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Fear Of The Fed Tightening On Holiday

In his Daily Market Notes report to investors, Louis Navellier wrote: Fear Of The Fed Tightening Stocks marched higher throughout the day yesterday, albeit on low volume. The same is happening this morning. Fear of the Fed tightening seems to be on holiday. Q3 2022 hedge fund letters, conferences and more   Despite a seriously […] In his Daily Market Notes report to investors, Louis Navellier wrote: Fear Of The Fed Tightening Stocks marched higher throughout the day yesterday, albeit on low volume. The same is happening this morning. Fear of the Fed tightening seems to be on holiday. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2022 hedge fund letters, conferences and more   Despite a seriously inverted curve, an historically reliable indicator of a pending recession, stocks are saying that earnings are not about to fall significantly. There's no doubt that higher interest rates have made houses and cars more expensive to finance, yet prices are not materially coming down. Consumers are running up their credit cards and the savings rate is falling fast but cash balances, overall, remain high by historical levels. Consumer sentiment is low but rising again. We will learn a lot about consumer sentiment after Black Friday and Cyber Monday in the next few days. While economic indicators have been softening both in the US and globally, it has been less than feared given the markedly higher interest rates. The market continues to climb the wall of worry, in this case that the Fed will feel compelled to remain aggressive longer, given the resilience of the job market, and try to push inflation down without hesitation as long as the economy continues to hum along. Today we're looking at lower crude prices, down 3.9% to below $78/bbl, a lower US 10yr yield, down 3bps to 3.73%, a lower US dollar index back below 106.5, and a VIX at a 2 month low of 21.3. While earnings may still be trimmed for '23 and the P/E is more likely to fall than rise as the Fed aggressively taps the brakes, stocks continue to be the best investment to outpace inflation, and the US remains the "safest" place to invest and will continue to receive funds flow. Investors certainly have reason to be thankful for this holiday week. Coffee Beans Ford Crown Victoria is the most commonly used car in Hollywood’s horror movies – appearing in some 1,514 feature films. Other popular car choices include the Ford Mustang, appearing in 710 movies, followed by the Chevrolet Caprice (606 movies), Chevrolet Impala (594 movies), and the Jeep Cherokee (362 movies). Source: Statista. See the full story here......»»

Category: blogSource: valuewalkNov 23rd, 2022

Futures Slump Ahead Of Powell Speech

Futures Slump Ahead Of Powell Speech US futures dropped as investors waited to see whether Fed Chair Jerome Powell will differentiate himself from hawkish comments made by two policy makers on Monday when he speaks later at an event in Sweden at 9am ET. S&P 500 and Nasdaq 100 futures dropped to session lows around 7:15am ET after trading little changed for much of the overnight session. Traders are also reluctant to take strong directional bets before US inflation data is published on Thursday and visibility clears up on the trajectory of interest rates. The Bloomberg Dollar Spot Index was near session after trading earlier in a tight range, while the rest of the currencies in the Group of 10 were mixed. Treasuries also broke out above a range, hitting session highs around 3.57% around the time stocks stumbled. Oil rose with gold and Bitcoin rallying for a seventh-straight day. Among US premarket movers, Virgin Orbit slumped as much as 27%, putting the stock on track for its biggest drop since June 2022, after the failure of a rocket that Richard Branson’s satellite company launched from a Boeing 747. Among winners, Oak Street Health rose 33% after Bloomberg reported that drugstore operator CVS is exploring an acquisition of the primary care provider, in a deal which could exceed $10 billion, including debt. Shares in Frontline, listed both in the US and Norway, surged as much as 20% in Oslo after the shipping giant controlled by billionaire John Fredriksen walked away from its plans to acquire Belgium’s Euronav, which dropped 21% on the news. Bed Bath & Beyond shares also jumped as much as 20%, poised to continue its rebound from the previous session, ahead of its earnings report and after the troubled home furnishings retailer saw its long-term rating upgraded at S&P. Here are some other notable premarket movers: Boeing stock slides 2.7% as Morgan Stanley downgraded its rating on the planemaker to equal-weight from overweight, saying the stock is now approaching fair value following recent outperformance. Frontline (FRO US) shares surge 22% after the company said it wouldn’t make a voluntary conditional exchange offer for all outstanding shares of the oil tanker operator Euronav. The decision not to proceed follows opposition from Belgium’s Saverys family - a major holder in Euronav. Bed Bath & Beyond (BBBY US) shares jump 20%, poised to continue their rebound from the previous session before its earnings report. The troubled home furnishings retailer also saw its long-term rating upgraded at S&P. HP Enterprise shares were down 1.9% after Barclays downgraded them to equal-weight, taking a cautious view on IT hardware stocks in 2023 given a challenging macro backdrop. The broker also cut NetApp (NTAP US) and upgraded Keysight (KEYS US) shares. Barclays expects a difficult 1H for US software stocks as estimates still look too high, even if valuation levels are “interesting.” The broker upgrades DoubleVerify (DV US) and Confluent (CFLT US), cuts Dynatrace (DT US). RBC anticipates a challenging start for US software stocks in 2023, which will eventually give way to “green shoots” of optimism. The broker outlines its top picks in the sector and cuts Box (BOX US) to underperform. Watch Chemours (CC US) after the stock was cut to sector perform from outperform at RBC on expectations that a challenging fourth quarter for the chemicals firm will feed into the first half of 2023. Keep an eye on PPG Industries (PPG US) as it was cut to sector perform from outperform at RBC with limited upside seen for the paint-maker’s stock amid expectations that volumes will come under pressure. Sentiment was dented on Monday, as a 1.4% gain in the S&P was fully reversed, after the San Francisco and Atlanta Fed presidents poured cold water on hopes that monetary tightening would soon ease off by calling for interest rates to rise above 5% and staying there, a scenario strategists believe would be negative for stock markets. It's also what they have been saying for months, but the market is always happy to keep pricing in the same flashing red headline as if it was new. "Sentiment is torn between the fear of missing out good news on inflation and, by opposite, angsts the Fed will be stubborn in its fight against inflation which reinforces the risk of a recession,” said Sarah Thirion, a Paris-based strategist at TP ICAP Europe. Fears about Covid in China and the trend of corporate guidance which will be unveiled during the next earnings season are also weighing on stocks, Thirion said. "The same pattern keeps emerging, with investors clinging onto any data which appears to show the economy is cooling off, only to see their hopes dashed by policymakers who clearly believe the inflation-busting job is far from over,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. Thursday’s US inflation report, which will come out almost a week after the latest jobs data showed wage growth has decelerated, will be among the last such readings Fed policy makers will see before their Jan. 31-Feb. 1 gathering. European stock markets, which have outperformed Wall Street since September, were also in a cautious mood with the Stoxx 600 down 0.6% after hitting an eight-month high yesterday. Retailers, industrials and miners are the worst performing sectors. Here are some of the most notable European movers: Orsted gains as much as 4.1% after being named among preferred picks in the renewables space by both Morgan Stanley and Exane. Card Factory jumps as much as 9.4% after raising full-year pretax profit guidance in a trading update. Liberum said the greetings-card retailer delivered another “impressive” update. Plus500 gains as much as 3% after giving an update for the year-end, with Liberum saying the trading platform saw an “excellent” performance in FY22. AO World rises as much as 18% after raising guidance for FY adjusted Ebitda. Jefferies says the update shows that efforts to cut costs and improve margins are working. European staffing stocks drop following a warning from UK recruiter Robert Walters and with Dutch peer Randstad downgraded by Degroof Euronav slumps 21% after Frontline said it won’t make a voluntary conditional exchange offer for all outstanding shares of the oil tanker operator. Husqvarna falls as much as 4.6%, the most since Dec. 15, after Danske Bank cut its recommendation to hold from buy, expecting a “challenging” first half of 2023. Kahoot shares fall as much as 18%, the most since November, after the company published below-forecast fourth- quarter preliminary adjusted Ebitda on weak macro conditions. Games Workshop falls as much as 6.9% after reporting 1H results that Jefferies said contained highs and lows, highlighting the challenges flagged by management. Optimism for the region is rising with economists at Goldman Sachs no longer predicting a euro-zone recession after the economy proved more resilient at the end of 2022, natural gas prices fell sharply and China abandoned Covid-19 restrictions earlier than anticipated. GDP is now expected to increase 0.6% this year, compared with an earlier forecast for a contraction of 0.1%. Economists led by Jari Stehn warn in a report to clients of weak growth during the winter given the energy crisis, and say headline inflation will ease faster than thought, to about 3.25% by end-2023. As reported previously, BofA CIO Michael Hartnett said a new era may have started with the ratio of the S&P 500 index to the Stoxx Europe 600 breaking its 100-week moving average, a support that has held strong for more than a decade. Earlier in the session, Asian stocks declined as Chinese equities halted their rally, which had pushed a key regional benchmark to a bull market, amid profit-taking and renewed caution on the Fed’s rate-hike path.  The MSCI Asia Pacific Index dropped as much as 0.3% as of 4:17 pm in Singapore, dragged lower by Alibaba and Ping An Insurance. Trading volume was about 4% lower than the three-month average, according to data complied by Bloomberg. Tuesday’s breather comes as Asia’s benchmark index a day earlier entered bull territory, driven by China’s reopening and a weakening dollar that lured investors back to the region after facing a downward spiral for much of 2022.  Benchmarks in Hong Kong posted moderate losses while stock gauges in India, Singapore and Indonesia dropped more than 1%. Indonesian stocks were on track to enter a technical correction as investors looked to cash out from one of Asia’s hottest markets for 2022. Japanese equities climbed as traders returned from a holiday; as investors assessed the impact of China’s reopening and US job data that showed slower-than-expected average wage growth. The Topix Index rose 0.3% to 1,880.88 as of the market close in Tokyo, while the Nikkei advanced 0.8% to 26,175.56. Daikin Industries Ltd. contributed the most to the Topix Index gain, increasing 5.3%. Out of 2,162 stocks in the index, 1,092 rose and 953 fell, while 117 were unchanged. “Japanese stocks benefited from the belief that the Fed’s next rate hike will be more moderate,” said Tomo Kinoshita, a global market strategist at Invesco Asset Management. “China’s reopening has a positive impact on Japanese stocks, and inbound demand will resume once regulations around Chinese tourists are eased.” “After the sharp rally, Asian markets could see a bout of profit taking amid headwinds from tighter financial conditions and no respite in Fed rate-hike outlook,” said Nitin Chanduka, a strategist at Bloomberg Intelligence.  Two Fed officials said the central bank will likely need to raise interest rates above 5% before pausing and holding for some time. Still, the recent rally in Chinese equities may have more legs as consumption-driven firms drive the reopening rebound further and China shifts its focus to economic growth. Investors expect a strong 2023 for both Chinese stocks and the yuan as Asia’s largest economy bucks the global trend of weakening expansion. Morgan Stanley turned even more bullish on the market, raising price targets further and expecting China to top global equity-market performance in 2023.  “We remain of the view that Asian investors should use this volatility in 1Q23 as an opportunity to raise exposure,” said Chetan Seth, an Asia equity strategist at Nomura Holdings.  Australian stocks nudged lower after Fed speakers dampened risk sentiment. The S&P/ASX 200 index fell 0.3% to close at 7,131.00 as investors assessed hawkish commentary from Fed officials. The retreat halted the benchmark’s four-day run of gains. Miners and banks were the biggest drags on Tuesday. In New Zealand, the S&P/NZX 50 index rose 0.2% to 11,665.26 Stocks in India resumed a decline after bellwether Tata Consultancy’s quarterly earnings showed increasing caution over technology spending amid an uncertain economic outlook. The S&P BSE Sensex fell 1% to 60,115.48 in Mumbai, while the NSE Nifty 50 Index declined by an equal measure. Both the gauges are close to extending their losses from peak levels last month to 5% as investors resort to profit-taking at the start of the earnings season. Sixteen of BSE Ltd.’s 20 sector sub-gauges declined, led by telecom companies, while Reliance Industries was the biggest drag on the Sensex, plunging 1.5%. Tata Consultancy Services closed 1% lower after its net income for the fiscal third quarter trailed estimates. Foreign investors have been sellers of local shares this month, taking out about $602 million through Jan. 6 after $167m of outflows in December. In FX, the Bloomberg Dollar Index jumped near session highs after the greenback initially slipped against most of its Group-of-10 peers. The dollar finds itself at a make-or-break technical moment, with its two-year rally under threat as key US inflation data looms. The euro rose to a daily high of around $1.0750 in European session. The euro hit fresh cycle highs Monday and options pricing is coming to reflect a more constructive outlook in the short-term. Bunds and Italian bonds dropped, underperforming Treasuries The Canadian dollar was steady. USD/CAD’s downward path is being refueled in the options space as traders position for an extended period of US dollar weakness The Australian dollar was the worst G-10 performer. Sovereign bonds inched up The yen was steady at 131.80 per dollar. Tokyo’s inflation outpaced forecasts to hit 4% for the first time since 1982, suggesting the underlying price trend is stronger than expected by economists, a factor that could further fuel speculation the Bank of Japan will adjust policy again In rates, Treasuries ease lower, following wider losses across core European rates amid supply pressures and ahead of a Riksbank conference on central bank independence where ECB’s Schnabel, BOE Governor Bailey and Fed Chair Powell are all scheduled to speak. US 10-year yield around 3.56%, cheaper by 3bp on the day with bunds and gilts lagging by additional 2.5bp and 2bp; long-end Treasuries outperformance flattens 5s30s by 1.5bp vs Monday’s close.  Front-end and intermediates lead slight losses in Treasuries, flattening 5s30s spread. After Powell appearance, the year's first auction cycle begins at 1pm ET with $40bn in 3-year new issue, followed by $32b 10-year, $18b 30-year reopenings on Wednesday and Thursday.  European bonds are also in the red with Bund futures underperforming their UK counterparts. The Gilt curve bear steepens with 2s10s widening 2.1bps. In commodities, crude futures reversed an earlier drop to trade higher. WTI Has added 0.5% to trade near $75.00. Spot gold rises roughly $5 to trade near $1,877/oz. Bitcoin is support above the USD 17k mark, holding towards the top-end of USD 17133-17294 parameters. Looking to the day ahea, at 9 a.m., Fed Chair Jerome Powell will speak at an event hosted by the Swedish central bank. Other speakers include  BoE Governor Bailey, BoJ Governor Kuroda, BoC Governor Macklem, and the ECB’s Schnabel, De Cos, and Knot. An hour later, we’ll get the latest data on wholesale inventories. At 10:30 a.m., President Joe Biden will meet Canada’s Justin Trudeau, while Treasury Secretary Janet Yellen meets Canadian Deputy Prime Minister Chrystia Freeland at 1:30 p.m. The US will sell $40 billion 3-year notes at 1 p.m. Market Snapshot S&P 500 futures down 0.5% to 3,896 STOXX Europe 600 down 0.7% to 445.05 MXAP little changed at 161.72 MXAPJ down 0.3% to 534.27 Nikkei up 0.8% to 26,175.56 Topix up 0.3% to 1,880.88 Hang Seng Index down 0.3% to 21,331.46 Shanghai Composite down 0.2% to 3,169.51 Sensex down 1.1% to 60,097.38 Australia S&P/ASX 200 down 0.3% to 7,131.00 Kospi little changed at 2,351.31 German 10Y yield little changed at 2.27% Euro up 0.2% to $1.0751 Brent Futures up 0.1% to $79.73/bbl Brent Futures up 0.1% to $79.74/bbl Gold spot up 0.3% to $1,876.70 U.S. Dollar Index little changed at 103.06 Top Overnight News from Bloomberg Cost pressures in corporate Germany appear to be easing, with fewer companies planning price increases during the coming months. Price expectations for the whole economy fell to 40.3 points in December from 46.2 points the previous month, according to a survey by the Ifo Institute published Tuesday Back in October equities and bonds were breaking from their normal settings to move together far more tightly than at almost any stage in history. Since then, the ties have only become tighter, as the prospects of an end to Fed rate hikes helps to drive gains for both Treasury futures and S&P 500 contracts East European nations started 2023 with a flurry of dollar issuance, putting the region on track for a record year as it rediscovers the foreign-debt market beyond its traditional euro-denominated sales Deflationary pressure in China worsened in the fourth quarter as the economy slumped, with price-growth likely to be subdued even when the economy rebounds later this year, according to China Beige Book International Egypt’s urban inflation accelerated at its fastest pace in five years as several rounds of currency devaluation filtered through to consumers A more detailed look at global markets courtesy of Newsquawk APAC stocks traded mostly lower as the risk appetite in the region stalled following a similar handover from Wall St where the major indices failed to sustain early gains despite a further dovish Fed repricing. ASX 200 was lacklustre amid weakness in industrials and mining stocks, although price action was rangebound amid the lack of any major fresh drivers. Nikkei 225 outperformed as it played catch-up to Monday’s advances on return from the extended weekend but with upside capped as participants also reflected on weak Household Spending and firm Tokyo CPI data releases. Hang Seng and Shanghai Comp were indecisive as the border reopening euphoria faded and despite reports that China will cut VAT for small businesses, while the PBoC also continued to drain liquidity. Top Asian News Chinese state media noted that the COVID-19 wave is past its peak in many parts of China. China's embassy in South Korea stopped issuing short-term visas for Korean citizens visiting China and said it will adjust policy subject to the lifting of South Korea's discriminatory entry restrictions against China, according to Reuters. Subsequently, the embassies in Japan took the same step. China's State Planner publishes registration rules for mid- & long-term foreign borrowings by companies, aimed at promoting orderly offshore financing. PBoC is to increase financial support for domestic demand and the supply system, to guide the balance sheets of high-quality real estate enterprises back to a safe range, ensure steady and orderly property financing. European bourses are underpressure, Euro Stoxx 50 -0.5%, in a continuation of the tepid APAC tone amid minimal newsflow. US futures are similarly contained and are diverging slightly around the unchanged mark pre-Powell. Amazon (AMZN) intends to close three UK warehouses (will impact 1,200 jobs), according to the PA. Top European News ECB's Schnabel says greening monetary policy requires structural changes to our monetary policy framework rather than adjustments to our reaction function. Preliminary inflation data for December point to a persistent build-up of underlying price pressures even as energy price inflation has started to subside. Interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive. Adyen, Nexi to Be Hit by Weaker Card Spending, Barclays Says Teneo Is Said to Near Deal to Buy British PR Firm Tulchan RBC Sees Good Growth For European Luxury and Premium Brands Uniper Says CEO and COO to Resign After Government Takeover FX Dollar is trying to regroup ahead of Fed Chair Powell, but DXY is heavy on the 103.000 handle and mixed vs majors. Kiwi marginally outperforming as Aussie retreats with Yuan after some Chinese officials warn about 2-way volatility in 2023. AUD/NZD cross reverses towards 1.0800 from 1.0860+, USD/CNH bounces from 6.7585 to almost 6.8000. Euro consolidates on a 1.0700 handle vs Buck, but Pound runs into resistance pips from 1.2200 PBoC set USD/CNY mid-point at 6.7611 vs exp. 6.7613 (prev. 6.8265) Fixed Income Bonds retreat further from peaks in consolidation and consideration of heavy conventional and syndicated issuance. Bunds sub-137.00 and very close to Monday's base, Gilts mostly under 102.00 and T-note below par within a 114-19+/11 range. Focus on Central Bank speakers at a Riksbank symposium where ECB's Schnabel has already been hawkish. Saudi Arabia has begun marketing a three-part USD bond, via Bloomberg. Commodities Crude benchmarks spent much of the European morning little changed, but have recently broken out of and eclipsed initial parameters, with upside of circa. USD 0.50/bbl as such. Barclays remains constructive on the space reiterating its Brent 2023 forecast of USD 98/bbl; writing there is the potential for USD 15-25/bbl of downside if the slump in global manufacturing worsens.. Goldman Sachs cut its Summer 2023 TTF price forecast by EUR 80 to EUR 100/MWh, citing exceptionally warm realised and forecast weather, as well as strong energy conservation. Iraq's December crude production was unchanged from November at 4.43mln BPD; in-line with its OPEC+ quota. Large Chinese nickel producer Tsingshan is in talks with struggling Chinese copper plants regarding processing its material which could double Chinese refined nickel output this year, according to Mining.com. LME says further work will be required to prepare and communicate to the market a detailed implementation plan re. the Oliver Wydman review. Spot gold and silver are diverging a touch and remain in close proximity to the unchanged mark in similarly narrow ranges, base metals are generally contained though the negative APAC bias remains in play. Geopolitics US Pentagon is mulling sending Stryker armoured vehicles to Ukraine in an upcoming aid package, according to people familiar with the matter cited by Politico. UK is willing to send battle tanks to Ukraine with PM Sunak supportive of Challenger II supply that could provide Ukrainian President Zelensky with a ‘knockout punch’, according to The Telegraph. Russian Defence Minister Shoigu says Moscow will develop its nuclear triad and be the main guarantee of Russian sovereignty, according to Interfax. Crypto Bitcoin is support above the USD 17k mark, holding towards the top-end of USD 17133-17294 parameters. US Event Calendar 06:00: Dec. SMALL BUSINESS OPTIMISM, 89.8; est. 91.5, prior 91.9 10:00: Nov. Wholesale Trade Sales MoM, est. 0.2%, prior 0.4% 10:00: Nov. Wholesale Inventories MoM, est. 1.0%, prior 1.0% Central Bank Speakers 05:10: Bailey, Schnabel, Macklem Speak in Stockholm 09:00: Powell Discusses Central Bank Independence at Riksbank Event DB's Jim Reid concludes the overnight wrap Markets looked set to start the week off with a positive start across the globe yesterday until the last hurdle as the S&P 500 slipped around 1.5% from the European close to end -0.07%. The narrative explaining the reversal centred around more hawkish Fed speak but short-end markets didn’t move at all over this period so one has to be cautious on the reasons for the dip. For the record though, Atlanta Fed President Bostic indicated that the Fed was committed to raising interest rates into a “5-5.25% range” and then holding there through 2024 in order to stamp down on excess demand in the economy. The length of time and the implication that rate cuts were not imminent seems to have been what the market grabbed on to, and this mirrors the comments from the FOMC minutes earlier this month, which indicated the Fed’s concern over a “pause” being mistaken by the market as a “pivot”. Bostic also was in favour of slowing rate hikes to 25bps in February if the inflation print on Thursday showed consumer prices cooling after the payrolls data last Friday showed slowing wage growth. Separately, San Francisco Fed President Daly said that she expected the fed funds rate to reach above 5% but that the final level is dependent on incoming inflation data, while highlighting how core services ex-housing has been a persistent source of pricing pressures. Neither Fed presidents are voting members this year, but offer a window into the FOMC’s thinking but as we said, Fed pricing was also little changed after these comments. Those remarks come ahead of Fed Chair Powell today, who’ll be speaking at an event on central bank independence at 14:00 London time. It’s uncertain whether the topic in question will lead to an in-depth policy discussion, but if we do get any, a key question will be whether he entertains the prospect of a further downshift in the pace of rate hikes to 25bps. That’s currently the base case in markets, but clearly the CPI release on Thursday will be an influence on this and to future FOMC meetings too. Most of the US session was more about pricing in less Fed hikes over the coming months with the 10yr yield down -2.59bps to 3.532% (fairly flat in Asia this morning). Investors also continued to downgrade their expectations for further hikes from the Fed, with the year-end rate at just 4.44%, down -4.2bps on the day. Those moves were given a further boost by data from the New York Fed, whose data on inflation expectations showed that 1yr expectations fell to a 17-month low in December of 5.0%. That said, the news wasn’t quite as positive when it came to longer time horizons, with 3yr expectations remaining at 3.0%, and 5yr expectations ticking up a tenth to 2.4%. Even though US equities gave up gains, Tech stocks outperformed with yields lower, with both the NASDAQ (+0.63%) and particularly the FANG+ index (+2.41%) holding on to larger gains. Tesla (+5.9%) was the best performing member of the large-cap index and reduced its YTD losses to -2.77%. And back in Europe, the STOXX 600 (+0.88%) continued to move higher, bringing its 2023 YTD gains to +5.52%, and marking out European equities as one of the top 2023 performers so far. However, one area that struggled yesterday were European sovereigns, with yields on 10yr bunds (+1.8bps) and OATs (+1.1bps) both rising, even if both had come off their earlier session highs. That followed data showing that Euro Area unemployment remained at a record low of 6.5% in November, which points to a historically tight labour market that could lead to further wage and hence inflationary pressures. Gilts were one of the biggest underperformers, with the 10yr yield up +5.4bps on the day amidst a speech from BoE chief economist Pill. In his remarks, he said that “the distinctive context that prevails in the UK… creates the potential for inflation to prove more persistent”. In terms of currencies, the US Dollar index (-0.85%) weakened to its lowest level since early June, which brings its declines to almost -10% (-9.73%) since its peak in late-September, back when the UK mini-budget turmoil was at its height and global markets were selling off more broadly. This decline in the dollar very much leans into our strategists’ latest FX blueprint, where they write that various forces such as a reversal in the European energy shock and the economic reopening in China have bearish implications for the dollar with a target of $1.15 by year-end (current $1.07). You can read their full piece here. That dollar weakness went hand-in-hand with noticeably tighter CDS spreads for most of the day, hitting levels we haven’t seen in months. For instance in Europe, the iTraxx Crossover tightened -8.4bps to 417bps, meaning it’s now more than -250bps beneath its own peak in late-September and the tightest since April. Meanwhile in the US, the CDX HY spread was down -10bps to 438bps at one point, its tightest level since August, before the late turn in risk assets saw CDX HY spreads wider (+1.9bps) on the day. A reminder that we revised our already bullish Euro Q1 credit spreads forecasts tighter over the weekend. See the piece here. Asian equity markets are mixed this morning with the Hang Seng (-0.34%), the Shanghai Composite (-0.18%) and the CSI (-0.10%) lower whilst the KOSPI (+0.31%) and Nikkei (+0.76%) are edging higher with the latter reopening following a public holiday. DM stock futures are pricing in a weaker start with contracts on the S&P 500 (-0.28%), NASDAQ 100 (-0.35%) and the DAX (-0.85%) all trading in the red. Early morning data showed broadening signs of inflationary pressures in Japan after Tokyo’s core consumer prices advanced +4.0% y/y in December - the fastest pace in four decades and beating market expectations of a +3.8% gain and against a +3.6% increase last month. With the core inflation figure staying above the BOJ’s 2% price target for the seventh consecutive month, it further heightens the possibility of an additional rise in the nationwide CPI. There wasn’t much in the way of other data yesterday, although German industrial production grew by +0.2% in November (vs. +0.3% expected), and the previous month’s decline was revised to show a larger -0.4% contraction (vs. -0.1% previously). To the day ahead now, and there are an array of central bank speakers including Fed Chair Powell, BoE Governor Bailey, BoJ Governor Kuroda, BoC Governor Macklem, and the ECB’s Schnabel, De Cos, and Knot. Otherwise, data releases include French industrial production for November, and in the US there’s the NFIB’s small business optimism index for December. Tyler Durden Tue, 01/10/2023 - 08:08.....»»

