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Dow Tumbles Over 300 Points; Crude Oil Down 2%

U.S. stocks traded lower toward the end of trading, with the Dow Jones dipping more than 300 points on Friday. The Dow traded down 1.23% to 28,865.85 while the NASDAQ fell 0.92% to 10,638.61. The S&P 500 also fell, dropping, 0.97% to 3,605.32. Also check this: Bitcoin, Ethereum Remain Stable; Here Are The Top Crypto Movers For Friday Leading and Lagging Sectors Real estate shares rose by 1.5% on Friday. In trading on Friday, utilities shares fell by 1.3%. Top Headline Personal income in the US climbed by 0.3% from a month ago in August, while personal spending rose 0.4%. The personal consumption expenditure price index rose 0.3% month-over-month in August following a 0.1% decline in July. Equities Trading UP   F45 Training Holdings Inc. (NYSE: FXLV) shares shot up 43% to $3.1250 after a 13D filing showed the company received a non-binding proposal offer by one or more funds for a value of $4 per share. Shares of SOBR Safe, Inc. (NASDAQ: SOBR) got a boost, shooting 38% to $2.6550 after the company announced it signed three reseller agreements with national distributors. Ainos, Inc. (NASDAQ: AIMD) shares were also up, gaining 36% to $1.8799 after the company reported results from the additional preclinical study of its ...Full story available on Benzinga.com.....»»

Category: earningsSource: benzingaSep 30th, 2022

Futures Tumble After UK Double-Digit Inflation Shock Sparks Surge In Yields

Futures Tumble After UK Double-Digit Inflation Shock Sparks Surge In Yields Futures were grinding gingerly higher, perhaps celebrating the end of the Cheney family's presence in Congress, and looked set to re-test Michael Hartnett bearish target of 4,328 on the S&P (which marked the peak of yesterday's meltup before a waterfall slide lower when spoos got to within half a point of the bogey), when algos and the few remaining carbon-based traders got a stark reminder that central banks will keep hammering risk assets after the UK reported a blistering CPI print, which at a double digit 10.1% was not only higher than the highest forecast, but was the highest in 40 years. The print appeared to shock markets out of their month-long levitating complacency, and yields - both in the UK and the US - spiked... ... and with yields surging, futures had no choice but to notice and after trading at session highs just before the UK CPI print, they have since tumbled more than 40 points and were last down 0.85% or 37 points to 4,271. Nasdaq 100 futures retreated 0.9% signaling a selloff in technology names will continue. The dollar rose as investors awaited the minutes of the Fed’s last policy meeting for clues on policy makers’ sensitivity to weaker economic data. In US premarket trading, retail giant Target slumped 4% after reporting earnings that missed expectations despite still predicting a rebound. Applied Materials and PayPal dropped at least 1.3%. Tech stocks are the forefront of the growing pessimism over equity valuations on the back of Fed rate increases. The S&P 500 had posted a small gain on Tuesday, aided by earnings reports from retailers Walmart Inc. and Home Depot. Here are some of the other biggest U.S. movers today: Manchester United (MANU US) rises as much as 17% in US premarket trading before trimming most of the gains, after Tesla CEO Elon Musk said he was buying the English football club but later added that he was joking. Hill International (HIL US) shares rise 61% in premarket trading hours after it announced Global Infrastructure Solutions will commence an all-cash tender offer for $2.85/share in cash, representing a premium of 63% to the last closing price. BioNTech (BNTX US) was initiated with a market perform recommendation at Cowen, which expects demand for Covid-19 vaccines to mirror annual flu trends as the pandemic enters its endemic phase. Bed Bath & Beyond (BBBY US) shares surge 20% in premarket trading, putting the stock on track for its sixth day of gains. The home-goods company has helped reinvigorate a wave of meme stock buying Agilent (A US) saw its price target boosted at brokers as analysts say the scientific testing equipment maker’s results were strong thanks to growth in biopharma and a recovery in China, while the company’s guidance was on the conservative side. Shares rose . Jefferies initiated coverage of Waldencast Plc (WALD US) class A with a buy recommendation as analyst Stephanie Wissink sees 29% upside potential. Sea Ltd. (SE US) ADRs slipped as much as 2.1% in US premarket trading, extending Tuesday’s declines, as Morgan Stanley cut its PT on expectations of slowing growth at the Shopee owner’s e-commerce business in the third quarter. Weber (WEBR US) downgraded to sell from neutral at Citi, which says there are too many concerns to remain on the sidelines, including a decline in point-of-sale traffic and macro factors like inflation weighing on consumer demand In the past two months, US stocks rallied on signs of peaking inflation and an earnings-reporting season that saw four out of five companies meeting or beating estimates. Boosted by relentless systematic (CTA) buying and retail-driven short squeezes, as well as a surge in buybacks, stocks recovered more than 50% of the bear market retracement. Yet, continuing rate hikes and the likelihood of a recession in the world’s largest economy are weighing on sentiment. Meanwhile, concern is growing that Fed rate setters will remain focused on the fight against inflation rather than supporting growth. “We expect the FOMC minutes to have a hawkish tilt,” Carol Kong, strategist at Commonwealth Bank of Australia Ltd., wrote in a note. “We would not be surprised if the minutes show the FOMC considered a 100 basis-point increase in July.” In Europe, the Stoxx 600 fell after a strong start amid signs the continent’s energy crisis is worsening. Benchmark natural-gas futures jumped as much as 5.1% on expectations the hot weather will boost demand for cooling. In the UK, consumer-price growth jumped to 10.1%, sending gilts tumbling. Real estate, retailers and miners are the worst performing sectors. The Stoxx 600 Real Estate Index declined 2%, making it the worst-performing sector in the wider European market, as focus turned to UK inflation that soared to double digits for the first time in four decades and also to today's FOMC minutes. German and Swedish names almost exclusively account for the 10 biggest decliners. TAG Immobilien drops 5.4%, Wallenstam is down 4.7%, Castellum falls 4% and LEG Immobilien declines 3.3%. The sector tumbles on rising bond yields, with 10y Bund yield up 11bps, and dwindling demand for Swedish real estate amid rising rates. Earlier on Wednesday, stocks rose in Asia amid speculation that China may deploy more stimulus to shore up its ailing economy while Japanese exporters were boosted by a weaker yen. After a string of weak data driven by a property-sector slump and Covid curbs, China’s Premier Li Keqiang asked local officials from six key provinces that account for 40% of the economy to bolster pro-growth measures. The MSCI Asia Pacific Index advanced as much as 0.8%, with consumer-discretionary and industrial stocks such as Japanese automakers Toyota and Honda among the leaders on Wednesday. The benchmark Topix erased its year-to-date loss. Chinese food-delivery platform Meituan also rebounded after dropping more than 9% in the previous session on a Reuters report that Tencent may divest its stake in the firm. Chinese stocks erased declines early in the day, as investors hoped for more economic stimulus after a surprise rate cut on Monday failed to excite the market. Premier Li Keqiang has asked local officials from six key provinces that account for about 40% of the country’s economy to bolster pro-growth measures. “I believe policymakers have the tools to prevent a hard landing if needed,” Kristina Hooper, chief global market strategist at Invesco, said in a note. “I find investors are overly pessimistic about Chinese stocks -- which means there is the potential for positive surprise.” Asia’s stock benchmark is trading at mid-June levels as traders attempt to determine the trajectory of interest-rate hikes and economic growth globally -- as well as the impact of China’s property crisis and Covid policies. Meanwhile, minutes of the US Federal Reserve’s July policy meeting, out later Wednesday, will be carefully parsed. New Zealand stocks closed little changed as the country’s central bank raised interest rates by a half percentage point for a fourth-straight meeting. Australia's S&P/ASX 200 index rose 0.3% to close at 7,127.70, supported by materials and consumer discretionary stocks. South Korea’s benchmark missed out on the rally across Asian equities, as losses by large-cap exporters weighed on the measure In FX, the Bloomberg Dollar Spot Index rose as the dollar gained versus most of its Group-of-10 peers. The pound was the best G-10 performer while gilts slumped, led by the short end and sending 2-year yields to their highest level since 2008, after UK inflation accelerated more than expected in July. The yield curve inverted the most since the financial crisis as traders ratcheted up bets on BOE rate hikes in money markets, wagering on 200 more basis points of hikes by May. The euro traded in a narrow range against the dollar while the region’s bonds slumped, led by the front end. Scandinavian currencies recovered some early European session losses while the aussie, kiwi and yen extended their slide in thin trading. EUR/NOK one-day volatility touched a 15.12% high before paring ahead of Norges Bank’s meeting Thursday where it may have to raise rates by a bigger margin than indicated in June given Norway’s inflation exceeded forecasts for a fourth straight month, hitting a new 34-year high. Consumer sentiment in Norway fell to the lowest level since data began in 1992, according to Finance Norway. New Zealand’s dollar and bond yields both rose in response to the Reserve Bank hiking rates by 50bps, while flagging concern about labor market pressures and consequent wage inflation; the currency subsequently gave up gains in early European trading. The Aussie slumped after data showing the nation’s wages advanced at less than half the pace of inflation in the three months through June, backing the Reserve Bank’s move to give itself more flexibility on interest rates. In rates, treasuries held losses incurred during European morning as gilt yields climbed after UK inflation rose more than forecast. US 10-year around 2.87% is 6.5bp cheaper on the day vs ~13bp for UK 10-year; UK curve aggressively bear-flattened following inflation data, with long-end yields rising about 10bp. Front-end UK yields remain cheaper by ~20bp, off session highs, leading a global government bond selloff. US yields are higher on the day by by 4bp-7bp; focal points of US session are 20-year bond auction and FOMC minutes release an hour later. Treasury auctions resume with $15b 20-year bond sale at 1pm ET; WI 20-year yield at around 3.35% is ~7bp richer than July’s sale, which stopped 2.7bp through the WI level. In commodities, oil fluctuated between gains and losses, and was in sight of a more than six-month low -- reflecting lingering worries about a tough economic outlook amid high inflation and tightening monetary policy.  Spot gold is little changed at $1,774/oz Looking at the day ahead, the FOMC minutes from July will be the main highlight, and the other central bank speaker will be Fed Governor Bowman. Otherwise, earnings releases include Target, Lowe’s and Cisco Systems, and data releases include US retail sales and UK CPI for July. Market Snapshot S&P 500 futures down 0.3% to 4,293.00 STOXX Europe 600 little changed at 443.30 MXAP up 0.5% to 163.48 MXAPJ up 0.2% to 530.38 Nikkei up 1.2% to 29,222.77 Topix up 1.3% to 2,006.99 Hang Seng Index up 0.5% to 19,922.45 Shanghai Composite up 0.4% to 3,292.53 Sensex up 0.5% to 60,168.83 Australia S&P/ASX 200 up 0.3% to 7,127.68 Kospi down 0.7% to 2,516.47 German 10Y yield little changed at 1.06% Euro little changed at $1.0178 Gold spot down 0.0% to $1,775.21 U.S. Dollar Index little changed at 106.50 Top Overnight News from Bloomberg More market prognosticators are alighting on the idea of benchmark Treasury yields sliding to 2% if the US succumbs to a recession. That’s an out-of-consensus call, compared with Bloomberg estimates of about a 3% level by the end of this year and similar levels through 2023. But it’s a sign of how growth worries are forcing a rethink in some quarters The euro-area economy grew slightly less than initially estimated in the second quarter as signs continue to emerge that momentum is unraveling. Output rose 0.6% from the previous three months between April and June, compared with a preliminary reading of 0.7%, Eurostat said Wednesday Egypt became a prime destination for hot money by tethering its currency and boasting the world’s highest interest rates when adjusted for inflation Norway’s $1.3 trillion sovereign wealth fund, the world’s largest, posted its biggest loss since the pandemic as rate hikes, surging inflation and Russia’s invasion of Ukraine spurred volatility. It lost an equivalent of $174 billion in the six months through June, or 14.4% A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks just about shrugged off the choppy lead from the US where markets were tentative amid mixed data signals and strong retailer earnings, but with gains capped overnight ahead of the FOMC Minutes and as participants digested another 50bps rate hike by the RBNZ. ASX 200 swung between gains and losses with the index indecisive amid a slew of earnings and with strength in the consumer sectors offset by underperformance in tech, energy and healthcare. Nikkei 225 climbed above the 29,000 level with the index unfazed by mixed data releases in which Machinery Orders disappointed although both Exports and Imports topped forecasts. Hang Seng and Shanghai Comp were somewhat varied with Hong Kong led higher by tech amid plenty of attention on Meituan after reports its largest shareholder Tencent could reduce all or the bulk of its shares in the Co. which a Tencent executive later refuted, while the mainland was less decisive amid headwinds from the ongoing COVID situation and with power restrictions disrupting activity in Sichuan, although reports also noted that Chinese Premier Li told top provincial officials that they must have a sense of urgency to consolidate the economic recovery and reiterated to step up macro policies. Top Asian News RBNZ hiked the OCR by 50bps to 3.00%, as expected, while it stated that conditions need to continue to tighten and they agreed that maintaining the current pace of tightening remains the best means. RBNZ also agreed that further increases in the OCR were required to meet the remit objective and that domestic inflationary pressures had increased since May. Furthermore, the RBNZ raised its projections for the OCR and inflation with the OCR seen at 3.69% in Dec. 2022 (prev. 3.41%) and at 4.1% for both Sept. 2023 and Dec. 2023 (prev. 3.95%), while it sees annual CPI at 4.1% by Sept. 2023 (prev. 3.0%). RBNZ Governor Orr stated at the press conference that they are not forecasting a recession but expected below-potential growth amid subdued consumer spending. Governor Orr also stated that they did not discuss a 75bps rate hike today and that 50bps moves have been orderly and sufficient, while he added that getting rates to 4% would buy comfort for the policy committee and that a Cash Rate of around 4% is unambiguously above neutral and sufficient to meet the inflation mandate. Chongqing, China is to curb power use for eight days for industry. China’s Infrastructure Boom Gets Swamped by Property Woes Tencent 2Q Revenue Misses Estimates Hong Kong Denies Democracy Advocates Security Law Jury Trial UN Expert Says Xinjiang Forced Labor Claims ‘Reasonable’ Singapore’s COE Category B Bidding Hits New Record Delayed Deals Add to Floundering Singapore IPO Market: ECM Watch European bourses have dipped from initial mixed/flat performance and are modestly into negative territory, Euro Stoxx 50 -0.5%. Stateside, futures are under similar pressure awaiting fresh corporate updates and the July FOMC Minutes, ES -0.6%. Fresh drivers relatively limited throughout the session with known themes in play and focus on upcoming risk events; stocks also suffering on further hawkish yield action. Lowe's Companies Inc (LOW) Q1 2023 (USD): EPS 4.68 (exp. 4.58), Revenue 27.47 (exp. 28.12bln); expect FY22 total & comp. sales at bottom-end of outlook range, Operating Income and Diluted EPS at top-end. Target Corp (TGT) Q1 2023 (USD): EPS 0.39 (exp. 0.72), Revenue 26.0bln (exp. 26.04bln); current trends support prior guidance. Top European News German Gas to Last Less Than 3 Months if Russia Cuts Supply European Gas Surges Again as Higher Demand Compounds Supply Pain Entain Falls; Citi Views Fine Negatively but Notes Steps by Firm UK Inflation Hits Double Digits for the First Time in 40 Years Crypto.com Receives Registration as UK Cryptoasset Provider FX Greenback underpinned ahead of US retail sales data and FOMC minutes, DXY holds tight around 106.500. Pound pegged back after spike in wake of stronger than expected UK inflation metrics, Cable hovers circa 1.2100 after fade into 1.2150. Kiwi retreats following knee jerk rise on the back of hawkish RBNZ hike, NZD/USD near 0.6300 from 0.6380+ overnight peak. Aussie undermined by marginally softer than anticipated wage prices and lower RBA tightening bets in response, AUD/USD well under 0.7000 vs 0.7026 at one stage. Yen weaker as yield differentials widen again, but Euro cushioned by more pronounced EGB reversal vs USTs, USD/JPY probes 21 DMA just below 135.00, EUR/USD bounces from around 1.0150 towards 1.0200. Loonie and Nokkie soft amidst latest slippage in oil, USD/CAD closer to 1.2900 than 1.2800, EUR/NOK nudging 9.8600 within 9.8215-9.8740 range. Fixed Income Debt retracement ongoing and gathering pace ahead of Wednesday's key risk events. Bunds now closer to 154.00 than 156.00 and 157.00 only yesterday, Gilts not far from 114.50 vs almost 116.00 and 117.00+ earlier this week and T-note sub-119-00 vs 119-31 at best on Monday. Sonia strip hit hardest as markets price in aggressive BoE hikes in response to UK inflation data toppy already elevated expectations. Commodities Crude benchmarks are currently little changed overall, having recovered from a bout of initial pressure; newsflow thin awaiting fresh JCPOA developments Spot gold is little changed overall but with a slight negative bias as the USD remains resilient and outpaces the yellow metal as the haven of choice. Aluminium is the clear outperformer amid updates from Norsk Hydro that they are shutting production at their Slovalco site (175k/T year) by end-September, due to elevated energy prices. OPEC Sec Gen says he sees a likelihood of an oil-supply squeeze this year, open for dialogue with the US. Still bullish on oil demand for 2022. Too soon to call the outcome of the September 5th gathering. Spare capacity at around the 2-3mln BPD mark, "running on thin ice". US Private Inventory Data (bbls): Crude -0.4mln (exp. -0.3mln), Cushing +0.3mln, Gasoline -4.5mln (exp. -1.1mln), Distillates -0.8mln (exp. +0.4mln). Shell (SHEL LN) announced it is to shut its Gulf of Mexico Odyssey and Delta crude pipelines for two weeks in September for maintenance, according to Reuters. Uniper (UN01 GY) says the energy supply situation in Europe is far from easing and gas supply in winter remains "extremely challenging". China sets the second batch of the 2022 rare earth mining output quota at 109.2k/T, via Industry Ministry; smelting/separation quota 104.8k/T. Geopolitics China's military is to partake in a military exercise in Russia, their participation has nothing to do with the international situation. Taiwan's Defence Ministry says they have detected 21 Chinese aircraft and five ships around Taiwan on Wednesday, via Reuters. Iran is calling on the US to free jailed Iranian's, says they are prepared for prisoner swaps, via Fars. US Event Calendar 07:00: Aug. MBA Mortgage Applications, prior 0.2% 08:30: July Retail Sales Advance MoM, est. 0.1%, prior 1.0% 08:30: July Retail Sales Ex Auto MoM, est. -0.1%, prior 1.0% 08:30: July Retail Sales Control Group, est. 0.6%, prior 0.8% 10:00: June Business Inventories, est. 1.4%, prior 1.4% 14:00: July FOMC Meeting Minutes DB's Tim Wessel concludes the overnight wrap Starting in Europe, where the looming energy crisis remains at the forefront. An update from our team, who just published the fourth edition of their indispensable gas monitor (link here), where they note the surprisingly fast rebuild of German gas storage, driven by reductions in industrial activity, reduces the risk that rationing may become reality this winter. Many more insights within, so do read the full piece for analysis spanning scenarios. Keep in mind, that while gas may be available, it is set to come at a higher clearing price, which manifest itself in markets yesterday where European natural gas futures rose a further +2.64% to €226 per megawatt-hour, just shy of their closing record at €227 in March. But, that’s still well beneath their intraday high from March, where at one point they traded at €345. Further, one-year German power futures increased +6.30%, breaching €500 for the first time, closing at €507. Germany is weighing consumer relief measures in light of climbing consumer prices and also announced that planned nuclear facility closures would be “temporarily” postponed. The upward energy price pressure and attenuated (albeit, not eliminated) risk of rationing pushed European sovereign yields higher. 10yr German bunds climbed +7.1bps to 0.97%, while 10yr OATs kept the pace, increasing +7.4bps. 10yr BTPs increased +15.9bps, widening sovereign spreads, while high yield crossover spreads widened +10.2bps in the credit space. Equities were resilient, however, with the STOXX 600 posting a +0.16% gain after flitting around a narrow range all day. Regional indices were also robust to climbing energy prices, with the DAX up +0.68% and the CAC +0.34% higher. In the States the S&P 500 registered a modest +0.19% gain, with the NASDAQ mirroring the index, falling -0.19%. Retail shares drove the S&P on the day, with the two consumer sectors both gaining more than +1%, following strong earnings reports from Wal Mart and Home Depot. Treasury yields also climbed, but the story was the further flattening in the curve. 2yr yields were +7.5bps higher while 10yr yields managed to increase just +1.6bps, leaving 2s10s at its second most negative close of the cycle at -46bps. 10yr yields are another basis point higher this morning. A hodgepodge of data painted a mixed picture. Housing permits beat expectations (+1674k vs. +1640k) while starts (+1446k vs. +1527k) fell to their slowest pace since February 2021. However, under the hood, even permits weren’t necessarily as strong as first glance, as single family permits fell -4.3% with gains in multifamily pushing the aggregate higher. Indeed, year-over-year, single family permits have now fallen -11.7% while multifamily permits are +23.5% higher. So the single family housing market continues to feel the impact of Fed tightening. Meanwhile, industrial production climbed +0.6% month-over-month (vs. +0.3%), with capacity utilization hitting its highest level since 2008 at 80.3%. Drifting north of the border, Canadian inflation slowed to 7.6% YoY in July in line with estimates, while the average of core measures climbed to a record 5.3%. Bank of Canada Governor Macklem penned an opinion piece saying that while it looks like inflation may have peaked, “the bad news is that inflation will likely remain too high for some time.” In turn, Canadian OIS rates by December climbed +16.2bps. In other data, the expectations component of the German ZEW survey fell to -55.3, its lowest level since October 2008 at the depths of the GFC. In the UK, regular pay (excluding bonuses) fell by -3.0% in real terms over the year to April-June 2022, its fastest decline on record. On the Iranian nuclear deal, EU negotiators reportedly found Iran’s response constructive, though Iran still had some concerns. Notably, Iran is looking for guarantees that if a future US administration withdraws from the JCPOA the US will "have to pay a price”, seeking insulation from the vagaries of representative democracy. Asian equity markets are trading higher after Wall Street’s solid performance overnight. The Nikkei (+0.76%) is leading gains across the region with the Hang Seng (+0.57%), the Shanghai Composite (+0.23%) and the CSI (+0.51%) all rebounding from its opening losses this morning. US futures are struggling to gain traction this morning with the S&P 500 (-0.02%) and NASDAQ 100 (-0.09%) trading just below flat. The Reserve Bank of New Zealand lifted its official cash rate (OCR) for the fourth consecutive time by an expected +50bps to 3%, a seven-year high, while bringing forward the estimate of future rate increases. The central bank expects the OCR will reach 3.69% at the end of this year and expects it to peak at 4.1% in March 2023, higher and sooner than previously forecast. Early morning data coming out from Japan showed that exports rose +19.0% y/y in July (v/s +17.6% expected) posting 17 straight months of gains while imports advanced +47.2% (v/s +45.5% expected) driven by global fuel inflation and a weakening yen. With the imports outweighing exports, the nation reported trade deficit for the 14th consecutive month, swelling to -2.13 trillion yen in July (v/s -1.91 trillion yen expected) compared to a revised deficit of -1.95 trillion yen in June. In terms of the day ahead, the FOMC minutes from July will be the main highlight, and the other central bank speaker will be Fed Governor Bowman. Otherwise, earnings releases include Target, Lowe’s and Cisco Systems, and data releases include US retail sales and UK CPI for July. Tyler Durden Wed, 08/17/2022 - 07:55.....»»

