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Exclusive: U.S. moves to cut Huawei off from global chip suppliers

The Trump administration on Friday moved to block shipments of semiconductors to Huawei Technologies from global chipmakers, in an action that could ramp up tensions with China......»»

Category: topSource: reutersMay 15th, 2020

4 Diversified Chemical Stocks to Watch Amid Industry Woes

Raw material cost pressure and demand worries due to chip shortage and the slowdown in China pose headwinds for the Zacks Chemicals Diversified industry. APD, ALB, UNVR and IOSP are poised to survive the industry challenges. The Zacks Chemicals Diversified industry is grappling with raw material cost inflation as well as higher supply-chain, energy and logistics costs, made worse by the Russia-Ukraine conflict. Semiconductor shortage, which is hurting the automotive sector, and pandemic-related restrictions in China may also impact demand for chemicals. Industry players like Air Products and Chemicals, Inc. APD, Albemarle Corporation ALB, Univar Solutions Inc. UNVR and Innospec Inc. IOSP are banking on strategic measures, including operating cost reductions and aggressive price hikes to tide over the challenging environment.About the IndustryThe Zacks Chemicals Diversified industry consists of manufacturers of basic chemicals, plastics, specialty chemicals and agricultural chemicals. Companies in this space serve a host of end markets, such as automotive, building & construction, transportation, electronics, aerospace and agriculture. Basic chemicals are produced in large quantities, and include petrochemicals and intermediates (such as ethylene, propylene and benzene), polymers (including plastic resins such as polyethylene, polypropylene and polyvinyl chloride), and inorganic chemicals (such as chlorine, caustic soda and titanium dioxide). Specialty chemicals that include catalysts, specialty polymers and coating additives are used in specific fields based on their performance. Agricultural chemicals include herbicides, fungicides and insecticides that are used to protect crops from disease, pests and weeds.What's Shaping the Future of the Chemicals Diversified Industry?Higher Input Costs Pose Margin Headwinds: The industry players are exposed to cost pressure associated with raw materials resulting from short supply. These companies also face challenges arising from higher supply-chain and logistics costs. The disruption in the supply chain has pushed up the prices of inputs. Russia's invasion of Ukraine and new government-mandated lockdowns in China have also put more pressure on the already strained global supply chain. These companies are also facing headwinds from higher energy costs, especially in Europe, which has witnessed a significant spike in costs amid the ongoing war in Ukraine. The lingering impacts of these bottlenecks are expected to continue over the short term. Higher raw material, energy and logistics costs are, thus, likely to hurt the margins of diversified chemical companies.Demand Worries From Chip Crunch, China Slowdown: Companies in the chemical-diversified space face headwinds from the slowdown in the global automotive industry. The semiconductor shortage has led to reduced automotive builds around the world, causing a slowdown in chemical demand in this major market. The Russia-Ukraine conflict has triggered a fresh round of global microchip shortage. Both these countries are major suppliers of raw materials required for global semiconductor production. The chip crisis is unlikely to abate anytime soon, given the impact of the war. The slowdown in automotive production may create a short-term demand headwind. The slowdown in economic activities in China due to the restrictions following a resurgence in COVID-19 infections is also impacting chemical demand. The restrictions in China have resulted in a higher level of near-term economic uncertainty, which may continue to affect chemical volumes.Strategic Actions to Aid Results: The companies in this space are taking a host of strategic measures, including cost-cutting and productivity improvement, operational efficiency improvement and actions to strengthen the balance sheet and boost cash flows. In particular, the industry participants are aggressively implementing actions to bring down costs. These include the reduction of discretionary spending and traveling expenses. The industry players are also raising selling prices to counter raw material and logistics cost inflation. These moves are likely to help the industry in sustaining margins amid the prevailing challenges. Zacks Industry Rank Indicates Downbeat ProspectsThe Zacks Chemicals Diversified industry is part of the broader Zacks Basic Materials sector. It carries a Zacks Industry Rank #186, which places it at the bottom 25% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture. Industry Outperforms S&P 500The Zacks Chemicals Diversified industry has outperformed the Zacks S&P 500 composite while modestly underperforming the broader Zacks Basic Materials sector over the past year.The industry has lost 0.7% over this period compared with the S&P 500’s decline of 16.3% and the broader sector’s decline of 0.1%. One-Year Price Performance Industry's Current ValuationOn the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA) ratio, which is a commonly used multiple for valuing chemical stocks, the industry is currently trading at 7.84X, below the S&P 500’s 12.18X and above the sector’s 7.27X.Over the past five years, the industry has traded as high as 13.44X, as low as 5.38X and at the median of 8.03X, as the chart below shows. Enterprise Value/EBITDA (EV/EBITDA) Ratio  Enterprise Value/EBITDA (EV/EBITDA) Ratio  4 Chemicals Diversified Stocks to Keep a Close Eye onInnospec: Colorado-based Innospec makes and markets a wide range of specialty chemicals to markets in the Americas, Europe, the Middle East, Africa and Asia-Pacific. It is witnessing a recovery across all its businesses from the pandemic-led slowdown. Strength in the personal care segment is driving sales in the company’s Performance Chemicals division.IOSP’s investment in capacity expansion will also offer incremental growth opportunities in this business. Its Fuel Specialties unit is benefiting from the expansion of technologies in areas such as renewable diesel, low-sulfur marine fuel and gasoline direct injection engines.Innospec carrying a Zacks Rank #2 (Buy), has an expected earnings growth rate of 30.4% for the current year. The Zacks Consensus Estimate for IOSP's current-year earnings has been revised 5.7% upward over the last 60 days. The company beat the Zacks Consensus Estimate for earnings in each of the last four quarters at an average of roughly 25.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.  Price and Consensus: IOSP  Air Products: Based in Pennsylvania, Air Products is a leading industrial gases company. It is benefiting from investments in high-return projects, new business deals, acquisitions and productivity initiatives. It remains committed to its gasification strategy and is executing its growth projects. These projects are expected to be accretive to earnings and cash flows.Air Products is also boosting productivity to improve its cost structure. APD is seeing the positive impacts of its productivity actions. Benefits from additional productivity and cost improvement programs are likely to support its margins. Air Products also has been benefiting from higher pricing. Higher merchant demand is also driving its volumes.Air Products, a Zacks Rank #3 (Hold) stock, has expected earnings growth of 9.3% for the current fiscal year. APD beat the Zacks Consensus Estimate in each of the trailing four quarters. In this time frame, it has delivered an average earnings surprise of roughly 1.7%. Price and Consensus: APD  Albemarle: North Carolina-based Albemarle is a premier specialty chemicals company with leading positions in attractive end markets globally. It is benefiting from higher volumes in its lithium business on continued recovery in global economic activities. Healthy customer orders and plant productivity improvements are supporting volumes. Higher lithium prices due to tight market conditions are also supporting its performance. Its bromine business is also gaining from higher demand, a rebound in certain end markets, higher pricing and cost-saving actions.ALB is seeing strong demand for flame retardants. The company is also strategically executing its projects aimed at boosting its global lithium derivative capacity. It remains focused on investing in high-return projects to drive productivity. Albemarle is also benefiting from cost-saving and productivity initiatives.Albemarle, currently carrying a Zacks Rank #3, has expected earnings growth of 420.3% for the current year. ALB has also surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.6%. Price and Consensus: ALB  Univar: Illinois-based Univar is a leading commodity and specialty chemical and ingredient distributor. It is benefiting from market share gains, operational execution, acquisitions, cost minimization and a robust liquidity position. UNVR remains committed to cost-cutting, expense management and productivity actions that are helping it minimize operational costs and boost margins.The acquisition of Nexeo Solutions has also enhanced the company’s capabilities and accelerated its ability to create significant value for customers, supplier partners, employees and shareholders. The buyout of Brazilian ingredients and specialty chemicals distributor Sweetmix is also anticipated to drive growth for the company’s Food Ingredients portfolio in Brazil and generate growth and cost synergies.Univar, carrying a Zacks Rank #3, has a projected earnings growth rate of 56.8% for the current year. UNVR's consensus estimate for the current year has been revised 2.7% upward over the last 60 days. It beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 16.8%. Price and Consensus: UNVR   7 Best Stocks for the Next 30 Days Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops." Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.8% per year. So be sure to give these hand-picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Air Products and Chemicals, Inc. (APD): Free Stock Analysis Report Albemarle Corporation (ALB): Free Stock Analysis Report Innospec Inc. (IOSP): Free Stock Analysis Report Univar Solutions Inc. (UNVR): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksDec 16th, 2022

Futures Trade In Narrow Range Ahead Of Tech Giant Earnings

Futures Trade In Narrow Range Ahead Of Tech Giant Earnings US equity futures erased modest earlier gains and traded modestly in the red, after rebounding from session lows as they struggled for direction while investors awaited major earnings reports and weighed last week's conflicting comments from central bankers who are now in a blackout period. As of 7:30am, contracts on the S&P 500 dropped 0.1% to 3,803 after positive corporate results boosted the underlying index on Monday; on Tuesday, Coca-Cola, General Motors and United Parcel Service all beat analysts’ earnings estimates, while 3M and General Electric fell short.  Alphabet Inc. and Microsoft Corp. are among major companies still reporting after the close. Nasdaq 100 futures were flat, with traders awaiting earnings after market hours from tech giants including Microsoft, Texas Instruments and Alphabet. Treasury yields tumbled for a second day and the dollar was steady even as the Yuan plunged to the lowest on record after the weakest PBOC fix since 2008. “While the earnings season could still produce many surprises, the outcome so far is consistent with our advice to favor more defensive parts of the market, such as healthcare and consumer staples,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. In pre-market trading, US-listed Chinese stocks staged a limited rebound after losing almost $80 billion of market value in a record selloff that pushed the shares to their lowest level in over nine years. Major internet companies including Alibaba, JD.com and Pinduoduo gained at least 2% each. Facebook Meta Platforms was slightly weak after a global outage on its WhatsApp messaging service, while broker KeyBanc cut price targets on the stock, as well as on Alphabet, citing skepticism of revenue growth amid mounting concerns of a downturn in 2023. Here are some other notable premarket movers: Weber stock surged 22% in US premarket trading as BDT Capital Partners has proposed to buy the shares it doesn’t already own for $6.25 per share in cash. Mullen Automotive rose as much as 20% in US premarket trading, set to extend its four-day rising streak. Shares closed up by about a third on Monday after the firm secured exclusive sales rights for the I-GO electric vehicle, in select European markets. Taysha Gene Therapies shares surge as much as 60% in US premarket trading, putting the stock on track for a record gain, after Japanese pharmaceutical company Astellas Pharma said it will take a 15% stake in the US gene therapy developer for $50m. US-listed Chinese stocks rose in US premarket trading on Tuesday, following a rebound across Hong Kong peers which bounced back from Monday’s historic selloff. Alibaba (BABA US) +2.5%, Baidu (BIDU US) +2.9%, JD.com (JD US) +3.3%, Nio (NIO US) +2%, Li Auto (LI US) +3%, XPeng (XPEV US) +2.7% Linde shares dropped 1.9% in US premarket trading after the company said holders will vote on delisting shares from the Frankfurt Stock Exchange. The move would force Europe-only investors to sell their stakes, according to analysts. Packaging Corp shares fell 1.7% in US postmarket trading on Tuesday as the company’s 4Q guidance was lighter than expected, analysts said, pointing to weaker demand as the containerboard maker grapples with the impact of cost inflation, overshadowing a beat in 3Q adjusted earnings per share. Crown Holdings shares fell 9.4% in US after-hours trading on Monday with analysts pointing to a slowdown in demand as the main reason for the packaging products maker’s lowered guidance for both the 4Q and year, alongside a strong US dollar, higher European energy costs and increased interest expense. Keep an eye on Alphabet and Meta (META US) as their price targets were cut at KeyBanc, with the brokerage noting that investors are increasingly skeptical of revenue growth amid mounting concerns of a downturn in 2023. Watch Arista Networks stock as it was cut to neutral from outperform and PT slashed to a street-low $110 from $185 at Credit Suisse, with the broker seeing more challenging dynamics for the cloud networking group into 2023. According to Bloomberg data, about a fifth of S&P 500 companies had posted third-quarter earnings before today, with more than half outperforming estimates. Still, investors are concerned the effects of a slowing economy will be felt further down the line, with the Fed set to raise interest rates next week even as the economy shows signs of flagging. “What we’ve seen throughout the year is that equity risk premia have really compressed,” Christian Mueller-Glissmann, Goldman Sachs managing director for portfolio strategy, said on Bloomberg TV. “That makes you more vulnerable if you disappoint on growth, cash flows, et cetera. For now that hasn’t happened really, but all the lead indicators are pointing to risks in this direction.” Manufacturing and services data for the US underwhelmed on Monday, indicating Federal Reserve rate hikes are beginning to slow activity. Fed officials have entered a blackout period ahead of the central bank’s meeting next week, where it’s expected to raise rates 75 basis points. Investors are starting to speculate that the central bank may be approaching the end of its aggressive tightening campaign. “Investors are getting more confident that inflation will soften as the consumer rethinks massive purchases,” said Edward Moya, a senior markets analyst at OANDA Corp. “Fed rate-hike expectations will remain volatile, but expectations are growing that a weaker economy will let the Fed pause their tightening after the February policy meeting.” “Even if optimism remains alive, investors are likely to need concrete evidence of monetary and economic improvements before driving stock indexes higher,” said Pierre Veyret, a technical analyst at ActivTrades. “Until then, it’s only investors buying rumours.” In Europe, the Stoxx Europe 600 Index erased an early advance, with chemicals the worst-performing sector as Linde Plc dropped after proposing to de-list from the Frankfurt exchange. Spain's IBEX outperforms peers, adding 0.5%, FTSE 100 lags, dropping 0.4%. Banks underperformed as the ECB considers curbing windfall profits from rising interest rates, while HSBC Holdings Plc plunged more than 7% after reporting higher-than-expected charges for possible loan losses. The most notable mover was Adidas, which slumps as much as 3.9%, sinking to lowest since March 2016 after the German sportswear company announced plans to end a partnership with Kanye West, while the firm also received a downgrade from Morgan Stanley. On the plus side, UBS Group AG buoyed financial services after it exceeded earnings estimates, while technology stocks climbed after software developer SAP SE’s third-quarter revenue beat. Here are all the notable European movers: SAP shares gained as much as 4.7% after the software firm reported 3Q revenue and operating profit ahead of estimates, helped by strong growth in its cloud business, with gross margin and backlog strong despite macro uncertainties. Air Liquide climbs as much as 4.7%, the most since March, after company delivered “strong set of results,” Stifel says in note as 3Q revenue beat estimates. UBS Group shares extend gains to as much as 6.0%, the most since June, after it reported net income for the third quarter that beat the average analyst estimate, driven by the investment bank and global wealth management divisions, which benefited from higher rates. Universal Music Group rises as much as 9.8%, the most since IPO in 2021, after Citi wrote that Apple’s price increase would “give comfort to UMG bulls.” Novartis shares shake off early losses to trade steady after the company released 3Q results that were broadly in line with expectations, with a small increase to the outlook for generics unit Sandoz a positive surprise, analysts say. Linde shares drop as much as 7.9%, the most intraday since February, after saying holders will vote on delisting shares from the Frankfurt Stock Exchange. HSBC shares drop as much as 8.2% in London, the most in six months, after the lender announced a change of chief financial officer and reported higher-than- expected loan loss charges in its third-quarter results. Alfa Laval drops as much as 11.3%, the most since May, as 3Q showed a “big margin miss,” impacted by weak trading in the Marine and Food & Water divisions, Citi writes. Viaplay shares drop as much as 31%, the most on record, after Nordic streaming company cut its guidance on slower growth in its Nordic business. Earlier in the session, Asian stocks climbed, helped by a rebound in Chinese technology shares that followed Monday’s steep losses in the wake of the Communist Party congress. The MSCI Asia Pacific Index rose as much as 0.9% before paring the advance to 0.3%, boosted by gains in internet giants Alibaba and JD.com. A gauge of Chinese tech stocks erased an early loss of almost 3% to jump by a similar magnitude, as Alibaba Health and JD Health climbed. Tech and materials shares in the broader region fell. Benchmarks in Hong Kong and on the mainland whipsawed in volatile trading, closing marginally lower. Sentiment remains fragile after the dramatic selloff Monday following Xi Jinping’s move to secure his grip on power and amid ongoing concern over the nation’s Covid-zero policy.  “Without reopening, visibility on China’s economy and corporate earnings will remain very low, and risk-off trade in the stock market may continue,” BofA Securities strategists, including Winnie Wu, wrote in a note. Value stocks will likely outperform growth stocks, and the onshore market may outperform offshore, they added. China Budget Gap Widens to 7.16t Yuan as Covid, Property Weigh Vietnamese equities fell before reversing losses after the central bank unexpectedly raised interest rates by another one percentage point. Shares in Japan climbed for a second day amid optimism over corporate earnings and hopes for an eventual slowdown in Federal Reserve interest rate hikes. “We’re certainly staying away from the Chinese market right now because the political scene is not favorable,” Laila Pence, president of Pence Wealth Management, said in an interview on Bloomberg TV. “There’s a lot less risk in the US and just as much upside.” Japanese stocks climbed, following an extended rally in US peers, as investors assessed the potential for good corporate earnings amid continued monetary tightening by the Fed.  The Topix rose 1.1% to close at 1,907.14, while the Nikkei advanced 1% to 27,250.28. Keyence Corp. contributed the most to the Topix Index gain, rising 2.9%. Out of 2,166 stocks in the index, 1,584 rose and 477 fell, while 105 were unchanged. Stocks are getting a boost from the potential slowdown of Fed interest rate hikes, and US earnings “are not that bad,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. “Japanese earnings are not that bad as well, with the weak yen, and price pass-throughs have shown up this quarter so domestic-oriented companies are expected to perform better.” Australia's S&P/ASX 200 index rose 0.3% to close at 6,798.60, extending gains for a second day, as property and financial sectors supported the benchmark. Traders are also awaiting the unveiling of Australia’s budget later on Tuesday. The nation’s budget deficit in fiscal 2023 is forecast to be less than half the level anticipated by the previous administration in March, bolstered by windfall revenue from surging commodity prices. Read: Australia Budget Expected to Rock Stocks From Housing to Mining In New Zealand, the S&P/NZX 50 index rose 1.1% to 10,902.31. In rates, treasuries traded at the best levels of the day into early US session, following wider gains across bunds where long-end of the curve is richer by up to 10bp. Treasuries rally led by intermediates, stretching 5s30s spread past 4bp and onto steepest levels since Sept. 13. Focal points of US session include start of auction cycle with 2-year at 1pm New York time. US yields richer by as much as 7bp across 5- to 7-year sector with 2s5s30s fly dropping 5bp as belly outperforms; 10-year yields around 4.1585% with bunds outperforming by 2.5bp and gilts underperforming by 2.5bp anticipating new Prime Minister Rishi Sunak’s fiscal plans over the coming days. German bonds rally ahead of the ECB rate decision this week, led by the long-end. Bunds 10-year yield down ~6.5bps to 2.26%. Peripheral spreads tighten to Germany with 10y BTP/Bund narrowing 5.2bps to 219.8bps.  The US auction cycle includes $42b 2-year note followed by $43b 5-year Wednesday and $35b 7- year Thursday. WI 2-year around 4.455% is above auction stops since 2007 and ~16.5bp cheaper than last month’s, which tailed by 1.6bp. In FX, the Bloomberg Dollar Spot Index steadied and the greenback traded mixed versus its Group-of-10 peers. Here's how all other majors did: The pound led gains and UK government bonds advanced, led by the long end, as investors awaited more details on economic and fiscal policy from the incoming prime minister, who takes office later in the day. The euro erased gains, after rising toward $0.99 in Asian trading. Bunds extended yesterday’s advance, while Italian bonds stretched gains to a fourth session, the longest run since November 2021, as money markets pared ECB tightening bets ahead of Thursday’s policy outcome. Germany Oct. IFO business confidence index came in at 84.3 versus estimate 83.5. The yen was little changed as traders remained wary of further intervention by authorities, while a drop in US yields weighed on the greenback. Super-long government bonds rallied. Front-end volatility in dollar-yen retreats sharply as the latest round of Japanese intervention makes the case for tighter ranges. The Australian dollar inched up. Gains were tempered by elevated Covid case numbers in China and iron ore falling to its lowest level since November. The New Zealand dollar swung to a loss in European trading; the government said it’s made no decision yet on raising the minimum wage for the next year. The onshore yuan fell by the most among Asian peers to its lowest level since 2007 after the PBOC’s weaker fixing was interpreted by traders as a sign for a weaker currency. One-month implied volatility of USD/CNH rose to 10.46%, the highest on record in data back to 2011. China’s foreign exchange regulator is consulting some banks on positioning in the currency market as the yuan declines to the lowest levels since 2008, Reuters reports, citing unidentified people familiar with the matter. PBOC adjusted rules to allow companies to borrow more from overseas, enabling more foreign capital inflows at a time when the currency is plunging to fresh 2008 lows against the dollar. In commodities, WTI trades within Monday’s range, falling 0.6% to near $84 with crude benchmarks pressured amid the general risk tone with sentiment slipping throughout the morning amid a resilient USD and Ifo pointing to a German recession. Currently, WTI and Brent Dec contracts are lower by just over 1% or USD 1/bbl and reside at session lows of USD 83.50/bbl and USD 92/bbl respectively. IEA's Birol said the OPEC+ decision to cut output by 2mln BPD is a risky one especially as several economies are on the brink of recession; the Global LNG market to tighten further next year as European imports increase and China's appetite may rebound, via Reuters. Bitcoin is pressured but within a narrow USD 200 range that is itself a similar magnitude above the USD 19k mark. Looking to the day ahead now and economic indicators in store will feature the Conference Board consumer confidence index for October, Richmond Fed manufacturing index and August FHFA house price index for the US. In Europe, we will get October Ifo survey for Germany and the Eurozone bank lending survey will also be published. The earnings line-up for today will be key, featuring most prominently Microsoft and Alphabet after the US market close. Earlier in the day, we will hear from Coca-Cola, General Electric, General Motors and UPS. Other notable names reporting will feature Visa, Novartis, Texas Instruments, Raytheon Technologies, HSBC, SAP, 3M, UBS, ADM, Valero Energy, Chipotle, Biogen, Halliburton, Spotify and Norsk Hydro. Market Snapshot S&P 500 futures down 0.2% at 3,800.00 STOXX Europe 600 up 0.2% to 402.68 MXAP up 0.4% to 134.79 MXAPJ little changed at 430.13 Nikkei up 1.0% to 27,250.28 Topix up 1.1% to 1,907.14 Hang Seng Index little changed at 15,165.59 Shanghai Composite little changed at 2,976.28 Sensex down 0.1% to 59,750.45 Australia S&P/ASX 200 up 0.3% to 6,798.62 Kospi little changed at 2,235.07 German 10Y yield down 2.6% at 2.27% Euro down 0.1% at $0.9863 Brent Futures down 1.2% to $92.13/bbl Gold spot down 0.4% to $1,642.86 U.S. Dollar Index little changed at 112.031 Top Overnight News from Bloomberg Two younger officials promoted to the Communist Party’s ranks are standing out as the most likely candidates to be tasked with steering the People’s Bank of China through challenging economic times The era of negative-yielding global bonds looks tantalizingly close to an end, with Japan’s two-year yield on the cusp of breaking above zero for the first time since 2015 New Zealand’s central bank is “hopeful” that inflation has peaked, even though it was higher than anyone expected in the third quarter, Chief Economist Paul Conway said China’s central bank adjusted rules to allow companies to borrow more from overseas, enabling more foreign capital inflows at a time when the currency is plunging to fresh 2008 lows against the dollar The offshore yuan fell to a fresh record low after the People’s Bank of China loosened its grip on the tightly controlled fixing by setting the rate at the weakest level in 14 years New Zealand’s central bank is “hopeful” that inflation has peaked, even though it was higher than anyone expected in the third quarter, chief economist Paul Conway said Australia’s budget deficit in fiscal 2023 is set to be less than half the level anticipated by the previous administration in March, bolstered by windfall revenue from surging commodity prices Oil steadied as traders assessed near-term supply tightness in the crude market and broad appetite for risk assets including commodities WhatsApp Appears to Have Outage, With Thousands Reporting Issues US Stays China Course, Works on Biden Meeting as Xi Cements Grip Carney Addresses ‘Tension’ After Bankers Balked at CO2 Proposal Oil Steadies as Market Tightness Vies With Slowdown Concerns Fed Is Losing Billions, Wiping Out Profits That Funded Spending China Rout Puts Focus on Stocks With Foreign Holdings, BofA Says Carnival Unit Halts Asia Cruises as China Covid Zero Bites Xi Rewards Combat-Ready China Generals Amid Taiwan Tensions Warner Bros. Discovery Expects Billions in Restructuring Charges Barrack Testifies Trump Presidency Was ‘Disastrous’ for Him Sunak Expected to Keep Hunt as He Readies New UK Cabinet Tesla Options Hint at Trouble Ahead With Bets Around $200 State Street’s CEO Says Private Credit Can Lower Risk for Banks VIX’s Tandem Swings With S&P 500 Show Options Obsession Persists What the Alzheimer’s Drug Breakthrough Means for Other Diseases A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks eventually traded higher following a firm lead from Wall Street, with the Chinese market experiencing a choppy session overnight. ASX 200 held onto gains as the clock ticks down for the unveiling of the Australian Federal Budget, with gains in the index led by financials, telecoms and healthcare. Nikkei 225 remained above the 27,000 mark as its manufacturing stocks kept the index buoyed. KOSPI was supported by the chip sector but gains were capped as South Korean President Yoon said North Korea has completed preparations for a seventh nuclear test, whilst South Korean consumer inflation expectations also ticked up from the prior month. Hang Seng and Shanghai Comp were volatile throughout the session and both indices swung between gains and losses with the former dipping under the 15,000 mark at one point - desks pointed to continued angst following the CCP National Congress. The indices later surged whilst there were unconfirmed reports of Chinese intervention in the stock market. Top Asian News US Treasury Secretary Yellen is unaware of Japan's FX intervention and Tokyo hasn't informed them. PBoC relaxed cross-border funding by raising the macroprudential parameter to 1.25 from 1. PBoC injected CNY 230bln via 7-day reverse repos at a maintained rate of 2.00% for a daily injection of CNY 228bln China State Planner said China is to promote the expansion of foreign investments focusing on the manufacturing industry. Japan kept its overall economic view unchanged that the economy is picking up moderately, and added that "full attention" must be paid to market volatility. Govt raised Capex view for the first time in eight months; downgrades view on imports. Japanese Finance Minister Suzuki does not comment on daily forex moves, ready to take appropriate action on FX movements if necessary; watching FX with a high sense of urgency. Suzuki said they are in constant communication with US authorities and he is aware of US Treasury Secretary Yellen's comments that she did not know about Japan's intervention. Japanese government official citing BoJ Governor Kuroda said sharp one-sided JPY weakening is not desirable for the economy; BoJ will work closely with govt to monitor financial and currency market moves and their impact on Japan's economy and prices Japanese PM Kishida is to appoint former Health Minister Goto as the new economy minister to replace Yamagiwa, via NHK. Japan FX intervention on October 24th has been estimated at JPY 700-900bln, according to calculation provided by a market source to Reuters. South Korean Oct 12-month consumer median inflation expectation 4.3% (prev. 4.2% in Sep), according to the BoK. RBNZ Chief Economist said the RBNZ anticipates that inflationary pressures will ease and notes that falling house prices are expected to slow consumption. Australian Federal Budget: 2022/23 budget deficit seen at 1.5% of GDP, 2023/24 seen at 1.8% of GDP, 2024/25 seen at 2.0% of GDP. Click here for full details. European bourses are on the backfoot despite a firmer open as participants digest numerous heavyweight earnings and the latest Ifo ahead of key US prints; Euro Stoxx 50 -0.3%. Sectors post outperformance in Media and Tech following Apple's pricing update and SAP +4.0%, respectively, while Chemicals are pressured as heavyweight Linde considers a Frankfurt delisting. Stateside, futures are pressured and having been moving in-tandem with European bourses as we look to heavyweight US names; ES -0.4%. United Parcel Service Inc (UPS) Q3 2022 (USD): EPS 2.96 (exp. 2.84), Revenue 24.2bln (exp. 24.32bln). Top European News Sky News sources suggest Jeremy Hunt is to remain UK Chancellor, while Penny Mordaunt wants the Foreign Secretary job. BoE Chief Economist Pill says might have benefitted if "other institutions" had respected UK institutional framework in recent weeks. EU has warned that a price cap on natural gas will need the involvement of the UK and Switzerland for it to be effective, according to Bloomberg citing sources. German gov't increases tax revenue forecast for 2022-2026 by EUR 110bln, via Handelsblatt. FX DXY rangy around the 112.000 handle and Dollar mixed against major peers, Pound reclaims 1.1300+ status as new PM Sunak prepares to take the reins from Truss. Loonie lagging ahead of BoC policy meeting on Wednesday as WTI retreats further. Aussie hovers above 0.6300 vs the Buck post-as anticipated Budget. Euro remains confined between tight 0.9899-52 lines against the Greenback with little reaction to mixed Ifo and ECB lending surveys. PBoC set USD/CNY mid-point at 7.1668 vs exp. 7.1348 (prev. 7.1230); weakest since 2008 China's FX regulator surveyed banks regarding Yuan positioning as the currency tumbles, via Reuters citing sources. Turkish Finance Minister held a meeting with the bank association and senior executives on Monday, via Reuters citing sources; subsequently confirmed. Fixed Income Bonds resume recovery rally as Bunds breach 137.00 and Bobls scale 119.00 irrespective of a weak 5 year auction. Gilts establish firmer foothold above 100.00 as new UK PM takes over the helm and US Treasuries flip from bear-steepening to bull-flattening ahead of 2 year note supply. German Finance Agency Diemer says volatility is making it harder for primary dealers to take risk in bidding within German auctions, via Reuters. Commodities Crude benchmarks are pressured amid the general risk tone with sentiment slipping throughout the morning amid a resilient USD and Ifo pointing to a German recession. Currently, WTI and Brent Dec contracts are lower by just over 1% or USD 1/bbl and reside at session lows of USD 83.50/bbl and USD 92/bbl respectively. IEA's Birol said the OPEC+ decision to cut output by 2mln BPD is a risky one especially as several economies are on the brink of recession; the Global LNG market to tighten further next year as European imports increase and China's appetite may rebound, via Reuters. The European Commission is to discuss a proposal today for a permanent fix to decouple gas from electricity prices, according to Politico. Spot gold is tarnished by ongoing USD strength with the DXY remaining resilient around the 112.00 mark after a brief move below. As such, the yellow metal remains below the 10-DMA. Aluminium is faring better than the likes of copper at present and perhaps deriving some support from Norsk Hydro announcing it is to commence a partial curtailment of its Norwegian aluminium smelters Geopolitical Russia will regard the use of a "dirty bomb" by Kyiv as an act of nuclear terrorism; Russia said it has not intended nor intends to use nuclear weapons in Ukraine, according to a letter cited by Reuters. US DoJ said four Chinese nationals, including three intelligence officials, have been charged in a spy recruitment campaign, according to Reuters. South Korean President Yoon said North Korea has completed preparations for a seventh nuclear test, via Yonhap. US Event Calendar 09:00: Aug. S&P CS Composite-20 YoY, est. 14.05%, prior 16.06% S&P/CS 20 City MoM SA, est. -0.80%, prior -0.44% FHFA House Price Index MoM, est. -0.6%, prior -0.6% 10:00: Oct. Conf. Board Expectations, prior 80.3 Conf. Board Present Situation, prior 149.6 Conf. Board Consumer Confidenc, est. 106.0, prior 108.0 10:00: Oct. Richmond Fed Index, est. -5, prior 0 DB's Jim Reid concludes the overnight wrap I’m off to New York this morning as soon as I press send on this. I've been told that the kids are queueing up to replace me and sleep on my side of the bed when I'm gone. So much so that I'm not sure I'll get my old slot back! It’ll be my first visit to NY since just prior to the pandemic. That's a lot of missing products from the Apple store to make up for. However Sterling's fall, and inflation since then will likely temper my enthusiasm for the new iPad out on Thursday! Talking of inflation, this morning we've just put out a note looking at what normally happens next when inflation hits 8% through history using 50 DM and EM countries, around 320 unique observations and covering up to a 100 years of data. With consensus being so bad at predicting inflation in this cycle we thought we'd look at what history says. Without too many spoilers, it would be unusual to see inflation now fall back as quickly as consensus believes over the next 2 years. In fact using data from the last 50 years (the fiat money era) current consensus forecasts would be in the most optimistic decile of observations over this period. Whether consensus or the median observation through history is correct will have profound implications for assets over the next few months and years. See the short report here for more. On a related subject, we wondered in yesterday's EMR whether the WSJ article on Friday would mark the 6th attempt this year to try to pre-empt a Fed pivot after Friday's reaction to the story. The reality is though that there hasn't been enough follow-through in US rates pricing yesterday for this to yet qualify as a 6th attempt. In fact, we saw a part reversal of Friday’s move yesterday. Indeed, even with a monster rally in UK bonds, US rates edged back up with 2 and 10yr yields +4.5bps and +3.2bps, respectively. Implied rates from the December 2022 - July 2023 Fed contracts increased c.+2-6bps. In Asia, 2yr and 10yr UST are back -1.2bps and -4bps lower, respectively, though. Gilts have been the standout rates mover over the last 24 hours though with 2yr and 10yrs around -37bps and -31bps lower yesterday as Rishi Sunak's path to PM was cleared by all others dropping out. 2yr notes had their largest gain in nearly 30 years. Sunak will be formally appointed today. The rates repricing has also tempered expectations of BoE hikes beyond the next couple of meetings, amid hopes for greater fiscal discipline, with the June 23 contract falling 21bps. For further reference, from morning trading just before the mini-budget on September 23rd, 2yr, 10yr and 30yr gilts are now -15.1bps, +24.8bps and -1.5bps, respectively, with GBP c.1% higher. A massive round trip. Interestingly, 10yr UST and 10yr Bunds are +51bps and +40bps over the exact same period, so Gilts have outperformed. Although US rates haven't followed through on Friday's price action, European equivalents followed Gilts and perhaps reacted to weak PMIs (more below) and the UK move more. 10yr Bunds (-8.4bps), OATs (-11.0bps) and BTPs -16.4bps rallied hard. 2yr yields also declined (-4.2bps in Germany, -4.3bps in France and -12.2 in Italy) ahead of the ECB’s meeting on Thursday. US stocks carried on their recent bounce, shrugging off weak PMIs there too, with the S&P 500 (+1.19%) and Dow Jones (+1.34%) finishing in the green for the day amid gains in health care (+1.91%), IT (+1.38%) and staples (+1.79%). Only two sectors ended up with losses on the day – real estate (-0.1%) and materials (-0.62%) – and 82% of S&P 500 members were in the green. News of Tesla (-1.49%) lowering prices on its cars sold in China amid competitive pressures weighed on the Nasdaq (+0.86%) as well. Watch out for an upcoming 48-hour blitz of tech earnings with 20% of the S&P 500 market cap reporting across 5 names. We have Microsoft, Alphabet (after hours today), Meta (tomorrow) and Apple and Amazon (Thursday). European equities also rallied amid a -15% fall in European natural gas prices to a below the 100 euro mark for the first time since June amid milder weather (not on my weekend break away!!) and good storage metrics. Indeed, "next hour" delivery TTF gas contracts briefly traded in negative territory yesterday having been over €300 in late August. With storage nearly full and the weather warm, there is very limited immediate delivery demand. This doesn't change the medium-term problems but for now there's a glut of near-term gas. The Stoxx 600 rallied +1.40%, led by utilities (+2.68%) and IT (+2.20%), with no sector in the red on the day. Bourses of Spain (IBEX +1.79%) and Italy (FTSE MIB +1.93%) were the relative outperformance but the DAX (+1.58%) and CAC 40 (+1.59%) also posted solid gains. That's it for the good news as the global flash PMIs painted a rather bleak picture on both sides of the Atlantic. Perhaps the most glaring miss was that for the US, with the manufacturing gauge (49.9) sliding into contractionary territory for the first time since June 2020 from September’s 52.0 reading and way off the 51.0 median estimate on Bloomberg. The services PMI reading disappointed even more, falling to 46.6 from 49.3 and defying expectations of a mild rebound to 49.5. Adding to the gloom, the employment component of the index fell to 49.4 from 52.2 and business expectations contracted to 57.4 (vs 66.7), the lowest since June and September of 2020, respectively. A silver lining came from a fall in input prices in the manufacturing PMI (63.9 vs 65.2), the lowest level since November 2020, although the measure crept higher for services (68.5 vs 67.7). Overall, this meant a fourth month in a row of being in contractionary theory for the composite. Manufacturing PMIs disappointed to the downside in Europe as well, falling to 46.6 from 48.4 (vs 47.9 expected) for the Eurozone aggregate and to 45.7 in Germany (vs 47.0 expected). Over in the UK, the services gauge also had a solid miss, falling from 50.0 to 47.5 (vs 49.0 expected), in addition to the manufacturing index (45.8 vs 48.0 expected). Amid these results, France stood out by having a “breakeven” composite of 50.0 on the back of an upward beat on manufacturing (47.4 vs 47.0 expected) and a miss on services (51.3 vs 51.5). Overnight in Asia, major bourses are catching up to yesterday’s price action in the US, with the Nikkei (+1.25%) and the Kospi (+0.29%) in the green and Chinese assets recording a volatile session after yesterday’s rout that saw the Hang Seng falling by -6.36%, the most in a day since the financial crisis. As of this morning, the index is notching a rebound of +0.87% on hopes of prior overselling and further parsing of the Communist Party Congress while the Shanghai composite is also higher (+0.74%). Dip buying is especially strong in the Hang Seng Tech index (+3.95%) which declined by nearly -10% yesterday and today’s volatility was boosted by news of PBOC’s multi-year-low fixing which sent the onshore yuan below the 7.30 level, the weakest since the financial crisis. Little of this is currently spilling over into US assets, with S&P 500 futures broadly flat. To the day ahead now and economic indicators in store will feature the Conference Board consumer confidence index for October, Richmond Fed manufacturing index and August FHFA house price index for the US. In Europe, we will get October Ifo survey for Germany and the Eurozone bank lending survey will also be published. The earnings line-up for today will be key, featuring most prominently Microsoft and Alphabet after the US market close. Earlier in the day, we will hear from Coca-Cola, General Electric, General Motors and UPS. Other notable names reporting will feature Visa, Novartis, Texas Instruments, Raytheon Technologies, HSBC, SAP, 3M, UBS, ADM, Valero Energy, Chipotle, Biogen, Halliburton, Spotify and Norsk Hydro. Tyler Durden Tue, 10/25/2022 - 08:10.....»»