Category: smallbizSource: nytJan 10th, 2023

Stock Market News for Jan 3, 2023

Wall Street closed slightly lower on Friday, the last trading day of the year. Wall Street closed slightly lower on Friday, the last trading day of the year. Investor mood was grim as they looked at the coming months skeptically, with no signals about policy loosening coming from the Fed yet. All three major indexes ended in the red.How Did the Benchmarks Perform?The Dow Jones Industrial Average (DJI) fell 0.2% or 73.55 points to close at 33,147.25 points. Nineteen components of the 30-stock index ended in negative territory, while 11 ended in positive.The S&P 500 lost 0.3% or 9.78 points to close at 3,839.50 points. Nine of the 11 broad sectors of the benchmark index ended in negative territory. The Utilities Select Sector SPDR (XLU), the Real Estate Select Sector SPDR (XLRE) and the Materials Select Sector SPDR (XLB) went down 1%, 0.9% and 0.7%, respectively, while the Energy Select Sector SPDR (XLE) progressed 0.6%.The tech-heavy Nasdaq dipped 0.1% or 11.61 points to finish at 10,466.48 points.The fear-gauge CBOE Volatility Index (VIX) increased 1.1% to 21.67. A total of 8.5 billion shares were traded on Friday, lower than the last 20-session average of 10.8 billion. Decliners outnumbered advancers on the NYSE by a 1.50-to-1 ratio. On Nasdaq, a 1.03-to-1 ratio favored declining issues.Last Trading Day Ends With a WhimperTrading activity was sparse and low on the last trading day in 2022, as investors remained apprehensive about the direction the Fed was taking the economy toward. Friday capped one of the worst years seen in the market in the last one and a half decades, the worst since 2008, primarily pulled down by oil and commodity prices rising as a fallout of the Ukraine situation and the resultant policy tightening by the Fed in its bid to curb inflation. Expectations are that interest rates will continue to rise in the near term until there are concrete signs that inflation is coming down at a rapid pace. But with the Fed target rate remaining at a 2% inflation, tough, austere policies may continue for the time being without an end in sight.The war escalating in Ukraine and the covid situation in China have also kept investors jittery in the week that ended the year. Utilities and Real Estate were the worst-hit sectors for the day. Consequently, shares of American Electric Power Company, Inc. AEP and Brookfield Corporation BN fell 1.1% and 1.8%, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.Weekly Round UpThe three most widely followed indexes declined on Friday to close out a slightly losing last week of 2022. The tech-heavy Nasdaq Composite fell 0.3% for the week, while the S&P 500 and the Dow Jones Industrial Average lost 0.1% and 0.2%, respectively. A general grim mood about continuing interest rate hikes was somewhat pared by good news from the labor market showing rising jobless claims, and demand concerns over the energy market with covid cases increasing in China met its match in the strong domestic demand for crude oil in the United States. The result was a week that more or less ended flat.Monthly Round UpDecember was especially disappointing for investors as a Santa Claus rally was expected in the holiday season to cap off what has been a horrid year. But the rally did not arrive to boost the market as mixed economic data, especially in the labor market, failed to deter the Fed from signaling further interest rate hikes going forward. It did, however, oversee the end to a streak of 75 bps rate hikes and settled down to a 50 bps one in the Fed December meet. The Nasdaq, the S&P 500, and the Dow fell 8.7%, 5.9% and 4.2% for the month.Quarterly Round UpOn a quarterly basis, the S&P 500 and the Dow grew 7.1% and 15.4% while the tech-heavy Nasdaq declined 1% in fourth-quarter 2022. Even as economic indicators suggested that Fed policies were starting to take effect, mega-cap growth stocks continued to decline as recession loomed large on the economy, thus bearing down on the Nasdaq. The two other major indexes reaped the benefits of a relief rebound, with the general consensus being that the worst of the inflation was behind us.Half-Yearly Round UpWith headline inflation peaking at 9.1% in June, the market was in a buy-the-dip damage control mode for the rest of the year as rebound rallies punctuated its business. Even as fear of an impending recession continued to cast a pall over Wall Street, stocks made a comeback, with the Fed starting to send somewhat dovish signals and ending its unprecedented streak of 75 bps rate hikes. China relaxing its stringent covid measures and opening up for business also helped. Nasdaq fell 5.1% for the period, but the S&P 500 and the Dow grew 1.4% and 7.7% for the quarter. This was quite a comeback considering the fact that in the first half, the Dow was hovering in the correction zone, while the S&P 500 and the Nasdaq were in the bear market territory.Yearly Round UpWall Street closed its worst year since 2008 on Friday. Situations in Ukraine and China and the resultant price pressures on the global markets have led to this big meltdown. In the year, the S&P 500 declined 19.4% and is in the bear market territory, falling 20% below its record high. The tech-heavy Nasdaq Composite is down 33.1%, with mega-cap growth stocks getting a beatdown. Dow fared the best with a “modest” 8.8% fall compared to others. All eyes will be on the Fed in the days and weeks to come and the direction it gives to the economy. Its failure to achieve a soft landing might have cataclysmic repercussions for the market and the economy in general.Economic DataChicago Purchasing Manager’s Index increased to 44.9 for December. The unrevised numbers for November remained at 37.2. Zacks Top 10 Stocks for 2023 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2023? From inception in 2012 through November, the Zacks Top 10 Stocks portfolio has tripled the market, gaining an impressive +884.5% versus the S&P 500’s +287.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.Be First to New Top 10 Stocks >>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 American Electric Power Company, Inc. (AEP): Free Stock Analysis Report Brookfield Corporation (BN): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksJan 4th, 2023

Stock Market News for Dec 30, 2022

Wall Street closed higher on Thursday in a light day of trading. Wall Street closed higher on Thursday in a light day of trading. The general mood was buy-the-dip as the market went in for a year-end rally. Economic data showed jobless claims rising even as the labor market remained resilient. All three major indexes ended in the green.How Did the Benchmarks Perform?The Dow Jones Industrial Average (DJI) rose 1.1% or 345.09 points to close at 33,220.8 points. Twenty-eight components of the 30-stock index ended in positive territory, while two ended in the negative.The S&P 500 gained 1.8% or 66.06 points to close at 3,849.28 points. All of the 11 broad sectors of the benchmark index ended in positive territory. The Communication Services Select Sector SPDR (XLC), the Technology Select Sector SPDR (XLK) and the Consumer Discretionary Select Sector SPDR (XLY) increased 2.8%, 2.6% and 2.6%, respectively.The tech-heavy Nasdaq added 2.6% or 264.80 points to finish at 10,478.09 points, led by large-cap growth stocks.The fear-gauge CBOE Volatility Index (VIX) decreased 3.2% to 21.44. A total of 8.8 billion shares were traded on Thursday, lower than the last 20-session average of 11 billion. Advancers outnumbered decliners on the NYSE by a 4.80-to-1 ratio. On Nasdaq, a 4.30-to-1 ratio favored advancing issues.Jobless Claims Lead Year-end Relief RallyWall Street continues to be in a “bad news is good news” mood after it became amply clear that there was no Santa Claus Rally in the offing. The Fed, in its December meet, sent out signals that accelerated rate hikes would continue well into 2023 till there is sustained and quantifiable evidence that inflation is in control. Recent sessions have been dominated either by the apprehension of an economic downturn rising out of continued monetary policy tightening, or economic indicators suggesting a soft landing for the economy. Thursday’s trade was boosted by economic data, with jobless claims for the week coming in higher.The Labor Department said on Thursday that initial jobless claims rose to 225,000, increasing 9,000 for the week ending Dec 24, from the previous week's unrevised level. The four-week moving average decreased to 221,000, marking a fall of 250 from the previous week’s revised average. The previous week's average was revised down by 500 from 221,750 to 221,250.Continuing claims came in at 1,710,000 for the week ending Dec 17, increasing 41,000 from the previous week’s revised level. The previous week's numbers were revised down by 3,000 from 1,672,000 to 1,669,000. The 4-week moving average came in at 1,679,500, an increase of 25,250 from the previous week's revised average. The previous week's average was revised down by 3,000 from 1,657,250 to 1,654,250.The irony remains that investors are currently optimistic as they see an increased number of Americans filing claims for jobless benefits last week. But even as new claims rise and continued claims came in the highest since February, they remain at a level that suggests that the labor market is still tight. This might deter the Fed from going slow in its policy tightening.However, these jobs numbers certainly did enough on the day to send the market into a much due relief rally in a week that is looking to end more or less flat, that too in the peak holiday season. Crude oil prices fell on the day as COVID cases rose in China, with the mega oil-importer relaxing its pandemic restrictions. However, strong demand in the U.S. market ensured that the energy sector did not suffer for the day. WTI crude fell 0.7% to settle at $78.40/barrel, while Brent settled at $82.26/barrel, down 1.2%. The biggest gainers on the day were communication services, technology and consumer discretionary stocks, in a broad-based relief rally.Consequently, shares of Apple Inc. AAPL and Amazon.com, Inc. AMZN rose 2.8% and 2.9%, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.Economic DataFor the week ending Dec 23, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 0.7 million barrels from the previous week. Last week, it had gone down by 5.9 million barrels. Zacks Top 10 Stocks for 2023 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2023? From inception in 2012 through November, the Zacks Top 10 Stocks portfolio has tripled the market, gaining an impressive +884.5% versus the S&P 500’s +287.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.Be First to New Top 10 Stocks >>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 Amazon.com, Inc. (AMZN): Free Stock Analysis Report Apple Inc. (AAPL): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksDec 30th, 2022

Take the Zacks Approach to Beat the Market: NVIDIA, Boeing, Amgen in Focus

Our time-tested methodologies were at work to help investors navigate the market well last week. Here are some of our key performance data from the past three months. The three most widely followed indexes closed a losing week last Friday. The Dow Jones Industrial Average fell 2.8% to post its worst week since September, while the S&P 500 and the tech-heavy Nasdaq lost 3.4% and 4%, respectively.A slew of economic data took a grip on the market, with investors trying to gauge the Fed’s next move. After falling for three straight sessions early in the week, higher-than-expected jobless claims number gave some respite to the market on Thursday, with market participants inferring that the Fed might conclude that its policies were taking effect. Wall Street is currently in a “bad news is good news” mode, with investors hoping that indications of an economic slowdown might deter the Fed from further tightening its monetary policy.However, as the week drew to a close, producer-side inflation remained on the higher side and weighed in on the market. Wall Street closed a dismal week, pricing in a 50 bps interest rate hike in the Fed’s December meet. The fear of an impending recession is prevalent and the much-awaited holiday season boost is yet to take shape.Regardless of market conditions, we, here at Zacks, provide investors with unbiased guidance on how to beat the market.  As usual, Zacks Research guided investors over the past three months with its time-tested methodologies. Given the prevailing market uncertainty, you may want to look at our feats to prepare better for your next action.Here are some of our key achievements:Nordea Bank, Bank of Princeton Surge Following Zacks Rank UpgradeShares of Nordea Bank Abp NRDBY have surged 15.8% since it was upgraded to a Zacks Rank #1 (Strong Buy) on September 26.Another stock, The Bank of Princeton BPRN, was also upgraded to a Zacks Rank #1 on September 30v and has returned 15.4% since then.Zacks Rank, our short-term rating system, has earnings estimate revisions at its core. Empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.  This stock-rating system, which uses four factors related to earnings estimates to classify stocks into five groups, ranging from Zacks Rank #1 to Zacks Rank #5 (Strong Sell), has an impressive externally audited track record, with Zacks Rank #1 stocks generating an average annual return of +24.8% since 1988.You can see the complete list of today’s Zacks Rank #1 stocks here >>>Check Nordea Bank’s historical EPS and Sales here>>>Check Bank of Princeton’s historical EPS and Sales here>>>            Image Source: Zacks Investment ResearchZacks Recommendation Upgrade Drives Taboola and FS Bancorp Higher  Shares of Taboola.com Ltd. TBLA and FS Bancorp, Inc. FSBW have gained 30.3% and 25.4% since their Zacks Recommendation was upgraded to Outperform on September 29 and September 30, respectively.While the Zacks Rank is our short-term rating system that is most effective over the one- to three-month holding horizon, the Zacks Recommendation aims to predict performance over the next 6 to 12 months. However, just like the Zacks Rank, the foundation for the Zacks Recommendation is trends in earnings estimate revisions.The Zacks Recommendation classifies stocks into three groups — Outperform, Neutral and Underperform. While these recommendations are determined quantitatively, our analysts have the flexibility to override them for the 1100+ stocks they closely follow based on their better judgment of factors such as valuation, industry conditions and management effectiveness than the quantitative model.To access our research reports with Zacks Recommendations for the 1100+ stocks we cover, click here>>>Zacks Focus List Model Portfolio NVIDIA, Boeing Surge AheadShares of NVIDIA Corporation NVDA, which belongs to the Zacks Focus List, have surged 31.5% over the past 12 weeks. The stock was added to the Focus List on May 20, 2019. Another Focus-List holding, The Boeing Company BA, which was added to the portfolio on March 23,2020, has returned 19.9% over the past 12 weeks. The Zacks Focus List is a model portfolio of 50 hand-picked stocks that possess the right fundamental ingredients to outperform the market over the next 12 months. These 50 stocks are picked from a long list of stocks with the highest Zacks Rank.Since its inception on February 1, 1996, the Focus List portfolio has delivered an annualized return of +12.9%.Unlock all of our powerful research, tools and analysis, including the Focus List, Zacks #1 Rank List, Equity Research Reports, Zacks Earnings ESP Filter, Premium Screener and more, as part of Zacks Premium. Gain full access now >>Zacks ECAP Stocks Tractor Supply, Monster Beverage SoarTractor Supply Company TSCO, a component of our Earnings Certain Admiral Portfolio (ECAP), jumped 16.2% over the past 12 weeks. Monster Beverage Corporation MNST followed Tractor Supply with 14.5% returns.ECAP is a model portfolio of 30 concentrated, ultra-defensive, long-term Buy and Hold stocks. With little to no turnover and annual rebalance periodicity, the ECAP seeks to minimize capital loss by holding shares of companies whose earnings streams exhibit a proven 20+ year track record of surviving recessionary periods with minimal impact on aggregate earnings growth relative to the overall S&P 500.The ECAP and many other model portfolios are available as part of Zacks Advisor Tools, a cloud-based solution to access Zacks award-winning stock, mutual fund and ETF research. Click here to schedule a demo.Zacks ECDP Stocks Amgen, Quest Diagnostics Outperform PeersAmgen Inc. AMGN, which is part of our Earnings Certain Dividend Portfolio (ECDP), has returned 22.4% over the past 12 weeks. Another ECDP stock, Quest Diagnostics Incorporated DGX, has climbed 19.8% over the same time frame. Of course, the inclination of investors toward quality dividend stocks to secure an income stream amid the heightened market volatility contributed to this performance.Check Amgen’s dividend history here>>>Check Quest Diagnostics’ dividend history here>>>With an extremely low Beta and a history of minimum earnings variability over the last 20+ years, this 25-stock portfolio helps significantly mitigate risk. The ECDP has consistently outperformed the S&P 500 Dividend Aristocrats ETF NOBL.Click here to access this portfolio on Zacks Advisor Tools.   Zacks Top 10 Stocks for 2023 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2023? From inception in 2012 through November, the Zacks Top 10 Stocks portfolio has tripled the market, gaining an impressive +884.5% versus the S&P 500’s +287.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.Be First to New Top 10 Stocks >>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 The Boeing Company (BA): Free Stock Analysis Report Amgen Inc. (AMGN): Free Stock Analysis Report Quest Diagnostics Incorporated (DGX): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Tractor Supply Company (TSCO): Free Stock Analysis Report Monster Beverage Corporation (MNST): Free Stock Analysis Report ProShares S&P 500 Dividend Aristocrats ETF (NOBL): ETF Research Reports FS Bancorp, Inc. (FSBW): Free Stock Analysis Report The Bank of Princeton (BPRN): Free Stock Analysis Report Nordea Bank AB (NRDBY): Free Stock Analysis Report Taboola.com Ltd. (TBLA): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksDec 12th, 2022

Stock Market News for Dec 9, 2022

Wall Street closed higher on Thursday, its first winning day of the week. Wall Street closed higher on Thursday, its first winning day of the week. Investor mood improved on jobless claims coming in higher, on expected lines, thereby acting as an indicator for the Fed to infer that its policies were showing results. All three major indexes ended in the green.How Did the Benchmarks Perform?The Dow Jones Industrial Average (DJI) rose 0.6% or 183.56 points to close at 33,781.48 points. Twenty-two components of the 30-stock index ended in positive territory, while eight ended in negative.The S&P 500 gained 0.8% or 29.59 points to close at 3,963.51 points. Nine of the 11 broad sectors of the benchmark index ended in positive territory. The Technology Select Sector SPDR (XLK), the Consumer Discretionary Select Sector SPDR (XLY) and the Health Care Select Sector SPDR (XLV) increased 1.6%, 1% and 0.9%, respectively, while the Energy Select Sector SPDR (XLE) declined 0.5%.The tech-heavy Nasdaq added 1.1% or 123.45 points to finish at 11,082.00 points.The fear-gauge CBOE Volatility Index (VIX) decreased 1.7% to 22.29. A total of 10.1 billion shares were traded on Thursday, lower than the last 20-session average of 10.9 billion. The S&P 500 recorded 15 new 52-week highs and three new lows, while the Nasdaq posted 82 new highs and 232 new lows.Jobless Claims Report Sparks a Relief RallyWall Street is currently in a “bad news is good news” territory. Recent sessions have been dominated either by the apprehension of an economic downturn arising out of continued monetary policy tightening or economic indicators suggesting that the Fed might already be convinced that its measures have started taking effect and would go slow in its pace of rate hikes. Wednesday’s trade was boosted by the latter, with jobless claims for the week coming in high.The Labor Department said on Thursday that initial jobless claims rose to 230,000, increasing by 4,000 for the week ending Dec 3, from the previous week's revised level. The previous week's level was revised up by 1,000 from 225,000 to 226,000. The four-week moving average increased to 230,000, marking a rise of 1,000 from the previous week’s revised average. The previous week's average was revised up by 250 from 228,750 to 229,000.Continuing claims came in at 1,671,000 for the week ending Nov 26, increasing 62,000 from the previous week’s revised level. The previous week's numbers were revised up by 1,000 from 1,608,000 to 1,609,000. The four-week moving average came in at 1,582,250, an increase of 43,250 from the previous week's revised average. The previous week's average was revised up by 250 from 1,538,750 to 1,539,000.These job numbers come in as a counter to last Friday’s labor market report, which had shown employers hiring more workers and wage had increased. Usually, strong economic data is good news for the market. However, such are times that investors cheered seeing an increased number of Americans filing claims for jobless benefits last week and unemployment rolls hitting a 10-month high toward the end of November.The general consensus is that this might again push the Fed into contemplating that its measures have actually started taking effect and it would turn more dovish, thereby bringing down treasury yields and attaining a soft-landing of the economy. Currently, bets are on the central bank raising rates by 50 basis points at its Dec 13-14 policy meeting. But these jobs numbers certainly did enough on the day to send the market into a relief rally in a week which is likely to end in losses, that too well into the holiday season. The biggest gainers on the day were technology and consumer discretionary stocks.Consequently, shares of Hyatt Hotels Corporation H and Amazon.com, Inc. AMZN rose 1.8% and 2.1%, respectively. Hyatt Hotels carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>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 Amazon.com, Inc. (AMZN): Free Stock Analysis Report Hyatt Hotels Corporation (H): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksDec 9th, 2022

Stock Market News for Dec 5, 2022

Wall Street closed modestly lower on Friday. Wall Street closed modestly lower on Friday. Nonfarm employment numbers showed that jobs had risen much higher than expected in November, raising concerns that this might stop the Fed from going slow on its policy tightening measures. Treasury yields remained virtually flat. All three major indexes ended slightly in the red.How Did The Benchmarks Perform?The Dow Jones Industrial Average (DJI) rose 0.1% or 34.87 points to end at 34,429.88 points. Seventeen components of the 30-stock index ended in the positive territory, while 12 ended in the negative.The S&P 500 lost 0.1% or 4.87 points to close at 4,071.70 points. Six of the 11 broad sectors of the benchmark index ended in negative territory. The Energy Select Sector SPDR (XLE), the Technology Select Sector SPDR (XLK) and the Real Estate Select Sector SPDR (XLRE) decreased 0.6%, 0.6% and 0.5%, respectively, while the Materials Select Sector SPDR (XLB) gained 1.1%.The tech-heavy Nasdaq dropped 0.2% or 20.95 points to finish at 11,461.50 points.The fear-gauge CBOE Volatility Index (VIX) decreased 3.9% to 19.06. Advancers outnumbered decliners on the NYSE by a 1.15-to-1 ratio. On Nasdaq, a 1.35-to-1 ratio favored the advancers. The S&P 500 posted 20 new 52-week highs.Nonfarm Payrolls Weigh In On The MarketTimes are such that what may be good for the jobs market may not necessarily be encouraging news for Wall Street. In recent weeks, the market has been singularly driven in the hope that the Fed would be looking to slow down its steep pace of interest rate hikes, having seen its policies take effect in reducing demand, thereby lending some breathing space to stock trading.With the holiday season commencing with Thanksgiving, market participants have hoped that the central bank would at least reduce to a 50 bps hike in its December meet, as opposed to the string of 75 bps hikes it has unleashed in its bid to tackle inflation. Confidence has risen in that respect as various Fed officials, including Fed Chair Jerome Powell have hinted that indeed they are looking to do so.However, a much higher-than-expected nonfarm employment report for November, released on Friday, dented that confidence somewhat. The Bureau of Labor Statistics reported that total nonfarm payroll employment increased by 263,000 in November, roughly in line with the average growth over the past three months. This has decimated the consensus estimate of 200,000 job additions for the period. For October, the numbers were revised upward to 284,000 from the 261,000 reported earlier. There were notable job gains in the leisure and hospitality, health care, and government sectors.Investors are apprehensive that upon seeing these numbers, the Fed might infer that it has not done enough to dampen market demand. Otherwise, the labor market should not be booming. And this might push the central bank to pivot on its recent soft stance and turn hawkish again.Indeed, the possibility of yet another 75 bps hike in December has become a talking point after the numbers were released. The market gave up some of its gains made earlier when Jerome Powell’s positive remarks had emerged, and the S&P 500 closed slightly lower for the week.The yield on the U.S. two-year Treasury note, which is sensitive to interest rate expectations, rose 0.02 percentage points to 4.27% as stock prices fell. The 10-year treasury note closed virtually flat.Consequently, shares of PayPal Holdings, Inc. PYPL and Salesforce, Inc. CRM slid 4.9% and 1.7%, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.Economic DataThe Labor Department said on Friday that the unemployment rate remained unchanged for November at 3.7%, in line with expectations.Average Hourly Earnings increased by 0.6% for November, while the increase for October was revised up to 0.5% from the previously reported 4%.Average Workweek decreased to 34.5 against the 34.4 reported in October.Weekly RoundupThe three most widely followed indexes closed a second straight winning week for the first time since October. The Dow Jones Industrial Average, the S&P 500 and the tech-heavy Nasdaq gained 0.2%, 1.1% and 2.1%, respectively. Stocks did well earlier in the week on Fed Chair Jerome Powell’s comment in which he strongly signaled that the central bank would be slowing down its rate hikes. As the week drew to a close, a hotter-than-expected labor report wiped away some of the gains, sparking a debate on whether the numbers would push the Fed into raising rates yet again by 75 bps in its December meeting.  Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>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 Salesforce Inc. (CRM): Free Stock Analysis Report PayPal Holdings, Inc. (PYPL): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksDec 5th, 2022

Transcript: Boaz Weinstein (Live!)

