and China are likely the major beneficiaries of this dangerous scenario.  Per my earlier comment about a stealth combatant in the war on fossil fuels, it may surprise you that a past NATO Secretary General* has accused Russian intelligence of avidly supporting the anti-fracking movements in Western Europe.  Russian TV has railed against fracking for years, even comparing it to pedophilia (certainly, a most bizarre analogy!).  The success of the anti-fracking movement on the Continent has essentially prevented a European version of America’s shale miracles (the UK has the potential to be a major shale gas producer).  Consequently, the European Union’s domestic natural gas production has been in a rapid decline phase for years.  Banning fracking has, of course, made Europe heavily reliant on Russian gas shipments with more than 40% of its supplies coming from Russia. This is in graphic contrast to the shale output boom in the US that has not only made us natural gas self-sufficient but also an export powerhouse of liquified natural gas (LNG).  In 2011, the Nord Stream system of pipelines running under the Baltic Sea from northern Russia began delivering gas west from northern Russia to the German coastal city of Greifswald.  For years, the Russians sought to build a parallel system with the inventive name of Nord Stream 2.  The US government opposed its approval on security grounds but the Biden administration has dropped its opposition.  It now appears Nord Stream 2 will happen, leaving Europe even more exposed to Russian coercion.  Is it possible the Russian government and the Chinese Communist Party have been secretly and aggressively supporting the anti-fossil fuel movements in America?  In my mind, it seems not only possible but probable.  In fact, I believe it is naïve not to come that conclusion.  After all, wouldn’t it be in both of their geopolitical interests to see the US once again caught in a cycle of debilitating inflation, ensnared by the twin traps of MMT and the third energy crisis? *Per former NATO Secretary General, Anders Fogh Rasumssen:  Russia has “engaged actively with so-called non-governmental organizations—environmental organizations working against shale gas—to maintain Europe’s dependence on imported Russian gas”. Along these lines, I was shocked to listen to a recent podcast by the New Yorker magazine on the topic of “intelligent sabotage”.  This segment was an interview between the magazine’s David Remnick and a Swedish professor, Adreas Malm.  Mr. Malm is the author of a new book with the literally explosive title “How To Blow Up A Pipeline”.   Just as it sounds, he advocates detonating pipelines to inhibit fossil fuel distribution.  Mr. Remnick was clearly sympathetic to his guest but he did ask him about the impact on the poor of driving energy prices up drastically which would be the obvious ramification if his sabotage recommendations were widely followed.  Mr. Malm’s reaction was a verbal shrug of the shoulders and words to the effect that this was the price to pay to save the planet. Frankly, I am appalled that the venerable New Yorker would provide a platform for such a radical and unlawful suggestion.  In an era when people are de-platformed for often innocuous comments, it’s incredible to me this was posted and has not been pulled down.  In my mind, this reflects just how tolerant the media is of attacks on the fossil fuel industry, regardless of the deleterious impact on consumers and the global economy. Surely, there is a far better way of coping with the harmful aspects of fossil fuel-based energy than this scorched earth (literally, in the case of Mr. Malm) approach, which includes efforts to block new pipelines, shut existing ones, and severely restrict US energy production.  In America’s case, the result will be forcing us to unnecessarily and increasingly rely on overseas imports.  (For example, per the Wall Street Journal, drilling permits on federal land have crashed to 171 in August from 671 in April.  Further, the contentious $3.5 trillion “infrastructure” plan would raise royalties and fees high enough on US energy producers that it would render them globally uncompetitive.) Such actions would only aggravate what is already a severe energy shock, one that may be worse than the 1970s twin energy crises.  America has it easy compared to Europe, though, given current US policy trends, we might be in their same heavily listing energy boat soon. Solutions include fast-tracking small modular nuclear plants; encouraging the further switch from burning coal to natural gas (a trend that is, unfortunately, going the other way now, as noted above); utilizing and enhancing carbon and methane capture at the point of emission (including improving tail pipe effluent-reduction technology); enhancing pipeline integrity to inhibit methane leaks; among many other mitigation techniques that recognize the reality the global economy will be reliant on fossil fuels for many years, if not decades, to come.  If the climate change movement fails to recognize the essential nature of fossil fuels, it will almost certainly trigger a backlash that will undermine the positive change it is trying to bring about.  This is similar to what it did via its relentless assault on nuclear power which produced a frenzy of coal plant construction in the 1980s and 1990s.  On this point, it’s interesting to see how quickly Europe is re-embracing coal power to alleviate the energy poverty and rationing occurring over there right now - even before winter sets in.  When the choice is between supporting climate change initiatives on one hand and being able to heat your home and provide for your family on the other, is there really any doubt about which option the majority of voters will select? Tyler Durden Tue, 10/26/2021 - 19:30.....»»