Category: blogSource: zerohedgeOct 25th, 2022

Semiconductors Emerge As Battleground In US-China Race

Semiconductors Emerge As Battleground In US-China Race Authored by Jessica Mao via The Epoch Times (emphasis ours), 300-millimeter wafers are pictured in a machine for coating with gold in a clean room during the mass production of semiconductor chips at the Bosch's semiconductor plant in Dresden, eastern Germany, on July 12, 2022. (Photo by Jens Schlueter/AFP via Getty Images) As every aspect of modern life becomes more and more digitized, not just the economies of nations but their sovereign influence will rely more and more on the command of technology. Although the United States and China are not engaged in traditional warfare, they are engaged in a war of ideas, trade, and technology, especially in semiconductor hegemony, where both sides are battling for supply and advancement. In recent years, the United States has made a series of moves to hinder and outpace Chinese development in semiconductors, including persuading Asian semiconductor powerhouses to join its alliance, passing a massive spending bill to aid domestic chip production, and banning exports of high-end chipmaking equipment to China. In late July, the United States expanded its bans on exports to China of equipment that can make semiconductors up to 14 nanometers in size, according to major U.S. chipmaking equipment suppliers, such as Lam Research Corp. and KLA, who were notified by the government about the expanded restrictions. Previously, the United States had banned the sale of equipment that can produce chips of 10 nm or smaller to Chinese chip manufacturers. Generally in semiconductor fabrication, the smaller the process technology, the more advanced the chip. The smaller the technology node, the higher the transistor density and the lower the chip power consumption, resulting in higher performance. However, the smaller manufacturing process requires more advanced material and equipment, and will incur a greater cost in R&D and production. Semiconductors are seen on a circuit board that powers a Samsung video camera at the Samsung MOBILE-ization media and analyst event in San Jose, Calif., on March 23, 2011. (Justin Sullivan/Getty Images) The development follows a historic $52 billion bill passed by U.S. congress on July 27 to aid domestic chip makers in research, development, and production volume. One of the conditions is that the companies receiving the funds will not increase advanced chip production in mainland China. The U.S. Department of Commerce said the tightening policies impair “PRC efforts to manufacture advanced semiconductors to address significant national security risks to the United States.” Meanwhile, the United States is also reportedly planning to ban the exports of U.S. chipmaking equipment that produces advanced NAND chips to major Chinese chipmakers, such as Yangtze Memory Technologies Corp (YMTC). YMTC is a state-owned company and China’s only storage NAND flash memory manufacturer competing with major U.S. manufacturers. Its global market share is about 5 percent. In a report released by the White House in June 2021, YMTC was identified as the “national champion” enterprise of the Chinese regime, having received $24 billion in subsidies from the Chinese government. NAND chips are used to store data in a wide range of electronic devices such as smartphones and personal computers, as well as in the data centers of companies such as Amazon, Facebook, and Google. If the NAND chip initiatives are officially issued, they will be the first time that the United States uses trade restrictions to contain China’s ability to produce non-military use memory chips, broadening the scope of protecting the U.S.’s national security and dealing a massive blow to Chins’s memory chip industry. On Aug. 1, U.S. senators, including Senate majority leader Chuck Schumer (D-N.Y.), requested that the Department of Commerce add YMTC to the U.S. trade blacklist. The move could further hamper the growth of China’s semiconductor industry and protect American companies; the only two U.S. memory chip makers, Western Digital and Micron Technology. The two account for about a quarter of the NAND chip market share. According to a Bloomberg report, the United States is also pushing the Netherlands and Japan to stop the chipmaking equipment suppliers, ASML and Nikon, from selling lithography machines to China. The move could potentially deal a severe blow to major Chinese chipmakers such as Semiconductor Manufacturing International Corp. (SMIC) and Hua Hong Semiconductor Ltd. US CHIPS Act On July 26, the U.S. Senate voted to advance its Chips and Science Bill aimed at boosting domestic semiconductor production and improving technological competitiveness with China. The bill was later passed in the U.S. House of Representatives on July 28 and signed into law by President Joe Biden on Aug. 2. Senate Majority Leader Chuck Schumer (D-N.Y.) speaks alongside a bipartisan group of U.S. Senators, including (L-R) Roger Wicker (R-Miss.); Mark Warner (D-Va.); Todd Young (R-Ind.), and Maria Cantwell (D-Wash.), following the passage of the CHIPS Act, providing domestic semiconductor manufacturers with $52 billion in subsidies to cut reliance on foreign sourcing, at the U.S. Capitol in Washington, D.C., on July 27, 2022. (SAUL LOEB/AFP via Getty Images) The legislation will provide $280 billion in funding to prop up and kickstart domestic semiconductor manufacturing and research; the price tag is far above previous legislation that aimed to provide just $52 billion to manufacturers. Officially dubbed the CHIPS [Creating Helpful Incentives to Produce Semiconductors for America] Act of 2022, the measure would provide tens of billions of dollars in subsidies and tax breaks to technology corporations in an effort to spur new market growth, as well as funding for government-backed tech research. Proponents of the legislation have long said that it’s necessary in order to maintain a competitive edge with China, which is pouring money into its own domestic chip production. The legislation also clarifies that entities receiving U.S. government funding are prohibited from engaging in transactions involving substantial expansion of semiconductor manufacturing in China or any other foreign country of concern for at least ten years after the Act takes effect. These restrictions are designed to prevent chipmakers from significantly expanding the production of chips more advanced than 28nm in China within the next decade. Even though the 28-nanometer chips are a few generations behind today’s advanced semiconductors, they are still widely used in cars, lower-end smartphones, appliances, and more. Chip 4 Alliance The United States has also been working to persuade Asian semiconductor powerhouses to participate in its “Chip 4 alliance.” The U.S.-led alliance aims to strengthen cooperation in the semiconductors industry among the United States and the East Asian powerhouses of Taiwan, South Korea, and Japan to build a secure supply chain that excludes China. Taiwan and Japan have already agreed to participate in the Chip 4 alliance proposed by the United States this March, pending South Korea’s decision to join. The United States has reportedly given South Korea a deadline to decide whether it will join the “Chip 4 alliance” by Aug. 31, according to local South Korean reports citing unnamed sources in Washington. Read more here... Tyler Durden Mon, 08/08/2022 - 16:50.....»»