Category: dealsSource: nytAug 17th, 2022

Futures Slide On Tech Weakness As Meme Stocks Fade, CPI Looms

Futures Slide On Tech Weakness As Meme Stocks Fade, CPI Looms After a Monday which started off with a powerful rally only to fizzle and close in the red, overnight market action has seen a continuation of the muted drift lower, and S&P 500 futures have turned lower this morning, falling 0.2% to 4,132, near session lows after trading 0.2% higher earlier. Nasdaq futures dropped 0.5%, indicating that the index will extend its losses for a third session, and semiconductor companies like Nvidia and AMD slipped in premarket trading after Micron forecast adjusted revenue for the fourth quarter at or below the low end of its June 30 guidance. The fading of some meme stock euphoria that defined the past 3 days has not helped bullish sentiment. Treasuries dipped, with the 10-year benchmark yield rising three basis points to 2.79% as traders await Wednesday’s CPI report to gauge the path of Federal Reserve tightening. In premarket trading, US semiconductor companies like Nvidia and AMD slipped after Micron followed Nvidia and forecast adjusted revenue for the fourth quarter at or below the low end of its June 30 guidance. At the same time, bank stocks were mostly higher in premarket trading Tuesday as the US 10-year Treasury yield holds steady around the 2.79% level. In corporate news, growing tensions within the Carlyle Group reached breaking point last week with the board deciding it had lost confidence in CEO Kewsong Lee. Here are some other notable premarket movers: Novavax (NVAX US) tumbles 33% in premarket trading as analysts see the quarterly revenue miss and guidance cut as disappointing, while remaining positive on the vaccine-maker’s longer term outlook. GoodRx (GDRX US) shares soar by 50% in premarket trading, poised for their biggest jump since September 2020. The telemedicine firm’s 2Q results were good but more important for the company is the resolution of a dispute between its pharmacy benefit management customers and grocer Kroger, as this will “dramatically” improve visibility, analysts say. Upstart (UPST US) shares slump 12% in premarket trading, as Barclays says investors should brace themselves for a “lengthier period of macro-driven instability” after the consumer finance company forecast revenue for the third quarter below analyst expectations and withdrew its full-year guidance. Lemonade (LMND US) shares rally 16% in premarket trading after the insurance company posted a smaller-than-expected quarterly loss and issued a full-year revenue forecast that includes Metromile. Jefferies says the beat was largely driven by reduced growth spend. Palantir Technologies (PLTR US) falls 1.2% in premarket trading after being cut to sell from hold at Deutsche Bank, which says that 2Q results leave “little to hang our hat on.” Tandem DiabetesCare (TNDM US) drops 1.8% on low volume after the firm was double-downgraded to underweight from overweight at Wells Fargo, with the broker saying consensus estimates for the insulin pumps-maker are too high. Bed Bath & Beyond (BBBY US) rallied 14% in premarket trading, rising along with fellow meme stocks, as the home-goods retailer is set to extend its rising streak for a tenth session - longest since 2007. Avaya Holdings (AVYA US) shares sank 17% in premarket trading, after the company said there is substantial doubt about its ability to continue as a going concern. Third-quarter loss was wider than the average analyst estimate, while adjusted Ebitda and gross margin missed Focus now turns to the question of whether US inflation may have peaked in June as economists project the biggest drop in more than two years for July's CPI print due tomorrow. A blowout reading for nonfarm payrolls has eased worries about a recession, while corporate performance remains stellar. "Until inflation abates and the Federal Reserve rebalances its priorities away from inflation and toward growth, tempting rallies are likely to remain unsustainable," Seema Shah, chief strategist at Principal Global Investors, wrote in a note to clients. European stocks also fell, the Stoxx 600 declining 0.3%, with almost every sector in the red outside of banks, insurers and energy producers. Travel, tech and chemicals are the worst performing sectors. FTSE 100 is flat, but outperforms regional indexes. Here are some of the biggest movers in Europe today: European semiconductor stocks slip after US memory-chip maker Micron reduced its 4Q sales forecast, citing challenging market conditions. IWG shares drop as much as 18%, the most intraday since March 2020, with RBC saying the flexible office firm’s 1H results look “light.” Zur Rose was cut to equal-weight from overweight at Barclays, which cited balance sheet concerns and “less conviction” on near-term growth acceleration. Shares drop as much as 12%. RPS shares jump 75% to 205p after the environmental consultant received a takeover offer from Canada’s WSP at a price of 206p/share, or enterprise value of around GBP625m. Abrdn shares slump as much as 10%, the most since April 2020, after the investment firm reported revenue that missed analyst estimates and delayed ambitions for sales growth. Dufry gains as much as 4.4% after the Swiss duty-free store operator reported what RBC called a higher-than-expected set of 1H results with continued top-line recovery in July. Kindred shares drop as much as 6.6%, the most intraday since June, after Bank of America initiated coverage of the Swedish online gambling firm at underperform with a SEK88 PT, saying its recovery could prove tougher than expected. PostNL shares fall as much as 7.3% after Jefferies downgraded the stock to hold from buy citing “slower parcel volume growth, and rising fuel and labor costs.” CEZ jumped as much as 3.4% after the Czech utility increased its profit guidance for the second time this year, citing surging electricity prices. Earlier in the session, Asian stocks slid after Hong Kong damped speculation about looser stamp duty rules and China ordered a probe of the $3 trillion trust industry; meanwhile investors awaited this week’s US inflation report for cues on the pace of monetary tightening, while assessing the ongoing corporate earnings season. The MSCI Asia Pacific Index fell as much as 0.6%, as technology shares followed US peers lower after a weak revenue forecast from Nvidia. Japanese stocks underperformed the rest of the region, weighed down by Tokyo Electron on disappointing earnings. Asian equities have been struggling for direction as investors remain wary over the prospect of faster US rate increases to curb inflation as well as rising geopolitical tensions. Fresh Covid lockdowns in China also added to the cautious sentiment. Asian emerging markets “remain too close to ground zero when it comes to the negative impacts of the trifecta of higher US interest rates, a slowing global economy and a deteriorating US-China relationship,” said Olivier d’Assier, head of APAC applied research at Qontigo. “These pressures are likely to keep investors in those markets on the defensive for the time being.” Hong Kong stocks dropped for a second day, erasing earlier gains as the government said it had no plans to relax the stamp duty on home purchases. Markets in Singapore and India were closed for a holiday on Tuesday. Japan stocks dropped as investors reacted to the discouraging earnings from major US tech companies while also weighing the domestic results.  The Topix Index fell 0.7% to 1,937.02 as of market close in Tokyo, while the Nikkei declined 0.9% to 27,999.96. Tokyo Electron Ltd. contributed the most to the Topix’s decline with its 8.2% tumble, as the maker of electronics short of operating income estimates and investors reacted to Nvidia’s quarterly results. Out of 2,170 shares in the index, 1,408 fell, 667 rose while 95 were unchanged. “Stocks linked to earnings are affecting the move today,” said Makoto Furukawa, chief portfolio strategist at Mitsubishi UFJ MS Securities. “Long-term investors will not be taking much of an action as they will be waiting for the CPI data, though there may be some mid-to-long term investors that could be paying close attention to the financial earnings announcements, but not much of an major trend overall.” Australia's S&P/ASX 200 index rose 0.1% to close at 7,029.80, boosted by strength across consumer discretionary and real estate shares. The financials sub-gauge declined, dragged by shares of National Australia Bank after the lender updated its cost outlook for the full year.  Meanwhile, Australia’s consumer sentiment tumbled as surging inflation, interest-rate increases, and falling home prices weighed on the outlook for households.  In New Zealand, the S&P/NZX 50 index rose 0.4% to 11,753.48 In FX, the dollar retreated for a second day, with Group-of-10 currencies broadly in a holding pattern ahead of US CPI data on Wednesday.  Norwegian and Danish currencies outperform peers, while the Australian dollar underperformed peers, weighed by lingering fears on the outlook for global growth. The Bloomberg Dollar Spot Index fell 0.2% after declining 0.2% on Monday: “Even if inflation turned out lower than expected in July, we think the body of evidence justifies staying the course of swift monetary tightening,” wrote Danske Bank analysts in a note to clients on Tuesday. “If short-term inflation expectations do not moderate over the coming months, the Federal Reserve will likely need to hike more and extend the hiking cycle into next year.” That should support the dollar, while US LNG exporters are poised to benefit as heating season approaches, they wrote. Expect EUR/USD to drop to 0.95 in 12 months EUR/USD gains 0.3% to 1.0228. Large expiries in the pair include 1.0185 (EU1.41b), 1.0300 (EU1.27b) GBP/USD rises 0.2% to 1.2108: Bank of England Deputy Governor Dave Ramsden told Reuters that the BOE would continue to sell gilts accumulated under its bond-buying programs even if officials eventually cut rates AUDUSD fell as much as 0.3% after data show growing pessimism among Australian households despite business conditions and sentiment remaining strong. The pace of the currency’s decline has softened as there’s “some acceptance now of the tightening cycle,” says Patrick Bennett, a strategist at Canadian Imperial Bank of Commerce in Hong Kong. “The Aussie looks to be trading more of its own accord, less of a global high beta at the moment” USD/JPY little changed at 134.93 In rates, Treasuries were cheaper across the curve ahead as US auctions resume with 3-year note sale, to be followed in next two days by 10-year note and 30-year bond offerings. US stock index futures near day’s low with focus on earnings. Yields were cheaper by more than 4bp across belly of the curve, elevating 2s5s30s fly by around 3bp on the session; 10-year yields at 2.795% trade broadly in line with bund performance over European session and slightly underperform gilts. $42BN 3-year note sale at 1pm ET is first coupon auction of the August-October quarter; $35b 10-year and $21b 30-year follow Wednesday and Thursday. WI 3-year yield around 3.165% is above auction stops since 2007 and ~7bp cheaper than last month’s, which stopped 0.5bp through. The UK long-end shrugs off comments by BOE’s Ramsden that the central bank would sell gilts even if interest rates are reduced. In commodities, WTI crude futures trade around $90 a barrel; gold slightly firmer around $1,790. Base metals are mixed: LME aluminum outperforms while tin lags. Bitcoin is underpressure after yesterday's strong performance, action that has pushed the crypto back below USD 23.5k. To the day ahead now, and data releases from the US include Q2’s preliminary nonfarm productivity and the NFIB’s small business optimism index for July. Otherwise, earnings releases include Coinbase. Market Snapshot S&P 500 futures down 0.3% to 4,128.00 STOXX Europe 600 down 0.3% to 437.82 MXAP down 0.3% to 160.23 MXAPJ little changed at 524.51 Nikkei down 0.9% to 27,999.96 Topix down 0.7% to 1,937.02 Hang Seng Index down 0.2% to 20,003.44 Shanghai Composite up 0.3% to 3,247.43 Sensex up 0.8% to 58,853.07 Australia S&P/ASX 200 up 0.1% to 7,029.83 Kospi up 0.4% to 2,503.46 German 10Y yield little changed at 0.91% Euro up 0.3% to $1.0232 Brent Futures down 1.3% to $95.38/bbl Brent Futures up 1.3% to $97.38/bbl Gold spot up 0.2% to $1,792.75 U.S. Dollar Index down 0.31% to 106.11 Top Overnight News from Bloomberg FBI Raid Focused on Material Trump Brought From White House China Drills Show Preparation for Possible Invasion, Taiwan Says China Seizes on Pelosi Visit to Set ‘New Normal’ for Taiwan China Orders Surprise Audit of $3 Trillion Trust Industry China Corruption Probes Stem From Anger Over Failed Chip Plans Goldman Analyst Calls Out ‘Deeply Disappointing’ Energy Bets Alibaba Reduced Workforce by Nearly 10,000 in Three Months SoftBank Pledges Sweeping Cost Cuts After $23.4 Billion Loss Micron Technology to Invest $40b in US Through End of Decade Carlyle’s Billionaire Founders Reached a Breaking Point With CEO ConEd Asks Brooklyn, Queens to Reduce Power Amid High Heat Google Search Outage Affects Tens of Thousands of Users Franklin Templeton Appoints Nomura Veteran as Head of China What-If DC War Game Maps Huge Toll of US-China Clash Over Taiwan Boeing to Restart 787 Deliveries Within Days on FAA Approval Top China Analyst Sees Stocks in Limbo as GDP Growth Slows to 2% Trump Turns to Lawyer on Bannon’s Losing Case for DOJ Talks A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks eventually traded mostly higher but with gains capped as the region focused on key earnings releases and initially followed suit to the indecisive performance in the US. ASX 200 was just about kept afloat by strength in tech and miners although gains were limited by weakness in financials including NAB despite posting earnings growth as it also flagged higher costs. Nikkei 225 was the laggard with the worst performing stocks pressured by earnings releases including SoftBank which suffered a record quarterly loss and warned of a potentially dramatic reduction in its headcount. Hang Seng and Shanghai Comp were indecisive in early trade with participants tentative amid lingering geopolitical concerns and  after a Chinese press report suggested that interest rate and RRR cuts are unlikely. The Hang Seng Index later strengthened with property names underpinned after reports that Hong Kong is considering waiving double stamp duty for mainland Chinese homebuyers. However, these reports were later refuted by the government. Top Asian News Recession Watch Spreads as Global Curves Follow Treasuries Trend Felixstowe Dockers Offered £500 Bonus in Bid to Stop Strike China’s Small Caps Defy Market Slump to Trounce Blue-Chip Stocks Hong Kong Has No Plan to Cut Stamp Duty After Ip Floats Idea Treasuries Hold Rebound, Australian Bonds Eke Out Advance Tokyo Taxi Fares Set for Rare Hike as Inflation Pressures Mount European bourses are under modest pressure, Euro Stoxx 50 -0.5%, but remain relatively rangebound and lack conviction with catalysts thin. Stateside, futures are similarly rangebound though are posting incrementally more mixed/flat performance, ES -0.1%. Pressure has been seen following a downbeat Q4 guidance update from Micron (-5% pre-mkt), pressuring the NQ -0.4% and European tech performance. Micron (MU) sees Q4 revenue at or below the low end of June 30th guidance; expects challenging market environment in Q4 2022 and Q1 2023. Additionally, has announced USD 40bln investments in leading-edge US memory manufacturing; Micron expects to begin production in the second half of the decade, ramping overall supply in line with industry demand trends. Top European News Barclaycard said UK consumer spending rose 7.7% Y/Y in July which was boosted by clothing, beauty and staycations, while it added that UK consumers are starting to cut back on overseas travel, eating out and drinking to offset higher outgoings. Poland’s Kaczynski (de-facto leader) has pledged they will not undertake any further steps in adhering to the EU Commission’s rule of law demands regarding unlocking grants/loans, saying “..shown maximum goodwill, but concessions have yielded nothing”. Will, if necessary, veto EU initiatives and seek to remove President von der Leyen. (Politico) Recession Watch Spreads as Global Curves Follow Treasuries Trend Continental Sees Better Second Half on Rising Auto Output Ukraine Latest: Zelenskiy Lauds Biden Over ‘Unprecedented’ Aid UK Airfares Up 30% as Bumper Demand Runs Up Against Flight Caps Searing Temperatures Across Europe Trigger Weather Warnings FX DXY briefly dipped under 106.00 from a 106.40 peak despite a lack of news flow. Sterling saw some downside on commentary from BoE Deputy Governor Ramsden, EUR/USD eyes several notable OpEx ahead of the NY cut. Non-US Dollars are firmer to varying degrees with the aid of the softer Dollar. USD/JPY found some resistance by its 50 DMA (135.14) early in the session and trades just under 135 awaiting the next catalyst Fixed Income Sonia/Gilts supported on BoE's Ramsden before reverting to a 'hawkish' bias amid broader EGB/UST pressure. Catalysts are thin with the initial upside fizzling out in short order though seemingly unaffected by strong/poor UK and German supply respectively. US yields are incrementally stepper though the broader inversion remains while BTP-Bund spread holds around 210bp. Commodities Crude oil futures have drifted off best levels; however, pronounced upside seen most recently on Russia reportedly suspending oil exports via southern-section of the Druzhba pipeline. Spot gold eyes USD 1,800/oz to the upside amid the softer Dollar. Base metals are mixed with the breadth of the market also narrow, but LME copper reclaimed a footing above USD 8,000/t. Norway has drawn up plans to ration electricity exports in a move which could stoke fears of energy shortages in Europe and the UK this winter, according to The Telegraph. China's NDRC is to lower retail prices of gasoline and diesel by CNY 130/tonne and CNY 125/tonnes respectively as of August 10th; 4th consecutive decline in prices. Russia suspends oil exports via southern-leg of the Druzhba pipeline amid transit payment issues, via Reuters citing sources. US Event Calendar 06:00: July SMALL BUSINESS OPTIMISM 59.9, est. 89.5, prior 89.5 08:30: 2Q Unit Labor Costs, est. 9.5%, prior 12.6% 08:30: 2Q Nonfarm Productivity, est. -4.7%, prior -7.3% DB's Jim Reid concludes the overnight wrap Yesterday was the quietest day of the month after last week’s drama in Taiwan and the stronger than expected US data that put a more aggressive Fed back in play and created a lot of bond volatility and much flatter curves. There were still some big swings but it didn't feel as frantic or busy. This temporary calm could clearly all change tomorrow with the latest US CPI so maybe the next 30 hours will be the calm before the storm or perhaps herald in the real start of the dog days of summer. I'm going on holiday to Cornwall next week and after around 2 months where there's been no rain here in the UK, the first drops of rain for some time seem to be dropping on Cornwall for the first day of our holiday and then carrying on through the week. Typical. At the age of 48, I bought my first ever wetsuit yesterday for paddle boarding and the like. If you don't vote for me in next year's II survey I'll send you a picture! Anyway, having said that it was calmer yesterday, that's still relative as the NASDAQ and S&P 500, having been up around 1.5% and 1% respectively early in the session, ended up closing -0.12% and -0.1% respectively. The former was up +20% from its June lows at one point but Nvidia's preliminary results and outlook led to the stock falling -6.3% and slowly taking the market down with it. Basically a good old fashion profit warning for the biggest chipmaker. As I type, US stock futures are edging back up with contracts on the S&P 500 (+0.23%) and NASDAQ 100 (+0.25%) slightly higher. In Europe, the market closed while the S&P 500 was still up just over half a percent so the STOXX 600 (+0.74%), the DAX (+0.84%) and the CAC 40 (+0.80%) were all still able to post solid gains of their own. This morning though DAX futures are -0.17% lower. There was good news yesterday though. One of the main stories was the New York Fed’s latest Survey of Consumer expectations for July, which found that inflation expectations were declining at the 1-year, 3-year and 5 year-horizons. That’ll be music to the Fed’s ears, since if that trend continues then it means that the Fed may not have to be so aggressive in hiking rates, since one of their big fears is that higher inflation expectations will lead to a self-fulfilling prophecy of higher actual inflation as firms adjust prices and workers bargain for wages accordingly. Indeed, the numbers were pretty good across the board, with 3-year expectations down to 3.2% (from 3.6%), which is the lowest reading for that measure since April 2021. That said, when it comes to the Fed’s next meeting in just over 6 weeks, the decline in expectations didn’t seem to move the dial for investors, and futures are still pricing in a 75bps move as more likely than not following Friday’s very strong jobs report, with the hike priced in for next time priced at around 68.5bps down a basis point. Sovereign bonds rallied steadily all day further out the curve so it was hard to say there was a definite trigger even if the inflation expectations story fitted the narrative. Yields on 10yr Treasuries fell c.-7bps to 2.746%, but with 2s10s flattening a further -6bps to -46bps, which is the most inverted it’s been since 2000. It was much the same story in Europe too, since the German 2s10s curve flattened by -3.2bps to close at its flattest level so far in 2022. And whilst yields fell back there as well, with those on 10yr bunds (-5.7bps), OATs (-5.0bps) and gilts (-9.7bps) all moving lower, that went alongside a fresh widening in peripheral spreads after a good run over the last week, with the gap between 10yr Italian yields over bunds up by +7.6bps to 213ps. Elsewhere we got some further concerning news on the energy side yesterday, with Norway’s energy minister saying that they would be prepared to limit power exports if required, with refilling reservoirs to be prioritised over power production. This is a potentially significant development, since Norway is a key exporter of electricity to Europe, and this comes on top of the existing energy disruption thanks to Russia’s invasion of Ukraine, as well as the current European heatwave that has further bolstered demand. In fact, French power prices for 2023 hit a record €543 per megawatt-hour yesterday, and their German counterpart also surged to €406 per megawatt-hour. For context, exactly a year ago today those prices closed at €81.70 and €79.14 respectively, so we’re talking about increases of more than five-fold over the last 12 months. And that also came amidst a fresh rise in oil prices, with Brent crude back up by +1.82% to $96.65/bbl, while WTI rose +1.97% to $90.76/bbl. Another negative story of late have been the growing tensions between the US and China over Taiwan, with China continuing military exercises beyond their original conclusion on Sunday into yesterday. US President Biden said that he didn’t think China was “going to do anything more” but did say “I’m concerned that they’re moving as much as they are”. However, there was some more positive news for Biden domestically, as with less than 3 months to go until the mid-term elections now, FiveThirtyEight’s models are giving the Democrats their best chances of retaining the House and the Senate in recent months. For the Senate, they give the Democrats a 59% chance of retaining control (up from 47% a month earlier), and for the House they put that at 20% (up from 13% a month earlier). That comes amidst a fresh legislative win for Biden over the weekend, with the Senate passing the Inflation Reduction Act, which the House is expected to take up later in the week. Asian equity markets are struggling to gain traction on a quiet morning. The Nikkei (-0.85%) is lagging in early trade but the Hang Seng (+0.77%) has pared initial losses on news that double stamp duty on the Island may be waived for Chinese homebuyers. Over in Mainland China, stocks are rebounding as the Shanghai Composite (+0.31%) and the CSI (+0.17%) moved back into positive territory whilst the Kospi (-0.03%) is oscillating between gains and losses as I type. Elsewhere, early morning data showed that Australia’s NAB Business Confidence rose 5 points to +7 in July from the previous month, while business conditions advanced 6 points to +20 points in the same period, despite rising interest rates and high inflation. These were above expectations. To the day ahead now, and data releases from the US include Q2’s preliminary nonfarm productivity and the NFIB’s small business optimism index for July. Otherwise, earnings releases include Coinbase. Tyler Durden Tue, 08/09/2022 - 08:01.....»»