Category: worldSource: nytOct 26th, 2021

Futures Rise Ahead Of Deluge Of Big Tech Earnings

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

Category: blogSource: zerohedgeOct 25th, 2021

Futures Slide On Evergrande, Stagflation, Energy Crisis Fears

Futures Slide On Evergrande, Stagflation, Energy Crisis Fears Stock futures ticked lower on Monday, hurt by weakening sentiment in Asia and Europe amid growing worries about economic stagflation, the global energy crisis and renewed fears about property developer China Evergrande whose stock was halted overnight in Hong Kong, while Tesla shares rose after reporting a record number of electric vehicle deliveries. At 715 a.m. ET, Dow e-minis were down 114 points, or 0.33%, S&P 500 e-minis were down 16.25 points, or 0.37%, and Nasdaq 100 e-minis were down 73.75 points, or 0.5%. “The global chip and energy shortage is getting worse, the inflation is rising, the recovery may be slowing, and that puts central banks between a rock and a hard place,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note. “The best they could do is to do nothing, or to tighten their monetary policy to avoid losing control on the economy.” The most notable overnight event was the suspension of trading in shares of debt-laden Evergrande which unsettled markets further about any fallout from its troubles even as media reports said the company would sell a stake in its property management unit for over $5 billion. Wall Street’s main indexes were battered in September, hit by worries about the U.S. debt ceiling, the fate of a massive infrastructure spending bill and the meltdown of heavily indebted China Evergrande Group. On the second trading day of October, investors took a defensive stance, with a cautious approach to riskier assets as a spreading energy crunch meets concerns over the duration of broader rising prices and the tapering of economic stimulus efforts. Investors also kept close watch on rising U.S. Treasury yields after data last week showed increased consumer spending, accelerated factory activity and elevated inflation growth, which could help push the Federal Reserve towards tightening its accommodative monetary policy sooner than expected. Among individual stocks, Merck & Co. extended its gains from Friday on the results of its experimental Covid pill. The stock climbed 2.6% premarket. 3M shares fell 1.5% after J.P. Morgan cut its rating on the industrial conglomerate’s stock to “neutral” from “overweight”.  Here are some of the other notable premarket movers today: Tesla (TSLA  US) shares climb 2.6% higher in U.S. premarket trading after the electric car maker reported record 3Q deliveries that easily beat estimates Amplify Energy (AMPY US) shares plummet 33% in premarket trading after California beaches in northern Orange County were closed and wetlands contaminated by a huge oil spill caused by a broken pipeline off the coast DHT Holdings (DHT US) shares rose as much as 3.7% in Friday extended trading after the company said it bought 1.23m of its own shares Offerpad Solutions (OPAD US) was down 3.1% Friday postmarket after registering shares for potential sale Adverum Biotechnologies (ADVM US) shares rose as much as 23% in Friday extended trading after co. reported new long-term data from the OPTIC clinical trial of ADVM-022 single, in-office intravitreal injection gene therapy Markets also awaited U.S. Joe Biden’s new plan on China trade strategy, with U.S. Trade Representative Katherine Tai set for new talks with Beijing later in the day over its failure to keep promises made in a “Phase 1” trade deal struck with former President Donald Trump. Biden's new plan follows a top-to-bottom review of import tariffs and other measures imposed by the Trump administration; reports also said that USTR will today say that China is not complying with the Phase 1 deal. Europe's Stoxx 600 Index trades flat, erasing earlier losses of as much as 0.6%, helped by gains in health care and basic resources shares. The healthcare sub index rose 0.8% after AstraZeneca’s Enhertu got a breakthrough therapy designation while basic resources sub-index up 0.3% as iron ore rallies. Euro Stoxx 50 is down 0.2% having declined as much as 1% at the open. FTSE MIB lags on the recovery; FTSE 100 trades flat. Autos, banks and travel names are the weakest sectors. Here are some of the biggest European movers today: Adler Group shares jump as much as 18%, briefly erasing the previous week’s declines, after the firm said it’s reviewing strategic options that may result in a sale of assets Wm Morrison declines as much as 3.8% after the offer terms from winning bidder CD&R disappointed investors Sainsbury rises as much as 5.9% and Tesco gains 1.7% on speculation that CD&R’s Morrison deal may drive further interest in Britain’s grocery sector at a time when cash-rich buyout funds are stalking undervalued U.K. companies; also, a report says Tesco will announce a share buyback program this week Plus500 gains as much as 6.1% after the contracts-for-difference trading firm says full-year profit will beat market expectations Bewi rises as much as 9.9% after the owner of 50% of building products company Jackon Holding accepted Bewi’s offer BT slumps as much as 7.8% to a six-month low following a Telegraph report that Sky is closing in on a broadband investment deal with Virgin Media O2, raising worries over competition Azelio falls as much as 22% after newspaper Dagens Industri raised questions about orders for the renewable energy equipment developer Aryzta tumbles as much as 13% after results, halting a four-day winning streak Frasers falls as much as 12%, the most since December. Bank of America cut the owner of the Sports Direct retail chain to underperform from buy Asia stocks also declined, with Hong Kong shares a drag, after debt-ridden China Evergrande Group’s trading was suspended while investors also sold health care-related names and appeared wary heading into the final quarter of 2021. The MSCI Asia Pacific Index slipped as much as 0.8%. Vaccine maker CanSino Biologics and Shanghai Fosun Pharmaceutical Group were the biggest decliners on the measure as Merck & Co. said its experimental Covid-19 antiviral pill cuts the risk of hospitalization and death in half. “Investors will need to take a sell-first ask-later stance given current elevated valuation levels of vaccine stocks,” said Justin Tang, head of Asian research at United First Partners. Also weighing on traders’ minds is the global energy crisis, which has spread to India and is stoking inflation concerns. Speculation about the potential restructuring of China Evergrande Group, which has suspended trading of its Hong Kong shares, is also affecting sentiment at a time liquidity is thinner. The mainland Chinese market is closed through Thursday for Golden Week holidays. Singapore’s benchmark Straits Times Index was among the top-performing gauges in Asia Pacific as the country takes steps toward further reopening. Measures across the cyclicals-heavy Southeast Asian markets also rose, while tech stocks including Alibaba and Meituan took a hit. Asian assets will be sold alongside global peers in the short term, said Tai Hui, chief Asia market strategist at JPMorgan Asset Management. “But we think cyclical sectors, especially exporters, should also perform well for the rest of the year, especially as more Asian economies are seeing a rising level of vaccination,” he added. Japanese equities fell for a sixth-straight day, as investor concerns deepened over contagion from China’s real-estate sector woes on the suspension of trading in shares of Evergrande and its property management unit. Electronics makers were the biggest drag on the Topix, which declined 0.6%, capping its worst losing streak since February 2020. Tokyo Electron and Fanuc were the largest contributors to a 1.1% drop in the Nikkei 225. “It’s possible Evergrande news flow is impacting Japan stocks, the issues surrounding the property firm aren’t resolved,” said Mamoru Shimode, chief strategist at Resona Asset Management. “It’s also important to keep in mind markets overall have been in risk-off mood since the latter half of September.” Travel and retail stocks gained, following U.S. peers higher after promising results for Merck’s experimental Covid-19 pill and amid signs of a pick-up in Japanese department-store sales. Meanwhile, Fumio Kishida was appointed prime minister by parliament Monday, and was set to reveal a new cabinet lineup as he seeks to revive support for his ruling party ahead of a general election that could likely come this month. In rates, Treasuries are near session lows, the 10Y TSY pushing on 1.50% cheaper by ~3.5bp on the day and near middle of last week’s 1.44%-1.565% range in early U.S. session after erasing gains that pushed yields to lowest levels in a week. 5s30s curve at ~111.7bp is steeper by nearly 2bp, probing 50-DMA and approaching last week’s high. Gilts led the selloff during European morning as regional stocks recovered from a weak open. Curve steepens, with long-end yields cheaper by around 4bp vs Friday’s close.  Peripheral spreads widen with long end Italy underperforming. Semi-core spreads tighten at the margin. In FX, Bloomberg dollar index is little changed; NOK, CAD and CHF are the best performers in G-10, JPY lags but trading ranges are narrow. Crude futures hold slightly in the red in choppy trade. The Bloomberg Dollar Spot Index was steady and the greenback traded in tight ranges against its Group-of-10 peers. The euro reversed a modest decline to trade above $1.16, while the pound hovered after touching its highest level in nearly a week during the Asia session. Expected volatility is now at the highest in five months. The currency fell to a year-to-date low last week amid concerns over soaring energy prices, falling business confidence and the end of the government’s furlough scheme. The Aussie dollar was flat and option markets aren’t expecting the RBA’s policy decision Tuesday to be an eventful one for spot. The yen inched lower after earlier touching a one-week high when concern over potential contagion from indebted Chinese developer Evergrande weighed on Japanese stocks. In commodities, WTI is down 0.25% near $75.70, Brent just 0.1% lower near $79.20 ahead of today’s OPEC+ virtual gathering. Spot gold drops ~$10 to test Friday’s low near $1,750/oz. Base metals trade well with LME aluminum and zinc rising over 1% to outperform peers. Bitcoin and cryptos dropped after a burst higher late on Sunday, following the China Evergrande suspension even though i) the news appears to be positive and is in relation to the latest asset sale and ii) China has banned trading in cryptos, so it wasn't exactly clear why any mainlanders would be selling to meet margin calls. On today's calendar, we get August factory orders, and the final August durable goods orders, core capital goods orders. We also get more central bank speakers including Fed's Bullard, BoE’s Ramsden, ECB Vice President de Guindos and ECB’s Makhlouf. Market Snapshot S&P 500 futures down 0.4% to 4,324.25 STOXX Europe 600 little changed at 453.24 MXAP down 0.5% to 194.02 MXAPJ down 0.3% to 629.26 Nikkei down 1.1% to 28,444.89 Topix down 0.6% to 1,973.92 Hang Seng Index down 2.2% to 24,036.37 Shanghai Composite up 0.9% to 3,568.17 Sensex up 1.1% to 59,391.71 Australia S&P/ASX 200 up 1.3% to 7,278.54 Kospi down 1.6% to 3,019.18 Brent Futures little changed at $79.22/bbl Gold spot down 0.5% to $1,752.29 U.S. Dollar Index little changed at 93.96 German 10Y yield rose 1.4 bps to -0.210% Euro up 0.1% to $1.1613 Top Overnight News from Bloomberg China Evergrande Group and its property-services arm were halted in Hong Kong stock trading amid a report that the developer agreed to sell a controlling stake in the unit to raise much- needed cash U.K. Prime Minister Boris Johnson said he won’t fall back on immigration to solve the U.K.’s truck driver shortage, as he presented supply chain troubles that have left supermarket shelves bare and gas stations dry as a “period of adjustment” in the wake of Brexit and the pandemic House Speaker Nancy Pelosi reset the clock on Saturday, giving lawmakers until Halloween to strike a deal on both the bipartisan $550 billion infrastructure deal and a broader, signature package of social spending, health care and tax measures they must pass with only Democratic votes Germany’s Social Democrats under chancellor-in-waiting Olaf Scholz signaled progress in talks with the Greens on forming a coalition government with the Free Democrats, while Angela Merkel’s bloc kept the door ajar for a conservative-led alliance Japan’s Fumio Kishida was appointed prime minister by parliament Monday, and is set to reveal a new cabinet lineup as he seeks to revive support for his ruling party ahead of a general election that could likely come this month. A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mixed as ongoing Evergrande default concerns clouded over the initial optimism following Friday’s rebound on Wall St where all major indices found some reprieve from last week’s downturn, although the S&P 500 still suffered its worst weekly performance since February and US equity futures also failed to hold on to opening gains with this week’s upcoming risk events adding to the cautiousness including the OPEC+ meeting later today, a bout of Asia-Pac central bank policy decisions from Tuesday and Friday’s NFP job data. The ASX 200 (+1.3%) outperformed, with the index unfazed by the absence of key market participants with mainland China away for Golden Week, South Korea closed due to National Foundation Day, and amid the quasi-holiday conditions in Australia as New South Wales observed Labour Day. Nonetheless, the local benchmark was propped up by the top-weighted financials sector with shares in Australia’s largest bank CBA boosted following a AUD 6.0bln off-market buyback and with reopening stocks, especially those in the travel industry, among the biggest gainers. The Nikkei 225 (-1.1%) wiped out its opening advances despite the lack of significant news catalyst for the reversal which was spearheaded by exporter names, while the focus in Japan turned to PM Kishida’s confirmation in parliament and for details of the new Cabinet members. The Hang Seng (-2.2%) was heavily pressured by losses in health and biotech stocks, while property names also suffered amid the current Evergrande fears after a USD 260mln note from Jumbo Fortune Enterprises matured on Sunday which was guaranteed by China Evergrande Group and its unit Tianji Holding Ltd, while there is no grace period for the payment but five days will be allowed for administrative or technical errors. Furthermore, shares of Evergrande, its property services unit and structured products have all been halted which reports circulating that Hopson Development is to acquire a 51% stake in Evergrande Property Services for HKD 40bln. Finally, 10yr JGBs tracked recent upside in T-notes and with support also from the negative mood in Japanese stocks, as well as the BoJ’s presence in the market for over JPY 1tln of JGBs mostly concentrated in 1yr-5yr maturities. Top Asian News Singapore Eyes More Vaccinated Travel Lanes in Cautious Reopen India Farm Protests Gather Momentum After 4 Demonstrators Killed U.S. Natural Gas Jumps Amid Strong Overseas Demand for Fuel Suzuki Takes Japan Finance Reins as Election, Stimulus Loom Major bourses in Europe have adopted somewhat of a mixed picture (Euro Stoxx 50 Unch; Stoxx 600 -0.2%), following on from the broad-based downbeat cash open seen as Europe picked up the baton from APAC. US equity futures see modest losses across the board but have again drifted off worst levels. Nonetheless, the NQ (-0.5%) remains the slight laggard vs its RTY (-0.1%), ES (-0.2%) and YM (-0.4%) counterparts. Sectors are now mixed with a slight defensive tilt, with Healthcare and Food & Beverages among the top gainers, whilst financials bear the brunt of the yield decline on Friday, with Banks at the foot of the bunch. In