Category: smallbizSource: nytAug 8th, 2022

Futures, Yields And Oil All Rise On Last Day Of Turbulent Week

Futures, Yields And Oil All Rise On Last Day Of Turbulent Week After several extremely volatile days, US equity futures are ending the week in the green (for now) with European equities snapping two days of declines sparked by the Federal Reserve’s plan for aggressive monetary-policy tightening, and Asian stocks trading higher. S&P 500 and Nasdaq 100 futures trimmed earlier gains to trade 0.3% higher as traders weighed the latest developments about the war in Ukraine. Contracts on U.S. stock benchmarks trim earlier gains as traders weigh developments about the war in Ukraine.Nasdaq 100 futures flat; S&P 500 futures +0.1%; Dow Jones futures +0.2%. The dollar rose for a 7th consecutive week and US Treasuries sold off across the curve; gold and bitcoin were flat. Oil was steady after three days of losses stoked by plans to release millions of barrels of crude from strategic reserves and China’s demand-sapping virus outbreak. Markets had a subdued session yesterday after sinking more than 4% in the previous two days as hawkish signals from the Federal Reserve sent Treasury yields surging. Among notable premarket moves, Robinhood slid 3% after Goldman Sachs, not too long ago the lead underwriter on the company's IPO, cut their rating on the stock to sell, saying softening retail engagement levels and profitability concerns will likely limit any outperformance. Some other notable premarket movers: Alcoa (AA US) is 1.2% lower as Credit Suisse analyst Curt Woodworth trims his recommendation to neutral as he views LME aluminum prices near peak levels. Quidel (QDEL US) gained in extended trading Thursday after it posted preliminary revenue for the first quarter that beat the average analyst estimate. CrowdStrike (CRWD US) advanced 4.1%. Analysts responded positively after management set a framework to reach $5 billion in annual recurring revenue (ARR) by 2026, during the cybersecurity company’s investor briefing. WD-40 (WDFC US) is poised to gain after producing a “solid” beat in the second quarter, Jefferies said, adding that an increased market share and new product launches would support volume growth of 3% in 2022. Kura Sushi (KRUS US) shares rose in postmarket trading after the restaurant chain reported a year-over-year jump in quarterly sales. ACM Research (ACMR US) edged lower in extended trading Thursday after saying in a release its first quarter revenue would be “significantly below” expectations, but reiterated full-year revenue guidance for 2022. U.S. stocks are on course to snap a three-week winning streak with investors shedding risk assets following indications from the Fed of a faster-than-expected pace of tightening in monetary policy. Concerns are also growing about the impact of high inflation and slowing economic growth on corporate earnings. The two-year Treasury yield rose five basis points and the 10-year yield climbed one point, reversing some of the curve steepening seen in the wake of the Fed minutes Wednesday, which outlined plans to pare the central bank’s balance sheet by more than $1 trillion a year alongside interest-rate hikes. Global equities are nursing losses for the week as markets grapple with the Fed’s campaign against elevated price pressures, Russia’s grinding war in Ukraine and China’s Covid travails. The lockdown in Shanghai -- which recorded more than 21,000 new daily virus cases -- has become one of President Xi Jinping’s biggest challenges. Expectations are growing that China will take steps to support its economy. “Stocks have had a little bit of a harder time this week digesting the fact that interest rates are going to be higher” amid a major shift in expectations around monetary policy, Anthony Saglimbene, global market strategist at Ameriprise Financial Inc., said on Bloomberg Television. Still, U.S. equities saw a second straight week of inflows at $1.5 billion, with large-cap and growth stocks outperforming small-cap and value sectors, according to Bank of America strategists. Marija Veitmane, a senior strategist at State Street Global Markets, also said stocks still appeared to be the safest option. “Cash gives you nothing with 7% inflation, bonds just had one of the worse quarters in history, and then if you look at stocks, we still have decent earnings outlook, and to me the biggest attraction is really strong balance sheets,” she said on Bloomberg TV. In the latest news out of Ukraine, dozens were killed Friday morning as Russian troops allegedly bombed civilians waiting at a train station to be evacuated from the Donetsk region. Meanwhile, U.S. officials warned that the war may last for weeks, months or even years, as Kyiv’s foreign minister pleaded for urgent military assistance. Here are the latest Ukraine war developments: Ukraine intends to establish up to 10 humanitarian corridors on Friday, those leaving Mariupol will need to use private vehicles. Ukrainian advisor Podolyak says negotiations with Russia continue online constantly, but the mood changed after Bucha events, via Reuters. Kremlin says it does not understand EU concerns about European countries paying for Russian gas in RUB, adds Commission President von der Leyen probably needs more information. On planned EU ban of Russian coal, says coal is in high demand. Special operation in Ukraine could be completed in the foreseeable future, given aims are being achieved and work is being carried out by peace negotiators and the military. EU ready to release EUR 500mln for arms to Ukraine, according to AFP citing EU chief. Russia says it has destroyed a training centre for foreign mercenaries within Ukraine, was located north of Odesa, via Tass. Japan's Industry Ministry plans to reduce Russian coal imports gradually while looking for alternative suppliers, according to Reuters. Ukraine PM says they have large stocks of grain, cereals and vegetable oil. Are able to provide themselves with food; this year's harvest will be 20% less YY. Ukraine gas grid warns that Russian actions could impact gas flows to Europe, via Reuters. On Thursday, St Louis Fed president James Bullard said he prefers boosting the policy rate to 3%-3.25% in the second half of 2022. Chicago Fed President Charles Evans and his Atlanta counterpart Raphael Bostic said they favor raising rates to neutral while monitoring the economy’s performance. The steepening in the Treasury yield curve contrasts with the flattening and inversions that have vexed markets this year. The two-year rate topped the 10-year last week for the first time since 2019, a possible warning of recession. “We’re seeing a tactical re-steepening right now but the curve is going to continue to flatten,” Kelsey Berro, fixed income portfolio manager at JPMorgan Asset Management, said on Bloomberg Television. “That’s because the Fed has told us, we’d like to get to neutral expeditiously. On top of that, they may need to tighten beyond neutral. Front-end yields can still go higher.” In Europe, Euro Stoxx 50 rallies over 1.8% before stalling while the Stoxx 600 index climbed 1.2% but drifted off best levels as investors took advantage of beaten-down stock valuations with energy, banks and autos the strongest-performing sectors. Banks outperformed as Banco BPM SpA surged after Credit Agricole SA bought a 9.2% stake in the Italian lender. An Asia-Pacific share index eked out a small increase.  Here are some of the biggest European movers today: Scout24 shares rise as much as 17%, the most intraday since December 2018, after a report that Hellman & Friedman, EQT and Permira have discussed taking the firm private. Banco BPM shares rise as much as 17% after Credit Agricole bought a 9.2% stake in the Italian lender, with Bank of America saying the deal is a reminder that real value should be based on fundamentals. Sodexo shares jump as much as 7.4%, their biggest single-day gain in a month, after RBC Capital Markets upgrades the French caterer to outperform from sector perform. K+S gains as much as 10% after JPMorgan double-upgraded the shares to overweight from underweight, seeing a very positive environment for fertilizers amid supply disruptions and high energy prices. Atlantia shares rise as much as 4.5% following a report in a Italian newspaper that the Benetton family and Blackstone may start their takeover offer for Atlantia at more than EU22 per share. Saab rise as much as 5% as SEB upgrades the shares to buy from hold on the Swedish defense firm’s sales potential in the coming decade in the wake of Russia’s invasion of Ukraine. Moncler shares rise as much as 4.2% after Barclays upgrades the Italian luxury company to overweight, citing an “attractive” defensive profile in the current environment. Genmab fall as much as 10%, the most since September 2020, after saying a tribunal decided in favor of Janssen Biotech over two issues surrounding the cancer drug daratumumab (Darzalex). Ahead of this weekend's French election, Macron's lead is shrinking: the current President led his rivals in the April 10 election with 26.2% support, down from 27.2% a day earlier, according to a polling average calculated by Bloomberg on April 8. Macron was 3.5 percentage points ahead of second-placed Marine Le Pen, down from 4.1 points. Asian stocks edged higher on Friday, poised to snap three days of declines as traders assessed the prospect of policy easing by Beijing.  The MSCI Asia Pacific Index erased early losses of as much as 0.4% to climb 0.2%. Chinese property and infrastructure-related stocks surged on hopes for fiscal as well as monetary easing as the government seeks to prop up growth.   For the week, the Asian benchmark was down 2% as investors turned cautious on risk assets after latest comments from the Federal Reserve suggested aggressive tightening lies ahead. Tech shares were hit hard in particular, with the MSCI Asia-Pacific Information Technology Index losing 4% this week, on track for its worst performance since end-January. “There appears to be speculation that monetary easing by the PBOC might be imminent,” said Kazutaka Kubo, senior economist at Okasan Securities. There are also expectations that once lockdowns are over, the economy could be supported by pent-up demand, he added.  Chinese authorities have repeatedly vowed to support the economy and markets in thet past few weeks, as rising Covid-19 infections and lockdowns darken the outlook for growth. The pledges have spurred bets that some form of monetary easing may come soon.  Movements in most national benchmarks in the region were modest on Friday, gaining less than 1%. Stocks in the Philippines and Indonesia outperformed, while Singapore shares fell.  Indian stocks gained after the Reserve Bank of India kept borrowing costs at a record low, while India’s 10-year bond yield hit 7% - the highest since 2019 - as the nation’s central bank boosted an inflation forecast. The central bank also announced the start of policy normalization as the pandemic’s impact fades. The S&P BSE Sensex climbed 0.7% to 59,447.18 in Mumbai to complete a second week of gains, while the NSE Nifty 50 Index rose 0.8%. Gauges of small- and mid-sized companies gained 1% and 0.9%, respectively. The Reserve Bank of India’s monetary policy panel held the benchmark rate at 4%, in line with predictions of all 36 economists surveyed by Bloomberg. RBI Governor Shaktikanta Das said the central bank will start focusing on withdrawal of banking liquidity accommodation to target inflation but such a move would be “multi-year” and carried out without disrupting the markets. “Equity markets will like the RBI’s continued focus on growth and its commitment to an accommodative stance,” said Abhay Agarwal, a fund manager at Mumbai-based Piper Serica Advisors Pvt.  The RBI’s commentary means adequate flow of liquidity will continue and immediate beneficiaries will be consumers who are borrowing to purchase real estate and autos, he added. All but one of 19 sectoral sub-indexes compiled by BSE Ltd. advanced, led by a gauge of power companies. Reliance Industries Ltd. was a key gainer on the Sensex, which saw 22 of its 30 components advance. The RBI has comforted markets by refraining from being aggressive, unlike its global peers, and by ensuring that the liquidity withdrawal will be gradual, Yesha Shah, head of equity research at Samco Securities wrote in a note.  “On the growth front, one can assume that the central bank expects private investment to ramp up now that capacity utilization has improved further,” she said, adding the policy lays the framework for a possible rate increase in coming reviews. Australian stocks advanced - the S&P/ASX 200 index rose 0.5% to close at 7,478.00 - supported by materials and industrial stocks. GrainCorp shares surged to a record high, after the firm upgraded its FY22 earnings guidance as high levels of rain in Australia lay a path for a bumper crop.  Platinum Asset plunged to an all-time low after the company reported net outflows of A$222 million in March. In New Zealand, the S&P/NZX 50 index was little changed at 12,066.27. In rates, Treasuries fell across the curve, with the front-end of the Treasuries curve pressured lower, flattening 2s10s spread by ~5bp as 2-year yields trade more than 7bp cheaper on the day at ~2.54%. S&P 500 futures near top of Thursday’s range, following bigger advance for European stocks after three straight declines. Yields across long-end of the curve are little changed on the day, as flattening extends out to 5s30s spread which is tighter by ~4bp; 10-year yields around 2.683%, cheaper by 2.5bp vs Thursday close; bunds and gilts outperform by 1bp-2bp in the sector. Bunds reversed opening gains, adding to a three-day run of declines; French debt underperformed bunds ahead of presidential elections beginning Sunday. The German curve bull-flattens, richening 2bps across the back end. Peripheral spreads widen to core with Italy underperforming. In FX, Bloomberg dollar index advanced a seventh consecutive day and neared the strongest level since July 2020 as the greenback advanced against all of its Group-of-10 peers apart from the Norwegian krone. The euro pared losses after touching a one-month low against the dollar in early London trading. The pound fell to the lowest in more than three weeks as bets for aggressive policy tightening by the Federal Reserve boost the dollar. Gilts rose across the curve as U.S. Treasury yields stabilized following the recent selloff. The Australian and New Zealand dollars were the worst-performing G-10 currencies; Australia’s yield curve steepened following a similar move in Treasuries on Thursday. Most Japanese government bonds rose, thanks to support from the central bank’s regular purchase operations. The yen briefly reversed early an Asia session loss after an ex-BOJ official said there’s likelihood of a policy shift as soon as this summer. Bitcoin is contained and unable to derive traction either way from the broader risk tone. Strike payment platform launches Shopify (SHOP) integration, which allows merchants to accept Bitcoin (BTC), according to Bloomberg. In commodities, crude futures trade within Thursday’s range; WTI holds above $96, Brent stalls near $102. Spot gold holds steady near $1,930/oz. Most base metals trade well: LME zinc and lead outperforming, tin lags. To the day ahead now. Central bank speakers include the ECB’s de Cos, Centeno, Panetta, Stournaras, Makhlouf and Herodotou. Italian retail sales for February and Canadian employment for March round out this week’s data. Market Snapshot S&P 500 futures up 0.5% to 4,517.00 STOXX Europe 600 up 1.4% to 461.27 MXAP up 0.2% to 176.33 MXAPJ up 0.3% to 584.66 Nikkei up 0.4% to 26,985.80 Topix up 0.2% to 1,896.79 Hang Seng Index up 0.3% to 21,872.01 Shanghai Composite up 0.5% to 3,251.85 Sensex up 0.9% to 59,558.63 Australia S&P/ASX 200 up 0.5% to 7,477.99 Kospi up 0.2% to 2,700.39 Brent Futures up 1.2% to $101.76/bbl Gold spot down 0.0% to $1,931.38 U.S. Dollar Index up 0.14% to 99.89 German 10Y yield little changed at 0.68% Euro down 0.1% to $1.0865 Top Overnight News from Bloomberg The Bank of Russia delivered a surprise cut in its key interest rate Friday, reversing some of the steep increase it made after the invasion of Ukraine as the ruble recovered. The central bank lowered the rate to 17% from 20% and said further cuts could be made at upcoming meetings if conditions permit EU countries agreed to ban coal imports from Russia, the first time the bloc’s sanctions have targeted Moscow’s crucial energy revenues. Japan is also looking to curb imports, in what could be a shift in policy from one of the world’s largest energy buyers The EU is aiming to lock in progress on trade and technology disputes with the U.S. during President Joe Biden’s first term amid concerns that any gains could otherwise be easily reversed The relationship between Australia’s equities and currency has become the closest in a decade as commodity prices surge. The 180-day correlation between the country’s stock benchmark and the Australian dollar has climbed to the highest level since late 2011, according to data compiled by Bloomberg. The strengthened ties come as rallies in materials from oil to iron ore have boosted both the nation’s equities and the Aussie The ECB will look past threats to economic growth from the war in Ukraine, ending asset purchases in the summer and setting the stage for a first interest-rate increase in more than a decade in December, according to a survey of economists Junk bond sales across Europe are experiencing their longest drought in more than 10 years, as the Russian invasion of Ukraine and the prospect of rising interest rates neuter risk appetite A more detailed look at global markets courtesy of Newsquawk: Asia-Pacific stocks were choppy and eventually conformed to a mixed picture; some weakness was seen shortly after the Chinese cash open. ASX 200 bucked the trend and was propped up by its energy and gold names. Nikkei 225 was choppy and moved in tandem with action in USD/JPY whilst the KOSPI was weighed on by its chip and telecoms sectors. Hang Seng remained pressured by losses across its large constituents - Alibaba and JD.com. Shanghai Comp swung between gains and losses but overall remained supported by reports from China's Securities Journal which noted of a potential PBoC RRR in Q2. Top Asian News Hong Kong Tycoons Heed China, Endorse John Lee to lead City Chinese Tech Stocks Fall as Tencent Shuts Game Streaming Site Abu Dhabi’s IHC Invests $2 Billion in Billionaire Adani’s Empire ADDX Rolls Out Private Market Services for Wealth Managers European bourses are firmer across the board, Euro Stoxx 50 +1.5%, bouncing in a morning of quiet newsflow with the broader tone modestly risk-on. Albeit, benchmarks are still negative on the week and some way from earlier WTD peaks; unsurprisingly, sectors are all in the green with defensive-bias names lagging. Stateside, futures are similarly in the green, ES +0.2%, though magnitudes are more contained ahead of a limited US schedule to round off the week. Top European News U.S. Sanctions Russian Miner Producing 30% of World’s Diamonds Atlantia Gains After Reports of Offer Price Above EU22/Share Generali CEO Says He Won’t Change Plan Challenged by Investors Baader Downgrades Six Chemical Firms, Citing Ukraine War In FX: DXY touches 100.000 as US Treasury yields continue to soar and curve steepen, but unable to break barrier. Kiwi underperforms awaiting NZIER Q1 survey, while Aussie holds up better after hawkish warning in RBA FSR; NZD/USD around 0.6950, AUD/USD nearer 0.7460. Yen sub-124.00 as Japanese export supply is absorbed, Euro supported by bids circa 1.0850 and Sterling treading water above 1.3000. Rouble relatively resilient in the face of 300 bp CBR rate reduction as it remains above pre-conflict highs. Fixed income: Choppy trade in bonds approaching the end of another very bearish week. Bunds and Gilts nurse losses mostly above par around 157.00 and 120.00 handles vs fresh cycle lows of 156.40 and 119.83. US Treasuries most seeing red, but curve less steep in correction after hawkish FOMC minutes and Fed commentary, via Brainard and Bullard especially Central Banks: RBA Financial Stability Review: important that borrowers are prepared for an increase interest rates; global asset markets are vulnerable to larger-than-expected rate increases, via Reuters. RBI leave rates unchanged as expected, retains "accommodative" stance as expected; will focus on withdrawing accommodation going forward. RBI is to restore LAF corridor to 50bps and floor to be constituted by SDF, according to Reuters. CBRT April survey sees Turkish End-Year CPI at 46.44% (prev. 40.47%) CNB Minutes (March): Dedek and Michl voted in the minority for stable rates. Board assessed risks and uncertainties of winter forecast as being markedly inflationary, particularly in short-term CBR cuts its Key Rate to 17.00% (prev. 20.00%) as of April 11th; holds open the prospect of further key rate reduction at its upcoming meetings. In commodities, WTI and Brent are bolstered amid broader sentiment, though crude/geopolitical specific developments have been limited In-fitting with equities, the benchmarks are negative on the week and some way shy of best levels as such. New York will suspend the state gas tax from June 1st to December 31st, according to Reuters. Barclays raises oil forecasts by USD 7-8/bb assuming no material disruption in Russian supplies beyond Q2 2022, according to Reuters. Spot gold is marginally firmer, but, remains drawn to USD 1930/oz after marginally eclipsing the level overnight; base metals bid in-line with sentiment. US Event Calendar 10:00: Feb. Wholesale Trade Sales MoM, est. 0.8%, prior 4.0% 10:00: Feb. Wholesale Inventories MoM, est. 2.1%, prior 2.1% DB's Henry Allen concludes the overnight wrap Yesterday’s ECB minutes reinforced what we learned from the March FOMC minutes and soon-to-be Vice Chair Brainard earlier this week – there are no doves in fox holes – by casting doubt on the likelihood of inflation returning to target this year. We also heard from St. Louis Fed President Bullard, the hawk leading the charge, who called for a fed funds rates above 3% this year. That would beckon a faster pace of hikes along with more aggregate tightening. Regional Presidents Bostic and Evans, non-voters each, meanwhile, want to get rates to neutral. The tighter path of global policy continued to drive sovereign yields higher and equity indices lower. Market-implied ECB policy rates by the end of the year increased +6.0bps to +62.3bps, the highest level this cycle. Sovereign yields rose to multi-year highs of their own, with those on 10yr bund (+3.4bps), OATs (+4.4bps) and BTPs (+3.5bps) moving higher, with 10yr breakevens falling in Germany (-1.9bps) and France (-0.7bps) for the first time in five days, while Italian breakevens were essentially flat (+0.2bps). Meanwhile, fed funds futures by end-2022 staged a slight retreat, falling -1.2bps to 2.50%, albeit +10bps higher than a week ago. While the probability of a +50bp hike in May remained steady at 85.4%. 2yr yields fell in line, declining -1.2bps, while 10yr Treasuries gained +6.0bps, leaving the curve at +19.2bps. If you’re up on the yield curve discourse, you’ll know the Fed discounts the signal coming from 2s10s, instead preferring shorter-dated measures of the yield curve, which wound up flattening yesterday. Yesterday’s yield curve steepening should not be viewed in a vacuum. The 2s10s curve has taken a 58.3bp round trip over the last two weeks, falling from +23.1bps two weeks ago, to -8.0bps last Friday, to +19.2bps at yesterday’s close. The fundamental outlook hasn’t changed dramatically over that time span. Instead, this likely reflects the elevated rates volatility environment we currently sit in. This, all before QT has even begun. Real Treasury yields continue to march higher in the back end, with 10yr real yields gaining +5.3bps to -0.19%, their highest level since March 2020, having gained +25.1bps this week alone, and +91.3bps YTD. Despite higher rates and more restrictive language, the S&P 500 ended the day +0.43% higher, after losing -2.21% the previous two sessions. The S&P 500 is now -5.58% YTD following the massive repricing of Fed expectations, while the Bloomberg Financial Conditions index is just a hair tighter than the post-2010 average. Monetary policy may need to adjust tighter yet to engineer the demand slowdown commensurate with a return of inflation to target. European equities were modestly lower, with the STOXX 600 slipping -0.21% and the DAX down -0.52%. The CAC (-0.57%) underperformed the STOXX 600 for the seventh consecutive session, on the back of growing Presidential election jitters. Polls between President Macron and his closest rival, Marine Le Pen, tightened. In particular, one poll (caveat emptor) from Atlas actually put Le Pen marginally ahead of Macron in a head-to-head runoff for the first time, by 50.5%-49.5%. The news immediately saw the French 10yr spread over bund yields widen in response, ending the day at 54.2bps, its widest since March 2020. While one poll a race does not make, it’s worth noting the broader poll narrowing over the last month. That has seen Macron’s lead in the first round over Le Pen go from 30%-17% a month ago (according to Politico’s average), to just 27%-22% now. In the second round, polls are likewise pointing to a tight contest, with Macron ahead of Le Pen by 52-48% (Ifop) and 53%-47% (Ipsos). For those looking for more details on the presidential race, DB’s Marc de-Muizon put out a guide yesterday (link here), where he looks at the current state of play in the election, the main aspects of both Macron and Le Pen’s programmes, as well as some potential challenges for both candidates. Back to the US, in a rare show of bi-partisanship, the Senate voted 100-0 to discontinue normal trade relations with Russia and Belarus and to ban Russian oil imports. Brent crude prices fell below $100/bbl for the first time since mid-March intraday, ultimately falling -0.48% to close at $100.58/bbl. The EU also moved to include a Russian coal embargo in its fifth round of sanctions. The opprobrium was global, with the UN General Assembly voting to suspend Russia from the Human Rights Council following its human rights violations, the first such suspension since Libya in 2011. On the ground, the Kremlin admitted to enduring heavy troop losses, and while the locus of the war still seems set to shift eastward, Ukrainian commanders have their guard up for a renewed assault on Kyiv. Elsewhere, Judge Ketanji Brown Jackson was confirmed to the Supreme Court. It’s expected the Senate will now turn to approving President Biden’s nominations for the Fed Board of Governors later this month, which will still have one empty seat following Sarah Bloom Raskin withdrawing her nomination. Asian equity markets this morning aren’t matching Wall Street’s resilience from yesterday. The Hang Seng (-0.57%) is leading the moves lower with the Nikkei (-0.08%), Kospi (-0.10%), Shanghai Composite (-0.06%) and CSI (-0.10%) all slightly on the wrong foot. Along with tighter global monetary policy, China’s Covid outbreak is worsening and dragging on sentiment. US stock futures are unperturbed, with S&P 500 and Nasdaq futures virtually unchanged. Meanwhile, the aforementioned rates volatility continues to rear its head, with the curve snapping back flatter as we go to press, with 2yr Treasuries +4.2bps higher and the 10yr a bit softer at -0.5bps. Oil prices are extending their decline this morning with Brent futures (-0.74%) sliding below $100/bbl. On the data side, Japan’s current account swung back to surplus in February to +¥1.6 trillion, following a -¥1.2 trillion deficit in January - the second-biggest deficit on record. The main release yesterday came from the US weekly initial jobless claims, which fell to their lowest level since 1968, with just 166k initial claims in the week through April 2 (vs. 200k expected). In addition, the previous week was revised down to 171k from 202k, which left the smoother 4-week moving average at 170k, the lowest ever in the entire data series going back to 1967. Euro Area retail sales grew by +0.3% in February (vs. +0.5% expected), and German industrial production grew by +0.2% that same month, in line with expectations. To the day ahead now. Central bank speakers include the ECB’s de Cos, Centeno, Panetta, Stournaras, Makhlouf and Herodotou. Italian retail sales for February and Canadian employment for March round out this week’s data. Tyler Durden Fri, 04/08/2022 - 07:51.....»»

Category: blogSource: zerohedgeApr 8th, 2022

How Ukraine Fits Into The Global Jigsaw

How Ukraine Fits Into The Global Jigsaw Authored by Alasdair Macleod via GoldMoney.com, Ukraine is part of a far bigger geopolitical picture. Russia and China want US hegemonic influence in the Eurasian continent marginalised. Following defeats for US foreign policy in Syria and Afghanistan and following Brexit, Putin is driving a wedge between America and the non-Anglo-Saxon EU. Due to global monetary expansion, rising energy prices are benefiting Russia, which can afford to squeeze Germany and other EU states dependent on Russian natural gas. The squeeze will only stop when America backs off. Being keenly aware that its dominant role in NATO is under threat, America has been trying to escalate the Ukraine crisis to suck Russia into an untenable occupation. Putin won’t fall for it. The danger for us all is not a boots-on-the-ground war — that’s likely to only involve the pre-emptive attacks on military installations Putin initiated last night — but a financial war for which Russia is fully prepared. Both sides probably do not know how fragile the Eurozone banking system is, with both the ECB and its national central bank shareholders already having liabilities greater than their assets. In other words, rising interest rates have broken the euro system and an economic and financial catastrophe on its eastern flank will probably trigger its collapse. The bigger picture is Mackinder’s World Island The developing tension over Ukraine is part of a bigger picture — a struggle between America and the two Eurasian hegemons, Russia and China. The prize is ultimate control over Mackinder’s World Island. Halford Mackinder is acknowledged as the founder of geopolitics: the study of factors such as geography, geology, economics, demography, politics, and foreign policy and their interaction. His original paper was entitled “The Geographical Pivot of History”, presented at the Royal Geographical Society in 1905 in which he first formulated his Heartland Theory, which extended geopolitical analysis to encompass the entire globe. In this and a subsequent paper (Democratic Ideals and Reality: A study in the Politics of Reconstruction, 1919) he built on his Heartland Theory, and from which his famous quote has been passed down to us: “Who rules East Europe commands the World Island [Eurasia]; Who rules the World Island rules the World”. Stalin was said to have been interested in this theory, and while it is not generally admitted, the leaders and administrations of Russia, China and America are almost certainly aware of Mackinder’s theory and its implications. We cannot know if the Russian and Chinese leaders and administrations are avid Mackinder fans, but their partnership in the Shanghai Cooperation Organisation is consistent with his World Island Theory. Since commencing as a post-Soviet, post-Mao security agreement between Russia and China founded in 2001 to suppress Islamic fundamentalism, the SCO has evolved into a political and economic intergovernmental organisation, which with its members, observer states, and dialog partners accounts for over 3.5 billion people, half the world’s population. The symbiotic relationship between resource rich Russia and the industrial Chinese ties the whole SCO together. China’s development of the Asian land mass holds the promise of dramatic improvements in everyone’s living conditions. And consistent with the World Island Theory, Chinese money now dominates the whole of sub-Saharan Africa, the Middle East and South-East Asian nations, particularly those controlled and influenced by the Chinese diaspora. China’s influence also spreads to South America through organisations such as BRICS (B is for Brazil) and Chile for copper and other metals. While the Sino-Russian partnership dominates the World Island economically, America has only gradually been expelled from Asian affairs. Its post 9/11 campaigns in the Middle East destabilised that region, creating fuel for America’s enemies and appalling refugee calamities for her European allies to this day. Her withdrawal from resource-rich Afghanistan was merely the last domino to fall. She retains political influence in Western Europe and South-East Asia only, though her military and intelligence presence is still widespread. Today, America’s actions are those of a hegemon whose time is passing. By the UK opting for Brexit, American influence over the European Union through its security and political partnership with the UK has been diminished. Its grip on European affairs through NATO is being undermined by both Turkey’s determination to shift its interests into the Turkic regions of Central Asia, and the EU’s determination to establish its own defence arrangements. The irrelevance of NATO for the future defence of Western Europe is now becoming apparent to the Russians, and it must be hard for them to resist speeding its decline. The cold war in the Pacific is all about containing China. While Taiwan’s future and China’s attempts to establish naval bases in the South China Seas hog the headlines, China’s trade influence in the region continues to increase. After President Trump withdrew America from the planned Trans-Pacific Partnership, the TTP was replaced by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership which came into force in December 2018, whose eleven signatories have combined economies representing 13.4% of world GDP. This makes it one of the largest free trade areas by GDP and includes Australia and New Zealand. Even the UK has formally applied to join (it qualifies as a Pacific nation through its dependencies in the region), so that three of the US security “five eyes” members will be part of the CPTPP. China also applied to join the CPTPP last September. For now, China’s membership of the CPTPP is in doubt. US allies in the partnership, including Japan, are insisting on various obstructive provisions. But in that well-worn hackneyed metaphor, China is the elephant in the room, and it is hard to see the CPTPP holding out against her membership for ever. For now, China can chip away at it by separate free trade agreements with selected CPTPP members, with whom it is already in bilateral trade. Whatever America’s desire to retain political and military control over the Pacific may be, the economics of trade will eventually diminish that influence. And while sabres are being rattled over Taiwan and Pacific atolls, Russia is putting pressure on Europe to put an end to American dominated defence arrangements at the other end of the World Island. Observers of the greatest of the great games would be right to look at current developments over Ukraine in the context of Mackinder’s heartland theory. Understand that, and you have a grasp of Putin’s reasoning. Driving American influence out of the Eurasian continent has been his objective ever since America reneged on her agreement not to advance NATO any closer to Russia following the ending of the old USSR. Ukraine is caught in the middle Both Russia and the Anglo-Saxons are ramping up the rhetoric over Ukraine. Until recently, Ukraine itself had seen little evidence of any truth in Western propaganda, asking for it to be toned down because all this war talk is increasing its likelihood and ruining the economy. Meanwhile the EU mainstream just wants peace and natural gas. Concern is being expressed in some quarters that all this talk of war might become self-fulfilling — like the first World War. In this case, it is generally agreed by military strategists that Putin would be mad to take over Ukraine. He certainly has the fire power, and Ukraine is cast like a Belgium on the Steppes, with two ethnic groups and whose main purpose seems to be to allow foreign occupation and passage for foreign troops. But holding on to Ukraine against the peoples’ will, when there is an immensely long border over which dissidents can be provided with arms and anti-Russian propaganda is another matter. Russian occupation is likely to be limited to defending Donbas and Luhansk now that Russia has formally recognised their right to self-determination. Without firing a shot, the Russian military has moved the border a hundred miles into formally Ukrainian territory. But that is where an occupying invasion is likely to stop and is not to be confused with the pre-emptive strikes against military bases and airfields today. These moves are there to apply increasing pressure for a diplomatic settlement. So, what is it that Putin wants? Basically, he wants America to get out of Eastern Europe. And following Brexit, as America’s poodle he sees no reason why Britain should be there either. And having his thumb over various gas pipes into Europe, he is squeezing Germany and the other EU NATO members into his way of thinking. Ukraine comes in the wake of America’s disastrous evacuation of Afghanistan, which followed the failure of her attempt to remove Syria’s Assad. It is rumoured that US intelligence services organised the failed coup in Kazakhstan, which was quickly subdued by Russian troops. So, from Putin’s point of view, American policy with respect to the Eurasian land mass has failed, he has America on the run, and he will want to capitalise on its retreat. Meanwhile America, which has ruled western Europe through NATO following WW2, finds it hard to come to terms with its setbacks and needs to get back on the front foot. Presumably, by ramping up fears of a Russian invasion, the Biden administration hoped that either Putin would back down or be tricked into attacking Ukraine. If he had backed down, that would be a diplomatic victory and allow America to rebuild its presence in Kiev. If Putin invades and occupies Ukraine, America can help make life extremely difficult for an occupying force. Either way, it would mark the end of American policy failures on the Eurasian continent. Britain, as always, merely toes the American line. But Putin is no fool. He is destroying Ukraine’s economy. He has his thumb on Nord Stream 1 and 2. And Germany has too many commercial and financial interests in both Russia and Eastern Europe for this not to hurt. Germany also hosts the main railhead for China’s silk road. If Germany kowtows to America, will America then put pressure on her to cut ties with China? This is the geopolitical reality Germany and all mainland Europeans must now face. The new German Chancellor must decide: does he back America, sacrifice Germany’s economic potential and see energy costs soar, or does he recognise the economic realities of the Russia—China partnership and the enormous opportunities it provides for the long run? Russia, America, and Germany are the principal actors whose decisions will decide the outcome of the Ukrainian situation. An escalation into a non-nuclear conflict and Russian occupation of Ukraine will only suit the Americans, confirming that their presence is the guarantee of national security. Ukraine has become a virtual battleground. Ukraine’s geographical position, between the liberated central European states and Russia ensured that it would become central to the continuing rivalry between Russia and America. Since the fall of the Soviet Union, Ukraine has been determined to forge its path independent of Russia as a sovereign nation. But its starting point was difficult, with its eastern provinces predominantly Russian, while the western regions were more central European. The Orange and Maidan Revolutions in 2004 and 2014 respectively were proxy struggles between America and Russia. While America allegedly chucked billions into its Ukrainian interests, in 2014 Russia responded by taking over Crimea and fomented rebellions in Luhansk and Donetsk. By capturing Crimea and fostering two breakaway provinces, Putin had won this territorial battle in an ongoing war. Other than these eastern provinces, most Ukrainians have desperately tried to avoid their country becoming a Russian colony. They wanted to apply for EU membership, which was rejected by Russian-backed President Yanukovych in 2013, leading to the Maidan Revolution and Yanukovych fleeing the country to Russia. Ukraine has also sought the protection of NATO, which has provoked Putin to put a stop to American influences marching eastwards. While Ukraine never left the headlines, the US moved its focus to Syria later in 2014.The eventual failure to oust Assad, who drew on Russian help, was followed by Afghanistan. Ukraine is now back in the headlines, this time at the behest of Russia. Putin is now proactively leading this conflict instead of quietly letting America make all the mistakes and rolling with the punches, representing a major change in Russian strategy. It implies that Putin perceives America to be off balance, and he sees it as the time for a winning move. Putin has prepared his defences carefully. US politicians called for Russia to be cut out of SWIFT after the Crimean invasion. Since then, Russia has developed Mir, a payment system for electronic fund transfers, and a SWIFT equivalent known as SPFS — System for transfer of Financial Messages, with agreements linking SPFS to other payment systems in China, India, Iran, and member nations of the Eurasian Economic Union. The Central Bank of Russia has strengthened the commercial banking network. And it has also reduced its dollar exposure as much as possible by investing in gold and euros instead, which means less reserves are held as deposits in the US banking system and invested in US bonds. From these actions, Putin has signalled that he is aware that the danger to Russia is more likely to be a financial war, rather than a physical one. As President Biden said, to have American troops on the ground fighting the Russians is a world war and will not happen. In that sense the Ukraine, over which Russia retains an energy stranglehold, is a virtual battleground for a proxy war. Financial considerations In examining the strengths and weakness of the principal parties, we must first confirm who they are: Russia, America, and the EU. And in the EU, principally it is Germany, but all member states will be affected. As argued above, Russia’s real objective is to get America out of Europe, and Putin’s strategy is to drive a wedge between America and the EU, and in particular its industrial powerhouse, Germany. Plans to split America from Europe go back to Putin’s earlier days, with the construction of Nord Stream to bypass Ukraine with which Russia’s Gazprom was in dispute. Delivering 55bn billion cubic meters of natural gas annually, the first Nord Stream was completed in 2012. A second pipeline. Nord Stream 2, which is ready to go online, doubles this capacity. American pressure on Germany to delay the operation of Nord Stream 2 follows the dollar’s debasement from March 2020 in particular, when the Fed reduced interest rates to zero and instituted QE of $120bn every month. The effect has been to undermine the dollar’s purchasing power for nearly all commodities, including energy. Consequently, a combination of dollar debasement, winter demand and the absence of extra supply from Russia has created an energy crisis not just for Germany, but all EU members. Germany is particularly hard hit, with its producer prices index up 25% year-on-year at the end of January. Germany cannot go along with an escalation of financial sanctions against Russia at a time when its industry is struggling with other rising production costs. Not only is her trade with Russia substantial, but she has banking and financial interests in Central Europe, Eastern Europe, and Russia, which could be destabilised by American-led attempts to restrict payments. Despite Chancellor Scholz’s initial support for EU sanctions Germany is likely to be indecisive, torn between competing demands from a collapsing economy and pressure from NATO. By withholding regulatory permission for Nord Stream 2 he has demonstrated that instead of regarding his electors’ interests as paramount, he has given in to NATO pressure. This weakness on Olaf Scholz’s part is consistent with the indecisive socialism of his Social Democratic Party and Germany’s continuing guilt trip following two world wars. Recognising the importance of Germany and its likely indecision, President Macron of France seized the political opportunity to mediate between Russia and the EU, which suits the Russian cause. Macron simply provided another channel for Putin’s message about NATO: get the US out of Europe and the EU should be responsible for its own defence. And given Macron’s ambitions for France in Europe he is likely to see it as an opportunity to enable France to take the lead in the EU’s future defence arrangements after the Ukraine situation has blown over. That will be down the road, but for now the EU is standing firm behind US and UK sanction proposals. Sanctions rarely work. They merely encourage the sanctioned to dig deeper into their own intellectual and entrepreneurial resources and work hard to find ways round them. Russia will merely sell its gas elsewhere: at these high prices harm is minimal, and they can afford to restrict supplies through Ukraine, the Yamal-Europe and Turk-stream pipeline supplies. It might be sensible for Russia to allow flows through Nord Stream 1 to continue for now, holding its restriction as a backup threat. European gas prices will likely rise even further, providing a price windfall for Russia. The tweet below, from Russian President Medvedev implies European gas prices will double from here. The apparent lack of understanding of economic and financial consequences for the EU by the EU leadership is a wild card danger. The economic and financial exposure of Germany to its eastern neighbours has already been mentioned, but other EU members are similarly exposed. Furthermore, the reckless inflationary policies of the ECB have undermined the financial health of the entire euro system to the point where even on the current rise in bond yields, the ECB and all the national central banks (with only three minor exceptions) have liabilities greater than their assets. The whole eurozone is a mountain of financial disasters balanced on an apex over which it is set to topple. We cannot say for sure that Ukraine will be the last straw for the euro system, but we can point to political ignorance of this instability. Any dissenting central banker (and there could be some, particularly at the Bundesbank) has no influence at the political level. We must assume that none of the major political players in this tragedy are aware of the financial and economic crisis in Europe waiting to be triggered. And if the Russians have made a mistake, it will be in their accumulation of euro reserves, which will turn out to be worthless when the euro system collapses. Financial sanctions against individual oligarchs have probably already been anticipated and avoiding action been taken by them: oligarchs are not dumb. Sanctions against Russian banks will have also been anticipated and will probably inflict less damage on them than on their counterparties in the EU banking system, particularly if SWIFT comes under pressure to suspend Russian banking access. Not only Ukraine, but the whole of the EU, for which Russia supplies over 40% of its natural gas, is being squeezed. We can be reasonably sure that the Russian government has war-gamed this situation in advance. Inflation, gold, and unintended consequences The situation today is very different from that of 2014 at the time of the Maidan revolution, with the world massively increasing government debt and currency in circulation since then. At the time of the Crimean take-over, commodity prices were declining from their peak in 2011, and following Crimea, they fell sharply with negative consequences for the Russian economy. The expansion of world currencies is now driving commodity and energy prices higher due to their purchasing power is declining. Figure 2 shows how a basket of commodities has increased in price since the Fed reduced its funds rate to the zero bound and instituted QE at $120bn per month. In those 22 months commodity prices have risen by 127% by this measure. When all commodity prices rise at the same time it is due to currency debasement, which is what has happened here. Within the broader commodity context, energy price increases have been particularly acute, with Russia being a major beneficiary, leading to a substantial surplus on its balance of trade. It has been a long-term ambition of the Sino-Russian partnership not just to expel America from the World Island but to reduce dependency on dollars as well. While trade between Russia and China is increasingly settled in their own currencies, so long as the dollar has credibility for settling international transactions it will still dominate trade for the other nations in the Eurasian landmass. The fiat alternative for Russia has been the euro, which partly explains why Russia has accumulated them in her foreign currency reserves. But since 2014, the stability of the euro system has deteriorated to the point where the currency is no longer a credible alternative to the US dollar. We cannot be sure if this is understood in the Kremlin. But there has always been a Plan B, which is the accumulation of physical gold. There is evidence that official reserves in China and Russia understate the true position. Following the enactment of regulations in 1983 whereby the Peoples Bank was appointed sole responsibility for the acquisition of China’s gold and silver reserves, I have estimated that the State accumulated as much as 20,000 tonnes of gold before permitting the public to own gold, for which purpose the Shanghai Gold Exchange was established in 2002. Since then, the SGE has delivered a further 20,000 tonnes from its vaults into public hands, though some of this will have been returned as scrap. The Chinese state has retained the exclusive right to mine and refine gold, even importing doré from abroad. China is now the largest gold mine producer in the world by far, continuing to add over tonnes annually to total above ground stocks (last year’s dip to 350 tonnes was due to covid), which are all ringfenced in China. These policies, as well as anecdotal evidence suggests that my earlier estimate of state-owned gold of 20,000 tonnes was realistic. Russia has been relatively late in adding to her gold reserves, having officially accumulated 2,298 tonnes. But being only second to China as a gold mine producer at 330 tonnes, it is likely that following earlier financial sanctions that Russia has accumulated undeclared gold reserves as well. Additionally, we can see that all the SCO members and their associates have increased their declared gold reserves by 75% since 2014. Plan B therefore appears to be to back fiat roubles and renminbi with gold in the event of a Western fiat currency meltdown. The West has no such plan. America’s fifty-one-year denial of and attempted demotion of gold as the ultimate money appears to have left it short: otherwise it could have returned Germany’s gold on demand instead of trying to spin it out over a number of years. Furthermore, Western central banks routinely lease and swap their gold, leading to double counting of reserves and lack of clarity over ownership. We can be sure that neither Russia nor China indulge in these practices. The consequence of these disparities is to weaponize gold’s monetary status, turning it into a nuclear weapon in a financial war. If, say, during NATO-led attempts to destabilise the rouble Russia was to declare another 6,000 tonnes to match America’s unaudited figure and for China to revise its reserves to stabilise the renminbi, it would probably result in a run against the dollar. It would be a sure-fire way for the Asian hegemons to destroy US economic and military power. Therefore, ultimately, the US and its five-eyes allies cannot win a financial war. When China and Russia planned their financial defences, this golden umbrella made sense, and the security services in America would have been aware of it, if not the full implications. But things have changed, particularly the debasement of all major currencies, including the renminbi. China has an old-fashioned cyclical property crisis on her hands and can only think to print her way out of trouble. Together with the Fed, the ECB, and the Bank of Japan, the Peoples Bank has expanded its balance sheet recklessly, and all together they have increased from $5 trillion equivalent in 2007 to over $31 trillion today, with their rate of expansion being particularly high from March 2020. The consequences for their currencies’ purchasing power are becoming obvious now, turbocharging Russia’s strategy with respect to European energy supply. What few politicians appear to be aware of, and we should include Putin in this, is the fragile state of the major central banks. Having loaded their balance sheets up with fixed-interest government debt, falling market values for these bonds are eliminating central banks’ margin of assets over liabilities. While the Fed, the Bank of Japan and the Bank of England can turn to their governments for recapitalisation, embarrassing though that may be, the ECB has no such recourse. The ECB’s shareholders are the national central banks in the euro system. And they in turn, except for Ireland’s, Malta’s, and Slovenia’s central banks, all have liabilities easily exceeding their assets. The euro system is already insolvent, and Russian action on energy supplies could tip the whole currency system over the edge. Given the Russian Central Bank’s reserve holding of euros, we can call that an unintended consequence. Tyler Durden Fri, 02/25/2022 - 02:00.....»»

