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Gold futures tally a gain of 1.1% for the week

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Category: topSource: marketwatchJan 14th, 2022

US futures rise ahead of key consumer inflation data, while gold hovers at three-month lows

A softening in the data could reinforce investor confidence in the ability of the Federal Reserve to tame inflation, which is at 40-year highs. Traders work on the floor of the New York Stock ExchangeAndrew Burton/Getty Images US futures gained on Wednesday with all eyes on the upcoming consumer price index report. The CPI is expected to rise 8.1% in April, down from the 8.5% gain in March, suggesting inflation may have peaked. The data could influence how aggressively the Fed hikes interest rates following its half-point increase last week. US stock index futures gained on Wednesday ahead of a key read on consumer inflation that could help set investor expectations for the likely path of Federal Reserve monetary policy.S&P 500 futures gained 1.06%, while Dow Jones futures rose 0.87% and Nasdaq futures climbed 1.20%, suggesting a strong start to trade later in the day. Wednesday's consumer price index report, which is due at 08.30am ET, is a closely-monitored gauge of broad inflation in key goods and services.Economists expect the index to have risen by 8.1% year-over-year in April, compared with March's 8.5% gain, thanks to a decline in the cost of fuel and used cars, in particular, which in turn, could signal inflation in the US has peaked.Core CPI, which excludes volatile energy and food prices, is expected to have risen 6% year-over-year, down from the 6.5% year-over-year rise in March."All eyes today are on the US CPI inflation print," said Neil Wilson, Chief Market Analyst for Markets.com.The inflation data could influence how aggressively the Federal Reserve raises interest rates. The Fed hiked rates by 50 basis points for the first time in over two decades to control soaring inflation, which surged to 41-year highs in March. The last time the Fed raised interest rates by 50 basis points at a single meeting was in May 2000."If the US CPI number shows weakness in its numbers today, that could change the narrative in the market quite significantly because that would mean that the Fed's hawkish stance is close to its peak as well," said Naeem Aslam, Chief Market Analyst at Avatrade."If inflation begins to show retracement from its recent high, we are likely to hear a less hawkish narrative from the Fed, which could strengthen the risk-on sentiment among traders."Futures markets show traders expect half-point increases at the central bank's June and July meetings before returning to 0.25-point hikes in the fall.May's increase was the second of the Fed's current hiking cycle following the 25 basis point hike in March. The benchmark rate now has an upper limit of 1%, up from the 0.25% limit seen through much of the pandemic.The dollar eased against other major currencies, falling 0.4% to 105.33. It touched its highest in almost 20 years on Monday, driven by expectations for hefty rate rises from the Fed.Gold, meanwhile, rose 0.5% to trade around $1,850.50 an ounce, but still hovered close to three-month lows. A stronger dollar, rising bond yields and the prospect of a hawkish Fed have combined to push the price down by 11% from highs above $2,000 back in March.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 11th, 2022

Futures Dead Cat Bounced As BTFDers Emerge On Turnaround Tuesday

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

Category: smallbizSource: nytMay 10th, 2022

Futures Slide Ahead Of Payrolls And Six Fed Speakers

Futures Slide Ahead Of Payrolls And Six Fed Speakers The market crash will continue until Biden's approval rating improves. US futures extended their slide on Friday, signaling continuation of a drop in tech stocks following the Nasdaq 100’s biggest selloff since September 2020, ahead of today's jobs report (which bulls pray comes in at around minus 1 million to put a premature end to Powell's market-crashing tightening) and ahead of no less than six Fed speakers, as investors grappled with fears of a stagflationary recession against tightening monetary policy. Nasdaq 100 futures were 0.9% lower and S&P 500 futures traded at session lows, down 0.7% as of 7:30 a.m. EDT as panicked traders sell first and don't even bother to ask questions. Ten-year U.S. Treasury yield continued to climb, trading at 3.1%, near the highest since November 2018. The dollar continued its relentless ascent, while cryptos continued to tumble. Perhaps even more concerning to traders than the jobs report is that six Fed speakers are lined up including Williams, Kashkari, Bostic, Bullard, Waller and Daly. Stocks plunged on Thursday, completely erasing their gains from the prior session amid a broad-based selloff in risk assets. The S&P 500 Index sank 3.6% on Thursday, while the tech-heavy Nasdaq 100 Index plunged 5.1%, its biggest decline since September 2020.  Still, some investors say that concerns may be overblown. “Looking back at just the past two days, it’s not really all that dramatic,” said Mattias Isakson, head of strategy and allocation at Swedbank, adding that indexes were roughly back to where they were compared to before the Fed press conference. “The overall market outlook hasn’t changed at all: interest rates and inflation worries will continue to create volatility in the short term,” Isakson said. On Friday, shares of US-listed Chinese firms extended losses in premarket trading amid growing concerns about the country’s economic growth prospects and continued weakness in tech shares. Peloton shares dropped premarket after the company was said to be considering selling a stake of around 20%. Meanwhile, DoorDash jumped after earnings and Tesla gained after planning to boost car production at its Shanghai plant. Here are some more details on the biggest premarket movers today: Tesla (TSLA US) shares gain as much as 1.1% in U.S. premarket trading, leaving them set to bounce back following Thursday’s losses, after the electric-vehicle maker was said to be making plans to boost car production at its Shanghai plant as soon as mid-May. Shares of U.S.-listed Chinese firms extend losses in premarket trading amid growing concerns about the country’s economic growth prospects and continued weakness in tech shares. Alibaba (BABA US) -1.9%, Baidu (BIDU US) -2.4%, JD.com (JD US) -2%. Peloton (PTON US) shares fall as much as 1.7% in U.S. premarket trading after the maker of indoor exercise bikes was said to be considering selling a stake of around 20% as part of a turnaround. Cloudflare (NET US) shares drop 9.3% in U.S. premarket despite a boosted full-year revenue guidance; analysts say the outlook implies a significant deceleration for lead metrics. At least 3 analysts cut their price targets on the stock. Digital Brands Group (DBGI US) shares decline 50% in U.S. premarket trading after pricing an offering of 37.4m shares at $0.25 apiece, representing a discount of ~50% to Thursday’s close. DoorDash (DASH US) shares jump as much as 6.9% in U.S. premarket trading, with analysts positive on the food-delivery firm’s first-quarter update given tough pandemic comparisons and a difficult macroeconomic environment, though some trimmed price targets amid higher investments. Block Inc. (SQ US) shares rise 7% after 1Q results, with analysts upbeat on demand for the company’s Square and Cash App payment services as the fintech company displays resilience amid a challenging market. Live Nation (LYV US) shares gained 4% in postmarket trading. Its leading indicators like ticket sales, show counts and committed sponsorships remain robust, according to Guggenheim analyst Curry Baker. Opendoor (OPEN US) jumps as much as 16% in U.S. premarket trading after the real estate platform provider forecast revenue for the second quarter that beat the average analyst estimate. Zillow (ZG US) shares decline 6.7% in U.S. premarket trading after underwhelming guidance disappoints analysts, who believe that rising mortgage rates will cool the U.S. housing market. At least 3 analysts cut their price targets with one saying he doubts the real-estate technology firm’s ability to achieve its 2025 targets. According to BofA, the global market selloff has further to run, as every asset class saw outflows in the week prior to the Federal Reserve’s meeting this week, with real estate posting its biggest outflow on record - $2.2 billion - and investors piling into safe havens like Treasuries although one wouldn't know it judging by where yields are trading. “The Fed is attempting to land a B52 bomber on a piece of string and most risk markets still have their fingers in their ears and their hands over their eyes,” said James Athey, a London-based investment director at abrdn. “Hope is not a strategy.” The next key event for markets is Friday’s U.S. jobs report (full preview here), which will be closely watched for signs that rising wage costs are adding to the inflationary pressures rattling investors. Estimates by economists are looking for payrolls to expand by 380,000 in April, and the unemployment rate to fall to 3.5%, although whisper numbers are lower. A print higher than 500,000 in non-farm payrolls will provoke U.S. dollar buying as equities and bonds sell-off, while less than 300,000 should see the reverse, says Jeffrey Halley at OANDA. “A sharp divergence, up or down, from the median forecast, should produce a very binary outcome,” he says. “It’s that sort of market.” “Any upward pressure on the average hourly earnings could lead to another spike of U.S. yields and therefore add negative pressure on equities and especially tech stocks,” said Christophe Barraud, chief economist at Market Securities LLP in Paris. In Europe, the Stoxx 600 Index followed the Wall Street rout and was set for its worst weekly drop in two months, with consumer, retail and travel and leisure among the biggest decliners. FTSE MIB posts the smallest decline. Retailers, consumer products and media are the worst performing sectors. Traders will be watching job data, while Cigna, Dish, NRG Energy and Under Armour are among companies reporting earnings. Here are the biggest European movers today: Grifols rose as much as 9.3%, to the highest since November, after the Spanish maker of pharmaceutical products derived from blood plasma gave a business update that Citi said supports its buy rating on the stock. Leonardo rose as much as 4.4% after reporting earnings. Deutsche Bank said 1Q numbers were solid, while Intesa Sanpaolo said the company delivered “a sound start” to 2022. S4 Capital shares gained as much as 9.9% after the digital advertising agency released delayed FY results that showed limited audit adjustments. Revenue was ahead of analyst expectations. SKF shares advanced, breaking a seven-session declining streak, after Danske Bank upgraded the shares to buy, saying they “could generate good return in the coming 3-12 months.” Krones shares surged as much as 11%, the most since October 2019, after the machinery company reported 1Q Ebitda that beat estimate, with analysts noting scope for upgrades. Ambu shares dropped as much as 17% after the Danish health care equipment firm cut its outlook. Handelsbanken says the new guidance may lead to a 30% drop in FY Ebit estimates. Adidas shares fell more than 6% after the German sportswear maker cut its margin outlook for the year. Analysts noted the impact of lockdowns in China. Peer Puma also fell. IAG fell as much as 12%, the most intraday since November. The British Airways parent posted a 1Q operating loss that Citi analysts said was worse than consensus and their own expectations. JCDecaux shares slumped as much as 12% after its 2Q organic revenue growth target of more than 15% fell short of analyst expectations amid lockdowns in China. Earlier in the session, Asian stocks were on track for five straight days of losses, as traders questioned whether the Federal Reserve’s interest rate hike was enough to tackle inflation and Chinese leaders warned against doubting their Covid-Zero stance. The MSCI Asia Pacific Index declined by as much as 1.8%, poised for its longest losing streak since January and lowest closing level since July 2020. The broad-based selloff followed steep declines in U.S. shares overnight, with benchmarks in Australia, Taiwan and Vietnam each declining more than 1.7%. “Volatility comes from doubts whether the 50 basis-point hike can be enough to curb inflation,” said Lee Han-Young, chief fund manager at DS Asset Management, a Seoul-based hedge fund.  For market volatility to ease, CPI or other inflation-related data needs to peak or slow down, he said. “Before that, volatility seems inevitable.” Stock indexes in Hong Kong and mainland China were the worst performers in the region after the Politburo’s supreme Standing Committee reaffirmed its support for a lockdown-dependent approach on Thursday. Still, declines in Asia were less than the rout in U.S. shares, with generally smaller-sized market reactions to the Fed’s policy statement Wednesday. China’s economic slowdown and regulation of its tech industry are also playing on investors’ minds, with the Hang Seng Tech Index sliding amid a lack of concrete steps to support the industry.  Overall, tech and financial stocks were among the biggest drags on the MSCI Asia Pacific Index. The measure is on track to fall about 2.6% this week, the largest weekly slide since mid-March. Bucking the regional trend, Japanese equities rose after a three-day holiday. India’s benchmark stocks index registered its worst weekly decline in more than five months as growing concerns over higher borrowing costs to curb inflation dented risk sentiment.  The S&P BSE Sensex declined 1.6% to 54,835.58 in Mumbai on Friday, taking its loss this week to 3.9%, the biggest five-day drop since the period ended Nov. 26. The NSE Nifty 50 Index slipped 1.6% to 16,411.25.  HDFC Bank Ltd. fell 2.6% and was the biggest drag on the Sensex, which had 24 of the 30 member stocks trading lower. All but two of 19 sectoral sub-indexes compiled by BSE Ltd. fell, led by a gauge of realty companies.  The Reserve Bank of India raised its policy rate by 40 basis points in an out-of-cycle move this week after keeping it at a record-low level of 4% for the past two years.  “This suggests that the scales of growth versus inflation is tilted towards inflation and can be leading indicator of further rate hikes in FY23,” Shibani Kurian, head of equity research at Kotak Mahindra Asset Management Co. wrote in a note. She expects market participants to focus on earnings and commentary on demand and margins from companies.  The U.S. Federal Reserve and Bank of England also raised rates to tackle rising inflation.     In earnings, of the 24 Nifty 50 firms that have announced results so far, 17 either met or exceeded analysts’ estimates, while seven missed forecasts. Reliance Industries Ltd., the nation’s largest company, is scheduled to announce its results Friday.  In rates, Treasuries extended Thursday’s bear-steepening move, with yields cheaper by 2bp to 4bp across the curve, amid bigger losses for German bonds after ECB’s Villeroy said above-zero rates are “reasonable” by year-end, and that there are signs inflation expectations are less anchored. US 10-year yields around 3.09%, cheaper by ~3bp on the day with 2s10s steeper by ~2.5bp; front-end yields outperform, higher by ~2bp at around 2.72%. Dollar issuance slate empty so far and expected to be muted because of jobs report; four names priced $7.6b Thursday taking weekly total above $16b, shy of $20b-$25b expected range. Peripheral spreads eventually tighten slightly to core after 10y BTP/Bund briefly widening through 200bps In FX, a gauge of the dollar’s strength was little changed as traders awaited a U.S. jobs report on Friday. Bloomberg Dollar Spot Index gained 0.2% as traders awaited the U.S. jobs report due on Friday. Ten-year Treasury yields rose 2 basis points to 3.05%. The yen underperformed most G-10 currencies as Japan’s markets reopened following a three-day holiday. Leveraged funds initiated long dollar-yen positions heading into U.S. payrolls data, according to an Asia-based FX trader Long gamma exposure in the major currencies meets a fresh round of demand following the Bank of England’s policy decision, which is contributing to continued erratic moves in the options space into the U.S. report. Real money and hedge funds both net USD buyers, according to three Europe-based traders, with demand for USD calls in the likes of EUR, AUD and MXN. In commodities, WTI trades within Thursday’s range, adding 1.6% to trade near $110. Spot gold rises roughly $5 to trade above $1,880/oz. Most base metals trade in the red. Bitcoin continues to slide, and was last trading below $36,000, after cracking to key support levels yesterday. Looking at the day ahead now, the main highlight will be the aforementioned US jobs report for April. Other data releases include German industrial production and Italian retail sales for March. From central banks, we’ll hear from the ECB’s Villeroy, Nagel, Elderson and Rehn, the Fed’s Williams, Kashkari and Bostic, and the BoE’s Pill and Tenreyro. Market Snapshot S&P 500 futures little changed at 4,140.00 STOXX Europe 600 down 0.9% to 434.26 MXAP down 1.6% to 164.46 MXAPJ down 2.7% to 538.32 Nikkei up 0.7% to 27,003.56 Topix up 0.9% to 1,915.91 Hang Seng Index down 3.8% to 20,001.96 Shanghai Composite down 2.2% to 3,001.56 Sensex down 1.4% to 54,941.03 Australia S&P/ASX 200 down 2.2% to 7,205.64 Kospi down 1.2% to 2,644.51 German 10Y yield little changed at 1.07% Euro up 0.3% to $1.0570 Brent Futures up 1.3% to $112.39/bbl Gold spot up 0.1% to $1,879.09 U.S. Dollar Index down 0.31% to 103.43 Top Overnight News from Bloomberg European Central Bank Governing Council member Francois Villeroy de Galhau said interest rates may be raised back above zero this year if the euro-zone economy doesn’t suffer another setback. The European Union has proposed a revision to its Russia oil sanctions ban that would give Hungary and Slovakia an extra year, until the end of 2024, to comply, according to people familiar with the matter. China has ordered central government agencies and state-backed corporations to replace foreign- branded personal computers with domestic alternatives within two years, marking one of Beijing’s most aggressive efforts so far to eradicate key overseas technology from within its most sensitive organs. Germany is ready to support eastern European nations in their efforts to wean themselves off Russian energy to secure broader support for sanctions targeting the country’s oil and gas sector, Chancellor Olaf Scholz said Thursday The cost of living in Tokyo rose at the fastest pace in almost three decades in April, as the impact of soaring energy prices became clearer, an outcome that complicates the Bank of Japan’s messaging on inflation and the need for continued stimulus China’s top leaders warned against questioning Xi Jinping’s Covid Zero strategy, as pressure builds to relax virus curbs and protect the economic growth that has long been a source of Communist Party strength An escalating selloff in long-end Treasuries pushed yields to fresh multi-year highs Thursday, with the benchmark 10-year rate closing above 3% for the first time since 2018 as concern over inflation rattled the bond market Having plunged by the most on record in offshore trade last month, China’s yuan is now facing the threat of selling pressure from the nation’s companies The Federal Reserve will need to raise short-term interest rates to at least 3.5% to bring surging inflation under control, former Vice Chairman Richard Clarida said South Korea needs to act preemptively on risk factors while monitoring situations in the economy and markets, as there are concerns local financial and FX markets will react sensitively according to various factors, Vice Finance Minister Lee Eog-weon says A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mostly lower amid spillover selling from the sharp declines on Wall Street. ASX 200 was heavily pressured in which the losses in tech led the broad declines across all sectors. Nikkei 225 initially declined on return from the Golden Week holidays but then pared all its losses as currency weakness persisted with Japan also planning to introduce tax incentives, as well as ease border measures in June. Hang Seng and Shanghai Comp conformed to the downbeat mood with tech and property names dragging the Hong Kong benchmark lower, while China also remained steadfast in its "dynamic COVID clearance" policy. Top Asian News Adidas Shares Drop Amid ‘Dialed-Down’ Outlook: Street Wrap JAL Sees Return to Profit as Japan Moves to Reopen Borders Food Prices Hold Near Record as Ukraine War Upends Global Trade Nine in 10 Central Banks Exploring Own Digital Money, BIS Says European bourses are subdued across the board, Euro Stoxx 50 -1.1%, reacting to the late-doors pressure in Wall Street. Currently, US futures are modestly softer but relatively tentative overall going into the NFP release and subsequent Fed speak. US regulatory officials have arrived in China for "late-stage" audit deal talks, according to Reuters sources. China's auto sales in April are estimated to have plunged 48.1% y-o-y to 1.17 million units, data from CAAM revealed. The recent Omicron outbreak has disrupted the auto sector, in particular in the Yangtze River Delta region, according to Global Times. Top European News EU Plan to Ban Russian Oil Means Windfall for Hungarian Refiner BNP Paribas Offers Up to EU400m Non-Dilutive Convertible Bonds ECB’s Villeroy Says Above-Zero Rates ‘Reasonable’ This Year Sorrell Pledges Changes After S4’s ‘Embarassing’ Results Lag In FX ECB officials ramp up hawkish rhetoric to boost Euro; EUR/USD makes round trip to high 1.0580 area from sub-1.0500. Pound continues to flounder as UK election results spell trouble for already under pressure PM Johnson and Tory Party, Cable under 1.2300 at one stage and EUR/GBP cross over 0.8550. Buck reverses all and more post-Fed losses pre-payrolls before Euro rebound knocks DXY back below 104.000, index down to new 103.340 low vs 104.070 peak. Aussie slumps despite hawkish RBA SOMP, Yen weak regardless of firmer than forecast Tokyo inflation data and return of Japanese markets from Golden Week; AUD/USD under 0.7100 and USD/JPY over 130.00. Loonie cushioned by strong crude prices ahead of Canadian LFS, USD/CAD within 1.2814-67 range and close to 1.29bln option expiries between 1.2835-40. Swedish Krona rangy after Riksbank minutes highlighting divergent views; EUR/SEK straddling 10.5000. Fixed Income EZ debt downed by latest hawkish ECB guidance, Bunds below 152.00 and periphery underperforming. Gilts hold up better on the 118-00 handle awaiting BoE commentary after super Thursday. US Treasuries dragged down by Eurozone bonds to an extent, as 10 year T-note pivots 118-00 ahead of NFP. Commodities WTI and Brent are bid in an exacerbation of APAC price action although, specific bullish-drivers have been somewhat sparse. Much of the focus has been on the potential EU Russian oil import embargo, particularly Hungary's ongoing opposition and the EU's attempts to appease them. Brazilian President Bolsonaro said a fresh hike in fuel prices by Petrobras could bankrupt Brazil and urged Petrobras not to increase fuel prices again, according to Reuters. PetroChina (0857 HK) says they have no plans to buy discounted Russian oil or gas, according to an executive. China is to sell 341k tonnes of imported soybeans from state reserve on May 13, according to the trade centre. Spot gold is bid but has failed to derive much traction above the 100- and 10-DMAs at USD 1883.08/oz and USD 1885.1/oz respectively. Central Banks ECB's Villeroy says too weak EUR would go against ECB inflation target; inflation is not only higher but broader; core inflation is firmly above target. Case for APP beyond June is not obvious. Adds, it is possible to raise rates into positive territory (i.e. above zero) by year-end. ECB's Nagel says current inflation too high, confident it can get back to 2% target in the medium-term; adds, window to act is closing. Is optimistic re. a 2022 move. Does not buy the argument that policy should hold back because of the economy right now, via FAZ. ECB's Holzmann said the ECB is planning to raise rates which they will discuss and probably do at the June meeting, while he added that rates will rise this year, by how much and when, will be discussed intensively in June, according to Reuters. ECB's Vasle says appropriate timing to start ECB hikes is "before summer"; inflation is becoming broad-based, cannot claim that monetary policy cannot curb inflation. BoE's Pill: says the BoE does not have a forex target or objective; when questioned on what would cause them to pause (re. hikes), says more evidence of factors becoming more consistent with target(s). If we don't see this, will have to act further. Market Snapshot 08:30: April Change in Nonfarm Payrolls, est. 380,000, prior 431,000 April Change in Private Payrolls, est. 378,000, prior 426,000 April Change in Manufact. Payrolls, est. 35,000, prior 38,000 April Unemployment Rate, est. 3.5%, prior 3.6% April Underemployment Rate, prior 6.9% April Labor Force Participation Rate, est. 62.5%, prior 62.4% April Average Hourly Earnings YoY, est. 5.5%, prior 5.6% April Average Weekly Hours All Emplo, est. 34.7, prior 34.6 April Average Hourly Earnings MoM, est. 0.4%, prior 0.4% 15:00: March Consumer Credit, est. $25b, prior $41.8b Fed Speakers 09:15: Fed’s Williams Gives Opening Remarks 11:00: Fed’s Kashkari Takes Part in Moderated Discussion 15:00: Fed’s Bostic Gives Commencement Address at Georgia Tech 19:15: Fed’s Bullard and Waller Speak on Hoover Institute Panel 20:00: Fed’s Daly Gives Commencement Speech DB's Jim Reid concludes the overnight wrap What’s dangerous about yesterday’s huge market slump is that there must be an element of doubting the ability of there to be an effective "Fed Put" in this cycle following a 30-40 year period where the central bank has almost always been able to come to the market's rescue. As we know, Wednesday saw a strong post-FOMC rally (S&P 500 +2.99%) on a belief that the Fed would be relatively measured in their tightening cycle after Chair Powell pushed back against 75bp hikes. However in a remarkable turnaround yesterday (S&P 500 -3.56%) the only conclusion you can draw is that the market quickly realised that the Fed really aren't going to be able to control this cycle very easily. As you know our view is that the Fed won't be able to achieve a soft landing and that a recession is coming. This was something we dwelt on in our recent “What’s in the Tails?” piece (link here), where we expressed surprise that our call for a US recession in late-2023 was the outlier rather than the consensus given how far inflation is from target and the tightness of the US labour market right now (more today on this in the payrolls report). I can't help but think that a great deal of the reaction yesterday was the appreciation that whilst the Fed can make soothing pronouncements, they are starting from an extraordinary difficult starting point, and with limited flexibility to respond to market or economy concerns whilst they fight inflation. The Bank of England couldn't have helped either, as they became the first major central bank to forecast a contraction in 2023 alongside double-digit inflation later this year. In terms of the moves themselves, US Treasury yields soared to fresh highs for this cycle at the long end, with those on 10yr Treasuries up +10.2bps at 3.04%, after a volatile day that saw 10yr yields increase as much as +17.2bps to 3.11% intra-day, meaning the 10yr range since the FOMC has been +21bps wide. Yesterday’s increase was driven entirely by real yields, which snapped back up by +12.2bps to 0.18%, thus closing at their highest levels since the Covid-related tumult in March 2020. Real yields were also as much as +17.2bps higher intraday, showing they were a large component of yesterday’s volatility. The rise in yields came as investors retraced some of their expectations from the previous day about a shallower pace of monetary tightening, raising the expected rate at the Fed’s December meeting by +5.0bps. And there was further evidence that the Fed’s tightening cycle is already having an effect on the real economy, with Freddie Mac reporting that the average rate for a 30-year mortgage had risen to 5.27%, which is the highest its been since 2009. It also marks a +231bp increase over the last year, which is the largest annual increase in mortgage rates since 1982. Those trends have continued this morning, with yields on 10yr USTs up +1.9bps to 3.06%, and the policy rate priced for December’s meeting up a further +1.3bps. With yields bouncing higher, US equities were hammered once again with the more interest-sensitive tech stocks leading the way. As mentioned at the top, the S&P 500 fell back by -3.56%, which would be more newsworthy were it not for the fact that Friday’s -3.63% decline was even larger! Tech and mega-cap stocks really bore the brunt of the sell-off, as the NASDAQ slumped -4.99%, the largest since June 2020, and the FANG+ index fell -6.43%, the largest since September 2020, with all those indices ending a run of 3 consecutive advances. The sharp turnaround sent the VIX +6.07pts higher, and back above 30 at 31.49. It was a somewhat better picture in Europe, but that reflected the fact they hadn’t participated in the massive US rally after the Fed. However the major indices lost ground continuously through the day, with the STOXX 600 erasing an initial gain of +1.84% immediately after the open to end the day -0.70% lower. Yesterday’s volatility came alongside a fresh round of central bank news, with the Bank of England continuing its recent series of rate hikes. In terms of the main headlines, they hiked by 25bps as expected to take Bank Rate up to 1%, and 3 of the 9 members on the Committee were even in favour of a larger 50bps move. Nevertheless, the decision was interpreted in a very dovish light, as two members did not find it appropriate to provide guidance for more rate hikes going forward, so potentially a three-way split on the committee. Adding to the dovish interpretation, the growth forecasts produced by the BoE were significantly downgraded, and now see an annual economic contraction occurring in 2023. Furthermore, they upgraded their inflation forecasts once again, seeing CPI rising further over the rest of 2022, and averaging “slightly over 10% at its peak” in Q4. For more info on the BoE, see our economist’s full reaction note (link here). The more downbeat news on the economy led investors to reappraise the likely path of future hikes from the BoE, and overnight index swaps took out -17bps worth of tightening by the December meeting in response. In turn, sterling was the worst-performing G10 currency yesterday, with a -2.13% move against the US Dollar, which came as investors took stock of the potential for a more gradual tightening, as well as the prospect of a UK recession. The developments also meant that gilts outperformed their counterparts elsewhere in Europe, with the 10yr yield coming down -0.3bps on the day, a big contrast to those on bunds (+7.3bps), OATs (+7.2bps) and BTPs (+8.3bps) which all moved higher. These losses were witnessed over on the credit side as well, where the iTraxx Crossover index moved up +19.3bps to 453bps, the highest its been since May 2020. Those moves higher in Euro Area yields came as the drum beat for an ECB rate hike as soon as July continued, with Bank of Finland’s Governor Rehn endorsing a hike in July. This is a world away from the situation just after Russia’s invasion of Ukraine, when there was serious scepticism among many that the ECB would be able to hike at all this year given the growth shock. But the inflation developments have outweighed that, and overnight index swaps are still pricing in 89bps worth of hikes this year, enough to take the current -0.5% deposit rate firmly into positive territory. Remember DB is forecasting +100bps of hikes before year end. Overnight in Asia, equities have similarly begun the day deep in negative territory, tracking those sharp overnight losses on Wall Street. Across the region, the Hang Seng (-3.67%) is the largest underperformer with tech firms among the worst hit. In mainland China, the Shanghai Composite (-2.31%) and CSI 300 (-2.59%) have also seen a large slide as COVID-19 lockdowns continue to darken the economic outlook and weigh on investor sentiment. There’ve been further signs they’ll be continuing their zero Covid strategy overnight, with state broadcaster CCTV reporting that the Politburo’s seven-member Standing Committee reaffirmed their support for the approach. The only place not seeing large slides overnight are Japanese markets, where the Nikkei is up +0.92%, but that reflects the fact they’ve come back to trade today after 3 days of holidays. Looking forward, US stock futures are pointing to a stabilization today, with contracts on the S&P 500 (-0.02%) and NASDAQ 100 (-0.02%) marginally lower. From the perspective of the major central banks, another negative development over the last 24 hours has been the continued rise in oil prices, with Brent Crude up another +0.69% yesterday to reach $110.90/bbl. The move was driven by the news that the US Energy Department would begin the process of replenishing its oil reserves, with a process to buy 60m barrels in the autumn. That said, prices pared back their gains in the European afternoon as the more negative risk-off move took hold, with prices declining from an intraday high of $114/bbl at one point. This morning in Asian trading hours, Brent crude (+0.50%) is extending its gains again, now at $111.46/bbl. Looking forward now, the main highlight today will likely be the US jobs report for April, which along with next Wednesday’s CPI reading will help frame the policy debate over the 6 weeks ahead of the next FOMC meeting in mid-June. In terms of what to expect, our economists think that nonfarm payrolls will have risen by +465k, which in turn will lower the unemployment rate by a tenth to 3.5%. That would be a significant milestone, since 3.5% was the pre-pandemic low in the unemployment rate. On the data side, the US weekly initial jobless claims came in at 200k in the week through April 30 (vs. 180k expected). Elsewhere, German factory orders fell by a larger-than-expected -4.7% in March (vs. -1.1% expected). To the day ahead now, and the main highlight will be the aforementioned US jobs report for April. Other data releases include German industrial production and Italian retail sales for March. From central banks, we’ll hear from the ECB’s Villeroy, Nagel, Elderson and Rehn, the Fed’s Williams, Kashkari and Bostic, and the BoE’s Pill and Tenreyro. Tyler Durden Fri, 05/06/2022 - 08:01.....»»

Category: smallbizSource: nytMay 6th, 2022

Futures Slip As Traders Read Between Powell"s Lines

Futures Slip As Traders Read Between Powell's Lines After yesterday's torrid, Powell-inspired meltup which saw the S&P soar the most since May 2020 (just days after its biggest drop since June 2020)... In the past week, S&P 500 has had both its best day since May 2020 and its worst day since June 2020 [Past performance is no guarantee of future results] pic.twitter.com/BA9p6MDzWZ — Liz Ann Sonders (@LizAnnSonders) May 5, 2022 ... U.S. futures paused their surge after Jerome Powell eased fears that the Federal Reserve will unleash an even more aggressive tightening path and took a 75bps rate hike off the table. As of 745am EDT, S&P 500 futures dropped 0.6%, while Nasdaq 100 contracts fell 0.8%, as investors digested Powell’s vow to curb inflation, while acknowledging it could inflict some “pain” to the economy. In fact, an example of just what the Fed is fearing came earlier today when the BOE hiked 25bps as expected, but warned a stagflationary recession is be imminent as the central bank now expects GDP to contract while inflation rises double digits in the coming months, which is precisely what happens when central banks are far behind the curve.  In other assets, the dollar jumped to session highs as cable tumbled to July 2020 lows, 10Y yields were flat around 2.95 while bitcoin traded off yesterday's highs between 39K and 40K. “Alongside tightening monetary policy, a number of risks - persistently high inflation, indications that consumer demand is softening, and the economic consequences of the Russian invasion of Ukraine - have raised investors’ concerns about the strength of future economic growth,” said Richard Flynn, U.K. managing director at Charles Schwab. “In this context, market volatility is likely to continue.” For those who missed yesterday's white knuckle session, the US central bank raised the benchmark rate by a half percentage point on Wednesday, the steepest increment since 2000, in order to keep inflation under control. By ruling out a more aggressive hike, the central bank gave a boost to equity markets, with the S&P 500 posting its biggest daily advance since 2020. The Nasdaq 100 closed 3.4% higher, but is still down 17% this year. “We are puzzled why the market thinks that Fed hikes are going to stop inflation,” said Nancy Davis, founder of Quadratic Capital Management. “We see inflation as driven by massive government spending, supply chain disruptions and, more recently, by Russia’s invasion of Ukraine.” Sure, the Fed is powerless to do anything against inflation, but it has to do something. Policy makers are trying to juggle the need to quell the fastest inflation in four decades against hard-won economic growth. In Europe, German factory orders plummeted, highlighting the toll from the war. The soaring price of commodities further complicates efforts to subdue price pressures. “The combination of high inflation and a weakening global economic outlook has fueled concerns about how far central banks will be able to raise interest rates without overburdening the economy,” Fraser Lundie, head of public fixed income markets at Federated Hermes, wrote in a note to clients. In premarket trading, EBay plunged 6.9% as analysts said macro headwinds, including the war in Ukraine, inflation and consumer confidence, will pressure results in the near term. The e-commerce firm gave a lackluster sales and profit outlook for the second  quarter, as a pandemic-driven sales bump fades. U.S.-listed Chinese stocks dropped again as investors mulled an expanding list of firms that face potential security delistings and the Federal Reserve’s rate decision. JD.com (JD US) shares trade down 2.8%, Pinduoduo (PDD US) -3.5% and Bilibili (BILI US)  -5% in premarket. Some other notable premarket movers: Albemarle (ALB US) shares jump 14% in premarket trading after the company boosted its profit and sales guidance for the full year, citing continued strength in pricing in the Lithium and Bromine businesses. . Hycroft Mining (HYMC US) shares surge as much as 36% in U.S. premarket trading after the precious metals producer gave an update for the first quarter, with the firm saying that its strengthened balance sheet allows it to cut debt, complete technical studies and launch an exploration program. Qorvo (QRVO US) analysts said that guidance from the radio frequency solutions fell short of expectations amid weakness in China and high inventory, prompting price target cuts among brokers. Qorvo shares fell 4.9% in postmarket trading on Wednesday after forecasting adjusted earnings per share for the first quarter that missed the average analyst estimate. Booking Holdings (BKNG US) impressed analysts with April bookings topping 2019 levels and positive comments on summer travel. The shares rose 7.7% in postmarket trading after the company’s first-quarter revenue and gross bookings both beat the average analyst estimate. Twilio (TWLO US) analysts highlighted the gross margin performance and reiteration of guidance as encouraging points in the communication-software provider’s results, though some were left wanting more from the firm’s revenue beat. The shares rose 3.8% in after-hours trading Wednesday after adjusted earnings per share for the first quarter beat the average analyst estimate. Fortinet (FTNT US) analysts lauded the infrastructure software company’s solid quarter in light of continued supply chain pressures. The company’s shares rose 7% in extended trading on Wednesday after it reported first-quarter results and raised its full-year forecast. Etsy (ETSY US) analysts were overall positive on the e-commerce firm’s results, though noted that challenges relating to the macroeonomic backdrop and the reopening of economies weighed on the company’s outlook. Etsy shares fell 10% in postmarket trading Wednesday after its forecast for second-quarter revenue fell short of the average analyst estimate. In Europe, the Stoxx 600 was up 1% after rising as much as 1.8%. FTSE 100 up 1.1%, and DAX +1.4%, with most indexes well off session highs. Tech, real estate and industrials were the strongest performing sectors, autos and insurance underperform as gains are faded. Positive results from large caps including Airbus SE, Shell Plc, UniCredit SpA and ArcelorMittal SA also helped brighten the mood. Some notable European movers: Airbus jumps as much as 8.5% on a “solid” 1Q, with adjusted Ebit “significantly” above consensus, Bernstein says, with Jefferies noting key highlight is plan to ramp up A320 production. Shell shares rise as much as 3.6% after company reports record profit for the quarter. Jefferies said the results signaled “strong” second-half buyback acceleration. UniCredit jumps as much as 7.6%, the most intraday since March 29, after reporting revenue for the first quarter that beat estimates. Analysts note “solid” earnings ex-Russia. S4 Capital shares soared as much as 20% on Thursday after Martin Sorrell’s media company said it will publish its results for last year tomorrow, following a lengthy delay. Outokumpu shares rise as much as 9.3% after the Finnish steel maker presented its latest earnings, which included several beats to consensus estimates, including on adjusted Ebitda. Argenx shares rise as much as 6.7% after the Belgian immunology firm posted its latest earnings, which included a large beat on sales for its key drug Vyvgart (efgartigimod). Netcompany shares rise as much as 6.1%, the most intraday in a month, after the software developer reported 1Q earnings that are broadly in line with estimates. Verbund dropped the most in two months after the Austrian Chancellor said he’s asked the finance and economy ministries to develop new rules to administer windfall profits at state-controlled companies. Virgin Money shares slide as much as 6.7% after the lender reported first-half results. Goodbody linked the share price drop to several factors, including the bank not announcing a buyback. Hikma Pharmaceuticals fell as much as 11%, the most since April 2020, after the company reduced guidance for its generics division. Peel Hunt calls update “obviously disappointing.” Earlier in the session, Asia’s stock benchmark rose, poised to snap a three-day decline, as the Federal Reserve’s policy announcement calmed fears about super-sized hikes. The MSCI Asia Pacific Index climbed as much as 1.2% before paring gains to around 0.4%. Tech and materials were the biggest boosts to the Asia gauge as most sectors rose, with TSMC and Infosys hauling up the measure. Bucking the trend, China’s stock gauge closed lower after a three-day holiday in a sign that Beijing’s vow to boost growth has failed to alleviate concerns over the outlook.  The Fed delivered a 50-basis-point increase that was in line with expectations on Wednesday, and said a bigger hike was not being actively considered. Benchmarks in the Philippines and Vietnam were among the top gainers in the region. Japan and South Korea markets were closed for holidays.  Tech stocks will likely “see a further rally until the next U.S. consumer price inflation reading next week,” said Jessica Amir, a market strategist at Saxo Capital Markets Australia. “The rate hikes weren’t as much as feared,” bond yields have pared and volatility is subsiding, she added. The rally marked a reprieve for Asia’s beaten-down shares, which remain mired in a bear market. The regional benchmark is underperforming U.S. and European peers this year, hurt by the impact of China’s strict Covid-19 restrictions and rising inflation around the region. In FX, the Bloomberg Dollar Spot Index jumped as cable tumbled on the BOE's recession warning, clawing back some of its post-FOMC losses when Powell ruled out a more aggressive pace of monetary tightening. The greenback traded higher against all of its Group-of-10 peers and the Treasury yield curve bear-flattened, trimming some of Wednesday’s aggressive bull steepening which followed the FOMC outcome. The euro fell back below $1.06 and yields on short-dated European bonds fell as ECB hike bets were pared. German factory orders plummeted, highlighting the toll from the war. The pound plunged after the Bank of England warned of a stagflationary recession even as it hiked another 25bps. Norway’s krone held a loss after the central bank kept its key policy unchanged, as widely expected among analysts, and confirmed its plan to deliver a fourth increase in borrowing costs next month. Australia’s dollar pared yesterday’s gains; weaker-than- expected Chinese economic data raised concerns over demand for the nation’s commodity exports and weighed on the Australia’s sovereign bond yields. China’s yuan dropped as weak economic data hit sentiment. The USD/CNH rose 0.4% to 6.6489; USD/CNY gains 0.2% to 6.6194 after China’s services activity slumped to its weakest level in more than two years in April as Covid outbreaks and lockdowns continued to pummel consumer spending and threaten economic growth. The Caixin China Services purchasing managers’ index crashed to 36.2 in April, the lowest since February 2020, as Covid outbreaks and lockdowns continued to pummel consumer spending, threatening economic growth. In rates, the Treasury front-end briefly extends losses, following move in gilts after Bank of England hiked 25bp with three voters looking for a bigger 50bp move. U.S. 10-year yields traded around 2.95%, little changed after retreating from day’s high; gilts outperform. Yields cheapened as much as 6bp across front-end of the curve before retreating; U.K. 2-year yields erased the 3bp increase that followed the Bank of England policy announcement; front-end led losses flatten 2s10s, 5s30s spreads by ~2bp and ~4bp on the day.  Bear-flattening move has 5s30s spread near session lows into early U.S. session, unwinding portion of Wednesday’s post-Fed bull-steepening. Fed speakers resume Friday with six events slated. In the aftermath of Wednesday’s policy announcement, overnight swaps are now pricing in close to 50bp rate hikes at the next three policy meetings. Dollar issuance slate empty so far; session has potential to be busy given a number of expected issuers have so far stood down this week. Three-month dollar Libor dropped -3.54bp at 1.37071%, its first decline since April 5.   Looking at today's calendar, we get the BoE policy decision (a hike of 25bps as noted earlier, but accompanied by a very dovish warning of recession in late 2022) and UK local elections. Otherwise from central banks, we’ll hear from the ECB’s Lane, Holzmann and Centeno. Data releases include the weekly initial jobless claims from the US and nonfarm productivity. Finally, earnings releases today include Shell. Market Snapshot S&P 500 futures down 0.7% to 4,267.00 MXAP up 0.4% to 167.94 MXAPJ up 0.4% to 556.06 Nikkei down 0.1% to 26,818.53 Topix little changed at 1,898.35 Hang Seng Index down 0.4% to 20,793.40 Shanghai Composite up 0.7% to 3,067.76 Sensex up 0.3% to 55,834.32 Australia S&P/ASX 200 up 0.8% to 7,364.65 Kospi down 0.1% to 2,677.57 STOXX Europe 600 up 1.2% to 446.50 Brent Futures up 0.4% to $110.56/bbl Gold spot up 0.5% to $1,890.84 U.S. Dollar Index up 0.34% to 102.94 German 10Y yield little changed at 1.01% Euro down 0.3% to $1.0587 Top Overnight NEws from Bloomberg ECB Executive Board member Fabio Panetta said economic expansion has almost ground to a halt in the euro area and faces further “high costs” as policy makers battle record inflation On the eve of the 25th anniversary of its independence, the U.K. central bank is widely expected to hike interest rates to 1% -- the highest since the financial crisis -- and lay out how it intends to take uncharted steps toward unwinding more than a decade of bond purchases U.K. Prime Minister Boris Johnson will meet his Japanese counterpart Fumio Kishida in London where they are expected to discuss a plan to support Asian nations in diversifying away from Russian oil and gas Boris Johnson has been engulfed by scandal for months and came close to being ousted by members of his Conservative Party. On Thursday, voters across the U.K. are likely to give him their own kicking. Local election results typically deliver losses for ruling parties, especially if they’ve been in power for 12 years as the Tories have The Reserve Bank of New Zealand’s Monetary Policy Committee will return to a full complement of seven for the first time this year when it meets later this month. Assistant Governor Karen Silk joins the RBNZ on May 16 and will be an internal member of the committee from that date The dollar fell Wednesday by the most in nearly a month on a trade-weighted basis following the latest Federal Reserve policy decision yet pairs some of those losses as the move was more down to short-term positioning A more detailed breakdown of global markets courtesy of Newsquawk Asia-Pac stocks traded positively as the region reacted to the FOMC meeting where the Fed hiked rates by 50bps as expected and announced to begin reducing the balance sheet from next month, while Fed Chair Powell dispelled concerns of a more aggressive  75bps rate hike. ASX 200 was firmer with gold miners buoyed by higher prices and as the energy sector benefitted from the proposed Russian oil embargo. Hang Seng and Shanghai Comp were higher following the mainland’s return from the Labour Day holidays but with advances initially contained by several headwinds including an extension of COVID restrictions in Beijing, the deterioration in Caixin Services and Composite PMIs, while the US SEC added over 80 companies to its list for possible delisting and HKMA also hiked its base rate by 50bps in lockstep with the Fed. Top Asian News Concerns Mount Over Asset Sales; Stocks Fall: Evergrande Update S&P 500 Remains Expensive Despite Yield-Driven Drop: Macro View North Korea Lifts Sweeping Lockdown After One Day, Yonhap Says India’s Surprise Rate Hike Spurs Aggressive Tightening Bets European bourses are firmer across the board, Euro Stoxx 50 +1.3%, benefitting from the perceived less-hawkish Fed and associated Wall St./APAC performance. Stateside, futures are softer across the board though the likes of the ES remain in relative proximity to overnight best levels, ES -0.5%. Back to Europe, sectors are mostly positive with Real Estate and Tech the outperformers while defensive-biased names are lagging. Top European News UniCredit Takes $2 Billion Hit on Russia to Cover Potential Exit U.K. April Composite PMI 58.2 vs Flash Reading 57.6 BMW Profit Beats Estimates on Strong Demand for Top-End Cars Norway Rate Hike Locked and Loaded for June to Quell Inflation FX: Dollar finds its feet after FOMC fall out on less hawkish than factored in policy guidance from Fed chair Powell, DXY back within reach of 103.000 vs 102.340 low. Aussie* undermined by much weaker than forecast building approvals, mixed trade, technical and psychological resistance; AUD/USD closer to 0.7200 than 0.7250 and AUD/NZD fades just shy of 1.1100. Sterling weak on super BoE Thursday on prospects that MPC may be more circumspect after latest 25 bp hike; Cable down around 1.2550 vs 1.2635 peak and EUR/GBP firm on 0.8400 handle. Euro underpinned by rebound in EGB yields and option expiries as 1.8 bn rolls off 1.0600. Loonie cushioned by crude alongside Norwegian Crown after no change in rates by Norges Bank that is sticking to schedule for next quarter point hike in June; USD/CAD mostly sub-1.2750 and EUR/NOK capped below 9.9000. Turkish Lira deflated as CPI soars even further beyond target and PPI over 100%. Polish Zloty awaits 100 bp hike from NBP and Czech Koruna 50 bp courtesy of CNB. Brazil's Central Bank raised the Selic rate by 100bps to 12.75%, as expected, while it left the door open to further monetary tightening at a slower pace and considered it appropriate to advance the process of monetary tightening significantly into even more restrictive territory. BCB also stated that inflationary pressures arising from the pandemic period have intensified due to problems related to the new COVID-19 wave in China and the Ukraine war, according to Reuters. Norges Bank: Key Policy Rate 0.75% (exp. 0.75%, prev. 0.75%). Reiterates that the next hike will “most likely” occur in June. Adds, the Krone has recently depreciated and is now weaker than projected. Fixed Income Very volatile moves in bonds between the FOMC, BoE and NFP, with Treasuries flipping from bull-to-bear steepening. 10 year note soft within wide 119-09+/118-19+ range, Bunds flat between 153.79-152.74 parameters and Gilts firm in catch-up trade either side of 118.00. Bonos and Oats off best levels after digesting Spanish and French multi-tranche debt issuance Commodities WTI and Brent have been pivoting relatively narrow ranges ahead of today's JMMC/OPEC+ gatherings, currently posting gains of USD 0.30/bbl. OPEC+ is expected to maintain its policy of increase the output quota by 432k BPD in June, lifted from the 400k BPD in May as part of the pacts terms; newsquawk preview here. Spot gold is bid but lost the USD 1900/oz mark in early-European trade, a figure it has spent the morning modestly below. Norway's labour unions said initial wage talks with oil firms broke down and they will proceed with mediation, according to Reuters. Crypto Bitcoin is subdued and returned to existing session lows of USD 39.4k amid coverage of the below WSJ story; more broadly, Bitcoin has been steady at the lower-end of the morning's ranges. US Senators Warren and Smith have sent a letter to Fidelity over its Bitcoin 401(k) plan which would allow investors to allocate as much as 20% of their portfolios into Bitcoin, according to WSJ; senators suggest that Bitcoin could be too risky for savers. US Event Calendar 08:30: 1Q Unit Labor Costs, est. 10.0%, prior 0.9% 08:30: 1Q Nonfarm Productivity, est. -5.3%, prior 6.6% 08:30: April Continuing Claims, est. 1.4m, prior 1.41m 08:30: April Initial Jobless Claims, est. 180,000, prior 180,000 DB's Jim Reid concludes the overnight wrap I'm normally asleep at around 945pm each evening but tense football games often disturb that equilibrium and last night was the ultimate sleep disrupter. I was just about to close down my iPad in bed and fall asleep as Man City we're two goals ahead in injury time in the Champions League semi. I stayed the extra minute and in that minute Real Madrid scored twice, took the game into extra time and ultimately won a stunning tie. I finally turned my iPad off 10 minutes before the end but couldn't sleep so turned it on again after they won. Liverpool vs Real Madrid will be an epic final! So all in all a hectic evening trying to watch the Fed while my wife and I watched Ozark (stressful in its own right) and then the football. I'm worn out this morning. So after all that, the Fed intentionally or unintentionally decided that the market has had enough stress for now and clamped down on the more hawkish potential near-term paths for policy. As a result equities soared, yields fell (especially at the front-end), credit tightened, the dollar slumped and oil built on its earlier rally. Let's very briefly get the boring bit out of the way in a line or two. Basically the FOMC rose rates by +50bps and signalled they would begin to reduce the size of their balance sheet in June, both in line with our expectations (Our full US econ review is here). However the most pressing question for markets was how willing the Committee was to consider future rate increases of +75bps. Market participants didn't have to wait long for an answer, as Chair Powell quickly noted that +75bp hikes were not actively being considered, while +50bp hikes were on the table for the "next couple" of meetings. In line, market pricing for the next two meetings ended the day at +100bps, having stripped out any of the small, but recently growing, premium priced in for +75bps over the June and July meetings. The firm rebuke led to a rally in Treasury yields, led by the short-end, as 2yr yields fell -14.0bps, while 10yr yields were a relatively benign -3.7bps by comparison. The move in nominal 10yrs again masked divergence in the decomposition driven by the market’s dovish interpretation, with breakevens widening +4.9bps to 2.88%, while real yields fell -8.6bps, still managing to finish the day in positive territory at 0.05% though. Elsewhere in the presser, the Chair made multiple mentions of the Committee’s intention to “expeditiously” get policy towards more neutral levels given the monumental inflation-fighting task at hand. He demurred when asked if policy would ultimately need to reach a restrictive rather than just neutral stance, but did not rule it out. He still maintained hope that the Fed could engineer a soft landing after this hiking cycle, but to be fair, it is hard to imagine him saying anything else. He cited strong household and consumer balance sheets as reasons for why the economy could withstand the hiking cycle, when indeed, that very strength when inflation is at multi-decade highs is why policy will probably need to reach restrictive levels not currently appreciated by market pricing. In my opinion the Fed can control the near-term market expectations but beyond that it is all about the inflation data. If it doesn't improve then 50bps will be live at every meeting and not just the "next couple", and 75bps risks will be back on the table. This is all for another day though. When all was said and done, the market took -11.7bps out of policy tightening during 2022, with futures implying fed funds hitting 2.77% after the December meeting. Futures are still implying that the Fed will hit its terminal rates sometime in the third quarter next year, but that rate was around -18bps lower following the meeting at 3.24%. Indeed the breathing space given by the removal of the price hike premiums sent US equities on a tear. Little changed heading into the meeting, the S&P 500 ended the day +2.99% higher, its largest one-day gain since May 2020. Every sector ended in the green, with a full 477 companies posting gains, the most since February. The gains were broad-based, with every sector but real estate (+1.09%) gaining at least 2%, though energy (+4.12%), communications (+3.68%) and tech (+3.51%) were the standouts. In line, the NASDAQ (+3.19%) and FANG+ index (+3.40%) outperformed, on the drop in discount rates. In Asia, mainland Chinese stocks returned following a few days of holidays and are in positive territory with the Shanghai Composite (+0.95%) and CSI (+0.28%) higher. Meanwhile, the Hang Seng (+0.76%) is trading up, but paring its early morning gains. Elsewhere, the S&P/ASX 200 (+0.67%) is climbing while the Japanese and Korean markets are closed for public holidays. Outside of Asia, contracts on the S&P 500 (-0.08%) and NASDAQ 100 (-0.07%) are fractionally lower. Stoxx 50 futures are +2.4% due to a post Fed catch-up effect. Early morning data showed that China’s services sector activity contracted further in April as the Caixin services PMI tumbled to 36.2, its lowest level since the initial onset of the pandemic in February 2020 and compared to March’s reading of 42. Back now to life pre the Fed. Earlier we had seen sovereign bonds sell off in Europe, with yields on 10yr bunds marginally up +0.7bps to 0.97%, having regularly traded above the 1% mark during the session. Those moves were echoed across the continent and there was a further widening in peripheral spreads, with the gap between Italian 10yr yields over bunds widening by +6.7bps to 198bps. That’s their 11th consecutive move wider, and takes the spread to its highest closing level in almost two years. We’ve also seen a similar move with the Spanish spread, which is at its highest in nearly two years as well, at 109bps. It is likely we'll get a decent reversal this morning though. That selloff in sovereign bonds came as oil prices reversed their declines so far this week, with Brent Crude up +4.93% to $110.14/bbl after EU President Von der Leyen proposed a ban on Russian oil in the latest sanctions package. Von der Leyen said this would be done “in an orderly fashion”, with the proposal seeing Russian crude oil phased out within 6 months, and refined products by year-end. Nevertheless, Hungary’s foreign minister said that “In its current form the Brussels sanctions package cannot be supported”, which risks holding up the package since it has to have unanimous agreement among the 27 member states. Bloomberg reported people familiar with the matter saying that Hungary and Slovakia would be granted a longer period until the end of 2023 to enforce the sanctions. Although energy stocks benefited from the rise in prices yesterday, they were mostly the exception in Europe, where the broader STOXX 600 underwent a larger -1.08% decline. This morning, Brent crude (+0.43%) is extending its gains. Looking forward now, central banks will remain on the agenda today as well, with the Bank of England decision at mid-day where the consensus and market pricing are expecting a 25bps hike, which would take Bank Rate up to its highest level since the GFC, at 1%. In his preview (link here), our UK economist is in line with this, and expects the core message from the MPC to remain similar to March, highlighting the uncomfortable and intensifying trade-off between growth and inflation. He’s also expecting that the MPC will confirm its intension to start selling gilts, but doesn’t think we’ll get the details until August, with sales commencing early September. Staying on the UK, we’ve got local elections taking place today as well that’ll be an important mid-term milestone for both the government and opposition, and our UK economists have put together a preview (link here). Last year the Conservatives had a very good set of results as the economy reopened amidst the vaccine rollout. But whereas they were 9 points ahead of Labour in the polls a year ago, they’re now 6 points behind them according to Politico’s average, so it’s a very different context. However, given most of the seats up for grabs today were last fought in 2018 when the Conservatives and Labour were roughly level in the polls during Theresa May’s premiership, the scale of Conservative losses may not be as big as the polling swing over the last 12 months would otherwise imply. One important contest to watch out for will be the Assembly elections in Northern Ireland, where the Irish nationalist Sinn Féin party are leading in the polls, and could become the largest party for the first time since Irish partition in the 1920s. Politico’s poll of polls puts Sinn Féin on 26%, ahead of the unionist DUP on 19%. On the data side yesterday, we saw the ADP’s report of private payrolls for April, which showed weaker-than-expected growth of 247k in April (vs. 383k expected). That comes ahead of tomorrow’s US jobs report, where our economists are expecting that nonfarm payrolls will have risen by +465k in April. Then there was the ISM services index for April, where the headline felt to 57.1 (vs. 58.5), but the prices paid index rose to a record 84.6. Over in Europe meanwhile, the final composite PMI for the Euro Area in April was in line with the flash reading at 55.8, and March’s retail sales fell by -0.4% (vs. -0.3% expected). To the day ahead now, and the highlights will include the aforementioned BoE policy decision and UK local elections. Otherwise from central banks, we’ll hear from the ECB’s Lane, Holzmann and Centeno. Data releases include German factory orders and French industrial production for March, the final UK services and composite PMIs for April, and the weekly initial jobless claims from the US. Finally, earnings releases today include Shell. Tyler Durden Thu, 05/05/2022 - 08:13.....»»