     The transcript from this week’s, MiB: NAME, TITLE, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters in Business with Barry… Read More The post Transcript: Boaz Weinstein (Live!) appeared first on The Big Picture.      The transcript from this week’s, MiB: NAME, TITLE, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I have an extra special guest and a funny story about how this podcast came about. I interviewed Boaz Weinstein back in May of 2022. It was one of the most popular podcasts we did this year. And when the folks over at the Bloomberg Invest Conference came to me and said, “Hey, we’re looking for somebody who’s a little out-of-the-box thinker and kind of interesting, who might you suggest as an interviewee?” That was easy, I said, “We just did this interview with Boaz six months ago. Everybody seemed to really like it. He’s very much an outside-the-box thinker, covers everything from credit derivatives to SPACs, to stocks and bonds, but from an unusual perspective, not your typical investor.” For example, he’s been an investor in SPACs because he looks at it as a guaranteed fixed income return in a time of zero, with potential upside. So he’s done that really, really successfully. He’s one of the five largest SPAC investors in the world. In case you don’t know who Boaz Weinstein is of Saba capital, he’s the person who made the bet against the London Whale, and then went to JPMorgan Chase and presented at one of their conferences and said, “By the way, you guys, you have this person in London that’s sucking up all of the energy options. It’s a wildly lopsided bet and it’s going to blow up. Oh, and PS, I’ve bet against him.” And lo and behold, when the London Whale blows up six months later, Saba Capital nets $300 million or $400 million on the trade. Just an amazing story and incredible ability to look at risk and figure out when it’s a fair bet, or when it’s an asymmetrical bet, where, hey, if we lose, we lose a little bit. But if we win, it’s a giant homerun. So he’s really an intriguing person. We did the interview at the Bloomberg Invest Conference. So when you hear the audio of this, it’s a live event. You’ll hear the audience. You’ll hear people rustling papers. It’s not the usual, hey, we’re in a studio that’s pristine and you don’t hear anything other than the two of us speaking and breathing. So this was a live event. But it was so well received, and it was so interesting. And he just is such a fascinating investor, we thought it would be perfect for the holiday weekend. So with no further ado, here is my live interview with Saba Capital’s Boaz Weinstein at the Bloomberg Invest Live Conference. So this is the first time I’m wearing a suit and tie, and I don’t know how long. And I’m glad– BOAZ WEINSTEIN, CHIEF INVESTMENT OFFICER, SABA CAPITAL MANAGEMENT LP: He didn’t tell me about the tie. Sorry, guys. RITHOLTZ: So we previously had a conversation. Was it early this year? Last year? I can’t even tell anymore. And there were a lot of really interesting things that came up. I think this audience would love to hear an update on what’s happened since then. But I have to start by asking, you were a highly-ranked chess player as a young kid. You have a reputation as a killer poker player and dangerous blackjack player. These involve making probabilistic assessments about an inherently unknowable future, seems like you’ve been setting yourself up for tail risk and derivatives and trading since you were a kid. WEINSTEIN: You’re giving me a lot of credit for having planned everything since I was 5. I think the only tail risk I would think then when I was 5 was pin the tail on the donkey, to be quite honest. So you know, really, I enjoy games of strategy. And it turns out that Wall Street is the ultimate puzzle and challenge and so, yeah, I’ve been working on Wall Street since I was 15. And I think, at a young age, I’ve already seen a lot. RITHOLTZ: So let’s talk about what’s going on right now. We’ve discussed and you’ve brought up how different this bear market has been from recent bear markets. What are the similarities? What are the differences? What makes 2022 so unique? WEINSTEIN: Yeah. So when you think about not only what’s happened, but even the investor behavior that it engenders, a lot of the tail events that I’ve lived through, I was trading while 9/11 happened. I was at the New York Fed the weekend that Lehman was failing. A lot of those events, not all of them, but a lot of them were bolts from the blue. COVID, you’ve kind of had a month from when people knew it’s a thing before the market started falling. But there were bolts in the blue, and if you had not done anything about it, you had plenty of air cover to say who knew this would happen? What could I have done in advance? Whereas this one has been so telegraphed, at least, the initial part of it about inflation being transitory, and then transitory and then transitory. They’re not transitory. So there was a lot of time in 2021 to get worried, and very little places to hide, to say, you know, it was not reasonable to have thought what if this 40-year bull market in bonds not only comes to an end, but does a sharp reversal. Those were things that we and other managers were talking about, where the 60/40 plans that were using Treasuries as their antidote to a sell-off, it turns out the Treasuries were the poison. And so, you know, this has been different in that respect. It’s also been different because you have so many different problems swirling around, some of them in conflict with each other. So solve one at the expense of the other. And then the number of new things showing up, whether it’s, you know, maybe untoward rumors about Credit Suisse, or what’s happening in the U.K. gilt market. It just makes the number of balls in the air enormous in terms of things, known unknowns that could really cause more than a sell-off, but more like a crash. RITHOLTZ: So let’s talk about that. You’ve discussed multiple problems in multiple areas taking place at the same time. How do you distinguish between what’s a genuine risk, what’s a known risk, and what’s truly an unknown unknown? WEINSTEIN: So usually, you have your known unknown, like, something is bad, we just don’t know how bad and you can respond to it. So, you know, 9/11 happens, it’s not a good time to buy airline stocks. You know, COVID happens, it’s not a good time to buy airline stocks. ’08 happens, probably you should derisk from financials, even like the moment after it happened. And here, you just don’t know exactly what to do. So normally, for example, European investment grade trades 5 basis points lower than U.S. investment grade. Now, it trades 30 basis points higher, 25 basis points higher. Is that enough? Europe is going to have a much more severe recession, according to those that pontificate. And so whether or not you underweight or overweight, Europe is all about what do you think happens with Ukraine? Is there a chance it gets asymmetric? What can be done to mitigate? And then at the same time, you have these other theaters, whether it’s zero COVID policy in China may be extending well past the Party Congress, continuing to cause disruption in the economy. So really, what’s happened is people just feel risk all over. They felt it now for 10 months, and they’re derisking the things that are in their book. And that has led to some things that I don’t view as particularly risky, blowing out as much as things that I do view as risky, and that’s created some interesting distortions, interesting opportunities. RITHOLTZ: So let’s talk about those opportunities. What has been overly derisked? What are looking attractive after investors throw the baby out with the bathwater? WEINSTEIN: Right. So not knowing where to focus your arrows, and instead just focusing on derisking. And the comments that Jamie Dimon made about bracing for a hurricane, and another CEO said bracing for a tornado, and someone else mentioned some other weather disaster. You know, like, what did they actually mean when they do that? How do they actually brace other than like, you know, a physical brace? What are they doing? They’re a bank. They have loans. They go to their loan portfolio hedging group, and they say, “Please increase the amount of hedging.” So what does the bank do? It looks at the loans that it’s made, often to the best companies in America or in the world, and derisks where the risk is. And so we did a number of trades with banks, where they’re coming to us to say, “In the middle of all this, we want to buy protection on Coca-Cola, on Johnson & Johnson, on Home Depot, on Walmart, you know, AT&T, Verizon,” these big companies that have a lot of debt outstanding in terms of revolvers, and not relative to their balance sheet, but relative to just the quantity of debt. And so there are a bunch of names, in fact, I think everyone I mentioned, where if you look at where it is today, it’s above the worst day of COVID. So those names that are not even candidates for discussion about could they run into trouble as credits are above their worst day of COVID. Whereas the index that they sit in is only trading at two-thirds of the worst day of COVID. Why would those names be worse? Why would they be at the widest levels and the average be only at two-thirds? It’s because of this technical in the market, and I think technicals are the biggest force in the credit market now, much more than fundamentals, much more than any time in my career, where if somebody has something to do, which is to buy billions of dollars of Verizon one year or two year CDS, that’s going to move the price to levels that just doesn’t make sense from a fundamental point of view. And so what we’ve been doing is going long those names, selling that insurance to fund protection on companies with a history of blowing out, if actually there is a real recession or some other kind of crisis. And so that would be found usually in consumer finance companies, economically-sensitive company, cyclicals, steel, shipping, paper. And so we found it very interesting in the middle of this problem to be able to find attractive long/short trades because of the technical distortion. RITHOLTZ: So are you looking at the fundamentals of these equities? Are you looking at the technicals of how they’re trading? Or are you looking at the credit spreads and saying, hey, people are way too frightened beyond what they should be? WEINSTEIN: Yeah. So we probably more than most, on the credit side, do look at equities for clues. And sometimes there is one market above, faster or slower than the other. But we’re sourcing the tail protection that we provide our investors, which is one of the main things we do through the credit market. And we’ll get to that I’m sure. And we’re paying for it because there are many investors that want it paid for. They don’t want to just leave the negative carry through some of these, I view as ultra-low risk trades in Verizon or Coca-Cola. (COMMERCIAL BREAK) RITHOLTZ: So do we want to get more specific? Is it strictly an equity bet, or is it equity combined with some derivative? How are you putting together these paired trades? WEINSTEIN: So you could look at their history. And first, you could use common sense and say, is this the kind of company that could run into trouble? Is it not? And the price is not efficient compared to the past, where fundamentals were the biggest driver. We’re looking at the credit, a little bit about the fundamentals, but the fundamentals are sort of not in question on the long side. It’s really, have these served us well and investors well as tail hedges in the past? We look at ’08 and 2000, 2012 and say, is this the kind of company that regularly blows out from 100 basis points to 400 basis points? Take General Motors, for example, they defaulted in ’08, problems with the UAW behind them, they’ve still been enormously volatile as a credit, as a company, super exposed to the U.S. economy and global economy, and pressures. The credit in 2020 went from 100 to 700 back to 100. And it’s had that kind of roller coaster. And so we looked at and said, that’s a really volatile credit. And when it’s low, that’s really asymmetric. You could buy protection. And if things change, it might move out a lot. Right now, it’s at 250. It has moved out a lot more than the index. And so we’re looking at histories to give us a clue. We’re looking at forward-looking models, equity, vol, fundamentals. But what we’re, at the end, also doing and I should make sure I say this, is we’re providing liquidity to the banks that need it. And if they come and say they want to buy protection on Pepsi, or LVMH, or Nestle, that’s amazing. You’ve now given me the ammunition I needed to go and fund protection and companies that really may run into trouble. RITHOLTZ: So let’s talk a little bit about history. You mentioned ‘08 and 2020, we can also mention 2000 in the same sentence, that were fairly rapid and disorderly dislocations. Maybe 2020 might be the exception. You’ve described 2022 was sort of a slow motion implosion, and yet it’s still been very orderly. What makes this year so unusual compared to previous collapses that really seem to make a bottom and snapback pretty abruptly? WEINSTEIN: Yeah. So first, the market is still trying to figure out what it should most worry about. And so, you know, it’s like just when you think of something, maybe we’re at peak inflation past us, maybe the supply chain problems are coming down, but then you have new things. And so there’s just been this sell-off that continues to find new rationale. And then you have the Fed leaning on the market, actually. And when Powell sounded too dovish, you know, first, all of his peers came out to say, “No, no, you know, the market, we’re going to keep going.” And they’ve continued to say that, Kashkari, most recently. So you have the Fed kind of intent on showing that they mean what they say. And so they’re probably liking that the market is going down on an orderly way, even if it’s created some disorder in other markets. Look what’s happening in the U.K. And so I’m used to, and we’re all used to sell-offs that are fairly quick, that we know even ’08 was five or six months from Lehman to the lows of March ’09, where at the end of it, you can kind of wonder, is there an all clear sign? We have the Fed behind us, quantitative easing. Now, we don’t really know who the savior is because at the end of all of this, we’re still going to have quantitative tightening and shrinking the balance sheet. Whereas a lot of sell-offs were just a prelude to a bull market one or six months later, you know, this has the feeling to me, like, we’re going to be worried about some number of these things, or new things for potentially quarters and maybe even years to come. RITHOLTZ: So no capitulation yet, no flash which gives us that all clear signal. How much of that is based on truly not knowing what the Fed is going to do? Or is it we don’t know which potential problem is real and which is fake news? WEINSTEIN: These things are so hard to predict. I even want to be cautious about, you know, opining too much because it’s just such a confusing market. And there hasn’t been a single thing to say, okay, this is why 20% is not enough, it should be 40. Let’s take inflation, if you look at its forward inflation, it’s expected to come down a lot. So you could look at tomorrow’s CPI print, if it comes in a 10th or below or high, and get excited about it. But the market is still telling you inflation is not going to be the problem that it is one year from now. Now, if a few months from now, that conviction is shaken, then we’re going to have a real strong sell-off. If somehow Russia, heaven forbid, becomes more asymmetric, we’re going to have a real problem. And so we just don’t know we’re in a fog, and we should not rely on the lessons that people learned maybe incorrectly for this environment, that we’re good between ’08 and 2022, which was the Fed is your put, don’t fight the Fed, and dips should all be bought, and being short is fighting the Fed. You know, this really does not feel like that environment, in particular, because of where the central banks are versus then. RITHOLTZ: But the one lesson that should carry through sounds like continue not to fighting the Fed when the Fed reverses their position. WEINSTEIN: I’m glad you said that, Barry, because about nine years ago, I had a prospective investor in my own office. We’re long vol funds. One of our main products is long volatility. And I don’t know if he didn’t quite know that because he kind of wagged his finger at me and said, you know, he’s like, “Sonny, didn’t someone ever tell you don’t fight the Fed?” Just to be long volatility, when Mario Draghi said, “Trust me and I’ll do whatever it takes. But that psychology of don’t fight the Fed, don’t be short is, in my opinion, a lazy person’s way of saying, “Let’s always be long.” Because if that person was around today, I don’t exactly remember who he even was, to make that call back and say, “If you really believe in don’t fight the Fed,” how much of your risk did you take down when the Fed said that they really meant business and we’re going to be selling assets for years to come? And plus all of these problems that when you add up the number of problems in different theaters, I can’t think of a corollary that, you know, to me, it does feel worse in many respects than any other experience in the market I’ve had. RITHOLTZ: So you hinted at U.K. gilts and what’s going on over in London. The strength of the dollar is another factor. How do you think about those when you’re considering tail risk and volatility? WEINSTEIN: So we’re not experts in foreign exchange. But I look at the gilt market, for example, and you see like the U.K. half a percent bond of 2061. Somebody, you know, in 2021, bought a 40-year bond that was going to pay, not someone, a lot of people is going to pay half a percent a year for 40 years. And at the end of all, that the most you could possibly make was half a percent times 40, minus some inflation. And so that would be 20 points without discounting, without inflation, the thing is down 73 points. So when you think about boundary conditions, you know, and what I like to do in the derivative markets is look at boundary conditions and say, how much can I make? How much can I lose? And where is there some asymmetry? And by the way, we were not short any U.K. bonds, to be clear. But there are a lot of trades that looked like this kind of, I can only lose a little bit. But just in case, it’s not transitory, or just in case, there’s an unknown unknown that is really problematic. You might be able to make 8 to 10 or 20 times when you might have lost. And to see this move, and it may continue of higher rates, whether it’s the U.S. or Europe, where the investor loses three or four times what they could possibly make, at the end of the day, with bonds. I think it reminds me of how investors don’t really think about fixed income and equities in the way that I do, which is, you know, equities give you this unbounded upside. So it could be Tesla. It could be Faraday Future or Fisker. But you know, you’re minus 100 and you’re plus 20,000 and that’s the range. But in fixed income, often there’s so little to earn that when I see my peers talk about high yield at 5% is amazing because it used to be at 3%. I feel like, wait a second, how many defaults do we expect this year? There’s a lot of companies in that index that are going to run into trouble. So how excited can we really get just because high yield has, you know, widened by 2 percentage points. And so I think fixed income can end up effectively being an option, but people don’t look at it as an option. And I view it often as asymmetric short, and that’s one of the guiding principles of our tail hedge strategy. (COMMERCIAL BREAK) RITHOLTZ: So let’s talk about another credit-related issue. A couple of weekends ago, people were talking about the widening credit defaults on Credit Suisse. And surprisingly, you came out and said, “Everybody, catch your breath. Credit Suisse isn’t Lehman Brothers. Just look at various ratios.” What made that so attractive to shorts and what led you to the conclusion that Credit Suisse was more or less okay? WEINSTEIN: Yeah. I didn’t start out thinking I want to say something public. I basically have zero Twitter followers before this. Then all of a sudden, you know, it became a thing. I noticed that people with hundreds of thousands of followers were saying Credit Suisse spreads are out there decade high. It’s an imminent default according to secret sources. And when you see like people with 100 followers saying that’s fine. But, you know, kind of at the same time, you could almost read that it was the same person sending it from accounts or team with hundreds of thousands of followers, that this sounds like scare-mongering. It sounds like someone is trying to make something about it. And well, what do I know? I know that this quote, it’s a decade high, you know, can be used as fake news to say, therefore, it’s going to default. But if you look at the spread at the time the five-year credit spread of CS was 2.5%. Now, if it defaulted back to our boundary conditions, it could go to zero, it could go to 50. You’d be like 2.5 to lose or make, to make or lose 50 to 100. It’s still priced like 25 to 1, right? And– RITHOLTZ: Low probability. WEINSTEIN: Very low probability, but it’s discussed as something that’s about to happen. And so I kind of took offense to it. I am supposed to know a thing or two about CDS. So I wrote a little bit about it, and then I posted, “Coca-Cola, by the way, also a decade high, better stock up on Coca-Cola.” And you know, articles come out saying that I was saying Coca-Cola may go to business, which, you know, reminded me about sarcasm and how it doesn’t naturally translate to at least some of the users. But this point of, you know, some things that a decade widest level, therefore crisis, I took offense to it. And I don’t have any special connection to Credit Suisse, but I felt like weighing in. RITHOLTZ: And so far, Credit Suisse is still hanging around, right, has yet to default. WEINSTEIN: I did get some very nice messages from the fine folks at Credit Suisse. So, yeah. RITHOLTZ: So since we’re talking about tail risks, let’s talk a little bit about that and hedges. Why have equity puts or VIX calls so disappointed this year as insurance? WEINSTEIN: Oh, that’s a brutal question, actually. Because there are people, you know, it’s like if you say, look, I didn’t study hard for the test. I didn’t do well on the test. Okay, mom, dad, whatever, study harder. But when you study hard and you say, I’m going to be prudent. I’m going to buy tail protection. I was there, I was there in January to buy it. And then it doesn’t work. It’s like, you know, tail hedges have to be reliable because they serve a greater purpose. It’s not just how did this manager do unto themselves? It’s, “I was counting on this tail hedge to do me some great service in my portfolio.” And I think the really interesting thing is that the VIX is cited all the time as the barometer of fear. Well, so I remember and probably many of you remember that in the period, let’s say, 2012 to 2019, we even talked about there was a single digit day for the VIX. It went below 10. It was often between 10 and 12 in good times. But something happened after 2020 which is, you know, we had COVID. And that enormous volatility, it actually destroyed the people picking up nickels in front of the steamroller, aka the short volatility crowd. They were no longer there after March 2020. And then came a new breed of investor that love to buy options, whether it was options on meme stocks, and you saw the volatilities go nuts there. SoftBank set up unit to buy options on short, you know, in tech stocks. And culturally, I think in this country, on the investing side, things became fast. Think about, you know, when someone, when your friend, because it wasn’t me, would tell you that some NFT went up by 10x. And you’d say 10x, I would like 1x in five years. I’d be really excited about that. And everything became fast, and options are way to get there fast. So the long-winded way to say when we came into 2022, the VIX, by prior measures, was already at a 4 alarm fire. We were at like 22 to 28 on the VIX, and that kind of number would have been a bear market, the prior decade. But we were at the peak for the S&P. So tail protection through equity options was incredibly expensive and it has served investors very poorly. Whereas credit spreads came into the year near the lows that they were pre-COVID. They’ve widened and they’ve done their job, even if there’s still a lot of widening potentially to come. RITHOLTZ: So let’s dive a little deeper into that. So the end of 2021, peak bull market and the VIX very, very high. So how are investors supposed to put two and two together? What did that signify? WEINSTEIN: It meant that if you said I’m going to spend a certain amount of premium, like you think about with your car insurance or home insurance and say, I have this much premium, I’m going to buy a put, struck 5% out of the money or 10% on the money. If I’m right, if this insurance was good to buy, what kind of payoff profile would I get? And you were getting nothing like you would get not just pre-COVID, but, you know, over the past let’s say 20 years, you were getting pretty miserable payouts for a bull market. When times are rough and vol is high, you understand why you have to pay a lot. But coming into this year, vol was stubbornly high, and so equity options were extremely expensive. We did a webinar for our clients, where we showed that basically across assets, a bank, Bank of America put out some neat research that had the S&P and the Nasdaq as literally out of 50 assets, the two worst you could get interesting payouts from. And so those things are not necessarily undecipherable. But credit in every sell-off, credit has blown out, whether it’s the credit crisis, of course, but even the flash crash. I remember being surprised that the flash, I was trading during the flash crash, May 2010, maybe I’ll get the date wrong by a little bit. And credit spreads, because of a glitch in the New York Stock Exchange, moved that day almost as much as they did the day of 9/11. So credit is an option. This low spread thing can move a lot. You can get an option like payout being short, or be exposed to the loss being long. And it is, in my view, a much more reliable tail hedge that’s been backed up in academic research. And it also stands to reason that, you know, credit as an option, whether you look at an emerging model, or you just think about, I’m taking this little spread in return for exposing myself to a wider credit spread environment or defaults. And this is why I feel very fortunate that my sandbox where I grew up in the credit sort of market, you know, is a really viable forum for tail hedging. RITHOLTZ: So I have the last question before we go to audience questions in the last few minutes. Given where we are, how wide have credit spreads gone? And if the put side wasn’t attractive on equities at the top in the market, how does the call side look on equities today? WEINSTEIN: So credit spreads today are like in absolute terms, they’re slightly elevated. Like, let’s say it this way. Remember December 2018, Trump and Xi were having a skirmish. The Fed was, you know, was being tough on the market, while growth was faltering. That seems like a walk in the park compared to now. And credit spreads then were roughly the same as they are today. So maybe they shouldn’t have been that wide then, or maybe they’re too low now. But spreads now are elevated, but in my view, nowhere near what the risks, the hidden risks and observed risks are in the marketplace now. In terms of call options, you know, there’s moments where credit falls enough that it isn’t asymmetric, that it’s symmetric, or it looks like if you locked it away in a box, you’re going to get a high return compared to defaults. We’re not near that yet. And I still believe equities are much more attractive long, even though there’s going to be this sort of technical of people looking with loving eyes at a, you know, 5% yield or 6% yield. And you can find in some investment grade corporates, 7% or 8% yields if you go out far enough from the curve. And so there will be probably some people saying I want the certainty of that yield. But that also comes with plenty of interest rate risk. RITHOLTZ: Yeah, to say the very least. All right, a couple of questions from the audience, starting with, where do you see the largest realignments of capital coming in the next 5 to 10 years? I don’t know if that’s really your sort of question. But– WEINSTEIN: I don’t even know what’s going to happen in the next five months, so five years, with respect, I really don’t know. But what I do believe is that the QT world, when all this is behind us, there’s still a giant balance sheet. There’s a headwind to the market. It’s going to be really brutal for investors that have survived the QT. RITHOLTZ: Meaning $4 trillion in Fed assets that have to come off the balance sheet? WEINSTEIN: Just in the U.S., and maybe they’ll go slow or less low. But I think this is going to be a period of much higher volatility than the last decade was. RITHOLTZ: So future volatility is going to increase; whereas it was modest, but not low over the past decade? WEINSTEIN: Yeah. There were punctuated moments, but there was a long period of very low volatility. And it seems like that may be behind us because even if some of the problems go away, you still have the undoing of QE, which is more than just no QE, it’s the opposite of QE is I think a really underrated continuous headwind. RITHOLTZ: And final question and I’m going to modify this, given where 10-year Treasury yields are today, what does that mean for future GDP growth? What does that mean for the possibility of a recession, either mild or more significant? WEINSTEIN: So, you know, until March, there really weren’t any banks calling for a recession as the most likely case. It was around then, maybe one or two banks. Obviously, Larry Summers and others did speak out. I think that these kinds of forecasts are really folly. Literally, we’re standing in a thick fog, trying to like play tennis and we can’t even see the ball. And by the way, that’s a great question you asked. But, like, when people answer it, I kind of shutter, so I’m going to try to not shutter on myself and say who knows, but what I know is that we should be aware that this is not the market we were in. And still, I can feel this thinking of, you know, as soon as CPI misses, as soon as we come in at 7 something, okay, it’s going to be off to the races with the market. Firstly, I think it’s a sell the rally market because people are not yet accustomed to all of the issues hanging over us. And anyway, that’s my two cents. RITHOLTZ: Thank you, Boaz, for being so generous with your time. We have been speaking with Boaz Weinstein, founder of Saba Capital. If you enjoy this conversation, well, be sure and check out any of the 400 previous ones we’ve done over the past eight years. You can find those at iTunes, Spotify, wherever you find your favorite podcasts. We love your comments, feedback and suggestions. Write to us at mibpodcast@bloomberg.net. Follow me on Twitter @ritholtz. Check out my daily reads at ritholtz.com I would be remiss if I did not thank the crack team that helps put these conversations together each week. Mohamad Rimawi is my audio engineer. Sean Russo is my head of Research. Paris Wald is our producer. Atika Valbrun is our project manager. I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio. END   ~~~   The post Transcript: Boaz Weinstein (Live!) appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureNov 29th, 2022

Stock Market News for Nov 25, 2022

Wall Street ended higher for the second-straight session on Wednesday as the minutes from the Fed's policy meeting showed that the policymakers are expecting to hand out smaller rate hikes in the coming months as inflation shows signs of cooling off. Wall Street ended higher for the second-straight session on Wednesday as the minutes from the Fed’s policy meeting showed that the policymakers are expecting to hand out smaller rate hikes in the coming months as inflation shows signs of cooling off. All three major indexes ended in positive territory. U.S. stock markets were closed on Thursday for the Thanksgiving holiday.How Did The Benchmarks Perform?The Dow Jones Industrial Average (DJI) rose 0.3% or 95.96 points to close at 34,194.06 points.The S&P 500 climbed 0.6% or 23.68 points to finish at 4,027.26 points. Consumer discretionary, communication services and utilities stocks were the biggest gainers.The Consumer Discretionary Select Sector SPDR (XLY) rose 1.4%, while the Communication Services Select Sector SPDR (XLC) gained 1.3%. The Utilities Select Sector SPDR (XLU) added 1.1%. Ten of the 11 sectors of the benchmark index ended in positive territory.The tech-heavy Nasdaq gained 1% or 110.91 points to end at 11,285.32 points.The fear-gauge CBOE Volatility Index (VIX) was down 4.42% to 20.35. Advancers outnumbered decliners on the NYSE by a 1.97-to-1 ratio. On Nasdaq, a 1.61-to-1 ratio favored advancing issues. A total of 9.25 billion shares were traded on Wednesday, lower than the last 20-session average of 11.6 billion.Hint of Slower Rate HikesMarkets closed higher on Tuesday after investors shed fears of further economic slowdown owing to China tightening its COVID policies following a surge in new cases, and focus on a batch of earnings from some big retailers.The upbeat sentiment continued into Wednesday and got a further boost after the minutes from Fed’s November meeting showed that the majority of the policymakers agreed that it would be appropriate to go for slower interest rate hikes in the coming months, as inflation showed signs of cooling off.This means the Fed could go for a lower rate hike in December and into 2023. However, Fed officials are still unsure how high the benchmark rate would rise to control the multi-year high inflation.The Fed hiked interest rates by 75 basis points in November for the fourth consecutive time this year, bringing rates to their highest point since 2008. However, with inflation cooling, economists now are expecting a 50-basis point hike in December.Following the release of the minutes of the Fed’s meeting, treasury yields fell. The 10-year Treasury yield fell to 3.708%, while the 2-year Treasury yield fell 3.6 basis points to 4.481%.A decline in treasury yields sent growth stocks on a rally. Shares of Netflix, Inc. NFLX gained 1.7%, while Microsoft Corporation MSFT advanced 1%. Netflix carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.Consumer discretionary stocks also gained on Wednesday. Shares of Carnival Corporation & plc CCL jumped 2.8%, while Royal Caribbean Cruises Ltd. RCL gained 0.7%.Economic DataA lot of economic data was released on Wednesday ahead of the Thanksgiving Day holiday. The University of Michigan’s final reading of the consumer sentiment index saw a decline in November. Consumer sentiment fell to 56.8 in November.The Commerce Department said U.S. new home sales increased 7.5% to a seasonally adjusted annual rate of 632,000 in October from 588,000 in September.Durable goods orders unexpectedly rose 1% in October, beating expectations of a rise of 0.4%.In other economic data released on Wednesday, the Labor Department reported that jobless claims totaled 240,000 for the week ending Nov 19, increasing 17,000 from the previous week’s revised level of 223,000. The four-week moving average decreased to 226,750, an increase of 5,500 from the previous week’s revised average of 221,250.Continuing claims came in at 1,551,000, an increase of 48,000 from the previous week’s revised level of 1,503,000. The 4-week moving average was 1,509,750 an increase of 28,250 from the previous week's unrevised average of 1,481,500. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>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 Microsoft Corporation (MSFT): Free Stock Analysis Report Carnival Corporation (CCL): Free Stock Analysis Report Netflix, Inc. (NFLX): Free Stock Analysis Report Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksNov 25th, 2022

Stock Market News for Nov 23, 2022

U.S. stocks closed higher on Tuesday as investors looked past the tight COVID-19 restrictions being imposed in China and focused on a batch of earnings reports while they await Wednesday's minutes from the Fed's last policy meeting. U.S. stocks closed higher on Tuesday as investors looked past the tight COVID-19 restrictions being imposed in China and focused on a batch of earnings reports while they await Wednesday’s minutes from the Fed’s last policy meeting. All three major indexes ended in positive territory.How Did The Benchmarks Perform?The Dow Jones Industrial Average (DJI) climbed 1.2% or 397.82 points to end at 34,098.10 points.The S&P 500 advanced 1.4% or 53.64 points to close at 4,003.58 points. Energy, materials and tech stocks were the biggest gainers.The Materials Select Sector SPDR (XLB) gained 2.3%, while the Energy Select Sector SPDR (XLE) advanced 3.1%. The Technology Select Sector SPDR (XLK) climbed 1.9%. All 11 sectors of the benchmark index ended in positive territory.The tech-heavy Nasdaq gained 1.4% or 149.89 points to finish at 11,174.40 points.The fear-gauge CBOE Volatility Index (VIX) was down 4.79% to 21.29. Advancers outnumbered decliners on the NYSE by a 3.40-to-1 ratio. On Nasdaq, a 1.56-to-1 ratio favored advancing issues. A total of 9.45 billion shares were traded on Tuesday, lower than the last 20-session average of 11.75 billion.Investors Shift Focus from China’s Covid SituationInvestors have been worrying about the surge in fresh COVID-19 cases in China that has led Beijing to tighten restrictions. Also, China reported its first death from the mainland since May over the weekend, which raised fears among investors that leading stocks to end lower on Monday.However, investors looked past the tightening Covid policy in China and focused on a batch of mixed earnings from big retailers. China started loosening its COVID restrictions only last week when reports of a surge in fresh cases made investors concerned.It’s a holiday-shortened week and trading volume is low traditionally. However, markets managed to finish in the green in thin trade, with the S&P 500 recording its best day in more than two months.The earnings season is nearing its end, with the last batch of retailers reporting their quarterly results. On Wednesday Best Buy Co., Inc. BBY reported impressive earnings results. Best Buy reported third-quarter 2022 earnings of $1.38 per share, beating the Zacks Consensus Estimate of $1.03 per share. Shares of Best Buy soared 12.8%. Best Buy carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.Also, Dollar Tree, Inc. DLTR also reported earnings beat. The company reported third-quarter earnings of $1.20 per share, surpassing the Zacks Consensus Estimate of $1.17 per share. However, the company’s shares declined 7.9% after it cut its annual profit forecast for the second time.Markets will remain closed on Thursday. No economic data was released on Tuesday. This Little-Known Semiconductor Stock Could Be Your Portfolio’s Hedge Against Inflation Everyone uses semiconductors. But only a small number of people know what they are and what they do. If you use a smartphone, computer, microwave, digital camera or refrigerator (and that’s just the tip of the iceberg), you have a need for semiconductors. That’s why their importance can’t be overstated and their disruption in the supply chain has such a global effect. But every cloud has a silver lining. Shockwaves to the international supply chain from the global pandemic have unearthed a tremendous opportunity for investors. And today, Zacks' leading stock strategist is revealing the one semiconductor stock that stands to gain the most in a new FREE report. It's yours at no cost and with no obligation.>>Yes, I Want to Help Protect My Portfolio During the RecessionWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Dollar Tree, Inc. (DLTR): Free Stock Analysis Report Best Buy Co., Inc. (BBY): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksNov 24th, 2022

Nomura Sees An Inflection Point In "Crash Up" Hedges, Warns "It"s The Dollar", Stupid!

Nomura Sees An Inflection Point In 'Crash Up' Hedges, Warns "It's The Dollar", Stupid! US equity markets are chopping around wildly in the last few days as Nomura's Charlie McElligott notes that risk is drifting on a mini "triple whammy" causing a modest reversal stronger in the USD (after the post-CPI puke)... 1) China’s again-devolving COVID outbreak (Beijing reported 3 COVID-related deaths, Guangzhou imposed a 5-day lockdown, Hong Kong’s CEO tested positive for COVID, and Shijiazhuang--the 11m population city profiled by the FT last week as a potential “test case” for re-opening--instituted lockdowns and mass PCR testing—h/t AK), 2) the ultimate arrival of cold European weather finally seeing first drawdowns of Gas reserves and 3) a raft of better US economic data late last week (Bloomberg US Eco Surprise Index at best levels since May) is flowing-through financial markets via suddenly-squeezing US Dollar. Bloomberg Dollar Index has now bounced more than 2% off the three month low made last week, which sits at the root of the overnight risk-asset pullback to start the holiday-shortened US trading week. Source: Bloomberg And naturally, as the Nomura strategist details, this is occurring just as the latest CFTC / TFF data shows both 1) Specs / Non Comms finally “net short” US Dollars for the first time since mid ’21... ...and 2) Asset Managers at their most “net short” US Dollars since July ’21... ...resulting in what is now the largest three session cumulative “positive” move in DXY in over three weeks, and overnight, with all G10 and Bloomberg EMFX weaker vs USD. Remember and as noted in the days which followed the lite CPI print which set off such a profilic VaR shock unwind in legacy “FCI tightening” trade expressions most clearly represented by “Long USD,” that up until then had worked all year (and, accordingly, were VERY crowded) - the Dollar’s recent blast weaker (largest 6d drawdown since 2008) was not simply about crowded “Long USD” expressions being taken-down / stopped-out…but the fundamental catalysts (as noted at the top of this article) also shifting. This “strong USD” impact is particularly evident with US Equities, where “USD Liquidity” (proxied by USD xccy basis swaps, as a measure of USD demand) shows “weak USD” as currently the largest POSITIVE macro factor price-driver for US Equities... ...meaning “strong USD” then has the opposite effect on “lower stocks”. And even more explicitly, the largest Negative Driver for S&P 500 in the Quant Insight macro factor PCA model now screens as USDCNH… where after the shock move lower in recent weeks, we’ve now seen the largest cumulative 4 session move higher in USDCNH since September, and is a “top 10” largest 4d cumulative move since 2019... So the fundamentals may be shifting in the most critical driver of equity strength, but, as McElligott notes, there is a perhaps even more important inflection point in risk attitudes appearing. After an almost 9-month-long period of pervasive bids for "Crash-Up" upside in US equities (versus any fear of a "Crash-Down") - as investors were strictly concerned about missing rallies as opposed to further selloffs, because they were so egregriously under-positioned... And the grab for "Crash-Up" hedges prompted November's 2nd largest daily average S&P 500 gain (following October's explosion)... McElligott notes that something just changed... After the short-squeeze, SPX Index Options “Call Skew” has come off the boil... ...as we got the impulse +12% rally in Nasdaq and +8% rally in SPX in mere days post CPI miss... ...while we have FINALLY seen SPX Skew & Put Skew pick-up off historic “flats” (steepened 5 out of 6 days), which McElligott suggests is because as clients finally began getting longer again for the first time in months, they actually had some need to hedge underlying exposures again! That said, in the sense that I think now after Thanksgiving that the fiscal year is effectively “over” for most as far as being able to deploy new risk, and after this latest rally was sooooo much about de-grossing of “Shorts”... McElligott suggests that we can see “Skew” staying broken until the turn into 2023...and accordingly, we’ve seen VVIX trade back down near 5 year lows by end of last week, as “Vol of Vol” remains just absolutely “dead in the water”. Given all of this, SpotGamma continues to like holding some downside “lotto tickets” given the dynamics of: Put Wall staged significantly below current prices – indicates lack of hedges IV/SKEW continuing to be very flat – indicates lack of hedges “Medium term” IV should hold a bid due to 12/14 FOMC DEC OPEX positioning could act as a catalyst to drive downside volatility This week we look for strong support at 3900 given that traders will likely not want to carry puts over Thanksgiving, and we have smaller near term options positions. Beneath 3900 we look for volatility to tick substantially higher, as we believe traders will need to add downside put protection. Tyler Durden Mon, 11/21/2022 - 10:48.....»»