terms of individual movers, Morrisons (-3.8%) has accepted CD&R’s takeover offer, which has left Fortress empty-handed but has fanned speculation that the group may look towards Sainsbury’s (+5.9%), Tesco (+1.7%) or Marks & Spencer (+1.5%) as potential targets, with the former being the best suitor, according to reports. Elsewhere BT (-7%) plumbed the depths with some citing reports that Sky is to partner with Virgin Media-O2 in a move set to intensify the challenge to BT’s infrastructure builder Openreach. Top European News U.K.’s Fuel Crisis Has at Least a Week to Run as Army Steps In Adler Group Weighs Asset Sales to Cut Debt After Multiple Bids Amazon Rival Noon to Raise $2 Billion From Backers Including PIF Romanian Billionaire Petrescu Dies in Plane Crash Near Milan In FX, the broader Dollar and index remain caged to a tight range, with the latter within a narrow 93.900-94.104 band after last week printing a new YTD peak at 94.504. The Dollar remains on standby as risk events are abundant this coming week, including deliberations on Capitol Hill and Friday’s NFP. In terms of the developments in Washington, congressional leaders set a new unofficial month-end deadline to pass the infrastructure bill, and USD 3.5tln spending package, and House progressives were reported to offer to reduce spending to save the bill and are willing to compromise on the USD 3.5tln amount with limits but rejected moderate Democrat Senator Manchin’s USD 1.5tln offer. Over to the Fed and a story to keep on the radar - Fed’s Clarida (seen as the nucleus of the Fed) reportedly shifted out of a bond fund into a stock fund last year, which occurred a day prior to Fed Chair Powell issuing a statement of potential policy action due to the pandemic. A spokesperson passed this off as “pre-planned” balancing, but a similar situation led to the early resignation of Kaplan and Rosengren. Elsewhere, USTR Tai is to today unveil the China trade policy following a top-to-bottom review of the Trump admin’s tariffs and other measures. The pre-release noted that the US would begin a process to exempt certain products from tariffs on Chinese imports, with the US also seeking a meeting on Phase 1. That being said, officials noted that all tools remain on the table when asked about further tariffs. Net-net, the release was constructive and, as such, provided tailwinds to the CNH, whereby USD/CNH dipped from 6.4560 to a low of 6.4385. AUD, NZD, CAD - The non-US Dollars somewhat vary with the Loonie attached to price action in the oil complex heading into the OPEC+ meeting later today. The NZD outperforms in the G10 bunch, with the AUD on the other side of the spectrum in what is a busy central bank week for the antipodeans. The AUD/NZD cross will likely take some focus as the RBNZ is poised to hike its OCR, whilst the RBA is seen holding policy steady. AUD/NZD has made its way back towards 1.4050 from its 1.0485 overnight high. NZD/USD meanders around 0.6950 (0.6927-53 range) whilst AUD/USD hovers around the 0.7250 mark (where AUD 1bln of OpEx resides), with the 21 DMA at 0.7295 and the 50 at 0.7311. EUR, GBP - Both European majors trade relatively flat in the European morning, but Brexit rhetoric has ramped up with UK Brexit Minister Frost warning the EU that the UK is prepared to trigger Article 16 unless the EU agrees to replace the Northern Ireland Protocol. There were separate reports that ministers will be given a deadline of the end of next month to decide on whether to suspend the Northern Ireland Brexit deal unilaterally, and senior sources warned that unless the EU was prepared to engage in a “serious negotiation” during the coming weeks, the government would have no choice but to suspend the deal by December. EUR/GBP topped its 100 and 21 DMAs (both at 0.8566) after finding a floor at its 100 DMA (0.8546). EUR/USD is back above 1.1600 (vs 1.1588 base) with EUR 1bln options expiring at the figure. GBP/USD hovers mid-range between 1.3534-77. In commodities, WTI and Brent front-month futures have clambered off worst levels but remain tentative ahead of the OPEC+ confab later today (full preview in the Newsquawk Research Suite). In terms of the long and short of it, markets expect OPEC+ to stick to its plan of raising monthly oil output by +400k BPD; albeit, some look for a larger-than-planned hike. Oil journalists have said this morning that despite the noise surrounding a greater-than-planned hike, ministers expect the current plan to be maintained, although drama in the meeting cannot be omitted. Upside during the European session coincided with headlines suggesting “OPEC+ is seen keeping output policy unchanged”, citing sources, although this was poorly phrased as it incorrectly intimates production being unchanged as opposed to plans for the 400k BPD hike being unchanged. Other things to be aware of aside from OPEC, BioNTech CEO expects the virus to likely mutate and that a new vaccine formulation could be required by the middle of next year, according to the FT, whilst the Gulf of Oman has seen cyclone Shaheen hit the area, although exports are not expected to be impacted yet aside from a delay in loadings. WTI Nov resides just under 76/bbl (75.30-76.20 range) whilst Brent Dec hovers sub USD 79.50/bbl (78.75-79.50/bbl range.) Elsewhere, spot gold and silver have been drifting lower in tandem with the rise in yields seen throughout the morning, with the former briefly dipping under USD 1,750/oz whilst spot silver fell under USD 22.40/oz. Turning to base metals, LME copper posts modest gains and remains north of USD 9,000/t, with some dip-buying being cited. US Event Calendar 10am: Aug. Cap Goods Ship Nondef Ex Air, prior 0.7% 10am: Aug. Cap Goods Orders Nondef Ex Air, prior 0.5% 10am: Aug. -Less Transportation, prior 0.2% 10am: Aug. Factory Orders Ex Trans, est. 0.4%, prior 0.8% 10am: Aug. Factory Orders, est. 1.0%, prior 0.4% 10am: Aug. Durable Goods Orders, est. 1.8%, prior 1.8% 10am: Fed’s Bullard Takes Part in Panel Discussion on the Economy DB's Jim Reid concludes the overnight wrap It’s certainly an odd financial world at the moment. The negatives are obvious and revolve mostly around delta, weaker than expected growth, the energy crisis, ever higher inflation and tighter central bank policy. The positives are that the base effects with numerous lockdowns imposed in Q4 2020 to at least the start of Q3 2021 mean that it won’t be that difficult for growth to still be numerically healthy for a few more quarters. So once the disappointment of growth not being as high as was hoped at this stage fades we should still be left with decent growth. Famous last words but covid should play less and less part in our lives over the year ahead as vaccines and better treatments (eg Merck antiviral pill news on Friday) become more and more widespread. In addition, stimulus and excess savings remain high and financial conditions are still very loose. While regular readers will know I’ve long been beating the drum on higher inflation and will continue to do so, I’m not convinced that growth is rolling over enough for stagflation to be the best description of the outlook for the next 12 months. However I suppose much depends on how you define it. Whilst on the topic of the energy crisis, the world is full of pictures of the UK population queuing for petrol because of a perceived shortage of HGV drivers. We’ll never know if there was actually a shortage that would have threatened fuel supplies as when the story broke 10 days ago panic set in and we had a fuel run (not as shocking as a bank run but formed from the same cloth) as the population desperately tried to refuel. My wife decided to hold out thinking the situation would resolve itself. However by Saturday night we had 10 miles left in the tank and during the day she had passed 6-7 petrol stations with either no fuel or huge queues. As we were putting the kids to bed she announced that she was getting desperate and stressed about it and was going to go out now as she was worried she wouldn’t be able to take the kids to school this week if she didn’t go out to the local area to try to find petrol. I said she was crazy to go at peak time (partly as I didn’t want to put the kids to bed alone - tough on crutches) and urged her to go very early Sunday morning instead. She ignored me and ventured out on what I thought was a suicide mission. 20 minutes later she was back with a full tank! I’ve no idea how and I won’t ask! I apologised! Outside of all the ongoing energy and stagflation chatter, all roads this week point to payrolls Friday as unless there is a marked deterioration across the whole sweep of labour market indicators within the report, this will likely be the catalyst to cement the November taper barring an exogenous or market shock. Investors will also be increasingly focused on the US debt ceiling deadline, whilst Congress simultaneously grapples with the infrastructure bill and the reconciliation package. Elsewhere on the political scene, coalition negotiations in Germany will be important to look out for, as the parties seek to form a government after the election. Before we look ahead, markets have started the week with a risk-off tone, with Asian equities including the Hang Seng (-2.17%), Kospi (-1.62%), the Nikkei (-0.95%) all moving lower while markets in China remain closed. Stocks pared gains on the news that Evergrande’s trading had been suspended in Hong Kong, with a filing from the Hong Kong Stock Exchange saying that this was “pending the release by the Company of an announcement containing inside information about a major transaction.” Meanwhile Bloomberg reported earlier that Evergrande had guaranteed a dollar note worth $260m with an official due date of Oct 3 by Jumbo Fortune Enterprises, making the effective due date today since maturity was on a Sunday. Elsewhere in Asia, NHK reported that Japan’s incoming Prime Minister, Fumio Kishida, planned to hold a general election on October 31, and looking forward, US equity futures are also pointing lower, with those on the S&P 500 down -0.32%. Looking ahead, the US jobs report will be one of the main macro highlights this week, and follows last month’s release that strongly underwhelmed expectations, with nonfarm payrolls growth of just +235k in August being the slowest since January. So another poor release would not be welcome news even if it did reflect labour shortages. In terms of what to expect this time around, our US economists are forecasting a pickup in September, with nonfarm payrolls growing by +400k, and the unemployment rate ticking down to a post-pandemic low of 5.1%. Remember in the weak report last month, yields rose on the day as markets focused on the wage increases rather than the poor headline number. As we said at the time the bond reaction to last month’s report probably helped signal the end of the extreme positive technicals and short positioning in treasuries. Over the summer strong inflation and decent data couldn’t help treasuries sell off, indicating bullet proof technicals but the period around last month’s release seemed to turn the tide the other way a bit. The other important data release this week will be the global services and composite PMIs out tomorrow, which will give an indication of how the economy has fared into the end of Q3. That said, the flash readings we’ve already had have indicated slowing growth momentum across the major economies, so it will be interesting to see where things progress from here. Turning to the US, negotiations in Congress will be in focus as legislators face the debt ceiling deadline this month (expected to be breached around October 18th according to Treasury Secretary Yellen last week), just as the Democrats are also seeking to pass a $550bn bipartisan infrastructure bill and a reconciliation package. On Saturday, Speaker Pelosi seemed to suggest that the new deadline was October 31st for the bipartisan bill which highlights how much difference there still is between the progressives and moderates on the reconciliation package. Will they eventually find a compromise for a lower amount than the original $3.5tn (maybe around $2tn) that makes nether side happy but gets the legislation through? Staying on the political scene, there’ll also be a focus on coalition negotiations in Germany, where exploratory talks have now begun between the parties. The Greens and the liberal FDP will be key to forming a majority in the new Bundestag, with 210 seats between them, as both the centre-left SPD and the conservative CDU/CSU bloc still hope to lead the next coalition. Initial exploratory talks began with the SPD yesterday, and the FDP have also spoken to the CDU/CSU, with the Greens set to follow tomorrow. On the central bank side it’s a quieter week ahead, with the two G20 policy decisions expected from the Reserve Bank of Australia (tomorrow) and the Reserve Bank of India (Friday). In Australia, our economist is expecting no change in policy and a reaffirmation of their dovish policy outlook. And in India, our economist also expects the MPC to keep all key policy rates unchanged, with our base case remaining for a reverse repo rate liftoff starting from December. The day-by-day calendar is at the end as usual. Back to last week, and global equity markets slid for the third week out of the last four as the S&P 500 fell -2.21%, with a +1.15% increase on Friday not stopping the index from having its worst week since the end of February. The losses were primarily led by growth and technology stocks as the NASDAQ declined -3.20% on the week, while cyclicals such as banks (+1.92%) and energy (+5.78%) stocks outperformed. European equities similarly fell back, as the STOXX 600 ended the week -2.24% lower after Friday’s -0.42% loss came prior to a late US rally. Global sovereign bonds sold off for a sixth straight week, though most of that selling came in the first two days as the global risk-off tone caused investors to search for havens. US 10yr Treasury yields still ended the week up +1.1bps, despite Friday’s -2.6bp decline. Bond yields in Europe moved higher as well, with those on 10yr bunds increasing +0.4bps, to trade at their highest levels since early-July. And 10yr yields on French OATs (+1.2bps) and Italians BTPs (+3.1bps) also rose further. UK gilts underperformed them all with yields increasing +7.7bps. The major driver of the move in global yields was rising inflation expectations with US 10yr breakevens increasing +4.5bps, while 10yr bund and breakevens rose +9.3bps to reach their highest level since 2013 and gilt breakevens (+3.5bps) rose to their highest level since 2008 even though they were much higher mid-week. The US September ISM manufacturing survey rose to 61.1 from 59.9 in the prior month even as supply bottlenecks intensified. This along with strong demand readings from businesses and consumers have led to higher prices which are mostly being passed onto consumers. This was seen in the PCE deflator data from Friday which showed prices rose 4.3% (4.2% expected) y/y with the core reading increasing 3.6% (3.5% expected) y/y. The University of Michigan survey showed respondents’ inflation expectations in a year dropped slightly from the initial reading 4.6% (4.7% initial , 4.8% exp), which was in-line with last month. 5-10yr expectations remain elevated at 3.0%. Overall the sentiment reading of 72.8 (71.0 prior) was better than the initial survey but still was the fifth worst reading in a decade, with only last month and the early months of the pandemic having been lower. Separately, Euro-area inflation reached its highest level since September 2008 on Friday as the headline September CPI print registered at 3.4% y/y (3.3% expected) in September, fuelled by the cost of energy and travel. Meanwhile, in Europe the manufacturing PMI readings were largely in-line with the preliminary readings with the Euro Area print sitting at 58.6 (58.7 prior) with Germany (58.4) and France (55.0) both just under their prior readings. Tyler Durden Mon, 10/04/2021 - 07:55.....»»