Category: blogSource: zerohedgeMay 5th, 2022

Futures Rise Ahead Of Biggest Fed Rate Hike Since The Dot Com Bubble Burst

Futures Rise Ahead Of Biggest Fed Rate Hike Since The Dot Com Bubble Burst May the 4th is here, and US futures are up slightly ahead of a key Federal Reserve meeting in which the Fed is widely expected to raise rates by 50bps, the biggest hike since the dot com bubble burst in May 2000, and to release plans for balance-sheet normalization; Chair Powell’s post-meeting press conference will provide guidance on potential for bigger rate hikes at subsequent meetings and policy makers’ assessment of the neutral rate. As DB's Jim Reid puts it, "if you're under 43, did 3 years at university and then joined financial markets then you won't have worked in an era of 50bps Fed rate hikes. This will very likely change tonight as the Fed are a near certainty to raise rates by 50bps. In fact it'll be the first time the Fed have hiked at consecutive meetings since 2006. So we enter a new era that won't be familiar to many." In any case, investors have already priced in the Fed’s largest hike since 2000 - in fact, OIS contracts currently price in around 160bp of additional hikes over the next three policy meetings -  and they will scrutinize Chair Jerome Powell’s speech for clues on the pace of future rate increases and balance-sheet reduction. Some traders are betting on an even larger 75 basis-point hike in June. As such, even though global financial conditions are already the tightest they have ever been (according to Goldman), S&P and Nasdaq futures are both up 0.5%, while 10-year yields drifts lower, having stalled again near 3% at the European open. "Powell’s words about how aggressively the Fed will tame inflation are likely to shape market sentiment for the next couple of weeks at least," said technical analyst Pierre Veyret at ActivTrades in London. Lyft tumbled 26% in premarket trading after the ride-hailing company’s second-quarter outlook disappointed Wall Street. Global bonds have slumped under a wave of monetary tightening, with German 10-year yields around 1% and the U.K.’s near 2%, while US 10Y yields are circling 3%. Adding to the tightening outlook, European Central Bank Executive Board Member Isabel Schnabel said it’s time for policy makers to take action to tame inflation, and that an interest-rate hike might come as early as July. Meanwhile, Iceland’s central bank delivered its biggest hike since the 2008 financial crisis and India’s raised its key interest rate in a surprise move Wednesday. “There is a difficult set up in general for risk assets” as valuations remain stretched despite a drop in equities, Kathryn Koch, chief investment officer for public markets equity at Goldman Sachs & Co., said on Bloomberg Television. She added that “some people think stagflation is a real risk.” In premarket trading, Didi Global was 6% lower and Chinese technology shares slumped as the U.S. Securities and Exchange Commission is investigating the ride-hailing giant’s chaotic 2021 debut in New York.  Advanced Micro Devices jumped 5.7% in premarket trading after the chipmaker gave a strong sales forecast for the current quarter. Starbucks gained 6.6% after the coffee chain reported higher-than-expected U.S. sales, outweighing the negative impact of high inflation and Chinese lockdowns. Here are some of the biggest U.S. movers today: Lyft (LYFT) shares slump 27% premarket after the ride-hailing company’s second-quarter outlook disappointed Wall Street, highlighting investors’ willingness to dump growth stocks at the first hint of trouble Uber (UBER) slipped as Lyft’s results hit the more diversified peer. Uber said it rescheduled the release of its 1Q financial results and its quarterly conference to Wednesday morning from the afternoon, after rival Lyft gave a weaker-than-expected outlook Airbnb (ABNB) jumps 4.5% premarket after its second-quarter revenue forecast beat estimates, with the company seeing “substantial demand” after more than two years of Covid-19 restrictions Livent (LHTM) shares surge 23% premarket, with KeyBanc highlighting an increase in the lithium product maker’s 2022 Ebitda guidance Match Group (MTCH) slips 6.7% premarket as analysts say the miss in the dating-app company’s guidance takes some of the shine off its revenue beat Didi Global (DIDI) led a drop in U.S.-listed Chinese internet stocks after news of an SEC investigation into the ride-hailing company’s 2021 debut in New York added to investor concerns around the sector Skyworks Solutions (SKWS) shares drop 2.5% premarket after the semiconductor device company gave a forecast that was below the average analyst estimate Herbalife (HLF) sinks 17% premarket after slashing its full-year forecast and setting second-quarter adjusted earnings per share outlook below the average analyst estimate Advanced Micro Devices (AMD) rises as much as 7.5% in premarket trading, with analysts positive on the demand the chipmaker is seeing from data centers Akamai (AKAM) falls as much as 14% after analysts noted that a slowdown in internet traffic and the loss of revenue due to the war in Ukraine hit the company’s first-quarter results and full-year guidance JPMorgan CEO Jamie Dimon said in an interview Wednesday that the Fed should have moved quicker to raise rates as inflation hits the world economy. He said there was a 33% chance of the Federal Reserve’s actions leading to a soft landing for the U.S. economy and a third chance of a mild recession. “The Fed remains very focused on bringing inflation down, however, any further hawkish pivots will likely be tempered to some extent by the desire to achieve a soft landing,” Blerina Uruci, U.S. economist at T. Rowe Price Group Inc., wrote in a note. In Europe, declines for retailers and most other industry groups outweighed gains for energy, media and travel and leisure companies, pulling the Stoxx 600 Europe Index down 0.6%. The DAX outperforms, dropping 0.4%, Stoxx 600 lags, dropping 0.5%. Retailers, financial services and construction are the worst performing sectors. Here are the biggest European movers: Flutter Entertainment rises more than 6.9% its 1Q update matched broker expectations. Jefferies says a strong U.S. performance fuels confidence that a profitability “tipping point” is nearing. Kindred shares advance after its second-biggest shareholder, Corvex Management LP, said it believes Kindred’s board should evaluate strategic alternatives including a sale or merger. Fresenius SE shares rise as much as 4.2% on beating 1Q expectations. The beat was driven by the Kabi pharmaceutical division, which benefited from a positive FX impact, according to Jefferies. Siemens Healthineers rises after the German health care firm upgraded its earnings guidance. The beat was driven by a “strong performance” in its diagnostics division, Jefferies says. Stillfront shares rise as much as 10% after the Swedish video gaming group presented its latest earnings. Handelsbanken says the report provides good news, justifying some relief in the shares. Yara and K+S climb after the EU’s proposal to sanction the largest Belarus potash companies. Yara may see higher input prices but its market share may rise in wake of a ban, analysts note. Skanska falls as much as 12% after the construction group presented its latest earnings. The report was overall in-line, but construction margins were a weakness, Kepler Cheuvreux says. Earlier in the session, Asian stocks declined for a third straight day, with the Federal Reserve’s upcoming policy decision and a U.S. regulatory probe into Didi Global weighing on sentiment. The MSCI Asia Pacific Index fell by as much as 0.5%, with Chinese internet giants Tencent and Alibaba the biggest drags. The sector declined on news that the U.S. regulators are investigating Didi’s 2021 trading debut in New York. India’s stock measures fell the most in the region as the domestic central bank hiked a key policy rate in an unscheduled decision. Benchmarks in Hong Kong and Vietnam also fell as some markets returned from holidays, while Japan and China remained closed. All eyes are now on the Fed’s interest-rate decision on Wednesday, with policy makers expected to hike by 50 basis points, the biggest increase since 2000.   “We have two forces of gravity working on Asian equities -the rising interest rates and the lockdowns and weaker growth in China,” Herald van der Linde, head of Asia Pacific equity strategy at HSBC, told Bloomberg Television. The MSCI Asia gauge has dropped more than 13% this year as rising borrowing costs, China’s Covid-19 lockdowns and rising inflation hurt prospects for corporate profits. Shanghai’s exit from a five-week lockdown that has snarled global supply chains is being delayed by infections persistently appearing in the community. “The most important decision Asian equity investors have to make throughout this year may be duration, how to position themselves if inflation is going to peak,” van der Linde added. In rates, treasuries advanced, outperforming bunds and rising with stock futures, although price action remains subdued ahead of 2pm ET Fed policy decision. Intermediate sectors lead the advance, with yields richer by ~2bp in 5- to 10-year sectors, before Treasury’s quarterly refunding announcement at 8:30am. Yields little changed across 2-year sector, flattening 2s10s by ~1.5bp; 10-year at ~2.96% outperforms bunds and gilts by ~3.5bp. Dollar issuance slate empty so far; two borrowers priced $3.7b Tuesday taking weekly total past $8b as new-issue activity remains light; at least two borrowers stood down from announcing deals. Bund and gilt curves bear flatten. Euribor futures drop 7-8 ticks in red and green packs following comments from ECB’s Schnabel late Tuesday. In FX, the Bloomberg Dollar Spot Index was little changed and the dollar was steady to slightly weaker against most of its Group- of-10 peers. Treasuries were steady, with the 10-year yield nudging 3%. The euro hovered around $1.0520 and European bonds fell. The pound rose past the key $1.25 level and gilts fell in line with euro-area peers, as traders braced for the FOMC rate decision later Wednesday and eyed Thursday’s Bank of England meeting. Data from the British Retail Consortium showed shop price inflation accelerated to 2.7% from a year ago in April, the most since 2011. Australia’s dollar advanced against all its Group-of-10 peers and the nation’s sovereign bonds extended losses as retail sales rising to a record high boosted bets for central bank tightening. Retail sales surged 1.6% in March to A$33.6b, more than triple economists’ forecast for a 0.5% increase. Bitcoin is bid this morning, in contrast to the recent contained sessions, posting upside in excess of 3.0% on the session; albeit, yet to mount a test of the USD 40k mark. In commodities, oil rallies after the European Union proposed to ban Russian crude oil over the next six months; however, sources indicate that Hungary and Slovakia will receive an extend phase-our period in order to appease their known opposition. WTI drifts 3.2% higher with gains capped near $105 so far. Spot gold steady at $1,868/Oz. Most base metals trade in the green Looking at the day ahead, the main highlight will be the aforementioned Fed decision, along with Chair Powell’s subsequent press conference. On the data side, we’ll also get the final services and composite PMIs from around the world, UK mortgage approvals and Euro Area retail sales for March, and US data for the March trade balance, the ISM services index for April, and the ADP’s report of private payrolls for April. Finally, earnings releases include CVS Health, Booking Holdings, Regeneron, Uber, Marriott International and Moderna. Market Snapshot S&P 500 futures up 0.3% to 4,180.00 STOXX Europe 600 down 0.4% to 444.21 MXAP down 0.3% to 167.37 MXAPJ down 0.4% to 553.87 Nikkei down 0.1% to 26,818.53 Topix little changed at 1,898.35 Hang Seng Index down 1.1% to 20,869.52 Shanghai Composite up 2.4% to 3,047.06 Sensex down 1.2% to 56,318.69 Australia S&P/ASX 200 down 0.2% to 7,304.68 Kospi down 0.1% to 2,677.57 German 10Y yield little changed at 1.00% Euro little changed at $1.0527 Brent Futures up 3.6% to $108.77/bbl Gold spot up 0.1% to $1,870.11 U.S. Dollar Index little changed at 103.40 Top Overnight News from Bloomberg A lot is riding on how Federal Reserve Chairman Jerome Powell parries a question he’ll surely be asked after Wednesday’s monetary policy decision: is a 75-basis-point rate hike in the cards at some stage? The negative-yielding bond is nearing extinction: there’s only 100 left in the world. That’s down from over 4,500 such securities last year in the Bloomberg Global Aggregate Negative Yielding Debt index, following a surge in yields as investors bet on imminent interest-rate hikes. The EU plans to ban Russian crude oil over the next six months and refined fuels by the end of the year as part of a sixth round of sanctions to increase pressure on Vladimir Putin over his invasion of Ukraine The ECB should consider raising interest rates as soon as July as inflation accelerates, ERR reported, citing Governing Council member Madis Muller North Korea launched what appeared to be a medium-range ballistic missile Wednesday, as Kim Jong Un ramps up his nuclear program ahead of U.S. President Joe Biden’s first visit to Seoul Iceland’s central bank delivered its biggest hike since the 2008 financial crisis to try to curb inflation and rein in Europe’s fastest house-price rally. The Monetary Policy Committee in Reykjavik lifted the seven-day term deposit rate by 100 basis points to 3.75%, accelerating tightening with its largest move yet since the pandemic. The increase was within the range of outcomes indicated by recent surveys of market participants A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were cautious amid holiday closures and as markets braced for the incoming FOMC. ASX 200 was rangebound as strength in financials was offset by tech and consumer sector losses. Hang Seng underperformed amid a tech rout and after a wider than expected contraction in Hong Kong’s advanced Q1 GDP, while China’s COVID-19 woes persisted with Beijing tightening its restrictions. Top Asian News Hong Kong Plots Different Covid Path to Xi’s Zero Tolerance Beijing Shuts Metro Stations and Suspends Bus Routes Didi Leads Slump in U.S.-Listed Chinese Shares Amid SEC Probe Record India IPO Opens to Retail Amid Fickle Markets: ECM Watch European bourses, Euro Stoxx 50 -0.3%, are modestly softer after another subdued but limited APAC handover amid ongoing regional closures. US futures remain in tight pre-FOMC ranges, with participants also awaiting ISM Services and ADP. In Europe, sectors are mostly lower with the exception. US President Biden's administration is reportedly moving towards the imposition of human-rights related sanctions on Hikvision, according to FT sources; final decision has not been taken. Top European News Hungary Voices Objection to EU Sanctions Plan on Russian Oil U.K. Mortgage Approvals Fall to 70.7k in March Vs. Est. 70k European Energy Prices Jump as EU Proposes Banning Russian Oil Boohoo Plunges as Online Clothing Retailer’s Growth Wilts FX DXY anchored around 103.500 awaiting FOMC and Fed chair Powell for further guidance. Aussie gets retail therapy and hawkish RBA rate calls to consolidate gains made in wake of 25 bp hike; AUD/USD pivots 0.7100 and AUD/NZD 1.1050. Kiwi elevated following NZ labour data showing record low unemployment and strength in wages, NZD/USD tightens grip of 0.6400 handle and closer to half round number above. Loonie on a firmer footing ahead of Canadian trade as oil prices bounce, USD/CAD towards base of a broad 1.2850-00 range. Indian Rupee rallies after RBI lifts benchmark rate and reserve ratio at off-cycle policy meeting, former up 40 bp to 4.40% and latter +50 bp to 4.50%. Euro, Yen and Franc remain in close proximity of round and psychological numbers, circa 1.0500, 130.00 and 0.9800 respectively. RBI raises its key repo rate by 40bps to 4.4% in an off-cycle meeting; Also raises the cash reserve ratio by 50bps to 4.5%. Will retain accommodative policy stands but will remain focused on the withdrawal of accommodation. Fixed Income Bonds attempt to nurse some losses before FOMC and a busy agenda in the run up, including ADP, Quarterly Refunding details and the services ISM. Bunds back from a 152.44 low to 153.00+, Gilts edging towards 118.00 from 117.55 and 10 year T-note fractionally above par within a 118-17+/06 range. German Green issuance well received as cover climbs from prior sale and retention dips, albeit with the average yield sharply higher. Commodities WTI and Brent are bolstered amid the EU unveiling the sixth round of Russian sanctions, seeing a complete import ban on all Russian oil, benchmarks firmer by circa. USD 3.5/bbl However, sources indicate that Hungary and Slovakia will receive an extend phase-our period in order to appease their known opposition. US Energy Inventory Data (bbls): Crude -3.5mln (exp. -0.8mln), Gasoline -4.5mln (exp. -0.6mln), Distillate -4.5mln (exp. -1.3mln), Cushing +1.0mln. India is looking for Russian oil at under USD 70/bbl on a delivered basis in order to compensate for additional components incl. securing financing, via Bloomberg sources; adding, that India has purchased over 40mln/bbl of Russian crude since late-Feb. OPEC+ sees the 2022 surplus at 1.9mln, +600k BPD from the prior forecasts, according to the JTC report. Several OPEC+ officials expected the current oil pact to continue, according to Argus Media. US Event Calendar 07:00: April MBA Mortgage Applications, prior -8.3% 08:15: April ADP Employment Change, est. 382,000, prior 455,000 08:30: March Trade Balance, est. -$107.1b, prior -$89.2b 09:45: April S&P Global US Services PMI, est. 54.7, prior 54.7 09:45: April S&P Global US Composite PMI, est. 55.1, prior 55.1 10:00: April ISM Services Index, est. 58.5, prior 58.3 14:00: May Interest on Reserve Balances R, est. 0.90%, prior 0.40% 14:00: May FOMC Rate Decision; est. 0.75%, prior 0.25% DB's Jim Reid concludes the overnight wrap I feel like I aged 20 years after the first half of the Champions League semi-final last night. Luckily the second half was less stressful and Liverpool are through to the final. I don't think I got those 20 years back though. Talking of age, if you're under 43, did 3 years at university and then joined financial markets then you won't have worked in an era of 50bps Fed rate hikes. This will very likely change tonight as the Fed are a near certainty to raise rates by 50bps. In fact it'll be the first time the Fed have hiked at consecutive meetings since 2006. So we enter a new era that won't be familiar to many. In terms of what to expect later, our US economists are also calling for a 50bps hike in their preview (link here), which follows the comment from Chair Powell before the blackout period that “50 basis points will be on the table” at this meeting. Looking forward, they further see Powell affirming market pricing that further 50bp hikes are ahead, and our US economists believe this will be the first of 3 consecutive 50bp moves, which will eventually take the Fed funds to a peak of 3.6% in mid-2023. We’re also expecting an announcement that balance sheet rundown will begin in June, with terminal cap sizes of $60bn for Treasuries and $35bn for MBS, with both to be phased in over 3 months. See Tim’s preview on QT (link here) for more info on that as well. While the Fed might have already begun their hiking cycle 7 weeks ago now, the sense that they’re behind the curve has only grown over that time. For example, the latest inflation data from March showed CPI hitting a 40-year high of +8.5%, meaning that the Fed Funds rate was beneath -8% in real terms that month, which is lower than at any point during the 1970s. Meanwhile the labour market has continued to tighten as well, with unemployment at a post-pandemic low of 3.6% in March, and data out yesterday showed that the number of job openings hit a record high of 11.55m (vs. 11.2m expected) as well. That means the number of vacancies per unemployed worker stood at a record high of 1.94 in March, which speaks to the labour shortages present across numerous sectors at the minute. Ahead of the decision later on, the S&P 500 surrendered an intraday gain of more than +1% to finish the day +0.48% higher, in another New York afternoon turnaround. Energy (+2.87%) and financials (+1.26%) did most of the work keeping the index afloat after dipping its toes in the red late in the day, while only two sectors ultimately finished lower, staples (-0.24%) and discretionary (-0.29%). A sizable 35 S&P 500 companies reported earnings before the close, but there weren’t any standout results to drive an index-wide response. Indeed, the mega-cap FANG+ index only slightly underperformed the broader index at +0.11%. In Europe the STOXX 600 was up +0.53%, closing before the New York reversal. In line with the turnaround, overall volatility remained elevated, with the VIX index (-3.09pts) closing just below the 30 mark. Ahead of today’s FOMC decision US Treasuries continued their recent back-and-forth price action. The 10yr yield ended ever so slightly lower at -0.1bps. That masks continued rates volatility, however, with the 10yr as much as -8bps lower intraday after having moved above 3% in the previous session for the first time since 2018. The back-and-forth was matched by real yields, as 10yr real yields were as many as -11bps lower before closing down just -0.1bps, comfortably in positive territory for only the second day since March 2020 at 0.14%. The curve flattened as short-end rates moved higher, with 2yr yields gaining +5.1bps, after most tenors were lower earlier in the session. In Europe, yields on 10yr bunds moved above 1% in trading for the first time since 2015 shortly after the open. Yields did then swing lower, but subsequently recovered to be down just -0.2bps at 0.961%. However, bunds were one of the stronger-performing European sovereigns yesterday, and the spread of both Italian (+2.2bps) and Spanish (+1.1bps) 10yr yields over bunds widened to fresh post-Covid highs in both cases, at 191bps and 106bps respectively. Asian equity markets are mixed in a holiday thinned session ahead of the Fed’s key rate decision later. The Hang Seng (-0.90%) is trading in negative territory as a decline in Chinese listed tech stocks is weighing on sentiment. Elsewhere, the Kospi (-0.15%) and S&P/ASX 200 (-0.08%) are fractionally lower. Meanwhile, markets in Japan and mainland China are closed today for holidays. Oil prices are slightly higher amid rising prospects of an EU embargo of Russian crude oil. As I type, Brent and WTI futures are c.+1% up to trade at $106.09/bbl and $103.53/bbl respectively. Early morning data showed that Australia’s retail sales rose for the third consecutive month, advancing +1.6% m/m in March and going past market estimates for a + 0.5% gain. It followed a +1.8% rise in February. Looking at yesterday’s other data releases, US factory orders grew by a stronger-than-expected +2.2% in March (vs. +1.2% expected). And over in Europe, German unemployment fell be -13k in April (vs. -15k expected), whilst the Euro Area unemployment rate in March fell to 6.8%, which is the lowest since the single currency’s formation. Finally, Euro Area PPI in March soared to 36.8% (vs. 36.3% expected), which is also a record since the single currency’s formation. To the day ahead now, and the main highlight will be the aforementioned Fed decision, along with Chair Powell’s subsequent press conference. On the data side, we’ll also get the final services and composite PMIs from around the world, UK mortgage approvals and Euro Area retail sales for March, and US data for the March trade balance, the ISM services index for April, and the ADP’s report of private payrolls for April. Finally, earnings releases include CVS Health, Booking Holdings, Regeneron, Uber, Marriott International and Moderna. Tyler Durden Wed, 05/04/2022 - 07:50.....»»

Category: blogSource: zerohedgeMay 4th, 2022

Futures Slide As Amazon, Apple Slump; Nasdaq Set For Worst Month Since Nov 2008

Futures Slide As Amazon, Apple Slump; Nasdaq Set For Worst Month Since Nov 2008 It has been an illiquid, rollercoaster session on the last day of the week and month, which first saw US index futures modestly rise alongside European stocks propped up by surging Chinese and Asian markets following Beijing's latest vow to use new tools and policies to spur growth, however the initial move higher quickly faded as markets remembered that not only did Amazon report dismal earnings (with Apple also sliding on weak guidance) but the Fed is set to hike 50bps (or maybe 75bps) next week, and put a lit on any upside follow through. As a result, S&P500 futures dropped 0.9%, while Nasdaq futures retreated 1.1% on the last trading day of April, adding to their 9.3% decline so far this month and on pace for the worst monthly performance since November 2008 as fears of rising rates hurt bubbly growth shares and fuel risks for future profits. The yen snapped a slide while staying near 20-year lows. The yuan, euro, pound and commodity-linked currencies made gains while the dollar dipped. 10Y TSY yields rose, rising by about 4bps to 2.87% while gold moved back above $1900. Bitcoin tumbled as usual, and last traded back under $39,000. In premarket trading, Amazon.com plunged 9%, after projecting dismal second-quarter sales growth, while the world's largest company Apple dropped 2.8% after warning on supply constraints. Meanwhile, Tesla shares gained 3.1% premarket after CEO Elon Musk said he doesn’t plan on selling any more stock after a $4 billion stake sale. Here are some other notable premarket movers: Intel (INTC US) shares slide 3.1% premarket as analysts flag “light” guidance for the chipmaker’s second quarter, stoking worries over the impact of waning demand for PCs. Intel’s second-quarter forecast missed the average estimate. Robinhood (HOOD US) shares are set to open at a record low Friday as a lockdown-driven boom in retail trading continues to fade and a stock market selloff squeezes out some clients. Tesla (TSLA US) shares rise as much as 4.2% premarket, after CEO Elon Musk said he doesn’t plan on offloading any more Tesla stock after selling ~$4b of shares in the electric vehicle maker following his deal to buy Twitter. Accolade (ACCD US) plummets 36% premarket after the company’s 2023 revenue forecast fell short of estimates, with Morgan Stanley downgrading the healthcare software provider to equal-weight after the loss of a key customer. Finch Therapeutics (FNCH US) shares soar as much as 54% premarket after the biotech announced that the FDA removed the clinical hold on Finch’s investigational new drug application for CP101. Piper Sandler cut its recommendation on Mastercard (MA US) to underweight, becoming the first broker to downgrade the company with a sell-equivalent rating since August. Shares down 1.1% premarket. U.S.-listed Chinese stocks rally across the board in premarket trading after China’s top leaders pledged more support to spur economic growth and vowed to contain Covid outbreaks. Alibaba (BABA US) +13%, JD.com (JD US) +16%. Zymeworks (ZYME US) climbs 30% premarket; All Blue Capital made a non-binding offer at $10.50 per share in cash for the biotech company, Reuters reports, citing people familiar with the matter. Outside of the flagship tech giant earnings misses, the results season has been reassuring so far. S&P 500 earnings growth is tracking 4.3% year-on-year, with 86% of companies beating estimates, according to Barclays strategists. “With continued solid U.S. growth prospects, robust earnings, and relatively strong household balance sheets, a recession in the next 12 months is not in our base case,” said UBS Wealth Management CIO Mark Haefele.  Meanwhile, as reported earlier, China’s top leaders promised to boost economic stimulus to spur growth.  While China’s announcement brought some relief for markets, many risks remain. They span China’s ongoing Covid challenges, the impact of the Fed on the U.S. economy and Russia’s war in Ukraine. “The Fed’s record on soft landings is not that strong,” Carol Schleif, deputy chief investment officer at BMO Family Office LLC, said on Bloomberg Television. “Markets are watching very, very carefully to see if we can thread that needle.” The latest U.S. data showed that the world’s largest economy unexpectedly shrank for the first time since 2020. That reflected an import surge tied to solid consumer demand, suggesting growth will return imminently.  The figures underscore the debate about how much scope the U.S. central bank has to tighten policy before the economy cracks. Markets continue to project a half-point Fed rate hike next week. “A year from now, 10-year yields are most likely going to be lower than where we are today,” Jimmy Chang, chief investment officer at Rockefeller Financial LLC, said on Bloomberg Television, referring to Treasuries. “I do believe at some point the economy starts to weaken, the Fed will be less hawkish, perhaps even go into a pause mode by, say, early next year.” Meanwhile, China's latest vow to prop up markets helped support European stocks (in addition to Asian and Chinese stocks of course), also spurred by a robust earnings season. The Stoxx Europe 600 Index climbed 0.8%, trimming a monthly decline. The Euro Stoxx 50 gains as much as 1.5% with most cash equity indexes gaining over 1% before stalling. Tech, consumer products and financial services are the strongest performing sectors. Here are some of the biggest European movers today: Novo Nordisk shares gain as much as 7.3% after the Danish pharmaceutical giant reported its latest earnings, which included a large beat on its blockbuster obesity drug Wegovy. The company also hiked its outlook. BBVA rises as much as 5.6% after better-than-expected first-quarter earnings, as the Spanish lender’s performance in Turkey showed signs of vindicating Chief Executive Officer Onur Genc’s bet on the country. Johnson Matthey jumps as much as 36%, the steepest gain since at least 1989 when Bloomberg’s records started, after Standard Industries Inc. bought a stake in the company. Remy Cointreau climbs as much as 3.8% after the French distiller reported 4Q sales that were in line with consensus. Analysts noted the strong start to the current fiscal year and a limited impact so far from a Covid-19 resurgence in the key Chinese market. Spie shares climb as much as 5.1% after the French company reported 1Q figures that Bryan Garnier said were “substantially” above expectations, with planned European investments for energy independence also viewed as a potential headwind. AstraZeneca shares decline as much as 1.3% after the company’s first-quarter earnings included a beat on core EPS and overall revenue, but also a slight miss on Alexion rare disease medication and key growth drugs such as Imfinzi. Neste falls as much as 8.7% even as the Finnish maker of renewable diesel reported first-quarter results that beat estimates. Jefferies (hold) said the lack of longer-term (full-year 2022) margin guidance could disappoint. Henkel tumbles as much as 10% after what RBC says was a “substantial profit warning” for 2022. NatWest falls as much as 6% after its 1Q results got a mixed response from analysts. Some were impressed with the performance of the bank’s Go-Forward business, while others highlighted the very low mortgage spread and miss in the CET1 capital ratio. Orsted drop as much as 3.2% despite reporting a 1Q profit beat, with analysts focusing on the project delays due to supply chain shortages as well as the impact of high input costs. Earlier in the session, Asian stocks climbed for a second day led by a jump in Chinese technology shares, amid a series of new policy promises from the country’s top leaders to bolster the economy and markets.  The MSCI Asia Pacific Index advanced as much as 1.7%, with Tencent and Alibaba among the biggest gainers. The Hang Seng Tech Index soared more than 10%, rebounding from earlier losses, as the country vowed to support healthy growth of platform companies. As reported earlier, China’s Politburo, led by President Xi Jinping, vowed to meet economic targets in a sign that it may step up stimulus to support growth. Shortly before the measures were unveiled, Chinese tech stocks reversed earlier losses as traders speculated about a possible relaxation of the yearlong regulatory clampdown. Chipmakers in Taiwan and South Korea also climbed, helping the region’s tech sector. A Bloomberg index of Asian semiconductor stocks rallied as much as 2.4%, its biggest gain in more than two weeks. A key technical indicator suggested that the sector is still oversold after Intel’s disappointing profit forecast. “After recent selloffs in the semiconductor sector, the price levels have become attractive for dip buyers,” said Seo Jung-Hun, a strategist at Samsung Securities, adding that the rebound may be limited ahead of the U.S. Federal Reserve meeting next week.   Stocks in South Korea, Taiwan and Australia advanced while those in Japan were closed for a holiday. Asia’s equity benchmark was still poised for its steepest monthly drop since March 2020 and its fourth monthly decline. Australian stocks also advanced, paring the week's decline. The S&P/ASX 200 index rose 1.1% to 7,435.00, paring the week’s loss. Technology and communications sectors gained the most Friday. Pointsbet gained the most in almost a month, snapping a five day losing streak after reporting turnover for the third quarter. Domino’s Pizza fell for a fourth day, dropping the most in a month. New Zealand, the S&P/NZX 50 index was little changed at 11,884.30. India’s benchmark equities index completed a third monthly slide this year as higher oil prices weighed on sentiment.  The S&P BSE Sensex fell 0.8% to 57,060.87 in Mumbai on Friday, taking its loss in April to 2.6%. Axis Bank Ltd. dropped 6.6% after reporting earnings and was the biggest drag on the Sensex, which saw 23 of 30 member-stocks fall. The NSE Nifty 50 Index also slipped 0.8% to 17,102.55. All 19 sectoral sub-indexes compiled by BSE Ltd. slipped, led by a gauge of oil and gas companies.  “We’ve been seeing the index oscillating in a broader range for the last two weeks and there’s no clarity over the next directional move yet,” Ajit Mishra, vice president for research at Religare Broking Ltd., wrote in a note.  The brokerage maintains a cautious view, with focus on earnings, auto sales data and the initial share sale of Life Insurance Corporation next week.  Of the 15 Nifty 50 firms that have announced earnings results so far, 10 either met or exceeded analysts’ expectations, while five missed.  In FX, the Bloomberg Dollar Spot Index fell after touching an almost two-year high yesterday as the greenback weakened against all of its Group-of-10 peers. Treasuries underperformed European bonds, with 3-year yields rising by 7bps. Scandinavian currencies were the top performers as they were supported by month-end flows. The Australian dollar extended intra-day gains after China’s top leaders promised to boost economic stimulus to spur growth and vowed to contain the country’s worst Covid outbreak since 2020, which is threatening official targets for this year. The euro snapped six days of losses against the dollar but was still set for its worst monthly performance in almost four years. Bunds extended losses and yields rose by up to 5 bps after data showed euro-area consumer prices rose by 7.5% from a year earlier in April, in line with the median estimate in a Bloomberg survey. A gauge excluding volatile items such as food and energy jumped to 3.5%. The pound advanced against the dollar, trimming a weekly decline of 2.2%. The cost of hedging against swings in the pound over a one-week period rose to the highest since December 2020. Gilts outperformed bunds and Treasuries, as money markets pared BOE tightening wagers. The yen rose on demand over the currency fix in Tokyo but it remains on track for its worst monthly performance since 2016 In rates, Treasuries hold losses into the U.S. session leaving yields down by as much as 6bps across front-end as the curve flattens. 10-year TSY yields were around 2.86%, cheaper by 4bp vs. Thursday close while 2s10s, 5s30s spreads flatten 2bp and 2.5bp amid front-end and belly-led weakness. German short-end cheapens roughly 5 bps to 0.24% as euro-area core inflation accelerated higher than expected. In Europe, peripherals underperform and lead bond losses while Estoxx50 climbs following better sentiment across Asia stocks after China’s pledge to ramp up stimulus.  Dollar issuance slate empty so far; two names priced $4.5b Thursday, taking weekly volumes through $8b vs. $20b forecast. Expectations are for $20b to $25b next week and a total of $125b to $150b for the month of May In commodities, WTI rose 1.2% higher to trade near $107. Saudi Aramco is expected to lower its official selling prices for June-loading crudes, market sources told S&P Global Commodity Insights; following tepid Asian demand fundamentals, with the OSP differentials retreating from the record highs. North Sea Crude oil grades underpinning dated Brent Benchmark to average 540k BPD in June (prev. 755k BPD), according to programmes. Indian firms are reportedly seeking oil import deals with Russia, according to sources cited by Reuters; three refiners looking to buy up to 16mln bbl per month of oil from Russia. Spot gold rises roughly $20 to trade around $1,915/oz. Most base metals trade in the green. Bitcoin prices are softer as usual and briefly retreated beneath the 39,000 level. Looking at the day ahead now, and data releases include the flash CPI estimate for the Euro Area in April, as well as the first look at Q1 GDP for the Euro Area, Germany, France and Italy. Otherwise from the US, we’ll get March’s data on personal spending and personal income, the Q1 employment cost index, the NI Chicago PMI for April, and the University of Michigan’s final consumer sentiment index for April. From central banks, we’ll hear from the ECB’s de Cos, and the Central Bank of Russia will be making its latest policy decision. Finally, earnings releases include ExxonMobil, Chevron, AbbVie, Bristol-Myers Squibb, Honeywell International, Charter Communications, Aon and NatWest. Market Snapshot S&P 500 futures down 0.9% to 4,242.00 STOXX Europe 600 up 1.0% to 451.55 MXAP up 2.0% to 169.00 MXAPJ up 2.6% to 561.33 Nikkei up 1.7% to 26,847.90 Topix up 2.1% to 1,899.62 Hang Seng Index up 4.0% to 21,089.39 Shanghai Composite up 2.4% to 3,047.06 Sensex up 0.5% to 57,796.94 Australia S&P/ASX 200 up 1.1% to 7,435.01 Kospi up 1.0% to 2,695.05 German 10Y yield little changed at 0.88% Euro up 0.7% to $1.0574 Brent Futures up 0.9% to $108.51/bbl Brent Futures up 0.9% to $108.51/bbl Gold spot up 1.1% to $1,915.10 U.S. Dollar Index down 0.66% to 102.94 Top Overnight News from Bloomberg More than six years after China’s shock 2015 devaluation roiled global markets and spurred an estimated $1 trillion in capital flight, the yuan is weakening at a similar pace. Onshore it’s lost nearly 4% in eight days, while the offshore rate is heading for its worst month relative to the greenback in history. Selling momentum is the strongest since the height of Donald Trump’s trade war in 2018 Geopolitical turmoil is reviving the dollar’s status as a haven, extending gains seen earlier this year as traders shifted to the U.S. to seize on rising interest rates from the Federal Reserve. On Thursday, one gauge of the greenback pushed through to the strongest level since 2002, swept up by a wave of demand for the world’s reserve currency Russia’s war with Ukraine may persuade the Swiss National Bank to adjust its monetary policy if inflation accelerates, SNB President Thomas Jordan said Economic expansion in the euro zone began 2022 on a weak footing -- underscoring the damage from soaring energy costs and worsening supply snarls following Russia’s invasion of Ukraine. Output increased 0.2% from the previous quarter in the three months through March -- matching the median estimate in a Bloomberg survey U.K. house prices rose for a ninth consecutive month in April as the housing market continued to defy an escalating cost of living crisis. The 0.3% gain marked the longest winning streak since 2016 Oil is poised for a fifth monthly gain after another tumultuous period of trading that saw prices whipsawed by the fallout from Russia’s war in Ukraine and the resurgence of Covid-19 in China A More detailed look at global markets courtesy of Newsquawk APAC stocks gained after the firm lead from the US where stocks looked past the surprise contraction in US GDP, but with advances in the region capped heading into month-end and next week's mass closures. ASX 200 was firmer as tech mirrored the outperformance of the Nasdaq stateside and with gold miners following closely behind after the precious metal reclaimed the psychological USD 1900/oz level. Hang Seng and Shanghai Comp were initially indecisive ahead of next week’s holiday closures including in the mainland where markets will remain closed through to Wednesday, while participants also digested the surprise contraction in Hong Kong’s exports and imports data. However, a surge in Hong Kong tech stocks and policy pledges by China's Politburo helped shake off the indecision. Top Asian News Bets of Easing Crackdown Spur Dizzying Jump in China Tech Stocks Grab Gets Malaysia Digital Bank License as Five Bids Win CATL Posts Sharp Drop in Earnings in Abrupt Reversal of Fortune China Plans Symposium With Big Tech Firms After Labor Day: SCMP European equities remained on the front foot on the last trading day of the month.   In terms of sectors, tech currently stands as the clear outperformer amid the sectoral gains on Wall Street yesterday alongside the surge in Chinese Tech. Overall, sectors have a slight anti-defensive bias. State-side futures were dented overnight amid after-hours losses in Amazon (-9% pre-market) and Apple (-2.4% pre-market) following disappointing guidance and inflationary headwinds. Thus, the NQ (-0.8%) currently lags. Top European News Russia Offers Dual-Payment Plan for Oil, Other Trade With India Germany Says Won’t Block Embargo on Russian Oil to Punish Putin UBS Wealth Says Too Early to Bet on Recession, Fed’s Failure U.K. House Prices Deliver Longest Winning Streak Since 2016 FX Dollar bulls book profits into month end and DXY pulls back further from near 104.000 peak in the process. High betas, cyclical and activity currencies grab the chance to recoup losses vs Buck. Euro rebounds amidst more hot Eurozone inflation data, but could be hampered by big option expiries. Yuan regroups as Chinese Government promises stimulus measures and aid for sectors of the economy suffering worst covid contagion Central Bank of Russia (CBR) cuts key rate by 300bps to 14.00% (exp. 15.00%); sees key rate in 12.5-14.00% range this year (prev. 9.0-11.0%). Russia's Kremlin, when asked about the idea of pegging the RUB to gold prices, says it is under discussion, according to Reuters. Fixed Income Bonds suffer another inflation setback after early EU rebound. Bunds some 100 ticks down from 154.69 peak, Gilts flattish between 119.34-118.73 parameters and 10 year T-note nearer 119-04+ low than 19-24 high. BTPs weak after so-so reception at end of month Italian auctions - US PCE data also adds to caution as Fed's preferred measure of inflation. Commodities WTI and Brent front-month futures have been gaining during the European morning. Saudi Aramco is expected to lower its official selling prices for June-loading crudes, market sources told S&P Global Commodity Insights; following tepid Asian demand fundamentals, with the OSP differentials retreating from the record highs. (S&PGlobal) North Sea Crude oil grades underpinning dated Brent Benchmark to average 540k BPD in June (prev. 755k BPD), according to programmes. Indian firms are reportedly seeking oil import deals with Russia, according to sources cited by Reuters; three refiners looking to buy up to 16mln bbl per month of oil from Russia. Spot gold has been rising in tandem with a pullback in the Buck but ahead of the US March PCE metric. Overnight, base metals saw gains in Shanghai, with some also citing a demand front-load ahead of the Chinese Labour Day. US Event Calendar 08:30: 1Q Employment Cost Index, est. 1.1%, prior 1.0% 08:30: March Personal Income, est. 0.4%, prior 0.5% March Personal Spending, est. 0.6%, prior 0.2% March Real Personal Spending, est. -0.1%, prior -0.4% March PCE Deflator MoM, est. 0.9%, prior 0.6% March PCE Deflator YoY, est. 6.7%, prior 6.4% March PCE Core Deflator MoM, est. 0.3%, prior 0.4% March PCE Core Deflator YoY, est. 5.3%, prior 5.4% 09:45: April MNI Chicago PMI, est. 62.0, prior 62.9 10:00: April U. of Mich. Sentiment, est. 65.7, prior 65.7 U. of Mich. Expectations, est. 64.1, prior 64.1 U. of Mich. Current Conditions, est. 68.0, prior 68.1 U. of Mich. 1 Yr Inflation, est. 5.5%, prior 5.4%; 5-10 Yr Inflation, prior 3.0% DB's Jim Reid concludes the overnight wrap By the time you're reading this I'll be lying down with straps around my ankles and wrists and making strange noises while I get manipulated by someone very strict. No I'm not remaking "50 Shades" but instead starting "Reformer Pilates" for the first time at a very early physio appointment. The miracle worker of a back consultant that has for now cured my debilitating sciatica with one simple injection has recommended it as a way of preventing a relapse. At this point, I will do absolutely anything he says so I’m prepared to humiliate myself on a regular basis going forward. So feel free to picture this as you read this. Some of the bearish chains have been loosened in risk markets over the last 24 hours but volatility remains elevated. We’ve seen another major European bond selloff, the highest German inflation since 1950, a further surge in the dollar, an unexpected US economic contraction in Q1, poor Amazon earnings, as well as growing geopolitical tensions as speculation continues about a Russian oil embargo in Europe. In spite of all that however, major equity indices have continued to advance from their Tuesday lows, with the S&P 500 (+2.47%) staging a huge comeback as investors focused on the more positive stories from recent corporate earnings releases. This was before Amazon missed sales expectations after the bell and revised down sales expectations for the second-quarter, fueling fears that consumer spending may slow despite evidence of robust activity in yesterday's GDP data. Amazon shares were -9.15% lower after hours. However, Apple reported earnings that beat estimates on strong iPhone sales, despite supply chain issues coinciding with China’s lockdowns. Shares were -2.19% lower after hours. Overall sentiment still remains fragile with NASDAQ 100 futures (-1.04%) and S&P 500 futures (-0.43%) moving lower in the overnight trade. This followed the best day for the S&P 500 (+2.47%) since the bounceback after the initial invasion in early March, with every sector more than +1.00% higher. Megacap tech stocks led the way as the FANG+ index rose +4.78%, its best day since mid-March. Europe also saw decent gains, although missing most of the rally that took place in the New York afternoon, with the STOXX 600 (+0.62%), the DAX (+1.35%) and the FTSE 100 (+1.13%) all higher. Given the big run-up in the New York afternoon, the S&P 500 was 'only' around +0.8% higher as Europe closed. Bond markets were again lively with most of the action in Europe, with a significant selloff after the German CPI print for April surprised on the upside yet again. Looking at the details, the year-on-year measure rose to +7.8% using the EU-harmonised method (vs. +7.6% expected), which is certainly the fastest pace of inflation since German reunification, and at the same level briefly seen in West Germany after the first oil shock in 1973. Indeed if you’re looking for German inflation faster than that, you’ve got to go all the way back to the 1950s, since West Germany had much more success than the US or UK for example in keeping inflation in the single-digits even during the 1970s. We’ll have to see what the flash CPI reading for the entire Euro Area brings today, but as I mentioned in my Chart of the Day yesterday (link here), this brings home just how far the ECB is behind the curve, since the last time inflation was around these levels in the 70s, the Bundesbank certainly didn’t have a negative deposit rate. With the inflation reading coming in above expectations, that catalysed a fresh bond selloff that took the 10yr bund yield up by +9.8bps to 0.89%. This echoes some of the other big moves higher in yields we’ve seen over the last couple of months, but it still leaves them beneath the peak of 0.97% at the end of last week. What was also noticeable was the fresh widening in spreads that speaks to the building minor stresses in European markets right now, with the gap between Italian and German 10yr yields up a further +4.2bps to 181bps, a level not seen since June 2020. As in the previous session, those moves were seen in the credit space too, with the iTraxx Crossover widening +3.7bps to 418bps, leaving it just shy of its recent peak at 421bps in early March. Another cause for concern in European markets have been the ongoing tensions between Russia and the West over Ukraine, with the Euro falling by a further -0.55% yesterday to $1.0499, the first close below $1.05 since early 2017, although this morning it has moved back up to $1.0514. Conversely the dollar index (+0.65%) continued its upward march, strengthening for the 19th time in the last 21 sessions, and closing at its strongest level since 2002. That comes as the latest reports indicate that a Russian oil embargo is moving closer, with Brent crude ending the day up +2.16% at $107.59/bbl after Dow Jones reported that Germany had dropped its opposition to an embargo, and this morning, Brent has risen further to $108.00/bbl. We also heard from President Biden, who requested $33bn from Congress for further assistance to Ukraine, including $20.4bn on security and military assistance, $8.5bn on economic assistance, and $3bn on humanitarian assistance. Overnight in Asia, equity markets are mostly trading higher following the strong performance on Wall Street, with tech stocks leading the way. The Hang Seng (+2.04%) has seen one of the strongest performances, far outpacing mainland Chinese indices including the Shanghai Composite (+0.37%) and the CSI 300 (-0.06%). That comes amidst persistent concerns over the country’s lockdowns, with Shanghai seeing an increase in Covid-19 cases for the first time in 6 days, and overnight we also heard from China’s Politburo, with CCTV reporting that they’re urging efforts to meet the economic growth targets. Elsewhere, the Kospi (+0.78%) is trading up while markets in Japan are closed for a holiday today. Back on the data front, another notable release yesterday came from the US GDP reading for Q1. On one level it’s a fairly backward-looking reading, but the print saw an unexpected contraction, with the economy shrinking at an annualised rate of -1.4%, marking the first quarterly contraction since the lockdowns of Q2 2020. That said, there are no indications this is going to derail the Fed from their path of rate hikes, with a 50bps move next week still fully priced in. In fact, there was a massive drag coming from the surprisingly large trade deficit, while underlying consumption was actually very robust, suggesting rates need to get even higher to slow demand, as we’ve been arguing. In turn, the amount of Fed hikes priced for the rest of the year moved up +2.2bps to 239bps, and this morning they’re up to 242bps, just shy of their closing high last Friday at 244bps. That led to a renewed flattening in the yield curve, and 2yr yields gained +2.6bps while 10yr yields fell -0.9bps. Despite the tepid headline nominal move, there was a big divergence in 10yr inflation breakevens and real yields. Breakevens gained +7.3bps to 2.98%, a few bps shy of their highest levels on record from last week. By contrast, real yields fell -8.2bps to -0.16%, taking them a further from positive territory ahead of next week’s FOMC where its also widely-anticipated they will announce the beginning of their QT program. To the day ahead now, and data releases include the flash CPI estimate for the Euro Area in April, as well as the first look at Q1 GDP for the Euro Area, Germany, France and Italy. Otherwise from the US, we’ll get March’s data on personal spending and personal income, the Q1 employment cost index, the MNI Chicago PMI for April, and the University of Michigan’s final consumer sentiment index for April. From central banks, we’ll hear from the ECB’s de Cos, and the Central Bank of Russia will be making its latest policy decision. Finally, earnings releases include ExxonMobil, Chevron, AbbVie, Bristol-Myers Squibb, Honeywell International, Charter Communications, Aon and NatWest. Tyler Durden Fri, 04/29/2022 - 07:33.....»»