Category: dealsSource: nytNov 21st, 2022

Stock Market News for Nov 17, 2022

Wall Street closed lower on Wednesday in a choppy session. Wall Street closed lower on Wednesday in a choppy session. Declining retail and semiconductor stocks weighed down on the market. Positive comments from a Fed official with a hawkish reputation indicated the central bank might be considering going slow on policy tightening. All three major indexes ended in negative territory.How Did The Benchmarks Perform?The Dow Jones Industrial Average (DJI) fell 0.1% or 39.09 points to end at 33,553.83 points. Sixteen components of the 30-stock index ended in the negative territory, while 14 ended in the positive.The S&P 500 lost 0.8% or 32.94 points to close at 3,958.79 points. Nine of the 11 broad sectors of the benchmark index ended in negative territory. The Energy Select Sector SPDR (XLE), the Consumer Discretionary Select Sector SPDR (XLY) and the Technology Select Sector SPDR (XLK) decreased 2%, 1.5% and 1.4%, respectively, while the Utilities Select Sector SPDR (XLU) gained 0.9%.The tech-heavy Nasdaq declined 1.5% or 174.75 points to finish at 11,183.66 points.The fear-gauge CBOE Volatility Index (VIX) decreased 1.8% to 24.11. A total of 10.5 billion shares were traded on Wednesday, lower than the last 20-session average of 12.2 billion. Decliners outnumbered advancers on the NYSE by a 1.96-to-1 ratio. On Nasdaq, a 2.23-to-1 ratio favored the decliners.Target Corporation’s Sales Outlook Dampens MoodTarget Corporation TGT forecast a gloomy holiday-quarter sales outlook on Wednesday, citing rising inflation and a decrease in consumer spending as the main reasons. Without disclosing specific details, the company said it would launch a cost-cut plan to save $2 billion to $3 billion over the next three years.According to CEO Brian Cornell, an early start to holiday season promotions and consumers waiting for steeper discounts cut the big-box retailer’s third-quarter profit by half. "Clearly it's an environment where consumers have been stressed," Cornell said. The general feeling was that consumers were giving up discretionary purchases to focus on essentials.Target expects fourth-quarter sales to fall in the range of a low single-digit percentage and its operating margin to about 3%. It cited big holiday discounts and rising theft and organized crime across retail stores’ as the key reasons for its outlook. The company announced third-quarter earnings per share of $1.54, widely missing the Zacks Consensus Estimate of $2.15. Its shares got plummeted by 13.1% as a result. It also had a wider bearing on the retail and consumer discretionaries sector as stocks declined on the news.Another major dampener for the day came in from semiconductor major Micron Technology, Inc. MU, which said it would reduce memory chip supply and make more cuts to its capital spending plan, as it struggles with excess inventory due to a slump in demand. Micron’s shares fell 6.7% with this announcement. On the news, The S&P 500 Technology Select Sector fell 1.4% and the Philadelphia SE Semiconductor Index sank 4.3%.Consequently, shares of Macy's, Inc. M and Texas Instruments Incorporated TXN slid 8.1% and 2.3%, respectively. Macy’s carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.Hawkish Fed Official Does An U-turnFed Governor Christopher Waller, a reputed “hawk", said on Wednesday that he is now "more comfortable" with smaller rate increases going forward. This dovish turn is in contrast to recent statements coming from Waller and reinforces the market belief that the Fed is currently on the verge of slowing down its rate of interest rate hikes. Waller, however, said he will not make a final decision about what to do at the Fed’s December policy meeting until the rest of the data between now and then is reviewed, and is still unsure of whether inflation has peaked. Nonetheless, this comes as a good sign for market participants.Economic DataAs reported by the Federal Reserve, Capacity Utilization for October decreased by 0.2 percentage points to 79.9. The September reading was revised down to 80.1.Industrial Production for October decreased by 0.1%, while the gain in September was revised down by 0.1%.The U.S. Census Bureau reported that Retail Sales for October had advanced by 1.3% against a consensus of 1.1%. In September, it had remained unchanged.Business Inventories for September were up 0.4%, adjusted for seasonal and trading day differences. The August advance was revised to 0.9%.For the week ending Nov 11, 2022, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 5.4 million barrels from the previous week. FREE Report: The Metaverse is Exploding! Don’t You Want to Cash In? Rising gas prices. The war in Ukraine. America's recession. Inflation. It's no wonder why the metaverse is so popular and growing every day. Becoming Spider Man and fighting Darth Vader is infinitely more appealing than spending over $5 per gallon at the pump. And that appeal is why the metaverse can provide such massive gains for investors. But do you know where to look? Do you know which metaverse stocks to buy and which to avoid? In a new FREE report from Zacks' leading stock specialist, we reveal how you could profit from the internet’s next evolution. Even though the popularity of the metaverse is spreading like wildfire, investors like you can still get in on the ground floor and cash in. Don't miss your chance to get your piece of this innovative $30 trillion opportunity - FREE.>>Yes, I want to know the top metaverse stocks for 2022>>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 Texas Instruments Incorporated (TXN): Free Stock Analysis Report Macy's, Inc. (M): Free Stock Analysis Report Target Corporation (TGT): Free Stock Analysis Report Micron Technology, Inc. (MU): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 17th, 2022

From Crypto Carnage To A Financial Crash?

From Crypto Carnage To A Financial Crash? Authored by Tuomas Malinen via The Epoch Times, Cryptocurrencies have been on the doldrums since the ‘Crypto Carnage’ of Spring 2021. Over the weekend, a Bahama-based crypto exchange FTX Exchange collapsed. It will probably not be the last one. Due to the massive financial speculation, induced by the credit (QE) programs of central banks, the crypto market grew into a hub of speculation. During their first global crash in spring 2021, it was rumored that some players had been engaged in speculation with leverage of 100x. That is, by borrowing 100 times the value of the underlying asset (cryptocurrency) and investing it back into the market. I have to admit that I had never heard of anything similar. In standard economic thinking, leverage of 12x was considered extreme. That “rule of thumb” was shattered in the crypto markets. Now, the situation is a bit similar but different. Leverage used in the crypto market has most likely fallen from the previous extremes, but now the ‘Ponzi schemes’ are starting to reveal themselves in the crypto markets. Some crypto exchanges seem to have used the money invested there to speculate on assets or to other suspicious activities. FTX Exchange To top of it all, the now defunct FTX Exchange released a note on Saturday stating that it had been hacked and hundreds of millions of dollars removed from its accounts. So, the situation with FTX Exchange looks like fraud. It has also been rumored to have dubious connections to the Democratic Party, but that may just be a political gimmick. The FTX logo is seen on a computer in Atlanta, Ga. on Nov.10, 2022. (Michael M. Santiago/Getty Images) I and the company I am running, GnS Economics, have warned about the instability of cryptocurrencies for some years. In a special report published in June 2021, we concluded that: “While the technology itself is promising and even “revolutionary”, its application alone does not add a tremendous amount of value. Nobody owns blockchain technology and anyone can make a new cryptocurrency, and many have done just that. While artificial scarcity is induced by design for particular cryptocurrencies, there is no limit to the potential number of different cryptocurrencies. As a result, new competing cryptocurrencies are popping up with no end in sight. Which—if any—will survive in the medium or long run?” Controlling Money When the current carnage in the crypto markets is over, and the dust settles, they are likely to face another existential threat from central banks and governments who want to control money. They may try to regulate the cryptocurrencies that survive the crash to death. Cryptocurrencies have thus, most likely, entered a battle from which only few will survive. However, I don’t consider the all-but-necessary reshuffling of the cryptocurrency scene as the main foretelling of the current crypto carnage. This is because the collapse of the crypto scene implies that speculation and leverage are being pulled from the financial system, starting from the most-speculative end, i.e., the crypto market. There are three reasons for this: monetary tightening by the central banks, approaching recession, and the coming winter in Europe. The last time central banks tried to diminish their global balance sheet, first asset and credit markets nearly crashed (in the turn of 2018/2019), and then the repurchase or repo markets imploded (September 2019). This event ended the global quantitative tightening. Now the central banks are trying to diminish their balance sheets from a much higher level. I wish them the best of luck, but I fear the worst. A figure presenting the combined balance sheet of the Bank of Japan, European Central Bank, the Federal Reserve, the Fed Funds rate, and the major market events from Jan. 2018 to Dec. 2019. (GnS Economics, BoJ, ECB, Fed) A figure of the balance sheets of the Bank of Japan, European Central Bank, the Federal Reserve, and the Peoples Bank of China in U.S. dollars. (GnS Economics, BoJ, ECB, Fed, PBoC) I have been warning about the approaching recession for months. The European Commission now expects the Eurozone to fall into recession by the year-end, and it appears recession is also finally reaching the United States. Recently, FedEx, the global logistic giant, announced it would start furloughing the workforce due to “current business conditions impacting volumes.” There probably cannot be a clearer sign of impending recession that a logistics company announcing workforce diminution during the main holiday season of the year. According to the forecasts, winter will arrive in Europe (it has been long overdue) this week. It will most likely lead to another spike in energy prices and, in the worst case, to rolling blackouts or even energy lockdowns down the line. An energy crisis is likely (it has already) hit the industrial mainland of Europe, Germany, hard and it will continue to reverberate across our continent. It is questionable will the financial sector be able to handle yet another series of shocks just three months apart. My fear is that the hit may start the next stage of the economic collapse that began already in 2020. The fact is that the global financial sector is in dire straits, which is visible when one analyzes the sources of global liquidity (credit). I will return to these issues in more detail in my following posts. In the meantime, I am urging everyone to continue preparing for the winter, which may be the darkest we have seen for a very long time. Tyler Durden Thu, 11/17/2022 - 09:25.....»»

Category: smallbizSource: nytNov 17th, 2022

"Global Gloom": World Markets Plunge To Start The Week As Global Currency Crash Hits Max Pain And Beyond

"Global Gloom": World Markets Plunge To Start The Week As Global Currency Crash Hits Max Pain And Beyond The rout which hammered stocks on Friday, nearly pushing them to close at a new 2022 low, resumed overnight when the global FX crisis returned with a bang, and a flash crash in the British pound which as noted late last night, plummeted 500pips in thin trading, to fresh record lows following Friday's shocking mini-budget announcement which confirmed the UK has no idea what it is doing and will cut rates and issue more debt just as the BOE is desperately trying to tighten financial conditions. The plunge in cable was however just one symptom of a bigger malaise, namely the relentless surge in the dollar which overnight hit fresh record highs as the BBDXY rose as high as 1,355 before briefly fading the surge... ... as every dollar-denominated debt issuer in the world is suffering crippling pain and begging Powell to do something to ease the unprecedented shock of the strongest dollar in history just as the world slumps into a global depression. Alas, so far there is nothing but silence from the Fed - which will likely have to make some announcement on central bank currency swaps at some point before the open today to avoid an even more epic FX rout - and as traders await something to break big time across global markets... This is the week of the barbell trade: deep OTM calls and puts as things either break or CBs panic. — zerohedge (@zerohedge) September 26, 2022 ... this morning futures have tumbled another 0.7%, as eminis drop to 3,683 while Nasdaq futures are down 0.8% to 11,290 on fears that Federal Reserve rate hikes to combat persistently elevated inflation will crush the economy into a full-blown recession, or depression, and the VIX soared above 32. It wasn't just FX and stocks crashing: British bonds also cratered as yields surged to the highest in more than a decade, sparking talk of emergency action by the Bank of England. For one example of the total chaos look no further than 5Y UK Gilts which have exploded 51bps higher and last traded around 4.58% as the market now prices in Similar implosions were observed in US TSYs, where the 10Y traded just shy of Friday's mini blowout, and was last seen at 3.7828% as bond traders are hit by VaR shocks at the same time in every possible market. Turning back to stocks, the rout wasn't isolated to just one market and an index of global stocks traded to the lowest since 2020. European equities extended declines after sliding into a bear market on Friday, with mining and energy stocks underperforming as metals and oil fell. “We’re in a period of global gloom, with pessimism blanketing different countries for different reasons,” said Ed Yardeni, president of his eponymous research firm, who warned of growing storm clouds for the US economy. “The latest data jibe with our growth recession scenario, but the risks of a full-blown recession are obviously increasing,” he wrote in a note Monday. In premarket trading, major US tech and internet stocks including Apple, Amazon and Microsoft tumbled. Here are some other notable premarket movers: Farfetch (FTCH US) shares fall as much as 4.43% in US premarket trading, after Citi begins coverage of the luxury online retailer with a sell rating, with broker flagging “weak” underlying profitability. Shares of US-listed Macau casinos jump in premarket trading, after Macau government said tour groups from mainland China could resume as early as November. Wynn Resorts (WYNN US) jumps 5.4%; Las Vegas Sands (LVS US) +6.9%, Melco (MLCO US) +9.6% and MGM resorts (MGM US) +1.6% Cryptocurrency-exposed stocks edged higher in premarket trading on Monday as Bitcoin rose above $19,000. Marathon Digital (MARA US) +1.9%, Coinbase (COIN US) +0.4% Keep an eye on Diana Shipping (DSX US) and Safe Bulkers (SB US) as Jefferies downgraded them to hold from buy and lowered dry bulk estimates to reflect the decline in dry bulk charter rates. European shares extended their fall to Dec. 2020 lows; sliding 1% and extending losses as investors priced a major economic shock and recession. The Stoxx 600 Index was down 1% by 10:50am in London, touching its lowest since December 2020, with real estate and banks among the worst performing sectors, while technology shares outperformed. Italy’s FTSE MIB bucked broader European declines to trade little changed, after Giorgia Meloni won a clear majority in Sunday’s election, in line with expectations. Banks and real estate stocks were the worst-performing sectors in Europe on Monday, with declines led by UK stocks as the pound and UK bonds slump. The Stoxx 600 Banks Index and the Stoxx 600 Real Estate are both down at least 2.5% while the benchmark gauge is 1.1% lower. The bank index decline is led by UK names including Virgin Money (-10%), Lloyds (-4.6%) and NatWest (-4.5%). Virgin Money was today resumed with a hold rating at Berenberg; broker said that the lender is expected to see revenue declines and a sector- lagging return on tangible equity which will affect ability to re-rate. Among real estate stocks, the UK’s Safestore Holdings (-4.2%), Assura (-3.9%) and Derwent London (-3.8%) are among the worst performers; non-index member housebuilders, including Persimmon, Bellway and Taylor Wimpey, are also plunging as the pound’s slump prompts talk of emergency action by the Bank of England. Here are the most notable movers today: The Stoxx 600 Tech Index rises as much as 2.4%, set for its biggest one-day outperformance against the broader Stoxx 600 since early-August, with semiconductor stocks leading gains. Among chip stocks, ASML rose as much as +3.7% after Santander upgraded the stock to neutral from underperform Italy’s FTSE MIB index gains, bucking weaker markets in Europe, after Giorgia Meloni won a clear majority in Sunday’s election. While the outcome was in line with expectations, the fact that the coalition didn’t obtain a super majority needed to change the constitution reassures investors. Telecom Italia rose as much +7.4%, FinecoBank +5.1%, Moncler +4.4% Unilever shares rise as much as 3.7% after it announced that CEO Alan Jope will retire from the company at the end of 2023, in a move that Jefferies analyst Martin Deboo (buy) sees as a positive development. RPS Group shares rise as much as 13% after Tetra Tech’s agreed deal to buy the company at 222p/share in cash, representing a 7.8% premium to an offer WSP made in August. Liberum does not rule out a counterbid. Belimo shares rise as much as 8.5% since the market isn’t fully pricing in its growth outlook, Berenberg says in a note, moving to buy and establishing a Street-high CHF440 target. The stock gains as much as 8.1%, the most since March 2021. Zalando shares rise as much as 4.8% after Citi analyst says they like the long-term investment story, short-term earnings risks are still high. UK Domestics: the most remarkable reaction to Friday’s not-so-mini budget, however, might be in lenders’ shares. The decline in banking stocks reflects investors’ pessimistic view on Britain’s economy. HSBC fell as much as 2.9%; Lloyds -4.3%, NatWest -4.7% and Barclays -3.0%. Virgin Money UK shares drop as much as 10% after Berenberg resumed a hold rating in note, stating that in many ways the UK small banks are “more different than they are alike.” Utilities are the day’s worst-performing European sector. Citi analyst Piotr Dzieciolowski says the EU’s funding for its policy response has so far been insufficient and also expects uncertainty to persist for UK names. United Utilities fell as much as -3.4%, Drax -3.8% Geopolitical risks from the war in Ukraine to escalating tensions over Taiwan and unrest in Iran also weighed on sentiment. Meanwhile, the OECD cut almost all growth forecasts for the Group of 20 next year while anticipating further interest-rate hikes, and a gauge of German business confidence deteriorated. Earlier in the session, a rout in Asian stocks extended into Monday as rising concerns about a global recession and weak demand hit the region’s exporters and materials producers. The MSCI Asia Pacific Index declined as much as 2.3% to the lowest since April 2020, dragged lower by TSMC, BHP and Toyota Motor. All but one sector traded lower with materials leading the slump.  South Korean stocks fell the most in the region, with the benchmark tumbling 3% to more than a two-year low. The Korean market’s heavy tech exposure has proven costly amid rising rates and a stronger dollar, with fears that a looming recession may wreak havoc on global demand. Gauges in Hong Kong and China reversed earlier gains as the region’s selloff intensified.   Korea Assets Are Asia’s Biggest Losers on Global Recession Angst “Investor sentiment is again at the stage of extreme fear,” said Lee Kyoung-Min, an analyst at Daishin Investment. “It is becoming solid and clear that Kospi and other global stock markets are on a mid-to-long term downward trend.” Asian stock benchmarks are being buffeted by global headwinds as well as risks of their own. The Federal Reserve’s relentless rate hike campaign is pushing Asian currencies lower and raising the risk of capital outflows, while China’s adherence to Covid Zero is hurting growth in the region’s economic giant.  If Monday’s losses are extended through the week, the MSCI Asia Pacific Index will see its longest run of declines since 2015. Japan stocks declined more than 2% as the nation resumed trading after a holiday on Friday. The Philippine stock market was closed Monday as Super Typhoon Noru barreled into the main Luzon island.  Among the key issues investors are watching this week are speeches by central bank officials in US and Europe, including Fed Chair Jerome Powell on Tuesday. Japanese equities tumbled as the market reopened following a three-day weekend, tracking US peers lower after the Fed’s hawkish comments last week deepened fears of a global downturn. The Topix fell 2.7% to close at 1,864.28, while the Nikkei declined 2.7% to 26,431.55. Toyota Motor contributed the most to the Topix decline, decreasing 3.2% after its monthly production update lagged expectations. Out of 2,169 stocks in the index, 145 rose and 1,985 fell, while 39 were unchanged. “There is a possibility that inflation will not subside and interest rates will rise further, which the markets will not like,” said Shoji Hirakawa, a chief global strategist at Tokai Tokyo Research. In Australia, the S&P/ASX 200 index fell 1.6% to close at 6,469.40, as energy and mining shares plummeted. An energy gauge including oil and coal linked securities declined by the most since March 2020.  The New Zealand market was closed for a holiday In India, key stocks gauges plunged to their lowest closing levels in almost two months as the global equity rout continues. The S&P BSE Sensex dropped 1.6% to 57,145.22 in Mumbai to its lowest since July 28. The NSE Nifty 50 Index fell 1.8%, its biggest single-day plunge since Sept. 16. Both the indexes, down in four of the past five weeks, have lost almost 6% since this month’s peak. Volatility in domestic equities is likely to remain elevated this week, pending monthly derivatives expiry on Thursday. Of 30 shares in the Sensex index, 24 fell and 6 advanced. All but one of the 19 sector sub-indexes compiled by BSE Ltd. declined, led by utilities and power companies.  The Indian rupee weakened to a new record against the dollar amid surging US Treasury yields. The Reserve Bank of India’s rate-setting panel will announce monetary policy later this week. As noted above, while stocks are ugly, rates are a horrorshow as Treasuries extended their worst bond slide in decades as a dollar gauge rose to yet another record. Treasuries extended losses in a bear flattening move with yields cheaper by up to 10bp across the belly of the curve. US 10-year yields around 3.78%, cheaper by 6bp on the day with 5s30s spread flatter by 5bp, dropping as low as -45.4bp in European session; UK yields cheaper by 60bp to 25bp from front- end out to long-end of the curve. The Move comes as market participants brace for accelerated policy tightening from global central banks and headlines such as this: *TRADERS PRICE IN UP TO 200BPS OF BOE RATE HIKES BY NOVEMBER Yields on 2-year gilts are 60bp cheaper heading into early US session, while the pound recovers slightly after reaching a fresh all-time low. US session focus on 2-year auction, while a barrage of Fed speakers are expected for the week. Peripheral spreads widen to Germany with 10y BTP/Bund widening 7bps to 238bps. FX, of course, is a disaster, with the Bloomberg Dollar Spot Index rising a fifth consecutive day as the greenback advanced versus most of its Group-of-10 peers. The pound plunged almost 5% to $1.0350 in Asian trading, the lowest recorded in Bloomberg data going back to 1971, while gilts crashed after the UK government vowed to press ahead with more tax cuts, stoking fears that new fiscal policies will send inflation and debt soaring, triggering emergency rate hikes. The options market signals no respite even as the pound rebounded from a record low hit during the Asia session. The yield on two- year bonds surged more than 55 basis points to 4.51%, while the 10-year yield rose 37 basis points to 4.19%. Money markets price in more than 150 basis points of rate increases by the BoE’s next policy meeting in November The euro steadied after earlier dropping to $0.9554; European bond yields rose; Italian bonds underperformed German peers. Giorgia Meloni won a clear majority in Sunday’s Italian election, setting herself up to become the country’s first female prime minister at the head of the most right-wing government since World War II. Germany’s IFO business expectations slid to 75.2 in September from 80.3 in August. That’s the lowest since April 2020. Analysts had predicted a drop to 79. An index of current conditions also fell. The Australian and New Zealand dollars pared some losses after earlier touching fresh 2-year lows. Aussie bond yields rose by up to 13bps, led by the front end The yen weakened amid a broadly stronger dollar. Bank of Japan Governor Haruhiko Kuroda said the government’s intervention in the foreign exchange market last week was appropriate given the recent volatility in the yen The currency’s rally is “untenable” for risk assets, according to a note by Morgan Stanley strategists led by Michael Wilson, while Sian Fenner, senior Asia economist for Oxford Economics, said that “It’s a king US dollar...“It’s adding to inflationary pressures and more central banks raising rates more than we have historically seen.” In commodities, WTI slides almost 1% to trade near $78/bbl. Spot gold mostly unchanged near $1,643/oz. Bitcoin climbs above $19,000. Trading this week will be punctuated by a number of economic reports including US initial jobless claims and gross-domestic-product data, along with PMI figures from China. Choppiness in price moves is likely with a steady stream of Federal Reserve officials speaking through the week. Looking at today's calendar, we get the September Dallas Fed manufacturing activity index, and the August Chicago Fed national activity index. Central bank speakers include the Fed's Bostic, Collins, Logan and Mester; ECB's Lagarde also speaks as does Nagel, Guindos, Centeno and Panetta speak, BoE's Tenreyro speaks. Market Snapshot S&P 500 futures little changed at 3,706.25 MXAP down 2.0% to 142.24 MXAPJ down 1.4% to 463.08 Nikkei down 2.7% to 26,431.55 Topix down 2.7% to 1,864.28 Hang Seng Index down 0.4% to 17,855.14 Shanghai Composite down 1.2% to 3,051.23 Sensex down 1.2% to 57,378.30 Australia S&P/ASX 200 down 1.6% to 6,469.41 Kospi down 3.0% to 2,220.94 STOXX Europe 600 down 0.2% to 389.70 German 10Y yield little changed at 2.08% Euro little changed at $0.9683 Brent Futures down 0.7% to $85.59/bbl Brent Futures down 0.7% to $85.59/bbl Gold spot up 0.1% to $1,645.98 U.S. Dollar Index little changed at 113.22 Top Overnight News from Bloomberg Chancellor of the Exchequer Kwasi Kwarteng must do more to reassure the markets about his plans for the economy after a selloff sent the pound crashing to an all-time low against the dollar, said Gerard Lyons, an external adviser to Prime Minister Liz Truss The UK’s foreign currency holdings are a fraction of the huge stockpiles built up by some of its peers, making unilateral intervention in the market to prop up the plunging pound a tall order for UK policymakers. The UK had $108 billion in foreign currency reserves at the end of August, according to data from the IMF Hedge funds ramped up bullish bets on the pound just days before the UK government’s unexpectedly large tax cuts sent the currency tumbling The ECB’s newest policy maker, Boris Vujcic, says “it’s clear that this is the right way to go,” backing this month’s 75-basis point interest-rate hike ECB Vice President Luis de Guindos said the biggest problem facing the continent’s economy is record inflation, which is becoming more broad-based, threatening investment and consumer spending ECB Governing Council member Yannis Stournaras says the central bank must maintain the main principles of gradualism and flexibility, since the problem it faces is different from the one that the US Fed faces China made it more expensive to bet against the yuan in the derivatives market, ramping up support for the currency as it slides toward the weakest level since the 2008 financial crisis A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mostly negative in a resumption of last week's global stock rout amid the continued surge in the dollar and higher yields, while there was also FX volatility which saw a flash crash in GBP/USD to a record low. ASX 200 was dragged lower amid losses in the commodity-related sectors and with sentiment dampened by the collapse of potential M&A deals involving Ramsay Health-KKR and Link Administration-Dye & Durham. Nikkei 225 underperformed with Mazda Motors among the worst hit as it considers exiting Russian operations. Hang Seng and Shanghai Comp retraced most of their initial losses with Hong Kong underpinned following the scrapping of hotel quarantine policy and with casinos boosted as Macau is to resume tour groups from China, while the property industry benefits after China Construction Bank formed a CNY 30bln housing rental fund and some Twitter sources also circulated that some China state banks were reportedly ordered to buy stocks to contain selling. Top Asian News PBoC injected CNY 42bln via 7-day reverse repos with the rate kept at 2.00% and CNY 93bln via 14-day reverse repos with the rate kept at 2.15% for a net CNY 133bln injection. There were rumours circulating on social media of a coup against Chinese President Xi, although experts and journalists in Beijing dismissed the rumours and said there was no evidence to support them, according to The Print. Philippines Stock Exchange announced a trading suspension for Monday amid a typhoon in the capital, according to Reuters. European bourses are softer after a mixed cash open and despite a brief foray higher, Euro Stoxx 50 -0.5%, as sentiment remains subdued amid recession/inflation concerns. The breakdown features modest outperformance in the FTSE MIB as Italian election results are in-line with expectations. Stateside, futures are lower across the board in-fitting with peers going into a week of Fed speak and inflation data. Top European News UK PM Truss said she is determined to make the special relationship with the US even more special and said she agreed with US President Biden that it is vital to protect the Northern Ireland Good Friday Agreement, while she wants to find a way forward with a negotiated solution with the EU, according to Reuters and a CNN interview. UK PM Truss is to review visa schemes in an attempt to ease UK labour shortages, according to FT. UK Chancellor Kwarteng hinted that more tax cuts are on the way and claimed his tax cuts “favour people right across the income scale” amid accusations they mainly help the rich, according to Evening Standard. UK Chancellor Kwarteng said he is focused on growing the economy and the longer term when asked about the market reaction to his statement on Friday. Kwarteng added that he shares ideas with BoE Governor Bailey but added that Bailey is completely independent and Kwarteng is confident the BoE is dealing with inflation, according to Reuters. UK opposition Labour Party leader Starmer said they would reintroduce the top rate of income tax at 45% which the government announced to scrap last week, while he added that they will support the government plan to lower the basic rate of income tax to 19%, according to Reuters. Italy's right-wing bloc is seen winning the national election with 43.3% and centre-left bloc is seen winning 25.4%, according to the first projection by LA7 TV based on the actual vote count.. Click here for newsquawk snap analysis. Italy's Meloni said Italians gave clear backing to a centre-right government led by the Brothers of Italy and said the situation is difficult and needs contribution from everyone. It was separately reported that Italy's Democratic Party conceded in the election and said it will be the main opposition force, while Italy's Meloni claimed leadership of the next Italian government, according to Reuters and AFP. FX DXY climbed to a fresh YTD high of 114.58 before paring modestly, but remaining firmer, as GBP in particular lifts off worst levels. Cable succumbed to a flash crash overnight, with GBP/USD hitting an all-time-low around 1.0350 as participants confidence in the economy slips. EUR suffers amid the mentioned USD move but derives relative benefit from GBP, while ECB speakers thus far have added little. Antipodeans and CAD weighed on by broader risk and commodity pressure. Japanese Finance Minister Suzuki said the government and BoJ share views on concerns about a weak JPY, while he added that FX intervention had a certain effect and there is no change to the stance that they will respond to market moves as needed, according to Reuters. PBoC set USD/CNY mid-point at 7.0298 vs exp. 7.0019 (prev. 6.9920) PBoC imposed a 20% risk reserve requirement for FX forward sales from September 28th to rein in yuan weakness. Fixed Income Gilts have retained some composure after slumping over 200ticks at the commencement of trade and have settled around halfway between intraday extremes. EGBs downbeat in sympathy while BTPs marginally lag core-EGB peers as Italian as-expected election results are digested with BTP-Bund only modestly wider as such. Stateside, USTs are pressured in-fitting with peers and also conscious of the week's supply docket getting underway via a 43bln 2yr. Central Banks Fed’s Bostic (2024 voter) said inflation is too high and that they need to do all they can to bring it down and said demand is beginning to shrink which will ultimately pay dividends in inflation levels. Bostic also stated that there are scenarios where they can avoid deep pain but there will likely be some job losses, according to Reuters. BoJ's Kuroda says the BoJ will maintain accommodative monetary conditions to support companies, hopes to support a positive economic cycle, long-term inflation expectations have begun to heighten, via Reuters. Intervention from the MoF is an "appropriate" move, does not think gov't intervention and BoJ policy are contradictory. Amamiya says the domestic economy is picking up, must carefully watch how FX moves affect the economy and prices. BoJ Governor Kuroda says when he stated that BoJ forward guidance will not change for 2-3yrs, did not refer to guidance on keeping short and long-term rates at present of lower levels via Reuters. ECB's de Guindos says Q3 and Q4 point towards growth rates being close to zero within the EZ, the scenario is market by high uncertainty, lower growth and higher inflation. ECB's Panetta says ECB is assessing the potential of distributed ledger technology (DLT) and "the extent to which it could improve our services.". Capital Economics calls for the BoE to "get on the front foot with a big rate hike". Allianz's El-Erian says, on GBP, the fall is about extra tax cuts and Chancellor Kwarteng could recalibrate this. Alternative, would be for the BoE to hike at an emergency meeting. Adding, he would hike by 100bp. BoE publishes key elements of the 2022 annual cyclical scenario stress test; includes a scenario where the Bank Rate is assumed to rise rapidly to a peak of 6% in early 2023 before gradually reduced to sub-3.5%. Commodities WTI and Brent November futures remain subdued in early European trade following last week’s recession-induced losses. Spot gold trades in tandem with the Buck and sees resistance at around USD 1,650/oz after falling to USD 1,627/oz as a casualty of the Sterling flash crash overnight. LME metals are softer across the board with 3M copper futures having a hard time reclaiming USD +7,500/t status with upside capped by the Buck. Iraq began trial operations at the Karabala oil refinery which has a production capacity of 140k bpd, according to a statement from the Oil Ministry. German Chancellor Scholz signed a strategic agreement with UAE’s President on accelerating energy security and industrial growth, while UAE’s ADNOC signed an agreement with Germany’s RWE which includes ADNOC exporting its first LNG cargo to RWE and will conduct trial shipments of low-carbon ammonia to Germany. Furthermore, Chancellor Scholz said while visiting Doha that he talked with the Emir about LNG deliveries and that they want to achieve further progress, according to Reuters. Germany is preparing a national electricity price cap to be implemented this fall in the scenario the EU falls to agree on a similar move for the entirety of the bloc, via WSJ citing officials. Vitol's CEO said at the Asia Pacific Petroleum Conference that Russian gas supply cuts put enormous strain on supply-demand in Europe and that high gas prices are to impact 60%-80% of demand, while Ecopetrol's CEO said they are increasing crude exports to Europe this year to replace Russian supplies and are drilling 600 oil wells this year. Anglo American (AAL LN) tightens copper production guidance for Chile to 560k-580k tonnes of copper (prev. 560k-600k tonnes) due to lower throughput at Los Bronces caused by a combination of water restrictions and a change in ore characteristics, via Reuters. US Event Calendar 08:30: Aug. Chicago Fed Nat Activity Index, est. 0.23, prior 0.27 10:30: Sept. Dallas Fed Manf. Activity, est. -10.0, prior -12.9 Central Banks 10:00: Boston Fed’s Susan Collins Speaks to Boston Chamber of... 12:00: Fed’s Bostic Discusses Income Inequality 12:30: Fed’s Logan Speaks at Banking Conference 16:00: Fed’s Mester Discusses Economic Outlook DB's Jim Reid concludes the overnight wrap I wonder whether any research report has ever been written whilst watching synchronised swimming? Well if not, then you’re reading the first ever as I’m getting a head start on the early morning news by starting this on Sunday evening watching my daughter Maisie do her second session after getting into the local club. Watching this sport is going to take some getting used to after years of watching football, cricket, golf, F1, athletics, rugby... actually.... virtually every sport bar synchronised swimming. I think everyone felt they were swimming in a tsunami of newsflow last week after one of the most incredible macro weeks in recent memory in terms of breadth of events. Yes there have been more extreme weeks in crises but last week had a bit more variety and was outside of a crisis period. If over 500bps of global rate hikes wasn’t enough, you also had 2yr US yields moving higher for the 12th successive day on Friday (the longest steak since data begins in 1976), the BoJ intervening in FX markets for the first time since 1998, and what can only be termed as one of the darker days for sterling assets on record on Friday after a mammoth tax giveaway in what was a mini-budget in name and not by nature. Henry and I put a note out on Friday night (link here) showing that it was the third worst day for Sterling (-3.57%) since Black Wednesday in 1992, with the worst two since being the day after the Brexit vote (-8.1%) and after the initial covid shock in 2020 (-3.71%) when there was a global flight to dollars. We also show a graph of daily Sterling moves back to 1862 and on that it was the 41st worst day in history spanning 47,000 trading days. Obviously in the long era of fixed FX rates there were the occasional big devaluations which were much bigger than Friday. This morning is Asia it fell around -4.5% at one point (1.0392) which was a record low against the Dollar. It's around -2.78% as I type. This follows a weekend interview where Chancellor Kwarteng suggested that more tax cuts were to come so that certainly was a red rag to markets. Will we hear from the upper echelons of the BoE today? Watch out for any comments, especially at the market open. DB's George Saravelos suggested on Friday that the Bank of England need to do an inter meeting hike to restore policy credibility. There’s also a graph in our note mentioned above showing that Friday was the worst day for 5yr gilts (+50.3bps) since a +200bps hike in 1985 when sterling was also slumping. So maybe omens here. I suppose the only slight mystery is the timing of the sell-off as the mini-budget in magnitude was broadly in-line with the recent elevated fiscal expectations that had been building. However perhaps it was the unabashed revival of trickle-down economics that had markets a little aghast. It goes against the current economic orthodoxy and the overall zeitgeist of our immediate times. As such there is likely to be concerns of a credibility issue. We are publishing our long-term study today with the title “How we got here, and where we’re going?”. In it we try to put the current macro woes into historical context in an attempt to work out where we’re going. There are quite a few people who have proof-read it on my team and they were all thoroughly depressed at the end. I didn't feel that way writing it but maybe it's a case of starting point perceptions. Anyway, look out for it around the European lunchtime. Overnight in Italy, the right-wing alliance led by Giorgia Meloni's Brothers of Italy party was on course to become the nation’s first woman prime minister after exit polls gave it a clear majority. With the full results due later today, she is predicted to win up to 26% of the vote ahead of her closest rival Enrico Letta from the centre left. The right wing alliance is slated to be on course for around 43% of the vote, enough for a majority if correct. As I type, the euro is extending its losses against the dollar for the fifth day, its longest streak since April 28, falling as much as -0.5% to 0.9638, albeit being overshadowed by Sterling. For this week we have an array of consumer-driven economic data in the US and some important European inflation prints. We will also get a number of consumer sentiment indicators across the key economies and PMIs from Asia. Away from the data, there are more than 30 central banker appearances across the Fed and the ECB to keep markets busy. Tomorrow also sees referendums in the Russia-annexed Ukrainian territories as the conflict goes into its eight month. Going through the data in more details now. Starting with the US, the PCE and personal income and spending data will be front and centre for markets next week as they gauge the extent of inflationary pressures and the strength of the consumer. The Fed’s preferred inflation gauge, the PCE, due Friday, will be watched for signs of price pressures we saw in last week's CPI report. Our US economists expect core PCE to edge higher by +0.5% MoM (vs +0.1% in July) which won’t allow the Fed to take the foot off the tightening pedal. For the other two data points, our team forecasts a +0.1% MoM increase for both income and consumption. Final US Q2 GDP will also be released on Thursday and although DB expect no change to the -0.6% second reading, watch out for the annual benchmark revisions back to Q1 2017. History could be re-written that could have some implications for how we all think about the economy. In other US data, we will also get the consumer confidence index on Tuesday, along with durable goods orders, and inventories data on Wednesday, with the Chicago PMI on Friday. Over in Europe, all eyes will be on September's inflation data, including the Euro Area flash CPI release on Friday. Our economists are expecting the measure to hit a record +9.5%, up from the previous record of +9.1% in August. Other data in the region will include consumer and economic sentiment from Germany, France, Italy and the Eurozone throughout the week. Meanwhile, EU energy ministers will meet again on Friday regarding the emergency intervention amid elevated energy prices. Finally, next week's earnings line up will feature a number of retail bellwethers on Thursday. Among them will be Nike, H&M and Next. Micron will report that day as well. See our usual day by day guide to the week at the end which contains many of the key Fed and ECB speakers including Powell and Lagarde. Stock markets across Asia are mostly lower this morning. The Kospi (-2.40%), Nikkei (-2.30%) and the S&P/ASX 200 (-1.40%) are leading the declines. Meanwhile, the Hang Seng (+0.11%) is swinging between gains and losses after rising by +2.45% initially with Chinese shares mixed as the Shanghai Composite (-0.10%) is trading lower while the CSI (+0.46%) is up as we go to press. Stock futures in DMs are pointing to further losses with contracts on the S&P 500 (-0.49%), NASDAQ 100 (-0.46%) and DAX (-0.33%) all moving lower. Early morning data showed that Japan’s manufacturing sector continued to expand albeit at a slower pace as the latest au Jibun Bank manufacturing PMI slipped to a 20-month low of 51.0 in September from 51.5 in August, pulled lower by high energy and raw material prices that was exacerbated by a weak yen. At the same time, the au Jibun Bank services PMI returned to expansion, recording a level of 51.9 in September from August's 49.5 final reading. Moving on to China, in order to stabilise expectations in the FX market, the People’s Bank of China (PBOC) today raised the risk reserve requirement on foreign exchange forward sales to 20% from 0% beginning September 28 as the yuan faces increasing depreciation pressure, in line with most major currencies amid broad dollar strength. Looking back now on a week that will not be forgotten anytime soon. While there were historic central bank hikes all week, the biggest news came from the fiscal authorities, following the UK’s budget Friday, which had the largest tax cut package since the 1970s. Gilt yields had their largest one-day increase in decades with 2yrs +44.7bps, 5yrs +50.3bps, and 10yrs +33.3bps. As we mentioned at the top, 5yrs yields saw their largest move since 1985 after a +200bps hike aimed at helping a plunging currency. The pound fell -3.57% against the US dollar to within a percentage point of the weakest in the post-Bretton Woods 51yr free float era. It was already a busy macro week before the blockbuster budget, where we got more than 500bps of global central bank hikes and a currency intervention from Japan. In terms of the biggest players, the Fed delivered its third consecutive 75bp hike while the BoE delivered its second 50bp hike in a row, with both banks guiding toward yet more tightening, while the BoJ remained the outlier by keeping its accommodative policy in place, which isn’t going to help the yen turnaround even with intervention. When all was said and done, sovereign bonds and equities sold off in size, while yield curves flattened. 2yr Treasuries (+33.4bps, +7.9bps Friday), 2yr Bunds (+38.5bps, +7.2bps Friday), 2yr Gilts (+82.1bps, +44.7bps Friday) reached their highest levels since 2007, 2008, and 2008, respectively, as markets priced in more tightening to overcome inflationary pressures (and in the case of the UK, fiscal expansion). 10yr Treasuries (+23.5bps, -2.9bps Friday) ended the week a touch lower on the day but hit their highest levels since 2011 during the week, while 10yr Bunds (+26.8bps, +5.9bps Friday), and 10yr Gilts (+69.1bps, +33.3bps Friday) hit their highest levels since 2013 and 2011, respectively. The mixture unsurprisingly proved unpalatable to risk assets, driving the STOXX 600 and S&P 500 back to their lows for the year. The STOXX 600 retreated -4.37% on the week and -2.34% on Friday, the worst weekly and daily return since mid-June. The S&P 500 fell -4.65% (-1.75% Friday), returning to bear market territory. The FTSE managed to stay above its YTD lows, but still fell -3.01% on the week, its worst weekly return since mid-June as well, and retreated -1.97% on Friday, the worst daily return since early July. Tyler Durden Mon, 09/26/2022 - 08:08.....»»