Category: personnelSource: nytFeb 25th, 2022

Big Marijuana Stock Profits in Surprising Places

You can still get in on the ground floor of the marijuana market, which will only get hotter as more states and countries move toward legalization. Ben Rains shows several ways to invest before the floodgates open. Legal marijuana is a smoking hot growth industry in the U.S., Canada, and beyond. The global cannabis market is projected to soar from $20.5 billion back in 2020 to $90.4 billion by 2026.¹ And these estimates are likely conservative, as the U.S. moves closer to wide-ranging federal legalization and European nations, including economic powerhouse Germany, prepare to do the same in 2022.The best part about investing in legal marijuana right now is that despite all of the progress, there are ample opportunities to get in right near the ground floor given where we are in the legal lifecycle. Plus, many top pot stocks are trading near all-time lows heading into the new year, after they were beaten down in 2021, along with other former covid high-flyers and growth stocks.Still in the Early InningsThe legal recreational cannabis market has come a long way in the last few years. Yet the growth runway remains massive. Eighteen states have legalized adult-use marijuana as of December—up from zero in 2011. Meanwhile, Canada is one of only a couple countries to legalize marijuana nationally and it did so in 2018.Luckily, more U.S. states are poised to join the legal ranks in 2022, while others could add to the number of medical marijuana states to help take the country well above the current 36 states. Crucially, multiple bills are circulating around Washington, D.C. right now that aim to introduce sweeping Federal marijuana legalization, which will be an overnight game-changer and supercharge the space and the stocks.Even Republicans, the party historically opposed to legal weed, have started to roll out their own legalization proposals including one high-profile effort introduced in November. All of this is to say that Washington appears ready to enact some form of Federal legalization soon.The heightened political drive follows increased bipartisan support that matches the polling data—68% of U.S. adults are in favor of legal marijuana, including 50% of Republicans. Legalization at the national level will open the floodgates for U.S. growers to list on the NYSE and the Nasdaq, and for money to pour in from established players far outside the current pot space looking to cash in and make a big splash.Before those floodgates open, savvy investors are starting to focus on companies that are direct plays within the booming marijuana industry. These stocks are primed to continue growing and receiving institutional investment both before and after federal legalization.Continued . . .------------------------------------------------------------------------------------------------------Marijuana Stocks? There’s Never Been a Better TimeToday we’re on the verge of bipartisan marijuana legislation at the Federal level. Once the bill is passed, money is likely to flow into current and brand-new stocks at a rate that has never been seen in this industry.Thirty-six states plus D.C. have already legalized medicinal marijuana and 18 states plus D.C. made recreational use legal. There’s no stopping this trend, and now is the time to join the rush for profits. Global sales are predicted to skyrocket from $20.5 billion back in 2020 to $90.4 billion by 2026.Zacks recently closed marijuana trades of +39.7%, +94.5%, even +147.0% in as little as 4-1/2 months. Plus, new stocks are being lined up that could greatly surpass these gains.²See Zacks' latest pot stocks now >>------------------------------------------------------------------------------------------------------Don’t Touch the Plant Only Canadian marijuana growers can list on U.S. exchanges given the current standing of cannabis at the Federal level. Fortunately, outside of growers and pure-play pot companies, an array of stocks and industries provide access to legal marijuana because they maintain just enough distance from cannabis.Don’t touch the plant stocks also theoretically provide greater stability amid the current legal grey area in the U.S. The growing niche within pot investing includes real estate investment trusts, suppliers and equipment makers, tech firms, product safety and testing operations, pharmaceutical giants, and beyond.Hydroponics & High-Tech Farming Marijuana, even with all of the complicated new ways to consume it, is a plant. Therefore, the companies that directly support the growing of cannabis are some of the most straightforward and essential of the don’t touch the plant stocks.Today’s cannabis companies run grow operations that more often resemble high-tech, spotless computer chip factories than anything close to a farm. Hydroponic gardening or farming, which simply means growing without the use of soil, by utilizing formulated, mineral nutrient solutions in water, is front and center of modern cannabis cultivation.Marijuana is planted in an inert growing media and constantly supplied with nutrient-rich solutions, oxygen, and water, while light, temperature, and carbon dioxide levels are carefully controlled through various gadgets and other devices. Hydroponics allows for year-round growing, larger yields, and nearly complete control of the process.The global hydroponics market, which spans from multi-billion dollar operations to home grows, reportedly hit around $10 billion in 2020, and it's expected to reach well over $20 billion before the end of the decade. Many public hydroponics and indoor farming companies have posted 60% or higher revenue growth over the last several years.Plus, large institutional investors are pouring money into hydroponics stocks, with most holding at least 50% institutional ownership, compared to pure-play pot stocks that are closer to 15% or less.Real Estate Expansion Huge, high-tech marijuana growers require tons of capital and cash to start and operate. Yet, marijuana’s classification under federal law makes running successful U.S. pot businesses complex and cumbersome, especially when it comes to money. Most local and national banks don’t want anything to do with the legal marijuana market because of all the various state laws and expensive compliance standards.A few companies have helped fill the void for firms that don’t have access to traditional banking services. This backdrop enables cannabis-focused real estate investment trusts or REITs to essentially lend millions of dollars to cannabis companies that don’t have easy access to other sources of capital and collect extremely high interest rates for doing so, on long-term agreements. And like all REITs, they are required to distribute 90% of their taxable income to shareholders.Cannabis Tech Technology dominates our lives and the market, so of course, it plays a vital role in legal pot. There are multiple companies that sell cannabis-specific software to help growers, dispensaries, and others operate more effectively and efficiently in the highly-regulated space.Various publicly traded companies offer solutions for compliance, data, taxation, payments, plant tracking, and much more. The opportunity for expansion is huge in the marijuana tech world and a few companies are in the midst of rapid consolidation to try to capture more market share ahead of U.S. federal legalization that will likely require increasingly stringent guidelines.Extracting Profits from Plants The transition from the black market to labs and hydroponics ushered in the age of endless, hyper-specific marijuana strains. Outside of traditional flower that’s smoked, tons of growth is coming from edible products, oils, and other highly concentrated forms of cannabis.In order to transform cannabis plants and marijuana buds into new-age consumption methods, from concentrates to topical creams, detailed and varied extraction processes must be completed. There are various extraction methods that must be performed repeatedly and precisely, often on a massive scale.Extraction is growing more crucial given the global scope and the increasing demand for non-flower products, which includes widely popular non-psychoactive CBD products.Marijuana Testing  Medical-grade and adult-use cannabis products sold in legal markets are required by law to be clearly labeled with ingredients, cannabinoid levels, dosage recommendations, and tons of other information. Like all industries, from food to medicine, tons of testing is involved at various stages of the cultivation process.Cannabis testing is a potentially huge segment and it will garner even more attention at the national level, especially amid a rise in laced black market drugs. The broader field includes regulatory compliance, quality control, research, and beyond. There are currently multiple cannabis testing companies out there, and a few publicly traded names stand out through their exposure to other areas outside of marijuana.Pharmaceuticals and Biotech Far outside of medical marijuana exists the nascent world of cannabis-based medicine. There are a few stocks making waves in this growing field. One such public company sells the first prescription, plant-derived cannabis-based medicine approved by the FDA and the European Commission.The drug is used in the treatment of seizures associated with various syndromes in patients one year or older. Another more home-run style stock has attracted investment for its potential first-in-class therapeutics targeting the endocannabinoid system that aims to address needs in multiple diseases and conditions, including anorexia, cancer, pain, and inflammation.Multiple Opportunities for Investors As mentioned, this space looks to explode from $20.5 billion in 2020 to $90.4 billion by 2026. Yet only a few growers, pharmaceuticals, financial firms, suppliers - both established and start-ups - are the true innovators and offer historic profit potential.So if you don't want to devote constant attention and painstaking analysis to find these often little-known tickers, we can find them for you.Today, as the legalized marijuana floodgates are about to open, you’re invited to take part in our portfolio service Zacks Marijuana Innovators.This approach is responsible and vigilant, but we look for aggressive growth. Recently, we closed gains of +39.7%, +94.5%, even +147.0% in as little as 4-1/2 months.²Right now you can follow the live buys and sells inside Marijuana Innovators, and be among the first to get in on new buys that I’m lining up.Bonus Report: Speaking of industries with explosive growth potential, when you check our marijuana recommendations you are also invited to download our Special Report, One Semiconductor Stock Stands to Gain the Most. From 35 semiconductor stocks, you can get an early look at Zacks’ top pick during today’s chip shortage crisis.We can’t let everyone in on our marijuana portfolio, so your chance to gain access must end at midnight this Sunday, December 26. Sorry, no extensions.See Zacks' Marijuana Innovators Trades and Bonus Semiconductor Report Now >>Good Investing,Ben RainsEditorBen Rains develops strategies that enable investors to profit from the growing legal market in the U.S. and beyond. Ben uses his extensive experience and concentrated industry study to direct our unique portfolio service, Zacks Marijuana Innovators.¹ Source for marijuana industry growth estimate: Research and Markets ² The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position.  Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksDec 23rd, 2021

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 Rebound Fizzles On Slowing iPhone Demand, Omicron Fears

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

Category: dealsSource: nytDec 2nd, 2021

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

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

Category: smallbizSource: nytNov 1st, 2021

Take our return-to-office survey to help us understand how employees feel about their companies" remote work policies

How do remote work and return-to-office policies impact employees? We want to hear from workers worldwide. Insider Many companies have been working remotely for over a year. Now it's time for them to decide when and how to return, and the first policies are being announced. Have an opinion? Take our survey. Do you miss the office? Share your opinion in our global survey Should you bring your employees to the office five or two days a week?Who should decide on the time and date of return to the office: management boards, teams, or employees themselves? Offices are (probably) coming back Global companies already have the first answers. For now, they agree on one thing: they want to open offices as soon as possible. The date moves every month.In early September this year, Google announced that it would be January 2022. Earlier it spoke of October 2021, and even earlier about September and July.Other tech giants are also planning to reopen their offices early next year. Facebook, Apple, Uber, and Roblox all set the new date for January. Asana and Lyft chose February, and Airbnb selected September 2022.After it didn't follow its announcement to open offices in early October this year, Microsoft does not want to announce a new return date at all. As for companies outside the tech industry, Goldman Sachs employees have been in the office since June this year, and Nike and Starbucks employees will head back to the office from January 2022.Only the vaccinated can enterIf there is one thing American employers agree on in return-to-office policies, it's vaccination. Back in July this year, Facebook, Google, Amazon, and Microsoft did not require employees to be vaccinated against COVID-19. Today the same companies treat vaccinating office staff as mandatory. This is the case with Google (from July 28), Facebook, Twitter, Lyft, Uber, Cisco, Microsoft, Adobe, VMware, Twilio, and Asana.One of the few big tech companies that has yet to make COVID-19 vaccination mandatory is Apple. Beginning November 1, unvaccinated office workers in this company must undergo a COVID-19 test every time they enter their office door, and the vaccinated ones must take one rapid test per week. By October 24, all employees must inform the iPhone manufacturer of their vaccination status and show proof.Do you miss the office? Share your opinion in our global survey Apple will soon be forced to change its policy on compulsory vaccination, though. US President Joe Biden ordered government contractors to fully vaccinate their employees by December 6, and Apple sells its products to the US administration through a dedicated sales channel.Is working in the office an opportunity or an obligation?The main line of dispute on hybrid work is around flexibility - should employees be given the choice between working in the office and working from home? There is no consent among companies here. The social network Twitter gives the greatest freedom among tech corporations. In May 2020, at the height of the pandemic, CEO Jack Dorsey announced to employees that they could work remotely "forever". Offices were treated as an option for those willing. Among large corporations, this seems to be the exception rather than the rule. Facebook, Google, Microsoft, Uber, Revolut, Spotify, KPMG, EY, JP Morgan, HSBC, Unilever, and Disney have all announced hybrid work as company policy.For now, these plans only exist on paper. Some employees are openly protesting against being forced to work in the office. As recently reported by Vox and The Verge, over 7,000 Apple employees participate regularly in an internal corporate Slack group called "remote work advocacy," where workers discuss their frustrations with management on the issue, and how other companies are offering more flexible arrangements. The group's conversations with CEO Tim Cook on remote work leak to the press regularly, proving how important and sensitive the subject is for tech talent.Employers change their minds about working from homeThe pressure on employers to adopt fully flexible work is growing. Amazon CEO Andy Jassy announced a new policy in mid-October stating that workers will be able to perform their tasks from home full time, and how many days they come into the office will be up to their team director to decide. Labor market analysts note that Amazon has just started a huge recruiting campaign for 40,000 corporate and tech positions which will constitute a 20% rise in staffing. Remote work could potentially become a bargaining chip in the fight for specialists.Do you miss the office? Share your opinion in our global survey The research firm Gartner recently asked 10,000 digital workers in the US, Europe and Asia about what is important to them at work and what helps them to be more productive. 43% of specialists mentioned flexibility of working hours, and 30% of them indicated that they are more effective when they spend less time commuting or do not commute to the office at all.In late September, PwC became the first of the big four accounting and consulting companies to offer permanent remote work to willing customer service staff, affecting 40,000 people in the US alone. PwC employees who choose to work from home permanently will have to come to the offices at least three days a month for scheduled in-person meetings, key team meetings, client visits, or learning sessions.PwC makes no secret that its flexible attitude to work from home is motivated by the desire to retain and attract talent, and in mid-June this year, the company, which employs 295,000 people worldwide, announced a plan to recruit 100,000 new workers (70-75,000 from outside the US). Share your opinion with usThe future model of work is being shaped in front of our eyes. As the Amazon and PwC examples show, offering employees real flexibility in their choice of work options can be a calling card for the most innovative employers in the months to come. What's your opinion? What should be the future work model for you and your company?Share your opinion in our global survey about returning to the office. There are 17 questions that will take you no more than 5-7 minutes to answer.In return, you will receive a report with research results and expert comments. We'll also invite you to an exclusive webinar where you will learn how the world's most progressive companies are resolving their return-to-office dilemmas. Do you miss the office? Share your opinion in our global surveyRead the original article on Business Insider.....»»