Category: worldSource: nytAug 9th, 2022

Futures, Oil Jump As Record Dollar Rally Fizzles

Futures, Oil Jump As Record Dollar Rally Fizzles US futures and European stocks advanced, shaking off data that showed China’s economy expanded slowest pace since the initial 2020 Wuhan outbreak amid pervasive lockdowns... ... while the dollar’s record surge stalled at the end of a week in which markets have been whipsawed by shifting expectations for monetary tightening by the Federal Reserve and worries over global economic growth. S&P futures traded at session highs, rising 0.38% or 14 points to 3807.50 signaling a higher open for US stocks after Wall Street closed with a small drop as investors dialed back expectations of how aggressively the Fed will hike interest rates to combat inflation. Europe's Estoxx50 gained 1% in quiet trading while Asian stocks closed mixed after lower-than-forecast China GDP data. Oil reversed recent losses which briefly dragged it below the 200DMA, and was also near session highs, up 3% even as WTI is poised to end the week below $100 a barrel for the first time since April.  Commodity metals remained under pressure, with copper touching below $7,000/t, its lowest level in 20 months, as growth data from China fueled concern around the demand outlook for commodities while gold tested support at $1,700/oz. Treasuries rose and the the yield curve between two-year and 10-year maturities remained inverted, something viewed as recession signal. The Bloomberg Dollar Spot Index dipped from a record high. In premarket trading, Wells Fargo dropped after missing analysts’ second-quarter profit estimates, adding to worries about the outlook for corporate profits after disappointing results yesterday from JPMorgan Chase & Co. and Morgan Stanley. Here are some other notable premarket movers: Pinterest (PINS US) shares surge as much as 16% in premarket trading after the Wall Street Journal reported that activist investor Elliott Management has acquired a stake in the social- media company. Codexis (CDXS US) tumbles 21% in premarket trading after the enzyme engineering company cut its sales guidance for the year and reported preliminary quarterly revenue that trailed the average estimate. Vonage (VG US) rises 7% in premarket trading after Ericsson receives all the necessary approvals from regulators to buy the cloud-based communications provider. Solar stocks could be active on Friday after Senator Joe Manchin told Democratic leaders he wouldn’t support new spending on climate measures or tax increases. First Solar (FSLR US) falls 2% in premarket trading. Investors are evaluating how hawkish the Fed must be to curb inflation and the likely toll on the economy. Bets on a one-percentage-point July rate hike have been scaled back after the latest commentary pointed toward 75 basis points; a retail sales miss in this morning's data should take a 100bps rate hike off the table. “It seems most market operators are buying the news after selling the rumor of more monetary tightening brought by a higher US CPI,” said Pierre Veyret, a technical analyst at ActivTrades. Investors now expect a 0.75-1% rate hike from the Fed at the end of the month, he said adding that the tightening cycle is projected to end with the benchmark rate at about 3.2% in 2023, with monetary policy then seen as easing to combat slower economic conditions. The pace of monetary tightening along with ebbing liquidity still threatens to stir more market volatility after steep losses for stocks and bonds in 2022. In his latest comments, Fed Governor Christopher Waller backed raising rates by 75 basis points this month, nixing Nomura's base case of a 100bps rate hike, though he said he could go bigger if warranted by the data. St. Louis Fed President James Bullard echoed some of those comments, saying he favored hiking by the same amount. “We need liquidity to dry up in order to reduce inflation,” Erin Gibbs, chief investment officer at Main Street Asset Management, said on Bloomberg Radio. “It’s a challenge, it’s a difficult situation, transition. I don’t envy the Federal Reserve, but we’ve known there has been too much money out there and that’s why we’re here in this position.” In Europe, the Stoxx 50 rallied 1.2%. DAX outperforms adding 1.7%. Autos, energy and retailers are the strongest-performing sectors, while luxury stocks got hit after data showed China’s economy grew at the slowest pace since the country was first hit by the coronavirus outbreak two years ago. LVMH led the declines in European luxury stocks while Richemont and Burberry slide as China’s Covid Zero policy weighs on results. Louis Vuitton owner LVMH down 2.2%, while Birkin handbag maker Hermes and watch maker Swatch fall 1.1% and 3.1%, respectively, as China is a key market for luxury houses. Italy’s benchmark index rallied after the country’s president rejected an offer from Mario Draghi to resign as prime minister. Here are the biggest European equity movers: European automakers and car-parts suppliers lead gains in Europe with the Stoxx 600 Autos sub-index up as much as 3.8%. BofA analysts say current sector concerns are overdone. Uniper gains as much as 12% on Friday as Goldman Sachs upgraded the stock and progress was said to be made on its rescue package. Fortum, which owns 75% of Uniper, up 3.4%. Fevertree shares fall as much as 33%, the most on record, after the high-end tonic maker cut its outlook for the year. RBC said the profit warning raises questions about the company’s pricing power and long-term earnings potential, while UBS pointed to concerns about the “visibility on 2022 and beyond.” Burberry shares drop as much as 7%, the most since March 4, after the British fashion brand surprised investors by reporting a weak 1Q in the Americas. The operating environment in China remains “extremely volatile,” according to Morgan Stanley. Richemont shares fall as much as 6%, the most since May 20, with the 1Q sales beat not enough to quell investor concern over the broader macro-economic backdrop, including what Citigroup calls an “uncertain recovery in China.” TomTom shares gained as much as 9.8%, most since Feb. 7, after company reported “satisfactory results given challenging circumstances,” writes ING. Hapag-Lloyd shares drop as much as 7.1% after Morgan Stanley cuts its recommendation to underweight from equal-weight on expectations that demand for containers will decline in 2023. Direct Line shares rise as much as 3.6% following a 12% drop for the motor insurer in the prior session. Berenberg upgrades its rating to buy, saying the decline has created an opportunity, while JPMorgan cuts its ratings on both Direct Line and peer Admiral. Rio Tinto shares fall as much as 2.9% in London after the miner’s 2Q production report, with the company noting headwinds from a global economic slowdown and China’s Covid outbreaks. Aston Martin shares jump as much as 28%, reversing an early decline, after the luxury car-maker announces a funding package. Friday’s gain is the biggest since May 2020. Earlier in the session, Asian stocks declined as renewed fear of a crackdown on enterprises battered Chinese internet names while traders assessed the market impact from weaker-than-expected China growth data and corporate earnings.  The MSCI Asia Pacific Index fell as much as 0.6%, on track for a weekly decline. Alibaba dragged down the Asian benchmark and the Hang Seng Tech Index following a report that said some company executives were summoned for talks by authorities in Shanghai in connection with the theft of a vast police database. All but two sectors slipped.  Stocks in China declined after data showed that the world’s second-largest economy grew 0.4% in the second quarter, the slowest pace since the country was first hit by the coronavirus outbreak two years ago. While the lower-than-expected expansion extended hopes that Beijing would maintain its easing stance, the latest figure puts its GDP target out of reach. According to Jack Siu, Greater China chief investment officer at Credit Suisse, the government’s current fiscal stimulus on tax rebate and the front loading of special purpose bonds issuance should bring 2022 GDP to 4.8%. READ: Fresh Scrutiny of Alibaba Sends China Tech Stocks Into Tailspin “While disappointing growth data gave views that the current easing stance would be maintained, traders are waiting for the government’s further response as banks, property and other sectors are hit by regulations and growth concerns,” said Kim Kyung Hwan, a Chinese equity strategist at Hana Financial Investment. Asian stocks are poised for their worst week in about a month amid worries about resurging virus cases in China and a possible global recession. Central banks in the region and elsewhere have been tightening their policy to curb high inflation, with decisions by Singapore and the Philippines surprising investors earlier in the week. Japan’s Nikkei 225 rose as the yen held near a fresh 24-year low, remaining close to 140 per dollar.  The Nikkei 225 advanced 0.5% to 26,788.47 at the 3 p.m. close in Tokyo, while the Topix index was virtually unchanged at 1,892.50. Out of 2,170 shares in the index, 745 rose and 1,334 fell, while 91 were unchanged. “The yen’s depreciation to 139 yen provided support, but there is a limit to that,” said Mamoru Shimode, chief strategist at Resona Asset Management. In Australia, the S&P/ASX 200 index fell 0.7% to close at 6,605.60, dragged lower by miners and energy stocks as commodities from iron ore to copper declined. Pendal was the worst performer after reporting net outflows for the third quarter of A$4.2 billion. Iron ore miners dropped on weaker prices for the steelmaking ingredient. Goldman analysts also cut their rating on peer BHP, while Rio Tinto warned of headwinds emerging from a global economic slowdown and China’s Covid-19 outbreaks. In New Zealand, the S&P/NZX 50 index fell 0.6% to 11,122.61. In FX, the Bloomberg Dollar Spot Index slumped with AUD and NZD the weakest performers in G-10 FX, while CHF and SEK outperform. The euro held above parity, rising to session highs as US traders walked in. Sterling hovered near a two-year low against the US dollar, which remains broadly supported by demand for the safe-haven greenback. Markets will be keeping an eye on a debate between UK Conservative party candidates later in the day for a steer on who could become the country’s next prime minister. The Aussie weakened for a second day after Westpac trimmed its forecast for RBA rate hikes, and iron-ore prices tumbled. The yen rose from a 24-year low as risk sentiment was subdued amid weak Chinese economic data and concerns over aggressive policy tightening in the US. In rates, Treasuries rose, led by the belly, while gilts jumped at the open and bunds extended gains. Treasuries were slightly richer across the curve with front-end lagging, mildly flattening 2s10s and 2s5s spreads. Yields richer by 2bp to 3bp across the curve with 10-year around 2.93%, trading broadly inline with bunds and outperforming Italian bonds by 4bp. Peripheral spreads widen to Germany with 10y BTP/Bund adding 6.5bps to 213.4bps. Italian bonds yields rose at the front end of the curve as political uncertainty prevailed: indeed, the focus remains on Italian bonds after President Sergio Mattarella rejected Prime Minister Mario Draghi’s resignation late Thursday. US session includes a packed data slate and three Fed speakers before blackout ahead of July 27 policy meeting.  In commodities, crude futures rose. WTI trades within Thursday’s range, adding 0.3% to trade near $96.05. Brent rises 0.7% near $99.83. Metals remain under pressure, with copper touching below $7,000/t and gold testing support at $1,700/oz. To the day ahead now, and data releases include US retail sales, industrial production and capacity utilisation for June, along with the Empire State manufacturing survey for July, and the University of Michigan’s preliminary consumer sentiment index for July. Central bank speakers include the ECB’s Rehn, and the Fed’s Bostic and Bullard. Earnings releases include UnitedHealth Group, Wells Fargo, BlackRock and Citigroup. Finally, G20 finance ministers and central bank governors will be meeting in Indonesia. Market Snapshot S&P 500 futures little changed at 3,795.50 STOXX Europe 600 up 0.9% to 410.06 MXAP down 0.5% to 153.77 MXAPJ down 0.8% to 505.79 Nikkei up 0.5% to 26,788.47 Topix little changed at 1,892.50 Hang Seng Index down 2.2% to 20,297.72 Shanghai Composite down 1.6% to 3,228.06 Sensex up 0.1% to 53,490.31 Australia S&P/ASX 200 down 0.7% to 6,605.57 Kospi up 0.4% to 2,330.98 German 10Y yield little changed at 1.11% Euro little changed at $1.0026 Gold spot down 0.4% to $1,702.69 US Dollar Index little changed at 108.58 Top Overnight News from Bloomberg China’s economy grew at the slowest pace since the country was first hit by the coronavirus outbreak two years ago, making Beijing’s growth target for the year increasingly unattainable as economists downgrade their forecasts further. The 0.4% expansion in GDP reported for the second quarter, when dozens of cities including Shanghai and Changchun imposed lockdowns, was the second weakest ever recorded With Italy on the brink of chaos, Mario Draghi has less than a week to forge some difficult compromises with the populists in his government that have reluctantly backed him for the past 18 months The ECB will unveil an unlimited bond-buying tool next week to help markets better adjust to steeper and faster interest-rate increases than previously thought, economists surveyed by Bloomberg say Copper is heading for its steepest weekly decline since the early months of the coronavirus pandemic, with fears mounting of a recession that could destroy global demand for industrial commodities A more detailed looked at global markets courtesy of Newsquawk Asia-Pac stocks traded mixed after the 100bps Fed rate hike bets unwound and with headwinds from China's GDP miss. ASX 200 was dragged lower by the mining sector amid losses in Rio Tinto shares despite an increase in its quarterly output and shipments, as it also warned of headwinds to its business and higher costs. Nikkei 225 swung between gains and losses but was ultimately higher intraday amid recent currency weakness and with index heavyweight Fast Retailing boosted by strong 9-month results. Hang Seng and Shanghai Comp. were indecisive after disappointing Chinese growth data which showed weaker than expected GDP and Industrial Production, although Retail Sales surprisingly expanded and the Unemployment Rate declined. Top Asian News PBoC injected CNY 100bln via 1-year MLF vs CNY 100bln maturing with the rate kept at 2.85%. China's Foreign Minister Wang also commented that China-Australia relations currently face challenges and opportunities, while he added that China is willing to recalibrate relations in the spirit of mutual respect, according to Reuters. China NBS official said downward pressure on the domestic economy increased substantially during Q2 and that the foundation for a sustained economic recovery is not solid, while the economy is facing shrinking demand and supply shock, according to Reuters. China's Huaiyuan county has announced a lockdown amid COVID, according to local TV; 151 prelim cases were reported on July 14th, according to CCTV. China Traders Pile Into Carry Trades While Easy Money Lasts Telkom Indonesia Jumps Most in Seven Months on 2Q Bet MTN in Talks to Buy Rival Telkom in Cash & Shares: M&A Snapshot SK Hynix Is Said to Weigh Slashing Spending by 25% in 2023 European bourses are firmer across the board, as initial jittery performance dissipated with participants looking to US data and Fed speak. US futures are in the green, but only modestly so, and have been relatively contained awaiting further guidance from upcoming Fed  officials on the 75bp/100bp discussion. UnitedHealth Group Inc (UNH) Q2 2022 (USD): Adj. EPS 5.57 (exp. 5.20/4.98 GAAP), Revenue 80.30bln (exp. 79.68bln). BlackRock Inc (BLK) Q2 2022 (USD): EPS 7.06 (exp. 7.90) Revenue 4.53bln (exp. 4.65bln). AUM 8.49tln (exp. 8.86tln). Net inflows 89.57bln (exp. 116.78bln). Top European News ECB's Rehn says ECB likely to go 25bps in July and 50bps in September. Note, the ECB is in its quiet period at the moment. Burberry Upbeat on Outlook But Concerns About China Remain Aston Martin Stock Jumps as Carmaker’s Fundraising Calms Nerves Euro Extreme Bearish Bets Have Room to Grow on NatGas Shut Off UBS Wealth Sees 15% Downside for European Stocks in Recession FX Dollar in need of consumption or production boost after two Fed hawks lean against 100bp hike expectations that were becoming embedded for forthcoming FOMC meeting, DXY retreats through 108.500 after setting new 2022 peak at 109.290 yesterday. Franc outpaces fellow majors as yields retreat and curves re-steepen, while retaining bid against Euro, USD/CHF sub-0.9800 vs high near 0.9900 on Thursday, EUR/CHF depressed largely under 0.9850. Aussie underperforms as Chinese GDP data disappoints and iron ore dumps in response; AUD/USD top heavy above 0.6750, AUD/NZD reverses around 1.1000 handle. Loonie pares declines from new y-t-d low vs Greenback as crude prices stabilise, USD/CAD close to 1.15bln option expiries at the 1.3100 strike compared to 1.3200+ high yesterday. Euro attempts to consolidate back on a par with Buck after fleeting if not false break below. Yuan nurses losses after further depreciation on growth concerns and latest Covid lockdowns -Usd/Cnh and Usd/Cny slip from overnight peaks circa 6.7840 and 6.7690 respectively. Fixed Income Bonds back off following further retracement from lows on less hawkish Fed vibes that prompted bull re-steepening Bunds sub-153.00 vs new 153.80 WTD peak, Gilts under 116.00 from 116.39 and 10 year T-note midway between 118-29+/118-13 stalls BTPs stage impressive recovery to 124.30 from 121.96 trough on Thursday awaiting next chapter in Italian political drama Commodities Crude benchmarks are firmer, tracking sentiment, but cognizant of the Saudi-Biden meeting though an immediate production increase is not anticipated; WTI +USD 0.20/bbl. The US is not expecting Saudi Arabia to immediately boost oil production, US eyes the next OPEC+ meeting, according to a US official cited by Reuters. UAE says it wants more stable oil markets, will abide by OPEC+ decision; idea of a confrontational approach re. Iran is not something they buy into, via Reuters. Spot gold remains pressured near, but yet to breach, the USD 1700/oz handle; despite a pull-back in the USD as sentiment turns incrementally more constructive. US Event Calendar 08:30: June Import Price Index YoY, est. 11.4%, prior 11.7%; MoM, est. 0.7%, prior 0.6% June Export Price Index YoY, est. 19.9%, prior 18.9%; MoM, est. 1.2%, prior 2.8% 08:30: June Retail Sales Advance MoM, est. 0.9%, prior -0.3% June Retail Sales Ex Auto MoM, est. 0.7%, prior 0.5% June Retail Sales Ex Auto and Gas, est. 0.1%, prior 0.1% June Retail Sales Control Group, est. 0.3%, prior 0% 08:30: July Empire Manufacturing, est. -2.0, prior -1.2 09:15: June Industrial Production MoM, est. 0.1%, prior 0.2%, revised 0.1% June Capacity Utilization, est. 80.8%, prior 79.0%, revised 80.8% June Manufacturing (SIC) Production, est. -0.1%, prior -0.1% 10:00: May Business Inventories, est. 1.4%, prior 1.2% 10:00: July U. of Mich. Sentiment, est. 50.0, prior 50.0; Expectations, est. 47.0, prior 47.5; Current Conditions, est. 53.7, prior 53.8 1 Yr Inflation, est. 5.3%, prior 5.3% 5-10 Yr Inflation, est. 3.0%, prior 3.1% DB's Jim Reid concludes the overnight wrap The last 24 hours have seen another major risk-off move in financial markets, with worries about a potential recession getting fresh support from a weak round of US bank earnings as we kick off the latest results season, followed by much weaker than expected Chinese GDP growth in Q2. To be honest, it was hard to find an asset class where recession signals weren’t flashing red, with yesterday seeing the S&P 500 (-0.30%) lose ground for a 5th consecutive session, peripheral bond spreads widen in Europe, and oil prices seeing their lowest intraday levels since Russia’s invasion of Ukraine began. In terms of the specific moves, equities declined across the board yesterday with the S&P 500’s losses led by energy and the more cyclical sectors. Banks were a major contributor to that, and JPMorgan (-3.49%) suffered, hitting a 20-month low after their earnings missed expectations and they announced the suspension of share buybacks, whilst Morgan Stanley (-0.39%) saw investment banking revenue down -55% on the previous year. European equities also suffered significant losses, with the STOXX 600 coming down -1.53% on the day. However, the final losses by the US close were far from where they had been at the open, with the S&P 500 recovering from intraday losses of -2.11% after the FOMC’s resident hawks walked back the prospects of a super-sized 100bps hike in July, and signalled that a 75bp increase remained preferable despite the CPI beat. Tech shares were a particular beneficiary, and the NASDAQ managed to eke out a +0.03% gain by the close as a result. In terms of the comments, Governor Waller said that “with the CPI data in hand, I support another 75-basis point increase”. However, he did say that if upcoming retail sales and housing data were “materially stronger than expected it would make me lean towards a larger hike”. And then St Louis Fed President Bullard was quoted in a Nikkei interview that he “would advocate 75 basis points again at the next meeting.” In response, futures dialled back their expectations for a 100bp move, with pricing moving down from a peak of +94bps not long before Waller’s remarks came out, to +82.5bps by the close of trade. Those remarks helped trigger a recovery among US Treasuries, with the 2yr yield falling back from an intraday high of 3.27% to end the day at 3.13%, and this morning it’s fallen further to 3.12%. Yield curves also steepened on the back of the remarks, although the 2s10s curve (+4.9bps yesterday) still remains well in inversion territory at -18.1bps as we go to press. Yields on 10yr Treasuries were up +2.6bps yesterday to 2.96%, although this morning have also fallen back to 2.94%. Today we’ll get further comments from Atlanta Fed President Bostic, St Louis Fed President Bullard and San Francisco President Daly, which will be important as today is the last day before the FOMC’s blackout period begins ahead of their next meeting, so all eyes will be on their thoughts about a 100bps move. Over in Europe, Italian assets lost significant ground yesterday amidst ongoing political turmoil in the country. Prime Minister Draghi tried to tender his resignation after the Five Star Movement boycotted a confidence vote in the Senate, saying that “The loyalty agreement that was the foundation of my government has gone missing”, but President Mattarella rejected it, and it’s uncertain what exactly will happen next. Draghi is set to address parliament next week, although early elections remain a possibility if an agreement is unable to be reached. In terms of the market reaction, Italy’s FTSE MIB underperformed all the other major European indices, with a -3.44% decline that leaves the index at its lowest level since November 2020 just before Pfizer announced their positive vaccine news. Meanwhile the spread of 10yr Italian yields over bunds widened +7.7bps to 206bps yesterday, which is their highest level in nearly a month. That theme of widening spreads was echoed on the credit side too, where iTraxx Crossover widened +22.2bps to 626bps, which is its highest level since April 2020. Yields on 10yr bunds themselves were up +3.3bps. That negative tone has persisted in Asia overnight after China’s Q2 GDP data showed economic growth slowed to just +0.4% year-on-year in Q2 (vs. +1.2% expected). On a quarter-on-quarter basis, there was even a -2.6% contraction (vs. -2.0% expected), which marks the first quarterly contraction since Q1 2020 when the Covid-19 pandemic started. The data for June alone was better however, with retail sales up +3.1% year-on-year (vs. +0.3% expected), and industrial production up +3.9% year-on-year (vs. +4.0% expected). Separately, China have reported their highest number of daily Covid-19 cases in 7 weeks, with 432 infections yesterday, of which 165 were in Guangxi province. A number of equity indices have lost ground against that backdrop, including the CSI 300 (-0.05%), the Shanghai Comp (-0.24%) and the Hang Seng (-1.19%), although the Kospi (+0.22%) and the Nikkei (+0.58%) have advanced, whilst Brent crude oil prices are back above $100/bbl. US and European equity futures are also pointing to a positive start, with those on the S&P 500 (+0.32%), the NASDAQ 100 (+0.41%) and the DAX (+0.99%) all up. Yesterday’s other data releases didn’t exactly help sentiment either, with US producer price inflation beating expectations as well at a monthly +1.1% (vs. +0.8% expected), although core inflation did fall to +0.4% (vs. +0.5% expected). That pushed the headline year-on-year PPI reading up to +11.3% (vs. +10.7% expected), and core fell to +8.2% as expected. Separately, the weekly initial jobless claims for the week through July 9 came in at 244k (vs. 235k expected), which is their highest level since November. Furthermore, the 4-week moving average of claims rose to 235.75k, which was its highest level since December. Instead, the main positive news came from the continuing claims data for the week through July 2, which fell to 1331k (vs. 1380k expected). Here in the UK, the second ballot of Conservative MPs took place yesterday as they select their next leader and the country’s next Prime minister. Former Chancellor Sunak remained in the lead with 101 votes, but trade minister Penny Mordaunt maintained her momentum with an increase to 83 votes, whilst Foreign Secretary Truss won 64 votes. There are now just 5 candidates remaining with the next ballot scheduled for Monday, and there are also a couple of TV debates taking place before then, so there’s still the potential for things to change over the weekend. To the day ahead now, and data releases include US retail sales, industrial production and capacity utilisation for June, along with the Empire State manufacturing survey for July, and the University of Michigan’s preliminary consumer sentiment index for July. Central bank speakers include the ECB’s Rehn, and the Fed’s Bostic and Bullard. Earnings releases include UnitedHealth Group, Wells Fargo, BlackRock and Citigroup. Finally, G20 finance ministers and central bank governors will be meeting in Indonesia. Tyler Durden Fri, 07/15/2022 - 07:57.....»»

Category: personnelSource: nytJul 15th, 2022

Futures Tumble As Dollar Hits Record High; JPM, Morgan Stanley Slide

Futures Tumble As Dollar Hits Record High; JPM, Morgan Stanley Slide US futures were already sliding fast as the reality of the Fed's upcoming 100bps rate hike was fully appreciated by the market, as even Goldman was shocked by the kneejerk move higher yesterday, saying "Does it makes sense for mkt to move higher after a 9.1% print and BOC hiking by 100bps...of course not...but that was max pain trade today and this market seeks max pain." Well, this morning the max pain was clearly lower, as US equity futures fell along with stocks in Europe and Asian, while the Bloomberg dollar index rose to a record Thursday, surpassing the record hit during the covid 2020 crash when the Fed launched unlimited swap lines to ease the global dollar crunch... ... after high US inflation hardened expectations for more aggressive Federal Reserve monetary tightening that could trigger a recession. S&P 500 futures tumbled more than 1%, down almost 200 points since Friday, as the US second-quarter earnings season got underway. All risk assets were lower, as well as gold and oil, while all non-USD currencies are getting steamrolled by the relentless surge in the dollar. 10Y yields dropped to 2.93% after rising just shy of 3.00% overnight. The inversion between two-year and 10-year yields -- a potential recession indicator -- is the deepest since 2000 But wait there's more, because while markets are freaking out over soaring inflation, Fed hikes and crashing earnings, Europe is about to enter the 9th circle of hell: France's Macron warns that citizens and companies will need to reduce energy usage as Germany reports that gas storage is already being withdrawn, even before peak usage in the winter. Meanwhile, Italian bonds and banks are tumbling amid speculation Mario Draghi’s government is about to collapse as coalition partner Five Star threatens to pull out. Looking at premarket movers, JPMorgan plunged more than 5% in premarket trading after reporting results that missed analyst  expectations. Tesla also dipped after the company’s top artificial-intelligence executive and an architect of its Autopilot self-driving system announced plans to depart the maker of electric vehicles and as Morgan Stanley makes “material” cuts to its forecasts across its auto portfolio. Some other notable premarket movers: Theravance Biopharma (TBPH US) shares jump as much as 25% in premarket trading after the biotech firm agrees to sell royalty interests in Trelegy Ellipta to Royalty Pharma. ContraFect (CFRX US) sinks as much as 77% in US premarket trading after the biotech company said that the Data Safety Monitoring Board recommended stopping its Exebacase phase 3 study. Netflix’s (NFLX US) decision to pick Microsoft (MSFT US) as a technology and sales partner for its new advertising-supported streaming service was a surprise to the industry. Analysts say the move makes sense. Netflix slips 1% in premarket trading, Microsoft -0.9%. As discussed yesterday, Fed officials will be debating a historic one percentage-point rate hike later this month in an attempt to combat inflation. Markets price in 69% odds that the Fed will raise interest rates by 100 basis points when it meets July 26-27, which would be the largest increase since the Fed started directly using overnight interest rates to conduct monetary policy in the early 1990s. Technology stocks will be in focus as higher rates mean a bigger discount for the present value of future profits, hurting growth stocks with the highest valuations. A 100 basis points hike is now likely and the “inflation reading should also raise the odds of recession, which we now estimate is likely sooner rather than later and possibly more severe,” said Tiffany Wilding, an economist at Pacific Investment Management Co. “The market has already priced in the unexpected extreme tightening, so there isn’t that much more the Fed can do to prepare the markets,” said Mehvish Ayub, a senior strategist at State Street Global Advisors. “We need to position portfolios accordingly and expect volatility to continue as it has since the beginning of the year,” she said in an interview with Bloomberg Television. “It is clear that central banks around the world are laser-focused on fighting the entrenched inflation they helped to create, growth-be-damned,” said Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Ltd. “US markets are pricing in faster Fed tightening, and a recession is on the way imminently.” In Europe, the Stoxx 50 index slumped 1.2%. DAX outperforms peers, dropping 0.9%, FTSE MIB lags, dropping 2.3%. Miners, energy and telecoms are the worst-performing Stoxx 600 sectors. Here are the biggest European movers: Ericsson tumbles as much as 12% to the lowest level since March 2020, after a mixed quarterly report with revenue ahead of expectations but margin and earnings missing estimates. Sabre Insurance plunged more than 30% after warning that everything related to an insurance claim -- the car parts, paint, labor and the cost of replacing the vehicle -- has risen faster than expected. Peers Admiral and Direct Line dropped 13% and 7.9%, respectively. Hugo Boss shares rise as much as 3.2% to the highest since late February after what analysts say was a “blow- out” second-quarter for the luxury apparel firm. Entain rises as much as 5.2%, rallying after last week’s heavy losses, as the owner of the Ladbrokes and Coral betting brands publishes a video updating on the progress of Enlabs since last year’s acquisition of the firm. Technogym shares fall as much as 6.8% as Goldman Sachs cuts its PT on the Italian gym-equipment maker on a weaker medium-term growth outlook and low visibility on near- term consumption patterns. Acciona slumped after newspaper Expansion said the Spanish government is analyzing 16 companies, including renewable unit Acciona Energia, to impose a new windfall profit levy announced earlier in the week. Storebrand rises as much as 4% in Oslo trading after second-quarter pretax profit beat the average analyst estimate. SBB posted a surprise pretax loss and the Swedish property company’s stock price tumbled as much as 17%. SEB shares gain as much as 4.7% in early European trading after the lender posted 2Q earnings that showed higher deposit margins and decent loan growth, Handelsbanken writes in a note. Hunting’s steep slide since its June 30 trading update offers a good entry point, Berenberg writes in note, upgrading the stock to buy from hold. Hunting shares up as much as 7.1%. Asian stocks declined, as markets in Singapore and the Philippines fell after surprise monetary tightening by the two Southeast Asian nations, while Chinese bank shares weighed amid a property crisis.  The MSCI Asia Pacific Index dropped as much as 0.6%, with the financials gauge weighing the most on the measure. Ping An Insurance was the single biggest drag, leading a fall among Chinese lenders as home buyers in China refused to pay mortgages on delayed construction projects.    Shares in Singapore and Manila declined after local monetary authorities unexpectedly tightened policy rates to tackle inflation. Their declines helped put a key Southeast Asian equities gauge on track for a bear market. Taiwan’s benchmark rose for a second day after a government support pledge, while Chinese tech firms also climbed.   The region’s mixed performance comes as investors continue to digest the prospect of a recession on hardened expectations of more aggressive Federal Reserve monetary tightening after sizzling US inflation data. Traders in Asia also are waiting for Friday’s release of China’s second-quarter GDP growth figure.  “Even while central banks in most of the rest of the world are moving in one direction, here in Asia we’ve got a very, very large player doing something different,” said Alexander Treves, head of investment specialists for Asia Pacific equities at JPMorgan Asset Management, referring to China in an interview with Bloomberg TV. “The government has got quite ambitious growth targets for this year and it might be they don’t meet them but they are going to try very, very hard to stimulate in that direction.” The higher-than-expected consumer prices data from the US overnight was “lagged bad news,” according to David Kelly, chief global strategist at J.P. Morgan Asset Management.  “But we do expect lagged good news in the coming months, with energy prices diving lower, food prices cooling and consumer demand stepping back,” Kelly wrote in a note. “This should provide some inflation relief to the Fed and consumers, and hopefully lead sentiment to recover from its record-lows.” Japanese equities erased earlier losses as the yen weakened after US inflation data hardened expectations of more aggressive Federal Reserve monetary tightening.  The Topix index closed 0.2% higher at 1,893.13 in Tokyo, while the Nikkei 225 advanced 0.6% to 26,643.39. Keyence Corp. contributed the most to the Topix’s gain, increasing 3.5%. Out of 2,170 shares in the index, 1,229 rose and 803 fell, while 138 were unchanged. “The weak yen and continuation of monetary easing in Japan, which is completely different from the situation in the US and Europe, will help to support stock prices,” said Tomo Kinoshita, a global market strategist at Invesco Asset Management.  Australia's S&P/ASX 200 index rose 0.4% to close at 6,650.60, climbing for a third session. Miners contributed the most to the benchmark’s gain. EML Payments was the top performer, bouncing back after three days of losses. Lake Resources was the biggest laggard after responding to a short-seller report. Investors also assessed jobs data. Australia’s hiring boom gathered pace in June, sending the unemployment rate to the lowest in almost 50 years and bolstering the case for a supersized interest rate hike next month.  In New Zealand, the S&P/NZX 50 index rose 0.7% to 11,187.97 India’s benchmark equity index erased early gains to close at its lowest level in more than a week as shares of technology firms Infosys and TCS weighed.  The S&P BSE Sensex fell 0.2% to 53,416.15 in Mumbai, while the NSE Nifty 50 Index declined by the same magnitude. Axis Bank was the worst performer on the Sensex, which saw 17 of its 30 member stocks trading lower. India’s biggest technology company TCS fell to the lowest level since March last year, setting the pace for a tech selloff.  India’s headline inflation rose 15.18% compared to last year, which was below estimates for the first time since June 2021. In FX, the Bloomberg Dollar Spot Index rose by around 0.5% hitting an all time high, as the greenback advanced against all of its Group-of-10 peers. AUD and DKK are the strongest performers in G-10 FX, JPY and CAD underperform. COP (+3%), RUB (+1.4%) lead gains in EMFX. The euro fluctuated, but held above parity. An early decline in the face of widespread dollar demand paused at buy orders from a reserve manager based in Asia seeking to diversify away from the greenback, according to Asia-based FX traders. One-week volatility in euro-dollar rallied as the tenor now captures the next ECB decision on July 21, the same day when a key Russian gas pipeline is scheduled to reopen. German and UK short-end bonds fell, led by the front-end, underperforming on their curves as money markets cranked up ECB and BOE rate-hike wagers for a second day. Investors were dumping Italian assets as political turmoil puts Prime Minister Mario Draghi’s government at risk of collapse and complicates efforts by the European Central Bank to support the market. Swedish 2-year bonds slumped after inflation rose faster than forecast in June. The yen approached 140 per dollar as the currency is decoupling from its close relationship with US bonds amid a broad rally in the dollar. In rates, the treasuries curve extends Wednesday’s flattening move with 2s10s spread reaching -27bp during European morning, as political turmoil in Italy has investors dumping its bonds. US yields cheaper by up to 5bp in front end and belly of the curve, flattening 2s10s, 5s30s spreads by ~2bp and ~5bp on the day; 10-year yields around 2.95%, cheaper by ~3bp vs Wednesday’s close; Italian bonds underperform by more 20bp in the sector. In front end, investors continue to anticipate front-loaded and aggressive Fed hikes to peak by year-end; swaps price 92bp of hikes into the July policy meeting and 213bp of additional hikes into the December FOMC, where policy rate is expected to peak.  Bund, and gilt curves bear-flatten; UST 2s10s yield-curve inversion deepens. Peripheral spreads widen to Germany with 10y BTP/Bund adding 9.7bps to 209.2bps. Bitcoin is bid but has reverted below the USD 20k mark once more, despite a brief foray to USD 20.4k initial highs. In commodities, crude futures decline. WTI trades within Wednesday’s range, falling 2.3% to trade near $94.08. Brent falls 1.9% near $97.66. Most base metals trade in the red; LME nickel falls 5.1%, underperforming peers. Spot gold falls roughly $19 to trade near $1,717/oz. Spot silver loses 1.4% near $19. To the day ahead now, data releases include the US PPI reading for June and the weekly initial jobless claims. Otherwise, central bank speakers include the Fed’s Waller and the ECB’s Centeno. Earnings releases include JPMorgan Chase and Morgan Stanley. The European Commission will be publishing their latest economic forecasts, and UK Conservative MPs will hold another ballot on their next leader. Market Snapshot S&P 500 futures down 0.9% to 3,768.75 MXAP down 0.6% to 154.55 MXAPJ down 0.2% to 510.23 Nikkei up 0.6% to 26,643.39 Topix up 0.2% to 1,893.13 Hang Seng Index down 0.2% to 20,751.21 Shanghai Composite little changed at 3,281.74 Sensex down 0.4% to 53,290.44 Australia S&P/ASX 200 up 0.4% to 6,650.62 Kospi down 0.3% to 2,322.32 STOXX Europe 600 down 0.7% to 409.97 German 10Y yield little changed at 1.24% Euro down 0.4% to $1.0023 Gold spot down 1.0% to $1,717.77 US Dollar Index up 0.57% to 108.57 Top Overnight News from Bloomberg The three-month euribor’s seven-year foray in to negative territory ended as money markets prepared for the ECB’s first rate hike in more than a decade Italy’s Five Star Movement will refuse to back Mario Draghi’s government in a confidence vote on Thursday, raising the prospect that the prime minister offers to resign, potentially leading to an early election. A financial- market crisis focused on Italy might augur the worst turmoil in the history of the euro Singapore’s central bank unexpectedly tightened monetary policy on Thursday, its second surprise move this year, as rising inflation fanned the risk of economic contraction China will take further measures to stabilize employment as the country grapples with a flagging economy battered by the Covid-19 pandemic and a crumbling real-estate market Chinese regulators have been asked to exercise greater caution when it comes to reviewing new overseas spending and investment plans amid concerns among senior leaders that higher US interest rates could spur capital outflows, according to people familiar with the matter The euro area’s rebound from the pandemic will be weaker than anticipated while inflation will be faster because of Russia’s war in Ukraine, according to draft projections by the European Commission Central banks across the globe are speeding up interest-rate hikes, seeking to crush an inflation surge partly of their own making. Wednesday saw Canada’s central bank hike a greater-than-expected full percentage point following two half-point moves, South Korea raise by a half point after several quarter-point moves, and New Zealand increase by a half point for a third straight meeting A more detailed look at global markets courtesy of Newsquawk Asia-pac stocks mostly traded with cautious gains after the recent hotter-than-expected US inflation data which printed at a fresh 40-year high and spurred hawkish market pricing with Fed Fund Rate futures leaning towards a 100bps Fed rate hike this month. ASX 200 was kept afloat amid strength in the commodity-related sectors although gains were capped as blockbuster jobs data raised the odds for the RBA to deliver a more aggressive 75bps hike at its next meeting. Nikkei 225 outperformed its major counterparts on the back of further currency depreciation. Hang Seng and Shanghai Comp. were initially pressured by weakness in the property sector although the downside in the broader market was cushioned and eventually reversed after recent policy support pledges in which the PBoC said it will step up support for the real economy and deepen interest rate reforms. STI and PSEi were the laggards and traded in the red after both the Monetary Authority of Singapore and the Philippines Central Bank tightened their monetary policies in unscheduled announcements. Top Asian News Tokyo is expected to raise the COVID warning to its highest level, according to FNN. Monetary Authority of Singapore announced to re-centre the mid-point of the SGD NEER policy band up to the prevailing level in an unscheduled meeting, while there was no change to the slope and width of the band. MAS said the move is to help slow the momentum of inflation and that inflation pressures are to remain elevated in months ahead, while it is appropriate to further tighten monetary policy further. Philippines Central Bank raised its key rates by 75bps to 3.25% in an unscheduled policy decision. Philippines Central Bank Governor said they recognised that a significant further tightening of monetary policy was warranted by sustained broadening price pressures, while they are ready to take further action and said the economy can accommodate further tightening. Chinese authorities reportedly met with banks regarding the mortgage payment boycott, according to Bloomberg sources European bourses are pressured across the board, Euro Stoxx 50 -0.8%, but off worst levels while the FTSE MIB -1.9% languishes on domestic turmoil. Sectors are essentially all in the red with Tech giving up its initial TSMC-driven strength and succumbing to risk/yield moves. Stateside, futures are off lows but in-fitting European benchmarks awaiting guidance from the key banking names due to report imminently. TSMC (2330 TT) Q2 (TWD): Net Profit 237bln (exp. 219bln), Revenue 534bln (prev. 372bln YY), Operating Income 262bln (prev. 145bln YY); excess inventory in chip supply will take a few quarters to rebalance; expect capacity to remain tight this year; expects some capex this year to be pushed into next year due to tool supply issues. 2022 Capex closer to the lower end of prior guidance of USD 40-44bln. 2023 will see more of a typical downcycle in chip demand, unlike the large downcycle in 2008. Intel (INTC) has reportedly informed customers it will increase prices on a majority of its microprocessors and peripheral chip products later this year, citing rising costs, via Nikkei; Increases have not been finalized, likely to range from a minimal single-digit increase to over 10% or 20% in some cases, according to sources. Top European News The first round of the Conservative leadership ballot saw Sunak, Mordaunt, Truss, Tugendhat, Badenoch, and Braverman make it to the next round, while Hunt and Zahawi were eliminated. Italy's 5-Star leader Conte said the party will not participate in the confidence vote on Thursday, according to Reuters. EU draft report cut 2022 EU GDP forecast to 2.6% from 2.8% and for 2023 to 1.4% from 2.3%. FX Yen yields to inevitable further widening in BoJ/Fed policy rates as markets place 2/3 probability on 100bp July FOMC hike; USD/JPY jumps through 139.00 towards October 1998 peak at 139.50, but pares back below 1.48bln option expiry interest at the round number. DXY rebounds firmly after post-US CPI retreat to set new YTD peak before fading, index tops out at 108.650 vs 108.190 bottom and 107.470 midweek low. Loonie loses all and more BoC boost as oil tanks, USD/CAD close to 1.3100 compared to Wednesday's sub-1.2950 trough. Euro is still defiant above parity vs the Buck but facing Italian political risk via a vote of no confidence. Aussie underpinned by upbeat labour market report and more speculation that China may lift embargo on coal, UAD/USD holds around 0.6750. Kiwi flanked by decent option expiry interest either side of 0.6100. Yuan unable to avoid broad Dollar revival, as CNH slips under 200 WMA circa 6.7330. Fixed Income Debt under renewed pressure post-US CPI as 100bp hike odds continue to shorten and keep curves in bear-flattening mode Bunds down to 151.21 from 153.01 at best, Gilts reverse from 116.05-115.14 and 10-year T-note retreats to 118-10+ from 118-30 Italian bonds underperform awaiting no-confidence vote in PM Draghi's coalition Government Commodities The complex is broadly pressured amid the general risk tone and ongoing USD strength, crude benchmarks lower by over USD 2.00/bbl. China is said to be mulling ending the Australian coal ban on Russian supply fears, according to Bloomberg. White House Economic Adviser Rouse said President Biden is focused on getting more oil into the market and his Saudi visit will help get more oil into the market. Spot gold is dented on the USD move which is far outweighing any possible haven allure thus far; base metals broadly lower. US Event Calendar 08:30: June PPI Final Demand YoY, est. 10.7%, prior 10.8%; MoM, est. 0.8%, prior 0.8% 08:30: June PPI Ex Food and Energy YoY, est. 8.2%, prior 8.3%; MoM, est. 0.5%, prior 0.5% 08:30: June PPI Ex Food, Energy, Trade YoY, est. 6.6%, prior 6.8%; MoM, est. 0.5%, prior 0.5% 08:30: July Initial Jobless Claims, est. 235,000, prior 235,000; Continuing Claims, est. 1.38m, prior 1.38m DB's Jim Reid concludes the overnight wrap There are just 9 days to go until the happiest day of my life. It’ll be the most expensive too but I’m trying not to dwell on that. However, the final balances were all paid at the weekend, so I’ve figured that in purely accounting terms the wedding is now a sunk cost. For those who’ve been asking, preparation is going well. At long last we finally chose our first dance with less than a month to spare. But there’s still a few more things left on the agenda, including wearing in my new shoes. So if you saw a guy walking to the supermarket yesterday evening in casual summer clothes with oddly formal footwear, that might have been me. For markets, the agenda yesterday was set by another stronger-than-expected US CPI print, which led to a sizeable reaction across asset classes as investors pondered whether it might lead the Fed to move even more aggressively than anticipated. In terms of the details, there wasn’t much good news at all for those hoping to see signs of weaker price pressures, with the headline CPI reading coming in at a monthly +1.3% in June (vs. +1.1% expected), which is the highest monthly reading since September 2005. There was little respite on core CPI either, which came in at its fastest in a year at +0.7% (vs. +0.5% expected). And on top of that, the Cleveland Fed’s Trimmed-Mean measure (which removes the biggest outliers in either direction) rose to +0.80% on the month, which is the fastest since that series began in 1983, and just shows how broad inflationary pressures have become. Thanks to the strength of the monthly print, year-on-year CPI rose to its highest level since 1981, at +9.1% (vs. +8.8% expected). And in turn, that’s led to serious speculation among investors that the Fed could hike by 100bps at their next meeting, which would be even faster than the 75bps we saw in June that itself was the biggest hike since 1994. Fed funds futures for the July meeting are pricing in a growing chance of that, with the hike being priced for that meeting going up from +74.5bps on Tuesday to +90.7bps by the close yesterday, to +92.0bps this morning. So that’s noticeably closer to 100bps than 75bps now. We did hear from a few Fed speakers yesterday after the release, including Atlanta Fed President Bostic, who said that “Everything is in play”, whilst Cleveland Fed President Mester referred to the report as “uniformly bad – there was no good news in that report at all”. All eyes will be on the remaining FOMC speakers over the next couple of days and what they have to say about a potential 100bps move. Remember this is also the last chance we’ll get to hear from them ahead of the decision, since the blackout period ahead of their next meeting begins on Saturday. With investors pricing in an increasingly front-loaded hiking cycle by the Fed, that led to a further bout of yield curve steepening, with the 2yr Treasury yield up +10.6bps to 3.15%, whilst the 10yr yield came down -3.5bps to 2.93%. That left the 2s10s yield curve at an inverted -22.7bps, which is the most inverted that it’s been at any point in this cycle, and this morning it’s inverted even further to -24.9bps, which is the most inverted since 2000. The prospect that the Fed might make a larger than expected move was only bolstered by what then happened in Canada, where the central bank hiked by a surprise +100bps that marked their most rapid increase since 1998. In his statement, BoC Governor Macklem said that “By front-loading interest rate increases now, we are trying to avoid the need for ever higher interest rates down the road”. After the CPI release came out, the prospect of more aggressive tightening from the Fed sent the Euro down to parity against the dollar for the first time since 2002, hitting an intraday low of $0.9998, although it’s since recovered and is trading this morning at $1.0033. To be fair, the CPI report was merely the catalyst for the final move lower, since the Euro’s decline had been building for some time, not least with the threat of a Russian gas cut-off looming. As our FX strategists have pointed out, parity in itself is more psychologically significant rather than economically significant, but the significant weakening over recent weeks will add to inflationary pressures, and an ECB spokesman said that although the ECB “does not target a particular exchange rate”, they mentioned how “we are always attentive to the impact of the exchange rate on inflation, in line with our mandate for price stability”. In spite of the turbulence elsewhere, US equities managed to avoid a major slump yesterday, with the S&P 500 recovering from its initial losses of -1.56% to only close -0.45% lower. Meanwhile the NASDAQ (-0.15%) managed to modestly outperform, as did the small-cap Russell 2000 (-0.12%). In Europe however, there was a much weaker performance and the STOXX 600 shed -1.01% along with other indices on the continent, including German’s DAX (-1.16%). Sovereign bond yields also moved higher across much of the Euro Area, with those on 10yr bunds (+1.1bps), OATs (+1.1bps) and BTPs (+2.4bps) all rising on the day. Overnight in Asia, equity markets have fluctuating this morning with the major indices opening lower before recovering. As we go to press, the Nikkei (+0.70%), the Hang Seng (+0.17%), Shanghai Composite (+0.31%), CSI (+0.44%) and Kospi (+0.10%) are all in positive territory. Meanwhile in Australia, the S&P/ASX 200 (+0.45%) has also gained following the release of strong employment data, with the unemployment rate down to a post-1974 low of 3.5% in June (vs. 3.8% expected). Looking forward however, US equity futures have posted modest losses in early trading with contracts on the S&P 500 (-0.10%) and the NASDAQ 100 (-0.17%) slightly lower. Otherwise overnight, oil prices have rebounded somewhat, with Brent Crude moving just back above $100/bbl. Here in the UK, we had the first ballot of MPs in the Conservative leadership contest yesterday, which will also decide the country’s next Prime Minister. Of the 8 candidates on the ballot, former Chancellor Rishi Sunak came out on top with 88 votes, followed by trade minister Penny Mordaunt on 67 votes, and Foreign Secretary Liz Truss on 50 votes. At the other end, both former Foreign Secretary Jeremy Hunt and Chancellor Nadhim Zahawi were eliminated for not achieving the 30 votes required, so there are just 6 candidates left now. Today will see another ballot take place, and the candidate with the lowest votes will be eliminated. Looking at yesterday’s other data, UK GDP grew by +0.5% in May (vs. +0.1% expected), and the decline in April was positively revised to show a -0.2% contraction (vs. -0.3% previously). Separately in the Euro Area, industrial production in May grew by +0.8% (vs. +0.3% expected). To the day ahead now, and data releases include the US PPI reading for June and the weekly initial jobless claims. Otherwise, central bank speakers include the Fed’s Waller and the ECB’s Centeno. Earnings releases include JPMorgan Chase and Morgan Stanley. The European Commission will be publishing their latest economic forecasts, and UK Conservative MPs will hold another ballot on their next leader.   Tyler Durden Thu, 07/14/2022 - 08:24.....»»