Category: dealsSource: nytOct 4th, 2021

59 gifts for college students that will help them manage dorm life, midterms, and adulting

The best gifts for college students are practical and fun. Here are 59 gift ideas from a recent college graduate. When you buy through our links, Insider may earn an affiliate commission. Learn more.Amazon; Urban OutfittersWhen students enter university and are first introduced to the world of adulting, the more practical and helpful the gift is, the better. A reliable face cleanser that manages stress breakouts? Check. Professional accessories to defeat imposter syndrome at their new internship? Check. Dorm decor that makes their place feel like a real home? Check, check, check.Between studying and working and more studying and more working, college students can use a break – or a helpful gift to keep them motivated. Keep scrolling to browse gifts beyond the essentials, from cool neon signs to a unisex skincare routine.The 59 best gifts for college students in 2022:A trendy Trader Joe's-inspired cookbookUrban Outfitters"The I Love Trader Joe's College Cookbook" by Andrea Lynn, available at Urban Outfitters and Amazon, from $15.29If there's one place you hear all these Gen Z'ers talking about, it's Trader Joe's. This quirky cookbook contains 160 easy recipes for busy (and usually broke) college students, drawing from some of the brand's favorite ingredients to create mouth-watering hors d'oeuvres, party-worthy appetizers, and nourishing meals.Does your student prefer to cook with the air fryer? Check out this equally nifty "I Love Trader Joe's Air Fryer Cookbook"! A helpful air purifierBed Bath & BeyondHoMedics TotalClean 4-in-1 Air Purifier, available at Bed Bath & Beyond, Amazon, and Home Depot, $69.99For college students living in a traditional dorm room, a breath of fresh air is more than welcome. This HoMedics TotalClean 4-in-1 air purifier creates cleaner air no matter how small the space is, clearing pollen, dust, smoke, pet dander, mold spores, and germs for easy breathing. Bonus points: It has an auto shut-off timer, a built-in night light, and a three-year manufacturer's warranty for optimal satisfaction.A bottle or two of famous toilet spraysPourriPoo-Pourri Toilet Sprays, available at Pourri and Amazon, $9.99Whether they're in a community bathroom or a private one, odds are they'll be sharing it with a roommate. These Poo-Pourri toilet sprays use essential oils and plant-based ingredients to eliminate bathroom odor before it begins. Just pick their fave scent, spray, and go — no stink necessary!Neon light signs for ultimate dorm vibesDormify"Good Vibes Only" Neon Sign, available at Dormify, $79Nothing screams college vibes more than a quirky neon light or color-changing LED-rimmed walls. Dormify's options are perfect for achieving this, and the brand has everything from wholesome neon signs to goofy ones. A manifestation of good vibes is probably helpful for the average student, but there are plenty of other options like GRLPWR, Happy, and Party.Coffee table books that add a touch of personalityAmazon"In Vogue: An Illustrated History of the World's Most Famous Fashion Magazine" by Alberto Oliva dna Norberto Angeletti, Available at Amazon and Walmart, $50.99"Color Scheme: An Irreverent History of Art and Pop Culture in Color Palettes" by Edith Young, available at Amazon and Walmart, $19.29For all the books college students have to read for class, it's nice to have some decor books laying around that are beautiful to look at and fun to flip through. Depending on their interests and aspirations, "In Vogue: An Illustrated History of the World's Most Famous Fashion Magazine" is perfect for a fashionista. For an artsy student, "Color Scheme: An Irreverent History of Art and Pop Culture in Color Palettes" is a great choice. A statement scrunchie that'll make any outfit look goodAmazonKitsch Dinner Scrunchie, available at Amazon and Target, from $13.53There are few accessories that can pull together an outfit and make it look chic, even if that outfit is sweatpants. The massive dinner scrunchies by Kitsch are the perfect accessory to add to a quick outfit and make it look put together. Gifting this to someone means they will always have the option to add an easy, fashionable touch to their look.A trio of unisex products that makes skincare clean and simpleAtticusBest Seller Trio, available at Atticus, $83.70Stress affects how our skin looks, especially in college. Skincare, however, can get overwhelming because of how many options are available. Atticus's high-quality skincare line makes it simple for everyone and is made to be gender inclusive. Its trios, like the Best Seller, include all the products you need: a cleanser, daily moisturizer with SPF, and night cream with anti-aging ingredients. A modern card game for nights in and partiesAmazonWhat Do You Meme Game, available at Amazon and Walmart, $29.99College students today are of the meme generation, so this game will be highly appreciated. This set includes 75 of the funniest memes plus 360 caption cards to make the wonkiest combinations for a game during study breaks or chill wine nights.One of the easiest ways to find your favorite fragranceScentbirdPerfume subscription (6-months), available at Scentbird, $89Finding a fragrance that speaks to you is a step towards finding your style. But buying a bunch of different scents can take a long time and cost a lot. Scentbird is a perfume and cologne discovery subscription that helps you find your favorite perfumes by sending monthly options based on your preferences.A sunrise alarm clock for a gentle, phone-free wakeupSuzy Hernandez/InsiderHatch Restore, available at Amazon and Target, $129.99Using your phone as an alarm clock makes it a lot more tempting to start scrolling on your phone first thing in the morning, which isn't the healthiest habit. A sunrise alarm clock can help your student have a much better start to their day than immediately checking emails or scrolling on Instagram. The Hatch Restore is a great sunrise alarm option with a ton of special features.One of the nicest and most classic notebooksMoleskineMoleskine Classic Notebook, available at Amazon and Walmart, from $18.63Moleskine journals have a history of belonging to creatives and being the place where great ideas and art begin. If the student you're thinking of is a writer or artist, a Moleskine journal is a perfect gift to let them know you support them. These are also stellar for note-taking.An air fryer for the snack loverAmazonThe Philips Premium TurboStar Air Fryer, available at Amazon and Walmart, from $149.95Air fryers are all the buzz for how they can turn just about anything into a warm, crispy delight. Plus, they save a ton of time, which every college student can appreciate. The Philips Premium TurboStar Air Fryer is one of the best air fryers on the market today.There's some controversy about how good air fryers actually are, so you can also think about gifting a toaster oven.A good wallet to hold their cards, cash, and student IDVera BradleyVera Bradley Microfiber Zip ID Wallet, available at Vera Bradley and Amazon, from $20Vera Bradley's Zip ID Wallet is a great option for students who have to frequently show or swipe their student ID, but don't need an overstuffed bifold. The O-ring is a convenient and sturdy place to hold all their keys. It also makes it easy to clip the wallet into their other bags.A steady supply of healthier (and still tasty) snacksThrive Market1-Year Membership + $25 Shopping Credit, available at Thrive Market, $84.95College students live off good food and snacks. Gifting a subscription to Thrive Market means access to healthier snacks, which leads to them feeling more energized and better studying.A long-lasting backpack that'll look good on campus and at job interviewsHerschelHerschel Little America Backpack, available at Herschel and Amazon, from $94.99Typical backpacks work great for class, but what about everything that happens outside of class? Having a sturdy backpack that's well-suited for traveling and job interviews helps a ton. Herschel's Little America is a great option because it's versatile, sturdy, and stylish. Similarly, the Dagne Dover backpack ($215) is specifically designed for a woman's body and is made to store everything you need and go anywhere you go. If the student is a tote person and doesn't touch backpacks, the Longchamp Le Pliage Shoulder Bag ($155) is a staple for students and young workers alike.An aroma diffuser to set the moodGrove CollaborativeCollaborative Ultrasonic Aromatherapy Diffuser, available at Grove, $39.99An aroma diffuser delivers calming, in-home aromatherapy and is a great fragrance option for dorms where candles usually aren't allowed. This one from Grove Collaborative diffuses essential oils for up to five hours at a time, has LED light options, and elegantly blends into any room thanks to its minimalistic ceramic design.If you're looking for more diffusing options, check out our guide to the best essential oil diffusers we tested. A weighted blanket that'll change the way you sleepTranquilityTranquility Weighted Blanket, available at Target and Walmart, from $49Every college student ever has needed better sleep. Weighted blankets apply a calming pressure on you, making it easier to fall asleep and wake up more rested. Tranquility's weighted blanket is perfectly-sized it is to move from bed to couch, fits a standard dorm twin XL bed, and is easily washable.A foolproof planner to keep everything in orderDay DesignerWeekly Planner, available at Day Designer, $68A planner keeps them organized between all their assignments, exams, and social events. Day Designer makes luxurious planners that students love. Planners come in daily or weekly options which each have space for all your checklists and schedules, plus extra pages for goal setting, future planning, and notes.If this style doesn't suit them, pick another from our favorite planners for college students.The most comfortable socks college students can ownBombasWomen's and Men's Ankle Sock 4-Pack, available at Bombas, $49.40Bombas makes the best socks on the market. They benefit from upgrades like a supportive honeycomb stitch, blister tabs built into ankle-height styles, and a Y-stitched heel and "invisitoe" that minimizes annoying bumps. Even if it seems like socks aren't an exciting gift, comfort is pretty much always a hit in college. Plus, for every pair purchased, Bombas donates a specially designed sock to someone in need.A cult-favorite tumbler to keep their drinks just the right temperature for hoursHydro FlaskHydro Flask 40 oz. Wide Mouth Water Bottle, available at Hydro Flask, REI, and Amazon, from $49.95This HydroFlask will keep cold drinks cold for up to 24 hours and hot drinks hot for up to 12 hours with the lid on, perfect for when they need coffee during a long night studying.Great coffee from all over the world to help them stay energizedAtlas Coffee Club3-Month Coffee Subscription, available at Atlas Coffee Club, $60If they drink coffee, they'll likely drink a fair amount of it during college. And it's really nice to have a cup better than one from the dining hall. Atlas Coffee is a monthly subscription that's sort of like a worldwide coffee tour — bringing the best single-origin coffee (with a postcard from its origin country) to your door. They'll also get brewing tips and flavor notes. A book that helps them build good habits and break bad onesAmazon"Atomic Habits: An Easy & Proven Way to Build Good Habits & Break Bad Ones" by James Clear, available at Amazon and Barnes & Noble, from $11.98Many college students are trying to map out what they want out of life and how to build the habits that get them where they want to go. In the popular book "Atomic Habits," James Clear, an expert on habit formation, teaches practical strategies for building lasting habits and ditching detrimental ones. Popular wireless over-ear headphones for quality noise-cancelingAmazonBeats Solo3 Wireless Noise Cancelling On-Ear Headphones, available at Amazon, Walmart, and Apple, from $116.09If there's one thing every college student needs, it's good wireless headphones. This Beats pair has rich sound and up to 40 hours of listening time. And if they let the battery run out, a five-minute charge converts to three hours of playback.If they're a runner and need something lightweight and in-ear, you should opt for Jaybird Vista.An inexpensive way to get the iced coffee they love at homeAmazonTakeya Patented Deluxe Cold Brew Coffee Maker, available at Amazon and Walmart, from $30.39If the student you're thinking of drinks coffee — and there's a very good chance they do — having access to one of the best cold brew contraptions will be a gift that keeps on giving. A cold brew machine means you can go 4-5 days in a row without brewing another pot. It's also easy to clean. Find a full review here.A waterproof speaker that can bring the bassJBLJBL Flip 5 Bluetooth Speaker, available at JBL, Amazon, and Walmart, from $89A Bluetooth speaker is a must-have: it helps set the mood for study nights and brings the party to life whenever they're hosting. JBL's Flip 5 speaker is the best choice. It has vibrantly booming bass, lasts for up to 12 hours without a charge, and is waterproof.Clothes and shoes for their upcoming interviews and presentationsEverlaneThe Oversized Blazer, available at Everlane, $228Workday Khakis, available at Dockers, $66Wool Coat, available at Other Stories, from $219College is full of big meetings, presentations, and nerve-wracking interviews. For days when sweatpants aren't an option and something more formal is needed, these are some great options for women's staples. We've also created a list of our personal favorite workwear stores for women and men — plus the best styles to buy from each one. A nice watch they can wear to internshipsMVMTMVMT Men's Chrono Watch, available at MVMT and Amazon, from $135MVMT Women's Avenue Watch, available at MVMT and Amazon, $128MVMT makes beautiful watches for men and women at great prices, and they feel more contemporary to wear than most on the market. It's a versatile, sentimental gift you can feel good about giving because you know they'll feel good — and perhaps more put-together — wearing it. One of the best tablets for note-taking, entertainment, and everything elseAmazonApple 10.2-inch iPad (32 GB), available at Amazon, Apple, and Walmart, from $299.95 If you go on a college campus today, you'll probably see iPads all over the place — and for good reason. These slim rectangular boxes are bundles of joy for students. They make note-taking, e-reading, Netflix, and leisure drawing easy to do all in one place. The new 256GB iPad ($479) will make an unforgettable gift. If you want to take it up a notch, the highly-coveted and ultrafast 11" iPad Pro ($799) is even better.If they already have an iPad, you can think about getting them an Apple Pencil ($129), which will level up their gadget even more.A key-, wallet-, and iPhone-finderAmazonTile Mate, available at Amazon, Target, and Walmart, $24.99You can't go wrong with a tracker for their keys, wallet, or phone. The Tile Mate is compact, thoughtful, and useful for everyone — especially an oft-frazzled college student.  