Category: topSource: businessinsiderOct 25th, 2021

Futures Surge As Banks Report Stellar Earnings; PPI On Deck

Futures Surge As Banks Report Stellar Earnings; PPI On Deck US equity futures, already sharply higher overnight, jumped this morning as a risk-on mood inspired by stellar bank earnings, overshadowed concern that supply snarls. a China property crunch, a tapering Fed and stagflation will weigh on the global recovery. Nasdaq futures jumped 1%, just ahead of the S&P 500 which was up 0.9%. 10-year Treasury yields ticked lower to about 1.5%, and with the dollar lower as well, oil jumped. Bitcoin and the broader crypto space continued to rise. Shares in Morgan Stanley, Citi and Bank of America jumped as their deal-making units rode a record wave of M&A. On the other end, Boeing shares fell more than 1% after a Dow Jones report said the plane maker is dealing with a new defect on its 787 Dreamliner. Here are some of the biggest other U.S. movers today: Occidental (OXY US) rises 1.6% in U.S. premarket trading after it agreed to sell its interests in two Ghana offshore fields for $750m to Kosmos Energy and Ghana National Petroleum Plug Power (PLUG US) rises 3.3% premarket, extending gains from Wednesday, when it announced partnership with Airbus SE and Phillips 66 to find ways to harness hydrogen to power airplanes, vehicles and industry Esports Entertainment (GMBL US) shares rise 16% in U.S. premarket trading after the online gambling company reported its FY21 results and reaffirmed its FY22 guidance Perrigo  (PRGO US) gains 2.8% in premarket trading after Raymond James upgrades to outperform following acquisition of HRA Pharma and recent settlement of Irish tax dispute AT&T (T US) ticks higher in premarket trading after KeyBanc writes upgrades to sector weight from underweight, saying it seems harder to justify further downside from here Avis Budget (CAR US) may be active after getting its only negative rating among analysts as Morgan Stanley cuts to underweight with risk/reward seen pointing toward downside OrthoPediatrics (KIDS US) dipped 2% Wednesday postmarket after it said 3Q revenue was hurt by the surge in cases of Covid-19 delta variant and RSV within children’s hospitals combined with staff shortage Investors continue to evaluate the resilience of economic reopening to supply chain disruptions, a jump in energy prices and the prospect of reduced central bank support. In the earnings season so far, executives at S&P 500 companies mentioned the phrase “supply chain” about 3,000 times on investor calls as of Tuesday -- far higher than last year’s then-record figure. “Our constructive outlook for growth means that our asset allocation remains broadly pro-risk and we continue to be modestly overweight global equities,” according to Michael Grady, head of investment strategy and chief economist at Aviva Investors. “However, we have scaled back that position marginally because of growing pains which could impact sales and margins.” Europe's Stoxx 600 index reached its highest level in almost three weeks, boosted by gains in tech shares and miners. The Euro Stoxx 50 rose over 1% to best levels for the week. FTSE 100 rises 0.75%, underperforming at the margin. Miners and tech names are the strongest sectors with only healthcare stocks in small negative territory. Here are some of the biggest European movers today: THG shares advance as much as 10%, snapping a four-day losing streak, after a non-executive director bought stock while analysts at Goldman Sachs and Liberum defended their buy recommendations. Steico gains as much as 9.9%, the most since Jan., after the insulation manufacturer reported record quarterly revenue, which Warburg says “leaves no doubt” about underlying market momentum. Banco BPM climbs as much as 3.6% and is the day’s best performer on the FTSE MIB benchmark index; bank initiated at buy at Jefferies as broker says opportunity to internalize insurance business offers 9%-16% possible upside to 2023 consensus EPS and is not priced in by the market. Hays rises as much as 4.3% after the recruiter posted a jump in comparable net fees for the first quarter. Publicis jumps as much as 3.7%, the stock’s best day since July, with JPMorgan saying the advertising company’s results show a “strong” third quarter, though there are risks ahead. Kesko shares rise as much as 6.1%. The timing of this year’s third guidance upgrade was a surprise, Inderes says. Ubisoft shares fall as much as 5.5% after JPMorgan Cazenove (overweight) opened a negative catalyst watch, citing short-term downside risk to earnings ahead of results. Earlier in the session, Asian stocks advanced, boosted by a rebound in technology shares as traders focused on the ongoing earnings season and assessed economic-reopening prospects in the region. The MSCI Asia Pacific Index gained as much as 0.7%, as a sub-gauge of tech stocks rose, halting a three-day slide. Tokyo Electron contributed the most to the measure’s climb, while Taiwan Semiconductor Manufacturing Co. closed up 0.4% ahead of its earnings release. India’s tech stocks rose following better-than-expected earnings for three leading firms in the sector. Philippine stocks were among Asia’s best performers as Manila began easing virus restrictions, which will allow more businesses in the capital to reopen this weekend. Indonesia’s stock benchmark rallied for a third-straight day, as the government prepared to reopen Bali to tourists. READ: Commodities Boom, Tourism Hopes Fuel Southeast Asia Stock Rally Ilya Spivak, head of Greater Asia at DailyFX, said FOMC minutes released overnight provided Asian markets with little direction, which may offer some opportunity for recouping recent losses. The report showed officials broadly agreed last month they should start reducing pandemic-era stimulus in mid-November or mid-December. U.S. 10-year Treasury yields stayed below 1.6%, providing support for tech stocks.  “Markets seemed to conclude the near-term narrative is on pause until further evidence,” Spivak said. Shares in mainland China fell as the country reported factory-gate prices grew at the fastest pace in almost 26 years in September. Singapore’s stock benchmark pared initial losses as the country’s central bank unexpectedly tightened policy. Hong Kong’s equity market was closed for a holiday In rates, Treasuries were steady to a tad higher, underperforming Bunds which advanced, led by the long end.  Fixed income is mixed: gilts bull steepen with short dates richening ~2.5bps, offering only a muted reaction to dovish commentary from BOE’s Tenreyro. Bunds rise with 10y futures breaching 169. USTs are relatively quiet with 5s30s unable to crack 100bps to the upside. Peripheral spreads widen slightly. In FX, the Turkish lira was again the overnight standout as it weakened to a record low after President Recep Tayyip Erdogan fired three central bankers. The Bloomberg Dollar Spot Index fell and the greenback slipped against all of its Group-of-10 peers apart from the yen, with risk-sensitive and resource-based currencies leading gains; the euro rose to trade above $1.16 for the first time in a week.  The pound rose to more than a two-week high amid dollar weakness as traders wait for a raft of Bank of England policy makers to speak. Sweden’s krona temporarily came off an almost eight-month high against the euro after inflation fell short of estimates. The euro dropped to the lowest since November against the Swiss franc as banks targeted large option barriers and leveraged sell-stops under 1.0700, traders said; Currency traders are responding to stagflation risks by turning to the Swiss franc. The Aussie advanced to a five-week high versus the greenback even as a monthly jobs report showed employment fell in September; the jobless rate rose less than economists forecast. The kiwi was a among the top performers; RBNZ Deputy Governor Geoff Bascand said inflation pressures were becoming more persistent China’s yuan declined from a four-month high after the central bank signaled discomfort with recent gains by setting a weaker-than-expected reference rate. In commodities, crude futures extend Asia’s gains with WTI up ~$1 before stalling near $81.50. Brent regains a $84-handle. Spot gold drifts through Wednesday’s highs, adding $4 to print just shy of the $1,800/oz mark. Base metals are well bid with LME copper and aluminum gaining as much as 3%.  Looking at the day ahead, we’ve got central bank speakers including the Fed’s Bullard, Bostic, Barkin, Daly and Harker, the ECB’s Elderson and Knot, along with the BoE’s Deputy Governor Cunliffe, Tenreyro and Mann. Data releases from the US include the September PPI reading along with the weekly initial jobless claims. Lastly, earnings releases will include UnitedHealth, Bank of America, Wells Fargo, Morgan Stanley, Citigroup, US Bancorp and Walgreens Boots Alliance. Market Snapshot S&P 500 futures up 0.6% to 4,382.50 STOXX Europe 600 up 0.9% to 464.38 MXAP up 0.7% to 196.12 MXAPJ up 0.6% to 642.66 Nikkei up 1.5% to 28,550.93 Topix up 0.7% to 1,986.97 Hang Seng Index down 1.4% to 24,962.59 Shanghai Composite little changed at 3,558.28 Sensex up 0.7% to 61,190.63 Australia S&P/ASX 200 up 0.5% to 7,311.73 Kospi up 1.5% to 2,988.64 Brent Futures up 1.0% to $83.98/bbl Gold spot up 0.2% to $1,796.13 U.S. Dollar Index down 0.25% to 93.84 German 10Y yield fell 1.5 bps to -0.143% Euro little changed at $1.1615 Brent Futures up 1.0% to $84.13/bbl Top Overnight News from Bloomberg A flattening Treasury yield curve signals increasing concern Federal Reserve efforts to keep inflation in check will derail the recovery in the world’s largest economy China’s factory-gate prices grew at the fastest pace in almost 26 years in September, potentially adding to global inflation pressure if local businesses start passing on higher costs to consumers. Turkish President Recep Tayyip Erdogan fired monetary policy makers wary of cutting interest rates further, driving the lira to record lows against the dollar with his midnight decree Singapore’s central bank unexpectedly tightened its monetary policy settings, strengthening the local dollar, as the city-state joins policymakers globally concerned about risks of persistent inflation Shortages of natural gas in Europe and Asia are boosting demand for oil, deepening what was already a sizable supply deficit in crude markets, the International Energy Agency said A tropical storm that’s lashing southern China mixed with Covid-related supply chain snarls is causing a ship backlog from Shenzhen to Singapore, intensifying fears retail shelves may look rather empty come Christmas A more detailed look at global markets courtesy of Newsquawk A constructive mood was seen across Asia-Pac stocks with the region building on the mild positive bias stateside where the Nasdaq outperformed as tech and growth stocks benefitted from the curve flattening, with global risk appetite unfazed by the firmer US CPI data and FOMC Minutes that suggested the start of tapering in either mid-November of mid-December. The ASX 200 (+0.5%) traded higher as tech stocks found inspiration from the outperformance of US counterparts and with the mining sector buoyed by gains in underlying commodity prices. The Nikkei 225 (+1.5%) was the biggest gainer amid currency-related tailwinds and with the latest securities flow data showing a substantial shift by foreign investors to net purchases of Japanese stocks during the prior week. The KOSPI (+1.5%) conformed to the brightening picture amid signs of a slowdown in weekly infections, while the Singapore’s Straits Times Index (+0.3%) lagged for most of the session following weaker than expected Q3 GDP data, and after the MAS surprisingly tightened its FX-based policy by slightly raising the slope of the SGD nominal effective exchange rate (NEER). The Shanghai Comp. (U/C) was initially kept afloat but with gains capped after slightly softer than expected loans and financing data from China and with participants digesting mixed inflation numbers in which CPI printed below estimates but PPI topped forecasts for a record increase in factory gate prices, while there was also an absence of Stock Connect flows with participants in Hong Kong away for holiday. Finally, 10yr JGBs were higher after the recent curve flattening stateside and rebound in T-notes with the US longer-end also helped by a solid 30yr auction, although gains for JGBs were capped amid the outperformance in Tokyo stocks and mostly weaker metrics at the 5yr JGB auction. Top Asian News Chinese Developer Shares Fall on Debt Crisis: Evergrande Update Japan’s Yamagiwa Says Abenomics Fell Short at Spreading Wealth China Seen Rolling Over Policy Loans to Keep Liquidity Abundant Malaysia’s 2020 Fertility Rate Falls to Lowest in Four Decades Bourses in Europe have modestly extended on the upside seen at the European cash open (Euro Stoxx 50 +1.1%; Stoxx 600 +0.9%) in a continuation of the firm sentiment experienced overnight. US equity futures have also conformed to the broader upbeat tone, with gains seen across the ES (+0.7%), NQ (+0.8%), RTY (+0.8%) and YM (+0.7%). The upside comes despite a lack of overly pertinent newsflow, with participants looking ahead to a plethora of central bank speakers. The major indices in Europe also see a broad-based performance, but the periphery narrowly outperforms, whilst the SMI (Unch) lags amid the sectorial underperformance seen in Healthcare. Overall, the sectors portray somewhat of a cyclical tilt. The Basic Resources sector is the clear winner and is closely followed by Tech and Financial Services. Individual moves are scarce as price action is largely dictated by the macro picture, but the tech sector is led higher by gains in chip names after the world's largest contract chipmaker TSMC (+3.1% pre-market) reported strong earnings and upgraded its revenue guidance. Top European News German 2021 Economic Growth Forecast Slashed on Supply Crunch U.K. Gas Shipper Stops Supplies in Another Blow to Power Firms Christmas Toy Shortages Loom as Cargo Clogs a Major U.K. Port Putin Is Back to Building Financial Fortress as Reserves Grow In FX, the Dollar and index by default have retreated further from Tuesday’s 2021 peak for the latter as US Treasury yields continue to soften and the curve realign in wake of yesterday’s broadly in line CPI data and FOMC minutes that set the schedule for tapering, but maintained a clear differential between scaling down the pace of asset purchases and the timing of rate normalisation. Hence, the Buck is losing bullish momentum with the DXY now eying bids and downside technical support under 94.000 having slipped beneath an early October low (93.804 from the 5th of the month vs 93.675 a day earlier) and the 21 DMA that comes in at 93.770 today between 94.090-93.754 parameters before the next IJC update, PPI data and a heavy slate of Fed speakers. NZD/AUD - No real surprise that the Kiwi has been given a new lease of life given that the RBNZ has already taken its first tightening step and put physical distance between the OCR and the US FFR, not to mention that the move sparked a major ‘sell fact’ after ‘buy rumour’ reaction. However, Nzd/Usd is back on the 0.7000 handle with additional impetus via favourable tailwinds down under as the Aud/Nzd cross is now nearer 1.0550 than 1.0600 even though the Aussie is also taking advantage of the Greenback’s fall from grace to reclaim 0.7400+ status. Note, Aud/Usd may be lagging somewhat on the back of a somewhat labour report overnight as the employment tally fell slightly short of expectations and participation dipped, but the jobless rate fell and full time jobs rose. Moreover, RBA Deputy Governor Debelle repeated that circumstances are different for Australia compared to countries where policy is tightening, adding that employment is positive overall, but there is not much improvement on the wage front. CAD/GBP/CHF - The next best majors in terms of reclaiming losses vs their US counterpart, with the Loonie also encouraged by a firm bounce in oil prices and other commodities in keeping with a general recovery in risk appetite. Usd/Cad is under 1.2400, while Cable is now over 1.3700 having clearly breached Fib resistance around 1.3663 and the Franc is probing 0.9200 for a big figure-plus turnaround from recent lows irrespective of mixed Swiss import and producer prices. EUR/JPY - Relative laggards, but the Euro has finally hurdled chart obstacles standing in the way of 1.1600 and gradually gathering impetus to pull away from decent option expiry interest at the round number and just above (1.5 bn and 1 bn 1.1610-20), and the Yen regrouping around the 113.50 axis regardless of dovish BoJ rhetoric. In short, board member Noguchi conceded that the Bank may have little choice but to extend pandemic relief support unless it becomes clear that the economy has returned to a pre-pandemic state, adding that more easing may be necessary if the jobs market does not improve from pent-up demand, though he doesn't see and immediate need to top up stimulus or big stagflation risk. In commodities, WTI and Brent front month futures are continuing the grind higher seen since the European close yesterday as the risk tone remains supportive and in the aftermath of an overall bullish IEA oil market report. The IEA upgraded its 2021 and 2022 oil demand forecasts by 170k and 210k BPD respectively, which contrasts the EIA STEO and the OPEC MOMR – with the former upping its 2021 but cutting 2022 forecast, whilst the OPEC MOMR saw the 2021 demand forecast cut and 2022 was maintained. The IEA report however noted that the ongoing energy crisis could boost oil demand by 500k BPD, and oil demand could exceed pre-pandemic levels in 2022. On this, China has asked Russia to double electricity supply between November-December. The morning saw commentary from various energy ministers, but perhaps the most telling from the Russian Deputy PM Novak who suggested Russia will produce 9.9mln BPD of oil in October (in-line with the quota), but that Russia has no problem in increasing oil output which can go to 11.3mln BPD (Russia’s capacity) and even more than that, but output will depend on market situation. Long story short, Russia can ramp up output but is currently caged by the OPEC+ pact. WTI Nov extended on gain about USD 81/bbl to a current high of USD 81.41/bbl (vs 80.41/bbl low) while its Brent counter topped USD 84.00/bbl to a USD 84.24/bbl high (vs 83.18/bbl low). As a reminder, the weekly DoEs will be released at 16:00BST/11:00EDT on account of the Columbus Day holiday. Gas prices have also moved higher in intraday, with the UK Nat Gas future +5.5% at the time of writing. Returning to the Russian Deputy PM Novak who noted that Nord Stream 2 will be ready for work in the next few days, still expects certification to occur and commercial supplies of gas via Nord Stream 2 could start following certification. Elsewhere, spot gold and silver have been drifting higher as the Buck wanes, with spot gold topping its 200 DMA (1,7995/oz) and in striking distance of its 100 DMA (1,799/oz) ahead of the USD 1,800/oz mark. Over to base metals, LME copper is again on a firmer footing, owing to the overall constructive tone across the market. Dalian iron ore meanwhile fell for a second straight day in a continuation of the downside seen as Beijing imposed tougher steel output controls for winter. World Steel Association also cut its global steel demand forecast to +4.5% in 2021 (prev. forecast +5.8%); +2.2% in 2022 (prev. forecast 2.7%). US Event Calendar 8:30am: Sept. PPI Final Demand MoM, est. 0.6%, prior 0.7%; YoY, est. 8.6%, prior 8.3% 8:30am: Sept. PPI Ex Food and Energy MoM, est. 0.5%, prior 0.6%; YoY, est. 7.1%, prior 6.7% 8:30am: Sept. PPI Ex Food, Energy, Trade MoM, est. 0.4%, prior 0.3%; YoY, est. 6.5%, prior 6.3% 8:30am: Oct. Initial Jobless Claims, est. 320,000, prior 326,000; Continuing Claims, est. 2.67m, prior 2.71m 9:45am: Oct. Langer Consumer Comfort, prior 53.4 Central Banks 8:35am: Fed’s Bullard Takes Part in Virtual Discussion 9:45am: Fed’s Bostic Takes Part in Panel on Inclusive Growth 12pm: New York Fed’s Logan Gives Speech on Policy Implementation 1pm: Fed’s Barkin Gives Speech 1pm: Fed’s Daly Speaks at Conference on Small Business Credit 6pm: Fed’s Harker Discusses the Economic Outlook DB's Jim Reid concludes the overnight wrap Inflation dominated the conversation yet again for markets yesterday, after another upside surprise from the US CPI data led to the increasing realisation that we’ll still be talking about the topic for some time yet. Equities were pretty subdued as they looked forward to the upcoming earnings season, but investor jitters were evident as the classic inflation hedge of gold (+1.87%) posted its strongest daily performance since March, whilst the US dollar (-0.46%) ended the session as the worst performer among the G10 currencies. Running through the details of that release, headline US consumer prices were up by +0.4% on a monthly basis in September (vs. +0.3% expected), marking the 5th time in the last 7 months that the figure has come in above the median estimate on Bloomberg, though core prices were in line with consensus at +0.2% month-over-month. There were a number of drivers behind the faster pace, but food inflation (+0.93%) saw its biggest monthly increase since April 2020. Whilst some pandemic-sensitive sectors registered soft readings, housing-related prices were much firmer. Rent of primary residence grew +0.45%, its fastest pace since May 2001 and owners’ equivalent rent increased +0.43%, its strongest since June 2006. These housing gauges are something that Fed officials have signposted as having the potential to provide more durable upward pressure on inflation. The CPI release only added to speculation that the Fed would be forced to hike rates earlier than previously anticipated, and investors are now pricing in almost 4 hikes by the end of 2023, which is over a full hike more than they were pricing in just a month earlier. In response, the Treasury yield curve continued the previous day’s flattening, with the prospect of tighter monetary policy seeing the 2yr yield up +2.0bps to a post-pandemic high of 0.358%, whilst the 10yr decreased -4.0bps to 1.537%. That move lower in the 10yr yield was entirely down to lower real rates, however, which were down -7.4bps, suggesting investors were increasingly concerned about long-term growth prospects, whereas the 10yr inflation breakeven was up +3.3bps to 2.525%, its highest level since May. Meanwhile in Europe, 10yr sovereign bond yields took a turn lower alongside Treasuries, with those on bunds (-4.2bps), OATs (-4.0bps) and BTPs (-2.3bps) all falling. Recent inflation dynamics and issues on the supply-side are something that politicians have become increasingly attuned to, and President Biden gave remarks last night where he outlined efforts to address the supply-chain bottlenecks. This followed headlines earlier in the session that major ports in southern California would move to a 24/7 schedule to unclog delivery backlogs, and Mr. Biden also used the opportunity to push for the passage of the infrastructure plan. That comes as it’s also been reported by Reuters that the White House has been speaking with US oil and gas producers to see how prices can be brought lower. We should hear from Mr. Biden again today, who’s due to give an update on the Covid-19 response. On the topic of institutions that care about inflation, the September FOMC minutes suggested staff still remained optimistic that inflationary pressures would prove transitory, although Committee members themselves were predictably more split on the matter. Several participants pointed out that pandemic-sensitive prices were driving most of the gains, while some expressed concerns that high rates of inflation would feed into longer-term inflation expectations. Otherwise, the minutes all but confirmed DB’s US economists’ call for a November taper announcement, with monthly reductions in the pace of asset purchases of $10 billion for Treasuries and $5 billion for MBS. Markets took the news in their stride immediately following the release, reflecting how the build-up to this move has been gradually telegraphed through the year. Turning to equities, the S&P 500 managed to end its 3-day losing streak, gaining +0.30% by the close. Megacap technology stocks led the way, with the FANG+ index up +1.13% as the NASDAQ added +0.73%. On the other hand, cyclicals such as financials (-0.64%) lagged behind the broader index following flatter yield curve, and JPMorgan Chase (-2.64%) sold off as the company’s Q3 earnings release showed muted loan growth. Separately, Delta Air Lines (-5.76%) also sold off along with the broader S&P 500 airlines index (-3.51%), as they warned that rising fuel costs would threaten earnings over the current quarter. European indices posted a more solid performance than the US, with the STOXX 600 up +0.71%, though the sectoral balance was similar with tech stocks outperforming whilst the STOXX Banks index (-2.05%) fell back from its 2-year high the previous session. Overnight in Asia equities have put in a mixed performance, with the KOSPI (+1.17%) and the Nikkei (+1.01%) moving higher whilst the Shanghai Composite (-0.25%) and the CSI (-0.62%) have lost ground. Those moves follow the release of Chinese inflation data for September, which showed producer price inflation hit its highest in nearly 26 years, at +10.7% (vs. +10.5% expected), driven mostly by higher coal prices and energy-sensitive categories. On the other hand, the CPI measure for September came in slightly below consensus at +0.7% (vs. +0.8% expected), indicating that higher factory gate prices have not yet translated into consumer prices. Meanwhile, equity markets in the US are pointing to a positive start later on with S&P 500 futures up +0.32%. Of course, one of the drivers behind the renewal of inflation jitters has been the recent surge in commodity prices across the board, and we’ve seen further gains yesterday and this morning that will only add to the concerns about inflation readings yet to come. Oil prices have advanced yet again, with Brent Crude up +0.69% this morning to be on track to close at a 3-year high as it stands. That comes in spite of OPEC’s monthly oil market report revising down their forecast for world oil demand this year to 5.8mb/d, having been at 5.96mb/d last month. Elsewhere, European natural gas prices were up +9.24% as they continued to pare back some of the declines from last week, and a further two energy suppliers in the UK collapsed, Pure Planet and Colorado Energy, who supply quarter of a million customers between them. Otherwise, copper (+4.4x%) hit a 2-month high yesterday, and it up a further +1.01% this morning, Turning to Brexit, yesterday saw the European Commission put forward a set of adjustments to the Northern Ireland Protocol, which is a part of the Brexit deal that’s caused a significant dispute between the UK and the EU. The proposals from Commission Vice President Šefčovič would see an 80% reduction in checks on animal and plant-based products, as well as a 50% reduction in paperwork by reducing the documentation needed for goods moving between Great Britain and Northern Ireland. It follows a speech by the UK’s David Frost on Tuesday, in which he said that Article 16 of the Protocol, which allows either side to take unilateral safeguard measures, could be used “if necessary”. Mr. Frost is due to meet with Šefčovič in Brussels tomorrow. Running through yesterday’s other data, UK GDP grew by +0.4% in August (vs. +0.5% expected), and the July number was revised down to show a -0.1% contraction (vs. +0.1% growth previously). The release means that GDP in August was still -0.8% beneath its pre-pandemic level back in February 2020. To the day ahead now, and on the calendar we’ve got central bank speakers including the Fed’s Bullard, Bostic, Barkin, Daly and Harker, the ECB’s Elderson and Knot, along with the BoE’s Deputy Governor Cunliffe, Tenreyro and Mann. Data releases from the US include the September PPI reading along with the weekly initial jobless claims. Lastly, earnings releases will include UnitedHealth, Bank of America, Wells Fargo, Morgan Stanley, Citigroup, US Bancorp and Walgreens Boots Alliance. Tyler Durden Thu, 10/14/2021 - 08:29.....»»