Category: blogSource: zerohedgeJul 14th, 2022

Futures Rise As Dip Buyers Emerge To Cap Best Week Since Mid-March

Futures Rise As Dip Buyers Emerge To Cap Best Week Since Mid-March Unless stocks crater today, and the S&P tumbles by 4.3%, the streak of seven consecutive weekly declines in the S&P is about to end... ... as US stock futures rose again on Friday, their third consecutive gain, setting up the underlying indexes for the first strong weekly finish since late March on signs consumers remain resilient despite inflationary pressures, as upbeat earnings from Alibaba and Baidu eased some fears on the economic impact of China’s Covid lockdowns, and as investors (mostly retail) have staged a cautious return to the market hoping that the selloff earlier this month left valuations at bargain levels. Nasdaq 100 contracts rose 0.5% by 7:15 a.m. in New York, while S&P 500 futures were up 0.4%. Still, even after the recent rout, upside may be limited as the S&P 500’s 12-month fwd P/E ratio is now near its 10-year average. Among notable moves in premarket trading, Gap Inc. shares sank as much as 17% as analysts after analysts said that the retailer’s guidance cut was worse than expected, prompting brokers to lower their targets and downgrade the stock given a worsening macroeconomic environment could trigger further bad news. China's Uber, Didi Chuxing, jumped after a Bloomberg News report that state-owned automaker China FAW Group is considering acquiring a significant stake in the ride-hailing company. Zscaler Inc. rose after the security software company reported results above expectations.  Here are some other notable premarket movers: Gap (GPS US) shares dropped as much as 17% in US premarket trading with analysts saying that the retailer’s guidance cut was more than expected, prompting brokers to lower their targets and downgrade the stock given a worsening macroeconomic environment could trigger further bad news. Costco (COST US) shares dropped 2.1% in US after-hours trading on Thursday. While Costco’s margins disappointed analysts, brokers were generally positive on how the wholesale retailer is navigating an environment with rising inflation by controlling expenses. Zscaler (ZS US) shares rose 2% in extended trading on Thursday, after the security software company reported third- quarter results that beat expectations and raised its full-year forecast. Analysts lauded strength in multi-product deals. Marvell Technology (MRVL US) shares climbed 3.4% in US postmarket trading after results. Analysts highlighted that the semiconductor maker is seeing strength across key markets, in particular across data center and carrier infrastructure. 23andMe Holding Co. (ME US) dropped 8.3% in postmarket trading Thursday. It is in a “tough spot,” Citi says in note after the consumer genetics firm gave a fiscal 2023 revenue forecast that missed expectations. Workday (WDAY US) shares fell 9% in extended trading on Thursday, after the software company reported adjusted first-quarter earnings that missed expectations. Analysts noted that software deals were pushed out of the quarter and cut their price targets as they factored in the increased global uncertainty. The latest round of retail earnings have restored some confidence in consumer demand, lifting appetite for risk assets, while speculation is growing that the Federal Reserve will pause its rate hikes later this year as inflation shows signs of peaking. Still, Citigroup strategists on Friday cut their recommendation on US stocks to neutral on the risk of a recession, joining an increasing number of banks in warning of a growth slowdown. The path for the Federal Reserve to successfully bring inflation down while keeping the rate of economic growth above zero is narrow, according to Mark Haefele, chief investment officer at UBS Global Wealth Management. “If Fed policymakers underestimate the strength of the US economy, we face an extended period of above-target inflation. If they overestimate it, we face a recession. And we can’t know with great conviction which path we’re on,” he wrote in a note. Global stock funds saw their biggest inflows in 10 weeks, led by US stocks, according to EPFR data, as cheaper valuations lured buyers after a steep selloff on recession fears. The selloff made valuations attractive and enticed investors back into a market still shadowed by worries about inflation and higher interest rates, China’s downbeat economic outlook and the war in Ukraine. “We may see a little bit more stability here because we have repriced the stocks so much already,” Anastasia Amoroso, iCapital chief investment strategist, said on Bloomberg Television. “In the next three to six months it’s still going to be a constrained market environment.” Meanwhile, China-US tensions are once again being played out after direct comments from Secretary of State Antony Blinken aimed at Chinese President Xi Jinping. And in a fresh challenge to Beijing, the US and Taiwan are planning to announce negotiations to deepen economic ties. And elseshwere, as the Russins war in Ukraine approaches 100 days, the US may announce a new package of aid for Kyiv as soon as next week that would include long-range rocket systems and other advanced weapons. Boris Johnson urged further military support for Ukraine, including sending it more offensive weapons such as Multiple Launch Rocket Systems that can strike targets from much further away. Russia’s efforts to avoid its first foreign default in a century are back in focus on Friday, when investors are supposed to receive about $100 million in interest on Russian debt. Turning back to markets, consumer and technology sectors led gains in Europe’s Stoxx 600 which rose 0.9%, and was headed for its best weekly advance since mid-March, while utilities and energy shared lagged after the UK government announced windfall tax plans on oil and gas companies on Thursday. BP Plc said it will look again at its plans in the country. Here are some of the more notable movers in Europe: Cantargia gains as much as 23%, the largest intraday rise since December, after releasing three research updates late Thursday. The interim readout for the company’s nadunolimab (CAN04), used in combination with gemcitabine and nab-paclitaxel as a first line treatment of PDAC, a type of pancreatic cancer, was the most interesting of the data releases, according Kempen. FirstGroup shares jump as much as 9.8%, extending the gains from yesterday’s confirmation that the public transport operator received an unsolicited takeover approach from I Squared. Richemont shares rise as much as 8.3%, heading for their best weekly advance since November, pushing the Swiss Market Index higher as dip buyers returned more broadly this week. European miners advance for a third day, outperforming all other sectors on the Stoxx 600 on Friday as iron ore futures climb and metals posted broad gains. Hapag-Lloyd falls as much as 7.1% after Citi cut the recommendation to neutral from buy due to valuation versus peers. In note on European shipping, broker says it expects the supply and demand dynamics to remain favorable in the near term. Rieter Holding falls as much as 5.4% as Baader Helvea downgrades its recommendation to reduce from add after the manufacturer of chemical fiber systems said that it’s seeing a challenging first half. Earlier in the session, Asian stocks also advanced as upbeat earnings from Alibaba and Baidu eased some fears on the economic impact of China’s Covid lockdowns and fueled risk-on sentiment. The MSCI Asia Pacific Index rose 1.6%, poised for its first gain in four sessions, led by consumer discretionary and technology shares. Most markets in the region were up, led by Hong Kong.  Alibaba and Baidu both delivered better-than-expected quarterly sales growth, providing investors with some relief after Tencent’s recent lackluster report and amid concerns over China’s virus measure and regulatory crackdowns. The Hang Seng Tech Index, which tracks the nation’s tech giants listed in Hong Kong, surged 3.8%. Asian equities have gained about 0.7% this week, set for a back-to-back weekly advance as dip buyers emerged. The regional MSCI benchmark is still down about 14% this year amid ongoing market concerns over global inflation and higher US interest rates, China’s economic outlook and the war in Ukraine. “The risk of a bull trap cannot be dismissed,” Vishnu Varathan, the head of economics and strategy at Mizuho Bank, wrote in a note. “Bear markets are famous for the pockets of relief rallies,” and increasing strains on liquidity in the coming quarters “may not pass without pain.” Japan’s stocks likewise advanced as the nation prepared to reopen to foreign tourists and China’s tech shares jumped.    The Topix rose 0.5% to 1,887.30 as of the 3pm close in Tokyo, while the Nikkei 225 advanced 0.7% to 26,781.68. Tokyo Electron Ltd. contributed the most to the Topix’s gain, increasing 3.2%. Out of 2,171 shares in the index, 1,480 rose and 615 fell, while 76 were unchanged In Australia, the S&P/ASX 200 index rose 1.1% to close at 7,182.70, the highest level since May 6, led by energy and consumer discretionary shares. Woodside Energy Group was among the biggest gainers as US crude and gasoline stockpiles showed signs of continuing decline ahead of the summer driving season. Appen was the top decliner after saying that Telus revoked its indicative proposal for a takeover. In New Zealand, the S&P/NZX 50 index fell 0.3% to 11,065.15 In FX, the Bloomberg Dollar Spot Index slumped as the dollar was steady to weaker against all of its Group-of-10 peers. Treasuries were steady across the curve. The euro inched up to touch a fresh one- month high of 1.0765 before paring. The bund yield curve bull- flattened slightly, drawing the 10-year yield away from 1%. Risk- sensitive Antipodean and Scandinavian currencies led gains. The Australian dollar climbed as a decent retail sales print brightened the outlook and a drop in the greenback triggered buy-stops. Benchmark bonds slipped. Australian retail sales rose 0.9% m/m in April vs estimate +1% and prior +1.6%. The pound ticked higher, touching its highest level in a month against the dollar, while gilts advanced. Chancellor of the Exchequer Rishi Sunak said that his package of support for the UK economy will have a “minimal” impact on inflation. The yen advanced for a second day as lower Treasury yields weighed on the dollar. Japanese bonds rise after being sold off on Thursday In rates, Treasuries were steady, following gains in European markets where bull-flattening was observed across bunds and gilts. Yields were richer by 1bp-3bp across the curve, the 10-year yield dropped by ~2bp to 2.72%, underperforming bunds by 1.5bp, gilts by ~3bp. IG dollar issuance slate still blank in what has so far been the slowest week of the year for new deals; next week’s calendar is expected to total $25b- $30b. Focal points for US session include several economic data releases including April personal income/spending with PCE deflator. Sifma recommended 2pm close of trading for dollar-denominated fixed income ahead of US holiday weekend.    In commodities, WTI drifts 0.7% higher to trade below $115. Spot gold rises roughly $7 to trade at $1,858/oz. Most base metals are in the green; LME nickel rises 6.6%, outperforming peers. Looking to the day ahead, and data releases include US personal income and personal spending for April, as well as the preliminary wholesale inventories for that month, and the final University of Michigan consumer sentiment index for May. In the Euro Area, there’s also the M3 money supply for April. Otherwise, central bank speakers include ECB Chief Economist Lane. Market Snapshot S&P 500 futures up 0.3% to 4,068.25 STOXX Europe 600 up 0.7% to 440.64 MXAP up 1.6% to 165.89 MXAPJ up 2.1% to 542.44 Nikkei up 0.7% to 26,781.68 Topix up 0.5% to 1,887.30 Hang Seng Index up 2.9% to 20,697.36 Shanghai Composite up 0.2% to 3,130.24 Sensex up 1.2% to 54,919.92 Australia S&P/ASX 200 up 1.1% to 7,182.71 Kospi up 1.0% to 2,638.05 German 10Y yield little changed at 0.99% Euro up 0.1% to $1.0737 Brent Futures up 0.4% to $117.91/bbl Gold spot up 0.5% to $1,859.48 U.S. Dollar Index down 0.16% to 101.67 Top Overnight News from Bloomberg The path for Russia to keep sidestepping its first foreign default in a century is turning more onerous as another coupon comes due on the warring nation’s debt. Investors are supposed to receive about $100 million of interest on Russian foreign debt in their accounts by Friday, payments President Vladimir Putin’s government says it has already made China’s oil trading giant Unipec has significantly increased the number of hired tankers to ship a key crude from eastern Russia A central bank legal proposal envisages Russian eurobond issuers placing “substitute” bonds in order to ensure debt payments come through to local investors, Interfax reported The US and Taiwan are planning to announce negotiations to deepen economic ties, people familiar with the matter said, in a fresh challenge to Beijing, which has cautioned Washington on its relationship with the island. Profits at Chinese industrial firms shrank last month for the first time in two years as Covid outbreaks and lockdowns disrupted factory production, transport logistics and sales “The process of increasing interest rates should be gradual,” ECB Governing Council member Pablo Hernandez de Cos comments in op- ed in Expansion. “The aim is to avoid abrupt movements, which could be particularly damaging in a context of high uncertainty such as the current one” The RBA is poised for its first review in a generation as new Treasurer Jim Chalmers makes good on a pledge to ensure the nation’s monetary and fiscal regimes are fit for purpose The UK signed its first trade agreement with a US state, amid warnings that Prime Minister Boris Johnson’s stance on Brexit is hindering progress on a broader deal with Joe Biden’s administration A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks took impetus from the risk-on mood on Wall St where all major indices were lifted amid month-end flows and encouraging retailer earnings.  ASX 200 was led higher by outperformance in the commodity and resources industries, while consumer stocks were mixed after Retail Sales printed in line with expectations, albeit at a slowdown from the prior month. Nikkei 225 traded positively but with upside capped by a mixed currency and weakness in energy and power names after increases in international prices and with the government looking to address the tight energy market. Hang Seng and Shanghai Comp were firmer with notable outperformance in Hong Kong amid a euphoric tech sector after earnings from Alibaba and Baidu topped estimates which also inspired the NASDAQ Golden Dragon China Index during the prior US session, while advances in the mainland were moderated by the contraction in April Industrial Profits and after Premier Li’s unpublished comments from Wednesday’s emergency meeting came to light in which he warned of dire consequences for the economy. Top Asian News China’s State Council will seek specific implementation rules by May 31st regarding necessary measures at all levels of government and will dispatch inspection teams to all 31 provinces, municipalities and autonomous regions to oversee the rollout amid an urgent need for national economic mobilisation, according to SGH Macro Advisors. US is seeking to hold economic discussions with Taiwan in the latest test with China, while supply chains and agriculture are said to be among the topics, according to Bloomberg. Furthermore, reports noted that bilateral economic talks will be announced in the upcoming weeks. Evergrande (3333 HK) is reportedly considering repaying offshore bondholders in instalments, according to Reuters sources; discussing giving the option of converting part of debt into equity of property management and EV units. China's Health Official says some areas along the Jilin border report local infections without a clear source, close attention should be paid to the risk of importing the virus; COVID infections show a trend of gradual spread from border to inland areas, via Reuters European bourses are firmer, Euro Stoxx 50 +0.9%, drawing impetus from APAC strength into month-end with catalysts thin thus far. Stateside, futures are supported across the board with familiar themes in play pre-PCE Price Index for insight into the 'peak' inflation narrative; ES +0.3%. Note, the FTSE 100 Unch. is the mornings underperformer amid pressure in energy names after Chancellor Sunak's windfall tax announcement on Thursday. DiDi (DIDI) has reportedly drawn interest from FAW Group, regarding a stake purchase, according to Bloomberg. +7.5% in the pre-market Top European News UK Oil Windfall Tax Prompts BP to Review Investment Plans; UK Energy Stocks Extend Windfall Declines as Retailers Gain Richemont Leads Swiss Stocks Higher as Dip Buyers Return Hapag-Lloyd Drops; Cut to Neutral at Citi on Valuation Big Dividend Payers May Be Next After UK Windfall Tax on Energy FX Greenback grinds higher ahead of PCE inflation metrics with month end rebalancing flows providing impetus, DXY bounces from fresh WTD base just under 101.500 to 101.800. Kiwi and Aussie propped by bounce in commodities and Loonie protected by further gains in crude; NZD/USD tests Fib retracement at 0.7129, AUD/USD eyes 0.7150 and USD/CAD probes 1.2750. Big option expiries in the mix and potentially supportive for the Dollar into long US holiday weekend, +1bln rolling off at NY cut not far from spot in EUR/USD, USD/JPY, AUD/USD and USD/CAD. Rand firmer as Gold touches Usd 1860/oz after 200 DMA breach, USD/ZAR below 15.7000. Fixed Income Debt futures on a firmer footing ahead of US PCE price metrics, but some way below weekly peaks. Bunds sub-154.00, Gilts under 119.00 and 10 year T-note below 121-00. Curves a tad flatter following hot reception for 7 year US issuance. Commodities Crude benchmarks are underpinned, but off best levels, by broader sentiment and initial USD weakness going into a long US weekend with Memorial Day touted as the driving seasons commencement. WTI July and Brent August, at best, were in proximity to USD 115/bbl vs troughs of USD 113.61/bbl and USD 113.77/bbl respectively. US Treasury is reportedly expected to renew Chevron’s (CVX) license to operate in Venezuela as soon as Friday, according to Reuters citing sources. China's State Planner has approved a coal mine in the Shanxi area to bolster annual output to 12mln tonnes per annum from 8mln; investment of CNY 5.35bln, via Reuters. Spot gold is steady and holding onto the bulk of overnight upside after breaching the 21-DMA at USD 1850.80/oz; USD 1860.19/oz peak, thus far. US Event Calendar 08:30: April Advance Goods Trade Balance, est. -$114.8b, prior -$125.3b, revised -$127.1b 08:30: April Retail Inventories MoM, est. 2.0%, prior 2.0% April Wholesale Inventories MoM, est. 2.0%, prior 2.3% 08:30: April Personal Income, est. 0.5%, prior 0.5%; April Personal Spending, est. 0.8%, prior 1.1% 08:30: April PCE Deflator MoM, est. 0.2%, prior 0.9%; PCE Deflator YoY, est. 6.2%, prior 6.6% April PCE Core Deflator MoM, est. 0.3%, prior 0.3%; PCE Core Deflator YoY, est. 4.9%, prior 5.2% April Real Personal Spending, est. 0.7%, prior 0.2% 10:00: May U. of Mich. Current Conditions, est. 63.6, prior 63.6; Expectations, est. 56.3, prior 56.3; Sentiment, est. 59.1, prior 59.1 10:00: May U. of Mich. 1 Yr Inflation, est. 5.4%, prior 5.4%; 5-10 Yr Inflation, prior 3.0% DB's Jim Reid concludes the overnight wrap A reminder that it’s your last chance to answer our latest monthly survey, where we try to ask questions that aren’t easy to derive from market pricing. This time we ask if you think the Fed would be willing to push the economy into recession in order to get inflation back to target. We also ask whether you think there are still bubbles in markets and whether equities have bottomed out yet. And there’s another on which is the best asset class to hedge against inflation. The more people that fill it in the more useful so all help from readers is very welcome. The link is here. I did have tickets available for tomorrow night's Champions League final but there is a big 36 hole golf tournament at my club so I decided that at my age you never know when your body will fail next so playing sport now pips watching it live. So I'll be playing golf all day, trying to rescue my marriage for an hour when I get home, and then blaring out the final on the TV at home with a couple of glasses of wine for good measure. I can't honestly think of a better day. However I may come last and Liverpool may lose so let's see what happens! The market comeback this week is on a par with some of Madrid's remarkable ones this year and indeed it’s been another strong performance over the last 24 hours, with better-than-expected outlooks from US retailers helping to bolster sentiment, coupled with growing hopes that the Fed won’t take policy much into restrictive territory, if at all. Those developments helped the S&P 500 to post a +1.99% advance yesterday, bringing its gains for the week to +4.01%, and means we should finally be on the verge of ending a run of 7 consecutive weekly losses. Obviously it’s not impossible things could end up in negative territory given recent volatility, and it was only last week the index posted a one-day decline of more than -4%, but it would still take a massive slump today to get an 8th consecutive week in the red for only the third time since the Great Depression. That advance grew stronger as the day went on, with S&P futures having actually been negative when we went to press yesterday. But sentiment was aided by a number of positive earnings developments, with Macy’s (+19.31%) boosting its adjusted EPS guidance before the US open, whilst the discount retailers Dollar Tree (+21.87%) and Dollar General (+13.72%) both surged as well thanks to decent reports of their own. That helped consumer discretionary (+4.78%) to be the top performing sector in the S&P, and in fact Dollar Tree was the top performing company in the entire index. Cyclicals were the outperformers, but defensives also shared in the advance that saw around 90% of the index’s members move higher on the day. As well as that news on the retail side, risk appetite has been further supported by growing speculation that the Fed won’t be as aggressive in hiking rates as had been speculated just a few weeks ago. I'm not sure I agree with that conclusion but if you look at the futures-implied rate by the December 2022 meeting of 2.64%, that is some way down from its peak of 2.88% back on May 3rd, and in fact means that markets have now taken out just shy of one 25bp hike from the rate implied by year end, which makes a change from that pretty consistent move higher we’ve seen over recent months. Yesterday also brought fresh signs that this re-pricing is beginning to filter its way through to the real economy, with data from Freddie Mac showing that the average rate for a 30-year mortgage fell to 5.10% last week, down from 5.25% the week before. For reference that’s the biggest weekly decline since April 2020, and comes on the back of recent housing data that’s underwhelmed against the backdrop of higher rates. There was another report fitting that pattern yesterday too, with pending home sales for April dropping by a larger than expected -3.9% (vs. -2.1% expected). But as with the retail outlooks, the more timely data was much more positive, with the weekly initial jobless claims falling to 210k (vs. 215k expected) in the week ending May 21, whilst the Kansas City Fed’s manufacturing index for May came in at 23 (vs. 15 expected). Treasuries swung back and forth against this backdrop, but ultimately the more bullish outlook led to a small steepening in the curve, with the 2yr yield down -1.6bps as 10yr yields were essentially flat at 2.75%. In a change from recent weeks, breakevens marched higher despite the little changed headline, with the 10yr breakeven up +7.0bps to come off its two-month low the previous day. But to be fair, that came amidst a big surge in oil prices after US data showed gasoline stockpiles fell to their lowest seasonal level since 2014, with Brent Crude (+2.96%) up to a 2-month high of $117.40/bbl, whilst WTI (+3.41%) rose to $114.09/bbl. European markets followed a pretty similar pattern to the US, with the STOXX 600 advancing +0.78% on the day. However, utilities (-1.12%) were the worst-performing after the UK government moved to impose a temporary windfall tax on oil and gas firms’ profits at a rate of 25%. That came as part of a wider package of measures to help with the cost of living, adding up to £15bn in total. They included a one-off payment of £650 to 8mn households in receipt of state benefits, with separate payments of £300 to pensioner households and £150 to those receiving disability benefits. There was also a doubling in the energy bills discount from £200 to £400, whilst the requirement to pay it back over five years has been removed as well. See Sanjay Raja’s blog on it here and where he also compares the measures to similar ones seen in the big 4 EuroArea economies. With more fiscal spending in the pipeline, UK gilts underperformed their counterparts elsewhere in Europe, with 10yr yields ending the day up +5.9bps. Those on bunds (+4.6bps) and OATs (+3.2bps) also rose too, but the broader risk-on tone led to a tightening in peripheral spreads, with the gap between 10yr BTPs over bunds falling -10.4bps yesterday to 189bps. There was a similar pattern on the credit side, with iTraxx crossover coming down -23.9bps to 439bps, which was its biggest daily decline in nearly 2 months. Asian equity markets are joining in the rally this morning with the Hang Seng rising +2.93% as Chinese listed tech stocks are witnessing big gains after Alibaba (+12.21%) posted better than expected Q4 earnings yesterday. Mainland Chinese stocks are also trading higher with the Shanghai Composite (+0.52%) and CSI (+0.63%) up. Elsewhere, the Nikkei (+0.63%) and Kospi (+0.89%) are also in the green. Outside of Asia, futures contracts on the S&P 500 (-0.11%) and NASDAQ 100 (-0.14%) are seeing mild losses. Data released earlier showed that Tokyo’s core CPI rose +1.9% y/y in May versus +2.0% expected. Core core was +0.9% y/y as expected with nothing here at the moment to change the BoJ's stance. Elsewhere, China’s industrial profits (-8.5% y/y) shrank at the fastest pace in two years in April, swinging from a +12.2% gain in March. On the geopolitical front, we heard from US Secretary of State Blinken yesterday, who gave a significant speech on the Biden Administration’s China policy. Blinken zoomed out to give a view of the forest from the trees, noting that the Russia-Ukraine conflict was not as strategically important as America’s relationship with China over the long-run. He offered a three pillar strategy for managing the relationship with China that involved investing in US competitiveness, aligning strategy with allies to enhance effectiveness, and to compete with China across economic, military, and technological frontiers. He noted the countries’ two different political systems need not impair connection between its peoples, or inhibit dialogue. Staying on the US-China front but switching gears, a bi-partisan group of US senators sent a letter to President Biden urging him to keep tariffs on China, to improve the US’s negotiating position in future deals, pouring cold water on the prospects for tariff relief to provide a temporary salve to raging price pressures. To the day ahead, and data releases include US personal income and personal spending for April, as well as the preliminary wholesale inventories for that month, and the final University of Michigan consumer sentiment index for May. In the Euro Area, there’s also the M3 money supply for April. Otherwise, central bank speakers include ECB Chief Economist Lane.   Tyler Durden Fri, 05/27/2022 - 07:54.....»»