Category: blogSource: zerohedgeSep 26th, 2022

“Global Gloom": World Markets Plunge To Start The Week As Global Currency Crash Hits Max Pain And Beyond

“Global Gloom": World Markets Plunge To Start The Week As Global Currency Crash Hits Max Pain And Beyond The rout which hammered stocks on Friday, nearly pushing them to close at a new 2022 low, resumed overnight when the global FX crisis returned with a bang, and a flash crash in the British pound which as noted late last night, plummeted 500pips in thin trading, to fresh record lows following Friday's shocking mini-budget announcement which confirmed the UK has no idea what it is doing and will cut rates and issue more debt just as the BOE is desperately trying to tighten financial conditions. The plunge in cable was however just one symptom of a bigger malaise, namely the relentless surge in the dollar which overnight hit fresh record highs as the BBDXY rose as high as 1,355 before briefly fading the surge... ... as every dollar-denominated debt issuer in the world is suffering crippling pain and begging Powell to do something to ease the unprecedented shock of the strongest dollar in history just as the world slumps into a global depression. Alas, so far there is nothing but silence from the Fed - which will likely have to make some announcement on central bank currency swaps at some point before the open today to avoid an even more epic FX rout - and as traders await something to break big time across global markets... This is the week of the barbell trade: deep OTM calls and puts as things either break or CBs panic. — zerohedge (@zerohedge) September 26, 2022 ... this morning futures have tumbled another 0.7%, as eminis drop to 3,683 while Nasdaq futures are down 0.8% to 11,290 on fears that Federal Reserve rate hikes to combat persistently elevated inflation will crush the economy into a full-blown recession, or depression, and the VIX soared above 32. It wasn't just FX and stocks crashing: British bonds also cratered as yields surged to the highest in more than a decade, sparking talk of emergency action by the Bank of England. For one example of the total chaos look no further than 5Y UK Gilts which have exploded 51bps higher and last traded around 4.58% as the market now prices in Similar implosions were observed in US TSYs, where the 10Y traded just shy of Friday's mini blowout, and was last seen at 3.7828% as bond traders are hit by VaR shocks at the same time in every possible market. Turning back to stocks, the rout wasn't isolated to just one market and an index of global stocks traded to the lowest since 2020. European equities extended declines after sliding into a bear market on Friday, with mining and energy stocks underperforming as metals and oil fell. “We’re in a period of global gloom, with pessimism blanketing different countries for different reasons,” said Ed Yardeni, president of his eponymous research firm, who warned of growing storm clouds for the US economy. “The latest data jibe with our growth recession scenario, but the risks of a full-blown recession are obviously increasing,” he wrote in a note Monday. In premarket trading, major US tech and internet stocks including Apple, Amazon and Microsoft tumbled. Here are some other notable premarket movers: Farfetch (FTCH US) shares fall as much as 4.43% in US premarket trading, after Citi begins coverage of the luxury online retailer with a sell rating, with broker flagging “weak” underlying profitability. Shares of US-listed Macau casinos jump in premarket trading, after Macau government said tour groups from mainland China could resume as early as November. Wynn Resorts (WYNN US) jumps 5.4%; Las Vegas Sands (LVS US) +6.9%, Melco (MLCO US) +9.6% and MGM resorts (MGM US) +1.6% Cryptocurrency-exposed stocks edged higher in premarket trading on Monday as Bitcoin rose above $19,000. Marathon Digital (MARA US) +1.9%, Coinbase (COIN US) +0.4% Keep an eye on Diana Shipping (DSX US) and Safe Bulkers (SB US) as Jefferies downgraded them to hold from buy and lowered dry bulk estimates to reflect the decline in dry bulk charter rates. European shares extended their fall to Dec. 2020 lows; sliding 1% and extending losses as investors priced a major economic shock and recession. The Stoxx 600 Index was down 1% by 10:50am in London, touching its lowest since December 2020, with real estate and banks among the worst performing sectors, while technology shares outperformed. Italy’s FTSE MIB bucked broader European declines to trade little changed, after Giorgia Meloni won a clear majority in Sunday’s election, in line with expectations. Banks and real estate stocks were the worst-performing sectors in Europe on Monday, with declines led by UK stocks as the pound and UK bonds slump. The Stoxx 600 Banks Index and the Stoxx 600 Real Estate are both down at least 2.5% while the benchmark gauge is 1.1% lower. The bank index decline is led by UK names including Virgin Money (-10%), Lloyds (-4.6%) and NatWest (-4.5%). Virgin Money was today resumed with a hold rating at Berenberg; broker said that the lender is expected to see revenue declines and a sector- lagging return on tangible equity which will affect ability to re-rate. Among real estate stocks, the UK’s Safestore Holdings (-4.2%), Assura (-3.9%) and Derwent London (-3.8%) are among the worst performers; non-index member housebuilders, including Persimmon, Bellway and Taylor Wimpey, are also plunging as the pound’s slump prompts talk of emergency action by the Bank of England. Here are the most notable movers today: The Stoxx 600 Tech Index rises as much as 2.4%, set for its biggest one-day outperformance against the broader Stoxx 600 since early-August, with semiconductor stocks leading gains. Among chip stocks, ASML rose as much as +3.7% after Santander upgraded the stock to neutral from underperform Italy’s FTSE MIB index gains, bucking weaker markets in Europe, after Giorgia Meloni won a clear majority in Sunday’s election. While the outcome was in line with expectations, the fact that the coalition didn’t obtain a super majority needed to change the constitution reassures investors. Telecom Italia rose as much +7.4%, FinecoBank +5.1%, Moncler +4.4% Unilever shares rise as much as 3.7% after it announced that CEO Alan Jope will retire from the company at the end of 2023, in a move that Jefferies analyst Martin Deboo (buy) sees as a positive development. RPS Group shares rise as much as 13% after Tetra Tech’s agreed deal to buy the company at 222p/share in cash, representing a 7.8% premium to an offer WSP made in August. Liberum does not rule out a counterbid. Belimo shares rise as much as 8.5% since the market isn’t fully pricing in its growth outlook, Berenberg says in a note, moving to buy and establishing a Street-high CHF440 target. The stock gains as much as 8.1%, the most since March 2021. Zalando shares rise as much as 4.8% after Citi analyst says they like the long-term investment story, short-term earnings risks are still high. UK Domestics: the most remarkable reaction to Friday’s not-so-mini budget, however, might be in lenders’ shares. The decline in banking stocks reflects investors’ pessimistic view on Britain’s economy. HSBC fell as much as 2.9%; Lloyds -4.3%, NatWest -4.7% and Barclays -3.0%. Virgin Money UK shares drop as much as 10% after Berenberg resumed a hold rating in note, stating that in many ways the UK small banks are “more different than they are alike.” Utilities are the day’s worst-performing European sector. Citi analyst Piotr Dzieciolowski says the EU’s funding for its policy response has so far been insufficient and also expects uncertainty to persist for UK names. United Utilities fell as much as -3.4%, Drax -3.8% Geopolitical risks from the war in Ukraine to escalating tensions over Taiwan and unrest in Iran also weighed on sentiment. Meanwhile, the OECD cut almost all growth forecasts for the Group of 20 next year while anticipating further interest-rate hikes, and a gauge of German business confidence deteriorated. Earlier in the session, a rout in Asian stocks extended into Monday as rising concerns about a global recession and weak demand hit the region’s exporters and materials producers. The MSCI Asia Pacific Index declined as much as 2.3% to the lowest since April 2020, dragged lower by TSMC, BHP and Toyota Motor. All but one sector traded lower with materials leading the slump.  South Korean stocks fell the most in the region, with the benchmark tumbling 3% to more than a two-year low. The Korean market’s heavy tech exposure has proven costly amid rising rates and a stronger dollar, with fears that a looming recession may wreak havoc on global demand. Gauges in Hong Kong and China reversed earlier gains as the region’s selloff intensified.   Korea Assets Are Asia’s Biggest Losers on Global Recession Angst “Investor sentiment is again at the stage of extreme fear,” said Lee Kyoung-Min, an analyst at Daishin Investment. “It is becoming solid and clear that Kospi and other global stock markets are on a mid-to-long term downward trend.” Asian stock benchmarks are being buffeted by global headwinds as well as risks of their own. The Federal Reserve’s relentless rate hike campaign is pushing Asian currencies lower and raising the risk of capital outflows, while China’s adherence to Covid Zero is hurting growth in the region’s economic giant.  If Monday’s losses are extended through the week, the MSCI Asia Pacific Index will see its longest run of declines since 2015. Japan stocks declined more than 2% as the nation resumed trading after a holiday on Friday. The Philippine stock market was closed Monday as Super Typhoon Noru barreled into the main Luzon island.  Among the key issues investors are watching this week are speeches by central bank officials in US and Europe, including Fed Chair Jerome Powell on Tuesday. Japanese equities tumbled as the market reopened following a three-day weekend, tracking US peers lower after the Fed’s hawkish comments last week deepened fears of a global downturn. The Topix fell 2.7% to close at 1,864.28, while the Nikkei declined 2.7% to 26,431.55. Toyota Motor contributed the most to the Topix decline, decreasing 3.2% after its monthly production update lagged expectations. Out of 2,169 stocks in the index, 145 rose and 1,985 fell, while 39 were unchanged. “There is a possibility that inflation will not subside and interest rates will rise further, which the markets will not like,” said Shoji Hirakawa, a chief global strategist at Tokai Tokyo Research. In Australia, the S&P/ASX 200 index fell 1.6% to close at 6,469.40, as energy and mining shares plummeted. An energy gauge including oil and coal linked securities declined by the most since March 2020.  The New Zealand market was closed for a holiday In India, key stocks gauges plunged to their lowest closing levels in almost two months as the global equity rout continues. The S&P BSE Sensex dropped 1.6% to 57,145.22 in Mumbai to its lowest since July 28. The NSE Nifty 50 Index fell 1.8%, its biggest single-day plunge since Sept. 16. Both the indexes, down in four of the past five weeks, have lost almost 6% since this month’s peak. Volatility in domestic equities is likely to remain elevated this week, pending monthly derivatives expiry on Thursday. Of 30 shares in the Sensex index, 24 fell and 6 advanced. All but one of the 19 sector sub-indexes compiled by BSE Ltd. declined, led by utilities and power companies.  The Indian rupee weakened to a new record against the dollar amid surging US Treasury yields. The Reserve Bank of India’s rate-setting panel will announce monetary policy later this week. As noted above, while stocks are ugly, rates are a horrorshow as Treasuries extended their worst bond slide in decades as a dollar gauge rose to yet another record. Treasuries extended losses in a bear flattening move with yields cheaper by up to 10bp across the belly of the curve. US 10-year yields around 3.78%, cheaper by 6bp on the day with 5s30s spread flatter by 5bp, dropping as low as -45.4bp in European session; UK yields cheaper by 60bp to 25bp from front- end out to long-end of the curve. The Move comes as market participants brace for accelerated policy tightening from global central banks and headlines such as this: *TRADERS PRICE IN UP TO 200BPS OF BOE RATE HIKES BY NOVEMBER Yields on 2-year gilts are 60bp cheaper heading into early US session, while the pound recovers slightly after reaching a fresh all-time low. US session focus on 2-year auction, while a barrage of Fed speakers are expected for the week. Peripheral spreads widen to Germany with 10y BTP/Bund widening 7bps to 238bps. FX, of course, is a disaster, with the Bloomberg Dollar Spot Index rising a fifth consecutive day as the greenback advanced versus most of its Group-of-10 peers. The pound plunged almost 5% to $1.0350 in Asian trading, the lowest recorded in Bloomberg data going back to 1971, while gilts crashed after the UK government vowed to press ahead with more tax cuts, stoking fears that new fiscal policies will send inflation and debt soaring, triggering emergency rate hikes. The options market signals no respite even as the pound rebounded from a record low hit during the Asia session. The yield on two- year bonds surged more than 55 basis points to 4.51%, while the 10-year yield rose 37 basis points to 4.19%. Money markets price in more than 150 basis points of rate increases by the BoE’s next policy meeting in November The euro steadied after earlier dropping to $0.9554; European bond yields rose; Italian bonds underperformed German peers. Giorgia Meloni won a clear majority in Sunday’s Italian election, setting herself up to become the country’s first female prime minister at the head of the most right-wing government since World War II. Germany’s IFO business expectations slid to 75.2 in September from 80.3 in August. That’s the lowest since April 2020. Analysts had predicted a drop to 79. An index of current conditions also fell. The Australian and New Zealand dollars pared some losses after earlier touching fresh 2-year lows. Aussie bond yields rose by up to 13bps, led by the front end The yen weakened amid a broadly stronger dollar. Bank of Japan Governor Haruhiko Kuroda said the government’s intervention in the foreign exchange market last week was appropriate given the recent volatility in the yen The currency’s rally is “untenable” for risk assets, according to a note by Morgan Stanley strategists led by Michael Wilson, while Sian Fenner, senior Asia economist for Oxford Economics, said that “It’s a king US dollar...“It’s adding to inflationary pressures and more central banks raising rates more than we have historically seen.” In commodities, WTI slides almost 1% to trade near $78/bbl. Spot gold mostly unchanged near $1,643/oz. Bitcoin climbs above $19,000. Trading this week will be punctuated by a number of economic reports including US initial jobless claims and gross-domestic-product data, along with PMI figures from China. Choppiness in price moves is likely with a steady stream of Federal Reserve officials speaking through the week. Looking at today's calendar, we get the September Dallas Fed manufacturing activity index, and the August Chicago Fed national activity index. Central bank speakers include the Fed's Bostic, Collins, Logan and Mester; ECB's Lagarde also speaks as does Nagel, Guindos, Centeno and Panetta speak, BoE's Tenreyro speaks. Market Snapshot S&P 500 futures little changed at 3,706.25 MXAP down 2.0% to 142.24 MXAPJ down 1.4% to 463.08 Nikkei down 2.7% to 26,431.55 Topix down 2.7% to 1,864.28 Hang Seng Index down 0.4% to 17,855.14 Shanghai Composite down 1.2% to 3,051.23 Sensex down 1.2% to 57,378.30 Australia S&P/ASX 200 down 1.6% to 6,469.41 Kospi down 3.0% to 2,220.94 STOXX Europe 600 down 0.2% to 389.70 German 10Y yield little changed at 2.08% Euro little changed at $0.9683 Brent Futures down 0.7% to $85.59/bbl Brent Futures down 0.7% to $85.59/bbl Gold spot up 0.1% to $1,645.98 U.S. Dollar Index little changed at 113.22 Top Overnight News from Bloomberg Chancellor of the Exchequer Kwasi Kwarteng must do more to reassure the markets about his plans for the economy after a selloff sent the pound crashing to an all-time low against the dollar, said Gerard Lyons, an external adviser to Prime Minister Liz Truss The UK’s foreign currency holdings are a fraction of the huge stockpiles built up by some of its peers, making unilateral intervention in the market to prop up the plunging pound a tall order for UK policymakers. The UK had $108 billion in foreign currency reserves at the end of August, according to data from the IMF Hedge funds ramped up bullish bets on the pound just days before the UK government’s unexpectedly large tax cuts sent the currency tumbling The ECB’s newest policy maker, Boris Vujcic, says “it’s clear that this is the right way to go,” backing this month’s 75-basis point interest-rate hike ECB Vice President Luis de Guindos said the biggest problem facing the continent’s economy is record inflation, which is becoming more broad-based, threatening investment and consumer spending ECB Governing Council member Yannis Stournaras says the central bank must maintain the main principles of gradualism and flexibility, since the problem it faces is different from the one that the US Fed faces China made it more expensive to bet against the yuan in the derivatives market, ramping up support for the currency as it slides toward the weakest level since the 2008 financial crisis A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mostly negative in a resumption of last week's global stock rout amid the continued surge in the dollar and higher yields, while there was also FX volatility which saw a flash crash in GBP/USD to a record low. ASX 200 was dragged lower amid losses in the commodity-related sectors and with sentiment dampened by the collapse of potential M&A deals involving Ramsay Health-KKR and Link Administration-Dye & Durham. Nikkei 225 underperformed with Mazda Motors among the worst hit as it considers exiting Russian operations. Hang Seng and Shanghai Comp retraced most of their initial losses with Hong Kong underpinned following the scrapping of hotel quarantine policy and with casinos boosted as Macau is to resume tour groups from China, while the property industry benefits after China Construction Bank formed a CNY 30bln housing rental fund and some Twitter sources also circulated that some China state banks were reportedly ordered to buy stocks to contain selling. Top Asian News PBoC injected CNY 42bln via 7-day reverse repos with the rate kept at 2.00% and CNY 93bln via 14-day reverse repos with the rate kept at 2.15% for a net CNY 133bln injection. There were rumours circulating on social media of a coup against Chinese President Xi, although experts and journalists in Beijing dismissed the rumours and said there was no evidence to support them, according to The Print. Philippines Stock Exchange announced a trading suspension for Monday amid a typhoon in the capital, according to Reuters. European bourses are softer after a mixed cash open and despite a brief foray higher, Euro Stoxx 50 -0.5%, as sentiment remains subdued amid recession/inflation concerns. The breakdown features modest outperformance in the FTSE MIB as Italian election results are in-line with expectations. Stateside, futures are lower across the board in-fitting with peers going into a week of Fed speak and inflation data. Top European News UK PM Truss said she is determined to make the special relationship with the US even more special and said she agreed with US President Biden that it is vital to protect the Northern Ireland Good Friday Agreement, while she wants to find a way forward with a negotiated solution with the EU, according to Reuters and a CNN interview. UK PM Truss is to review visa schemes in an attempt to ease UK labour shortages, according to FT. UK Chancellor Kwarteng hinted that more tax cuts are on the way and claimed his tax cuts “favour people right across the income scale” amid accusations they mainly help the rich, according to Evening Standard. UK Chancellor Kwarteng said he is focused on growing the economy and the longer term when asked about the market reaction to his statement on Friday. Kwarteng added that he shares ideas with BoE Governor Bailey but added that Bailey is completely independent and Kwarteng is confident the BoE is dealing with inflation, according to Reuters. UK opposition Labour Party leader Starmer said they would reintroduce the top rate of income tax at 45% which the government announced to scrap last week, while he added that they will support the government plan to lower the basic rate of income tax to 19%, according to Reuters. Italy's right-wing bloc is seen winning the national election with 43.3% and centre-left bloc is seen winning 25.4%, according to the first projection by LA7 TV based on the actual vote count.. Click here for newsquawk snap analysis. Italy's Meloni said Italians gave clear backing to a centre-right government led by the Brothers of Italy and said the situation is difficult and needs contribution from everyone. It was separately reported that Italy's Democratic Party conceded in the election and said it will be the main opposition force, while Italy's Meloni claimed leadership of the next Italian government, according to Reuters and AFP. FX DXY climbed to a fresh YTD high of 114.58 before paring modestly, but remaining firmer, as GBP in particular lifts off worst levels. Cable succumbed to a flash crash overnight, with GBP/USD hitting an all-time-low around 1.0350 as participants confidence in the economy slips. EUR suffers amid the mentioned USD move but derives relative benefit from GBP, while ECB speakers thus far have added little. Antipodeans and CAD weighed on by broader risk and commodity pressure. Japanese Finance Minister Suzuki said the government and BoJ share views on concerns about a weak JPY, while he added that FX intervention had a certain effect and there is no change to the stance that they will respond to market moves as needed, according to Reuters. PBoC set USD/CNY mid-point at 7.0298 vs exp. 7.0019 (prev. 6.9920) PBoC imposed a 20% risk reserve requirement for FX forward sales from September 28th to rein in yuan weakness. Fixed Income Gilts have retained some composure after slumping over 200ticks at the commencement of trade and have settled around halfway between intraday extremes. EGBs downbeat in sympathy while BTPs marginally lag core-EGB peers as Italian as-expected election results are digested with BTP-Bund only modestly wider as such. Stateside, USTs are pressured in-fitting with peers and also conscious of the week's supply docket getting underway via a 43bln 2yr. Central Banks Fed’s Bostic (2024 voter) said inflation is too high and that they need to do all they can to bring it down and said demand is beginning to shrink which will ultimately pay dividends in inflation levels. Bostic also stated that there are scenarios where they can avoid deep pain but there will likely be some job losses, according to Reuters. BoJ's Kuroda says the BoJ will maintain accommodative monetary conditions to support companies, hopes to support a positive economic cycle, long-term inflation expectations have begun to heighten, via Reuters. Intervention from the MoF is an "appropriate" move, does not think gov't intervention and BoJ policy are contradictory. Amamiya says the domestic economy is picking up, must carefully watch how FX moves affect the economy and prices. BoJ Governor Kuroda says when he stated that BoJ forward guidance will not change for 2-3yrs, did not refer to guidance on keeping short and long-term rates at present of lower levels via Reuters. ECB's de Guindos says Q3 and Q4 point towards growth rates being close to zero within the EZ, the scenario is market by high uncertainty, lower growth and higher inflation. ECB's Panetta says ECB is assessing the potential of distributed ledger technology (DLT) and "the extent to which it could improve our services.". Capital Economics calls for the BoE to "get on the front foot with a big rate hike". Allianz's El-Erian says, on GBP, the fall is about extra tax cuts and Chancellor Kwarteng could recalibrate this. Alternative, would be for the BoE to hike at an emergency meeting. Adding, he would hike by 100bp. BoE publishes key elements of the 2022 annual cyclical scenario stress test; includes a scenario where the Bank Rate is assumed to rise rapidly to a peak of 6% in early 2023 before gradually reduced to sub-3.5%. Commodities WTI and Brent November futures remain subdued in early European trade following last week’s recession-induced losses. Spot gold trades in tandem with the Buck and sees resistance at around USD 1,650/oz after falling to USD 1,627/oz as a casualty of the Sterling flash crash overnight. LME metals are softer across the board with 3M copper futures having a hard time reclaiming USD +7,500/t status with upside capped by the Buck. Iraq began trial operations at the Karabala oil refinery which has a production capacity of 140k bpd, according to a statement from the Oil Ministry. German Chancellor Scholz signed a strategic agreement with UAE’s President on accelerating energy security and industrial growth, while UAE’s ADNOC signed an agreement with Germany’s RWE which includes ADNOC exporting its first LNG cargo to RWE and will conduct trial shipments of low-carbon ammonia to Germany. Furthermore, Chancellor Scholz said while visiting Doha that he talked with the Emir about LNG deliveries and that they want to achieve further progress, according to Reuters. Germany is preparing a national electricity price cap to be implemented this fall in the scenario the EU falls to agree on a similar move for the entirety of the bloc, via WSJ citing officials. Vitol's CEO said at the Asia Pacific Petroleum Conference that Russian gas supply cuts put enormous strain on supply-demand in Europe and that high gas prices are to impact 60%-80% of demand, while Ecopetrol's CEO said they are increasing crude exports to Europe this year to replace Russian supplies and are drilling 600 oil wells this year. Anglo American (AAL LN) tightens copper production guidance for Chile to 560k-580k tonnes of copper (prev. 560k-600k tonnes) due to lower throughput at Los Bronces caused by a combination of water restrictions and a change in ore characteristics, via Reuters. US Event Calendar 08:30: Aug. Chicago Fed Nat Activity Index, est. 0.23, prior 0.27 10:30: Sept. Dallas Fed Manf. Activity, est. -10.0, prior -12.9 Central Banks 10:00: Boston Fed’s Susan Collins Speaks to Boston Chamber of... 12:00: Fed’s Bostic Discusses Income Inequality 12:30: Fed’s Logan Speaks at Banking Conference 16:00: Fed’s Mester Discusses Economic Outlook DB's Jim Reid concludes the overnight wrap I wonder whether any research report has ever been written whilst watching synchronised swimming? Well if not, then you’re reading the first ever as I’m getting a head start on the early morning news by starting this on Sunday evening watching my daughter Maisie do her second session after getting into the local club. Watching this sport is going to take some getting used to after years of watching football, cricket, golf, F1, athletics, rugby... actually.... virtually every sport bar synchronised swimming. I think everyone felt they were swimming in a tsunami of newsflow last week after one of the most incredible macro weeks in recent memory in terms of breadth of events. Yes there have been more extreme weeks in crises but last week had a bit more variety and was outside of a crisis period. If over 500bps of global rate hikes wasn’t enough, you also had 2yr US yields moving higher for the 12th successive day on Friday (the longest steak since data begins in 1976), the BoJ intervening in FX markets for the first time since 1998, and what can only be termed as one of the darker days for sterling assets on record on Friday after a mammoth tax giveaway in what was a mini-budget in name and not by nature. Henry and I put a note out on Friday night (link here) showing that it was the third worst day for Sterling (-3.57%) since Black Wednesday in 1992, with the worst two since being the day after the Brexit vote (-8.1%) and after the initial covid shock in 2020 (-3.71%) when there was a global flight to dollars. We also show a graph of daily Sterling moves back to 1862 and on that it was the 41st worst day in history spanning 47,000 trading days. Obviously in the long era of fixed FX rates there were the occasional big devaluations which were much bigger than Friday. This morning is Asia it fell around -4.5% at one point (1.0392) which was a record low against the Dollar. It's around -2.78% as I type. This follows a weekend interview where Chancellor Kwarteng suggested that more tax cuts were to come so that certainly was a red rag to markets. Will we hear from the upper echelons of the BoE today? Watch out for any comments, especially at the market open. DB's George Saravelos suggested on Friday that the Bank of England need to do an inter meeting hike to restore policy credibility. There’s also a graph in our note mentioned above showing that Friday was the worst day for 5yr gilts (+50.3bps) since a +200bps hike in 1985 when sterling was also slumping. So maybe omens here. I suppose the only slight mystery is the timing of the sell-off as the mini-budget in magnitude was broadly in-line with the recent elevated fiscal expectations that had been building. However perhaps it was the unabashed revival of trickle-down economics that had markets a little aghast. It goes against the current economic orthodoxy and the overall zeitgeist of our immediate times. As such there is likely to be concerns of a credibility issue. We are publishing our long-term study today with the title “How we got here, and where we’re going?”. In it we try to put the current macro woes into historical context in an attempt to work out where we’re going. There are quite a few people who have proof-read it on my team and they were all thoroughly depressed at the end. I didn't feel that way writing it but maybe it's a case of starting point perceptions. Anyway, look out for it around the European lunchtime. Overnight in Italy, the right-wing alliance led by Giorgia Meloni's Brothers of Italy party was on course to become the nation’s first woman prime minister after exit polls gave it a clear majority. With the full results due later today, she is predicted to win up to 26% of the vote ahead of her closest rival Enrico Letta from the centre left. The right wing alliance is slated to be on course for around 43% of the vote, enough for a majority if correct. As I type, the euro is extending its losses against the dollar for the fifth day, its longest streak since April 28, falling as much as -0.5% to 0.9638, albeit being overshadowed by Sterling. For this week we have an array of consumer-driven economic data in the US and some important European inflation prints. We will also get a number of consumer sentiment indicators across the key economies and PMIs from Asia. Away from the data, there are more than 30 central banker appearances across the Fed and the ECB to keep markets busy. Tomorrow also sees referendums in the Russia-annexed Ukrainian territories as the conflict goes into its eight month. Going through the data in more details now. Starting with the US, the PCE and personal income and spending data will be front and centre for markets next week as they gauge the extent of inflationary pressures and the strength of the consumer. The Fed’s preferred inflation gauge, the PCE, due Friday, will be watched for signs of price pressures we saw in last week's CPI report. Our US economists expect core PCE to edge higher by +0.5% MoM (vs +0.1% in July) which won’t allow the Fed to take the foot off the tightening pedal. For the other two data points, our team forecasts a +0.1% MoM increase for both income and consumption. Final US Q2 GDP will also be released on Thursday and although DB expect no change to the -0.6% second reading, watch out for the annual benchmark revisions back to Q1 2017. History could be re-written that could have some implications for how we all think about the economy. In other US data, we will also get the consumer confidence index on Tuesday, along with durable goods orders, and inventories data on Wednesday, with the Chicago PMI on Friday. Over in Europe, all eyes will be on September's inflation data, including the Euro Area flash CPI release on Friday. Our economists are expecting the measure to hit a record +9.5%, up from the previous record of +9.1% in August. Other data in the region will include consumer and economic sentiment from Germany, France, Italy and the Eurozone throughout the week. Meanwhile, EU energy ministers will meet again on Friday regarding the emergency intervention amid elevated energy prices. Finally, next week's earnings line up will feature a number of retail bellwethers on Thursday. Among them will be Nike, H&M and Next. Micron will report that day as well. See our usual day by day guide to the week at the end which contains many of the key Fed and ECB speakers including Powell and Lagarde. Stock markets across Asia are mostly lower this morning. The Kospi (-2.40%), Nikkei (-2.30%) and the S&P/ASX 200 (-1.40%) are leading the declines. Meanwhile, the Hang Seng (+0.11%) is swinging between gains and losses after rising by +2.45% initially with Chinese shares mixed as the Shanghai Composite (-0.10%) is trading lower while the CSI (+0.46%) is up as we go to press. Stock futures in DMs are pointing to further losses with contracts on the S&P 500 (-0.49%), NASDAQ 100 (-0.46%) and DAX (-0.33%) all moving lower. Early morning data showed that Japan’s manufacturing sector continued to expand albeit at a slower pace as the latest au Jibun Bank manufacturing PMI slipped to a 20-month low of 51.0 in September from 51.5 in August, pulled lower by high energy and raw material prices that was exacerbated by a weak yen. At the same time, the au Jibun Bank services PMI returned to expansion, recording a level of 51.9 in September from August's 49.5 final reading. Moving on to China, in order to stabilise expectations in the FX market, the People’s Bank of China (PBOC) today raised the risk reserve requirement on foreign exchange forward sales to 20% from 0% beginning September 28 as the yuan faces increasing depreciation pressure, in line with most major currencies amid broad dollar strength. Looking back now on a week that will not be forgotten anytime soon. While there were historic central bank hikes all week, the biggest news came from the fiscal authorities, following the UK’s budget Friday, which had the largest tax cut package since the 1970s. Gilt yields had their largest one-day increase in decades with 2yrs +44.7bps, 5yrs +50.3bps, and 10yrs +33.3bps. As we mentioned at the top, 5yrs yields saw their largest move since 1985 after a +200bps hike aimed at helping a plunging currency. The pound fell -3.57% against the US dollar to within a percentage point of the weakest in the post-Bretton Woods 51yr free float era. It was already a busy macro week before the blockbuster budget, where we got more than 500bps of global central bank hikes and a currency intervention from Japan. In terms of the biggest players, the Fed delivered its third consecutive 75bp hike while the BoE delivered its second 50bp hike in a row, with both banks guiding toward yet more tightening, while the BoJ remained the outlier by keeping its accommodative policy in place, which isn’t going to help the yen turnaround even with intervention. When all was said and done, sovereign bonds and equities sold off in size, while yield curves flattened. 2yr Treasuries (+33.4bps, +7.9bps Friday), 2yr Bunds (+38.5bps, +7.2bps Friday), 2yr Gilts (+82.1bps, +44.7bps Friday) reached their highest levels since 2007, 2008, and 2008, respectively, as markets priced in more tightening to overcome inflationary pressures (and in the case of the UK, fiscal expansion). 10yr Treasuries (+23.5bps, -2.9bps Friday) ended the week a touch lower on the day but hit their highest levels since 2011 during the week, while 10yr Bunds (+26.8bps, +5.9bps Friday), and 10yr Gilts (+69.1bps, +33.3bps Friday) hit their highest levels since 2013 and 2011, respectively. The mixture unsurprisingly proved unpalatable to risk assets, driving the STOXX 600 and S&P 500 back to their lows for the year. The STOXX 600 retreated -4.37% on the week and -2.34% on Friday, the worst weekly and daily return since mid-June. The S&P 500 fell -4.65% (-1.75% Friday), returning to bear market territory. The FTSE managed to stay above its YTD lows, but still fell -3.01% on the week, its worst weekly return since mid-June as well, and retreated -1.97% on Friday, the worst daily return since early July. Tyler Durden Mon, 09/26/2022 - 08:08.....»»