Category: personnelSource: nytApr 29th, 2022

Futures Rebound From Tuesday Rout As Dip Buyers Emerge

Futures Rebound From Tuesday Rout As Dip Buyers Emerge After the worst day for stocks in a long time, which saw the Dow plunge 800 points or 2.2% and the Nasdaq tumble almost 4% to the lowest level in nearly a year, it seemed that Wednesday would be another puke fest, with Google tumbling as much as 10% afterhours after reporting mixed earnings that missed on YouTube revenues and EPS, and dragging the Nasdaq with it. However, solid results from Microsoft as well as some long overdue stability in Chinese markets helped to reveres the dour mood, and aside for a brief but sharp selloff around the time Europe opened, US equity futures have been a diagonal line up, with the Nasdaq recovering from its lowest level in nearly a year, as dip buyers returned on corporate earnings and “all out” stimulus pledges by China.  As of 7:00am ET, S&P 500 and Nasdaq 100 contracts each rose around 0.8%, 10Y yields rose 3bps to 2.77%, the dollar rose again and Brent was flattish around $105. Fears that the Fed would tip the world’s largest economy into a recession have plagued markets all week, all while activity slows in China as Covid lockdowns bite. Sentiment got a modest pickup overnight after China’s President Xi Jinping made a commitment to boost infrastructure construction in Beijing’s latest bid to rescue economic grow. In Europe, the euro touched the weakest level versus the greenback since 2017 on Wednesday as Russia said it will stop natural gas flows to Poland and Bulgaria. European gas prices surged as traders weighed the risk of other countries being hit next, spurring worries over a further spike in inflation and a sharp slowdown in the economy. However, after initially sliding, European stocks staged a strong rebound. “The backdrop for risk assets continues to be weak, and wasn’t helped by headlines of Russia halting gas supplies to Poland,” wrote Mizuho International Plc strategists including Peter Chatwell. “If we get closer towards the 4200 level on the S&P 500, this may bring some temporary relief for risk, especially with the potential for some earnings positivity today.” “On U.S. earnings, there is a risk of high-profile idiosyncratic disappointments, most likely among beneficiaries of the Covid-19 pandemic,” said UBS Wealth Management chief investment officer Mark Haefele. “Facing geopolitical risks, threats to growth from China’s lockdowns, and uncertainty over the prospect of overtightening by the Fed, equity markets are likely to remain volatile.” Microsoft, along with Google parent Alphabet, kicked off a big week of tech earnings yesterday with a mixed bag that won't fully soothe jittery tech investors. Alphabet posted a rare miss on slower European ad sales and lackluster YouTube performance. YouTube was hit by its rivalry with TikTok and Apple's privacy changes. But Microsoft beat estimates, fueled by robust growth in cloud-services demand. This comes after a big subscriber loss by Netflix last week. Facebook parent Meta Platforms reports later today. The recent selloff in FANG stocks looks more significant than those that preceded it. As a result, Microsoft jumped 5.6% in premarket trading while Alphabet and Texas Instruments dropped as their earnings disappointed, putting the Nasdaq on pace for a 12% loss this month, its worst performance since October 2008 during the global financial crisis. Technology shares have been under particular pressure this year on the risks from rising rates amid a hawkish shift in the Federal Reserve’s monetary policy. Twitter again fell in premarket trading, set to extend losses on Wednesday as shares drop further below Elon Musk’s offer price of $54.20 per share. Tesla Inc. advanced after slumping on Tuesday.  Some other premarket movers: Bank stocks are mostly higher in premarket trading Wednesday as the U.S. 10-year yield rebounds to hit 2.76%. Robinhood stock rose after the company announced it is dismissing 9% of its workforce in a move that Morgan Stanley says boosts its chance to become profitable. Meanwhile, Visa shares jumped after the firm reported “impressive” second-quarter results Mattel shares rise 13% in U.S. premarket amid a WSJ report that the the maker of Barbie and Hot Wheels has held preliminary discussions with at least two private-equity firms about a possible buyout. NCR shares sink 20% in thin premarket trading Wednesday after the company cut its full-year outlook for revenue, adjusted EBITDA and non-GAAP earnings per share due to factors including the war in Ukraine and inflationary pressures. Robert Half rises 2% in premarket trading after the provider of staffing services reported earnings per share for the first quarter that beat the average analyst estimate. BofA lifts the stock’s rating while highlighting “labor market momentum.” “Overall earnings are not that bad and that should come as a support to the market right now,” said Barclays Plc strategist Emmanuel Cau. “It’s essential to focus on earnings to figure out what you want to buy and what you want to sell.” European equities started off in the red but inched higher bouncing off six-week lows, as investors assessed the economic implications of cuts in gas supplies from Russia. Euro Stoxx 50 rises 0.6% having traded down as much as 1.2%. CAC 40 and FTSE 100 outperform slightly. Miners, autos and chemicals are the best performing sectors. Mercedes-Benz jumped 3.4% after the German carmaker published better-than-expected earnings and an upbeat outlook. Michelin also reported earnings beats, helping to turn around an earlier loss in the Stoxx 600 Europe Index and propelling automakers to session leaders. Meanwhile, perennial disappointment Deutsche Bank slumped 5.2%, falling for a fourth consecutive session. Here are some of the other notable European movers today SEB rises as much as 9% after 1Q earnings showed beats across the board, with outperformance on net interest income, fees and trading. Handelsbanken gains as much as 6.3% after the lender’s quarterly results beat analyst estimates on several points, including net interest income, net income and commission. Clariant climbs as much as 12% after the conclusion of investigations into 2020-21 accounting of non-cash reserves proved “positive,” Zurcher Kantonalbank says in a note. Umicore rises as much as 6.3% after the company signed a long-term supply agreement for electric vehicle high-nickel cathode materials with Automotive Cells Company. Deutsche Bank shares fall as much as 6.7% after quarterly results as higher costs offset a better-than-expected performance at its investment banking business. Credit Suisse drops as much as 1.8% as 1Q results fail to ease concerns about the bank’s momentum and provide another negative surprise after its warning earlier in the month. Stoxx 600 Automobiles & Parts Index gains as much as 2.6% and is the second-best performing subgroup on the wider equity gauge after slew of positive 1Q results. Valeo +3%, Mercedes-Benz +3.7%, Michelin +3.1% Aveva slides as much as 21% after the engineering software firm said it ceased new operations in Russia and anticipates its FY23 revenue will be hit by the war in Ukraine. Bank of Ireland drops as much as 8.6% after its 1Q trading update was overshadowed by the announced departure of its CEO Francesca McDonagh. Schneider Electric falls as much as 3.8% following 1Q results as analysts said the beat from the electrical-goods group wasn’t a surprise following recent peer reports. Earlier in the session, Asia’s stocks benchmark declined to the lowest level since July 2020 as caution prevailed in a busy week of earnings. The MSCI Asia Pacific Index slumped as much as 1.3% Wednesday, with all but two sectors in the red. Tech was the biggest sectoral loser, dragged down by giants TSMC and Samsung Electronics. Earnings reports from chipmakers including Texas Instruments and SK Hynix disappointed investors, hurting sentiment in an industry already hammered by rising global interest rates and supply-chain woes.  The overall growth outlook for the region remains weak, with China’s Covid-19 outbreaks and lockdowns in the spotlight. “As bond yields continue to face upward pressure it’s going to be a very, very difficult situation for tech,” Eli Lee, head of investment strategy at Bank of Singapore, told Bloomberg Television. “Value will still outperform growth, large cap will outperform mid cap in the next two to three months. There will be a strong bid for energy and commodity names.”   Equity benchmarks with heavy tech weightings such as those in Taiwan, South Korea and Japan underperformed, with each dropping about 1% or more. China stocks advanced following President Xi Jinping’s pledge to boost construction and infrastructure.   READ: Xi’s Pledge Boosts Hopes Among Jaded China Stock Traders Japanese equities dropped, as disappointing earnings at home and abroad added to concerns on inflation, U.S. monetary policy and China lockdowns.  The Topix Index fell 0.9% to close at 1,860.76, while the Nikkei declined 1.2% to 26,386.63. Shimano Inc. contributed the most to the Topix Index decline, decreasing 13%. Out of 2,170 shares in the index, 768 rose and 1,352 fell, while 50 were unchanged. Australia stocks also fell: the S&P/ASX 200 index fell 0.8% to 7,261.20, capping a third day of declines, after Australia’s core inflation accelerated to the fastest pace since 2009, intensifying pressure on policy makers to raise interest rates during an election campaign. Life360 dropped by a record after releasing a 1Q trading update and saying it’s halting plans for a U.S. dual listing. Downer EDI was a top performer after saying it sees strong demand in 4Q. In New Zealand, the S&P/NZX 50 index fell 0.7% to 11,726.39 In FX, the Bloomberg Dollar Spot Index rose as the greenback advanced against most of its Group-of-10 peers and the three-year Treasury yield added 8bps, The euro extended its drop against the dollar to touch 1.0588, while bunds reversed opening losses, sending yields as much as 3bps lower. Australia’s front-end bond yields rose and the Australian dollar advanced for the first time in five days versus the greenback after trimmed mean CPI climbed to hit 3.7%; swaps traders are now fully pricing in a 15bps hike by the Reserve Bank of Australia on Tuesday that would push up the cash rate to 0.25%. Sweden’s currency fluctuated against the dollar; it rose against the euro and overnight volatility in the euro-krona pair touched the highest level in six weeks as it captured tomorrow’s Riksbank decision where some expect it to raise the repo rate for the first time since 2019. The yen resumed its decline after a two-day gain amid a surge in U.S. Treasury yields on expectations of aggressive policy tightening by global central banks. Benchmark 10-year yields rose near the Bank of Japan’s upper limit ahead of the bank’s policy decision Thursday. In rates, Treasuries bear flatten as stocks recover a portion of Tuesday’s losses, leaving underperforming front-end yields cheaper by up to 7bp into early U.S. session. U.S. 10-year yields around 2.77%, with bunds and gilts outperforming by 4bp and 1.5bp in the sector; front-end led losses flattens 2s10s, 5s30s spreads by 3.1bp and 1.8bp. Bunds, gilts outperform Treasuries; bunds bull steepen, richer by ~1.5bps across the short end. Gilts seen a roughly 1bps parallel cheapening move. Peripheral spreads are wider to core with 10y Bund/BTP spread hitting the widest since June 2020. U.S. session includes 5-year note sale, follows strong 2-year auction on Tuesday. In commodities, crude futures hold a relatively narrow range. WTI is up ~50c near $102.20. Spot gold fades a small dip by remains below $1,900/oz. European gas surged 20% after Russia blocked flows to Poland and Bulgaria. Base metals trade well with LME zinc outperforming.  Bitcoin attempts to recover from yesterday's slide and meanders around 39k. Looking to the day ahead now, and US data releases include preliminary wholesale inventories for March, pending home sales for March, and the advance goods trade balance for March. Over in Europe, there’s also Germany’s GfK consumer confidence reading for May, and France’s consumer confidence for April. Central bank speakers include ECB President Lagarde, the ECB’s Muller and Bank of Canada Governor Macklem. Finally, earnings releases include Meta, T-Mobile, Qualcomm, Amgen, American Tower, Boeing and PayPal. Market Snapshot S&P 500 futures up 0.9% to 4,209.25 MXAP down 1.0% to 164.75 MXAPJ down 0.7% to 541.64 Nikkei down 1.2% to 26,386.63 Topix down 0.9% to 1,860.76 Hang Seng Index little changed at 19,946.36 Shanghai Composite up 2.5% to 2,958.28 Sensex down 0.8% to 56,885.14 Australia S&P/ASX 200 down 0.8% to 7,261.17 Kospi down 1.1% to 2,639.06 STOXX Europe 600 up 0.2% to 441.88 German 10Y yield little changed at 0.80% Euro down 0.2% to $1.0612 Brent Futures up 0.3% to $105.31/bbl Gold spot down 0.5% to $1,895.06 U.S. Dollar Index up 0.26% to 102.57 Top Overnight News from Bloomberg Russia said it stopped natural gas flows to Poland and Bulgaria on Wednesday, making good on a threat to cut off buyers if they refuse President Vladimir Putin’s demand to pay in rubles. European gas prices surged more than 20% on the move and the euro fell to its lowest against the dollar since April 2017 Ten European gas companies have opened the accounts at Gazprombank needed to meet Russia’s demand to pay in rubles and four have already made payments, according to a person familiar with the matter New Zealand’s central bank said it will design a framework to impose debt-to-income mortgage lending restrictions, but indicated they may not be needed anytime soon as the housing market cools Shanghai hinted at an easing of lockdown measures as coronavirus infections dropped to the lowest in three weeks, while case numbers in Beijing stabilized, in a potential sign authorities are starting to bring the twin outbreaks under control. A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks were mostly negative after the losses in the US where participants braced for the large-cap tech results including Alphabet which disappointed, while the region also navigated through a deluge of earnings. ASX 200 was dragged lower by underperformance in tech and the consumer-related stocks, while mostly firmer than expected CPI data added to the pressure for the RBA to hike as early as next week. Nikkei 225 retreated with the worst-performing stocks in the index pressured by earnings updates. Hang Seng and Shanghai Comp were choppy as Beijing lockdown fears were stoked after Chaoyang district was classified as high-risk and the Tongzhou district halted schools, although participants also digested firmer Industrial Profits and President Xi’s recent announcement to step up infrastructure construction. Top Asian News Malaysia Scraps Covid Tests for Travelers, Outdoor Mask Mandate Hong Kong’s New Travel Easing Leaves Business Still Wanting More HKEX Outlook Weak as Stock Market Activity Sluggish: Street Wrap China’s Covid Outbreak Hits Profits of Foreign Firms European bourses recovered from the losses seen at the cash open, with the region currently posting board-based gains.     Sector performance in Europe is mostly firmer but with no clear theme; Basic Resources is the clear outperformer.     Stateside, US equity futures see slightly more pronounced gains vs Europe following yesterday’s hefty losses.     Alphabet Inc (GOOG) - Q1 2022 (USD): EPS 24.62 (exp. 25.96), Revenue 68bln (exp. 68.1bln); authorised to buyback additional 70bln. (Newswires) Shares fell 3.0% after market. Microsoft (MSFT) - Adj. EPS 2.22 (exp. 2.19), Revenue 49.4bln (exp. 49.05bln). Co. guides Q4 intelligent cloud rev. USD 21.1bln-21.35bln, productivity and business process rev. USD 16.65bln-16.9bln. (PR Newswire) Shares rose 5.4% after market Top European News Moldova’s Transnistria Says It Was Fired Upon From Ukraine: IFX Twitter Extends Losses to Dip Further Below Musk’s Offer Price Private Equity Firms Set Sights on Battered IPO Stocks in Europe Mercedes Sees Strong Returns Persist Through War, Supply Turmoil In FX Greenback continues to grind higher in its guise of global reserve and prime safe haven with DXY inching closer to 103.000, at 102.780 vs 2020 peak of 102.990. Aussie inflated as sizzling CPI metrics up the RBA rate hike ante amidst calls for liftoff next week. Yen hits resistance and importer offers after probing 127.00 vs Dollar. Euro hits new sub-1.0600 multi year low as Russia threatens to suspend gas supplies from more unfriendly nations and Pound flounders mostly under 1.2600 with little help from dire CBI Survey. Yuan loses RRR cut momentum as spread of Covid continues in China - Usd/Cny closes at highest in a year around 6.5500+, Usd/Cnh eyeing 6.6000 again.  In Fixed income Choppy midweek session for bonds, so far, as recovery momentum fades amidst a raft of issuance Bunds fade after topping Tuesday's peak at 155.77 in wake of a lukewarm reception for new 2038 benchmark Gilts top out at 119.72 before much worse than feared UK CPI sales survey Treasuries edgy ahead of 5 year supply with T-note probing 120-00 vs 120-18+ overnight high In commodities WTI and Brent June futures have been moving horizontally since yesterday's settlement, US Private Energy Inventory Data (bbls): Crude +4.8mln (exp. +2.2mln), Gasoline -3.9mln (exp. +0.5mln), Distillates +0.4mln (exp. -0.6mln), Cushing +1.1mln Russian Economy Ministry expects Russian oil exports to fall this year to 228.3mln tonnes (vs 231mln in 2021) in its baseline scenario and to 213.3mln tonnes in its conservative scenario. Spot gold saw some selling pressure in which the yellow metal fell below the 25th April low (USD 1,891.20/oz) and tripped stops below USD 1,890/oz. Base metals markets are relatively mixed, with nothing interesting standing out. US Event Calendar 07:00: April MBA Mortgage Applications -8.3%, prior -5.0% 08:30: March Retail Inventories MoM, est. 1.4%, prior 1.1%; Wholesale Inventories MoM, est. 1.5%, prior 2.5% 08:30: March Advance Goods Trade Balance, est. -$105b, prior -$106.6b, revised -$106.3b 10:00: March Pending Home Sales YoY, est. -8.1%, prior -5.4%; Pending Home Sales (MoM), est. -1.0%, prior -4.1% DB's Jim Reid concludes the overnight wrap Staying in advertising mode, yesterday saw DB’s Head of Research and Chief Economist David Folkerts-Landau publish an important piece alongside Peter Hooper and myself. In our World Outlook earlier in the month, we became the first bank to forecast a US recession by the end of 2023, but in this note we argue that if anything, the risks are skewed towards a much more significant recession. Indeed, we find it bizarre that consensus forecasters expect us to believe there’ll be a soft landing from a starting point at which a soft landing has never been achieved. We outline the full rationale in the report, but our view is that the Fed is behind the curve in a manner unseen in a generation, that inflation is going to prove a lot stickier than expected, and hence monetary tightening will push the US economy into a significant recession, with unemployment ultimately rising several percentage points. The link is here. Speaking of growth concerns, yesterday saw global equities return to the sell-off mode they were in before the second half bounce back yesterday. The S&P 500 gave up a further -2.82%, it’s worst daily return since the Ukraine invasion in early March, to keep the index on track for its worst monthly performance (-7.84%) since the pandemic chaos of March 2020. There wasn’t one single catalyst, but the widespread collection of risks are giving investors serious pause right now, including Chinese lockdowns, persistent inflation, selected corporate earnings weakness, the risk of a hard landing from the Fed, as well as the ongoing geopolitical worries given Russia’s invasion of Ukraine. Some of the media commentary even blamed our note for the market falls. We’ll start with the geopolitics, since there were several negative headlines on that front that dampened risk appetite significantly. First, there were reports from Moldova of a further attack on a military unit yesterday in the breakaway region of Transnistria. The Kremlin said it was following events closely and it was a cause for serious concern, whilst Moldova’s President Sandu said the government would resist “attempts to drag Moldova into actions that may endanger peace within the country.” Then we also saw European gas futures surge in the afternoon after it was reported by the Onet.pl website that gas flows to Poland had been halted, before falling back somewhat to end the day up “only” +6.64%. After European energy markets finished trading, it was revealed Russia would stop flows to Bulgaria as well, so the risk is more countries get added to the list as the payment currency becomes weaponised. This could be a big story today. With energy remaining a significant geopolitical tool right now, we also heard from German economy minister Habeck, who said that an embargo on Russian oil would be “manageable”, with Germany having cut its share of Russian oil in its imports from 35% before the invasion to around 12%. This darkening backdrop saw the selloff gather pace as the day went on, with major equity indices including the S&P 500 (-2.82%), the NASDAQ (-3.95%), the STOXX 600 (-0.90%) and the DAX (-1.20%) all seeing significant losses. The pullback led to the VIX spiking +6.5ppts higher to 33.52, its third highest closing level of the year, only pipped by two days around the invasion of Ukraine in early March. As mentioned, it was the worst day for the S&P 500 since early March, but for the NASDAQ it was the worst day since September 2020, bringing the index into correction territory for the month alone, down -12.16% in April – and that was before mixed mega-tech earnings after the close (more below). The declines in the main index were incredibly broad-based, though Tesla (-12.18%) was the worst performer in the S&P 500 following the move by their CEO Elon Musk to acquire Twitter, whilst General Electric (-10.34%) was the second-worst performer as the company released its earnings and warned of supply-chain challenges. Energy was one of the few outperformers on both sides of the Atlantic, and indeed the only sector to close above flat in both the S&P 500 and STOXX 600, aided by higher prices that included a rebound in Brent Crude (+2.61%) to $104.99/bbl. They are +0.35% this morning. On those aforementioned tech earnings, Alphabet missed revenue expectations on a combination of slower-than-expected ad growth as well as some impact from the war in Europe, sending shares -2.84% lower in after hours trading. Microsoft shares, meanwhile, were supported by growth in their cloud-computing business, which saw shares +4.64% higher after the close. In contrast to the last 3 weeks when US equities and Treasuries sold off side-by-side, the risk-off tone has seen a significant rally back in sovereign bonds over the last couple of days, not least since markets are now assuming that central banks won’t move quite as aggressively as they were expecting at the end of last week. For instance, fed funds futures have taken out -14.5bps of tightening this calendar year relative to Friday, even if they continue to expect +50bp hikes at the next 3 meetings, whilst they’ve also taken out -4.6bps from 2022 ECB tightening this week, too. That helped yields on 2yr Treasury yields fall -14.8bps, while 10yr Treasuries fell a further -9.9bps in yesterday’s session to 2.72%, in another day pocked with rates volatility, as 10yr yields went from +4.1bps higher before the US open to -9.8bps lower around the European close, selling off again before finishing the day at their lows. The decline in 10yr yields was roughly split between real yields and breakevens in line with fears of global growth and the commensurate shallower path of Fed tightening. In Europe it was much the same picture, with yields on 10yr bunds (-2.2bps), gilts (-4.5bps), and BTPs (-2.1bps) all falling back too, while OATs (+0.4bps) underperformed. Other safe havens benefited also, with the dollar index (+0.58%) strengthening for the 17th time in the last 19 sessions, leaving it at a 2-year high, just as gold (+0.42%) rallied as well. The treasury market yo-yo continues this morning with 10yr yields back up c.+5bps and 2yrs +9bps. Asia is playing catch-up to the global sell/off but DM futures are up so there is a circuit breaker for now. The Nikkei (-1.88%) is leading losses across the region with the Kospi (-1.05%) also falling. Stocks in mainland China are attempting to bounce back with the Shanghai Composite (+0.38%) and CSI (+1.05%) higher after President Xi in a statement yesterday pledged to ramp up infrastructure construction to bolster domestic demand and drive economic growth going forward. Outside of Asia, stock futures in the US are indicating a positive start with contracts on the S&P 500 (+0.52%) and Nasdaq (+0.41%) trading up after their poor showing yesterday. In terms of overnight data, China’s industrial profits advanced +8.5% y/y in the January-March period compared to a + 5.0% rise in the preceding three-months. Elsewhere, Australia’s CPI surged by +5.1% y/y for the March quarter, its fastest pace in 21 years and easily topping market estimates of a +4.6% gain, following a + 3.5% increase in the previous quarter. The dramatic rise in the inflation has prompted market participants to price-in an interest rate hike at the Reserve Bank of Australia’s (RBA) next meeting scheduled on May 03. DB now expect a 15bps hike next week with an additional 50bps in June. See their report here. In terms of yesterday’s data, the US Conference Board’s consumer confidence reading for April came in a bit below expectations at 107.3 (vs. 108.2 expected). Otherwise, in the more backward-looking data, preliminary durable goods orders in March rose by +0.8% (vs. +1.0% expected) and core capital goods orders were up +1.0% (vs. +0.5%). Finally in February, there was still significant momentum in house prices, with the FHFA’s house price index rising by +2.1% (vs. +1.5% expected), which is the fastest monthly pace since the index begins in 1991. The year-on-year growth in the Case-Shiller national home price index also moved back up to +19.8% that month. To the day ahead now, and US data releases include preliminary wholesale inventories for March, pending home sales for March, and the advance goods trade balance for March. Over in Europe, there’s also Germany’s GfK consumer confidence reading for May, and France’s consumer confidence for April. Central bank speakers include ECB President Lagarde, the ECB’s Muller and Bank of Canada Governor Macklem. Finally, earnings releases include Meta, T-Mobile, Qualcomm, Amgen, American Tower, Boeing and PayPal. Tyler Durden Wed, 04/27/2022 - 08:00.....»»

Category: personnelSource: nytApr 27th, 2022

Futures Slide Ahead Of Tech Earnings Deluge

Futures Slide Ahead Of Tech Earnings Deluge One day after stocks staged a remarkable rebound and closing well in the green after sliding as much as 1.5% (ostensibly after getting a boost from the latest bout of bearishness from Dennis Gartman), index futures are trading lower again despite another attempt by China's central bank to reassure investors overnight that China's sliding risk assets will rebound, with investors once again preoccupied by risks from aggressive monetary tightening. S&P500 futures contracts were 0.4% not too far off the worst levels ahead of a busy session of earnings releases including Google, Microsoft and Google; Nasdaq 100 futures declined 0.3%. Treasuries were steady and the dollar gained. “Markets in general are preoccupied by the prospect of tighter monetary policy conditions from global central banks to stem rising prices,” said Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management. “Indeed, while the Federal Reserve and the ECB both stepped up their inflation-fighting rhetoric, they failed to prevent market-based inflation expectations from moving higher.” Twitter extended gains in premarket trading after Elon Musk agreed to buy the social media company for $44 billion. Its shares are still trading below the offer price of $54.20 per share. Analysts say Musk’s vision to reduce moderation to promote free speech could put the social media company’s advertising dollars at risk. Here are some of the other big U.S. movers today: Meme stock Cenntro Electric (CENN) drops as much as 15% in U.S. premarket trading, after the maker of commercial electric vehicles reported a net loss of $16.4 million for 2021. Redbox Entertainment (RDBX) shares rise 2.8% in U.S. premarket trading after the company disclosed after Monday’s close that CFO Kavita Sutha had resigned. O-I Glass (OI) “crushes” its first-quarter, according to Truist Securities, with the broker noting the glass bottle maker’s operating profit beat and a guidance hike. O-I shares were up 12% in postmarket trading. Venator Materials (VNTR) jumps as much as 27% in premarket trading Tuesday after the company reached an $85 million cash settlement with Tronox Holdings over a break fee from a failed chemical plant deal dating back to 2018. Nkarta (NKTX) shares slump 8% in U.S. premarket after launching a stock offering via Cowen, SVB, Evercore at a price of $15/share that represents 19.9% discount to last close. Universal Health’s (UHS) weaker-than-expected results and potential guidance downgrade were driven by labor headwinds, analysts say. Shares fell 12% in after-hours trading. Protagonist Therapeutics’ (PTGX) PN-943 drug candidate “still has legs to make it across the finish line,” despite the Phase 2 data showing that a 450 mg BID dose did not meet its primary endpoint. Shares fell 31% in postmarket trading. Barclays sees positive fundamentals for medical office building property category, expanding coverage with initiations on Healthcare Realty Trust (HR US) and Physicians Realty Trust (DOC) at overweight. Companies reporting earnings on Tuesday include Microsoft, Google parent Alphabet and Visa. European stocks traded well, the Stoxx 600 Index 0.8% higher with energy and mining shares gaining as commodity prices rebounded. Euro Stoxx rises as much as 1.25%, roughly halving Monday’s decline. Miners and real estate lead broad sectoral gains. A third of Stoxx 600 companies will be updating on earnings and sales this week.  Asian stocks pared most of their early Tuesday advance as Chinese shares gave up gains spurred by a renewed central bank pledge to support the region’s biggest economy. The MSCI Asia Pacific Index was up 0.3% as of 5:38 p.m. in Hong Kong, versus an earlier rally of as much as 0.8%. China’s CSI 300 Index ended 0.8% lower as worries about a potential city-wide lockdown in Beijing weighed on sentiment. Still, a gauge of the nation’s tech stocks jumped almost 3% in Hong Kong on fresh policy promises to end a regulatory crackdown in the sector. Continued losses in Chinese equities have weighed on the Asian stock benchmark, which is headed for a fourth straight month of losses. China’s government expanded Covid-19 testing to most of Beijing, sparking fears about an unprecedented lockdown. Traders have said a change in the nation’s Covid-Zero strategy is the key to turning around sentiment.  “It would be difficult to see a quick improvement in sentiment” amid weak market fundamentals and fund flows, said Kim Kyung Hwan, a Chinese equity strategist at Hana Financial Investment in Seoul. “Market players are waiting for stronger measures, such as an interest-rate cut.” Elsewhere in Asia, stocks rose in India and South Korea while those in Australia slipped. Traders are also monitoring results releases in what is set to be the busiest week of the current earnings cycle in Asia. Japanese equities rose for the first time in three sessions, boosted by gains in telecoms. Service providers also lifted the Topix, which rose 0.1%. SoftBank Group and M3 Inc. were the largest contributors to a 0.4% rise in the Nikkei 225 Australian stocks fell the most in two months on the continued Materials selloff. The S&P/ASX 200 index fell 2.1%, the most since Feb. 24, to close at 7,318.00, as trading resumed after a three-day break. The materials and energy groups led declines following drops in commodities prices. EML Payments tumbled to the lowest level in two years after lowering its revenue and earnings forecasts for the full year. Nufarm was among the biggest gainers, rising to its highest level since September 2018 after issuing 1H guidance.  In New Zealand, the S&P/NZX 50 index fell 0.8% to 11,813.18. Fixed income grinds higher with 10y bund and UST futures erasing Asia’s losses; the 10-year TSY is around 2.795% outperforming bunds by ~2.5bp, gilts by ~3.5bp. Treasuries are moderately richer across the curve, sharply outperforming bunds and gilts over the London session, although 10-year note futures remain inside Monday’s range. US yields are richer by 1bp-3bp across most of the curve with long-end lagging slightly, steepening 5s30s and 10s30s by ~2bp. Peripheral spreads widen to cover with long-end Portugal underperforming. Japan’s bond futures gained after the central bank said it will extend its unlimited debt buying operation by two more days. In FX, the Bloomberg Dollar Spot Index rose a fourth day, as the greenback advanced against most of its Group-of-10 peers. Treasury yields dropped 2-3 bps across the curve. The euro fell to touch $1.0673, the lowest level since March 2020. European bonds were little changed, underperforming U.S. Treasuries.  China’s yuan rose for the first time in six days after the nation’s central bank pledged to support the economy through targeted financing for small businesses, and a quick resolution of the ongoing crackdown on technology firms, in a bid to reassure investors nervous about growth and Covid lockdowns. Australian dollar climbed on leveraged buying as China’s policy-support pledge spurred a turnaround in the nation’s stock indexes and added to a bounce in oil and iron ore. The yen was set for its longest winning streak in almost a month.  The pound ticked lower against the dollar amid broad-based greenback strength and Gilts inched up, led by the short end. Prime Minister Boris Johnson will urge ministers to explore “innovative ways” to ease pressures on household finances on Tuesday In commodities, crude futures decline with WTI eventually finding support near $97. Spot gold posts small gains, Bitcoin holds a narrow range near $40,500. Binance has launched Binance Refugee Crypto Card for all current and new Binance users from Ukraine moving to EEA countries Looking at the day ahead, data releases from the US include the Conference Board’s consumer confidence indicator for April, preliminary March data on durable goods orders and core capital goods orders, the FHFA house price index for February, and new home sales for March. From central banks, we’ll hear from the ECB’s Villeroy and de Cos. Finally, earnings releases include Microsoft, Alphabet, Visa, Pepsico, UPS, Texas Instruments, General Electric and General Motors. Market Snapshot S&P 500 futures down 0.3% to 4,281.50 STOXX Europe 600 up 0.8% to 448.67 MXAP up 0.2% to 166.28 MXAPJ up 0.3% to 546.79 Nikkei up 0.4% to 26,700.11 Topix up 0.1% to 1,878.51 Hang Seng Index up 0.3% to 19,934.71 Shanghai Composite down 1.4% to 2,886.43 Sensex up 1.0% to 57,161.33 Australia S&P/ASX 200 down 2.1% to 7,317.98 Kospi up 0.4% to 2,668.31 German 10Y yield little changed at 0.84% Euro down 0.2% to $1.0687 Brent Futures down 0.3% to $101.97/bbl Brent Futures down 0.3% to $101.97/bbl Gold spot up 0.3% to $1,902.86 U.S. Dollar Index up 0.13% to 101.89 Top overnight News from Bloomberg ECB Governing Council member Martins Kazaks says the central bank should raise interest rates soon and has room for as many as three hikes this year, Reuters reports The renewed pledge by Chinese authorities to boost the economy is being met with skepticism by stock traders worried about a potential city-wide lockdown in Beijing China’s central bank pledged to increase support for the economy, seeking to reassure investors as financial markets take a hammering from a worsening growth outlook and threats of widespread Covid lockdowns. China’s economy slowed rapidly in April as the costs of both a worsening Covid outbreak and the nation’s stringent approach to eliminating the virus took their toll. Oil held its decline below $100 a barrel as investors assessed the impact of China’s Covid-19 resurgence on the outlook for global demand. Base metals in London plunged on Monday, following sinking iron ore markets in Asia as investors fret over deteriorating demand outlook in China and higher interest rates in western economies. A more detailed look at global markets courtesy of Newsquawk APAC stocks were mostly higher with bourses in the region encouraged after the rebound on Wall Street. ASX 200 bucked the trend as the prior day’s rout caught up with markets in Australia and New Zealand on return from the extended weekend, with miners pressured by tepid output from South32 and Woodside Petroleum. Nikkei 225 gained after a surprise decline in Unemployment and amid preparations for a relief package. Hang Seng and Shanghai Comp were lifted as strength in tech helped the former reclaim the 20k level and after further PBoC policy support pledges gradually offset the initial Beijing COVID-19 jitters in the mainland. Top Asian news BOJ Extends Unlimited Bond Buying Into Policy Meeting This Week China Tech Stocks Rebound as Beijing Renews Policy Support China Is Running Out of Ways to Stem Self-Made Market Meltdown Tencent-Backed Fintech Startup Airwallex Said to Seek New Funds European bourses feel some reprieve following the bout of selling seen in recent sessions and following Wall Street's afternoon bounce yesterday. Sectors are all in the green but to varying degrees – with Basic Resources rebounding with a vengeance after yesterday’s slide, albeit Energy has failed to hold onto early gains as the underlying commodity price wanes. Stateside, US equity futures trade relatively flat with a mild downside bias (ES -0.1%, NQ -0.1%, RYT -0.1%, YM -0.1%), trimming earlier losses. United Parcel Service Inc (UPS) Q1 2022 (USD): EPS 3.03 (exp. 2.88), Revenue 24.4bln (exp. 23.79bln), reaffirms guidance; doubles buy-back target to USD 2bln Top European News Germany to Send Anti-Aircraft Tanks to Ukraine in Policy Shift European Gas Prices Swing With Focus on LNG Imports, Russia Flow Gupta’s GFG Alliance Offices in Paris Raided by French Police Sunak Warns Future Generations at Risk From U.K. Debt Burden FX Dollar mixed as broad risk appetite returns after Monday’s flight to safety; USD down vs high betas, but up against most index components. Aussie and Kiwi refreshed following long holiday weekend and further rebound in Yuan on the back of China’s RRR reduction effective May 15 Euro and Pound flounder as DXY eyes 102.000 and conflict contagion weighs heavier in Europe relative to the US Yen continues to consolidate off multi year lows after a dip in Japan’s unemployment rate and Government rolls out fiscal relief measures Japanese PM Kishida said rapid FX moves are undesirable; no comment on specific JPY levels. Fixed Income Debt futures resume recovery rally or retracement from recent cycle lows with curves a tad flatter ahead of 2 year US auction    Bunds are just shy of Monday's 155.26 peak, Gilts back above 119.00 and 10 year T-note eyeing 120-00 BTPs hold firm following Italian issuance, irrespective marginally softer cover ratios UK debt lags after larger than forecast PSNB deficit and upwardly revised 2022/32 DMO remit UK DMO raises its 2022/23 Gilt issuance remit to GBP 131.5bln from GBP 124.7bln and sees GBP 7bln additional T-bill sales Commodities WTI and Brent June futures continue drifting lower as the crude complex continues to be dampened by China's COVID situation. Spot gold was pressured by the firmer Buck and fell to a current intraday low of USD 1,894/oz in early trade before finding a base and reclaiming a USD 1,900/oz handle   Base metals, meanwhile, are mostly firmer in what is seemingly a rebound following yesterday's downside. Shanghai Futures Exchange raises trading limits and margin requirements for steel rebar, wire rod, and hot rolled coils futures from settlement on April 28. US Event Calendar 08:30: March Durable Goods Orders, est. 1.0%, prior -2.1%; -Less Transportation, est. 0.6%, prior -0.6% 08:30: March Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 0.3%; Cap Goods Orders Nondef Ex Air, est. 0.5%, prior -0.2% 09:00: Feb. S&P CS Composite-20 YoY, est. 19.20%, prior 19.10% Feb. S&P/CS 20 City MoM SA, est. 1.50%, prior 1.79% 10:00: April Conf. Board Consumer Confidenc, est. 108.2, prior 107.2 Present Situation, prior 153.0; Expectations, prior 76.6 10:00: April Richmond Fed Index, est. 9, prior 13 10:00: March New Home Sales, est. 768,000, prior 772,000 March New Home Sales MoM, est. -0.6%, prior -2.0% DB's Jim Reid concludes the overnight wrap I'll admit to being a bit tired this morning as at 2am I got woken by loud constant shouts of "Daddy, Daddy". On bleary eyed investigation one of the twins wanted to know when we are next going to a water park. As we haven't discussed this or been to one since last summer this was a bit random. I said it was inappropriate to shout the house down at 2am to ask this. He then said "what's inappropriate mean". I angrily shut the conversation down which didn't help him or I get back to sleep very quickly. The market felt tired and worn down by the building risks yesterday and by the time Europe closed things were looking pretty bleak. However a late rally turned the S&P 500 from being -1.67% to closing +0.57%. The Nasdaq closed +1.29% and was rallying back even before Twitter agreed to sell the company to Elon Musk. Outside of that late story it was hard to find a narrative for the strong rebound. Tech stocks will stay front-and-center though as earnings progress this week, with Microsoft and Alphabet both set to report after the close tonight. It was much easier to find a narrative for the earlier sell-off as investors grappled with the continued Covid outbreak in China, further signs of inflationary pressures, and the prospect that the Fed and other central banks’ hiking cycles might push their economies into recession. As Europe closed the S&P was over -7% lower in April and on track to see the worst month since the pandemic rout of March 2020. Even with the rebound, the index is still more than -5% lower over April and still at risk of taking the ignominious title of worst monthly return since Covid if it dips below this January’s -5.26% return. Bonds also sold off with the US equity bounce back but unlike equities held on a large proportion of the days gains. 10yr Treasuries closed down -7.9bps to 2.82%, after being as much as -14bps lower intraday. That decline was driven by declining inflation expectations, as growth fears dominated. Given the global growth fear flavour of yesterday’s risk off, the 2s10s curve flattened -3.7bps to 18.8bps, as 2yr yields lagged the longer-maturity rally. The curve has maintained its level this morning but the yield reversal has continued with 2 and 10yr yields both back up around +3.5bps as we type. The dollar was another significant beneficiary yesterday, strengthening +0.53% to levels not seen since March 2020, and leaving it on track for its best monthly performance since January 2015. It's given up -0.18% of the gains so far this morning. As discussed, the biggest concern yesterday came from China, where the potential that there could be a lockdown in Beijing (in addition to the one already in Shanghai) saw the CSI 300 (-4.94%) fall to a 2-year low in yesterday’s session, marking the index’s worst daily performance since the original Covid-19 outbreak there in February 2020. This morning the index is +0.90% higher with the Shanghai Composite (+0.67%) also trading in positive territory after the PBOC reassured markets of their policy support for the economy. That comes as Beijing expanded its Covid testing to 11 further districts from today until April 30, with growing questions as to how the economy will perform against the backdrop of further lockdowns, particularly if the country continues its Zero Covid strategy. Other Chinese assets are also struggling, with the offshore Yuan weakening to its lowest levels against the US Dollar since 2020, though yesterday the People’s Bank of China said in a statement that they will lower banks’ FX reserve ratio from 9% to 8% beginning May 15. Overnight, the Yuan has witnessed a rebound, climbing +0.4% to 6.533 against the US dollar, snapping five days of losses. Elsewhere in Asia, equity markets are mostly trading higher with the Hang Seng (+1.81%) leading gains across the region in early trading amid a gain in tech stocks. Elsewhere, the Nikkei (+0.51%) is up following the release of upbeat jobs data. Data showed that Japan’s jobless rate unexpectedly dropped 0.1 percentage points to 2.6% in March while the Job-To-Applicant Ratio improved to +1.22 in March from +1.21, climbing for the third consecutive month. Meanwhile, the Kospi (+0.60%) is climbing after South Korea’s Q1 GDP data surprised on the upside. The nation’s GDP expanded +0.7% q/q, slowing from +1.2% a quarter earlier, but slightly faster than the +0.6% expected. Looking ahead, stock futures in the US are pointing to a positive start with contracts on the S&P 500 (+0.23%) and Nasdaq (+0.25%) trading up with European future soaring (Stoxx 50 +1.66%) after the poor close yesterday. European sovereign bonds are likely to sell off at the open after a strong close yesterday before the risk relief rally. Yesterday, yields on 10yr German bunds (-13.5bps) saw the biggest declines as havens outperformed. The French 10yr spread over bunds did widen by +2.6bps, but that was part of a broader widening in European spreads rather than because of the election result that was mostly priced in already, and we also saw the Italian (+4.1bps) and Greek (+11.0bps) spreads move by even larger margins. That left the Italian spread at 173.6bps, its widest level since June 2020. Back to equities and earlier the STOXX 600 (-1.81%) slumped along with other bourses on the continent, closing during the nadir in US equities. On a sectoral basis, the biggest global underperformer for equities were energy stocks, but that was no surprise considering the decline in oil prices given concerns over Chinese demand going forward. By the close, Brent Crude fell by -4.06% to $102.32/bbl, but rallied along with equities after trading as much as -6.30% lower intraday and below $100/bbl for the first time in a couple of weeks. WTI was also down -3.46% at $98.54/bbl. And other energy prices lost ground too, with European natural gas futures (-2.15%) falling to their lowest levels since Russia’s invasion of Ukraine began, at €92.84/MWh. Oil is back up around 1% this morning after the renewed global risk appetite. In spite of the more negative growth tone in markets, the Ifo’s business climate indicator from Germany yesterday came in above expectations in April, with the reading at 91.8 (vs. 89.0 expected), marking an unexpected improvement from the March reading that had been the worst since August 2020. Otherwise on the data side, the Dallas Fed’s manufacturing activity index for April fell to 1.1 (vs. 5.0 expected), the lowest since July 2020. To the day ahead now, and data releases from the US include the Conference Board’s consumer confidence indicator for April, preliminary March data on durable goods orders and core capital goods orders, the FHFA house price index for February, and new home sales for March. From central banks, we’ll hear from the ECB’s Villeroy and de Cos. Finally, earnings releases include Microsoft, Alphabet, Visa, Pepsico, UPS, Texas Instruments, General Electric and General Motors. Tyler Durden Tue, 04/26/2022 - 07:45.....»»