Category: blogSource: zerohedgeMay 27th, 2022

US stock futures slip as Netflix tumbles 27%, and rising bond yields unnerve investors

The IMF's sharp downgrade of its global growth predictions on Tuesday was also weighing on investors' minds. Netflix shed subscribers in the first quarter.Rafael Henrique/SOPA Images/LightRocket via Getty Images US stock futures slipped Wednesday after Netflix earnings disappointed and as bond yield gains unnerved investors. Netflix said its subscriber numbers fell for the first time in a decade in the first quarter, sending the stock tumbling. The IMF sharply downgraded its predictions for global growth, as the Ukraine war clouds the outlook. US stock futures slipped Wednesday as investors digested downbeat earnings from Netflix and a sharp rise in bond yields.S&P 500 futures were down 0.06% after paring steeper earlier losses. The benchmark US stock index jumped 1.61% Tuesday as companies' earnings updates by and large beat estimates.Dow Jones futures were roughly flat Wednesday, while futures for the tech-heavy Nasdaq 100 index dropped 0.16%.Netflix fell 27.58% in premarket trading after it said it had lost subscribers for the first time in a decade.The streaming media giant also forecast its subscriber count would drop by around 2 million in the first quarter, with stiff competition and rising living costs weighing on growth. Disney — which has a major streaming service — fell 4.49% premarket as investors fretted about the health of the industry.Also weighing on investors' minds was a sharp rise in government bond yields, driven by expectations that the Federal Reserve will hike interest rates aggressively this year to tame inflation.So-call real yields on 10-year government bonds — the amount that an investor will receive when taking inflation into account — briefly turned positive Tuesday for the first time since 2020. Analysts said positive real yields could weigh considerably on stocks, given that investors can finally make money on bonds again.The yield on the 10-year US Treasury note was down 4.3 basis points Wednesday at 2.898%, hovering around its highest level since late 2018.Also on investors' radar was the International Monetary Fund's downgrade of its global growth predictions Tuesday. The Fund now thinks the world economy will grow 3.6% this year, compared with a previous 4.4% forecast."Global economic prospects have been severely set back, largely because of Russia's invasion of Ukraine," Pierre-Olivier Gourinchas, the IMF's director of research said.Europe's continent-wide Stoxx 600 stock index rose 0.75% in morning trading after falling Tuesday. Overnight in Asia, China's CSI 300 lost 1.55%, but Tokyo's Nikkei 225 moved up 0.86%.Elsewhere in markets, oil prices rose as the market continued to be rocked by uncertainties about the global economy and Russia's war in Ukraine.Brent crude was up 0.75% at $108.05 a barrel, while WTI crude was 0.81% higher at $103.39 a barrel.Earnings season continued in the US, with Tesla and Procter & Gamble due to report Wednesday. Analysts said relatively strong earnings so far had supported stocks in recent days."Although still early in the season, there are contrasting factors at play, with an estimated 80% of companies so far exceeding expectations," Richard Hunter, head of markets at trading platform Interactive Investor, said."Meanwhile, the general consensus remains rooted to the likelihood of the Federal Reserve ratcheting up the pressure on inflation with higher than expected interest rate rises," he said."The country's ability to withstand such increases without derailing the economic recovery remains central to concerns."Read more: Stagflation risk is soaring, according to 3 top strategists at a $950 billion asset manager. They explain why some stocks are still attractive — and share 4 ways to prepare a portfolio for the looming combination of high inflation and sluggish growth.Read the original article on Business Insider.....»»

Category: dealsSource: nytApr 20th, 2022

Dow tumbles more than 400 points as spike in oil prices stokes further inflation fears

Each of the three major indexes finished down more than 1% Wednesday after extending losses late in the trading session. Lumber prices plummeted in June.Carolyn Cole/Getty Images The Dow fell more than 400 points as all three major US indexes finished in the red. Oil prices jumped with West Texas Intermediate settling 5.2% higher at $114.93 a barrel. Adobe stock dropped 11% after the company said it would take a hit by pulling out of business in Russia.  US stocks declined Wednesday as another spike in oil prices stoked renewed inflation concerns while investors digested the latest developments in the Ukraine war.Each of the three major indexes finished down more than 1% after extending losses late in the trading session.Ukrainian President Volodymyr Zelenskyy called for more pressure on Russia from Western nations, ahead of President Joe Biden's visit to Europe, where he will meet with NATO leaders. Biden is also expected to announce new sanctions on Moscow and discuss ways to reduce Europe's dependence on Russian energy.Meanwhile, Russian President Vladimir Putin sought to counter Western sanctions on his country by requiring hostile nations to pay for Russian gas using rubles. Nonetheless, the Russian government still has a long list of bond payments looming in foreign currencies while its top companies teeter near default. Here's where US indexes stood as the market closed at 4:00 p.m. on Wednesday: S&P 500: 4,456.23, down 1.23%Dow Jones Industrial Average: 34,358.50, down 1.29% (448.96 points)Nasdaq Composite: 13,922.60, down 1.32%Adobe stock slumped 11% in Wednesday trading after the software maker said halting sales in Russia will reduce the company's yearly revenue. Mohamed El-Erian said that the Federal Reserve is facing a lose-lose situation, with either hot inflation or a recession. But the top economist said he'd prefer the Fed to err on the side of high prices.Meanwhile, a wealth manager said the "new FANG" trade will consist of commodities amid war in Ukraine. But lumber, for its part, has been one of the few that have dropped, and the spike in mortgage rates is expected to slow down housing demand. Oil rose, with West Texas Intermediate settled up 5.2% to $114.93 a barrel. Brent crude, the international benchmark, rose 5.3% to $121.63 a barrel. Gold inched 1.3% higher to $1,947 per ounce. The 10-year yield was down 7.6 basis points to 2.30%.Bitcoin slipped 0.74% to $42,252.47.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMar 23rd, 2022