Category: blogSource: zerohedgeOct 14th, 2021

Futures Reverse Losses Ahead Of Key CPI Report

Futures Reverse Losses Ahead Of Key CPI Report For the second day in a row, an overnight slump in equity futures sparked by concerns about iPhone sales (with Bloomberg reporting at the close on Tuesday that iPhone 13 production target may be cut by 10mm units due to chip shortages) and driven be more weakness out of China was rescued thanks to aggressive buying around the European open. At 800 a.m. ET, Dow e-minis were up 35 points, or 0.1%, S&P 500 e-minis were up 10.25 points, or 0.24%, and Nasdaq 100 e-minis were up 58.50 points, or 0.4% ahead of the CPI report due at 830am ET. 10Y yields dipped to 1.566%, the dollar was lower and Brent crude dropped below $83. JPMorgan rose as much as 0.8% in premarket trading after the firm’s merger advisory business reported its best quarterly profit. On the other end, Apple dropped 1% lower in premarket trading, a day after Bloomberg reported that the technology giant is likely to slash its projected iPhone 13 production targets for 2021 by as many as 10 million units due to prolonged chip shortages. Here are some of the biggest U.S. movers today: Suppliers Skyworks Solutions (SWKS US), Qorvo (ORVO) and Cirrus Logic (CRUS US) slipped Tuesday postmarket Koss (KOSS US) shares jump 23% in U.S. premarket trading in an extension of Tuesday’s surge after tech giant Apple was rebuffed in two patent challenges against the headphones and speakers firm Qualcomm (QCOM US) shares were up 2.7% in U.S. premarket trading after it announced a $10.0 billion stock buyback International Paper (IP US) in focus after its board authorized a program to acquire up to $2b of the company’s common stock; cut quarterly dividend by 5c per share Smart Global (SGH US) shares rose 2% Tuesday postmarket after it reported adjusted earnings per share for the fourth quarter that beat the average analyst estimate Wayfair (W US) shares slide 1.8% in thin premarket trading after the stock gets tactical downgrade to hold at Jefferies Plug Power (PLUG US) gains 4.9% in premarket trading after Morgan Stanley upgrades the fuel cell systems company to overweight, saying in note that it’s “particularly well positioned” to be a leader in the hydrogen economy Wall Street ended lower in choppy trading on Tuesday, as investors grew jittery in the run-up to earnings amid worries about supply chain problems and higher prices affecting businesses emerging from the pandemic. As we noted last night, the S&P 500 has gone 27 straight days without rallying to a fresh high, the longest such stretch since last September, signaling some fatigue in the dip-buying that pushed the market up from drops earlier this year. Focus now turn to inflation data, due at 0830 a.m. ET, which will cement the imminent arrival of the Fed's taper.  "A strong inflation will only reinforce the expectation that the Fed would start tapering its bond purchases by next month, that's already priced in," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. "Yet, a too strong figure could boost expectations of an earlier rate hike from the Fed and that is not necessarily fully priced in." The minutes of the Federal Reserve's September policy meeting, due later in the day, will also be scrutinized for signals that the days of crisis-era policy were numbered. Most European equities reverse small opening losses and were last up about 0.5%, as news that German software giant SAP increased its revenue forecast led tech stocks higher. DAX gained 0.7% with tech, retail and travel names leading. FTSE 100, FTSE MIB and IBEX remained in the red. Here are some of the biggest European movers today: Entra shares gain as much as 10% after Balder increases its stake and says it intends to submit a mandatory offer. Spie jumps as much as 10%, the biggest intraday gain in more than a year, after the French company pulled out of the process to buy Engie’s Equans services unit. Man Group rises as much as 8.3% after the world’s largest publicly traded hedge fund announced quarterly record inflows. 3Q21 net inflows were a “clear beat” and confirm pipeline strength, Morgan Stanley said in a note. Barratt Developments climbs as much as 6.3%, with analysts saying the U.K. homebuilder’s update shows current trading is improving. Recticel climbs 15% to its highest level in more than 20 years as the stock resumes trading after the company announced plans to sell its foams unit to Carpenter Co. Bossard Holding rises as much as 9.1% to a record high after the company reported 3Q earnings that ZKB said show strong growth. Sartorius gains as much as 5.9% after Kepler Cheuvreux upgrades to hold from sell and raises its price target, saying it expects “impressive earnings growth” to continue for the lab equipment company. SAP jumps as much as 5% after the German software giant increased its revenue forecast owing to accelerating cloud sales. Just Eat Takeaway slides as much as 5.8% in Amsterdam to the lowest since March 2020 after a 3Q trading update. Analysts flagged disappointing orders as pandemic restrictions eased, and an underwhelming performance in the online food delivery firm’s U.S. market. Earlier in the session, Asian stocks posted a modest advance as investors awaited key inflation data out of the U.S. and Hong Kong closed its equity market because of typhoon Kompasu. The MSCI Asia Pacific Index rose 0.2% after fluctuating between gains and losses, with chip and electronics manufacturers sliding amid concerns over memory chip supply-chain issues and Apple’s iPhone 13 production targets. Hong Kong’s $6.3 trillion market was shut as strong winds and rain hit the financial hub.  “Broader supply tightness continues to be a real issue across a number of end markets,” Morgan Stanley analysts including Katy L. Huberty wrote in a note. The most significant iPhone production bottleneck stems from a “shortage of camera modules for the iPhone 13 Pro/Pro Max due to low utilization rates at a Sharp factory in southern Vietnam,” they added. Wednesday’s direction-less trading illustrated the uncertainty in Asian markets as traders reassess earnings forecasts to factor in inflation and supply chain concerns. U.S. consumer price index figures and FOMC minutes due overnight may move shares. Southeast Asian indexes rose thanks to their cyclical exposure. Singapore’s stock gauge was the top performer in the region, rising to its highest in about two months, before the the nation’s central bank decides on monetary policy on Thursday. Japanese stocks fell for a second day as electronics makers declined amid worries about memory chip supply-chain issues and concerns over Apple’s iPhone 13 production targets.  The Topix index fell 0.4% to 1,973.83 at the 3 p.m. close in Tokyo, while the Nikkei 225 declined 0.3% to 28,140.28. Toyota Motor Corp. contributed the most to the Topix’s loss, decreasing 1.3%. Out of 2,181 shares in the index, 608 rose and 1,489 fell, while 84 were unchanged. Japanese Apple suppliers such as TDK, Murata and Taiyo Yuden slid. The U.S. company is likely to slash its projected iPhone 13 production targets for 2021 by as many as 10 million units as prolonged chip shortages hit its flagship product, according to people with knowledge of the matter Australian stocks closed lower as banks and miners weighed on the index. The S&P/ASX 200 index fell 0.1% to close at 7,272.50, dragged down by banks and miners as iron ore extended its decline. All other subgauges edged higher. a2 Milk surged after its peer Bubs Australia reported growing China sales and pointed to a better outlook for daigou channels. Bank of Queensland tumbled after its earnings release. In New Zealand, the S&P/NZX 50 index rose 0.2% to 13,025.18. In rates, Treasuries extended Tuesday’s bull-flattening gains, led by gilts and, to a lesser extent, bunds. Treasuries were richer by ~2bps across the long-end of the curve, flattening 5s30s by about that much; U.K. 30-year yield is down nearly 7bp, with same curve flatter by ~6bp. Long-end gilts outperform in a broad-based bull flattening move that pushed 30y gilt yields down ~7bps back near 1.38%. Peripheral spreads widen slightly to Germany. Cash USTs bull flatten but trade cheaper by ~2bps across the back end to both bunds and gilt ahead of today’s CPI release. In FX, the Bloomberg Dollar Spot Index fell by as much as 0.2% and the greenback weakened against all of its Group-of-10 peers; the Treasury curve flattened, mainly via falling yields in the long- end, The euro advanced to trade at around $1.1550 and the Bund yield curve flattened, with German bonds outperforming Treasuries. The euro’s volatility skew versus the dollar shows investors remain bearish the common currency as policy divergence between the Federal Reserve and the European Central Bank remains for now. The pound advanced with traders shrugging off the U.K.’s weaker-than-expected economic growth performance in August. Australia’s sovereign yield curve flattened for a second day while the currency underperformed its New Zealand peer amid a drop in iron ore prices. The yen steadied after four days of declines. In commodities, crude futures hold a narrow range with WTI near $80, Brent dipping slightly below $83. Spot gold pops back toward Tuesday’s best levels near $1,770/oz. Base metals are in the green with most of the complex up at least 1%. To the day ahead now, and the main data highlight will be the aforementioned US CPI reading for September, while today will also see the most recent FOMC meeting minutes released. Other data releases include UK GDP for August and Euro Area industrial production for August. Central bank speakers include BoE Deputy Governor Cunliffe, the ECB’s Visco and the Fed’s Brainard. Finally, earnings releases include JPMorgan Chase, BlackRock and Delta Air Lines. Market Snapshot S&P 500 futures up 0.1% to 4,346.25 STOXX Europe 600 up 0.4% to 459.04 MXAP up 0.2% to 194.60 MXAPJ up 0.4% to 638.16 Nikkei down 0.3% to 28,140.28 Topix down 0.4% to 1,973.83 Hang Seng Index down 1.4% to 24,962.59 Shanghai Composite up 0.4% to 3,561.76 Sensex up 0.8% to 60,782.71 Australia S&P/ASX 200 down 0.1% to 7,272.54 Kospi up 1.0% to 2,944.41 Brent Futures down 0.4% to $83.12/bbl Gold spot up 0.5% to $1,768.13 U.S. Dollar Index down 0.23% to 94.30 German 10Y yield fell 4.2 bps to -0.127% Euro little changed at $1.1553 Brent Futures down 0.4% to $83.12/bbl Top Overnight News from Bloomberg Vladimir Putin wants to press the EU to rewrite some of the rules of its gas market after years of ignoring Moscow’s concerns, to tilt them away from spot-pricing toward long-term contracts favored by Russia’s state run Gazprom, according to two people with knowledge of the matter. Russia is also seeking rapid certification of the controversial Nord Stream 2 pipeline to Germany to boost gas deliveries, they said. Federal Reserve Vice Chairman for Supervision Randal Quarles will be removed from his role as the main watchdog of Wall Street lenders after his title officially expires this week. The EU will offer a new package of concessions to the U.K. that would ease trade barriers in Northern Ireland, as the two sides prepare for a new round of contentious Brexit negotiations. U.K. Chancellor of the Exchequer Rishi Sunak is on course to raise taxes and cut spending to control the budget deficit, while BoE Governor Andrew Bailey has warned interest rates are likely to rise in the coming months to curb a rapid surge in prices. Together, those moves would mark a simultaneous major tightening of both policy levers just months after the biggest recession in a century -- an unprecedented move since the BoE gained independence in 1997. Peter Kazimir, a member of the ECB’s Governing Council, was charged with bribery in Slovakia. Kazimir, who heads the country’s central bank, rejected the allegations A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mixed following the choppy performance stateside with global risk appetite cautious amid the rate hike bets in US and heading into key events including US CPI and FOMC Minutes, while there were also mild headwinds for US equity futures after the closing bell on reports that Apple is set to reduce output of iPhones by 10mln from what was initially planned amid the chip shortage. ASX 200 (unch.) was little changed as gains in gold miners, energy and tech were offset by losses in financials and the broader mining sector, with softer Westpac Consumer Confidence also limiting upside in the index. Nikkei 225 (-0.3%) was pressured at the open as participants digested mixed Machinery Orders data which showed the largest M/M contraction since February 2018 and prompted the government to cut its assessment on machinery orders, although the benchmark index gradually retraced most its losses after finding support around the 28k level and amid the recent favourable currency moves. Shanghai Comp. (+0.4%) also declined as participants digested mixed Chinese trade data in which exports topped estimates but imports disappointed and with Hong Kong markets kept shut due to a typhoon warning. Finally, 10yr JGBs were steady with price action contained after the curve flattening stateside and tentative mood heading to upcoming risk events, although prices were kept afloat amid the BoJ’s purchases in the market for around JPY 1tln of JGBs predominantly focused on 1-3yr and 5-10yr maturities. Top Asian News Gold Edges Higher on Weaker Dollar Before U.S. Inflation Report RBA Rate Hike Expectations Too Aggressive, TD Ameritrade Says LG Electronics Has Series of Stock-Target Cuts After Profit Miss The mood across European stocks has improved from the subdued cash open (Euro Stoxx 50 +0.5%; Stoxx 600 +0.3%) despite a distinct lack of newsflow and heading into the official start of US earnings season, US CPI and FOMC minutes. US equity futures have also nursed earlier losses and trade in modest positive territory across the board, with the NQ (+0.5%) narrowly outperforming owing to the intraday fall in yields, alongside the sectorial outperformance seen in European tech amid tech giant SAP (+4.7%) upgrading its full FY outlook, reflecting the strong business performance which is expected to continue to accelerate cloud revenue growth. As such, the DAX 40 (+0.7%) outperformed since the cash open, whilst the FTSE 100 (-0.2%) is weighed on by underperformance in its heavyweight Banking and Basic Resources sectors amid a decline in yields and hefty losses in iron ore prices. Elsewhere, the CAC 40 (+0.3%) is buoyed by LMVH (+2.0%) after the luxury name topped revenue forecasts and subsequently lifted the Retail sector in tandem. Overall, sectors are mixed with no clear bias. In terms of individual movers, Volkswagen (+3.5%) was bolstered amid Handelsblatt reports in which the Co was said to be cutting some 30k jobs as costs are too high vs competitors, whilst separate sources suggested the automaker is said to be mulling spinning off its Battery Cell and charging unit. Chipmakers meanwhile see mixed fortunes in the aftermath of sources which suggested Apple (-0.7% pre-market) is said to be slashing output amid the chip crunch. Top European News The Hut Shares Swing as Strategy Day Feeds Investor Concern U.K. Economy Grows Less Than Expected as Services Disappoint Man Group Gets $5.3 Billion to Lift Assets to Another Record Jeff Ubben and Singapore’s GIC Back $830 Million Fertiglobe IPO In FX, the Dollar looks somewhat deflated or jaded after yesterday’s exertions when it carved out several fresh 2021 highs against rival currencies and a new record peak vs the increasingly beleaguered Turkish Lira. In index terms, a bout of profit taking, consolidation and position paring seems to have prompted a pull-back from 94.563 into a marginally lower 94.533-246 range awaiting potentially pivotal US inflation data, more Fed rhetoric and FOMC minutes from the last policy meeting that may provide more clues or clarity about prospects for near term tapering. NZD/GBP - Both taking advantage of the Greenback’s aforementioned loss of momentum, but also deriving impetus from favourable crosswinds closer to home as the Kiwi briefly revisited 0.6950+ terrain and Aud/Nzd retreats quite sharply from 1.0600+, while Cable has rebounded through 1.3600 again as Eur/Gbp retests support south of 0.8480 yet again, or 1.1800 as a reciprocal. From a fundamental perspective, Nzd/Usd may also be gleaning leverage from the more forward-looking Activity Outlook component of ANZ’s preliminary business survey for October rather than a decline in sentiment, and Sterling could be content with reported concessions from the EU on NI customs in an effort to resolve the Protocol impasse. EUR/CAD/AUD/CHF - Also reclaiming some lost ground against the Buck, with the Euro rebounding from around 1.1525 to circa 1.1560, though not technically stable until closer to 1.1600 having faded ahead of the round number on several occasions in the last week. Meanwhile, the Loonie is straddling 1.2450 in keeping with WTI crude on the Usd 80/brl handle, the Aussie is pivoting 0.7350, but capped in wake of a dip in Westpac consumer confidence, and the Franc is rotating either side of 0.9300. JPY - The Yen seems rather reluctant to get too carried away by the Dollar’s demise or join the broad retracement given so many false dawns of late before further depreciation and a continuation of its losing streak. Indeed, the latest recovery has stalled around 113.35 and Usd/Jpy appears firmly underpinned following significantly weaker than expected Japanese m/m machinery orders overnight. SCANDI/EM - Not much upside in the Sek via firmer Swedish money market inflation expectations and perhaps due to the fact that actual CPI data preceded the latest survey and topped consensus, but the Cnh and Cny are firmer on the back of China’s much wider than forecast trade surplus that was bloated by exports exceeding estimates by some distance in contrast to imports. Elsewhere, further hawkish guidance for the Czk as CNB’s Benda contends that high inflation warrants relatively rapid tightening, but the Try has not derived a lot of support from reports that Turkey is in talks to secure extra gas supplies to meet demand this winter, according to a Minister, and perhaps due to more sabre-rattling from the Foreign Ministry over Syria with accusations aimed at the US and Russia. In commodities, WTI and Brent front-month futures see another choppy session within recent and elevated levels – with the former around USD 80.50/bbl (80.79-79.87/bbl) and the latter around 83.35/bbl (83.50-82.65/bbl range). The complex saw some downside in conjunction with jawboning from the Iraqi Energy Minster, who state oil price is unlikely to increase further, whilst at the same time, the Gazprom CEO suggested that the oil market is overheated. Nonetheless, prices saw a rebound from those lows heading into the US inflation figure, whilst the OPEC MOMR is scheduled for 12:00BST/07:00EDT. Although the release will not likely sway prices amidst the myriad of risk events on the docket, it will offer a peek into OPEC's current thinking on the market. As a reminder, the weekly Private Inventory report will be released tonight, with the DoE's slated for tomorrow on account of Monday's Columbus Day holiday. Gas prices, meanwhile, are relatively stable. Russia's Kremlin noted gas supplies have increased to their maximum possible levels, whilst Gazprom is sticking to its contractual obligations, and there can be no gas supplies beyond those obligations. Over to metals, spot gold and silver move in tandem with the receding Buck, with spot gold inching closer towards its 50 DMA at 1,776/oz (vs low 1,759.50/oz). In terms of base metals, LME copper has regained a footing above USD 9,500/t as stocks grind higher. Conversely, iron ore and rebar futures overnight fell some 6%, with overnight headlines suggesting that China has required steel mills to cut winter output. Further from the supply side, Nyrstar is to limit European smelter output by up to 50% due to energy costs. Nyrstar has a market-leading position in zinc and lead. LME zinc hit the highest levels since March 2018 following the headlines US Event Calendar 8:30am: Sept. CPI YoY, est. 5.3%, prior 5.3%; MoM, est. 0.3%, prior 0.3% 8:30am: Sept. CPI Ex Food and Energy YoY, est. 4.0%, prior 4.0%; MoM, est. 0.2%, prior 0.1% 8:30am: Sept. Real Avg Weekly Earnings YoY, prior -0.9%, revised -1.4% 2pm: Sept. FOMC Meeting Minutes DB's Jim Reid concludes the overnight wrap So tonight it’s my first ever “live” parents evening and then James Bond via Wagamama. Given my daughter (6) is the eldest in her year and the twins (4) the youngest (plus additional youth for being premature), I’m expecting my daughter to be at least above average but for my boys to only just about be vaguely aware of what’s going on around them. Poor things. For those reading yesterday, the Cameo video of Nadia Comanenci went down a storm, especially when she mentioned our kids’ names, but the fact that there was no birthday cake wasn’t as popular. So I played a very complicated, defence splitting 80 yard through ball but missed an open goal. Anyway ahead of Bond tonight, with all this inflation about I’m half expecting him to be known as 008 going forward. The next installment of the US prices saga will be seen today with US CPI at 13:30 London time. This is an important one, since it’s the last CPI number the Fed will have ahead of their next policy decision just 3 weeks from now, where investors are awaiting a potential announcement on tapering asset purchases. Interestingly the August reading last month was the first time so far this year that the month-on-month measure was actually beneath the consensus expectation on Bloomberg, with the +0.3% growth being the slowest since January. Famous last words but this report might not be the most interesting since it may be a bit backward looking given WTI oil is up c.7.5% in October alone. In addition, used cars were up +5.4% in September after falling in late summer. So given the 2-3 month lag for this to filter through into the CPI we won’t be getting the full picture today. I loved the fact from his speech last night that the Fed’s Bostic has introduced a “transitory” swear jar in his office. More on the Fedspeak later. In terms of what to expect this time around though, our US economists are forecasting month-on-month growth of +0.41% in the headline CPI, and +0.27% for core, which would take the year-on-year rates to +5.4% for headline and +4.1% for core. Ahead of this, inflation expectations softened late in the day as Fed officials were on the hawkish side. The US 10yr breakeven dropped -1.9bps to 2.49% after trading at 2.527% earlier in the session. This is still the 3rd highest closing level since May, and remains only 7bps off its post-2013 closing high. Earlier, inflation expectations continued to climb in Europe, where the 5y5y forward inflation swap hit a post-2015 high of 1.84%. Also on inflation, the New York Fed released their latest Survey of Consumer Expectations later in the European session, which showed that 1-year ahead inflation expectations were now at +5.3%, which is the highest level since the survey began in 2013, whilst 3-year ahead expectations were now at +4.2%, which was also a high for the series. The late rally in US breakevens, coupled with lower real yields (-1.6bps) meant that the 10yr Treasury yield ended the session down -3.5bps at 1.577% - their biggest one day drop in just over 3 weeks. There was a decent flattening of the yield curve, with the 2yr yield up +2.0bps to 0.34%, its highest level since the pandemic began as the market priced in more near-term Fed rate hikes. In the Euro Area it was a very different story however, with 10yr yields rising to their highest level in months, including among bunds (+3.5bps), OATs (+2.9bps) and BTPs (+1.0bps). That rise in the 10yr bund yield left it at -0.09%, taking it above its recent peak earlier this year to its highest closing level since May 2019. Interestingly gilts (-4.0bps) massively out-performed after having aggressively sold off for the last week or so. Against this backdrop, equity markets struggled for direction as they awaited the CPI reading and the start of the US Q3 earnings season today. By the close of trade, the S&P 500 (-0.24%) and the STOXX 600 (-0.07%) had both posted modest losses as they awaited the next catalyst. Defensive sectors were the outperformers on both sides of the Atlantic. Real estate (+1.34%) and utilities (+0.67%) were among the best performing US stocks, though some notable “reopening” industries outperformed as well including airlines (+0.83%), hotels & leisure (+0.51%). News came out after the US close regarding the global chip shortage, with Bloomberg reporting that Apple, who are one of the largest buyers of chips, would revise down their iPhone 13 production targets for 2021 by 10 million units. Recent rumblings from chip producers suggest that the problems are expected to persist, which will make central bank decisions even more complicated over the coming weeks as they grapple with increasing supply-side constraints that push up inflation whilst threatening to undermine the recovery. Speaking of central bankers, Vice Chair Clarida echoed his previous remarks and other communications from the so-called “core” of the FOMC that the current bout of inflation would prove largely transitory and that underlying trend inflation was hovering close to 2%, while admitting that risks were tilted towards higher inflation. Atlanta Fed President Bostic took a much harder line though, noting that price pressures were expanding beyond the pandemic-impacted sectors, and measures of inflation expectations were creeping higher. Specifically, he said, “it is becoming increasingly clear that the feature of this episode that has animated price pressures — mainly the intense and widespread supply-chain disruptions — will not be brief.” His ‘transitory swear word jar’ for his office was considerably more full by the end of his speech. As highlighted above, while President Bostic spoke US 10yr breakevens dropped -2bps and then continued declining through the New York afternoon. In what is likely to be Clarida’s last consequential decision on monetary policy before his term expires, he noted it may soon be time to start a tapering program that ends in the middle of next year, in line with our US economics team’s call for a November taper announcement. In that vein, our US economists have updated their forecasts for rate hikes yesterday, and now see liftoff taking place in December 2022, followed by 3 rate increases in each of 2023 and 2024. That comes in light of supply disruptions lifting inflation, a likely rise in inflation expectations (which are sensitive to oil prices), and measures of labour market slack continuing to outperform. For those interested, you can read a more in-depth discussion of this here. Turning to commodities, yesterday saw a stabilisation in prices after the rapid gains on Monday, with WTI (+0.15%) and Brent Crude (-0.27%) oil prices seeing only modest movements either way, whilst iron ore prices in Singapore were down -3.45%. That said it wasn’t entirely bad news for the asset class, with Chinese coal futures (+4.45%) hitting fresh records, just as aluminium prices on the London Metal Exchange (+0.13%) eked out another gain to hit a new post-2008 high. Overnight in Asia, equity markets are seeing a mixed performance with the KOSPI (+1.24%) posting decent gains, whereas the CSI (-0.06%), Nikkei (-0.22%) and Shanghai Composite (-0.69%) have all lost ground. The KOSPI’s strength came about on the back of a decent jobs report, with South Korea adding +671k relative to a year earlier, the most since March 2014. The Hong Kong Exchange is closed however due to the impact of typhoon Kompasu. Separately, coal futures in China are up another +8.00% this morning, so no sign of those price pressures abating just yet following recent floods. Meanwhile, US equity futures are pointing to little change later on, with those on the S&P 500 down -0.12%. Here in Europe, we had some fresh Brexit headlines after the UK’s Brexit minister, David Frost, said that the Northern Ireland Protocol “is not working” and was not protecting the Good Friday Agreement. He said that he was sharing a new amended Protocol with the EU, which comes ahead of the release of the EU’s own proposals on the issue today. But Frost also said that “if we are going to get a solution we must, collectively, deliver significant change”, and that Article 16 which allows either side to take unilateral safeguard measures could be used “if necessary”. Elsewhere yesterday, the IMF marginally downgraded their global growth forecast for this year, now seeing +5.9% growth in 2021 (vs. +6.0% in July), whilst their 2022 forecast was maintained at +4.9%. This masked some serious differences between countries however, with the US downgraded to +6.0% in 2021 (vs. +7.0% in July), whereas Italy’s was upgraded to +5.8% (vs. +4.9% in July). On inflation they said that risks were skewed to the upside, and upgraded their forecasts for the advanced economies to +2.8% in 2021, and to +2.3% in 2022. Looking at yesterday’s data, US job openings declined in August for the first time this year, falling to 10.439m (vs. 10.954m expected). But the quits rate hit a record of 2.9%, well above its pre-Covid levels of 2.3-2.4%. Here in the UK, data showed the number of payroll employees rose by +207k in September, while the unemployment rate for the three months to August fell to 4.5%, in line with expectations. And in a further sign of supply-side issues, the number of job vacancies in the three months to September hit a record high of 1.102m. Separately in Germany, the ZEW survey results came in beneath expectations, with the current situation declining to 21.6 (vs. 28.0 expected), whilst expectations fell to 22.3 (vs. 23.5 expected), its lowest level since March 2020. To the day ahead now, and the main data highlight will be the aforementioned US CPI reading for September, while today will also see the most recent FOMC meeting minutes released. Other data releases include UK GDP for August and Euro Area industrial production for August. Central bank speakers include BoE Deputy Governor Cunliffe, the ECB’s Visco and the Fed’s Brainard. Finally, earnings releases include JPMorgan Chase, BlackRock and Delta Air Lines. Tyler Durden Wed, 10/13/2021 - 08:13.....»»