Category: blogSource: zerohedgeApr 26th, 2022

Futures Jump On Relief From Tesla"s Blowout Earnings

Futures Jump On Relief From Tesla's Blowout Earnings US equity futures traded higher led by tech stocks, after Tesla’s results beat expectations boosting hopes for another strong earnings season and allayed fears of an imminent recession. The electric-vehicle maker’s shares jumped 7.2% in premarket trading on Thursday, while United Airlines rose 7% after forecasting it will return to profit this year. By contrast, Alcoa dropped 5.7% after reporting worse-than-expected sales and higher inventories due to supply-chain disruptions. S&P futures rose 0.85% or 37 points to 4,493 while Nasdaq 100 futs rose 1.2% to 14,175. A selloff in Treasuries resumed with a debate raging around whether inflation is peaking: the 10-year Treasury yield added 4 basis points. The euro and German bund yields rose after hawkish comments from European Central Bank officials. The dollar reversed losses, gold slumped to session lows and bitcoin jumped above $42,000. Tesla’s earnings provided some relief for investors in tech after Netflix’s 35% slump on Wednesday raised concerns that the industry is being hit by inflation and expected rapid monetary-policy tightening by the Federal Reserve, according to Swissquote analyst Ipek Ozkardeskaya. "The macroeconomic conditions are not favorable for tech companies this year,” she said. “Although we haven’t seen a shocking migration from tech to value names, the tech companies that have shaky future earnings, and that can’t pass inflation on to their customers will likely suffer more." Besides the surging Tesla, here are some other notable premarket movers: Alcoa (AA US) shares decline 5.7% in premarket trading Thursday after the aluminum producer’s 1Q revenue missed estimates. Netflix (NFLX US) shares fall 1.1% in premarket trading, extending Wednesday’s 35% plunge after the streaming firm announced a surprise decline in subscribers. Analysts highlight the company’s valuation and business model are under review, while inflation and competition are challenging for the stock. United Airlines (UAL US) shares rise 7.5% in premarket trading after forecasting a profit this year. It has experienced a “rapid improvement” in both demand and revenue, according to MKM Partners. U.S.-listed Macau casino operators Las Vegas Sands (LVS US), MGM Resorts (MGM US) and Melco Resorts (MLCO US) may be active after Shanghai reported a sharp increase in its number of seriously ill Covid patients. Meanwhile, Chinese stocks extended this week’s rout as investors fretted over the economic effects of the nation’s Covid-Zero strategy, with lower-than-expected policy stimulus adding to their disappointment. An address by President Xi Jinping failed to soothe investors pining for more measures to support growth. Bond bears have returned after Wednesday’s rally in Treasuries fueled by some investors including Bank of America and Nomura who said the panic over inflation and rate-hike bets had gone too far. However, a Federal Reserve anecdotal survey showed inflationary pressures remained strong. Meanwhile, equities stayed resilient to higher yields with their focus on earnings. While the peak-inflation debate is intensifying, it’s unlikely to derail global central banks from their tightening path as commodity shortages from the war in Ukraine keep prices elevated. New Zealand inflation accelerated in the first quarter to the fastest pace in 32 years, validating the central bank’s pursuit of an aggressive tightening cycle. As noted yesterday, the U.S. 10-year real yield turned positive on Wednesday for the first time since March 2020 as traders added to bets on an aggressive Fed hiking cycle. However, the level failed to hold for long. Separately, the Fed said in its Beige Book survey released Wednesday revealed that the U.S. economy grew at a moderate pace through mid-April, but rising prices and geopolitical developments created uncertainty and clouded the outlook for future growth. “Strong demand allowed firms to pass through input cost increases in consumers,” Carol Kong, a strategist at Commonwealth Bank of Australia, said in a note. “The anecdotal evidence supports our view the FOMC is well behind the curve and needs to tighten policy aggressively.” In Europe, the travel and construction sectors led gain, pushing the Stoxx Europe 600 Index 0.9% higher. CAC 40 outperforms, adding 1.2%, FTSE 100 lags, dropping 0.3%. Travel, construction and industrials are the strongest-performing sectors. French equities including Alstom and Saint-Gobain outperform after Wednesday’s sole debate between President Emmanuel Macron and nationalist leader Marine Le Pen reassured investors, with the pro-business incumbent seen as having dominated the encounter. Basic resources shares underperform in Europe, heading for the biggest three-day decline on a closing basis since January, as miners fall on 1Q production reports. ABB jumped 5.3% after the Swiss automation group reported better-than-expected earnings. Anglo American fell 8.2% in London after the mining company cut output goals and said costs would be higher than expected. Here are some of the biggest European movers today: Nestle shares advance as much as 1.9% after the food company reported quarterly sales that exceeded market expectations. Analysts were impressed by the quality of the beat, highlighting the company’s pricing power. ABB shares rise as much as 5.9% after the industrial automation and robotics group’s 1Q results topped expectations. Akzo Nobel shares rise as much as 7.7% after the paint maker’s first-quarter adjusted operating income beat estimates, which Citi says is the result of pricing offsetting increased raw material costs for the first time this cycle. Sartorius AG rises as much as 6.1%, biggest gainer on the Stoxx 600 Health Care subindex, after reporting earnings that included consensus beats on adjusted Ebitda and adjusted Ebitda margins. Rexel rose as much as 7.3% after reporting 1Q revenue that topped estimates. The electrical-supplies company enjoyed pricing benefits, though there may be questions about why it didn’t raise guidance, Citi writes in a note. Europeanlong-haul airlines rise on Thursday after U.S. peer United Air forecast a return to profit, with British Airways owner IAG +6.8%, Air France-KLM +4.1% and Lufthansa +3.9%. Anglo American stock drop as much as 9.3% after the miner cut some output goals and raised costs guidance; Antofagasta also slumps following production decline, trades “ex-dividend.” Carrefour falls as much as 4.4%, with Citi saying it could “pause” after a recent run even as it met 1Q sales expectations, with Latin America and French convenience stores outperforming. Kinnevik shares slide as much as 9.2%, the most since February, after reporting its latest earnings, which included a drop in NAV to SEK243.50 from SEK424 y/y Earlier in the session, Asian stocks edged lower, with Chinese and Hong Kong gauges leading losses on mounting growth concerns, while stocks in other parts of the region were mostly higher.  The MSCI Asia Pacific Index dropped as much as 0.5% Thursday before paring losses. Communication and consumer shares slipped as technology stocks got a boost for a second day from stabilizing bond yields. Japanese equities gained as the yen resumed weakening against the dollar. Chinese benchmarks extended declines as investors became increasingly worried about growth in the world’s second-largest economy. Chinese tech stocks fell for a third consecutive day, weighed by shares linked to electric-vehicle production as lockdowns on the mainland disrupt logistics. Investors have so far been disappointed at Chinese attempts to counter the economic impact of lockdowns. JD.com Inc. and Pinduoduo Inc. fell at least 1.4% each in New York premarket trading. The CSI 300 Index capped a fifth day of losses, with lockdown-induced disruptions to supply chains and a series of disappointing monetary policy decisions quelling sentiment. “The timing of the policy stimulus would be key,” said Wai Ho Leong, a strategist at Modular Asset Management, referring to China’s monetary policy. He added that investors are also watching for stabilization of Covid-19 cases. The U.S. 10-year Treasury yield is down from a three-year high as some investors called for dip buying after the recent rout. Still, more monetary tightening is expected as the Federal Reserve said inflation pressures remain strong and that rising prices are clouding the economic outlook. More aggressive tightening by the Fed in early May, “such as a 75 basis-point hike or start of balance sheet reduction, may limit the People’s Bank of China’s options going forward,” said Marvin Chen, a strategist at Bloomberg Intelligence. Japanese equities rose for a third day, driven by advances in electronics and machinery makers. Chemical makers also boosted the Topix, which gained 0.7%. Tokyo Electron and Fast Retailing were the largest contributors to a 1.2% rise in the Nikkei 225. The yen resumed weakening against the dollar after rallying 0.8% Wednesday. India’s stock gauges rose for a second consecutive session to further reduce their sharp losses in the previous five days, driven by a continued recovery in index heavyweight technology and banking stocks. Reliance Industries surged to a record, giving the biggest boost to the indexes, after Morgan Stanley raised the price target on India’s most valuable company by 11%, citing the company’s focus on hydrogen production amid global energy transition. The S&P BSE Sensex rose 1.5% to 57,911.68 in Mumbai, while the NSE Nifty 50 Index advanced by an equal measure. There were 27 advancers, while 3 stocks declined. All but one the 19 sector sub-indexes compiled by BSE Ltd. climbed. Auto, consumer discretionary and finance companies were among the top performers Australia's commodity-heavy stocks rose for a fifth day near a record high. The S&P/ASX 200 index rose 0.3% to close at 7,592.80, climbing for a fifth day, led by gains in the industrial and real estate sectors. The five-day advance brought the benchmark less than 1% shy of a record high hit in August. Brambles rose after boosting its underlying profit at constant FX rates forecast for the full year. Meanwhile, Megaport plunged the most on record following its third-quarter revenue update. Citi said the result was weaker than expected and saw misses on monthly recurring revenue (MRR) and Megaport Virtual Edge (MVE) additions. In New Zealand, the S&P/NZX 50 index fell 0.1% to 11,954.00 In FX, the Bloomberg dollar spot index rebounded back into the green after falling 0.1%. NZD and JPY are the weakest performers in G-10 FX. the Euro rallies while short-end German bond yields rise sharply in response to hawkish comments from ECB’s Wunsch and Guindos. EUR/USD rises 0.7% on to a 1.09 handle, outperforming in G-10. Money markets briefly price 75 bps of interest-rate hikes by the ECB’s December decision. China’s yuan dropped for a third day amid rising volatility; the currency extended declines amid rising volatility spurred by uncertainties surrounding policy support for the slowing economy. Cautious risk sentiment in global markets also weighed on the yuan ahead of Fed Chair Jerome Powell’s speech later on Thursday. In rates, treasuries resumed their drop and are cheaper across the curve, following wider losses across bunds after hawkish comments from ECB’s Wunsch and Guindos as money markets priced in a more aggressive rate path for the euro-zone central bank. Treasury yields cheaper by ~5bp across the curve with 10-year around 2.87%; bunds lead losses in core rates. The German curve leads a broad-based bear-flattening move. Short end moves sharply lower, with 2y and 5y yields rising 10-12bps. USTs and gilts follow but outperform by ~3bps at the 10y point. Peripheral spreads are mixed, tightening to core at the short end, widening a touch at the back end. Futures activity during Asia session and European morning has featured continued selling of 10-year note contracts via 5k-lot block trades, most recent at 6:38am. The IG corporate issuance slate is not too busy and includes Development Bank of Japan 5Y SOFR and KfW 5Y SOFR; four deals priced $10.5b Wednesday, taking weekly volume above $40b. Focal points of U.S. session focus include appearance by Fed Chair Powell and 5-year TIPS auction, both at 1pm ET. European bonds fell, with 10-year bund yields adding 5 basis points. Traders are betting on three quarter-point hikes from the ECB this year, after Governing Council member Pierre Wunsch said policy rates could be raised above zero before year-end, with the bank perhaps even deploying “restrictive” policy to get surging prices under control. Adding to the sense of urgency, fellow members Luis de Guindos and Martins Kazaks said a rate hike in July was possible. In commodities, WTI drifts 1% higher to trade around $103; Brent is also firmer but off best levels and currently reside around the mid-point of USD 2.50/bbl ranges amid multiple pertinent updates. Namely, Russian-Ukraine negotiations and Mariupol developments, though we await Western confirmation, and China's COVID situation with strict curbs seemingly set to remain. Brazilian Oil Minister discussed raising oil output with the US amid the Ukraine crisis, while Brazil is willing to meet India's oil needs and wants Indian investment. Furthermore, the oil minister hopes oil prices stabilise below USD 100/bbl and said a high oil price is not good for producers and consumers, according to Reuters. Spot gold has continued to slip below the USD 1950/oz mark losing the 21-DMA at USD 1947 ahead of potential 50-DMA support at USD 1936.05/oz. Bitcoin is firmer on the session but seemingly remains drawn to the USD 42k mark, in-spite of a brief foray above the figure. Looking to the day ahead now, and central bank speakers include Fed Chair Powell and ECB President Lagarde, who are taking part in a panel on the global economy, as well as BoE Governor Bailey and the BoE’s Mann. Data releases from the US include the weekly initial jobless claims, and from the Euro Area there’s also the European Commission’s advance consumer confidence reading for April. Finally, earnings releases include Danaher, NextEra Energy, Philip Morris International, Union Pacific and Blackstone. Market Snapshot S&P 500 futures up 0.8% to 4,489.75 MXAP down 0.2% to 171.95 MXAPJ down 0.4% to 567.72 Nikkei up 1.2% to 27,553.06 Topix up 0.7% to 1,928.00 Hang Seng Index down 1.3% to 20,682.22 Shanghai Composite down 2.3% to 3,079.81 Sensex up 1.4% to 57,837.40 Australia S&P/ASX 200 up 0.3% to 7,592.79 Kospi up 0.4% to 2,728.21 STOXX Europe 600 up 0.4% to 461.91 Brent Futures up 0.9% to $107.76/bbl German 10Y yield little changed at 0.93% Euro up 0.6% to $1.0916 Gold spot down 0.6% to $1,945.26 U.S. Dollar Index down 0.39% to 100.00 Top Overnight News from Bloomberg The ECB could lift policy rates above zero before the end of the year unless the euro-zone economy suffers a severe shock, and it might even have to deploy “restrictive” policy to get surging prices under control, Governing Council member Pierre Wunsch said The ECB should be able to phase out asset purchases in July to pave the way for an interest-rate increase as early as that month, according to Vice President Luis de Guindos The euro is being used less often as a global payment currency, posting its biggest percentage-point drop in more than a decade in March, as inflation and the war in Ukraine weigh on its appeal for transactions Liquefied natural gas suppliers are asking clients to pay much higher rates for new long-term contracts, as a global effort to cut Russian imports is expected to keep the market tight for the next decade President Xi Jinping defended China’s lockdown-dependent approach to fighting the pandemic, even as he sought to reassure the world that the country was still committed to opening its economy A more detailed look at global markets courtesy of Newsquawk   Top Asian News China State Energy Giants in Talks for Shell’s Russian Gas Stake Japan Upgrades View of Economy Following Lifting of Covid Curbs Bank of Korea Governor Rhee Warns of Debt, Aging Risks BofA Said to Relocate Some Hong Kong Dealmakers to Singapore European bourses are firmer across the board, Euro Stoxx 50 +1.2%, upside that occurred alongside renewed EUR upside; potentially, on a stronger currency alleviating some imported-inflation pain. However, the FTSE 100 -0.1% is the clear laggard in-spite of favourable GBP action with heavy-weight mining names pressured after Q1 production reports. Stateside, US futures are firmer across the board, NQ +1.0%, following a strong TSLA, +7% pre-market, report and ahead of commentary from Fed's Powell at two events. Top European News Fired BNP Boss Accused of ‘Emotional Terrorism’ Seeks $4 Million Macron Brushes Off Attacks as Debate Reassures Investors Dutch Government Votes to Tighten Bonus Rules For Finance Firms Binance Limits Russia Services After EU Sanctions on Crypto FX Euro outperforms as dovish-leaning ECB member de Guindos tilts towards July hike and markets factor in 75 bps tightening before year end; EUR/USD hits 1.0936 high after breaching series of tech resistance levels and huge option expiries between 1.0900-05 (3.3 bln). Dollar rattled by Euro exertions and DXY loses 100.000+ status in response. Loonie and Kiwi diverge after mixed Canadian and NZ inflation data in relation to consensus, USD/CAD sub-1.2500 where 1.36bln expiry interest resides and NZD/USD sub-0.6800. Yen back under pressure as yields rebound markedly and BoJ continues efforts to impose YCT, while keeping verbal currency intervention trained on the pace rather than scale of moves, USD/JPY above 128.00. Pound undermined by EUR/GBP rally through technical resistance awaiting BoE rhetoric, while Yuan extends losses after latest weaker CNY fix and comments from Chinese media citing factors that may lead to further depreciation; Cable capped into 1.3100 and cross up over 21 and 50 DMAs to circa 0.8367. Rouble rebounds as CBR says it is contemplating FX controls, USD/RUB just under 80.0000. Fixed Income Bonds reverse course after latest correction from bear market territory, with Bunds, Gilts and 10 year T-note trying to stay on 154.00, 118.00 and 119-00 handles. Eurozone debt hit by hawkish sounding remarks from usual ECB dove de Guindos to the effect that data may determine a July hike. French OATs hold up better than the rest after strong multi-tranche auction, on balance and Macron's outperformance during Presidential TV debate. Commodities WTI and Brent are firmer but off best levels and currently reside around the mid-point of USD 2.50/bbl ranges amid multiple pertinent updates. Namely, Russian-Ukraine negotiations and Mariupol developments, though we await Western confirmation, and China's COVID situation with strict curbs seemingly set to remain. Brazilian Oil Minister discussed raising oil output with the US amid the Ukraine crisis, while Brazil is willing to meet India's oil needs and wants Indian investment. Furthermore, the oil minister hopes oil prices stabilise below USD 100/bbl and said a high oil price is not good for producers and consumers, according to Reuters. Peru is to declare a state of emergency to restore copper output at the Cuajone mine which was halted by protests in late February, according to Reuters. Spot gold has continued to slip below the USD 1950/oz mark losing the 21-DMA at USD 1947 ahead of potential 50-DMA support at USD 1936.05/oz.   US Event Calendar 08:30: April Continuing Claims, est. 1.46m, prior 1.48m 08:30: April Initial Jobless Claims, est. 180,000, prior 185,000 08:30: April Philadelphia Fed Business Outl, est. 21.4, prior 27.4 10:00: March Leading Index, est. 0.2%, prior 0.3% Central Bank Speakers 13:00: Powell and Lagarde Take Part in IMF Panel on Global Economy DB's Jim Reid concludes the overnight wrap After a major selloff so far in April, sovereign bonds have pared back their losses over the last 24 hours as investors await comments today from Fed Chair Powell and ECB President Lagarde, who’ll be appearing together on an IMF panel on the global economy in the New York afternoon. The moves saw 10yr Treasury yields undergo a major intraday swing, falling more than -13bps from their intraday high of 2.98% during Asian trading, before closing at 2.83%, ahead of a +3bps move back higher this morning. There seemed to be a belief that if inflation was in the process of peaking out, the strength of the recent rates sell-off might be overdone. But even as longer-dated yields moved lower on both sides of the Atlantic, the front end has been much more subdued by comparison, with the 2yr yield falling just -1.6bps yesterday and actually up +3bps this morning as investors continue to price in yet more Fed hikes over the near term. In fact, the amount of hikes priced in by December hit a fresh high of 227bps yesterday, and when you include the 25bp hike from last month, that implies the Fed will have tightened by more than 260bps for the year as a whole, so more than the 250bps worth of tightening we saw back in 1994. Market pricing is in line with what the Fed has been communicating of late. Even yesterday’s dovish leaning speakers, Presidents Daly and Evans, expressed a desire to get policy rates to neutral by the end of this year, which the most recent dot plot pegs at right around 250bps. Looking beyond this year as well, the rate that futures are pricing in for June 2023 hit a fresh closing high of 3.10%, although that’s still beneath our US economists’ call for a rate of 3.6% by then. This growing drumbeat for monetary tightening was echoed in Europe too, where a couple of speakers signalled that an initial rate hike as early as July was potentially on the table. First, we heard from Latvian central bank governor Kazaks in a Bloomberg interview, who said that “A rate increase in July is possible”. And then Bundesbank President Nagel said that there could be a rate hike “at the beginning of the third quarter” if asset purchases were finished at the end of Q2. Currently, overnight index swaps are only fully pricing in a 25bp hike by the September meeting, and that’s when our own European economists are also expecting the ECB to move on rates as well. So if July were realised that would be a step up from where markets currently are right now. That said, this would fit the pattern we saw with the Fed, where markets progressively brought forward the expected timing of the first hike, having initially not expected one in 2022 at all to the point where one got priced in as early as March, even with the shock presented by Russia’s invasion of Ukraine. Even with the increasing chatter around a July ECB hike, sovereign bonds in Europe pretty much echoed their US counterparts, with yields on 10yr bunds (-5.5bps), OATs (-4.6bps) and BTPs (-3.6bps) all moving lower. That came as European natural gas prices fell to another post-invasion low yesterday, down -1.21% at €92.63/MWh, though the war itself continues to show no sign of ending, with the commentary around any negotiations still taking on a very negative tone from both sides. Equities put in a solid performance for the most part, although Netflix plunged -35.12% in trading after it reported a decline in subscribers in the first quarter, marking its worst daily performance since 2004. The move also leaves its share price at its lowest level in over 4 years, and the company’s YTD losses now stand at -62.45%, making it the worst performer in the entire S&P 500 on a YTD basis. My bingeing of Bridgerton 2 on holiday and starting the final series of Better Call Saul (the best show of the last few years) last night obviously hasn’t helped. Netflix’s decline dragged down a number of indices, with the FANG+ index of megacap tech stocks shedding -6.17%, primarily due to the Netflix move, whilst the NASDAQ fell -1.22%. The broader S&P 500 was more resilient, falling a mere -0.06%, with 378 stocks actually advancing showing that big cap tech was a drag. European shares were stronger, with the STOXX 600 gaining +0.84% as it more than recovered from the previous day’s losses. Contrary to Netflix, Tesla revealed a record profit on strong demand for electric vehicles and through the sale of carbon credits in their earnings after the close. Going forward, they believe production will continue to grow despite supply chain issues beleaguering the industry. TSLA shares were +5.59% higher in after hours trading, moving back above $1,000 a share. Most Asian equity markets are trading higher but with mainland China and Hong Kong stocks lagging, hurt by worries about the Chinese economy as the nation continues to battle Covid-19 outbreaks. The Shanghai Composite (-1.68%), CSI (-1.05%) and the Hang Seng (-1.56%) are trading in negative territory as a speech by the Chinese President Xi Jinping failed to bolster investor sentiment as markets have been disappointed with Chinese attempts at tackling the economic impact of lockdowns. Elsewhere, the Nikkei (+1.21%) and the Kospi (+0.48%) are trading up building on previous session gains. Looking ahead, stock futures are indicating a positive start after Tesla's earnings with the S&P 500 (+0.38%), Nasdaq (+0.55%) and DAX (+0.30%) in the green. Oil prices are higher this morning with pressure in Europe to impose formal sanctions on Russian oil mounting. As I type, Brent futures are +1.04% higher at $107.91/bbl. In FX, the Japanese Yen continues to remain weaker and is -0.32% lower. Elsewhere, we’re just 3 days away from the French presidential election runoff now. The second round candidates held their only debate last night, expounding their world views for about three hours. There didn’t seem to be anything from the debate that should tip the scales of the election in either direction. The polls continue to put President Macron ahead of Marine Le Pen, and yesterday’s releases maintained that pattern of Macron’s lead being outside the margin of error, with leads of 56.5-43.5 (Ipsos), 55.5-44.5 (Ifop), 55-45 (from Kantar), and 54-46 (from Harris). There wasn’t a massive amount of data yesterday, but we did get a fresh reminder on inflationary pressures from the German PPI data, which came in at a year-on-year rate of +30.9% in March (vs. +30.0% expected). It’s also the fastest annual rate since the official series begins in 1949. Otherwise, there were US existing home sales for March, which fell to an annualised rate of 5.77m as expected, the lowest rate since June 2020. Elsewhere the Credit Derivatives Determinations Committee said Russia’s remuneration of foreign currency bonds with rubles would constitute a default, triggering credit default swaps on Russian debt. Recall, US bank custodians were prevented from processing Russian dollar debt payments earlier this month. Russia still has some time to avoid a default, with a 30-day grace period to make creditors whole expiring on May 4. To the day ahead now, and central bank speakers include Fed Chair Powell and ECB President Lagarde, who are taking part in a panel on the global economy, as well as BoE Governor Bailey and the BoE’s Mann. Data releases from the US include the weekly initial jobless claims, and from the Euro Area there’s also the European Commission’s advance consumer confidence reading for April. Finally, earnings releases include Danaher, NextEra Energy, Philip Morris International, Union Pacific and Blackstone. Tyler Durden Thu, 04/21/2022 - 07:55.....»»

Category: blogSource: zerohedgeApr 21st, 2022

Futures Recover Losses After Netflix Disaster; 10Y Real Yields Turn Positive

Futures Recover Losses After Netflix Disaster; 10Y Real Yields Turn Positive US index futures were little changed, trading in a narrow, 20-point range, and erasing earlier declines as a selloff in bonds reversed with investors also focusing on the catastrophic Q1 earnings report from Netflix. Nasdaq 100 Index futures slipped 0.2% by 7:15 a.m. in New York, recovering from an earlier drop of as much as 1.2%; the Nasdaq 100 has erased $1.3 trillion in market value since April 4 as bond yields have been surging on fears of rate hikes. S&P 500 futures also recouped losses to trade little changed around 4,460. Treasuries rallied and 10Y yields dropped to 2.86% after hitting 2.98% yesterday. The dollar dropped for the first time in 4 days after hitting the highest level since July 2020, and gold was flat while bitcoin rose again, hitting $42K. In perhaps the most notable move overnight, US 10-year real yields turned positive for the first time since March 2020, signaling a potential return to the pre-pandemic normal. But that was quickly followed by a global drop in bond yields as investors assessed growth challenges from the Ukraine war and the potential for a peak in inflation. “Real yields matter for equities,” Esty Dwek, chief investment officer at Flowbank SA, said in an interview with Bloomberg Television. “It’s another aspect for the valuation picture that isn’t helping. It shouldn’t be that much of a surprise to see real yields are back closer to zero again. We’re pricing in so much bad news already between inflation and the hikes and war and supply chains.” 10-year Treasurys yield shed 7 basis points in choppy session after as money managers from Bank of America to Nomura indicated the panic over inflation has gone too far: “Our forecasts point to inflation peaking this quarter and falling steadily into 2023,” BofA analysts including Ralph Axel wrote in a note. “We believe this will reduce the panic level around inflation and allow rates to decline.”  Bank of America also said it has turned long on 10-year Treasuries. Elsewhere, Japan's 10-year yield holds at 0.25%, the top of Bank of Japan’s trading band as the central bank resumes massive intervention. Despite the BOJ's dovish commitment to keep rates low, the Japanese yen rebounded from a 13-day slump and gold extended its decline. Going back to stocks, Netflix shares which have a 1.2% weighting in the Nasdaq, sank 27% in premarket trading after the streaming service said it lost customers for the first time in a decade and forecast that the decline will continue. The shares were downgraded at many firms including UBS Group AG, KGI Securities and Piper Sandler. Other streaming stocks including Walt Disney and Roku also slipped. IBM, on the other hand, rose 2.5% after reporting revenue that beat the average analyst estimate on demand for its hybrid-cloud offerings. Analysts acknowledged the strong quarter of revenue performance. A dimmer outlook for corporate earnings as well as the rise in yields have dented demand for risk assets, with investors preferring defensive stocks such as healthcare to growth-linked stocks, which come under greater pressure from higher interest rates. Some other notable premarket movers: Interactive Brokers (IBKR US) shares fell 1.1% in after-market trading as net income missed analysts’ consensus estimates. Still, analysts at Piper Sandler and Jefferies are positive. Omnicom (OMC US) shares jumped 3.7% in postmarket. Its cautious outlook for the rest of the year could bring some positive surprises, according to analysts, after the company’s 1Q revenue beat estimates In Europe, the Stoxx 600 rose 0.8%, led by banking and technology shares while miners underperformed as metals fell, as investors assessed a mixed bag of corporate results and the outlook for France’s presidential-election runoff on Sunday.  There’s a divergence in performance of European stocks; Euro Stoxx 50 rallies 1.2%. FTSE 100 lags, adding 0.4%. Danone SA rose after reporting its fastest sales growth in seven years, and Heineken NV advanced after sales climbed. Here are some of the biggest European movers today: ASML shares rise as much as 8% with analysts saying the semiconductor-equipment group’s earnings show demand remains strong, even if a timing issue meant its outlook missed expectations. Danone shares gain as much as 9% following a French financial newsletter report that rival Lactalis may be interested in buying its businesses and after the producer of Evian reported a surge in bottled water revenue. Just Eat Takeaway shares rise as much as 7.7% after the company gave mixed guidance and said it is considering selling Grubhub. While analysts note the growth looks weak, they highlight the focus on profitability and the strategic review of Grubhub are positives. Vopak shares rise as much as 7.2%, most since March 2020, after the tank terminal operator reported higher revenues and Ebitda for the first quarter. Heineken shares rise as much as 5% after the Dutch brewer reported 1Q organic beer volume that beat analyst expectations and said net revenue (beia) per hectolitre grew 18.3%. Analysts were impressed by the company’s price-mix during the period. Rio Tinto shares fall as much as 3.9%. A production miss for 1Q could prevent the miner’s shares from recovering after recent underperformance, RBC Capital Markets says. Credit Suisse declines as much as 2.8% after the bank said it anticipates a first-quarter loss owing to a hit to revenue from Russia invading Ukraine and an increase in legal provisions. Oxford Biomedica drops as much as 10% after reporting full-year revenue that was below consensus. RBC Capital said reasons for the revenue miss were “unclear,” adding that there was no new business development news. Asian stocks rose as Japanese equities rallied on the back of a weaker yen, which will support exports. Shares in China fell as investors were disappointed by the decision among banks to keep borrowing rates there unchanged. The MSCI Asia Pacific Index gained as much as 0.9% and was poised to snap a three-day losing streak. Japanese exporters including Toyota and Sony helped lead the way, with shares also stronger in Singapore, Malaysia and the Philippines.  “It looks like the cheap yen may continue for a longer period than originally expected,” said Bloomberg Intelligence auto analyst Tatsuo Yoshida. “The weaker yen is good for all Japanese automakers.” China’s benchmarks bucked the uptrend and dipped more than 1%, as lenders maintained their loan rates for a third month despite the central bank’s call for lower borrowing costs to help an economy hurt by Covid-19 and geopolitical headwinds.  China’s rate stall, together with last week’s smaller-than-expected cut in the reserve requirement, has led some investors to believe broad and significant policy easing is unlikely. “Doubts about access to easier funding remain a bugbear despite headline easing,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, wrote in a note. “Inadvertent restraints on actual lending may mute intended stimulus, revealing risks of ‘too little too late’ stimulus.” In positive news, daily covid cases in Shanghai were in downtrend in recent days and number of communities with more than 100 daily infections fell for three consecutive days, Wu Qianyu, an official with Shanghai’s health commission, says at a briefing. Financial stocks outside of China gained after U.S. 10-year Treasury real yields turned positive for the first time since 2020 as traders continue to bet on a series of aggressive Federal Reserve rate hikes. This may pose more headwinds for Asian tech stocks, which have dragged the broader market lower this year. Japanese equities rose for a second day after the yen weakened against the dollar for a record 13 straight days. Automakers were the biggest boost to the Topix, which climbed 1%. Financials advanced as yields gained. Fast Retailing and SoftBank Group were the largest contributors to a 0.9% gain in the Nikkei 225. The yen strengthened slightly after shedding nearly 6% against the dollar since the start of the month. “It looks like the cheap yen may continue for a longer period than originally expected,” said Bloomberg Intelligence auto analyst Tatsuo Yoshida. “The weaker yen is good for all Japaneseautomakers, “no one loses,” he added. Indian equities snapped their five-day drop as energy companies advanced on expectations of blockbuster earnings, driven by wider refining margins. Software exporters Infosys, Tata Consultancy and lender HDFC Bank bounced back from a slump, triggered by weaker results.  The S&P BSE Sensex gained 1% to 57,037.50 in Mumbai, while the NSE Nifty 50 Index rose 1.1%. The two gauges posted their biggest surge since April 4. Thirteen of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by a gauge of automobile companies. “A series of sharp negative reactions to minor misses in earnings from large caps points to a precarious state of positioning among investors,” according to S. Hariharan, head of sales trading at Emkay Global Financial. He expects corporate commentary on the margin outlook for FY23 to be key to investors’ reaction to other quarterly results, which will be released over the next couple of weeks. The benchmark Sensex lost about 5% in the five sessions through Tuesday, dragged lower by a selloff in software makers, a slump in HDFC Bank and its parent Housing Development Finance Corp. Foreign investors, who have been net sellers of Indian stocks since the start of October, have withdrawn $1.7 billion from local equities this month through April 18. The IMF slashed its world growth forecast by the most since the early months of the Covid-19 pandemic and projected even faster inflation. It expects India’s economy to grow by 8.2% in fiscal 2023 compared with an earlier estimate of 9%. Reliance Industries contributed the most to the Sensex’s gain, increasing 3%. Out of 30 shares in the Sensex index, 20 rose, while 10 fell. In FX, the Bloomberg Dollar Spot Index fell 0.4%, its first drop in four days, after yesterday reaching its highest level since July 2020, as the greenback weakened against all Group-of-10 peers. Scandinavian and Antipodean currencies led gains followed by the yen, which halted a 13-day rout. The euro advanced a second day and bunds extended gains, underperforming euro-area peers as money markets pared ECB tightening wagers. The yen snapped a historic declining streak amid short covering after the currency approached a key level of 130 per dollar. The Bank of Japan stepped in to cap 10-year yields for the first time since late March as it reiterated its ultra loose monetary policy with four days of unscheduled bond buying. The Australian and New Zealand dollars gained as risk sentiment improved after a selloff in Treasuries paused. The Aussie was supported by offshore funds buying into contracting yield spreads with the U.S. and on demand from exporters for hedging at the week’s low, according to FX traders. The pound edged higher against a broadly weaker dollar, but lagged behind the rest of its Group-of-10 peers, with focus on the risks to the U.K. economy. In rates, Treasuries advanced, reversing a portion of Tuesday’s sharp selloff which pushed the 10Y as high as 2.98%, with gains led by belly of the curve amid bull-flattening in core Focal points of U.S. session include Fed speakers and $16b 20-year bond reopening. US yields were richer by ~7bp across belly of the curve, 10-year yields around 2.87% keeping pace with gilts while outperforming bunds, Fed-dated OIS contracts price in around 222bp of rate hikes for the December FOMC meeting vs 213bp priced at Monday’s close; 49bp of hikes remain priced in for the May policy meeting. Japan 10-year yields held at 0.25%, the top of Bank of Japan’s trading band as the central bank resumes massive intervention. Australian and New Zealand bonds post back-to-back declines. Coupon issuance resumes with $16b 20-year bond sale at 1pm New York time; WI yield at around 3.10% sits ~45bp cheaper than March result, which stopped 1.4bp through.  IG dollar issuance slate includes Development Bank of Japan 5Y SOFR, Canada 3Y and ADB 3Y/10Y SOFR; six deals priced almost $19b Tuesday, headlined by financials including JPMorgan and Bank. In commodities, crude futures advance. WTI trades within Tuesday’s range, adding 1.1% to around $103. Brent rises 0.9% to around $108. Most base metals trade in the red; LME lead falls 1.6%, underperforming peers. Spot gold falls roughly $4 to trade near $1,946/oz. Looking at the day ahead now, and data releases include German PPI for March, Euro Area industrial production for February, US existing home sales for march, and Canadian CPI for March. From central banks, we’ll hear from the Fed’s Bostic, Evans and Daly, as well as the ECB’s Rehn and Nagel, whilst the Federal Reserve will be releasing their Beige Book. Earnings releases include Tesla, Procter & Gamble, and Abbott Laboratories. Finally, French President Macron and Marine Le Pen will debate tonight ahead of Sunday’s presidential election. Market Snapshot S&P 500 futures down 0.4% to 4,443.50 STOXX Europe 600 up 0.4% to 458.21 MXAP up 0.5% to 171.88 MXAPJ up 0.2% to 570.00 Nikkei up 0.9% to 27,217.85 Topix up 1.0% to 1,915.15 Hang Seng Index down 0.4% to 20,944.67 Shanghai Composite down 1.3% to 3,151.05 Sensex up 0.9% to 56,945.14 Australia S&P/ASX 200 little changed at 7,569.23 Kospi little changed at 2,718.69 German 10Y yield little changed at 0.88% Euro up 0.3% to $1.0823 Brent Futures up 1.0% to $108.27/bbl Brent Futures up 1.0% to $108.27/bbl Gold spot down 0.3% to $1,943.30 U.S. Dollar Index down 0.28% to 100.67 Top Overnight News from Bloomberg On the surface the yen looks like the perfect well for carry traders to dip into, under pressure from a Bank of Japan determined to keep local yields anchored to the floor even as interest rates around the world push higher. But despite consensus building for further losses -- peers look like better funding options on certain key metrics Almost eight weeks after Vladimir Putin sent troops into Ukraine, with military losses mounting and Russia facing unprecedented international isolation, a small but growing number of senior Kremlin insiders are quietly questioning his decision to go to war French President Emmanuel Macron and nationalist leader Marine le Pen are gearing up for their only live TV debate on Wednesday evening, a high-stakes event just days before the final ballot of the presidential election this weekend China will continue strengthening strategic ties with Russia, a senior diplomat said, showing the relationship remains solid despite growing concerns over war crimes in Vladimir Putin’s war in Ukraine A more detailed look at global markets courtesy of Newsquawk APAC stocks eventually traded mostly positive after the firm handover from the US despite continued upside in yields. ASX 200 was led by the healthcare sector as shares in Ramsay Health Care surged due to a takeover proposal from a KKR-led consortium, but with gains capped by miners after Rio Tinto's lower quarterly iron ore production and shipments. Nikkei 225 was underpinned by the initial currency depreciation and with the BoJ defending its yield cap. Hang Seng and Shanghai Comp were mixed with the mainland subdued after the PBoC defied expectations for a cut to its benchmark lending rates and instead maintained the 1yr and 5yr Loan Prime Rates at 3.70% and 4.60%, respectively. Top Asian News Fed’s Aggressive Rate Hike Plans Jolt Policy in China and Japan BOJ Further Boosts Bond Buying as Yields Advance to Policy Limit Sunac Bondholders Say They Haven’t Received Interest Due Tuesday Regulators Under Pressure to Ease Loan Curbs: Evergrande Update China Buys Cheap Russian Coal as World Shuns Moscow European bourses and US futures were choppy at the commencement of the European session, but, have since derived impetus in relatively quiet newsflow amid multiple earnings and as yields continue to ease; ES Unch. Currently, Euro Stoxx 50 +1.8%, while US futures are little changed on the session but rapidly approaching positive territory ahead of key earnings incl. TSLA. Netflix Inc (NFLX) - Q1 2022 (USD): EPS 3.53 (exp. 2.89), Revenue 7.87bln (exp. 7.93bln), Net Subscriber Additions: -0.2mln (exp. +2.5mln). Q1 UCAN streaming paid net change -640k (exp.+87.5k). Co. lost 640k subscribers in US/Canada, 300k in EMEA, and 350k in LatAm. Co. Said macro factors, including sluggish economic growth, increasing inflation, geopolitical events such as Russia’s invasion of Ukraine, and some continued disruption from COVID are likely having an impact, via PR Newswire. Click here for the full breakdown. -26% in the pre-market. Chinese Civil Aviation publishes prelim report looking into the China Eastern Airline crash; still recovering and analysing damaged black boxes from the plane: there was no abnormal communication between air crew and air controllers before the aircraft deviated from cruising altitude; no dangerous weather, goods or overdue maintenance. Top European News Le Pen Upset Would Be as Big a Shock to Markets as Brexit Macron and Le Pen Set for High Stakes French Debate Riksbank Governor Leaves Door Open for String of Rate Hikes Danone Gains on Lactalis Takeover Speculation, Evian Rebound Heineken Rises; MS Says Results Were Widely Expected FX: Buck concedes ground to recovering Yen as US Treasury yields recede, USD/JPY over 150 pips below new 20 year high circa 129.42. Yuan on the rocks after PBoC set a soft onshore reference rate and regardless of unchanged LPRs, USD/CNH eyes 6.4500 after breach of 200 DMA. Aussie back in pole position as high betas benefit from Greenback retreat and Kiwi in second spot ahead of NZ CPI data; AUD/USD rebounds through 0.7400 and NZD/USD from under 0.6750. Loonie also bouncing before Canadian inflation metrics, with Usd/Cad closer to 1.2550 than 1.2625, while Euro and Pound are both firmer on 1.0800 and 1.3000 handles respectively as DXY dips below 100.500. Rand shrugs aside mixed SA CPI prints as correction from bull run continues and Gold slips under Usd 1950/oz, USD/ZAR holds above 15.0000. ECB's Kazaks says a rate hike is possible as soon as July this year; ending APP early in Q3 is possible and appropriate; zero is not an a cap for the deposit rate, via Bloomberg. Adds, a gradual approach does not mean a slow approach, do not need to wait for stronger wage growth. Fixed Income: Debt redemption, as futures retrace following tests/probes of cycle lows. Lack of concession not really evident at longer-dated German and UK bond sales, but 20 year US supply may be a separate issue. BoJ ramps up intervention and aims to anchor rather than cap 10 year JGB yield around zero percent, while BoA suggests contra-trend position in 10 year UST to target 2.25% from current levels close to 3.0%. Commodities: Crude benchmarks are firmer on the session in what is more of a consolidation from yesterday's pressured settlement than a concerted effort to move higher, also benefitting from broader equity action. Currently, WTI and Brent reside at the top-end of USD 2/bbl parameters; focus very much on China-COVID, Iran, Libyan supply and Ukraine-Russia developments. US Private Energy Inventory Data (bbls): Crude -4.5mln (exp. +2.5mln), Cushing +0.1mln, Gasoline +2.9mln (exp. -1.0mln), Distillate -1.7mln (exp. -0.8mln). Spot gold/silver are contained at present but have seen bouts of modest pressure, including the loss of the USD 1946.45/oz 21-DMA at worst. US Event Calendar 07:00: April MBA Mortgage Applications, prior -1.3% 10:00: March Existing Home Sales MoM, est. -4.1%, prior -7.2% 10:00: March Home Resales with Condos, est. 5.77m, prior 6.02m 14:00: U.S. Federal Reserve Releases Beige Book Central Bank Speakers 11:25: Fed’s Daly Discusses the Outlook 11:30: Fed’s Evans Discusses the Economic and Policy Outlook 13:00: Fed’s Bostic Discusses Equity in Urban Development DB's Jim Reid concludes the overnight wrap It took me a while to adjust to being back to the office yesterday after two and a half weeks off. No screaming kids, no stealing half their food as I made their meals, and no stepping on endless lego and screaming myself. My team at work are much better behaved, protect their food, and clear up after playing with their toys. Talking of lego, the first day of the holiday was spent in a snow blizzard at LEGOLAND and the last day in shorts and t-shirt on a family bike ride on the Thames. No I haven't been off for that long just a typical April in the UK. When I left you, I was in constant agony due to sciatica in my back and a knee that was very fragile post surgery. On my last day I had a back injection that I wasn't that hopeful about as three previous ones hadn't done anything. However after a second opinion and a new consultant, this injection hit the spot and my sciatica has completely gone and I'm just back to the long-standing normal wear and tear related back stiffness. The consultant can't tell me how long it'll last so Reformer Pilates starts next week. My knee is slowly getting better via some overuse flare ups. So until the next time, I'm in as good a shape as I have been for quite some time! It's hard to guage how good a shape the market is in at the moment as there are lots of conflicting forces. Since I've been off global yields have exploded higher, the US yield curve has resteepened notably and risk is a bit softer. As regular readers know I think a late 2023/early 2024 US recession is likely in this first proper boom and bust cycle for over 40 years. However we're still in some kind of boom phase and I've been trying not to get too bearish too early. While I was off, I published our latest credit spread forecasts and having met our earlier year widening targets, we've moved more neutral for the rest of the year. However into year end 2023, we now have a very big widening of spreads in the forecasts to reflect the likely recession. See the report here. Also while I've been off, the House View is now also that we'll get a US recession at a similar point which as far as I can see is the first Wall Street bank to officially predict this. See the World Outlook here for more. On the steepening I don't have a strong view but ultimately I think 2 year yields will probably have to rise again at some point after a recent pause as the risks are skewed to the Fed having to move faster than the market expects. The long end is complicated by QT but generally I suspect the curve will be fairly flat or inverted for most of the next few months. Coming back after my holidays and the long Easter weekend, the bond market sell-off resumed yesterday with yields climbing to fresh highs. In fact, the losses for Treasuries so far in April now stand at -2.95% on a total return basis, just outperforming the -3.04% decline in March that itself was the worst monthly performance since January 2009, back when the US economy started emerging from the worst phase of the GFC. Elsewhere the US yield curve flattened for the first time in six sessions, with 2yr yields climbing +14.4bps to 2.59%, their highest level since early 2019. Yields on 10yr Treasuries rose +8.3bps to 2.94%, a level unseen since late 2018, on another day marked by heightened rates volatility. Meanwhile 30yr yields breached 3.00% intraday for the first time since early 2019, climbing +5.4bps. And what was also noticeable was the continued rise in real yields, with the 10yr real yield closing at -0.009% yesterday, and briefly trading in positive territory for the first time since March 2020 in early trading this morning. Bear in mind that the 10yr real yield has surged roughly 110bps in around 6 weeks, and since we’ve been able to calculate real yields using TIPS, the only faster moves over such a short time period have been during the GFC and a remarkable 2-week period in March 2020 around the initial Covid-19 wave. On the other hand, as I pointed out in my CoTD yesterday (link here), the 10yr real yield based on spot inflation is currently around -5.6%, so still incredibly negative. The latest moves come ahead of the Fed’s next decision two weeks from now, where futures are placing the odds of a 50bp hike at over 100% now. We’ve been talking about 50bps for some time, and we’d probably have had one last month had it not been for Russia’s invasion of Ukraine, but it would still be a historic moment if it happens, since the last 50bp hike was all the way back in 2000. Nevertheless, we could be about to see a whole run of them, with our economists pencilling in 50bp hikes at the next 3 meetings, whilst St Louis Fed President Bullard (the only dissenting vote at the last meeting who wanted 50bps) said on Monday night that he wouldn’t even rule out a 75bps hike, which probably gave some fuel to the subsequent front end selloff. The bond selloff also took hold in Europe yesterday, where yields on 10yr bunds (+6.9ps), 10yr OATs (+5.0bps) and BTPs (+6.2bps) all hit fresh multi-year highs. Indeed, those on 10yr bunds (0.91%) were at their highest level since 2015, having staged an astonishing turnaround since they closed in negative territory as recently as March 7. Rising inflation expectations have been a driving theme behind this, and yesterday we saw the 5y5y forward inflation swap for the Euro Area close above 2.4%, which is the first time that’s happened in almost a decade, and just shows how investor confidence in the idea of “transitory” inflation is becoming increasingly subdued given that metric is looking at the 5-10 year horizon. Those moves higher in inflation expectations came in spite of the fact that European natural gas prices fell to their lowest level since Russia’s invasion of Ukraine began yesterday. By the close, they’d fallen -1.94% to €93.77/MWh, whilst Brent crude oil prices were down -5.22% to $107.25/bbl. In Asia, oil prices are a touch higher, with Brent futures +0.82% higher as we go to press. Whilst bonds sold off significantly on both sides of the Atlantic, equities put in a much more divergent performance, with the US seeing significant advances just as Europe sold off. By the close of trade, the S&P 500 (+1.61%) had posted its best day in more than a month, as part of a broad-based advance that left 446 companies in the index higher on the day, the most gainers in a month. Tech stocks outperformed in spite of the rise in yields, with the NASDAQ (+2.15%) and the FANG+ index (+1.81%) posting solid advances, and the small-cap Russell 2000 (+2.04%) also outperformed. In Europe however, the STOXX 600 shed -0.77%, with others including the DAX (-0.07%), the CAC 40 (-0.83%) and the FTSE 100 (-0.20%) also losing ground. The S&P was higher despite a day of mixed earnings. Of the ten companies reporting during trading yesterday, only 4 beat both sales and earnings expectations. After hours, Netflix was the main story, losing subscribers for the first quarter in over a decade and forecasting further declines this quarter, which sent the stock as much as -24% lower in after hours trading. It’s 2 bad earnings releases in a row for the world’s largest streaming service, who saw their stock dip -21.79% the day after their fourth quarter earnings in January. Asian equity markets are mixed this morning as the People’s Bank of China (PBOC) defied market expectations by keeping its benchmark lending rates steady. In mainland China, the Shanghai Composite (-0.21%) and the CSI (-0.43%) are lagging on the news. Bucking the trend is the Nikkei (+0.57%) and the Hang Seng (+0.66%). Outside of Asia, stock futures are indicating a negative start in the US with contracts on the S&P 500 (-0.35%) and Nasdaq (-0.75%) both trading in the red partly due to the Netflix earnings miss. Separately, the Bank of Japan (BOJ) reiterated its commitment to purchase an unlimited amount of 10-yr Japanese Government Bonds (JGBs) at 0.25% to contain yields, underscoring its desire for ultra-loose monetary settings, in contrast to the global move in a more hawkish direction. The yen has moved slightly higher (+0.3%) after depreciating for 13 straight days, a streak which hasn’t been matched since the US left the gold standard in the early 70s and effectively brought the global free floating exchange rate regime into being. The pace and magnitude of the depreciation has brought some expressions of consternation from Japanese officials, but no official intervention. The reality is, it would be extraordinarily difficult to credibly support the currency at the same time as maintaining strict control of the yield curve. 10yr JGBs continue to trade just beneath the important 0.25% level. Over in France, we’re now just 4 days away from the French presidential election run-off on Sunday, and tonight will see President Macron face off against Marine Le Pen in a live TV debate. Whilst that will be an important moment, recent days have seen a slight widening in Macron’s poll lead that has also coincided with signs of an easing in market stress, with the spread of French 10yr yields over bunds coming down to its lowest level since the start of the month yesterday, at 46.7bps. In terms of yesterday’s polls, Macron was ahead of Le Pen by 56-44 (Opinionway), 56.5-43.5 (Ipsos), and 55-54 (Ifop), putting his lead beyond the margin of error in all of them. Elsewhere, the IMF released their latest World Economic Outlook yesterday, in which they downgraded their estimates for global growth in light of Russia’s invasion of Ukraine. They now see global growth in both 2022 and 2023 at +3.6%, down from estimates in January of +4.4% in 2022 and +3.8% in 2023. Unsurprisingly it was Russia that saw the biggest downgrades, but they were broadly shared across the advanced and emerging market economies, whilst inflation was revised up at the same time. Otherwise on the data side, US housing starts grew at an annualised rate of 1.793m in March (vs. 1.74m expected), which is their highest level since 2006. Building permits also rose to an annualised rate of 1.873m (vs. 1.82m expected), albeit this was still beneath its post-GFC high reached in January. To the day ahead now, and data releases include German PPI for March, Euro Area industrial production for February, US existing home sales for march, and Canadian CPI for March. From central banks, we’ll hear from the Fed’s Bostic, Evans and Daly, as well as the ECB’s Rehn and Nagel, whilst the Federal Reserve will be releasing their Beige Book. Earnings releases include Tesla, Procter & Gamble, and Abbott Laboratories. Finally, French President Macron and Marine Le Pen will debate tonight ahead of Sunday’s presidential election. Tyler Durden Wed, 04/20/2022 - 08:02.....»»