Futures Jump In Volatile Session Dragged By Latest Twists In Omicron Saga

Futures Jump In Volatile Session Dragged By Latest Twists In Omicron Saga Much of the overnight session was a snooze fest with stocks drifting first higher then lower after surging on Tuesday, as the narrative meandered from "omicron fears ease" optimism to "vaccines won't work" pessimism, before futures took a sudden leg lower, dropping into the red just after 530am ET, following news that UK's Boris Johnson would introduce new restrictions in England to curb Omicron spread, sparking fears that Omicron is more dangerous that expected (and than futures reflected). However, this episode of pessimism proved short-lived because just an hour later, the WSJ confirmed that Omicron is really just a pitch for covid booster shots when it reported that even though the covid vaccine loses significant effectiveness against Omicron in an early study, this is miraculously reversed with a booster shot as three doses of the vaccine were able to neutralize the variant in an initial laboratory study, and the companies said two doses may still protect against severe disease. Futures quickly shot up on the news, spiking above the gamma "all clear" level of 4,700 in a move best summarized with the following chart. And so, after going nowhere, S&P futures climbed for a third day, last seen 12 points, or 0.3% higher, just around 4,700 after rising the most since March on Tuesday. Europe’s Stoxx 600 Index rose following the biggest jump in more than a year. In addition to the omicron soap opera, which as we noted yesterday turns out was just one staged covid booster shot advertisement (because Pfizer and Moderna can always do with a bigger yacth), sentiment was also lifted by Chinese authorities' reversal to "easing mode" and aggressive efforts to limit the fallout from property market woes which lifted risk assets in Asia even as key debt deadlines at China Evergrande Group and Kaisa Group Holdings Ltd. passed without any sign of payment. "Clearly in the very short term uncertainty has risen over the Omicron virus... but overall at this stage we do not believe it will derail the macro picture in the medium-term," said Jeremy Gatto, multi-asset portfolio manager at Unigestion. Treasury yields were little changed after rising across the curve Tuesday. The VIX spiked first on the FT news, then dropped back into the red, while the dollar was flat and crude rose after turning red. Besides macro, micro was also in play and here are some other notable premarket movers Apple (AAPL US) ticks 1% higher in premarket trading following a Nikkei report that the tech giant told suppliers to speed up iPhone output for Nov.-Jan, citing people it didn’t identify. Amazon.com (AMZN US) shares in focus after an Amazon Web Services outage is wreaking havoc on the e-commerce giant’s delivery operation Stitch Fix (SFIX US) tumbles 25% in U.S. premarket trading after a 2Q forecast miss that analysts called “surprising,” while customer additions also disappointed Pfizer (PFE US) shares drop 2% in U.S. premarket trading after an early study showed that the company’s vaccine provides less immunity to the omicron variant Dare Bioscience (DARE US) soars 41% in premarket trading after Xaciato gets FDA approval for treating bacterial vaginosis EPAM Systems (EPAM US) soars 8% in premarket after S&P Dow Jones Indices said co. will replace Kansas City Southern in the S&P 500 effective prior to the opening of trading on Dec. 14 Goodyear Tire & Rubber (GT US) upgraded to buy from hold and target boosted to Street-high $32 from $29 at Deutsche Bank with the company seen as a major beneficiary from the shift to electric vehicles. Shares up 4.3% in premarket trading NXP Semiconductor (NXPI US) shares slide 2.2% in U.S. premarket trading after the chipmaker got a new sell rating at UBS Dave & Buster’s (PLAY US) gained 3.5% postmarket after the dining and entertainment company reported EPS that beat the average analyst estimate and authorized a $100 million share buyback program "Every day that passes without a wave of severe cases driven by Omicron is offering more hope that this won't be the curveball to throw the recovery off course," wrote Deutsche Bank strategist Jim Reid in a note to clients. In Europe, the Stoxx Europe 600 Index initially drifted both higher and lower then bounced 0.3% on the favorable Pfizer and BioNTech news one day after posting its bigger surge in a year. European benchmark index earlier rose as much as 2%, dropped 2.1%. Health care sub-index leads gains, rising 1.2%, followed by travel stocks. The Stoxx 600 closed 2.5% higher on Tuesday, biggest gain since November 2020 Earlier in the session, Asia stocks also rose for a second day as concerns about the omicron variant and China’s economic slowdown eased. The MSCI AsiaPacific Index climbed as much as 0.9% after capping its biggest one-day gain in more than three months on Tuesday. Technology and health-care shares provided the biggest boosts. Benchmarks in New Zealand and India -- where the central bank held rates at a record low -- were among the day’s best performers. “The biggest point appealing to investors is that the Omicron variant doesn’t seem to be too fatal,” which is encouraging to those who had been going short to close out their positions, said Tomoichiro Kubota, a senior market analyst at Matsui Securities in Tokyo. “Worry that the Chinese economy will lose its growth momentum has subsided quite a bit.” Thus far, Omicron cases haven’t overwhelmed hospitals while vaccine developments indicate some promise in dealing with the variant. While vaccines like the one made by Pfizer and BioNTech SE may be less powerful against the new strain, protection can be fortified with boosters. The two-day rally in the Asian stock benchmark marks a sharp turnaround following weeks of declines since mid-November. Stocks in China also climbed for a second day. The nation’s central bank said Monday it will cut the amount of cash most banks must keep in reserve from Dec. 15, providing a liquidity boost and helping restore investor confidence In FX, news on the Omicron variant rippled through G-10 currencies after a report the Pfizer vaccine could neutralize the Omicron variant boosted risk appetite. The pound underperformed other Group-of-10 peers, extending declines after reports that the U.K. government is poised to introduce new Covid-19 restrictions.  A gauge of the dollar’s strength fluctuated as Treasuries pare gains and stocks rally after a report that said Pfizer and BioNTech claim three vaccine doses neutralize the omicron variant. EUR/USD rose 0.1% to 1.1277; USD/NOK falls as much as 0.8% to 8.9459, lowest since Nov. 25 Sterling fell against the euro and the dollar, as traders pare bets on the path of Bank of England rate hikes following reports that the U.K. could introduce fresh Covid-19 restrictions such as working from home and vaccine passports for large venues. Money markets pare rate hike bets, with just six basis points of interest rate hikes priced in for the BOE meeting next week. GBP/USD falls as much as 0.6% to 1.3163, testing the key level of 1.3165, the 38.2% Fibonacci retracement of gains since March 2020. EUR/GBP gains as much as 0.7% to 0.85695, the highest since Nov. 11. “The market will probably see this as more U.K. specific and therefore an issue for the pound at least in the short term,” said Stuart Bennett, FX strategist at Santander. In rates, Treasuries were mixed with markets reacting in a risk-on manner to the Dow Jones report that Pfizer and BioNTech claim three vaccine doses neutralize the omicron variant. Yields remain richer by less than 1bp across long-end of the curve while front-end trades cheaper on the day, flattening curve spreads. Session’s focal points include $36b 10-year note reopening at 1pm ET, following Tuesday’s strong 3-year note auction. Treasury 10-year yields around 1.475%, near flat on the day; gilts outperform slightly after Financial Times report that further Covid restrictions will be announced imminently to curb the variant’s spread. U.S. 2-year yields were cheaper by 1bp on the day, rose to new 2021 high following Pfizer vaccine report; 2s10s spread erased a flattening move In commodities, crude futures turned red, WTI falling 0.8%, popping back below $72. Spot gold holds Asia’s modest gains, adding $8 to trade near $1,792/oz. Looking at the day ahead, and Olaf Scholz is expected to become German Chancellor in a Bundestag vote today. From central banks, the Bank of Canada will be deciding on rates, and we’ll also hear from ECB President Lagarde, Vice President de Guindos and the ECB’s Schnabel. Finally, data releases include the JOLTS job openings from the US for October. Market Snapshot S&P 500 futures up 0.2% to 4,693.75 STOXX Europe 600 little changed at 480.55 MXAP up 0.7% to 194.84 MXAPJ up 0.6% to 632.78 Nikkei up 1.4% to 28,860.62 Topix up 0.6% to 2,002.24 Hang Seng Index little changed at 23,996.87 Shanghai Composite up 1.2% to 3,637.57 Sensex up 1.8% to 58,654.25 Australia S&P/ASX 200 up 1.3% to 7,405.45 Kospi up 0.3% to 3,001.80 Brent Futures down 0.5% to $75.04/bbl Gold spot up 0.3% to $1,790.33 U.S. Dollar Index down 0.17% to 96.20 German 10Y yield little changed at -0.38% Euro up 0.2% to $1.1286 Brent Futures down 0.5% to $75.04/bbl Top Overnight News from Bloomberg The omicron variant of Covid-19 must inflict significant damage on the euro-area economy for European Central Bank Governing Council member Martins Kazaks to back additional stimulus “The current phase of higher inflation could last longer than expected only some months ago,” ECB vice president Luis de Guindos says at event The earliest studies on omicron are in and the glimpse they’re providing is cautiously optimistic: while vaccines like the one made by Pfizer Inc. and BioNTech SE may be less powerful against the new variant, protection can be fortified with boosters U.K. Prime Minister Boris Johnson is set to announce new Covid-19 restrictions in England, known as “Plan B,” to stop the spread of the Omicron variant, the Financial Times reported, citing three senior Whitehall officials familiar with the matter. French economic activity will continue to rise in December, despite another wave of the Covid-19 pandemic and fresh uncertainty over the omicron variant, according the Bank of France The Kingdom of Denmark will sell a sovereign green bond for the first time next month to help the Nordic nation meet one of the world’s most ambitious climate targets Tom Hayes, the former UBS Group AG and Citigroup Inc. trader who became the face of the sprawling Libor scandal, has lost his bid to appeal his U.K. criminal conviction Poland is poised for a hefty increase in interest rates after a spike in inflation to a two- decade high convinced central bankers that spiraling price growth isn’t transitory. Of 32 economists surveyed by Bloomberg, 20 expect a 50 basis-point hike to 1.75% today and 10 see the rate rising to 2%. The other two expect a 25 basis-point increase Australia is weighing plans for a central bank-issued digital currency alongside the regulation of the crypto market as it seeks to overhaul how the nation’s consumers and businesses pay for goods and services Bank of Japan Deputy Governor Masayoshi Amamiya dropped a strong hint that big firms are in less need of funding support, a comment that will likely fuel speculation the BOJ will scale back its pandemic buying of corporate bonds and commercial paper A detailed summary of global markets courtesy of Newsquawk Asian equity markets traded positively as the region took impetus from the global risk momentum following the tech-led rally in the US, where Apple shares rose to a record high and amid increased optimism that Omicron could be less dangerous than prior variants. This was after early hospitalisation data from South Africa showed the new variant could result in less severe COVID and NIH's Fauci also suggested that Omicron was 'almost certainly' not more severe than Delta, although there were some slight headwinds in late Wall Street trade after a small study pointed to reduced vaccine efficacy against the new variant. The ASX 200 (+1.3%) was underpinned in which tech led the broad gains across sectors as it found inspiration from the outperformance of big tech stateside, and with energy bolstered by the recent rebound in underlying oil prices. The Nikkei 225 (+1.4%) conformed to the upbeat mood although further advances were capped after USD/JPY eased off the prior day’s highs and following a wider-than-expected contraction to the economy with the final annualised Q3 GDP at -3.6% vs exp. -3.1%. The Hang Seng (+0.1%) and Shanghai Comp. (+1.2%) were less decisive and initially lagged behind their peers as sentiment was mired by default concerns due to the failure by Evergrande to pay bondholders in the lapsed 30-day grace period on two USD-denominated bond payments and with Kaisa Group in a trading halt after missing the deadline for USD 400mln in offshore debt which didn’t bode well for its affiliates. Furthermore, China Aoyuan Property Group received over USD 650mln in repayment demands and warned it may not be able to meet debt obligations, while a subdued Hong Kong debut for Weibo shares which declined around 6% from the offer price added to the glum mood for Hong Kong’s blue-chip tech stocks, as did reports that China is to tighten rules for tech companies seeking foreign funding. Finally, 10yr JGBs languished after spillover selling from T-notes and due to the heightened global risk appetite, but with downside stemmed by support at the key psychological 152.00 level and amid the presence of the BoJ in the market today for over JPY 1.0tln of JGBs. Top Asian News China Clean Car Sales Spike as Consumers Embrace Electric Gold Edges Higher as Traders Weigh Vaccine Efficacy, Geopolitics Paint Maker Avia Avian Falls in Debut After $763 Million IPO Tokyo Prepares to Introduce Same-Sex Partnerships Next Year Equities in Europe shifted to a lower configuration after a mixed open (Euro Stoxx 50 -0.7%; Stoxx 600 -0.1%) as sentiment was dented by rumours of tightening COVID measures in the UK. Markets have been awaiting the next catalyst to latch onto for direction amidst a lack of fresh fundamentals. US equity futures have also been dented but to a lesser extent, with the YM (-0.1%) and ES (Unch) straddling behind the NQ (+0.2%) and RTY (+0.2%). Sources in recent trade suggested an 85% chance of the UK implementing COVID Plan B, according to Times' Dunn; reports indicate such restrictions could be implemented on Thursday, with the potential for an announcement today. In terms of the timings, the UK cabinet is penciled in for 15:45GMT and presser for 17:30GMT on Plan B, according to BBC's Goodall. Note, this will not be a formal lockdown but more so work-from-home guidance, vaccine passports for nightlife and numerical restrictions on indoor/outdoor gatherings. APAC closed in the green across the board following the tech-led rally in the US. The upside overnight was attributed to a continuation of market optimism after early hospitalisation data from South Africa showed the new variant could result in less severe COVID, albeit after a small study pointed to reduced vaccine efficacy against the new variant. Participants will be closely watching any updates from the vaccine-makers, with the BioNTech CEO stating the drugmaker has data coming Wednesday or Thursday related to the new COVID-19 variant, thus markets will be eyeing a potential update this week ahead of the Pfizer investor call next Friday. Back to European, the UK’s FTSE 100 (Unch) and the Swiss SMI (+0.8%) are largely buoyed by their defensive stocks, with sectors seeing a defensive formation, albeit to a slightly lesser extent vs the open. Healthcare retains its top spot closely followed by Food & Beverages, although Personal & Household Goods and Telecoms have moved down the ranks. On the flip side, Retail, Banks and Travel & Leisure trade at the bottom of the bunch, whilst Tech nursed some earlier losses after opening as the lagging sector. In terms of individual movers, Nestle (+1.8%) is bolstered after announcing a CHF 20bln share repurchase programme alongside a stake reduction in L'Oreal (+1.0%) to 20.1% from 23.3% - worth some EUR 9bln. L’Oreal has shrugged off the stake sale and conforms to the firm sectoral performance across the Personal & Household Goods. Meanwhile, chip names are under pressure after Nikkei sources reported that Apple (+0.8% pre-market) was forced to scale back the total output target for 2021, with iPhone and iPad assembly halted for several days due to supply chain constraints and restrictions on the use of power in China, multiple sources told Nikkei. STMicroelectronics (-1.7%) and Infineon (-5.0%) are among the losers, with the latter also weighed on by a broker downgrade at JPM. Top European News ECB’s Kazaks Sets High Bar for Omicron-Driven Extra Stimulus Biden Is Left Guessing Over Putin’s Ultimate Aim in Ukraine Byju’s Buys Austria’s GeoGebra to Bolster Online Math Courses Scholz Elected by Parliament to Take Charge as German Chancellor In FX, the Dollar index continues to hold above 96.000, but bounces have become less pronounced and the range so far today is distinctly narrower (96.285-130) in fitting with the generally restrained trade in pairings within the basket and beyond, bar a few exceptions. Price action suggests a relatively muted midweek session unless a major game-changer arrives and Wednesday’s agenda does not bode that well in terms of catalysts aside from JOLTS and the BoC policy meeting before the second leg of this week’s refunding in the form of Usd 36 bn 10 year notes. AUD/EUR - Notwithstanding the largely contained currency moves noted above, the Aussie is maintaining bullish momentum on specific factors including strength in iron ore prices and encouraging Chinese data plus PBoC easing that should have a positive knock-on effect for one of its main trading partners even though diplomatic relations between the two nations are increasingly strained. Aud/Usd has also cleared a couple of technical hurdles on the way up to circa 0.7143 and Aud/Nzd is firmer on the 1.0500 handle ahead of the RBA’s latest chart pack release and a speech by Governor Lowe. Elsewhere, the Euro has regained composure after its sub-1.1250 tumble on Tuesday vs the Buck and dip through 0.8500 against the Pound, but still faces psychological resistance at 1.1300 and the 21 DMA that comes in at 1.1317 today, while Eur/Gbp needs to breach the 100 DMA (0.8513) convincingly or close above to confirm a change in direction for the cross from a chart perspective. CHF/CAD/JPY/GBP/NZD - All sitting tight in relation to their US counterpart, with the Franc paring some declines between 0.9255-30 parameters and the Loonie straddling 1.2650 in the run up to the aforementioned BoC that is widely seen as a non-event given no new MPR or press conference, not to mention the actual changes in QE and rate guidance last time. Nevertheless, implied volatility is quite high via a 63 pip breakeven for Usd/Cad. Meanwhile, Sterling lost grip of the 1.3200 handle amidst swirling speculation about the UK reverting to plan B and more Tory MPs calling for PM Johnson to resign, the Yen is rotating around 113.50 eyeing broad risk sentiment and US Treasury yields in context of spreads to JGBs, and the Kiwi is lagging after touching 0.6800 awaiting independent impetus from NZ manufacturing sales for Q3. SCANDI/EM - The Nok extended its advantage/outperformance against the Sek as Brent rebounded towards Usd 76/brl in early trade and Riksbank’s Jansson retained reservations about flagging a repo rate hike at the end of the forecast horizon, while the Mxn and Rub also initially derived some support from oil with the latter also taking on board latest hawkish talk from the CBR. However, the Cny and Cnh are outpacing their rivals again with some assistance from a firmer PBoC midpoint fix to hit multi-year peaks vs the Usd and probe 6.3500 ahead of option expiry interest at 6.3000 and a Fib retracement at 6.2946, in stark contrast to the Try that is unwinding recent recovery gains with no help from the latest blast from Turkish President Erdogan - see 10.00GMT post in the Headline Feed for more. Conversely, the Czk has taken heed of CNB’s Holub underscoring tightening signals and expectations for the next rate convene and the Pln and Brl are anticipating hikes from the NBP and BCB. In commodities, crude futures have been hit on the prospect of imminent COVID-related measures in the UK, albeit the measures do not involve lockdowns. Brent and WTI front month futures slipped from European highs to breach APAC lows. The former dipped below USD 74.50/bbl from a USD 76.00/bbl European peak while its WTI counterpart tested USD 71.00/bbl from USD 72.50/bbl at best. Overnight the benchmarks traded on either side the USD 75/bbl mark and just under USD 72/bbl after the weekly Private Inventories printed a larger-than-expected draw (-3.6mln vs exp. -3.1mln), albeit the internals were less bullish. Yesterday also saw the release of the EIA STEO, cut its 2021 world oil demand growth forecast by an insignificant 10k BPD but raised the 2022 metric by 200k BPD – with the IEA and OPEC monthly reports poised to be released next week. On the vaccine front, a small preliminary study of 12 people showed a 40x reduction in neutralization capacity of the Pfizer vaccine against Omicron, but early hospitalisation data from South Africa showed the new variant could result in less severe COVID. BioNTech CEO said they have data coming in on Wednesday or Thursday related to the new Omicron variant. The geopolitical space is also worth keeping on the radar, with US President Biden yesterday warning Russian President Putin that gas exports via Nord Stream 2 will be targeted and more troops will be deployed if he orders an invasion of Ukraine. Further, reports suggested, an Indian army helicopter crashed in Tamil Nadu, with Chief of Defence staff reportedly on board, according to Sputnik. Note, Tamil Nadu is located towards the south of the country and away from conflict zones. Elsewhere spot gold was supported by the overnight pullback in the Dollar, but the recent risk aversion took the yellow metal above the 100 DMA around USD 1,790/oz, with nearby upside levels including the 200 DMA (1,792/oz) and the 50 DMA (1,794/oz). Copper prices meanwhile consolidated within a tight range, with LME copper holding onto a USD 9,500/t handle (just about). Dalian iron ore extended on gains in a continuation of the upside seen in recent trade. US Event Calendar 7am: Dec. MBA Mortgage Applications, prior -7.2% 10am: Oct. JOLTs Job Openings, est. 10.5m, prior 10.4m DB's Jim Reid concludes the overnight wrap A reminder that we are currently conducting our special 2022 survey. We ask about rates, equities, bond yields and the path of covid in 2022, amongst other things, and also return to a festive question we asked in 2019, namely your favourite ever Christmas songs. The link is here and it’ll be open until tomorrow. All help filling in very much appreciated. My optimism for life has been shattered this morning. Not from the markets or the virus but just as I woke this morning England cricketers finally surrendered and collapsed in a heap on the first day of the Ashes - one the oldest international rivalries in sport. It was all I could do not to turn round and go back to bed. However out of duty I’m soldering on. After the twins nativity play went without incident yesterday, this morning it’s Maisie’s turn. Given she’s in a wheelchair at the moment she can’t get on stage so they’ve given her a solo singing spot at the start. I’m going so I can bring a bucket for all my wife’s tears as she sings!! If I shed a tear I’ll pretend it’s because of the cricket. The global market rebound continued to gather strength yesterday as investors became increasingly optimistic that the Omicron variant wouldn’t prove as bad as initially feared. To be honest, it was more the absence of bad news rather than any concrete good news helping to drive sentiment. Late in the US session we did see some headlines suggesting that the Pfizer vaccine may provide some defence against Omicron but also that the new variant does evade some of the immunity produced by this vaccine. This report of the small study (12 people!!) from South Africa lacked substance but you could take positives and negatives from it. More information is clearly needed. For the markets though, every day that passes without a wave of severe cases driven by Omicron is offering more hope that this won’t be the curveball to throw the recovery off course. Indeed, to get a sense of the scale of the market rebound, both the S&P 500 and the STOXX 600 in Europe have now clocked in their strongest 2-day performances of 2021 so far, with the indices up by +3.27% and +3.76% respectively since the start of the week. Meanwhile, the VIX fell below 25 for the first time in a week. On the day, the S&P 500 (+2.07%) put in its strongest daily performance since March, whilst the STOXX 600 (+2.45%) saw its strongest daily performance since the news that the Pfizer vaccine was successful in trials back in November 2020. Once again the gains were incredibly broad-based, albeit with cyclical sectors leading the way. The Nasdaq (+3.03%) outperformed the S&P 500 for the first time in a week as tech shares led the rally. Small cap stocks also had a strong day, with the Russell 2000 up +2.28%, on the back of Omicron optimism. This recovery in risk assets was also seen in the bounceback in oil prices, with Brent crude (+3.23%) and WTI (+3.68%) now both up by more than $5.5/bbl since the start of the week, which puts them well on the way to ending a run of 6 consecutive weekly declines. For further evidence of this increased optimism, we can also look at the way that investors have been dialling back up their estimates of future rate hikes from the Fed, with yesterday seeing another push in this direction. Before the Omicron news hit, Fed fund futures were fully pricing in an initial hike by the June meeting, but by the close on the Monday after Thanksgiving they’d moved down those odds to just 61% in June, with an initial hike not fully priced until September. Fast forward just over a week however, and we’re now not only back to pricing in a June hike, but the odds of a May hike are standing at +78.8%, which is actually higher than the +66.1% chance priced before the Omicron news hit. A reminder that we’re just a week away now from the Fed’s next decision, where it’s hotly anticipated they could accelerate the pace at which they’ll taper their asset purchases. With investors bringing forward their bets on monetary tightening, front-end US Treasury yields were hitting post-pandemic highs yesterday, with the 2yr Treasury yield up +5.8bps to 0.69%, a level we haven’t seen since March 2020. Longer-dated yield increases weren’t as large, with the 10yr yield up +3.9bps to 1.47%, and the 5s30s curve flattened another -1.8bps to 54.4bps, just above the post-pandemic low of 53.7bps. Over in Europe there was similarly a rise in most countries’ bond yields, with those on 10yr bunds (+1.4bps), OATs (+1.0bps) and BTPs (+4.4bps) all moving higher, though incidentally, the 5s30s curve in Germany was also down -2.2bps to its own post-pandemic low of 50.0bps. One pretty big news story that markets have been relatively unperturbed by so far is the rising tensions between the US and Russia over Ukraine. Yesterday saw a video call between US President Biden and Russian President Putin. The US readout from the call did not offer much in the way of concrete details, but if you’re looking for any optimistic news, it said that both sides tasked their teams with following up. Setting the background for the call, there were reports immediately beforehand that the US was considering evacuating their citizens and posturing to stop Nord Stream 2 if Russia invaded Ukraine. The Ruble appreciated +0.42% against the dollar, and is now only slightly weaker versus the dollar on the week. Overnight in Asia stocks are trading mostly higher led by the Nikkei (+1.49%), CSI (+1.11%), Shanghai Composite (+0.86%) and the KOSPI (+0.78%) as markets respond positively to the Pfizer study mentioned at the top. The Hang Seng (-0.12%) is lagging though. In Japan, the final Q3 GDP contracted -3.6% quarter on quarter annualised against consensus expectations of -3.1% on lower consumer spending than initially estimated. In India, the RBI left the key policy rate unchanged for the ninth consecutive meeting today while underscoring increasing headwinds from the Omicron variant. Futures markets indicate a positive start in the US and Europe with S&P 500 (+0.41%) and DAX (+0.12%) futures trading in the green. Back on the pandemic, despite the relative benign news on Omicron, rising global case counts mean that the direction of travel is still towards tougher restrictions across a range of countries. In fact here in the UK, we saw the 7-day average of reported cases move above 48,000 for the first time since January. In terms of fresh restrictions, yesterday saw Canada announce that they’d be extending their vaccine mandate, which will now require employees in all federally regulated workplaces to be vaccinated, including road transportation, telecommunications and banking. In Sweden, the government is preparing a bill that would see Covid passes introduced for gyms and restaurants, while Poland put further measures in place, including remote schooling from December 20 until January 9, while vaccines would become mandatory for health workers, teachers and uniformed services from March 1. One move to ease restrictions came in Austria, where it was confirmed shops would be reopening on Monday, albeit only for those vaccinated, while restaurants and hotels would reopen the following week. If you see our daily charts you’ll see that cases in Austria have dropped sharply since the peaks a couple of weeks ago, albeit still high internationally. In DC, Congressional leaders apparently agreed to a deal that would ultimately lead to the debt ceiling being increased, after some procedural chicanery. Senate Majority Leader McConnell voiced support for the measure, which is a good sign for its ultimate prospects of passing, but it still needs at least 10 Republican votes in the Senate to pass. McConnell indicated the votes would be there when the Senate ultimately takes it up, which is reportedly set to happen this week. The House passed the measure last night. Yields on Treasury bills maturing in December fell following the headlines. Looking ahead, today will mark the end of an era in Germany, as Olaf Scholz is set to become Chancellor in a Bundestag vote later on, marking an end to Chancellor Merkel’s 16-year tenure. That vote will simply be a formality given the three parties of the incoming coalition (the centre-left SPD, the Greens and the liberal FDP) have a comfortable majority between them, and the new cabinet will feature 7 SPD ministers, 5 Green ministers, and 4 from the FDP. Among the positions will include Green co-leader Robert Habeck as Vice Chancellor, Green co-leader Annalena Baerbock as foreign minister, and FDP leader Christian Lindner as finance minister. Running through yesterday’s data, the US trade deficit narrowed to $67.1bn in October (vs. $66.8bn expected), marking its smallest level since April. Meanwhile in the Euro Area, the latest Q3 growth estimate was left unchanged at +2.2%, but both Q1 and Q2’s growth was revised up a tenth. Over in Germany, industrial production grew by a stronger-than-expected +2.8% in October (vs. +1.0% expected), with the previous month’s contraction also revised to show a smaller -0.5% decline. In addition, the expectations component of the December ZEW survey fell by less than expected to 29.9 (vs. 25.4 expected), but the current situation measure fell to a 6-month low of -7.4 (vs. 5.7 expected). To the day ahead now, and Olaf Scholz is expected to become German Chancellor in a Bundestag vote today. From central banks, the Bank of Canada will be deciding on rates, and we’ll also hear from ECB President Lagarde, Vice President de Guindos and the ECB’s Schnabel. Finally, data releases include the JOLTS job openings from the US for October. Tyler Durden Wed, 12/08/2021 - 07:58.....»»