Category: blogSource: zerohedgeOct 13th, 2021

Futures Fade Rally With Congress Set To Avert Government Shutdown

Futures Fade Rally With Congress Set To Avert Government Shutdown US equity futures faded an overnight rally on the last day of September as lingering global-growth risks underscored by China's official manufacturing PMI contracted for the first time since Feb 2020 as widely expected offset a debt-ceiling deal in Washington and central-bank assurances about transitory inflation. The deal to extend government funding removes one uncertainty from the minds of investors, amid China risks and concerns over Federal Reserve tapering. Comments from Fed Chair Powell and ECB head Christine Lagarde about inflation being transitory rather than permanent also helped sentiment, even if nobody actually believes them any more.In China, authorities told bankers to help local governments support the property market and homebuyers, signaling concern at the economic fallout from the debt crisis at China Evergrande As of 7:15am ET, S&P futures were up 18 points ot 0.44%, trimming an earlier gain of 0.9%. Dow eminis were up 135 or 0.4% and Nasdaq futs rose 0.43%. 10Y TSY yields were higher, rising as high as 1.54% and last seen at 1.5289%; the US Dollar erased earlier losses and was unchanged. All the three major indexes are set for a monthly drop, with the benchmark S&P 500 on track to break its seven-month winning streak as worries about persistent inflation, the fallout from China Evergrande’s potential default and political wrangling over the debt ceiling rattled sentiment. The index was, however, on course to mark its sixth straight quarterly gain, albeit its smallest, since March 2020’s drop. The rate-sensitive FAANG stocks have lost about $415 billion in value this month after the Federal Reserve’s hawkish shift on monetary policy sparked a rally in Treasury yields and prompted investors to move into energy, banks and small-cap sectors that stand to benefit the most from an economic revival. Among individual stocks, oil-and-gas companies APA Corp. and Devon Energy Corp. led premarket gains among S&P 500 members. Virgin Galactic shares surged 9.7% in premarket trading after the U.S. aviation regulator gave the company a green-light to resume flights to the brink of space. Perrigo climbed 14% after reporting a settlement in a tax dispute with Ireland.  U.S.-listed Macau casino operators may get a boost Thursday after Macau Chief Executive Ho Iat Seng said the region will strive to resume quarantine-free travel to Zhuhai by Oct. 1, the start of the Golden Week holiday, if the Covid-19 situation in Macau is stable. Here are some of the other biggest U.S. movers today: Retail investor favorites Farmmi (FAMI US) and Camber Energy (CEI US) both rise in U.S. premarket trading, continuing their strong recent runs on high volumes Virgin Galactic (SPCE US) shares rise 8.9% in U.S. premarket trading after the U.S. aviation regulator gave co. a green-light to resume flights to the brink of space Perrigo (PRGO US) rises 15% in U.S. premarket trading after reporting a settlement in a tax dispute with Ireland. The stock was raised to buy from hold at Jefferies over the “very favorable” resolution Landec (LNDC US) shares fell 17% in Wednesday postmarket trading after fiscal 1Q revenue and adjusted loss per share miss consensus estimates Affimed (AFMD US) rises 4.3% in Wednesday postmarket trading after Stifel analyst Bradley Canino initiates at a buy with a $12 price target, implying the stock may more than double over the next year Herman Miller (MLHR US) up ~2.8% in Wednesday postmarket trading after the office furnishings maker posts fiscal 1Q net sales that beat the consensus estimate Orion Group Holdings (ORN US) shares surged as much as 43% in Wednesday extended trading after the company disclosed two contract awards for its Marine segment totaling nearly $200m Kaival Brands (KAVL US) fell 18% Wednesday postmarket after offering shares, warrants via Maxim An agreement among U.S. lawmakers to extend government funding removes one uncertainty from a litany of risks investors are contenting with, ranging from China’s growth slowdown to Federal Reserve tapering. “Republicans and Democrats showed some compromise by averting a government shutdown,” Sebastien Galy, a senior macro strategist at Nordea Investment Funds. “By removing what felt like a significant risk for a retail audience, it helps sentiment in the equity market.” Still, president Joe Biden’s agenda remains at risk of being derailed by divisions among his own Democrats, as moderates voiced anger on Wednesday at the idea of delaying a $1 trillion infrastructure bill ahead of a critical vote to avert a government shutdown. The big overnight economic news came from China whose September NBS manufacturing PMI fell to 49.6 from 50.1 in August, the first contraction since Feb 2020, likely due to the production cuts caused by energy constraints. Both the output sub-index and the new orders sub-index in the NBS manufacturing PMI survey decreased in September. The NBS non-manufacturing PMI rebounded to 53.2 in September from 47.5 in August on a recovery of services activities as COVID restrictions eased. However, the numbers may not capture full impact of energy restrictions as the NBS survey was taken around 22nd-25th of the month: expect far worse number in the months ahead unless China manages to contain its energy crisis. Europe’s Stoxx 600 Index advanced 0.3%, trimming a monthly loss but fading an earlier gain of 0.9%, led by gains in basic resources companies as iron ore climbed, with the CAC and FTSE 100 outperforming at the margin. Technology stocks, battered earlier this week, also extended their rebound.  Miners, oil & gas and media are the strongest sectors; utility and industrial names lag. European natural gas and power markets hit fresh record highs as supply constraints persist. Perrigo jumped 13.8% after the drugmaker agreed to settle with Irish tax authorities over a 2018 issue by paying $1.90 billion in taxes Asian stocks were poised to cap their first quarterly loss since March 2020 as Chinese technology names fell and as investors remained wary over a recent rise in U.S. Treasury yields.  The MSCI Asia Pacific Index is set to end the September quarter with a loss of more than 5%, snapping a winning streak of five straight quarters. A combination of higher yields, Beijing’s corporate crackdown and worry over slowing economic growth in Asia’s biggest economy have hurt sentiment, bringing the market down following a brief rally in late August.  The Asian benchmark rose less than 0.1% after posting its worst single-day drop in six weeks on Wednesday. Consumer discretionary and communication services groups fell, while financials advanced. The Hang Seng Tech Index ended 1.3% lower as Beijing announced new curbs on the sector, while higher yields hurt sentiment toward growth stocks.  “Because there’s growing worry over U.S. inflation, we need to keep an eye on the potential risks, globally,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. “Also, there’s the Evergrande issue. The market is in a wait-and-see mode now, with a focus on whether the group will be able to make future interest rate payments.”  Benchmarks in Thailand and Malaysia were the biggest losers, while Indonesia and Australia outperformed. Japan’s Topix and the Nikkei 225 Stock Average slipped for a fourth day as investors weighed Fumio Kishida’s election victory as the new ruling party leader. Global stocks are poised to end the quarter with a small loss, after a five-quarter rally, as investors braced for the Fed to wind down its stimulus. They also remain concerned about slowing growth and elevated inflation, supply-chain bottlenecks, an energy crunch and regulatory risks emanating from China. A majority of participants in a Citigroup survey said a 20% pullback in stocks is more likely than a 20% rally. In rates, Treasuries were slightly cheaper across the curve, off session lows as stock futures pare gains. 10-year TSY yields were around 1.53%, cheaper by 1.2bp on the day vs 2.3bp for U.K. 10-year; MPC-dated OIS rates price in ~65bps of BOE hikes by December 2022. Gilts lead the selloff, with U.K. curve bear-steepening as BOE rate-hike expectations continue to ramp up. Host of Fed speakers are in focus during U.S. session, while month-end extension may serve to underpin long-end of the curve.   A gauge of the dollar’s strength headed for its first drop in five days as Treasury yields steadied after a recent rise, and amid quarter-end flows. The Bloomberg Dollar Spot Index fell as the dollar steady or weaker against most of its Group-of-10 peers. The euro hovered around $1.16 and the pound was steady while Gilts inched lower, underperforming Bunds and Treasuries. Money markets now see around 65 basis points of tightening by the BOE’s December 2022 meeting, according to sterling overnight index swaps. That means they’re betting the key rate will rise to 0.75% next year from 0.1% currently. The Australian dollar led gains after it rose off its lowest level since August 23 amid exporter month-end demand and as iron ore buyers locked in purchases ahead of a week-long holiday in China. Norway’s krone was the worst G-10 performer and slipped a fifth day versus the dollar, its longest loosing streak in a year. In commodities, oil surrendered gains, still heading for a monthly gain amid tighter supplies. West Texas Intermediate futures briefly recaptured the level above $75 per barrel, before trading at $74.71. APA and Devon rose at least 1.8% in early New York trading. European gas prices meanwhile hit a new all time high. Looking at the day ahead, one of the highlights will be Fed Chair Powell’s appearance at the House Financial Services Committee, alongside Treasury Secretary Yellen. Other central bank speakers include the Fed’s Williams, Bostic, Harker, Evans, Bullard and Daly, as well as the ECB’s Centeno, Visco and Hernandez de Cos. On the data side, today’s highlights include German, French and Italian CPI for September, while in the US there’s the weekly initial jobless claims, the third estimate of Q2 GDP and the MNI Chicago PMI for September. Market Snapshot S&P 500 futures up 0.7% to 4,379.00 STOXX Europe 600 up 0.6% to 457.59 MXAP little changed at 196.85 MXAPJ up 0.3% to 635.71 Nikkei down 0.3% to 29,452.66 Topix down 0.4% to 2,030.16 Hang Seng Index down 0.4% to 24,575.64 Shanghai Composite up 0.9% to 3,568.17 Sensex down 0.3% to 59,239.76 Australia S&P/ASX 200 up 1.9% to 7,332.16 Kospi up 0.3% to 3,068.82 Brent Futures up 0.4% to $78.98/bbl Gold spot up 0.4% to $1,732.86 U.S. Dollar Index little changed at 94.27 German 10Y yield fell 0.5 bps to -0.212% Euro little changed at $1.1607 Top Overnight News from Bloomberg U.K. gross domestic product rose 5.5% in the second quarter instead of the 4.8% earlier estimated, official figures published Thursday show. The data, which reflected the reopening of stores and the hospitality industry, mean the economy was still 3.3% smaller than it was before the pandemic struck. China has urged financial institutions to help local governments stabilize the rapidly cooling housing market and ease mortgages for some home buyers, another signal that authorities are worried about fallout from the debt crisis at China Evergrande Group. The U.S. currency’s surge is helping the Chinese yuan record its largest gain in eight months on a trade-weighted basis in September. It adds to headwinds for the world’s second- largest economy already slowing due to a resurgence in Covid cases, a power crisis and regulatory curbs. The Swiss National Bank bought foreign exchange worth 5.44 billion francs ($5.8 billion) in the second quarter, part of its long-running policy to alleviate appreciation pressure on the franc   A few members of the Riksbank’s executive board discussed a rate path that could indicate a rate rise at the end of the forecast period, Sweden’s central bank says in minutes from its Sept. 20 meeting French inflation accelerated in September as households in the euro area’s second-largest economy faced a jump in the costs of energy and services. A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded somewhat varied with the region indecisive at quarter-end and as participants digested a slew of data releases including mixed Chinese PMI figures. ASX 200 (+1.7%) was underpinned by broad strength across its industries including the top-weighted financials sector and with the large cap miners lifted as iron ore futures surge by double-digit percentages, while the surprise expansion in Building Approvals also helped markets overlook the 51% spike in daily new infections for Victoria state. Nikkei 225 (+0.1%) was subdued for most of the session after disappointing Industrial Production and Retail Sales data which prompted the government to cut its assessment of industrial output which it stated was stalling. The government also warned that factory output could decline for a third consecutive month in September and that October has large downside risk due to uncertainty from auto manufacturing cuts. However, Nikkei 225 then recovered with the index marginally supported by currency flows. Hang Seng (-1.0%) and Shanghai Comp. (+0.4%) diverged heading into the National Day holidays and week-long closure for the mainland with tech names in Hong Kong pressured by ongoing regulatory concerns as China is to tighten regulation of algorithms related to internet information services. Nonetheless, mainland bourses were kept afloat after a further liquidity injection by the PBoC ahead of the Golden Week celebrations and as markets took the latest PMI figures in their strides whereby the official headline Manufacturing PMI disappointed to print its first contraction since February 2020, although Non-Manufacturing PMI and Composite PMI returned to expansionary territory and Caixin Manufacturing PMI topped estimates to print at the 50-benchmark level. Top Asian News S&P Points to Progress as Bondholders Wait: Evergrande Update Bank Linked to Kazakh Leader Buys Kcell Stake After Share Slump Goldman Sachs Names Andy Tai Head of IBD Southeast Asia: Memo What Japan’s Middle-of-the-Road New Leader Means for Markets The upside momentum seen across US and European equity futures overnight stalled, with European cash also drifting from the best seen at the open (Euro Stoxx 50 +0.1%; Stoxx 600 +0.4%). This follows somewhat mixed APAC handover, and as newsflow remains light on month and quarter-end. US equity futures are firmer across the board, but again off best levels, although the RTY (+0.8%) outperforms the ES (+0.4%), YM (+0.4%) and NQ (+0.5%). Back to Europe, the periphery lags vs core markets, whilst the DAX 40 (-0.3%) underperforms within the core market. Sectors in Europe are mostly in the green but do not portray a particular risk bias. Basic Resources top the chart with aid from overnight action in some base metals, particularly iron, in turn aiding the large iron miners BHP (+2.2%), Rio Tinto (+3.4%) and Anglo American (+2.9%). The bottom of the sectors meanwhile consists of Travel & Leisure, Autos & Parts and Industrial Goods & Services, with the former potentially feeling some headwinds from China’s travel restrictions during its upcoming National Day holiday. In terms of M&A, French press reported that CAC-listed Carrefour (-1.3%) is reportedly looking at options for sector consolidation, and talks are said to have taken place with the chain stores Auchan, with peer Casino (Unch) also initially seeing a leg higher in sympathy amid the prospect of sector consolidation. That being said, Carrefour has now reversed its earlier upside with no particular catalyst for the reversal. It is, however, worth keeping in mind that regulatory/competition hurdles cannot be ruled out – as a reminder, earlier this year, France blocked the takeover of Carrefour by Canada’s Alimentation Couche-Tard. In the case of a successful deal, Carrefour will likely be the acquirer as the largest supermarket in France. Sticking with M&A, Eutelsat (+14%) was bolstered at the open amid source reports that French billionaire Patrick Drahi is said to have made an unsolicited takeover offer of EUR 12.10/shr for Eutelsat (vs EUR 10.35 close on Wednesday), whilst the FT reported that this offer was rejected. Top European News European Banks Dangle $26 Billion in Payouts as ECB Cap Ends U.K. Economy Emerged From Lockdown Stronger Than Expected In a First, Uber Joins Drivers in Strike Against Brussels Rules EU, U.S. Seek to Avert Chip-Subsidy Race, Float Supply Links In FX, The non-US Dollars are taking advantage of the Greenback’s loss of momentum, and the Aussie in particular given an unexpected boost from building approvals completely confounding expectations for a fall, while a spike in iron ore prices overnight provided additional incentive amidst somewhat mixed external impulses via Chinese PMIs. Hence, Aud/Usd is leading the chasing pack and back up around 0.7200, Usd/Cad is retreating through 1.2750 and away from decent option expiry interest at 1.2755 and between 1.2750-40 (in 1.3 bn and 1 bn respectively) with some assistance from the latest bounce in crude benchmarks and Nzd/Usd is still trying to tag along, but capped into 0.6900 as the Aud/Nzd cross continues to grind higher and hamper the Kiwi. DXY/GBP/JPY/EUR/CHF - It’s far too early to call time on the Buck’s impressive rally and revival from recent lows, but it has stalled following a midweek extension that propelled the index to the brink of 94.500, at 94.435. The DXY subsequently slipped back to 94.233 and is now meandering around 94.300 having topped out at 94.401 awaiting residual rebalancing flows for the final day of September, Q3 and the half fy that Citi is still classifying as Dollar positive, albeit with tweaks to sd hedges for certain Usd/major pairings. Also ahead, the last US data and survey releases for the month including final Q2 GDP, IJC and Chicago PMI before another raft of Fed speakers. Meanwhile, Sterling has gleaned some much needed support from upward revisions to Q2 UK GDP, a much narrower than forecast current account deficit and upbeat Lloyds business barometer rather than sub-consensus Nationwide house prices to bounce from the low 1.3600 area vs the Greenback and unwind more of its underperformance against the Euro within a 0.8643-12 range. However, the latter is keeping tabs on 1.1600 vs its US peer in wake of firmer German state CPI prints and with the aforementioned Citi model flagging a sub-1 standard deviation for Eur/Usd in contrast to Usd/Jpy that has been elevated to 1.85 from a prelim 1.12. Nevertheless, the Yen is deriving some traction from the calmer yield backdrop rather than disappointing Japanese data in the form of ip and retail sales to contain losses under 112.00, and the Franc is trying to do the same around 0.9350. SCANDI/EM - The tables have been turning and fortunes changing for the Nok and Sek, but the former has now given up all and more its post-Norges Bank hike gains and more as Brent consolidates beneath Usd 80/brl and the foreign currency purchases have been set at the same level for October as the current month. Conversely, the latter has taken heed of a hawkish hue to the latest set of Riksbank minutes and the fact that a few Board members discussed a rate path that could indicate a rise at the end of the forecast period. Elsewhere, the Zar looks underpinned by marginally firmer than anticipated SA ppi and private sector credit, while the Mxn is treading cautiously ahead of Banxico and a widely touted 25 bp hike. In commodities, WTI and Brent futures are choppy but trade with modest gains heading into the US open and in the run-up to Monday’s OPEC+ meeting. The European session thus far has been quiet from a news flow standpoint, but the contracts saw some fleeting upside after breaking above overnight ranges, albeit the momentum did not last long. Eyes turn to OPEC+ commentary heading into the meeting, which is expected to be another smooth affair, according to Argus sources. As a reminder, the group is expected to stick to its plan to raise output by 400k BPD despite outside pressure to further open the taps in a bid to control prices. Elsewhere, as a mild proxy for Chinese demand, China’s Sinopec noted that all LNG receiving terminals are to be operated at full capacity. WTI trades on either side of USD 75/bbl (vs low USD 74.54/bbl), while its Brent counterpart remains north of USD 78/bbl (vs low USD 77.66/bbl). Turning to metals, spot gold and silver continue to consolidate after yesterday’s Dollar induced losses, with the former finding some support around the USD 1,725/oz mark and the latter establishing a floor around USD 21.50/oz. Over to base metals, Dalian iron ore futures rose to three-week highs amid pre-holiday Chinese demand and after Fortescue Metals Group halted mining operations at a Pilbara project. Conversely, LME copper is on a softer footing as the Buck holds onto recent gains. US Event Calendar 8:30am: 2Q PCE Core QoQ, est. 6.1%, prior 6.1% 8:30am: 2Q GDP Price Index, est. 6.1%, prior 6.1% 8:30am: 2Q Personal Consumption, est. 11.9%, prior 11.9% 8:30am: Sept. Continuing Claims, est. 2.79m, prior 2.85m 8:30am: 2Q GDP Annualized QoQ, est. 6.6%, prior 6.6% 8:30am: Sept. Initial Jobless Claims, est. 330,000, prior 351,000 9:45am: Sept. MNI Chicago PMI, est. 65.0, prior 66.8 Central Bank speakers 10am: Fed’s Williams Discusses the Fed’s Pandemic Response 10am: Powell and Yellen Appear Before House Finance Panel 11am: Fed’s Bostic Discusses Economic Mobility 11:30am: Fed’s Harker Discusses Sustainable Assets and Financial... 12:30pm: Fed’s Evans Discusses Economic Outlook 1:05pm: Fed’s Bullard Makes Opening Remarks at Book Launch 2:30pm: Fed’s Daly Speaks at Women and Leadership Event Government Calendar 10am ET: Treasury Secretary Yellen, Fed Chair Powell appear at a House Financial Services Committee hearing on the Treasury, Fed’s pandemic response 10:30am ET: Senate begins voting process for continuing resolution that extends U.S. government funding to December 3 10:30am ET: Senate Commerce subcommittee holds hearing on Facebook, Instagram’s influence on kids with Antigone Davis, Director, Global Head of Safety, Facebook 10:45am ET: House Speaker Nancy Pelosi holds weekly press briefing DB's Jim Reid concludes the overnight wrap I’ll be getting my stitches out of my knee today and will have a chance to grill the surgeon who I think told me I’ll probably soon need a knee replacement. I say think as it was all a bit of a medicated blur post the operation 2 weeks ago. These have been a painfully slow 2 weeks of no weight bearing with another 4 to go and perhaps all to no avail. As you can imagine I’ve done no housework, can’t fend much for myself, or been able to control the kids much over this period. I’m not sure if having bad knees are grounds for divorce but I’m going to further put it to the test over the next month. In sickness and in health I plea. Like me, markets are hobbling into the end of Q3 today even if they’ve seen some signs of stabilising over the last 24 hours following their latest selloff, with equities bouncing back a bit and sovereign bond yields taking a breather from their recent relentless climb. It did feel that we hit yield levels on Tuesday that started to hurt risk enough that some flight to quality money recycled back into bonds. So the next leg higher in yields (which I think will happen) might be met with more risk off resistance, and counter rallies. The latest moves came amidst relatively dovish and supportive comments from central bank governors at the ECB’s forum yesterday, but sentiment was dampened somewhat as uncertainty abounds over a potential US government shutdown and breaching of the debt ceiling, after both houses of Congress could not agree on a plan to extend government funding. Overnight, there have been signs of progress on the shutdown question, with Majority Leader Schumer saying that senators had reached agreement on a stopgap funding measure that will fund the government through December 3, with the Senate set to vote on the measure this morning.However, we’re still no closer to resolving the debt ceiling issue (where the latest estimates from the Treasury Department point to October 18 as the deadline), and tensions within the Democratic party between moderates and progressives are threatening to sink both the $550bn bipartisan infrastructure bill and the $3.5tn reconciliation package, which together contain much of President Biden’s economic agenda. We could see some developments on that soon however, as Speaker Pelosi said yesterday that the House was set to vote on the infrastructure bill today. Assuming the vote goes ahead later, this will be very interesting since a number of progressive Democrats have said that they don’t want to pass the infrastructure bill without the reconciliation bill (which contains the administration’s other priorities on social programs). This is because they fear that with the infrastructure bill passed (which moderates are keen on), the moderates could then scale back the spending in the reconciliation bill, and by holding out on passing the infrastructure bill, this gives them leverage on reconciliation. House Speaker Pelosi and Majority Leader Schumer were in the Oval Office with President Biden yesterday, and a White House statement said that Biden spoke on the phone with lawmakers and engagement would continue into today. So an important day for Biden’s agenda. Against this backdrop, risk assets made a tentative recovery yesterday, with the S&P 500 up +0.16% and Europe’s STOXX 600 up +0.59%. However, unless we get a big surge in either index today, both indices remain on track for their worst monthly performances so far this year, even if they’re still in positive territory for Q3 as a whole. Looking elsewhere, tech stocks had appeared set to pare back some of the previous day’s losses, but a late fade left the NASDAQ down -0.24% and the FANG+ index down a greater -0.72%. Much of the tech weakness was driven by falling semiconductor shares (-1.53%), as producers have offered investors poor revenue guidance on the heels of the ongoing supply chain issues that are driving chip shortages globally. Outside of tech, US equities broadly did better yesterday with 17 of 24 industry groups gaining, led by utilities (+1.30%), biotech (+1.05%) and food & beverages (+1.00%). Similarly, while they initially staged a recovery, small caps in the Russell 2000 (-0.20%) continued to struggle. One asset that remained on trend was the US dollar. The greenback continued its climb yesterday, with the dollar index increasing +0.61% to close at its highest level in over a year, exceeding its closing high from last November. Over in sovereign bond markets, the partial rebound saw yields on 10yr Treasuries down -2.1bps at 1.517%, marking their first move lower in a week. And there was much the same pattern in Europe as well, where yields on 10yr bunds (-1.4bps), OATs (-1.3bps) and BTPs (-3.1bps) all moved lower as well. One continued underperformer were UK gilts (+0.3bps), and yesterday we saw the spread between 10yr gilt and bund yields widen to its biggest gap in over 2 years, at 120bps. Staying on the UK, the pound (-0.81%) continued to slump yesterday, hitting its lowest level against the dollar since last December, which comes as the country has continued to face major issues over its energy supply. Yesterday actually saw natural gas prices take another leg higher in both the UK (+10.09%) and Europe (+10.24%), and the UK regulator said that three smaller suppliers (who supply fewer than 1% of domestic customers between them) had gone out of business. This energy/inflation/BoE conundrum is confusing the life out of Sterling 10 year breakevens. They rose +18bps from Monday morning to Tuesday lunchtime but then entirely reversed the move into last night’s close. This is an exaggerated version of how the world’s financial markets are puzzling over whether breakevens should go up because of energy or go down because of the demand destruction and central bank response. Central bankers were in no mood to panic yesterday though as we saw Fed Chair Powell, ECB President Lagarde, BoE Governor Bailey and BoJ Governor Kuroda all appear on a policy panel at the ECB’s forum on central banking. There was much to discuss but the central bank heads all maintained that this current inflation spike will relent with Powell saying that it was “really a consequence of supply constraints meeting very strong demand, and that is all associated with the reopening of the economy -- which is a process that will have a beginning, a middle and an end.” ECB President Lagarde shared that sentiment, adding that “we certainly have no reason to believe that these price increases that we are seeing now will not be largely transitory going forward.” Overnight in Asia, equities have seen a mixed performance, with the Nikkei (-0.40%), and the Hang Seng (-1.08%) both losing ground, whereas the Kospi (+0.41%) and the Shanghai Composite (+0.30%) have posted gains. The moves came amidst weak September PMI data from China, which showed the manufacturing PMI fall to 49.6 (vs. 50.0 expected), marking its lowest level since the height of the Covid crisis in February 2020. The non-manufacturing PMI held up better however, at a stronger 53.2 (vs. 49.8 expected), although new orders were beneath 50 for a 4th consecutive month. Elsewhere, futures on the S&P 500 (+0.50%) and those on European indices are pointing to a higher start later on, as markets continue to stabilise after their slump earlier in the week. Staying on Asia, shortly after we went to press yesterday, former Japanese foreign minister Fumio Kishida was elected as leader of the governing Liberal Democratic Party, and is set to become the country’s next Prime Minister. The Japanese Diet will hold a vote on Monday to elect Kishida as the new PM, after which he’ll announce a new cabinet, and attention will very soon turn to the upcoming general election, which is due to take place by the end of November. Our Chief Japan economist has written more on Kishida’s victory and his economic policy (link here), but he notes that on fiscal policy, Kishida’s plans to redistribute income echo the shift towards a greater role for government in the US and elsewhere. There wasn’t a massive amount of data yesterday, though Spain’s CPI reading for September rose to an above-expected +4.0% (vs. 3.5% expected), so it will be interesting to see if something similar happens with today’s releases from Germany, France and Italy, ahead of the Euro Area release tomorrow. Otherwise, UK mortgage approvals came in at 74.5k in August (vs. 73.0k expected), and the European Commission’s economic sentiment indicator for the Euro Area rose to 117.8 in September (vs. 117.0 expected). To the day ahead now, and one of the highlights will be Fed Chair Powell’s appearance at the House Financial Services Committee, alongside Treasury Secretary Yellen. Other central bank speakers include the Fed’s Williams, Bostic, Harker, Evans, Bullard and Daly, as well as the ECB’s Centeno, Visco and Hernandez de Cos. On the data side, today’s highlights include German, French and Italian CPI for September, while in the US there’s the weekly initial jobless claims, the third estimate of Q2 GDP and the MNI Chicago PMI for September. Tyler Durden Thu, 09/30/2021 - 07:49.....»»