Category: blogSource: zerohedgeApr 20th, 2022

Futures Flat Ahead Of ECB And Barrage Of Bank Earnings With $2.1 Trillion In Options Expiring

Futures Flat Ahead Of ECB And Barrage Of Bank Earnings With $2.1 Trillion In Options Expiring US index were flat on Thursday, reversing earlier gains sparked by hopes of imminent easing in China, as investors turned their attention to the ECB which is set to maintain its speedier withdrawal of stimulus, data on retail sales and unemployment claims, and a barrage of earnings from Goldman Sachs, Morgan Stanley, Citigroup and Wells Fargo, and all of this happening as $2.1 trillion in options are set to expire (since tomorrow is a holiday). At 7;00am ET, S&P futures were unchanged at 4440, Nasdaq futures were down 0.1% and Europe’s Stoxx 600 rose 0.2%. Asian stocks rose after China again indicated looser monetary policy is on the way. Treasuries extended gains as investors dialed back aggressive bets on Federal Reserve interest-rate hikes. The yen bounced from a two-decade low against the dollar. The greenback slipped after snapping its longest winning streak since 2020. Oil fell. Twitter shares soared after Elon Musk offered to buy the whole company for $54.20. Delta Air Lines gained 0.9% in premarket trading, extending this week’s rally after it had its price projection raised at JPMorgan and Barclays. However the biggest mover in the premarket was Twitter which soared as much as 18%, and was last trading at $51 following a hostile offer by Elon Musk; Tesla shares fell. While elevated and sticky inflation “remains a key risk for investors,” there are signs that price growth will ease in the rest of the year, according to Mark Haefele, chief investment officer at UBS Global Wealth Management. “In our base case, this should allow central banks to slow the pace of monetary tightening and tone down hawkish rhetoric,” he said. “That in turn should lower the threat of an economic hard landing.” China is expected to cut a key policy interest rate for the second time this year on Friday and reduce the reserve requirement ratio soon. South Korea raised its key interest rate and Singapore further tightened policy, spurring advances in their currencies. “We have actually turned cautiously optimistic on the Chinese equity market in April already,” Stefanie Holtze-Jen, Asia-Pacific chief investment officer at Deutsche Bank AG in Singapore, said on Bloomberg Television. “We perceived the communication from the government as the line in the sand.” “We’re still being cautious” about equities, Michael Vogelzang, chief investment officer at CAPTRUST, said on Bloomberg Television. “We think there’s still a lot more that can go wrong than probably can go right.” The latest developments over the war in Ukraine included a European Union warning for member states that President Vladimir Putin’s demand that “unfriendly countries” effectively pay for Russian gas in rubles would violate sanctions. The U.S. will expand the scope of weapons it’s providing to Ukraine in a new $800 million package of military assistance. In Europe, gains for travel and consumer companies outweighed declines in the telecommunications and energy industries, leading the Stoxx Europe 600 Index up 0.1% and Stoxx 50 up 0.3%. CAC 40 outperforms, adding 0.4%, FTSE 100 lags, dropping 0.2%. Atlantia jumped 4.9% in Milan after the Benetton family and Blackstone offered to buy out the Italian highway operator for 23 euros per share. Ericsson dropped 5.6% in Stockholm after its earnings missed estimates. Here are some of Europe's most notable movers: Wizz Air shares jump as much as 8.9% after it said it sees its 4Q operating result ahead of guidance provided at 3Q. Concorde says the low-cost carrier’s expectation to fly 30%-40% more compared with 2019 capacity in the next two quarters is “encouraging.” Holcim shares rise as much as 4.3%, most since March 29, following a Bloomberg report that the group is considering the sale of assets in India. Atlantia shares rise as much as 5.8% after Italy’s Benetton family and Blackstone have made a EU19b bid to buy out the infrastructure group, it follows Bloomberg News last week’s report that the firm was circled by potential suitors. Hermes shares advance as much as 4.6% after publishing 1Q sales that one analyst described as “spectacular.” Peers are also up with Richemont rose as much as +3% Ericsson shares fall as much as 9.2% after reporting adjusted operating profit that undershot average analyst estimates by 25%. While the first-quarter revenue came ahead of expectations, a “clear miss” on profits together with multiple new headwinds to margins may keep investors on the sidelines, according to Barclays. VW shares decline as much as 2.3% after the car-maker reported preliminary figures that Jefferies says are “overall negative.” UPM shares decline as much as 5.1% on Friday after the Finnish company said it has not been able to come to new collective labor agreements with the Paperworkers’ Union. Ashmore shares sink as much as 9.2%, the most since April 2020, after the emerging markets-focused asset manager reported 3Q net outflows of $3.7b, which analysts say were worse than consensus expectations. European bonds fell and the euro advanced as attention turns to the ECB, which is set to maintain its speedier withdrawal of stimulus. Earlier in the session, Asian stocks headed for a two-day gain amid growing expectations that China’s central bank will ease policy to support growth in the region’s biggest economy. The MSCI Asia Pacific Index climbed as much as 0.8% as all sectors rose, with shares in mainland China leading the regionon hopes that the People’s Bank of China will cut its key policy rate soon. A 50-basis point, broad-based reduction in the reserve requirement ratio could also be confirmed as early as Friday, injecting 1.2 trillion yuan ($188 billion) of liquidity into the economy, Citigroup said. While an RRR cut “will help in terms of stabilizing expectations, it could be just an expedient measure as the economy urgently calls for more easing,” wrote Huatai Securities analysts including Yi Huan in a note. Asia’s cyclical and defensive shares climbed with SoftBank Group hauling up the gauge, as Mizuho Securities said the technology giant may sell some of its assets to improve its finances.  Japan’s main gauges were also among the top performers in Asia, rising for a second day, driven by advances in technology shares. Electronics makers were the biggest boost to the Topix, which gained 1%. Fast Retailing and Tokyo Electron were the largest contributors to a 1.2% rise in the Nikkei 225.  The Kospi index ended the day little changed after the Bank of Korea raised its seven-day repurchase rate by a quarter percentage point. China’s growth outlook has been a key pressure point for Asian shares as the country maintains its Covid Zero strategy. The MSCI Asia Pacific Index is down about 10% in 2022, extending last year’s underperformance versus the S&P 500. “China’s dynamic zero-Covid policy could ravage the Chinese economy if lockdowns continue,” Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis, wrote in a note. “Beyond the reduced demand for imports from China, an even more immediate effect is inflation given the world’s dependence on China’s production of intermediate goods.” In rates, yields are lower by as much as 2bp in 3- to 5-year sector, steepening 5s30s spread by about that much with long-end yields little changed; 10-year, lower by ~1bp at around 2.69%, outperforms bunds and gilts in the sector by 5bp-6bp. Treasuries were slightly richer across front-end and belly of the curve, steepening most curve spreads and outperforming European core rates ahead of ECB policy decision at 7:45am ET and President Christine Lagarde’s press conference. Focal points of U.S. session include retail sales data and three Fed speakers. Sifma has recommended a 2pm close ahead of Friday’s U.S. market holiday.   German curve bear-steepens with yields up 2.5-3bps across the back end. Peripheral spreads widen to Germany with 10y BTP/Bund widening 2.9bps to 242.3bps. Cash USTs bull-steepen with the curve seeing ~2bps of riching from the 5y point out. U.K. curve bear-steepens with 30y yields rising over 3bps. The Bloomberg Dollar Spot Index headed for a second day of losses, falling 0.1%. and the dollar fell against most of its Group-of 10 peers. CHF and AUD are the weakest performers in G-10 FX, SEK and NZD outperform. The euro rose above $1.09 while yields on Bunds and Italian bonds advanced as money markets increased ECB rate hike bets ahead of the monetary policy decision.  Sweden’s krona strengthened against all of its G-10 peers and the nation’s sovereign bonds slumped, led by the front-end of the curve. Markets rushed to price in faster Riksbank tightening after its target measure, CPIF, rose to 6.1% on an annual basis in March. Economists surveyed by Bloomberg expected underlying prices to rise by 5.6%. The Australian dollar declined versus its New Zealand counterpart as the economy added fewer jobs than expected last month. Yen snapped a nine-day losing streak as U.S. yields continued to fall and players prepared for the long Easter weekend. Japanese government bonds followed Treasuries higher. BOJ Deputy Governor Masazumi Wakatabe said that it’s desirable for foreign exchange rates to reflect economic fundamentals and move in a stable manner. In commodities, crude futures decline. WTI trades within Wednesday’s range, falling 0.7% to trade around $103. Brent falls 0.7% to $108. Most base metals trade in the red; LME zinc falls 1.1%, underperforming peers. LME aluminum outperforms, adding 1.1%. Gold weakens to around $1,972. The commodity-fueled jump in costs exacerbated by Russia’s war in Ukraine continues to ripple across the global economy and color market sentiment. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said inflation and the conflict were creating “significant” challenges. The firm was among the first of the big U.S. banks to report earnings. Looking to the day ahead, the main highlight will be the ECB’s latest policy decision. We’ll also hear from the Fed’s Williams, Mester and Harker. Data releases include US retail sales for March, the weekly initial jobless claims, and the University of Michigan’s preliminary consumer sentiment index for April. Lastly, earnings releases are again financials heavy, with Wells Fargo, Citigroup, Morgan Stanley, Goldman Sachs and UnitedHealth Group showcasing. Market Snapshot S&P 500 futures down 0.1% to 4,437.75 STOXX Europe 600 little changed at 457.19 MXAP up 0.6% to 175.12 MXAPJ up 0.4% to 580.08 Nikkei up 1.2% to 27,172.00 Topix up 1.0% to 1,908.05 Hang Seng Index up 0.7% to 21,518.08 Shanghai Composite up 1.2% to 3,225.64 Sensex down 0.4% to 58,338.93 Australia S&P/ASX 200 up 0.6% to 7,523.43 Kospi little changed at 2,716.71 German 10Y yield little changed at 0.78% Euro up 0.2% to $1.0906 Brent Futures down 0.7% to $108.07/bbl Gold spot down 0.1% to $1,975.23 U.S. Dollar Index down 0.17% to 99.71 Top Overnight News from Bloomberg Jumbo-sized interest rate hikes from Canada to New Zealand are boosting market confidence that central banks are on track to tame inflation, putting bonds back in investors’ focus Russian authorities are considering a step-by-step approach to rolling back the harsh capital controls imposed to stabilize markets after the invasion of Ukraine. Discussions this week focused on options that included extending the deadline for exporters to carry out mandatory conversions of their overseas earnings into rubles and lowering below 80% the share of foreign proceeds that companies are obliged to sell in the market, according to people informed on the matter Russia threatened to deploy nuclear weapons in and around the Baltic Sea region if Finland and Sweden join the North Atlantic Treaty Organization as tensions fueled by Vladimir Putin’s invasion of Ukraine spread Singapore’s central bank further tightened monetary settings and raised its inflation forecast, sending the currency higher as it seeks to fight cost pressures that threaten the recovery from the pandemic Chinese President Xi Jinping says his government will stick to its zero-tolerance approach to Covid even as public anger simmers in Shanghai and economic costs mount Copper and aluminum rose on signs China will loosen monetary policy to revive its virus-wracked economy, while zinc dipped but remained near the highest close since 2006 amid a global supply crunch A More detailed breakdown of global news from Newsquawk Asia-Pac stocks were mostly positive after the gains on Wall St where risk appetite was supported by lower yields, although some bourses lagged on policy tightening. ASX 200 traded higher but with gains capped by cautiousness in the top-weighted financials sector after Bank of Queensland's shares failed to benefit post-earnings. Nikkei 225 outperformed and reclaimed the 27,000 level with Japan's ruling coalition parties unveiling their draft relief proposals. Fast Retailing (9983 JT) 6-month (JPY): Net Profit 146.84bln, +38.7%; Operating Profit 189.3bln, +12.7%; Pretax Profit 212.6bln, +24%; Sees FY net income at 190bln (prev. guidance 175bln). KOSPI and Straits Times Index lagged after the BoK unexpectedly hiked rates by 25bps points and the MAS tightened FX-based policy, respectively. Hang Seng and Shanghai Comp were kept afloat with speculation rife that the PBoC will lower rates tomorrow via an MLF rate cut, while Citi also sees the possibility for a RRR cut on Friday to free up around CNY 1.2tln cash. Top Asian News Chinese Stocks Advance as Key Rate Cut Seen as Soon as Friday TSMC Raises Sales Outlook Despite Fears Around Global Demand Sri Lanka Seeking Up to $4 Billion as IMF Talks Set to Start Uniqlo Owner Gets Serious About Conquering North American Market European bourses are firmer, Euro Stoxx 50 +0.4%, but off best levels as sentiment was hit on commentary from Russia's  Medvedev and as we await key bank earnings. Sectors in Europe are contained and are not exhibiting any pronounced theme thus far. US futures remain within narrow parameters at this point in time awaiting updates from Goldman Sachs and Morgan Stanley before Retail Sales rounds off the week's key data; NQ +0.1%. Tesla (TSLA) CEO Musk, on April 13th, offered to purchase all of the outstanding Twitter (TWTR) shares for USD 54.20/shr (vs prior close of USD 45.85); said it was his final offer. TWTR +13% in the pre-market. TSMC (2330 TW) Q1 (TWD): Revenue 491bln (prev. 362bln), Net Profit 202.7bln (exp. 184.7bln), Gross Margin 55.6%. Expects chip demand to continue in the long term, believes capacity will remain tight this year and expects another strong year. Working to address supply chain challenges with tool suppliers. Top European News ArcelorMittal Buys $1 Billion Voestalpine Plant in Texas VW Sees Profit Surge on $3.8 Billion Hedging Boost Valneva’s Covid Vaccine Gets U.K. Clearance After Rocky Ride Macron’s Lead Grows in French Election Polling Average FX: DXY almost full point down from midweek y-t-d peak as US Treasury yields continue to recede ahead of packed pre-Easter agenda index hovering above 95.500 vs 100.520 high. Kiwi rebounds after RBNZ letdown with tailwinds from AUD/NZD cross in wake of weaker than forecast Aussie jobs data, NZD/USD back on 0.6800 handle, AUD/USD straddling 0.7450. Euro takes advantage of Greenback retreat awaiting words of wisdom from ECB President Lagarde following policy announcement that is not expected to reveal changes; EUR/USD above 1.0900 vs close shave with 2022 low (1.0806) yesterday. Swedish Crown aloft as more consensus and Riksbank target topping inflation prints prompt earlier rate hike calls, EUR/SEK pivots 10.3000. Korean Won and Singapore Dollar boosted by shock BoK hike and MAS tightening, but Chinese Yuan backs off amidst growing speculation about PBoC easing possibly as soon as tomorrow. Fixed income: Eurozone bonds extend retreat from recovery peaks and underperformance ahead of the ECB. Bunds nearer 155.00 after rebound to just shy of 156.00, Gilts sub-119.00 vs 119.65 Liffe high and 10 year T-note closer to 120-19+ overnight bottom than 121-05+ top. US Treasuries down in sympathy with Gilts and curve a tad steeper after so-so long bond auction. Debt also defensive pre-long Easter weekend and busy line up of US data, including IJC and retail sales. Commodities: WTI and Brent are pressured and in relatively proximity to the session's troughs of USD 102.50/bbl and USD 107.01/bbl. Newsflow remains focused on Ukraine-Russia, particularly Medvedev's commentary, and the COVID situation in China as other cities are on edge re. Shanghai. Libyan National Unity Government adopted a plan to develop the oil sector to raise output to 1.4mln bpd, according to Reuters. Chinese refiners are seen cutting April's crude throughput by 900k BPD, around 6% of the 2021 average, via Reuters citing sources/analysts; expected to export 2mln/T of refined fuel in April, counter to earlier China plan to halt exports. Spot gold/silver are pressured and have lost the brief upside derived from earlier geopolitical developments, yellow metal at lows of USD 1967/oz. US Event Calendar 08:30: April Initial Jobless Claims, est. 170,000, prior 166,000 Continuing Claims, est. 1.5m, prior 1.52m 08:30: March Import Price Index YoY, est. 11.9%, prior 10.9%; MoM, est. 2.3%, prior 1.4% March Export Price Index YoY, est. 16.2%, prior 16.6%; MoM, est. 2.2%, prior 3.0% 08:30: March Retail Sales Advance MoM, est. 0.6%, prior 0.3% March Retail Sales Ex Auto MoM, est. 1.0%, prior 0.2% March Retail Sales Control Group, est. 0.1%, prior -1.2% 10:00: Feb. Business Inventories, est. 1.3%, prior 1.1% 10:00: April U. of Mich. Sentiment, est. 59.0, prior 59.4; Current Conditions, est. 67.0, prior 67.2 Expectations, est. 53.6, prior 54.3 1 Yr Inflation, est. 5.5%, prior 5.4%;  5-10 Yr Inflation, prior 3.0% DB concludes the overnight wrap The EMR will be joining much of the market on holiday and will be back on Tuesday. A happy, restful long weekend to our loyal readers, and cheers to whatever it is you may be celebrating. Ahead of the holiday, the yield curve rose on the third day straight, with 2s10s having risen +42.5bps since its nadir at the start of the month. Global sovereign yields modestly fell, while US equities outperformed their European counterparts. The ECB meets today, where our economists are not expecting a change in tune. Starting with Ukraine, the US announced another round of aid, which will include heavy weaponry. Meanwhile, Finland has started the process to obtain NATO membership, and Swedish media report Sweden is considering the same. This, following President Biden labelling Russia’s excursions into Ukraine a genocide, the lack of negotiation progress, and the collective bracing for a renewed assault in the east, has cast a gloomy pall over the conflict. The International Energy Agency elsewhere warned that the disruption to Russian oil supply has yet to bind, with upwards of 3m bbls/day coming offline starting in May. The combined effect was to send Brent crude oil futures higher, which gained +4.14% yesterday to $108.78bbl, their highest level in two weeks following a +10.5% gain over the last two days. Sovereign yields had a subdued day by the standards of recent volatility, with yields falling across most jurisdictions and tenors. 10yr Treasuries were down -2.3bps, outpaced by the -5.7bp decline in 2yr yields that led to a further steepening of the curve. Most of the declines came in the New York morning, when reports of large block futures trades were relentlessly hitting the tapes. In Europe, 10yr bund, OAT, and BTP yields were -2.4bps, -3.5bps, and -3.4bps lower ahead of today’s ECB meeting, respectively. Both ECB meetings so far this year have surprised on the hawkish side of expectations, which comes as inflation has continued to accelerate to the fastest since the single currency’s formation, at +7.5% in March. Today, however, our economists preview (link here) that they’re not expecting much change to the ECB’s message. Instead, they believe with the new staff forecasts in June, the ECB will announce that APP purchases will end in July, ahead of liftoff in September. Equities were mixed in Europe, with the DAX falling -0.34%, while the STOXX 600 and CAC managed marginal gains of +0.03% and +0.07%, respectively. Farther from the conflict, the S&P 500 outperformed, climbing +1.12%, with mega-cap shares leading the way on falling discount rates, as the FANG+ climbed +2.06%. The S&P outperformance came amidst mixed results from some bellwether US financials, with JPM missing analyst earnings expectations while Blackrock sales came below expectations. In their release, JPM noted that they were increasing reserves to account for increased recession probabilities and to account for exposures to the war, two themes likely to suffuse earnings releases this season. In other central bank news, the Bank of Canada rose rates by +50bps to 1.00%, as was expected, and announced that their bond purchases would stop on April 25, a decision that contained some intrigue. The 50bp hike was the largest since 2000; Canada is no outlier in fighting multi-decade high inflation. The BoC said interest rates would need to rise further, as there was growing risk of higher inflation expectations becoming entrenched, a primal fear for any central banker. How much further? President Macklem suggested rates may need to surpass neutral if inflation doesn’t moderate, and the BoC happened to revise their neutral rate 25bps higher to a range between 2% and 3%. They also revised higher their inflation and GDP forecasts for 2022, revising down their 2023 growth forecast to 3.2%, which is nevertheless still above trend growth. US producer prices grew at a much faster rate than analysts were expecting, with final demand growing +11.2% year-on-year, versus expectations of +10.6%, while the core measure grew at +9.2%. Interesting enough, the elements of PPI that feed into core PCE were among those that printed to the soft side. Combined with the CPI data from the day before, our economists are expecting core PCE in March to grow at +0.25% Asian equity markets are following US stocks higher this morning, with most indices in the green, augmented by China signalling a potential impending RRR cut. US equity futures are pointing to a steady start today, with contracts on the S&P 500 (+0.07%) and Nasdaq 100 (+0.16%) both a smidge higher. Brent crude futures are -0.61% down to $108.12/bbl. 10yr Treasury yields have declined -2.7bps to 2.67%, with the 2yr yields edging -2.9bps lower to 2.32%. The Bank of Korea got in on the global tightening overnight, lifting its base rate by +25bps to 1.5%, its highest since August 2019 and making it the fourth rate increase since August 2021. The increase came even without the formal appointment of a new governor Rhee Chang-yong, who is expected to begin his four-year term from April 19. With 10 days left until the French Presidential election, polls show a consistent lead for President Macron. His lead over Marine Le Pen expanded in 3 of the 4 polls released yesterday, yet still reflect a smaller expected margin of victory than his previous triumph. The spread of French 10yr yields over bunds narrowed to close beneath 50bps for the first time in over a week. Aside from the US PPI data, the other main release yesterday were the UK inflation numbers, where the year-on-year measure for headline CPI rose to +7.0% (vs. +6.7% expected). That’s the 6th consecutive month that the reading has surpassed the consensus expectation, whilst core CPI also surprised to the upside at +5.7% (vs. +5.3% expected). In turn, investors moved to raise the probability of a 50bp hike in May from the Bank of England to 28%, the highest in a couple of weeks. Our UK economist also put out an update after the report (link here) move above 9% year-on-year in the April data next month. To the day ahead now, the main highlight will be the ECB’s latest policy decision. We’ll also hear from the Fed’s Williams, Mester and Harker. Data releases include US retail sales for March, the weekly initial jobless claims, and the University of Michigan’s preliminary consumer sentiment index for April. Lastly, earnings releases are again financials heavy, with Wells Fargo, Citigroup, Morgan Stanley, Goldman Sachs and UnitedHealth Group showcasing. Tyler Durden Thu, 04/14/2022 - 07:25.....»»

Category: blogSource: zerohedgeApr 14th, 2022

Futures Rise As Earnings Season Begins

Futures Rise As Earnings Season Begins US index futures bounced, with Nasdaq 100 contracts halting a three-day drop, as investor attention turned to the start of corporate earnings season, which BofA dubbed the "Last big beat for a while" amid concerns over high inflation and slowing growth. Contracts on the Nasdaq 100 were up 0.4% as of 630 a.m. in New York, signaling a pause in the rout that wiped $1.6 trillion from the market value of technology behemoths in just over a week. S&P 500 futures and Dow futures gained 0.4%, with Asian stocks also rising even as Europe’s Stoxx 600 Index dropped; the selloff in U.S. Treasuries also eased with the 10Y yield flat at 2.72% while the US Dollar resumed its advance and the yen fell to a 20-year low as the growing gap between rising U.S. bond yields and perpetually low ones in Japan continued to pressure the currency. Oil rose after Russia vowed to continue the war in Ukraine and China partially eased Covid curbs. Bitcoin continued to trade on either side of $40K. A quick look around the world: U.K. inflation surged to a 30-year high, surging 7% above expectations of 6.7%, before the Bank of England’s next decision in May, while New Zealand’s central bank delivered a surprise 50bps rate hike (exp 25bps) its biggest interest-rate increase in 22 years. Meanwhile, markets continued to digest Tuesday’s U.S. inflation data which was viewed by many as a peak in CPI, which prompted traders to pare back expectations on how aggressively the Federal Reserve will raise interest rates. St. Louis Fed President James Bullard said U.S. monetary policy needs to be tightened to a point that it curtails economic growth or policy makers will end up risking their credibility (translation: he wants stocks 30% lower). He supports a half percentage point increase at the Fed’s policy meeting in May and says the rate should move up “sharply” after that. On the geopolitical front, the presidents of Poland and the three Baltic states are heading to Kyiv in a show of support that follows the visits of other leaders to the Ukrainian capital, including from Boris Johnson and European Union chiefs. The Biden administration is preparing a new military assistance package for Ukraine.  Here are some of the latest news out of Ukraine: Ukrainian President Zelensky proposed swapping pro-Russian politician Medvedchuk for Ukrainian prisoners of war, according to Reuters. Ukrainian Deputy PM says it is not possible to open humanitarian corridors on Wednesday; occupying forces have violated the ceasefire, via Reuters. Sweden's largest party Social Democrats favour applying to NATO at the June meeting in Spain, according to SvD. US President Biden said it will be up to lawyers to determine if Russia's actions in Ukraine qualify as genocide but added it seems like genocide to him and that the evidence is mounting, according to Reuters. US President Biden's administration is expected to announce at least USD 750mln in additional weapons for Ukraine and deliberations continue on a mix of weapons, which could evolve, according to Reuters. Ukrainian President Zelensky said it is not possible to draw 100% firm conclusions about whether Russia used chemical weapons in Mariupol and that it is not possible to conduct a full investigation in a besieged city, according to Reuters. Chechen leader Kadyrov said over 1,000 Ukrainian marines surrendered in Mariupol, according to Sputnik. US equities have been roiled again this month by the double whammy of soaring bond yields and concerns around a looming global recession. After data on Tuesday showed a smaller-than-expected increase in core inflation last month, focus this week will be on quarterly earnings starting with the big banks, which generally offer a window on the economy since they touch on everything from mortgages to general consumer behavior. “Despite the increased price pressure, analysts are still expecting profit margins of the S&P 500 to reach new all-time highs by the second quater, which seems optimistic in our view,” said Mathieu Racheter, head of equity strategy at Julius Baer. “We see a higher risks of negative earnings revision ahead, driven by the cyclicals sectors. We continue to recommend investors to remain defensively positioned within their equities allocation.” Among notable pre-market moves in the US, Sierra Oncology shares jumped 37% to $54.30 after GlaxoSmithKline agreed to buy the maker of therapies for rare forms of cancer for $55/shares in cash, or about $1.9 billion. Genius Group shares, on the other hand, tumbled 29% after a whopping 408% gain on their first day of trading yesterday. JPMorgan was little changed ahead of its first-quarter results due later in the morning. Here are some of the biggest U.S. movers today: Antares Pharma (ATRS US) surges 48% in premarket trading after Dow Jones reported that Halozyme Therapeutics (HALO US) is close to buying the maker of needle-free systems for $5.60 per share in cash, citing people familiar with the matter. The departure of PayPal (PYPL US) finance chief John Rainey to become CFO at Walmart (WMT US) was less concerning to some analysts than the absence of a guidance update with the announcement. PayPal stock falls 1.5% in premarket, Walmart +0.5%. Hillman Solutions (HLMN US) fell 8.9% postmarket Tuesday after holders offered 10m shares. Investors are now turning their attention to the earnings season, while awaiting the European Central Bank’s meeting on Thursday. Money managers are increasingly hedging the risk of stagflation, especially in Europe, amid concerns that high inflation and slowing growth will end up squeezing company profits. “It appears that the market is swinging quickly to try and price ‘peak inflation,’” Jeffrey Halley, senior market analyst at Oanda, wrote in a note. “Naturally, ‘peak inflation’ should be a reason to pile back into equities. However, it just isn’t that simple. The environment for equities remains challenging.” “We’re hopeful that this is where it’s going to peak,” Ann Miletti, head of active equity at Allspring Global Investments, said on Bloomberg Television, referring to U.S. inflation. But she added that markets continue to face a wall of worry, ranging from rising rates to the impact of China’s Covid lockdowns. In Europe, the Stoxx 600 Index was down 0.4%, with travel and leisure sector leading declines as energy, miners and media are the strongest performing sectors. FTSE 100 outperforms, adding 0.3%; DAX lags, dropping 0.3%. LVMH erased early gains as it warned of a negative impact on demand because of lockdowns in China. Here are some of the biggest European movers today: Telecom Italia shares rise as much as 4.7% after a local press report that Apax and France’s Iliad are preparing a joint offer for its ConsumerCo business. Ted Baker shares rise as much as 5.7% after the high-street retailer said Sycamore will participate in formal sale process. Oxford Instruments gains as much as 9.4% after the firm said it expects its financial performance to be marginally ahead of expectations. Tesco shares slump as much as 7% after the U.K. grocer said profit may show little change or decline slightly this year amid the U.K.’s cost of living crisis. Analysts noted Tesco’s focus on providing customers with “compelling” value. Other U.K. grocery stocks including Ocado, Sainsbury and Marks & Spencer also fell Adidas shares declined as much as 4.1% after being downgraded to reduce from add and PT cut to Street-low EU190 at Baader Helvea based on rising headwinds and a “more cloudy” outlook for rest of the year. LVMH shares fall as much as 1.3%, reversing earlier gains, as worry over a Covid-19 resurgence in the key market of China remained at the forefront of investors mind even as the luxury conglomerate beat first-quarter expectations. Barry Callebaut shares fall as much as 5.4% amid worries the Swiss chocolate maker may be further affected by the war in Ukraine and its far- reaching consequences. The company said it’s taking an impairment for its financial assets in Russia. Earlier in the session, Asian equities rose for the first time in three days as U.S. Treasury yields retreated from multi-year highs, easing concerns over potential damage to corporate earnings. The MSCI Asia Pacific Index climbed as much as 1.2%, rebounding from its lowest level since March 16. Tech hardware stocks drove gains after the 10-year Treasury yield slipped overnight following a smaller-than-expected jump in a key U.S. inflation gauge. TSMC was among the biggest contributors to gains in Asia ahead of its earnings release Thursday. “A pause in the yield rally at the current level may provide a breather for the equities market in the coming days, as attention will be shifted to the upcoming earnings season to drive sentiment,” said Jun Rong Yeap, a strategist at IG Asia. Benchmarks in Taiwan, Japan and South Korea led gains around the region. New Zealand’s main index fell after an unexpectedly large 50-basis-point hike by its central bank --its biggest in 22 years. Chinese stocks declined as a top virus expert stressed the importance of the nation’s dynamic zero strategy and data showed Chinese imports unexpectedly fell. China’s Imports Drop, Export Growth Slows on Covid Lockdowns Amid news of looser quarantines in some Chinese cities, investors are keenly awaiting formal relaxation of Beijing’s strict virus policies as its growth slowdown weighs on the region. Meanwhile, soaring prices in the U.S. and parts of Europe have finally reached Asia, deepening concerns about rising input costs for businesses Japanese equities gained, rebounding after two days of losses, following a smaller-than-expected rise in U.S. inflation and a drop in Treasury yields. Electronics and auto makers were the biggest boosts to the Topix, which rose 1.4%. Fast Retailing and Tokyo Electron were the biggest contributors to a 1.9% advance in the Nikkei 225. The yen extended losses against the dollar to a ninth day. The U.S. consumer price index increased 8.5% in March compared with a year earlier, less than economists expected. The 10-year Treasury yield slipped six basis points Tuesday following the inflation data. “Markets had been pricing in substantial negative impacts from higher U.S. interest and lockdowns in China, so stocks are rebounding somewhat today,” said Tomo Kinoshita, global market strategist at Invesco Asset Management. “There was a risk that if the U.S. CPI came in higher than market expectations that the Fed would turn more hawkish, but that didn’t happen.” In FX, the Bloomberg dollar spot index is near flat. CHF and EUR are the strongest performers in G-10 FX, NZD and JPY underperform. Yen drops to a 20-year low against the U.S. dollar, trading now at 126.15. In fixed income, bonds bounced ahead of Tuesday's new lows, but recovery remains weak rather than firm as Bunds hover above 155.00, Gilts just under 119.00 and T-note midway between 119-31/120-17 extremes. Lacklustre 10-year Bund auction in keeping with T-note sale last night, and with long bond supply still to come. Italy sees decent demand for multi-tranche offerings after recent heavier concession. In commodities, crude futures advanced with Brent extending on its torrid Tuesday gains and rising 2% back over $106. The International Energy Agency halved its estimate for a decline in Russian crude oil output for April as the nation has been able to find new customers even with global restrictions and self-sanctioning by traditional buyers. But top oil trader Vitol Group said it intends to completely stop trading Russia-origin crude and products by the end of this year. Most base metals trade in the green; LME zinc rises 2.8%, outperforming peers. LME copper lags, dropping 0.1%. Spot gold rises roughly $9 to trade at $1,976/oz. Spot silver gains 1.2% to ~$26. Looking at the day ahead now, data releases include US PPI for March, UK CPI for March and Italy’s industrial production for February. From central banks, we’ve got a policy decision from the Bank of Canada, as well as a speech from Bank of Japan Governor Kuroda. Finally, today’s earnings releases include JPMorgan Chase, BlackRock, Tesco and Delta Air Lines. Market Snapshot S&P 500 futures up 0.6% to 4,418.25 MXAP up 0.7% to 173.79 MXAPJ up 0.7% to 577.71 Nikkei up 1.9% to 26,843.49 Topix up 1.4% to 1,890.06 Hang Seng Index up 0.3% to 21,374.37 Shanghai Composite down 0.8% to 3,186.82 Sensex down 0.3% to 58,425.03 Australia S&P/ASX 200 up 0.3% to 7,479.02 Kospi up 1.9% to 2,716.49 STOXX Europe 600 little changed at 456.72 German 10Y yield little changed at 0.84% Euro little changed at $1.0832 Brent Futures up 0.2% to $104.89/bbl Gold spot up 0.4% to $1,975.13 U.S. Dollar Index little changed at 100.37 Top Overnight News from Bloomberg Federal Reserve Bank of St. Louis President James Bullard said U.S. monetary policy needs to be tightened to a point that it curtails economic growth or policy makers will end up risking their credibility The Biden administration is preparing a military assistance package of roughly $750 million for Ukraine in its battles against Russian invaders, people familiar with the matter said Tuesday night An immediate interruption in Russian energy supplies over the war in Ukraine could jeopardize 220 billion euros ($240 billion) of German output over the next two years, a report warned The yen’s drop to a two-decade low versus the dollar sets the tone in the options space, while overnight volatility in the euro rallies ahead of the ECB decision Thursday It’s the next big market call that could enrich traders across Wall Street: The raging global energy crisis and ever-more hawkish central banks knock key economies into 1970s- style stagflation French President Emmanuel Macron led his rival Marine Le Pen 53.2% to 46.8% ahead of the run-off presidential election set for April 24, according to a polling average calculated by Bloomberg on April 13. The gap between them has narrowed from the 8 percentage points recorded on April 11 A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks mostly shrugged off the weak lead from the US and rebounded from a two-day losing streak. ASX 200 was kept afloat by the commodity-related sectors including energy after WTI crude futures climbed back above USD 100/bbl landmark and with Australia's government providing funding for domestic refiners. Nikkei 225 outperformed currency weakness and with the index unfazed by disappointing Machinery Orders. Hang Seng and Shanghai Comp lagged on COVID woes despite China testing an easing of quarantine rules in eight cities, as infections continued to spread with a fresh record of daily cases in Shanghai, while Sunac's missed coupon payment, further inclusions to the US HFCAA list and mixed trade data added to the cautious mood. Top Asian News Yen Falls to 20-Year Low as Policy, Yield Divergence Continues Japan Finance Minister Says Sudden FX Moves Problematic: Kyodo SMBC Nikko Ex-Deputy President Indicted Over Block Offers China’s Exports to Russia Slump After Ukraine Invasion European bourses are pressured across the board, Euro Stoxx 50 -0.7%, in what has been a somewhat choppy European morning with limited fresh macro drivers emerging. Sectors are similar to their initial cash open performance, as Energy and Basic Resources outperform while Travel, Retail and Personal Goods lag. US futures are firmer across the board, ES +0.3%, and while they have been directionally moving with Europe magnitudes are more limited; support following yesterday's CPI but ahead of PPI and JPM earnings. BlackRock Inc (BLK) Q1 2022 (USD): EPS 9.52 (exp. 8.95), Revenue 4.699bln (exp. 4.74bln). +0.3% in the premarket. Top European News Deutsche Telekom Edges Closer to T-Mobile Control With New Stake U.K. Inflation Jumps More Than Expected to 30-Year High of 7% European Gas Rises With Lower Flows Via Ukraine, Norway Outages U.K. Homebuilders Commit $2.6 Billion for Fire Safety Repairs FX: Kiwi knee jerks higher after bigger than generally expected 50 bp RBNZ hike before retreating abruptly on reflection of unchanged OCR outlook; NZD/USD sub-0.6800 vs peak just over big figure above. Yen flogged yet again as Japanese officials continue to fret about speed rather than size of moves and core machinery orders miss consensus; USD/JPY knocks down barriers at 126.00 to reach 126.31 and breach 2015 peak. DXY extends advance above 100.000 before waning ahead of May 2020 peak just over 100.500. Aussie retains 0.7400+ status vs Greenback before jobs data, but with assistance from sharp reversal in AUD /NZD cross flows - from circa 1.0833 to 1.0950. Euro keeps its head above 2022 low against Dollar, narrowly, and Pound rebounds after minor boost from strong UK inflation prints, EUR/USD down to 1.0811 or so vs 1.0806, Cable revisits 1.3000 vs 1.2972 at worst. Loonie immersed in technical levels awaiting BoC and guidance to accompany a widely forecast half point rate rise; USD/CAD near 1.2650 and flanked by 200, 100 and 50 DMAs. Fixed Income: Bonds bounce ahead of Tuesday's new lows, but recovery remains feline rather than firm as Bunds hover above 155.00, Gilts just under 119.00 and T-note midway between 119-31/120-17 extremes. Lacklustre 10-year Bund auction in keeping with T-note sale last night, and with long bond supply still to come. Italy sees decent demand for multi-tranche offerings after recent heavier concession. Commodities: WTI and are firmer in a continuation of the consolidation from the upside seen in yesterday's session amid Brent geopolitical tensions. Most recently, the benchmarks have eclipsed a circa. USD 2/bbl range that had been holding throughout the morning; current bests, USD 102.13/bbl and USD 106.45/bbl respectively. US Private Energy Inventory Data (bbls): Crude +7.8mln (exp. +0.9mln), Cushing +0.4mln, Gasoline -5.1mln (exp. -0.4mln), Distillate -5.0mln (exp. -0.5mln). IEA OMR: Lowers 2022 global oil demand estimate by 260k BPD on COVID in China and lower OECD demand. February global stocks 714mln/bbl below the end-2020 level, OECD accounts for 70% of the decline. Russian oil supply is expected to fall by 1.5mln BPD in April and by around 3mln BPD from May. CNOOC (883 HK) is said to be considering exiting operations in Britain, US and Canada amid tensions with the West, according to Reuters sources. Spot gold and are bid this morning, though the yellow metal is still shy of yesterday's USD 1978.21/oz silver peak. LME Zinc outperforms piggybacking the performance of its Shanghai peer overnight US Event Calendar 07:00: April MBA Mortgage Applications, prior -6.3% 08:30: March PPI Final Demand YoY, est. 10.6%, prior 10.0%; 08:30: PPI Final Demand MoM, est. 1.1%, prior 0.8% 08:30: March PPI Ex Food and Energy YoY, est. 8.4%, prior 8.4%; MoM, est. 0.5%, prior 0.2% 08:30: March PPI Ex Food, Energy, Trade YoY, est. 6.5%, prior 6.6%; MoM, est. 0.5%, prior 0.2% DB's Henry Allen concludes the overnight wrap After a succession of major bond selloffs this month, yesterday marked the first time so far in April that US Treasuries put in a positive performance. Given the US CPI report showed inflation hitting its highest rate since 1981 in March, with a year-on-year rate of +8.5%, that might seem counter-intuitive. But the monthly print of +1.2% was already expected by the consensus, even if it was the strongest since September 2005, whilst there was also a downside surprise in core inflation, which came in at +0.3% over the month (vs. +0.5% expected). In turn, that saw investors take out some of the expected monetary tightening they’d been pricing over the rest of the year, with the futures-implied policy rate by December’s meeting down by -10bps relative to the previous day. Looking at some of the details, higher gasoline prices were responsible for more than half of the headline monthly increase in CPI, having gone up by +18.3% in March. That’s their biggest monthly increase since June 2009, and follows the major spike in oil prices following Russia’s invasion of Ukraine. On the other hand, used cars and trucks came down -3.8% over the month, which is their largest monthly decline since May 1969. In terms of housing inflation, rent of primary residence fell back to +0.43% (vs. +0.57% in Feb), though owners’ equivalent rent came in at +0.43%, in line with the narrow band of +0.41-0.45% in which it’s been rising since September. Against that backdrop, yields on 10yr Treasuries came down -5.9bps to 2.721%, marking their first daily decline so far this month, with trademark intraday volatility, as 10yrs were as much as +5.3bps higher in early morning trading, before trading -10.8bps lower during the New York lunch hour. 2yr yields had a larger on net decline (-9.2bps) that saw the 2s10s curve steepen up to 31.2bps, which is the steepest its been since the March FOMC meeting when the Fed embarked on their new hiking cycle. And although the total number of hikes priced for the year as a whole came down somewhat, the odds of a 50bp move at the next meeting in May actually ticked up to 93.5%, the highest to date. Overnight though, the 10yr yield has pared back some of its declines yesterday, moving up +2.3bps to 2.744%. While the CPI release may have triggered a bond rally, Fed communications remained just as hawkish, and yesterday we heard more from Governor Brainard, who is awaiting confirmation to her new post as Vice Chair. She expressed a preference to get the policy rate to neutral by the end of this year, echoing similar comments from Fed officials earlier in the week. She still thinks the Fed has room to engineer a soft landing and sustain the current economic expansion due to the historic strength of the labour market. Separately, in an interview released overnight with the FT, St Louis Fed President Bullard (who voted for a 50bps hike in March) said that it was a “fantasy” that the Fed could bring inflation down without going above neutral. Even as investors priced in a slightly shallower pace of Fed rate hikes over the coming year, US equities still managed to rollover after trading in the green for most of the day, with the S&P 500 down -0.34%. Financials (-1.07%) led the way lower with the decline in yields ahead of financials earnings kicking off today, while energy (+1.72%) was the clear outperformer on rebounding crude prices. Small-cap stocks put in a decent performance, with the Russell 2000 (+0.33%) ending a run of 5 consecutive declines. European equities also traded lower as well, with the STOXX 600 down -0.35%, along with other indices including the DAX (-0.48%), the CAC 40 (-0.28%) and the FTSE 100 (-0.55%). Turning to commodities, oil prices moved sharply higher yesterday, with Brent Crude (+6.26%) closing above $104/bbl for the first time in over a week. That came as Russian President Putin said that talk with Ukraine were “at a dead end”, and other haven assets including gold (+0.68%) also moved higher on the day. Over in the US meanwhile, President Biden accused Russia of “genocide”, standing by his comments and saying that “it has become clearer and clearer that Putin is just trying to wipe out the idea of being able to be Ukrainian”. Those further gains in oil prices meant that European inflation expectations rose to fresh highs, with the 10yr German breakeven up to 2.90%, its highest level yet in data going back to 2009, whilst the 10yr Italian breakeven rose to 2.69%, a level not seen since 2008. Importantly, measures of long-run inflation expectations, ostensibly beyond the influence of the current shock, have increased as well, with the 5y5y forward inflation swap for the Euro Area rising to +1.6bps to 2.38% yesterday, marking its highest level since 2013. In spite of those rises in European inflation expectations, sovereign bond yields in Europe moved lower along with US Treasuries, paring back an initial rise that saw the 10yr bund yield move to its highest intraday level since 2015, at 0.87%. By the close of day however, yields on 10yr bunds (-2.6bps), OATs (-1.9bps) and BTPs (-5.7bps) had all moved lower. Overnight in Asia, equity markets have bucked the trend seen in the US and Europe, with the Nikkei (+1.60%), the Kospi (+1.40%) and the Hang Seng (+0.29%) all moving higher. However, the Shanghai Composite (-0.44%) and CSI (-0.51%) are both lagging as the Covid-19 outbreak in China continues to weigh on investor sentiment. Looking forward, stock futures in the US are pointing to a decent start today, with contracts on the S&P 500 (+0.51%) and Nasdaq 100 (+0.69%) both higher. On the monetary policy front, we also heard from the Reserve Bank of New Zealand overnight, who hiked their official cash rate by +50bps to 1.50% as they seeks to tame inflation. This is the fourth consecutive interest rate hike by the central bank and its biggest hike since 2000. Turning to the French election, we’re now just 11 days away from the second round between President Macron and Marine Le Pen, and the polls continued to point to a fairly tight race, albeit with Macron in the lead. In terms of yesterday’s polls, Macron was ahead by 54-46 in Opinionway (down from 55-45 the previous day), whilst Ifop’s 52.5-47.5 margin was unchanged from the previous day. French assets performed basically in line with their European counterparts yesterday, with the spread of French 10yr yields over bunds moving up by just +0.6bps to 50.8bps. Running through yesterday’s other data, the UK employment report was somewhat softer than expected, with payrolled employees up by just +35k in March (vs. +125k expected). Nevertheless, the unemployment rate did fall back to the pre-pandemic low of 3.8% in the three months to February, in line with expectations. Elsewhere, Germany’s ZEW survey saw further declines in April, with the current situation reading down to an 11-month low of -30.8 (vs. -35.0 expected), and the expectations component fell to a 2-year low of -41.0 (vs. -48.5 expected), even if both were somewhat better than expected. Finally in the US, the NFIB’s small business optimism index fell to a 2-year low of 93.2 in March (vs. 95.0 expected). To the day ahead now, and data releases include US PPI for March, UK CPI for March and Italy’s industrial production for February. From central banks, we’ve got a policy decision from the Bank of Canada, as well as a speech from Bank of Japan Governor Kuroda. Finally, today’s earnings releases include JPMorgan Chase, BlackRock, Tesco and Delta Air Lines. Tyler Durden Wed, 04/13/2022 - 06:57.....»»