Category: blogSource: zerohedgeSep 26th, 2022

Reading Q3 Earnings Tea Leaves After the FedEx Bombshell

The shortfall in FedEx Ground, the unit that is tied closely to e-commerce deliveries in the U.S., has read-through implications for the U.S. consumer and operators in the digital economy. The FedEx FDX pre-announcement has spooked the market as it feeds into the long-feared narrative of an impending negative turn in the economy.FedEx, scheduled to report results on Thursday, September 22nd, came up short of its own targets as it faced fast-declining shipping demand in Asia and Europe, which the company sees as providing an early read on what to expect globally.As we all know, FedEx is no ordinary economic actor, as its business literally touches every corner of the global economy. The shortfall in FedEx Ground, the unit that is tied closely to e-commerce deliveries in the U.S., has read-through implications for the U.S. consumer and operators in the digital economy. This is significant since the next few months of the year include the holiday shopping season.As unsettling as FedEx’s bombshell is for our reading of the macro picture, we shouldn’t lose sight of the company’s operational and management challenges.I see the withdrawal of the full-year guidance — that was initially put in place just three months back — by the new management team as more a comment on their grasp of the ground reality than the fast-shifting macro landscape. Needless to say that FedEx’s new management team is off to a terrible start in establishing its credibility with the market, particularly if UPS UPS and others don’t validate their outlook.FedEx’s company specific challenges notwithstanding, we know that the macroeconomic landscape is expected to be tougher. Europe is practically in a recession already and China has held itself down with its zero-Covid policy. The U.S. economy has been faring better, but everyone knows there is pain ahead. The Fed Chief ‘promised’ us that in his Jackson Hole speech.The lagging effect of the extraordinary tightening already implemented and the incremental rate hikes ahead, including in next week’s Fed meeting, will at least slow down the economy — if not push us into a recession, as many have started to fear.All of this has direct earnings implications, as estimates for the coming periods get trimmed.To get a sense of what is currently expected, take a look at the chart below that shows current earnings and revenue growth expectations for the S&P 500 index for 2022 Q3 and the following three quarters: Image Source: Zacks Investment ResearchAs you can see here, 2022 Q3 earnings are expected to be up +1.2% on +9.1% higher revenues. Keep in mind that it is the strong contribution from the Energy sector that is keeping the aggregate Q3 earnings growth in positive territory. Excluding the Energy sector, Q3 earnings for the rest of the S&P 500 index would be down -5.5% from the same period last year.Analysts have been lowering their estimates since the quarter got underway, as the chart below shows: Image Source: Zacks Investment ResearchThe -5.5% decline expected in Q3 on an ex-Energy basis is down from +2.1% in early July.Q3 estimates have come down for all sectors, except Energy and Autos, with the biggest declines at Consumer Discretionary, Basic Materials, Consumer Staples, Technology and Construction.Estimates for 2022 Q4 and full-year 2024 have also been coming down.The chart below shows the comparable picture on an annual basis:  Image Source: Zacks Investment ResearchThe +6.9% earnings growth expected for the index this year drops to +0.3% once the Energy sector’s contribution is excluded.The chart below shows how the aggregate bottom-up earnings total for 2023 on an ex-Energy basis has evolved lately: Image Source: Zacks Investment ResearchNext Week’s Reporting DocketThe FedEx release was actually a pre-announcement, the actual quarterly report comes out on Thursday, September 22nd. There are 7 other S&P 500 members on deck to report results this week, in addition to FedEx. The ones we will be closely watching are from General Mills GIS and Accenture ACN on Wednesday, Costco COST on Thursday.Given the FedEx pre-announcement and the weak Adobe ADBE guidance, we will be closely watching whether the problems in these two companies are specific to them or something more endemic.For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>> Q3 Earnings Season Gets Underway    Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>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 Accenture PLC (ACN): Free Stock Analysis Report United Parcel Service, Inc. (UPS): Free Stock Analysis Report General Mills, Inc. (GIS): Free Stock Analysis Report Costco Wholesale Corporation (COST): Free Stock Analysis Report Adobe Inc. (ADBE): Free Stock Analysis Report FedEx Corporation (FDX): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 16th, 2022

Stock Market News for Sep 16, 2022

Wall Street closed sharply lower on Thursday, pulled down by tech and energy stocks. Wall Street closed sharply lower on Thursday, pulled down by tech and energy stocks. Markets remained apprehensive about policy tightening by the Fed while ignoring positive economic data released on the day. The World Bank’s outlook of a global recession in 2023 also clouded investor mood. All three major stock indexes ended in the red.How Did The Benchmarks Perform?The Dow Jones Industrial Average (DJI) fell 0.6% or 173.27 points to close at 30,961.82. Twenty-four components of the 30-stock index ended in negative territory, while six ended in positive.The tech-heavy Nasdaq Composite lost 167.32 points or 1.4% to 11,552.36.The S&P 500 dropped 1.1%, or 44.66 points, to end at 3,901.35. Nine of the 11 broad sectors of the benchmark index closed in the red. The Energy Select Sector SPDR (XLE), the Utilities Select Sector SPDR (XLU) and the Technology Select Sector SPDR (XLK) fell 2.6%, 2.5% and 2.3%, respectively, while the Healthcare Select Sector SPDR (XLV) advanced 0.6%.The fear-gauge CBOE Volatility Index (VIX) increased 0.4% to 26.27. A total of 11.1 billion shares were traded on Thursday, higher than the last 20-session average of 10.4 billion. Decliners outnumbered advancers on the NYSE by a 2.79-to-1 ratio. On the Nasdaq, a 1.35-to-1 ratio favored the declining issues.Tech And Energy Sector Pulls Down MarketOil prices slid over 3% to a one-week low on Thursday as a tentative agreement was reached between the government and unionists to avert a U.S. rail strike. Also, the fear of weaker global demand and continued U.S. dollar strength ahead of a potentially large interest rate increase in the September Fed FOMC meeting had a bearing on the energy sector. Brent crude fell $3.26, or 3.5%, to close at $90.84/barrel, while WTI crude ended $3.38, or 3.8%, lower at $85.10/barrel. These are the lowest closes for both benchmarks in the last week.Tech shares fell through the day as bond yields rose, rendering their future valuation look less profitable. Moreover, with interest rates slated to continue rising, the apprehensions of a market slump is having an adverse impact on growth stocks like large-cap tech.Consequently, shares of Valero Energy Corporation VLO, Salesforce, Inc. CRM and Amazon.com, Inc. AMZN lost 4%, 3.4% and 1.8%, respectively. Valero Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.World Bank Predicts Global Recession In 2023Even as investors try to price in an expected 75 bps interest rate hike from the Fed in its meeting next week, comments from World Bank president David Malpass and inferences drawn from a recent study by the apex body have borne down on their mood. The decline in the world’s three largest economies, the United States, China and the Eurozone has pushed the global economy into its sharpest fall since 1970, according to the study.Interest rate hikes and related policy actions taken by central banks around the world were likely to continue well into next year but might not be sufficient to bring inflation back down to the pre-pandemic levels, the bank said. In the absence of supply-side disruptions and labor-market pressures subsiding, global inflation, excluding energy, could stay at about 5% in 2023. According to Malpass, more countries would fall into recession if global growth continues to slow down, and this would have devastating consequences for emerging markets and developing economies.Economic DataThe Labor Department said on Thursday that initial jobless claims fell to 213,000, decreasing 5,000 for the week ending Sep 10. The previous week's level was revised down by 4,000 from 222,000 to 218,000. The four-week moving average decreased to 224,000, a fall of 8000 from the previous week’s revised average of 232,000.Continuing claims came in at 1,403,000 for the week ending Sep 3, increasing 2,000 from the previous week’s revised level. The previous week's numbers were revised down by 72,000 from 1,473,000 to 1,401,000. The 4-week moving average came in at 1,413,250, a decrease of 7,750 from the previous week's revised average. The previous week's average was revised down by 18,000 from 1,439,000 to 1,421,000.Per the U.S. Census Bureau, advance estimates of U.S. retail and food services sales for August 2022 are $683.3 billion, indicating an increase of 0.3% from July. The estimate is adjusted for seasonal variation and holiday and trading-day differences, but not for price changes. The July numbers were revised to a 0.4% decline.Also, business inventories for July, adjusted for seasonal and trading day differences but not for price changes, were estimated at $2,434.3 billion, up 0.6% from the unrevised June numbers.According to a report published by the Fed, industrial production went down 0.2% in August from July. The July numbers were revised down to an increase of 0.5% from 0.6%. Capacity utilization declined 0.2 percentage points in August to 80%, after the earlier reported July numbers were revised to 80.2%.Stocks That Have Made HeadlineFedEx Drops 16.58% on Dismal Q1 Preliminary ResultsFedEx Corporation FDX reported dismal preliminary results for first-quarter fiscal 2023 (ended Aug 31, 2022), citing global volume softness. (Read More) Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>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 Amazon.com, Inc. (AMZN): Free Stock Analysis Report Salesforce Inc. (CRM): Free Stock Analysis Report Valero Energy Corporation (VLO): Free Stock Analysis Report FedEx Corporation (FDX): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 16th, 2022

"Weak Links" Are Being Exposed - Jeff Gundlach Warns "The Period Of Abundance Is Over"