A bed frame that can easily move with themLauren Savoie/InsiderThuma Bed Frame (Full), available at Thuma, from $995A good bed frame is the foundation of good sleep and this one by Thuma features interlocking Japanese joinery that makes it incredibly sturdy but easy to disassemble, move, and store. It's a great option for young adults on the move, especially if they're moving into older or smaller buildings. A smartphone-sized travel photo printerStaplesFujifilm Instax Mini Link Bluetooth Photo Printer, available at Amazon, B&H Photo, and Apple, from $89.95Mini portable Bluetooth printers make turning iPhone photos into tangible memories quick and easy — which is especially convenient for decorating their room. All they'll have to do is download the app (which also has internal PhotoShop elements and features like themed stickers and collages) and connect via Bluetooth. Their favorite comfort foodsGoldbellyFood gifts, available at Goldbelly, prices varyGoldbelly makes it possible to satisfy their most specific and nostalgic cravings no matter where they live in the US — a cheesecake from Junior's, deep dish pizza from Lou Malnati, and more. Browse the iconic gifts section for inspiration.A media streamer that transforms a normal TV into a smart oneAmazonRoku Ultra 4K/HDR/HD Streaming Player, available at Amazon, Roku, and Walmart, from $86.89Most college students aren't forking over a monthly payment to cable. This streaming player is, overall, the best one you can buy, and it transforms an otherwise ordinary TV into one that can stream shows and movies from Netflix, Hulu, HBO Now, Prime Video, and others all in one spot.  One of the best facial cleansers for a clean and effective routineFOREOFOREO Luna 3 Facial Cleansing Device, available at FOREO, Amazon, and Sephora, $219FOREO's cult-favorite Luna 2 cleansing device gently and effectively cleans with thin, antimicrobial silicone touch points, and it removes 98.5% of dirt and makeup residue without irritating the skin. Plus, it's 100% waterproof and the battery life lasts for a few months per charge. Find a full review from a female reporter and a male reporter here.Trendy and convenient Apple AirPodsAppleApple AirPods Pro (2nd Gen) with Charging Case, available at Target, Amazon, and Apple, from $239.99If you're after the title of their favorite relative of the year, here's a good place to start. AirPods are both easy to use and functional as well as trendy. A comfy Patagonia pullover they'll rely onPatagoniaMen's and Women's Lightweight Synchilla Snap-T Pullover, available at Patagonia, $129Men's and Women's Better Sweater 1/4-Zip Fleece, available at REI, $129It's a good bet that many of their peers will also have this Snap-T pullover from Patagonia. This and the Better Sweater are long-held favorites, and both are comfortable classics that they'll no doubt come to rely upon. A Patagonia sweater is also a particularly good gift for students who are invested in sustainability. The company has been turning plastic bottles into polyester for its clothing since 1993, and continues to do so today.The world's comfiest shoesAllbirds/InstagramMen's and Women's Wool Runners, available at Allbirds, $110Startup Allbirds makes wildly popular shoes out of soft, sustainable materials. Their Runners, made of super-soft merino wool, have been nicknamed "the world's most comfortable shoes." You can find a full review here. A portable projector that's the size of a soda canAmazonAnker Nebula Capsule Smart Mini Projector, available at Amazon and Walmart, $299.99Anker's Nebula Capsule is a powerful and versatile mini projector, and its portability makes it a great option for college students who want a cozy movie-viewing experience in the comfort of their own room. It's 1 pound and the size of a soda can, but it has surprisingly crisp image quality and 360-degree sound. Find a full review here.College merchandise for school spiritAmerican EagleShop American Eagle's Tailgate ApparelParticularly if they're going to a school with a big sports team, you can be sure they'll both need and appreciate all the fan gear. A great game for a night in with friendsAmazonCards Against Humanity, available at Amazon, Target, and Walmart, $29Grab a fun card game they'll inevitably end up pulling out to play with friends on the weekend nights and snow days. Check out What Do You Meme, too.A Brooklinen gift card for really nice sheetsBrooklinenGift Card, available at Brooklinen, from $50Few things sound as nice as comfortable, beautiful sheets that you don't need to buy for yourself. Brooklinen is one of our favorite startups to shop at, and we ranked their sateen cotton sheets the best luxury sheets you can buy.A monthly subscription of personalized new makeup, haircare, and skincare samplesBirchbox Man/InstagramOne Year Subscription, available at Birchbox, $156College students like to look and feel good, but tight budgets aren't conducive to trying a lot of new grooming products. Birchbox sends samples of new and beloved products once a month, so they can test out new finds and discover products they may want to buy a full size of in the future. It's also just fun to get a monthly gift that is all about them. An Echo Dot with a built-in clockAmazonEcho Dot (4th Gen) with Clock, available at Amazon, B&H Photo, and Best Buy, $59.99The newest Echo Dot is more convenient than ever. The all-new design features a larger speaker for better audio, a digital clock to display the time and timer countdowns, and all of Alexa's other features. A savvy suitcase for traveling on holiday breaksAway/FacebookThe Carry-On, available at Away, from $275Away's popular suitcases deserve their hype. Their hard shell is lightweight but durable, their 360-degree spinner wheels make for seamless traveling, and the external (and ejectable and TSA-compliant) battery pack included can charge a smartphone five times over. It's also guaranteed for life by Away. Find our full review here.We also recommend Calpak for other luggage options. A book about capitalizing on the huge choices to make in your 20sAmazon"The Defining Decade: Why Your Twenties Matter — And How to Make the Most of Them Now" by Meg Jay, available at Amazon and Barnes & Noble, from $12.19The decisions you make in your 20s can greatly impact the rest of your life. The best defense is a good offense and your grad should know now, before any life-altering events crop up, how to get the most out of their "defining decade."An Amazon Prime membershipTommaso Boddi / Getty ImagesGift an Amazon Prime membership, $139An Amazon Prime membership is one of those things that immediately makes life easier. If you decide to gift one, the recipient will enjoy free two-day shipping; access to the Prime Now app, which provides free two-hour delivery on tens of thousands of items; Prime Video, Amazon's streaming video service; Prime Music; the Kindle Lending Library; Prime Reading; Prime Audible Channels; unlimited photo storage, and more.If you want to see how Amazon Prime actually gives you a lot more than free shipping, you can read about the benefits of the service here.A candle to remind college students of their favorite place or hometownAmazonHomesick Location Scented Candle, available at Amazon, Homesick, and Uncommon Goods, from $34If they're away from family or friends, a reminder of home is a wonderful thing to have around. Make sure to check the rules of their dorm or living situation before buying them a candle.Childlike cereal for adultsMagic SpoonFour Flavors, available at Magic Spoon, $39Magic Spoon is a "childlike cereal for adults" that's high in protein and low in sugar — and all four flavors are delicious. Here's one way to show college kids it is completely possible to transition to adulthood without losing all the joy of being a kid. You can read more in a personal review here. Framed memoriesFramebridgeGift Card or Frame a Memory, available at Framebridge, from $45Help them honor some of their best memories — whether it's from friends now studying across the country, family, or best-loved locales. Framebridge is relatively affordable, but decor is one of the luxuries plenty of college students shirk to save elsewhere, so give them permission and funds to make their dorm a home.A monogrammed leather shave bagLeatherologyLeatherology Small Shave Bag, available at Leatherology and Amazon, from $95The dreaded truth of college is that you'll most likely need to schlep your shower belongings to a communal area if you live in the dorms. No one wants to rely on a plastic shower caddy to do that. Grab them a leather shave bag that they'll use for years to come — they probably wouldn't justify the expense on their own, and they'll be grateful to have it. If you're looking for a chic aesthetic, Dagne Dover also makes a great neoprene toiletry bag named the Hunter (from $45) that's built to accommodate makeup. If they have a lot of toiletries, you'll probably want to get the large size for $55.The most comfortable lounge pants we've ever tried for lazy weekend morningsMeUndiesMen's and Women's Lounge Pant, available at MeUndies, $68MeUndies is a popular LA startup that makes some of the most comfortable underwear we've ever tried. Their lounge pants, however, are the real hidden gem — perfect for lounging around on weekend mornings, and they're sleek enough to avoid feeling too unkempt.The best pillow you can buyCoop Home GoodsPremium Adjustable Memory Foam Pillow, available at Coop Home Goods and Amazon, $72Make sure they're optimizing their sleep with the best pillow you can buy. Thanks to the shredded memory foam, they'll get the support and comfortable "sinking in" sensation of a traditional memory foam pillow, but none of the excessive heat or firmness that can be a problem with solid foam. Read more in our buying guide here.A wonderful addition to any skincare routineSephoraKiehl's Ferulic Brew Antioxidant Facial Treatment with Lactic Acid, available at Kiehl's and Sephora, $54This new facial essence from Kiehl's is a great addition to any skincare routine. It's especially good for those who want to even out their skin tone, smooth skin texture, and add some extra moisture. It's made with rich ingredients and is simple to use: you just pat a few drops onto your face, rub it in, and it'll do its magic.A custom poster of their favorite placeGrafomapA customized poster, available at Grafomap, from $19Commemorate their college town, hometown, or favorite place in the world with this customizable graphic map so they can keep it with them wherever life takes them.An extra-long, reinforced phone chargerAmazonNative Union 10-Foot Extra-Long Charging Cable with Leather Strap, available at Amazon, Walmart, and Native Union, from $24If they're going to be tethered to devices, you may as well give them a long leash. This long charging cable means no matter where one is, they'll have power — and they won't have to sit at the foot of their bed to reach it. A gym bag that can transition to a professional settingNordstromHerschel Supply Co. Novel Duffel Bag, available at Amazon, Nordstrom, and Herschel, from $67.64Just like bringing a beat-up JanSport everywhere, lugging an old nylon gym bag isn't ideal for anyone looking for versatile use. Herschel Supply Co. makes reliable, long-lasting bags, and this one has a separate compartment for gym or dress shoes. A microwave-safe ramen cooker for stressful or time-crunched nightsAmazonRapid Ramen Cooker, available at Amazon and Walmart, from $5.99There will be plenty of late nights filled with cheap and tasty ramen. If they're going to eat it anyway, at least let them make it quickly and perfectly every time.A super soft throw blanket they'll cocoon themselves in time and time againAmazonBEDSURE Sherpa Fleece Blanket, available at Amazon and Walmart, from $25.99Grab their favorite candy, this sherpa-lined fleece blanket with over 4,400 five-star reviews on Amazon, and a Hulu gift card to make their nights in actually fun.Gift cards — perhaps the best gift you can give a cash-strapped college studentFlickr Creative Commons/Lani EldertsWhat a stressed, broke college student needs most is money and probably a hug. If you're looking for a way to gift maximum convenience, gift cards are a surprisingly thoughtful way to do that — either for their favorite restaurant, transportation, school books, or music to keep them occupied during long study hours. Check out more gift card gifts here. Everything: Visa Gift Card / Amazon Gift Card Coffee: Starbucks Gift CardSchool books: Amazon Gift Card Entertainment: Netflix Gift Card / Hulu Gift Card / Sling Gift Card / StubHub Gift CardTransportation: Uber Gift CardFurniture: Amazon Gift Card / Wayfair Gift CardMusic: Spotify Gift CardGroceries and food: Whole Foods Gift Card / Chipotle Gift CardClothes: Nordstrom Gift Card / Everlane Gift CardTech: Best Buy Gift CardTravel: Delta Gift Card / Airbnb Gift CardRead the original article on Business Insider.....»»