Category: blogSource: zerohedgeApr 13th, 2022

US Futures On Edge Ahead Of "Extraordinarily Elevated" CPI Print

US Futures On Edge Ahead Of "Extraordinarily Elevated" CPI Print US index futures were flat on Tuesday, rebounding off overnight session lows as investors braced for red hot inflation data which the White House yesterday called "extraordinarily elevated" and which will likely boost the argument for aggressive monetary tightening - perhaps even a 75bps or intermeeting rate hike - despite a looming economic slowdown. Nasdaq futures were 0.2% higher, while S&P futures were flat after dropping as much as 0.5%. China’s Premier Li Keqiang issued a third warning about economic growth risks in less than a week but Chinese stocks bounced back over bets that policy makers will take measures to support the economy. The rate on 10-year Treasuries rose to the highest since 2018 as the global bond rout continued, rising for an 8th straight day as high as 2.83% before easing. The Bloomberg dollar index was set to extend its longest winning streak since 2020, rising for a ninth day. Both trends reflect expectations that the Fed will implement its fastest monetary tightening since 1994. The euro weakened. Oil staged a partial recovery after a tumble that saw crude erase most of the gains sparked by Russia’s invasion of Ukraine. China’s virus outbreaks and mobility curbs, in pursuit of a controversial Covid-zero strategy, are imperiling demand. “What we’re faced with this year is stagflation,” Kathryn Rooney Vera, head of global macro research at Bulltick LLC, said on Bloomberg Television. “It’s a very complicated environment that the Fed has found itself in” and the market is pricing in potentially 50 basis points of hikes at each of the next two policy meetings, she added. Meanwhile, the Peterson Institute for International Economics expects a global recession by the end of the year due to Covid-related shutdowns in China and the Russia-Ukraine war In premarket trading, Apple was flat after Citi said that it was likely to announce an incremental stock buyback of $80b-$90b and raise its dividend by 5-10% when it reports 2Q results later this month, according to Citi. Hewlett Packard Enterprise fell 3.6% after Morgan Stanley downgraded the stock to underweight and lowered its industry view for telecom and networking equipment to cautious from in-line, citing demand data. Other notable premarket movers include: Cisco (CSCO US) drop as much as 2.1% in premarket after Citi cuts rating to sell from neutral, citing competition and more difficult year-over-year comparisons for quarters ahead. Biodesix (BDSX US) surges 79% premarket after its chairman, board members revealed they had bought shares in the biotechnology firm. Coinbase (COIN US) price target cut by Mizuho Securities for a second straight week, this time citing analysis which suggests the cryptocurrency exchange is losing market share to other platforms. Shares up 0.8% premarket. Aeglea BioTherapeutics (AGLE US) shared added data from the PEACE Phase 3 study of pegzilarginase for the treatment of arginase 1 deficiency, with shares gaining 31% premarket. Global growth optimism sank to a fresh all-time low, with recession fears surging in the world’s investment community, according to the latest monthly Bank of America survey of fund managers. The next major test for markets looms later Tuesday, when the U.S. is expected to unveil an inflation print for March of more than 8%, the highest since early 1982 (see our CPI preview here).  One of the more dangerous scenarios for markets “is that we have to raise rates at such a pace that it will clamp down on growth,” Kathryn Kaminski, chief research strategist at AlphaSimplex Group, said on Bloomberg Television. “That’s the scenario that most people are worried about.” “These concerns over inflation are likely to remain in focus over the next two days,” said Michael Hewson, chief analyst at CMC Markets in London. “Today’s CPI numbers look set to seal the deal on a 50 basis-point rate move at the Federal Reserve’s May meeting, a move that bond markets are already discounting with the prospect of more to come.” In Europe, stocks pared some losses as energy benefits from oil’s rally, while global yields slightly cool their ascent. Declines in the personal care and healthcare industries outweighed gains for energy and mining companies, with the Stoxx Europe 600 Index down 0.5% and the Euro Stoxx 50 falling 0.9%. IBEX outperformed, dropping 0.3%, DAX lags, dropping 1.1%. Health care, banks and financial services are the worst performing sectors. Energy is the best performing sector of Stoxx 600. Banking stocks were among the biggest decliners in Europe as concern over the impact of war in Ukraine and the possibility of recession started to impact profit estimates. Deutsche Bank AG and Commerzbank AG led the drop after stake sales worth a combined 1.75 billion euros ($1.9 billion) in Germany’s two largest listed banks. Russian stocks fell for a third day. Dubai Electricity & Water Authority jumped in its trading debut after raising $6.1 billion in the world’s second-biggest initial public offering this year. In the U.K., living standards fell at the fastest pace in more than eight years in February as wages lagged further behind the rate of inflation. Earlier in the session, Asia’s stock benchmark pared much of its early drop on Tuesday, with Chinese shares bouncing back on speculation that policy makers will step in to support the economy. The MSCI Asia Pacific Index was down 0.6% as of 6:00 p.m. in Singapore after falling as much as 1%. The CSI 300 Index advanced by the most this month as traders bet that authorities may step up monetary-policy easing or relax some of the most severe Covid-19 restrictions. The broader risk-off sentiment remained, however, as lockdowns in China and higher U.S. interest rates dim the region’s growth prospects. Industrial firms were among the biggest drags on the MSCI measure, while chipmakers and electronic-hardware stocks followed U.S. tech peers lower as the 10-year Treasury yield climbed above 2.8%. “Investors globally are looking to hold defensive stocks and sell cyclical stocks that may be affected economically, and machinery-related stocks are one of the more economically sensitive ones,” said Shogo Maekawa, a strategist at JPMorgan Asset Management. Key gauges in Japan, the Philippines and South Korea led equity declines. Chinese tech stocks edged higher after a volatile trading day, as investors tipped toward optimism after Beijing’s approval of new video game licenses. China’s Covid-Zero policy remains a concern for international investors and is expected to continue to weigh on Asian shares, with the regional benchmark trading at its lowest since March 16. Sri Lanka warned of an unprecedented default and halted payments on foreign debt, an extraordinary step taken to preserve its dwindling dollar stockpile for essential food and fuel imports. Japanese equities dropped, dragged by technology shares for a second day amid ongoing concerns over inflation and Federal Reserve monetary policy. Electronics and machinery makers were the biggest drags on the Topix, which fell 1.4%. Fast Retailing and Tokyo Electron were the largest contributors to a 1.8% loss in the Nikkei 225. The yen slightly extended losses to around 125.5 per dollar after weakening 0.8% Monday. “Earnings will start coming out now, and I think it will still take some time before the uncertainty clears up and people start to buy back,” said said Shogo Maekawa, a strategist at JPMorgan Asset Management. “Investors globally are looking to hold defensive stocks and sell cyclical stocks that may be affected economically, and machinery-related stocks are one of the more economically sensitive ones.” Australian stocks fell, led by the healthcare sector: the S&P/ASX 200 index fell 0.4% to close at 7,454.00, with the health sector falling most.  Imugene was the biggest decliner on the benchmark gauge. Mining company Regis rose for a fourth day to the highest since Oct. 25, leading gains in the materials sector. In New Zealand, the S&P/NZX 50 index fell 0.4% to 11,889.17 In rates, treasuries remained cheaper across the curve after paring declines that were led by bunds as ECB and BOE policy-tightening premium increased further. U.S. yields cheaper by up to 2bp across front-end of the curve which underperforms slightly; 10-year yields around 2.79%, higher by ~1bp, with German 10-year cheaper by an additional 1bp. Focal points for U.S. session include March CPI data -- with 5-year TIPS breakeven rate ~25bp off its March peak -- and $34b 10-year note reopening. Monday’s 3-year auction was solid; cycle concludes Wednesday with $20b 30-year bond reopening. Gilts and bunds extended their drop as the market set pre-CPI positioning. U.K.’s 10-year debt sale had a bid-to-cover ratio of 2.64. Germany’s 2-year notes sale ahead, while U.S. 10-year sale is due after inflation data later Tuesday. In FX, the greenback traded mixed against its Group-of-10 peers and the Bloomberg Dollar Spot Index edged up 0.1%, advancing for a ninth consecutive session - its longest winning stretch since 2020 - as traders bet on the Federal Reserve hiking rates to counter heated price growth, with the Australian dollar outperforming while the Swiss franc lagged. Hedge funds faded the euro move below 1.0860, while trimming dollar-yen longs above 125.50, two Europe-based traders say. The euro neared $1.0850 before paring losses; the bund curve bear steepens Germany’s ZEW investor expectations fell to to -41.0 (estimate -48.5) in April from -39.3 in March The pound fell below 1.30 per dollar, while gilts inched lower, led by the long end of the curve. U.K. jobs data showed a strong labor market, although average earnings excluding bonuses adjusted for prices dropped the most since late 2013 year-on-year. U.K. retailers warned that inflation is curbing demand, recording a sharp slowdown in sales in March. The Australian and New Zealand dollars erased an Asia session loss against the U.S. dollar. Australian sovereign bonds followed Treasuries lower and in view of a bounce in crude oil and iron ore, the latter of which arrested a five-day slide. Australian business sentiment surged as firms passed on increasing costs to consumers, reflecting strong underlying demand that highlights both economic momentum and gathering inflationary pressures The yen weakened for an eighth day before U.S. CPI numbers that are expected to reinforce the economic and monetary policy divergence between America and Japan. Five-year bonds outperformed after a solid auction. The yen’s implied and historical volatility may not be in the driver’s seat for the Group-of-10, but traders are betting it’s the currency that can move the most over the next month Bitcoin is firmer and is holding onto the USD 40k mark after pronounced pressure in yesterday's session saw a breach of the level and a subsequent fall to a USD 39.21k overnight low. Bitcoin has dropped for seven days out of the past eight. In commodities, crude futures advanced with WTI trading within Monday’s range, adding 3.2% to around $97. Brent rises 3.4% above $101. Spot gold falls roughly $2 to trade around $1,950/oz. Base metals are mixed; LME tin falls 0.6% while LME nickel gains 1.5%. Looking at the day ahead, today brings the ever-important US CPI release. Consensus expects the monthly gain in headline CPI of +1.2% will push the year-on-year rate to +8.4%, the highest since 1981. However, many economists also think that March is the peak in the year-on-year rates for both headline and core. Elsewhere in the US, there’s the March NFIB small business optimism index. We’ll also get February UK unemployment and the April German ZEW survey. Finally, central bank speakers today include the Fed’s Brainard and Barkin. Market Snapshot S&P 500 futures down 0.2% to 4,402.00 STOXX Europe 600 down 0.8% to 454.78 MXAP down 0.5% to 172.46 MXAPJ little changed at 573.96 Nikkei down 1.8% to 26,334.98 Topix down 1.4% to 1,863.63 Hang Seng Index up 0.5% to 21,319.13 Shanghai Composite up 1.5% to 3,213.33 Sensex down 0.7% to 58,579.23 Australia S&P/ASX 200 down 0.4% to 7,453.98 Kospi down 1.0% to 2,666.76 German 10Y yield little changed at 0.86% Euro down 0.2% to $1.0862 Brent Futures up 2.2% to $100.65/bbl Gold spot up 0.0% to $1,954.10 U.S. Dollar Index up 0.24% to 100.17 Top Overnight News from Bloomberg Global growth optimism has sunk to an all-time low, with recession fears surging in the world’s investment community, according to the latest Bank of America Corp. fund manager survey Some Russian exporters face difficulties selling foreign currency proceeds in the market, newspaper Vedomosti reports, citing unidentified people close to the government, Bank of Russia and some exporters Global crude markets have swung from chaos to calm in just a few weeks as frenzied trading and a run- up in prices triggered by Russia’s invasion of Ukraine gives way to a return to more normal conditions U.K. living standards fell at the fastest pace in more than eight years in February as wages lagged further behind the rate of inflation. Average earnings excluding bonuses rose 4.1% from a year earlier, the Office for National Statistics said Tuesday. Adjusted for prices over the same period, however, they dropped 1.3%, the most since late 2013 A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks followed suit to the losses across global counterparts amid higher yields and inflationary concerns. ASX 200 was dragged lower by weakness across defensives and tech but with losses in the broader market somewhat contained amid the improvement in NAB Business Confidence and Conditions. Nikkei 225 declined despite recent currency depreciation and the ruling LDP seeking to provide cash handouts. Hang Seng and Shanghai Comp were indecisive with early support in the former as gaming and internet stocks were boosted by China’s resumption of videogame approvals following a 9-month suspension. However, the gains for the Hong Kong benchmark were later pared and the mainland bourse was also cautious amid ongoing COVID woes. Top Asian News China Tech Stocks Slide as Risks Outweigh Game Approval Uplift Tencent Soars After China Ends Eight-Month Gaming Freeze Macau Premium Mass Operators to Outperform Peers: Citi Australia Minister To Make Rare Solomon Islands Trip, ABC says European bourses are subdued, Euro Stoxx 50 -0.7%, but off lows as participants await the US CPI metrics for fresh insight into the inflation narrative and for any read across to ongoing yield upside. The breakdown features relatively broad-based losses as the CAC 40 is in-line after Monday's election inspired outperformance while Banking names lag initially in a pullback from that session’s strength while Energy & Tech fare better. Stateside, futures are attempting to move into positive territory, ES Unch., but are yet to find a robust foothold. Top European News German Investor Mood Sours Further Amid War-Driven Inflation U.K. Workers See Biggest Fall in Living Standards in Eight Years U.K. Labor Market Missing Almost 600,000 People Since Covid Hit EasyJet Sees Summer Flight Capacity Approaching 2019 Levels Fixed Income Bonds bounce after sliding once more and setting fresh yield highs; 10 year T-note, Bunds and Gilts off new 119-10+, 154.27 and 118.42 cycle lows. UK and German debt may be gleaning some comfort from solid covers at Schatz and 2032 DMO auctions. Treasuries await US CPI and 10 year supply. FX: Greenback grinds higher before US CPI with White House officials upping the ante for a hot set of inflation data, DXY eclipses last Friday's peak within a firmer 100.230-99.923 range. Aussie resilient after increases in NAB business sentiment and conditions and Kiwi underpinned awaiting 25bp or 50bp from the RBNZ, overnight; AUD/USD bounces off 0.7400 and NZD/USD keeps grip of 0.6800 handle. Euro holds above recent low and 2022 trough with some traction from Germany’s ZEW survey showing not as bad as feared economic sentiment and current conditions, EUR/USD above 1.0850 vs 1.0836 last Friday and 1.0806 y-t-d base. Sterling treading water around 1.3000 after mixed UK jobs and earnings, Loonie looking for support via decent option expiry interest at 1.2650 or chart levels after dropping through 200 DMA before BoC on Wednesday. Yen and Franc yield to divergent dynamics; USD/JPY poised below 2015 peak and USD/CHF rebounds from low 0.9300 zone. Japanese Finance Minister Suzuki said FX stability is important but did not comment on FX levels, while he added they are watching closely with vigilance how FX moves could impact Japan's economy. Suzuki also noted that excess FX volatility and disorderly FX moves could have an adverse effect on Japan's economy, while they will respond to FX as appropriate while communicating with the US and other countries. Commodities: Crude benchmarks are continuing to regain composure after Monday's pressure, with WTI and Brent in proximity to highs of USD 97.72/bbl and USD 102.15/bbl respectively. European Commission official said the EU repeated its call during a meeting with OPEC for oil producers to look at whether they can increase deliveries, according to Reuters. US President Biden will on Tuesday lay out plans to extend the availability of higher biofuels-blended gasoline during the summer in a bit to control fuel costs, according to Reuters sources. Spot gold and silver are contained, particularly in the context of yesterday's price action, ahead of the key US events on the schedule. US Event Calendar 06:00: March SMALL BUSINESS OPTIMISM dropped to 93.2, est. 95.0, prior 95.7 08:30: March CPI YoY, est. 8.4%, prior 7.9%; CPI MoM, est. 1.2%, prior 0.8% 08:30: March CPI Ex Food and Energy YoY, est. 6.6%, prior 6.4%; CPI Ex Food and Energy MoM, est. 0.5%, prior 0.5% 08:30: March Real Avg Hourly Earning YoY, prior -2.6%, revised -2.5% 08:30: March Real Avg Weekly Earnings YoY, prior -2.3%, revised -2.2% 14:00: March Monthly Budget Statement, est. -$190b, prior -$659.6b       DB's Tim Wessel concludes the overnight wrap Yesterday was painted with a panoply of senior-level gatherings. The EU foreign ministers met in Luxembourg, where they weighed whether to sanction Russia’s energy sector. Those closer to Russia’s border were quicker to advocate for a ban on oil imports. The idea was not ruled out, with several EU countries seeking more time to transition energy supplies before signing up for an outright ban. This, as Russia posted its biggest current account surplus in nearly three decades on the back of strong energy export revenues. Germany is also ready to send weapons to Ukraine according to Chancellor Scholz. Austrian Chancellor Nehammer, meanwhile, became the first European head of state to meet with President Putin in person since his invasion. Nehammer expressed pessimism on peace prospects following the discussion. Farther afield, President Biden met with Indian Prime Minister Modi. Biden pledged to help India diversify its energy sources in an attempt to persuade India from increasing purchases of Russian energy exports. Finally, as we go to press this morning, the Pentagon is monitoring claims that Russia used a chemical agent in Mariupol. A number of news agencies have reported the accusation, but as of yet, none have been able to verify the original claim. If true, that would mark a much-feared escalation in tactics as Ukraine braces for a renewed assault on its territory in the east. After starting the week off on a weak foot, S&P 500 futures are down another -0.41% this morning. Back to yesterday, Treasury yields continued their blistering selloff and curve re-steepening. Chicago Fed President Evans, owner of an inimitable dovish CV, thought that a +50bp hike in May was not only possible, but likely. He went on to say that policy should get to neutral by December, a range he pegged between 2.25% and 2.5%, which implies at least two +50bp hikes this year. The implied probability of a +50bp hike in May edged to a cycle high of 91.2%, with the amount of anticipated 2022 policy rate tightening hitting its own high at +255bps. 10yr Treasury yields gained another +8.0bps to 2.78%, their highest levels since January 2019, with breakevens (+4.3bps) and real yields (+3.7bps) each contributing. 2s10s steepened another +9.6bps to +27.4bps, its highest level in a month. Much like how the Fed’s rhetoric has shaded ever more restrictive over the last few months, so too has their recent handicapping of a soft landing turned more pessimistic. Once a widely-accepted base case, yesterday Governor Waller was much more blunt, if not fatalistic, noting that interest rates are a “brute-force tool” and that there will be some “collateral damage” when they are used to slow inflation. US equities took some collateral damage yesterday, with the S&P 500 down -1.69% to start the week, with every sector in the red, bringing YTD performance down to -7.42%. Energy (-3.11%) led the declines on the fall in oil prices, with brent crude futures down -4.18% to close below $100 for the first time in a month. Mega-cap tech names underperformed, with FANG+ falling -3.03%, given the discount rate hit to valuations, capping off five straight days of declines that has brought the FANG+ -11.73% lower. The index is now down -17.69% on the year. It was a similar story in Europe, with year-end OIS rates increasing +5.4bps to +67.6bps, a cycle high, suggesting some probability that the deposit rate could end the year in positive territory. 10yr bund yields climbed +10.9bps to 0.82%, the highest level since 2015, while 10yr gilts gained +9.7bps to 1.85%, their highest since 2016. European stocks were a touch more resilient, with the STOXX 600 falling -0.59%. In Europe, markets were also reacting to the first round of the French election. French assets outperformed as President Macron’s lead over Marine Le Pen was slightly wider than the final polls had implied. In particular, the spread of French 10yr yields over bunds narrowed by -5.2bps, coming down from its 2-year high last Friday. Furthermore, the CAC 40 (+0.12%) outperformed all the other major European equity indices. The second round is set for later this month, and polls over the last 24 hours were a bit more favorable to Macron than the readings from late last week. Macron leads Le Pen by 55%-45% in Opinionway’s poll, and then 54.5%-45.5% in Odoxa’s. Ifop was somewhat narrower, at 52.5%-47.5%, but even that was wider than the 51%-49% margin they reported Sunday night. Harris had a 53-47% margin, also wider than its previous reading. For those after further information on the election, Marc de-Muizon from DB’s European economics team has published his takeaways following the first round (link here). The other major thematic story is the continued Covid spread in China, their strict lockdown response, and the downstream impacts on supply chains and markets. Asian equities are broadly in the red to start trading this morning, with tech shares also lagging on the increase in long-dated sovereign yields. The Nikkei (-1.44%) is leading losses, which comes as Japanese PPI rose to +9.5% in March, while the February figure was revised to a four-decade high of +9.7%. Oil prices have partially retraced yesterday’s big decline, with Brent futures rising +1.33% to $99.79/bbl. 10yr Treasury yields continue to forge a path higher, increasing +4.2bps to a three-year high of 2.82% this morning. The yield curve has shifted higher in parallel, with 2yr yields not far behind at +3.7bps. There wasn’t a massive amount of data yesterday, but we did get the monthly GDP reading for February from the UK. That showed the economy grew by just +0.1% that month (vs. +0.2% expected). Consumers increased their inflation expectations for the year ahead to +6.6%, while three-year inflation dropped to +3.7%, according to the New York Fed’s survey. To the day ahead, today brings the ever-important US CPI release. Our US econ and rates team put our their joint-preview, here. They’re expecting the monthly gain in headline CPI of +1.3% will push the year-on-year rate to +8.6%, the highest since 1981. However, they think that March is the peak in the year-on-year rates for both headline and core. Elsewhere in the US, there’s the March NFIB small business optimism index. We’ll also get February UK unemployment and the April German ZEW survey. Finally, central bank speakers today include the Fed’s Brainard and Barkin. Tyler Durden Tue, 04/12/2022 - 08:02.....»»

Category: blogSource: zerohedgeApr 12th, 2022

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

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

Category: blogSource: zerohedgeApr 8th, 2022

Futures Rebound From Two-Day Plunge As Yield And Oil Rise

Futures Rebound From Two-Day Plunge As Yield And Oil Rise U.S. index futures edged higher, along with European shares, after the sharpest two-day drop in almost a month, as investors digested Federal Reserve’s hawkish path and were jerked higher by a fleeting moment of Ukraine ceasefire hope when Emini futures initially spiked to session highs on the following Reuters headline: RUSSIAN FOREIGN MINISTER SAYS UKRAINE PRESENTED A NEW DRAFT AGREEMENT TO RUSSIA ON WEDNESDAY - IFX ... only to reverse the entire move two minutes later when the following headline hit: LAVROV: UKRAINE PROPOSALS ON CRIMEA, DONBAS UNACCEPTABLE: IFX Mini hiccup aside, S&P futures were about 0.1% higher at 4,481 while Nasdaq futures gained 0.5% to 14,574, signaling an end to a selloff in the underlying index that erased $850 billion in market value over two days.  Ten-year Treasury yields were flat around 2.61%, the dollar extended its rally to a sixth day, the longest streak in almost 10 months, and oil rebounded from yestereday's IEA reserve release-driven plunge. Markets are showing signs of recovery after a selloff brought on by hawkish Fed minutes in which the central bank laid out a long-awaited plan to shrink their balance sheet by about $95BN per month or more than $1 trillion a year while raising interest rates “expeditiously” to counter the hottest inflation in four decades. “The FOMC minutes gave the clarity that every investors was looking for,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “The US 2-10 year spread is back in the positive after having slipped below zero, but the recession threat is real, keeping the investor mood sour as the Fed pulls back support.” “The Fed delivered what most market watchers were looking for, with details around the pace and composition of the balance sheet runoff,” said Janus Henderson global bond PM Jason England. Along with recent hawkish comments from Fed officials, the minutes showed “the Fed has pivoted from a gradual approach to tightening monetary policy to now moving more rapidly toward a neutral stance,” he said. In premarket trading, HP shares were up 13% after Warren Buffett’s Berkshire Hathaway bought an 11% stake worth $4.2 billion in the laptop maker valued at more than $4.2 billion. SoFi shares declined 5.1% in premarket after the fintech firm gave new guidance as the U.S. government extended the pause on student-loan payments. Other notable premarket overs include: Levi Strauss & Co. (LEVI US) gains 5.5% in premarket trading after it said revenue during the most recent quarter increased 22% to $1.6 billion. Wells Fargo said comments about a strong first quarter and good momentum in March should help dispel investor concerns, at least in the near term. Wayfair (W US) falls 4.4% in premarket trading after Wells Fargo downgrades to underweight from equal weight in sector note turning more cautious on housing-impacted retailers. SoFi (SOFI US) drops 5.1% in premarket trading as Morgan Stanley cuts its 2022 Ebitda estimate by $42m to $100m after the fintech firm gave new guidance as the U.S. government extended the pause on student-loan payments. Sprinklr’s fourth- quarter results were a positive, though the most impressive point was the software company’s guidance, Barclays analysts led by Raimo Lenschow write in a note. The shares rose 4.7% in postmarket trading on Wednesday. Vapotherm (VAPO US) falls 23% in premarket trading after the respiratory-device company reported preliminary quarterly revenue that fell short of analysts’ estimates and withdrew its annual guidance. In Europe, the Stoxx 600 added 0.7%, boosted by a rally in shares of Atlantia SpA, the billionaire Benettons’ highway and airport group. Atlantia added 10% in Italian trading after a non-binding bid from Global Infrastructure Partners and Brookfield Asset Management Inc. European healthcare and chemical stocks outperformed, while energy and miners declined. IBEX outperformed, adding 1.5%, FTSE 100 lags, dropping 0.1%. Health care, chemicals and travel are the strongest performing sectors. The energy sector was in the red, dragging the U.K.’s benchmark FTSE 100 down, as Shell’s $4-$5BN hit from its withdrawal from Russia weighed on oil producers. The statement from the London-based giant shows that, despite a surge in oil and gas prices, Russia’s invasion of Ukraine has upended the supermajors’ plans and left them scrambling to adapt to historic shifts in energy markets. Here are the most notable European premarket movers: Atlantia shares rise as much as 12%, extending yesterday’s gains, after a Bloomberg report that the motorway and airport company could become the target of a bidding war. Electrolux advances as much as 5.8% after announcing a positive non- recurring item of $70.5m in 1Q. Euronav shares gain as much as 12% on news of a potential stock-for-stock combination with Frontline to create a tanker company with a market capitalization of more than $4.2b. Daetwyler shares jump as much as 6% after it announced the acquisition of U.S. electrical connector seals company QSR, with Baader saying the deal may benefit earnings from day one. 888 shares surge as much as 31% after the gambling company announced a share placement to pay for its now-cheaper acquisition of William Hill’s international assets, with analysts reacting positively. Verbio shares surge to a record high after Hauck & Aufhauser lifts its PT on the biodiesel manufacturer by almost 33% ahead of what the broker expects to be “another outstanding quarter.” European basic resources and energy shares decline, lagging all other sectors, as commodity prices start to pull back, with Anglo American, Rio Tinto and Glencore all posting declines. PageGroup and other staffing companies fall after Jefferies lowers EPS estimates across the sector and takes a “more risk-off approach” in note, downgrading PageGroup in the process. Countryside shares sank as the home developer forecast a decline in profit after conducting a review of its business following a dispute with an activist investor. TI Fluid Systems falls as much as 12% after Jefferies downgraded the automotive parts maker to hold from buy, saying conditions faced by the company are among the most difficult in its coverage. Earlier in the session, Asian stocks slid to a three-week low as traders feared a rapid rise in U.S. interest rates and aggressive scale-back of the Federal Reserve’s bond holdings could stymie growth and hurt earnings. The MSCI Asia Pacific Index lost as much as 1.4% on Thursday, with tech shares leading the losses in many countries, after minutes of the Fed’s March meeting showed plans to shrink its balance sheet by more than $1 trillion a year. The fall came after the Asian benchmark slumped 1.5% on Wednesday following similarly hawkish comments from Fed Governor Lael Brainard. Worries that hawkish policy tightening by the Fed may cool the world’s largest economy or even tip it into a recession are hitting equities broadly across Asia. Stocks in China also buckled, even as the state council renewed its pledge to use monetary policy tools at an “appropriate time” and consider other measures to boost consumption, according to the readout from a meeting of the State Council chaired by Premier Li Keqiang on Wednesday. “The Fed is telling us that the party is over. It is saying it will take away the punch bowl,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. “This will have a serious impact on all risk assets.” Fujito saw tech shares with rich valuations as the most vulnerable, adding that investors will be trying to seek shelter in utilities and defensive stocks. The MSCI Asia Pacific Information Technology Index fell about 2%.  Benchmarks in Japan and South Korea underperformed other Asian peers, while gauges in Australia and India posted smaller declines on Thursday.   For April, the MSCI Asia is now down more than 2% on top of a slump of almost 7% last quarter -- the most since the first three months of 2020 -- amid concern about the war in Ukraine, higher rates and inflation.  Japanese equities fell by the most in almost four weeks, deepening declines in tandem with U.S. peers amid concerns over the Federal Reserve’s plans to tighten monetary policy. Electronics makers and service providers were the biggest drags the Topix, which dropped 1.6%, in its third day of decline. Tokyo Electron and Fast Retailing were the largest contributors to a 1.7% loss in the Nikkei 225.  Minutes from the latest Federal Reserve meeting showed the U.S. central bank is prepared to raise rates sharply and reduce its balance sheet to cool the economy. Indian stocks dropped with peers across Asia as the weekly expiry of derivative contracts weighed on the market.  The S&P BSE Sensex slipped for a third session, dropping 1% to 59,034.95, its biggest fall since March 21. The NSE Nifty 50 Index slipped 0.9%. HDFC Bank retreated 2.2%, while Reliance Industries declined 1.8%. Seventeen of 30 shares on the Sensex traded lower.  Fifteen of 19 sectoral sub-indexes compiled by BSE Ltd. declined, led by a gauge of oil & gas stocks. The Fed’s plan to prune its near $9 trillion balance sheet, which was swollen by pandemic-era bond purchases, points to more volatility in global markets. Locally, the nation’s central bank will likely raise its inflation outlook to reflect costlier oil while leaving borrowing costs steady in its policy decision on Friday. “U.S. Fed’s hawkish stance has raised concerns of steeper interest rate hikes going ahead,” Kotak Securities analyst Shrikant Chouhan said. He sees volatility in global crude oil prices leading to profit taking in Reliance Industries and other energy stocks. The S&P/ASX 200 index fell 0.6% to close at 7,442.80, retreating alongside global peers after the Federal Reserve outlined plans to trim its balance sheet by more than $1 trillion a year while raising interest rates. Life360 was the biggest laggard as tech stocks dropped. Magellan Financial was the top performer after its funds under management update showed a slowdown in net outflows. In New Zealand, the S&P/NZX 50 index was little changed at 12,075.91 In FX, the Bloomberg dollar spot index is near flat, handing back earlier gains that saw it at a three-week high. RUB leads gains in EMFX. In rates, the treasuries curve extends steepening counter-trend as front-end and belly yields retreat further from Wednesday’s YTD highs while long-end cheapens slightly. Yields richer by up to 3bp across front-end of the curve, steepening 2s10s by ~3bp with 10-year little changed near 2.60%; bunds and gilts keep pace. Bund, Treasury and gilt curves all bull steepen. Meanwhile commodity markets continue to be whipsawed by disruptions sparked by Russia’s war in Ukraine and efforts to curb raw-material costs. WTI crude climbed toward $98 a barrel, paring a slump that was triggered by the International Energy Agency’s decision to deploy 60 million barrels from emergency stockpiles. WTI added 1.4% to trade near $98. Brent rises 1.5% to over $102. Most base metals trade in the red; LME nickel falls 2.3%, underperforming peers. Spot gold is little changed at $1,926/oz. Raw materials could surge by as much 40% -- taking them far into record territory -- should investors boost their allocation to commodities at a time of rising inflation, according to JPMorgan. In crypto, bitcoin is pressured and towards the low-end of a range that continues to drift from the USD 45k mark. Meta (FB) is exploring a virtual currency for the metaverse, according to the FT. U.S. economic data slate includes initial jobless claims (8:30am) and February consumer credit (3pm). Fed speakers scheduled include Bullard (9am) and Bostic (2pm). U.S. session highlights include speech and Q&A by St. Louis Fed’s Bullard --who dissented from March FOMC decision in favor of a bigger rate increase -- at 9am ET.  Other central bank speakers include Bostic and Evans, as well as the BoE’s Pill. We’ll also get the minutes from the ECB’s March meeting, along with remarks from the Fed’s Bullard, Market Snapshot S&P 500 futures little changed at 4,476.75 MXAP down 1.4% to 176.33 MXAPJ down 1.4% to 584.33 Nikkei down 1.7% to 26,888.57 Topix down 1.6% to 1,892.90 Hang Seng Index down 1.2% to 21,808.98 Shanghai Composite down 1.4% to 3,236.70 Sensex down 0.7% to 59,191.33 Australia S&P/ASX 200 down 0.6% to 7,442.83 Kospi down 1.4% to 2,695.86 Brent Futures little changed at $101.14/bbl Gold spot up 0.1% to $1,928.10 U.S. Dollar Index little changed at 99.69     Top Overnight News from Bloomberg ECB President Christine Lagarde said she tested positive for Covid-19, adding that her symptoms are “reasonably mild” and that there won’t be any impact on the operations of her institution Surging U.S. real yields suggest bond traders believe the Federal Reserve can get a grip on inflation, but are likely to put further pressure on stocks and precious metals German Economy Minister Robert Habeck said the nation has already cut its reliance on Russian coal by at least half in the past month and won’t stand in the way of a European Union ban on imports of the fuel from the country In the days after the Ukraine war began, the ruble’s collapse was a potent symbol of Russia’s newfound financial isolation. Now, the ruble has surged all the way back to where it was before Putin invaded Ukraine Hungary kept its effective key interest rate unchanged at the highest level in the European Union after the forint plunged on the bloc’s announcement that it is triggering a process that may block the country’s aid funds China signaled it will step up monetary stimulus for the economy, acknowledging that domestic and global risks are now bigger than previously expected Bank of Japan board member Asahi Noguchi says it’s vital to continue with monetary easing as it will take some time before the possibility of shrinking stimulus comes into sight. A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded lower throughout most of the session as the downbeat mood reverberated from Wall Street. ASX 200 was dragged lower by its tech sector following a similar sectoral performance in the West. Nikkei 225 was hit by losses across its energy, mining and manufacturing names. KOSPI conformed to the global losses whilst Samsung Electronics (-0.3%) failed to benefit from better-thanexpected prelim earnings. Hang Seng and Shanghai Comp were choppy and initially swung between gains and losses before stabilising in the red. Samsung Electronics (005930 KS) - Prelim Q1 (KRW) Revenue 77tln (exp. 75.7tln), Operating Profit 14.1tln (exp. 13.3tln), via Reuters Top Asian News Suspected Chinese Hackers Collect Intel From India’s Grid SoftBank Tripled Share Buybacks to $1 Billion in March Thailand Mulls Easing Covid Test Rules for Overseas Visitors Japan to Release 15m Barrels From Oil Reserves: Kyodo European bourses are firmer across the board and back in proximity to post-cash open levels after initial strength waned in choppy price action, Euro Stoxx 50 +0.7%. US futures have been relatively in-fitting with European peers, though the NQ, +0.5%, is the modest outperformer as yields take a breather from their recent surge. China's Shanghai City is to cap the load factor of international flights by foreign airlines at 40% (prev. 75%), according to Reuters sources; effective from April 11th until month-end. Top European News Turkey Transfers Khashoggi Case to Saudi Arabia to Improve Ties Shunned Oil Piling Up Off China as Virus Outbreak Worsens EU Full Ban on Russia Coal to Be Delayed Until Mid-August: Rtrs Yellen Says U.S. Would Use Sanctions If China Invaded Taiwan FX: Greenback sets marginal new YTD best after hawkish FOMC minutes reveal tight call between 25 bp and 50 bp lift-off plus large cap balance sheet reduction, DXY up to 99.823, thus far. Albeit, the DXY has waned from best levels and turns flat ahead of the arrival of US participants as yields continue to pare Euro eyeing option expiries for support ahead of ECB minutes following loss of 1.0900 handle vs Dollar; EUR/USD down below Fib at 1.0895. Aussie unwinds more RBA inspired upside as trade surplus narrows on zero export balance; AUD/USD around 0.7475 vs circa 0.7661 only yesterday. Yen benefits from retreat in yields rather than BoJ rhetoric reaffirming ultra easy policy and merits of a weaker currency, USD/JPY capped below 124.00. Commodities: Crude benchmarks consolidate near WTD lows after reserve release pressure; specifically, near lows of USD 95.43/bbl and USD 100.13/bbl for WTI and Brent. Updates elsewhere have been slim, and focused on China's Shanghai City from a demand-side perspective amidst ongoing Ukraine-Russia developments; albeit, nothing fundamentally new in terms of negotiations. China is to strictly control new production capacity in the oil refining industry, according to the industry ministry Gas flows via Yamal-Europe pipeline resume westward, according to Gascade data. Spot gold/silver are contained and the yellow metal is once again capped by USD 1930/oz and LME Copper has failed to benefit from the equity pickup. US Event Calendar 08:30: April Initial Jobless Claims, est. 200,000, prior 202,000; Continuing Claims, est. 1.3m, prior 1.31m 15:00: Feb. Consumer Credit, est. $18.1b, prior $6.84b Central Bank Speakers 09:00: Fed’s Bullard Discusses the Economy and Monetary Policy 14:00: Fed’s Bostic and Evans Discuss Inclusive Employment 16:05: cancelled: Fed’s Williams Makes Closing Remarks DB's Henry Allen concludes the overnight wrap We might be less than a week into Q2, but based on how markets are performing it’s shaping up to be very similar to Q1 thus far, with yesterday seeing another bond selloff and significant declines for global equities as markets gear up for the fastest monetary tightening we’ve seen in decades. Indeed, it seems to be progressively dawning on investors that this cycle of hikes is going to be very different to the one we saw from 2015, when even at its fastest in 2018, the Fed still only hiked rates by 100bps in a single year. As Jim has written, if we could erase the post-GFC cycle from people’s memory banks, there’s a case that markets would be pricing 300-400bps this year given where inflation is right now, not least given we saw hikes on that scale in the late-80s and from 1994 with inflation at much lower levels than it is at the minute. Given the rapid expected tightening (as well as the negative shock of Russia’s invasion of Ukraine), it’s worth noting that DB Research’s new World Outlook came out on Tuesday, (link here), where we downgraded our global growth forecasts and are now forecasting a US recession by the end of next year as our baseline. We also got a look into the Fed’s outlook yesterday with the release of the March FOMC minutes, where it looks like they would have hiked by 50bps in March were it not for the Russian invasion, and they are ready to entertain 50bps hikes going forward. The markets got the message, and upgraded the probability of a 50bp hike at the next meeting in early May to 85%. The other big takeaway from the minutes were details around QT, which they signalled would start in May, in line with recent Fed speakers. The FOMC noted the balance sheet would rundown at a pace of $60bn Treasuries and $35bn MBS a month once QT hits terminal velocity, which should be by July if the minutes are to be believed. Markets digested the news, with Treasury yields more or less in line with their pre-minute levels into the close after declining modestly in the New York afternoon. With the pace of the runoff now set, the focus will turn to who buys the securities with the Fed stepping away and when the Fed has to stop QT. Alongside the minutes, remarks from a number of officials yesterday helped to reiterate the point that policy will become tighter this year. Philadelphia Fed President Harker said that he expected “a series of deliberate, methodical hikes as the year continues”, whilst on the question of whether to move by 50bps, Richmond Fed President Barkin said that the FOMC “could certainly do that again if it is necessary to prevent inflation expectations from unanchoring”. With all said and done, sovereign bond yields moved up to fresh highs on both sides of the Atlantic, with those on 10yr Treasuries up +5.1bps to 2.598%, which was its highest closing level since 2019, albeit some way beneath its intraday high of 2.656% shortly before noon in London, and this morning they have fallen a further -1.5bps to 2.583%. That increase yesterday was entirely driven by a rise in real yields, which rose +7.3bps to -0.24%, their highest level since March 2020, whilst a rally at the short end of the curve meant the 2s10s slope steepened for a 3rd day running, heading up to 12.2bps by the close. Those declines in shorter-dated yields came as futures actually took out a bit of Fed tightening from 2022, modestly reducing the expected number of additional hikes this year from 220bps in the previous session to 217bps by the close. Over in Europe there were similar moves, with sovereign bond yields reaching fresh highs before paring back some of that increase towards the close. Yields on 10yr bunds (+3.3bps), OATs (+3.1bps) and BTPs (+3.8ps) all closed at multi-year records, although a key difference with US Treasuries were that the rise in European yields yesterday were driven by higher inflation expectations rather than real rates. In fact the 10yr German breakeven hit 2.81%, its highest in the data series that starts back in 2009, whilst the Italian 10yr breakeven hit 2.63%, its highest since 2008. As on Tuesday, the selloff in bonds went hand in hand with further declines in equities, and by the close the S&P 500 (-0.97%) and Europe’s STOXX 600 (-1.53%) had both lost ground as well, with cyclical sectors leading the declines. Tech stocks in particular were an underperformer once again, and the NASDAQ (-2.22%) and the FANG+ index (-3.46%) both struggled again, bringing their declines over the last 2 sessions to -4.43% and -6.63% respectively. Amidst the equity declines, the VIX index of volatility rose +1.1pts yesterday to 22.1pts, taking it up to its highest level in 2 weeks. Overnight in Asia, equities have very much followed that retreat on Wall Street as monetary tightening remained in focus. Among the main indices, the Nikkei (-2.00%) is leading the moves lower, whilst the Kospi (-1.42%), Hang Seng (-1.04%), Shanghai Composite (-0.99%), and the CSI (-0.78%) are also trading in negative territory. Separately, we heard from China’s State Council yesterday that they would use monetary policy at an “appropriate time”, as they acknowledged downward pressures on the economy. Looking forward, stock futures in the US are pointing to further declines today, with contracts on the S&P 500 (-0.37%) and Nasdaq 100 (-0.33%) both lower following those Fed minutes. In terms of the latest on Ukraine, the EU continued to edge towards a fresh sanctions package, although that wasn’t finalised yesterday as had initially been suggested, with Reuters reporting that technical issues needed to be addressed like whether the ban on Russian coal would affect existing contracts. The report said that diplomats were optimistic about achieving a compromise today, so we could potentially see some news on that later, whilst in his speech to the European Parliament yesterday, European Council President Charles Michel also said that “I believe that measures on oil and even on gas will also be needed sooner or later.” Otherwise on sanctions, the US imposed further measures, including full blocking sanctions on Sberbank and Alfa Bank, along with a prohibition on new investment in Russia. The various decisions came amidst a further decline in oil prices yesterday, with Brent crude down -5.22% to $101.07/bbl, its lowest closing level in 3 weeks. That was supported by confirmation that the International Energy Agency would release 60m barrels of crude, on top of the Biden Administration’s release from the Strategic Petroleum Reserve. Brent has recovered somewhat this morning however, up +1.85% to $102.94/bbl. Turning to the French presidential election, we’re now just 3 days away from the first round on Sunday, and the polls have continued to tighten between President Macron and his main challenger Marine Le Pen. Yesterday’s polls for the second round runoff put Macron ahead of Le Pen by 54%-46% (Ipsos), 53-47% (Opinionway), and 52.5%-47.5% (Ifop), which are all much tighter than the 66%-34% margin in the 2017 election. French assets have continued to underperform against this backdrop, with the CAC 40 equity index (-2.21%) seeing a weaker performance than the broader STOXX 600 (-1.53%) for a 6th consecutive session. On yesterday’s data, the Euro Area PPI reading for February came in at a year-on-year rate of +31.4% (vs. 31.6% expected), which is the fastest pace since the formation of the single currency. Separately, German factory orders contracted by a larger than expected -2.2% in February (vs. -0.3% expected). To the day ahead now, and data releases include German industrial production and Euro Area retail sales for February, along with the weekly initial jobless claims from the US. Meanwhile from central banks, we’ll get the minutes from the ECB’s March meeting, along with remarks from the Fed’s Bullard, Bostic and Evans, as well as the BoE’s Pill. Tyler Durden Thu, 04/07/2022 - 07:49.....»»