Category: blogSource: zerohedgeSep 30th, 2021

Futures Slide, Nasdaq Plunges As Yields Surge And Oil Tops $80

Futures Slide, Nasdaq Plunges As Yields Surge And Oil Tops $80 For much of 2021, a vocal contingent of market bulls had claimed that there is no way the broader market could sell off as long as the gigacap tech "general" refused to drop. Well, it looks like that day is finally upon us because this morning US equity futures are sliding again, continuing their Monday drop as yields from the US to Germany again, the 10Y TSY rising as high as 1.55%, driven to an extent by Fed tapering fears but mostly by the surge in oil which has pushed Brent above $80, the highest price since late 2018. The dollar gained amid the deteriorating global supply crunch from oil to semiconductors. The surge in oil sparked a new round of stagflation fears, sending Nasdaq futures down 240 points or 1.3% as the yield on the benchmark 10-year U.S. Treasury climbed sharply. S&P 500 and Dow Jones futures also retreated, with spoos sliding below 4,400 as to a session low of 4,390. Rising bond yields prompted a shift from growth to cyclical stocks in the United States, in a move that analysts expect could become more permanent after a prolonged period of supressed bond yields. The premarket selloff was led by semiconductor stocks which tracked similar falls for European peers, as a rising 10-year Treasury yield puts pressure on the tech sector. Applied Materials Inc. led a slump in chip stocks in New York premarket trading while Nvidia was down 2.6%, AMD -2.1%, Applied Materials -2.9%, Micron -1.6%. Meanwhile retail trader favorite meme stock Naked Brand Group, an underwear and swimwear retailer, rises again after having surged 40% in the past two trading sessions after Chairman Justin Davis-Rice said in a letter to shareholders that he believes the company has found a “disruptive” potential acquisition in the clean technology sector. Frequency Electronics also soared after being awarded a contract by the Office of Naval Research to develop an atomic clock. Chinese stocks listed in the U.S. were mixed and semiconductor stocks declined. Here are some of the other notable U.S. movers today: iPower (IPW US) shares rise as much as 61% in U.S. premarket trading after the online hydroponics equipment retailer posted 4Q and FY21 earnings Alibaba (BABA US) rises 2.5% in U.S. premarket trading after the company’s shares listed in Hong Kong rose, adding to the Hang Seng Tech Index’s gains Frequency Electronics (FEIM US) soars 20% in U.S. premarket trading after being awarded a contract by the Office of Naval Research to develop an atomic clock Concentrix (CNXC) jumped 5.9% in Monday after hours trading after setting its first dividend payment and buyback program since being spun off from from Synnex in December Brookdale Senior Living (BKD US) shares fell in extended trading on Monday after announcing a $200 million convertible bond offering Altimmune (ALT US) rose as much as 4.2% in Monday postmarket trading on plans to announce results for an early stage study of ALT-801 in overweight people on Tuesday Ziopharm Oncology (ZIOP US) fell in extended trading after company said it cut about 60 positions, or a more than 50% reduction in personnel, to extend its cash runway into 1H 2023 Montrose Environmental Group (MEG US) was down 2.8% Monday postmarket after offering shares via JPMorgan, BofA Securities, William Blair The main catalyst for the stock selloff was the continued drop in Treasurys which sent the 10-year Treasury rising as high as 1.55% while shorter-dated rates surged toward pre-pandemic levels. This in turn was driven by the relentless meltup in commodities: overnight Brent roared above $80 a barrel - on its way to Goldman's revised $90 price target - on louder signs that demand is running ahead of supply and depleting inventories as the world finds itself in an unprecedented energy crisis. The international crude benchmark extended a recent run of gains to hit the highest since October 2018, while West Texas Intermediate also climbed. Oil’s latest upswing has come with a flurry of bullish price predictions from banks and traders, forecasts for surging demand this winter, and speculation the industry isn’t investing enough to maintain supplies. The jump to $80 also is adding inflationary pressure to the global economy at a time when prices of energy commodities are soaring. European natural gas, carbon permits and power rose to fresh records Tuesday, with little sign of the rally slowing. As Bloomberg notes, traders have begun reassessing valuations amid multiplying global risks, while Fed officials have communicated increasingly hawkish signals in recent days as supply-chain bottlenecks threaten to keep inflation elevated. China’s growth slowdown which saw Goldman lower its q/q Q3 GDP forecast to a flat 0.0%, and a debt crisis in the nation’s property market.have also fueled the risk-off shift. "Central bankers have set out how they want to normalize monetary policy for some time,” Chris Iggo, chief investment officer for core investments at AXA Investment Managers, said in a note. “That process could start soon. The realization of this has the potential to provoke some volatility in rates and equities." Elsewhere, European stocks also declined with the Stoxx Europe 600 dragged down most by technology shares. Europe’s Stoxx Tech Index drops as much as 2.8% to a five-week low after falling 1.5% on Monday having previously touched its highest level since 2000 earlier in the month. Single-stock downgrades also weighed. Stocks which performed particularly well this year are among the biggest fallers, with chip equipment makers BE Semi -4.6% and ASML -4.4%, and chipmaker Nordic Semi down 4.2%. Among other laggards, Logitech drops as much as 8.5% after being downgraded to underweight at Morgan Stanley. Earlier in the session, Asian stocks fell for the first time in four days as declines in technology names overshadowed a rally in energy shares.  The MSCI Asia Pacific Index dropped as much as 0.7%, with a jump in U.S. Treasury yields weighing on richly-valued tech stocks. That’s even as the region’s oil and gas shares climbed amid signs of a global energy crunch. Chipmakers Taiwan Semiconductor Manufacturing and Samsung Electronics were the biggest drags on the Asian benchmark. “The climb in yields led to the selling of growth stocks that have been strong, with investors rotating into names that are sensitive to business cycles - not unlike what happened in U.S. equities,” said Shutaro Yasuda, an analyst at Tokai Tokyo Research Center.  Asian equities have been recovering after being whipsawed by concerns over any fallout from China Evergrande Group’s debt troubles. As worries over the distressed property developer abate, the pace of rise in Treasury yields and global inflation data are being closely watched for clues on the U.S. Federal Reserve’s policy stance. Australia’s equity benchmark was among the biggest losers in Asia Tuesday, dragged down by losses in mining and healthcare stocks. Still, broad-based gains in oil explorers and refiners helped mitigate the Asian market’s retreat. In South Korea, importers and distributors of liquefied petroleum gas and liquefied natural gas rallied as the price of natural gas jumped. The future of Evergrande is being forensically scrutinized by investors after the company last Friday did not meet a deadline to make an interest payment to offshore bond holders. Evergrande has 30 days to make the payment before it falls into default and Shenzen authorities are now investigating the company's wealth management unit. Without making reference to Evergrande, the People's Bank of China (PBOC) said Monday in a statement posted to its website that it would "safeguard the legitimate rights of housing consumers". Widening power shortages in China, meanwhile, halted production at a number of factories including suppliers to Apple Inc and Tesla Inc and are expected to hit the country's manufacturing sector and associated supply chains. Analysts cautioned the ongoing blackouts could affect the country's listed industrial stocks. "What we see in China with the developers and the blackouts is going to be a negative weight on the Asian markets," Tai Hui, JPMorgan Asset Management's Asian chief market strategist told Reuters. "Most people are trying to work out the potential contagion effect with Evergrande and how far and wide it could go. We keep monitoring the policy response and we have started to see some shift towards supporting homebuyers which is what we have been expecting." In rates, as noted above, the selloff in Treasuries gathered pace in Asia, early Europe session leaving yields cheaper by 3.5bp to 5.5bp across the curve with 20s and 30s extending above 2% and 10-year through 1.50%. Treasury 10-year yields traded around 1.53%, cheaper by 4.5bp on the day after topping at 1.55%, highest since mid-June; in front- and belly, 2- and 5-year yields remain near cheapest levels in at least 18 months; in 10-year sector, gilts lag by 3bp vs. Treasuries while German yields are narrowly richer. Gilts underperformed further, where long-end yields are cheaper by up to 7.5bp on the day. Treasury futures volumes over Asia, early European session were at more than twice usual levels, with most activity seen in 10-year note contract; eurodollar futures volumes were also well above recent average. With recent aggressive move higher in yields, threat of convexity hedging has exacerbated moves as rate hike premium continues to filter into the curve after last week’s FOMC. Auctions conclude Tuesday with 7-year note sale, while busy Fed speaker slate includes Fed Chair Powell. In FX, the Bloomberg dollar index reached the highest level in more than a month as rising energy costs drove up Treasury yields for a fourth session. The dollar gained against all its peers; Japan’s currency slid for a fifth day against the greenback before a speech Tuesday from Fed Chair Jerome Powell who will say inflation is elevated and is likely to remain so in coming months, according to prepared remarks. Treasury two-year yields rose to the highest since March 2020. “Dollar-yen saw the clearest expression of Treasury yield increases and we attributed this divergence to the surge in energy prices,” says Christopher Wong, senior foreign-exchange strategist at Malayan Banking in Singapore. U.S. natural gas futures soared to their highest since February 2014 on concern over tight inventories. Brent oil topped $80 a barrel amid signs demand is outrunning supply. The euro slipped to hit its lowest level since Aug. 20, nearing the year-to-date low of $1.1664. The Treasury yield curve bear steepened; euro curves followed suit, with the yield on U.K. 10-year notes soaring past 1% for the first time since March 2020 on the prospects for Bank of England policy tightening. In commodities, Crude futures extend Asia’s gains. WTI rises as much as 1.6% to highs of $76.67 before stalling. Brent holds above $80. Spot gold trades around last week’s lows near $1,740/oz. Base metals are mixed: LME aluminum outperforming, rising as much as 1.1%; nickel and copper are in the red. Looking at the day ahead, one of the main highlights will be the appearance of Fed Chair Powell, and Treasury Secretary Yellen at the Senate Banking Committee. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Schnabel, Panetta and Kazimir, along with the BoE’s Mann and the Fed’s Evans, Bowman and Bostic. US data highlights include the US Conference Board’s consumer confidence indicator for September and the FHFA house price index for July. Market Snapshot S&P 500 futures down 0.7% to 4,403.50 STOXX Europe 600 down 1.2% to 456.83 MXAP down 0.4% to 200.06 MXAPJ down 0.4% to 641.05 Nikkei down 0.2% to 30,183.96 Topix down 0.3% to 2,081.77 Hang Seng Index up 1.2% to 24,500.39 Shanghai Composite up 0.5% to 3,602.22 Sensex down 1.4% to 59,209.94 Australia S&P/ASX 200 down 1.5% to 7,275.55 Kospi down 1.1% to 3,097.92 Brent Futures up 0.8% to $80.15/bbl Gold spot down 0.4% to $1,742.61 U.S. Dollar Index up 0.20% to 93.57 German 10Y yield rose 2.7 bps to -0.196% Euro down 0.1% to $1.1681 Top Overnight News from Bloomberg Chinese authorities are striving to signal to traders that whatever happens to China Evergrande Group, its debt crisis won’t spiral out of control or derail the economy Brent oil roared above $80 a barrel, the latest milestone in a global energy crisis, on signs that demand is running ahead of supply and depleting inventories As the dust settles on Germany’s election, control over the finances of Europe’s largest economy could fall to a 42-year-old former tech entrepreneur who wants to lower taxes and tighten spending Wells Fargo agreed to pay $37 million in penalties and forfeiture to settle U.S. claims that it overcharged almost 800 commercial customers that used its foreign exchange services, the latest in a series of scandals at the bank A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mixed following on from a Wall Street lead where value outperformed growth and tech suffered as yields rose. ASX 200 (-1.5%) was the laggard with losses in healthcare, gold miners and tech frontrunning the declines which dragged the index beneath 7300. Nikkei 225 (-0.2%) was lacklustre and briefly approached 30k to the downside but then bounced off worse levels amid a softer currency, while the KOSPI (-1.1%) also declined following a suspected North Korean ballistic missile launch and with a recent South Korean court order to sell seized Mitsubishi Heavy assets as compensation for wartime forced labour, threatening a flare up of tensions between Japan and South Korea. Hang Seng (+1.2%) and Shanghai Comp. (+0.5%) were underpinned after the PBoC continued to inject liquidity ahead of the approaching National Day holidays and with Hong Kong led higher by strength in property names after the PBoC stated it will safeguard legitimate rights and interests of housing consumers which also provided Evergrande-related stocks further reprieve from their recent sell-off. Finally, 10yr JGBs retreated on spillover selling from T-notes after yields rose on the back of further Fed taper rhetoric and with prices not helped by the uninspiring 2yr and 5yr auctions stateside, while weaker results at the 40yr JGB auction also provided a headwind for prices. Top Asian News Top-Performing Global Luxury Stock Seen Cooling After 680% Gain China Power Price Hike Sought Amid Supply Crunch: Energy Update Macau Evacuates Airport Quarantine Hotel After Outbreak Iron Ore Dips Again as China Power Crisis Adds to Steel Curbs Bourses in Europe extended on the losses seen at the cash open and trade lower across the board (Euro Stoxx 50 -1.7%; Stoxx 600 -1.7%) as sentiment retreated from a mixed APAC handover as month-end looms alongside tier 1 data and a slew of central bank speakers. US equity futures have also succumbed to the mood in Europe alongside the surge in global yields – which takes its toll on the NQ (-1.5%) vs the ES (-0.8%), YM (-0.4%) and RTY (-0.3%). From a more technical standpoint, ESZ1 fell under its 50 DMA (4,431) and tested the 4,400 level to the downside, whilst NQZ1 briefly fell under 15k and the YMZ1 inches towards its 100 DMA (34,489). Back to Europe, the FTSE 100 (-0.4%) sees losses to a lesser extent vs its European peers as energy prices and yields keep the index oil giants and banks supported – with some of the top gainers including Shell (+2.8%), BP (+2.1%). Sectors in Europe are predominantly in the red, but Oil & Gas buck the trend. Sectors also portray more of a defensive bias, whilst the downside sees Tech, Real Estate, and Travel & Leisure at the foot of the bunch, with the former hit by the rise in yields, which sees the US 10yr further above 1.50%, the 20yr above 2.00% and the UK 10yr hitting 1.00% for the first time since March 2020. In terms of individual movers, Smiths Group (+3.8%) is at the top of the Stoxx 600 following encouraging earnings. ING (+0.3%) holds onto gains after sources noted SocGen's (-0.6%) interest in ING's retail banking arm. Finally, chip-maker ASM International (-3.5%) has succumbed to the broader tech weakness despite upping its guidance and announcing capacity expansion by early 2023. Top European News U.K. 10-Year Yield Rises Past 1% for First Time Since March 2020 Goldman’s Petershill Unit Valued at $5.5 Billion in U.K. IPO Go-Ahead Sinks as U.K. Takes Over Southeastern Rail Franchise Hedge Funds and Private Equity Are Targeting European Soccer In FX, It took a while for the index to breach resistance ahead of 93.500, but when US Treasuries resumed their bear-steepening run and the intensity of the moves in futures and cash picked up pace the break beyond the half round number was relatively quick and decisive. Indeed, the DXY duly surpassed its post-FOMC peak (93.526) and a prior recent high from August 19 (93.587) on the way to reaching 93.619 amidst almost all round Dollar gains, as 5, 10, 20 and 30 year yields all rallied through or further above psychological levels (such as 1%, 1.5% and 2% in the case of the latter two maturities). However, petro and a few other commodity currencies are displaying varying degrees of resilience in the face of general Greenback strength that is compounded by buy signals for September 30 rebalancing on spot month, quarter and half fy end. Ahead, trade data, consumer confidence, more regional Fed surveys, speakers and the 7 year auction. NZD/CHF/JPY/AUD - The Kiwi was already losing altitude above 0.7000 vs its US counterpart and 1.0400 against the Aussie on Monday, so the deeper retreat is hardly surprising to circa 0.6975 and 1.0415 awaiting some independent impetus that may come via NZ building consents tomorrow. Meanwhile, the Franc has recoiled towards 0.9300 in advance of comments from SNB’s Maechler and the Yen continues to suffer on the aforementioned rampant yield and steeper curve trajectory on top of a more pronounced 1+ sd portfolio hedge selling requirement vs the Buck, with Usd/Jpy meandering midway between 110.94-111.42 parameters irrespective of renewed risk aversion due to same bond rout dynamic. Back down under, Aud/Usd has faded from around 0.7311 to the low 0.7260 area, though holding up a bit better in wake of not quite as weak as forecast final retail sales overnight. CAD/EUR/GBP - All softer against their US rival, but the Loonie putting up a decent fight with ongoing help from WTI crude that has now topped Usd 76.50/brl, and Usd/Cad also has decent option expiry interest to keep an eye on given 1.2 bn rolling off at 1.2615 and an even heftier 3 bn at 1.2675 compared to current extremes spanning 1.2693-1.2652. Elsewhere, the Euro has lost its battle to stay afloat of multiple sub-1.1700 lows even though EGBs are tumbling alongside USTs and the same goes for Sterling in relation to the 1.3700 handle irrespective of the 10 year Gilt touching 1% for the first time since March 2020. SCANDI/EM - Brent’s advances on Usd 80 brl have been offset to an extent by soft Norwegian retail sales data, as the Nok pares more of its post-Norges Bank gains, while the Sek looks somewhat caught between stalls following a recovery in Swedish consumption, but big swing in trade balance from surplus to larger deficit. However, the Try is taking no delight from the costlier price of oil or remarks from Turkey’s Deputy Finance Minister contending that interest rates can move lower by reducing the current account and budget deficits, or conceding that Dollarisation is a problem and steps need to be taken to enhance confidence in the Lira. Conversely, the Cnh and Cny are still holding a firm line following another net injection of 2 week funds from the PBoC and the Governor saying that China will lengthen the period for the implementation of normal monetary policy, adding that it has conditions to keep a normal and upward yield curve, as it sees no need to purchase assets at present. In commodities, WTI and Brent futures have extended on the gains seen during APAC hours, which saw the Brent November contract topping USD 80/bbl, albeit the volume and open interest has migrated to the December contract – which topped out just before the USD 80/bbl mark. WTI November meanwhile advanced past the USD 76/bbl mark to a current peak at USD 76.67/bbl (vs low USD 75.21/bbl). Desks have been attributing the leg higher to tight supply – with the UK fuel situation further deteriorating amid a shortage of drivers coupled with panic buying. It's worth bearing in mind that the demand side of the equation has also seen supportive, with the US announcing the lifting of international travel curbs recently alongside the economic resilience to the Delta variant heading into the winter period. Traders would also be keeping an eye on the electricity situation in China, which in theory would provide tailwinds for diesel demand via generators, although this could be offset by a slowdown in economic activity due to power outages. There has also been growing noise for OPEC+ to hike output beyond the monthly plan of 400k BPD, with some African nations also struggling to ramp up production due to maintenance issues and lack of investments. Ministers recently noted that the plan would be maintained at next week's confab. As a reminder, the OPEC World Oil Outlook is set to be released at 13:30BST/08:30EDT, although the findings may be stale given the recent developments in crude dynamics. Major banks have also provided commentary on Brent following Goldman Sachs' bullish call recently, with Barclays upping its forecast for both benchmarks due to supply deficits, whilst Morgan Stanley maintained its forecast but suggested that the USD 85/bbl Brent scenario clearly exists. MS also noted that oil inventories continue to draw at high rates and suggest that the market is more undersupplied than generally perceived; the analysts see the market undersupplied into 2022 amid its expectation for further OPEC discipline. Nat gas also remains in focus, with prices +11% at one point, whilst Russia's Kremlin said Russia remains the safeguard of natural gas to Europe and Gazprom is ready to discuss new gas supply contracts with increased volumes to meet rising European demand. It's also worth being aware of the increasing likelihood of state intervention at these levels as nations attempt to save or at least cushion consumers and company margins. Elsewhere, precious metals are under pressure as the Buck remains buoyant, with spot gold still under USD 1,750/oz as it inches closer to the 11th August low of USD 1,722/oz. Spot silver remains within recent ranges above USD 22/oz. Overnight Chinese nickel and tin prices extended losses with traders citing subdued demand, whilst coking coal and coke futures leapt on tight supply. US Event Calendar 8:30am: Aug. Advance Goods Trade Balance, est. -$87.3b, prior -$86.4b, revised -$86.8b 8:30am: Aug. Retail Inventories MoM, est. 0.5%, prior 0.4%; Wholesale Inventories MoM, est. 0.8%, prior 0.6% 9am: July S&P CS Composite-20 YoY, est. 20.00%, prior 19.08% 9am: July S&P/CS 20 City MoM SA, est. 1.70%, prior 1.77% 9am: July FHFA House Price Index MoM, est. 1.5%, prior 1.6% 10am: Sept. Conf. Board Consumer Confidence, est. 115.0, prior 113.8 Expectations, prior 91.4 Present Situation, prior 147.3 10am: Sept. Richmond Fed Index, est. 10, prior 9 Central Bank Speakers 9am: Fed’s Evans Makes Welcome Remarks at Payments Conference 10am: Powell and Yellen Appear Before Senate Banking Panel 1:40pm: Fed’s Bowman Speaks at Community Bank Event 3pm: Fed’s Bostic Discusses the Economic Outlook 7pm: Fed’s Bullard Discusses U.S. Economy and Monetary Policy DB's Jim Reid concludes the overnight wrap What a difference a week makes. You hardly hear the word Evergrande now. We asked in a flash poll last week whether we would still be talking about it in a month or whether it would be a distant memory by then. Maybe we should have narrowed the time frame to a week! We’ve quickly moved on to rate hikes and rising bond yields as the topic de jour. A further rise in the Bloomberg Commodity Spot Index (+1.87%) to a fresh high for the decade helped reinforce the move. Indeed, sovereign bond yields moved higher once again yesterday amidst a sharp rise in inflation expectations, with those on 10yr Treasury yields rising +3.6bps to 1.487%, their highest level in over 3 months. Meanwhile the 2yr yield rose +0.8bps to 0.278%, its highest level since the pandemic began, which comes on the back of last week’s Fed meeting that prompted investors to price in an initial rate hike from the Fed by the end of 2022. The moves in Treasury yields were almost entirely driven by higher inflation breakevens, with 10yr breakevens up +3.7bps. That echoed similar moves in Europe, where the German 10yr breakeven (+4.7bps) hit a post-2013 high of 1.653%, and their Italian counterparts (+3.9bps) hit a post-2011 high. The biggest move was in the UK however, where the 10yr breakeven (+13.2bps) reached its highest level since 2008, which comes amidst a continued fuel shortage in the country, alongside another rise in UK natural gas futures, which were up +8.20% yesterday to £190/therm, exceeding the previous closing peak set a week earlier. We were waiting for the wind to blow in this country to get alternatives back on stream and boy did it blow yesterday but with no impact yet on gas prices. Lower real rates dampened the rise in yields across the continent, though yields on 10yr bunds (+0.5bps), OATs (+0.9bps), BTPs (+1.3bps) and gilts (+2.7bps) had all moved higher by the close of trade. Those spikes in commodity prices were evident more broadly yesterday, with energy prices in particular seeing a major increase. Brent crude oil prices were up +1.84% to $79.53/bbl, marking their highest closing level since late-2018, and this morning in trading they have now exceeded the $80/bbl mark with a further +0.94% increase. It was much the same story for WTI (+1.99%), which closed at $75.45/bbl, which was its own highest closing level since 2018 too. And those pressures in UK natural gas prices we mentioned above were seen across Europe more broadly, where futures were up +8.92%. With yields moving higher and inflationary pressures growing stronger, tech stocks struggled significantly yesterday, with the NASDAQ down -0.52%. The megacap tech FANG+ index fell -0.15% on the day, but was initially down as much as -1.7% in early trading. The NASDAQ underperformed the S&P 500, which was only down -0.28%, but that masked significant sectoral divergences, with interest-sensitive growth stocks struggling, just as cyclicals more broadly posted fresh gains. More specifically, energy (+3.43%), bank (+2.29%) and autos (+2.19%) led the S&P, while biotech (-1.65%) and software (-1.39%) shares were among the largest laggards. European equities were also pretty subdued, with the STOXX 600 down -0.19%, though the DAX was up +0.27% following the results of the German election, which removed the tail risk outcome of a more left-wing coalition featuring the SPD, the Greens and Die Linke. Staying on the political scene, we are now less than 72 hours away from a potential US government shutdown as it stands. As was expected, Republicans in the Senate blocked the House-passed measure to fund the government for another 2 months and raise the debt ceiling for 2 years. While Democrats have not put forward their alternative strategy if Republicans refuse to vote to lift the debt ceiling, their only option would be to attach it to the budget reconciliation plan that currently makes up much of the Biden economic agenda. In an effort to keep all party members on board, Speaker Pelosi moved the vote on the $550bn bipartisan infrastructure bill to Thursday in order to give all sides more time to finish the larger budget bill and pass both together. It is a going to be a very busy Thursday, since Congress will have to also pass the funding bill that day. Republicans and Democrats already agree on a funding bill to keep the government open that does not include the debt ceiling increase so it is just a matter of how exactly the debt ceiling provision goes through without a Republican Senate vote. Overnight in Asia, equity indices are seeing a mixed performance. On the one hand, most of the region including the Nikkei (-0.24%) and KOSPI (-0.80%) are trading lower as investors begin to price in tighter monetary policy from the Fed. However, the Hang Seng (+1.50%), Shanghai Composite (+0.53%) and CSI (0.38%) have all advanced after the People’s Bank of China said that they would ensure a “healthy property market”. Looking forward, US equity futures are pointing to little change, with those on the S&P 500 down just -0.05%, and 10yr Treasury yields have risen +1.9bps this morning to trade above 1.50% again. Back to the German election, where the aftermath yesterday saw various party leaders assess the results and stake their claims to participate in a new coalition. As a reminder, the SPD came in first place with 25.7%, but the CDU/CSU weren’t far behind on 24.1%, making it mathematically possible for either to form a government in a coalition with the Greens and the FDP. The SPD’s chancellor candidate, Finance Minister Olaf Scholz, appealed for the Greens and FDP to join him in forming a government, and told the media that he wanted to form a coalition before Christmas. Meanwhile Green co-leader Robert Habeck said that “Of course there is a certain priority for talks with the SPD and the FDP”, but said that this didn’t mean they wouldn’t speak with the CDU/CSU either. As the SPD were calling for an alliance, the tone sounded more negative from the CDU’s leadership, even though Armin Laschet said that he had not given up on the idea of forming a government. Notably, Laschet said that no party was able to draw a clear mandate from the result, including the SPD, and this echoed remarks from the CSU leader Markus Söder, who said that the conservatives had no mandate to form a government, though they could “make an offer out of a sense of responsibility for the country.” Meanwhile, attention will turn to the FDP and the Greens to see which way they’re leaning when it comes to forming a government. FDP leader Lindner said that he would hold preliminary talks with the Greens, after which they would be open to invitations from either the SPD or the CDU/CSU for further discussions. Back on the UK, there was an interesting speech from BoE Governor Bailey yesterday, where he echoed the line from the MPC minutes last week, saying that “all of us believe that there will need to be some modest tightening of policy to be consistent with meeting the inflation target sustainable over the medium-term”. However, he also said that their view was that “the price pressures will be transient”, and that “monetary policy will not increase the supply of semi-conductor chips … nor will it produce more HGV drivers.” He then further added that tighter policy “could make things worse in this situation by putting more downward pressure on a weakening recovery of the economy”. So a bit of a mixed message of backing rate hike expectations but warning about its impact on growth. Over in the US we heard from a host of Fed speakers with Governor Brainard saying that while “employment is still a bit short of the mark” of “substantial further progress”, she expects that the labour market will recover enough to start tapering asset purchases soon. Separately on the inflation debate, Minneapolis Fed President Kashkari argued that this year’s pickup in US inflation has been a byproduct of the supply disruptions associated with Covid and that policy makers should not react to it just yet. He cited the need to get US employment back up as the Fed’s “highest priority”. New York Fed President Williams agreed with his colleague, saying that “this process of adjustment may take another year or so to complete as the pandemic-related swings in supply and demand gradually recede.” And Chicago Fed President Evans is even worried about downside inflation risks, as he is " more uneasy about us not generating enough inflation in 2023 and 2024 than the possibility that we will be living with too much.” Lastly, news came out yesterday that Boston Fed President Rosengren will retire this week due to health concerns. He was due to step down in June regardless as there is a mandatory retirement age of 65. Dallas Fed President Kaplan also announced his retirement yesterday, which will take effect October 8th. Both officials have drawn scrutiny in recent days stemming from their recent disclosure of trading activity over the last year, though the activity did not violate the Fed’s ethics code even as Fed Chair Powell announced an official review of those rules. The Boston Fed President will be a voting member on the FOMC next year, and the Dallas Fed President in 2023. Running through yesterday’s data, the preliminary reading for US durable goods orders in August showed growth of +1.8% (vs. +0.7% expected), and the previous month was also revised up to show growth of +0.5% (vs. -0.1% previously). Meanwhile core capital goods orders grew by +0.5% (vs. +0.4% expected), and the previous month’s growth was revised up two-tenths. Finally, the Dallas Fed’s manufacturing activity index for September came in at 4.6 (vs. 11.0 expected) – its lowest reading since July 2020. To the day ahead now, and one of the main highlights will be the appearance of Fed Chair Powell, and Treasury Secretary Yellen at the Senate Banking Committee. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Schnabel, Panetta and Kazimir, along with the BoE’s Mann and the Fed’s Evans, Bowman and Bostic. US data highlights include the US Conference Board’s consumer confidence indicator for September and the FHFA house price index for July. Tyler Durden Tue, 09/28/2021 - 07:52.....»»

Category: blogSource: zerohedgeSep 28th, 2021

U.S. moves to cut Huawei off from global chip suppliers as China eyes retaliation

The Trump administration on Friday moved to block global chip supplies to blacklisted telecoms equipment giant Huawei Technologies [HWT.UL], spurring fears of Chinese retaliation and hammering shares of U.S. producers of chipmaking equipment......»»

Category: topSource: reutersMay 15th, 2020

U.S. moves to cut off Huawei from chip suppliers

The Trump administration moved Friday to block shipments of semiconductors to Huawei Technologies from global chipmakers. As Fred Katayama reports, the action is sure to ramp up tensions with China......»»

Category: videoSource: reutersMay 15th, 2020

U.S. moves to cut Huawei off from global chip suppliers

The Trump administration on Friday moved to block shipments of semiconductors to Huawei Technologies from global chipmakers, in an action ramping up tensions with China......»»

Category: topSource: reutersMay 15th, 2020

Exclusive: U.S. moves to cut Huawei off from global chip suppliers

The Trump administration on Friday moved to block shipments of semiconductors to Huawei Technologies from global chipmakers, in an action that could ramp up tensions with China......»»

Category: topSource: reutersMay 15th, 2020

Mitsui Fudosan America’s 527 Madison Avenue Announces Renewal, Expansions and New Lease

Mitsui Fudosan America, Inc. (MFA) announced it has leased two full floors and a pre-built partial floor at 527 Madison Avenue—its trophy 26-story office tower located at the corner of 54th Street in the Plaza District—with the addition of a new tenant and growing footprints of two financial firms in the... The post Mitsui Fudosan America’s 527 Madison Avenue Announces Renewal, Expansions and New Lease appeared first on Real Estate Weekly. Mitsui Fudosan America, Inc. (MFA) announced it has leased two full floors and a pre-built partial floor at 527 Madison Avenue—its trophy 26-story office tower located at the corner of 54th Street in the Plaza District—with the addition of a new tenant and growing footprints of two financial firms in the building. Private equity investment firm Clarion Capital Partners signed a 10-year renewal and expansion, taking the 10th and 11th floors for a total of 17,200 square feet. A private global container terminal operator signed a full-floor, long-term lease for 6,500 square feet on the 25th floor. Fintech firm CAIS added newly prebuilt space spanning 4,484 square feet on the 12th floor, bringing its total to 17,734 square feet. The tenant expansions and new lease bring the approximately 240,000-square-foot boutique building property close to full occupancy, with just the entire 11,600-square-foot 8th floor available. “We are pleased to announce this recent leasing success as we continue our commitment to providing our tenants with amenity-rich environments that inspire productivity and collaboration,” said Slater Traaen, MFA’s senior director of Asset Management and Leasing. “527 Madison’s tour and leasing velocity appears to outpace the broader submarket, which is attributable to the building’s blue-chip tenant roster and ability to provide tenants full-floor identity.” MFA invested in a multi-million-dollar modernization of the distinctive property, which included a modern lobby of polished marble designed by MdeAS that features rotating art exhibitions, as well as upgraded elevators, state-of-the-art security and a 10th floor wi-fi-enabled terrace for tenants’ exclusive use. 527 Madison’s roster includes Australia’s biggest pension fund, and internationally recognized hedge funds and global investment firms. Savills vice chairman Stephen Berliner represented Clarion Capital Partners in its renewal and expansion. The container terminal operator was represented by Todd Abrams, managing director of Prime Manhattan Realty. CAIS was represented by Brad Needleman, an executive managing director with Newmark. A Cushman & Wakefield team led by executive vice chairman Mark Boisi, and executive directors Stephen Bellwood and Bryan Boisi, serve as exclusive leasing agents for 527 Madison Avenue. Hines is the property manager. “These transactions are a reflection of ownership’s impeccable management track record and strong commitment to meeting the needs of tenants seeking high-end space that engages their employees,” said Mark Boisi. “The building’s full-floor offerings, in-house construction program, high-end pre-builts and amenities, coupled with its premier Plaza District location, make it an ideal home for discerning companies. “527 Madison Avenue’s in-building public parking and proximity to numerous public transit options is also a huge draw, as well as its proximity to Central Park and iconic eateries like the Monkey Bar at the Hotel Elysée and Nerai.” The post Mitsui Fudosan America’s 527 Madison Avenue Announces Renewal, Expansions and New Lease appeared first on Real Estate Weekly......»»

Category: realestateSource: realestateweekly13 hr. 26 min. ago

A Chinese invasion of Taiwan is a real and dangerous possibility that could wreck armies and ruin the global economy worse than the 1929 stock market crash

A Chinese invasion of Taiwan could bring about a global recession and significant military losses for both countries and possibly others. The rusted out wreckage of an old tank is seen at Ou Cuo Sandy Beach on Taiwan's Kinmen islands, which lie just 3.2 kms (two miles) from the mainland China coast, on August 11, 2022.SAM YEH/AFP via Getty Images It could be only a matter of time before China invades Taiwan.  Experts say the military and economic impacts for could be catastrophic, and not just for China and Taiwan. The conflict could bring about a global recession and significant military losses. Separated from mainland China by a narrow strait, Taiwan faces a constant threat from a powerful neighbor that claims the island as an inseparable part of its territory. Taiwan is armed to the teeth and has powerful friends, but with China growing stronger and more aggressive, the risk of armed conflict is climbing higher.Beijing continues to view the island's democratic government as a challenge to its authoritarian rule, and has never taken the use of force off the table to get what it wants. In October, US Secretary of State Anthony Blinken said China might take steps to annex Taiwan on a "much faster timeline" than previously thought.Whether it's 2030, 2027, 2025, or even this year, experts say it could wreak havoc on the global economy and take a devastating toll on the militaries involved.The US, which has armed Taiwan with everything from air defense systems to anti-ship missiles to fighter jets, is not required to intervene China invades Taiwan. But President Joe Biden has broken away from strategic ambiguity and said that the US would come to the island's defense if China invaded, meaning that if a fight breaks out over Taiwan, it could get messy in a hurry.War games say China likely loses, but nobody winsBeijing has noticeably "intensified" its military, diplomatic, and political pressure against Taiwan and increased its "provocative and destabilizing actions," the US Department of Defense wrote in a 2022 report on China's military. The Chinese People's Liberation Army is spending more time carrying out drills focused on seizing islands by force and flying more bombers, fighters, and other aircraft near Taiwan, the Pentagon reported.A brigade of the Army under the Eastern Theater Command, together with a department of the Navy, air Force and army aviation, organizes a red and blue combat drill for real troops in Zhangzhou, Fujian Province, China, Sept 2, 2022.CFOTO/Future Publishing via Getty ImagesThough China's actions have stirred fears of a possible Chinese attack, the US military assesses that an invasion of Taiwan would prove extremely difficult for the Chinese military. It would likely invite intervention from other militaries, strain the Chinese People's Liberation Army, and create political and military risks for Chinese leader Xi Jinping and the ruling Chinese Communist Party.The Center for Strategic and International Studies recently ran war games looking at how a large-scale Chinese invasion of Taiwan might play out, and the outcomes were bleak for China, but also for everyone else involved.China would start by bombing Taiwan's air force and navy before using its own naval forces to surround and lay siege to the island. Meanwhile, Chinese air assault and airborne troops would land on Taiwan's shores as tens of thousands of soldiers head to the island on civilian cargo ships and military amphibious vessels.      But Beijing's efforts would likely not be enough, CSIS found. Chinese troops would struggle to strengthen their supplies and move inland from the beaches, where they would be met by stiff resistance from defending Taiwanese forces. US and Japanese forces, assuming they came to the island's aid, would likely be able to take out China's amphibious fleet, but at tremendous cost. Taiwan would probably remain unconquered but heavily damaged, CSIS concluded. For example, the island would struggle to maintain basic services and electricity, and its military would be significantly depleted. China, on the other hand, would be left with tens of thousands of soldiers killed, wounded, or captured, a navy in total ruins, and a shattered amphibious force. CM-11 tanks fire artillery during the 2-day live-fire drill, amid intensifying threats military from China, in Pingtung county, Taiwan, 7 September 2022.Ceng Shou Yi/NurPhoto via Getty ImagesOne important condition for Taiwan's survival, the Washington-based think tank noted, is that the island must be able to withstand the initial Chinese assault and avoid surrendering before US and partner forces can get involved. "In most scenarios, the United States/Taiwan/Japan defeated a conventional amphibious invasion by China and maintained an autonomous Taiwan," CSIS summarized in its report on the simulations. "However, this defense came at high cost. The United States and its allies lost dozens of ships, hundreds of aircraft, and tens of thousands of service members. Taiwan saw its economy devastated." The CSIS report added that "the high losses damaged the US global position for many years" while noting that "China also lost heavily" and that the failure to occupy Taiwan led to instability within the Chinese Communist Party.Threats to one company could spell catastropheLooking at this situation from an economic perspective, a Chinese invasion of Taiwan could mean trillions of dollars in losses and a serious global recession. Taiwan is home to TSMC, the world's biggest chipmaker. Given that no other company makes such advanced chips at such a high volume, a conflict could mean the production of everything from cars to iPhones grinds to a halt. "If China would invade Taiwan, that would be the biggest impact we've seen to the global economy — possibly ever," Glenn O'Donnell, the vice president and research director at Forrester, previously told Insider. "This could be bigger than 1929."While US businesses can take some steps to reduce their reliance on Taiwan chipmaking, including bolstering their chip inventories and diversifying their supply chains, this is unlikely to mitigate the full risk of a Taiwan crisis."Given how predominant Taiwan is in the global semiconductor value chain, even with adjustments, any type of disruption to access to Taiwan semiconductor output is going to have tremendous consequences for the global economy," Martijn Rasser, a former senior intelligence officer at the CIA, who is now a security and technology expert at the Center for a New American Security, told Insider. Taiwan's armed forces hold two days of routine drills to show combat readiness ahead of Lunar New Year holidays at a military base on January 11, 2023 in Kaohsiung, Taiwan.Annabelle Chih/Getty ImagesIf the US and its allies, for instance, imposed significant sanctions on Chinese imports following an invasion, there could be a "huge impact on American consumers and the US economy generally," William Alan Reinsch, a senior advisor at the Center for Strategic and International Studies, a national security think tank, told Insider. While the US and its allies have imposed strong sanctions against Russia following its invasion of Ukraine, "It would be much more challenging in the China context," Rasser said, "just because of the economic interdependencies that are there" between the countries. In the event of an invasion, there's been speculation the US would consider evacuating TSMC's engineers — or even destroy the company's facilities — to prevent China from having sole access to TSMC's chip production. But Chen Ming-tong, director-general of Taiwan's National Security Bureau, said in October these steps would not be necessary. The US and other countries could simply cut off TSMC's access to supply chains it needs to keep production running, he said, resulting in a situation in which there is "no way TSMC can continue its production.""Even if China got a hold of the golden hen, it won't be able to lay golden eggs," he added.The potential economic consequences of an invasion for both China and the rest of the world, as well as the possibility that China lose access to TSMC's semiconductors, could serve to deter an invasion in the short-term. Taiwanese soldiers stand guard as flares are fired during a Taiwanese military live-fire drill, after Beijing increased its military exercises near Taiwan, in Pingtung, Taiwan, 6 September 2022.Ceng Shou Yi/NurPhoto via Getty ImagesA crisis in 2023 is probably unlikelyWhile the risk of a conflict in the medium term appears to have increased, there's a good chance the countries avoid a conflict in 2023."We've seen increased surface vessel activity around Taiwan," US Secretary of Defense Lloyd Austin said during a press conference Wednesday. "But whether or not that means that an invasion is imminent, you know, I seriously doubt that." "I don't think Xi will make a move until and unless he is absolutely sure that an invasion will be successful," Gen. James Clapper, who led the intelligence community under President Obama, previously told Insider. "And right now, I don't think he has the degree of certitude.""China will defer moves that could possibly provoke military conflict until the balance of power is decisively in its favor," the political research and consulting firm Eurasia Group said in its 2023 top risks report, "or until the US is ruled by a president who is clearly unwilling to defend Taiwan. None of this is remotely possible in 2023."Expectations are largely that China would not take such a risk until later this decade at the earliest.Others have argued it's in the self interest of both China and the United State to overplay the likelihood of a Taiwan invasion. The threat gives China negotiating power, they say, and justifies additional military spending in the US.  Read the original article on Business Insider.....»»

Category: smallbizSource: nytJan 29th, 2023