Category: dealsSource: nytSep 30th, 2022

Oil Reclaims $80 After EIA Reports Supply Draw on All Fronts

Energy companies like Occidental Petroleum (OXY), Marathon Petroleum (MPC) and Hess Corporation (HESS) have seen solid gains in 2022. U.S. oil prices bounced back from an eight-month low after government data showed a weekly draw in crude, gasoline and distillate supplies.A decline in stocks across the board together with a falling dollar and supply disruptions from Hurricane Ian saw the commodity rise above $80-a-barrel. However, it remained under pressure from recessionary fears.On the New York Mercantile Exchange, WTI crude futures settled at $81.23 a barrel yesterday. Investors should know that oil slipped to a nine-month low of around $77 earlier in the week — the lowest since January.Before going into the overall macro environment for oil, let's dig deep into the Energy Information Administration’s ("EIA") Weekly Petroleum Status Report for the week ending Sep 23.Analyzing the Latest EIA ReportCrude Oil: The federal government’s EIA report revealed that crude inventories fell 215,000 barrels compared to expectations of a 300,000-barrel decrease per the analysts. The combination of a surge in exports, lower imports and a dip in domestic production accounted for the stockpile draw with the world’s biggest oil consumer even as refinery demand contracted.Total domestic stocks now stand at 430.6 million barrels — 2.9% more than the year-ago figure but 2% lower than the five-year average.The latest report also showed that supplies at the Cushing terminal (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) rose 692,000 barrels to 25.7 million barrels.Meanwhile, the crude supply cover increased from 26.7 days in the previous week to 26.9 days. In the year-ago period, the supply cover was 28.2 days.Let’s turn to the products now.Gasoline: Gasoline supplies decreased for the second time in three weeks. The 2.4 million-barrel fall was primarily attributable to a surge in demand. Analysts had forecast that gasoline inventories would rise 900,000 barrels. At 212.2 million barrels, the current stock of the most widely used petroleum product is 4.3% less than the year-earlier level and 6% below the five-year average range.Distillate: Distillate fuel supplies (including diesel and heating oil) dropped after rising for four weeks in a row. The 2.9 million-barrel fall reflected an uptick in demand and lower production. Meanwhile, the market looked for a supply draw of some 100,000 barrels. Despite the recent decreases, current inventories — at 114.4 million barrels — are 11.8% below the year-ago level and 20% lower than the five-year average.Refinery Rates: Refinery utilization, at 90.6%, fell 3% from the prior week.Final WordWTI prices recently posted its longest run of weekly losses in 2022 following the Federal Reserve's decision to hike interest rates further in line with many other central banks across the world to step up the fight against soaring inflation. The tightening monetary policies have sparked concerns about a possible recession and, consequently, slowing crude demand. A stronger greenback, which can weaken dollar-denominated commodities like crude, also contributed to the downside.What stands out is that rates may not have peaked yet, and more toughness could be in store for the remainder of this year and 2023. This is because attempts are being made to cool the 40-year high inflation and prevent it from becoming entrenched.However, the U.S. benchmark has regained some ground in the wake of EIA’s bullish inventory report. Prices also drew support from the greenback’s climbdown from a 20-year high, which can strengthen dollar-denominated commodities like crude.As it is, with the Russia-Ukraine conflict showing no signs of a quick resolution, the risk of dwindling inventory and the influential oil exporters’ group (OPEC+) agreeing on a production curtailment, the Oil/Energy market has enough reasons to stay elevated in the near-to-medium term.As a matter of fact, the Energy Select Sector SPDR — an assortment of the largest U.S. companies thronging the space — has risen nearly 31% year to date against a 24% loss for the broader S&P 500 benchmark.Consequently, three of the top five gainers of the S&P 500 this year are all energy-related names: Occidental Petroleum OXY, Marathon Petroleum MPC and Hess Corporation HES.Occidental Petroleum: OXY is the top-performing S&P 500 stock in 2022, with a gain of 114%. Occidental Petroleum beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of 21.6%, on average.OXY has a projected earnings growth rate of 331.8% for this year. The Zacks Consensus Estimate for Occidental Petroleum’s 2022 earnings has been revised 5.5% upward over the past 60 days.Marathon Petroleum: This stock is among the best performers on the S&P 500 Index, with shares having appreciated 54% in 2022. MPC, carrying a Zacks Rank #1 (Strong Buy),  has a projected earnings growth rate of 788.6% for this year.You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Marathon Petroleum’s 2022 earnings has been revised 14.6% upward over the past 60 days. MPC’s expected EPS growth rate for three to five years is currently 23%, which compares favorably with the industry's growth rate of 10.5%.Hess Corporation: Hess shares have appreciated 47% so far in 2022. HES has a projected earnings growth rate of 309.1% for this year.Hess, with a market capitalization of $33.5 billion, has a VGM Score opf B. HES beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 7.1%. This Little-Known Semiconductor Stock Could Be Your Portfolio’s Hedge Against Inflation Everyone uses semiconductors. But only a small number of people know what they are and what they do. If you use a smartphone, computer, microwave, digital camera or refrigerator (and that’s just the tip of the iceberg), you have a need for semiconductors. That’s why their importance can’t be overstated and their disruption in the supply chain has such a global effect. But every cloud has a silver lining. Shockwaves to the international supply chain from the global pandemic have unearthed a tremendous opportunity for investors. And today, Zacks' leading stock strategist is revealing the one semiconductor stock that stands to gain the most in a new FREE report. It's yours at no cost and with no obligation.>>Yes, I Want to Help Protect My Portfolio During the RecessionWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Hess Corporation (HES): Free Stock Analysis Report Occidental Petroleum Corporation (OXY): Free Stock Analysis Report Marathon Petroleum Corporation (MPC): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 30th, 2022

Bull of the Day: Cracker Barrel Old Country Store (CBRL)

This restaurant stock is coming into a buy zone. Cracker Barrel Old Country Store (CBRL) is a Zacks Rank #1 (Strong Buy) that is engaged in the ownership and operation of full-service restaurants with a restaurant and a retail store in the same unit. Their popular signs can be seen all over the country when one takes a road trip on America’s highways.2022 has not been kind to the stock, which is down over 25%. Additionally, the stock is off over 45% from its 2021 highs. So, is now the time to buy?A recent earnings beat was not initially good enough for investors, causing the stock to traded lower. However, the stock came off its post-earnings lows as analysts raised estimates. Investors should watch this one closely as the overall stock market tries to find its footing.  About the Company Cracker Barrel was founded in 1969 and is headquartered in Lebanon, TN. The company operates over 650 stores in 45 states and has a market cap of $2 Billion.The company aims to provide an environment that has a friendly home-away-from-home feel. They provide home-style meals and a retail shop that offers unique gifts and self-indulgences.The stock has Zacks Style Scores of “B” in Value and “A” in Momentum. The stock also pays a hefty 5.4% dividend.  Q4 Earnings Beat On September 27th, the company reported an earnings beat of 14%. Revenues came in below expectations, but the company guided initial FY23 revenues up 7-8%.Comparable restaurant sales were up 6.1%, while operating income margin ticked up to 4.4% from 4.3% last quarter.A couple negatives in the guidance was commodity inflation +8% and wage inflation +5%. These will add to cost pressures but management seemed optimistic, with the CEO saying:“Despite the high levels of commodity inflation, we faced throughout the year, we kept a long-term focus and invested to retain a position of value leadership through a thoughtful combination of pricing strategy and menu design, despite the short-term impact on margin. Our commitment to value and in delivering a great guest experience helped us weather a weaker than expected summer travel season, gas prices that exceeded expectations, and historic inflationary pressures on the consumer, and we were encouraged by better traffic and sales trends in the final few weeks of the quarter. I believe our focus on delivering a compelling value and experience to our guests, coupled with our cost savings programs, investments in technology, and strategies to attract a broader group of guests, position us well for fiscal 2023 and beyond, particularly when inflationary pressures eventually ease.”Analyst Estimates Since the earnings report, analysts estimates have ticked higher for the current quarter. Over the last 7 days, estimates have gone from $1.04 to $1.12, or 7%.For the current year, estimates have gone up 5% over that same time frame, from $6.06 to $6.35.If you look on a lager time frame, estimate have gone up over the last 90 days. For next year, we see a 5% gain, with the number going from $6.18 to $6.51.While commodity inflation has hurt margins, some analysts are making the case that the recent fall in commodities could help improve margins next year.The TechnicalsWhen looking at the charts, there is not much to like. The stock is below all the moving averages, with the 50-day MA at $104 and the 200-day at $111. Until the bulls push price over those levels, the bears are in control.However, the stock does have a nice dividend, so some investors are very interested in current levels.The recent pullback has fallen into a 61.8% Fibonacci retracement drawn from June lows to recent highs. This buy zone seems to be an area of interest and if it holds, could start a move back above $100.Bottom Line The current market atmosphere is not the best for investors. However, there are stocks that are approaching buyable levels. Watch support zones for buyers and if the levels hold up, it could be a great buying opportunity.Cracker Barrel presents one such opportunity, especially if the market can gain some footing into the end of the year This Little-Known Semiconductor Stock Could Be Your Portfolio’s Hedge Against Inflation Everyone uses semiconductors. But only a small number of people know what they are and what they do. If you use a smartphone, computer, microwave, digital camera or refrigerator (and that’s just the tip of the iceberg), you have a need for semiconductors. That’s why their importance can’t be overstated and their disruption in the supply chain has such a global effect. But every cloud has a silver lining. Shockwaves to the international supply chain from the global pandemic have unearthed a tremendous opportunity for investors. And today, Zacks' leading stock strategist is revealing the one semiconductor stock that stands to gain the most in a new FREE report. It's yours at no cost and with no obligation.>>Yes, I Want to Help Protect My Portfolio During the RecessionWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cracker Barrel Old Country Store, Inc. (CBRL): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 30th, 2022