Category: blogSource: zerohedgeApr 7th, 2022

Futures Grind Higher To Start New Quarter With All Eyes On Payrolls

Futures Grind Higher To Start New Quarter With All Eyes On Payrolls Following yesterday's furious quarter-end puke, which saw the S&P tumble 50 points in the last hour of trading as a massive $10 billion Market on Close sell imbalance sparked a liquidation frenzy, U.S. index futures started off the new quarter on the right foot, rising as investors weighed a drop in oil prices sparked by Biden's unprecedented pre-midterm election draining of the petroleum reserve, ongoing developments in the Ukraine war and tightening monetary policy ahead of ISM and payrolls data. S&P500 and Nasdaq 100 futures gained around 0.5% before March payrolls figures later on Friday, after U.S. stocks ended their worst quarter since the start of the pandemic. Europe’s Stoxx 600 gained after its worst quarter since the pandemic bear market. Oil reversed an earlier decline as euro-area inflation accelerated to another all-time high and Russia’s Gazprom PJSC started telling clients how to pay for gas in rubles. Treasury yields rose and the dollar was steady as traders await the jobs report, which unless it is a total disaster, will strengthen the case for a 50bps rate hike in May. U.S. data on Friday include nonfarm payroll and ISM data while no major company is expected to report earnings. U.S.-listed Chinese stocks jumped in premarket trading after Bloomberg News reported that Chinese authorities are preparing to give U.S. regulators full access to auditing reports of the majority of the 200-plus companies listed in New York. Alibaba shares rose 5.8% in premarket trading; E-commerce peers JD.com up 4% and Pinduoduo up 7.9%. Didi Global was among the top gainers, rising more than 18%, following a 15% drop Thursday. Meanwhile, shares of Lulu’s Fashion Lounge Holdings Inc. rose 27% in U.S. premarket after better-than-expected fourth-quarter and full-year guidance. Here are some other notable premarket movers: Chicken Soup For The Soul Entertainment (CSSE US) shares rise 21% in U.S. premarket, rebounding from yesterday’s losses, after Guggenheim’s Michael Morris (buy) said the company posted a “solid” 4Q performance, with sales modestly below his estimates but adjusted Ebitda slightly better. GameStop (GME US) shares rose 15% in premarket trading and were on course to open at the highest level this year after the video-game retailer announced plans for a stock split, fueling a rally in fellow so-called meme stocks. Redwire (RDW US) slumps 22% in U.S. premarket trading after the space infrastructure company reported 2021 results, with Jefferies saying that while the firm’s outlook was encouraging, it was disappointing versus prior expectations. Meanwhile, the curve between two-year and 10-year Treasuries yields is flipping between positive and negative, signaling that the countdown to the next recession has begun (see "The Yield Curve Inverts: What Happens Next"). “The market, like the Fed, has no idea how much tightening is necessary to stop a wage inflation spiral, but by upping the ante on the market with a series of 50bp rate hikes this year and a higher terminal rate, it can regain the control of the narrative and market expectations,” said Sebastien Galy, senior macro strategist at Nordea. Investors begin a new quarter wondering if the fighting in Ukraine, the isolation of Russia and the Fed’s increasingly hawkish turn will engender still more volatility and losses for stocks and bonds. Raw materials are the only key asset class to deliver major gains so far in 2022. Meanwhile, in Ukraine, talks between Ukraine and Russia resumed Friday via video link, following meetings earlier in the week in Turkey. Russia said two Ukrainian military helicopters made a rare strike across the border, hitting an oil tank facility in the city of Belgorod. Russian Foreign Minister Sergei Lavrov said Moscow is preparing a response to Ukraine’s proposals on ending hostilities; Lavrov also said Russia is preparing a response to Ukraine's proposals, says there has been movement forward; he also added that Russia has seen "much more understanding" of the situation in Crimea and Donbass from the Ukrainian side. Lavrov says peace talks with Ukraine need to continue. UK reportedly urged Ukraine not to back down and is concerned US, France and Germany will push Ukraine to “settle” and make significant concessions to Russia, according to The Times citing a government source. Mayor of Ukraine's Mariupol says Russian forces are not allowing humanitarian aid in; City is dangerous to try and exit. European equities also drifted higher after a slow start. Euro Stoxx 50 rises 0.7%. IBEX outperforms, adding 0.9%, FTSE 100 lags. Retailers, banks and miners are the strongest performing sectors. Euro-zone inflation accelerated to another all-time high as Russia’s invasion roiled global supply chains and provided a fresh driver for already-soaring energy costs. Euro-zone March consumer prices surged 7.5% from a year ago, up from 5.9% in February and far higher than the 6.7% median estimate in a Bloomberg survey. The Stoxx Europe 600 Index however, was on the rise, led by retail and banking stocks.  Here are some of the biggest European movers today: Santander shares rise as much as 3.2% after reiterating its financial targets for the year and saying its business remained resilient in the first quarter. The statement provides reassurance of recent trends, Barclays writes. Vestas Wind Systems gains as much as 5.4% after announcing orders totaling 2,179 MW in 1Q, with Handelsbanken saying the order intake is “promising” and well-above estimates. Bridgepoint Group jumps as much as 7.8% after the private-equity firm was upgraded to buy from neutral at Citi following a drop in the shares since the broker’s initiation in August 2021. Assicurazioni Generali rises as much as 3.8%, climbing for a third session, amid speculation the Italian insurer may get involved in industry M&A going forward. Greggs gains as much as 2.9% after Berenberg reiterates its buy recommendation, saying there is a “rare opportunity” to invest in the U.K. bakery chain at a “reasonable multiple.” Yara climbs as much as 1.8% after the company said it pre-ordered 15 floating bunkering terminals from Azane Fuel Solutions to establish a carbon-free ammonia fuel bunker network in Scandinavia. Stratec rises as much as 21% after a Bloomberg report that EQT and KKR are among several private equity firms weighing bids for the German health-care technology provider. Energiekontor jumps as much as 6.8%, extending its record high, after Warburg raised its price target to a Street- high, saying there is an “appetite for more” following Thursday’s FY results. Sodexo shares fall as much as 10% after the French caterer said the environment “remains uncertain” due to intermittent local outbreaks of Covid-19 and the war in Ukraine. Russian stocks gained for a third day, the longest winning streak since trading resumed on March 24. Talks between Ukraine and Russia will resume Friday via video link, following meetings earlier in the week in Turkey. Russian Foreign Minister Sergei Lavrov said Moscow is preparing a response to Ukraine’s proposals on ending hostilities.   The manufacturing resurgence in Europe and Asia softened in March as factories saw worsening supply shortages and soaring costs after Russia’s invasion. Friday’s data follow inflation overshoots this week from Spain and Germany that prompted investors to bring forward bets on when the European Central Bank will end almost eight years of negative interest rates. Earlier in the session, Asian stock retreated for a second day amid concerns about the extent the war in Ukraine will hurt global growth and as Chinese tech shares extended a selloff.   The MSCI Asia-Pacific Index slid as much as 1.1% before paring about two-thirds of that loss. The benchmark still remained on pace to finish the week up 0.3%, extending its winning streak to a third week.  Tech shares including Taiwan Semiconductor Manufacturing and Alibaba were major drags on Friday as traders assessed economic data and continued to eye possible U.S. delistings of Chinese firms. Equities in Japan underperformed the region while China’s consumer shares boosted the mainland benchmark.  Investors are watching the impact of soaring inflation and higher interest rates on global growth as the war in Europe continues. Asia’s manufacturing resurgence softened in March as factories saw worsening supply shortages and surging costs after Russia’s invasion of Ukraine. Data on Friday showed Japan’s business mood weakened while South Korean imports jumped on rising costs.   Also on investors’ radars are the trading halts of dozens of firms in Hong Kong from today after they missed a deadline to report annual results, increasing uncertainty in the market.  “We are in the middle of a war between two globally vital suppliers of energy and food,” said Justin Tang, the head of Asian research at United First Partners. “The ramifications are plenty and as long as there is no cease fire, we will continue to experience ebbs and flows in volatility.”   Asian stocks finished their worst quarter since early 2020 on Thursday with a drop of nearly 7%. Still, the measure has bounced back from the quarter-low touched in mid-March.   Sri Lanka’s stock market stopped trading on Friday and the rupee extended its loss after protests against surging living costs and daily power cuts amid dwindling foreign-exchange reserves. Trading in 33 Hong Kong-listed stocks was halted after a number of firms missed a deadline to report annual results Japanese stocks fell in Tokyo fell for a third day after U.S. peers declined and the Tankan survey showed a gloomier view of business conditions among Japan’s biggest manufacturers. The yen slipped 0.5% against the dollar during the trading day, helping stocks trim earlier losses. Still, both major gauges capped their first weekly losses in three, shedding more than 1.7% each since March 25. Electronics and auto makers were the biggest drags as the Topix fell 0.1% Friday, paring an earlier slide of as much as 1.3%. Tokyo Electron and Fast Retailing were the largest contributors to a 0.6% loss in the Nikkei 225.  The Tankan index of sentiment dropped to 14 from a revised 17 in the previous quarter, the first deterioration since June 2020, according to the central bank’s quarterly report Friday. The business mood among large non-manufacturers slipped to 9 from a revised 10 in the December report India’s benchmark stocks index completed its third weekly gain in four weeks, as local buying helped steady war-induced volatility in equities. The S&P BSE Sensex rose 1.2% to 59,276.69 in Mumbai, taking it weekly advance to 3.3%. The key gauge completed its best monthly climb since August in the previous session. The NSE Nifty 50 Index rose 1.2% to 17,670.45 on Friday.  HDFC Bank Ltd. surged 2.4% to its highest in more than a month and was the biggest boost to the Sensex, which saw 25 of the 30 shares trading higher. All 19 sectoral sub-indexes compiled by BSE Ltd. rose, led by a measure of utilities. Funds in India bought $5.2 billion worth of shares in March, while foreign investors extended their selling to a sixth consecutive month. The new fiscal year and quarter have started with concerns about the war in Ukraine, a hawkish U.S. Federal Reserve and the impact of higher commodity costs on company earnings.   “We expect FY23 to witness continued volatility in equity markets, especially in the first half of the year with rising interest rates globally and high inflation, which is expected to persist,” Nishit Master, portfolio manager at Axis Securities Ltd., wrote in a note.  The brokerage expects the Nifty index to rise to 20,200 by year-end and is positive on metals, hospitals, oil refining and capital goods.    In FX, the Bloomberg Dollar index inched up as the greenback traded mixed against its Group-of-10 peers; commodity currencies and the Swedish krona led gains while the yen was the worst performer. The euro fell and European bonds came off lows after euro-zone March consumer prices surged 7.5% from a year ago, up from 5.9% in February and more than the 6.7% median estimate in a Bloomberg survey. The pound consolidated against the euro, after rebounding from its weakest level since December on Thursday; the yen slid for the first time in four days. Japanese government bond yield curve resumed its steepening even as the Bank of Japan raised the amounts it plans to buy through regular market operations this quarter. Australia’s yield curve bear flattened, following a similar move in Treasuries. New Zealand dollar weakened; a gauge of consumer confidence dropped to an all-time low last month, according to ANZ data. In rates, Treasuries dropped across the curve Friday as investors positioned before U.S. jobs data forecast to show average hourly earnings accelerated in March, backing the case for a faster pace of Federal Reserve interest-rate hikes. Treasury futures traded off session lows in early U.S. trading, although yields remain cheaper by 4bp to 7bp across the curve after Thursday’s late month-end selling was extended in early Asia. Fixed income weakness is Treasuries centric, with both bunds and gilts outperforming on the day. 10-year yields trade around 2.40% after peaking at 2.437% in early European session - bunds and gilts outperform by 4bp and 2bp in the sector. Long-end led losses steepens 5s30s spread by 1.4bp and 2s10s by 2bp on the day; March jobs report is due at 8:30am with headline change in payrolls expected at 490k vs. 678k prior -- whisper number is higher than estimate at 529k. In Europe, the German curve bear steepened, cheapening up 2-3bps across the back end but broadly brushing off a hot Eurozone inflation print . Peripheral spreads mostly widen to core with long end Spain underperforming. Cash USTs maintain Asia’s bear flatten bias ahead of today’s payrolls release; the belly cheaper by ~6bps. In commodities, crude futures recoup Asia’s weakness. WTI returns to little changed, regaining a $100-handle after a brief dip in late Asia. Base metals are mixed; LME zinc rises 1.4%, outperforming peers. LME copper lags. Spot gold falls roughly $2 to trade near $1,935/oz. The US will also have the March ISM manufacturing reading, while global manufacturing PMIs are due. Otherwise, central bank speakers include the ECB’s Centeno, De Cos, Makhlouf, Schnabel and Knot, as well as the Fed’s Evans. Market Snapshot S&P 500 futures up 0.4% to 4,548.50 STOXX Europe 600 up 0.3% to 457.37 MXAP down 0.4% to 179.71 MXAPJ little changed at 590.96 Nikkei down 0.6% to 27,665.98 Topix down 0.1% to 1,944.27 Hang Seng Index up 0.2% to 22,039.55 Shanghai Composite up 0.9% to 3,282.72 Sensex up 0.7% to 58,980.92 Australia S&P/ASX 200 little changed at 7,493.80 Kospi down 0.6% to 2,739.85 German 10Y yield little changed at 0.58% Euro little changed at $1.1065 Brent Futures down 1.0% to $103.69/bbl Gold spot down 0.3% to $1,931.84 U.S. Dollar Index up 0.16% to 98.47 Top Overnight News from Bloomberg China’s factory activity fell to its worst level since the pandemic’s onset two years ago and a housing slump showed no sign of easing, darkening the outlook for the world’s second- largest economy Bundesbank President Joachim Nagel urged the European Central Bank to respond to quickly accelerating price pressures. Australia named Michele Bullock as the Reserve Bank’s first female deputy governor, propelling her to the front of the queue to succeed Philip Lowe in the top job At the U.S. Commerce Department, Secretary Gina Raimondo’s teams are working on ways to further undermine Putin’s ability to wage war For all the hardships visited on consumers at home and the financial chokehold put on the government from abroad, Bloomberg Economics expects Russia will earn nearly $321 billion from energy exports this year, an increase of more than a third from 2021. Iron ore futures in Asia gained with investors anticipating a strong recovery following the lifting of virus-related restrictions, even as news of Chinese housing giants missing earnings-report deadlines emerged Prime Minister Fumio Kishida’s government signed off on the reappointment of one of the Bank of Japan’s key policy architects in a move that suggests the central bank is looking for policy continuity after Governor Haruhiko Kuroda steps down next April A more detailed look at global markets courtesy of Newsquawk: Asia-Pac stocks were cautious following the uninspiring lead from Wall St, where the major indices closed off their worst quarterly performance in two years and as the region digested weak data releases. ASX 200 traded rangebound as pressure from losses in tech, industrials and financials was counterbalanced by resilience in the commodity-related sectors and upgrade to Australian PMI data. Nikkei 225 was subdued after mixed Tankan data in which the headline Large Manufacturing Index topped estimates, but Large Manufacturers and Non-Manufacturers' sentiment worsened for the first time in 7 quarters. Hang Seng and were mixed with sentiment clouded after the PBoC drained liquidity andShanghai Comp. Chinese Caixin Manufacturing PMI slipped into contraction territory, although the mainland recovered amid the partial lifting of the lockdown in Shanghai and as Chinese press continued to advocate monetary easing Top Asian News Shanghai Shifts Lockdown; Singapore Border: Virus Update Quarantine Eased for Hong Kong Flight Crew in Boost for Cathay China Chipmaker’s Buyer Said to Miss $9 Billion Payment Deadline Kasikornbank Said to Weigh Sale of $2 Billion Asset Manager Unit European equities (Stoxx 600 +0.6%) opened marginally firmer before extending on gains after positive commentary from Russian Foreign Minister Lavrov. The Stoxx 600 set to close the week out with marginal gains of around 0.6% in what has been a choppy week for indices. Sectors in Europe are higher across the board with Retail, Banks and Autos top of the leaderboard. Top European News London IPO Market Hasn’t Been This Bad in More Than a Decade Tiber Crossing Left in Limbo After War Sends Steel Surging Global Manufacturing Rebound Falters as War Takes Its Toll EU to Warn China It Will Hurt Global Role by Helping Russia In FX, the Yen has relented as yields rebound and repatriation demand dries up - Usd/Jpy bounced further from recent lows beyond near term resistance through to circa 122.75. Greenback has regrouped in advance of NFP with the DXY straddling 98.500. Aussie outperforms as risk appetite picks up and 0.7500 continues to prove pivotal. Euro finds a base after marked month end reversal as hot inflation offset lukewarm manufacturing PMIs - Eur/USD holding around 1.1050 after soaking up stops on a minor and brief half round number break.Yuan weaker after sub-50 Caixin Chinese manufacturing print, softer PBoC Cny midpoint fix and 7-day liquidity drain - USDCNH above 6.3650. In commodities, WTI (+0.6%) and Brent (+0.8%) kicked the session off on the backfoot following yesterday’s SPR announcement by the Biden administration with WTI breaching it's weekly low printed on Tuesday at USD 98.44 with Brent so far unable to take out its weekly low of USD 102.19. Since then, crude benchmarks have attempted to claw back lost ground and sit in minor positive territory. White House Press Secretary Psaki said a gas tax holiday is not off the table, according to Reuters. US House Majority Leader Hoyer said oil companies should either produce on leases and drill wells or pay a fee for unused leases and idled wells, according to EIN News. Russian oil and gas condensate production slipped to 11.01mln BPD in March vs. 11.08mln BPD in February, according to Reuters sources Gazprom says refilling storage ahead of winter will be a challenge for the EU. Gazprom says it has begun sending requests of gas-for-rouble payment switch to clients today; sats it remains a responsible partner and continues to secure gas supplies US Event Calendar 08:30: March Change in Nonfarm Payrolls, est. 490,000, prior 678,000 Change in Private Payrolls, est. 495,000, prior 654,000 Change in Manufact. Payrolls, est. 32,000, prior 36,000 March Unemployment Rate, est. 3.7%, prior 3.8% Underemployment Rate, prior 7.2% Labor Force Participation Rate, est. 62.4%, prior 62.3% Average Hourly Earnings YoY, est. 5.5%, prior 5.1%; MoM, est. 0.4%, prior 0% Average Weekly Hours All Emplo, est. 34.7, prior 34.7 09:45: March S&P Global US Manufacturing PM, est. 58.5, prior 58.5 10:00: March ISM Employment, est. 53.1, prior 52.9 ISM Prices Paid, est. 80.0, prior 75.6 ISM New Orders, est. 58.5, prior 61.7 ISM Manufacturing, est. 59.0, prior 58.6 10:00: Feb. Construction Spending MoM, est. 1.0%, prior 1.3% DB's Jim Reid concludes the overnight wrap Filling in while Jim is on holiday, my quick scan for sports-related injuries for this introduction yielded nothing. Meanwhile, a scan of quarter end markets showed sovereign bonds again yielding less than nothing, as 2yr bund yields (-7.8bps) fell back below 0 to -0.09% while the 2s10s Treasury curve closed below zero for the first time since 2019. Yields farther out the curve followed oil and transatlantic equity prices lower as well. No rest for the weary, though, as today’s US employment data kickstarts the new quarter. Before diving into markets, a couple of research plugs. *** Jim’s latest chartbook, “The yield curve inverts … what happens next?”, is out. We looked at all things inversion, including recession risks, asset price performance, the Fed’s viewpoint, our economists' latest recession models and also how yield curve inversions have been explained away in previous cycles. You can take a look here *** Staying in advertising mode, with Q2 starting, we will publish our Q1 performance review shortly. Q1 was a dramatic time in financial markets, with Russia’s invasion of Ukraine, accelerating inflation, the Fed hiking rates, and the yield curve closing the quarter inverted. As a result, it was a pretty bad month for most assets, with losses across equities, credit, and sovereign bonds. The big exception were commodities as energy, metals and agricultural goods realized large gains. See the full report out shortly for more. Turning back to yesterday’s markets, Brent and WTI crude futures fell -4.88% and -6.99%, respectively, following the US’s plan to release 1m barrels per day from its Strategic Petroleum Reserve for the next six months to combat eye-watering energy prices, the largest such SPR release on record. In an address to the nation, President Biden also announced measures to pressure domestic producers to increase their supply to the market along with easing regulations that currently restrict oil transport between American ports to American vessels. The President will also invoke the Defense Production Act to compel manufactures to prioritize the production of minerals used for large capacity batteries. While the UK is considering whether to join the reserve-releasing effort, OPEC+ production will be steady as she goes, with the cartel ratifying the plan to increase production only gradually by 432k barrels a day, in line with expectations. Even without a material increase in OPEC+ production, reports overnight that the US was strategically aligned with allies on Iran inched us closer to a nuclear deal that would open up Iranian supply. Crude oil futures are down a further -3.23% as we go to press this morning. The debate about Russian natural gas invoicing appeared to reach a denouement yesterday; European importers will be able to pay for Russian supply in euros and dollars as contracts specify, with the conversion to rubles happening internally within Russia. Nevertheless, European natural gas gained +5.83%. On the war, more reports joined the chorus signalling that Russian troops were indeed retreating from certain theatres, including various cities, airports, and the Chernobyl nuclear facility. While positive, the consensus is the locus of the war is moving to the east, rather than ending. Negotiations between Ukraine and Russia are set to resume today. Foreshadowed in the lede, European sovereign yields staged a large rally to end the quarter. 10yr bunds, OATs, and BTPs all rallied more than -9bps, led by falling inflation compensation on the drawdown in oil prices; 10yr breakevens across Germany, France, and Italy, narrowed -7.0bps, -8.1bps, and -6.5bps, respectively. The rallies weren’t confined to the long-end, as -6.8bps of expected ECB rate hikes through 2022 were priced out as well. It was smoother sailing for Treasury yields after a stormy quarter, but 2s10s nevertheless managed to dip below zero to close the quarter after briefly testing the waters earlier this week. 2yr yields climbed +2.8bps while 10yr yields dropped anchor, falling -1.1bps, leaving 2s10s at -0.06bps. As was the case earlier this week, the curve re-steepened after the initial inversion plunge, trading at +1.2bps this morning. Stocks retreated on both sides of the Atlantic, with the STOXX 600 and S&P 500 falling -0.94% and -1.57%, cementing the first negative quarterly return for both indices since the original Covid onslaught in Q1 2020. STOXX 600 utilities (+0.37%) were the only sector in the green across both indices, with cyclical stocks the largest underperformers. The retreat was likely exacerbated by quarter end, which served to push the VIX (+1.23ppts) back above 20 for the first time this week. Major Asian bourses are trading on the downbeat with tech stocks among the worst performers. Losses in the region are led by the Hang Seng (-0.72%), extending its previous session losses, with Chinese tech stocks listed in Hong Kong plunging. The Nikkei (-0.42%) is lagging after the BOJ’s quarterly Tankan business sentiment survey revealed that sentiment at Japan’s large manufacturers soured in the first three months of 2022. Chinese Caixin services PMI dropped to 48.1 in March, the steepest rate of contraction since February 2020. The deterioration was mainly triggered by the domestic Covid-19 resurgence. Despite the underwhelming data, Chinese stocks are outperforming the region, with the Shanghai Composite up +0.69%. Outside of Asia, stock futures in the US are pointing to a positive start, with contracts on the S&P 500 (+0.25%), Nasdaq (+0.26%) and Dow Jones (+0.25%) all trading higher. In data, US PCE increased 0.4%, month-over-month, in line with expectations, while the year-over-year measure moved to fresh four-decade high of 5.4%. The Chicago PMI printed at 67.9 vs. expectations of 57.0, while weekly initial jobless claims ticked up to a still low 202k vs. expectations of 196k. German unemployment fell by -18k in March (vs. -20k expected), which is the smallest monthly decline since last April. In turn, the unemployment rate remained at 5.0%, in line with expectations. To the day ahead, Q2 kicks off with the March US employment situation report in the New York morning. Strong January and February data coincided with upside surprises and revisions to payrolls data, lending credence to the Fed’s position that the labor market is ready to withstand much tighter monetary policy, if not beckons it. Our US economists expect nonfarm payrolls to increase by +400k, bringing the unemployment rate to a post-pandemic low of 3.7%. The Euro Area flash CPI will be the other main data, due at 10 am London, and is expected to show inflation rise to a fresh record since the single currency’s formation. After the massive upside surprises from Germany and Spain’s releases on Wednesday, yesterday brought another above-consensus print from France, where inflation rose to +5.1% on the EU-harmonised measure (vs. +4.9% expected). Meanwhile, Italy was the only one of the 4 biggest Euro Area countries not to see an upside surprise, but the +7.0% print (vs. +7.2% expected) nevertheless marked a gain over February’s +6.2% release. The US will also have the March ISM manufacturing reading, while global manufacturing PMIs are due. Otherwise, central bank speakers include the ECB’s Centeno, De Cos, Makhlouf, Schnabel and Knot, as well as the Fed’s Evans. Tyler Durden Fri, 04/01/2022 - 08:06.....»»

Category: blogSource: zerohedgeApr 1st, 2022

Futures Slide, Oil Rises As Ukraine War De-escalation Optimism Fizzles

Futures Slide, Oil Rises As Ukraine War De-escalation Optimism Fizzles S&P 500 futures edged lower along with European shares, as the "peace in our time" optimism that pushed stocks on a history bear market short and gamma squeeze rally in the past two weeks fizzled and was instead replaced with the far less pleasant reality that de-escalation of the war in Ukraine is exaggerated as the Kremlin said that talks with Ukraine in Istanbul Tuesday yielded no breakthroughs and refused to discuss the status of Crimea as part of a peace deal, as the Russian constitution prohibits anyone discussing the fate of Russian regions. The S&P futures were 0.3% lower while Nasdaq futures declined 0.4%. Commodities climbed, fueling renewed concerns about inflation’s impact on profits and economic growth while the inversion of the 2s10s yield curve that started the clock on the next recession did not help investor mood. Europe’s Stoxx 600 snapped a three-day winning streak after surging to the highest level in five weeks and oil futures gained over 2%. The dollar slipped, the euro climbed and the yen bounced from a six-year low after the Bank of Japan pledged to buy more securities than planned and include longer-dated debt. “The yield curve inversion needs to be sustained before it’s a predictor of anything,” Mariann Montagne, senior portfolio manager at Gradient Investments , said on Bloomberg Television. “We’ll have volatility both in the stock and the bond markets but we think that progression” on the cease-fire talks will lead to upward earnings revisions. Apple shares were slightly lower in premarket trading, set to end their longest winning streak since 2003 after the iPhone maker surged nearly 20% over the past 11 days. Chinese live-streaming platforms fell in U.S. premarket trading after Chinese government agencies vowed to crack down on any tax-related crimes in the sector. Bilibili (BILI US) falls 3.8%, HUYA (HUYA US) -4.4%. Other notable premarket movers: BioNTech (BNTX US) rises 3% premarket as the Covid-19 vaccine- maker says it’s planning a share buyback of as much as $1.5 billion and will propose a special dividend. Chewy (CHWY US) slumps 14% in premarket trading after the online pet products retailer’s results missed estimates and it forecast slower-than- anticipated sales growth. Microvast (MVST US) slumps 14% in premarket after the battery solutions provider reported 2021 results, with the company’s CEO flagging “many headwinds” in the release. RH (RH US) falls 14% premarket after the furniture retailer’s fourth-quarter results missed expectations amid “softening” demand in the current quarter. Romeo Power (RMO US) shares jump 7.1% in premarket after the battery-products maker said it has started shipping its first production pedigree packs to a key customer. On Tuesday, the S&P 500 rallied to the highest level since mid-January. Skeptical NATO allies are evaluating whether Russia’s promise to scale back military operations in Ukraine marks a turning point in the conflict or simply a tactical shift as attacks were still reported near Kiev. Here are some of the latest developments involving the Ukraine war courtesy of Newsquawk: Ukrainian President Zelenskiy said they are not reducing defensive efforts as the Russian army still has significant potential to carry out attacks, according to Reuters. Ukraine Deputy PM says three humanitarian corridors have been agreed for evacuations on Wednesday; said Ukraine had requested 97 corridors to be opened in the worst-hit areas. Ukraine Forces warn of danger of Russian ammunition exploding at Chernobyl. Ukraine Presidential Adviser says on negotiations, Ukraine has improved its position in all respects. Russian Kremlin says Ukraine has begun to put demands down on paper and be more specific which is a positive thing. Not seen anything really promising that looks like a breakthrough, there is a lot of work ahead Governor of Donestsk region says situation is difficult, shelling is continuing in nearly all cities around the demarcation line. Germany triggered an emergency plan to brace for a potential Russian gas cut-off, as President Vladimir Putin steps up demands that the fuel should be paid for in rubles. Russia may expand the list of commodities for which it demands payment in rubles to include grain, oil, metals and others. Meanwhile, as reported last night, BofA analysts echoed Goldman and warned that the 11% surge in U.S. stocks in the past two weeks has the hallmarks of a bear-market rally that might give way to deeper losses. Philadelphia Fed Bank President Patrick Harker said Tuesday he expects a series of “deliberate, methodical” rate increases this year, but said he is open to a half-point move in May if near-term data shows more inflation. Economic data releases Wednesday include U.S. GDP.  “While the Fed faces considerable challenges in pulling off an economic soft landing, the central bank did manage to do so in 1965, 1984, and 1994; thus, we think it is too soon to write off their chances of doing so again, said Mark Haefele, chief investment officer at UBS Global Wealth Management. “We believe investors should brace for higher rates, without overreacting by neglecting areas of value in equity markets.” Europe's Stoxx 600 was down 0.6%, but traded off worst levels; sentiment was dented after Kremlin comments that there has been no breakthrough in Ukraine talks. Travel, retail and media names lag; energy and miners outperform. European stocks exposed to Russia and Ukraine slipped in early trading as optimism about a de-escalation of the war in Ukraine faded. The skepticism over Russia’s promise to scale back military operations in Ukraine has dented global stocks and boosted oil prices. Nokian Renkaat, which has a large factory near St. Petersburg, is down more than 7%, among top decliners on Stoxx 600. Here are some of the most notable premarket movers: Equinor, Shell, BP and other energy peers lead gains on the Stoxx 600, with the energy subindex its best performer, with basic resources gaining too: Glencore +2.5%, Boliden +4.7% Bachem rises as much as 4.1%, the best performer on the Stoxx 600 Health Care index, after Credit Suisse upgraded the company to outperform on its strength in peptides manufacturing Bloomsbury Publishing climbs as much as 8.8% after the company best known for the Harry Potter series said the new fantasy novel series ‘Crescent City’ had driven “exceptional” sales in February Encavis shares gain as much as 9.3% as Warburg sees an “upbeat outlook” that should “trigger earnings revisions,” after the company reported earnings late Tuesday Pearson shares fall as much as 11% after Apollo said it does not intend to make an offer for the firm after being unable to reach agreement over the terms with Pearson’s board Nokian Renkaat slides as much as 7.5% after JPMorgan and SEB cut their ratings for the Finnish tire maker due to its exposure to Russia, bringing its YTD loss to over 50% Other Russia-exposed peers also fall as optimism about a de-escalation of the war in Ukraine fades: Wizz Air drops as much as 5.5%, Faurecia as much as 7.5% Atlas Copco, SKF and Sandvik all fall after after reports emerged in Swedish media that its equipment and service contracts in Russia may have been been used by the military Earlier in the session, Asian equities advanced for a second day as traders remained cautiously optimistic over Russia’s offer to scale back military operations in Ukraine. The MSCI Asia Pacific Index climbed as much as 0.9%, with Taiwan Semiconductor Manufacturing the biggest contributor following Micron’s strong forecast. Equities in mainland China outperformed, led by gains in brokerages and developers. Japanese stocks retreated as the yen strengthened. Inflation Trade Is Key to Everything in Global Markets Right Now Investors are hoping for a de-escalation in the war in Ukraine, though progress in cease fire talks has been met with some skepticism. Also on traders’ radar are Chinese firms’ earnings results and the risk of trading halts, and the impact from the yield-curve inversion in U.S. treasuries that are typically seen as a sign of future recession. “With talk of de-escalation in Ukraine, volatility is easing off and that’s a positive for global equities – the benefits of which ought to flow through to an Asian region that’s very sensitive to the economic cycle and commodity prices,” said Kyle Rodda, analyst at IG Markets Ltd.  While the yield curve’s inversion is another factor to consider, a recession typically comes anywhere between 12 and 24 months following an inversion implying “there’s no major reason why sentiment can’t remain well supported,” he added. Elsewhere in Asia, stocks in Australia rose for a seven-day winning streak following a stimulatory federal budget package. China tech stocks traded in Hong Kong trimmed earlier advance amid fresh regulatory crackdown worries.   Japanese equities fell as the yen strengthened amid concerns it had weakened too much. More than 1,500 Topix stocks traded without rights to the next dividend, shaving 22.4 points off the benchmark. Banks and automakers were the biggest drags the Topix, which fell 1.2%. KDDI and Tokyo Electron were the largest contributors to a 0.3% loss in the Nikkei 225. The yen strengthened 0.7% against the dollar, extending its 0.8% rally on Tuesday. The yen is still down more than 6% against the greenback since March 4 amid the Bank of Japan’s determination to continue easing. Perceived benefits of the weaker currency have helped boost the Nikkei 5.7% this month, its best since November 2020. “There’s much talk about the yen weakening further but it seems like it has gone too far,” said Tetsuo Seshimo, a portfolio manager at Saison Asset Management. The level of products exported from Japan is actually low, so “the image is a little different from reality.” Australia's stocks climbed, with the S&P/ASX 200 index rising 0.7% to close at 7,514.50, gaining for a seventh day, its longest win streak since December 2020.  The rally followed a stimulatory federal budget package unveiled late Tuesday. Hopes for talks between Russia and Ukraine also helped investor sentiment.  Life360 gained the most, rising for a second day, while Telix Pharmaceuticals led decliners. In New Zealand, the S&P/NZX 50 index rose 1.5% to 12,098.80. In FX, the Bloomberg dollar spot index fell 0.4% as the greenback was steady to weaker against all its Group-of-10 peers; short-dated Treasury yields fell by around 4bps while longer dated ones were steady. European bonds slid, led by shorter maturities, as traders bet hotter-than-expected inflation readings will force the ECB to end its era of negative rates sooner than previously anticipated. Traders are wagering the ECB will raise its key interest rate to zero two months earlier than expected after Spain’s statistics service said EU-harmonized CPI jumped 9.8% from a year ago in March, topping all 15 estimates in a Bloomberg survey of economists. The yen outperformed all its G-10 peers as the options market signaled that a short-term top has been established in spot dollar-yen. The Bank of Japan ramped up efforts to rein in rising yields by offering to buy more debt across maturities. Bank of Japan Governor Haruhiko Kuroda gave another strong indication that the central bank will continue capping long-term bond yields after holding his first meeting with Prime Minister Fumio Kishida since the yen touched its lowest level since 2015 In rates, Treasuries were mixed with the curve steepening, pivoting around a little changed 7-year sector as 2s10s spread continues to widen away from the brief inversion that took place Tuesday. 2-year TSY yields are richer by ~3bp on the day while long-end of the curve cheapens almost 3bp -- 2s10s spread steeper by 5bp; wides of the day more than 8bp. U.S. 10-year yields around 2.41%, with bunds and gilts trading 4bp and 1bp cheaper in the sector. Long-end Treasuries underperformed, cheaper on the day and following wider losses across bunds and gilts. Early gains in Asia spurred by Bank of Japan bond-buying operations, especially at long end of the curve which pushed Japanese government bond yields lower. IG dollar issuance slate includes three SOFR deals and a Misc Bhd 3Y/5Y; four issuers priced $5.1b Tuesday, takes weekly total to around $9b vs. $20b to $25b projected European bonds slid, led by shorter maturities as traders bet higher inflation will force the European Central Bank to end its era of negative rates sooner than previously anticipated. German two-year yields, among the most sensitive to changes in the key policy rate, are on course for their first close above zero since 2014. The German curve bear-flattens, cheapening ~7bps across the short end. ECB-dated OIS rates point to a zero percent depo rate by the October meeting, red pack Euribor drops up to 9.5 ticks. USTs bull steepen, with 2y yields up 5bps. Gilts are comparatively quiet. Peripheral spreads tighten to core. In commodities, crude futures advanced with WTI adding ~2% near $106.25. Base metals trade in the green; LME aluminum rises over 3%. Spot gold is little changed at $1,919/oz. European natural gas surges as much as 15% after Germany triggered an emergency plan to brace for a potential Russian gas cut-off. Looking at the day ahead now, and data releases include German CPI for March and Italian PPI for February, whilst in the US there’s the ADP’s report of private payrolls for March and the third estimate of Q4 GDP. Otherwise, central bank speakers include ECB President Lagarde, and the ECB’s Holzmann, Wunsch, Makhlouf and Panetta, along with the Fed’s Barkin and George, and BoE Deputy Governor Broadbent. Market Snapshot S&P 500 futures down 0.3% to 4,609.50 STOXX Europe 600 down 0.7% to 458.63 German 10Y yield little changed at 0.64% Euro up 0.4% to $1.1131 Brent Futures up 1.8% to $112.22/bbl Gold spot up 0.2% to $1,922.70   U.S. Dollar Index down 0.41% to 98.00 MXAP up 0.7% to 181.73 MXAPJ up 1.3% to 595.64 Nikkei down 0.8% to 28,027.25 Topix down 1.2% to 1,967.60 Hang Seng Index up 1.4% to 22,232.03 Shanghai Composite up 2.0% to 3,266.60 Sensex up 0.9% to 58,467.18 Australia S&P/ASX 200 up 0.7% to 7,514.52 Kospi up 0.2% to 2,746.74 Top Overnight News from Bloomberg Skeptical NATO allies are evaluating whether Russia’s promise to scale back military operations in Ukraine marks a turning point in the conflict or simply a tactical shift as attacks were still reported near Kyiv ECB President Christine Lagarde said Russia’s invasion poses “significant risks to growth” and has introduced “considerable uncertainty” into the economic outlook. At the same time, sticky energy costs, increasing food prices and persistent bottlenecks “are likely to take inflation higher,” she said The initial reaction to the prospect of a peace deal in Ukraine shows how the most important trades in markets are now all about inflation. Equities, Treasuries and the yen all rallied, underscoring how investing is being filtered through an inflation-driven prism rather than by a peace dividend, according to strategists In the third week of March, redemptions from China equity funds were the highest since early 2021, while outflows from Chinese bond funds exceeded $1 billion for the first time ever, according to data provider EPFR Global. That’s after regulators made promises this month to ensure policies are more transparent and predictable U.S. trade chief Katherine Tai said it’s time to forget about changing China’s behavior and instead take a more defensive posture toward the world’s second- biggest economy Germany triggered an emergency plan to brace for a potential Russian gas cut-off, as President Vladimir Putin steps up demands that the crucial fuel should be paid for in rubles Germany faces a “considerable risk” of lower output and possibly even a recession because of its high dependency on Russian energy, according to a panel of advisers to Chancellor Olaf Scholz. Even without a gas-supply shutoff, the Council of Economic Experts prediction is that gross domestic product will rise just 1.8% this year, down from a November projection of 4.6% BOE’s Broadbent sees an unprecedented external hit to the U.K.’s national income as Russia’s invasion of Ukraine “has led to substantial rises in the cost of energy and other commodities” India’s government is considering a proposal from Russia to use a system developed by the Russian central bank for bilateral payments, according to people with knowledge of the matter, as the Asian nation seeks to buy oil and weapons from the sanctions-hit country A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mostly positive amid optimism from Russia-Ukraine talks in which negotiators discussed a ceasefire and with Russia to scale down military activity in Kyiv and Chernihiv, although the US was unconvinced. ASX 200 gained on continued tech strength and with consumer stocks helped on Budget support measures. Nikkei 225 fell beneath the 28,000 level after weaker than expected Retail Sales and as the Yen nursed losses. Hang Seng and were underpinned after continued PBoC liquidity efforts and amid a deluge ofShanghai Comp. earnings including from large banks in which Bank of China and China Construction Bank both topped estimates Top Asian News China’s Growth Outlook Worsens as Lockdown Fears Escalate U.S., India Officials Set to Hold Security Meetings in April Logan Unit Warns About Ability to Meet Bond-Repayment Demands China Tech Stocks Pare Gains After Reports on Online Video Curbs European equities (Eurostoxx 50 -0.8%) are mostly lower as optimism from Ukraine/Russia updates yesterday fades and inflation concerns were further bolstered by regional German CPIs. FTSE 100 (+0.1%) remains afloat following gains in Energy and Basic Resources names Top European News BOE’s Broadbent Sees Unprecented External Hit to National Income ECB’s Lagarde Says Costs of War Increase the Longer It Lasts Spanish Inflation Unexpectedly Soars to Almost 10% on War Citi Workers Stay Home as London Power Cut Disrupts Canary Wharf In FX, Yen repatriation offsets BoJ yield intervention to keep recovery intact - Usd/Jpy extends sharp retreat to circa 121.31 from 125.10 on Monday. Euro inflated by significantly stronger than expected preliminary CPI prints and further EGB/UST yield convergence - Eur Usd takes out recent peak and probes Fib retracement in decent option expiry zone before fading around 1.1160. Kiwi rebounds on strong building approvals and improvements in NBNZ survey readings - NzdUsd firmly above 0.6950 and AudNzd back under 1.0800. Dollar drifts ahead of ADP and more Fed commentary, with under 98.000. In commodities, WTI and Brent have continued to pare back some of the aggressive selling pressure seen during yesterday’s session. From a technical standpoint, May’22 WTI has made it back up to USD 107.30 vs. yesterday’s peak of USD 107.84, whilst June’22 Brent sits at 113.05 vs. yesterday’s peak of USD 114.83. US Energy Inventory Data (bbls): Crude -3.0mln (exp. -1.0mln), Gasoline -1.4mln (exp. -1.7mln), Distillate -0.2 (exp. -1.6mln), Cushing -1.1mln. US House Energy and Commerce Committee is to hold a hearing next week with six oil company executives regarding rising gas prices, according to Reuters. Germany declares "Early Warning" stage of gas supply emergency to prepare for possible escalation by Russia; says no current gas supply shortages. India is to increase natural gas prices for April-Sept to USD 6.10/mmbtu from USD 2.90mmbtu currently, according to Reuters sources. Spot gold traded sideways and only marginally benefitted from the weaker greenback. US Event Calendar 07:00: March MBA Mortgage Applications, prior -8.1% 08:15: March ADP Employment Change, est. 450,000, prior 475,000 08:30: 4Q PCE Core QoQ, est. 5.0%, prior 5.0% 08:30: 4Q GDP Price Index, est. 7.1%, prior 7.1% 08:30: 4Q Personal Consumption, est. 3.1%, prior 3.1% 08:30: 4Q GDP Annualized QoQ, est. 7.0%, prior 7.0% DB's Jim Reid concludes the overnight wrap The last two times that the 2s10s first inverted during the cycle occurred when I was on holiday (August 22nd 2019 and way back on December 27th 2005). Proving that the yield curve is no respecter of my two-week holiday starting tomorrow, 2s10s teasingly dipped its toes into negative territory after Europe closed yesterday before discretely re-steepening into the US close (at 2.4bps). Nevertheless, the headline damage was done. The momentum has been toward flatter curves for a while, so this moment has felt inevitable even if it happened quicker than we expected. It is surely only a matter of time before we close inverted. I'll likely be on holiday when it does so see you in a couple of weeks. First stop a diagnostic and steroid injection today in my back. Henry and Tim will be taking care of the EMR in my absence. First stop LEGOLAND and the Natural History Museum at the end of this week. The latter to see some dinosaurs that aren't Daddy. See you on the other side. Back to the curve and 2s10s has now flattened -75.0bps YTD, -17.4bps of which have come over the last two days amidst heightened bond market volatility, which showed no signs of calming yesterday with 2yr and 10yr Treasuries again trading in a wide range. 2yr yields were +12.3bps higher as New York walked in before finishing the day up +3.7bps, while 10yr yields went from +7.4bps higher early in the day to as low as -8.2bps, before closing down -6.4bps. US yields are another -5 to -6bps lower in Asia as I type so 15 to 20bps off the highs 18 hours ago. Yields hit their intraday peaks at this point alongside the peak in optimism around potential peace talks covered in more detail below. Having said that there were other important bond milestones yesterday. 2yr German debt moved into positive territory in trading for the first time since 2014, although by the close it was “only” up +6.2bps at -0.07%. Note German inflation is coming out later today and the NRW region has just come out at a very high 7.6% which likely means the 6.2% national average expected is going to be beaten. So maybe more grounds for bond volatility today. Also Italian PPI is out. Remember last month this hit an astonishing 41.8% YoY. This all comes as the Ukraine developments yesterday led to growing conviction that the ECB would commence liftoff in its policy rates this calendar year, and the amount of ECB tightening priced for 2022 went all the way up to +62.1bps by the close, surpassing their previous peak prior to the invasion. At the same time, yields on 10yr bunds (+5.3bps), OATs (+4.9bps) and BTPs (+0.9bps) all hit multi-year highs of their own even if 10yr bunds closed at 0.63, -10bps below its intraday highs of 0.73%. As discussed near the top, the last leg of the global yield spike higher came as peace hopes exploded in the middle of the European session. However the spike in nominal yields was very short lived as commodities fell back following the positive news, dragging breakevens down with them. This followed some of the most optimistic headlines we’ve seen since the conflict began. In particular, Russia said it would “dramatically reduce” its military operations around Kyiv, and their chief negotiator Vladimir Medinsky said that Ukraine’s proposals would be passed onto President Putin for a response. Meanwhile Ukraine’s negotiator Mykhailo Podolyak said that the agreement offered would see both sides “resolve issues linked to Crimea and the city of Sevastopol though bilateral negotiations”, which Russia has occupied since 2014. So although it’s worth pointing out that we don’t even have a ceasefire yet, the fact that both sides might be edging closer towards one another has seen markets reduce the perceived likelihood of further escalation scenarios. The alternative view is that the Russians are simply diverting resources to other areas and this is purely tactical. So it's still a long way from being over but the tail risks seem to be reducing. This growing optimism was evident across multiple asset classes, with European equities moving back up to levels not seen since the conflict began. Indeed, the STOXX 600 (+1.74%) closed at its highest level since February 17, having now recovered by +13.85% since its closing low just 3 weeks earlier. The S&P 500 (+1.23%) also advanced, which reduced its YTD losses to just -2.82%, whilst the NASDAQ was up +1.84%. While fixed income volatility has taken off, equity volatility continues to fall as indices rally and risk sentiment improves. The VIX fell another -0.73ppts yesterday to 18.9ppts, having fallen 13 of the last 16 days after reaching its highest level in over a year earlier in the month. Oil prices had a significant reaction as well, with Brent Crude falling by about $10/bbl between its intraday high and low just a couple of hours apart, before settling -0.94% lower at $111.42/bbl. And the euro itself strengthened by +0.92% to move just shy of $1.11. When it comes to the Fed, the added optimism did not do much to alter pricing this year, as it seems markets have already internalised that the Fed is now less inclined to let war get in the way of the hiking cycle. Expectations for a 50bp hike at the May meeting remain high, having oscillated between 65% and 80% since last Monday, finishing yesterday near the upper end of that range at 75%. The only speaker of note was Philadelphia Fed President Harker, who said that he wouldn’t take 50bps off the table for May, but expected “a series of deliberate, methodical hikes as the year continues”. The jobs report on Friday as well as the CPI report on April 12 will be very important ahead of the Fed’s decision in early May. Asian stock markets are mostly trading in positive territory. The Hang Seng (+1.15%) is up after shares of Chinese tech giant Tencent rose more than +2%. Meanwhile, shares of China Evergrande Group will “remain suspended until further notice” as per yesterday’s announcement by the firm. Chinese stocks opened higher with the Shanghai Composite (+1.28%) and CSI (+1.40%) leading gains across the region. Elsewhere, the Kospi (+0.25%) is trading up, building on gains in the previous session. Bucking the trend is the Nikkei (-1.27%) after giving up its earlier session gains as the Japanese Yen strengthened (~1.0%) against the US Dollar. Data showed that Japan’s retail sales (-0.8% m/m) fell for the third straight month in February, exceeding market expectations for a -0.3% loss and after falling -0.9% last month. Moving on, the S&P 500 (-0.12%), Nasdaq (-0.11%) and DAX (-0.15%) futures are all slightly down. On the data side yesterday, there were a number of interesting releases from the US, which collectively pointed to inflationary pressures still in the pipeline. In particular, the total number of job openings in February came in at 11.266m (vs. 11m expected), which means that the number of job openings per unemployed moved back up to its second highest ever level, at 1.80 openings per unemployed person. Furthermore, the quits rate also ticked back up to 2.9%, just shy of its record 3.0% back in November and December. Otherwise, the FHFA house price index was up +1.6% in January (vs. +1.2% expected), and that was the fastest monthly gain in 7 months. Meanwhile, the Conference Board’s consumer confidence measure ticked up slightly to 107.2 (vs. 107.0 expected), but there was a growing divergence between the present situation reading, which rose to 153.0, unlike the expectations measure at 76.6, which hit its lowest level since February 2014. To the day ahead now, and data releases include German CPI for March and Italian PPI for February, whilst in the US there’s the ADP’s report of private payrolls for March and the third estimate of Q4 GDP. Otherwise, central bank speakers include ECB President Lagarde, and the ECB’s Holzmann, Wunsch, Makhlouf and Panetta, along with the Fed’s Barkin and George, and BoE Deputy Governor Broadbent. Tyler Durden Wed, 03/30/2022 - 07:51.....»»