Category: blogSource: zerohedgeDec 8th, 2021

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

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

Category: blogSource: zerohedgeNov 24th, 2021

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

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

Category: blogSource: zerohedgeNov 23rd, 2021

Frenzied Futures Rally Fizzles As All Eyes Turn To Fed"s Taper Announcement

Frenzied Futures Rally Fizzles As All Eyes Turn To Fed's Taper Announcement US futures and European bourses retreated slightly from record highs as investors weighed the ever worsening supply crunch and virus curbs in China against strong earnings with all eyes turning to the conclusion of the Fed's 2-day meeting tomorrow, when Powell will announce the launch of a $15BN/month taper. At 7:20 a.m. ET, Dow e-minis were up 7 points, or 0.02%, S&P 500 e-minis were down 0.50 points, or 0.01%, and Nasdaq 100 e-minis were down 28.75 points, or 0.18%. Iron-ore futures tumbled on shrinking steal output in China. Tesla led premarket losses in New York. Investors paused to reflect on a rally that’s taken U.S. and European stocks to record highs. With a post-pandemic supply crunch stoking inflation and pushing central banks to tighten monetary policy, they have begun to question valuations. Economic recovery is also under strain as countries from China to Bulgaria report rising Covid cases. Both the S&P 500 Index and the Dow have been scaling new peaks as U.S. companies post another stellar quarter for earnings. Of the 295 companies in the equity benchmark that have reported results, 87% have either met or surpassed estimates. Dow futures slipped after the underlying gauge briefly surged past the 36,000 mark on Monday. Russell 2000 contracts rose. Bonds from Europe to the U.S. jumped after Australia signaled patience with rate increases despite abandoning Yield Curve Control due to "economic improvement." Yields on the two-year and five-year Treasuries fell as the RBA joined global central banks inching closer to policy tightening. However, the central bank’s insistence on remaining patient with rate hikes pushed traders to pare back hawkish bets in Australia as well as in global bond markets during European hours. “The Fed meeting could still shake the markets, because even though we know the concrete outcome of the meeting, which is the opening bell of the QE tapering, the risks remain tilted to the hawkish side,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “Still, investors prefer seeing the glass half full.” In early trading, Tesla tumbled 5%, retreating from a gamma-squeeze record on Monday after Elon Musk said the carmaker hasn’t yet signed a contract with Hertz Global for Model 3 sedans. Chegg slumped 32% after the online-education company cut revenue forecasts and its results missed estimates, prompting a raft of downgrades. Clorox rose 1.6% after the bleach maker posted upbeat first-quarter results. Simon Property Group added 4.2% after the mall operator raised its 2021 forecast for profit and quarterly dividend. Pfizer gained 2.4% after the drugmaker boosted (get it "boosted"?) its full-year sales forecast for the company’s COVID-19 vaccine to $36 billion. Here are some of the biggest U.S. movers today: Tesla drops as much as 6.9% in premarket trading after closing at a record on Monday after Elon Musk said the electric vehicle-maker hasn’t yet signed a contract with Hertz Global. Chegg slumps 31% after the online education company slashed revenue forecasts and posted quarterly results that missed estimates. Novavax gains 5.3%, signaling an extension of Monday’s 16% rally, amid optimism over Covid vaccine approvals. Triterras tumbles as much as 20% after the short seller target said it encountered an “unanticipated delay in the finalization” of an independent audit of its financial statements. Teva Pharmaceutical Industries depositary receipts rise 7.7% and Endo International (ENDP US) gains 6.3% after the firms joined other former opioid makers in scoring a litigation win. Geron gains 4.5% and and SAB Bio (SABS US) soars 39% after Baird starts coverage of both with outperform ratings. Cryptocurrency-related stocks gained in premarket trading on Tuesday, as Bitcoin climbed and Etherium hit a record high.    NXT-ID up 38.18% premarket, Marathon Digital +4.0%, Riot Blockchain +2.9%, Bit Digital +2.5%, Canaan +3.2%, Coinbase +2.0%, MicroStrategy +1.5% While stocks continue to trade in a world of their own, just shy of all time highs, bond and currency markets are bracing for the Fed to announce a tapering of asset purchases as an initial step to eventually raising interest rates to contain inflation. Equity markets, on the other hand, are focusing on earnings growth and valuations. Meanwhile, mixed data on the global economic revival is further clouding the picture as the pandemic is making a comeback in parts of the world. “We expect volatility in financial markets to remain high as not only the Fed, but other central banks around the world, extract liquidity to combat the rise in inflation,” Lon Erickson, portfolio manager at Thornburg Investment Management, wrote in a note. Despite Fed rhetoric, “we’ve started to see the market price in earlier policy rate moves, perhaps losing confidence in the ‘transitory’ nature of inflation.” In Europe, the Stoxx Europe 600 Index slid 0.1% from a record reached on Monday, led lower by miners and travel companies. Spain's IBEX and the UK FTSE 100 dropped 0.6%. DAX outperforms. BP dropped 2.8% in London even as the oil giant announced an additional $1.25 billion buyback. HelloFresh jumped 14%, the most this year, after the German meal-kit company raised its full-year outlook. Basic-materials stocks were the weakest of 20 sector indexes in Europe as falling iron ore and steel prices weigh on miners and steel producers. Here are some of the biggest European movers today: HelloFresh shares surge as much as 16%, their best day since Dec. 2020, with analysts positive on the meal-kit maker’s guidance hike. Jefferies says that the company’s 3Q results included “little not to like.” Demant shares rise as much as 6.5%, the most intraday since March 23, after the hearing-aid maker raised its earnings forecast and topped estimates. Fresenius SE shares gain as much as 6.5% after reporting 3Q earnings slightly ahead of analyst estimates, with Jefferies saying the focus lies on the company’s cost-savings efforts and future plans for Kabi. Fresenius Medical shares up as much as 4.5% after posting 3Q earnings. Company’s FY22 recovery is “key to share price development from here,” according to Jefferies. Sinch shares drop as much as 17%, the most on record, after reporting 3Q results which showed organic growth slowing down, a trend Handelsbanken expects to worsen. Standard Chartered shares fall as much as 9.5%, the most since March 2020, as the lender’s third-quarter margins disappointed amid suppressed Asia rates and analysts flagged weakness in its retail operations. Flutter shares drop as much as 9% in London, the most intraday since March 2020, after the gaming company cut its profit outlook on unfavorable sporting results and a regulatory change in the Netherlands. Analysts expect ex-U.S. earnings consensus to fall. Steel makers underperform, with Kloeckner -5.3%, ArcelorMittal -2.9%, ThyssenKrupp -2.5%, Salzgitter -2.5% Asian stocks dipped, led by Chinese shares on concerns about the impact of measures to curb Covid-19 infections, while financials underperformed ahead of key central bank decisions this week. The MSCI Asia Pacific Index erased earlier gains of as much as 0.4% to fall 0.2% in afternoon trading. Blue-chip financial stocks including China Merchants Bank and Westpac Banking were among the biggest drags. Traders are focused on this week’s U.S. Federal Reserve meeting amid concerns about elevated inflation. Sentiment turned sour after authorities in Beijing halted classes at 18 schools amid Covid-19 resurgence. China’s benchmark CSI 300 Index fell 1%, while Hong Kong’s Hang Seng Index reversed an earlier gain of 1.9% to close in negative territory.  China’s CSI 300 Index falls by as much as 1.9% after Beijing’s suspension of classes across 18 schools heightened concerns over the impact of the recent Covid-19 outbreak. China Tourism Group Duty Free slumped as much as 9.8%, the worst performer in the benchmark and one of its biggest drags. The Shanghai Composite Index also extends decline to 1.9% while the ChiNext Index pares a 1.2% gain to trade little changed. “Investors are worried that Beijing’s virus measures may cool down China’s economic activities and hamper its recovery,” said Steven Leung, executive director at UOB Kay Hian in Hong Kong. Asian stocks rose on Monday, a turnaround after a drop of 1.5% during last week, the worst such performance since early October. Shares have been whipsawed by ongoing concern over supply-chain constraints impacting industries such as technology and auto making. Investors are also parsing through earnings data, with more than half of the companies on MSCI’s Asia gauge having reported results.  “At this level, it can be said that investors are no longer pessimistic but are not yet hopeful either,” Olivier d’Assier, head of APAC applied research at Qontigo, wrote in a note.  Japanese stocks fell, halting a two-day rally, as some investors adjusted positions after the market jumped yesterday.  The Topix index slid 0.6% to 2,031.67 at the 3 p.m. close in Tokyo, while the Nikkei 225 declined 0.4% to 29,520.90.  Mitsui & Co. contributed most to the Topix’s loss, decreasing 4%. Out of 2,181 shares in the index, 538 rose and 1,583 fell, while 60 were unchanged. Both the Topix and Nikkei 225 gained more than 2% on Monday after the ruling coalition secured an election victory that was better than many had expected. Japan’s stock market will be closed Wednesday for a national holiday. Australian stocks slide, with the S&P/ASX 200 index falling 0.6% to close at 7,324.30, after the Reserve Bank of Australia abandoned a bond-yield target, following an acceleration in inflation that spurred traders to price in higher borrowing costs. Banks and miners slumped, while real estate and consumer discretionary stocks climbed. Goodman Group was the biggest gainer after the company raised its full-year guidance. Insurance Australia Group tumbled after the firm cut its reported insurance margin forecast for the full year.  In New Zealand, the S&P/NZX 50 index fell 0.3% to 12,992.50. In rates, Treasuries were higher across both the front-end and belly of the curve, led by bull-steepening gains across European bonds with peripherals outperforming. Treasury yields were lower by 2bp-3bp across front-end of the curve, steepening 2s10s by that amount with 10-year little changed around 1.55%; German 10-year is lower by ~4bp, U.K. by ~1bp. Aussie front-end rallied during Asia session after the RBA abandoned its yield target but maintained its bond buying pace; euro-zone money markets subsequently pared the amount of ECB policy tightening that’s priced in. European fixed income rallied with curves bull steepening. Belly of the German curve outperforms, trading ~2-3bps richer to gilts and USTs respectively. Peripheral spreads tighten; long-end Italy outperforms, narrowing ~6bps near 170bps. In FX, the Bloomberg Dollar Spot Index inched up and the greenback advanced versus all its Group-of-10 peers apart from the yen; Treasury yields fell by up to 3bps as the curve bull- steepened. The euro hovered around $1.16 while Italian bonds and bunds jumped, snapping three days of declines and tracking short-end Australian debt. The Australian dollar declined against all Group-of-10 peers and Australian short-end bond yields fell after the central bank dispensed with its bond-yield target and damped expectations of interest-rate hikes.  One-week volatility in the Australian dollar dropped a second day as spot pulls back from its 200-DMA of 0.7556 after the central bank’s policy decision. The pound fell for a third day, to nearly a three-week low, as investors weighed up the possibilities for the Bank of England’s policy meeting on Thursday. The yen strengthened ahead of a local holiday in Japan and amid souring market sentiment. In commodities, crude futures hold a narrow range with WTI near $84 and Brent stalling near $85. Spot gold drift close to $1,795/oz. The base and ferrous metals complex remains under pressure: LME nickel and zinc drop ~1%, iron ore down over 6%. Looking at the day ahead now, and the data highlights include the October manufacturing PMIs for the Euro Area, Germany, France and Italy. Central bank speakers will include the ECB’s Elderson and de Cos, whilst today’s earnings releases include Pfizer, T-Mobile, Estee Lauder and Amgen. Finally, there are US gubernatorial elections in Virginia and New Jersey. Virginia is the more interesting race from a macro perspective: a big, diverse state that has bounced between Democratic and Republican candidates on the national stage. So it could provide the first read of American voter sentiment heading into next year’s mid-terms. Market Snapshot S&P 500 futures little changed at 4,605.25 STOXX Europe 600 down 0.2% to 477.90 MXAP down 0.2% to 198.29 MXAPJ down 0.2% to 646.50 Nikkei down 0.4% to 29,520.90 Topix down 0.6% to 2,031.67 Hang Seng Index down 0.2% to 25,099.67 Shanghai Composite down 1.1% to 3,505.63 Sensex down 0.3% to 59,984.88 Australia S&P/ASX 200 down 0.6% to 7,324.32 Kospi up 1.2% to 3,013.49 German 10Y yield little changed at -0.14% Euro little changed at $1.1603 Brent Futures up 0.5% to $85.17/bbl Gold spot down 0.1% to $1,791.04 U.S. Dollar Index little changed at 93.89 Top Overnight News from Bloomberg Federal Reserve policy makers are expected to announce this week that they will start scaling back their massive asset-purchase program amid greater concern over inflation, economists surveyed by Bloomberg said President Emmanuel Macron backed away from his imminent threat to punish the U.K. for restricting the access of French fishing boats to British waters, saying he would give negotiations more time The Reserve Bank of Australia’s dovish policy statement and downplaying of the inflation threat is likely to reignite a steepening of the yield curve from near the flattest in a year. The spread between three- and 10-year yields jumped as much as 10 basis points on Tuesday after central bank Governor Philip Lowe cooled expectations for any near-term interest-rate increase even though the RBA scrapped its yield- curve control policy A more detailed look at global markets courtesy of Newsquawk Asian equities traded mixed as upcoming risk events kept participants cautious and offset the momentum from the US, where stocks began the month on the front foot in a continuation of recent advances to lift the major indices to fresh record highs. Nonetheless, ASX 200 (-0.6%) was pressured by underperformance in the top-weighted financials sector and notable weakness in mining names, while quasi holiday conditions due to the Melbourne Cup in Australia’s second most populous state of Victoria and the crucial RBA policy announcement in which it maintained the Cash Rate Target at 0.10% but dropped the April 2024 government bond yield target and tweaked its guidance, further added to the cautious mood. Nikkei 225 (-0.4%) was lacklustre as it took a breather from the prior day’s surge after stalling just shy of the 29,600 level and with the index not helped by a slight reversal of the recent beneficial currency flows. Hang Seng (-0.3%) and Shanghai Comp. (-1.4%) were varied as the former initially atoned for yesterday’s losses led by strength in tech and biotech including Alibaba shares with its Singles Day sales event underway. In addition, Hong Kong participants were seemingly unfazed by the recent weaker than expected GDP for Q3 as the data showed it narrowly averted a technical recession, although the gains were later wiped out and the mainland suffered following another substantial liquidity drain and with Chinese commodity prices pressured including iron futures which hit limit down. Finally, 10yr JGBs were flat with price action muted despite the subdued mood for Tokyo stocks and with the presence of the BoJ in the market for over JPY 1tln of JGBs in mostly 1yr-5yr maturities, doing little to spur demand. Top Asian News Bank of Korea Minutes Show Majority Sees Need for Rate Hike China’s Gas Prices Are Surging Just as Coal Market Cools Off China Shares Fall as Shut Schools Spark Concern on Virus Curbs SMBC Nikko Is Working With Securities Watchdog on Investigation Bourses in Europe have now adopted more of a mixed picture (Euro Stoxx 50 +0.1%; Stoxx 600 -0.2%) Stoxx 600 following the lacklustre cash open and downbeat APAC handover. US equity futures meanwhile are somewhat mixed with the RTY (+0.2%) narrowly outperforming the ES (-0.1%), YM (Unch), and NQ (-0.2%) – with the latter also seeing some pressure from Tesla (-6.0% pre-market) after CEO Musk said no deal was signed yet with Hertz and that a deal would have zero impact on Tesla's economics. Back to Europe, a divergence is evident with the DAX 40 (+0.4%) outpacing amid post-earnings gains from HelloFresh (+14%), Fresenius SE (+4.6%) and Fresenius Medical Care (+2.0%). The FTSE 100 (-0.5%) meanwhile lags with the Dec futures and cash both under 7,250 – with the index pressured by heft losses in some of its heaviest sectors. Basic resources sit at the foot of the bunch due to softer base metal prices across the board, which saw Dalian iron ore futures hit limit down at least twice in the overnight session. Travel & Leisure closely follows as sector heavyweight Flutter Entertainment (~23% weighting) slipped after cutting guidance. Oil & Gas and Banks closely follow due to the recent declines in crude (and BP post-earnings) and yields respectively. On the flip side, some of the more defensive sectors stand at the top of the leader board with Healthcare and Food & Beverages the current winners. In terms of other individual movers, THG (-6.1%) resides near the bottom of the Stoxx 600 second-largest shareholder BlackRock (9.5% stake) is reportedly planning to sell 55mln shares equating to around 4% of its holding. It’s also worth noting Apple (-0.1% pre-market) has reportedly reduced iPad production to feed chips to the iPhone 13, according to Nikkei sources; iPad production was reportedly -50% from Apple's original plans, sources added. In terms of broad equity commentary, Credit Suisse remains overweight value in Europe, whilst raising US small caps to overnight and reducing the UK to underweight. Looking at the rationale, CS notes that European value tend to outperform while inflation expectations or Bund yields rise. US small caps meanwhile have underperformed almost all macro drivers, whilst earnings momentum takes a turn for the better. Finally, CS argues UK small caps are much more cyclical than large caps and could face further tailwinds from UK’s macro landscape and with some tightening potentially on the table this week. Top European News BP Grows Buyback as Profit Rises on Higher Prices, Trading Ferrexpo Drops as Credit Suisse Downgrades on Lower Pricing OPEC+ Gets a Warning From Japan Before Key Supply Meeting THG Extends Decline as Key Shareholder BlackRock Reduces Stake In FX, the Aussie has reversed even more sharply from its recent core inflation and yield induced highs in wake of the RBA policy meeting overnight and confirmation of the moves/tweaks most were expecting. To recap, YCT was officially withdrawn after the Bank allowed the 3 year target rate to soar through the 0.1% ceiling and guidance on rates being held at the same level until 2024, at the earliest, was also withdrawn and replaced by a more flexible or conditional timeframe when inflation is sustainably in the 2-3% remit range. However, Governor Lowe retained a decidedly dovish tone in the aftermath, pushing back against more aggressive market pricing for tightening and stressing that it is entirely plausible that the first increase in the Cash Rate will not be before the maturity of the current April 2024 target bond, though it is also plausible that a hike could be appropriate in 2023 and there is genuine uncertainty as to the timing of future adjustments in the Cash Rate. Aud/Usd is now closer to 0.7450 than 0.7550 and the Aud/Nzd cross nearer 1.0400 than the round number above with added weight applied by weakness in copper and iron ore prices especially (latter hit limit down on China’s Dallian exchange). Meanwhile, the Kiwi also felt some contagion after a drop in NZ building consents and as attention turns to the Q3 HLFS report, with Nzd/Usd eyeing 0.7150 having got to within pips of 0.7200 only yesterday. EUR/DXY - Technical forces seem to be having an influence on direction in Eur/Usd amidst somewhat mixed Eurozone manufacturing PMIs as the headline pair topped out precisely or pretty much bang on a 50% retracement of the reversal from 1.1692 to 1.1535 at 1.1613 and subsequently probed the 21 DMA that comes in at 1.1598 today. Moreover, the Euro appears reliant on hefty option expiry interest for support given 1.9 bn rolling off at 1.1585 if it cannot reclaim 1.1600+ status, as the Dollar regroups and trades firmer against most majors, bar the Yen. Indeed, in stark contrast to Monday, the index has bounced off a marginally deeper sub-94.000 low between tight 93.818-985 confines, albeit in cautious, choppy pre-FOMC mood. CHF/CAD/GBP - No traction for the Franc via firmer than forecast Swiss CPI or a faster pace of consumption, while the Loonie is on the defensive ahead of Canadian building permits and Sterling is still on a softer footing awaiting the BoE on Thursday alongside what could be a make or break meeting in France where UK Brexit Minister Frost is due to tackle the fishing dispute face-to-face with Secretary of State for European Affairs Beaune. Usd/Chf is straddling 0.9100, Usd/Cad is hovering around 1.2400, Cable pivots 1.3650 and Eur/Gbp is probing 0.8500. JPY - As noted above, the Yen is bucking the broad G10 trend with gains vs the Greenback amidst appreciably softer US Treasury and global bond yields, as Usd/Jpy retreats from 114.00+ peaks to test support circa 113.50. In commodities, WTI and Brent front-month futures are moving sideways ahead of the OPEC+ meeting on Thursday, whereby expectations are skewed towards an unwind of current curbs by 400k BPD despite outside pressure for the group to further open the taps. Ministers, including de-facto heads Russia and Saudi, have been vocal in their support towards a maintained pace of production hikes. There have also been reports of Angola and Nigeria struggling to keep up with the output hikes, which may further dissuade the producer to further ramp up output. The morning also saw macro commentary from BP, whereby the CFO suggested global oil demand has returned to levels above 100mln BPD. The Co. expects oil prices to be supported by continued inventory draw-down, with the potential for additional demand from gas to oil switching. OPEC+ decision making on production levels continues to be a key factor in oil prices and market rebalancing. Gas markets were very strong in the quarter and BP expect the market to remain tight during the period of peak winter demand. In the fourth quarter industry refining margins are expected to be lower compared to the third quarter driven by seasonal demand. WTI Dec trades on either side of USD 84/bbl and Brent on either side of USD 85/bbl. Elsewhere, spot gold and silver are relatively flat with the former in close proximity to its 200 DMA (1,790/oz), 100 DMA (1,785/oz), 50 DMA (1,780/oz) and 21 DMA (1,778/oz). Over to base metals, Dalian iron ore futures were in focus overnight after prices hit limit down at least twice and nearly hit 1yr lows amid high supply and lower demand, with the latter namely a function of China cutting steel output forecasts. LME copper meanwhile has clambered off worst levels (USD 9,430/t) but remains just under USD 9,500/t as prices track sentiment. US Event Calendar Oct. Wards Total Vehicle Sales, est. 12.5mm, prior 12.2mm DB's Jim Reid concludes the overnight wrap The RBA press conference is still going onas we type this but the key outcome has been that they’ve abandoned the 0.1% target for the April 2024 bond. However they seem to be making it clear in the presser that their expectation is only that rate hikes might creep into 2023 rather than 2024 previously. The governor has said that market expectations of hikes in 2022 are “a complete overreaction to recent inflation data”. So they are trying to pull back the market expectations that ran away from them last week. The reality is that they’ll now be hostage to the data. They don’t expect inflation to be a big problem going forward but time will tell. Yield moves have been relatively subdued but are generally lower with a small steepening seen. 2y (-0.2bps), 3y (-4.5bps) and 5y (-3.3bps) are falling but with the 10y (+0.3bps) steadier. Ahead of the RBA, risk assets got the month off to a strong start as investors awaited tomorrow’s all-important Federal Reserve meeting conclusion. However there was little sign of caution in equities as a range of global indices advanced to all-time records yesterday, including the S&P 500 (+0.18%), the NASDAQ (+0.63%), the STOXX 600 (+0.71%), and the MSCI World Index (+0.50%). Energy (+1.59%) and consumer discretionary (+1.46%) were the clear outperformers in the S&P, with Tesla (+8.49%) doing a lot of the work of boosting the latter sector. While it’s a busy week for earnings, only 2 S&P companies reported during trading hours yesterday, so it didn’t materially drive sentiment. 11 more companies reported after hours, with 7 beating earnings estimates. Elsewhere, the Dow Jones actually crossed the 36,000 mark in trading for the first time. Readers of a certain age may remember an infamous book published in 1999 called “Dow 36,000” during the dot com bubble, which predicted the Dow would more than triple over the next 3-5 years to that level. In reality, even the half way mark of 18k wasn’t reached until late-2014, and of course it took 22 years to get to yesterday’s 36k milestone. So a good case study of the heady optimism many had back then. We’ll see if yesterday’s milestones are the first step on the path to Dow 100k, but one asset inching its way to $100 in oil, with yesterday seeing a fresh recovery in many commodity prices after their declines last week. Both WTI (+0.57%) and Brent crude (+0.39%) posted gains, with copper (+0.58%) also seeing a modest advance. Agricultural prices set fresh records, with wheat prices (+3.17%) climbing above $8/bushel in intraday trading for the first time since 2012. It may be a pretty busy macro week with the Fed, BoE and the US jobs report, but the OPEC+ meeting on output this Thursday could also be a vital one for the global economy in light of the resurgence in energy prices lately. We’ve already heard some frustration at the group from a number of countries, with President Biden saying this Sunday at the G20 that “I do think that the idea that Russia and Saudi Arabia and other major producers are not gonna pump more oil so people can have gasoline to get to and from work for example, is … not right”. So one to keep an eye on, with potentially big implications for inflation and hence central banks. Staying on an inflation theme, investors got a further glimpse of ongoing supply chain issues from the ISM manufacturing print as well yesterday. The overall reading for October actually came in slightly above expectations at 60.8 (vs. 60.5 expected), but the prices paid order similarly rose to 85.7 (vs. 82.0 expected) in its second successive monthly increase. Bear in mind it’s been above the 80 mark for all but one month so far this year, and there were further signs of supply-chain issues from the supplier delivery time measure, which hit a 5-month high of 75.6. With markets attuned to inflation and the potential for plenty of central bank action this week, sovereign bonds came under further pressure yesterday on both sides of the Atlantic, even if they finished well off the yield highs. Yields on 10yr Treasuries ended the session up +0.7 bps to 1.56%, which comes as markets are almost pricing an initial full hike from the Fed by the time of their June 2022 meeting. However we were off the day’s high of 1.60%. Meanwhile in Europe, yields on 10yr bunds (+0.4 bps), OATs (+0.3 bps) and gilts (+2.8 bps) moved higher as well, but interestingly we also saw peripheral sovereign bond spreads closing in on their highest levels for some time. Indeed by the close of trade yesterday, the gap between Italian (+4.4 bps) and Spanish (+2.2 bps) 10yr yields over bunds had widened to their biggest level in almost a year. Meanwhile, 10yr breakevens widened +4.5 bps in the UK and +2.0 bps in Germany. US breakevens were the outlier, narrowing -7.5 bps to 2.51% and now -18.0 bps below the highs reached just a week ago. In Asia, the Nikkei 225 (-0.56%) and the Shanghai Composite (-0.62%) are trading lower, while the Hang Seng (+0.74%) and the KOSPI (+1.36%) are edging higher. Some of the news weighing on Chinese stocks are surging gas prices, which reached a record high today. Elsewhere, the S&P 500 futures (-0.22%) is down this morning and the 10y US Treasury is at 1.55% (-0.9bps). Heads of state gave their opening salvos at COP26 yesterday. The biggest commitment came from Indian Prime Minister Narendra Modi, who said the world’s third-biggest emitter will have zero net pollution by 2070, while also making more near-term commitments to increase reliance on non-fossil fuel energy sources. Looking at yesterday’s other data, German retail sales unexpectedly fell by -2.5% in September (vs. +0.4% expected). However, the final UK manufacturing PMI for October was revised up a tenth from the flash reading to 57.8. Over in the US though, there was a downward revision to 58.4 (vs. flash 59.2). To the day ahead now, and the data highlights include the October manufacturing PMIs for the Euro Area, Germany, France and Italy. Central bank speakers will include the ECB’s Elderson and de Cos, whilst today’s earnings releases include Pfizer, T-Mobile, Estee Lauder and Amgen. Finally, there are US gubernatorial elections in Virginia and New Jersey. Virginia is the more interesting race from a macro perspective: a big, diverse state that has bounced between Democratic and Republican candidates on the national stage. So it could provide the first read of American voter sentiment heading into next year’s mid-terms. Tyler Durden Tue, 11/02/2021 - 07:52.....»»

Category: dealsSource: nytNov 2nd, 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

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

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

Category: blogSource: zerohedgeSep 21st, 2021

NewsWatch: Stocks close sharply lower as Dow tumbles 600 points in wake of oil-market woes

Stocks close sharply lower Monday, with the Dow Jones Industrial Average tumbling 600 points as crude oil prices extended their retreat......»»

Category: topSource: marketwatchNov 12th, 2018

Market Snapshot: Stocks close sharply lower as Dow tumbles 600 points in wake of oil-market woes

Stocks close sharply lower Monday, with the Dow Jones Industrial Average tumbling 600 points as crude oil prices extended their retreat......»»

Category: topSource: marketwatchNov 12th, 2018

US stocks finish mixed amid fears of more Fed hawkishness after hot jobs report

JPMorgan Asset Management's David Kelly said the jobs report was likely distorted, and there's still plenty of room for the Fed to taper rate hikes. Trader Leon Montana works on the floor of the New York Stock Exchange stocks NYSE worryAP Photo/Richard Drew US stocks closed mixed on Friday after November's job report clocked in above economists' expectations. The Dow reversed higher as the Fed is still largely expected to slow its pace of rate hikes. But the hot jobs data could push the Fed to tack on more rate hikes in early 2023, some analysts say. US stocks closed mixed in volatile trade on Friday after the strong November jobs report triggered an early sell-off on fears the Federal Reserve will have to stay hawkish.The addition of 263,000 jobs last month topped forecasts for 200,000, suggesting the central bank faces a longer battle against inflation. But the Dow Jones Industrial Average turned positive while the S&P 500 and Nasdaq pared losses sharply, as analysts raised doubts that the data point would be enough to change the direction of rates.JPMorgan Asset Management chief strategist David Kelly said the jobs report was likely distorted, and there's still plenty of room for the Fed to taper rate hikes and pause in 2023.The central bank is still widely expected to deliver a 50-basis-point hike at its next meeting, slowing down after four consecutive increases of 75 basis points.Here's where US indexes stood as the market closed 4:00 p.m. on Friday: S&P 500: 4,071.71, down 0.12%Dow Jones Industrial Average: 34,429.88, up 0.10% (34.87 points)Nasdaq Composite: 11,461.50, down 0.18%To be sure, a strong labor market is a sign of an expanding economy, potentially putting pressure on the Fed to keep tightening despite already having raised rates by 375 basis points so far this year.Principal Asset Management chief strategist Seema Shah said the jobs report could push the Fed to raise rates above 5%. Oanda analyst Edward Moya said a more balanced response was possible, adding that the payroll data could lead to smaller rate hikes into 2023. "This report doesn't mean the risks of the Fed raising rates to 6% are back on the table. It might add another 25bp to the February meeting, and it doesn't change the trend of the data for both," he saidHere's what else is happening:Bank of America warned it was time for investors to sell any rally in stocks, as job losses are set to shock the market in 2023.EU diplomats settled on a price cap target of $60 a barrel for Russian oil, just as EU sanctions on Russian oil are set to take effect on Monday.Sam Bankman-Fried's Alameda Research was found to have shielded FTX from a loss of up to $1 billion, a report said.In oil, commodities, and crypto:Oil prices slipped, with West Texas Intermediate down 1.39% to $80.09 a barrel. Brent crude, the international benchmark, inched lower 1.31% to $85.74 a barrel.Gold edged lower 0.27% to 1,798.43 per ounce.The 10-year Treasury yield fell 1 basis point to 3.515%.Bitcoin ticked higher 0.06% to $16,989.10.Read the original article on Business Insider.....»»

Category: personnelSource: nytDec 2nd, 2022

US stocks fall as stronger-than-expected jobs report raises fears of continued Fed hawkishness

Nonfarm payrolls increased by 263,000 in November, exceeding the expected 200,000 increase, dashing hopes of an easing monetary policy path. Chair of the U.S. Federal Reserve Jerome Powell speaks at the Brookings Institution, November 30, 2022 in Washington, DC. Powell discussed the economic outlook, inflation and the labor market.Drew Angerer/Getty Images US stocks dropped Friday on the back of a stronger-than-expected jobs report.  Nonfarm payrolls increased by 263,000, above the expected 200,000 and opening the door for continued hawkishness from the Federal Reserve.  The still-tight labor market dashes hopes of policymakers easing monetary tightening.   US stocks dropped on Friday following a stronger-than-expected jobs report that raised the odds that the Federal Reserve will continue to take a hawkish approach to cooling down the economy to tame inflation. Nonfarm payrolls increased by 263,000, above the expected 200,000, and workers' wages came in hotter than expected. The unemployment rate remained at 3.7%Traders ramped up bets slightly that the Fed would initiate a fifth consecutive 75 basis-point rate hike this month, though fed fund futures were still pricing in nearly a 75% chance that it would be a smaller 50 basis-point move. Here's where US indexes stood as the market opened 9:30 a.m. on Friday: S&P 500: 4,039.19, down 0.92% Dow Jones Industrial Average: 34,147.02, down 0.72% (247.99 points)Nasdaq Composite: 11,482.45, down 1.23%Here's what else is happening:Binance has frozen withdrawals of a crypto linked to its own token that looks like it's been hacked, CZ says.Mohamed El-Erian said markets are fixated on a "dynamite" rate hike slowdown.Mike Novogratz backed off his call for bitcoin to hit $500,000, blaming the Fed's rate hikes.FTX customers could get their money back in Japan, as the local unit is working on unfreezing withdrawals.Coinbase said Apple shut down the ability for users to send NFTs because it can't collect the 30% in-app fee.In oil, commodities, and crypto:Oil prices slipped, with West Texas Intermediate down 0.71% to $80.64 a barrel. Brent crude, the international benchmark, inched lower 0.62% to $86.35 a barrel.Gold edged lower 0.93% to 1,798.50 per ounce.The 10-year Treasury yield ticked higher 4.5 basis points to 3.572%.Bitcoin dropped 0.15% to $16,909.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 2nd, 2022

US stocks close mixed as investors nervously await November jobs report

Stocks wavered to start December after weekly jobless claims indicated the labor market is still running strong ahead of Friday's jobs report. Traders work on the floor of the New York Stock Exchange.Spencer Platt/Getty Images US stocks ended mixed Thursday, marking a pullback from gains during the session.  The Fed's preferred inflation gauge rose by less than expected in October, by 0.2%.  But weekly jobless claims fell, with the data arriving a day before a big November jobs report.  US stocks finished mostly lower Thursday as investors at the start of December trade appeared to prepare for a potentially strong monthly jobs report, just before the Federal Reserve delivers its last rate hike of 2022. Stocks advanced earlier in the session after the Commerce Department said the core Personal Consumption Expenditures Index rose 0.2% in October month over month. The Fed's preferred inflation gauge, which strips out food and energy prices, was below an Econoday consensus estimate of 0.3%. But the indexes turned mixed later in the day as investors considered other data points, including a drop in weekly jobless claims, by 16,000 to 225,000.  Here's where US indexes stood at the 4:30 p.m. closing bell on Thursday:  S&P 500: 4,076.57, down 0.09%Dow Jones Industrial Average: 34,395.01, down 0.56% (194.76 points)Nasdaq Composite: 11,482.45, up 0.13% "The initial jobless claims headline reading showed the labor market is still strong," Edward Moya, senior market analyst at Oanda, wrote in a note. "The trends are clear for inflation, but the big question mark is if the labor market is going to have a broader slowdown.  Tomorrow's nonfarm payrolls report will be important as it could move forward bets that inflation will continue to decline." Ahead of the jobs report, investors were widely expecting the Fed to start downsizing the size of its rate hikes, to 50 basis points at its December 13-14 meeting.  The Fed has pushed up interest rates from 0% this year to bring inflation down to its 2% target by slowing economic activity.The PCE Index rose 5% year over year in October compared with 5.2% in September. Meanwhile, consumer price inflation was running around a four-decade high below 8%. Here's what else is happening today:Chinese stocks rose after the country's top pandemic official signals a softening of the country's strict zero-COVID policy.Morgan Stanley's Mike Wilson says there's still a case for the S&P 500 to fall another 26% in 2023. BlackRock's bond chief Rick Rieder tells Insider he's never seen a market this rich in income opportunities. Treasury Secretary Janet Yellen likened the implosion of Sam Bankman-Fried's FTX to that of Lehman's blowup.BMO Capital Markets sees a modest gain for the S&P 500 in 2023 but investors will likely travel a rough road to get there. Billionaire investor Leon Cooperman says the S&P 500 won't hit a new high for a long time. BlackRock CEO Larry Fink thinks most crypto companies will go out of business in the wake of FTX's collapse. In commodities, bonds, and crypto:West Texas Intermediate crude gained 1% to $81.37 per barrel. Brent crude, the international benchmark, rose 1.9% to $87.02.  Gold jumped 3.2% to $1,815.50 per ounce. The 10-year Treasury yield slid 21 basis points to 3.53%.Bitcoin fell 0.9% to $16,951.04.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 1st, 2022

US stocks rise as cooling of key inflation measure supports potential for smaller Fed rate hikes

December trade started off with the Fed's preferred inflation gauge rising 0.2% in October, a smaller increase than anticipated. Michael M. Santiago/Getty Images US stocks rose Thursday as December trade gets underway.  The Fed's preferred inflation gauge -- the PCE index -- rose by less than expected in October.  Markets are looking for a smaller rate hike of 50 basis points in December  US stocks opened slightly higher Thursday, starting December's trade with an eye on the Federal Reserve potentially downshifting the size of its rate hikes in part after the central bank's preferred inflation measure has eased. Wall Street's main equity indexes edged up after the Commerce Department said the core Personal Consumption Expenditures Index rose 0.2% in October month over month. The reading, which strips out food and energy prices, was below an Econoday consensus estimate of 0.3%. The PCE Index rose 5% year over year in October compared with 5.2% in September.Here's where US indexes stood at the 9:30 a.m. opening bell on Thursday:  S&P 500: 4,086.34, up 0.15% Dow Jones Industrial Average: 34,540.05, down 0.14% (49.72 points)Nasdaq Composite: 11,468.39, up 0.01%Stocks soared Wednesday after Federal Reserve Chairman Jerome Powell in a speech at the Brookings Institution said there are signs inflation is starting to ease from scorching levels and that could lead to the Fed sizing down its interest rate hikes as soon as its December meeting. "Despite the fact that the overall rhetoric remained cautious, with some uncertainty remaining as to how far and for how long higher rates would need to be in place, the comments nonetheless reflected a slight softening of attitude," Richard Hunter, head of markets at Interactive Investor, wrote in a note Thursday. Wednesday's rally helped equity indexes finish higher in November, with gains of more than 5% for the Nasdaq Composite and the S&P 500. "The relief bounce has made some difference to the performance of the main indices, but only a quite extraordinary 'Santa rally' could repair the damage which has already been wrought," said Hunter in noting still sharp year-to-date losses for the S&P 500, the Nasdaq and the Dow Jones Industrial Average. Here's what else is happening today:Chinese stocks were up after the country's top pandemic official signals a softening of the country's strict zero-COVID policy.Billionaire investor Leon Cooperman says the S&P 500 won't hit a new high for a long time. BlackRock CEO Larry Fink thinks most crypto companies will go out of business in the wake of FTX's collapse. In commodities, bonds, and crypto:West Texas Intermediate crude gained 1.9% to $82.10 per barrel. Brent crude, the international benchmark, rose 1.8% to $84.47.  Gold tacked on 2.4% to $1,801.05 per ounce. The 10-year Treasury yield fell 10 basis points to 3.59%.Bitcoin fell 0.7% to $16,981.11.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 1st, 2022

Rally Pauses After Frenzied Meltup Sends S&P Above 200DMA For First Time Since April