Ford (F) Sets Up Independent Subsidiary for China EV Business

Ford (F) sets up an exclusive EV-dedicated subsidiary, FMeT, to carry forward its China electrification business. It will have R&D-focused units for electrification, digital experience and ADAS. Ford Motor F is putting in zealous efforts to rev up its electrification progress. In a landmark announcement via the media recently, it has set up a new subsidiary, Ford Electric Mach Technologies or FMeT, dedicated solely to the research and developmen, and operation of intelligent electric vehicles (EVs) in China. The company has already made a notable footprint in the U.S. EV space, and the latest development will boost its China's electrification strategy.FMeT will be a first-of-kind EV-dedicated entity set up by a foreign automaker in China. The company currently sells three EV models in the country, including its signature Mustang Mach-E crossover, which recorded deliveries of 3,576 in the first half of this year.Per the media report, the integrated R&D system will include an electrification center, a digital experience center and an advanced driver assistance system (ADAS) center. The digital experience center will focus on advanced cockpit and mobile connectivity solutions for Chinese customers. The ADAS center will leverage the BlueOval intelligent technology stack resource and partner with local companies for local road and traffic data. This will ensure a speedy deployment of Ford’s BlueCruise ADAS feature in the country.Through its high-end intelligent EV-focused brand, Ford Select, the automaker has developed an independent direct sales network for premium EVs in China. Ford Select currently has 106 sales outlets in 43 cities in the country. Ford Select’s first flagship store will be opened by the end of the year. FMeT will adopt a direct sales model through this network instead of selling through dealerships. This will allow better brand penetration.The announcement comes at a time when Ford’s business in China is experiencing weakness. F witnessed a dismal second-quarter sales performance in the country. The company sold a mere 120,000 vehicles in China in the second quarter of 2022, down 22% year over year. This marked the lowest sales in the country since the first quarter of 2020, when the company sold close to 89,000 vehicles. Ford reported its worst quarterly performance in the country since the onset of pandemic-related challenges. A re-imposition of lockdowns, especially in Shanghai and supply bottlenecks across some major facilities greatly impeded volumes.In light of the dampening situation, Ford is focusing on new vehicle launches and joint ventures in the country to ensure a quick revival from the pandemic-led slump. Ford launched four new vehicles in the Chinese market in the second quarter, including the all-new Ford Equator Sport Dark Edition, new Focus, all-new F-150 Raptor and Lincoln Aviator.Also, sales for Ford’s Mustang Mach-E, which was unveiled last year in the country, are picking up pace. Together with the all-new Ford Mondeo and all-new Lincoln Zephyr launched in the first quarter, the new product lineup is expected to drive up the momentum.Setting up an independent EV business in the country will put a strong focus on the regional performance and hopefully ramp it up to pre-pandemic levels.Shares of Ford have lost 17.4% in the past year compared with its industry’s 9.6% decline.Image Source: Zacks Investment ResearchZacks Rank & Key PicksF carries a Zacks Rank #3 (Hold) currently.Some better-ranked players in the auto space are Yamaha Motor Co. YAMHF, sporting a Zacks Rank #1 (Strong Buy), and Visteon Company VC and Wabash National WNC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Yamaha has an expected earnings growth rate of 1% for 2023. The Zacks Consensus Estimate for current-year earnings has been revised 5% upward in the past 30 days.Yamaha’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. YAMHF pulled off a trailing four-quarter earnings surprise of 47.95%, on average. The stock has declined 33.3% over the past year.Visteon has an expected earnings growth rate of 144.1% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant in the past 30 days.Visteon’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. VC pulled off a trailing four-quarter earnings surprise of 400.13%, on average. The stock has risen 18.2% in the past year.Wabash National has an expected earnings growth rate of 241.1% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant in the past 30 days.Wabash National’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and missed in two. WNC pulled off a trailing four-quarter earnings surprise of 28%, on average. The stock has declined 0.2% in the past year. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ford Motor Company (F): Free Stock Analysis Report Visteon Corporation (VC): Free Stock Analysis Report Wabash National Corporation (WNC): Free Stock Analysis Report Yamaha Motor Co., Ltd. (YAMHF): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 28th, 2022

29 romantic gifts to remind your long-distance partner you"re thinking of them

If you're in a long distance relationship, a gift can remind your other half how much you miss them. Here are the best items to show you care. When you buy through our links, Insider may earn an affiliate commission. Learn more.EtsyIt's true that long-distance relationships take a lot of effort, and it can be a little more difficult to remind your partner that they're always on your mind when they're not right there beside you. Gestures big or small mean everything, and nothing says you care more than sending over a little something to remind them that they're the only person for you — no matter how far away.We compiled more than 20 long-distance approved gift ideas to spice up virtual date nights or bring a smile to their face. Sneak peek: A throwback to romantic letters, a modern day mixtape, and an adorably comedic tea spoon.Here are the 29 best long-distance relationship giftsA stationary kit for writing old-school love lettersUncommon GoodsA Year Of Connection, available at Uncommon Goods, $30Take a step back from FaceTime and DMs with this mindful stationary kit that brings thoughtfulness back into how we communicate. Send one card to your special someone with romantic envelopes, meaningful prompts, and reflection space.A Scandinavian-inspired conversation gameAmazonThe Hygge Conversation Game, available at Amazon, $20While you may not be able to physically spend lazy Sunday mornings and casual nights together at the moment, this light-hearted game can easily be transferred to FaceTime. This pack perfectly captures the feeling of wellbeing and togetherness that defines the Danish values of hygge, and invites you into 330 cozy conversation starters with your favorite person.A pro-level cocktail kit for virtual date nightsUncommon GoodsThe Specialty Craft Cocktail Kit, available at Uncommon Goods, from $29If your long-distance lover is a cocktail connoisseur, this kit is a must-have for virtual date nights. Featuring all of the ingredients they'll need to mix a one-of-a-kind artisan cocktail — from bespoke pineapple shrub to small batch syrups and garnishes — all they'll need to do is add their spirit of choice. A modern day mixtapeEtsyTheBlankRecordStore 4GB USB Mixtape, available at Etsy, from $21.44 Remember when "I made you a mixtape" was the most romantic thing in the world? This retro-esque USB port will take them back to the good ole days. Even with a more modern-day, practical twist, you can load this bad boy up with all the songs you need to prove your devotion.A set of aesthetically-pleasing touch lampsEtsyFriendship Lamps, available at Etsy, $176Even though you miss them constantly, sometimes a text message here and there doesn't feel like it gets your emotions across. When you touch your lamp, theirs lights up no matter where or how far away they are — a soothing and subtle reminder of your affection that can be placed on their nightstand or desk. A fun set of virtual gamesJackbox GamesThe Jackbox Party Starter, available at Jackbox Games, $19.99 Introduce them to your friends in the most casual (and fun) way possible, albeit remotely, with this set of fun virtual party games. This starter pack contains three updated versions of Jackbox's most beloved games: Tee K.O., Quiplash Trivia, and Murder Party 2. One person needs to own the game to host, the rest of the team joins on their phones.A pair of matching undiesMeUndiesMatching Pairs, available at MeUndies, from $34/month A pair (or two) of fun, PJ-worthy MeUndies makes it so easy to match your bottom half to your better half. Choose from countless colors and designs, including Pride and fandom-inspired wear.A custom anniversary star mapThe Night SkyCustom Star Map, available at The Night Sky, from $50Recapture the moment your hearts skipped a beat with this stunning creation of the night sky, complete with geographically accurate star formations. Every time they see it hanging on their wall, it'll remind them of where it all began. A comedic tea spoonAmazonStir Your Tea and Think of Me Spoon, available at Amazon, $12.99This quirky tea spoon not only induces smiles — it also makes sure that every time they give their morning fix a stir, you'll be on their mind. Sounds like a win-win!A digital picture frame to display your best memories togetherAuraCarver Digital Frame, available at Aura, $179 Photos are the best way to keep the memories alive, but moving them off your phones and onto a countertop is a real gesture. The Carver frame shuffles through countless digital photos as it holds unlimited storage space.A weighted blanket to bring physical comfortGravityGravity Weighted Blanket, available at Amazon and Gravity, from $136.50A weighted blanket can help ease the loneliness of missing that body next to you at night. It's certainly not the same, but that warmth still brings comfort — especially if it was gifted by you. This blanket from Carver is our top pick for an extra-heavy weighted blanket among those we tested.A bracelet that vibrates when your partner is thinking of youUncommon GoodsLong Distance Touch Bracelet Set, available at Uncommon Goods, $138This bracelet set helps show your love from afar: Simply touch your bracelet and the other half on your partner's wrist will light up and vibrate to show you're thinking of them.Fresh flowers delivered to their doorUrbanStemsUrban Stems Flower Delivery, from $55Nothing brightens up a lonely room or says, "Wish I could be there" for special occasions you're missing quite like a gorgeous bouquet of flowers. Urban Stems is the best flower delivery service we've tested with so many different arrangements, perfect for any partner.An instant love letterUncommon GoodsLovebox Spinning Heart Messenger, available at Uncommon Goods, from $100Love letters in the mailbox are great, but this unique gift let's you deliver them instantly. After sending them the physical box, you can send your partner special messages via the app and a large red heart spins on their box to inform them their digital love letter inside is ready to read.A necklace that says they're your perfect fitEtsyJuneSixth Personalized Tiny Puzzle Piece Necklace, available at Etsy, from $24Let your partner know they're your other half with these adorable puzzle necklaces. The way you just fit together just makes sense, even miles apart.A Disney+ subscription for date nightsDisney PlusDisney Plus Gift Subscription, $79.99/yearNetflix — erm, Disney+ — and chill from across the country with a subscription that lets you both access movies from nostalgic Disney classics to Marvel hits. The streaming service contains a variety of old and new content that's available to watch in multiple countries.A gourmet meal from homeGoldbellyRestaurant Meals, available at Goldbelly, prices varyIf they're missing home, chances are it's about more than just you. Surprise them with their favorite restaurant or hometown meal from Goldbelly. A gift card for a trip or experience togetherAirbnbAirbnb Gift Card, from $100Make the next time you two are together a special adventure. Whether it's a destination or virtual experience, an Airbnb gift card never expires and is an easy way to start new memories.A book subscription to pass the timeBook of the MonthBook Subscription, available at Book of the Month, from $49.99Start a book club with your significant other as a fun activity to pass the time. Book of the Month subscription offers quality bonding time at the start and finish of each book. An art piece with a custom Spotify playlistAmazonCustom Spotify Glass Art, available at Amazon, from $12.95This Spotify glass art lets your partner scan a custom song code to pull up a playlist you've created of all the tunes  that remind  you of each other. And the art piece comes on a wooden stand so it doubles as something nice to look at on the nightstand.A romantic candleAmazonHomesick Love Letters Candle, available at Amazon, Nordstrom, and Homesick, $38The heart grows fonder with this candle's romantic scent inspiration. Fill your partner's space with soft notes of lemon, sandalwood, and rose that are just as passionate as love letters.A delicious box of chocolatesBon Bon Bon/InsiderMedium Mystery Mix Bons, available at Bon Bon Bon, $52.50Chocolates are the sweetest just-because gift to brighten their day. This tasty gift set includes a mix of 15 favorite Bons chocolate that are all beautifully wrapped individually.GrafomapGrafomapCustom map, available at Grafomap, from $19Whether it's the special place you two met or got engaged, this custom map poster keeps that memory alive. It doubles as a great interior piece and a cherished memento to store at home.A weekender bag to make travel easierDagne DoverLandon Carryall Bag, available at Dagne Dover, from $125An extra-long weekender is exactly what they need for when they get to come visit you. This Dagne Dover bag prepares for any type of weekend trip as it contains a shoe bag, water bottle holder, and a laptop sleeve on the inside.  Paired mugs to remind them of your love every dayKate SpadeDaisy Place Love You More Mug Set, available at Kate Spade, $40There's no question you two are a pair like these cute mugs. And if words aren't enough, show your partner how much you love them with these matching mugs.A scratch-off poster of bucket list movies to watch togetherUncommon Goods100 Movies Scratch Off Poster, available at Uncommon Goods, $15The next virtual watch party just became easier with this scratch-off movie poster. Explore 100 iconic films to scratch off your movie night bucket list.A jar of pre-written love messagesAmazonLong Distance Messages in a Bottle, available at Amazon, $23.99"I miss you" text messages are too predictable. Instead, send these pre-written love messages tucked away in capsules for your partner to open once a day.Conversation prompts to spice up your phone callsAmazon141 Outrageous Conversation Starters, available at Amazon, $19.99Rather than recapping each other's day, get to know each other more with this couples game. Switch out normal conversations with this card game's ridiculous prompts that guarantee a fun phone call.A neck massager when you can't be there to work out the kinksAmazonShiatsu Neck and Back Massager, available at Amazon, $39.09When they're having a stressful day, this neck and back massager is a soothing companion when your hands are too far for a massage. The heated massage device has eight kneading massage nodes and three speeds level to alleviate muscle soreness and stiffness.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderSep 21st, 2022

India ETFs Beat S&P 500: More Upside In the Cards?