"Weak Links" Are Being Exposed - Jeff Gundlach Warns "The Period Of Abundance Is Over" Authored by Christoph Gisiger via TheMarket.ch, Jeffrey Gundlach, CEO of DoubleLine, worries that the Federal Reserve is overreacting in the fight against inflation. He expects a severe slowdown of the economy and says how investors can navigate today’s challenging market environment. A conversation with the Bond King. When Jeffrey Gundlach speaks, financial markets around the globe listen carefully. The founder and CEO of DoubleLine, a Los Angeles based investment boutique mainly specializing in bonds, ranks among America’s highest-profile investors. On Wall Street, he is known for speaking his mind. According to his view, one of the biggest risks right now is that the Federal Reserve is doing considerable damage to the economy with its aggressive rate hikes: «The next shock is that we’re having to put in a big overreaction to the inflation problem which we created from our initial reaction of excess stimulus,» Mr. Gundlach says. «My guess is that we will end up creating momentum that’s more deflationary than a lot of people believe is even possible.» In this in-depth interview with The Market NZZ, the market maven explains why he expects a severe economic downturn in the coming months, where he sees the weak links in the system, and where he spots opportunities for prudent investments in today’s volatile market environment. Mr. Gundlach, financial markets are in a fragile state. Inflation is the highest in more than four decades, and stocks as well as bonds suffered significant losses this year. What’s on your mind in light of this environment? The Federal Reserve is very keen on preserving what is left of its credibility and reputation because they have not been able to execute on their interest rate plans for many years. Every time they try to tighten monetary policy, it doesn’t take long for the economy to get weak, and they get embarrassed. In the past, the Fed was able to pivot like it did at the end of 2018 when it completely reversed its course in just six weeks because the stock market collapsed. It was able to do that because the inflation rate was still below 2%, so it didn’t seem to have much of a near-term consequence. And how about today? This time, the inflation rate is 500+ basis points higher than the yield on any Treasury bond, and the Fed has said forcefully and repeatedly that they are going to bring it down. Therefore, they are not in a position to do a quick pivot. What do you think happens next? Weirdly, the market consensus thinks that the Fed is going to raise rates somewhat more, maybe even 125 or 150 basis points, and then, around six or seven months from now, the market expects that they mysteriously are going to start easing. Basically, the idea is that they are going to hike interest rates significantly more, and then they are going to drop them back down. To me, that’s a strange thing to predict because why bother with anything then? If you’re taking rates up and then back down, why bother taking them up? Why not just do nothing? It’s like a six-foot-tall man who’s in shape and weighs 185 pounds saying: «I’m going to put on 100 pounds this holiday season, and then I’ll take it off with a crash diet by Easter.» What’s the point of that? That’s not healthy, it’s very bad. But isn’t the idea here to give the economy a quick hit so that inflationary pressures subside and the system can recalibrate on a more balanced basis? Sure, but what you’re implying here is that the inflation rate goes down from 9% to 2% which is the Fed’s goal within a year or by the end of next year. That’s sort of the hope. But if this would be really possible, if the inflation rate were to fall so quickly and so sharply, why do you think it would stop at 2%? Why wouldn’t you think it goes negative? Why wouldn’t you think so much momentum towards a slowing economy might overshoot on the deflation side? How serious is the risk of deflation, in your view? Due to the pandemic, we did this huge amount of radical economic policy. The idea was that it was going to be free money and free growth with no bad consequences. But of course, we’ve had bad consequences. Now, people are thinking we can just do this reactionary shock to the economy by taking the federal funds rate up to 3.5% or 4%. But if that’s enough to weaken the economy to take 7 percentage points off the inflation rate, why wouldn’t it be 15 points? So maybe, we are going to get a delayed reaction that’s deflationary, just like we had a delayed reaction that was highly inflationary. What would that mean for financial markets? These shock-and-awe tactics work with a delay, and if you overdo them, you end up getting tremendous incremental volatility. We’ve had so much economic volatility in the past two and a half years compared with the preceding decade where the economy grew more or less steadily at 2% and the inflation rate never truly budged. Then, we introduced all these extraordinary policies that work with a lag. We just keep doing them until they kick in after the lag, and by then we’ve greatly overdone it. I think that’s the message of the bond market. Why else would we have interest rates so far below the inflation rate and such a flat yield curve? Into this highly volatile situation, we have a Fed that is expected to do $1 trillion of quantitative tightening over the next twelve months. Will this become an additional burden for the economy? Yes, that will add to economic weakness. The consumer is very weak as you can see with some of the upper middle-class oriented retail chains like Nordstrom. Nordstrom’s stock lost 25% just last month. All these things that are aspirational purchases rather than necessities have fallen off the cliff because people have to spend too much money on gasoline and food. In contrast, low-end retailers like Walmart had an explosion in new customers. Many of them used to shop at Whole Foods, now they shop at Walmart because the food there is about 30% cheaper. Walmart is also reporting a significant shift in their customers paying with credit cards, not debit cards. In other words, shoppers are borrowing to buy food. However, the labor market is still performing quite robustly. It’s highly suspicious. The labor market is screwed up because of all the dislocation. People still don’t know what the future is for office work, or for hybrid work. Looking ahead, it’s hard to figure out where the economic strength is supposed to come from. It’s pretty obvious that the consumer is not in good shape. Therefore, it’s not surprising that we’re seeing weakness in some of the former stock market darlings like Peloton. Peloton’s stock is down like 97% from its high, and it looks like it’s going to zero. Zoom and all the other darlings of the lockdown are collapsing as well. My guess is that a lot of them are going to go bankrupt.   In this context, where are the weak links investors should pay close attention to?   The large banks in Europe continue to perform very poorly. I see Credit Suisse is backing away from trying to be a Wall Street and United States titan. Their stock just seems to never go up. Deutsche Bank fared a little bit better, but interest rate suppression policies had made it impossible for European banks to make money. In the American economy, the weak links are producers and retailers of discretionary goods because the people don’t have the money to buy them. It’s like French President Macron recently said: The period of abundance is over. The weak links are those that benefit from abundance. We’re in an economy that doesn’t have the liquidity. There is no more funding for questionable ventures, for non-profitable businesses. Those are the weak links: The people that were living off of free money and cheap money and not making any money. What is the probability of a more severe economic downturn in this regard? Again, the overarching theme people are not fully appreciating is that we have become unhinged in terms of our economic parameters versus trying to manage the economy gradualisticly, as we did for quite a while. All of sudden, we’ve decided we had to respond in a way that is not all gradualistic. We had to damn the torpedoes and just go for it. That took us off balance, and we’re having a hard time finding our footing. It’s going to take a long time to find footing, but the next shock is that we’re having to put in a big overreaction to the inflation problem which we created from our initial reaction of excess stimulus. My guess is that we will end up creating momentum that’s more deflationary than a lot of people believe is even possible. Do you think Fed Chair Powell has the stamina to resolutely continue his fight against inflation if the signs of an economic slowdown continue to pile up? He has to. He’s not going to stop. He waffled too much in the past. He made policy pivots on small changes of data, and that put him in an unfortunate light. Now, he has made a pledge to bring inflation down, and he can’t break it without strong evidence that the reason for the pledge has passed. He can’t say «we have won the inflation battle» if the consumer price index stays above 6%. If Powell changes his rhetoric, he will go down in history as a joke. He has said unequivocally and repeatedly that he’s not going to stop just because we get one or two good inflation numbers or we get a little bit of economic weakness. I’m paraphrasing here because he doesn’t want to say it so directly, but essentially, he stated that the Fed doesn’t care if we have a mild recession.   But what happens if this turns out to be a severe downturn?   Powell is in an unstable place right now because it probably can’t last. He has a supposedly good employment market. While that’s suspicious, the unemployment rate is at 3.7%, and there are a lot of job openings, which gives the Fed cover to fight inflation. By a mild recession Powell means the unemployment rate goes up to 4%. If it rises to that level, I think he can continue with inflation fighting. But what if the unemployment rate goes up to 8%? Then what? We know exactly what’s going to happen: In the next recession, the US is going to go on a much more aggressive round of free money. You’re referring to another money printing binge? Much bigger. That’s their methodology: zero interest rates and money printing. It started back in the 2000s, and we’ve been at it ever since. And it always takes a bigger dose. Once you’re on a debt-financed scheme, you always have to borrow more. What then, would you advise monetary policy makers to do right now? I think Powell should slow down. The Fed should actually not raise the target rate by 75 basis points at the next meeting. They should do 25 basis points, and let a little time pass. Powell can keep playing the inflation fighter as long as he’s raising rates gradually. I wouldn’t even care if he skipped a meeting: A 25 basis point hike in September, and then pause at the next FOMC meeting in November. Let’s wait and see what happens because the bond market should be listened to: Every time the bond market is at odds with consensus economists, the bond market is right. And the bond market is saying that yields are peaking. But wouldn’t waiting raise the risk of persistently high inflation? We had this incredible shock of liquidity injected into the system in the second quarter of 2020, and the negative consequences really didn’t show up for over a year. The inflation rate didn’t start to go up significantly until the second half of last year. That’s why we should wait. We started raising rates meaningfully in May, so let these hikes percolate through and see what happens. But Powell can’t do that. He has stated so forcefully and repeatedly that he’s not going to let up until he sees inflation coming down in a «convincing» way. Satisfying these conditions is going to take some time. But I think he should slow down. How can prudent investors navigate this challenging environment? This has been a capital preservation situation for the past year. Beginning of this year or a year ago, stocks, by historical measures, were extremely overvalued in terms of P/E ratios, price-to-book, and all kinds of measures. Except for one thing: As overvalued stocks were versus historical measures, they were actually cheap to bonds. Bonds were even more overvalued, and it’s surprising to people that bonds are down as much as stocks this year. The only thing that’s up at all is commodities, and that ended too back in June. Nothing is really up since the Fed started raising interest rates in earnest in June. So it’s just a capital preservation market. That doesn’t sound encouraging. Is there nothing investors can do? The problem is that financial markets are entirely balanced upon zero interest rates and quantitative easing. The Fed pledged that was going away, and they are still speaking like they have the intention of further honoring that pledge. As a consequence, your financial assets are devaluing. If people really wanted to invest in something fundamentally, you probably want to invest in something like an energy company. You actually want to have the most old-school types of assets, things producing something that’s needed: farm land, food, energy, oil. Those are the places where you can protect yourself from inflation. These are also assets that are somewhat recession proof. People have to buy food and other necessities, but there is nothing left for all of this abundance spending. What about bonds, DoubleLine’s core competence? As I said, bond yields are probably in the process of peaking out. Parts of the yield curve have been inverted for a while, so it’s very reasonable to expect an economic downturn of significance within a year. We’re heading into the lean years, and that’s probably a situation where ultimately income becomes harder to come by. That’s why bond yields have been stuck at around 3% to 3.25% for about three or four months now. It sends the message that high-quality bonds might actually perform reasonably well as unattractive as they are versus inflation. In fact, they already have. The long bond got to 3.50%; it’s up in price the past few months. That’s why I think investors should own bonds instead of stocks; bonds are cheap to stocks.   Where do you see the most attractive opportunities for fixed-income investments?   Because of the illiquidity and the redemptions from the bond industry, spreads on non-government bonds were widening in a pretty powerful way until the middle of the summer. For instance, junk bonds started out this year with a yield of about 5%, and they got up to about 10%. Some emerging market bonds are yielding 15%, 18%. These are risky, but they are so much more attractive than stocks. Some bonds have yields of 10% to 12% and have prices of 75 cents on the dollar. Think about what the return potential is here: If you have a yield of 10-12%, and you have a 10% price gain, you could easily make 20-25%. It’s very unlikely that you make that from stocks. The bond market has gone from no value anywhere two years ago to abundant value relative to stocks. A key question is also what the dollar is going to do after the recent strong rally. How do you view the outlook for the greenback? The dollar is in the very late stages of its strength. The dollar will go up until the next recession, and then it will drop precipitously. I have been bullish on the dollar for over a year, but I’m extremely bearish on the dollar for the next ten years. A weaker dollar should be good for emerging markets, shouldn’t it? Yes, when the dollar tops out, you should own nothing but emerging markets if you’re an extremely aggressive investor. I wouldn’t do it personally because I’m a low-risk personality type, but emerging markets will do very, very well. They’re so cheap compared to developed markets, and their currencies will appreciate, I think, in the next recession. That means you could have a double win when you’re a US dollar-based investor. But I don’t think it’s going to happen this year. That might be a story for 2023. China looms particularly large for many investors in emerging markets since it represents an outsize stake in many EM funds. How should one deal with that in times of rising geopolitical tensions? I wouldn’t invest in China. I think there is just too much uncertainty. Tensions between China and the United States are high, and likely to get much worse. If you’re an American, you might not even be able to redeem your investment. So I would stay out of there, but Asia ex-China I would invest in. Should investors rather buy bonds or shares when it comes to emerging markets? I think you would buy both when we get to the next recession, after we have perhaps a Treasury rally. I think bonds broadly will do reasonably well, and in emerging markets they’re so much cheaper than in the United States. Right now, emerging market portfolios yield about 9.5%. So if the currency goes your way, and the yield goes your way, you make a lot of money off emerging markets.   How about Europe? Do you spot opportunities for investments in Europe?   We own European stocks. I think in the next recession they will do better, and they’re cheaper than US stocks. Europe doesn’t have the same sort of crazy zombie companies to the extent we do in the United States. It’s the zombie companies that are really going to have problems, and the US is loaded with zombie companies. And again, ultimately the dollar will depreciate, which is another reason we like European stocks. So far, this position hasn’t been a tremendous benefit to us, but it hasn’t hurt either. That’s actually a good sign. Europe was underperforming the United States almost all the time for a decade, and that stopped two years ago. When the trend stops, it takes a while for it to reverse, but once it stops, it tends to reverse. You started your career in the investment industry in the early Eighties when the general environment was somewhat similar to today. Looking back on your experience in all kinds of markets, what is the most important thing in investing? You have to buy when prices are low. I’m not making a joke, I mean it. Every time when there is a problem in the bond market, money pours out. There is greed and fear: Greed is powerful, but fear is more powerful. Yet, there is one thing that is even more powerful: need. When you need something, you have to have it. If people need to make a certain investment return, what they will do when opportunities go down is increase their risk because they need a higher return. They can’t live on a 3% return, they need 6%. So when there is no 6%, they try to manufacture a 6%. As a result, their risk goes up, up, up, up, up, and then they’re maximum exposed to risk. Next, prices collapse, and then they sell because their fear is so great. Instead, they should be buying. Right now, the bond market is very attractive, but no one is listening because everybody is selling. You’re supposed to be buying when people are selling, and that opportunity is still very strong today. Tyler Durden Thu, 09/08/2022 - 17:40.....»»

Category: dealsSource: nytSep 8th, 2022

Futures Head For Another Monthly Drop, As Oil Slumps, Yields And Dollar Rise

Futures Head For Another Monthly Drop, As Oil Slumps, Yields And Dollar Rise After three days of steep declines, S&P futures traded between modest gains and losses as global markets headed for the third consecutive weekly decline and another monthly drop on concerns that aggressive central bank tightening will push the global economy into a hard recession. At 7:15am ET, futures were up 0.2% and Nasdaq futures rose 0.7%, after trading both higher and lower earlier in the session. The dollar rose, Treasury yields jumped after another record CPI print in Europe, while the bizarre oil slump extended. In premarket trading, Bed Bath& Beyond plunged after the home-goods retailer filed a form to sell an unspecified number of shares. HP also fell 6.8% after the company reported quarterly sales that missed estimates and cut its annual profit forecast as demand for personal computers and printers slowed. Analysts noted that the PC maker will need a couple of quarters to correct its inventory. Here are other notable premarket movers: Robinhood (HOOD US) falls 2.3% as Barclays cut its rating to underweight from equal weight ChargePoint (CHPT US) shares rose as much as 2.1% in US premarket trading, after the electric vehicle charging network operator’s second-quarter revenue came in ahead of estimates, with analysts positive on the company’s gross margin performance amid supply-chain woes HP Enterprise (HPE US) narrowed its full-year adjusted earnings per share forecast and reported in-line revenue for the third quarter. Analysts were bracing for the worst, after Dell’s disappointing outlook last week. Shares fall 1% in premarket trading PayPal shares rise 2.9% in premarket trading after Bank of America upgraded its rating on the payments stock to buy from neutral previously Morgan Stanley resumes coverage of Welltower (WELL US) at overweight and a $90 PT with the broker bullish on a recovery for the US senior housing market “What’s clear is that predicting this market is not clean cut,” Angeline Newman, a managing director at UBS Global Wealth Management, said on Bloomberg Television. “We are living in a world where conflicting economic signals are making the path of monetary policy very difficult to determine.” Market bets on a shallower trajectory for Federal Reserve tightening are receding, raising the prospect of more losses for stocks and bonds in an already difficult year. Investors are scouring incoming data for clues on the policy path, with August US jobs figures on Friday the next key report. European shares reversed earlier gains to trade at the lowest level in more than six weeks, after Euro-area inflation accelerated to another all-time high, strengthening the case for the European Central Bank to consider a jumbo interest-rate hike when it meets next week. ECB Governing Council member Joachim Nagel urged a “strong” reaction, hinting at a 75bps hike just as Europe braces for an energy disaster with winter coming. Paradoxically this pushed the EUR to session lows. In Europe, the Stoxx 50 fell 0.7%, with the FTSE 100 lagging, dropping 1%. Energy and autos slump while utilities is the worst-performing sub-index in the European gauge on Wednesday, extending their selloff to a fourth session as investors fret over Russian gas supplies at the start of a three-day halt of the key Nord Stream pipeline. Slump is lead by Drax (-4.3%), National Grid (-4%), Italy’s Terna (-2.3%), Germany’s Uniper (-4%) and Fortum (-3%). Some renewables also take a hit, including Orsted (-2.4%) and Verbund (-1.4%). Citi says utilities had to put up more than EUR100b of additional collateral versus 2020 levels because of record levels of future power and gas prices. Here are the biggest European movers: ASML rises as much as 3.4%. It is among the “most attractive names” in the current uncertain macro environment, UBS says in a note upgrading the semiconductor-equipment company to buy from neutral. Stadler Rail shares climb as much as 6% after reporting mixed results, with 1H sales beating estimates and a strong order intake, offset by more cautious comments on margins and a negative currency impact, according to analysts. CFE shares surge as much as 23% after the Belgian construction and development company’s 1H results, with Degroof raising its estimates. Ackermans & van Haaren rises as much as 7.5% after KBC upgrades its rating on the industrial holding company to buy from hold following first-half results, which the broker describes as “resilient” in tough times. Lundbergforetagen shares rise as much as 5.5%, the most since May, after DNB reiterated its buy recommendation for the Swedish real estate investment firm, while trimming its PT to SEK485 from SEK530. Utilities are among the worst-performing sub-index in the European gauge on Wednesday, extending their selloff to a fourth session as investors fret over Russian gas supplies at the start of a three-day halt of the key Nord Stream pipeline. European energy stocks underperform for a second day after oil erased initial gains on Wednesday to head for a third monthly decline as rate hikes by major central banks and China’s Covid Zero strategy increase the likelihood of a global economic slowdown. Brunello Cucinelli shares fall as much as 7.2% after the Italian luxury fashion company reported 1H results; Deutsche Bank says the update is “largely as expected” with guidance appearing “relatively conservative.” Europe's weakness was sparked by the ongoing rout in oil, which headed for a third monthly drop - the longest losing run in more than two years - hampered by the likelihood of slower global growth, yet which as Goldman says is now the best asset to own having priced in a recession more than any other asset class. European natural gas advanced after a two-day slump, with traders weighing risks to Russian supplies against the continent’s drastic efforts to curb the energy crisis. Earlier in the session, Asian equities climbed in a mixed day that saw tech shares advance but Japan’s bourses retreat as traders digested China’s weak economic data while technology stocks rebounded. BYD Co. plunged in Hong Kong after Warren Buffett’s Berkshire Hathaway Inc. trimmed its stake in the electric vehicle maker. The MSCI Asia Pacific Index erased an earlier loss to trade up as much as 0.6%. Chinese benchmarks underperformed the region after factory activity contracted on power shortages spurred by a historic drought. Stocks were also weak in Hong Kong as Warren Buffett’s sale of shares in BYD Co. fueled general risk-off sentiment, countered by advances in the city’s tech shares. Traders also weighed US job and consumer confidence numbers, which were seen backing the Federal Reserve’s rate-hike plans. “The dented risk sentiment from tighter-for-longer central bank policies is likely to weigh on sentiment in the region,” Jun Rong Yeap, a market strategist at IG Asia Pte, wrote in a note. He added that further headwinds including Covid lockdowns may weigh on Chinese equities. Taiwanese stocks rose, even amid a potential escalation of cross-strait tensions, while South Korean shares also advanced on gains in tech names. Indian and Malaysian markets were closed for holidays. Investors are also contending with mounting friction between Beijing and Taipei after Taiwanese soldiers fired shots to ward off civilian drones and evaluating the latest Chinese data, which indicated factory activity shrank for a second month. Power shortages, a property sector crisis and Covid outbreaks all took a toll. In Japan, stock dropped amid concerns over the potential for Federal Reserve tightening and data that showed weak factory activity in China.  The Topix fell 0.3% to 1,963.16 as of the market close Tokyo time, while the Nikkei 225 declined 0.4% to 28,091.53. Sony Group Corp. contributed the most to the Topix’s decline, decreasing 1.7%. Out of 2,169 stocks in the index, 683 rose and 1,381 fell, while 105 were unchanged. “US stocks, which plummeted on the Jackson Hole meeting last week, have fallen further and Japan stocks are matching that,” said Kiyoshi Ishigane, a chief fund manager at Mitsubishi UFJ Kokusai Asset Management. In Australia, the S&P/ASX 200 index fell 0.2% to close at at 6,986.80, weighed by losses in mining and energy shares.  Asia-Pacific energy-related stocks fell as oil headed for its third straight monthly decline, the longest losing run in more than two years, on prospects for slower global growth. In New Zealand, the S&P/NZX 50 index fell 0.4% to 11,601.10 In FX, the Bloomberg dollar spot index rose again, up 0.2%, as it reversed a loss as the greenback rebounded, with most Group-of-10 peers swinging to a loss in the European session. AUD and JPY are the strongest performers in G-10 FX, NOK and CHF underperform. The euro fell to a session low of $0.9974 as euro-area inflation accelerated to another all-time high of 9.1% from a year ago, exceeding the 9% median estimate in a Bloomberg survey. Norway’s krone plunged by 1% against the euro and even more versus the dollar after news that the nation’s central bank will ramp up its purchases of foreign currency to 3.5 billion kroner ($350 million) a day in September from 1.5 billion in August as it deposits energy revenue into the $1.2 trillion sovereign wealth fund. The pound neared the lowest since March 2020 against the greenback that was touched yesterday, yet options suggest a short-squeeze could be due. The Australian and New Zealand dollars held up well amid month-end demand after earlier gains in US stock futures following China PMI data. The yen was steady. Board member Junko Nakagawa said that the Bank of Japan’s forward guidance for interest rates isn’t necessarily directly linked with its Covid funding program. In rates, Treasuries are off session lows as US trading gets under way Wednesday, selloff paced by gilts with UK yields higher by 9bp-13bp. US 2Y barely exceeded Tuesday’s multiyear high. US yields are higher by 3bp-5bp, 2- year rose as much as 5.3bp to 3.275%, Treasury 10-year yield adds 4bps to around 3.14%.  Curve spreads are little changed, inverted 5s30s around -5.7bp, near lowest level since mid June; month-end index rebalancing at 4pm New York time will extend the duration of Bloomberg Treasury index by an estimated 0.12 year. European bonds slide across the curve, led by gilts, after hotter-than-expected euro-area inflation data. Gilts 10-year yield is up 11 bps to 2.82%, while German 10-year yield rises 3.6bps to 1.55%. Peripheral spreads widen to Germany with 10y BTP/Bund adding 2.2bps to 233.4bps. Bitcoin has managed to reclaim USD 20k after slipping to a USD 19.7k low, overall the crypto remains in fairly tight sub-1k parameters. In commodities, crude futures extend declines. WTI drifts 2.6% lower to trade near $89, while Brent falls 3% to the $96 level. Base metals are mixed; LME tin falls 2.5% while LME nickel gains 1.4%. Spot gold falls roughly $10 to trade near $1,714/oz. Spot silver loses 1.5% near $18. Looking to the day ahead now, data releases include the flash CPI reading for the Euro Area in August, as well as the country readings for France and Italy. On top of that, there’s the ADP’s new report of private payrolls for August and the MNI Chicago PMI for August. Finally, central bank speakers include the Fed’s Mester and Bostic. Market Snapshot S&P 500 futures little changed at 3,986.25 STOXX Europe 600 down 0.6% to 417.39 MXAP up 0.2% to 158.39 MXAPJ up 0.3% to 519.46 Nikkei down 0.4% to 28,091.53 Topix down 0.3% to 1,963.16 Hang Seng Index little changed at 19,954.39 Shanghai Composite down 0.8% to 3,202.14 Sensex up 2.7% to 59,537.07 Australia S&P/ASX 200 down 0.2% to 6,986.76 Kospi up 0.9% to 2,472.05 German 10Y yield little changed at 1.54% Euro down 0.1% to $1.0003 Gold spot down 0.5% to $1,715.78 U.S. Dollar Index up 0.14% to 108.92 Top Overnight News from Bloomberg Forget about a soft landing. Federal Reserve Chair Jerome Powell is now aiming for something much more painful for the economy to put an end to elevated inflation. The trouble is, even that may not be enough. It’s known to economists by the paradoxical name of a “growth recession.” France said the nation’s natural gas storage will be full in about two weeks, enabling the country to ride out the coming winter even as Russia turns the screw on deliveries of the fuel UK statisticians decided that a £400 ($466) government grant to help households with energy won’t lower headline inflation numbers, a move that will protect the returns of some bond holders but increase payments made by both the Treasury and consumers Sweden’s Riksbank hopes to be able to avoid a recession as it is prepared to do what is necessary to bring soaring inflation back to the central bank’s 2% target, deputy governor Anna Breman said The People’s Bank of China set stronger-than-expected yuan fixings for six sessions to Wednesday and people familiar with the matter said at least two local banks pushed back against the weakness when submitting data for the reference rate. Traders still expect it to weaken past the psychological 7 per dollar level, even if the moves slowed the decline China’s retail activity flatlined in August with e-commerce demand especially weak, according to satellite data, suggesting that consumer caution due to the ongoing Covid Zero policy and elevated unemployment remain major drags on the world’s second-largest economy Russia’s seaborne crude shipments to Asia have fallen by more than 500,000 barrels a day in the past three months, with flows to the region hitting their lowest levels since late March A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks were mostly negative following the losses across global counterparts owing to recent hawkish central bank rhetoric and with geopolitical concerns stoked after Taiwan fired warning shots at a Chinese drone. ASX 200 was subdued by weakness in commodity-related stocks with the energy sector the worst hit after the recent slump in oil prices, while a surprise contraction in Construction Work added to the headwinds and feeds into next week’s GDP release. Nikkei 225 declined but held above 28k after encouraging Industrial Production and Retail Sales. Hang Seng and Shanghai Comp were pressured amid a heavy slate of earnings releases and with US regulators said to have selected a number of US-listed Chinese companies for audit inspections including Alibaba, while participants also reacted to the Chinese PMI data in which the headline Manufacturing PMI topped estimates but remained in contraction territory. Top Asian News Japanese PM Kishida said he has fully recovered from COVID-19 and returned to normal duty. Kishida added that they will begin administering Omicron variant targeted vaccines earlier than planned, while he announced to increase the daily upper limit of entrants to Japan to 50k on September 7th and will look into further loosening of border controls. South Korean vice-Finance Minister says they received "positive signs" during talks with FTSE Russell, FX environment has not emerged as a hurdle in discussions. Possibility is high for S. Korea's inclusion to the FTSE's WGBI watch-list in September Chinese NBS Manufacturing PMI (Aug) 49.4 vs. Exp. 49.2 (Prev. 49.0); Non-Manufacturing PMI (Aug) 52.6 vs Exp. 52.2 (Prev. 53.8) Chinese Composite PMI (Aug) 51.7 (Prev. 52.5) Japanese Industrial Production Prelim. (Jul P) 1.0% vs. Exp. -0.5% (Prev. 9.2%); Retail Sales YY (Jul) 2.4% vs. Exp. 1.9% (Prev. 1.5%) Australian Construction Work Done (Q2) -3.8% vs. Exp. 0.9% (Prev. -0.9%) Initial upside in Europe faded as broader price action took another hawkish turn amid inflation data, Euro Stoxx 50 -1.0%. Stateside, futures are mixed around the unchanged mark, ES -0.2%, though are similarly well off best levels with data and Fed speak due. Top European News UK's ONS rules that energy bill rebate does not directly affect inflation statistics directly; "concluded that payments under the scheme should be classified as a current transfer paid by central government to the households sector." i.e. the payment is being treated as a fiscal transfer as opposed to a price adjustment. UK government could reportedly fast-track nuclear power projects to help ease the energy crisis, according to The Telegraph. UK government is considering caps on rent to protect social housing tenants as part of a wider effort to ease the soaring costs of living, according to FT. Former UK Chancellor Sunak warned that Foreign Secretary Truss's campaign promises could increase inflation and borrowing costs, according to FT. German Economy Minister Habeck said they would reject the idea of 'capping' energy prices; Finance Minister Lindner says the hurdle to an excess profit tax is high (re. energy); Chancellor Scholz says the early steps on energy means we will get through the winter period, will take measures to ensure energy prices "do not go through the roof". FX A session of gains for the DXY with upside spurred by haven bids, as the broader market sentiment deteriorated shortly after the European cash open. EUR/USD sits as one of the laggards with minimal immediate reaction seen in wake of hotter-than-expected August flash CPI for the EZ, although the upside for the pair may be capped by Nord Stream 1 jitters. The antipodeans are mixed as AUD leads the gains as the outperforming G10 peer on the back of better-than-expected Chinese official PMI metrics; Petro-currencies are softer as the slide in crude oil resumes. The JPY remains somewhat resilient in the face of the USD strength, likely amid the risk aversion across the market. Fixed Income Core benchmarks experienced a fairly contained start to the session, though this proved to be shortlived and pronounced action occurred on inflation release. Bunds remain sub-147.50, though off worst, as initial French-CPI induced upside was reversed following hot Italian and subsequent EZ-wide Flash August HICP; market pricing for 75bp remains just above 50%. Gilts are the standout laggard as on the ONS treats the Energy Support as a fiscal transfer, thus Ofgem Energy adj. will be fully reflecting in CPI; Gilts sub-130 ticks in wake. USTs are directionally downbeat but comparably contained in terms of magnitudes, ADP and Fed's Bostic/Mester due. Commodities WTI and Brent futures resumed selling off in tandem with the broader risk-mood. Dutch TTF futures are on a firmer footing today following yesterday’s near-10% slump. Spot gold is pressured by the firmer Dollar and approaches USD 1,700/oz to the downside. 3M LME copper has been extending on gains with a boost from the above-forecast Chinese PMI metrics, but the contract remains under USD 8,000/t. OPEC+ JTC upgrades 2022 oil market surplus forecast by 100k BPD to 900k BPD, according to a report via Reuters; sees market surplus rising to 1.4mln BPD in November from 0.6mln BPD in October. OPEC+ JTC report says rising energy costs "may lead to a more significant reduction in consumptions towards year-end", via Reuters. US Private Inventory Data (bbls): Crude +0.6mln (exp. -1.5mln), Cushing -0.6mln, Gasoline -3.4mln (exp. -1.2mln), Distillates -1.7mln (exp. -1.0mln). Oman crude OSP calculated at USD 97.00bbl for October vs. USD 103.21bbl in September, according to DME data. Central Banks BoJ's Nakagawa says the central bank decided to maintain easy policy bias in July, and hopes to discuss at the September meeting whether it should continue doing so based on data. Must remain vigilant to downward economic pressure from pandemic. BoJ is to conduct fixed-rate purchase operations for the cheapest-to-deliver 357th JGB notes for an extended period of time as of September 1st. ECB's Rehn says the economic outlook has darkened, normalisation of monetary policy progressing consistently. Rates will increase in September, will be necessary to hike further at future gatherings. Riksbank's Bremen says it is of the utmost importance to defend the inflation target as anchor for price setting and wage formation; adds inflation is too high. Inflation outcomes have been higher than expected recently, inflation risks are on the upside. Does not rule out a 50bps or 75bps hike at the 20th September meeting. Norges Bank Currency Purchases (Sep) NOK 3.5bln (prev. NOK 1.5bln) US Event Calendar 07:00: Aug. MBA Mortgage Applications -3.7%, prior -1.2% 08:15: ADP resumes publication of jobs report with new methodology 08:15: Aug. ADP Employment Change, est. 300,000 09:45: Aug. MNI Chicago PMI, est. 52.1, prior 52.1 Central Banks 08:00: Fed’s Mester Discusses Economic Outlook 18:00: Dallas Fed Holds Event to Introduce New President Lorie Logan 18:30: Fed’s Bostic speaks on role of fintech in financial inclusion DB's Henry Allen concludes the overnight wrap Was back in the office yesterday after a two-week break but needed an extra day recovery before I started the EMR again as Monday was the twin's 5th birthday. To say they were excited would be an understatement. More is to come as they have their birthday party and 30-40 kids coming round our house on Sunday. After another dry spell Sunday brings rain again apparently! We're used to this adversity as the first day of our Cornwall holiday saw a dramatic storm and the first rain for 2-3 months. A few days of typically chilly, breezy, and slightly wet UK beach weather followed. In my second week off back home I played 5 rounds of golf so that was the proper holiday. My handicap is now the lowest it's ever been so there's life in the multiple operated on old dog yet! Back to the real world now though and not only has the world got darker since I've been off but so have work hours. I always take these two weeks off every year and it always marks a depressing reality that winter is coming. Before I go away it's just about light when I get up. However, by the time I get back from holiday it's firmly dark waking up for the EMR. It'll be a good 7-8 months before I see light again on the early EMR shift. The dark mirrors the mood in markets which has seen a rapid deterioration since Jackson Hole, with the S&P 500 shedding a further -1.10% yesterday to move back beneath the 4000 mark. The index is now -7.85% below its mid-August intra-day highs and -5.08% since last Thursday's pre Jackson Hole close. We're still +8.71% above the June lows though. Ironically, strong US data releases prompted the latest sell-off, as they showed that consumer confidence was more resilient and the labour market was tighter than expected. But in today’s high-inflation environment, good economic news is enabling the Fed to be even more aggressive on rate hikes, and the market developments yesterday were very much in keeping with that theme. We actually reached an important milestone yesterday too, as the futures-implied Fed funds rate for December ticked up +3.0bps to 3.73%, which surpasses the previous high of 3.72% seen back in June after the bumper CPI report for May came in. So for 2022 at least, markets are pricing in their most aggressive pace of hikes to date which makes a lot more sense than where we were a few weeks ago. In terms of the specifics of those data releases, an important one was the JOLTS data, which showed that job openings unexpectedly rose to 11.239m in July (vs. 10.375m expected). That marked a break in the trend of 3 consecutive declines, and shows that the Fed still have significant work to do if they want to bring labour demand and labour supply back into balance. Another indicator we’ve been tracking is the number of job openings per unemployed worker. That also bounced back up to 1.98 in July, which is just shy of its record high of 1.99 in March. So even with 225bps of Fed hikes by the July meeting, that measure of labour market tightness has barely budged. Then we got the Conference Board’s consumer confidence data for August, which came in at a 3-month high of 103.2 (vs. 98.0 expected), with rises for both the expectations and the present situation indicators. This positive news on the economy gave investors growing confidence that the Fed are set to keep hiking into 2023, and sent yields on 2yr Treasuries up +1.8bps to 3.44%. That’s their highest closing level since the GFC, and on an intraday basis they even hit 3.49% at one point. Longer-dated yields also increased, albeit to a lesser extent, with those on 10yr Treasuries flat. FOMC Vice Chair and New York Fed President Williams emphasised the point, saying that rates will need to stay in restrictive territory “for some time”, so the days of pricing rate cuts early next year are over for now. The fed funds futures curve currently has policy rates peaking around 3.90% in the second quarter of next year, with the first full -25bp cut from those highs not until November of next year, as of last night's close. The trend towards increasing hawkishness was echoed at the ECB as well yesterday, where the prospect of a 75bps move next week is being increasingly discussed by officials. In the last 24 hours alone, we heard from Estonia’s Muller, who said that “75 basis points should be among the options for September given that the inflation outlook has not improved”. Furthermore, Slovenia’s Vasle said that he favoured a hike “that could exceed 50 basis points”. Germany’s Nagel echoed the ECB chatter from last week, that they should not delay rate hikes just for fear of recession, instead arguing the call for earlier rate hikes to prevent later pain. Further, Pierre Wunsch of Belgium argued the current bout of inflation had structural roots, which called for a quick move to restrictive policy. While neither Nagel nor Wunsch explicitly endorsed a 75bp hike, their comments don't push back on it. So overall it’s clear that officials are contemplating a larger hike, and overnight index swaps continue to price a 75bps move as more likely than 50bps for the September decision, closing yesterday pricing +65.8bps worth of hiking for next week’s meeting. It's set to be a big one! We should get some additional clues on how fast the ECB might hike with the release of the flash CPI data for the Euro Area this morning. But there weren’t any big surprises in either direction from the country readings ahead of that yesterday. In Germany, the EU-harmonised reading rose to a fresh high of +8.8%, but that was as expected, and it was a similar story in Spain where the harmonised reading fell back to +10.3% as expected. A complicating factor for the ECB relative to the Fed is the stagflationary impulse coming from the ongoing energy shock, where prices have soared to new records in the last week. However, the last 24 hours brought some further declines that built on Monday’s moves lower, with natural gas futures coming down -7.21% to €253 per megawatt-hour. German power prices for next year came down by an even bigger -21.05%, on top of the -22.84% decline on Monday, although even that -39.09% total decline hasn’t erased the previous week’s gains. One other thing to keep an eye out for from today will be the start of maintenance on the Nord Stream pipeline, which is set to last for 3 days if you take the statement at face value. But as with the shutdown in July, there are concerns that gas flows won’t resume again afterwards, so that’s definitely one to watch. Oil futures took a big slide, with brent futures down -4.79% and WTI down -5.54%. The proximate cause appeared to be unsubstantiated rumours that the US and Iran had reached a deal to reinstate the nuclear deal. However, a US State Department spokesperson later denied the rumours, and we’ve already heard from OPEC+ that any supply increase from Iran would be offset by supply cuts among the cartel. So if oil prices stay around these levels, perhaps the market is pricing in more global demand slowdown than unmitigated supply expansion. For sovereign bond yields, the more hawkish noises from the ECB outweighed the effect of falling energy prices yesterday, with the 2yr German yield up +6.1bps. Similarly to the US, the increases in yields were concentrated at the more policy-sensitive front end of the curve, with longer-dated yields seeing smaller moves, including those on 10yr bunds (+0.8bps), OATs (+0.7bps) and BTPs (+1.7bps). On the equity side, the risk-off tone took the major indices lower on both sides of the Atlantic, with the S&P 500 (-1.10%) experiencing a 3rd consecutive decline. The more cyclical sectors led the moves lower, and the more interest-sensitive megacap tech stocks continued to struggle, with the FANG+ index down a further -2.04%. In Europe, the STOXX 600 was down -0.67% yesterday, although that decline was somewhat exaggerated by the fact that London equities were returning after Monday’s declines. Indeed, the DAX actually ended the day up +0.53%, although that was the exception as the CAC 40 (-0.19%) and the FTSE MIB (-0.08%) both posted modest declines. The more negative mood of the last few days has continued into today’s Asian session, with the Nikkei (-0.40%), Hang Seng (-0.39%) and the Shanghai composite (-1.18%) all losing ground this morning despite earlier better-than-expected economic data from China and Japan. Starting with the former, both manufacturing (49.4 vs 49.2 expected) and non-manufacturing PMI (52.6 vs 52.3 expected) were ahead of estimates but the manufacturing gauge stayed in contraction territory. In Japan, we got strong beats for industrial production (+1.0% vs -0.5% expected, MoM) and retail sales (+0.8% vs +0.3% expected, MoM). US Treasury yields are up across the curve, with the 2y yield (+2.1bps) gains ahead of 10y ones (+0.9bps). To the day ahead now, and data releases include the flash CPI reading for the Euro Area in August, as well as the country readings for France and Italy. On top of that, there’s German unemployment for August, Canada’s GDP for Q2, and in the US there’s the ADP’s report of private payrolls for August and the MNI Chicago PMI for August. Finally, central bank speakers include the Fed’s Mester and Bostic. Tyler Durden Wed, 08/31/2022 - 07:44.....»»