Rally Pauses After Frenzied Meltup Sends S&P Above 200DMA For First Time Since April Global stocks climbed and the dollar slipped to a three-month low this morning amid early signs of a softer stance on Covid restrictions from China and after Federal Reserve Chair Jerome Powell confirmed that the pace of interest rate hikes was set to slow. S&P futures were little changed, pausing a rally that added $1.1 trillion to the market value of S&P 500 companies. Nasdaq contracts dropped 0.2% following sharp gains in the previous session.  Markets elsewhere continued to ride high, with Europe’s Stoxx 600 benchmark up more than 0.5% and a range of regional indexes on the cusp of bull-market territory, having gained almost 20% from lows hit in September. A gauge of global shares touched a three-month high. Sentiment got an extra boost after China’s top official in charge of the fight against the coronavirus, Vice Premier Sun Chunlan, said the response was entering a new phase, with the omicron variant weakening and more Chinese getting vaccinated. Beijing also indicated some Covid patients could isolate at home. The benchmark US index surged to its highest in more than 11 weeks Wednesday, while the Dow confirmed a technical bull market, as Fed Chair Jerome Powell signaled the central bank will slow the pace of interest-rate increases this month. His comments likely cement expectations for the Fed to raise interest rates by 50 basis points when they meet Dec. 13-14, following four straight 75 basis-point moves. The S&P 500 closed above its 200-day moving average for the first time since April on Wednesday. Still, Powell also stressed that borrowing costs will need to keep rising and remain restrictive for some time to beat inflation, and market strategists warned that uncertainty remains high about the impact of a dovish tilt in policy on inflation and economic growth. “Stepping back, Powell again reiterated that inflation is too high, flagged the likelihood of higher-for-longer funds rate and warned again against risk of prematurely loosening policy,” said Mark Taylor, a sales trader at Mirabaud Securities. “Slowdown = further tightening, but that isn’t the seasonal concern heading into the final three trading weeks of the year.” In premarket trading, Salesforce Inc. dropped, after the software company gave an outlook that analysts say reflects a weaker economic environment. Snowflake Inc. also slid on weaker-than-expected revenue outlook. Meanwhile, US-listed Chinese stocks pulled back after their record monthly rally in November. Here are some of the biggest premarket movers this morning: US-listed Chinese stocks decline in premarket trading Thursday, after the Nasdaq Golden Dragon China Index gained 42% in November, its best month on record. Alibaba -2.6%, Baidu -0.5%. Splunk shares jumped as much as 9.4% in US premarket trading after the software company boosted its revenue guidance for the full year, with analysts positive that demand is holding up despite the macroeconomic backdrop. Brokers did note that Splunk tempered its outlook for cloud revenue, showing that customers could be delaying cloud migration Salesforce Inc. shares are down 6.4% in premarket trading, after the software company gave an outlook that analysts say reflects a weaker economic environment. Analysts were also surprised by the exit of co-CEO Bret Taylor, as he became the latest potential successor to leave the company. G-III Apparel shares sank as much as 27% in US premarket trading, with the DKNY brand owner set for its worst day since March 2020 after cutting guidance for the full year and saying that its licensing agreements with Calvin Klein and Tommy Hilfiger brands, owned by PVH, will expire in the next five years. . Okta shares jump 15% in premarket trading, after the software company gave a fourth- quarter forecast that was stronger than expected. Analysts noted that the results were much better than feared with the company executing sales more effectively, even against a tougher macro backdrop. Snowflake slides 6.2% in premarket trading after the software company gave an outlook for product revenue that was weaker than expected. Economic headwinds are pressuring the 4Q outlook, according to analysts, who remain bullish on the company’s longer-term prospects. Elastic shares fell 17% in US postmarket trading after the company lowered its revenue forecast for the current fiscal year. The guidance cut and the lack of visibility into FY24 are likely to weigh on investor confidence, analysts said. PVH Corp. gained 9.4% in extended trading after the parent company of Calvin Klein and Tommy Hilfiger increased its adjusted earnings per share view for the year. It also expects annual revenue to come in at the top end of its previous guidance range. Victoria’s Secret fell in extended trading after issuing an earnings-per-share forecast for the fourth quarter that trailed the average analyst estimate at the midpoint of the range. The retailer also reported a steeper-than-expected decline in third- quarter comparable sales. Confirming that he has the absolutely worst market timing, literally minutes before one of the biggest market meltups in weeks, JPM's Marko Kolanovic warned turned even more bearish after being ultra bullish all year, and said that the S&P 500 will likely re-test this year’s lows in the first half of 2023, implying a decline of about 12% from current levels against the backdrop of a mild recession and Federal Reserve rate hikes. Finally catching up with most strategists, JPMorgan also now expects a pivot in the Fed’s hawkish policy to fuel a stock recovery in the second half of next year. The bank's target of 4,200 for end-2023 leaves an upside of about 3% from here on; it also means that the S&P will likely close far higher in keeping with JPM's historical error. The founder of bankrupt cryptocurrency exchange FTX Sam Bankman-Fried denied trying a perpetrate a fraud, while mystery still surrounds missing billions at the firm. More key economic indicators are expected today, with data on consumer spending, unemployment and manufacturing all due this morning. The buoyant mood knocked the dollar lower against its Group-of-10 counterparts for the third straight day, while Treasury 10-year yields stayed just off two-month lows hit in the wake of Powell’s comments. The yen advanced more than 1% and the euro touched a five-month peak. “There is no one-way bet any more on dollar strength,” said Sarah Hewin, senior economist at Standard Chartered in London. “We had a good signal about a pivot from Powell, so the market has dialed back its expectations on peak rates.” Focus will now shift to how economic growth will fare in coming quarters. US activity gauges have painted a mixed third-quarter picture, with Wednesday’s daa showing job openings down in October, while Friday’s jobs report is currently forecast to show employers added 200,000 workers to payrolls in November. Later in the day, investors will get to parse the latest US core PCE print -- one of the Fed’s favored inflation gauges. “The market’s wanting to see whether PCE inflation for November aligns with the soft CPI numbers,” analysts at Mizuho wrote, referring to below-forecast inflation data that kicked off the equity rally in November. There are signs that cooling growth is affecting corporate earnings, especially in the tech sector. Tech shares led losses in US premarket trading, with software maker Salesforce down sharply after an earnings outlook that appeared to reflect a weaker economic environment. In Europe, the Stoxx 50 rose 0.3% as the  prospect of a smaller Fed hike boosts risk appetite. IBEX outperforms, adding 0.8%, CAC 40 is flat but underperforms peers. Real estate, tech and financial services are the strongest-performing sectors. European tech stocks leap in early Thursday trading, following rallies in US peers on Wednesday after Federal Reserve Chair Jerome Powell signaled a slowdown in the pace of interest-rate hikes. Chip stocks surge, with ASML climbing as much as +4.3%, and ASM International +6.5%. Shares in the Swiss lender decline for a 13th straight session, marking their longest run of losses since at least 1989, after JPMorgan cuts earnings estimates and its price target for the Swiss bank following a decline in the wealth unit’s assets under management, and with a material loss expected for 4Q.  Here are some other notable European movers: Shop Apotheke and Zur Rose gain after Germany’s health minister was reported to have said the country’s digital e-prescriptions program, identified as a major trigger for both firms, should be in place by mid-2023. Shop Apotheke climbs as much as 11% and Zur Rose rises as much as 11% Heineken shares rise as much as 3% after confirming its outlook and highlighting higher cost-savings for next year. UBS says Heineken reiterated its commitment to deliver superior growth, well balanced between volume and price mix. International Distributions Services gains as much as 5.6% after Exane starts coverage at outperform, writing in note that the Royal Mail owner has levers available to ease concerns over the long term. Credit Suisse shares drop as much as 5.5% after JPMorgan cuts earnings estimates and its price target for the Swiss lender following a decline in the wealth unit’s assets under management, and with a material loss expected for 4Q. Shares in the Swiss lender decline for a 13th straight session, marking their longest run of losses since at least 1989. RBC says it would take an “incrementally cautious” view on mining stocks heading into 2023, in a note downgrading its rating on Anglo American and Boliden to sector perform. Anglo falls as much as 2.8%, Boliden as much as 2.2%. Also, Glencore falls as much 1.5% Pearson, Thomson Reuters and Wolters Kluwer are cut at Exane as the broker says the elevated valuation multiples don’t reflect the expectations of increasing cost inflation and operating margin pressure in 2023. Pearson falls as much as 4%. Earlier in the session, equities in Asia extended gains after their best monthly rally in 24 years, as concerns eased over China’s Covid measures and the Federal Reserve’s tightening. After capping a 15% gain November, the MSCI Asia Pacific Index jumped as much as 2.5% Thursday, inching closer toward a bull market. Gauges in China, Japan and Taiwan led gains --although Hong Kong’s measures pared -- as a top Chinese official said efforts to combat the virus are entering a new phase with the omicron variant weakening and vaccination rates rising. Investors may look past China’s near-term economic slump “as long as there are positive signs of China’s reopening,” David Chao, global market strategist for Asia Pacific ex-Japan at Invesco, wrote in a note. Traders will watch whether China’s central bank will ease further in December, he added. Regional equities also got a boost from a weaker dollar, after Fed Chair Jerome Powell said that the pace of rate increases may moderate in December. The comments came as ADP Research Institute data showed hiring at US firms cooled last month and wage gains moderated.  Asian stocks have battled back as the shift in the Fed’s policy stance and China’s reopening appeared to materialize and foreign funds piled into emerging markets. The exuberance may be on shaky ground, however, as the outlook for global growth dims into next year Japanese equities rose, following US peers higher after Fed chair Jerome Powell signaled a slower pace of interest rate hikes. Gains were limited by the yen’s surge against the dollar. The Topix rose by less than a point to close at 1,986.46, while the Nikkei advanced 0.9% to 28,226.08. The Japanese currency advanced more than 1% against the greenback. Out of 2,165 stocks in the index, 714 rose and 1,348 fell, while 103 were unchanged. “Fed Chairman Powell’s remarks were within the market’s expectations, which provided a sense of security,” said Hitoshi Asaoka, strategist at Asset Management One Australia's he S&P/ASX 200 index rose 1% to close at 7,354.40, the highest since May 5, after China appeared to soften its Covid stance and Federal Reserve Chair Jerome Powell signaled a slowdown in the pace of interest-rate hikes. Nine of the 11 sector gauges advanced, with mining and real estate shares rallying most.  In New Zealand, the S&P/NZX 50 index rose 0.9% to close at 11,654.56, extending gains for a third day In FX, the Bloomberg dollar spot index falls 0.5%. CAD and CHF are the weakest performers in G-10 FX, JPY and NZD outperform. BRL (1.8%), KRW (1.5%) lead gains in EMFX. The Dollar Spot Index fell for a third day as the greenback weakened against all of its Group-of-10 peers apart from the Canadian dollar.  The euro rose to trade at around $1.0450 after briefly giving up gains in early European session. Money managers are amping up bets the dollar will continue to fall. Investors scurried to European and UK debt, following a similar rush for US Treasuries after Federal Reserve Jerome Powell signaled the pace of monetary policy tightening may slow as soon as this month The Swiss franc underperformed most Group- of-10 peers. Switzerland’s consumer prices rose 3% from a year earlier Japan’s yen and Korea’s won spearheaded a surge in Asian currencies. The Japanese currency rose by as much as 1.3% to 135.84 per dollar; demand at a 10-year bond auction jumped to the highest since 2005 Australian and New Zealand dollars extended Powell-driven gains, boosted by the signs that China is moving further away from its Covid-Zero mandate. Bonds rose In rates, Treasuries twist-flattened modestly, as the 2-year yield rose by 2bps and the 30-year yield well by a similar amount. After plunging on Wednesday, the 10Y TSY yield dipped further, and was last trading just below 3.60%. Peripheral spreads are mixed to Germany; Italy tightens, Spain tightens and Portugal widens. In commodities, oil rose on Thursday supported by investor wariness that OPEC+ may cut supply further at its meeting on Sunday and as easing COVID curbs in China raised hopes about higher demand in the world's top crude importer. Crude gained further support, and the U.S. dollar weakened, after the Federal Reserve Chair opened the door to a slowdown in the pace of rate hikes. Dollar weakness makes oil cheaper for other currency holders and tends to support risk assets.  "Oil is finding support on investor optimism that OPEC+ will deliver further cuts in production when they meet," said Ehsan Khoman, analyst at MUFG Bank, in a report. Brent crude was up 44 cents, or 0.5%, to $87.41 a barrel by 0918 GMT, while U.S. West Texas Intermediate crude futures added 55 cents, or 0.7%, to $81.10. "Barring any negative surprise during Sunday's virtual OPEC+ talks and assuming a healthy compromise on the Russian oil price cap before the EU sanctions kick in on Monday it is tempting to audaciously conclude that the bottom has been found," said Tamas Varga of oil broker PVM. "Inflation has not been defeated but its negative economic impact has probably been mitigated." Most base metals trade in the green; LME tin rises 1%, outperforming peers. LME lead lags, dropping 0.8%. Spot gold rises roughly $11 to trade near $1,780/oz. Base metals are firmer across the board following the recent China optimism and Dollar-induced boost, with 3M LME copper briefly topping the USD 8,300/t mark. Sam Bankman-Fried said the FTX US platform is fully funded and he believes withdrawals could be opened, while he denied committing fraud and said that FTX had huge management failures. To the day ahead now, and data releases include the global manufacturing PMIs for November, German retail sales for October, the Euro Area unemployment rate for October, the US weekly initial jobless claims, personal income and personal spending for October, and the ISM manufacturing for November. Otherwise, central bank speakers include the Fed’s Logan, Bowman and Barr, as well as the ECB’s Lane. Market Snapshot S&P 500 futures down 0.1% to 4,076.50 STOXX Europe 600 up 0.6% to 442.83 MXAP up 1.6% to 158.96 MXAPJ up 1.3% to 515.72 Nikkei up 0.9% to 28,226.08 Topix little changed at 1,986.46 Hang Seng Index up 0.7% to 18,736.44 Shanghai Composite up 0.4% to 3,165.47 Sensex up 0.3% to 63,296.21 Australia S&P/ASX 200 up 1.0% to 7,354.42 Kospi up 0.3% to 2,479.84 German 10Y yield little changed at 1.86% Euro up 0.3% to $1.0435 Brent Futures up 0.5% to $87.42/bbl Gold spot up 0.5% to $1,777.38 U.S. Dollar Index down 0.36% to 105.57 Central bank speakers 09:15: NY Fed’s Dianne Dobbeck Speaks at FT Banking Summit 09:20: Fed’s Logan Speaks at Dallas Breakfast Event 09:30: Fed’s Bowman Speaks at Strategy Forum 15:00: Fed’s Barr Discusses Bank Capital Top Overnight News from Bloomberg A rush by Japan’s life insurers to protect themselves against a stronger yen may have the paradoxical effect of accelerating gains in the currency The yuan is closing in on a key milestone as hints of a China reopening fuel a burst of buying, but some analysts say the rally may soon pause ECB Governing Council member Yannis Stournaras said further hikes in borrowing costs should be gradual, following the most aggressive bout of monetary tightening since the euro was introduced UK house prices are falling more sharply than expected after a jump in borrowing costs quelled demand, Nationwide Building Society said. The mortgage lender said home prices fell 1.4% in November. That was the second decline in as many months and the fastest drop since June 2020 Even one of the strongest easing advocates on the BOJ’s board said that a shift in Japan’s long-held deflationary price norms is beginning to materialize, although he didn’t hint at any policy change soon BOJ Board Member Asahi Noguchi says that monetary easing needs to be continued persistently to help improve a labor market that remains below its pre-pandemic level Wednesday’s Treasury rally may have been more about month- end positioning, according to market participants A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks took impetus from the strong rally on Wall Street after Fed Chair Powell’s speech which signalled the Fed is ready to slow the pace of rate increases as soon as the December meeting, with sentiment in the region also helped by China reopening optimism and with Chinese Caixin PMI data not as bad as feared. ASX 200 was firmer with outperformance in the mining industry amid the heightened global risk appetite and as participants shrugged off the mixed-to-softer domestic data releases. Nikkei 225 was boosted at the open after Japanese firms' recurring profits hit a record for Q3 although the index moved off its highs after hitting resistance just shy of the 28,500 level. Hang Seng and Shanghai Comp advanced after several large Chinese cities relaxed some COVID controls and Vice Premier Sun Chunlan noted that the country’s fight against the virus is entering a new phase, while the latest Caixin Manufacturing PMI data topped forecasts although remained in contraction territory. Top Asian News Beijing is to allow some low-risk COVID patients to home isolate which represents a major COVID policy shift, while COVID protests and stretched infrastructure were said to have led to the change, according to Bloomberg. China is to release supplementary COVID-19 measures in the coming days, via Reuters citing sources; to allow positive cases to quarantine at home with conditions, to allow close contacts of positive cases to quarantine at home with conditions. Step up antigen testing for COVID, reduce the frequency of mass testing and regular PCR tests. Chinese Vice Premier says weakening pathogenicity of Omicron has created conditions to improve COVID prevention measures, via State Media. Beijing City reports 2,126 new local COVID cases (prev. 2,378) during 15 hours to 3pm on Thursday. BoJ Board Member Noguchi said the BoJ must maintain monetary easing and keep interest rates at low levels now as achievement of the 2% inflation target remains uncertain. Noguchi noted that they cannot say that Japan has stably and sustainably achieved the BoJ's 2% inflation target, while he added that consumer inflation is likely to fall back below 2% once cost-push factors dissipate. European equities benefited at the cash-open from the post-Powell surge in US stocks. Fresh macro drivers for Europe have been lacking thus far and therefore some of the enthusiasm at the cash open has scaled back somewhat. Sectors in Europe are mostly firmer with Tech stocks following suit to the strong showing during US hours yesterday, whilst Real Estate names are also posting solid gains. To the downside, Autos, Consumer Products and Energy names are the only sectors in the red. US futures are flat/softer as markets pause for breath following yesterday’s impressive rally which took the ES to just shy of the 4.1k mark. JPMorgan lowers its 2023 S&P 500 EPS forecast to USD 205 (prev. 225); sees the index at 4,200 by end-2023; expects the S&P 500 to re-test its 2022 lows (at around 3,577) in H1 2023 Top European News German Ifo says companies are hiring despite the upcoming winter recession, employment barometer increased to 99.6 for November (prev. 97.8). First increase after five consecutive declines. Germany's VDMA says Engineering Orders in Oct -12% Y/Y (Domestic -13%; Foreign -11%); Aug-Oct Orders -4% Y/Y (Domestic -8%; Foreign -2%). ECB's Stournaras says inflationary pressures will ease, as such advocates the ECB takes greater account of the risk of an economic crisis in monetary policy, via Handelsblatt. ECB's Enria says the new risk environment warrants some adjustments to supervisory approach; supervisors will closely scrutinise capital planning and challenge management actions to ensure an appropriate level of conservatism. FX The Dollar index remains suppressed in the post-Powell aftermath of dovishly-received remarks from the Fed Chair, with today's base at 105.30 matching the lows set on the 15th and 28th of November. Most G10s are firmer against the USD but to varying degrees. The JPY has been the greatest beneficiary of the Powell-induced narrowing in the Fed-BoJ differential and as US yields sold off yesterday. The Loonie stands as the underperformer with no clear reason aside from a breather from the Dollar and crude-induced gains yesterday and in the run-up to the Canadian jobs report tomorrow. South Africa President Ramaphosa is reportedly considering resigning over the farm scandal, according to Bloomberg. PBoC set USD/CNY mid-point at 7.1225 vs exp. 7.1231 (prev. 7.1769) Fixed Income EGBs are bid across the board as participants react to the commentary from Chair Powell on Wednesday; as such, ECB pricing has tilted towards 50bp, Chief Economist Lane speaks later. USTs have continued to climb with yields lower across the curve and particularly at the long-end given Powell stressing they do not want to overtighten and ahead of key data including October’s PCE. The European morning has digested a substantial amount of supply with over EUR 11bln taken down between France, Spain and the UK; overall, the issuance was well received and marks the last outings for France and Spain this year Commodities WTI Jan and Brent Feb futures are somewhat choppy with the initial upside paring back in recent trade despite a distinct lack of news flow and a steady Dollar at the time. Spot gold benefits from the decline in the Dollar as the yellow metal extends on gains above USD 1,775/oz as it sets its sight on the 200 DMA at USD 1,796.07/oz ahead of USD 1,800/oz. Base metals are firmer across the board following the recent China optimism and Dollar-induced boost, with 3M LME copper briefly topping the USD 8,300/t mark. OPEC November oil output fell 710k BPD from October to 29.10mln BPD after the OPEC+ production cut decision, while quota-bound members complied with 163% of pledged cuts in November, according to a Reuters OPEC survey. Crypto Sam Bankman-Fried said the FTX US platform is fully funded and he believes withdrawals could be opened, while he denied committing fraud and said that FTX had huge management failures. Geopolitics US is considering a dramatic expansion in the training the US military provides to Ukraine including instructing as many as 2,500 Ukrainian soldiers a month in a US base in Germany, according to CNN citing sources. Chinese President Xi told European Council President Michel that China will continue to strengthen strategic coordination with the EU and hopes EU will establish an objective and correct perception of China. Xi added that China and EU should strengthen macroeconomic policy coordination and complementary advantages and jointly create new growth engines, and should jointly ensure the safety, stability, and reliability of industrial supply chains. Xi said China will remain open to European companies and hope EU can provide a fair and transparent business environment for Chinese firms, according to Bloomberg. Russian Foreign Minister Lavrov says a channel for negotiations has been established between the Russian and US special forces, via Reuters. US Defence Secretary Austin informed his Turkish counterpart of his strong opposition to a new Turkish military operation in Syria, according to Reuters. US lawmakers are poised to back as much as USD 10bln to bolster Taiwan's defences against growing tensions and threats from China as part of a compromise annual defence authorisation bill, according to Bloomberg. Japanese Chief Cabinet Secretary Matsuno said they informed China and Russia through diplomatic channels of severe concerns regarding frequent joint air force activities around Japan, while they are closely monitoring increasing military cooperation between China and Russia with concern, according to Reuters. US Event Calendar 07:30: Nov. Challenger Job Cuts YoY, prior 48.3% 08:30: Nov. Initial Jobless Claims, est. 235,000, prior 240,000 Nov. Continuing Claims, est. 1.57m, prior 1.55m 08:30: Oct. Personal Spending, est. 0.8%, prior 0.6% Real Personal Spending, est. 0.5%, prior 0.3% Personal Income, est. 0.4%, prior 0.4% PCE Deflator MoM, est. 0.4%, prior 0.3%; PCE Core Deflator MoM, est. 0.3%, prior 0.5% PCE Deflator YoY, est. 6.0%, prior 6.2%; PCE Core Deflator YoY, est. 5.0%, prior 5.1% 09:45: Nov. S&P Global US Manufacturing PM, est. 47.6, prior 47.6 10:00: Oct. Construction Spending MoM, est. -0.2%, prior 0.2% 10:00: Nov. ISM New Orders, est. 48.5, prior 49.2 ISM Employment, est. 50.0, prior 50.0 ISM Prices Paid, est. 45.9, prior 46.6 ISM Manufacturing, est. 49.7, prior 50.2 DB's Jim Reid concludes the overnight wrap Welcome to December. Since it’s the start of a new month, our usual performance review of financial assets over the last month will be out shortly. November was a very strong month for markets across several asset classes, which makes a change from what we’ve been used to this year. Indeed, the Hang Seng index has just seen its strongest monthly performance since October 1998. However, at the other end of the leaderboard the US dollar has just put in its worst monthly performance in over a decade. Full report in your inboxes soon. That general optimism through November carried into the final day of the month yesterday, with markets surging thanks to a speech from Fed Chair Powell. He confirmed that “the time for moderating the pace of rate increases may come as soon as the December meeting”, which cemented expectations that the Fed will move away from the 75bp hikes they’ve pursued at the last four meetings in favour of a slower 50bp pace. Furthermore, he said in the Q&A after the speech that “my colleagues and I do not want to overtighten”, which acknowledged some of the concerns that the Fed may end up going too far, particularly given monetary policy operates with time lags. In turn, risk assets surged on the back of Powell’s remarks, with the S&P 500 moving out of negative territory beforehand to end the day up +3.09%. To be fair, Powell did make some more hawkish points during his speech, but when he did it was generally in line with comments we’d already heard before. For instance, he said that the “ultimate level of rates will need to be somewhat higher than thought at the time of the September meeting”, but this was in line with his language from the November FOMC press conference. Separately, he said that restoring price stability would likely “require holding policy at a restrictive level for some time”, but again this mirrored his remarks at the Jackson Hole speech back in August. So the incremental news was in a slightly more dovish direction. As a result of the speech, investors moderated their views on the likely pace of rate hikes over the months ahead, with terminal rate pricing down from 5.01% the previous day to 4.92% by the close yesterday. In the meantime, the rate priced for end-2023 came down by an even larger -21.3bps on the day to 4.43%. That prompted a substantial fall in Treasury yields across the curve, with the 10yr yield down -13.9bps on the day to 3.61%, whilst the more policy-sensitive 2yr yield was down -16.3bps to 4.31%. For equities the reaction was buoyant as well, with the S&P 500 up +3.09% on the day to its highest level since mid-September. The advance was incredibly broad-based, but was led by the more cyclical sectors, with the NASDAQ (+4.41%) and the FANG+ Index (+7.33%) seeing even larger gains. Ahead of Powell’s speech, the latest US data releases painted a mixed picture on the state of the economy. First, the number of job openings in October fell to 10.334m (vs. 10.25m expected), a sign that labour demand was continuing to decline. That meant that the number of job openings per unemployment fell to 1.71 in October, which is the lowest since November 2021. Furthermore, the quits rate of those voluntarily leaving their job (which is correlated with wage growth) fell back to 2.6% in October, and that’s the lowest it’s been since May 2021. From the Fed’s perspective it’s a positive sign in that inflationary pressures from the labour market might be abating, but this is still a very tight labour market compared to the pre-pandemic world of 2019. Earlier in the day, we also had some more negative data on the growth side, since the MNI Chicago PMI for November fell back to just 37.2 (vs. 47.0 expected). Apart from the pandemic months of April and May 2020, that’s the worst reading for that measure since early 2009, back when the economy was just beginning to emerge from the global financial crisis. In addition, we got the ADP’s report of private payrolls ahead of tomorrow’s jobs report, which showed the slowest monthly growth since January 2021, at just +127k in November (vs. +200k expected). So that echoes the more negative readings we’ve already had from the flash PMIs for November last week. One small piece of good news came from the more backward-looking data for Q3, with the second estimate of GDP revised upwards to show growth at an annualised +2.9% (vs. 2.6% previous estimate). Over in Europe, we had some better news on the data side, since the flash estimate for Euro Area CPI fell to +10.0% in November, which was beneath the +10.4% reading expected, and down from a record +10.6% in October. It was also the first time in over a year that Euro Area inflation had slowed relative to the previous months, and the downside surprise will offer some support to the more dovish voices at the ECB ahead of their meeting in just a couple of weeks’ time. Nevertheless, our European economists still expect inflation to remain elevated through next year, and their forecasts show it remaining at more than double the ECB’s 2% target throughout 2023, only falling to 4.8% by December 2023. Some of the details from yesterday’s release were also a bit less promising than the headline, with core CPI holding steady at a record +5.0%. Investor expectations for the ECB were little changed in response to the release, having already reacted to the downside surprises in the country-specific releases on Tuesday. In fact sovereign bond yields actually moved higher across the continent, as they had in the US prior to Fed Chair Powell’s speech, and yields on 10yr bunds (+0.9bps), OATs (+1.3bps) and BTPs (+5.3bps) all moved higher on the day. Equities also put in a pretty strong performance, although they closed ahead of the subsequent bounce in the US, leaving the STOXX up +0.63%. Overnight in Asia, the optimism from the US has continued and equity markets are rallying across the region. Chinese equities are leading the outperformance, with the Hang Seng (+1.36%), the CSI 300 (+1.31%) and the Shanghai Composite (+0.66%) all seeing solid gains. Those moves have also been supported by comments from China’s Vice Premier Sun Chunlan, who said that “As the omicron variant becomes less pathogenic, more people get vaccinated and our experience in Covid prevention accumulates, our fight against the pandemic is at a new stage and it comes with new tasks”. That was seen by investors as another signal that China could be inching away from the zero Covid strategy. Elsewhere in the region, equities are also trading in positive territory, with the Nikkei (+1.13%) and the KOSPI (+0.28) advancing. In addition, US and European equity futures are pointing to further gains ahead, with those on the S&P 500 up +0.20% this morning. In terms of yesterday’s other data, German unemployment rose by +17k in November (vs. +13.5k expected), which took the unemployment rate up to 5.6%. Over in the US, the latest data on pending home sales showed a 5th consecutive monthly decline in October, which takes them to their lowest level in over a decade if you exclude the pandemic month of April 2020. To the day ahead now, and data releases include the global manufacturing PMIs for November, German retail sales for October, the Euro Area unemployment rate for October, the US weekly initial jobless claims, personal income and personal spending for October, and the ISM manufacturing for November. Otherwise, central bank speakers include the Fed’s Logan, Bowman and Barr, as well as the ECB’s Lane. Tyler Durden Thu, 12/01/2022 - 07:12.....»»

Category: worldSource: nytDec 1st, 2022