India???s stock market has outperformed the S&P 500 in the past one month. India’s stock market has outperformed the S&P 500 this year.  iShares India 50 ETF INDY (up 1.1%) beat the S&P 500 (down 5.8%) past month. The fund INDY is down 5.1% this year while the S&P 500 has lost 18.7%.The Indian economy expanded 13.5% year over year in the second quarter of 2022, the maximum in a year but less than market forecasts of 15.2%. Though many rating agencies have cut India’s GDP growth forecasts recently, India is still in the strong growth territory. India Ratings became the latest agency to slash its FY23 gross domestic product forecast.The ratings agency cut the forecast to 6.9% from 7%, joining other institutions who have lowered their projections to below 7% since the release of the April-June quarter GDP data. With the festive and wedding seasons in India approaching, activities in the economy should gain.India’s economic performance has proved to be better than its peers, as the growth recovery has been robust while inflation has increased by much less than in other economies, per Barclays. Barclays predicts an annual growth of at least 6.0-6.5% year-over-year can be generated over the next two years as underlying demand seems strong, as households and corporates are benefiting from countercyclical fiscal tools, such as tax cuts and subsidies, per Barclays, as quoted on ET Now.The United States, U.K. and Europe may witness recession this year. Goldman Sachs expects GDP growth of 1.1% next year, down from its prior projection of 1.5% growth from the fourth quarter of 2022 to the end of 2023, as quoted on Economic Times.According to a report by India’s ministry of finance, the country hauled in $17.3 billion in foreign direct investment in the first quarter, which placed the country ahead of emerging market peers Indonesia and Argentina, but behind countries including Brazil and Mexico, as quoted on CNBC.India imports 80% of its energy requirement. Hence, movement of oil price is pretty important in assessing Indian economy’s health. The Brent crude oil spot price is forecast averages $98 per barrel (b) in the fourth quarter of 2022 (4Q22) and $97/b in 2023, per EIA. India has already survived about $120/b this year. So, we expect the economy to navigate through the likely volatility in the oil market.Against this backdrop, below we highlight a few India ETFs that have been in high momentum in the past one month.ETFs in FocusiShares MSCI India Small-Cap ETF SMIN – Up 2.6%WisdomTree India Earnings Fund EPI – Up 0.15%Nifty India Financials ETF INDF – Down 0.6%First Trust India NIFTY 50 Equal Weight ETF NFTY – Down 0.7%Columbia India Consumer ETF INCO – Down 1% Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report WisdomTree India Earnings ETF (EPI): ETF Research Reports iShares India 50 ETF (INDY): ETF Research Reports Nifty India Financials ETF (INDF): ETF Research Reports iShares MSCI India SmallCap ETF (SMIN): ETF Research Reports Columbia India Consumer ETF (INCO): ETF Research Reports First Trust India NIFTY 50 Equal Weight ETF (NFTY): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 21st, 2022

7 Ways Entrepreneurs Can Inject New Capital Into Their Business During A Recession

Recessions are an inevitable part of the market cycle — and there’s no denying that they can be scary for consultants and the businesses they work with. Regardless of the size of the business, a recession can pose a serious financial risk. As consumer spending declines, so too will companies’ revenue and profit. This can […] Recessions are an inevitable part of the market cycle — and there’s no denying that they can be scary for consultants and the businesses they work with. Regardless of the size of the business, a recession can pose a serious financial risk. As consumer spending declines, so too will companies’ revenue and profit. This can create a precarious situation. Businesses may be more inclined to view B2B services as an unnecessary expense. This is especially true during times when they need to tighten their budget. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2022 hedge fund letters, conferences and more   Aside from ensuring that their services can become truly essential to their clients, to survive these periods of economic uncertainty, entrepreneurs must find ways to inject new capital into their business. By expanding revenue options, you can greatly increase your odds for long-term success. You’ll do this by ensuring that a decline in one area doesn’t completely wipe out your business. Injecting new sources of capital doesn’t just help you survive a recession. It also enables you to deliver greater value to your clients so you can thrive in the long run, regardless of what the economy looks like. Why Injecting New Capital Should Be a Priority Entrepreneurs who rely on a single source of revenue can put themselves at significant financial risk, even during relatively stable times. In their article “Diversification Reconsidered” from the Journal of Social Entrepreneurship, Peter Frumkin and Elizabeth K. Keating explain, “Business and non-profit researchers have long argued that by establishing and maintaining multiple streams of funding […] organizations are able to avoid excessive dependence on any single revenue source, stabilize their financial positions, and thereby reduce the risk of financial crises.” Few things are more likely to disrupt the relationships you have with clients than a recession. Changes to their financial circumstances (or your own) can result in requests to renegotiate contracts. It might cause them to obtain similar services from a less expensive provider. Entrepreneurs who are focused on a single type of service or a small group of clients are at the greatest risk. Suddenly losing the bulk of your clients due to a recession can spell disaster. It could cause you to run out of cash before you have time to respond to the situation. Diversifying revenue and finding new ways to inject capital can help mitigate such losses so that even if you have to tighten your budget, you will at least maintain sufficient cash flow to keep from going under. Options for Finding New Capital (to Resist a Recession) Now that you understand the value of making your business more resistant to the impact of a recession, you’re doubtless wondering where and how to get started. The following ideas are some of the best ways to inject new capital (or better retain the cash you already have) so you can grow your revenue, even when the economic picture looks bleak. Adjust your rates. Perhaps the simplest thing an entrepreneur can do in the midst of a recession is adjust their rates. After all, during times of rising inflation, your own costs for doing business can increase dramatically. If you continue to charge the same rates to your clients, your cash flow will suffer as your profit margins decline. Of course, during a recession, a significant rate hike could be enough to cause some clients to stop doing business with you. As such, this option should always be approached with extreme caution. Rate increases or decreases may need to be approached on a client-by-client basis to balance risk and reward. If you decide to increase rates, inform your clients in advance of pending changes with a rate increase letter. This letter should be clear and direct, explaining what the increase will be and when it will go into effect. It should also provide justification for the rate increase (such as an increase in your own operating costs). The letter should also express gratitude for your clients’ support. There is no guarantee that you won’t lose clients if you increase your rates. However, if you are able to replace them with new clients at the higher rate, you will be better able to stay ahead of inflation. Use a referral program. Referral programs reward existing customers who refer family, friends, or business colleagues to use your products or services. Reward options could include offering a current client a discount off of their next invoice after a person they refer signs up for your services. You could even offer larger discounts if they get more people to sign up for your services. Obtaining referrals from existing clients is a cost-effective way to grow your client base when you need to cut back on marketing costs. Potential customers are more likely to pursue a referral that comes from a person they trust. At the same time, because they are in the same “circle” as current clients, they are more likely to also stand to benefit from your services. In fact, 78 percent of marketers report referral marketing as delivering “excellent” leads, with conversion rates four times higher than other marketing methods. With a referral program, you can create a true “win-win” scenario that helps you find new clients while simultaneously fueling loyalty in your current client base. Offer your services to new types of clients. Focusing on a specific niche can help entrepreneurs develop a unique selling proposition for potential clients. However, targeting too narrow of a niche can prove limiting. To counteract this, entrepreneurs can strategically evaluate how they can begin offering their services to new groups of clients who fit outside their current target market. For example, if you offer consulting services to local grocery store chains, you could consider expanding your services to assist other companies in related niches, such as food and beverage producers. Alternatively, you could continue to focus on your core target market, but expand your reach to new areas by marketing to clients in a different part of the country. When targeting a new audience, some adjustments to your current messaging may be needed. Look at how others who already target that market engage with their audience. Identifying successful tactics, such as key marketing channels and the tone of their marketing, can help you identify how best to appeal to a new market. You must also be aware of the opportunities and challenges facing potential clients in the new market. You will only achieve long-term success if you can offer dependable results. Don’t jump into a new market until you’ve done your research. Join a reseller program. Even more powerful than earning a few dollars from your referrals is joining software companies’ “reseller” programs. These are often partnerships that enable consultants and entrepreneurs to sell third-party apps as a central part of the value they deliver to their clients. For example, as vcita’s Amy Wilder explains, the company’s reseller program offers significant commissions. The program makes it easy for entrepreneurs to co-manage clients’ use of the small business management platform. It essentially allows you to offer “digital transformation as a service.” The program is also adaptable to the needs of individual entrepreneurs. “For example, let’s say you run a marketing agency. You’ll likely be laser-focused on selling training packages that focus on features such as lead-capturing and nurturing. If you’re a business consultant, you might be more focused on our CRM features,” Wilder suggests. “Either way, you can choose accordingly. You have the freedom to pick and choose features à la carte, based on your business.” By partnering with third-party reseller programs that are relevant to their clients, consultants can further increase their revenue as they deliver greater value to their target audience. Choose programs that are related to your current service areas. Or choose programs that can help you expand on the types of services you can provide. Success as a reseller is ultimately dependent on partnering with brands that are a solid match for your clients’ needs. Introduce a new product or service. When introducing new products or services to your clients, choose something complementary to your primary offering. It should serve the same target audience, and allow you to potentially increase the lifetime value of your existing customers by providing something else that appeals to them. A successful product or service addition will further improve outcomes for your clients. This typically happens by helping them save time or money, or helping them make better use of the current resources. New services should match an entrepreneur’s current skill set and strengths. The alternative is hiring additional staff with expertise in that area. During a recession, focusing on services that you can provide yourself without needing to hire additional staff could be key to keeping expenses manageable during a launch. Promotion should start with your existing customers. This could entail offering them a special preview or sample of the service. Alternatively, you might provide an offer for a discount on the new service as a pre-existing customer. Existing customers are 50 percent more likely to buy from you in the first place, so this is an ideal place to begin your marketing efforts to ensure that the new service starts generating revenue immediately. Niche down. After talking about introducing new services or targeting new audiences, the idea of niching down may seem counterintuitive. However, targeting a more specific, narrow niche could prove key to generating revenue growth. It will bolster the client loyalty needed to sustain your business. The idea behind niching down is that you become less of a generalist and more of a specialist. There are several inherent advantages to niching down. For one, there tend to be fewer competitors with such an intense focus on your target audience. Niching down can also help you grow your capital as you become the go-to expert for your niche. Of course, before you niche down, make sure you are truly an expert. Customers will quickly become dissatisfied if you market yourself as a specialist but continue to provide generalist-level services. Know what to cut. The phrase “addition by subtraction” is generally used to describe when you gain something of value by getting rid of something negative. Essentially, you can make your business more lean and agile. You do this by getting rid of the excess that keeps you from being as efficient as possible. For example, let’s say you offer ten service packages, but only four generate significant revenue. As a result, you are likely losing money by continuing to market the low-earning services. Cutting the underperforming services allows you to focus your marketing budget on the services that generate the most revenue. Auditing your business operating expenses can also help you identify whether current expenses are necessary, or if you could get the same service elsewhere for a lower cost. Recessions Are Inevitable - Failure Isn’t Yes, recessions are scary. But with proactive planning to inject new capital into your own business efforts, you can weather the storms ahead. By appropriately managing your cash supply and using relevant methods to cut costs and diversify your revenue (even if it’s only temporary), you can garner new capital investments and forge ahead with confidence. Article by Deanna Ritchie, Due About the Author Deanna Ritchie is a financial editor at Due. She has a degree in English Literature. She has written 1000+ articles on getting out of debt and mastering your finances. She has edited over 40,000 articles in her life. She has a passion for helping writers inspire others through their words. Deanna has also been an editor at Entrepreneur Magazine and ReadWrite......»»

Category: blogSource: valuewalkSep 18th, 2022