Category: smallbizSource: nytMar 30th, 2022

Futures, Yields Rise On Ceasefire Hopes As Ukraine-Russia Talks Resume

Futures, Yields Rise On Ceasefire Hopes As Ukraine-Russia Talks Resume Following yesterday's surge in stocks following an FT report that Russia has eased on its Ukraine demands and the Russian ceasefire document no longer contains any discussion of three of Russia’s initial core demands - “denazification”, “demilitarisation”, and legal protection for the Russian language in Ukraine - overnight futures have extended their "feel good" rise as peace negotiations which resumed on Tuesday in Turkey between Russia and Ukraine stoked a rally in global equities, and hit session highs after Ukrainian negotiator Podoliak noted that a ceasefire is being discussed with Russia adding a press conference is to be expected later. Ukraine is striving for a cease-fire agreement in talks with Russian negotiators that started Tuesday in Turkey, setting a “minimum” goal of an improvement in the humanitarian situation. Nasdaq 100 futures were up 0.6% while S&P 500 futures gained 0.5% and Dow futures 0.4%. Europe’s Stoxx 600 Index also advanced, with auto and consumer stocks outperforming. Oil fluctuated as investors weighed the impact of China’s mobility curbs against a Covid resurgence on demand; the dollar dropped. Treasuries bear flattened, outperforming bunds and gilts as haven demand continues to be unwound; the 10Y TSY yield rose to 2.50%. Apple headed higher in premarket trading and was set for its longest winning streak since 2003, in which the iPhone maker has added about $407 billion in market capitalization. A revival in the so-called meme stock rally also set GameStop on course for its 11th straight day of gains as retail traders bid up OTM calls sparking yet another gamma squeeze and proving that the market remains hopelessly broken. Here are some other notable premarket mvoers: Dave & Buster’s (PLAY) shares drop 7.2% after the dining and entertainment venue operator reported earnings per share for the fourth quarter that missed the average analyst estimate. While analysts pointed to the impact of the Omicron variant of the Covid-19 virus on the company’s fourth-quarter, they saw reassuring signs in the firm’s margins and recent improvements. Progenity (PROG US) falls 20% in U.S. premarket trading after the firm late on Monday reported a wider annual loss for 2021 than expected. Small biotech and pharma companies rally in U.S. premarket trading, rebounding from this year’s declines, as investor appetite for riskier assets and so-called meme stocks grows. Brooklyn Immunotherapeutics (BTX US) +8.7%, Alaunos Therapeutics (TCRT US) +6.5%. CVS Health (CVS US) shares drop 1.7% in U.S. premarket trading after Deutsche Bank downgrades the pharmacy health care provider to hold from buy amid rising risks. U.S. stocks have rebounded in March as the Federal Reserve issued an upbeat outlook on economic growth, with investors also looking past surging inflation and a historic rout in Treasuries. Paradoxically, technology-heavy stocks, which tend to sell off when interest rates are rising, have in fact outperformed the benchmark S&P 500 as traders focused instead on differentiating between profitable and unprofitable firms.  Even more paradoxically as a new cold war rages, the Nasdaq 100 is on track for its biggest monthly gain since October 2021. "The resilience of global stocks given the cocktail of risks facing the global economy is truly impressive, but this stoicism is likely to face continuing tests as the impact of mounting prices and the actions of central banks continue to feed through, not to mention the ongoing geopolitical concerns,” Russ Mould, investment director at AJ Bell Ltd., said in emailed comments. Meanwhile, government bond yields rose, with bets on aggressive U.S. monetary tightening hurting shorter maturity Treasuries. Inversions along the curve, where some short-term rates exceed longer tenor yields, point to concerns about a looming economic downturn as the Federal Reserve hikes interest rates to quell high inflation. Hopes of a cease-fire in Ukraine-Russia talks also bolstered European equities. The Stoxx 600 jumped 1.3%, with automakers, consumer products and services and technology shares leading gains. Here are some of the biggest European movers today: Carlsberg shares advance as much as 4.5% as analysts welcomed the brewer’s decision to exit Russia, with Credit Suisse seeing potential for a re-rating for a stock battered by Russia’s invasion of Ukraine. Adyen shares gain as much as 6% after JPMorgan said the company could boost its outlook for long-term margin to more than 70% from 65%, placing the firm on “positive catalyst watch.” Currys Plc shares rise as much as 12% following a so-called uncooked mention in a Betaville blog post regarding potential takeover interest in the electrical goods retailer. Euromoney shares climb as much as 4.9% after Investec raises its recommendation to buy from hold, citing a disconnect between the share price and the media firm’s operational performance. Schibsted shares rise as much as 6.6%, the most since March 16, after its largest shareholder, Blommenholm Industrier, buys 1 million Class A shares at NOK222.5 each. Nordex shares rise as much as 8.3% after the wind-turbine maker’s new FY22 guidance is ahead of expectations, Jefferies says; wind power peers Vestas and Orsted gain, too. Barclays falls as much as 5.7% in London following news that an unnamed investor sold about 575m shares at a discount. Stock is also downgraded to neutral from overweight at JPMorgan. Maersk, Kuehne + Nagel and Hapag-Lloyd all drop after Deutsche Bank downgrades several logistics and container stocks due to the indirect consequences of the war in Ukraine. Sanofi shares fall as much as 2.5% after the firm provided a new sales forecast for its drug Dupixent, with both Morgan Stanley and Citi noting guidance is slightly behind expectations. Earlier in the session, Asian stocks advanced after a three-day loss, as a decline in oil prices eased concerns over corporate earnings and Chinese tech stocks extended gains into a second day. The MSCI Asia Pacific Index rose 0.7% with Tencent, Toyota Motor, and Alibaba among the biggest contributors to the advance. Apart from Hong Kong, where gains in tech and health names drove gauges higher, equities in Japan and Australia outperformed, with the former benefiting from a weaker yen and the latter rising ahead of a budget release after markets closed. Investors are waiting to see how the cease-fire talks between Russia and Ukraine proceed, while assessing the repercussions to businesses from the lockdown in Shanghai. The risk of Chinese firms, especially those in the property sector, facing trading halts is weighing on sentiment as a key earnings deadline looms.  Oil Extends Losses on China Demand Concerns Ahead of OPEC+ Meet “A V-shaped recovery in stock markets looks difficult,” said Kim Kyung Hwan, a strategist at Hana Financial Investment in Seoul.  “The worst is behind in terms of investor sentiment, but issues like Covid lockdowns and the war in Ukraine aren’t resolved, traders are just getting used to them.” Despite Tuesday’s gain, the benchmark Asian measure is poised for a third straight monthly loss. It’s also lagging behind the S&P 500 index in recent performance Japanese equities rose, powered by exporters after the yen plunged by the most since March 2020 against the U.S. dollar on the Bank of Japan’s easing measures. Electronics and auto makers were the biggest boosts to the Topix, which rose 0.9%. Fast Retailing and SoftBank Group were the largest contributors to a 1.1% gain in the Nikkei 225. The yen was slightly higher after weakening 1.5% against the greenback on Monday. “Makers of export-related products like automobiles should rise with the BOJ’s continuous bond-purchase operations expected to continue weakening the yen,” said Hideyuki Ishiguro, a strategist at Nomura Asset Management. The drop in oil prices is a “relief” for Japan as an importer, and growth stocks should benefit from the slowing rise in long-term U.S. interest rates, he added Indian stocks rose as a drop in crude prices along with prospects of more cease-fire talks between Russia and Ukraine supported buying sentiment. The S&P BSE Sensex climbed 0.6% to 57,943.65, in Mumbai, a second day of gains, while the NSE Nifty 50 Index also advanced by a similar magnitude. Housing Development Finance Corp. advanced 3.1% and was the biggest boost to the Sensex, which had 20 of the 30 shares trading higher.   Fifteen of 19 sectoral indexes compiled by BSE Ltd. rose, led by a gauge of healthcare stocks. Price of Brent crude, a major import for India, hovered around $113 a barrel, down about 6% this week.  Lower oil is supporting gains across economies as a lockdown in parts of China after a resurgence in Covid cases raised possibilities of lower demand, Mitul Shah, head of research at Reliance Securities, wrote in a note. “The Russia-Ukraine conflict and inflationary pressures continue to keep the market wavered,” he said.    In rates, Treasuries extended bear-flattening move with yields cheaper by ~5bp across front-end of the curve, following wider losses for bunds and gilts in early European session. U.S. 10-year yields around 2.49%, higher by ~3bp on the day with bunds and gilts trading cheaper by 6bp and 4bp in the sector; Treasury curve-flattening persists with 2s10s spread tighter by 4.5bp as front-end continues to underperform. The week's auction cycle concludes with $47b 7-year note sale at 1pm ET, following Monday double supply of 2- and 5-year notes; WI 7-year around 2.60% is above auction stops since 2019 and ~69.5bp cheaper than February’s stop-out. IG dollar issuance slate includes two 3Y SOFR deals; two deals priced $4b Monday, and early calls for April are for around $100b of issuance. In Europe, fixed income trades heavy in the risk-on environment. Bund and Treasury curves bear-flatten with U.S. 5s30s remaining inverted and 2s10s flattening a further ~5bps near 7bps. Germany’s 2y yield trades ~3bps shy of a 0% yield. Gilts bear-steepen, cheapening 7-8bps across the back end. Peripheral spreads tighten modestly. In FX, Bloomberg dollar spot drops 0.3%, CHF is the weakest in G-10 sending EUR/CHF 0.6% higher on to a 1.03-handle. The Bloomberg Dollar Spot Index hovered as the greenback traded mixed versus its Group-of-10 peers; Scandinavian currencies were the best performers while the Swiss franc and the pound were the worst. The yen inched up after posting is biggest drop in over a year Monday; the currency may be heading for its worst monthly performance versus the dollar since November 2016, yet trading in the options space is much more balanced. Super-long Japanese government bonds dropped while benchmark 10-year notes were supported by the central bank’s purchase operations; The Bank of Japan offered to buy an unlimited amount of 5- to 10-year government notes for a second time on Tuesday Cable gave up an early advance to fall to an almost two-week low; gilts fell. London’s Metropolitan Police are set to issue at least 20 fines to government officials close to the prime minister who broke U.K. lockdown rules, although this tranche of fines is unlikely to touch Prime Minister Boris Johnson Australia’s three-year bonds dropped after retail sales beat economists’ estimates, with the gap over 10-year notes narrowing to the least since March 2020 In commodities, crude futures hold in the green, recouping Asia’s weakness. WTI regains a $106-handle, Brent trades near $113. Spot gold extends losses, dropping ~$13 before stalling near $1,910/oz. Base metals trade poorly with LME nickel underperforming Looking at the day ahead now, and data releases from the US include the FHFA house price index for January, the Case-Shiller home price index for January, the Conference Board’s consumer confidence indicator for March, and the JOLTS job openings for February. Over in Europe there’s also French consumer confidence for March, Germany’s GfK consumer confidence reading for April and UK mortgage approvals for February. Lastly, central bank speakers include the Fed’s Harker. Market Snapshot S&P 500 futures up 0.5% to 4,590.75 STOXX Europe 600 up 1.1% to 459.14 MXAP up 0.7% to 179.73 MXAPJ up 0.6% to 586.67 Nikkei up 1.1% to 28,252.42 Topix up 0.9% to 1,991.66 Hang Seng Index up 1.1% to 21,927.63 Shanghai Composite down 0.3% to 3,203.94 Sensex up 0.2% to 57,724.92 Australia S&P/ASX 200 up 0.7% to 7,464.26 Kospi up 0.4% to 2,741.07 German 10Y yield little changed at 0.63% Euro little changed at $1.0995 Brent Futures up 1.3% to $113.95/bbl Gold spot down 0.4% to $1,916.02 U.S. Dollar Index little changed at 99.04 Top Overnight News from Bloomberg Deputy Treasury Secretary Wally Adeyemo said the U.S. and its allies will tighten the sanction screws on Russia over its invasion of Ukraine, singling out industries integral to Moscow’s war effort As NATO allies discuss the terms of any potential peace deal to be struck between Russia and Ukraine, signs of strategic splits are emerging from within their ranks Policymakers in Japan on Tuesday sought to balance a commitment to ultra-loose monetary policy in a world of rising interest rates without letting the yen tumble further toward a 20-year low Japan’s Finance Minister Shunichi Suzuki highlighted the need to check if a weaker yen is harming the economy, as he indicated heightened government concern over the currency’s recent slide The additional increase in energy prices resulting from the war in Ukraine pushed inflation significantly higher in March, European Central Bank Governing Council member Pablo Hernandez De Cos says Key OPEC members said oil prices would be even more volatile if not for the group’s strategy and that the U.S. must trust what it’s doing, as calls from major importers for higher production grow Russia has made a $102 million interest payment as the world’s biggest energy exporter continues to service its foreign bonds despite financial isolation after the invasion of Ukraine North Korea looks set to detonate its first nuclear bomb in more than four years, as the U.S.’s sanctions disputes with Russia and China make further United Nations penalties against the country unlikely More detailed look at global markets courtesy of Newsquawk Asia Pac stocks traded mostly higher following the gains in the US where growth stocks spearheaded a recovery and with a decline in oil prices conducive for risk. ASX 200 was led by strength in tech and consumer stocks heading into the Budget announcement. Nikkei 225 gained with Japan to compile economic measures by the end of next month. Hang Seng and traded mixed with the mainland index faltering amid the ongoing lockdown inShanghai Comp. Shanghai and despite the announcement of supportive measures by the local government. Top Asian News Australia’s Budget Pitches Cash to Key Voters Ahead of Election Samsung to Offer More Credit in India to Boost Smartphone Sales Modern Land Joins List of Earnings Delays: Evergrande Update Iron Ore Edges Lower in China as Virus Controls Dent Demand European bourses, Euro Stoxx 50 +2.2%, are firmer across the board in a continuation of the APAC/US handover as Russian-Ukraine talks begin. Upside that has been exacerbated by remarks from both Ukraine and Russian officials. US futures are firmer across the board, ES +0.4%, though magnitudes more contained with Fed speak and supply ahead Top European News U.K. Consumer Credit Surges at Strongest Pace in Five Years U.K. Faces Crypto Exodus as Firms Sound Off Before FCA Deadline European Banks Could Earn $6.6 Billion a Year Greening Economy Inflation Rose Sharply in March on Energy Shock: ECB’s de Cos Commodities: Crude benchmarks have experienced an erosion of earlier upside amid multiple, but generally constructive, updates from Ukraine and Russia. Specifically, Ukrainian negotiator Podoliak noted that a ceasefire is being discussed with Russia adding a press conference is to be expected later. Albeit, the morning's action has not been sufficient to spark a test of the overnight parameters for WTI and Brent. Spot are pressured once more, generally speaking in-fitting with other havens, exacerbated by thegold/silver aforementioned risk-on move. In FX, Euro elevated as EGB yields ramp up again and hopes rise regarding a Russia-Ukraine peace resolution, EUR /USD above 1.1000 and a series of decent option expiries stretching between 1.0950 and the round number. Buck caught amidst buoyant risk sentiment and hawkish Fed vibe, DXY sub-99.000 after narrowly missing test of 2022 peak on Monday. Yen maintains recovery momentum amidst more MoF verbal intervention and demand for month/fy end, USD /JPY under 124.00 vs 125.00+ peak yesterday. Franc flounders as SNB ponders direct repo indexing to main policy rate, USD/CHF around 0.9360 and EUR /CHF over 1.0300. US Event Calendar 09:00: Jan. S&P/CS 20 City MoM SA, est. 1.50%, prior 1.46% 09:00: Jan. FHFA House Price Index MoM, est. 1.2%, prior 1.2% 10:00: March Conf. Board Present Situation, prior 145.1 10:00: March Conf. Board Expectations, prior 87.5 10:00: Feb. JOLTs Job Openings, est. 11m, prior 11.3m 10:00: March Conf. Board Consumer Confidenc, est. 107.0, prior 110.5 Central Bank Speakers 09:00: Fed’s Williams Makes Opening Remarks at Bank Culture... 10:45: Fed’s Harker Discusses Economic Outlook 21:30: Fed’s Bostic Discusses Economic Leadership DB's Jim Reid concludes the overnight wrap A mixed medical report from the Reid family today. I have a nerve root block injection and a diagnostic test on my back tomorrow to battle my sciatica. I managed to stretch for an hour before attempting to play golf on Saturday thinking there was no hope. Miraculously it must have helped me get round but I then suffered for the rest of the weekend as I seized up as soon as I stopped. I told my wife I should have just carried on playing. She despaired at me. On the more positive side my 6-yr old Maisie had her latest 3-4 month scan yesterday. Regular readers will remember she's been in a wheelchair since November after an operation to help her battle a rare hip disorder called Perthes. There are no guarantees as to the long-term outcome with Perthes but the latest scan was encouraging and suggested that while her hip ball is fragmenting (disintegrating), it's not collapsing and getting out of shape largely due to no weight bearing. That suggests a decent chance that when it regrows (assuming it does) it will regrow relatively normally. The nightmare is if the hip ball gets squashed as it disintegrates. She'll still need to keep the weight off for most of the rest of the year but there's hope that by the end of it she can come out of her wheelchair and start the rehab towards a manageable hip. There are some horror stories with this disease in terms of pain and constant discomfort through the entirety of childhood so fingers crossed it's going in the right direction due to her discipline in spite of missing out on all the running about that she's desperate to do. Also helping is that she continues to swim 3-4 times a week and is remarkably good now. This has been the one blessing that's come out of a year and a half where we tried to get her problem diagnosed and then treated. Fingers crossed that the next scan in July will continue to move her in the right direction. Bond markets continued to be as volatile as my back yesterday with big swings in yields but with the front end sell-off being durable. This helped push a number of yield curves ever closer to inversion, meaning we have multiple recessionary signals starting or continuing to flash. The one we always look most closely at is the 2s10s curve, which has inverted prior to every one of the last 10 US recessions. Yesterday this flattened by -7.3bps to 12.5bps and this morning it’s currently just above 6bps with more flattening plus a new on the run 2yr note to blame. Could we invert today? Regardless it's likely to happen soon. A key factor behind this curve flattening has been monetary policy expectations, and over the last 24 hours we’ve seen investors continue to ratchet up their bets on how much tightening we’re likely to see this year. By the close yesterday, Fed Funds futures were pricing in a further 211bps of tightening by the end of 2022, on top of the 25bps a couple of weeks back, which if realised would be the largest move tighter in a calendar year since 1994, back when the Fed raised the target range for the Federal Funds by 250bps. On top of that, it’s clear that investors are also reappraising what the terminal rate is likely to be, and at one point yesterday investors were pricing in a move above 3% by the second half of 2023. We’re not talking much about the terminal rate at the moment, but as we move deeper into the hiking cycle, that’s likely to grab increasing attention, since the destination will have big implications for a wide variety of financial assets. Whilst the all-important 2s10s curve is still (just about) in positive territory, increasing numbers of curves have been inverting across different maturities, with the 3s30s curve becoming the latest to do so around the time we went to press yesterday, eventually closing down -10.4bps at -2.9bps. Similarly, the 3s10s that had already inverted went even deeper into inversion territory to close at -11.5bps, which is the most inverted it's been since 2006. The 5s30s was another to invert yesterday, falling as low as -7.1bps at one point before it steepened to close at -0.9bps. Clearly they are all a bit flatter this morning. If you’re interested in reading more on the yield curve, DB’s US economics team put out a piece last Friday (link here) looking at the value of these various measures for predicting recessions. The Fed have played down the usefulness of the 2s10s curve, and have argued that the Fed forward spread (18-month forward, 3-month yield minus the spot 3-month yield) is more valuable when it comes to explaining recessions risks over the next 12 months. But our economists find that traditional curve slope metrics like the 2s10s provide useful information over a longer horizon, like the next 2 years, and they point out that the 2s10s slope is consistent with a probability greater than 60% of a recession at some point over the next 2 years. Even with the latest round of flattening though, the truth is that the trend has been nearly all one-way for basically a year now. In fact, it was a year ago tomorrow that the slope of the 2s10s curve saw its intraday peak for this cycle, when it hit 162bps. Yesterday’s flattening also coincided with a healthy dose of Treasury volatility. 2yr yields ultimately wound up +5.8bps higher at 2.33%, after trading as much as +13.8bps higher during London trading. 10yr yields fell -1.5bps to 2.46%, but were as much as +8.0bps higher during London trading, and -6.1bps lower during the New York morning. This pushed the MOVE index of Treasury volatility +4.0pts higher to 129.3, just below levels realised in early March. In spite of all the volatility, equities were mostly positive yesterday, with the S&P 500 (+0.71%) staging a steady second half rally to start another week off in the green. The decline in longer-dated yields from their early London peak helped spur tech outperformance, with the NASDAQ gaining +1.31%. Europe also started the week on the front foot, with the STOXX 600 (+0.14%) advancing, alongside the DAX (+0.78%) and the CAC 40 (+0.54%). There were pockets of relative weakness however, with the small-cap Russell 2000 in the US closing flat. Energy stocks were left behind in the otherwise broad rally on both sides of the Atlantic given the large decline in oil discussed below, with the S&P 500 energy sector down -2.56% and the STOXX 600 energy sector down -2.10%. Indeed, Oil prices did fall back yesterday, with Brent crude down -6.77% to $112.48/bbl, but that reflected the lockdown in Shanghai and the prospect of a further release from the US Strategic Petroleum Reserve rather than more positive developments out of Ukraine. It's down another -0.8% this morning. On the other hand European natural gas (+1.26%) rose to €102.55/MWh, which occurred as German Economy minister Habeck said that the G7 had rejected the proposal from President Putin that natural gas contracts be paid in Rubles, with Habeck saying it was a “one-sided and clear breach of contracts”. Back to sovereign bonds, and there were some major moves in European sovereign bonds as well as the US yesterday, with yields on 10yr bunds moving to a fresh high above 0.6% after the open before modestly retreating -0.6bps to 0.58%. That pattern was common across core European sovereigns, with yields on 10yr gilts (-7.9bps) and OATs (-1.2bps) eventually also moving lower following their increases that morning. Similarly to the US, this has come as investor conviction has grown about the chances of tighter ECB policy in the coming months, with 48bps of hikes priced by year-end. Nevertheless, there’s still a wide policy divergence between the Fed’s and the ECB’s trajectory, and we saw this in the widening spread between 2yr US and Germany yields, which closed at 246.1bps yesterday, the most since September 2019. Asian equity markets are trading higher outside of China this morning with the Nikkei (+0.60%), Hang Seng (+0.40%) and Kospi (+0.31%) up. Stocks in mainland China are wavering with the Shanghai Composite (-0.44%) and CSI (-0.11%) both trading in negative territory as I type. Meanwhile, contracts on the S&P 500 (+0.04%) are fractionally higher while Nasdaq futures are down -0.11%. Early morning data showed that Japan’s industrial output rebounded +0.5% m/m in February after January’s contraction of -0.8%. Separately, Japan’s jobless rate inched down to 2.7% in February from 2.8% in January while the jobs-to-applicants ratio improved to 1.21 in February from 1.20 in the prior month. Elsewhere, Australia reported retail sales for February, advancing +1.8% m/m and beating market expectations for a +0.9% gain. It followed a downwardly revised +1.6% m/m increase in January. The Japanese Yen weakened to its lowest level against the US Dollar since 2015, depreciating -1.48% to 123.86 per dollar, and at one point surpassing 125 per dollar. It's moved nearly 8% in four weeks - a substantial move historically. The latest move came as the Bank of Japan announced they would purchase 10yr JGBs in unlimited quantities over three sessions today, tomorrow and the day after, which followed their move above 0.25% at one point, which we haven’t seen since 2016. The Yen is trading at 123.31 as we go to press so a continued reversal from the close and the lows yesterday morning. Elsewhere today, there’s set to be another round of in-person talks taking place in Turkey between Russia and Ukraine as the war continues into its second month. Investors have grasped at positive headlines in recent weeks and more sensitive assets such as energy prices have reacted accordingly, but the reality has been few signs of concrete progress towards any ceasefire, even if there has been a moderation in some of the demands from either side as to any potential settlement. Finally on Europe, we’re now just 12 days away from the first round of the French presidential election, and there are signs the race is tightening up slightly as the official campaign period began yesterday. Politico’s polling average puts President Macron in the lead still, but his 1st round polling has dipped to 28%, having been at 30% a couple of weeks earlier following the bounce he saw after Russia’s invasion of Ukraine. Behind him is Marine Le Pen on 19%, who he also faced in the second round back in 2017, and her average is up from 18% a couple of weeks earlier. The far-left Jean-Luc Mélenchon is also gaining, now in 3rd place with 14% (up from 12% a couple of weeks ago), but he’s still 5 points behind Le Pen, and only the top 2 candidates go through to the run-off two weeks later. Behind them are also the far-right Eric Zemmour (11%), as well as the conservative Valérie Pécresse (11%). To the day ahead now, and data releases from the US include the FHFA house price index for January, the Case-Shiller home price index for January, the Conference Board’s consumer confidence indicator for March, and the JOLTS job openings for February. Over in Europe there’s also French consumer confidence for March, Germany’s GfK consumer confidence reading for April and UK mortgage approvals for February. Lastly, central bank speakers include the Fed’s Harker. Tyler Durden Tue, 03/29/2022 - 07:51.....»»

Category: blogSource: zerohedgeMar 29th, 2022

US Equity Futures Reverse Overnight Decline, Turn Positive As Oil Surges

US Equity Futures Reverse Overnight Decline, Turn Positive As Oil Surges U.S. equity futures and European bourses stocks reversed modest overnight losses and turned higher as US traders got to their desks on Monday as crude oil extended a climb and investors monitored diplomatic efforts to bring an end to Russia’s almost month-old war in Ukraine.  S&P futures rose 0.07% or 3 points after earlier sliding almost 30 points; Nasdaq futures were flat. Focus on Monday will be on a speech by Fed Chair Jerome Powell after the central bank kicked off a rate-hiking cycle last week.  Powell is set to speak at the annual meeting of the National Association for Business Economics at 12pm ET; text release and Q&A are expected. In addition to concerns about Russian crude supply, which Russia's deputy prime minister Novak said could surge to $300/bbl if Russian oil is shunned, also jumped after Saudi Arabia announced a “temporary reduction” in oil output at an Aramco facility after Yemen’s Houthi rebels launched multiple cross-border attacks on Sunday .A drone assault on the YASREF refinery, in the Yanbu Industrial City on the Red Sea, has “led to a temporary reduction in the refinery’s production, which will be compensated for from the inventory,” the energy ministry said in a statement. WTI rose as high as $108, surging $15 from prices hit last Tuesday, with Brent trading around $113. The S&P 500 last week had its biggest gain since November 2020 and European equities recouped all of their losses triggered by Russia’s invasion of Ukraine nearly a month ago as peace negotiations and the lure of cheap valuations drew investors back. But that optimism may not be justified, given the “increasingly brutal measures that Russian forces are taking,” according to  Michael Hewson, chief analyst at CMC Markets in London. “There appears to be a growing disconnect between what markets are doing and what is happening on the ground in Ukraine,” he said in a report. “Commodity markets continue to chop wildly” and “concerns about inflation are still posing awkward questions for central banks,” Hewson wrote. A key question is whether last week’s stock rebound and drop in volatility are durable. European equities have recouped all of their losses triggered by Russia’s invasion of Ukraine nearly a month ago as optimism around peace negotiations and the lure of cheapened valuations draw investors back. But a historic spike in commodity prices on supply concerns shows little sign of easing, keeping traders on high alert over inflation and shaking their faith in the Federal Reserve to douse price pressures while keeping the economic recovery on track. “The Fed comes out last week and basically tells you they have to do more -- into higher inflation but slowing growth,” Brian Weinstein, head of global fixed income at Morgan Stanley Investment Management, said in an interview with Bloomberg TV. “It certainly looks like the market is afraid of a traditional Fed goes too much, slows the economy down, and we don’t get the much-anticipated soft landing.” In premarket trading, Boeing stock tumbled 6.6% after a China Eastern Airlines Boeing 737-800NG (yes, THE 737 MAX) plane carrying 132 people crashed in southwestern China. Additionally, US-listed Chinese stocks slumped in premarket trading Monday, following their Asian peers lower, as investors were disappointed after Chinese banks left the loan prime rate unchanged despite expectations of some easing. Large-cap technology stocks are leading the decline including Alibaba -5.6%, JD.com -6%, NetEase -5.7%, Pinduoduo -5.6% and Baidu -3.4%. Among other China stocks listed in the U.S. that are lower this morning: Nio -2%, Li Auto -4.2%, XPeng -4.3%, Didi -5.9%, KE Holdings -6.4%, Lufax -3.2%, Trip.com -6.2%, Bilibili -7.6% and Tencent Music -7.5%. Other notable premarket movers: Anaplan (PLAN US) shares jump 27% in U.S. premarket after Thoma Bravo agreed to acquire U.S. enterprise software company in a deal valued at $10.7 billion, adding to a string of deals this year by cash-rich private equity firms. Nielsen Holdings (NLSN US) shares decline in U.S. premarket after it rejected an acquisition proposal from a private equity consortium, valuing the company at $25.40/share, a price that doesn’t “adequately compensate shareholders for Nielsen’s growth prospects.” Uber (UBER US) shares are slightly lower in U.S. premarket trading after price target is lowered at RBC Capital Markets, with broker less positive on the ride-hailing giant versus peer Lyft following proprietary driver supply analysis. Alleghany Corp. (Y US) shares could be active as Berkshire Hathaway Inc. is buying it for $11.6 billion in cash. In the latest developments, Ukraine rejected a Russian demand that its forces lay down their arms Monday and leave the besieged southern port of Mariupol, which has been under intense Russian bombardment. Morgan Stanley’s chief U.S. equity strategist Michael Wilson said the recent rebound in U.S. stocks is an opportunity to sell and position more defensively.  Meanwhile, U.S. President Joe Biden will speak with European leaders ahead of his trip to the continent this week. Senior U.S. officials will also meet with executives of Exxon Mobil Corp., JPMorgan Chase & Co. and other firms about the impact of the invasion and sanctions.  European equities had a subdued start to the week with most indexes opening flat. Euro Stoxx 50 and DAX rise slightly, while the FTSE MIB outperformed gaining 0.7%. Energy and mining stocks lead gains, tech and travel are in the red. Commodity-linked stocks are the biggest gainers on the Stoxx Europe 600 as prices rally with the war in Ukraine nearing the end of its first month with no conclusion in sight. The basic resources sub-index rises 1.8% as the energy sub-index gains 1.5%. Rio Tinto, Glencore and Anglo American are among the miners rising while Shell, BP and Equinor lead gains among energy stocks. Meanwhile, Europe’s formerly “unstoppable” luxury stocks are facing a swath of new challenges, from rising rates, war in Ukraine and China risks, leaving investors and analysts divided on whether valuations have fallen far enough yet. The MSCI Europe Textiles Apparel & Luxury Goods Index is down 14% this year, following three years of outsized gains. Hermes, the maker of $10,000 Birkin bags, is among top decliners, down 21% after a whopping 75% jump last year. Louis Vuitton owner LVMH, meanwhile, recently lost its crown as Europe’s biggest company to food giant Nestle. Investors were already dumping pricey luxury stocks in favor of cheaper shares amid concerns about rate hikes, while the war in Ukraine added further uncertainty. Valuation-wise, the group now trades at about a 60% premium to the broader market, near pre-pandemic levels and below its 5-year average. Asia stocks fell after China’s lenders kept borrowing costs unchanged. The MSCI Asia Pacific Index was down 0.5% as of 3:13 p.m. in Singapore, erasing an earlier gain of 0.4%, weighed by declines in financials and communication services. The regional benchmark’s bumpy day followed its best week since February 2021. “Some may have clung to expectations for an LPR cut today, which I think will come later when they assess the growth drag from the outbreak,” said Wai Ho Leong, strategist at Modular Asset Management. “Peace talks and the Xi-Biden call also did not deliver substantive outcomes.” Stocks climbed last week as China pledged to stabilize its markets, and some traders had expected some help from banks’ loan prime rate announcement Monday. Talks between Xi Jinping and Joe Biden held Friday also failed to excite investors, although China’s top envoy to Washington pledged his country “will do everything” to de-escalate the war in Ukraine.  Hong Kong Lifts Overseas Flight Ban; Cuts Hotel Quarantine Shares slid in China and Hong Kong, erasing earlier gains. Stocks in South Korea and Malaysia led declines in the region. Japanese markets were closed for a holiday. India’s stocks took a breather on Monday after a sharp rally last week, as a drop in financial and consumer goods companies weighed on the indexes. The S&P BSE Sensex fell 1% to 57,292.49 in Mumbai, while the NSE Nifty 50 Index dropped by an equal measure. The gauges posted their biggest single-day drop since March 15. All but three of the 19 sector sub-indexes compiled by BSE Ltd fell, led by a gauge of utility companies. “Slowing rural sector is a risk even as urban consumption is showing signs of relatively better performance,” according to JM Financial analyst Dhananjay Sinha. Lower than expected growth and higher inflation are a key risk to Indian companies’ profitability, he added. Metal stocks were among gainers as Vedanta, Hindalco Industries and Coal India rose on the back of rising prices and worsening demand-supply scenario.   ICICI Bank contributed the most to Sensex’s decline, decreasing 1.3%. Out of 30 shares in the Sensex, 25 fell, while 5 declined. In FX, most FX majors are range-bound, as the DXY hovers on 98.000 handle awaiting speeches from Fed’s Bostic and chair Powell. Loonie underpinned by strong oil prices -Usd/Cad straddling 1.2600. Franc firm ahead of SNB policy assessment as Swiss sight deposits suggest less intervention; USD/CHF near 0.9300 and EUR/CHF sub-1.0300. Euro straddles 1.1050 with hawkish ECB commentary supportive, but hefty option expiries capping the upside (almost 2.8bln at 1.1100) Aussie unwinding recent gains on technical grounds and in wake of defeat for PM Morrison’s liberal party in local election - Aud/Usd back below 0.7400. Sterling still smarting after last week’s dovish BoE hike - Cable around 1.3150 and Eur/Gbp probing 100 DMA at 0.8415. In rates, Treasuries followed wider losses across gilts while front-end leads the move lower, flattening the curve.  2Y-5Y yields cheaper by ~4bp, flattening 5s30s spread by ~3bp; 10-year yields around 2.18%, higher by ~2bp vs ~4bp for U.K. 10- year. Bunds and gilts bear steepen, cheapening roughly 3bps across the back end. Cash USTs open bear flatter with short dated yields up close to 5bps. Peripheral spreads are slightly wider to core. In commodities, crude futures extend Asia’s gains; WTI adds ~4% to trade just shy of a 109-handle. Spot gold trades a narrow range in small positive territory near $1,924/oz. Base metals are mixed; LME nickel trades limit down for the fourth straight session. LME aluminum gains 3.8%, trading just off the late-Asia highs after Australia, the world’s biggest exporter of alumina, announced a ban on shipments to Russia. Bitcoin is modestly pressured but contained within last week's parameters overall, holding above USD 41k. Today's calendar is relatively quiet, with just the Chicago Fed National Activity Index on dex (exp 0.5, down from 0.69). Powell speaks at NABE at 12pm although it is unlikely he will make any monetary policy comments. Market Snapshot S&P 500 futures up 0.1% to 4,448.75 STOXX Europe 600 little changed at 455.00 MXAP down 0.5% to 177.54 MXAPJ down 0.7% to 579.14 Nikkei up 0.7% to 26,827.43 Topix up 0.5% to 1,909.27 Hang Seng Index down 0.9% to 21,221.34 Shanghai Composite little changed at 3,253.69 Sensex down 0.8% to 57,428.60 Australia S&P/ASX 200 down 0.2% to 7,278.55 Kospi down 0.8% to 2,686.05 Brent Futures up 3.8% to $112.03/bbl Gold spot up 0.2% to $1,924.77 U.S. Dollar Index little changed at 98.27 German 10Y yield little changed at 0.39% Euro little changed at $1.1048 Brent Futures up 3.8% to $112.03/bbl Top Overnight News from Bloomberg Ukraine rejected a Russian demand to surrender of the embattled southern port city of Mariupol, and an aide to President Volodymyr Zelenskiy said Russian forces are using “more destructive artillery.” More talks on ending the war are expected on Monday after Turkey said the two sides had made progress on key points Chinese banks left borrowing costs unchanged in line with expectations as the focus shifts to other possible easing measures from the central bank after top leaders pledged to boost the economy European Central Bank Vice President Luis de Guindos has yet to see any indication that soaring inflation rates are leading to higher wage demands, according to an interview with Handelsblatt Oil rose for a third day as the war in Ukraine neared the end of its first month with no end in sight, and Iranian-backed rebels attacked energy facilities in key exporter Saudi Arabia Hong Kong will lift a ban on flights from nine countries including the U.S. as of April 1, and cut the time incoming travelers need to spend in hotel quarantine in half provided they test negative, Chief Executive Carrie Lam said China and Russia’s trade relationship has become more complicated since the war started more than three weeks ago, raising questions about the future flow of energy, metals and crops between the two powerhouses A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were choppy with sentiment clouded amid the uncertain geopolitical climate and higher oil prices. ASX 200 was indecisive as outperformance in tech was offset by losses in financials and with PM Morrison’s Liberal Party defeated in South Australia's state election, raising concerns for the government ahead of the federal election in two months Nikkei 225 was closed for the Vernal Equinox holiday. Hang Seng and Shanghai Comp. swung between gains and losses with an early surge in Hong Kong tech stocks ahead of a widely speculated relaxation to COVID restrictions after the city’s daily cases fell to a threeweek low and with China’s tech hub of Shenzhen resuming normal work output. However, the gains were wiped out with the mainland hampered as Shanghai tussles with a COVID-19 outbreak, while the PBoC also kept its Loan Prime Rates unchanged, as expected. Top Asian News Indonesia Ends Quarantine Requirement for Overseas Travelers Asia Stocks Edge Down as Concerns Linger on China Policy Support Russia’s War Lifts Default Risk for Distressed Economies China Confirms Ambassador Met With Russian Defense Official European bourses are contained and haven't differed too far from the unchanged mark overall, Euro Stoxx 50 +0.1%, as we await updates on Russia-Ukraine. Developments throughout the morning have been limited, and commentary from the Kremlin is predominantly infitting with last-week's/weekend updates. US futures are pressured, ES -0.2%, awaiting geopolitical catalysts with Fed speak, including Chair Powell, ahead. China Eastern airlines passenger jet flying from Kunming to Guangzhou on Monday experienced an accident in Guangxi, via State Media; unknown injuries/deaths from the accident. Craft was a Boeing (BA) 737 . Subsequently, China's Aviation Regulator confirms the crash of the China Eastern airlines passenger jet carrying 132 people. Boeing -8.3% in the pre-market Berkshire Hathaway (BRK/B) is to purchase Alleghany Corp (Y) for USD 848.02/shr (vs. close USD 676.75 /shr) in a USD 11.6bln transaction. Top European News ECB’s Lagarde Says She’s Not Seeing Elements of Stagflation Now LSE Group to Sell BETA+ to Motive Partners, Clearlake: Sky S&T CEO’s Grosso Tech to Offer EU15.30/Shr for ~5.5m S&T Shares Julius Baer Says Sanctioned Clients in ‘Low Single Digits’ In FX, DXY hovers on 98.000 handle awaiting speeches from Fed’s Bostic and chair Powell. Loonie underpinned by strong oil prices -Usd/Cad straddling 1.2600. Franc firm ahead of SNB policy assessment as Swiss sight deposits suggest less intervention; USD/CHF near 0.9300 and EUR/CHF sub-1.0300. Euro straddles 1.1050 with hawkish ECB commentary supportive, but hefty option expiries capping the upside (almost 2.8bln at 1.1100) Aussie unwinding recent gains on technical grounds and in wake of defeat for PM Morrison’s liberal party in local election - Aud/Usd back below 0.7400. Sterling still smarting after last week’s dovish BoE hike - Cable around 1.3150 and Eur/Gbp probing 100 DMA at 0.8415. In commodities, WTI and Brent have been dipping from best-levels, but remain underpinned on the session amid weekend geopolitical premia.; albeit, the European morning's developments have been more limited. WTI May resides around USD 107/bbl (vs high ~108.20/bbl) while its Brent counterpart trades just under USD 112 /bbl (vs high ~112.75/bbl). Saudi-led coalition reported that Yemen Houthis targeted a gas station in Khamis Mushait on Saturday which resulted in material damage to civilian cars and homes but no casualties, according to the state news agency. Saudi-led coalition also said it destroyed an explosive-laden boat to thwart an attack on shipping in the Red Sea, while it was also reported that Aramco’s petroleum products distribution plant in Jeddah was attacked and production at a Saudi oil refinery in Yanbu declined momentarily after an attack by Houthis. Saudi Aramco reported FY net income USD 110.0bln vs prev. USD 49.0bln Y/Y, while the CEO expects oil demand to return to pre-pandemic levels by year-end and said they are seeing healthy demand especially in Asia. Saudi Aramco's CEO also noted that there is limited spare capacity which is declining every month with global spare capacity around 2mln bpd and that the market is very tight in terms of available barrels. US Event Calendar and Central Bank speakers 8am: Fed’s Bostic Gives Speech at NABE Conference 8:30am: Feb. Chicago Fed Nat Activity Index, est. 0.50, prior 0.69 12pm: Fed Chair Powell speaks at NABE DB's Jim Reid concludes the overnight wrap After a few weekends with some dramatic news of late, this weekend was relatively sparse in terms of new incremental news flow. The conflict and negotiations continue but without any major developments. Last week was the best for US and European equities since November 2020’s US election week; so markets are coming to terms with the current state of the conflict. Over the weekend, Ukrainian officials rejected an offer given by the Russian military for its forces and civilians to surrender the city of Mariupol as shelling continued in Kyiv. Separately, the White House announced that President Joe Biden will travel to Poland in his upcoming trip to Europe for urgent talks with NATO and European allies. Mr. Biden is also hosting a call with his counterparts in the UK, Germany and Italy today at 11am UK time. Overnight, Turkey’s Foreign Minister Mevlut Cavusoglu indicated that Ukraine and Russia are close to an agreement following progress in peace talks and is hopeful for a ceasefire if both the sides do not backtrack from their current positions. However there is no other developments on the current state of negotiations. Asian equity markets have started the week on a weaker footing with the Hang Seng (-0.69%), reversing its early morning gains after it rose more than 1%. Mainland Chinese stocks are also dipping as I type with the CSI (-0.66%) and Shanghai Composite (-0.10%) lower after the PBOC kept the one-year loan prime rate unchanged at 3.7%. Elsewhere, markets in Japan are closed for a holiday. Moving on, stock futures in the DMs are also falling, as contracts on the S&P 500 (-0.42%), Nasdaq (-0.60%) and DAX (-0.58%) are all down. Oil prices are up this morning with Brent futures advancing +3.08% to $111.25/bbl while WTI futures are up +3.23% at $108.08/bbl, as I type. Elsewhere, today's holiday in Japan means no USTs trading in Asia. One of the key events this week will be Thursday’s March flash PMIs from around the world where we’ll see the first impact of the Russia/Ukraine conflict on activity, especially in Europe. Outside of that, UK CPI data on Wednesday is going to be very interesting after the BoE warned on both growth and inflation last week in their surprisingly dovish hike. See our UK economist’s review here. There is also the Spring UK (Budget) Statement on Wednesday (preview here) where all things fiscal will be in focus. Wednesday's new home sales, Friday's pending home sales and Thursday's durable goods are the main economic releases in the US. There's plenty of Fed speak to sharpen up the message from last week's FOMC but don't expect a chorus line singing from the same song sheet. The dot plot showed the range of YE '22 Fed funds rates, as forecast by the committee, was a historically wide 1.4% to 3.1%. Boston (non-voter hawk) and Chair Powell himself are up today with the latter also on the docket on Wednesday. Williams (dove) will be on a panel tomorrow but also gives a speech on Friday. Daly (non-voter / dove) speaks tomorrow, Wednesday and Friday. Mester (voter / hawk) speaks tomorrow. Bullard (voter / hawk) is up on Wednesday and remember he was the lone 50bps dissenter last week. Kashkari (non-voter / dove), Governor Waller (hawk) and Chicago President Evans (non-voter / dove) speak on Thursday. Barkin (non-voter / hawk) concludes the Fed's business for the week on Friday. Looking back at last week now and the conflict raged on but peace negotiations between Ukraine and Russia continued, with the headlines presenting a staccato back and forth about Ukrainian and Russian leaders’ current perceptions of the negotiation outlook. Markets seemed to look through this back-and-forth and took solace that negotiations were even happening, which was a material step up from where we were but a short time ago. In particular, both sides reported common ground on Ukraine’s neutral status and lack of NATO membership as a positive. Another positive came on Friday after Presidents Biden and Xi Jinping spoke. China’s support for Russia remained a key unknown, but following the call both sides expressed aspirations for a peaceful resolution to the conflict, and for tensions to not escalate any further. Ahead of the meeting, US diplomatic officials warned that the US would impose costs on China were it to support the Russian invasion. Russian sovereign bond payments made their way to creditors via custodians, despite some uncertainty, avoiding a default. Nevertheless, S&P cut the rating on Russian sovereign debt another notch, considering it at high risk of default. However, Russia’s remaining interest repayments this month will keep investors anxious as a $447 million payment is due on March 31, followed by a $2 billion payment as a bond comes due on April 4. Dragging on sentiment were American intelligence reports that President Putin was prepared to re-engage in nuclear sabre rattling should the conflict drag on. That drove futures lower at the time of release but was not enough to drag risk negative on the week. That said it was a good week for risk with the S&P 500 and STOXX 600 gaining +6.16% (+1.17% Friday) and +5.43% (+0.91% Friday) over the week, respectively. That marked the best weekly performance for both indices since the week of the US Presidential election in November 2020. Financials and mega cap tech stocks performed even better. The S&P and STOXX bank indices gained +6.60% (-0.15% Friday) and +8.72% (+0.22% Friday), respectively, while the FANG+ gained +13.61% (+3.37%). That was the best weekly performance ever for the FANG+, which also put in its best daily performance ever on Wednesday following the Fed meeting, and more positive Chinese state support news (the index contains Baidu and Alibaba), gaining +10.19%. Speaking of the Fed, after two years at the zero lower bound, the FOMC raised policy rates by 25 basis points, with the dots projecting an additional 150 basis points of tightening this year, in line with DB expectations. Further, the Fed’s projections put policy into an explicitly restrictive stance by 2023. Despite the tightening, Chair Powell did not place particularly high risks on a recession occurring in the next year, which was apparently enough to help equities, with the S&P gaining +2.24% the day of the meeting in addition to the gangbusters day for the FANG+ index. The Fed also announced plans to start reducing their bond holdings at a coming meeting. Chair Powell noted the asset holding reductions would roughly equate to an additional 25 basis points of tightening this year and could commence as early as the FOMC’s next meeting in May. Money markets ended the week pricing around 167 basis points of additional policy rate tightening, suggesting some probability of a 50 basis point hike this year, which the Chair did not rule out. 10yr Treasury yields gained +15.8bps (-2.1bps Friday) on the week, driven entirely by real yields, which increased +22.7bps (+1.5bps Friday). The 2s10s yield curve continued its flattening, as 2yr yields gained +18.8bps (+2.2bps Friday), bringing the level to 20.5bps, the lowest since early March 2020. The Bank of England also hiked rates, raising the Bank Rate by 25 basis points in an 8-1 decision. The lone dissenter preferred to keep policy rates on hold, in contrast to the four dissenters in the February meeting which voted for a 50 basis point increase. Forward guidance added to the dovish tone, as it emphasised two-sided risks around the outlook, with downside impacts to growth featuring as prominent as upside risks to inflation, in contrast with recent advanced economy central bank communications. In line, 10yr gilt yields lagged other DM yields, gaining +0.6bps (-6.8bps Friday), as 10yr bunds increased +12.4bps (-1.2bps Friday). 2yr gilt yields priced out hikes, falling -10.9bps (-8.9bps Friday). Markets are pricing the Bank Rate to end the year at 1.87%, as opposed to 2.0% a week ago. Meanwhile, the Bank of Japan left policy unchanged, and warned of downside risks to growth stemming from the invasion of Ukraine, picking up the BoE’s dovish mantle. In line with the improvement in risk sentiment, crude oil prices fell a modest -3.97% over the week (+1.21% Friday), but still put in some large intraday swings. Prices also eased following reports that progress on the Iran nuclear deal would not be handcuffed by sanctions on Russia. European natural gas also fell -23.42% (-0.65% Friday). Given the volatility in energy markets, French President Macron warned the state may need to seize control of some energy firms. Elsewhere, sentiment was boosted by reports that China would actively introduce policies that benefit markets and take steps to avoid the most spartan lockdown measures. Tyler Durden Mon, 03/21/2022 - 07:52.....»»

Category: blogSource: zerohedgeMar 21st, 2022

Banks Are Restocking Gold At Fastest Pace In Years

Banks Are Restocking Gold At Fastest Pace In Years Via SchiffGold.com, Banks are in the process of restocking gold at a pace not seen in years. This analysis focuses on gold and silver within the Comex/CME futures exchange. See the article What is the Comex? for more detail. The charts and tables below specifically analyze the physical stock/inventory data at the Comex to show the physical movement of metal into and out of Comex vaults. Registered = Warrant assigned and can be used for Comex delivery, Eligible = No warrant attached – owner has not made it available for delivery. CURRENT TRENDS Gold In a recent article, I speculated that the big players might be prepared to let the price of gold run. Part of this will mean increased delivery volume in April after a very strong March. The Comex vaults have been steadily depleted over the last several months, however, 1.6M ounces of gold just showed up since March 1 as shown below. This is the largest inflow since October 2020 and we are only halfway through March! Figure: 1 Recent Monthly Stock Change This may be simply a restock of the metal lost in Jan and Feb. It’s also possible this is being used to support the massive delivery volume being seen in the historically quiet month of March. But a third possibility is that the banks are preparing for massive delivery volume in April. After all, as shown below, this metal has just shown up in the last three days and is primarily in Eligible. Most of it is not yet available for delivery, but it can be moved over instantaneously if the owner so wishes. Figure: 2 Recent Monthly Stock Change Silver Silver continues to show a different trend than gold. It’s as if the big players are fully focused on gold for the moment. Nearly 3.9M ounces left Comex vaults in just the past few days. Figure: 3 Recent Monthly Stock Change Looking at the detailed report shows the mechanics. Metal that was listed as Eligible was being moved to Registered to satisfy the extremely strong delivery demand being seen in March. Unlike gold, this metal has not been restocked and continues to leave Comex vaults. In aggregate, the Eligible category has lost 17.7M ounces over the last month! Figure: 4 Recent Monthly Stock Change The table below summarizes the movement activity over several time periods. Gold Gold has reversed a 50% of the 12-month movement of metal out of the vault in a matter of days Eligible has increased 7.2% in a single week In total, Registered could support 192k contracts standing for delivery. This is 3.5 times larger than the biggest month on record (June 2020 at 55k contracts) The data shows the banks well capitalized to handle higher delivery volume It should be noted that most of this is probably still from the London vaults that came to New York in the depths of the April 2020 liquidity crisis Rhetorical questions: Why are the banks bolstering gold reserves if they appear so well-capitalized? How much metal is actually there ready for delivery? If it’s the full 19.2M then why a sudden flood of new metal? Whether it’s restocking March or preparation for April, there should be enough metal to satisfy demand. Right? Silver Silver has seen stock deplete by 29M ounces over the last year or 7.8%. This has been concentrated entirely in Registered but the last month has seen a major trend change with Eligible seeing the largest outflows The last month outflows from eligible undid 85% of the inflows over the last year Figure: 5 Stock Change Summary The next table shows the activity by bank/Holder. It details the numbers above to see the movement specific to vaults. Gold Almost every vault is now adding to inventory which is a complete reversal from last month JP Morgan and Manfra are leading the way with increases of 7.1% and 15.2% over the last month respectively JP Morgan now has positive flows over the last year. Again, the net gain of JP Morgan inventory over the last year has been added in the last week Why is every vault adding metal all of a sudden? Why is JP Morgan aggressively restocking its inventory? What are the banks preparing for? Silver Over the last month, only Delaware Depository has positive inflows while 6 vaults have seen significant outflows CNT has lost 8.2% of its inventory in a single month! Figure: 6 Stock Change Detail As postulated in the margin analysis, all eyes seem to be on gold. The banks are clearly preparing for a large delivery volume. The current open interest positioning, combined with the lack of increase in margin rates suggests this could be allowed to happen right now. Add the current inventory increase as more evidence. Silver continues to be the forgotten metal. This isn’t entirely surprising though. Gold is the true historical currency of the world. Central banks own hordes of gold (Russia wishes they had more). If the market were to start moving in a big way, it’s going to happen in gold first. The question now becomes: why is this being allowed to happen? None of the powers that be want a surging gold price. It calls into question the entire fiat system. My running theory is that the banks pick their times when to fight it and when to ride it. Right now, the momentum is strong and they appear to be preparing to ride the wave. Prices declined this week, but there is clearly a bullish trend afoot. Be cautious though, there are levers in place (e.g., margin and short selling) that can cause the market to turn on a dime. Expect these levers to be used when they can exact the most impact (e.g., speculation reaches a fever pitch). This was on display on March 9 when margin requirements were raised at the same time gold fell by $80. Perhaps now is not the time to strike, but no question that time will come. The question is, how soon. The data hints at late summer (after the June contract), but an opportunity could present itself much sooner given the market volatility. Gold prices have been under pressure all week. Historical Perspective Zooming out and looking at the inventory for gold and silver since 2016 shows the impact that Covid had on the Comex vaults. Gold had almost nothing in the Registered category before JP Morgan and Brinks added their London inventory with nearly 20M ounces. The gold inventory peeked in February of last year and has been steadily falling ever since aside from brief increases that don’t seem to last. Will the current increase follow the same fate (see spike on far right)? Figure: 7 Historical Eligible and Registered Silver also saw an increase in Registered around March 2020 but has been draining, albeit more slowly than gold. The recent uptick in Registered as a % of the total (far right spike in the black bar) is due to the recent flip of Eligible to Registered noted above. Figure: 8 Historical Eligible and Registered Available supply for potential demand As can be seen in the chart below, the ratio of open interest to total stock has fallen from over 8 to 1.5. In terms of Registered (available for delivery against open interest), the ratio collapsed from nose bleed levels (think Nov 2019 where 100% stood for delivery) down to 3.26 in the latest month. This is due to the recent surge in open interest. On March 7, the ratio hit 3.41. This was the highest since September 2020. The current restocking has helped bring this ratio down along with open interest falling some. Figure: 9 Open Interest/Stock Ratio Coverage in silver is weaker than in gold with 8.4 open interest contracts to each available physical supply of Registered (down from 9.8 on March 8). This is near the highs from June 2020. The current dip can be entirely attributed to open interest falling from 168k on March 8 to 157k today. This drop-in open interest occurred without margin rates going up at all. Figure: 10 Open Interest/Stock Ratio Wrapping Up The Comex gold market has been flashing warning signs since early January. This continues to be the case. The latest influx of metal further supports the notion that banks are preparing for higher delivery volume and potentially higher prices. That being said, with over 12 years of experience watching this market, nothing is ever easy or simple. The bullish setup is there, but something tells me this game has a few more twists ahead. Let’s see how the data unfolds. Tyler Durden Sun, 03/20/2022 - 12:30.....»»

Category: worldSource: nytMar 20th, 2022