Category: blogSource: zerohedgeAug 31st, 2022

Futures Flat After Hawkish Fed Comments, Dollar Ascent Resumes

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

Category: blogSource: zerohedgeAug 24th, 2022

Futures Rise In Morbid Volumes With All Eyes On 50% Fib Retracement Level

Futures Rise In Morbid Volumes With All Eyes On 50% Fib Retracement Level European stocks and US futures rallied on the last day of the week, however traded well off session highs in extremely low-volume trading and tracked the sudden drop in oil, as investors pressed bets that easing inflation will allow the Fed to pivot to less aggressive rate hiking (if not ease outright). S&P 500 and Nasdaq 100 contracts rose about 0.3%, with both underlying indexes set to post their longest sequence of weekly gains since November. Treasury yields were steady at 2.87% and the US dollar rose but was set for the worst week since May. Crude oil fell, reducing its biggest weekly gain in about four months. Gold headed for a fourth weekly gain and Bitcoin was summarily smacked down below the $24,000 level yet again as crypto bears fight to preserve the upper hand. For the second day in a row an attempt to void the bear market rally narrative by pushing spoos above the 50% fib retracement level is being defended by bears, with futures trading at 4222, or right on top of the critical level, which also doubles as the 100DMA. If broken through it could lead to substantial upside gains as even more bears throw in the towel. In premarket trading, Alibaba led a premarket decline in US-listed China stocks after some of the nation’s largest state-owned companies announced plans to delist from American exchanges. Bank stocks traded higher, set to gain for a fourth straight day as investors continue to pile into stocks amid signs that inflation is cooling. In corporate news, Huobi Group founder Leon Li is in talks with a clutch of investors to sell his majority stake in the crypto-exchange at a valuation of as much as $3 billion. Here are some of the other notable premarket movers: Rivian (RIVN US) shares fall 1.4% in premarket trading after the electric vehicle-maker forecast a bigger adjusted Ebitda loss for the full year than previously expected. Expensify (EXFY US) shares fall 14% in premarket trading after the software company’s second-quarter revenue missed the average analyst estimate. Toast (TOST US) shares soar 15% in premarket trading after the company boosted its revenue guidance for the full year and beat analyst estimates. Chinese stocks in US slip in premarket trading after China Life Insurance (LFC US), PetroChina (PTR US) and Sinopec (SNP US) announced plans to delist American depository shares from the NYSE. Ciena (CIEN US) gains 2.9% in premarket trading as Morgan Stanley upgrades its rating on to overweight with strong quarters seen ahead for the telecoms and networking equipment firm. Co-Diagnostics (CODX US) shares plunge as much as 40% in US premarket trading, after the molecular diagnostics firm flagged lower volumes for its Covid-19 test. Olo (OLO US) falls 31% in premarket trading, after the restaurant delivery platform cut revenue guidance. Phunware (PHUN US) falls almost 7% in premarket trading after the enterprise cloud platform posted revenue and Ebitda that missed the average estimate. Poshmark (POSH US) gave a weaker-than- expected quarterly revenue forecast as the online marketplace for second-hand goods sees sales growth being held back by macro pressures. The stock fell about 5% in postmarket trading on Thursday. SmartRent’s (SMRT US) lowered full-year guidance represents a more attainable earnings outlook for the smart-home automation company, Cantor Fitzgerald said. Shares fell 16% in postmarket trading. Traders pared back bets on Fed rate hikes after a report on Thursday showed US producer prices fell in July from a month earlier for the first time in over two years. That added to Wednesday’s data on slower increases in consumer prices to provide signs of cooling but still troubling inflation. Swaps referencing the Fed’s September meeting point to some uncertainty over whether a half-point or another 75 basis-point rate hike is on the cards. Working hard to prevent stocks from rising even more, in the latest US central banker comments, San Francisco Fed President Mary Daly said inflation is too high, adding she anticipates more restrictive monetary policy in 2023. Her baseline is a half-point September hike but she’s open to another 75 basis-point move if necessary, Daly said in a Bloomberg Television interview. “The macroeconomic environment may be starting to improve a little bit, with a peak in US CPI calling into question the need to hike rates aggressively,” economists at Rand Merchant Bank in Johannesburg said. “Inflation is still high and the Fed will still need to increase rates, but the situation is not as bad as many had feared.” European stocks erased early gains as energy stocks fell with crude oil futures and investors weighed the impact of recent macroeconomic data on central bank policy. The Stoxx Europe 600 index fell 0.1% by 12:03 p.m. in London after gaining as much as 0.5% earlier. Health care giant GSK Plc was among outperformers, trimming a rout this week that was driven by worries about Zantac litigation, with some analysts suggesting the selloff may have been extreme. Elsewhere, travel and leisure was lifted by gains for Flutter Entertainment Plc following earnings, while consumer staples and miners declined. The region’s main stocks benchmark has risen about 10% since early July, with gains this week spurred by softer-than-expected US inflation data. Still, many investors are skeptical over the impact the report will have on monetary policy. “We’re having another moment where the market is not listening to central banks,” said Tatjana Greil Castro, co-head of public markets at Muzinich & Co. “Marginally, investors are very reluctant to sell anything and want to buy,” she told Bloomberg Television. Paradoxically, at the same time, data from Bank of America showed outflows from European equity funds continued for a 26th week at $4.8 billion. The recent bounce for the region’s benchmark is likely to fizzle out in the absence of a pickup in economic growth, BofA’s strategists said. Here are the biggest European movers: Flutter shares rise as much as much as 13% after the gambling firm reported 1H earnings that beat estimates. The strong update was led by the US and Australia, according to Goodbody. GSK shares rise as much as 5% after its worst two-day rout on Zantac litigation worries. In response to the selloff on Zantac, GSK downplayed cancer risks from ranitidine and said it will vigorously defend all claims. Sanofi, also caught up in the Zantac-related selloff, rises as much as 3.2%, while Haleon edges up as much as 2%. Telecom Italia gains as much as 9.1% following a Bloomberg News report that Italy’s far-right Brothers of Italy party is promoting a plan to take the phone company private and sell off its in a bid to cut its debt pile by more than half. Nexi shares surge as much as 7.4% amid a Reuters report that the payment firm has received several unsolicited approaches from private equity firms, including Silver Lake, to take the company private. Boozt shares rise as much as 18%, the most since October 2020, with DNB (buy) highlighting a strong beat on the bottom line for the Swedish ecommerce retailer. Argenx shares rise as much as 3.7% after KBC reiterates its buy recommendation, saying the biotech is executing on schedule after yesterday’s European approval for Vyvgart, and with regulatory filing submitted in China. Kingfisher shares drop as much as 4.2% after UBS cut its recommendation on the stock to sell from neutral, citing a softening outlook for the UK do-it-yourself (DIY) and do-it-for- me (DIFM) categories. 888 Holdings shares drop as much as 16%, the most since February 2015, after the gambling company reported results and forecast 2H revenue will be in line with 1H. Galenica shares fall as much as 2.5%, with Credit Suisse recommending staying put due to “demanding” valuation. Asian stocks rose to a two-month high as Japan lifted the region higher in a catch-up rally, with traders digesting another downside surprise in US inflation. The MSCI Asia Pacific Index rose as much as 0.7%, poised for a third day of gains. Japan’s Topix Index added 2% after traders returned from a holiday, while markets in the rest of the region were mixed. Chinese shares fluctuated in a narrow range. Concerns on US inflation eased further after an unexpected month-on-month fall in July’s producer price index, which came a day after slower-than-expected US consumer prices. Stocks were initially strong overnight, before the rally faltered on concerns it may have gone to far. Gains in Asia were more modest on Friday, following hawkish commentary from a Fed speaker.  Some optimism has emerged across Asia this week as traders bet on slower interest-rate increases by the Fed amid easing price pressures. The regional stock benchmark headed for a fourth weekly gain, the longest streak since January 2021. Still, the gauge is down more than 15% this year, trailing other equity benchmarks in the US and Europe. “Clearly in the last month and a half, people sort of moved from that inflationary fear to the Goldilocks scenario. And I think that gives a bit of time for reflection,” Joshua Crabb, head of Asia Pacific equities at Robeco, said in a Bloomberg TV interview. The current earnings season is critical because “we’re also gonna see how much demand destruction that inflation is gonna put forward.” Australia's S&P/ASX 200 index fell 0.5% to close at 7,032.50, dragged by losses in mining and health shares. Still, the benchmark climbed 0.2% for the week in its fourth straight week of gains.  The materials sub-gauge contributed most to the gauge’s decline on Friday after iron ore fell, as a report showed stockpiles of the steel-making ingredient are still rising. In New Zealand, the S&P/NZX 50 index fell 0.3% to 11,730.52. The nation’s food prices surged 7.4% from a year earlier in July, the largest increase in four months, according to data released by Statistics New Zealand Indian stocks clocked their longest stretch of weekly gains since the middle of January as a pickup in foreign buying pushed key indexes higher.  The S&P BSE Sensex rose 0.2% to 59,462.78 in Mumbai, taking its weekly gains to almost 2%. This was the fourth week of advance for the key index. The NSE Nifty 50 Index also climbed 0.2% on Friday. Of the 30 stocks in the Sensex, half fell and the rest climbed. Reliance Industries offered the biggest boost to the key gauge.  Thirteen of 19 sectoral sub-indexes compiled by BSE Ltd. rose, led by a gauge of oil and gas companies.  Foreign investors have bought a net $3.2 billion of Indian shares since the end of June through Aug. 10. That’s after dumping about $33 billion in the previous nine months as concerns over the Federal Reserve’s aggressive tightening boosted the dollar and spurred outflows from emerging market assets. “FPIs flows were positive this week. With results season coming towards a close, market focus will shift towards macro factors that includes inflation, central bank rate action, oil prices and recession concerns in key economies globally,” Shrikant Chouhan, head of equity research at Kotak Securities wrote in a note. In FX, Bloomberg dollar spot index is in a holding pattern, up about 0.1%. NZD and AUD are the strongest performers in G-10 FX, SEK and GBP underperform. The Swedish krona led losses after weaker-than-expected inflation data, with the pound also lagging after stronger-than-expected data showed the UK economy shrank in the second quarter. The yen also underperformed. The Canadian dollar and Norwegian krone led gains, with NOK/SEK hitting the highest since April In rates, Treasuries were slightly richer across the curve with gains led by long-end, although futures remain near bottom of Thursday’s range. Curve mildly flatter, but spreads broadly hold Thursday’s steepening move. Gilts underperform after raft of UK data including 2Q GDP which contracted less than expected. US yields richer by as much as 4bp across long-end of the curve with 5s30s spreads steeper by more than 2bp on the day; 10-year yields around 2.865%, richer by 2bp on the day and outperforming bunds, gilts by 3.5bp and 5.5bp in the sector. Gilts underperform bunds and Treasuries, trading about 3-4bps higher across the yield curve after UK 2Q GDP contracted less than expected, with traders raising BOE tightening bets. German 10-year yield briefly rose above 1%, now up about 2bps to 0.99%. Peripheral spreads widen to Germany. Treasuries 10-year yield down 1 bps to 2.87%. In commodities, WTI crude is trading slightly lower at ~$94, within Thursday’s range, and gold is down close to $3 at ~$1,787 Looking to the day ahead now, and data releases include the UK’s GDP reading for Q2, Euro Area industrial production for June, and in the US there’s the University of Michigan’s preliminary consumer sentiment index for August. Market Snapshot S&P 500 futures up 0.6% to 4,234.25 STOXX Europe 600 up 0.4% to 442.02 MXAP up 0.6% to 163.27 MXAPJ up 0.2% to 531.44 Nikkei up 2.6% to 28,546.98 Topix up 2.0% to 1,973.18 Hang Seng Index up 0.5% to 20,175.62 Shanghai Composite down 0.1% to 3,276.89 Sensex up 0.3% to 59,482.94 Australia S&P/ASX 200 down 0.5% to 7,032.51 Kospi up 0.2% to 2,527.94 German 10Y yield little changed at 1.00% Euro down 0.2% to $1.0295 Brent Futures up 0.3% to $99.90/bbl Brent Futures up 0.3% to $99.87/bbl Gold spot down 0.1% to $1,787.09 U.S. Dollar Index up 0.25% to 105.35 Top Overnight News from Bloomberg Three of China’s largest state-owned companies announced plans to delist from US exchanges as the two countries struggle to come to an agreement allowing American regulators to inspect audits of Chinese businesses The cooler inflation reading for July is welcome news and may mean it’s appropriate for the Federal Reserve to slow its interest-rate increase to 50 basis points at its September meeting, but the fight against fast price growth is far from over, San Francisco Fed President Mary Daly said. China may be ready to curb some of the excess liquidity sloshing in the banking system as it turns its focus to mitigating risks in the financial industry. In the fight against pandemic inflation, Latin America led the world into a new age of tight money. Eighteen months later, there’s not much sign that being first in will help the region to become first out The UK economy shrank in the second quarter for the first time since the pandemic, driven by a decline in spending by households and on fighting the coronavirus A more detailed look at global markets courtesy of Newsquawk Asia-Pc stocks were mixed following a similar indecisive lead from Wall Street where stocks and treasuries faded the initial gains from the softer-than-expected PPI data, although Japan outperformed on return from holiday. ASX 200 was dragged lower by losses across nearly all sectors including the top-weighted financial industry despite the confirmation of a return to profit for IAG, while energy bucked the trend after a recent rebound in oil. Nikkei 225 notched firm gains as it played catch-up to global peers and took its first opportunity to react to the softer inflationary signals from the US, while Softbank was among the top performers as it expects to gain USD 34bln from reducing its stake in Alibaba. Hang Seng and Shanghai Comp were both subdued in early trade amid weakness in property stocks and ongoing COVID-related headwinds, although the Hong Kong benchmark gradually recovered with earnings releases also in the limelight. Top Asian News Japanese PM Kishida plans to hold a meeting on August 15th to address rising goods prices, wages and daily life, while he called for additional measures on dealing with rising food and energy prices, according to Reuters. Jardine Matheson Slumps 9.6% as MSCI Cuts Co. Weight in Indexes Baltic States Abandon East European Cooperation With China Gold Set for Fourth Weekly Gain on Signs Fed to Ease Rate Hikes Asian Gas Prices Rally on Rush by Japan to Secure Winter Supply European bourses are firmer, but action has been relatively contained with newsflow slim, Euro Stoxx 50 +0.2%; however, benchmarks waned alongside US futures following China ADS updates. Currently, ES +0.4% but similarly off best levels amid Chinese stocks announcing intentions to delist their ADSs and reports that Germany is being looked at as a banking base. China Life (2628 HK), PetroChina (857 HK), Sinopec (386 HK) plan to delist ADSs from NYSE; last trading day for China Life expected to be on or after 1st September. Subsequently, China's Securities Regulator says it is normal within capital markets for companies to list and delist. Chinese brokers are reportedly looking at Germany as a banking base amid tensions with the US, via Bloomberg citing sources. SMIC (0981 HK) CEO says increasing geopolitical tensions, elevated inflation and a cyclical downturn in demand for chips has resulted in "some panic" within the industry, via FT. Huawei - H1 2022 (CNY): Revenue -5.9% Y/Y to 301.6bln. Net Profit 15.08bln (prev. 31.39bln Y/Y). Device Business Revenue -25.3% Y/Y. 2022 will probably be the most challenging year historically for our devices business Chinese and Hong Kong regulators are to announce adjustments to the trading calendar for the stock connect Top European News Union Leaders Kick Off Rallies Across UK in Living Cost Protest Baltic States Abandon East European Cooperation With China Swedish Core Inflation Surge Fuels Bets of Faster Rate Hikes JPMorgan Strategists Say US 2Q Earnings Fall 3% Excluding Energy Ukraine Latest: Putin’s Economy in Focus; More Grain on the Move FX DXY attempts to recover from its post-CPI lows as it eyes yesterday’s 105.46 high. EUR, JPY, and GBP are under pressure from the firmer Dollar; EUR/USD eyes some notable OpEx for the NY cut. The non-US Dollars are resilient this morning on the back of the general risk tone across stocks and the rise in commodities. Fleeting SEK upside was seen in wake of inflation data, with the metrics being in-line/below expectations. Fixed Income Core benchmarks are little changed overall on the session and particularly when compared to price action seen earlier in the week. Further pressure seen following the Gilt open in wake of UK GDP metrics. USTs in-fitting with peers and the yield curve, currently, does not exhibit any overt bias Commodities WTI and Brent hold an upside bias in Europe amid the broader risk tone. Spot gold is relatively uneventful as the firming Dollar keeps the yellow metal capped under USD 1,800/oz. Base metals markets are relatively mixed with the market breadth shallow, although LME copper extends on gains above USD 8k/t. US Event Calendar 08:30: July Import Price Index YoY, est. 9.4%, prior 10.7%; MoM, est. -0.9%, prior 0.2% July Export Price Index YoY, prior 18.2%; MoM, est. -1.0%, prior 0.7% 10:00: Aug. U. of Mich. Sentiment, est. 52.5, prior 51.5 Aug. U. of Mich. Current Conditions, est. 57.8, prior 58.1 Aug. U. of Mich. Expectations, est. 48.5, prior 47.3 Aug. U. of Mich. 1 Yr Inflation, est. 5.1%, prior 5.2%; 5-10 Yr Inflation, est. 2.8%, prior 2.9% DB's Jim Reid concludes the overnight wrap This will be the last EMR from me for a couple of weeks as I'm off on holiday. We're going to Cornwall rather than our usual France trip this summer as transporting a child in a wheelchair around a beach was seen as mildly easier than doing the same up and down a mountain. Hopefully this time next year we'll be back in the invigorating mountain air. If you're reading this having originated from Cornwall please don't take offence! However I've never liked beach holidays and I think I'm too old to change my mind. The kids on the other hand can't contain their excitement. So expect me to spend most of my time in an uncomfortable wetsuit trying desperately to ensure that they don't get washed away. Give me the stress of payrolls or CPI any day over that. I'll be gazing longingly from the sea at the golf course next door. Life's been quite a beach for markets of late but the last 24 hours have been a bit strange, as a second successive weaker-than-expected US inflation reading (PPI) actually left longer dated yields notably higher than where they were before the better than expected CPI on Wednesday, and at one point they were +23bps above where they were immediately after the first of these two dovish prints. The S&P 500 also reversed earlier gains of more than +1% to finish lower at -0.07%. Maybe we shouldn't read too much into summer illiquidity but the moves have been a bit all over the place of late. While the combination of below-expectations inflation and worsening labour data (see below) initially drove a dovish-Fed interpretation, the price action reverted throughout the day, and we closed with still around even odds between a 50bp or 75bp hike at the September FOMC meeting (61.8bps implied). When it came to Treasuries, despite the selloff, there was a decent amount of curve steepening, with the 2yr yield climbing +0.4bps whilst the 10yr yield rose by +10.6bps to 2.89%, the highest since July 20th. This helped the 2s10s curve to see its biggest daily steepening move in over 3 months and closing at -33bps, but still having closed inverted 29 for days running. 30yr Treasuries (+14.2bps) hit the highest since July 8 after receiving a lukewarm reception at auction. Maybe the longer end yield rises actually reflect a view that the Fed will be less likely to need to choke the recovery off now inflation is cooling. So maybe yields would have been lower this week with stronger inflation prints? Or is that just the silly season getting to me? To add to the ups and downs, this morning in Asia, 10yr UST yields (-2.73 bps) are edging lower, trading at 2.86% with the 2yr yield down -1.86 bps at 3.20% thus flattening the curve a tad as we go to press. Over in equities, the S&P 500 (-0.07%) was marginally lower last night after increasing more than +1% in the New York morning. Small caps were a big outperformer, with the Russell 2000 index up by +0.31% to reach its highest level since April as the near-term growth outlook still looks OK, whereas the NASDAQ bore the brunt of the gradual duration selloff throughout the day, falling -0.58%. Overnight, contracts on the S&P 500 (+0.14%) and NASDAQ 100 (+0.22%) are moving slightly higher again. In terms of the details of that inflation print, US producer prices fell by -0.5% in July, which was some way beneath expectations for a +0.2% rise, and marks the biggest monthly decline since April 2020 when the economy was experiencing Covid lockdowns. As with the CPI release the previous day, the PPI was dragged down by a sharp fall in energy prices, which fell by -9.0% on the month, and that helped the annual headline measure fall from +11.3% in June down to +9.8% in July. Even if you just looked at core PPI however, the reading was still softer than expected, with the monthly gain excluding food and energy at +0.2% (vs. +0.4% expected), which sent the annual gain down to +7.6%. The prospect that the Fed would be more cautious in hiking rates was given a slight bit of extra support thanks to additional signs that the labour market was softening. The weekly initial jobless claims for the week through August 6 came in at 262k (vs. 265k expected), which is their highest level since November, and the smoother 4-week moving average also rose to a post-November high of 252k. Continuing claims climbed to 1428k, above expectations. Recall, our US economics team has showed that once the 4-week average of continuing claims increases 11% over recent lows near-term recession alarms start sounding. We’re at 1399k on the 4-week moving average on claims, still a reasonable distance from this 11% increase of 1465k. Overall, although the weekly claims data is slowly getting worse, it's still happening in a sea of huge job openings and generally big job growth. Perhaps the labour market is behaving slightly different from usual in that you can have both big job openings but claims edging up because of a sudden skills mismatch post Covid. If so it makes traditional clues to the future direction of the economy more difficult to decipher. For us the US jobs market is still healthy for now. I suspect it won't be in 12 months time but that's a story for another day. For Europe, the newsflow continued to be much more downbeat than in the US of late, as concerns mounted across the continent about the energy situation this winter. Natural gas futures rose a further +1.34% yesterday to €208 per megawatt-hour, putting them at their highest levels since early March just after Russia’s invasion of Ukraine began. Power prices also soared to fresh records, with German prices for next year up +5.24% to €449 per megawatt-hour, whilst French prices were up +6.62% to €615 per megawatt-hour. Governments are coming under increasing pressure to do something about this, and German Chancellor Scholz said yesterday that there would be further relief measures for consumers. Growing concerns about an imminent recession meant that European equities also had a lacklustre day, with the STOXX 600 only up +0.06%. Sovereign bonds also lost ground, with yields on 10yr bunds (+8.2bps), OATs (+8.3bps) and BTPs (+3.8bps) all moving higher on the day, although gilts were the biggest underperformer on this side of the Atlantic with yields up by +10.8bps. Asian equity markets are relatively quiet this morning with the exception of the Nikkei (+2.37%) which is surging and catching-up up after a holiday on Thursday, whilst the Hang Seng (+0.09%), the Shanghai Composite (+0.16%), the CSI (+0.08%) and the Kospi (+0.02%) are all edging up. Elsewhere, the San Francisco Fed President Mary Daly in her overnight remarks indicated that a 50 bps interest rate hike in September “makes sense” following two back-to-back 75-basis-point hikes in June and July given recent economic data including on inflation. However, she added that she is open for a bigger rate hike if the data showed it was needed. To the day ahead now, and data releases include the UK’s GDP reading for Q2, Euro Area industrial production for June, and in the US there’s the University of Michigan’s preliminary consumer sentiment index for August. Tyler Durden Fri, 08/12/2022 - 08:08.....»»

Category: dealsSource: nytAug 12th, 2022